ALL AMERICAN COMMUNICATIONS INC, S-2, 1995-10-18

ALL AMERICAN COMMUNICATIONS INC
S-2, 1995-10-18
MOTION PICTURE & VIDEO TAPE PRODUCTION

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<PAGE> 1

AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON OCTOBER 18, 1995
REGISTRATION NO. 33-
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON D.C. 20549
------------------------

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

ALL AMERICAN COMMUNICATIONS, INC.
(Exact name of registrant as specified in its charter)

<TABLE>
<S> <C>
DELAWARE 95-3803222
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
</TABLE>

2114 PICO BOULEVARD
SANTA MONICA, CALIFORNIA 90405
(310) 450-3193
(Address, including zip code, and telephone number, including area code, of
registrant's principal executive offices)
------------------------
THOMAS BRADSHAW
SENIOR EXECUTIVE VICE PRESIDENT AND CHIEF FINANCIAL OFFICER
ALL AMERICAN COMMUNICATIONS, INC.
2114 PICO BOULEVARD
SANTA MONICA, CALIFORNIA 90405
(310) 450-3193
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
------------------------
With copies to:

<TABLE>
<S> <C>
BARRY L. DASTIN, ESQ. HOWARD SHECTER, ESQ.
KAYE, SCHOLER, FIERMAN, HAYS & HANDLER MORGAN, LEWIS & BOCKIUS LLP
1999 AVENUE OF THE STARS, SUITE 1600 101 PARK AVENUE
LOS ANGELES, CA 90067 NEW YORK, NY 10178-0060
(310) 788-1000 (212) 309-6000
</TABLE>

------------------------
APPROXIMATE DATE OF PROPOSED SALE TO THE PUBLIC:
As soon as practicable after this 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 of
1933, check the following box. / /

If the Registrant elects to deliver its latest annual report to security
holders, or a complete and legible facsimile thereof, pursuant to Item 11(a)(1)
of this Form, check the following box. / /
------------------------
CALCULATION OF REGISTRATION FEE
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<TABLE>
<S> <C> <C> <C> <C>
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PROPOSED PROPOSED
MAXIMUM MAXIMUM
OFFERING AGGREGATE AMOUNT OF
TITLE OF SHARES TO BE AMOUNT TO BE PRICE OFFERING REGISTRATION
REGISTERED REGISTERED PER SHARE(2) PRICE(2) FEE(2)
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Class B Common Stock,
$.0001 par value........... 5,175,000 shares(1) $12.1875 $63,070,313 $21,748.38
- --------------------------------------------------------------------------------------------------
</TABLE>

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(1) Includes 675,000 shares of Class B Common Stock subject to the Underwriters'
over-allotment option.
(2) Estimated solely for purposes of determining the registration fee and
calculated pursuant to Rule 457(c) under the Securities Act of 1933.
------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THIS 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

ALL AMERICAN COMMUNICATIONS, INC.,

CROSS REFERENCE SHEET SHOWING LOCATION IN PROSPECTUS
OF INFORMATION REQUIRED BY ITEMS OF FORM S-2

<TABLE>
<CAPTION>
FORM S-2 REGISTRATION STATEMENT ITEM AND
HEADING HEADING IN PROSPECTUS
------------------------------------------ ---------------------------------------------
<C> <S> <C>
1. Forepart of the Registration Statement and
Outside Front Cover Page of Prospectus.... Facing Page; Cross Reference Sheet; Outside
Front Cover Page
2. Inside Front and Outside Back Cover Pages
of Prospectus............................. Inside Front and Outside Back Cover Pages
3. Summary Information and Risk Factors...... Prospectus Summary; The Company; Summary
Selected Consolidated Financial Data; Risk
Factors
4. Use of Proceeds........................... Prospectus Summary; Use of Proceeds
5. Determination of Offering Price........... Underwriting
6. Dilution.................................. Not Applicable
7. Selling Security Holders.................. Principal and Selling Stockholders
8. Plan of Distribution...................... Outside Front Cover Page; Underwriting
9. Description of Securities to be
Registered................................ Prospectus Summary; Capitalization;
Description of Capital Stock
10. Interests of Named Experts and Counsel.... Not Applicable
11. Information with Respect to the
Registrant................................ Outside and Inside Front Cover Page;
Prospectus Summary; The Company; Certain Pro
Forma Information; Risk Factors; Use of
Proceeds; Market For Common Stock and
Dividends; Capitalization; Selected
Consolidated Financial Data; Management's
Discussion and Analysis of Financial
Condition and Results of Operations;
Business; Description of Capital Stock;
Experts; Incorporation of Certain Documents
by Reference; Available Information;
Consolidated Financial Statements
12. Incorporation of Certain Documents by
Reference................................. Incorporation of Certain Documents by
Reference
13. Disclosure of Commission Position on
Indemnification for Securities Act
Liabilities............................... Not Applicable
</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 OCTOBER , 1995

4,500,000 SHARES
ALL AMERICAN COMMUNICATIONS, INC.
LOGO CLASS B COMMON STOCK
------------------------

Of the 4,500,000 shares of Class B Common Stock offered hereby 4,000,000
shares are being sold by All American Communications, Inc. (the "Company") and
500,000 shares are being sold by The Interpublic Group of Companies, Inc.
("Interpublic"). See "Principal and Selling Stockholders." The Company will not
receive any proceeds from the sale of shares by Interpublic. The Class B Common
Stock is identical to the Company's outstanding Common Stock except that the
Class B Common Stock is non-voting. See "Description of Capital Stock." Prior to
this offering, there has been no public market for the Class B Common Stock. The
public offering price has been determined with reference to the market price for
the Common Stock. See "Underwriting."

The Company has applied for quotation of the Class B Common Stock on The
Nasdaq National Market ("NNM") under the trading symbol "AACIB". The Common
Stock of the Company is currently traded on The Nasdaq SmallCap Market under the
symbol "AACI". The Company has also applied for quotation of the Common Stock of
the Company on the NNM. On October , 1995, the closing bid and ask prices of
the Common Stock as reported by the National Association of Securities Dealers,
Inc. Automated Quotation System were $ per share and $ per share,
respectively. See "Market for Common Stock and Dividends."

THE CLASS B COMMON STOCK OFFERED HEREBY INVOLVES A HIGH DEGREE OF RISK. SEE
"RISK FACTORS" BEGINNING ON PAGE 8 OF THIS PROSPECTUS.
------------------------

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
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<TABLE>
<S> <C> <C> <C> <C>
PROCEEDS TO
PRICE TO UNDERWRITING PROCEEDS TO SELLING
PUBLIC DISCOUNT(1) COMPANY(2) STOCKHOLDERS(2)
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Per Share................... $ $ $ $
Total(3).................... $ $ $ $
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</TABLE>

(1) See "Underwriting" for information concerning indemnification of the
Underwriters and other information.

(2) Before deducting expenses of the offering estimated at $ payable by
the Company and $ payable by the Selling Stockholders.

(3) Certain stockholders named under "Principal and Selling Stockholders"
(together with Interpublic, "Selling Stockholders") have granted the
Underwriters an option, exercisable within 30 days of the date hereof, to
purchase up to 675,000 additional shares of Class B Common Stock for the
purpose of covering over-allotments, if any. If the Underwriters exercise
such option in full, the total Price to Public, Underwriting Discount,
Proceeds to Company and Proceeds to Selling Stockholders will be
$ , $ , $ and $ , respectively. See
"Underwriting."
------------------------

The shares of Class B Common Stock are offered by the Underwriters when, as
and if delivered to and accepted by them, subject to their right to withdraw,
cancel or reject orders in whole or in part and subject to certain other
conditions. It is expected that delivery of certificates representing the shares
of Class B Common Stock will be made against payment on or about ,
1995 at the office of Oppenheimer & Co., Inc., Oppenheimer Tower, World
Financial Center, New York, New York 10281.

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

OPPENHEIMER & CO., INC. ARNHOLD AND S. BLEICHROEDER, INC.

The date of this Prospectus is November , 1995
<PAGE> 4

LOGO

IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE CLASS B COMMON
STOCK OFFERED HEREBY OR THE COMMON STOCK AT A LEVEL ABOVE THAT WHICH MIGHT
OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH STABILIZING, IF COMMENCED, MAY BE
DISCONTINUED AT ANY TIME.
<PAGE> 5

PROSPECTUS SUMMARY

The following summary is qualified in its entirety by the more detailed
information and consolidated financial data appearing elsewhere in this
Prospectus. Unless the context otherwise requires, references herein to the
"Company" or "All American" are to All American Communications, Inc., its direct
or indirect subsidiaries and its predecessors. Except as otherwise indicated,
all information in this Prospectus assumes the Underwriters' over-allotment
option will not be exercised.

THE COMPANY

The Company is a leading independent supplier of television programming,
including the production and domestic distribution of Baywatch, currently one of
the highest rated one-hour series in first-run syndication and seen in more than
100 countries around the world. In addition, the Company is one of the world's
largest distributors of television game shows outside of the United States. In
October 1995, in order to further strengthen its position in the game show
business, the Company agreed to form a 50/50 joint venture with The Interpublic
Group of Companies, Inc. ("Interpublic") to acquire substantially all of the
assets of Mark Goodson Productions, L.P. and a related entity (the "Mark Goodson
Acquisition"), including ownership of rights to approximately 45 Goodson game
show formats, including The Price Is Right, and a tape library of approximately
17,000 hours of programming and 30,000 broadcast episodes. The Mark Goodson
Acquisition is scheduled to close in approximately 30 days, subject only to the
expiration or termination of a regulatory waiting period and other customary
closing conditions. The Company also distributes an extensive library of
television programming and has operated as an independent record company since
1981.

The Company's television operations currently include the production and
domestic distribution of Baywatch, the production and world-wide distribution of
Baywatch Nights and the domestic distribution of The Richard Bey Show. Currently
being telecast for its sixth season, Baywatch has been exhibited by the Company
in first-run syndication since the 1991/1992 broadcast season and is currently
being broadcast to approximately 99% of the U.S. television market. The Company
has also launched a rerun strip syndication package of 111 previously aired
Baywatch episodes for exhibition through September 1997. Through October 16,
1995, the rerun syndication package has been licensed to television stations
covering approximately 93% of the U.S. television market. The Company has
granted exclusive rights to such previously aired Baywatch episodes (together
with certain future episodes) to USA Networks for cable and satellite television
exhibition commencing in September 1997 for a three-year period, subject to
certain renewal options in favor of the licensee. See "Business -- Television
Operations -- Domestic Television Production."

Based upon the success of its Baywatch series, the Company has launched a
new one-hour spin-off in first-run syndication, Baywatch Nights, for the
1995/1996 broadcast season. The new series is currently being broadcast to more
than 96% of the U.S. television market. In August 1995, in order to expand its
production activities to network television, the Company entered into a two-year
agreement (subject to a one-year renewal option) with The Gerber Company with
respect to the services of David Gerber, who while head of television
programming at a major studio, was responsible for television programs such as
thirtysomething and In The Heat Of The Night. As head of a production team, Mr.
Gerber is overseeing development of movies-for-television and episodic series
for potential network exhibition. The Company is also distributing The Richard
Bey Show, a daily one-hour talk show in first-run syndication, after having
commenced distribution of the show during the middle of the prior broadcast
year.

The Company's Fremantle International, Inc. subsidiary (together with its
related entities, "Fremantle" or "AAFII") currently produces or distributes
approximately 90 game shows in 28 countries, principally in the local language
and based upon formats licensed from U.S. game show producers, including Mark
Goodson Productions. Thus, for example, Fremantle produces German language
versions of The Price Is Right and Let's Make a Deal which include German hosts
and contestants and which are televised in the German market. By virtue of the
Mark Goodson Acquisition, the Company will be in a position to expand its
television game show business in the United States and on a world-wide basis.

3
<PAGE> 6

In addition to its current television programming and projects in
development, the Company distributes, represents or owns participation interests
in an extensive television library of previously aired programming, including
more than 50 television series, television rights to over 135 motion pictures, a
variety of children's programming and "live event" specials. Such programming
includes the children's animated series Heathcliff and Inspector Gadget,
documentaries on Marilyn Monroe, John F. Kennedy and Elvis Presley, contemporary
films such as Split Decision with Gene Hackman, The Long Walk Home with Whoopi
Goldberg and Defenseless with Sam Shepard and 11 classic Bob Hope films. See
"Business -- Television Operations -- Domestic Television Distribution."

The Company's business strategy includes as a principal component the
expansion of the Company through the acquisition of complementary assets or
businesses. In February 1993, the Company completed the acquisition of the
domestic syndication operations and programming assets of LBS Communications,
Inc. In August 1994, the Company completed the acquisition (the "Fremantle
Acquisition") of certain international programming rights and equity of
Fremantle from Interpublic. In October 1995, the Company entered into an
acquisition agreement relating to the Mark Goodson Acquisition. One of the
principal purposes of this offering is to provide the Company with additional
working capital potentially available for future acquisitions. See "Use of
Proceeds" and "Business -- Acquisitions."

The Company produces and distributes recorded music both domestically and
internationally. The Company currently has a roster of 15 active recording
artists and a catalog of approximately 140 albums of individual artists, groups
and motion picture soundtracks. These artists include James Brown, Freddie
Jackson, Skee-Lo, 12 Gauge and "Weird Al" Yankovic, and the catalog includes
certain previously released works by such artists, pop/rock groups such as
Survivor and E.L.O. Part II, jazz artists such as Count Basie, Sarah Vaughn and
Dizzy Gillespie and soundtracks from motion pictures and television shows such
as Baywatch, Never Talk to Strangers, Cliffhanger, Rocky IV and Eddie and the
Cruisers. The Company's new product mix primarily focuses on urban and
alternative music under its Street Life label.

All American's principal business strategies are to: (i) develop, produce
and distribute quality television programming on a world-wide basis; (ii)
increase its library of programming for television distribution by both internal
production and acquisition of rights from third parties; (iii) acquire assets or
businesses complementary to its current operations; and (iv) develop its
recorded music operations through both new and established artists and
increasing sales from its catalog.

4
<PAGE> 7

THE OFFERING

<TABLE>
<S> <C>
Class B Common Stock offered by the Company...... 4,000,000 shares
Class B Common Stock offered by the Selling
Stockholders................................... 500,000 shares(1)
Class B Common Stock to be outstanding after the
offering....................................... 6,520,000 shares(1)
Common Stock and Class B Common Stock to be
outstanding after the offering................. 11,945,971 shares(2)
Estimated net proceeds to the Company............ $ (3)
Use of proceeds.................................. To reduce indebtedness and for general
corporate purposes, including possible
acquisitions. See "Use of Proceeds."
Proposed Nasdaq symbol for Class B Common
Stock.......................................... AACIB
</TABLE>

- ---------------
(1) Does not include an additional 675,000 shares of Class B Common Stock which
would be issued in connection with the exercise in full of the Underwriters'
over-allotment option. See "Underwriting" and "Principal and Selling
Stockholders."

(2) Does not include 6,526,168 shares of Common Stock reserved for issuance in
respect of outstanding convertible notes, options and warrants. Of such
amount, holders of an aggregate of $1.3 million principal balance of
outstanding convertible notes have advised the Company of their intention to
convert such notes into Common Stock (approximately 109,565 shares) on or
prior to October 16, 1995.

(3) After deducting expenses of the offering estimated at $ .

5
<PAGE> 8

SUMMARY SELECTED CONSOLIDATED FINANCIAL DATA(1)

The following summary selected consolidated financial data are derived from
the Consolidated Financial Statements of All American Communications, Inc. The
data should be read in conjunction with the Consolidated Financial Statements,
related notes, and other financial information included or incorporated by
reference herein.

<TABLE>
<CAPTION>
SIX MONTHS ENDED TEN MONTHS
JUNE 30, YEAR ENDED DECEMBER 31, ENDED
------------------- --------------------------------------------- DECEMBER 31,
1995 1994 1994 1993 1992 1991 1990(2)
------- ------- -------- ------- ------- ------- ------------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C> <C>
HISTORICAL OPERATING DATA:
Revenues:
Television.......................... $67,819 $20,201 $ 98,771 $57,407 $45,302 $25,173 $1,332
Recorded music...................... 7,208 7,406 16,130 13,215 12,616 7,758 3,720
------- ------- -------- ------- ------- ------- -------
75,027 27,607 114,901 70,622 57,918 32,931 5,052
------- ------- -------- ------- ------- ------- -------
Expenses:
Television.......................... 54,308 15,612 75,196 42,560 32,078 18,337 1,039
Recorded music...................... 5,663 4,736 10,750 9,780 9,250 4,885 762
Selling, general & administrative... 12,094 8,815 21,523 16,074 13,471 9,543 2,219
Goodwill amortization............... 1,070 46 971 133 138 67 --
------- ------- -------- ------- ------- ------- -------
73,135 29,209 108,440 68,547 54,937 32,832 4,020
------- ------- -------- ------- ------- ------- -------
Operating income (loss)............... $ 1,892 $(1,602) $ 6,461 $ 2,075 $ 2,981 $ 99 $1,032
======= ======= ======== ======= ======= ======= =======
Income (loss) from continuing
operations.......................... $(1,571) $(3,757) $ 455 $ 380 $ 1,863 $ 145 $ 244
======= ======= ======== ======= ======= ======= =======
Net income (loss) per share applicable
to common stockholders from
continuing operations(3)............ $ (0.20) $ (0.78) $ 0.07 $ 0.87(4) $ (0.18)(5) $ (0.49)(5) $ 0.07
======= ======= ======== ======= ======= ======= =======
Weighted average common shares and
share equivalents outstanding(3).... 7,976 4,826 6,201 4,874 4,752 3,970 3,544
======= ======= ======== ======= ======= ======= =======
</TABLE>

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

(1) Includes (a) for periods subsequent to February 1991 the combined operations
of Scotti Brothers Entertainment Industries, Inc. ("SBEI") and All American
Television, Inc., certain predecessors of the Company and (b) for periods
subsequent to February 1993 and August 1994, respectively, the combined
operations of the Company including LBS Communications, Inc. and Fremantle,
following their respective dates of purchase by the Company. See "The
Company" and "Selected Consolidated Financial Data."

(2) Effective December 31, 1990, the Company changed its fiscal year end to
December 31.

(3) Adjusted to give retroactive effect to a one-for-four reverse stock split
effected on March 20, 1992.

(4) Per share income from continuing operations applicable to common
stockholders for the year ended December 31, 1993 includes a gain of $3.9
million, which represents the excess carrying value of redeemable preferred
and common stock formerly outstanding over the price paid for its purchase,
net of accretion and dividends on such redeemable stock.

(5) Per share income from continuing operations applicable to common
stockholders for the years ended December 31, 1992 and December 31, 1991
includes the effect of $2.7 million and $2.1 million, respectively, of
accretion and dividends on redeemable stock.

6
<PAGE> 9

CERTAIN PRO FORMA DATA(1)

The following unaudited pro forma operating data for the six months ended
June 30, 1995 and the pro forma balance sheet data as of June 30, 1995 give
effect to the Mark Goodson Acquisition (which is being accounted for using the
equity method) and this offering. The unaudited pro forma operating data for the
year ended December 31, 1994 and the six months ended June 30, 1994 give effect
to the Fremantle Acquisition (which was accounted for as a purchase in August
1994) and is then further adjusted to give effect for the Mark Goodson
Acquisition and this offering. The unaudited pro forma operating data have been
prepared as if the aforementioned transactions had occurred at the beginning of
the earliest period presented (January 1, 1994). The unaudited pro forma balance
sheet data has been prepared as if the Mark Goodson Acquisition and the sale of
the Class B Common Stock had occurred at the end of the latest period presented
(June 30, 1995).

PRO FORMA OPERATING DATA:

<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE 30,
------------------------------------------------------ YEAR ENDED
1994 DECEMBER 31, 1994
1995 --------------------------------- -----------------------------------
---------------- AS FURTHER AS FURTHER
AS ADJUSTED(2) AS ADJUSTED(3) ADJUSTED(2)(3) AS ADJUSTED(3) ADJUSTED(2)(3)
---------------- -------------- ---------------- -------------- ----------------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C>
Revenue..................... $ 75,027 $ 54,489 $ 54,489 $145,465 $145,465
Goodwill amortization....... 1,896 1,013 1,683 2,154 3,494
Operating income............ 2,527 21 1,067 6,732 8,837
Equity earnings in
unconsolidated
affiliate................. 2,681 -- 2,592 -- 5,860
Interest expense............ 4,590 3,722 4,984 7,590 9,114
Net income (loss)........... 432 (3,663) (520) (1,102) 3,304
Net income (loss) per
share..................... 0.04 (0.46) (0.04) (0.14) 0.27
Weighted average common
shares and common share
equivalents outstanding... 12,081 7,976 11,976 7,976 12,042
</TABLE>

PRO FORMA BALANCE SHEET DATA:

<TABLE>
<CAPTION>
JUNE 30, 1995
-----------------------------
ACTUAL AS ADJUSTED(2)
-------- --------------
(IN THOUSANDS)
<S> <C> <C>
Cash.................................................................................. $ 10,126 $ 17,221(4)
Television program costs, net......................................................... 88,109 88,109
Investment in unconsolidated affiliate................................................ -- 26,000
Goodwill.............................................................................. 50,476 50,476
Total assets.......................................................................... 228,514 261,609
Notes payable......................................................................... 127,475 115,000(4)
Total liabilities..................................................................... 201,529 190,054(4)
Stockholders' equity.................................................................. 26,985 71,555
</TABLE>

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

(1) The pro forma information presented above is prepared for comparative
purposes only and does not purport to be indicative of what would have
occurred had the acquisitions and the offering been made at the dates
indicated, or of the results which may occur in the future. The unaudited
pro forma data do not give effect to the possible exercise by the Company of
a proposed option (the "Interpublic Option") to purchase the remaining 50%
interest in the joint venture formed to consummate the Mark Goodson
Acquisition during the six-month period commencing six months after the
final closing of the Mark Goodson Acquisition. See
"Business -- Acquisitions."

(2) Adjusted for the Mark Goodson Acquisition and this offering.

(3) Adjusted for the Fremantle Acquisition.

(4) Assumes that the $25.0 million Tranche E Term Loan financing the cash
portion of the purchase price of the Mark Goodson Acquisition has been
completed. See "Management's Discussion and Analysis of Financial Condition
and Results of Operations -- Liquidity and Capital Resources." If such
financing does not occur, cash would be $10.1 million, notes payable would
be $107.9 million and total liabilities would be $183.0 million.

7
<PAGE> 10

RISK FACTORS

Prospective investors should consider carefully the following factors, as
well as all of the other information set forth in this Prospectus, in evaluating
an investment in the Class B Common Stock offered hereby.

DEPENDENCE ON A LIMITED NUMBER OF PROJECTS

The Company's revenues have been derived principally from a relatively
small number of television projects and recorded music releases. The loss of a
major project in any period, unless replaced by new projects, could have an
adverse effect on the Company's results of operations. There is no assurance
that Baywatch, which contributed approximately 16%, 31% and 41% of the Company's
revenues during the six month period ended June 30, 1995 and the years ended
December 31, 1994 and 1993, respectively, will continue at its historical level
of success in the 1995/1996 television season or that it will be successful in
rerun syndication. There is no assurance that Baywatch Nights, the Company's new
series in first-run syndication, will be successful. Additionally, a significant
amount (approximately 23% for the six-month period ended June 30, 1995 and
approximately 42% in 1994 and 58% in 1993) of the Company's revenues from
television operations are derived from barter sales, which may fluctuate
significantly based on ratings of a particular program and general economic
trends, such as advertising rates.

LIQUIDITY AND FINANCING REQUIREMENTS

The Company's television and recorded music operations require significant
cash outlays. The Company experienced significant negative cash flows from
operations in the approximate amounts of $14.0 million in the six-month period
ended June 30, 1995, and $14.7 million and $19.3 million in the years ended
December 31, 1994 and 1993, respectively, due primarily to net increases in
capitalized television program costs. This negative cash flow was funded by an
increase in bank financings and the sale of the Company's 6 1/2% convertible
subordinated notes due 2003 (the "Notes"). The Company expects to continue to
experience, from time to time, negative cash flows from operations. In such
event, the Company may be required to fund at least a portion of production and
recording costs, pending receipt of licensing revenues, out of its lines of
credit or from outside sources. The Company believes that its existing working
capital, together with the net proceeds from the offering, its lines of credit
and anticipated cash flows from operations, will be sufficient to satisfy the
Company's operating requirements for at least the next twelve months. However,
there can be no assurance that there will be adequate liquidity or financing
available to the Company for all of its capital requirements in the future. In
addition, the liquidity provided to the Company by this offering may be
partially utilized if the Company exercises the proposed Interpublic Option or
certain additional rights are exercised by the Company or Interpublic. See "Use
of Proceeds" and "Business -- Acquisitions."

The Company, from time to time, considers the acquisition of program rights
and the expansion of its business through the acquisition of businesses
complementary to the current operations of the Company. Consummation of any such
acquisition or other expansion of the business conducted by the Company, if
beyond the Company's capital resources, would be subject to the Company securing
additional financing to the extent required.

EXPANSION RISKS

The Company has experienced significant revenue growth since 1991, in
substantial part due to acquisitions, and the Company continues to regularly
evaluate potential acquisitions. No assurance can be given that the pending Mark
Goodson Acquisition or any other acquisition will be successful. There can be no
assurance that the Company will consummate any other acquisitions or that any
recent or future expansions of the Company's operations will be profitable. The
Company's ability to achieve its expansion plans will depend on a variety of
factors, many of which may be beyond the Company's control, including the
Company's ability to identify and negotiate satisfactory terms with acquisition
targets, obtain additional capital on satisfactory terms, operate its business
profitably and attract and retain qualified and experienced personnel.

8
<PAGE> 11

CERTAIN RISKS RELATING TO THE MARK GOODSON ACQUISITION

While the Company and Interpublic entered into an acquisition agreement
dated as of October 6, 1995 with respect to the Mark Goodson Acquisition,
consummation of the transaction is subject to the expiration or termination of a
regulatory waiting period and satisfaction of other customary closing
conditions. There is no assurance that the Mark Goodson Acquisition, if
consummated, will be successful. In particular, with respect to the 1995/1996
broadcast season, the only game show in initial production for the domestic
market is "The Price Is Right" hosted by Bob Barker and there is no assurance
that the show will be renewed for the 1996/1997 broadcast season. The Company
has initially financed the $25.0 million cash portion of the purchase price for
the acquisition through a letter of credit utilizing substantially all of the
remaining balance of its general working capital line, pending completion of a
new $25.0 million term loan (referred to generally as "Tranche E") from its
existing bank lenders. While the agent for the bank lenders has issued a
commitment, subject to customary conditions, for its portion of the Tranche E
facility, the Company has not received formal commitments from the remaining
members of the syndicate and there is no assurance that the Tranche E facility
will be consummated. If the Tranche E facility is not consummated, the Company's
liquidity will be reduced. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations -- Liquidity and Capital
Resources." In addition, pursuant to the operative documents relating to the
limited liability company which will purchase the assets in the Mark Goodson
Acquisition, under certain circumstances Interpublic may exercise certain "put"
rights and the Company may exercise the proposed Interpublic Option or certain
"call" rights, any of which would reduce the Company's liquidity and shift 100%
of the risk of the Mark Goodson Acquisition to the Company. See
"Business -- Acquisitions."

DEPENDENCE ON KEY PERSONNEL

The Company is dependent on the efforts and abilities of certain of its
senior management, particularly those of Anthony J. Scotti, the Company's
co-founder and chief executive officer. The loss of any of the Company's key
executives could have an adverse effect on the business and prospects of the
Company if a suitable replacement was not promptly obtained. The Company
maintains $10.0 million "key man" life insurance policies on each of Anthony J.
Scotti and Lawrence E. Lamattina (the chief executive officer of All American
Fremantle Television Group) which are payable first to the Company's principal
bank lenders for so long as amounts on the Company's credit facilities remain
outstanding. The name and the logo "Scotti Brothers Records" and all other
rights to use the name "Scotti" belong to Anthony J. Scotti and Benjamin J.
Scotti (the Company's co-founder and Senior Executive Vice President). The
Company will no longer be permitted to use such name and logo in the event that
either of them is no longer employed by the Company (unless amounts are then
outstanding on the Company's credit facilities). In addition, the Company's
credit facilities permit the lenders to terminate the commitments and/or declare
all outstanding principal and interest amounts forthwith due and payable if
Anthony J. Scotti or any two of the following: Thomas Bradshaw, Myron Roth and
Lawrence E. Lamattina cease to be active in the business of the Company.
Furthermore, any project in production by the Company may be dependent upon the
availability of material talent involved in such projects, the loss of whom
could have a negative impact on the operating results of the Company.

FLUCTUATIONS IN RESULTS OF OPERATIONS

A large percentage of a television program's revenues are recognized when
the program is delivered, or, in the case of syndicated reruns, available for
broadcast. As a result, significant fluctuations in the Company's total revenues
and net income can occur from period to period depending on the delivery or
availability dates of programs. The Company's television distribution revenues
have historically been higher in the third and fourth quarters as a result of
the commencement of the television broadcast season in the fall of each year.
Pursuant to the Company's accounting policy, as required under generally
accepted accounting principles, capitalized television program costs are
reviewed on a quarterly basis and any portion of such costs that subsequently
appear not to be fully recoverable from future revenues are charged to expense
during the period in which the loss becomes evident. As a result, some quarters
or years will have fluctuating levels of expenses due to such losses. The
Company's recorded music operations are also subject to fluctuations due to the
timing of album releases (which may generate significant revenues in the period
in which the release occurs) and to

9
<PAGE> 12

the timing of the recognition of artist cost expense (which may occur during a
period prior to determination of actual sales of an album).

From March 31, 1993 through the quarter ended June 30, 1995, the Company's
quarterly revenues have ranged from approximately $7.6 million to $49.2 million,
and quarterly net income before accretion and dividends on redeemable stock has
ranged from a net loss of approximately $3.8 million to a net profit of
approximately $3.1 million. Year to year comparisons of quarterly results may
not be meaningful and quarterly operating results during the course of a fiscal
year may not be indicative of results that may be expected for the entire fiscal
year. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations -- Quarterly Results of Operations."

COMPETITION

Competition is intense within the television and recorded music industries
and between each of these industries and other entertainment media. The Company
is in competition with major television and recorded music companies as well as
with numerous smaller companies for the services of performing artists, other
creative and technical personnel and creative material. Many of the entities
that the Company competes against have far greater financial and managerial
resources than the Company. There can be no assurance that the Company will
continue to acquire rights to additional successful properties or enter into
agreements for the financing, production or licensing of television programs or
musical recordings on terms favorable to the Company. Furthermore, the Company's
success is highly dependent upon various unpredictable factors such as the
viewing preferences of television audiences and the popularity of new releases
of recorded music.

LIMITATIONS ON CLASS B STOCKHOLDERS' ABILITY TO VOTE

The shares of Class B Common Stock have no voting rights except as required
by law. Therefore, the holders of shares of Class B Common Stock will have no
ability to elect any directors and no vote on such significant issues as whether
to dissolve, merge or sell the assets of the Company. Prospective investors in
the Class B Common Stock should note that (i) the Company can issue additional
voting shares of Common Stock at any time, and (ii) that the shares of Class B
Common Stock only become voting shares in the event of a "change in control" of
the Company. See "Description of Capital Stock."

CONTROL BY MANAGEMENT

Upon consummation of the offering (assuming no conversion of the Notes or
exercise of outstanding warrants or options or of the over-allotment option),
approximately 72% of the outstanding shares of Common Stock will be beneficially
held by executive officers and directors of the Company. Anthony J. Scotti,
together with his brother Benjamin J. Scotti, beneficially holds approximately
70% of the outstanding shares and thereby effectively controls the Company.
Prior to the conversion of the Notes, senior management (primarily Anthony J.
Scotti) will continue to be in a position to elect the entire Board of Directors
of the Company, and to determine whether to dissolve, merge or sell the assets
of the Company and, generally, to direct the affairs of the Company. The Board
of Directors of the Company has approved an amendment to the Company's charter,
subject to stockholder approval, which would enable holders of Common Stock to
convert such shares into Class B Common Stock on a one-for-one basis. To the
extent non-management holders of Common Stock choose to convert into shares of
Class B Common Stock, the management holders will have an increased
concentration of ownership of Common Stock. See "Description of Capital Stock."

CHANGE OF CONTROL

Anthony J. Scotti (together with certain related persons and Company
affiliates) controls the Company and, through such ownership, the related power
ultimately to elect or re-name all of the Company's directors. In the event of a
"change of control" of the Company as variously defined in particular
contractual provisions (generally the sale of the Company or the acquisition by
persons other than Mr. Scotti and related persons of more than 50% of the
outstanding Common Stock or the beneficial ownership by Mr. Scotti and related
persons of less than a specified percentage of the Company Common Stock) various
potentially adverse consequences could occur. Such consequences include the
potential acceleration of the Company's secured

10
<PAGE> 13

bank debt, mandatory prepayment of the Notes, exercise by Interpublic of certain
"put" rights to the Company with respect to its interest in the Mark Goodson
Acquisition, accelerated vesting of employee stock options, loss of the right to
use the name "Scotti" and the automatic conversion of the Class B Common Stock
into Common Stock. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations." The cumulative impact of such provisions
may have the effect of discouraging certain types of transactions involving an
actual or potential change of control of the Company, including transactions in
which the holders of Common Stock or Class B Common Stock might otherwise
receive a premium for their shares over the current market prices.

NATURE OF THE ENTERTAINMENT INDUSTRY

The television and recorded music industries are highly speculative and
historically have involved a substantial degree of risk. The success of an
individual television program or musical recording depends upon unpredictable
and changing factors, such as personal tastes of the public and critics.
Therefore, there is a substantial risk that any of the Company's projects will
not be successful, resulting in costs not being recouped and anticipated profits
not being realized. Although the Company attempts to limit various risks
involved with production through various activities including obtaining
insurance and completion bonds, and entering into co-productions and pre-sales,
in selected projects and in its distribution activities the Company expects to
continue to take significant financial risks in return for more favorable
participation in potential revenues over the life of the programs. Public taste
is unpredictable and a shift in demand could cause the Company's television
programming to lose its appeal. The Company's television syndication barter
business is also impacted by advertising rates, which to the extent they may
decline, will have an adverse impact on the Company. For a description of the
barter syndication business, see "Management's Discussion and Analysis of
Financial Condition and Results of Operations -- Overview." In addition, because
the success of recording artists and releases is highly dependent on consumer
taste and critical response, as well as public awareness of recording artists,
the level of marketing and promotional activities and expenses necessary or
advisable in any particular instance cannot be predicted with certainty.

GOVERNMENT REGULATION

In a decision released September 6, 1995, the Federal Communications
Commission ("FCC") repealed its financial interest and syndication rules
effective as of September 21, 1995. Those FCC rules, which were adopted in 1970
to limit television network control over television programming and thereby
foster the development of diverse programming sources, had restricted the
ability of the three established, major U.S. television networks (i.e., ABC, CBS
and NBC), to own and syndicate television programming. The impact of the repeal
of the FCC's financial interest and syndication rules on the Company's
operations cannot be predicted at the present time, although it is expected that
there will be an increase in in-house productions of television programming for
the networks' own use. It is possible that this change will have a negative
impact on the Company's business. Additionally, in international markets, the
Company may be subject to local content and quota requirements which effectively
prohibit or limit access to particular markets.

In a decision released September 1, 1995, the FCC repealed the Prime Time
Access Rule, effective August 30, 1996. The Prime Time Access Rule generally
prohibits network-affiliated television stations in the top 50 television
markets from broadcasting more than three hours of network programs, or programs
previously aired on a network during the four prime time viewing hours (i.e.,
7:00 p.m. - 11:00 p.m. Eastern and Pacific times, and 6:00 p.m. - 10:00 p.m.
Central and Mountain times). Due to the Prime Time Access Rule,
network-affiliated television stations often acquire a certain amount of
programming (typically including game shows) for exhibition during the prime
time access period from independent television producers and syndicators. While
the Company's sale of syndicated programming during prime time is primarily to
independent television stations rather than to network-affiliated stations, it
is possible that the repeal of the Prime Time Access Rule may constrict the
market for the Company's television programming product and that the Company
might be subject to increased competition.

FOREIGN CURRENCY EXCHANGE RATE RISK

The operations of the Company's foreign entities are measured in
substantial part in local currencies. For reporting purposes, assets and
liabilities are translated into United States dollars using exchange rates in
effect

11
<PAGE> 14

at the end of each reporting period. Revenues and expenses are translated into
U.S. dollars at the average exchange rates prevailing during the period. The
Company has not purchased financial instruments designed to hedge or minimize
such foreign currency exposure. To the extent the Company does not enter into
such agreements, the Company can expect to record foreign exchange losses and
gains in the future.

BROAD DISCRETION AS TO USE OF PROCEEDS

The Company intends to use a substantial portion of the net proceeds of the
offering for general corporate purposes, which may include the acquisition of
program rights and the acquisition of businesses complementary to the current
operations of the Company. The Company has not entered into any acquisition
agreement (other than with respect to the Mark Goodson Acquisition) and has not
yet determined the extent to which it will expand its program rights. As a
result, a significant portion of the net proceeds will be available for
acquisitions and projects that are not yet identified, and the Board of
Directors will have broad discretion with respect to the application of such
proceeds. In addition, the Company may use a portion of the net proceeds of this
offering to exercise the proposed Interpublic Option, in the event the Company
determines to exercise such option, to acquire a 100% interest in the Mark
Goodson Acquisition. The Company may not be able to consummate acquisitions or
identify and arrange projects that meet the Company's requirements. See "Use of
Proceeds."

NO PRIOR MARKET FOR THE CLASS B COMMON STOCK; POSSIBLE VOLATILITY OF STOCK PRICE

There has been no prior market for the Class B Common Stock, and no
assurance can be given that a viable public market will develop or be sustained
after this offering. The public offering price has been determined with
reference to the market price of the Company's Common Stock. Although the Class
B Common Stock is generally the same as the Common Stock, it is non-voting and,
as a consequence, may trade at a discount to the Common Stock. In addition, the
market price of the Class B Common Stock could be subject to substantial
fluctuations in response to variances in quarterly financial results, the market
price of the Common Stock, general trends in the Company's industry, general
economic conditions and other factors. See "Market for Common Stock and
Dividends" and "Underwriting."

SHARES AVAILABLE FOR FUTURE SALE

The prevailing market price of the Class B Common Stock could be adversely
affected by the availability of shares for sale or actual sales of substantial
amounts of Class B Common Stock or Common Stock by existing stockholders. Upon
completion of this offering, there will be 6,520,000 shares of Class B Common
Stock outstanding (assuming no exercise of the Underwriters' over-allotment
option). There is currently one holder of Class B Common Stock, Interpublic,
which has 2,520,000 shares, all of which are "restricted securities" subject to
Rule 144 promulgated under the Securities Act of 1933, as amended (the
"Securities Act"); however, Interpublic has demand and piggyback registration
rights with respect to all of such shares. The Company has agreed to register
and sell, as part of this offering, 500,000 shares of Interpublic's Class B
Common Stock. Interpublic has agreed with the Representatives of the
Underwriters (the "Representatives") that it will not publicly offer for sale,
sell, distribute, grant any option for the sale of or otherwise encumber or
dispose of, directly or indirectly, or exercise registration rights with respect
to, any shares of Common Stock or Class B Common Stock (or any securities
convertible into, exercisable for or exchangeable for such shares) for a period
of one year from the date hereof without the prior written consent of the
Company and the Representatives. Sales of substantial numbers of shares of Class
B Common Stock on the public market (or the perception that such sales would
occur) could adversely affect the market price of the Class B Common Stock and
could impair the Company's future ability to raise capital through a public
offering of additional equity securities.

12
<PAGE> 15

1,032,206 shares are freely tradeable by non-affiliates without restriction
under the Securities Act, and holders of an additional 4,393,765 outstanding
shares of Common Stock may sell their shares at any time subject to the volume,
timing and manner of sale limitations under Rule 144 of the Securities Act. All
of the 5,217,391 shares of Common Stock currently issuable upon conversion of
the Notes are freely tradeable upon issuance without restriction under the
Securities Act pursuant to an effective registration statement or exemption from
registration. An additional 1,273,063 shares of Common Stock are issuable
pursuant to options and warrants, of which 404,863 shares are vested and all
such shares, upon vesting, may be freely tradeable upon issuance without
restriction under the Securities Act. The Company plans to file a Registration
Statement on Form S-8 under the Securities Act to register all of the shares
granted pursuant to the Company's employee stock option plans.

Officers and directors of the Company holding an aggregate amount of
3,763,765 shares of Common Stock and the holders of options and warrants
exercisable for an aggregate of 657,500 shares of Common Stock, of which 91,300
shares are currently vested, have agreed not to offer for sale, sell,
distribute, grant any option for the sale of or otherwise encumber or dispose
of, directly or indirectly, or exercise registration rights with respect to
shares of Common Stock or Class B Common Stock (or any securities convertible
into, exercisable for or exchangeable for such shares), other than in connection
with an exercise by the Underwriters of the over-allotment option, so long as
such persons are employees of the Company, for a period of 180 days after the
date of this Prospectus without the prior written consent of the
Representatives. See "Description of Capital Stock -- Shares Available for
Future Sale."

The Company has agreed not to offer for sale, sell, distribute or otherwise
dispose of, directly or indirectly, shares of Common Stock or Class B Common
Stock (or any securities convertible into, exercisable for or exchangeable for
such shares) for a period of 180 days after the date of this Prospectus without
the prior written consent of the Representatives; provided however, that the
Company may issue shares of Common Stock or Class B Common Stock, as the case
may be, (i) in connection with this offering or the Underwriters' over-allotment
option, (ii) pursuant to any employee benefit plan, (iii) upon conversion of the
Notes or exercise of outstanding options or warrants, (iv) upon conversion of
shares of Common Stock into Class B Common Stock (following amendment of the
Company's charter) or (v) pursuant to a merger, acquisition or other business
combination or in a private placement to one or more strategic investors (as
determined in good faith by the Company's Board of Directors).

13
<PAGE> 16

THE COMPANY

The Company is a leading independent supplier of television programming,
including the production and domestic distribution of Baywatch, currently one of
the highest rated one-hour series in first-run syndication and seen in more than
100 countries around the world. In addition, the Company is one of the world's
largest distributors of television game shows outside of the United States. In
October 1995, in order to further strengthen its position in the game show
business, the Company agreed to form a 50/50 joint venture with The Interpublic
Group of Companies, Inc. ("Interpublic") to acquire substantially all of the
assets of Mark Goodson Productions, L.P. and a related entity (the "Mark Goodson
Acquisition"), including ownership of rights to approximately 45 Goodson game
show formats, including The Price Is Right, and a tape library of approximately
17,000 hours of programming and 30,000 broadcast episodes. The Company also
distributes an extensive library of television programming and has operated as
an independent record producer.

The Company is the successor of All American Television, Inc., a Delaware
corporation primarily engaged in the distribution of television programming. All
American Television, Inc. had distributed certain television programming
produced by Scotti Brothers Entertainment Industries, Inc., a Delaware
corporation ("SBEI"), among its other business activities. On February 25, 1991,
a wholly-owned subsidiary of All American Television, Inc. was merged into SBEI,
and SBEI became a wholly-owned subsidiary of the Company. On such date, the
Company changed its name to "All American Communications, Inc." and the
pre-merger operations of All American Television, Inc. were contributed to
another wholly-owned subsidiary of the Company (named All American Television,
Inc. and referred to herein as "AATV"). In February 1993 the Company acquired
LBS Communications, Inc. (the "LBS Acquisition"), which became a wholly-owned
subsidiary of the Company. In August 1994 the Company completed the Fremantle
Acquisition. In October 1995 a joint venture of which the Company is a member
entered into an agreement to consummate the Mark Goodson Acquisition. See
"Business -- Acquisitions."

The Company's principal executive offices are presently located at 2114
Pico Boulevard, Santa Monica, California 90405 and its telephone number is (310)
450-3193.

USE OF PROCEEDS

The net proceeds from the sale of the shares of Class B Common Stock
offered hereby at an assumed public offering price of $ per share are
estimated to be $ , after deduction of the underwriting discount and
estimated offering expenses payable by the Company. The Company will not receive
any proceeds from the sale of shares of Class B Common Stock by Interpublic or
by the other Selling Stockholders pursuant to the Underwriters' over-allotment
option.

The Company intends to use a substantial portion of the net proceeds for
general corporate purposes, which may include the acquisition of program rights
and the acquisition of businesses complementary to the current operations of the
Company. On an interim basis, the Company intends to use a portion of the net
proceeds to repay outstanding revolving debt under its Working Capital and
Production Lines (as defined in "Management's Discussion and Analysis of
Financial Condition and Results of Operations -- Liquidity and Capital
Resources") under which an aggregate of $72.3 million was outstanding or
utilized on October 16, 1995 and $37.5 million was outstanding on June 30, 1995.
The lines of credit accrue interest at annual rates based upon specified margins
over LIBOR (currently accruing at 8.63%) or the bank's Alternate Base Rate
(currently accruing at 10.5%) and are scheduled to mature on April 13, 1999. In
the event that the Tranche E term facility is consummated prior to the
completion of this offering, the amounts outstanding or utilized under the
Working Capital Line referred to above will have been reduced by $25.0 million.
See "Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Liquidity and Capital Resources."

The Company has not entered into any acquisition agreement (other than with
respect to the Mark Goodson Acquisition) and has not determined the extent to
which it will expand its business by acquisitions, as contrasted with internal
growth. As a result, the Company has no specific plans at this time for a
significant portion of the net proceeds of this offering. A significant portion
of the net proceeds may be available for acquisitions and projects that are not
yet identified, and the Board of Directors will have broad discretion with

14
<PAGE> 17

respect to the application of such proceeds. Without limiting the generality of
the foregoing, the Company may use a portion of the net proceeds to fund the
exercise of the Interpublic Option. No determination has been made by the
Company whether or not to exercise the proposed Interpublic Option. See
"Business -- Acquisitions." The exercise by the Company of the Interpublic
Option or consummation of any other acquisition may be subject to obtaining the
consent of the banks under the Company's existing credit facilities. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Liquidity and Capital Resources." The Company may not be able to
consummate acquisitions or identify and arrange projects that meet the Company's
requirements.

Pending such use, the balance of the net proceeds from the offering not
used to pay down outstanding revolving debt will be placed in short-term,
interest-bearing, investment-grade debt securities, certificates of deposit or
guaranteed obligations of the United States of America.

15
<PAGE> 18

MARKET FOR COMMON STOCK AND DIVIDENDS

MARKET INFORMATION

The Common Stock is traded in the over-the-counter market under the symbol
AACI. The following table sets forth, for the periods indicated, the range of
low and high bid quotations for the Common Stock as reported by the National
Association of Securities Dealers, Inc. Automated Quotation System ("Nasdaq")
SmallCap Market. The prices reflect inter-dealer quotations without retail
mark-ups, mark-downs or commissions and may not represent actual transactions.
Prior to this offering, there was no public market for the Class B Common Stock.
The Company has applied to list the Class B Common Stock on the NNM, under the
symbol "AACIB". There is no assurance that the prices set forth below will
prevail for the Class B Common Stock.

<TABLE>
<CAPTION>
LOW HIGH
----- -----
<S> <C> <C>
YEAR ENDED DECEMBER 31, 1993
First Quarter.............................................................. 6.50 7.75
Second Quarter............................................................. 6.75 8.25
Third Quarter.............................................................. 7.00 10.25
Fourth Quarter............................................................. 7.25 10.50
YEAR ENDED DECEMBER 31, 1994
First Quarter.............................................................. 7.25 9.75
Second Quarter............................................................. 7.00 9.25
Third Quarter.............................................................. 7.00 9.75
Fourth Quarter............................................................. 5.25 7.25
YEAR ENDED DECEMBER 31, 1995
First Quarter.............................................................. 6.25 10.00
Second Quarter............................................................. 8.25 11.50
Third Quarter.............................................................. 9.75 13.69
Fourth Quarter (through October 16, 1995).................................. 11.88 13.00
</TABLE>

- ---------------
On October 16, 1995, the closing bid and ask prices of the Common Stock as
reported on Nasdaq were $11.88 and $12.50 per share, respectively. As of October
4, 1995, there were 72 holders of record of the Common Stock and one holder of
the Class B Common Stock.

DIVIDENDS

The Company has never declared or paid a cash dividend on its Common Stock
or Class B Common Stock. The Company currently intends to retain all earnings to
finance the continued growth of the Company's business and does not anticipate
paying any cash dividends in the foreseeable future on its Common Stock or Class
B Common Stock. In addition, the Company's bank agreements prohibit the
declaration and payment of dividends on the Common Stock and Class B Common
Stock. See "Management's Discussion and Analysis and Results of
Operations -- Liquidity and Capital Resources."

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<PAGE> 19

CAPITALIZATION

The following table sets forth the consolidated capitalization of the
Company as of June 30, 1995 and as adjusted to give effect to the Mark Goodson
Acquisition and to further give effect to the sale of shares of Class B Common
Stock being offered hereby (assuming the Underwriters' over-allotment option is
not exercised) and the application of the estimated net proceeds therefrom. See
"Use of Proceeds." This information should be read in conjunction with the
audited consolidated financial statements of the Company as of December 31, 1994
and 1993 and for the three years ended December 31, 1994 and the unaudited
condensed consolidated financial statements for the six month periods ended June
30, 1995 and 1994, and the related notes thereto, included elsewhere herein.

<TABLE>
<CAPTION>
JUNE 30, 1995
-------------------------------------------------
AS ADJUSTED
FOR THE AS FURTHER
MARK GOODSON ADJUSTED
ACTUAL ACQUISITION(1) FOR THE OFFERING(1)
-------- ------------ -------------------
(IN THOUSANDS EXCEPT SHARE AMOUNTS)
<S> <C> <C> <C>
Notes payable:
Television production facilities................ $ 20,375 $ 20,375 $ --
Working capital facilities...................... 17,100 17,100 --
Term loans...................................... 30,000 55,000 55,000
Convertible Subordinated Notes Due 2003(2)...... 60,000 60,000 60,000
-------- -------- --------
Total notes payable..................... 127,475 152,475 115,000
-------- -------- --------
Stockholders' equity:
Common stock, $.0001 par value, authorized
20,000,000 shares; 5,455,971 shares issued
and outstanding.............................. 1 1 1
Class B common stock, $.0001 par value,
authorized 20,000,000 shares; 2,520,000
issued and outstanding; 6,520,000 shares
issued and outstanding as adjusted........... -- -- 1
Additional paid-in capital...................... 28,751 28,751 73,320
Retained earnings (accumulated deficit)......... (1,880) (1,880) (1,880)
Other........................................... 113 113 113
-------- -------- --------
Total stockholders' equity................... 26,985 26,985 71,555
-------- -------- --------
Total capitalization.................... $154,460 $179,460 $ 186,555
======== ======== ========
</TABLE>

(1) Assumes that the $25.0 million Tranche E Term Loan financing the cash
portion of the purchase price payable by the Company has been completed.
See "Management's Discussion and Analysis of Financial Condition and
Results of Operations -- Liquidity and Capital Resources." If such
financing does not occur, term loans on an adjusted basis would decrease
by $25.0 million and working capital facilities and cash used would
increase by an equivalent amount.

(2) Holders of an aggregate of $1.3 million principal amount of the Notes have
advised the Company of their intention to convert such Notes into Common
Stock (approximately 109,565 shares) on or prior to October 16, 1995.

17
<PAGE> 20

SELECTED CONSOLIDATED FINANCIAL DATA(1)

The following selected consolidated financial data are derived from the
Consolidated Financial Statements of All American Communications, Inc. The data
should be read in conjunction with the Consolidated Financial Statements,
related notes, and other financial information included or incorporated by
reference herein.

<TABLE>
<CAPTION>
SIX MONTHS ENDED TEN MONTHS
JUNE 30, YEAR ENDED DECEMBER 31, ENDED
------------------ -------------------------------------------- DECEMBER 31,
1995 1994 1994 1993 1992 1991 1990(2)
-------- ------- -------- -------- ------- ------- ------------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C> <C>
OPERATING DATA:
Revenues
Television............................. $ 67,819 $20,201 $ 98,771 $ 57,407 $45,302 $25,173 $ 1,332
Recorded music......................... 7,208 7,406 16,130 13,215 12,616 7,758 3,720
-------- ------- -------- -------- ------- ------- -------
75,027 27,607 114,901 70,622 57,918 32,931 5,052
-------- ------- -------- -------- ------- ------- -------
Expenses
Television............................. 54,308 15,612 75,196 42,560 32,078 18,337 1,039
Recorded music......................... 5,663 4,736 10,750 9,780 9,250 4,885 762
Selling, general & administrative...... 12,094 8,815 21,523 16,074 13,471 9,543 2,219
Goodwill amortization.................. 1,070 46 971 133 138 67 --
-------- ------- -------- -------- ------- ------- -------
73,135 29,209 108,440 68,547 54,937 32,832 4,020
-------- ------- -------- -------- ------- ------- -------
Operating income (loss).................. $ 1,892 $(1,602) $ 6,461 $ 2,075 $ 2,981 $ 99 $ 1,032
======== ======= ======== ======== ======= ======= =======
Income (loss) from continuing
operations............................. $ (1,571) $(3,757) $ 455 $ 380 $ 1,863 $ 145 $ 244
======== ======= ======== ======== ======= ======= =======
Net income (loss) per share applicable to
common stockholders from continuing
operations:
Primary(3)........................... $ (0.20) $ (0.78) $ 0.07 $ 0.87(4) $ (0.18)(5) $ (0.49)(5) $ 0.07
======== ======= ======== ======== ======= ======= =======
Fully diluted(3)..................... $ (0.20) $ (0.78) $ 0.07 $ 0.78(4) $ (0.18)(5) $ (0.49)(5) $ 0.07
======== ======= ======== ======== ======= ======= =======
BALANCE SHEET DATA:
Cash and cash equivalents................ $ 5,873 $ 5,354 $ 1,662 $ 3,264 $ 72 $ 506 $ 340
Trade receivables, net................... 65,553 30,174 62,338 43,226 27,178 16,769 2,825
Television program costs, net............ 88,109 50,430 68,437 52,381 33,993 19,293 12,255
Goodwill, net............................ 50,476 1,838 51,545 2,395 1,883 1,954 --
Total assets............................. 228,514 99,124 208,007 112,521 74,130 46,856 18,963
Due to producers......................... 29,295 14,350 27,278 22,086 17,237 10,056 --
Notes payable............................ 127,475 60,000 115,343 60,424 11,234 10,419 14,716
Total liabilities........................ 201,529 95,241 179,924 104,768 51,084 29,301 15,852
Redeemable stock:
Preferred.............................. -- -- -- -- 11,124 10,496 --
Common................................. -- -- -- -- 9,241 7,941 --
Retained earnings (accumulated
deficit)............................... (1,880) (4,521) (309) (764) (1,144)(6) (524)(6) 2,811
</TABLE>

- ---------------
(1) The Selected Consolidated Financial Data for periods subsequent to February
1993 and August 1994 include the combined operations of LBS Communications,
Inc. and the Company and Fremantle International, Inc. and the Company,
respectively. The LBS and the Fremantle Acquisitions were each accounted for
as a purchase by the Company. The financial data for periods subsequent to
February 1991 include the combined operations of Scotti Brothers
Entertainment Industries, Inc., a Delaware corporation ("SBEI") and All
American Television, Inc. SBEI merged into All American Television, Inc. in
February 1991, which was accounted for as a purchase by SBEI of All American
Television, Inc. The Selected Consolidated Financial Data reflects the
financial results of SBEI for periods prior to February 1991.

(2) Effective December 31, 1990, the Company changed its fiscal year end to
December 31.

(3) Adjusted to give retroactive effect to a one-for-four reverse stock split
effected on March 20, 1992.

(6) The Company charged approximately $1.5 million during each of the years
ended December 31, 1992 and December 31, 1991 against retained earnings for
accretion on redeemable stock and dividends on preferred stock. The gain of
$3.9 million recorded during the year ended December 31, 1993 (see Note (4)
above) was credited to additional paid in capital.

18
<PAGE> 21

CERTAIN PRO FORMA INFORMATION

The following unaudited pro forma condensed consolidated balance sheet as
of June 30, 1995 and the pro forma condensed consolidated statements of
operations for the six months ended June 30, 1995 and 1994 and the year ended
December 31, 1994 give effect to the October 1995 agreement of Mark Goodson
Productions, LLC (the "LLC") to purchase substantially all of the assets of Mark
Goodson Productions, L.P. and The Child's Play Company (the "Sellers") (the
"Mark Goodson Acquisition"), the August 1994 acquisition (the "Fremantle
Acquisition") of certain net assets and all of the outstanding non-voting common
stock of Fremantle International, Inc. ("Fremantle") and the offering.

The pro forma information is based on the historical financial statements
of the Company, the Sellers and Fremantle, giving effect to: (i) the Mark
Goodson Acquisition under the equity method of accounting, (ii) the Fremantle
Acquisition under the purchase method of accounting, (iii) the offering and (iv)
the assumptions and adjustments described in the accompanying notes to the pro
forma condensed consolidated financial statements. The unaudited pro forma
condensed consolidated statements of operations have been prepared as if the
above transactions had occurred at the beginning of the earliest period
presented (January 1, 1994). The unaudited pro forma condensed consolidated
balance sheet data has been prepared as if the Mark Goodson Acquisition and the
offering had occurred at the end of the period presented (June 30, 1995).

These pro forma statements may not be indicative of the results that would
have occurred if the above transactions had occurred on the dates indicated or
which may be obtained in the future. The pro forma financial statements should
be read in conjunction with the Consolidated Financial Statements and notes of
the Company for the year ended December 31, 1994 and the condensed consolidated
financial statements and notes of the Company for the six months ended June 30,
1995 contained or incorporated by reference herein.

THE MARK GOODSON ACQUISITION

As of October 6, 1995, the Company agreed to form the LLC as a 50/50 joint
venture with Interpublic. The LLC entered into an agreement to purchase
substantially all of the assets of the Sellers. The purchase price paid by the
Company for its undivided 50% interest of the Sellers' net assets acquired
consisted of a cash payment of $25.0 million plus an as yet undetermined
contingent purchase price. The contingent purchase price, payable to the
Sellers, is to be earned and paid based on the income (as defined) resulting
from a domestic television network contract and the exploitation of certain
other domestic television rights. The contingent purchase price, in total, is
limited to $48.5 million if paid (whether earned or not) during the first five
years following October 6, 1995. Otherwise the amount of contingent purchase
price is unlimited to the extent it is earned within the first ten years
following October 6, 1995. At the end of ten years no additional contingent
purchase price accrues. The Company shares equally with Interpublic in the
contingent purchase price.

Based upon a preliminary review and evaluation, substantially all of the
Company's $25.0 million portion of the initial purchase price has been allocated
to goodwill. The contingent purchase price, to the extent earned, will be
treated as an increase in goodwill and will be amortized coterminously with the
original 25 year period. To the extent additional contingent purchase price
payments are made, amortization will increase in future periods. Management of
the Company is in the process of reviewing the allocation of the purchase price
and, when completed, may modify its preliminary allocation. The Mark Goodson
Acquisition will be accounted for by the Company under the equity method of
accounting.

THE FREMANTLE ACQUISITION

In August 1994 the Company completed the Fremantle Acquisition. The
purchase price paid by the Company consisted of the following: (i) a cash
payment of $31.5 million and (ii) the issuance of 630,000 shares of Common Stock
and 2,520,000 shares of Class B Common Stock.

The Company has accounted for the Fremantle Acquisition as a purchase and
has allocated the purchase price based on the estimated fair value of assets and
liabilities acquired. The total consideration of $52.5 million (including
expenses related to the acquisition of $1.0 million) exceeded the estimated fair
value of net assets acquired by $50.3 million (goodwill); such goodwill is being
amortized over 25 years. The amounts shown as historical Fremantle have been
adjusted to reflect contractual terms with respect to the Fremantle Acquisition.

19
<PAGE> 22

PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET (UNAUDITED)

<TABLE>
<CAPTION>
JUNE 30, 1995
----------------------------------------------
AS ADJUSTED
FOR THE
MARK GOODSON
ACQUISITION
HISTORICAL PRO FORMA AND THE
COMPANY ADJUSTMENTS OFFERING
----------- ------------ -------------
(IN THOUSANDS)
<S> <C> <C> <C>
Cash and cash equivalents........................................ $ 10,126 $ 7,095(1) $ 17,221
Trade receivables, net........................................... 65,553 65,553
Inventory........................................................ 1,173 1,173
Advances to recording artists.................................... 1,357 1,357
Television program costs, net.................................... 88,109 88,109
Property and equipment, net...................................... 3,725 3,725
Investment in unconsolidated affiliate........................... -- 25,000(2) 26,000
1,000(3)
Goodwill, net.................................................... 50,476 50,476
Debt issue costs................................................. 5,031 400(4) 5,431
Deferred income taxes............................................ 1,373 1,373
Other............................................................ 1,591 (400)(3) 1,191
-------- ------ -------
Total assets................................................ $ 228,514 $ 33,095 $ 261,609
======== ====== =======
Liabilities:
Accounts payable and accrued expenses............................ $ 20,464 $ 600(3) $ 21,464
400(4)
Royalties payable................................................ 2,555 2,555
Deferred revenues................................................ 2,878 2,878
Due to producers................................................. 29,295 29,295
Participations payable........................................... 18,862 18,862
Due to banks..................................................... 67,475 (37,475)(1) 55,000
25,000(5)
Notes payable.................................................... 60,000 60,000
-------- ------ -------
Total liabilities........................................... 201,529 (11,475) 190,054
Stockholders' equity:
Preferred stock.................................................. -- --
Common stock..................................................... 1 1
Class B common stock............................................. -- 1(6) 1
Additional paid in capital....................................... 28,751 44,569(6) 73,320
Accumulated deficit.............................................. (1,880) (1,880)
Other............................................................ 113 113
-------- ------ -------
Total stockholders' equity.................................. 26,985 44,570 71,555
-------- ------ -------
Total liabilities and stockholders' equity.................. $ 228,514 $ 33,095 $ 261,609
======== ====== =======
</TABLE>

20
<PAGE> 23

PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS (UNAUDITED)

<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE 30, 1995
---------------------------------------------
AS ADUSTED
FOR THE
MARK GOODSON
HISTORICAL ACQUISITION
----------- PRO FORMA AND THE
COMPANY ADJUSTMENTS OFFERING
----------- ------------ ------------
(IN THOUSANDS -- EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C>
Revenues........................................................................ $75,027 $ $ 75,027
Cost of sales................................................................... 59,971 (1,461)(7) 58,510
Selling, general and administrative............................................. 12,094 12,094
Goodwill amortization........................................................... 1,070 826(8) 1,896
------- ------- --------
Operating income.............................................................. 1,892 635 2,527
------- ------- --------
Equity earnings in unconsolidated affiliate..................................... -- 1,657(9) 2,681
2,485(10)
(1,461)(7)
Other income, net............................................................... 127 127
Interest income/(expense), net.................................................. (4,728) 1,400(11) (4,590)
(1,195)(12)
(67)(13)
------- ------- --------
Income (loss) before taxes.................................................... (2,709) 3,454 745
Provision (benefit) for income taxes............................................ (1,138) 1,451(14) 313
------- ------- --------
Net income (loss)............................................................. $(1,571) $2,003 $ 432
======= ======= ========
Net income (loss) per share................................................... $ (0.20) $ 0.04
======= ========
Weighted average number of common shares and common share equivalents 105(15)
outstanding................................................................. 7,976 4,000(6) 12,081
======= ========
</TABLE>

<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE 30, 1994
-----------------------------------------------------------------------------------
AS FURTHER
ADJUSTED
FOR THE
AS ADJUSTED MARK GOODSON
HISTORICAL FOR THE ACQUISITION
------------------- PRO FORMA FREMANTLE PRO FORMA AND THE
COMPANY FREMANTLE ADJUSTMENTS ACQUISITION ADJUSTMENTS OFFERING
------- --------- ----------- ----------- ------------ -------------
(IN THOUSANDS -- EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C>
Revenues.................................... $27,607 $ 26,882 $ $54,489 $ $54,489
Cost of sales............................... 20,348 21,546 255(17) 42,149 (1,716)(7) 40,433
Selling, general and administrative......... 8,815 2,491 11,306 11,306
Goodwill amortization....................... 46 383 967(18) 1,013 670(8) 1,683
(383)(19)
------- ------- ------- ------- ------ -------
Operating income.......................... (1,602) 2,462 (839) 21 1,046 1,067
------- ------- ------- ------- ------ -------
Equity earnings in unconsolidated
affiliate................................. -- -- 1,488(9) 2,592
2,820(10)
(1,716)(7)
Other income/(expense), net................. -- 428 428 428
Interest income/(expense), net.............. (2,124) 85 (1,500)(12) (3,722) (1,195)(12) (4,984)
(183)(13) (67)(13)
------- ------- ------- ------- ------ -------
Income (loss) before taxes................ (3,726) 2,975 (2,522) (3,273) 2,376 (897)
Provision (benefit) for income taxes........ 31 1,729 (1,370)(14) 390 (767)(14) (377)
------- ------- ------- ------- ------ -------
Net income (loss)......................... $(3,757) $ 1,246 $(1,152) $(3,663) $3,143 $ (520)
======= ======= ======= ======= ====== =======
Net income (loss) per share............... $ (0.78) $ (0.46) $ (0.04)
======= ======= =======
Weighted average number of common shares
and
common share equivalents outstanding.... 4,826 3,150(21) 7,976 4,000(6) 11,976
======= ======= ======= ====== =======
</TABLE>

21
<PAGE> 24

PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS (UNAUDITED)
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
1994
------------
SEVEN MONTH
YEAR ENDED PERIOD ENDED AS ADJUSTED
DECEMBER 31, JULY 31, 1994 FOR THE
1994 HISTORICAL PRO FORMA FREMANTLE
AS REPORTED(16) FREMANTLE ADJUSTMENTS ACQUISITION
--------------- ------------- ------------ ------------
(IN THOUSANDS -- EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C>
Revenues................................................. $ 114,901 $30,564 $ $145,465
Cost of sales............................................ 85,946 25,820 298(17) 112,064
Selling, general and administrative...................... 21,523 2,992 24,515
Goodwill amortization.................................... 971 447 1,183(18) 2,154
(447)(19)
-------- ------- ------- --------
Operating income....................................... 6,461 1,305 (1,034) 6,732
-------- ------- ------- --------
Equity earnings in unconsolidated affiliate.............. -- -- --
Other income, net........................................ 49 64 113
Interest income/(expense), net........................... (5,725) 99 (1,750)(12) (7,590)
(214)(13)
-------- ------- ------- --------
Income (loss) before taxes............................. 785 1,468 (2,998) (745)
Provision (benefit) for income taxes..................... 330 992 (965)(14) 357
-------- ------- ------- --------
Net income (loss)...................................... $ 455 $ 476 $ (2,033) $ (1,102)
======== ======= ======= ========
Net income (loss) per share............................ $ 0.07 $ (0.14)
======== ========
Weighted average number of common shares and common (66)(20)
share equivalents outstanding........................ 6,201 1,841(21) 7,976
======== ========

AS FURTHER
ADJUSTED
FOR THE
MARK GOODSON
ACQUISITION
PRO FORMA AND THE
ADJUSTMENTS OFFERING
----------- ------------

<S> <C> <C> <C>
Revenues................................................. $ $145,465
Cost of sales............................................ (3,445)(7) 108,619
Selling, general and administrative...................... 24,515
Goodwill amortization.................................... 1,340(8) 3,494

------ -------
Operating income....................................... 2,105 8,837
------ -------
Equity earnings in unconsolidated affiliate.............. 3,588(9) 5,860
5,717(10)
(3,445)(7)
Other income, net........................................ 113
Interest income/(expense), net........................... 1,000(11) (9,114)
(2,391)(12)
(133)(13)
------ -------
Income (loss) before taxes............................. 6,441 5,696
Provision (benefit) for income taxes..................... 2,035(14) 2,392
------ -------
Net income (loss)...................................... $ 4,406 $ 3,304
====== =======
Net income (loss) per share............................ $ 0.27
=======
Weighted average number of common shares and common 66(15)
share equivalents outstanding........................ 4,000(6) 12,042
=======
</TABLE>

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

NOTES TO PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

The following footnotes relate to the pro forma balance sheet as of June
30, 1995 and the pro forma statements of operations for the six month periods
ended June 30, 1995 and 1994 and the year ended December 31, 1994.

(1) Reflects expected use of net proceeds in connection with the offering based
upon an assumed aggregate offering amount of $49.0 million before expenses.

(2) Reflects the Company's investment in the LLC.

(3) Reflects closing costs incurred by the Company in connection with the Mark
Goodson Acquisition ($.4 million of such costs were included in the
Company's other assets as prepaid items in the June 30, 1995 historical
balance sheet).

(4) Reflects debt issue costs incurred in connection with the Mark Goodson
Acquisition.

(5) Reflects the bank financing incurred in connection with the Mark Goodson
Acquisition.

(6) Reflects the issuance of Class B Common Stock in connection with the
offering.

(7) Reflects the intercompany elimination of the Company's 50% share of
Fremantle license fees paid to Mark Goodson Productions, L.P.

(8) Reflects amortization of initial goodwill in connection with the Mark
Goodson Acquisition of $26.0 million, plus amortization of estimated
contingent purchase price of $7.5 million in 1994 over 25 years and
amortization of additional estimated contingent purchase price of $3.8
million for the 1995 six month period over 24 years. To the extent
additional contingent purchase price payments are made, amortization will
increase in future periods.

22
<PAGE> 25

NOTES TO PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

(9) Reflects the Company's 50% interest in the historical net earnings of Mark
Goodson Productions, L.P.

(10) Reflects the elimination of the Company's 50% share of Mark Goodson
Productions, L.P. historical selling, general and administrative costs
which will not be incurred subsequent to the date of the Mark Goodson
Acquisition. The Mark Goodson Productions, L.P. day to day operations will
be absorbed into the Company's existing operations.

(11) Reflects expected reduction in interest expense from the use of the net
proceeds from the offering to pay down short term debt (no short term debt
was outstanding during the six months ended June 30, 1994).

(12) Reflects interest expense on debt incurred in connection with the
acquisitions.

(13) Reflects amortization of debt issuance costs.

(14) Reflects income tax effects of the pro forma adjustments.

(15) Reflects the inclusion of dilutive common stock equivalents for earnings
per share purposes.

(16) The historical results for the year ended December 31, 1994 include the
five months of operations of Fremantle from August 1994, the date of the
Fremantle Acquisition.

(17) Reflects additional amortization of television program costs, as adjusted,
acquired in connection with the Fremantle Acquisition.

(18) Reflects amortization of goodwill in connection with the Fremantle
Acquisition of $50.3 million over 25 years.

(19) Reflects the elimination of goodwill amortization recorded by Fremantle
prior to the Fremantle Acquisition.

(20) Reflects the elimination of anti-dilutive common stock equivalents for
earnings per share purposes.

(21) Reflects the weighted average number of shares issued in connection with
the Fremantle Acquisition.

23
<PAGE> 26

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

OVERVIEW

The Company is a diversified entertainment company which produces and
distributes, markets and promotes television programs and recorded music both
domestically and internationally.

The television industry may be broadly divided into three major segments:
production, involving the development, financing and making of television shows;
distribution, involving the promotion and exploitation of completed television
shows; and broadcast, involving the airing or broadcast of programming over
network affiliated stations, independent stations and cable or satellite
television. The United States broadcast television market is served principally
by network affiliated stations, independent stations and cable and satellite
television operators. During prime time hours (primarily 8:00 P.M. to 11:00 P.M.
in the Eastern and Pacific time zones and 7:00 P.M. to 10:00 P.M. in the Central
and Mountain time zones), network affiliates primarily broadcast programming
produced for the networks. In non-prime time, network affiliates telecast
network programming, off-network programming (reruns), first-run programming
(programming produced for distribution on a syndicated basis) and local
programming produced by the local stations themselves. Independent television
stations, during both prime and non-prime time, telecast self produced
programming, off-network programming or first-run programming from independent
producers or "syndicators." In general terms, a syndicator is a company that
sells programming to independent television stations and network affiliates.
Programming acquired by stations on a syndicated basis is acquired either for a
cash license fee or in exchange for a certain amount of commercial advertising
time within the program which is retained by the syndicator for sale thereby to
advertisers ("barter"), or for a combination of cash and barter. The Company
domestically distributes programming for television produced by the Company or
unrelated third parties in the first-run and rerun syndication markets. In
general, the Company receives its revenues from program license fees paid by
broadcasters and/or by selling advertising time for programs distributed on a
barter basis.

Barter syndication is the process whereby a syndicator obtains clearances
from television stations to broadcast a program in certain agreed upon time
periods, retains advertising time in the program in lieu of receiving a cash
licensing fee, and sells such retained advertising time for its own account to
national advertisers at rates based on projected ratings and viewer
demographics. From time to time, certain stations may obtain cash consideration
from the Company in addition to programming in exchange for advertising time
and/or a commitment for a particular time period. By placing the program with
television stations throughout the United States, the syndicator creates an "ad
hoc" network of stations that have agreed to carry the program. The creation of
this ad hoc network, typically representing a penetration of at least 70% of
total United States television households (calculated by means of a generally
recognized system as measured by Nielsen Media Ratings), enables the syndicator
to sell the commercial inventory to sponsors desiring national coverage. The
rates charged by a syndicator for advertising time are typically lower than the
rates charged by the networks for similar demographics since the networks'
coverage of the market is generally greater. See "-- Television
Operations -- Domestic Television Distribution"

Rates for the sale of advertising time are established on the basis of
certain levels of audience rating and, in some cases, an assumed demographic
make-up of the viewing audience assumed by the Company. Because the Company's
arrangements with advertisers do not permit the Company to receive advertising
revenue on the amount by which the actual ratings or demographic make-up (as
determined by Nielsen Media Ratings or similar ratings services) exceed the
assumed ratings or demographic make-up, it is in the interest of the Company to
establish as high an assumed rating and as favorable a demographic make-up as
possible. If the television program does not achieve the assumed rating or
demographic make-up, the Company may be obligated to offer the advertiser
additional advertising time ("make goods") on the same program or on other
programs. "Make goods" are the predominant means whereby the Company satisfies
such obligations to advertisers. Alternatively, the Company may be obligated to
refund a portion of the advertising revenue derived from such sales. There can
be no assurance in advance that the actual rating or demographic make-up of a
particular program will support the rates initially charged for advertising time
on such program. The Company generally reports net revenues from barter
syndication after deducting a reserve for potential make

24
<PAGE> 27

goods. Historically, such reserve has been sufficient to cover the actual
provision for make goods, although there is no assurance that such reserve will
continue to be adequate.

Sponsors that regularly purchase advertising time in the Company's programs
include Procter & Gamble, Bristol Myers-Squibb, MCI, Beecham, Kellogg Company,
Nestle and RJR Nabisco. Sales are typically made through advertising agencies
representing the sponsors. The barter syndication licenses granted by the
Company provide that the Company retains negotiated amounts of commercial time
per program for sale to national advertisers, with the remaining commercial time
retained by the station for local sale. A significant percentage of the
Company's revenues from television operations are derived from barter sales
(approximately 23% for the six-month period ended June 30, 1995 and
approximately 42% in 1994, 58% in 1993 and 62% in 1992). Barter sales may
fluctuate significantly based on ratings of a particular program and general
economic trends, such as advertising rates.

In most cases, the Company's distribution revenues are based on a
percentage of the net revenues derived from the sale of advertiser sponsorships
and/or on cash license fees. The Company normally advances all distribution
costs for items such as advertising, promotion, and tape shipping and
duplication and recovers such expenses out of program revenues. The Company's
fee for distribution is generally between 15% and 35% of net revenues and its
fee for advertiser sales representation is generally between 10% and 15% of net
revenues. However, each fee arrangement is separately negotiated and may be
subject to variation. Amounts remaining in excess of the Company's distribution
fees and recoupable expenses (including a portion of the amounts derived from
the sale of advertising time) are either remitted in full to the producer from
whom the Company obtained the distribution rights, or, if the Company has a
profit participation in the program, are shared between the Company and the
producer in accordance with a pre-determined allocation. In some instances, the
Company will make an advance payment to the producer to cover production costs
or will guarantee the producer certain minimum license fees. For the 1994/1995
season the Company made advance payments and/or certain guarantees with respect
to SuperHuman Samurai Syber Squad, Sirens and The New Family Feud.

Television production costs are capitalized as incurred. The income
forecast method is used to amortize these costs based upon the revenues
recognized in proportion to management's estimate of ultimate revenues to be
received. Unamortized costs are reviewed periodically and compared with net
realizable values on a project-by-project basis and losses are provided to the
extent necessary. Advertising revenues are recognized upon the commencement of
the license period of the program and when the advertising time has been sold
pursuant to non-cancelable agreements, provided the program is available for its
first broadcast. The portion of recognized revenue which is to be shared with
the producers and owners of the licensed program material (participations
payable and due to producers) is accrued as the related revenue is recognized.
Minimum guaranteed amounts from domestic television sales generally are
recognized when the license period begins and the program becomes available
pursuant to the terms of the license agreement. Foreign minimum guaranteed
amounts or outright fees are recorded as revenues and contracts receivable on
the date of the license agreement unless the program is not yet available for
exhibition. Revenues under foreign production agreements are recognized as
completed episodes are delivered. Deferred revenues consist principally of
advance payments received on television contracts for which the products are not
yet available for broadcast or exploitation.

Domestic revenues from recorded music are recorded as units are shipped to
customers. The Company provides for estimated future returns of recorded music
product at the time the products are initially sold. These reserves are based
upon historical experience. Actual returns are charged against the reserve.
Foreign distribution of recorded music is effected through a distributor in
exchange for guaranteed non-refundable advances against future royalties.
Non-refundable guarantees from foreign sales are generally recognized as the
Company satisfies its delivery requirements to its foreign distributor.

Royalties earned by artists from sales of records are charged to expense as
the related revenues are recognized. Advances to artists against future
royalties are recorded as assets if the Company estimates that the amount of
advances will be recoverable from future royalties to be earned by the artist,
based upon the past performance and current popularity of the artist to whom the
advance is made. Such advances are applied

25
<PAGE> 28

against subsequent royalties earned by the artist. The Company expenses
recoupable artist advances and recording costs for new record artists and for
artists where recovery cannot be estimated. Pursuant to this policy, capitalized
artist advances are reviewed on a quarterly basis and any portion of advances
that subsequently appear not to be fully recoverable from future royalties to be
earned by the artist are charged to expense during the period in which the loss
becomes evident. As a result, some quarters or years will have fluctuating
levels of these expenses depending on the number or type of artists signed or on
changes in recording activities from period to period. In the event of
subsequent sales for any such artists for which the related advances were
expensed, the Company will have a higher margin for these sales than for sales
by the Company's other artists.

A small number of programs and musical recordings historically have
accounted for a significant portion of the Company's revenues in any given
fiscal period. In addition, the Company's television distribution revenues have
historically been higher in the third and fourth quarters as a result of the
commencement of the television season in the fall of each year. As a result of
the strip syndication of Baywatch commencing in September 1995, the Company
expects that the third and fourth quarters of 1995 may reflect additional
revenues relative to comparable periods in prior years. Any change in programs
from period to period or the discontinuation of certain projects may materially
adversely affect a given period's results of operations. Therefore, year-to-year
results may not be comparable and results in any quarter may not be indicative
of results for an entire year.

RESULTS OF OPERATIONS

The following table sets forth the amount of, and percentage relationship
to, total revenues of certain items included in the Company's Consolidated
Statements of Operations from continuing operations for the six month periods
ended June 30, 1995 and 1994 and fiscal years ended December 31, 1994, 1993 and
1992.

<TABLE>
<CAPTION>
SIX MONTHS ENDED SIX MONTHS ENDED YEAR ENDED DECEMBER 31,
----------------------------------------------------------
JUNE 30, 1995 JUNE 30, 1994 1994 1993 1992
----------------- ----------------- ------------------ ----------------- -----------------
% OF % OF % OF % OF % OF
TOTAL TOTAL TOTAL TOTAL TOTAL
AMOUNT REVENUE AMOUNT REVENUE AMOUNT REVENUE AMOUNT REVENUE AMOUNT REVENUE
------- ------- ------- ------- -------- ------- ------- ------- ------- -------
(AMOUNTS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Revenues:
Television............ $67,819 90.4% $20,201 73.2% $ 98,771 86.0% $57,407 81.3% $45,302 78.2%
Recorded music........ 7,208 9.6% 7,406 26.8% 16,130 14.0% 13,215 18.7% 12,616 21.8%
------- ------- ------- ------- -------- ------- ------- ------- ------- -------
75,027 100.0% 27,607 100.0% 114,901 100.0% 70,622 100.0% 57,918 100.0%
------- ------- ------- ------- -------- ------- ------- ------- ------- -------
Expenses:
Television............ 54,308 72.5% 15,612 56.5% 75,196 65.5% 42,560 60.3% 32,078 55.4%
Recorded music........ 5,663 7.5% 4,736 17.2% 10,750 9.4% 9,780 13.8% 9,250 16.0%
Selling, general &
administrative...... 12,094 16.1% 8,815 31.9% 21,523 18.7% 16,074 22.8% 13,471 23.3%
Goodwill
amortization........ 1,070 1.4% 46 0.2% 971 0.8% 133 0.2% 138 0.2%
------- ------- ------- ------- -------- ------- ------- ------- ------- -------
73,135 97.5% 29,209 105.8% 108,440 94.4% 68,547 97.1% 54,937 94.9%
------- ------- ------- ------- -------- ------- ------- ------- ------- -------
Operating income
(loss)................ 1,892 2.5% (1,602) (5.8)% 6,461 5.6% 2,075 2.9% 2,981 5.1%
Other expense........... 4,601 6.1% 2,124 7.7% 5,676 4.9% 1,520 2.1% 191 0.3%
------- ------- ------- ------- -------- ------- ------- ------- ------- -------
Net income (loss) from
continuing operations
before income taxes... $(2,709) (3.6)% $(3,726) (13.5)% $ 785 0.7% $ 555 0.8% $ 2,790 4.8%
======= ======= ======= ======= ======== ======= ======= ======= ======= =======
</TABLE>

SIX MONTHS ENDED JUNE 30, 1995 COMPARED TO SIX MONTHS ENDED JUNE 30, 1994

Revenues. The Company's total revenues increased by $47.4 million to $75.0
million for the six months ended June 30, 1995 as compared to $27.6 million for
the six months ended June 30, 1994. Revenues from television operations
increased by $47.6 million to $67.8 million for the six months ended June 30,
1995 as compared to $20.2 million for the six months ended June 30, 1994. This
increase was due primarily to the Fremantle Acquisition, which contributed
revenues of $35.7 million, recognition of Baywatch strip revenues of

26
<PAGE> 29

$7.2 million, the initial recognition of $2.0 million from the USA Networks
cable sale (See "Business -- Television Operations -- Domestic Television
Distribution"), and higher distribution revenues from new programming of
approximately $8.0 million (primarily Sirens and The Richard Bey Show), offset
primarily by a reduction in revenues in connection with Baywatch attributable to
the delivery of no new episodes in the first six months of 1995 as compared with
the delivery of six new episodes in the first six months of 1994.

All American Fremantle International, Inc. ("AAFII") revenues from the
production and distribution of television programming in Germany and Greece
contributed $25.7 million (72% of total AAFII revenues) and $2.6 million (7% of
total AAFII revenues), respectively. AAFII revenues, on a pro forma basis,
increased by $8.8 million, or 33%, to $35.7 million for the six months ended
June 30, 1995 due to the commencement of production operations in Germany during
that time period.

Recorded music division revenues decreased by $.2 million or 3%, to $7.2
million during the six months ended June 30, 1995 from $7.4 million during the
six months ended June 30, 1994. This decrease was primarily attributable to
lower foreign licensing revenues recognized in the six months ended June 30,
1995 as compared with the six months ended June 30, 1994.

Operating Expenses. Total operating expenses increased by $43.9 million to
$73.1 million for the six months ended June 30, 1995 from $29.2 million for the
six months ended June 30, 1994 due primarily to the Fremantle Acquisition, which
contributed operating expenses of $33.0 million (including AAFII overhead and
$1.0 million of goodwill amortization) and additional amortization of television
program costs due to the higher television revenues. Selling, general and
administrative expenses, including corporate overhead, increased by $3.3 million
to $12.1 million for the six months ended June 30, 1995 from $8.8 million for
the six months ended June 30, 1994 due principally to the inclusion of AAFII
overhead.

The Company's television division expenses before overhead and goodwill
amortization increased by $38.7 million to $54.3 million (80% of total
television revenues) for the six months ended June 30, 1995 from $15.6 million
(77% of total television revenues) for the six months ended June 30, 1994. The
increase was primarily due to the inclusion of AAFII expenses of $29.3 million
(82% of AAFII revenues) and increased amortization of television program costs.
Television selling, general and administrative expenses during the six months
ended June 30, 1995 of $6.7 million increased by $2.4 million from $4.3 million
for the six months ended June 30, 1994 due primarily to the inclusion of AAFII
charges of $2.7 million.

The Company's recorded music division expenses, before selling, general and
administrative expenses, increased $.9 million to $5.6 million (79% of total
recording revenues) for the six months ended June 30, 1995 from $4.7 million
(64% of total recording revenues) for the six months ended June 30, 1994. This
increase was primarily due to an increase in artist cost amortization including
the amortization of costs incurred for new artists.

Operating Income. Total operating income for the Company increased $3.5
million to $1.9 million for the six months ended June 30, 1995 from an operating
loss of $1.6 million for the six months ended June 30, 1994 due principally to
an increase in television operating income, partially offset by a decrease in
recorded music operating income. Operating income from television operations
increased $6.6 million to $6.8 million for the six months ended June 30, 1995
from operating income of $.3 million for the six months ended June 30, 1994.
This increase in television operating income was primarily attributable to the
inclusion of AAFII operating income of $3.7 million (before amortization of
goodwill), and the revenue recognition discussed above. Goodwill amortization
for the six months ended June 30, 1995 increased by $1.0 million to $1.1 million
from $.1 million for the six months ended June 30, 1994 due to the inclusion of
AAFII amortization of $1.0 million.

The Company's recorded music division recognized an operating loss of $1.5
million (after inclusion of selling, general and administrative expenses of $3.1
million) for the six months ended June 30, 1995 as compared to an operating loss
of $.03 million (after inclusion of selling, general and administrative expenses
of $2.7 million) for the six months ended June 30, 1994. Such increase in the
operating loss was primarily attributable to decreased revenues and increased
artist costs as discussed above.

27
<PAGE> 30

Foreign Currency Exchange Gain. The Company recognized a foreign currency
exchange gain of $.1 million as of June 30, 1995 which was attributable to the
inclusion of AAFII and results from the settlement and valuation of certain
licensing agreements, denominated in foreign currencies, into U.S. dollars as of
June 30, 1995. No comparable amounts existed at June 30, 1994. The Company has
experienced in the past, and may experience in the future, gains and losses as a
result of fluctuations in exchange rates. The Company does not typically
purchase financial instruments designed to hedge or minimize such foreign
currency exposure, and has no present intention of purchasing such financial
instruments in any material amount. To the extent the Company does not enter
into foreign currency swap agreements, the Company can expect to record foreign
exchange losses and gains in the future.

Interest Expense. Interest expense, net of interest capitalized ($.4
million) and interest income ($.04 million), increased $2.6 million to $4.7
million for the six months ended June 30, 1995 from $2.1 million for the six
months ended June 30, 1994, due to increased borrowings in connection with the
Fremantle Acquisition and increased production activities. The Company expects
that the trend of increased interest costs will continue.

Income Taxes. The Company recorded a tax benefit for the six months ended
June 30, 1995 in the amount of $1.1 million. The tax benefit, recognized in
accordance with SFAS No. 109, relates primarily to the loss recorded for the six
months at an expected effective rate for 1995 of approximately 42%. Due in part
to contracted strip syndication sales of Baywatch, the income tax benefit
recognized on the loss for the six months ended June 30, 1995 is expected to be
realized during the remainder of 1995. During the six months ended June 30,
1994, the Company recorded income taxes of $.03 million representing foreign
taxes withheld at the source and state minimum franchise taxes.

Net Loss. The net loss of $1.6 million for the six months ended June 30,
1995 compares with a net loss of $3.8 million for the six months ended June 30,
1994. The variance is attributable to matters discussed above.

FISCAL YEAR ENDED DECEMBER 31, 1994 COMPARED TO FISCAL YEAR ENDED DECEMBER 31,
1993

Revenues. The Company's total revenues increased by $44.3 million, or 63%,
to $114.9 million for the year ended December 31, 1994 from $70.6 million for
the year ended December 31, 1993. Revenues from television operations increased
by $41.4 million, or 72%, to $98.8 million for the year ended December 31, 1994
from $57.4 million for the year ended December 31, 1993. The growth in revenues
from television operations was primarily due to the Fremantle Acquisition, which
contributed $31.8 million in revenues from the date of acquisition (August 3,
1994 through December 31, 1994), and an increase in the number of Baywatch
episodes delivered during 1994 from 22 in 1993 to 28 in 1994 (as well as an
increase in the ratings of the series). The Company delivered 22 new one-hour
episodes of Baywatch for the 1994/1995 television broadcast season in 1994.
Additionally, 6 episodes of the 1993/1994 television broadcast season were
delivered in the first quarter of 1994.

Recorded music revenues increased by $2.9 million, or 22%, to $16.1 million
for the year ended December 31, 1994 from $13.2 million during the year ended
December 31, 1993. This increase was due in part to an increase in units sold in
1994 from 1993, principally attributable to sales of the new artist 12 Gauge.
During the year ended December 31, 1994, the Company sold approximately 240,000
albums and 767,000 singles of the new artist 12 Gauge. The increase in revenues
for 1994 was partially offset by a decline in the number of units sold of "Weird
Al" Yankovic, who released compilation material in 1994 compared to an album
containing primarily new original compositions in 1993, and a decline in the
amount of publishing revenue recognized, due to the partial sale and
administration transaction relating to Baywatch publishing rights, from $1.0
million in 1993 to $.5 million in 1994.

Operating Expenses. Total operating expenses increased by $39.8 million,
or 58%, to $108.4 million for the year ended December 31, 1994 from $68.6
million for the year ended December 31, 1993. AAFII contributed $24.9 million to
such increase with respect to the period August 3, 1994 through December 31,
1994. Selling, general and administrative expenses increased $5.4 million, or
34% to $21.5 million for the year ended December 31, 1994 from $16.1 million for
the year ended December 31, 1993 due to the additional

28
<PAGE> 31

overhead related to the operations of AAFII which were acquired during the third
quarter of 1994 and certain increases in corporate overhead.

Television expenses increased by $32.6 million, or 77%, to $75.2 million
(76% of total television revenues) for the year ended December 31, 1994 from
$42.6 million (74% of total television revenues) for the year ended December 31,
1993. This increase was primarily due to the inclusion of AAFII operating
expenses of $21.7 million (68% of AAFII revenues) from the date of the Fremantle
Acquisition, an increase in revenues from certain delivered programming which
had lower gross profit percentages than the overall mix of the Company's other
distributed programming, lower than expected revenues from Sirens and lower than
expected ratings on one of the Company's daily series.

Recorded music expenses increased $1.0 million, or 10%, to $10.8 million
(67% of total recorded music revenues) for the year ended December 31, 1994 from
$9.8 million (74% of total recorded music revenues) for the year ended December
31, 1993. The increase in recorded music expenses corresponds to increases in
revenues for the year.

Corporate overhead increased by $1.6 million, or 41%, to $5.6 million for
the year ended December 31, 1994 from $4.0 million for the year ended December
31, 1993. Such increase was primarily attributable to charges related to certain
employment terminations and an increase in certain consulting and professional
fees. Approximately $2.5 million of overhead was capitalized to productions in
each of 1994 and 1993.

Goodwill amortization increased by $.9 million to $1.0 million for the year
ended December 31, 1994 from $.1 million for the year ended December 31, 1993
due to commencement, following the Fremantle Acquisition, of amortization of
goodwill of $50.3 million attributable to such Fremantle Acquisition. Such
goodwill is being amortized over 25 years and during 1994 amortization expense
of $.8 million has been recorded from the date of acquisition (August 3, 1994
through December 31, 1994). Amortization expense will be higher in 1995
(approximately $2.1 million in total) as goodwill related to the Fremantle
Acquisition will be amortized for a full year as compared with approximately
five months during 1994.

Operating Income. Total operating income for the Company increased by $4.4
million to $6.5 million for the year ended December 31, 1994 from $2.1 million
for the year ended December 31, 1993 due primarily to the inclusion of AAFII
results from the date of the Fremantle Acquisition.

Operating income from television increased $5.5 million, or 79%, to $12.5
million for the year ended December 31, 1994 from $7.0 million for the year
ended December 31, 1993. This increase is attributable to the inclusion of AAFII
results from the date of acquisition and increased earnings from the Company's
series Baywatch offset by increased television expenses as discussed above.

The recorded music division recognized an operating loss of $.5 million for
the year ended December 31, 1994 as compared to an operating loss of $.9 million
for the year ended December 31, 1993. The decrease in the operating loss was
primarily due to increased revenues as discussed above.

Interest Expense. Interest expense increased $4.2 million to $5.9 million
for the year ended December 31, 1994 from $1.7 million for the year ended
December 31, 1993, due to the effect of higher average borrowings including the
inclusion of the Notes (as defined below), issued in October 1993, for a full
year, higher average borrowings under its bank facilities, including increased
borrowings in connection with the Fremantle Acquisition. Interest expense is
expected to be higher in 1995 due to the planned increase in production spending
and a full year's interest on borrowings incurred in connection with the
Fremantle Acquisition and expected to be incurred in connection with the Mark
Goodson Acquisition.

Income Taxes. The provision for income taxes was $.3 million (42% of
pre-tax income) and $.2 million (32% of pre-tax income) for the years ended
December 31, 1994 and 1993, respectively. The increase in 1994 was partially
attributed to higher foreign tax withholding resulting from the inclusion of
AAFII.

Net Income Applicable To Common Stockholders. The net income applicable to
common stockholders decreased to $.5 million (or $.07 per share) for the year
ended December 31, 1994 from $4.2 million (or $.87 per share) for the year ended
December 31, 1993. The net income applicable to common stockholders for 1993
reflected a one-time increase in net income in the amount of $6.1 million which
represents the excess of

29
<PAGE> 32

the carrying value of the Redeemable Shares over the price paid for their
purchase offset by accretion and dividends on redeemable stock of $2.2 million.
No comparable items existed in 1994. See Notes 1 and 6 of Notes to Consolidated
Financial Statements.

FISCAL YEAR ENDED DECEMBER 31, 1993 COMPARED TO FISCAL YEAR ENDED DECEMBER 31,
1992

Revenues. The Company's total revenues increased by $12.7 million, 22%, to
$70.6 million for the year ended December 31, 1993 from $57.9 million for the
year ended December 31, 1992. Revenues from television operations increased by
$12.1 million, or 27%, to $57.4 million for the year ended December 31, 1993
from $45.3 million for the year ended December 31, 1992. The growth in revenues
from television operations was due to an increase in the number of programs
cleared for syndication and to a 20% increase in Nielsen Media Ratings achieved
by Baywatch, as well as increases in catalog revenues related to programming
acquisitions. The Company produced 22 new one-hour episodes of Baywatch for the
1993/1994 television broadcast season. As of December 31, 1993, 16 episodes for
the 1993/1994 season had been delivered and the remaining 6 episodes were
completed and delivered in the first quarter of 1994. The Company acquired LBS
during the first quarter of 1993 which contributed $5.3 million of revenues
during the year ended December 31, 1993.

Recording revenues increased by $.6 million, or 5%, to $13.2 million for
the year ended December 31, 1993 from $12.6 million during the year ended
December 31, 1992. This increase was due to $1.0 million in publishing revenue
accrued in the fourth quarter of 1993, partially offset by a reduction in units
sold in 1993 from 1992. Sales during the year ended December 31, 1992 included
the release of "Weird Al" Yankovic's album titled Off The Deep End in the second
quarter of 1992, which sold 680,000 units as compared to the release of "Weird
Al" Yankovic's album titled Alapalooza in the third quarter of 1993 which had
sales of 590,000 units during 1993. The Company has shipped an additional 30,000
units of Alapalooza in the first quarter of 1994. During the year ended December
31, 1993, the Company also recognized $1.0 million in foreign revenues related
to delivery of albums in the second and third quarters pursuant to a foreign
distribution agreement. The Company recognized $.8 million of such revenue in
the year ended December 31, 1992.

Operating Expenses. Total operating expenses increased by $13.6 million,
or 25%, to $68.5 million for the year ended December 31, 1993 from $54.9 million
for the year ended December 31, 1992. Selling, general and administrative
expenses increased $2.6 million, or 19% to $16.1 million for the year ended
December 31, 1993 from $13.5 million for the year ended December 31, 1992
primarily due to the additional overhead related to the operations of LBS which
were acquired during the first quarter of 1993. Approximately $2.5 million of
overhead was capitalized to productions during 1993 as compared to $.9 million
in 1992.

Television expenses increased by $10.5 million, or 33%, to $42.6 million
for the year ended December 31, 1993 from $32.1 million for the year ended
December 31, 1992. As a percentage of television revenues, television expenses
increased from 71% for the year ended December 31, 1992 to 74% for the year
ended December 31, 1993. This increase was primarily due to an increase in
revenues from certain programming which was delivered, which had lower gross
profit percentages than the overall mix of the Company's other distributed
programming and due to lower than expected revenues on Acapulco H.E.A.T.

The Company's recording expenses increased $.5 million, or 6%, to $9.8
million for the year ended December 31, 1993 from $9.3 million for the year
ended December 31, 1992. The increase in recording expenses is primarily
attributable to $.5 million of costs associated with the publishing revenue
accrued in the fourth quarter.

Operating Income. Total operating income for the Company decreased $.9
million, or 30%, to $2.1 million for the year ended December 31, 1993 from $3.0
million for the year ended December 31, 1992. Operating income from television
operations decreased $2.0 million, or 22%, to $7.0 million for the year ended
December 31, 1993 from $9.0 million for the year ended December 31, 1992. This
decrease is primarily attributable to increased selling, general and
administrative expense resulting from the inclusion of the operations of LBS
which was acquired in the first quarter of 1993 and the factors discussed above,
offset partially by the increased earnings from sublicense of the Company's
Baywatch and Heathcliff series.

30
<PAGE> 33

The Company's recorded music division recognized an operating loss of $.9
million for the year ended December 31, 1993 as compared to operating loss of
$2.7 million for the year ended December 31, 1992. The decrease in the operating
loss was primarily due to lower marketing and overhead costs incurred during the
year ended December 31, 1993, partially offset by an increase in artist costs
expense during 1993.

Interest Expense. Interest expense increased $1.2 million to $1.7 million
for the year ended December 31, 1993 from $.5 million for the year ended
December 31, 1992, due to the effect of higher average borrowings including the
issuance of the Notes (as defined below) during the period. Interest income
remained relatively constant for both the year ended December 31, 1993 and 1992.

Income Taxes. The provision for income taxes was $.2 million and $.9
million for the years ended December 31, 1993 and 1992, respectively. The
provision for income taxes for the year ended December 31, 1992 was net of a tax
benefit of $.6 million related to the loss from discontinued operations for that
period.

Net Income. Net income decreased to $.4 million for the year ended
December 31, 1993 from $.9 million for the year ended December 31, 1992 due to
lower than expected revenues on Acapulco H.E.A.T., increased selling, general
and administrative expenses in connection with the LBS acquisition and increased
interest costs in connection with the issuance by the Company of its $60.0
million Notes.

Net Income Applicable To Common Stockholders. The net income applicable to
common stockholders increased to $4.2 million for the year ended December 31,
1993 from a net loss of $1.8 million for the year ended December 31, 1992. The
net income applicable to common stockholders for 1993 reflected a one-time
increase in net income in the amount of $6.1 million which represents the excess
of the carrying value of the redeemable stock over the price paid for their
purchase, offset by accretion and dividends on redeemable stock of $2.2 million.
The net loss applicable to stockholders for 1992 in the amount of $1.8 million
reflected a reduction in net income in the amount of $2.8 million for preferred
dividends paid during 1992 of $.8 million and an accrual of the mandatory
redemption value. See Notes 1 and 6 of Notes to Consolidated Financial
Statements for the year ended December 31, 1994. In October 1993, the Company
issued its 6 1/2% Convertible Subordinated Notes Due 2003 (the "Notes") in the
aggregate principal amount of $60.0 million. The Company received net proceeds
from approximately $56.8 million which were used, in part, to repurchase and
retire all of the Company's redeemable Series A Preferred Stock and redeemable
Common Stock.

31
<PAGE> 34

QUARTERLY RESULTS OF OPERATIONS

Selected unaudited data reflecting the Company's results of operations for
each of the last ten fiscal quarters are shown in the following table. These
results, however, are not necessarily indicative of results for any future
period.

The following table sets forth selected data by quarter included in the
Company's Consolidated Statements of Operations (unaudited).

<TABLE>
<CAPTION>
QUARTERS ENDED
IN 1995 QUARTERS ENDED IN 1994 QUARTERS ENDED IN 1993
----------------- ---------------------------------------- ----------------------------------------
JUNE MARCH DECEMBER SEPTEMBER JUNE MARCH DECEMBER SEPTEMBER JUNE MARCH
30, 31, 31, 30, 30, 31, 31, 30, 30, 31,
------- ------- -------- --------- ------- ------- -------- --------- ------- -------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Revenues:
Television............ $33,875 $33,944 $44,000 $34,570 $ 4,103 $16,098 $20,681 $12,184 $10,118 $14,424
Recorded music........ 4,190 3,018 5,183 3,541 3,502 3,904 3,784 4,359 2,774 2,298
------- ------- -------- --------- ------- ------- -------- --------- ------- -------
38,065 36,962 49,183 38,111 7,605 20,002 24,465 16,543 12,892 16,722
------- ------- -------- --------- ------- ------- -------- --------- ------- -------
Expenses:
Television............ 26,259 28,049 33,902 25,682 3,630 11,982 17,409 8,579 6,334 10,238
Recorded music........ 3,799 1,864 3,648 2,366 2,275 2,461 3,403 2,856 2,098 1,423
Selling, general and
administrative...... 6,326 5,768 6,031 6,677 4,386 4,429 3,634 3,959 4,340 4,141
Goodwill
amortization........ 530 540 561 364 23 23 34 33 33 33
------- ------- -------- --------- ------- ------- -------- --------- ------- -------
36,914 36,221 44,142 35,089 10,314 18,875 24,480 15,427 12,805 15,835
------- ------- -------- --------- ------- ------- -------- --------- ------- -------
Operating income
(loss)................ 1,151 741 5,041 3,022 (2,709) 1,107 (15 ) 1,116 87 887
Other expenses.......... 2,317 2,284 1,724 1,828 1,065 1,059 827 227 307 159
------- ------- -------- --------- ------- ------- -------- --------- ------- -------
Net income (loss) from
continuing operations
before income taxes... $(1,166) $(1,543) $ 3,317 $ 1,194 $(3,774) $ 48 $ (842 ) $ 889 $ (220) $ 728
======= ======= ======== ======== ======= ======= ======== ======== ======= =======
</TABLE>

LIQUIDITY AND CAPITAL RESOURCES

Historically, the Company has financed its cash flow requirements through
cash flows generated from operations, the issuance of securities and third party
and bank financings. The proceeds from these financings and securities offerings
were used to complete the Fremantle Acquisition and the LBS Acquisition, to
finance the Company's operations, including the production of Baywatch, and for
general operating expenses.

In April 1995, the Company secured a new $110.0 million senior credit
facility (the "Senior Credit Facility Agreement"), with a syndicate of lenders
led by Chemical Bank. This facility currently consists of four tranches: (A) a
term loan of $30.0 million (the "Term Loan" or "Tranche A") which was utilized
to refinance existing bank debt incurred in connection with the Fremantle
Acquisition; (B) a revolving credit facility of up to $20.0 million in the
aggregate to be utilized for production and distribution of Baywatch, of which
$14.0 million was initially utilized to refinance existing bank debt related to
production of Baywatch for the 1994/1995 and 1995/1996 broadcast seasons (the
"Baywatch Production Line" or "Tranche B"); (C) a revolving credit facility of
up to $20.0 million in the aggregate for production and distribution of Baywatch
Nights (the "Baywatch Nights Production Line" or "Tranche C"); and (D) a
revolving credit facility of up to $40.0 million to be utilized to finance
certain working capital needs of the Company, of which $10.0 million was
initially primarily used to refinance existing bank debt related to the
Company's working capital needs and to pay certain fees in connection with the
Senior Credit Facility Agreement (the "Working Capital Line" or "Tranche D").
The Working Capital Line together with the Baywatch Production Line and the
Baywatch Nights Production Line are referred to collectively as the "Chemical
Bank Facilities." In connection with the Mark Goodson Acquisition, the Company
effected a credit utilization in the form of a letter of credit (the "Letter of
Credit") from Chemical Bank, the reimbursement obligation of which will
initially be funded by the Working Capital Line, to fund its $25.0 million cash
portion of the total purchase price. The Company has received the commitment of
Chemical Bank, to the extent the other members of the syndicate of lenders
similarly commit, to amend the Senior Credit Facility Agreement to provide its
pro rata portion of an additional $25.0 million term loan under this facility
("Tranche E"), which will increase the total facility to a maximum of $135.0
million, in order to fund the Company's reimbursement obligations under the
Letter of Credit. See "Business -- Acquisitions." The obligations of the Company
under the Chemical Bank Facilities and the Tranche A Term Loan are
cross-collateralized. The Tranche A Term Loan matures on December 31,

32
<PAGE> 35

1998. The Chemical Bank Facilities mature on April 13, 1999. It is expected that
the Tranche E Term Loan will also be a cross-collateralized obligation and will
mature on April 13, 1999. Under the terms of the Senior Credit Facility
Agreement, the amounts the Company may borrow under Tranche B, C, D are based
upon the value of the collateral in the borrowing base which consists
principally of accounts receivable of the Company. Borrowings under the Senior
Credit Facility Agreement bear interest, at the Company's option, either (i) at
LIBOR plus 2 3/4% (8.63% as of October 16, 1995) or (ii) at the Alternate Base
Rate (which is the greater of Chemical Bank's Prime Rate, its Base CD Rate plus
1%, or the Federal Funds Effective Rate plus 1/2%) plus 1 3/4% (10.5% as of
October 16, 1995), subject to reduction if certain financial ratios are
satisfied. As of October 16, 1995 the Company has borrowed or utilized an
aggregate of $27.5 million under the Tranche A Term Loan and $72.3 million under
the Chemical Bank Facilities with approximately $1.2 million available for
borrowing under the Chemical Bank Facilities. In the event the Chemical Bank
Facilities are amended to include the Tranche E Term Loan, approximately $47.3
million would have been drawn down under the Senior Credit Facility Agreement
and approximately $26.2 million would have been available for borrowing under
the Chemical Bank Facilities as of October 12, 1995. As an interim measure, the
Company expects to repay all of the outstanding amounts borrowed under the
revolving Chemical Bank Facilities from a portion of the net proceeds of this
offering. See "Use of Proceeds." Amounts repaid under the Chemical Bank
Facilities may be reborrowed subject to the Company having an adequate borrowing
base and meeting the conditions precedent to each borrowing.

The Senior Credit Facility Agreement imposes a number of financial and
other conditions upon the Company, including limitations on indebtedness,
restrictions on the disposition of assets, restrictions on making certain
payments (including dividends), restrictions on acquisitions and certain
financial tests. In particular, the exercise by the Company of the proposed
Interpublic Option or consummation of any other acquisition may be subject to
obtaining bank consent under the Senior Credit Facility Agreement. The Baywatch
Production Line and the Baywatch Nights Production Line provide that certain
conditions must be satisfied before funding of each season of the respective
series and such conditions have been met for the 1995/1996 broadcast season of
Baywatch and Baywatch Nights. The Tranche E Term Loan will impose a separate set
of financial and other conditions upon the Company, including a requirement that
"International Cash Flow," defined to mean all payments due to the LLC under the
terms of its primary license agreement (other than with respect to the domestic
exploitation of programs), be maintained at specified levels (or, in lieu
thereof, that the Tranche E Term Loan be prepaid to specified levels). See
"Business -- Acquisitions."

Except to the extent set forth below, under the terms of the Senior Credit
Facility Agreement substantially all of the Company's cash collections are
required to be paid into accounts maintained by Chemical Bank and applied to the
repayment of the Company's obligations under the Chemical Bank Facilities. All
of AAFII's cash collections are required to be paid into accounts maintained by
Chemical Bank and applied, subject to certain exceptions for working capital, to
interest and principal amounts outstanding under the Tranche A Term Loan until
such time as the Term Loan is repaid in full. The Tranche A Term Loan is
repayable in thirteen quarterly principal installments as follows: September
1995, $2.5 million; December 1995, $2.5 million; March 1996, $.5 million; June
1996, $.5 million; September 1996, $3.0 million; December 1996, $3.0 million;
March 1997, $1.0 million; June 1997, $1.0 million; September 1997, $3.0 million;
December 1997, $3.0 million; March 1998, $1.0 million; June 1998, $1.0 million;
September 1998, $4.0 million and a final installment due on the last borrower's
day of December 1998 (each such payment being subject to reduction from certain
prepayments). The Company made the $2.5 million principal installment payment on
the Tranche A Term Loan in September 1995. The amount the Company is able to
reborrow under the Chemical Bank Facilities is subject to the collateral pledged
to the lenders having sufficient borrowing base value to support such
borrowings. Substantially all of the Company's assets other than real property
are pledged under the Senior Credit Facility Agreement.

Under the proposed $25.0 million Tranche E Term Loan which would refinance
the cash portion of the purchase price payable by the Company in connection with
the Mark Goodson Acquisition, the proposed borrower will be All American
Goodson, Inc. ("AAG"), a newly-formed wholly-owned subsidiary of All American
and the prospective licensee of the world-wide distribution rights of the LLC,
subject to certain existing licenses. Under the Tranche E facility,
substantially all of the cash flow available to AAG from exploiting the Mark
Goodson assets will be available, after reserving for earn-out payments to the
Sellers and

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<PAGE> 36

certain administrative, tax and other distributions to the LLC, to prepay the
Tranche E Term Loan. The Company has agreed to a "make whole" provision so that
following the repayment in full of the Tranche E Term Loan (or earlier, in the
case of certain acceleration events), each of the other members will have
received its equal share of LLC cash flow, together with interest to the extent
that the Company received disproportionate use of cash. The "make-whole" will be
payable out of LLC cash flow or, if accelerated in accordance with its terms, at
the Company's option, in cash, shares of Common Stock or shares of Class B
Common Stock (subject, in the latter case, to certain liquidity tests being
met). Interpublic will also have the benefit of certain "put" rights and the
Company will have the benefit of the proposed Interpublic Option and certain
"call" rights with respect to Interpublic's membership interest in the LLC, the
exercise of which could substantially reduce the Company's liquidity. See
"Business -- Acquisitions." The Company's obligations to Interpublic will be
supported by guarantees by AAG and certain related licensees and secured by a
second priority security interest, subject only to the first priority security
interest of the lenders with respect to the Tranche E Term Loan. In this
connection, the lenders and Interpublic have entered into an Intercreditor
Agreement with the Company relating to their respective rights in connection
with the Tranche E Term Loan (or, if not consummated, the repayment of the
portion of the Working Capital Line utilized to fund the cash portion of the
Mark Goodson Acquisition).

In October 1993, the Company issued its 6 1/2% Convertible Subordinated
Notes Due 2003 (the "Notes") in the aggregate principal amount of $60.0 million.
The Company received net proceeds of approximately $56.8 million from the
issuance of the Notes. A portion of the proceeds were used to repurchase and
retire all of the issued and outstanding shares of redeemable Series A Preferred
Stock and redeemable Common Stock of the Company, to temporarily repay all
amounts outstanding under its commercial bank facilities, and for general
corporate purposes.

The Notes were issued pursuant to a Fiscal Agency Agreement, dated as of
October 6, 1993 (the "Fiscal Agency Agreement"), between the Company and
BankAmerica National Trust Company, as Fiscal Agent (the "Fiscal Agent"). The
Notes bear interest from October 6, 1993 at the rate of 6 1/2% per annum,
payable semiannually in arrears on each April 1 and October 1. Interest on the
Notes will be paid on the basis of a 360-day year of twelve 30-day months. The
Notes will mature on October 1, 2003.

The Notes are subordinated in right of payment to the prior payment in full
of all Senior Indebtedness (as defined in the Notes and the Fiscal Agency
Agreement) of the Company.

Except for certain limitations, the Notes are convertible into Common
Stock, initially at a conversion price of $11.50 per share (equivalent to 86.957
shares of Common Stock for each $1,000 principal amount of Notes) prior to
redemption or maturity. On or prior to October 16, 1995, the Company received
conversion notices with respect to the $1.3 million principal amount of the
Notes (as to which approximately 109,565 shares of Common Stock will be issued).
The conversion price is subject to adjustment in certain events as set forth in
the Fiscal Agency Agreement. The shares underlying certain of the Notes have
been registered with the Securities and Exchange Commission (the "Commission")
pursuant to an effective registration statement.

The Notes may be redeemed, at the option of the Company, in whole or in
part, at any time on or after October 1, 1996, at redemption prices commencing
at 104.643% of par and declining to 100% in 2001 together with accrued but
unpaid interest thereon through the date of redemption. The Notes may be
redeemed at any time, as a whole but not in part, in the event of certain
changes in United States tax laws. In case of any such redemption, the
redemption price will be 100% of the principal amount of the Notes, together in
each case with accrued interest to the date of redemption. The Notes are also
subject to mandatory prepayment at 101% of par in the event any person, other
than certain executive officers and directors of the Company, acquires more than
50% of the total voting power of the Common Stock (with certain exceptions).

During the six months ended June 30, 1995, the Company used $14.0 million
of cash in its operations as compared to $2.9 million of cash provided by its
operations for the six months ended June 30, 1994. Operating cash flows during
the six months ended June 30, 1995 were negatively impacted by increases in
trade receivables and inventory, as well as by a net increase in television
program costs. The cash flow used by operations was offset by an increase in
bank financing. The Company expects, from time to time, to continue

34
<PAGE> 37

to experience negative cash flows from operations. Any such uses of cash flows
are expected to be funded, pending receipt of licensing revenues, out of its
lines of credit or outside sources.

As described more fully below, the Company will have substantial capital
requirements during the next twelve months principally arising from the
acquisition, production and distribution of television programming and the
continued release of record albums requiring related marketing, promotion and
recording expenses. The commencement of the production of television programming
for the 1995/1996 broadcast season has required the Company to incur substantial
production costs in advance of generating revenues and receipts. Similarly, the
Company plans to incur significant costs associated with its television
distribution operations. The Company believes that its existing working capital
together with net proceeds from the offering, anticipated cash flows from
operations and other available funding sources will be sufficient to meet its
expected and resulting working capital needs for at least the next twelve
months.

The Company from time to time considers the acquisition of program rights
and the expansion of its business through the acquisition of businesses
complementary to the current operations of the Company. Consummation of any such
acquisition or other expansion of the business conducted by the Company, if
beyond the Company's capital resources, would be subject to the Company securing
additional financing to the extent required.

Television Production and Distribution

In order to obtain television programming for distribution, the Company may
be required to make advance cash payments to the producers of such programming.
However, the Company generally attempts to avoid advance payment requirements by
making minimum guarantees to producers or owners in connection with the
acquisition of television programming. In addition, the Company has obtained
letters of credit and other sources of bank financing to facilitate certain
programming acquisitions. The Company may acquire domestic or foreign
distribution rights to a particular television program in exchange for a minimum
guarantee against a specified percentage of future licensing and/or advertising
sales revenue less certain costs of distribution. These guarantees are typically
subject to delivery of the completed programs. While the Company generally
anticipates that it will recoup payments made under its guarantees from
licensing fees and the sale of advertising time, the Company often is required
to make payments under such guarantees in advance of generating revenues and
receipts. Any expansion of the Company's business could require the Company to
make substantially increased advance payments or provide guarantees to third
parties. Further, there can be no assurance that such amounts will be recouped
by the Company and, if not recouped, that such payments will not have a material
adverse affect on the Company. In addition, the Company's working capital
requirements in connection with its development and production activities
relating to potential network programming are expected to substantially increase
as a result of the Company's agreement, effective August 1995, with The David
Gerber Company. See "Business -- Television Operations -- Domestic Television
Production."

Recorded Music Operations

In the course of its distribution activities, the Company is responsible
for funding all distribution activities, including producing, marketing,
promoting and manufacturing recorded music for domestic distribution. In order
to perform this responsibility, the Company has significant personnel and other
overhead and marketing expenses, which requires substantial capital.

The Company currently has a roster of 15 active recording artists.
Additionally, the Company contracts from time to time with other artists or
entities for the production of recorded music for its special projects division.
Such growth has required the Company to fund artist advances and recording
costs. Artist advances, recording costs, recording studio and other overhead and
marketing expenses were funded with cash flows from operations and by the
Company's working capital credit facility.

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<PAGE> 38

Minimum contractual commitments to existing artists totaled approximately
$.5 million at October 10, 1995 and the Company will be required to spend
additional sums for recording and marketing expenses for several artists in its
current roster. The Company's receipt of periodic advances from its foreign
distributors is dependent upon the Company meeting certain minimum delivery
requirements under its foreign distribution agreement.

Inflation

The Company believes that the impact of inflation has not been significant
to its financial condition or results of operations.

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<PAGE> 39

BUSINESS

The Company is a diversified entertainment company with significant
operations in television production and distribution and recorded music
production and distribution. The Company is a leading independent supplier of
television programing, including the production and domestic distribution of
Baywatch, currently one of the highest rated one-hour series in first-run
syndication and seen in more than 100 countries around the world. In addition,
the Company is one of the world's largest distributors of television game shows
outside of the United States. In October 1995, in order to further strengthen
its position in the game show business, the Company agreed to form a joint
venture, which is acquiring substantially all of the assets of Mark Goodson
Productions, L.P. and The Child's Play Company, including rights to The Price Is
Right, Match Game, Password, Beat the Clock, Family Feud, Card Sharks, What's My
Line, To Tell the Truth and other Goodson game show formats. The Company also
distributes an extensive library of programming and has operated as an
independent record producer since 1981.

BUSINESS STRATEGY

All American's principal business strategies are to (i) develop, produce
and distribute quality television programming on a world-wide basis; (ii)
increase its library of programming for television distribution by both internal
production and acquisition of rights from third parties; (iii) acquire assets or
businesses complementary to its current operations; and (iv) develop its
recorded music operations through acquiring both new and established artists and
increasing sales from its catalog. The Company's acquisition strategy to date
has resulted in the LBS Acquisition in February 1993, the Fremantle Acquisition
in August 1994 and entering into the Mark Goodson Acquisition in October 1995.

TELEVISION OPERATIONS

The Television Industry

Domestic Television Production

In May 1991, the Company acquired the rights to produce the weekly action
drama series Baywatch starring David Hasselhoff. Baywatch is currently one of
the highest rated series in first-run syndication in the United States. In
December 1991, the Company also acquired the domestic rights to distribute the
original episodes on a strip basis (i.e., Monday through Friday). The original
23 episodes were produced by a third party and aired on the NBC network during
the 1989/1990 broadcast season. Broadcast of the Baywatch episodes produced by
the Company commenced in the United States in September 1991. Since it began
producing Baywatch for the 1991/1992 broadcast season the Company has produced
and delivered an aggregate of 88 episodes of Baywatch through the 1994/1995
broadcast season.

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<PAGE> 40

The Company has completed production of 22 episodes and delivered ten
episodes of Baywatch for the 1995/1996 broadcast season through October 16,
1995. Additionally, the Company has recently launched the domestic rerun
syndication of 111 previously aired episodes of Baywatch on a strip basis to
commence during the 1995/1996 broadcast season. See "-- Television
Distribution."

Based upon the success of its Baywatch series and the popularity of its
star, David Hasselhoff, the Company is producing a Baywatch spin-off, Baywatch
Nights for exhibition in first-run syndication. Baywatch Nights has been
licensed for the 1995/1996 broadcast season to television stations covering 96%
of the U.S. market, and the Company is the exclusive domestic and, through
AAFII, the exclusive international distributor of the series. Through October
16, 1995 the Company has produced and delivered ten of the planned 22 episodes
of Baywatch Nights.

The Company is also a producer of several hour-long dramatic series,
numerous specials and movies of the week and musically oriented television
programs. The Company's production approach has been and continues to be to
focus on the one-hour action drama format with each format based around a well
known television star to ensure both domestic and international appeal. The
Company's production philosophy has been and continues to be to keep production
costs low through cost effective production techniques and then to secure
advance foreign commitments and pre-sell advertising time to cover production
costs up front.

In July 1995, the Company entered into an arrangement with The Gerber
Company ("TGC") pursuant to which the operations of TGC will be incorporated
into the Company's future television development and production operations for a
two-year term commencing in August 1995, subject to a one-year renewal option in
favor of the Company. Mr. David Gerber, formerly a senior executive of both
Columbia Pictures Television and MGM Television, has assumed the position of
President, All American Television Production, Inc., a wholly-owned subsidiary
of the Company, and heads a team of up to eight additional production personnel.
Mr. Gerber is responsible for developing programming for both network television
and, to a lesser extent first-run syndication. While head of television
programming at a major studio, Mr. Gerber was responsible for television
projects such as thirtysomething and In The Heat Of The Night. TGC is currently
developing movies-for-television and episodic series for potential network
exhibition.

Domestic Television Distribution

In addition to producing Baywatch, the Company distributes the show
domestically to independent broadcast stations. During the 1994/1995 broadcast
season, the Company licensed the show to independent broadcast stations covering
more than 99% of the United States television market. The 1995/1996 broadcast
season will represent the fifth consecutive season for which the Company has
produced and domestically distributed the show. Through October 12, 1995,
Baywatch had been licensed for the 1995/1996 broadcast season to television
stations covering approximately 99% of the United States television market.

The Company has launched a domestic rerun ("strip") syndication package of
111 previously aired Baywatch episodes (23 episodes originally produced by a
third party and 88 episodes by the Company) for broadcast during the 1995/1996
and 1996/1997 broadcast seasons. Domestic rerun syndication typically involves
the exhibition of programming five days a week on local television stations
and/or cable services after first-run exhibition. Typically, to be successful in
rerun syndication, a television series must have at least 65 episodes (the
equivalent of three full television seasons). Through October 16, 1995, the
rerun syndication package has been licensed to television stations covering
approximately 93% of the United States television market on a cash and barter
basis and the Company continues to actively market the package. As of October
16, 1995, the Company has generated approximately $19.0 million of cash sales
(i.e., excluding barter) related to the domestic strip licensing of Baywatch
and, in addition, will generally retain three minutes of advertising time per
telecast. The cash sales will be collected ratably over the term of the strip
license period.

In addition to producing the new series Baywatch Nights, the Company is
distributing the show domestically and internationally. Through October 16,
1995, Baywatch Nights had been licensed for the 1995/1996 broadcast season to
television stations covering approximately 96% of the United States television

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<PAGE> 41

market. The Company has entered into a sublicensing agreement for the
distribution of the show throughout Continental Europe.

The Company has entered into an exclusive license agreement dated as of May
1, 1995 with USA Networks in regard to the licensing of up to 111 episodes of
Baywatch, 22 episodes of Sirens, and 22 episodes of Acapulco H.E.A.T. and, under
certain circumstances, at the option of the licensee, up to 22 episodes of
Baywatch Nights. The license agreement is exclusive in the United States, its
territories and possessions (including Puerto Rico) over all forms of
transmission by all means (including, without limitation, free over-the-air
broadcasts, basic and pay cable, or via video on demand), other than via
continuous first-run syndication and other than the rerun strip syndication of
the first 111 episodes of Baywatch during the period commencing June 26, 1995
through September 19, 1997. The initial term of the license agreement commenced
in May 1995 for Acapulco H.E.A.T. and will commence in October 1995 for Sirens,
September 1996 for Baywatch Nights (if the option has been exercised with
respect to such series) and September 1997 for Baywatch with a common
termination date of September, 2000 for all four shows. Revenue will be
recognized on commencement of the license period for each show. The initial
minimum license fee aggregates $25.3 million payable in 36 equal monthly
installments of approximately $.7 million commencing September, 1997 through
August, 2000. The license agreement also contains certain additional obligations
and rights of USA Networks regarding additional episodes of Baywatch and gives
USA Networks the option to extend the term of the license for up to four years
for additional specified consideration.

In January 1995, the Company entered into an arrangement with United
Television/Chris Craft Industries, Inc. ("Chris Craft") whereby the Company was
engaged commencing with the then remaining portion of the 1994/1995 broadcast
season through September 1997 as the exclusive domestic television distributor
for The Richard Bey Show, a daily afternoon one-hour talk show. Chris Craft has
retained the right, which right must be exercised on or prior to December 1,
1995, to buy-out the Company's distribution of the show during the 1996/1997
broadcast season at a price equal to the Company's distribution fee that season.
Chris Craft has agreed to deliver 39 weeks of original one-hour programs during
each 52 week broadcast season and to air The Richard Bey Show on Chris Craft's
six owned and operated stations (WWOR New York, KCOP Los Angeles, KBWK San
Francisco, KMSP Minneapolis, KUTP Phoenix, and KPTV Portland).

Fremantle International

In August 1994, the Company completed the Fremantle Acquisition. As a
result of the Fremantle Acquisition, the Company currently produces and
distributes approximately 90 game shows in 28 countries. The Company's
programming outside the United States has expanded to include the foreign
distribution rights to such shows as The Price Is Right, The Dating Game,
$25,000 Pyramid, Jeopardy and Let's Make a Deal. The Company now distributes,
and in some cases locally produces, game shows throughout Europe, Asia,
Australia and South America. The Company believes that it is one of the world's
largest suppliers of television game shows outside the United States.

During the 1960's, Fremantle (founded in 1952) pioneered the international
production of U.S.-created television formats with Romper Room which was
produced in local versions by Fremantle in 29 countries and 9 languages. During
this period, Fremantle also became involved with game show formats through an
affiliation with Mark Goodson Productions, LP, among others. Fremantle licensed
and, in some cases, locally produced such shows as The Price Is Right, Family
Feud, Password and Concentration in various European countries. During the
1970's and 1980's, Fremantle developed licensing arrangements with a number of
the largest game show producers in the U.S. In the late 1980's, a minority stake
in Fremantle was acquired by Interpublic whose subsidiary advertising agencies,
Ammirati, Puris & Lintas Worldwide, McCann-Erickson Worldwide and The Lowe
Group, are among substantial buyers of television time in Europe. Interpublic
increased its interest in Fremantle to an 80% interest in 1991 and, immediately
prior to the time of the Fremantle Acquisition, acquired the 20% balance in
Fremantle owned by the original founder of Fremantle.

The Company distributes and, in some cases, produces game shows pursuant to
licensing contracts ("producer contracts") with various producers who control
the rights to specific game show formats (e.g., The

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<PAGE> 42

Price Is Right, The Newlywed Game, Let's Make A Deal, etc.). The Company
licenses the right to create and/or to distribute game shows on a local basis in
various international territories using the successful U.S. format. Thus, for
example, the Company produces German language versions of The Price Is Right and
Let's Make A Deal which include German hosts and contestants and which are
televised in the German market.

The rights derived from the producer contracts are sub-licensed to
broadcast outlets in mostly Western European territories ("sub-license
contracts") with major television exhibitors. These sub-license contracts have
terms which generally range from one to three years with renewal options. While
the sub-license contracts are generally of a short term nature, the risk of
their non-renewal is, as historically determined, largely a function of ratings
performance. In a number of cases, the Company's programs are among the top
rated programs in their time slots in their markets. There is no assurance that
the Company can continue to achieve the ratings necessary to cause the programs
to be renewed or that the programs will be renewed. The producer contracts
generally include provisions or are subject to a course of dealing which allow
Fremantle or the Company to retain distribution rights indefinitely (except in
certain circumstances where there is a specific outside term) under expired
producer contracts on stations in those territories in which the show is already
being broadcast. In such a case, the Company would not have the right to sell
the show into new territories unless a new contract were negotiated, thereby
limiting certain growth opportunities. By virtue of the Mark Goodson
Acquisition, the Company will be in a position to expand Fremantle's business
with respect to Goodson game show formats in new territories. See "-- Mark
Goodson Productions."

Developing strong international distribution capabilities has complemented
the Company's existing production business. For example, the Company is
self-distributing Baywatch Nights in both the domestic and international
marketplace. Fremantle's management is broadly experienced in the various facets
of international television production and distribution, and it has strong links
with the advertising community.

Mark Goodson Productions

Mark Goodson Productions L.P. ("Goodson"), is a well-known producer of
television game show programs. Since 1946, Goodson has produced over 30,000
episodes of television programming, totaling approximately 17,000 broadcast
hours. Goodson was the creator of and, pursuant to the Mark Goodson Acquisition,
will transfer ownership rights to the following game show formats to a limited
liability company jointly owned by the Company and Interpublic (and managed by
the Company):

<TABLE>
<S> <C> <C> <C>
Beat The Clock He Said, She Said Password That's My Line
Blockbusters Hit the Jackpot Password Plus The Better Sex
Body Language It's News To Me Play Your Hunch The Match Game
By Popular Demand Judge For Yourself Rate Your Mate The Name's The Same
Call My Bluff! Make The Connection Say When! The Price Is Right
Card Sharks Match Game Showoffs To Tell the Truth
Child's Play Mindreaders Snap Judgment Trivia Trap
Choose Up Sides Missing Links Split Personality Two For The Money
Double Dare Name's the Same Spin to Win Winner Take All
Family Feud Now You See It Super Password What's My Line?
New Family Feud Number Please Tattletales What's Going On
Get The Message
</TABLE>

Goodson produces television programming for network broadcast and
television syndication in the United States, and licenses the rights to its game
show formats to international licensees for local television production outside
the United States. Currently the only Goodson show in initial network exhibition
is "The Price Is Right", in its 24th season, hosted by Bob Barker and exhibited
on the CBS Television Network as a day-time program. The Company expects that
negotiations will commence with CBS with respect to the 1996/1997 broadcast
season in early 1996 although there is no assurance that the series will be
continued. During the 1994/1995 broadcast season, Goodson also produced "New
Family Feud" hosted by Richard Dawson and exhibited in first-run syndication
through All American.

Goodson currently licenses the rights to its game show formats to
international licensees (including Fremantle) who produce local versions of the
shows for broadcast outside the United States. The Price Is

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<PAGE> 43

Right, for example, is licensed for production in eight foreign countries and is
known as Le Juste Prix in France, Der Preis Ist Heiss in Germany and El Precio
Justo in Spain.

The Goodson game show formats are currently broadcast in approximately 26
foreign markets. Many formats, including Blockbusters, Card Sharks, Family Feud,
Now You See It, The Price Is Right and To Tell the Truth, are licensed in more
than one foreign country.

In addition to rights to the use of its formats for new production, Goodson
also owns a library of tapes of previous game show episodes. This library, which
includes almost 17,000 broadcast hours of programming and approximately 30,000
episodes, is one of the largest game show libraries in the world. Goodson has
maintained high-quality tapes covering a substantial proportion of its
production. Substantially all of the existing tapes in the Goodson library have
been licensed for exclusive domestic distribution by the Sony Game Show Channel.
See "-- Acquisitions" for a description of the Mark Goodson Acquisition.

Library

Television programming currently distributed or represented by the Company
consists of a library of more than 135 motion pictures, including contemporary
titles such as Split Decision starring Gene Hackman, The Long Walk Home starring
Whoopi Goldberg and Sissy Spacek, and Defenseless starring Sam Shepard and
Barbara Hershey, various specials and 11 Bob Hope classic titles. The Company
distributes All American Feature Theater, a package of feature length motion
pictures acquired by the Company in separate agreements with Vision
International, Skouras Pictures and New Visions Entertainment, among others. The
Company also distributes other programming including a mini-series titled
Sherlock Holmes: Incident at Victoria Falls, and documentary series. In
addition, the Company acquired certain programming rights from Blair
Entertainment Corporation and John Blair Communications, Inc. (collectively
"Blair") in June 1992 including distribution rights to Divorce Court.

The Company distributes children's television programming consisting of
both television series and animated feature films including Heathcliff and
Inspector Gadget. In February 1993, the Company entered into a long term
sublicense agreement with The Family Channel for the animated series Heathcliff
for the domestic cable and syndication markets.

The Company has been building an extensive library of programming to
support its distribution activities. The Company currently distributes,
represents or owns participation interests in more than 135 motion pictures and
more than 50 television series, and a variety of children's programming and
live-event specials. The table below sets forth certain of these properties as
of the date hereof:

<TABLE>
<S> <C>
SERIES Baywatch, Baywatch Nights, Acapulco H.E.A.T., America's Top Ten,
BeachClash, Divorce Court, Sirens, Stuntmasters, Tales From The
Darkside
GAME SHOWS The Price Is Right, Password, Match Game, Beat the Clock, To Tell The
Truth, The New Family Feud, The Dating Game, Child's Play, $25,000
Pyramid, Blockbusters, Card Sharks, Now You See It
CHILDREN'S SERIES Bots Master, Heathcliff, Inspector Gadget, M.A.S.K.
MOTION PICTURES Agatha, Bad Influence, Care Bears Movie, Care Bears Movie II, Eye of
the Tiger, Lady Beware, Defenseless, Eddie and the Cruisers II, Freeze
Frame, The Gate, Ghostwriter, The Grey Fox, Hansel and Gretel, Heat,
He's My Girl, It Nearly Wasn't Christmas, The Long Walk Home, Split
Decision, Straight Time, Sword of Gideon, Wild Orchid, The Wraith
BOB HOPE CLASSIC
FILMS My Favorite Brunette, Road to Rio, The Great Lover, The Lemon Drop Kid,
Son of Paleface, Road to Bali, Seven Little Foys, Cancel My
Reservation, How to Commit Marriage, The Private Navy of Sgt.
O'Farrell, Paris Holiday
</TABLE>

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<PAGE> 44

<TABLE>
<S> <C>
SPECIALS The Boy King, Christmas at the Movies, The Elvis Files, Exploring
Psychic Powers, Madonna Exposed, Mysteries of the Pyramids, Remembering
Marilyn, Return to the Titanic, The Royal Family -- In Crisis, The JFK
Conspiracy, The Kennedy Assassinations
MINI-SERIES Around the World in 80 Days, Sherlock Holmes: Incident at Victoria
Falls, Sherlock Holmes and the Leading Lady
</TABLE>

The distribution terms and rights vary as to media and geographic area for
each program, but are generally for representation or distribution throughout
the United States except for the game shows, which are for distribution
internationally. Extensions of the term may be available in certain cases if the
Company meets pre-defined performance standards. The Company intends to seek
extensions of the distribution periods for these properties on satisfactory
economic terms although there is no assurance the Company will be able to do so.

Acquisition of Properties for Distribution

The Company generally acquires properties for television distribution by
entering into agreements with producers/owners or by producing or co-producing
its own programs. The Company's distribution agreements generally provide that
the revenues derived from the program are allocated between the producer and the
Company on a pre-negotiated basis. Acquisitions are based on projected station
demand and acceptance as well as expected advertiser sponsorship.

Under some arrangements, the Company will guarantee that the producer's
share of revenues will not be less than a specified dollar amount. In other
instances, the Company will provide the producer with a production advance, in
which case the Company usually recoups such advance before making any remittance
of the producer's share of revenues. Where possible, the Company has endeavored
to limit its risk by arranging for other distribution or major station groups to
provide production, financing and/or distribution services in exchange for a
portion of the Company's fees.

In addition to United States television broadcast rights, the Company also
acquires, where available on acceptable terms, world-wide broadcast television
and non-standard television distribution rights (such as cable and videocassette
rights) to the programs it distributes. These acquisitions are typically on a
long-term exclusive basis, often between three and twelve years, in some cases
with various renewal options, and may provide that the Company has the right to
undertake production of the program in the event the producer fails to deliver
the contracted programming.

Competition; Concentration

Competition in the production and distribution of television programming is
intense. The Company's programming competes with other first-run programming,
network reruns and programs produced by local television stations. The Company
competes with many other companies that have been acquiring, producing and
distributing programs for longer than the Company, and most of these companies
have greater financial resources than those of the Company. These competitors
include large television and film studios such as the Walt Disney Company,
Paramount Communications Inc., Columbia Pictures Television, 20th Century Fox
Film Corp., MCA Inc., and Warner Bros. Inc., as well as other television
distribution companies such as King World Productions, Inc. The Company also
competes with other companies for the sale of television advertising time,
including Tribune Broadcasting Co./Entertainment Co., Viacom International, Inc.
and King World Productions, Inc.

The Company's success is highly dependent upon such various unpredictable
factors as the viewing preferences of television audiences. Public taste is
unpredictable and a shift in demand could cause the Company's programming to
lose its appeal. Television programming also competes for audiences with many
other forms of entertainment and leisure time activities, some of which include
new areas of technology (e.g., video games and home video), the impact of which
on the Company's operations cannot be predicted.

42
<PAGE> 45

During the years ended December 31, 1994, 1993 and 1992, The Fremantle
Corporation, a corporation not affiliated with the Company, accounted for 13%,
17% and 20% of consolidated revenues, respectively. In 1994, licensing contracts
with three producers represented 75% of gross revenues of AAFII; the Goodson
license represented 44% of such gross revenues and expired in December 1994
(subject to certain provisions which maintain the continuing effectiveness of
such license as to existing programming in existing territories); the Hatos Hall
license represented 24% of such gross revenues and will expire in March 1996;
and the Columbia license represented 7% of such gross revenues and expired in
1992.

ANCILLARY BUSINESSES

The Company generates additional revenue by merchandising certain of its
television properties, principally Baywatch, and developing on-line and
interactive applications as well. The Company also retains music publishing
rights with respect to its television and recorded music products to the extent
possible.

ACQUISITIONS

The Company from time to time considers the acquisition of program rights
and the expansion of its business through the acquisition of assets or
businesses of other entities engaged in businesses complementary to the current
operations of the Company. As part of the implementation of its strategy to
acquire assets that increase production and distribution capabilities, the
Company significantly expanded its international television production and
distribution operations with the Fremantle Acquisition in August 1994 and its
potential world-wide expansion in the television game show business with the
Mark Goodson Acquisition entered into in October 1995.

The price for the stock and assets of Fremantle consisted of $31.5 million
in cash, 630,000 shares of Common Stock and 25,200 shares of newly created
Series B Convertible Preferred Stock (which have been converted into 2,520,000
shares of Class B Common Stock) (collectively, these securities represent an
approximate 23% interest in the Company on a fully diluted basis). Additionally,
the Company incurred transaction costs of $1.0 million. Upon consummation of the
Fremantle Acquisition, certain international programming rights (excluding
programming rights under the Goodson contract) were transferred to the Company
and 100% of the non-voting equity of Fremantle (representing 99% of total
outstanding equity) was transferred to the Company. The Company expects to
acquire the remaining equity of Fremantle prior to December 31, 1995 in
consideration of the payment of an additional $.2 million to Interpublic.

As of October 6, 1995, the Company entered into an Asset Purchase Agreement
pursuant to which a newly-formed limited liability company (the "LLC"), jointly
owned, directly or indirectly by the Company and Interpublic, agreed to acquire
substantially all of the assets (excluding assets relating to the lottery
business) and to assume certain specified liabilities (the "Mark Goodson
Acquisition") of Mark Goodson Productions, L.P. and The Child's Play Company
(collectively, the "Sellers"). The Asset Purchase Agreement provides that the
purchase price will consist of payment by the Company of $25.0 million in cash
and issuance by Interpublic of $25.0 million in its common stock to the Sellers,
together with a contingent earn-out described below. Under the earn-out, the LLC
will initially pay to an assignee of the Sellers a specified percentage of
"Domestic Net Profits" (i.e. generally gross receipts less production costs, if
applicable, a distribution fee to the Company under certain circumstances and
residual payments) realized from the exploitation in the U.S. and Canada
(currently, primarily consisting of "The Price Is Right") of the Goodson game
shows and other purchased television formats during the five-year period
following October 6, 1995 (which period is subject to extension for an
additional five years if total earn-out payments do not equal $48.5 million, in
which case the earn-out shall be payable in neither a minimum nor a maximum
amount). The specified percentage of Domestic Net Profits payable to the Sellers
with respect to "The Price Is Right" is 75% during the network exhibition of the
program during the five years after October 6, 1995. However, the earn-out does
not apply to any net profits realized from the international exploitation of any
of the purchased game shows or other purchased television formats.

Consummation of the Mark Goodson Acquisition is subject to expiration or
termination of the regulatory waiting period under the Hart-Scott-Rodino
Antitrust Improvements Act of 1976 and satisfaction of other

43
<PAGE> 46

customary closing conditions. The parties executed and delivered most of the
principal operative documents (including the delivery by the Company of a $25.0
million letter of credit covering the cash portion of the purchase price) into
escrow, pending final closing. The Company believes that final closing will
occur in approximately 30 days.

As of the final closing, the LLC will enter into a long-term license with a
wholly-owned subsidiary of the Company which will exploit, in consideration of
customary distribution fees and recoupment of certain out-of-pocket expenses,
all of the Goodson formats world-wide. Accordingly, while the Company's
ownership interest resulting from the Mark Goodson Acquisition will be limited
to a 50% interest, the Company will control the world-wide exploitation of the
underlying rights, subject only to the rights under existing licenses including
the existing Fremantle license. The Company's wholly-owned subsidiary has agreed
to sublicense the right to continuously exploit "The Price Is Right" on U.S.
network television during the earn-out period to a wholly-owned subsidiary of
Interpublic, which will hire an affiliate of Goodson as producer of the show on
a "for hire" basis under an agreed-upon production budget.

It is anticipated that Interpublic and the Company will enter into an
agreement pursuant to which the Company will have a six-month option to acquire
Interpublic's undivided 50% share in the LLC commencing in April 1996 for $25.9
million (increasing during the option exercise period at a rate of 7% per
annum). No determination has been made by the Company whether or not to exercise
the Interpublic Option, which determination may be based upon, among other
things, the availability of sufficient resources to exercise the option, the
renewal or non-renewal of The Price Is Right and management's business judgment
as to the best use of the Company's resources during the option exercise period
commencing six months after final closing of the Mark Goodson Acquisition.

In addition, under the operative documents relating to the LLC, Interpublic
will have certain rights to "put" its interest in the LLC to the Company and the
Company will have certain additional rights to "call" Interpublic's interests,
under the circumstances specified below. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations -- Liquidity and
Capital Resources."

In the event that the Company merges or consolidates with another entity
and the Company is not the surviving entity or if any person other than Anthony
J. Scotti (together with certain members of his immediate family) beneficially
owns more than fifty percent (50%) of the Company's Common Stock (a "Change in
Control"), Interpublic shall have the right to "put" (the "Change in Control
Put") or the Company will have the right to "call" (the "Change in Control
Call") Interpublic's interest in the LLC for an amount equal to Interpublic's
net capital contribution together with a rate of return equal to 12% per year
based on Interpublic's average outstanding capital contribution. In addition,
Interpublic will also have an additional "put" right (the "Ordinary Put") to the
Company following the time when it has been "made whole" by the LLC from
ordinary distributions (subject to acceleration of such rights in the event of a
"make whole default" (as defined) by the Company or a "change in ownership"
(i.e. beneficial ownership by Anthony J. Scotti, Benjamin J. Scotti and related
persons of less than 10% of the outstanding shares of Common Stock). The "put"
purchase price of the Ordinary Put will be based upon a specified multiple of
the LLC's "average operating income" (as defined), together with any unpaid
"make whole," and will be payable by the Company in cash as follows: 50%
immediately, with the balance (plus interest) in three equal annual
installments. The Company also has the right to an additional "call" at any time
after the second anniversary of the escrow closing for an amount equal to $25.0
million plus the then unpaid "make whole" due to Interpublic. Interpublic can
reject the foregoing "call" by the Company in which case the future right to
exercise an Ordinary Put shall expire.

RECORDED MUSIC OPERATIONS

The Recorded Music Industry

According to statistics released by the Recording Industry Association of
America, Inc., sales in the United States recorded music industry increased 20%
during 1994 to $12 billion, based in part on the shipment of 1.1 billion units
of records, tapes, compact discs ("CDs") and music videos. Industry wide unit
shipments of CDs grew 33.6% compared to new shipments in 1993. CDs also
generally have a higher wholesale price and

44
<PAGE> 47

per unit gross profit margin than vinyl records and tapes. However, recordable
CD, digital audio tape ("DAT") and digital compact cassette ("DCC") technology
has recently been introduced into the marketplace and enables consumers to make
high quality duplicates from original CDs and DATs. In the absence of adequate
copyright protection, recordable CD, DAT and DCC technology may affect industry
sales of CDs, DATs and DCCs. It is not possible to predict the extent to which
such sales will be affected.

Recorded Music Artists and Catalog

The Company's recorded music division has been in business for
approximately 14 years, nine years as a custom label and approximately the last
five years as a full service operation. During this period, the Company has
released approximately 140 albums of individual artists, groups and motion
picture soundtracks. The Company's current roster is comprised of 15 active
artists, including soul singer James Brown and music humorist "Weird Al"
Yankovic, whose latest album, entitled Permanent Record (Box Set), includes the
separately released single Headline News which is also the subject of a music
video produced by the Company. The Company has recently changed the product mix
of its new recorded music product to focus more on urban and alternative music,
due in part to the success of these music styles and in this connection has
launched a new label named Street Life which markets and promotes urban and rap
records. The following table sets forth certain of the albums in the Company's
catalog:

<TABLE>
<S> <C>
"WEIRD AL" YANKOVIC Permanent Record (Box Set), Greatest Hits Vol. II, Alapalooza, Dare to
be Stupid, Even Worse, The Food Album, Greatest Hits, In 3-D, Off the
Deep End, Polka Party
JAMES BROWN Gravity, Greatest Hits of the Fourth Decade, Greatest Hits-Live, I'm
Real, Living in America, Love Overdue, Universal James, Live at the
Apollo
SURVIVOR Caught in the Game, Eye of the Tiger, Greatest Hits, Moment of Truth,
Premonition, Vital Signs, When Seconds Count
E.L.O. PART II Electric Light Orchestra Part 2, Greatest Hits-Live
THE NYLONS Four on the Floor, Live to Love, Because, Harmony (The Christmas LP)
SWEET SABLE Old Time's Sake
SKEE-LO I Wish
12 GAUGE 12 Gauge, Let Me Ride Again
FREDDIE JACKSON Private Party
COUNT BASIE, Jazz Fest Masters
SARAH VAUGHN,
DIZZY GILLESPIE
EDDIE & THE CRUISERS Eddie: The Unreleased Tapes
JOHN CAFFERTY & Roadhouse, Tough All Over
THE BEAVER BROWN BAND
SOUNDTRACKS Baywatch, Never Talk to Strangers, Another 48 Hours, Cliffhanger,
Cobra, Eddie & The Cruisers, Eddie & The Cruisers II: Eddie Lives,
Rambo III, Revenge of the Nerds, Rocky IV, The Transformers, UHF
</TABLE>

Music Distribution

Music distribution includes the sale and physical delivery of product to
retailers and the collection of the related receivables. Generally, the recorded
music industry attempts to restrict the return to the distributor of products
that remain unsold through the use of penalties on the percentage of delivered
products that are returned.

Since September 1990, the Bertlesmann Music Group ("BMG") has provided
certain distribution functions (including physical delivery of the product,
collection of receivables and certain sales functions)

45
<PAGE> 48

pursuant to a five year (twice extended to December 31, 1995) domestic
distribution agreement with the Company for which BMG receives a distribution
fee. The Company is responsible for all other activities, including producing,
marketing, promoting and manufacturing recorded music product for domestic
distribution. This arrangement requires the Company to fund various costs and,
as a result, is riskier to the Company than its previous "custom label"
arrangement. However, this arrangement has the potential for resulting in
increased per unit gross profit to the Company. The Company, at its option, may
permit its agreement with BMG to continue past December 31, 1995 under the
existing terms of such agreement until such time as the Company has provided BMG
with ninety (90) days prior notice of its intent to terminate the term of the
agreement. The Company recently notified BMG of its intent to terminate the BMG
contract unless a new agreement can be reached on more favorable terms to the
Company. Although the Company believes that it will be able to renegotiate the
BMG contract or enter into a new contract with a different distributor on more
favorable terms, no assurance can be given that the Company will be able to
obtain such a contract. BMG has the right to withhold certain amounts in reserve
upon notification of termination of this agreement. The Company owns 64-track
digital and 24-track recording facilities which enable the Company to produce
recordings at a reduced cost in comparison with the cost of using outside
facilities. The agreement with BMG may also be terminated by BMG if Anthony J.
Scotti ceases to perform certain managerial functions in respect of artists and
promotion in the recorded music operations of the Company. During the years
ended December 31, 1994, 1993 and 1992, sales through BMG accounted for
approximately 11%, 14% and 20% of consolidated revenues, respectively.

The Company has extended, effective July 1, 1995, its existing foreign
record distribution agreement with PolyGram S.A. ("PolyGram") solely with
respect to current catalog product for five years, expiring June 30, 2000.
PolyGram provides the Company with distribution and collection of record sales
for which the Company earns a royalty based on records sold throughout the world
(net of reserves for returns), excluding the United States, Canada and Japan.
PolyGram is responsible for all costs and expenses in connection with
manufacturing, marketing, promotion and distribution in its territories.

The Company has entered into arrangements with other companies for
distribution of the Company's recorded music products in Canada (Attic) and
Japan (Pony/Canyon, Inc.). These arrangements provide for advances to the
Company against royalties to be earned by the Company on records sold. The
Company is in discussion with other companies concerning the distribution of new
product in the PolyGram territories.

Marketing and Promotion

Marketing involves advertising and otherwise gaining exposure for
recordings and artists through public performances and magazines, radio and
television, other media and point-of-sale material. Promotion consists of
efforts to obtain air play by radio stations of the recordings in coordination
with the marketing and distribution programs. Under its arrangement with BMG,
the Company is responsible for all such domestic activities and expenses.

Because the success of recording artists and releases is highly dependent
upon consumer tastes and critical response, as well as public awareness of
recording artists, the level of marketing and promotional activities and
expenses necessary in any particular instance cannot be predicted with
certainty.

The production of music videos to accompany certain major record releases
has become a promotional necessity and an additional financial burden to the
releasing company. These videos may significantly increase the losses on any
individual release should such recording not be successful, or increase revenues
on a successful recording.

Concentration and Competition

There are six major record distribution companies: WEA, Inc., Sony Music,
BMG, PolyGram, Capitol Records/EMI (CEMA) and MCA Records, Inc. (UNI). The
combined sales of these companies (with the inclusion of their independent
distribution) represent substantially all of the sales in the record industry.
Significant consolidation has occurred through the acquisition by these major
companies of smaller recorded

46
<PAGE> 49

music companies, such as the acquisitions by PolyGram, the Company's primary
foreign distributor, of A&M, Island Records and Motown Record Corp.

The success of any musical release depends upon unpredictable and changing
factors such as the individual tastes of critics and consumers. The capital
resources, artist rosters and retail penetration of the "major" recorded music
companies are significantly greater than those of the Company. The greater
capital resources of the "majors" would permit them to withstand longer periods
of low rates of successful releases.

The relatively large number of artists under contract with a "major" could
tend to increase the absolute number of profitable records produced by such a
company; however, there are also inherent risks of producing relatively large
numbers of unsuccessful products. While the Company has several successful
artists under contract, each of the "majors" have far larger numbers of such
artists under contract and may therefore be less affected than the Company by a
single success or failure.

Through the Company's arrangement for distribution with BMG and PolyGram,
the Company seeks to take advantage of the distribution facilities of two of the
"majors" and their inherently greater market penetration.

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<PAGE> 50

MANAGEMENT

Directors of the Company are elected annually by the stockholders to serve
for a term of one year or until their successors are duly elected and qualified.
Set forth below is certain information concerning each person who is presently
an executive officer or director of the Company.

<TABLE>
<CAPTION>
NAME POSITION AGE
- ----------------------------- ---------------------------------------------------------- ---
<S> <C> <C>
Anthony J. Scotti**.......... Chief Executive Officer and Chairman of the Board 55
Myron I. Roth**.............. President, Chief Operating Officer and Director 62
Thomas Bradshaw**............ Chief Financial Officer, Senior Executive Vice President 52
and Director
Sydney D. Vinnedge........... Senior Executive Vice President and Director 51
Benjamin J. Scotti........... Senior Executive Vice President, Executive Vice 58
President -- Records Group and Director
Lawrence E. Lamattina........ Chief Executive Officer and President -- All 50
American/Fremantle Television Group and Director
Gordon C. Luce*+............. Director 69
R. Timothy O'Donnell*+++..... Director 40
David A. Mount*+++........... Director 53
Eugene P. Beard.............. Director 60
</TABLE>

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

* Member of Stock Option Committee

** Member of Executive Committee

+ Member of Compensation Committee

++ Member of Audit Committee

Each of the persons listed above (other than Messrs. Lamattina, O'Donnell,
Mount and Beard) assumed the positions listed above on February 25, 1991, the
date SBEI merged (the "Merger") into All American Television, Inc., the legal
predecessor to the Company. Prior to such date, Anthony J. Scotti and Mr.
Vinnedge were already Directors of such predecessor.

ANTHONY J. SCOTTI was a co-founder of the Company and has been a director
of the Company since its inception in 1982. He became Chief Executive Officer
and Chairman of the Board on February 25, 1991. In 1974, he co-founded the
predecessor to SBEI and served as Chief Executive Officer and Co-Chairman of
SBEI from 1974 through February 25, 1991. Mr. Scotti is the non-executive
Chairman of the Board of LIVE Entertainment Inc. (entertainment software) and
also served as a consultant to Carolco Pictures Inc. Mr. Scotti's services,
under the terms of his employment agreement with the Company, are rendered on a
full time basis during normal working conditions; provided, however, that Mr.
Scotti is entitled to devote such reasonable amount of time, as Mr. Scotti shall
determine, on certain business activities in addition to Mr. Scotti's services
to the Company and such activities may be conducted by Mr. Scotti in various
areas of the entertainment industry.

MYRON ROTH joined SBEI in December 1990 as President and Chief Operating
Officer, and he assumed the same titles and became a director of the Company on
February 25, 1991. From November 1988 to November 1990, Mr. Roth was Senior Vice
President and General Manager for CBS Records West Coast, where he was
responsible for coordinating all of the activities of CBS's West Coast
operations in the records division. Prior to joining CBS Records, Mr. Roth was
President of MCA Records from May 1986 to November 1988, and Executive Vice
President of MCA Records from May 1983 to May 1986. Mr. Roth is a member of the
Board of Directors of the Record Industry Association of America.

THOMAS BRADSHAW was a director, Senior Executive Vice President and Chief
Financial Officer of SBEI from 1985 and, on February 25, 1991, he assumed the
same positions at the Company. Prior to 1985, Mr. Bradshaw was involved in
entertainment business management for ten years. In addition, Mr. Bradshaw

48
<PAGE> 51

was a director of LIVE Home Video Inc. (home video distribution) from 1987 to
1988 and was a director of LIVE Entertainment Inc. from December 1988 to
November 1993.

SYDNEY D. VINNEDGE was a co-founder of the Company and has been a director
of the Company since its inception in 1982. Since February 25, 1991, Mr.
Vinnedge has served as Senior Executive Vice President of the Company. From 1966
to 1970 he was Supervisor of Broadcasting at J. Walter Thompson. From 1970 to
1975 he was Vice President and Head of Television and Radio Programming at Grey
Advertising. In 1975 he founded his own production company, where he served as
its President until 1979 when he became Senior Executive Vice President of the
Company.

BENJAMIN J. SCOTTI co-founded the predecessor to SBEI in 1974 and served as
Co-Chairman of SBEI until February 25, 1991. Since February 25, 1991, Mr. Scotti
has been Senior Executive Vice President and Executive Vice President -- Records
Group and a director of the Company. Mr. Scotti is recognized for his success in
record promotion and has been responsible for the promotion of numerous
award-winning artists.

LAWRENCE E. LAMATTINA became Chief Executive Officer and President of All
American/Fremantle Television Group, an operating division of the Company on
August 3, 1994 and a director on October 12, 1994. Since May 1989 he has been
Chairman of the Board of Fremantle International, Inc., and Chairman and Chief
Executive Officer of EC TV, a division of Interpublic. Mr. Lamattina also
continues to act as a consultant to Interpublic with respect to areas that are
not competitive with the Company.

GORDON C. LUCE is a senior advisor to Eastman & Benirschke Financial Group
(financial planning and insurance brokerage), a position he has held from July
1990 to the present. Mr. Luce was Chairman of the Board and Chief Executive
Officer of Great American First Savings Bank (formerly San Diego Federal
Savings) from 1970 until his retirement in June 1990. The bank was put into a
conservatorship in August 1991. Mr. Luce has had a career in public service and
was a member of the President's Foreign Intelligence Advisory Board from 1988 to
1990 and the Presidential Board of Advisors on Private Sector Initiative from
1985 to 1988. Mr. Luce was also the Alternate Delegate to the United Nations
with the rank of Ambassador in 1982 and 1983, and served as California's
Secretary of Business and Transportation from 1967 to 1969. Mr. Luce is a member
of the Board of Directors of PS Group (a diversified investment company),
Molecular Biosystems, Inc. (a medical research enterprise), and Carolco
Pictures, Inc. In addition, from October 1988 to October 1991, Mr. Luce was
Chairman of the Board of Trustees of the Scripps Clinic and Research Foundation
of La Jolla, California and he is currently a member of the Board of Trustees of
the University of Southern California. He became a director of the Company on
February 25, 1991.

R. TIMOTHY O'DONNELL was elected to the Company's Board of Directors
effective January 2, 1992. He is President of Jefferson Capital Group, Ltd., a
privately held investment banking group co-founded by Mr. O'Donnell in September
1989. From July 1988 until September 1989, Mr. O'Donnell served as Vice
President, Acquisitions of CCA Industries Inc., a privately held diversified
investment company. From April 1983 through June 1988, Mr. O'Donnell was
associated with Paine Webber Incorporated, a diversified investment company,
most recently as First Vice President. Mr. O'Donnell has been a Director of LIVE
Entertainment Inc. since 1988 and was a director of LIVE Home Video Inc. from
1987 to 1988. In addition, Mr. O'Donnell has been a Director of Shorewood
Packaging Corporation (packager for records, videos and cassettes) since October
1991 and a Director of Cinergi Pictures Entertainment Inc. since March 1994.

DAVID A. MOUNT was appointed to the Board of Directors on May 5, 1994. In
March 1995, Mr. Mount was named Chairman and Chief Executive Officer of Warner
Media Manufacturing and Distribution. Prior thereto, Mr. Mount had been
President and Chief Executive Officer of WEA Corporation, a division of Time
Warner, Inc., since October 1, 1993. Mr. Mount was President and Chief Executive
Officer of LIVE Entertainment Inc. from August 1, 1988 to September 30, 1993. In
addition, Mr. Mount served as a director of LIVE Entertainment in 1989 and from
January 1992 to the present. On February 2, 1993, LIVE Entertainment filed a
voluntary petition under Chapter 11 of the U.S. Bankruptcy Code and emerged
pursuant to a plan of reorganization on March 17, 1993. From August 1989 to June
1993, Mr. Mount was President of LIVE Home Video Inc., a subsidiary of LIVE
Entertainment, Inc. He was Chief Executive Officer of LIVE Home Video, Inc. from
August 1989 to October 1993.

49
<PAGE> 52

EUGENE P. BEARD became a member of the Board of Directors on October 12,
1994. Mr. Beard has been the Executive Vice President -- Finance and Operations
and Chief Financial Officer of Interpublic since October 1985 and has served as
a director of Interpublic since 1982. Mr. Beard is a member of the Board of
Directors of Brown Brothers Harriman 59 Wall Street Fund, Inc. (diversified
investment fund), National Westminster Bancorp Inc. (commercial bank) and
Micrografx, Inc. (computer software).

Interpublic has a voting agreement entered into with certain management
stockholders of the Company (including Anthony J. Scotti) to vote for the
election of one member of the Company's Board of Directors nominated by
Interpublic. In addition, in connection with the Mark Goodson Acquisition, the
Company will set up a conflicts committee of the Board consisting of Messrs.
Scotti, Beard and Mount to determine whether any particular future game show
project pursued by the Company apart from the LLC infringes upon the formats to
be acquired in the Mark Goodson Acquisition.

PRINCIPAL AND SELLING STOCKHOLDERS

The following table sets forth information concerning the beneficial
ownership of the Common Stock and the Class B Common Stock as of October 12,
1995 and as adjusted to reflect the sale of 4,000,000 shares of Class B Common
Stock offered hereby by the Company and the 500,000 shares of Class B Common
Stock offered hereby by Interpublic, by (i) each person who is known to the
Company to be a beneficial owner of more than 5% of each class of the
outstanding Common Stock or Class B Common Stock, (ii) each of the current
directors of the Company and (iii) all current directors and named executive
officers of the Company as a group. The table also assumes, on an as adjusted
basis, the sale of the maximum number of shares of Class B Common Stock offered
by the other Selling Stockholders if the over-allotment option granted to the
Underwriters is exercised in full (and the proposed simultaneous exchange by
such stockholders with the Company of an equal number of shares of Common Stock
for shares of Class B Common Stock to effectuate such over-allotment option).
Unless otherwise specified, the address of each beneficial owner listed below is
2114 Pico Boulevard, Santa Monica, California 90405.

<TABLE>
<CAPTION>
SHARES OF CLASS B ADJUSTED TO
PERCENT OF CLASS B COMMON STOCK REFLECT COMMON PERCENT OF
COMMON COMMON COMMON OFFERED GIVING STOCK COMMON STOCK
STOCK STOCK STOCK EFFECT TO BENEFICIALLY BENEFICIALLY
BENEFICIALLY BENEFICIALLY BENEFICIALLY EXCHANGE OF OWNED AFTER OWNED AFTER
OWNED OWNED OWNED COMMON STOCK(1) OFFERING OFFERING
------------ ------------ ------------ ----------------- --------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Anthony J. Scotti(2)....... 2,383,866 43.62% -- 255,304 2,013,225 42.03%
Benjamin J. Scotti(3)...... 1,437,995 26.35% -- 245,405 1,192,590 24.93%
Myron Roth(4).............. 340,850 6.25% -- 58,168 282,682 5.91%
Thomas Bradshaw(5)......... 315,850 5.79% -- 53,902 261,948 5.48%
Sydney D. Vinnedge(6)...... 141,975 2.60% -- 24,229 117,746 2.46%
Lawrence E. Lamattina(7)... 55,000 1.00% -- 4,266 50,734 1.06%
Gordon C. Luce(8).......... 600 * -- 102 498 *
David A. Mount(8).......... 600 * -- 102 498 *
R. Timothy O'Donnell(9).... 96,200 1.74% -- -- 96,200 1.99%
Jefferson Capital Group,
Ltd.
One James Center
901 East Cary Street
Suite 1400
Richmond, Virginia 23219
Eugene P. Beard(10)........ -- -- -- -- -- --
The Interpublic Group of
Companies, Inc.
1271 Avenue of the
Americas
New York, New York 10020
The Interpublic Group of
Companies,
Inc.(11)(12)............. 630,000 11.55% 2,520,000 500,000(13) 630,000(13) 13.18%(13)
1271 Avenue of the
Americas
New York, New York 10020
</TABLE>

50
<PAGE> 53

- ---------------
* less than 1%

(1) Represents the number of shares being offered by such Selling Stockholder
(other than Interpublic) only in the event the Underwriters' over-allotment
option is exercised and assumes such option is exercised in full. If such
option is exercised in part, such shares offered by such Selling
Stockholder shall be proportionately decreased. The Company will not
receive any proceeds from the sale of shares by any Selling Stockholder.

(2) Includes 879,175 shares (763,838 shares assuming full exercise of the
Underwriters' over-allotment option) owned by Messrs. Roth, Bradshaw,
Vinnedge, Lamattina and certain other employees which Anthony J. Scotti has
a proxy to vote. Includes 8,696 shares issuable upon conversion of the
Notes registered under a registration statement. Excludes 200,000
performance based options not yet vested or subject to vesting in the next
60 days and additional annual performance based options which Mr. Scotti
will receive pursuant to his employment agreement.

(3) Excludes 18,000 time vesting options not yet vested or subject to vesting
in the next 60 days.

(4) 315,850 of such shares are subject to a voting proxy granted to Anthony J.
Scotti. Excludes 100,000 performance based options not yet vested or
subject to vesting in the next 60 days.

(5) 315,850 of such shares are subject to a voting proxy granted to Anthony J.
Scotti. Excludes 70,000 performance based options not yet vested or subject
to vesting in the next 60 days.

(6) 108,225 of such shares are subject to a voting proxy granted to Anthony J.
Scotti. Excludes 12,000 performance based options not yet vested or subject
to vesting in the next 60 days.

(7) Mr. Lamattina owns 30,000 shares of restricted Common Stock which vest in
July 1998 and is vested in 25,000 time vested options. All such shares are
subject to a voting proxy granted to Anthony J. Scotti. Excludes 100,000
time vesting and 50,000 performance based options not yet vested or subject
to vesting in the next 60 days and additional annual performance based
options which Mr. Lamattina will receive pursuant to his employment
agreement.

(8) Excludes 5,400 time vesting options not yet vested or subject to vesting in
the next 60 days.

(9) Mr. O'Donnell owns 33,100 shares of Common Stock and his affiliate,
Jefferson Capital Group, Ltd., owns warrants to purchase 62,500 shares.
Excludes 5,400 time vesting options not yet vested or subject to vesting in
the next 60 days.

(10) Mr. Beard was appointed to the Board of Directors on October 12, 1994 to
fill a vacancy. Mr. Beard does not own any shares directly and disclaims
beneficial ownership of the 630,000 shares of Common Stock and the
2,520,000 shares of Class B Common Stock owned by Interpublic.

(11) As disclosed on a Schedule 13D, dated August 12, 1994. Does not include
2,520,000 shares of the Class B Common Stock prior to the offering.

(12) Represents 39.49% (approximately 23% on a fully-diluted basis) of capital
stock when Common Stock and Class B Common Stock are aggregated as one
class prior to the offering.

(13) Interpublic currently beneficially owns 100% of the outstanding Class B
Common Stock. Interpublic is offering 500,000 shares of Class B Common
Stock for its account pursuant to this offering (and no additional shares
will be sold by Interpublic in connection with the Underwriters'
over-allotment option). After this offering Interpublic will own 2,020,000
shares of Class B Common Stock, representing 30.98% of the outstanding
shares of Class B Common Stock (28.08% if the over-allotment option is
exercised in full). The Company will not receive any proceeds from the sale
of shares by Interpublic.

(14) As disclosed on a Schedule 13G, dated February 13, 1995; includes shares
issuable upon conversion of the Notes registered under a Registration
Statement.

(15) As disclosed on a Schedule 13G dated as of February 3, 1995; includes
shares issuable upon conversion of the Notes registered under a
Registration Statement.

(16) An additional 33,522 shares are being offered in the aggregate as part of
the over-allotment option by approximately 24 employees of the Company.

51
<PAGE> 54

DESCRIPTION OF CAPITAL STOCK

GENERAL

The authorized capital stock of the Company consists of 40,000,000 shares
of Common Stock, consisting of (i) 20,000,000 shares of Common Stock having a
par value of $0.0001 per share and (ii) 20,000,000 shares of Class B Common
Stock having a par value of $0.0001 per share, and 5,000,000 shares of preferred
stock, par value $0.01 per share. Immediately prior to the offering, 5,425,971
shares of Common Stock and 2,520,000 shares of Class B Common Stock were issued
and outstanding and at the date hereof, there are no shares of preferred stock
which have been issued and which are currently outstanding. The Board of
Directors, without further action by the stockholders, is authorized to issue
preferred stock in one or more series and to designate as to any such series the
dividend rate, redemption prices, preferences on liquidation or dissolution,
sinking fund terms, conversion rights, voting rights and any other preferences
or special rights and qualifications.

COMMON STOCK

The Common Stock has no preemptive rights and no redemption, sinking fund
or conversion provisions. All shares of Common Stock have one vote on any matter
submitted to the vote of stockholders. The Common Stock does not have cumulative
voting rights. Upon any liquidation of the Company, the holders of Common Stock
are entitled to receive, share for share with the holders of shares of Common
Stock on a pro rata basis, all assets then legally available for distribution
after payment of debts and liabilities and preferences on preferred stock, if
any. Holders of Common Stock are entitled to receive dividends share for share
with the holders of shares of Common Stock when and as declared by the Board of
Directors out of funds legally available therefor (subject to the prior rights
of preferred stock, if any). All shares of Common Stock are fully paid and
nonassessable. As of October 4, 1995 there were approximately 72 registered
holders of Common Stock.

CLASS B COMMON STOCK

The Class B Common Stock has no preemptive rights and no redemption,
sinking fund or conversion provisions. Except as otherwise required by law, the
shares of Class B Common Stock have no voting rights. The Class B Common Stock
shall be automatically converted into shares of Common Stock on a share for
share basis (i) if there does not exist on Nasdaq or other exchange or
over-the-counter market, a public float of at least 1,000,000 shares of Class B
Common Stock on or prior to August 1, 1999; or (ii) upon certain changes in
control (as defined) of the Company. Consummation of this offering will
eliminate the first such requirement. As defined a "change in control" shall
mean (i) the beneficial ownership (as determined pursuant to Rule 13d-3 under
the Securities Exchange Act of 1934, as amended) of Anthony J. Scotti (and of
members of his immediate family, including Benjamin J. Scotti and his immediate
family) and Related Parties (which includes shares of Common Stock as to which
Anthony J. Scotti, from time to time, holds a proxy and any shares of Common
Stock beneficially owned by Interpublic) is less than 30% of the outstanding
Common Stock (prior to any conversion of the Notes), (ii) the beneficial
ownership of Anthony J. Scotti and Related Parties is less than 20% (the
"Applicable Percentage") of the outstanding Common Stock following conversion of
any of the Notes (which percentage applies as a result of the conversion of a
portion of the Notes prior to the date hereof), or (iii) if any person other
than Anthony J. Scotti or any Related Person acquires more than 50% of the
Common Stock. The Company intends to seek an amendment to its Restated
Certificate of Incorporation by stockholder vote with a record date prior to the
effective date of this offering to reduce the Applicable Percentage for a
"change in control" to 10%. Upon any liquidation of the Company, the holders of
Class B Common Stock are entitled to receive, share for share with the holders
of shares of Common Stock on a pro rata basis, all assets then legally available
for distribution after payment of debts and liabilities and preferences on
preferred stock, if any. Holders of Class B Common Stock are entitled to receive
dividends share for share with the holders of shares of Common Stock when and as
declared by the Board of Directors out of funds legally available therefor
(subject to the prior rights of preferred stock, if any). All shares of Class B
Common Stock are fully paid and nonassessable. As of October 12, 1995, without
giving effect to this offering, there was one registered holder of Class B
Common Stock.

52
<PAGE> 55

In addition, the Company agreed with Interpublic, in connection with the
Fremantle Acquisition, that Interpublic has the right to exchange a
proportionate number of shares (calculated on a fully diluted basis) of Class B
Common Stock acquired by Interpublic pursuant to the Fremantle Acquisition for
shares of Common Stock in the event the Company consummates an acquisition of a
business pursuant to which the Company issues shares of Common Stock in exchange
for the assets or the capital stock of such business (a "Transaction"),
provided, however, such shares shall not be exchangeable until the Company
issues, in one or more Transactions, an aggregate of 1,000,000 shares (subject
to proportionate increase or decrease for stock splits, stock dividends or
combinations) of Common Stock. This contractual exchange right applies to
Interpublic only and will not apply to any of the holders of Class B Common
Stock acquired in this offering.

The Board of Directors of the Company has adopted an amendment to the
Company's Restated Certificate of Incorporation, subject to stockholder
approval, which would permit holders of Common Stock to convert each share of
Common Stock held by such holder into one share of Class B Common Stock. Holders
of Common Stock who choose to convert their shares will not receive any
consideration for such conversion, other than shares of Class B Common Stock,
which shares will be identical to the Class B Common Stock offered hereby. The
Company intends to seek stockholder approval of the amendment at its next
stockholders' meeting where such approval is expected to be obtained. No
assurances can be made that any necessary approvals in connection with such
proposed amendment will be obtained.

WARRANTS

In accordance with the terms of the LBS Acquisition, the Company issued
warrants to acquire up to an aggregate of 281,250 shares of its Common Stock to
certain creditors of LBS and other third parties as follows: warrants to
purchase 31,250 shares of Common Stock were issued to each of International
Family Entertainment, Inc. and the unsecured creditors of LBS at an exercise
price of $11.00 per share and warrants to acquire an aggregate of up to 218,750
shares of Common Stock were issued to the former senior secured creditor of LBS,
The Bank of New York. The Bank of New York received the following put options:
(i) with respect to warrants to acquire up to an aggregate of 156,250 shares of
Common Stock, at $8.00 per warrant if the Company's reported cumulative pre-tax
earnings reach $30.0 million at any time during the period beginning January 1,
1993 and ending December 31, 1995, for a total obligation of $1.3 million, and
(ii) with respect to warrants to acquire up to an aggregate of 62,500 shares of
Common Stock, at $4.00 per warrant beginning after December 31, 1993, for a
total obligation of $.3 million (which put was exercised). The Bank of New York
warrant was sold, without the remaining put option, to accounts managed by
Arnhold and S. Bleichroeder, Inc., one of the Representatives. None of the
foregoing warrants are publicly tradable.

INDEMNIFICATION

In accordance with Delaware General Corporation Law, the Company's Restated
Certificate of Incorporation eliminates in certain circumstances the liability
of directors of the Company for monetary damages for breach of their fiduciary
duty as directors. This provision does not eliminate the liability of a director
(i) for a breach of the director's duty of loyalty to the Company or its
stockholders, (ii) for acts or omissions by the director not in good faith or
which involve intentional misconduct or a knowing violation of law, (iii) for a
willful or negligent declaration of an unlawful dividend, stock purchase or
redemption or (iv) for transactions from which the director derived an improper
personal benefit.

TRANSFER AGENT AND REGISTRAR

The Transfer Agent and Registrar for the Class B Common Stock is
Continental Stock Transfer & Trust Company.

SHARES AVAILABLE FOR FUTURE SALE

53
<PAGE> 56

Stock outstanding (assuming no exercise of the Underwriters' over-allotment
option). There is currently one holder of Class B Common Stock, Interpublic,
which has 2,520,000 shares, all of which are "restricted securities" subject to
Rule 144 promulgated under the Securities Act of 1933, as amended; however,
Interpublic has demand and piggyback registration rights with respect to all of
such shares. The Company has agreed to register and sell, as part of this
offering, 500,000 shares of Interpublic's Class B Common Stock. Interpublic has
agreed with the Underwriters that it will not publicly offer for sale, sell,
distribute, grant any option for the sale of, or otherwise encumber or dispose
of, directly or indirectly, or exercise registration rights with respect to, any
shares of Common Stock or Class B Common Stock (or any securities convertible in
to, exercisable for or exchangeable for such shares), other than the 500,000
shares of Class B Common Stock offered hereby for its account, for a period of
one year from the date hereof without the prior written consent of the Company
and the Representatives. Sales of substantial numbers of shares of Class B
Common Stock on the public market (or the perception that such sales would
occur), pursuant to a registration statement, Rule 144 or otherwise, could
adversely affect the market price of the Class B Common Stock and could impair
the Company's future ability to raise capital through a public offering of
additional equity securities.

Upon completion of this offering, there will be 5,425,971 shares of Common
Stock outstanding prior to conversion of any of the Notes (which are convertible
at $11.50 per share into 5,217,391 shares of Common Stock subject to adjustment
under certain circumstances) and assuming no exercise of the Underwriters' over-
allotment option (in connection with which up to 675,000 outstanding shares of
Common Stock would be exchanged for an equal number of newly-issued shares of
Class B Common Stock and retired). The number of shares of Common Stock is also
subject to increase upon exercise of outstanding options and warrants. Of the
currently outstanding shares of Common Stock, 1,032,206 shares are freely
tradeable by non-affiliates without restriction under the Securities Act and
holders of an additional 4,393,765 outstanding shares of Common Stock may sell
their shares at any time subject to the volume, timing and manner of sale
limitations under Rule 144 of the Securities Act. All of the 5,217,391 shares of
Common Stock currently issuable upon conversion of the Notes are freely
tradeable upon issuance without restriction under the Securities Act pursuant to
an effective registration statement or exemption from registration. An
additional 1,273,063 shares of Common Stock are issuable pursuant to options and
warrants, of which 404,863 shares are vested and are freely tradeable upon
issuance without restriction under the Securities Act. The Company plans to file
a Registration Statement on Form S-8 to register all of the shares granted
pursuant to the Company's employee stock option plans.

Officers and directors of the Company holding an aggregate amount of
3,763,765 shares of Common Stock and the holders of options and warrants
exercisable for an aggregate of 657,500 shares of Common Stock, of which 91,300
shares are currently vested, have agreed not to publicly offer for sale, sell,
distribute, grant any option for the sale of or otherwise encumber or dispose
of, directly or indirectly, such shares (or any securities convertible into,
exercisable for or exchangeable for such shares), other than in connection with
an exercise by the Underwriters of the over-allotment option, so long as such
persons are employees of the Company, for a period of 180 days after the date of
this Prospectus without the prior written consent of the Representatives.

54
<PAGE> 57

UNDERWRITING

Subject to the terms and conditions set forth in the Underwriting Agreement
among the Company and the Selling Stockholders and Oppenheimer & Co., Inc. and
Arnhold and S. Bleichroeder, Inc. as the Representatives of the Underwriters,
each of the Underwriters named below has severally agreed to purchase from the
Company, and the Company and Interpublic have agreed to sell to the several
Underwriters, the shares of Class B Common Stock set forth opposite its name
below.

<TABLE>
<CAPTION>
UNDERWRITER NUMBER OF SHARES
------------------------------------------------------------- ----------------
<S> <C>
Oppenheimer & Co., Inc. .....................................
Arnhold and S. Bleichroeder, Inc. ...........................

---------
4,500,000
=========
</TABLE>

Of such shares of Class B Common Stock, 4,000,000 shares are being sold by
the Company and 500,000 shares are being sold by Interpublic.

The Underwriting Agreement provides that the obligations of the several
Underwriters thereunder are subject to approval of certain legal matters by
counsel and to various other conditions. The nature of the Underwriters'
obligations is such that they are committed to purchase all of the above shares
of Class B Common Stock if any are purchased.

The Underwriters propose to offer the shares of Class B Common Stock
directly to the public at the public offering price set forth on the cover page
of this Prospectus, and at such price less a concession not in excess of $ per
share to certain dealers, of which a concession not in excess of $ per share
may be reallowed to certain other dealers. After the public offering, the public
offering price and other selling terms may be changed by the Underwriters.

The Underwriters have advised the Company that they do not intend to
confirm sales of Class B Common Stock offered hereby to accounts over which they
exercise discretionary authority.

The Underwriters have been granted a 30-day over-allotment option to
purchase from the Selling Stockholders (other than Interpublic) up to an
aggregate of 675,000 additional shares of Class B Common Stock, exercisable at
the public offering price less the underwriting discount. If the Underwriters
exercise such over-allotment option, then each of the Underwriters will have a
firm commitment, subject to certain conditions, to purchase approximately the
same percentage thereof as the number of shares of Class B Common Stock to be
purchased by it as shown in the above table bears to the total number of shares
of Class B Common Stock offered hereby. The Underwriters may exercise such
option only to cover over-allotments made in connection with the sale of the
shares of Class B Common stock offered hereby. In the event that any Selling
Stockholder (other than Interpublic) fails to deliver shares of Class B Common
Stock to cover his or her portion of the over-allotment option, the Company has
agreed to sell a corresponding number of shares of Class B Common Stock to the
Underwriters to cover such shortfall.

Officers and directors of the Company holding an aggregate amount of
3,763,765 shares of Common Stock and the holders of options and warrants
exercisable in an aggregate of 657,500 shares of Common Stock, of which 91,300
shares of Common Stock are currently vested, have agreed that they will not
offer for

55
<PAGE> 58

sale, sell, distribute, grant any option for the sale of or otherwise encumber
or dispose of, directly or indirectly, or exercise registration rights with
respect to, any shares of Common Stock or Class B Common Stock (or any
securities convertible into, exercisable for, or exchangeable for such shares),
other than in connection with an exercise by the Underwriters of the
over-allotment option, so long as such persons are employees of the Company, for
a period of 180 days after the date of this Prospectus, without the prior
written consent of the Representatives.

Interpublic has agreed with the Representatives that it will not publicly
offer for sale, sell, distribute, grant any option for the sale of, or otherwise
encumber or dispose of directly or indirectly, or exercise registration rights
with respect to, any shares of Common Stock or Class B Common Stock or any
securities convertible into, exercisable for or exchangeable for such shares
(other than the 500,000 shares of Class B Common Stock offered hereby for its
account) for a period of one year after the date of this Prospectus, without the
prior written consent of the Company and the Representatives.

The Company and Interpublic have agreed to indemnify the Underwriters
against certain liabilities, losses and expenses, including liabilities under
the Securities Act, or to contribute to payments that the Underwriters may be
required to make in respect thereof.

Prior to this offering, there has been no previous public market for the
Class B Common Stock. The public offering price for the Class B Common Stock
offered hereby has been determined by negotiation among the Company and the
Representatives with reference to the market price for the Common Stock.

LEGAL MATTERS

The validity of the shares of Class B Common Stock offered hereby will be
passed upon for the Company by Kaye, Scholer, Fierman, Hays & Handler, Los
Angeles, California. Certain legal matters will be passed upon for the
Underwriters by Morgan, Lewis & Bockius LLP, Los Angeles, California.

EXPERTS

The consolidated financial statements of All American Communications, Inc.
at December 31, 1994 and 1993, and for each of the three years in the period
ended December 31, 1994, appearing in this Prospectus and Registration Statement
have been audited by Ernst & Young LLP, independent auditors, as set forth in
their reports thereon appearing elsewhere herein and in the Registration
Statements, and are included in reliance upon such reports given upon the
authority of such firm as experts in accounting and auditing.

The statements of net assets of The Game Show Division of Mark Goodson
Productions and Affiliates at December 31, 1994 and 1993 and the statements of
operating income and cash flows for each of the years in the three year period
ended December 31, 1994 included in this Form S-2, Registration Statement, have
been included herein in reliance upon the report of Coopers & Lybrand L.L.P.,
certified public accountants, given on the authority of such firm as experts in
accounting and auditing.

56
<PAGE> 59

INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE

The Company incorporates by reference the following documents heretofore
filed with the Commission pursuant to the Exchange Act:

1. Amendment to Quarterly Report of the Company on Form 10-Q/A for the
fiscal quarter ended June 30, 1995.

2. Quarterly Report of the Company on Form 10-Q for the fiscal quarter
ended June 30, 1995.

3. Quarterly Report of the Company on Form 10-Q for the fiscal quarter
ended March 31, 1995.

4. Annual Report of the Company on Form 10-K for the year ended
December 31, 1994.

Any statement contained in a document incorporated by reference herein
shall be deemed to be modified or superseded for purposes of this Prospectus to
the extent that a statement contained herein modifies or supersedes such
statement. Any statement so modified or superseded shall not be deemed, except
as so modified or superseded, to constitute part of this Prospectus.

Copies of all documents incorporated by reference herein (other than
exhibits to such documents unless such exhibits are specifically incorporated by
reference herein) will be provided without charge to each person, including any
beneficial owner, who receives a copy of this Prospectus on the request of such
person made to All American Communications, Inc., 2114 Pico Boulevard, Santa
Monica, California 90405, Attention: Thomas Bradshaw, Senior Executive Vice
President and Chief Financial Officer.

AVAILABLE INFORMATION

The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended, and in accordance therewith files reports,
proxy statements and other information with the Commission. Such reports, proxy
statements and other information can be inspected and copied at the public
reference facilities maintained by the Commission at Judiciary Plaza, 450 Fifth
Street, N.W., Washington, D.C. 20549 and at the following regional offices: 7
World Trade Center, 13th Floor, New York, New York 10048 and 500 West Madison
Street, Chicago, Illinois 60661. Copies of such material can be obtained from
the Public Reference Section of the Commission, Washington, D.C. 20549 at
prescribed rates. Reports, proxy materials and other information concerning the
Company may also be inspected at the offices of the National Association of
Securities Dealers, Inc. at 1735 K Street, N.W., Washington, D.C. 20006-1500.

Additional information regarding the Company and the Class B Common Stock
offered hereby is contained in the Registration Statement on Form S-2 (of which
this Prospectus is a part) and the exhibits thereto filed with the Commission
under the Securities Act. This Prospectus does not contain all the information
set forth in the Registration Statement, certain portions of which have been
omitted as permitted by the rules and regulations of the Commission. For further
information pertaining to the Company and the Class B Common Stock offered
hereby, reference is made to the Registration Statement, and to the exhibits and
schedules thereto and the financial statements filed as a part thereof.
Statements contained in this Prospectus as to the contents of any contract or
other document are not necessarily complete, and in each instance such
statements are qualified in their entirety by reference to the copy of such
contract or other document filed as an exhibit to the Registration Statement or
the documents incorporated by reference herein.

57
<PAGE> 60

INDEX TO FINANCIAL STATEMENTS

<TABLE>
<S> <C>
ALL AMERICAN COMMUNICATIONS, INC. AND SUBSIDIARIES
Condensed Consolidated Balance Sheets at June 30, 1995 (Unaudited) and December 31,
1994............................................................................. F-2
Condensed Consolidated Statements of Operations for the Three Months ended June 30,
1995
and 1994 (Unaudited)............................................................. F-3
Condensed Consolidated Statements of Operations for the Six Months ended June 30,
1995 and 1994 (Unaudited)........................................................ F-4
Condensed Consolidated Statements of Cash Flows for the Six Months ended June 30,
1995
and 1994 (Unaudited)............................................................. F-5
Notes to Unaudited Condensed Consolidated Financial Statements -- June 30, 1995..... F-6
Report of Independent Auditors...................................................... F-12
Consolidated Balance Sheets at December 31, 1994 and 1993........................... F-13
Consolidated Statements of Operations for Years ended December 31, 1994, 1993 and
1992............................................................................. F-15
Consolidated Statements of Stockholders' Equity for Years ended December 31, 1994,
1993 and 1992.................................................................... F-16
Consolidated Statements of Cash Flows for Years ended December 31, 1994, 1993 and
1992............................................................................. F-18
Notes to Consolidated Financial Statements -- December 31, 1994..................... F-19
THE GAME SHOW DIVISION OF MARK GOODSON PRODUCTIONS AND AFFILIATES
Report of Independent Auditors...................................................... F-37
Combined Statements of Net Assets at June 30, 1995 (Unaudited) and December 31, 1993
and 1994......................................................................... F-38
Combined Statements of Operating Income for the Six Months ended June 30, 1994 and
1995 (Unaudited) and for the Years ended December 31, 1992, 1993 and 1994........ F-39
Combined Statements of Cash Flows for the Six Months Ended June 30, 1994 and 1995
(Unaudited) and for the Years ended December 31, 1992, 1993 and 1994............. F-40
Notes to the Combined Financial Statements.......................................... F-41
</TABLE>

F-1
<PAGE> 61

PART I.

FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

ALL AMERICAN COMMUNICATIONS, INC. & SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS)

<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
1995 1994
(UNAUDITED) (NOTE)
----------- ------------
<S> <C> <C>
ASSETS
Cash and cash equivalents..................................................... $ 5,873 $ 1,662
Restricted cash............................................................... 4,253 10,246
Trade receivables, less allowances of $2,322 and $3,855 at June 30, 1995 and
December 31, 1994, respectively............................................. 65,553 62,338
Inventory of recorded music product, net...................................... 1,173 1,423
Advances to recording artists, net............................................ 1,357 1,801
Television program costs, less accumulated amortization of $126,678 and
$114,269 at June 30, 1995 and December 31, 1994, respectively............... 88,109 68,437
Property and equipment, less accumulated depreciation and amortization........ 3,725 3,772
Goodwill, less accumulated amortization of $2,311 and $1,242 at June 30, 1995
and December 31, 1994, respectively......................................... 50,476 51,545
Deferred income taxes......................................................... 1,373 235
Other......................................................................... 6,622 6,548
-------- --------
Total assets........................................................ $ 228,514 $208,007
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Accounts payable............................................................ $ 6,437 $ 6,826
Accrued expenses............................................................ 14,027 10,652
Royalties payable........................................................... 2,555 2,477
Deferred revenues........................................................... 2,878 257
Due to producers............................................................ 29,295 27,278
Participations payable...................................................... 18,862 17,091
Notes payable............................................................... 127,475 115,343
-------- --------
Total liabilities................................................... 201,529 179,924
-------- --------
Commitments and contingencies
Stockholders' equity
Preferred stock, authorized 5,000,000 shares, none issued................... -- --
Common stock, voting, $.0001 par value, authorized 20,000,000 shares, issued
5,455,971 in 1995 and 1994 (including treasury shares)................... 1 1
Common stock, Class B non-voting, $.0001 par value, authorized 20,000,000
shares, issued 2,520,000 in 1995 and 1994................................ -- --
Additional paid-in capital.................................................. 28,751 28,751
Common stock in treasury, at cost, 30,000 shares in 1995 and 1994........... (135) (135)
Stock subscriptions receivable.............................................. (97) (153)
Accumulated deficit......................................................... (1,880) (309)
Currency translation adjustment............................................. 345 (72)
-------- --------
Total stockholders' equity.......................................... 26,985 28,083
-------- --------
Total liabilities and stockholders' equity.......................... $ 228,514 $208,007
======== ========
</TABLE>

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

Note: The balance sheet at December 31, 1994 has been derived from the audited
financial statements at that date but does not include all of the
information and footnotes required by generally accepted accounting
principles for complete financial statements.

See accompanying notes to unaudited condensed consolidated financial statements.

F-2
<PAGE> 62

ALL AMERICAN COMMUNICATIONS, INC. & SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

<TABLE>
<CAPTION>
THREE MONTHS ENDED JUNE
30,
-------------------------
1995 1994
---------- ----------
(UNAUDITED)
<S> <C> <C>
Revenues:
Television........................................................ $ 33,875 $ 4,103
Recorded music.................................................... 4,190 3,502
---------- ----------
38,065 7,605
---------- ----------
Expenses:
Television........................................................ 26,259 3,630
Recorded music.................................................... 3,799 2,275
Selling, general and administrative............................... 6,326 4,386
Goodwill amortization............................................. 530 23
---------- ----------
36,914 10,314
---------- ----------
Operating income (loss)............................................. 1,151 (2,709)
Other income (expense):
Interest income................................................... 23 56
Interest expense, net of amounts capitalized...................... (2,407) (1,119)
Other............................................................. 67 (2)
---------- ----------
(2,317) (1,065)
Loss before provision (benefit) for income taxes.................... (1,166) (3,774)
Provision (benefit) for income taxes................................ (490) 6
---------- ----------
Net loss.......................................................... $ (676) $ (3,780)
========== ==========
Net loss per share................................................ $ (.08) $ (.78)
========== ==========
Weighted average number of common shares and common share
equivalents outstanding........................................ 7,976,000 4,826,000
========== ==========
</TABLE>

See accompanying notes to unaudited condensed consolidated financial statements.

F-3
<PAGE> 63

ALL AMERICAN COMMUNICATIONS, INC. & SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE
30,
-----------------------
1995 1994
---------- ----------
(UNAUDITED)
<S> <C> <C>
Revenues:
Television.......................................................... $ 67,819 $ 20,201
Recorded music...................................................... 7,208 7,406
---------- ----------
75,027 27,607
---------- ----------
Expenses:
Television.......................................................... 54,308 15,612
Recorded music...................................................... 5,663 4,736
Selling, general and administrative................................. 12,094 8,815
Goodwill amortization............................................... 1,070 46
---------- ----------
73,135 29,209
---------- ----------
Operating income (loss)............................................... 1,892 (1,602)
Other income (expense):
Interest income..................................................... 44 96
Interest expense, net of amounts capitalized........................ (4,772) (2,220)
Other............................................................... 127 --
---------- ----------
(4,601) (2,124)
Loss before provision (benefit) for income taxes...................... (2,709) (3,726)
Provision (benefit) for income taxes.................................. (1,138) 31
---------- ----------
Net loss............................................................ $ (1,571) $ (3,757)
========== ==========
Net loss per share.................................................. $ (.20) $ (.78)
========== ==========
Weighted average number of common shares and common share
equivalents outstanding.......................................... 7,976,000 4,826,000
========== ==========
</TABLE>

See accompanying notes to unaudited condensed consolidated financial statements.

F-4
<PAGE> 64

ALL AMERICAN COMMUNICATIONS, INC. & SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS)

<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30,
--------------------
1995 1994
-------- -------
(UNAUDITED)
<S> <C> <C>
OPERATING ACTIVITIES
Net loss................................................................ $ (1,571) $(3,757)
Adjustments to reconcile net loss to net cash (used) provided by
operating activities:
Depreciation and amortization of property, equipment and goodwill..... 1,330 257
Amortization of television program costs.............................. 12,409 11,281
Increase (decrease) in allowance for doubtful accounts................ 38 (63)
Decrease in allowance for sales returns............................... (293) (151)
Increase (decrease) in make goods reserve............................. (1,278) 531
Changes in operating assets and liabilities:
Restricted cash.................................................... 136 49
Trade receivables, inventory and advances to recording artists..... (988) 12,772
Additions to television program costs.............................. (32,081) (8,930)
Deferred income tax benefit........................................ (1,138) --
Accounts payable, accrued expenses and royalties payable........... 3,064 (1,337)
Due to producers and participations payable........................ 3,788 (7,860)
Deferred revenues.................................................. 2,621 94
Other assets....................................................... (74) (25)
-------- -------
Net cash (used) provided by operating activities........................ (14,037) 2,861
-------- -------
INVESTING ACTIVITY
Purchase of property and equipment...................................... (214) (234)
-------- -------
Net cash used in investing activity..................................... (214) (234)
-------- -------
FINANCING ACTIVITIES
Repurchase of redeemable warrants....................................... -- (250)
Payments on stock subscriptions receivable.............................. 56 137
Proceeds from borrowings................................................ 109,880 --
Repayments of borrowings................................................ (97,748) (424)
Restricted cash held for repayment of borrowings........................ 5,857 --
-------- -------
Net cash provided (used) by financing activities........................ 18,045 (537)
-------- -------
Effect of exchange rate changes on cash................................. 417 --
-------- -------
Increase in cash........................................................ 4,211 2,090
Cash and cash equivalents at beginning of period........................ 1,662 3,264
-------- -------
Cash and cash equivalents at end of period.............................. $ 5,873 $ 5,354
======== =======
Supplemental disclosure of cash flow information:
Cash paid during the period for:
Interest, net of amounts capitalized............................. $ 4,482 $ 2,125
======== =======
Income taxes..................................................... $ 220 $ 97
======== =======
</TABLE>

See accompanying notes to unaudited condensed consolidated financial statements.

F-5
<PAGE> 65

ALL AMERICAN COMMUNICATIONS, INC. & SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)

JUNE 30, 1995

1. SIGNIFICANT ACCOUNTING POLICIES

Description of Business:

All American Communications, Inc. ("AAC") and its wholly-owned
subsidiaries, All American Television, Inc. ("AATV"), All American Productions,
Inc., ("AAP"), Scotti Brothers Entertainment Industries, Inc. ("SBEI") and All
American Fremantle International, Inc. ("AAFII") (and together with their
respective wholly-owned subsidiaries collectively, the "Company" or "All
American"), produce and/or distribute, market and promote television programs
and recorded music product both domestically and internationally.

Acquisition:

In August 1994, the Company acquired (the "Fremantle Acquisition") certain
assets and securities and assumed certain liabilities of Fremantle
International, Inc. ("Fremantle") through the Company's newly formed
wholly-owned subsidiary, AAFII. The consideration for the Fremantle Acquisition
consisted of 630,000 shares of the Company's Common Stock, 2,520,000 shares of
nonvoting Class B Common Stock and $31,500,000 in cash funded by a term loan
from Chemical Bank (See Note 2). The Company has accounted for the Fremantle
Acquisition as a purchase and has allocated the purchase price based on the
estimated fair value of assets and liabilities acquired. The total consideration
of $52,527,000 (including expenses related to the acquisition of $1,027,000)
exceeded the estimated fair value of net assets acquired by $50,267,000
(goodwill); such goodwill is being amortized over 25 years. Results of
operations of AAFII have been included in the Company's results from August 3,
1994.

It is the Company's policy to evaluate the recovery of its intangible
assets (principally goodwill) and to recognize impairment if it is probable that
the recorded amounts are not recoverable from future undiscounted cash flows, or
if there is an event or change in circumstances which establish the existence of
impairment indicators.

The pro forma unaudited results from operations for the six months ended
June 30, 1994 assuming consummation of the Fremantle Acquisition at January 1,
1994 follows:

<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30, 1994
----------------
(IN THOUSANDS
EXCEPT
PER SHARE
AMOUNTS)
<S> <C>
Revenues.......................................................... $ 54,489
Operating income.................................................. $ 21
Net loss.......................................................... $ (3,663)
Loss per share.................................................... $ (.46)
</TABLE>

The pro forma information presented above is prepared for comparative
purposes only and does not purport to be indicative of what would have occurred
had the acquisition been made at January 1, 1994, or of the results which may
occur in the future.

Basis of Presentation:

The accompanying unaudited condensed consolidated financial statements
include the accounts of AAC and its subsidiaries. All significant intercompany
transactions have been eliminated.

The accompanying unaudited condensed consolidated financial statements have
been prepared in accordance with generally accepted accounting principles for
interim financial information and with the

F-6
<PAGE> 66

ALL AMERICAN COMMUNICATIONS, INC. & SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

instructions to Form 10-Q and the applicable rules of the Securities and
Exchange Commission. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments, consisting
of normal recurring accruals, considered necessary for a fair presentation have
been included. Operating results for the three and six month period ended June
30, 1995 are not necessarily indicative of the results that may be expected for
the year ending December 31, 1995. These financial statements should be read in
conjunction with the consolidated financial statements and related footnotes
included in the Company's latest Annual Report on Form 10-K.

Restricted Cash:

Pursuant to the Company's lending agreement, substantially all cash
collected is required to be paid into accounts maintained by Chemical Bank and
applied to the repayment of the outstanding borrowings as specified in the
lending agreement -- See Note 2. The cash held for repayment is included as
restricted cash. Additionally, amounts held in an interest bearing reserve
account with respect to a dispute have been included as restricted cash -- See
Note 5.

Foreign Currency:

The operations of all foreign entities are measured in local currencies.
Assets and liabilities are translated into United States ("U.S.") dollars using
exchange rates in effect at the end of each reporting period. Revenues and
expenses are translated at the average exchange rates prevailing during the
period. Adjustments resulting from translating the financial statements of
foreign entities into U.S. dollars are recorded as a separate component of
stockholders' equity.

Share Information -- Loss Per Share:

Loss per share was computed based on the weighted average number of common
shares outstanding for the three and six month periods ended June 30, 1994 and
on the weighted average number of common shares outstanding including 2,520,000
shares of the Company's Class B non-voting common stock issued in connection
with the Fremantle Acquisition for the three and six month periods ended June
30, 1995. Common stock equivalents are antidilutive and as such have been
excluded from the loss per share calculation for the three and six month periods
ended June 30, 1995 and 1994. Fully diluted loss per share has not been
presented as the effect would be antidilutive for the three and six month
periods ended June 30, 1995 and 1994.

Income Taxes:

Income tax expense (benefit) is determined using the expected annual
effective tax rates of 42% and 35% for 1995 and 1994, respectively. Tax benefits
recognized during the three and six month periods ended June 30, 1995 are
expected to be realized within the current year.

2. NOTES PAYABLE AND AMOUNTS DUE TO BANKS

Notes payable and amounts due to banks are comprised of the following:

<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
1995 1994
-------- ------------
(IN THOUSANDS)
<S> <C> <C>
Convertible subordinated notes, 6 1/2%................................. $ 60,000 $ 60,000
Notes payable to banks................................................. 67,475 55,343
-------- --------
$127,475 $115,343
======== ========
</TABLE>

F-7
<PAGE> 67

ALL AMERICAN COMMUNICATIONS, INC. & SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

In April 1995, the Company secured a new senior credit facility (the
"Senior Credit Facility Agreement"), with a syndicate of lenders led by Chemical
Bank. This facility consists of four tranches: (A) a term loan of $30,000,000
(the "Term Loan" or "Tranche A") which was utilized to refinance existing bank
debt incurred in connection with the Fremantle Acquisition; (B) a revolving
credit facility of up to $20,000,000 in the aggregate to be utilized for
production and distribution of Baywatch, of which $14,000,000 was initially
utilized to refinance existing bank debt related to production of Baywatch for
the 1994/1995 and 1995/1996 broadcast seasons (the "Baywatch Production Line" or
"Tranche B"); (C) a revolving credit facility of up to $20,000,000 in the
aggregate for production and distribution of Baywatch Nights (the "Baywatch
Nights Production Line" or "Tranche C"); and (D) a revolving credit facility of
up to $40,000,000 to be utilized to finance certain working capital needs of the
Company, of which $10,000,000 was initially primarily used to refinance existing
bank debt related to the Company's working capital needs and to pay certain fees
in connection with the Senior Credit Facility Agreement (the "Working Capital
Line" or "Tranche D"). The Working Capital Line together with the Baywatch
Production Line and the Baywatch Nights Production Line are referred to
collectively as the "Chemical Bank Facilities". The obligations of the Company
under the Chemical Bank Facilities and the Term Loan are cross-collateralized.
The Term Loan matures on December 31, 1998. The Chemical Bank Facilities mature
on April 13, 1999. Under the terms of the Senior Credit Facility Agreement, the
amount the Company may borrow under Tranche B, C and D is based upon the value
of the collateral in the borrowing base which consists principally of accounts
receivable of the Company. Borrowings under the Senior Credit Facility Agreement
bear interest, at the Company's option, either (i) at LIBOR plus 2 3/4% (8.63%
as of July 26, 1995) or (ii) at the Alternate Base Rate (which is the greater of
Chemical Bank's Prime Rate, its Base CD Rate plus 1%, or the Federal Funds
Effective Rate plus 1/2%) plus 1 3/4% (10.50% as of July 26, 1995), subject to
reduction if certain financial ratios are satisfied. The Senior Credit Facility
Agreement imposes a number of financial and other conditions upon the Company,
including limitations on indebtedness, restrictions on the disposition of
assets, restrictions on making certain payments (including dividends) and
certain financial tests. Additionally, the Baywatch Production Line and the
Baywatch Nights Production Line provide that certain conditions must be
satisfied before funding of each season of the respective series and such
conditions have been met for the 1995/1996 broadcast season of Baywatch and
Baywatch Nights.

Except to the extent set forth below, under the terms of the Senior Credit
Facility Agreement substantially all of the Company's cash collections are
required to be paid into accounts maintained by Chemical Bank and applied to the
repayment of the Company's obligations under the Chemical Bank Facilities. All
of AAFII's cash collections are required to be paid into accounts maintained by
Chemical Bank and applied, subject to certain exceptions for working capital, to
interest and principal amounts outstanding under the Term Loan until such time
as the Term Loan is repaid in full. The Term Loan is repayable in thirteen
quarterly principal installments ranging from $500,000 to $4,000,000 commencing
September 1995 (each payment being subject to reduction from certain
prepayments). The amount the Company is able to reborrow under the Chemical Bank
Facilities is subject to the ability of the Company to pledge certain collateral
to the lenders with sufficient borrowing base value to collateralize such
borrowings. Substantially all of the Company's assets are pledged under the
Senior Credit Facility Agreement except the real property owned by the Company.

F-8
<PAGE> 68

ALL AMERICAN COMMUNICATIONS, INC. & SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

3. TELEVISION PROGRAM COSTS

Costs for television programs are comprised of the following:

<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
1995 1994
-------- ------------
(IN THOUSANDS)
<S> <C> <C>
Released, less accumulated amortization................................. $ 66,795 $ 64,780
In process and development.............................................. 21,314 3,657
------- -------
$ 88,109 $ 68,437
======= =======
</TABLE>

4. RELATED PARTY TRANSACTIONS

Certain officers/stockholders of the Company have issued to the Company
promissory notes in consideration for the shares of the Company's Common Stock.
Principal and interest under such notes are payable in five equal annual
installments. The principal balance outstanding on such notes as of June 30,
1995 was approximately $97,000.

During 1994 the Company loaned $250,000 to an officer of the Company, which
loan is secured by a pledge of shares of Common Stock of the Company owned by
such officer. The loan bears interest at a rate of 8.0% per annum (equal to the
rate then in effect under the Company's working capital loan) and will mature
upon expiration of the officer's employment agreement which is currently
February 1996. The loan has been included with other assets in the accompanying
condensed consolidated balance sheet at June 30, 1995.

5. COMMITMENTS AND CONTINGENCIES

Minimum commitments for advances to recording artists at June 30, 1995
amounted to approximately $729,000.

All American Television entered into an exclusive license agreement dated
as of May 1, 1995 with USA Networks in regard to the licensing of up to 111
episodes of Baywatch, 22 episodes of Sirens, and 22 episodes of Acapulco
H.E.A.T. and, under certain circumstances up to 22 episodes of Baywatch Nights.
The license agreement is exclusive in the United States, its territories and
possessions (including Puerto Rico) over all forms of transmission by all means
(including, without limitation, free over-the-air broadcasts, basic and pay
cable, or via video on demand), other than via continuous first run syndication
and other than the rerun strip syndication of the first 110 episodes of Baywatch
during the period commencing June 26, 1995 through September 19, 1997. The
initial term of the license agreement commenced in May 1995 for Acapulco
H.E.A.T. and will commence in October 1995 for Sirens, September 1996 for
Baywatch Nights and September 1997 for Baywatch with a common termination date
of September, 2000 for all four shows. Revenue will be recognized on
commencement of the license period for each show. The initial minimum license
fee aggregates $25,300,000 payable in 36 equal monthly installments of
approximately $703,000 commencing September, 1997 through August, 2000. The
license agreement also contains certain additional obligations and rights of USA
Networks regarding additional episodes of Baywatch and the right to extend the
term of the license for up to four years for additional specified consideration.

In June 1995, the Company commenced principal photography (for the sixth
season) of the Company's weekly drama series Baywatch, consisting of 22 new one
hour episodes for the 1995/1996 television broadcast season. The total
production budget of approximately $22,000,000 for the 1995/1996 broadcast
season is expected to be funded through a combination of (i) borrowings under
the Baywatch Production Line and (ii) cash payments pursuant to its foreign
distribution agreements. Through June 30, 1995, the Company has spent
approximately $5,600,000 towards the production of Baywatch for the 1995/1996
broadcast season.

F-9
<PAGE> 69

ALL AMERICAN COMMUNICATIONS, INC. & SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

The Company has begun production of a spin-off of Baywatch, Baywatch
Nights, which commenced principal photography in April 1995 and will be
initially aired in first-run syndication during the 1995/1996 broadcast season.
The Company will self-distribute Baywatch Nights both domestically and
internationally. The total revised production budget for the 22 planned new
one-hour episodes for the 1995/1996 broadcast season of approximately
$23,000,000 is expected to be funded through borrowings under the Baywatch
Nights Production Line or by obtaining funding from licensing of the program.
Through June 30, 1995 the Company has spent approximately $11,500,000 towards
the production of Baywatch Nights.

In June, 1993 the Company entered into an agreement with Richard and Esther
Shapiro (the creators of Dynasty and The Colbys) pursuant to which the Company
was granted a six-month period to arrange for the development, production and
exploitation of a television series entitled The Colony ( formerly The Malibu
Branch). In February 1995, the ABC Television Network (the "ABC Network") agreed
to pay a license fee of $2,850,000 for the production of a two-hour pilot and
retained a previously acquired option to order production and licensing of a
minimum of 13 episodes of the series for the 1995/1996 broadcast season (or as a
mid-season replacement). The production budget of the two-hour pilot is
$3,200,000 which the Company financed through the ABC Network license fee and
distribution in certain international markets. The Company has entered into a
license agreement with Taurus Film GmbH ("Taurus") for distribution of the pilot
in certain international markets and which grants to Taurus an exclusive option
to distribute the series in these markets. The Company was notified that the ABC
Network did not exercise its fall series option for the 1995/1996 broadcast
season. There can be no assurance that the ABC Network will exercise its option
to order production of the series as a mid-season replacement.

The Company distributed the series The New Family Feud for the 1994/1995
broadcast season. The Company guaranteed the producers $7,500,000 payable in 15
monthly installments of $500,000 each, which commenced on July 15, 1994. Through
July 26, 1995, $6,500,000 of the guarantee has been satisfied by the Company.
Remaining payments due under the guarantee are expected to be satisfied through
collections from the sale of program advertising time. The Company has
determined it will not distribute the series for the 1995/1996 broadcast season.

In November 1993, the Company entered into an agreement to distribute the
series Sirens throughout the world (excluding Canada) for the 1994/1995
broadcast season. The Company guaranteed the producers approximately $434,000
per episode for the 22 episodes to be produced for the 1994/1995 broadcast
season (for an aggregate of $9,548,000). As of July 26, 1995, such guarantee has
been fully satisfied. Pursuant to the Company's agreement with the producers,
the Company has determined it will not distribute the series for the 1995/1996
broadcast season.

In September 1994, the Company filed a complaint, as amended, against the
producers of the series Acapulco H.E.A.T. in the Superior Court of the State of
California alleging, among other things, breach of contract and fraud. The
Company had entered into an agreement, dated as of October 7, 1992, with the
producers for the Company to distribute the series Acapulco H.E.A.T. in the
domestic television market. Subject to the fulfillment of certain terms by the
producer, the Company agreed to pay a distribution advance of $6,600,000 (plus
an additional amount per episode under certain circumstances) payable over ten
months commencing November 30, 1993. As of September 1994, the Company had made
payments totaling approximately $4,698,000 at which time a dispute with the
producers with regard to the non-fulfillment of certain terms by the producers
was raised by the Company and the Company discontinued making such advance
payments. The unpaid portion of the advance payments, totaling approximately
$2,452,000, has been placed in an interest-bearing restricted cash account
pending resolution of the dispute. The producers have filed an answer and
cross-complaint alleging, among other things, breach of contract and fraud in
connection with the agreement to distribute Acapulco H.E.A.T. and breach of
contract and fraud in connection with the Company's barter distribution of
certain theatrical films unrelated to Acapulco H.E.A.T. The Company intends to
vigorously pursue its claim and defend against the cross-complaint. The
litigation is currently in the

F-10
<PAGE> 70

ALL AMERICAN COMMUNICATIONS, INC. & SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

discovery phase and depositions continue to be scheduled. Management does not
believe the ultimate outcome of this matter will result in a materially adverse
effect on the Company's financial condition or results of operations. However,
there can be no assurance that the Company will be successful on the merits of
the lawsuit.

On May 31, 1995, Credit Lyonnais Bank Nederland N.V. ("CLBN") made demand
upon SBEI under a Guarantee dated July 29, 1986 (the "SBEI Guarantee"), (a) for
payment of approximately $916,000 plus interest accrued since October 31, 1994
under a Loan and Security Assignment dated July 29, 1986 (the "Loan Agreement")
between CLBN and various former subsidiaries of SBEI relating to the
discontinued motion picture operations of the Company, and (b) for payment of
$2,667,000 plus interest accruing since September 30, 1994 under an alleged
unmemorialized amendment of the Loan Agreement. This demand superseded an
earlier demand, made on December 12, 1994, for payment of $3,742,000 plus
interest or costs booked since November 11, 1994. SBEI rejected the foregoing
May 31, 1995 demand based upon, among other reasons, the following: (a) that in
a January 1993 agreement CLBN agreed to release all liens and any interests in
any property or assets of SBEI, which in effect released SBEI from any
obligations under the SBEI Guarantee; (b) that the loan purportedly guaranteed
has been repaid; and (c) that SBEI in any event is not a party to and was not
bound by the alleged "unmemorialized" amendment to the Loan Agreement.

In addition, since approximately November 1993, CLBN and its
representatives have been reviewing certain books and records relating to the
distribution and production of certain motion pictures by Minority Pictures,
Inc. (formerly Scotti Brothers Pictures, Inc.) or its subsidiaries for which
CLBN provided financing. In October 1994, and again in June 1995, CLBN requested
that Minority Pictures, Inc. and various of its current and former affiliates
(including the Company and certain of its subsidiaries) execute a tolling
agreement which would have tolled claims which CLBN may have against such
persons, including but not limited to causes of action based on such financing.
The Company has declined to enter into a tolling agreement because based upon
the information thus far provided by CLBN, or the lack thereof, it is extremely
unclear whether there are any tenable claims against the Company and its
subsidiaries. While the Company believes that SBEI has good meritorious defenses
with respect to the SBEI Guarantee and any other claims which CLBN may assert,
and that the ultimate outcome of this matter will not result in a materially
adverse effect on the Company's financial condition or results of operations,
there can be no assurance that the Company ultimately will prevail.

The Company is party to certain other legal proceedings which are routine
and incidental to the business. The Company believes that the results of such
litigation will not have a material adverse effect on the Company's financial
condition or results of operations.

F-11
<PAGE> 71

REPORT OF INDEPENDENT AUDITORS

The Board of Directors and Stockholders
All American Communications, Inc.

We have audited the accompanying consolidated balance sheets of All
American Communications, Inc. and subsidiaries as of December 31, 1994 and 1993,
and the related consolidated statements of operations, stockholders' equity, and
cash flows for each of the three years in the period ended December 31, 1994.
These financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements based
on our audits.

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

In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position of
All American Communications, Inc. and subsidiaries at December 31, 1994 and
1993, and the consolidated results of their operations and their cash flows for
each of the three years in the period ended December 31, 1994, in conformity
with generally accepted accounting principles.

/s/ ERNST & YOUNG LLP

--------------------------------------
ERNST & YOUNG LLP

Los Angeles, California
March 8, 1995

F-12
<PAGE> 72

ALL AMERICAN COMMUNICATIONS, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS)

ASSETS

<TABLE>
<CAPTION>
DECEMBER 31,
-------------------
1994 1993
-------- --------
<S> <C> <C>
Cash and cash equivalents................................................ $ 1,662 $ 3,264
Restricted cash -- Notes 1 and 11........................................ 10,246 140
Trade receivables, less allowances of $3,855 and $3,241 at December 31,
1994
and 1993, respectively -- Note 11...................................... 62,338 43,226
Inventory, net........................................................... 1,423 1,050
Advances to recording artists, net....................................... 1,801 3,047
Television program costs, less accumulated amortization of $114,269 and
$81,735 at December 31, 1994 and 1993, respectively -- Note 4.......... 68,437 52,381
Property and equipment, less accumulated depreciation
and amortization -- Note 3............................................. 3,772 2,658
Goodwill, less accumulated amortization of $1,242 and $271 at
December 31, 1994 and 1993, respectively -- Note 1..................... 51,545 2,395
Deferred income tax benefits -- Note 9................................... 235 --
Other -- Note 8.......................................................... 6,548 4,360

-------- --------
Total assets................................................... $208,007 $112,521
======== ========
</TABLE>

See accompanying notes.

F-13
<PAGE> 73

ALL AMERICAN COMMUNICATIONS, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS)

LIABILITIES AND STOCKHOLDERS' EQUITY

<TABLE>
<CAPTION>
DECEMBER 31,
-------------------
1994 1993
-------- --------
<S> <C> <C>
Liabilities:
Accounts payable....................................................... $ 6,826 $ 3,133
Accrued expenses....................................................... 10,652 4,536
Royalties payable...................................................... 2,477 2,615
Deferred revenues...................................................... 257 786
Due to producers....................................................... 27,278 22,086
Participations payable................................................. 17,091 11,094
Notes payable -- Note 5................................................ 115,343 60,424
Deferred taxes payable -- Note 9....................................... -- 94
-------- --------
Total liabilities.............................................. 179,924 104,768
Redeemable stock -- Notes 6 and 7:
Series A preferred stock, none issued and outstanding in 1994 and
1993................................................................ -- --
Common stock, none issued and outstanding in 1994 and 1993............. -- --
Redeemable warrants.................................................... -- 250
Commitments and contingencies -- Note 10
Stockholders' equity -- Notes 5, 6, 7 and 8:
Preferred stock, authorized 5,000,000 shares........................... -- --
Common stock, voting, $.0001 par value, authorized 20,000,000 shares,
issued 5,455,971 in 1994 and 4,825,971 in 1993 (including treasury
shares)............................................................. 1 1
Common stock, Class B non-voting, $.0001 par value, authorized
20,000,000 shares, issued 2,520,000 in 1994 and 0 in 1993........... -- --
Additional paid-in capital.......................................... 28,751 9,096
Common stock in treasury, at cost, 30,000 shares in 1994 and 1993...... (135) (135)
Stock subscriptions receivable and deferred compensation............... (153) (695)
Accumulated deficit.................................................... (309) (764)
Currency translation adjustment........................................ (72) --
-------- --------
Total stockholders' equity..................................... 28,083 7,503
-------- --------
Total liabilities and stockholders' equity..................... $208,007 $112,521
======== ========
</TABLE>

See accompanying notes.

F-14
<PAGE> 74

ALL AMERICAN COMMUNICATIONS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------------
1994 1993 1992
---------- ---------- ----------
<S> <C> <C> <C>
Revenues:
Television............................................... $ 98,771 $ 57,407 $ 45,302
Recorded music........................................... 16,130 13,215 12,616
---------- ---------- ----------
114,901 70,622 57,918
---------- ---------- ----------
Expenses:
Television............................................... 75,196 42,560 32,078
Recorded music........................................... 10,750 9,780 9,250
Selling, general and administrative...................... 21,523 16,074 13,471
Goodwill amortization.................................... 971 133 138
---------- ---------- ----------
108,440 68,547 54,937
---------- ---------- ----------
Operating income........................................... 6,461 2,075 2,981
Other income (expense):
Interest income.......................................... 204 91 114
Interest expense......................................... (5,929) (1,688) (501)
Other.................................................... 49 77 196
---------- ---------- ----------
(5,676) (1,520) (191)
---------- ---------- ----------
Income from continuing operations before income taxes...... 785 555 2,790
Provision for income taxes -- Note 9....................... 330 175 927
---------- ---------- ----------
Income from continuing operations.......................... 455 380 1,863
Discontinued operations -- film segment -- Note 2:
Loss from operations of film segment, net of income tax
benefit............................................... -- -- (861)
Estimated loss on disposal, net of taxes................. -- -- (80)
---------- ---------- ----------
Loss from discontinued operations........................ -- -- (941)
---------- ---------- ----------
Net income............................................... 455 380 922
Accretion and dividends on redeemable stock --
Notes 1, 5 and 6...................................... -- (2,208) (2,728)
Excess of carrying value of redeemable shares over
purchase price -- Notes 1, 5 and 6.................... -- 6,070 --
---------- ---------- ----------
Net income (loss) applicable to common stockholders...... $ 455 $ 4,242 $ (1,806)
========== ========== ==========
Earnings (loss) per share -- primary -- Note 1:
Continuing operations.................................... $ .07 $ .87 $ (.18)
Discontinued operations.................................. -- -- (.20)
---------- ---------- ----------
Net earnings (loss)...................................... $ .07 $ .87 $ (.38)
========== ========== ==========
Weighted average number of common shares outstanding....... 6,201,000 4,874,000 4,752,000
========== ========== ==========
Earnings (loss) per share -- fully diluted -- Note 1:
Continuing operations.................................... $ .07 $ .78 $ (.18)
Discontinued operations.................................. -- -- (.20)
---------- ---------- ----------
Net earnings (loss)...................................... $ .07 $ .78 $ (.38)
========== ========== ==========
Weighted average number of common shares outstanding....... 6,201,000 6,275,000 4,752,000
========== ========== ==========
</TABLE>

See accompanying notes.

F-15
<PAGE> 75

ALL AMERICAN COMMUNICATIONS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(DOLLARS IN THOUSANDS)

<TABLE>
<CAPTION>
COMMON STOCK
-----------------------------------------------
CLASS B
(NON-VOTING)
SHARES ISSUED SHARES ISSUED ADDITIONAL COMMON
AND AND PAID-IN STOCK IN
OUTSTANDING AMOUNT OUTSTANDING AMOUNT CAPITAL TREASURY
------------- ------ ------------- ------ ---------- --------
<S> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1991......... 4,066,974 $ 1 -- $ -- $ 350 $ (135)
Public offering of common stock.... 750,000 -- -- -- 5,143 --
Accretion on redeemable stock...... -- -- -- -- (786) --
Dividends on preferred stock....... -- -- -- -- (400) --
Amortization of deferred
compensation.................... -- -- -- -- -- --
Options issued in conjunction with
debt............................ -- -- -- -- 100 --
Additions to stock subscriptions... 9,000 -- -- -- 77 --
Payments on stock subscriptions
receivable...................... -- -- -- -- -- --
Fractional shares attributable to
stock split..................... (3) -- -- -- -- --
Net income......................... -- -- -- -- -- --
--------- --- --------- --- ------- -----
Balance at December 31, 1992......... 4,825,971 1 -- -- 4,484 (135)
--------- --- --------- --- ------- -----
Excess of carrying value of
redeemable stock over purchase
price........................... -- -- -- -- 6,070 --
Accretion on redeemable stock...... -- -- -- -- (1,608) --
Payments on stock subscriptions
receivable...................... -- -- -- -- -- --
Amortization of deferred
compensation.................... -- -- -- -- -- --
Dividends on preferred stock....... -- -- -- -- (600) --
Issuance of employee stock
options......................... -- -- -- -- 750 --
Net income......................... -- -- -- -- -- --
--------- --- --------- --- ------- -----
Balance at December 31, 1993......... 4,825,971 1 -- -- 9,096 (135)
--------- --- --------- --- ------- -----
Stock issued in connection with the
Fremantle Acquisition........... 630,000 -- 2,520,000 -- 20,000 --
Payments on stock subscriptions
receivable...................... -- -- -- -- -- --
Amortization of deferred
compensation.................... -- -- -- -- -- --
Cancellation of deferred
compensation.................... -- -- -- -- (345) --
Currency translation adjustment.... -- -- -- -- -- --
Net income......................... -- -- -- -- -- --
--------- --- --------- --- ------- -----
Balance at December 31, 1994......... 5,455,971 $ 1 2,520,000 $ -- $ 28,751 $ (135)
========= === ========= === ======= =====
</TABLE>

See accompanying notes.

F-16
<PAGE> 76

ALL AMERICAN COMMUNICATIONS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY -- (CONTINUED)
(DOLLARS IN THOUSANDS)

<TABLE>
<CAPTION>
STOCK
SUBSCRIPTIONS RETAINED
RECEIVABLE EARNINGS CURRENCY
AND DEFERRED (ACCUMULATED TRANSLATION
COMPENSATION DEFICIT) ADJUSTMENT TOTAL
------------- ------------ ----------- -------
<S> <C> <C> <C> <C>
Balance at December 31, 1991...................... $(574) $ (524) $ -- $ (882)
Public offering of common stock................. -- -- -- 5,143
Accretion on redeemable stock................... -- (1,142) -- (1,928)
Dividends on preferred stock.................... -- (400) -- (800)
Amortization of deferred compensation........... 32 -- -- 32
Options issued in conjunction with debt......... -- -- -- 100
Additions to stock subscriptions................ (77) -- -- --
Payments on stock subscriptions receivable...... 94 -- -- 94
Fractional shares attributable to stock split... -- -- -- --
Net income...................................... -- 922 -- 922
----- ------- ---- -------
Balance at December 31, 1992...................... (525) (1,144) -- 2,681
----- ------- ---- -------
Excess of carrying value of redeemable stock
over purchase price.......................... -- -- -- 6,070
Accretion on redeemable stock................... -- -- -- (1,608)
Payments on stock subscriptions receivable...... 119 -- -- 119
Amortization of deferred compensation........... 146 -- -- 146
Dividends on preferred stock.................... -- -- -- (600)
Issuance of employee stock options.............. (435) -- -- 315
Net income...................................... -- 380 -- 380
----- ------- ---- -------
Balance at December 31, 1993...................... (695) (764) -- 7,503
----- ------- ---- -------
Stock issued in connection with the Fremantle
Acquisition.................................. -- -- -- 20,000
Payments on stock subscriptions receivable...... 137 -- -- 137
Amortization of deferred compensation........... 60 -- -- 60
Cancellation of deferred compensation........... 345 -- -- --
Currency translation adjustment................. -- -- (72) (72)
Net income...................................... -- 455 -- 455
----- ------- ---- -------
Balance at December 31, 1994...................... $(153) $ (309) $ (72) $28,083
===== ======= ==== =======
</TABLE>

See accompanying notes.

F-17
<PAGE> 77

ALL AMERICAN COMMUNICATIONS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS)

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------------
1994 1993 1992
-------- -------- --------
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net income...................................................................... $ 455 $ 380 $ 922
Adjustments to reconcile net income to net cash used by operating activities:
Depreciation and amortization of property and equipment and goodwill.......... 1,450 454 535
Amortization of television program costs...................................... 32,534 33,236 21,389
Increase in allowance for doubtful accounts................................... 287 37 165
Increase (decrease) in allowance for sales returns............................ 204 (209) 401
Increase in makegoods reserve................................................. 123 28 1,006
Changes in operating assets and liabilities:
Restricted cash............................................................. (2,590) 360 (198)
Trade receivables, inventory and advances to recording artists.............. (5,423) (13,623) (12,862)
Deferred income tax benefits................................................ (235) -- --
Accounts payable, accrued expenses and royalties payable.................... (1,469) (686) 6,532
Due to producers and participations payable................................. 4,797 6,152 6,696
Additions to television program costs....................................... (43,490) (45,578) (26,867)
Deferred revenues........................................................... (1,680) (767) (251)
Deferred taxes payable...................................................... (94) 94 --
Other assets................................................................ 457 872 (1,714)
-------- -------- --------
Net cash used by operating activities........................................... (14,674) (19,250) (4,246)
INVESTING ACTIVITIES
Purchase of property and equipment, net of book value of assets retired......... (497) (135) (66)
Purchase of short term investments.............................................. -- -- (10,183)
Sale of short term investments.................................................. -- -- 10,183
Purchase of LBS, net of cash acquired........................................... -- (3,626) --
Purchase of Fremantle........................................................... (32,527) -- --
Payment of net liabilities of the film division................................. -- (3,553) --
-------- -------- --------
Net cash used by investing activities........................................... (33,024) (7,314) (66)
FINANCING ACTIVITIES
Dividends paid.................................................................. $ -- $ (600) $ (800)
Repurchase of redeemable warrants............................................... (250) -- --
Proceeds from public offering of common stock................................... -- -- 5,143
Proceeds from issuance of Notes, net of related costs........................... -- 56,793 --
Repurchase of redeemable stock, including related costs......................... -- (15,746) --
Payments on stock subscriptions receivable...................................... 137 119 93
Proceeds from borrowings........................................................ 38,768 55,281 17,828
Repayments of borrowings........................................................ (18,849) (66,091) (18,371)
Restricted cash held for repayment of borrowings................................ (7,516) -- --
Proceeds from borrowings -- purchase of Fremantle, net of issuance costs........ 33,878 -- --
-------- -------- --------
Net cash provided by financing activities....................................... 46,168 29,756 3,893
Effect of exchange rate changes on cash......................................... (72) -- --
-------- -------- --------
Increase (decrease) in cash..................................................... (1,602) 3,192 (419)
Cash and cash equivalents at beginning of period................................ 3,264 72 491
-------- -------- --------
Cash and cash equivalents at end of period...................................... $ 1,662 $ 3,264 $ 72
======== ======== ========
Supplemental disclosure of cash flow information:
Cash paid during the period for:
Interest, net of amount capitalized......................................... $ 5,552 $ 765 $ 1,789
======== ======== ========
Income taxes................................................................ $ 247 $ 81 $ 144
======== ======== ========
</TABLE>

See accompanying notes.

F-18
<PAGE> 78

ALL AMERICAN COMMUNICATIONS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 1994

1. SIGNIFICANT ACCOUNTING POLICIES

Description of Business

All American Communications, Inc. ("AAC") and its wholly-owned
subsidiaries, All American Television, Inc. ("AATV"), Scotti Brothers
Entertainment Industries, Inc. ("SBEI") and All American Fremantle
International, Inc. ("AAFII") (collectively, the "Company" or "All American"),
produce and/or distribute, market and promote television programs and recorded
music both domestically and internationally.

Acquisitions

On August 3, 1994, the Company acquired (the "Fremantle Acquisition")
certain assets and securities and assumed certain liabilities of Fremantle
International, Inc. ("Fremantle") through the Company's newly formed
wholly-owned subsidiary, All American Fremantle International, Inc. ("AAFII").
The consideration for the Fremantle Acquisition consisted of 630,000 shares of
the Company's Common Stock, 25,200 shares of newly created Series B Convertible
Preferred Stock with an aggregate fair market value of $20,000,000 and
$31,500,000 in cash funded by the Fremantle Loan (See Note 5). The 25,200 shares
of Series B Convertible Preferred Stock have been converted into 2,520,000
shares of nonvoting Class B Common Stock following stockholder approval, in
December 1994, of the amendment to the Company's certificate of incorporation to
authorize creation of the Class B Common Stock. The shares of Class B Common
Stock are identical to the existing Common Stock except that they are nonvoting
other than as may be required by law. The Company has accounted for the
Fremantle Acquisition as a purchase and has allocated the purchase price based
on the estimated fair value of assets and liabilities acquired. The total
consideration of $52,527,000 (including expenses related to the acquisition of
$1,027,000) exceeds the estimated fair value of net assets acquired by
$50,267,000 (goodwill); such goodwill is being amortized over 25 years. Results
of operations of AAFII have been included in the Company's results from August
3, 1994.

The pro forma unaudited results from operations for the years ended
December 31, 1994 and 1993 assuming consummation of the Fremantle Acquisition at
January 1, 1993 follows:

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER
31,
---------------------
1994 1993
-------- --------
(IN THOUSANDS EXCEPT
PER SHARE AMOUNTS)
<S> <C> <C>
Revenues....................................................... $145,465 $131,464
Operating income............................................... $ 6,732 $ 13,370
Net income (loss).............................................. $ (1,102) $ 4,936
Earnings (loss) per share...................................... $ (.14) $ .62
</TABLE>

The pro forma information presented above is prepared for comparative
purposes only and does not purport to be indicative of what would have occurred
had the acquisition been made at January 1, 1993, or of the results which may
occur in the future.

On February 8, 1993 the Company completed the acquisition (the "LBS
Acquisition") of LBS Communications, Inc. ("LBS"), under an agreement ("LBS
Agreement") wherein the Company agreed, subject to various terms and conditions,
to purchase 100% of LBS' Class A Common Stock, constituting 100% of the
outstanding shares of capital stock of LBS. LBS is a company engaged in the
television syndication business. The purchase was made under an LBS plan of
reorganization ("Plan") as confirmed by the U.S. Bankruptcy Court for the
Southern District of New York ("Bankruptcy Court") on September 30, 1992. LBS is
operated as a subsidiary of AATV.

F-19
<PAGE> 79

ALL AMERICAN COMMUNICATIONS, INC. & SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

The purchase price paid by the Company for the stock of LBS consisted of
the following: (i) cash payment of $5,161,000 of which (x) $2,786,000 was paid
by the Company at closing, (y) $2,250,000 was obtained through a licensing
agreement between LBS and International Family Entertainment, Inc. with respect
to the animated series Heathcliff, and (z) $125,000 which was paid in January,
1994 by AATV under the terms of a non-interest bearing promissory note; and (ii)
the issuance of Common Stock warrants to certain creditors of LBS and other
third parties to acquire an aggregate of 281,250 shares of the Company's Common
Stock, $0.0001 par value per share ("Common Stock") at an exercise price of $11
per share. The Company also incurred approximately $3,000,000 of additional
costs and expenses related to the LBS Acquisition. In addition, the Company
became responsible for a portion of the occupancy expenses under LBS' office
lease in New York for a term which expired on October 31, 1993. The Company
satisfied an obligation of LBS by issuing a note payable for $299,000 with
interest at 8%, principal and interest due January 31, 1994 to a producer of a
television series in lieu of issuing such producer 36,000 shares of the
Company's Common Stock. Such note was fully paid in January, 1994.

The Company granted to The Bank of New York demand registration rights for
shares acquired through the exercise of its warrants obtained in connection with
the above LBS acquisition. In addition, the Company granted put rights
obligating it (i) to pay The Bank of New York $4.00 per warrant upon the Bank's
exercise of its put right after December 31, 1993 in respect of the warrants for
62,500 shares (such option was put to the Company in January, 1994 for $250,000)
and (ii) to pay $1,250,000 to The Bank of New York upon exercise of the put with
respect to the warrants for 156,250 shares during the 30-day period following
the first public release by the Company on Form 10-K or Form 10-Q on or prior to
December 31, 1995 showing that the Company has earned cumulative net pre-tax
income (net of losses) during the period from January 1, 1993, through the date
of the public report of $30,000,000.

The acquisition of LBS has been accounted for by the Company under the
purchase method of accounting. Accordingly, LBS' results of operations are
included in the Company's results from February 8, 1993, the date of purchase.

Basis of Presentation and Principles of Consolidation

The accompanying consolidated financial statements include the accounts of
AAC and subsidiaries; all significant intercompany balances and transactions
have been eliminated.

Recognition of Revenues

Minimum guaranteed amounts from domestic television sales generally are
recognized when the license period begins and the program becomes available
pursuant to the terms of the license agreement. Advertising revenues are
recognized upon the commencement of the license period of the program and when
the advertising time has been sold pursuant to non-cancelable agreements,
provided the program is available for its first broadcast. Foreign minimum
guaranteed amounts or outright fees are recorded as revenues and contracts
receivable on the date of the license agreement unless the program is not yet
available for exhibition. Revenues under foreign production agreements are
recognized as completed episodes are delivered. Deferred revenues consist
principally of advance payments received on television contracts for which the
program materials are not yet available for broadcast or exploitation.

The portion of recognized revenue which is to be shared with the producers
and owners of the licensed program material (participations payable and due to
producers) is accrued as the revenue is recognized.

In certain instances, the Company guarantees viewer ratings for its
syndicated programs. Applicable revenue is recorded net of estimated shortfalls,
which are settled either by additional advertising time (make goods) or cash
refunds to the advertiser. The Company provides for the full amount of the
estimated shortfall.

F-20
<PAGE> 80

ALL AMERICAN COMMUNICATIONS, INC. & SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Domestic revenues from recorded music are recognized as units are shipped
to customers. The Company provides for estimated future returns of recorded
music product at the time the products are initially sold. These provisions are
based upon historical experience. Actual returns are charged against the
reserve. Foreign distribution of recorded music is effected through a
distributor in exchange for guaranteed nonrefundable advances against future
royalties. Nonrefundable guarantees from foreign sales are recognized as product
is delivered to the Company's foreign distributor.

Cash Equivalents

The Company considers all highly liquid debt instruments purchased with an
original maturity of three months or less and investments in money market funds
to be cash equivalents.

Restricted Cash

Pursuant to the Company's lending agreements, substantially all cash
collected is required to be paid into accounts maintained by Chemical Bank and
applied to the repayment of the outstanding borrowings as specified in the
lending agreements (See Note 5). The cash held for repayment is included as
restricted cash. Additionally, amounts held in an interest bearing reserve
account with respect to Acapulco H.E.A.T. have been included as restricted cash
(See Note 10).

Inventory

Inventory consists of recorded music product and is carried at the lower of
cost or estimated net realizable value. Pursuant to the Company's distribution
agreement with Bertelsmann Music Group ("BMG"), BMG has a security interest in
the Company's master recordings at any time the Company owes money to BMG.

Television Program Costs

Television program costs consist of direct production costs, production
overhead, capitalized interest and certain exploitation costs, less accumulated
amortization. Such costs are stated at the lower of unamortized cost or
estimated net realizable value. Selling costs and other distribution costs which
are not recoverable from the producers share of revenues are charged to expense
as incurred.

Television program costs, and estimated total costs of participations and
residuals, are amortized under the individual film forecast method in the ratio
that current period revenue recognized bears to management's estimate of
remaining gross revenue to be recognized. Such estimates are re-evaluated
quarterly in connection with a review of the Company's inventory of television
product, and estimated losses, if any, are provided for in full.

Artist Compensation Cost

Royalties earned by artists from sales of recorded music are charged to
expense as the related revenues are recognized. Advances to artists against
future royalties are recorded as assets if the Company estimates the amount of
the advances will be recoverable from future royalties to be earned by the
artist, based upon the past performance and current popularity of the artist to
whom the advance is made. Such advances are applied against subsequent royalties
earned by the artist.

Depreciation and Amortization

Property and equipment are carried at cost and depreciation is computed
using accelerated and straight line methods over the estimated useful lives of
the assets; thirty years for the building and ranging from three to seven years
for the remaining assets. Leasehold improvements are amortized over the lesser
of the term of the lease or the estimated useful lives of the improvements.

F-21
<PAGE> 81

ALL AMERICAN COMMUNICATIONS, INC. & SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Goodwill is amortized on a straight-line basis over periods ranging from 10
to 25 years (principally 25 years).

Income Taxes

Effective January 1, 1993, the Company records its income tax provision in
accordance with Statement of Financial Accounting Standards No. 109, "Accounting
for Income Taxes" ("SFAS No. 109"). Prior to the adoption of SFAS No. 109,
income tax expense was determined using the liability method prescribed by
Statement of Financial Accounting Standards No. 96 ("SFAS No. 96") which was
superseded by SFAS No. 109. Among other changes, SFAS No. 109 changes the
recognition and measurement criteria for deferred tax assets included in SFAS
No. 96. Adoption of SFAS No. 109 did not have a material impact on the Company's
financial position or results of operations (See Note 9).

Deferred income taxes under the liability method arise primarily from the
differences in the timing of the recognition of certain television and recorded
music revenue and expense items for book and tax purposes.

The Company uses the flow-through method of accounting for unused
investment credits.

Share Information; Earnings Per Share

Primary earnings per share represents the per share income or loss
applicable to common stockholders and is computed based on the weighted average
common shares outstanding and dilutive Common Stock equivalents. The net income
for 1993 and 1992 have been adjusted for the dividend paid to Series A Preferred
stockholders and the accretion required to increase the carrying values of the
redeemable Series A Preferred and redeemable Common Stock to their mandatory
redemption amounts (See Notes 6 and 7). In addition, net income applicable to
common stockholders for the year ended December 31, 1993 includes $6,070,000
which represents the excess of the carrying value of the Redeemable Shares over
the price paid for their purchase; such treatment is in accordance with
Securities and Exchange Commission guidelines.

The fully diluted per share computation for 1993 reflects the effect of the
assumed conversion of the Company's 6 1/2% Convertible Subordinated Notes due
2003 (See Note 5) and increases net income applicable to common stockholders by
$666,000 for the elimination of interest expense on such notes, net of tax
benefits. Such assumed conversion is anti-dilutive for 1994.

Foreign Currency

Reclassifications

Certain reclassifications have been made to the 1993 and 1992 financial
statements to conform to the current year's presentation.

2. DISCONTINUED OPERATIONS

On December 1, 1992 the Company approved a formal plan to discontinue its
motion picture division which operations consisted of the production of feature
films. On February 8, 1993 the Company transferred its ownership of certain
indirect subsidiaries (Film Companies) which held rights to eight motion
pictures produced and/or distributed by the Film Companies to an unrelated third
party. The transferee acquired all of

F-22
<PAGE> 82

ALL AMERICAN COMMUNICATIONS, INC. & SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

the issued and outstanding stock of the Film Companies subject to certain
secured indebtedness in favor of Credit Lyonnais Bank Nederland (CLBN).

Revenues of the discontinued motion picture division were $2,132,000 for
the year ended December 31, 1992. In conjunction with the discontinuance, the
Company recorded a loss from discontinued operations and estimated loss on
disposal of $941,000, net of $629,000 in income tax benefits. The actual loss on
disposal approximated the Company's estimate.

3. PROPERTY AND EQUIPMENT

Property and equipment are comprised of the following:

<TABLE>
<CAPTION>
DECEMBER 31,
-------------------
1994 1993
------- -------
(IN THOUSANDS)
<S> <C> <C>
Land............................................................. $ 403 $ 403
Building and improvements........................................ 1,462 1,288
Sound studio and related equipment............................... 1,540 1,535
Office furniture and fixtures.................................... 3,079 1,658
Automobiles...................................................... 163 163
Other............................................................ 30 37
------- -------
6,677 5,084
Less accumulated depreciation and amortization................... (2,905) (2,426)
------- -------
$ 3,772 $ 2,658
======= =======
</TABLE>

4. TELEVISION PROGRAM COSTS

Costs for television programs are comprised of the following:

<TABLE>
<CAPTION>
DECEMBER 31,
-------------------
1994 1993
------- -------
(IN THOUSANDS)
<S> <C> <C>
Released, less accumulated amortization.......................... $64,780 $46,921
In process and development....................................... 3,657 5,460
------- -------
$68,437 $52,381
======= =======
</TABLE>

Based on management's estimates of gross revenues as of December 31, 1994,
approximately 76% of the unamortized costs applicable to released television
programming will be amortized during the three years ending December 31, 1997.
Interest capitalized to television program costs during the periods ended
December 31, 1994, 1993 and 1992 was approximately $399,000, $259,000 and
$277,000, respectively.

F-23
<PAGE> 83

ALL AMERICAN COMMUNICATIONS, INC. & SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

5. NOTES PAYABLE

Notes payable are comprised of the following:

<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
1994 1993
-------- -------
(IN THOUSANDS)
<S> <C> <C>
Notes payable to banks.......................................... $ 55,343 $ 125
Note payable to LBS creditor, 8%................................ -- 299
Convertible Subordinated Notes, 6 1/2%.......................... 60,000 60,000
-------- -------
$115,343 $60,424
======== =======
</TABLE>

In connection with the Fremantle Acquisition, the Company entered into a
Credit, Security, Guaranty and Pledge Agreement by and among the Company and
Chemical Bank (the "Fremantle Loan Agreement"), whereby AAFII obtained a term
loan in the aggregate amount of $35,000,000, from Chemical Bank (the "Fremantle
Loan"). The Fremantle Loan bears interest, at the Company's option, at either
(i) the London Interbank Offered Rate ("LIBOR") plus 3%, or (ii) at the
Alternate Base Rate (which is the greater of Chemical Bank's Prime Rate, its
Base CD Rate plus 1 1/4%, or the Federal Funds Effective Rate plus 1/2%) plus
2% (10.875% as of December 31, 1994). The applicable interest rate spread is
subject to an increase of 1/8 of 1% at six month intervals up to a maximum
increased spread of 2%. The Fremantle Loan is repayable in quarterly principal
installments of $1,500,000 commencing December 1994, increasing to $3,000,000 in
December 1995, and increasing again to $4,250,000 in December 1996 with a final
installment of $4,250,000 due August 1997 (each payment being subject to
reduction from certain prepayments). Interest is payable (i) on the last day of
the Interest Period (as defined in the Fremantle Loan Agreement) in the case of
Eurodollar Loans but no less often than quarterly or (ii) on the last business
day of each calendar quarter (commencing September 1994) in the case of
Alternate Base Rate Loans. The Fremantle Loan Agreement imposes a number of
financial and other conditions upon the Company, including limitations on
indebtedness, restrictions on the disposition of assets, restrictions on making
certain payments (including dividends) and certain financial tests. The
obligation is cross-collateralized with borrowings of the Company under the
Working Capital Loan Agreement and Production Loan Agreement as defined below.
Substantially all of AAFII's cash collections and certain payments from
Fremantle are required to be paid into accounts maintained by Chemical Bank and
applied, subject to certain exceptions for working capital and production costs,
to interest and principal amounts outstanding under the Fremantle Loan until
such time as the loan is repaid in full. As of December 31, 1994 payments of
$1,500,000 had been made to reduce the $35,000,000 principal balance.
Additionally, as of December 31, 1994, the Company is holding approximately
$7,516,000 in restricted cash balances from AAFII, a substantial portion of
which will be used to reduce the Fremantle Loan balance.

On February 8, 1993, the Company entered into a Credit, Security, Guaranty
and Pledge Agreement among the Company and Chemical Bank (the "Working Capital
Loan Agreement"), whereby the Company obtained a revolving credit facility, the
total commitment of which is $7,500,000, from Chemical Bank (the "Working
Capital Loan"). Concurrently with the execution of the Working Capital Loan
Agreement, the Company also entered into a Credit, Security, Guaranty and Pledge
Agreement among the Company and a syndicate of lenders led by Chemical Bank and
including De Nationale Investeringsbank N.V. and Kredietbank S.A.
Luxembourgeoise (the "Production Loan Agreement"), pursuant to which the Company
has obtained a revolving credit facility with commitments of up to $17,500,000
in the aggregate for production of Baywatch (the "Production Line"). On August
2, 1993, an additional lender was included in the Production Line facility and
the line was increased to a maximum of $20,000,000. The obligations of the
Company under the Working Capital Loan Agreement are cross-collateralized with
those of the Company under the Production Loan Agreement.

F-24
<PAGE> 84

ALL AMERICAN COMMUNICATIONS, INC. & SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Under the Working Capital Loan Agreement and the Production Loan Agreement,
the terms and conditions of which are substantially similar, the amount the
Company may borrow is based upon the value of the collateral in the borrowing
base which consists principally of accounts receivable and certain other assets
of the Company (although the Production Line borrowing base is calculated
independently of the Working Capital Loan borrowing base and is based only on
Baywatch accounts receivable). Borrowings bear interest either (i) at LIBOR plus
3%, or (ii) at the Alternate Base Rate (which is the greater of Chemical Bank's
Prime Rate, its Base CD Rate plus 1 1/4%, or the Federal Funds Effective Rate
plus 1/2%) plus 2% (10.875% as of December 31, 1994), and were originally
scheduled to mature on October 31, 1994. In July 1994, the Company extended the
maturity date of the Production Line to October 1995. In October 1994, the
Company extended the maturity date of the Working Capital Loan to January 31,
1995 and in January 1995 the Working Capital Loan was extended to April 28,
1995. In addition, the Working Capital Loan Agreement provides for the issuance
of letters of credit on behalf of the Company. These facilities impose a number
of financial and other conditions upon the Company, including limitations on
indebtedness, restrictions on the disposition of assets, restrictions on making
certain payments (including dividends except to the extent dividends are
required to be paid on the Company's Series A Preferred Stock) and certain
financial tests. Additionally, the Production Loan Agreement provides that
certain conditions precedent must be satisfied before funding of each season of
the Baywatch series.

Substantially all of the Company's cash collections are required to be paid
into accounts maintained by Chemical Bank and applied to the repayment of the
Company's revolving credit obligations under the Working Capital Loan Agreement
and the Production Loan Agreement. The amount the Company is able to reborrow
under these facilities is subject to the ability of the Company to pledge
collateral to the banks with sufficient value to collateralize such borrowings.
Substantially all of the Company's assets are pledged under the Working Capital
and Production Loan Agreements except the real property owned by the Company and
certain physical record inventory. At December 31, 1994, the Company had
$2,072,000 and $3,585,000 available for borrowing under the Working Capital Loan
and the Production Line, respectively, and $5,428,000 was outstanding under the
Working Capital Loan and $16,415,000 was outstanding under the Production Line.

During the third quarter of 1993, the Company issued a note payable for
$299,000 to a creditor of LBS in lieu of issuing 36,000 shares of the Company's
Common Stock to such creditor. Such amount was repaid during the first quarter
of 1994.

In October 1993, the Company issued its 6 1/2% Convertible Subordinated
Notes Due 2003 (the "Notes") in the aggregate principal amount of $60,000,000.
The Company received net proceeds of approximately $56,793,000 from the issuance
of the Notes. A portion of the proceeds were used to repurchase and retire all
of the issued and outstanding shares of redeemable Series A Preferred Stock and
redeemable Common Stock of the Company (collectively, the "Redeemable Shares"),
to temporarily repay all amounts outstanding under the Chemical Facilities, and
for general corporate purposes.

The Notes were issued pursuant to a Fiscal Agency Agreement, dated as of
October 6, 1993 (the "Fiscal Agency Agreement"), between the Company and
BankAmerica National Trust Company, as Fiscal Agent (the "Fiscal Agent"). The
following description of the Notes summarizes the detailed provisions of the
Notes and the Fiscal Agency Agreement.

The Notes bear interest from October 6, 1993 at the rate of 6 1/2% per
annum, payable semiannually in arrears on each April 1 and October 1, commencing
on April 1, 1994. Interest on the Notes will be paid on the basis of a 360-day
year of twelve 30-day months. The Notes will mature on October 1, 2003 and upon
maturity will be redeemed at 100% of the principal amount thereof.

The Notes are subordinated in right of payment to the prior payment in full
of all Senior Indebtedness (as defined in the Notes and the Fiscal Agency
Agreement) of the Company.

F-25
<PAGE> 85

ALL AMERICAN COMMUNICATIONS, INC. & SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Except for certain limitations, the Notes are convertible into Common
Stock, initially at a conversion price of $11.50 per share (equivalent to 86.957
shares of Common Stock for each $1,000 principal amount of Notes) prior to
redemption or maturity. The conversion price is subject to adjustment in certain
events as set forth in the Fiscal Agency Agreement. The underlying shares have
been registered with the Securities and Exchange Commission (the "Commission")
pursuant to a registration statement filed on Form S-1 declared effective by the
Commission in February, 1994.

In January 1994, the Company paid a note payable of $125,000 to the Bank of
New York that was due December 31, 1993.

The Company is currently in negotiations for a new senior credit facility
(the "Senior Credit Facility Agreement"), with a syndicate of lenders led by
Chemical Bank consisting of the following four tranches: (A) a term loan, the
total commitment of which is expected to be $30,000,000 (the "Term Loan" or
"Tranche A") and which will be utilized to refinance existing bank debt incurred
in connection with the Fremantle Acquisition; (B) a revolving credit facility of
up to $20,000,000 in the aggregate to be utilized for production of Baywatch and
a portion of which is expected to be initially utilized to refinance existing
bank debt related to production of Baywatch during the 1994/1995 broadcast
season (the "Baywatch Production Line" or "Tranche B"); (C) a revolving credit
facility, of up to $20,000,000 in the aggregate for production of Baywatch
Nights (the "Baywatch Nights Production Line" or "Tranche C"); and (D) a
revolving credit facility of up to $40,000,000 to be utilized to finance certain
working capital needs of the Company and a portion of which is expected to be
initially used to refinance existing bank debt related to the Company's working
capital needs (the "Working Capital Line" or "Tranche D"). The Working Capital
Line together with the Term Loan, the Baywatch Production Line and the Baywatch
Nights Production Line are referred to collectively as the "Chemical Bank
Facilities". The obligations of the Company under the Chemical Bank Facilities
are to be cross-collateralized with one another and mature on December 31, 1998.
Under the expected terms of the Senior Credit Facility Agreement, the amount the
Company may borrow under Tranche B, C and D will be based upon the value of the
collateral in the applicable borrowing base which consists principally of
accounts receivable and certain other assets of the Company. Borrowings under
the Chemical Bank Facilities are expected to bear interest, at the Company's
option, either (i) at LIBOR plus 2 3/4%, or (ii) at the Alternate Base Rate
(which is the greater of Chemical Bank's Prime Rate, its Base CD Rate plus 1%,
or the Federal Funds Effective Rate plus 1/2%) plus 1 3/4%, subject to
reduction if certain financial ratios are satisfied. The Chemical Bank
Facilities are expected to impose a number of financial and other conditions
upon the Company, similar to the provisions under the Company's existing
Chemical Bank facilities, including limitations on indebtedness, restrictions on
the disposition of assets, restrictions on making certain payments (including
dividends) and certain financial tests.

Under the terms of the Chemical Bank Facilities substantially all of the
Company's cash collections will be required to be paid into accounts maintained
by Chemical Bank and applied to the repayment of the Company's revolving credit
obligations under the Chemical Bank Facilities. The amount the Company will be
able to reborrow under the Chemical Bank Facilities is subject to the ability of
the Company to pledge collateral to the banks with sufficient value to
collateralize such borrowings. Substantially all of the Company's assets will be
pledged under the Chemical Bank Facilities except the real property owned by the
Company and certain physical record inventory. It is currently expected that the
Chemical Bank Facilities will be consummated in April 1995. The Company's
ability to meet its working capital requirements for its planned

F-26
<PAGE> 86

ALL AMERICAN COMMUNICATIONS, INC. & SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

production and distribution activities is dependent, in part, upon the
completion of the Chemical Bank Facilities or the availability of other similar
financing or refinancing. There is no assurance that the Company will be
successful in obtaining the Chemical Bank Facilities on or prior to April 28,
1995, the maturity date of the Working Capital Loan, or that in the event
thereof, the Company will be able to further extend the maturity date of the
Working Capital Loan.

6. CAPITAL STOCK

In August 1994, in connection with the Fremantle Acquisition, the Company
issued 630,000 shares of its Common Stock and 2,520,000 shares of its Class B
non-voting Common Stock (See Note 1).

In October, 1993, the Company used part of the net proceeds from issuance
of the Notes (See Note 5) to repurchase and retire all of the Redeemable Shares.
As a consequence of the repurchase and retirement of such stock, the difference
between the current carrying value and the repurchase price (including related
costs) in the amount of $6,070,000 was credited to additional paid-in capital.

During 1993 and 1992, the carrying value of the Redeemable Shares was
adjusted to reflect the accretion required to increase the carrying values to
their mandatory redemption amounts. The increase in the carrying amount for the
years ended December 31, 1993 and 1992 totaled $1,608,000 and $1,928,000,
respectively. The Redeemable Shares were repurchased by the Company in October
1993.

In 1992, an employee and relative of an officer issued a promissory note in
the amount of $77,000 in consideration for shares of the Company's Common Stock.
The note bears interest at 6.35% and is payable in 5 annual equal installments
through 1997. In 1990, three officers of the Company issued the Company
promissory notes in the aggregate amount of $510,000 in consideration for shares
of the Company's Common Stock. The notes bear interest at rates ranging from
8.5% to 10.4% and are payable in five annual equal installments through 1995.

7. STOCK OPTIONS AND WARRANTS

The Company's 1994 Incentive Stock Option Plan (the "1994 Plan") provides
for the granting of stock incentive awards ("Awards") for up to 1,250,000 shares
of its Common Stock to eligible employees, directors and consultants. The 1994
Plan, which will terminate June 21, 2004, is administered by a committee
appointed by the Board of Directors (the "Committee") which determines the
number of shares to be covered by an award, the term and exercise price, if any,
of the award and other terms and provisions of awards.

Awards can be Stock Options ("Options"), Stock Appreciation Rights
("SARs"), Performance Share Awards ("PSAs") and Restricted Stock Awards
("RSAs"). The number and kind of shares available under the 1994 Plan are
subject to adjustment in certain events. Shares relating to Options or SARs
which are not exercised, shares relating to RSAs which do not vest and shares
relating to PSAs which are not issued will again be available for issuance under
the 1994 Plan.

An Option may be an incentive stock option ("ISO") or a non-qualified
Option. The exercise price for Options is to be determined by the Committee, but
in the case of an ISO is not to be less than fair market value on the date the
Option is granted (110% of fair market value in the case of an ISO granted to
any person who owns more than 10% of the Common Stock). The purchase price is
payable in any combination of cash, shares of Common Stock already owned by the
participant for at least six months or, if authorized by the Committee, a
promissory note secured by the Common Stock issuable upon exercise. In addition,
the award agreement may provide for "cashless" exercise and payment. Subject to
early termination or acceleration provisions, an Option is exercisable, in whole
or in part, from the date specified in the related award agreement (which may be
six months after the date of grant) until the expiration date determined by the
Committee. The aggregate fair market value (determined on the date of grant) of
the shares of Common Stock for which ISOs may be granted to any participant
under the 1994 Plan and any other plan by the Company or its

F-27
<PAGE> 87

ALL AMERICAN COMMUNICATIONS, INC. & SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

affiliates which are exercisable for the first time by such participant during
any calendar year may not exceed $100,000.

The Options granted under the 1994 Plan become exercisable on such dates as
the Committee determines in the terms of each individual Option. Options become
immediately exercisable in full in the event of a disposition of all or
substantially all of the assets or capital stock of the Company by means of a
sale, merger, consolidation, reorganization, liquidation or otherwise, unless
the Committee arranges for the optionee to receive new Options covering shares
of the corporation purchasing or acquiring the assets or stock of the Company,
in substitution of the Options granted under the Plan (which Options shall
thereupon terminate). The Committee in any event may, on such terms and
conditions as it deems appropriate, accelerate the exercisability of Options
granted under the Plan. An ISO to a holder of more than 10% of the total
combined voting power of all classes of stock of the Company must expire no
later than five years from the date of grant. A non-qualified Option must expire
no later than ten years from the date of the grant.

The Options granted under the 1994 Plan are not transferable other than by
will or the laws of descent and distribution. Unexercised Options generally
lapse three months after termination of employment other than by reason of
retirement, disability or death in which case it terminates one year thereafter.

An SAR is the right to receive payment based on the appreciation in the
fair market value of Common Stock from the date of grant to the date of
exercise. In its discretion, the Committee may grant an SAR concurrently with
the grant of an Option. An SAR is only exercisable at such time, and to the
extent, that the related Option is exercisable. Upon exercise of an SAR, which
was issued concurrent with an Option, the holder receives for each share with
respect to which the SAR is exercised an amount equal to the difference between
the exercise price under the related Option and the fair market value of a share
of Common Stock on the date of exercise of the SAR. The Committee in its
discretion may pay the amount in cash, shares of Common Stock, or a combination
thereof.

An RSA is an award of a fixed number of shares of Common Stock subject to
restrictions. The Committee specifies the prices, if any, the recipient must pay
for such shares. Shares included in an RSA may not be sold, assigned,
transferred, pledged or otherwise disposed of or encumbered until they have
vested. These restrictions may not terminate earlier than six months after the
award date. The recipient is entitled to dividend and voting rights pertaining
to such RSA shares even though they have not vested, so long as such shares have
not been forfeited.

A PSA is an award of a fixed number of shares of Common Stock, the issuance
of which is contingent upon the attainment of such performance objectives, and
the payment of such consideration, if any, as is specified by the Committee.
Issuance shall in any case not be earlier than six months after the award date.

The 1994 Plan also provides for certain stock depreciation protections, tax
offset bonuses and tax withholding using shares of Common Stock instead of cash.

Upon the date a participant is no longer employed by the Company for any
reason, shares subject to the participant's RSAs which have not become vested by
that date or shares subject to the participant's PSAs which have not been issued
shall be forfeited in accordance with the terms of the related Award agreements.
Options which have become exercisable by the date of termination of employment
or of service on the Committee must be exercised within certain specified
periods of time from the date of termination, the period of time to depend on
the reason for termination. Options which have not yet become exercisable on the
date the participant terminates employment or service on the Committee for a
reason other than retirement, death or total disability shall terminate on that
date.

In the event a change in control occurs, all of the outstanding options may
be accelerated. The 1994 Plan defines a change in control to have occurred if a
"person," as defined in Section 13(d) and 14(d) under the

F-28
<PAGE> 88

ALL AMERICAN COMMUNICATIONS, INC. & SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Securities Exchange Act of 1934, as amended, acquires 20% or more of the
outstanding shares of Common Stock of the Company unless waived in advance by
Committee.

The 1994 Plan provides for anti-dilution adjustments in the event of a
reorganization, merger, combination recapitalization, reclassification, stock
dividend, stock split or reverse stock split; however, no such adjustment need
be made if it is determined that the adjustment may result in the receipt of
federally taxable income to optionees of the holders of Common Stock or other
classes of the Company's securities. Upon the dissolution or liquidation of the
Company, or upon a reorganization, merger or consolidation of the Company as a
result of which the Company is not the surviving entity, the Plan shall
terminate, and any outstanding awards shall terminate and be forfeited unless
assumed by the successor corporation.

The Company's 1991 Incentive Stock Option Plan (the "1991 Plan"), as
amended, provides for the granting of options for up to 1,200,000 shares of its
Common Stock to eligible employees and directors. Under the 1991 Plan, options
are granted at no less than fair market value on the date of grant. The period
during which these options are exercisable is fixed by the Stock Option
Committee at the time of grant. Options generally expire if not exercised within
ten years (or five years in the case of an employee owning 10% or more of the
Company's stock on the date of grant).

The following table summarizes stock option transactions under the 1991
Plan and 1994 Plan (the "Plans") for the remaining unexercised stock options and
remaining unexercised warrants and stock options granted outside of the Plans:

<TABLE>
<CAPTION>
1991 PLAN AND 1994 PLAN OUTSIDE OF THE PLANS
--------------------------- ---------------------------
NUMBER OF NUMBER OF
SHARES PRICE PER SHARE SHARES PRICE PER SHARE
--------- --------------- --------- ---------------
<S> <C> <C> <C> <C>
Outstanding at December 31,
1991........................ 23,063 $11.00 - $30.00 375,000 $4.00
Granted....................... 80,000 2.63 - 7.25 357,143 7.50
Exercised..................... -- --
Canceled...................... -- --
------- ---------
Outstanding at December 31,
1992........................ 103,063 2.63 - 30.00 732,143 4.00 - 7.50
Granted....................... 5,000 7.00 306,250 4.00 - 18.00
Exercised..................... -- --
Canceled...................... (18,750) 7.25 (25,000 ) 12.00 - 18.00
------- ---------
Outstanding at December 31,
1993........................ 89,313 2.63 - 30.00 1,013,393 4.00 - 11.00
Granted....................... 490,500 7.63 - 8.50 --
Exercised..................... -- (62,500 ) 4.00
Canceled...................... (12,500) 11.00 (633,929 ) 4.00 - 7.50
------- ---------
Outstanding at December 31,
1994........................ 567,313 2.63 - 30.00 316,964 4.00 - 11.00
------- ---------
</TABLE>

Options and warrants exercisable at December 31,

<TABLE>
<CAPTION>
UNDER THE 1991 PLAN
AND 1994 PLAN OUTSIDE OF THE PLANS
------------------- --------------------
<S> <C> <C>
1994............................................. 63,063 316,964
1993............................................. 51,813 983,393
</TABLE>

As of July 6, 1994, in connection with the employment agreement of an
officer (such officer also being a Director), the Company granted an RSA for
30,000 shares with a vesting date of July 5, 1998. The RSA

F-29
<PAGE> 89

ALL AMERICAN COMMUNICATIONS, INC. & SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

shares are subject to the terms of the 1994 Plan and the officer's employment
agreement. Based on a closing bid price on July 6, 1994 of $7.25 per share, this
grant is expected to generate expense of approximately $218,000 through July 5,
1998.

As of December 31, 1994, there have been no other SARs, PSAs or RSAs
granted.

Shares of the Company's Common Stock reserved for issuance follow:

<TABLE>
<CAPTION>
DECEMBER 31,
-----------------
1994 1993
------- ------
(IN THOUSANDS)
<S> <C> <C>
1991 Plan and 1994 Plan............................................. 2,450 1,200
Non-Plan options and warrants granted............................... 317 1,013
Common Stock Class B -- non-voting.................................. 2,520 --
6 1/2% Convertible Subordinated Notes............................... 5,217 5,217
------ -----
10,504 7,430
====== =====
</TABLE>

8. RELATED PARTY TRANSACTIONS

During 1994 the Company loaned $250,000 to Thomas Bradshaw, the Company's
Chief Financial Officer, which loan is secured by a pledge of shares of Common
Stock of the Company owned by Mr. Bradshaw. The loan bears interest at a rate of
8.0% per annum (equal to the rate then in effect under the Company's Working
Capital Loan) and will mature upon expiration of Mr. Bradshaw's employment
agreement which is currently February 1996. The loan has been included with
other assets in the accompanying consolidated balance sheet at December 31,
1994.

The Company engaged Jefferson Capital Group ("JCG") to provide investment
banking services to the Company in connection with the Fremantle Acquisition,
including valuation of the transaction, pricing and financing for fees and
expenses totaling $319,000. A member of the Company's Board of Directors is the
President and a significant stockholder of JCG. The Company also agreed to
indemnify JCG against any liabilities it incurs in connection with the
acquisition of Fremantle, except due to JCG's gross negligence or willful
misconduct.

The Company engaged JCG to provide investment banking services to the
Company in connection with the LBS Acquisition, including valuation of the
transaction, pricing and financing for a fee of $100,000. During 1991 and 1992
in consideration for certain services the Company issued to JCG warrants to
acquire 98,214 shares of Common Stock at exercise prices ranging from $4.00 to
$7.50 per share, which may be exercised for up to five years from the date of
issuance. The Company has also agreed to indemnify JCG against any liabilities
it incurs in connection with the LBS Acquisition, except due to JCG's gross
negligence or willful misconduct.

One officer/stockholder/director and one director of AAC are members of the
Board of Directors of LIVE. A subsidiary of LIVE distributed certain films
produced in prior years by the Company in the domestic video market. AAC had
revenues from sales to LIVE and its affiliates of approximately $1,500,000
during the year ended December 31, 1992. The film operations were discontinued
effective December 1992. (See Note 2 regarding discontinued film operations).

Certain officers/stockholders of the Company have issued to SBEI promissory
notes in consideration for the shares of SBEI Common Stock purchased by them
before the Merger. Principal and interest under the notes are payable in five
equal annual installments. The principal balance outstanding on such notes as of
December 31, 1994 was approximately $153,000.

F-30
<PAGE> 90

ALL AMERICAN COMMUNICATIONS, INC. & SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

SBEI currently leases a building from two officers/members of the Board of
Directors of the Company at a cost to SBEI of approximately $4,400 per month,
which the Company believes is a market rate. This building is used for office
and warehouse space for the Company's recorded music operations.

9. INCOME TAXES

The provision for income taxes related to continuing operations is
comprised of the following:

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------
1994 1993 1992
----- ---- ----
(IN THOUSANDS)
<S> <C> <C> <C>
Current:
Federal.................................................... $ -- $ -- $ --
State and local............................................ 13 14 11
Foreign.................................................... 646 67 127
----- ---- ----
659 81 138
Deferred:
Federal.................................................... (329) 67 632
State...................................................... -- 27 157
----- ---- ----
(329) 94 789
----- ---- ----
$ 330 $175 $927
===== ==== ====
</TABLE>

Components of deferred income taxes as calculated under SFAS 109 as of
December 31, 1994 and 1993 are as follows:

<TABLE>
<CAPTION>
DECEMBER 31,
-------------------
1994 1993
------- -------
(IN THOUSANDS)
<S> <C> <C>
Amortization and depreciation.................................... $(9,627) $(7,283)
Accruals not currently deductible for tax purposes............... 6,874 5,901
Deferred revenues................................................ 103 314
Net operating loss carryover..................................... 2,466 672
Foreign tax and investment tax credit carryover.................. 1,384 1,205
------- -------
1,200 809
Valuation allowance.............................................. (965) (903)
------- -------
$ 235 $ (94)
======= =======
</TABLE>

Components of deferred income taxes for the year ended December 31, 1992
are as follows:

<TABLE>
<S> <C>
Amortization and depreciation................................................ $ 775
Accruals not previously deductible for tax expense........................... (371)
Inventory capitalization..................................................... 162
Accelerated deductions....................................................... 111
Other........................................................................ 112
-----
$ 789
=====
</TABLE>

F-31
<PAGE> 91

ALL AMERICAN COMMUNICATIONS, INC. & SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Reconciliation of effective rate of income taxes related to continuing
operations:

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------
1994 1993 1992
----- ---- -----
(IN THOUSANDS)
<S> <C> <C> <C>
Provision for income taxes at statutory federal rate of
35%....................................................... $ 275 $189 $ 949
State and local income taxes................................ 9 9 111
Foreign income taxes........................................ 646 67 127
Utilization of net operating losses, foreign and investment
tax credits............................................... (329) -- (343)
Tax deductible items and other items........................ (271) (90) 83
----- ---- -----
Provision for income taxes.................................. $ 330 $175 $ 927
===== ==== =====
</TABLE>

Foreign taxes withheld on revenues were utilized for financial reporting
purposes in determining the provision for income taxes. These amounts withheld
in the periods ended December 31, 1994, 1993 and 1992 were $646,000, $67,000 and
$127,000, respectively.

At December 31, 1994, the Company had available for federal income tax
purposes a net operating loss carryover of approximately $6,165,000 expiring
through 2009, unused investment tax credits of approximately $238,000 expiring
in 2001 and 2002 and unused foreign tax credits of approximately $1,146,000
expiring from 1995 to 1999.

10. COMMITMENTS AND CONTINGENCIES

The Company has exercised its option with the producers of Baywatch to
produce 22 episodes of Baywatch for the 1995/1996 broadcast season. As of
December 31, 1994, two of the episodes for the 1995/ 1996 broadcast season have
been completed. The total production budget of approximately $22,000,000 for the
1995/1996 broadcast season is expected to be funded through a combination of:
(i) borrowings under the proposed Chemical Bank Facilities; (ii) cash payments
by The Fremantle Corporation (an unrelated company); and (iii) working capital.

The Company has entered into an agreement to produce a spin-off of
Baywatch, Baywatch Nights, which is currently scheduled to commence production
in March 1995 for initial airing in first-run syndication in the 1995/1996
broadcast season. The Company currently plans to self-distribute Baywatch Nights
both domestically and internationally. The total production budget for the 22
planned new one-hour episodes for the 1995/ 1996 broadcast season of
approximately $22,000,000 is expected to be funded through (i) borrowings under
the proposed Chemical Bank Facilities, (ii) foreign sales agreements and (iii)
working capital.

The Company is distributing the series The New Family Feud for the
1994/1995 broadcast season and distributed the series for the 1993/1994
broadcast season. The Company guaranteed the producers, $6,300,000 and
$7,500,000 for the 1993/1994 and 1994/1995 broadcast seasons, respectively. As
of November 1, 1994, the 1993/1994 guarantee had been satisfied through a
combination of payments by the Company and collections of cash license fees by
the producer. With respect to the 1994/1995 broadcast season, the Company's
guarantee is payable in 15 monthly installments of $500,000 each, which
commenced on July 15, 1994, reducible by a certain amount if the Company
exercises its right to reduce the number of new one-hour programs from 26 to 23
and an additional $120,000 upon the occurrence of certain other specified
conditions. Through March 10, 1995, $4,000,000 of the 1994/1995 guarantee has
been satisfied by the Company. The Company has elected not to exercise its
option to continue distributing the show for the 1995/1996 broadcast season.

In January 1995, the Company structured an arrangement with United
Television/Chris Craft Industries, Inc. ("Chris Craft") whereby the Company was
engaged through September 1997 as the exclusive domestic television distributor
for The Richard Bey Show, a five day per week one-hour talk show. Chris Craft
has

F-32
<PAGE> 92

ALL AMERICAN COMMUNICATIONS, INC. & SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

retained the right, which right must be exercised on or prior to December 1,
1995, to buy-out the Company's distribution of the show during the 1996/1997
broadcast season at a price equal to the Company's distribution fee that season.
Chris Craft has agreed to deliver 39 weeks of original one-hour programs during
each 39 week broadcast season and to air The Richard Bey Show on Chris Craft's
six owned and operated stations (WWOR-TV New York, KCOP Los Angeles, KBWK San
Francisco, KMSP Minneapolis, KUTP Phoenix, and KPTV Portland).

In June 1993, the Company entered into an agreement with Richard and Esther
Shapiro pursuant to which the Company was granted a six-month period to arrange
for the development, production and exploitation of a television series
presently entitled The Malibu Branch. In February 1995, the ABC Network agreed
to pay a license fee of $2,850,000 for the production of a two-hour pilot and
retained the right to order production and licensing of a minimum of 13 episodes
of the series for the 1995/1996 broadcast season. The estimated production
budget of the two-hour pilot is approximately $3,200,000 which the Company
expects to finance through the ABC Network license fee and distribution in
certain international markets. Production of the pilot commenced in March 1995
and the Company anticipates delivery of the completed pilot to the ABC Network
in May 1995. There can be no assurance that the ABC Network will exercise its
series option.

In December 1993, the Company entered into an arrangement with DIC
Productions, L.P. ("DIC") pursuant to which the Company was engaged as the
domestic broadcast television distributor (excluding Puerto Rico) for SuperHuman
Samurai Syber Squad for the 1994/1995 broadcast season. The arrangement called
for the Company to make certain payments towards the costs of media buying and
certain other miscellaneous costs against a percentage of the producer's future
royalties. The parties shall mutually determine on or prior to December 31 of
each subsequent broadcast season whether to produce additional new episodes for
such broadcast season. The parties have determined that DIC shall not produce
any new episodes for the 1995/1996 broadcast season. The Company will have the
right to continue to distribute the previously produced episodes in the
1995/1996 broadcast season and in subsequent broadcast seasons if the Company
exercises its option to do so on or prior to April 15th and if the show is being
syndicated to a minimum of 70% of the domestic television market. As of March
10, 1995, the 1995/1996 broadcast season of SuperHuman Samurai Syber Squad had
been cleared in approximately 56% of the domestic television market. The Company
continues to seek additional clearances for this show. There can be no
assurance, however, that the Company will be able to obtain additional
clearances or that it will continue to distribute the show.

In November 1993, the Company entered into an agreement with Telescene Film
Group ("Telescene") for Telescene to produce 22 episodes of Sirens, a weekly
one-hour action drama series and for the Company to distribute the series Sirens
throughout the world (excluding Canada) for the 1994/1995 broadcast season. The
original 13 episodes of Sirens initially aired on the ABC Network in the
1992/1993 broadcast season. Through March 10, 1995, Sirens had been syndicated
to approximately 80% of the domestic television market. The Company guaranteed
the producers approximately $434,000 per episode for the 22 episodes produced
for the 1994/1995 broadcast season (for an aggregate of $9,548,000). As of March
10, 1995, the Company has made guarantee payments to the producers totaling
$8,144,000. Pursuant to the Company's agreement with Telescene, the Company has
determined that it will not distribute the series for the 1995/1996 broadcast
season.

Minimum commitments for advances to recording artists at December 31, 1994
amounted to approximately $1,129,000.

In September 1994, the Company filed a complaint as amended against the
producers of the series Acapulco H.E.A.T. in the Superior Court of the State of
California alleging, among other things, breach of contract and fraud. The
Company had entered into an agreement, dated as of October 7, 1992, with the
producers for the Company to distribute the series Acapulco H.E.A.T. in the
domestic television market. Subject to the fulfillment of certain terms by the
producer, the Company agreed to pay a distribution advance of $6,600,000 (plus
an additional amount per episode under certain circumstances) payable over ten
months

F-33
<PAGE> 93

ALL AMERICAN COMMUNICATIONS, INC. & SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

commencing November 30, 1993. The Company has discontinued making such advance
payments. As of December 31, 1994, the Company had made payments totaling
approximately $4,698,000 at which time a dispute with the producers with regard
to the non-fulfillment of certain terms by the producers was raised by the
Company. The unpaid portion of the advance payments, totaling approximately
$2,476,000, has been placed in an interest-bearing restricted cash account
pending resolution of the dispute. The producers have filed an answer and
cross-complaint alleging, among other things, breach of contract and fraud in
connection with the agreement to distribute Acapulco H.E.A.T. and breach of
contract and fraud in connection with the Company's barter distribution of
certain theatrical films unrelated to Acapulco H.E.A.T. The Company did not
exercise its option, to distribute any additional new episodes of Acapulco
H.E.A.T. for the 1994/1995 broadcast. The Company intends to vigorously pursue
its claim and defend against the cross-complaint. The litigation is currently in
the discovery phase and depositions continue to be scheduled. Management does
not believe the ultimate outcome of this matter will result in a materially
adverse effect on the Company's financial condition or results of operations.
However, there can be no assurance that the Company will be successful on the
merits of the lawsuit.

On December 12, 1994, Credit Lyonnais Bank Nederland N.V. ("CLBN") made
demand upon SBEI under a Guarantee dated July 29, 1986 (the "SBEI Guarantee"),
for payment of approximately $3,742,000 plus interest accrued or costs booked
since November 11, 1994 under a Loan and Security Assignment dated July 29, 1986
between CLBN and various former subsidiaries of SBEI relating to the
discontinued motion picture operations of the Company. See Note 2. In a letter
dated December 22, 1994, SBEI rejected the foregoing demand based upon, among
other reasons, the following: (a) that in a January 1993 agreement CLBN agreed
to release all liens and any interests in any property or assets of SBEI, which
in effect released SBEI from any obligations under the SBEI Guarantee; (b) that
the loan purportedly guaranteed has been repaid; and (c) that SBEI is not a
party to and was not bound by a material amendment to the above-referenced Loan
and Security Assignment.

In addition, since approximately November 1993, CLBN and its
representatives have been reviewing certain books and records relating to the
distribution and production of certain motion pictures by Minority Pictures,
Inc. (formerly Scotti Brothers Pictures, Inc.) or its subsidiaries for which
CLBN provided financing. In October 1994, CLBN requested that Minority Pictures,
Inc. and various of its current and former affiliates (including All American
Communications, Inc. and certain of its subsidiaries) execute a tolling
agreement which would have tolled any claims which CLBN may have against such
persons, including but not limited to causes of action based on such financing.
In December 1994, the Company responded that based upon the information provided
by CLBN, or the lack thereof, it was extremely unclear whether there were any
tenable claims against the Company and its subsidiaries and that the Company was
therefore unwilling to enter into any tolling agreement. While the Company
believes that SBEI has good and meritorious defenses with respect to the SBEI
Guarantee and any related claims which CLBN may assert, and that the ultimate
outcome of this matter will not result in a materially adverse effect on the
Company's financial condition or results of operations, there can be no
assurance that the Company ultimately will prevail.

The Company is party to legal proceedings which are routine and incidental
to the business. The Company believes that the results of such litigation will
not have a material adverse effect on the Company's financial condition or
results of operations.

F-34
<PAGE> 94

ALL AMERICAN COMMUNICATIONS, INC. & SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

The Company leases office and production studio space under operating
leases expiring at various dates through 2005. Renewal options are available on
certain of these leases. The minimum lease payments, net of minimum sublease
income, under noncancellable operating leases at December 31, 1994 are as
follows:

<TABLE>
<CAPTION>
MINIMUM AMOUNTS
-----------------------------------
LEASE SUBLEASE NET LEASE
PAYMENTS INCOME PAYMENTS
-------- -------- ---------
(IN THOUSANDS)
<S> <C> <C> <C>
1995.......................................... $ 1,438 $ 64 $ 1,374
1996.......................................... 1,993 258 1,735
1997.......................................... 1,785 258 1,527
1998.......................................... 1,690 65 1,625
1999.......................................... 1,298 -- 1,298
Thereafter.................................... 4,974 -- 4,974
------- ---- -------
$13,178 $645 $12,533
======= ==== =======
</TABLE>

Rent expense of approximately $912,000, $702,000 and $297,000 is net of
sublease income of $57,000, $45,000 and $0 in the years ended December 31, 1994,
1993 and 1992, respectively.

11. FINANCIAL INSTRUMENTS

Concentration of Credit Risk

Financial instruments that potentially subject the Company to significant
concentrations of credit risk consist principally of cash, restricted cash and
trade receivables.

The Company maintains its cash and restricted cash balances at various
financial institutions. These financial institutions are throughout the world
and Company policy is designed to limit exposure to any one institution. The
Company performs periodic evaluations of the relative credit standing of those
financial institutions holding significant account balances. As of December 31,
1994, a significant concentration of credit risk exists only with respect to the
interest bearing restricted cash account held, pending resolution of a dispute
(See Note 10), with a single financial institution other than the Company's
primary lender. The balance of such account is $2,478,000 at December 31, 1994.
As of December 31, 1993, the Company had no significant concentration of credit
risk with respect to cash or restricted cash balances.

The Company produces and sells television programs, and recorded music
product to domestic and foreign distributors. Sales of advertising time retained
in television programming sold are to agencies representing national
advertisers, primarily in the consumer products industry. The Company generally
does not require collateral on trade receivables. Concentrations of credit risk
on trade receivables exist only with respect to the domestic recorded music
trade receivable. The Company's domestic recorded music trade receivable
($4,775,000 at December 31, 1994) is with BMG, one of the six major record
companies. Credit losses and returns of recorded music product have consistently
been within management's expectations.

Fair Value of Financial Instruments

The carrying value of the Company's financial instruments approximate their
fair value with the exception of the Company's $60,000,000, 6 1/2% Convertible
Subordinated Notes ("Notes"). The Notes, which have a carrying value of
$60,000,000, had a fair value of approximately $44,400,000 and $57,600,000 at
December 31, 1994 and 1993, respectively. Such fair value was determined using
the quoted market prices for the Notes as of December 31, 1994 and 1993.

F-35
<PAGE> 95

ALL AMERICAN COMMUNICATIONS, INC. & SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

12. BUSINESS SEGMENT AND GEOGRAPHIC INFORMATION

The Company's activities consist of two business segments -- television
production and distribution, and recorded music production and distribution.
Summaries of financial information by business segment follows:

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1994
--------------------------------------------------
RECORDED
TELEVISION MUSIC CORPORATE TOTAL
---------- -------- --------- --------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Revenues......................................... $ 98,771 $ 16,130 $ -- $114,901
Operating income (loss).......................... 12,523 (450) (5,612) 6,461
Identifiable assets.............................. 190,064 8,949 8,994 208,007
Depreciation and amortization.................... 33,783 141 60 33,984
Expenditures for property and equipment.......... 377 20 100 497
</TABLE>

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1993
--------------------------------------------------
RECORDED
TELEVISION MUSIC CORPORATE TOTAL
---------- -------- --------- --------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Revenues.......................................... $ 57,407 $ 13,215 $ -- $ 70,622
Operating income (loss)........................... 7,012 (949) (3,988) 2,075
Identifiable assets............................... 92,387 9,887 10,247 112,521
Depreciation and amortization..................... 33,635 -- 55 33,690
Expenditures for property and equipment........... 119 16 -- 135
</TABLE>

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1992
-------------------------------------------------
RECORDED
TELEVISION MUSIC CORPORATE TOTAL
---------- -------- --------- -------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Revenues........................................... $ 45,302 $ 12,616 $ -- $57,918
Operating income (loss)............................ 8,990 (2,722) (3,287) 2,981
Identifiable assets................................ 61,850 6,084 6,196 74,130
Depreciation and amortization...................... 21,494 352 78 21,924
Expenditures for property and equipment............ 25 16 25 66
</TABLE>

A summary of geographic financial information is presented for 1994. Prior
to 1994, the Company had operations in the United States only.

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1994
-----------------------------
UNITED
STATES EUROPE TOTAL
-------- ------- --------
(IN THOUSANDS)
<S> <C> <C> <C>
Revenues........................................................ $ 83,135 $31,766 $114,901
Operating income................................................ (388) 6,849 6,461
Identifiable assets............................................. 129,231 78,776 208,007
Depreciation and amortization................................... 32,882 1,102 33,984
Expenditures for property and equipment......................... 273 224 497
</TABLE>

Revenues related to the television series Baywatch amounted to $35,328,000,
$29,185,000 and $24,758,000 for the years ended December 31, 1994, 1993 and
1992, respectively.

During the years ended December 31, 1994, 1993 and 1992, one customer of
the recorded music segment accounted for 11%, 14% and 20%, respectively, and one
customer of the television segment accounted for 13%, 17% and 20%, respectively
of consolidated revenues.

Included in United States sales are export sales in the years ended
December 31, 1994, 1993 and 1992 of $20,821,000, $14,921,000 and $12,509,000,
respectively.

F-36
<PAGE> 96

REPORT OF INDEPENDENT AUDITORS

To the Partners of
Mark Goodson Productions, L.P.,
The Childs Play Company and Affiliates:

We have audited the accompanying combined statements of net assets of THE
GAME SHOW DIVISION of MARK GOODSON PRODUCTIONS and AFFILIATES (the "Division")
as of December 31, 1993 and 1994, and the related combined statements of
operating income and cash flows for the years ended December 31, 1992, 1993 and
1994. These financial statements are the responsibility of the Division's
management. Our responsibility is to express an opinion on these financial
statements based on our audit.

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

As indicated in Note 1, the combined financial statements have been
prepared from the books and records of certain commonly controlled entities and
reflect significant assumptions and allocations of costs and expenses.
Accordingly, they are not necessarily indicative of the financial position or
results of operations of the Division had it operated as a stand alone entity.

In our opinion, the combined financial statements referred to above present
fairly, in all material respects, the combined net assets of the Game Show
Division of Mark Goodson Productions and Affiliates at December 31, 1993 and
1994, and the combined operating income and their combined cash flows for the
years ended December 31, 1992, 1993 and 1994, in conformity with generally
accepted accounting principles.

COOPERS & LYBRAND L.L.P.

New York, New York
September 8, 1995.

F-37
<PAGE> 97

THE GAME SHOW DIVISION OF MARK GOODSON PRODUCTIONS
AND AFFILIATES (NOTE 1)
COMBINED STATEMENTS OF NET ASSETS
(IN THOUSANDS)

<TABLE>
<CAPTION>
DECEMBER 31,
----------------- JUNE 30, 1995
1993 1994 (UNAUDITED)
------ ------ -------------
<S> <C> <C> <C>
ASSETS (NOTE 1)
Current assets:
Accounts receivable........................................ $6,231 $6,091 $ 4,105
Deferred production costs.................................. 1,541 1,985 992
Prepaid expenses and other current assets.................. 82
------ ------ ------
Total current assets............................... 7,854 8,076 5,097
Property and equipment, net of accumulated
depreciation of $2,033, $381, and $402 (Note 2)............ 275 296 276
Deferred tape library costs, net of accumulated amortization
of $97 and $269 (Note 3)................................... 1,344 1,733
Programs in the process of development....................... 338 326 205
Other assets................................................. 88 113 104
------ ------ ------
Total assets....................................... 8,555 10,155 7,415
------ ------ ------
LIABILITIES (NOTE 1)
Current liabilities:
Accounts payable and accrued expenses...................... 2,096 3,483 1,539
Deferred syndication revenue............................... 692
------ ------ ------
Total current liabilities.......................... 2,096 4,175 1,539
------ ------ ------
Total liabilities.................................. 2,096 4,175 1,539
Commitments and contingencies (Note 4)
------ ------ ------
Net assets......................................... $6,459 $5,980 $ 5,876
====== ====== ======
</TABLE>

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

F-38
<PAGE> 98

THE GAME SHOW DIVISION OF MARK GOODSON PRODUCTIONS
AND AFFILIATES (NOTE 1)

COMBINED STATEMENTS OF OPERATING INCOME
(IN THOUSANDS)

<TABLE>
<CAPTION>
FOR THE YEARS ENDED FOR THE SIX MONTHS
DECEMBER 31, ENDED JUNE 30,
----------------------------- --------------------------
1992 1993 1994 1994 1995
------- ------- ------- ----------- -----------
<S> <C> <C> <C> <C> <C>
(UNAUDITED) (UNAUDITED)
Revenues (Note 1):
Network................................ $20,105 $18,808 $12,720 $ 5,586 $ 6,095
Syndication............................ 6,746 7,405 11,454 3,429 3,750
Advertising............................ 1,440 460 1,111 167 276
Foreign royalties...................... 8,047 8,503 6,890 3,432 2,921
Music and other royalties.............. 630 447 487 175 228
----- ----- ----- ----- -----
Total operating revenues....... 36,968 35,623 32,662 12,789 13,270
Operating expenses (Note 1):
Production costs....................... 13,847 12,873 14,023 4,142 4,986
General and administrative............. 18,255 12,919 11,278 5,611 4,776
Depreciation and amortization.......... 1,662 653 156 28 194
----- ----- ----- ----- -----
Total operating expenses....... 33,764 26,445 25,457 9,781 9,956
----- ----- ----- ----- -----
Operating income............... 3,204 9,178 7,205 3,008 3,314
Other:
Gain/(loss) on sale of fixed assets.... 2,665 (30) (32)
----- ----- ----- ----- -----
Operating income............... $ 3,204 $11,843 $ 7,175 $ 2,976 $ 3,314
===== ===== ===== ===== =====
</TABLE>

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

F-39
<PAGE> 99

THE GAME SHOW DIVISION OF MARK GOODSON PRODUCTIONS
AND AFFILIATES (NOTE 1)

COMBINED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)

<TABLE>
<CAPTION>
FOR THE YEARS ENDED
DECEMBER 31,
--------------------------------
1992 1993 1994
------- -------- ------- FOR THE SIX MONTHS
ENDED JUNE 30,
-------------------------
1994 1995
----------- -----------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C>
Cash flows from operating activities:
Operating income...................... $ 3,204 $ 11,843 $ 7,175 $ 2,976 $ 3,314
Adjustments to reconcile operating
income to net cash provided by
operating activities:
Depreciation and amortization...... 1,662 653 156 28 194
(Gain)/loss on disposal of property
and equipment.................... (2,665) 30 32
Changes in:
Accounts receivable.............. (836) (1,111) 140 1,272 1,986
Prepaid expenses................. (90) 82 83 57
Deferred production costs........ 215 (185) (444) 423 993
Programs in the process of
development................... 400 (79) 12 (67) 121
Other assets..................... 15 1 (25) (25) 9
Accounts payable and accrued
expenses...................... (1,062) (788) 1,387 (649) (1,945)
Deferred syndication revenue..... (72) 692 (692)
------- -------- ------- ------- -------
Net cash provided by operating
activities.................. 3,436 7,751 9,206 4,047 3,980
------- -------- ------- ------- -------
Cash flows from investing activities:
Purchase of property and equipment.... (73) (21) (116) (91) (1)
Sale of marketable securities......... 1,008
Proceeds from sale of property and
equipment.......................... 4,532 5
Deferred tape library costs........... (1,441) (516) (561)
------- -------- ------- ------- -------
Net cash used in investing
activities.................. (73) 5,519 (1,552) (607) (562)
------- -------- ------- ------- -------
Cash flows from financing activities:
Repayment of long term debt........... (426) (4,224)
Cash distribution to Parent........... (2,937) (9,046) (7,654) (3,440) (3,418)
------- -------- ------- ------- -------
Net cash used in financing
activities.................. (3,363) (13,270) (7,654) (3,440) (3,418)
------- -------- ------- ------- -------
Net cash and cash
equivalents................. $ -- $ -- $ -- $ -- $ --
======= ======== ======= ======= =======
Non cash distribution to Parent......... (220)
</TABLE>

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

F-40
<PAGE> 100

THE GAME SHOW DIVISION OF MARK GOODSON PRODUCTIONS
AND AFFILIATES (NOTE 1)

NOTES TO THE COMBINED FINANCIAL STATEMENTS

1. SIGNIFICANT ACCOUNTING POLICIES AND TRANSACTIONS

(A) BASIS OF PRESENTATION:

The Game Show Division of Mark Goodson Productions and Affiliates (the
"Division") is not a separate legal entity, but was operated as part of the
overall business of Mark Goodson Productions, L.P., The Childs Play Company and
certain affiliates under common control (collectively the "Parent" or "Owner").
The Division is in the business of producing and licensing television game shows
(primarily Price is Right, Family Feud and Concentration), for network and
syndicated broadcasters, in domestic and foreign markets. The Parent is
currently negotiating an Asset Purchase Agreement for the sale of the Division's
net assets. Under the terms of the proposed agreement, the Parent will sell
substantially all the assets of the Division, except the assets relating to the
operations of the Video Lottery Business, the Sony Game Show Channel and other
assets as specified in the agreement.

The accompanying statements have been prepared from the books and records
of Mark Goodson Productions, L.P., The Childs Play Company and certain
affiliates under common control and present substantially all the revenues and
expenses of the Division for the years ended December 31, 1992, 1993 and 1994
and the net assets of the Division at December 31, 1993 and 1994.

The statements of net assets and statements of operations and cash flows
may not necessarily be indicative of the financial position or results of
operations that would have resulted had the Division been operated as a
stand-alone entity. General and administrative expenses, deemed reasonable by
management, totaling $18,255,000 in 1992, $12,919,000 in 1993 and $11,278,000 in
1994, are net of expenses allocated by the Parent to the Video Lottery Business
and the Sony Game Show Channel in the amounts of $444,000, $939,000 and
$1,228,000 for 1992, 1993 and 1994, respectively. The allocation procedures
include various bases such as employee numbers and estimated time spent.
Expenses not allocated to the Division include taxes on income, pension, post
retirement and interest, other than interest expense incurred for the airplane
financing amounting to $334,000 in 1992 and $208,000 in 1993. Rental expense
incurred by the Division amounted to $1,532,000 in 1992, $1,325,000 in 1993 and
$1,138,000 in 1994. These amounts are included in general and administrative
expenses.

The financial statements do not include any adjustments which may be
required by the consummation of the agreement of sale nor do they consider any
adjustments which may result from changes in the operations of the Division by
the Buyer.

(B) UNAUDITED SIX MONTH FINANCIAL STATEMENTS:

The unaudited six month financial statements as of June 30, 1994 and 1995
include all adjustments, consisting only of normal recurring adjustments which
in the opinion of the Division's management, are necessary for a fair
presentation of the results of operations for the six months presented. The
results for the six months ended June 30, 1995 are not indicative of the results
which may be expected for the entire year ended December 31, 1995.

Revenue from television licensing agreements is recognized in the
accounting period in which the game shows become available for broadcast or when
identified and broadcast according to the terms of the license agreements.
Foreign, music and other royalty income is recognized upon receipt of earnings
reports from licensees. Advertising revenue is recognized when the
advertisements are broadcast. Deferred revenues consists of advance payments
received on television contracts for which the revenue has not yet been
recognized.

F-41
<PAGE> 101

THE GAME SHOW DIVISION OF MARK GOODSON PRODUCTIONS
AND AFFILIATES (NOTE 1) -- (CONTINUED)

NOTES TO THE COMBINED FINANCIAL STATEMENTS -- (CONTINUED)

(D) PRODUCTION COSTS:

Game show production costs are recognized in a manner consistent with the
revenue recognition policies. Program development costs are deferred unless
management's estimates indicate that such costs are non-recoverable, in which
case the costs are charged against operations currently.

(E) PROPERTY AND EQUIPMENT:

Property and equipment are stated at cost. Depreciation and amortization
are recorded by the declining-balance method for furniture and equipment, and by
the straight-line method for leasehold improvements, over the shorter of lease
term or estimated useful lives of the assets.

(F) INCOME TAXES

No provision for income taxes has been reflected in the accompanying
statement of operating income because income tax expense is not allocated by the
Parent to the Division.

(G) DIVISION EQUITY

For cash flow purposes, all transfers of cash between the Division and the
Parent are recorded through Division Equity.

2. PROPERTY AND EQUIPMENT

The components of property and equipment are:

<TABLE>
<CAPTION>
DECEMBER 31,
------------- ESTIMATED
1993 1994 LIFE
------ ---- --------------
<S> <C> <C> <C>
Office furniture and equipment........................ $1,937 $411 5 to 7 years
Automobiles........................................... 147 126 5 years
Leasehold improvements................................ 224 140 7 shorter of
lease term or
life of assets
------ ----
2,308 677
Less: Accumulated depreciation and amortization..... 2,033 381
------ ----
Property and equipment, net................. $ 275 $296
====== ====
</TABLE>

Depreciation and amortization expense for the years ended December 31, 1993
and 1994 amounted to $653,000 and $59,000 respectively, and $22,000 for the six
months ended June 30, 1995.

3. DEFERRED TAPE LIBRARY COSTS

Deferred tape library costs consists of costs incurred to upgrade and copy
the Division's program library. Amortization of these costs is provided by the
straight-line method over a five-year period and amounted to $97,000 in 1994 and
$172,000 for the six months ended June 30, 1995.

F-42
<PAGE> 102

THE GAME SHOW DIVISION OF MARK GOODSON PRODUCTIONS
AND AFFILIATES (NOTE 1) -- (CONTINUED)

NOTES TO THE COMBINED FINANCIAL STATEMENTS -- (CONTINUED)

4. COMMITMENTS AND CONTINGENCIES

(A) TALENT AGREEMENTS:

The Division is committed under four talent agreements relating to the game
show productions. The gross compensation due on the agreement's, which extend
through the end of the 1995-1996 broadcast year is $6,193,000 (net of network
reimbursements -- $1,102,000).

(B) LITIGATION:

In the opinion of management and its counsel, the Division is not a party
to any litigation that would have a material adverse effect on its business,
results of operations, or financial condition if settled in an unfavorable
manner.

F-43
<PAGE> 103

LOGO
<PAGE> 104

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

NO DEALER, SALESPERSON OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATION IN CONNECTION WITH THIS OFFERING 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, ANY UNDERWRITER OR ANY SELLING STOCKHOLDER. THIS PROSPECTUS DOES NOT
CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF ANY OFFER TO BUY BY ANYONE IN
ANY JURISDICTION IN WHICH SUCH OFFER TO SELL OR SOLICITATION IS NOT AUTHORIZED,
OR IN WHICH THE PERSON MAKING SUCH OFFER OR SOLICITATION IS NOT QUALIFIED TO DO
SO OR TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION.
NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER
ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE
AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF OR THAT THE INFORMATION CONTAINED
HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO ITS DATE.

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

TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary........................ 3
Risk Factors.............................. 8
The Company............................... 14
Use of Proceeds........................... 14
Market For Common Stock and Dividends..... 16
Capitalization............................ 17
Selected Consolidated Financial Data...... 18
Certain Pro Forma Information............. 19
Management's Discussion and
Analysis of Financial Condition and
Results of Operations................... 24
Business.................................. 37
Management................................ 48
Principal and Selling Stockholders........ 50
Description of Capital Stock.............. 52
Underwriting.............................. 55
Legal Matters............................. 56
Experts................................... 56
Incorporation of Certain Documents
by Reference............................ 57
Available Information..................... 57
Index to Financial Statements............. F-1
</TABLE>

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

4,500,000 SHARES
LOGO
ALL AMERICAN

COMMUNICATIONS, INC.

CLASS B COMMON STOCK
--------------------

PROSPECTUS
--------------------
OPPENHEIMER & CO., INC.
ARNHOLD AND S. BLEICHROEDER, INC.
- ------------------------------------------------------------
- ------------------------------------------------------------
<PAGE> 105
GRAPHIC PRESENTATION MATERIAL

Inside Front Cover of Prospectus

A fold out collage of photographs of game shows and television
series produced and distributed by the Company. The captions list the names
of the shows and the countries in which the shows are produced. The name of
the Company is listed across the top of the page.

The Company's logo is on the outside flap.

Inside Back Cover of Prospectus

A fold out collage of twelve album covers produced and distributed by
the Company. The Company's logo is on the bottom of the page and "All American
Music Group" is on the top of the page.

A chart of 35 logos representing the various game shows produced by
Mark Goodson Productions, L.P. The Company's logo is on the bottom of the page
and "Mark Goodson Productions" is on the top of the page.

The Company's logo is on the outside flap.

<PAGE> 106

PART II

INFORMATION NOT REQUIRED IN PROSPECTUS

ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION

The following table sets forth costs and expenses, other than underwriting
discounts and commissions, payable in connection with the sale and distribution
of the securities being registered. All amounts are estimated except the
Securities and Exchange Commission registration fee.

<TABLE>
<CAPTION>
ITEM
- ---------------------------------------------------------------------------------
<S> <C>
Registration Fee................................................................. $21,748.38
----------
NASD Filing Fee.................................................................. $ 6,807.00
Blue Sky fees and expenses....................................................... $ *
Legal fees and expenses.......................................................... $ *
Printing Expenses................................................................ $ *
Accounting fees and expenses..................................................... $ *
Miscellaneous.................................................................... $ *
----------
Total.................................................................. $
==========
</TABLE>

- ---------------
* To be completed by amendment

ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS

Subsection (a) of Section 145 of the General Corporation Law of Delaware
empowers a corporation to indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action,
suit or proceeding, whether civil, criminal, administrative or investigative
(other than an action by or in the right of the corporation) by reason of the
fact that he is or was a director, officer, employee or agent of the
corporation, partnership, joint venture, trust or other enterprise, against
expenses (including attorneys' fees), judgments, fines and amounts paid in
settlement actually and reasonably incurred by him in connection with such
action, suit or proceeding if he acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interest of the
corporation and, with respect to any criminal action or proceeding, had no
reasonable cause to believe his conduct was unlawful.

Subsection (b) of Section 145 empowers a corporation to indemnify any
person who was or is a party or is threatened to be made a party to any
threatened, pending or completed action or suit by or in the right of the
corporation to procure a judgment in its favor by reason of the fact that such
person acted in any of the capacities set forth above, against expenses
(including attorneys' fees) actually and reasonably incurred by him in
connection with the defense or settlement of such action or suit if he acted in
good faith and in a manner he believed to be in or not opposed to the best
interests of the corporation, except that no indemnification may be made in
respect of any claim, issue or matter as to which such person shall have been
adjudged to be liable to the corporation unless and only to the extent that the
Court of Chancery or the court in which such action or suit was brought shall
determine that, despite the adjudication of liability, such person is fairly and
reasonably entitled to indemnity for such expenses which the court shall deem
proper.

Section 145 further provides that to the extent a director, officer,
employee or agent of a corporation has been successful in the defense of any
action, suit or proceeding referred to in subsections (a) and (b) or in the
defense of any claim, issue or matter therein, he shall be indemnified against
expenses (including attorneys' fees) actually and reasonably incurred by him in
connection therewith that indemnification provided for by Section 145 shall not
be deemed exclusive of any other rights to which the indemnified party may be
entitled; and that the corporation is empowered to purchase and maintain
insurance on behalf of a director, officer, employee or agent of the corporation
against any liability asserted him or incurred by him in any such capacity or
arising out of his status as such, whether or not the corporation would have the
power to indemnify him against such liability under Section 145.

II-1
<PAGE> 107

Article IV of the Registrant's Bylaws provides, in substance, for the
indemnification of directors and officers of the Registrant to the fullest
extent permitted by Delaware law.

The Registrant refers to the Underwriting Agreement filed as Exhibit 1.1 to
this Registration Statement, which provides for indemnification, under certain
circumstances, of the Registrant, certain of its directors and officers and
persons who control the Registrant against certain liabilities in connection
with this offering, including liabilities under the Securities Act.

The Registrant also refers to the indemnification provisions in the
employment agreements filed as Exhibits 10.1 through 10.6.1 to this Registration
Statement, which provide for the indemnification by the Company of certain
officers and directors of the Registrant against certain liabilities in
connection with this offering, including liabilities under the Securities Act.

See Item 17 of this Registration Statement regarding the opinion of the
Securities and Exchange Commission as to indemnification for liabilities arising
under the Securities Act.

ITEM 16. EXHIBITS

<TABLE>
<S> <C>
1.1 Form of Underwriting Agreement.*
2.1 Agreement dated as of June 30, 1994 as amended and restated as of August 3, 1994 by
and among the Company, Fremantle International, Inc. and The Interpublic Group of
Companies, Inc. (incorporated by reference to Exhibit 99.2 of the Company's Form
8-K/A dated August 3, 1994).
3.1 Restated Certificate of Incorporation of the Registrant filed on February 25, 1991
with the Secretary of State of the State of Delaware (incorporated by reference to
the same numbered Exhibit to the March 1991 Form 10-Q).
3.2 Restated Bylaws of the Registrant dated February 25, 1991 (incorporated by reference
to the same numbered Exhibit to the March 1991 Form 10-Q).
3.3 Certificate of Designations, Preferences and Relative, Participating, Optional or
Other Special Rights of Series A Convertible Preferred Stock of the Company filed on
February 25, 1991 with the Secretary of State of the State of Delaware (incorporated
by reference to the same numbered Exhibit to the March 1991 Form 10-Q).
3.4 Certificate of Amendment to Restated Certificate of Incorporation of the Registrant
filed on March 20, 1992 with the Secretary of State of the State of Delaware
(incorporated by reference to the same numbered Exhibit to the Registrant's
Amendment No. I to Form S-1 Registration Statement filed with the Securities and
Exchange Commission on April 3, 1992 (the "Amendment No. I to Form S-1")).
3.5 Certificate of the Voting Powers, Designations, Preferences, Rights, Qualifications,
Limitations and Restrictions of the Series B Convertible Preferred Stock of the
Company filed on August 2, 1994 with the Secretary of State of the State of Delaware
(incorporated by reference to Exhibit 3.1 to the Registrants' June 30, 1994 Form
10-Q (the "June 30, 1994 Form 10-Q").
4.1 Specimen Certificate for Common Stock (incorporated by reference to the same
numbered Exhibit to the Amendment No. 1 to Form S-l).
4.2 1994 Stock Incentive Plan (incorporated by reference to the same numbered Exhibit to
the June 30, 1994 Form 10-Q).
5.1 Opinion of Kaye, Scholer, Fierman, Hays & Handler.*
9.1 Shareholders Voting Agreement dated August 3, 1994 between The Interpublic Group of
Companies, Inc. the Company and certain of the Companies shareholders (incorporated
by reference to the same numbered Exhibit to the June 30, 1994 Form 10-Q).
9.2 Shareholders Agreement dated as of February 25, 1991 between the Company, Anthony J.
Scotti, Benjamin J. Scotti, Thomas Bradshaw, Myron Roth, Sydney D. Vinnedge, George
Back and Joseph E. Kovacs (incorporated by reference to the same numbered Exhibit to
the December 31, 1990 Form 10-K).
</TABLE>

II-2
<PAGE> 108

<TABLE>
<S> <C>
10.1 Employment Agreement dated as of February 25, 1991 between All American
Communications, Inc. and Anthony J. Scotti (incorporated by reference to the same
numbered Exhibit to the December 31, 1990 Form 10-K).
10.1.1 Amendment to Employment Agreement dated as of February 25,1991 between All American
Communications, Inc. and Anthony J. Scotti (incorporated by reference to the same
numbered Exhibit to the Registrant's Form S-1 Registration Statement filed with the
Securities and Exchange Commission on January 27, 1992 as thereafter amended and
declared effective on May 7, 1992 (the "1992 Form S-1")).
10.1.2 Second Amendment to Employment Agreement dated as of February 25, 1991 between All
American Communications, Inc. and Anthony J. Scotti (incorporated by reference to
the same numbered Exhibit to the December 31, 1994 Form 10-K).
10.1.3 Third Amendment dated May 1, 1995 to Employment Agreement dated as of February 25,
1991 between All American Communications, Inc. and Anthony J. Scotti (incorporated
by reference to the same numbered Exhibit to the December 31, 1994 Form 10-K).
10.2 Employment Agreement dated as of February 26, 1991 between All American
Communications, Inc. and Myron Roth (incorporated by reference to the same numbered
Exhibit to the December 31, 1990 Form 10-K).
10.2.1 Amendment to Employment Agreement dated as of February 26, 1991 between All American
Communications, Inc. and Myron Roth (incorporated by reference to the same numbered
Exhibit to the 1992 Form S-1).
10.3 Employment Agreement dated as of February 25, 1991 between All American
Communications, Inc. and Thomas Bradshaw (incorporated by reference to the same
numbered Exhibit to the December 31, 1990 Form 10-K).
10.3.1 Amendment to Employment Agreement dated as of February 25, 1991 between All American
Communications, Inc. and Thomas Bradshaw (incorporated by reference to the same
numbered Exhibit to the 1992 Form S-1).
10.4 Employment Agreement dated as of February 25, 1991 between All American
Communications, Inc. and Benjamin J. Scotti (incorporated by reference to the same
numbered Exhibit to the December 31, 1990 Form 10-K).
10.4.1. Amendment to Employment Agreement dated as of February 25, 1991 between All American
Communications, Inc. and Benjamin J. Scotti (incorporated by reference to the same
numbered Exhibit to the 1992 Form S-1).
10.5 Employment Agreement dated as of February 25, 1991 between All American
Communications, Inc. and Sydney Vinnedge (incorporated by reference to the same
numbered to the December 31, 1990 Form 10-K).
10.5.1 Amendment to Employment Agreement dated as of February 25, 1991 between All American
Communications, Inc. and Sydney Vinnedge (incorporated by reference to the same
numbered Exhibit to the 1992 Form S-1).
10.5.2 Second Amendment to Employment Agreement dated as of January 7, 1992 between All
American Communications, Inc. and Sydney Vinnedge (incorporated by reference to the
same numbered Exhibit to the Amendment No. 1 to 1992 Form S-1).
10.6 Employment Agreement, dated as of July 1, 1990, between All American Television,
Inc. and George Back (incorporated by reference to Exhibit 10.1 of the Company's
Quarterly Report on Form 10-K for the fiscal quarter ended June 30, 1990 (the "June
1990 Form 10-K").
10.6.1 Second Amendment to Employment Agreement dated January 7, 1992 between All American
Communications, Inc. and George Back (incorporated by reference to the same numbered
Exhibit to the Amendment No. 1 to Form S-1).
</TABLE>

II-3
<PAGE> 109

<TABLE>
<S> <C>
10.7 Credit, Security, Guaranty and Pledge Agreement, dated as of April 13, 1995 by and
among All American Communications, Inc., All American Fremantle International, Inc.,
The Baywatch Production Company, The Baywatch Nights Production Company and Chemical
Bank, as agent and Fronting Bank for the lenders named therein (incorporated by
reference to Exhibit 10.8 of the Company's Quarterly Report on Form 10-Q for the
quarter ended March 31, 1995 (the "March 31, 1995 Form 10-Q")).
10.7.1 Amendment No. 1 dated as of April 13, 1995 to Credit, Security, Guaranty and Pledge
Agreement, among All American Communications, Inc., All American Fremantle
International, Inc., The Baywatch Production Company, The Baywatch Nights Production
Company, the guarantors named therein, and Chemical Bank, as Agent and Fronting Bank
for the lenders named therein (incorporated by reference to Exhibit 10.8.1 of the
March 31, 1995 Form 10-Q).
10.8 Shared Facilities and Services Agreement dated as of August 2, 1994 by and between
All American Communications, Inc. and Fremantle International, Inc. (incorporated by
reference to Exhibit 10.10 to the December 31, 1994 Form 10-K)
10.9 Registration Rights Agreement dated as of August 3. 1994 by and between All American
Communications, Inc. and The Interpublic Group of Companies, Inc. (incorporated by
reference to Exhibit 10.11to the December 31, 1994 Form 10-K).
10.10 Option Letter, dated August 3, 1994, from The Interpublic Group of Companies, Inc.
and Fremantle International, Inc. to All American Communications, Inc. (incorporated
by reference to Exhibit 10.12 to the December 31, 1994 Form 10-K).
10.11 Exclusive License Agreement dated as of December 15, 1994 between The Baywatch
Nights Production Company and Taurus Film & Co. (confidential treatment granted)
(incorporated by reference to Exhibit 10.13 to the December 31, 1994 Form 10-K).
10.12 Letter Agreement dated as of June 10, 1994 to that certain Outline of Terms dated
May 10, 1991 as amended by that certain letter dated February 16, 1993 by and
between The Baywatch Nights Production Company, on the one hand, and Michael Berk,
Douglas Schwartz and Gregory Bonann, on the other hand (incorporated by reference to
Exhibit 10.2 to the Registrant's September 30, 1994 Form 10-Q (the "September 30,
1994 Form 10-Q").
10.13 Standard Industrial Lease Agreement dated October 31, 1994 between All American
Communications, Inc. and Wilshire Lincoln Properties (incorporated by reference to
Exhibit 10.3 to the September 30, 1994 Form 10-Q).
10.14 Secured Promissory Note dated October 19, 1994 between All American Communications,
Inc. and Thomas Bradshaw (incorporated by reference to Exhibit 10.4 to the September
30, 1994 Form 10-Q).
10.15 Second Modification of Warrant and Warrant Agreement dated as of November 5, 1993
between All American Communications, Inc. and Jefferson Capital Group, Ltd.
(incorporated by reference to Exhibit 10.35.2 to the 1994 Form S-1).
10.16 Office Building Lease dated December 13, 1991 for 5301 Beethoven Street, Los
Angeles, California between All American Television Production, Inc. and Harvey
Capital Corp. (incorporated by reference to Exhibit 10.6 to the 1992 Form S-l).
10.17 Amendment No. 1 dated April 20, 1992, Amendment No. 2 dated September 14, 1993 and
Amendment No. 3 dated March 14, 1994, in each case, to the Office Building Lease
dated December 13, 1991 for 5301 Beethoven Street, Los Angeles, California
(incorporated by reference to Exhibit 10.40.1 to the Registrants Annual Report on
Form 10-K for the year ended December 31, 1993) Amendment No. 4 dated October 11,
1994 and Amendment No.5 dated November 16, 1994 to the Office Building Lease dated
December 13, 1991 for 5301 Beethoven Street, Los Angeles, California (incorporated
by reference to Exhibit 10.19 to the December 31, 1994 Form 10-K).
</TABLE>

II-4
<PAGE> 110

<TABLE>
<S> <C>
10.18 Industrial-Commercial Lease dated May 28, 1991 (and amendment) for 5433 Beethoven
Street, Los Angeles, California between The Baywatch Production Company and Jerome
Cohen, Trustee of the Fannie Delman 1983 Trust et. al. (incorporated by reference to
Exhibit 10.41 to the 1992 Form S-1).
10.19 Modification of Agreement of Sublease, dated as of February 8, 1993, for 875 Third
Avenue, New York, New York between Grey Advertising, Inc. and LBS Communications,
Inc. (incorporated by reference to Exhibit number 10.62 to the December 31, 1992
Form 10-K).
10.20 Fiscal Agency Agreement dated September 29,1993, between the Company and BankAmerica
National Trust Company, as Fiscal Agent and Form of Note attached thereto as Exhibit
A (incorporated by reference to the Exhibit 10.12 to the 1994 Form S-1).
10.22 Lease, dated as of December 7, 1993, for 1325 Avenue of the Americas between All
American Television, Inc. and 1325 Limited Partnership (incorporated by reference to
the Exhibit 10.13 to the 1994 Form S-1).
10.23 Asset Purchase Agreement dated as of October 6, 1995 between and among Mark Goodson
Productions, L.P., The Child's Play Company, Mark Goodson Productions, LLC, The
Interpublic Group of Companies, Inc., the Estate of Mark Goodson and All American
Communications, Inc.*
10.24 License Agreement between Mark Goodson Productions, LLC and All American Goodson,
Inc, dated as of October 6, 1995.*
10.25 Network License Agreement between All American Goodson, Inc. and Interpublic Game
Shows, Inc, dated as of October 6, 1995.*
10.26 Operating Agreement between All American Communications, Inc. and All American
Goodson, Inc. dated as of October 6, 1995.*
10.27 Amended and Restated Operating Agreement among All American Communications, Inc.,
All American Goodson, Inc., The Interpublic Group of Companies, Inc. and Interpublic
Game Shows, Inc., dated as of October 6, 1995.*
11 Statement re Computation of Per Share Earnings (incorporated by reference to the
same numbered exhibit to the December 31, 1994 Form 10-K).
11.1 Statement re Computation of Per Share Earnings -- Pro Forma Information, Six Months
Ended June 30, 1995.
11.2 Statement re Computation of Per Share Earnings -- Pro Forma Information, Year Ended
December 31, 1994.
11.3 Statement re Computation of Per Share Earnings -- Pro Forma Information, Six Months
Ended June 30, 1994.
23.1 Consent of Ernst & Young LLP.
23.2 Consent of Coopers & Lybrand, LLP.
23.3 Consent of Kaye, Scholer, Fierman, Hays & Handler (included in Exhibit 5.1)
24.1 Power of Attorney (included on page II - 7).
</TABLE>

- ---------------
* To be filed by amendment

ITEM 17. UNDERTAKINGS

Insofar as indemnification for liabilities arising under Securities Act of
1933, as amended (the "Securities Act"), may be permitted as to directors,
officers, and controlling persons of the Registrant pursuant to the provisions
described in Item 15 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 Securities Act and is, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by the Registrant of expenses incurred or
paid by a director, officer, or controlling person of the Registrant in the
successful defense of any action, suit, or proceeding) is asserted by such
director, officer, or controlling person in connection with the securities being
registered, the Registrant

II-5
<PAGE> 111

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 Securities Act and will be governed by the final adjudication
of such issue.

The undersigned Registrant hereby undertakes:

A. To file during any period in which offers or sales are being made, a
post-effective amendment to the registration statement: (1) to include any
prospectus required by Section 10(a)(3) of the Securities Act; (2) to reflect in
the prospectus any fact or events arising after the effective date of the
registration statement (or the most recent post-effective amendment thereof)
which, individually or in the aggregate, represent a fundamental change in the
information set forth in the registration statement; (3) to include any material
information with respect to the plan of distribution not previously disclosed in
the registration statement or any material change to such information in the
registration statement.

B. That, for the purpose of determining liability under the Securities
Act, each such post-effective amendment shall be deemed to be a new registration
statement relating to the securities offered therein, and the offering of
securities at that time shall be deemed to be the initial bona fide offering
thereof.

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

D. That: (1) for purposes of determining any liability under the
Securities Act, the information omitted from the form of prospectus as filed as
part of the registration statement in reliance upon Rule 430A and contained in
the form of prospectus filed by the Registrant pursuant to Rule 424(b)(1) or (4)
or 497(h) under the Securities Act shall be deemed to be part of the
registration statement as of the time it was declared effective, and (2) for the
purpose of determining any liability under the Securities Act, each
post-effective amendment that contains a form of prospectus shall be deemed to
be a new registration statement relating to the securities offered therein, and
the offering of such securities at that time shall be deemed to be the initial
bona fide offering thereof.

II-6
<PAGE> 112

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, the registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-2 and has duly caused this registration
statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Santa Monica, State of California, on October 18,
1995.

ALL AMERICAN COMMUNICATIONS, INC.,

By: /s/ ANTHONY J. SCOTTI

------------------------------------
Anthony J. Scotti
Chief Executive Officer

POWER OF ATTORNEY

BE IT KNOWN TO ALL MEN BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints each of Anthony J. Scotti and Thomas
Bradshaw and each of them acting alone, his lawful attorney-in-fact or agent,
with full powers of substitution and resubstitution for him and in his name,
place and stead, in any and all capacities, to sign any or all amendments to
this Registration Statement, and to file the same, with all exhibits thereto,
and other documents in connection therewith, with the Securities and Exchange
Commission granting unto said attorney-in-fact and agents, each acting alone,
full power and authority to do and perform each and every act and thing
requisite and necessary to be done in and about the premises, as fully for all
intents and purposes as he might or could do in person, hereby ratifying and
confirming all that said attorneys-in-fact and agents, each acting alone, or his
substitute may lawfully do or cause to be done by virtue hereof.

IN WITNESS WHEREOF, each of the undersigned has executed this Power of
Attorney as of the date indicated.

Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the date indicated:

<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ------------------------------------------ -------------------------------- -----------------
<S> <C> <C>
/s/ ANTHONY J. SCOTTI Chairman of the Board October 18, 1995
- ------------------------------------------ Chief Executive Officer
Anthony J. Scotti (principal executive officer)
/s/ THOMAS BRADSHAW Director, Chief Financial October 18, 1995
- ------------------------------------------ Officer
Thomas Bradshaw and Treasurer
(principal financial officer
and principal accounting
officer)
/s/ EUGENE P. BEARD Director October 18, 1995
- ------------------------------------------
Eugene P. Beard
/s/ LAWRENCE E. LAMATTINA Director October 18, 1995
- ------------------------------------------
Lawrence E. Lamattina
/s/ GORDON LUCE Director October 18, 1995
- ------------------------------------------
Gordon Luce
/s/ R. TIMOTHY O'DONNELL Director October 18, 1995
- ------------------------------------------
R. Timothy O'Donnell
</TABLE>

II-7
<PAGE> 113

<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ------------------------------------------ -------------------------------- -----------------
<S> <C> <C>
Director
- ------------------------------------------
David A. Mount
/s/ MYRON I. ROTH Director October 18, 1995
- ------------------------------------------
Myron I. Roth
/s/ BENJAMIN J. SCOTTI Director October 18, 1995
- ------------------------------------------
Benjamin J. Scotti
/s/ SYDNEY D. VINNEDGE Director October 18, 1995
- ------------------------------------------
Sydney D. Vinnedge
</TABLE>

II-8
<PAGE> 114

INDEX TO EXHIBITS

<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NUMBERED
NUMBER DESCRIPTION PAGE
- ------ ------------------------------------------------------------------------- ------------
<C> <S> <C>
1.1 Form of Underwriting Agreement*..........................................
2.1 Agreement dated as of June 30, 1994 as amended and restated as of August
3, 1994 by and among the Company, Fremantle International, Inc. and The
Interpublic Group of Companies, Inc. (incorporated by reference to
Exhibit 99.2 of the Company's Form 8-K/A dated August 3, 1994)...........
3.1 Restated Certificate of Incorporation of the Registrant filed on February
25, 1991 with the Secretary of State of the State of Delaware
(incorporated by reference to the same numbered Exhibit to the March 1991
Form 10-Q)...............................................................
3.2 Restated Bylaws of the Registrant dated February 25, 1991 (incorporated
by reference to the same numbered Exhibit to the March 1991 Form 10-Q)...
3.3 Certificate of Designations, Preferences and Relative, Participating,
Optional or Other Special Rights of Series A Convertible Preferred Stock
of the Company filed on February 25, 1991 with the Secretary of State of
the State of Delaware (incorporated by reference to the same numbered
Exhibit to the March 1991 Form 10-Q).....................................
3.4 Certificate of Amendment to Restated Certificate of Incorporation of the
Registrant filed on March 20, 1992 with the Secretary of State of the
State of Delaware (incorporated by reference to the same numbered Exhibit
to the Registrant's Amendment No. I to Form S-1 Registration Statement
filed with the Securities and Exchange Commission on April 3, 1992 (the
"Amendment No. I to Form S-1"))..........................................
3.5 Certificate of the Voting Powers, Designations, Preferences, Rights,
Qualifications, Limitations and Restrictions of the Series B Convertible
Preferred Stock of the Company filed on August 2, 1994 with the Secretary
of State of the State of Delaware (incorporated by reference to Exhibit
3.1 to the Registrants' June 30, 1994 Form 10-Q (the "June 30, 1994 Form
10-Q")...................................................................
4.1 Specimen Certificate for Common Stock (incorporated by reference to the
same numbered Exhibit to the Amendment No. 1 to Form S-l)................
4.2 1994 Stock Incentive Plan (incorporated by reference to the same numbered
Exhibit to the June 30, 1994 Form 10-Q)..................................
5.1 Opinion of Kaye, Scholer, Fierman, Hays & Handler*.......................
9.1 Shareholders Voting Agreement dated August 3, 1994 between The
Interpublic Group of Companies, Inc. the Company and certain of the
Companies shareholders (incorporated by reference to the same numbered
Exhibit to the June 30, 1994 Form 10-Q)..................................
9.2 Shareholders Agreement dated as of February 25, 1991 between the Company,
Anthony J. Scotti, Benjamin J. Scotti, Thomas Bradshaw, Myron Roth,
Sydney D. Vinnedge, George Back and Joseph E. Kovacs (incorporated by
reference to the same numbered Exhibit to the December 31, 1990 Form
10-K)....................................................................
10.1 Employment Agreement dated as of February 25, 1991 between All American
Communications, Inc. and Anthony J. Scotti (incorporated by reference to
the same numbered Exhibit to the December 31, 1990 Form 10-K)............
10.1.1 Amendment to Employment Agreement dated as of February 25,1991 between
All American Communications, Inc. and Anthony J. Scotti (incorporated by
reference to the same numbered Exhibit to the Registrant's Form S-1
Registration Statement filed with the Securities and Exchange Commission
on January 27, 1992 as thereafter amended and declared effective on May
7, 1992 (the "1992 Form S-1"))...........................................
</TABLE>
<PAGE> 115

<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NUMBERED
NUMBER DESCRIPTION PAGE
- ------ ------------------------------------------------------------------------- ------------
<C> <S> <C>
10.1.2 Second Amendment to Employment Agreement dated as of February 25, 1991
between All American Communications, Inc. and Anthony J. Scotti
(incorporated by reference to the same numbered Exhibit to the December
31, 1994 Form 10-K)......................................................
10.1.3 Third Amendment dated May 1, 1995 to Employment Agreement dated as of
February 25, 1991 between All American Communications, Inc. and Anthony
J. Scotti (incorporated by reference to the same numbered Exhibit to the
December 31, 1994 Form 10-K).............................................
10.2 Employment Agreement dated as of February 26, 1991 between All American
Communications, Inc. and Myron Roth (incorporated by reference to the
same numbered Exhibit to the December 31, 1990 Form 10-K)................
10.2.1 Amendment to Employment Agreement dated as of February 26, 1991 between
All American Communications, Inc. and Myron Roth (incorporated by
reference to the same numbered Exhibit to the 1992 Form S-1).............
10.3 Employment Agreement dated as of February 25, 1991 between All American
Communications, Inc. and Thomas Bradshaw (incorporated by reference to
the same numbered Exhibit to the December 31, 1990 Form 10-K)............
10.3.1 Amendment to Employment Agreement dated as of February 25, 1991 between
All American Communications, Inc. and Thomas Bradshaw (incorporated by
reference to the same numbered Exhibit to the 1992 Form S-1).............
10.4 Employment Agreement dated as of February 25, 1991 between All American
Communications, Inc. and Benjamin J. Scotti (incorporated by reference to
the same numbered Exhibit to the December 31, 1990 Form 10-K)............
10.4.1 Amendment to Employment Agreement dated as of February 25, 1991 between
All American Communications, Inc. and Benjamin J. Scotti (incorporated by
reference to the same numbered Exhibit to the 1992 Form S-1).............
10.5 Employment Agreement dated as of February 25, 1991 between All American
Communications, Inc. and Sydney Vinnedge (incorporated by reference to
the same numbered to the December 31, 1990 Form 10-K)....................
10.5.1 Amendment to Employment Agreement dated as of February 25, 1991 between
All American Communications, Inc. and Sydney Vinnedge (incorporated by
reference to the same numbered Exhibit to the 1992 Form S-1).............
10.5.2 Second Amendment to Employment Agreement dated as of January 7, 1992
between All American Communications, Inc. and Sydney Vinnedge
(incorporated by reference to the same numbered Exhibit to the Amendment
No. 1 to 1992 Form S-1)..................................................
10.6 Employment Agreement, dated as of July 1, 1990, between All American
Television, Inc. and George Back (incorporated by reference to Exhibit
10.1 of the Company's Quarterly Report on Form 10-K for the fiscal
quarter ended June 30, 1990 (the "June 1990 Form 10-K")..................
10.6.1 Second Amendment to Employment Agreement dated January 7, 1992 between
All American Communications, Inc. and George Back (incorporated by
reference to the same numbered Exhibit to the Amendment No. 1 to Form
S-1).....................................................................
10.7 Credit, Security, Guaranty and Pledge Agreement, dated as of April 13,
1995 by and among All American Communications, Inc., All American
Fremantle International, Inc., The Baywatch Production Company, The
Baywatch Nights Production Company and Chemical Bank, as agent and
Fronting Bank for the lenders named therein (incorporated by reference to
Exhibit 10.8 of the Company's Quarterly Report on Form 10-Q for the
quarter ended March 31, 1995 (the "March 31, 1995 Form 10-Q"))...........
</TABLE>
<PAGE> 116

<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NUMBERED
NUMBER DESCRIPTION PAGE
- ------ ------------------------------------------------------------------------- ------------
<C> <S> <C>
10.7.1 Amendment No. 1 dated as of April 13, 1995 to Credit, Security, Guaranty
and Pledge Agreement, among All American Communications, Inc., All
American Fremantle International, Inc., The Baywatch Production Company,
The Baywatch Nights Production Company, the guarantors named therein, and
Chemical Bank, as Agent and Fronting Bank for the lenders named therein
(incorporated by reference to Exhibit 10.8.1 of the March 31, 1995 Form
10-Q)....................................................................
10.8 Shared Facilities and Services Agreement dated as of August 2, 1994 by
and between All American Communications, Inc. and Fremantle
International, Inc. (incorporated by reference to Exhibit 10.10 to the
December 31, 1994 Form 10-K).............................................
10.9 Registration Rights Agreement dated as of August 3. 1994 by and between
All American Communications, Inc. and The Interpublic Group of Companies,
Inc. (incorporated by reference to Exhibit 10.11to the December 31, 1994
Form 10-K)...............................................................
10.10 Option Letter, dated August 3, 1994, from The Interpublic Group of
Companies, Inc. and Fremantle International, Inc. to All American
Communications, Inc. (incorporated by reference to Exhibit 10.12 to the
December 31, 1994 Form 10-K).............................................
10.11 Exclusive License Agreement dated as of December 15, 1994 between The
Baywatch Nights Production Company and Taurus Film & Co. (confidential
treatment granted) (incorporated by reference to Exhibit 10.13 to the
December 31, 1994 Form 10-K).............................................
10.12 Letter Agreement dated as of June 10, 1994 to that certain Outline of
Terms dated May 10, 1991 as amended by that certain letter dated February
16, 1993 by and between The Baywatch Nights Production Company, on the
one hand, and Michael Berk, Douglas Schwartz and Gregory Bonann, on the
other hand (incorporated by reference to Exhibit 10.2 to the Registrant's
September 30, 1994 Form 10-Q (the "September 30, 1994 Form 10-Q")........
10.13 Standard Industrial Lease Agreement dated October 31, 1994 between All
American Communications, Inc. and Wilshire Lincoln Properties
(incorporated by reference to Exhibit 10.3 to the September 30, 1994 Form
10-Q)....................................................................
10.14 Secured Promissory Note dated October 19, 1994 between All American
Communications, Inc. and Thomas Bradshaw (incorporated by reference to
Exhibit 10.4 to the September 30, 1994 Form 10-Q)........................
10.15 Second Modification of Warrant and Warrant Agreement dated as of November
5, 1993 between All American Communications, Inc. and Jefferson Capital
Group, Ltd. (incorporated by reference to Exhibit 10.35.2 to the 1994
Form S-1)................................................................
10.16 Office Building Lease dated December 13, 1991 for 5301 Beethoven Street,
Los Angeles, California between All American Television Production, Inc.
and Harvey Capital Corp. (incorporated by reference to Exhibit 10.6 to
the 1992 Form S-l).......................................................
10.17 Amendment No. 1 dated April 20, 1992, Amendment No. 2 dated September 14,
1993 and Amendment No. 3 dated March 14, 1994, in each case, to the
Office Building Lease dated December 13, 1991 for 5301 Beethoven Street,
Los Angeles, California (incorporated by reference to Exhibit 10.40.1 to
the Registrants Annual Report on Form 10-K for the year ended December
31, 1993) Amendment No. 4 dated October 11, 1994 and Amendment No.5 dated
November 16, 1994 to the Office Building Lease dated December 13, 1991
for 5301 Beethoven Street, Los Angeles, California (incorporated by
reference to Exhibit 10.19 to the December 31, 1994 Form 10-K)...........
</TABLE>
<PAGE> 117

<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NUMBERED
NUMBER DESCRIPTION PAGE
- ------ ------------------------------------------------------------------------- ------------
<C> <S> <C>
10.18 Industrial-Commercial Lease dated May 28, 1991 (and amendment) for 5433
Beethoven Street, Los Angeles, California between The Baywatch Production
Company and Jerome Cohen, Trustee of the Fannie Delman 1983 Trust et. al.
(incorporated by reference to Exhibit 10.41 to the 1992 Form S-1)........
10.19 Modification of Agreement of Sublease, dated as of February 8, 1993, for
875 Third Avenue, New York, New York between Grey Advertising, Inc. and
LBS Communications, Inc. (incorporated by reference to Exhibit number
10.62 to the December 31, 1992 Form 10-K)................................
10.20 Fiscal Agency Agreement dated September 29,1993, between the Company and
BankAmerica National Trust Company, as Fiscal Agent and Form of Note
attached thereto as Exhibit A (incorporated by reference to the Exhibit
10.12 to the 1994 Form S-1)..............................................
10.22 Lease, dated as of December 7, 1993, for 1325 Avenue of the Americas
between All American Television, Inc. and 1325 Limited Partnership
(incorporated by reference to the Exhibit 10.13 to the 1994 Form S-1)....
10.23 Asset Purchase Agreement dated as of October 6, 1995 between and among
Mark Goodson Productions, L.P., The Child's Play Company, Mark Goodson
Productions, LLC, The Interpublic Group of Companies, Inc., the Estate of
Mark Goodson and All American Communications, Inc.*......................
10.24 License Agreement between Mark Goodson Productions, LLC and All American
Goodson, Inc, dated as of October 6, 1995*...............................
10.25 Network License Agreement between All American Goodson, Inc. and
Interpublic Game Shows, Inc, dated as of October 6, 1995*................
10.26 Operating Agreement between All American Communications, Inc. and All
American Goodson, Inc. dated as of October 6, 1995*......................
10.27 Amended and Restated Operating Agreement among All American
Communications, Inc., All American Goodson, Inc., The Interpublic Group
of Companies, Inc. and Interpublic Game Shows, Inc., dated as of October
6, 1995*.................................................................
11 Statement re Computation of Per Share Earnings (incorporated by reference
to the same numbered exhibit to the December 31, 1994 Form 10-K..........
11.1 Statement re Computation of Per Share Earnings -- Pro Forma Information,
Six Months Ended June 30, 1995...........................................
11.2 Statement re Computation of Per Share Earnings -- Pro Forma Information,
Year Ended December 31, 1994.............................................
11.3 Statement re Computation of Per Share Earnings -- Pro Forma Information,
Six Months Ended June 30, 1994...........................................
23.1 Consent of Ernst & Young LLP.............................................
23.2 Consent of Coopers & Lybrand, LLP........................................
23.3 Consent of Kaye, Scholer, Fierman, Hays & Handler (included in Exhibit
5.1).....................................................................
24.1 Power of Attorney (included on page II - 7)..............................
</TABLE>

- ---------------
* To be filed by amendment

<PAGE> 1

EXHIBIT 11.1

ALL AMERICAN COMMUNICATIONS, INC. & SUBSIDIARIES

STATEMENT RE: COMPUTATION OF PER SHARE EARNINGS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE 30, 1995
---------------------------------------------
AS ADJUSTED
FOR THE MARK
GOODSON
ACQUISITION
HISTORICAL PRO FORMA AND THE
COMPANY ADJUSTMENTS OFFERING
----------- ------------ ------------
<S> <C> <C> <C>
Weighted average number of common shares outstanding.... 7,976 4,000(1) 11,976
Assumed exercise of dilutive options and warrants under
the treasury stock method based on average market
price................................................. 105(2) 105
------- ------ -------
Weighted average number of common shares and common
share equivalents -- primary (B)...................... 7,976 4,105 12,081
Additional shares from assumed exercise of dilutive
options and warrants under the treasury stock method
based on ending market price.......................... 162(2) 162
Weighted average assumed conversion of 6 1/2%
Convertible Subordinated Notes due 2003............... 5,217 5,217
------- ------ -------
Weighted average number of common shares and common
share equivalents -- fully diluted (D)................ 13,193 4,267 17,460
======= ====== =======
Computation of net income (loss) for per share purposes:
Net income (loss) (A)................................... $(1,571) $2,003 $ 432
Add: After tax reduction of interest expense for assumed
conversion of 6 1/2% Convertible Subordinated Notes
due 2003........................................... 1,254 1,254
------- ------ -------
Net income (loss) for fully diluted per share
computation (C)....................................... $ (317) $2,003 $ 1,686
======= ====== =======
Net earnings (loss) per share -- Primary (A)/(B)........ $ (0.20) $ 0.04
======= =======
Net earnings (loss) per share -- Fully diluted
(C)/(D)............................................... $ (0.02)(*) $ 0.10(*)
======= =======
</TABLE>

- ---------------
(*) Calculation is antidilutive

(1) Reflects the issuance of Class B Common Stock in connection with the
offering.

(2) Reflects the inclusion of dilutive common stock equivalents.

<PAGE> 1

EXHIBIT 11.2

ALL AMERICAN COMMUNICATIONS, INC. & SUBSIDIARIES

STATEMENT RE: COMPUTATION OF PER SHARE EARNINGS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1994
--------------------------------------------------
AS ADJUSTED
SEVEN MONTH FOR THE
YEAR ENDED PERIOD ENDED AS ADJUSTED MARK GOODSON
DECEMBER 31, JULY 31, 1994 FOR THE ACQUISITION
1994 HISTORICAL PRO FORMA FREMANTLE PRO FORMA AND THE
AS REPORTED(1) FREMANTLE ADJUSTMENTS ACQUISITION ADJUSTMENTS OFFERING
--------------- ------------- ------------ ------------ ------------- -------------
(IN THOUSANDS -- EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C>
Weighted average number
of common shares
outstanding............ 6,135 1,841(2) 7,976 4,000(5) 11,976
Assumed exercise of
dilutive options and
warrants under the
treasury stock method
based on average
market price.......... 66 (66) (3) -- 66(4) 66
-------- ------- ------- -------- ------ -------
Weighted average number
of common shares and
common share
equivalents -- primary
(B)................... 6,201 -- 1,775 7,976 4,066 12,042
Additional shares from
assumed exercise of
dilutive options and
warrants under the
treasury stock method
based on ending market
price................. -- 66(4) 66 (66)(3) --
Weighted average assumed
conversion of 6 1/2%
Convertible
Subordinated Notes due
2003.................. 5,217 5,217 5,217
-------- ------- ------- -------- ------ -------
Weighted average number
of common shares and
common share
equivalents -- fully
diluted (D)........... 11,418 -- 1,841 13,259 4,000 17,259
======== ======= ======= ======== ====== =======
Computation of net
income (loss) for per
share purposes:
Net income (loss) (A)... $ 455 $ 476 $ (2,033) $ (1,102) $ 4,406 $ 3,304
Add: After tax reduction
of interest expense
for assumed
conversion of
6 1/2% Convertible
Subordinated Notes
due 2003........... 2,508 2,508 2,508
-------- ------- ------- -------- ------ -------
Net income (loss) for
fully diluted per
share computation
(C)................... $ 2,963 $ 476 $ (2,033) $ 1,406 $ 4,406 $ 5,812
======== ======= ======= ======== ====== =======
Net earnings (loss) per
share -- Primary
(A)/(B)............... $ 0.07 $ (0.14) $ 0.27
======== ======== =======
Net earnings (loss) per
share -- Fully diluted
(C)/(D)............... $ 0.26(*) $ 0.11(*) $ 0.34(*)
======== ======== =======
</TABLE>

- ---------------
(*) Calculation is antidilutive

(1) The historical results for the year ended December 31, 1994 include the five
months of operations of Fremantle from August 1994, the date of the
Fremantle Acquisition.

(2) Reflects the weighted average number of shares issued in connection with the
Fremantle Acquisition.

(3) Reflects the elimination of anti-dilutive common stock equivalents.

(4) Reflects the inclusion of dilutive common stock equivalents.

(5) Reflects the issuance of Class B Common Stock in connection with the
offering.

<PAGE> 1

EXHIBIT 11.3

ALL AMERICAN COMMUNICATIONS, INC. & SUBSIDIARIES

STATEMENT RE: COMPUTATION OF PER SHARE EARNINGS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE 30, 1994
-----------------------------------------------------------------------------------
AS FURTHER
ADJUSTED
FOR THE
AS ADJUSTED MARK GOODSON
HISTORICAL FOR THE ACQUISITION
------------------- PRO FORMA FREMANTLE PRO FORMA AND THE
COMPANY FREMANTLE ADJUSTMENTS ACQUISITION ADJUSTMENTS OFFERING
------- --------- ----------- ----------- ------------ -------------
(IN THOUSANDS -- EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C>
Weighted average number of common shares
outstanding................................ 4,826 3,150(1) 7,976 4,000(2) 11,976
Assumed exercise of dilutive options and
warrants under the treasury stock method
based on average market price............. -- -- --
------- ------- ------- ------- ------ -------
Weighted average number of common shares and
common share equivalents -- primary(B).... 4,826 -- 3,150 7,976 4,000 11,976
Additional shares from assumed exercise of
dilutive options and warrants under the
treasury stock method based on ending
market price.............................. -- -- 197(3) 197
Weighted average assumed conversion of
6 1/2% Convertible Subordinated Notes due
2003...................................... 5,217 5,217 5,217
------- ------- ------- ------- ------ -------
Weighted average number of common shares and
common share equivalents -- fully
diluted(D)................................ 10,043 -- 3,150 13,193 4,197 17,390
======= ======= ======= ======= ====== =======
Computation of net income (loss) for per
share purposes:
Net income (loss)(A)........................ $(3,757) $ 1,246 $(1,152) $(3,663) $3,143 $ (520)
Add: After tax reduction of interest expense
for assumed conversion of 6 1/2%
Convertible Subordinated Notes due
2003................................... 1,254 1,254 1,254
------- ------- ------- ------- ------ -------
Net income (loss) for fully diluted per
share computation(C)...................... $(2,503) $ 1,246 $(1,152) $(2,409) $3,143 $ 734
======= ======= ======= ======= ====== =======
Net earnings (loss) per share -- Primary
(A)/(B)................................... $ (0.78) $ (0.46) $ (0.04)
======= ======= =======
Net earnings (loss) per share -- Fully
diluted(C)/(D)............................ $ (0.25)(*) $ (0.18)(*) $ 0.04(*)
======= ======= =======
</TABLE>

- ---------------
(*) Calculation is antidilutive

(1) Reflects the weighted average number of shares issued in connection with the
Fremantle Acquisition.

(2) Reflects the issuance of Class B Common Stock in connection with the
offering.

(3) Reflects the inclusion of dilutive common stock equivalents.

<PAGE> 1

EXHIBIT 23.1

CONSENT OF INDEPENDENT AUDITORS

We consent to the reference to our firm under the caption "Experts" and to
the use of our report dated March 8, 1995, in the Registration Statement (Form
S-2) and related Prospectus of All American Communications, Inc. for the
registration of 5,175,000 shares of its Class B Common Stock.

We also consent to the incorporation by reference therein of our report
with respect to the financial statement schedule of All American Communications,
Inc. for the years ended December 31, 1994, 1993 and 1992 included in the Annual
Report (Form 10-K) for 1994 filed with the Securities and Exchange Commission.

ERNST & YOUNG LLP

Los Angeles, California
October 17, 1995

<PAGE> 1

EXHIBIT 23.2

CONSENT OF INDEPENDENT ACCOUNTANTS

We consent to the inclusion in this registration statement of All American
Communications Inc. on Form S-2 (File No. 33- ) of our report dated
September 8, 1995, on our audits of the financial statements of The Game Show
Division of Mark Goodson Productions and Affiliates. We also consent to the
reference to our firm under the caption "Experts".

COOPERS & LYBRAND L.L.P.

New York, New York
October 17, 1995