**SECURITIES      AND EXCHANGE COMMISSION**

**WASHINGTON,      D.C. 20549**

**FORM      10-KSB**

| [X] | Annual                report pursuant to section 13 or 15(d) of the Securities Exchange                Act of                1934 for the fiscal year ended June 30, 2006                or |
|-----|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

**Family      Room Entertainment Corporation**

----

**PART      I**

**ITEM      1.**
**Description      of Business **

**General      Business Development**
** **

**Restructuring      Transaction**

**Asset      Purchase**

**Name      and Symbol Change**

**Family      Room Entertainment Business Overview **

----

**Financing      FMLY’s Motion Pictures**

**Distributing      FMLY’s Motion Pictures**

**The      Home Marketplace for Motion Picture Product**

----

| **Major                Customers**      |   | **June                30,** |
|-----------------------------------------|--------|-----------------------------|
|                                    |   |                        | **2006** | **2005** |
| NuImage/Millennium                Films | 96.07  | 86.78%                      |
| Lions                Gate Films         | 0.00   | 0.00%                       |
| Regents                Films            |   | 0.30                        | 0.00% |
| Platinum                Disc            |   | 0.19                        | 1.00% |
| Lantern                Lane             |   | 0.08                        | 1.00% |
| Other                                   |   |                        | 3.36 | 11.22% |
| Total                Revenue            |   | 100.00%                     | 100.00% |

**Technological      Developments **

**Foreign      Markets**

**New      Technologies**

**Motion      Picture Property Acquisition Process **

----

**FMLY      Feature Film Production **

**Film      Project History**

**Profit      Participation**

----

**Royalties**

----

| **FAMILY                ROOM ENTERTAINMENT CORPORATION**   |
|------------------------------------------------------------|
|                                                       |
| **SUMMARY                OF FILM PROJECT HISTORY (1) (4)** |
|                                                       |

| **Picture**                             |                                |                                       | **Fees                Received**       |
|-----------------------------------------|-------------------------------------|--------------------------------------------|----------------------------------------|
| **Initial                Release Date** |                                | **Function**                               | **Year                ended June 30,** |
| **and                Media Type**       |                                | **Performed                by FMLY (2)**   |
|                                    |                                | **Type                of**                 |
| **Film                Credit Received** | **Principal                Talent** | **Production                Services**     |                                   | **2004** |   | **2005** |   | **2006** |
| ***Speedway                Junky***     | Jesse                Bradford,      | Picture                originally produced |                                   |   |   |   |   |   |
|                                    | Jordan                Brower,       | by                a third party financier. |                                   |   |   |   |   |   |
| 1-Sep                                   | Jonathan                Taylor      | FMLY                subsequently           |                                   |   |   |   |   |   |
|                                    | Thomas,                Tiffani      | acquired                50% ownership      |                                   |   |   |   |   |   |
| Theatrical                              | Amber                Theisssen,     | from                the financier and      |                                   |   |   |   |   |   |
|                                    | Warren                G, Daryl      | receives                royalties if any   |                                   |   |   |   |   |   |
|                                    | Hannah                              |                                       |                                   |   |   |   |   |   |
|                                    |                                |                                       |                                   |   |   |   |   |   |
| Randall                Emmett &     |                                | Production                services         |                                   |   |   |   |   |   |
| George                Furla             |                                | provided                include the        |                                   |   |   |   |   |   |
| Producers                               |                                | negotiation                of financing    |                                   |   |   |   |   |   |
|                                    |                                | and                distribution of the     |                                   |   |   |   |   |   |
|                                    |                                | picture,                and consulting     |                                   |   |   |   |   |   |
|                                    |                                | services                                   |                                   |   |   |   |   |   |
|                                    |                                |                                       | $                                      | **76,979** |   | **(3)** |   | **(3)** |

----

| ***Held                For Ransom*** | Dennis                Hopper,         | Picture                originally produced |   |      |   |      |   |    |
|--------------------------------------|---------------------------------------|--------------------------------------------|--------|-----------|--------|-----------|--------|---------|
|                                 | Zachery                Ty Bryan,      | by                a third party financier. |   |      |   |      |   |    |
| Aug-00                               | Kam                Heskin,            | FMLY                subsequently           |   |      |   |      |   |    |
|                                 | Jordan                Brower,         | acquired                100% ownership     |   |      |   |      |   |    |
| Video/Cable                          | Randy                Spelling,        | from                said third party.      |   |      |   |      |   |    |
|                                 | Tsianina                Joelson,      | receives                royalties, if any. |   |      |   |      |   |    |
|                                 | &                Morgan Fairchild |                                       |   |      |   |      |   |    |
|                                 |                                  |                                       |   | **(3-A)** | **$**  | **6,000** |   | **(3)** |
| ***After                Sex***       | Brooke                Shields,        | Picture                originally produced |   |      |   |      |   |    |
|                                 | Virginia                Madsen,       | by                a third party financier. |   |      |   |      |   |    |
| Aug-00                               | D.B.                Sweeney,          | FMLY                subsequently           |   |      |   |      |   |    |
|                                 | Dan                Cortese,           | acquired                100% ownership     |   |      |   |      |   |    |
| Video/Cable                          | Maria                Pitillo, &   | from                the financier and      |   |      |   |      |   |    |
|                                 | Jonathon                Schaech       | receives                royalties, if any. |   |      |   |      |   |    |
|                                 |                                  |                                       |   | **(3-A)** | **$**  | **6,000** |   | **(3)** |

----

| ***I'm                Over Here Now*** | Andrew                "Dice"     | Picture                produced            |   |    |   |    |   |    |
|----------------------------------------|----------------------------------|--------------------------------------------|--------|---------|--------|---------|--------|---------|
|                                   | Clay                             | by                a third party financier. |   |    |   |    |   |    |
| Mar-00                                 |                             | FMLY                retains profit         |   |    |   |    |   |    |
|                                   |                             | participation,                if any.      |   |    |   |    |   |    |
| Pay-per-View/                Video     |                             | No                profit participation     |   |    |   |    |   |    |
|                                   |                             | payments                received to date.  |   |    |   |    |   |    |
|                                   |                             |                                       |   | **(3)** |   | **(3)** |   | **(3)** |
| ***Good                Advice***       | Charlie                Sheen,    | Picture                produced by FMLY    |   |    |   |    |   |    |
|                                   | Angie                Harmon,     | in                conjunction with a third |   |    |   |    |   |    |
| 1-Dec                                  | Denise                Richards,  | party.                FMLY retains         |   |    |   |    |   |    |
|                                   | Rosanna                Arquette, | primary                ownership and       |   |    |   |    |   |    |
| Video/Cable                            | &                Jon Lovitz  | receives                royalties, if any. |   |    |   |    |   |    |

----

| Randall                Emmett & |                                | Production                services           |   |       |   |    |   |    |
|-------------------------------------|-------------------------------------|----------------------------------------------|--------|------------|--------|---------|--------|---------|
| George                Furla         |                                | provided                include the          |   |       |   |    |   |    |
| Producers                           |                                | negotiation                of financing      |   |       |   |    |   |    |
|                                |                                | and                distribution of the       |   |       |   |    |   |    |
|                                |                                | picture,                and consulting       |   |       |   |    |   |    |
|                                |                                | services                during               |   |       |   |    |   |    |
|                                |                                | development,                during           |   |       |   |    |   |    |
|                                |                                | principal                photography,        |   |       |   |    |   |    |
|                                |                                | and                during post               |   |       |   |    |   |    |
|                                |                                | production                (to ensure         |   |       |   |    |   |    |
|                                |                                | that                the film was             |   |       |   |    |   |    |
|                                |                                | completed                on time and         |   |       |   |    |   |    |
|                                |                                |  within                budget).         | $      | **60,000** |   | **(3)** |   | **(3)** |
| ***Ticker***                        | **Tom                Sizemore,**    | **Produced                by a third party** |   |       |   |    |   |    |   |
|                                | Steven                Seagal,       | financier.                FMLY provided      |   |       |   |    |   |    |   |
| 1-Dec                               | Jamie                Pressly, & | production                services and       |   |       |   |    |   |    |   |
|                                | Dennis                Hopper        | financing                and received        |   |       |   |    |   |    |   |
| Video/Cable                         |                                | a                fee and profit              |   |       |   |    |   |    |   |
|                                |                                | participation,                If any. No     |   |       |   |    |   |    |   |
|                                |                                | profit                participation to       |   |       |   |    |   |    |   |
|                                |                                | received                to date              |   |       |   |    |   |    |   |
|                                |                                |                                         |   | **(3)**    |   | **(3)** |   | **(3)** |   |

----

| ***The                Badge***              | Billy                Bob Thornton, | Produced                by a third party     |   |                                                    |   |                                                 |   |    |   |
|---------------------------------------------|------------------------------------|----------------------------------------------|--------|---------------------------------------------------------|--------|------------------------------------------------------|--------|---------|--------|
| ***(f/k/a                Behind the Sun)*** | Patricia                Arquette,  | financier.                FMLY provided      |   |                                                    |   |                                                 |   |    |   |
|                                        | &                Seal Ward     | production                services and       |   |                                                    |   |                                                 |   |    |   |
| 2-Sep                                       |                               | received                a fee and            |   |                                                    |   |                                                 |   |    |   |
|                                        |                               | profit                participation, if any. |   |                                                    |   |                                                 |   |    |   |
| Video/Cable                                 |                               | No                profit participation       |   |                                                    |   |                                                 |   |    |   |
|                                        |                               | received                to date.             |   |                                                    |   |                                                 |   |    |   |
|                                        |                               |                                         |   |                                                    |   |                                                 |   |    |   |
| Randall                Emmett &         |                               | Production                services           |   |                                                    |   |                                                 |   |    |   |
| George                Furla                 |                               | provided                include the          |   |                                                    |   |                                                 |   |    |   |
| Executive                Producers          |                               | negotiation                of financing      |   |                                                    |   |                                                 |   |    |   |
|                                        |                               | and                distribution of the       |   |                                                    |   |                                                 |   |    |   |
|                                        |                               | picture,                and consulting       |   |                                                    |   |                                                 |   |    |   |
|                                        |                               | services                during develop-      |   |                                                    |   |                                                 |   |    |   |
|                                        |                               | ment,                during principal photo- |   | graphy,                and during post** **        |   | production                (to ensure that,** ** |   |    |   |
|                                        |                               | On                behalf of the financier    |   | and                distributor, that creative** ** |   | and                financial resources               |   |    |   |
|                                        |                               | were                fully utilized)          |   |                                                    |   |                                                 |   |    |   |
|                                        |                               |                                         |   | **(3)**                                                 |   | **(3)**                                              |   | **(3)** |   |

----

| ***Run                for the Money*** | Christian                Slater,                    | Produced                by a third party     |   |        |   |    |   |    |   |
|----------------------------------------|-----------------------------------------------------|----------------------------------------------|--------|-------------|--------|---------|--------|---------|--------|
|                                   | Val                Kilmer,                          | financier.                FMLY provided      |   |        |   |    |   |    |   |
| 2-Feb                                  | Daryl                Hannah,                        | production                services and       |   |        |   |    |   |    |   |
|                                   | Bokeem                Woodbine,                     | received                a fee and            |   |        |   |    |   |    |   |
| Video/Cable                            | &                Vern Troyer                    | profit                participation, if any. |   |        |   |    |   |    |   |
|                                   |                                                | No                profit participation       |   |        |   |    |   |    |   |
|                                   |                                                | received                to date.             |   |        |   |    |   |    |   |
|                                   |                                                |                                         |   |        |   |    |   |    |   |
| Randall                Emmett &    | Production                services             | provided                include following    |   | :** ** |   |    |   |    |   |
| George                Furla            | Negotiated                for the acting       | services                of Val Kilmer,       |   |        |   |    |   |    |   |
| Producers                              | Christian                Slater and Daryl      | Hannah;                negotiated for the    |   |        |   |    |   |    |   |
|                                   | financing                and distribution      | of                the film and provided      |   |        |   |    |   |    |   |
|                                   | consulting                services during           | development,                during           |   |        |   |    |   |    |   |
|                                   | principal                photography,          | and                during post production    |   |        |   |    |   |    |   |
|                                   | (to                ensure that, on             | behalf                of the financier       |   |        |   |    |   |    |   |
|                                   | and                distributor, that creative  | and                financial resources       |   |        |   |    |   |    |   |
|                                   |                                                | were                fully utilized)          |   |        |   |    |   |    |   |
|                                   |                                                |                                         |   | **(3)**     |   | **(3)** |   | **(3)** |   |

----

| ***Run                for the Money*** | Christian                Slater,                    | Produced                by a third party     |   |    |   |    |   |    |   |
|----------------------------------------|-----------------------------------------------------|----------------------------------------------|--------|---------|--------|---------|--------|---------|--------|
|                                   | Val                Kilmer,                          | financier.                FMLY provided      |   |    |   |    |   |    |   |
| 2-Feb                                  | Daryl                Hannah,                        | production                services and       |   |    |   |    |   |    |   |
|                                   | Bokeem                Woodbine,                     | received                a fee and            |   |    |   |    |   |    |   |
| Video/Cable                            | &                Vern Troyer                    | profit                participation, if any. |   |    |   |    |   |    |   |
|                                   |                                                | No                profit participation       |   |    |   |    |   |    |   |
|                                   |                                                | received                to date.             |   |    |   |    |   |    |   |
|                                   |                                                |                                         |   |    |   |    |   |    |   |
| Randall                Emmett &    | Production                services             | provided                include following    |   |    |   |    |   |    |   |
| George                Furla            | Negotiated                for the acting       | :                services of Val Kilmer,     |   |    |   |    |   |    |   |
| Producers                              | Christian                Slater and Daryl      | Hannah;                negotiated for the    |   |    |   |    |   |    |   |
|                                   | financing                and distribution      | of                the film and provided      |   |    |   |    |   |    |   |
|                                   | consulting                services during      | development,                during           |   |    |   |    |   |    |   |
|                                   | principal                photography,          | and                during post production    |   |    |   |    |   |    |   |
|                                   | (to                ensure that, on             | behalf                of the financier       |   |    |   |    |   |    |   |
|                                   | and                distributor, that creative  | and                financial resources       |   |    |   |    |   |    |   |
|                                   |                                                | were                fully utilized)          |   |    |   |    |   |    |   |
|                                   |                                                |                                         |   | **(3)** |   | **(3)** |   | **(3)** |   |
|                                   |                                                |                                         |   |    |   |    |   |    |   |

----

| ***Narc***                          | Ray                Liotta,        | Produced                by a third party       |   |    |   |    |   |    |   |
|-------------------------------------|-----------------------------------|------------------------------------------------|--------|---------|--------|---------|--------|---------|--------|
|                                | Jason                Patric,      | financier.                FMLY provided        |   |    |   |    |   |    |   |
| 2-Dec                               | &                Busta Rhymes | production                services and         |   |    |   |    |   |    |   |
|                                |                              | financing                and received          |   |    |   |    |   |    |   |
| Theatrical                          |                              | a                fee and profit participation, |   |    |   |    |   |    |   |
|                                |                              | if                any. No profit participation |   |    |   |    |   |    |   |
|                                |                              | received                to date.               |   |    |   |    |   |    |   |
|                                |                              |                                           |   |    |   |    |   |    |   |
|                                |                              |                                           |   |    |   |    |   |    |   |
| Randall                Emmett & |                              | Production                services             |   |    |   |    |   |    |   |
| George                Furla         |                              | provided                include consulting     |   |    |   |    |   |    |   |
| Executive                Producers  |                              | on                the financing of the         |   |    |   |    |   |    |   |
|                                |                              | picture.                                       |   |    |   |    |   |    |   |
|                                |                              |                                           |   | **(3)** |   | **(3)** |   | **(3)** |   |

----

| ***The                Devil and***         | Alec                Baldwin,       | Produced                by a third party     |   |                                                   |   |    |   |    |
|--------------------------------------------|------------------------------------|----------------------------------------------|--------|--------------------------------------------------------|--------|---------|--------|---------|
| ***Daniel                Webster***        | Anthony                Hopkins,    | financier.                FMLY provided      |   |                                                   |   |    |   |    |
| 3-Mar                                 | &                Jennifer Love | production                services and       |   |                                                   |   |    |   |    |
| Video/Cable                                | Hewitt                             | received                a fee. and           |   | profit                participation, if any.** ** |   |    |   |    |
| (Foreign                Release)      |                               | No                profit participation       |   | received                to date.** **             |   |    |   |    |
|                                       |                               |                                         | $      | **-**                                                  | **$**  | **-**   | **$**  | **-**   |
| ***All                I Want***            | Elijah                Wood,        | Produced                by a third party     |   |                                                   |   |    |   |    |
| ***(f/k/a                Try Seventeen)*** | Franka                Potente,     | financier.                FMLY provided      |   |                                                   |   |    |   |    |
|                                       | &                Mandy Moore   | production                services and       |   |                                                   |   |    |   |    |
| 3-Sep                                      |                               | received                a fee and            |   |                                                   |   |    |   |    |
|                                       |                               | profit                participation, if any. |   |                                                   |   |    |   |    |
| Video/Cable                                |                               | No                profit participation       |   |                                                   |   |    |   |    |
|                                       |                               | received                to date.             |   |                                                   |   |    |   |    |
|                                       |                               |                                         |   |                                                   |   |    |   |    |
| Randall                Emmett &        |                               | Production                services           |   |                                                   |   |    |   |    |
| George                Furla                |                               | provided                include              |   |                                                   |   |    |   |    |
| Producers                                  |                               | consulting                on the financing   |   | of                the picture.** **               |   |    |   |    |
|                                       |                               |                                         |   |                                                   |   |    |   |    |
|                                       |                               |                                         | $      | **-**                                                  | **$**  | **(3)** |   | **(3)** |

----

| ***Out                for a Kill*** | Steven                Seagal | Produced                by a third party     |   |   |   |   |   |   |
|-------------------------------------|------------------------------|----------------------------------------------|--------|--------|--------|--------|--------|--------|
|                                |                         | financier.                FMLY provided      |   |   |   |   |   |   |
| 3-Aug                               |                         | production                services and       |   |   |   |   |   |   |
|                                |                         | received                a fee and            |   |   |   |   |   |   |
| Video/Cable                         |                         | profit                participation, if any. |   |   |   |   |   |   |
|                                |                         | No                profit participation       |   |   |   |   |   |   |
|                                |                         | received                to date.             |   |   |   |   |   |   |
|                                |                         |                                         |   |   |   |   |   |   |
| Randall                Emmett & |                         | Production                services           |   |   |   |   |   |   |
| George                Furla         |                         | provided                include              |   |   |   |   |   |   |
| Producers                           |                         | negotiating                for the services  |   |   |   |   |   |   |
|                                |                         | of                Steven Segal for the       |   |   |   |   |   |   |
|                                |                         | picture                and providing         |   |   |   |   |   |   |
|                                |                         | consulting                services during    |   |   |   |   |   |   |
|                                |                         | development,                on location      |   |   |   |   |   |   |
|                                |                         | and                during principal          |   |   |   |   |   |   |
|                                |                         | photography                                  |   |   |   |   |   |   |
|                                |                         | (to                ensure that the film      |   |   |   |   |   |   |
|                                |                         | was                completed on time and     |   |   |   |   |   |   |
|                                |                         | within                budget).               |   |   |   |   |   |   |
|                                |                         |                                         | $      | **-**  | **$**  | **-**  |   |   |

----

| ***Belly                of the Beast*** | Steven                Seagal | Produced                by a third party     |   |   |   |   |   |   |
|-----------------------------------------|------------------------------|----------------------------------------------|--------|--------|--------|--------|--------|--------|
|                                    |                         | financier.                FMLY provided      |   |   |   |   |   |   |
| 3-Dec                                   |                         | production                services and       |   |   |   |   |   |   |
|                                    |                         | received                a fee and            |   |   |   |   |   |   |
| Video/Cable                             |                         | profit                participation, if any. |   |   |   |   |   |   |
|                                    |                         | No                profit participation       |   |   |   |   |   |   |
|                                    |                         | received                to date.             |   |   |   |   |   |   |
|                                    |                         |                                         |   |   |   |   |   |   |
| Randall                Emmett &     |                         | Production                services           |   |   |   |   |   |   |
| George                Furla             |                         | provided                include              |   |   |   |   |   |   |
| Executive                Producers      |                         | negotiating                for the services  |   |   |   |   |   |   |
|                                    |                         | of                Steven Segal for the       |   |   |   |   |   |   |
|                                    |                         | picture                and providing         |   |   |   |   |   |   |
|                                    |                         | consulting                services during    |   |   |   |   |   |   |
|                                    |                         | development,                on location      |   |   |   |   |   |   |
|                                    |                         | and                during principal          |   |   |   |   |   |   |
|                                    |                         | photography                                  |   |   |   |   |   |   |
|                                    |                         | (to                ensure that the film      |   |   |   |   |   |   |
|                                    |                         | was                completed on time and     |   |   |   |   |   |   |
|                                    |                         | within                budget).               |   |   |   |   |   |   |
|                                    |                         |                                         | $      | **-**  | **$**  | **-**  |   |   |

----

| ***Blind                Horizon***  | Val                Kilmer,                         | Produced                by a third party      |   |   |   |   |   |   |
|-------------------------------------|----------------------------------------------------|-----------------------------------------------|--------|--------|--------|--------|--------|--------|
|                                | Neve                Campbell,                      | financier.                FMLY provided       |   |   |   |   |   |   |
| 4-Dec                               | Sam                Shepard &                   | production                services and        |   |   |   |   |   |   |
|                                | Faye                Dunaway                        | received                a fee and             |   |   |   |   |   |   |
|                                |                                               | profit                participation, if any.  |   |   |   |   |   |   |
| Video/Cable                         |                                               | No                profit participation        |   |   |   |   |   |   |
|                                |                                               | received                to date.              |   |   |   |   |   |   |
|                                |                                               |                                          |   |   |   |   |   |   |
| Randall                Emmett & | Production                services                 | provided                include               |   |   |   |   |   |   |
| George                Furla         | negotiating                for the acting     | services                of Val Kilmer,        |   |   |   |   |   |   |
| Producers                           | negotiating                for the financing  | and                distribution of the        |   |   |   |   |   |   |
|                                | picture                and providing          | consulting                services during     |   |   |   |   |   |   |
|                                | development,                during            | principal                photography and      |   |   |   |   |   |   |
|                                | during                post production         | (to                ensure that, on            |   |   |   |   |   |   |
|                                | behalf                of the financier        | and                distributor, that creative |   |   |   |   |   |   |
|                                |                                               | and                financial resources        |   |   |   |   |   |   |
|                                |                                               | were                fully utilized)           |   |   |   |   |   |   |
|                                |                                               |                                          | $      | **-**  | **$**  | **-**  |   |   |

----

| ***Control***                       | Ray                Liotta, &                  | Produced                by a third party     |   |        |   |   |   |   |
|-------------------------------------|---------------------------------------------------|----------------------------------------------|--------|-------------|--------|--------|--------|--------|
|                                | William                Dafoe                      | financier.                FMLY provided      |   |        |   |   |   |   |
| 5-Feb                               |                                              | production                services and       |   |        |   |   |   |   |
|                                |                                              | received                a fee and            |   |        |   |   |   |   |
|                                |                                              | profit                participation, if any. |   |        |   |   |   |   |
| Video/Cable                         |                                              | No                profit participation       |   |        |   |   |   |   |
|                                |                                              | received                to date.             |   |        |   |   |   |   |
|                                |                                              |                                         |   |        |   |   |   |   |
| Randall                Emmett & |                                              | Production                services           |   |        |   |   |   |   |
| George                Furla         |                                              | provided                include negotiating  |   |        |   |   |   |   |
| Producers                           |                                              | for                the acquisition of the    |   |        |   |   |   |   |
|                                | rights                in and to the screen-  | upon                which the picture play   |   |        |   |   |   |   |
|                                | was                based and negotiating     | the                acting services           |   |        |   |   |   |   |
|                                | agreement                with Ray Liotta.    | Also                performed consulting     |   |        |   |   |   |   |
|                                | services                during principal     | photography                and through       |   |        |   |   |   |   |
|                                | out                the post production       | process                to assist in getting  |   |        |   |   |   |   |
|                                | the                picture completed on      | time                and within budget        |   |        |   |   |   |   |
|                                |                                              |                                         | $      | **117,500** | **$**  | **-**  |   | **-**  |

----

| ***Love                Song for Bobby Long*** | John                Travolta & | Produced                by a third party     |   |       |   |   |   |   |
|-----------------------------------------------|------------------------------------|----------------------------------------------|--------|------------|--------|--------|--------|--------|
|                                          | Scarlett                Johansson  | financier.                FMLY provided      |   |       |   |   |   |   |
|                                          |                               | production                services and       |   |       |   |   |   |   |
| 4-Dec                                         |                               | received                a fee and            |   |       |   |   |   |   |
|                                          |                               | profit                participation, if any. |   |       |   |   |   |   |
| Theatrical                                    |                               | No                profit participation       |   |       |   |   |   |   |
|                                          |                               | received                to date.             |   |       |   |   |   |   |
|                                          |                               |                                         |   |       |   |   |   |   |
| Randall                Emmett &           |                               | Production                services           |   |       |   |   |   |   |
| George                Furla                   |                               | provided                include consulting   |   |       |   |   |   |   |
| Executive                Producers            |                               | in                the negotiations for the   |   |       |   |   |   |   |
|                                          |                               | acting                services of John       |   |       |   |   |   |   |
|                                          |                               | Travolta                for the picture.     |   |       |   |   |   |   |
|                                          |                               |                                         | $      | **25,000** | **$**  | **-**  |   | **-**  |

----

| ***The                Amityville Horror*** | Ryan                Reynolds, & | Produced                by a third party    |   |        |   |        |   |   |
|--------------------------------------------|-------------------------------------|---------------------------------------------|--------|-------------|--------|-------------|--------|--------|
|                                       | Melissa                George       | financier.                FMLY provided     |   |        |   |        |   |   |
| 5-Apr                                      |                                | development                services and     |   |        |   |        |   |   |
|                                       |                                | received                a fee.              |   |        |   |        |   |   |
|                                       |                                |                                        |   |        |   |        |   |   |
| Theatrical                                 |                                |                                        |   |        |   |        |   |   |
|                                       |                                |                                        |   |        |   |        |   |   |
| Randall                Emmett &        |                                | Production                services          |   |        |   |        |   |   |
| George                Furla                |                                | provided                include negotiating |   |        |   |        |   |   |
| Co-                Executive Producers     |                                | for                the acquisition of the   |   |        |   |        |   |   |
|                                       |                                | rights                in and to the picture |   |        |   |        |   |   |
|                                       |                                | and                subsequently             |   |        |   |        |   |   |
|                                       |                                | negotiated                for their sale    |   |        |   |        |   |   |
|                                       |                                | to                NuImage.                  |   |        |   |        |   |   |
|                                       |                                |                                        | $      | **110,516** | **$**  | **500,000** |   |   |

----

| ***Edison***                        | Morgan                Freeman,                   | Produced                by a third party      |   |        |   |   |   |   |
|-------------------------------------|--------------------------------------------------|-----------------------------------------------|--------|-------------|--------|--------|--------|--------|
|                                | Justin                Timberlake,                | financier.                FMLY provided       |   |        |   |   |   |   |
| 6-Aug                               | LL                Cool J, &                  | production                services and        |   |        |   |   |   |   |
|                                | Kevin                Spacey                      | received                a fee and             |   |        |   |   |   |   |
|                                |                                             | profit                participation, if any,  |   |        |   |   |   |   |
|                                |                                             | in                the film.                   |   |        |   |   |   |   |
| video/cable                         |                                             |                                          |   |        |   |   |   |   |
|                                |                                             |                                          |   |        |   |   |   |   |
| Randall                Emmett & | Production                services          | provided                include negotiating   |   |        |   |   |   |   |
| George                Furla         | for                the acquisition of the   | rights                in and to the screen-   |   |        |   |   |   |   |
| Producers                           | play                upon which the picture  | was                based as well as           |   |        |   |   |   |   |
|                                | the                acting services          | agreements                of Morgan           |   |        |   |   |   |   |
|                                | Freeman,                Justin Timberlake   | LL                Cool J and Kevin            |   |        |   |   |   |   |
|                                | Spacey.                Also provided        | consulting                services            |   |        |   |   |   |   |
|                                | during                principal             | photography                and the post       |   |        |   |   |   |   |
|                                | production                process.          | (to                ensure that, on            |   |        |   |   |   |   |
|                                | behalf                of the financier      | and                distributor, that creative |   |        |   |   |   |   |
|                                | and                financial resources      | were                fully utilized)           |   |        |   |   |   |   |
|                                |                                             |                                          | $      | **250,000** | **$**  | **-**  |   |   |

----

| ***Submerged***                     | Steven                Seagal | Produced                by a third party  |   |   |   |        |   |   |
|-------------------------------------|------------------------------|-------------------------------------------|--------|--------|--------|-------------|--------|--------|
|                                |                         | financier.                FMLY provided   |   |   |   |        |   |   |
| 5-Jun                               |                         | development                services and   |   |   |   |        |   |   |
|                                |                         | received                a fee.            |   |   |   |        |   |   |
|                                |                         |                                      |   |   |   |        |   |   |
| Video/Cable                         |                         |                                      |   |   |   |        |   |   |
|                                |                         |                                      |   |   |   |        |   |   |
| Randall                Emmett & |                         | Production                services        |   |   |   |        |   |   |
| George                Furla         |                         | provided                include           |   |   |   |        |   |   |
| Producers                           |                         | negotiating                an acting      |   |   |   |        |   |   |
|                                |                         | services                agreement with    |   |   |   |        |   |   |
|                                |                         | Steven                Segal for the       |   |   |   |        |   |   |
|                                |                         | picture                and providing      |   |   |   |        |   |   |
|                                |                         | consulting                services during |   |   |   |        |   |   |
|                                |                         | development,                and on        |   |   |   |        |   |   |
|                                |                         | location                during principal  |   |   |   |        |   |   |
|                                |                         | photography.                              |   |   |   |        |   |   |
|                                |                         |                                      | $      | **-**  | **$**  | **300,000** |   |   |

----

| ***The                Tenants***      | Dylan                McDermott,  | Produced                by a third party |   |   |   |       |   |          |   |
|---------------------------------------|----------------------------------|------------------------------------------|--------|--------|--------|------------|--------|---------------|--------|
|                                  | Snoop                Doggy Dogg, | financier.                FMLY provided  |   |   |   |       |   |          |   |
| 6-Feb                                 | &                Peter Falk  | production                services and   |   |   |   |       |   |          |   |
|                                  |                             | financing                and received    |   |   |   |       |   |          |   |
|                                  |                             | a                fee and profit          |   |   |   |       |   |          |   |
| Theatrical                            |                             | participation,                if any, in |   |   |   |       |   |          |   |
| Distribution                Guarantee |                             | the                film.                 |   |   |   |       |   | **1,300,000** |   |
|                                  |                             |                                     |   |   |   |       |   |          |   |
| Randall                Emmett &   |                             | Production                services       |   |   |   |       |   |          |   |
| George                Furla           |                             | provided                include          |   |   |   |       |   |          |   |
| Producers                             |                             | negotiating                the financing |   |   |   |       |   |          |   |
|                                  |                             | of                the picture and its    |   |   |   |       |   |          |   |
|                                  |                             | distribution                by NuImage.  |   |   |   |       |   |          |   |
|                                  |                             |                                     | $      | **-**  | **$**  | **12,000** |   | **-**         |   |

----

| ***Today                You Die***  | Steven                Seagal | Produced                by a third party  |   |   |   |        |   |   |
|-------------------------------------|------------------------------|-------------------------------------------|--------|--------|--------|-------------|--------|--------|
|                                |                         | financier.                FMLY provided   |   |   |   |        |   |   |
| 5-Sep                               |                         | production                services and    |   |   |   |        |   |   |
|                                |                         | received                a fee and profit  |   |   |   |        |   |   |
|                                |                         | participation,                if any, in  |   |   |   |        |   |   |
| Video/Cable                         |                         | the                film                   |   |   |   |        |   |   |
|                                |                         |                                      |   |   |   |        |   |   |
| Randall                Emmett & |                         | Production                services        |   |   |   |        |   |   |
| George                Furla         |                         | provided                include           |   |   |   |        |   |   |
| Producers                           |                         | negotiating                an acting      |   |   |   |        |   |   |
|                                |                         | services                agreement with    |   |   |   |        |   |   |
|                                |                         | Steven                Segal for the       |   |   |   |        |   |   |
|                                |                         | picture                and providing      |   |   |   |        |   |   |
|                                |                         | consulting                services during |   |   |   |        |   |   |
|                                |                         | development,                and on        |   |   |   |        |   |   |
|                                |                         | location                during principal  |   |   |   |        |   |   |
|                                |                         | photography.                              |   |   |   |        |   |   |
|                                |                         |                                      | $      | **-**  | **$**  | **200,000** |   | **-**  |

----

| ***Wonderland***                    | Val                Kilmer,      | Produced                by a third party    |   |   |   |   |   |   |
|-------------------------------------|---------------------------------|---------------------------------------------|--------|--------|--------|--------|--------|--------|
|                                | Kate                Bosworth,   | financier.                FMLY provided     |   |   |   |   |   |   |
| 3-Oct                               | Lisa                Kudrow,     | development                services and     |   |   |   |   |   |   |
|                                | Josh                Lucas & | received                a fee.              |   |   |   |   |   |   |
| Theatrical                          | Dylan                Mcdermott  |                                        |   |   |   |   |   |   |
|                                |                            |                                        |   |   |   |   |   |   |
| Randall                Emmett & |                            | Production                services          |   |   |   |   |   |   |
| George                Furla         |                            | provided                include             |   |   |   |   |   |   |
| Executive                Producers  |                            | obtaining                financing          |   |   |   |   |   |   |
|                                |                            | and                negotiating for the      |   |   |   |   |   |   |
|                                |                            | distribution                of the picture. |   |   |   |   |   |   |
|                                |                            |                                        | $      | **-**  | **$**  | **-**  |   |   |

----

| ***Loverboy***                         | Kyra                Sdgwick,      | Produced                by a third party   |   |   |   |   |   |   |
|----------------------------------------|-----------------------------------|--------------------------------------------|--------|--------|--------|--------|--------|--------|
|                                   | Kevin                Bacon,       | financier.                FMLY provided    |   |   |   |   |   |   |
| 5-May                                  | Sandra                Bullock,    | development                services and    |   |   |   |   |   |   |
|                                   | Matt                Dillon,       | received                a fee.             |   |   |   |   |   |   |
| Theatrical                             | Oliver                Platt & |                                       |   |   |   |   |   |   |
|                                   | Marissa                Tomei      |                                       |   |   |   |   |   |   |
|                                   |                              |                                       |   |   |   |   |   |   |
| Randall                Emmett &    |                              | Production                services         |   |   |   |   |   |   |
| George                Furla            |                              | provided                include            |   |   |   |   |   |   |
| Co-                Executive Producers |                              | consulting                on the financing |   |   |   |   |   |   |
|                                   |                              | and                distribution of the     |   |   |   |   |   |   |
|                                   |                              | picture.                                   |   |   |   |   |   |   |
|                                   |                              |                                       | $      | **-**  | **$**  | **-**  |   | **-**  |

----

| ***Shottas***                          | Ky-Mani                Marley,    | Produced                by a third party   |   |   |   |   |   |   |
|----------------------------------------|-----------------------------------|--------------------------------------------|--------|--------|--------|--------|--------|--------|
|                                   | Spragga                Benz,      | financier.                FMLY provided    |   |   |   |   |   |   |
| 5-Dec                                  | Wyclef                Jean,       | post-production                services    |   |   |   |   |   |   |
| (Estimated                Release)     | &                Louie Rankin | and                financing and will      |   |   |   |   |   |   |
|                                   |                              | receive                a fee and profit    |   |   |   |   |   |   |
| Video/Cable                            |                              | participation,                if any, in   |   |   |   |   |   |   |
|                                   |                              | the                film.                   |   |   |   |   |   |   |
|                                   |                              |                                       |   |   |   |   |   |   |
| Randall                Emmett &    |                              | Production                services         |   |   |   |   |   |   |
| George                Furla            |                              | provided                include            |   |   |   |   |   |   |
| Co-                Executive Producers |                              | consulting                on the financing |   |   |   |   |   |   |
|                                   |                              | and                distribution of the     |   |   |   |   |   |   |
|                                   |                              | picture.                                   |   |   |   |   |   |   |
|                                   |                              |                                       | $      | **-**  | **$**  | **-**  |   | **-**  |

----

| ***Before                It Had A***  | William                Dafoe | Produced                by a third party    |   |   |   |   |   |   |
|---------------------------------------|------------------------------|---------------------------------------------|--------|--------|--------|--------|--------|--------|
| ***Name                f/k/a Black*** |                         | financier.                FMLY provided     |   |   |   |   |   |   |
| ***Widow                f/ka The***   |                         | development                services         |   |   |   |   |   |   |
| ***Widow's                Lover***    |                         | and                received a fee.          |   |   |   |   |   |   |
| 6-Dec                                 |                         |                                        |   |   |   |   |   |   |
| (Estimated                Release)    |                         |                                        |   |   |   |   |   |   |
|                                  |                         |                                        |   |   |   |   |   |   |
| Video/Cable                           |                         |                                        |   |   |   |   |   |   |
|                                  |                         |                                        |   |   |   |   |   |   |
| Randall                Emmett &   |                         | Production                services          |   |   |   |   |   |   |
| George                Furla           |                         | provided                include obtaining   |   |   |   |   |   |   |
| Executive                Producers    |                         | financing,                negotiating for   |   |   |   |   |   |   |
|                                  |                         | distribution                of the picture, |   |   |   |   |   |   |
|                                  |                         | and                providing consulting     |   |   |   |   |   |   |
|                                  |                         | services                during              |   |   |   |   |   |   |
|                                  |                         | development,                and on          |   |   |   |   |   |   |
|                                  |                         | location                during principal    |   |   |   |   |   |   |
|                                  |                         | photography.                                |   |   |   |   |   |   |
|                                  |                         |                                        | $      | **-**  | **$**  | **-**  |   | **-**  |

----

| ***Lonely                Hearts***    | John                Travolta,    | Produced                by a third party   |   |   |   |        |   |   |   |
|---------------------------------------|----------------------------------|--------------------------------------------|--------|--------|--------|-------------|--------|--------|--------|
|                                  | James                Gandofini,  | financier.                FMLY provided    |   |   |   |        |   |   |   |
| 7-Jan                                 | &                Salma Hayek | development                services        |   |   |   |        |   |   |   |
| (Estimated                Release)    |                             | and                received a fee.         |   |   |   |        |   |   |   |
|                                  |                             |                                       |   |   |   |        |   |   |   |
| Theatrical                            |                             |                                       |   |   |   |        |   |   |   |
|                                  |                             |                                       |   |   |   |        |   |   |   |
| Randall                Emmett &   |                             | Production                services         |   |   |   |        |   |   |   |
| George                Furla           |                             | provided                include            |   |   |   |        |   |   |   |
| Co-Executive                Producers |                             | negotiating                an acting       |   |   |   |        |   |   |   |
|                                  |                             | services                agreement for this |   |   |   |        |   |   |   |
|                                  |                             | picture                with John Travolta  |   |   |   |        |   |   |   |
|                                  |                             | and                providing consulting    |   |   |   |        |   |   |   |
|                                  |                             | services                during             |   |   |   |        |   |   |   |
|                                  |                             | development,                and on         |   |   |   |        |   |   |   |
|                                  |                             | location                during principal   |   |   |   |        |   |   |   |
|                                  |                             | photography.                               |   |   |   |        |   |   |   |
|                                  |                             |                                       | $      | **-**  | **$**  | **100,000** |   | **-**  |   |

----

| ***Mercenary                for***           | Steven                Seagal                    | Produced                by a third party   |   |   |   |        |   |    |   |
|----------------------------------------------|-------------------------------------------------|--------------------------------------------|--------|--------|--------|-------------|--------|---------|--------|
| ***Justice                f/k/a Mercenary*** |                                            | financier.                FMLY provided    |   |   |   |        |   |    |   |
| 6-Apr                                        |                                            | production                services and     |   |   |   |        |   |    |   |
|                                         |                                            | and                received a fee.         |   |   |   |        |   |    |   |
|                                         |                                            |                                       |   |   |   |        |   |    |   |
| Video/Cable                                  |                                            | 2005                                       |   |   |   |        |   |    |   |
|                                         |                                            |                                       |   |   |   |        |   |    |   |
|                                         |                                            |                                       |   |   |   |        |   |    |   |
|                                         |                                            |                                       |   |   |   |        |   |    |   |
|                                         |                                            |                                       |   |   |   |        |   |    |   |
| Randall                Emmett &          | Production                services         | provided                include            |   |   |   |        |   |    |   |
| George                Furla                  | negotiating                an acting       | services                agreement with     |   |   |   |        |   |    |   |
| Producers                                    | Steven                Segal for the        | picture                and providing       |   |   |   |        |   |    |   |
|                                         | consulting                services during  | development,                and on         |   |   |   |        |   |    |   |
|                                         | location                during principal        | photography.                               |   |   |   |        |   |    |   |
|                                         | Note:                We do not have a      |                                       |   |   |   |        |   |    |   |
|                                         |                                            | contract                on this project;   |   |   |   |        |   |    |   |
|                                         |                                            | **and                are uncertain about** |   |   |   |        |   |    |   |
|                                         |                                            | **profit                participation.**   |   |   |   |        |   |    |   |
|                                         |                                            |                                       | $      | **-**  | **$**  | **300,000** |   | ***-*** |   |

----

| ***16                Blocks***      | Bruce                Willis                       | Produced                by a third party     |   |   |   |        |   |   |
|-------------------------------------|---------------------------------------------------|----------------------------------------------|--------|--------|--------|-------------|--------|--------|
|                                | Mos                Def                            | financier.                FMLY provided      |   |   |   |        |   |   |
| 6-Mar                               |                                              | production                services and       |   |   |   |        |   |   |
|                                |                                              | and                received a fee.           |   |   |   |        |   |   |
|                                |                                              | 2005.                Additionally, we        |   |   |   |        |   |   |
| Theatrical                          |                                              | will                receive a profit         |   |   |   |        |   |   |
|                                |                                              | participation,                if any, in the |   |   |   |        |   |   |
|                                |                                              | film.                                        |   |   |   |        |   |   |
| Randall                Emmett & |                                              | Production                services           |   |   |   |        |   |   |
| George                Furla         | provided                include negotiating  | the                acquisition of the for    |   |   |   |        |   |   |
| Producer/                           | rights                in and to the screen   | play                upon which the picture   |   |   |   |        |   |   |
| Executive                Producer   | was                based as well as          | the                acting services           |   |   |   |        |   |   |
|                                | agreements                of Bruce           | Willis                and the directing      |   |   |   |        |   |   |
|                                | services                of Richard           | Donner.                Also provided         |   |   |   |        |   |   |
|                                | consulting                services           | during                principal              |   |   |   |        |   |   |
|                                | photography                and the post      | production                process.           |   |   |   |        |   |   |
|                                |                                              |                                         | $      | **-**  | **$**  | **625,000** |   | **-**  |

----

| ***Borderland***                    | Brian                Presley  | Picture                produced by FMLY    |   |   |   |   |   |   |
|-------------------------------------|-------------------------------|--------------------------------------------|--------|--------|--------|--------|--------|--------|
|                                | Jake                Muxworthy | in                conjunction with a third |   |   |   |   |   |   |
| 7-Mar                               | Rider                Strong   | party.                FMLY retains         |   |   |   |   |   |   |
| (Estimated                Release)  | Sean                Astin     | 50%                ownership and           |   |   |   |   |   |   |
| Theatrical                          | Beto                Cuevas    | receives                royalties, if any. |   |   |   |   |   |   |
|                                |                          |                                       |   |   |   |   |   |   |
| Randall                Emmett & |                          | Production                services         |   |   |   |   |   |   |
| George                Furla         |                          | provided                include the        |   |   |   |   |   |   |
| Producers                           |                          | negotiation                of financing    |   |   |   |   |   |   |
|                                |                          | and                distribution of the     |   |   |   |   |   |   |
|                                |                          | picture,                and consulting     |   |   |   |   |   |   |
|                                |                          | services                during             |   |   |   |   |   |   |
|                                |                          | development,                during         |   |   |   |   |   |   |
|                                |                          | principal                photography,      |   |   |   |   |   |   |
|                                |                          | and                during post             |   |   |   |   |   |   |
|                                |                          | production                (to ensure       |   |   |   |   |   |   |
|                                |                          | that                the film was           |   |   |   |   |   |   |
|                                |                          | completed                on time and       |   |   |   |   |   |   |
|                                |                          |  within                budget).       | $      | **-**  | **$**  | **-**  |   | **-**  |

----

| ***The                Wicker Man*** | Nicolas                Cage                      | Produced                by a third party    |   |                                                   |   |   |   |        |   |
|-------------------------------------|--------------------------------------------------|---------------------------------------------|--------|--------------------------------------------------------|--------|--------|--------|-------------|--------|
|                                | Ellen                Burstyn                     | financier.                FMLY provided     |   |                                                   |   |   |   |        |   |
| 6-Sep                               | Leelee                Sobieski                   | production                services and      |   | will                receive a producers                |   |   |   |        |   |
|                                |                                             | fee                in the first quarter of  |   | 2006.                Additionally, we** **        |   |   |   |        |   |
|                                |                                             | will                receive a profit        |   | participation,                if any, in the** ** |   |   |   |        |   |
| Theatrical                          |                                             | film.                (This project is in    |   | production                with principal** **     |   |   |   |        |   |
|                                |                                             | photography                having started   |   | on                July 28, 2005)** **             |   |   |   |        |   |
|                                |                                             |                                        | $      | **-**                                                  | **$**  | **-**  |   |        |   |
| Randall                Emmett & | Production                services          | provided                include negotiating |   |                                                   |   |   |   |        |   |
| George                Furla         | for                the acquisition of the   | rights                in and to the screen  |   |                                                   |   |   |   |        |   |
| Producer/                           | play                upon which the picture  | was                based as well as         |   |                                                   |   |   |   |        |   |
| Executive                Producer   | the                acting services          | agreements                of Nicolas        |   |                                                   |   |   |   |        |   |
|                                | Cage                and the directing       | services                of Neil             |   |                                                   |   |   |   |        |   |
|                                | La                Bute Also provided        | consulting                services          |   |                                                   |   |   |   |        |   |
|                                | during                principal             | photography                and the post     |   | production                process** **            |   |   |   |        |   |
|                                |                                             |                                        | $      | **-**                                                  | **$**  | **-**  |   | **300,000** |   |

----

| ***The                Contract***   | Morgan                Freeman | Produced                by a third party            |   |                                                         |   |   |   |        |   |
|-------------------------------------|-------------------------------|-----------------------------------------------------|--------|--------------------------------------------------------------|--------|--------|--------|-------------|--------|
|                                | John                Cusack    | financier.                FMLY provided             |   | production                services and** **             |   |   |   |        |   |
| 7-Jun                               |                          | will                receive a producers             |   | fee                in the first quarter of** **         |   |   |   |        |   |
| (Estimated                Release)  |                          | 2006.                Additionally, we               |   | will                receive a profit participation** ** |   |   |   |        |   |
|                                |                          | if                any, in the film (This project is |   | In                production with principal** **        |   |   |   |        |   |
| Theatrical                          |                          | photography                having started           |   | on                July 11, 2005)** **                   |   |   |   |        |   |
| Randall                Emmett & |                          | Production                services                  |   | provided                include negotiating** **        |   |   |   |        |   |
| George                Furla         |                          | for                the acquisition of the           |   | rights                in and to the screen** **         |   |   |   |        |   |
| Producer/                           |                          | play                upon which the picture          |   | was                based as well as** **                |   |   |   |        |   |
| Executive                Producer   |                          | the                acting services                  |   | agreements                of Morgan** **                |   |   |   |        |   |
|                                |                          | Freemand                and John                    |   | Cusack                and the directing** **            |   |   |   |        |   |
|                                |                          | services                of Bruce                    |   | Beresford                Also provided** **             |   |   |   |        |   |
|                                |                          | consulting                services                  |   |                                                         |   |   |   |        |   |
|                                |                          | during                principal                     |   |                                                         |   |   |   |        |   |
|                                |                          | photography                and the post             |   |                                                         |   |   |   |        |   |
|                                |                          | production                process.                  |   |                                                         |   |   |   |        |   |
|                                |                          |                                                | $      | **-**                                                        | **$**  | **-**  |   | **300,000** |   |

----

| ***88                Minutes***     | Al                Pacino | Produced                by a third party     |   |                                                  |   |   |   |        |   |
|-------------------------------------|--------------------------|----------------------------------------------|--------|-------------------------------------------------------|--------|--------|--------|-------------|--------|
|                                |                     | financier.                FMLY provided      |   | production                services and                |   |   |   |        |   |
| 7-Jun                               |                     | fee                in the first quarter of   |   | fee                in the first quarter of** **  |   |   |   |        |   |
| (Estimated                Release)  |                     | 2006.                Additionally, we        |   | will                receive a profit** **        |   |   |   |        |   |
|                                |                     | participation,                if any, in the |   | film.                (This project is in** **    |   |   |   |        |   |
| Theatrical                          |                     | production                with principal     |   | photography                having started** **   |   |   |   |        |   |
|                                |                     | on                July 11, 2005)             |   |                                                  |   |   |   |        |   |
| Randall                Emmett & |                     | Production                services           |   | provided                include negotiating** ** |   |   |   |        |   |
| George                Furla         |                     | for                the acquisition of the    |   | rights                in and to the screen-** ** |   |   |   |        |   |
| Producer/                           |                     | play                upon which the picture   |   | was                based as well as** **         |   |   |   |        |   |
| Executive                Producer   |                     | the                acting services           |   | agreements                of Al** **             |   |   |   |        |   |
|                                |                     | Pacino                and the directing      |   | services                of Jon** **              |   |   |   |        |   |
|                                |                     | Avnet.                Also provided          |   | consulting                services                    |   |   |   |        |   |
|                                |                     | during                principal              |   | photography                and the post               |   |   |   |        |   |
|                                |                     | production                process.           |   |                                                  |   |   |   |        |   |
|                                |                     |                                         | $      | **-**                                                 | **$**  | **-**  |   | **400,000** |   |

----

| ***Home                of the Brave*** | Sam                Jackson      | Produced                by a third party  |   |                                                        |   |    |   |    |   |
|----------------------------------------|---------------------------------|-------------------------------------------|--------|-------------------------------------------------------------|--------|---------|--------|---------|--------|
|                                   | Jessica                Biel,    | financier.                FMLY provided   |   | production                services and** **            |   |    |   |    |   |
| 6-Dec                                  | Curtis                "50 Cent" | will                receive a profit      |   | participation,                if any, in the** **      |   |    |   |    |   |
| (Scheduled                Release)     | Jackson,                        | film.                (This project has    |   | wrapped                production** **                 |   |    |   |    |   |
| Theatrical                             | Christina                Ricci, | with                principal             |   | photography                having commenced on** **    |   |    |   |    |   |
|                                   | Brian                Pressley   | March                23, 2006.            |   |                                                        |   |    |   |    |   |
| Randall                Emmett &    |                            | Production                services        |   | provided                include (1) participating** ** |   |    |   |    |   |
| George                Furla            |                            | in                the negotiation of the  |   | acting                services agreements** **         |   |    |   |    |   |
| Producer/                              |                            |  of                Sam jackson       |   | Jessica                Biel** **                       |   |    |   |    |   |
| Executive                Producer      |                            | Curtis                "50 cent" Jackson   |   | Christina                Ricci** **                    |   |    |   |    |   |
|                                   |                            | Brian                Pressley and (2)     |   | negotaiting                with** **                   |   |    |   |    |   |
|                                   |                            | a                third party equity       |   | participant                for** **                    |   |    |   |    |   |
|                                   |                            | said                party's participation |   | in                the financing of the picture** **    |   |    |   |    |   |
|                                   |                            | production                process. Also   |   | Also                provided** **                      |   |    |   |    |   |
|                                   |                            | consulting                services        |   | during                principal** **                   |   |    |   |    |   |
|                                   |                            | photography                and the post   |   | production                process.** **                |   |    |   |    |   |
|                                   |                            |                                      | $      | **0**                                                       |   | **(3)** |   | **(3)** |   |

----

| ***King                of California*** | Michael                Douglas  | Produced                by a third party                |   |                                                   |   |    |   |    |
|-----------------------------------------|---------------------------------|---------------------------------------------------------|--------|--------------------------------------------------------|--------|---------|--------|---------|
|                                    | Evan                Rachel Wood | co-financier.                FMLY provided              |   | production                services and                 |   |    |   |    |
| 7-May                                   |                            | will                receive a profit                    |   | participation,                if any, in the** ** |   |    |   |    |
| (Estimated                Release)      |                            | Film.                Principal Photography              |   | commenced                on** **                  |   |    |   |    |
| Theatrical                              |                            | May                2, 2006.                             |   | Production                services** **           |   |    |   |    |
| Randall                Emmett &     |                            |  provided                include (1) participating |   | in                the negotiation of the               |   |    |   |    |
| George                Furla             |                            | of                Michael Douglas                       |   | and                Evan Rachel                         |   |    |   |    |
| Producers                               |                            | Wood                and (2)                             |   |                                                   |   |    |   |    |
|                                    |                            | negotaiting                with                         |   | a                third party equity** **          |   |    |   |    |
|                                    |                            | participant                for                          |   | said                party's participation** **    |   |    |   |    |
|                                    |                            | in                the financing of the picture          |   | production                process. Also** **      |   |    |   |    |
|                                    |                            | Also                provided                            |   |                                                   |   |    |   |    |
|                                    |                            | consulting                services                      |   |                                                   |   |    |   |    |
|                                    |                            | during                principal                         |   |                                                   |   |    |   |    |
|                                    |                            | photography                and the post                 |   |                                                   |   |    |   |    |
|                                    |                            | production                process.                      |   |                                                   |   |    |   |    |
|                                    |                            |                                                    | $      | **0**                                                  |   | **(3)** |   | **(3)** |

----

| ***Microwave                Park*** | Cast-TBA | Picture                produced by FMLY    |   |   |   |    |   |   |   |
|-------------------------------------|----------|--------------------------------------------|--------|--------|--------|---------|--------|--------|--------|
|                                |     | in                conjunction with a third |   |   |   |    |   |   |   |
| 8-Jun                               |     | party.                FMLY                 |   |   |   |    |   |   |   |
| (Estimatred                Release) |     | receives                royalties, if any. |   |   |   |    |   |   |   |
| Theatrical                          |     | Production                services         |   |   |   |    |   |   |   |
|                                |     | provided                include the        |   |   |   |    |   |   |   |
|                                |     | negotiation                of financing    |   |   |   |    |   |   |   |
|                                |     | and                distribution of the     |   |   |   |    |   |   |   |
| Randall                Emmett & |     | picture,                and consulting     |   |   |   |    |   |   |   |
| George                Furla         |     | services                during             |   |   |   |    |   |   |   |
| Producers                           |     | development,                during         |   |   |   |    |   |   |   |
|                                |     | principal                photography,      |   |   |   |    |   |   |   |
|                                |     | and                during post             |   |   |   |    |   |   |   |
|                                |     | production                (to ensure       |   |   |   |    |   |   |   |
|                                |     | that                the film was           |   |   |   |    |   |   |   |
|                                |     | completed                on time and       |   |   |   |    |   |   |   |
|                                |     | within                budget).             |   |   |   |    |   |   |   |
|                                |     |                                       | $      | **0**  |   | **(3)** |   |   |   |

----

| ***Rin                Tin Tin***                                       | Armande                Assante, Ben Cross                 | Produced                by a third party financier.                                                                                                         |   |                                                                                                                                                                |   |   |   |   |   |
|------------------------------------------------------------------------|-----------------------------------------------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------|--------|--------|--------|
| 7-Mar                                                             |                                                      | FMLY                provided production services.                                                                                                           |   | FMLY                will receive profit participation , if any, in the film.** **                                                                              |   |   |   |   |   |
| (Estimated                Release)                                     |                                                      | This                project is "in production" with principal photography having started                on                                                  |   | January                26, 2007.** **                                                                                                                          |   |   |   |   |   |
|                                                                   | Production                services provided include  | b)                negotiating for a writer to adapt the underlying rights into a feature                film screenplay upon which the movie will be based; |   | as                well as, ('c) providing consulting services during the development,                principal photography and post-production processes.** ** |   |   |   |   |   |
| Video/Cable                Randall Emmett & George Furla Producers |                                                      | :                                                                                                                                                           |   |                                                                                                                                                                |   |   |   |   |   |
|                                                                   |                                                      |                                                                                                                                                        | $      | **-**                                                                                                                                                               | **$**  | **-**  |   | **-**  |   |

----

| ***Day                of the Dead***                             | Mena                Suvari, Nick Cannon, Ving Rhames                                                                                                        | Produced                by a third party financier.                                                                                                                    |   |                                                                                                                                       |   |   |   |   |
|------------------------------------------------------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------------------------------------------------------------------------------------------------------------------------------------------|--------|--------|--------|--------|
|                                                             |  FMLY                provided production services                                                                                                      | .                FMLY will receive profit participation , if any, in the                film                                                                           |   | This                project is "in production" with principal photography having started                on                7-Oct.** ** |   |   |   |   |
|                                                             | (Estimated                Release)                                                                                                                     | July                24, 2006                                                                                                                                           |   |                                                                                                                                       |   |   |   |   |
| TheatricalProduction                services prodived include:   | a)                negotiating for the acquisition of the underlying rights to certain                intellectual property copyrights and trademarks;  | .** **b)                negotiating for a writer to adapt the underlying rights into a feature                film screenplay upon which the movie will be based; |   | c)                participated in the negotiation of Mena Survai, Nick Cannon and Ving                Rhames' acting contracts;** **  |   |   |   |   |
| Randall                Emmett & George Furla Producers  |                                                                                                                                                        | as                well as, (d) providing consulting services during the development,                principal photography and post-production processes.               |   |                                                                                                                                       |   |   |   |   |
|                                                             |                                                                                                                                                        |                                                                                                                                                                   | $      | **-**                                                                                                                                      | **$**  | **-**  |   | **-**  |

----

| ***Rambo                IV***                    | Sylvester                Stallone | Produced                by a third party financier.                                                                                                     |   |   |   |   |   |   |
|--------------------------------------------------|-----------------------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------|--------|--------|--------|--------|
|                                             |                              | FMLY                provided production services.                                                                                                       |   |   |   |   |   |   |
| 8-Jan                                            |                              | In                connection with said services, FMLY will receive a "producer                fee"                                                      |   |   |   |   |   |   |
| (Estimated                Release)               |                              | In                the third quarter of Fiscal 2007.                                                                                                     |   |   |   |   |   |   |
|                                             |                              | Additionally,                FMLY will receive profit participation , if any, in the                film.                                               |   |   |   |   |   |   |
| Theatrical                                       |                              | This                project is "in development" with principal photography scheduled                to start                on January 10, 2007.        |   |   |   |   |   |   |
| Randall                Emmett & George Furla |                              | Production                services prodived include:                                                                                                    |   |   |   |   |   |   |
| Producers                                        |                              | providing                consulting services during the development, principal photography                and                post-production processes. |   |   |   |   |   |   |
|                                             |                              |                                                                                                                                                    | $      | **-**  | **$**  | **-**  |   | **-**  |

----

| ***Brilliant***                                                 | Scarlett                Johansson                                                                                | Produced                by a third party financier.                                                                                                      |   |   |   |   |   |   |
|-----------------------------------------------------------------|------------------------------------------------------------------------------------------------------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------|--------|--------|--------|--------|
| 8-Aug                                                      |  FMLY                provided production services.                                                          | In                connection with said services, FMLY will receive a "producer                fee"                                                       |   |   |   |   |   |   |
| (Estimated                Release)                              |  In                the third quarter of Fiscal 2007.                                                        | Additionally,                FMLY will receive profit participation , if any, in the                film.                                                |   |   |   |   |   |   |
| Theatrical                                                      |                                                                                                             | This                project is "in development" with principal photography scheduled                to start                on July 24, 2006.            |   |   |   |   |   |   |
| Randall                Emmett & George Furla producers | Production                services prodived include:                                                        | (a)                negotiating for the acquisition of the screenplay upon which the                movie                will be based                    |   |   |   |   |   |   |
|                                                            | (b)                participated in the negotiation of Scarlett Johansson's acting                contract;  | as                well as, (d) providing consulting services during the development,                principal photography and post-production processes. |   |   |   |   |   |   |
|                                                            |                                                                                                             |                                                                                                                                                     | $      | **-**  | **$**  | **-**  |   | **-**  |

----

| ***The                Code***                     | Morgan                Freeman                                                                               | Produced                by a third party financier.                                                                                                      |   | **-**  |   | **-**  |   | **-**  |
|---------------------------------------------------|-------------------------------------------------------------------------------------------------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------|--------|--------|--------|--------|
|                                              |  FMLY                provided production services.                                                     | In                connection with said services, FMLY will receive a "producer                fee"                                                       |   |   |   |   |   |   |
| 8-Aug  Estimated                Release |  In                the third quarter of Fiscal 2007.                                                   | Additionally,                FMLY will receive profit participation , if any, in the                film.                                                |   |   |   |   |   |   |
| Theatrical                                        |                                                                                                        | This                project is "in development" with principal photography scheduled                to start                on April 1, 2006             |   |   |   |   |   |   |
| Randall                Emmett & George Furla  | Production                services prodived include:                                                   | (a)                negotiating for the acquisition of the screenplay upon which the                movie                will be based                    |   |   |   |   |   |   |
| Producers                                         | b)                participated in the negotiation of Morgan Freeman's acting                contract;  | as                well as, (d) providing consulting services during the development,                principal photography and post-production processes. |   |   |   |   |   |   |
|                                              |                                                                                                        |                                                                                                                                                     | $      | **-**  | **$**  | **-**  |   | **-**  |

----

| Royalties                and other revenue       |                                |   | **105,440** |        | **281,534** |          | **1,134,882** |
|--------------------------------------------------|-------------------------------------|--------|-------------|-------------|-------------|---------------|---------------|
|                                             |                                |   |        |        |        |          |          |   |
| Total                                            |                                |   | $           | **745,435** | **$**       | **2,330,534** | **$**         | **3,434,882** |
| **Revenue                by Customer (5)**  |                                |   |        |        |        |          |          |   |
| Nuimage/Millenium                                | Producer                Fees        |   | $           | **571,511** | **$**       | **2,278,000** | **$**         | **2,300,000** |
| Nuimage/Milleniuem                               | Distribution                special | e)     |        | **-**       |        | **-**         |          | **1,000,000** |
| Lions                Gate Films                  |                                |   |        | **60,000**  |        | **-**         |          | **-** |
| Regent                Films                      |                                |   |        | **76,979**  |        | **-**         |          | **2,771** |
| Platium/s                other                   |                                |   |        | **-**       |        | **-**         |          | **22,111** |
| Other                misc.                       |                                |   |        | **36,945**  |        | **52,534**    |          | **110,000** |
|                                             |                                |   | $           | **745,435** | **$**       | **2,330,534** | **$**         | **3,434,882** |
|                                             |                                |   |        |        |        |          |          |   |

| **(1)                The following is a chronological history of film projects that were                developed, packaged and/or produced by**                      |
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| **FMLY                for third party financiers (unless otherwise noted) and for third                party                distributors and have been either**       |
| **produced,                released or waiting to be released by third parties in fiscal years                2000                through 2004, and/or are**          |
| **scheduled                for release in fiscal 2005**                                                                                                               |   |   |   |   |   |
|                                                                                                                                                                  |   |   |   |   |   |   |
| **(2)                Substantially all production, financing, and motion picture related                services provided by FMLY are performed**                     |
| **by                Randall Emmett and George Furla, officers and significant stockholders                of                the Company. The primary**                |
| **functions/services                performed by Messrs. Emmett and Furla are as                follows:**                                                            |   |   |
| **a)                Seek creative material, acquire rights and arrange for writing the                screenplay**                                                    |   |   |
| **b)                Negotiate talent for the project (I.e. development, actors, directors                and                writers) and assist with**                |
| **pre-production,                post-production and packaging.**                                                                                                     |   |   |   |   |
| **c)                Negotiate distribution agreements, both domestic and                foreign.**                                                                    |   |   |   |
| **d)                Arrange for the sale of film rights.**                                                                                                            |   |   |   |   |   |
|                                                                                                                                                                  |   |   |   |   |   |   |
| **(3)                This motion picture has been in release for greater than two years                and                FMLY does not expect it to yield**          |
| **significant                additional revenue.**                                                                                                                    |   |   |   |   |   |
|                                                                                                                                                                  |   |   |   |   |   |   |
| **(3-A)                This motion picture has been in release for greater than two years                and is                in its second cycle of distribution.** |
| **FMLY                anticipates minimal additional revenues from new distribution                agreements.**                                                      |   |   |
|                                                                                                                                                                  |   |   |   |   |   |   |
| **(4)                There is no assurance that any motion picture that has not yet been                released, will be released, that a change**                   |
| **in                the scheduled release dates of any such films will not occur, or                that if                such motion picture is released,**         |
| **that                it will be successful. FMLY has various additional feature films                under                development and there can be no**          |
| **assurance                that any project under development will be produced, or that if produced,                that it will be released**                        |
| **or                successful.**                                                                                                                                     |   |   |   |   |   |   |
|                                                                                                                                                                  |   |   |   |   |   |   |
| **(5)                FMLY conducts business with a limited number of customers and loss                of any                one of those customers could**           |
| **have                a negative impact on its results of operations.**                                                                                               |   |   |   |   |
|                                                                                                                                                                  |   |   |   |   |   |   |

----

**News      Releases**

----

----

----

----

----

----

----

----

----

----

**ITEM      2.**
**Properties      **

**ITEM      3.**
**Legal      Proceedings**

**ITEM      4.**
**      Submission of Matters to a Vote of Security Holders **

----

**ITEM      5.**
**Market      for Common Equity and Related Stockholder Matters**

|                                            | HIGH   | LOW    |
|-------------------------------------------------|--------|--------|
|                                  | BID    | BID    |
|                                            |   |   |
| **Fiscal                2004**             |   |   |
| September                30, 2003     | $0.18  | $0.09  |
| December                31, 2003      | $0.11  | $0.09  |
| March                31, 2004    | $0.15  | $0.09  |
| June                30, 2004                    | $0.12  | $0.09  |
|                                            |   |   |
| **Fiscal                2005**             |   |   |
| September                30, 2004     | $0.09  | $0.06  |
| December                31, 2004      | $0.09  | $0.07  |
| March                31, 2005                   | $0.09  | $0.07  |
| June                30, 2005                    |   |   |
|                                            |   |   |
| **Fiscal                2006**                  |   |   |
| September                30, 2005               | $.05   | $.03   |
| December                30, 2005                | $.03   | $.01   |
| March                31, 2006                   | $.02   | $.01   |
| June                30, 2006                    | $.03   | $.01   |

----

----

----

**ITEM      6.**
**Managements      Discussion and Analysis of Financial Condition and Results of      Operations**

**GENERAL**

**Critical      Accounting Policies and Estimates **

| 1.   | Producers              Fees - Producer fees are recognized upon receipt of the fees and delivery              of the related services. If upon receipt of the fees all services have              not              been provided, the fees are deferred and recognized as the services              are              performed; |
|----------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 2.   | Royalties              - Royalty and profit participation are recognized when the amounts              are              known and the receipt of the royalties is reasonably assured. Accordingly,              recognition generally occurs upon receipt (usually quarterly or              semi-annually); and |
|----------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 3.   | Producer              Development and Production Service Fees** **-              As these services are provided, these fees are invoiced by FMLY to              the              third party financiers and producers and are recognized when the amount              has been determined and receipt is reasonably assured. |
|----------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

----

**Plan      of Operation**

----

**RESULTS      OF OPERATIONS**

----

----

| The                recurring cash commitments of FMLY at June 30, 2006 are as                follows: |                                                                                                                        |
|-------------------------------------------------------------------------------------------------------|-----------------------------------------------------------------------------------------------------------------------------|
|                                                                                                  |                                                                                                                        |   |   |   |   |   |   |   |   |   |   |   |
| **Future                annual debt maturities (including the convertible                notes):**    |                                                                                                                        |
|                                                                                                  |                                                                                                                        |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                                  | **Year                Ending**                                                                                              |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                                  | **June                30,**                                                                                                 |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                                  |                                                                                                                        |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                                  | 2007                                                                                                                        |   |   |   |   |   |   |   |   | $ | 1,597,204 |   |
|                                                                                                  |                                                                                                                        |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                                  |                                  Total |   |   |   |   |   |   |   |   | $ | 1,597,204 |   |
|                                                                                                  |                                                                                                                        |   |   |   |   |   |   |   |   |   |   |   |

| **Accounts                payable and accrued liabilities:**                                                              |                             |
|---------------------------------------------------------------------------------------------------------------------------|----------------------------------|
|                                                                                                                      |                             |   |   |   |   |   |   |   |   |   |   |   |
| **Description**                                                                                                           |                             |   |   |   |   |   |   |   |
|                                                                                                                      |                             |   |   |   |   |   |   |   |   |   |   |   |
| Accounts                payable                                                                                           |                             |   |   |   |   |   |   |   | $ | 200,274 |   |
| Accrued                Interest, professional fees and other                                                              |                             |   |   |   |   |   |   | 44,111 |   |
|                                                                                                                      |                             |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                                                      | Total                            |   |   |   |   |   |   |   |   | $ | 244,385 |   |
|                                                                                                                      |                             |   |   |   |   |   |   |   |   |   |   |   |
|     **Future                annual minimum lease payments under operating                leases:**    |                             |
|                                                                                                                      |                             |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                                                      | **Period                Ending** |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                                                      | **June                30,**      |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                                                      |                             |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                                                      |                             |   |   |   |   |   |   |   |   | $ |   |   |
|                                                                                                                      | 2007                             |   |   |   |   |   |   |   |   |   | 81,324 |   |
|                                                                                                                      | 2008                             |   |   |   |   |   |   |   |   |   | 81,324 |   |
|                                                                                                                      |                             |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                                                      | Total                            |   |   |   |   |   |   |   |   | $ | 162,648 |   |
|                                                                                                                      |                             |   |   |   |   |   |   |   |   |   |   |   |
| **Estimated                fixed recurring monthly average selling, general and administrative                expenses:** |                             |
|                                                                                                                      |                             |   |   |   |   |   |   |   |   |   |   |   |
| **Description**                                                                                                           |                             |   |   |   |   |   |   |   |
|                                                                                                                      |                             |   |   |   |   |   |   |   |   |   |   |   |
| Salaries,                consultants and benefits                                                                         |                             |   |   |   |   | $ | 48,500 |   |
| Rent                                                                                                                      |                             |   |   |   |   |   | 7,410 |   |
| Parking                                                                                                                   |                             |   |   |   |   |   | 1,580 |   |
| Equipment                rental                                                                                           |                             |   |   |   |   |   | 4,200 |   |
| Telephone                and communications                                                                               |                             |   |   |   |   |   | 2,560 |   |
| Directors,                officers and corporate insurance                                                                |                             |   |   |   |   |   | 5,650 |   |
| Accounting                and auditing                                                                                    |                             |   |   |   |   |   | 6,500 |   |
|                                                                                                                      |                             |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                                                      | Total                            |   |   |   |   |   |   |   |   | $ | 76,400 |   |

----

**Estimated      Future Cash Requirements**

----

----

----

----

**ITEM      7.**
**Financial      Statements**

**ITEM      8.**
**Changes      in and Disagreements with Accountants on Accounting and Financial      Disclosure**

**ITEM      8A.**
**Controls      and Procedures **

**ITEM      8B.**

**               NA**

----

**PART      III**

**ITEM      9.**
**Directors,      Executive Officers, Promoters and Control Persons; Compliance with Section      16(a)      of the Exchange Act**

----

**Code      of Ethics for Chief Executive Officer and Senior Financial      Officers**

**ITEM      10. EXECUTIVE COMPENSATION**

|                                                                                                         |         | Annual                Compensation   |         | Long                Term Compensation Awards   |
|--------------------------------------------------------------------------------------------------------------|--------------|-------------------------------------------|--------------|-----------------------------------------------------|
| Name                andPrincipal                Position                                                |         | Year                                 |         | Salary(1)                                 |   | Bonus                  |   | OtherAnnualCompensation(2)   |   | RestrictedStockAwards                  |   | SecuritiesUnderlyingOptions                  |   | All                OtherCompensation                  |
| George                FurlaCo-Chairman,Chief                Executive Officer and President                  |         | 200620052004                              |         |                                                | 000 |   |   | 000 |   | $549,819$413,758                $141,746 |   |   | 000 |   | 000 |   |   | $                $                0$354,166 |
|  Randall                EmmettCo-ChairmanChief                Operating Officer and Assistant Secretary |    |  200620052004                        |    |                                                |  000 |   |     |  000                  |   |  $722,043$599,609$180,404 |   |   |  000 |   |  000 |   |   |  $                $                0$354,166 |
|  Stanley                TepperChief                Financial Officer                                    |    |  200620052004                        |    |                                                |  00                0 |   |   |  000 |   |  000 |   |   |  000 |   |  000 |   |   |  $50,000$35,000$12,500 |

| (1)   | George              Furla and Randall Emmett get paid a production fee on each movie              produced. |
|-----------------|-------------------------------------------------------------------------------------------------------------|

| (2)   | 2006              compensation includes a $300,000 special bonus consulting production              fee              per each. |
|-----------------|--------------------------------------------------------------------------------------------------------------------------------|

----

**Option      Grants in Last Fiscal Year **

|                          |   | **Individual                Grants**                                                                                                             |   |                         |   |   |
|-------------------------------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------|--------|------------------------------|--------|--------|
|                          |   | **Potential                Realizable Value at Assumed Annual Rates of Stock Price Appreciation                for                Option Term**  |
|                          |   | **Number                of Securities Underlying Options Granted**                                                                               |   |                         |   |   |   |   |
|                          |   | **%                of Total Options Granted to Employees in 2006**                                                                               |   |                         |   |   |
|                          |   | **Exercise                or Base Price****($/Sh)**                                                                                              |   | **Expiration****Date**  |
|                          |   | **5%**                                                                                                                                           |   | **10%**                 |
| George                Furla   |   | 0                                                                                                                                                     |   | 0                            |   |   |   |   |   |   |   |   |   |   |
| Randall                Emmett |   |                                 0                                     |   | 0                            |   |   |   |   |   |   |   |   |   |   |
| Stanley                Tepper |   | 0                                                                                                                                                     |   | 0                            |   |   |   |   |   |   |   |   |   |   |

**N/A**

**2006      Option Exercises and Year-End Option Holdings **

**Aggregate      Option Exercises in Last Fiscal Year and Fiscal Year-End Option Values**

|                          |                  |                                                 |                    |                        |                  | **Number                of Unexercised Options Held at June 30, 2006**  |                    | **Value                of Unexercised****In-the-Money                Options at June 30, 2006**  |
|-------------------------------|-----------------------|------------------------------------------------------|-------------------------|-----------------------------|-----------------------|-----------------------------------------------------------------------------------|-------------------------|-------------------------------------------------------------------------------------------------------|
| **Name**                 |                  | **Shares                Acquired on Exercise**  |                    | **Value****Realized**  |
|                          | **Exercisable**  |                                                 | **Unexercisable**  |                        | **Exercisable**  |                                                                              | **Unexercisable**  |
| George                Furla   |                  |                                                 |                    |                        |                  |                                                                              |                    |                                                                                                  |   |   |   |   |   |   |
| Randall                Emmett |                  |                                                 |                    |                        |                  |                                                                              |                    |                                                                                                  |   |   |   |   |   |   |
| Stanley                Tepper |                  |                                                 |                    |                        |                  |                                                                              |                    |                                                                                                  |   |   |   |   |   |   |

**N/A**

----

**ITEM      11 SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND      MANAGEMENT**

**ITEM      12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS**

----

**ITEM      13. EXHIBITS AND REPORTS ON FORM 8-K**

| 31.1   | Certification                    of the Chief Executive Officer pursuant to Rule              13a-14(a) |
|------------------|---------------------------------------------------------------------------------------------------------|

| 31.2   | Certification              of the Chief Financial Officer pursuant to Rule              13a-14(a) |
|------------------|---------------------------------------------------------------------------------------------------|

| 32.1   | Certification              of the Chief Executive Officer pursuant to 18 U.S.C.ss.1350 |
|------------------|----------------------------------------------------------------------------------------|

| 32.2   | Certification              of the Chief Financial Officer pursuant to 18              U.S.C.ss.1350 |
|------------------|-----------------------------------------------------------------------------------------------------|

| (b)      | Reports                on Form 8-K                                                                                              |
|----------|---------------------------------------------------------------------------------------------------------------------------------|
| **Date** | **Subject**                                                                                                                     |
| 6/27/06  | ITEM                4.02 Restatement of Financials, due to an accounting error (EITF                0019                issue). |

----

**ITEM      14. PRINCIPAL ACCOUNTANT FEES AND SERVICES **

|                              | **For                the Year Ended June 30,** |
|-----------------------------------|------------------------------------------------|
|                              | **2006**                                       | **2005** |
| Audit                Fees         | $60,500                                        | $55,000 |
| Audit-Related                Fees | $-                                             | $- |
| Tax                Fees           | $4,500                                         | $6,900 |
| All                Other Fees     | $-                                             | $- |
| Total                Fees         | $65,000                                        | $61,900 |

**Audit      committee’s pre-approval policies and procedures**

**Percentage      of hours expended**

----

**Signatures**

----

**PART        I - FINANCIAL INFORMATION **

| **Item                  1.** | **Consolidated                  Financial Statements** |
|------------------------------|--------------------------------------------------------|

**FAMILY        ROOM ENTERTAINMENT CORPORATION **

**CONSOLIDATED        FINANCIAL STATEMENTS **

**WITH        REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM **

**for        the years ended June 30, 2006 and 2005 **

----

**FAMILY        ROOM ENTERTAINMENT CORPORATION **

**TABLE        OF CONTENTS **

|                                                                     | **Page**  |
|--------------------------------------------------------------------------|-----------|
| Report                  of Independent Registered Public Accounting Firm | F-3  |
| Consolidated                  Balance Sheets as                          |      |
| of                  June 30, 2006 and 2005                               | F-4       |
|                                                                     |      |
| Consolidated                  Statements of Operations for the           |      |
| years                  ended June 30, 2006 and 2005                      | F-5       |
|                                                                     |      |
| Consolidated                  Statements of Stockholders’          |      |
| Equity                  for the years ended June 30, 2006 and 2005       | F-6       |
|                                                                     |      |
| Consolidated                  Statements of Cash Flows for the           |      |
| year                  endeds June 30, 2006 and 2005                      | F-7       |
|                                                                     |      |
| Notes                  to Consolidated Financial Statements              | F-8       |
|                                                                     |      |

----

**H**

**L**

**B**

**REPORT            OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM**

----

| **FAMILY                  ROOM ENTERTAINMENT CORPORATION**                                                                                          |
|-----------------------------------------------------------------------------------------------------------------------------------------------------|
| **CONSOLIDATED                  BALANCE SHEETS**                                                                                                    |
| **June                  30, 2006 and 2005**                                                                                                         |
|                                                                                                                                                |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                                                                                |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                                                                                |   |   |   |   |   |   |   |   |   | **June                  30,** |   | **June                  30,** |   |
|                                                                                                                                                |   |   |   |   |   |   |   |   |   | **2006** |   | **2005** |   |
| **ASSETS**                                                                                                                                          |   |   |   |   |   |   |   |
|                                                                                                                                                |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Cash                  and cash equivalents                                                                                                          |   | $ | 678,695 |   | $ | 736,870 |   |
| Restricted                  cash                                                                                                                    |   |   | 88,877 |   |   | 2,544,345 |   |
| Accounts                  receivable                                                                                                                |   |   | 555,000 |   |   | 366,704 |   |
| Film                  costs, net                                                                                                                    |   |   | 5,801,448 |   |   | 3,378,185 |   |
| Property                  and equipment, net                                                                                                        |   |   | 64,883 |   |   | 56,540 |   |
| Prepaid                  expenses and other assets                                                                                                  |   |   | 63,499 |   |   | 44,936 |   |
|                                                                                                                                                |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                                                                                |   | Total                  assets |   | $ | 7,252,,402 |   | $ | 7,127,580 |   |
|                                                                                                                                                |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                                                                                |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| **LIABILITIES                  AND STOCKHOLDERS' DEFICIT**                                                                                          |   |   |   |   |   |   |   |
|                                                                                                                                                |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Notes                  payable under film participants agreements                                                                                   |   | $  |  5,907,411 |   | $  | 4,929,719- |   |
| Notes                  payable convertible debt, net of debt discount of $1,157,451 in                  2006, and                  $756,600 in 2005 |   |   | 487,693 |   |   | 1,067,600 |   |
| Accounts                  payable and accrued liabilities                                                                                           |   |   | 244,385 |   |   | 198,972 |   |
| Derivative                  financial instrument liabilities                                                                                        |   |   | 954,756 |   |   | 1,158,898 |   |
|                                                                                                                                                |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                                                                                |   | Total                  liabilities |   |   | 7,594,245 |   |   | 7,355,189 |   |
|                                                                                                                                                |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Commitments                  and contingencies                                                                                                      |   |   |   |   |   |   |   |
|                                                                                                                                                |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Stockholders'                  deficit                                                                                                              |   |   |   |   |   |   |   |
|                                                                                                                                                | Preferred                  stock: $0.01 par value, 5,000,000 shares |   |   |   |   |   |   |   |
|                                                                                                                                                |   | authorized,                  no shares issued and outstanding |   |   |   |   |   |   |   |
|                                                                                                                                                | Common                  stock: $0.01 par value, 200,000,000 shares |   |   |   |   |   |   |   |
|                                                                                                                                                |   | authorized,                  199,824,105 and 89,537,254 shares |   |   |   |   |   |   |   |
|                                                                                                                                                |   | issued                  and outstanding at June 30, 2006 and |   |   |   |   |   |   |   |
|                                                                                                                                                |   | June                  30, 2005, respectively |   |   | 1,998,241 |   |   | 895,373 |   |
|                                                                                                                                                | Additional                  paid-in capital |   |   | 17,694,,028 |   |   | 17,609,454 |   |
|                                                                                                                                                | Accumulated                  deficit |   |   | (20,034,112 | ) |   | (18,732,436 | ) |
|                                                                                                                                           |   | Total                  stockholders' deficit |   |   | (341,843 | ) |   | (227,609 | ) |
|                                                                                                                                                |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                                                                                |   | Total                  liabilities and stockholders' deficit |   | $ | 7,252,402 |   | $ | 7,127,580 |   |
|  The                  accompanying notes are an integral part of these consolidated financial                  statements                      |

----

| **FAMILY                  ROOM ENTERTAINMENT CORPORATION**                                                               |
|--------------------------------------------------------------------------------------------------------------------------|
| **CONSOLIDATED                  STATEMENTS OF OPERATIONS**                                                               |
| **For                  the years ended June 30, 2006 and 2005**                                                          |
|                                                                                                                     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                                                     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                                                     |   |   |   |   |   |   |   |   |   |   |   | **Years                  ended June 30,** |   |
|                                                                                                                     |   |   |   |   |   |   |   |   |   |   |   |   |   | **2006** |   | **2005** |   |
|                                                                                                                     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                                                     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Film                  revenue                                                                                            |   |   |   |   |   |   |   |   |   |   | $ | 3,432,532 |   | $ | 2,330,534 |   |
|                                                                                                                     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Operating                  cost - amortization film costs                                                                |   |   |   |   |   |   |   |   | 2,790,266 |   |   | 1,669,809  |   |
|                                                                                                                     | Distribution                  costs |   |   |   |   |   |   |   |   |   |   | 2,219 |   |   |   |   |
|                                                                                                                     |   | Net                  operating | costs |   |   |   |   |   |   |   |   |   |   |   |   |   | 2,792,,485 |   |   | 1,669,809  |   |
|                                                                                                                     |   | Gross                  margin |   |   |   |   |   |   |   |   |   | 640,047 |   |   | 660,725 |   |
|                                                                                                                     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                                                     |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                                                     | Selling,                  general and administrative expenses |   |   |   |   |   |   |   |   | 2,165,809 |   |   | 1,371,740 |   |
|                                                                                                                     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                                                     |   | Loss                  from operations |   |   |   |   |   |   |   |   | (1,525,762 | ) |   | (711,015 | ) |
|                                                                                                                     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Other                  income and (expense)                                                                              |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                                                     | Interest                  income |   |   |   |   |   |   |   |   |   | 4,990 |   |   | 5,764 |   |
|                                                                                                                     | Other                  incomeInterest                  expense |   |   |   |   |   |   |   |   |  1,450(122,266) |   |   |  -(514,870 |  ) |
|                                                                                                                     | Change                  in value of derivative |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                                                     |   | financial                  instruments |   |   |   |   |   |   |   |   | 339,912 |   |   | (117,296 | ) |
|                                                                                                                     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                                                     |   | Total                  other income (expense) |   |   |   |   |   |   |   |   | 224,086 |   |   | (626,402 | ) |
|                                                                                                                     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                                                     | Net                  loss |   |   |   |   |   |   |   |   |   |   |   | $ | (1,301,676 | ) | $ | (1,337,417 | ) |
|                                                                                                                     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Weighted                  average number of                                                                              |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                                                     | common                  shares outstanding - |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                                                     | basic                  and diluted |   |   |   |   |   |   |   |   | 132,564,534 |   |   | 89,626,295 |   |
|                                                                                                                     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net                  loss per common share -                                                                             |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                                                     | basic                  and diluted |   |   |   |   |   |   |   | $ | (0.01 | ) | $ | (0.02 | ) |
|                                                                                                                     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                                                     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                                                     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| The                  accompanying notes are an integral part of these consolidated financial                  statements |

----

| **FAMILY                  ROOM ENTERTAINMENT CORPORATION**                                                               |
|--------------------------------------------------------------------------------------------------------------------------|
| **CONSOLIDATED                  STATEMENTS OF STOCKHOLDERS’ DEFICIT**                                              |
| **For                  the years ended June 30, 2006 and 2005**                                                          |
|                                                                                                                     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                                                     |   |   |   |   |   |   |   |   |   |   |   |   | **Additional** |   |   |   |   |   |   |   |
|                                                                                                                     |   |   |   |   |   |   | **Common                  Stock** |   | **Paid-In** |   | **Accumulated** |   |   |   |   |
|                                                                                                                     |   |   |   |   |   |   | **Shares** |   | **Amount** |   | **Capital** |   | **Deficit** |   | **Total** |   |
|                                                                                                                     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                                                     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                                                     | Balance                  at June 30, 2004 |   |   | 87,037,254 |   | $ | 870,373 |   | $ | 17,444,454 |   | $ | (17,395,019 | ) | $ | 919,808 |   |
|                                                                                                                     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Common                  Stock issued for                                                                                 |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                                                     | consulting                  services |   |   | 2,500,000  |   |   | 25,000  |   |   | 165,000  |   |   | -  |   |   | 190,000  |   |
| Net                  loss                                                                                           |   |   |   | - |   |   | - |   |   | - |   |   | (1,337,417) |   |   | (1,337,417) |   |
|                                                                                                                     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Balance                  at June 30, 2005,                                                                               |   |   | 89,537,254 |   |   | 895,373 |   |   | 17,609,454 |   |   | (18,732,436) |   |   | (227,609) |   |
|                                                                                                                     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Conversion                  of convertible debt and                                                                      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                                                     | accrued                  interest to common stock |   |   | 83,370,185 |   |   | 833,702 |   |   | 6,542 |   |   | - |   |   | 840,244 |   |
|                                                                                                                     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Common                  stock issued for consulting                                                                      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                                                     | services                  and officers compensation |   |   | 26,916,666 |   |   | 269,166 |   |   | 78,032 |   |   | - |   |   | 347,198 |   |
|                                                                                                                     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net                  loss                                                                                                |   |   |   | - |   |   | - |   |   | - |   |   | (1,301,676 | ) |   | (1,301,676 | ) |
|                                                                                                                     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Balance                  at June 30, 2006                                                                                |   |   | 199,824,105 |   | $ | 1,998,241 |   | $ | 17,694,028 |   | $ | (20,034,112 | ) | $ | (341,843 | ) |
|                                                                                                                     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                                                     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                                                     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                                                     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| The                  accompanying notes are an integral part of these consolidated financial                  statements |

----

| **FAMILY                  ROOM ENTERTAINMENT CORPORATION**                                                               |
|--------------------------------------------------------------------------------------------------------------------------|
| **CONSOLIDATED                  STATEMENTS OF CASH FLOWS**                                                               |
| **For                  the years ended June 30, 2006 and 2005**                                                          |
|                                                                                                                     |   |   |   |   |   |   |   |   |   | **2006** |   | **2005** |   |
| Cash                  Flows from operating activities:                                                                   |   |   |   |   |   |   |   |
|                                                                                                                     | Net                  loss |   | $ | (1,301,676 | ) | $ | (1,337,417 | ) |
|                                                                                                                     | Adjustment                  to reconcile net loss to net cash used in |   |   |   |   |   |   |   |
|                                                                                                                     |   | operating                  activities: |   |   |   |   |   |   |   |
|                                                                                                                     |   |   | Depreciation                  expense |   |   | 18,895 |   |   | 27,013 |   |
|                                                                                                                     |   |   | Amortization                  of film costs |   |   | 2,790,266 |   |   | 1,669,809 |   |
|                                                                                                                     |   |   | Common                  stock issued for services and stock based compensation |   |   | 347,198 |   |   | 190,000 |   |
|                                                                                                                     |   |   | Derivative                  valuation adjustment |   |   | (204,142) |   |   | 117,296 |   |
|                                                                                                                     |   |   | Accretion                  of debt discount and conversion of accrued |   |   |   |   |   |   |   |
|                                                                                                                     |   |   | interest                  to equity and amortization of loan cost |   |   | (139,663) |   |   | 285,000 |   |
|                                                                                                                     |   |   | Change                  in operating assets and liabilities: |   |   |   |   |   |   |   |
|                                                                                                                     |   |   | Accounts                  receivable |   |   | (188,296) |   |   | (247,206 | ) |
|                                                                                                                     |   |   | Film                  costs |   |   | (5,213,529) |   |   | (4,253,120 | ) |
|                                                                                                                     |   |   | Other                  assets |   |   | (18,563) |   |   | (44,761 | ) |
|                                                                                                                     |   |   | Accounts                  payable and accrued liabilities |   |   | 45,413 |   |   | 56,064 |   |
|                                                                                                                     |   |   | Net                  cash used in operating activities |   |   | (3,864,097 | ) |   | (3,537,305 | ) |
|                                                                                                                     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Cash                  flows from investing activities:                                                                   |   |   |   |   |   |   |   |
|                                                                                                                     | Decrease                  (increase) in restricted cash |   |   | 2,455,468 |   |   | (2,554,345 | ) |
|                                                                                                                     | Purchase                  of property and equipment |   |   | (27,238 | ) |   | (44,595 | ) |
|                                                                                                                     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                                                     |   |   | Net                  cash used by investing activities |   |   | 2,428,230 |   |   | (2,588,940 | ) |
|                                                                                                                     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Cash                  flows from financing activities:                                                                   |   |   |   |   |   |   |   |
|                                                                                                                     |  Proceeds                  from notes payable and advancesunder film participation agreements |   |   |   3,227,692 |   |   |  4,929,719 |   |
|                                                                                                                     | Net                  proceeds from notes payable convertible debentures |   |   | 400,000 |   |   | 2,000,000 |   |
|                                                                                                                     | Payments                  on notes payables Payment                  of debt issue costs on convertible debentures  |   |   | (2,250,000- | ) |   |  (180,653 (175,800 | )                  ) |
|                                                                                                                     |   |   | Net                  cash provided by financing activities |   |   | 1,377,692 |   |   | 6,573,266 |   |
|                                                                                                                     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Increase                  (decrease) in cash and cash equivalents                                                        |   |   | (58,175) |   |   | 447,021 |   |
|                                                                                                                     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Cash                  and cash equivalents at beginning of period                                                        |   |   | 736,870 |   |   | 289,849 |   |
|                                                                                                                     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Cash                  and cash equivalents at end of period                                                              |   | $ | 678,695 |   | $ | 736,870 |   |
|                                                                                                                     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| The                  accompanying notes are an integral part of these consolidated financial                  statements |

----

**FAMILY        ROOM ENTERTAINMENT CORPORATION**

**NOTES        TO CONSOLIDATED FINANCIAL STATEMENTS**

**                                                                                                                                                         **

**1.**
**General**

**2.**
**Summary        of Significant Accounting Policies**

**Principles        of Consolidation**

**Unclassified        Consolidated Balance Sheet**

----

**FAMILY        ROOM ENTERTAINMENT CORPORATION**

**NOTES        TO CONSOLIDATED FINANCIAL STATEMENTS**

**                                                                                                                                                         **

**2.**
**Summary        of Significant Accounting Policies, continued**

**Accounting        Estimates**

**Revenue        Recognition**

| •   | FMLY                has a valid sale or licensing agreement in                place. |
|---------------------|--------------------------------------------------------------------------------------|
| •   | The                motion picture is complete and in accordance with the agreement with                the                customer. |
|---------------------|-------------------------------------------------------------------------------------------------------------------------------------|
| •   | The                motion picture has been delivered or is                deliverable. |
|---------------------|----------------------------------------------------------------------------------------|
| •   | The                license period has begun. |
|---------------------|----------------------------------------------|
| •   | The                revenue is fixed or determinable and collection is reasonably                assured. |
|---------------------|----------------------------------------------------------------------------------------------------------|
| **1.  ** | **Producers                Fees**                -                Producer fees are recognized upon receipt of the fees and delivery                of the                related services. If upon receipt of the fees all services have not                been                provided, the fees are deferred and recognized as the services are                performed; |
|--------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| **2.  ** | **Royalties**                -                Royalty and profit participation are recognized when the amounts                are known                and the receipt of the royalties is reasonably assured. Accordingly,                recognition generally occurs upon receipt (usually quarterly or                semi-annually); and |
|--------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| **3.  ** | **Producer                Development, Production Service Fees and Film Distribution Fees**-                As these services are provided, these fees are invoiced by FMLY to                the                third party financiers and producers and are recognized when the                amount                has been determined and receipt is reasonably assured. |
|--------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

**Film        Costs**

----

**FAMILY        ROOM ENTERTAINMENT CORPORATION**

**NOTES        TO CONSOLIDATED FINANCIAL STATEMENTS**

**                                                                                                                                                         **

| **2.** | **Summary                  of Significant Accounting Policies,                  continued** |
|--------|---------------------------------------------------------------------------------------------|

**Film        Costs, continued**

**Exploitation        Costs**

**Participation        Costs**

**Convertible        Debt Financing and Derivative Liabilities**

----

**FAMILY        ROOM ENTERTAINMENT CORPORATION**

**NOTES        TO CONSOLIDATED FINANCIAL STATEMENTS**

**                                                                                                                                                         **

| **2.** | **Summary                  of Significant Accounting Policies,                  continued** |
|--------|---------------------------------------------------------------------------------------------|

**Convertible        Debt Financing and Derivative Liabilities**

** **
**        Cash Equivalents**

**Property        and Equipment**

**Income        Taxes**

**Interest**

----

**FAMILY        ROOM ENTERTAINMENT CORPORATION**

**NOTES        TO CONSOLIDATED FINANCIAL STATEMENTS**

**                                                                                                                                                         **

| **2.** | **Summary                  of Significant Accounting Policies,                  continued** |
|--------|---------------------------------------------------------------------------------------------|

**Net        Loss Per Common Share**

**Stock-Based        Compensation**

**Comprehensive        Income**

**Fair        Value of Financial Instruments**

**Concentrations        of Credit Risk**

|   | **Debt                  Issuance Costs** |
|--------|------------------------------------------|

|   | Debt                  issuance costs are amortized on a straight line basis over the                  term of the                  related notes. |
|--------|---------------------------------------------------------------------------------------------------------------------------------------------------|

----

**FAMILY        ROOM ENTERTAINMENT CORPORATION**

**NOTES        TO CONSOLIDATED FINANCIAL STATEMENTS**

**                                                                                                                                                         **

| **2.** | **Summary                  of Significant Accounting Policies,                  continued** |
|--------|---------------------------------------------------------------------------------------------|

**Recently        Issued Accounting Pronouncements, continued**

----

**FAMILY        ROOM ENTERTAINMENT CORPORATION**

**NOTES        TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS**

**                                                                                                                                                         **

| **2.** | **Summary                  of Significant Accounting Policies,                  continued** |
|--------|---------------------------------------------------------------------------------------------|

**Recently        Issued Accounting Pronouncements, continued**

*Accounting        for Transfers and Servicing of Financial Assets and Extinguishments of        Liabilities,*

| 1.   | Requires                an entity to recognize a servicing asset or servicing liability each                time                it undertakes an obligation to service a financial asset by entering                into                a servicing contract. |
|----------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

**FAMILY        ROOM ENTERTAINMENT CORPORATION**

**NOTES        TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS**

**                                                                                                                                                         **

| **2.** | **Summary                  of Significant Accounting Policies,                  continued** |
|--------|---------------------------------------------------------------------------------------------|

** **
**Recently        Issued Accounting Pronouncements, continued**

| 2.   | Requires                all separately recognized servicing assets and servicing liabilities                to be                initially measured at fair value, if practicable. |
|----------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| 3.   | Permits                an entity to choose ‘Amortization method’ or Fair value measurement                method’ for each class of separately recognized servicing assets and                servicing liabilities: |
|----------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| 4.   | At                its initial adoption, permits a one-time reclassification of                available-for-sale securities to trading securities by entities with                recognized servicing rights, without calling into question the treatment                of other available-for-sale securities under Statement 115, provided                that                the available-for-sale securities are identified in some manner as                offsetting the entity’s exposure to changes in fair value of servicing                assets or servicing liabilities that a servicer elects to subsequently                measure at fair value. |
|----------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| 5.   | Requires                separate presentation of servicing assets and servicing liabilities                subsequently measured at fair value in the statement of financial                position                and additional disclosures for all separately recognized servicing                assets                and servicing liabilities. |
|----------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

**3.**
**Restricted        Cash**

** **

| **4.** | **Accounts                  Receivable** |
|--------|------------------------------------------|

| ** ** | ** ** | ** ** | ** **                                                                    | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** **     | ** ** | ** **     | ** ** |
|------------|------------|------------|-------------------------------------------------------------------------------|------------|------------|------------|------------|------------|------------|------------|----------------|------------|----------------|------------|
| ** ** | ** ** | ** ** | ** **                                                                    | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** |  **2006** | ** ** |  **2005** | ** ** |
| ** ** | ** ** | ** ** | ** **                                                                    | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** **     | ** ** | ** **     | ** ** | ** ** | ** ** |
| ** ** | ** ** | ** ** | Accrued                  receivables - producer fees and production recharges | ** ** | ** ** | ** ** | ** ** | ** ** | **$**      | 515,000    |           | **$**      | 325,000        |       |
| ** ** | ** ** | ** ** | Accrued                  distribution, royalties and other                    | ** ** | ** ** | ** ** | ** ** | ** ** | 40,000     |       | ** **     | 41,704     |           |
| ** ** | ** ** | ** ** |                                                                          | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** **     |       |           | ** ** |   |   |
| ** ** | ** ** | ** ** | Total                                                                         | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | **$**          | 555,,000   |           | **$**      | 366,704 |   |

**.        **

----

**FMILY        ROOM ENTERTAINMENT CORPORATION**

**NOTES        TO CONSOLIDATED FINANCIAL STATEMENTS**

**                                                                                                                                                         **

| **5.** | **Film                  Costs, Revenues and Amortization of Film                  Costs** |
|--------|-------------------------------------------------------------------------------------------|

|   |   |   |                                                 |                                           |   |   |         |   |           |      |           |                          | **Development** |    |   |      |      |
|--------|--------|--------|------------------------------------------------------|------------------------------------------------|--------|--------|--------------|--------|----------------|-----------|----------------|-------------------------------|-----------------|---------|--------|-----------|-----------|
|   |   |   |                                                 |                                           |   |   |         |   |           | **In**    |           | **and                  Pre-** |            |    |   |
|   |   |   |                                                 |                                           |   |   | **Released** |   | **Production** |      | **Production** |                          | **Total**       |    |
|   |   |   |                                                 |                                           |   |   |         |   |           |      |           |                          |            |    |   |      |      |   |
|   |   |   | Net                  film cost balance at June 30,   |                                           |   |   |         |   |           |      |           |                          |            |    |   |      |
|   |   |   |                                                 | 2005                                           |   | $      | 60,000       |   | $              | 2,663,707 |           | $                             | 654,478         |    | $      | 3,378,185 |      |
|   |   |   |                                                 |                                           |   |   |         |   |           |      |           |                          |            |    |   |      |      |   |
|   |   |   | Production                  costs incurred during    |                                           |   |   |         |   |           |      |           |                          |            |    |   |      |
|   |   |   |                                                 | fiscal                  2006                   |   |   | 39,819       |   |           | 4,807,860 |           |                          | 365,834         |    |   | 5,213,513 |      |
|   |   |   |                                                 |                                           |   |   |         |   |           |      |           |                          |            |    |   |      |      |   |
|   |   |   | Transfers                  of film costs between     |                                           |   |   |         |   |           |      |           |                          |            |    |   |      |
|   |   |   |                                                 | categories                  in fiscal 2006     |   |   | -            |   |           | 481,164   |           |                          | (481,164)       |    |   | -         |      |
|   |   |   |                                                 |                                           |   |   |         |   |           |      |           |                          |            |    |   |      |      |   |
|   |   |   | Total                  film costs incurred and       |                                           |   |   |         |   |           |      |           |                          |            |    |   |      |
|   |   |   |                                                 | paid                  by FMLY during fiscal    |   |   |         |   |           |      |           |                          |            |    |   |      |      |
|   |   |   |                                                 | 2006                                           |   |   | 39,819       |   |           | 5,289,024 |           |                          | (115,330)       |    |   | 5,213,513 |      |
|   |   |   |                                                 |                                           |   |   |         |   |           |      |           |                          |            |    |   |      |      |   |
|   |   |   | Net                  film cost balance before fiscal |                                           |   |   |         |   |           |      |           |                          |            |    |   |      |
|   |   |   |                                                 | 2006                  amortization and write   |   |   | 99,819       |   |           | 7,952,731 |           |                          | 539,148         |    |   | 8,591,698 |      |
|   |   |   |                                                 | Offs                                           |   |   |         |   |           |      |           |                          |            |    |   |      |      |
|   |   |   |                                                 |                                           |   |   |         |   |           |      |           |                          |            |    |   |      |      |   |
|   |   |   | Less                  film cost amortization and     |                                           |   |   |         |   |           |      |           |                          |            |    |   |      |
|   |   |   |                                                 | write                  offs during fiscal 2006 |   |   | 49,819       |   |           | 2,501,606 |           |                          | 238,841         |    |   | 2,790,266 |      |
|   |   |   |                                                 |                                           |   |   |         |   |           |      |           |                          |            |    |   |      |      |   |
|   |   |   | Net                  film cost balance at June 30,   |                                           |   |   |         |   |           |      |           |                          |            |    |   |      |
|   |   |   |                                                 |                                           | 2006   |   | $            | 50,000 |           | $         | 5,451,125      |                          | $               | 300,307 |   | $         | 5,801,432 |   |

----

**FMILY        ROOM ENTERTAINMENT CORPORATION**

**NOTES        TO CONSOLIDATED FINANCIAL STATEMENTS**

**                                                                                                                                                         **

**5.        F**
**ilm        Costs, Revenues and Amortization of Film Costs,        continued**

|   |   |   |                                               |                                         |   |   |         |   |           |      |           |                          | **Development** |   |   |      |   |
|--------|--------|--------|----------------------------------------------------|----------------------------------------------|--------|--------|--------------|--------|----------------|-----------|----------------|-------------------------------|-----------------|--------|--------|-----------|--------|
|   |   |   |                                               |                                         |   |   |         |   |           | **In**    |           | **and                  Pre-** |            |   |   |
|   |   |   |                                               |                                         |   |   | **Released** |   | **Production** |      | **Production** |                          | **Total**       |   |
|   |   |   |                                               |                                         |   |   |         |   |           |      |           |                          |            |   |   |      |   |   |
|   |   |   | Net                  film cost balance at June 30, |                                         |   |   |         |   |           |      |           |                          |            |   |   |      |
|   |   |   |                                               | 2004                                         |   | $      | 210,499      |   | $              | 157,529   |           | $                             | 426,846         |   | $      | 794,874   |   |
|   |   |   |                                               |                                         |   |   |         |   |           |      |           |                          |            |   |   |      |   |   |
|   |   |   | Production                  costs incurred during  |                                         |   |   |         |   |           |      |           |                          |            |   |   |      |
|   |   |   |                                               | fiscal                  2005                 |   |   | 77,607       |   |           | 3,180,156 |           |                          | 895,357         |   |   | 4,253,120 |   |
|   |   |   |                                               |                                         |   |   |         |   |           |      |           |                          |            |   |   |      |   |   |
|   |   |   |                                               |                                         |   |   |         |   |           |      |           |                          |            |   |   |      |   |   |
|   |   |   | Transfers                  of film costs between   |                                         |   |   |         |   |           |      |           |                          |            |   |   |      |
|   |   |   |                                               | categories                  in 2005          |   |   | -            |   |           | 271,460   |           |                          | (271,460        | )      |   | -         |   |
|   |   |   |                                               |                                         |   |   |         |   |           |      |           |                          |            |   |   |      |   |   |
|   |   |   | Total                  film costs incurred and     |                                         |   |   |         |   |           |      |           |                          |            |   |   |      |
|   |   |   |                                               | paid                  by FMLY during fiscal  |   |   |         |   |           |      |           |                          |            |   |   |      |   |
|   |   |   |                                               | 2005                                         |   |   | 77,607       |   |           | 3,551,616 |           |                          | 623,897         |   |   | 4,253,120 |   |
|   |   |   |                                               |                                         |   |   |         |   |           |      |           |                          |            |   |   |      |   |   |
|   |   |   | Net                  film cost balance before      |                                         |   |   |         |   |           |      |           |                          |            |   |   |      |
|   |   |   |                                               | 2005                  amortization and write |   |   |         |   |           |      |           |                          |            |   |   |      |   |
|   |   |   |                                               | offs                                         |   |   | 288,106      |   |           | 3,709,146 |           |                          | 1,050,742       |   |   | 5,047,994 |   |
|   |   |   |                                               |                                         |   |   |         |   |           |      |           |                          |            |   |   |      |   |   |
|   |   |   | Less                  film cost amortization and   |                                         |   |   |         |   |           |      |           |                          |            |   |   |      |
|   |   |   |                                               | write-offs                  during 2005      |   |   | 228,106      |   |           | 1,045,439 |           |                          | 396,264         |   |   | 1,669,809 |   |
|   |   |   |                                               |                                         |   |   |         |   |           |      |           |                          |            |   |   |      |   |   |
|   |   |   | Net                  film cost balance at June 30, |                                         |   |   |         |   |           |      |           |                          |            |   |   |      |
|   |   |   |                                               | 2005                                         |   | $      | 60,000       |   | $              | 2,663,707 |           | $                             | 654,478         |   | $      | 3,378,185 |   |

----

**FAMILY        ROOM ENTERTAINMENT CORPORATION**

**NOTES        TO CONSOLIDATED FINANCIAL STATEMENTS**

**                                                                                                                                                         **

| **5.  ** | **Film                Costs, Revenues and Amortization of Film Costs,                continued** |
|--------------------|--------------------------------------------------------------------------------------------------|

|   |   |   |                                                                           |                                                |                                                |   |   |   | **Year                  Ended** |   |
|--------|--------|--------|--------------------------------------------------------------------------------|-----------------------------------------------------|-----------------------------------------------------|--------|--------|--------|---------------------------------|--------|
|   |   |   |                                                                           |                                                |                                                |   |   |   | **June                  30,**   |   |
|   |   |   |                                                                           |                                                |                                                |   |   |   |                            |   | **2006** |   | **2005** |   |
|   |   |   |                                                                           |                                                |                                                |   |   |   |                            |   |   |   |   |   |   |   |   |   |
|   |   |   | **Released                  Projects - Amortization**                          |                                                |                                                |   |   |   |                            |   |   |   |   |   |   |   |
|   |   |   |                                                                           | After                  Sex                          |                                                |   |   |   |                            |   |   |   | 5,785 |   |   | 40,413 |   |
|   |   |   |                                                                           | Held                  for Ransom                    |                                                |   |   |   |                            |   |   |   | 5,819 |   |   | 41,020 |   |
|   |   |   |                                                                           | Speedway                  Junkie                    |                                                |   |   |   |                            |   |   |   | 5 |   |   | 9,641 |   |
|   |   |   |                                                                           | 16                  Blocks                          |                                                |   |   |   |                            |   |   |   | 36,729 |   |   | - |   |
|   |   |   |                                                                           | Good                  Advice                        |                                                |   |   |   |                            |   |   |   | 413 |   |   | 98,926 |   |
|   |   |   |                                                                           | Other                                               |                                                |   |   |   |                            |   |   |   | 1,068 |   |   | - |   |
|   |   |   |                                                                           |                                                |                                                |   |   |   |                            |   |   |   |   |   |   |   |   |
|   |   |   |                                                                           | Total                                               |                                                |   |   |   |                            |   |   |   | 49,819 |   |   | 190,000 |   |
|   |   |   |                                                                           |                                                |                                                |   |   |   |                            |   |   |   |   |   |   |   |   |   |
|   |   |   | **Projects                  in Development, In-Production, or Pre-Production** |                                                |                                                |   |   |   |                            |   |   |
|   |   |   |                                                                           | 16                  Blocks                          |                                                |   |   |   |                            |   |   |   | 146,098 |   |   | 270,981                  - |   |
|   |   |   |                                                                           | The                  Tenant                         |                                                |   |   |   |                            |   |   |   | 1,279,621 |   |   |   |   |
|   |   |   |                                                                           | Wickerman                                           |                                                |   |   |   |                            |   |   |   | 290,829 |   |   | - |   |
|   |   |   |                                                                           | The                  Contract                       |                                                |   |   |   |                            |   |   |   | 255,314 |   |   | - |   |
|   |   |   |                                                                           | 88                  Minutes                         |                                                |   |   |   |                            |   |   |   | 430,079 |   |   | - |   |
|   |   |   |                                                                           | Saturday                  Night Special             |                                                |   |   |   |                            |   |   |   | 93,942 |   |   | - |   |
|   |   |   |                                                                           | Amityville                  Horror After 25 Years   |                                                |   |   |   |                            |   |   |   | - |   |   | 311,827 |   |
|   |   |   |                                                                           | Today                  We Die                       |                                                |   |   |   |                            |   |   |   | - |   |   | 188,634 |   |
|   |   |   |                                                                           | Rin                  Tin Tin                        |                                                |   |   |   |                            |   |   |   | 127,134 |   |   | - |   |
|   |   |   |                                                                           | Submerged                                           |                                                |   |   |   |                            |   |   |   | - |   |   | 291,741 |   |
|   |   |   |                                                                           | Lonely                  Hearts                      |                                                |   |   |   |                            |   |   |   | - |   |   | 62,941 |   |
|   |   |   |                                                                           | MercenaryTotal                  of other individual |                                                |   |   |   |                            |   |   |   | - - |   |   | 117,271  |   |
|   |   |   |                                                                           |                                                | projects                  with total original costs |   |   |   |                            |   |   |   |   |   |   |   |   |   |
|   |   |   |                                                                           |                                                | less                  than $40,000                  |   |   |   |                            |   |   |   |   | 117,420 |   |   | 236,414 |   |
|   |   |   |                                                                           |                                                |                                                |   |   |   |                            |   |   |   |   |   |   |   |   |   |
|   |   |   |                                                                           | Total                                               |                                                |   |   |   |                            |   |   |   | 2,740,437 |   |   | 1,479,809 |   |
|   |   |   |                                                                           |                                                |                                                |   |   |   |                            |   |   |   |   |   |   |   |   |   |
|   |   |   |                                                                           |                                                | Total                  all projects                 |   |   |   |                            |   |   |   | $ | 2,790,256 |   | $ | 1,669,809 |   |

----

**FAMILY        ROOM ENTERTAINMENT CORPORATION**

**NOTES        TO CONSOLIDATED FINANCIAL STATEMENTS**

**                                                                                                                                                      **

**5.**
**Film        Costs, Revenues and Amortization of Film Costs,        continued**

----

**FAMILY        ROOM ENTERTAINMENT CORPORATION**

**NOTES        TO CONSOLIDATED FINANCIAL STATEMENTS**

**                                                                                                                                                       **

**5.**
**Film        Costs, Revenues and Amortization of Film Costs,        continued**

|   |   |   |                                                             |   |   |   |   |   |   |   |   |   |     |   |     |   |
|--------|--------|--------|------------------------------------------------------------------|--------|--------|--------|--------|--------|--------|--------|--------|--------|----------|--------|----------|--------|
|   |   |   |                                                             |   |   |   |   |   |   |   |   |   | **2006** |   | **2005** |   |
|   |   |   |                                                             |   |   |   |   |   |   |   |   |   |     |   |     |   |   |   |
|   |   |   | The                  Tenant                                      |   |   |   |   |   |   |   |   | -      | %        |   | 37       | %      |
|   |   |   | Borderland                                                       |   |   |   |   |   |   |   |   | 82     |     |   | 22       |   |
|   |   |   | White                  Air                                       |   |   |   |   |   |   |   |   | 6      |     |   | 7        |   |
|   |   |   | Wickerman                                                        |   |   |   |   |   |   |   |   | 4      |     |   | 7        |   |
|   |   |   | 88                  Minutes                                      |   |   |   |   |   | -      |   |   | 5      |     |
|   |   |   | Total                  of other individual projects less than 5% |   |   |   |   |   | 9      |   |   | 22     |     |
|   |   |   |                                                             |   |   |   |   |   |   |   |   |   |     |   |     |   |   |   |
|   |   |   |                                                             | Total  |   |   |   |   |   |   |   |   | 100      | %      |     | 100    | % |

|   |   |   |                                                                                                       |                                                |   |   |   |   |   |   |
|--------|--------|--------|------------------------------------------------------------------------------------------------------------|-----------------------------------------------------|--------|--------|--------|--------|--------|--------|
|   |   |   |                                                                                                       |                                                |   |   |   |   |   |   | **2006** |   | **2005** |   |
|   |   |   | **Producer                  Fees**                                                                         |                                                |   |   |   |   |   |   |   |   |   |   |   |   |
|   |   |   | Wickerman                                                                                                  |                                                |   |   |   |   |   |   | $ | 300,000 |   | $ | - |   |
|   |   |   | The                  Contract                                                                              |                                                |   |   |   |   |   |   |   | 300,000 |   |   | - |   |
|   |   |   | 88                  Minutes                                                                                |                                                |   |   |   |   |   |   |   | 400,000 |   |   | - |   |
|   |   |   | Amityville                  Horror After 25 Years                                                          |                                                |   |   |   |   |   |   |   | - |   |   | 500,000 |   |
|   |   |   | MercenarySubmerged                                                                                         |                                                |   |   |   |   |   |   |   | - |   |   | 300,000                  300,000 |   |
|   |   |   | Today                  We Die                                                                              |                                                |   |   |   |   |   |   |   | - |   |   | 200,000 |   |
|   |   |   | The                  Tennant                                                                               |                                                |   |   |   |   |   |   |   |   |   |   | 12,000 |   |
|   |   |   | Lonely                  Hearts                                                                             |                                                |   |   |   |   |   |   |   |   |   |   | 100,000 |   |
|   |   |   | 16                  Blocks                                                                                 |                                                |   |   |   |   |   |   |   |   |   |   | 625,000 |   |
|   |   |   |                                                                                                       | Total                  producer fees / film revenue |   |   |   |   |   |   |   |   | 1,000,000 |   |   | 2,037,000 |   |
|   |   |   |                                                                                                       |                                                |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|   |   |   | **Royalties                  and Other Revenue**                                                           |                                                |   |   |   |   |   |   |   |   |   |   |   |   |
|   |   |   | Royalties                                                                                                  |                                                |   |   |   |   |   |   |   | 16,861 |   |   | 28,034 |   |
|   |   |   | Film                  production service fees and other Net                  Income participation revenues |                                                |   |   |   |   |   |   |   | 5,250110,000 |   |   | 241,000 |   |
|   |   |   | Distribution                  revenue                                                                      |                                                |   |   |   |   |   |   |   | 1,302,771 |   |   | 24,500 |   |
|   |   |   | Consultant                  and participation fees                                                         |                                                |   |   |   |   |   |   |   | 1,000,000 |   |   |   |   |
|   |   |   |                                                                                                       | Total                  royalties and other revenue  |   |   |   |   |   |   |   |   | 2,434,,882 |   |   | 293,534 |   |
|   |   |   |                                                                                                       |                                                |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|   |   |   | Total                  revenue                                                                             |                                                |   |   |   |   |   |   | $ | 3,434,882 |   | $ | 2,330,534 |   |

----

**FAMILY        ROOM ENTERTAINMENT CORPORATION**

**NOTES        TO CONSOLIDATED FINANCIAL STATEMENTS**

**                                                                                                                                             **

| **6.** | **Property                  and Equipment** |
|--------|---------------------------------------------|

|   |   |   |                                                            |   |   |   |   |   | **Life**                 |   | **2006** |    | **2005** |   |
|--------|--------|--------|-----------------------------------------------------------------|--------|--------|--------|--------|--------|--------------------------|--------|----------|---------|----------|--------|
|   |   |   |                                                            |   |   |   |   |   |                     |   |     |    |     |   |   |   |
|   |   |   | Office                  furniture and equipment                 |   |   |   |   |   | 7                  years |   | $        | 50,284  |     | $      | 45,793 |   |
|   |   |   | Computer                  equipment                             |   |   |   |   |   | 5                  years |   |     | 73,313  |     |   | 55,413 |   |
|   |   |   | Software                                                        |   |   |   |   |   | 3                  years |   |     | 85,472  |     |   | 79,409 |   |
|   |   |   |                                                            |   |   |   |   |   |                     |   |     |    |     |   |   |   |
|   |   |   | Total                                                           |   |   |   |   |   |                     |   |     | 209,069 |     |   | 180,615 |   |
|   |   |   |                                                            |   |   |   |   |   |                     |   |     |    |     |   |   |   |
|   |   |   | Less                  accumulated depreciation and amortization |   |   |   |   |   | 144,186                  |   |     | 124,075 |     |   |   |
|   |   |   |                                                            |   |   |   |   |   |                     |   |     |    |     |   |   |   |
|   |   |   |                                                            |   |   |   |   |   |                     |   | $        | 64,883  |     | $      | 56,540 |   |

| **7.** | **Notes                  Payable Under Film Participation                  Agreements** |
|--------|-----------------------------------------------------------------------------------------|

|                               |                                 | **Investor                  Loans** |
|------------------------------------|--------------------------------------|-------------------------------------|
|                               |                                 | **Tau**                             | **Scorched** |   |   |
|                               |                                 | **Entertainment**                   | **Earth** | **Freedom** | **EFF** |
| **Specified                  Use** | **(Elisa                  Salinas)** | **Entertainment**                   | **Films** | **Partners,                  LLC** |
|                               |                                 |                                |   |   |   |   |   |   |   |   |   |   |   |
| The                  Tenant        |                                 | $                                   | - |   | $ | - |   | $ | - |   | $ | 68,486 |   |
| Borderland                         |                                 |                                | 1,799,719 |   |   | 572,500 |   |   | 2,355,192 |   |   | - |   |
| White                  Air         |                                 |                                | - |   |   | - |   |   | - |   |   | 346,514 |   |
| Wickerman                          |                                 |                                | 250,000 |   |   | - |   |   | - |   |   | - |   |
| Room                  Service      |                                 |                                | 130,000 |   |   | - |   |   | - |   |   | - |   |
| Day                  of the Dead   |                                 | -                                   |   |   | - |   |   | - |   |   | 300,000 |   |
| Rin                  Tin Tin       |                                 |                                | - |   |   | - |   |   | - |   |   |                    85,000 |   |
|                               |                                 | $                                   | 2,179,719 |   | $ | 572,500 |   | $ | 2,355,192 |   | $ | 800,000 |   |

----

**FAMILY        ROOM ENTERTAINMENT CORPORATION**

**NOTES        TO CONSOLIDATED FINANCIAL STATEMENTS**

**                                                                                                                                            **

**7.        **
**Notes        Payable Under Film Participation Agreements (        continued)**

**         **

----

**FAMILY        ROOM ENTERTAINMENT CORPORATION**

**NOTES        TO CONSOLIDATED FINANCIAL STATEMENTS**

**                                                                                                                                             **

**8.**
**Convertible        Notes Payable**

**Convertible        notes payable at June 30, 2006 and 2005 consisted of the        following**

|                                                |       |       |     | **2006**   |   | **2005** |
|-----------------------------------------------------|------------|------------|----------|------------|--------|----------|
|                                                |       |       |     |       |   |     |
| Notes                  payable Convertible debt     |       | $1,645,144 |     | $1,824,200 |
|                                                |       |       |     |       |   |     |
| Less                  un-amortized debt issue costs | $1,157,451 |       | $756,600 |
|                                                |       |       |     |       |   |     |
| Notes                  payable Convertible debt     |       | $487,693   |     | $1,067,600 |

----

**FAMILY        ROOM ENTERTAINMENT CORPORATION**

**NOTES        TO CONSOLIDATED FINANCIAL STATEMENTS**

**                                                                                                                                             **

**8.**
**Convertible        Notes Payable, continued**

**Debt        Features**

**Warrants        Issued**

----

**FAMILY        ROOM ENTERTAINMENT CORPORATION**

**NOTES        TO CONSOLIDATED FINANCIAL STATEMENTS**

**                                                                                                                                             **

**8.**
**Convertible        Notes Payable, continued**

**Debt        Features **

----

**FAMILY        ROOM ENTERTAINMENT CORPORATION**

**NOTES        TO CONSOLIDATED FINANCIAL STATEMENTS**

**                                                                                                                                           **

**8.**
**Convertible        Notes Payable, continued**

----

**FAMILY        ROOM ENTERTAINMENT CORPORATION**

**NOTES        TO CONSOLIDATED FINANCIAL STATEMENTS**

**                                                                                                                                             **

| **9.** | **Accounts                  Payable and Accrued                  Liabilities** |
|--------|--------------------------------------------------------------------------------|

|   |   |   |                                      |   |   |   |   |   |   |   | **2006** |    | **2005** |   |
|--------|--------|--------|-------------------------------------------|--------|--------|--------|--------|--------|--------|--------|----------|---------|----------|--------|
|   |   |   |                                      |   |   |   |   |   |   |   |     |    |     |   |   |   |
|   |   |   | Accounts                  payable         |   |   |   |   |   |   |   | $        | 200,273 |     | $      | 89,097 |   |
|   |   |   | Accrued                  film costs       |   |   |   |   |   |   |   |     |    |     |   | - |   |
|   |   |   | Accrued                  interest payable |   |   |   |   |   |   |   |     | 44,111  |     |   | 109,975 |   |
|   |   |   |                                      |   |   |   |   |   |   |   |     |    |     |   |   |   |
|   |   |   |                                      |   |   |   |   |   |   |   | $        | 244,385 |     | $      | 199,072 |   |

| **10.** | **Income                  Taxes** |
|---------|-----------------------------------|

|   |   |   |                                                                   |   |   |   |   |   |   |   | **2006** |        | **2005** |   |
|--------|--------|--------|------------------------------------------------------------------------|--------|--------|--------|--------|--------|--------|--------|----------|-------------|----------|--------|
|   |   |   |                                                                   |   |   |   |   |   |   |   |     |        |     |   |   |   |
|   |   |   | **Deferred                  tax assets:**                              |   |   |   |   |   |   |   |     |        |     |   |   |   |
|   |   |   | Net                  operating losses                                  |   |   |   |   |   |   |   | $        | 3,602,406   |     | $      | 3,305,763 |   |
|   |   |   | Accounts                  receivable - allowance for doubtful accounts |   |   |   | -      |   |   | 28,050 |     |        |     |   | - |
|   |   |   | Valuation                  allowance                                   |   |   |   |   |   |   |   |     | (3,597,906) |     |   | (3,302,763) |   |
|   |   |   |                                                                   |   |   |   |   |   |   |   |     |        |     |   |   |   |
|   |   |   | Total                  deferred tax assets                             |   |   |   |   |   |   |   |     | 4,500       |     |   | 3,000 |   |
|   |   |   |                                                                   |   |   |   |   |   |   |   |     |        |     |   |   |   |
|   |   |   | **Deferred                  tax liabilities:**                         |   |   |   |   |   |   |   |     |        |     |   |   |   |
|   |   |   | Basis                  of property and equipment                       |   |   |   |   |   |   |   |     | 4,500       |     |   | 3,000 |   |
|   |   |   |                                                                   |   |   |   |   |   |   |   |     |        |     |   |   |   |
|   |   |   | Net                  deferred tax asset                                |   |   |   |   |   |   |   | $        | -           |     | $      | - |   |

----

**FAMILY        ROOM ENTERTAINMENT CORPORATION**

**NOTES        TO CONSOLIDATED FINANCIAL STATEMENTS**

**                                                                                                                                             **

**10.**
**Income        Taxes, continued**

|   |   |   |                                                                                                                       |   | **2006**   |      | **2005**    |   |
|--------|--------|--------|----------------------------------------------------------------------------------------------------------------------------|--------|------------|-----------|-------------|--------|
|   |   |   |                                                                                                                       |   | **Amount** |      | **Percent** |   | **Amount** |   | **Percent** |   |
|   |   |   |                                                                                                                       |   |       |      |        |   |   |   |   |   |   |   |   |   |
|   |   |   | Benefit                  for income tax at federal                                                                         |   |       |      |        |   |   |   |   |   |   |   |   |   |
|   |   |   | statutory                  rate                                                                                            |   | $          | 442,570   |        |   | 34% |   | $ | 454,722 |   |   | 34% |   |
|   |   |   | Non-deductible                  stock-based                                                                                |   |       |      |        |   |   |   |   |   |   |   |   |   |
|   |   |   | Compensation                                                                                                               |   |       | (118,047) |        |   | (10)% |   |   | - |   |   | 0% |   |
|   |   |   | Non-deductible                  expenses related to convertible debt and derivative financial                  instruments |   |       | (62,997)  |        |   | (5)% |   |   | (153,684 | ) |   | (12)% |   |
|   |   |   | Other,                  including non-deductible                                                                           |   |       |      |        |   |   |   |   |   |   |   |   |   |
|   |   |   | business                  meals and entertainment                                                                          |   |       | (9,357)   |        |   | (-)% |   |   | (7,704 | ) |   | -                  % |   |
|   |   |   | Change                  in valuation allowance                                                                             |   |       | (252,169) |        |   | (19)% |   |   | (293,334 | ) |   | (22)% |   |
|   |   |   |                                                                                                                       |   |       |      |        |   |   |   |   |   |   |   |   |   |
|   |   |   |                                                                                                                       |   | $          | -         |        |   | - |   | $ | - |   |   | - |   |

**11.**
**Lease        Agreement**

| **Year                  Ending** |   |   |   |   |   |   |   |   |   |   |       |    |   |
|----------------------------------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|------------|---------|--------|
| **June                  30,**    |   |   |   |   |   |   |   |   |   |   | **Amount** |    |
|                             |   |   |   |   |   |   |   |   |   |   |       |    |   |
| 2007                             |   |   |   |   |   |   |   |   |   |   | $          | 81,324  |   |
| 2008                             |   |   |   |   |   |   |   |   |   |   |       | 81,324  |   |
|                             |   |   |   |   |   |   |   |   |   |   |       |    |   |
|                             |   |   |   |   |   |   |   |   |   |   | $          | 162,648 |   |

----

**FAMILY        ROOM ENTERTAINMENT CORPORATION**

**NOTES        TO CONSOLIDATED FINANCIAL STATEMENTS**

**                                                                                                                                             **

| **12.** | **Stockholders’                  Equity** |
|---------|-------------------------------------------------|

**Common        Stock**

**Stock        Options**

----

**FAMILY        ROOM ENTERTAINMENT CORPORATION**

**NOTES        TO CONSOLIDATED FINANCIAL STATEMENTS**

**                                                                                                                                             **

| **12.** | **Stockholders’                  Equity, Continued** |
|---------|------------------------------------------------------------|

**Stock        Options, continued**

|   |   |   |                                          |   |   |   |   |   | **Number                  of** |        | **Weighted**                   |   |
|--------|--------|--------|-----------------------------------------------|--------|--------|--------|--------|--------|--------------------------------|-------------|--------------------------------|--------|
|   |   |   |                                          |   |   |   |   |   | **Shares**                     |        | **Average**                    |   |
|   |   |   |                                          |   |   |   |   |   | **Under**                      |        | **Exercise**                   |   |
|   |   |   | **Description**                               |   |   |   |   |   | **Options**                    |        | **Price                  ($)** |   |
|   |   |   |                                          |   |   |   |   |   |                           |        |                           |   |   |   |
|   |   |   | Outstanding                  at June 30, 2004 |   |   |   |   |   |                           | 1,625,000   |                           |   | 0.25 |   |
|   |   |   | Granted                                       |   |   |   |   |   |                           | -           |                           |   | - |   |
|   |   |   | Exercised                                     |   |   |   |   |   |                           | -           |                           |   | - |   |
|   |   |   | Forfeited                                     |   |   |   |   |   |                           | (1,480,000) |                           |   | 0.25 |   |
|   |   |   |                                          |   |   |   |   |   |                           |        |                           |   |   |   |
|   |   |   | Outstanding                  at June 30, 2005 |   |   |   |   |   |                           | 145,000     |                           |   | 0.25 |   |
|   |   |   |                                          |   |   |   |   |   |                           |        |                           |   |   |   |
|   |   |   | Granted                                       |   |   |   |   |   |                           | -           |                           |   | - |   |
|   |   |   | Exercised                                     |   |   |   |   |   |                           | -           |                           |   | - |   |
|   |   |   | Forfeited                                     |   |   |   |   |   |                           | -           |                           |   | _________- |   |
|   |   |   |                                          |   |   |   |   |   |                           |        |                           |   |   |   |
|   |   |   | Outstanding                  at June 30, 2006 |   |   |   |   |   |                           | 145,000     |                           |   | 0.25 |   |

|   |   |   |                                  |   |   |   |   |                           |   | **Remaining**   |   |         |   |
|--------|--------|--------|---------------------------------------|--------|--------|--------|--------|--------------------------------|--------|-----------------|--------|--------------|--------|
|   |   |   |                                  |   |   |   |   |                           |   | **Contractual** |   |         |   |
|   |   |   |                                  |   |   |   |   | **Expiration**                 |   | **Life**        |   | **Exercise** |   |
|   |   |   | **Number                  of Shares** |   |   |   |   | **Date**                       |   | **(Years)**     |   | **Price**    |   |
|   |   |   |                                  |   |   |   |   |                           |   |            |   |         |   |
|   |   |   | 45,000                                |   |   |   |   | December                  2006 |   | .5              |   | $0.25        |   |
|   |   |   | 100,000                               |   |   |   |   | June                  2007     |   | 1.0             |   | $0.25        |   |
|   |   |   |                                  |   |   |   |   |                           |   |            |   |         |   |
|   |   |   | 145,000                               |   |   |   |   |                           |   |            |   |         |   |

**Stock        Compensation Plan**

----

**FAMILY        ROOM ENTERTAINMENT CORPORATION**

**NOTES        TO CONSOLIDATED FINANCIAL STATEMENTS**

**                                                                                                                                             **

| **12.** | **Stockholders’                  Equity, Continued** |
|---------|------------------------------------------------------------|

**Stock        Warrants**

|   |   |   |                                          |   |   |   |   |   |   |   |   | **Number                  of** |       |
|--------|--------|--------|-----------------------------------------------|--------|--------|--------|--------|--------|--------|--------|--------|--------------------------------|------------|
|   |   |   |                                          |   |   |   |   |   |   |   |   | **Shares**                     |       |
|   |   |   |                                          |   |   |   |   |   |   |   |   | **Under**                      |       |
|   |   |   | **Description**                               |   |   |   |   |   |   |   |   | **Warrants**                   |       |
|   |   |   |                                          |   |   |   |   |   |   |   |   |                           |       |   |
|   |   |   | Outstanding                  at June 30, 2004 |   |   |   |   |   |   |   |   |                           | 11,071,428 |   |
|   |   |   |                                          |   |   |   |   |   |   |   |   |                           |       |   |
|   |   |   | Granted                                       |   |   |   |   |   |   |   |   |                           | 23,333,334 |   |
|   |   |   |                                          |   |   |   |   |   |   |   |   |                           |       |   |
|   |   |   | Outstanding                  at June 30, 2005 |   |   |   |   |   |   |   |   |                           | 34,404,762 |   |
|   |   |   |                                          |   |   |   |   |   |   |   |   |                           |       |   |
|   |   |   | Granted                                       |   |   |   |   |   |   |   |   |                           | -          |   |
|   |   |   |                                          |   |   |   |   |   |   |   |   |                           |       |   |
|   |   |   | Outstanding                  at June 30, 2006 |   |   |   |   |   |   |   |   |                           | 34,404,762 |   |

|   |   |   |                                  |   |   |   |                            |   |        |   | **Remaining**                   |   |   |   |   |
|--------|--------|--------|---------------------------------------|--------|--------|--------|---------------------------------|--------|-------------|--------|---------------------------------|--------|--------|--------|--------|
|   |   |   |                                  |   |   |   |                            |   |        |   | **Contractual**                 |   |   |   |   |
|   |   |   |                                  |   |   |   | **Expiration**                  |   | **Life**    |   | **Exercise**                    |   |
|   |   |   | **Number                  of Shares** |   |   |   | **Date**                        |   | **(Years)** |   | **Price**                       |   |
|   |   |   |                                  |   |   |   |                            |   |        |   |                            |   |   |   |   |   |
|   |   |   | 250,000                               |   |   |   | September                  2006 |   | .3          |   | 110%                  of market |   |
|   |   |   | 1,500,000                             |   |   |   | January                  2008   |   | 1.5         |   | $3.00                           |   |
|   |   |   | 750,000                               |   |   |   | January                  2008   |   | 1.5         |   | 65%                  of market  |   |
|   |   |   | 5,000,000                             |   |   |   | January                  2008   |   | 1.5         |   | $0.50                           |   |
|   |   |   | 3,571,428                             |   |   |   | January                  2008   |   | 1.5         |   | $0.13                           |   |
|   |   |   | 23,333,334                            |   |   |   | November                  2009  |   | 3.4         |   | $0.12                           |   |
|   |   |   |                                  |   |   |   |                            |   |        |   |                            |   |   |   |   |   |
|   |   |   | 34,404,762                            |   |   |   |                            |   |        |   |                            |   |   |   |   |   |

----

**FAMILY        ROOM ENTERTAINMENT CORPORATION**

**NOTES        TO CONSOLIDATED FINANCIAL STATEMENTS**

**                                                                                                                                             **

**13.**
**Claims        and Contingencies**

**14.**
**Major        Customers and Concentrations**

|   |   |   |                                                                       |   |   |   |   |   | **2006** |   | **2005** |   |
|--------|--------|--------|----------------------------------------------------------------------------|--------|--------|--------|--------|--------|----------|--------|----------|--------|
|   |   |   |                                                                       |   |   |   |   |   |     |   |     |   |   |   |
|   |   |   | Number                  of customers accounting for more than 10%          |   |   | 1      |   |   | 1        |   |
|   |   |   | of                  revenue                                                |   |   |   |   |   |     |   |     |   |   |   |
|   |   |   |                                                                       |   |   |   |   |   |     |   |
|   |   |   | Percentage                  of total revenue derived from largest customer |   |   | 82%    |   |   | 87%      |   |
|   |   |   |                                                                       |   |   |   |   |   |     |   |     |   |   |   |
|   |   |   | Percentage                  of total revenue derived from second largest   |   |   |   |   |   |     |   |
|   |   |   | Customer                                                                   |   |   |   |   |   |     | 1%     |     |   | 1% |   |

**15.**
**Related        Party Transactions**

----

**FAMILY        ROOM ENTERTAINMENT CORPORATION**

**NOTES        TO CONSOLIDATED FINANCIAL STATEMENTS**

**                                                                                                                                            **

**16.**
**Non-Cash        Investing and Financing Activities**

|   | During                  the year ended June 30, 2005, FMLY issued embedded derivative financial                  instruments as part of convertible debt valued at $1,041,602. |
|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| **17.** | **Subsequent                  Events** |
|---------|----------------------------------------|

----

|                                           | FAMILY                  ROOM ENTERTAINMENT CORP - TREASUARY SHARES |       |
|------------------------------------------------|--------------------------------------------------------------------|------------|
|                                           |                                                               |       |   |   |   |   |
|                                           |                                                               |       |   |   |   |   |
| **Date**                                       |                                                               | **Shares** | Market                  Price | **Share** | **Commissons** | **Amount** |
|                                           |                                                               |       |   |   |   |   |
| 8/3/2006                                       |                                                               | 650,000    | $0.0120 | $7,800.00 | $399.50 | $8,199.50 |
| 8/4/2006                                       |                                                               | 325,000    | $0.0096 | $4,120.00 | $163.50 | $3,283.50 |
| 8/15/2006                                      |                                                               | 274,833    | $0.0093 | $2,555.95 | $134.50 | $2,690.45 |
| 8/16/2006                                      |                                                               | 495,000    | $0.0098 | $4,851.00 | $247.50 | $5,098.50 |
| 8/17/2006                                      |                                                               | 100,000    | $0.0120 | $1,200.00 | $25.00 | $1,225.00 |
| 8/17/2006                                      |                                                               | 890,000    | $0.0118 | $10,502.00 | $527.50 | $11,029.50 |
| 8/18/2006                                      |                                                               | 960,000    | $0.0117 | $11,232.00 | $557.50 | $11,789.50 |
| 8/21/2006                                      |                                                               | 100,000    | $0.0120 | $1,225.00 | $0.00 | $1,225.00 |
| 8/21/2006                                      |                                                               | 250,000    | $0.0120 | $3,000.00 | $0.00 | $3,000.00 |
| 8/21/2006                                      |                                                               | 250,000    | $0.0120 | $3,000.00 | $7.50 | $3,007.50 |
| 8/21/2006                                      |                                                               | 100,000    | $0.0135 | $1,350.00 | $0.00 | $1,350.00 |
| 8/23/2006                                      |                                                               | 50,000     | $0.0115 | $575.00 | $7.50 | $582.50 |
| 8/23/2006                                      |                                                               | 100,000    | $0.0125 | $1,250.00 | $57.50 | $1,307.50 |
| 8/30/2006                                      |                                                               | 50,000     | $0.0115 | $575.00 | $27.50 | $602.50 |
| 8/31/2006                                      |                                                               | 50,000     | $0.0090 | $450.00 | $32.50 | $482.50 |
| 9/5/2006                                       |                                                               | 200,000    | $0.0090 | $1,800.00 | $97.50 | $1,897.50 |
| 9/7/2006                                       |                                                               | 200,000    | $0.0080 | $1,600.00 | $87.50 | $1,687.50 |
| 9/14/2006                                      |                                                               | 20,000     | $0.0095 | $190.00 | $27.50 | $217.50 |
| 9/14/2006                                      |                                                               | 100,000    | $0.0095 | $950.00 | $32.00 | $982.00 |
| 9/18/2006                                      |                                                               | 200,000    | $0.0080 | $1,600.00 | $72.50 | $1,672.50 |
| 9/18/2006                                      |                                                               | 20,000     | $0.0080 | $160.00 | $25.00 | $185.00 |
| 9/19/2006                                      |                                                               | 50,000     | $0.0080 | $400.00 | $27.50 | $427.50 |
| 9/26/2006                                      |                                                               | 250,000    | $0.0085 | $2,125.00 | $71.50 | $2,196.50 |
| 9/27/2006                                      |                                                               | 100,000    | $0.0090 | $900.00 | $34.50 | $934.50 |
| 9/27/2006                                      |                                                               | 140,000    | $0.0094 | $1,316.00 | $7.50 | $1,323.50 |
| 9/27/2006                                      |                                                               | 10,000     | $0.0090 | $90.00 | $0.00 | $90.00 |
| 9/28/2006                                      |                                                               | 250,000    | $0.0094 | $2,350.00 | $7.50 | $2,357.50 |
| 9/29/2006                                      |                                                               | 250,000    | $0.0094 | $2,350.00 | $7.50 | $2,357.50 |
| 10/05/2006                                     |                                                               | 200,000    | $0.0080 | $1,600.00 | $32.50 | $1,632.50 |
| Total                  Shares Purchased        | 6,634,833                                                          | $003649    | $69,516.95 | $2,685.50 | $71,202.45 |
|                                           |                                                               |       |   |   |   |   |
| Average                  Stock Price Per Share | $0.01258                                                           |       |   |   |

----