As filed with the Securities and Exchange Commission on December 19, 1997
Registration No. 
===============================================================================

                              SECURITIES AND EXCHANGE COMMISSION
                                    Washington, D.C. 20549
                                    ----------------------
                                         FORM S-8/S-3
                                 REGISTRATION STATEMENT UNDER
                                  THE SECURITIES ACT OF 1933
                                    ----------------------
                                        OUT-TAKES, INC.
                    (Exact name of registrant as specified in its charter)
             Delaware                                                95-4363944
       (State or other jurisdiction of                         (I.R.S. Employer
       incorporation or organization)                        identification No.)
                                1419 Peerless Place, Suite 116
                                 Los Angeles, California 90035
                                        (310) 788-9440
                 (Address,  including zip code, and telephone number,  including
                    area code, of registrant's principal executive offices)
                                    ----------------------
            OUT-TAKES, INC. AMENDED AND RESTATED 1992 EMPLOYEE STOCK OPTION PLAN
                                   (Full Title of the Plan)
                                    ----------------------
                                      Michael C. Roubicek
                                1419 Peerless Place, Suite 116
                                 Los Angeles, California 90035
                                        (310) 788-9440
                       (Name, address, including zip code, and telephone
                      number, including area code, of agent for service)
                                    ----------------------
                                          Copies to:
                                     Hillel T. Cohn, Esq.
                                      Graham & James LLP
                             801 South Figueroa Street, Suite 1400
                                 Los Angeles, California 90017
                                        (213) 624-2500
                                    ----------------------
            Approximate date of commencement of proposed sale to the public:
       From time to time after the effective date of this Registration Statement

      If any of the securities  being  registered on this Form are to be offered
on a delayed or continuous  basis  pursuant to Rule 415 under the Securities Act
of 1933 check the following box.
<TABLE>

                                CALCULATION OF REGISTRATION FEE

Title of Each Class of SecuritiesAmount to be      Proposed       Proposed Maximum     Amount of
          Registered             Registered(1) Offering Price PerAggregate Offering Registration Fee
<S>                             <C>          <C>               <C>                <C>   

                                                   Share(2)           Price(3)
Stock Options                    1,586,786    $  --              $    --            $  --
Common Stock, $.01 par value     1,586,786    $0.078125          $123,967.66        $36.57(2)
Common Stock, $.01 par value     1,586,786(4) $0.078125          $123,967.66        $  -- (5)
Total                                                                                $36.57
===============================  ============ ================== ================== ================
</TABLE>

(1)   Represents  the maximum  amount of shares  issuable as of the date of this
      registration  statement.  If the amount of issuable shares increases after
      the filing of this statement, Registrant will amend this statement and pay
      an additional registration fee, if required.
(2) Estimated solely for the purpose of calculating the registration fee.
(3)   Calculated in accordance with Rule 457(h)(1) on the basis of the average
      of the high and low bid prices for the Common Stock on the OTC-
      Bulletin BoardSM on December 17, 1997.
(4)   Represents the same shares described on the line above, which may be 
      resold by the holders of options issued or issuable under the Out-Takes,
      Inc. Amended and Restated 1992 Employee Stock Option Plan.
(5)   Pursuant  to Rule  457(h)(3),  no  additional  fee is payable  since these
      shares,  which  may be  offered  for  resale,  are the same  shares  being
      registered  hereby upon their initial issuance  pursuant to the Out-Takes,
      Inc. Amended and Restated 1992 Employee Stock Option Plan.






<PAGE>




                                   OUT-TAKES, INC.

                Cross-Reference Sheet Showing Location in Prospectus
                    of Information Required by Items of Form S-3


          Form S-3 Registration Statement
                  Item and Heading                 Heading in Prospectus
 1. Forepart of the Registration Statement and Outside
    Front Cover Page of Prospectus.......... Facing Page; Cross Reference Sheet;
                                             Outside Front Cover Page of
                                             Prospectus; Additional Information
 2. Inside Front and Outside Back Cover Pages of
   Prospectus.............................. Inside Front and Outside Back Cover
                                               Pages of Prospectus
3. Summary Information, Risk Factors and Ratio of
      Earnings to Fixed Charges............... The Company; Risk Factors
4. Use of Proceeds......................... Use of Proceeds
5. Determination of Offering Price....... Outside Front Cover Page of Prospectus
 6. Dilution................................ Not Applicable
 7. Selling Security Holders................ Selling Shareholders
 8. Plan of Distribution.................. Outside and Inside Front Cover Pages
                                            of Prospectus; Plan of Distribution
 9. Description of Securities to be RegistereOutside Front Cover Page of
                                               Prospectus
  10. Interests of Named Experts and Counsel.. Legal Matters; Experts
  11. Material Changes........................ Not Applicable
  12. Incorporation of Certain Information by
      Reference......................... Incorporation of Certain Information by
                                             Reference
  13. Disclosure of Commission's Position on
      Indemnification for Securities Act LiabilNoteApplicable



<PAGE>



                                      PART I

               INFORMATION REQUIRED IN THE SECTION 10(a) PROSPECTUS

Item 1.  Plan Information.

Item 2.  Registrant Information and Employee Plan Annual Information.

      The document(s)  containing the information  specified in this Part I will
be sent or given to  participants  in the Out-Takes,  Inc.  Amended and Restated
1992 Employee Stock Option Plan to which this Registration Statement relates, as
specified  by Rule  428(b)  promulgated  under the  Securities  Act of 1933,  as
amended, and are not filed as part of this Registration Statement.


<PAGE>



PROSPECTUS

                                  OUT-TAKES, INC.

                           Common Stock, $.01 par value

      This  Prospectus  covers up to 1,586,786  shares (the  "Shares") of common
stock,  $.01 par value (the  "Common  Stock"),  of  Out-Takes,  Inc., a Delaware
corporation (the "Company"). Such Shares have been or may be acquired by certain
officers and  directors  (the "Selling  Shareholders"),  who may be deemed to be
affiliates of the Company,  pursuant to the terms of the Out-Takes, Inc. Amended
and Restated 1992  Employee  Stock Option Plan (the "Stock  Option  Plan").  The
Company  will  receive no part of the  proceeds  of sales by such  persons.  All
expenses incurred in connection with this offering will be borne by the Company.

      The Company has been  advised by the  Selling  Shareholders  that they may
sell all or a portion of the Shares offered hereby from time to time through the
facilities of the OTC-Bulletin BoardSM (the "OTC"), or through the facilities of
such  exchange  or  automated  quotation  system  where the Common  Stock may be
listed, at prices prevailing at the time of such sales. The Selling Shareholders
may also make private sales at negotiated prices directly or through a broker or
brokers.  The Selling  Shareholders and any broker  executing  selling orders on
behalf of the Selling Shareholders may be deemed to be "underwriters" within the
meaning of the  Securities  Act of 1933, as amended (the "Act"),  in which event
commissions  received  by any  such  broker  may be  deemed  to be  underwriting
commissions under the Act.

      The Common  Stock of the  Company is traded on the OTC.  On  December  17,
1997,  the average of the high and low bid prices of the Company's  Common Stock
was $0.078125 per share.

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

            See "Risk  Factors" for a discussion of certain  factors that should
           be considered by prospective purchasers of the Shares.
                               --------------------

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

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

                 The date of this Prospectus is December 19, 1997.

                                      -4-

<PAGE>



                               AVAILABLE INFORMATION

      The Company is subject to the informational requirements of the Securities
Exchange  Act of 1934,  as  amended  (the  "Exchange  Act"),  and in  accordance
therewith,  files reports and other information with the Securities and Exchange
Commission (the "Commission").  Reports, proxy and information  statements,  and
other information filed by the Company can be inspected and copied at the public
reference  facilities  maintained by the Commission at Judiciary Plaza Building,
450 Fifth Street,  N.W., Room 1024,  Washington,  D.C. 20549 and at the regional
offices of the  Commission  located at 7 World Trade Center,  New York 10048 and
500 West Madison Street,  Suite 1400,  Chicago,  Illinois 60661.  Copies of such
material can be obtained from the Public Reference  Section of the Commission at
450 Fifth Street, N.W., Room 1024, Washington,  D.C. 20549, at prescribed rates.
The Commission also maintains a Web site at http://www.sec.gov that contains all
electronically  filed  reports,  proxy  and  information  statements  and  other
information regarding the Company.

      The  Prospectus  constitutes  part  of a  Registration  Statement  on Form
S-8/S-3  (together with all amendments and exhibits  thereto,  the "Registration
Statement")  filed  by the  Company  with the  Commission  under  the Act.  This
Prospectus  omits  certain  of the  information  contained  in the  Registration
Statement,  and  reference  is hereby  made to the  Registration  Statement  for
further  information  with respect to the Company and the Shares offered hereby.
Any statements  contained herein concerning the provisions of any document filed
as an  exhibit  to the  Registration  Statement  or  otherwise  filed  with  the
Commission are not necessarily complete,  and in each instance reference is made
to the copy of such document as filed.  Each such  statement is qualified in its
entirety by such reference.

                 INCORPORATION OF CERTAIN INFORMATION BY REFERENCE

      The following  documents and any  amendments  thereto filed by the Company
with the Commission under the Exchange Act are incorporated by reference in this
Prospectus:  (i) the  Company's  Annual  Report on Form 10-K for the fiscal year
ended March 31, 1997, (ii) the Company's  Quarterly  Report on Form 10-Q for the
period ended September 30, 1997,  (iii) the Company's  Quarterly  Report on Form
10-Q for the period ended June 30, 1997, (iv) the Company's  Quarterly Report on
Form 10-Q/A dated May 22, 1997 for the period ended  September 30, 1996, (v) the
Company's Proxy Statement dated June 16, 1997 with respect to its annual meeting
of shareholders held on July 10, 1997, and (vi) the description of the Company's
Common Stock as set forth in the Registration  Statement filed by the Company on
Form 8-A  pursuant to Section 12 of the  Exchange  Act,  and any  amendments  or
reports  thereto  filed with the  Commission  for the purpose of  updating  such
description.

      All documents and any amendments thereto subsequently filed by the Company
pursuant to Sections 13(a), 13(c), 14, or 15(d) of the Exchange Act prior to the
filing of a post-effective amendment which indicates that all securities offered
hereby have been sold or which deregisters all securities then remaining unsold,
shall  be  deemed  to be  incorporated  by  reference  and to be a part  of this
Prospectus from the date of filing of such documents. Any statement contained in
a document  incorporated  by reference  herein shall be deemed to be modified or
superseded  for all  purposes to the extent that a statement  contained  in this
Prospectus,   or  in  any  other  subsequently  filed  document  which  is  also
incorporated  by  reference,  modifies  or  replaces  such  statement.  Any such
statement so modified or superseded  shall not be deemed,  except as so modified
or superseded, to constitute a part of this Prospectus.

      The  Company  will  provide  without  charge  to each  person to whom this
Prospectus  is  delivered,  on written or oral  request of such  person,  a copy
(without exhibits) of any and all information  incorporated by reference in this
Prospectus.  Requests for such copies should be directed to Michael C. Roubicek,
Out-Takes,  Inc. (i) if by  telephone  to (310)  788-9440 and (ii) if by mail to
1419 Peerless Place, Suite 116, Los Angeles, California 90035.

                                    THE COMPANY

                                      -2-

<PAGE>



      The  Company was  incorporated  in Delaware on March 18, 1992 to engage in
the sale of photographic  portraits of children,  adults and family groups.  The
Company  currently  operates and derives  substantially all of its revenues from
two retail studios,  called  Out-Takes(R),  the first of which opened on May 24,
1993 and is  located  in  MCA/Universal's  CityWalkSM  project  in Los  Angeles,
California (the "CityWalk  Studio").  The second studio commenced  operations on
December  1,  1995,  at the  Entertainment  Center in the  Bazaar at the  Irvine
Spectrum located in Irvine, Orange County, California (the "Irvine Studio"). The
Company has also developed a travelling  studio (the  "Travelling  Studio") that
has been used in a number of two-day promotions.

      The studios  employ  proprietary  hardware and software  developed  by, or
specifically  for, the Company,  which includes  digital imaging  technology and
automated motion control equipment to position the studio camera and set subject
lighting to the proper  levels for each scene  (collectively,  the  "Proprietary
System"). Using the Proprietary System, the Company is able to place pictures it
takes of its clients "into" still  photographs  prepared in advance from popular
movie  scenes  and  other  backgrounds  licensed  by the  Company.  Most  of the
portraits  taken in the CityWalk  Studio and the Irvine  Studio are presented to
the  customer as framed 8" x 10", 5" x 7" and  wallet-sized  photographs  within
about thirty  minutes  after the portrait  session is  completed.  The remainder
(primarily  enlargements and greeting cards based on these photographic  images)
are produced and delivered to clients  within  several weeks using the Company's
order   fulfillment   capabilities  as  well  as  processing   arranged  through
independent service bureaus.

      As used herein the term the "Company"  refers to  Out-Takes,  Inc. and its
subsidiaries and affiliates  unless  otherwise  noted.  The Company's  principal
executive  offices are located at 1419 Peerless  Place,  Suite 116, Los Angeles,
California 90035.

                                   RISK FACTORS

      Prospective  investors  should  consider  carefully the following  factors
related to the  business  of the Company and this  offering,  together  with the
information  and financial data set forth elsewhere in this  Prospectus,  before
deciding to invest in the Shares.

1.    Operating Losses; No Assurance of Profitability.

      The Company is utilizing a  newly-developed  technology  to compete in the
portrait  studio  industry.  Despite the  continued  operations  of the CityWalk
Studio and the Irvine  Studio,  the Company  continues to operate at a net loss.
The Company believes that this failure to achieve profitability is predominantly
due to the poor  performance of the Irvine  Studio.  Based on the length of time
that the Irvine  Studio has been  open,  the  continuing  poor  performance  and
negative cash flow  generated by the studio,  despite the Company's  substantial
efforts to improve the studio's  profitability,  the Company has determined that
the continued operation of the Irvine Studio is not in the best interests of the
Company.  Accordingly,  the Company has decided to close the Irvine Studio on or
about December 28, 1997.  There is, however,  no assurance that these efforts to
improve the profitability of the Company will be successful.

      The Company  hopes to locate  additional  opportunities  and venues and to
continue to reduce  operating  expenses and minimize  overhead costs in order to
improve  cash flows,  reduce  liabilities  and enable  additional  studios to be
opened in the future.  Net losses are expected to continue,  however,  until the
Company opens  additional  studios or revenues from the CityWalk Studio increase
substantially.



2.    Availability of Additional Capital.

                                      -3-

<PAGE>



      The Company's  operations do not currently  generate  sufficient  funds to
meet the Company's working capital  requirements.  The Company  historically has
depended on the sale of securities and borrowings from Photo  Corporation  Group
Pty.  Limited  ("PCG") to fund its working capital  requirements.  To the extent
that the Company  requires  additional funds to meet such  requirements,  it may
seek to  raise  such  funds  through  the  sale of  securities  or  through  new
borrowings from PCG. No assurance can be given,  however,  that the Company will
be able to obtain additional funds from PCG or from any other source. Should the
Company be unable to obtain additional  capital when needed, the Company may not
have sufficient financial resources to continue operating as a going concern.

3.    Competition.

      Competition  in the  traditional  portrait  photography  industry  and the
merchandise licensing business is intense. The Company enjoys limited protection
from  competition  at its  CityWalk  Studio  because  of a  restriction  in that
studio's  lease that  provides  that during the  initial  lease term (which runs
through May 31, 1998) the landlord  will not lease to third  parties nor operate
for its own  account  a  retail  store  engaged  in  selling  computer-generated
photographs similar to those produced and sold by the Company.

      The Company has  identified  three  potential  kinds of  competition:  (1)
traditional  photographers,  who are likely to compete for retail  customers  as
well as future locations; (2) photographers who employ digital technologies, who
are likely to compete for retail  customers,  future locations and merchandising
licensing agreements; and (3) new technologies, which may render the Proprietary
System  obsolete or require the Company to incur a substantial  expense in order
to remain  competitive  in terms of  product  quality,  selection,  pricing  and
customer service.

      The  Company   believes  that  its  portrait   photography   products  are
competitive in terms of product  quality,  service quality and the selection and
attractiveness  of its  licensed  products.  Many of the  firms  with  which the
Company  competes,  or can  reasonably be  anticipated to compete in the future,
however,   have  far  greater  financial  resources,   experience  and  industry
relationships  than the Company.  In addition,  such  organizations  have proven
operating  histories,  which may afford these firms  significant  advantages  in
negotiating  and  obtaining  future  merchandise  licenses  and  retail  leases,
arranging financing,  attracting skilled personnel and developing technology and
products. Many of these firms offer their products at substantially lower prices
than the Company sells its products.

4.    Dependence on License Agreements.

      The  Company  has   merchandise   licensing   agreements   (the   "License
Agreements") with Paramount Pictures  Corporation  ("Paramount");  MCA/Universal
Merchandising,  Inc.  ("Universal");  Warner Bros.  Consumer  Products  formerly
Turner Home  Entertainment,  Inc.  ("Warner") with respect to several properties
from the  Hanna-Barbera  and MGM  libraries;  Twentieth  Century Fox Licensing &
Merchandising  ("Fox");  Jay  P.  Morgan  Photography  ("Morgan");   Tony  Stone
Worldwide  Stock Agency  ("TSW"),  Queen Bee  Productions  ("Queen Bee"),  Simon
Kornblit ("Kornblit"),  Curtis Archives ("Curtis A"), Curtis Management ("Curtis
M"), King Features  ("King"),  MTV Networks ("MTV"),  Saban  Merchandising  Inc.
("Saban"),   Innerspace  Visions   ("Visions")  and  others,   individually  and
collectively  referred to as the  "License  Agreements"  (Paramount,  Universal,
Warner,  Fox, Morgan,  TSW, Queen Bee, Kornblit,  Curtis A, Curtis M, King, MTV,
Saban and  Visions  are  individually  and  collectively  referred  to herein as
"Licensors").


      The  License   Agreements   generally  grant  the  Company  the  right  to
manufacture,  sell  and  distribute  in  a  defined  geographic  area,  computer
generated  photographs  incorporating a customer's image into a still photograph
("Licensed Products") with the characters, designs and/or visual representations
("Licensed Articles") as they appear

                                      -4-

<PAGE>



in television productions and motion pictures. The Licensed Products may be sold
separately or affixed to items approved by the Licensor,  including photographic
enlargements,  greeting cards, posters, books, t-shirts, mugs, buttons and other
novelty  items,  in  consideration  of payment to the  Licensor  of a  specified
royalty  based on a percentage  of gross  retail sales  revenue from each of the
Licensed  Products.  Most of the  License  Agreements  require a  non-refundable
advance  payment  against  future  royalties and stipulate a guaranteed  minimum
level of royalties that must be paid during each year of their term. The License
Agreements also provide that the Licensor  retains  approval rights over the use
of the Licensed Articles.

      No single License Agreement  represents  greater than 25% of the Company's
aggregate sales revenues.  The Company is materially  dependent upon the License
Agreements with Paramount,  Universal, Warner, Fox and Morgan, and the appeal of
Licensed Articles from these Licensors in the retail marketplace. Three of these
License Agreements each represents  approximately 10% of the Company's revenues.
Although  the Company has not  commenced  to market all  Licensed  Articles on a
timely basis, the Company has not received any notice that any Licensor intends,
by virtue of this matter,  to exercise  any of the remedies  provided for in its
respective  License  Agreements.  The  Company  is current  with  respect to all
payments  and  required   reports  to  all   Licensors  and  believes  that  its
relationship with all Licensors is satisfactory.

5.    Environmental Regulations.

      In  order  to  comply  with   federal,   state  and  local   environmental
regulations,  the Company has permanent  filtration  systems at the CityWalk and
Irvine  Studios  that  lessen the  discharge  of certain  chemicals  that may be
harmful to the environment by reducing the  concentration  of these chemicals to
safe  levels  before  they are  disposed.  The  Company  also  contracts  with a
hazardous waste disposal  company with respect to the residue  (primarily  trace
silver)  that the  filtration  unit  produces.  The Company  believes  that this
equipment  and these  procedures  are  sufficient  to address any  environmental
problems  associated  with its business and has not received any indication that
it is not complying with all applicable regulations.  If, however, such measures
prove to be ineffective in preventing environmental  contamination,  the Company
could incur  substantial  expenses in developing  new hazardous  waste  disposal
procedures and remediating any resulting contamination.

6.    Limited Protection of Intellectual Property and Proprietary Rights;
 Risk of Litigation

      The  Company  pursues  a  policy  of  obtaining  patents  for  appropriate
inventions  related to products  marketed or  manufactured  by the Company.  The
Company has filed a document (the  "Disclosure  Document")  with the U.S. Patent
and  Trademark  Office  concerning   aspects  of  its  technology  that  may  be
patentable.  The Company has also filed an application  with the U.S. Patent and
Trademark Office seeking patent  protection for certain aspects of the Company's
technology  described  in the  Disclosure  Document  and has  supplemented  that
document with a "Continuation in Part" filing, which is currently pending.

      There can be no  assurance  that  patents,  domestic or  foreign,  will be
obtained with respect to the Company's technology, or that, if issued, they will
provide  substantial  protection or be of commercial benefit to the Company.  In
addition,  the patent  laws of foreign  countries  may differ  from those of the
United  States  as  to  the  patentability  of  the  Company's  technology  and,
accordingly, the degree of protection afforded by foreign patents may be more or
less than in the United States.

      In the United  States,  although a patent has a statutory  presumption  of
validity,  the issuance of a patent is not  conclusive as to such validity or as
to the enforceable scope of its claims therein.  The validity and enforceability
of a patent can be attacked by litigation  after its issuance by the U.S. Patent
and Trademark  Office. If the outcome of such litigation is adverse to the owner
of the patent in that the patent is held to be invalid,  other  parties may then
use the invention covered by the patent. Accordingly,  there can be no assurance
that patents with respect to the

                                      -5-

<PAGE>



Company's technology, if issued, will afford protection against competitors with
similar  products,  nor can there be any assurance  that the patents will not be
infringed upon or designed around by others.

      The Company has  registered the marks  Out-Takes(R),  So You Want to be in
Pictures(R),  Photomation(R)  and Create the Moment(R) with the U.S.  Patent and
Trademark Office and has registered the  Out-Takes(R)  service mark in Japan, in
both Japanese and English.

7.    No Dividends.

      The Company  has not paid any  dividends  on its Common  Stock and has not
adopted any policy with respect to the payment of dividends in the future. It is
anticipated that all or most of the earnings from the Company's  operations will
be used to finance its growth for the immediate future.

8.    Domicile of Officers and Directors

      All of the executive  officers and directors of the Company reside outside
of the United States and most or all of their assets are located  outside of the
United States.  Accordingly,  such persons may not be subject to the in personam
jurisdiction  of courts in the United  States.  It is not clear if the courts of
Australia  would  enforce  against such persons a judgment  obtained in a United
States court predicated upon the liability  provisions of the Federal securities
laws of the United States, nor is it clear whether the courts of Australia would
entertain  original  actions  predicated  upon such  provisions  of the  Federal
securities laws of the United States.


                                  USE OF PROCEEDS

      If any of the Shares are resold by the Selling  Shareholders,  the Company
would  receive no proceeds  from any such sale.  The Shares would be offered for
the respective accounts of the Selling Shareholders.

                               SELLING SHAREHOLDERS

      The following table sets forth certain  information as of the date of this
prospectus with respect to the Selling Shareholders. The address of each Selling
Stockholder is 1419 Peerless Place, Suite 116, Los Angeles, California 90035.

                       Number of
Name of                Shares                         Shares to be Beneficially
Beneficial             Beneficially      Shares to        Owned After Sale (1)
                                                     --------------------------
Owner                  Owned (1)(2)      be Sold       NumberPercent(3)
-----                  -----------       -------       ----------------
Michael C. Roubicek


(1)   Unless otherwise indicated, each individual has sole voting and 
investment power with respect to all Shares owned by such
      individual.


(2)   Shares  shown in this  column  include  shares of Common  Stock  currently
      owned,  Shares  issuable  pursuant to  presently  exercisable  options and
      Shares issuable  pursuant to options which are exercisable  within 60 days
      of the date of this Prospectus.

(3)   Based upon  20,495,726  shares of Common Stock  outstanding as of November
      10, 1997, plus shares of Common Stock issuable pursuant to options held by
      the particular Selling Stockholder. Percentages shown after sale are based
      upon  all  Shares  registered   hereunder  being  sold.  Asterisks  denote
      ownership of less than one percent.


                                      -6-

<PAGE>



                               PLAN OF DISTRIBUTION

      The Company has been advised by the Selling  Shareholders that they intend
to sell all or a portion of the shares  offered hereby from time to time through
the  facilities  of the OTC,  or through  the  facilities  of such  exchange  or
automated  quotation system where the Common Stock may be listed, and that sales
will be made at  prices  prevailing  at the  times of such  sales.  The  Selling
Shareholders  may also  make  private  sales  directly  or  through  a broker or
brokers. The Selling Shareholders will be responsible for payment of any and all
commissions  to brokers,  which will be negotiated on an  individual  basis.  In
connection   with  any  sales,   the  Selling   Shareholders   and  any  brokers
participating in such sales may be deemed to be underwriters  within the meaning
of the Act.

      The   Company   has   informed   the   Selling   Shareholders   that   the
anti-manipulative  rules set forth in Regulation M of the Exchange Act may apply
to their sales in the market and has furnished each Selling  Stockholder  with a
copy of said Regulation.

      There is no assurance that any of the Selling  Shareholders  will sell any
or all of the shares of Common Stock offered by them.

      The Company will pay all expenses incident to the offering and sale of the
Common Stock to the public other than brokerage  commissions  which will be paid
by the Selling Shareholders.

                                   LEGAL MATTERS

      Graham & James LLP, special counsel to the Company for this offering,  has
rendered an opinion to the Company that the Common Stock offered  hereby will be
duly and validly issued, fully paid and nonassessable.

                                      EXPERTS

      The  consolidated  financial  statements as of March 31, 1996 and 1997 and
for  each of the  years  in the  three-year  period  ended  March  31,  1997 are
incorporated in this Prospectus by reference from the Company's Annual Report on
Form 10-K for the year ended  March 31,  1997,  in  reliance  upon the report of
Moore Stephens, P.C., independent certified public accountants,  incorporated by
reference  herein and upon the  authority of said firm as experts in  accounting
and auditing.


                                      -7-

<PAGE>






    No dealer,  salesman or any other person has been  authorized  in connection
with this offering to give any information or to make any representations  other
than those contained in this Prospectus (including any Prospectus supplement) in
connection  with the offer made hereby.  If given or made,  such  information or
representations  must  not be  relied  upon as  having  been  authorized  by the
company,  by any  underwriter or by the Selling  Shareholders.  This  Prospectus
(including  any  Prospectus  supplement)  does  not  constitute  an  offer  or a
solicitation  in any  jurisdiction  to any person to whom it is unlawful to make
such an offer or  solicitation.  Neither the delivery of this Prospectus nor any
sale made hereunder shall, under any  circumstances,  create an implication that
there has been no change in the circumstances of the Company or the facts herein
set forth since the date hereof.



                                         ----------



                                      TABLE OF CONTENTS
                                                                            Page
Available Information..........................................................2
Incorporation of Certain
  Information by Reference.....................................................2
The Company...................................................................3
Risk Factors...................................................................3
Use of Proceeds................................................................6
Selling Shareholders...........................................................6
Plan of Distribution...........................................................7
Legal Matters..................................................................7
Experts........................................................................7



                                         ----------



    Out-Takes, Inc. has filed with the Securities and Exchange
Commission, Washington, D.C., a Registration Statement under the
Securities Act of 1933 with respect to the Shares offered hereby.

    This  Prospectus  omits certain  information  contained in the  Registration
Statement.  The  information  omitted may be obtained  from the  Securities  and
Exchange Commission upon payment of the regular charge therefor.







                                       OUT-TAKES, INC.







                                      1,586,786 Shares
                                      of Common Stock,
                                       $.01 par value





                                      -1-

<PAGE>



                                           PART II

                     INFORMATION REQUIRED IN THE REGISTRATION STATEMENT

Item 3.  Incorporation of Documents by Reference.

      The following documents,  and any amendments thereto,  filed by Out-Takes,
Inc.  (the  "Company"  or the  "Registrant")  with the  Securities  and Exchange
Commission (the "Commission") are incorporated by reference in this Registration
Statement  and shall be deemed to be a part  hereof from the date of filing such
documents.

      (a) The  Company's  Annual  Report on Form 10-K for the fiscal  year ended
March 31, 1997;

      (b) The  Company's  Quarterly  Report  on Form 10-Q for the  period  ended
September 30, 1997;

      (c) The Company's  Quarterly Report on Form 10-Q for the period ended June
30, 1997;

      (d)   The Company's Quarterly Report on Form 10-Q/A dated May 22, 1997 for
            the period ended September 30, 1996;

      (e)   The Company's  Proxy  Statement  dated June 16, 1997 with respect to
            its annual meeting of shareholders held on July 10, 1997;

      (f)   The  description  of the Company's  Common Stock as set forth in the
            Registration  Statement filed by the Company on Form 8-A pursuant to
            Section  12(g) of the Exchange  Act, and any  amendments  or reports
            thereto filed with the  Commission  for the purpose of updating such
            description; and

      (g)   All documents  filed by the Company  pursuant to Sections 13, 14, or
            15(d) of the  Exchange  Act  after the date of this  Prospectus  and
            prior to the  termination  of the  offering of the Common Stock made
            hereby  shall be deemed to be  incorporated  in this  Prospectus  by
            reference  and to be a part  hereof  from the date of filing of such
            documents,  except  as to  any  portion  of  any  future  Annual  or
            Quarterly Report to the Shareholders which is not deemed to be filed
            under said provisions.

Item 4.  Description of Securities.

      Not Applicable.

Item 5.  Interests of Named Experts and Counsel.

      Not Applicable.



Item 6.  Indemnification of Officers and Directors.

                                           II-2

<PAGE>



      The Company's Certificate of Incorporation,  as amended, provides that the
Company  shall,  to the fullest  extent  permitted by Section 145 of the General
Corporation Law of the State of Delaware,  indemnify any and all persons whom it
shall have the power to  indemnify  under said  section from and against any and
all of the expenses,  liabilities, or other matters referred to in or covered by
said  section.  Section  145 of the  General  Corporation  Law of the  State  of
Delaware  provides that a corporation  may indemnify any person who was or is or
is  threatened  to be made a party  to any  threatened,  pending,  or  completed
action,  suit or proceeding,  whether civil,  criminal or administrative  (other
than an action by or in the right of the corporation) by reason of the fact that
he is or was a director,  officer,  employee or agent of the  corporation.  Such
person must have acted in good faith and in a manner  reasonably  believed to be
in the  best  interests  of  the  corporation.  With  respect  to  any  criminal
proceedings,  such  person  must have had no  reasonable  cause to  believe  his
conduct  was  unlawful.  Any  such  indemnification  may  only  be  made  upon a
determination by the corporation that such indemnification is proper because the
person met the applicable standard of conduct. Section 145 further provides that
the  indemnification  authorized  thereby  shall not be deemed  exclusive of any
additional  rights to  indemnification  that any such  person may be entitled to
under any bylaw, vote of stockholders or disinterested  directors, or otherwise.
Section 145 also authorizes a corporation to purchase and maintain  insurance on
behalf of any person who is or was a director, officer, employee or agent of the
corporation.

      The Company's  Bylaws provide that the Company shall  indemnify any person
who was or is a party,  or is threatened to be made a party,  to any threatened,
pending or completed proceeding (other than an action by or in the right of this
corporation  to procure a judgment in its favor) by reason of the fact that such
person is or was a director, officer, employee, or agent of the Company, against
expenses,   judgments,   fines,  settlements  and  other  amounts  actually  and
reasonably  incurred in connection  with such proceeding if such person acted in
good faith and in a manner  such  person  reasonably  believed to be in the best
interests  of the  Company  and,  in the case of a criminal  proceeding,  had no
reasonable cause to believe the conduct of such person was unlawful.

Item 7.  Exemption from Registration Claimed.

      Not Applicable.

Item 8.  Exhibits.

       4.1  Out-Takes, Inc. Amended and Restated 1992 Employee Stock Option Plan
       5.1  Opinion of Graham & James LLP
      23.1  Consent of Moore Stephens, P.C.
      23.2 Consent of Graham & James LLP (included in Exhibit 5.1) 24.1 Power of
      Attorney (see Part II, page 5)



                                           II-3

<PAGE>


xxxxx
Item 9.  Undertakings.

      The undersigned Registrant hereby undertakes:

      1. To file,  during any period in which  offers or sales are being made, a
post-effective  amendment to this Registration Statement to include any material
information with respect to the plan of distribution not previously disclosed in
the  Registration  Statement or any material  change to such  information in the
Registration Statement.

      2. That, for the purpose of determining any liability under the Securities
Act of 1933,  each  such  post-effective  amendment  shall be deemed to be a new
registration  statement  relating to the  securities  offered  therein,  and the
offering of such  securities at that time shall be deemed to be the initial bona
fide offering thereof.

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

      The  undersigned  Registrant  hereby  undertakes  that,  for  purposes  of
determining  any liability  under the Securities Act of 1933, each filing of the
Registrant's  annual  report  pursuant to Section  13(a) or Section 15(d) of the
Exchange Act, and each filing of the Plan's  annual  report  pursuant to Section
15(d) of the Exchange Act, that is incorporated by reference in the Registration
Statement  shall be deemed to be a new  Registration  Statement  relating to the
securities  offered  therein,  and the offering of such  securities at that time
shall be deemed to be the initial bona fide offering thereof.

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



                                           II-4

<PAGE>



                                         SIGNATURES

      Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies  that it has  reasonable  grounds to believe  that it meets all of the
requirements  for filing on Form  S-8/S-3 and has duly caused this  registration
statement  to be  signed  on its  behalf  by  the  undersigned,  thereunto  duly
authorized, in the City of Los Angeles, State of California, on this 15th day of
September, 1997.


                                                OUT-TAKES, INC.



                                          By:   /s/ Peter C. Watt
                                         Peter C. Watt, Chief Executive Officer
                                      POWER OF ATTORNEY

      KNOW ALL MEN BY THESE PRESENTS,  that each person whose signature  appears
below
constitutes and appoints Michael C. Roubicek as his  attorney-in-fact,  with the
power of substitution for him in any and all capacities,  to sign any amendments
to this registration statement, including post-effective amendments, and to file
the same,  with exhibits  thereto and other  documents in connection  therewith,
with the Securities and Exchange Commission, hereby ratifying and confirming all
that said attorney-in-fact, or his substitute or substitutes, may do or cause to
be done by virtue hereof.

      Pursuant  to  the  requirements  of  the  Securities  Act  of  1933,  this
registration  statement  has  been  signed  by  the  following  persons  in  the
capacities and on the date indicated.

Signature                        Title                          Date


/s/ Peter C. Watt             Chairman of the Board,         September 15, 1997
---------------------------
Peter C. Watt                    President, Chief Executive
                                 Officer, Principal Financial
                                 Officer and Secretary (Principal
                                 Executive Officer and Principal
                                 Accounting Officer)


/s/ Michael C. Roubicek       Vice President and Director    September 15, 1997
---------------------------
Michael C. Roubicek




                                           II-5

<PAGE>



                                        EXHIBIT INDEX



                Sequential
Number          Exhibit                                         Page No.

 4.1            Out-Takes, Inc. Amended and Restated
                1992 Employee Stock Option Plan                 ___
 5.1            Opinion of Graham & James LLP
                regarding legality                              ___
23.1            Consent of Moore Stephens, P.C.                 ___
23.2            Consent of Graham & James LLP
                (included in Exhibit 5.1)
24.1            Power of Attorney
                (see Part II, page 5)


                                           II-6

<PAGE>




                                OUT-TAKES, INC.

                             AMENDED AND RESTATED

                        1992 EMPLOYEE STOCK OPTION PLAN



1.   Purpose.

     Effective  February 28, 1997,  the 1992 Employee Stock Option Plan ("Plan")
is amended  and  restated in its  entirety  to reflect  the revised  rules under
Section 16(b) of the Securities Exchange Act of 1934, as amended. The purpose of
this Plan is to advance the  interests  of the Company and its  stockholders  by
providing  a means to  attract,  retain,  and  reward  employees,  officers  and
directors of, and consultants or advisors to, the Company and its  subsidiaries,
by  providing  for  incentives  to such  persons  that  will  encourage  them to
contribute to the Company's future growth and success,  and by strengthening the
mutuality of interests  between such persons and the Company's  stockholders  by
enabling such persons to acquire a proprietary interest in the Company.

2.   Definitions.

     (a)   "Affiliate"   shall  mean  any  parent   corporation   or  subsidiary
corporation,  within the meaning of Section 424(e) and (f), respectively, of the
Company.

     (b) "Board" shall mean the Board of Directors of the Company.

     (c) "Code" shall mean the Internal Revenue Code of 1986, as amended.

     (d) "Committee" shall mean a Committee appointed by the Board in accordance
with Section 3 of the Plan.

     (e)  "Common  Stock"  shall  mean the $.01 par  value  Common  Stock of the
Company.

     (f) "Company" shall mean Out-Takes, Inc., a Delaware corporation.

     (g)  "Disability"  shall mean the condition of an Employee who is unable to
substantially perform the duties of such office.

     (h) "ERISA" shall mean the Employee Retirement Income Security Act of 1974,
as amended.

     (i)  "Exercise  Price"  shall mean the  purchase  price per share of Common
Stock upon exercise of an Option,  which shall be determined in accordance  with
Section 7.

     (j) "Fair Market  Value" of a Share of Common Stock as of a specified  date
shall mean the  closing  price of a Share on the  composite  reporting  tape for
exchange-listed securities on the day immediately preceding the date as of which
Fair Market Value is being  determined,  or on the next  preceding date on which
such Shares are traded if no Shares were  traded on such  immediately  preceding
day, or if the Shares are not traded on a securities exchange, Fair Market Value
shall be deemed to be the  average  of the high bid and low asked  prices of the
Shares in the over-the-counter  market on the day immediately preceding the date
as of

                                           II-7

<PAGE>



which Fair Market Value is being  determined  or on the next  preceding  date on
which such high bid and low asked  prices were  recorded.  If the Shares are not
publicly traded, Fair Market Value of a share of Common Stock (including, in the
case of any repurchase of Shares,  any distributions  with respect thereto which
would be  repurchased  with the Shares) shall be determined in good faith by the
Board of Directors  (or the  Committee,  if  applicable).  In no case shall Fair
Market Value be determined with regard to restrictions  other than  restrictions
which,  by their terms,  will never lapse. In no case shall Fair Market Value be
less than the par value of a Share of Common Stock.

     (k) "Option" shall mean an incentive stock option or a non-statutory  stock
option granted pursuant to the Plan.

     (l) "Optionee" shall mean a person to whom an Option has been granted.

     (m) "Plan"  shall mean this  Out-Takes,  Inc.  Amended  and  Restated  1992
Employee Stock Option Plan.

     (n)  "Purchase  Price"  shall mean the  Exercise  Price times the number of
whole Shares with respect to which an Option is exercised.

     (o)  "Securities  Exchange Act" shall mean the  Securities  Exchange Act of
1934, as amended.

     (p) "Share" shall mean one share of Common Stock.

3. Type of Options and Administration.

     (a) Types of  Options.  Grants of  Options  pursuant  to the Plan  shall be
authorized by action of the Board of Directors of the Company (or the Committee,
if  applicable)  and Options so granted may be either  incentive  stock  options
("Incentive  Stock Options") meeting the requirements of Section 422 of the Code
or  non-statutory  options  which are not intended to meet the  requirements  of
Section 422 of the Code. Except as provided in Sections 16 and 22, Options shall
be  granted  under the Plan for no  consideration  other  than  past and  future
services of the Optionee.

     (b)  Administration.  The  Plan  shall  be  administered  by the  Board  of
Directors or in its  discretion by a committee  ("Committee"),  comprised of not
less than two non-employee  directors appointed by the Board of Directors.  Only
non-employee  directors  (as  defined  under  Rule 16b-3  promulgated  under the
Securities Exchange Act) shall be eligible to serve on the Committee.  The Board
of Directors  may, from time to time,  at its sole  discretion,  remove  members
from,  or add members to, the  Committee.  Vacancies on the  Committee,  however
caused,  shall be filled by the Board of Directors.  The Committee  shall select
one of its members as Chairman,  and shall hold  meetings at such time and place
as it determines  advisable.  A majority of the Committee  shall  constitute the
quorum;  and the acts of a majority of the members  present at any  meeting,  or
acts reduced to and approved in writing by a majority of the Committee, shall be
valid acts of the  Committee.  With the exception of option grants to members of
the Committee which shall be made and  administered  exclusively by the Board of
Directors pursuant to the express terms and conditions of the Plan, the Board of
Directors (or the Committee,  if applicable)  shall have the sole power to grant
options pursuant to the Plan, including the determination of the persons to whom
options shall be granted,  the times when they shall  receive  them,  the option
price of each option, and the number of shares to be subject to each option. All
such actions by the Board of Directors (or the Committee,  if applicable),  with
respect to officers and  directors of the Company and its  Affiliates,  shall be
evidenced by written documentation properly executed on its behalf.

                                     -2-

<PAGE>




     (c) Indemnification of Board of Directors (or Committee, if applicable). In
addition to such other rights of  indemnification  as they may have as directors
or as members of the  Committee,  the members of the Board of Directors  (or the
Committee,  if  applicable)  shall be  indemnified  by the  Company  against the
reasonable  expenses,   including  attorneys'  fees,  actually  and  necessarily
incurred in connection with the defense of any action, suit or proceeding, or in
connection with any appeal therein,  to which they or any of them may be a party
by reason of any action taken or failure to act under or in connection  with the
Plan or any option granted  thereunder,  and against all amounts paid by them in
settlement  thereof  (provided such settlement is approved by independent  legal
counsel  selected by the Company) or paid by them in  satisfaction of a judgment
in any such action, suit or proceeding except in relation to matters as of which
it shall be  adjudged  in such  action,  suit or  proceeding  that such Board of
Director  (or  Committee,  if  applicable)  member is liable for  negligence  or
misconduct  in the  performance  of his duties;  provided that within sixty days
after institution of any such action, suit or proceeding a Board of Director (or
Committee,  if  applicable)  member  shall in  writing  offer  the  Company  the
opportunity, at its own expense, to handle and defend the same.

4.   Eligibility.

     (a)  General.  Options  may be granted to persons  who are,  at the time of
grant,  employees,  officers or directors of, or consultants or advisors to, the
Company and/or an Affiliate;  provided, that Incentive Stock Options may only be
granted to  individuals  who are  employees  of the Company  and/or an Affiliate
(within  the  meaning  of Section  3401(c)  of the Code).  A person who has been
granted an option may, if he or she is otherwise eligible, be granted additional
options if the Board of Directors (or the  Committee,  if  applicable)  shall so
determine.

5.   Stock Subject to Plan.

     The stock  subject  to  options  granted  under the Plan shall be shares of
authorized  but unissued or reacquired  Common  Stock.  Subject to adjustment as
provided in Section 16 below,  the maximum  number of Shares which may be issued
and sold under the Plan is 562,000 Shares plus 5% of the number of Shares issued
(other than any issuance under the Plan or any other executive compensation plan
of the  Company),  except any  Shares  added  under  this  clause as a result of
further  issuances by the Company shall not be available for grants of Incentive
Stock  Options  under  the  Plan.  The  number  of  Shares  subject  to  Options
outstanding  under  the Plan at any time may not  exceed  the  number  of Shares
remaining  available for issuance under the Plan. If an Option granted under the
Plan shall expire,  terminate or is cancelled for any reason without having been
exercised in full, the unpurchased  Shares subject to such Option shall again be
available for subsequent Option grants under the Plan.

6.   Forms of Option Agreements.

     As a condition to the grant of an Option under the Plan,  each recipient of
an Option shall execute an option agreement in such form not  inconsistent  with
the Plan as may be  approved by the Board of  Directors  (or the  Committee,  if
applicable). Such option agreements may differ among recipients.

7.   Purchase Price.

     (a)  General.  The  Exercise  Price  shall be  determined  by the  Board of
Directors (or the Committee, if applicable) at the time of grant of such Option;
provided,  however,  that in the case of an Incentive Stock Option, the Exercise
Price  shall  not be less  than 100% of the Fair  Market  Value (as  hereinafter
defined) of

                                     -3-

<PAGE>



such stock, at the time of grant of such Option,  or less than 110% of such Fair
Market Value in the case of Incentive  Stock Options  described in Section 12(b)
unless  otherwise  determined  by the Board of Directors (or the  Committee,  if
applicable),  and in the case of non-statutory options, the Exercise Price shall
not be less than 85% of the Fair Market Value.

     (b) Payment of Purchase  Price.  Options granted under the Plan may provide
for the  payment of the  Exercise  Price by  delivery  of cash or a check to the
order of the Company in an amount equal to the Purchase Price, or, to the extent
provided in the applicable option  agreement,  (i) by delivery to the Company of
Shares of Common Stock of the Company  having a Fair Market Value on the date of
exercise equal in amount to the Exercise  Price of the Options being  exercised,
(ii) by any  other  means  (including,  without  limitation,  by  delivery  of a
promissory  note of the Optionee  payable on such terms as are  specified by the
Board  of  Directors  (or the  Committee  if  applicable))  which  the  Board of
Directors (or the Committee,  if applicable)  determines are consistent with the
purpose of the Plan and with applicable laws and regulations (including, without
limitation, the provisions of Rule 16b-3, Regulations G and T promulgated by the
Federal Reserve Board) and the Delaware General  Corporation Law or (iii) by any
combination of such methods of payment. Notwithstanding the foregoing, the right
to pay the option price by delivery of a promissory  note shall not be available
to any Optionee who is a person  described  in Section  16(a) of the  Securities
Exchange Act.

8.   Option Period.

     Subject to earlier termination as provided in the Plan, each Option and all
rights  thereunder  shall  expire  on such  date as  determined  by the Board of
Directors (or the  Committee,  if  applicable)  and set forth in the  applicable
option  agreement,  provided,  that such date  shall not be later  than (10) ten
years after the date on which the Option is granted.

9.   Exercise of Options.

     Each Option granted under the Plan shall be  exercisable  either in full or
in  installments  at such  time or times  and  during  such  period  as shall be
determined by the Board of Directors (or the Committee, if applicable) set forth
in the option agreement evidencing such Option, subject to the provisions of the
Plan.  If an Option  is not at the time of grant  immediately  exercisable,  the
Board of Directors (or the Committee,  if  applicable)  may (i) in the agreement
evidencing  such Option,  provide for the  acceleration  of the exercise date or
dates of the subject Option upon the occurrence of specified events, and/or (ii)
at any time  prior to the  complete  termination  of an Option,  accelerate  the
exercise date or dates of such Option.


                                     -4-

<PAGE>



10.  Nontransferability of Options.

     No Option or other  derivative  security  granted  under this Plan shall be
assignable or otherwise  transferable  by the Optionee  except by will or by the
laws of descent and  distribution  or to a beneficiary  designated in accordance
with  procedures  established  by the Board of Directors (or the  Committee,  if
applicable). An Option may be exercised during the lifetime of the Optionee only
by the Optionee.

11. Effect of Termination of Employment or Other Relationship.

     Except as otherwise determined by the Board of Directors (or the Committee,
if  applicable)  at or after  grant,  with respect to any Option or as otherwise
provided in Section 12(d) with respect to Incentive  Stock Options,  and subject
to the provisions of the Plan, an Optionee may exercise, to the extent vested at
the time of termination, an Option at any time within three (3) months following
the  termination of the  Optionee's  employment or other  relationship  with the
Company  (or the  Affiliate,  if  applicable)  or  within  one (1)  year if such
termination  was due to the death or disability of the Optionee,  but, except in
the case of the Optionee's  death, in no event later than the expiration date of
the Option.  If the termination of the Optionee's  employment is for cause or is
otherwise  attributable  to a  breach  by  the  Optionee  of  an  employment  or
confidentiality   or  non-  disclosure   agreement,   the  Option  shall  expire
immediately upon such termination.  The Board of Directors (or the Committee, if
applicable) shall have the power to determine what constitutes a termination for
cause  or a  breach  of  an  employment  or  confidentiality  or  non-disclosure
agreement,  whether an Optionee  has been  terminated  for cause or has breached
such an agreement,  and the date upon which such termination for cause or breach
occurs. Any such  determinations  shall be final and conclusive and binding upon
the Optionee.

12.  Incentive Stock Options.

     Options  granted  under the Plan which are intended to be  Incentive  Stock
Options shall be subject to the following additional terms and conditions:

     (a) Express Designation. All Incentive Stock Options granted under the Plan
shall, at the time of grant,  be  specifically  designated as such in the option
agreement covering such Incentive Stock Options.

     (b) 10%  Shareholder.  If any employee to whom an Incentive Stock Option is
to be granted  under the Plan is, at the time of the grant of such  Option,  the
owner of stock  possessing  more than 10% of the total combined  voting power of
all classes of stock of the Company or an Affiliate  (after  taking into account
the attribution of stock  ownership  rules of Section 424(d) of the Code),  then
the following  special  provisions  shall be  applicable to the Incentive  Stock
Option granted to such individual.

          i) The purchase  price per share of the Common  Stock  subject to such
     Incentive Stock Option shall not be less than 110% of the Fair Market Value
     of one share of Common Stock at the time of grant; and

          ii) the Option  exercise  period  shall not exceed five years from the
date of grant.

     (c) Dollar  Limitation.  For so long as the Code shall so provide,  Options
granted to any  employee  under the Plan (and any other  incentive  stock option
plans  of the  Company  or any  Affiliate)  which  are  intended  to  constitute
Incentive  Stock Options  shall not  constitute  Incentive  Stock Options to the
extent that such Options,  in the aggregate,  become  exercisable  for the first
time in any one calendar year for shares of Common Stock with an aggregate  Fair
Market Value, as of the respective date or dates of grant, of more than

                                     -5-

<PAGE>



$100,000.  Options  which fail to qualify as Incentive  Stock Options under this
limitation shall be deemed non-statutory options granted under the Plan.

     (d)  Termination  of  Employment,  Death or  Disability.  Unless  otherwise
determined  by the Board of Directors  (or the  Committee,  if  applicable),  no
Incentive  Stock Option may be exercised  unless,  at the time of such exercise,
the Optionee is, and has been continuously since the date of grant of his or her
Option, employed by the Company (or the Affiliate, if applicable), except that:

          i) an Incentive Stock Option may be exercised, to the extent vested at
     the time of  cessation  of  employment,  within the period of three  months
     after the date of  Optionee  ceases to be an employee of the Company or the
     Affiliate  (or  within  such  lesser  period  as  may be  specified  in the
     applicable option agreement);

          ii) if the  Optionee  dies while in the employ of the  Company (or the
     Affiliate, if applicable), or within three months after the Optionee ceases
     to be such an employee,  the Incentive Stock Option may be exercised by the
     person  to  whom it is  transferred  by will  or the  laws of  descent  and
     distribution  within  the  period  of one year  after the date of death (or
     within such lesser  period as may be  specified  in the  applicable  option
     agreement); and

          iii) if the Optionee  becomes  disabled (within the meaning of Section
     22(e)(3)  of the Code or any  successor  provisions  thereto)  while in the
     employ of the Company (or the  Affiliate,  if  applicable),  the  Incentive
     Stock Option may be exercised  within the period of one year after the date
     the Optionee  ceases to be such an employee  because of such disability (or
     within such lesser  period as may be  specified  in the  applicable  option
     agreement).

For all  purposes  of the Plan and any Option  granted  hereunder,  "employment"
shall be defined in accordance with the provisions of Section  1.421-7(h) of the
Income Tax  Regulations  (or any  successor  regulations).  Notwithstanding  the
foregoing  provisions,  no Incentive  Stock  Option may be  exercised  after its
expiration  date and if the agreement  with respect to such Option  designates a
longer  exercise  period than permitted in Section  12(d)(i)-(iii),  and if such
Option is in fact exercised after such post-termination period, the Option shall
be treated as the exercise of a non-statutory option under the Plan.

13.  Additional Provisions.

     (a) Additional Option Provisions. The Board of Directors (or the Committee,
if applicable) may, in its sole  discretion,  include  additional  provisions in
option  agreements  covering Options granted under the Plan,  including  without
limitation restrictions on transfer, repurchase rights, rights of first refusal,
commitments  to pay cash bonuses,  to make,  arrange for or guaranty loans or to
transfer  other  property to optionees  upon exercise of options,  or such other
provisions as shall be  determined by the Board of Directors (or the  Committee,
if  applicable);   provided,  that  such  additional  provisions  shall  not  be
inconsistent  with any other term or condition  of the Plan and such  additional
provisions  shall not be applicable to any Incentive  Stock Option granted under
the Plan if and to the  extent  that they  would  cause  such  Option to fail to
qualify as an  Incentive  Stock  Option  with the  meaning of Section 422 of the
Code.

     (b) Acceleration, Extension, Etc. The Board of Directors (or the Committee,
if applicable) may, in its sole discretion,  (i) accelerate the date or dates on
which all or any  particular  Option or  Options  granted  under the Plan may be
exercised or (ii) extend the dates during which all, or any  particular,  Option
or Options granted under the Plan may be exercised;  provided,  however, that no
such extension shall be permitted if it

                                     -6-

<PAGE>



would cause any Incentive Stock Option to fail to comply with Section 422 of the
Code and, in any event,  no extension shall authorize the exercise of any Option
more than ten years after the date of grant.

14.  General Restrictions.

     (a) Investment Representations.  The Company may require any person to whom
an Option is granted,  as a condition of exercising such Option, to give written
assurances in substance and form  satisfactory to the Company to the effect that
such person is acquiring  the Common Stock  subject to the Option for his or her
own account for  investment  and not with any  present  intention  of selling or
otherwise  distributing the same, and to such other effects as the Company deems
necessary or appropriate  in order to comply with federal and  applicable  state
securities  laws, or with  covenants or  representations  made by the Company in
connection with any public offering of its Common Stock.

     (b) Compliance  With  Securities Law. The Company shall not be obligated to
issue Shares or accept surrender of Shares in payment of the Exercise Price. If,
at  any  time,  counsel  to  the  company  shall  determine  that  the  listing,
registration  or  qualification  of the Shares  subject to such  Option upon any
securities  exchange  or under any  state or  federal  law,  or the  consent  or
approval of any  governmental  or  regulatory  body,  or that the  disclosure of
non-public  information or the  satisfaction of any other condition is necessary
as a  condition  of, or in  connection  with the  issuance or purchase of Shares
thereunder,  such Option may not be exercised,  in whole or in part, unless such
listing,  registration,  qualification,  consent or approval, or satisfaction of
such condition shall have been effected or obtained on conditions  acceptable to
the Board of Directors (or the Committee,  if applicable).  Nothing herein shall
be deemed to  require  the  Company  to apply  for or to  obtain  such  listing,
registration or qualification, or to satisfy such condition.

15. Rights as a Shareholder.

     The holder of an Option shall have no rights as a shareholder  with respect
to any Shares covered by the Option (including,  without limitation,  any rights
to receive  dividends  or non-cash  distributions  with  respect to such Shares)
until the Option has been validly  exercised.  No  adjustment  shall be made for
dividends or other rights for which the record date is prior to the date of such
valid exercise.

16. Adjustment  Provisions for  Recapitalizations,  Reorganizations  and Related
Transactions.

     (a) Recapitalizations and Related Transactions.  If, through or as a result
of any recapitalization,  reclassification, stock dividend, stock split, reverse
stock split or other similar  transaction (i) the  outstanding  shares of Common
Stock are  increased,decreased  or exchanged  for a different  number or kind of
shares or other securities of the Company,  or (ii) additional  Shares or new or
different  shares or other non-cash assets are distributed  with respect to such
Shares or other securities, an appropriate and proportionate adjustment shall be
made in (w) the maximum  number and kind of Shares  reserved for issuance  under
the Plan (x) the  number  and kind of Shares or other  securities  automatically
granted under  Section 6, (y) the number and kind of Shares or other  securities
subject to any then  outstanding  Options under the Plan,  and (z) the price for
each  Share   subject  to  any  then   outstanding   Options   under  the  Plan.
Notwithstanding  the  foregoing , no  adjustment  shall be made pursuant to this
Section 16 if such  adjustment  (i) would  cause the Plan to fail to comply with
Section  422 of the Code or (ii) would be  considered  as the  adoption of a new
plan requiring stockholder approval.

     (b) Reorganization,  Merger and Related Transactions.  If the Company shall
be the surviving  corporation in any reorganization,  merger or consolidation of
the Company with one or more other

                                     -7-

<PAGE>



corporations,  any then  outstanding  Option granted  pursuant to the Plan shall
pertain to and apply to the securities to which a holder of the number of shares
of Common Stock  subject to such Options  would have been  entitled  immediately
following such  reorganization,  merger, or consolidation,  with a corresponding
proportionate  adjustment of the Purchase  Price as to which such Options may be
exercised so that the aggregate  Purchase  Price as to which such Options may be
exercised  shall be the same as the  aggregate  Purchase  Price as to which such
Options  may be  exercised  for the  Shares  remaining  subject  to the  Options
immediately prior to such reorganization, merger, or consolidation.

     (c) Authority to Make  Adjustments.  Any adjustments  under this Section 16
will be made by the Board of Directors  (or the  Committee,  if  applicable)  in
order to prevent  dilution or enlargement  of the rights of Optionees,  and such
determinations  as to what  adjustments,  if any,  will be made  and the  extent
thereof will be final,  binding and  conclusive.  No  fractional  Shares will be
issued under the Plan on account of any such adjustments or otherwise.

17. Merger, Consolidation, Asset Sale, Liquidation, etc.

      (a)  General.  In the  event of a  consolidation  or  merger  in which the
Company is not the surviving corporation, or sale of all or substantially all of
the  assets of the  Company  in which  outstanding  shares  of Common  Stock are
exchanged for  securities,  cash or other  property of any other  corporation or
business entity or in the event of a liquidation of the Company (collectively, a
"Corporate  Transaction"),  the  Board  of  Directors  of the  Company  (or  the
Committee, if applicable), or the board of directors of any corporation assuming
the obligations of the Company, may, in its discretion,  take any one or more of
the following actions, as to outstanding  Options: (i) provide that such Options
shall be assumed,  or equivalent Options shall be substituted,  by the acquiring
or  succeeding  corporation  (or an affiliate  thereof),  provided that any such
Options  substituted for Incentive Stock Options shall meet the  requirements of
Section 424(a) of the Code,  (ii) upon written notice to the Optionees,  provide
that  all  unexercised   Options  will  terminate   immediately   prior  to  the
consummation  of such  transaction  unless  exercised by the  Optionee  within a
specified  period  following  the date of such  notice,  (iii) in the event of a
Corporate  Transaction  under the terms of which  holders of the Common Stock of
the Company will receive upon consummation thereof a cash payment for each share
surrendered in the Corporation  Transaction (the "Transaction  Price"),  make or
provide for a cash payment to the Optionees equal to the difference  between (A)
the Transaction Price times the number of shares of Common Stock subject to such
outstanding  Options (to the extent then  exercisable at prices not in excess of
the  Transaction  Price)  and (B)  the  aggregate  exercise  price  of all  such
outstanding  Options in exchange for the  termination of such Options,  and (iv)
provide that all or any  outstanding  Options shall become  exercisable  in full
immediately prior to such event.

     (b)  Substitute  Options.  The Company may grant  Options under the Plan in
substitution  for Options held by employees  of another  corporation  who become
employees of the  Company,  or a  subsidiary  of the  Company,  as a result of a
merger or  consolidation  of the  employing  corporation  with the  Company or a
subsidiary of the Company,  or as a result of the acquisition by the Company, or
one of its subsidiaries,  of property or stock of the employing corporation. The
Company  may  direct  that  substitute  Options  be  granted  on such  terms and
conditions as the Board of Directors (or the Committee, if applicable) considers
appropriate in the circumstances.

18.  No Special Employment Rights.

     Nothing  contained  in the  Plan or in any  Option  shall  confer  upon any
Optionee any right with respect to the  continuation of his or her employment by
the Company or interfere in any way with the right of the

                                     -8-

<PAGE>



Company at any time to terminate such  employment or to increase or decrease the
compensation of the Optionee.

19.  Other Employee Rights.

     Except  as  to  plans  which  by  their  terms   include  such  amounts  as
compensation,  the  amount  of any  compensation  deemed  to be  received  by an
employee as a result of the exercise of an Option or the sale of Shares received
upon such exercise will not  constitute  compensation  with respect to which any
other  employee  benefits of such employee are  determined,  including,  without
limitation, benefits under any bonus, pension, profit-sharing, life insurance or
salary  continuation  plan, except as otherwise  specifically  determined by the
Board of Directors (or the Committee, if applicable).

20. Amendment of the Plan.

     (a) The Board  (and not the  Committee)  may at any time,  and from time to
time,  modify or amend the Plan in any  respect,  except that if at any time the
approval of the  stockholders of the Company is required by any law,  regulation
or contractual  provision  binding the Company,  such  modification or amendment
must be  approved  by the  stockholders  of the  Company not later than one year
after adoption thereof by the Board of Directors.

                                     -9-

<PAGE>



     (b) The termination or any modification or amendment of the Plan shall not,
without the consent of an Optionee,  materially and adversely  affect his or her
rights  under an Option  previously  granted to him or her.  The Board may amend
outstanding option agreements in a manner not inconsistent with the Plan.

21.  Withholding.

     (a) The Company  shall have the right to deduct  from  payments of any kind
otherwise  due to the  Optionee  any  federal,  state or local taxes of any kind
required by law to be withheld  with respect to any Shares  issued upon exercise
of Options under the Plan.  Subject to the prior approval of the Company,  which
may be withheld by the Company in its sole discretion, the Optionee may elect to
satisfy  such  obligations,  in whole or in part,  (i) by causing the Company to
withhold shares of Common Stock otherwise  issuable  pursuant to the exercise of
an Option or (ii) by  delivering  to the Company  shares of Common Stock already
owned by the  Optionee.  The Shares so delivered or withheld  shall be valued at
their then-current Fair Market Value as of the date that the amount of tax to be
withheld is to be determined.  An Optionee who has made an election  pursuant to
this  Section  20(a) may only  satisfy his or her  withholding  obligation  with
shares of Common  Stock  which are not  subject to any  repurchase,  forfeiture,
unfulfilled vesting or other similar requirements.

     (b) The  acceptance of shares of Common Stock upon exercise of an Incentive
Stock  Option  shall  constitute  an agreement by the Optionee (i) to notify the
Company if any or all of such Shares are disposed of by the Optionee  within two
years from the date the Option was  granted or within one year form the date the
Shares were transferred to the Optionee  pursuant to the exercise of the Option,
and (ii) if required by law, to remit to the Company,  at the time of and in the
case of any such  disposition,  an amount  sufficient  to satisfy the  Company's
federal,  state and local  withholding  tax  obligations  with  respect  to such
disposition,  whether or not,  as to both (i) and (ii),  the  Optionee is in the
employ of the Company at the time of such disposition.

22. Cancellation and New Grant of Options, etc.

     The Board of Directors (or the  Committee,  if  applicable)  shall have the
authority to effect,  at any time and from time to time, with the consent of the
affected Optionees, (i) the cancellation of any or all outstanding Options under
the Plan and the grant in  substitution  therefor of new Options  under the Plan
covering the same of  different  numbers of shares of Common Stock and having an
Exercise Price which is higher or lower than the then-current  Exercise Price of
such  outstanding  Options  or (ii) the  amendment  of the  terms of any and all
outstanding  Options under the Plan to provide an Exercise Price which is higher
or lower than the then-current Exercise Price of such outstanding Options.

23. Effective Date and Duration of the Plan.

     (a) Effective  Date. The effective date of the Plan, as initially  adopted,
is July 27, 1993.  Amendments  to the Plan not  requiring  stockholder  approval
shall  become  effective  when  adopted  by the Board of  Directors;  amendments
requiring  stockholder  approval  (as  provided  in  Section  20)  shall  become
effective when adopted by the Board of Directors,  but no Incentive Stock Option
granted after the date of such amendment shall become exercisable (to the extent
that such amendment to the Plan was required to enable the Company to grant such
Incentive Stock Option to a particular Optionee) unless and until such amendment
shall have been  approved by the  Company's  stockholders.  If such  stockholder
approval is not obtained  within twelve  months of the Board's  adoption of such
amendment,  any  Incentive  Stock  Options  granted on or after the date of such
amendment  shall  terminate  to the extent that such  amendment  to the Plan was
required to enable the Company to grant such  Option to a  particular  Optionee.
Subject to this  limitation,  Options may be granted  under the Plan at any time
after the effective date and before the date fixed for

                                     -10-

<PAGE>



termination of the Plan.

     (b)  Termination.  Unless sooner  terminated in accordance with Section 16,
the  Plan  shall  terminate  upon the date on which  all  Shares  available  for
issuance  under the Plan shall have been issued under the Plan,  and the Company
has not further obligations under the Plan. The foregoing  notwithstanding,  the
term during which  Incentive  Stock Options may be granted under this Plan shall
expire on July 26, 2003.

24.  Rule 16b-3 Compliance.

     (a) Notice of Sale of Shares.  Directors  and  officers who fall within the
definition of "officer"  under Rule 16a-1(f)  promulgated  under the  Securities
Exchange Act shall deliver to the Corporate Secretary of the Company an executed
notice of  his/her  intention  to sell  Shares of  Common  Stock of the  Company
acquired upon  exercise,  in whole or in part, of an option  granted  hereunder.
Such notice,  in which there is  specified  the number of shares which are to be
sold and the date such shares were acquired, shall be provided at least one full
business day in advance of the proposed date of sale.

     (b)  Reformation To Comply with Rule 16b-3. It is the intent of the Company
that this Plan comply in all respects with  applicable  provisions of Rule 16b-3
or Rule  16a-1(c)(3)  under the Securities  Exchange Act in connection  with any
grant of Options or related  rights to a cash  payment to, or other  transaction
by, an Optionee  who is a Reporting  Person  (except for  transactions  exempted
under alternative Securities Exchange Act Rules or acknowledged in writing to be
non-exempt by such Optionee).  Accordingly, if any provision of this Plan or any
agreement  relating to an Option does not comply with the  requirements  of Rule
16b-3 or Rule  16a-1(c)(3)  as then  applicable  to any such  transaction,  such
provision will be construed or deemed amended to the extent necessary to conform
to the applicable  requirements of Rule 16b-3 or Rule  16a-1(c)(3) to the extent
required so that such Optionee shall avoid liability under Section 16(b).

25.  Provision for Foreign Participants.

     The Board of Directors  (or the  Committee,  if  applicable)  may,  without
amending the Plan,  modify  awards or Options  granted to  participants  who are
foreign nationals or employed outside the United States to recognize differences
in laws,  rules,  regulations  or customs  of such  foreign  jurisdictions  with
respect to tax, securities, currency, employee benefit or other matters.

26.  Governing Law.

     The  provisions  of this Plan shall be governed and construed in accordance
with the laws of the  State of  Delaware  without  regard to the  principles  of
conflicts of laws and applicable federal law.


                                     -11-

<PAGE>





                                     -12-

<PAGE>


The Board of Directors
Out-Takes, Inc.
October 30, 1997
Page 13






October 30, 1997














The Board of Directors
Out-Takes, Inc.
1419 Peerless Place, Suite 116
Los Angeles, California 90035

Re:   Form S-8/S-3 Registration Statement
      Our File Reference:  33816.00001

Gentlemen:

      We have acted as special securities counsel to Out-Takes, Inc., a Delaware
corporation  (the  "Company"),  in connection with the preparation and filing by
the Company of a  registration  statement  on Form  S-8/S-3  (the  "Registration
Statement") to be filed with the Securities and Exchange  Commission (the "SEC")
under the Securities Act of 1933, as amended, relating to (i) stock options (the
"Options")  to purchase up to 1,586,786  shares of the  Company's  Common Stock,
$.01 par value per share (the "Common Stock"), granted or to be granted pursuant
to the  Company's  Amended and  Restated  1992  Employee  Stock Option Plan (the
"Plan"),  and (ii) a maximum of 1,586,786  shares (the "Shares") of Common Stock
issuable upon exercise of the Options.

      In connection  with the opinions  expressed  herein,  we have examined the
following  documents:  (i) the Certificate of Incorporation  of the Company,  as
amended,  (ii) the  By-Laws  of the  Company,  as  amended,  (iii) an  Officer's
Certificate, dated as of November 3, 1997, executed by Michael C. Roubicek, Vice
President of the Company, (iv) a Good Standing Certificate of the Company, dated
October 6, 1997, (v) the Plan, and (vi) the  Registration  Statement  (including
exhibits  thereto).  We  have  also  made  such  inquiries,  and  have  examined
originals,  certified copies or copies otherwise  identified to our satisfaction
of such other documents,  corporate  records and other  instruments,  as we have
deemed necessary or appropriate for the purposes of this opinion letter.



<PAGE>


The Board of Directors
Out-Takes, Inc.
October 30, 1997
Page 2

      In our  examinations,  we have assumed the  genuineness of all signatures,
the legal capacity of all natural  persons,  the  authenticity  of all documents
submitted  to us as  originals,  the  conformity  to original  documents  of all
documents submitted to us as certified,  photostatic or facsimile copies and the
authenticity  of the originals of such  documents.  For the purpose of rendering
the opinions  expressed herein, we have further assumed the truth,  accuracy and
completeness of all the representations  and other factual statements  contained
in such documents,  records and other  instruments,  and that there have been no
changes in the matters  represented  therein from the  respective  dates thereof
through the date hereof. We have not undertaken any independent investigation to
determine the truth, accuracy or completeness of any of such factual statements,
although  nothing has come to our  attention  that leads us to believe  that any
such factual  statement is  incorrect.  Finally,  for purposes of rendering  the
opinions  expressed  herein,  we have  expressly  assumed that the  Registration
Statement as filed by the Company with the SEC will be identical to the draft of
the Registration  Statement reviewed by us in connection with the preparation of
this opinion letter.

      Based upon our examination of the foregoing  documents,  records and other
instruments, and expressly subject to the assumptions set forth above, it is our
opinion that:

      1.    The Company has been duly incorporated and is a
corporation in good standing under the laws of the State of Delaware;
and

      2. The  issuance  of the  Options and the Shares has been duly and validly
authorized  by the  Company,  and  when  issued  and  paid  for  in  the  manner
contemplated  by the Plan and the  Registration  Statement,  the Options will be
validly  issued  and  the  Shares  will  be  validly  issued,   fully  paid  and
non-assessable.

      We are members of the Bar of the State of  California.  Our  opinions  are
limited to matters involving the federal laws of the United States,  the laws of
the State of California, and the corporate laws of the State of Delaware, and we
do not express any opinion as to the laws of

                               -2-

<PAGE>


The Board of Directors
Out-Takes, Inc.
October 30, 1997
Page 3

any other  jurisdiction.  The  information set forth in this letter is as of the
date of this letter and we  disclaim  any  undertaking  to advise you of changes
which may  thereafter  be  brought  or come to our  attention.  This  opinion is
rendered  solely  for  your  benefit  in  connection  with  the  filing  of  the
Registration  Statement  with the SEC,  and may not be relied  upon by any other
person or entity or for any other purpose  without our prior written  consent in
each instance.

      We  consent  to the  filing of this  opinion  letter as an  exhibit to the
Registration  Statement  and to the  reference  to  Graham & James LLP under the
caption "Legal  Matters" in the  Prospectus  contained  within the  Registration
Statement.


Very truly yours,

/s/ Graham & James LLP

GRAHAM & JAMES LLP

                               -3-

<PAGE>







                      CONSENT OF INDEPENDENT AUDITOR




The Board of Directors and Stockholders of
  Out-Takes, Inc.:


       We consent to incorporation by reference in the registration statement on
Form S-8/S-3 of Out-Takes, Inc. of our report dated May 15, 1997 relating to the
balance sheets of Out-Takes,  Inc. as of March 31, 1997 and 1996 and the related
statements of  operations,  stockholders'  equity,  and cash flows for the three
years in the period ended March 31, 1997 which  report  appears in the March 31,
1997 annual report on Form 10-K of Out-Takes, Inc.



                                           /s/ Moore Stephens, P.C.


                                           Moore Stephens, P.C.
                                           Certified Public Accountants



Cranford, New Jersey
September 15, 1997



<PAGE>
[{"type": "S-8", "sequence": "1", "description": "FORM S8/S3", "secsgml_size_bytes": 90739}]
{"company-data": {"conformed-name": "OUT TAKES INC", "cik": "0000889353", "assigned-sic": "7200", "irs-number": "954363944", "state-of-incorporation": "DE", "fiscal-year-end": "0331"}, "filing-values": {"form-type": "S-8", "act": "33", "file-number": "333-42665", "film-number": "97740954"}, "business-address": {"street1": "1419 PEERLESS PL", "street2": "STE 116", "city": "LOS ANGELES", "state": "CA", "zip": "90035", "phone": "3105873252"}}
As filed with the Securities and Exchange Commission on December 19, 1997
Registration No. 
===============================================================================

                              SECURITIES AND EXCHANGE COMMISSION
                                    Washington, D.C. 20549
                                    ----------------------
                                         FORM S-8/S-3
                                 REGISTRATION STATEMENT UNDER
                                  THE SECURITIES ACT OF 1933
                                    ----------------------
                                        OUT-TAKES, INC.
                    (Exact name of registrant as specified in its charter)
             Delaware                                                95-4363944
       (State or other jurisdiction of                         (I.R.S. Employer
       incorporation or organization)                        identification No.)
                                1419 Peerless Place, Suite 116
                                 Los Angeles, California 90035
                                        (310) 788-9440
                 (Address,  including zip code, and telephone number,  including
                    area code, of registrant's principal executive offices)
                                    ----------------------
            OUT-TAKES, INC. AMENDED AND RESTATED 1992 EMPLOYEE STOCK OPTION PLAN
                                   (Full Title of the Plan)
                                    ----------------------
                                      Michael C. Roubicek
                                1419 Peerless Place, Suite 116
                                 Los Angeles, California 90035
                                        (310) 788-9440
                       (Name, address, including zip code, and telephone
                      number, including area code, of agent for service)
                                    ----------------------
                                          Copies to:
                                     Hillel T. Cohn, Esq.
                                      Graham & James LLP
                             801 South Figueroa Street, Suite 1400
                                 Los Angeles, California 90017
                                        (213) 624-2500
                                    ----------------------
            Approximate date of commencement of proposed sale to the public:
       From time to time after the effective date of this Registration Statement

      If any of the securities  being  registered on this Form are to be offered
on a delayed or continuous  basis  pursuant to Rule 415 under the Securities Act
of 1933 check the following box.

                                CALCULATION OF REGISTRATION FEE

Title of Each Class of SecuritiesAmount to be      Proposed       Proposed Maximum     Amount of
          Registered             Registered(1) Offering Price PerAggregate Offering Registration Fee
Share(2)           Price(3)
Stock Options                    1,586,786    $  --              $    --            $  --
Common Stock, $.01 par value     1,586,786    $0.078125          $123,967.66        $36.57(2)
Common Stock, $.01 par value     1,586,786(4) $0.078125          $123,967.66        $  -- (5)
Total                                                                                $36.57
===============================  ============ ================== ================== ================
(1)   Represents  the maximum  amount of shares  issuable as of the date of this
      registration  statement.  If the amount of issuable shares increases after
      the filing of this statement, Registrant will amend this statement and pay
      an additional registration fee, if required.
(2) Estimated solely for the purpose of calculating the registration fee.
(3)   Calculated in accordance with Rule 457(h)(1) on the basis of the average
      of the high and low bid prices for the Common Stock on the OTC-
      Bulletin BoardSM on December 17, 1997.
(4)   Represents the same shares described on the line above, which may be 
      resold by the holders of options issued or issuable under the Out-Takes,
      Inc. Amended and Restated 1992 Employee Stock Option Plan.
(5)   Pursuant  to Rule  457(h)(3),  no  additional  fee is payable  since these
      shares,  which  may be  offered  for  resale,  are the same  shares  being
      registered  hereby upon their initial issuance  pursuant to the Out-Takes,
      Inc. Amended and Restated 1992 Employee Stock Option Plan.
OUT-TAKES, INC.

                Cross-Reference Sheet Showing Location in Prospectus
                    of Information Required by Items of Form S-3

          Form S-3 Registration Statement
                  Item and Heading                 Heading in Prospectus
 1. Forepart of the Registration Statement and Outside
    Front Cover Page of Prospectus.......... Facing Page; Cross Reference Sheet;
                                             Outside Front Cover Page of
                                             Prospectus; Additional Information
 2. Inside Front and Outside Back Cover Pages of
   Prospectus.............................. Inside Front and Outside Back Cover
                                               Pages of Prospectus
3. Summary Information, Risk Factors and Ratio of
      Earnings to Fixed Charges............... The Company; Risk Factors
4. Use of Proceeds......................... Use of Proceeds
5. Determination of Offering Price....... Outside Front Cover Page of Prospectus
 6. Dilution................................ Not Applicable
 7. Selling Security Holders................ Selling Shareholders
 8. Plan of Distribution.................. Outside and Inside Front Cover Pages
                                            of Prospectus; Plan of Distribution
 9. Description of Securities to be RegistereOutside Front Cover Page of
                                               Prospectus
  10. Interests of Named Experts and Counsel.. Legal Matters; Experts
  11. Material Changes........................ Not Applicable
  12. Incorporation of Certain Information by
      Reference......................... Incorporation of Certain Information by
                                             Reference
  13. Disclosure of Commission's Position on
      Indemnification for Securities Act LiabilNoteApplicable
PART I

               INFORMATION REQUIRED IN THE SECTION 10(a) PROSPECTUS

Item 1.  Plan Information.

Item 2.  Registrant Information and Employee Plan Annual Information.

      The document(s)  containing the information  specified in this Part I will
be sent or given to  participants  in the Out-Takes,  Inc.  Amended and Restated
1992 Employee Stock Option Plan to which this Registration Statement relates, as
specified  by Rule  428(b)  promulgated  under the  Securities  Act of 1933,  as
amended, and are not filed as part of this Registration Statement.
PROSPECTUS

                                  OUT-TAKES, INC.

                           Common Stock, $.01 par value

      This  Prospectus  covers up to 1,586,786  shares (the  "Shares") of common
stock,  $.01 par value (the  "Common  Stock"),  of  Out-Takes,  Inc., a Delaware
corporation (the "Company"). Such Shares have been or may be acquired by certain
officers and  directors  (the "Selling  Shareholders"),  who may be deemed to be
affiliates of the Company,  pursuant to the terms of the Out-Takes, Inc. Amended
and Restated 1992  Employee  Stock Option Plan (the "Stock  Option  Plan").  The
Company  will  receive no part of the  proceeds  of sales by such  persons.  All
expenses incurred in connection with this offering will be borne by the Company.

      The Company has been  advised by the  Selling  Shareholders  that they may
sell all or a portion of the Shares offered hereby from time to time through the
facilities of the OTC-Bulletin BoardSM (the "OTC"), or through the facilities of
such  exchange  or  automated  quotation  system  where the Common  Stock may be
listed, at prices prevailing at the time of such sales. The Selling Shareholders
may also make private sales at negotiated prices directly or through a broker or
brokers.  The Selling  Shareholders and any broker  executing  selling orders on
behalf of the Selling Shareholders may be deemed to be "underwriters" within the
meaning of the  Securities  Act of 1933, as amended (the "Act"),  in which event
commissions  received  by any  such  broker  may be  deemed  to be  underwriting
commissions under the Act.

      The Common  Stock of the  Company is traded on the OTC.  On  December  17,
1997,  the average of the high and low bid prices of the Company's  Common Stock
was $0.078125 per share.

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

            See "Risk  Factors" for a discussion of certain  factors that should
           be considered by prospective purchasers of the Shares.
                               --------------------

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

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

                 The date of this Prospectus is December 19, 1997.

                                      -4-
AVAILABLE INFORMATION

      The Company is subject to the informational requirements of the Securities
Exchange  Act of 1934,  as  amended  (the  "Exchange  Act"),  and in  accordance
therewith,  files reports and other information with the Securities and Exchange
Commission (the "Commission").  Reports, proxy and information  statements,  and
other information filed by the Company can be inspected and copied at the public
reference  facilities  maintained by the Commission at Judiciary Plaza Building,
450 Fifth Street,  N.W., Room 1024,  Washington,  D.C. 20549 and at the regional
offices of the  Commission  located at 7 World Trade Center,  New York 10048 and
500 West Madison Street,  Suite 1400,  Chicago,  Illinois 60661.  Copies of such
material can be obtained from the Public Reference  Section of the Commission at
450 Fifth Street, N.W., Room 1024, Washington,  D.C. 20549, at prescribed rates.
The Commission also maintains a Web site at http://www.sec.gov that contains all
electronically  filed  reports,  proxy  and  information  statements  and  other
information regarding the Company.

      The  Prospectus  constitutes  part  of a  Registration  Statement  on Form
S-8/S-3  (together with all amendments and exhibits  thereto,  the "Registration
Statement")  filed  by the  Company  with the  Commission  under  the Act.  This
Prospectus  omits  certain  of the  information  contained  in the  Registration
Statement,  and  reference  is hereby  made to the  Registration  Statement  for
further  information  with respect to the Company and the Shares offered hereby.
Any statements  contained herein concerning the provisions of any document filed
as an  exhibit  to the  Registration  Statement  or  otherwise  filed  with  the
Commission are not necessarily complete,  and in each instance reference is made
to the copy of such document as filed.  Each such  statement is qualified in its
entirety by such reference.

                 INCORPORATION OF CERTAIN INFORMATION BY REFERENCE

      The following  documents and any  amendments  thereto filed by the Company
with the Commission under the Exchange Act are incorporated by reference in this
Prospectus:  (i) the  Company's  Annual  Report on Form 10-K for the fiscal year
ended March 31, 1997, (ii) the Company's  Quarterly  Report on Form 10-Q for the
period ended September 30, 1997,  (iii) the Company's  Quarterly  Report on Form
10-Q for the period ended June 30, 1997, (iv) the Company's  Quarterly Report on
Form 10-Q/A dated May 22, 1997 for the period ended  September 30, 1996, (v) the
Company's Proxy Statement dated June 16, 1997 with respect to its annual meeting
of shareholders held on July 10, 1997, and (vi) the description of the Company's
Common Stock as set forth in the Registration  Statement filed by the Company on
Form 8-A  pursuant to Section 12 of the  Exchange  Act,  and any  amendments  or
reports  thereto  filed with the  Commission  for the purpose of  updating  such
description.

      All documents and any amendments thereto subsequently filed by the Company
pursuant to Sections 13(a), 13(c), 14, or 15(d) of the Exchange Act prior to the
filing of a post-effective amendment which indicates that all securities offered
hereby have been sold or which deregisters all securities then remaining unsold,
shall  be  deemed  to be  incorporated  by  reference  and to be a part  of this
Prospectus from the date of filing of such documents. Any statement contained in
a document  incorporated  by reference  herein shall be deemed to be modified or
superseded  for all  purposes to the extent that a statement  contained  in this
Prospectus,   or  in  any  other  subsequently  filed  document  which  is  also
incorporated  by  reference,  modifies  or  replaces  such  statement.  Any such
statement so modified or superseded  shall not be deemed,  except as so modified
or superseded, to constitute a part of this Prospectus.

      The  Company  will  provide  without  charge  to each  person to whom this
Prospectus  is  delivered,  on written or oral  request of such  person,  a copy
(without exhibits) of any and all information  incorporated by reference in this
Prospectus.  Requests for such copies should be directed to Michael C. Roubicek,
Out-Takes,  Inc. (i) if by  telephone  to (310)  788-9440 and (ii) if by mail to
1419 Peerless Place, Suite 116, Los Angeles, California 90035.

                                    THE COMPANY

                                      -2-
The  Company was  incorporated  in Delaware on March 18, 1992 to engage in
the sale of photographic  portraits of children,  adults and family groups.  The
Company  currently  operates and derives  substantially all of its revenues from
two retail studios,  called  Out-Takes(R),  the first of which opened on May 24,
1993 and is  located  in  MCA/Universal's  CityWalkSM  project  in Los  Angeles,
California (the "CityWalk  Studio").  The second studio commenced  operations on
December  1,  1995,  at the  Entertainment  Center in the  Bazaar at the  Irvine
Spectrum located in Irvine, Orange County, California (the "Irvine Studio"). The
Company has also developed a travelling  studio (the  "Travelling  Studio") that
has been used in a number of two-day promotions.

      The studios  employ  proprietary  hardware and software  developed  by, or
specifically  for, the Company,  which includes  digital imaging  technology and
automated motion control equipment to position the studio camera and set subject
lighting to the proper  levels for each scene  (collectively,  the  "Proprietary
System"). Using the Proprietary System, the Company is able to place pictures it
takes of its clients "into" still  photographs  prepared in advance from popular
movie  scenes  and  other  backgrounds  licensed  by the  Company.  Most  of the
portraits  taken in the CityWalk  Studio and the Irvine  Studio are presented to
the  customer as framed 8" x 10", 5" x 7" and  wallet-sized  photographs  within
about thirty  minutes  after the portrait  session is  completed.  The remainder
(primarily  enlargements and greeting cards based on these photographic  images)
are produced and delivered to clients  within  several weeks using the Company's
order   fulfillment   capabilities  as  well  as  processing   arranged  through
independent service bureaus.

      As used herein the term the "Company"  refers to  Out-Takes,  Inc. and its
subsidiaries and affiliates  unless  otherwise  noted.  The Company's  principal
executive  offices are located at 1419 Peerless  Place,  Suite 116, Los Angeles,
California 90035.

                                   RISK FACTORS

      Prospective  investors  should  consider  carefully the following  factors
related to the  business  of the Company and this  offering,  together  with the
information  and financial data set forth elsewhere in this  Prospectus,  before
deciding to invest in the Shares.

1.    Operating Losses; No Assurance of Profitability.

      The Company is utilizing a  newly-developed  technology  to compete in the
portrait  studio  industry.  Despite the  continued  operations  of the CityWalk
Studio and the Irvine  Studio,  the Company  continues to operate at a net loss.
The Company believes that this failure to achieve profitability is predominantly
due to the poor  performance of the Irvine  Studio.  Based on the length of time
that the Irvine  Studio has been  open,  the  continuing  poor  performance  and
negative cash flow  generated by the studio,  despite the Company's  substantial
efforts to improve the studio's  profitability,  the Company has determined that
the continued operation of the Irvine Studio is not in the best interests of the
Company.  Accordingly,  the Company has decided to close the Irvine Studio on or
about December 28, 1997.  There is, however,  no assurance that these efforts to
improve the profitability of the Company will be successful.

      The Company  hopes to locate  additional  opportunities  and venues and to
continue to reduce  operating  expenses and minimize  overhead costs in order to
improve  cash flows,  reduce  liabilities  and enable  additional  studios to be
opened in the future.  Net losses are expected to continue,  however,  until the
Company opens  additional  studios or revenues from the CityWalk Studio increase
substantially.

2.    Availability of Additional Capital.

                                      -3-
The Company's  operations do not currently  generate  sufficient  funds to
meet the Company's working capital  requirements.  The Company  historically has
depended on the sale of securities and borrowings from Photo  Corporation  Group
Pty.  Limited  ("PCG") to fund its working capital  requirements.  To the extent
that the Company  requires  additional funds to meet such  requirements,  it may
seek to  raise  such  funds  through  the  sale of  securities  or  through  new
borrowings from PCG. No assurance can be given,  however,  that the Company will
be able to obtain additional funds from PCG or from any other source. Should the
Company be unable to obtain additional  capital when needed, the Company may not
have sufficient financial resources to continue operating as a going concern.

3.    Competition.

      Competition  in the  traditional  portrait  photography  industry  and the
merchandise licensing business is intense. The Company enjoys limited protection
from  competition  at its  CityWalk  Studio  because  of a  restriction  in that
studio's  lease that  provides  that during the  initial  lease term (which runs
through May 31, 1998) the landlord  will not lease to third  parties nor operate
for its own  account  a  retail  store  engaged  in  selling  computer-generated
photographs similar to those produced and sold by the Company.

      The Company has  identified  three  potential  kinds of  competition:  (1)
traditional  photographers,  who are likely to compete for retail  customers  as
well as future locations; (2) photographers who employ digital technologies, who
are likely to compete for retail  customers,  future locations and merchandising
licensing agreements; and (3) new technologies, which may render the Proprietary
System  obsolete or require the Company to incur a substantial  expense in order
to remain  competitive  in terms of  product  quality,  selection,  pricing  and
customer service.

      The  Company   believes  that  its  portrait   photography   products  are
competitive in terms of product  quality,  service quality and the selection and
attractiveness  of its  licensed  products.  Many of the  firms  with  which the
Company  competes,  or can  reasonably be  anticipated to compete in the future,
however,   have  far  greater  financial  resources,   experience  and  industry
relationships  than the Company.  In addition,  such  organizations  have proven
operating  histories,  which may afford these firms  significant  advantages  in
negotiating  and  obtaining  future  merchandise  licenses  and  retail  leases,
arranging financing,  attracting skilled personnel and developing technology and
products. Many of these firms offer their products at substantially lower prices
than the Company sells its products.

4.    Dependence on License Agreements.

      The  Company  has   merchandise   licensing   agreements   (the   "License
Agreements") with Paramount Pictures  Corporation  ("Paramount");  MCA/Universal
Merchandising,  Inc.  ("Universal");  Warner Bros.  Consumer  Products  formerly
Turner Home  Entertainment,  Inc.  ("Warner") with respect to several properties
from the  Hanna-Barbera  and MGM  libraries;  Twentieth  Century Fox Licensing &
Merchandising  ("Fox");  Jay  P.  Morgan  Photography  ("Morgan");   Tony  Stone
Worldwide  Stock Agency  ("TSW"),  Queen Bee  Productions  ("Queen Bee"),  Simon
Kornblit ("Kornblit"),  Curtis Archives ("Curtis A"), Curtis Management ("Curtis
M"), King Features  ("King"),  MTV Networks ("MTV"),  Saban  Merchandising  Inc.
("Saban"),   Innerspace  Visions   ("Visions")  and  others,   individually  and
collectively  referred to as the  "License  Agreements"  (Paramount,  Universal,
Warner,  Fox, Morgan,  TSW, Queen Bee, Kornblit,  Curtis A, Curtis M, King, MTV,
Saban and  Visions  are  individually  and  collectively  referred  to herein as
"Licensors").

      The  License   Agreements   generally  grant  the  Company  the  right  to
manufacture,  sell  and  distribute  in  a  defined  geographic  area,  computer
generated  photographs  incorporating a customer's image into a still photograph
("Licensed Products") with the characters, designs and/or visual representations
("Licensed Articles") as they appear

                                      -4-
in television productions and motion pictures. The Licensed Products may be sold
separately or affixed to items approved by the Licensor,  including photographic
enlargements,  greeting cards, posters, books, t-shirts, mugs, buttons and other
novelty  items,  in  consideration  of payment to the  Licensor  of a  specified
royalty  based on a percentage  of gross  retail sales  revenue from each of the
Licensed  Products.  Most of the  License  Agreements  require a  non-refundable
advance  payment  against  future  royalties and stipulate a guaranteed  minimum
level of royalties that must be paid during each year of their term. The License
Agreements also provide that the Licensor  retains  approval rights over the use
of the Licensed Articles.

      No single License Agreement  represents  greater than 25% of the Company's
aggregate sales revenues.  The Company is materially  dependent upon the License
Agreements with Paramount,  Universal, Warner, Fox and Morgan, and the appeal of
Licensed Articles from these Licensors in the retail marketplace. Three of these
License Agreements each represents  approximately 10% of the Company's revenues.
Although  the Company has not  commenced  to market all  Licensed  Articles on a
timely basis, the Company has not received any notice that any Licensor intends,
by virtue of this matter,  to exercise  any of the remedies  provided for in its
respective  License  Agreements.  The  Company  is current  with  respect to all
payments  and  required   reports  to  all   Licensors  and  believes  that  its
relationship with all Licensors is satisfactory.

5.    Environmental Regulations.

      In  order  to  comply  with   federal,   state  and  local   environmental
regulations,  the Company has permanent  filtration  systems at the CityWalk and
Irvine  Studios  that  lessen the  discharge  of certain  chemicals  that may be
harmful to the environment by reducing the  concentration  of these chemicals to
safe  levels  before  they are  disposed.  The  Company  also  contracts  with a
hazardous waste disposal  company with respect to the residue  (primarily  trace
silver)  that the  filtration  unit  produces.  The Company  believes  that this
equipment  and these  procedures  are  sufficient  to address any  environmental
problems  associated  with its business and has not received any indication that
it is not complying with all applicable regulations.  If, however, such measures
prove to be ineffective in preventing environmental  contamination,  the Company
could incur  substantial  expenses in developing  new hazardous  waste  disposal
procedures and remediating any resulting contamination.

6.    Limited Protection of Intellectual Property and Proprietary Rights;
 Risk of Litigation

      The  Company  pursues  a  policy  of  obtaining  patents  for  appropriate
inventions  related to products  marketed or  manufactured  by the Company.  The
Company has filed a document (the  "Disclosure  Document")  with the U.S. Patent
and  Trademark  Office  concerning   aspects  of  its  technology  that  may  be
patentable.  The Company has also filed an application  with the U.S. Patent and
Trademark Office seeking patent  protection for certain aspects of the Company's
technology  described  in the  Disclosure  Document  and has  supplemented  that
document with a "Continuation in Part" filing, which is currently pending.

      There can be no  assurance  that  patents,  domestic or  foreign,  will be
obtained with respect to the Company's technology, or that, if issued, they will
provide  substantial  protection or be of commercial benefit to the Company.  In
addition,  the patent  laws of foreign  countries  may differ  from those of the
United  States  as  to  the  patentability  of  the  Company's  technology  and,
accordingly, the degree of protection afforded by foreign patents may be more or
less than in the United States.

      In the United  States,  although a patent has a statutory  presumption  of
validity,  the issuance of a patent is not  conclusive as to such validity or as
to the enforceable scope of its claims therein.  The validity and enforceability
of a patent can be attacked by litigation  after its issuance by the U.S. Patent
and Trademark  Office. If the outcome of such litigation is adverse to the owner
of the patent in that the patent is held to be invalid,  other  parties may then
use the invention covered by the patent. Accordingly,  there can be no assurance
that patents with respect to the

                                      -5-
Company's technology, if issued, will afford protection against competitors with
similar  products,  nor can there be any assurance  that the patents will not be
infringed upon or designed around by others.

      The Company has  registered the marks  Out-Takes(R),  So You Want to be in
Pictures(R),  Photomation(R)  and Create the Moment(R) with the U.S.  Patent and
Trademark Office and has registered the  Out-Takes(R)  service mark in Japan, in
both Japanese and English.

7.    No Dividends.

      The Company  has not paid any  dividends  on its Common  Stock and has not
adopted any policy with respect to the payment of dividends in the future. It is
anticipated that all or most of the earnings from the Company's  operations will
be used to finance its growth for the immediate future.

8.    Domicile of Officers and Directors

      All of the executive  officers and directors of the Company reside outside
of the United States and most or all of their assets are located  outside of the
United States.  Accordingly,  such persons may not be subject to the in personam
jurisdiction  of courts in the United  States.  It is not clear if the courts of
Australia  would  enforce  against such persons a judgment  obtained in a United
States court predicated upon the liability  provisions of the Federal securities
laws of the United States, nor is it clear whether the courts of Australia would
entertain  original  actions  predicated  upon such  provisions  of the  Federal
securities laws of the United States.

                                  USE OF PROCEEDS

      If any of the Shares are resold by the Selling  Shareholders,  the Company
would  receive no proceeds  from any such sale.  The Shares would be offered for
the respective accounts of the Selling Shareholders.

                               SELLING SHAREHOLDERS

      The following table sets forth certain  information as of the date of this
prospectus with respect to the Selling Shareholders. The address of each Selling
Stockholder is 1419 Peerless Place, Suite 116, Los Angeles, California 90035.

                       Number of
Name of                Shares                         Shares to be Beneficially
Beneficial             Beneficially      Shares to        Owned After Sale (1)
                                                     --------------------------
Owner                  Owned (1)(2)      be Sold       NumberPercent(3)
-----                  -----------       -------       ----------------
Michael C. Roubicek

(1)   Unless otherwise indicated, each individual has sole voting and 
investment power with respect to all Shares owned by such
      individual.

(2)   Shares  shown in this  column  include  shares of Common  Stock  currently
      owned,  Shares  issuable  pursuant to  presently  exercisable  options and
      Shares issuable  pursuant to options which are exercisable  within 60 days
      of the date of this Prospectus.

(3)   Based upon  20,495,726  shares of Common Stock  outstanding as of November
      10, 1997, plus shares of Common Stock issuable pursuant to options held by
      the particular Selling Stockholder. Percentages shown after sale are based
      upon  all  Shares  registered   hereunder  being  sold.  Asterisks  denote
      ownership of less than one percent.

                                      -6-
PLAN OF DISTRIBUTION

      The Company has been advised by the Selling  Shareholders that they intend
to sell all or a portion of the shares  offered hereby from time to time through
the  facilities  of the OTC,  or through  the  facilities  of such  exchange  or
automated  quotation system where the Common Stock may be listed, and that sales
will be made at  prices  prevailing  at the  times of such  sales.  The  Selling
Shareholders  may also  make  private  sales  directly  or  through  a broker or
brokers. The Selling Shareholders will be responsible for payment of any and all
commissions  to brokers,  which will be negotiated on an  individual  basis.  In
connection   with  any  sales,   the  Selling   Shareholders   and  any  brokers
participating in such sales may be deemed to be underwriters  within the meaning
of the Act.

      The   Company   has   informed   the   Selling   Shareholders   that   the
anti-manipulative  rules set forth in Regulation M of the Exchange Act may apply
to their sales in the market and has furnished each Selling  Stockholder  with a
copy of said Regulation.

      There is no assurance that any of the Selling  Shareholders  will sell any
or all of the shares of Common Stock offered by them.

      The Company will pay all expenses incident to the offering and sale of the
Common Stock to the public other than brokerage  commissions  which will be paid
by the Selling Shareholders.

                                   LEGAL MATTERS

      Graham & James LLP, special counsel to the Company for this offering,  has
rendered an opinion to the Company that the Common Stock offered  hereby will be
duly and validly issued, fully paid and nonassessable.

                                      EXPERTS

      The  consolidated  financial  statements as of March 31, 1996 and 1997 and
for  each of the  years  in the  three-year  period  ended  March  31,  1997 are
incorporated in this Prospectus by reference from the Company's Annual Report on
Form 10-K for the year ended  March 31,  1997,  in  reliance  upon the report of
Moore Stephens, P.C., independent certified public accountants,  incorporated by
reference  herein and upon the  authority of said firm as experts in  accounting
and auditing.

                                      -7-
No dealer,  salesman or any other person has been  authorized  in connection
with this offering to give any information or to make any representations  other
than those contained in this Prospectus (including any Prospectus supplement) in
connection  with the offer made hereby.  If given or made,  such  information or
representations  must  not be  relied  upon as  having  been  authorized  by the
company,  by any  underwriter or by the Selling  Shareholders.  This  Prospectus
(including  any  Prospectus  supplement)  does  not  constitute  an  offer  or a
solicitation  in any  jurisdiction  to any person to whom it is unlawful to make
such an offer or  solicitation.  Neither the delivery of this Prospectus nor any
sale made hereunder shall, under any  circumstances,  create an implication that
there has been no change in the circumstances of the Company or the facts herein
set forth since the date hereof.

                                         ----------

                                      TABLE OF CONTENTS
                                                                            Page
Available Information..........................................................2
Incorporation of Certain
  Information by Reference.....................................................2
The Company...................................................................3
Risk Factors...................................................................3
Use of Proceeds................................................................6
Selling Shareholders...........................................................6
Plan of Distribution...........................................................7
Legal Matters..................................................................7
Experts........................................................................7

                                         ----------

    Out-Takes, Inc. has filed with the Securities and Exchange
Commission, Washington, D.C., a Registration Statement under the
Securities Act of 1933 with respect to the Shares offered hereby.

    This  Prospectus  omits certain  information  contained in the  Registration
Statement.  The  information  omitted may be obtained  from the  Securities  and
Exchange Commission upon payment of the regular charge therefor.

                                       OUT-TAKES, INC.

                                      1,586,786 Shares
                                      of Common Stock,
                                       $.01 par value

                                      -1-
PART II

                     INFORMATION REQUIRED IN THE REGISTRATION STATEMENT

Item 3.  Incorporation of Documents by Reference.

      The following documents,  and any amendments thereto,  filed by Out-Takes,
Inc.  (the  "Company"  or the  "Registrant")  with the  Securities  and Exchange
Commission (the "Commission") are incorporated by reference in this Registration
Statement  and shall be deemed to be a part  hereof from the date of filing such
documents.

      (a) The  Company's  Annual  Report on Form 10-K for the fiscal  year ended
March 31, 1997;

      (b) The  Company's  Quarterly  Report  on Form 10-Q for the  period  ended
September 30, 1997;

      (c) The Company's  Quarterly Report on Form 10-Q for the period ended June
30, 1997;

      (d)   The Company's Quarterly Report on Form 10-Q/A dated May 22, 1997 for
            the period ended September 30, 1996;

      (e)   The Company's  Proxy  Statement  dated June 16, 1997 with respect to
            its annual meeting of shareholders held on July 10, 1997;

      (f)   The  description  of the Company's  Common Stock as set forth in the
            Registration  Statement filed by the Company on Form 8-A pursuant to
            Section  12(g) of the Exchange  Act, and any  amendments  or reports
            thereto filed with the  Commission  for the purpose of updating such
            description; and

      (g)   All documents  filed by the Company  pursuant to Sections 13, 14, or
            15(d) of the  Exchange  Act  after the date of this  Prospectus  and
            prior to the  termination  of the  offering of the Common Stock made
            hereby  shall be deemed to be  incorporated  in this  Prospectus  by
            reference  and to be a part  hereof  from the date of filing of such
            documents,  except  as to  any  portion  of  any  future  Annual  or
            Quarterly Report to the Shareholders which is not deemed to be filed
            under said provisions.

Item 4.  Description of Securities.

      Not Applicable.

Item 5.  Interests of Named Experts and Counsel.

      Not Applicable.

Item 6.  Indemnification of Officers and Directors.

                                           II-2
The Company's Certificate of Incorporation,  as amended, provides that the
Company  shall,  to the fullest  extent  permitted by Section 145 of the General
Corporation Law of the State of Delaware,  indemnify any and all persons whom it
shall have the power to  indemnify  under said  section from and against any and
all of the expenses,  liabilities, or other matters referred to in or covered by
said  section.  Section  145 of the  General  Corporation  Law of the  State  of
Delaware  provides that a corporation  may indemnify any person who was or is or
is  threatened  to be made a party  to any  threatened,  pending,  or  completed
action,  suit or proceeding,  whether civil,  criminal or administrative  (other
than an action by or in the right of the corporation) by reason of the fact that
he is or was a director,  officer,  employee or agent of the  corporation.  Such
person must have acted in good faith and in a manner  reasonably  believed to be
in the  best  interests  of  the  corporation.  With  respect  to  any  criminal
proceedings,  such  person  must have had no  reasonable  cause to  believe  his
conduct  was  unlawful.  Any  such  indemnification  may  only  be  made  upon a
determination by the corporation that such indemnification is proper because the
person met the applicable standard of conduct. Section 145 further provides that
the  indemnification  authorized  thereby  shall not be deemed  exclusive of any
additional  rights to  indemnification  that any such  person may be entitled to
under any bylaw, vote of stockholders or disinterested  directors, or otherwise.
Section 145 also authorizes a corporation to purchase and maintain  insurance on
behalf of any person who is or was a director, officer, employee or agent of the
corporation.

      The Company's  Bylaws provide that the Company shall  indemnify any person
who was or is a party,  or is threatened to be made a party,  to any threatened,
pending or completed proceeding (other than an action by or in the right of this
corporation  to procure a judgment in its favor) by reason of the fact that such
person is or was a director, officer, employee, or agent of the Company, against
expenses,   judgments,   fines,  settlements  and  other  amounts  actually  and
reasonably  incurred in connection  with such proceeding if such person acted in
good faith and in a manner  such  person  reasonably  believed to be in the best
interests  of the  Company  and,  in the case of a criminal  proceeding,  had no
reasonable cause to believe the conduct of such person was unlawful.

Item 7.  Exemption from Registration Claimed.

      Not Applicable.

Item 8.  Exhibits.

       4.1  Out-Takes, Inc. Amended and Restated 1992 Employee Stock Option Plan
       5.1  Opinion of Graham & James LLP
      23.1  Consent of Moore Stephens, P.C.
      23.2 Consent of Graham & James LLP (included in Exhibit 5.1) 24.1 Power of
      Attorney (see Part II, page 5)

                                           II-3
xxxxx
Item 9.  Undertakings.

      The undersigned Registrant hereby undertakes:

      1. To file,  during any period in which  offers or sales are being made, a
post-effective  amendment to this Registration Statement to include any material
information with respect to the plan of distribution not previously disclosed in
the  Registration  Statement or any material  change to such  information in the
Registration Statement.

      2. That, for the purpose of determining any liability under the Securities
Act of 1933,  each  such  post-effective  amendment  shall be deemed to be a new
registration  statement  relating to the  securities  offered  therein,  and the
offering of such  securities at that time shall be deemed to be the initial bona
fide offering thereof.

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

      The  undersigned  Registrant  hereby  undertakes  that,  for  purposes  of
determining  any liability  under the Securities Act of 1933, each filing of the
Registrant's  annual  report  pursuant to Section  13(a) or Section 15(d) of the
Exchange Act, and each filing of the Plan's  annual  report  pursuant to Section
15(d) of the Exchange Act, that is incorporated by reference in the Registration
Statement  shall be deemed to be a new  Registration  Statement  relating to the
securities  offered  therein,  and the offering of such  securities at that time
shall be deemed to be the initial bona fide offering thereof.

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

                                           II-4
SIGNATURES

      Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies  that it has  reasonable  grounds to believe  that it meets all of the
requirements  for filing on Form  S-8/S-3 and has duly caused this  registration
statement  to be  signed  on its  behalf  by  the  undersigned,  thereunto  duly
authorized, in the City of Los Angeles, State of California, on this 15th day of
September, 1997.

                                                OUT-TAKES, INC.

                                          By:   /s/ Peter C. Watt
                                         Peter C. Watt, Chief Executive Officer
                                      POWER OF ATTORNEY

      KNOW ALL MEN BY THESE PRESENTS,  that each person whose signature  appears
below
constitutes and appoints Michael C. Roubicek as his  attorney-in-fact,  with the
power of substitution for him in any and all capacities,  to sign any amendments
to this registration statement, including post-effective amendments, and to file
the same,  with exhibits  thereto and other  documents in connection  therewith,
with the Securities and Exchange Commission, hereby ratifying and confirming all
that said attorney-in-fact, or his substitute or substitutes, may do or cause to
be done by virtue hereof.

      Pursuant  to  the  requirements  of  the  Securities  Act  of  1933,  this
registration  statement  has  been  signed  by  the  following  persons  in  the
capacities and on the date indicated.

Signature                        Title                          Date

/s/ Peter C. Watt             Chairman of the Board,         September 15, 1997
---------------------------
Peter C. Watt                    President, Chief Executive
                                 Officer, Principal Financial
                                 Officer and Secretary (Principal
                                 Executive Officer and Principal
                                 Accounting Officer)

/s/ Michael C. Roubicek       Vice President and Director    September 15, 1997
---------------------------
Michael C. Roubicek

                                           II-5
EXHIBIT INDEX

                Sequential
Number          Exhibit                                         Page No.

 4.1            Out-Takes, Inc. Amended and Restated
                1992 Employee Stock Option Plan                 ___
 5.1            Opinion of Graham & James LLP
                regarding legality                              ___
23.1            Consent of Moore Stephens, P.C.                 ___
23.2            Consent of Graham & James LLP
                (included in Exhibit 5.1)
24.1            Power of Attorney
                (see Part II, page 5)

                                           II-6
OUT-TAKES, INC.

                             AMENDED AND RESTATED

                        1992 EMPLOYEE STOCK OPTION PLAN

1.   Purpose.

     Effective  February 28, 1997,  the 1992 Employee Stock Option Plan ("Plan")
is amended  and  restated in its  entirety  to reflect  the revised  rules under
Section 16(b) of the Securities Exchange Act of 1934, as amended. The purpose of
this Plan is to advance the  interests  of the Company and its  stockholders  by
providing  a means to  attract,  retain,  and  reward  employees,  officers  and
directors of, and consultants or advisors to, the Company and its  subsidiaries,
by  providing  for  incentives  to such  persons  that  will  encourage  them to
contribute to the Company's future growth and success,  and by strengthening the
mutuality of interests  between such persons and the Company's  stockholders  by
enabling such persons to acquire a proprietary interest in the Company.

2.   Definitions.

     (a)   "Affiliate"   shall  mean  any  parent   corporation   or  subsidiary
corporation,  within the meaning of Section 424(e) and (f), respectively, of the
Company.

     (b) "Board" shall mean the Board of Directors of the Company.

     (c) "Code" shall mean the Internal Revenue Code of 1986, as amended.

     (d) "Committee" shall mean a Committee appointed by the Board in accordance
with Section 3 of the Plan.

     (e)  "Common  Stock"  shall  mean the $.01 par  value  Common  Stock of the
Company.

     (f) "Company" shall mean Out-Takes, Inc., a Delaware corporation.

     (g)  "Disability"  shall mean the condition of an Employee who is unable to
substantially perform the duties of such office.

     (h) "ERISA" shall mean the Employee Retirement Income Security Act of 1974,
as amended.

     (i)  "Exercise  Price"  shall mean the  purchase  price per share of Common
Stock upon exercise of an Option,  which shall be determined in accordance  with
Section 7.

     (j) "Fair Market  Value" of a Share of Common Stock as of a specified  date
shall mean the  closing  price of a Share on the  composite  reporting  tape for
exchange-listed securities on the day immediately preceding the date as of which
Fair Market Value is being  determined,  or on the next  preceding date on which
such Shares are traded if no Shares were  traded on such  immediately  preceding
day, or if the Shares are not traded on a securities exchange, Fair Market Value
shall be deemed to be the  average  of the high bid and low asked  prices of the
Shares in the over-the-counter  market on the day immediately preceding the date
as of

                                           II-7
which Fair Market Value is being  determined  or on the next  preceding  date on
which such high bid and low asked  prices were  recorded.  If the Shares are not
publicly traded, Fair Market Value of a share of Common Stock (including, in the
case of any repurchase of Shares,  any distributions  with respect thereto which
would be  repurchased  with the Shares) shall be determined in good faith by the
Board of Directors  (or the  Committee,  if  applicable).  In no case shall Fair
Market Value be determined with regard to restrictions  other than  restrictions
which,  by their terms,  will never lapse. In no case shall Fair Market Value be
less than the par value of a Share of Common Stock.

     (k) "Option" shall mean an incentive stock option or a non-statutory  stock
option granted pursuant to the Plan.

     (l) "Optionee" shall mean a person to whom an Option has been granted.

     (m) "Plan"  shall mean this  Out-Takes,  Inc.  Amended  and  Restated  1992
Employee Stock Option Plan.

     (n)  "Purchase  Price"  shall mean the  Exercise  Price times the number of
whole Shares with respect to which an Option is exercised.

     (o)  "Securities  Exchange Act" shall mean the  Securities  Exchange Act of
1934, as amended.

     (p) "Share" shall mean one share of Common Stock.

3. Type of Options and Administration.

     (a) Types of  Options.  Grants of  Options  pursuant  to the Plan  shall be
authorized by action of the Board of Directors of the Company (or the Committee,
if  applicable)  and Options so granted may be either  incentive  stock  options
("Incentive  Stock Options") meeting the requirements of Section 422 of the Code
or  non-statutory  options  which are not intended to meet the  requirements  of
Section 422 of the Code. Except as provided in Sections 16 and 22, Options shall
be  granted  under the Plan for no  consideration  other  than  past and  future
services of the Optionee.

     (b)  Administration.  The  Plan  shall  be  administered  by the  Board  of
Directors or in its  discretion by a committee  ("Committee"),  comprised of not
less than two non-employee  directors appointed by the Board of Directors.  Only
non-employee  directors  (as  defined  under  Rule 16b-3  promulgated  under the
Securities Exchange Act) shall be eligible to serve on the Committee.  The Board
of Directors  may, from time to time,  at its sole  discretion,  remove  members
from,  or add members to, the  Committee.  Vacancies on the  Committee,  however
caused,  shall be filled by the Board of Directors.  The Committee  shall select
one of its members as Chairman,  and shall hold  meetings at such time and place
as it determines  advisable.  A majority of the Committee  shall  constitute the
quorum;  and the acts of a majority of the members  present at any  meeting,  or
acts reduced to and approved in writing by a majority of the Committee, shall be
valid acts of the  Committee.  With the exception of option grants to members of
the Committee which shall be made and  administered  exclusively by the Board of
Directors pursuant to the express terms and conditions of the Plan, the Board of
Directors (or the Committee,  if applicable)  shall have the sole power to grant
options pursuant to the Plan, including the determination of the persons to whom
options shall be granted,  the times when they shall  receive  them,  the option
price of each option, and the number of shares to be subject to each option. All
such actions by the Board of Directors (or the Committee,  if applicable),  with
respect to officers and  directors of the Company and its  Affiliates,  shall be
evidenced by written documentation properly executed on its behalf.

                                     -2-
(c) Indemnification of Board of Directors (or Committee, if applicable). In
addition to such other rights of  indemnification  as they may have as directors
or as members of the  Committee,  the members of the Board of Directors  (or the
Committee,  if  applicable)  shall be  indemnified  by the  Company  against the
reasonable  expenses,   including  attorneys'  fees,  actually  and  necessarily
incurred in connection with the defense of any action, suit or proceeding, or in
connection with any appeal therein,  to which they or any of them may be a party
by reason of any action taken or failure to act under or in connection  with the
Plan or any option granted  thereunder,  and against all amounts paid by them in
settlement  thereof  (provided such settlement is approved by independent  legal
counsel  selected by the Company) or paid by them in  satisfaction of a judgment
in any such action, suit or proceeding except in relation to matters as of which
it shall be  adjudged  in such  action,  suit or  proceeding  that such Board of
Director  (or  Committee,  if  applicable)  member is liable for  negligence  or
misconduct  in the  performance  of his duties;  provided that within sixty days
after institution of any such action, suit or proceeding a Board of Director (or
Committee,  if  applicable)  member  shall in  writing  offer  the  Company  the
opportunity, at its own expense, to handle and defend the same.

4.   Eligibility.

     (a)  General.  Options  may be granted to persons  who are,  at the time of
grant,  employees,  officers or directors of, or consultants or advisors to, the
Company and/or an Affiliate;  provided, that Incentive Stock Options may only be
granted to  individuals  who are  employees  of the Company  and/or an Affiliate
(within  the  meaning  of Section  3401(c)  of the Code).  A person who has been
granted an option may, if he or she is otherwise eligible, be granted additional
options if the Board of Directors (or the  Committee,  if  applicable)  shall so
determine.

5.   Stock Subject to Plan.

     The stock  subject  to  options  granted  under the Plan shall be shares of
authorized  but unissued or reacquired  Common  Stock.  Subject to adjustment as
provided in Section 16 below,  the maximum  number of Shares which may be issued
and sold under the Plan is 562,000 Shares plus 5% of the number of Shares issued
(other than any issuance under the Plan or any other executive compensation plan
of the  Company),  except any  Shares  added  under  this  clause as a result of
further  issuances by the Company shall not be available for grants of Incentive
Stock  Options  under  the  Plan.  The  number  of  Shares  subject  to  Options
outstanding  under  the Plan at any time may not  exceed  the  number  of Shares
remaining  available for issuance under the Plan. If an Option granted under the
Plan shall expire,  terminate or is cancelled for any reason without having been
exercised in full, the unpurchased  Shares subject to such Option shall again be
available for subsequent Option grants under the Plan.

6.   Forms of Option Agreements.

     As a condition to the grant of an Option under the Plan,  each recipient of
an Option shall execute an option agreement in such form not  inconsistent  with
the Plan as may be  approved by the Board of  Directors  (or the  Committee,  if
applicable). Such option agreements may differ among recipients.

7.   Purchase Price.

     (a)  General.  The  Exercise  Price  shall be  determined  by the  Board of
Directors (or the Committee, if applicable) at the time of grant of such Option;
provided,  however,  that in the case of an Incentive Stock Option, the Exercise
Price  shall  not be less  than 100% of the Fair  Market  Value (as  hereinafter
defined) of

                                     -3-
such stock, at the time of grant of such Option,  or less than 110% of such Fair
Market Value in the case of Incentive  Stock Options  described in Section 12(b)
unless  otherwise  determined  by the Board of Directors (or the  Committee,  if
applicable),  and in the case of non-statutory options, the Exercise Price shall
not be less than 85% of the Fair Market Value.

     (b) Payment of Purchase  Price.  Options granted under the Plan may provide
for the  payment of the  Exercise  Price by  delivery  of cash or a check to the
order of the Company in an amount equal to the Purchase Price, or, to the extent
provided in the applicable option  agreement,  (i) by delivery to the Company of
Shares of Common Stock of the Company  having a Fair Market Value on the date of
exercise equal in amount to the Exercise  Price of the Options being  exercised,
(ii) by any  other  means  (including,  without  limitation,  by  delivery  of a
promissory  note of the Optionee  payable on such terms as are  specified by the
Board  of  Directors  (or the  Committee  if  applicable))  which  the  Board of
Directors (or the Committee,  if applicable)  determines are consistent with the
purpose of the Plan and with applicable laws and regulations (including, without
limitation, the provisions of Rule 16b-3, Regulations G and T promulgated by the
Federal Reserve Board) and the Delaware General  Corporation Law or (iii) by any
combination of such methods of payment. Notwithstanding the foregoing, the right
to pay the option price by delivery of a promissory  note shall not be available
to any Optionee who is a person  described  in Section  16(a) of the  Securities
Exchange Act.

8.   Option Period.

     Subject to earlier termination as provided in the Plan, each Option and all
rights  thereunder  shall  expire  on such  date as  determined  by the Board of
Directors (or the  Committee,  if  applicable)  and set forth in the  applicable
option  agreement,  provided,  that such date  shall not be later  than (10) ten
years after the date on which the Option is granted.

9.   Exercise of Options.

     Each Option granted under the Plan shall be  exercisable  either in full or
in  installments  at such  time or times  and  during  such  period  as shall be
determined by the Board of Directors (or the Committee, if applicable) set forth
in the option agreement evidencing such Option, subject to the provisions of the
Plan.  If an Option  is not at the time of grant  immediately  exercisable,  the
Board of Directors (or the Committee,  if  applicable)  may (i) in the agreement
evidencing  such Option,  provide for the  acceleration  of the exercise date or
dates of the subject Option upon the occurrence of specified events, and/or (ii)
at any time  prior to the  complete  termination  of an Option,  accelerate  the
exercise date or dates of such Option.

                                     -4-
10.  Nontransferability of Options.

     No Option or other  derivative  security  granted  under this Plan shall be
assignable or otherwise  transferable  by the Optionee  except by will or by the
laws of descent and  distribution  or to a beneficiary  designated in accordance
with  procedures  established  by the Board of Directors (or the  Committee,  if
applicable). An Option may be exercised during the lifetime of the Optionee only
by the Optionee.

11. Effect of Termination of Employment or Other Relationship.

     Except as otherwise determined by the Board of Directors (or the Committee,
if  applicable)  at or after  grant,  with respect to any Option or as otherwise
provided in Section 12(d) with respect to Incentive  Stock Options,  and subject
to the provisions of the Plan, an Optionee may exercise, to the extent vested at
the time of termination, an Option at any time within three (3) months following
the  termination of the  Optionee's  employment or other  relationship  with the
Company  (or the  Affiliate,  if  applicable)  or  within  one (1)  year if such
termination  was due to the death or disability of the Optionee,  but, except in
the case of the Optionee's  death, in no event later than the expiration date of
the Option.  If the termination of the Optionee's  employment is for cause or is
otherwise  attributable  to a  breach  by  the  Optionee  of  an  employment  or
confidentiality   or  non-  disclosure   agreement,   the  Option  shall  expire
immediately upon such termination.  The Board of Directors (or the Committee, if
applicable) shall have the power to determine what constitutes a termination for
cause  or a  breach  of  an  employment  or  confidentiality  or  non-disclosure
agreement,  whether an Optionee  has been  terminated  for cause or has breached
such an agreement,  and the date upon which such termination for cause or breach
occurs. Any such  determinations  shall be final and conclusive and binding upon
the Optionee.

12.  Incentive Stock Options.

     Options  granted  under the Plan which are intended to be  Incentive  Stock
Options shall be subject to the following additional terms and conditions:

     (a) Express Designation. All Incentive Stock Options granted under the Plan
shall, at the time of grant,  be  specifically  designated as such in the option
agreement covering such Incentive Stock Options.

     (b) 10%  Shareholder.  If any employee to whom an Incentive Stock Option is
to be granted  under the Plan is, at the time of the grant of such  Option,  the
owner of stock  possessing  more than 10% of the total combined  voting power of
all classes of stock of the Company or an Affiliate  (after  taking into account
the attribution of stock  ownership  rules of Section 424(d) of the Code),  then
the following  special  provisions  shall be  applicable to the Incentive  Stock
Option granted to such individual.

          i) The purchase  price per share of the Common  Stock  subject to such
     Incentive Stock Option shall not be less than 110% of the Fair Market Value
     of one share of Common Stock at the time of grant; and

          ii) the Option  exercise  period  shall not exceed five years from the
date of grant.

     (c) Dollar  Limitation.  For so long as the Code shall so provide,  Options
granted to any  employee  under the Plan (and any other  incentive  stock option
plans  of the  Company  or any  Affiliate)  which  are  intended  to  constitute
Incentive  Stock Options  shall not  constitute  Incentive  Stock Options to the
extent that such Options,  in the aggregate,  become  exercisable  for the first
time in any one calendar year for shares of Common Stock with an aggregate  Fair
Market Value, as of the respective date or dates of grant, of more than

                                     -5-
$100,000.  Options  which fail to qualify as Incentive  Stock Options under this
limitation shall be deemed non-statutory options granted under the Plan.

     (d)  Termination  of  Employment,  Death or  Disability.  Unless  otherwise
determined  by the Board of Directors  (or the  Committee,  if  applicable),  no
Incentive  Stock Option may be exercised  unless,  at the time of such exercise,
the Optionee is, and has been continuously since the date of grant of his or her
Option, employed by the Company (or the Affiliate, if applicable), except that:

          i) an Incentive Stock Option may be exercised, to the extent vested at
     the time of  cessation  of  employment,  within the period of three  months
     after the date of  Optionee  ceases to be an employee of the Company or the
     Affiliate  (or  within  such  lesser  period  as  may be  specified  in the
     applicable option agreement);

          ii) if the  Optionee  dies while in the employ of the  Company (or the
     Affiliate, if applicable), or within three months after the Optionee ceases
     to be such an employee,  the Incentive Stock Option may be exercised by the
     person  to  whom it is  transferred  by will  or the  laws of  descent  and
     distribution  within  the  period  of one year  after the date of death (or
     within such lesser  period as may be  specified  in the  applicable  option
     agreement); and

          iii) if the Optionee  becomes  disabled (within the meaning of Section
     22(e)(3)  of the Code or any  successor  provisions  thereto)  while in the
     employ of the Company (or the  Affiliate,  if  applicable),  the  Incentive
     Stock Option may be exercised  within the period of one year after the date
     the Optionee  ceases to be such an employee  because of such disability (or
     within such lesser  period as may be  specified  in the  applicable  option
     agreement).

For all  purposes  of the Plan and any Option  granted  hereunder,  "employment"
shall be defined in accordance with the provisions of Section  1.421-7(h) of the
Income Tax  Regulations  (or any  successor  regulations).  Notwithstanding  the
foregoing  provisions,  no Incentive  Stock  Option may be  exercised  after its
expiration  date and if the agreement  with respect to such Option  designates a
longer  exercise  period than permitted in Section  12(d)(i)-(iii),  and if such
Option is in fact exercised after such post-termination period, the Option shall
be treated as the exercise of a non-statutory option under the Plan.

13.  Additional Provisions.

     (a) Additional Option Provisions. The Board of Directors (or the Committee,
if applicable) may, in its sole  discretion,  include  additional  provisions in
option  agreements  covering Options granted under the Plan,  including  without
limitation restrictions on transfer, repurchase rights, rights of first refusal,
commitments  to pay cash bonuses,  to make,  arrange for or guaranty loans or to
transfer  other  property to optionees  upon exercise of options,  or such other
provisions as shall be  determined by the Board of Directors (or the  Committee,
if  applicable);   provided,  that  such  additional  provisions  shall  not  be
inconsistent  with any other term or condition  of the Plan and such  additional
provisions  shall not be applicable to any Incentive  Stock Option granted under
the Plan if and to the  extent  that they  would  cause  such  Option to fail to
qualify as an  Incentive  Stock  Option  with the  meaning of Section 422 of the
Code.

     (b) Acceleration, Extension, Etc. The Board of Directors (or the Committee,
if applicable) may, in its sole discretion,  (i) accelerate the date or dates on
which all or any  particular  Option or  Options  granted  under the Plan may be
exercised or (ii) extend the dates during which all, or any  particular,  Option
or Options granted under the Plan may be exercised;  provided,  however, that no
such extension shall be permitted if it

                                     -6-
would cause any Incentive Stock Option to fail to comply with Section 422 of the
Code and, in any event,  no extension shall authorize the exercise of any Option
more than ten years after the date of grant.

14.  General Restrictions.

     (a) Investment Representations.  The Company may require any person to whom
an Option is granted,  as a condition of exercising such Option, to give written
assurances in substance and form  satisfactory to the Company to the effect that
such person is acquiring  the Common Stock  subject to the Option for his or her
own account for  investment  and not with any  present  intention  of selling or
otherwise  distributing the same, and to such other effects as the Company deems
necessary or appropriate  in order to comply with federal and  applicable  state
securities  laws, or with  covenants or  representations  made by the Company in
connection with any public offering of its Common Stock.

     (b) Compliance  With  Securities Law. The Company shall not be obligated to
issue Shares or accept surrender of Shares in payment of the Exercise Price. If,
at  any  time,  counsel  to  the  company  shall  determine  that  the  listing,
registration  or  qualification  of the Shares  subject to such  Option upon any
securities  exchange  or under any  state or  federal  law,  or the  consent  or
approval of any  governmental  or  regulatory  body,  or that the  disclosure of
non-public  information or the  satisfaction of any other condition is necessary
as a  condition  of, or in  connection  with the  issuance or purchase of Shares
thereunder,  such Option may not be exercised,  in whole or in part, unless such
listing,  registration,  qualification,  consent or approval, or satisfaction of
such condition shall have been effected or obtained on conditions  acceptable to
the Board of Directors (or the Committee,  if applicable).  Nothing herein shall
be deemed to  require  the  Company  to apply  for or to  obtain  such  listing,
registration or qualification, or to satisfy such condition.

15. Rights as a Shareholder.

     The holder of an Option shall have no rights as a shareholder  with respect
to any Shares covered by the Option (including,  without limitation,  any rights
to receive  dividends  or non-cash  distributions  with  respect to such Shares)
until the Option has been validly  exercised.  No  adjustment  shall be made for
dividends or other rights for which the record date is prior to the date of such
valid exercise.

16. Adjustment  Provisions for  Recapitalizations,  Reorganizations  and Related
Transactions.

     (a) Recapitalizations and Related Transactions.  If, through or as a result
of any recapitalization,  reclassification, stock dividend, stock split, reverse
stock split or other similar  transaction (i) the  outstanding  shares of Common
Stock are  increased,decreased  or exchanged  for a different  number or kind of
shares or other securities of the Company,  or (ii) additional  Shares or new or
different  shares or other non-cash assets are distributed  with respect to such
Shares or other securities, an appropriate and proportionate adjustment shall be
made in (w) the maximum  number and kind of Shares  reserved for issuance  under
the Plan (x) the  number  and kind of Shares or other  securities  automatically
granted under  Section 6, (y) the number and kind of Shares or other  securities
subject to any then  outstanding  Options under the Plan,  and (z) the price for
each  Share   subject  to  any  then   outstanding   Options   under  the  Plan.
Notwithstanding  the  foregoing , no  adjustment  shall be made pursuant to this
Section 16 if such  adjustment  (i) would  cause the Plan to fail to comply with
Section  422 of the Code or (ii) would be  considered  as the  adoption of a new
plan requiring stockholder approval.

     (b) Reorganization,  Merger and Related Transactions.  If the Company shall
be the surviving  corporation in any reorganization,  merger or consolidation of
the Company with one or more other

                                     -7-
corporations,  any then  outstanding  Option granted  pursuant to the Plan shall
pertain to and apply to the securities to which a holder of the number of shares
of Common Stock  subject to such Options  would have been  entitled  immediately
following such  reorganization,  merger, or consolidation,  with a corresponding
proportionate  adjustment of the Purchase  Price as to which such Options may be
exercised so that the aggregate  Purchase  Price as to which such Options may be
exercised  shall be the same as the  aggregate  Purchase  Price as to which such
Options  may be  exercised  for the  Shares  remaining  subject  to the  Options
immediately prior to such reorganization, merger, or consolidation.

     (c) Authority to Make  Adjustments.  Any adjustments  under this Section 16
will be made by the Board of Directors  (or the  Committee,  if  applicable)  in
order to prevent  dilution or enlargement  of the rights of Optionees,  and such
determinations  as to what  adjustments,  if any,  will be made  and the  extent
thereof will be final,  binding and  conclusive.  No  fractional  Shares will be
issued under the Plan on account of any such adjustments or otherwise.

17. Merger, Consolidation, Asset Sale, Liquidation, etc.

      (a)  General.  In the  event of a  consolidation  or  merger  in which the
Company is not the surviving corporation, or sale of all or substantially all of
the  assets of the  Company  in which  outstanding  shares  of Common  Stock are
exchanged for  securities,  cash or other  property of any other  corporation or
business entity or in the event of a liquidation of the Company (collectively, a
"Corporate  Transaction"),  the  Board  of  Directors  of the  Company  (or  the
Committee, if applicable), or the board of directors of any corporation assuming
the obligations of the Company, may, in its discretion,  take any one or more of
the following actions, as to outstanding  Options: (i) provide that such Options
shall be assumed,  or equivalent Options shall be substituted,  by the acquiring
or  succeeding  corporation  (or an affiliate  thereof),  provided that any such
Options  substituted for Incentive Stock Options shall meet the  requirements of
Section 424(a) of the Code,  (ii) upon written notice to the Optionees,  provide
that  all  unexercised   Options  will  terminate   immediately   prior  to  the
consummation  of such  transaction  unless  exercised by the  Optionee  within a
specified  period  following  the date of such  notice,  (iii) in the event of a
Corporate  Transaction  under the terms of which  holders of the Common Stock of
the Company will receive upon consummation thereof a cash payment for each share
surrendered in the Corporation  Transaction (the "Transaction  Price"),  make or
provide for a cash payment to the Optionees equal to the difference  between (A)
the Transaction Price times the number of shares of Common Stock subject to such
outstanding  Options (to the extent then  exercisable at prices not in excess of
the  Transaction  Price)  and (B)  the  aggregate  exercise  price  of all  such
outstanding  Options in exchange for the  termination of such Options,  and (iv)
provide that all or any  outstanding  Options shall become  exercisable  in full
immediately prior to such event.

     (b)  Substitute  Options.  The Company may grant  Options under the Plan in
substitution  for Options held by employees  of another  corporation  who become
employees of the  Company,  or a  subsidiary  of the  Company,  as a result of a
merger or  consolidation  of the  employing  corporation  with the  Company or a
subsidiary of the Company,  or as a result of the acquisition by the Company, or
one of its subsidiaries,  of property or stock of the employing corporation. The
Company  may  direct  that  substitute  Options  be  granted  on such  terms and
conditions as the Board of Directors (or the Committee, if applicable) considers
appropriate in the circumstances.

18.  No Special Employment Rights.

     Nothing  contained  in the  Plan or in any  Option  shall  confer  upon any
Optionee any right with respect to the  continuation of his or her employment by
the Company or interfere in any way with the right of the

                                     -8-
Company at any time to terminate such  employment or to increase or decrease the
compensation of the Optionee.

19.  Other Employee Rights.

     Except  as  to  plans  which  by  their  terms   include  such  amounts  as
compensation,  the  amount  of any  compensation  deemed  to be  received  by an
employee as a result of the exercise of an Option or the sale of Shares received
upon such exercise will not  constitute  compensation  with respect to which any
other  employee  benefits of such employee are  determined,  including,  without
limitation, benefits under any bonus, pension, profit-sharing, life insurance or
salary  continuation  plan, except as otherwise  specifically  determined by the
Board of Directors (or the Committee, if applicable).

20. Amendment of the Plan.

     (a) The Board  (and not the  Committee)  may at any time,  and from time to
time,  modify or amend the Plan in any  respect,  except that if at any time the
approval of the  stockholders of the Company is required by any law,  regulation
or contractual  provision  binding the Company,  such  modification or amendment
must be  approved  by the  stockholders  of the  Company not later than one year
after adoption thereof by the Board of Directors.

                                     -9-
(b) The termination or any modification or amendment of the Plan shall not,
without the consent of an Optionee,  materially and adversely  affect his or her
rights  under an Option  previously  granted to him or her.  The Board may amend
outstanding option agreements in a manner not inconsistent with the Plan.

21.  Withholding.

     (a) The Company  shall have the right to deduct  from  payments of any kind
otherwise  due to the  Optionee  any  federal,  state or local taxes of any kind
required by law to be withheld  with respect to any Shares  issued upon exercise
of Options under the Plan.  Subject to the prior approval of the Company,  which
may be withheld by the Company in its sole discretion, the Optionee may elect to
satisfy  such  obligations,  in whole or in part,  (i) by causing the Company to
withhold shares of Common Stock otherwise  issuable  pursuant to the exercise of
an Option or (ii) by  delivering  to the Company  shares of Common Stock already
owned by the  Optionee.  The Shares so delivered or withheld  shall be valued at
their then-current Fair Market Value as of the date that the amount of tax to be
withheld is to be determined.  An Optionee who has made an election  pursuant to
this  Section  20(a) may only  satisfy his or her  withholding  obligation  with
shares of Common  Stock  which are not  subject to any  repurchase,  forfeiture,
unfulfilled vesting or other similar requirements.

     (b) The  acceptance of shares of Common Stock upon exercise of an Incentive
Stock  Option  shall  constitute  an agreement by the Optionee (i) to notify the
Company if any or all of such Shares are disposed of by the Optionee  within two
years from the date the Option was  granted or within one year form the date the
Shares were transferred to the Optionee  pursuant to the exercise of the Option,
and (ii) if required by law, to remit to the Company,  at the time of and in the
case of any such  disposition,  an amount  sufficient  to satisfy the  Company's
federal,  state and local  withholding  tax  obligations  with  respect  to such
disposition,  whether or not,  as to both (i) and (ii),  the  Optionee is in the
employ of the Company at the time of such disposition.

22. Cancellation and New Grant of Options, etc.

     The Board of Directors (or the  Committee,  if  applicable)  shall have the
authority to effect,  at any time and from time to time, with the consent of the
affected Optionees, (i) the cancellation of any or all outstanding Options under
the Plan and the grant in  substitution  therefor of new Options  under the Plan
covering the same of  different  numbers of shares of Common Stock and having an
Exercise Price which is higher or lower than the then-current  Exercise Price of
such  outstanding  Options  or (ii) the  amendment  of the  terms of any and all
outstanding  Options under the Plan to provide an Exercise Price which is higher
or lower than the then-current Exercise Price of such outstanding Options.

23. Effective Date and Duration of the Plan.

     (a) Effective  Date. The effective date of the Plan, as initially  adopted,
is July 27, 1993.  Amendments  to the Plan not  requiring  stockholder  approval
shall  become  effective  when  adopted  by the Board of  Directors;  amendments
requiring  stockholder  approval  (as  provided  in  Section  20)  shall  become
effective when adopted by the Board of Directors,  but no Incentive Stock Option
granted after the date of such amendment shall become exercisable (to the extent
that such amendment to the Plan was required to enable the Company to grant such
Incentive Stock Option to a particular Optionee) unless and until such amendment
shall have been  approved by the  Company's  stockholders.  If such  stockholder
approval is not obtained  within twelve  months of the Board's  adoption of such
amendment,  any  Incentive  Stock  Options  granted on or after the date of such
amendment  shall  terminate  to the extent that such  amendment  to the Plan was
required to enable the Company to grant such  Option to a  particular  Optionee.
Subject to this  limitation,  Options may be granted  under the Plan at any time
after the effective date and before the date fixed for

                                     -10-
termination of the Plan.

     (b)  Termination.  Unless sooner  terminated in accordance with Section 16,
the  Plan  shall  terminate  upon the date on which  all  Shares  available  for
issuance  under the Plan shall have been issued under the Plan,  and the Company
has not further obligations under the Plan. The foregoing  notwithstanding,  the
term during which  Incentive  Stock Options may be granted under this Plan shall
expire on July 26, 2003.

24.  Rule 16b-3 Compliance.

     (a) Notice of Sale of Shares.  Directors  and  officers who fall within the
definition of "officer"  under Rule 16a-1(f)  promulgated  under the  Securities
Exchange Act shall deliver to the Corporate Secretary of the Company an executed
notice of  his/her  intention  to sell  Shares of  Common  Stock of the  Company
acquired upon  exercise,  in whole or in part, of an option  granted  hereunder.
Such notice,  in which there is  specified  the number of shares which are to be
sold and the date such shares were acquired, shall be provided at least one full
business day in advance of the proposed date of sale.

     (b)  Reformation To Comply with Rule 16b-3. It is the intent of the Company
that this Plan comply in all respects with  applicable  provisions of Rule 16b-3
or Rule  16a-1(c)(3)  under the Securities  Exchange Act in connection  with any
grant of Options or related  rights to a cash  payment to, or other  transaction
by, an Optionee  who is a Reporting  Person  (except for  transactions  exempted
under alternative Securities Exchange Act Rules or acknowledged in writing to be
non-exempt by such Optionee).  Accordingly, if any provision of this Plan or any
agreement  relating to an Option does not comply with the  requirements  of Rule
16b-3 or Rule  16a-1(c)(3)  as then  applicable  to any such  transaction,  such
provision will be construed or deemed amended to the extent necessary to conform
to the applicable  requirements of Rule 16b-3 or Rule  16a-1(c)(3) to the extent
required so that such Optionee shall avoid liability under Section 16(b).

25.  Provision for Foreign Participants.

     The Board of Directors  (or the  Committee,  if  applicable)  may,  without
amending the Plan,  modify  awards or Options  granted to  participants  who are
foreign nationals or employed outside the United States to recognize differences
in laws,  rules,  regulations  or customs  of such  foreign  jurisdictions  with
respect to tax, securities, currency, employee benefit or other matters.

26.  Governing Law.

     The  provisions  of this Plan shall be governed and construed in accordance
with the laws of the  State of  Delaware  without  regard to the  principles  of
conflicts of laws and applicable federal law.

                                     -11-
-12-
The Board of Directors
Out-Takes, Inc.
October 30, 1997
Page 13

October 30, 1997

The Board of Directors
Out-Takes, Inc.
1419 Peerless Place, Suite 116
Los Angeles, California 90035

Re:   Form S-8/S-3 Registration Statement
      Our File Reference:  33816.00001

Gentlemen:

      We have acted as special securities counsel to Out-Takes, Inc., a Delaware
corporation  (the  "Company"),  in connection with the preparation and filing by
the Company of a  registration  statement  on Form  S-8/S-3  (the  "Registration
Statement") to be filed with the Securities and Exchange  Commission (the "SEC")
under the Securities Act of 1933, as amended, relating to (i) stock options (the
"Options")  to purchase up to 1,586,786  shares of the  Company's  Common Stock,
$.01 par value per share (the "Common Stock"), granted or to be granted pursuant
to the  Company's  Amended and  Restated  1992  Employee  Stock Option Plan (the
"Plan"),  and (ii) a maximum of 1,586,786  shares (the "Shares") of Common Stock
issuable upon exercise of the Options.

      In connection  with the opinions  expressed  herein,  we have examined the
following  documents:  (i) the Certificate of Incorporation  of the Company,  as
amended,  (ii) the  By-Laws  of the  Company,  as  amended,  (iii) an  Officer's
Certificate, dated as of November 3, 1997, executed by Michael C. Roubicek, Vice
President of the Company, (iv) a Good Standing Certificate of the Company, dated
October 6, 1997, (v) the Plan, and (vi) the  Registration  Statement  (including
exhibits  thereto).  We  have  also  made  such  inquiries,  and  have  examined
originals,  certified copies or copies otherwise  identified to our satisfaction
of such other documents,  corporate  records and other  instruments,  as we have
deemed necessary or appropriate for the purposes of this opinion letter.
The Board of Directors
Out-Takes, Inc.
October 30, 1997
Page 2

      In our  examinations,  we have assumed the  genuineness of all signatures,
the legal capacity of all natural  persons,  the  authenticity  of all documents
submitted  to us as  originals,  the  conformity  to original  documents  of all
documents submitted to us as certified,  photostatic or facsimile copies and the
authenticity  of the originals of such  documents.  For the purpose of rendering
the opinions  expressed herein, we have further assumed the truth,  accuracy and
completeness of all the representations  and other factual statements  contained
in such documents,  records and other  instruments,  and that there have been no
changes in the matters  represented  therein from the  respective  dates thereof
through the date hereof. We have not undertaken any independent investigation to
determine the truth, accuracy or completeness of any of such factual statements,
although  nothing has come to our  attention  that leads us to believe  that any
such factual  statement is  incorrect.  Finally,  for purposes of rendering  the
opinions  expressed  herein,  we have  expressly  assumed that the  Registration
Statement as filed by the Company with the SEC will be identical to the draft of
the Registration  Statement reviewed by us in connection with the preparation of
this opinion letter.

      Based upon our examination of the foregoing  documents,  records and other
instruments, and expressly subject to the assumptions set forth above, it is our
opinion that:

      1.    The Company has been duly incorporated and is a
corporation in good standing under the laws of the State of Delaware;
and

      2. The  issuance  of the  Options and the Shares has been duly and validly
authorized  by the  Company,  and  when  issued  and  paid  for  in  the  manner
contemplated  by the Plan and the  Registration  Statement,  the Options will be
validly  issued  and  the  Shares  will  be  validly  issued,   fully  paid  and
non-assessable.

      We are members of the Bar of the State of  California.  Our  opinions  are
limited to matters involving the federal laws of the United States,  the laws of
the State of California, and the corporate laws of the State of Delaware, and we
do not express any opinion as to the laws of

                               -2-
The Board of Directors
Out-Takes, Inc.
October 30, 1997
Page 3

any other  jurisdiction.  The  information set forth in this letter is as of the
date of this letter and we  disclaim  any  undertaking  to advise you of changes
which may  thereafter  be  brought  or come to our  attention.  This  opinion is
rendered  solely  for  your  benefit  in  connection  with  the  filing  of  the
Registration  Statement  with the SEC,  and may not be relied  upon by any other
person or entity or for any other purpose  without our prior written  consent in
each instance.

      We  consent  to the  filing of this  opinion  letter as an  exhibit to the
Registration  Statement  and to the  reference  to  Graham & James LLP under the
caption "Legal  Matters" in the  Prospectus  contained  within the  Registration
Statement.

Very truly yours,

/s/ Graham & James LLP

GRAHAM & JAMES LLP

                               -3-
CONSENT OF INDEPENDENT AUDITOR

The Board of Directors and Stockholders of
  Out-Takes, Inc.:

       We consent to incorporation by reference in the registration statement on
Form S-8/S-3 of Out-Takes, Inc. of our report dated May 15, 1997 relating to the
balance sheets of Out-Takes,  Inc. as of March 31, 1997 and 1996 and the related
statements of  operations,  stockholders'  equity,  and cash flows for the three
years in the period ended March 31, 1997 which  report  appears in the March 31,
1997 annual report on Form 10-K of Out-Takes, Inc.

                                           /s/ Moore Stephens, P.C.

                                           Moore Stephens, P.C.
                                           Certified Public Accountants

Cranford, New Jersey
September 15, 1997