TEAM COMMUNICATION GROUP INC, 10KSB, 1999-04-15

TEAM COMMUNICATION GROUP INC
10KSB, 1999-04-15
MOTION PICTURE & VIDEO TAPE DISTRIBUTION

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U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

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FORM 10-KSB

(MARK ONE)

[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934

FOR THE FISCAL YEAR ENDED DECEMBER 31, 1998

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

FOR THE TRANSITION PERIOD FROM TO .

COMMISSION FILE NO. 333-26307

TEAM COMMUNICATION GROUP, INC.
(NAME OF SMALL BUSINESS ISSUER IN ITS CHARTER)

<TABLE>
<S> <C>
CALIFORNIA 954519215
(STATE OR OTHER JURISDICTION OF (IRS EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
12300 WILSHIRE BLVD., SUITE 400,
LOS ANGELES, CALIFORNIA 90025
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
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(310) 442-3500
(ISSUER'S TELEPHONE NUMBER, INCLUDING AREA CODE)

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

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

TITLE OF EACH CLASS
COMMON STOCK

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

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

Registrant's revenues for its most recent fiscal year were $13,581,900.

The aggregate market value of the voting stock held by non-affiliates
computed based on the average of the closing bid and asked prices of such stock
as of April 9, 1999, was approximately $8,250,000.

The number of shares outstanding of the issuer's common equity as of April
9, 1999, was 3,127,161 shares of common stock, no par value.

Transitional Small Business Disclosure Format (check one): Yes [ ] No [X]

Documents Incorporated by Reference: None
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PART I

ITEM 1. DESCRIPTION OF BUSINESS

OUR HISTORY

We were formed in February 1995. We have focused our 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. We derive substantially all of
our revenues from production fees earned from our original productions,
distribution fees from the exploitation of product acquired from others, and the
exploitation of our owned programming.

Our 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, we co-developed and co-produced a reality based five-day per week
("strip") syndicated series, called "Strange Universe," with United/Chris-Craft
television stations and Rysher Entertainment. This series, which aired on
United/Chris-Craft stations, involved the production of 130 episodes over its
two, thirteen week commitments. We have also completed the production of a
series of 48 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 Amazing Tales
have been produced and delivered, and the series is currently airing on
Discovery Communications' Animal Planet.

In March 1999 our co-production of 22 episodes of a television series based
on the hit movie "Total Recall" began to air on Showtime Networks. We maintain a
dramatic development and production department which is developing and will
produce movies-of-the-week and drama series for exhibition on network
television, cable or ad hoc networks of independent stations which sometimes
form to air special programming. We also maintain an international sales force
and currently have distribution rights to approximately 335 half-hours of family
and documentary series and specials, and 190 hours of dramatic series and films.
We are also developing a wide variety of family, dramatic, reality-based and
children's programing.

RECENT DEVELOPMENTS; CERTAIN CONSIDERATIONS

This Annual Report contains forward-looking statements regarding
contemplated operations which involve risks and uncertainties. Our 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 discussed elsewhere in this Form 10KSB.

Going Concern Assumption. The independent accountants' report included in
our financial statements for each of the fiscal years since our formation,
including those for the fiscal year ended December 31, 1998, contain an
explanatory paragraph indicating that our financial condition raises substantial
doubt as to our ability to continue as a going concern. There can be no
assurance that future financial statements will not include a similar
explanatory paragraph if we remain unable to raise sufficient funds or generate
sufficient cash flow from operations to cover the cost of our operations. The
existence of such an explanatory paragraph may have a material adverse effect on
our relationship with third parties who are concerned about our ability to
complete projects that we are contractually required to develop or produce, and
could also impact our ability to complete future financings.

Limited Operating History; Liquidity Deficit. We were formed in February
1995, and thus we have a limited operating history. Although we have generated
profitable operations during each of the fiscal years ended December 31, 1996,
1997 and 1998, we have experienced a negative cash flow from operations during
such periods. No assurance can be given that we will continue to be profitable
in the foreseeable future or that we will be able to generate positive cash flow
from our operations. Implementation of our business plan is subject to all the
risks inherent in the establishment of a new business enterprise, including
potential operating

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losses. In addition, we will be subject to certain factors affecting the
entertainment industry generally, such as sensitivity to general economic
conditions, critical acceptance of our products and intense competition. The
likelihood of our success must be considered in light of the problems, expenses,
difficulties, complications and delays frequently encountered in connection with
the formation of a new business.

As of December 31, 1998, we had an accumulated deficit of ($179,500) and a
liquidity deficit of ($3,718,300), such deficit being defined as (i) cash and
cash equivalents plus accounts receivable (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; Existing Defaults; Dilution; No Assurance
Of Future Financings. The entertainment industry is highly capital intensive.
Despite our public offering, our operations have been hurt by ongoing capital
shortages caused by a slowness in collecting receivables and the inability to
complete a long term banking relationship. Despite these problems, we have
attempted to address our capital requirements by (i) selling up to $3,000,000 in
convertible debt, $1,850,000 of which has been subscribed for, (ii) entering
into a letter of intent to complete an offering of our Common Stock on the
German Bourse market (the "German Offering"), and (iii) entering into an
agreement with an investment banking firm to provide up to $3,000,000 of
additional debt financing, with warrants, as a bridge to the German Offering.

These financings in general, and the convertible debt financing in
particular, may be dilutive to our shareholders. We have the right to take down
the remaining portion of the Convertible Debt Financing upon the occurrence of
shareholder approval for the issuance of the underlying securities (if required)
and the registration of the common stock underlying these securities. If we
require that the entire financing be completed (i.e, that all $3,000,000 be
sold), based on a market price of $1.77 per share, we would be required to issue
approximately [1,900,000] shares.

Despite the dilutive nature of these financings, we believe that completing
these offerings are critical as we have approximately $2,655,000 principal
amount of notes which mature over the next 6 months, including $1,140,000 of
notes which have matured (or mature within the next two weeks) and are currently
(or will shortly be) in default. Notwithstanding the importance of these
financings, we cannot give our shareholders any assurance that the foregoing
financing activities will be concluded. Moreover, if additional financing is not
available, we will be required to reduce or suspend our operations, seek an
acquisition partner or try other ways to sell securities on terms that may be
highly dilutive or otherwise disadvantageous to current shareholders. See also
Item 6 -- "Management's Discussion and Analysis of Financial Condition and
Results of Operations -- Liquidity and Capital Resources" and Note 13 of Notes
to Consolidated Financial Statements.

Reliance on Significant Customers; Allowance for Doubtful Accounts. As of
December 31, 1998, we had $4,736,700 in receivables; 47% and 21% of which
relates to Latin American Programming -- TV and 1158465 Ontario Limited, an
affiliate of Microtainment, a Canadian distribution company, respectively.
Should we be required to make an additional allowance for doubtful accounts with
respect to these receivables, our results of operations and financial condition
in future periods could be adversely affected. While we believe that each of the
licensees are reasonable credit risks (and are, in fact, leading distributors in
their respective territories) any failure to pay could have a material adverse
impact on our results. In fact, for the fiscal year just concluded, our results
reflect the reserve for doubtful accounts of $664,000 in respect of all
receivables.

Dependence on Emerging Markets; Dependence on Foreign Sales. A substantial
portion of our revenues to date have been, and for the foreseeable future may
be, derived from the sale or license of our products to recently established
domestic television or cable networks such as the WB Network, UPN, The Discovery
Channel and The Learning Channel, (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. In addition to the foregoing, a
substantial portion of our revenues are dependent on sales to sub-licensees and
sub-distributors not domiciled in the U.S. The marketing and distribution
efforts of these entities could impact our ability to realize overages with
respect to our 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 we become involved in a protracted dispute with
respect to the manner in which our product is distributed, or should we be
forced to initiate collection activities
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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.

As indicated above, substantially all of our receivables as of December 31,
1998 are trade receivables (less the allowance for doubtful accounts) from
entities domiciled outside the United States $4,736,700. These receivables
represent 100% of all trade receivables and 28% of our total assets. Any
difficulty or delay in the collection of these receivables would have a material
adverse effect on us. Of this amount, approximately $3,200,000 of such
receivables are from: (i) Latin America Programming-TV and (ii) 1158465 Ontario
Limited, an affiliate of Microtainment, a Canadian distribution company. The
recent and ongoing economic crisis in Southeast Asia may impact our future sales
for South Korea, Thailand and Indonesia. While we had no material sales in this
region, we have experienced significant delays in collecting on sales in Japan.

As indicated above, we have taken a reserve of $664,000 in respect of our
receivable for the past fiscal year.

Business Combinations. We are currently in discussions with a number of
distribution and production companies regarding possible business combinations.
In March 1999, we entered into a letter of intent to acquire Goldstar
Entertainment Media, Inc. The terms of the acquisition have not been agreed to,
and are subject to the completion of due diligence. Goldstar is a publicly held
company whose stock currently trades on the Bulletin Board operated by NASDAQ.
Goldstar has assembled a library of classic rock videos. If we compete the
acquisition, we intend to pursue a strategy of creating a classic rock network,
and related Internet strategy with respect thereto. Goldstar has had discussions
with a number of Internet companies with a view to creating such a network.

Competition. The entertainment industry is highly competitive. We 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. Virtually all of
our competitors are organizations of substantially larger size and capacity,
with far greater financial, human and other resources and longer operating
histories than ours. 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, actors and/or celebrity
hosts and financing.

STRATEGY

The global television market has experienced substantial growth since 1985
and we believe this market will continue to experience substantial growth during
the foreseeable future as foreign state television monopolies end and commercial
broadcast outlets expand to provide increasingly varied and specialized content
to consumers throughout the world. In the U.S. alone, there have been numerous
new television channels which have commenced operation since 1985. Such growth
has led to the development and commercialization of specialized cable and
satellite 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.

Although we have been significantly impacted by recurring cash flow
problems, our operating strategy is to fulfill the demand for programming by:
(i) expanding the activities of our three operating departments, development and
production, distribution and licensing and merchandising and direct-marketing;
(ii) implementing strategic acquisitions of film, television and video libraries
and smaller production companies; and (iii) entering into joint ventures with,
or acquisitions of, unaffiliated third parties, with the intention that such
acquisitions or joint ventures would lower our financial risk should we expand,
as
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anticipated, into related activities, such as direct marketing and interactive
programming. We intend, subject to financing, to acquire, co-produce and
co-finance other series, movies and specials from third party producers in order
to increase our programming library and self distribute such product on a
worldwide basis.

We believe 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
(including the dissemination of product on and through the Internet) and other
related media investments. While the number of distribution channels has been
increasing, we believe 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 we will be
successful in obtaining the financing necessary for these acquisitions or that,
if consummated, such acquisitions would prove financially successful. In
addition, a significant acquisition of product or another company could require
us to obtain financing for such acquisition. No assurance can be given that such
financing will be available at all, or that if available it will be on terms
that are favorable to us.

OPERATIONS

We currently operate three principal departments: (i) development and
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. Such programming may also be produced for new networks such as the United
Paramount Network ("UPN") and the Warner Bros.'s "WB" Network, first-run pay
television exhibition or directly for syndication (i.e., independent or
non-network) television, including PBS, as well as numerous 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.

We are 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 by us, it is presented to a 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, we negotiate a
license fee or distribution advance with the network or distributor. This fee is
a flat sum payment through which we generally attempt to cover a significant
portion of our 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
license fees. If programming is produced for an entity like PBS, which does not
pay significant license fees or distribution advances (and in many instances,
may not pay any fee), we attempt 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, we believe that we can defray a significant portion of
the production costs of PBS programming using these alternative financing
methods, thus availing ourselves of the key demographics of PBS viewership,
particularly in children's programming.

With respect to series for the networks or pay cable channels, we generally
attempt to negotiate significant license fees for both series and movies of the
week. In many cases, we 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, we 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, we may seek to obtain funding in excess of network
license fees from a studio or a third party who
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will provide such financing in return for a share of the profits from the
syndication of such programming. Similarly, for television series, we 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.

There can be no assurance, however, that once we commit to fund production
of a series licensed to a network, the network will order and exhibit sufficient
episodes to enable us 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. We
believe, 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 for series of between 13 to 26 episodes per season. We intend to focus
our production activity in the following areas or genres: Movies of the Week and
Mini-Series; Drama Series and Reality Series. It is our intention to expand the
production of dramatic programming, over the next 24 months. Such programming,
if any, will be licensed in foreign markets through our sales personnel where we
do not have foreign partners.

We 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. We entered into an agreement with
Alliance, a leading Canadian production company, pursuant to which Alliance is
co-producing and co-financing an initial 22 episodes of the series with us. We
also entered into an agreement with PolyGram, pursuant to which PolyGram will
co-finance and acquire television distribution rights to the series in the U.S.
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.
PolyGram sold the series, entitled "Total Recall -- 2070", to the U.S. pay
television network, Showtime Network, where it debuted in March 1999. "First
run" domestic syndication is being handled by PolyGram for airing to begin in
January 2000. Miramax, which acquired the theatrical sequel rights to "Total
Recall," has also acquired worldwide (other than Canada, Japan and Spain) home
video rights to the series from us. Based upon our initial 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. By co-producing the series with Alliance, the series qualify for
certain Canadian co-production and tax benefits. The proceeds from all
distribution of the series, after recoupment of production costs, will be
allocated 40% to us and 60% to Alliance. As part of the co-production agreement,
we are to assign our license agreements to the co-production and pay over to the
production account the deposits we have received to date in the amount of
$305,000. Alliance has notified us that these deposits are currently due to the
co-production. We have agreed to assign these amounts and will be in breach of
our agreements with Alliance if we fail to remit such amounts.

As of the date hereof, television and home video sales of approximately $15
million have been made with respect to "Total Recall -- 2070" for the U.S.
(Polygram), all of Asia and the Middle East, and parts of Europe, Latin America
and Canada. Still remaining for licensing, among other areas, are most of the
European territories, and parts of Latin America.

We have entered into agreements with the Family Channel for the development
of two movies of the week. The first, "Earthquake in New York" is a story about
an earthquake in New York City. The production was financed by the Family
Channel. We have received our executive producing fee. "Earthquake in New York"
aired on the Family Channel in October 1998. The second movie of the week, "Down
Fall," is about an avalanche at an exclusive ski resort. The script for "Down
Fall" which has already been written, was paid for by the Family Channel. No
funds have been advanced for the "Down Fall" production as of this date.

The acquisition of the one hour dramatic series "Water Rats," a high
suspense police action drama set in Sydney, Australia (116 episodes delivered
for the first four seasons), and the one hour dramatic series "Cover Story,"
which takes place on the set of a television entertainment magazine program (26
episodes delivered), both of which were acquired from the Australian production
company Southern Star, are examples of our

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strategy to acquire programming from third parties. We have the rights for
distribution in all Latin American countries, including Mexico and Puerto Rico,
and have cumulative sales of approximately $1.0 million for Mexican broadcast
television and pan-Latin American satellite broadcast television with the
majority of terrestrial broadcast rights remaining available for sale.

We have also 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. Its acquisition brings the total
hours of dramatic programming licensed by us in Latin America to 220.

Finally, we have received a firm commitment from Discovery Channel's Animal
Planet for the initial production of 13 one-hour episodes of the "The Call of
the Wild," based on Jack London's classic novel. Subject to financing, we
anticipate creating a Canadian co-venture. Production of this series is
currently contemplated to begin in the early summer (subject to financing and
obtaining adequate pre-sales for certain European territories), with delivery to
take place from August to October of this year.

LIVE ACTION AND ANIMATED CHILDREN'S PROGRAMMING. To take advantage of what
we believe is a significant television market for children's programming, we
intend to develop and produce inventive and original shows, including both
animated series and live-action series. We continue to develop "LoCoMoTioN," a
program which incorporates, songs, games and exercise to stimulate both the
bodies and the minds of preschool children, and hope to sell the show to
domestic and international television markets in the fall of 1999. If the show
is successful, it is anticipated that it will provide us with licensing and
merchandising opportunities.

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, the
United Paramount Network, 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. We intend to
capitalize upon the programming expertise developed by management prior to our
formation.

We have an extensive development slate of new series which are currently
being sold in the international marketplace. Such programs include "Strange
Universe," a 130 half-hour five day per week ("strip") syndicated series which
was produced in association with United/Chris-Craft television stations and
Rysher Entertainment. "Amazing Tails," a weekly series of 48 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, we has also licensed "Amazing Tails" in Japan for $300,000 and in the
United Kingdom, France, Italy, Spain, Portugal and Greece for an aggregate of
$595,000.

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

"HOW TO" AND INSTRUCTIONAL PROGRAMMING. From gardening and style to cooking
and home repair, "how to" and instructional programming is an expanding market
in which we have strived to develop, produce, and distribute a variety of
programs which both entertain and educate. "Simply Style," a 60 episode "strip"
created by us for The Discovery Channel and hosted by fashion expert Leah
Feldon, is the first such series produced by us.

DISTRIBUTION

An active part of our business is the presentation of our own product as
well as product acquired from third-party producers to the international
marketplace. Our current library includes 335 half hours of reality based
series, mini-series and specials and 190 hours of dramatic series and film
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

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these markets, our distribution personnel attend such major international trade
shows as MIPCOM-TV, Monte Carlo Television Festival, MIP-TV and NATPE.

In territories such as Latin America, we use subdistributors such as the
Giniger Entities. We use agents in such territories because we believe that
these agents typically have long-standing relationships in those territories
where we might otherwise have difficulty accessing purchasers or in obtaining
favorable prices from such purchasers.

We have also 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, we have an active "format" business overseas, where we
represent and "reformat" successful foreign shows for the domestic marketplace
and vice versa. We also currently represent several other custom formats which
are under consideration in numerous territories.

LICENSING, MERCHANDISING AND DIRECT MARKETING

Our strategic objectives encompass the exploitation of additional revenue
streams through licensing and merchandising efforts. We hope 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 -- 2070," have begun to focus on the marketing
and merchandising rights that are available with respect to the "Total
Recall -- 2070" series.

We also intend 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, or instructional program can be extended into a
continuity club, infomercial, and retail products. For example, should we have
sufficient financing, we intend to develop from the series "Amazing Tails" a pet
"fan" club, with commercial tie-ins with its sponsors.

COMPETITION

The entertainment industry is highly competitive. We compete 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 our present and future competitors are organizations of
substantially larger size and capacity, with far greater financial and personnel
resources and longer operating history than us. 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, actors and/or celebrity hosts and financing.

EMPLOYEES

We currently employ 12 full-time employees, six of whom are members of
senior management. From time to time, as projects go into production, temporary
employees are also employed by us.

DIVIDENDS

We currently intend to retain all earnings and thus will not be issuing
dividends. Moreover, certain of our notes restrict our ability to pay dividends,
and we anticipate similar prohibitions if we obtain a regular commercial line of
credit.

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ITEM 2. DESCRIPTION OF PROPERTY

We currently rent office space at 12300 Wilshire Boulevard, Los Angeles,
California from an unaffiliated third party, pursuant to a 36 month lease that
began on May 15, 1995 and was extended for an additional 12 months. The lease
terminates on May 14, 1999, and we have begun discussions to extend the lease.
We rent approximately 4,600 square feet at a monthly rate of $2.10 per square
foot. Mr. Levin has personally guaranteed the obligations under the lease. We
believe that our current offices are adequate for our requirements, and that
additional space, if required, is available throughout the Los Angeles area at
commercially reasonable rates.

ITEM 3. LEGAL PROCEEDINGS

In April 1998, we were served with a complaint in a matter styled Program
Power Entertainment, Inc. vs. Team Communications Group, Inc., filed in Superior
Court for the County of Los Angeles. In the complaint, the Plaintiff, a producer
of four hours of programming (the "Programs") distributed internationally by us,
alleges, among other things, that we failed to use our best efforts to maximize
income from the distribution of the Programs by licensing the Programs in
conjunction with other producers' programs, allocating revenues from such
licenses among the Programs in conjunction with other producers' programs,
allocating revenues from such licenses among the producers to the detriment of
the Plaintiff, and that we failed to properly account to the Plaintiff for such
revenue. The complaint seeks an accounting and damages as may be established at
trial. We have filed an answer in this action, and intend to vigorously defend
ourselves.

In January 1999, we were served with a complaint in a matter styled Mel
Giniger & Associates vs. Team Communications Group, Inc. et al filed in the
Superior Court of the County of Los Angeles. In the complaint, the Plaintiff, an
individual who served and continues to serve as a sales agent for us, alleges
that he is owed commissions for sales of certain of our programming and that we
have failed to pay in full the amounts Plaintiff alleges are owed to him. The
complaint seeks damages for breach of contract, services rendered, account
stated and for payment of value for services rendered. We have filed an answer
in this action, and intend to vigorously defend ourselves.

In March 1999, we were served with notice of a Demand for Arbitration in a
matter styled Venture Management Consultant, LLC and TEAM Communications Group,
Inc. et al. with the American Arbitration Association. The demand stems from a
dispute between the parties concerning a consulting agreement to provide
investment banking services. We have filed an answer in this action, and intend
to vigorously defend ourselves.

We are also aware of a claim being asserted by Chase Financing Ltd. in the
amount of $356,000 allegedly due and owing to the claimant pursuant to various
consulting agreements with which we believe we received absolutely no services
or value. This matter has not been submitted to any form of dispute resolution,
and, in the event that it is, we intend to vigorously defend ourselves.

At this time, the outcome of any of the above matters cannot be determined
with any certainty.

ITEM 4. SUBMISSION OF MATTERS TO VOTE OF SECURITY HOLDERS

No matters were submitted to a vote of our security holders during the
fourth quarter of the fiscal year ended December 31, 1998.

8
<PAGE> 10

PART II

ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

MARKET INFORMATION

Our Common Stock began to trade on the NASDAQ SmallCap Market under the
symbol "TMTV" in July, 1998.

The following table sets forth the high and low last sales prices as
reported on the NASDAQ SmallCap Market for the time period that our Common Stock
has been publicly traded.

<TABLE>
<CAPTION>
SALES PRICES FOR
COMMON STOCK
----------------
QUARTER ENDING HIGH LOW
-------------- ------ ------
<S> <C> <C>
September 30, 1998.......................................... 5.00 1.563
December 31, 1998........................................... 2.75 1.469
</TABLE>

HOLDERS

The approximate number of record holders of our Common Stock as of April 9,
1999, was 47, as well as 55 in street name.

DIVIDENDS

We have never paid cash dividends on our Common Stock. We anticipate that
any future earnings, of which there is no assurance, will be retained for
development of our businesses, and, therefore, it can be expected that no
dividends on our Common Stock will be declared in the foreseeable future.

RECENT SALES OF UNREGISTERED SECURITIES

(a) Between September 1998 and January 1999 we issued shares of our Common
Stock to the following individuals and entities: (i) Fifty Nine Thousand
(59,000) shares to Delbert Reedy, an individual ("Reedy") (the "Reedy Shares"),
pursuant to the conversion of that certain promissory note, dated May 29, 1998,
payable to Reedy in the amount of Fifty Thousand Dollars ($50,000) (the "Reedy
Note"); (ii) Fifty Nine Thousand (59,000) shares to the Carter Family Trust
("Carter") (the "Carter Shares"), pursuant to the conversion of that certain
promissory note, dated May 29, 1998, payable to Carter in the amount of Fifty
Thousand Dollars ($50,000) (the "Carter Note"); (iii) Thirty One Thousand
(31,000) shares to Claudio Nessi, an individual ("Nessi") (the "Nessi Shares"),
pursuant to that certain promissory note, dated June 18, 1998 , payable to Nessi
in the amount of Fifty Thousand Dollars ($50,000) (the "Nessi Note"), (iv) 1,000
shares for Dr. Michael Berlin in connection with certain accommodations made to
Dr. Michael Berlin (the "Berlin Shares") and (v) 50,000 shares (the "Marathon
Shares") to Marathon Consulting, Inc. ("Marathon") and 283,000 shares (the "IRS
Shares") to Investor Relations Services, Inc. ("IRS") (collectively, the
Marathon Shares and the IRS Shares are referred to herein as the "IR Shares") in
connection with the Consulting Agreement, dated as of November 17, 1998 with
Investor Relations Services, Inc. (The Reedy Shares, the Carter Shares, the
Nessi Shares, the Berlin Shares, and IR Shares the are hereinafter sometimes
collectively referred to as the "Shares," and Reedy, Carter, Nessi, Berliner,
Marathon and IRS are hereinafter sometimes collectively referred to as the
"Recipients"). The issuance of the shares to the Recipients were made pursuant
to non-public transactions with existing security holders or service providers,
and were exempt from registration under Section 4(2) of the Securities and
Exchange Act of 1933, as amended.

(b) On January 30, 1999, we entered into a Securities Purchase Agreement
(the "Securities Purchase Agreement") with Austinvest Anstalt Balzers, Esquire
Trade & Finance Inc., Amro International, S.A. and Nesher Inc. (collectively,
the "Purchasers") pursuant to which we agreed to sell up to and issue to the
Purchasers, and the Purchasers agreed to purchase from us, an aggregate
principal amount of up to $2,000,000 of 8% Convertible Debentures (the
"Debentures") and Warrants (the "Warrants") to purchase up to 200,000 shares of
Common Stock. The sale is to take place in up to four separate trades, the first
of which (the "Initial

9
<PAGE> 11

Closing") occurred on January 30, 1999. On that date, we sold, for an aggregate
purchase price of $850,000, $850,000 principal amount of Debentures and 85,000
Warrants.

The Debentures are convertible into shares of Common Stock at the option of
the Purchasers at any time after the Initial Closing. The conversion price for
each Debenture in effect on any conversion date will be the lesser of (A) an
amount equal to 90% of the average per share market value for five consecutive
trading days immediately prior to the Initial Closing date or (B) an amount
equal to 85% of the per share market value for the trading day having the lowest
per share market value during the five trading days prior to the conversion
date. Purchasers effect conversions by surrendering the Debentures to be
converted, together with the form of conversion notice attached thereto. If not
otherwise converted, the Debentures mature on January 27, 2002. The Warrants are
exercisable at an exercise price equal to 110% of the Per Share Market Value as
of the last Trading Day prior to the date of the issuance of the Warrants. This
price, which is subject to adjustment in the event of certain dilutive events,
was $1.96 as of the Initial Closing. The Warrants expire three years after their
date of issuance.

Without shareholder approval, we cannot issue securities representing more
than 20% of our outstanding shares of Common Stock at a price below market value
or book value pursuant to applicable NASDAQ rules. We intend to immediately seek
shareholder approval ("Shareholder Approval") at a meeting of our shareholders
held in accordance with our articles of incorporation and by-laws, for the
issuance by us of all of the shares of Common Stock potentially called for as a
consequence of the conversion of the Debentures into shares of Common Stock at a
price less than the greater of the book or market value on the Original Issue
Date as and to the extent required pursuant to Rule 4460(i) of The NASDAQ Stock
Market, Inc.'s Marketplace Rules (or any successor or replacement provision
thereof). If on the Conversion Date applicable to any conversion, (A) the Common
Stock is then listed for trading on the NASDAQ National Market, the New York
Stock Exchange, the American Stock Exchange or The NASDAQ SmallCap Market, (B)
the Conversion Price then in effect is such that the aggregate number of shares
of Common Stock that would then be issuable upon conversion of all the
outstanding Debentures, together with any shares of Common Stock previously
issued upon conversion of Debentures, would equal or exceed 20% of the number of
shares of Common Stock outstanding on the Original Issue Date, and (C) we have
not previously obtained Shareholder Approval from our shareholders, may cause us
to be subject to financial penalties, as well as being required to issue
additional shares of Common Stock. Similar penalties apply in the event that we
cannot effectuate the filing of the Registration Statement in a timely fashion.

We have retained the right to redeem the Debentures at a price equal to
115% of the principal amount thereof, if the price of the our Common Stock
trades at a price of $1.50 or less per share for a specified period of trading.
The Purchasers have agreed, subject to certain limitations, that they will not
engage in any "short sales" of the Company's Common Stock. The issuance of the
shares to the Recipients were made pursuant to non-public transactions with
existing security holders or service providers, and were exempt from
registration under Section 4(2) of the Securities and Exchange Act of 1933, as
amended.

(c) On March 19, 1999, we entered into a Securities Purchase Agreement,
dated as of February 23, 1999 (the "Securities Purchase Agreement") with VMR
Luxembourg, S. A., Chateau Woltz, 34 Rue Neuve, Remich, L5560 Luxembourg,
pursuant to which we agreed to sell up to and issue to the Purchasers, and the
Purchasers agreed to purchase from the Company, an aggregate principal amount of
up to $1,000,000 of 8% Convertible Debentures (the "Debentures") and Warrants
(the "Warrants") to purchase up to 100,000 shares of Common Stock. The sale
(referred to herein as the "VMR Sale") is to take place in up to two separate
sales, the first of which (the "Initial Closing") occurred on March 16, 1999. On
that date the Company sold, for an aggregate purchase price of $500,000,
$500,000 principal amount of Debentures and 50,000 Warrants. An additional
second sale of $500,000 was subscribed for on April 7, 1999. The purchasers have
also indicated they intend to convert their debentures into Common Stock.

The terms of the Debentures and Warrants are substantially similar to the
Debentures and Warrants issued on January 29, 1999. The holders of those
Debentures (the "Original Purchasers") have consented to this sale, and have
agreed to increase the overall size of that offering to $3,000,000. The Original
Purchasers

10
<PAGE> 12

have agreed that the registration of the underlying securities must now be
completed by May 31, 1999 , and that a special meeting of shareholders, if
necessary, must be held by April 30, 1999.

Pursuant to the terms of the Securities Purchase Agreement, and a related
registration rights agreement, we are obligated to file a registration statement
with respect to the shares issuable upon conversion of the debentures and the
shares issuable upon exercise of the Warrants, which Registration Statement must
be declared effective, as indicated above, no later than May 31, 1999.

Beginning on the date on which the initial registration statement (the
"Registration Statement") is filed with the Securities and Exchange Commission
(the "Commission"), we have the right to deliver a written notice to the
Original Purchasers requiring the Purchasers to purchase an additional $350,000
aggregate principal amount of Debentures and Warrants to purchase an additional
35,000 shares of Common Stock for an aggregate purchase price of $350,000.
Subject to the terms and conditions set forth in Section 4.2 of the Securities
Purchase Agreement, and elsewhere in the Securities Purchase Agreement and
beginning on the date that the Registration Statement is declared effective by
the Commission, we have the right to request that the Original Purchasers
purchase an additional $400,000 aggregate principal amount of Debentures and
Warrants to purchase an additional 40,000 shares of Common Stock for an
aggregate purchase price of $400,000. The issuance of the shares to the
foregoing recipients were made pursuant to non-public transactions with existing
security holders or service providers, and were exempt from registration under
Section 4(2) of the Securities and Exchange Act of 1933, as amended.

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

FORWARD LOOKING STATEMENTS

This Management's Discussion and Analysis of Financial Conditions and
Results of Operations contains certain "forward-looking statements" as defined
in the Private Securities Litigation Reform Act of 1995. Such statements
relating to future events and financial performance are forward-looking
statements involving risks and uncertainties that are detailed from time to time
in our various Securities and Exchange Commission filings. Our actual results
could differ materially from those anticipated in these forward-looking
statements as a result of uncontrollable factors. The following discussion
should be read in conjunction with the Consolidated Financial Statements and
Notes thereto appearing elsewhere in this 10KSB.

RESULTS OF OPERATIONS

For the year ended December 31, 1998, we reported net earnings before
extraordinary items of approximately $474,700 on total revenues of approximately
$13,581,900 compared to net earnings before extraordinary items of approximately
$447,100 on total revenues of approximately $6,875,600 for the same period ended
December 31, 1997. For the year ended December 31, 1998, we reported net
earnings of $405,200 (net of an income tax benefit of $37,500 and after an
extraordinary loss from the early extinguishment of $69,500 of debt) compared to
$447,100 for same period ended December 31, 1997. No extraordinary items were
reported for the year ended December 31, 1997.

11
<PAGE> 13

Revenues for the year ended December 31, 1998 were comprised of
approximately $6,672,700 on sales and availability for "Total Recall -- 2070"
produced by us and Alliance/Atlantis, approximately $2,755,300 for the sale of a
movie of the week produced by us, "Earthquake in New York" to Fox Family
Channel, approximately $1,527,900 on sales for our reality based series "Amazing
Tails", approximately $882,000 on sales of satellite rights of the Australian
television series "Water Rats", and approximately $1,744,000 on sales of other
library product acquired by us. For the year ended December 31, 1998,
approximately 26 percent of revenues were attributable to sales to customers
outside North America, i.e. United States and Canada. Revenues for the year
ended December 31, 1997, were comprised of approximately $1,975,500 on sales of
our reality based series "Amazing Tails", approximately $1,250,000 on sales of
"Water Rats", approximately $2,460,000 on sales of movies acquired by us and
approximately $1,190,100 on sales of other reality based programming acquired by
us. For the year ended December 31, 1997, approximately 80 percent of revenues
were attributable to sales to customers outside North America. Within the
foreign market, allocations among the four principal geographic regions in which
we do business, Europe, Asia and Australia, South America and Africa, vary from
period to period. The variations in revenues relate to the type of product being
offered, as well as local economic trends and conditions, and the emergence of
multiple broadcasting channels in the applicable territory. See Note 9 to the
Consolidated Financial Statements for a breakdown of the geographic distribution
of sales of our product.

Cost of revenues was $9,076,000 for the year ended December 31, 1998 as
compared to $2,355,300 for the year ended December 31, 1997. The costs primarily
relate to amortization of production costs of television programming for which
revenue was recognized during the respective period. Cost of revenues increased
due to the increase in revenues.

Gross profit margin on sales of television programming for the year ended
December 31, 1998 was 33 percent compared to 66 percent for the period ended
December 31, 1997. The lower gross profit margin for the year ended December 31,
1998 was due to our producing and selling original programming as opposed to
primarily selling previously produced programming. We co-produced our first
drama series "Total Recall -- 2070" with Alliance/Atlantis. Production of drama
series such as "Total Recall -- 2070" are more expensive than the reality based
programming we had produced and acquired in 1997. Original programming generally
has higher amortization rates in its initial cycle until it demonstrates
audience acceptance. However, a successful drama series will be worth
substantially more than reality based programming in ancillary markets.

General and administrative expenses were approximately $3,274,100 for the
year ended December 31, 1998 as compared to $3,244,900 for the year ended
December 31, 1997. Included in general and administrative expenses was $664,000
as an allowance for doubtful accounts for the year ended December 31, 1998
compared to $1,115,600 for the year ended December 31, 1997. Subtracting the
effect from the allowance of doubtful, general and administrative expenses was
$2,610,000 for the year ended December 31, 1998 compared to $2,129,300 for the
year ended December 31,1997. The increase is primarily due to additional staff
hired in 1998 to focus on development of new television programming.

Interest expense was $902,600 for the year ended December 31, 1998, as
compared to $1,040,100 for the year ended December 31, 1997. The decrease is due
to the retirement of debt from the proceeds of our initial public offering.

Interest income was $202,900 for the year ended December 31, 1998 as
compared to $211,800 for the year ended December 31, 1997.

Earnings before extraordinary items increased $27,000 to $474,700 for the
year ended December 31, 1998 as compared to $447,100 for the year ended December
31, 1997. The increase is attributable to an increase in sales as discussed
above.

All $4,736,700 included in receivables as of December 31, 1998, are due
from entities domiciled outside the United States. These receivables represent
approximately 28 percent of our total assets. We have established $337,000 as an
allowance for doubtful accounts as of December 31, 1998. We believe the
allowance for doubtful accounts is adequate and we have adequate resources to
collect our trade receivables.

12
<PAGE> 14

Any difficulty or delay in the collection of these receivables beyond the
allowance for doubtful accounts already established by us would have a material
adverse effect on us.

LIQUIDITY AND CAPITAL RESOURCES

The entertainment industry is highly capital intensive. As of December 31,
1998, we had a liquidity deficit of ($3,718,300). Liquidity deficit is defined
as cash and cash equivalents plus accounts receivables (net), and due from
officer less accounts payable, line of credit, notes payable, accrued expenses
and other liabilities, deferred revenue, accrued participation, shareholder
loans and notes payable and accrued interest.

We have financed our operations from our own sales and production
activities, notes payables, lines of credit and loans from our shareholders. On
July 29, 1998, we completed an initial public offering, raising $5,744,700 (net
of offering expenses including underwriters discounts, fees and expenses, of
$1,597,800). These proceeds were used to repay approximately $5,273,600 of debt.
Since our initial public offering, our sales and collections have been less than
anticipated. Also, we have elected to use our resources to retire expensive debt
with the anticipation of acquiring additional interim financing. Remaining notes
payables, lines of credit and loans from our shareholders aggregate $4,449,900
as of December 31, 1998, including $530,900 in accrued interest.

Despite our public offering, our operations have been hurt by ongoing
capital shortages caused by a slowness in collecting receivables and the
inability to complete a long term banking relationship. Despite these problems,
we have attempted to address our capital requirements by (i) selling up to
$3,000,000 in convertible debt, $1,350,000 of which has been subscribed for,
(ii) entering into a letter of intent to complete an offering of our common
stock on the German Bourse market, and (iii) entering into an agreement with an
investment banking firm to provide up to $3,000,000 of additional debt financing
as a bridge to the German Offering.

As of March 31, 1999 we had indebtedness and related accrued interest of
$5,350,000, including notes payable of $3,453,600 of which all matures within
one year, accrued interest of $596,400, $850,000 outstanding on a revolving line
of credit and $450,000 outstanding on a shareholder loan. As of March 31, 1999,
we had cash and accounts receivable due to be collected within one year of
approximately $4,702,300. Included in such sums are amounts which have already
started to mature. We have approximately $2,655,000 principal amount of notes
which mature over the next 6 months, including $1,140,000 of notes which have
matured (or mature within the next two weeks) and are currently (or will shortly
be) in default. We are currently negotiating with these noteholders and have not
yet received any written action regarding the defaults under the notes. We
believe, however, that we will be able to cure these defaults by either
converting the notes to equity or raising additional financings to repay them.
Of the remaining debt, approximately $1,815,000 matures by September 30, 1999.
No assurance can be given that we will be able to effectuate any of the
foregoing alternatives, or that if we seek to extend such obligations or
refinance them, that such extensions or refinancing alternatives will be on
terms which are financially advantageous to us.

We continue to pursue financing and search for additional capital as
described above. We are continuing to explore a variety of financial
alternatives to increase our working capital, including increasing our line of
credit with a commercial bank, or pursuing other types of debt or equity
financing. No assurance can be given that such financing can be obtained or that
it will be on reasonably attractive terms.

Assuming the foregoing defaults are cured, we believe that our current
resources of cash, accounts receivable and available credit line will enable us
to operate at current expenditure levels through June 30, 1999. We further
believe that our projected cash flow from operations, with contemplated sales of
certain acquired programming, will be sufficient to permit us to conduct our
operations as contemplated for only the next 6 months, through September 30,
1999. Our belief is based upon certain assumptions, including assumptions
regarding the anticipated level of operations and overhead, the anticipated
sales of certain acquired programming, and anticipated expenditures required by
us for development and production of programming. If sales do not materialize
and financing is not completed by these dates, we will have to limit our
development and production activities, reduce our overhead spending, restructure
debt pay outs and take other cost reduction measures. Further, even if we
successfully raise additional financing, there is no assurance that we will be
profitable or maintain positive cash flow.
13
<PAGE> 15

RECENT ACCOUNTING PRONOUNCEMENTS

We have adopted SFAS No. 130 "Reporting Comprehensive Income" and SFAS No.
131 "Disclosures About Segments of an Enterprise and Related Information."
Adoption of these pronouncements did not materially affect our financial
statements.

In April 1998, Statement of Position 98-5 "Reporting on the Costs of
Start-Up Activities" ("SOP 98-5") was issued. SOP 98-5 provides guidance on the
financial reporting of start-up costs and organization costs. The SOP is
effective for financial statements for fiscal years beginning after December 15,
1998. We do not anticipate that the adoption of this statement will have a
material effect on our financial statements.

In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities", effective for fiscal years beginning after
June 15, 1999. We anticipate that due to its limited use of derivative
instruments, the adoption of SFAS No. 133 will not have a material effect on our
financial statements.

In October 1998, the FASB released an exposure draft of the proposed
statement on "Rescission of FASB Statement No. 53, Financial Reporting by
Producers and Distributors of Motion Picture Films." An entity that previously
was subject to the requirements of SFAS No. 53 would follow the guidance in a
proposed Statement of Position, "Accounting by Producers and Distributors of
Films." This proposed Statement of Position would be effective for financial
statements for fiscal years beginning after December 15, 1999 and could have a
significant impact on our results of operations and financial position depending
on its final outcome. We have not concluded on its impact given the preliminary
stages of the proposed Statement of Position.

YEAR 2000 COMPLIANCE

As has been widely reported, many computer systems process dates based on
two digits for the year of a transaction and are unable to process dates in the
year 2000 and beyond. Since our formation in 1995, we have installed new
information systems which are year 2000 compliant. Although we do not expect
Year 2000 to have a material adverse effect on our internal operations, it is
possible that Year 2000 problems could have a significant adverse effect on our
suppliers and their ability to service us and to accurately process payments
received.

14
<PAGE> 16

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 31, 1998, and the related
consolidated statements of income, shareholders' equity and cash flows for the
two years 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 required 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 financial position of Team
Communications Group, Inc. and subsidiaries at December 31, 1998 and the
consolidated results of its operations and its cash flows for the years ended
December 31, 1998 and 1997, 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 13, the Company
has had significant cash used by its operating activities, and has been
dependent on outside equity investors and lenders to finance those operations,
and certain notes payable are past due. Continuation as a going concern will be
dependent upon continued outside financing. 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 13 to the financial
statements. The financial statements do not include any adjustments that might
result from the outcome of these uncertainties.

/s/ STONEFIELD JOSEPHSON, INC.

STONEFIELD JOSEPHSON, INC.
CERTIFIED PUBLIC ACCOUNTANTS

Santa Monica, California
April 15, 1999

15
<PAGE> 17

ITEM 7. FINANCIAL STATEMENTS

TEAM COMMUNICATIONS GROUP, INC.

CONSOLIDATED BALANCE SHEET

ASSETS

<TABLE>
<CAPTION>
DECEMBER 31,
1998
------------
<S> <C>
Cash and cash equivalents................................... $ 1,027,700
Trade receivables, less allowance for doubtful accounts of
$337,000.................................................. 4,736,700
Television programming costs, less accumulated amortization
of $6,952,100............................................. 11,018,800
Due from officer............................................ 145,400
Fixed assets, net........................................... 16,400
Organizational costs and other assets....................... 82,700
-----------
Total Assets...................................... $17,027,700
===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Accounts payable, accrued expenses and other liabilities.... $ 1,679,400
Deferred revenue............................................ 472,900
Accrued participations...................................... 3,025,800
Line of credit -- Bank...................................... 1,114,000
Notes payable............................................... 2,305,000
Accrued interest............................................ 530,900
Shareholder note payable.................................... 500,000
-----------
Total Liabilities................................. 9,628,000
-----------
Commitments and contingencies
-----------
Shareholders' equity:
Preferred stock, no par value; 2,000,000 shares
authorized; no shares issued and outstanding........... --
Common stock, no par value; 18,000,000 shares authorized;
2,816,135 issued and outstanding....................... 1,000
Paid in capital........................................... 7,612,700
Treasury Stock............................................ (34,600)
Accumulated Deficit....................................... (179,400)
-----------
Total shareholders' equity........................ 7,399,700
-----------
Total liabilities and shareholders' equity........ $17,027,700
===========
</TABLE>

The accompanying notes are an integral part of these consolidated financial
statements.
16
<PAGE> 18

TEAM COMMUNICATIONS GROUP, INC.

CONSOLIDATED INCOME STATEMENT

<TABLE>
<CAPTION>
FOR THE YEAR FOR THE YEAR
ENDED ENDED
DECEMBER 31, 1998 DECEMBER 31, 1997
----------------- -----------------
<S> <C> <C>
Revenues................................................... $13,581,900 $6,875,600
Cost of Revenues........................................... 9,076,000 2,355,300
General and administrative expense......................... 3,274,000 3,244,900
----------- ----------
Earnings from operations................................... 1,231,900 1,275,400
Interest expense........................................... 902,600 1,040,100
Interest income............................................ 202,900 211,800
Other income............................................... -- --
----------- ----------
Earnings before income taxes............................... 532,200 447,100
Provision for income taxes, all current.................... 57,500 --
----------- ----------
Earnings before extraordinary item......................... $ 474,700 $ 447,100
Extraordinary (loss) from early extinguishment of debt (net
of income tax benefit of $37,500)........................ (69,500) --
----------- ----------
Net Earnings............................................... $ 405,200 $ 447,100
Basic earnings per common share............................ -- --
Earnings before extraordinary item......................... $ 0.26 $ 0.40
Extraordinary (loss)....................................... (0.04) --
----------- ----------
Net Earnings -- Basic...................................... $ 0.22 $ 0.40
=========== ==========
Weighted average number of shares outstanding basic........ 1,833,340 1,131,344
=========== ==========
Diluted earnings per share
Earnings before extraordinary item......................... $ 0.20 $ 0.25
Extraordinary (loss)....................................... (0.03) --
----------- ----------
Net Earnings -- Diluted.................................... $ 0.17 $ 0.25
=========== ==========
Weighted average number of shares outstanding diluted...... 2,434,017 1,821,800
=========== ==========
</TABLE>

The accompanying notes are an integral part of these consolidated financial
statements.
17
<PAGE> 19

TEAM COMMUNICATIONS GROUP, INC.

CONSOLIDATED STATEMENT OF CASH FLOWS

<TABLE>
<CAPTION>
FOR THE YEAR FOR THE YEAR
ENDED ENDED
DECEMBER 31, 1998 DECEMBER 31, 1997
----------------- -----------------
<S> <C> <C>
OPERATING ACTIVITIES:
Net income............................................... $ 405,200 $ 447,100
Adjustments to reconcile net income to cash used for
operating activities:
Depreciation and amortization....................... 12,600 13,100
Amortization of television programming costs........ 8,980,300 1,455,000
Allowance for doubtful accounts..................... 664,000 1,115,600
Additions to television programming costs........... (15,712,000) (2,186,200)
Amortization of notes payable discount.............. -- 372,000
Changes in assets and liabilities:
Decrease (increase) in trade receivables............ 1,340,100 (4,514,300)
Increase in organizational costs and other assets... 495,300 (433,100)
Increase (decrease) in accounts payable, accrued
expenses and other liabilities................... (1,553,700) 2,050,300
Increase in deferred revenue........................ (102,100) 570,500
Increase in accrued participations.................. 2,041,000 (443,600)
Increase (decrease) in accrued interest............. (367,400) 284,300
------------ -----------
Net cash used for operating activities........... (3,796,700) (1,269,300)
------------ -----------
INVESTING ACTIVITIES:
Decrease (increase) in due from officer.................. 50,100 (184,100)
------------ -----------
Net cash provided (used) for investing
activities..................................... 50,100 (184,100)
------------ -----------
FINANCING ACTIVITIES:
Proceeds from shareholder loan and notes payable......... -- 1,423,500
Proceeds from issuance of note payable and warrants...... 2,681,000 --
Proceeds from bank line of credit........................ 1,114,000 --
Principal payment on loan due to shareholder............. (240,000) (10,000)
Purchase treasury stocks................................. (34,600) --
Extraordinary charge for early retirement of debt........ 69,500 --
Principal payment of notes payable....................... (5,372,600) --
Issuance of common stock................................. 6,382,600 --
------------ -----------
Net cash provided by financing activities........ 4,599,900 1,413,500
------------ -----------
Net change in cash....................................... 853,300 (39,900)
Cash at beginning of period.............................. 174,400 214,300
------------ -----------
Cash at end of period.................................... $ 1,027,700 $ 174,400
============ ===========
Supplemental disclosure of cash flow information:
Interest paid............................................ $ 1,270,000 $ --
============ ===========
Income taxes paid........................................ $ 12,200 $ 4,000
============ ===========
</TABLE>

The accompanying notes are an integral part of these consolidated financial
statements.
18
<PAGE> 20

TEAM COMMUNICATIONS GROUP, INC.

CONSOLIDATED STATEMENT OF CASH FLOWS
SUPPLEMENTAL SCHEDULE OF NON CASH ACTIVITIES

<TABLE>
<CAPTION>
FOR THE FOR THE
YEAR ENDED YEAR ENDED
DECEMBER 31, 1998 DECEMBER 31, 1997
----------------- -----------------
<S> <C> <C>
Extinguishment of TPEG settlement payable by assignment of
the treasury stock receivable............................ -- 178,000
Issuance of warrants in conjunction with notes payable
(Note 8)................................................. 62,500 286,600
Issuance of shares in connection with conversion of notes
payable (Note 8)......................................... 53,600 --
Issuance of warrants in connection with services provided
to the Company........................................... 58,000 --
Issuance of shares in connection with extinguishment of
debt..................................................... 458,000 --
</TABLE>

The accompanying notes are an integral part of these consolidated financial
statements.
19
<PAGE> 21

TEAM COMMUNICATIONS GROUP, INC.

CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY

<TABLE>
<CAPTION>
COMMON STOCK RETAINED
--------------------- EARNINGS
NUMBER PAID IN TREASURY ACCUMULATED/
OF SHARES PAR VALUE CAPITAL STOCK (DEFICIT)
--------- --------- ---------- -------- ------------
<S> <C> <C> <C> <C> <C>
Balance at December 31, 1996............ 1,131,344 $1,000 $ 943,300 $ -- $(1,031,700)
Net Income for the Year
ended December 31, 1997............... -- -- -- -- 447,100
Issuance of warrants in connection with
private placement..................... -- -- 286,800 -- --
--------- ------ ---------- -------- -----------
Balance at December 31, 1997............ 1,131,344 $1,000 $1,230,100 $ -- $ (584,600)
Net Income for the Year
ended December 31, 1998............... -- -- -- -- 405,200
Issuance of shares in connection with
the initial public offering........... 1,500,000 -- 5,744,700 -- --
Issuance of shares in connection with
the extinguishment of debt............ 188,974 -- 458,000 -- --
Purchase of Treasury Stock.............. (17,000) -- -- (34,600) --
Issuance of debt with beneficial
conversion feature.................... -- -- 66,100 -- --
Conversion of debt to equity............ -- -- 50,000 -- --
Issuance of warrants for services....... -- -- 58,000 -- --
Exercise of warrants.................... 12,817 -- 5,800 -- --
--------- ------ ---------- -------- -----------
Balance at December 31, 1998............ 2,816,135 $1,000 $7,612,700 $(34,600) $ (179,400)
========= ====== ========== ======== ===========
</TABLE>

The accompanying notes are an integral part of these consolidated financial
statements
20
<PAGE> 22

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 dramatic and
reality-based television series, mini-series, animated series, programs,
specials, and made-for-television movies for telecast, exhibition or
distribution in the domestic and foreign television and home video markets. The
Company's primary focus is on developing and producing family drama and children
programming and reality based programming for both domestic and international
broadcast networks and cable channels such as Discovery's Animal Planet, the
Learning Channel, the Showtime Networks, Fox Family 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 four major customers accounted for approximately 69% of the
Company's total operating revenue for the year ended December 31, 1998. Sales to
four major customers accounted for approximately 88% of the Company's total
operating revenue for the year ended December 31, 1997.

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. Cash equivalents consist of interest-bearing securities with
original maturities of less than 90 days.

Included in cash and cash equivalents is an $860,000 certificate of
deposit. This certificate of deposit is restricted as it secures the Company's
revolving line of credit of $850,000 with Mercantile National Bank.

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

21
<PAGE> 23
TEAM COMMUNICATIONS GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

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.

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 $41,800 in accumulated depreciation at
December 31, 1998.

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.

Debt with Stock Purchase Warrants

The proceeds received from debt issued with stock purchase warrants is
allocated between the debt and the warrants, based upon the relative fair values
of the two securities. Fair value of the debt element of the financial
instrument is determined by discounting the future payments of principal and
interest, based upon management's estimate of its borrowing rate for similar
financial instruments of this risk (generally 25%), and the balance of the
proceeds is accounted for as additional paid in capital. The resulting debt
discount is amortized to expense over the term of the debt instrument, using the
effective interest method. In the event of settlement of such debt in advance of
the maturity date, a loss is recognized based upon the difference between the
then carrying amount (i.e., face amount less unamortized discount) and amount of
payment.

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 December 31, 1998 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
December 31, 1998 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.

Included in television program costs in development is one project with
aggregate capitalized costs of $451,600, the development of which commenced in
September of 1995. The Company continues to develop this program and pursue
production commitments. In the event the Company is unable to produce this
project, the Company may incur significant write-downs in the future.

22
<PAGE> 24
TEAM COMMUNICATIONS GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

Common Stock

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 reverse stock split for all periods
presented.

Concentration of Credit Risk

Three customers represented approximately 83% of the trade receivable
balance at December 31, 1998.

Net Earnings Per Common Share

For the years ended December 31, 1998 and December 31, 1997, the per share
data is based on the weighted average number of common and common equivalent
shares outstanding. For 1997, per share data is calculated in accordance with
Staff Accounting Bulletin of the Securities and Exchange Commission (SAB) No. 98
whereby common stock, options or warrants to purchase common stock or other
potentially dilutive instruments issued for nominal consideration must be
reflected in basic and diluted per share calculations for all periods in a
manner similar to a stock split, even if anti-dilutive. Accordingly, in
computing basic earnings per share, nominal issuances of common stock are
reflected in a manner similar to a stock split or dividend. In computing diluted
earnings per share, nominal issuances of common stock and potential common stock
are reflected in a manner similar to a stock split or dividend.

A portion of convertible debt was not included in the calculation of
weighted average shares because the Chairman and CEO has personally guaranteed
to the Company that, on certain debt, 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 this 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 SFAS 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.

Year 2000 Compliance

As has been widely reported, many computer systems process dates based on
two digits for the year of a transaction and are unable to process dates in the
year 2000 and beyond. Since the Company's formation in 1995, the Company has
installed new information systems which are year 2000 compliant. Although the
Company does not expect Year 2000 to have a material adverse effect on its
internal operations, it is possible that Year 2000 problems could have a
significant adverse effect on the Company's suppliers and their ability to
service the Company and to accurately process payments received.

23
<PAGE> 25
TEAM COMMUNICATIONS GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

New Accounting Pronouncements

The Company has adopted SFAS No. 130 "Reporting Comprehensive Income" and
SFAS No. 131 "Disclosures About Segments of an Enterprise and Related
Information". Adoption of these pronouncements did not materially affect the
financial statements.

Recent Pronouncements Effective Subsequent to 1998

In April 1998, Statement of Position 98-5 "Reporting on the Costs of
Start-Up Activities" ("SOP 98-5") was issued. SOP 98-5 provides guidance on the
financial reporting of start-up costs and organization costs. The SOP is
effective for financial statements for fiscal years beginning after December 15,
1998. The Company does not anticipate that the adoption of this statement will
have a material effect on its financial statements.

In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities", effective for fiscal years beginning after
June 15, 1999. The Company anticipates that due to its limited use of derivative
instruments, the adoption of SFAS No. 133 will not have a material effect on its
financial statements.

In October 1998, the FASB released an exposure draft of the proposed
statement on "Rescission of FASB Statement No. 53, Financial Reporting by
Producers and Distributors of Motion Picture Films". An entity that previously
was subject to the requirements of SFAS No. 53 would follow the guidance in a
proposed Statement of Position, "Accounting by Producers and Distributors of
Films." This proposed Statement of Position would be effective for financial
statements for fiscal years beginning after December 15, 1999 and could have a
significant impact on the Company's results of operations and financial position
depending on its final outcome. The Company has not concluded on its impact
given the preliminary stages of the proposed Statement of Position.

NOTE 3 -- TELEVISION PROGRAM COSTS:

Television program costs consist of the following:

<TABLE>
<S> <C>
In process and development.............................. $ 1,017,400
Released, less accumulated amortization................. 10,001,400
-----------
Total television program costs................ $11,018,800
===========
</TABLE>

Based on management's estimates of future gross revenue as of December 31,
1998, approximately 63% of the $11,018,800 in unamortized released television
program costs will be amortized during the three years ending December 31, 2001
and 80% will be amortized during the five years ending December 31, 2003.

NOTE 4 -- INCOME TAXES:

Deferred taxes result from temporary differences in the recognition of
expense for tax and financial statement reporting purposes.

24
<PAGE> 26
TEAM COMMUNICATIONS GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

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:

<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31,
1998 1997
------------ ------------
<S> <C> <C>
Statutory federal tax rate......................... 34% 34%
State income tax provision......................... 3% 0%
Benefits of operating loss carryforward............ (26)% (34)%
--- ---
Effective tax rate................................. 11% 0%
=== ===
</TABLE>

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:

<TABLE>
<S> <C>
Net operating loss (carryforward)........................... $ 61,156
Valuation allowance......................................... $(61,156)
--------
Net deferred tax asset.................................... $ --
--------
Total current and deferred taxes payable.................... $ --
========
</TABLE>

At December 31, 1998, the Company has a federal net operating loss
carryforward of $180,000.

NOTE 5 -- RELATED PARTY TRANSACTIONS:

The due from officer balance of $145,400 at December 31, 1998, represents
payments made by the Company on behalf of and short-term interest free loans
made to the Chairman and CEO, less producer's fees earned by the Chairman and
CEO for services on a company production.

The shareholder loan and note payable balance are comprised of the
following:

<TABLE>
<S> <C>
Promissory note:
12% secured promissory note due August 31, 1999(i)...... $500,000
--------
$500,000
========
</TABLE>

(i) In April 1995, the Company entered into a $500,000 promissory note with
a shareholder. The note accrues interest at 10% through December 31, 1995 and at
12% thereafter. The note and all unpaid interest is due August 31, 1999, as
amended. The note is secured by all of the Chairman and CEO's shares and the
assets of the Company. The shareholder has waived all accrued interest relating
to this note totaling $165,000 through March 31, 1998. Interest subsequent to
March 31, 1998 is accruing at prime plus two percent, currently 9.5%.

NOTE 6 -- COMMITMENTS AND CONTINGENCIES:

In April 1998, the Company was served with a complaint in a matter styled
Program Power Entertainment, Inc. vs. Team Communications Group, Inc., filed in
Superior Court for the County of Los Angeles. In the complaint, the Plaintiff, a
producer of four hours of programming (the "Programs") distributed
internationally by the Company, alleges, among other things, that the Company
failed to use its best efforts to maximize income from the distribution of the
Programs by licensing the Programs in conjunction with other producers'
programs, allocating revenues from such licenses among the Programs in
conjunction with other producers' programs, allocating revenues from such
licenses among the producers to

25
<PAGE> 27
TEAM COMMUNICATIONS GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

the detriment of the Plaintiff, and that the Company failed to properly account
to the Plaintiff for such revenue. The complaint seeks an accounting and damages
as may be established at trial. The Company has filed an answer in this action
and intends to vigorously defend itself.

In January 1999, the Company was served with a complaint in a matter styled
Mel Giniger & Associates vs. Team Communications Group, Inc. et al filed in the
Superior Court of the County of Los Angeles. In the complaint, the Plaintiff, an
individual who served and continues to serve as a sales agent for the company,
alleges that he is owed commissions for sales of certain of the Company's
programming and that the Company has failed to pay in full the amounts Plaintiff
alleges are owed to him. The complaint seeks damages for breach of contract,
services rendered, account stated and for payment of value for services
rendered. The Company has filed an answer in this action and intends to
vigorously defend itself.

In March 1999, the Company was served with notice of a Demand for
Arbitration in a matter styled Venture Management Consultant, LLC and TEAM
Communications Group, Inc. et al. with the American Arbitration Association. The
demand stems from a dispute between the parties concerning a consulting
agreement to provide investment banking services. The Company has filed an
answer in this action and intends to vigorously defend itself.

The Company is also aware of a claim being asserted by Chase Financing Ltd.
in the amount of $356,000 allegedly due and owing to the claimant pursuant to
various consulting agreements with the Company under which the Company asserts
it has received no services or value. This matter has not been submitted to any
form of dispute resolution, and, in the event that it is, the Company intends to
vigorously defend itself.

At this time, the outcome of any of the above matters cannot be determined
by the Company with any certainty. The Company is subject to the above mentioned
litigation and other various claims and lawsuits in the ordinary course of
business. In the opinion of management, the ultimate resolution of these matters
will not have a material adverse effect on the Company's financial condition,
results of operations or cash flows.

The Company leases office space and certain office equipment. The total
lease expense was $118,400 and $96,300 for the periods ended December 31, 1998
and December 31, 1997, respectively. The various operating leases to which the
Company is presently subject require minimum lease payments for the years ending
December 31, as follows:

NOTE 7 -- LINE OF CREDIT -- BANK

The Company has a $1,114,000 line of credit with its bank, secured by a
certificate of deposit and certain receivables, which accrues interest on the
outstanding balance at 1.75% over Merchantile Bank's certificate of deposit
rate. The agreement expires June 15, 1999.

26
<PAGE> 28
TEAM COMMUNICATIONS GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE 8 -- NOTE PAYABLE:

Notes payable consists of the following at December 31, 1998:

<TABLE>
<S> <C>
Private placements:
12% secured notes due August 1999(i).................. $ 225,000
10% secured convertible notes due August 1999(ii)..... 296,000
10% secured notes due August 1999(iii)................ 80,000
Promissory notes:
10% secured promissory note due August 1999(iv)....... 250,000
11% unsecured promissory note past due(v)............. 124,900
12% secured note due April 1999, past due(vi)......... 150,000
12% secured note due March 1999, past due(vii)........ 150,000
12% secured note due April 1999(viii)................. 350,000
18% secured note past due(ix)......................... 115,000
12% secured note due January 2000(x).................. 284,100
16% secured note due August 1999(xi).................. 30,000
10% secured note due March 1999, past due(xii)........ 250,000
----------
$2,305,000
==========
</TABLE>

In 1998, the Company recognized a $69,500 extraordinary loss as a result of
the early redemption of certain notes. The extraordinary loss consisted of the
write-off of the associated debt discount, net of income tax benefits of
$37,500.

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 stock on a fully diluted basis through an initial public
offering. The Company issued 188,974 shares of common stock upon conversion of
these notes plus accrued interest through the Company's initial public offering.

(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 $122,900 at December
31, 1998. 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, July 29, 1998, and terminating on
the July 29, 2001. Through this private placement, the Company raised
$900,000 and issued 115,351 warrants. Principal and interest were due no
later than July 15, 1998, $675,000 was redeemed at the initial public
offering. The remainder of the noteholders extended the maturity date to
August 1999. 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%, based upon management's estimate of its borrowing rate
in an arm's length transaction for a financial instrument of this risk. The
notes were discounted at this market rate. The value of the warrants
amounted to $162,000 and is included in paid in capital.

27
<PAGE> 29
TEAM COMMUNICATIONS GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(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, Von Graffenried AG, 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, July
29, 1998, 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, July 29, 1998, and terminating on July 29, 2001. As of December
31, 1996, the Company raised $975,000 and issued 83,308 warrants. Principal
and interest were due no later than July 15, 1998 and $679,000 was redeemed
at the initial public offering. The remainder of the noteholders extended
the maturity date to August 1999. The accrued interest balance was $108,500
at December 31, 1998. 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 $381,928 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 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 note payable with
interest of 10% per annum, payable at six month intervals, and 10,000
Common Stock Purchase warrants. In 1998 $889,000 was repaid. The maturity
date of the notes is August 1999. Each warrant entitles the holder to buy
one share of common stock at an exercise price of $0.97. 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 September 30,
1997, the Company raised $969,000 and issued 193,870 warrants. The accrued
interest balance was $41,100 at December 31, 1998. 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 $286,797 and is included in paid-in capital.

(iv) 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 August 20, 1999, as amended. At the initial public offering, $250,000
was repaid. The accrued interest balance was $124,200 at December 31, 1998.
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.

(v) 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 from October 1995
and required payments such that the note would be repaid by March 31,

28
<PAGE> 30
TEAM COMMUNICATIONS GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

1997. As of December 31, 1998, there was $29,700 of accrued interest.
During 1997, the Company made a $10,000 principal payment. During 1996, the
Company made a $30,250 payment, of which $15,125 was applied to the
principal balance, and $15,125 was applied to accrued interest. The holder
of the note has not filed a notice of default and the Company is
negotiating an extension of the payment terms.

(vi) In March 1998, the Company obtained a loan in the amount of
$150,000 from Arab Commerce Bank, which carries interest at 12% per annum
and matures on April 1, 1999. As of December 31, 1998 there was accrued
interest of $13,800. The note is secured by substantially all the assets of
the Company.

(vii) In March 1998, the Company obtained a loan in the amount of
$150,000 from Nick Kahla, which carries interest at 12% per annum and
matures on March 16, 1999. As of December 31, 1998, there was accrued
interest of $14,100. The note is secured by substantially all the assets of
the Company.

(viii) Between March 1998 and May 1998, the Company arranged $650,000
in short-term loans. $300,000 was repaid at the initial public offering.
These loans bear an interest rate of 12%, and $100,000 matures in March
1999 and $250,000 matures in April 1999. At December 31, 1998, the accrued
interest was $29,400.

(ix) In May 1998, the Company obtained a loan in the amount of
$115,000 from the High Bridge Fund. The loan includes a $15,000 loan
origination fee and begins to accrue interest at 18% per year if the loan
goes into default. At December 31, 1998, the accrued interest was $2,000.
The loan matured November 15, 1998 and management is currently negotiating
a settlement of this note.

(x) In May and June 1998, the Company arranged with nine parties for
$375,000 of long term loans. The loans mature January 2000. Of the
$375,000, there are two loan origination fees, one for $8,000 and one for
$8,500. Two notes are convertible at their principal and interest amount
into common stock of the Company at any time through maturity at the
conversion price of 50% of the current per share market value. One note is
convertible at its principal and interest amount into common stock of the
Company at the conversion price of 75% of the current per share market
value. These conversion features were valued at $62,500 and included in
paid in capital. The resulting discount on the notes payable is amortized
over the life of the note using the effective interest method. At December
31, 1998, $284,100 principal amount remained outstanding. The loans accrue
interest at 12% per annum. As of December 31, 1998, there was accrued
interest of $22,700.

(xi) In July 1998, the Company arranged a loan for $340,000. The loan
matures August 1999. The loan bears an interest rate of 16% per annum. At
December 31, 1998, $30,000 principal amount remained outstanding. As of
December 31, 1998, there was accrued interest of $11,100.

(xii) On December 29, 1998, the Company arranged a loan for $250,000.
The loan accrues interest at 10% per annum. The loan matures on March 31,
1999.

As of April 15, 1999 or within the next two weeks, the Company was or will
be in technical default in respect to obligations aggregating approximately
$1,140,000, exclusive of interest. The Company is currently negotiating with
these noteholders. The Company has not received any written action regarding
these defaults and the Company believes it will cure such defaults within the
first six months of 1999.

29
<PAGE> 31
TEAM COMMUNICATIONS GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE 9 -- 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:

<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31,
1998 1997
------------ ------------
<S> <C> <C>
North America..................................... $ 9,844,500 $1,383,600
Europe............................................ -- 307,100
South America..................................... 1,351,800 3,798,900
Asia.............................................. 1,412,900 136,000
Australia and Africa.............................. 972,700 1,250,000
----------- ----------
Total............................................. $13,581,900 $6,975,600
=========== ==========
</TABLE>

NOTE 10 -- 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 year ended December 31, 1998.

A summary of the Key Employee Plan as of and for the years ended December
31, 1998 and December 31, 1997 is presented below:

<TABLE>
<CAPTION>
WEIGHTED AVERAGE
KEY EMPLOYEE PLAN SHARES EXERCISED PRICE
----------------- ------- ----------------
<S> <C> <C>
Outstanding as of January 1, 1997.................... 35,000 $1.14
Granted............................................ -- --
Exercised.......................................... -- --
Forfeited/Expired.................................. -- --
-------
Outstanding as of December 31, 1997 and
December 31, 1998.................................. 35,000
=======
Weighted-average fair value of options outstanding... $ 1.14
=======
</TABLE>

30
<PAGE> 32
TEAM COMMUNICATIONS GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

The following table summarizes information about options outstanding at
December 31, 1998 and December 31, 1997:

<TABLE>
<CAPTION>
SHARES EXERCISABLE AT
DECEMBER 31, 1998, DATE
TOTAL SHARES EXERCISE PRICE DECEMBER 31, 1997 OPTIONS EXPIRE
------------ -------------- --------------------- --------------
<S> <C> <C> <C> <C>
30,000 $1.00 10,000 July 1, 2006
5,000 $2.00 5,000 June 6, 2006
------ ------
35,000 15,000
====== ======
</TABLE>

The Company has elected, as permitted by SFAS No. 123, "Accounting for
Stock Based Compensation", to account for its stock compensation arrangements
under the provisions of APB No. 25, "Accounting for Stock Issued to Employees".
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 SFAS 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 pro forma net income nor earnings per share are
presented.

During 1998, the Company granted 32,000 warrants exercisable at $2.75,
5,000 warrants exercisable at $3.50, 100,000 warrants exercisable at $1.62,
75,000 warrants exercisable at $3.00, 25,000 warrants exercisable at $3.25 and
10,000 warrants exercisable at $2.00 to five outside parties for services
provided to the Company. In addition, the Company granted 131,000 warrants
exercisable at $1.62 and 20,000 warrants exercisable at $2.45 to two outside
parties in connection with debt raised by the Company. The Company also granted
in aggregate 60,000 warrants exercisable at $2.50 to two outside members of its
board of directors.

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 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.

31
<PAGE> 33
TEAM COMMUNICATIONS GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE 11 -- SUBSEQUENT EVENTS:

On January 30, 1999, the Company agreed to sell up to $2,000,000 of 8%
Convertible Debentures and warrants to purchase up to 200,000 shares of common
stock. At that date, the Company sold $850,000 principal amount of these
debentures and 85,000 warrants.

On March 16, 1999, the Company agreed to sell up to $1,000,000 of 8%
Convertible Debentures and warrants to purchase up to 100,000 shares of common
stock. At that date, the Company sold $500,000 principal amount of these
debentures and 50,000 warrants. An additional second sale of $500,000 was
subscribed for on April 7, 1999.

The Convertible Debentures have the same terms. The conversion price for
each Debenture will be the lesser of (A) 90% of the average per share market
value for five consecutive days prior to the Initial Closing date or (B) 85% of
the per share market value for the trading day having the lowest per share
market value during the five trading days prior to the conversion date. If not
otherwise converted, the Debentures mature on January 27, 2002.

NOTE 12 -- INITIAL PUBLIC OFFERING:

During July 1998 the Company completed an initial public offering of
1,500,000 shares of its common stock at $5.50 per share, raising net proceeds of
approximately $5.7 million. A reconciliation of the use of proceeds with the
amounts set forth in the registration statement for the shares follows:

<TABLE>
<CAPTION>
PER REGISTRATION
STATEMENT ACTUAL
---------------- ----------
<S> <C> <C>
Offering proceeds................................ $8,250,000 $8,250,000
Underwriters discount (9%) and non-accountable
expense allowance (2%)......................... (907,500) (907,500)
Expenses of the offering......................... (928,700) (1,597,800)
---------- ----------
Net Proceeds..................................... $6,413,800 $5,744,700
========== ==========
Use of Proceeds:
Repayment of loans, including interest........... $4,553,000 $5,273,600
Acquisition of distribution rights............... 1,750,000 350,000
Corporate overhead and working capital........... 110,800 121,100
---------- ----------
$6,413,000 $5,744,200
========== ==========
</TABLE>

Expenses of the offering were greater than amounts set forth in the
registration statement due to additional travel and miscellaneous costs of
approximately $269,000 associated with presentations of the Company to
prospective investors in the United States and Europe, $140,000 in additional
legal and accounting expenses, and the use of an outside consultant for $260,000
to assist in selling the securities.

NOTE 13 -- GOING CONCERN:

The Company's financial statements for the years ended December 31, 1997
and December 31, 1998 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.

32
<PAGE> 34
TEAM COMMUNICATIONS GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

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. 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.

33
<PAGE> 35

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

No change in, or disagreement with, our independent auditors occurred
during the fiscal year ended December 31, 1998.

PART III

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

DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS

Our directors and executive officers, together with their respective ages
and positions with us, are as follows:

<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- -----------------------------------------------------------
<S> <C> <C>
Drew S. Levin........ 45 Chairman of the Board, Chief Executive Officer and Director
Jonathan D.
Shapiro............ 43 President, Chief Operating Officer and Director
Eric Elias........... 43 Senior Vice President, Business and Legal Affairs
Timothy A. Hill...... 32 Chief Financial Officer, Secretary
Declan O'Brien....... 33 Senior Vice President, Development
W. Russell Barry..... 63 Director(1)(2)
Michael Jay
Solomon............ 61 Director(1)(2)
</TABLE>

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

(2) Member of the Audit Committee.

The current officers and directors serve until the next annual meeting or
until their respective successors are elected and qualified. All officers serve
at the discretion of the Board of Directors. Certain information regarding the
backgrounds of each of the officers and directors is set forth below.

Drew S. Levin has been our President, Chief Executive Officer and Chairman
of the Board of since we were formed in 1995. With the hiring of Mr. Shapiro,
Mr. Levin relinquished the title of President. From 1987 through 1994, Mr. Levin
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 "Future Quest," for which Mr. Levin received an Emmy
Award, "Hollywood Stuntmakers," "FX Masters" and "Forces Beyond" for the
Discovery Network. Mr. Levin has extensive experience in international
co-productions, including co-producing a domestic and international version of
"Top of the Pops" with the British Broadcasting Company for the CBS television
network and the Montreux Rock Festival for the Showtime Network.

Jonathan D. (Jody) Shapiro has been President, Chief Operating Officer and
a Director since January 1, 1999. Before joining the Company, Mr. Shapiro was
employed at Harmony Holdings Inc., where he was Executive Vice President, as
well as President of Harmony Entertainment, Inc., from 1998 to 1999. During
1997, Mr. Shapiro was an independent consultant. From 1993 to December 1996, he
was President and Chief Executive Officer of CST Entertainment, Inc., where he
executive produced the award winning made for television movie "Wyatt Earp:
Return to Tombstone", as well as other series. From 1990 to 1993, Mr. Shapiro
was President of RHI Television Sales (formerly New Line Television
Distribution). From 1986 to 1990, he was at Qintex Entertainment, Inc., where he
served as both Executive Vice President of Qintex Telecommunications Group and
President of Hal Roach Studios Syndication, Inc. Mr. Shapiro began his career at
Telepictures Corporation, attaining the position of Senior Vice President of
Domestic Television.

Eric Elias has served in the capacity as Senior Vice President, Business
and Legal Affairs since our formation in 1995. Mr. Elias has previously served
as corporate counsel and general manager for a retail and

34
<PAGE> 36

wholesale leisure electronics firm and, for the past twelve years, has been in
general private practice of law, providing business and legal affairs services
for television production entities similar to the Company.

Timothy A. Hill has been Senior Vice President/Chief Financial Officer and
Secretary since August 18, 1998. Prior to joining the Company, Mr. Hill served
as Controller for Spelling Films, Inc. From 1994 to 1996, Mr. Hill was a Manager
for Price Waterhouse LLP, where he worked with entertainment, media and
communications clients. From 1989 to 1994, he was Manager with Arthur Andersen
LLP. Mr. Hill is a certified public accountant. He received a Bachelor's of
Science Degree in Accounting from Pepperdine University. Mr. Hill is a member of
the American Film Market Association, where he serves as Chairman of the Finance
Committee.

Declan O'Brien has been Senior Vice President, Development since April 13,
1998. For the past 5 years, Mr. O'Brien has worked for several television and
motion picture companies located at The Walt Disney Company Studios. From 1996
to 1998, Mr. O'Brien served as Director of Development at Goldenring
Productions. Prior to 1996, he was involved in production at Touchstone
Pictures. Mr. O'Brien holds a Bachelor of Arts degree from California State
University, Pomona, where he was graduated with honors.

Michael Jay Solomon has been a member of the Board of Directors since
August, 1998. Mr. Solomon has over 41 years experience in the entertainment
business. In 1978, Mr. Solomon founded Telepictures Corp., serving as its
Chairman of the Board and Chief Executive Officer. In 1985, Telepictures Corp.
merged with Lorimar Inc., with Mr. Solomon being appointed as the combined
companies' President. From 1989 to April 1994, Mr. Solomon was President of
Warner Bros. International Television, heading up that company's sales and
marketing to television, cable and satellite companies outside of the United
States. For the past four years, Mr. Solomon has been Chairman and Chief
Executive Officer of Solomon Broadcasting International, a television
communications company which he formed in April 1994. In 1997, Mr. Solomon
became the U.S. representative of Telefonica, Spain, in its new digital Pay TV,
Pay-Per-View and Basic Cable Television System -- Via Digital. Mr. Solomon
serves on the Boards of Directors of the International Council of the National
Academy of Television Arts and Sciences and the New York University Stern School
of Business.

W. Russell Barry has been a member of the Board of Directors since March
16, 1999. Mr. Barry has more than thirty years experience as a senior management
executive in broadcasting, television production, and worldwide distribution.
From 1961 to 1976, Mr. Barry worked for CBS and held various sales and
management positions including Vice President and General Manager of KNXT (CBS
owned station in Los Angeles). In 1976, he joined 20th Century Fox as Vice
President Network Sales and subsequently became President of 20th Century Fox
Television. Recruited in 1981 by Playboy Enterprises as President of their
production company, he negotiated a joint venture with Cablevision and launched
the Playboy Channel. From 1983 to 1986, he was President of Taft Entertainment
Television. In 1986, he was named President, and then in June of 1995, Chairman
of Turner Program Services, the television distribution company for Turner
Broadcasting. During those twelve years, his responsibilities included the
worldwide marketing and sales of CNN, the MGM library, Hanna Barbera and other
Turner programing. Currently, he is a partner in Bandit Films and consults for
several companies.

INVOLVEMENT IN CERTAIN LEGAL PROCEEDINGS

In January 1997, CST Entertainment, Inc., a publicly held company primarily
involved in the colorization of old "black and white" film material, filed for
federal bankruptcy protection in the Southern District of California. From 1993
to December 1996, Mr. Shapiro, our current President, Chief Operating Officer
and a director, was president, chief executive officer and a director of CST
Entertainment, Inc.

COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT

Based solely on a review of Forms 3 and 4 furnished to us since our initial
public offering in July 1998, 1 current director, Michael Joy Solomon, 1 prior
director, Seth Willenson, and 1 officer, Timothy A. Hill, inadvertently filed
their Forms 3s late.

35
<PAGE> 37

ITEM 10. 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, 1996, 1997 and 1998 by the Company's Chief
Executive Officer and the Company's other executive officer whose salary and
bonus exceeded $100,000 (the "Named Executive Officers"):

SUMMARY COMPENSATION TABLE

<TABLE>
<CAPTION>
STOCK ALL OTHER
NAME AND PRINCIPAL POSITION(1) YEAR SALARY BONUS OPTIONS COMPENSATION
------------------------------ ---- -------- -------- ------- ------------
<S> <C> <C> <C> <C> <C>
Drew S. Levin(5).............................. 1998 $220,000 $145,000
Chairman of the Board 1997 $220,000 $145,000
and Chief Executive Officer 1996 $350,000 $ 45,000(2) (3) $13,400(4)
</TABLE>

- ---------------
(1) Other than salary described herein, the Company did not pay the Named
Executive Officers any compensation, including incidental personal benefits
in excess of 10% of such individual Named Executive Officer's salary.

(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 Tails." During such period
Mr. Levin received $45,000 and, pursuant to the terms of his new employment
agreement (which became effective upon the closing of the public offering in
August 1998), has agreed to apply the balance of such accrued but unpaid
bonus ($175,000) to repay certain loans made to him by the Company. This
amount ($175,000) was reflected in Mr. Levin's compensation for fiscal 1998.
In the future, Mr. Levin will not receive production bonuses. The loan
balance is $147,241 as of the date hereof. Such amount is net of amounts
owed to Mr. Levin for accrued producer fees and the bonus effective April 1,
1998. See "Certain Relationships and Related Transactions."

(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 public offering price.
These options shall be deemed fully vested.

(4) Mr. Levin was entitled to receive a car allowance of $1,250 for 8 months and
$850 per month for 4 months.

(5) For the fiscal year ending December 31, 1998, the Company has granted Mr.
Levin a bonus, effective as of April 1, 1998, of $70,000 in respect of his
services for 1997. This amount is in addition to his agreed upon contractual
compensation. In addition, Mr. Levin received a bonus of $30,000 pursuant to
the terms of his employment agreement for the fiscal year ended December 31,
1998.

COMPENSATION OF DIRECTORS

Under the 1996 Directors Plan, Directors who are not are employees receive
annual option grants 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.

In October 1998, the Company agreed to seek amendments to the 1996 Plan,
and otherwise restate such plan, so that directors were each granted 30,000
options at the then effective exercise price of $2.50. The Company is currently
planning to submit such a plan to its shareholders.

EMPLOYMENT CONTRACTS AND TERMINATION OF EMPLOYMENT, AND CHANGE IN CONTROL
AGREEMENTS

DREW LEVIN. We have entered into an employment agreement with Mr. Levin
(the "Levin Agreement") providing for his services as President and Chief
Executive Officer effective January 1, 1997 through December 31, 2001. With the
hiring of Mr. Shapiro, Mr. Levin relinquished the title of President. Pursuant
to the Levin Agreement, Mr. Levin will receive a salary of $220,000, plus
$145,000 per annum as an advance against a pro-rata portion of producer's fees
earned by Mr. Levin (the "Annual Salary"). Producer's fees in

36
<PAGE> 38

excess of $145,000 will be retained by us. Mr. Levin has agreed that any
producer's fees relating to Company produced programming shall be allocated to
us. Pursuant to the Levin Agreement, Mr. Levin will receive: (i) from 5% to 7.5%
of our pre-tax profit beginning in 1997 pursuant to a formula based on specified
earnings levels (no such payments were made in 1997); and (ii) options to
acquire an aggregate of 85,000 shares of our 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.

The Levin Agreement also provides that if Mr. Levin dies or becomes unable
to perform his duties, functions and responsibilities for a period of 3
consecutive months or shorter periods aggregating 4 months within any 12 month
period, the Company may terminate Mr. Levin, in which case Mr. Levin or his
beneficiary shall be entitled to receive all of Mr. Levin's base salary, accrued
share of bonus for that fiscal year and thereafter for an additional one year
period. If the Company were to terminate Mr. Levin without cause, Mr. Levin
would be entitled to receive (i) a lump sum payment equal to the Annual Salary,
as well as unpaid vacation pay, unreimbursed business expenses and any other
monies payable to Mr. Levin under any employee benefit plan; (ii) the right to
obtain a transfer of any life insurance policy existing for the benefit of Mr.
Levin; and (iii) one half of the balance of the Annual Salary payable through
the end of then current term, as due and scheduled under the Levin Agreement as
if Mr. Levin had not been terminated, with a minimum payable of 1 year's Annual
Salary and a maximum payable of 2 years' Annual Salary.

JONATHAN D. (JODY) SHAPIRO. We have entered into an employment agreement
with Mr. Shapiro (the "Shapiro Agreement") providing for his services as
President and Chief Operating Officer, effective as of November 22, 1998. As
part of the Shapiro Agreement, the Company's management agreed to use its best
efforts to elect Mr. Shapiro as a Director of the Company. The term of the
Shapiro Agreement commenced January 1, 1999 and continues until December 31,
1999. If during such period Mr. Shapiro is successful in helping the Company to
raise a minimum of $3,000,000 in debt or equity financing, the Shapiro Agreement
will be extended for an additional 2 years. Mr. Shapiro is to be paid a base
salary of $220,000 per year, plus a bonus to be determined by the Compensation
Committee of the Board of Directors based upon his performance. In addition,
applied against such bonus will be 2% of the gross dollars raised through Mr.
Shapiro's efforts and 1% of the Company's post tax profits. Mr. Shapiro's bonus
shall be a minimum of $25,000 upon the successful completion of the initial
term. The minimum bonus shall increase to $30,000 for the second year and
$40,000 for the third year. Mr. Shapiro will be granted 90,000 stock options at
an exercise price of $1.65 per share, such options to vest ratably over the
first 2 years of his employment.

TIMOTHY A. HILL. We have entered into an employment agreement with Timothy
A. Hill (the "Hill Agreement") providing for his services as Senior Vice
President/Chief Financial Officer effective August 18, 1998. The term of the
Hill Agreement is for 1 year with the Company having an option to extend it for
1 additional year. Mr. Hill is to be paid a salary of $115,000 per year, plus a
minimum annual bonus of $10,000. Mr. Hill is to be granted 10,000 stock options
per year of service, to vest at the end of each year of service.

ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The following table sets forth, as of March 31, 1999, certain information
regarding the ownership of Common Stock by: (i) each person who is known by the
us to own of record or beneficially more than 5% of the outstanding Common
Stock; (ii) each of our directors; and (iii) each named executive officer; and
(iv) all

37
<PAGE> 39

directors and executive officers 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.

<TABLE>
<CAPTION>
AGGREGATE NUMBER PERCENT OF
OF SHARES BENEFICIAL SHARES
NAME AND ADDRESS(1) OWNED(2) OUTSTANDING
------------------- -------------------- -----------
<S> <C> <C>
Drew S. Levin(3)........................................ 684,123 21.3%
Joe Cayre(4)............................................ 263,617 8.3%
Michael Jay Solomon(5).................................. 50,000 *%
W. Russell Barry(6)..................................... 30,000 *%
Jonathan D. Shapiro(7).................................. 18,750 *%
All officers and directors as a group (8 persons)....... 23.9%
</TABLE>

- ---------------
* 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 Wedmore Corporation N.V. and the
conversion of the Conversion Note computed on a fully diluted basis.

(3) Includes 249,488 shares which Mr. Joseph 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 at an exercise price of $1.00 per share which the Company
granted to Mr. Levin concurrently with the execution of his Employment
Agreement.

(4) Includes options to purchase 48,743 shares of the Company's Common Stock at
an exercise price of $0.43 per share.

(5) Includes a warrant to purchase 30,000 shares of Common Stock at an exercise
price $2.50 per share.

(6) Includes a warrant to purchase 30,000 shares of Common Stock at an exercise
price $2.50 per share.

(7) Pursuant to Mr. Shapiro's employment agreement, he has been granted options
to purchase 90,000 shares of the Company's Common Stock at an exercise price
of $1.65 per share, of which 18,750 shares are exercisable within 60 days.

ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

SHORT TERM BORROWINGS BY MR. LEVIN; TRANSACTIONS WITH JOSEPH CAYRE; TRANSACTIONS
WITH ERIC ELIAS

SHORT TERM BORROWINGS BY MR. LEVIN. The Company had due from officer
balances of $145,400, $195,500 and $11,300 at December 31, 1998, December 31,
1997 and December 31, 1996, respectively, representing short-term interest free
loans made by the Company to Mr. Levin, less producer's fees earned for services
on a Company production. At December 31, 1998, December 31, 1997 and December
31, 1996, the amount of such loans owed by Mr. Levin to the Company (which also
represents the highest amount borrowed during such periods) was $145,400,
$195,500 and $11,300, respectively. As of March 31, 1999, the amount of such
loans is $170,400, with a majority of the disinterested members of the Board of
Directors having approved the additional $25,000 loan. Such amount is net of
amounts owed to Mr. Levin for accrued producer fees and bonus effective April 1,
1998. Any future borrowings by any officer of the Company will require the
approval of a majority of the disinterested members of the Board. There is no
interest being charged on the amount Mr. Levin owes the Company and there is no
interest accruing on the producer fees owed by the Company to Mr. Levin.

In connection with the Company's facilities, Mr. Levin has personally
guaranteed the obligations under the Company's lease through May 1999.

TRANSACTIONS WITH JOSEPH CAYRE. As of the date hereof, the Company was
indebted to Joseph Cayre, one of its original shareholders, in respect of a loan
made in April in the amount of $500,000 and Interest on

38
<PAGE> 40

this loan currently accrues at the prime rate established by Republic National
Bank, New York, New York, plus 2% per year. Mr. Cayre has waived the interest
that accrued on this loan prior to March 31, 1998. Mr. Cayre's loan is currently
secured by Mr. Levin's shares and all of the assets of the Company.

Mr. Cayre and Mr. Levin agreed that as of the closing of the Company's
initial public offering, Mr. Cayre would receive payment of $250,000 in respect
of the amounts owed to him, and the remaining debt of $500,000 would be extended
until August 31,1999. Subject to the foregoing, Mr. Levin and Mr. Cayre also
agreed to restructure Mr. Cayre's investment in the Company. Mr. Cayre agreed
that upon the closing of the Company's initial public offering, Mr. Cayre's
interest in the Company would be reduced to 214,874 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 entered into a consulting agreement with the
Company pursuant to which he was paid $260,000 for his consulting services to
the Company 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, which options are
exercisable at the time of the Company's initial public offering.

TRANSACTIONS WITH ERIC ELIAS. Mr. Elias, who serves as Senior Vice
President, Business and Legal Affairs, is paid through his private law firm. In
1997 Mr. Elias received approximately $125,000, including expense
reimbursements, for such legal services. In 1998, Mr. Elias received
approximately $170,000, including expense reimbursements, for such legal
services. On June 30, 1997, Mr. Elias was granted an option to purchase 12,500
shares of the Company's Common Stock at the Company's initial public offering
price of $5.50 per share.

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.

ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K

(a)(1) Financial Statements are included in Item 7, Part II of this report.

(a)(2) Exhibits:

Except as noted, all Exhibits, numbered as they were numbered for
filing as Exhibits to the Company's Form SB-2, Registration
Statement, No. 333-26307, effective July 29, 1998, are incorporated
herein by this reference to such Registration Statement.

(b) Reports on Form 8-K: None.

<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<C> <S>
3.1 Articles of Incorporation
3.2 By-laws of the Company
4.1 Form of Warrant Agreement March 1996
4.2 Form of Warrant Agreement May 1996
4.3 Form of Warrant Agreement February 1997
4.4 Form of Convertible Note March 1996 and related Security
Agreement
4.5 Form of Convertible Note May 1996 and related Security
Agreement
4.6 Form of Convertible Note February 1997
4.7.1 Extensions relating to South Ferry #2, L.P. Indebtedness
4.7.2 Extensions relating to Certain February 1996 Convertible
Notes
</TABLE>

39
<PAGE> 41

<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<C> <S>
4.8 Restated Joe Cayre Agreement
4.9 Agreement with AMAE Ventures, related note and Security
Agreement
4.10 Agreements re Total Recall Financing July 1996
4.11 Agreements re LoCoMoTioN Financing with South Ferry #2, L.P.
4.12 1996 Employee Stock Option Plan
4.13 1996 Directors Stock Option Plan
4.14 Form of Financial Advisory Agreement between National
Securities Corporation and the Company
4.15 Specimen Certificate
4.16 Form of National Securities Corporation's Warrant
4.17 Venture Management Consultants L.L.C., December 1997
Promissory Note
4.18 March through July Promissory Notes
4.19 Securities Purchase Agreement between the Company and
Austinvest Anstalt Balzers; Esquire Trade & Finance Inc.;
Amro International, S.A. and Nesher Inc.(3)
4.20 Form of Debenture(3)
4.21 Form of Warrant(3)
4.22 Form of Registration Rights Agreement between the Company
and Austinvest Anstalt Balzers; Esquire Trade & Finance
Inc.; Amro International, S.A. and Nesher Inc.(3)
10.1 Agreement with Mel Giniger
10.2 Agreement with Beyond Distribution PTY. Limited
10.3 Interpublic Group of Companies Contract
10.4 Employment Agreement, dated as of January 1, 1997, between
the Company and Drew Levin
10.5 Lease between the Company and TCW, amended as of March 20,
1998
10.6 Agreement with Alliance Production Ltd. re Total Recall
10.7 Interpublic -- Team Co-financing Agreement
10.8 Miramax Term Sheet
10.9 Agreement with Leucadia Film Corp.
10.10 Agreements with the Family Channel re Quake and Down Fall
10.11 Agreements with Discovery Communications, Inc., re Amazing
Tails II
10.14 Consulting Agreement, dated October 9, 1997, as amended as
of December 31, 1997, between the Company and Joseph Cayre
10.15 Letter of Intent to acquire Goldstar Entertainment(2)
10.16 Letter of Intent to list securities on the Neuer Market(2)
10.17 Letter of Resignation of Seth Williamson received March 26,
1999(2)
10.18 Employment Agreement, dated as of August 18, 1998 between
the Company and Timothy A. Hill(1)
10.19 Employment Agreement dated as November 22, 1998, between the
Company and Jonathan D. Shapiro(1)
21 Subsidiaries of the Registrant
27 Financial Data Schedule(1)
</TABLE>

40
<PAGE> 42

- ---------------
(1) Filed herewith.

(2) Incorporated by reference to the identical number in Registrant's Current
Report on Form 8-K dated March 29, 1999.

(3) Incorporated by reference to the Registrant's Current Report on Form 8-K
dated February 5, 1999.

41
<PAGE> 43

SIGNATURES

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

TEAM COMMUNICATIONS GROUP, INC.

By: /s/ DREW S. LEVIN

------------------------------------
Drew S. Levin,
Chairman of the Board of
Directors and Chief Executive
Officer

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

<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>

/s/ DREW S. LEVIN Chairman of the Board of Directors April 15, 1999
- --------------------------------------------- and Chief Executive Officer
Drew S. Levin

/s/ JONATHAN D. SHAPIRO President, Chief Operating Officer April 15, 1999
- --------------------------------------------- and Director
Jonathan D. Shapiro

/s/ MICHAEL JAY SOLOMON Director April 15, 1999
- ---------------------------------------------
Michael Jay Solomon

/s/ W. RUSSELL BARRY Director April 15, 1999
- ---------------------------------------------
W. Russell Barry

/s/ TIMOTHY A. HILL Senior Vice President, April 15, 1999
- --------------------------------------------- Chief Financial Officer
Timothy A. Hill and Secretary
</TABLE>

<PAGE> 1
EXHIBIT 10.18

August 18, 1998

Mr. Timothy A. Hill
1817 Pelham Avenue #101
Los Angeles CA 90025

Dear Mr. Hill:

Following are the basic deal points of the offer of employment to you from TEAM
Communications Group, Inc. ("TEAM"):

1. Start Date: August 18, 1998.

2. Term: One (1) year, with an option at TEAM's discretion for one (1)
additional year.

3. Title: Senior Vice President/Chief Financial Officer

4. Duties and Responsibilities: To perform the usual accounting and
financial functions typically associated with the position of a
controller, and such other related duties as may be assigned to you from
time to time. You will report to Mr. Drew Levin.

5. Compensation: (a) Salary payable at the rate of $115,000 per year, in
weekly installments on the Company's usual payroll schedule.

(b) You will also receive a minimum annual bonus of $10,000, to accrue
over the term of this agreement, and such other bonus as is determined
at the discretion of the compensation committee of the board of
directors.

6. TEAM will further reimburse you for preapproved expenses. Pre-approved
expenses will be reimbursed within the normal payables cycle, not to
exceed 30 days;

7. Vacations: You will accrue two (2) weeks of vacation the first year of
this agreement, and three (3) weeks for each year of service thereafter.

8. Benefits: You will receive health insurance as it is provided to other
employees, commencing at the beginning of the first full calendar month,
ninety (90) days after start of employment.

<PAGE> 2
Mr. Timothy A. Hill
August 18, 1998
Page 2

9. Exclusivity: You will be full time and exclusive to TEAM during the term
of employment.

10. Proprietary Information and Confidentiality: It is agreed that all
proprietary information, trade secrets and internal operations of TEAM,
including but not limited to the terms and conditions of this agreement,
shall remain confidential, except as the necessity arises to have this
agreement reviewed by attorneys, accountants or other professionals in
the ordinary and usual course of business. This confidentiality
provision will survive the term of employment.

11. Stock Options: You will participate in the Company's employee stock
option plan in the amount of 10,000 options per year of service, to vest
at the end of each year of this agreement, and pursuant to the terms of
the existing employee stock option plan.

Please review the above and indicate your acceptance thereof by signing, dating,
and returning a copy of this letter. We will thereafter prepare a more formal
employment agreement for signature. Until such time this letter agreement will
serve to memorialize the terms of your employment. Thank you.

Kind regards,

/s/ DREW S. LEVIN
- ------------------------------------
Drew S. Levin
President/ CEO

Agreed to and accepted:

/s/ TIMOTHY A. HILL Date: 8/20/1998
- ------------------------------------
Timothy A. Hill
Social Security No. ###-##-####

<PAGE> 1
EXHIBIT 10.19

December 22, 1998
As of November 22, 1998

Mr. Jonathan D. Shapiro
25439 Collette Way
Calabasas CA 91302

Dear Mr. Shapiro:

The following is to confirm the terms of your employment agreement with TEAM
Communications Group, Inc. ("TEAM"). This agreement is intended to replace in
its entirety any and all preexisting such agreements, oral or otherwise. The
terms are as follows:

1. Your title will be President & Chief Operating Officer. You will be
reporting to Drew S. Levin, Chairman and CEO. Management agrees to use
its best efforts and to vote its stock to secure an "inside"seat as
member of the board of directors of TEAM.

2. Your services will be exclusive to TEAM during the term of this
agreement.

3. Term: Start date to be concurrent with the closing of TEAM's next
financing in excess of $1,000,000 in the aggregate. The initial term,
once commenced, shall end December 31, 1999. Subject to your raising an
additional minimum of $3,000,000 in either debt or equity capital for
the company during the initial term, TEAM shall thereafter renew this
agreement for two (2) additional years.

4. Compensation: Base Salary to be at the rate of $220,000 per year,
payable in equal installments on the company's regularly scheduled
salary cycle. Plus, as a bonus, you shall receive an additional sum as
determined by the compensation committee of the board of directors, and
based on your performance. In any event, applied against this bonus will
be two per cent (2%) of the gross dollars raised through your efforts in
either debt or equity capital, and one per cent (1%) of the company's
post tax profits. Such bonus will have a floor of $25,000 upon the
successful completion of your initial term of employment, December 31,
1999. This floor will be increased to $30,000 upon the successful
completion of the first year of the option term and to $40,000 upon the
successful completion of the second year of the option term. This
minimum bonus compensation will be payable in quarterly installments,
within sixty (60) days of the end

<PAGE> 2

Mr. Jonathan D. Shapiro
December 22, 1998
As of November , 1998
Page 2

of each quarter.

5. You will be granted 90,000 stock options at $1.65 each, from the
employee stock option plan. These options will vest ratably over the
first two years of your employment.

6. You will receive office space, a parking space, reimbursement of all
reasonable pre-approved business expenses, three (3) weeks vacation per
year for the first year of this agreement, and four (4) weeks vacation
per year thereafter, and health insurance as it is provided to other
comparable executives. You will further receive an automobile allowance
of $600.00 per month, to commence with the start date of the initial
term. Upon successful completion of the first term, during your second
year of employment, this automobile allowance will be increased to
$800.00 per month.

7. In the event that you develop any programming which the company
produces, you will be eligible to receive on screen credit and
production fees, at terms no less favorable than any comparable
executive at TEAM. Any on screen credit will be subject to third party
buyer approval and any foreign subsidy or tax credit/shelter
requirements.

8. Results and Proceeds: All results and proceeds of your services to TEAM
shall be deemed a "work made for hire" and the sole, exclusive and
absolute property of TEAM for any and all purposes whatsoever in
perpetuity.

9. Confidentiality: You agrees that all proprietary information, trade
secrets and internal operations of TEAM, including but not limited to
the terms and conditions of this offer, shall remain confidential,
except as necessity arises to have this agreement reviewed by attorneys,
accountants or other professionals in the ordinary and usual course of
business. You also expressly agree that this confidentiality provision
will survive your employment, and continue to be binding upon you after
your employment with TEAM.

10. Termination for Cause: TEAM expressly reserves the right to terminate
your employment for dishonesty, incompetence, intoxication, drug
addiction, insubordination, and any violation of any rule or regulation
that may be established from time to time for the conduct of TEAM's
employees, for any failure of yours to perform any agreement, duty or
obligation of your employment under this Agreement. If TEAM discharges
you pursuant to the provisions of this section or for any reason
referred to, TEAM shall have the right in its sole discretion to give
you two (2) weeks notice, or two (2) weeks severance pay. There will not
be any additional notice requirement or severance pay necessary if your
employment is terminated as a result of the expiration of the term of
your contract.

<PAGE> 3

Mr. Jonathan D. Shapiro
December 22, 1998
As of November , 1998
Page 3

11. All other points not discussed shall be negotiated in good faith at the
appropriate time.

Please indicate your acceptance of, and agreement with, all of the above terms
and conditions by signing the attached copy of this letter and returning it to
me. We will thereafter prepare a more formal agreement incorporating the above
and other usual and customary terms and conditions.
Thank you.

Best Regards,

/s/ DREW S. LEVIN
- -------------------------
Drew S. Levin

DSL/

Agreed to and accepted:

Dated: December 11, 1998. /s/ JONATHAN D. SHAPIRO
-------------------------------
Jonathan D. Shapiro

-------------------------------
Social Security Number

<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED FINANCIAL STATEMENTS AS OF DECEMBER 31, 1999 AND FOR THE YEAR THEN
ENDED AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>

<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> DEC-31-1998
<CASH> 1,027,700
<SECURITIES> 0
<RECEIVABLES> 4,736,700
<ALLOWANCES> 337,000
<INVENTORY> 11,018,800
<CURRENT-ASSETS> 1,027,700
<PP&E> 16,400
<DEPRECIATION> 41,600
<TOTAL-ASSETS> 17,027,700
<CURRENT-LIABILITIES> 9,628,000
<BONDS> 0
0
0
<COMMON> 1,000
<OTHER-SE> 7,398,700
<TOTAL-LIABILITY-AND-EQUITY> 17,027,700
<SALES> 13,581,900
<TOTAL-REVENUES> 13,784,800
<CGS> 9,076,000
<TOTAL-COSTS> 12,350,000
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 902,600
<INCOME-PRETAX> 532,200
<INCOME-TAX> 57,500
<INCOME-CONTINUING> 474,700
<DISCONTINUED> 0
<EXTRAORDINARY> (69,500)
<CHANGES> 0
<NET-INCOME> 405,200
<EPS-PRIMARY> .22
<EPS-DILUTED> .17

</TABLE>