STUDIO CITY HOLDING CORP, SB-2/A, 1998-12-07

STUDIO CITY HOLDING CORP
SB-2/A, 1998-12-07
MOTION PICTURE & VIDEO TAPE PRODUCTION

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<PAGE> 1

AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON DECEMBER 7, 1998

REGISTRATION NO. 333-62551
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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AMENDMENT NO. 2

FORM SB-2
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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STUDIO CITY HOLDING CORPORATION
(NAME OF SMALL BUSINESS ISSUER IN ITS CHARTER)

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<S> <C> <C>
NEW YORK 7812 13-322-7032
(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER IDENTIFICATION
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) NO.)
</TABLE>

14400 SOUTHWEST 46TH COURT
OCALA, FLORIDA 34473
(352) 347-3947
(ADDRESS AND TELEPHONE NUMBER OF PRINCIPAL EXECUTIVE OFFICES)
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<S> <C>
COPY TO:
LARRY D. FAW DAVID J. LEVENSON
STUDIO CITY HOLDING CORPORATION MCGUIRE WOODS BATTLE & BOOTHE LLP
14400 SOUTHWEST 46TH COURT 1627 EYE STREET, NW
OCALA, FLORIDA 34473 WASHINGTON, DC 20006
(352) 347-3947 (202) 857-1757
</TABLE>

(NAME, ADDRESS AND TELEPHONE NUMBER OF AGENT FOR SERVICE)

APPROXIMATE DATE OF PROPOSED SALE TO THE PUBLIC:
As soon as possible after the Registration Statement becomes effective.

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

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

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

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

CALCULATION OF REGISTRATION FEE

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<CAPTION>
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PROPOSED MAXIMUM PROPOSED MAXIMUM
TITLE OF EACH CLASS OF SECURITIES TO BE AMOUNT TO OFFERING PRICE AGGREGATE AMOUNT OF
REGISTERED BE REGISTERED PER UNIT (1) OFFERING PRICE (1) REGISTRATION FEE
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<S> <C> <C> <C> <C>
Common Stock, $.002 par value.......... 27,482,001 $.002 $54,964 $16
Class B Preferred Stock, $.0001 par
value.................................. 3,825,834 .0001 $383 1
TOTAL.................................. 17
===================================================================================================================================
</TABLE>

(1) Estimated solely for purposes of calculating the registration fee.

(2) Calculated in accordance with Rule 457(g).
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THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRATION
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.

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<PAGE> 2

STUDIO CITY HOLDING CORPORATION

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CROSS REFERENCE SHEET

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<CAPTION>
FORM SB-2 ITEM CAPTION IN PROSPECTUS
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<C> <S> <C>
PART I
1. Front of Registration Statement and Outside
Front Cover of Prospectus..................... Cover Page; Outside Front Page of Prospectus
2. Inside Front and Outside Back Cover Pages of
Prospectus.................................... Inside Front and Outside Back Cover Pages of
Prospectus
3. Summary Information and Risk Factors............ Prospectus Summary; Risk Factors
4. Use of Proceeds................................. Use of Proceeds
5. Determination of Offering Price................. Determination of Offering Price
6. Dilution........................................ Not Applicable
7. Selling Security Holders........................ Selling Security Holders and Plan of
Distribution
8. Plan of Distribution............................ Selling Security Holders and Plan of
Distribution
9. Legal Proceedings............................... Not Applicable
10. Director, Executive Officers, Promoters and
Control Persons............................... Management; Principal Stockholders
11. Security Ownership of Certain Beneficial Owners
and Management................................ Principal Stockholders
12. Description of Securities....................... Description of Securities
13. Interest of Named Experts and Counsel........... Legal Matters; Experts
14. Disclosures of Commission Position on
Indemnification for Securities Act
Liabilities................................... Management -- Limitation of Liability and
Indemnification Matters
15. Organization Within Last Five Years............. Business
16. Description of Business......................... Business
17. Management's Discussion and Analysis or Plan of
Operation..................................... Management's Discussion and Analysis of
Financial Condition and Results of
Operations
18. Description of Property......................... Business -- Properties
19. Certain Relationships and Related
Transactions.................................. Certain Transactions
20. Market for Common Equity and Related Stockholder
Matters....................................... Not Applicable
21. Executive Compensation.......................... Management -- Executive Compensation
22. Financial Statements............................ Financial Statements
23. Changes in and Disagreements With Accountants on
Accounting and Financial Disclosure........... Not Applicable
PART II
24. Indemnification of Directors and Officers....... Indemnification of Directors and Officers
25. Other Expenses of Issuance and Distribution..... Other Expenses of Issuance and Distribution
26. Recent Sales of Unregistered Securities......... Recent Sales of Unregistered Securities
27. Exhibits........................................ Exhibits
28. Undertakings.................................... Undertakings
</TABLE>
<PAGE> 3

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

SUBJECT TO COMPLETION, DATED DECEMBER 7, 1998

PROSPECTUS

STUDIO CITY HOLDING CORPORATION

27,482,001 SHARES OF COMMON STOCK

3,825,834 SHARES OF CLASS B PREFERRED STOCK

This securities of Studio City Holding Corporation, a New York corporation
(together with its subsidiaries, the "Company") to which this Prospectus relates
are: (i) 27,482,001 shares (the "Shares") of Common Stock, $.002 par value (the
"Common Stock) and (ii) 3,825,834 shares of Class B Preferred Stock, $.0001 par
value per share (the "Class B Preferred Stock"), all of which securities are to
be offered and sold from time to time by and on behalf of the holders of such
securities, referred to herein as "Selling Security Holders." The names of such
Selling Security Holders and their respective holdings are set forth in Appendix
A under "Selling Security Holders."

The securities of the Company to which this Prospectus relates were issued
without compliance with the registration provisions of the Securities Act of
1933 in reliance upon exemptions therefrom the Company believed were available.
Since the exemptions from registration relied upon by the Company may not have
been available, by virtue of the relatively large number of persons involved,
the Company is effecting registration of all such securities in the Registration
Statement of which this Prospectus is a part, so that the holders of the
securities, most of whom acquired their securities more than two years ago, may
publicly offer and sell their securities freely and without limitation (unless
they are "affiliates" of the Company). None of the proceeds from the sale of the
securities by the Selling Security Holders pursuant to this Prospectus will be
received by the Company. The securities may be offered by the Selling Security
Holders from time to time in transactions for their own accounts in the
over-the-counter market in negotiated transactions, at negotiated prices, in
that there is no established trading market for such securities. The Selling
Security Holders may effect such transactions by selling to or through
broker-dealers, and such broker-dealers may receive compensation in the form of
discounts, concessions or commissions from the Selling Security Holders or the
purchasers of the securities for whom/which such broker-dealers may act as agent
or to whom/which they sell as principal, or both (which compensation as to a
particular broker-dealer might be in excess of customary commissions).

The Selling Security Holders and any broker-dealers that act in connection
with the sale of the securities may be deemed to be "underwriters" within the
meaning of Section 2(l1) of the Securities Act and any commissions received by
them and any profit on the resale of the securities as principal might be deemed
to be underwriting compensation under the Securities Act.

The holders of Class B Preferred Stock have no voting rights except as
required by law. The holders of Class B Preferred Stock are entitled to receive,
out of funds legally available therefor, cumulative preferential dividends at
the rate of 12% per annum per share, based on earnings. Shares of Class B
Preferred Stock may be converted into shares of Common Stock on the basis of one
share of Class B Preferred Stock for ten shares of Common Stock. See
"Description of Securities."

There is currently no public trading market for any securities of the
Company and there can be no assurance that any such market will develop in the
future. In that there is no public trading market, the estimated offering prices
for the securities set forth in the table below have been arbitrarily determined
by the Company as the par value of such securities and may not be indicative of
the negotiated prices at which such securities may be offered or sold by the
Selling Security Holders.

THESE SECURITIES ARE SUBJECT TO A HIGH DEGREE OF RISK.
POTENTIAL PURCHASERS SHOULD CAREFULLY CONSIDER THE MATTERS SET FORTH UNDER "RISK
FACTORS." COMMENCING ON PAGE 4 HEREOF.

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

<TABLE>
<CAPTION>
ESTIMATED UNDERWRITING PROCEEDS TO
PRICE TO DISCOUNTS & PROCEEDS TO SELLING SECURITY
PUBLIC COMMISSIONS COMPANY(*) HOLDERS(*)
--------- ------------ ----------- ----------------
<S> <C> <C> <C> <C>
Per Share of Common Stock................................ $ .002 $-0- -0- $ .002
Total............................................... $54,964 $-0- -0- $54,964
Per Share of Class B Preferred Stock..................... $ .0001 $-0- -0- $ .0001
Total............................................... $ 383 $-0- -0- $ 1,000
</TABLE>

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(*) The expenses of the offering, including registration fees, and printing,
legal and accounting fees, estimated at $150,000, will be borne by the
Company from its general funds; none of such expenses will be borne by the
Selling Security Holders.

The date of this Prospectus is December 7, 1998.

<PAGE> 4

The Company currently is not a reporting company under the Securities
Exchange Act of 1934, as amended (the "Exchange Act"). As a result of the
offering made hereby, the Company will become subject to the periodic and other
informational requirements of the Exchange Act. The Company intends to
distribute to its shareholders Annual Reports containing audited financial
statements and may distribute quarterly reports as determined by the Board of
Directors of the Company.

No person has been authorized to give any information or to make any
representation not contained in or incorporated by reference in this Prospectus,
and, if given or made, such information or representation not contained herein
must not be relied upon as having been authorized. This Prospectus does not
constitute an offer to sell, or the solicitation of an offer to purchase, any of
the securities offered by this Prospectus, in any jurisdiction to or from any
person to or from whom it is unlawful to make such offer or solicitation of an
offer, or proxy solicitation in such jurisdiction. Neither the delivery of this
Prospectus nor the issuance or sale of any securities hereunder shall under any
circumstances create any implication that there has been no change in the
information set forth herein since the date hereof or delivered and incorporated
by reference herein since the date hereof.

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<PAGE> 5

PROSPECTUS SUMMARY

The following is a brief summary of the information contained in this
Prospectus. This Prospectus Summary is not intended to be complete and is
qualified in its entirety by the more detailed information contained elsewhere
in this Prospectus. Unless otherwise defined herein, capitalized terms used in
this Prospectus Summary have the respective meanings assigned to them elsewhere
in this Prospectus. Unless the context otherwise requires, the "Company" refers
to Studio City Holding Corporation and its predecessors and subsidiaries.
Potential investors should read carefully this Prospectus in its entirety.

THE OFFERING

The securities of Studio City Holding Corporation, a New York corporation
(together with its subsidiaries, the "Company") to which this Prospectus relates
are: (i) 27,482,001 shares (the "Shares") of Common Stock, $.002 par value (the
"Common Stock") and (ii) 3,825834 shares of Class B Preferred Stock, $.0001 par
value per share (the "Class B Preferred Stock"), all of which are to be offered
and sold from time to time by and on behalf of the holders of such securities,
referred to herein as "Selling Security Holders." The names of such Selling
Security Holders and their respective holdings are set forth in Appendix A under
"Selling Security Holders." None of the proceeds from the sale of the securities
by the Selling Security Holders pursuant to this Prospectus will be received by
the Company. The securities may be offered by the Selling Security Holders from
time to time in transactions for their own accounts in the over-the-counter
market, in negotiated transactions, or in a combination of such methods of sale,
at negotiated prices. The Selling Security Holders may effect such transactions
by selling to or through broker-dealers, and such broker-dealers may receive
compensation in the form of discounts, concessions or commissions from the
Selling Security Holders or the purchasers of securities for whom/which such
broker-dealers may act as agent or to whom/which they sell as principal, or both
(which compensation as to a particular broker-dealer might be in excess of
customary commissions).

As of October 1, 1998, there were issued and outstanding 31,282,001 shares
of Common Stock (including 3,800,000 treasury shares), 10,000,000 shares of
Class A Preferred Stock and 3,825,834 shares of Class B Preferred Stock. None of
the securities covered by this Prospectus will be offered by the Company and
there will continue to be 31,282,001 shares of Common Stock, 10,000,000 shares
of Class A Preferred Stock and 3,825,834 shares of Class B Preferred Stock
issued and outstanding after giving effect to the offering by the Selling
Security Holders. Also outstanding are warrants to purchase 500,000 shares of
Common Stock at $3.00 per share until December 31, 1999 and warrants to purchase
5,000,000 shares of Common Stock at $1.00 per share until February 16, 2003.

THE COMPANY

The Company is a development stage media holding company specializing in
the creation of "entertainment franchises" and the development of its fifteen
wholly-owned or majority-owned media subsidiaries. An "entertainment franchise"
is an intellectual property which can create substantial revenues from at least
five different and non-related sources of revenue creation; it is purposefully
created and designed to be recognized as a "brand name" with multiple areas of
revenue generators. For example, an intellectual property which is an
entertainment franchise could create revenues from (1) publishing, (2) motion
picture distribution, (3) television broadcast, (4) home video sales, (5) audio
product sales, (6) licensing, (7) spinoff product sales, (8) merchandising, (9)
ancillary products and (10) segmented usage. The Company, through its
subsidiaries, owns a portfolio of intellectual properties and production rights.
The Company plans to provide its operating subsidiaries with financing and
management services, including accounting, planning, budgeting and human
resources management. The Company's subsidiaries are media companies which
intend to produce products in the motion picture, television, publishing and
other industries.

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<PAGE> 6

Except for certain limited operations, the Company's activities to date
have consisted primarily of raising capital, obtaining financing, acquiring
intellectual properties, and administrative activities relating to the
foregoing. The Company's proposed business, including both expansion of its
current limited operations and its proposed activities, requires substantial
additional equity or debt financing, which may not be available in a timely
manner, on commercially reasonable terms, or at all. Since the Company is in the
development stage, it is subject to all the risks inherent in undertaking a new
business venture. See "Risk Factors."

Each of its subsidiaries also is in the development stage with a limited or
no operating history. Consequently, the subsidiaries have generated little or no
revenues as of the date hereof. In addition, there can be no assurance that any
of the subsidiaries will achieve significant operations, generate significant
revenues or attain profitability.

The Company was incorporated in New York under the name "CVT Corp. of
America" ("CVT") in March 1984. From 1984 to 1993, CVT was engaged in limited
sales, manufacturing and marketing operations of continuous variable speed
transmissions. CVT had a public offering of securities registered with the
Securities and Exchange Commission in 1984. Unable to finance the research and
development necessary to continue operations, CVT ceased operations in 1993. On
June 28, 1996, CVT changed its name to "Studio City Holding Corporation" and,
effective July 1, 1996, merged with Studio City Incorporated Holding, a Florida
corporation ("Studio City-Florida"), a development stage media holding company.
The Company's principal executive office is located at 14400 Southwest 46th
Court, Ocala, Florida 34484, where its telephone number is (352) 347-3947. The
Company's corporate offices are located in care of Dante S. Alberi, Esq., 153
Stevens Avenue, Suite 7, Mount Vernon, New York 10550, where the telephone
number is (914)668-5020.

Studio City-Florida was a development stage multimedia company incorporated
in 1991 to engage in asset development, business management, production and
post-production studio operation, motion picture studio operation, tourist
attraction operation, the development of motion pictures for theatrical
exhibition, for television and home video, and in the development, production
and distribution of printed publications. At the time of the merger with CVT
Corp. of America, Studio City-Florida and its subsidiaries owned a large number
of intellectual properties and a partial interest in other intellectual
properties, but had not generated significant revenues. See
"Business -- Subsidiaries."

RISK FACTORS

An investment in the securities offered hereby is highly speculative in
nature, involves a high degree of risk and should be made only by investors who
can afford the loss of their entire investment. In addition to the factors set
forth elsewhere in this Prospectus, prospective investors should give careful
consideration to the following risk factors in evaluating the Company and its
business before purchasing any securities offered hereby.

Substantial Operating Losses; No Assurance of Success. During the years
ended December 31, 1995, 1996 and 1997, and the five months ended May 31, 1998,
the Company had net losses of $316,578, $557,405, $539,002 and $187,881
respectively. At May 31, 1998, the Company had cumulative deficits since
inception of $1,942,162. The cumulative deficits reflect the cost of
developmental and other start-up activities, without significant offsetting
revenues. The Company's business is capital intensive. The Company expects to
continue to incur significant losses in the future. The Company's proposed
operations are subject to numerous risks associated with establishing any new
business, including unforeseeable expenses, delays and complications, as well as
specific risks of the highly competitive entertainment industry. There can be no
assurance that the Company's business plan will be successful, that it will be
able to market any product on a commercial scale, that it will achieve or
sustain profitable operations or that it will be able to remain in business. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and "Business."

Possible Contingent Liability. Effective July 1, 1996, Studio City-Florida
merged with and into the Company, pursuant to an Agreement and Plan of Merger
dated October 12, 1995 (the "Plan of Merger"), approved by the vote of the
shareholders of such constituent corporations. Pursuant to the Plan of Merger
(i) 100,000,000 shares of Common Stock of Studio City-Florida held by Larry D.
Faw, the President and Chairman of the Board of the Company, were converted into
10,000,000 shares of the Company's Class A Preferred Stock, (ii) 10,000,000
shares of Common Stock of Studio City-Florida held by Mr. Faw were converted
into 1,000,000 shares of the Company's Class B Preferred Stock, (iii) 1,000,000
shares of the

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Class B Preferred Stock of Studio City-Florida held by Mr. Faw were converted
into 1,000,000 shares of Class B Preferred Stock of the Company, (iv) warrants
to purchase 5,000,000 shares of Common Stock of Studio City-Florida were
converted into Warrants to purchase 5,000,000 shares of the Company's Common
Stock, at $1.00 per share, and (v) each of the remaining issued and outstanding
shares of Common Stock of Studio City-Florida were converted into one share of
the Company's Common Stock. These securities were issued without compliance with
the registration requirements of the federal securities laws or any state
securities laws, in reliance upon exemptions therefrom the Company believed to
be available therefor. However, the exemptions relied upon may not have been
available, because of the number of persons involved, and, consequently, the
Company may be contingently liable up to $1,125,405. The registration statement
of which this Prospectus is a part does not affect the Company's contingent
liability.

Need for Additional Financing; Working Capital Deficit. The entertainment
industry generally requires constant infusions of new and substantial capital to
finance projects. There can be no assurance that such funds will be available to
the Company or, if available, that the funds can be obtained on terms favorable
to the Company. The Company's ability to operate as a going concern is
contingent upon such infusions of capital or the ability of the Company to
attract financing for its projects from other sources. Any equity financings
could result in dilution to the Company's then existing stockholders. At
September 30, 1998, the Company had a working capital deficit of $142,561. The
Company's business plan for the next fiscal year contemplates the need for more
than $900,000, exclusive of the liability to Mr. Faw, see "Business -- Faw
Purchase Agreement," with no known sources of liquidity. To the extent that less
than $900,000 is available, the Company's business plan will have to be
curtailed. See "Management's Discussion and Analysis of Financial Condition and
Results of Operation." The Company's failure to pay its liability to Mr. Faw, or
to other creditors, could result in its bankruptcy.

Valuation Uncertainty. In 1993, Studio City-Florida acquired various
intellectual properties from Mr. Faw which had an estimated value of $7,226,000,
in exchange for a demand promissory note for $1,554,027 and certain securities.
The purchase price was determined by reference to industry standards as detailed
in the National Labor Relations Board's Collective Bargaining Agreement between
the Alliance of Motion Picture and Television Producers and the Writers Guild of
America, which reflects the minimum replacement costs and pass through financial
obligations to industry-wide motion picture and television producers and
purchasers of intellectual properties. The industry standards referred to in
that agreement may have no relationship to commercial, economic or fair market
value of the intangible assets. At September 30, 1998, the total obligation to
Mr. Faw was $1,912,830 in principal and interest.

Risk of Low-Priced Stocks. Currently, the Company's Common Stock is
considered a "penny stock" for purposes of the Exchange Act. Rules The penny
stock regulations, set forth in Rules 15g-I through 15g-9 promulgated under the
Exchange Act, impose sales practice and disclosure requirements on certain
brokers and dealers who engage in certain transactions involving penny stock.

Under the penny stock regulations, unless the broker or dealer or the
transaction is otherwise exempt, a broker or dealer selling penny stock to
anyone other than an established customer or "accredited investor" (generally,
an individual with net worth in excess of $ 1,000,000 or annual income exceeding
$200,000, or $300,000 together with his or her spouse) must make a special
suitability determination for the purchaser and must receive the purchaser's
written consent to the transaction prior to sale. In addition, the penny stock
regulations require the broker or dealer to deliver, prior to any transaction
involving a penny stock, a disclosure schedule prepared by the Securities and
Exchange Commission (the "Commission") relating to the penny stock market. A
broker or dealer is also required to disclose commissions payable to the broker
or dealer and the registered representative and current quotations for the
securities. In addition, a broker or dealer is required to send monthly
statements disclosing recent price information with respect to the penny stock
held in a customer's account and information with respect to the limited market
in penny stocks.

The additional sales practice and disclosure requirements imposed by the
penny stock regulations could impede the sale of the Company's Common Stock in
the secondary market. In addition, the market liquidity for the Company's
securities may be severely adversely affected, with concomitant adverse effects
on the price of the Company's securities.

Entertainment Industry. The entertainment industry is highly competitive
and involves a considerable degree of risk. Each entertainment project is an
individual artistic work, and its commercial success is
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<PAGE> 8

primarily determined by audience reaction, which is unpredictable. Accordingly,
there can be no assurance as to the financial success of any motion picture or
entertainment project. Furthermore, there can be no assurance that the audiences
for motion pictures or entertainment projects will remain constant. The motion
picture and entertainment industries are extremely competitive. The Company
competes with many other motion picture and entertainment companies, including
the "major" motion picture studios, which are larger and have financial
resources which are substantially greater than those of the Company. The major
motion picture studios are typically large, diversified entertainment concerns
or subsidiaries of diversified corporations which have strong relationships with
creative talent, exhibitors and others involved in the entertainment industry,
and whose non-motion picture operations often provide stable sources of earnings
that offset variations in the financial performance of their motion picture
operations.

Reliance Upon Management. The business of the Company will be managed by
Larry D. Faw who shall serve as the Company's President and Chairman of the
Board of Directors, as well as the executive producer and the director of its
productions. The loss of Mr. Faw, particularly in the early stages of the
Company's operations, would materially adversely affect the Company. The Company
has no key man insurance in effect for Mr. Faw. See "Management."

Competition. The Company's entertainment projects will be competing with
other motion pictures or films and projects attempting to gain distribution. The
major studios and many independents have established relationships with
successful filmmakers and are able to obtain distribution agreements with
comparatively favorable terms. Many of these companies have the ability to offer
potential distributors and promoters a number of films or projects which may be
more attractive than a single film or project. Although some industry practices
have enabled smaller independents with viable products to find distribution for
a single reasonably budgeted film, the Company will not possess many of the
advantages in distribution which are enjoyed by the larger well established film
producers. Once the Company has contracted with a distributor, its motion
pictures and projects will be competing with other products for exhibition time
in the various markets. There is no assurance that the Company's products will
be able to compete successfully under these circumstances. See
"Business-Competition."

No Trademark and Limited Copyright Protection. The Company's trademarks
and rights to characters are the principal assets of the Company. The Company
presently has no trademarks and limited copyrights, but plans to file
applications for trademark and copyright protection for each of its produced
titles and featured characters before the end of 1998. There can be no assurance
that any such application, when filed, will be approved, or that the Company
will have the financial and other resources necessary to enforce its proprietary
rights against infringement by others. The inability of the Company to obtain
adequate protection of or to enforce its proprietary rights could have a
material adverse effect on the Company. It is the Company's policy not to file
for copyright protection until production, in order to protect what it considers
its trade secrets.

Effect of Outstanding Warrants and Convertible Securities. As of the date
of this Prospectus, the Company has outstanding warrants to purchase 5,000,000
shares of Common Stock at $1.00 per share, warrants to purchase 500,000 shares
of Common Stock at $3.00 per share, and 3,825,834 shares of Class B Preferred
Stock convertible into 38,258,340 shares of Common Stock. As long as such
warrants and convertible securities remain unexercised or are not converted, as
the case may be, the terms under which the Company could obtain additional
capital may be adversely affected.

Control by Present Stockholders. The Company's President and Chairman of
the Board of Directors, Larry Faw, beneficially owns 10,000,000 shares of Class
A Preferred Stock and 10,196,277 shares of Common Stock representing
approximately 83.1% of the total voting power of the Company. As a result, he
will be able to continue to influence the election of the Company's directors
and otherwise control the Company's management and operations. See "Principal
Stockholders" and "Description of Securities."

Collective Bargaining Agreements. A substantial number of the artists,
talent and crafts-people involved in the entertainment industry are represented
by trade unions with industry-wide collective bargaining agreements. An
industry-wide strike causing a prolonged disruption in project production could
have a material adverse effect on the Company's business.

No Distribution Agreement. The Company currently does not have a
pre-production distribution agreement in place for any of its products and can
not offer any assurance to investors that a distribution

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agreement can be obtained or if obtained that such agreement will be profitable.
It is difficult for a small independent producer to market a product to the
networks or for independent syndication. The success of such marketing effort is
dependent upon many factors including (a) the quality of the product, (b) the
fit of the product to the network's or syndicate's other program mix and
selection criteria, (c) perceived public trends, (d) the reputation of the
producers, and (e) in part the individual producers interpersonal relationships
within the industry. Although management believes favorable distribution
agreements can be obtained, the lack of a pre-production agreement substantially
increases the risk to the investors.

Determination of Offering Price; Market Illiquidity. The initial offering
price of $.002 per share for the Common Stock and $.0001 for the Class B
Preferred Stock was arbitrarily determined by the Company and represents the
respective par value of each of those securities. The price is not based upon
earnings or any history of operations and should not be construed as indicative
of the present or anticipated future value of the securities. There is currently
no public trading market for the securities and there can be no assurance that
one will develop in the future. The price at which these securities may be
offered to the public by Selling Security Holders may be greater than the market
price for the securities following the offering. Due to the lack of earnings
history of the Company and the absence of a reasonable expectation of dividends
in the near future, there can be no assurance of an active and liquid trading
market for the Common Stock or any other securities of the Company developing in
the future. A purchaser of securities in this offering may face difficulties in
finding a purchaser for his or her securities and may expect to receive a lower
price for such securities than otherwise may be the case. See "Determination of
Offering Price." The offer and sale of substantial amounts of Common Stock in
the public market could adversely affect the market price prevailing from time
to time.

No Dividends. The Company has not paid any cash dividends on any of its
shares of Class A Preferred Stock, Class B Preferred Stock or Common Stock and
does not presently intend to pay cash in the foreseeable future. Rather, any
future earnings will be used to satisfy the considerable financing requirements
of the Company. However, to the extent that earnings permit, the Company will
pay a dividend of 12% per annum on its shares of Class B Preferred Stock. It is
not likely that any cash dividends will be paid in the foreseeable future.

Forward-Looking Statements. Certain statements throughout this Prospectus
regarding the Company's financial position, business strategy and the plans and
objectives of Company management for future operations, are forward-looking
statements rather than historical or current facts. When used in this
Prospectus, words such as "anticipate," "believe," "estimate," "expect,"
"intend" and similar expressions, as they relate to the Company or its
management, identify forward-looking statements. Such forward-looking statements
are based on the beliefs of the Company's management as well as assumptions made
by and information currently available to the Company's management. Such
statements are inherently uncertain, and there can be no assurance that the
underlying assumptions will prove to be valid. Actual results could differ
materially from those contemplated by the forward-looking statements as a result
of certain factors, such as those disclosed under "Risk Factors," including but
not limited to the Company's lack of operating history, competitive factors, and
general economic conditions. Such statements reflect the current views of the
Company with respect to future events and are subject to these and other risks,
uncertainties and assumptions relating to the operations, results of operations,
growth strategy and liquidity of the Company. All subsequent written and oral
forward-looking statements attributable to the Company or persons acting on its
behalf are expressly qualified in their entirety by this paragraph.

USE OF PROCEEDS

The Company will not receive any proceeds upon the sale of any securities
by the Selling Security Holders. The net proceeds to the Company with respect to
the exercise of any of the Warrants will be used for general corporate purposes
and working capital, in order to pay administrative costs of operating the
Company, including salaries, rent, legal and accounting fees and expenses.
However, there can be no assurance that any of the Warrants will be exercised
and due to the lack of market for the Common Stock the Company does not expect
any of the Warrants to be exercised at this time. The expenses of this offering,
estimated at $150,000, will be paid solely by the Company.

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<PAGE> 10

DETERMINATION OF OFFERING PRICE

The initial offering price of $.002 per share for the Common Stock and
$.0001 for the Class B Preferred Stock was arbitrarily determined by the Company
and represents the par value of the Company's Common Stock. The price is not
based upon earnings or any history of operations and should not be construed as
indicative of the present or anticipated future value of the Common Stock. There
is currently no public market for the shares of Common Stock or Class B
Preferred Stock. The price at which these shares are being offered to the public
may be greater than the market price for the Common Stock and Class B Preferred
Stock following the offering. Due to the lack of earnings history of the Company
and the absence of a reasonable expectation or assurance of dividends in the
near future, there can be no assurance of an active and liquid market for the
Common Stock and Class B Preferred Stock developing in the future. A purchaser
of securities in this offering may face difficulties in finding a purchaser for
his or her securities and may expect to receive a lower price for such
securities than otherwise may be the case.

SELLING SECURITY HOLDERS

The Shares and Class B Preferred Stock are to be offered and sold from time
to time by and on behalf of the Selling Security Holders named in Appendix A, in
the manner and under the circumstances described on the cover page of this
Prospectus and under "The Offering" and "Plan of Distribution."

Appendix A to this Prospectus sets forth for each Selling Security Holder
the number of Shares and Class B Preferred Stock beneficially owned prior to the
offering and the number to be offered and sold; assuming that each Selling
Security Holder sells all his or her securities, the number and percentage of
shares of Common Stock and Class B Preferred Stock to be owned by each after
completion of the offering will be zero. Except as described, there are no
material relationships between any of the Selling Security Holders and the
Company or any of its predecessors or affiliates, nor have any such material
relationships existed within the past three years.

PLAN OF DISTRIBUTION

The Shares and Class B Preferred Stock may be offered by the Selling
Security Holders from time to time in transactions for their own account (which
may include block transactions) in the over-the-counter market, in negotiated
transactions, or a combination of such methods of sale, at negotiated prices, in
that there is no established trading market for such securities. The Selling
Security Holders may effect the sale of the Shares and Class B Preferred Stock
by selling the securities to or through broker-dealers, and such broker-dealers
may receive compensation in the form of discounts, concessions or commissions
from the Selling Security Holders or the purchasers for whom/which such
broker-dealers may act as agent or to whom/which they sell as principal, or both
(which compensation as to a particular broker-dealer might be in excess of
customary commissions). The Selling Security Holders and any broker-dealers that
act in connection with the sale of the securities may be deemed to be
"underwriters" within the meaning of Section 2(l1) of the Securities Act and any
commissions received by them and any profit on the resale of the securities as
principal might be deemed to be underwriting compensation under the Securities
Act.

There is no established public trading market for any securities of the
Company and there is no assurance that any such market will develop in the
future. Moreover, the initial offering prices for the securities have been
arbitrarily determined by the Company as the par value of each of such
securities and may not be indicative of the prices at which such securities may
be offered and sold by the Selling Security Holders.

BUSINESS

GENERAL

The Company is a development stage media holding company specializing in
the creation of "entertainment franchises" and the development of its fifteen
media subsidiaries. The Company, through its subsidiaries, owns a portfolio of
intellectual properties and production rights. The properties include stories
and titles, some of which are copyrighted and others of which are works in
progress or under development. The Company plans to provide its operating
subsidiaries with financing and management services, including accounting,
planning, budgeting and human resources management. The Company's subsidiaries
also are development stage media companies which intend to produce products in
the motion picture, television, publishing and other industries.

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<PAGE> 11

Except for certain limited operations, the Company's activities to date
have consisted primarily of raising capital, obtaining financing, acquiring
intellectual properties, and administrative activities relating to the
foregoing. The Company's proposed business, including both expansion of its
current limited operations and its proposed activities, requires substantial
additional equity or debt financing, which may not be available in a timely
manner, on commercially reasonable terms, or at all. The Company has not
exploited any of the properties acquired from Mr. Faw in 1993 due to the lack of
necessary financing. Since the Company is in the development stage, it is
subject to all the risks inherent in undertaking a new business venture.

Depending upon the availability of necessary financing, of which there can
be no assurance, the Company's plan of operation for the next 12 months includes
release by Zweig of "The First Flight of St. Nicholas," the second book of "The
Nicholas Stories" trilogy, before December 31, 1998, and publication of "The
Maiden Voyage of Kris Kringle, the third book of the trilogy, during the fourth
quarter of 1999; publication by PPI of a second comic book series during 1999;
participation by FIPC as a strategic partner in one Hollywood-based motion
picture production during 1999; and technical production by Xenormorph of a
children's video series during 1999.

FAW PURCHASE AGREEMENT

In February 1993, Studio City-Florida entered into an agreement with Larry
D. Faw, the President and Chairman of the Board of the Company, to acquire
direct ownership of various intellectual properties having an estimated value of
$7,226,000, including 72 motion picture properties, four television pilot
properties, 48 books for publication, four inventions, one franchise program and
one specialty product design and marketing program, in exchange for a promissory
note payable on February 16, 1995 in the amount of $1,554,027 (the "Faw Note"),
and warrants to purchase 5,000,000 shares of Common Stock of Studio
City-Florida. Interest on the Faw Note accrues at the rate of 2% per annum and
the principal amount was due and payable on February 16, 1995. Since 1993,
interest payments of $130,000 have been made on the Faw Note and accrued
interest payable to Mr. Faw at September 30, 1998 is $358,803. Since maturity,
the Faw Note has been extended for consecutive six month terms at the annual
interest rate of 9%. The warrants are exercisable until 2003 at $1.00 per share.
In addition, Mr. Faw received 1,000,000 shares of Class Preferred B Stock. See
"Description of Securities -- Warrants" and "Certain Transactions."

THE MERGER

Effective July 1, 1996, Studio City-Florida merged with and into the
Company, pursuant to the Plan of Merger. Except for certain shares held by Larry
D. Faw, the President and Chairman of the Board, each of the issued and
outstanding shares of common stock of Studio City-Florida were converted into
one share of the Company's Common Stock, and 100,000,000 shares of common stock
of Studio City-Florida held by Larry D. Faw, were converted into 10,000,000
shares of the Company's Class A Preferred Stock. See "Description of
Securities."

Pursuant to the federal and state securities laws, it is unlawful to sell
any security unless the security is registered or exempt from the registration
requirements of such laws. The shares of the Company's Common Stock and Class A
Preferred Stock issued pursuant to the Plan of Merger were not registered and
may not have been exempt from registration. Consequently, although the Company
believed exemptions to be available, the offer and sale of the shares of Common
Stock may have been made in violation of federal and state securities laws
because of the relatively large number of persons involved. The federal
securities laws and most state laws provide for rights of redress (in the form
of rescission, or damages if the security has been sold) for purchasers of
securities sold in violation of the applicable registration provisions of such
laws. There can be no assurance that claims asserting violations of state or
federal securities laws will not be asserted. A successful claim brought against
the Company could have a material adverse effect on the Company's business,
financial condition and results of operations.

SUBSIDIARIES

Set forth below is a description of the Company's subsidiaries. Unless
otherwise indicated, all of the subsidiaries described below are wholly-owned by
the Company. Each of its subsidiaries is in the development stage with a limited
or no operating history. Consequently, none of the subsidiaries has generated
significant revenues as of the date hereof. In addition, there can be no
assurance that any of the Company's subsidiaries will achieve significant sales
of its products or attain profitability.

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Fawnsworth International Pictures Corporation, a Florida corporation
("FIPC"), was incorporated in October 1991 to engage in motion picture
production and distribution. FIPC currently owns fifteen intellectual
properties, which are all ready for production. FIPC also owns options to
acquire over one hundred intellectual properties.

Poc-It Publishers, Incorporated, a Florida corporation ("PPI"), was
incorporated in May 1993 to assemble, acquire, produce and publish various
literary properties. PPI currently owns the rights to forty-four titles, as well
as options for more.

Poc-It Comics, Incorporated, a Florida corporation ("PCI"), was
incorporated in March 1994, and is a comic book publisher. It owns three comic
book franchises for development which it plans to produce as comic books,
television series (live action and animation), video games and interactive
CD-ROM's. In May 1995, PCI published and distributed its first issue of the
comic book "Shadow Raven," which sold approximately 5,000 copies. PCI is 96.0%
owned.

Zweig Knights Publishing Corporation ("Zweig"), a Florida corporation
incorporated in March 1994, is a publisher of limited first editions and special
editions of hardback children's books and inspirational family related
publications, that owns the rights to forty-four titles. In 1995, Zweig entered
into an agreement with Calico Animation and Creations to create the "animation
key cel art" (a combination of character studies, backgrounds and moves in flat
artwork) and "master paintings" (original watercolor paintings) for an
entertainment franchise entitled "The Nicholas Stories," a collection of three
children's books. An animated broadcast version of one of the books, "The Boy
with a Wish," was produced and in December 1996 was broadcast regionally on a
local cable and television station in the Tampa Bay, Florida region. Zweig is
64.3% owned. Larry Faw, Harry Knights, Genevieve Faw, Vincent Neville, Charles
Flood, executive officers of the Company, a family trust of Roger Hefler, the
former chief executive officer, and 29 unrelated persons each beneficially own
less than 1%.

The International Children's Television Network, Inc., a Florida
corporation ("ICT Net"), was incorporated in April 1994 to develop certain
children's and youth oriented television properties and programming. ICT Net
currently has 15 literary properties which will provide approximately 12 hours
of children's programming. In 1995, ICT Net's literary property entitled
"Willie's Adventures" was published as a weekly serial in Knight-Ridder
newspapers as a children's travel and adventure weekly feature. ICT Net is 99.9%
owned; an unrelated person beneficially owns less than 1%.

Quagga Entertainment Corporation ("Quagga"), incorporated in Florida in
March 1995, was formed to engage in the exploitation of motion picture and
television properties. Quagga completed its first production video: "Zoo Toonz
Volume I," a children's television pilot project narrated by two puppet
characters. The pilot was premiered at the National Association of Program and
Television Executives convention in Las Vegas, Nevada during January 1996.
Subsequently, a second generation of Zoo Toonz has been produced for Volume I
and five additional volumes are currently in post production. In addition, a
third generation of Zoo Toonz is being developed into a television pilot and 25
episodes of a new children's educational television series. Quagga is 94.95%
owned; Larry Faw, Genevieve Faw, Vincent Neville, directors and executive
officers of the Company, and a private investor each own 1.25% and two unrelated
investors each beneficially own less than 1%.

Studio City Amusements, Inc., incorporated in Florida in November 1994,
owns two theatrical musical productions and was formed to develop and manage
entertainment properties and develop and produce specialty entertainment
projects (non-intellectual properties and asset management projects with real
property which provide continuous cash flows and revenue streams).

Non-Existent Major League Fantasy Sports Association, Incorporated was
incorporated in Florida in November 1994 to develop a series of interactive
radio and television fantasy sporting events. It owns "The 1994 Fan's Choice
Fantasy World Championship of Baseball," a 12-hour radio play of a fantasy
baseball world series, the first in a series of radio and television fantasy
sporting events.

Accinemetron Releasing Corporation ("Accinemetron"), incorporated in
Florida in March 1995, was formed to coordinate the distribution of various
product lines including films, television programming, videocassettes, audio
products and ancillary merchandise.

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<PAGE> 13

The Magic Shop, Inc. was incorporated in Florida in October 1995 to serve
as a production center and business incubator for entertainment related
companies.

Zollipe Cyberspace Corporation was incorporated in Florida in June 1996 to
develop computer programming and software for interactive games and information.

Zzoonzuit, Inc. was incorporated in Florida in June 1996 to design and
manufacture a new line of beachwear, swimwear and athletic clothing.

Xenomorph Digital Post, Inc. ("Xenomorph"), was incorporated in Florida in
June 1996 to be a digital broadcast and video post production center and on-line
producer of television programming. Xenomorph entered into a lease purchase
agreement to purchase an Avid Media 1000 digital nonlinear editing system and
has expanded its post production capabilities by purchasing television broadcast
production and post production equipment for a total purchase price of $348,400.

Pro-Sports Entertainment Group, Inc. was incorporated in November 1996 to
be a motion picture and television production group to produce entertainment
products focused on minority role models.

Zingrr N-2Aktiv Television Network, Inc. ("Zingrr") was incorporated in
November 1994 to serve as a partner in development, creation, maintenance and
programming of FCC licensed wireless cable stations and systems.

DISTRIBUTION

Distribution of Films. If and when produced, the Company will seek
distribution of its proposed films either to theaters or as original television
movies. These could be marketed to the networks, HBO, Showtime or for similar
movie channel distribution, or for syndicated distribution to independents. Once
a pilot has been produced, the Company will attempt to market to the networks or
through syndication to independents.

The Company currently does not have a pre-production distribution agreement
in place for any of its products and cannot offer any assurance that a
distribution agreement can be obtained or if obtained that such agreement will
be profitable. It is difficult for a small independent producer to market a
product to the networks or for independent syndication. The success of such a
marketing effort is dependent upon many factors including (a) the quality of the
product, (b) the fit of the product to the network or syndicate's other program
mix and selection criteria, (c) perceived public trends, (d) the reputation of
the producers, and (e) in part, the individual producer's interpersonal
relationships within the industry.

Although management believes favorable distribution agreements can be
obtained, the lack of a preproduction agreement substantially increases the risk
to these projects and to the inventors.

Distribution of Literary Properties. The Company intends to seek
distribution of its literary properties through two of its subsidiaries, Zweig
and Accinematron, by direct sales, televised infomercials and special events.

The Company intends to seek to finance operations through a combination of
funding sources, including borrowings from management and principal shareholders
and public and private securities offerings. There are no present agreements,
contracts, understandings or other arrangements for such necessary financing.

TRADEMARKS

The Company's rights to characters are principal assets of the Company.
Although used in interstate commerce, such proprietary information is not
subject to any trademark, service mark or similar registration or protection at
this time. There can be no assurance that any such application, if and when
filed, will be approved, or that the Company will have the financial and other
resources necessary to enforce its proprietary rights against infringement by
others. The inability of the Company to obtain adequate protection of, or to
enforce, its proprietary rights could have a material adverse effect on the
Company.

ROYALTY AGREEMENTS

Under certain royalty agreements with various unaffiliated individuals, the
Company is obligated to make contingent payments, royalties and profit
participation payments ranging from 1% to 10% of the gross net profits.

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COLLECTIVE BARGAINING AGREEMENT

The Company is represented by the Alliance of Motion Picture and Television
Producers in its Collective Bargaining Agreement under the auspice of the
National Labor Relations Board, which includes Signatory status with various
Unions and Guilds. The Collective Bargaining Agreement requires that the Company
meet negotiated requirements to the various Unions and Guilds, when applicable,
and maintain a minimum cost from service contracts for various Union and Guild
members. These costs are carried over into future production and pass-through to
any purchaser. These costs and obligations are considered to be perpetual.

COMPETITION

The entertainment business in general, and the film and television
entertainment industry in particular, is undergoing significant changes.
Alternative forms of filmed entertainment have become available, including
expanded pay and basic cable television, pay-per-view programming, and home
entertainment equipment. Given technological developments and shifting consumer
tastes, it is difficult to predict what effect these changes will have on the
potential overall revenue for feature-length motion pictures. Management
believes however that these changes within the television industry will create
an increased demand for new products and, in this respect, these trends are
favorable to the Company.

Competition in the film industry. There is substantial competition in the
industry for a limited number of producers, directors, actors and properties
which are able to attract major distribution in all media and all markets
throughout the world. The motion picture business is highly competitive and
extremely high profile in terms of name recognition, with relatively
insignificant barriers to entry and with numerous firms competing for the same
directors, producers, actors/actresses, distributors and theaters, among other
items. There is intense competition within the film industry for exhibition
times at theaters, as well as for distribution in other media, and for the
attention of the movie-going public and other viewing audiences. Competition for
distribution in other media is intense.

Each of its subsidiaries is in the development stage with a limited or no
operating history. Consequently, none of the subsidiaries has generated revenues
as of the date hereof. In addition, there can be no assurance that any of the
Company's subsidiaries will achieve significant sales of product or attain
profitability.

FAW PURCHASE AGREEMENT

In February 1993, Studio City-Florida entered into an agreement to acquire
direct ownership of various intellectual properties having an estimated value of
$7,226,000, including 72 motion picture properties, four television pilot
properties, 48 books for publication, four inventions, one franchise program and
one specialty product design and marketing program in exchange for a promissory
note payable in the amount of $1,554,027 (the "Faw Note") payable to Larry D.
Faw, the President and Chairman of the Board of the Company, and warrants to
purchase 5,000,000 shares of Common Stock of Studio City-Florida exercisable at
$1.00 per share until February 16, 2003. The principal amount was due and
payable on February 16, 1995, with interest at the annual rate of 2%. Since
maturity, when the Company was unable to pay the Faw Note, it has been extended
for consecutive six month terms at an annual interest rate of 9%. Since 1993,
the Company has paid $130,000 interest on the Faw Note and accrued interest
payable to Mr. Faw at September 30, 1998 was $358,803. In addition, Mr. Faw
received 1,000,000 shares of Class Preferred B Stock. See "Description of
Securities" and "Certain Transactions." The Faw Note is a demand obligation, but
there is no schedule for repayment of principal or interest.

The purchase price of the intangible assets was determined by reference to
industry standards as detailed in the National Labor Relations Board's
Collective Bargaining Agreement between the Alliance of Motion Picture and
Television Producers and the Writers Guild of America which reflects the minimum
replacement costs and pass through financial obligations to industry-wide motion
picture and television producers and purchasers of intellectual properties. The
industry standards referred to in that agreement may have no relationship to
commercial, economic or fair market value of the intangible assets. See
"Collective Bargaining Agreement."

EMPLOYEES

At June 1, 1998, the Company had two full-time employees. The Company has
never experienced a work stoppage or interruption due to a labor dispute. In
1998, employment agreements, which expire on April 8,

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<PAGE> 15

2000 unless renewed, were negotiated and completed with the following persons to
serve in the following positions: Larry D. Faw, Chairman of the Board and
President; Vincent J. Neville, Vice Chairman and Chief Executive Officer;
Genevieve H. Faw, Director and Senior Vice President; Andrew C. Rigrod, Chief
Operations Officer; Walter Johnson Williams, Chief Financial Officer;; Harry B.
Knights, Senior Vice President-Operations; Charles H. Flood, Senior Vice
President-Sales; Wallis M. Spence, Senior Vice President-Financial Marketing;
James W. Courchaine, Senior Vice President-Logistics; and John A. Churchill,
Jr., Controller. See "Management" and "Employment Agreements."

The Company expects to retain additional employees in the areas of
production and post production as permitted by its financial condition and
required by its business. Most screenwriters, performers, directors and
technical personnel who will be involved in the Company's films are members of
guilds or unions which bargain collectively with producers on an industry-wide
basis from time to time.

REAL PROPERTIES

The Company currently leases approximately 410 square feet for its
executive offices, at 14400 Southwest 46th Court, Ocala, Florida, for $400 per
month on a month-to-month basis from Larry D. Faw, the Chairman of the Board and
President. The Company believes that the terms of such leasing arrangement are
no less favorable to the Company than those that could have been obtained from
an independent third party.

The Company also leases approximately 1700 square feet at $675 per month
for its studio located at 4716 North Lois Avenue, Tampa, Florida. The one-year
lease expires April 30, 1999.

LEGAL PROCEEDINGS

As a multimedia holding company in the entertainment industry, the Company
is often required to defend its rights and license for intellectual properties
that it either owns or serves as a joint venture partner. Currently, the Company
and its subsidiary, PCI, are defending their rights in the production and
distribution of an entertainment franchise based on a comic book story entitled
"Shadow Raven." The Company and PCI filed a verified complaint for declaratory
judgment in the Circuit Court of the Ninth Judicial Circuit in and for Orange
County, Florida against the author and owner of certain copyrighted works
entitled "Shadow Raven" and "The Shadow Raven Sequels," and his corporation, who
had irrevocably assigned the copyrighted works in a 1994 agreement, to confirm
their rights. The principals in the pending action are currently attempting to
resolve the issues in negotiation.

The Company and its subsidiary, Quaggga, are defending a challenge to the
companies' rights associated with a joint venture to create, produce, distribute
and exploit an intellectual property entitled "Zoo Toonz," a joint venture where
the timeliness of the creation of finished products are in question. Litigation
is pending in this matter, and it has been determined that the production will
be completed without the assistance of the joint venture partner, and the
Company and its financial partners will seek to recoup all of their investment.
The action is pending in the Circuit Court in and for Pinellas County, Florida,
where the co-author and original co-owner of the intellectual property entitled
"Zoo Toonz" filed a complaint for declaratory relief against the Company and Mr.
Faw, to confirm ownership and control of the intellectual property, and for
unspecified damages (which do not exceed $15,000) for services rendered pursuant
to the 1995 joint venture agreement to exploit the property. The defendants have
filed an answer and affirmative defenses to the complaint, and a counterclaim
for damages (that exceed $15,000) for breach of fiduciary duty and breach of
contract.

MANAGEMENTS DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Studio City-Florida was a development stage multimedia company incorporated
in 1991 to engage in asset development, business management, production and
post-production studio operation, motion picture studio operation, tourist
attraction operation, the development of motion pictures for theatrical
exhibition, for television and home video, and in the development, production
and distribution of printed publications. At the time of the merger with CVT
Corp. of America, Studio City-Florida owned a large number of intellectual
properties and a partial interest in other intellectual properties, but had not
generated significant revenues. The

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Company was incorporated in New York under the name "CVT Corp. of America"
("CVT") in March 1984 and, until 1993, was engaged in limited sales,
manufacturing and marketing operations of continuous variable speed
transmissions. Unable to finance the research and development necessary to
continue operation, CVT ceased operations in 1993. On June 28, 1996, CVT changed
its name to "Studio City Holding Corporation" and, effective July 1, 1996,
merged with Studio City-Florida, a development stage media holding company.

The Company is a development stage media holding company specializing in
the creation of "entertainment franchises" and the development of its fifteen
wholly-owned or majority-owned media subsidiaries. Except for certain limited
operations, the Company's activities to date primarily have consisted of raising
capital, obtaining financing, acquiring intellectual properties, and
administrative activities relating to the foregoing.

Each of its subsidiaries is in the development stage with a limited or no
operating history. Consequently, the subsidiaries have generated limited or no
revenues as of the date hereof. In addition, there can be no assurance that any
of the Company's subsidiaries will achieve significant sales of its products or
attain profitability.

During the years ended December 31, 1995, 1996 and 1997, and the nine
months ended September 30, 1998, the Company had net losses of $316,578,
$558,221, $540,455 and $342,205, respectively. The interim financial statements
of the Company as of September 30, 1998 are unaudited and include all
adjustments which in the opinion of management are necessary in order to make
such financial statements not misleading. At December 31, 1997, the cumulative
deficit since inception was $1,942,162, reflecting the cost of development and
other start-up activities without significant offsetting revenues. The Company's
business is capital intensive and it expects to continue to incur significant
losses in the future.

Depending upon the availability of necessary financing, of which there can
be no assurance, the Company's plan of operation for the next 12 months
includes: release by Zweig of "The First Flight of St. Nicholas," the second
book of "The Nicholas Stories" trilogy, before December 31, 1998, and
publication of "The Maiden Voyage of Kris Kringle, the third book of the
trilogy, during the fourth quarter of 1999; publication by PPI of a second comic
book series during 1999; participation by FIPC as a strategic partner in one
Hollywood-based motion picture production during 1999; and technical production
by Xenormorph of a children's video series during 1999. The Company's business
plan for the next 12 months contemplates the need for more than $900,000. To the
extent that less than $900,000 is available, the Company's business plan will
have to be curtailed. The Company contemplates using available funds for
business purposes and not for payment of the Faw Note or preferred stock
dividends.

The Company's proposed business, including both expansion of its current
limited operations and its proposed activities, requires substantial additional
equity or debt financing, which may not be available in a timely manner, on
commercially reasonable terms, or at all. The Company will have to raise funds
to satisfy its cash requirements in the next 12 months. As of the date hereof,
the Company has no agreement, arrangement or understanding with any person for
the necessary financing. Therefore, the Company anticipates that it will
continue to meet its cash requirements by the private sale of securities, as
well as advances from management, the main source of liquidity in the past.
There are no plans to purchase significant equipment, nor are any significant
changes in the number of employees expected.

14
<PAGE> 17

Year 2000. Because many computer and computer applications define date by
the last two digits of the year, "00" may not be properly identified as the year
2000. This error could result in miscalculations or systems failure in computer
systems, network elements, software applications and other business systems that
have time sensitive programs. Management does not anticipate that the so-called
Year 2000 issue will have a significant impact on its business or require a
significant commitment of resources to resolve potential problems associated
with this issue.

There can be no assurance, however, that the Company will be unaffected by
the Year 2000 issue affecting its customers or suppliers, but the Company does
not believe the Year 2000 readiness of its customers or suppliers will have a
material impact on the Company's business or financial statements.

15
<PAGE> 18

MANAGEMENT

DIRECTORS AND EXECUTIVE OFFICERS

The directors and executive officers of the Company are as follows:

<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- ------------------------------------------
<S> <C> <C>
Larry D. Faw.............................. 50 Chairman of the Board and President
Vincent J. Neville........................ 67 Vice Chairman of the Board and Chief
Executive Officer
Genevieve H. Faw.......................... 38 Senior Vice President, Secretary and
Director
Andrew C. Rigrod.......................... 56 Chief Operations Officer
Walter Johnson Williams................... 49 Chief Financial Officer
Harry B. Knights.......................... 51 Senior Vice President -- Operations
Charles H. Flood.......................... 48 Senior Vice President -- Sales
Senior Vice President -- Financial
Wallis M. Spence.......................... 50 Marketing
James W. Courchaine....................... 67 Senior Vice President -- Logistics
John A. Churchill, Jr..................... 59 Controller
</TABLE>

Each director is elected to hold office until the next annual meeting of
stockholders and until his successor is elected and qualified. All officers
serve at the discretion of the Board of Directors. Of all the directors and
executive officers of the Company, only Mr. Faw, Mrs. Faw and Mr. Knights devote
full time and attention to its affairs; the other directors and executive
officers devote only such (usually minimal) time to the Company's affairs as is
required from time to time.

The following sets forth certain biographical information with respect to
the directors and executive officers of the Company:

Larry D. Faw has served as Chairman of the Board of Directors and President
of the Company since inception of Studio City-Florida in 1991. Mr. Faw has
twenty-six years of experience in the financing, production, and distribution of
feature motion pictures, documentaries, television commercials, and short films.
Mr. Faw is the husband of Genevieve Faw.

Vincent J. Neville was a director and Senior Vice President of the Company
from November 1995 until December 1997, when he became Vice Chairman and Chief
Executive Officer. He has served as President of Finest Security Service Inc.,
Flushing, New York, since 1986, and as President of T.J. Catering Inc.,
Flushing, New York, since June 1997. Also, Mr. Neville has over twenty years
experience in law enforcement as a former Detective with the New York City
Police Department, where for eleven years he served as an Investigator and
Personal Bodyguard for the District Attorney of Queens County.

Genevieve H. Faw has served as an Senior Vice President, Secretary and
director of the Company since inception of Studio City-Florida in 1991. Ms.
Faw's background includes accounting, business management, feature-length motion
picture production, and the publication of children's books and specialty niche
market publications. Ms. Faw is the wife of Larry Faw.

Andrew C. Rigrod has served as Chief Operations Officer since April 1998.
Mr. Rigrod, who graduated from Cornell Law School in 1966 and was an editor of
the Cornell Law Review, has been practicing law for 30 years, specializing in
entertainment law exclusively for the last 24 years, representing producers,
writers, directors and actors.

Walter Johnson Williams has served as Chief Financial Officer since January
1998. Mr. Williams has served as an adviser to the Company since 1992. Mr.
Williams is the President of American Business Econometrics, Inc., an economic
consultancy firm he founded in 1983 which publishes The Straight Shooter
Newsletter and analyzes government reports through the Shadow Bureau of
Government Statistics. He also provides consulting services to major financial
institutions and Fortune 500 companies, as well as to private individuals; he
also provides economic commentary to financial newspapers, journals and other
publications and radio and television business and finance programs.

16
<PAGE> 19

Harry B. Knights has served as Senior Vice President-Operations since March
1998. Mr. Knights also has served as Co-Publisher and Chief Operations Officer
of Zweig Knights Publishing Corporation, a majority owned subsidiary, since May
1994. Mr. Knights authored "The Nicholas Stories: The Boy With A Wish, The First
Flight of St. Nicholas; The Maiden Voyage of Kris Kringle;" and "The Spirit of
Christmas" and "The Homecoming." He was discharged from personal bankruptcy in
April 1994.

Charles H. Flood has served as Senior Vice President-Sales since October
1996. Mr. Flood also has served as Co-Publisher and President of National Sales
of the Eleemosynary/Traditional Publishing Division of Zweig Knights Publishing
Corporation, since July 1994. Mr. Flood has over twenty years of experience in
sales management, product development, marketing, education and publishing. His
experience includes custom publishing, interactive CD ROM development,
sub-rights and co-publishing for animation, joint venture television and
publishing programs, and, eleemosynary publishing.

Wallis M. Spence has served as Senior Vice President-Financial Marketing
since February 1998. He owns The Striker Steel Co. (steel framed homes), since
February 1996, and is a self-employed financial consultant specializing in
portfolio/pension funds for long term investment, since 1989.

James W. Courchaine has served as Senior Vice President-Logistics since
June 1998. In 1979, Mr. Courchaine retired from the United States Air Force
after twenty years and became a self-employed financial consultant specializing
in financial services and planning for insurance companies. He was discharged
from personal bankruptcy in October 1995.

John A. Churchill, Jr. will serve as Controller after the effective date of
the Registration Statement of which this Prospectus is a part. He owns Central
Business Services Corporation, a financial services company, since 1990. He
serves as Treasurer of E.L. Trevena, Inc., a demolition company, since 1996, and
was Chairman of Agrovit, Inc., a fertilizer brokerage, from 1991 to 1996.

EXECUTIVE COMPENSATION

Neither the Chief Executive Officer nor any other executive officer of the
Company received total salary and bonus in excess of $100,000 in any of the
fiscal years ended December 31, 1995, 1996 or 1997. Roger Hefler, who died on
December 26, 1997, received $24,000 as Vice Chairman and Chief Executive Officer
during each of the fiscal years ended December 31, 1996 and 1997.

DIRECTORS' COMPENSATION

Directors of the Company are not compensated for their services.

EMPLOYMENT AGREEMENTS

On April 8, 1998, the Company entered into employment agreements with all
executive officers. The employee agreements provide for remuneration, stock
awards, and performance awards. Each executive officer will receive (i) a
sign-on award of 25,000 shares of stock, (ii) cash compensation at the end of
recapitalization level 1 ($1,000,000 in new capital) of $48,000 per annum; (iii)
stock award of 25,000 shares at the end of the 1st year of employment; (iv) cash
compensation at the end of capitalization level 2 ($10,000,000 in new capital)
of $75,000 per annum; (v) stock award of 25,000 shares at the end of the 2nd
year of employment; and (vi) stock award of 25,000 shares at the end of the 3rd
year of employment. Each employment agreement expires on April 8, 2000. Pursuant
to the employment agreements, Larry D. Faw serves as Chairman of the Board of
Directors and President, Vincent J. Neville serves as Vice Chairman and Chief
Executive Officer, Genevieve H. Faw serves as a Director, Secretary and Senior
Vice President-Children's Programming, Andrew C. Rigrod, Esquire serves as Chief
Operations Officer, Walter Johnson Williams serves as Chief Financial Officer,
Wallis M. Spence serves as Senior Vice President-Financial Marketing, Harry B.
Knights serves as a Senior Vice President-Operations, Charles H. Flood serves as
Senior Vice President-Sales, James W. Courchaine serves as Senior Vice
President-Logistics; and John A. Churchill, Jr. serves as Controller. Each of
the executive officers will be entitled to receive reimbursement for all
reasonable expenses incurred in connection with the performance of any of
his/her obligations pursuant to the Employment Agreements. The Employment
Agreements contain a covenant not to compete and an agreement to keep
confidential certain information.

17
<PAGE> 20

LIMITATION OF LIABILITY AND INDEMNIFICATION MATTERS

The Certificate of Amendment and Restated Certificate of Incorporation, and
the By-Laws of the Company, as amended, provide that the Company shall indemnify
its officers and directors to the full extent permitted by the Business
Corporation Law of the State of New York.

Reference is hereby made to Section 402(b) of the Business Corporation Law
of the State of New York relating to the indemnification of officers and
directors, which Section is hereby incorporated herein by reference.

Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers or others pursuant to the
foregoing provisions, the Company has been informed that in the opinion of the
Securities and Exchange Commission such indemnification is against public policy
as expressed in the Securities Act of 1933 and is therefore unenforceable.

INCENTIVE STOCK OPTION PLAN

In March 1993, the Board of Directors and shareholders approved in
principle an Employee Incentive Stock Option Plan (the "Plan") for full time
employees including executive officers. Under the Plan, the Company would issue
options to purchase shares of the Company's Common Stock, exercisable at the
current market value (110% of current market value only to 10% or greater
stockholders) up to $100,000 annually. The Plan would terminate on March 1,
2001, unless renewed.

Under the Plan, any officer or director owning 10% of the voting plan of
the Company would be restricted from exercising his/her options to three years
after the receipt of such Grant. Additional provisions would be as follows: (1)
options terminated or expired, revert back to the Plan, (2) unpurchased option
shares remain in the Plan, (3) options are exercisable by the optionee or
his/her estate, (4) options are not transferable, and, (5) carryover amounts
from one year to the next year cannot exceed 50% of the Plan. The Company will
reserve 500,000 shares of Common Stock for issuance under the Plan. The Plan has
not been implemented and no options have been granted under the Plan.

CERTAIN TRANSACTIONS

FAW PURCHASE AGREEMENT

In February 1993, Studio City-Florida entered into an agreement with Larry
D. Faw, Chairman of the Board of Directors and President, to acquire direct
ownership of various intellectual properties having an estimated value of
$7,226,000, including 72 motion picture properties, four television pilot
properties, 48 books for publication, four inventions, one franchise program and
one specialty product design and marketing program, in exchange for a promissory
note payable in the amount of $1,554,027 and warrants to purchase 5,000,000
shares of Common Stock of Studio City-Florida exercisable at $1.00 per share
until February 16, 2003. The principal amount was due and payable on February
16, 1995, with interest at the annual rate of 2%. Since maturity, when the
Company was unable to pay the Faw Note, it has been extended for consecutive six
month terms at an annual interest rate of 9%. Since 1993, the Company has paid
$130,000 in interest on the Faw Note and accrued interest payable to Mr. Faw at
September 30, 1998 was $358,803. The Faw Note is a demand obligation, but there
is no schedule for repayment of principal or interest.

"FAW PURCHASE AGREEMENT" -- OTHER

Effective July 1, 1996, Studio City-Florida merged with and into the
Company, pursuant to the Plan of Merger. Pursuant to the Plan of Merger (i)
100,000,000 shares of Common Stock of Studio City-Florida held by Larry D. Faw
were converted into 10,000,000 shares of the Company's Class A Preferred Stock,
(ii) 10,000,000 shares of Common Stock of Studio City-Florida held by Mr. Faw
were converted into

18
<PAGE> 21

1,000,000 shares of the Company's Class B Preferred Stock, (iii) warrants to
purchase 5,000,000 shares of Common Stock of Studio City-Florida were converted
into warrants to purchase 5,000,000 shares of Common Stock of the Company, and
(iv) each of the remaining issued and outstanding shares of Common Stock of
Studio City-Florida were converted into one share of the Company's Common Stock.
In addition, Mr. Faw received 1,000,000 shares of Class Preferred B Stock in
connection with the merger.

See "Business -- Subsidiaries" and Note 12 to Consolidated Financial
Statements for information about the interests of certain directors and
executive officers in subsidiaries of the Company.

PRINCIPAL STOCKHOLDERS

The following table sets forth, as of July 1, 1998, the beneficial
ownership of shares of the Common Stock of the Company by any person known to
the Company to be the beneficial owner of more than five per cent; each of the
directors and executive officers; and all directors and executive officers as a
group.

<TABLE>
<CAPTION>
AMOUNT AND NATURE OF BENEFICIAL
NAME OF BENEFICIAL OWNER OWNERSHIP OF COMMON STOCK(1)(2) PER CENT OF TOTAL VOTING POWER(2)
------------------------ ------------------------------- ---------------------------------
<S> <C> <C>
Larry D. Faw......................... 10,196,277(2)(3) 83.1%
14400 Southwest 46th Court
Ocala, Florida 34473
Vincent J. Neville................... 442,000(4) *
Genevieve H. Faw..................... 10,196,277(2)(3) 83.1%
14400 Southwest 46th Court
Ocala, Florida 34473
Andrew C. Rigrod..................... 25,000 *
Walter Johnson Williams.............. 526,000 *
Harry B. Knights..................... 181,000(5) *
Charles H. Flood..................... 30,000 *
Wallis M. Spence..................... 25,000 *
James W. Courchaine.................. 289,400(6) *
John A. Churchill, Jr................ 1,154,400(7) *
All directors and officers as a
group.............................. 12,869,077 85.2%
</TABLE>

- ---------------
* Less than one per cent.

(1) Except as otherwise indicated, each of the persons named has sole voting and
investment power with respect to all shares of Common Stock beneficially
owned. Beneficial ownership is calculated in accordance with Rule 13d-3(d)
of the Securities Exchange Act of 1934.

(2) The Company has two classes of voting securities, Common Stock and Class A
Preferred Stock. Holders of Class A Preferred Stock vote together with
holders of Common Stock and are entitled to ten votes for each share of
Class A Preferred Stock on all matters voted upon by the shareholders of the
Company. Larry D. Faw, Chairman of the Board and President of the Company
beneficially owns all outstanding shares of Class A Preferred Stock, or 100%
of that class, and therefore is the beneficial owner of 83.1% of the voting
power of the Company. The Class A Preferred Stock is included in the
calculation of the per cent of total voting power. The Class B Preferred
Stock, each share of which is convertible into ten shares of Common stock at
the annual rate of 20% commencing two years after acquisition, are not
included in the calculation.

(3) Includes: 2,870,000 shares held by Larry D. Faw, Incorporated, of which Mr.
Faw is the President; 401,277 shares held by the Von Falconbourg Family
Trust, of which Mr. Faw is the Managing Trustee; 1,000,000 shares held by
Morgan Rothchild Anzo, Inc. for the account and benefit of Mr. Faw; warrants
to purchase 5,000,000 shares at $1.00 per share; and 925,000 shares held by
Genevieve H. Faw, Mr. Faw's wife. Does not include 10,000,000 shares of
Class A Preferred Stock held by Mr. Faw, or 1,000,000 shares of Class B
Preferred Stock held by each of Mr. Faw and the Von Falconbourg Family

19
<PAGE> 22

trust or 300,000 shares of Class B Preferred Stock held by Mrs. Faw. Each of
Mr. Faw and Mrs. Faw disclaims beneficial ownership of the other's shares.

(4) Includes 5,000 shares held by Mr. Neville's wife.

(5) Includes 6,000 shares held jointly with Mr. Knight's wife. Does not include
35,000 shares of Class B Preferred Stock.

(6) Includes 153,400 shares held by the Courchaine Family Partnership, of which
Mr. Courchaine is the managing partner. Includes 10,000 shares held jointly
with Mr. Courchaine's wife. Does not include 35,000 shares of Class B
Preferred Stock held jointly with Mr. Courchaine's wife.

(7) Includes 12,000 shares held by five members of Mr. Churchill's family.

DESCRIPTION OF SECURITIES

GENERAL

The aggregate number of shares that the Corporation had authority to issue
is 85,000,000 shares, consisting of (i) 40,000,000 shares of Common Stock, (ii)
10,000,000 shares of Class A Preferred Stock, (iii) 25,000,000 shares of Class B
Preferred Stock and (iv) 10,000,000 shares of Preferred Stock, $.0001 per share
par value, to be issued in series. The Board of Directors has the authority to
issue Preferred Stock in series, fix the number of shares to be included in such
series, the dividends payable on the shares of such series, the redemption price
of the shares of such series, if any, and the terms and conditions of such
redemption, the terms and conditions under which the shares of such series are
convertible, if they are convertible, and other rights, preferences and
limitations pertaining to such series.

The relative rights, preferences and limitations of the shares of each
class are as follows:

Voting. Every holder of Common Stock is entitled to one vote for each
share of Common Stock on all matters voted upon by the shareholders of the
Corporation. Every holder of Class A Preferred Stock is entitled to ten votes
for each share of Class A Preferred Stock on all matters voted upon by the
shareholders of the Corporation and shall vote as a class with the holders of
Common Stock of the Corporation on all matters. The holders of Class B Preferred
Stock have no voting rights except as required by law.

Dividends. The holders of Class B Preferred Stock are entitled to receive,
out of funds legally available therefor, cumulative preferential dividends at
the rate of 12% per annum per share of Class B Preferred Stock, based on net
income before taxes. Dividends are payable on the Common Stock when and if
declared by the Board of Directors after payment of dividends on the Class B
Preferred Stock.

Liquidation. In the event of the voluntary or involuntary liquidation,
dissolution or other termination of the Company, the holders of the Class A
Preferred Stock are entitled to be paid $.06 per share of the Class A Preferred
Stock and an amount equal to any unpaid accrued dividends before any amount
shall be paid to the holders of the Class B Preferred Stock or the Common Stock;
and after such payment to the holders of the Class A Preferred Stock, the
holders of the Class B Preferred Stock are entitled to be paid $.06 per share of
the Class B Preferred Stock and an amount equal to any unpaid accrued dividends
before any amount shall be paid to the holders of the Common Stock. After
payment shall have been made to the holders of Class A Preferred Stock and Class
B Preferred Stock of the full amounts to which they shall be entitled, the
holders of Class A Preferred Stock, Class B. Preferred Stock and Common Stock
are entitled to share ratably in all remaining assets of the Corporation
available for distribution, according to the number of shares of capital stock
held, with the holders of Class B Preferred Stock and the holders of Common
Stock to share ratably according to the number of shares of Class B Preferred
Stock and/or Common Stock held by them, and the holders of Class A Preferred
Stock to share ratably according to the number of shares of Common Stock into
which such shares of Class A Preferred Stock may be converted.

Conversion. Shares of Class B Preferred Stock may be converted into shares
of Common Stock on the basis of one share of Class B Preferred Stock for ten
shares of Common Stock, at the rate of 20% per year commencing two years after
issuance, which ranges from 1993 for the 1,000,000 shares held by Mr. Faw to
1998 for the 2,825,834 shares held by others.

19
<PAGE> 23

Warrants. Warrants to purchase 500,000 shares of Common Stock are
exercisable at $3.00 per share and expire on December 31, 1999. Warrants to
purchase 5,000,000 shares of Common Stock, held by Mr. Faw, are exercisable at
$1.00 per share and expire on February 16, 2003. None of the Warrants entitle
the holder to any voting rights or other rights as a stockholder of the Company.

TRANSFER AGENT

The Company's transfer agent is Continental Stock Transfer & Trust Company,
2 Broadway, New York, New York 10004.

SELLING SECURITY HOLDERS

The name of each Selling Security Holder, any position or office held with
the Company and the amount of securities owned before the offering and after the
offering is complete are set forth in Appendix A. The percentages of the classes
before the offering is less than one percent for all Selling Security Holders
except as indicated under "Principal Shareholders," and the percentages of the
classes after the offering is complete is zero (-0-) for all Selling Security
Holders, assuming all securities offered are sold.

SHARES ELIGIBLE FOR FUTURE SALE

Upon completion of this Offering, there will continue to be outstanding
31,282,001 shares of Common Stock (including 3,800,000 treasury shares) and
3,825,834 shares of Class B Preferred Stock. Such shares of Common Stock and
Class B Preferred offered hereby will be freely tradable in the public market
without restriction under the Securities Act of 1933, as amended (the
"Securities Act"). There is no public trading market for such shares at present
and there can be no assurance that such a market will develop in the future. No
prediction can be made as to the effect, if any, that future sales of shares, or
the availability of shares for future sale, will have on the market price of the
Common Stock prevailing from time to time. Sales of substantial amounts of
Common Stock in the public market, or the perception that such sales could
occur, could adversely affect prevailing market prices for the Common Stock. If
such sales reduce the market price of the Common Stock, the Company's ability to
raise additional capital in the equity markets also could be adversely affected.

LEGAL MATTERS

The validity of the securities offered hereby has been passed upon for the
Company by Gerald Weinberg, P.C., Albany, New York.

EXPERTS

The financial statements of the Company at December 31, 1995, 1996 and 1997
and for the years then ended, appearing in this Prospectus and Registration
Statement have been audited by Peel Schatzel & Wells, P.A., independent
auditors, as set forth in their report thereon appearing elsewhere herein and in
the Registration Statement, and are included in reliance upon such report given
upon the authority of such firm as experts in accounting and auditing.

ADDITIONAL INFORMATION

The Company has filed with the Commission the Registration Statement under
the Securities Act with respect to the securities offered by this Prospectus. As
permitted by the rules and regulations of the Commission, this Prospectus does
not contain all the information set forth in the Registration Statement and the
exhibits thereto. Statements contained in this Prospectus as to the contents of
any contract or other documents referred to herein are not necessarily complete,
and in each instance reference is made to the copy of such contract or other
document filed as an exhibit to the Registration Statement, each such statement
being qualified in all respects by such reference. For further information with
respect to the Company and the securities offered hereby, reference is made to
the Registration Statement and the exhibits thereto, which may be may be
inspected and copied at certain regional offices of the Commission located at
Northwestern Atrium Center, 500 West Madison Street, Suite 1400, Chicago,
Illinois 60661-2511 and 75 Park Place, 14th Floor,

20
<PAGE> 24

New York, New York 10007, and may be inspected and copied at the public
reference facilities maintained by the Commission at Room 1024, Judiciary Plaza,
450 Fifth Street, N.W., Washington, D.C. 20549-1004. In addition, the Company is
required to file electronic versions of these documents with the Commission
through the Commission's Electronic Data Gathering, Analysis and Retrieval
(EDGAR) system. The Commission maintains a World Wide Web site at
http://www.sec.gov that contains reports, proxy and information statements and
other information regarding registrants that file electronically with the
Commission.

21
<PAGE> 25

INDEX TO FINANCIAL STATEMENTS

<TABLE>
<S> <C>
Report of Peel Schatzel & Wells, P.A., Independent
Auditors.................................................. F-2
Consolidated Balance Sheets................................. F-3
Consolidated Statements of Operations....................... F-4
Consolidated Statements of Changes in Stockholders'
Equity.................................................... F-5
Consolidated Statement of Cash Flows........................ F-6
Notes to Consolidated Financial Statements.................. F-7
</TABLE>

F-1
<PAGE> 26

INDEPENDENT AUDITOR'S REPORT

To the Board of Directors and Stockholders

Studio City Holding Corporation

We have audited the accompanying consolidated balance sheets of Studio City
Holding Corporation (a New York corporation) (a development stage company) and
subsidiaries (development stage companies) as of December 31, 1997 and 1996, and
the related consolidated statements of operations, changes in stockholders'
equity, and cash flows for the years ended December 31, 1991 through 1997
(inception through December 31, 1997). These consolidated financial statements
are the responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits 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 statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements present fairly, in
all material respects, the financial position of Studio City Holding Corporation
and subsidiaries as of December 31, 1997 and 1996, and the results of their
operations, changes in stockholders' equity and their cash flows for the years
ended December 31, 1991 through 1997 (inception through December 31, 1997) in
conformity with generally accepted accounting principles.

/s/ Peel, Schatzel & Wells, P.A.

St. Petersburg, Florida

July 9, 1998

F-2
<PAGE> 27

STUDIO CITY HOLDING CORPORATION AND SUBSIDIARIES

(A DEVELOPMENT STAGE COMPANY)

CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
DECEMBER 31, (UNAUDITED)
------------------------- SEPTEMBER 30,
1996 1997 1998
----------- ----------- -------------
<S> <C> <C> <C>
ASSETS
Cash and cash equivalents............................. $ 6,650 $ 18,448 $ 107,220
Intangible assets..................................... 7,320,458 7,303,315 7,303,315
Investment in joint ventures and stock................ 56,823 56,823 56,823
Prepaid services...................................... 3,469 3,469 3,469
Office equipment (cost $44,343, $52,506 and $52,506;
accumulated depreciation $17,973, $23,493 and
$28,275)............................................ 26,370 29,013 24,231
Organization costs (net of accumulated
amortization)....................................... 1,126 782 782
Offering costs........................................ 32,051 32,051 32,051
Stock subscriptions receivable........................ 53,000
----------- ----------- -----------
TOTAL ASSETS..................................... $ 7,446,947 $ 7,496,901 $ 7,527,891
=========== =========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES
Note payable-stockholder............................ $ 1,554,027 $ 1,554,027 $ 1,554,027
Accrued interest.................................... 194,456 290,518 358,803
Accrued expenses.................................... 27,803 37,841 7,750
Loans from stockholders............................. 245,500
CONTINGENT LIABILITIES -- Collective Bargaining
Agreement (Note 3).................................. -- -- --
LEASE COMMITMENTS -- (Note 15)........................ -- -- --
----------- ----------- -----------
TOTAL LIABILITIES................................ 1,776,286 1,882,386 2,166,080
STOCKHOLDERS' EQUITY
Common stock - par value $.0001 in 1996 and $.002 in
1997 and 1998; 150,000,000 shares authorized;
150,000,000, 31,028,500 and 31,057,001 shares
issued and outstanding in 1996, 1997 and 1998
respectively..................................... 15,000 62,057 62,114
Common stock warrants............................... 5,000,000 5,000,000 5,000,000
Preferred stock -- A - par value $.0001 in 1997 and
1998; 10,000,000 shares authorized, issued and
outstanding in 1997 and 1998..................... 1,000 1,000
Preferred stock -- B - no par value in 1996, $.0001
par value in 1997 and 1998; 10,000,000 shares
authorized; 3,825,834 issued and outstanding in
1997 and 1998.................................... 671,974 383 383
Additional paid-in capital.......................... 1,197,513 2,305,356 2,394,800
Deficit accumulated during development stage........ (1,213,826) (1,754,281) (2,096,486)
----------- ----------- -----------
TOTAL STOCKHOLDERS' EQUITY....................... 5,670,661 5,614,515 5,361,811
----------- ----------- -----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY....... $ 7,446,947 $ 7,496,901 $ 7,527,891
=========== =========== ===========
</TABLE>

The accompanying notes are an integral part of these financial statements.
F-3
<PAGE> 28

STUDIO CITY HOLDING CORPORATION AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>
CUMULATIVE FOR THE YEAR ENDED (UNAUDITED)
FROM INCEPTION DECEMBER 31, FOR THE NINE
OCTOBER 21, 1991 --------------------- MONTHS ENDED
TO SEPTEMBER 30, 1998 1996 1997 SEPTEMBER 30, 1998
--------------------- --------- --------- ------------------
<S> <C> <C> <C> <C>
INCOME.............................. $ 234,147 $ 175,727 $ 15,693 $ 14,005
EXPENSES
Accounting fees................... 88,518 28,500 24,209 12,694
Advertising....................... 15,556 4,228
Amortization -- organization
costs.......................... 1,208 341 342
Auto expenses..................... 159,172 32,661 24,712 10,515
Bad debts......................... 167,695 167,695
Bank charges...................... 786 157
Commissions....................... 36,906 36,906
Consulting fees................... 119,318 46,082 19,506 6,872
Contributions..................... 227
Depreciation...................... 28,274 6,172 5,520 4,782
Dues and publications............. 15,715 2,021 3,986 3,199
Equipment rental.................. 190,923 36,858 80,058 68,415
Insurance......................... 24,089 7,146 8,367 892
Interest.......................... 576,779 139,862 139,862 108,638
Legal fees........................ 123,038 9,069 66,180 26,582
Licenses.......................... 19,520 4,306 3,212 2,417
Meals............................. 26,408 9,495 2,654 1,606
Medical
reimbursement -- officer....... 8,517 5,298
Miscellaneous expenses............ 48,015 8,073 8,485 19,240
Office expenses................... 119,304 19,998 15,746 9,164
Officer compensation.............. 5,000
Postage........................... 49,707 11,991 11,363 7,910
Professional fees................. 91,221 48,229 25,382 5,110
Project costs..................... 126,763 85,833 40,930
Rent.............................. 129,626 53,149 14,358 13,419
Seminars.......................... 604
Telephone expense................. 72,563 28,411 8,340 6,459
Travel............................ 52,315 22,205 4,435 4,169
Utilities......................... 18,949 2,089 3,598 3,040
Wages............................. 13,917 3,153
----------- --------- --------- ---------
TOTAL EXPENSES...................... 2,330,633 733,938 556,148 356,210
----------- --------- --------- ---------
DEFICIT ACCUMULATED
DURING DEVELOPMENT STAGE.......... $(2,096,486) $(558,211) $(540,455) $(342,205)
=========== ========= ========= =========
EARNINGS (LOSS) PER
COMMON SHARE
(Basic and Diluted Loss Per Share
are the same--See Note 2)...... $ (0.0169) $ (0.0038) $ (0.0175) $ (0.0061)
=========== ========= ========= =========
</TABLE>

The accompanying notes are an integral part of these financial statements.
F-4
<PAGE> 29

STUDIO CITY HOLDING CORPORATION AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
COMMON STOCK DEFICIT
-------------------------------------------------- ACCUMULATED
ADDITIONAL COMMON DURING
COMMON PAID-IN STOCK PREFERRED PREFERRED DEVELOPMENT
SHARES AMOUNT CAPITAL WARRANTS STOCK A STOCK B STAGE
------------ -------- ----------- ---------- --------- --------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Issuance of common stock........ 748,000 $ 11,920 $ 1,138,500 $ -- $ -- $ -- $ --
Common shareholder loss for
period October 21, 1991 to
December 31, 1991............. (35,455)
------------ -------- ----------- ---------- ------ --------- -----------
Balance at December 31, 1991.... 748,000 11,920 1,138,500 -- -- -- (35,455)
Issuance of common stock........ 610,201 1,662 72,770
Common shareholder loss for year
ended December 31, 1992....... (57,999)
------------ -------- ----------- ---------- ------ --------- -----------
Balance at December 31, 1992.... 1,358,201 13,582 1,211,270 -- -- -- (93,454)
Stock split 1 to 100............ 134,461,899
Shares for properties........... (1,151,004)
Issuance of common and preferred
stock and common warrants..... 16,749,900 1,675 56,976 5,000,000 671,974
Common shareholder loss for year
ended December 31, 1993....... (73,409)
------------ -------- ----------- ---------- ------ --------- -----------
Balance at December 31, 1993.... 152,570,000 15,257 117,242 5,000,000 -- 671,974 (166,863)
Issuance of common stock........ (13,420,000) (1,342) 242,670
Common shareholder loss for year
ended December 31, 1994....... (172,174)
------------ -------- ----------- ---------- ------ --------- -----------
Balance at December 31, 1994.... 139,150,000 13,915 359,912 5,000,000 -- 671,974 (339,037)
Issuance of common stock........ 4,150,000 415 406,095
Common shareholder loss for year
ended December 31, 1995....... (316,578)
------------ -------- ----------- ---------- ------ --------- -----------
Balance at December 31, 1995.... 143,300,000 14,330 766,007 5,000,000 -- 671,974 (655,615)
Issuance of common stock........ 6,700,000 670 431,506
Common shareholder loss for year
ended December 31, 1996....... (558,211)
------------ -------- ----------- ---------- ------ --------- -----------
Balance at December 31, 1996.... 150,000,000 15,000 1,197,513 5,000,000 -- 671,974 (1,213,826)
Issuance of common stock........ 155,000 310 541,633
Common shareholder loss for year
ended December 31, 1997....... (540,455)
Shares issued, exchanged or
converted..................... (119,126,500) (11,000) 9,000 1,000 1,182
Merger adjustments.............. 57,747 557,210 (672,773)
------------ -------- ----------- ---------- ------ --------- -----------
Balance at December 31, 1997.... 31,028,500 62,057 2,305,356 5,000,000 1,000 383 (1,754,281)
Issuance of common stock
(Unaudited)................... 28,501 57 89,444
Common shareholder loss for nine
months ended September 30,
1998 (Unaudited).............. (342,205)
------------ -------- ----------- ---------- ------ --------- -----------
Balance at September 30, 1998... 31,057,001 $ 62,114 $ 2,394,800 $5,000,000 $1,000 $ 383 $(2,096,486)
============ ======== =========== ========== ====== ========= ===========

TOTAL
STOCKHOLDERS'
EQUITY
-------------
<S> <C>
Issuance of common stock........ $ 1,150,420
Common shareholder loss for
period October 21, 1991 to
December 31, 1991............. (35,455)
-----------
Balance at December 31, 1991.... 1,114,965
Issuance of common stock........ 74,432
Common shareholder loss for year
ended December 31, 1992....... (57,999)
-----------
Balance at December 31, 1992.... 1,131,398
Stock split 1 to 100............
Shares for properties........... (1,151,004)
Issuance of common and preferred
stock and common warrants..... 5,730,625
Common shareholder loss for year
ended December 31, 1993....... (73,409)
-----------
Balance at December 31, 1993.... 5,637,610
Issuance of common stock........ 241,328
Common shareholder loss for year
ended December 31, 1994....... (172,174)
-----------
Balance at December 31, 1994.... 5,706,764
Issuance of common stock........ 406,510
Common shareholder loss for year
ended December 31, 1995....... (316,578)
-----------
Balance at December 31, 1995.... 5,796,696
Issuance of common stock........ 432,176
Common shareholder loss for year
ended December 31, 1996....... (558,211)
-----------
Balance at December 31, 1996.... 5,670,661
Issuance of common stock........ 541,943
Common shareholder loss for year
ended December 31, 1997....... (540,455)
Shares issued, exchanged or
converted..................... 182
Merger adjustments.............. (57,816)
-----------
Balance at December 31, 1997.... 5,614,515
Issuance of common stock
(Unaudited)................... 89,501
Common shareholder loss for nine
months ended September 30,
1998 (Unaudited).............. (342,205)
-----------
Balance at September 30, 1998... $ 5,361,811
===========
</TABLE>

The accompanying notes are an integral part of these financial statements.
F-5
<PAGE> 30

STUDIO CITY HOLDING CORPORATION AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)

CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
CUMULATIVE FOR THE YEAR ENDED (UNAUDITED)
FROM INCEPTION DECEMBER 31, FOR THE NINE
TO OCTOBER 21, 1991 --------------------- MONTHS ENDED
SEPTEMBER 30, 1998 1996 1997 SEPTEMBER 30, 1998
------------------- --------- --------- ------------------
<S> <C> <C> <C> <C>
OPERATING ACTIVITIES
Deficit accumulated during
development stage................ $(2,096,486) $(558,211) $(540,455) $(342,205)
Amortization and depreciation....... 29,482 6,511 5,862 4,782
Changes in operating assets and
liabilities:
Increase in prepaid services..... (1,024)
Increase in organizational
costs.......................... (1,860) (488)
Increase in offering costs....... (32,051) (10,551)
(Increase) decrease in stock
subscription................... 20,000 (53,000) 53,000
Increase (decrease) in accrued
expenses....................... 7,750 23,794 14,047 (30,091)
Increase in accrued interest
payable........................ 358,803 85,863 96,062 68,285
Decrease in intangible
assets -- project costs........ 19,750 19,750
Decrease in other liabilities.... (100)
----------- --------- --------- ---------
Net cash used in operating
activities.......................... (1,715,636) (433,182) (457,734) (246,229)

INVESTING ACTIVITIES
Investment in CVT Corporation of
America.......................... (12,000)
Investment in joint ventures and
stocks........................... (56,824) (32,088)
Investment in subsidiaries.......... (34,036) (10,912)
Acquisition of equipment............ (52,505) (12,637) (8,163)
Acquisition of properties........... (96,966) (43,479) (2,605)
----------- --------- --------- ---------
Net cash used in investing
activities.......................... (252,331) (99,116) (10,768) --

FINANCING ACTIVITIES
Borrowings from stockholders........ 318,237 245,500
Proceeds for issuance of common
stock............................ 1,855,970 502,511 480,300 89,501
Repayment of stockholders loans..... (77,740) (33,474)
Loan to affiliated company.......... (21,280) (2,701)
----------- --------- --------- ---------
Net cash provided by financing
activities.......................... 2,075,187 466,336 480,300 335,001
----------- --------- --------- ---------
Cash and cash equivalents -- increase
(decrease).......................... 107,220 (65,962) 11,798 88,772
Cash and cash
equivalents -- Beginning............ -- 72,612 6,650 18,448
----------- --------- --------- ---------
Cash and cash equivalents -- Ending... $ 107,220 $ 6,650 $ 18,448 $ 107,220
=========== ========= ========= =========

Supplemental Disclosures of Cash Flow
Information:
Cash paid for interest.............. $ 177,626 $ 53,999 $ 43,803 $ 36,612
=========== ========= ========= =========
Noncash financing transaction:
Value of Studio City shares
issued for services............ $ 3,647 $ 171 $ 114 $ --
=========== ========= ========= =========
</TABLE>

The accompanying notes are an integral part of these financial statements.
F-6
<PAGE> 31

STUDIO CITY HOLDING CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
OCTOBER 21, 1991 (INCEPTION) THROUGH SEPTEMBER 30, 1998

NOTE 1 -- ORGANIZATION, BACKGROUND INFORMATION AND BASIS OF PRESENTATION

Organization and Background Information

STUDIO CITY INCORPORATED HOLDING (the Company) was incorporated in the
State of Florida on October 25, 1991 as Studio City Incorporated. Prior to
incorporation, pre-incorporation operations commenced in February of 1991. The
Company is engaged in asset development, business management, production and
post-production studio operation, motion picture studio operation, tourist
attraction operation, the development of motion pictures for theatrical
exhibition, for television (i.e. network, cable, pay-per-view, etc.) and home
video, and in the development, production, and distribution of printed
publications. The Company owns a significant number of intellectual properties
and has a partial interest in other intellectual properties.

FAWNSWORTH INTERNATIONAL PICTURES CORPORATION (FIPC) was incorporated in
the State of Florida on October 21, 1991. Prior to incorporation,
pre-incorporation operations commenced in February of 1991. FIPC is a full
service motion picture and television production and distribution company. As a
result of the stockholders of FIPC receiving 491,150 shares of common stock of
Studio City with a par value of $1.00 in exchange for their ownership in the
shares of FIPC, FIPC became a wholly owned subsidiary of the Company on October
18, 1992. The Company owns 100% of the voting stock of FIPC.

Prior to the stock exchange and transfer, the stockholders of Studio City
Incorporated voted unanimously to increase the amount of common stock authorized
from 1,000,000 shares to 1,500,000 to accommodate the exchange with FIPC
stockholders. The end result was that Studio City, Incorporated became the
parent company of FIPC (a wholly owned subsidiary) with both companies being
developmental stage companies. In a unanimous vote of the stockholders of the
Company, it was voted to change the name of the Company to Studio City
Incorporated Holding, which also operated under the name SCI Holding.

In a unanimous vote of its stockholders, the Company was instructed to
execute a stock split to fully dilute the stock of the Company. The 100 to 1
stock split was executed on March 1, 1993. On that date, the total authorized
common stock of 150,000,000 shares includes all of the stock authorized
including 500,000 shares reserved under the Company's Employee Incentive Stock
Option Plan. The common stock of the Company originally had a par value of $1.00
per share and was amended to $.01 per share at the time of the stock split.
Subsequent to the stock split, the par value has again been amended to reflect
the par value at $.0001 per share, and this is the par value per share for each
of the subsidiaries subsequently formed.

Realizing the necessity for expansion, the Company created another
subsidiary, POC-IT PUBLISHERS, INCORPORATED (Poc-It). Poc-It was incorporated in
the State of Florida on May 3, 1993. The Company owns 100% of the voting stock.
This subsidiary was created to assemble, acquire, produce and publish various
literary properties owned by Studio City Incorporated Holding.

On December 14, 1993, the Company entered into an agreement to acquire
77.5% of CVT CORPORATION OF AMERICA (CVT), an inactive New York based public
company. The cost of the stock was $12,000 plus the Company assumed certain
debts. The purpose of this acquisition was as follows: (i) to reactivate the
operations of CVT after a subsequent reorganization, (ii) prepare CVT for a
merger, (iii) merge the Company into CVT, thus becoming Studio City Holding
Corporation, a New York public company, (iv) prepare the merged entity for SEC
and NASD registration, and (v) prepare the merged entity for a Secondary
Offering.

The Company and its subsidiaries are in the developmental stage and have
not generated significant revenues. In addition, the development of commercial
products using the Company's proprietary technology and inventory of
intellectual properties have not been completed and will require significant
additional

F-7
<PAGE> 32

STUDIO CITY HOLDING CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
OCTOBER 21, 1991 (INCEPTION) THROUGH SEPTEMBER 30, 1998 -- CONTINUED

NOTE 1 -- ORGANIZATION, BACKGROUND INFORMATION AND BASIS
OF PRESENTATION -- CONTINUED
financing. There is no assurance that commercially successful products will be
developed and that the Company will achieve a profitable level of operations.

Realizing the necessity to develop certain intellectual properties and
assets through the expansion of operations, the Company created six subsidiaries
in 1994. They are as follows:

The Company formed POC-IT COMICS, INCORPORATED on March 29, 1994 as a
Florida corporation. The Company owns 96.93% of the voting stock. Poc-It Comics
has three comic book franchises for development -- "THE EARTH WARRIORS" created
by Larry Faw; "MAGNET MAN" created by Paul Piterski; and "SHADOW RAVEN" created
by Frank Zanca. Poc-It Comics owns literary properties, as well as character
artwork. The first comic book -- SHADOW RAVEN PREMIER EDITION was distributed in
May 1995.

The Company formed ZWEIG KNIGHTS PUBLISHING CORPORATION on March 29, 1994
as a Florida corporation. The Company owns 64.30% of the voting stock. Zweig
Knights Publishing owns twenty six literary properties for future development
and publication. On November 11, 1997, Zweig Knights published its first in a
series of "Limited First Editions", The Nicholas Stories: The Boy With A Wish.
The second book of The Nicholas Stories series, The First Flight of St.
Nicholas, is scheduled for release on November 1, 1998, and the third book in
the series, The Maiden Voyage of Kris Kringle, is scheduled for release on
October 1, 1999. An animated television special of The Nicholas Stories: A
Holiday Classic is currently in pre-production.

The Company formed The INTERNATIONAL CHILDREN'S TELEVISION NETWORK,
INCORPORATED on April 14, 1994 as a Florida corporation. The Company owns 99.96%
of the voting stock. The International Children's Television Network has fifteen
literary properties, which is the equivalent of twelve hours of children's
programming.

The Company formed STUDIO CITY AMUSEMENTS, INC. on November 10, 1994 as a
Florida corporation. The Company owns 100% of the voting stock. Studio City
Amusements owns two theatrical musical productions entitled "SLICING UP THE BIG
APPLE" and "TINTYPES ON AN INTERGALACTICAL STAGE". Studio City Amusements
purpose is to develop and manage entertainment properties, and to develop and
produce Specialty Entertainment Projects.

The Company formed NON-EXISTENT MAJOR LEAGUE FANTASY SPORTS ASSOCIATION,
INCORPORATED on November 10, 1994 as a Florida corporation. The Company owns
100% of the voting stock. Non-Existent Major League Fantasy Sports Association
owns "The 1994 Fan's Choice Fantasy World Championship of Baseball", the first
in a series of interactive radio and television fantasy sporting events. This
satirical 12 hour long radio play of a "fantasy world series of baseball" was
completed December 1, 1994 and is now ready for radio broadcast and/or
distribution.

The Company formed ZINGRR N-2-AKTIV TELEVISION NETWORK, INC. on November
22, 1994 as a Florida corporation. The Company owns 94.95% of the voting stock.
Zingrr N-2-Aktiv was created to serve as a partner in development, creation,
maintenance and programming of FCC Licensed Wireless Cable Stations and Systems.

The following seven subsidiaries were formed subsequently for the purposes
of diversification and expansion. They are as follows:

The Company formed QUAGGA ENTERTAINMENT CORPORATION on March 30, 1995 as a
Florida corporation. The Company owns 93.33% of the voting stock. Quagga is in
the development stage and is engaged in the
F-8
<PAGE> 33

STUDIO CITY HOLDING CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
OCTOBER 21, 1991 (INCEPTION) THROUGH SEPTEMBER 30, 1998 -- CONTINUED

NOTE 1 -- ORGANIZATION, BACKGROUND INFORMATION AND BASIS
OF PRESENTATION -- CONTINUED
exploitation of motion picture and television properties including the creation
of revenue streams and profits from captive intellectual and franchiseable
properties. These activities would include creating products for television,
theatrical release, spin-off book products, and ancillary spin-offs.

The Company formed ACCINEMATRON RELEASING CORPORATION on September 13, 1995
as a Florida corporation. The Company owns 100% of the voting stock.
Accinematron was created to coordinate the distribution of various product lines
which include films, television programming, videocassettes, audio products, and
ancillary merchandise.

The Company formed The MAGIC SHOP, INC. on October 7, 1995 as a Florida
corporation. The Company owns 100% of the voting stock. The Magic Shop was
created to serve as a production center and business incubator for entertainment
related companies.

The Company formed ZOLLIPE CYBERSPACE CORPORATION on June 14, 1996 as a
Florida corporation. The Company owns 100% of the voting stock. Zollipe was
created to develop computer programming and software for interactive games and
information from both the CD-ROM platform and worldwide web.

The Company formed ZZOONZUIT, INC. on June 14, 1996 as a Florida
corporation. The Company owns 100% of the voting stock. Zzoonzuit was created to
design and manufacture a new line of beachwear, swimwear, and athletic clothing.

The Company formed XENOMORPH DIGITAL POST, INC. on June 14, 1996 as a
Florida corporation. The Company owns 100% of the voting stock. Xenomorph was
created to be a digital broadcast and video post-production center and on-line
producer of television programming.

The Company formed PRO-SPORTS ENTERTAINMENT GROUP, INC. on November 1, 1996
as a Florida corporation. The Company owns 100% of the voting stock. Pro-sports
was created as a motion picture and television production group to produce
entertainment products focused on minority role models.

Basis of Presentation

The consolidated financial statements include the accounts of Studio City
Holding Corporation, and all subsidiaries. All significant intercompany accounts
and transactions have been eliminated.

These consolidated financial statements have been prepared to comply with
disclosure requirements of Securities and Exchange Commission Regulation S-X and
conform to S-B format.

NOTE 2 -- SIGNIFICANT ACCOUNTING POLICIES

Cash and Cash Equivalents: The Company considers all highly liquid
investments with a maturity of three months or less when purchased to be cash
equivalents.

Office Furniture and Equipment: Office furniture and equipment is stated
on the basis of cost. Depreciation is computed by the straight-line method over
useful lives of 5-10 years.

Organization Costs: Costs to organize the corporations have been
capitalized and are stated on the basis of cost. Amortization is computed by the
straight-line method over 60 months.

F-9
<PAGE> 34

STUDIO CITY HOLDING CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
OCTOBER 21, 1991 (INCEPTION) THROUGH SEPTEMBER 30, 1998 -- CONTINUED

NOTE 2 -- SIGNIFICANT ACCOUNTING POLICIES -- CONTINUED
Offering Costs: As discussed in Note 16, Quagga incurred specific
incremental costs in connection with a proposed Securities Act of 1993
Regulation D-504 offering. These offering costs will be charged against the
offering proceeds.

Use of Estimates: The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that effect the reported amounts of assets and
liabilities and disclosures 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.

Earnings (Loss) Per Common Share: Basic Earnings (Loss) Per Share is
computed by dividing income available to common stockholders by the weighted
average number of common shares outstanding during the year. Diluted Earnings
(Loss) Per Share is computed the same as Basic but also giving effect to all
dilutive potential common shares such as options, warrants and convertible
preferred stock. However, the computation of Diluted Earnings (Loss) Per Share
does not assume conversion of any potential common shares if that has an
antidilutive effect on earnings per share. Since there is a loss from
operations, Diluted Earnings (Loss) Per Share is computed the same as Basic
Earnings (Loss) Per Share. This is computed by dividing the net loss by weighted
average number of common shares outstanding during the year. The Earnings (Loss)
Per Share are as follows:

<TABLE>
<CAPTION>
YEAR NET LOSS WEIGHTED AVERAGE SHARES LOSS PER SHARE
---- -------- ----------------------- --------------
<S> <C> <C> <C>
1998..................................... $342,205 31,042,751 $(.0110)
1997..................................... $540,455 30,950,955 $(.0175)
1996..................................... $558,211 146,650,000 $(.0038)
1995..................................... $316,578 141,225,000 $(.0022)
1994..................................... $172,174 145,703,500 $(.0012)
1993..................................... $ 73,409 144,038,550 $(.0005)
1992..................................... $ 57,999 1,071,101 $(.0541)
1991..................................... $ 35,455 784,000 $(.0452)
</TABLE>

NOTE 3 -- INTANGIBLE ASSETS AND RELATED OBLIGATIONS

Intangible assets consists of ownership of and rights to a significant
number of literary properties.

In October 1991, the date of incorporation of the Company and FIPC, stock
was issued for rights to several literary properties. 750,000 shares of Studio
City Incorporated Holding stock and 400,000 shares of Fawnsworth International
Pictures Corporation were issued at $1.00 per share in exchange for property
rights and exploitation. Therefore, the recorded amount of these intangible
assets for the years 1991 and 1992 was $750,000 for the Company and was $400,000
for FIPC.

Purchase Agreement: On February 16, 1993, the Company entered into an
agreement to acquire the direct ownership of various intellectual properties in
the amount of $7,226,000, which included 72 motion picture properties, 4
television pilot properties, 48 books for publication, 4 inventions, 1 franchise
program and 1 Specialty Product Design and marketing program. The Company's
Purchase Agreement for these properties included an obligation in the form of a
promissory demand note in the amount of $1,554,027 payable to Larry D. Faw, the
majority stockholder. In addition, the Company granted to Larry D. Faw warrants
with the option to purchase 5,000,000 shares of common stock, which was
considered to be partial payment under the

F-10
<PAGE> 35

STUDIO CITY HOLDING CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
OCTOBER 21, 1991 (INCEPTION) THROUGH SEPTEMBER 30, 1998 -- CONTINUED

NOTE 3 -- INTANGIBLE ASSETS AND RELATED OBLIGATIONS -- CONTINUED
Purchase Agreement. These warrants are exercisable at $1.00 per share at a
maximum of 25% per year beginning the first anniversary of the effective date of
the grant and continues until one of the following occurs: (i) to the year 2003,
or, (ii) when all warrants have been exercised, or, (iii) all rights to such
warrants have been terminated in a mutually agreed upon written agreement.

The Purchase Agreement additionally provided for the requirement that 51%
of the Company's preferred stock be issued to Larry D. Faw. The amount of
preferred stock was later decreased to 1,000,000 shares of redeemable
convertible and callable preferred B stock, with each share of preferred stock
being entitled to noncumulative dividends at 6% annual rate upon declaration of
the Board of Directors.

The preferred stock was recorded in the amount of $671,973, which was the
purchase price of the assets less the amount attributed to the promissory demand
note and the common stock warrants.

The Company, as part of the Purchase Agreement issued 1,000,000 shares of
its preferred B stock on February 15, 1995. The preferred stock can be converted
to common stock at market price, or, callable at any time by the Company at a
fixed price of $50 per share for preferred B stock and $105 per share for
preferred A stock, or in parts, on or after February 16, 1996, and will be
redeemable and/or callable until February 16, 2006.

In summary, the Purchase Agreement includes the $1,554,027 promissory
demand note, the $5,000,000 common stock warrants and $671,973 value of
preferred stock for a total price of $7,226,000. Management believes this
Purchase Agreement was at a significant discount which is evidenced by the
Independent Valuation as discussed below in Note 3.

Pre-existing Rights: Ownership of certain literary properties were
transferred from the Company to its subsidiaries in 1993. Properties with a
value of $600,000 were transferred to Fawnsworth International Pictures
Corporation, increasing the intangible asset value from $400,000 to $1,000,000
(note: properties were purchased in 1993 for $100, increasing intangible assets
to $1,000,100) and increasing its additional paid-in capital from $433,880 to
$1,033,880. Properties with a value of $1,200,000 were transferred to Poc-It
Publishers, Incorporated in exchange for its common stock. After these
transfers, the Company's intangible assets were $5,026,000. Incidental costs
have subsequently been incurred increasing the asset costs.

The purchase price of the intangible assets acquired from the majority
stockholder, Larry D. Faw, was determined by Industry Standards (i.e. Union
Minimums as detailed in the Writers Guild of America 1992 Minimum Basic
Agreement as collectively bargained with the Alliance of Motion Picture and
Television Producers, Producers Guild of America, Directors Guild of America,
and all other signatory union business franchise valuation methods, and other
similar industry standards for product and merchandise development).

Independent Valuation: In 1995, the Company engaged a major U.S.
investment banking firm to conduct an analysis of the Companies' intellectual
properties as an independent third party consultant. This Independent Valuation
was in direct response as a requirement of the Securities and Exchange
Commission's Chief Accounting Office. This Independent Valuation was prepared as
a Preliminary Valuation prior to a public offering and was created as an
internal document, which due to its sensitive contents, has been made available
to the Securities and Exchange Commission as a confidential sealed document. The
Preliminary Independent Valuation was prepared through the following:

(1) Independent Research: (a) the investment banker's Research Analysts
Reports, (b) Standard & Poor's Industry Surveys, (c) Mergers and Acquisitions
from Securities Data Corporation, and, (d) financial reports from publicly
traded media holding companies and motion picture/television production
companies.

F-11
<PAGE> 36

STUDIO CITY HOLDING CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
OCTOBER 21, 1991 (INCEPTION) THROUGH SEPTEMBER 30, 1998 -- CONTINUED

NOTE 3 -- INTANGIBLE ASSETS AND RELATED OBLIGATIONS -- CONTINUED
(2) Industry Guidelines.

(3) Analysis of the Collective Bargaining Agreements: The 1992 Writers
Guild of America-Alliance of Motion Picture & Television Producers Theatrical
and Television Basic Agreement, Amended and Effective May 2, 1992 through May 1,
1995; and the 1995 Writers Guild of America-Alliance of Motion Picture &
Television Producers Theatrical and Television Basic Agreement, Amended and
Effective May 2, 1995 through May 1, 1998, and ratified and amended on May 2,
1998 through May 1, 2001. All of which are Collective Bargaining Agreements
under the auspices of the National Labor Relations Board.

(4) Management Interviews.

The Preliminary Valuation Summary was prepared utilizing two valuation
methodologies for 22 of the Companies' intellectual properties: (1) Cost
Approach projected as $9,700,000 and, (2) Discounted Cash Flow projected as
$46,000,000. Based on the two methodologies, the preliminary value achieved was
$9,659,980 for 22 intellectual properties having a projected
costs/obligations/value of $439,090 for each of the 22 intellectual properties.
At the time of the Independent Valuation, Studio City Holding Corporation and
its subsidiaries owned 152 intellectual properties, the majority of which were
not utilized in calculations of the Preliminary Valuation.

Contingent Liabilities-Collective Bargaining Agreement: Studio City
Holding Corporation, Fawnsworth International Pictures Corporation, the
International Children's Television Network, Incorporated, and Zingrr N-2-Aktiv
Television Network, Inc. are registered signatory companies to the 1995 Writer's
Guild of America-Alliance of Motion Picture & Television Producers Theatrical
and Television Basis Agreement ("MBA"), Amended and Effective May 2, 1995
through May 1, 1998. Studio City Holding Corporation and its subsidiaries are
exclusively represented by the Alliance of Motion Picture & Television
Producers, Inc. The collective bargaining agreement is under the auspices of the
National Labor Relations Board and is deemed to be a contingent liability for
Studio City Holding Corporation and its subsidiaries in regards to all literary
properties owned by the companies for development and/or sale. All aspects of
intellectual properties represented by the "MBA" have been tabulated and have
pre-set financial obligations that pass through to the Company and/or other type
of ownership, and, directly passes through to any and all purchasers of the
intellectual properties. The contingent liabilities, requisite costs, and
expense calculations as determined under the 1995 "MBA" are restrictive and
compliance is dictated by law.

NOTE 4 -- INVESTMENT IN JOINT VENTURE AND STOCK

The Companies currently own (in entirety) literary properties whose
"replacement cost/value" and/or "1995 Minimum Basic Agreements" contingent
liabilities/obligation and/or associated direct pass-through costs for
production and distribution are tabulated under the Agreement as of December 31,
1996 as $811,931 per intellectual property. Studio City Holding Corporation and
its subsidiaries current portfolio of intellectual properties are required to
comply with all of the aspects pertaining to the collective bargaining agreement
in its most current form, and, those contingent liabilities pass through to the
owner of record.

This investment represents costs of $6,823 paid by FIPC on behalf of
Florida Screen Gems Partners, a partnership of which the FIPC is a partner. The
Partnership is in the development stage. The Company has also invested in two
Corporations -- Environmental Production Systems and Florida Film Investment
Company. These investments are recorded at cost for a total of $50,000.

F-12
<PAGE> 37

STUDIO CITY HOLDING CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
OCTOBER 21, 1991 (INCEPTION) THROUGH SEPTEMBER 30, 1998 -- CONTINUED

NOTE 5 -- PREPAID SERVICES

The Company and FIPC issued common stock to several individuals in exchange
for future services and expertise. The amount recorded as an asset is equal to
the number of shares of common stock issued at its then current par value.

NOTE 6 -- OFFICE FURNITURE AND EQUIPMENT AND NOTE PAYABLE-STOCKHOLDER

At the time of incorporation in October 1991, FIPC acquired office
furniture and equipment from a stockholder, Genevieve Faw in the amount of
$13,600. The Company became indebted for this amount plus $1,520 for supplies
that was expensed in 1991. Therefore, the total liability to the stockholder for
this transaction was $15,120 since 1991. In 1994 the liability was satisfied.

In 1995, the Company and Poc-It Comics acquired office furniture and
equipment. In 1996 and 1997, the Company acquired additional office furniture
and equipment. Office furniture and equipment is recorded at cost, less
accumulated depreciation. The provision for depreciation is computed on the
straight-line method over the estimated useful lives of the assets which range
from 5 to 7 years.

NOTE 7 -- NOTE PAYABLE-STOCKHOLDER

As discussed in Note 3 above, the Company became obligated under the
Purchase Agreement to its majority stockholder, Larry D. Faw. The promissory
demand note is dated the date of the Purchase Agreement, which is February 16,
1993. The promissory demand note contains the following provisions: (i) due upon
demand, (ii) payments may be made at any time, and (iii) a balloon payment is
due on February 16, 1995. The note has an initial annual interest rate of 2%. On
February 16, 1995, the note became due and subsequently was extended for six
months at an annual interest rate of 9%. Since August 16, 1995, the note has
been extended six times through February 16, 1999. No principal payments have
been made on this note, but partial interest payments have been made in 1995,
1996, 1997 and 1998 Accrued interest on this note was $358,803 as of September
30, 1998, and $290,518, $194,456, $108,593, $58,158 and $27,078 as of December
31, 1997, 1996, 1995, 1994 and 1993 respectively.

NOTE 8 -- RELATED PARTY TRANSACTIONS

In February of 1991, both the Company and FIPC started incurring
pre-incorporation expenses that were expensed by the companies and were paid by
its majority stockholder, Larry D. Faw. This practice has continued through the
present and both companies have reimbursed the stockholder for these expenses.

The nature of these expenses were automobile expense, office rent expense,
telephone expense, office supplies expense and other operational expenses. These
expenses were corporate expenses that were paid by the majority stockholder,
Larry D. Faw and charged to the companies. The Company incurred automobile
expenses and reimbursed Larry D. Faw at the mileage rates as prescribed by the
Internal Revenue Service. Additionally, the Company incurred office rent and
utilities and reimbursed Larry D. Faw $500 and $84 per month respectively.
Additional expenses were incurred and reimbursed to Larry D. Faw such as
telephone expenses, office supplies, and other operational expenses.

As discussed in Note 3, the Company acquired various intellectual
properties from the majority stockholder, Larry D. Faw, for $7,226,000 in
exchange for a promissory demand note, preferred stock and warrants to purchase
common stock at a fixed price.

The Company executed a statutory merger with CVT Corporation of America
(name changed to Studio City Holding Corporation) on July 1, 1996 with Studio
City Holding Corporation (a New York Corporation)

F-13
<PAGE> 38

STUDIO CITY HOLDING CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
OCTOBER 21, 1991 (INCEPTION) THROUGH SEPTEMBER 30, 1998 -- CONTINUED

NOTE 8 -- RELATED PARTY TRANSACTIONS -- CONTINUED
being the surviving entity. Subsequently, the operations of Studio City
Incorporated Holding (a Florida Corporation) were wound up and the corporation
dissolved. (See Note 17 -- Merger).

NOTE 9 -- STOCKHOLDERS' EQUITY

Common Stock and Preferred Stock

Studio City Holding Corporation immediately after the Merger and as of
December 31, 1996 (See Note 17) had 150,000,000 shares authorized, issued and
outstanding with a par value of $.01 per share. Upon the Merger, Larry D. Faw,
the principal stockholder converted 100,000,000 shares of common stock into
10,000,000 shares of Class A Preferred Stock and 10,000,000 shares of common
stock into 1,000,000 shares of Class B Preferred Stock. Additionally, the former
stockholders of CVT exchanged their shares for 9,123,250 shares of common stock.
Additionally, some shareholders elected the option to exchange their common
shares for Class B Preferred Stock (10 shares of common for 1 share of Class B
Preferred Stock). 18,258,340 shares of common stock were exchanged for 1,825,834
shares of Class B Preferred Stock. Additional shares of common were issued
during 1997. As of September 30, 1998 and December 31, 1997, there were
31,057,001 and 31,028,500 shares issued and outstanding. The par value was
amended to $.002 per share.

As discussed above, Larry D. Faw, the principal stockholder, converted
common stock into 10,000,000 shares of Class A Preferred Stock. This is the
amount of shares issued and outstanding as of September 30, 1998 and December
31, 1997. The par value is $.0001 per share.

As discussed above, Larry D. Faw, the principal stockholder, converted
common stock into 1,000,000 shares of Class B Preferred Stock. He previously had
1,000,000 shares prior to this conversion. Additionally, other stockholders
exchanged common stock for 1,825,834 shares of Class B Preferred Stock. As of
September 30, 1998 and December 31, 1997, there were 3,825,834 shares issued and
outstanding. The par value is $.0001 per share.

Fawnsworth International Pictures Corporation has 500,000 shares
authorized. The par value is $.01 per share. There were 491,150 shares issued
and outstanding as of December 31, 1997 with Studio City being the registered
beneficial owner.

Poc-It Publishers, Incorporated has 10,000,000 shares authorized, issued
and outstanding. The par value is $.0001 per share.

Poc-It Comics, Incorporated has one class of common stock and it is voting
(one share, one vote). The par value is $.0001 per share with 10,000,000
authorized. 10,000,000 shares are issued and outstanding. Poc-It Comics has
5,000,000 shares authorized, issued and outstanding of Class A Preferred Stock
at $.0001 par value per share which is callable, voting and convertible to
common. There are also 5,000,000 shares authorized, issued and outstanding Class
B Preferred Stock at $.0001 par value per share which is non-voting with
preferential dividends.

Quagga Entertainment Corporation has one class of common stock and it is
voting (one share, one vote). The par value is $.001 per share with 10,000,000
shares authorized and 7,000,000 shares issued and outstanding. Quagga has
5,000,000 shares of Class A Preferred Stock authorized, issued, and outstanding.
The par value of the Classes A shares is zero. The Class A shares (1) are
voting -- one share, one vote (2) receive no dividends (3) are not convertible
(4) are not redeemable (5) are callable at $25.00 per share.

F-14
<PAGE> 39

STUDIO CITY HOLDING CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
OCTOBER 21, 1991 (INCEPTION) THROUGH SEPTEMBER 30, 1998 -- CONTINUED

NOTE 9 -- STOCKHOLDERS' EQUITY -- CONTINUED
Quagga has 5,000,000 shares of Class B Preferred Stock of which 2,500,000
are issued and outstanding. The par value of the Class B shares is zero. The
Class B shares (1) are non-voting (2) have special dividend rights based on
earnings (3) have the initial price of $6.00 (4) have a fixed dividend of 12%
per annum based on earnings (5) are callable at $7.50 per share after the first
year's dividend (6) are callable after 3 years at $10.00 per share (7) are
convertible to common (8) have preferential liquidation treatment above all
other shares. Additionally, Quagga has 500,000 shares of Class C Preferred
Stock, however, no shares have been issued. The par value of the Class C shares
is zero. The Class C shares (1) are non-voting (2) have special dividend rights
based on earnings (3) have the initial price of $2.00 (4) are callable any time
after issuance for $2.00 for a period up to two years (5) are callable for $2.50
after two years (6) are convertible to common after three years on a one to one
basis (7) have preferential liquidation treatment over common stock and Class A
Preferred stock.

All other entities presented in these financial statements other than those
referred to above in this note, have one class of common stock and it is voting
(one share, one vote). The par value is $.0001 per share with 10,000,000
authorized, issued and outstanding. There are 5,000,000 shares authorized,
issued and outstanding each of Class A and B Preferred Stock at $.0001 par value
per share. Class A is voting and convertible to common and Class B is non-voting
with preferential dividends.

NOTE 10 -- TRADEMARKS, COPYRIGHTS AND LICENSES

The Company uses its own and licensed trademarks from its subsidiaries for
spinoff product development and merchandising from its various intellectual
properties. The Company owns 126 copyrights and will seek patents for 4
products. Additionally, the Company will be purchasing new products and literary
properties for development, and/or, enter into joint ventures for the
development of intellectual properties or consumer products. Each such instance
will be earmarked by distinct contractual requirements and obligations by the
Company.

NOTE 11 -- EMPLOYEES, EMPLOYMENT AGREEMENTS AND EMPLOYEE BENEFITS

The Company has had no full-time employees from inception to date except
for Quagga Entertainment Corporation during 1995. The Company has had
contractual relationships with independent contractors. Operations are managed
by officers, directors, and stockholders who receive no monetary compensation.
The Company has had no employment agreements with key officers from inception to
date. However, the Company anticipates entering into employment agreements with
key personnel and intends to obtain key-man insurance when the Company emerges
from the development stage.

The Company does maintain a medical reimbursement plan whereby the majority
stockholder, Larry D. Faw, is reimbursed for his medical costs. This does not
include any other family members.

NOTE 12 -- ADDITIONAL CONTINGENT PAYMENTS

As of September 30, 1998, the Company was obligated to make future
contingent payments under research and development contracts, which are based
upon actual utilization of certain intellectual properties in pre-publication,
published or cinematic form. These contingent payments will continue for an
indeterminable length of time, and will be payable in all cases at the time of
funding for each respective project. Under certain of these contracts, the
Company is obligated to pay royalties ranging from 1.5% to 5% of the gross net
profits which are distributable from the commercialization and merchandising of
these properties.

F-15
<PAGE> 40

STUDIO CITY HOLDING CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
OCTOBER 21, 1991 (INCEPTION) THROUGH SEPTEMBER 30, 1998 -- CONTINUED

NOTE 12 -- ADDITIONAL CONTINGENT PAYMENTS -- CONTINUED
The Company has agreements with various individuals who will receive funds
from the initial distribution proceeds from the exploitation of certain literary
properties. These amounts are uncalculable because they are percentage rights in
individual properties which are identified in the Company's unaudited financial
statements and inventory analysis. These contracts and percentage rights are as
follows:

For the motion picture property "Bawdyhouse Bandits":

<TABLE>
<S> <C>
Frederick G. Spriggs................................... 1% profit participation
Norman T. Godheim...................................... 1% profit participation
Heflar Family Trust.................................... 2% profit participation
Darlene C. Barror...................................... 1% profit participation
Suzanne Quinonez....................................... 1% profit participation
Genevieve H. Faw....................................... 2% profit participation
</TABLE>

For each of the following motion picture properties -- "Return To Treasure
Island", "Bad News", "TampaVice or The Comic Misadventures of Nipit and Budd",
"Mistaken Identity", "Love Can Kill", "Billion Dollar Bunnies", "The Love Bugs",
"A Touch of Evil", "Eyes of Terror", "Rail Rider", "Swingtime", "Whooz Choice",
"The War Lords", "Captain J Ride Again", "Midnight Blues", "Belle of Berry
Hill", "Hells Revenge", "Vendetta", "A Miracle In Tibet", "The Junkyard Gang",
"Land of the GaNodds", "So Far From My Heart", "Water Drop Series", "Damon
Runyon Series", "Way Off Broadway", "Paparazzi", "Love Bugs-Television Game
Show", "Fright Night", "Fountain Blue", "The Worlds Greatest Escapes", and
"Seminole" -- the following contractual agreements exist: Genevieve H.
Faw -- 2%.

For each of the following motion picture properties under option -- "Cut
Throat Ridge", "The Plunderers", "The Last Glider", "Silence Awaits", "Stihlman
and the Firestone", "The Orion Murders", "Battle of Buck Mountain", "A Delicate
Obsession", "Seven Eleven Sorority Street", "Happy Bob", "Ghost Rider", "Teeth
of Lions", "Dali", "The Hillsville Courthouse Murder Massacre", "The Last Great
Adventure", "Otto", "Wheels", "Freefalling", and "Like A Butterfly" -- the
following contractual agreements exist: Genevieve H. Faw -- 1%.

For the following book rights and motion picture rights on "Cain and Abel
Revisited: The True Life Story of Earle Don Fagan, Jr." -- the following
contractual agreement exists:

<TABLE>
<S> <C>
The E. Don Fagan, Jr. Trust....................... $50,000 on contract to sale
$25,000 new purchase
1% net profit participation
</TABLE>

The Company has separate contractual royalty agreements with Genevieve H.
Faw for deferred fees and royalties for each of the following
inventions -- "Enviro Tools"(tm), "Boot Valet"(r), "Book Lounge"(r), and "Radius
Gauge"(r). The following contracts exist: Genevieve H. Faw -- 1% royalty per
number sold.

The Company has separate contractual agreements for royalties for books
under the research and development phase of the Company's wholly owned
subsidiary, Poc-It Publishers, Incorporated. All of the following book titles in
each series have royalty fees -- "Reward Series" (13 titles), "The Poc-It Mania
Series" (11 titles), "Self Help Manuals" (11 titles), and "Contemporary Career
Guide Series" (10 titles): The following contracts exist: Genevieve H. Faw -- 1%
royalty per number sold.

There are separate contractual agreements in connection with the assignment
of Artistic Property Agreement between Fawnsworth International Pictures
Corporation and Michael Fields for ownership rights
F-16
<PAGE> 41

STUDIO CITY HOLDING CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
OCTOBER 21, 1991 (INCEPTION) THROUGH SEPTEMBER 30, 1998 -- CONTINUED

NOTE 12 -- ADDITIONAL CONTINGENT PAYMENTS -- CONTINUED
of original art for 4 comic books characters created by Larry D. Faw. These 4
characters are "Taren", "Mercer", "Shrieve", and "Quant", all from the "Earth
Warrior" series. Poc-It Comics, Incorporated issued 10,000 shares of common
stock to Michael Fields in addition to $100 cash per contract -- $400 total.
Additionally, Fields is to receive a flat fee of $5,000 for each agreement
payable when and if the art design is utilized in the production of a movie or
animation product -- $20,000 total if all character art is utilized.

There is a separate Purchase & Profit Participation Agreement between
Fawnsworth International Pictures Corporation and Paul and Brahm Piterski for
the ownership of the literary rights and artwork of the comic book character
"Willy the Magnet Man". Poc-It Comics, Incorporated issued 50,000 shares of
common stock to Piterski in addition to $100 cash. Additionally, Piterski is to
receive a $15,000 consultant/production fee at time of movie production plus 10%
of the net profits generated from the exploitation of the entertainment
franchise.

There is a separate Agreement between the Company, Roger H. Hefler, Larry
D. Faw and Frank Zanca/ Wingspan Productions for the ownership rights of the
literary property "Shadow Raven", which are assigned to Poc-It Comics,
Incorporated. Poc-It Comics, Incorporated issued 50,000 shares of common stock
and 100,000 shares of Class B preferred stock to Zanca.

There is a separate Assignment of Artistic Property Agreement between
Fawnsworth International Pictures Corporation and Calvin B. Clarke for the
ownership rights of original art for the comic book character created by Larry
D. Faw. The character is "Hafro", another character from the "Earth Warrior"
series. Clarke received $100 cash plus he will receive a $5,000 consultant fee
if the art is utilized plus a pro rata percentage from 5% allocated to Talent
Pool.

There is a separate Assignment of Artistic Property Agreement between
Fawnsworth International Pictures Corporation and Ricardo Colon for the
ownership rights of original art for the comic book character "Un-named". Colon
received $100 cash plus he will receive a $5,000 consultant fee if the art is
utilized plus a pro rata percentage from 5% allocated to Talent Pool.

There is a separate Assignment of Artistic Property Agreement between
Fawnsworth International Pictures Corporation and Marco Antonio Nazario for the
ownership rights of original art for the comic book character created by Larry
D. Faw. The character is "Sunspot", another character from the "Earth Warrior"
series. Clarke received $100 cash plus he will receive a $5,000 consultant fee
if the art is utilized plus a pro rata percentage from 5% allocated to Talent
Pool.

There is a separate Assignment of Artistic Property Agreement between
Fawnsworth International Pictures Corporation and Melissa Polizzi for the
ownership rights of original art for 3 comic book characters created by Larry D.
Faw. The characters are "Marilise", "Lilian", and "Renata", triplet characters
from the "Earth Warrior" series. Polizzi received $100 cash plus she will
receive a $5,000 consultant fee if the art is utilized plus a pro rata
percentage from 5% allocated to Talent Pool.

There is a separate Assignment of Rights and Profit Participation Agreement
between Fawnsworth International Pictures Corporation and Larry D. Faw for the
licensing rights of the literary property "Earth Warriors", which consists of 12
characters. This Agreement is for a 5 year period ending October 9, 1998. Faw
received no cash but did receive 50,000 shares of Poc-It Comics, Incorporated on
March 29, 1994. If the rights are utilized, Faw will receive $15,000 for print
format, $50,000 for motion picture and/or other multi-media plus 5% of the net
profits attributable to this entertainment franchise.

F-17
<PAGE> 42

STUDIO CITY HOLDING CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
OCTOBER 21, 1991 (INCEPTION) THROUGH SEPTEMBER 30, 1998 -- CONTINUED

NOTE 12 -- ADDITIONAL CONTINGENT PAYMENTS -- CONTINUED
There is a separate Agreement between the Company and Harry B. Knights, the
author of "The Nicholas Stories", who serves as Senior Vice-President of the
Company and Chief Operations Officer of Zweig Knights Publishing Corporation, a
subsidiary of the Company. The contractual obligation to Harry B. Knights was
met by issuing to him 1,250,000 shares of Preferred A and 1,250,000 of shares of
Preferred B stock of Zweig Knights Publishing Corporation plus 100,000 shares of
restricted common stock of the Company in April 1994. Additionally, Harry B.
Knights received a cash consulting fee of $5,000 on the 1997 production of "The
Nicholas Stories".

There is a separate pass-through Agreement between Harry B. Knights which
is contingent upon the publication and/or cinematic adaptation of any of these
intellectual properties. He is to receive a consultant fee and a profit
participation in each of these properties.

On July 1, 1995, the Company entered into a joint venture with Quagga
Television Partners Limited Partnership for the production and distribution of
low budget motion pictures and television programming. Larry D. Faw is the
Managing Partner of Quagga Television Partners and is the largest contributor as
a limited partner. Quagga Television Partners furnished the majority of the
funding for the production of Zoo Toonz. Quagga Television Partners owns a
library of video footage of exotic animals for the creation of animal music
videos. As of this date, Quagga Television Partners has not licensed use of this
footage.

The Company has entered into a series of Joint Venture Agreements with Lisa
Moody/Tin Woman Music, Inc. for the creation of music for the first generation
of Zoo Toonz. Larry D. Faw and Quagga Television Partners Limited Partnership
have contributed capital for these joint ventures. To date, 5 contractual
arrangements have been made for the creation of 27 songs for the Zoo Toonz
project. The songwriter has been prepaid for the creation of these songs and
separate funds have been expended for the production of Recording Masters. A
contingent liability passes through to the Company for any profits associated
with the useage of these songs, if the songs are utilized.

The Company had entered into an Agreement for the use of 2 puppets, Clyde
and Alfred, for the utilization in volume one of Zoo Toonz, with John C.
Cummings, Jr. Additional puppet footage was shot at Disney-MGM Studios, however,
the footage was unacceptable. Due to contractual restrictions placed on the
Company by Disney for Volume one of Zoo Toonz, the release and distribution was
cancelled. The Joint Venture Agreement was terminated by John C. Cummings, Sr.
on October 2, 1996.

A Contingent Production Joint Venture was entered into by the Company with
Marc Rose and Radio Cinema for the creation of various products and merchandise
which could be created from the distribution and cinematic adaptation of a
series of radio shows entitled "Dry Smoke and Whispers". This contingent
agreement may be terminated.

On June 17, 1996, the Company purchased the patents and trademarks for
"Uncle Tuffy's French Security Window". The purchase was made between the
Company and Paul Piterski, the inventor and patent owner for $2,000 in cash plus
5% of the gross profits attributable to the sale, licensing, or other profits
due to the Company for the exploitation of this patented product.

In July 1996, the Company placed a $10,000 option on the right to purchase
literary properties written by science fiction writer Andre Norton. The
properties which were optioned were "The Wraiths of Time" and "A New Property
Adaptation From The Screenplay of The Wraiths of Time". The option still exists,
however, original funding was to be realized from the public offering of Quagga
Entertainment Corporation's D-504, which expired. Publishing Corporation, has
entered into an Agreement to be a corporate general partner in ZK

F-18
<PAGE> 43

STUDIO CITY HOLDING CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
OCTOBER 21, 1991 (INCEPTION) THROUGH SEPTEMBER 30, 1998 -- CONTINUED

NOTE 12 -- ADDITIONAL CONTINGENT PAYMENTS -- CONTINUED
Partners Limited Partnership. This Partnership is currently being formed for the
financing of an animation for "The Nicholas Stories", and is currently in the
development stage.

NOTE 13 -- EMPLOYEE INCENTIVE STOCK OPTION PLAN

On March 1, 1993, the Board of Directors adopted in Outline Form an
Employee Incentive Stock Option Plan for future full time employees and
officers. Under the Proposed Outline, the Company may issue options exercisable
at the current market value (110% of current market value only to 10% or greater
stockholders) up to $100,000 annually. The Proposed Plan was extended from March
1, 1998, to terminate on March 1, 2002.

Under the Proposed Plan, any person owning 10% of the voting power of the
Company is restricted from exercising his/her options to three years after the
receipt of such grant. Additional stipulations are as follows: (1) options
terminated or expired revert back into the Plan, (2) unpurchased option shares
remain in the Plan, (3) options are only exercisable by the optionee or his/her
estate, (4) options are not transferable, (5) carryover amounts from one year to
the next year can not exceed 50% of the option, and (6) option shares are
restricted until SEC registration.

The Company has reserved 500,000 shares of common stock for issuance under
the Proposed Plan.

No options have been granted under the Proposed Plan from inception to
date.

NOTE 14 -- INCOME TAXES

The Company and its subsidiaries have filed separate corporate income tax
returns since each corporation's inception through December 31, 1997. As of
December 31, 1997, there have been no timing differences in the recognition of
revenue and expense for financial reporting and income tax purposes. As of
December 31, 1997, the Company and its subsidiaries each have available net
operating loss carryforwards for federal and state income tax purposes (which
are the same amount) that will be available to offset future

F-19
<PAGE> 44

STUDIO CITY HOLDING CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
OCTOBER 21, 1991 (INCEPTION) THROUGH SEPTEMBER 30, 1998 -- CONTINUED

NOTE 14 -- INCOME TAXES -- CONTINUED
taxable income of the Company. If unused, net operating loss carryforwards
expire after 15 years. The loss carryforwards are summarized as follows:

<TABLE>
<CAPTION>
YEAR LOSS YEAR LOSS CARRYFORWARD
INCURRED EXPIRES AMOUNT
--------- --------- ------------
<S> <C> <C> <C>
Studio City Incorporated Holding...................... 1991 2006 $ 15,596
1992 2007 $ 24,000
1993 2008 $ 63,543
1994 2009 $158,468
1995 2010 $309,995
1996 2011 $496,761
1997 2012 $451,266

Fawnsworth International Pictures Corporation......... 1991 2006 $ 19,859
1992 2007 $ 33,999
1993 2008 $ 9,850
1994 2009 $ 5,746
1995 2010 $ 3,815
1996 2011 $ 3,000
1997 2012 $ 1,228

Poc-It Publishers, Incorporated....................... 1993 2008 $ 16
1994 2009 $ 7,894
1995 2010 $ 1,221
1996 2011 $ 258
1997 2012 $ 523

Other Entities........................................ 1994 2009 $ 66
1995 2010 $ 1,547
1996 2011 $ 57,386
1997 2012 $ 87,038
</TABLE>

(This space is intentionally left blank.)

F-20
<PAGE> 45

STUDIO CITY HOLDING CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
OCTOBER 21, 1991 (INCEPTION) THROUGH SEPTEMBER 30, 1998 -- CONTINUED

NOTE 15 -- RENTALS UNDER OPERATING LEASES

The Company's leasing operations consist principally of the leasing of
broadcast television equipment, various computer, video and sound equipment
under operating leases that expire over the next three to five years. Due to a
cross default by a joint venture partner, a portion of the equipment under two
of the leases was reposessed by the lessor for late payment (see note 18
regarding "Zoo Toonz"). The Company has continued making monthly payments on all
lease obligations and expects to satisfy all obligations and obtain full use of
all equipment under lease.

The following is a schedule by years of future minimum rental payments
required under operating leases that have initial or remaining noncancelable
lease terms in excess of one year as of December 31, 1997:

<TABLE>
<CAPTION>
YEAR ENDING DECEMBER 31, AMOUNT
------------------------ --------
<S> <C>
1998........................................................ $ 84,324
1999........................................................ 83,595
2000........................................................ 53,084
2001........................................................ 44,199
2002........................................................ 2,177
Later years................................................. 0
--------
$267,379
--------
</TABLE>

NOTE 16 -- CHANGING ECONOMIC CONDITIONS AND SUBSEQUENT EVENTS

From September 1995 to September 1996 Studio City Incorporated Holding
entered into a "First Right of Refusal/Space Lease Agreement" with The Walt
Disney Company on product produced on the Disney-MGM Studios by Studio City. The
Company entered into a one year space lease/first right of refusal/production
agreement to expend a minimum of $1,200,000 at the studio for its projects. The
Company entered into this agreement with Disney based on an agreement with a New
York investment banker taking a contractual (dated August 28, 1995) equity
position of $1,200,000 in Quagga Entertainment Corporation, the production arm
which was located with the Company at Disney/MGM Studios. Quagga Entertainment
Corporation was to achieve total capitalization in 1996 of $8,500,000 based on a
registered public offering in Connecticut. The Company was also qualified to
sell the offering in the state of New York as a registered broker/dealer. The
Company was represented by an investment banker/consultant in Connecticut, who
contractually committed to raising Quagga's capital needs through a D-504
offering. Also, the Company had the option to create and market a "red herring"
D-506 private placement. The Company chose "Shadow Raven", a low-budget feature
motion picture, to be the first project. However, due to expanded costs
associated with the contingent joint venture production partners, the project
was postponed until sufficient capitalization was realized. Quagga's D-504
offering was registered in Connecticut on April 12, 1996. The investment banker
was to commence the financial marketing of the offering, but failed to do so.
The New York equity investor could not meet the contractual commitment. As a
result, the D-504 offering expired on April 12, 1997 and the "red herring" D-506
was withdrawn as a viable funding plan. With the lack of alternative financing
available to the Company, the contract with Walt Disney Company expired on
September 15, 1996 along with the contingent joint venture production
partnerships.

In April 1997, the Company expanded its operations by relocating to Tampa,
Florida into a facility which provides a small soundstage, office operations,
and edit suite. This new organization of its operations in Tampa is anticipated
to increase revenue production, while providing low costs to the Company for its
own projects.

F-21
<PAGE> 46

STUDIO CITY HOLDING CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
OCTOBER 21, 1991 (INCEPTION) THROUGH SEPTEMBER 30, 1998 -- CONTINUED

NOTE 17 -- MERGER

On June 29, 1996, CVT Corporation of America restated and amended its
articles of incorporation to allow for a name change, the creation of Class A
and B Preferred Stock, the reorganization of operations, and limiting the
liability of its Directors and Officers. CVT Corporation changed its name to
Studio City Holding Corporation (a New York Corporation). 10,000,000 shares of
Class A Preferred Stock with special voting powers were created and 25,000,000
shares of Class B Preferred Stock with preferential dividends and various rights
were created. The Company adopted a new set of By-Laws which streamlined its
operations as a public company and adopted a set of procedures which limited the
liability of its Directors and Officers.

On July 1, 1996, Studio City Incorporated Holding (a Florida Corporation)
and its subsidiaries merged with and into Studio City Holding Corporation (a New
York Corporation) in a statutory merger. The merger transaction was executed in
a "like kind" stock exchange, share for share of common stock of Studio City
Incorporated Holding for common stock of Studio City Holding Corporation. On
October 24, 1996, Studio City Incorporated Holding was dissolved, with the
surviving entity being Studio City Holding Corporation. All of the assets and
liabilities of Studio City Incorporated Holding and its subsidiaries were merged
with and into Studio City Holding Corporation.

As per the Merger Agreement, Larry D. Faw, principal stockholder of Studio
City Incorporated Holding, was required to convert 100,000,000 shares of voting
common stock of Studio City Incorporated Holding into 10,000,000 shares of
Studio City Holding Corporation Class A Preferred Stock and was also required to
convert 10,000,000 shares of common stock into 1,000,000 shares of Class B
Preferred Stock.

On October 29, 1997, the Company called for a name change and exchange of
shares from both former CVT stockholders and Studio City Incorporated Holding
stockholders. This exchange was executed in a "like-kind" share for share
exchange. Additionally, all of the stockholders in the Merged Entity had the
option to convert any, all, or none of their shares of common stock into Class B
Preferred Stock at a ratio of 10 shares of common for 1 share of Class B
Preferred Stock.

NOTE 18 -- PENDING LITIGATION

When the merger occurred, there were no significant changes in the
operations of the Company and its subsidiaries. Studio City Holding Corporation
and its subsidiaries continued its operations as the merged entity.

The Company being an entertainment company is often required to defend its
rights and licenses for intellectual properties that the Company either owns or
serves as a joint venture partner. This type of litigation is common in the
entertainment industry, and considering that the Company owns numerous
intellectual properties and owns various types of licenses and joint
participations in intellectual properties, it can safely be assumed that the
Company will be required to defend its rights, presently and in the future.

Currently, the Company and its subsidiary, Poc-It Comics, Incorporated, are
defending their rights in the production and distribution of an entertainment
franchise based on a comic book story entitled "Shadow Raven". The principals
are currently attempting to resolve their issues in negotiation.

Secondly, the Company and its subsidiary, Quagga Entertainment Corporation,
are defending a challenge to the Companies' rights associated with a joint
venture to create, produce, distribute and exploit an intellectual property
entitled "Zoo Toonz", a joint venture where the timeliness of the creation of
finished products are in question. Litigation is pending in this matter, and, it
has been determined that the products will be completed without the assistance
of the joint venture partner. The Company and its financial partners will seek
to recoup all of its investment.

F-22
<PAGE> 47

STUDIO CITY HOLDING CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
OCTOBER 21, 1991 (INCEPTION) THROUGH SEPTEMBER 30, 1998 -- CONTINUED

NOTE 19 -- LOANS FROM STOCKHOLDERS

During 1998, various minority stockholders loaned the Company money. These
unsecured, short-term (less than one year) loans accrue interest at 10% per
annum. The total amount outstanding is $245,500 as of September 30, 1998.

F-23
<PAGE> 48

APPENDIX A
<PAGE> 49

APPENDIX A-1

<TABLE>
<CAPTION>
COMMON STOCK
- -----------------------------------------------------------------------------------------------------
BENEFICIAL OWNERSHIP MAXIMUM
SELLING SECURITYHOLDER PRIOR TO OFFERING AMOUNT TO BE SOLD
- ----------------------------------------------------------- -------------------- -----------------
<S> <C> <C>
Harry E. Abel.............................................. 3,000 3,000
Raymond Abrams............................................. 2,000 2,000
Edward & Milred Adelman.................................... 2,000 2,000
Farrell E. Aderholt, Jr. .................................. 5,500 5,500
Jonathan A. Ahrens......................................... 4,188 4,188
Dante Alberi............................................... 350,000 350,000
Peter B. Allen............................................. 100,000 100,000
Frank & Julie Amaral....................................... 2,400 2,400
Ameritrade................................................. 2,300 2,300
Andy & Cha-oom Ampie....................................... 5,000 5,000
Henry R. Anderson, Jr. .................................... 2,000 2,000
George Andeloudakis........................................ 5,000 5,000
Sam Angelo................................................. 4,000 4,000
John G. Anselmo............................................ 4,000 4,000
Robert Anthony............................................. 6,000 6,000
Edgar Arvelo............................................... 32,500 32,500
Chester & Ruth Badgett..................................... 4,000 4,000
Bant Enterprises, Inc. .................................... 6,000 6,000
Elmer A. Barce............................................. 1,000 1,000
Darlene Calzon Barror...................................... 1,000,000 1,000,000
Dovie Bass................................................. 2,500 2,500
Marc Bear.................................................. 18,000 18,000
Marcus Barth............................................... 1,000 1,000
Alex Bekanich.............................................. 1,000 1,000
Plummer (deceased) & Marilyn Bell.......................... 27,000 27,000
Lily A. Bennett............................................ 500 500
Carl Bensen................................................ 2,000 2,000
Robert Benson.............................................. 4,000 4,000
John Bevell................................................ 1,000 1,000
BHC Securities, Inc. ...................................... 1,500 1,500
John & Diane Batcha........................................ 5,000 5,000
Brad H. Bienvenu........................................... 10,000 10,000
Anthony Blandi............................................. 2,500 2,500
Herbert Bloomenthol........................................ 2,500 2,500
John P. Boghosian.......................................... 3,000 3,000
Karon & Aimee Bondy........................................ 3,300 3,300
Domenic Borello............................................ 700,000 700,000
Jon Bottone................................................ 13,500 13,500
Michael Brown.............................................. 400 400
Peter A. Boudreau.......................................... 2,500 2,500
Joseph Boyan............................................... 2,000 2,000
John L. Brine.............................................. 1,500 1,500
Don Brown & Lavon Ellerman................................. 600 600
Joseph Burkhart............................................ 4,000 4,000
Wesley L. Burchardt........................................ 27,000 27,000
David A. Buffkin........................................... 6,000 6,000
Russell & Roselyn Burrell.................................. 2,000 2,000
Ronald R. Bussetti......................................... 422,000 422,000
</TABLE>
<PAGE> 50

<TABLE>
<CAPTION>
COMMON STOCK
- -----------------------------------------------------------------------------------------------------
BENEFICIAL OWNERSHIP MAXIMUM
SELLING SECURITYHOLDER PRIOR TO OFFERING AMOUNT TO BE SOLD
- ----------------------------------------------------------- -------------------- -----------------
<S> <C> <C>
Butcher & Singer, Inc. .................................... 1,500 1,500
Rex & Joyce Butler......................................... 2,000 2,000
Joseph M. Campbell......................................... 6,000 6,000
Lisa S. Carlton............................................ 1,500 1,500
Joanne Carature............................................ 1,000 1,000
Anthony Carfagno........................................... 50,000 50,000
Mindy A. Carr (custodian).................................. 100 100
Dan & Linda Cashman........................................ 4,000 4,000
Cash Unlimited............................................. 300,000 300,000
Noel A. Casiroghi.......................................... 5,000 5,000
Carrucci Family Partners................................... 89,900 89,900
William D. Cattucci........................................ 10,000 10,000
Cede & Company............................................. 832,500 832,500
Ed Cheetham................................................ 10,000 10,000
Marie Chevas............................................... 10,000 10,000
* Donna B. Churchill....................................... 500 500
* Greg Churchill........................................... 10,000 10,000
* John A. Churchill, Jr. .................................. 1,142,400 1,142,400
* John G. Churchill........................................ 500 500
* Lindsey B. Churchill..................................... 500 500
* Steven N. Churchill...................................... 500 500
William Cianelli........................................... 20,000 20,000
Arthur Ciccone............................................. 5,000 5,000
James M. Clancy............................................ 15,000 15,000
Lena Clancy................................................ 100,000 100,000
Scott Clemens.............................................. 12,000 12,000
Brian Clark................................................ 1,600 1,600
Henry & Christine Coleman.................................. 1,000 1,000
Celeste Como............................................... 8,000 8,000
Jennifer Como.............................................. 16,000 16,000
Ronald A. Como............................................. 50,000 50,000
Richard Cornell............................................ 1,500 1,500
Gabrial P. Costenzo........................................ 2,700 2,700
* Courchaine Family Partnership............................ 153,400 153,400
* James & Doris Courchaine................................. 10,000 10,000
James W. Courchaine........................................ 126,000 126,000
Charles & Kathleen Crano................................... 700 700
John C. Cummings........................................... 10,000 10,000
D & D Auto Sales........................................... 1,101,000 1,101,000
Mary Dabal................................................. 6,000 6,000
Leo Darian................................................. 4,000 4,000
Wayne Daughtridge.......................................... 48,000 48,000
Randy DeFazio.............................................. 1,000 1,000
Harold & Martha Dellerman.................................. 3,000 3,000
Phillip DeMasco............................................ 7,500 7,500
Phillip J. DeMasco......................................... 5,000 5,000
Phillip L. DeMasco......................................... 7,500 7,500
Arthur Denfield............................................ 3,000 3,000
</TABLE>

- ---------------
* Director or executive officer or affiliate or associate thereof.
<PAGE> 51
<TABLE>
<CAPTION>
COMMON STOCK
- -----------------------------------------------------------------------------------------------------
BENEFICIAL OWNERSHIP MAXIMUM
SELLING SECURITYHOLDER PRIOR TO OFFERING AMOUNT TO BE SOLD
- ----------------------------------------------------------- -------------------- -----------------
<S> <C> <C>
August Dennis.............................................. 2,000 2,000
Isabel Rita Dennis......................................... 25,000 25,000
Olivia Dergis & J.C. Worthington........................... 1,000 1,000
Neil & Sonal Desai......................................... 10,000 10,000
Barbara Deveronica......................................... 700 700
Rose DiFabio............................................... 2,700 2,700
Dimitri Dimitri............................................ 5,000 5,000
Joe Distefano.............................................. 25,000 25,000
Francisca Y. Donahue....................................... 1,000 1,000
William M. Donahue......................................... 1,000 1,000
Chic Donchin............................................... 2,000 2,000
Alison & Beth Donovan...................................... 400 400
Alison Donovan............................................. 4,800 4,800
Michael Dooley............................................. 2,000 2,000
Randell L. Drovdhal........................................ 1,500 1,500
William Drubel............................................. 25,000 25,000
Ralph Drum................................................. 3,000 3,000
James & Janet Dunn......................................... 15,000 15,000
Charles & Helen Dustin..................................... 1,000 1,000
Sherry Eden................................................ 250 250
James Edmonson............................................. 7,000 7,000
A. G. Edwards, Inc. ....................................... 24,000 24,000
Leonard & Rosemarie Eichhorn............................... 200 200
Robert F. Ely.............................................. 2,000 2,000
Frances G. Emerson......................................... 3,000 3,000
David & Janet Engel........................................ 2,500 2,500
Orvill K. England.......................................... 1,300 1,300
Douglas H. Erbeck.......................................... 1,800 1,800
James C. Etheridge......................................... 24,000 24,000
Harry & Theresa Evans...................................... 1,000 1,000
E.D. Fagan & J.C. Worthington.............................. 50,000 50,000
E.D. Fagan & J.C. Worthington.............................. 100,000 100,000
* von Falconbourg Family Trust............................. 401,277 401,277
Phyllis & Joe Farenkamm.................................... 60,000 60,000
John Farrell............................................... 1,500 1,500
* Genevieve H. Faw......................................... 925,000 925,000
* Larry D. Faw............................................. 395,000 395,000
* Larry D. Faw, Incorporated............................... 2,870,000 2,870,000
Bernard Filiac............................................. 10,000 10,000
Financial Clearing Services................................ 15,900 15,900
Glen Fitzpatrick (custodian)............................... 2,000 2,000
Fitzgerald DeArman & Roberts............................... 5,000 5,000
Paul Flinn................................................. 3,500 3,500
* Charles H. Flood......................................... 30,000 30,000
Anthony Formisaro.......................................... 4,000 4,000
Ralph Forte................................................ 300,000 300,000
Russell & Donna Foster..................................... 4,000 4,000
Kenneth M. Fournie......................................... 1,200 1,200
</TABLE>

- ---------------
* Director or executive officer or affiliate or associate thereof.
<PAGE> 52
<TABLE>
<CAPTION>
COMMON STOCK
- -----------------------------------------------------------------------------------------------------
BENEFICIAL OWNERSHIP MAXIMUM
SELLING SECURITYHOLDER PRIOR TO OFFERING AMOUNT TO BE SOLD
- ----------------------------------------------------------- -------------------- -----------------
<S> <C> <C>
William R. Freund.......................................... 5,000 5,000
Sandra Gallman............................................. 1,000,000 1,000,000
Rene Gandelman............................................. 2,000 2,000
Carlos Garcia.............................................. 25,000 25,000
Gilbert Garcia............................................. 2,000 2,000
James & Patrice Gauger..................................... 2,000 2,000
Stephanie Gehring.......................................... 1,500 1,500
Jane & Santo Genovese...................................... 1,000 1,000
Vernon G. Gerdes........................................... 7,000 7,000
Mark H. German............................................. 6,000 6,000
Charles Gettig............................................. 2,000 2,000
Williard & Helen Gilkerson................................. 2,000 2,000
John Giovannucci........................................... 250,000 250,000
The Godheim Family Partnership............................. 200 200
Norman Godheim............................................. 4,584 4,584
Jeffrey & Susan Gold....................................... 4,000 4,000
Leon & Evelyn Goldapple.................................... 1,000 1,000
Alan R. Golden............................................. 3,000 3,000
Alan R. Golden............................................. 1,000 1,000
Kathy Gomberg.............................................. 2,000 2,000
Bradley Gompers............................................ 2,000 2,000
Samuel Gompers............................................. 2,000 2,000
Helen Gompers-Foster....................................... 2,000 2,000
Humberto Gonzalez, Jr. .................................... 55,000 55,000
Steve Gonzalez............................................. 912,000 912,000
Joel Goodman............................................... 5,000 5,000
Gordon Development Corp. .................................. 500 500
Emily R. Grande............................................ 1,000 1,000
Timothy Greenwood.......................................... 5,000 5,000
John & Barbara Green....................................... 1,000 1,000
Dorothy Grooms............................................. 2,000 2,000
John Haer.................................................. 6,000 6,000
Kevin & Karen Hand......................................... 1,500 1,500
Joseph & Jeanne Hanes...................................... 2,000 2,000
John C. Hanner............................................. 11,000 11,000
Rita Hansen................................................ 1,000 1,000
Roy Hansen................................................. 2,000 2,000
Donald Harmon.............................................. 2,000 2,000
Jack & Sue Hauser.......................................... 1,500 1,500
William & Jean Hayden...................................... 3,500 3,500
Haywood Securities......................................... 5,000 5,000
Mary I. Hearne............................................. 2,000 2,000
Doris Hefler............................................... 1,000 1,000
Hefler Family Trust........................................ 910,100 910,100
Steve Heidmann............................................. 25,500 25,500
Robert Hood................................................ 3,000 3,000
David & Marion Hooper...................................... 12,000 12,000
Linda Hyer................................................. 500 500
</TABLE>

- ---------------
* Director or executive officer or affiliate or associate thereof.
<PAGE> 53
<TABLE>
<CAPTION>
COMMON STOCK
- -----------------------------------------------------------------------------------------------------
BENEFICIAL OWNERSHIP MAXIMUM
SELLING SECURITYHOLDER PRIOR TO OFFERING AMOUNT TO BE SOLD
- ----------------------------------------------------------- -------------------- -----------------
<S> <C> <C>
Rachelle G. Jacover........................................ 2,000 2,000
Bill James................................................. 1,300 1,300
Bipin & Pratibha Jhaveri................................... 1,000 1,000
Thomas S. Jennings......................................... 8,000 8,000
Kenneth & Elisabeth Jester................................. 15,000 15,000
Timothy Jewett............................................. 3,000 3,000
Josephthal & Company, Inc. ................................ 2,500 2,500
Abdellattif & Hikmat Juma.................................. 6,000 6,000
Mark A. Kasrel............................................. 1,000 1,000
James L. Kaufman........................................... 1,250 1,250
Glen Keller/Trustee........................................ 8,000 8,000
Patrick J. Keenan.......................................... 15,000 15,000
Kenny Family Security Trust................................ 500 500
Kenny Family Security Trust................................ 2,500 2,500
Thomas J. Kinney........................................... 1,000 1,000
Firasat Khan............................................... 4,000 4,000
* Harry B. Knights......................................... 175,000 175,000
* Harry & Elizabeth Knights................................ 6,000 6,000
Benjamin Koester........................................... 3,000 3,000
Walter Kosic............................................... 10,000 10,000
Laurence Krasick........................................... 200 200
Scott Krasick & Abby Bacal................................. 300 300
Kray & Company............................................. 299,000 299,000
Anthony Labarbera.......................................... 1,000 1,000
Beverly Lamar.............................................. 5,000 5,000
Stanley & Loretta Lamble................................... 5,000 5,000
Dori W. Lapp............................................... 4,000 4,000
Anthony Latona............................................. 6,000 6,000
Anthony Latona............................................. 1,000 1,000
Cynthia Laub............................................... 200 200
Mildred & Millicent Lecount................................ 2,500 2,500
Philip Leon................................................ 1,000 1,000
Winnona Lesher............................................. 1,000 1,000
Alan M. Levine............................................. 400,000 400,000
Winifred & Alan Levinson................................... 10,000 10,000
Lexus International, Inc. ................................. 51,100 51,100
Maurice & Gloria Lieber.................................... 1,000 1,000
Diane Limoli............................................... 1,000 1,000
Dorthoy Lindsey............................................ 1,500 1,500
A.G. Little................................................ 1,000 1,000
Michael A. Littman......................................... 6,000 6,000
S. Michael Long............................................ 300 300
Oscar Louik................................................ 3,000 3,000
John & Ruth Lovas.......................................... 500 500
Bill Love G.W. Garrett..................................... 11,000 11,000
Herbert Lubowsky........................................... 15,000 15,000
Joseph Lucmon/J.C. Worthington............................. 1,000 1,000
Amy MacCallum.............................................. 500 500
</TABLE>

- ---------------
* Director or executive officer or affiliate or associate thereof.
<PAGE> 54
<TABLE>
<CAPTION>
COMMON STOCK
- -----------------------------------------------------------------------------------------------------
BENEFICIAL OWNERSHIP MAXIMUM
SELLING SECURITYHOLDER PRIOR TO OFFERING AMOUNT TO BE SOLD
- ----------------------------------------------------------- -------------------- -----------------
<S> <C> <C>
Myra & John Mack........................................... 5,000 5,000
Scott Mann & Mary Mahone................................... 1,500 1,500
George & Frances Markham................................... 2,500 2,500
Harold Markle.............................................. 800 800
Paul E. Martineau.......................................... 2,500 2,500
Steven & Barbara Marz...................................... 2,000 2,000
Andrew D. Marzano.......................................... 2,500 2,500
Juan Martinez.............................................. 11,000 11,000
Larry Matthews............................................. 5,000 5,000
Nena Maybury............................................... 5,500 5,500
Mark J. Mazzone............................................ 2,500 2,500
James McDade............................................... 500 500
James McDade............................................... 1,500 1,500
Robert L. McGee............................................ 140,000 140,000
Michael/Hugh McHugh (deceased)............................. 2,500 2,500
Brad McKinney.............................................. 320 320
Michael J. McKinney........................................ 100 100
Morley G. Melden........................................... 2,000 2,000
Merrill Lynch Pierce Fenner & Smith........................ 32,500 32,500
Jane A. Miller............................................. 2,000 2,000
Mike Mirabelli............................................. 7,000 7,000
Carl Misenheimer........................................... 12,000 12,000
Charlotte & Leroy Molitor.................................. 2,000 2,000
Lisa Moody................................................. 10,000 10,000
Morgan Olmstead Kennedy & Gardner, Inc. ................... 1,300 1,300
Morgan Rothchild Anzo, Inc. ............................... 1,000,000 1,000,000
Raymond & Irene Morse...................................... 1,000 1,000
Olin & Rosemarie Morrison.................................. 3,000 3,000
Dominick & Marie Muggeo.................................... 12,500 12,500
Eugene J. Mullen, Jr. (custodian).......................... 500 500
Nicholas Munger, Esq....................................... 10,000 10,000
Elpidio Pete Munoz......................................... 235,000 135,000
Nicholas Stuart Munson..................................... 10,000 10,000
Grover Hulan Nasworthy, Jr. ............................... 31,000 31,000
Patrica Neenan............................................. 5,000 5,000
Barry F. Neer.............................................. 10,000 10,000
Frank Neer................................................. 10,000 10,000
* Mahrukh Neville.......................................... 5,000 5,000
* Vincent J. Neville....................................... 437,000 437,000
Cynthia Nolan.............................................. 1,000 1,000
Norsedatter Imports, Inc. ................................. 500 500
John P. O'Donnell.......................................... 2,000 2,000
Donald F. O'Neill.......................................... 5,000 5,000
Mark Ornoff................................................ 5,000 5,000
Angiolina & Bob Owens...................................... 3,000 3,000
Celesete Padgett........................................... 10,000 10,000
Mark & Karen Palermo....................................... 27,000 27,000
Gus W. Pappas.............................................. 3,500 3,500
</TABLE>

- ---------------
* Director or executive officer or affiliate or associate thereof.
<PAGE> 55
<TABLE>
<CAPTION>
COMMON STOCK
- -----------------------------------------------------------------------------------------------------
BENEFICIAL OWNERSHIP MAXIMUM
SELLING SECURITYHOLDER PRIOR TO OFFERING AMOUNT TO BE SOLD
- ----------------------------------------------------------- -------------------- -----------------
<S> <C> <C>
Amy Parbury................................................ 5,000 5,000
Wayne A. Parker............................................ 4,000 4,000
James & Bonnie Parsons..................................... 300 300
H. Steven Passion.......................................... 10,000 10,000
Danai & Rawiwarn Pechkam................................... 5,000 5,000
Josephine Pecoraro......................................... 6,000 6,000
Howard Pelkey.............................................. 1,600 1,600
James J. Petroff........................................... 2,000 2,000
Philadep & Company......................................... 20,000 20,000
Donald & Elly Pine......................................... 1,300 1,300
Paul J. Piterski........................................... 15,000 15,000
Pittco..................................................... 4,700 4,700
Janis & Donald Plym........................................ 1,000 1,000
Christopher & Josephine Porter............................. 3,400 3,400
Robert W. Presley.......................................... 50,000 50,000
Ernest & Cherie Previch.................................... 1,500 1,500
Pro-Tech Appliance Service, Inc. .......................... 11,000 11,000
Don & Beverly Quinn........................................ 3,000 3,000
Jeffrey F. Rahrig.......................................... 2,000 2,000
William Raisis............................................. 9,000 9,000
Kathleen Reavey............................................ 500 500
Freda Z. Reeves............................................ 8,000 8,000
Lou Anne Reeves............................................ 1,000 1,000
Tommi Reeves............................................... 1,000 1,000
Tommi & LouAnne Reeves..................................... 500,000 500,000
Refco Securities, Inc. .................................... 3,000 3,000
Regional Clearing Corp. ................................... 40,500 40,500
Jill Ressler............................................... 500 500
Retirement Accounts fbo Howard Dennis...................... 49,000 49,000
Retirement Accounts fbo Charles H. Flood................... 3,000 3,000
Retirement Accounts fbo Charles Grande..................... 38,316 38,316
Retirement Accounts fbo Robert L. McGee.................... 128,962 128,962
Retirement Accounts fbo Thomas L. Rotunno.................. 5,000 5,000
Retirement Accounts fbo Etty Segal......................... 13,834 13,834
Retirement Accounts fbo Israel Segal....................... 49,305 49,305
Retirement Accounts fbo Ross Hagstoc....................... 2,000 2,000
Anna & James Revis......................................... 1,000 1,000
Leo Rice................................................... 2,000 2,000
Ronald & Susan Richardson.................................. 1,500 1,500
* Andrew C. Rigrod......................................... 25,000 25,000
Rimco...................................................... 400 400
Marc Rose.................................................. 10,000 10,000
Armin D. Rosencranz........................................ 12,000 12,000
Seymour & Judith Rosenfield................................ 1,500 1,500
Michael Rossetti........................................... 1,000 1,000
Doug B. Ross............................................... 1,000 1,000
David Rotunno.............................................. 6,000 6,000
Elizabeth Rottuno.......................................... 7,000 7,000
</TABLE>

- ---------------
* Director or executive officer or affiliate or associate thereof.
<PAGE> 56

<TABLE>
<CAPTION>
COMMON STOCK
- -----------------------------------------------------------------------------------------------------
BENEFICIAL OWNERSHIP MAXIMUM
SELLING SECURITYHOLDER PRIOR TO OFFERING AMOUNT TO BE SOLD
- ----------------------------------------------------------- -------------------- -----------------
<S> <C> <C>
Lou Rotunno................................................ 40,500 40,500
Ralph Rotunno.............................................. 2,000 2,000
Thomas Rotunno............................................. 4,500 4,500
Rodney J. Rush............................................. 60,000 60,000
Frank & Anne Russo......................................... 12,500 12,500
Leslie & Frank Orlando..................................... 1,300 1,300
J.T. Scanlon & Philip Carroll.............................. 6,000 6,000
Joseph Scaturro............................................ 2,000 2,000
Odell Sassnett & Laura Sassnett-Furey...................... 24,000 24,000
Henry G. Scheuring......................................... 112,000 112,000
Allen & Jacklyn Schmetzer.................................. 1,000 1,000
Warren C Schmidt........................................... 1,000 1,000
W. J. Schroeder............................................ 1,000 1,000
Scinta Enterprises, Inc. .................................. 1,200 1,200
Scottsdale Securities, Inc. ............................... 1,000 1,000
Gilbert Scwwarting......................................... 2,000 2,000
Sector II Corporation...................................... 92,300 92,300
Alan T. Sedgwick........................................... 4,000 4,000
Harriet N. Segal........................................... 4,000 4,000
Roger P. Selle............................................. 2,000 2,000
Edna Shields............................................... 500 500
Sho Shiraga................................................ 1,000 1,000
Marc J. Shuman............................................. 6,000 6,000
William B. Silverman....................................... 3,000 3,000
Samual & Elizabeth Simcox.................................. 2,000 2,000
Carl Sims.................................................. 1,200 1,200
Boreen Sisolak............................................. 5,000 5,000
Smith Barney, Inc. ........................................ 30,000 30,000
Dallas Smith............................................... 13,000 13,000
Eugene F. Smith............................................ 500,000 500,000
George Smith............................................... 3,000 3,000
Stephen & Harold Solin..................................... 1,500 1,500
John Sosinski.............................................. 3,300 3,300
Edwin & Blanch Sossong..................................... 10,000 10,000
Spear Leeds & Kellogg...................................... 500 500
* Wallis M. Spence......................................... 25,000 25,000
Frank & Jeannette Spiegel.................................. 5,000 5,000
Fredrick Spriggs........................................... 301,158 301,158
Susan Stanton.............................................. 1,500 1,500
Donna Stacy & Travis Vonderhaar............................ 1,000 1,000
Alvin Starke............................................... 2,000 2,000
Thomas H. Steele........................................... 4,000 4,000
Harry Stevenson............................................ 2,500 2,500
John T. Stone.............................................. 5,000 5,000
Gary Stratton.............................................. 12,000 12,000
Bernard C. Stritt.......................................... 600,000 600,000
Kurt & Pam Stumpferrnagel.................................. 2,000 2,000
Stutz Motor Car of America................................. 125,000 125,000
</TABLE>

- ---------------
* Director or executive officer or affiliate or associate thereof.
<PAGE> 57
<TABLE>
<CAPTION>
COMMON STOCK
- -----------------------------------------------------------------------------------------------------
BENEFICIAL OWNERSHIP MAXIMUM
SELLING SECURITYHOLDER PRIOR TO OFFERING AMOUNT TO BE SOLD
- ----------------------------------------------------------- -------------------- -----------------
<S> <C> <C>
Mickey & Henry Sunier...................................... 3,000 3,000
Richard & Joyce Sutton..................................... 2,500 2,500
Doug & Rose Swierczynski................................... 4,000 4,000
Raymond Szulc.............................................. 5,000 5,000
John & Rose Taddeo......................................... 6,000 6,000
Thomas (deceased) & Misaye Tanabe.......................... 23,000 23,000
Thomas Tausig.............................................. 10,000 10,000
Phillip J. Testa........................................... 1,001,000 1,001,000
Jean Thomas................................................ 17,000 17,000
Urias & Bessie Thomas...................................... 7,500 7,500
Robert & Barbara Thrun..................................... 200 200
John & Mary Jo Thurston.................................... 1,000 1,000
Willie & Barbara Tia....................................... 6,000 6,000
Daryl M. Tirico............................................ 80,000 80,000
Andrew Toliver............................................. 1,000 1,000
Ken Torgerson.............................................. 25,000 25,000
John Toth.................................................. 100,000 100,000
Lovie Trice................................................ 1,500 1,500
Ruth Trudeau............................................... 2,000 2,000
Mike Uttley................................................ 1,300 1,300
Kenneth Vance.............................................. 520 520
Carl Vancuren.............................................. 1,000 1,000
Manuel Vela, Jr. .......................................... 16,000 16,000
Ron Vonderhaar............................................. 2,000 2,000
Gail Waldinger............................................. 2,000 2,000
Jeanette M. Walker......................................... 7,500 7,500
Wall Street Clearing/BT Alex Brown......................... 100 100
Bruce D. Waldron........................................... 500 500
Katsuo Watanabe............................................ 7,500 7,500
David & Lola Webster, III.................................. 6,000 6,000
David Weideman............................................. 1,000 1,000
Michael Wells.............................................. 2,000 2,000
Gene & Millie Wendler...................................... 10,000 10,000
Courtney P. Wendt.......................................... 2,000 2,000
Sheila Wessner............................................. 700 700
David West................................................. 500 500
* Walter Johnson Williams.................................. 526,000 526,000
Charles N. Wilkinson....................................... 2,500 2,500
Thomas F. Williamson....................................... 800 800
Mary B. Wolfram............................................ 2,000 2,000
Rebecca L. Womble.......................................... 1,400 1,400
King Wong.................................................. 1,000 1,000
Elliott Wooton............................................. 3,000 3,000
George & Edwina Worsley.................................... 50,371 50,371
John C. Worthington........................................ 351,000 351,000
James Yaboni............................................... 5,000 5,000
Bradford Yoder............................................. 2,000 2,000
Ted Yong................................................... 20,000 20,000
</TABLE>

- ---------------
* Director or executive officer or affiliate or associate thereof.
<PAGE> 58
<TABLE>
<CAPTION>
COMMON STOCK
- -----------------------------------------------------------------------------------------------------
BENEFICIAL OWNERSHIP MAXIMUM
SELLING SECURITYHOLDER PRIOR TO OFFERING AMOUNT TO BE SOLD
- ----------------------------------------------------------- -------------------- -----------------
<S> <C> <C>
Elmer J. Zorn.............................................. 50,000 50,000
---------- ----------
Total................................................. 31,282,001 31,282,001
========== ==========
</TABLE>

- ---------------
* Director or executive officer or affiliate or associate thereof.
<PAGE> 59

APPENDIX A-2

<TABLE>
<CAPTION>
CLASS B PREFERRED STOCK
- -----------------------------------------------------------------------------------------------------
BENEFICIAL OWNERSHIP MAXIMUM
SELLING SECURITYHOLDER PRIOR TO OFFERING AMOUNT TO BE SOLD
- ----------------------------------------------------------- -------------------- -----------------
<S> <C> <C>
Jonathon A. Ahrens......................................... 419 419
Dante J. Alberi............................................ 15,000 15,000
Carter E. Allman........................................... 300 300
Willie & Yvonne Baker...................................... 500 500
John & Josephine Batcha.................................... 1,000 1,000
Domenic Borello............................................ 40,000 40,000
John Bottome............................................... 300 300
Peter & Thersea Calligandes................................ 50 50
Patrick J. Campbell........................................ 30 30
John D. Carlos............................................. 200 200
Dan & Linda Cashman........................................ 700 700
Chaffin Trust.............................................. 170 170
Walter & Ester Chapman..................................... 1,000 1,000
George Clanton............................................. 9,500 9,500
U.S. Clearing.............................................. 4,495 4,495
Celeste Como............................................... 200 200
Jennifer Como.............................................. 400 400
Ronald A. Como............................................. 1,000 1,000
David & Michelle Copeland.................................. 1,500 1,500
* Doris & James W. Courchaine.............................. 25,000 25,000
D.L. & Juanita Cremeen..................................... 300 300
Juanita Cremeen............................................ 300 300
Mary Dabal................................................. 600 600
Dean Witter Reynolds, Inc. ................................ 500 500
Tom Delaney................................................ 250 250
Patrick & Dolores Demasco.................................. 250 250
William H. Drubel, Jr. .................................... 7,600 7,600
James E. Edmonson.......................................... 200 200
Douglas Erbeck............................................. 170 170
Harry & Theresa Evans...................................... 40 40
* Geneiveve H. Faw......................................... 300,000 300,000
* Larry D. Faw............................................. 1,000,000 1,000,000
* von Falconbourg Family Trust............................. 1,000,000 1,000,000
Charles H. Flood........................................... 2,000 2,000
Ralph Forte................................................ 5,000 5,000
Stephanie Gehring.......................................... 150 150
J. W. Giovannucci.......................................... 10,000 10,000
Godheim Family Partnership................................. 160,520 160,520
C. Bradley Gompers......................................... 200 200
Samuel L. Gompers.......................................... 200 200
Helen Gompers-Foster....................................... 200 200
Steve Gonzalez............................................. 30,000 30,000
Elenor & David Govoni...................................... 300 300
Emily R. Grande............................................ 500 500
John & Barbara Green....................................... 100 100
Hefler Family Trust........................................ 300,000 300,000
</TABLE>

- ---------------
* Director or executive officer or affiliate or associate thereof.
<PAGE> 60
<TABLE>
<CAPTION>
CLASS B PREFERRED STOCK
- -----------------------------------------------------------------------------------------------------
BENEFICIAL OWNERSHIP MAXIMUM
SELLING SECURITYHOLDER PRIOR TO OFFERING AMOUNT TO BE SOLD
- ----------------------------------------------------------- -------------------- -----------------
<S> <C> <C>
William C. Hoegler......................................... 6,000 6,000
William C. Hueston......................................... 100 100
Rachelle Jacover........................................... 200 200
Janney Montgomery Scott, Inc. ............................. 140 140
Abdellattif & Hikmat Juma.................................. 600 600
Patrick Keenan............................................. 1,500 1,500
* Harry B. Knights......................................... 35,000 35,000
Anthony Labarbera.......................................... 500 500
Jack Laramore.............................................. 100 100
Larko...................................................... 500 500
Anthony Latona............................................. 1,800 1,800
Lehman Brothers, Inc. ..................................... 2,500 2,500
Alan M. Levine............................................. 10,000 10,000
Robert & Patricia Lomas.................................... 300 300
S. Michael Long............................................ 130 130
Lundgren & McCorrison...................................... 90 90
Lundrew & McCorrison....................................... 90 90
Harold Markle.............................................. 120 120
Joe Maselli................................................ 300 300
Mike Mirabelli............................................. 300 300
Olin & Rosemarie Morrison.................................. 200 200
National Investor Services................................. 1,000 1,000
* Vincent J. Neville....................................... 60,000 60,000
Yoshiro & Sueko Oishi...................................... 450 450
Olivia Ortega.............................................. 100 100
John & Victoria Ortenzi.................................... 400 400
Russell V. Panchelli....................................... 250 250
James & Bonnie Parsons..................................... 30 30
Leo & Lois Paul............................................ 300 300
Paul J. Piterski........................................... 500 500
Leonard Platnick........................................... 50 50
Janis & Donald Plym........................................ 100 100
RAF Financial Corp. ....................................... 3,380 3,380
Kathleen Reavey............................................ 200 200
Tommi & Lou Anne Reeves.................................... 50,000 50,000
Elizabeth Rotunno.......................................... 700 700
Lou Rotunno................................................ 10,000 10,000
Ralph & Patricia Rotunno................................... 200 200
Thomas Rotunno, Sr. ....................................... 1,000 1,000
Dale E. Rue................................................ 130 130
Rodney J. Rush............................................. 1,000 1,000
Joseph Scaturro............................................ 200 200
Henry G. Scheuring......................................... 113,800 113,800
Warren C. Schmidt.......................................... 330 330
Sector II Corporation...................................... 9,230 9,230
Harriet N. Segal........................................... 300 300
Dennis Smith............................................... 250 250
Stephen & Harold Solin..................................... 100 100
</TABLE>

- ---------------
* Director or executive officer or affiliate or associate thereof.
<PAGE> 61
<TABLE>
<CAPTION>
CLASS B PREFERRED STOCK
- -----------------------------------------------------------------------------------------------------
BENEFICIAL OWNERSHIP MAXIMUM
SELLING SECURITYHOLDER PRIOR TO OFFERING AMOUNT TO BE SOLD
- ----------------------------------------------------------- -------------------- -----------------
<S> <C> <C>
Fredrick Spriggs........................................... 80,000 80,000
Thomas H. Steele........................................... 300 300
Bernard C. Stritt.......................................... 50,000 50,000
Kurt & Pam Stumpfernagel................................... 19,800 19,800
Richard & Ellen Stupak..................................... 100 100
Phillip J. Testa........................................... 200,000 200,000
Robert & Josephine Tomasulo................................ 200 200
Kenneth H. Vance........................................... 20 20
Mauel Vela, Jr. ........................................... 1,000 1,000
Wall Street Clrg/BT Alex Brown............................. 3,100 3,100
William L. Whitacre........................................ 1,000 1,000
Tim Wickman................................................ 100 100
* Walter Johnson Williams.................................. 250,000 250,000
Mary B. Wolfram............................................ 200 200
John C. Worthington........................................ 10,000 10,000
</TABLE>

- ---------------
* Director or executive officer or affiliate or associate thereof.
<PAGE> 62
================================================================================

NO DEALER, SALESMAN OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS, AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT
BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY. THIS PROSPECTUS DOES
NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY, BY ANY
PERSON IN ANY JURISDICTION IN WHICH IT IS UNLAWFUL FOR SUCH PERSON TO MAKE SUCH
OFFER OR SOLICITATION. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY OFFER,
SOLICITATION OR SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES CREATE ANY
IMPLICATION THAT THE INFORMATION HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO
THE (DATE OF THE PROSPECTUS).

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

TABLE OF CONTENTS

<TABLE>
<S> <C>
PAGE
Prospectus Summary................... 3
Risk Factors......................... 4
Use of Proceeds...................... 7
Determination of Offering Price...... 7
Selling Security Holders............. 8
Plan of Distribution................. 8
Business............................. 8
Management's Discussion and Analysis
of Financial Condition and Results
of Operations...................... 13
Management........................... 15
Certain Transactions................. 17
Principal Stockholders............... 18
Description of Securities............ 19
Selling Security Holders............. 20
Shares Eligible for Future Sale...... 20
Legal Matters........................ 20
Experts.............................. 20
Additional Information............... 20
Index to Financial Statements........ F-1
</TABLE>

Until , 1998 (90 days after the date of this Prospectus), all
dealers effecting transactions in the registered securities, whether or not
participating In this distribution, may be required to deliver a Prospectus.
This Is in addition to the obligations of dealers to deliver a Prospectus when
acting as underwriters and with respect to their unsold allotments or
subscriptions.

STUDIO CITY HOLDING
CORPORATION
COMMON STOCK
CLASS B PREFERRED STOCK
PROSPECTUS

, 1998

================================================================================
<PAGE> 63

STUDIO CITY HOLDING CORPORATION

PART II.
INFORMATION NOT REQUIRED IN PROSPECTUS

ITEM 24. INDEMNIFICATION OF DIRECTORS AND OFFICERS.

The Restated Certificate of Incorporation, as amended, and By-Laws of the
Company, as amended, provide that the Company shall indemnify its officers and
directors to the full extent permitted by the Business Corporation Law of the
State of New York.

Insofar as indemnification for liabilities arising under the Securities Act
of 1933 ("Act") may be permitted to directors, officers and controlling persons
of the registrant pursuant to the foregoing provisions, or otherwise, the
registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the Act
and is, therefore, unenforceable.

ITEM 25. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.

It is estimated that the following expenses will be incurred in connection
with the proposed offering hereunder. All of such expenses will be borne by the
Company. With the exception of the registration fees, all amounts shown are:

<TABLE>
<S> <C>
Registration fees........................................... $20
Legal fees and expenses..................................... 63,000
Accounting fees and expenses................................ 100,000
Blue sky fees and expenses (including counsel fees)......... 2,500*
Printing expenses........................................... 25,000*
Miscellaneous............................................... 1,000*
Total............................................. $191,520
</TABLE>

- ---------------
* Estimated.

ITEM 26. RECENT SALES OF UNREGISTERED SECURITIES.

The following sets forth certain information regarding sales of, and other
transactions with respect to, securities of the Company issued within the past
three years, which sales and other transactions were not registered pursuant to
the Securities Act of 1933, as amended (the "Securities Act").

During 1998 (through October 28, 1998), the Company sold shares of Common
Stock to 15 individuals, 5 of whom were shareholders, for aggregate
consideration of $87,500.

During 1997, the Company sold 85,622 shares of Common Stock to 49
individuals who were either existing stockholders, or, business associates or
friends or relatives of affiliates, at $5.00 per share for net proceeds to the
Company of $428,110. Also during 1997, 69,429 Units were issued to 4 individuals
as compensation for services rendered. During 1996, 1,917 shares of Common Stock
were issued to an individual for services rendered, 17,500 Units were issued to
another individual as compensation for services rendered and 2,000 Units were
issued to another individual in repayment of a loan of $ 8,371. No commissions
or fees were paid in these transactions. Each Unit consisted of one share of
Common Stock and one Common Stock Purchase Warrant. Each Common Stock Purchase
Warrant entitles the holder to purchase one share of Common Stock at an exercise
price of $3.00 and is exercisable until December 31, 1999. See "Description of
Securities -- Warrants."

During 1996, the Company sold shares of Common Stock to 34 individuals, 17
of whom were shareholders, for aggregate consideration of $599,596.
II-1
<PAGE> 64

In May 1996, the Company paid consulting fees of $600 to Harry B. Knights,
Senior Vice President, to create a financial marketing plan for Zweig Knights
Publishing Corporation, a majority owned subsidiary; in connection with this
plan 1,000 shares of Common Stock were sold to an individual at $5 per share; no
commissions or fees were paid.

The foregoing securities were issued without registration in reliance upon
exemptions the Company believed available at the time of issuance, including
those afforded by Section 4(2) or Rules 505 or 506 of Regulation D of the
Securities Act, based upon the following factors: (i) the issuance of the
securities was to a limited number of persons; (ii) such persons were given
access to all available financial and other information, (iii) such persons were
sophisticated and experienced investors, (iv) such persons represented that they
were acquiring the securities for investment and not with a view to
distribution; and (v) the certificates evidencing the securities bore
appropriate restrictive transfer legends.

Effective July 1, 1996, Studio City-Florida merged with and into the
Company, pursuant to the Plan of Merger. Pursuant to the Plan of Merger (i)
100,000,000 shares of Common Stock of Studio City-Florida held by Larry D. Faw,
the President and Chairman of the Board of the Company, were converted into
10,000,000 shares of the Company's Class A Preferred Stock, (ii) 10,000,000
shares of Common Stock of Studio City-Florida held by Mr. Faw were converted
into 1,000,000 shares of the Company's Class B Preferred Stock, (iii) 1,000,000
shares of the Class B Preferred Stock of Studio City-Florida held by Mr. Faw
were converted into 1,000,000 shares of Class B Preferred Stock of the Company,
(iv) warrants to purchase 5,000,000 shares of Common Stock of Studio
City-Florida were converted into warrants to purchase 5,000,000 shares of Common
Stock of the Company, and (v) each of the remaining issued and outstanding
shares of Common Stock of Studio City-Florida were converted into one share of
the Company's Common Stock. These securities were issued without compliance with
the registration requirements of the federal securities laws or any state
securities laws, in reliance upon exemptions therefrom the Company believed to
be available therefor, including Section 4(2) and Rules 505 and 506 of
Regulation D of the Securities Act of 1933.

THE EXEMPTIONS RELIED UPON BY THE COMPANY MAY NOT HAVE BEEN AVAILABLE AND
THE COMPANY IS EFFECTING THE REGISTRATION OF ALL ITS ISSUED AND OUTSTANDING
SECURITIES IN THIS REGISTRATION STATEMENT.

ITEM 27. EXHIBITS.

The following exhibits are filed as part of this Registration Statement:

<TABLE>
<C> <S>
3.1 Certificate of Amendment and Restated Certificate of
Incorporation of the Company.
3.2 Bylaws of the Company, as amended.
5.1 Opinion of Gerald Weinberg, P.C., regarding the legality of
the securities being registered.
10.2 Warrant to purchase 5,000,000 shares of Common Stock.
10.3 Agreement dated December 17, 1993, between CVT Corp. of
America and Studio City Incorporated Holding.
10.4 Bill of Sale and Conveyance, dated February 16, 1993,
between Larry Faw and Studio City Incorporated, as amended.
10.6 Option to Acquire Filmed Entertainment Properties, dated as
of February 16, 1993, between Larry Faw and Studio City
Incorporated.
10.7 Agreement to Exercise Purchase Option, dated February 16,
1995, between Larry Faw and Studio City Incorporated.
10.8 Promissory Note to Larry Faw dated February 16, 1993 in the
principal amount of $1,554,026.50.
</TABLE>

II-2
<PAGE> 65

<TABLE>
<C> <S>
*23.1 Consent of Peel Schatzel & Wells, P.A.
23.2 Consent of Gerald Weinberg, P.C. (included in Exhibit 5.1)
27.1 Financial Data Schedule
</TABLE>

- ---------------
* Filed herewith.

ITEM 28. UNDERTAKINGS.

The undersigned registrant hereby undertakes:

(1) To file, during any period in which it offers or sales securities,
a post-effective amendment to this Registration Statement to:

(i) Include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933, as amended (the "Act");

(ii) Reflect in the prospectus any facts or events which,
individually or together, represent a fundamental change in the
information in the Registration Statement;

(iii) Include any additional or changed material information on the
plan of distribution.

(2) For determining liability under the Act, to treat each
post-effective amendment as a new registration statement of the securities
offered, and the offering of the securities at that time to be the initial
bona fide offering.

(3) To file a post-effective amendment to remove from registration any
of the securities that remain unsold at the end of the offering.

The undersigned registrant hereby undertakes:

(1) For determining any liability under the Act, to treat the
information omitted from the form of prospectus filed as part of this
Registration Statement in reliance upon Rule 430A and contained in the form
of prospectus filed by the registrant under Rule 424(b)(1) or (4), or
497(h) under the Act as part of this Registration Statement as of the time
the Commission declared it effective.

(2) For determining any liability under the Act, to treat each
post-effective amendment that contains a form of prospectus as a new
registration statement for the securities offered in the registration
statement, and the offering of the securities at that time as the initial
bona fide offering of those securities.

Insofar as indemnification for liabilities arising under the Securities Act
of 1933 (the "Act") may be permitted to directors, officers and controlling
persons of the Company pursuant to the governing instruments of the Company or
Section 402(b) of the Business Corporation Law of the State of New York, the
Company has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in that
Act and is, therefore, unenforceable.

In the event that a claim for indemnification against such liabilities
(other than the payment by the Company of expenses incurred or paid by a
director, officer or controlling person in the successful defense of any action,
suit or proceeding) is asserted by such director, officer or controlling person
in connection with the securities being registered, the Company will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Act and will
be governed by the final adjudication of such issue.

II-3
<PAGE> 66

SIGNATURES

In accordance with the requirements of the Securities Act of 1933, the
registrant certifies that it has reasonable grounds to believe that it meets all
the requirements for filing on Form SB-2 and authorized this Registration
Statement to be signed on its behalf by the undersigned, in the city of New
York, state of New York on December 7, 1998.

STUDIO CITY HOLDING CORPORATION

By: /s/ VINCENT J. NEVILLE
-----------------------------------
Vice Chairman
and Chief Executive Officer

In accordance with the requirements of the Securities Act of 1933, the
Registration Statement has been signed below by the following persons in the
capacity and in the dates indicated.

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

/s/ VINCENT J. NEVILLE Vice Chairman and Chief Executive December 7, 1998
- ------------------------------------------------ Officer (Principal Executive
Vincent J. Neville Officer)

/s/ GENEVIEVE H. FAW Senior Vice President and December 7, 1998
- ------------------------------------------------ Director
Genevieve H. Faw

/s/ LARRY D. FAW President and Chairman of the December 7, 1998
- ------------------------------------------------ Board of Directors
Larry D. Faw

/s/ WALTER JOHNSON WILLIAMS Chief Financial Officer December 7, 1998
- ------------------------------------------------
Walter Johnson Williams
</TABLE>

II-4
<PAGE> 67

EXHIBIT INDEX

<TABLE>
<CAPTION>
PAGE IN
SEQUENTIAL
EXHIBIT NUMBERING
NO. SYSTEM
- ------- ----------
<C> <S> <C>
3.1 Certificate of Amendment and Restated Certificate of
Incorporation of the Company. ..............................
3.2 Bylaws of the Company, as amended. .........................
5.1 Opinion of Gerald Weinberg, P.C., regarding the legality of
the securities being registered. ...........................
10.2 Warrant to purchase 5,000,000 shares of Common Stock. ......
10.3 Agreement dated December 17, 1993, between CVT Corp. of
America and Studio City Incorporated Holding. ..............
10.4 Bill of Sale and Conveyance, dated February 16, 1993,
between Larry Faw and Studio City Incorporated, as
amended. ...................................................
10.6 Option to Acquire Filmed Entertainment Properties, dated as
of February 16, 1993, between Larry Faw and Studio City
Incorporated. ..............................................
10.7 Agreement to Exercise Purchase Option, dated February 16,
1995, between Larry Faw and Studio City Incorporated. ......
10.8 Promissory Note to Larry Faw dated February 16, 1993 in the
principal amount of $1,554,026.50. .........................
10.9 Form of Executive Employment Agreement. ....................
23.1 Consent of Peel Schatzel & Wells, P.A. .....................
*23.2 Consent of Gerald Weinberg, P.C. (included in Exhibit
5.1)........................................................
27.1 Financial Data Schedule.....................................
</TABLE>

- ---------------
* Filed herewith.

<PAGE> 1
CONSENT OF INDEPENDENT AUDITORS

We consent to the reference to our firm under the caption "Experts" and to the
use of our report dated July 9, 1998, in the Registration Statement on Form
SB-2 as amended, of Studio City Holding Corporation (No. 333-6255 1) filed with
the Securities and Exchange Commission, and the related Prospectus contained
therein.

/s/ PEEL, SCHATZEL & WELLS, P.A.

PEEL, SCHATZEL & WELLS, P.A.
ST. PETERSBURG, FLORIDA

DECEMBER 3, 1998