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UNITED STATES SECURITES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 FORM 10-QSB
 (Mark One)
 þ
    
    QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the quarterly period ended September 30, 2006
 o
    
    TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT
 For the transition period from  to
 Commission file number: 000-26073
 IMMEDIATEK, INC.
 (Exact name of small business issuer as specified in its charter)
 Nevada
    
    86-0881193(State or other jurisdiction of incorporation or
    
    (IRS Employer Identification No.)organization)
 10488 Brockwood Road
Dallas, Texas 75238
 
  (972) 852-2876
 
  þ o
 o þ
  o þ




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##### 



IMMEDIATEK, INC.
 TABLE OF CONTENTS
 PageIntroduction
    
    
    1Forward-Looking Statements
    
    
    2Part I  Financial Information
    
    
    3Item 1. Financial Statements
    
    
    3Condensed Consolidated Balance Sheet at September 30, 2006
    
    
    3Condensed Consolidated Statements of Operations for the three months ended
September 30, 2006 (unaudited), the period from January 1, 2006 to June 7, 2006 (unaudited),
the period from June 8, 2006 to September 30, 2006 (unaudited); and the three and
nine months ended September 30, 2005 (restated) (unaudited)
    
    
    4Condensed Consolidated Statements of Cash Flow for the three months ended
September 30, 2006 (unaudited), the period from January 1, 2006 to June 7, 2006 (unaudited),
the period from June 8, 2006 to September 30, 2006 (unaudited) and the three and
nine months ended September 30, 2005 (restated) (unaudited)
    
    
    5Notes to Condensed Consolidated Financial Statements (unaudited)
    
    
    6Item 2. Managements Discussion and Analysis or Plan of Operation
    
    
    27Item 3. Controls and Procedures
    
    
    37Part II  Other Information
    
    
    39Item 6. Exhibits
    
    
    39Certification of Principal Executive OfficerCertification of Principal Financial OfficerCertification Required by 18 U.S.C. Section 1350
  i




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##### Table of Contents



INTRODUCTION
 Unless the context otherwise indicates, all references in this Quarterly Report on Form 10-QSB
to the Company, Immediatek, we, us, our or ours or similar words are to Immediatek,
Inc. and its direct, wholly-owned subsidiary, DiscLive, Inc. Accordingly, there are no separate
financial statements for DiscLive, Inc.
 Change in Control
    Reverse Stock Split
  New Basis of Accounting
  
    
    adjustments to our fixed assets to reflect a step-up in basis of those assets;
    
    the recording of a value for our trade names, trade marks and covenants not to compete;
    
    adjustments to historical goodwill to reflect goodwill arising from the push down
accounting adjustments;
    
    the recording of a value for assets held for sale;
    
    the recording of a value for our deferred tax asset and liability; and
    
    an increase in additional paid-in capital from these adjustments.
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
    
    an increase in net operating loss due to a higher level of depreciation from the
increase in the depreciable basis of fixed assets; and
    
    an increase in net operating loss due to a higher level of amortization related to
the increase in the amortizable basis of intangible assets.
   
 
 FORWARD-LOOKING STATEMENTS
  
    
    our inability to continue as a going concern;
    
    our history of losses, which are likely to continue;
    
    our utilization of funds received in a manner that is accretive;
    
    our ability to generate sufficient funds from operating activities to fund our operations,
    
    our ability to obtain a sufficient number of contracts to record live content,
    
    changes in anticipated levels of sales of our products;
    
    dependence on third party manufacturers and contractors;
    
    changes in technology that may make our products less attractive or obsolete;
    
    difficulties in developing and marketing new products; and
    
    changes in conditions affecting the economy generally.
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PART I  FINANCIAL INFORMATION
 
 Item 1. Financial Statements
 Immediatek, Inc.
 
 Condensed Consolidated Balance Sheet
 September 30, 2006(unaudited)AssetsCurrent assets:Cash
    
    $
    1,230,500Accounts receivable
    
    
    1,328Prepaid expenses and other current assets
    
    
    6,587Total current assets
    
    
    1,238,415Fixed assets, net
    
    
    140,812Assets held for sale
    
    
    30,810Intangible assets, net
    
    
    39,027Goodwill
    
    
    1,765,493Deferred tax asset, net
    
    
    64,464Total Assets
    
    $
    3,279,021Liabilities and Stockholders DeficitCurrent liabilities:Accounts payable
    
    $
    541Accrued liabilities
    
    
    316,327Accrued interest
    
    
    10,801Convertible notes payable
    
    
    100,000Total current liabilities
    
    
    427,669Deferred tax liability
    
    
    64,464Total Liabilities
    
    
    492,133Series A Convertible Preferred Stock (conditionally redeemable) 
4,392,286 authorized, issued and outstanding; $0.001 par value
liquidation/redemption preference of $0.68
    
    
    3,000,000Stockholders Deficit:Common stock, $0.001 par value, 500,000,000 shares
authorized, 474,807 shares issued and outstanding
    
    
    475Additional paid-in capital (deficit)
    
    
    (94,614
    )Accumulated deficit
    
    
    (118,973
    )Total Stockholders Deficit
    
    
    (213,112
    )Total Liabilities, Preferred Stock and Stockholders Deficit
    
    $
    3,279,021
  3




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Immediatek, Inc.
 
 Condensed Consolidated Statements of Operations
 For the Three Months Ended
    
    
    For the Nine Months EndedSeptember 30,
    
    
    September 30,2006
    
    
    
    2005
    
    
    2006
    
    
    2005(restated)
    
    
    
    
    
    
    
    
    
    
    
    (restated)(unaudited)
    
    
    
    (unaudited)
    
    
    (unaudited)
    
    
    (unaudited)(see Note 4)
    
    
    
    
    
    
    
    (see Note 4)Successor
    
    
    
    PredecessorSuccessor
    
    
    
    Predecessor
    
    
    June 8 - September 30
    
    
    
    January 1 - June 7
    
    
    PredecessorRevenues
    
    $
    7,235
    
    
    
    $
    35,018
    
    
    $
    26,975
    
    
    
    $
    19,451
    
    
    $
    111,814Cost of sales
    
    
    12,709
    
    
    
    
    62,053
    
    
    
    20,181
    
    
    
    
    43,584
    
    
    
    114,658Gross margin
    
    
    (5,474
    )
    
    
    
    (27,035
    )
    
    
    6,794
    
    
    
    
    (24,133
    )
    
    
    (2,844
    )Expenses:General and administrative expenses
    
    
    15,322
    
    
    
    
    34,976
    
    
    
    20,781
    
    
    
    
    34,903
    
    
    
    174,915Consulting services
    
    
    5,995
    
    
    
    
    8,636
    
    
    
    5,995
    
    
    
    
    
    
    
    
    26,847Professional fees
    
    
    35,547
    
    
    
    
    6,783
    
    
    
    55,806
    
    
    
    
    328,347
    
    
    
    76,203Salaries and benefits
    
    
    67,227
    
    
    
    
    24,421
    
    
    
    98,752
    
    
    
    
    89,130
    
    
    
    167,657Non-cash stock compensation
    
    
    
    
    
    
    
    2,500
    
    
    
    
    
    
    
    
    3,410
    
    
    
    54,501Non-cash consulting expense
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    37,680Depreciation and amortization
    
    
    12,624
    
    
    
    
    78,897
    
    
    
    15,491
    
    
    
    
    2,755
    
    
    
    196,612(Gain) loss on extinguishment of debt
    
    
    
    
    
    
    
    
    
    
    
    (69,219
    )
    
    
    
    43,056
    
    
    
    46,000Gain on settlement of accounts payable
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (140,525
    )
    
    
    Total expenses
    
    
    136,715
    
    
    
    
    156,213
    
    
    
    127,606
    
    
    
    
    361,076
    
    
    
    780,415Net operating loss
    
    $
    (142,189
    )
    
    
    $
    (183,248
    )
    
    $
    (120,812
    )
    
    
    $
    (385,209
    )
    
    $
    (783,259
    )Other income (expense):Interest income (expense), net
    
    
    1,838
    
    
    
    
    (53,394
    )
    
    
    1,839
    
    
    
    
    (73,276
    )
    
    
    (131,808
    )Net loss
    
    $
    (140,351
    )
    
    
    $
    (236,642
    )
    
    $
    (118,973
    )
    
    
    $
    (458,485
    )
    
    $
    (915,067
    )Deemed dividend related to beneficial
conversion feature on Series A convertible
preferred stock
    
    
    
    
    
    
    
    
    
    
    
    (3,000,000
    )
    
    
    
    
    
    
    
    Net loss attributable to common stockholders
    
    $
    (140,351
    )
    
    
    $
    (236,642
    )
    
    $
    (3,118,973
    )
    
    
    $
    (458,485
    )
    
    $
    (915,067
    )Weighted average number of common shares
outstanding  basic and fully diluted
    
    
    474,807
    
    
    
    
    324,078
    
    
    
    388,140
    
    
    
    
    388,140
    
    
    
    318,089Basic and diluted loss per common share attributable
to common stockholders
    
    $
    (0.30
    )
    
    
    $
    (0.73
    )
    
    $
    (8.04
    )
    
    
    $
    (1.18
    )
    
    $
    (2.88
    )
  4




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Immediatek, Inc.
 
 Condensed Consolidated Statements of Cash Flow
 For the Three Months Ended
    
    
    For the Nine Months EndedSeptember 30,
    
    
    September 30,2006
    
    
    
    2005
    
    
    2006
    
    
    2005(restated)
    
    
    
    
    
    
    
    
    
    
    
    (restated)(unaudited)
    
    
    
    (unaudited)
    
    
    (unaudited)
    
    
    (unaudited)(see Note 4)
    
    
    
    
    
    
    
    (see Note 4)Successor
    
    
    
    PredecessorSuccessor
    
    
    
    Predecessor
    
    
    June 8 - September 30
    
    
    
    January 1 - June 7
    
    
    PredecessorCash flows from operating activitiesNet loss
    
    $
    (140,351
    )
    
    
    $
    (236,642
    )
    
    $
    (118,973
    )
    
    
    $
    (458,485
    )
    
    $
    (915,067
    )Depreciation and amortization
    
    
    12,624
    
    
    
    
    78,897
    
    
    
    15,491
    
    
    
    
    2,755
    
    
    
    196,612Non-cash interest expense
    
    
    
    
    
    
    
    7,386
    
    
    
    
    
    
    
    
    12,353
    
    
    
    25,788Non-cash consulting fees
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    37,680Non-cash stock compensation
    
    
    
    
    
    
    
    2,500
    
    
    
    
    
    
    
    
    3,410
    
    
    
    54,501(Gain) loss on extinguishment of debt
    
    
    
    
    
    
    
    
    
    
    
    (69,219
    )
    
    
    
    43,056
    
    
    
    46,000Adjustments to reconcile net loss to net cash
(used in) provided by operating activities:Accounts receivable
    
    
    2,817
    
    
    
    
    
    
    
    
    2,672
    
    
    
    
    (4,000
    )
    
    
    73,281Prepaid expenses and other current assets
    
    
    3,415
    
    
    
    
    11,857
    
    
    
    28,315
    
    
    
    
    (26,000
    )
    
    
    25,108Accounts payable
    
    
    (415,144
    )
    
    
    
    85,819
    
    
    
    (549,204
    )
    
    
    
    61,233
    
    
    
    84,931Accrued liabilities
    
    
    (12,382
    )
    
    
    
    44,909
    
    
    
    (209,017
    )
    
    
    
    17,267
    
    
    
    102,005Accrued interest
    
    
    (124
    )
    
    
    
    23,031
    
    
    
    (124
    )
    
    
    
    47,895
    
    
    
    46,068Net cash (used in) provided by operating activities
    
    
    (549,145
    )
    
    
    
    17,757
    
    
    
    (900,059
    )
    
    
    
    (300,516
    )
    
    
    (223,093
    )Cash flows from investing activitiesPurchase of fixed assets
    
    
    (22,645
    )
    
    
    
    
    
    
    
    (22,645
    )
    
    
    
    (2,476
    )
    
    
    Net cash used in investing activities
    
    
    (22,645
    )
    
    
    
    
    
    
    
    (22,645
    )
    
    
    
    (2,476
    )
    
    
    Cash flows from financing activitiesCash deficit
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,951
    
    
    
    Legal fees paid for equity issuance
    
    
    
    
    
    
    
    (64,045
    )
    
    
    
    
    
    
    
    
    
    
    
    (64,045
    )Payments on notes payable
    
    
    
    
    
    
    
    (9,400
    )
    
    
    (528,149
    )
    
    
    
    (18,606
    )
    
    
    (245,600
    )Proceeds from notes payable
    
    
    
    
    
    
    
    61,000
    
    
    
    
    
    
    
    
    347,000
    
    
    
    516,500Proceeds from issuance of Series A convertible
preferred stock
    
    
    
    
    
    
    
    
    
    
    
    2,653,000
    
    
    
    
    
    
    
    
    Net cash (used in) provided by financing activities
    
    
    
    
    
    
    
    (12,445
    )
    
    
    2,124,851
    
    
    
    
    331,345
    
    
    
    206,855Net (decrease) increase in cash
    
    
    (571,790
    )
    
    
    
    5,312
    
    
    
    1,202,147
    
    
    
    
    28,353
    
    
    
    (16,238
    )Cash  beginning
    
    
    1,802,290
    
    
    
    
    
    
    
    
    28,353
    
    
    
    
    
    
    
    
    21,550Cash  ending
    
    $
    1,230,500
    
    
    
    $
    5,312
    
    
    $
    1,230,500
    
    
    
    $
    28,353
    
    
    $
    5,312Supplemental disclosures:Interest paid
    
    $
    
    
    
    
    $
    
    
    
    $
    
    
    
    
    $
    
    
    
    $
    Income taxes paid
    
    $
    
    
    
    
    $
    
    
    
    $
    
    
    
    
    $
    
    
    
    $
    Number of shares issued for consulting services
    
    
    
    
    
    
    
    500
    
    
    
    
    
    
    
    
    
    
    
    
    3,140Value of shares issued for consulting services
    
    $
    
    
    
    
    $
    2,500
    
    
    $
    
    
    
    
    $
    
    
    
    $
    40,180Number of shares issued for settlement of contingencies
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    108,662
    
    
    
    Value of shares issued for settlement of contingencies
    
    $
    
    
    
    
    $
    
    
    
    $
    
    
    
    
    $
    1,521,268
    
    
    $
    Number of shares issued for conversion of notes payable
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    42,040
    
    
    
    7,000Value of shares issued for conversion of notes payable
    
    $
    
    
    
    
    $
    
    
    
    $
    
    
    
    
    $
    636,640
    
    
    $
    126,000Number of shares issued for acquisition of assets
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    16,000Value of shares issued for acquisition of assets
    
    $
    
    
    
    
    $
    
    
    
    $
    
    
    
    
    $
    
    
    
    $
    288,000
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IMMEDIATEK, INC.
 
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 SEPTEMBER 30, 2006
 (Unaudited)
 NOTE 1  RESTATEMENT OF PRIOR YEARS CONSOLIDATED FINANCIAL STATEMENTS
   Summary
of Restatements by Category
  Common Stock Issued to Officers for Intellectual Property
 Warrants and Options
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IMMEDIATEK, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  CONTINUED
SEPTEMBER 30, 2006
(Unaudited)
 Payroll Tax
 Sales Tax
 Mechanicals and Royalties
 Assets Acquired from Moving Records, LLC
 Loss on Forgiveness of Debt related to certain assets purchased
 Common Stock Issued on Behalf of the Company for Consulting Services
 Common Stock Issued on Behalf of the Company for Conversion of Note Payable
 Common Stock Issued on Behalf of the Company for Issuance of Note Payable
 7




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IMMEDIATEK, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  CONTINUED
SEPTEMBER 30, 2006
(Unaudited)
 Common Stock Issued on Behalf of the Company for Employee Compensation
 Warrants to Purchase Common Stock Issued on Behalf of the Company for Consulting Services
 Conversion of Notes Payable to Common Stock with Warrants.
 Conversion of Notes Payable to Common Stock Upon Exercise of Warrants.
 Legal Fees Related to Capital Transactions
 Common Stock Issued with Warrants.
 Warrants to Purchase Common Stock Issued for Consulting Services
 8




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IMMEDIATEK, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  CONTINUED
SEPTEMBER 30, 2006
(Unaudited)
 Common Stock Issued with Warrants in a Private Placement.
 Consulting Services Related to Capital Transactions
 Common Stock Issued for Consulting Services
 Common Stock Issued to Employees
 Common Stock Options Granted to Employees
 Imputed Interest on Non-Interest Bearing Notes Payable
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IMMEDIATEK, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  CONTINUED
SEPTEMBER 30, 2006
(Unaudited)
 Consolidated Balance Sheets as of December 31, 2005, 2004 and 003
 As of December 31,2005
    
    
    2004
    
    
    2003As
    
    
    
    
    
    
    
    
    
    
    As
    
    
    
    
    
    
    
    
    
    
    AsPreviously
    
    
    
    
    
    
    
    
    
    
    Previously
    
    
    
    
    
    
    
    
    
    
    PreviouslyReported
    
    
    Adjustments
    
    
    As Restated
    
    
    Restated
    
    
    Adjustments
    
    
    As Restated
    
    
    Restated
    
    
    Adjustments
    
    
    As RestatedAssetsCurrent assets:Cash
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    21,550
    
    
    $
    
    
    
    $
    21,550
    
    
    $
    118,562
    
    
    $
    
    
    
    $
    118,562Accounts receivable
    
    
    4,000
    
    
    
    
    
    
    
    4,000
    
    
    
    73,281
    
    
    
    
    
    
    
    73,281
    
    
    
    1,647
    
    
    
    
    
    
    
    1,647Prepaid expenses and other current assets
    
    
    3,668
    
    
    
    
    
    
    
    3,668
    
    
    
    20,678
    
    
    
    70,249
    
    
    
    90,927
    
    
    
    5,760
    
    
    
    
    
    
    
    5,760Total current assets
    
    
    7,668
    
    
    
    
    
    
    
    7,668
    
    
    
    115,509
    
    
    
    70,249
    
    
    
    185,758
    
    
    
    125,969
    
    
    
    
    
    
    
    125,969Fixed assets, net
    
    
    18,599
    
    
    
    
    
    
    
    18,599
    
    
    
    294,404
    
    
    
    (19,202
    )
    
    
    275,202
    
    
    
    6,576
    
    
    
    
    
    
    
    6,576Intellectual property
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    65,601
    
    
    
    65,601Goodwill
    
    
    162,071
    
    
    
    
    
    
    
    162,071
    
    
    
    324,142
    
    
    
    
    
    
    
    324,142
    
    
    
    65,601
    
    
    
    (65,601
    )
    
    
    Total Assets
    
    $
    188,338
    
    
    $
    
    
    
    $
    188,338
    
    
    $
    734,055
    
    
    $
    51,047
    
    
    $
    785,102
    
    
    $
    198,146
    
    
    $
    
    
    
    $
    198,146Liabilities and Stockholders DeficitCurrent liabilities:Cash deficit
    
    $
    2,951
    
    
    $
    
    
    
    $
    2,951
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    Accounts payable
    
    
    488,512
    
    
    
    
    
    
    
    488,512
    
    
    
    346,868
    
    
    
    
    
    
    
    346,868
    
    
    
    67,706
    
    
    
    43,221
    
    
    
    110,927Accrued liablities
    
    
    480,991
    
    
    
    27,084
    
    
    
    508,075
    
    
    
    442,381
    
    
    
    (110,312
    )
    
    
    332,069
    
    
    
    60,907
    
    
    
    
    
    
    
    60,907Accrued interest
    
    
    85,397
    
    
    
    5,220
    
    
    
    90,617
    
    
    
    
    
    
    
    12,793
    
    
    
    12,793
    
    
    
    
    
    
    
    
    
    
    
    Notes payable
    
    
    123,606
    
    
    
    
    
    
    
    123,606
    
    
    
    3,000
    
    
    
    
    
    
    
    3,000
    
    
    
    
    
    
    
    9,500
    
    
    
    9,500Notes payable  related party
    
    
    43,000
    
    
    
    
    
    
    
    43,000
    
    
    
    43,000
    
    
    
    
    
    
    
    43,000
    
    
    
    
    
    
    
    
    
    
    
    Convertible notes payable
    
    
    1,005,249
    
    
    
    
    
    
    
    1,005,249
    
    
    
    640,000
    
    
    
    
    
    
    
    640,000
    
    
    
    9,500
    
    
    
    (9,500
    )
    
    
    Total current liabilities
    
    $
    2,229,706
    
    
    $
    32,304
    
    
    $
    2,262,010
    
    
    $
    1,475,249
    
    
    $
    (97,519
    )
    
    $
    1,377,730
    
    
    $
    138,113
    
    
    $
    43,221
    
    
    $
    181,334Stockholders Deficit:Common stock, $0.001 par value, 500,000,000
shares authorized, 324,105, 297,965
and 229,737 shares issued and
outstanding in 2005, 2004 and 2003,
respectively
    
    $
    388
    
    
    $
    (64
    )
    
    $
    324
    
    
    $
    298
    
    
    $
    
    
    
    $
    298
    
    
    $
    230
    
    
    $
    
    
    
    $
    230Additional paid-in capital
    
    
    5,153,844
    
    
    
    1,859,361
    
    
    
    7,013,205
    
    
    
    4,533,421
    
    
    
    2,017,786
    
    
    
    6,551,207
    
    
    
    1,429,355
    
    
    
    2,737,752
    
    
    
    4,167,107Accumulated Deficit
    
    
    (7,195,600
    )
    
    
    (1,891,601
    )
    
    
    (9,087,201
    )
    
    
    (5,274,913
    )
    
    
    (1,869,220
    )
    
    
    (7,144,133
    )
    
    
    (1,369,552
    )
    
    
    (2,780,973
    )
    
    
    (4,150,525
    )Total Stockholders Deficit
    
    
    (2,041,368
    )
    
    
    (32,304
    )
    
    
    (2,073,672
    )
    
    
    (741,194
    )
    
    
    148,566
    
    
    
    (592,628
    )
    
    
    60,033
    
    
    
    (43,221
    )
    
    
    16,812Total Liabilities and Stockholders Deficit
    
    $
    188,338
    
    
    $
    
    
    
    $
    188,338
    
    
    $
    734,055
    
    
    $
    51,047
    
    
    $
    785,102
    
    
    $
    198,146
    
    
    $
    
    
    
    $
    198,146
 Consolidated Statements of Operations for the years ended December 31, 2005, 2004 and 2003
 For the Fiscal Year Ended December 31,2005
    
    
    2004
    
    
    2003AsPreviously
    
    
    
    
    
    
    
    
    
    
    As Previously
    
    
    
    
    
    
    
    
    
    
    As PreviouslyReported
    
    
    Adjustments
    
    
    As Restated
    
    
    Restated
    
    
    Adjustments
    
    
    As Restated
    
    
    Restated
    
    
    Adjustments
    
    
    As RestatedRevenues
    
    $
    140,912
    
    
    $
    
    
    
    $
    140,912
    
    
    $
    1,098,680
    
    
    $
    73,281
    
    
    $
    1,171,961
    
    
    $
    133,485
    
    
    $
    1
    
    
    $
    133,486Cost of sales
    
    
    153,228
    
    
    
    13,732
    
    
    
    166,960
    
    
    
    919,295
    
    
    
    (81,166
    )
    
    
    838,129
    
    
    
    48,156
    
    
    
    
    
    
    
    48,156Gross Margin
    
    
    (12,316
    )
    
    
    (13,732
    )
    
    
    (26,048
    )
    
    
    179,385
    
    
    
    154,447
    
    
    
    333,832
    
    
    
    85,329
    
    
    
    1
    
    
    
    85,330Expenses:General and administrative expenses
    
    
    329,425
    
    
    
    114
    
    
    
    329,539
    
    
    
    335,684
    
    
    
    870,459
    
    
    
    1,206,143
    
    
    
    340,676
    
    
    
    (109,192
    )
    
    
    231,484Consulting fees
    
    
    36,001
    
    
    
    (9,154
    )
    
    
    26,847
    
    
    
    1,190,224
    
    
    
    (1,055,130
    )
    
    
    135,094
    
    
    
    
    
    
    
    54,766
    
    
    
    54,766Professional fees
    
    
    153,309
    
    
    
    (64,045
    )
    
    
    89,264
    
    
    
    284,183
    
    
    
    93,901
    
    
    
    378,084
    
    
    
    
    
    
    
    
    
    
    
    Administrative salaries
    
    
    144,440
    
    
    
    40,145
    
    
    
    184,585
    
    
    
    465,611
    
    
    
    (34,375
    )
    
    
    431,236
    
    
    
    161,775
    
    
    
    23,855
    
    
    
    185,630Non-cash stock compensation
    
    
    32,833
    
    
    
    12,663
    
    
    
    45,496
    
    
    
    61,020
    
    
    
    145,425
    
    
    
    206,445
    
    
    
    38,000
    
    
    
    2,345,645
    
    
    
    2,383,645Non-cash consulting expense
    
    
    137,680
    
    
    
    (69,309
    )
    
    
    68,371
    
    
    
    1,573,191
    
    
    
    (806,335
    )
    
    
    766,856
    
    
    
    390,400
    
    
    
    20,000
    
    
    
    410,400Depreciation and amortization
    
    
    59,445
    
    
    
    198,150
    
    
    
    257,595
    
    
    
    71,881
    
    
    
    (24,269
    )
    
    
    47,612
    
    
    
    439
    
    
    
    
    
    
    
    439(Gain) Loss on extinguishment of debt
    
    
    (7,634
    )
    
    
    53,634
    
    
    
    46,000
    
    
    
    
    
    
    
    50,043
    
    
    
    50,043
    
    
    
    
    
    
    
    445,900
    
    
    
    445,900Total cost and expenses
    
    
    885,499
    
    
    
    162,198
    
    
    
    1,047,697
    
    
    
    3,981,794
    
    
    
    (760,281
    )
    
    
    3,221,513
    
    
    
    931,290
    
    
    
    2,780,974
    
    
    
    3,712,264Net operating loss
    
    
    (897,815
    )
    
    
    (175,930
    )
    
    
    (1,073,745
    )
    
    
    (3,802,409
    )
    
    
    914,728
    
    
    
    (2,887,681
    )
    
    
    (845,961
    )
    
    
    (2,780,973
    )
    
    
    (3,626,934
    )Other (expense) income:Loss on impairment of assets
    
    
    (939,454
    )
    
    
    237,951
    
    
    
    (701,503
    )
    
    
    (68,700
    )
    
    
    
    
    
    
    (68,700
    )
    
    
    
    
    
    
    
    
    
    
    Interest (expense) income, net
    
    
    (83,418
    )
    
    
    (84,402
    )
    
    
    (167,820
    )
    
    
    (34,252
    )
    
    
    (2,975
    )
    
    
    (37,227
    )
    
    
    437
    
    
    
    
    
    
    
    437Net loss
    
    $
    (1,920,687
    )
    
    $
    (22,381
    )
    
    $
    (1,943,068
    )
    
    $
    (3,905,361
    )
    
    $
    911,753
    
    
    $
    (2,993,608
    )
    
    $
    (845,524
    )
    
    $
    (2,780,973
    )
    
    $
    (3,626,497
    )Weighted average number of common
shares outstanding  basic and fully diluted
    
    
    328,544
    
    
    
    (94,619
    )
    
    
    233,925
    
    
    
    254,168
    
    
    
    (41,898
    )
    
    
    212,270
    
    
    
    177,736
    
    
    
    (6,057
    )
    
    
    171,679Net loss per share  basic and fully diluted
    
    $
    (5.85
    )
    
    $
    (2.46
    )
    
    $
    (8.31
    )
    
    $
    (15.37
    )
    
    $
    1.27
    
    
    $
    (14.10
    )
    
    $
    (4.76
    )
    
    $
    (16.36
    )
    
    $
    (21.12
    )
 10




---



##### Table of Contents



IMMEDIATEK, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  CONTINUED
SEPTEMBER 30, 2006
(Unaudited)
  Consolidated Statements of Cash Flow for the years ended December 31, 2005, 2004 and 2003
 For the Fiscal Year Ended December 31,2005
    
    
    2004
    
    
    2003AsAs Previously
    
    
    
    
    
    
    
    
    As Previously
    
    
    
    
    
    
    
    
    PreviouslyReported
    
    
    Adjustments
    
    
    As Restated
    
    
    Restated
    
    
    Adjustments
    
    
    As Restated
    
    
    Restated
    
    
    Adjustments
    
    
    As RestatedCash flows from operating activitiesNet loss
    
    $
    (1,920,687
    )
    
    $
    (22,381
    )
    
    $
    (1,943,068
    )
    
    $
    (3,905,361
    )
    
    $
    911,753
    
    
    $
    (2,993,608
    )
    
    $
    (845,524
    )
    
    $
    (2,780,973
    )
    
    $
    (3,626,497
    )Depreciation and amortization
    
    
    59,445
    
    
    
    198,150
    
    
    
    257,595
    
    
    
    71,881
    
    
    
    (24,269
    )
    
    
    47,612
    
    
    
    439
    
    
    
    
    
    
    
    439Non-cash interest expense
    
    
    
    
    
    
    37,902
    
    
    
    37,902
    
    
    
    
    
    
    
    32,191
    
    
    
    32,191
    
    
    
    
    
    
    
    
    
    
    
    Non-cash consulting fees
    
    
    137,680
    
    
    
    (69,309
    )
    
    
    68,371
    
    
    
    1,573,191
    
    
    
    (806,335
    )
    
    
    766,856
    
    
    
    390,400
    
    
    
    20,000
    
    
    
    410,400Non-cash stock compensation
    
    
    32,833
    
    
    
    12,663
    
    
    
    45,496
    
    
    
    61,020
    
    
    
    145,425
    
    
    
    206,445
    
    
    
    38,000
    
    
    
    2,345,645
    
    
    
    2,383,645(Gain) Loss on extinguishment of debt
    
    
    (7,634
    )
    
    
    53,634
    
    
    
    46,000
    
    
    
    
    
    
    
    50,043
    
    
    
    50,043
    
    
    
    
    
    
    
    445,900
    
    
    
    445,900Impairment loss on assets
    
    
    939,454
    
    
    
    (237,951
    )
    
    
    701,503
    
    
    
    68,700
    
    
    
    
    
    
    
    68,700
    
    
    
    
    
    
    
    
    
    
    
    Adjustments to reconcile net loss to net
cash used by operating activities:Accounts receivable
    
    
    69,281
    
    
    
    
    
    
    
    69,281
    
    
    
    (73,281
    )
    
    
    1,647
    
    
    
    (71,634
    )
    
    
    (1,205
    )
    
    
    
    
    
    
    (1,205
    )Other assets
    
    
    40,124
    
    
    
    (7,633
    )
    
    
    32,491
    
    
    
    665
    
    
    
    (51,724
    )
    
    
    (51,059
    )
    
    
    (7,605
    )
    
    
    
    
    
    
    (7,605
    )Accounts payable
    
    
    165,393
    
    
    
    (23,749
    )
    
    
    141,644
    
    
    
    324,279
    
    
    
    (88,338
    )
    
    
    235,941
    
    
    
    60,198
    
    
    
    
    
    
    
    60,198Accrued liabilities
    
    
    38,610
    
    
    
    137,396
    
    
    
    176,006
    
    
    
    461,348
    
    
    
    (190,186
    )
    
    
    271,162
    
    
    
    132,643
    
    
    
    (30,572
    )
    
    
    102,071Accrued interest
    
    
    85,397
    
    
    
    (7,573
    )
    
    
    77,824
    
    
    
    
    
    
    
    12,793
    
    
    
    12,793
    
    
    
    
    
    
    
    
    
    
    
    Net cash used by operating activities
    
    
    (360,104
    )
    
    
    71,149
    
    
    
    (288,955
    )
    
    
    (1,417,558
    )
    
    
    (7,000
    )
    
    
    (1,424,558
    )
    
    
    (232,654
    )
    
    
    
    
    
    
    (232,654
    )Cash flows from investing activitiesPurchase of fixed assets
    
    
    (13,646
    )
    
    
    
    
    
    
    (13,646
    )
    
    
    (31,539
    )
    
    
    9,470
    
    
    
    (22,069
    )
    
    
    (3,129
    )
    
    
    
    
    
    
    (3,129
    )Cash received in acquisition
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    20,662
    
    
    
    
    
    
    
    20,662
    
    
    
    
    
    
    
    
    
    
    
    Net cash used by investing activities
    
    
    (13,646
    )
    
    
    
    
    
    
    (13,646
    )
    
    
    (10,877
    )
    
    
    9,470
    
    
    
    (1,407
    )
    
    
    (3,129
    )
    
    
    
    
    
    
    (3,129
    )Cash flows from financing activitiesCash deficit
    
    
    2,951
    
    
    
    
    
    
    
    2,951
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Payments on notes payable
    
    
    (339,200
    )
    
    
    90,600
    
    
    
    (248,600
    )
    
    
    (54,000
    )
    
    
    (41,000
    )
    
    
    (95,000
    )
    
    
    (7,500
    )
    
    
    
    
    
    
    (7,500
    )Proceeds from notes payable
    
    
    688,449
    
    
    
    (97,704
    )
    
    
    590,745
    
    
    
    528,000
    
    
    
    53,000
    
    
    
    581,000
    
    
    
    147,000
    
    
    
    
    
    
    
    147,000Proceeds from issuance of common stock, net of fees
    
    
    
    
    
    
    (64,045
    )
    
    
    (64,045
    )
    
    
    857,423
    
    
    
    (14,470
    )
    
    
    842,953
    
    
    
    210,000
    
    
    
    
    
    
    
    210,000Net cash provided by financing activities
    
    
    352,200
    
    
    
    (71,149
    )
    
    
    281,051
    
    
    
    1,331,423
    
    
    
    (2,470
    )
    
    
    1,328,953
    
    
    
    349,500
    
    
    
    
    
    
    
    349,500Net increase in cash
    
    
    (21,550
    )
    
    
    
    
    
    
    (21,550
    )
    
    
    (97,012
    )
    
    
    
    
    
    
    (97,012
    )
    
    
    113,717
    
    
    
    
    
    
    
    113,717Cash  beginning
    
    
    21,550
    
    
    
    
    
    
    
    21,550
    
    
    
    118,562
    
    
    
    
    
    
    
    118,562
    
    
    
    4,845
    
    
    
    
    
    
    
    4,845Cash  ending
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    21,550
    
    
    $
    
    
    
    $
    21,550
    
    
    $
    118,562
    
    
    $
    
    
    
    $
    118,562Supplemental disclosures:Interest paid
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    2,698
    
    
    $
    2,698Income taxes paid
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    Number of shares issued for consulting services
    
    
    64,890
    
    
    
    (62,250
    )
    
    
    2,640
    
    
    
    22,192
    
    
    
    (6,250
    )
    
    
    15,942
    
    
    
    10,300
    
    
    
    
    
    
    
    10,300Value of shares issued for consulting services
    
    $
    137,680
    
    
    $
    (100,000
    )
    
    $
    37,680
    
    
    $
    385,996
    
    
    $
    (62,849
    )
    
    $
    323,147
    
    
    $
    390,400
    
    
    $
    20,000
    
    
    $
    410,400Number of shares issued for employee services
    
    
    
    
    
    
    500
    
    
    
    500
    
    
    
    
    
    
    
    6,250
    
    
    
    6,250
    
    
    
    181,014
    
    
    
    990
    
    
    
    182,004Value of shares issued for employee services
    
    $
    
    
    
    $
    2,500
    
    
    $
    2,500
    
    
    $
    
    
    
    $
    75,000
    
    
    $
    75,000
    
    
    $
    38,000
    
    
    $
    2,345,951
    
    
    $
    2,383,951Number of shares issued for conversion of notes payable
    
    
    
    
    
    
    7,000
    
    
    
    7,000
    
    
    
    634
    
    
    
    
    
    
    
    634
    
    
    
    9,559
    
    
    
    (600
    )
    
    
    8,959Value of shares issued for conversion of notes payable
    
    $
    
    
    
    $
    126,000
    
    
    $
    126,000
    
    
    $
    9,500
    
    
    $
    10,133
    
    
    $
    19,633
    
    
    $
    137,500
    
    
    $
    400,000
    
    
    $
    537,500Number of shares issued for acquisitions
    
    
    
    
    
    
    16,000
    
    
    
    16,000
    
    
    
    16,667
    
    
    
    
    
    
    
    16,667
    
    
    
    
    
    
    
    
    
    
    
    Value of shares issued for acquisitions
    
    $
    
    
    
    $
    288,000
    
    
    $
    288,000
    
    
    $
    600,000
    
    
    $
    (124,196
    )
    
    $
    475,804
    
    
    $
    
    
    
    $
    
    
    
    $
    Number of shares issued for assets
    
    
    25,000
    
    
    
    (25,000
    )
    
    
    
    
    
    
    100
    
    
    
    
    
    
    
    100
    
    
    
    2,084
    
    
    
    (750
    )
    
    
    1,334Value of shares issued for assets
    
    $
    450,000
    
    
    $
    (450,000
    )
    
    $
    
    
    
    $
    3,000
    
    
    $
    
    
    
    $
    3,000
    
    
    $
    48,500
    
    
    $
    
    
    
    $
    48,500
  11




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IMMEDIATEK, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  CONTINUED
SEPTEMBER 30, 2006
(Unaudited)
 NOTE 2  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND PROCEDURES
 Push Down Accounting:
 Going Concern:
  Description of Business:
 Basis of Presentation:
  (i)
    
    the three months ended September 30, 2006;(ii)
    
    the period from January 1, 2006 to June 7, 2006;(iii)
    
    the period from June 8, 2006 to September 30, 2006; and(iv)
    
    the three and nine months ended September 30, 2005 (restated),
  Management Estimates and Significant Risks and Uncertainties:
 12




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IMMEDIATEK, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  CONTINUED
SEPTEMBER 30, 2006
(Unaudited)
   
    
    our inability to continue as a going concern;
    
    our history of losses, which are likely to continue;
    
    our utilization of funds received in a manner that is accretive;
    
    our ability to generate sufficient funds from operating activities to fund our operations,
    
    our ability to obtain a sufficient number of contracts to record live content,
    
    changes in anticipated levels of sales of our products;
    
    dependence on third party manufacturers and contractors;
    
    changes in technology that may make our products less attractive or obsolete;
    
    difficulties in developing and marketing new products; and
    
    changes in conditions affecting the economy generally.
 Business Segments:
 Cash:
 Fair Value of Financial Instruments:
  Fixed Assets: See
 Estimated Remaining
    
    
    Accumulated
    
    
    Net Book Value atCost
    
    
    Useful Lives
    
    
    Depreciation
    
    
    September 30, 2006Transportation equipment
    
    $
    30,810
    
    
    Held for Sale
    
    $
    
    
    
    $
    30,810Computer equipment
    
    
    40,063
    
    
    1.5 years
    
    
    3,993
    
    
    
    36,070Recording equipment
    
    
    102,539
    
    
    5 years
    
    
    6,509
    
    
    
    96,030Office furniture and equipment
    
    
    9,722
    
    
    3 years
    
    
    1,010
    
    
    
    8,712Total fixed assets
    
    $
    152,324
    
    
    
    
    
    
    $
    11,512
    
    
    $
    140,812
 13




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##### Table of Contents



IMMEDIATEK, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  CONTINUED
SEPTEMBER 30, 2006
(Unaudited)
  Intangible Assets: See
 Estimated Remaining
    
    
    Accumulated
    
    
    Net atCost
    
    
    Useful Lives
    
    
    Amortization
    
    
    September 30, 2006Trade name and trademarks
    
    $
    29,100
    
    
    5 years
    
    $
    1,811
    
    
    $
    27,289Covenants not-to-compete
    
    
    13,900
    
    
    2 years
    
    
    2,162
    
    
    
    11,738Total intangible assets
    
    $
    43,000
    
    
    
    
    
    
    $
    3,973
    
    
    $
    39,027
  Revenue Recognition:
  For the Three Months Ended
    
    For the Nine Months EndedSeptember 30,
    
    September 30,2006
    
    
    2005
    
    2006
    
    2005(restated)
    
    
    
    
    
    
    
    
    
    
    (restated)(unaudited)
    
    (unaudited)
    
    (unaudited)(See Note 4)
    
    
    
    
    
    
    (see Note 4)Successor
    
    
    PredecessorSuccessor
    
    
    Predecessor
    
    June 8 - September 30
    
    
    January 1 - June 7
    
    PredecessorRevenues
    
    $
    7,235
    
    
    
    $
    35,018
    
    
    $
    26,975
    
    
    
    $
    19,451
    
    
    $
    111,814Cost of sales
    
    $
    12,709
    
    
    
    $
    62,053
    
    
    $
    20,181
    
    
    
    $
    43,584
    
    
    $
    114,658
 Goodwill: See
 14




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IMMEDIATEK, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  CONTINUED
SEPTEMBER 30, 2006
(Unaudited)
   Stock-Based Compensation:
 Net Loss Per Share:
 Comprehensive Loss:
 Income Taxes:
  NOTE 3  CHANGE IN CONTROL AND SERIES A CONVERTIBLE PREFERRED STOCK
 Change in Control.
  15




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IMMEDIATEK, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  CONTINUED
SEPTEMBER 30, 2006
(Unaudited)
  Series A Convertible Preferred Stock.
 Dividends
 Liquidation
 
    
    $0.683015632 per share of Series A Convertible Preferred Stock; and
    
    The amount that the holder of that share of Series A Convertible Preferred
Stock would have received had the holder converted that share into shares of
Company common stock immediately prior to the liquidation event.
  Ranking
 Conversion
  16




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IMMEDIATEK, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  CONTINUED
SEPTEMBER 30, 2006
(Unaudited)
  Voting
 Protective Provisions.
            17




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IMMEDIATEK, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  CONTINUED
SEPTEMBER 30, 2006
(Unaudited)
           Board of Directors
 Investors Rights Agreement See
 18




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##### Table of Contents



IMMEDIATEK, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  CONTINUED
SEPTEMBER 30, 2006
(Unaudited)
 Classification.
 NOTE 4  NEW BASIS OF ACCOUNTING
  
    
    adjustments to the Companys fixed assets to reflect a step-up in basis of those
assets;
    
    the recording of a value for the Companys trade names, trade marks and covenants
not to compete;
    
    adjustments to historical goodwill to reflect goodwill arising from the push down
accounting adjustments;
    
    the recording of a value for assets held for sale;
    
    the recording of a value for the Companys deferred tax asset and liability; and
    
    an increase in additional paid-in capital from these adjustments.
  
    
    an increase in net operating loss due to a higher level of depreciation from the
increase in the depreciable basis of fixed assets; and
    
    an increase in net operating loss due to a higher level of amortization related to
the increase in the amortizable basis of intangible assets.
   19




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IMMEDIATEK, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  CONTINUED
SEPTEMBER 30, 2006
(Unaudited)
  NOTE 5  GOING CONCERN
     NOTE 6  ASSET ACQUISITION
  20




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IMMEDIATEK, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  CONTINUED
SEPTEMBER 30, 2006
(Unaudited)
 Equipment
    
    $
    288,998Intellectual property
    
    
    237,781Accounts payable
    
    
    (13,973
    )Note payable due to bank
    
    
    (24,806
    )Note payable  commercial vehicle
    
    
    (80,000
    )Note payable  sellers
    
    
    (120,000
    )Net fair market value
    
    $
    288,000
  NOTE 7  STOCKHOLDERS EQUITY
     See
   21




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IMMEDIATEK, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  CONTINUED
SEPTEMBER 30, 2006
(Unaudited)
   See
 NOTE 8  WARRANTS AND OPTIONS
 Warrants to Purchase Common Stock:
  2006
    
    
    2005Number of
    
    
    
    
    
    
    Number ofShares
    
    
    Weighted
    
    
    Shares
    
    
    WeightedUnderlying
    
    
    Average
    
    
    Underlying
    
    
    AverageWarrants
    
    
    Exercise Price
    
    
    Warrants
    
    
    Exercise PriceBalance, beginning of year
    
    
    38,759
    
    
    $
    23.51
    
    
    
    45,559
    
    
    $
    34.37Warrants granted
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Warrants expired
    
    
    1,334
    
    
    
    30.00
    
    
    
    6,500
    
    
    
    100.00Warrants exercised
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Balance, September 30
    
    
    37,425
    
    
    $
    23.28
    
    
    
    39,059
    
    
    $
    23.45Exercisable, September 30
    
    
    37,425
    
    
    $
    23.28
    
    
    
    39,059
    
    
    $
    23.45
 Shares UnderlyingShares Underlying Warrants Outstanding
    
    Warrants ExercisableWeightedShares
    
    Average
    
    Weighted
    
    Shares
    
    WeightedUnderlying
    
    Remaining
    
    Average
    
    Underlying
    
    AverageRange of
    
    Warrants
    
    Contractual
    
    Exercise
    
    Warrants
    
    ExerciseDate
    
    Exercise Prices
    
    Outstanding
    
    Life
    
    Price
    
    Exercisable
    
    PriceSeptember 30, 2005
    
    $
    15.00 - 75.00
    
    
    
    39,059
    
    
    1.5 years
    
    $
    23.45
    
    
    
    39,059
    
    
    $
    23.45September 30, 2006
    
    $
    20.00-75.00
    
    
    
    37,425
    
    
    0.5 years
    
    $
    23.28
    
    
    
    37,425
    
    
    $
    23.28
 22




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IMMEDIATEK, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  CONTINUED
SEPTEMBER 30, 2006
(Unaudited)
 Options to Purchase Common Stock:
   2006
    
    
    2005Number of
    
    
    
    
    
    
    Number ofShares
    
    
    Weighted
    
    
    Shares
    
    
    WeightedUnderlying
    
    
    Average
    
    
    Underlying
    
    
    AverageOptions
    
    
    Exercise Price
    
    
    Options
    
    
    Exercise PriceBalance, beginning of year
    
    
    11,000
    
    
    $
    35.45
    
    
    
    4,500
    
    
    $
    65.00Options granted
    
    
    
    
    
    
    
    
    
    
    6,500
    
    
    
    15.00Options expired
    
    
    9,375
    
    
    
    39.00
    
    
    
    
    
    
    
    Options exercised
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Balance, September 30
    
    
    1,625
    
    
    $
    15.00
    
    
    
    11,000
    
    
    $
    35.45Exercisable, September 30
    
    
    1,625
    
    
    $
    15.00
    
    
    
    5,403
    
    
    $
    56.65
 Shares UnderlyingShares Underlying Options Outstanding
    
    Options ExercisableWeightedShares
    
    Average
    
    Weighted
    
    Shares
    
    WeightedUnderlying
    
    Remaining
    
    Average
    
    Underlying
    
    AverageRange of
    
    Options
    
    Contractual
    
    Exercise
    
    Options
    
    ExerciseDate
    
    Exercise Prices
    
    Outstanding
    
    Life
    
    Price
    
    Exercisable
    
    PriceSeptember 30, 2005
    
    $
    15.00-65.00
    
    
    
    11,000
    
    
    1.8 years
    
    $
    35.45
    
    
    
    5,403
    
    
    $
    56.65September 30, 2006
    
    $
    15.00
    
    
    
    1,625
    
    
    1.6 years
    
    $
    15.00
    
    
    
    1,625
    
    
    $
    15.00
 NOTE 9  NOTES PAYABLE
   23




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IMMEDIATEK, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  CONTINUED
SEPTEMBER 30, 2006
(Unaudited)
   Principal
    
    
    PrincipalDescription
    
    Outstanding
    
    
    ConvertedAmended
& Restated Consolidated Secured Convertible Promissory Note,
bearing interest at 10% per annum, due on June 30, 2006
    
    $
    330,749
    
    
    $
    300,500Secured Convertible Promissory Notes, bearing interest at 10% per annum
due April 1, 2006
    
    
    175,000
    
    
    
    150,000Secured Convertible Promissory Notes, bearing interest at 10% per annum
due April 1, 2006
    
    
    25,000
    
    
    
    25,000Secured Convertible Promissory Notes, bearing interest at 10% per annum
due April 1, 2006
    
    
    50,000
    
    
    
    50,000$
    580,749
    
    
    $
    525,500
   See
 NOTE 10  ACCOUNTS PAYABLE
   24




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IMMEDIATEK, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  CONTINUED
SEPTEMBER 30, 2006
(Unaudited)
 NOTE 11  INCOME TAXES
   Deferred Tax Asset:Net operating loss  acquired
    
    $
    2,670,000Net operating loss  Successor
    
    
    118,657Valuation allowance
    
    
    (2,724,193
    )Deferred tax asset, net
    
    $
    64,464Deferred Tax Liability:Depreciation
    
    $
    49,844Amortization
    
    
    14,620$
    64,464
 NOTE 12  SUBSEQUENT EVENTS
   25




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IMMEDIATEK, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  CONTINUED
SEPTEMBER 30, 2006
(Unaudited)
    26




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IMMEDIATEK, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  CONTINUED
SEPTEMBER 30, 2006
(Unaudited)
 
 Item 2. Managements Discussion and Analysis or Plan of Operation
 Overview
   
    
    Recent Developments  a description of important events that have recently occurred.
    
    Our Business  a general description of our business; our objective, our areas of
focus; and the challenges and risks of our business.
    
    Critical Accounting Policies and Estimates  a discussion of accounting policies that
require critical judgments and estimates.
    
    Operations Review  an analysis of our consolidated results of operations for the
periods presented in our condensed consolidated financial statements included in this
Quarterly Report on Form 10-QSB.
    
    Liquidity, Capital Resources and Financial Position  an analysis of our cash flows and
debt and contractual obligations; and an overview of our financial position.
 Recent Developments
    27




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Our Business
 General
   History of Operating Losses
  For the Three Months Ended
    
    For the Nine Months EndedSeptember 30,
    
    September 30,2006
    
    
    2005
    
    2006
    
    2005(restated)
    
    
    
    
    
    
    
    
    
    
    (restated)(unaudited)
    
    
    (unaudited)
    
    (unaudited)
    
    (unaudited)(see Note 4)
    
    
    
    
    
    
    (see Note 4)Successor
    
    
    PredecessorSuccessor
    
    
    Predecessor
    
    June 8 - September 30
    
    
    January 1 - June 7
    
    PredecessorNet loss
    
    $
    (140,351
    )
    
    
    $
    (236,642
    )
    
    $
    (118,873
    )
    
    
    $
    (458,485
    )
    
    $
    (915,067
    )Net cash (used in) provided by operating activities
    
    $
    (549,145
    )
    
    
    $
    17,757
    
    
    $
    (900,059
    )
    
    
    $
    (300,516
    )
    
    $
    (223,093
    )
   See
 28




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Our Objective
  
    
    Increase in Recordings: Market and expand our services to a number of
different live events, including those other than concerts, in order to increase
the sales of our product.
    
    Profit: Maximizing our profit on live events by controlling costs and
utilizing our assets efficiently. We are refining our strategy on the deployment
of assets to record live events in order to make most efficient use of those
assets, while reducing costs. In that regard, we have reconfigured certain of our
equipment and purchased additional equipment to decrease transportation expense.
Additionally, we believe by expanding our services outside of concert recordings
that we can more effectively maximize profit by reducing sales risk.
 Areas of Focus
 Revitalizing the Company.
 Realizing on Our Business Plan and Potential.
 Disposing of Non-Essential Assets and the Acquisition of New Equipment
 Challenges and Risks
  Utilizing the New Funds in a Manner that is Accretive
 Obtaining Contracts to Record Live Content that are Profitable
 29




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Maintaining a Quality Product.
   Critical Accounting Policies and Estimates
  
    
    Recoverability of Non-Current Assets.The Company has certain non-current assets.
Management considers the useful life of the assets on an annual basis and assesses
whether or not there is an impairment. An assessment of recoverability involves
comparing the carrying value of the asset with its recoverable amount, typically its
value in use. If the value in use of a non-current asset were determined to be less
than its carrying value, an impairment would be charged to the income statement.
    
    Goodwill.Management evaluates goodwill for impairment
on an annual basis or more frequently if events occur that
provide indications of impairment. If indicators of potential impairment exist, we
perform a review to determine if the carrying value of the recorded goodwill is
impaired. The first step of this process is to identify potential goodwill impairment
by comparing the fair value of the single reporting unit to its carrying value. We
estimate fair value using discounted cash flows. If the carrying value is less than
the fair value, we would complete step two in the impairment review process, which
measures the amount of goodwill impairment. We test the reasonableness of the inputs
and outcomes of the discounted cash flow analysis.
    
    Convertible Securities.From time to time, we issue
convertible securities with beneficial conversion features. We
account for these convertible securities in accordance with Emerging Issues Task Force Issue
98-5, Accounting for Convertible Securities with a Beneficial Conversion Features or
Contingently Adjustable Conversion Ratios (EITF 98-5) and EITF 00-27, Application of
Issue No. 98-5 to Certain Convertible Instruments.
    
    New Basis of Accounting.As a result of a 95% change
in control of the Company, we have applied push down
accounting, which requires that the proportionate basis of the assets
acquired and liabilities assumed be pushed down to the
Company based upon their estimated fair market values. We
make estimates and judgments in determining the fair value of the acquired assets and
liabilities. We base our determination on independent appraisal reports as well as
our internal judgments based on the existing facts and
 30




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##### Table of Contents



circumstances. If we were to use different judgments or assumptions, the amounts
assigned to the individual assets or liabilities could be materially different.
 
    
    Revenue Recognition.DiscLive primarily delivers products sold by it through
shipment to the customer. Revenue is recognized upon shipment of the product to the
customer. A smaller percentage of revenues are recognized at the point of sale at the
event being recorded. Certain customers purchase and accept hand delivery of the
product on-site at the event. Pursuant to Emerging Issues Task Force Issue No. 00-10,
Accounting for Shipping and Handling Fees and Costs, (EITF 00-10), the Company
includes all shipping and handling fees charged to its customers in gross revenue.
All actual costs incurred by the Company for shipping and handling are immaterial in
nature and are included as direct costs of revenue.
  Operations Review
  31




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Three Months Ended September 30, 2006 Compared to Three Months Ended September 30, 2005
(restated)
 For the Three Months EndedSeptember 30,2006
    
    
    
    2005(restated)(unaudited)
    
    
    
    (unaudited)(see Note 4)Successor
    
    
    
    PredecessorRevenues
    
    $
    7,235
    
    
    
    $
    35,018Cost of sales
    
    
    12,709
    
    
    
    
    62,053Gross Margin
    
    
    (5,474
    )
    
    
    
    (27,035
    )Gross Margin Percentage
    
    
    (76
    )%
    
    
    
    (77
    )%General and administrative expenses
    
    
    15,322
    
    
    
    
    34,976Consulting services
    
    
    5,995
    
    
    
    
    8,636Professional fees
    
    
    35,547
    
    
    
    
    6,783Salaries and benefits
    
    
    67,227
    
    
    
    
    24,421Non-cash stock compensation
    
    
    
    
    
    
    
    2,500Depreciation and amortization
    
    
    12,624
    
    
    
    
    78,897Net operating loss
    
    $
    (142,189
    )
    
    
    $
    (183,248
    )Interest income (expense), net
    
    
    1,838
    
    
    
    
    (53,394
    )Net loss
    
    $
    (140,351
    )
    
    
    $
    (236,642
    )Weighted average number of common shares
outstanding  basic and fully diluted
    
    
    474,807
    
    
    
    
    324,078Basic and diluted loss per common share attributable
to common stockholders
    
    $
    (0.30
    )
    
    
    $
    (0.73
    )
 Revenues
  Cost of Sales
  General and Administrative Expense
  32




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##### Table of Contents



Consulting Services.
 Professional Fees
  Salaries and Benefits
 Depreciation and Amortization.
 Interest
 Income Taxes.
 33




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Nine Months Ended September 30, 2006 Compared to Nine Months Ended September 30, 2005 (restated)
 For the Nine Months EndedSeptember 30,2006
    
    
    2005(restated)(unaudited)
    
    
    (unaudited)(see Note 4)Successor
    
    
    
    PredecessorJune 8 - September 30
    
    
    
    January 1 - June 7
    
    
    PredecessorRevenues
    
    $
    26,975
    
    
    
    $
    19,451
    
    
    $
    111,814Cost of sales
    
    
    20,181
    
    
    
    
    43,584
    
    
    
    114,658Gross Margin
    
    
    6,794
    
    
    
    
    (24,133
    )
    
    
    (2,844
    )Gross Margin Percentage
    
    
    25
    %
    
    
    
    (124
    )%
    
    
    (3
    )%General and administrative expenses
    
    
    20,781
    
    
    
    
    34,903
    
    
    
    174,915Consulting services
    
    
    5,995
    
    
    
    
    
    
    
    
    26,847Professional fees
    
    
    55,806
    
    
    
    
    328,347
    
    
    
    76,203Salaries and benefits
    
    
    98,752
    
    
    
    
    89,130
    
    
    
    167,657Non-cash stock compensation
    
    
    
    
    
    
    
    3,410
    
    
    
    54,501Non-cash consulting expense
    
    
    
    
    
    
    
    
    
    
    
    37,680Depreciation and amortization
    
    
    15,491
    
    
    
    
    2,755
    
    
    
    196,612(Gain) loss on extinguishment of debt
    
    
    (69,219
    )
    
    
    
    43,056
    
    
    
    46,000Gain on settlement of accounts payable
    
    
    
    
    
    
    
    (140,525
    )
    
    
    Net operating loss
    
    $
    (120,812
    )
    
    
    $
    (385,209
    )
    
    $
    (783,259
    )Interest income (expense), net
    
    
    1,839
    
    
    
    
    (73,276
    )
    
    
    (131,808
    )Net loss
    
    $
    (118,973
    )
    
    
    $
    (458,485
    )
    
    $
    (915,067
    )Deemed dividend related to beneficial
conversion feature on Series A convertible
preferred stock
    
    
    (3,000,000
    )
    
    
    
    
    
    
    
    Net loss attributable to common stockholders
    
    $
    (3,118,973
    )
    
    
    $
    (458,485
    )
    
    $
    (915,067
    )Weighted average number of common shares
outstanding  basic and fully diluted
    
    
    388,140
    
    
    
    
    388,140
    
    
    
    318,089Basic and diluted loss per common share attributable
to common stockholders
    
    $
    (8.04
    )
    
    
    $
    (1.18
    )
    
    $
    (2.88
    )
 Revenues
  Cost of Sales
  34




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##### Table of Contents



General and Administrative Expense
  Consulting Services.
 Professional Fees
  Salaries and Benefits
 Depreciation and Amortization.
 Loss on Extinguishment of Debt
 Gain on Settlement of Accounts Payable
 Interest
Expense
 Income Taxes.
 35




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##### Table of Contents



Liquidity and Capital Resources and Financial Position
   Operating Activities.
  Investing Activities.
  Financing Activities
 36




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##### Table of Contents



Indebtedness
 See
 Contractual Obligations and Commercial Commitments
  Payments due by PeriodContractual Obligations
    
    Total
    
    
    Less than 1 Year
    
    
    1-3 YearsShort-Term Debt (1)
    
    $
    100,000
    
    
    $
    100,000
    
    
    
    Lease
    
    
    10,000
    
    
    
    10,000
    
    
    
    Total:
    
    $
    110,000
    
    
    $
    110,000
    
    
    
    
 
 (1)
    
    This noteholder has agreed to waive any and all accrued but unpaid interest on this
note. This note was repaid in full on October 13, 2006. Liquidity
   
 Item 3. Controls and Procedures
  37




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##### Table of Contents



Plan for Remediation of Material Weaknesses
  Changes in Internal Controls
  Limitations on the Effectiveness of Controls
   38




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##### Table of Contents



PART II  OTHER INFORMATION
 
 Item 6. Exhibits
  ExhibitNumber
    
    Description of Exhibit31.1
    
    Certification of Principal Executive Officer pursuant to Rule
13a-14(a) of the Securities Exchange Act.31.2
    
    Certification of Principal Financial Officer pursuant to Rule
13a-14(a) of the Securities Exchange Act.32.1
    
    Certification Required by 18 U.S.C. Section 1350 (as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002).
 39




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##### Table of Contents



SIGNATURES
  Date: November 14, 2006
    
    IMMEDIATEK, INC.a Nevada corporationBy:
    
    /s/ PAUL MARINName:
    
    Paul MarinTitle:
    
    President and Secretary(On behalf of the Registrant and as PrincipalFinancial Officer)
 S-1




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##### Table of Contents



INDEX TO EXHIBITS
 ExhibitNumber
    
    Description of Exhibit31.1
    
    Certification of Principal Executive Officer pursuant to Rule
13a-14(a) of the Securities Exchange Act.31.2
    
    Certification of Principal Financial Officer pursuant to Rule
13a-14(a) of the Securities Exchange Act.32.1
    
    Certification Required by 18 U.S.C. Section 1350 (as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002).