UTAH
(State
or other jurisdiction of
incorporation
or organization)
|
95-4545704
(I.R.S.
Employer
identification
no.)
|
305
NE 102ND AVENUE, SUITE 105
PORTLAND,
OREGON 97220
(Address
of principal executive offices)
|
(503)
257-6700
(Issuer’s
telephone number,
including
area code)
|
2
|
||
3
|
||
5
|
||
6
|
||
8
|
||
28
|
||
36
|
||
38
|
||
39
|
||
39
|
||
41 |
April
30,
2006
|
||||
Current
Assets:
|
||||
Cash
|
$
|
4,007,470
|
||
Other
current assets
|
43,872
|
|||
TOTAL
CURRENT ASSETS
|
4,051,342
|
|||
Property
and equipment (net of accumulated depreciation of $2,477)
|
13,182
|
|||
Technology
license and capitalized software development fee
(net
of accumulated amortization of $315,232)
|
5,735,768
|
|||
Deferred
financing costs (net of accumulated amortization of
$1,249,428)
|
2,292,390
|
|||
Other
assets
|
9,854
|
|||
TOTAL
ASSETS
|
$
|
12,102,536
|
Current
Liabilities:
|
||||
Convertible
notes payable
|
$
|
525,000
|
||
Convertible
debentures (net of debt discount of $24,136)
|
100,864
|
|||
Conversion
option liability
|
2,588,813 | |||
Account
payable and accrued expenses
|
785,473
|
|||
TOTAL
CURRENT LIABILITIES
|
4,000,150
|
|||
Long-term
portion of convertible debentures (net of debt discount of
$4,732,137)
|
1,308,427
|
|||
TOTAL
LIABILITIES
|
5,308,577
|
|||
Commitments,
Contingencies and Other Matters
|
||||
Stockholders’
Equity:
|
||||
Preferred
stock - $0.01 par value; 15,000,000 shares authorized;
-0-
shares issued and outstanding
|
—
|
|||
Common
stock - $0.001 par value; 900,000,000 shares authorized;
323,542,617
shares issued and 323,042,763 shares outstanding
|
323,543
|
|||
Treasury
stock - 499,854 shares at cost
|
(7,498
|
)
|
||
Additional
paid-in capital
|
75,096,501
|
|||
Unearned
compensation
|
(1,687,796
|
)
|
||
Accumulated
deficit
|
(66,930,791
|
)
|
||
TOTAL
STOCKHOLDERS’ EQUITY
|
6,793,959
|
|||
TOTAL
LIABILITIES AND STOCKHOLDERS’ EQUITY
|
$
|
12,102,536
|
For
the Six Months Ended
April
30,
|
|||||||
2006
|
2005
|
||||||
REVENUES
|
$
|
58,874
|
$
|
16,198
|
|||
OPERATING
EXPENSES:
|
|||||||
Cost
of sales
|
—
|
11,945
|
|||||
Amortization
of technology license and capitalized
|
|||||||
software
development fee
|
315,232
|
—
|
|||||
Research
and development expenses (including
|
|||||||
stock
based compensation of $26,860 and
|
|||||||
$0,
respectively)
|
137,600
|
7,053
|
|||||
Selling,
general and administrative expenses
|
|||||||
(including
stock based compensation of $983,710
|
|||||||
and
$888,930, respectively)
|
2,356,072
|
1,571,334
|
|||||
TOTAL
OPERATING EXPENSES
|
2,808,904
|
1,590,332
|
|||||
OPERATING
LOSS
|
(2,750,030
|
)
|
(1,574,134
|
)
|
|||
OTHER
(INCOME) EXPENSES:
|
|||||||
Interest
expense
|
2,223,816
|
639,646
|
|||||
Amortization
of deferred financing costs
|
568,819
|
53,109
|
|||||
Gain
on forgiveness of principal and interest
|
|||||||
on
Zaiq Note
|
(1,169,820
|
)
|
—
|
||||
Gain
on sale of property and equipment
|
—
|
(20,000
|
)
|
||||
Gain
on exchange of Redeemable Series B Preferred
|
|||||||
Stock
into common stock
|
—
|
(55,814
|
)
|
||||
Loss
on exchange of notes payable into common stock
|
446,386
|
—
|
|||||
Other
|
(3,000
|
)
|
(28,506
|
)
|
|||
TOTAL
OTHER (INCOME) EXPENSES
|
2,066,201
|
588,435
|
|||||
NET
LOSS
|
$
|
(4,816,231
|
)
|
$
|
(2,162,569
|
)
|
|
BASIC
AND DILUTED NET LOSS PER COMMON SHARE
|
$
|
(0.02
|
)
|
$
|
(0.02
|
)
|
|
WEIGHTED
AVERAGE NUMBER OF COMMON SHARES OUTSTANDING
|
267,242,791
|
93,198,867
|
For
the Three Months Ended
April
30,
|
|||||||
2006
|
2005
|
||||||
REVENUES
|
$
|
18,698
|
$
|
7,397
|
|||
OPERATING
EXPENSES:
|
|||||||
Cost
of sales
|
—
|
5,320
|
|||||
Amortization
of technology license and capitalized
|
|||||||
software
development fee
|
212,536
|
—
|
|||||
Research
and development expenses (including
|
|||||||
stock
based compensation of $5,044 and
|
|||||||
$0,
respectively)
|
52,556
|
—
|
|||||
Selling,
general and administrative expenses
|
|||||||
(including
stock based compensation of $333,958
|
|||||||
and
$609,381, respectively)
|
1,549,001
|
974,388
|
|||||
TOTAL
OPERATING EXPENSES
|
1,814,093
|
979,708
|
|||||
OPERATING
LOSS
|
(1,795,395
|
)
|
(972,311
|
)
|
|||
OTHER
(INCOME) EXPENSES:
|
|||||||
Interest
expense
|
978,860
|
360,864
|
|||||
Amortization
of deferred financing costs
|
324,852
|
28,490
|
|||||
Gain
on sale of property and equipment
|
—
|
(20,000
|
)
|
||||
Gain
on exchange of Redeemable Series B Preferred
|
|||||||
Stock
into common stock
|
—
|
(55,814
|
)
|
||||
Loss
on exchange of notes payable into common stock
|
446,386
|
—
|
|||||
Other
|
(3,000
|
)
|
(28,506
|
)
|
|||
TOTAL
OTHER (INCOME) EXPENSES
|
1,747,098
|
285,034
|
|||||
NET
LOSS
|
$
|
(3,542,493
|
)
|
$
|
(1,257,345
|
)
|
|
BASIC
AND DILUTED NET LOSS PER COMMON SHARE
|
$
|
(0.01
|
)
|
$
|
(0.01
|
)
|
|
WEIGHTED
AVERAGE NUMBER OF COMMON SHARES OUTSTANDING
|
306,633,326
|
99,061,445
|
Common
Stock
|
Treasury
Stock
|
Additional
Paid-in
Capital
|
Unearned
Compensation
|
Accumulated
Deficit
|
Total
Stockholders’
Equity
|
||||||||||||||||||||
Shares
|
Amount
|
Shares
|
Amount
|
||||||||||||||||||||||
Balance
at October 31, 2005
|
184,901,320
|
$
|
184,902
|
—
|
—
|
$
|
63,679,065
|
$
|
(22,771
|
)
|
$
|
(62,114,560
|
)
|
$
|
1,726,636
|
||||||||||
Repurchase
of common
stock
for cash
|
—
|
—
|
(499,854
|
)
|
$
|
(7,498
|
)
|
—
|
—
|
—
|
(7,498
|
)
|
|||||||||||||
Issuance
of common stock
under
consulting
agreements
|
11,000,000
|
11,000
|
—
|
—
|
1,859,000
|
(1,870,000
|
)
|
—
|
—
|
||||||||||||||||
Issuance
of common stock
for
conversion of
convertible
deben-
tures
and accrued
interest
|
104,170,465
|
104,170
|
—
|
—
|
1,743,155
|
—
|
—
|
1,847,325
|
|||||||||||||||||
Issuance
of common stock
for
convertible notes
payable
and accrued
interest
|
35,714
|
36
|
—
|
—
|
14,964
|
—
|
—
|
15,000
|
|||||||||||||||||
Issuance
of common stock
for
notes payable
and
accrued interest
|
12,064,494
|
12,064
|
—
|
—
|
1,278,837
|
—
|
—
|
1,290,901
|
|||||||||||||||||
Issuance
of common stock
upon
exercise of
warrants
|
11,370,624
|
11,371
|
—
|
—
|
557,160
|
—
|
—
|
568,531
|
|||||||||||||||||
Stock
options issued to
key
employees and
advisory
board
member
|
—
|
—
|
—
|
—
|
805,595
|
(805,595
|
)
|
—
|
—
|
||||||||||||||||
Warrants
issued with
notes
payable
|
—
|
—
|
—
|
—
|
120,000
|
—
|
—
|
120,000
|
|||||||||||||||||
Warrants
issued with
convertible
debentures
|
—
|
—
|
—
|
—
|
2,485,490
|
—
|
—
|
2,485,490
|
|||||||||||||||||
Warrants
issued to
placement
agent
|
—
|
—
|
—
|
—
|
1,792,452
|
—
|
—
|
1,792,452
|
|||||||||||||||||
Reclassification
of
conversion
option
liability
|
—
|
—
|
—
|
—
|
760,783
|
—
|
—
|
760,783
|
|||||||||||||||||
Amortization
of unearned
compensation
expense
|
—
|
—
|
—
|
—
|
—
|
1,010,570
|
—
|
1,010,570
|
|||||||||||||||||
Net
loss
|
—
|
—
|
—
|
—
|
—
|
—
|
(4,816,231
|
)
|
(4,816,231
|
)
|
|||||||||||||||
Balance
at April 30, 2006
|
323,542,617
|
$
|
323,543
|
(499,854
|
)
|
$
|
(7,498
|
)
|
$
|
75,096,501
|
$
|
(1,687,796
|
)
|
$
|
(66,930,791
|
)
|
$
|
6,793,959
|
For
the Six Months Ended
April
30,
|
|||||||
2006
|
2005
|
||||||
CASH
FLOWS FROM OPERATING ACTIVITIES
|
|||||||
Net
Loss
|
$
|
(4,816,231
|
)
|
$
|
(2,162,569
|
)
|
|
Adjustments
to reconcile net loss to net cash used in operating
activities:
|
|||||||
Consulting
fees and other compensatory elements of stock
issuances
|
1,010,570
|
888,930
|
|||||
Loss
on exchange of notes payable into common stock
|
446,386
|
—
|
|||||
Gain
on forgiveness of principal and interest on Zaiq
Note
|
(1,169,820
|
)
|
—
|
||||
Gain
on sale of property and equipment
|
—
|
(20,000
|
)
|
||||
Gain
on exchange of Redeemable Series B Preferred Stock
into common stock
|
—
|
(55,814
|
)
|
||||
Other
non-cash income
|
—
|
(33,514
|
)
|
||||
Amortization
of deferred financing costs
|
568,819
|
53,109
|
|||||
Amortization
of film in production costs
|
—
|
11,945
|
|||||
Amortization
of debt discount on notes
|
2,103,107
|
520,169
|
|||||
Amortization
of technology license and capitalized software
development fee
|
315,232
|
—
|
|||||
Depreciation
|
1,239
|
7,095
|
|||||
Change
in Assets (Increase) Decrease:
|
|||||||
Other
current assets
|
(9,841
|
)
|
(898
|
)
|
|||
Other
assets
|
370
|
(2,990
|
)
|
||||
Change
in Liabilities Increase (Decrease):
|
|||||||
Accounts
payable and accrued expenses
|
199,687
|
(22,329
|
)
|
||||
NET
CASH USED IN OPERATING ACTIVITIES
|
(1,350,482
|
)
|
(816,866
|
)
|
|||
CASH
FLOWS FROM INVESTING ACTIVITIES
|
|||||||
Acquisition
of technology license and development fee
|
(200,000
|
)
|
—
|
||||
Acquisition
of property and equipment
|
(4,499
|
)
|
—
|
||||
NET
CASH USED IN INVESTING ACTIVITIES
|
(204,499
|
)
|
—
|
||||
CASH
FLOWS FROM FINANCING ACTIVITIES
|
|||||||
Proceeds
from issuance of common stock
|
—
|
800,100
|
|||||
Proceeds
from exercise of warrants
|
568,531
|
—
|
|||||
Purchase
of treasury stock
|
(7,498
|
)
|
—
|
||||
Proceeds
from convertible debentures
|
6,000,000
|
—
|
|||||
Proceeds
from notes payable
|
750,000
|
300,000
|
|||||
Capitalized
financing costs
|
(742,450
|
)
|
(33,029
|
)
|
|||
Repayments
of notes payable
|
(944,291
|
)
|
—
|
||||
Repayments
of convertible notes payable
|
(435,322
|
)
|
(25,625
|
)
|
|||
NET
CASH PROVIDED BY FINANCING ACTIVITIES
|
5,188,970
|
1,041,446
|
|||||
INCREASE
IN CASH
|
3,633,989
|
224,580
|
|||||
CASH
- BEGINNING OF PERIOD
|
373,481
|
127,811
|
|||||
CASH
- ENDING OF PERIOD
|
$
|
4,007,470
|
$
|
352,391
|
For
the Six Months Ended
April
30,
|
|||||||
2006
|
2005
|
||||||
SUPPLEMENTAL
DISCLOSURE OF CASH FLOW INFORMATION:
|
|||||||
Cash
paid during the period for:
|
|||||||
Interest
|
$
|
3,158
|
$
|
5,400
|
|||
NON-CASH
INVESTING AND FINANCING ACTIVITIES:
|
|||||||
Common
stock issued for conversion of convertible debentures,
convertible
notes payable, notes payable and accrued interest
|
$
|
3,153,226
|
$
|
630,476
|
|||
Common
stock issued for consulting services
|
$
|
1,870,000
|
$
|
—
|
|||
Value
assigned to warrants issued in connection with
notes payable
|
$
|
120,000
|
$
|
—
|
|||
Value
assigned to warrants issued to holders of 2006
Debentures
|
$
|
2,485,490
|
$
|
—
|
|||
Value
assigned to warrants issued to placement agents
|
$
|
1,792,452
|
$
|
—
|
|||
Accounts
payable and accrued expenses satisfied by issuance of
common stock
|
$
|
—
|
$
|
71,911
|
|||
Common
stock issued for accrued liquidated damages
|
$
|
—
|
$
|
96,000
|
|||
Accounts
payable and accrued expenses converted to note payable
|
$
|
—
|
$
|
55,251
|
|||
Deferred
compensation converted to convertible note payable (See
footnote 6(4))
|
$
|
212,450
|
$
|
383,911
|
|||
Reclassification
of conversion option liability to equity
|
$
|
760,783
|
$
|
—
|
|||
Redeemable
Series B Preferred Stock exchanged into notes payable
|
$
|
—
|
$
|
2,392,000
|
|||
Redeemable
Series B Preferred Stock (recorded at $800,000) exchanged
into
common stock
|
$
|
—
|
$
|
744,186
|
·
|
persuasive
evidence of a sale or licensing arrangement with a customer exists;
|
·
|
the
film is complete and, in accordance with the terms of the arrangement,
has
been delivered or is available for immediate and unconditional delivery;
|
·
|
the
license period of the arrangement has begun and the customer can
begin its
exploitation, exhibition or sale;
|
·
|
the
arrangement fee is fixed or determinable; and
|
·
|
collection
of the arrangement fee is reasonably assured.
|
For
the Six
Months
Ended
April
30, 2005
|
For
the Three
Months
Ended
April
30, 2005
|
||||||
Net
loss, as reported
|
$
|
(2,162,569
|
)
|
$
|
(1,257,345
|
)
|
|
Add:
Stock-based employee compensation expense
included
in reported net loss
|
20,915
|
20,915
|
|||||
Less:
Total stock-based employee compensation expense
determined
under the fair value-based method of all awards
|
(190,788
|
)
|
(190,788
|
)
|
|||
Net
loss, pro-forma
|
$
|
(2,332,442
|
)
|
$
|
(1,427,218
|
)
|
|
Basic
and Diluted Net Loss per Common Share:
|
|||||||
As
reported
|
$
|
(0.02
|
)
|
$
|
(0.01
|
)
|
|
Pro-forma
|
$
|
(0.03
|
)
|
$
|
(0.01
|
)
|
Deferred
financing costs
|
$
|
3,541,818
|
||
Less:
accumulated amortization
|
(1,249,428
|
)
|
||
Deferred
financing costs, net
|
$
|
2,292,390
|
At
April 30, 2006
|
||||
Note
payable (1)
|
$
|
47,000
|
||
Notes
payable (ten notes) (2)
|
468,000
|
|||
Note
payable, 9% interest (3)
|
10,000
|
|||
TOTAL
|
$
|
525,000
|
(1)
|
Due
when receipts received by the Company from its Top Secret Productions,
LLC
joint venture exceed $375,000. The Company made payments of $25,000
and
$50,000 during the three months and six months ended April 30, 2006,
respectively.
|
(2)
|
Due
when receipts received by the Company from its Top Secret Productions,
LLC
joint venture exceed $2,250,000. Principal of $10,000 and accrued
interest
of $5,000 was converted into 35,714 shares of common stock during
the
three months ended April 30, 2006.
|
(3)
|
Due
when receipts received by the Company from its Top Secret Productions,
LLC
joint venture exceed $750,000.
|
Outstanding
Principal
Amount
|
Unamortized
Debt
Discount
|
Net
Carrying
Value
|
||||||||
Long-term
portion
|
$
6,000,000
|
$
4,704,111
|
$
1,295,889
|
Outstanding
Principal
Amount
|
Unamortized
Debt
Discount
|
Net
Carrying
Value
|
||||||||
Long-term
portion
|
$
40,564
|
$
28,026
|
$
12,538
|
Outstanding
Principal
Amount
|
Unamortized
Debt
Discount
|
Net
Carrying
Value
|
||||||||
Current
portion
|
$
125,000
|
$
24,136
|
$
100,864
|
·
|
issued
104,170,465 shares of common stock for conversion of convertible
debentures with a principal amount of $1,775,947 and accrued interest
of
$72,178;
|
·
|
repurchased
499,854 shares of common stock for $7,498 from
Zaiq;
|
·
|
issued
35,714 shares of common stock for conversion of convertible notes
payable
with a principal amount of $10,000 and accrued interest of
$5,000;
|
·
|
issued
12,064,494 shares of common stock valued at $1,290,901 in exchange
for the
return and cancellation of notes payable with a principal amount
of
$700,337 and accrued interest of
$144,178;
|
·
|
issued
11,370,624 shares of common stock upon exercise of warrants resulting
in
gross proceeds of $568,531; and
|
·
|
issued
11,000,000 shares of restricted common stock to consultants for services
valued at $1,870,000.
|
Expected
volatility
|
147%
|
Risk-free
interest rate
|
4.4%
|
Expected
dividends
|
0.0%
|
Expected
life
|
10
years
|
Under
the
Plans
|
Weighted
Average
Exercise
Price
|
Aggregate
Intrinsic
Value
|
Outside
the
Plans
|
Weighted
Average
Exercise Price
|
Aggregate
Intrinsic
Value
|
||||||||||||||
Outstanding
at October 31, 2005
|
993,750
|
$
|
0.97
|
15,900,000
|
$
|
0.25
|
|||||||||||||
Options
granted:
|
|||||||||||||||||||
Under
the Plans
|
100,000
|
0.08
|
—
|
—
|
|||||||||||||||
Outside
the Plans
|
—
|
—
|
26,400,000
|
$
|
0.03
|
||||||||||||||
Options
expired/cancelled:
|
|||||||||||||||||||
Under
the Plans
|
—
|
—
|
—
|
—
|
|||||||||||||||
Outside
the Plans
|
—
|
—
|
(14,000,000
|
)
|
$
|
0.17
|
|||||||||||||
Options
exercised:
|
|||||||||||||||||||
Under
the Plans
|
—
|
—
|
—
|
—
|
|||||||||||||||
Outside
the Plans
|
—
|
—
|
—
|
—
|
|||||||||||||||
Outstanding
at April 30, 2006
|
1,093,750
|
$
|
0.89
|
$
|
4,500
|
28,300,000
|
$
|
0.08
|
$
|
2,567,600
|
|||||||||
Exercisable
at April 30, 2006
|
999,306
|
$
|
0.97
|
$
|
250
|
16,100,000
|
$
|
0.13
|
$
|
1,381,800
|
(i)
|
Options
to purchase 2,000,000 shares of common stock were granted to directors.
These options were valued at $84,277 and have a 10-year term, an
exercise
price of $0.0319 per share, and vested on May 1, 2006;
|
(ii)
|
Options
to purchase 2,000,000 shares of common stock were granted in connection
with legal services performed for the Company. These options were
valued
at $84,277 and have a 10-year term, an exercise price of $0.0319
per
share, and vested on March 1, 2006; and
|
(iii)
|
Options
to purchase 100,000 shares of common stock were granted to an employee.
These options were valued at $16,887 and have a 10-year term, exercise
price of $0.08 per share, and vest equally over a three year
period.
|
Warrants
to purchase common stock
|
131,888,793
|
|||
2006
Debentures and accrued interest (1)
|
69,021,246
|
|||
Options
to purchase common stock
|
29,393,750
|
|||
Convertible
notes payable and accrued interest
|
1,757,414
|
|||
7%
debentures and accrued interest
|
975,204
|
|||
2005
Debentures and accrued interest (2)
|
500,247
|
|||
Total
as of April 30, 2006
|
233,536,654
|
(1)
|
Based
on a twenty day volume weighted average common stock price discounted
by
30% at April 30, 2006 of $0.08778.
|
(2)
|
Based
on a five day volume weighted average common stock price discounted
by 30%
at April 30, 2006 of $0.09002.
|
Telecommunications
Business
|
Entertainment
Business
|
Unallocable
|
Totals
|
||||||||||
Net
Sales - domestic
|
$
|
—
|
$
|
6,932
|
$
|
—
|
$
|
6,932
|
|||||
Net
Sales - foreign
|
$
|
—
|
$
|
51,942
|
$
|
—
|
$
|
51,942
|
|||||
Operating
income (loss)
|
$
|
(316,471
|
)
|
$
|
53,688
|
$
|
(2,487,247
|
)
|
$
|
(2,750,030
|
)
|
||
Depreciation
and amortization
|
$
|
316,471
|
$
|
—
|
$
|
—
|
$
|
316,471
|
|||||
Total
Identifiable Assets at April
30, 2006
|
$
|
8,041,340
|
$
|
—
|
$
|
4,061,196
|
$
|
12,102,536
|
Telecommunications
Business
|
Entertainment
Business
|
Unallocable
|
Totals
|
||||||||||
Net
Sales - domestic
|
$
|
—
|
$
|
9,898
|
$
|
—
|
$
|
9,898
|
|||||
Net
Sales - foreign
|
$
|
—
|
$
|
6,300
|
$
|
—
|
$
|
6,300
|
|||||
Operating
income (loss)
|
$
|
(1,899
|
)
|
$
|
(7,317
|
)
|
$
|
(1,564,918
|
)
|
$
|
(1,574,134
|
)
|
|
Depreciation
and amortization
|
$
|
1,899
|
$
|
5,196
|
$
|
—
|
$
|
7,095
|
|||||
Total
Identifiable Assets at April
30, 2005
|
$
|
5,935,110
|
$
|
1,009,777
|
$
|
371,967
|
$
|
7,316,854
|
Telecommunications
Business
|
Entertainment
Business
|
Unallocable
|
Totals
|
||||||||||
Net
Sales - domestic
|
$
|
—
|
$
|
698
|
$
|
—
|
$
|
698
|
|||||
Net
Sales - foreign
|
$
|
—
|
$
|
18,000
|
$
|
—
|
$
|
18,000
|
|||||
Operating
income (loss)
|
$
|
(213,156
|
)
|
$
|
17,397
|
$
|
(1,599,636
|
)
|
$
|
(1,795,395
|
)
|
||
Depreciation
and amortization
|
$
|
213,156
|
$
|
—
|
$
|
—
|
$
|
213,156
|
|||||
Total
Identifiable Assets at April
30, 2006
|
$
|
8,041,340
|
$
|
—
|
$
|
4,061,196
|
$
|
12,102,536
|
Telecommunications
Business
|
Entertainment
Business
|
Unallocable
|
Totals
|
||||||||||
Net
Sales - domestic
|
$
|
—
|
$
|
7,397
|
$
|
—
|
$
|
7,397
|
|||||
Net
Sales - foreign
|
$
|
—
|
$
|
—
|
$
|
—
|
$
|
—
|
|||||
Operating
income (loss)
|
$
|
(740
|
)
|
$
|
(3,601
|
)
|
$
|
(967,970
|
)
|
$
|
(972,311
|
)
|
|
Depreciation
and amortization
|
$
|
740
|
$
|
2,187
|
$
|
—
|
$
|
2,927
|
|||||
Total
Identifiable Assets at April
30, 2005
|
$
|
5,935,110
|
$
|
1,009,777
|
$
|
371,967
|
$
|
7,316,854
|
(i)
|
persuasive
evidence of a sale or licensing arrangement with a customer
exists;
|
(ii)
|
the
film is complete and, in accordance with the terms of the arrangement,
has
been delivered or is available for immediate and unconditional
delivery;
|
(iii)
|
the
license period of the arrangement has begun and the customer can
begin its
exploitation, exhibition or sale;
|
(iv)
|
the
arrangement fee is fixed or determinable; and
|
(v)
|
collection
of the arrangement fee is reasonably
assured.
|
·
|
an
increase in the net loss, which was $4,816,231, compared with $2,162,569
for the six months ended April 30, 2005; and
|
·
|
a
decrease for the six months ended April 30, 2006 of accounts payable
and
accrued liabilities of $199,687, compared to an increase of
accounts payable and accrued liabilities for the six months ended
April
30, 2005 of $22,329, resulting in a net decrease in cash used of
$177,358;
|
·
|
increased
amortization of deferred financing costs, which were $568,819 for
the six
months ended April 30, 2006, compared to $53,109 for the six months
ended
April 30, 2005, principally due to increased conversions of the May
2005
debentures, the repayment of a note payable, and the amortization
of
additional deferred financing costs related to the 2006
Debentures;
|
·
|
increased
amortization of debt discount on notes, which was $2,103,107 for
the six
months ended April 30, 2006, compared to $520,169 for the six months
ended
April 30, 2005, principally due to increased conversions of the May
2005
Debentures, the repayment of a note payable, and the amortization
of
additional debt discount related to the 2006
Debentures;
|
·
|
increased
amortization of technology license and capitalized software development
fee, which was $315,232 for the six months ended April 30, 2006,
compared
to $0 for the six months ended April 30, 2005, due to the commencement
of
amortization related to the market release of the E30 (Release 1.3)
to
prospective customers for evaluation and testing;
|
·
|
gain
on forgiveness of principal and interest on the promissory note to
Zaiq
Technologies, Inc. of $1,169,820 during the six months ended April
30,
2006;
|
·
|
increased
stock-based compensation expense, which was $1,010,570 for the six
months
ended April 30, 2006 compared to $888,930 for the six months ended
April
30, 2005; and
|
·
|
loss
on exchange of notes payable into common stock of $446,386 during
the six
months ended April 30, 2006.
|
In
March 2006, we issued
|
Name
of Director
|
Votes
For
|
Votes
Withheld
|
Brad
Ketch
|
257,328,351
|
3,737,068
|
Ray
Willenberg, Jr.
|
257,955,892
|
3,109,527
|
Jack
L. Peckham
|
256,575,209
|
4,490,210
|
Thomas
J. Cooper
|
257,200,818
|
3,864,601
|
3.1
|
Amended
and Restated Articles of Incorporation (incorporated by reference
to
Exhibit 3.1 of the Company’s Registration Statement on Form SB-2 filed
with the Commission on April 24, 2006).
|
4.1
|
Amendment
to Class 2005-A, -B and -C Common Stock Purchase Warrants dated as
of
February 21, 2006 (incorporated by reference to Exhibit 4.1 of the
Company’s Report on Form 8-K filed with the Commission on March 9,
2006).
|
4.2
|
Form
of 7% Senior Secured Convertible Debenture (incorporated by reference
to
Exhibit 4.1 of the Company’s Report on Form 8-K filed with the Commission
on March 13, 2006 (the “March 13, 2006 8-K”)).
|
10.1
|
License
Agreement dated as of February 6, 2006 between the Company and HelloSoft,
Inc. (Confidential treatment has been requested with r |