Office of the United States Trustee

In re:	DEBTOR IN POSSESSION OPERATING REPORT
The Kushner-Locke Company, et al. Debtors
	Report Number:	2	Page 1 of 2
Chapter 11	For the Period FROM:	12/1/2001
Case No. LA 01-44828-SB (Administratively Consolidated with	TO:	12/31/2001
Case Nos. LA 01-44829-SB through LA 01-44831-SB; LA 01- 44833-SB through LA 01-44836-SB; and LA 01-44841-SB)

1 Profit and Loss Statement (Accrual Basis Only)
	A.	Related to Business Operations
		Gross Sales				$	15,200
		Costs Related to Revenues (Film Cost Amortization)					15,032
				Gross Profit					168
		Less: Operating Expenses
		Officer Compensation			—
		Salaries and Wages — Other Employees			67,412
			Total Salaries and Wages				67,412
			Employee Benefits and Pensions				11,570
		Employer Payroll Taxes/Fees			5,156
		Other Taxes			—
			Total Taxes				5,156
		Rent and Lease Expense (including parking)			59,555
		Distribution/Delivery Expenses			5,944
		Interest Expense			—
		Insurance			—
		Automobile Expense/Mileage			—
		Utilities (incl. Phone, phone equipment, internet)			4,505
		Depreciation and Amortization			—
		Advertising			—
		Business Expense reimbursement			10,150
		Supplies, Office Expenses, Photocopies, etc.			1,921
		Bad Debts			—
		Miscellaneous Operating Expenses			—
			Total Operating Expenses				166,212
				Net Gain/Loss from Business Operations					(166,044	)
	B.	Not related to Business Operations
			Income
			Interest Income				743
			Other Non-Operating Revenues				—
			Gross Proceeds on Sale of Assets		—
			Less: Original Cost of Assets plus expenses of sale		—
				Net Gain/Loss on Sale of Assets			—
			Total Non-Operating Income						743
		Expenses Not Related to Business Operations
			Legal and Professional Service Fees (Covered by prepetition retainer)				—
			Other Non-Operating Expenses				—
			Total Non-Operating Expenses						—
	NET INCOME/(LOSS) FOR PERIOD							$	(165,301	)

      DEBTOR IN POSSESSION OPERATING REPORT NO: 2 Page 2 of 2

2 Aging of Accounts Payable and Accounts Receivable (exclude prepetition accounts payable):

		Accounts		Accounts
		Payable		Receivable
Current Under 30 days			1,708		—
Overdue 31-60 days			—		175,300
Overdue 61-90 days			—		—
Overdue 91-120 days			—		3,750,377
Overdue Over 121 days			—		4,919,206
Due in the Future			—		4,310,063
	TOTAL		1,708		13,154,946

3 Statement of Status of Payments to Secured Creditors and Lessors:

	No payments to Secured Creditors or Lessors were paid or payable during the reporting period.
4	Tax Liability
	No tax payments were paid or payable during the reporting period other than payroll taxes shown above.
5	Insurance Coverage

	Carrier/	Amount of		Policy		Premium Paid
	Agent Name	Coverage		Expiration Date		Through Date
Worker’s Compensation (RENEWED 1/11/02)	St. Paul		1,000,000		1/14/2003		1/14/2003
Commercial Property (including Liability & Auto)	St. Paul		2,000,000		2/14/2002		2/14/2002
Commercial Umbrella	St. Paul		10,000,000		2/14/2002		2/14/2002
Guild Travel Accident Coverage	Hartford		500,000		2/14/2002		2/14/2002
Crime/Fiduciary Liability	Federal		1,000,000		2/14/2002		2/14/2002
Foreign GL & WC	ACE American		1,000,000		2/14/2002		2/14/2002
Errors & Omissions — Productions	AIG		6,000,000		3/3/2002		3/3/2002
Errors & Omissions — Library	St. Paul		3,000,000		3/3/2002		3/3/2002
Directors and Officers	Nat'l Union		10,000,000		8/21/2002		8/21/2002
Employment Practices Liability	Nat'l Union		5,000,000		10/31/2002		10/31/2002
Life, Peter Locke: (Beneficiary: Company)	Jefferson		5,000,000		2/14/2002		2/14/2002
Life, Donald Kushner: (Beneficiary: Company)	Lincoln		5,000,000		2/14/2002		2/14/2002

6 Questions:

A.	Has the Debtor in Possession provided compensation to any officers, directors, shareholders, or other principals without the approval of the Office of the United States Trustee?
	[   ] Yes                      Explain:
	[x] No
B.	Has the Debtor in Possession, subsequent to the filing of the petition, made any payments on its prepetition unsecured debt, except as authorized by the Court?
	[   ] Yes                      Explain:
	[x] No

7	Statement on Unpaid Professional Fees (Postpetition Amounts Only)
	No post-petition Professional Fees went unpaid during the reporting period.
8	Narrative Report of Significant Events and Events out of the Ordinary Course of Business:
	None.
9	Quarterly Fees:

	Total
	Disbursements								Quarterly Fee
Quarterly Period Ending	for Quarter		Quarterly Fee		Date Paid		Check No.		Still Owing
December 31, 2001	$	168,823.50	$	1,250.00		1/16/02		037081		—

I, Brett Robinson, declare under penalty of perjury that the information contained in the above Debtor in Possession Interim Statement is true and correct to the best of my knowledge.

Debtor in Possession

Office of the United States Trustee

In re:	DEBTOR IN POSSESSION INTERIM STATEMENT
The Kushner-Locke Company, et al. Debtors		Page 1 of 2
	Statement Number:	2
Chapter 11	For the Period FROM:	12/1/2001
Case No. LA 01-44828-SB (Administratively Consolidated with	TO:	12/31/2001
Case Nos. LA 01-44829-SB through LA 01-44831-SB; LA 01- 44833-SB through LA 01-44836-SB; and LA 01-44841-SB)

								Kushner-Locke		Post Production
				Collateral		Concentration		Payroll		Payroll
				Account		Account		Account		Account
CASH ACTIVITY ANALYSIS (Cash Basis Only)
Balance before Statement #1				$	268,333.21	$	65,956.21	$	1,844.78	$	257.48
A. Total Receipts per all Prior Interim Statements					446,443.98		681.02		—		—
B. Less: Total Disbursements per all Prior Statements					—		2,810.76		—		—
C. Beginning Balance				$	714,777.19	$	63,826.47	$	1,844.78	$	257.48
D. Receipts during Current Period
			Description
	USA — Mindripper				3,333.33
	USA — Mindripper				3,333.33
	Insurance refund				1,960.00
	Material payments				1,415.00
	RCV — various titles				73,448.33
	Encore — Then There Were Giants				13,333.33
	Material payments				1,150.00
	Material payments				1,702.00
	Tax refund				103.04
	Reimbursement of expenses				1,533.91
	Interest				742.69
	Wire transfer between accounts						100,000.00
	Wire transfer between accounts						35,000.00
	Cinevision — parking/insurance payments						1,754.42
	COBRA payments — former employees						1,105.77
	Payroll transfers								24,466.10
	Payroll tax/benefits transfer								9,086.20
	Payroll transfers								24,420.13
	Payroll tax/benefits transfer								9,090.08
			TOTAL RECEIPTS THIS PERIOD		102,054.96		137,860.19		67,062.51		—
E. Balance Available (C plus D)				$	816,832.15	$	201,686.66	$	68,907.29	$	257.48
F. Less: Disbursements during Current Period:
		Date    Check No.    Payee/Purpose
12/4/2001 Wire transfer between accounts					100,000.00
12/4/2001 Wire transfer between accounts					35,000.00
12/4/2001 37006 New Wave/Delivery							416.50
12/6/2001 37007 Print Co./Copy deposit							500.00
12/6/2001 37009 Fortis/Dental Ins.							1,569.04
12/6/2001 37010 Blue Cross/Medical Ins.							12,523.00
12/6/2001 37011 Ampco/Parking							3,161.37
12/7/2001 37013 CFI/Delivery							1,533.91
12/10/2001 37015 Arden/Dec. Rent							56,613.10
12/11/2001 37016 Dean Cleverdon/Rights Consultant							1,765.00
12/11/2001 37017 Ayelet Agmon/Payroll Acct.							600.00
12/12/2001 37018 Laser Medic/Fix printer							95.00
12/13/2001 37019 Brett Robinson/expense reim.							10.91
12/13/2001 37020 New Wave/Delivery							2,335.50
12/13/2001 37021 Zerolag/Internet							100.00
12/13/2001 37022 New Wave/Delivery							121.60
12/14/2001 37023 Peter Locke/expense reim.							907.45
12/17/2001 37024 Neopost/postage lease							280.66
12/17/2001 37025 NTFC/Phone Equipment							2,894.05
12/17/2001 37026 Alberstone Enterprises							43.20
12/17/2001 37027 Scottel/telephone							200.00
12/17/2001 37028 File Keepers/Storage							45.00
12/17/2001 37029 Foodcraft/supplies							162.67

DEBTOR IN POSSESSION INTERIM STATEMENT NO: 2 Page 2 of 2

						Kushner-Locke		Post Production
		Collateral		Concentration		Payroll		Payroll
		Account		Account		Account		Account
F. Less: Disbursements during Current Period (continued):
12/17/2001 37030 Adelphia					111.05
12/17/2001 37031 DHL					13.22
12/17/2001 37032 Financial Decisions/benefits admin					119.00
12/17/2001 37033 Casablanca Continuity/delivery					1,500.00
12/17/2001 37034 Still Photo Lab/delivery					108.50
12/18/2001 37035 Petty Cash/general expense					236.80
12/18/2001 37036 Zerolag/internet					1,200.00
12/18/2001 37037 Foodcraft/supplies					153.04
12/18/2001 37038 Federal Express					247.36
12/18/2001 37039 All Nations Forwarding/shipping					272.00
12/21/2001 37040 Donald Kushner/expense reim.					8,994.35
12/21/2001 37042 Ayelet Agmon/Payroll Acct.					862.50
12/21/2001 37044 Still Photo Lab/delivery					36.00
12/21/2001 37045 Dean Cleverdon/rights consultant					1,760.00
12/12/2001 Payroll transfers					24,466.10
12/12/2001 Payroll tax/fees/benefits transfer					9,086.20
12/26/2001 Payroll transfers					24,420.13
12/26/2001 Payroll tax/fees/benefits transfer					9,090.08
12/12/2001 Payroll taxes							7,786.06
12/12/2001 Payroll — to various employees							24,466.10
12/12/2001 401K wire to Eagle Trust							62.27
12/12/2001 Section 125 wire to Financial Decisions							1,113.55
12/12/2001 ADP Fees							141.48		75.76
12/26/2001 Payroll taxes							7,789.94
12/26/2001 Payroll — to various employees							24,420.13
12/26/2001 401K wire to Eagle Trust							62.27
12/26/2001 Section 125 wire to Financial Decisions							1,113.55
12/26/2001 ADP Fees							300.61
	TOTAL DISBURSEMENTS THIS PERIOD:		135,000.00		168,554.29		67,255.96		75.76
G. Ending Balance (E less F)		$	681,832.15	$	33,132.37	$	1,651.33	$	181.72

H.	(1)	Collateral Account:
		a)	Depository Name and Location:	Chase Bank 1 Chase Manhattan Plaza, New York, NY 10081
		b)	Account Number:	323221556
	(2)	Concentration Account:
		a)	Depository Name and Location:	Comerica Bank 10900 Wilshire Blvd, Los Angeles, CA 90024
		b)	Account Number:	1891935460
	(3)	Kushner-Locke Payroll Account:
		a)	Depository Name and Location:	Comerica Bank 10900 Wilshire Blvd, Los Angeles, CA 90024
		b)	Account Number:	1890694506
	(4)	Post Production Payroll Account:
		a)	Depository Name and Location:	Comerica Bank 10900 Wilshire Blvd, Los Angeles, CA 90024
		b)	Account Number:	1890694639

I:  Other monies on hand:

The Kushner Locke Company PWI account	1891215236	$	1,000.00
Bank of Scotland — Pinocchio	3549485		1,233,426.84 Pounds Sterling	Time Deposit
Bank of Scotland — Basil	3626816		192,009.08 Pounds Sterling	Time Deposit
Allied Pinocchio	10747301		4,423.11 Pounds Sterling
KLI-UK	10008956		No recent statements — Less than 1,000 Pounds

Additionally, the Company maintains a minimal amount of Petty Cash (less than $500).

Joint Venture Accounts:
KL MDP Sensation	60-066-930	$17,724.61
KL\7 Venture	1890-69-6360	8,201.34
Denial Venture	1890-69-6501	41,503.02
Cracker LLC	1891-04-1665	1,000.00

I, Brett Robinson, declare under penalty of perjury that the information contained in the above Debtor in Possession Interim Statement is true and correct to the best of my knowledge.

/s/ BRETT ROBINSON Debtor in Possession