[NY Film Works Proxy Statement]

PRES14C 1 proxystatement3b.htm INFORMATION STATEMENT [NY Film Works Proxy Statement]

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NEW YORK FILM WORKS, INC.

928 Broadway

New York NY 10010

NOTICE OF SPECIAL MEETING OF SHAREHOLDERS TO BE HELD DECEMBER 19, 2001 AT 3:00 PM EASTERN STANDARD TIME

To our shareholders:

New York Film Works, Inc. will hold a special meeting of its shareholders at the offices of Raice Paykin & Krieg LLP, 185 Madison Avenue, 10th floor, New York, New York on December 19, 2001 at 3:00 PM EST. At the meeting we will ask you:

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To approve an amendment of the Certificate of Incorporation to:

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reduce the number of issued and outstanding shares of common stock by changing each 25 issued and outstanding shares into one new share;

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reduce the authorized common stock to 50,000,000 shares;

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create a new class of 2,000,000 shares of “blank check” preferred stock, and designate 150,000 of those preferred shares as Series A Redeemable Convertible 8% Preferred Shares; and

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change our name to Cinegram Digital Media Group, Inc.

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To approve the creation of an incentive stock option plan; and

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To authorize reincorporation of the Company in the State of Delaware within the following calendar year.

The Board of Directors has approved an exchange agreement calling for an exchange of shares of New York Film Works common stock for all of the outstanding common stock of Cinegram Media, Inc. That exchange, as well as the proposals above, are more fully described in the attached information statement. All of the proposals to be considered at the meeting are related to the proposed exchange. I urge you to read the Information Statement carefully.

A majority of the shareholders have signified their intention to approve the proposals.

WE ARE NOT ASKING YOU FOR A PROXY AND WE ASK YOU NOT TO SEND US A PROXY

Sincerely,

Michael Cohen

President

November___, 2001

This document is being first sent to shareholders on or about November __, 2001

INFORMATION STATEMENT

TABLE OF CONTENTS

Summary

Summary of the Share exchange

The Meeting

Proposal # 1 - Amendment of certificate of incorporation

Proposal # 2 - establishment of Incentive stock option plan

Proposal # 3 - change of domicile of the corporation

Financial Information

Forms 10-K and 10-Q Filed with the Securities and Exchange Commission

Statements Regarding Forward-Looking Information

FREQUENTLY ASKED QUESTIONS

What is the share exchange?

The share exchange will combine two businesses, New York Film Works and Cinegram Media. In the exchange, Cinegram Media will become a wholly-owned subsidiary of New York Film Works. The exchange will be carried out by New York Film Works, Inc. issuing shares of its common stock in exchange for all the issued and outstanding shares of Cinegram Media, Inc.

For a more complete description of the exchange, see the section entitled "" on page .

Why are New York Film Works and Cinegram Media combining their businesses?

This share exchange will combine Cinegram Media's expertise in the field of interactive multi media software products and digitally reproduced gallery quality art work with New York Film Works's technology in film processing and New York Film Works's status as a publicly reporting company. In addition, we believe it will strengthen New York Film Works's management through the addition of senior level executives familiar with the technology and business aspects of digital reproduction. Overall, both New York Film Works and Cinegram Media believe that the exchange will provide added value to their shareholders. For a complete description of New York Film Works's and Cinegram Media's reasons for the exchange, we encourage you to refer to page of this document.

What does New York Film Works's management see as the future of the combined company?

Cinegram Media's reputation and recognized creative ability, attention to quality and ability to combine the use of many forms of digital/computer technology give Cinegram an edge in the acquisition of heretofore un-exploited intellectual property and the ability to generate significant sales and profit growth. New York Film Works’ management sees the opportunity to combine the growth prospects and business knowledge of Cinegram with the stability and potential expansion New York Film Works to generate increased shareholder value.

Cinegram Media seems to have a lot of debt. Why would New York Film Works take on Cinegram Media's debt?

Most of Cinegram Media's debt is the result of its research and development in the development of interactive multi media programs, acquisition of intellectual property assets and development of the “print-on-demand” business concept. We believe Cinegram Media's overall debt is acceptable relative to the level of opportunity it has reached. We believe that Cinegram Media, despite being undercapitalized, has achieved a strong position in its industry, and an admirable reputation for quality and creativity. Third party research indicates significant growth potential for interactive multi media programs both for the education markets and for the home entertainment market. It indicates an even greater growth potential in the market for high quality digitally produced reproduction artwork. We believe, with sufficient funding, based on Cinegram Media's growth projections for the next few years, that this exchange will provide greatly expanded revenue with the likelihood of significant earnings per share.

What will Cinegram Media shareholders receive in the exchange?

In the exchange, Cinegram Media shareholders will receive shares of New York Film Works common stock in exchange for their shares of Cinegram Media common stock. The shares of New York Film Works common stock that they receive in the exchange will represent stock ownership in the combined company after the exchange.

After the reverse split of 1 new share for 25 old shares, each Cinegram Media shareholder will receive 3.207 shares of New York Film Works common stock for each share of Cinegram Media common stock owned. This will result in the Cinegram Media shareholders owning 6,760,000 shares, or 65% of the shares of the combined companies. Holders of Cinegram Media stock options will receive options to purchase New York Film Works common stock on terms substantially the same as their Cinegram Media stock options, with quantity and exercise price adjusted for the exchange ratio.

What will New York Film Works shareholders receive in the exchange?

New York Film Works shareholders will not receive any new shares of New York Film Works common stock as a result of the exchange. New York Film Works shareholders before the share exchange will continue to own their shares of New York Film Works common stock, and those shares will represent stock ownership in the combined company, after the share exchange; however, as a result of the reverse stock split, new certificates will be issued to the New York Film Works shareholders.

Why are you doing a reverse split of 1 for 25 ?

The board of directors believes that reducing the number of shares will result in a more appropriate share price for our shares; factors considered to arrive at this decision include the liquidity of the shareholder’s investment and the potential of upgrading the listing status .

Why are you reducing the authorized Common stock and creating a new Preferred Stock?

Our authorized and issued common stock had been increased in the past to reflect circumstances relevant at that time. The board of directors believes that the reduction in the authorized common stock reflects a more realistic need for authorized stock based upon the reduced number of issued shares. It also reduces the potential Franchise Tax calculated on authorized capital. If we need special forms of equity to effect acquisitions or other capital transactions, the new “blank check” preferred stock will give the Board the needed resource.

Why are you designating 150,000 shares of the Series A redeemable convertible 8% preferred stock at the present time?

Under the exchange agreement, Raymond F. Wright, one of the Cinegram shareholders, is to exchange $2,000,000 in indebtedness owed to him by Cinegram for 100,000 shares of newly created Series A Convertible Redeemable Preferred Stock of Film Works having the terms specified in the amended certificate of incorporation. This will improve the balance sheet of New York Film Works. He may in the future exchange additional indebtedness for preferred stock having the same terms.

What will the name of the combined company be after the exchange?

Immediately after the exchange, the name of New York Film Works, Inc. will be changed to Cinegram Digital Media Group, Inc. It is expected that the trading symbol will be changed to CDMG.

Why are you changing your name?

The Board of Directors has concluded that the growth and long term earnings prospects for Cinegram in its digital media lines of business are far greater than for New York Film Works. In addition, the use of digital technology in the film processing industry is rapidly expanding. The combination of these factors have made the change to Cinegram Digital Media Group, Inc. appropriate.

Will I recognize a taxable gain or loss as a result of the share exchange?

We expect that the exchange will be a tax-free exchange and you will not recognize gain or loss for income tax purposes. However, we urge you to consult your own tax advisor to determine your particular tax consequences.

For a more complete description of the tax consequences, see the section entitled "" on page .

Should I do anything with my New York Film Works stock certificates?

Not at this time. Your New York Film Works stock certificates will be exchanged for new certificates as soon as practicable after we file the amendment of the certificate of incorporation effecting the reverse split and the change of name.

When do you expect the share exchange to be completed?

We are working toward completing the exchange as quickly as possible. We expect to complete it before December 31, 2001

Why are you authorizing an incentive stock option plan?

Both companies have been operating with a very small number of employees. Cinegram Media recognized the value of retention of these valuable employees and the need to attract additional management and other personnel, and had created an employee stock option plan for its employees. Cinegram had also used options to induce investors to provide the initial finding for the Company. It is the intention in the share exchange agreement to continue to recognize these options. The board of directors believes that it is in our the best interests to extend the option program to employees of New York Film Works to assist in keeping the current employees and to help attract additional employees.

Why do you intend to change the State of incorporation of the Company?

The board of directors has concluded that, in light of the change in geographic focus of the Company and the anticipated increase in corporate activity, it would be in our best interests to change the corporate domicile from the State of New York to the State of Delaware.

Who should I call with questions?

New York Film Works shareholders should call Raymond F. Wright at (908) 598-4755 with any questions about the Information in this document.

You may also obtain additional information about New York Film Works from documents we have filed with the Securities and Exchange Commission by following the instructions in the section entitled "" on page .

SUMMARY

This summary information is provided to aid you in understanding the actions we are taking in connection with share exchange transaction and the resulting change in the nature of your company. You should read this document and the Annexes in their entirety for a complete understanding of the share exchange and other changes being made in our business.

The Companies

New York Film Works, Inc.

928 Broadway

New York NY 10010

(212) 475 5700

New York Film Works provides a wide array of photo finishing and processing services principally for the professional and commercial photographic market in New York City. It was incorporated under the laws of the State of New York on November 5, 1980 and began operations in April 1981. It acquired all of the outstanding shares of common stock of Emulsion Stripping, Ltd., an Illinois corporation, on February 8, 1984. Emulsion Stripping, Ltd. changed its name to ES Graphics, Inc. ("ES Graphics") in March 1984. ES Graphics subsequently went out of business.

After pursuing our business and finding results unsuccessful, we filed a Chapter 7 proceeding in the U.S. Bankruptcy Court. On September 3, 1992, our case was converted from a Chapter 7 to Chapter 11 proceeding under which we were a Debtor-in-Possession. We submitted a Plan of Reorganization in order to restructure our pre-petition obligations, which was subsequently approved by the Bankruptcy Court. On August 21, 1996, the U.S. Bankruptcy Court discharged us from our bankruptcy.

New York Film Works's Business

Business Overview

New York Film Works provides a wide array of photo finishing and a full service photo-processing laboratory principally for the professional and commercial photographic market in New York City.

We plan to take advantage of the technological and digital advances that have developed in the photographic and film processing industry such as the use of digital technologies, the Internet and scanning equipment. Our product line has expanded to include: "Digital C-Prints," Computer Graphic Output Scanning Services, Laser Prints and Video Transfer Services.

Film Processing and Printing Services.

Our products and services include: of laser/photo realistic digital copies, 35 mm & 4x5 computer output from digital data, digital printing from computer files, computer graphics creation, scans in a flash, photo CD and pro CD scanning services, video transfer services, film to VHS video, prints from VHS videos, custom "C" prints, quality color prints, custom "R" prints, custom black & white printing, professional mini-lab services, professional duping services, plaque framing center, photo restoration & retouching, Kodachrome and E-6 slide film processing and black & white and color contact sheet services.

Sales and Marketing.

We perform film processing services for

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professional and commercial photographers, photographic editors of magazines and periodicals, photographic dealers on a wholesale basis and

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amateur photographers on a retail basis.

We generate our professional and commercial sales primarily by telephone solicitations, sales visits, referrals, publicity in trade journals and from participation in trade shows. We also enjoy a large walk-in clientele from our location on Broadway in New York City.

Customers.

As of October 31, 2000, New York Film's customer base consisted of approximately 20% professional photographers, 10% film dealers, 20% corporate and commercial accounts, and 50% retail professional and quality-oriented amateurs.

Employees.

As of July 31, 2001 we employ 13 persons on a full-time basis, including 2 officers, 3 administrative personnel and 8 technicians.

Competition.

Competition in our industry is intense and our products and services are subject to technological advances and other changes.

We have a large number of competitors in the photographic processing industry. Many of our competitors are larger than we are and have much greater financial resources than we do. As a result, the demand for our products and services may decrease and our prices may be reduced. In addition, our products and services are affected by our ability to adapt to the technological advances made in the photographic industry, such as the use of digital technologies, the Internet and scanning equipment.

Facilities

New York Film Works leases 9,000 square feet of space located at 928 Broadway, New York, New York 10010. Our lease expires on February 28, 2006. We own various laboratory equipment including: film recorders and post production equipment such as film and paper processors, mounting machines, silver recovery units, densitometer, spectrophotometer, pH meter, enlargers, copy camera, automatic titrimeter and computers,.

Management.

Michael V. Cohen has served as our President and a director for the past eight years. Mr. Cohen received a B.S. degree in Business Administration from the Rochester Institute of Technology.

Stephen M. Cohen has served as the General Manager, Corporate Secretary and a director of New York Film Works since January 1, 1998. Before that he was employed by New York Film Works as Technician, Custom Color and Black & White Printing Division, and Commercial Sales and Service Manager. Mr. Cohen received his B.B.A. in Finance from Hofstra University.

Cinegram Media, Inc.

One Springfield Ave

Summit NJ 07901

(908) 598-4755

Cinegram Media, Inc. publishes high quality, interactive, multimedia products and provides gallery quality digitally produced artwork. It is a privately owned company incorporated in Delaware in 1996. Since 1996, Cinegram has focused on development of product concepts and initial products, and establishing strategic relationships with

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various business organizations to provide production and marketing services and

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organizations owning intellectual property that the company will use in the development of its product lines.

Cinegram provides “content”; it uses technology to present content in exciting new ways in the $3 billion PC-based “edu-tainment” software market. Cinegram's multimedia products are entertaining general interest and educational software programs designed for use on personal computers at home and in the classroom.

Cinegram's gallery quality digitally produced artwork is derived from the best known repositories of original art, prints, maps and other artwork. Through interactive technology Cinegram provides exciting new wall decor to the $11 billion retail art market.

Product Lines

Cinegram's business is organized into two product lines:

Interactive multimedia programs

These programs are designed for delivery currently on CD-ROM. As technology permits, and as the market demands, products will also be made available through the Internet and on DVD-ROM.

Cinegram publishes and distributes learning and entertainment products involving the arts, science, technology, history, and other categories. Its programs are designed to arouse curiosity, inform, entertain, motivate, inspire, and stimulate the thinking process. It chooses themes that it believes will have a broad and enduring appeal. Some of its products are developed internally and others are licensed from other developers; “Search for the Golden Dolphin” is an example of the first category and “RedShift 4” and “Anne Frank House” are examples of the second category.

Cinegram provides its products in three formats:

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full feature interactive multimedia programs,

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interactive Picture-Paks™, and

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screen savers.

Full feature interactive multimedia products now in distribution include:

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“Norman Rockwell, The Man and His Art”,

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“The Amistad Incident”,

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“Search for the Golden Dolphin”,

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“Exploring the Planets”,

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“RedShift 4”,

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“Anne Frank House”,

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“Atlas of the Solar System”,

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“RedShift 3 for Macintosh” and

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“Space Station Simulator”.

Cinegram strives to present historically accurate content in an enjoyable, entertaining and educational manner.

Additional products, including “Atlas of the Ancient World”, “Treasures of the Vatican Library” and “explorations” with National Geographic Society are in the concept and/or development stage.

Interactive Picture Paks™ (iPP)™ is a proprietary software delivery program that combines CD-ROM capabilities with those of the Internet. The CD-ROM delivers a base program and program content, and also enables the user to receive updates and add-ons on a regular basis as Cinegram makes them available. The first iPP product is titled “Tall Ships; 100 of the World’s Tallest Ships”, and the second is “Tall Ships – OpSail Edition”. This latter product was completed for introduction for the millennium celebrations on the East Coast including the Parade of Tall Ships in New York harbor. Additional products under development are based on the US Post Office series of contemporary stamps, and The New Yorker Magazine cartoons.

Cinegram also produces screen savers available in CD-ROM format, or as a direct download via the Internet.

Digital Art Treasures

Digital Art Treasures is the second line of products under the Cinegram Media umbrella. Using Internet technology and high resolution digital imaging and printing expertise, Digital Art Treasures provides digitally produced, gallery quality, art prints and photographs in an internet enabled print-on-demand system. The sources for these products are the same intellectual property bases used in Cinegram's interactive multi media programs - the museum, galley, institutional and corporate collections of original artwork, photographs, books, maps and other reproducible images. Cinegram enters into agreements (usually exclusive) for the right to re-purpose their asset collections while providing valuable archival services.

Customers can choose from a wide selection of images, in a number of collections in a growing on-line store. Cinegram can reproduce these images on a variety of papers and other substrates including canvas and clear plastic, and can mat and frame the images and to the customer’s choosing. The customer can view the completed image on Cinegram's Web site's virtual frame shop before purchasing.

Museums and other institutions that are linked in this system include Peabody Essex Museum, Library of Congress and New York Botanical Garden. Cinegram will be adding Mystic Seaport Museum, the Saturday Evening Post cover collection, the Charles R Knight collection, and others, shortly.

Products in the Digital Art Treasures line of business are available on the Internet at www.digitalarttreasures.com and www.museumarchives.com.

The market for retail “wall decor” is estimated at $ 11 billion by the U.S. Department of Commerce and is growing at about 5% ($500 million) per year. At present only a small portion of this market is served by high resolution digital reproduction techniques in an on-line environment. However the technology is available and open to new entrants who are capable of combining digital imaging, digital reproduction and the Internet. Competitors currently in this market include Art.com, NextMonet, Inc., Corbis Corporation, and Artland.com.

Sales, Marketing and Distribution

Cinegram has completed its development stage and has begun to ship commercial quantities of product into the consumer and education markets. Consumer market customers include

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major retailers such as CompUSA, Best-Buy, Amazon.com, and

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specialty retail outlets such as museum gift shops and other specialty retailers.

Cinegram sells to the educational market through direct sales and through specialty distributors.

Cinegram also maintains a web site - www.cinegram.com - where customers may find information and purchase its products.

Cinegram has contracted out its sales and distribution to the major retailers through agreements with Tri-Synergy, Inc of Dallas and Boston and through Tri-Synergy with Navarre Inc., one of the largest distributors to the retail computer products chains. Sales to the specialty retailers are made by direct sales calls and through specialty distributors. Sales and distribution to the education markets are made through direct sales calls and distributors and resellers specializing in the education markets. Marketing and sales support has been limited by Cinegram's lack of capital and needs to be increased now that products have been developed and are available for sale.

Sales of Digital Art Treasures products are being made principally via the on-line store on the Internet. Sales to retailers such as Restoration Hardware and Home Depot are also being pursued. These sales will be at wholesale pricing levels. Marketing is via the affiliation web sites of collection owners and via catalogs and magazine advertising. Museum Archives of Washington Inc. handles distribution under contract.

Competition.

Many companies produce CD-ROM based products for the computer user markets. Most competitors are better capitalized and established than we are. Companies producing products in this competitive environment include

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Microsoft,

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Take Two Interactive,

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Learn Technology,

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Sienna Software

and many more.

Cinegram believes it can succeed in this environment because of its focus on intellectual properties that are restricted in their availability, allowing it to produce products that are not available from others.

At present only a small portion of the reatail “wall decor” market is served by high resolution digital reproduction techniques in an on-line environment. However the technology is available and open to new entrants who have the capability to combine digital imaging, digital reproduction and the Internet. Competitors currently in this market include Art.com, NextMonet, Inc., Corbis Corporation, and Artland.com.

Intellectual Property Agreements.

A key element of Cinegram’s business plan is the acquisition of rights to intellectual properties of organizations. Frequently these are not-for-profit organizations that do not have the resources to exploit the resources they have in their archives. Cinegram solves three problems facing such organizations:

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widening the knowledge of the archives,

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generating revenues to further their objectives and

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providing valuable archival services.

Cinegram's approach has led to exclusive agreements that give it access to vast collections of material that can be incorporated into edu-tainment products or to generate gallery quality reproduction artwork. Among the organizations with which it has exclusive agreements are Mystic Seaport Museum, the Norman Rockwell Licensing Company, and New York Botanical Garden.

Customers.

Cinegram’s principal direct customer is Tri-Synergy, Inc., the company’s sales and distribution agent for the major retailers. For the year ended December 31, 2000, Tri-Synergy Inc accounted for 60% of the company’s sales. Indirectly, Cinegram’s customers include Navarre Inc., Best Buy Inc, CompUSA Inc, Amazon.com Inc. Fry’s Electronics Inc and most of the major retail outlets selling computer software products. Cinegram also sells directly to specialty retail outlets such as museum gift shops, (e.g. the American Museum of History, the Mystic Seaport Museum store, the US Holocaust Museum), and specialty trade retailers (e.g. Shutan Camera and Electronics, Anne Frank Center, Astronomy House) and to the education markets through direct sales and through reseller/distributors. Cinegram also sells direct to consumers via its web site store at www.cinegram.com. Digital Art Treasures will be available at www.museumarchives.com and www.digitalarttreasures.com.

Employees.

A large portion of Cinegram's operations are “outsourced” - e.g. sales to the major retailers, packaging and replication, product programming, warehousing and distribution, fulfillment, etc. Its small number of employees focus on development and co-ordination activities. As of June 30, 2001, Cinegram had 4 full time employees, including 2 officers, and 2 part time employees.

Facilities.

Because Cinegram outsources a large portion of its operations - e.g. sales to the major retailers, packaging and replication, product programming, warehousing and distribution, fulfillment, etc., Cinegram needs only limited facilities to house the core stafff. The Company occupies “full service” space under a one year, renewable contract, for office space and services at the HQ facility at One Springfield Ave., Summit, NJ. 07901.

SUMMARY OF THE SHARE EXCHANGE

This summary may not contain all of the information that is important to you. You should read carefully this entire document, including the share exchange agreement, and the Certificate of Amendment to New York Film Works's Articles of Incorporation and the other documents we refer to for a more complete understanding of the share exchange. The share exchange agreement is attached to this document as Annex A and the Certificate of Amendment is attached as Annex B. We encourage you to read these documents carefully.

New York Film Works's reasons for the Share Exchange

Factors Considered

At a meeting held on in October 10, 2001, the board of directors of New York Film Works concluded that the share exchange was in the best interests of New York Film Works and its shareholders, and determined to recommend that the New York Film Works shareholders approve of the changes needed to complete the share exchange.

In considering the share exchange, the New York Film Works board reviewed several factors, including, but not limited to:

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historical information concerning our respective businesses, financial performance and condition, operations, technology and management, including reports concerning results of operations;

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New York Film Works management's view of the financial condition, results of operations and businesses of New York Film Works and Cinegram Media, both before and after giving effect to the share exchange, and the New York Film Works board's determination of the share exchange's effect on shareholder value;

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current financial market conditions and historical market prices, volatility and trading information; and

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the consideration Cinegram Media shareholders will receive in the share exchange in light of other alternatives to increase shareholder value.

Present business and prospects

In deciding to recommend the share exchange, the board gave serious consideration to New York Film Works's present business and the future prospects, including

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the presence of current and possible future competitors with far more resources than we have;

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the fact that our business tends to be limited to a narrow geographic area; and

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the fact that we are highly dependent on the skills of our two executive officers.

Potential benefits

The decision of the board of directors of New York Film Works was based upon several potential benefits of the share exchange, including the potential to:

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build on Cinegram Media’s progress in developing exciting products based on digital technologies for the consumer, education and Internet markets;

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strengthen our management through the addition of senior level executives familiar with both the technology and business aspects of digital imaging and reproduction;

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improve our ability to raise capital through the public market as a result of our status as a fully reporting company and Cinegram Media's additional business potential;

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combine New York Film Works's expertise in the area of analog and digital film processing with Cinegram Media's expertise and creativity in the use of digital image technologies in the development of exciting new products; and

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expand our potential market from our current geographical base to a broader base and newer areas of applications such as processing for not-for-profit organizations.

Risks

The New York Film Works board also identified and considered several potentially negative factors in its deliberations concerning the share exchange including the following:

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more working capital may be needed to support an increase in the scope of our operations;

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there is a possibility that the demand for Cinegram Media's products may be less than the parties expect;

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larger and better-funded companies may be able to develop technology for interactive products that would be superior to that of Cinegram Media, or would have a lower cost;

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there is a possibility that if Cinegram Media's business plan is successful other companies with more resources and greater name recognition may enter the field; and

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we will have to deal with technical, operational, managerial, and personnel-related challenges in integrating the two companies.

The board concluded, however, that the potential benefits of the share exchange to New York Film Works and its shareholders outweighed the risks associated with the share exchange.

The discussion of the information and factors considered by the New York Film Works board is not intended to be exhaustive. In view of the variety of factors considered in evaluating the share exchange, the New York Film Works board did not find it practicable to, and did not, quantify or otherwise assign relative weight to the specific factors considered in reaching its determination.

The Share Exchange Agreement

How the Share Exchange Will Work

Upon approval of the reverse stock split, New York Film Works, Inc. will issue shares of New York Film Works to the stockholders of Cinegram Media, Inc. in exchange for all of the issued and outstanding shares of Cinegram Media, Inc. Cinegram Media Inc will then become a wholly owned subsidiary of New York Film Works, Inc. Each outstanding Cinegram Media share will be exchanged for 3.207 shares of New York Film Works, Inc. so that after the share exchange the former Cinegram Media shareholders will own 65% of New York Film Works, Inc. and the current shareholders of New York Film Works, Inc. will own 35% of the expanded share base of the Company. In addition, options to purchase shares in Cinegram Digital Media Group, Inc. will be issued at the same exchange rate to the holders of options and/or warrants in Cinegram Media Inc. If Cinegram achieves certain performance targets, additional shares and options may be issued to the Cinegram share/option/warrantholders so that the former Cinegram stockholders would own (if calculated at the closing date of the share exchange), up to 75% of the expanded share base of New York Film Works, Inc.

The business of New York Film Works Inc will be transferred to a new Delaware incorporated wholly owned subsidiary to be called New York Film Works (D) Inc. and the name of New York Film Works Inc will be changed to Cinegram Digital Media Group, Inc. Cinegram and the Film Works business will be operated as separate wholly owned subsidiaries so that each may focus on its own expertise, with exchange of information and common goals being co-coordinated by the parent company, Cinegram Digital Media Group, Inc. Mr Raymond F Wright, Chairman and CEO of Cinegram will be appointed President and CEO of the parent company while continuing to be the CEO of Cinegram. Messrs Michael and Stephen Cohen will be appointed President and General Manager and Secretary, respectively of New York Film Works (D), Inc. and will continue to be responsible for the success of the film works business. All other employees of the current New York Film Works, Inc will continue as employees of the new New York Film Works (D), Inc. Messrs Raymond F Wright, Chairman and CEO, Harold Denstman, President and Chief Development Officer and Mr Tom Martin, Vice President Digital Imaging Technology, will continue in their roles and will continue to be responsible for the success of Cinegram. All other officers and employees of Cinegram Media Inc. will continue in their current responsibilities.

Representations and Warranties of the Parties to the Share Exchange

New York Film Works and Cinegram Media each made substantially similar representations and warranties in the share exchange agreement regarding aspects of our businesses, financial condition, structure, and other facts pertinent to the share exchange, including representations and warranties by each company as to:

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its corporate organization, good standing, and qualification to do business;

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authority to enter into the share exchange agreement and related agreements;

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its capitalization;

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the accuracy and completeness of its charter, bylaws, and corporate minute book;

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its taxes;

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compliance with laws;

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required consents, waivers, and approvals;

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litigation to which it is a party;

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its agreements, contracts, and commitments;

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its title to the properties it owns and leases;

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its officers, directors and employees;

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its intellectual property, and intellectual property that it uses;

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its products;

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its employee benefit plans;

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information each company is to furnish for disclosure to shareholders of New York Film Works;

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in the case of Cinegram Media, changes in its business since December 31, 2000;

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in the case of Cinegram Media, the accuracy of its unaudited financial statements;

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in the case of Cinegram Media, its subsidiary and ownership interests in other entities;

•

in the case of New York Film Works, the accuracy of its reports filed with the SEC and its listing status on the Electronic Bulletin Board; and

•

in the case of New York Film Works, issuance of the share exchange shares in compliance with federal and state securities laws

The representations and warranties in the share exchange agreement are complicated and are not easily summarized. We urge you to read the articles of the share exchange agreement entitled "Representations and warranties of Film Works", "Representations and warranties of the Cinegram Stockholders " and "Representations and warranties of Cinegram" carefully.

Conditions to closing the Share Exchange

The obligations of each of the companies to complete the share exchange are subject to the satisfaction or waiver of several conditions.

The principal conditions that must be satisfied or waived before Cinegram Media is required to complete the share exchange include the following, subject to exceptions and qualifications:

•

the representations and warranties of New York Film Works in the share exchange agreement must be true and complete in all material respects;

•

the share exchange agreement must be adopted and approved by the Cinegram Media stockholders;

•

neither party shall have shown losses or deterioration in its cash position in excess of what might reasonably be expected in view of its history of operations to date;

•

we and Cinegram Media must obtain all required government approvals and other required consents;

•

each of the companies must comply in all material respects with our respective agreements in the share exchange agreement;

•

Cinegram must have received at least $250,000 in interim financing.

Some of the conditions may be waived by New York Film Works and some may be waived by Cinegram Media. For a more complete description of the conditions to closing the share exchange, see the sections entitled “8. Conditions Precedent to the Performance of Filmworks and the Cinegram Stockholders”, “9. Conditions Precedent to the Performance of Filmworks” and “10. Conditions Precedent to the Performance of the Cinegram Stockholders”, on page 20 of the Exchange Agreement.

No other negotiations

Until the share exchange is completed or the share exchange agreement is terminated, both New York Film Works and Cinegram Media have agreed not to solicit or encourage the submission of, or negotiate with respect to, an acquisition proposal from any third party.

Termination of the Share Exchange agreement

The share exchange agreement may be terminated under specified circumstances at any time prior to closing the share exchange, as follows:

•

by our mutual consent;

•

by either of us, if the share exchange is not completed by December 31, 2001;

•

by either of us, upon a breach of any of the other party's obligations under the share exchange agreement if the breach is not cured within 10 days after notice of the breach;

If the share exchange agreement is terminated by either party for a reason other than the other party's breach of its obligations under the agreement, neither party will have any further obligations under the agreement. If the share exchange agreement is terminated because the other party has breached the agreement, then the non-breaching party may pursue all legal rights available to it.

Material United States Federal Income Tax Consequences of the Share Exchange

The following general discussion summarizes the material United States federal income tax consequences of the share exchange. This discussion is based on the Internal Revenue Code, the related regulations promulgated, and existing administrative interpretations and court decisions, all of which are subject to change, possibly with retroactive effect.

Based on discussions with its independent public accountants, New York Film Works's management believes that the tax status of shares held by shareholders of New York Film Works will not be affected by the share exchange and that New York Film Works should not recognize gain or loss for United States federal income tax purposes as a result of the share exchange. Based on discussions with its independent public accountants, Cinegram Media’s management believe that the shares of New York Film Works, Inc received by the Stockholders of Cinegram Media, Inc. pursuant to the share exchange will be treated as a tax free “reorganization” within the meaning of Section 368(a) for United States federal income tax purposes. Neither New York Film Works or Cinegram Media have sought a tax ruling from the IRS or obtained a legal opinion confirming the information described above. These opinions will not bind the IRS and will not preclude the IRS from adopting a contrary position , and no assurance can be given that contrary positions will not be successfully asserted by the IRS or adopted by a court if the issues are litigated. Neither New York Film Works nor Cinegram Media intends to obtain a ruling from the IRS as to the tax consequences of the share exchange.

This discussion is only intended to provide you with a general summary, and it is not intended to be a complete analysis, advice, or description of all potential United States federal income tax consequences or any other consequences of the share exchange. In addition, this discussion does not address tax consequences which may vary with, or are contingent on, your individual circumstances. Moreover, this discussion does not address any non-income tax or any foreign, state, or local tax consequences of the share exchange. Accordingly, you are strongly urged to consult with your tax advisor to determine the particular United States federal, state, local, or foreign income or other tax consequences to you of the share exchange.

Restrictions on Sales of Shares of New York Film Works Common Stock Issued in the Share Exchange

All shares of New York Film Works common stock received by Cinegram Media shareholders in the share exchange will be issued in reliance on exemptions from registration as a private offering. As a result, those shares will be "restricted securities" under the Securities Act of 1933.

Cinegram Media holders may not sell their shares of New York Film Works common stock acquired in the share exchange except pursuant to

•

an effective registration statement under the Securities Act covering the resale of those shares, or

•

any other applicable exemption under the Securities Act.

Regulatory Approvals

No federal or state regulatory requirements or approvals are needed in connection with the share exchange transaction.

Accounting Treatment of the Share Exchange

In accordance with generally accepted accounting principles, we intend to account for the share exchange as a purchase of New York Film Works by Cinegram Media for financial reporting and accounting purposes. Under APB Opinion No.16, “ ... a combining company which either retains or receives the larger portion of the voting rights in the combined corporation [. That corporation] should be treated as the acquirer ...”. Accordingly, the “accounting predecessor” will be Cinegram Media, Inc. and the operating results for prior years will differ significantly from the operating results reported last year.

Operations of the combined company after the Share Exchange

Following the share exchange, the combined company will operate under the name "Cinegram Digital Media Group, Inc." The company's corporate headquarters will be relocated to Summit, New Jersey.

The stockholders of Cinegram Media will become shareholders of New York Film Works, Inc., and their rights as shareholders will be governed by New York Film Works's amended articles of incorporation and New York Film Works's amended bylaws.

Change in Board of Directors

Under the share exchange agreement, the board of directors, will be increased to five members. Mr Gerald Cohen, former Chairman and director of the Corporation and Mr Raymond F Wright, Chairman and CEO of Cinegram Media will be appointed to the board and Messeurs Michael and Stephen Cohen will resign from the board. Mr James B Witker II, outside director on the board of directors of Cinegram and two additional outside directors will be appointed to the board. Information on the three new Board members is as follows:

Raymond F Wright is currently Chairman and Chief Executive Officer of Cinegram Media, Inc. a position he has held since November 1999. Prior to November 1999 and since the company’s founding in 1996, he provided services as Executive Vice President and Chief Financial Officer for the Company, while providing consulting services to other non related parties. Mr Wright has more than 30 years of experience as a senior corporate officer in both the US and international markets, in finance, information systems, stategic planning, and general management. Prior to 1996, he was employed by Tambrands, Inc. and Nabisco Brands, Inc. in various roles in the United States and abroad. He is a Canadian by birth and received his formal education in Canada. Mr Wright will become President and Chief Executive Officer after the completion of the share exchange.

Gerald Cohen was a founder of New York Film Works and served as a director of that company from its formation in 1980 through October 1999. Mr. Cohen is an attorney and certified public accountant admitted to practice in the State of New York. From 1960 to the present, Mr. Cohen has practiced as an attorney under his own name. Mr. Cohen was graduated from Brooklyn Law School and Brooklyn College and has a Master's Degree in Accounting from the City University of New York

Mr James B Witker II was a founder of Cinegram Media in 1996 and has continued as a director since its founding. Mr Witker provides consulting services to Cinegram in the area of intellectual property acquisition and other projects. Mr Witker has been chairman of the Tavistock Company, a book and education material publisher, of which he is the principal shareholder.

New York Film Works Market Price Information

New York Film Works common stock has been traded on the Electronic Bulletin Board under the symbol NYFW since April 2001. Cinegram Media common stock is not publicly traded.

Per Share Market Price Data

The following table sets forth, for the fiscal quarters indicated, the high and low sale prices per share of New York Film Works common stock as reported on the Electronic Bulletin Board:

	High	Low
First Quarter ended January 31, 2001	n/a	n/a
Second Quarter ended April 30, 2001	$0.01	$0.005
Third Quarter ended July 31, 2001	$0.10	$0.005
Fourth Quarter ended October 31, 2001	$0.018	$0.005

The closing prices per share of New York Film Works common stock as reported on the Electronic Bulletin Board on October 3, 2001, the last day business day on which the common stock was traded prior to public announcement that New York Film Works and Cinegram Media had entered into the share exchange agreement was $.005. On _________, 2001, the last full trading day for which closing prices were available at the time of the printing of this document, the closing price of the New York Film Works common stock was $ .

New York Film Works and Cinegram Media have never paid cash dividends on their shares of capital stock. Under the share exchange agreement, each of New York Film Works and Cinegram Media has agreed not to pay cash dividends before the closing of the share exchange without the written consent of the other. New York Film Works presently intends to retain future earnings, if any, for use in its business and has no present intention to pay cash dividends before or after the share exchange.

THE MEETING

Record date and outstanding shares

The record date for determining who is entitled to vote at the meeting is November 20, 2001. Only holders of record of New York Film Works common stock at the close of business on the record date are entitled to notice of the meeting and to vote at the meeting. As of the close of business on the record date, there were 91,000,000 shares of New York Film Works common stock outstanding and entitled to vote, held of record by approximately 1,157 shareholders. Each New York Film Works shareholder is entitled to one vote for each share of New York Film Works common stock held as of the record date.

On the record date, directors, executive officers and affiliates of New York Film Works as a group owned 40,227,952 shares of New York Film Works common stock. These shares constituted approximately 44.2% of all of the outstanding shares of New York Film Works common stock as of the record date. In addition the holders of 6,386,007 shares of New York Film Works common stock have indicated they intend to vote for approval of the proposals. Collectively, the holders of 46,613,959 shares of New York Film Works common stock, representing 51.2% of all of the outstanding shares of New York Film Works common stock as of the record date have indicated they intend to vote in favor of the proposals.

Vote and quorum required

The holders of a majority of the shares of New York Film Works common stock entitled to vote at the New York Film Works shareholders' meeting, present in person or represented by proxy, will constitute a quorum for the meeting. The vote of holders of a majority of the shares of New York Film Works common stock outstanding as of November 20, 2001, the record date, is required to approve the proposal to to amend the certificate of incorporation and the proposal to approve the re-incorporation of the Company in the State of Delaware within the following calendar year. The vote of holders of a majority of the shares present and voting at the meeting is required to approve the stock option plan.

PROPOSAL # 1 - AMENDMENT OF CERTIFICATE OF INCORPORATION

This proposal would amend the Certificate of Incorporation as follows:

•

to change each 25 outstanding shares of the Corporation’s Common Stock, par value $0.001 per share into one share of Common Stock, par value $0.001 per share;

•

to reduce the authorized Common Stock of the Corporation to 50,000,000 shares of Common Stock, par value $0.001;

•

to change the name of the Corporation from New York Film Works, Inc. to Cinegram Digital Media Group Inc.;

•

to create a new class of Preferred Stock consisting of 2,000,000 shares, par value $0.001 per share, to designate 150,000 of the newly created shares as Series A Redeemable Convertible 8% Preferred Shares and to vest in the Board of Directors the authority to establish and designate additional series of Preferred Stock, to fix the number of shares therein, and the variations in the relative rights, preferences and limitations as between series;

The Certificate of Amendment is attached to this document as Annex B, and we urge you to carefully read this document in its entirety.

Vote required to authorize the Amendment to the Certificate of Incorporation of New York Film Works, Inc.

The vote of holders of a majority of the common stock outstanding is required to approve the amendment to the Certificate of Incorporation of the Corporation.

Collectively, the holders of 46,613,959 shares of New York Film Works common stock, representing 51.2% of all of the outstanding shares of New York Film Works common stock as of the record date have indicated they intend to vote in favor of Resolution # 1.

PROPOSAL # 2 - ESTABLISHMENT OF INCENTIVE STOCK OPTION PLAN

2001 Stock Option Plan

Description of plan

The following description of the stock option plans is qualified in its entirety by reference to the full text of the 2001 Incentive Stock Option Plan, a copy of which, is attached as Annex “C” to this information statement. Options granted under the plan may be either incentive stock options or non-statutory options. In the discussion that follows, options that are issued under the plan but not intended to comply with IRS requirements for incentive stock options are called "non-statutory options."

Purpose. The purpose of the plan is to allow us to attract, retain and motivate key employees and other service providers who are important to the success and growth of our business, and to create a long-term mutuality of interest between our shareholders and those key employees by granting them options to purchase our common stock. In addition, the Plan will recognize the options and warrants previously granted to Cinegram Media employees, directors, contractors and suppliers in recognition of their service to date. Options granted under the plan may be either incentive stock options or non-statutory options. The Board of Directors administers the plan, either directly or by a committee consisting of two or more outside directors.

Option price and exercisability. Under the plan, options may be granted to our key employees and other service providers. The option price is to be fixed by the committee at the time the option is granted. If the option is intended to be an incentive stock option, the purchase price is to be not less than 100% of the fair market value of the common stock at the time the option is granted, or, if the person to whom the option is granted is the owner of 10% or more of our common stock, 110% of that fair market value. The committee is to specify when and on what terms the options granted to are to become exercisable. However, no option may be exercisable after more than 10 years from the date it was granted or five years from the date it was granted if it was granted to a holder of 10% or more of our common stock.

Maximum dollar amounts. For incentive stock options, the aggregate fair market value of the shares for which the options are exercisable for the first time during any calendar year may not exceed $100,000 unless this limitation has ceased to be in effect under the applicable section of the Internal Revenue Code.

Special provisions on exercisability. If there is a change of control of the company, all outstanding options become immediately exercisable in full. If an employee dies, or if he or she retires at or after age 65 or before age 65 with the consent of the committee, the option holder may exercise the options for a period of one year from the date he or she dies or retires. If the employee's employment terminates for reasons other than death or retirement, the options remain exercisable for three months after employment terminated unless termination was for cause. If the termination was for cause, all outstanding options are immediately canceled.

Number of options available. Following approval of the share exchange agreement with Cinegram Media, the board voted to adopt a share option plan providing for the issuance of up to 5,000,000 shares. However, no eligible individuals may be granted options for more than 500,000 shares in any calendar year. The option price and number of shares covered by an option will be adjusted proportionately in the event of a stock split, stock dividend, etc., and the committee is authorized to make other adjustments to take into consideration any other event which it determines to be appropriate to avoid distortion of the operation of the plan. If there is a merger or consolidation, option holders will be entitled to acquire the number and class of shares of the surviving corporation which they would have been entitled to receive after the merger or consolidation if they had been the holders of the number of shares covered by the options. If the Company is not the surviving entity in a merger and consolidation, the committee may in its discretion terminate all outstanding options, and if that happens option holders will have 20 days from the time they received notice of termination to exercise all their outstanding options.

Options to be granted on approval of the plan . Upon approval of the plan, (and the reverse split), and in accordance with the share exchange agreement, options to acquire 2,088,666 shares will be issued in replacement of the options and warrants issued previously by Cinegram Media. The replacement options will have termination dates equal to the original Cinegram option or warrant (which dates are not later than five years from date of the share exchange agreement). In addition, options to acquire 350,000 shares will be granted to Messrs Gerald, Michael and Stephen Cohen in recognition of their services to date. The Option Exercise Price for the Cinegram options will range from $0.36 to $0.48 per share, on a post reverse split basis. The Cohen options are at $0.48 per share.

Term of plan and use of proceeds. The plan terminates 10 years from its effective date unless terminated earlier by the board of directors or the shareholders. Proceeds of the sale of shares subject to options under the plan are to be added to our general funds and used for our general corporate purposes.

Federal Tax Consequences. The grant of incentive options to an employee does not result in any income tax consequences. The exercise of an incentive option generally does not result in any income tax consequences to an employee if (i) the incentive options is exercised by the employee during his employment with New York Film Works or a subsidiary of, or within a specified period after termination of employment, and (ii) the employee does not dispose of shares acquired by exercising an incentive option within two years from the date of grant or one year after exercise, whichever is later. This time period is referred to as the holding period. However, the excess of the fair market value of the shares in of common stock as of the date of exercise over the option exercise price is includable in an employee’s alternative minimum taxable income in the year of exercise.

An employee who disposes of his incentive option shares before the end of the holding period described in the preceding paragraph generally will recognize ordinary income in the year of sale in an amount equal to the excess, if any, of (a) the lesser of (i) the fair market value of the shares on the date of exercise or (ii) the amount realized on the sale, over (b) the incentive option price. Any additional amount realized on an early disposition should be treated as capital gain to the employee, short or long term, depending on the employee’s holding period for the shares.

New York Film Works will not be entitled to a deduction as a result of the grant of an incentive option, the exercise of an the incentive option, or the sale of he incentive option shares after the holding period. If an employee disposes of incentive option shares in an early disposition, New York Film Works would be entitled to deduct the amount of ordinary income recognized by the employee.

The grant of non-statutory options will not result in the recognition of any taxable income by the optionee. An optionee will recognize ordinary income on the date of exercise of a non-statutory option equal to the excess, if any, of (i) the fair market value of the shares acquired as of the exercise date, over (ii) the exercise price. The income reportable on exercise of a non-statutory option is subject to federal income and employment tax withholding. Generally, New York Film Works will be entitled to a deduction in its taxation year within which the optionee recognizes compensation income in a corresponding amount.

Executive Compensation

Summary Compensation Table

The following Summary Compensation Table sets forth all compensation awarded to, earned by, or paid to the Company's chief executive officer for all services rendered in all capacities to the Company and its subsidiaries for the fiscal years ended October 31, 2000, 1999 and 1998,. No executive officer received compensation of more than $100,000 in any of those years.

					Long-Term Compensation Awards
Name and Principal Position	Fiscal Year	Salary($)	Bonus($)	Other Annual Compensation	Securities Underlying Options	All Other Compensation
Michael Cohen	2000	77,481	-	-	-	-
	1999	69,938	-	-	-	-
	1998	59,888	-	-	-	-

On October 19, 2001, we issued 7.5 million shares of common stock to Gerald Cohen as compensation for services previously rendered to the Company. As of that date, the market value of those shares, based on the most recent closing price prior to the date of grant was $0.005.

Director Compensation

Directors do not receive any compensation for serving as directors.

Stock Options

No Stock options were granted to any officer or director during the year ended October 31, 2000, and no officer or director exercised any stock options during that period. No officer or director held an option to acquire any of the Company's securities as of the date of this information statement.

Stock Options to be Issued Upon Completion of Exchange

Upon completion of the exchange, the post-exchange officers and directors listed below will receive options to purchase the number of shares indicated at a price of $0.48 per share.

Optionee		Number of shares
Gerald Cohen		200,000
Michael Cohen		100,000
Stephen Cohen		50,000

In addition, officers and directors of Cinegram holding options under its incentive stock option plan will be issued, in replacement of the options previously granted to them by Cinegram, options to purchase the number of shares indicated below at the specified prices.

Optionee	Number of shares	Exercise price
Harold Denstman	442,967	$0.48
James B. Witker	3,207	$0.36
Raymond F. Wright	1,072,058	$0.44
Hollis E. Wright	427,333	$0.44

These options will expire at various times from May 2002 through July 2007.

Executive Compensation After Completion of Exchange

After completion of the exchange, Messrs. Wright and Dentsman will each be entitled to a salary of $125,000 per year as the Company's Chairman and President, respectively. In addition, each of them will participate in Cinegram's incentive compensation plan, which provides for the payment of incentive compensation of anywhere between 0% and 150% of a targeted amount established by the Board of Directors each year, with the percentage actually received to be dependent upon performance against established objectives. Michael Cohen, as President of the Film Works subsidiary, will be entitled to a salary of $110,000 per year.

Vote required to authorize the 2001 Stock Option Plan

The vote of holders of a majority of the common stock present and voting at the meeting is required to approve the 2001 Stock Option Plan.

Collectively, the holders of 46,613,959 shares of New York Film Works common stock, representing 51.2% of all of the outstanding shares of New York Film Works common stock as of the record date have signified their intention to vote in favor of Resolution # 2.

PROPOSAL # 3 - CHANGE OF DOMICILE OF THE CORPORATION

(Approval to vest in the Board of Directors the authority to change the domicile of the Corporation from New York State to the State of Delaware.)

Description of the proposal

At a meeting held on of October 10, 2001, the board of directors of New York Film Works concluded that, in light of the change in geographic focus of the Company and the anticipated increase in corporate activity, it would be in the best interests of the Company to change the corporate domicile from the State of New York to the State of Delaware. As there are many procedural steps necessary to effectuate such a change, the Board determined that the most appropriate course of action would be to obtain Shareholder approval for the change at the same time and asks for approval of the other actions requiring shareholder approval, and to authorize the Board of Directors to make the change when all procedural steps have been completed.

Vote Required to Authorize the Change of Domicile of the Corporation

The vote of holders of a majority of the outstanding common stock is required to approve the authorization to change the company's domicile.

Collectively, the holders of 46,613,959 shares of New York Film Works common stock, representing 51.2% of all of the outstanding shares of New York Film Works common stock as of the record date have signified their intention to vote in favor of Resolution # 3.

FINANCIAL INFORMATION

NEW YORK FILM WORKS, INC

Financial Information

INDEX TO FINANCIAL INFORMATION

___________________________________________________________________________________________

New York Film Works Management's Discussion and Analysis Fiscal Years Ended October 31, 2000 and 1999, Three Months Ended July 31, 2001 and 2000 and Nine Months Ended July 31, 2001

New York Film Works Audited Financial Statements for Fiscal Years Ended October 31, 2000 and 1999

New York Film Works Unaudited Financial Statements for Three Month Period Ended July 31, 2001 and 2000 and for the Nine Month Period Ended July 31, 2001 and 2000

Cinegram Media Audited Financial Statements for Fiscal Years Ended December 31, 2000 and 1999

Cinegram Media Unaudited Condensed Financial Statements for Three Months and Six Month Periods Ended June 30, 2001

Unaudited Pro Forma Condensed Combined Financial Statements

New York Film Works Management's Discussion and Analysis of Fiscal Years Ended October 31, 2000 and 1999, Three Months Ended July 31, 2001 and 2000 and nine months ended july 31, 2001 and 2000.

Year Ended October 31, 2000 compared to Year ended October 31 1999

The following discussion contains certain forward-looking statements that are subject to business and economic risks and uncertainties, and the Company's actual results could differ materially from those forward-looking statements. The following discussion regarding the financial statements of the Company should be read in conjunction with the financial statements and notes thereto.

The following discussion of the financial condition and results of operation of our Company should be read in conjunction with the financial statements and notes thereto appearing elsewhere herein.

Results of Operations.

Fiscal year ended October 31, 2000 (the "fiscal year 2000") compared to fiscal year ended October 31, 1999 (the "fiscal year 1999").

Total revenues for our fiscal year 2000 were $1,443,973 as compared to revenues of $1,337,326 for our fiscal year 1999. Revenues increased by $106,647. Nearly all of our revenues were generated by sales to professional photographers, film dealers and photographic editors of magazines and periodicals and no single customer accounted for 10% or more of our revenues.

Our General and Administrative Expenses have increased by $131,574 from $264,522 for our fiscal year 1999 to $396,126 for our fiscal year 2000 as a result of increased salaries and administrative costs. Our Selling and Shipping Expenses, decreased by $13,684 from $179,391 for our fiscal 1999 to $165,707 for our fiscal year 2000 due primarily to the costs and expenses associated with selling and shipping our products. Our management is currently exploring various alternatives to continue to decrease our selling and shipping expenses.

Liquidity and Capital Resources.

During our fiscal year 2000, cash provided by operating activities was $50,491 compared with cash provided of $106,620 during our prior fiscal year 1999.

Our Company had working capital of $289,960 at the end of the fiscal year 2000 compared to working capital of $254,079 at the end of the fiscal year 1999. We believe we have sufficient cash resources and working capital to meet our capital requirements for the balance of the current fiscal year. We finance our operations primarily with existing capital and funds generating from operations.

Quarter and nine months ended July 31, 2001 compared to Quarter and nine months ended July 31, 2000.

The following discussion of the financial condition and results of operation of our Company should be read in conjunction with the financial statements and notes thereto appearing elsewhere herein.

Results of Operations.

Total Sales for the quarter ended July 31, 2001 were $327,853 compared to sales in the prior year of $387,955. The decline of $60,102 reflected a general decline in business activity in the quarter. Total Sales for the nine months ended July 31, 2001 were $975,339 compared to sales in the prior year of $1,037,371. The decline of $62,032 reflected the general decline in business activity in the third quarter. Selling and Shipping Expenses of $41,860 in the quarter were lower than last year by $6,246 reflecting the lower sales level. Selling and Shipping Expenses of $110,653 for the nine months were higher than last year by $9,039 reflecting higher costs in the first six months of the current year. General and Administrative Expenses of $90,865 in the quarter were $53,705 higher than last year; the principal year over year difference in the quarter arises from receipt of insurance proceeds in the prior year in the amount of $66,158. Without this item, G & A expenses were $12,453 less than last year reflecting the lower sales level and productive efforts to reduce overheads. General and Administrative Expenses of $302,306 for the nine months were $ 3,639 lower than the prior year reflecting the lower sales level and productive efforts to reduce overheads.

Operating results in this year’s third quarter resulted in a loss of $7,606 compared to a profit in the prior year of $103,325, which reflected the insurance proceeds of $66,158. Without the insurance proceeds, the loss compared to the prior year profit results principally from the reduced sales level this year. For the nine months this year, Operating results resulted in a loss of $43,281 compared to a profit last year of $20,216. The decline in profitability year over year results principally from the reduced sales level.

Liquidity and Capital Resources.

For the nine months through July 31,2001 cash flow from operations was negative $35,941 directly attributable to the Loss from Operations. Additions to Property and Equipment for updating equipment amounted to $25,502. Total Cash Flow for the nine months was negative $61,443, reducing cash balances to $135,883. In the prior year, cash flow from operations was $26,343 reflecting the favorable operating results. Property and Equipment purchases amounted to $25,393 in the prior year.

As at July 31, the Company had cash and cash equivalent balances of $135,883 compared to $197,326 at October 31, 2000. Working Capital amounted to $221,555 at July 31, 2001 compared to $289,960 at October 31, 2000. We believe we have sufficient cash resources and working capital to meet our requirements for the balance of the current fiscal year. However, any projections of future cash needs is subject to substantial uncertainty. We finance our operations primarily with existing capital and funds generated from operations.

Plan of Operations

The opinion of the Company's independent auditor for each of the last two fiscal years expressed substantial doubt as to the Company's ability to continue as a going concern. Based on the unaudited results and the projected results furnished to the Company by Cinegram Media, we anticipate that if the share exchange is completed, equity funding is achieved as planned, and if our due diligence confirms the information we have been furnished, the combined company should achieve profitability within the next 24 months. It should be noted, however, that to achieve those results we will need to obtain additional financing to continue development of new products, for marketing of products, for retirement of debt, working capital, and other purposes. It is the intention of management to raise equity capital as soon as practicable after completion of the share exchange and reverse stock split. If the proposed share exchange is not completed the outlook is much less favorable. In that case, until such time as the Company is able to obtain additional financing, it plans to limit its operations by conducting marketing efforts primarily on the basis of person-to-person contact and limiting expansion of its operations.

FINANCIAL STATEMENTS

New York Film Works, Inc.

Years Ended October 31, 2000 and October 31, 1999

Page

Report of Independent Certified Public Accountant

Consolidated Balance Sheets as of October 31, 2000 and 1999

Statement of Shareholders' Equity from October 31, 1997 through October 31, 2000

Statement of Profit and Loss for the years ending October 31, 2000 and October 31, 1999

Statement of Cash Flows as of October 31, 2000 and October 31, 1999.

Notes to Financial Statements

[Firm Letterhead]

REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANT

The Board of Directors

New York Film Works, Inc.

928 Broadway

New York, New York 10010

Gentlemen:

I have audited the accompanying balance sheet of New York Film Works, Inc., October 31, 2000 and 1999, and the related statements of income, shareholders' equity, and cash flows for the years ended October 31, 2000, and 1999. These financial statements are the responsibility of the Company's management. My responsibility is to express an opinion on these financial statements and schedules based on my audits.

I conducted my audit in accordance with generally accepted accounting standards. These standards require that I 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.

I believe that my audit provides a reasonable basis for my opinion.

In my opinion, the financial statements referred to above present fairly, in all material respects, the financial position of New York Film Works, Inc. of October 31, 2000, and 1999, and the results of its operations and its cash flows for the years ended October 31, 2000 and 1999, in conformity with generally accepted accounting standards, and the schedules referred to above present fairly, in all material respects, when read in conjunction with the related financial statements, the information therein set forth.

Respectfully submitted,

/s/ David Suss

David Suss, CPA

January 9, 2001

NEW YORK FILM WORKS, INC.

CONSOLIDATED BALANCE SHEET

AS OF OCTOBER 31

ASSETS

Current Assets:	2000	1999

Cash and Cash Equivalents - Note 1	$ 197,326	$ 167,169
Accounts Receivable-Net	128,415	153,132
Inventory-Note 1	13,495	11,911
Prepaid Expenses	2,388	7,886
Prepaid Insurance	5,711	5,715
Total Current Assets	$ 347,335	$ 345,813

Property, Plant and Equipment:

Machinery and Equipment	1,727,445	1,703,127
Furniture and Fixtures	189,048	189,048
Leasehold Improvements	436,180	436,180
Total	$2,352,673	$2,328,355

Less: Accumulated Depreciation	2,242,069	2,221,268

Property, Plant and Equipment-Net	$ 110,604	$ 113,937

Other Assets:

Security Deposits	32,058	32,058

Total Assets:	$ 489,997	$ 484,958

LIABILITIES
Current Liabilities:	2000	1999

Notes Payable-Shareholders	--	$ 28,458
Accounts Payable	21,403	36,850
Accrued Expenses	35,972	26,426
Total Current Liabilities:	$ 57,375	$ 91,734

Stockholders' Equity:

Common Stock-$.001 Par Value 120,000,000 Shares Authorized; 83,500,000 Shares Issued and Outstanding	83,500	83,500
Capital in Excess of Par	3,260,558	3,260,558
Retained Earnings (Deficit)	(2,911,436)	(2,950,834)

Total Shareholders' Equity	432,622	393,224

Total Liabilities and Shareholders' Equity	$ 489,997	$ 484,958

NEW YORK FILM WORKS, INC.

STATEMENT OF SHAREHOLDERS' EQUITY

FROM NOVEMBER 1, 1997 TO OCTOBER 31, 2000

Balance-November 1, 1997	$83,500	$32,60,558	($3,166,908)

Net Income (Loss)
Y/E 10/31/98			109,454

Balance-November 1, 1998	83,500	3,260,558	(3,057,454)

Net Income (Loss)
Y/E 10/31/99			106,620

Balance-October 31, 1999	83,500	3,260,558	(2,950,834)

Net Income (Loss)
Y/E 10/31/00			50,491

Balance-October 31, 2000	$83,500	$3,260,558	$(2,900,343)

NEW YORK FILM WORKS, INC.

STATEMENT OF PROFIT AND LOSS

FOR THE YEAR ENDING OCTOBER 31

	2000	1999

Sales	$ 1,443,973	$ 1,337,326

Cost of Sales	831,649	786,793

Gross Profit	$ 612,324	$ 550,533

Operating Expenses:

Selling and Shipping	165,707	179,391

General and Administrative	396,126	264,552

Total Operating Expenses	$ 561,833	$ 443,913

Net Income from Operations	50,491	106,620

Earnings Before Income Tax	$ 50,491	$ 106,620

Income Tax	0	0

Net Income	50,491	106,620

Earnings Per Share	$0.00	$0.00

Weighted Average Number of Shares	83,500,000	83,500,000

NEW YORK FILM WORKS, INC.

STATEMENT OF CASH FLOWS

AS OF OCTOBER 31

	2000	1999

Cash Flows from Operations	$ 50,491	$ 106,620

Increase (Decrease) in Cash:

Accounts Receivable	24,717	(15,522)

Inventory	(1,584)	(1,174)

Prepaid Expenses	5,502	668

Security Deposits	--	(30,958)

Notes Payable	(28,458)	--

Accounts Payable	(15,447)	(7,090)

Accrued Expenses	9,546	25,995

Stockholders Loans	--	(59,403)

	$ 44,767	$ 19,136

Cash Flows from Investing Activities

Purchase of Property and Equipment	(14,610)	(30,132)

Increase (Decrease in Cash)	30,157	(19,996)

Cash Beginning of Year	167,169	178,165

Cash End of Year	$ 197,326	$ 167,169

NEW YORK FILM WORKS, INC.

NOTES TO FINANCIAL STATEMENTS OCTOBER 31, 2000

Note 1: Summary of Significant Accounting Policies

Description of Business: The Company provides film processing services principally for the professional photographic market and the Company operates full service color labs.

This summary of the major accounting policies of New York Film Works, Inc. is provided to assist the reader in evaluating the financial statements of the Company.

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

Inventory: Inventory, which consists of supplies and raw materials, is stated at the lower cost or market, on a first-in, first-out basis.

Property, Plant and Equipment: Property, plant and equipment is stated at cost. Additions, renewals and improvements, unless of relatively minor amounts, are capitalized. Expenditures for maintenance and repairs are expensed as incurred. The cost of property and equipment retired or sold, together with the related accumulated depreciation, is removed from the appropriate asset and depreciation accounts and the resulting gain or loss is included in the statement of income.

Depreciation: For financial reporting, depreciation and amortization are provided on the straight-line method over the following estimated useful lives.

Leasehold improvements

10 Years

Machinery and Equipment

7 Years

Furniture and Fixtures

7 Years

Income Taxes: Investment credits are accounted for under the flow-through method. Under this method, credits are recognized as a reduction of income tax expense in the year in which the credits are utilized for tax purposes.

Note 2: Income Taxes. The Company has sustained operating losses since inception and loss carry-forwards and investment tax credits will be used to reduce future provisions for income taxes.

The Company has available net operating loss carry-forwards of $2,482,348.

Note 3: Bankruptcy. The Company entered into bankruptcy under Chapter 11 of Federal Bankruptcy Laws 8/25/92. The Company was discharged from Chapter 11 of Federal Bankruptcy 8/2/96.

New York Film Works

Interim financial statements

For quarter and nine months as of July 31, 2001

The accompanying interim unaudited financial statements 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 adjustments) considered necessary for a fair presentation have been included, and the disclosures are adequate to make the information presented not misleading. Operating results for the nine months ended July 31, 2001, are not necessarily indicative of the results that may be expected for the year ended October 31, 2001. These statements should be read in conjunction with the financial statements and notes thereto included in the Annual Report on Form 10-KSB (filed with the Securities and Exchange Commission) for the year ended October 31, 2000.

NEW YORK FILM WORKS, INC.

BALANCE SHEETS as at

July 31,2001 (unaudited) and October 31, 2000 (audited)

ASSETS

	July 31, 2001	October 31, 2000
Current Assets:
Cash and Cash Equivalents - Note 1	$ 135,883	$ 197,326
Accounts Receivable-Net	129,850	128,415
Inventory - Note 1	13,418	13,495
Prepaid Expenses	2,253	2,388
Prepaid Insurance	5,223	5,711
Total Current Assets	286,627	347,335

Property, Plant and Equipment:

Machinery and Equipment –Net	1,752,949	1,727,445
Furniture and Fixtures	189,048	189,048
Leasehold Improvements	436,180	436,180
Total	2,378,176	2,352,673

Less: Accumulated Depreciation	2,242,070	2,242,069

Property, Plant and Equipment - Net	136,106	110,604

Other Assets:

Security Deposits	31,680	32,058
Total Assets	$ 454,413	$ 489,997

NEW YORK FILM WORKS, INC.

CONSOLIDATED BALANCE SHEETS

As of July 31, 2001 (Unaudited) and October 31, 2000 (Audited)

LIABILITIES AND SHAREHOLDERS' EQUITY

	July 31, 200	October 31, 2000

Current Liabilities:

Accounts Payable	23,250	21,403
Accrued Expenses & Taxes	41,822	35,972
Total Current Liabilities	65,072	57,375

Stockholders' Equity:

Common Stock - $.001 Par Value 120,000,000 Shares Authorized; 83,500,000 Shares Issued and Outstanding	83,500	83,500

Capital in Excess of Par	3,260,558	3,260,558

Retained Earnings (Deficit)	(2,954,717)	(2,911,436)
Total Shareholders' Equity	389,341	432,622

Total Liabilities and Shareholders' Equity	454,413	489,997

NEW YORK FILM WORKS, INC.

STATEMENT OF PROFIT AND LOSS

	3 mo ended	9 mo ended	3 mo ended	9 mo ended
	July 31, 2001	July 31, 2001	July 31, 2000	July 31, 2000

Sales	327,853	975,339	387,955	1,037,371
Cost of Sales	202,734	605,661	199,364	609,596
Gross Profit	125,119	369,678	188,591	427,775

Operating Expenses:

Selling and Shipping	41,860	110,653	48,106	101,614
General and Admin	90,865	302,306	37,160	305,945

Total Operating Expenses	132,725	412,959	85,266	407,559
Net Income (Loss) from Operations	$ (7,606)	$ (43,281)	$103,325	$ 20,216
Earnings(Loss)before tax	$ (7,606)	$ (43,281)	$103,325	$ 20,216

Income Tax	0	0	0	0
Net Income (Loss)	$ (7,606)	$ (43,281)	$103,325	$ 20,216

Earnings Per Share	0.00	0.00	0.00	0.00

Weighted Average Number Of Shares	83,500,000	83,500,000	83,500,000	83,500,000

NEW YORK FILM WORKS, INC.

STATEMENT OF SHAREHOLDERS' EQUITY

From November 1, 1998 to July 31, 2001 (Unaudited)

	Common Stock	Capital in Excess of Par	Retained Earnings (Deficit)	Total Shareholders' Equity
Balance - November 1, 1998	83,500	3,260,558	(3,057,454)	286,604

Net Income (Loss) Y/E 10-31-99			95,527	95,527

Balance - October 31, 1999	83,500	3,260,558	(2,961,927 )	382,131

Net Income Y/E Oct. 31, 2000			50,491	50,491

Balance –October 31, 2000	83,500	3,260,558	(2,911,436)	432,622
Of
Net Loss –9 mos July 31, 2001			(43,281)	(43,281)

Balance – July 31, 2001	83,500	3,260,558	(2,954,717)	389,341

NEW YORK FILM WORKS, INC

STATEMENT OF CASH FLOWS

Nine months ended JULY 31, 2001 and July 31, 2000 (Unaudited)

	July 31, 2001	July 31, 2000
Net Income/(Loss) for the period	(43,281)	20,216

Increase (Decrease) in cash from:

Accounts Receivable	(1,435)	21,465

Inventory	77	(959)

Prepaid Expenses	1,001	5,460

Accounts Payable	1,847	(7,763)

Accrued Expenses	5,850	16,382

Stockholders Loans	-0-	(28,458)

Cash Flow from Operations	(35,491)	(26,343)

Cash flows from investing activities:

Purchase of Property and Equipment	(25,502)	(25,393)

Increase (Decrease in Cash)	(61,443)	(950)

Cash beginning	197,326	167,169

Cash end	$135,883	$166,219

NEW YORK FILM WORKS, INC.

NOTES TO FINANCIAL STATEMENTS JULY 31, 2001

Note 1: Summary of Significant Accounting Policies

Description of Business: The Company provides full service film processing services principally for the professional photographic market.

This summary of the major accounting policies of New York Film Works, Inc. is provided to assist the reader in evaluating the financial statements of the Company.

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

Inventory: Inventory, which consists of supplies and raw materials, is stated at the lower of cost or market, on a first-in, first-out basis.

Depreciation: For financial reporting, depreciation and amortization are provided on the straight-line method over the following estimated useful lives.

Leasehold Improvements

10 Years

Machinery and Equipment

7 Years

Furniture and Fixtures.

7 Years

Note 2: Income Taxes.

The Company has sustained operating losses since inception and loss carry forwards and investment tax credits will be used to reduce future provisions for income taxes.

The Company has available net operating loss carry forwards of $2,532,839.

Note 3: Bankruptcy. The Company entered into bankruptcy under Chapter 11 of Federal Bankruptcy Laws 8/25/92. The Company was discharged from Chapter 11 of federal bankruptcy 8/2/96.

CINEGRAM MEDIA, INC. AND SUBSIDIARY

CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2000 AND 1999

CONTENTS

Page

Independent Auditors' Report

Consolidated Financial Statements:

Balance Sheet

Statements of Operations

Statements of Changes in Stockholders' Deficiency

Statements of Cash Flows

Notes to Consolidated Financial Statements

INDEPENDENT AUDITORS' REPORT

Board of Directors and Stockholders

Cinegram Media, Inc. and Subsidiary

Summit, New Jersey

We have audited the accompanying consolidated balance sheet of Cinegram Media, Inc. and Subsidiary, (a Delaware corporation) (the "Company") as of December 31, 2000, and the related consolidated statements of operations, changes in stockholders' deficiciency, and cash flows for the years ended December 31, 2000 and 1999. These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.

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

In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2000 and the results of its operations and its cash flows for the years ended December 31, 2000 and 1999 in conformity with accounting principles generally accepted in the United States of America.

The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 3 to the consolidated financial statements, the Company has suffered recurring losses from operations, has a stockholders' deficiency of $4,093,129 and current liabilities exceed current assets by $4,139,421. These matters raise substantial doubt as to the Company's ability to continue as a going concern. Management's plans in regard to these matters are also discussed in Note 3. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.

Certified Public Accountants

/s/ Sobel & Co., LLC

Livingston, NJ

March 21, 2001,

except for Note 16 as to which the date is March 27, 2001

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

CINEGRAM MEDIA, INC. AND SUBSIDIARY

CONSOLIDATED BALANCE SHEET

DECEMBER 31, 2000

ASSETS


CURRENT ASSETS:
Accounts receivable, net of allowances of $40,650	$ 178,645
Inventories	222,872
Prepaid expenses and deposits	32,669
Total Current Assets	434,186
FIXED ASSETS:
Office equipment	28,349
Accumulated depreciation	(27,346)
Fixed Assets, net	1,003
OTHER ASSETS:
Program development costs, net	442,171
Prepaid royalties	490,861
Total Other Assets	933,032
TOTAL ASSETS:	$1,368,221

LIABILITIES AND STOCKHOLDERS' DEFICIENCY
CURRENT LIABILITIES:
Line of credit	$1,731,499
Short-term loans	45,519
Accounts payable and accrued expenses	583,778
Accrued interest	551,415
Notes and debenture payable - current	790,500
Officer compensation and stockholder advances	870,896
Total Current Liabilities	4,573,607

LONG-TERM LIABILITIES:
Notes and debenture payable	600,000
Due to stockholder	287,743
Total Long-Term Liabilities	887,743

COMMITMENTS AND CONTINGENCIES

STOCKHOLDERS' DEFICIENCY:
Common shares - class A - par value $0.01, 1,750,000 shares authorized; 1,455,637 issued and outstanding	14,556
Common shares - class B - par value $0.01, 750,000 shares authorized; 152,250 issued and outstanding	1,523
Additional paid-in capital	1,126,958
Accumulated deficit	(5,236,166)
Total Stockholders' Deficiency	(4,093,129)
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY	$1,368,221

CINEGRAM MEDIA, INC. AND SUBSIDIARY

CONSOLIDATED STATEMENT OF OPERATIONS YEARS ENDED DECEMBER 31, 2000 AND 1999

	Year Ended December 31,
	2000	1999

PRODUCT SALES	$ 247,395	$ 43,045

COST OF GOODS SOLD	(57,476)	(37,593)

GROSS MARGIN	189,919	5,452

SOFTWARE DEVELOPMENT COSTS	-	(1,294,912)

SELLING, MARKETING AND DISTRIBUTION COSTS	(463,241)	(362,240)

ADMINISTRATIVE AND GENERAL EXPENSES	(1,013,360)	(763,646)

NET OPERATING LOSS	(1,286,682)	(2,415,346)

INTEREST EXPENSE	(440,557)	(264,802)

NET LOSS BEFORE PROVISION FOR INCOME TAXES	(1,727,239)	(2,680,148)
PROVISION FOR INCOME TAXES	-	-

NET LOSS	$(1,727,239)	$(2,680,148)

LOSS PER COMMON SHARE	$(2.13)	$(13.95)

WEIGHTED AVERAGE COMMON SHARES OUTSTANDING	812,494	192,183

CINEGRAM MEDIA, INC. AND SUBSIDIARY

STATEMENT OF STOCKHOLDERS' DEFICIENCY YEARS ENDED

DECEMBER 31, 2000 AND 1999

	Common Shares, $0.01 par value
	Class "A" Voting		Class "B" Non-Voting		Additional		Total
					Paid-in	Accumulated	Stockholders'
	Number	Value	Number	Value	Capital	Deficit	Deficiency

BALANCE, January 1, 1999	171,350	$ 1,713	12,500	$ 125	$ 87,691	$ (828,779)	$ (739,250)

1999
Shares issued:
Cash sales	500,000	5,000	10,000	100	509,900	-	515,000
Services rendered	-	-	35,750	358	3,741	-	4,099

Net loss, 1999	-	-	-	-	-	(2,680,148)	(2,680,148)

BALANCE, December 31, 1999	671,350	6,713	58,250	583	601,332	(3,508,927)	(2,900,299)

Shares issued: Cash sales	500,000	5,000	-	-	495,000	-	500,000
Cash option exercise	282,287	2,823	58,000	580	30,626	-	34,029
Services rendered	2,000	20	36,000	360	-	-	380

Net loss, 2000	-	-	-	-	-	(1,727,239)	(1,727,239)

BALANCE, December 31, 2000	1,455,637	$14,556	152,250	$1,523	$1,126,958	$(5,236,166)	$(4,093,129)

CINEGRAM MEDIA, INC. AND SUBSIDIARY

STATEMENT OF CASH FLOWS YEARS ENDED

DECEMBER 31, 2000 AND 1999

CINEGRAM MEDIA, INC. AND SUBSIDIARY

STATEMENT OF CASH FLOWS YEARS ENDED

DECEMBER 31, 2000 AND 1999

	Year Ended December 31,
2000	1999	CASH FLOWS PROVIDED BY (USED FOR):
		OPERATING ACTIVITIES:
		Net loss
$(1,727,239)	$(2,680,148)	Adjustments to reconcile net loss to net cash used for operating activities:
		Depreciation
7,783	7,783	Amortization of development costs
14,110	1,294,912	Write-off of investment
26,331	-	Equity in affiliated companies
2,934	734	Officer compensation
318,875	257,099	Shares in lieu of cash
380	-	Changes in certain assets and liabilities:
		(Increase) decrease in:
		Accounts receivable
(95,316)	20,594	Inventory
(102,253)	(32,894)	Prepaids and deposits
(437,095)	(15,663)	Increase (decrease) in:
		Accounts payable and accrued expenses
575,259	275,508	Net Cash Used for Operating Activities
(1,416,231)	(872,075)
		INVESTING ACTIVITIES:
		Equipment leases
(1,651)	(8,516)	Software development costs
(223,703)	(474,704)	Investment in affiliated companies
-	(29,266)	Net Cash Used for Investing Activities
(225,354)	(512,486)
		FINANCING ACTIVITIES:
		Long-term borrowings
300,000	300,000	Debt borrowings
45,519	-	Advances from stockholder
433,500	80,000	Stockholder guaranteed bank loans
327,698	490,400	Share capital activity
534,029	515,000	Net Cash Provided by Financing Activities
1,640,746	1,385,400
		(DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS
(839)	839
		CASH AND CASH EQUIVALENTS:

		Beginning of year
839	-
		End of year
$ -	$ 839

CINEGRAM MEDIA, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2000 AND 1999

NOTE 1 - NATURE OF BUSINESS:

Cinegram Media, Inc. and Subsidiary (the "Company"), a Delaware corporation, develops and publishes content-rich, interest-specific Interactive Multimedia Programs (Programs) for the general interest and educational markets. Generally, the Programs are developed under exclusive licenses. Through a subsidiary incorporated by the Company, History Treasures.com, Inc., the Company is developing an Internet business to provide products, services and information on history themes based on its relationships with intellectual property owners.

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:

Accounts Receivable Allowances:

The Company utilizes the reserve method of accounting for doubtful accounts and sales returns. The reserves are based on management's evaluation of outstanding accounts receivable at the end of the year.

Use of Estimates:

The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results may differ from those estimates.

Inventories:

Inventories are valued at the lower of cost (first-in, first-out) or market. The Company reviews inventory for impairments to net realizable value whenever circumstances warrant.

Fixed Assets and Depreciation:

Office equipment is stated at cost. Maintenance and repairs are expensed as incurred, while betterments are capitalized.

Depreciation is computed using the straight-line method over their estimated useful lives of three years.

Program Development Costs:

The costs of development of Programs and Interactive Picture-Paks (IPP) are capitalized and amortized against the first forty-eight months of sales for Programs and thirty-six months of sales for IPP's. The Company reviews Program development costs for impairments to net realizable value whenever circumstances warrant.

Revenue Recognition:

Revenue is recognized when products are shipped unless the terms of sale are on consignment basis in which case revenue is recognized when the product is sold by the consignment customer.

Concentration of Credit Risk:

Sales and accounts receivable are from a relatively small number of distributors of the Company's products. The Company closely monitors extensions of credit.

CINEGRAM MEDIA, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2000 AND 1999

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: (Continued)

Loss Per Common Share:

Loss per common share is determined by dividing net loss available to common stockholders by the weighted average number of common shares outstanding during the year. Diluted loss per share is not presented since giving effect to potential common shares would be anti-dilutive.

Income Taxes:

The Company provides for income taxes under the provisions of Statement of Financial Accounting Standards (SFAS) No. 109 "Accounting for Income Taxes". SFAS 109 requires an asset and liabilities based aproach in accounting for income taxes. Deferred income tax assets and liabilities are recorded to reflect the tax consequences on future years of temporary differences of revenue and expense items for financial statement and income tax purposes.

Advertising:

Advertising and promotion costs are expensed as incurred.

Prepaid Royalty Payments:

Prepaid royalties consist of payments made by the Company to obtain licenses and rights to use artistic values. These costs are capitalized and amortized over the estimated useful life of the licenses.

Consolidated Financial Statements:

The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiary. All significant intercompany transactions and balances have been eliminated upon consolidation.

Investment in Affiliate:

The Company's investment in a joint venture, is carried at cost. Such investment is adjusted for any profits or losses of the joint venture.

NOTE 3 - GOING CONCERN:

The accompanying financial statements have been prepared assuming the Company is a going concern which assumption contemplates the realization of assets and satisfaction of liabilities in the normal course of business. The Company has suffered recurring losses from operations, has a stockholders' deficiency of $4,093,129 and current liabilities exceed current assets by $4,139,421. These factors raise substantial doubt about the Company's ability to continue as a going concern. The financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or the amount of liabilities that might be necessary should the Company be unable to continue in existence. Continuation of the Company as a going concern is dependent upon:

achieving profitable operations,

further financial funding to complete development of the Programs,

acquiring further content bases, and

the successful execution of its business plan.

Management's plans to achieve profitability include developing new products, obtaining new customers and content bases and increasing sales to existing customers. Management also plans to raise additional capital through equity issuance or other types of financing.

NOTE 4 - TRANSACTIONS WITH PRINCIPAL OFFICERS/STOCKHOLDERS:

Certain services being provided and costs being incurred by the principal officers/stockholders are being recorded by the Company as incurred. Payment will be made when it is determined by the Company that funds are available. Certain expenses incurred by the initial founders had been recorded as an obligation of the Company and were included in deferred stockholder expenses. During 1999, the Company determined that it was not possible to fairly estimate the value of services for the first development years, and that it was in the best interests of the Company to issue options to the officers/stockholders to acquire shares in the Company in lieu of ultimate cash payments.

NOTE 5 - INCOME TAXES:

As of December 31, 2000 and 1999, the Company has available, on a federal tax basis, net operating loss carryforwards of approximately $4,290,000 and $3,170,000, respectively, which expire at varying amounts through 2020. The net operating loss carryforwards result in deferred tax assets of approximately $1,460,000 and $1,080,000 at December 31, 2000 and 1999; however, a valuation reserve has been recorded for the full amount due to the uncertainty of realization of the deferred tax assets.

NOTE 6 - LINE OF CREDIT AGREEMENT:

The Company has entered into a line of credit agreement aggregating $1,700,000 with Merrill Lynch Business Financial Services Inc. (the ML Line). The ML Line bears interest at 3% over the 30-Day Commercial Paper Rate, and averaged about 9.5% during 2000 and 8.5% during 1999. The line of credit is guaranteed by certain stockholders of the Company and the Company is obligated to pay a fee equal to 3% of the amount borrowed under the ML Line to those stockholders as compensation for such guarantee. In addition to the 3% fee, an investor was granted 41,000 shares of the Company's class B stock and options to convert up to $410,000 of the line of credit into notes and further shares of the Company, in accordance with the terms of Rights Offering 2 (see Note 7).

During June 2000, that right to convert was canceled and replaced with a five year option to acquire 41,000 class B non-voting shares of the Company's stock at an exercise price of $1.00 per share. In November 2000, the ML Line of Credit was increased to $1,700,000 from $1,540,000 and a stockholder provided an additional guarantee to facilitate such increase; the stockholder will be paid a fee of 3% of the increase and was issued 6,000 shares of the Company's class B non-voting common shares and a five year option to acquire 6,000 shares of the Company's class B non-voting shares of the Company at an exercise price of $1.00 per share.

NOTE 6 - LINE OF CREDIT AGREEMENT: (Continued)

At December 31, 2000, the Company is overdrawn under the ML line by $31,499.

The Company also has a line of credit aggregating $50,000 with a financial institution. At December 31, 2000, $45,519 is outstanding under this line of credit. This line of credit bears interest at prime plus 4%. This line of credit is guaranteed by a stockholder.

NOTE 7 - COMMON STOCK:

The authorized capital of the Company consists of two classes of common shares, each with a par value of $0.01 per share - a class A fully voting share and a class B common share that has voting rights only in limited circumstances. In June 2000, the Board of Directors increased the authorized number of class A shares to 1,750,000, kept the authorized capital for the class B shares at 750,000 shares and restated the par value for both classes to $0.01 per share. During 1999, 500,000 class A shares were issued for $500,000 cash consideration and 41,000 class B shares were issued as additional consideration for providing a guarantee on a line of credit for the Company. During the fourth quarter of 2000, 36,000 class B shares were issued as additional consideration for providing a guarantee on a line of credit for the Company. At December 31, 2000 1,455,637 class A shares and 152,250 class B shares were issued, fully paid and non-assessable.

NOTE 8 - WARRANTS AND STOCK OPTION PLAN:

The Company has issued warrants and/or options to purchase stock to certain officers, employees, investors and suppliers. The warrants are exercisable at any time within five years of their issue, subject to certain vesting provisions. In 1999, the Company developed and implemented an Incentive Compensation Plan for its officers and employees whereby, the officer or employee would be granted options to purchase shares in the Company based upon attainment of predetermined performance goals. The following table outlines warrants/options issued through December 31, 2000.

	Warrants/Options on: A Shares B Shares		Weighted Average Exercise Price
Outstanding at January 1, 1999	93,300	83,882	$0.78
Granted in 1999	292,787	201,600	$0.29
Canceled in 1999	-	(52,915)	$1.00
Expired in 1999	-	(4,841)	$1.00
Outstanding at December 31, 1999	386,087	227,726	$0.36
Granted in 2000	22,000	251,650	$0.92
Exercised in 2000	(282,287)	(58,000)	$0.10
Canceled in 2000	-	(80,853)	$0.60
Outstanding at December 31, 2000	125,800	340,523	$0.84

As at December 31, 2000, all of the warrants/options on the A shares and 270,923 warrants/options on the B shares were fully vested and exercisable.

The Company follows Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees" (APB25). The option price under the Stock Option plans equals or exceeds the fair market value of the common shares on the date of grant and, accordingly, no compensation cost has been recognized under the provisions of APB25 for stock options.

The Company adopted the disclosure-only provisions of SFAS 123, "Accounting for Stock-Based Compensation" for stock options issued. Under SFAS 123, compensation cost is measured at the grant date based on the value of the award and is recognized over the service (or vesting) period.

Had compensation cost for the Company's stock option plan been recognized based on the fair value at the grant date for awards consistent with the provisions of SFAS 123, the Company's net loss and loss per share for the year ended December 31, 2000 would have been the same as reported in the financial statements.

NOTE 9 - NOTES AND DEBENTURE PAYABLE:

a) Series "A" three year notes payable, with interest at 12% per annum, payable quarterly, due December 1, 2001	$ 640,500

b) Series "B" three year notes payable, with interest at 12% per annum, payable quarterly, due August 1, 2001	150,000

c) Series "C" three year notes payable, with interest at 12% per annum, payable quarterly, due July 1, 2002	300,000

All of the above notes are held by the majority stockholder. Interest on the notes has been accrued, but has not been paid. The majority stockholder has agreed to accrue interest until adequate funds are available. In November 2000, the majority stockholder agreed to defer payment of the principal of the Series A Three Year Note due on December 1, 2000 for a further one year period in exchange for a five year option to acquire 64,050 class B non-voting common shares at an exercise price of $1.00 per share.

d) Debenture Payable: interest at 12% per annum, payable quarterly, due October 31, 2002	300,000

During October 2000, a stockholder provided a loan of $300,000 to the Company; terms and conditions of the loan agreement include: interest payable quarterly at 12% per annum; the issuance of 30,000 class B non-voting common shares of the Company; a five year option to acquire 30,000 class B non-voting shares of the Company at an exercise price of $1.00 per share; and security in the form of a debenture on the assets of the Company and a commercial collateral assignment of a license agreement.
Total Notes and Debenture Payable	1,390,500
Less: current portion	790,500

	$ 600,000

Notes and debenture payable mature as follows:

Year

2001

$ 790,500

2002

600,000

$1,390,500

NOTE 10 - CONCENTRATION OF RISKS:

The Company sells to one significant customer. This customer accounted for approximately 60% and 64% of the Company's sales in 2000 and 1999, respectively. This customer accounts for approximately 95% of total accounts receivable at December 31, 2000.

The Company maintains cash balances at a financial institution located in New Jersey. Amounts at this institution are insured by the Securities Protection Investing Corporation up to $500,000.

NOTE 11 - SUPPLEMENTAL DISCLOSURE OF CASH FLOWS INFORMATION:

Cash paid during the year ended December 31, for:

2000 1999

Income Taxes

$ - $ -

Interest

$15,300 $ -

Non-Cash Investing and Financing Activities:

2000

Class A shares issued for services rendered

$ 20

Class B shares issued for services rendered

$ 360

1999

Class B shares issued for services rendered

$4,099

NOTE 12 - COMMITMENTS AND CONTINGENCIES:

The Company leases office suite space under an operating lease and business services agreement. The agreement automatically renews for six-month periods and was renewed in late November 2000. The Company also leases various office equipment under operating leases. Rent expense under these leases for the year ended December 31, 2000 and 1999 was $79,442 and $70,559, respectively.

At December 31, 2000 future minimum lease payments are as follows:

Year

$64,596

The Company also has a distribution and fullfillment agreement. The distribution and fullfillment agreement provides for a fixed monthly management fee of $1,000 plus per piece charges. The length of the agreement is for one year and renews on the May anniversary date for one additional year.

NOTE 13 - KEY MAN LIFE INSURANCE:

The Company maintains key man term life insurance in the face amount of $1,500,000 on the Company's Chairman and Chief Executive Officer. The key man premiums are paid through April 15, 2001. This insurance policy has no cash surrender value.

NOTE 14 - PREPAID ROYALTIES:

Prepaid royalties consist of payments made by the Company to obtain licenses and rights to use artistic values. Licensor's usually require up front payments on execution of the license. The licenses accrue royalties at rates from .8% to 12.5% of net sales and average approximately 10%. The initial term of the licenses is usually five years and carry renewal option rights. These costs are capitalized and amortized over the estimated life of the licenses.

The amortization expense for the years ended December 31, 2000 and 1999 were $90,345 and $15,269 , respectively.

NOTE 15 - INVESTMENT IN AFFILIATE:

The Company had an investment in an affiliated company, which was carried at cost. This investment was recorded at cost because it had no readily determinable fair market value and as such is exempted specifically by FASB Statement No. 115 "Accounting for Certain Investments in Debt and Equity Securities." The Company's investment has been written down by $26,331 to zero as of December 31, 2000. Management believes there has been a permanent decline in the investment value.

NOTE 16 - SUBSEQUENT EVENT - CONFIDENTIAL OFFERING MEMORANDUM:

On March 27, 2001, the Company entered into an exclusive Investment Advisor/Financial Consultant and Placement Agent ("Financial Advisor") Agreement. The Agreement provides for the Financial Advisor to assist the Company in raising equity capital and/or debt. If the Financial Advisor is not able to raise (get firm commitments for) a minimum amount of $500,000 within one month from the Agreement date, the Company has the right to cancel the exclusivity clause in the Agreement.

The Company is currently preparing a Confidential Offering Memorandum to be utilized in conjunction with this raise of equity capital and/or debt.

CINEGRAM MEDIA, INC.

_________

UNAUDITED INTERIM FINANCIAL INFORMATION

June 30, 2001

			Cinegram Media, Inc & Subsidiary Company
			Consolidated Balance Sheets As of :
				June 30		December 31
				2001 (UNAUDITED)		2000
ASSETS
	Current Assets
		Cash in Banks		$ 249		0
		Accounts Receivable		90,651		180,540
		Inventories		196,316		220,977
		Prepaid Expenses and Deposits		22,139		26,479
	Total Current Assets				$ 309,354		$ 427,996

	Fixed Assets
		Computers & Office Equipment		28,349		28,349
		Accumulated Depreciation		(28,349)		(27,346)
					$ -		$ 1,003
	Other Assets
		Program Development Costs, net		467,298		442,171
		Prepaid Royalties		457,807		497,051
		Total Other Assets			925,105		939,222
TOTAL ASSETS					$ 1,234,459		$ 1,368,221

LIABILITIES & EQUITY
	Current Liabilities
		Bank Borrowings		$ 980,991		$ 1,731,499
		Other Short Term Loans		110,493		45,519
		Accounts Payable		600,957		435,952
		Accrued Liabilities		216,432		147,827
		Accrued Interest - Director		680,267		551,415
		Accrued Officer Compensation		146,004		301,800
		Advances from Shareholder		24,239		569,096
	Total Current Liabilities				$ 2,759,383		$ 3,783,108
	Long Term Liabilities
		Three Year Notes Payable		2,300,000		1,390,500
		Deferred Shareholder Expenses		597,981		287,743
	Total Long Term Liabilities				$ 2,897,981		$ 1,678,243
	Shareholders' Equity
		Capital Stock
		"A" Common Shares		165,276		165,276
		"B" Common Shares		16,761		11,761
		Additional Paid In Capital		1,461,000		966,000
		Total Capital Stock		1,643,037		1,143,037
		Retained Earnings/(Deficit)		(6,065,942)		(5,236,167)
	Total Shareholders Equity				$ (4,422,905)		$ (4,093,130)
TOTAL LIABILITIES & EQUITY					$ 1,234,459		$ 1,368,221

		Cinegram Media, Inc
		Consolidated Statement of Operations
		UNAUDITED


		For The Quarter Ended:			For the Six Months to:
			June 30,		June 30,
			2001	2000	2001	2000

PRODUCT SALES
	Interactive MultiMedia Products		70,944	44,188	124,657	27,295

Total Cost of Goods Sold			75,188	32,217	108,618	44,020

	GROSS MARGIN		(4,244)	11,971	16,040	(16,725)

						-
	Total Selling & Distribution Costs		78,091	94,258	167,727	140,834

						-
	Total Admin & General Expenses		215,546	237,709	442,517	465,109

Net Operating Profit/(Loss)			(297,882)	(319,996)	(594,205)	(622,668)


	Interest & Financing		121,770	114,543	235,571	199,599

NET (LOSS) (before Income Taxes)			(419,652)	(434,539)	(829,776)	(822,267)

	Cinegram Media, Inc
	Consolidated Cash Flow Statement

	For The Quarter Ended:			For The Year to:
		June 30		June 30
		2001	2,000	2001	2,000

Net Income (Loss)		$ (419,652)	$ (434,538)	$ (829,775)	$ (822,267)

Add: Non Cash Items:
Depreciation		-	1,946	1,003	3,891
Amortization of Development Costs		2,371	3,367	7,127	(13)
Deferred Principals' Compensation		81,438	55,500	154,438	125,375

Net Working Capital from Operations		(335,843)	(373,726)	(667,207)	(693,013)

Working Capital Management
Accounts Receivable		(37,404)	(12,226)	89,890	20,876
Inventory		30,570	(24,637)	24,661	(43,547)
Prepaids & Deposits		28,969	(145,081)	43,584	(213,624)
Accounts Payable		70,572	80,455	161,379	14,339
Accruals		143,440	85,609	197,396	186,679
		236,147	(15,880)	516,909	(35,276)
Net Cash Generated From Operations		(99,696)	(389,606)	(150,298)	(728,289)

Investment Activities
Equipment Purchases		-	-	-	-
Equipment Leases		-	(370)	-	(1,178)
Software Development Costs		(0)	(85,477)	(21,062)	(135,534)
Total Investment Activities		(0)	(85,847)	(21,062)	(136,712)
SELF SUSTAINING CASH FLOW		$ (99,696)	$ (475,453)	$ (171,360)	$ (865,002)

Financing Activities
Short Term Borrowings - net		17,067	-	64,974	-
Advances from Shareholder		313,010	441,000	364,643	696,000
Sharehldr Guaranteed Bank Loans		(730,132)	34,453	(758,008)	169,001
Share Capital Activity		500,000	-	500,000	-
Total Financing Activities		$ 99,945	$ 475,453	$ 171,609	$ 865,001
Net Cash Flow		249	(0)	249	(0)
Net Cash Balance - beginning		0	-	-	-
Net Cash Balance - ending		249	(0)	249	(0)

CINEGRAM MEDIA, INC.

NOTES TO UNAUDITED CONDENSED FINANCIAL INFORMATION

__________

Reference to Notes to Financial Statements Dated December 31, 2000

The notes to the financial statements dated December 31, 2000 should be read in conjunction with these unaudited condensed financial statements. These financial statements include all adjustments that are, in the opinion of management, necessary for a fair presentation of the results for the interim periods.

PRO FORMA FINANCIAL INFORMATION

UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS

The following unaudited pro forma condensed combined financial statements give effect to the share exchange, pursuant to which Cinegram Media will become a wholly owned subsidiary of New York Film Works. However, the share exchange transaction will be accounted for as a “reverse acquisition” of New York Film Works by Cinegram Media. The “reverse acquisition” purchase method of accounting treats the Corporation that receives the larger portion of the voting rights in a combination transaction as the “acquirer”; accordingly Cinegram Media Inc is deemed to be the acquirer. The unaudited pro forma condensed combined statements of operations give effect to the proposed share exchange of New York Film Works and Cinegram Media by combining the results of operations of New York Film Works for the year ended October 31, 2000 and for the nine-month period ended July 31, 2001. For purposes of these pro forma statements the results of operation for Cinegram have been revised to reflect the year ended October 31, 2000 and nine months through July 31, 2001. The unaudited pro forma condensed combined Balance Sheet as October 31, 2000 gives effect to the share exchange by combining the Balance Sheet of New York Film Works, Inc of October 31, 2000 and the unaudited pro forma Balance Sheet of Cinegram Media Inc as of October 31, 2000.

The unaudited pro forma condensed combined financial statements are based on the estimates and assumptions set forth in the notes to these financial statements, which are preliminary and have been made solely for purposes of developing this pro forma information. The unaudited pro forma condensed combined financial statements are presented for illustrative purposes only. The pro forma adjustments are based upon available information and assumptions that management believes are reasonable. The unaudited pro forma condensed combined financial statements are not necessarily an indication of the results that would have been achieved or that may be achieved in the future, or of the financial position of the combined companies had such transactions been consummated as of the dates indicated.

These unaudited pro forma condensed combined financial statements should be read in conjunction with the historical financial statements and related notes of New York Film Works and Cinegram Media, appearing elsewhere in this information statement.

	Cinegram Digital Media Group, Inc.
	PRO FORMA
	Consolidated Balance Sheets
	As of October 31, 2000
	Cinegram	NY Film		ProForma
	Media	Works	Adjustments	Combined
ASSETS
Current Assets
Cash in Banks	247	197,326		197,573
Accounts Receivable	19,930	128,415		148,345
Inventories	185,492	13,495		198,987
Prepaid Expenses & Deposits	65,673	8,099		73,772
Total Current Assets	271,342	347,335		618,677

Fixed Assets
Equipment & Improvements	28,349	2,352,673	200,000	2,581,022
Accumulated Depreciation	(26,049)	(2,242,069)	(15,000)	(2,283,118)
	2,300	110,604		297,904
Other Assets
Program Development Costs, net	442,063	32,058		474,121
Prepaid Royalties & Other Assets	532,862			532,862
"Goodwill"			769,870	769,870
Total Assets	1,248,567	489,997	954,870	2,693,434
LIABILITIES & STOCKHOLDERS' DEFICIT
Current Liabilities
Bank Borrowings	1,659,515			1,659,515
Accounts Payable	315,038	21,403		336,441
Accrued Liabilities	90,481	35,972		126,454
Accrued Interest (Director)	496,079			496,079
Advances from Shareholders	987,596		909,500	78,096
Total Current Liabilities	3,548,709	57,375		2,696,585

Long Term Liabilities
Three Year Notes Payable	1,390,500		1,090,500	300,000
Deferred Director's Expenses	522,375			522,375
Total Long Term Liabilities	1,912,875	-		822,375

Stockholders' Deficit
Capital Stock
Common Shares	-	83,500	73,400	10,100
Preferred Shares	-		(2,000,000)	2,000,000
Additional Paid In Capital	642,957	3,260,558	1,918,657	1,984,858
Total Capital Stock	642,957	3,344,058		3,994,958
Retained Eamings/(Deficit)	(3,150,414)	(2,961,927)	(2,961,927)	(3,150,414)
Current Year Income/(Loss)	(1,705,560)	50,491	15,000	(1,670,070)
Total Stockholders' Deficit	(4,213,017)	432,622		(825,526)
	1,248,567	489,997	(954,870)	2,693,434

NEW YORK FILM WORKS/CINEGRAM MEDIA

UNAUDITED PROFORMA CONDENSED COMBINED STATEMENT OF OPERATIONS

for the year ended October 31, 2000

__________

			Pro-Forma	Pro-Forma
	New York Film Works	Cinegram Media	Adjustments	Combined

Revenue:	$ 1,441,497	$ 128,724		$ 1,570,220


Cost of sales and services	831,646	104,900	15,000	951,546

Gross margin	609851	23,824	(15,000)	618,674



Selling and Marketing Expenses	166,788	404,007		570,794

Administrative and General Expenses	395,048	913,003		1,308,051

	_________	__________		_________
Income/(Loss) from operations	(48,015)	(1,293,185)		(1,260,171)


Other income (expenses):
Interest income	2,476			2,476
Interest expense	-	(412,376)		(412,376)

Total other income
(expenses)	2,476	(412,376)		(409,899)

Net income/(loss) from continuing
operations	$50,491	$(1,705,561)	$(15,000)	$(1,670,070)


Weighted average shares
outstanding	83,500,000	776,100	(72,383,922)	11,928,572

Basic and diluted net loss
from continuing operations
per common share	$ 0.001	$ (2.20)	$ -	$ (0.14)

NEW YORK FILM WORKS/CINEGRAM MEDIA

UNAUDITED PROFORMA CONDENSED COMBINED STATEMENT OF OPERATIONS

for the nine months ended July 31, 2001

__________

			Pro-Forma	Pro-Forma
	New York Film Works	Cinegram Media	Adjustments	Combined

Revenue:	$ 975,339	$ 334,901		$ 1,310,240


Cost of sales and services	601,960	287,426	11,250	900,636

Gross margin	373,379	47,475	(11,250)	409,604



Selling and Marketing Expenses	116,366	377,224		493,590

Administrative and General Expenses	305,152	644,846		949,998

	_________	__________	__________	_________
Loss from operations	(48,139)	(974,595)	(11,250)	(1,033,984)


Other income (expenses):
Interest income	4,858	-		4,858
Interest expense	-	(357,149)		(357,149)

Total other income
(expenses)	4,858	(357,149)		(352,291)

Net income/(loss) from continuing
operations	_(43,281)	$(1,331,744)	$(11,250)	$(1,386,275)


Weighted average shares
outstanding	83,500,000	1,553,739	(73,679,316)	11,928,572

Basic and diluted net loss
from continuing operations
per common share	$ (0.001)	$ (0.86)	$ -	$ (0.12)

NEW YORK FILM WORKS/CINEGRAM MEDIA

NOTES TO UNAUDITED PROFORMA CONDENSED COMBINED FINANCIAL INFORMATION

The proforma combined per share amounts are based on the combined weighted average of New York Film Works common shares and Cinegram Media common shares for all periods presented based on Cinegram Media shareholders receiving 6,760,000 shares of New York Film Works common shares for all of the Cinegram Media common shares outstanding, and after giving effect to the 1 for 25 reverse split.

There were no material transactions between New York Film Works and Cinegram Media during any of the periods presented.

Total transactions costs to be incurred by New York Film Works and Cinegram Media in connection with the share exchange are estimated to be approximately $30,000. These costs, related to legal, printing, accounting, financial advisory services and other related expense, will be charged against income upon consummation of the share exchange. A restructuring charge to operations by the combined company may occur subsequent to the share exchange to reflect the combination of the two companies. The effects of these costs have not been reflected in this proforma combined financial information.

An estimate of the revaluation of fixed assets of New York Film Works has been determined and additional depreciation based on this revaluation has been included in the statements.

For purposes of preparing the pro forma Balance Sheet, the value ascribed to the shares issued to the Cinegram Media stockholders has been determined from the average selling price of shares of the Company as reported by OTC Bulletin Board for the last 50 days, adjusted by multiplying such average by 25 to reflect the 1 for 25 reverse split. The actual value to be ascribed to the shares issued to the Cinegram Media stockholders will be determined at the date of the closing of the share exchange agreement.

Certain indebtedness owing to the principal shareholder of Cinegram Media has been reclassified to Preferred Stock pursuant to the terms of the share exchange agreement.

FORMS 10-K AND 10-Q FILED WITH THE SECURITIES AND EXCHANGE COMMISSION

Copies of our annual report on Form 10-KSB for the year ended October 31, 2000, and our quarterly report on Form 10-Q for the quarter ended July 31, 2001, as filed with the Securities and Exchange Commission and any amendments thereto, are available to shareholders free of charge by writing to:

NEW YORK FILM WORKS, INC.

928 Broadway

New York, NY 10010

Attn: Stephen Cohen, secretary

STATEMENTS REGARDING FORWARD-LOOKING INFORMATION

This document and the documents incorporated in this document by reference contain forward-looking statements within the "safe harbor" provisions of the Private Securities Litigation Reform Act of 1995 with respect to our financial condition, results of operations and business, and on the expected impact of the share exchange on New York Film Works's financial performance. Words such as "anticipates," "expects," "intends," "plans," "believes," "seeks," "estimates" and similar expressions identify forward-looking statements. These forward-looking statements are not guarantees of future performance and are subject to certain risks and uncertainties that could cause actual results to differ materially from the results contemplated by the forward-looking statements. Forward-looking statements are based on our current expectations and involve a number of uncertainties, including those described in the "" section above, elsewhere in this document and in documents incorporated into this document by reference. Actual results could differ materially from what is expected.

STOCK PURCHASE AGREEMENT

Exchange Agreement among,

New York Film Works, Inc.,

Cinegram Media, Inc., and the persons identified in Exhibit A

EXCHANGE AGREEMENT

EXCHANGE AGREEMENT (this “Agreement”) dated this 10th day of October, 2001 by and among, New York Film Works, Inc., a New York corporation (“Filmworks”), Cinegram Media, Inc., a Delaware corporation ("Cinegram") and the persons identified in Exhibit A (collectively, the "Cinegram Stockholders"). The signatories may hereinafter also be referred to jointly as the "Parties".

RECITALS

Capitalized terms in this Agreement which are not proper nouns are defined in Section -- Definitions.

The Cinegram Stockholders own in the aggregate 1,955,637 Class A shares and 152,250 Class B shares of the common stock of Cinegram, which shares constitute all of the issued and outstanding capital stock of Cinegram (the “Cinegram Shares”).

Prior to the Closing (as defined below), Filmworks intends to establish a newly organized corporation (the "Filmworks Subsidiary") to acquire the existing assets of Filmworks as provided below, to create and submit to its shareholders for approval, an incentive stock option plan authorizing the issuance of the stock options described herein, to effect a 1 for 25 reverse split to be effective immediately prior to the exchange contemplated by this Agreement, and to authorize the issuance of two million "blank check" preferred shares.

The Parties desire to effect the exchange of shares of common stock of Filmworks determined as set forth below, for the Cinegram Shares upon the terms and subject to the conditions set forth herein.

For federal income tax purposes, it is intended that the exchange shall qualify as a "reorganization" within the meaning of Section 368(a) of the Internal Revenue Code of 1986, as amended (the "Code") and the parties intend to adopt this Agreement as a "plan of reorganization" under Section 368(a) of the Code and the Treasury Regulations thereunder.

The Parties therefore agree as follows:

Exchange of Shares. Upon the terms and subject to the conditions set forth in this Agreement:

(a)

Transfer of Cinegram Shares. The Cinegram Stockholders will convey, assign, transfer and deliver to Filmworks all of the Cinegram Shares held by them as set forth in Exhibit A.

(b)

Issuance of Filmworks Shares. In exchange for the Cinegram Shares, Filmworks shall issue and deliver to the Cinegram Shareholders:

(i)

At the Effective Time (as defined below), an aggregate number of shares of common stock, par value $0.001 of Filmworks such that 65% of the outstanding common stock of Filmworks as of the Effective Time will be owned by the Cinegram Stockholders (the "Initial Shares"); such shares shall be allocated among the Cinegram Stockholders as stated in Exhibit A; and

(ii)

At the conclusion of the Earn-Out Period Filmworks shall issue to the Cinegram Stockholders that portion of the Earn-Out Shares specified in Section ; the total Earn-Out Shares shall be that number of shares such that when added to the Initial Shares will result in the Cinegram Stockholders owning 75% of the outstanding stock of Filmworks as of the Effective Time (the "Earn-Out Shares"); such shares shall be allocated among the Cinegram Stockholders as stated in Exhibit A. The shares to be issued at the Effective Time and the Earn-Out Shares actually issued as a result of the application of the formula in Section are referred to in this Agreement as the "Purchase Price Shares."

(c)

Exchange of Certain Indebtedness for Preferred Stock. At the Effective Time Raymond F. Wright will exchange $2,000,000 in indebtedness owed to him by Cinegram for 100,000 shares of newly created Series A Convertible Redeemable Preferred Stock of Filmworks having the terms set forth in Exhibit .

(d)

Determination of Earn-Out Shares. The number of Earn-Out Shares to be issued will be based upon the revenue and net income of Cinegram, determined in accordance with generally accepted accounting principles and without any allocation or charges for accounting, legal, overhead or other corporate expenses of Filmworks, for the two-year period ending December 31, 2003 (the "Earn-Out Period"). If the revenue of Cinegram for that period is at least $7,500,000 , and net income as so determined are at least $500,000, Filmworks shall issue Earn-Out Shares to the Cinegram Stockholders. The number of Earn-Out Shares to be so issued shall equal:

(i)

if the revenues are greater than $15,000,000, all of the Earn-Out Shares; or

(ii)

if the revenues do not exceed $15,000,000, that percentage of the Earn-Out Shares determined by dividing the actual revenues of the Company for the two years ending December 31, 2003 by $15,000,000.

(e)

Effect of Additional Financing. The parties understand that in connection with additional financing, including the financing which is a condition to closing, it may be necessary for Filmworks to issue warrants to purchase, or securities convertible into, common stock of Filmworks. In computing the 65% and 75%, common stock issued, or to be issued on exercise of those warrants or conversion of those convertible securities, shall be disregarded, so that the actual percentages may be lower than those indicated in Section .

(f)

Issuance of Options to Cinegram Option Holders. At the Effective Time Filmworks shall issue to each holder of outstanding stock options and/or warrants for shares of Cinegram options to purchase a number of shares of Filmworks determined by multiplying the number of shares of Cinegram subject to each such option by a fraction of which the numerator is the number of shares of Filmworks issued to the Cinegram Stockholders at the Effective Time and the denominator is the number of Cinegram Shares acquired by Filmworks at the Effective Time. The option exercise price shall be as detailed on Exhibit B, provided however that such option exercise price shall not be less than the closing bid price for the shares of Filmworks on the day immediately prior to the Closing. If Earn-Out Shares shall subsequently be issued to the Cinegram Stockholders, the number of shares subject to each such option shall automatically increase in the proportion that the Earn-out Shares so issued bears to the shares of Filmworks to be issued at Closing to the Cinegram Stockholders.

Based on Filmworks' 91,000,000 shares outstanding (which would become 3,640,000 shares after the reverse split), the formulas set forth in Sections and would call for the Purchaser to issue issue 6,760,000 Initial Shares and, if all Earn-Out Shares are issued, 4,159,998 Earn-Out Shares, and to issue options to acquire 2,088,666 shares.

(g)

Issuance of Options to Certain Filmworks Officers and Directors. At the Effective Time Filmworks shall issue to each of the persons identified below options to purchase the indicated number of shares of Filmworks. The option exercise price shall be $0.48 per share.

Optionee		Number of shares
Gerald Cohen		200,000
Michael Cohen		100,000
Stephen Cohen		50,000

(h)

Effective Time. The Effective Time shall be the first day of the month following the Closing Date.

Closing. The closing of the transactions contemplated hereby (the “Closing”) shall be held at the offices of Raice Paykin & Krieg LLP, located at 185 Madison Avenue, New York, New York, at 10:00 a.m., local time, on or before October___, 2001 or within five (5) days after the conditions contained in Sections , and have been satisfied or waived, or at such other place and time as may be agreed upon by the Parties, but in no event later than ninety (90) days from the execution of this Agreement unless further extended by agreement of the parties. The time and date of the Closing is referred to herein as the “Closing Date.”

At the Closing,

(a)

Transfer of Assets to Filmworks Subsidiary. Filmworks will transfer all of its assets as they exist prior to the Closing to the Filmworks Subsidiary in exchange for an assumption by the Filmworks Subsidiary of all of Filmworks' liabilities.

(b)

Appointment of Filmworks Directors and Officers.

(i)

The following persons shall become the Board of Directors of Filmworks.

Raymond F. Wright

Gerald Cohen

James B. Witker II

Two additional independent directors to be selected by the parties prior to Closing

(ii)

The following persons shall become the officers of Filmworks.

Gerald Cohen	Non-executive Chairman
Raymond F. Wright	President and Chief Executive Officer
Michael Cohen	Vice President & Secretary/Treasurer
Harold Denstman	Vice President

(c)

Appointment of Filmworks Subsidiary Directors and Officers.

(i)

The following persons shall become the Board of Directors of the Filmworks Subsidiary.

Michael Cohen

Steven Cohen

Raymond F. Wright

(ii)

The following persons shall become the officers of the Filmworks subsidiary.

Michael Cohen	President and CEO
Steven Cohen	Secretary and Treasurer

(d)

Appointment of Cinegram Directors and Officers.

(i)

The following persons shall become the Board of Directors of Cinegram.

Gerald Cohen

Raymond F. Wright

Harold Denstman

James B. Witker II

(ii)

The following persons shall become the officers of Cinegram.

Raymond F. Wright	Chairman, CEO and Treasurer
Harold Denstman	President and Chief Development Officer
Hollis E. Wright	Secretary

(e)

Delivery of Certificates for Earn-Out shares. Filmworks will deliver to the firm of Raice Paykin & Krieg LLP pending the Company's financial results for 2002 and 2003, and for delivery in accordance with an Escrow Agreement in the form of Exhibit , certificates made out in the names of the Cinegram Stockholders, but with the numbers of shares evidenced by the certificates blank.

(f)

Delivery of Other Instruments. The Parties shall deliver such, certificates, opinions and other documents as are specified in Sections -- Conditions Precedent to Performance of Filmworks and the Cinegram Stockholders, -- Conditions Precedent to the Performance of Filmworks and -- Conditions Precedent to Performance of the Cinegram Stockholders.

(g)

Transfer Taxes. Each party shall be responsible for its own transfer and similar taxes assessed or payable in connection with the sale and transfer of the Cinegram Shares or Purchase Price Shares, as the case may be, and the transactions contemplated hereby.

Representations and Warranties of Filmworks. Filmworks represents and warrants to Cinegram and the Cinegram Stockholders as follows:

(a)

Organization. Filmworks is a corporation duly organized, validly existing and in good standing under the laws of the State of New York, and has all requisite corporate power and authority to own, lease and operate its properties and to carry on its business as now being conducted. Filmworks is duly qualified to do business and in good standing as a foreign corporation in the jurisdictions in which the property owned, leased or operated by Filmworks or the nature of the business conducted by it makes such qualification necessary. True, accurate and complete copies of its Certificate of Incorporation and By-Laws are attached as exhibits to the SEC Reports (as defined below). Filmworks is not in violation of any of the provisions of its Certificate of Incorporation or By-Laws.

(b)

Authority. Filmworks has full corporate power and authority to execute and deliver this Agreement and to consummate the transactions contemplated hereby. The execution and delivery of this Agreement and the consummation of the transactions contemplated hereby have been duly and validly authorized by the Board of Directors of Filmworks and except for the shareholder approval contemplated by Section -- Shareholder Meeting, no other corporate proceedings on the part of Filmworks are necessary to authorize this Agreement or to consummate the transactions contemplated hereby. This Agreement has been duly authorized, executed and delivered by Filmworks and constitutes the legal, valid and binding obligation of Filmworks, enforceable against it in accordance with its terms.

(c)

Capitalization.

(i)

After giving effect to the reverse split referred to in Section -- Shareholder Meeting, Filmworks will have authorized capital stock of 50,000,000 shares of common stock, par value $0.001 per share, of which 3,640,000 shares will be issued and outstanding, and 2,000,000 shares of "blank check" preferred stock, of which none will be issued and outstanding, but 150,000 shares of which will have been designated as Series A Convertible Preferred Stock. All issued and outstanding shares of capital stock of Filmworks have been duly authorized, validly issued, fully paid, are nonassessable and free of preemptive rights. There are no convertible securities, options, warrants, subscription calls or other rights or agreements, arrangements or commitments obligating Filmworks to issue, transfer or sell any of its securities. None of such issued and outstanding shares is the subject of any voting trust agreement or other agreement relating to the voting thereof or restricting in any way the sale or transfer thereof. All of such shares have been issued in compliance with all applicable Federal and State Securities laws.

(ii)

The issuance, sale and delivery of the Purchase Price Shares has been duly authorized by all required corporate action on the part of Filmworks. The Purchase Price Shares when issued and paid for in accordance with this Agreement, will be validly issued, fully paid and nonassessable, with no personal liability attaching to the ownership thereof and will be free and clear of all Liens.

(d)

No Conflict; Required Filings and Consents.

(i)

The execution and delivery of this Agreement does not, and the consummation of the transactions contemplated hereby will not, (i) conflict with or violate any law, regulation, court order, judgment or decree, (ii) violate or conflict with the Certificate of Incorporation or By-Laws of Filmworks, or (iii) result in any breach of or constitute a default (or an event which with notice or lapse of time or both would become a default) under, or give to others any rights of termination or cancellation of any Contract, permit, license or franchise to which Filmworks is bound or affected, except for conflicts, violations, breaches or defaults which, in the aggregate, would not have a material adverse effect on the business, operations, Assets, Liabilities, condition (financial or otherwise), results of operations or prospects of Filmworks.

(ii)

Except for the filing of Forms 8-K and the Information Statement contemplated by this Agreement, the execution, delivery or performance of this Agreement does not, and the consummation of the transactions contemplated hereby will not require any notice, report or other filing with any governmental authority, domestic or foreign, or require any waiver, consent, approval or authorization of any Person or any governmental or regulatory authority, domestic or foreign.

(e)

SEC Reports. The common stock of Filmworks is registered under Section 12(g) of the Exchange Act, and is quoted on the OTC Bulletin Board, and Filmworks is currently subject to the periodic reporting requirements of Section 13 or Section 15(d) of the Exchange Act. Filmworks has filed all reports required to be filed by it pursuant to the Exchange Act and the regulations promulgated thereunder through the date hereof. Filmworks has previously delivered to Cinegram a true and complete copy of its Annual Report on Form 10-K for the fiscal year ended October 31, 2000 and with each report subsequently filed by Filmworks with the Securities and Exchange Commission. The documents filed with the SEC prior to the date of this Agreement are referred to in this Agreement as the “SEC Documents.” As of the filing date, the SEC Documents complied in all material respects with the requirements of the Exchange Act, and the SEC Documents do not contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements made therein, in light of the circumstances in which they were made, not misleading. The financial statements of Filmworks, including the notes thereto, included in the SEC Documents (the “Filmworks Financial Statements”) comply as to form in all material respects with applicable accounting requirements and with the published rules and regulations of the SEC with respect thereto, have been prepared in accordance with GAAP consistently applied (except as may be indicated in the notes thereto) and fairly present the consolidated financial position of Filmworks at the dates thereof and of its operations and cash flows for the periods then ended. There has been no change in Filmworks’ accounting policies or estimates except as described in the notes to the Filmworks Financial Statements. Filmworks has no material obligations other than (i) those set forth in the Filmworks Financial Statements and (ii) those not required to be set forth in the Filmworks Financial Statements under GAAP.

(f)

Real and Personal Property.

(i)

Except as set forth in Exhibit -- Filmworks Real and Personal Property, Filmworks does not own any real property and does not lease any property which is material to the operation of the business, would result in any material liability if the lease were terminated prior to the expiration of the term thereof or would interfere with the business of Filmworks if it was required to vacate such premises.

(ii)

Filmworks has good and marketable title to, or valid leasehold or license interests in, all other Assets used or held for use in the conduct of its business, including, without limitation, the Assets reflected on its books and records or acquired after the date thereof (other than those which have been disposed of in the ordinary course of business since such date), free and clear of any Liens, other than Liens for taxes not yet due and payable. All of the Assets owned or leased by Filmworks are in good condition and repair, ordinary wear and tear excepted, and well maintained. There are no material capital expenditures currently contemplated or necessary to maintain the current business of Filmworks.

(g)

No Undisclosed Liabilities. Except as set forth in the Filmworks Financial Statements, Filmworks has no direct or indirect Liabilities, whether due or to become due, arising out of transactions entered into prior to the date hereof, or arising out of any state of facts existing on the date hereof.

(h)

Absence of Certain Changes. Since the date of the most recent SEC Document referred to in Section -- SEC Reports, (i) there has been no material adverse change in the condition (financial or otherwise), Assets, Liabilities, results of operations, business or prospects of Filmworks and (ii) nothing has occurred relative to the business or prospects of Filmworks which would have a material adverse effect on the future business of Filmworks.

(i)

Tax Matters. Filmworks has filed (or received an appropriate extension of time to file) all tax returns required to be filed by it, has paid all taxes due whether identified on the tax returns or otherwise, and has made appropriate provision for any taxes not yet due, and all such tax returns were, are and will be true, correct and complete. No Assets of Filmworks, and no Assets used in the business of Filmworks, are subject to any Liens for taxes.

(j)

Entire Business. No portion of the business of Filmworks is conducted by any of its Affiliates or any third party and all of the Assets necessary for the conduct of the business of Filmworks as presently conducted are owned by Filmworks. All such Assets are exclusively owned or leased and used by Filmworks and not by any of its Affiliates or any other third party. Schedule sets forth all agreements, commitments or arrangements between Filmworks, on the one hand, and any of its Affiliates, on the other hand, and all agreements, commitments or arrangements by and among such Affiliates relating to Filmworks.

(k)

Litigation. No investigation or review by any governmental entity or regulatory body, foreign or domestic, with respect to Filmworks is pending or, to the knowledge of Filmworks, threatened against Filmworks, and no governmental entity or regulatory body has advised Filmworks of an intention to conduct any such investigation or review. There is no claim, action, suit, investigation or proceeding pending or, to the knowledge of Filmworks, threatened against or affecting Filmworks at law or in equity or before any federal, state, municipal or other governmental entity or regulatory body, or which challenges the validity of this Agreement or any action taken or to be taken by Filmworks pursuant to this Agreement. As of the date hereof, Filmworks is not subject to, nor is there in existence, any outstanding judgment, award, order, writ, injunction or decree of any court, governmental entity or regulatory body relating to Filmworks.

(l)

Employee Benefit Plans. Except as set forth in Schedule Filmworks neither maintains nor contributes to, or is required to maintain or contribute to any Employee Benefit Plan as defined in Section . Filmworks does not contribute to and has never contributed to and never has been required to contribute to, any multiemployer plan and Filmworks does not have any Liability (including withdrawal Liability) under any multiemployer plan. Filmworks does not maintain, has never maintained, does not contribute, has never contributed and has never been required to contribute to any Employee Welfare Benefit Plan providing medical, health, or life insurance or other welfare-type benefits for current or future retired or terminated employees, their spouses, or their dependents (other than in accordance with Code Section 4980B).

(m)

Contracts. Filmworks has previously provided Cinegram access to true, correct and complete copies of all Contracts to which Filmworks is a party. All such Contracts have been duly authorized and delivered, are in full force and effect and constitute the valid and binding obligations of the respective parties thereto enforceable in accordance with their respective terms. As to such Contracts, (i) there are no existing breaches or defaults by Filmworks thereunder or, to the knowledge of Filmworks, by the other parties to such Contracts; (ii) no event, act or omission has occurred or, as a result of the consummation of the transactions contemplated hereby, will occur which (with or without notice, lapse of time or the happening or occurrence of any other event) would result in a default by Filmworks thereunder or give cause for termination thereof, provided that insofar as the foregoing representation involves the actions or omissions of parties other than Filmworks, it shall be limited to the knowledge of Filmworks; (iii) none of them will result in any loss to Filmworks upon completion or performance thereof; and (iv) none of the parties to Contracts has expressed an indication to Filmworks of its intention to cancel, renegotiate or exercise or not exercise any option under any such Contracts. All such contracts calling for annual expenditures of $10,000 or more are identified in Schedule .

(n)

Intellectual property.

(i)

Agreements. Schedule -- Filmworks Intellectual Property Assets contains a complete and accurate list and summary description, including any royalties paid or received by Filmworks, of all contracts relating to the Intellectual Property Assets to which Filmworks is a party or by which Filmworks is bound, except for any license implied by the sale of a product and perpetual, paid-up licenses for commonly available software programs with a value of less than $500 under which Filmworks is the licensee. There are no outstanding and, to Filmworks's knowledge, no threatened, disputes or disagreements with respect to any such agreement.

(ii)

Ownership of Intellectual Property Assets. Filmworks is the owner of all right, title, and interest in and to each of the Intellectual Property Assets, free and clear of all liens, security interests, charges, encumbrances, equities, and other adverse claims, and is not required to make payments to any third party for the use of the Intellectual Property Assets.

(iii)

Arrangements with Employees. Except as set forth in Schedule -- Filmworks Intellectual Property Assets all former and current employees of Filmworks have executed written contracts with Filmworks that assign to Filmworks all rights to any inventions, improvements, discoveries, or information relating to the business of Filmworks. No employee of Filmworks has entered into any contract that restricts or limits in any way the scope or type of work in which the employee may be engaged or requires the employee to transfer, assign, or disclose information concerning his work to anyone other than Filmworks.

(iv)

Patents.

(A)

Filmworks does not own any Patents.

(B)

None of the products manufactured and sold, nor any process or know-how used, by Filmworks infringes or is alleged to infringe any patent or other proprietary right of any other Person.

(v)

Trademarks.

(A)

Schedule -- Filmworks Intellectual Property Assets contains a complete and accurate list and summary description of all Marks registered with the United States Patent and Trademark Office. Filmworks is the owner of all right, title, and interest in and to each of the Marks, free and clear of all liens, security interests, charges, encumbrances, equities, and other adverse claims.

(B)

All Marks that have been registered with the United States Patent and Trademark Office are currently in compliance with all formal legal requirements (including the timely post-registration filing of affidavits of use and incontestability and renewal applications), are valid and enforceable, and are not subject to any maintenance fees or taxes or actions falling due within ninety days after the Closing.

(C)

No Mark has been or is now involved in any opposition, invalidation, or cancellation and, no such action is known by Filmworks to be threatened with respect to any of the Marks.

(D)

Filmworks does not know of any potentially interfering trademark or trademark application of any third party.

(E)

No Mark is infringed or, to Filmworks's knowledge, has been challenged or threatened in any way. None of the Marks used by Filmworks infringes or is alleged to infringe any trade name, trademark, or service mark of any third party.

(F)

All products and materials containing a Mark bear the proper federal registration notice where permitted by law.

(vi)

Copyrights.

(A)

Filmworks does not hold any copyright registrations. Filmworks is the owner of all right, title, and interest in and to each of the Copyrights held by it, free and clear of all liens, security interests, charges, encumbrances, equities, and other adverse claims.

(B)

No Copyright is infringed or, to Filmworks's knowledge, has been challenged or threatened in any way. None of the subject matter of any of the Copyrights infringes or is alleged to infringe any copyright of any third party or is a derivative work based on the work of a third party.

(vii)

Trade Secrets. Filmworks has taken all reasonable precautions to protect the secrecy, confidentiality, and value of its trade secrets. Filmworks has good title and an absolute (but not necessarily exclusive) right to use the Trade Secrets. The trade secrets are not part of the public knowledge or literature, and have not to Filmworks's knowledge been used, divulged, or appropriated either for the benefit of any Person (other than Filmworks) or to Filmworks's detriment. No trade secret is subject to any adverse claim or has been challenged or threatened in any way.

(o)

Licenses, Permits and Consents; Compliance with Applicable Law.

(i)

Filmworks has all licenses and permits which individually or in the aggregate are material to the conduct of the business of Filmworks or any of its employees by reason of such employee's activities on behalf of Filmworks under applicable law or by any federal, state, local or foreign governmental entity or regulatory body for the operation of the business of Filmworks, and all of such licenses and permits are in full force and effect as of the date hereof and will remain in full force and effect following the consummation of the transactions contemplated hereby. Filmworks has not received notice and, to the knowledge of Filmworks, there is no reason to believe, that any appropriate authority intends to cancel or terminate any of such licenses or permits or that valid grounds for such cancellation or termination currently exist.

(ii)

Filmworks is not in violation or breach of any, and the business and operations of Filmworks comply in all material respects and are being conducted in accordance with, all governing laws, regulations and ordinances applicable thereto and Filmworks is not in violation of or in default under, any judgment, award, order, writ, injunction or decree of any court, arbitration tribunal, governmental entity or regulatory body.

(p)

Environmental, Health and Safety Matters. Filmworks and its predecessors have at all times complied with, and Filmworks is presently in compliance with, all environmental, health, and safety requirements required by applicable law.

(q)

Absence of Certain Business Practices. Neither Filmworks nor its directors, officers, employees or agents nor any other Person acting on its or their behalf has, directly or indirectly, within the past five (5) years given or agreed to give any gift or similar benefit to any customer, supplier, governmental employee or other Person who is or may be in a position to help or hinder the business of Filmworks or assist Filmworks in connection with any actual or proposed transaction which (i) might subject Filmworks to any damage or penalty in any civil, criminal or governmental litigation or proceeding, (ii) might have had a material adverse effect on Filmworks if not given in the past or (iii) might materially adversely affect the condition (financial or otherwise), business, Assets, Liabilities, operations or prospects of Filmworks or which might subject Filmworks to suit or penalty in any private or governmental litigation or proceeding if not continued in the future.

(r)

Employee Compensation.

(i)

Schedule -- Filmworks Employee Compensation contains a true and complete list of all Persons employed by Filmworks and all agents and consultants engaged by Filmworks as of the date hereof, together with the current aggregate base salary rate, commission rate or fee schedule for each such Person. Filmworks has not, because of past practices or previous commitments with respect to its employees, consultants or agents, established any rights on the part of such employees, consultants or agents to receive additional compensation with respect to any period after the Closing Date, except as and to the extent set forth in Schedule -- Filmworks Employee Compensation. Filmworks does not have any knowledge that any such employee, consultant or agent has ceased, or intends to cease, to continue to be employed by or otherwise provide services to Filmworks, either as a result of the transactions contemplated hereby or otherwise.

(ii)

Filmworks is not a party to any employment, severance, termination, consulting, bonus, profit sharing, percentage compensation, deferred compensation, stock purchase or stock option plans or other compensation plans, agreements, commitments or arrangements with any present or former directors, officers, employees, consultants or agents thereof or any of their Affiliates.

(s)

Finder's Fee. There is no investment banker, broker, finder or other intermediary which has been retained by, or is authorized to act on behalf of Filmworks or its Affiliates who might be entitled to any fee or commission from Cinegram, from Filmworks or from any of the Cinegram Stockholders upon the consummation of the transactions contemplated hereby or thereafter.

(t)

Information Statement. The Information Statement (except as to information relating solely to Cinegram and the Cinegram Stockholders) will (except to the extent revised or superseded by amendments or supplements contemplated hereby), at the date it (or any such amendment or supplement) is mailed to the stockholders of Filmworks and at the time of the Filmworks Shareholder Meeting, will comply in all material respects with the requirements of the Exchange Act and the Regulations promulgated thereunder and will not contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they are made, not misleading.

(u)

Accuracy of Representations. The representations and warranties made by Filmworks in this Agreement, and in any certificate or schedule referenced hereby or attached hereto, do not contain, and will not contain, any statement which is false or misleading with respect to any material fact and do not and will not omit to state a material fact required to be stated herein or therein or necessary in order to make the statements contained herein or therein not materially false or misleading. There is no fact or condition which could have a material adverse effect on Filmworks which has not been set forth in this Agreement or described in the Schedules hereto.

Representations and Warranties of the Cinegram Stockholders. Each of the Cinegram Stockholders, severally and not jointly, represents and warrants to Filmworks as follows:

(a)

Ownership of Shares. Such Stockholder is the record and beneficial owner of the number of Cinegram Shares indicated in Exhibit A, free and clear of any Lien.

(b)

Authority to Transfer. Such Stockholder has full right and authority to transfer the Cinegram Shares pursuant to the terms of this Agreement.

(c)

Securities Law Acknowledgments. Such Stockholder is aware that the Purchase Price Shares are being and will be issued to the Cinegram Stockholders in reliance on specific exemptions from the registration requirements of federal and state securities laws. Such Stockholder and any transferee of such Stockholder will not sell or otherwise transfer the Purchase Price Shares without registration under the Securities Act or an exemption therefrom, and fully understands and agrees that such Stockholder or any such transferee must bear the economic risk of holding the Purchase Price Shares for an indefinite period of time because, among other reasons, the Purchase Price Shares have not been registered under the Securities Act or under the securities laws of certain states and, therefore, cannot be resold, pledged, assigned or otherwise disposed of unless the securities are subsequently registered under the Securities Act and under the applicable securities laws of such states or unless an exemption from such registration is available in the opinion of counsel for the holder, which counsel and opinion are reasonably satisfactory to counsel for Filmworks. Each Cinegram Stockholder is acquiring the Purchase Price Shares for the account of such Cinegram Stockholder for investment and not with a view to resale or distribution except in compliance with the Securities Act.

(d)

Information Statement. None of the information supplied or to be supplied by or on behalf of the Cinegram Stockholders specifically for inclusion in the Information Statement will (except to the extent revised or superseded by amendments or supplements contemplated hereby), at the date it (or any such amendment or supplement) is mailed to the stockholders of Filmworks and at the time of the Filmworks Shareholder Meeting, contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they are made, not misleading.

(e)

Accuracy of Representations. The representations and warranties made by such Cinegram Stockholder in this Agreement, and in any certificate or schedule referenced hereby or attached hereto, do not contain, and will not contain, any statement which is false or misleading with respect to any material fact and do not and will not omit to state a material fact required to be stated herein or therein or necessary in order to make the statements contained herein or therein not materially false or misleading.

Representations and Warranties of Cinegram. Cinegram represents and warrants to Filmworks as follows.

(a)

Organization and Authority. Cinegram is a corporation duly organized, validly existing and in good standing under the laws of the state of Delaware and has all requisite corporate power and authority to own, lease and operate its properties and to carry on its business as now being conducted. It has one subsidiary, History Treasures.com, Inc., a Delaware corporation which is wholly owned by Cinegram. It is also a 50% shareholder in CineLinx.com, Inc. a joint venture corporation. Cinegram, History Treasure.com, Inc. and CineLinx.com, Inc. are each duly qualified to do business and in good standing as a foreign corporation in each jurisdiction in which the property owned, leased or operated by it or the nature of the business conducted by it makes such qualification necessary. Cinegram has heretofore delivered to Filmworks true, accurate and complete copies of its Certificate of Incorporation and Bylaws.

(b)

Capitalization. Cinegram has authorized capital stock of 1,750,000 Class A common shares and 750,000 Class B, non-voting shares, of which only the Cinegram Shares are issued and outstanding as of the date hereof. The Cinegram Shares have been duly authorized, validly issued, fully paid, are nonassessable and free of preemptive rights. Except as set forth on Exhibit B, there are no convertible securities, options, warrants, subscription calls or other rights or agreements, arrangements or commitments obligating Cinegram to issue, transfer or sell any of its securities. None of such issued and outstanding shares is the subject of any voting trust agreement or other agreement relating to the voting thereof or restricting in any way the sale or transfer thereof.

(c)

No Conflict; Required Filings and Consents.

(i)

The execution and delivery of this Agreement does not, and the consummation of the transactions contemplated hereby will not, (i) conflict with or violate any law, regulation, court order, judgment or decree applicable to Cinegram, (ii) result in any breach of or constitute a default (or an event which with notice or lapse of time or both would become a default) under, or give to others any rights of termination or cancellation of any Contract, permit, license or franchise to which Cinegram is a party or is bound or affected, which conflict, violation, breach, default or right of termination or cancellation would have a material adverse effect on the business, operations, Assets, Liabilities, condition (financial or otherwise), results of operations or prospects of Cinegram or impair the Cinegram Stockholders' ability to consummate the transactions contemplated hereby.

(ii)

The execution, delivery or performance of this Agreement does not, and the consummation of the transactions contemplated hereby will not require any notice, report or other filing with any governmental authority, domestic or foreign, or require any waiver, consent, approval or authorization of any Person or any governmental or regulatory authority, domestic or foreign except as otherwise set forth herein.

(d)

Financial Statements. Cinegram has delivered to Filmworks:

(i)

a balance sheet of Cinegram as at December 31, 2000 (including the notes thereto, the "Cinegram Balance Sheet"), and the related statements of income, changes in stockholders' equity, and cash flow for the fiscal year then ended, together with the report thereon of Sobel & Co., independent certified public accountants, and

(ii)

an unaudited consolidated balance sheet of Cinegram as at June 30, 2001 and the related unaudited consolidated statements of income, changes in stockholders' equity, and cash flow for the six months then ended, including in each case the notes thereto (the "Cinegram Interim Financial Statements").

Such financial statements and notes fairly present the financial condition and the results of operations, changes in stockholders' equity, and cash flow of Cinegram as at the respective dates of and for the periods referred to in such financial statements, all in accordance with GAAP, subject, in the case of interim financial statements, to normal recurring year-end adjustments and the absence of notes; the financial statements referred to in this Section -- Financial Statements reflect the consistent application of such accounting principles throughout the periods involved.

(e)

Real and Personal Property.

(i)

Except as set forth in Schedule -- Cinegram Real and Personal Property, Cinegram does not own any real property and does not lease any property which is material to the operation of the business, would result in any material liability if the lease were terminated prior to the expiration of the term thereof or would interfere with the business of Cinegram if it was required to vacate such premises.

(ii)

Cinegram has good and marketable title to, or valid leasehold or license interests in, all other Assets used or held for use in the conduct of its business, including, without limitation, the Assets reflected on its books and records or acquired after the date thereof (other than those which have been disposed of in the ordinary course of business since such date), free and clear of any Liens, other than Liens listed in Schedule -- Cinegram Real and Personal Property and Liens for taxes not yet due and payable. All of the Assets owned or leased by Cinegram are in all material respects in good condition and repair, ordinary wear and tear excepted, and well maintained. Except as set forth on Schedule -- Cinegram Real and Personal Property, there are no material capital expenditures currently contemplated or necessary to maintain the current business of Cinegram.

(f)

No Undisclosed Liabilities. Except as set forth in the financial statements referred to in Section -- Financial Statements, Cinegram has no direct or indirect Liabilities, whether due or to become due, arising out of transactions entered into prior to the date hereof, or arising out of any state of facts existing on the date hereof.

(g)

Absence of Certain Changes. Since the date of the the Cinegram Interim Balance Sheet, there has been no material adverse change in the condition (financial or otherwise), Assets, Liabilities, results of operations, business or prospects of Cinegram and (ii) nothing has occurred relative to the business or prospects of Cinegram which would have a material adverse effect on the future business of Cinegram.

(h)

Tax Matters. Cinegram has filed (or received an appropriate extension of time to file) all tax returns required to be filed by it, has paid all taxes due whether identified on the tax returns or otherwise, and has made appropriate provision for any taxes not yet due, and all such tax returns were, are and will be true, correct and complete. No Assets of Cinegram, and no Assets used in the business of Cinegram, are subject to any Liens for taxes.

(i)

Entire Business. Except as set forth in Schedule , no portion of the business of Cinegram is conducted by any of its Affiliates or any third party and all of the Assets necessary for the conduct of the business of Cinegram as presently conducted are owned or leased by Cinegram. All such Assets are exclusively owned or leased and used by Cinegram and not by any of its Affiliates or any other third party.

(j)

Litigation. Except as set forth on Schedule , no investigation or review by any governmental entity or regulatory body, foreign or domestic, with respect to Cinegram is pending or, to the knowledge of the Cinegram Stockholders, threatened against Cinegram, and no governmental entity or regulatory body has advised Cinegram of an intention to conduct any such investigation or review. There is no claim, action, suit, investigation or proceeding pending or, to the knowledge of Cinegram, threatened against or affecting Cinegram at law or in equity or before any federal, state, municipal or other governmental entity or regulatory body, or which challenges the validity of this Agreement or any action taken or to be taken by Cinegram pursuant to this Agreement. As of the date hereof, Cinegram is not subject to, nor is there in existence, any outstanding judgment, award, order, writ, injunction or decree of any court, governmental entity or regulatory body relating to Cinegram.

(k)

Employee Benefit Plans. Except as set forth on Schedule , Cinegram neither maintains nor contributes to, or is required to maintain or contribute to any Employee Benefit Plan. Cinegram does not contribute to and has never contributed to and never has been required to contribute to, any multiemployer plan and Cinegram does not have any Liability (including withdrawal Liability) under any multiemployer plan. Cinegram does not maintain, has never maintained, does not contribute, has never contributed and has never been required to contribute to any Employee Welfare Benefit Plan providing medical, health, or life insurance or other welfare-type benefits for current or future retired or terminated employees, their spouses, or their dependents (other than in accordance with Code Section 4980B).

(l)

Contracts. Cinegram has previously provided to Filmworks access to true, correct and complete copies of all Contracts to which Cinegram is a party. All such Contracts have been duly authorized and delivered, are in full force and effect and constitute the valid and binding obligations of the respective parties thereto enforceable in accordance with their respective terms. As to such Contracts, (i) there are no existing breaches or defaults by Cinegram thereunder or, to the knowledge of Cinegram, by the other parties to such Contracts; (ii) no event, act or omission has occurred or, as a result of the consummation of the transactions contemplated hereby, will occur which (with or without notice, lapse of time or the happening or occurrence of any other event) would result in a default by Cinegram thereunder or give cause for termination thereof; (iii) none of them will result in any loss to Cinegram upon completion or performance thereof; and (iv) none of the parties to Contracts have expressed an indication to Cinegram of their intention to cancel, renegotiate or exercise or not exercise any option under any such Contracts. All such contracts calling for annual expenditures of $10,000 or more are identified in Schedule .

(m)

Intellectual property.

(i)

Agreements. Schedule -- Cinegram Intellectual Property Assets contains a complete and accurate list and summary description, including any royalties paid or received by Cinegram, of all contracts relating to the Intellectual Property Assets to which Cinegram is a party or by which Cinegram is bound, except for any license implied by the sale of a product and perpetual, paid-up licenses for commonly available software programs with a value of less than $500 under which Cinegram is the licensee. There are no outstanding and, to Cinegram's knowledge, no threatened, disputes or disagreements with respect to any such agreement.

(ii)

Ownership of Intellectual Property Assets. Cinegram is the owner of all right, title, and interest in and to each of the Intellectual Property Assets, free and clear of all liens, security interests, charges, encumbrances, equities, and other adverse claims, and is not required to make payments to any third party for the use of the Intellectual Property Assets.

(iii)

Arrangements with Employees. All former and current employees of Cinegram have executed written contracts with Cinegram that assign to Cinegram all rights to any inventions, improvements, discoveries, or information relating to the business of Cinegram. No employee of Cinegram has entered into any contract that restricts or limits in any way the scope or type of work in which the employee may be engaged or requires the employee to transfer, assign, or disclose information concerning his work to anyone other than Cinegram.

(iv)

Patents.

(A)

Cinegram does not own any Patents.

(B)

None of the products manufactured and sold, nor any process or know-how used, by Cinegram infringes or is alleged to infringe any patent or other proprietary right of any other Person.

(v)

Trademarks.

(A)

Schedule -- Cinegram Intellectual Property Assets contains a complete and accurate list and summary description of all Marks registered with the United States Patent and Trademark Office. Cinegram is the owner of all right, title, and interest in and to each of the Marks, free and clear of all liens, security interests, charges, encumbrances, equities, and other adverse claims.

(B)

(C)

No Mark has been or is now involved in any opposition, invalidation, or cancellation and, no such action is known by Cinegram to be threatened with respect to any of the Marks.

(D)

Cinegram does not know of any potentially interfering trademark or trademark application of any third party.

(E)

No Mark is infringed or, to Cinegram's knowledge, has been challenged or threatened in any way. None of the Marks used by Cinegram infringes or is alleged to infringe any trade name, trademark, or service mark of any third party.

(F)

All products and materials containing a Mark bear the proper federal registration notice where permitted by law.

(vi)

Copyrights.

(A)

Schedule -- Cinegram Intellectual Property Assets contains a complete and accurate list and summary description of all copyright registrations held by Cinegram. Except as set forth in Schedule , Cinegram is the owner of all right, title, and interest in and to each of the Copyrights, free and clear of all liens, security interests, charges, encumbrances, equities, and other adverse claims.

(B)

All the Copyrights which have been registered are currently in compliance with formal legal requirements, are valid and enforceable, and are not subject to any maintenance fees or taxes or actions falling due within ninety days after the date of Closing.

(C)

No Copyright is infringed or, to Cinegram's knowledge, has been challenged or threatened in any way. None of the subject matter of any of the Copyrights infringes or is alleged to infringe any copyright of any third party or is a derivative work based on the work of a third party.

(vii)

Trade Secrets. Cinegram has taken all reasonable precautions to protect the secrecy, confidentiality, and value of its trade secrets. Cinegram has good title and an absolute (but not necessarily exclusive) right to use the Trade Secrets. The trade secrets are not part of the public knowledge or literature, and have not to Cinegram's knowledge been used, divulged, or appropriated either for the benefit of any Person (other than Cinegram) or to Cinegram's detriment. No trade secret is subject to any adverse claim or has been challenged or threatened in any way.

(n)

Licenses, Permits and Consents; Compliance with Applicable Law.

(i)

Cinegram has all licenses and permits which individually or in the aggregate are material to the conduct of the business of Cinegram or any of its employees by reason of such employee's activities on behalf of Cinegram under applicable law or by any federal, state, local or foreign governmental entity or regulatory body for the operation of the business of Cinegram, and all of such licenses and permits are in full force and effect as of the date hereof and will remain in full force and effect following the consummation of the transactions contemplated hereby. Cinegram has not received notice and, to the knowledge of Cinegram, there is no reason to believe, that any appropriate authority intends to cancel or terminate any of such licenses or permits or that valid grounds for such cancellation or termination currently exist.

(ii)

Cinegram is not in violation or breach of any, and the business and operations of Cinegram comply in all material respects and are being conducted in accordance with, all governing laws, regulations and ordinances applicable thereto and Cinegram is not in violation of or in default under, any judgment, award, order, writ, injunction or decree of any court, arbitration tribunal, governmental entity or regulatory body.

(o)

Environmental, Health and Safety Matters. Cinegram and its predecessors have at all times complied with, and Cinegram is presently in compliance with, all environmental, health, and safety requirements required by applicable law.

(p)

Absence of Certain Business Practices. Neither Cinegram nor its directors, officers, employees or agents nor any other Person acting on its or their behalf has, directly or indirectly, within the past five (5) years given or agreed to give any gift or similar benefit to any customer, supplier, governmental employee or other Person who is or may be in a position to help or hinder the business of Cinegram or assist Cinegram in connection with any actual or proposed transaction which (i) might subject Cinegram to any damage or penalty in any civil, criminal or governmental litigation or proceeding, (ii) might have had a material adverse effect on Cinegram if not given in the past or (iii) might materially adversely affect the condition (financial or otherwise), business, Assets, Liabilities, operations or prospects of Cinegram or which might subject Cinegram to suit or penalty in any private or governmental litigation or proceeding if not continued in the future.

(q)

Employee Compensation. Except as set forth in Schedule , Cinegram is not a party to any employment, severance, termination, consulting, bonus, profit sharing, percentage compensation, deferred compensation, stock purchase or stock option plans or other compensation plans, agreements, commitments or arrangements with any present or former directors, officers, employees, consultants or agents thereof or any of their Affiliates.

(r)

Finder's Fee. There is no investment banker, broker, finder or other intermediary which has been retained by, or is authorized to act on behalf of Cinegram who might be entitled to any fee or commission from Filmworks or any of its Affiliates upon the consummation of the transactions contemplated by this Agreement.

(s)

Information Statement. None of the information supplied or to be supplied by or on behalf of Cinegram specifically for inclusion in the Information Statement will (except to the extent revised or superseded by amendments or supplements contemplated hereby), at the date it (or any such amendment or supplement) is mailed to the stockholders of Filmworks and at the time of the Filmworks Shareholder Meeting, contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they are made, not misleading.

(t)

Accuracy of Representations. The representations and warranties made by Cinegram in this Agreement, and in any certificate or schedule referenced hereby or attached hereto, do not contain, and will not contain, any statement which is false or misleading with respect to any material fact and do not and will not omit to state a material fact required to be stated herein or therein or necessary in order to make the statements contained herein or therein not materially false or misleading. There is no fact or condition which could have a material adverse effect on Cinegram which has not been set forth in this Agreement or described in the Schedules hereto.

Covenants.

(a)

Consents. Each of Filmworks and Cinegram shall use its best efforts to obtain, at its expense, all consents, approvals and waivers of third Persons or governmental entities or regulatory bodies required to consummate the transactions contemplated hereby.

(b)

Public Announcements. Each of Filmworks and Cinegram will consult with one another before issuing any press release or otherwise making any public statement with respect to the transactions contemplated hereby and shall not, except as may be required by law or any listing agreements with any national securities exchange, issue any such press release or make any such public statement without the approval of one another.

(c)

Confidentiality. Between the date of this Agreement and the Closing Date, each of the Parties will maintain in confidence, and will cause the directors, officers, employees, agents, and advisors of the Parties to maintain in confidence, and not use to the detriment of another Party any written, oral, or other information obtained in confidence from another party in connection with this Agreement or the transactions contemplated hereby, unless (a) such information is already known to such party or to others not bound by a duty of confidentiality or such information becomes publicly available through no fault of such party, (b) the use of such information is necessary or appropriate in making any filing or obtaining any consent or approval required for the consummation of the transactions contemplated hereby, or (c) the furnishing or use of such information is required by legal proceedings. If the transactions contemplated hereby are not consummated, each party will return or destroy as much of such written information as the other party may reasonably request.

(d)

Expenses. Except as otherwise provided herein, whether or not the transactions contemplated hereby are consummated, all expenses incurred in connection with this Agreement and the transactions contemplated hereby shall be the obligation of the party incurring such expenses.

(e)

Conduct of Business. From the date hereof until the Closing Date, each of Filmworks and Cinegram shall:

(i)

Use its best efforts to maintain and preserve its business organization intact, retain its present employees so that they will be available after the Closing Date.

(ii)

Other than as contemplated by this Agreement, not change its articles of incorporation or bylaws.

(iii)

Other than as contemplated by this Agreement, not make any change in its authorized or issued capital stock, preferred stock or issue, encumber, purchase or otherwise acquire any of its capital stock or preferred stock other than as provided for in this Agreement.

(f)

Shareholders' Meeting. Each of Filmworks and Cinegram, to the extent required by law, will submit this Agreement to its shareholders with a favorable recommendation by its Board of Directors and will use its best efforts to obtain the requisite shareholder approval.

(g)

No Solicitation. From the date hereof to the Closing Date, each of the Parties will not, and each will direct and otherwise use its best efforts to cause its officers, directors, financial advisors, counsel and other agents, not to, (i) directly or indirectly solicit, encourage or facilitate (including by way of furnishing any non-public information concerning the Parties) the submission of proposals or offers from any person thereof relating to any acquisition or purchase of all or a material part of the stock or assets of, or any merger, consolidation or business combination with, Filmworks or Cinegram (an "Acquisition Proposal"), or (ii) participate in any discussions or negotiations regarding, or furnish any non-public information to any person other than to Filmworks or Cinegram and their representatives in connection with, any Acquisition Proposal by any person. Each of the Parties shall immediately cease and cause to be terminated any existing discussions or negotiations with any Parties conducted heretofore with respect to the foregoing.

(h)

Access to Information.

(i)

Between the date of this Agreement and the Closing Date each of Filmworks and Cinegram shall give the other, their respective officers, directors, financial advisors, counsel and other agents access to its officers and to all of its books and records, permit them to make such inspections as they may require and shall cause its officers, directors and employees to furnish them with such financial and operating data and other information with respect to their business and properties as they from time to time reasonably request, and as may be necessary to establish the performance of the covenants under this Agreement and the accuracy of its representations and warranties herein, and in connection with its preparation of any filing or submission to any governmental entity or regulatory body.

(ii)

Each of the Parties shall hold, and shall use their best efforts to cause their respective officers, directors, financial advisors, counsel and other agents to hold, in strict confidence, unless compelled to disclose by judicial or administrative process, or, in the opinion of their counsel, by other requirements of law, all documents and information concerning Filmworks or Cinegram, as the case may be, furnished to the other in connection with the transactions contemplated by this Agreement (except to the extent that such information can be shown to have been (i) in the public domain through no fault of the disclosing party or any of its respective affiliates; or (ii) later lawfully acquired without the breach of any other agreement).

(i)

Best Efforts. Subject to the terms and conditions herein provided, each of the Parties shall to use its best efforts to take, or cause to be taken, all action, and to do, or cause to be done, all things necessary, proper or advisable under applicable laws and regulations, including to make all required submissions or filings with governmental entities and regulatory bodies, to consummate and make effective the transactions contemplated by this Agreement. If at any time after the Closing Date any further action is necessary or desirable to carry out the purposes of this Agreement, the proper officers and directors of each party to this Agreement shall take all such necessary action. Filmworks, Cinegram and the Cinegram Stockholders will execute any additional instruments necessary to consummate the transactions contemplate hereby.

(j)

Information for Information Statement. Each Party will furnish to the other Party all information concerning itself and its Affiliates as the other Party or its counsel may reasonably request and that is required or customary for inclusion in the Information Statement.

Additional Covenant of Filmworks.

(a)

Shareholder Meeting. As promptly as practicable after execution of this Agreement, Filmworks shall call a special meeting of its shareholders in which the only items on the agenda shall be approval of this Agreement (including amendments to its Certificate of Incorporation to effect the reverse split contemplated herein), adoption of an incentive stock option plan providing for the issuance of incentive stock options to Filmworks' employees, including the options referred to in Section and authorization of a class of "blank check" preferred stock.

(b)

Information Statement. Filmworks will prepare and file with the SEC under the Exchange Act, as soon as reasonably practicable after the date hereof, an information statement in connection with the Filmworks Shareholder Meeting (the "Information Statement"). Filmworks shall allow Cinegram the opportunity to review and comment on the Information Statement prior to filing with the SEC.

(c)

Additional SEC Filings. Filmworks will timely file all reports and other documents required to be filed with the SEC by it after the date of this Agreement, and will furnish to Cinegram and the Cinegram Stockholders, promptly after filing, true and complete copies of such documents. All such documents shall comply in all material respects with the requirements of the Exchange Act, and shall not contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements made therein, in light of the circumstances in which they were made, not misleading.

Conditions Precedent to the Performance of Filmworks and the Cinegram Stockholders. The obligations of each of Filmworks and the Cinegram Stockholders under this Agreement are subject to the condition which may be waived in whole or in part by either or both of them at its election that Cinegram shall have received not less than $250,000 in additional financing prior to the Closing Date.

Conditions Precedent to the Performance of Filmworks. The obligations of Filmworks under this Agreement are subject to the following conditions which may be waived in whole or in part by Filmworks at its election:

(a)

Bring Down of Representations and Warranties. The representations and warranties of Cinegram and each of the Cinegram Stockholders in this Agreement shall be true and correct in all material respects on the date hereof and shall also be true and correct in all material respects on the Closing Date with the same force and effect as if made on and as of the Closing Date, and Cinegram and the Cinegram Stockholders shall have performed or complied in all material respects with all agreements, conditions and covenants required by this Agreement to be performed or complied with by them on or before the Closing Date.

(b)

Consents. Cinegram shall have obtained all approvals, authorizations and consents required to consummate the transactions contemplated hereby upon terms and subject to conditions satisfactory to Filmworks in its sole discretion and they shall be in full force and effect. Filmworks shall have been furnished with appropriate evidence, reasonably satisfactory to it and its counsel, of the granting of such approvals, authorizations and consents.

(c)

Opinion of Counsel. Cinegram and the Cinegram Stockholders shall have delivered to Filmworks the opinion of Raice Paykin & Krieg LLP counsel to Cinegram and the Cinegram Stockholders, dated as of the Closing Date, in the form of Schedule .

10.

Conditions Precedent to the Performance of the Cinegram Stockholders. The obligations of the Cinegram Stockholders under this Agreement are subject to the following conditions which may be waived in whole or in part by the Cinegram Stockholders at their election:

(a)

Bring Down of Representations and Warranties. The representations and warranties of Filmworks contained in this Agreement shall be true and correct in all material respects on the date hereof and shall also be true and correct in all material respects on and as at the Closing Date with the same force and effect as if made on and as of the Closing Date, and Filmworks shall have performed or complied in all material respects with all agreements, conditions and covenants required by this Agreement to be performed or complied with by it on or before the Closing Date.

(b)

Consents. Filmworks shall have obtained all approvals, authorizations and consents required to consummate the transactions contemplated hereby upon terms and subject to conditions satisfactory to in the Cinegram Stockholders in their sole discretion and those approvals, authorizations and consents shall be in full force and effect. The Cinegram Stockholders shall have been furnished with appropriate evidence, reasonably satisfactory to it and its counsel, of the granting of such approvals, authorizations and consents.

(c)

Opinions of Counsel. Filmworks shall have delivered to Cinegram and the Cinegram Stockholders the opinion of Kramer, Levin, Neftalis & Frankel LLP, counsel to Filmworks, dated as of the Closing Date, in the form of Schedule .

11.

Nature and Survival of Representations, Warranties and Covenants. All statements contained herein or in any certificate, schedule or other document delivered pursuant hereto shall be deemed representations and warranties by the party delivering the same. All representations and warranties and covenants shall survive the Closing Date. All representations and warranties contained in this Agreement and in the disclosure schedules or in any certificates or other documents delivered pursuant hereto shall not be deemed to be waived or otherwise affected by any prior knowledge of, or any investigation made by or on behalf of, any party hereto. All covenants and agreements shall survive the consummation of the transactions contemplated hereby.

12.

Indemnification.

(a)

Indemnification by Filmworks. Filmworks shall indemnify and hold harmless Cinegram and the Cinegram Stockholders from and against any Liabilities, damages, losses, claims, Liens, costs or expenses (including reasonable attorneys’ fees) of any nature insofar as a Loss (or actions in respect thereof), whether existing or accruing prior or subsequent to the Closing Date, arises out of or is based upon any misrepresentation or breach of any of the warranties, covenants or agreements made by Filmworks in this Agreement or in any certificate, Schedule, document or Exhibit referenced hereby or attached hereto relating to Filmworks.

(b)

Indemnification by the Cinegram Stockholders. The Cinegram Stockholders, severally and not jointly, shall indemnify and hold harmless Filmworks from and against any Liabilities, damages, losses, claims, Liens, costs or expenses (including reasonable attorneys’ fees) of any nature insofar as a Loss (or actions in respect thereof), whether existing or accruing prior or subsequent to the Closing Date, arises out of or is based upon any misrepresentation or breach of any of the warranties, covenants or agreements made by the Cinegram Stockholders in this Agreement or in any certificate, Schedule, document or Exhibit referenced hereby or attached hereto relating to Cinegram or the Cinegram Stockholders. Notwithstanding the foregoing, unless such misrepresentation is knowingly made or such breach is willful, the indemnity provided in this Article shall be limited to the extent of the fair market value of the Purchase Price Shares issued to such Stockholder, and may be satisfied at the option of such Stockholder by surrendering to Filmworks (in proportion to the number of Purchase Price Shares held by each of them immediately after the Closing) a number of Filmworks shares of the fair market value equal to the amount of the Loss.

(c)

Indemnification by Cinegram. Cinegram shall indemnify and hold harmless Filmworks from and against any Liabilities, damages, losses, claims, Liens, costs or expenses (including reasonable attorneys’ fees) of any nature insofar as a Loss (or actions in respect thereof), whether existing or accruing prior or subsequent to the Closing Date, arises out of or is based upon any misrepresentation or breach of any of the warranties, covenants or agreements made by Cinegram in this Agreement or in any certificate, Schedule, document or Exhibit referenced hereby or attached hereto relating to Cinegram.

(d)

Procedure for indemnification—third party claims.

(i)

Promptly after receipt by an indemnified party under Section -- Indemnification by Filmworks, -- Indemnification by Cinegram Stockholders or -- Indemnification by Cinegram of notice of the commencement of any proceeding against it, such indemnified party will, if a claim is to be made against an indemnifying party under such Section, give notice to the indemnifying party of the commencement of such claim, but the failure to notify the indemnifying party will not relieve the indemnifying party of any liability that it may have to any indemnified party, except to the extent that the indemnifying party demonstrates that the defense of such action is prejudiced by the indemnifying party's failure to give such notice.

(ii)

If any proceeding referred to in Section is brought against an indemnified party and it gives notice to the indemnifying party of the commencement of or making of such proceeding, the indemnifying party will, unless the claim involves taxes, be entitled to participate in such proceeding and, to the extent that it wishes (unless (i) the indemnifying party is also a party to such proceeding and the indemnified party determines in good faith that joint representation would be inappropriate, or (ii) the indemnifying party fails to provide reasonable assurance to the indemnified party of its financial capacity to defend such proceeding and provide indemnification with respect to such proceeding), to assume the defense of such proceeding with counsel reasonably satisfactory to the indemnified party and, after notice from the indemnifying party to the indemnified party of its election to assume the defense of such proceeding, the indemnifying party will not, as long as it diligently conducts such defense, be liable to the indemnified party under this Section -- Indemnification for any fees of other counsel or any other expenses with respect to the defense of such proceeding, in each case subsequently incurred by the indemnified party in connection with the defense of such proceeding, other than reasonable costs of investigation. The parties agree that the firms of Raice Paykin & Krieg LLP and Kramer, Levin, Neftalis & Frankel LLP are among those satisfactory for purposes of this Section. If the indemnifying party assumes the defense of a proceeding, (i) unless the indemnifying party has, prior to assuming such defense, notified the indemnified party that that defense is being undertaken without prejudice to any later claim that the claims made in the proceeding are not within the scope of, or subject to, indemnification, it will be conclusively established for purposes of this Agreement that the claims made in that proceeding are within the scope of and subject to indemnification; (ii) no compromise or settlement of such claims may be effected by the indemnifying party without the indemnified party's consent unless (A) there is no finding or admission of any violation of legal requirements or any violation of the rights of any person and no effect on any other claims that may be made against the indemnified party, and (B) the sole relief provided is monetary damages that are paid in full by the indemnifying party; and (iii) the indemnified party will have no liability with respect to any compromise or settlement of such claims effected without its consent. If notice is given to an indemnifying party of the commencement of any proceeding and the indemnifying party does not, within ten days after the indemnified party's notice is given, give notice to the indemnified party of its election to assume the defense of such proceeding, the indemnifying party will be bound by any determination made in such proceeding or any compromise or settlement effected by the indemnified party.

(iii)

Notwithstanding the foregoing, if an indemnified party determines in good faith that there is a reasonable probability that a proceeding may adversely affect it other than as a result of monetary damages for which it would be entitled to indemnification under this Agreement, the indemnified party may, by notice to the indemnifying party, assume the exclusive right to defend, compromise, or settle such proceeding, but the indemnifying party will not be bound by any determination of a proceeding so defended or any compromise or settlement effected without its written consent (which may not be unreasonably withheld).

(e)

Procedure for indemnification—other claims. A claim for indemnification for any matter not involving a third-party claim may be asserted by written notice to the party from whom indemnification is sought.

13.

Termination; Amendment; Waiver.

(a)

Termination. This Agreement and the transactions contemplated hereby may be terminated at any time prior to the Closing:

(i)

by mutual written agreement of Filmworks and Cinegram;

(ii)

by Cinegram, on the one hand, or Filmworks, on the other hand, as the case may be, if the Closing shall not have occurred on or before of December 31, 2001 (the “Termination Date”) so long as the party terminating this Agreement pursuant to this Section has not made any material misrepresentation or materially breached a covenant, agreement or warranty contained herein;

(iii)

by Cinegram, on the one hand, or Filmworks, on the other hand, in the event the other makes a material misrepresentation or breaches a covenant, agreement or warranty set forth in this Agreement, but such non-misrepresenting or non-breaching party's election to terminate shall not limit, waive or prejudice such party's remedies at law or in equity.

In the event this Agreement is terminated as provided in Section or , this Agreement shall become void and of no further force and effect and no party hereto shall have any further liability to any other party hereto, except that Sections -- Public Announcements and -- Expenses shall survive and continue in full force and effect notwithstanding termination.

(b)

Amendment. This Agreement may be amended by action taken by the Parties by an instrument in writing.

(c)

Extension; Waiver. At any time prior to the Closing Date, Cinegram, the Cinegram Stockholders and Filmworks may (i) extend the time for the performance of any of the obligations or other acts of the other; (ii) waive any inaccuracies in the representations and warranties contained herein or in any document, certificate or writing delivered pursuant hereto or thereto; and (iii) waive compliance with any of the agreements or conditions contained herein. Any agreement on the part of any party to any such extension or waiver shall be valid only if set forth in an instrument in writing signed by or on behalf of such party.

14.

Definitions. When used in this Agreement, the following terms shall have the meanings set forth below or in the indicated Sections:

(a)

"Acquisition Proposal" is defined in Section .

(b)

"Affiliate" means, with respect to any given Person, any other Person that directly, or indirectly through one or more intermediaries, controls, or is controlled by, or is under common control with, such Person. The term “control” (including, with correlative meaning, the terms "controlled by" and "under common control with"), as used with respect to any Person, means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of such Person, whether through the ownership of voting securities, by contract or otherwise.

(c)

"Assets" means all properties, assets, Contracts, business, goodwill and rights of Cinegram or Filmworks, as the case may be, as a going concern, of every kind, nature, character and description, tangible and intangible, wherever located and whether or not carried or reflected on the books and records of Cinegram or Filmworks, as the case may be, on the Closing Date.

(d)

"Cinegram Balance Sheet" is defined in Section .

(e)

"Cinegram Interim Financial Statements" is defined in Section .

(f)

"Cinegram Shares" has the meaning set forth in the Recitals.

(g)

"Closing" and "Closing Date" are defined in Section .

(h)

"Contract" means any contract, agreement, lease, license, arrangement, commitment, sales order, purchase order or any claim or right or any benefit or obligation arising thereunder or resulting therefrom and currently in effect, whether oral or written.

(i)

"Copyrights" means all copyrights, whether registered or unregistered, in both published works and unpublished works.

(j)

"Employee Benefit Plan" means any (i) nonqualified deferred compensation or retirement plan or arrangement which is an Employee Pension Benefit Plan, (ii) qualified defined contribution retirement plan or arrangement which is an Employee Pension Benefit Plan, (iii) qualified defined benefit retirement plan or arrangement which is an Employee Pension Benefit Plan (including any multiemployer plan), or (iv) Employee Welfare Benefit Plan or material fringe benefit plan or program.

(k)

"Employee Pension Benefit Plan" has the meaning set forth in ERISA Section 3(2).

(l)

"Employee Welfare Benefit Plan" has the meaning set forth in ERISA Section 3(1).

(m)

"ERISA" means the Employee Retirement Income Security Act of 1974, as amended.

(n)

"Exchange Act" shall mean the United States Securities Exchange Act of 1934, as amended.

(o)

"Earn-Out Shares" is defined in Section .

(p)

"Filmworks Financial Statements" is defined in Section -- SEC Reports.

(q)

"Filmworks Shareholder Meeting" means the meeting of shareholders of Filmworks referred to in Section -- Shareholder Meeting.

(r)

"Filmworks Subsidiary" is defined in the Recitals.

(s)

"GAAP" means generally accepted United States accounting principles, applied on a basis consistent with the basis on which the balance sheet and the other financial statements referred to in the applicable Section of this Agreement were prepared and consistent from period to period.

(t)

"Information Statement" is defined in Section .

(u)

"Initial Shares" has the meaning set forth in Section .

(v)

"Intellectual Property Assets" means any and all (i) inventions (whether patentable or unpatentable and whether or not reduced to practice), all improvements thereto, and all patents, patent applications, and patent disclosures, together with all reissuances, continuations, continuations-in-part, revisions, extensions, and reexaminations thereof, (ii) trademarks, service marks, trade dress, logos, trade names, and corporate names, together with all translations, adaptations, derivations, and combinations thereof and including all goodwill associated therewith, and all applications, registrations, and renewals in connection therewith, (iii) copyrightable works, whether or not registered, all copyrights, and all applications, registrations, and renewals in connection therewith, (iv) mask works and all applications, registrations, and renewals in connection therewith, (v) trade secrets and confidential business information (including ideas, research and development, Know-how, formulas, compositions, manufacturing and production processes and techniques, technical data, designs, drawings, blueprints, sketches, storyboards, models, engineering drawings, specifications, customer and supplier lists, pricing and cost information, and business and marketing plans and proposals), (vi) computer software (including data and related documentation), (vii) other proprietary rights and Know-how, (viii) copies and tangible embodiments thereof (in whatever form or medium) and (ix) licenses and sublicenses granted and obtained with respect thereto, and rights thereunder.

(w)

"Know-how" means any and all technical knowledge, proprietary rights, patented or unpatented inventions, trade secrets, analytical methodology, processes, data and all other information or experience possessed by Filmworks or Cinegram, as the case may be, or which Filmworks or Cinegram, as the case may be, has the right to use.

(x)

"Liabilities" means any direct or indirect liability, indebtedness, claim, loss, damage, deficiency, obligation or responsibility, fixed or unfixed, choate or inchoate, liquidated or unliquidated, secured or unsecured, accrued, absolute, known or unknown, contingent or otherwise.

(y)

"Lien" means any mortgage, lien, pledge, charge, security interest, license, lease, claim, restriction, option, conditional sale or installment Contract or encumbrance of any kind.

(z)

"Mark" means a party's corporate name, and all of its fictional business names, trading names, registered and unregistered trademarks, service marks, and applications for or reservations of any of the foregoing.

(aa)

"Patents" means all patents, patent applications, and inventions and discoveries that may be patentable.

(bb)

"Person" shall include an individual, a partnership, a corporation, or a division or business unit thereof, a trust, an unincorporated organization, a government or any department or agency thereof and any other entity.

(cc)

"Purchase Price Shares" is defined in Section .

(dd)

"SEC" shall mean the United States Securities and Exchange Commission.

(ee)

"SEC Documents" is defined in Section .

(ff)

"Securities Act" shall mean the United States Securities Act of 1933, as amended.

(gg)

"Termination Date" is defined in Section .

15.

Miscellaneous.

(a)

Entire Agreement; Assignment. This Agreement, together with all Schedules and Exhibits, constitutes the entire agreement among the Parties with respect to the subject matter hereof and supersedes all other prior agreements and understandings, both written and oral, among the Parties or between any of them with respect to the subject matter hereof. All references to Sections, Exhibits and Schedules shall be deemed references to such parts of this Agreement unless the text requires otherwise. This Agreement shall not be assigned by operation of law or otherwise.

(b)

Notices. All notices, requests, claims, demands and other communications hereunder shall be in writing and shall be given or made as of the date delivered or mailed if delivered in person, by telecopy, cable, telegram or telex, or by registered or certified mail (postage prepaid, return receipt requested) to the respective Parties as follows:

If to Filmworks:

New York Film Works, Inc.
928 Broadway

New York, NY 10010
Fax: (212) 475-5927
Attn.: Mr. Michael Cohen

With a copy (which shall not constitute notice) to:

Kramer, Levin, Neftalis & Frankel LLP

919 Third Avenue
New York, NY 10022-3852

Fax: 212-715-8000

If to The Cinegram Stockholders:

At the addresses set forth in Exhibit A

If to Cinegram:

Cinegram Media Inc.

One Springfield Ave.

Summit, NJ 07901

Fax: 908-598-4756

Attn: R. F. Wright, CEO

With a copy (which shall not constitute notice) to:

Raice Paykin & Krieg LLP
185 Madison Avenue
New York, New York 10016
Fax: (212) 684-9022
Attn: David C. Thomas, Esq.

or to such other address as the Person to whom notices is given may have previously furnished to the others in writing in the manner set forth above.

(c)

Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of New York, without giving effect to applicable principles of conflicts of laws thereof.

(d)

Costs; Expenses; Legal Fees. Each of the Parties shall pay its own costs and expenses in connection with the transactions contemplated by this Agreement, it being understood that none of the parties shall be responsible for the other's costs and expenses.

(e)

Parties in Interest. This Agreement shall be binding upon and inure solely to the benefit of each party hereto, its successors and assigns, except as to Section -- Issuance of Options, which shall also inure to the benefit of holders of Cinegram stock options.

(f)

Counterparts. This Agreement may be executed in two or more counterparts, each of which shall be deemed to be an original, but all of which shall constitute one and the same agreement.

(g)

Specific Performance. Irreparable damage would occur if any of the provisions of this Agreement were not performed in accordance with the terms hereof, and the parties shall be entitled to specific performance of the terms hereof, in addition to any other remedy at law or equity.

(h)

Construction. The parties have participated jointly in the negotiation and drafting of this Agreement. In the event an ambiguity or question of intent or interpretation arises, this Agreement shall be construed as if drafted jointly by the parties and no presumption or burden of proof shall arise favoring or disfavoring any party by virtue of the authorship of any of the provisions of this Agreement. Any reference to any federal, state, local, or foreign statute or law shall be deemed also to refer to all rules and regulations promulgated thereunder, unless the context requires otherwise. The word "including" shall mean including without limitation. Nothing in the Schedules shall be deemed adequate to disclose an exception to a representation or warranty made herein unless the Schedule identifies the exception with reasonable particularity and describes the relevant facts in reasonable detail. Without limiting the generality of the foregoing, the mere listing (or inclusion of a copy) of a document or other item shall not be deemed adequate to disclose an exception to a representation or warranty made herein (unless the representation or warranty has to do with the existence of the document or other item itself). The parties intend that each representation, warranty, and covenant contained herein shall have independent significance. If any party has breached any representation, warranty, or covenant contained herein in any respect, the fact that there exists another representation, warranty, or covenant relating to the same subject matter (regardless of the relative levels of specificity) which the party has not breached shall not detract from or mitigate the fact that the party is in breach of the first representation, warranty, or covenant.

(i)

Incorporation of Exhibits and Schedules. The Exhibits and Schedules identified in this Agreement are incorporated herein by reference and made a part hereof.

IN WITNESS WHEREOF, each of the parties has caused this Agreement to be executed on its behalf by its officers thereunto duly authorized, or individually, as the case may be, all as of the day and year first above written.

NEW YORK FILM WORKS, INC.

By:

Name:

Michael Cohen

Title:

President

CINEGRAM MEDIA, INC.

By:

Name:

Raymond F. Wright

Title

Chairman and Chief Executive Officer

CINEGRAM STOCKHOLDERS

____________________________________________

Harold Denstman

____________________________________________

Stephen C. Denstman

____________________________________________

James B. Witker II

____________________________________________

Hollis E. Wright

____________________________________________

Raymond F. Wright

AMENDED AND RESTATED CERTIFICATE OF INCORPORATION

CERTIFICATE OF AMENDMENT

CERTIFICATE OF INCORPORATION

NEW YORK FILM WORKS, INC.

(Under Section 805 of the Business Corporation Law)

CERTIFICATE OF AMENDMENT

CERTIFICATE OF INCORPORATION

NEW YORK FILM WORKS, INC.

(Under Section 805 of the Business Corporation Law)

The undersigned, Raymond F. Wright and Michael Cohen, being respectively the President and Secretary of NEW YORK FILM WORKS, INC., do hereby certify that:

The name of the Corporation is New York Film Works, Inc.

The name under which the Corporation was formed was New York Color Works, Inc.

The Certificate of Incorporation of the Corporation was filed by the Department of State on November 5, 1980.

The Certificate of Incorporation of the Corporation is amended to change the name of the Corporation to CINEGRAM DIGITAL MEDIA GROUP, INC. to change each twenty-five outstanding shares of the Corporation's Common Stock, par value $.001 per share into one share of Common Stock, par value $.001 per share, to create a new class of Preferred Stock consisting of 2,000,000 shares, par value $.001 per share, to designate 100,000 shares of such Preferred Stock as Series A Redeemable Convertible 8% Preferred Shares, and to vest in the Board of Directors the authority to establish and designate additional series of Preferred Stock, to fix the number of shares therein, and the variations in the relative rights, preferences and limitations as between series.

To effectuate the foregoing:

(a)

Effective upon filing of this Certificate of Amendment of Certificate of Incorporation, each 25 shares of the Corporation's Common Stock, par value $.001 per share, outstanding shall be changed into 1 share of such Common Stock. Each shareholder who would otherwise be entitled to receive a fractional share of 0.5 or greater shall receive a whole share and each shareholder who would otherwise be entitled to receive a fractional share of less than 0.5 shall not receive an additional whole share.

(b)

ARTICLE FIRST, which sets forth the name of the Corporation is amended to read as follows:

FIRST

The name of the Corporation is CINEGRAM DIGITAL MEDIA GROUP, INC.

(c)

Article FOURTH, which sets forth the total number of shares of stock which the Corporation shall have authority to issue is amended to read as follows:

FOURTH

The Corporation is authorized to issue two classes of stock to be designated, "Common Stock" and "Preferred Stock." The total number of shares which the Corporation is authorized to issue is 122 million shares. One hundred twenty million shares, par value $.001 per share, shall be Common Stock and two million shares, par value $.001 per share, shall be Preferred Stock.

Common Stock.

(1)

General. All shares of Common Stock will be identical and will entitle the holders thereof to the same rights, powers and privileges. The rights, powers and privileges of the holders of the Common Stock are subject to and qualified by the rights of holders of the Preferred Stock.

(2)

Dividends. Dividends may be declared and paid on the Common Stock from funds lawfully available therefor as and when determined by the Board of Directors and subject to any preferential dividend rights of any then outstanding Preferred Stock.

(3)

Dissolution, Liquidation or Winding Up. In the event of any dissolution, liquidation or winding-up of the affairs of the Corporation, whether voluntary or involuntary, each issued and outstanding share of Common Stock shall entitle the holder thereof to receive an equal portion of the net assets of the Corporation available for distribution to the holders of Common Stock, subject to any preferential rights of any then outstanding Preferred Stock.

(4)

Voting Rights. Except as otherwise required by law or the Certificate of Incorporation, each holder of Common Stock shall have one vote in respect of each share of stock held of record by such holder on the books of the Corporation for the election of directors and on all matters submitted to a vote of stockholders of the Corporation. Except as otherwise required by law or provided herein, holders of Common Stock shall vote together with holders of Preferred Stock as a single class, subject to any special or preferential voting rights of any then outstanding Preferred Stock. There shall be no cumulative voting.

(5)

Redemption. The Common Stock is not redeemable.

Preferred Stock. The Board of Directors is authorized, subject to limitations prescribed by law, to provide for the issuance of the shares of Preferred Stock in series, and by filing a certificate pursuant to the applicable law of the State of New York, to establish from time to time the number of shares to be included in each such series, and to fix the variations in the relative rights, preferences and limitations as between series. The authority of the Board with respect to each series shall include, but not be limited to, determination of the following:

(1)

The number of shares constituting that series and the distinctive designation of that series;

(2)

The dividend rate on the shares of that series, whether dividends shall be cumulative, and, if so, from which date or dates, and the relative rights of priority, if any, of payment of dividends on shares of that series;

(3)

Whether that series shall have voting rights, in addition to the voting rights provided by law, and, if so, the terms of such voting rights;

(4)

Whether that series shall have conversion privileges, and, if so, the terms and conditions of such conversion, including provision for adjustment of the conversion rate in such events as the Board of Directors shall determine;

(5)

Whether or not the shares of that series shall be redeemable, and, if so, the terms and conditions of such redemption, including the date or dates upon or after which they shall be redeemable, and the amount per share payable in case of redemption, which amount may vary under different conditions and at different redemption dates;

(6)

Whether that series shall have a sinking fund for the redemption or purchase of shares of that series, and, if so, the terms and amount of such sinking fund;

(7)

The rights of the shares of that series in the event of voluntary or involuntary liquidation, dissolution or winding-up of the Corporation, and the relative rights or priority, if any, of payment of shares of that series; and

(8)

Any other relative rights, preferences and limitations of that series. Dividends on outstanding shares of Preferred Stock shall be paid or declared and set apart for payment before any dividends shall be paid or declared and set apart for payment on the Common Stock with respect to the same dividend period. If upon any voluntary or involuntary liquidation, dissolution or winding-up of the Corporation, the assets available for distribution to holders of shares of Preferred Stock of all series shall be insufficient to pay such holders the full preferential amount to which they are entitled, then such assets shall be distributed ratably among the shares of all series of Preferred Stock in accordance with the respective preferential amounts (including unpaid cumulative dividends, if any) payable with respect thereto.

Series A Redeemable Convertible 8% Preferred Shares. One Series of Preferred Stock shall consist of 150,000 shares and shall be known as Series A Redeemable Convertible 8% Preferred Shares ("Series A Preferred Stock"). The Series A Preferred Stock shall have the following rights, preferences and limitations:

(1)

Liquidation Preference. In the event of any liquidation, dissolution or winding-up of the Corporation, whether voluntary or involuntary, before any payment or distribution of the assets of the Corporation (whether capital or surplus) shall be made to or set apart for the holders of any series or class or classes of stock of or other securities having an equity interest in the Corporation ranking junior to the Series A Preferred Stock upon liquidation, dissolution or winding-up , and after any such payment or distribution to the holders of any other series of preferred stock ranking prior, upon liquidation, dissolution or winding-up , to the Series A Preferred Stock, the holders of the shares of Series A Preferred Stock shall be entitled to receive an amount equal to the then effective Liquidation Preference and, in addition, an amount equal to any accrued but unpaid dividends. Liquidation Preference means an amount equal to $20 per share of Series A Preferred Stock, subject to change in accordance with , including, without limitation, Accumulated Dividends. After distribution of the full amount of the Liquidation Preference in accordance with this , the remaining assets of the Corporation available for distribution, if any, to the shareholders of the Corporation shall be distributed to the holders of shares of Common Stock and other securities junior to the Series A Preferred Stock upon liquidation, dissolution or winding-up , to the exclusion of the holders of Series A Preferred Stock. If the assets and funds of the Corporation available for distribution to the holders of Series A Preferred Stock shall be insufficient to permit the payment of the full preferential amounts set forth in this , then all of the assets of the Corporation available for distribution shall be distributed to the holders of Series A Preferred Stock pro rata so that each share receives the same percentage of its Liquidation Preference.

(2)

Dividends. The holder of each share of Series A Preferred Stock shall be entitled to receive cumulative dividends from the date of initial issuance of such shares of Series A Preferred Stock at a rate of 8% per annum on the amount of the then effective Liquidation Preference of the shares of Series A Preferred Stock. Dividends shall be computed on the basis of a 360 day year of twelve 30-day months, and will be payable by (A) cash if, and only if, paid on the applicable Dividend Payment Date (as defined below), (B) delivery of shares of Series A Preferred Stock (valued for this purpose at the Liquidation Preference as of the Dividend Payment Date), or (C) any combination of the foregoing. Dividends will be payable quarterly in arrears on February 15, May 15, August 15 and November 15 of each year (each a "Dividend Payment Date"), commencing November 15, 2001, for so long as any shares of Series A Preferred Stock are outstanding; provided, however, that if such date is not a Business Day, then the Dividend Payment Date shall be the next Business Day. Arrearages of unpaid dividends, whether declared or undeclared ("Accumulated Dividends"), will not themselves bear interest but will be added to the Liquidation Preference of the Series A Preferred Stock in accordance with the following sentence, and dividends will accrue thereafter on the full amount of the Liquidation Preference as so increased. If any dividend payable on any Dividend Payment Date is not declared and paid in full on such Dividend Payment Date, the amount so payable, to the extent not paid, shall be added to the then effective Liquidation Preference on such Dividend Payment Date.

For purposes of this , "Business Day" means each Monday, Tuesday, Wednesday, Thursday and Friday which is not a day on which banking institutions in The City of New York are authorized or obligated by law or executive order to be closed.

(3)

Other Distributions. In the event the Corporation shall declare a distribution payable in securities of other persons, evidences of indebtedness issued by the Corporation or other persons, assets (excluding cash dividends not in excess of 10% of earnings for the prior four fiscal quarters) or options or rights, then, in each such case, the holders of the Series A Preferred Stock shall be entitled to a proportionate share of any such distribution as though they were the holders of the number of shares of Common Stock in which their shares of Series A Preferred Stock are convertible as of the record date fixed for the determination of the holders of Common Stock of the Corporation entitled to receive such distribution.

(4)

Redemption.

(A)

Subject to below, shares of the Series A Preferred Stock may be redeemed by the Corporation at any time or from time to time upon not less than 30 days' written notice.

(B)

The amount per share at which the Series A Preferred Stock is to be redeemed pursuant to this shall be an amount equal to the Liquidation Preference as of the applicable Redemption Date. The total sum payable per share of Series A Preferred Stock on any Redemption Date is hereinafter referred to as the "Redemption Price."

(C)

On and after any Redemption Date (unless default shall be made by the Corporation in the payment of the applicable Redemption Price as herein provided, in which event such rights shall be exercisable until such default is cured), all rights in respect of the Series A Preferred Stock to be redeemed pursuant to notices received pursuant to , except to receive the applicable Redemption Price as herein provided, shall cease and terminate, and such Series A Preferred Stock shall no longer be deemed to be outstanding, whether or not the certificates representing such Series A Preferred Stock have been received by the Corporation.

(D)

At any time on or after any Redemption Date, the holders of record of Series A Preferred Stock to be redeemed on such Redemption Date in accordance with this shall be entitled to receive the applicable Redemption Price upon actual delivery to the Corporation or its agents of the certificates representing the Series A Preferred Stock to be redeemed.

(E)

Anything contained in this to the contrary notwithstanding, the holders of Series A Preferred Stock to be redeemed pursuant to this shall have the right, exercisable at any time up to the close of business on the Redemption Date (unless default shall be made by the Corporation in the payment of the Redemption Price as herein provided, in which event such right shall be exercisable with respect to those shares for which payment is not made until such default is cured), to convert all or any such shares to be redeemed as herein provided into shares of Common Stock pursuant to hereof.

(1)

Voting.

(A)

In addition to the rights specified in below and any other rights provided in the Corporation's By-laws or by law, each share of Series A Preferred Stock shall entitle the holder thereof to a number of votes equal to the number of shares of Common Stock into which such share is then convertible, and such holders shall be entitled to vote with the holders of Common Stock on all matters as to which holders of Common Stock shall be entitled to vote.

(B)

So long as any shares of the Series A Preferred Stock are outstanding, except where the vote of a greater number of shares is required by law or by the Corporation's Certificate of Incorporation, the Corporation shall not, without the affirmative vote of the holders of at least a majority of the shares of Series A Preferred Stock create or authorize the creation of any additional series or class of shares which ranks senior to holders of the Series A Preferred Stock as to liquidation rights; or

(1)

Conversion.

(A)

Each share of Series A Preferred Stock may, at the election of the holder thereof, at any time be converted into a number of fully paid and nonassessable shares of the Corporation’s Common Stock determined by dividing the Liquidation Preference by the conversion price per share of Common Stock in effect at the time of such conversion. Such conversion price, as adjusted and readjusted from time to time in accordance with this is referred to herein as the "Conversion Price.” The initial Conversion Price is $0.50, so that each Series A Preferred Stock is initially convertible into 40 shares of Common Stock.

(B)

Any Series A Preferred Stock may be converted by the holder thereof by surrender of the certificates evidencing such Series A Preferred Stock accompanied by notice of conversion thereof duly executed by such holder to the Corporation at its principal office, or at the office of the agency maintained for such purpose. Each conversion shall be deemed to have been effected immediately prior to the close of business on the date on which such certificates shall have been so surrendered to the Corporation or such agency; and at such time the rights of the holder of such Series A Preferred Stock, as such, shall cease, and the person or persons in whose name or names any certificate or certificates for shares of Common Stock (or other securities) shall be issuable upon such conversion shall be deemed to have become the holder or holder of record thereof.

(C)

The Corporation will, at the time of conversion of any Series A Preferred Stock upon the request of the holder thereof, acknowledge in writing its continuing obligation to afford such holder any rights to which such holder shall continue to be entitled after such conversion in accordance with the provisions of the agreement for initial issuance of the Series A Preferred Stock, provided that if any such holder shall fail to make any such request, such failure shall not affect the continuing obligation of the Corporation to afford to such holder all such rights.

(D)

As promptly as practicable after the conversion of any shares of the Series A Preferred Stock, and in any event within 30 calendar days thereafter, the Corporation at its expense (including the payment by it of any applicable issue taxes) will issue and deliver to the holder of such Preferred Stock, or as such holder (upon payment of such holder of any applicable transfer taxes) may direct, a certificate or certificates for the number of full shares of Common Stock (or other securities) issuable upon such conversion, plus, in lieu of any fractional shares to which such holder would otherwise be entitled, cash equal to such fraction multiplied by the market value determined in good faith by the Board of Directors of the Corporation of one full share as of the close of business on the date of such conversion.

(E)

The Conversion Price shall be subject to adjustment from time to time in accordance with this .

(1)

As used in this , "Other Securities" with reference to the conversion privilege of the holders of the Series A Preferred Stock shall mean any stock (other than Common Stock) and any other securities of the Corporation or of any other person which the holders of the Series A Preferred Stock at any time shall be entitled to receive, or shall have received, upon the conversion or partial conversion of the Series A Preferred Stock, in lieu of or in addition to Common Stock, or which at any time shall be issuable or shall have been issued in exchange for or in replacement of Common Stock (or Other Securities) pursuant to or otherwise.

(2)

In case the Corporation at any time or from time to time, after the date of issuance of the Series A Preferred Stock, shall declare or pay any dividend or distribution on the Common Stock payable in Common Stock, or effect a subdivision of the outstanding shares of Common Stock into a greater number of shares of Common Stock (by reclassification, reorganization or otherwise than by payment of a dividend in Common Stock), the Conversion Price in effect immediately prior to such combination or consolidation shall, concurrently with the effectiveness of such dividend, distribution or subdivision, be proportionately reduced.

(3)

In case the outstanding shares of Common Stock shall be combined or consolidated, by reclassification or otherwise, into a lesser number of shares of Common Stock, the Conversion Price in effect immediately prior to such combination or consolidation shall, concurrently with the effectiveness of such combination or consolidation, be proportionately increased.

(4)

In case the Corporation, after the date of issuance of the Series A Preferred Stock, shall consolidate with or merge into any other person (other than a merger with a subsidiary in which merger the Corporation is the continuing corporation and which does not result in any reclassification or change of outstanding shares of Common Stock), or shall transfer all or substantially all of its properties and assets to any other person and, in connection with such transfer, shares or stock or Other Securities or property of such person or any other person shall be issuable or deliverable in exchange for the Common Stock, or shall effect a capital reorganization or reclassification of the Common Stock of the Corporation, then, and in each such case, proper provision shall be made so that, on the terms and in the manner provided in this , each holder of Series A Preferred Stock, upon the conversion thereof at any time after the consummation of such consolidation, merger, transfer and exchange, reorganization or reclassification, shall be entitled to receive, in lieu of the Common Stock, (or Other Securities) issuable upon such conversion prior to such consummation, the stock and Other Securities and property to which such holder would have been entitled upon such consummation if such holder had so converted such Series A Preferred Stock immediately prior thereto, subject to adjustments (subsequent to such corporate action) as nearly equivalent as possible to the adjustments provided for in this .

(A)

The corporation will not, by amendment of its certificate of incorporation or through any reorganization, transfer of assets, consolidation, merger, dissolution, issue or sale of securities or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms to be observed or performed under this by the Corporation. Without limiting the generality of the foregoing, the Corporation

(1)

will not increase the par value of any shares of stock receivable upon the conversion of the Series A Preferred Stock above the principal amount of such Series A Preferred Stock then convertible into one share of such stock and

(2)

will take all such action as may be necessary or appropriate in order that the Corporation may validly and legally issue fully paid and nonassessable shares of capital stock upon the conversion in full of all Series A Preferred Stock from time to time outstanding.

(A)

In each case of an event requiring any adjustment or readjustment of the Conversion Price pursuant to this , the Corporation at its expense will promptly compute such adjustment or readjustment in accordance with the terms hereof and prepare and furnish to each holder of Series A Preferred Stock a certificate, signed by the principal financial or accounting officer of the Corporation, setting forth such adjustment or readjustment and showing in detail the facts upon which such adjustment and readjustments is based. The corporation will, upon the written request at any time of any holder of Series A Preferred Stock, furnish to such holder a like certificate setting forth (a) such adjustment and readjustments (b) the Conversion Price at the time in effect, and (c) the number of shares of Common Stock (or Other Securities) and the amount, if any, of other property at the time receivable upon the conversion of the Series A Preferred Stock held by such holder.

(1)

In the event of

(A)

any taking by the Corporation of the record of the holders of any class of securities for the purpose of determining the holders thereof who are entitled to receive any dividend (other than a cash dividend payable out of surplus at the same rate as that of the last cash dividend theretofore paid and other than a dividend on the Common Stock payable in Common Stock) or other distribution or any right to subscribe for, purchase or otherwise acquire any shares of stock of any class or any Other Securities or property, or to receive any other right, or

(B)

any capital reorganization or reclassification of the Common Stock of the Corporation or any transfer of all or substantially all the assets of the Corporation to or consolidation or merger of the Corporation with or into any other person, or

(C)

any voluntary or involuntary dissolution, liquidation or winding-up of the Corporation,

the Corporation will mail to each holder of Series A Preferred Stock at least 20 days prior to the date thereof, a notice specifying (i) the date on which any such record is to be taken for the purpose of such dividend, distribution or right, and stating the amount and character of such dividend, distribution or right, (ii) the date on which any such reorganization, reclassification, transfer, consolidation, merger, dissolution, liquidation or winding-up is expected to become effective, and the time, if any is to be fixed, as of which the holders of record of Common Stock (or Other Securities) shall be entitled to exchange their shares of Common Stock (or Other Securities) for securities or other property deliverable upon such reorganization, reclassification, transfer, consolidation, merger, dissolution, liquidation or winding-up.

The corporation will at all times reserve and keep available, solely for issuance and delivery upon the conversion of the Series A Preferred Stock, all shares of Common Stock (or Other Securities) from time to time issuable upon the conversion of the Series A Preferred Stock. All Shares of Common Stock issuable upon conversion of the Series A Preferred Stock shall be duly authorized and, when issued, validly issued, fully paid and nonassessable with no liability on the part of the holders thereof.

The foregoing amendment to the Certificate of Incorporation was authorized by the Board of Directors followed by at least a majority of the holders of all of the shares of the Corporation entitled to vote thereon.

IN WITNESS WHEREOF, we have signed this Certificate on the ___th day of October, 2001, and we affirm the statements contained therein are true under penalty of perjury.

/s/

Raymond F. Wright

_____________________________

RAYMOND F. WRIGHT, President

/s/

Michael Cohen

_____________________________

MICHAEL COHEN, Secretary