** **

**UNITEDSTATES**

**SECURITIESAND EXCHANGE COMMISSION**

**WASHINGTON, D.C. 20549**

  

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**FORM10-K/A**

  

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| **x** | ** ** | **ANNUAL REPORT PURSUANT TO SECTION  13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934** |
|-------|------------|-------------------------------------------------------------------------------------------|

  

**For The Fiscal Year Ended December31, 2005**

  
| **o** | ** ** | **TRANSITION REPORT PURSUANT TO  SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934** |
|-------|------------|-----------------------------------------------------------------------------------------------|

  

**For the Transition Period from              to              **

  

**CommissionFile Number 0-27412**

  

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**WATCHITMEDIA, INC.**

  

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| **Delaware**             | ** ** | **94-3173918** |
|--------------------------|------------|----------------|
| (State of incorporation) |       | (I.R.S. ID)    |

  

**655Montgomery Street, Suite 1000, San Francisco, CA 94111**

**(415)477-9905**

** **

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**Securitiesregistered pursuant to Section 12(b) of the Act:**

**None**

  

**Securitiesregistered pursuant to Section 12(g) of the Act:**

**CommonStock ($.01 par value)**

  

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Indicate by check mark if the registrant is a well-known seasonedissuer, as defined in Rule 405 of the Securities Act.   

Yes  o   No  ý.

 

Indicate by check mark if the registrant is not required to filereports pursuant to Section 13 or Section 15(d) of the Act.   

Yes  o   No  ý.

 

Indicate by check mark whether the registrant (1) hasfiled all reports required to be filed by Section 13 or 15(d) of the SecuritiesExchange Act of 1934 during the preceding 12 months (or for such shorter periodthat the registrant was required to file such reports), and (2) has beensubject to such filing requirements for the past 90days.    YES  x   NO  o

  

Indicate by check mark if disclosure of delinquentfilers pursuant to Item 405 of Regulation S-K is not contained herein and willnot be contained, to the best of registrant’s knowledge, in definitive proxy orinformation statements incorporated by reference in Part III of this Form10-K.  o

  

Indicate by check mark whether the registrant is anaccelerated filer (as defined in Rule 12b-2 of theAct).    YES  o   NO  **x**

  

The aggregate market value of the voting stock held bynon-affiliates of the registrant was approximately $2,700,261 based on theclosing price of $0.10 of the registrant’s Common Stock as reported on the OTCBulletin Board on June 30, 2005.

  

The number of shares of the registrant Common Stockoutstanding as of April 28, 2006 was 39,079,852. 

  

**DOCUMENTSINCORPORATED BY REFERENCE**

  

None. 

  

 

 

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Items 10, 11 12, 13 and 14 of the Form 10-K filed bythe Company on April 17, 2006 are hereby amended as follows. 

  

*Item 10— Directors and Executive Officers of the Registrant*

  

The number of directors on the Board of Directors iscurrently fixed at seven. Pursuant to the Company’s Certificate ofIncorporation and By-laws, the Board of Directors is divided into threeclasses, Class I, Class II and Class III, serving staggered three-year terms.One class of directors is elected at each annual meeting of stockholders toserve for the following three years. Currently there are two Class I directorswhose terms have expired but remain as directors until their successors areappointed, two Class II directors whose term expires in 2006, and one Class IIIdirector whose term expires in 2007. 

  

Class I Directors 

  

*DebraJ. Richardson*is51 years old, and joined the Company as a director in August 2001. Dr.Richardson is Dean of the School of Information and Computer Science andProfessor of Informatics at the University of California, Irvine; she holds theTed and Janice Smith Family Foundation Dean’s Endowed Chair. Dr. Richardsonjoined the faculty at UC Irvine in 1987, and was appointed department chair in2000. Her research interests include formal software quality analysis andtesting methods; she has developed leading edge software tools and worked withseveral companies in adopting technology to improve the quality of criticalsoftware systems. Dr. Richardson also serves as director of the Ada ByronResearch Center on Diversity in Computing and Information Technology, directorof the MICRO (Microelectronics Innovation and Computer Research Opportunities)program (one of the University of California’s Industry-Cooperative ResearchPrograms) and is a founding member of the UC Institute for Software Research.Dr. Richardson serves on the Boards of the Orange County chapters of Girls Inc.and Achievement Rewards for College Scientists (ARCS), on strategic advisoryboards of several academic institutions, and on the executive advisory board ofthe Association of Women in Technology. Richardson earned a Doctor ofPhilosophy and a Master of Science in computer and information science from theUniversity of Massachusetts, Amherst, and received a Bachelor of Arts degree inmathematics from Revelle College of the University of California, San Diego. 

  

*Tony C.Vickers*is 56years old and is a director of the Company. He joined the Company in thatcapacity in January 2004. Mr. Vickers is also Principal of IT ServicesDevelopment (ITSD), a results oriented management consulting firm that heestablished in 1998 that specializes in helping its clients to maximizeprofitable growth with the effective execution of projects ranging fromstrategic planning to mergers and acquisitions, and customer satisfactionsurveys. Previously, Mr. Vickers was CEO, President and a Director of ComputerPeople, a $400 million international IT professional services organization hefounded in 1972, and took public in 1987. In addition, Mr. Vickers was Chairmanof the IT Services Division of the Information Technology Association ofAmerica (ITAA) — the leading association for all aspects of the IT industryincluding software, services, system integration and Internet companies.Further, Mr. Vickers is a Director of Allin Corporation; a member of the Boardof Advisors of Bluecrane, Inc., and Make Corp.; a member of the NationalAssociation of Corporate Directors; and a member of the University of SouthernCalifornia’s Integrated Media Systems Center’s (IMSC) Board of Councilors. IMSC,which is sponsored 

 

 

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by the National Science Foundation, is engaged inresearch, education programs and industry collaboration in multimedia andInternet technologies. 

  

Class II Director 

  

*JamesR. Lavelle*is 55years old and is the founder, Chairman of the Board and Chief Executive Officerof the Company. Mr. Lavelle has served as Chief Executive Officer since hefounded the Company in 1993. From inception of the Company until August 1995,Mr. Lavelle was also Chairman of the Board of the Company, a position that hereassumed in April 1996. From 1985 to 1993, he was a business consultantspecializing in strategic marketing and organization development. From 1983 to1985, Mr. Lavelle was Senior Manager and Director of Management ConsultingServices for the San Francisco office of KMG Main Hurdman, an internationalaccounting firm. Prior to that, he was Manager of Management ConsultingServices in the San Francisco office of Price Waterhouse LLP, an internationalaccounting firm. Mr. Lavelle has a bachelor’s degree from University ofCalifornia at Santa Barbara and a Master of Business Administration degree fromSanta Clara University. 

* *

*R. Terry Leiweke*: is 57 years old and is a director of the Company.  He joined the Company in that capacity inMarch 2006.  After competing as a toplevel college athlete on the highly ranked University of Houston football team,Terry worked at ABC Sports producing college and National Football Leaguetelevision programming. Following that he spent seven years running televisionprogramming for the Houston Summit. In 1978, along with his three brothers, heformed The Leiweke Company and founded the Major Indoor Soccer League. TheLeiweke Company owned the Kansas City Comets. This success led to the creationof Sportsview Productions which was one of the original feeders of televisionprograms to Madison Square Garden and USA Networks. Sportsview went on toproduce a variety of film, commercial television and documentary programs. 

  

Recently, Mr. Leiweke became chief executiveofficer of The World Series of Golf, a global sports franchiseheadquartered in Las Vegas, Nevada. 

 

 

  

Class III Director 

  

*Paul D.Frankel*is 59years old and is a director of the Company. He joined the Company in thatcapacity in April 2005. Since June 2000, Mr. Frankel has been a partner andmanaging director of Van Der Moolen Specialists USA, a specialist firm on theNew York Stock Exchange. From 1989 until June 2000, Mr. Frankel was a partnerin Fagenson, Frankel and Streicher LLC, a specialist firm on the New York StockExchange. Mr. Frankel was a Senior Vice President and Treasurer of Jerome,Frankel & Company from 1979 until it became Fagenson, Frankel and StreicherLLC in 1989. Prior to 1979, Mr. Frankel was a partner and director of the JohnWebber Gallery in New York City and was owner of Paul David Press, an artpublishing house. Mr. Frankel currently serves on the Board of Directors of theJacobs Burns Film Center, an independent film and literacy educational centerlocated in Westchester Country of New York State and the Board of Directors ofVariety the Children’s Charity. 

 

 

Other Executive Officer 

  

*John C.Dong*is 52 yearsold and is Executive Vice President, Chief Financial Officer, Treasurer andSecretary of the Company.  Mr.Dong serves as our Executive Vice President, Chief Financial Officer, Treasurerand Secretary. From November 2005 until January 2006, Mr. Dong served asinterim Chief Financial Officer. For 15 of the past 27 years prior to joiningthe Company, Mr. Dong founded and grew a consulting firm specializing inacquisitions, turnarounds, IPOs and divestitures.  Mr. Dong’s experience includes financialservices, as well as high tech development firms, venture capital, Bio-Tech andmedia delivery and entertainment.  Priorto starting his consulting firm, Mr. Dong spent seven years as a seniorinternal consultant with Wells Fargo Bank and led the IPO effort for SanFrancisco Federal Savings.  Most recentlyhe led 

 

 

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the Sarbanes-Oxleycompliance team for Cell Genesys (NASDAQ: CEGE), a bio-tech firm focused on thedevelopment and commercialization of novel biological therapies for patientswith cancer.  Prior to that, he was CFOof BriteSmile Inc. a global leader in teeth whitening (NASDAQ: BSML), and priorthereto was the Chief Financial Officer of DV Capital, a diversified venturecapital firm.  Mr. Dong graduated fromthe University of California at Berkeley with a Bachelors Degree in Accountingand Finance.  Mr. Dong also holds an MBAand earned his CPA credentials with Coopers & Lybrand, Int’l.   

  

***Audit Committee Financial Expert***

  

The Board has determined that Paul Frankel, R. TerryLeiweke and Tony Vickers meet the definition of Audit Committee FinancialExpert, as specified by the rules of the United States Securities and ExchangeCommission and both are independent in accordance with listing standardsestablished by the New York Stock Exchange. 

  

***Code of Business Conduct and Ethics***

  

The Board has adopted a code of business conduct andethics that applies not only to the Company’s CEO and CFO, as required by theSEC, but also to its directors and employees. The current version of such codeof business conduct and ethics can be found on the Company’s Internet websiteat www.Watchit Media.com and is available in print free of charge to theCompany’s stockholders upon request. 

 

***Compliance with Section 16(a) of the Exchange Act***

 

Section 16(a) of the Exchange Act requires the Company’sofficers and directors, and persons who own more than 10% of a registered classof the Company’s equity securities, to file initial reports of ownership andreports of changes in ownership with the Securities and Exchange Commission(the “SEC”). Such persons are required by SEC regulation to furnish the Companywith copies of all Section 16(a) forms they file. 

  

Based solely on its review of the copies of such formsreceived by the Company with respect to the fiscal year ended December 31,2005, Debra J. Richardson, Tony C. Vickers and Harlan P. Kleiman each filed alate Form 5 reporting two transactions, one relating to the issuance of sharescommon stock for attendance at the 2004 annual meeting and one relating to theissuance of shares of common stock for director’s fees. James R. Lavelle fileda late Form 5 reporting relating to the grant of stock options. Curtis J.Parker filed a late Form 5 reporting two transactions both of which related tothe grant of stock options. Anthony M. Frank, a former director of the Company,who retired in August 2004, has not yet filed a Form 5 reporting thetermination of his reporting responsibilities under Section 16(a). Except forthese late filings, to the best of the Company’s knowledge, all other Section16(a) filing requirements have been satisfied. 

  

*Item 11— Executive Compensation*

  

The following table sets forth certain informationregarding the compensation earned by or awarded to the Chief Executive Officerand remaining executive officers of the Company for the fiscal years endedDecember 31, 2005, 2004 and 2003. 

 

 

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***Summary Compensation Table***

 
| ** **                      | ** ** | **Annual Compensation** | ** ** | **Long Term  Compensation   Awards** | ** ** |
|---------------------------------|------------|-------------------------|------------|--------------------------------------|------------|
| **Name and Principal Position** | ** ** | **Fiscal  Year**        | ** ** | **Salary($) (1)**               | ** ** | **Bonus($)** | ** ** | **Other($)** | ** ** | **Options/  SARs(#)** | ** ** |
| James R. Lavelle                |       | 2005                    |       | 291,996                              |       |   |   |   |   | 1,000,000 |   |
| Chairman and Chief              |       | 2004                    |       | 323,999                              |       | 639,597 |   | 76,660 | (2) | 400,000 |   |
| Executive Officer               |       |                    |       |                                 |       |   |   | 18,000 | (3) |   |   |
|                            |       | 2003                    |       | 440,441                              |       | 598,519 |   | 1,997 | (4) |   |   |
|                            |       |                    |       |                                 |       |   |   | 136,590 | (2) |   |   |
|                            |       |                    |       |                                 |       |   |   | 18,000 | (3) |   |   |
|                            |       |                    |       |                                 |       |   |   |   |   |   |   |
| Curtis J. Parker                |       | 2005                    |       | 144,112                              |       |   |   |   |   | 500,000 |   |
| Executive Vice                  |       | 2004                    |       | 193,232                              |       |   |   | 29,031 | (5) | 550,000 |   |
| President, Chief Financial      |       | 2003                    |       | 154,045                              |       |   |   | 1,123 | (4) |   |   |
| Officer, Treasurer              |       |                    |       |                                 |       |   |   | 18,773 | (5) |   |   |
| and Secretary                   |       |                    |       |                                 |       |   |   |   |   |   |   |
|                            |       |                    |       |                                 |       |   |   |   |   |   |   |
| John C. Dong                    |       | 2005                    |       | 16,275                               | (6)        |   |   |   |   |   |   |
| Acting Executive Vice           |       |                    |       |                                 |       |   |   |   |   |   |   |
| President, Chief Financial      |       |                    |       |                                 |       |   |   |   |   |   |   |
| Officer, Treasurer and          |       |                    |       |                                 |       |   |   |   |   |   |   |
| Secretary                       |       |                    |       |                                 |       |   |   |   |   |   |   |

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| (1) | Base salary earned.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |
|-----|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (2) | Represents $43,000 and $91,260 for duplicate housing  expenses and $33,660 and $45,330 for a gross-up of payroll taxes for 2004 and  2003, respectively (incurred in connection with the inclusion of the  duplicate living expenses in W-2 wages) paid for by the Company for such  employee’s southern California residence. These expenses were incurred in  connection with a cost cutting measure after the Company closed its northern  California corporate office and required the employee to commute and live  during the business week near the southern California office. |
| (3) | Represents auto allowance.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |
| (4) | Represents matching contributions by the Company  under the Company’s 401(k) Plan.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |
| (5) | Represents $15,750 and $11,600 for duplicate housing  expenses and $13,281 and $7,173 for a gross-up of payroll taxes for 2004 and  2003, respectively (incurred in connection with the inclusion of the  duplicate living expenses in W-2 wages) paid for by the Company for such employee’s  southern California residence. These expenses were incurred in connection  with a cost cutting measure after the Company closed its northern California  corporate office and required the employee to commute and live during the  business week near the southern California office.  |
| (6) | Represents consulting fees for November, 2005  through December 31, 2005.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |

 

 

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***Stock Option Grants Table***

  

The following table sets forth, as to the executiveofficers named in the Summary Compensation Table, information related to thegrant of stock options pursuant to the Company’s 1998 Long-Term Incentive Planduring the fiscal year ended December 31, 2005 

  

***Options Granted In The Fiscal Year Ended December 31, 2005***

  
| ** **       | ** ** | **Individual Grants**                                        | ** ** | ** **                                                                                                                           | ** ** | ** **                                             | ** ** |
|------------------|------------|--------------------------------------------------------------|------------|--------------------------------------------------------------------------------------------------------------------------------------|------------|--------------------------------------------------------|------------|
| **Name**         | ** ** | **Number of  Securities  Underlying Options   Granted** | ** ** | **Percentage of  Total Options  Granted to  Employees in the   fiscal year ended   December 31, 2005** | ** ** | **Exercise or  Base Price  Per Share  ($/Share)** | ** ** | **Potential Realizable Value   At Assumed Annual Rates of   Stock Price Appreciation   For Option Term ($)** | ** ** |
| ** **       | ** ** | ** **                                                   | ** ** | ** **                                                                                                                           | ** ** | ** **                                             | ** ** | **5%** | ** ** | **10%** | ** ** |
| James R. Lavelle |       | 1,000,000                                                    |       | 34                                                                                                                                   | %          | $0.13                                                  |       | 79,366 |   | 207,186 |   |
| Curtis J. Parker |       | 500,000                                                      |       | 17                                                                                                                                   | %          | $0.13                                                  |       | 39,683 |   | 103,593 |   |
|                  |            |                                                              |            |                                                                                                                                      |            |                                                        |            |  |  |  |  |  |  |

  

***Stock Option Exercises and Year End Values Table***

  

The following table shows, as to the executiveofficers named in the Summary Compensation Table, information with respect tothe unexercised options to purchase Common Stock granted under the 1995 and1998 Long-Term Incentive Plans and held as of December 31, 2005. 

  

***Value of Options at December 31, 2005***

  
| ** **       | ** ** | **Number of   Shares   Acquired   On Exercise** | ** ** | **Value   Realized   ($)** | ** ** | **Number of Securities   Underlying  Unexercised  Options Held at  December 31, 2005** | ** ** | **Value of Unexercised  In-the-Money Options  at December 31, 2005 ($)(1)** | ** ** |
|------------------|------------|------------------------------------------------------|------------|----------------------------|------------|----------------------------------------------------------------------------------------|------------|-----------------------------------------------------------------------------|------------|
| **Name**         | ** ** | ** **                                           | ** ** | ** **                 | ** ** | **Exercisable**                                                                        | ** ** | **Unexercisable**                                                           | ** ** | **Exercisable** | ** ** | **Unexercisable** | ** ** |
| James R. Lavelle |       | 0                                                    |       | 0                          |       | 1,800,000                                                                              |       | 0                                                                           |       | 0 |   | 0 |   |
| Curtis J. Parker |       | 0                                                    |       | 0                          |       | 1,250,000                                                                              |       | 100,000                                                                     |       | 0 |   | 0 |   |

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| (1) | Options are “in-the-money” if the closing market  price of the Company’s Common Stock exceeds the exercise price of the  options. The value of the unexercised options represents the difference  between the exercise price of such options and the closing market price  ($0.07) of the Company’s Common Stock on the OTC Bulletin Board on December  31, 2005. |
|-----|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

*** ***

***Employment Agreements; Covenants-Not-to-Compete***

  

Mr. James R. Lavelle, Watchit Media’s Chairman andChief Executive Officer, is a party to a three-year employment agreementeffective January 5, 2000 which, unless terminated or not renewed by him,continues thereafter on a year-to-year basis on the same terms and conditions.Mr. Lavelle’s employment agreement provides that, in the event of terminationof employment by the Company without cause, he shall be entitled to receivefrom the Company an amount equal to (i) three times the minimum base salary, asdefined in the employment agreement, plus (ii) three times his most recentannual bonus (not including any payments made under Watchit Media’s Long-RangeBonus Incentive Plan), without regard to whether he obtains subsequentemployment. Mr. Lavelle shall be deemed to have been terminated without causeby Watchit Media, if, among other things, Watchit Media fails to elect andcontinue Mr. Lavelle as Chief Executive Officer or Chairman or to nominate himfor re-election as a member of the board of directors unless Mr. Lavelle isterminated for good cause. In addition, his employment agreement provides that,in the event of a change in control of the Company where he has not received atleast five days’ notice of such change in control, he will be deemed to havebeen terminated without cause and shall be entitled to compensation asdescribed in the preceding sentence. Additionally, in such event he will not bebound by any non-compete terms in his employment agreement, as discussed below.If given at least five days notice of such change in control, he may elect toterminate his employment agreement and collect the respective compensationprovided above. 

  

In the event of a change in control, Mr. Lavelle isentitled to reimbursement for any excise taxes the employee incurs underSection 4999 of the Internal Revenue Code, as well as any interest or penaltiesrelated to the excise tax and any entitlements outside of the employmentagreement that are described in Section 280G(b)(2)(A)(i) of the InternalRevenue Code. In the employment agreement, a “Change in Control” is deemed tooccur if: (1) any person or entity, other than the Company, a corporation owneddirectly or indirectly by the stockholders of the Company in substantially thesame proportions as their ownership of the Common Stock of the Company, or anemployee benefit plan of Company or a subsidiary of Company, acquires directlyor indirectly Beneficial Ownership (as defined in Rule 13d-3 of the 

 

 

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Exchange Act) of any voting security of the Companyand immediately after such acquisition such person or entity is, directly orindirectly, the Beneficial Owner of voting securities representing 30% or moreof the total voting power of all of the then-outstanding voting securities ofthe Company; (2) a change in the composition of the individuals on the Board ofDirectors as a result of which fewer than one-half of the incumbent directorsare directors who either (a) had been directors of Company on the date 24months prior to the date of the event that constitutes a change in control (the“original directors”) or (b) were elected, or nominated with the affirmativevotes of at least a majority of the aggregate of the original directors whowere still in office at the time of the election or nomination and thedirectors whose election or nomination was previously so approved; (3) theconsummation of a merger or consolidation of Company with or into anotherentity or any other corporate reorganization, if more than 50% of the combinedvoting power of the continuing or surviving entity’s securities outstandingimmediately after such merger, consolidation or other reorganization is ownedby persons who were not stockholders of Company immediately prior to suchmerger, consolidation or other reorganization; or (4) the sale, transfer orother disposition of all or substantially all of the Company’s assets. Mr.Lavelle agreed that the purchase of OnSite Media, Inc., including the issuanceby the Company of shares of Common Stock and Warrants in connection therewith,would not result in a “Change in Control” as that term is defined in Mr.Lavelle’s employment agreement and that certain provisions of Mr. Lavelle’semployment agreement will not apply in connection with such purchase. 

  

The employment agreement of Mr. Lavelle contains acovenant-not-to-compete with the Company for a period of two years immediatelyfollowing the termination of employment; or, in the case of a terminationwithout cause, for a period of one year following the termination of hisemployment; or, in the case of a Change in Control in which he is not given atleast five days’ notice of such Change in Control, the covenant not-to-competedoes not apply for any period of time. If any court of competent jurisdictiondetermines that the scope, time or territorial restrictions contained in thecovenant are unreasonable, the covenant-not-to-compete shall be reduced to themaximum period permitted by such court. The compensation to which Mr. Lavelleis entitled, as the case may be, shall nonetheless be paid to him. 

 

Mr. Lavelle’s employment agreement calls for a minimumbase salary of $450,000. Mr. Lavelle’s annual base salary paid for the fiscalyear ended December 31, 2004 was $323,999. For the fiscal year ended December31, 2004, he was eligible for, and did receive, a $639,597 bonus based uponclosing the acquisition of OnSite Media, Inc. on March 2, 2004. Pursuant to theLong-Range Bonus Incentive Plan, Mr. Lavelle is eligible for bonuses up throughthe 2006 fiscal year based upon the operating results of the Company. InNovember 2004, Mr. Lavelle voluntarily reduced his base compensation to$273,996. 

  

Mr. Curtis J. Parker resigned as Executive VicePresident, Chief Financial Officer, Treasurer and Secretary on November 17,2005.

*** ***

***Equity Compensation***

  

The following table sets forth, as of December 31,2005, outstanding awards and shares remaining available for future issuanceunder the Company’s compensation plans under which equity securities areauthorized for issuance (excluding 401(k) plans and similar tax-qualifiedplans). 

 

 

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| **Plan Category**                                             | ** ** | **(a)   Number of securities to  be issued upon exercise of   outstanding options,  warrants and rights** | ** ** | **(b)   Weighted-average   exercise price of   outstanding options,  warrants and rights** | ** ** | **(c)  Number of securities   remaining available for   future issuance under   equity compensation plans** | ** ** | ** ** | ** ** |
|---------------------------------------------------------------|------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|-------------------------------------------------------------------------------------------------|------------|-----------------------------------------------------------------------------------------------------------------------|------------|------------|------------|
| Equity compensation plans approved by security holders        |       | 775,500                                                                                                                                                     |       | $0.40                                                                                           |       | 2,727,443                                                                                                             |       | (1         | )          |
| Equity compensation plans not approved by security holders(2) |       | 4,442,810                                                                                                                                                   |       | $0.14                                                                                           |       | not determinable                                                                                                 |       |       |       |
| Total                                                         |       | 5,218,310                                                                                                                                                   |       | $0.18                                                                                           |       | not  determinable                                                                                                     |       |       |       |

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| (1) | Includes 3,735,460 shares of Common Stock remaining  available for future issuance under the Company’s 1998 Long-Term Incentive  Plan (“1998 Plan”). Under the 1998 Plan, an aggregate of 18% of the then  outstanding shares of Common Stock are available for awards under such plan.  Unless otherwise provided by the Compensation Committee in an award  agreement, all outstanding awards under the 1998 Plan will generally become  exercisable or vested upon a “change in control” of the Company. The  acquisition by the Company of OnSite Media, Inc. on March 2, 2004 constituted  a “change in control” of the Company under the 1998 Plan. As a result, all  outstanding awards under the 1998 Plan became fully exercisable and vested as  of March 2, 2004. The number of securities remaining available for future  issuance also includes 2,000,000 shares of Common Stock remaining available  for future issuance under the Company’s 1999 Leveraged Stock Purchase Plan. |
|-----|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

 
| (2) | The 2000 Long-Term Incentive Plan (the “2000 Plan”)  was adopted by the Company’s Board of Directors on August 11, 2000, but was  not approved by stockholders. Awards under the 2000 Plan may be granted by  the Compensation Committee of the Board of Directors (or such other committee  designated by the Board of Directors to administer the 2000 Plan) and may  include: (i) non-qualified options to purchase shares of Common Stock; (ii)  stock appreciation rights (“SARs”), whether in conjunction with the grant of  stock options or independent of such grant, or stock appreciation rights that  are only exercisable in the event of a change in control of the Company or  upon other events; (iii) restricted stock, consisting of shares that are  subject to forfeiture based on the failure to satisfy employment-related restrictions;  (iv) deferred stock, representing the right to receive shares of stock in the  future; (v) bonus stock and awards in lieu of cash compensation; (vi)  dividend equivalents, consisting of a right to receive cash, other awards, or  other property equal in value to dividends paid with respect to a specified  number of shares of Common Stock, or other periodic payments; or (vii) other  awards not otherwise provided for, the value of which are based in whole or  in part upon the value of the Common Stock. Unless otherwise determined by  the Compensation Committee, all outstanding awards under the 2000 Plan will  generally become fully exercisable or vested upon a “change in control” of  the Company. The acquisition by the Company of OnSite Media Inc. on  March 2, 2004 constituted a “change in control” of the Company under the  2000 Plan. As a result, all outstanding awards under the 2000 Plan became  fully exercisable and vested as of March 2, 2004. The Compensation Committee  has the discretion to establish all of the terms and conditions of awards  under the 2000 Plan and to interpret the terms of the 2000 Plan. There is no  limit on the maximum number of shares of Common Stock that may be awarded  under the 2000 Plan. The 2000 Plan may be amended, altered, suspended, discontinued,  or terminated by the Board of Directors at any time. |
|-----|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

 

 

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***Performance Graph***

 

The following chart compares the yearly percentagechange in the cumulative total stockholder return on the Company’s Common Stockfrom March 31, 2000 through December 31, 2004, with the cumulative total returnon the Russell 2000 Index and the NASDAQ Composite Index. The comparisonassumes $100, as of February 14, 1996, the date of the Company’s initial publicoffering (the “Offering”) was invested in the Company’s Common Stock and ineach of the foregoing indices and assumes reinvestment of dividends, asapplicable. Watchit Media’s Offering price of $9.00 was used as the beginningprice of the Common Stock. Dates on the following chart represent the last dayof the indicated **fiscal year**.Watchit Media has paid no dividends during the periods shown.

 

 

**Comparisonof Five Year Cumulative Total Return**

  
| **Company/Index**      | ** ** | **December 31,   2001** | ** ** | **December 31,   2002** | ** ** | **December 31,   2003** | ** ** | **December 31,   2004** | ** ** | **December 31,   2005** | ** ** |
|------------------------|------------|------------------------------|------------|------------------------------|------------|------------------------------|------------|------------------------------|------------|------------------------------|------------|
| Watchit Media, Inc.    |       | $                            | 2.89       |                         | $          | 4.11                         |       | $                            | 2.44       |                         | $          | 1.22 |   | $ | 0.78 |   |
| Russell 2000 Index     |       | $                            | 151.90     |                         | $          | 119.12                       |       | $                            | 173.17     |                         | $          | 202.61 |   | $ | 209.34 |   |
| NASDAQ Composite Index |       | $                            | 178.82     |                         | $          | 122.45                       |       | $                            | 183.68     |                         | $          | 199.45 |   | $ | 202.19 |   |
|                        |            |                              |            |                              |            |                              |            |                              |            |                              |            |  |  |  |  |  |  |  |  |  |  |

 

***Director Compensation***

 

New outsidedirectors receive $10,000 worth of our Common Stock when they join the Board,at the closing price of the Common Stock the day the director joins the Board.Outside directors receive $5,000 worth of our Common Stock on the date of theCompany’s annual meeting at the closing price of the Common Stock the day ofthe meeting. Outside directors receive $20,000 in annual cash compensation paidin quarterly installments of $5,000. The Board may decide from time to time totake its installment compensation in the same value in our Common Stock.Outside directors receive $1,500 for each Board teleconference. Outsidedirectors receive $2,500 for Board meetings which require their personalattendance. We pay directors’ out-of-pocket expenses associated with meetingattendance or other activities conducted on behalf of the Company.

 

Each non-employee director received anautomatic annual option grant under the 1998 Long-Term Incentive Plan toacquire 5,000 shares of Common Stock on the date of each of the Company’sannual 

 

 

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meetings held after September 9, 1998. All of suchoptions have an exercise price equal to the fair market value of the CommonStock on the date of grant, and are exercisable immediately except as limitedby the rules and regulations of the Securities Act of 1933, as amended (the “SecuritiesAct”), and the Securities Exchange Act of 1934, as amended (the “Exchange Act”),and expire ten years from the date of grant. Beginning in 2004, directorsreceived Common Stock rather than a stock option grant related to the annualmeeting.

 

Directors are also reimbursed for out-of-pocketexpenses incurred for attending meetings of the Board of Directors or committeesthereof, and for other expenses incurred in their capacity as directors.

 

***Compensation Committee Report on Executive Compensation***

 

The following report of the Board of Directors ofWatchit Media shall not be deemed filed under either the Securities Act or theExchange Act except to the extent that Watchit Media specifically incorporatesthis information by reference.

 

**Overview**

 

The key components of executive officer compensationare salary, bonus and equity-based awards.

 

The Board of Directors hold primary responsibility fordetermining executive officer compensation levels, subject to the terms ofexecutive employment agreements.. The Board of Directors has adopted acompensation philosophy intended to align compensation with Watchit Media’soverall business strategy. The philosophy guiding the executive compensationprogram is designed to link executive compensation and stockholder value. Thegoals of the program are to:

  

•                  Compensate executive employees in amanner that aligns the employees’ interests with the interests of thestockholders; 

  

•      Encourage continuation of Watchit Media’sentrepreneurial spirit; 

  

•      Reward executives for successful long-term strategicmanagement; 

  

•      Recognize outstanding performance; and 

  

•      Attract and retain highly qualified and motivatedexecutives. 

 

The Board of Directors believes that Watchit Media’sexecutive compensation program should consist primarily of base salaries,performance bonuses and equity-based awards. The Board of Directors hasstructured these compensation elements to motivate and reward executivemanagement for performance that builds long-term stockholder value. Inparticular, base salaries and discretionary bonuses have been designed to giveWatchit Media’s executives the potential to earn in excess of competitiveindustry compensation if certain subjective and objective operating andperformance goals for Watchit Media are achieved. Moreover, the Board ofDirectors will continue granting Watchit Media’s executives and other keyemployees stock options and/or other equity-based awards at current marketvalue. Such options have no monetary value to the executives unless and untilthe market price of Watchit Media’s Common Stock increases. In this manner,Watchit Media’s executives will be compensated as stockholder

value increases. The Board of Directors anticipatesthat discretionary bonus payments and option grants made during the fiscal yearended December 31, 2004 and thereafter were and will be based on multiplesubjective and objective measurements and criteria linked to building long-termstockholder value.

 

The cash compensation paid to Watchit Media’sexecutive officers during the fiscal year ended December 31, 2005 was inaccordance with arms-length negotiations between Watchit Media and suchexecutive officers.

 

 

9

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**ChiefExecutive Officer’s Compensation**

 

Mr. James R. Lavelle, the Company’s Chairman and ChiefExecutive Officer, is a party to a three-year employment agreement which was negotiatedat arms-length and became effective on January 5, 2000 which, unless terminatedor not renewed by him, continues thereafter on a year-to-year basis on the sameterms and conditions. This employment agreement supercedes prior employmentagreements that the Company had entered into with Mr. Lavelle. Mr. Lavelle’semployment agreement provides for a minimum base salary of $450,000 (subject toincrease by the Compensation Committee) and the right to receive annuallydiscretionary incentive bonuses provided by the Compensation Committee and toreceive stock option grants at the discretion of the Compensation Committee.Mr. Lavelle may also participate in Watchit Media’s Long-Range Incentive BonusPlan.

 

Mr. Lavelle was eligible for, and did receive, a $639,597bonus during the fiscal year ended December 31, 2004 upon closing theacquisition of OnSite Media, Inc, on March 2, 2004. In November 2004, Mr.Lavelle voluntarily reduced his base compensation by $60,000 per year to$274,000 and received a grant of 400,000 stock options for the willingness toreduce compensation.

 

This report is submitted by the following independentmembers of the Company’s Board of Directors.

 

**R. Terry Leiweke**

**Debra J. Richardson**

**Tony C. Vickers**

 

**CompensationCommittee Interlocks and Insider Participation**

 

All of the members of the Compensation Committee arenon-employee directors of the Company and are not former officers of theCompany or its subsidiaries. No executive officer of the Company serves as amember of the board of directors or on the compensation committee of acorporation for which any of the Company’s directors serving on theCompensation Committee or on the Board of Directors of the Company is anexecutive officer.

* *

*Item 12— Security Ownership of Certain Beneficial Owners and Management*

 

The following table sets forth as of April 28, 2006information regarding the beneficial ownership of the Common Stock of theCompany by (i) each person known to beneficially own more than 5% of theoutstanding shares of Common Stock, (ii) each of the Company’s directors, (iii)each named executive officer and each officer named in the Summary CompensationTable and (iv) all executive officers and directors as a group. Unlessotherwise indicated, all persons listed have an address c/o the Company’sprincipal executive offices and have sole voting and investment power withrespect to their shares unless otherwise indicated.

  
| ** **                                                      | ** ** | **Shares Beneficially Owned** | ** ** |
|-----------------------------------------------------------------|------------|-----------------------------------------|------------|
| **Name**                                                        | ** ** | **Number**                              | ** ** | **Percent** | ** ** |
| Stiassni Capital Partners, LP(1)                                |       | 6,666,668                               |       | 11.25 | % |
| Colt Melby(2)                                                   |       | 5,000,000                               |       | 8.44 | % |
| James R. Lavelle(3)                                             |       | 4,955,307                               |       | 8.36 | % |
| Cliff Melby(4)                                                  |       | 3,333,334                               |       | 5.63 | % |
| Loren W. Willman(5)                                             |       | 1,514,581                               |       | 2.56 | % |
| John C. Dong(6)                                                 |       | 300,000                                 |       | * |   |
| Debra J. Richardson(7)                                          |       | 182,582                                 |       | * |   |
| Tony C. Vickers(8)                                              |       | 161,594                                 |       | * |   |
| Paul D. Frankel(9)                                              |       | 44,286                                  |       | * |   |
| R. Terry Leiweke(10)                                            |       | 5,000                                   |       | * |   |
| All executive officers and directors as a group (6 persons)(11) |       | 5,648,769                               |       | 9.53 | % |

----

| * | Less than 1% |
|---|--------------|

 

 

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| (1)  | Includes 3,333,334 shares issuable upon exercise of warrants  exercisable within 60 days of April 28, 2006.                                                                                                                                                                                                                                                                                            |
|------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (2)  | Includes 1,666,667 shares issuable upon exercise of  warrants exercisable within 60 days of April 28 2006.                                                                                                                                                                                                                                                                                             |
| (3)  | Includes 2,800,000 shares issuable upon exercise of  options and 1,000,000 shares issuable upon exercise of warrants exercisable  within 60 days of April 28, 2006.                                                                                                                                                                                                                                    |
| (4)  | Includes 1,111,111 shares  issuable upon exercise of warrants exercisable within 60 days of April 28  2006.                                                                                                                                                                                                                                                                                            |
| (5)  | Includes 1,514,581 shares issuable upon exercise of  warrants help by Mr. Willman within 60 days of April 28, 2006. This  information is based solely on the Company’s records of the number of shares  of Common Stock that may be received upon exercise of warrants held by Mr.  Willman and does not include any other shares of Common Stock that may be  beneficially owned by Mr. Willman. |
| (6)  | Includes 300,000 shares issuable upon exercise of  options exercisable within 60 days of April 28, 2006.                                                                                                                                                                                                                                                                                               |
| (7)  | Includes 15,000 shares issuable upon exercise of  options exercisable within 60 days of April 28, 2006.                                                                                                                                                                                                                                                                                                |
| (8)  | Includes 15,000 shares issuable upon exercise of  options exercisable within 60 days of April 28, 2006.                                                                                                                                                                                                                                                                                                |
| (9)  | Includes 5,000 shares issuable upon exercise of  options exercisable within 60 days of April 28, 2005.                                                                                                                                                                                                                                                                                                 |
| (10) | Includes 5,000 shares issuable upon exercise of  options exercisable within 60 days of April 28, 2006.                                                                                                                                                                                                                                                                                                 |
| (11) | Includes 3,140,000 shares issuable upon exercise of  options and 1,000,000 shares issuable upon exercise of warrants exercisable  within 60 days of April 28, 2006                                                                                                                                                                                                                                     |

 

*Item 13— Certain Relationships and Related Transactions*

 

The following is information with respect to certainrelationships and related transactions between directors and officers, on theone hand, and the Company, on the other hand.

** **

**CertainTransactions**

 

On March 31, 1996, the Company advanced to James R.Lavelle, Chairman of the Board and Chief Executive Officer of the Company,$37,902, evidenced by an unsecured demand promissory note bearing interestannually at a rate of 6%. The entire amount of such advance remainsoutstanding. Since the beginning of the 2000 fiscal year, the Company has alsoadvanced to Mr. Lavelle an aggregate amount of $619,000, evidenced by sevenseparate unsecured demand promissory notes. The purpose of such advances was tocover margin calls made on brokerage accounts held by Mr. Lavelle. On May 1,2000, Mr. Lavelle repaid $15,330 of principal and $34,670 of interest. Thenotes, although due on demand, were issued with original due dates in 2001. Thenotes were extended by a vote of the Compensation Committee of the Board ofDirectors on October 29, 2001 for three years to October 29, 2004. The interestrates on these notes remain unchanged at rates between 7.75% and 8.25%. Paymentof the notes is accelerated if the Company’s Common Stock reaches certainsustained target levels.

 

During the year ended December 31, 2003, the ChiefExecutive Officer repaid a portion of notes receivable due the Company. Inprior years the Chief Executive Officer had voluntarily reduced his basecompensation from its authorized level. Upon restoration of base compensationclose to its authorized level in 2003, the Chief Executive Officer used theincrease in compensation of $106,363 to offset against the notes receivable duethe Company. In addition, prior to December 31, 2003, the CompensationCommittee of the Board of Directors authorized a bonus to the Chief ExecutiveOfficer of $598,519 upon the signing of a definitive agreement for the purchaseof OnSite Media, Inc. The amount of bonus remaining, after tax was withheld bythe Company, was used to repay $354,816 of the notes receivable and accruedinterest. During 2004, the Compensation Committee of the Board of Directorsauthorized a further bonus of $639,597 upon the closing of the purchase ofOnsite Media, Inc. The amount of the bonus remaining, after tax was withheld bythe Company, was used to repay $354,527 of the notes receivable and accruedinterest. Upon payment of the second bonus in 2004, Mr. Lavelle satisfied theentire principal and accrued interest on all demand loans due the Company.

 

On September 8, 1999, the stockholders approved theWatchit Media, Inc. 1999 Leveraged Stock Purchase Plan (the “LSPP”), whichauthorizes the purchase of shares of Common Stock by eligible employees who areselected by the Compensation Committee of the Board to participate in the LSPPon terms and conditions determined by the Compensation Committee. Since theinception of the LSPP through March 31, 2000, Mr. Lavelle has been issued750,000 shares of Common Stock. Shares issued under the LSPP resulted in notesreceivable from Mr. Lavelle for $2,671,875 at 5.93% interest. Mr. Lavelle’snotes remained outstanding until March 29, 2005, when the Board decided to unwindthe sale of shares previously issued in connection with the LSPP. The Boardreceived an opinion of special Delaware counsel 

 

 

11

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to the effect that the receipt by the Company of thepromissory note from Mr. Lavelle as the sole consideration for the shares ofCommon Stock acquired did not constitute the consideration required by Section152 of the Delaware General Corporation Law then in effect for the shares ofCommon Stock to be validly issued, fully paid and nonassessable shares ofCommon Stock of the Company. As a result, the notes receivable from Mr.Lavelle, in the face amount of $2,671,875, together with all interest accruedthereunder, has been cancelled and the 750,000 shares of Common Stock werereturned by Mr. Lavelle to the Company and cancelled.

* *

*Item 14— Principal Accountant Fees and Services*

 

The Board of Directors authorized the dismissal ofKPMG LLP as independent auditors for the Company on June 30, 2004 and theimmediate engagement of Rowbotham & Company LLP as successor independentauditors. The following is information with respect to fees and the associatedservices rendered by KPMG LLP and Rowbotham & Company LLP during 2005.

  

•                  Audit Fees — The aggregate fees billed byKPMG LLP for the review of the financial statements as included on Form 10-Qfor the quarter ended March 31, 2004 were $20,268. The aggregate fees billed byKPMG LLP for services rendered in connection the registration statement asincluded on Form S-4/A dated February 4, 2004 were $11,110. The aggregate feesbilled by Rowbotham & Company LLP for the audit of the Company’s annualfinancial statements (including all the Company’s subsidiaries) for the threeyears ended December 31, 2004 as included on Form 10-K, and the reviews of thefinancial statements as included on Forms 10-Q for the quarters ended June 30,2004 and September 30, 2004 were $203,985. The aggregate fees billed byRowbotham & Company LLP for the audit of the Company's annual financialstatements (including all the Company’s subsidiaries) for the year endedDecember 31, 2005 as included on Form 10-K and the reviews of the financialstatements as indicated on Forms 10-Q for the quarters ended March 31, 2005,June 30, 2005 and September 30, 2005 were $170,066.

•      Audit-Related Fees — None

•      Tax Fees — None

•      AllOther Fees — None. 

 

Pre-approval policies: The Board of directors isrequired to pre-approve the rendering, by our independent auditor, of audit orpermitted non-audit services.

** **

 

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**SIGNATURES**

 

**Pursuantto the requirements of Section 13 or 15(d) of the Securities Exchange Act of1934, the Registrant has duly caused this report to be signed on its behalf bythe undersigned, thereunto duly authorized, in the City of San Francisco, Stateof California on the 28****th****day of April, 2006.**

 
|       |                    |                        |
|------------|-------------------------|-----------------------------|
| ** ** | **WATCHIT MEDIA, INC.** |
|       |                    |                        |
| ** ** | **By:**                 | **/s/ James R. Lavelle**    |
|       | ** **              | **James R. Lavelle**        |
|       | ** **              | **Chief Executive Officer** |

 

**Pursuantto the requirements of the Securities Act of 1934, this report has been singedbelow by the following persons in the capacities indicated on behalf of WatchitMedia, Inc. this 28****th****day of April 2006.**

 
| **Signature**             | ** ** | **Capacity**                                               | ** ** | **Date**            |
|---------------------------|------------|------------------------------------------------------------|------------|---------------------|
|                      |       |                                                       |       |                |
| **/s/  James R. Lavelle** | ** ** | **Chairman  of the Board of Directors, Director and**      | ** ** | **April  28, 2006** |
| **James R. Lavelle**      |       | **Chief  Executive Officer (Principal Executive Officer)** |       |                |
| ** **                | ** ** | ** **                                                 | ** ** | ** **          |
| **/s/  John C. Dong**     | ** ** | **Executive  Vice President, Chief Financial Officer**     | ** ** | **April  28, 2006** |
| **John C. Dong**          |       | **(Principal  Financial and Accounting Officer)**          |       |                |
| ** **                | ** ** | ** **                                                 | ** ** | ** **          |
| *****                     |       | **Director**                                               |       | **April  28, 2006** |
| **R. Terry Leiweke**      |       |                                                       |       |                |
|                      |       |                                                       |       |                |
| *****                     |       | **Director**                                               |       | **April  28, 2006** |
| **Debra J. Richardson**   |       |                                                       |       |                |
|                      |       |                                                       |       |                |
| *****                     |       | **Director**                                               |       | **April  28, 2006** |
| **Tony C. Vickers**       |       |                                                       |       |                |
|                      |       |                                                       |       |                |
|                      |       | **Director**                                               |       | **April  28, 2006** |
| **Paul D. Frankel**       |       |                                                       |       |                |
|                      |       |                                                       |       |                |
| **/s/  James R. Lavelle** |       | **Attorney-in-Fact***                                      |       |                |
| **James R. Lavelle**      |       |                                                       |       |                |

 

 

 
| **EXHIBIT NO.** | ** ** | **DESCRIPTION**                                                                                 |
|----------------------|------------|-------------------------------------------------------------------------------------------------|
| 24.1                 |       | Power  of attorney (included on signature page of original Form 10-K filed on April  17, 2006)  |
|                 |       |                                                                                            |
| 31.1                 |       | Certification  of the Chief Executive Officer pursuant to Rule 13a-14(a of the Exchange Act**)  |
|                 |       |                                                                                            |
| 31.2                 |       | Certification  of the Chief Financial Officer pursuant to Rule 13a-14(a of the Exchange  Act**) |

----

| ** | Filed herewith. |
|----|-----------------|

 

 

 

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