<PAGE>

                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                   FORM 10-KSB

       [X] ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
         ACT OF 1934 FOR THE FISCAL YEAR ENDED OCTOBER 31, 2005

                                       OR

        [ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
       EXCHANGE ACT OF 1934 for the transition period from _____ to _____

                        COMMISSION FILE NUMBER: 000-21785

                            Rim Semiconductor Company
                 (Name of small business issuer in its charter)


                    UTAH                                 95-4545704
        (State or other jurisdiction of              (I.R.S. Employer
         incorporation or organization)             identification no.)

        305 NE 102ND AVENUE, SUITE 105
            PORTLAND, OREGON 97220                    (503) 257-6700
    (Address of principal executive offices,    (Issuer's telephone number,
              including zip code)                   including area code)

           SECURITIES REGISTERED UNDER SECTION 12(b) OF THE EXCHANGE ACT:
                                      None

           SECURITIES REGISTERED UNDER SECTION 12(g) OF THE EXCHANGE ACT:
                          Common Stock, $.001 Par Value
          -------------------------------------------------------------

         Check whether the issuer is not required to file reports pursuant to
Section 13 or 15(d) of the Exchange Act. [ ]

         Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such
shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days.
Yes [X] No [ ]

         Check if there is no disclosure of delinquent filers pursuant to Item
405 of Regulation S-B contained in this form, and no disclosure will be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-KSB
or any amendment to this Form 10-KSB. [ ]

         Indicate by check mark whether the registrant is a shell company (as
defined in Rule 12b-2 of the Exchange Act). Yes [ ] No [X]

         Issuer's revenues for the fiscal year ended October 31, 2005: $39,866

         The aggregate market value of common stock held by non-affiliates of
the registrant as of January 24, 2006 was $6,913,778 (based on the last
reported sale price of $0.0266 per share on January 24, 2006).

         The number of shares of the issuer's common stock outstanding as of
January 24, 2006 was 265,663,656.

         DOCUMENTS INCORPORATED BY REFERENCE: Portions of the Company's
definitive Proxy Statement for the 2006 Annual Meeting of Shareholders are
incorporated by reference into Part III, Items 9, 10, 11, 12 and 14.

         Transitional Small Business Disclosure Format: Yes [ ] No [X]




<PAGE>

                            RIM SEMICONDUCTOR COMPANY
                        2005 ANNUAL REPORT ON FORM 10-KSB

                                TABLE OF CONTENTS


                                     PART I

ITEM 1.  DESCRIPTION OF BUSINESS                                               2

ITEM 2.  DESCRIPTION OF PROPERTY                                              15

ITEM 3.  LEGAL PROCEEDINGS                                                    15

ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS                  15

                                     PART II

ITEM 5.  MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS             16

ITEM 6.  MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION            17

ITEM 7.  FINANCIAL STATEMENTS                                                 25

ITEM 8.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
         AND FINANCIAL DISCLOSURE                                             25

ITEM 8A. CONTROLS AND PROCEDURES                                              25

ITEM 8B. OTHER INFORMATION                                                    25

                                    PART III

ITEM 9.  DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
         COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT                    26

ITEM 10. EXECUTIVE COMPENSATION                                               26

ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
         AND RELATED STOCKHOLDER MATTERS                                      26

ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS                       26

ITEM 13. EXHIBITS                                                             26

ITEM 14. PRINCIPAL ACCOUNTANT FEES & SERVICES                                 30


                                       1



<PAGE>

ITEM 1. DESCRIPTION OF BUSINESS.

OVERVIEW

         Rim Semiconductor Company (the "Company, "we," "our" or "us") is
developing advanced transmission technology products to enable data to be
transmitted across copper telephone wire at speeds and over distances that
exceed those offered by leading DSL technology providers. In September 2005, the
Company changed its name from New Visual Corporation to Rim Semiconductor
Company. Our common stock trades on the OTC Bulletin Board under the symbol
RSMI. Our corporate headquarters are located at 305 NE 102nd Avenue, Portland,
Oregon 97220 and our telephone number is (503) 257-6700.

         Our initial chipset in a planned family of transport processors, the
Embarq(TM) E30 (Release 1.3) digital signal processor, was made available to
prospective customers for evaluation and testing in the first quarter of fiscal
2006. We are presently working on Release 1.4 of the E30 and Release 1.1 of the
Embarq(TM) E20 analog front end. We market this novel technology to leading
equipment makers in the telecommunications industry. Our products are designed
to substantially increase the capacity of existing copper telephone networks,
allowing telephone companies, office building managers, and enterprise network
operators to provide enhanced and secure video, data and voice services over the
existing copper telecommunications infrastructure.

         We expect that system-level products that use our technology will have
a significant advantage over existing system-level products that use existing
broadband technologies, such as digital subscriber line (DSL), because such
products will transmit data faster, and over longer distances. We expect
products using our technology will offer numerous advantages to the network
operators that deploy them, including the ability to support new services, the
ability to offer existing and new services to previously unreachable locations
in their network, reduction in total cost of ownership, security and
reliability.

OUR TELECOMMUNICATIONS BUSINESS

THE BROADBAND BOTTLENECK

         In recent years, demand has increased significantly for high-speed
access to multimedia information and entertainment content. Telephone companies,
office building managers, and enterprise network operators (together, "service
providers") satisfy this demand by offering a mix of voice, video and data
services to homes, businesses and governmental locations (together, "service
subscribers") . These subscribers are increasingly seeking high-speed broadband
access in order to take advantage of the dramatic growth of the Internet and
increased use of the World Wide Web for communicating and accessing information,
e-commerce, and bandwidth-intensive applications such as video-conferencing,
gaming, data-mining, image processing, distance learning, streaming audio/video,
multimedia broadcasting, telecommuting and networking between branch offices.
Rapid growth in the number of Internet users and the amount of bandwidth that
each user requires has created bottlenecks on existing communications networks,
especially over the "last mile" of the legacy communications infrastructure. The
"last mile" generally refers to the connection between the edge of the
high-capacity service provider network and the device or premises of the service
subscriber. Generally speaking, the "last mile challenge" refers to the
bottleneck that occurs where the high-speed capability of the fiber optic
network meets the low-speed capacity of the local copper-based network.


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<PAGE>

         As the volume of data has increased, service subscribers have become
increasingly dissatisfied with the performance of telephone dial-up connections
that are typically limited to data rates of 28.8 kilobits per second ("kbps") to
56 kbps. At the same time, service providers and content developers are offering
more and more data-intensive applications, thus stimulating demand for
bandwidth. Businesses also are seeking faster access to broadband content as the
convergence of voice, video and data, and increasing volumes of electronic
traffic, have placed new demands on existing technologies and infrastructures.

         In response to the challenge to provide high-speed access for both
consumers and businesses, service providers have been upgrading their networks
so as to significantly increase data transmission speeds beyond the 56 kbps
capacity. Nonetheless, given the nature of the copper based networks, the
increased data transmission speeds do not approach those needed to address the
burgeoning demand. Our products are designed to increase data transmission
speeds on the existing copper-based network to satisfy this demand.

BROADBAND OPPORTUNITIES OVER METALLIC MEDIA

         We believe the value of the existing copper-based telephone network is
directly related to the amount of data that it can deliver. We also believe
there are substantial business opportunities for companies that can develop
technologies that increase the data-bearing capability, or bandwidth of this
network, enabling telephone network operators to increase their offering of
services and reduce the cost of network upgrades. Worldwide, this network
contains over 950 million copper lines, and currently delivers to end users most
of the world's telephone traffic and much of its broadband access. Virtually
every home, business and governmental location in the United States, Europe and
East Asia is served with an existing copper wire connection.

         But the existing copper wire connections were not engineered by service
providers to support high speed data. Originally buried in the ground or strung
on aerial cables to only carry voice calls, these wires are ill-suited to
carrying high speed data. The single most important technical limitation is that
the amount of data that a given piece of copper wire is capable of bearing
reduces as a function of its length. Thus, shorter wires can support higher data
rates, and longer wires must support lower data rates. This lack of suitability
has been the largest driving force behind the telephone companies' recent
capital investments in new fiber optic and wireless "last mile" networks. When
either of these technologies are introduced into a previously copper-based
network, the copper wires are either shortened or eliminated entirely. While the
introduction of our technologies are not likely to completely eliminate the need
for fiber optics or for wireless deployments, we believe that it could reduce or
forestall them. Such reduction or delay positively reduces the capital
expenditures of the service providers. Thus, we believe that the existing
worldwide copper wire base offers significant advantages over these alternative
networks as a medium for providing broadband access, and that telephone
companies adopting our technologies will enjoy these benefits:

         LOW COST DEPLOYMENT. First, these solutions enable the service provider
to leverage a huge existing infrastructure, avoiding the high costs associated
with replacing the local loop with fiber, laying new cable or upgrading existing
cable connections, or deploying relatively new wireless or satellite
communications technologies. Because our technology uses the existing local
loop, they can be less expensive to deploy than other high-speed data
transmission technologies.

         LIMITED SERVICE DEGRADATION AND IMPROVED SECURITY OVER ALTERNATIVE
TECHNOLOGIES. In contrast to cable delivery systems, our technology is a
point-to-point technology that connects the end user to the service provider's
central office or to an intermediate hub over copper wire. Our technology
therefore does not encounter service degradation as other subscribers are added
to the system, and also allows a higher level of security. Alternative
technologies, such as cable, are shared systems and may suffer degradation and
increased security risk as the number of end users on the system increases.

         RAPID DEPLOYMENT. Because virtually every home and business in the
United States, Europe and East Asia have existing copper telephone wire
connections, copper wire-based broadband solutions can be rapidly deployed to a
large number of potential end users.


                                       3

<PAGE>

OUR PRODUCT LINE

         We are developing an advanced transmission technology to enable data to
be transmitted across copper telephone wire at faster speeds and over greater
distances than is presently offered by leading digital subscriber line (DSL)
technology providers. Our technology, using the name Embarq(TM), offers
significant improvements over existing broadband technologies by:

         o        optimizing the bandwidth used and taking advantage of dynamic
                  changes in the available signal to noise ratio ("SNR").
                  Bandwidth is maximized by dynamically operating as close as
                  possible to the theoretically available bandwidth,
                  specifically by taking advantage of dynamic improvements in
                  the SNR. Telephone wiring has a static, known function of
                  attenuation versus frequency, while there are dynamic
                  characteristics that present both significant and exploitable
                  dynamic changes during transmission;

         o        utilizing offset quadrature amplitude modification (OQAM),
                  large subchannel sizes, short frame sizes and other data
                  manipulation techniques; and

         o        processing ethernet based data traffic in a more efficient
                  way.

Our solution takes advantage of these innovations, resulting in dramatically
improved achievable throughput.

The Technology Underlying Our Proposed Solution
-----------------------------------------------

         In April 2002, we entered into a development and license agreement with
Adaptive Networks, Inc. ("Adaptive") to acquire a worldwide, perpetual license
to Adaptive's Powerstream (TM) technology, intellectual property, and patent
portfolio for use in products relating to all applications in the field of the
copper telephone wire telecommunications network. Adaptive is engaged in the
research, development and sales of silicon embedded networking technology of use
in wiring environments. Powerstream(TM) technology refers to technologies that
enable data transmission across wiring infrastructures inside buildings. Under
the agreement with Adaptive, we have a license under 12 issued patents (five in
the United States) and 10 pending patent applications (four in the United
States) pertaining to methodologies for modifying data in order to transmit it
more efficiently on metallic media. The licensed technology provides the core
technology for our semiconductor products.

         In addition to the licensed technology, we and Adaptive have also
jointly developed technology and intellectual property that enhances the
licensed technology. Under the agreement with Adaptive, we co-own 10 pending
patent applications (two in the United States) pertaining to these enhancements.

         In consideration of the development services provided and the licenses
granted to us by Adaptive, we paid Adaptive an aggregate of $5,751,000 between
2002 and 2004 consisting of cash and our assumption of certain Adaptive
liabilities. This amount represents all payments for development that we are
required to make to Adaptive for both the licensed and the co-owned technologies
and related intellectual property. In addition to the above payment, Adaptive is
entitled to a percentage of any net sales of products sold by us and any license
revenue we receive from the licensed and co-owned technologies, less the first
five million dollars that would otherwise be payable to them under this royalty
arrangement.

Status of our Solution
----------------------

         Our initial chipset in a planned family of transport processors, the
Embarq(TM) E30 (Release 1.3) digital signal processor, was made available to
prospective customers for evaluation and testing in the first quarter of fiscal
2006. We are presently working on Release 1.4 of the E30 and Release 1.1 of the
Embarq(TM) E20 analog front end. We estimate that it will cost approximately
$600,000 to complete these releases. Subject to raising the needed capital, we
estimate that we will complete them in the second quarter of fiscal 2006.
Thereafter, we estimate that we will need an additional $1 million and three to
six months to complete release 2.0 of both products. Significant enhancements
are currently being designed for both products that are intended to reduce the
cost and increase the functionality of the products.


                                       4

<PAGE>

         The primary improvement that we intend to deliver with Release 2.0 is
moving both products from a field programmable gate array version to an
application specific standard part, thus lowering our cost to produce these
goods. We estimate that we will need an additional $1 million to accelerate our
sales, marketing, manufacturing and customer service activities.
We presently do not have the capital resources to undertake any of these steps
and do not have any commitments for any funds. No assurance can be provided that
we will be able to raise the needed funds (or any) on financially acceptable
terms or at all. Additionally, the complexity of our technology could result in
unforeseen delays or expenses in the commercialization process. Even if we are
able to raise additional necessary funds, there can be no assurance that we will
be able to successfully commercialize the Semiconductor Technologies. We also
presently have no agreements for any of the pilot deployment or extensive field
testing that we anticipate will precede the completion of Release 2.0 of either
the E20 or the E30. See "RISK FACTORS."

COMPETITION

         The market for high-speed telecommunications products is highly
competitive, and we expect that it will become increasingly competitive in the
future. Our competitors, including Centillium Communications, Inc., Conexant
Systems, Inc., PMC-Sierra, Texas Instruments Incorporated, Ikanos
Communications, ST Microelectronics N.V., Metalink Ltd., Broadcom Corporation,
Infineon Technologies A.G. and others, have developed and are currently
marketing technologies that also address the existing technical impediments of
using existing copper networks as broadband options or are otherwise
substantially similar to our products. Our competitors include some of the
largest, most successful domestic and international telecommunications companies
and other companies with well-established reputations in the broadband
telecommunications industry. Our competitors possess substantially greater name
recognition, financial, sales and marketing, manufacturing, technical,
personnel, and other resources than we have. These competitors may also have
pre-existing relationships with our potential customers. These competitors may
compete effectively with us because in addition to the above-listed factors,
they more quickly introduce new technologies, more rapidly or effectively
address customer requirements or devote greater resources to the promotion and
sale of their products than we do. Further, in the event of a manufacturing
capacity shortage, these competitors may be able to manufacture products when we
are unable to do so. In all of our target markets, we also may face competition
from newly established competitors, suppliers of products based on new or
emerging technologies, and customers who choose to develop wire based solutions
that are functionally similar to our Semiconductor Technologies.

         We believe we will be able to compete with these companies because our
products are designed to increase the data transfer rates of broadband
transmission over copper telephone wire at rates not yet achieved by competing
wire based technologies.

         Although we believe we will be able to compete based on the special
features of our products, they will incorporate new concepts and may not be
successful even if they are superior to those of our competitors. In addition to
facing competition from providers of DSL-based products, we will compete with
products using other broadband technologies, such as cable modems, wireless,
satellite, and fiber optic telecommunications technology. Commercial acceptance
of any one of these competing solutions could decrease demand for our products.

         We also face competition from new technologies that are currently under
development that may result in new competitors entering the market with products
that may make ours obsolete. We cannot predict the competitive impact of these
new technologies and competitors.

PROPRIETARY RIGHTS

         We currently rely on a combination of trade secret, patent, copyright
and trademark law, as well as non-disclosure agreements and invention-assignment
agreements, to protect our proprietary information. However, such methods may
not afford complete protection and there can be no assurance that other
competitors will not independently develop similar processes, concepts, ideas
and documentation. Under our agreement with Adaptive, we have a license under 12
issued patents (five in the United States) and 10 pending patent applications
(four in the United States) pertaining to methodologies for modifying data in
order to transmit it more efficiently on metallic media. Our license under each
of the Adaptive patents generally remains in effect for the life of the
applicable patent. In addition to the licensed technology, we and Adaptive have


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<PAGE>

also jointly developed technology and intellectual property that enhances the
licensed technology. Under the agreement with Adaptive, we co-own 10 pending
patent applications (two in the United States) pertaining to these enhancements.
Adaptive generally maintains, at its expense, these U.S. and foreign patent
rights and files and/or prosecutes the relevant patent applications in the U.S.
and foreign countries. We also rely upon trade secrets, know-how, continuing
technological innovations and licensing opportunities to develop our competitive
position. Our policy is to protect our technology by, among other things,
filing, or requiring the applicable licensor to file, patent applications for
technology that we consider important to the development of our business. We
intend to file additional patent applications, when appropriate, relating to our
technology, improvements to the technology, and to specific products we develop.

         Our policy is to require our employees, consultants, other advisors, as
well as software design collaborators, to execute confidentiality agreements
upon the commencement of employment, consulting or advisory relationships. These
agreements generally provide that all confidential information developed or made
known to the individual by us during the course of the individual's relationship
with us is to be kept confidential and not to be disclosed to third parties
except in specific circumstances. In the case of employees and consultants, the
agreements provide that inventions conceived by the individual in the course of
their employment or consulting relationship shall be our exclusive property.
There can be no assurance, however, that these agreements will provide
meaningful protection or adequate remedies for trade secrets in the event of
unauthorized use or disclosure of such information.

MANUFACTURING AND SUPPLIERS

         We intend to contract with third party manufacturers to produce our
products and will rely on third party suppliers to obtain the raw materials
essential to our products' production. Manufacturing of products utilizing our
semiconductor technology will be a complex process and we cannot assure you that
we will not experience production problems or delays. Any interruption in
operations could materially and adversely affect our business and operating
results.

         There may be a limited number of suppliers of some of the components
necessary for the manufacture of products utilizing our semiconductor
technologies. The reliance on a limited number of suppliers, particularly if
such suppliers are foreign, poses several risks, including a potential inability
to obtain an adequate supply of required components, low manufacturing yields
and reduced control over pricing, quality and timely delivery of components. We
cannot assure you that we will be able to obtain adequate supplies of raw
materials. Certain key components of the Semiconductor Technologies may involve
long lead times, and in the event of an unanticipated increase in the demand for
our products, we could be unable to manufacture certain products in a quantity
sufficient to satisfy potential demand. If we cannot obtain adequate deliveries
of key components, we may be unable to ship products on a timely basis. Low
manufacturing yields could cause us to incur substantially higher costs of goods
sold. Delays in shipment could damage our relationships with customers and could
harm our business and operating results.

GOVERNMENT REGULATION

         Our products are likely to be subject to extensive regulation by each
country and in the United States by federal and state agencies, including the
Federal Communications Commission (the "FCC"), and various state public utility
and service commissions. There are some regulations pertaining to the use of the
available bandwidth spectrum at present that have been interpreted by our target
customers as discouraging to the technical innovations that we are bringing to
market, though we do not believe this to be the case. Further, regulations
affecting the availability of broadband access services generally, the terms
under which telecommunications service providers conduct their business, and the
competitive environment among service providers, for example, could have a
negative impact on our business.

OUR JOINT VENTURE

         In April 2000, our NV Entertainment subsidiary entered into a joint
venture production agreement to produce a feature length film, "Step Into
Liquid" (the "Film") for theatrical distribution. We own a 50% interest in the
joint venture. We provided the funding for the production in the amount of
approximately $2,335,101. The financial condition and results of operations of
the joint venture are consolidated with our financial condition and results of


                                       6



<PAGE>

operations on the accompanying consolidated financial statements. The Film was
released to theaters in the United States in 2003 and is currently in foreign
and DVD distribution. During the years ended October 31, 2005 and 2004, we
received revenues of $39,866 and $287,570, respectively, from the Film. We
recorded amortization expense of $11,945 and $142,691 related to the Film for
the years ended October 31, 2005 and 2004, respectively.

         Based upon information received from the Film's distributor, Lion's
Gate Entertainment, in January 2005, we recorded an impairment charge of
$977,799 during the year ended October 31, 2004 that reduced the carrying value
of the Film on our balance sheet to $1,021,722. The impairment charge was due to
higher than expected distribution costs and lower than expected average retail
selling price for the DVD. In addition, based upon information received from
Lion's Gate Entertainment in July 2005, which indicated that sales were lower
than expected, we recorded an impairment charge of $1,009,777 during the year
ended October 31, 2005 which reduced the carrying value of the Film to $0 on our
balance sheet.

RESEARCH & DEVELOPMENT

         We outsource all of the development activities with respect to our
products to independent third party developers. During fiscal years 2005 and
2004 we expended $366,306 and $185,000, respectively, on research and
development with respect to the work on our Semiconductor Technologies.

OUR EMPLOYEES

         We currently have four full-time employees. We may, from time to time,
supplement our regular work force as necessary with temporary and contract
personnel. None of our employees is represented by a labor union.

         We anticipate that we will need to hire additional employees and other
personnel in order to achieve the commercialization of our Semiconductor
Technologies. The hiring of additional employees is subject to our raising
additional capital.

         Our future performance depends highly upon the continued service of the
senior members of our management team. We believe that our future success will
also depend upon our continuing ability to identify, attract, motivate, train
and retain other highly skilled managerial, technical, sales and marketing
personnel. Hiring for such personnel is intensely competitive, and there can be
no assurance that we will be able to retain our key employees or attract,
assimilate or retain the qualified personnel necessary for our business in a
timely manner or at all.

AVAILABLE INFORMATION

         Our Internet website is located at http://www.rimsemi.com. This
reference to our Internet website does not constitute incorporation by reference
in this report of the information contained on or hyperlinked from our Internet
website and such information should not be considered part of this report.

         The public may read and copy any materials we file with the Securities
and Exchange Commission ("SEC") at the SEC's Public Reference Room at 450 Fifth
Street, N.W., Washington, D.C. 20549. The public may obtain information on the
operation of the Public Reference Rooms by calling the SEC at 1-800-SEC-0330.
The SEC also maintains an Internet website that contains reports, proxy and
information statements and other information regarding issuers that file
electronically with the SEC. The SEC's Internet website is located at
http://www.sec.gov.

RISK FACTORS

         We are subject to various risks that may materially harm our business,
financial condition and results of operations. You should carefully consider the
risks and uncertainties described below and the other information in this filing
before deciding to purchase our common stock. If any of these risks or
uncertainties actually occurs, our business, financial condition or operating
results could be materially harmed. In that case, the trading price of our
Common Stock could decline and you could lose all or part of your investment.


                                       7



<PAGE>


         WE HAVE A HISTORY OF LOSSES AND WE EXPECT THESE LOSSES TO CONTINUE FOR
THE FORESEEABLE FUTURE.

         Since inception, we have incurred significant net losses. We incurred
net losses of $6,923,386 and $5,506,287 for the years ended October 31, 2005 and
2004, respectively. As of October 31, 2005, we had an accumulated deficit of
$62,114,560. We expect to continue to incur net losses for the foreseeable
future as we continue to develop our products and semiconductor technology. We
have been funding our operations through the sale of our securities and expect
to continue doing so for the foreseeable future. Our ability to generate and
sustain significant additional revenues or achieve profitability will depend
upon the factors discussed elsewhere in this "Risk Factors" section. We cannot
assure you that we will achieve or sustain profitability or that our operating
losses will not increase in the future. If we do achieve profitability, we
cannot be certain that we can sustain or increase profitability on a quarterly
or annual basis in the future. We expect to increase expense levels on research
and development, engineering, manufacturing, marketing, sales and administration
as we begin to market our products, and to invest in new semiconductor
technologies. These expenditures will necessarily precede the realization of
substantial revenues from the commercialization of the Semiconductor
Technologies and sales of products, if any, which may result in future operating
losses.

         OUR NEED FOR ADDITIONAL FINANCING IS ACUTE AND FAILURE TO OBTAIN
ADEQUATE FINANCING COULD LEAD TO THE FINANCIAL FAILURE OF OUR COMPANY IN THE
FUTURE.

         As of January 25, 2006, we had cash balances of approximately $543,000.
Although management believes funds on hand will enable us to meet our liquidity
needs for the next three months, we will require additional funds to repay a
secured loan that matures in May 2006, to continue to meet our other liquidity
needs and satisfy our current business plan. It is likely that we will need to
raise additional funds to pay existing current liabilities as they come due, as
well as to meet our operating requirements, prior to the receipt of revenues
from our semiconductor business. Even after we begin to sell our products, we do
not yet know what payment terms will be required by our customers or if our
products will be successful. At the present time, we have no commitments for any
additional financing, and there can be no assurance that, if needed, additional
capital will be available to us on commercially acceptable terms or at all. We
may have difficulty obtaining additional funds as and if needed, and we may have
to accept terms that would adversely affect our stockholders. Additional equity
financings are likely to be dilutive to holders of our Common Stock and debt
financing, if available, may involve significant payment obligations and
covenants that restrict how we operate our business.

         We also may be required to seek additional financing in the future to
respond to increased expenses or shortfalls in anticipated revenues, accelerate
product development and deployment, respond to competitive pressures, develop
new or enhanced products, or take advantage of unanticipated acquisition
opportunities. We cannot be certain we will be able to find such additional
financing on commercially reasonable terms, or at all. If we are unable to
obtain additional financing when needed, we could be required to modify our
business plan in accordance with the extent of available financing. We also may
not be able to accelerate the development and deployment of our products,
respond to competitive pressures, develop new or enhanced products or take
advantage of unanticipated acquisition opportunities.

         Our independent registered public accountants have included an
explanatory paragraph in their report accompanying our audited consolidated
financial statements for the year ended October 31, 2005 relating to the
uncertainty of our ability to continue as a going concern. This qualification
may make it more difficult for us to raise additional capital when needed. Our
auditors believe that there are conditions that raise substantial doubt about
our ability to continue as a going concern. The accompanying consolidated
financial statements do not include any adjustments relating to the
recoverability of reported assets or liabilities should we be unable to continue
as a going concern.

         WE HAVE NO AGREEMENT RELATING TO REVENUE GENERATING ACTIVITIES. NO
ASSURANCE CAN BE PROVIDED THAT WE WILL SUCCESSFULLY CONCLUDE ANY SUCH AGREEMENT.

         We presently have no agreement or understanding with any third party to
purchase our products or build equipment using our products, and no assurance
can be provided that we will be successful in concluding any significant-revenue
generating agreement on terms commercially acceptable to us or at all.


                                       8



<PAGE>

         OUR OPERATING RESULTS MAY VARY SIGNIFICANTLY DUE TO THE CYCLICALITY OF
THE SEMICONDUCTOR INDUSTRY AND ANY SUCH VARIATIONS COULD ADVERSELY AFFECT THE
MARKET PRICE OF OUR COMMON STOCK.

         We operate in the semiconductor industry, which is cyclical and subject
to rapid technological change. The semiconductor industry, from time to time,
experiences significant downturns characterized by diminished product demand,
accelerated erosion of prices and excess production capacity. These downturns in
the semiconductor industry may be severe and prolonged, and could delay or
hinder the market acceptance of our Semiconductor Technologies and seriously
impact our revenues and harm our business, financial condition and results of
operations. This industry also periodically experiences increased demand and
production capacity constraints, which may affect our ability to ship products
utilizing the Semiconductor Technologies in future periods. Accordingly, our
quarterly results may vary significantly as a result of the general conditions
in the semiconductor industry, which could cause our stock price to decline.

         In addition, the worldwide telecommunications industry from time to
time has experienced a significant downturn. In such an event, wireline
telecommunications carriers may reduce their capital expenditures, cancel or
delay new service introductions, and reduce their workforces and equipment
inventories. They may take a cautious approach to acquiring new equipment from
equipment manufacturers. Together or separately, these actions would have a
negative impact on our business. A downturn in the worldwide telecommunications
industry may cause our operating results to fluctuate from year to year, which
also may tend to increase the volatility of the price of our common stock and
harm our business.

         WE HAVE A LIMITED OPERATING HISTORY IN THE TELECOMMUNICATIONS INDUSTRY
AND, CONSEQUENTLY, THERE IS LIMITED HISTORICAL FINANCIAL DATA UPON WHICH AN
EVALUATION OF OUR BUSINESS PROSPECTS COULD BE MADE.

         We have only been engaged in the semiconductor business since February
2000. While we made our initial chipset available to customers for evaluation
and testing in December 2005, we have not begun commercial shipments, and
therefore have not generated any revenues from our semiconductor business. As a
result, we have no historical financial data that can be used in evaluating our
business prospects and in projecting future operating results. For example, we
cannot forecast operating expenses based on our historical results, and we are
instead required to forecast expenses based in part on future revenue
projections. In addition, our ability to accurately forecast our revenue going
forward is limited.

         You must consider our prospects in light of the risks, expenses and
difficulties we might encounter because we are at an early stage of product
introduction in a new and rapidly evolving market. Many of these risks are
described under the sub-headings below. We may not successfully address any or
all of these risks and our business strategy may not be successful.

         OUR SUCCESS IS CONTINGENT UPON THE INCORPORATION OF OUR PRODUCTS INTO
SUCCESSFUL PRODUCTS OFFERED BY LEADING EQUIPMENT MANUFACTURERS AND THE
NON-INCORPORATION OF OUR PRODUCTS INTO SUCH EQUIPMENT COULD ADVERSELY AFFECT OUR
BUSINESS PROSPECTS.

         Our products will not be sold directly to the end-user of broadband
services; rather, they will be components of other products. As a result, we
must rely upon equipment manufacturers to design our products into their
equipment. If equipment that incorporates our products is not accepted in the
marketplace, we may not achieve adequate sales volume, which would have a
negative effect on our results of operations. Accordingly, we must correctly
anticipate the price, performance and functionality requirements of these data
equipment manufacturers. We must also successfully develop products containing
our semiconductor technology that meet these requirements and make such products
available on a timely basis and in sufficient quantities. Further, if there is
consolidation in the data equipment manufacturing industry, or if a small number
of data equipment manufacturers otherwise dominate the market for data
equipment, then our success will depend upon our ability to establish and
maintain relationships with these market leaders. If we do not anticipate trends
in the market for products enabling the digital transmission of data, voice and
video to homes and business enterprises over existing copper wire telephone
lines and meet the requirements of equipment manufacturers, or if we do not
successfully establish and maintain relationships with leading data equipment
manufacturers, then our business, financial condition and results of operations
will be seriously harmed.


                                       9



<PAGE>

         BECAUSE WE WILL DEPEND ON THIRD PARTIES TO MANUFACTURE, PACKAGE AND
TEST THE SEMICONDUCTOR TECHNOLOGIES, WE MAY EXPERIENCE DELAYS IN RECEIVING
SEMICONDUCTOR DEVICES.

         We do not own or operate a semiconductor fabrication facility. Rather,
semiconductor devices that will contain our technology will be manufactured at
independent foundries. We intend to rely solely on third-party foundries and
other specialist suppliers for all of our manufacturing, packaging and testing
requirements. However, these parties may not be obligated to supply products to
us for any specific period, in any specific quantity or at any specific price,
except as may be provided in a particular purchase order that has been accepted
by one of them. As a result, we will not directly control semiconductor delivery
schedules, which could lead to product shortages, poor quality and increases in
the costs of our products. Because the semiconductor industry is currently
experiencing high demand, we may experience delays in receiving semiconductor
devices from foundries due to foundry scheduling and process problems. We cannot
be sure that we will be able to obtain semiconductors within the time frames and
in the volumes required by us at an affordable cost or at all. Any disruption in
the availability of semiconductors or any problems associated with the delivery,
quality or cost of the fabrication packaging and testing of our products could
significantly hinder our ability to deliver products to our customers.

         In order to secure sufficient manufacturing capacity, we may enter into
various arrangements that could be costly, including:

         o        option payments or other prepayments to a subcontractor;

         o        nonrefundable deposits in exchange for capacity commitments;

         o        contracts that commit us to purchase specified quantities of
                  products over extended periods;

         o        issuance of our equity securities to a subcontractor; and

         o        other contractual relationships with subcontractors.

         We may not be able to make any such arrangements in a timely fashion or
at all, and any arrangements may be costly, reduce our financial flexibility and
not be on terms favorable to us. Moreover, if we are able to secure facility
capacity, we may be obligated to use all of that capacity or incur penalties.
These penalties and obligations may be expensive and require significant capital
and could harm our business.

         WE MAY INCUR SUBSTANTIAL EXPENSES DEVELOPING NEW PRODUCTS BEFORE WE
EARN ASSOCIATED NET REVENUES AND MAY NOT ULTIMATELY SELL A LARGE VOLUME OF OUR
PRODUCTS.

         We are currently working on new products and we anticipate that we will
incur substantial development expenditures prior to generating associated net
revenues from a commercially deployable version (if any). We anticipate
receiving limited orders for our products during the period that potential
customers test and evaluate them. This test and evaluation period typically
lasts from three to six months or longer, and volume production of an equipment
manufacturer's product incorporating our products typically would not begin
until this test and evaluation period has been completed. As a result, a
significant period of time may lapse between product development and sales
efforts and the realization of revenues from volume ordering by customers of our
products. In addition, achieving a design win with a customer does not
necessarily mean that this customer will order our products. A design win is not
a binding commitment by a customer to purchase products. Rather, it is a
decision by a customer to use our products in the design process of that
customer's equipment. A customer can choose at any time to discontinue using our
products in that customer's designs or product development efforts. Even if our
products are chosen to be incorporated into a customer's equipment, we may still
not realize significant net revenues from that customer if that customer's
products are not commercially successful.

WE MAY BE UNABLE TO ADEQUATELY PROTECT OUR PROPRIETARY RIGHTS OR MAY BE SUED BY
THIRD PARTIES FOR INFRINGEMENT OF THEIR PROPRIETARY RIGHTS.

         We outsource to independent third parties all significant design,
development and testing activities relating to our products. Our success depends
significantly on our ability to obtain and maintain patent, trademark and
copyright protection for our intellectual property, to preserve our trade
secrets and to operate without infringing the proprietary rights of third


                                       10



<PAGE>

parties. If we are not adequately protected, our competitors could use the
intellectual property that we have developed to enhance their products and
services, which could harm our business.

         We rely on patent protection, as well as a combination of copyright and
trademark laws, trade secrets, confidentiality provisions and other contractual
provisions, to protect our proprietary rights, but these legal means afford only
limited protection. Despite any measures taken to protect our intellectual
property, unauthorized parties may copy aspects of our semiconductor technology
or obtain and use information that we regard as proprietary. In addition, the
laws of some foreign countries may not protect our proprietary rights as fully
as do the laws of the United States. If we litigated to enforce our rights, it
would be expensive, divert management resources and may not be adequate to
protect our intellectual property rights.

         The telecommunications industry is characterized by the existence of a
large number of patents and frequent litigation based on allegations of trade
secret, copyright or patent infringement. We may inadvertently infringe a patent
of which we are unaware. In addition, because patent applications can take many
years to issue, there may be a patent application now pending of which we are
unaware that will cause us to be infringing when it is issued in the future.
Although we are not currently involved in any intellectual property litigation,
we may be a party to litigation in the future to protect our intellectual
property or as a result of our alleged infringement of another's intellectual
property, forcing us to do one or more of the following:

         o        Cease selling, incorporating or using products or services
                  that incorporate the challenged intellectual property;
         o        Obtain from the holder of the infringed intellectual property
                  right a license to sell or use the relevant technology, which
                  license may not be available on reasonable terms; or
         o        Redesign those products or services that incorporate such
                  technology.

         A successful claim of infringement against us, and our failure to
license the same or similar technology, could adversely affect our business,
asset value or stock value. Infringement claims, with or without merit, would be
expensive to litigate or settle, and would divert management resources.

         OUR MARKET IS HIGHLY COMPETITIVE AND OUR PRODUCTS OR TECHNOLOGY MAY NOT
BE ABLE TO COMPETE EFFECTIVELY WITH OTHER PRODUCTS OR TECHNOLOGIES.

         The market for high-speed telecommunications products is highly
competitive, and we expect that it will become increasingly competitive in the
future. Our competitors, including Centillium Communications, Inc., Conexant
Systems, Inc., PMC-Sierra, Texas Instruments Incorporated, Ikanos
Communications, ST Microelectronics N.V., Metalink Ltd., Broadcom Corporation,
Infineon Technologies A.G. and others, have developed and are currently
marketing technologies that also address the existing technical impediments of
using existing copper networks as broadband options or are otherwise
substantially similar to our products. Our competitors include some of the
largest, most successful domestic and international telecommunications companies
and other companies with well-established reputations in the broadband
telecommunications industry. Some of our competitors operate their own
fabrication facilities. Our competitors have longer operating histories and
possess substantially greater name recognition, financial, sales and marketing,
manufacturing, technical, personnel, and other resources than we have. As a
result, these competitors may be able to adapt more quickly to new or emerging
technologies and changes in customer requirements. They may also be able to
devote greater resources to the promotion and sale of their products. These
competitors may also have pre-existing relationships with our potential
customers. Further, in the event of a manufacturing capacity shortage, these
competitors may be able to manufacture products when we are unable to do so. In
all of our target markets, we also may face competition from newly established
competitors, suppliers of products based on new or emerging technologies, and
customers who choose to develop wire based solutions that are functionally
similar to our products. Although we believe we will be able to compete based on
the special features of our products, they will incorporate new concepts and may
not be successful even if they are superior to those of our competitors.


                                       11



<PAGE>

         In addition to facing competition from the above-mentioned suppliers,
the Semiconductor Technologies will compete with products using other broadband
access technologies, such as cable modems, wireless, satellite and fiber optic
telecommunications technology. Commercial acceptance of any one of these
competing solutions, or new technologies, could decrease demand for our proposed
products. We cannot assure you that we will be able to compete successfully or
that competitive pressures will not materially and adversely affect our
business, financial condition and results of operations.

         WE MUST KEEP PACE WITH RAPID TECHNOLOGICAL CHANGES IN THE SEMICONDUCTOR
INDUSTRY AND BROADBAND COMMUNICATIONS MARKET IN ORDER TO BE COMPETITIVE.

         Our success will depend on our ability to anticipate and adapt to
changes in technology and industry standards. We will also need to develop and
introduce new and enhanced products to meet our customers' changing demands. The
semiconductor industry and broadband communications market are characterized by
rapidly changing technology, evolving industry standards, frequent new product
introductions and short product life cycles. In addition, this industry and
market continues to undergo rapid growth and consolidation. A cyclical slowdown
in the semiconductor industry or other broadband communications markets could
materially and adversely affect our business, financial condition and results of
operations. Our success will also depend on the ability of our potential
telecommunications equipment customers to develop new products and enhance
existing products for the broadband communications markets and to introduce and
promote those products successfully. The broadband communications markets may
not continue to develop to the extent or in the timeframes that we anticipate.
If new markets do not develop as we anticipate, or if upon their deployment our
products do not gain widespread acceptance in these markets, our business,
financial condition and results of operations could be materially and adversely
affected.

         BECAUSE OUR SUCCESS IS DEPENDENT UPON THE BROAD DEPLOYMENT OF DATA
SERVICES BY TELECOMMUNICATIONS SERVICE PROVIDERS, WE MAY NOT BE ABLE TO GENERATE
SUBSTANTIAL REVENUES IF SUCH DEPLOYMENT DOES NOT OCCUR.

         Our products are designed to be incorporated in equipment that is
targeted at end-users of data services offered by wire-line telecommunications
carriers. Consequently, the success of our products depends upon the decision by
telecommunications service providers to broadly deploy data technologies and the
timing of such deployment. If service providers do not offer data services on a
timely basis, or if there are technical difficulties with the deployment of
these services, sales of our products would be adversely affected, which would
have a negative effect on our results of operations. Factors that may impact
data deployment include:

         o        A prolonged approval process, including laboratory tests,
                  technical trials, marketing trials, initial commercial
                  deployment and full commercial deployment;
         o        The development of a viable business model for data services,
                  including the capability to market, sell, install and maintain
                  data services;
         o        Cost constraints, such as installation costs and space and
                  power requirements at the telecommunications service
                  provider's central office;
         o        Evolving industry standards; and
         o        Government regulation.

         THE COMPLEXITY OF OUR PRODUCTS COULD RESULT IN UNFORESEEN DELAYS OR
EXPENSE AND IN UNDETECTED DEFECTS, WHICH COULD ADVERSELY AFFECT THE MARKET
ACCEPTANCE OF NEW PRODUCTS AND DAMAGE OUR REPUTATION WITH PROSPECTIVE CUSTOMERS.

         Highly complex products such as the semiconductors that we expect to
offer frequently contain defects and bugs when they are first introduced or as
new versions are released. If our products contain defects, or have reliability,
quality or compatibility problems, our reputation may be damaged and customers
may be reluctant to buy our semiconductors, which could materially and adversely
affect our ability to retain existing customers or attract new customers. In
addition, these defects could interrupt or delay sales to our potential
customers. In order to alleviate these problems, we may have to invest
significant capital and other resources. Although our suppliers and potential
customers will test our products it is possible that these tests will fail to
uncover defects. If any of these problems are not found until after we have


                                       12



<PAGE>

commenced commercial production of products, we may be required to incur
additional development costs and product recall, repair or replacement costs.
These problems may also result in claims against us by our customers or others.
In addition, these problems may divert our technical and other resources from
other development efforts. Moreover, we would likely lose, or experience a delay
in, market acceptance of the affected product, and we could lose credibility
with our prospective customers.

         GOVERNMENTAL REGULATION CONCERNING THE TECHNICAL SPECIFICATIONS OF
SEMICONDUCTOR TECHNOLOGIES THAT ARE DEPLOYED IN THE TELEPHONE NETWORKS COULD
ADVERSELY AFFECT THE MARKET ACCEPTANCE OF OUR SEMICONDUCTORS.

         The jurisdiction of the Federal Communication Commission ("FCC")
extends to the entire US communications industry, including potential customers
for our semiconductors. Future FCC regulations affecting the broadband access
industry may adversely affect our business. In addition, international
regulatory bodies such as The American National Standards Institute (ANSI) and
The Committee T1E1.4 in North America, European Telecommunications Standards
Institute (ETSI) in Europe and ITU-T and the Institute of Electrical and
Electronics Engineers, Inc. (IEEE) worldwide are beginning to adopt standards
and regulations for the broadband access industry. These domestic and foreign
standards, laws and regulations address various aspects of Internet, telephony
and broadband use, including issues relating to liability for information
retrieved from or transmitted over the Internet, online context regulation, user
privacy, taxation, consumer protection, security of data, access by law
enforcement, tariffs, as well as intellectual property ownership, obscenity and
libel. Changes in laws, standards and/or regulations, or judgments in favor of
plaintiffs in lawsuits against service providers, e-commerce and other Internet
companies, could adversely affect the development of e-commerce and other uses
of the Internet. This, in turn, could directly or indirectly materially
adversely impact the broadband telecommunications and data industry in which our
customers operate. To the extent our customers are adversely affected by laws or
regulations regarding their business, products or service offerings, this could
result in a material and adverse effect on our business, financial condition and
results of operations.

         In addition, highly complex products such as the semiconductors that we
expect to offer are subject to rules, limitations and requirements as set forth
by international standards bodies such as The American National Standards
Institute (ANSI) and The Committee T1E1.4 in North America, European
Telecommunications Standards Institute (ETSI) in Europe and ITU-T and the
Institute of Electrical and Electronics Engineers, Inc. (IEEE) worldwide, and as
adopted by the governments of each of the countries that we intend to market in.
There are some FCC regulations in the United States pertaining to the use of the
available bandwidth spectrum that at present have been interpreted by some of
our target customers as discouraging to the technical innovations that we are
bringing to market. Further, regulations affecting the availability of broadband
access services generally, the terms under which telecommunications service
providers conduct their business, and the competitive environment among service
providers, for example, could have a negative impact on our business.

         WE DEPEND ON ATTRACTING, MOTIVATING AND RETAINING KEY PERSONNEL AND THE
FAILURE TO ATTRACT, MOTIVATE OR RETAIN NEEDED PERSONNEL COULD ADVERSELY AFFECT
OUR BUSINESS.

         We are highly dependent on the principal members of our management and
on our technology advisors and the technology staff of our development partners.
The loss of their services might significantly delay or prevent the achievement
of development or strategic objectives. Our success depends on our ability to
retain certain key employees and our partner relationships, and to attract
additional qualified employees. Competition for these employees is intense. We
cannot assure you that we will be able to retain existing personnel and partners
or attract and retain highly qualified employees in the future.

         FUTURE SALES OF COMMON STOCK OR OTHER DILUTIVE EVENTS MAY ADVERSELY
AFFECT PREVAILING MARKET PRICES FOR OUR COMMON STOCK.

         As of January 24, 2006, we had 265,663,656 shares of our common stock
issued and outstanding. As of January 25, 2006, an additional 83,406,507 shares
of common stock were reserved for issuance upon the exercise of outstanding
options and warrants exercisable at exercise prices ranging from $0.027 to
$10.00 per share. In addition, we have outstanding approximately $505,000
principal amount of convertible debentures we issued in May 2005, which are
convertible into an undeterminable number of shares of our common stock. The
exercise price of such debentures is variable, and is based upon a 30% discount
to the volume weighted average closing price of our common stock for the five

                                       13



<PAGE>

days preceding the applicable conversion date. We also have outstanding $125,000
principal amount of convertible debentures we issued in 2003. These debentures
are convertible into our common stock at an exercise price of $0.15 per share.
Many of the above options, warrants and convertible debentures contain
provisions that require the issuance of increased numbers of shares of common
stock upon exercise or conversion in the event of stock splits, redemptions,
mergers or other transactions.

         The occurrence of any such event or the exercise or conversion of any
of the options, warrants or convertible debentures described above would dilute
the interest in the Company represented by each share of common stock and may
adversely affect the prevailing market price of our common stock. Finally, the
Company may need to raise additional capital through the sale of shares of
common stock or other securities exercisable for or convertible into common
stock. The occurrence of any such sale would dilute the interest in the Company
represented by each share of common stock and may adversely affect the
prevailing market price of our common stock.

                  OUR STOCK PRICE MAY BE VOLATILE.

         The market price of our Common Stock will likely fluctuate
significantly in response to the following factors, some of which are beyond our
control:

         o        Variations in our quarterly operating results due to a number
                  of factors, including but not limited to those identified in
                  this "Risk Factors" section;
         o        Changes in financial estimates of our revenues and operating
                  results by securities analysts or investors;
         o        Changes in market valuations of telecommunications equipment
                  companies;
         o        Announcements by us of commencement to, changes to, or
                  cancellation of significant contracts, acquisitions, strategic
                  partnerships, joint ventures or capital commitments;
         o        Additions or departures of key personnel;
         o        Future sales of our Common Stock;
         o        Stock market price and volume fluctuations attributable to
                  inconsistent trading volume levels of our stock;
         o        Commencement of or involvement in litigation; and
         o        Announcements by us or our competitors of technological
                  innovations or new products.

         In addition, the equity markets have experienced volatility that has
particularly affected the market prices of equity securities issued by high
technology companies and that often has been unrelated or disproportionate to
the operating results of those companies. These broad market fluctuations may
adversely affect the market price of our Common Stock.


                                       14



<PAGE>

         WE DO NOT ANTICIPATE PAYING ANY DIVIDENDS ON OUR COMMON STOCK.

         We have not paid any dividends on our Common Stock since our inception
and do not anticipate paying any dividends on our Common Stock in the
foreseeable future. Instead, we intend to retain any future earnings for use in
the operation and expansion of our business.

         ADDITIONAL BURDENS IMPOSED UPON BROKER-DEALERS BY THE APPLICATION OF
THE "PENNY STOCK" RULES TO OUR COMMON STOCK MAY LIMIT THE MARKET FOR OUR COMMON
STOCK

         The Securities and Exchange Commission has adopted regulations
concerning low-priced (or "penny") stocks. The regulations generally define
"penny stock" to be any equity security that has a market price less than $5.00
per share, subject to certain exceptions. If our shares continue to be offered
at a market price less than $5.00 per share, and do not qualify for any
exemption from the penny stock regulations, our shares will continue to be
subject to these additional regulations relating to low-priced stocks.

         The penny stock regulations require that broker-dealers, who recommend
penny stocks to persons other than institutional accredited investors, make a
special suitability determination for the purchaser, receive the purchaser's
written agreement to the transaction prior to the sale and provide the purchaser
with risk disclosure documents that identify risks associated with investing in
penny stocks. Furthermore, the broker-dealer must obtain a signed and dated
acknowledgment from the purchaser demonstrating that the purchaser has actually
received the required risk disclosure document before effecting a transaction in
penny stock. These requirements have historically resulted in reducing the level
of trading activity in securities that become subject to the penny stock rules.

         The additional burdens imposed upon broker-dealers by these penny stock
requirements may discourage broker-dealers from effecting transactions in the
Common Stock, which could severely limit the market liquidity of our Common
Stock and our shareholders' ability to sell our Common Stock in the secondary
market.


ITEM 2.  DESCRIPTION OF PROPERTY

         We do not own any real property. Our corporate headquarters are located
at 305 NE 102nd Avenue, Suite 105, Portland, Oregon 97220. The premises are
occupied under a three-year lease that commenced on April 1, 2005. The current
monthly rental under the lease is $1,725. We also lease approximately 200 square
feet of space in La Jolla, California that we use for administrative offices
under a lease that expires in February 2007. Our monthly rental payment under
this lease is $1,450. We believe our properties are generally in good condition
and suitable to carry on our business. We also believe that, if required,
suitable alternative or additional space will be available to us on commercially
reasonable terms.


ITEM 3.  LEGAL PROCEEDINGS

         There are no material pending legal proceedings to which we are a party
or to which any of our properties are subject. There are no material proceedings
known to us to be contemplated by any governmental authority.


ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

         No matter was submitted to a vote of security holders during the three
months ended October 31, 2005.


                                       15



<PAGE>

                                     PART II

ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

         Our common stock is currently traded on the Nasdaq Stock Market's
over-the-counter bulletin board (the "OTC Bulletin Board") under the trading
symbol "RSMI."

         Investors should not rely on historical stock price performance as an
indication of future price performance. The closing price of our Common Stock on
January 24, 2006 was $0.0266 per share.

                                                      HIGH       LOW
                                                      ----       ---
         NOVEMBER 2004 THROUGH OCTOBER 2005
             First Quarter                           $  .19    $  .10
             Second Quarter                             .19       .14
             Third Quarter                              .18       .05
             Fourth Quarter                             .07       .03

         NOVEMBER 2003 THROUGH OCTOBER 2004
             First Quarter                           $  .34    $  .16
             Second Quarter                             .36       .17
             Third Quarter                              .22       .09
             Fourth Quarter                             .18       .07

SHAREHOLDERS

         As of January 24, 2006, there were approximately 1,067 holders of
record of our Common Stock. We believe that a significant number of shares of
our Common Stock are held in either nominee name or street name brokerage
accounts.

DIVIDENDS

         We have not declared or paid any cash dividends on our capital stock
and do not anticipate paying any cash dividends on our capital stock in the
foreseeable future. Payment of dividends on the common stock is within the
discretion of our Board of Directors. The Board currently intends to retain
future earnings, if any, to finance our business operations and fund the
development and growth of our business. The declaration of dividends in the
future will depend upon our earnings, capital requirements, financial condition,
and other factors deemed relevant by the Board of Directors.

UNREGISTERED SECURITIES ISSUED DURING THE THREE MONTHS ENDED OCTOBER 31, 2005

         During the three months ended October 31, 2005, we issued 499,854
shares of common stock to Zaiq Technologies, Inc. ("Zaiq") as required under
certain anti-dilution provisions of our Exchange Agreement with Zaiq dated April
6, 2005.

         These securities were issued without registration under the Securities
Act in reliance upon the exemption provided in Section 4(2) of the Securities
Act. Appropriate legends were affixed to the share certificates issued in the
transaction. The Company believes Zaiq was an "accredited investor" within the
meaning of Rule 501(a) of Regulation D under the Securities Act, or had such
knowledge and experience in financial and business matters as to be able to
evaluate the merits and risks of an investment in our common stock. Zaiq had
adequate access, through its relationship with the Company and its officers and
directors, to information about the Company. The transaction did not involve
general solicitation or advertising.


                                       16



<PAGE>

ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION

         We urge you to read the following discussion in conjunction with our
consolidated financial statements and the notes thereto included elsewhere in
this Annual Report on Form 10-KSB.

CAUTION REGARDING FORWARD-LOOKING STATEMENTS

         Our prospects are subject to uncertainties and risks. In this Annual
Report on Form 10-KSB, we make forward-looking statements under the headings
"Item 1. Business," "Item 6. Management's Discussion and Analysis or Plan of
Operation," and elsewhere, that also involve substantial uncertainties and
risks. These forward-looking statements are based upon our current expectations,
estimates and projections about our business and our industry, and that reflect
our beliefs and assumptions based upon information available to us at the date
of this report. In some cases, you can identify these statements by words such
as "if," "may," "might," "will," "should," "expects," "plans," "anticipates,"
"believes," "estimates," "predicts," "potential," "continue," and other similar
terms. These forward-looking statements include, among other things, projections
of our future financial performance and our anticipated growth, descriptions of
our strategies, our product and market development plans, the trends we
anticipate in our business and the markets in which we operate, and the
competitive nature and anticipated growth of those markets.

         We caution readers that forward-looking statements are predictions
based on our current expectations about future events. These forward-looking
statements are not guarantees of future performance and are subject to risks,
uncertainties and assumptions that are difficult to predict. Our actual results,
performance or achievements could differ materially from those expressed or
implied by the forward-looking statements as a result of a number of factors,
including but not limited to the risks and uncertainties discussed under the
heading "RISK FACTORS" in Item 1 of this Annual Report and in our other filings
with the SEC. We undertake no obligation to revise or update any forward-looking
statement for any reason.

OVERVIEW

         We are developing advanced transmission technology products to enable
data to be transmitted across copper telephone wire at speeds and
over distances that exceed those offered by leading DSL technology providers.
Our first chipset in a planned family of transport processors, the Embarq(TM)
E30 (Release 1.3) digital signal processor, was first made available to
prospective customers for evaluation and testing in the first quarter of fiscal
2006. We are presently working on Release 1.4 of the E30 and Release 1.1 of the
Embarq(TM) E20 analog front end. We market this novel technology to leading
equipment makers in the telecommunications industry. Our products are designed
to substantially increase the capacity of existing copper telephone networks,
allowing telephone companies, office building managers, and enterprise network
operators to provide enhanced and secure video, data and voice services over the
existing copper telecommunications infrastructure.

         We expect that system-level products that use our technology will have
a significant advantage over existing system-level products that use existing
broadband technologies, such as digital subscriber line (DSL), because such
products will transmit data faster, and over longer distances. We expect
products using our technology will offer numerous advantages to the network
operators that deploy them, including the ability to support new services, the
ability to offer existing and new services to previously unreachable locations
in their network, reduction in total cost of ownership, security and
reliability.

         Our semiconductor business segment is dependent upon our ability to
generate future revenues and positive cash flow from our advanced transmission
technology products, such as the E30 and E20. No assurance can be provided that
our target customers will purchase these products in large volumes, or at all.
See "RISK FACTORS."


                                       17



<PAGE>

         In April 2000, our NV Entertainment subsidiary entered into a joint
venture production agreement to produce a feature length film, "Step into
Liquid" (the "Film"). We own a 50% interest in the joint venture. The financial
condition and results of operations of the joint venture are consolidated with
our financial condition and results of operations on the accompanying
consolidated financial statements. The Film was released to theaters in the
United States in 2003 and is currently in foreign and DVD distribution. During
the years ended October 31, 2005 and 2004, we received revenues of $39,866 and
$287,570, respectively, from the Film. In July 2005, we recorded an impairment
charge of $1,009,777 and reduced the carrying value of the Film to $0 on our
balance sheet. We do not intend to make further investment in our entertainment
business.

CRITICAL ACCOUNTING POLICIES

         The preparation of our consolidated financial statements in conformity
with accounting principles generally accepted in the United States of America
requires us to make estimates and judgments that affect the reported amounts of
assets, liabilities, revenues and expenses, and related disclosure of contingent
assets and liabilities. Our estimates are based on historical experience, other
information that is currently available to us and various other assumptions that
we believe to be reasonable under the circumstances. Actual results may differ
from these estimates under different assumptions or conditions and the variances
could be material.

         Our critical accounting policies are those that affect our financial
statements materially and involve difficult, subjective or complex judgments by
management. We have identified the following critical accounting policies that
affect the more significant judgments and estimates used in the preparation of
our consolidated financial statements.

         REVENUE RECOGNITION

         We recognize revenue from the distribution of our Film and related
products when earned and reasonably estimable in accordance with Statement of
Position 00-2 -- "Accounting by Producers or Distributors of Films" (SOP 00-2).
The following are the conditions that must be met in order to recognize revenue
in accordance with SOP 00-2:

         (i)      persuasive evidence of a sale or licensing arrangement with a
                  customer exists;

         (ii)     the film is complete and, in accordance with the terms of the
                  arrangement, has been delivered or is available for immediate
                  and unconditional delivery;

         (iii)    the license period of the arrangement has begun and the
                  customer can begin its exploitation, exhibition or sale;

         (iv)     the arrangement fee is fixed or determinable; and (v)
                  collection of the arrangement fee is reasonably assured.

         Under a rights agreement with our distributor for our Film, we share
with the distributor in the profits of the Film after the distributor recovers
its marketing, distribution and other predefined costs and fees. The agreement
provides for the payment of minimum guaranteed license fees, usually payable on
delivery of the completed film, that are subject to further increase based on
the actual distribution results.

         In accordance with the provisions of SOP 00-2, a film is classified as
a library title after three years from the film's initial release. The term
library title is used solely for the purpose of classification and for
identifying previously released films in accordance with the provisions of SOP
00-2. Revenue recognition for such titles is in accordance with our revenue
recognition policy for film revenue.


                                       18



<PAGE>

FILM PRODUCTION COSTS

         SOP 00-2 requires that film costs be capitalized and reported as a
separate asset on the balance sheet. Film costs include all direct negative
costs incurred in the production of a film, as well as allocations of production
overhead and capitalized interest. Direct negative costs include cost of
scenario, story, compensation of cast, directors, producers, writers, extras and
staff, cost of set construction, wardrobe, accessories, sound synchronization,
rental of facilities on location and post production costs. SOP 00-2 also
requires that film costs be amortized and participation costs accrued, using the
individual-film-forecast- computation method, which amortizes or accrues such
costs in the same ratio that the current period actual revenue (numerator) bears
to the estimated remaining unrecognized ultimate revenue as of the beginning of
the fiscal year (denominator). We make certain estimates and judgments of future
gross revenue to be received for the Film based on information received by its
distributor, historical results and management's knowledge of the industry.
Revenue and cost forecasts are continually reviewed by management and revised
when warranted by changing conditions. A change to the estimate of gross
revenues for the Film may result in an increase or decrease to the percentage of
amortization of capitalized film costs relative to a previous period.

         In addition, SOP 00-2 also requires that if an event or change in
circumstances indicates that an entity should assess whether the fair value of a
film is less than its unamortized film costs, then an entity should determine
the fair value of the film and write-off to the statement of operations the
amount by which the unamortized film costs exceeds the film's fair value.

         We commenced amortization of capitalized film costs and began to accrue
expenses of participation costs when the Film was released and we began to
recognize revenue from the Film. Based on updated information that we received
in January 2005 relating to the fourth quarter of fiscal 2004 from the Film's
distributor as to the Film's actual distribution and related expenses and DVD
unit retail prices, we determined that the fair value of the Film was less than
the unamortized film costs and, accordingly, we wrote-down the carrying value
assigned to the Film during the three months ended October 31, 2004 to
$1,021,722. This resulted in an impairment of $977,799 that is included in the
consolidated statement of operations for the year ended October 31, 2004. In
addition, based upon information we received from the Film's distributor in July
2005, which indicated that sales were lower than expected, we recorded an
impairment charge of $1,009,777 during the three months ended July 31, 2005 that
reduced the carrying value of the Film to $0.

CAPITALIZED SOFTWARE DEVELOPMENT COSTS

         Capitalization of computer software development costs begins upon the
establishment of technological feasibility. Technological feasibility for our
computer software is generally based upon achievement of a detail program design
free of high-risk development issues and the completion of research and
development on the product hardware in which it is to be used. The establishment
of technological feasibility and the ongoing assessment of recoverability of
capitalized computer software development costs require considerable judgment by
management with respect to certain external factors, including, but not limited
to, technological feasibility, anticipated future gross revenue, estimated
economic life and changes in software and hardware technology.

         Amortization of capitalized computer software development costs
commences when the related products become available for general release to
customers. Amortization is provided on a product-by-product basis. The annual
amortization is the greater of the amount computed using (a) the ratio that
current gross revenue for a product bears to the total of current and
anticipated future gross revenue for that product, or (b) the straight-line
method over the remaining estimated economic life of the product.

         We periodically perform reviews of the recoverability of our
capitalized software development costs. At the time a determination is made that
capitalized amounts are not recoverable based on the estimated cash flows to be
generated from the applicable software, the capitalized costs of each software
product is then valued at the lower of its remaining unamortized costs or net
realizable value.


                                       19



<PAGE>

         At October 31, 2005 and 2004, the carrying value of our technology
license from Adaptive Networks, Inc. and the related capitalized software
development fee was $5,751,000. No assurance can be given that products we
release based upon the licensed technology will receive market acceptance. If we
determine in the future that our capitalized costs are not recoverable, the
carrying amount of the technology license would be reduced, and such reduction
could be material.

         We had no amortization expense for the year ended October 31, 2005 for
capitalized software development costs as the software was not available for
general release to customers until after year-end. We have commenced
amortization of capitalized software development costs during the three months
ending January 31, 2006.

STOCK-BASED COMPENSATION

         In December 2004, the FASB issued SFAS No. 123 (revised 2004),
"Shared-Based Payment." SFAS 123R addresses the accounting for share-based
payment transactions in which an enterprise receives employee services in
exchange for (a) equity instruments of the enterprise or (b) liabilities that
are based on the fair value of the enterprise's equity instruments or that may
be settled by the issuance of such equity instruments. SFAS 123R requires an
entity to recognize the grant-date fair-value of stock options and other
equity-based compensation issued to employees in the income statement. The
revised statement generally requires that an entity account for those
transactions using the fair-value-based method, and eliminates the intrinsic
value method of accounting in APB 25, which was permitted under SFAS No. 123, as
originally issued.

         The revised statement requires entities to disclose information about
the nature of the share-based payment transactions and the effects of those
transactions on the financial statements.

         We have elected to early adopt SFAS 123R and will apply its
requirements as of November 1, 2005.

         We have used stock in the past to raise capital and as a means of
compensation to employees. We believe we will need to continue using stock for
these same purposes.

RESEARCH AND DEVELOPMENT

         Research and development expenses relate to the design and development
of advanced transmission technology products. We outsource to independent third
parties all of our design and development activities. Payments made to
independent software developers under development agreements are capitalized to
software development costs once technological feasibility is established or if
the development costs have an alternative future use. Prior to establishing
technological feasibility, software development costs are expensed to research
and development costs and to cost of sales subsequent to confirmation of
technological feasibility. Internal development costs are capitalized to
software development costs once technological feasibility is established.
Technological feasibility is evaluated on a product-by-product basis.

         Research and development expenses generally consist of salaries,
related expenses for engineering personnel and third-party development costs
incurred.

RESULTS OF OPERATIONS

COMPARISON OF THE YEAR ENDED OCTOBER 31, 2005 (the "2005 period") AND THE YEAR
ENDED OCTOBER 31, 2004 (the "2004 period")

         REVENUES. Revenues for the 2005 period were $39,866. Of this amount,
$29,066 was in the form of guarantee and/or license payments relating to the
U.S. distribution of the Film and the remainder was fees relating to foreign
distribution of the Film. No revenues were recorded in connection with our
semiconductor business for the 2005 and 2004 Periods. Revenues for the 2004
period were $287,570, of which $94,788 was in the form of guaranteed and license
payments and the remainder was foreign distribution fees for the Film.


                                       20



<PAGE>

         OPERATING EXPENSES. Operating expenses included cost of sales, research
and development expenses in connection with the semiconductor business,
compensatory element of stock issuances, selling, general and administrative
expenses, and the impairment charge relating to the Film.

         Total operating expenses decreased 9% to $4,339,953 for the 2005 period
from $4,746,677 for the 2004 period, a $406,724 decrease. Cost of sales for 2005
and 2004 of $11,945 and $142,691, respectively, represent the amortization of
film cost for the Film. The decrease for the 2005 period when compared with the
2004 period was a result of lower revenues generated from the Film as cost of
sales are directly related to the revenues recognized under SOP-00-2.
Research and development expenses increased $181,306 to $366,306 for the 2005
period, principally as the result of our issuance of additional shares of common
stock to HelloSoft, Inc. ("HelloSoft") in accordance with the terms of our
services agreement, as amended. Selling, general and administrative expenses
decreased 14% or $489,262 to $2,951,925 primarily as a result of a decrease in
headcount in administrative personnel, including the elimination of executive
level positions, and lower compensation relating to issuing stock for services.

         In October 2004, we performed a review to determine if the fair value
of the Film was less than its unamortized film costs. As a result of this
review, the Company wrote-down the carrying value of the Film to $1,021,722.
This resulted in an impairment charge of $977,799 which is included in our
consolidated statement of operations for the year ended October 31, 2004. In
July 2005, we performed another review, and it was determined that the
unamortized film costs exceeded the fair value of the Film. As a result of this
review, the Company wrote-down the remaining carrying value attributed to the
Film to $0. This resulted in an impairment charge of $1,009,777 which is
included in our consolidated statement of operations for the year ended October
31, 2005.

         OTHER (INCOME) EXPENSES. Other expenses included interest expense and
amortization of deferred financing costs and unearned financing costs. Interest
expense increased $2,143,555 primarily as a result of issuing $3,500,000 of
convertible debentures in May 2005 as well as the increase in amortization of
debt discount. Amortization of deferred financing costs increased to $602,182
from $78,427 as a result of the additional deferred financing costs primarily
related to the issuance of $3,500,000 of convertible debentures. Both the
amortization of debt discount, which is included in interest expense, and the
amortization of deferred financing costs, increased significantly due to the
increase in conversions of convertible debentures into common stock. Upon
conversion or repayment of debt prior to its maturity date, a pro-rata share of
debt discount and deferred financing costs are written off and recorded as
expense. Amortization of unearned financing costs decreased to $0 from $85,161
as a result of there being no unearned financing costs as of the beginning of
the 2005 period.

         Other income in the 2005 period included gains totaling $1,006,030
related to the sale of property and equipment ($20,000), the exchange of
Redeemable Series B Preferred Stock into common stock ($55,814), the conversion
of accrued expenses into convertible notes payable (33,514), and the forgiveness
of liabilities ($896,702). The forgiveness of liabilities consisted primarily of
the forgiveness of liabilities to service providers and the reduction of
principal owed on the promissory note to Zaiq Technologies, Inc.($797,333). The
terms of the Zaiq Technologies, Inc. promissory note provide for the forgiveness
in the outstanding principal amount by $797,333 on each of the six-month and
twelve-month anniversaries of the date of the promissory note. In October 2005,
$797,333 was forgiven in accordance with these terms.

         NET LOSS. During the 2005 period our net loss increased $1,417,099 or
26% from $5,506,287 to $6,923,386 as the result of a decrease in the gross
profit generated on the Film ($116,958), higher interest costs ($2,143,555),
higher amortization of deferred financing costs ($523,755), a larger impairment
of the Film ($31,978), and higher research and development expenses ($181,306),
offset by lower selling, general and administrative expenses ($489,262), lower
amortization of unearned financing costs ($85,161), and gains totaling
$1,006,030 as discussed under Other (Income) Expenses above.


                                       21



<PAGE>

LIQUIDITY AND CAPITAL RESOURCES

         Cash balances totaled approximately $543,000 at January 25, 2006,
$373,481 at October 31, 2005, and $127,811 at October 31, 2004.

         Net cash used in operating activities was $2,412,199 in fiscal 2005,
compared to $1,647,678 in fiscal 2004. The increase in cash used in operations
was principally the result of the following items:

         o        An increase in the net loss, which was $6,923,386 in the 2005
                  period, compared with $5,506,287 in the 2004 period;

         o        a decrease in the 2005 period of accounts payable and accrued
                  liabilities of $224,084, compared to an increase of accounts
                  payable and accrued liabilities in the 2004 period of
                  $474,524, resulting in a net increase in cash used of
                  $698,608;

         impacted by the following non-cash items:

         o        increased amortization of deferred financing costs, which were
                  $602,182 in the 2005 period, compared to $78,427 in the 2004
                  period, principally due to increased conversions of the May
                  2005 debentures;

         o        increased amortization of debt discount on notes, which was
                  $2,692,581 in the 2005 period, compared to $568,471 in the
                  2004 period, principally due to increased conversions of the
                  May 2005 debentures;

         o        gain on forgiveness of liabilities of $896,702 in the 2005
                  period relating to the forgiveness of liabilities to service
                  providers and the reduction of principal on the promissory
                  note to Zaiq Technologies, Inc.;

         o        other gains in the 2005 period of $109,328 that did not occur
                  in the 2004 period; and

         o        lower amortization of Film costs in 2005 ($11,945 in the 2005
                  period compared to $142,691 in the 2004 period).


         Net cash used in investing activities in fiscal 2005 was $11,161
compared to $95,000 in fiscal 2004. Net cash used in investing activities for
the 2005 Period was the result of the acquisition of property and equipment of
$11,161. For the 2004 Period, cash used in investing activities was primarily
the result of payments of $95,000 in connection with payment of a license and
development fee.

         Net cash provided by financing activities was $2,669,030 in fiscal 2005
compared to $1,550,703 in fiscal 2004. Net cash provided by financing activities
in fiscal 2005 was the result of proceeds from the issuance of common stock
amounting to $835,100, proceeds from convertible debentures of $3,500,000, and
proceeds from notes payable of $300,000, offset by capitalized financing costs
of $422,010, repayments of notes payable of $1,010,021 and repayments of
convertible notes payable of $534,039.

         Net cash provided by financing activities in fiscal 2004 was the result
of proceeds from the issuance of common stock in the amount of $594,000,
proceeds from convertible debentures of $1,350,000, proceeds from notes payable
of $262,000 and proceeds from convertible notes of $100,000, offset by
capitalized financing costs of $144,822, repayments of convertible debentures of
$300,000 and repayments of convertible notes payable of $290,000.

         Since inception, we have funded our operations primarily through the
issuance of our common stock and debt securities. Our recent financings are
discussed below.

         In May 2005, we sold $3,500,000 in aggregate principal amount of our
Senior Secured 7% convertible debentures and warrants, receiving net proceeds of
approximately $3.11 million after the payment of offering related costs (the
"2005 Debentures"). As of January 24, 2006, $3,101,121 of principal amount and
interest of 2005 Debentures had been converted into 147,468,586 shares of our
common stock and there was approximately $505,000 of principal amount of the
2005 Debentures outstanding. The 2005 Debentures mature in May 2008.


                                       22



<PAGE>

         In December 2004, we entered into a loan agreement with an
institutional investor pursuant to which we borrowed $300,000. The outstanding
principal and accrued interest on this loan was repaid in May 2005 from the
proceeds of the 2005 Debentures.

         In September 2004, we entered into a loan agreement with an
institutional investor/stockholder pursuant to which we borrowed $250,000. The
principal amount of the loan and any accrued and unpaid interest was originally
due and payable on March 24, 2005 and was subsequently extended to May 31, 2005.
The outstanding principal and accrued interest on this loan was repaid in May
2005 from the proceeds of the 2005 Debentures.

         In December 2003, April 2004 and May 2004, we raised net proceeds of
approximately $1,024,000 from the private placement to certain private and
institutional investors of our three year 7% Convertible Debentures. $125,000 of
principal issued in December 2003 was outstanding as of January 24, 2006 and
October 31, 2005 and matures in December 2006.

         On January 24, 2006, we entered into a bridge loan agreement with a
third party pursuant to which we borrowed $750,000 from the lender. After
payment of due diligence fees and transaction related fees and expenses, we
received net proceeds of $672,470. An amount equal to 108% of the principal
amount of the loan is due and payable on the earlier of May 25, 2006 or the date
we effect a financing transaction or series of transactions resulting in gross
proceeds to us of at least $2,000,000. We may prepay the loan in whole or in
part at any time without penalty. In connection with the loan, we issued to the
lender warrants to purchase 7,500,000 shares of our Common Stock at an exercise
price of $0.10 per share. The loan is secured by a lien on all of our assets.

         As of January 25, 2006, we had cash balances of approximately
$543,000. Although management believes funds on hand will enable us to meet
our liquidity needs for the next three months, we will require additional funds
to repay the bridge loan upon maturity, continue to meet our other liquidity
needs and satisfy our current business plan. It is likely that we will need to
raise additional funds to pay existing current liabilities as they come due, as
well as to meet our operating requirements, prior to the receipt of revenues
from our semiconductor business.

         We may not be successful in our efforts to raise additional funds. Even
if we are able to raise additional funds through the issuance of debt or other
means, our cash needs could be heavier than anticipated in which case we could
be forced to raise additional capital. Even after we begin to sell our products,
we do not yet know what payment terms will be required by our customers or if
our products will be successful. At the present time, we have no commitments for
any additional financing, and there can be no assurance that, if needed,
additional capital will be available to us on commercially acceptable terms or
at all.

         Additional equity financings are likely to be dilutive to holders of
our Common Stock and debt financing, if available, may involve significant
payment obligations and covenants that restrict how we operate our business.

         Our independent registered public accounting firm's report accompanying
our consolidated financial statements for the year ended October 31, 2005
includes an explanatory paragraph relating to the uncertainty of our ability to
continue as a going concern. This qualification may make it more difficult for
us to raise additional capital when needed. Our auditors believe that there are
conditions that raise substantial doubt about the our ability to continue as a
going concern. The accompanying consolidated financial statements do not include
any adjustments relating to the recoverability of reported assets or liabilities
should we be unable to continue as a going concern.

IMPACT OF RECENTLY ISSUED ACCOUNTING STANDARDS

         In January 2003, the FASB issued Interpretation Number 46,
"Consolidation of Variable Interest Entities" ("FIN 46"). This interpretation of
Accounting Research Bulletin ("ARB") No. 51, "Consolidated Financial
Statements," provides guidance for identifying a controlling interest in a
variable interest entity ("VIE") established by means other than voting
interests. FIN 46 also requires consolidation of a VIE by an enterprise that
holds such a controlling interest. In December 2003, the FASB completed its
deliberations regarding the proposed modification to FIN 46 and issued
Interpretation Number 46(R), "Consolidation of Variable Interest Entities-an


                                       23



<PAGE>

Interpretation of ARB No. 51" ("FIN 46(R)"). The decisions reached included a
deferral of the effective date and provisions for additional scope exceptions
for certain types of variable interest. Application of FIN 46(R) is required in
financial statements of public entities that have interests in VIEs or potential
VIEs commonly referred to as special-purpose entities for periods ending after
December 15, 2003. Application by public small business issuers' entities is
required in all interim and annual financial statements for periods ending after
December 15, 2004. The adoption of this pronouncement did not have an impact on
our consolidated financial position, results of operations or cash
flows.

         In April 2005, the Securities and Exchange Commission issued release
number 33-8568, AMENDMENT TO RULE 4-01(A) OF REGULATION S-X REGARDING THE
COMPLIANCE DATE FOR STATEMENT OF FINANCIAL ACCOUNTING STANDARDS NO. 123 (REVISED
2004), "Share Based Payment". This release delays the date for compliance with
Statement of Financial Accounting Standards No. 123 (Revised 2004), Share Based
Payment ("SFAS 123R") to the registrant's first interim or annual reporting
period beginning on or after December 15, 2005. SFAS 123R requires public
entities to measure the cost of employee services received in exchange for an
award of equity instruments based on the grant-date fair value of the award, and
no longer allows companies to apply the intrinsic value based method of
accounting for stock compensation described in APB 25 . We have elected to early
adopt SFAS 123R and will apply its requirements as of November 1, 2005.

         We have elected to use the modified prospective application transition
method and accordingly, measurement and attribution of compensation cost for
awards that are outstanding as of the adoption date will be based on the
original grant date fair value and the same attribution method that we
previously used. We expect these transition provisions to result in the
recognition of approximately $250,000 in stock based compensation expense during
the three months ended January 31, 2006 related to the vesting of options
previously granted in April 2005.

         We estimate that options granted in January 2006 to our Chief Executive
Officer and our Executive Vice President will result in stock based compensation
expense of approximately $575,000 under the measurement requirements of SFAS
123R and expects this to be recognized through the service period of July 2006.

         In June 2005, the FASB published Statement of Financial Accounting
Standards No. 154, "Accounting Changes and Error Corrections" ("SFAS 154"). SFAS
154 establishes new standards on accounting for changes in accounting
principles. Pursuant to the new rules, all such changes must be accounted for by
retrospective application to the financial statements of prior periods unless it
is impracticable to do so. SFAS 154 completely replaces Accounting Principles
Bulletin No. 20 and SFAS 3, though it carries forward the guidance in those
pronouncements with respect to accounting for changes in estimates, changes in
the reporting entity, and the correction of errors. The requirements in SFAS 154
are effective for accounting changes made in fiscal years beginning after
December 15, 2005. We will apply these requirements to any accounting changes
after the implementation date.

         The Emerging Issues Task Force ("EITF") reached a tentative conclusion
on EITF Issue No. 05-1, "Accounting for the Conversion of an Instrument That
Becomes Convertible upon the Issuer's Exercise of a Call Option" that no gain or
loss should be recognized upon the conversion of an instrument that becomes
convertible as a result of an issuer's exercise of a call option pursuant to the
original terms of the instrument. The application of this pronouncement is not
expected to have an impact on our Consolidated financial position, results of
operations, or cash flows.

         In June 2005, the FASB ratified EITF Issue No. 05-2, "The Meaning of
'Conventional Convertible Debt Instrument' in EITF Issue No. 00-19, 'Accounting
for Derivative Financial Instruments Indexed to, and Potentially Settled in, a
Company's Own Stock'" ("EITF No. 05-2"), which addresses when a convertible debt
instrument should be considered 'conventional' for the purpose of applying the
guidance in EITF No. 00-19. EITF No. 05-2 also retained the exemption under EITF
No. 00-19 for conventional convertible debt instruments and indicated that
convertible preferred stock having a mandatory redemption date may qualify for
the exemption provided under EITF No. 00-19 for conventional convertible debt if
the instrument's economic characteristics are more similar to debt than equity.
EITF No. 05-2 is effective for new instruments entered into and instruments
modified in periods beginning after June 29, 2005. We have applied the
requirements of EITF No. 05-2 since the required implementation date. The
adoption of this pronouncement did not have an impact on our consolidated
financial position, results of operations or cash flows.

                                       24



<PAGE>

         EITF Issue No. 05-4 "The Effect of a Liquidated Damages Clause on a
Freestanding Financial Instrument Subject to EITF Issue No. 00-19, 'Accounting
for Derivative Financial Instruments Indexed to, and Potentially Settled in, a
Company's Own Stock'" ("EITF No. 05-4") addresses financial instruments, such as
stock purchase warrants, which are accounted for under EITF 00-19 that may be
issued at the same time and in contemplation of a registration rights agreement
that includes a liquidated damages clause. The consensus of EITF No. 05-4 has
not been finalized. In May 2005, we entered into a private placement agreement
for the 2005 Debentures, a registration rights agreement and warrants in
connection with the private placement (see Note 9). Based on the interpretive
guidance in EITF Issue No. 05-4, view C, due to certain factors, including an
uncapped liquidated damages provision in the registration rights agreement, we
determined that the embedded conversion option related to the 2005 Debentures
and the registration rights are derivative liabilities. Accordingly, the fair
value of the embedded conversion option of $1,500,000 was recorded as a
liability as of the closing of the sale of the 2005 Debentures. Due to various
factors, including substantial conversions of the 2005 Debentures and the
registration statement becoming effective on August 1, 2005, the value of the
registration rights was deemed to be de minimus.

         In September 2005, the FASB ratified EITF Issue No. 05-7, "Accounting
for Modifications to Conversion Options Embedded in Debt Instruments and Related
Issues" ("EITF No. 05-7"), which addresses whether a modification to a
conversion option that changes its fair value affects the recognition of
interest expense for the associated debt instrument after the modification and
whether a borrower should recognize a beneficial conversion feature, not a debt
extinguishment, if a debt modification increases the intrinsic value of the debt
(for example, the modification reduces the conversion price of the debt). EITF
No. 05-7 is effective for the first interim or annual reporting period beginning
after December 15, 2005. We will adopt EITF No. 05-7 as of the beginning of our
interim reporting period that begins on February 1, 2006. We are currently in
the process of evaluating the effect that the adoption of this pronouncement
will have on our financial statements.

         In September 2005, the FASB ratified EITF Issue No. 05-8, "Income Tax
Consequences of Issuing Convertible Debt with a Beneficial Conversion Feature"
("EITF No. 05-8"), which addresses the treatment of convertible debt issued with
a beneficial conversion feature as a temporary difference under the guidance in
SFAS 109. In addition, deferred taxes recognized for a temporary difference of
debt with a beneficial conversion feature should be recognized as an adjustment
of additional paid-in capital. Entities should apply the guidance in EITF No.
05-8 in the first interim or annual reporting period that begins after December
15, 2005. Its provisions should be applied retrospectively under the guidance in
SFAS 154 to all convertible debt instruments with a beneficial conversion
feature accounted for under the guidance in EITF No. 00-27 "Application of EITF
Issue No. 98-5 'Accounting for Convertible Securities with Beneficial Conversion
Features or Contingently Adjustable Conversion Ratios.'" We have applied the
requirements of EITF No. 05-8 to all previously existing convertible debt
instruments with a beneficial conversion feature and will apply the requirements
of EITF No. 05-8 beginning on February 1, 2006 for all new convertible debt
instruments with a beneficial conversion feature. The application of this
pronouncement for new convertible debt instruments with a beneficial conversion
feature is not expected to have an impact on our consolidated financial
position, results of operations or cash flows.

PROPOSED RESTATEMENT OF JULY 31, 2005 FORM 10-QSB

         On January 30, 2006, the Company's Board of Directors, after discussion
by management and the Audit Committee with the Company's independent registered
public accounting firm, concluded that the method used to account for sales of
certain convertible debentures was not in accordance with the requirements of
Emerging Issues Task Force ("EITF") Issue No.00-19 "Accounting for Derivative
Financial Instruments Indexed To and Potentially Settled In, a Company's Own
Stock," that there is an error in the consolidated financial statements included
in our Quarterly Report on Form 10-QSB for the period ended July 31, 2005 (the
"July 2005 10-QSB"), and that the financial statements included in the July 2005
10-QSB should not be relied upon due to such error. As a result of this error in
the application of certain accounting principles, $1,500,000 included in
stockholders' equity at July 31, 2005 as "value assigned to beneficial
conversions" should have been recorded as a liability. The treatment of this
non-cash accounting item did not impact the Statement of Operations included in
the July 2005 10- QSB or the Company's net loss for the period ended July 31,
2005.


                                       25


<PAGE>

         We estimate that the correction of the above error will result in the
following changes to our stockholders' equity and liabilities at July 31, 2005:

                                                                  As Expected
                                             As Reported          to be Restated
                                             -----------          --------------

Total liabilities                            $ 4,949,812           $ 6,449,812

Stockholders' equity                         $ 2,717,635           $ 1,217,635

         The Board has authorized the restatement of the financial statements
included in the July 2005 10-QSB to correct the above error. We intend to file
such restated financial statements on an amended quarterly report for the period
ended July 31, 2005 as soon as practicable.


ITEM 7. FINANCIAL STATEMENTS

         The information called for by this Item 7 is included following the
"Index to Financial Statements" contained in this Annual Report on Form 10-KSB.

ITEM 8.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE

         None.

ITEM 8A. CONTROLS AND PROCEDURES

         EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES. The Company, under
the supervision and with the participation of the Company's management,
including the Company's Chief Executive Officer and Chief Financial Officer, has
evaluated the effectiveness of the design and operation of the Company's
"disclosure controls and procedures," as such term is defined in Rule 13a-15(e)
promulgated under the Exchange Act as of this report. As described in Item 6
above under the heading, "PROPOSED RESTATEMENT OF JULY 31, 2005 FORM 10-QSB,"
the Company's Board determined that the method used to account for sales of
certain convertible debentures issued by the Company in May 2005 was not in
accordance with the requirements of Emerging Issues Task Force ("EITF") Issue
No. 00-19 "Accounting for Derivative Financial Instruments Indexed To and
Potentially Settled In, a Company's Own Stock." The Board has authorized the
restatement of the financial statements included in the July 2005 10-QSB to
correct the above error. Because the above error was not prevented by the
Company's then-existing disclosure controls and procedures, the Chief Executive
Officer and Chief Financial Officer has concluded based upon his evaluation that
the Company's disclosure controls and procedures were not effective as of the
end of the period covered by this report to provide reasonable assurance that
material information required to be disclosed by the Company in reports that it
files or submits under the Exchange Act is recorded, processed, summarized and
reported within the time periods specified in SEC rules and forms. The Company
believes that, as a result of its consultations with counsel, the Company's
outside auditors, and other accounting professionals, it has improved its
disclosure controls and procedures in the area of financial reporting of complex
equity transactions such as the convertible debentures.

         Management is aware that there is a lack of segregation of duties at
the Company due to the small number of employees dealing with general
administrative and financial matters. This constitutes a significant deficiency
in the internal controls. However, at this time management has decided that
considering the employees involved, the control procedures in place, and the
outsourcing of certain financial functions, the risks associated with such lack
of segregation are low and the potential benefits of adding additional employees
to clearly segregate duties do not justify the expenses associated with such
increases. The Company did hire a part-time employee during the year ended
October 31, 2005 to enhance its accounting staff. Management will periodically
reevaluate this situation. If the volume of the business increases and
sufficient capital is secured, it is the Company's intention to increase
staffing to mitigate the current lack of segregation of duties within the
general administrative and financial functions.

         A control system, no matter how well conceived and operated, can
provide only reasonable, not absolute, assurance that the objectives of the
control system are met. Because of the inherent limitations in all control
systems no evaluation of controls can provide absolute assurance that all
control issues, if any, within a company have been detected. Such limitations
include the fact that human judgment in decision-making can be faulty and that
breakdowns in internal control can occur because of human failures, such as
simple errors or mistakes or intentional circumvention of the established
process.

         CHANGES IN INTERNAL CONTROLS OVER FINANCIAL REPORTING. Except as
described above, during the three months ended October 31, 2005, there have been
no changes in our internal controls over financial reporting that have
materially affected, or are reasonably likely to materially affect, these
controls.


ITEM 8B.  OTHER INFORMATION

         None


                                       26



<PAGE>

                                    PART III

ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS; COMPLIANCE
WITH SECTION 16(A) OF THE EXCHANGE ACT

Incorporated by reference from the discussions under the headings "Item 1,
Election of Directors," "Executive Officers" and "Section 16(a) Beneficial
Ownership Reporting Compliance" in the Proxy Statement for our 2006 Annual
Meeting of Shareholders to be filed with the SEC within 120 days after the end
of the year ended October 31, 2005 (the "Proxy Statement").

We have adopted a code of ethics that applies to our chief executive officer,
president, chief financial officer, controller and others performing similar
executive and financial functions at the Company. This code of ethics is posted
on our Website located at www.rimsemi.com. The code of ethics may be found as
follows: From our main Web page, first click on "About Us" at the top of the
page and then on "Investors". Next, click on "Governance". Finally, click on
"Code of Ethics". We intend to satisfy the disclosure requirement under Item 10
of Form 8-K regarding an amendment to, or waiver from, a provision of this code
of ethics by posting such information on our Website, at the address and
location specified above.


ITEM 10. EXECUTIVE COMPENSATION

Incorporated by reference from the discussions under the headings "Executive
Compensation," "Employment Agreements with Executive Officers" and "Additional
Information Concerning the Board of Directors" in the Proxy Statement.


ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
RELATED STOCKHOLDER MATTERS

Incorporated by reference from the discussion under the headings "Equity
Compensation Plan Information" and "Beneficial Ownership of Certain
Shareholders, Directors and Executive Officers" in the Proxy Statement.


ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

Incorporated by reference from the discussion under the heading "Certain
Relationships and Related Transactions" in the Proxy Statement.


ITEM 13.          EXHIBITS

3.1               Articles of Amendment to the Articles of Incorporation dated
                  September 6, 2005.*

3.2               Articles of Amendment to the Articles of Incorporation
                  (incorporated by reference to Exhibit 3.1 of the Company's
                  Report on Form 10-Q for the period ended July 31, 2001).

3.3               Restated Articles of Incorporation (incorporated by reference
                  to Exhibit 3.1 of the Company's Report on Form 10-KSB/A for
                  the fiscal year ended October 31, 1999 (the "1999 10-KSB/A")).

3.4               Bylaws, as amended (incorporated by reference to Exhibit 3.1
                  of the Company's Report on Form 10-Q for the period ended
                  January 31, 2002 (the "January 2002 10-Q")).

3.5               Certificate of Designation of Series A Preferred Stock
                  (incorporated by reference to Exhibit A of Exhibit 4.1 of the
                  Company's Registration Statement on Form 8-A, filed with the
                  Commission on August 10, 2000).

3.6               Certificate of Designation of Series B Preferred Stock
                  (incorporated by reference to Exhibit 3.1 of the Company's
                  Report on Form 10-Q for the period ended April 30, 2002
                  ("April 2002 10-Q")).


                                       27





<PAGE>

3.7               Certificate of Designation of Series C Convertible Preferred
                  Stock (incorporated by reference to Exhibit 4.1 of the
                  Company's Report on Form 10-Q for the period ended January 31,
                  2003 (the "January 2003 10-Q")).

3.8               Certificate of Amendment to Certificate of Designation of
                  Series C Convertible Preferred Stock (incorporated by
                  reference to Exhibit 4.2 of the Company's Report on Form 10-Q
                  for the period ended April 30, 2003 (the "April 2003 10-Q")).

3.9               Certificate of Designation of Series D Convertible Preferred
                  Stock (incorporated by reference to Exhibit 4.4 of the April
                  2003 10-Q).

3.10              Certificate of Designation of Series E Convertible Preferred
                  Stock (incorporated by reference to Exhibit 4.3 of the
                  Company's Report on Form 10-Q for the period ended July 31,
                  2003 (the "July 2003 10-Q")).

3.11              Certificate of Designation of Series F Convertible Preferred
                  Stock (incorporated by reference to Exhibit 4.4 of the July
                  2003 10-Q).

3.12              Certificate of Designation of Series G Convertible Preferred
                  Stock (incorporated by reference to Exhibit 4.5 of the July
                  2003 10-Q).

4.1               Specimen Stock Certificate*

4.2               Warrant, dated as of October 31, 2003 issued in favor of
                  Melton Management Ltd. (incorporated by reference to Exhibit
                  4.3 of the Company's Registration Statement on Form SB-2 (No.
                  333-112643) filed with the Commission on February 11, 2004).

4.3               Form of Three Year Warrant issued to purchasers of the
                  Company's 7% Convertible Debentures (incorporated by reference
                  to Exhibit 4.5 of the Company's Registration Statement on Form
                  SB-2 (No. 333-112643) filed with the Commission on February
                  11, 2004).

4.4               Form of 7% Three Year Convertible Senior Convertible Debenture
                  (incorporated by reference to Exhibit 4.1 of the Company's
                  Report on Form 8-K filed with the Commission on June 1, 2005
                  (the "June 1, 2005 8-K")).

4.5               Form of Common Stock Purchase Warrant issued to certain
                  investors (incorporated by reference to Exhibit 4.2 of the
                  June 1, 2005 8-K).

10.1              2000 Omnibus Securities Plan (incorporated by reference to
                  Appendix A of the Company's Definitive Proxy Statement filed
                  with the Commission on May 2, 2000). (1)

10.2              Form of Credit Agreement dated June 29, 2000 by the Company
                  and each of the following trusts: Epics Events Trust, Ltd.;
                  Exodus Systems Trust, Ltd.; Prospect Development Trust, Ltd.;
                  Pearl Street Investments Trust, Ltd.; and Riviera Bay Holdings
                  Trust, Ltd. (incorporated by reference to Exhibit 10.3 of the
                  Company's Report on Form 10-Q for the period ended July 31,
                  2000).

10.3              Form of Amendment to Credit Agreement dated November 13, 2000
                  by the Company and each of the following trusts: Epics Events
                  Trust, Ltd.; Exodus Systems Trust, Ltd.; Prospect Development
                  Trust, Ltd.; Pearl Street Investments Trust, Ltd.; and Riviera
                  Bay Holdings Trust, Ltd. (incorporated by reference to Exhibit
                  10.9 of the Company's Report on Form 10-K for the period ended
                  October 31, 2000).

10.4              2001 Stock Incentive Plan (incorporated by reference to
                  Exhibit 4.1 of the Company's Registration Statement on Form
                  S-8 (No. 333-68716), filed with the Commission on August 30,
                  2001). (1)


                                       28



<PAGE>

10.5              Convertible Promissory Note dated October 10, 2001 by the
                  Company in favor of Nellie Streeter Crane, Ltd. (incorporated
                  by reference to Exhibit 10.18 of the Company's Report on Form
                  10-K for the fiscal year ended October 31, 2001 (the "2001
                  10-K").

10.6              Convertible Promissory Note dated October 23, 2001 by the
                  Company in favor of Charles R. Cono (incorporated by reference
                  to Exhibit 10.20 of the 2001 10-K).

10.7              Stock Option Agreement dated February 26, 2002, between the
                  Company and Thomas J. Cooper (incorporated by reference to
                  Exhibit 10.14 of the January 2002 10-Q). (1)

10.8              Convertible Promissory Note dated March 8, 2002, by the
                  Company in favor of Tony Finn (incorporated by reference to
                  Exhibit 10.1 of the Company's Report on Form 10-Q for the
                  period ended July 31, 2002 (the "July 2002 10-Q)).

10.9              Convertible Promissory Note dated May 31, 2002, by the Company
                  in favor of Robert E. Casey, Jr. (incorporated by reference to
                  Exhibit 10.9 of the July 2002 10-Q).

10.10             Convertible Promissory Note dated June 12, 2002, by the
                  Company in favor of Bonnie Davis (incorporated by reference to
                  Exhibit 10.10 of the July 2002 10-Q).

10.11             Promissory Note dated October 29, 2002, by the Company in
                  favor of Robert E. Casey, Jr. (incorporated by reference to
                  Exhibit 10.57 of the Company's Report on Form 10-K for the
                  year ended October 31, 2002 (the "2002 10-K")).

10.12             Promissory Note dated October 31, 2002, by the Company in
                  favor of Charles R. Cono Trust, Charles R. Cono, TTEE
                  (incorporated by reference to Exhibit 10.1 of the Company's.
                  Report on Form 8-K filed with the Commission on November 18,
                  2002).

10.13             Employment Agreement dated December 2, 2002, between the
                  Company and Brad Ketch (incorporated by reference to Exhibit
                  10.59 of the 2002 10-K). (1)

10.14             2003 Consultant Stock Plan (incorporated by reference to
                  Exhibit 10.4 of the Company's Report on Form 10-Q for the
                  period ended January 31, 2003).

10.15             Convertible Promissory Note dated February 10, 2003 by the
                  Company in favor of James Warren (incorporated by reference to
                  Exhibit 10.1 of the April 2003 10-Q).

10.16             Convertible Promissory Note dated July 23, 2003 by the Company
                  in favor of Johnnie R. Keith (incorporated by reference to
                  Exhibit 10.5 of the July 2003 10-Q).

10.17             Agreement dated December 31, 2003 between the Company and
                  Market Pulse (incorporated by reference to Exhibit 10.3 to the
                  Company's Report on Form 10-QSB for the period ended January
                  31, 2004).

10.18             Services Agreement dated as of March 31, 2004 between the
                  Company and HelloSoft, Inc. *

10.19             Promissory Note dated as of September 24, 2004, by the Company
                  in favor of Melton Management Ltd. (incorporated by reference
                  to Exhibit 2.03 of the Company's Report on Form 8-K filed with
                  the Commission on September 24, 2004).

10.20             First Amendment to the Services Agreement dated as of March
                  31, 2004 between the Company and HelloSoft, Inc. *


                                       29



<PAGE>

10.21             Amendment 1.0 to the Services Agreement dated as of October
                  11, 2004 between the Company and HelloSoft, Inc. (Confidential
                  treatment has been requested with respect to certain portions
                  of this exhibit. Omitted portions have been filed separately
                  with the Commission)*

10.22             Consulting Agreement between the Company and LF Technology
                  Group, LLC, dated November 1, 2004.*

10.23             Consulting Agreement between the Company and Starburst
                  Innovations, LLC, dated November 1, 2004.*

10.24             Letter Agreement dated November 11, 2004 between Lilly Beter
                  Capital Group, Ltd. and the Company.*

10.25             Amended and Restated Development and License Agreement dated
                  as of November 29, 2004 between Adaptive Networks, Inc. and
                  the Company. (Confidential treatment has been requested with
                  respect to certain portions of this exhibit. Omitted portions
                  have been filed separately with the Commission)*

10.26             Amended and Restated Right of First Refusal, Credit of
                  Payments and Revenue Sharing Agreement dated as of November
                  29, 2004, among the Company, Adaptive Networks, Inc. and
                  Certain Shareholders of Adaptive Networks, Inc.*

10.27             Promissory Note dated as of December 10, 2004, by the Company
                  in favor of Ivan Berkowitz.*

10.28             Promissory Note dated as of December 24, 2004 by the Company
                  in favor of Double U Master Fund LP (incorporated by reference
                  to Exhibit 2.03 of the Company's Report on Form 8-K filed with
                  the Commission on December 24, 2004).

10.29             Lease Agreement dated as of March 2, 2005 between the Company
                  and American Property Management (incorporated by reference to
                  Exhibit 10.2 of the Company's Report on Form 10-QSB for the
                  period ended January 31, 2005 (the "January 2005 10-QSB").

10.30             Letter Agreement dated March 14, 2005 between Starburst
                  Innovations, LLC and the Company.*

10.31             Employment Agreement between the Company and Ray Willenberg,
                  Jr. dated as of March 23, 2005 (incorporated by reference to
                  Exhibit 10.1 of the January 2005 10-QSB). (1)

10.32             Convertible Promissory Note dated March 23, 2005, by the
                  Company in favor of Ray Willenberg, Jr.*

10.33             Exchange Agreement between the Company and Zaiq Technologies,
                  Inc. dated as of April 6, 2005 (incorporated by reference to
                  Exhibit 10.2 of the January 2005 10-QSB).

10.34             Promissory Note dated April 6, 2005, by the Company in favor
                  of Zaiq Technologies, Inc. (incorporated by reference to
                  Exhibit 4.1 of the January 2005 10-QSB).

10.35             Form of Securities Purchase Agreement dated as of May 26,
                  2005, among the Company and certain investors (incorporated by
                  reference to Exhibit 10.1 of the Company's Report on Form 8-K
                  filed with the Commission on June 1, 2005 (the "June 2005
                  8-K")).

10.36             Form of Registration Rights Agreement dated as of May 26,
                  2005, among the Company and certain investors (incorporated by
                  reference to Exhibit 10.2 of the June 2005 8-K).

10.37             Security Interest Agreement dated as of May 26, 2005 among the
                  Company, certain specified investors, as secured parties, and
                  Krieger and Prager, as agent for the secured parties
                  (incorporated by reference to Exhibit 10.3 of the June 2005
                  8-K).

10.38             Consulting Agreement between the Company and Richard Hurn
                  dated July 19, 2005. *

                                       30



<PAGE>

10.39             Amendment 2.0 to the Services Agreement dated as of July 26,
                  2005 between the Company and HelloSoft, Inc. (Confidential
                  treatment has been requested with respect to certain portions
                  of this exhibit. Omitted portions have been filed separately
                  with the Commission)*

10.40             Amendment 3.0 to the Services Agreement dated as of November
                  3, 2005 between the Company and HelloSoft, Inc. (Confidential
                  treatment has been requested with respect to certain portions
                  of this exhibit. Omitted portions have been filed separately
                  with the Commission)*

10.41             Letter Agreement dated as of December 16, 2005 between the
                  Company and Zaiq Technologies, Inc.*

10.42             Stock Option Agreement dated January 26, 2006 between the
                  Company and Brad Ketch.* (1)

10.43             Stock Option Agreement dated January 26, 2006 between the
                  Company and Ray Willenberg, Jr.* (1)

10.44             Stock Option Agreement dated January 26, 2006 between the
                  Company and Walter Chen.*

21.1              Subsidiaries of the Registrant*

23.1              Consent of Marcum & Kliegman, LLP.*

31.1              Rule 13a-14(a) / 15d - 14(a) Certification.*

32.1              Section 1350 Certification.*

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

          *Filed herewith.

          (1) Signifies a management agreement or compensatory plan or
arrangement.


ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES

Incorporated by reference from the discussion under the heading "Independent
Auditor Fee Information" in the Proxy Statement.


                                       31



<PAGE>

                                   SIGNATURES

         In accordance with Section 13 or 15(d) of the Exchange Act, the
registrant caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.


DATE:  JANUARY 30, 2006                RIM SEMICONDUCTOR COMPANY


                                       BY: /S/ BRAD KETCH
                                           -------------------------------------
                                           BRAD KETCH
                                           PRESIDENT AND CHIEF EXECUTIVE OFFICER
                                           (PRINCIPAL EXECUTIVE OFFICER AND
                                           PRINCIPAL FINANCIAL AND
                                           ACCOUNTING OFFICER)

In accordance with Exchange Act, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated.

<TABLE>
<S>     <C>
      SIGNATURE                                     TITLE                                      DATE
      ---------                                     -----                                      ----


/s/ Brad Ketch                 President, Chief Executive Officer and Director            January 30, 2006
-----------------------        (PRINCIPAL EXECUTIVE OFFICER and PRINCIPAL FINANCIAL
Brad Ketch                      AND ACCOUNTING OFFICER)


/s/ Ray Willenberg, Jr.        Chairman of the Board and Executive Vice President         January 30, 2006
-----------------------
Ray Willenberg, Jr.


/s/ Jack Peckham               Director                                                   January 30, 2006
-----------------------
Jack Peckham


 /s/ Thomas J. Cooper          Director                                                   January 30, 2006
-----------------------
Thomas J. Cooper


                                                 32
</TABLE>






<PAGE>

               INDEX TO AUDITED CONSOLIDATED FINANCIAL STATEMENTS

Report of Independent Registered Public Accounting Firm                      F-1

Consolidated Balance Sheets
  At October 31, 2005 and 2004                                               F-2

Consolidated Statements of Operations
  for the Years Ended October 31, 2005 and 2004                              F-3

Consolidated Statements of Stockholders' Equity (Deficiency)
  for the Years Ended October 31, 2005 and 2004                       F-4 to F-5

Consolidated Statements of Cash Flows
  for the Years Ended October 31, 2005 and 2004                       F-6 to F-7

Notes to the Consolidated Financial Statements                       F-8 to F-35








<PAGE>

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM


Board of Directors
Rim Semiconductor Company
(formerly New Visual Corporation)

We have audited the accompanying consolidated balance sheets of Rim
Semiconductor Company (formerly New Visual Corporation) and Subsidiaries (the
"Company") as of October 31, 2005 and 2004 and the related consolidated
statements of operations, stockholders' equity (deficiency), and cash flows for
the years ended October 31, 2005 and 2004. These consolidated financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated financial
statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the
consolidated financial statements are free of material misstatement. The Company
is not required to have, nor are we engaged to perform, an audit of its internal
control over financial reporting. Our audits included consideration of internal
control over financial reporting as a basis for designing audit procedures that
are appropriate in the circumstances, but not for the purpose of expressing an
opinion on the effectiveness of the Company's control over financial reporting.
Accordingly, we express no opinion. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the consolidated
financial statements, assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall consolidated
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Rim Semiconductor
Company and Subsidiaries at October 31, 2005 and 2004 and the results of their
operations and their cash flows for the years ended October 31, 2005 and 2004 in
conformity with accounting principles generally accepted in the United States of
America.

The accompanying consolidated financial statements have been prepared assuming
that the Company will continue as a going concern. As shown in the consolidated
financial statements, the Company incurred net losses of $6,923,386 and
$5,506,287 during the years ended October 31, 2005 and 2004, respectively. As of
October 31, 2005, the Company had a working capital deficiency of approximately
$3,145,391. These conditions raise substantial doubt about the Company's ability
to continue as a going concern. Management's plans in regard to these matters
are also described in Note 1. The consolidated financial statements do not
include any adjustments that might result from the outcome of this uncertainty.


                                                       /s/ MARCUM & KLIEGMAN LLP


New York, New York
January 28, 2006


                                       F-1



<PAGE>
<TABLE>
<S>     <C>
                            RIM SEMICONDUCTOR COMPANY AND SUBSIDIARIES

                        (formerly New Visual Corporation and Subsidiaries)

                                    CONSOLIDATED BALANCE SHEETS


                                                                            October 31,
                                                                   -------------------------------
                                                                        2005             2004
                                                                   -------------     -------------
ASSETS
------

Current Assets:
   Cash                                                            $    373,481      $    127,811
   Other current assets                                                  34,031             7,984
                                                                   -------------     -------------
 TOTAL CURRENT ASSETS                                                   407,512           135,795

   Property and equipment - net                                           9,922            23,873
   Technology license and capitalized software
        development fee                                               5,751,000         5,751,000
   Film in distribution - net                                                --         1,021,722
   Deferred financing costs - net                                       326,307           187,413
   Other assets                                                          10,224             7,434
                                                                   -------------     -------------
TOTAL ASSETS                                                       $  6,504,965      $  7,127,237
                                                                   =============     =============

LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIENCY)
-------------------------------------------------

Current Liabilities:
   Convertible notes payable (net of debt discount
       of $20,875 and $0, respectively)                            $    736,997      $    913,000
   Convertible debentures (net of debt discount
       of $0 and $512,778, respectively)                                     --           197,222
   Notes payable                                                      1,834,073         1,002,310
   Accounts payable and accrued expenses                                981,833         2,007,871
                                                                   -------------     -------------
Total Current Liabilities                                             3,552,903         4,120,403

   Long-term portion of convertible debentures (net of
      debt discount of $1,601,586 and $268,750, respectively)           339,125            53,750
   Conversion option liability                                          778,167                --
   Long-term portion of notes payable                                   108,134                --
   Redeemable Series B Preferred Stock                                       --         3,192,000
                                                                   -------------     -------------
Total Liabilities                                                     4,778,329         7,366,153
                                                                   -------------     -------------
Commitments, Contingencies and Other Matters

Stockholders' Equity (Deficiency):
Preferred stock - $0.01 par value; 15,000,000 shares
  authorized; Series A junior participating preferred
  stock; -0- shares issued and outstanding                                   --                --
Common stock - $0.001 par value; 500,000,000 shares
  authorized; 184,901,320 and 84,781,959 shares issued and
  outstanding at October 31, 2005 and 2004, respectively                184,902            84,782
Additional paid-in capital                                           63,679,065        55,031,976
Unearned compensation                                                   (22,771)         (164,500)
Accumulated deficit                                                 (62,114,560)      (55,191,174)
                                                                   -------------     -------------

      Total Stockholders' Equity (Deficiency)                         1,726,636          (238,916)
                                                                   -------------     -------------
      Total Liabilities and Stockholders' Equity (Deficiency)      $  6,504,965      $  7,127,237
                                                                   =============     =============


      The accompanying notes are an integral part of these consolidated financial statements.


                                                F-2



<PAGE>

                         RIM SEMICONDUCTOR COMPANY AND SUBSIDIARIES

                     (formerly New Visual Corporation and Subsidiaries)

                           CONSOLIDATED STATEMENTS OF OPERATIONS


                                                           For the Years Ended October 31,
                                                               2005              2004
                                                          -------------      -------------

REVENUES                                                  $      39,866      $     287,570
                                                          -------------      -------------
OPERATING EXPENSES:
  Cost of sales                                                  11,945            142,691
  Impairment of film in distribution                          1,009,777            977,799
  Research and development expenses (including
    stock based compensation of $296,667
    and $92,500, respectively)                                  366,306            185,000
  Selling, general and administrative expenses
    (including stock based compensation of $1,131,874
    and $1,359,882, respectively)                             2,951,925          3,441,187
                                                          -------------      -------------
    TOTAL OPERATING EXPENSES                                  4,339,953          4,746,677
                                                          -------------      -------------

OPERATING LOSS                                               (4,300,087)        (4,459,107)
                                                          -------------      -------------
OTHER EXPENSES (INCOME):
  Interest expense                                            3,027,147            883,592
  Amortization of deferred financing costs                      602,182             78,427
  Amortization of unearned financing costs                           --             85,161
  Gain on sale of property and equipment                        (20,000)                --
  Gain on exchange of Redeemable Series B
   Preferred Stock into common stock                            (55,814)                --
  Gain on conversion of accrued expenses
   into convertible notes payable                               (33,514)                --
  Gain on forgiveness of liabilities                           (896,702)                --
                                                          -------------      -------------

TOTAL OTHER EXPENSES                                          2,623,299          1,047,180
                                                          -------------      -------------

NET LOSS                                                  $  (6,923,386)     $  (5,506,287)
                                                          =============      =============

BASIC AND DILUTED NET LOSS PER COMMON SHARE               $       (0.06)     $       (0.07)
                                                          =============      =============

WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING        114,687,798         78,052,498
                                                          =============      =============


  The accompanying notes are an integral part of these consolidated financial statements.

                                            F-3



<PAGE>

                                             RIM SEMICONDUCTOR COMPANY AND SUBSIDIARIES

                                         (formerly New Visual Corporation and Subsidiaries)

                                    CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIENCY)
                                            FOR THE YEARS ENDED OCTOBER 31, 2005 AND 2004

                                                                                                                          Total
                                      Common Stock          Additional     Unearned                                    Stockholders'
                              ---------------------------    Paid-In       Financing      Unearned      Accumulated       Equity
                                  Shares        Amount       Capital        Costs       Compensation      Deficit      (Deficiency)
                              ------------- ------------- -------------  -------------  -------------  -------------  -------------
Balance at October 31, 2004       84,781,959  $     84,782  $ 55,031,976   $         --  $   (164,500)  $(55,191,174)  $   (238,916)

Issuance of common
   stock for cash                 10,289,026        10,289       824,811             --            --             --        835,100
Issuance of common
   stock under consulting
   agreements                      2,837,500         2,838       339,162             --      (342,000)            --             --
Issuance of common
   stock for services              5,073,015         5,073       309,594             --      (314,667)            --             --
Issuance of common
   stock to key employees
   and directors                   2,750,000         2,750       449,750             --      (452,500)            --             --
Issuance of common
   stock for conversion
   of notes payable,
   convertible debentures,
   and accrued interest           72,763,232        72,763     2,636,193             --            --             --      2,708,956
Issuance of common
   stock for liquidated
   damages                           803,331           804        97,646             --            --             --         98,450
Issuance of common
   stock for Below Market
   Issuance                          529,311           529          (529)            --            --             --             --
Issuance of common
   stock in payment of
   accounts payable and
   accrued expenses                  422,783           423        71,488             --            --             --         71,911
Issuance of common
   stock in exchange for
   surrender of convertible
   preferred stock                 4,651,163         4,651       739,535             --            --             --        744,186
Stock options issued for
   professional services                  --            --       165,869             --      (165,869)            --             --
Stock offering costs                      --            --       (39,105)            --            --             --        (39,105)
Warrants issued with
   convertible debentures                 --            --     2,000,000             --            --             --      2,000,000
Reclassification of conversion
   option liability                       --            --       721,833             --            --             --        721,833
Warrants issued to
   placement agent                        --            --       319,066             --            --             --        319,066
Warrants issued for
   professional services                  --            --        11,776             --       (11,776)            --             --
Amortization of unearned
   compensation expense                   --            --            --             --     1,428,541             --      1,428,541
Net loss                                  --            --            --             --            --     (6,923,386)    (6,923,386)
                                ------------  ------------  ------------   ------------  ------------   ------------   ------------
Balance at October 31, 2005      184,901,320  $    184,902  $ 63,679,065   $         --  $    (22,771)  $(62,114,560)  $  1,726,636
                                ============  ============  ============   ============  ============   ============   ============

                      The accompanying notes are an integral part of these consolidated financial statements.

                                                                 F-4



<PAGE>

                                             RIM SEMICONDUCTOR COMPANY AND SUBSIDIARIES

                                         (formerly New Visual Corporation and Subsidiaries)

                                    CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIENCY)
                                            FOR THE YEARS ENDED OCTOBER 31, 2005 AND 2004

                                                                                                                          Total
                                      Common Stock          Additional     Unearned                                    Stockholders'
                               --------------------------    Paid-In       Financing      Unearned      Accumulated       Equity
                                  Shares        Amount       Capital        Costs       Compensation      Deficit      (Deficiency)
                               ------------  ------------  ------------   ------------   ------------   ------------   ------------

Balance at October 31, 2003      70,676,682  $     70,677  $ 51,131,622   $    (15,674)  $   (404,582)  $(49,684,887)  $  1,097,156

Issuance of common
   stock for cash                 4,907,085         4,907       589,093             --             --             --        594,000
Issuance of common stock
   for extension of
   promissory notes                 310,003           310        49,071        (49,381)            --             --             --
Issuance of common
   stock in payment for
   deferred payroll                  40,000            40         9,960             --             --             --         10,000
Issuance of common
   stock for compensation         1,003,999         1,004       230,076             --       (230,000)            --          1,080
Issuance of common
   stock under consulting
   agreements                     4,002,227         4,002       976,048             --       (980,050)            --             --
Issuance of common
   stock for services               468,047           468       109,739             --         (2,250)            --        107,957
Issuance of common
   stock for conversion
   of notes payable               2,209,631         2,210       329,235             --             --             --        331,445
Issuance of common
    stock for liquidated
    damages                         283,333           283        23,717             --             --             --         24,000
Issuance of common stock
   for research and
   development services             880,952           881        91,619             --             --             --         92,500
Stock offering costs                     --            --       (20,475)            --             --             --        (20,475)
Warrants issued with
   convertible
   debentures                            --            --       577,896             --             --             --        577,896
Value assigned to
   beneficial conversions                --            --       772,104             --             --             --        772,104
Warrants issued to
   placement agent                       --            --       121,018             --             --             --        121,018
Value assigned to
   warrants issued for
   extension of
   convertible notes                     --            --        15,992        (15,992)            --             --             --
Warrants issued for
   professional services                 --            --        21,147             --             --             --         21,147
Value assigned to
   warrants issued for
   convertible notes                     --            --         4,114         (4,114)            --             --             --
Amortization of unearned
   compensation expense                  --            --            --             --      1,452,382             --      1,452,382
Amortization of unearned
   financing costs                       --            --            --         85,161             --             --         85,161
Net loss                                 --            --            --             --             --     (5,506,287)    (5,506,287)
                               ------------  ------------  ------------   ------------   ------------   ------------   ------------
Balance at October 31, 2004      84,781,959  $     84,782  $ 55,031,976   $         --   $   (164,500)  $(55,191,174)  $   (238,916)
                               ============  ============  ============   ============   ============   ============   ============

                      The accompanying notes are an integral part of these consolidated financial statements.

                                                                F-5



<PAGE>

                         RIM SEMICONDUCTOR COMPANY AND SUBSIDIARIES

                     (formerly New Visual Corporation and Subsidiaries)

                            CONSOLIDATED STATEMENTS OF CASH FLOWS


                                                             For the Years Ended October 31,
                                                                  2005             2004
                                                              -----------      -----------

CASH FLOWS FROM OPERATING ACTIVITIES
  Net loss                                                    $(6,923,386)     $(5,506,287)
    Adjustments to reconcile net loss to net cash used in
     operating activities:
       Consulting fees and other compensatory elements of
         stock issuances                                        1,428,541        1,452,382
       Interest paid in stock                                          --           13,946
       Penalties paid in stock                                         --           24,000
       Warrants issued for services                                    --           21,147
       Impairment of film in distribution                       1,009,777          977,799
       Gain on sale of property and equipment                     (20,000)              --
       Gain on exchange of Redeemable Series B
         Preferred Stock into common stock                        (55,814)              --
       Gain on conversion of accrued expenses
         into convertible notes payable                           (33,514)              --
       Gain on forgiveness of liabilities                        (896,702)              --
       Amortization of unearned financing costs                        --           85,161
       Amortization of deferred financing costs                   602,182           78,427
       Amortization of film in production costs                    11,945          142,691
       Amortization on debt discount on notes                   2,692,581          568,471
       Depreciation                                                25,112           17,428
    Change in assets (increase) decrease:
       Other current assets                                       (26,047)          (2,969)
       Other assets                                                (2,790)           5,602
    Change in liabilities increase (decrease):
       Accounts payable and accrued expenses                     (224,084)         474,524
                                                              -----------      -----------
         NET CASH USED IN OPERATING ACTIVITIES                 (2,412,199)      (1,647,678)
                                                              -----------      -----------

CASH USED IN INVESTING ACTIVITIES
  Acquisition of technology license and
      development fee                                                  --          (95,000)
  Acquisition of property and equipment                           (11,161)              --
                                                              -----------      -----------
         NET CASH USED IN INVESTING ACTIVITIES                    (11,161)         (95,000)
                                                              -----------      -----------

CASH FLOWS FROM FINANCING ACTIVITIES
  Proceeds from issuance of common stock                          835,100          594,000
  Offering costs related to stock issuances                            --          (20,475)
  Proceeds from convertible debentures                          3,500,000        1,350,000
  Proceeds from notes payable                                     300,000          262,000
  Proceeds from convertible notes payable                              --          100,000
  Capitalized financing costs                                    (422,010)        (144,822)
  Repayments of convertible debentures                                 --         (300,000)
  Repayments of notes payable                                  (1,010,021)              --
  Repayments of convertible notes payable                        (534,039)        (290,000)
                                                              -----------      -----------
      NET CASH PROVIDED BY FINANCING ACTIVITIES                 2,669,030        1,550,703
                                                              -----------      -----------

INCREASE (DECREASE) IN CASH                                       245,670         (191,975)

CASH - BEGINNING OF YEAR                                          127,811          319,786
                                                              -----------      -----------
CASH - ENDING OF YEAR                                         $   373,481      $   127,811
                                                              ===========      ===========


   The accompanying notes are an integral part of these consolidated financial statements.

                                             F-6




<PAGE>

                                   RIM SEMICONDUCTOR COMPANY AND SUBSIDIARIES

                               (formerly New Visual Corporation and Subsidiaries)

                                      CONSOLIDATED STATEMENTS OF CASH FLOWS


                                                                                 For the Years Ended October 31,
                                                                                      2005             2004
                                                                                  ------------     ------------
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
  Cash paid during the period for:
    Interest                                                                      $    203,539     $     14,565
                                                                                  ============     ============
    Income taxes                                                                  $         --     $         --
                                                                                  ============     ============
NON-CASH INVESTING AND FINANCING ACTIVITIES:
  Compensation satisfied by issuance of common stock                              $         --     $    119,037
                                                                                  ============     ============
  Common stock issued for conversion of convertible
   debentures, notes payable and accrued interest                                 $  2,708,956     $    331,445
                                                                                  ============     ============
  Accounts payable and accrued expenses satisfied by issuance of common stock     $     71,911     $         --
                                                                                  ============     ============
  Common stock issued for accrued liquidated damages                              $     98,450     $     24,000
                                                                                  ============     ============
  Accounts payable and accrued expenses converted to notes payable                $     55,251     $         --
                                                                                  ============     ============
  Value assigned to beneficial conversion in connection with issuance of
   convertible debentures                                                         $         --     $    772,104
                                                                                  ============     ============
  Value assigned to warrants issued to purchasers of convertible debentures       $  2,000,000     $    577,896
                                                                                  ============     ============
  Value assigned to conversion option liability in connection with issuance
   of convertible debentures                                                      $  1,500,000     $         --
                                                                                  ============     ============
  Value assigned to warrants issued to placement agent                            $    319,066     $    121,018
                                                                                  ============     ============
  Value assigned to warrants issued for extension of convertible notes            $         --     $     20,106
                                                                                  ============     ============
  Redeemable Series B Preferred Stock exchanged into notes payable                $  2,392,000     $         --
                                                                                  ============     ============
  Redeemable Series B Preferred Stock (recorded at $800,000) exchanged
  into common stock                                                               $    744,186     $         --
                                                                                  ============     ============
  Deferred compensation converted to convertible note payable
  (see footnote 8 (6))                                                            $    383,911     $         --
                                                                                  ============     ============
  Reclassification of conversion option liability to equity                       $    721,833     $         --
                                                                                  ============     ============


             The accompanying notes are an integral part of these consolidated financial statements.

                                                       F-7
</TABLE>

<PAGE>

RIM SEMICONDUCTOR COMPANY AND SUBSIDIARIES
(formerly New Visual Corporation and Subsidiaries)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


NOTE 1 - PRINCIPLES OF CONSOLIDATION, BUSINESS AND CONTINUED OPERATIONS

The consolidated financial statements include the accounts of Rim Semiconductor
Company (formerly New Visual Corporation)("Rim Semi") and its wholly owned
operating subsidiaries, NV Entertainment, Inc. ("NV Entertainment") (including
its 50% owned subsidiary Top Secret Productions, LLC), and NV Technology, Inc.
("NV Technology" collectively, the "Company"). All significant intercompany
balances and transactions have been eliminated. The Company consolidates its 50%
owned subsidiary Top Secret Productions, LLC due to the Company's control of
management and financial matters of such entity.

Rim Semiconductor Company was incorporated under the laws of the State of Utah
on December 5, 1985. In November of 1999, the Company began to focus its
business activities on the development of new Semiconductor Technologies.
Pursuant to such plan, in February of 2000, the Company acquired NV Technology.
The Company's technology business has generated no revenues to date.

The Company operates in two business segments, the production of motion
pictures, films and videos (Entertainment Segment) and development of new
semiconductor technologies (Semiconductor Segment). The Company's Entertainment
Segment is dependent on future revenues from the Company's film "Step Into
Liquid" ("Film"). The Semiconductor Segment is dependent on the Company's
ability to successfully commercialize its developed technology.

Through its subsidiary NV Entertainment the Company has operating revenues for
its Entertainment Segment, but may continue to report operating losses for this
segment. The Semiconductor Segment will have no operating revenues until
successful commercialization of its developed technology, but will continue to
incur substantial operating expenses, capitalized costs and operating losses.

GOING CONCERN UNCERTAINTY

The accompanying consolidated financial statements have been prepared in
conformity with accounting principles generally accepted in the United States of
America, which contemplate continuation of the Company as a going concern and
the realization of assets and the satisfaction of liabilities in the normal
course of business.

The carrying amounts of assets and liabilities presented in the financial
statements do not purport to represent realizable or settlement values. The
Company has suffered significant recurring operating losses, used substantial
funds in its operations, and needs to raise additional funds to accomplish its
objectives. For the years ended October 31, 2005 and 2004 the Company incurred
net losses of approximately $6.9 million and $5.5 million, respectively, and as
of October 31, 2005 had a working capital deficiency of approximately $3.1
million. In addition, management believes that the Company will continue to
incur net losses and cash flow deficiencies from operating activities through at
least October 31, 2006. These conditions raise substantial doubt about the
Company's ability to continue as a going concern.

As more fully described in the notes below, the Company funded its operations
during 2005 and 2004 through sales of its common stock, par value $0.001 per
share (the "Common Stock"), proceeds from notes, convertible notes and
convertible debentures resulting in approximate net proceeds to the Company of
$4,635,000 and $2,306,000, respectively.


                                       F-8



<PAGE>

RIM SEMICONDUCTOR COMPANY AND SUBSIDIARIES
(formerly New Visual Corporation and Subsidiaries)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 - PRINCIPLES OF CONSOLIDATION, BUSINESS AND CONTINUED OPERATIONS
(CONTINUED)

The Company's ability to continue to operate as a going concern is dependent on
its ability to generate sufficient cash flows to meet its obligations on a
timely basis, to obtain additional financing and to ultimately attain
profitability.

Management of the Company is continuing its efforts to secure funds through
equity and/or debt instruments for its operations. The Company will require
additional funds for its operations and to pay down its liabilities, as well as
finance its expansion plans consistent with its business plan. However, there
can be no assurance that the Company will be able to secure additional funds and
that if such funds are available, whether the terms or conditions would be
acceptable to the Company and whether the Company will be able to turn into a
profitable position and generate positive operating cash flow. The consolidated
financial statements do not include any adjustments that might result from the
outcome of this uncertainty and these adjustments may be material.

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

ACCOUNTING ESTIMATES

The preparation of financial statements in accordance with accounting principles
generally accepted in the United States of America requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities, disclosures of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses during
the reporting period. Significant estimates include impairment analysis for
long-lived assets, the individual-film-forecast computation method, and
valuation of derivative instruments. Actual results could differ from those
estimates.

FAIR VALUE OF FINANCIAL INSTRUMENTS

The carrying amounts reported in the consolidated balance sheets for cash,
accounts payable, accrued expenses, convertible notes payable, and notes payable
approximate fair value because of their immediate or short-term nature. The fair
value of long-term notes payable and convertible debentures approximates their
carrying value because the stated rates of the debt either reflect recent market
conditions or are variable in nature.

PROPERTY AND EQUIPMENT

Property and equipment are stated at cost. Depreciation is computed on a
straight-line method over the estimated useful lives of the assets, which
generally range from five to seven years. Maintenance and repair expenses are
charged to operations as incurred.

FILM IN DISTRIBUTION

Statement of Position 00-2, "Accounting by Producers or Distributors of Films"
("SOP-00-2") requires that film costs be capitalized and reported as a separate
asset on the balance sheet. Film costs include all direct negative costs
incurred in the production of a film, as well as allocations of production
overhead and capitalized interest. Direct negative costs include cost of
scenario, story, compensation of cast, directors, producers, writers, extras and
staff, cost of set construction, wardrobe, accessories, sound synchronization,
rental of facilities on location and post production costs. SOP-00-2 also
requires that film costs be amortized and participation costs accrued, using the
individual-film-forecast-computation method, which amortizes or accrues such
costs in the same ratio that the current period actual revenue (numerator) bears
to the estimated remaining unrecognized ultimate revenue as of the beginning of
the fiscal year (denominator). The Company makes certain estimates and judgments
of its future gross revenue to be received for each film based on information
received by its distributors, historical results and management's knowledge of
the industry. Revenue and cost forecasts are continually reviewed by management
and revised when warranted by changing conditions. A change to the estimate of
gross revenues for an individual film may result in an increase or decrease to
the percentage of amortization of capitalized film costs relative to a previous
period.


                                       F-9



<PAGE>

RIM SEMICONDUCTOR COMPANY AND SUBSIDIARIES
(formerly New Visual Corporation and Subsidiaries)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

In addition, SOP-00-2 also requires that if an event or change in circumstances
indicates that an entity should assess whether the fair value of a film is less
than its unamortized film costs, then an entity should determine the fair value
of the film and write-off to the statements of operations the amount by which
the unamortized film costs exceeds the Film's fair value.

During January 2005, the Company performed its review, and it was determined
that the unamortized film costs exceeded the Film's fair value. The Company
determined that its previous estimation of the expenses incurred by the Film's
distributor were too low and the estimation of future revenue were too high. As
a result of this review, the Company wrote-down the carrying value attributed to
its Film In Distribution to $1,021,722 at October 31, 2004. This resulted in an
impairment of $977,799 which is included in the consolidated statement of
operations for the year ended October 31, 2004.

During July 2005, the Company performed its review, and it was determined that
the unamortized film costs exceeded the Film's fair value. The conclusion was
based upon information the Company received from the film's distributor relating
to lower than expected sales. As a result of this review, the Company wrote-down
the remaining carrying value attributed to the Film to $0. This resulted in an
impairment of $1,009,777 which is included in the consolidated statement of
operations for the year ended October 31, 2005.

INCOME TAXES

Income taxes are accounted for in accordance with Statement of Financial
Accounting Standards No. 109, "Accounting for Income Taxes" ("SFAS No. 109").
SFAS No. 109 employs an asset and liability method of accounting for income
taxes. Under the asset and liability method, deferred income taxes are
recognized for tax consequences of temporary differences by applying enacted
statutory tax rates applicable to future years to the difference between the
financial statement carrying amounts and the tax bases of existing assets and
liabilities. Under SFAS No. 109, the effect on deferred income taxes of a change
in tax rates is recognized in operations in the period that includes the
enactment date.

REVENUE RECOGNITION

The Company recognizes film revenue from the distribution of its feature film
and related products when earned and reasonably estimable in accordance with SOP
00-2. The following conditions must be met in order to recognize revenue in
accordance with SOP 00-2:

         o        persuasive evidence of a sale or licensing arrangement with a
                  customer exists;
         o        the film is complete and, in accordance with the terms of the
                  arrangement, has been delivered or is available for immediate
                  and unconditional delivery;
         o        the license period of the arrangement has begun and the
                  customer can begin its exploitation, exhibition or sale;
         o        the arrangement fee is fixed or determinable; and
         o        collection of the arrangement fee is reasonably assured.

Under a rights Agreement with Lions Gate Entertainment ("LGE") the domestic
distributor for its Film entitled Step Into Liquid, the Company shares with LGE
in the profits of the Film after LGE recovers its marketing, distribution and
other predefined costs and fees. The agreement provides for the payment of
minimum guaranteed license fees, usually payable on delivery of the respective
completed film, that are subject to further increase based on the actual
distribution results in the respective territory. Minimum guaranteed license
fees totaled approximately $27,000 and $95,000 during the years ended October
31, 2005 and 2004, respectively and were recorded as revenue.


                                      F-10



<PAGE>

RIM SEMICONDUCTOR COMPANY AND SUBSIDIARIES
(formerly New Visual Corporation and Subsidiaries)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

RESEARCH AND DEVELOPMENT

Research and development costs are charged to expense as incurred. Amounts
allocated to acquired-in-process research and development costs, from business
combinations, are charged to operations at the consummation of the acquisition.

CAPITALIZED SOFTWARE DEVELOPMENT COSTS

Capitalization of computer software development costs begins upon the
establishment of technological feasibility. Technological feasibility for the
Company's computer software is generally based upon achievement of a detail
program design free of high-risk development issues and the completion of
research and development on the product hardware in which it is to be used. The
establishment of technological feasibility and the ongoing assessment of
recoverability of capitalized computer software development costs require
considerable judgment by management with respect to certain external factors,
including, but not limited to, technological feasibility, anticipated future
gross revenue, estimated economic life and changes in software and hardware
technology.

Amortization of capitalized computer software development costs commences when
the related products become available for general release to customers.
Amortization is provided on a product-by-product basis. The annual amortization
is the greater of the amount computed using (a) the ratio that current gross
revenue for a product bears to the total of current and anticipated future gross
revenue for that product, or (b) the straight-line method over the remaining
estimated economic life of the product.

The Company periodically performs reviews of the recoverability of such
capitalized software costs. At the time a determination is made that capitalized
amounts are not recoverable based on the estimated cash flows to be generated
from the applicable software, the capitalized costs of each software product is
then valued at the lower of its remaining unamortized costs or net realizable
value.

No assurance can be given that the Company's technology will receive market
acceptance. Accordingly it is possible that the carrying amount of the
technology license may be reduced materially in the near future.

The Company has no amortization expense for the years ended October 31, 2005 and
2004 for its capitalized software development costs.

REDEEMABLE SERIES B PREFERRED STOCK

Redeemable Series B Preferred Stock, which includes characteristics of both
liabilities and equity, is classified as a long-term liability in accordance
with the provisions of SFAS No. 150, "Accounting for Certain Financial
Instruments with Characteristics of Both Liabilities and Equity." In April 2005,
the Redeemable Series B Preferred Stock was cancelled in exchange for the
issuance of common stock and a promissory note. See Note 7 for further
discussion.

LOSS PER COMMON SHARE

Basic loss per common share is computed based on weighted average shares
outstanding and excludes any potential dilution. Diluted loss per share reflects
the potential dilution from the exercise or conversion of all dilutive
securities into common stock based on the average market price of common shares
outstanding during the period. No effect has been given to outstanding options,
warrants or convertible debentures in the diluted computation, as their effect
would be anti-dilutive.

The number of potentially dilutive securities excluded from computation of
diluted loss per share was approximately 172,755,614 (see Note 13) and
38,509,190, for the years ended October 31, 2005 and 2004, respectively.


                                      F-11



<PAGE>

RIM SEMICONDUCTOR COMPANY AND SUBSIDIARIES
(formerly New Visual Corporation and Subsidiaries)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

STOCK-BASED COMPENSATION

The Company follows Statement of Financial Accounting Standards No. 123 ("SFAS
No. 123"), "Accounting for Stock-Based Compensation". SFAS No. 123 establishes
accounting and reporting standards for stock-based employee compensation plans.
This statement allows companies to choose between the fair value-based method of
accounting as defined in this statement and the intrinsic value-based method of
accounting as prescribed by Accounting Principles Board Opinion No. 25 ("APB
25"), "Accounting for Stock Issued to Employees".

The Company has elected to continue to follow the accounting guidance provided
by APB 25, as permitted for stock-based compensation relative to the Company
employees. Stock and options granted to other parties in connection with
providing goods and services to the Company are accounted for under the fair
value method as prescribed by SFAS No. 123.

In December 2002, the Financial Accounting Standards Board ("FASB") issued SFAS
No. 148, "Accounting for Stock-Based Compensation - Transition and Disclosure -
an Amendment of FASB Statement No. 123". This statement amends SFAS No. 123 to
provide alternative methods of transition for a voluntary change to the fair
value-based method of accounting for stock-based employee compensation. In
addition, SFAS No.148 amends the disclosure requirements of SFAS No. 123 to
require prominent disclosures in both annual and interim financial statements
about the method of accounting for stock-based employee compensation and the
effect of the method used on reported results. SFAS No. 148 also requires that
those effects be disclosed more prominently by specifying the form, content, and
location of those disclosures.

<TABLE>
                                                              For the years ended October 31,
                                                                  2005             2004
                                                               ------------     ------------
<S>                                                            <C>              <C>
    Net loss, as reported                                      $(6,923,386)     $(5,506,287)
    Add: Stock-based employee compensation expense
         included in reported net loss                                  --               --
    Less: Total stock-based employee compensation expense
          determined under the fair value-based method for
          all awards                                            (1,029,125)        (333,500)
                                                               ------------     ------------

    Net loss, pro-forma                                        $(7,952,511)     $(5,839,787)
                                                               ============     ============
    Basic and Diluted Net Loss per Common Share:

      As reported                                              $     (0.06)     $     (0.07)
                                                               ============     ============
      Pro-forma                                                $     (0.07)     $     (0.07)
                                                               ============     ============
</TABLE>

IMPAIRMENT OF LONG-LIVED ASSETS

Pursuant to SFAS No. 144, "Accounting for the Impairment of Long-Lived Assets
and for Long-Lived Assets to be Disposed of", the Company evaluates its
long-lived assets for financial impairment, and continues to evaluate them as
events or changes in circumstances indicate that the carrying amount of such
assets may not be fully recoverable.

The Company evaluates the recoverability of long-lived assets by measuring the
carrying amount of the assets against the estimated undiscounted future cash
flows associated with them. At the time such evaluations indicate that the
future undiscounted cash flows of certain long-lived assets are not sufficient
to recover the carrying value of such assets, the assets are adjusted to their
fair values.


                                      F-12



<PAGE>

RIM SEMICONDUCTOR COMPANY AND SUBSIDIARIES
(formerly New Visual Corporation and Subsidiaries)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

IMPACT OF RECENTLY ISSUED ACCOUNTING STANDARDS

In January 2003, the FASB issued Interpretation Number 46, "Consolidation of
Variable Interest Entities" ("FIN 46"). This interpretation of Accounting
Research Bulletin ("ARB") No. 51, "Consolidated Financial Statements," provides
guidance for identifying a controlling interest in a variable interest entity
("VIE") established by means other than voting interests. FIN 46 also requires
consolidation of a VIE by an enterprise that holds such a controlling interest.
In December 2003, the FASB completed its deliberations regarding the proposed
modification to FIN 46 and issued Interpretation Number 46(R), "Consolidation of
Variable Interest Entities-an Interpretation of ARB No. 51" ("FIN 46(R)"). The
decisions reached included a deferral of the effective date and provisions for
additional scope exceptions for certain types of variable interest. Application
of FIN 46(R) is required in financial statements of public entities that have
interests in VIEs or potential VIEs commonly referred to as special-purpose
entities for periods ending after December 15, 2003. Application by public small
business issuers' entities is required in all interim and annual financial
statements for periods ending after December 15, 2004. The adoption of this
pronouncement did not have an impact on the Company's consolidated financial
position, results of operations or cash flows.

In April 2005, the Securities and Exchange Commission issued release number
33-8568, AMENDMENT TO RULE 4-01(A) OF REGULATION S-X REGARDING THE COMPLIANCE
DATE FOR STATEMENT OF FINANCIAL ACCOUNTING STANDARDS NO. 123 (REVISED 2004),
SHARE BASED PAYMENT. This release delays the date for compliance with Statement
of Financial Accounting Standards No. 123 (Revised 2004), "Share Based Payment"
("SFAS 123R") to the registrant's first interim or annual reporting period
beginning on or after December 15, 2005. SFAS 123R requires public entities to
measure the cost of employee services received in exchange for an award of
equity instruments based on the grant-date fair value of the award, and no
longer allows companies to apply the intrinsic value based method of accounting
for stock compensation described in APB 25. The Company has elected to early
adopt SFAS 123R and will apply its requirements as of November 1, 2005.

The Company has elected to use the modified prospective application transition
method and accordingly, measurement and attribution of compensation cost for
awards that are outstanding as of the adoption date will be based on the
original grant date fair value and the same attribution method that the Company
previously used. The Company expects these transition provisions to result in
the recognition of approximately $250,000 in stock based compensation expense
during the three months ended January 31, 2006 related to the vesting of options
previously granted in April 2005 as further discussed in Note 13.

The Company estimates that options granted to the Company's Chief Executive
Officer and Executive Vice President in January 2006, as further discussed in
Note 17, will result in stock based compensation expense of approximately
$575,000 under the measurement requirements of SFAS 123R and expects this to be
recognized through the service period of July 2006.

In June 2005, the FASB published Statement of Financial Accounting Standards No.
154, "Accounting Changes and Error Corrections" ("SFAS 154"). SFAS 154
establishes new standards on accounting for changes in accounting principles.
Pursuant to the new rules, all such changes must be accounted for by
retrospective application to the financial statements of prior periods unless it
is impracticable to do so. SFAS 154 completely replaces Accounting Principles
Bulletin No. 20 and SFAS 3, though it carries forward the guidance in those
pronouncements with respect to accounting for changes in estimates, changes in
the reporting entity, and the correction of errors. The requirements in SFAS 154
are effective for accounting changes made in fiscal years beginning after
December 15, 2005. The Company will apply these requirements to any accounting
changes after the implementation date.

The Emerging Issues Task Force ("EITF") reached a tentative conclusion on EITF
Issue No. 05-1, "Accounting for the Conversion of an Instrument That Becomes
Convertible upon the Issuer's Exercise of a Call Option" that no gain or loss
should be recognized upon the conversion of an instrument that becomes
convertible as a result of an issuer's exercise of a call option pursuant to the
original terms of the instrument. The application of this pronouncement is not
expected to have an impact on the Company's consolidated financial position,
results of operations, or cash flows.


                                      F-13



<PAGE>

RIM SEMICONDUCTOR COMPANY AND SUBSIDIARIES
(formerly New Visual Corporation and Subsidiaries)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

IMPACT OF RECENTLY ISSUED ACCOUNTING STANDARDS (CONTINUED)

In June 2005, the FASB ratified EITF Issue No. 05-2, "The Meaning of
'Conventional Convertible Debt Instrument' in EITF Issue No. 00-19, 'Accounting
for Derivative Financial Instruments Indexed to, and Potentially Settled in, a
Company's Own Stock'" ("EITF No. 05-2"), which addresses when a convertible debt
instrument should be considered 'conventional' for the purpose of applying the
guidance in EITF No. 00-19. EITF No. 05-2 also retained the exemption under EITF
No. 00-19 for conventional convertible debt instruments and indicated that
convertible preferred stock having a mandatory redemption date may qualify for
the exemption provided under EITF No. 00-19 for conventional convertible debt if
the instrument's economic characteristics are more similar to debt than equity.
EITF No. 05-2 is effective for new instruments entered into and instruments
modified in periods beginning after June 29, 2005. The Company has applied the
requirements of EITF No. 05-2 since the required implementation date. The
adoption of this pronouncement did not have an impact on the Company's
consolidated financial position, results of operations or cash flows.

EITF Issue No. 05-4 "The Effect of a Liquidated Damages Clause on a Freestanding
Financial Instrument Subject to EITF Issue No. 00-19, 'Accounting for Derivative
Financial Instruments Indexed to, and Potentially Settled in, a Company's Own
Stock'" ("EITF No. 05-4") addresses financial instruments, such as stock
purchase warrants, which are accounted for under EITF 00-19 that may be issued
at the same time and in contemplation of a registration rights agreement that
includes a liquidated damages clause. The consensus of EITF No. 05-4 has not
been finalized. In May 2005, the Company entered into a private placement
agreement for convertible debentures, a registration rights agreement and
warrants in connection with the private placement (see Note 9). Based on the
interpretive guidance in EITF Issue No. 05-4, view C, due to certain factors,
including an uncapped liquidated damages provision in the registration rights
agreement, the Company determined that the embedded conversion option related to
these convertible debentures and the registration rights are derivative
liabilities. Accordingly, the fair value of the embedded conversion option of
$1,500,000 was recorded as a liability as of the closing of the sale of these
convertible debentures. Due to various factors, including substantial
conversions of these convertible debentures and the registration statement
becoming effective on August 1, 2005, the value of the registration rights was
deemed to be de minimus.

In September 2005, the FASB ratified EITF Issue No. 05-7, "Accounting for
Modifications to Conversion Options Embedded in Debt Instruments and Related
Issues" ("EITF No. 05-7"), which addresses whether a modification to a
conversion option that changes its fair value affects the recognition of
interest expense for the associated debt instrument after the modification and
whether a borrower should recognize a beneficial conversion feature, not a debt
extinguishment, if a debt modification increases the intrinsic value of the debt
(for example, the modification reduces the conversion price of the debt). EITF
No. 05-7 is effective for the first interim or annual reporting period beginning
after December 15, 2005. The Company will adopt EITF No. 05-7 as of the
beginning of the Company's interim reporting period that begins on February 1,
2006. The Company is currently in the process of evaluating the effect that the
adoption of this pronouncement will have on its financial statements.

In September 2005, the FASB ratified EITF Issue No. 05-8, "Income Tax
Consequences of Issuing Convertible Debt with a Beneficial Conversion Feature"
("EITF No. 05-8"), which addresses the treatment of convertible debt issued with
a beneficial conversion feature as a temporary difference under the guidance in
SFAS 109. In addition, deferred taxes recognized for a temporary difference of
debt with a beneficial conversion feature should be recognized as an adjustment
of additional paid-in capital. Entities should apply the guidance in EITF No.
05-8 in the first interim or annual reporting period that begins after December
15, 2005. Its provisions should be applied retrospectively under the guidance in
SFAS 154 to all convertible debt instruments with a beneficial conversion
feature accounted for under the guidance in EITF No. 00-27 "Application of EITF
Issue No. 98-5 'Accounting for Convertible Securities with Beneficial Conversion
Features or Contingently Adjustable Conversion Ratios.'" The Company has applied
the requirements of EITF No. 05-8 to all previously existing convertible debt
instruments with a beneficial conversion feature and will apply the requirements
of EITF No. 05-8 beginning on February 1, 2006 for all new convertible debt
instruments with a beneficial conversion feature. The application of this
pronouncement for new convertible debt instruments with a beneficial conversion
feature is not expected to have an impact on the Company's consolidated
financial position, results of operations or cash flows.

RECLASSIFICATIONS

Certain prior year balances have been reclassified to conform to the current
year presentation.



                                      F-14



<PAGE>

RIM SEMICONDUCTOR COMPANY AND SUBSIDIARIES
(formerly New Visual Corporation and Subsidiaries)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


NOTE 3 - PROPERTY AND EQUIPMENT


Property and equipment, consists of the following:

                                                        At October 31,
                                                        --------------
                                                    2005                2004
                                                ------------        ------------

Furniture and fixtures                          $     6,525         $    54,097
Camera equipment                                         --             298,109
Office equipment                                      4,636             109,515
                                                ------------        ------------
                                                     11,161             461,721
Less: accumulated depreciation                        1,239             437,848
                                                ------------        ------------
Total                                           $     9,922         $    23,873
                                                ============        ============

For the years ended October 31, 2005 and 2004, depreciation expense was $25,112
and $17,428, respectively.


NOTE 4 - TECHNOLOGY LICENSE AND DEVELOPMENT AGREEMENT

On April 17, 2002, the Company entered into a development and license agreement
with Adaptive Networks, Inc. ("Adaptive") to acquire a worldwide, perpetual
license to Adaptive's Powerstream (TM) technology, intellectual property, and
patent portfolio for use in products relating to all applications in the field
of the copper telephone wire telecommunications network. In consideration of the
grant of the license, the Company assumed certain debt obligations of Adaptive
to Zaiq Technologies, Inc. ("Zaiq") and TLSI, Inc. ("TLSI"). The Company then
issued 3,192 shares of its Redeemable Series B Preferred Stock, valued at
$3,192,000, with a liquidation preference of $1,000 per share and paid $250,000
in cash to Zaiq in satisfaction of the Zaiq debt. The Company also issued
624,480 shares of common stock, valued at $750,000, to TLSI in satisfaction of
the TLSI debt. The value of the consideration issued by the Company in
connection with the license agreement totaled $4,192,000.

The Company also paid Adaptive a development fee of $1,559,000 for software
development services and agreed to pay Adaptive a royalty equal to a percentage
of the net sales of products sold by the Company and license revenue received by
the Company.

The Company capitalized the consideration issued in connection with the license
fee and development fee totaling $5,751,000. The Company's technical employees
and advisors concluded that as of March 2002 the Company had established
technological feasibility for its ultimate telecommunication product to be
marketed. Additional development services and testing, to be performed
principally by HelloSoft, Inc. ("HelloSoft") of San Jose, California, a third
party consultant, are necessary to complete the commercialization of the product
development. The Company and HelloSoft are parties to a services agreement,
dated as of March 31, 2004, under which HelloSoft provides continuing
development services relating to the Company's semiconductor chipset. See Note
15 for further details.

In December 2005, the Company made available to target customers the E30 Release
1.3. No assurance can be given that the Company can complete development of such
technology, or that with respect to such technology that is fully developed, it
can be commercialized on a large-scale basis or at a feasible cost. No assurance
can be given that such technology will receive market acceptance. Accordingly it
is possible that the carrying amount of the technology license may be reduced
materially in the near future.


                                      F-15



<PAGE>

RIM SEMICONDUCTOR COMPANY AND SUBSIDIARIES
(formerly New Visual Corporation and Subsidiaries)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 4 - TECHNOLOGY LICENSE AND DEVELOPMENT AGREEMENT (CONTINUED)

The agreement with Adaptive was amended November 26, 2004. Under the Amended
Agreement, the Company has accepted from Adaptive final delivery of the source
code, the intellectual property rights related thereto and other materials
related to certain technologies that were to be developed by Adaptive. The
Company and Adaptive's joint ownership rights will continue with respect to any
improvements, developments, discoveries or other inventions that are developed
under the agreement with HelloSoft. In addition, under the Amended Agreement,
Adaptive has agreed that the first $5 million of royalties otherwise payable by
the Company to Adaptive thereunder from proceeds of the sale or license of the
semiconductor technologies are to be offset by a credit in the same amount.


NOTE 5 - FILM IN DISTRIBUTION

In April 2000, the Company entered into a joint venture production agreement to
produce a feature length film ("Step Into Liquid") for theatrical distribution.
The Company agreed to provide 100% of the funding for the production in the
amount of up to $2,250,000 and, in exchange, received a 50% share in all net
profits from worldwide distribution and merchandising, after receiving funds
equal to its initial investment of up to $2,250,000. As of October 31, 2005 the
Company has funded a net of $2,335,101 for completion of the film. The film is
currently in foreign and DVD distribution.

Based upon information received from the Company's film distributor in January
2005, the Company recorded an impairment charge of $977,799 during the year
ended October 31, 2004 which reduced the carrying value of its film in
distribution to $1,021,722. The impairment charge was due to higher than
expected distribution costs and lower than expected average retail selling price
for the DVD. In addition, based upon information received from the Company's
film distributor in July 2005, which indicated that sales were lower than
expected, the Company recorded an impairment charge of $1,009,777 during the
year ended October 31, 2005 which reduced the carrying value of its film in
distribution to $0.

The Company recognized revenues of $39,866 and $287,570 for the years ended
October 31, 2005 and 2004, respectively. The Company had amortization costs of
$11,945 and $142,691 for the years ended October 31, 2005 and 2004,
respectively.

NOTE 6 - DEFERRED FINANCING COST

At October 31, 2005, deferred financing cost consists of costs incurred and
warrants issued in connection with the sale of $3,500,000 of 2005 Debentures,
$1,350,000 of 7% convertible debentures, and a promissory note:

                      Deferred financing cost          $1,006,916
                      Less: accumulated amortization     (680,609)
                                                       ----------
                      Deferred financing cost, net     $  326,307
                                                       ==========

Costs incurred in connection with debt financings are capitalized as deferred
financing costs and amortized over the term of the related debt. If any or all
of the related debt is converted or repaid prior to its maturity date, a
pro-rata share of the related deferred financing costs are written off and
recorded as amortization expense in the period of the conversion or repayment in
the consolidated statement of operations. For the years ended October 31, 2005
and 2004, amortization of deferred financing cost was $602,182 and $78,427,
respectively.


                                      F-16



<PAGE>

RIM SEMICONDUCTOR COMPANY AND SUBSIDIARIES
(formerly New Visual Corporation and Subsidiaries)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


NOTE 7 - EXCHANGE AGREEMENT

In April 2005, the Company entered into an Exchange Agreement (the "Exchange
Agreement") with Zaiq Technologies, Inc. ("Zaiq"), pursuant to which the Company
issued 4,651,163 shares of common stock with a value of $744,186 and a
promissory note in the principal amount of $2,392,000 (see Note 10) in exchange
for the surrender by Zaiq of 3,192 shares of Redeemable Series B Preferred
Stock. The Company issued the Redeemable Series B Preferred Stock to Zaiq
pursuant to a Receivables Purchase and Stock Transfer Restriction Agreement
dated as of April 17, 2002. These shares had an aggregate liquidation preference
of $3,192,000, constituted all of the Redeemable Series B Preferred Stock issued
and outstanding as of the date of the Exchange Agreement, and were cancelled
upon the closing of the Exchange Agreement. The fair value of the common stock
and promissory note on the closing date was determined to be less than the
aggregate liquidation preference of the Redeemable Series B Preferred Stock and
accordingly a gain of $55,814 was recognized during the year ended October 31,
2005.

The Exchange Agreement provides that, subject to certain exceptions, if the
Company, at any time prior to the payment in full of the amount due under the
promissory note, issues common stock or securities convertible into or
exercisable for shares of common stock at a price below the fair market value of
the common stock or such securities (a "Below Market Issuance"), then the
Company will issue to Zaiq additional shares of common stock in an amount that
is determined in accordance with a formula that takes into consideration both
the number of shares of common stock or other securities issued and the total
consideration received by the Company in the Below Market Issuance. During the
year ended October 31, 2005, the Company issued 529,311 additional shares of
common stock with an aggregate par value of $529 and a fair value of $18,504 to
Zaiq as a result of Below Market Issuances.

Under the terms of the agreements with Zaiq, a portion of the proceeds of any
new financing consummated by the Company through the first anniversary of the
agreement are to be applied to the prepayment of the note. See Note 10.

In December 2005, the Company entered into an agreement with Zaiq to repurchase
shares of common stock held of record by Zaiq and retire the promissory note
with Zaiq at a discount. See Note 17 for further details.

NOTE 8 - CONVERTIBLE NOTES PAYABLE

The Company entered into several convertible promissory note agreements with
various trusts and individuals to fund the operations of the Company. The
Company agreed to pay the principal and an additional amount equal to 50% of the
principal on all notes below except for one note for $10,000 which accrues
interest at the rate of 9% per annum and the March 2005 convertible promissory
note discussed in the following paragraph. Except for these two notes, the notes
are due when the Company reaches certain milestones from the distribution of its
motion picture. The notes (with the exception of the March 2005 convertible
promissory note) may be converted at any time, in whole or in part, into that
number of fully paid and non-assessable shares of common stock at conversion
prices ranging from $.33 to $1.00. The March 2005 convertible promissory note
may be converted into shares of common stock at a conversion price per share
equal to the closing price of the common stock on the Over-the-Counter Bulletin
Board on the date of conversion.


                                      F-17



<PAGE>

RIM SEMICONDUCTOR COMPANY AND SUBSIDIARIES
(formerly New Visual Corporation and Subsidiaries)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


NOTE 8 - CONVERTIBLE NOTES PAYABLE (CONTINUED)

The outstanding convertible notes are summarized in the table below:

                                                           At October 31,
                                                        2005             2004
                                                        ----             ----
     Note payable (1)                               $   97,000       $  140,000
     Notes payable (ten notes) (2)                     478,000          483,000
     Note payable, 9% interest (3)                      10,000           10,000
     Notes payable (four notes), 12% interest (4)           --          180,000
     Notes payable (eight notes), 12% (5)                   --          100,000
     Note payable - related party(6)                   172,872               --
                                                    ----------------------------
     TOTAL                                          $  757,872       $  913,000

     less: unamortized debt discount                   (20,875)              --
                                                    ----------------------------
                                                    $  736,997       $  913,000
                                                    ============================

     (1)  Due when receipts received by the Company from the joint venture
          exceed $375,000.
     (2)  Due when receipts received by the Company from the joint venture
          exceed $2,250,000.
     (3)  Due when receipts received by the Company from the joint venture
          exceed $750,000.
     (4)  Notes had an original due date of November 21, 2003. The note holders
          extended the due date until January 7, 2004 in exchange for 160,000
          shares of common stock. In January 2004 the Company paid $180,000 of
          principal payments and further extended the remaining notes until the
          next round of financing was completed. The remaining principal of
          $180,000 was repaid in June 2005 from the proceeds of the private
          placement of the 2005 Debentures further discussed in Note 9, and
          accrued interest of $1,800 was paid on the 21st of each month through
          May 2005.
     (5)  On September 21, 2004, the Company entered into eight identical loan
          agreements totaling $100,000. The loan is evidenced by a promissory
          note dated September 21, 2004 issued by the Company to the lender. The
          principal amount of the loan and any accrued and unpaid interest was
          due and payable on June 21, 2005. These notes and accrued interest
          were repaid in June 2005 from the proceeds of the private placement of
          the 2005 Debentures further discussed in Note 9.
     (6)  In March 2005, the Company issued in favor of the Company's executive
          vice president, a non-interest bearing convertible promissory note in
          the principal amount of $383,911. The convertible promissory note was
          issued in evidence of the Company's obligation for deferred
          compensation. In accordance with APB 21, imputed interest (at an
          effective rate of 15%) was calculated to arrive at the fair value of
          the convertible promissory note. The difference between the face
          amount and the present value upon issuance of the convertible
          promissory note is shown as a discount that is amortized as interest
          expense over the life of the convertible promissory note. For the year
          ended October 31, 2005 amortization of debt discount on this note was
          $12,639. The convertible promissory note is payable in monthly
          installments, on the first day of each month, beginning on April 1,
          2005. Each month, the Company must pay to the executive vice president
          an amount not less than the monthly base salary paid to the Company's
          chief executive officer. However, if the Company determines in its
          sole discretion that it has the financial resources available, it may
          pay up to $20,833 per month. The Company made payments of $211,039
          during the year ended October 31, 2005.




                                      F-18



<PAGE>

RIM SEMICONDUCTOR COMPANY AND SUBSIDIARIES
(formerly New Visual Corporation and Subsidiaries)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 9 - CONVERTIBLE DEBENTURES

2005 DEBENTURES
---------------
On May 26, 2005, the Company completed a private placement to certain individual
and institutional investors of $3,500,000 in principal amount of its three-year
7% Senior Secured Convertible Debentures (the "2005 Debentures"). All principal
is due and payable on May 26, 2008. The 2005 Debentures are convertible into
shares of common stock at a conversion price equal to the lower of (x) 70% of
the 5 day volume weighted average price of the Company's common stock
immediately prior to conversion or (y) if the Company entered into certain
financing transactions subsequent to the closing date, the lowest purchase price
or conversion price applicable to that transaction.

The Company received net proceeds of approximately $3.11 million, following
repayment of offering related expenses. These offering related expenses were
recorded as deferred financing costs and are being charged to interest expense
(See Note 6). The Company used a portion of the proceeds to repay the principal
and accrued interest on notes payable and convertible notes payable (See Notes 8
and 10).

Interest on the 2005 Debentures accrues at the rate of 7% per annum and is
payable on a bi-annual basis, commencing December 31, 2005, or on conversion and
may be paid, at the option of the Company, either in cash or in shares of common
stock. The Company may prepay the amounts outstanding on the 2005 Debentures by
giving advance notice and paying an amount equal to 120% of the sum of (x) the
principal being prepaid plus (y) the accrued interest thereon.

In connection with the issuance of the 2005 Debentures, the Company issued to
the purchasers thereof warrants (the "Investor Warrants") to purchase 33,936,650
shares of common stock, with warrants for 11,312,220 shares being exercisable
through the last day of the month in which the first anniversary of the
effective date of the Registration Statement occurs (August 31, 2006) at a per
share exercise price of $0.1547 and warrants for 22,624,430 shares being
exercisable through the last day of the month in which the third anniversary of
the effective date of the Registration Statement occurs (August 31, 2008) at a
per share exercise price of $0.3094.

Holders of the Investor Warrants are entitled to exercise those warrants on a
cashless basis following the first anniversary of issuance if the Registration
Statement is not in effect at the time of exercise.

The gross proceeds of $3,500,000 were recorded net of a debt discount of
$3,500,000. The debt discount consisted of a $2,000,000 value related to the
Investor Warrants and a $1,500,000 value related to the embedded conversion
option in accordance with EITF issue No. 00-19 "Accounting for Derivative
Financial Instruments Indexed to and Potentially Settled in a Company's Own
Stock" and EITF issue No. 05-04, view C "The Effect of a Liquidated Damages
Clause on a Freestanding Financial Instrument". Due to certain factors,
including an uncapped liquidated damages provision in the registration rights
agreement, the Company determined that the embedded conversion option related to
the 2005 Debentures and the registration rights are derivative liabilities.
Accordingly, the fair value of the embedded conversion option of $1,500,000 was
recorded as a liability as of the closing of the sale of the 2005 Debentures.
Due to various factors, including substantial conversions of the 2005 Debentures
and the registration statement becoming effective on August 1, 2005, the value
of the registration rights was deemed to be de minimus.

As of October 31, 2005, the derivative liability of $1,500,000 was reduced to
$778,167 as a result of conversions of the 2005 Debentures during the period
ended October 31, 2005. Accordingly, $721,833 was reflected as a subsequent
reclassification to stockholders' equity during the period ended October 31,
2005.

The Company followed the guidelines in EITF issue No. 05-04, view C and
classified the fair value of the Investor Warrants as equity and separately
valued the derivative liability related to the registration rights.

No gain or loss was deemed necessary during the period ended October 31, 2005,
as the fair value of the derivative liabilities did not fluctuate in value.

                                      F-19



<PAGE>

RIM SEMICONDUCTOR COMPANY AND SUBSIDIARIES
(formerly New Visual Corporation and Subsidiaries)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 9 - CONVERTIBLE DEBENTURES (CONTINUED)

In connection with the issuance of the 2005 Debentures, the Company also issued
to a placement agent warrants to purchase up to 5,656,108 shares of Common Stock
(the "Compensation Warrants") valued at $319,066. This amount was recorded as a
deferred financing cost and is being charged to interest expense over the term
of the 2005 Debentures. Warrants to purchase up to 2,262,443 shares are
exercisable through the last day of the month in which the third anniversary of
the effective date of the Registration Statement occurs (August 31, 2008) at a
per share exercise price of $0.3094. Warrants to purchase up to 2,262,443 shares
are exercisable through the last day of the month in which the third anniversary
of the closing occurs (May 31, 2008) at a per share exercise price of $0.1547.
Warrants to purchase up to 1,131,222 shares are exercisable through the last day
of the month in which the first anniversary of the effective date of the
Registration Statement occurs (August 31, 2006) at a per share exercise price of
$0.1547. The Compensation Warrants are otherwise exercisable on substantially
the same terms and conditions as the Investor Warrants.

To secure the Company's obligations under the 2005 Debentures, the Company
granted a security interest in substantially all of its assets, including
without limitation, its intellectual property, in favor of the investors under
the terms and conditions of a Security Interest Agreement dated as of the date
of the 2005 Debentures. The security interest terminates upon the earlier of (i)
the date on which less than one-third of the original principal amount of the
2005 Debentures issued on the closing date are outstanding or (ii) payment or
satisfaction of all of the Company's obligations under the loan agreement.
Subsequent to October 31, 2005, condition (i) was met and therefore the security
interest terminated.

A registration statement (the "Registration Statement") covering the Common
Stock issuable upon conversion of the 2005 Debentures, the Investor Warrants and
the Compensation Warrants referred to above was declared effective on August 1,
2005.

As a result of obtaining the 2005 Debentures, 1,000,000 stock options granted to
each of the Company's chief executive officer and executive vice president in
April 2005 became fully vested and non-forfeitable, as discussed in Note 13.

During the period ended October 31, 2005, $1,684,289 of principal amount of 2005
Debentures plus accrued interest of $36,331 were converted into shares of common
stock.

Included in interest expense for the year ended October 31, 2005 is $1,946,031
related to the amortization of the debt discount related to these debentures.

The 2005 Debentures are summarized below at October 31, 2005:

                                   Outstanding
                                    Principal     Unamortized    Net Carrying
                                      Amount     Debt Discount      Value
                                    ----------   ------------    ------------
        Long-term portion           $1,815,711    $ 1,553,969     $ 261,742

7% DEBENTURES
-------------
In December 2003, the Company completed a private placement to certain private
and institutional investors of $1 million in principal amount of its three year
7% Convertible Debentures (the "7% Debentures") and signed commitments to place
an additional $1,000,000 of such Debentures (the "Additional Debentures") upon
the effectiveness of a registration statement covering the common stock
underlying the 7% Debentures. The registration statement was originally filed on
February 11, 2004. In April and May 2004, certain holders of the Debentures
waived the registration statement effectiveness condition and purchased an
aggregate of $350,000 in principal amount of Debentures, satisfying their post
effectiveness commitments. The registration statement was declared effective by
the Securities and Exchange Commission on August 16, 2004 solely with respect to
the common stock underlying the $1 million in principal amount of 7% Debentures
and related securities issued as of December 2003. As the registration statement
covering the common stock underlying the Additional Debentures was not declared
effective by the specified date of June 28, 2004, the Company will not be
issuing Additional Debentures for the remaining $650,000 under this transaction.


                                      F-20



<PAGE>

RIM SEMICONDUCTOR COMPANY AND SUBSIDIARIES
(formerly New Visual Corporation and Subsidiaries)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 9 - CONVERTIBLE DEBENTURES (CONTINUED)

In connection with the issuance of the 7% Debentures in December 2003, the
Company issued five-year warrants to purchase up to 6,666,667 shares of the
Company's Common Stock, at a per share exercise price of $0.25, subject to
cashless exercise provisions. In connection with the issuance of the additional
7% Debentures in April and May 2004, the Company issued five-year warrants to
purchase up to 2,333,332 shares of the Company's Common Stock, at a per share
exercise price of $0.25, subject to cashless exercise provisions.

The holders of the 7% Debentures can convert their debt into shares of the
Company's common stock at $.15 per share subject to certain anti-dilution
adjustments (stock splits, redemptions, mergers, and certain other
transactions).

Accrued interest under the 7% Debentures may be paid in cash or common stock. In
the event of an uncured default, as defined, or a non-permitted sale of
securities, the holders of the 7% Debenture can require the Company to redeem
their debentures. Providing that the certain conditions are met, the 7%
Debentures automatically convert into common shares on the third anniversary of
issuance. In addition, under certain circumstances, the Company can require the
conversion of the 7% Debentures before such time.

The gross proceeds of the $1,000,000 in December of 2003 were allocated 57.73%
or $577,259 to the debentures and 42.27% or $422,741 to the warrants. The
conversion price of the debentures was below the market price of the Company's
common stock at December 31, 2003, which resulted in a beneficial conversion
feature relating to the first $1,000,000 of $577,259. In accordance with EITF
00-27 the amount allocated to the beneficial conversion feature was limited to
the net proceeds of the offering less the value allocated to the warrants issued
to the purchasers.

The gross proceeds of the $100,000 in April of 2004 were allocated 52.66% or
$52,659 to the debentures and 47.34% or $47,341 to the warrants. The conversion
price of the debentures was below the market price of the Company's common stock
at April 20, 2004, which resulted in a beneficial conversion feature of $52,659.
In accordance with EITF 00-27 the amount allocated to the beneficial conversion
feature was limited to the net proceeds of the offering less the value allocated
to the warrants issued to the purchasers.

The gross proceeds of the $250,000 in May of 2004 were allocated 56.87% or
$142,186 to the debentures and 43.13% or $107,814 to the warrants. The
conversion price of the debentures was below the market price of the Company's
common stock at May 7, 2004, which resulted in a beneficial conversion feature
of $142,186. In accordance with EITF 00-27 the amount allocated to the
beneficial conversion feature was limited to the net proceeds of the offering
less the value allocated to the warrants issued to the purchasers.

In connection with this private placement, the Company issued to the placement
agent warrants to purchase 900,000 shares of the Company's common stock valued
at $121,018 and incurred $144,822 of other debt issuance costs. Such amount was
recorded as deferred financing costs and is being charged to interest expense
over the term of the loan. The warrants to purchase 666,667 shares of common
stock expire on December 31, 2008 and the warrants to purchase 66,666 shares of
common stock expire on April 20, 2009 and the warrants to purchase 166,667
shares of common stock expire on May 7, 2009. In each case, the warrants are
exercisable at $.15 per share.

The Company paid in full ($300,000 plus $3,540 of accrued interest) the 7%
convertible debenture issued on October 31, 2003 with a maturity date of April
30, 2004 out of the proceeds it received from the above December 31, 2003
private placement.


                                      F-21



<PAGE>

RIM SEMICONDUCTOR COMPANY AND SUBSIDIARIES
(formerly New Visual Corporation and Subsidiaries)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 9 - CONVERTIBLE DEBENTURES (CONTINUED)

Under the agreements with the purchasers of the December 2003 Debentures, the
Company is obligated to pay to the Debenture holders liquidated damages
associated with the late filing of the Registration Statement and the missed
Registration Statement required effective date of March 30, 2004. Liquidated
damages are equal to (x) 2% of the principal amount of all the Debentures during
the first 30-day period following late filing or effectiveness and (y) 3% of the
principal amount of all Debentures for each subsequent 30-day period (or part
thereof). These liquidated damages aggregated to $160,000. Accrued liquidated
damages as of October 31, 2005 was $37,550. At their option, the Debenture
holders are entitled to be paid such amount in cash or shares of Common Stock at
a per share rate equal to the effective conversion price of the Debentures,
which is currently $0.15. 803,331 shares of common stock valued at $98,450 were
issued during the year ended October 31, 2005.

During the year ended October 31, 2005, $907,500 of principal amount plus
accrued interest of $73,336 were converted into shares of common stock. During
the year ended October 31, 2004, $317,500 of principal amount plus accrued
interest of $13,945 were converted into shares common stock.

The 7% Debentures are summarized below:

                                   Outstanding
                                    Principal     Unamortized    Net Carrying
                                      Amount     Debt Discount      Value
                                    ----------   ------------    ------------
        Long-term portion           $ 125,000     $   47,617     $    77,383

The remaining 7% Debentures outstanding at October 31, 2005 were originally
issued in December 2003 and are due and payable in December 2006.


NOTE 10 - NOTES PAYABLE

<TABLE>
The Company has the following notes payable outstanding at October 31:

                                                                       2005             2004
                                                                  ------------     ------------
<S>                                                               <C>              <C>
Note payable (five individual notes with identical terms),
  unsecured, 6% interest, due on demand with three days notice    $   256,886      $   256,886
Note payable, 10% interest, unsecured, due on demand with
  three days notice (1)                                               443,451          483,424
Note payable, unsecured, 15% interest, due March 24, 2005 (2)              --          250,000
Note payable (3)                                                       12,000           12,000
Note payable (4)                                                    1,229,870               --
                                                                  ------------     ------------
     TOTAL                                                        $ 1,942,207      $ 1,002,310

     Less: current portion of notes payable                        (1,834,073)      (1,002,310)
                                                                  ------------     ------------
     Long-term portion of notes payable                           $   108,134      $        -0-
                                                                  ============     ============
</TABLE>

   (1)  Outstanding principal of $39,973 and interest of $110,027 was paid in
        June 2005 from the proceeds of the private placement of the 2005
        Debentures further discussed in Note 9.

   (2)  On September 24, 2004, the Company entered into a loan agreement with
        a stockholder pursuant to which the Company borrowed $250,000. The
        loan is evidenced by a promissory note dated as of September 24, 2004.
        The Company received net proceeds of $220,000 following the payment of
        transaction related fees and expenses. The principal amount of the
        loan and any accrued and unpaid interest was due and payable on March
        24, 2005. Interest owing in December 2004 was repaid from a subsequent
        loan made to the Company in December 2004. Outstanding principal of
        $250,000 and interest of $25,068 was paid in June 2005 from the
        proceeds of the private placement of the 2005 Debentures further
        discussed in Note 9.


                                      F-22



<PAGE>

RIM SEMICONDUCTOR COMPANY AND SUBSIDIARIES
(formerly New Visual Corporation and Subsidiaries)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 10 - NOTES PAYABLE (CONTINUED)

   (3)  On March 26, 2004, the Company entered into a loan agreement, pursuant
        to which the Company borrowed $12,000 from the lender. The loan is
        evidenced by an installment note dated as of March 26, 2004. The
        principal amount of the loan and any accrued and unpaid interest at a
        rate of 5% were due and payable on July 26, 2004. On July 26, 2004,
        the lender agreed to extend payment and unpaid accrued interest until
        November 15, 2004. The lender has subsequently agreed to modify the
        repayment terms such that the principal and interest are due on demand
        with three days notice, however the notice may not occur before
        November 15, 2005.

   (4)  In April 2005, the Company issued a promissory note in connection with
        the cancellation of the Redeemable Series B Preferred Stock (see Note 7)
        which bears interest at the rate of 7% per annum. The outstanding
        principal amount of the promissory note and interest accrued thereon is
        due and payable in four equal quarterly installments beginning on the
        first anniversary of the date of the promissory note. Unless an event of
        default has occurred and is continuing, the principal amount of the
        promissory note is forgiven in the amount of $797,333 on each of the
        six-month and twelve-month anniversaries of the date of the promissory
        note.

        In October 2005, $797,333 of principal was forgiven in accordance with
        these terms. The Company is required to pay to the holder 10% of the
        proceeds of any new financing consummated within 90 days of the date of
        the promissory note and 20% of the proceeds of any new financing
        consummated thereafter through the first anniversary of the promissory
        note in prepayment of the amount due under the promissory note. The
        Company has the right to prepay the outstanding principal amount of the
        promissory note and any accrued interest thereon in whole or in part
        without penalty or premium at any time. During the year ended October
        31, 2005, principal of $364,797 and interest of $27,983 were repaid from
        the proceeds of new financings to comply with the mandatory payment
        provisions of the promissory note. In December 2005, the Company entered
        into an agreement to repay a portion of the principal amount of the
        promissory note with the remaining balance being forgiven. See Note 17
        for further details.

NOTE 11 - ACCOUNTS PAYABLE AND ACCRUED EXPENSES

Accounts payable and accrued expenses consist of the following at October 31:

                                                          2005           2004
                                                      -----------    -----------
Accrued Officers Compensation, bonuses and payroll    $  215,450     $  495,676
Professional fees                                          5,718        537,796
Interest payable                                         611,863        590,390
Accrued liquidated damages                                37,550        136,000
Consulting fees                                           63,414        184,851
Miscellaneous                                             47,838         63,158
                                                      -----------    -----------
                                                      $  981,833     $2,007,871
                                                      ===========    ===========

NOTE 12 - PREFERRED STOCK

REDEEMABLE SERIES B PREFERRED STOCK

On April 10, 2002, the Company amended its Articles of Incorporation and
designated 4,000 shares of its authorized preferred stock as Series B Preferred
Stock, with a liquidation preference of $1,000 per share.

The Company may redeem any or all of the shares of Series B Preferred Stock at
any time or from time to time at a per share redemption price equal to the
preference amount.


                                      F-23



<PAGE>

RIM SEMICONDUCTOR COMPANY AND SUBSIDIARIES
(formerly New Visual Corporation and Subsidiaries)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 12 - PREFERRED STOCK (CONTINUED)

The Series B Preferred Stock are mandatorily redeemable by the Company at the
liquidation preference as follows:

         (i)      Closing of financing transaction of at least $15 million.
         (ii)     Closing of a corporate transaction, (such as a merger,
                  consolidation, reorganization, sale of significant assets,
                  etc.) resulting in a change of control.
         (iii)    In the event the Company completes a financing, which is at
                  least $3 million but less than $15 million, the Company must
                  partially redeem the Series B Preferred Stock based on a
                  fraction, the numerator of which is the net cash proceeds
                  received by the Company, as a result of the financing
                  transaction, and the denominator of which is $15 million.
         (iv)     The Company is obligated to redeem any outstanding Series B
                  Preferred Stock at its liquidation preference, in eight equal
                  quarterly payments, commencing on March 31, 2005 and ending on
                  December 31, 2006.

Holders of Series B Preferred Stock are entitled to receive dividends if, as and
when declared by the Company's Board of Directors in preference to the holders
of its common stock and of any other stock ranking junior to the Series B
Preferred Stock with respect to dividends.

The Company cannot declare or pay any dividend or make any distribution on its
Common Stock unless a dividend or distribution of at least two times the
dividend paid on the common stock is also paid on the Series B Preferred Stock.
Holders of Series B Preferred Stock are also entitled to share pro-rata (based
on the aggregate liquidation preference) in any dividend, redemption or other
distribution made to any other series of the Company's preferred stock. The
Series B Preferred Stock does not have voting rights, except as required by law.

Each share of the Series B Preferred Stock is convertible into shares of the
Company's Common Stock by dividing $1,000 by the conversion price. The
conversion price is the fair market value of the Company's Common Stock at the
time of conversion, but not to be less than $.34 per share, subject to
adjustment, and not to exceed $4.00 per share, subject to adjustment. Holders of
the Series B Preferred Stock were granted piggy-back registration rights to
register common shares reserved for such conversion.

In April 2002, the Company issued 3,192 shares of its Series B Preferred Stock,
with redemption and liquidation preference of $3,192,000, in connection with the
development and license agreement discussed in Note 4. These shares were
subsequently canceled in connection with the Exchange Agreement as discussed in
Note 7. As of October 31, 2005 and 2004, there were 4,000 authorized shares of
Series B Preferred Stock and 0 and 3,192 shares issued and outstanding,
respectively.

SERIES C, SERIES D, SERIES E, SERIES F AND SERIES G CONVERTIBLE PREFERRED STOCK

On February 24, 2003 the Company amended its Articles of Incorporation and
designated 100,000 shares of its authorized preferred stock as Series C
Preferred Stock. On May 16, 2003, the Company amended this designation and fixed
the number of shares designated as Series C Preferred Stock as 57,894,201. On
June 13, 2003 and June 27, 2003, the Company amended its Articles of
Incorporation and designated 9,090,909 Shares of its authorized preferred stock
as Series D Preferred Stock and 25,000 shares of its authorized preferred stock
as Series E Preferred Stock. On August 7, 2003 the Company amended its Articles
of Incorporation and designated 10,297,118 shares of its authorized preferred
stock as Series F Preferred Stock and 10,297,118 shares of its authorized
preferred stock as Series G Preferred Stock.

All of the designated Series C Preferred Stock, Series D Preferred Stock and
Series E Preferred Stock were issued between May and August 2003, to
collateralize proposed loans to the Company that never materialized. By their
terms, the share certificates representing these series are returnable to the
Company upon demand in the event the proposed loans are not completed by January
31, 2004. None of the proposed loans were ever concluded. While certain of the
issued certificates have been returned, certain others remain outstanding
despite the Company's request for their return. However, none of the series C,
D, E, F and G are classified as outstanding as of October 31, 2005 or 2004 as
such shares are issuable upon the funding of the loans.


                                      F-24



<PAGE>

RIM SEMICONDUCTOR COMPANY AND SUBSIDIARIES
(formerly New Visual Corporation and Subsidiaries)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 13 - STOCKHOLDERS' EQUITY (DEFICIENCY)

PREFERRED STOCK AND RIGHTS DIVIDEND

The Company adopted a stockholder rights plan, in which one right was
distributed on August 21, 2000 as a dividend on each outstanding share of common
stock to stockholders of record on that date. Each right will entitle the
stockholders to purchase 1/1000th of a share of a new series of junior
participating preferred stock of the Company at an exercise price of $200 per
right in certain events. The rights expired on August 21, 2004.

COMMON STOCK

Effective November 12, 2003, the Company amended its Articles of Incorporation
and increased the authorized number of shares of common stock from 100,000,000
to 500,000,000.

During the year ended October 31, 2005, the Company issued:

         o        10,289,026 shares of common stock to various investors for
                  cash proceeds of $835,100;
         o        2,837,500 shares of common stock for consulting services
                  valued at $342,000;
         o        5,073,015 shares of common stock for various services valued
                  at $314,667;
         o        2,750,000 shares of common stock to key employees and
                  directors valued at $452,500;
         o        72,763,232 shares of common stock for converted promissory
                  notes, debentures and accrued interest valued at $2,708,956;
         o        803,331 shares of common stock as penalty for delayed
                  filing/effectiveness of a registration statement valued at
                  $98,450;
         o        529,311 shares of common stock in connection with a Below
                  Market Issuance (See Note 7).
         o        422,783 shares of common stock in payment of accounts payable
                  and accrued expenses in the amount of $71,911;
         o        4,651,163 shares of common stock with a fair value of $744,186
                  in exchange for the surrender of Redeemable Series B Preferred
                  Stock valued at $800,000. The Company recognized a gain of
                  $55,814 on the transaction (See Note 7).

During the year ended October 31, 2004, the Company issued

         o        4,907,085 shares of common stock to various investors for cash
                  proceeds of $594,000;
         o        310,003 shares of common stock valued at $49,381 as
                  consideration for the extension of the due date of certain
                  convertible notes payable;
         o        40,000 shares of common stock for deferred compensation of
                  $10,000;
         o        1,003,999 shares of common stock for compensation to officers
                  and employees valued at $231,080;
         o        4,002,227 shares of common stock for consulting services
                  valued at $980,050;
         o        468,047 shares of common stock for services valued at
                  $110,207;
         o        2,209,631 shares of common stock for converted promissory
                  notes and accrued interest valued at $331,445;
         o        283,333 shares of common stock for liquidated damages valued
                  at $24,000;
         o        880,952 shares of common stock for research and development
                  services valued at $92,500.

STOCK OPTION PLANS

STOCK OPTIONS

During 2000, the Board of Directors and the stockholders of the Company approved
the 2000 Omnibus Securities Plan (the "2000 Plan"), which provides for the
granting of incentive and non-statutory options and restricted stock for up to
2,500,000 shares of common stock to officers, employees, directors and
consultants of the Company.

                                      F-25

<PAGE>

RIM SEMICONDUCTOR COMPANY AND SUBSIDIARIES
(formerly New Visual Corporation and Subsidiaries)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 13 - STOCKHOLDERS' EQUITY (DEFICIENCY) (CONTINUED)

STOCK OPTIONS (CONTINUED)

During August of 2001, the Board of Directors of the Company approved the 2001
Stock Incentive Plan (the "2001 Plan" and together with the "2000 Plan", the
Plans), which provides for the granting of incentive and non-statutory options,
restricted stock, dividend equivalent rights and stock appreciation rights for
up to 2,500,000 shares of common stock to officers, employees, directors and
consultants of the Company. The stockholders of the Company ratified the 2000
Plan in May 2000, and the 2001 Plan in July 2002.

In January 2003, the Board of Directors of the Company approved the 2003
Consultant Stock Plan ("2003 Plan"), which provides for the issuance of up to
6,000,000 non-qualified stock options or stock awards to consultants to the
Company. Directors, officers and employees are not eligible to participate in
the 2003 Plan. A total of 3,200,000 shares of common stock have been issued
under the 2003 Plan to four consultants. As of October 31, 2005 no options have
been awarded under the 2003 Plan.

In April 2005, the Company issued to each of its Chief Executive Officer and
Executive Vice President, 1,000,000 shares of common stock, and performance
based options to purchase 7,000,000 shares of restricted common stock at an
exercise price of $0.17, which was equal to the closing price of the common
stock on the Over-the-Counter Bulletin Board on the date of grant. Options to
purchase 1,000,000 shares of restricted common stock vested upon the Company's
consummation of the sale of the 2005 Debentures in May 2005 and options to
purchase 6,000,000 shares of restricted common stock vested subsequent to
year-end in December 2005 upon the Company's release of a beta version of its
semiconductor technologies. 2,325,000 options which were previously granted to
these two individuals were canceled in connection with the issuance of the
2,000,000 shares of restricted common stock. In January 2006, all of the
14,000,000 options were canceled and new options were granted (See Note 17).

As the closing price of common stock at October 31, 2005 was below the exercise
price of these performance based options and therefore the intrinsic value was
$0, no compensation expense has been recorded in connection with these options.

A summary of the Company's stock option activity and related information
follows:

<TABLE>
<S>     <C>
                                                       WEIGHTED                      WEIGHTED
                                                       AVERAGE                       AVERAGE
                                      UNDER            EXERCISE       OUTSIDE        EXERCISE
                                     THE PLANS         PRICE         THE PLANS        PRICE
                                   -------------- ----------------- ------------ --------------
Balance at October 31, 2003          2,188,750        $     1.25      4,192,500    $      2.03
 Options granted:
    In the Plans                            --                --             --             --
    Outside the option plans                --                --             --             --
 Options expired/cancelled:
    In the Plans                       (10,000)       $     2.36             --             --
    Outside the option plans                --                --       (201,250)   $      1.59
 Options exercised in the plans             --                --             --             --
                                    -----------     -------------    -----------   ------------
Balance at October 31, 2004          2,178,750        $     1.25      3,991,250    $      2.11
 Options granted:
    In the Plans                            --                --             --             --
    Outside the option plans                --                --     15,000,000    $      0.17
 Options expired/cancelled:
    In the Plans                    (1,185,000)       $     1.48             --             --
    Outside the option plans                --                --     (3,091,250)   $      1.92
 Options exercised in the plans             --                --             --             --
                                    -----------     -------------    -----------   ------------
Balance at October 31, 2005            993,750        $     0.97     15,900,000    $      0.25
                                    ===========                      ===========

Exercisable at October 31, 2004      2,077,084        $     1.27      3,366,250    $      2.38
                                    ===========                      ===========

Exercisable at October 31, 2005        980,417        $     0.98      3,900,000    $      0.51
                                    ===========                      ===========
</TABLE>

                                      F-26




<PAGE>

RIM SEMICONDUCTOR COMPANY AND SUBSIDIARIES
(formerly New Visual Corporation and Subsidiaries)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 13 - STOCKHOLDERS' EQUITY (DEFICIENCY) (CONTINUED)

STOCK OPTIONS (CONTINUED)

At October 31, 2005, 1,506,250 options are available under the 2000 Plan, 0
options are available under the 2001 Plan and 2,800,000 options or stock awards
are available under the 2003 Plan.

The weighted average fair value at date of grant for options granted during 2005
was $0.09 per option. The fair value of options at date of grant was estimated
using the Black-Scholes option pricing model utilizing the following weighted
average assumptions:

                                                 2005              2004
                                                 ----              ----
     Risk-free interest rates                   3.77%                 -
     Expected option life in years                 3                  -
     Expected stock price volatility              79%                 -
     Expected dividend yield                       0%                 -

The options outstanding and currently exercisable by exercise price at October
31, 2005 are as follows:

<TABLE>
<S>     <C>
    UNDER THE PLANS

             Options Outstanding                           Options Currently Exercisable
    ------------------------------------------------      -------------------------------
                                          Weighted
                              Weighted    Average                             Weighted
                              Average     Remaining                           Average
    Exercise      Number      Exercise    Contractual         Number          Exercise
     Price     Outstanding    Price       Life              Exercisable       Price
    --------- -------------  ----------  -----------       -------------     ----------
      $0.31        40,000       $0.31        6.67              26,667           $0.31
      $0.42       795,000       $0.42        6.32             795,000           $0.42
      $3.92       158,750       $3.92        5.34             158,750           $3.92

    OUTSIDE THE PLANS

             Options Outstanding                           Options Currently Exercisable
    ------------------------------------------------      -------------------------------
                                          Weighted
                              Weighted    Average                             Weighted
                              Average     Remaining                           Average
    Exercise      Number      Exercise    Contractual         Number          Exercise
     Price     Outstanding    Price       Life              Exercisable       Price
    --------- -------------  ----------  -----------       -------------     ----------
  $0.15-$0.17  15,000,000       $0.17        9.00           3,000,000           $0.16
      $0.39       500,000       $0.39        6.32             500,000           $0.39
  $1.02-$1.07      75,000       $1.05        5.97              75,000           $1.05
      $2.30        50,000       $2.30        5.60              50,000           $2.30
      $3.92        50,000       $3.92        5.76              50,000           $3.92
      $4.00       225,000       $4.00        5.06             225,000           $4.00
</TABLE>


WARRANTS GRANTED

On November 1, 2003, the Company granted warrants to purchase 100,000 shares of
its common stock at an exercise price of $.15 in connection with legal services
performed for the Company. The fair value of the stock warrants estimated on the
date of grant using the Black-Scholes option pricing model is $.15 per share or
$21,147.

On December 31, 2003 the Company issued warrants to purchase 6,666,667 shares of
its common stock at an exercise price of $.25 in connection with the placement
of $1,000,000 of 7% Debentures (see Note 9). The fair value of the stock
warrants estimated on the date of grant using the Black-Scholes option pricing
model is approximately $.08 per share or $577,259.


                                      F-27



<PAGE>

RIM SEMICONDUCTOR COMPANY AND SUBSIDIARIES
(formerly New Visual Corporation and Subsidiaries)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


NOTE 13 - STOCKHOLDERS' EQUITY (DEFICIENCY) (CONTINUED)

WARRANTS GRANTED (CONTINUED)

On December 31, 2003 the Company issued a warrant to purchase 666,667 shares of
its common stock at an exercise price of $.15 to the placement agent in
connection with the placement of $1,000,000 of 7% Debentures. The fair value of
the stock warrants estimated on the date of grant using the Black-Scholes option
pricing model is $.14 per share or $93,333 (see Note 9)

The Company granted to four convertible note holders warrants to purchase
120,003 shares of its common stock at an exercise price of $.25 in connection
with the extension of the convertible notes' due date. The fair value of the
stock warrants estimated on the date of grant using the Black-Scholes option
pricing model is $.13 per share or $15,992.

On April 20, 2004 the Company issued warrants to purchase 666,666 shares of its
common stock at an exercise price of $.25 in connection with the placement of
$100,000 of 7% Debentures (see Note 9). The fair value of the stock warrants
estimated on the date of grant using the Black-Scholes option pricing model is
approximately $.08 per share or $52,659.

On April 20, 2004, the Company granted a warrant to purchase 66,666 shares of
its common stock at an exercise price of $.15 to the placement agent in
connection with the placement of $100,000 of 7% Debentures (see Note 9). The
fair value of the stock warrants estimated on the date of grant using the
Black-Scholes option pricing model is $.15 per share or $9,990.

On May 7, 2004 the Company issued warrants to purchase 1,666,666 shares of its
common stock at an exercise price of $.25 in connection with the placement of
$250,000 of 7% Debentures (see Note 9). The fair value of the stock warrants
estimated on the date of grant using the Black-Scholes option pricing model is
approximately $.09 per share or $142,186.

On May 7, 2004, the Company granted a warrant to purchase 166,667 shares of its
common stock at an exercise price of $.15 to the placement agent in connection
with the placement of $250,000 of 7% Debentures (see Note 9). The fair value of
the stock warrants estimated on the date of grant using the Black-Scholes option
pricing model is $.15 per share or $17,695.

On October 1, 2004, the Company granted warrants to purchase 120,000 shares of
its common stock at an exercise price of $.25 in connection with the extension
of four convertible promissory notes that were originally due 11/21/03 and
extended once to January 7, 2004 and extended once again with the due date left
open. The fair value of the stock warrants estimated on the date of grant using
the Black-Scholes option pricing model is $.25 per share or $4,114.

On May 26, 2005, the Company issued warrants to purchase 22,624,430 shares of
its common stock at an exercise price of $.3094 in connection with the placement
of the 2005 Debentures (see Note 9). The fair value of the stock warrants
estimated on the date of grant using the Black-Scholes option pricing model is
approximately $.06 per share or $1,362,324.

On May 26, 2005, the Company issued warrants to purchase 11,312,220 shares of
its common stock at an exercise price of $.1547 in connection with the placement
of the 2005 Debentures (see Note 9). The fair value of the stock warrants
estimated on the date of grant using the Black-Scholes option pricing model is
approximately $.06 per share or $637,676.

On May 26, 2005, the Company granted warrants to purchase 2,262,443 shares of
its common stock at an exercise price of $.3094 to the placement agent in
connection with the placement of the 2005 Debentures (see Note 9). The fair
value of the stock warrants estimated on the date of grant using the
Black-Scholes option pricing model is $.06 per share or $130,710.

On May 26, 2005, the Company granted warrants to purchase 2,262,443 shares of
its common stock at an exercise price of $.1547 to the placement agent in
connection with the placement of the 2005 Debentures (see Note 9). The fair
value of the stock warrants estimated on the date of grant using the
Black-Scholes option pricing model is $.06 per share or $130,710.


                                      F-28



<PAGE>

RIM SEMICONDUCTOR COMPANY AND SUBSIDIARIES
(formerly New Visual Corporation and Subsidiaries)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


NOTE 13 - STOCKHOLDERS' EQUITY (DEFICIENCY) (CONTINUED)

WARRANTS GRANTED (CONTINUED)

On May 26, 2005, the Company granted warrants to purchase 1,131,222 shares of
its common stock at an exercise price of $.1547 to the placement agent in
connection with the placement of the 2005 Debentures (see Note 9). The fair
value of the stock warrants estimated on the date of grant using the
Black-Scholes option pricing model is $.05 per share or $57,646.

On June 23, 2005, the Company granted warrants to purchase 200,000 shares of its
common stock at an exercise price of $.12 in connection with consulting services
performed for the Company. The fair value of the stock warrants estimated on the
date of grant using the Black-Scholes option pricing model is $.06 per share or
$11,776.

WARRANTS EXPIRED

During the year ended October 31, 2005, warrants to purchase 800,000 shares of
common stock expired.

During the year ended October 31, 2004, warrants to purchase 154,943 shares of
common stock expired.


At October 31, 2005, the Company had outstanding warrants to purchase shares of
common stock as follows:

<TABLE>
<S>     <C>
                                              NUMBER OF         EXERCISE
                                               SHARES             PRICE                   EXPIRATION DATE
                                          ---------------------------------------------------------------------
          GRANT DATE
                 June 14, 2001                   50,000         $   2.50                      June 14, 2006
                 June 14, 2001                   25,000             5.00                      June 14, 2006
                 June 14, 2001                   25,000            10.00                      June 14, 2006
              November 5, 2001                  200,000             0.51                   November 5, 2005
              October 31, 2003                  600,000             0.15                 September 30, 2006 (1)
             December 31, 2003                7,333,333             0.25                  December 31, 2008
                April 20, 2004                  666,666             0.25                     April 30. 2009 (1)
                April 20, 2004                   66,667             0.15                     April 30, 2009 (1)
                   May 7, 2004                1,666,666             0.25                       May 31, 2009 (1)
                   May 7, 2004                  166,667             0.15                       May 31, 2009 (1)
               October 1, 2004                  120,000             0.25                    October 1, 2007
              January 11, 2004                  100,000             0.15                   January 11, 2005
                  May 26, 2005                2,262,443             0.1547                     May 31, 2008
                  May 26, 2005               24,886,873             0.3094                  August 31, 2008
                  May 26, 2005               12,443,442             0.1547                  August 31, 2006
                 June 23, 2005                  200,000             0.12                      June 23, 2008
                                            ------------
    Exercisable at October 31, 2005          50,812,757         $0.12 to $10.00           November 5, 2005 to
                                            ============                                       May 31, 2009

    (1)  Under certain conditions the Company may accelerate the expiration date.

</TABLE>

                                                 F-29



<PAGE>

RIM SEMICONDUCTOR COMPANY AND SUBSIDIARIES
(formerly New Visual Corporation and Subsidiaries)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 13 - STOCKHOLDERS' EQUITY (DEFICIENCY) (CONTINUED)

NET LOSS PER SHARE

Securities that could potentially dilute basic earnings per share (EPS), in the
future, that were not included in the computation of diluted EPS because to do
so would have been anti-dilutive for the periods presented, consist of the
following:

2005 Debentures and accrued interest (1)                       95,782,779
Warrants to purchase common stock (2)                          50,812,757
Options to purchase common stock (3)                           16,893,750
Convertible notes payable and accrued interest                  8,320,051
7% Debentures and accrued interest                                946,277
                                                              ------------
Total as of October 31, 2005                                  172,755,614
                                                              ============

(1)     (based on a five day volume weighted average common stock price
         discounted by 30% at October 31, 2005 of $0.01953)

(2)     (includes warrants to purchase 200,000 shares of common stock that
         expired in November 2005)

(3)     (includes options to purchase 14,000,000 shares of common stock that
         were canceled in January 2006)


Substantial issuances after October 31, 2005 through
  January 25, 2006

Options granted to purchase shares of common stock             22,400,000
                                                              ============
Warrants issued to purchase shares of common stock              7,500,000
                                                              ============
Common stock issued upon conversion of 2005
Debentures and accrued interest                                81,262,190
                                                              ============

NOTE 14 - INCOME TAXES

At October 31, 2005, the Company had approximately $46,042,000 of net operating
loss carry forwards for income tax purposes, which expire as follows:

                                             Net Operating
                    Year                          Loss
                   ------                    -------------
                    2011                     $  1,583,000
                    2012                        4,714,000
                    2018                        4,472,000
                    2019                        1,698,000
                    2020                        4,759,000
                    2021                        9,503,000
                    2022                       10,230,000
                    2023                        4,143,000
                    2024                        2,245,000
                    2025                        2,695,000
                                             -------------
                                             $ 46,042,000
                                             =============

At October 31, 2005 and 2004, the Company has a deferred tax asset of
approximately $19,877,000 and $22,104,000, respectively, representing the
benefits of its net operating loss and certain expenses not currently deductible
for tax purposes, principally related to the granting of stock options and
warrants and the difference in tax basis of certain intangible assets. The
Company's deferred tax asset has been fully reserved by a valuation allowance
since realization of its benefit is uncertain. The difference between the
Federal statutory tax rate of 34% and the Company's effective Federal tax rate
of 0% is due to the increase (decrease) in the valuation allowance of
$(2,227,000)(2005) and $1,770,000 (2004). The Company's ability to utilize its
carry forwards may be subject to any annual limitation in future periods,
pursuant to Section 382 of the Internal Revenue Code of 1986, as amended.


                                      F-30



<PAGE>

RIM SEMICONDUCTOR COMPANY AND SUBSIDIARIES
(formerly New Visual Corporation and Subsidiaries)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


NOTE 15 - COMMITMENTS, CONTINGENCIES AND OTHER MATTERS

LINE OF CREDIT

On July 21, 2004, the Company entered into a one-year $100,000 revolving line of
credit with a bank. The line of credit has a floating interest rate of the prime
rate set by the bank plus a margin of .500%. The initial interest rate is
approximately 1.04%. Ray Willenberg, Jr, Chairman of the Company, has guaranteed
the repayment of the line of credit. As of October 31, 2004, no amount was
outstanding under the line of credit. The above line expired on August 10, 2005.

RESEARCH AND DEVELOPMENT AGREEMENT

The Company and HelloSoft entered into an amendment, effective as of October 11,
2004 (the "Amendment"), to their Services Agreement dated as of March 31, 2004
(the "Original Agreement") pursuant to which HelloSoft will provide development
services relating to the Company's Semiconductor Technologies. The Original
Agreement provides that, upon the Company's request from time to time, HelloSoft
is to provide services to be specified pursuant to mutually agreed upon terms.
The Amendment represents the first project that HelloSoft is undertaking
pursuant to the Original Agreement.

In consideration for the services being rendered under the Amendment, the
Company agreed to pay to HelloSoft $185,000, half of which was paid in the form
of restricted common stock issued at a discount of 25% to the closing price of
the Company's Common Stock on the day of the commencement of services. The other
half will be remitted in cash, periodically, upon completion by HelloSoft and
acceptance by the Company of specified milestones. HelloSoft has assigned to the
Company the rights to any improvements, developments, discoveries or other
inventions that may be generated by HelloSoft in its performance of the services
to be provided under the Amendment.

On July 26, 2005, the Company signed an amendment to the Original Agreement that
defines and prices the next two phases of the technology development. The
Company will expend $445,000 on Phase II and $350,000 on Phase III. Half of
Phase II, or $222,500, was paid to HelloSoft on July 26, 2005, in the form of
restricted common stock issued at a discount of 25% to the closing price of the
Company's common stock on that date, and the other $222,500 will be paid to them
in cash when they complete Phase II. The restricted common stock issued to
HelloSoft was valued at $296,667 and recorded as research and development
expense. When HelloSoft commences Phase III, the Company will issue to them
$175,000 worth of restricted common stock, and the other $175,000 will be paid
to them in cash when they complete Phase III. Phase III will be deemed complete
when HelloSoft releases the E30 Rel. 1.4 to the Company. The Company projects
that this will occur in the second quarter of 2006.


LEASES

The Company's future minimum lease payments required under operating leases with
a term greater than one year are as follows:

Years ending October 31:

         2006                                $21,064
         2007                                 21,696
         2008                                  9,151
                                             --------
         Total                               $51,911
                                             ========

Rent expense for the years ended October 31, 2005 and 2004 was $39,747 and
$122,506, respectively.


                                      F-31




<PAGE>

RIM SEMICONDUCTOR COMPANY AND SUBSIDIARIES
(formerly New Visual Corporation and Subsidiaries)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


NOTE 15 - COMMITMENTS, CONTINGENCIES AND OTHER MATTERS (CONTINUED)

CONCENTRATION OF CREDIT RISK

The Company maintains cash balances in two financial institutions. The balances
are insured by the Federal Deposit Insurance Corporation up to $100,000 per
institution. From time to time, the Company's balances may exceed these limits.
At October 31, 2005 and 2004, uninsured cash balances were approximately
$303,682 and $63,744, respectively. The Company believes it is not exposed to
any significant credit risk for cash.

LEGAL DISPUTES

During the quarter ended July 31, 2004, the Company was served with the
following three summonses and complaints, each filed on July 30, 2004 in the
Superior Court of California (San Diego County):

Each complaint relates to a convertible promissory note issued by the Company in
December 2001 and payable, according to its terms, out of film distributions
that the Company receives. Each complaint alleges, among other things: that the
Company has failed to pay the amount due and owing under the convertible
promissory note issued to the plaintiff despite demands for payment; that the
Company's management has acted to forestall payments to its creditors, including
the plaintiff; and that the Company fraudulently induced the plaintiff to enter
into the convertible promissory note.

The Company was served with the following additional summons and complaint,
filed on July 30, 2004 in the Superior Court of California (San Diego County):
Gerald Handler, Trustee of the Gerald and Judith Handler Trust and Trustee of
the Handler Children Trust, and Wayne Lill Jr., Trustee of the Wayne Lill Trust
dated 12-22-99 v. New Visual Corporation, New Visual Entertainment, Inc., Top
Secret Productions, LLC and Does 1 through 20. The plaintiffs sought money
damages in the aggregate amount of $375,000, plus interest; an order avoiding
alleged fraudulent transfers; an injunction against disposition of allegedly
fraudulently transferred monies; the appointment of a receiver; a writ of
attachment and imposition of a constructive trust.

According to their terms, each of the convertible promissory notes underlying
these claims becomes due and payable upon the Company's receipt of a specified
amount of distributions from its Film and is payable out of those distributions
that the Company has actually received. The convertible promissory notes
underlying these claims were converted by the plaintiffs into shares of the
Company's common stock in March 2002.

The Company filed an answer to the complaints denying all allegations.

In July 2005 the legal proceedings were dismissed with prejudice upon the
issuance in favor of the plaintiffs of an irrevocable letter of credit in the
maximum amount of $300,000 by a non-related third party. The Company has no
reimbursement obligation with respect to the letter of credit.


                                      F-32



<PAGE>

RIM SEMICONDUCTOR COMPANY AND SUBSIDIARIES
(formerly New Visual Corporation and Subsidiaries)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


NOTE 16 - SEGMENT INFORMATION

Summarized financial information concerning the Company's reportable segments is
shown in the following table:

<TABLE>
                                                  Semiconductor    Entertainment
                                                     Business         Business        Unallocable        Totals
                                                  -------------    -------------    --------------    ------------
<S>                                               <C>              <C>              <C>               <C>
For the Year Ended October 31, 2005:

         Net Sales - Domestic                     $         --     $     29,066     $          --     $    29,066
                                                  =============    =============    ==============    ============
         Net Sales - Foreign                      $         --     $     10,800     $          --     $    10,800
                                                  =============    =============    ==============    ============
         Operating Loss                           $     (7,032)    $ (1,014,451)    $  (3,278,604)    $(4,300,087)
                                                  =============    =============    ==============    ============
         Depreciation                             $      7,032     $     18,080     $          --     $    25,112
                                                  =============    =============    ==============    ============
         Total Identifiable Assets                $  6,087,229     $         --     $     417,736     $ 6,504,965
                                                  =============    =============    ==============    ============
For the Year Ended October 31, 2004:

         Net Sales - Domestic                     $         --     $     94,788     $          --     $    94,788
                                                  =============    =============    ==============    ============
         Net Sales - Foreign                      $         --     $    191,750     $          --     $   191,750
                                                  =============    =============    ==============    ============
         Operating Loss                           $ (1,744,882)    $ (1,320,490)    $  (1,393,735)    $(4,459,107)
                                                  =============    =============    ==============    ============
         Depreciation                             $      3,665     $     13,763     $          --     $    17,428
                                                  =============    =============    ==============    ============
         Total Identifiable Assets                $  5,940,945     $  1,043,063     $     143,229     $ 7,127,237
                                                  =============    =============    ==============    ============
</TABLE>

NOTE 17 - SUBSEQUENT EVENTS

EQUITY TRANSACTIONS

In November 2005:

         o        32,013,269 shares of common stock were issued for converted
                  2005 Debentures with a principal amount of $489,885 and
                  accrued interest of $17,345; and

         o        warrants to purchase 200,000 shares of common stock expired.

In December 2005:

         o        31,194,234 shares of common stock were issued for converted
                  2005 Debentures with a principal amount of $520,839 and
                  accrued interest valued of $19,960; and

         o        499,854 shares of common stock previously held of record by
                  Zaiq were repurchased. See Zaiq Transaction below.

In January 2006:

         o        18,054,687 shares of common stock were issued for converted
                  2005 Debentures with a principal amount of $300,000 and
                  accrued interest of $32,472;

         o        performance based options to purchase 14,000,000 shares of
                  restricted common stock that were previously issued in April
                  2005 to the Company's Chief Executive Officer and Executive
                  Vice President were canceled; and

         o        options to purchase 22,400,000 shares of common stock were
                  granted to the Company's Chief Executive Officer, the
                  Executive Vice President, and an advisory board member. These
                  options were valued at approximately $600,000 and have a 10
                  year term, an exercise price of $0.027 per share, and vest at
                  various times between February 2006 and July 2006.


                                      F-33



<PAGE>

RIM SEMICONDUCTOR COMPANY AND SUBSIDIARIES
(formerly New Visual Corporation and Subsidiaries)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


NOTE 17 - SUBSEQUENT EVENTS (CONTINUED)

ZAIQ TRANSACTION

On December 19, 2005, the Company entered into a letter agreement with Zaiq,
pursuant to which the Company agreed to repurchase from Zaiq for total
consideration of $200,000 the following Zaiq assets: (i) 5,180,474 shares (the
"Zaiq Shares") of the Company's common stock held of record by Zaiq, and (ii) a
promissory note (the "Zaiq Note") issued by the Company and held by Zaiq with a
principal balance due of $1,201,887.

The Company had the right under the letter agreement to assign any or all of its
purchase commitment, and assigned its right to purchase 4,680,620 of the Zaiq
Shares to Double U Master Fund, LP ("Double U"), an unaffiliated third party
that has been a prior investor in the Company. Double U purchased $225,000 of
the debentures issued by the Company in May 2005.

On December 20, 2005, the Company paid Zaiq an aggregate of $129,789, out of an
advance on the bridge loan that was subsequently signed in January 2006, as
further discussed below, to purchase the Zaiq Note and 499,854 Zaiq Shares. The
Zaiq Shares purchased by the Company have been canceled and the Zaiq Note has
been delivered to the Company marked "Paid in Full." Following the closing of
this transaction, the Company's previous debt to Zaiq under the Zaiq Note
($1,292,111 in remaining principal, and accrued interest amount) has been
canceled, resulting in a gain of approximately $1,170,000.

BRIDGE LOAN

In January 2006, the Company entered into a loan agreement with a third party
pursuant to which the Company borrowed $750,000 from the lender. An amount equal
to 108% of the principal amount of the loan is due and payable on the earlier of
May 25, 2006 or the date the Company effects a financing transaction or series
of transactions resulting in gross proceeds to The Company of at least
$2,000,000. The Company may prepay the loan in whole or in part at any time
without penalty. The Company issued to the lender warrants to purchase 7,500,000
shares of its Common Stock at an exercise price of $0.10 per share. The fair
value of the warrants estimated on the date of grant is approximately $125,000.
In connection with the loan, the Company granted a security interest in all of
its assets. The Company received net proceeds of $672,470 from this loan
following the payment of due diligence fees and transaction fees and transaction
related fees and expenses.

AMENDMENT TO HELLOSOFT SERVICES AGREEMENT

On November 3, 2005, the Company and HelloSoft, Inc. entered into a further
amendment to the Services Agreement dated as of March 31, 2004 described in Note
15 above. Pursuant to the amendment, the Company paid HelloSoft $60,000 in cash,
and the parties agreed upon certain additions to the development services to be
performed by HelloSoft pursuant to the Services Agreement, as amended.

                                      F-34