<PAGE>
                UNITED STATES SECURITIES AND EXCHANGE COMMISSION
                              WASHINGTON, DC 20549
                       ___________________________________

                                   FORM 10-KSB

                  ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D)
                     OF THE SECURITIES EXCHANGE ACT OF 1934

FOR THE FISCAL YEAR ENDED OCTOBER 31, 2005         COMMISSION FILE NO. 000-49865
------------------------------------------         -----------------------------

                       TRIMEDIA ENTERTAINMENT GROUP, INC.
             ------------------------------------------------------
             (Exact name of registrant as specified in its charter)

             DELAWARE                                  14-1854107
 --------------------------------           ---------------------------------
 (State or other jurisdiction of            (IRS Employer Identification No.)
  incorporation or organization)

                      1080 N. DELAWARE AVENUE, 8TH FLOOR
                        PHILADELPHIA, PENNSYLVANIA 19125
             ------------------------------------------------------
               (Address of principal executive offices, Zip Code)

                                 (215) 426-5536
                ------------------------------------------------
                (Issuer's Telephone Number, including Area Code)

        SECTION REGISTERED UNDER SECTION 12(B) OF THE EXCHANGE ACT: None.
<TABLE>
<CAPTION>
            SECURITIES REGISTERED PURSUANT TO
                SECTION 12(G) OF THE ACT:                               NAME OF EACH EXCHANGE ON WHICH REGISTERED:
----------------------------------------------------------         ----------------------------------------------------
                         <S>                                                               <C>
         Common Stock, par value $.0001 per share                                          None
</TABLE>

         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) has 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 filings requirements for the past 90 days.

                            YES [X]      NO [ ]

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

         Indicate by check mark whether the registrant is a shell company (as
defined in Rule 12b-2 of the Exchange Act).

                            YES [ ]      NO [X]

         The registrant's revenues for the most recent fiscal year were $6,034.

         The aggregate market value of the voting common stock held by
non-affiliates of the issuer, as of February 24, 2005 was approximately
$2,048,950.30 (based on the average closing bid and asked prices of the
registrant's common stock in the over-the-counter market).

         As of February 24, 2006, 47,060,011 shares of the registrant's common
stock, par value $.0001 per share, were issued and outstanding.

         Documents Incorporated by Reference: None.
<PAGE>

                                TABLE OF CONTENTS
<TABLE>
<CAPTION>
<S>                    <C>                                                                                      <C>

PART I
   ITEM 1     -     DESCRIPTION OF BUSINESS...................................................................    1
   ITEM 2     -     DESCRIPTION OF PROPERTY...................................................................   20
   ITEM 3     -     LEGAL PROCEEDINGS.........................................................................   20
   ITEM 4     -     SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.......................................   20

PART II
   ITEM 5     -     MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS..................................   20
   ITEM 6     -     MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION.................................   23
   ITEM 7     -     FINANCIAL STATEMENTS......................................................................   29
   ITEM 8     -     CHANGES IN AND DISCUSSIONS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE........
                                                                                                                 29
   ITEM 8A          CONTROLS AND PROCEDURES...................................................................   29
   ITEM 8B          OTHER INFORMATION.........................................................................   30

PART III
   ITEM 9     -     DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS; COMPLIANCE WITH
                        SECTION 16(A) OF THE EXCHANGE ACT.....................................................   30
   ITEM 10    -     EXECUTIVE COMPENSATION....................................................................   31
   ITEM 11    -     SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT............................   34
   ITEM 12    -     CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS............................................   34
   ITEM 13    -     EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K...........................   35
   ITEM 14    -     PRINCIPAL ACCOUNTANT FEES AND SERVICES....................................................   38

   FINANCIAL STATEMENTS    ...................................................................................   F-1
</TABLE>

                                       (i)

<PAGE>
                           FORWARD LOOKING STATEMENTS

         Except for historical information, this document contains various
"forward-looking statements" within the meaning of Section 27A of the Securities
Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934,
as amended (the "Exchange Act"). These forward-looking statements involve risks
and uncertainties, including, among other things, statements regarding our
revenue mix, anticipated costs and expenses, development, relationships with
strategic partners and other factors discussed under "Description of Business"
and "Management's Discussion and Analysis". These forward-looking statements may
include declarations regarding our belief or current expectations of management,
such as statements indicating that "we expect," "we anticipate," "we intend,"
"we believe," and similar language. We caution that any forward-looking
statement made by us in this Form 10-KSB or in other announcements made by us
are further qualified by important factors that could cause actual results to
differ materially from those projected in the forward-looking statements,
including without limitation the risk factors set forth in this Form 10-KSB.

                                     PART I

ITEM 1. DESCRIPTION OF BUSINESS

                             BUSINESS OF THE COMPANY

GENERAL

         We are a multimedia entertainment company with a focus on developing
entertainment content. We develop, produce and distribute a broad range of
music, motion picture and other filmed entertainment content through our
following operating subsidiaries:

         o Ruffnation Music, Inc. ("Ruffnation Music");
         o Metropolitan Recording Inc. ("Metropolitan");
         o Ruffnation Films LLC ("Ruffnation Films");
         o Snipes Production LLC ("Snipes");
         o TM Film Distribution, Inc. ("TMF"); and
         o TriMedia Film Group, Inc ("TFG").

         In addition, we intend to establish a music publishing division, a
television production division and a producer/artist management division. We
have identified a market opportunity in the entertainment industry resulting
from the convergence of music and film in the world's fastest growing consumer
entertainment product, the digital video disc ("DVD"). The percentage of DVD
unit sales has increased in market share for entertainment content delivery to
consumers faster than any format in entertainment history. The DVD has received
overwhelming market acceptance and response. The music industry has used the DVD
to enhance the sale of its products. Many music fans have responded favorably to
concert DVD's and music video DVD's of their favorite artists. It is the vision
of Christopher Schwartz, our Chairman, Chief Executive Officer and principal
stockholder, and a pioneer of the Hip-Hop music industry, to focus on the DVD
format as a means to identify and enable creative artists to combine their
visual and audio talents in a consumer product that will protect the proprietary
nature of the content. Our mission is to become an independent multimedia
entertainment company combining state-of-the-art technologies with creative
product that meets the growing demand of today's market.

         As the demand for cost-effective entertainment product, including
digitally recorded music, television programming and film, continues to
increase, we believe that more of the major entertainment companies, including
radio, television, cable, film and Internet service providers, will be turning
towards independent entertainment companies to deliver product and programming
to improve their profitability and create market share.

         Our principal executive offices are located at 1080 N. Delaware Avenue,
8th Floor, Philadelphia, Pennsylvania 19125 where we have our corporate, music
and film offices.
<PAGE>

FILMS

         Ruffnation Films operates our film division. Ruffnation Films produces,
distributes and markets feature-length DVD films and movies, taking projects
from initial creative development through principal photography,
post-production, distribution and ancillary sales. We believe that fans of Pop,
Hip-Hop and Urban Music are active consumers throughout the world, purchasing
CDs, DVDs, records, clothes and concert tickets. In addition, members of the Pop
and Hip-Hop audience are a highly coveted demographic group targeted by
advertising retailers due to their age and spending habits. We believe that
outside of traditional Hollywood productions, there is a shortage of "Lifestyle
Specific" DVD products for the Pop and Hip-Hop audience.

         Ruffnation Films will produce low budget films with plots and marquee
name music artists that are relevant to the mainstream youth culture,
particularly the Pop, Hip-Hop and Urban Music audience. Ruffnation Films will
produce soundtracks featuring the aforementioned artists to be sold as a CD
packaged with a DVD for retail sale to consumers. Select projects approved by
Sony BMG Music Entertainment, Inc. ("Sony BMG") will be produced and distributed
through Charles Street, our co-venture with Sony BMG. For each of these
projects, Sony BMG will provide the soundtrack component, giving Ruffnation
Films access to Sony BMG marquee artists and Sony BMG will advance the cost of
producing those soundtracks.

         Pursuant to our international business development strategy, we plan to
form joint ventures for co-production of entertainment projects on a
territory-by-territory basis. On occasion we will also obtain the rights to
distribute and exploit entertainment projects in US and foreign markets as well
as co-venture projects for release and development in various media formats.

         Sony BMG Co-Venture
         -------------------

         Charles Street, our co-venture with Sony BMG, will produce and
distribute film projects, as well as their related soundtracks, and will produce
and distribute CDs and other recorded music projects. Ruffnation Films will
supervise the operations of Charles Street on a day-to-day. Pursuant to the
terms of the co-venture agreement, as amended on October 2, 2003, Ruffnation
Films will fund the creation, production and marketing of ten films for Charles
Street. Sony BMG has the right to accept or reject any film in its discretion.
Snipes was the first film we produced under the agreement. With respect to the
production of films, the term of the agreement will continue until the later of
September 30, 2006 and the date we deliver ten films to Sony BMG (the "Film
Term"). If Sony BMG determines not to accept or release a particular film, we
have the right to enter into an agreement with a third party on terms and
conditions approved by Sony BMG. Sony BMG has the exclusive right, throughout
the world, to manufacture, market, distribute and exploit on behalf of Charles
Street, DVDs and VHS tapes containing these films. Sony BMG will provide its
services on terms on which it customarily provides such services to its
wholly-owned home video affiliates. Ruffnation Films is responsible for
activities relating to production of films on behalf of Charles Street. Costs
incurred by Ruffnation Films in connection with the production of films are
deemed expenses of Charles Street and are subject to a budget approved by Sony
BMG. Sony BMG is responsible for activities relating to marketing, publicity and
promotion of home videos on behalf of Charles Street. Sony BMG pays marketing
costs in connection with the films. Sony BMG is not obligated to pay or
contribute any profit advances, loans, overhead, production or salary costs
toward the production of films.

         A distribution fee equal to 20% of net billings on any film project
will be paid to Sony BMG out of gross revenues generated by sales of the film.
All of Sony BMG's manufacturing and other costs will then be reimbursed out of
gross revenues generated by sales of the film. Next, a distribution of profits
will be made to Ruffnation Films and to Sony BMG proportionately based on the
amount of marketing costs incurred by Sony BMG and the production and marketing
costs incurred by Ruffnation Films. The parties shall receive this distribution
until all such costs have been reimbursed out of the profits of the film. Any
additional profits will be paid 50% to Sony BMG and 50% to Ruffnation Films.

         At any time during the 30-day period commencing eighteen months
following the date of expiration or termination of the Film Term or, for every
two-year period thereafter, for the 30-day period commencing on each biennial
anniversary of the termination or expiration of the Film Term, either Ruffnation
Films or Sony BMG will have the option to trigger a sale of either its or the
other party's interest in the film venture of Charles Street. Either party
electing this option will send written notice to the other party stating the
price at which the electing party wishes to sell its interest. The offeree will
then have the obligation to either purchase all of the offeror's interest in the
Charles Street film venture at such price or sell its interest in the Charles
Street film venture at such price. The offeree will have 30 days after receipt
of such written notice to make its election to purchase the offeror's interest

                                       2
<PAGE>

or to sell its interest. If the offeree does not notify the Offeror of its
election prior to the expiration of the 30-day period, the offeree shall be
deemed to have elected to sell its interest.

         The agreement will allow us to be one of only a small group of
independent entertainment companies nationally to have a co-venture with one of
the five largest international entertainment companies that dominate the world
market.

         Certain aspects of the Sony BMG Co-Venture relating to our music
division are set forth below.

         Film Production
         ---------------

         Our goal is to produce quality films in the low budget range with total
costs of $300,000 to $2,000,000 per film. Our current strategic plan calls for
the production or co-production of three to five films annually. Our ability to
execute this plan is dependent upon our ability to raise additional financing
necessary to fund such productions. Currently, we are reviewing film projects
for development and production and upon obtaining additional working capital, we
will begin the production of new films. In Fiscal 2001 and Fiscal 2002,
Ruffnation Films produced one film entitled Snipes. Ruffnation Films did not
produce any films in Fiscal 2003 or Fiscal 2004. In September 2002, Snipes
opened in theaters in New York, Philadelphia, Washington D.C., Detroit, Atlanta
and Baltimore. Snipes has received numerous acclaims including a
three-out-of-four star rating by the Philadelphia Inquirer's movie critic.
Snipes premiered at the Philadelphia Film Festival in April 2002 and was awarded
Best Feature Film and was the official selection of the 2001 Toronto
International Film Festival. Snipes is Richard Murray's directorial debut and
stars Nelly, a Grammy award winning hip-hop artist with approximately 17 million
album sales worldwide, Dean Winters of HBO's OZ, J.D. Williams, Sam Jones III,
Schoolly D and Frank Vincent. On February 25, 2003, the Snipes DVD was released
for commercial sale and distribution through Charles Street. In Fiscal 2005, we
re-released Snipes as a combination DVD/CD package through Charles Street for
distribution in the U.S. consumer market in connection with Nelly's concert
tour. Additionally, in Fiscal 2005, we released a film entitled Train Ride
through Charles Street. TrainRide is an urban drama that follows the harrowing
events on a college campus and stars Wood Harris (HBO's The Wire), Russell
Hemsby (ESPN's Playmakers) and hip-hop star MC Lyte.

         Sony BMG is obligated to deliver quarterly reports to us within
forty-five days following the end of each quarter and annual financial
statements to us within ninety days following the end of each calendar year.
Through December 31, 2005, the last quarter for which a report has been
received, Sony BMG reported gross billings for Charles Street related to the
release of the Snipes DVD/Home Video of $2,302,083 and net profits of $1,042,341
of which our portion is $857,516. There were no payments received from Sony BMG
related to the release of Snipes in Fiscal 2005. In November 2004, Snipes was
re-released as a combination DVD-CD package in the US, UK and various European
territories. Although we may receive additional payments from Charles Street in
Fiscal 2006 related to sales of Snipes, there can be no assurance of the amount
or timing of such payments. Additionally, through December 31, 2005, the last
quarter for which a report has been received, Sony BMG reported gross billings
for Charles Street related to the release of the Train Ride DVD/Home Video of
$210,789 and net profits of $74,606 of which our portion is $69,104. Although we
may receive additional payments from Charles Street in Fiscal 2006 related to
sales of Snipes and Train Ride, there can be no assurance of the amount or
timing of such payments.

         Distribution
         ------------

         Ruffnation Films' projects that are not distributed through Charles
Street may be distributed in the United States through RED Distribution, Inc.
("RED"), Sony BMG's independent distribution system, and through Fontana and up
to 17 licensees who service the industry throughout the world. Accordingly, we
anticipate that each project will have global distribution either through
Charles Street or through independent distribution. The end product at retail
will be a DVD/CD package that will have a retail price estimate of approximately
$29.99 to $34.99 with an approximate $16 to $20 wholesale price. Our sales goal
is 500,000 to 1,000,000 units worldwide for each project. We intend to
distribute to the rental market using direct distribution and revenue share
output arrangements with Blockbuster and other leading rental retailers. In
addition, when the opportunity arises we intend to distribute or sell directly
to mass merchandisers, such as Wal-Mart Stores Inc., Costco Wholesale
Corporation, Target Corporation, Best Buy Co. Inc., and others who buy large
volumes of videos and DVDs to sell directly to the consumer.

         Currently there have been a few products released in the DVD/CD
combination package. It is not common for major and independent distribution
companies in film and music to come together on one product for distribution.
Historically, film companies have been reluctant to give DVDs to music companies
and music companies have been reluctant to give CDs to film companies for
distribution. Our goal is to effectively exploit this format and become a leader


                                       3
<PAGE>


in this marketplace. Each film project will have the potential to allow us to
capitalize on multiple potential revenue streams for each of our business
operations.

         Keydata Media & Marketing 1 LLP Distribution
         --------------------------------------------

         In Fiscal 2004, we formed two wholly owned subsidiaries, TM Film
Distribution Inc. ("TMF") and TriMedia Film Group, Inc. ("TFG") for the
independent purposes of alternative film development, distribution and
financing.

         In Fiscal 2004, TFG and Keydata Media & Marketing 1 LLP ("KMM") entered
into a Sale and Purchase Agreement pursuant to which KMM is entitled to acquire
the rights to exploit any TFG film produced during the eight year term of the
agreement for a period of fifty years in exchange for a licensing fee of 1000
pounds sterling (approximately $1,742 at the current exchange rates). KMM may
exploit the films that it acquires through pay or public television, theatrical
release, airlines, ships or non-theatrical presentations. As of the date of this
report, TFG has not yet produced any films.

         Simultaneously, TMF entered into a Distribution Agreement with KMM
pursuant to which TMF shall have the rights to distribute KMM films for a period
of 15 years and TMF shall pay KMM a percentage of the gross receipts after
recoupment of participant deferments and distribution expenses. Additionally,
KMM is required to deposit payments into a Printing and Advertising fund in such
amounts as the parties shall agree. This fund shall be used to reimburse TMF for
printing, advertising and exploitation expenses incurred under the agreement.
TMF must provide KMM with a marketing plan and budget for each film and
supporting documentation for each expenditure in order to receive reimbursement
of these expenses. In Fiscal 2005, KMM deposited 11,646,835 pounds sterling into
the Printing and Advertising fund to be utilized for printing and advertising of
KMM films distributed pursuant to this Distribution Agreement. TMF has
discretion regarding the manner of distribution for each film. As of the date of
this report, KMM has not yet acquired any films from TFG that can be distributed
pursuant to this agreement.

         Pay and Free Television Distribution
         ------------------------------------

         We intend to license our own productions and productions acquired from
third parties to the domestic and international marketplace on a project basis
through Sony BMG or independent distributors on a territory-by-territory basis.

         On August 24, 2004, we entered into an agreement with Gerry Anderson
Productions PLC ("GAP") pursuant to which we will represent GAP as its agent in
the development and multimedia exploitation of GAP's New Captain Scarlet Series
properties in the United States, Canada and such other territories as are
mutually agreed upon. In connection with this agreement, we have introduced GAP
to Sony Wonder, a group of Sony and they have negotiated an agreement regarding
the broadcast and master licensing of the New Captain Scarlet Series pursuant to
which GAP will provide Sony Wonder with at least 13 episodes of the series for
the purpose of securing a broadcast arrangement with a major television network
and/or cable television network. In addition, Charles Street, our co-venture
with Sony, will negotiate with artists, develop and produce a soundtrack CD/DVD
for the New Captain Scarlet Series.

MUSIC

         Ruffnation Music operates our music division. We believe that the next
five years will offer important opportunities for the organization and growth of
viable, newly created record companies. We believe that such companies will be
more competitive because they have the ability to be flexible, responsive and
are not constrained by the typical large company bureaucracy.

         A popular music record company depends on its ability to sign and
retain artists who will appeal to popular taste over a period of time. We will
employ a popular music artist and repertoire ("A&R") staff whose task will be to
identify both new artists with potential appeal and established artists who will
complement our planned artist roster or whose potential we believe has not been
fully exploited. The A&R staff, which is headed by Christopher Schwartz, will
include a group of producers/songwriters and will meet on a regular basis to
discuss tapes of artists who have been previously screened by staff members. If
a consensus is reached to attempt to sign an artist, a strategy will be
developed for a contract proposal. Currently, we are evaluating several artists
with whom we would consider entering contracts. However, such considerations are
contingent upon our ability to obtain a sufficient amount of additional

                                       4
<PAGE>


financing. There can be no assurance that we will be able to attract and sign
artists or that such artists will be successful.

         Sony BMG Co-Venture
         -------------------

         During the Film Term, Sony BMG has the exclusive right, on an artist by
artist basis and subject in each case to our written approval, which we may not
unreasonably withhold, to require any record label owned or controlled by
Ruffnation Films or Christopher Schwartz to transfer to Charles Street all of
its or his rights and obligations in and to any particular recording artist
(each a "Designated Artist") whose records have been distributed by Fontana.
However, we believe that Sony BMG is only interested in those artists whose
music is distributed in connection with a film that Sony distributes. Sony BMG
has no obligation to accept, and we have no right to require them to accept, any
of our artists as Designated Artists.

         Subject to the terms and conditions of the co-venture agreement, Sony
BMG has the exclusive right, throughout the world, to manufacture, market,
distribute and exploit records and soundtracks containing musical performances
of Designated Artists on the terms which Sony BMG customarily provides such
services to its wholly-owned record labels. If Sony BMG decides not to
manufacture, market or distribute a record or soundtrack relating to one of our
films, then we may enter into a contract with a third party.

         During the Film Term, provided there are no material defaults, Sony BMG
will extend a loan to Charles Street through a line of credit to fund all
recording costs, advances and royalties relating to the creation, marketing and
exploitation of records and soundtracks. These costs shall be deemed expenses of
Charles Street. In order to secure its obligation to repay these loans, Charles
Street granted to Sony BMG a first priority security interest in all of the
assets of Charles Street.

         During the Film Term, neither Ruffnation Films, Christopher Schwartz
nor any entity owned or controlled by Ruffnation Films or Christopher Schwartz,
will furnish the services of any artist to any person or entity except Sony BMG,
with the exception of the independent labels discussed below, unless Sony BMG
consents to such action. At the end of the Label Term, we will no longer be
required to furnish the services of our artists to Sony BMG or Charles Street.
Sony BMG is obligated to license to Charles Street master recordings owned or
controlled by Sony BMG for inclusion in films, home videos and soundtracks.

         Sony BMG will pay all manufacturing and marketing costs associated with
each record or soundtrack produced by Charles Street, which costs will be
expenses of Charles Street. A distribution fee equal to 20% of net billings on
any recording project will be paid to Sony BMG out of gross revenues generated
by sales of the recording. Any loans advanced by Sony BMG pursuant to the line
of credit will be repaid out of gross revenues generated by sales of the
recording provided that, Ruffnation Films may receive 50% of its share of the
profits relating to any artist agreement for which Charles Street has recouped
all expenses. All remaining profits derived from the sale of records and
soundtracks will be distributed 50% to Sony BMG and 50% to Ruffnation Films.

         At any time during the 30-day period commencing eighteen months
following the date of expiration or termination of the Label Term or, for every
two-year period thereafter, for the 30-day period commencing on each biennial
anniversary of the termination or expiration of the Label Term, either
Ruffnation Films or Sony BMG will have the option to trigger a sale of either
its or the other party's interest in the recording venture of Charles Street.
Either party electing this option will send written notice to the other party
stating the price at which the electing party wishes to sell its interest. The
offeree will then have the obligation to either purchase all of the offeror's
interest in the recording venture of Charles Street at such price or sell its
interest in the recording venture of Charles Street to the offeror at such
price. The offeree will have 30 days after receipt of such written notice to
make its election to purchase the offeror's interest or to sell its interest. If
the offeree does not notify the offeror of its election prior to the expiration
of the 30-day period, the offeree shall be deemed to have elected to sell its
interest.

         Independent Label
         -----------------

         Our co-venture agreement with Sony BMG permits us to form independent
record labels to develop recording projects with artists and producers
independent of Charles Street. On occasion, we will identify artists and
producers that have a niche market segment that can be developed to create
popularity and recognition for a new creative talent. Many of these acts will
require little or no artist or producer advances and little or no recording
costs. Our independent labels will have a flexible style of deal making
involving different profit participation levels with artists and co-ownership of
masters and licensed masters.

                                       5
<PAGE>

         Fontana Distribution Agreement
         ------------------------------

         On June 8, 2005 Ruffnation Music, Inc. entered into a record
distribution agreement for our independent music productions with Fontana
Distribution LLC, a division of Universal Music Group. The first commercial
album release was the Spin Doctors album entitled Nice Talking to Me in 2005. In
March 2006, we plan to release a CD album by Kulcha Don entitled It's All About
You. The CDs will be distributed by Fontana.

         The distribution Agreement with Fontana provides that Fontana will have
the exclusive right to manufacture and distribute certain records owned or
controlled by us or Christopher Schwartz. Fontana also has the exclusive right
to sell and distribute our U.S. released records in any and all media.
Notwithstanding the foregoing, we can distribute the records directly to
consumers through our website or by our exclusive recording artists through
their web sites, as physical goods and/or by means of electronic transmissions.
Once a record is ready for release by us, Fontana will include the appropriate
pricing information and a description of the song in its monthly products
release book. Sales representatives from Fontana's sales branches throughout the
country and affiliates of Fontana solicit orders on our behalf. We maintain
control over the promotion and marketing of our recordings. However, at our
request, Fontana may assist us, at our expense, in coordinating various types of
marketing, promotion and placement of advertising directed toward its retail and
wholesale accounts. Generally, we are required to pay the manufacturing and
distribution costs associated with CDs prior to their manufacture by Fontana. We
will generally be permitted to pay these expenses out of the sales proceeds
generated by these CDs. However, in order to secure our obligation to pay these
expenses, we entered into a security agreement with Fontana on June 8, 2005
pursuant to which Fontana has a security interest in and to Masters, Artwork and
Materials as defined therein. The distribution agreement with Fontana will
expire on June 8, 2007, unless terminated earlier pursuant to the terms therein.
Fontana has two separate options to extend the term of the agreement for one
additional year each option period.

         Artist Recording Contracts
         --------------------------

         We will concentrate on the development of new talent rather than
competing with larger companies to acquire established artists. We believe that
the risks involved with higher advances and royalties demanded by established
artists may be difficult to justify financially. In addition to the lower
financial cost of signing and developing new talent, we believe that it
generally is easier to negotiate a longer contract term with new talent, whereas
established artists demand higher payments accompanied by shorter contract
terms. We recognize that established artists have existing fan support and name
recognition. However, we have determined that the cost associated with retaining
established artists represents a significantly greater financial risk if a
recording project fails to achieve minimum consumer sales in an intensely
competitive market. From time to time we may sign artists who require advances
because they have established sales bases.

         Pursuant to our strategy of identifying, signing and developing new
talent, the artists whom we intend to sign will generally have limited recording
industry backgrounds. For the most part, these artists will be identified and
contracted by us after analysis of demonstration tapes by our A&R department and
after consultation among our senior management.

         The Rock and Pop music genres will enable us to compete in a market
segment comprising 33.9% of gross business in the United States record industry.
Likewise, activity in the Rap/Hip-Hop, R&B/Urban segment of the market will put
us into an additional 23.4% of gross business in the United States record
industry. We may seek to develop operations that will address the remaining
segments of the market, which includes jazz, Latin and other musical styles.

         Although we may from time to time license already completed master
recordings for a fixed price plus royalty, we will primarily be involved in the
actual production of master recordings. This aspect of the recording business
will require our management to approve a specific project and then contract with
recording artists, musicians and producers to produce a master recording. The
artist and producer will each receive either a minimum fee plus a percentage
royalty based on the proceeds received by us from distribution of a recording or
a percentage royalty without a minimum fee. The fee and royalty arrangements
will be negotiated on a recording-by-recording basis. We will produce recordings
in studios with which we have access or by renting time at any one of a number
of recording studios. Management therefore seeks to reduce or eliminate certain
costs and to match the specific configuration of a particular studio to the
requirements of a particular artist or producer.

         Certain production and acquisition costs, such as artists' and
producers' royalties, are contingent upon subsequent sales while other costs,
such as salaries, overhead, manufacturing, studio time and other expenses, are


                                       6
<PAGE>

payable regardless of sales. Although the appeal of a particular artist may be
transitory, we believe that increasing the size and diversity of our planned
artist roster gives us a measure of protection against sudden shifts in taste.
Further, we believe that acquisition of interests in recorded music composition
catalogues will provide an important and relatively stable source of future
sales in addition to revenue generated from new releases.

         Promotion and Marketing
         -----------------------

         We plan to release records primarily in pop, neo-classical soul and
Rap/Hip-Hop, dance and alternative music fields. Accordingly, we expect to
market our records to the principal buying groups in the 12 to 45 year old
categories broadly representative of the American population in that age group.

         We plan to promote our recordings, as is generally the case throughout
the record industry, primarily through radio time. To supplement our staff, we
may engage independent promotion specialists on a record-by-record basis to
generate airplay. As sales increase, management may add additional promotion
staff.

         Cable operations, such as MTV, VH-1, BET and other music television
channels, as well as certain commercial television stations, have provided
significant exposure to new music groups. We intend to utilize television as a
promotional tool. In addition, we intend to produce promotional videotapes, CDs
and DVDs featuring our artists, and maintain effective cost controls through the
use of our own music video production department.

         The music video and DVD market has grown significantly over the past
few years and we believe that the music video and DVD business is a natural
extension of our other planned activities in the music business. Our music video
department will concentrate primarily upon promotional activities for our
artists to produce videos of single songs for promotional purposes. Generally,
income from music videos is derived from television broadcasts and from the sale
of videocassettes, CDs and DVDs. We may make electronic press kits ("EPKs"),
long-form videos and enhanced videos or CD-ROMS playable on computer. We also
may combine artist videos and EPKs for release on DVD, providing a whole new
format for viewing that previously was limited to television broadcasts. Our
music and videos may also be included in RealPlayer(R) packages. We anticipate
experiencing increased activity as we enter into contracts with additional
artists. In such event, longer music programs, such as DVDs or concert programs,
are contemplated.

         The marketing methods that we plan to use are customary in the music
industry. These methods will include:

         o  radio;
         o  television;
         o  artist/websites;
         o  newspaper and magazine advertising;
         o  distribution of posters featuring our artists and records;
         o  street teams;
         o  wrapped vans and trucks;
         o  bus backs, bus stops and benches;
         o  billboards;
         o  marquee style movie lights at label sponsored events and artists
            shows; and
         o  coordinated promotions with retail stores such as in-store displays
            and appearances by performers.

Initially, our principal efforts will be focused on radio promotion through
radio play of artist's singles to develop consumer recognition and product
demand. We plan future advertising in national music consumer publications and
industry trade publications as artists achieve increasing consumer recognition,
provided such additional advertising, in management's opinion, would enhance
sales.

         Licensing of Recordings
         -----------------------

         We also intend to license rights in certain of our recordings to other
major record labels for manufacture and distribution in foreign markets. These
labels normally pay all distribution and marketing costs and, in addition, pay
us an advance plus a royalty based on sales, which is payable after recovery of


                                       7
<PAGE>


the advance. A portion of any royalties received by us from sales will be used
to pay artists' and producers' royalties or the owner of a master recording, as
the case may be.

         We will seek agreements to license recordings of several of our future
artists through various record and licensing companies in Europe and Japan. We
intend to negotiate with several foreign distributors for the right to license
other artists. We intend to direct a material part of our future activities
toward the development of international markets.

         Copyright
         ---------

         Our business, like that of other record companies, primarily rests on
ownership or control and exploitation of musical works and sound and
audio-visual recordings.

         Rights and royalties relating to particular recordings vary from case
to case. When a recording is made, copyright in that recording vests either in
the recording artist and is licensed to a record company or in the company
itself, depending on the terms of agreement between the recording artist and the
record company. Similarly, when a musical composition is written, copyright in
the composition vests either in the writer and is licensed to a music publishing
company or in the publishing company. Artists generally record songs that are
controlled by music publishers. The rights to reproduce such songs on tapes and
CDs are obtained by the company from music publishers or collection societies on
their behalf. The manufacture and sale of tapes and CDs results in royalties
being payable by the record company to the publishing company at industry agreed
or statutory rates for the use of the composition and the publishing company in
turn pays a royalty to the writer and by the record company to the recording
artist for the use of the recording.

         Record companies are largely dependent upon legislation to protect
their rights against unauthorized reproduction, importation or rental. In all
territories where we intend to operate, our products will receive some degree of
copyright protection. The period of protection varies widely from 75 years from
first publication in the United States, to 50 years in the United Kingdom, to 30
years from date of recording in Japan.

         Piracy, or the unauthorized reproduction of recordings for commercial
sales and Internet file sharing exists throughout the world. Sales in certain
markets are very difficult, and some markets are virtually closed to legitimate
record companies because of the dominance of pirated product, which is
substantially cheaper than legitimate products due to lower quality standards
and the absence of recording and royalty costs. In recent years, however,
certain countries, particularly in Southeast Asia, have enforced copyrights
resulting in a reduction in piracy. There can be no assurance that the
proliferation of piracy of entertainment content through the Internet or other
means will be reduced in the future. The proliferation of these practices, if
continued, could have a material adverse affect on the entertainment industry.

         Home taping, or the unauthorized reproduction for personal use of
recordings, has been a global problem since the advent of cassette tapes and
CDs, which existing copyright laws have done little to contain. In some
countries, the industry has been successful in securing the introduction of a
levy on hardware used for such reproduction or on blank tapes. However, such
levies, which are generally shared among those involved in the production of
recordings, including the record companies and the artists, do not adequately
compensate for the losses suffered from home taping. CD recording technology may
increase the opportunity for consumers to make high-quality copies for home use.
There can be no assurance that the proliferation of piracy of entertainment
content through the Internet or other means will be reduced in the future that,
if continued, could have a material adverse affect on the entertainment
industry.

         Rental of tapes and CDs is a problem in those countries whose copyright
laws do not provide adequate protection. Those countries include Japan, where a
levy on rental income is paid to domestic rights owners, but not in respect of
foreign repertoire, and Germany.

         The recorded music industry has been affected by piracy, and in
particular, the home copying and file sharing of recorded music over the
Internet. Recording technologies have been developed that enable consumers to
make high quality duplicates of recorded music from original CDs and the
Internet. In the absence of adequate copyright protection, CD recording
technology may adversely affect sales of CDs. We cannot predict the extent to
which our CD sales would be affected by such technology. However, we generally
believe that as we focus on the development of new artists and have a limited
release schedule, we are not materially dependent upon foreign sales in markets


                                       8
<PAGE>

unregulated by copyright laws and that piracy or illegal home taping will not
have a material adverse impact on our business or operations in the near or
foreseeable future.

MUSIC PUBLISHING

         We intend to establish a music publishing operation. Music publishing
involves the acquisition of rights to the exploitation of musical compositions
as opposed to musical recordings. Principal sources of revenue are royalties
from the reproduction of musical works on cassette tapes, CDs, DVDs, license
fees from the radio and television broadcast (i.e., public performances) of such
musical works, and film soundtracks of recordings embodying the compositions
concerned.

         We intend to create a music publishing operation to collect performance
royalties for our products through ASCAP and BMI. ASCAP and BMI are collecting
societies licensed to collect performance royalties due from radio, television,
jukeboxes, film and similar venues for public performance of musical
compositions.

         We may receive publishing royalties on master recordings which we
produce. Moreover, we intend to negotiate with recording artists a percentage of
the copyright rate that is set by statute and modified from time to time by the
Copyright Royalty Tribunal.

         Once we form a publishing operation, we plan to seek to acquire
copyright ownership of, or other rights in, the songs written by or for our
artists. We propose to develop a catalogue of songs, retaining present and
future publishing rights. Additionally, we intend to employ songwriters and
producers to develop music products with publishing rights retained by us. We
plan to acquire interests in original songs that will be developed at our
facilities. We do not deem the acquisition of these songs to be material in that
presently none have been recorded or used in any of our activities, including
promotion, and we have no present intention or plans to use them in any
capacity. In the future, it is conceivable that songs commissioned or acquired
by us may be included on albums or produced as singles, although no assurance
can be given as to this use. We intend to use EMI Music Publishing to administer
our songs outside of the United States.

STUDIO OPERATIONS

         Metropolitan operates our studio operations, which provides support for
the in-house recording of our artists. Metropolitan has access to an audio
recording facility that provides us with "start to finish" music recording
services.

         Metropolitan has access to a studio and is capable of tracking to tape
or digitally. The studio features custom acoustical design treatments, which
provide a critically accurate listening environment. The studio's equipment
includes:

         o  a 72-input SSL Series 9000;
         o  a top-of-the-line recording/mixing console;
         o  two Studer A-827 2-inch tape machines;
         o  two ProTools 5.1 Mix Plus Cubes; and
         o  Quested Q212s monitors.

         Metropolitan also includes fully equipped digital film and editing
facilities for film, video and television productions. We view the studio
operations principally as a catalyst to attract artists and to record their
products in-house.

                               INDUSTRY BACKGROUND

THE RECORDED MUSIC INDUSTRY

         The recorded music industry is dominated by four major international
entertainment companies, which accounted for approximately 72% of worldwide
recorded music sales in 2004:

         o  Universal Music Group;
         o  Warner Music Group;
         o  Sony BMG Corp.; and
         o  EMI Group

                                       9

<PAGE>

There are many mid-sized and smaller companies in the music industry that
accounted for the remaining 28%, including independent music companies.

         In the late 1940's, record retail sales amounted to only $48 million
annually. By 1970, sales had grown to nearly $1.7 billion annually. By way of
current comparison, the Recording Industry Association of America ("RIAA")
reported the sound recording domestic market in 2004 to be $12.1 billion. The
International Federation of Phonographic Industry ("IFPI"), an organization that
represents the recording industry worldwide, reported recorded music sales
worldwide of $33.6 billion in 2004. Since 1984, the value of sales industry wide
has increased at a faster rate than unit volume growth, due in part to the
introduction and acceptance of CDs, which are priced substantially higher than
vinyl records and tapes. CDs represented 90.3 percent of all units shipped in
the United States in 2004. IFPI reports that sales of recorded music in 2004 to
be largest in the United States, Japan, United Kingdom, Germany and France,
accounting for 73% of the recorded music market. The proportion of global music
sales accounted for by the United States and the United Kingdom accounted for
47% of the value of the world market. IFPI reported that 2004 was a landmark
year for growth of digital services. Over 180 legitimate music download services
were launched globally in 2004. The United States represents approximately 36
percent of the total world music market. The RIAA reports that, in 2004, Rock
remained the most popular genre of music in the United States with 23.9 percent
of the market followed by Rap/Hip-Hop with 12.1 percent, R&B/Urban with 11.3
percent, Country music with 13 percent, Pop with 10 percent, Religious with 6
percent, Classical with 2 percent and Jazz with 2.7 percent of all music items
purchased.

         Both the RIAA and IFPI reported that the increased availability of free
music via mass digital copying and internet piracy have had a substantial
negative impact on the recorded music industry in 2004 and the industry is
aggressively pursuing strategies to resolve the erosion of unit shipments and
sales in the world market. In 2004, digital copying and Internet piracy have
resulted in an approximate $4.6 billion decline in worldwide revenues.

         Music is also an essential part of the advertising and film industries.
Music contributes significantly to the success of advertising. Additionally,
music has become an integral part of film, as seen from the successes of many
musical soundtracks of popular movies. Film soundtracks have also produced a
number of hit singles worldwide. The growth of the DVD format has demonstrated
an increased demand for DVD products.

         Foreign record sales account for over one-half of worldwide record
sales. English versions of popular hits have achieved acceptance and success
throughout the globe. Examples are the foreign chart successes of such artists
as Usher, Norah Jones, Eminem, U2, Avril Lavigne, Robbie Williams, Shania Twain,
Destiny's Child and many others. Generally, the U.S. record industry is
expanding its international liaisons through worldwide licenses.

         Music publishing rights serve as an additional and significant source
of earnings for record companies. Publishing and sub-publishing revenues are
generated for each song contained in an album, cassette or CD.

THE FEATURE FILM INDUSTRY

         General
         -------

         The feature film industry encompasses the development, production and
distribution of feature-length motion pictures and their subsequent distribution
in the home video, television and other ancillary markets. The major studios
dominate the industry, some of which have divisions that are promoted as
"independent" distributors of motion pictures, including:

         o  Universal Pictures, Warner Bros. (including New Line Cinema and
            Castle Rock Entertainment);
         o  Twentieth Century Fox, Sony BMG Pictures Entertainment (including
            Columbia Pictures and Columbia Tristar Motion Picture Group);
         o  Paramount Pictures;
         o  The Walt Disney Company (including Buena Vista Pictures, Touchstone
            Pictures and Miramax Film Corp.); and
         o  Metro-Goldwyn-Mayer Inc. (including MGM Pictures, United Artists
            Pictures Inc., Orion Pictures Corporation and Goldwyn Entertainment
            Company).


                                       10
<PAGE>

         In recent years, however, true "independent" motion picture production
and distribution companies have played an important role in the production of
motion pictures for the worldwide feature film market.

         Independent Feature Film Production and Financing
         -------------------------------------------------

         Generally, independent production companies do not have access to the
extensive capital required to make feature-length motion pictures, such as the
"blockbuster" films produced by the major studios. They also do not have the
capital necessary to maintain the substantial overhead that is typical of
operations of major studios. Independent producers target their product at
specialized markets and usually produce motion pictures with budgets of less
than $20 million. Generally, independent producers do not maintain significant
infrastructure. They instead hire only creative and other production personnel
and retain the other elements required for development, pre-production,
principal photography and post-production activities on a project-by-project
basis. Also, independent production companies typically finance their production
activities from bank loans, pre-sales, equity offerings, co-productions and
joint ventures rather than out of operating cash flow. They generally complete
financing of an independent motion picture prior to commencement of principal
photography to minimize the risk of loss.

         Independent Feature Film Distribution
         -------------------------------------

         Film distribution encompasses the exploitation of motion pictures in
theatres and in markets, such as home DVD and video, pay-per-view, pay
television, free television and ancillary markets, such as hotels, airlines and
streaming films on the Internet. Independent producers do not typically have
distribution capabilities. Instead, these producers rely on advances from
domestic and international distributors who approve their projects before
production commences, as well as profit sharing or equity arrangements for
individual projects. Generally, the local distributor in any country or region
will acquire distribution rights for a motion picture from an independent
producer using one or more of these methods. The local distributor will agree to
advance the producer a non-refundable minimum guarantee. The local distributor
will then generally receive a distribution fee of between 20% and 35% of gross
receipts, while the producer will receive a portion of gross receipts in excess
of the distribution fees, distribution expenses and monies retained by
exhibitors. The local distributor and theatrical exhibitor generally will enter
into an arrangement providing for the exhibitor's payment to the distributor of
a percentage of the box-office receipts for the exhibition period, generally 40%
to 50%, depending upon the success of the motion picture.

COMPETITION

         The recorded music, motion picture, and music publishing industries are
highly competitive. We will compete with other companies for artists, airtime
and space in retail outlets. We are not at present, and do not expect in the
foreseeable future, to be a significant participant in the marketplace. We face
competition from companies within the entertainment business and from
alternative forms of leisure entertainment, such as travel, sporting events,
outdoor recreation and other cultural activities. We compete with the major
media and entertainment companies and studios, numerous independent motion
picture, recorded music, music publishing and television production companies,
television networks and pay television systems for the acquisition of literary
and film properties, the services of performing artists, directors, producers
and other creative and technical personnel and production financing. In
addition, our music and motion picture productions compete for audience
acceptance and exhibition outlets with music and motion pictures produced and
distributed by other larger more established companies. As a result, the success
of any of our recorded music products or DVD/motion pictures is dependent not
only on the quality and acceptance of a particular production, but also on the
quality and acceptance of other competing productions released into the
marketplace at or near the same time.

         The entertainment industry is highly competitive, rapidly evolving and
subject to constant change. Other entertainment companies currently offer one or
more of each of the types of products and services we plan to offer. Some of our
competitors in the entertainment market will include Time Warner, Sony BMG, EMI,
Disney, Viacom and numerous independent companies. Some of our competitors in
the music business will include Motown, Warner Music Group, Universal Music
Group, Interscope, Sony BMG and EMI. We expect that our film business will
compete with well-established companies, including MGM, Dreamworks, Time Warner
Inc. and numerous smaller independent companies, which produce, develop or
market films, DVD's, television and cable programming.


<PAGE>

EMPLOYEES

         As of October 31, 2005, we had eight full-time employees in our
operations. We use and plan to continue using independent consultants,
producers, professionals and contractors on an as needed basis. Upon obtaining
additional financing, we will hire additional employees in connection with the
production of our recorded music and film productions. We believe that our
employee and labor relations are good. Our full-time employees are not members
of any union. On film projects, we may employ members of a number of unions,
including the International Alliance of Theatrical and Stage Employees, the
Screen Actors Guild and the Teamsters. A strike by one or more of the unions
that provide personnel essential to the production of films could delay or halt
our ongoing production activities. Such a halt or delay, depending on the length
of time involved, could cause delay in our release of new films and thereby
could adversely affect our cash flow and revenues.

RISK FACTORS

         In addition to other information included in this report, the following
factors should be considered in evaluating our business and future prospects.

         WE NEED TO OBTAIN FINANCING IN ORDER TO CONTINUE OUR OPERATIONS.

         On a prospective basis, we will require both short-term financing for
operations and long-term capital to fund our expected growth. We have no
existing bank lines of credit and have not established any definitive sources
for additional financing. Based on our current operating plan, we will not have
enough cash to meet our anticipated cash requirements through January 31, 2007
if we do not raise at least $10,000,000 from the sale of our securities or other
financing means. While we are in discussions and have entered agreements with
potential financing sources, we currently do not have definitive arrangements
with respect to, or sources of, additional financing. Additional financing may
not be available to us, or if available, then it may not be available upon terms
and conditions acceptable to us. If adequate funds are not available, then we
may be required to delay, reduce or eliminate product development or marketing
programs. The entertainment industry is rapidly evolving. Our inability to take
advantage of opportunities in the industry because of capital constraints may
have a material adverse effect on our business and our prospects.

         AS OF OCTOBER 31, 2005, WE HAD APPROXIMATELY $6,126,028 IN INDEBTEDNESS
AND APPROXIMATELY $1,223,097 IN ACCOUNTS PAYABLE AND ACCRUED EXPENSES; IF WE ARE
UNABLE TO SATISFY THESE OBLIGATIONS, THEN OUR BUSINESS WILL BE ADVERSELY
EFFECTED.

         As of October 31, 2005 we had indebtedness in the aggregate principal
amount of approximately $6,126,028 and accounts payable and accrued expenses of
approximately $1,223,097. Approximately $7,350,000 from the net proceeds of any
additional financing will be used to satisfy our existing loans and obligations
which have matured or will mature in the next twelve months and a portion of the
net proceeds of any additional financing will be used to pay down accounts
payable and accrued expenses. Approximately, $1,100,000 of this indebtedness
consists of amounts owed to our Chief Executive Officer pursuant to demand
promissory notes. Approximately $2,881,820 of this indebtedness consists of
amounts owed to a third party lender pursuant to promissory notes that mature in
December 2006. Approximately $2,017,500 of this indebtedness consists of amounts
owed to third party lenders pursuant to promissory notes that mature in Fiscal
2006. In addition, we are presently in technical default on a $162,000 loan
which we received from a bank. As of January 31, 2006, the outstanding balance
of this loan was $126,708. Although we have made all required payments under
this loan and the bank has not taken any action with respect to this technical
default, if the bank elected to exercise its rights under its security
agreement, it could foreclose on our assets in order to satisfy this
indebtedness. Any such action would adversely effect our operations. In
addition, due to our present lack of liquidity, we have not had the ability to
pay approximately $1,223,097 of accounts payable and accrued expenses.

         WE ARE DEPENDENT ON THE OPERATIONS OF CHARLES STREET, A CO-VENTURE
WHICH WE OPERATE WITH SONY BMG, FOR A SUBSTANTIAL PORTION OF OUR REVENUES.

         We entered into a co-venture agreement with Sony BMG, a major
international entertainment company. We intend to release a series of DVD films
and soundtrack records through this co-venture, Charles Street. While we also
plan to independently distribute records under private labels, we will depend on
Charles Street for a substantial portion of our revenues. There is no assurance
that we will obtain sufficient financing or that Charles Street will be funded
sufficiently to enable us to produce each DVD film and record we intend to

                                       12
<PAGE>

release. Any failure to produce each DVD film and soundtrack record which we
intend to release will have a material adverse effect on our business, results
of operations and financial condition. Pursuant to the terms of the co-venture
agreement with Sony BMG, the final decision regarding whether or not a
particular film project or soundtrack is made through Charles Street is in the
discretion of Sony BMG. If Sony BMG determines that it does not want to produce
our projects through Charles Street, then we will be forced to produce these
projects independently and they will not obtain the benefits of the marketing
and distribution support of Charles Street. It will be significantly more
difficult for us to produce and distribute such projects. In addition, pursuant
to the co-venture agreement, we will refer recording artists to Charles Street
for the production, marketing and distribution of CDs and other recordings. Sony
BMG has the exclusive right, on an artist-by-artist basis, to require us to
assign our contract rights to work with a recording artist to Charles Street.
Charles Street will then have the exclusive right, throughout the world to
exploit any recordings made by such artists. If Sony BMG determines that it does
not wish to produce and distribute recordings made by our artists through
Charles Street, then we will be forced to produce these CDs through our
independent label and distribute them through RED, Sony BMG's independent label
distribution channel, and we will not obtain the benefits of the marketing and
distribution support of Charles Street for these projects. Accordingly, it will
be more difficult for us to produce and distribute such projects.

         WE HAVE A LIMITED OPERATING HISTORY IN THE ENTERTAINMENT INDUSTRY.

         We have a limited history in the entertainment industry. On October 2,
2002, we entered into a Share Exchange Agreement with Christopher Schwartz,
pursuant to which we acquired all of the issued and outstanding common stock of
Metropolitan Recording Inc. and all of the membership interests of each of
Ruffnation Films and Snipes Productions. Our strategy is to become an
independent multimedia entertainment company. In addition to operating a music
division, recording studio division and film production company, we plan to
establish television, publishing and management operations. Prior to entering
into the Share Exchange Agreement, we did not operate in the multimedia and
entertainment industry. Accordingly, we have a limited history in the industry
in which we operate.

         WE HAVE A HISTORY OF LOSSES AND EXPECT THAT LOSSES MAY CONTINUE IN THE
FUTURE.

         Our net loss for the fiscal year ended October 31, 2005 totaled
$7,090,305 compared to a net loss of $4,777,612 for the fiscal year ended
October 31, 2004 and a net loss of $6,586,034 for the fiscal year ended October
31, 2003. In addition, we had negative working capital of $3,226,702 as of
October 31, 2005 and experienced negative cash flow from operations of
$5,050,282 during the fiscal year ended October 31, 2005. We expect that
production and development, marketing and operating expenses will increase
significantly during the next several years. In order to achieve profitability,
we will need to generate significant revenue. We cannot be certain that we will
generate sufficient revenue to achieve profitability. We anticipate that we will
continue to generate operating losses and negative cash flow from operations at
least through the end of Fiscal 2006. We cannot be certain that we will ever
achieve, or if achieved, maintain profitability. If our revenue grows at a
slower rate than we anticipate or if our project development, marketing and
operating expenses exceed our expectations or cannot be adjusted accordingly,
our business, results of operation and financial condition will be materially
adversely effected.

         INDEPENDENT DISTRIBUTORS WILL BE A SIGNIFICANT ELEMENT OF OUR GROWTH
STRATEGY.

         We will rely on independent distributors to distribute a significant
portion of our entertainment products and services when developed. A significant
element of our growth strategy will be to increase the sale and distribution of
our products and services by expanding our presence in local markets and by
extending this network into new markets either by internal growth, joint
ventures, licensing, acquisition or other means. We may not be able to develop,
recruit, maintain, motivate, retain or control a network of independent
distributors. In addition, we have little control over the resources that
independent distributors will devote to marketing our products and the amount of
our competitors' products that our independent distributors choose to market.
Any decision by a distributor to not distribute or promote our products or
services or to promote our competitors' products and services could have a
material adverse effect on our business, results of operations or financial
condition.

         SHARES OF OUR COMMON STOCK LACK A SIGNIFICANT TRADING MARKET.

         Shares of our common stock are not eligible for trading on any national
or regional exchange. Our common stock is eligible for trading in the
over-the-counter market on the Over-The-Counter Bulletin Board pursuant to Rule
15c2-11 of the Securities Exchange Act of 1934. This market tends to be highly
illiquid, in part because there is no national quotation system by which
potential investors can trace the market price of shares except through


                                       13
<PAGE>


information received or generated by certain selected broker-dealers that make a
market in that particular stock. There are currently no plans, proposals,
arrangements or understandings with any person with regard to the development of
a trading market in our common stock. There can be no assurance that an active
trading market in our common stock will develop, or if such a market develops,
that it will be sustained. In addition, there is a greater chance for market
volatility for securities that trade on the Over-The-Counter Bulletin Board as
opposed to securities that trade on a national exchange or quotation system.
This volatility may be caused by a variety of factors, including the lack of
readily available quotations, the absence of consistent administrative
supervision of "bid" and "ask" quotations and generally lower trading volume.

         OUR SUCCESS WILL DEPEND ON EXTERNAL FACTORS IN THE MUSIC AND FILM
INDUSTRIES.

         Operating in the music and film industries involves a substantial
degree of risk. Each planned music project or film production is an individual
artistic work, and unpredictable audience reactions primarily determine
commercial success. The commercial success of a music project or a film
production also depends upon:

         o  the quality and acceptance of other competing records or films
            released into the marketplace at or near the same time;
         o  critical reviews;
         o  the availability of alternative forms of entertainment and leisure
            activities;
         o  general economic conditions; and
         o  other tangible and intangible factors.

         Each of these factors is subject to change and cannot be predicted with
certainty. There can be no assurance that our planned music projects and film
productions will obtain favorable ratings or reviews or that consumers will
purchase our entertainment products and services.

         OUR SUCCESS WILL BE LARGELY DEPENDENT UPON OUR KEY EXECUTIVE OFFICERS
AND OTHER KEY PERSONNEL.

         Our success will be largely dependent upon the continued employment of
our key executive officers and, particularly, our continued employment of
Christopher Schwartz. The loss of Mr. Schwartz's services would have a material
adverse effect on us. We believe that our continued success will depend to a
significant extent upon the efforts and abilities of our executive officers and
our ability to retain them. Although Mr. Schwartz has entered into an employment
agreement with us, and owns approximately 40% of our issued and outstanding
common stock on an as-converted basis, there is no assurance that Mr. Schwartz
will continue his employment with us. Although we believe that we would be able
to locate a suitable replacement for Mr. Schwartz if his services were lost, we
cannot assure you that we would be able to do so. In addition, our future
operating results will substantially depend upon our ability to attract and
retain highly qualified management, financial, technical, creative and
administrative personnel. Competition for highly talented personnel is intense
and can lead to increased compensation expenses. We cannot assure you that we
will be able to attract and retain the personnel necessary for the development
of our business.

         UNAUTHORIZED USE OF OUR INTELLECTUAL PROPERTY AND TRADE SECRETS MAY
AFFECT OUR MARKET SHARE AND PROFITABILITY.

         We protect intellectual property rights to our productions through
available copyright and trademark laws and licensing and distribution
arrangements with reputable international companies in specific territories and
media for limited durations. Despite these precautions, existing copyright and
trademark laws afford only limited practical protection in certain
jurisdictions. We may distribute our products in some jurisdictions in which
there is no copyright and trademark protection. As a result, it may be possible
for unauthorized third parties to copy and distribute our productions or certain
portions or applications of our intended productions. We will rely on our
copyrights, trademarks, trade secrets, know-how and continuing technological
advancement to establish a competitive position in the marketplace. We will
attempt to protect our intellectual property through copyright and agreements
with future artists and employees. Other companies may independently develop or
otherwise acquire similar creative materials or gain access to our intellectual
property. Despite our precautions, there can be no assurance that we will be
able to adequately protect our intellectual property from competitors in the
future. In addition, litigation may be necessary in the future to:

         o  enforce intellectual property rights;
         o  to protect our trade secrets;
         o  to determine the validity and scope of the rights of others; or
         o  to defend against claims of infringement or invalidity.

                                       14
<PAGE>


Any such litigation could result in substantial costs and the diversion of
resources and could have a material adverse effect on our business, operating
results or financial condition.

         PROTECTING AND DEFENDING AGAINST INTELLECTUAL PROPERTY CLAIMS MAY HAVE
A MATERIAL ADVERSE EFFECT ON OUR BUSINESS.

         From time to time, we may receive notice that others have infringed on
our proprietary rights or that we have infringed on the intellectual property
rights of others. There can be no assurance that infringement or invalidity
claims will not materially adversely effect our business, financial condition or
results of operations. Regardless of the validity or the success of the
assertion of claims, we could incur significant costs and diversion of resources
in protecting or defending against claims, which could have a material adverse
effect on our business, financial condition or results of operations.

         PIRACY, ILLEGAL DUPLICATION OF CDS AND DVDS AND FILE SHARING OF MUSIC
AND FILM PRODUCTS OVER THE INTERNET MAY HAVE A MATERIAL ADVERSE EFFECT ON OUR
BUSINESS.

         Our ability to compete depends in part on the successful protection of
our intellectual property, including our music and film productions. Piracy,
illegal duplication and Internet peer-to-peer file sharing of music and film
products has had an adverse effect on the entertainment industry as a whole. If
new legislation aimed at protecting entertainment companies against piracy,
illegal duplication and Internet peer-to-peer file sharing is not enacted and
enforced, and we are unable to protect our music and film productions from
piracy, illegal duplication and Internet peer-to-peer file sharing, then such
continued activities may have a material adverse effect on our business.

      THE RECORDED MUSIC INDUSTRY HAS BEEN DECLINING AND MAY CONTINUE TO
DECLINE, WHICH MAY ADVERSELY AFFECT OUR PROSPECTS AND OUR RESULTS OF OPERATIONS.

      Illegal downloading of music from the Internet, CD-R piracy, industrial
piracy, economic recession, bankruptcies of record wholesalers and retailers and
growing competition for consumer discretionary spending and retail shelf space
may all be contributing to a declining recorded music industry. Additionally,
the period of growth in recorded music sales driven by the introduction and
penetration of the CD format has ended. No significant new legitimate audio
format has yet emerged to take the place of the CD. The value of worldwide sales
(recorded music, excluding sales of digital tracks), as reported by IFPI at
fixed 2004 exchange rates, fell as the music industry witnessed a decline of
1.6% from 1999 to 2000, 1.3% from 2000 to 2001, 6.7% from 2001 to 2002, 7.6%
from 2002 to 2003 and 1.3% from 2003 to 2004. We cannot assure you as to the
timing or the extent of any improvement in the industry. A declining recorded
music industry is likely to lead to reduced levels of revenue and operating
income generated by our Recorded Music business.

         ADVANCES IN TECHNOLOGY MAY HAVE A MATERIAL ADVERSE EFFECT ON OUR
REVENUES.

         Advances in technology may affect the manner in which entertainment
content is distributed to consumers. These changes, which might affect the
entertainment industry as a whole, include the proliferation of digital music
players, services that allow individuals to download and store single songs and
pay-per-view movie services. These technological advances have created new
outlets for consumers to purchase entertainment content. These new outlets may
affect the quantity of entertainment products that consumers purchase and may
reduce the amount that consumers are willing to pay for particular products. As
a result, this could have a negative impact on our ability to sell DVD's, CD's
and soundtracks. Any failure to adapt our business model to these changes could
have a material adverse effect on our revenues.

         OUR SUCCESS WILL DEPEND ON OUR ARTISTS.

         We plan to enter into film and recording contracts with several
artists. We cannot assure you that we will be able to retain the artists we plan
to enter contracts with or that we will be able to attract additional artists.
We may not be able to develop our artists successfully or in such a manner that
produces significant sales. Furthermore, each film and recording is an


                                       15
<PAGE>


individual artistic work, the public acceptance of which cannot be known in
advance. Accordingly, we cannot assure you that any film or record released by
any particular artist will experience financial success. In addition, if any
particular artist experiences success, we cannot predict the timing or longevity
of such success or the extent of the popularity of any particular artist.

         WE WILL DEPEND ON THE CONTINUED POPULARITY OF POP OR URBAN MUSIC.

         We plan to produce records in multiple genres of music including rock,
pop, neo-classical soul and hip-hop. Our proposed artists will be primarily in
this segment of the market. If tastes move away from this type of music and we
do not develop any alternatives, then we may not be able to sell enough
entertainment products and services to be profitable. Although we believe that
this sector will continue to grow, consumer taste is unpredictable and
constantly changing, and we cannot predict with any certainty that this segment
will continue to remain popular.

         OUR GROWTH AS A MULTIMEDIA ENTERTAINMENT COMPANY DEPENDS ON THE SUCCESS
AND INCREASED USE OF ENTERTAINMENT PRODUCTS AND SERVICES.

         The entertainment products and service market is rapidly evolving. The
demand and market acceptance of our planned products and services is uncertain
and subject to a high degree of risk. In order for certain of our planned
entertainment products and services to be successfully accepted in the
marketplace, the production and content of our entertainment products and
services must be accepted as a viable alternative to traditional entertainment
products and services. Because these markets may be new and evolving, it is
difficult to predict the size of the market and its growth rate. If the market
for our entertainment products and services fails to develop or develops more
slowly than we anticipate, we will not be able to generate revenues from our
entertainment products and services at the rate we anticipate. In addition, if
demand for our entertainment products and services grows too quickly, our
infrastructure may not be able to support the demands placed on us by this
growth and our performance and reliability may decline.

         WE WILL BE IN COMPETITION WITH COMPANIES THAT ARE LARGER, MORE
ESTABLISHED AND BETTER CAPITALIZED THAN WE ARE.

         The entertainment industry is highly competitive, rapidly evolving and
subject to constant change. Other entertainment companies currently offer one or
more of each of the products and services we plan to offer. Some of our
competitors in the entertainment market will include Time Warner Inc., Sony BMG,
EMI, Disney and Viacom. Some of our competitors in the music business will
include Motown, Warner Music, Universal Music Group, Interscope, Sony BMG, EMI
and numerous smaller independent companies. We expect that our film business
will compete with well-established companies, including MGM, Dreamworks, Time
Warner Inc. and numerous smaller independent companies, which produce, develop
or market films, DVD's, television and cable programming. Many of our
competitors have:

         o  greater financial, technical, personnel, promotional and marketing
            resources;
         o  longer operating histories;
         o  greater name recognition; and
         o  larger consumer bases than us.

         We believe that existing competitors are likely to continue to expand
their products and service offerings. Moreover, because there are few, if any,
substantial barriers to entry, we expect that new competitors are likely to
enter the entertainment market and attempt to market entertainment products and
services similar to our products and services, which would result in greater
competition. We cannot be certain that we will be able to compete successfully
in the entertainment, multimedia, music, film, management or television
programming markets.

         FUTURE SALES OF OUR SECURITIES WILL DILUTE THE OWNERSHIP INTEREST OF
OUR CURRENT STOCKHOLDERS.

         We expect to sell our equity securities in order to raise the funds
necessary to fund our operations. Any such transactions will involve the
issuance of our previously authorized and unissued securities and will result in
the dilution of the ownership interests of our present stockholders.

                                       16
<PAGE>

         WE MIGHT EXPAND THROUGH ACQUISITIONS WHICH MAY CAUSE DILUTION OF OUR
COMMON STOCK AND ADDITIONAL DEBT AND EXPENSES.

         Any acquisitions of other companies which we complete may result in
potentially dilutive issuances of our equity securities and the incurrence of
additional debt, all of which could have a material adverse effect on our
business, results of operations and financial condition. We plan to seek
acquisitions and joint ventures that will complement our services, broaden our
consumer base and improve our operating efficiencies. Acquisitions involve
numerous additional risks, including difficulties in the assimilation of the
operations, services, products and personnel of acquired companies, which could
result in charges to earnings or otherwise adversely affect our operating
results. There can be no assurance that acquisition or joint venture
opportunities will be available, that we will have access to the capital
required to finance potential acquisitions, that we will continue to acquire
businesses or that any acquired businesses will be profitable.

         OPERATING INTERNATIONALLY MAY EXPOSE US TO ADDITIONAL AND UNPREDICTABLE
RISKS.

         We intend to enter international markets, licensing arrangements and to
form joint ventures internationally to expand sales of our planned entertainment
products and to market our entertainment products and services. International
operations are subject to inherent risks, including:

         o  potentially weaker intellectual property rights;
         o  changes in laws and policies affecting trade;
         o  difficulties in obtaining foreign licenses;
         o  changes in regulatory requirements;
         o  instability of foreign economies and governments;
         o  instances of war or terrorists activities;
         o  unexpected changes in regulations and tariffs;
         o  fluctuations in the value of foreign currencies;
         o  intricate investment and tax laws, including laws and policies
            relating to the repatriation of funds and to withholding taxes; and
         o  uncertain market acceptance and difficulties in marketing efforts
            due to language and cultural differences.

Due to these risks, operating in international markets could have a material
adverse effect on our future business, results of operations or financial
condition.

         OUR SHARES OF COMMON STOCK ARE SUBJECT TO PENNY STOCK REGULATION.

         Holders of shares of our common stock may have difficulty selling those
shares because our common stock will probably be subject to the penny stock
rules. Shares of our common stock are subject to rules adopted by the Securities
and Exchange Commission that regulate broker-dealer practices in connection with
transactions in "penny stocks". Penny stocks are generally equity securities
with a price of less than $5.00 which are not registered on certain national
securities exchanges or quoted on the NASDAQ system, provided that current price
and volume information with respect to transactions in those securities is
provided by the exchange or system. The penny stock rules require a
broker-dealer, prior to a transaction in a penny stock not otherwise exempt from
those rules, to deliver a standardized risk disclosure document prepared by the
Securities and Exchange Commission, which contains the following:

         o  a description of the nature and level of risk in the market for
            penny stocks in both public offerings and secondary trading;
         o  a description of the broker's or dealer's duties to the customer and
            of the rights and remedies available to the customer with respect to
            violation to such duties or other requirements of securities laws;
         o  a brief, clear, narrative description of a dealer market, including
            "bid" and "ask" prices for penny stocks and the significance of the
            spread between the "bid" and "ask" price;
         o  a toll-free telephone number for inquiries on disciplinary actions;
         o  definitions of significant terms in the disclosure document or in
            the conduct of trading in penny stocks; and
         o  such other information and is in such form (including language,
            type, size and format), as the Securities and Exchange Commission
            shall require by rule or regulation.

                                       17
<PAGE>
Prior to effecting any transaction in penny stock, the broker-dealer also must
provide the customer with the following:

         o  the bid and offer quotations for the penny stock;
         o  the compensation of the broker-dealer and its salesperson in the
            transaction;
         o  the number of shares to which such bid and ask prices apply, or
            other comparable information relating to the depth and liquidity of
            the market for such stock; and
         o  monthly account statements showing the market value of each penny
            stock held in the customer's account.

In addition, the penny stock rules require that, prior to a transaction in a
penny stock not otherwise exempt from those rules, the broker-dealer must make a
special written determination that the penny stock is a suitable investment for
the purchaser and receive the purchaser's written acknowledgment of the receipt
of a risk disclosure statement, a written agreement to transactions involving
penny stocks, and a signed and dated copy of a written suitability statement.
These disclosure requirements may have the effect of reducing the trading
activity in the secondary market for a stock that becomes subject to the penny
stock rules.

         BUDGET OVERRUNS MAY ADVERSELY AFFECT OUR BUSINESS.

         Actual music projects or film production costs may exceed their budget,
sometimes significantly. Risks such as labor disputes, death or disability of
star performers, rapid high technology changes relating to special effects or
other aspects of production, shortages of necessary equipment, damage to film
negatives, master tapes and recordings or adverse weather conditions may cause
cost overruns and delay or frustrate completion of a production. If a music
project or film production incurs substantial budget overruns, then we may have
to seek additional financing from outside sources to complete production. We
cannot assure you that such financing will be available to us, or if available,
whether such funds will be available to us on acceptable terms. In addition, if
a music project or film production incurs substantial budget overruns, there can
be no assurance that such costs will be recouped, which could have a significant
impact on our business, results of operations or financial condition.

         OUR OPERATING RESULTS MAY FLUCTUATE SIGNIFICANTLY.

         We expect that our future operating results may fluctuate significantly
as a result of the following:

         o  the timing of domestic and international releases of future music
            projects, or films we produce;
         o  the success of our future music projects or films;
         o  the timing of the release of related products into their respective
            markets;
         o  the costs to distribute and promote the future music projects and
            films;
         o  the success of our distributors in marketing our future music
            projects and films;
         o  the timing of receipt of proceeds generated by the music projects,
            and films from distributors;
         o  the introduction of new music projects, and films by our future
            competitors;
         o  the timing and magnitude of operating expenses and capital
            expenditures;
         o  the level of unreimbursed production costs in excess of budgeted
            maximum amounts;
         o  the timing of the recognition of advertising costs for accounting
            purposes under generally accepted accounting principles; and
         o  general economic conditions, including continued slowdown in
            advertiser spending.

As a result, we believe that our results of operations may fluctuate
significantly, and it is possible that our operating results could be below the
expectations of investors.

         WE DO NOT INTEND TO PAY CASH DIVIDENDS ON OUR SHARES OF COMMON STOCK.

         The future payment of dividends will be at the discretion of our Board
of Directors and will depend on our future earnings, financial requirements and
other similarly unpredictable factors. For the foreseeable future, it is

                                       18
<PAGE>

anticipated that any earnings which may be generated from our operations will be
retained by us to finance and develop our business and that dividends will not
be paid to stockholders.

THERE MAY BE DOWNWARD PRESSURE ON OUR PRICING AND OUR PROFIT MARGINS.

      There are a variety of factors which could cause us to reduce our prices
and erode our profit margins. They are, among others, increased price
competition among record companies resulting from the Universal and Sony BMG
recorded music duopoly, price competition from the sale of motion pictures in
DVD-Video format and videogames, the ever greater price negotiating leverage of
mass merchandisers and big box retailers, the increased costs of doing business
with mass merchandisers and big box retailers as a result of complying with
operating procedures that are unique to their needs and the adoption by record
companies of initially lower-margin formats such as DualDisc and DVD-Audio.

OUR PROSPECTS AND FINANCIAL RESULTS MAY BE ADVERSELY AFFECTED IF WE FAIL TO
IDENTIFY, SIGN AND RETAIN ARTISTS AND SONGWRITERS.

      We are dependent on identifying, signing and retaining artists with
long-term potential, whose debut albums are well received on release, whose
subsequent albums are anticipated by consumers and whose music will generate
sales. The competition among record companies for such talent is intense.
Competition among record companies to sell records is also intense and the
marketing expenditures necessary to compete have increased as well. We are also
dependent on signing and retaining songwriters who will write the hit songs of
today and the classics of tomorrow under terms that are economically attractive
to us. Our competitive position is dependent on our ability to attract and
develop talent whose work can achieve a high degree of public acceptance. Our
financial results may be adversely affected if we are unable to identify, sign
and retain such artists and songwriters under terms that are economically
attractive to us. Our financial results may also be affected by the existence or
absence of artist releases during a particular period.

WE MAY HAVE DIFFICULTY ADDRESSING THE THREATS TO OUR BUSINESS ASSOCIATED WITH
HOME COPYING AND INTERNET DOWNLOADING.

      The combined effect of the decreasing cost of electronic and computer
equipment and related technology such as CD burners and the conversion of music
into digital formats have made it easier for consumers to create unauthorized
copies of our recordings in the form of, for example, CDs and MP3 files. The
music industry is working to control this problem through litigation, by
lobbying governments for new, stronger copyright protection laws and more
stringent enforcement of current laws and by establishing legitimate new media
business models. We cannot give any assurances that such measures will be
effective. If the music industry fails to obtain appropriate relief through the
judicial process or the complete enforcement of judicial decisions issued in our
favor (or if judicial decisions are not in our favor), if the music industry is
unsuccessful in its efforts to lobby governments to enact and enforce stronger
legal penalties for copyright infringement or if the music industry fails to
develop effective means of protecting its intellectual property (whether
copyrights or other rights such as patents, trademarks and trade secrets) or
entertainment-related products or services, our results of operations, financial
position and prospects may suffer.

ORGANIZED INDUSTRIAL PIRACY MAY LEAD TO DECREASED SALES.

      The global organized commercial pirate trade is a significant threat to
the music industry. Worldwide, industrial pirated music (which encompasses
unauthorized physical copies manufactured for sale but does not include Internet
downloads or home CD burning) is estimated to have generated over $4.6 billion
in revenues in 2004, according to IFPI. IFPI estimates that 1.5 billion pirated
units were manufactured in 2004. According to IFPI estimates, approximately 34%
of all music CDs sold worldwide in 2004 were pirated. Unauthorized copies and
piracy contributed to the decrease in the volume of legitimate sales and put
pressure on the price of legitimate sales. They have had, and may continue to
have, an adverse effect on our business.

LEGITIMATE CHANNELS FOR DIGITAL DISTRIBUTION OF OUR CREATIVE CONTENT ARE A
RECENT DEVELOPMENT, AND THEIR IMPACT ON OUR BUSINESS IS UNCLEAR AND MAY BE
ADVERSE.

      Legitimate channels for digital distribution are a recent development and
we cannot predict their impact on our business. In digital formats, certain
costs associated with physical products such as manufacturing, distribution,



                                       19
<PAGE>

inventory and return costs do not apply. While there are some digital-specific
variable costs and infrastructure investments necessary to produce, market and
sell music in digital formats, we believe it is reasonable to expect that we
will generally derive a higher contribution margin from digital versus physical
sales. However, we cannot assure you that we will generally continue to achieve
higher margins from digital sales. Any legitimate digital distribution channel
that does develop may result in lower or less profitable sales for us than
comparable physical sales. In addition, the transition to greater sales through
digital channels introduces uncertainty regarding the potential impact of the
"unbundling" of the album on our business. While recent studies have indicated
that consumers spend more on music in general when they begin to purchase music
in digital form than previously, it remains unclear how consumer behavior will
change when faced with the prospect of purchasing only their favorite tracks
from a given album rather than the entire album. In addition, if piracy
continues unabated and legitimate digital distribution channels fail to gain
consumer acceptance, our results of operations could be harmed.

ITEM 2. DESCRIPTION OF PROPERTY

         Our corporate headquarters is located at 1080 N. Delaware Avenue,
Philadelphia, Pennsylvania 19125 and occupies approximately 10,500 square feet
of space under a three-year lease agreement that expires on December 31, 2008.
We are obligated to pay rent of $9,625 per month during the first two years of
the term of this lease agreement and $10,500 per month during the last year of
the term of this lease agreement. We have an option to extend the lease for a
period of two years after the end of the initial term at a monthly rent of
$10,815 during the first year of the extension and a monthly rent of $11,139
during the second year of the extension.

         In November 2004, we assigned our rights under our existing office
lease for 101 Charles Drive, Bryn Mawr, Pennsylvania to an unaffiliated party
who has agreed to assume our obligations under this lease. As part of this
agreement, we agreed to maintain our recording studio equipment and fixtures at
these premises throughout the term of the assumed lease. The assignee has the
right to use the recording studio for 21 days per month and we retain the right
to use the recording studio for all remaining days in any calendar month
provided that we are required to provide the assignee with no less than 30 days
notice of our intent to use the recording studio for three or more consecutive
calendar days. We are obligated to pay one third of all costs of maintaining the
recording studio equipment and fixtures in good working order as well as one
third of all utilities costs.

         We believe that our current facilities are adequate to conduct our
business operations for the foreseeable future. We believe that we will be able
to renew this lease on similar terms upon expiration. If we cannot renew the
lease agreement, we believe that we could find other suitable premises without
any material adverse impact on our operations.

ITEM 3. LEGAL PROCEEDINGS

         We know of no pending legal proceedings to which we or any of our
subsidiaries are a party which are material or potentially material, either
individually or in the aggregate. We are from time to time, during the normal
course of our business operations, subject to various litigation claims and
legal disputes. We do not believe that the ultimate disposition of any of these
matters will have a material adverse effect on our consolidated financial
position, results of operations or liquidity.

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

         No matters were submitted to a vote of security holders during the
fourth quarter of fiscal year 2005.

                                     PART II

ITEM 5. MARKET FOR COMMON EQUITY AND RELATED SHAREHOLDER MATTERS

         Our common stock is currently quoted on the Over-The-Counter Bulletin
Board under the symbol "TMEG.OB".

                                       20
<PAGE>
Market Information
------------------

         The following table presents the high and low bid prices per share of
our common stock as quoted for the years ended October 31, 2005 and October 31,
2004 which information was provided by NASDAQ Trading and Market Services. All
amounts have been retroactively adjusted to reflect a 14-for-1 forward stock
split that occurred on October 7, 2002.

Fiscal Year ended October 31, 2005
--------------------------------------------------------------------------------
Quarter ended:                          High Bid                     Low Bid
                                        --------                     -------
     January 31, 2005                      .5                           .33
     April 30, 2005                        .3                           .19
     July 31, 2005                         .195                         .15
     October 31, 2005                      .13                          .07



Fiscal Year ended October 31, 2004
--------------------------------------------------------------------------------
Quarter ended:                          High Bid                     Low Bid
                                        --------                     -------
     January 31, 2004                     2.84                          .99
     April 30, 2004                       2.54                         1.27
     July 31, 2004                        1.70                          .64
     October 31, 2004                      .89                          .51

The above quotations reflect inter-dealer prices, without retail mark-up,
markdown or commission and may not reflect actual transactions. On February 24,
2006, the closing bid price for our common stock was $0.075 per share.

Holders
-------

         As of February 21, 2006, we had 77 stockholders of record of our common
stock. Such number of record holders was derived from the records maintained by
our transfer agent, Stocktrans, Inc.

Dividends
---------

         To date, we have not declared or paid any cash dividends and do not
intend to do so for the foreseeable future. We intend to retain all earnings, if
any, to finance the continued development of our business. Any future payment of
dividends will be determined solely in the discretion of our Board of Directors.

Recent Sales of Unregistered Securities and Use of Proceeds
-----------------------------------------------------------

         Pursuant to that certain loan agreement, dated November 1, 2002, with
Trident Growth Fund, L.P. (f/k/a/ Gemini Growth Fund, LP) ("Trident"), we were
required to comply with various financial and other covenants of which failure
to comply could have been deemed a default under the loan by Trident. As of
January 31, 2003, April 30, 2003 and July 31, 2003, we did not satisfy these
financial covenants and were in default under the loan agreement. On March 27,
2003 Trident waived this default for a period of six months ending April 30,
2003. On September 11, 2003 Trident waived this default for a period of six
months from April 30, 2003 through October 31, 2003. In exchange for the waiver
by Trident, on March 27, 2003 we issued Trident warrants to purchase 10,000
shares of our common stock at an initial exercise price of $1.50 per share.
These warrants were issued pursuant to Section 4(2) of the Securities Act. In
exchange for the waiver by Trident on September 11, 2003, we issued Trident
warrants to purchase 10,000 shares of our common stock at an initial exercise
price of $1.15 per share. These warrants were issued pursuant to Section 4(2) of
the Securities Act.

         Under the terms of the loan agreement, we were required to register for
Trident the resale of the shares of common stock issuable upon conversion of the
note or exercise of the warrants, within 180 days of the date of the loan
agreement. If the common stock was not fully registered within 180 days, at the
option of Trident, we were subject to a monthly penalty of .1% shares of our
common stock then outstanding computed on a fully diluted basis per day until
the shares were registered.

                                       21
<PAGE>

         As of April 30, 2003 we did not register the resale of the shares of
common stock issuable upon conversion of the note or exercise of the warrants.
However, on June 13, 2003, Trident waived this default for a period of six
months from April 30, 2003 through October 31, 2003. In exchange for the waiver
by Trident, on June 13, 2003 we issued Trident 100,000 shares of our common
stock and warrants to purchase 100,000 shares of our common stock at an initial
exercise price of $1.13 per share. These shares of common stock and warrants
were issued pursuant to Section 4(2) of the Securities Act.

         In June 2003 we issued and sold 25,000 shares of our common stock at an
offering price of $1.00 per share to an accredited investor pursuant to Section
4(2) of the Securities Act.

         On June 20, 2003, in exchange for services, we issued Aaron Lehmann
warrants to purchase 50,000 shares of our common stock at an exercise price of
$1.50 per share. These warrants were issued pursuant to Section 4(2) of the
Securities Act.

         On June 20, 2003, in exchange for services, we issued Founders Equity
Securities, Inc. warrants to purchase 100,000 shares of our common stock at an
exercise price of $1.50 per share. These warrants were issued pursuant to
Section 4(2) of the Securities Act.

         On July 2, 2003, in exchange for certain accommodations, we issued
Daryl Strickling warrants to purchase 25,000 shares of our common stock at an
exercise price of $1.50 per share. These warrants were issued pursuant to
Section 4(2) of the Securities Act.

         In January and February 2004, we issued and sold an aggregate of
500,000 shares of our common stock at an offering price of $1.00 per share to
three accredited investors pursuant to Rule 506 promulgated under the Securities
Act.

         In February and March 2004, we issued and sold an aggregate of
1,090,000 shares of our common stock at an offering price of $1.00 per share to
four accredited investors pursuant to Rule 506 promulgated under the Securities
Act. Additionally, in March 2004, we received a subscription for the sale of
75,000 shares of our common stock at an offering price of $1.00 per share. These
shares were subsequently issued in May 2004 to one accredited investors pursuant
to Rule 506 promulgated under the Securities Act.

         On March 23, 2004, we entered into an employment agreement with Daniel
J. B. Taylor. Pursuant to the terms of the employment agreement Mr. Taylor was
appointed as our President and Chief Executive Officer of European Operations
and we granted Mr. Taylor the option to purchase up to 6,000,000 shares of our
common stock pursuant to Section 4(2) of the Securities Act. The exercise price
for these options is $1.75 per share, the closing price of shares of our common
stock on March 23, 2004 and is subject to adjustment based on the market price
of our shares of common stock. Upon the execution of the employment agreement,
options immediately vested to purchase 2,000,000 share of our common stock. In
addition, options to purchase 2,000,000 shares of our common stock vest upon the
completion and funding of an initial public offering of our shares of common
stock in the United Kingdom and options to purchase 2,000,000 shares of our
common stock vest upon our completion of ten films in a form which can
reasonably be regarded as being capable of being exhibited or sold in DVD format
to the general public. Mr. Taylor resigned from the Company on June 14, 2005 and
the 4,000,000 unvested options expired. The vested options expired without being
exercised.

         In April 2004, we issued a Stock Purchase Warrant to purchase 121,875
shares of our common stock at an exercise price of $1.00 per share pursuant to
Section 4(2) of the Securities Act to Middle Fork Investments Ltd. in exchange
for financing services. The warrant is exercisable until April 5, 2007.

         In April 2004, we issued a Stock Purchase Warrant to purchase 2,500
shares of our common stock at an exercise price of $1.00 per share pursuant to
Section 4(2) of the Securities Act to Middle Fork Investments Ltd. in exchange
for financing services. The warrant is exercisable until April 5, 2007.

         In June 2004, we issued a Stock Purchase Warrant to purchase 50,000
shares of our common stock at an exercise price of $1.06 per share pursuant to
Section 4(2) of the Securities Act to Larry Feinstein in exchange for services.
The warrant is exercisable until June 1, 2007.

         In June 2004, we issued a Stock Purchase Warrant to purchase 62,500
shares of our common stock at an exercise price of $.80 per share pursuant to
Section 4(2) of the Securities Act to K. David Stevenson as an inducement to


                                       22
<PAGE>

provide us with a loan in the principal amount of $50,000. The warrant is
exercisable until June 25, 2007 and the loan is documented by a promissory note
that accrues interest at the rate of 10% per annum and is payable upon demand.

         In August 2004, we issued a Stock Purchase Warrant to purchase 62,500
shares of our common stock at an exercise price of $.80 per share pursuant to
Section 4(2) of the Securities Act to K. David Stevenson as an inducement to
provide us with a loan in the principal amount of $50,000. The warrant is
exercisable until August 13, 2007 and the loan is documented by a promissory
note that accrues interest at the rate of 10% per annum and is payable upon
demand.

         On August 24, 2004, we entered into the agreement with GAP pursuant to
which we will represent GAP as its agent in the development and multimedia
exploitation of GAP's New Captain Scarlet Series properties in the United
States, Canada and such other territories as are mutually agreed upon. Pursuant
to the terms of the agreement, GAP has purchased 1,505,539 shares of our common
stock at an aggregate purchase price of $978,600. We sold these shares of common
stock pursuant to Rule 506 promulgated under the Securities Act of 1933, as
amended.

         In connection with our offering to sell up to 6,666,667 Units to
accredited investors, on January 24, 2005, Clearview Investment Fund purchased
666,667 Units at $0.45 per Unit, pursuant to the terms set forth in our Amended
and Restated Subscription Agreement.

         On March 17, 2005, we and International Equities Group, Inc. ("IEG")
entered into the Operating Agreement of Battle Rap, LLC. We hold a 10% interest
in Battle Rap, for which we contributed 2,000,000 shares of our common stock to
Battle Rap, which distributed them to IEG. We also issued to IEG a warrant to
purchase 1,000,000 shares of our common stock at an exercise price of $.45 per
share. These transactions were completed pursuant to Section 4(2) of the
Securities Act.

         On April 29, 2005, we issued 10,000,000 shares of our common stock to
Christopher Schwartz upon his election to convert 1,000,000 shares of our Series
A Convertible Preferred Stock, stated value $10,00 per share into shares of our
common stock at the conversion price of $1.00 per share pursuant to Section 4(2)
of the Securities Act.

         On May 5, 2005, we entered into a Securities Purchase Agreement with IL
Resources, LLC ("IL Resources") pursuant to which we issued to IL Resources a
Secured Convertible Term Note in the aggregate principal amount of $1,590,000
and a warrant to purchase 2,000,000 shares of our common stock pursuant to
Section 4(2) of the Securities Act. The note is convertible into our common
stock at a conversion price of $.50, subject to certain adjustments.

         On or about May 6, 2005, eight of our creditors agreed to exchange an
aggregate of $3,268,162 in indebtedness owed to them for shares of our common
stock at a price of $1.00 per share, pursuant to Section 4(2) of the Securities
Act, for a total of 3,268,162 shares.

         On December 20, 2005, we entered into a consulting agreement with Walt
Beach pursuant to which we issued to Walt Beach 1,500,000 shares of our common
stock, pursuant to Section 4(2) of the Securities Act.

ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS

         The following discussion and analysis of our financial condition and
results of operations should be read in conjunction with our consolidated
financial statements and related notes appearing elsewhere in this report. This
discussion and analysis contains forward-looking statements that involve risks,
uncertainties, and assumptions. The actual results may differ materially from
those anticipated in these forward-looking statements as a result of certain
factors, including but not limited to the risks discussed in this report.

OVERVIEW
--------

         We are a multimedia entertainment company that has film and music
operations. We completed production of Snipes in Fiscal 2002 and released it in
Fiscal 2003 through Charles Street, our co-venture with Sony BMG. Snipes had a
limited theatrical release followed by release of the DVD/VHS of the film. In
addition, through a distribution agreement with New Line Television, Inc.,
Snipes was aired on VH-1, the music television channel. While we continued to
recognize revenues from Snipes in Fiscal 2004, we did not recognize the same
level of revenues that we recognized in Fiscal 2003. In Fiscal 2005, we
re-released Snipes as a combination DVD/CD package through Charles Street and we


                                       23
<PAGE>


distributed Train Ride, a film produced by a third party and released a CD by
our recording artists, the Spin Doctors. In Fiscal 2006, we anticipate assisting
GAP in the multimedia exploitation of the New Captain Scarlet series, commencing
production of our new movie Four Point Play and releasing CDs by our music
artists Kulcha Don and Kristy Frank.

         We presently do not have sufficient cash to implement our business
plan. We have experienced this lack of liquidity throughout Fiscal 2004 and
Fiscal 2005, causing us to be unable to produce any additional feature films. We
believe that we need to raise or otherwise obtain at least $10,000,000 in
additional financing in order to satisfy our existing obligations and implement
our business plan. If we are successful in obtaining such financing, we may
require an additional nine to twelve months in order to complete production of
additional feature films or music projects for release and distribution.
Accordingly, in order to generate revenues in Fiscal 2006, we may need to rely
on other sources of revenue such as acquiring the rights to distribute and
exploit feature films, music projects and other entertainment content produced
by third parties. If we are not successful in obtaining additional financing, we
will not be able to complete the projects we have planned for Fiscal 2006 or
continue to implement our business plan.

         The following discussion and analysis should be read in conjunction
with the consolidated financial statements and the related notes thereto
included in this Form 10-KSB.

CRITICAL ACCOUNTING POLICIES
----------------------------

         In presenting our financial statements in conformity with accounting
principles generally accepted in the United States, we are required to make
estimates and assumptions that affect the amounts reported therein. Several of
the estimates and assumptions we are required to make relate to matters that are
inherently uncertain as they pertain to future events. However, events that are
outside of our control cannot be predicted and, as such, they cannot be
contemplated in evaluating such estimates and assumptions. If there is a
significant unfavorable change to current conditions, it will likely result in a
material adverse impact to our consolidated results of operations, financial
position and in liquidity. We believe that the estimates and assumptions we used
when preparing our financial statements were the most appropriate at that time.
Presented below are those accounting policies that we believe require subjective
and complex judgments that could potentially affect reported results.

         Revenue Recognition
         -------------------

         We recognize revenue from the sale or licensing of films and
nonrefundable minimum guarantees from customers upon meeting all recognition
requirements of Statement of Position ("SOP") 00-2, "Accounting by Producers or
Distributors of Films". According to SOP 00-2, an entity should recognize
revenue from a sale or licensing arrangement of a film when all of the following
conditions are met:

         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.

If we do not meet any one of the preceding conditions, then we will defer
recognizing revenue until all of the conditions are met.

         Capitalized Film Costs
         ----------------------

         Costs of making motion picture films that are produced for sale to
third parties are stated at the lower of cost, less accumulated amortization, or
fair value. In accordance with SOP 00-2, we expense film costs based on the
ratio of the current period gross revenues to estimated total gross revenues
from all sources on an individual production basis. As of October 31, 2003, the
only film costs which we had recorded on our balance sheet were incurred in
connection with the production of the movie Snipes. During Fiscal 2003-Second
Quarter, we commenced the amortization of the original $3,694,162 in film costs
associated with the movie Snipes upon distribution of the DVD in February 2003.


                                       24
<PAGE>


We anticipated that these film costs would be fully amortized during Fiscal
2003. Accordingly, the amortization expense related to the film costs associated
with the movie Snipes for the fiscal year ended October 31, 2003 was $3,694,162.
If we estimated that Snipes would have generated more Net Revenues, then we
would have amortized less film costs during the fiscal year ended October 31,
2003 which would have reduced our net loss. We believe that full amortization of
these costs in Fiscal 2003 is appropriate as we currently estimate that is the
period in which we will have generated substantially all of the revenues
associated with the distribution of the DVD. The amortization of film costs
represented substantially all of the direct costs incurred during the fiscal
year ended October 31, 2003.


         Artist Compensation Costs
         -------------------------

         The amount of royalties earned by artists, as adjusted for anticipated
returns, is charged to expense in the period in which the sale of the record
takes place. Advance royalty paid to an artist is reported as an asset only if
the past performance and current popularity of the artist to whom the advance is
made provide a sound basis for estimating that the amount of the advance will be
recoverable from future royalties earned by the artist. Capitalized advances are
charged to expense as subsequent royalties are earned by the artist. Any portion
of capitalized advances that appear not to be fully recoverable from future
royalties to be earned from the artist are charged to expense during the period
in which the loss becomes evident.

RESULTS OF OPERATIONS
---------------------

Year Ended October 31, 2005 (Fiscal 2005) vs. Year Ended October 31, 2004
(Fiscal 2004)
<TABLE>
<CAPTION>
                                           FISCAL 2005        FISCAL 2004           $CHANGE
                                           ------------       -----------          ----------
<S>                                        <C>                <C>                  <C>
Net Loss                                   $(7,090,305)       $(4,777,612)         $2,312,693
Net Loss From Operations                   $(7,336,391)       $(4,782,312)         $2,554,079
Net Revenues                                    $6,034           $239,070           $(233,036)
Direct Costs                                  $990,482            $41,314            $949,168
Operating Expenses                          $6,351,943         $4,980,068          $1,371,875
Other Income                                  $246,086             $4,700            $241,386
</TABLE>

         The increase in Net Loss From Operations in Fiscal 2005 was primarily
due an increase in direct costs and operating expenses in Fiscal 2005.

         The decrease in Net Revenues in Fiscal 2005 was due to the fact that we
released Train Ride in Fiscal 2005 and obtained minimal revenue.

         The increase in Direct Costs for Fiscal 2005 was mainly the result of
final amortization of capitalized artist and production costs for music and film
projects and an increase in related disbursements. Direct Costs are costs
directly related to the production of film or music projects that we develop and
include such items as production fees and costs, artist costs and expenses,
engineering services, equipment rentals, amortization expense, studio supplies
and support services.

         The increase in Operating Expenses in Fiscal 2005 was primarily due to
an increase of $1,641,947 due to fees and expenses incurred in connection with
financings, an increase of $631,795 due to a loss on impairment of the
investment in Battle Rap. These increased expenses were offset by a decrease of
$550,000 in consulting expenses and a decrease of $365,000 travel and
entertainment. Operating Expenses are generally the costs of operating our
business and include salaries, advertising, professional and consulting fees,
rent and utilities and travel.

CHANGES IN FINANCIAL POSITION, LIQUIDITY AND CAPITAL RESOURCES
<TABLE>
<CAPTION>
                                             FISCAL 2005        FISCAL 2004          $CHANGE
                                             -----------        -----------          -------
<S>                                          <C>                <C>                <C>
Cash Flows From Operating Activities         $<5,050,282>       $<2,468,710>       $<2,581,572>
Cash Flows From Investing Activities            $<22,121>           $86,943          $<109,064>
Cash Flows From Financing Activities          $4,922,010         $2,552,778         $2,369,232
</TABLE>

         The use of cash from operations in Fiscal 2005 was due primarily to our
Net Loss, principally offset by non-cash charges for depreciation and
amortization of $179,485, loss on impairment of $1,055,000, an increase in

                                       25
<PAGE>


foreign currency exchange of $230,116, advances from distributors of $167,866,
an increase in prepaid expenses of $287,191 and an increase in amounts payable
and accrued expenses of $652,750.

         In Fiscal 2005, cash provided by investing activities represented
monies advanced to us by our principal stockholder of $22,242 offset by an
investment in affiliated company of $25,000 and a $22,288 purchase of equipment.
In Fiscal 2005, financing activities provided $3,111,936 from long-term debt,
$1,362,595 from term loans and $19,500 from the issuance of demand notes payable
and $427,979 from the sale of common stock.

         At October 31, 2005, we had approximately $34,700 in cash. At February
15, 2006, we had approximately $25,500 in cash. We do not believe that the
amount of cash that we had on hand at February 15, 2006 is sufficient to fund
our operations through January 31, 2007. We have principally relied on equity
financing and loans from our principal stockholder, distributions from Charles
Street, our co-venture with Sony BMG, and third party lenders to fund our
operations. During Fiscal 2006, we anticipate continuing to pursue all possible
funding scenarios that will finance our business operations. We intend to obtain
financing to fund our operations for the next twelve months and will consider
sales of our securities and/or a combination of alternative financing structures
including, but not limited to, joint or co-ventures, licensing of projects,
production subsidies, debt financing, tax structured financing, a merger with or
acquisition of a foreign listed entity and partnerships for individual or
multiple projects. However, we are not certain that these financing transactions
will close or whether we will be able to obtain additional financing. We believe
that it will be necessary for us to raise at least $10,000,000 in order to meet
our anticipated cash requirements through January 31, 2007. There can be no
assurances that we will be successful in our efforts to raise this amount of
additional financing. In the event that we are unable to raise these funds, we
will then be required to delay our plans to grow our business and we will rely
on our net revenues to fund our operations.

         On May 5, 2005, we entered into a Securities Purchase Agreement with IL
Resources, LLC ("IL Resources") pursuant to which we issued to IL Resources a
Secured Convertible Note in the aggregate principal amount of $1,590,000 and a
warrant to purchase 2,000,000 shares of our common stock. The Note is
convertible into a total of 3,180,000 shares of our common stock at a conversion
price of $0.50, subject to certain adjustments.

         On or about May 6, 2005, eight of our creditors agreed to exchange an
aggregate of $3,268,162 in indebtedness owed to them for shares of our common
stock at a price of $1.00 per share, for a total of 3,268,162 shares.

         On December 27, 2004, TM Film Distribution, Inc., our wholly-owned
subsidiary, entered into a Loan Agreement with Fairbairn Private Bank Limited
(the "Loan Agreement"). The Loan Agreement established a loan facility in the
maximum aggregate principal amount of 1,628,055 pounds sterling (the "Facility")
that TM Film Distribution may draw down from time to time. To date, TM Film
Distribution has drawn down 1,500,000 pounds sterling of this Facility. Interest
accrues for each advance under the Facility at the rate of LIBOR on the date of
the advance plus 0.375%. Pursuant to the Loan Agreement, the lender determines
LIBOR in its sole discretion by reference to either (i) the relevant Reuters
page at or about 11:00 a.m. (London time) on the date an advance is drawn or
(ii) if no such rate can be ascertained at the relevant time, the rate offered
to lender by any leading bank in the London inter-bank market at or about 11:00
a.m. (London time) on the date an advance is drawn. Amounts drawn under the
Facility are due for repayment on that date which is 24 months after the date on
which the final draw down of the Facility is made. Interest is payable quarterly
during the term that each advance is outstanding. TM Film Distribution's
obligation to repay all loan amounts under the Facility is secured by a Deed of
Charge Over Cash and a Deed of Charge Over Deposit each created in favor of the
lender and covering funds held on deposit by TM Film Distribution with the
lender. These funds are part of the Printing and Advertising fund established by
KMM on behalf of TM Film Distribution, as more fully described in Business of
the Company - Film Division - Keydata Media & Marketing 1 LLP Distribution
Arrangement. On December 27, 2004, we received a payment of $1,468,035 from TM
Film Distribution as payment of costs and expenses in connection with its
formation and its activities in connection with the structuring of transactions
with KeyData Media & Marketing 1, LLP.

         In August 2004, we engaged Brockington Securities, Inc. as our
financial advisor and investment banker pursuant to which we issued them 250,000
shares of our common stock. In January 2005, they assisted us in the completion
of a private placement offering pursuant to which we raised gross proceeds of
$300,000 and paid Brockington a commission of $30,000.

         We derived a significant portion of our net revenues in Fiscal 2003 and
Fiscal 2004 from our Charles Street joint venture related to the sale of the
feature film Snipes, which was released on DVD/Home Video by Sony BMG on
February 25, 2003. In Fiscal 2004, there was a significant decrease in net
revenues due to the decline in revenues from Snipes and our failure to release

                                       26
<PAGE>


any new movies or entertainment content. Under the terms of the co-venture
agreement with Sony BMG, as amended on October 2, 2003, Ruffnation Films will
fund the creation, production and marketing of ten films for Charles Street.
Snipes was the first film we produced under the agreement. Sony BMG will advance
funds for manufacturing, marketing, promotion, production, distribution and
other related expenses for film and music projects. These funds are considered a
loan to Charles Street and are recoverable by Sony BMG from the sales of
products released by Charles Street. Sony BMG has the right to accept or reject
any film in its discretion. Substantially all of the $1,149,584 in Net Revenues
which we generated in Fiscal 2003 and the $239,070 of Net Revenues which we
generated in Fiscal 2004 represented revenues primarily from sales to rental
outlets and limited retail sales of the feature film Snipes.

         Through June 30, 2004, Sony BMG has reported gross billings for Charles
Street related to the release of the Snipes DVD/Home Video of $2,441,323 and net
profits of $1,149,557, of which our portion is $953,627. As of the date of this
report, we have not received additional financial information from Sony BMG
relating to amounts due to Charles Street for Snipes. We anticipate receiving
financial information from Sony BMG relating to Charles Street for the period
ending December 31, 2004, however, we do not anticipate receiving significant
additional revenues related to Snipes. Although we may receive additional
payments from Charles Street in Fiscal 2005 related to sales of Snipes, there
can be no assurance of the amount or timing of such payments.

         On August 24, 2004, we entered into an agreement with Gerry Anderson
Productions PLC ("GAP") pursuant to which we will represent GAP as its agent in
the development and multimedia exploitation of GAP's New Captain Scarlet Series
properties in the United States, Canada and such other territories as are
mutually agreed upon. In connection with this agreement, we have introduced GAP
to Sony Wonder, a group of Sony and they have negotiated a term sheet agreement
regarding the broadcast and master licensing of the New Captain Scarlet Series
pursuant to which GAP will provide Sony Wonder with at least 13 episodes of the
series for the purpose of securing a broadcast arrangement with a major
television network and/or cable television network. In addition, Charles Street,
our co-venture with Sony, will negotiate with artists, develop and produce a
soundtrack CD/DVD for the New Captain Scarlet Series.

         As consideration for services provided under this agreement, we will
receive a fee equal to five percent of the gross cash receipts realized by GAP
from Sony's exploitation of the New Captain Scarlet Series (excluding revenues
generated by sub-agents or distributors appointed by Sony, if any). In addition,
GAP is obligated to purchase an aggregate of 1,538,462 shares of our common
stock in a private placement offering at an aggregate purchase price of
$1,000,000. During the period from September 2004 through January 2005, GAP
purchased 1,505,539 of these shares and remains obligated to purchase 32,923
shares of our common stock. Pursuant to the agreement, we also have a five-year
option to purchase up to $1,000,000 of GAP's capital stock at a 15% discount to
the value of the shares on the date that the option is exercised.

         We have entered into negotiations of agreements with licensors and
distributors of our film and music products both domestically and
internationally. Pursuant to industry standards, the terms and conditions of
these agreements provide for advances against sales of the respective film or
music product that is licensed or distributed. We use the advances for operating
capital needs. However in most cases these advances are recoverable from future
sales of our products. There is no assurance that the advances that we receive
will be recoverable from the sale of respective music or film products licensed
or distributed domestically or internationally. In addition, there is no
assurance that we will receive sufficient advances to adequately fund our
operations.

         We advance funds to artists and, in some cases, to independent
producers pursuant to their respective contracts for acquisition, composition,
marketing, production, development or other related costs. In most cases, these
expenses are recoverable from the artist or independent producer upon the sale
of such party's music or film product. However, there can be no assurance that
the advances or expenses will be recoverable from the artist or producer of a
film or music project. We do not presently have any existing obligations to
advance funds to any artists or independent producers and our ability to do so
in the future is highly dependent on our ability to raise additional financing.

         In addition to the financing that we need to implement our business
plan, we are in default on a loan in the original principal amount of $162,000
that Metropolitan, our subsidiary, received from a bank. The current principal
balance of the loan at February 15, 2006 was approximately $126,708. The
original maturity date of the loan was August 2006. The loan is payable in
monthly installments of $1,965, including accrued interest at a rate of 8% per
annum, with a lump sum payment due at maturity of $99,858. The loan is
collateralized by all assets of Metropolitan and a personal guarantee by
Christopher Schwartz. The loan agreement includes a provision that states that


                                       27
<PAGE>


any change of ownership of 25% or more of the common stock of Metropolitan
without the prior written consent of the bank is an event of default. The share
exchange transaction resulted in a change in ownership of all of the issued and
outstanding common stock of Metropolitan. Upon default, the bank, at its option,
may increase the interest rate four basis points, demand payment in full of the
outstanding principal balance of the loan plus all accrued interest thereon, and
may hold Metropolitan liable for all collection costs that it incurs. On May 10,
2004, the bank demanded payment in full of the outstanding principal balance of
the loan plus all accrued interest on the loan in the approximate amount of
$14,500 for the aggregate amount of approximately $147,100 by August 17, 2004.
We are currently negotiating terms for an extension of this payment deadline. As
we presently do not have sufficient cash on hand to repay this loan, we may be
faced with the bank's election to sell a sufficient amount of the assets of
Metropolitan to raise the funds necessary to repay this loan. Any such action
would have a material adverse effect on our operations. The total outstanding
amount of this note is reflected as a current liability in our October 31, 2004
Consolidated Balance Sheet.

         In addition, we have accounts payable and accrued expenses in the
aggregate amount of approximately $1,223,097 that are presently past due.

         We also have other obligations that mature or may mature in the next
twelve months.

         In June 2004, we received short-term loans in the aggregate amount of
$90,000 from a third party. These obligations are documented by promissory notes
that accrue interest at the rate of 10% per annum and are payable upon the
earlier of our receipt of $1,500,000 in additional financing or July 1, 2005.

         In June 2004 and August 2004, we received short-term loans in the
aggregate amount of $100,000 from a third party. These obligations are
documented by promissory notes that accrue interest at the rate of 10% per annum
and are payable upon demand. As an inducement for the loans we issued the lender
warrants to purchase 125,000 shares of common stock at a price per share of $.80
with a term of three years.

         On April 11, 2003, Snipes cancelled a $400,000 promissory note, a
$25,000 promissory note and $10,000 promissory note and issued an amended
promissory note in the principal amount of $435,000 to third party lenders. The
amended promissory note accrued interest at the rate of 35% per annum and was
due to mature on October 31, 2003. However, on October 30, 2003 the promissory
note was amended to extend the maturity date from October 31, 2003 until April
30, 2004. On June 2, 2004, the promissory note was further amended to extend the
maturity date from April 30, 2004 until September 30, 2004. As of June 2, 2004,
the outstanding principal and accrued interest on the promissory note was
$654,906. For the period from June 2, 2004 until September 30, 2004, the
interest rate on the promissory note was reduced from 35% to 20% and accrued on
the balance of $654,906. On May 1, 2005, the outstanding balance of $1,041,524
was repaid by the issuance of a promissory note in the amount of $510,000 and
conversion of the remaining $531,524 into shares of our common stock at a
conversion price of $1.00 per share.

         On March 24, 2003, we received a $12,500 loan and issued a promissory
note to 1025 Investments, Inc. This obligation is documented by a promissory
note payable on demand which accrues interest at the rate of 10% per annum. In
June 2003, we received a short-term loan in the aggregate principal amount of
$67,102 from 1025 Investments, Inc. This obligation is documented by a
promissory note payable on demand that bears interest at 12% per annum. In July
2003, we received a short-term loan in the aggregate principal amount of $17,000
from 1025 Investments, Inc. The obligation is documented by a promissory note
payable on demand that bears interest at 12% per annum. In August 2003, we
repaid $35,000 of these loans and $61,602 presently remains outstanding.

         We have received loans in the aggregate principal amount of $1,100,000
from Christopher Schwartz, our Chairman, Chief Executive Officer and principal
stockholder. These obligations are documented by a demand note payable which
accrues interest at the rate of 7% per annum. In addition, in Fiscal 2005, Mr.
Schwartz, extended short-term loans in an aggregate principal amount of $171,682
to us and our operating subsidiaries. We have repaid $253,837 of the principal
amount of these loans.

         Accordingly, approximately $7,350,000 from the net proceeds of any
additional financing will be used to satisfy our existing loans and obligations
that have matured or will mature in the next twelve months.

         The nature of our business is such that significant cash outlays are
required to produce and acquire films, television programs, music soundtracks
and albums. However, net revenues from these projects are earned over an
extended period of time after their completion or acquisition. Accordingly, we
will require a significant amount of cash to fund our present operations and to
continue to grow our business. As our operations grow, our financing



                                       28
<PAGE>


requirements are expected to grow proportionately and we project the continued
use of cash in operating activities for the foreseeable future. Therefore we are
dependent on continued access to external sources of financing. Our current
financing strategy is to sell our equity securities to raise a substantial
amount of our working capital. We also plan to leverage investment in film and
music productions through operating credit facilities, co-ventures and
single-purpose production financing. We plan to obtain financing commitments,
including, in some cases, foreign distribution commitments to cover, on average,
at least 50% of the budgeted third-party costs of a project before commencing
production. We plan to outsource required services and functions whenever
possible. We plan to use independent contractors and producers, consultants and
professionals to provide those services necessary to operate the corporate and
business operations in an effort to avoid build up of overhead infrastructures,
to maintain a flexible organization and financial structure for productions and
ventures and to be responsive to business opportunities worldwide. Accordingly,
once we raise at least $10,000,000 in additional financing, we believe that the
net proceeds from that financing together with cash flow from operations,
including our share of future film production under the Charles Street
co-venture with Sony, will be available to meet known operational cash
requirements. In addition, we believe that our improved liquidity position will
enable us to qualify for new lines of credit on an as-needed basis.

         These matters raise substantial doubt about our ability to continue as
a going concern. We will need to raise significant additional funding in order
to satisfy our existing obligations and to fully implement our business plan.
There can be no assurances that such funding will be available on terms
acceptable to us or at all. If we are unable to generate sufficient funds,
particularly at least $10,000,000, then we may be forced to cease or
substantially curtail operations.

         We do not pay and do not intend to pay dividends on our common stock.
We believe it to be in the best interest of our stockholders to invest all
available cash in the expansion of our business. Accordingly, our stockholders
may only receive income from the appreciation in our stock price, if any.

ITEM 7. FINANCIAL STATEMENTS

         Our consolidated financial statements for Fiscal Years 2005 and 2004
and footnotes related thereto are included within Item 13(a) of this report and
may be found at pages F-1 through F-20.

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

         As of October 31, 2005, we carried out an evaluation of the
effectiveness of the design and operation of our "disclosure controls and
procedures" (as defined in the Exchange Act Rules 13a-15(e) and 15d-15(e)) under
the supervision and with the participation of our management, including
Christopher Schwartz, our Chief Executive Officer and Chief Financial Officer.
Based upon that evaluation, Mr. Schwartz concluded that our disclosure controls
and procedures are effective. There were no significant changes in our
disclosure controls and procedures that have materially affected or are
reasonably likely to materially affect our internal controls over financial
reporting during the quarter ended October 31, 2005.

         Disclosure controls and procedures are controls and other procedures
that are designed to ensure that information required to be disclosed in our
reports filed or submitted under the Exchange Act are recorded, processed,
summarized and reported, within the time periods specified in the Securities and
Exchange Commission's rules and forms. Disclosure controls and procedures
include, without limitation, controls and procedures designed to ensure that
information required to be disclosed in our reports filed under the Exchange Act
is accumulated and communicated to management to allow timely decisions
regarding required disclosure.

         CHANGES IN INTERNAL CONTROLS
         ----------------------------

         There were no significant changes in our internal controls or, to our
knowledge, in other factors that could significantly affect our disclosure
controls and procedures subsequent to the date we carried out this evaluation.

                                       29
<PAGE>


ITEM 8B. OTHER INFORMATION

         On December 20, 2005, we entered into a consulting agreement with Walt
Beach pursuant to which we issued to Walt Beach 1,500,000 shares of our common
stock in consideration for consulting services rendered by Walt Beach, pursuant
to Section 4(2) of the Securities Act.

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

         The following table sets forth the names, ages and positions of our
directors and executive officers and executive officers of our major operating
subsidiaries as of January 26, 2005.
<TABLE>
<CAPTION>
        Name                           Age     Current Position(s) with Company
        --------------------           ---     ----------------------------------------------
         <S>                           <C>     <C>
        Christopher Schwartz           45      Chief Executive Officer, Chief Financial
                                               Officer, Treasurer and Director

        Richard Murray                 47      President of Ruffnation Films LLC

        Ernest J. Cimadamore           44      Secretary, President of Ruffnation Music, Inc.
</TABLE>

All directors serve until their successors are duly elected and qualified.
Vacancies in the Board of Directors are filled by majority vote of the remaining
directors. The executive officers are elected by, and serve at the discretion of
the Board of Directors.

         A brief description of the business experience during the past five
years of our director, our executive officers and our key employees is as
follows:

         CHRISTOPHER SCHWARTZ, CHAIRMAN OF THE BOARD OF DIRECTORS AND CEO - Mr.
Schwartz was elected as a member of our Board of Directors and was appointed as
our Chief Executive Officer in October 2002. Mr. Schwartz began in the music
field as a performer and started his experience in the record industry as a
promoter of musical talent for clients such as Priority and Island Records. He
is credited as one of the first record industry executives to 'crossover'
hip-hop to mainstream pop with the artist Schooly D. In 1989, he and his
partners formed Ruffhouse Records with a production and distribution deal with
Columbia Records, a division of Sony. As CEO of Ruffhouse, he achieved
international fame, with multimillion unit album sales, Billboard charting
topping acts and success of groups such as Cyprus Hill, Kriss Kross and The
Fugees. The Fugees are credited by the Recording Industry Association of America
with the biggest selling hip-hop album of all time by a group. He is also
credited with discovering and producing the multi-Grammy award winning artist
Lauryn Hill. In 1999, Ruffhouse was sold to Sony and Mr. Schwartz formed
Ruffworld Entertainment Group. As Founder and CEO of Ruffworld Entertainment,
Mr. Schwartz' vision of a multimedia entertainment company developing music and
film with musical content was born. Through its recording division, Ruffworld
Entertainment established a joint venture record label with Warner Brothers. Its
film division recently completed the DVD film, Snipes, starring Nelly, a Grammy
award winning hip-hop artist with over 17 million album sales. Mr. Schwartz has
developed, produced or discovered artists that have achieved over 100 million
unit sales and approximately $1 billion in sales over his career to date. As a
leader in the music industry, he has been recognized by Forbes, The Wall Street
Journal, The New York Times, CNN, CNBC and industry publications such as
Billboard, Vibe, Hits, Rolling Stone, The Hollywood Reporter and The Source.

         RICHARD MURRAY, PRESIDENT OF RUFFNATION FILM LLC - Mr. Murray is
responsible for overseeing our film operations. Recently Mr. Murray wrote,
produced and directed his first feature film, Snipes, which has been released
through Ruffnation Films co-venture with Sony. He has over 15 years experience
as a director, writer and producer of film related products and services. He has
directed and produced over 100 music videos for such star artists as Kriss
Kross, Spin Doctors, The Fugees, Arrested Development, Monica, and Jeff Healy.
With such a diverse list of credits, he is perhaps the only director who has had
a #1 video in four different genres of popular music. During his 15-year career
as a music video director, he has earned a reputation for his ability to define
the essence of whatever type of music and artist he has worked with. After

                                       30
<PAGE>


graduating from Temple University with a B.A. in Communications in 1984, Mr.
Murray began his professional career by directing some of the earliest rap
videos for hip-hop legends Schooly D and Roxanne Shante.

         ERNEST J. CIMADAMORE, PRESIDENT OF RUFFNATION MUSIC, INC.- Mr.
Cimadamore is responsible for our music operations and administration. He has 20
years of experience in the music industry. From 1981 to 1987, Mr. Cimadamore was
Senior Vice President of Philly World Records that was distributed by Atlantic
Records, a division of Time Warner. He joined Alpha International Records as a
Senior Vice President in 1987. Alpha International was a division of a public
company which had a distribution agreement through Polygram Records. He also
founded and operated his own marketing company. In a two-year period, the
company was responsible for 25 gold and platinum artist projects for numerous
major record companies, including Atlantic, Elektra, Sony, Warner Bros. and
Island. The company worked with artists that included Kurupt, Anita Baker,
Levert, Keith Sweat, and The Whispers. Over his 20 years in the music industry
he has successfully worked in the areas of operations, distribution, promotion,
sales and marketing. During the period from 1991 to 2002, Mr. Cimadamore served
as a corporate officer for Clariti Telecommunications International, Ltd., a
public company based in Philadelphia, Pennsylvania.

         There are no family relationships among any of our directors or
executive officers.

         COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT

         Section 16(a) of the Securities Exchange Act requires our directors,
executive officers and persons who are the beneficial owners of more than ten
percent of our common stock (collectively, the "Reporting Persons") to file
reports of ownership and changes in ownership with the Securities and Exchange
Commission and to furnish us with copies of these reports.

         In Fiscal 2004, Dan Taylor was deficient in filing a Form 3 required by
Section 16(a) of the Securities Exchange Act relating to his appointment as
President and the grant of options to purchase 6,000,000 shares of our common
stock pursuant to the terms of his employment agreement with us. In Fiscal 2004,
Ernie Cimadamore was deficient in filing a Form 4 required by Section 16(a) of
the Securities Exchange Act relating to his sale of 450,000 shares of our common
stock.

         CODE OF ETHICS

         We have not adopted a code of ethics that applies to our principal
executive officer, principal financial officer, principal accounting officer,
controller or persons performing similar functions. As Christopher Schwartz is
our majority stockholder, and was traditionally the sole member of our Board of
Directors, President, Chief Executive Officer and Chief Financial Officer, we
did not believe that a formal written Code of Ethics was necessary to regulate
his conduct.

ITEM 10. EXECUTIVE COMPENSATION

         The following table sets forth compensation paid or accrued during the
fiscal year ended October 31, 2005 ("Fiscal 2005") and the fiscal year ended
October 31, 2004 ("Fiscal 2004") to the our Chief Executive Officer and the most
highly compensated executive officers whose total annual salary and bonus
exceeded $100,000 during such fiscal year (collectively, the "Named
Executives").

                           SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
                                                                                                    Long-Term
                                                                      Annual Compensation       Compensation Awards
                                                                     ------------------------   -------------------
                                                                                                      Number of
Name and Principal Position                   Fiscal Year Ended      Salary             Bonus         Options
------------------------------------          -----------------     ----------        --------        ----------
<S>                                                <C>                 <C>              <C>             <C>
Christopher Schwartz (1)                      October 31, 2005       $176,899         $     0               0
Chief Executive Officer, President,           October 31, 2004       $332,750         $     0               0
Treasurer


Daniel J.B. Taylor  (2)                       October 31, 2005       $153,332         $     0               0
President, Chief Executive Officer of         October 31, 2004       $300,000         $     0       6,000,000
European Operations
</TABLE>

                                       31


<PAGE>
<TABLE>
<CAPTION>
                                                                                                    Long-Term
                                                                      Annual Compensation       Compensation Awards
                                                                     ------------------------   -------------------
                                                                                                      Number of
Name and Principal Position                   Fiscal Year Ended      Salary             Bonus         Options
------------------------------------          -----------------     ----------        --------        ----------
<S>                                                <C>                 <C>              <C>             <C>
Richard Murray  (3)                           October 31, 2005       $163,913         $     0               0
President of Ruffnation Films LLC             October 31, 2004       $221,834         $     0               0


Ernest J. Cimadamore  (4)                     October 31, 2005       $137,036         $     0               0
President of Ruffnation Music, Inc.           October 31, 2004       $221,834         $     0               0

Shawn Taylor (5)                              October 31, 2005       $146,617         $     0         100,000
Chief Financial Officer                       October 31, 2004       $      0         $     0               0
</TABLE>
______________
(1)  Mr. Schwartz was paid $176,899 of his Fiscal 2005 salary. In Fiscal 2005,
     Mr. Schwartz agreed to convert prior accrued salary and expenses for common
     stock at a conversion price of $1.00 per share. Substantially all of Fiscal
     2004 salary represents accrued expenses. In Fiscal 2005, Mr. Schwartz
     agreed to reduce his annual salary from the amount permitted per his
     employment agreement. As of the date of this report, his annual salary is
     $130,000.

(2)  Mr. Taylor was appointed our President and Chief Executive Officer of our
     European operations in March 2004. Substantially all of Mr. Taylor's Fiscal
     2005 salary represents accrued salary and expenses. He was paid $230,000 of
     his salary in Fiscal 2004 and the remaining amount represents accrued
     expenses. Mr. Taylor agreed to convert his accrued salary and expenses in
     Fiscal 2005 for common stock at a conversion price of $1.00 per share. Mr.
     Taylor resigned on June 14, 2005.

(3)  Mr. Murray was paid $163,913 of his Fiscal 2005 salary and $22,982 of his
     Fiscal 2004 salary. In Fiscal 2005, Mr. Murray agreed to convert prior
     accrued salary and expenses for common stock at a conversion price of $1.00
     per share. Mr. Murray was paid $122,500 in Fiscal 2004 against his salary
     and the remaining salary for Fiscal 2004 represents accrued expenses. In
     Fiscal 2005, Mr. Murray agreed to reduce his annual salary from the prior
     agreed amount. As of the date of this report, his annual salary is
     $130,000.

(4)  Mr. Cimadamore was paid $134,536in Fiscal 2005 and $74,229 of his Fiscal
     2004 salary. The remaining salary for Fiscal 2005 represents accrued
     expenses. In Fiscal 2005, Mr. Cimadamore agreed to convert prior accrued
     salary and expenses for common stock at a conversion price of $1.00 per
     share. Substantially all of his Fiscal 2004 salary represented accrued
     expenses. In Fiscal 2005, Mr. Cimadamore agreed to reduce his annual salary
     from the prior agreed amount. As of the date of this report, his current
     annual salary is $130,000.

(5)  Mr. Taylor was appointed our Chief Financial Officer in October 2004. Mr.
     Taylor resigned on June 14, 2005.

         Option Grants For the Fiscal Year Ended October 31, 2005
         --------------------------------------------------------

         In Fiscal 2004, we granted 6,000,000 stock options to Daniel Taylor
pursuant to an employment agreement. All of Mr. Taylor's options have expired.
No options were exercised by any of our executive officers in Fiscal 2005.

         The following table sets forth information concerning year-end option
values for Fiscal 2005 for the executive officers named in our Summary
Compensation Table above. The value of unexercised in-the-money options is
calculated based on the closing bid price of our common stock of $0.35 on
October 31, 2005, the last trading day in Fiscal 2005.

                                       32
<PAGE>

                          FISCAL YEAR END OPTION VALUES
<TABLE>
<CAPTION>
                                                                                     Value of Unexercised
                     Number of Unexercised Options                                   In-the-Money Options
                          at Fiscal Year End                                          at Fiscal Year End
--------------------------------------------------------------------          -----------------------------------
         Name                     Exercisable          Unexercisable          Exercisable           Unexercisable
--------------------              ------------         -------------          -----------           -------------
<S>                               <C>                   <C>                        <C>                    <C>
Christopher Schwartz              3,480,750(1)          2,305,957                  $0                     $0
</TABLE>

______________
(1)  Consists of options to purchase 750,000 shares of our common stock at an
     exercise price of $1.50 per share, options to purchase 825,000 shares of
     common stock at an exercise price of $1.09 per share, options to purchase
     907,500 shares of common stock at an exercise price of $0.79 per share and
     options to purchase 998,250 shares of common stock at an exercise price of
     $0.13.

         Long Term Incentive Plans
         -------------------------

         We currently do not have any long-term incentive plans.

         Compensation of Directors
         -------------------------

         Our directors are not compensated for any services provided as a
director.

         Employment Agreements
         ---------------------

         On October 9, 2002, we entered into a five-year Employment Agreement
with Christopher Schwartz. Pursuant to the terms of the Employment Agreement,
Christopher Schwartz is our Chief Executive Officer and shall be a member of our
Board of Directors. Pursuant to the Employment Agreement, Mr. Schwartz is
entitled to receive an initial annual base salary of $300,000 and is eligible to
receive bonus compensation at the discretion of the Board of Directors if
certain milestones are met. Mr. Schwartz has agreed to reduce his annual salary
to $130,000 per year. Pursuant to the Employment Agreement, Mr. Schwartz is
entitled to receive fringe benefits including paid vacation, medical insurance,
participation in pension, profit sharing and stock plans, reimbursement for
expenses and life insurance. Mr. Schwartz is also entitled to receive options to
purchase 5,786,707 shares of our common stock. If we terminate the employment of
Mr. Schwartz without cause, due to a long-term disability, or as a result of his
death or if Mr. Schwartz terminates his employment for good reason, as such
terms are defined in the employment agreement, then his right to exercise his
stock options shall be accelerated and all unvested options shall immediately
vest. In addition, if we experience a merger, acquisition, sale of our assets or
similar transaction in which we are not the surviving corporation, then all
unvested options will immediately vest unless such options are assumed by the
surviving corporation.

         On March 23, 2004, we entered into a two-year Employment Agreement with
Daniel J.B. Taylor that commenced on April 12, 2004. Pursuant to the terms of
the Employment Agreement, Mr. Taylor served as our President and Chief Executive
Officer of our European operations, was entitled to receive an annual base
salary of $540,000, was eligible to receive bonus compensation at the discretion
of the Board of Directors if certain milestones were met and was entitled to
receive fringe benefits including paid vacation, medical insurance,
participation in pension, profit sharing and stock plans, reimbursement for
expenses and life insurance. Mr. Taylor also was entitled to receive options to
purchase 6,000,000 shares of our common stock. Mr. Taylor resigned from the
Company on June 14, 2005 and he is no longer entitled to any stock options.

         On October 8, 2004, we entered into a letter agreement with Shawn
Taylor pursuant to which he served as our chief financial officer. The initial
term of this agreement was six months. Pursuant to the letter agreement, Mr.
Taylor was entitled to receive a salary of 60,000 pound sterling plus a pension
contribution and a car allowance totaling 12,000 pound sterling. These amounts
were payable in six monthly installments of 12,000 pound sterling plus 12.9% to
cover any applicable taxes in the United Kingdom. Upon completion of his
six-month term, we issued Mr. Taylor warrants to purchase 100,000 shares of our
common stock at an exercise price of $1.00 per share. Mr. Taylor resigned from
the Company on June 14, 2005.

         Repricing of Options
         --------------------

         We have not adjusted or amended the exercise price of any stock
options.

                                       33

<PAGE>

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

Securities Authorized for Issuance Under Equity Compensation Plans
------------------------------------------------------------------

None.

Owners of our Common Stock
---------------------------

         The following table sets forth, as of February 21, 2006, certain
information with respect to beneficial ownership of our common stock as of
February 21, 2006 by:

     o each person known to us to be the beneficial owner of more than 5% of our
       common stock;
     o each of our directors;
     o each of our executive officers; and
     o all of our executive officers and directors as a group.

Unless otherwise specified, we believe that all persons listed in the table
possess sole voting and investment power with respect to all shares of our
common stock beneficially owned by them. As of February 21, 2006, 47,060,011
shares of our common stock were issued and outstanding.
<TABLE>
<CAPTION>
                                                         Amount and Nature of
Name and Address                                        Beneficial Ownership(1)              Percent of Class
--------------------------------------------------     --------------------------           ------------------
<S>                                                              <C>                                <C>
Christopher Schwartz (2)                                      20,195,676                           40.764
1080 N. Delaware Avenue, 8th Floor
Philadelphia, PA 19125

Ernest Cimadamore (3)                                           199,166                             0.423
1080 N. Delaware Avenue, 8th Floor
Philadelphia, PA 19125

Richard Murray (4)                                              227,101                             0.483
1080 N. Delaware Avenue, 8th Floor
Philadelphia, PA 19125

All directors and executive officers as a group               20,621,943                           41.67
(3 people)
</TABLE>

________________

(1)  Beneficial ownership has been determined in accordance with Rule 13d-3
     under the Securities Exchange Act of 1934. Unless otherwise noted, we
     believe that all persons named in the table have sole voting and investment
     power with respect to all shares of common stock beneficially owned by
     them.
(2)  Chairman of the Board, Chief Executive Officer and Chief Financial Officer.
     Includes 2,635,000 shares of common stock held in escrow for Christopher
     Schwartz by Erskine, Wolfson & Gibbon. 2,482,500 shares of common stock are
     issuable upon exercise of vested stock options held by Mr. Schwartz.
(3)  President of Ruffnation Music, Inc.
(4)  President of Ruffnation Films LLC.

ITEM 12. CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS

         We have received loans in the aggregate principal amount of $1,199,040
from Christopher Schwartz, our Chief Executive Officer, sole director and
principal stockholder. These obligations are documented by a demand note payable
which accrues interest at the rate of 7% per annum. In addition, in Fiscal 2003,

                                       34
<PAGE>



Mr. Schwartz, extended short-term loans in an aggregate principal amount of
$520,009 to us and our operating subsidiaries. These obligations have not been
documented and are due on demand. We have repaid the entire principal amount of
these loans. During Fiscal 2005, Mr. Schwartz extended short-term loans in an
aggregate principal amount of $171,682 to us and our operating subsidiaries.
These obligations have not been documented and are due on demand. We have repaid
$253,837 of the principal amount of these loans.

         In March 2004, we committed to pay an initial annual operating budget
of 200,000 pounds sterling to Grosvenor Park Media Ltd. ("Grosvenor") for the
establishment of our European headquarters in London. This budget includes
office rent, support staff and related services. Daniel J.B. Taylor, our
President and Chief Executive Officer of European Operations, is Managing
Director of Grosvenor and Grosvenor's offices are presently serving as our
European headquarters.

         In December 2004, we entered into a consulting agreement with Joseph
Safina, who at the time was the Vice Chairman of our Board of Directors. The
term of the agreement was twelve months, after which it renewed automatically
for successive one-month periods unless either party provides written notice at
least ten business days prior to the expiration of the then current period that
it wishes to terminate the agreement. As compensation for services provided
pursuant to this agreement, Mr. Safina received warrants to purchase 1,000,000
shares of our common stock at an exercise price of $.49 per share, which was the
closing bid price of our common stock as quoted on the Over-the Counter Bulletin
Board (the "OTCBB") on December 21, 2004. Mr. Safina resigned as a director in
December 2005 and the consulting agreement expired at that time.

         On March 17, 2005, we and International Equities Group, Inc. ("IEG")
entered into the Operating Agreement of Battle Rap, LLC, a Delaware limited
liability company, and became the sole members of Battle Rap, LLC. Battle Rap,
LLC was formed for the purpose of creating a joint venture between us and IEG to
develop the "Battle Rap" video brand, owned by IEG, for entertainment content
including online interactive gaming, merchandise, film and music productions and
television programming. We hold a 10% membership interest in Battle Rap, for
which we contributed 2,000,000 shares of our common stock. IEG holds the
remaining 90% interests in Battle Rap. IEG contributed all ownership interests
in the Battle Rap concept to Battle Rap in exchange for its membership interest.
Joseph Safina owns and controls IEG and is the sole manager of Battle Rap.


ITEM 13. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K

         (a) The following Exhibits are filed as part of this report.

       Exhibit
       Number     Description
       -------    -----------
         2.1      Share Exchange Agreement and Plan of Reorganization dated as
                  of October 2, 2002 by and among US Patriot, Inc. and
                  Christopher Schwartz (incorporated by reference to Exhibit 1.1
                  of Current Report on Form 8-K filed on October 18, 2002).

         2.2      Agreement and Plan of Merger between US Patriot, Inc. and
                  TriMedia Entertainment Group, Inc. (incorporated by reference
                  to Exhibit 3.4 of Current Report on Form 8-K filed on December
                  2, 2002).

         2.3      Articles of Merger as filed in the State of South Carolina
                  (incorporated by reference to Exhibit 2.1 of Current Report on
                  Form 8-K filed on December 2, 2002).

         2.4      Certificate of Merger as filed in the State of Delaware
                  (incorporated by reference to Exhibit 3.5 of Current Report on
                  Form 8-K filed on December 2, 2002).

         3.1      Certificate of Incorporation of TriMedia Entertainment Group,
                  Inc. (incorporated by reference to Exhibit 3.1 of Current
                  Report on Form 8-K filed on December 2, 2002).

         3.2      Certificate of Amendment of Certificate of Incorporation
                  Before Payment of Capital of TriMedia Entertainment Group,
                  Inc. (incorporated by reference to Exhibit 3.2 of Current
                  Report on Form 8-K filed on December 2, 2002).

         3.3      By-laws of TriMedia Entertainment Group, Inc. (incorporated by
                  reference to Exhibit 3.3 of Current Report on Form 8-K filed
                  on December 2, 2002).

         4.1      Specimen Stock Certificate (incorporated by reference to
                  Exhibit 4.1 to the Annual Report on Form 10-KSB for the fiscal
                  year ended October 31, 2002 filed on March 17, 2003).

                                       35
<PAGE>
       Exhibit
       Number     Description
       -------    -----------

         4.2      Certificate of Designations of Series A Convertible Preferred
                  Stock of US Patriot, Inc. (incorporated by reference to
                  Exhibit 4.2 to the Annual Report on Form 10-KSB for the fiscal
                  year ended October 31, 2002 filed on March 17, 2003).

         4.3      Common Stock Purchase Warrant dated May 5, 2005 issued to IL
                  Resources, LLC (incorporated by reference to Exhibit 4.1 to
                  the 8K filed on June 8, 2005).

        10.1      Employment Agreement dated as of October 9, 2002 by and
                  between US Patriot, Inc. and Christopher Schwartz
                  (incorporated by reference to Exhibit 10.1 to the Annual
                  Report on Form 10-KSB for the fiscal year ended October 31,
                  2002 filed on March 17, 2003).

        10.2      Co-Venture Agreement between Sony Music, a Group of Sony Music
                  Entertainment, Inc., Ruffnation Films, LLC and Christopher
                  Schwartz dated as of September 20, 2002 (incorporated by
                  reference to Exhibit 10.2 to the Annual Report on Form 10-KSB
                  for the fiscal year ended October 31, 2002 filed on March 17,
                  2003).

        10.3      Stock Purchase Warrant to purchase 33,400 shares of common
                  stock issued to Frank Eiffe dated November 14, 2002
                  (incorporated by reference to Exhibit 10.12 to the Annual
                  Report on Form 10-KSB for the fiscal year ended October 31,
                  2002 filed on March 17, 2003).

        10.4      Stock Purchase Warrant to purchase 66,600 shares of common
                  stock issued to Dr. Wolfgang Moelzer dated November 14, 2002
                  (incorporated by reference to Exhibit 10.13 to the Annual
                  Report on Form 10-KSB for the fiscal year ended October 31,
                  2002 filed on March 17, 2003).

        10.5      Stock Purchase Warrant to purchase 50,000 shares of common
                  stock issued to BKB Boston K Borg Management GmbH dated
                  December 12, 2002 (incorporated by reference to Exhibit 10.14
                  to the Annual Report on Form 10-KSB for the fiscal year ended
                  October 31, 2002 filed on March 17, 2003).

        10.6      7% Demand Promissory Note in the principal amount of
                  $1,100,000 by Ruffnation Films LLC issued to Christopher
                  Schwartz dated May 1, 2002 (incorporated by reference to
                  Exhibit 10.15 to the Annual Report on Form 10-KSB for the
                  fiscal year ended October 31, 2002 filed on March 17, 2003).

        10.7      Security Agreement issued by Ruffnation Films LLC, Snipes
                  Productions LLC and Metropolitan Recording Inc. to Christopher
                  Schwartz dated May 1, 2002 (incorporated by reference to
                  Exhibit 10.16 to the Annual Report on Form 10-KSB for the
                  fiscal year ended October 31, 2002 filed on March 17, 2003).

        10.8      8% Promissory Note in the principal amount of $162,000 by
                  Metropolitan Recording Inc. issued to Founders Bank dated
                  August 21, 2001 (incorporated by reference to Exhibit 10.17 to
                  the Annual Report on Form 10-KSB for the fiscal year ended
                  October 31, 2002 filed on March 17, 2003).

        10.9      Security Agreement issued by Metropolitan Recording Inc. to
                  Founders Bank dated August 21, 2001 (incorporated by reference
                  to Exhibit 10.18 to the Annual Report on Form 10-KSB for the
                  fiscal year ended October 31, 2002 filed on March 17, 2003).

        10.10     Loan Agreement between Metropolitan Recording, Inc. and
                  Founders Bank dated August 21, 2001 (incorporated by reference
                  to Exhibit 10.19 to the Annual Report on Form 10-KSB for the
                  fiscal year ended October 31, 2002 filed on March 17, 2003).

        10.11     Warrants to purchase 10,000 shares of common stock issued to
                  Trident Growth Fund, L.P. dated March 27, 2003 (incorporated
                  by reference to Exhibit 10.2 of the Quarterly Report on Form
                  10-QSB filed on June 18, 2003).

        10.12     Warrants to purchase 100,000 shares of common stock issued to
                  Trident Growth Fund, L.P. dated June 13, 2003 (incorporated by
                  reference to Exhibit 10.1 of the Quarterly Report on Form
                  10-QSB filed on September 17, 2003).

        10.13     12% Demand Promissory Note in the principal amount of $67,102
                  issued to 1025 Investments, Inc. dated June 19, 2003
                  (incorporated by reference to Exhibit 10.2 of the Quarterly
                  Report on Form 10-QSB filed on September 17, 2003).

        10.14     Warrants to purchase 50,000 shares of common stock issued to
                  Aaron Lehmann dated June 20, 2003 (incorporated by reference
                  to Exhibit 10.3 of the Quarterly Report on Form 10-QSB filed
                  on September 17, 2003).

        10.15     Warrants to purchase 100,000 shares of common stock issued to
                  Founders Equity Securities, Inc. dated June 20, 2003
                  (incorporated by reference to Exhibit 10.4 of the Quarterly
                  Report on Form 10-QSB filed on September 17, 2003).

                                       36
<PAGE>
       Exhibit
       Number     Description
       -------    -----------

        10.16     Warrants to purchase 25,000 shares of common stock issued to
                  Daryl Strickling dated July 2, 2003 (incorporated by reference
                  to Exhibit 10.5 of the Quarterly Report on Form 10-QSB filed
                  on September 17, 2003).

        10.17     12% Demand Promissory Note in the principal amount of $17,000
                  issued to 1025 Investments, Inc. dated July 25, 2003
                  (incorporated by reference to Exhibit 10.6 of the Quarterly
                  Report on Form 10-QSB filed on September 17, 2003).

        10.18     Distribution Agreement between New Line Television, Inc. and
                  Ruffnation Films LLC dated November 26, 2002 (incorporated by
                  reference to Exhibit 10.7 of the Quarterly Report on Form
                  10-QSB filed on September 17, 2003).

        10.19     Amendment to Co-Venture Agreement between Sony Music, a Group
                  of Sony Music Entertainment, Inc., Ruffnation Films, LLC and
                  Christopher Schwartz dated as of October 2, 2003 (incorporated
                  by reference to Exhibit 10.30 to the Annual Report on Form
                  10-KSB for the fiscal year ended October 31, 2003 filed on
                  February 13, 2004).

        10.20     35% Secured Promissory Note in the principal amount of
                  $435,000 issued by Snipes Productions, LLC to SPH Investments,
                  Inc., Capital Growth Trust, HMA Investment Profit Sharing Plan
                  and Continental Southern Resources, Inc. dated June 27, 2002
                  as amended through April 11, 2003 and October 30, 2003
                  (incorporated by reference to Exhibit 10.31 to the Annual
                  Report on Form 10-KSB for the fiscal year ended October 31,
                  2003 filed on February 13, 2004).

        10.21     Warrants to purchase 10,000 shares of common stock issued to
                  Trident Growth Fund, L.P. dated September 11, 2003
                  (incorporated by reference to Exhibit 10.32 to the Annual
                  Report on Form 10-KSB for the fiscal year ended October 31,
                  2003 filed on February 13, 2004).

        10.22     Stock Purchase Warrant to purchase 2,500 shares of common
                  stock issued to Middle Fork Investments Ltd. dated April 5,
                  2004 (incorporated by reference to Exhibit 10.2 of the
                  Quarterly Report on Form 10-QSB filed on June 15, 2004).

        10.23     Stock Purchase Warrant to purchase 121,875 shares of common
                  stock issued to Middle Fork Investments Ltd. dated April 5,
                  2004 (incorporated by reference to Exhibit 10.3 of the
                  Quarterly Report on Form 10-QSB filed on June 15, 2004).

        10.24     Agreement dated as of August 12, 2004 by and between Gerry
                  Anderson Productions PLC and TriMedia Entertainment Group,
                  Inc. (incorporated by reference to Exhibit 10.1 of Current
                  Report on Form 8-K filed on September 10, 2004).

        10.25     Stock Purchase Warrant to purchase 50,000 shares of common
                  stock issued to Larry Feinstein dated June 1, 2004
                  (incorporated by reference to Exhibit 10.1 of the Quarterly
                  Report on Form 10-QSB filed on September 14, 2004).

        10.26     10% Demand Promissory Note in the principal amount of $50,000
                  issued to 1025 Investments, Inc. dated June 1, 2004
                  (incorporated by reference to Exhibit 10.2 of the Quarterly
                  Report on Form 10-QSB filed on September 14, 2004).

        10.27     10% Demand Promissory Note in the principal amount of $40,000
                  issued to 1025 Investments, Inc. dated June 14, 2004
                  (incorporated by reference to Exhibit 10.3 of the Quarterly
                  Report on Form 10-QSB filed on September 14, 2004).

        10.28     Stock Purchase Warrant to purchase 62,500 shares of common
                  stock issued to K. David Stevenson dated June 25, 2004
                  (incorporated by reference to Exhibit 10.4 of the Quarterly
                  Report on Form 10-QSB filed on September 14, 2004).

        10.29     10% Demand Promissory Note in the principal amount of $50,000
                  issued to K. David Stevenson dated June 25, 2004 (incorporated
                  by reference to Exhibit 10.5 of the Quarterly Report on Form
                  10-QSB filed on September 14, 2004).

        10.30     Stock Purchase Warrant to purchase 62,500 shares of common
                  stock issued to K. David Stevenson dated August 13, 2004
                  (incorporated by reference to Exhibit 10.6 of the Quarterly
                  Report on Form 10-QSB filed on September 14, 2004).

        10.31     10% Demand Promissory Note in the principal amount of $50,000
                  issued to K. David Stevenson dated August 13, 2004
                  (incorporated by reference to Exhibit 10.7 of the Quarterly
                  Report on Form 10-QSB filed on September 14, 2004).

                                       37
<PAGE>
       Exhibit
       Number     Description
       -------    -----------

        10.32     Loan Agreement Between Fairbairn Private Bank Limited and TM
                  Film Distribution, Inc. (incorporated by reference to Exhibit
                  10.1 of Current Report on Form 8-K filed on January 5, 2005).

        10.33     Lease Agreement by and between Delpar L.P. and TriMedia
                  Entertainment Group, Inc. (incorporated by reference to
                  Exhibit 10.36 of the Quarterly Report on From 10-QSB filed on
                  January 31, 2005).

        10.34     Sale and Purchase Agreement between TriMedia Film Group, Inc.
                  and Keydata Media and Marketing I, LLP. (incorporated by
                  reference to Exhibit 10.37 of the Quarterly Report on From
                  10-QSB filed on January 31, 2005).

        10.35     Distribution Agreement between Keydata Media and Marketing I,
                  LLP and TM Film Distribution, Inc. dated as of October 2004.
                  (incorporated by reference to Exhibit 10.38 of the Quarterly
                  Report on From 10-QSB filed on January 31, 2005).

        10.36     Secured Convertible Term Note dated May 5, 2005 (incorporated
                  by reference to Exhibit 10.2 to the K filed on June 8, 2005).

        10.37     Securities Purchase Agreement dated May 5, 2005 by and between
                  TriMedia Entertainment Group, Inc. and IL Resources, IL
                  (incorporated by reference to Exhibit 10.1 to the 8K filed on
                  June 8, 2005).

        10.38     Securities Pledge Agreement dated May 5, 2005 by and between
                  TriMedia Entertainment Group, Inc. and IL Resources, LLC
                  (incorporated by reference to Exhibit 10.3 to the 8K filed on
                  June 8, 2005).

        10.39     Security Agreement dated May 5, 2005 by and between TriMedia
                  Entertainment Group, Inc. and IL Resources, LLC (incorporated
                  by reference to Exhibit 10.5 to the 8K filed on June 8, 2005).

        10.40     Subsidiary Guaranty dated May 5, 2005 (incorporated by
                  reference to Exhibit 10.4 to the 8K filed on June 8, 2005).

        10.41     Consulting Agreement dated December 20, 2005 by and between
                  TriMedia Entertainment Group, Inc. and Walt Beach.

        16        Letter on change in certifying accountant from Elliot Davis,
                  LLC (incorporated by reference to Exhibit 16.1 of Current
                  Report on Form 8-K filed November 25, 2002).

        21        Subsidiaries of TriMedia Entertainment Group, Inc.

        31.1      Certification dated February 27, 2006 pursuant to Exchange Act
                  Rule 13a-14(a) or 15d-14(a) of the Principal Executive Officer
                  as adopted pursuant to Section 302 of the Sarbanes-Oxley Act
                  of 2002 by Christopher Schwartz, Chief Executive Officer.

        31.2      Certification dated February 27, 2006 pursuant to Exchange Act
                  Rule 13a-14(a) or 15d-14(a) of the Principal Financial Officer
                  as adopted pursuant to Section 302 of the Sarbanes-Oxley Act
                  of 2002 by Christopher Schwartz, Chief Financial Officer.

        32.1      Certification dated February 27, 2006 pursuant to 18 U.S.C.
                  Section 1350 as adopted pursuant to Section 906 of the
                  Sarbanes-Oxley Act of 2002 made by Christopher Schwartz, Chief
                  Executive Officer and Chief Financial Officer.

         (b) On September 10, 2004, we filed a current Report on Form 8-K
reporting that we entered into an agreement with Gerry Anderson Productions PLC.

ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES

         The following information represents services provided by Cogen Sklar,
LLP, our present principal accountants during Fiscal 2004 and Fiscal 2005.

         AUDIT FEES
         ----------

         During Fiscal 2005, the aggregate fees billed for professional services
rendered by our principal accountant for the audit of our annual financial
statements and review of our quarterly financial statements was $46,300. During
Fiscal 2004, the aggregate fees billed for professional services rendered by our
principal accountant for the audit of our annual financial statements and review
of our quarterly financial statements was $39,500.

                                       38
<PAGE>

         AUDIT-RELATED FEES
         ------------------

         During Fiscal 2005 and Fiscal 2004, our principal accountant did not
render assurance and related services reasonably related to the performance of
the audit or review of financial statements.

         TAX FEES
         --------

         During Fiscal 2005 and Fiscal 2004, our principal accountant did not
render services to us for tax compliance, tax advice and tax planning.

         ALL OTHER FEES
         --------------

         During Fiscal 2004 and Fiscal 2005, there were no fees billed for
products and services provided by the principal accountant other than those set
forth above.

         AUDIT COMMITTEE APPROVAL
         ------------------------

         We do not presently have an audit committee. All of the services listed
above were approved by Christopher Schwartz, our Chief Executive Officer and
sole director during Fiscal 2004 and Fiscal 2005.


                                       39

<PAGE>
                       TRIMEDIA ENTERTAINMENT GROUP, INC.

                                AND SUBSIDIARIES

                        CONSOLIDATED FINANCIAL STATEMENTS

                            OCTOBER 31, 2005 AND 2004


<PAGE>
               TRIMEDIA ENTERTAINMENT GROUP, INC. AND SUBSIDIARIES


                                 C O N T E N T S
                                 ---------------
<TABLE>
<CAPTION>
                                                                                   PAGE
                                                                               ------------
<S>                                                                                 <C>

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM                             F-1


CONSOLIDATED BALANCE SHEETS                                                         F-2


CONSOLIDATED STATEMENTS OF OPERATIONS                                               F-3


CONSOLIDATED STATEMENTS OF STOCKHOLDERS' DEFICIT                                    F-4


CONSOLIDATED STATEMENTS OF CASH FLOWS                                            F-5 - F-6


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS                                      F-7 - F-21

</TABLE>




<PAGE>

                        REPORT OF INDEPENDENT REGISTERED
                             PUBLIC ACCOUNTING FIRM


To the Board of Directors
Trimedia Entertainment Group, Inc.
  and Subsidiaries
Philadelphia, Pennsylvania

We have audited the consolidated balance sheets of Trimedia Entertainment Group,
Inc. and Subsidiaries as of October 31, 2005 and 2004, and the related
consolidated statements of operations, stockholders' deficit and cash flows for
the years then ended. 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 audits to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall 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 consolidated financial position of
Trimedia Entertainment Group, Inc. and Subsidiaries as of October 31, 2005 and
2004, and the results of their consolidated operations and cash flows for the
years then ended, in conformity with accounting principles generally accepted in
the United States.

The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 2 to the
financial statements, the Company has suffered recurring losses from operations,
has negative working capital of $3,266,702 at October 31, 2005 and experienced
negative cash flow from operations of $5,050,282 and $2,468,710 for the years
ended October 31, 2005 and 2004, all of which raises substantial doubt about its
ability to continue as a going concern. Management's plans in regard to this
matter are also described in Note 2. The financial statements do not include any
adjustments that might result from the outcome of this uncertainty.


/s/ COGEN SKLAR, LLP

Bala Cynwyd, Pennsylvania
January 6, 2006

                                       F-1

<PAGE>

               TRIMEDIA ENTERTAINMENT GROUP, INC. AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEETS
                            OCTOBER 31, 2005 AND 2004
<TABLE>
<CAPTION>
                                                                                      2005                  2004
                                                                                 ----------------      ---------------
<S>                                                                                     <C>                   <C>
         ASSETS

CURRENT ASSETS
  Cash                                                                               $    34,703          $   185,096
  Miscellaneous receivables                                                               16,547                    -
  Prepaid expenses                                                                       275,075               29,262
                                                                                 ----------------      ---------------
                                                                                         326,325              214,358

PROPERTY AND EQUIPMENT - Net                                                             298,737              456,135

CAPITALIZED FILM COSTS                                                                   133,910               83,140

OTHER ASSETS                                                                              27,695                9,625
                                                                                 ----------------      ---------------

TOTAL ASSETS                                                                         $   786,667          $   763,258
                                                                                 ================      ===============

         LIABILITIES AND STOCKHOLDERS' DEFICIT

CURRENT LIABILITIES
  Term loans                                                                         $ 2,144,208          $   781,613
  Demand notes payable                                                                         -              184,602
  Accounts payable and accrued expenses                                                1,223,097            3,425,599
  Taxes payable                                                                           17,501               17,501
  Advances from distributors                                                             180,954               13,088
  Due to stockholder                                                                      24,082                7,137
  Deferred revenue                                                                         3,185                1,167
                                                                                 ----------------      ---------------
                                                                                       3,593,027            4,430,707

LONG-TERM DEBT                                                                         2,881,820                    -

LOANS PAYABLE - STOCKHOLDER                                                            1,100,000            1,199,040
                                                                                 ----------------      ---------------

TOTAL LIABILITIES                                                                      7,574,847            5,629,747
                                                                                 ----------------      ---------------

         STOCKHOLDERS' DEFICIT

  Preferred stock, $0.0001 par value; 20,000,000 shares authorized;
    none and 1,000,000 shares issued and outstanding in 2005 and 2004                          -                  100
  Common stock, $0.0001 par value; 100,000,000 shares
    authorized; 45,560,011 and 29,511,314 shares
    issued and outstanding in 2005 and 2004                                                4,557                2,950
  Additional paid-in capital                                                          13,116,527            7,949,420
  Accumulated deficit                                                                (19,909,264)         (12,818,959)
                                                                                 ----------------      ---------------

TOTAL STOCKHOLDERS' DEFICIT                                                           (6,788,180)          (4,866,489)
                                                                                 ----------------      ---------------

TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT                                          $   786,667          $   763,258
                                                                                 ================      ===============
</TABLE>

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

                                      F-2
<PAGE>
               TRIMEDIA ENTERTAINMENT GROUP, INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF OPERATIONS
                      YEARS ENDED OCTOBER 31, 2005 AND 2004

<TABLE>
<CAPTION>
                                                                     2005                2004
                                                                 -------------       -------------
<S>                                                                     <C>                <C>

NET REVENUE                                                       $     6,034           $   239,070

DIRECT COSTS                                                          990,482                41,314
                                                                  ------------       ---------------

GROSS PROFIT (LOSS)                                                  (984,448)              197,756

LOSS ON IMPAIRMENT                                                  1,305,000               673,205

OPERATING EXPENSES                                                  5,046,943             4,306,863
                                                                  ------------       ---------------

LOSS FROM OPERATIONS                                               (7,336,391)           (4,782,312)
                                                                  ------------       ---------------

OTHER INCOME
  Foreign currency exchange gain                                      230,116                     -
  Miscellaneous income                                                 15,970                 4,700
                                                                  ------------       ---------------
                                                                      246,086                 4,700
                                                                  ------------       ---------------

NET LOSS                                                          $(7,090,305)          $(4,777,612)
                                                                  ============       ===============

BASIC AND DILUTED LOSS PER SHARE                                  $     (0.18)          $     (0.17)
                                                                  ============       ===============

WEIGHTED AVERAGE NUMBER OF SHARES                                  38,447,349            27,601,172
                                                                  ============       ===============
</TABLE>



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

                                      F-3
<PAGE>

               TRIMEDIA ENTERTAINMENT GROUP, INC. AND SUBSIDIARIES
                CONSOLIDATED STATEMENTS OF STOCKHOLDERS' DEFICIT
                YEARS ENDED OCTOBER 31, 2005 AND OCTOBER 31, 2004
<TABLE>
<CAPTION>
                                                                                    Additional
                                                         Preferred     Common        Paid-in        Accumulated
                                                           Stock        Stock        Capital          Deficit            Total
                                                         ----------    -------     -----------     --------------     ------------
<S>                                                          <C>         <C>         <C>              <C>               <C>
BALANCE AT OCTOBER 31, 2003                                $ 100       $2,612      $ 4,809,488      $ (8,041,347)     $(3,229,147)

Issuance of common stock                                       -          296        2,501,387                 -        2,501,683

Conversion of note payable                                     -           17          168,770                 -          168,787

Issuance of warrants for consulting services                   -            -          192,300                 -          192,300

Issuance of warrants for financing fees                        -            -           55,000                 -           55,000

Issuance of common stock for services                          -           25          222,475                 -          222,500

Net loss for the year ended October 31, 2004                   -            -                -        (4,777,612)      (4,777,612)
                                                           -----       ------      -----------      ------------      -----------

BALANCE AT OCTOBER 31, 2004                                  100        2,950        7,949,420       (12,818,959)      (4,866,489)

Conversion of debt and accrued expenses                        -          317        3,163,378                 -        3,163,695

Conversion of preferred stock                               (100)       1,000             (900)                -                -

Issuance of common stock                                       -           88          427,891                 -          427,979

Issuance of common stock for services                          -            2           13,938                 -           13,940

Issuance of common stock for investment                        -          200          779,800                 -          780,000

Issuance of warrants for investment                            -            -          250,000                 -          250,000

Issuance of warrants for consulting services                   -            -          338,000                 -          338,000

Issuance of warrants for financing fees                        -            -          195,000                 -          195,000

Net loss for the year ended October 31, 2005                   -            -                -        (7,090,305)      (7,090,305)
                                                           -----       ------      -----------      ------------      -----------

BALANCE AT OCTOBER 31, 2005                                $   -       $4,557      $13,116,527      $(19,909,264)     $(6,788,180)
                                                           =====       ======      ===========      ============      ===========

</TABLE>


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


                                      F-4
<PAGE>

               TRIMEDIA ENTERTAINMENT GROUP, INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                      YEARS ENDED OCTOBER 31, 2005 AND 2004
<TABLE>
<CAPTION>
                                                                                     2005                 2004
                                                                                ---------------      ---------------
<S>                                                                                   <C>                   <C>
CASH FLOWS FROM OPERATING ACTIVITIES
  Net loss                                                                        $ (7,090,305)        $ (4,777,612)
  Adjustment to reconcile net loss to net cash
   used in operating activities
    Foreign currency exchange gain                                                    (230,116)                   -
    Gain on sale of equipment                                                           (2,724)                   -
    Loss on impairment                                                               1,055,000              673,205
    Common stock issued for services                                                    13,940              222,500
    Warrants issued for expenses                                                             -              192,300
    Warrants issued for financing fees                                                       -               55,000
    Amortization of film costs                                                          41,035                    -
    Depreciation and amortization                                                      179,485              188,897
    (Increase) decrease in assets
      Miscellaneous receivable                                                         (16,547)                   -
      Film costs                                                                       (91,805)             (83,140)
      Prepaid expenses                                                                 287,191               (6,975)
      Other assets                                                                     (18,070)              (9,425)
    Increase (decrease) in liabilities
      Accounts payable and accrued expenses                                            652,750            1,197,590
      Advances from distributors                                                       167,866             (122,217)
      Deferred revenue                                                                   2,018                1,167
                                                                               ----------------     ----------------
  Net cash used in operating activities                                             (5,050,282)          (2,468,710)
                                                                               ----------------     ----------------

CASH FLOWS FROM INVESTING ACTIVITIES
  Due to stockholder                                                                    22,242               86,943
  Purchase of investment in affiliated company                                         (25,000)                   -
  Proceeds from sale of equipment                                                        2,925                    -
  Purchase of equipment                                                                (22,288)                   -
                                                                               ----------------     ----------------
  Net cash provided by (used in) investing activities                                  (22,121)              86,943
                                                                               ----------------     ----------------

CASH FLOWS FROM FINANCING ACTIVITIES
  Net borrowings on long-term debt                                                   3,111,936                    -
  Net borrowings on demand notes                                                        19,500              123,000
  Net borrowings on term loans                                                       1,362,595              (71,905)
  Net proceeds from sale of stock                                                      427,979            2,501,683
                                                                               ----------------     ----------------
  Net cash provided by financing activities                                          4,922,010            2,552,778
                                                                               ----------------     ----------------

NET INCREASE (DECREASE) IN CASH                                                       (150,393)             171,011

CASH - BEGINNING OF YEAR                                                               185,096               14,085
                                                                               ----------------     ----------------

CASH - END OF YEAR                                                                $     34,703         $    185,096
                                                                               ================     ================

SUPPLEMENTAL DISCLOSURES OF CASH
  FLOW INFORMATION

CASH PAID DURING THE YEAR FOR:
  Interest                                                                        $     81,088         $     86,933
                                                                               ================     ================
</TABLE>

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

                                      F-5
<PAGE>

               TRIMEDIA ENTERTAINMENT GROUP, INC. AND SUBSIDIARIES
                CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
                      YEARS ENDED OCTOBER 31, 2005 AND 2004

<TABLE>
<CAPTION>
                                                                                   2005                 2004
                                                                              --------------        ------------
<S>                                                                                 <C>                 <C>
SUPPLEMENTAL DISCLOSURES OF NON-CASH
  INVESTING AND FINANCING ACTIVITIES:

    Warrants issued for prepaid consulting services                             $   338,000           $       -
                                                                              ==============        ============

    Warrants issued for deferred financing fee                                  $   195,000           $       -
                                                                              ==============        ============

    Conversion of term loan to common stock                                     $         -           $ 168,787
                                                                              ==============        ============

    Accrued interest converted to term loan                                     $         -           $ 281,141
                                                                              ==============        ============

    Conversion of liabilities to common stock:
      Accounts payable and accrued expenses                                     $ 2,855,252           $       -
      Due to stockholder                                                              5,301                   -
      Loan payable - stockholder                                                     99,040                   -
      Demand note payable                                                           204,102                   -
                                                                              --------------        ------------

                                                                                $ 3,163,695           $       -
                                                                              ==============        ============

    Warrants issued for investment in affiliated company                        $   250,000           $       -
    Common stock issued for investment in affiliated company                        780,000                   -
                                                                              --------------        ------------

    Investment in affiliated company                                            $ 1,030,000           $       -
                                                                              ==============        ============

    Conversion of preferred stock to common stock:
      Preferred stock                                                           $      (100)          $       -
      Additional paid-in capital                                                       (900)                  -
                                                                              --------------        ------------

      Common stock                                                              $     1,000           $       -
                                                                              ==============        ============

</TABLE>
              The accompanying notes are an integral part of these
                       consolidated financial statements.


                                      F-6
<PAGE>


               TRIMEDIA ENTERTAINMENT GROUP, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                            OCTOBER 31, 2005 AND 2004



NOTE 1 - NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Nature of the Business
----------------------
Trimedia Entertainment Group, Inc. ("Trimedia") and its wholly-owned
subsidiaries, Metropolitan Recording Inc. ("Metropolitan"); Ruffnation Films,
LLC, Snipes Productions, LLC Ruffnation Music, Inc. ("Ruffnation Music"); Four
Point Play Productions, LLC ("Four Point Play"); TM Film Distribution, Inc.;
Trimedia Film Group, Inc. and TME Entertainment Film- und Musik- Producktions
and -Verwertungs- Gesellschaft m.b.H. ("TME") (collectively, the "Company")
operate a state of the art recording studio for film, video, audio and
television productions and operate independent film production companies.

Basis of Presentation
---------------------
The consolidated financial statements include the accounts of Trimedia and its
wholly-owned subsidiaries. All material intercompany transactions have been
eliminated in consolidation.

Revenue Recognition and Accounting for Exploitation Costs
---------------------------------------------------------
The Company's policy for revenue recognition and accounting for exploitation
costs, including advertising and marketing expenses and development and overhead
costs is in accordance with the AICPA Statement of Position No. 00-2,
"Accounting by Producers or Distributors of Films" ("SOP 00-2").

According to SOP 00-2, an entity should recognize revenue from a sale or
licensing arrangement of a film when all of the following conditions are met:

     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
        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.

If the Company does not meet any one of the preceding conditions, the Company
defers recognizing revenue until all of the conditions are met.

Royalty Advances
----------------
The Company commits to and pays advance royalties to its artists and songwriters
in respect of future sales. The Company accounts for these advance royalty
payments under the related guidance in Statement of Financial Accounting
Standard No. 50, "Finance Reporting in the Record and Music Industry" ("FAS
50"). Under FAS 50, the Company capitalizes as assets certain advance royalty
payments that management believes are recoverable from future royalties to be
earned by the artist or songwriter.

Management's decision to capitalize an advance to an artist or songwriter as an
asset requires significant judgment as to the recoverability of these advances.
The recoverability of these assets is assessed upon initial commitment of the
advance, based upon management's forecast of anticipated revenues from the sale
of future and existing music and publishing-related products. In determining
whether these amounts are recoverable, management evaluates the current and past
popularity of the artist or songwriter, the initial or expected commercial
acceptability of the product, the current and past popularity of the genre of
music that the product is designed to appeal to, and other relevant factors.
Based upon this information, management expenses the portion of such advances
that it believes is not recoverable. In many cases, royalty advance payments to
artists or publishers without history of successful commercial acceptability of
the product and evidence of current or past popularity will be expensed
immediately. All advances are assessed for recoverability continuously and at
minimum on a quarterly basis.

                                      F-7

<PAGE>
               TRIMEDIA ENTERTAINMENT GROUP, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                            OCTOBER 31, 2005 AND 2004


NOTE 1 - NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
         (Continued)

Comprehensive Income
--------------------
The Company follows the Statement of Financial Accounting Standard ("SFAS") No.
130, "Reporting Comprehensive Income." Comprehensive income is a more inclusive
financial reporting methodology that includes disclosure of certain financial
information that historically has not been recognized in the calculation of net
income. Since the Company has no items of other comprehensive income,
comprehensive income (loss) is equal to net income (loss).

Fair Value of Financial Instruments
-----------------------------------
The Company's financial instruments consist of cash and accounts payable. The
carrying values of cash and accounts payable approximate fair value because of
their short maturities.

The carrying value of the term loans, demand note payable and loan
payable-stockholder approximates fair value since the interest rate associated
with the debt approximates the current market interest rate.

Concentration of Credit Risk Involving Cash
-------------------------------------------
The Company maintains cash balances at several financial institutions. Accounts
at each institution are insured by the Federal Deposit Insurance Corporation up
to $100,000. During the year, the Company may have cash balances in these
financial institutions in excess of these limits. At October 31, 2005 there were
no balances in excess of insurable amounts.

Film Costs
----------
Costs of making motion picture films that are produced for sale to third parties
are stated at the lower of cost, less accumulated amortization, or fair value.
Film costs are expensed based on the ratio of the current period gross revenues
to estimated total gross revenues from all sources on an individual production
basis. This ratio requires the use of estimates based on management's knowledge
and experience; therefore, actual results could differ from this estimate. The
capitalized film costs of $133,910 and $83,140 as of October 31, 2005 and 2004
are costs associated with films that are in development. The capitalized film
costs associated with the film Train Ride in the amount of $41,035 were fully
amortized during the year ended October 31, 2005.

Cost Method Investments
-----------------------
For non-publicly traded investments, management's assessment of fair value is
based on valuation methodologies including discounted cash flows, estimates of
sales proceeds and external appraisals, as appropriate. The ability to
accurately predict future cash flows, especially in developing and unstable
markets, may impact the determination of fair value.

In the event a decline in fair value of an investment occurs, management may be
required to determine if the decline in market value is other than temporary.
Management's assessments as to the nature of a decline in fair value are based
on the valuation methodologies discussed above and its ability and intent to
hold the investment. If the fair value of any of the Company's equity method or
cost method investments is less than the carrying value and the decline in value
is considered to be other than temporary, an impairment charge is recorded to
write down the carrying value of the investment to its fair value. Management's
assessments of fair value in accordance with these valuation methodologies
represent its best estimates as of the time of the impairment review and are
consistent with its internal planning. If different fair values were estimated,
this could have a material impact on the financial statements.


                                      F-8
<PAGE>
               TRIMEDIA ENTERTAINMENT GROUP, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                            OCTOBER 31, 2005 AND 2004

NOTE 1 - NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
         (Continued)

Depreciation
------------
The cost of property and equipment is depreciated over the estimated useful
lives of the related assets. Depreciation is computed using the straight-line
method.

Income Taxes
------------
The Company follows SFAS 109, "Accounting for Income Taxes", which requires an
asset and liability approach to financial accounting and reporting for income
taxes. Deferred income tax assets and liabilities are computed annually for
temporary differences between the financial statement and tax bases of assets
and liabilities that will result in taxable or deductible amounts in the future
based on enacted tax laws and rates applicable to the periods in which the
differences are expected to affect taxable income. Valuation allowances are
established when necessary to reduce deferred tax assets to the amount expected
to be realized. Income tax expense is the tax payable or refundable for the
period plus or minus the change during the period in deferred tax assets and
liabilities.

Loss Per Share
--------------
The Company follows SFAS 128, "Earnings Per Share" resulting in the presentation
of basic and diluted earnings (loss) per share. Because the Company reported a
net loss for the years ended October 31, 2005 and 2004, common stock equivalents
consisting of Convertible Preferred Stock (in 2004), stock options and warrants
were anti-dilutive; therefore, the amounts reported for basic and dilutive loss
per share were the same.

Estimates
---------
The preparation of financial statements in conformity with accounting principles
generally accepted in the United States requires the use of estimates based on
management's knowledge and experience. Accordingly, actual results could differ
from those estimates.

Recoverability of Long Lived Assets
-----------------------------------
The Company follows SFAS No. 144, "Accounting for the Impairment or Disposal of
Long-Lived Assets" ("Statement 144"). Long-lived assets to be held and used are
reviewed for impairment whenever events or changes in circumstances indicate
that the related carrying amount may not be recoverable. When required,
impairment losses on assets to be held and used are recognized based on the
excess of the asset's carrying amount. Fair value of the asset and long-lived
assets to be disposed of are reported at the lower of carrying amount or fair
value less cost to sell. The Company recorded a loss on impairment of $673,205
during the year ended October 31, 2004 (Note 4).

Recently Issued Accounting Pronouncements
-----------------------------------------
In December 2004, the FASB revised SFAS 123, "Accounting for Stock-Based
Compensation" to require all companies to expense the fair value of employee
stock options. SFAS 123R is effective for the first period beginning after
December 15, 2005 for a small business issuer.


                                      F-9

<PAGE>
               TRIMEDIA ENTERTAINMENT GROUP, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                            OCTOBER 31, 2005 AND 2004

NOTE 2 - MANAGEMENT PLANS

Since its inception, the Company has incurred significant losses and, as of
October 31, 2005, had accumulated losses of $19,909,264. For the years ended
October 31, 2005 and 2004 the Company's net losses were $7,090,305 and
$4,777,612. In addition, the Company had negative working capital of $3,266,702
at October 31, 2005 and experienced negative cash flow from operations of
$5,050,282 and $2,468,710 for the years ended October 31, 2005 and 2004. The
Company may incur further operating losses and experience negative cash flow in
the future. Achieving profitability and positive cash flow depends on the
Company's ability to generate sufficient revenues from its films and recording
studio and raise additional capital in equity markets. There can be no
assurances that the Company will be able to generate sufficient revenues or
raise additional capital to achieve and sustain profitability and positive cash
flow in the future.

The Company has no firm commitments for funding its operations. The Company has
historically relied principally on equity financing and loans from its principal
stockholder and third parties to meet its cash requirements. The Company intends
to raise additional capital from loans and the sale of its securities. However,
there can be no assurances that the company will be successful in raising
sufficient capital to have a material positive effect of the company's
operations and cash flow.

The Company has outstanding debt in the aggregate principal amount of
approximately $6,126,028 as of October 31, 2005. The Company has granted
security interests in substantially all of its assets to secure its obligations
to repay approximately $5,026,028 of this indebtedness. According, the Company
will require a significant amount of cash to fund the present operations and to
continue to grow the business. As the Company's operations grow, the Company's
financing requirements are expected to grow proportionately and the Company
projects the continued use of cash in operating activities for the foreseeable
future. Therefore, the Company is dependent on continued access to external
sources of financing. The current financing strategy is to pursue loans and to
sell equity securities to raise a substantial amount of working capital. The
Company also plans to leverage investment in film and music productions through
operating credit facilities, co-ventures and single-purpose production
financing. The Company plans to obtain financing commitments, including, in some
cases, foreign distribution commitments to cover, on average, at 50% of the
budgeted third-party costs of a project before commencing production. The
Company plans to outsource required services and functions whenever possible.
The Company also plans to use independent contractors and producers, consultants
and professionals to provide those services necessary to operate the corporate
and business operations in an effort to avoid build up of overhead
infrastructures, to maintain a flexible organization and financial structure for
productions and ventures and to be responsive to business opportunities
worldwide. The Company believes that it will be necessary for the Company to
raise at least $10,000,000 in order to meet the anticipated cash requirements
through October 31, 2006. There can be no assurance that the Company will be
successful in its efforts to raise this amount of additional financing. In the
event that the Company is unable to raise these funds, the Company will then be
required to delay its plans to grow its business and the Company will rely on
its net revenues to fund its operations.

There can be no assurance that such funding will be generated or available on
terms acceptable to the Company, or at all, or that the commercial exploitation
of the Company's products will be economically profitable for the Company. These
uncertainties raise substantial doubt about the ability of the Company to
continue as a going concern. Significant additional funding will be required
during fiscal 2006 to meet expected negative operating cash flows.


                                      F-10
<PAGE>

               TRIMEDIA ENTERTAINMENT GROUP, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                            OCTOBER 31, 2005 AND 2004



NOTE 3 - PROPERTY AND EQUIPMENT

Property, equipment and estimated useful lives consist of the following:
<TABLE>
<CAPTION>
                                                    YEARS          2005              2004
                                                  ----------    -----------      ------------
   <S>                                                  <C>            <C>               <C>
   Studio equipment                                 5 - 7       $1,131,708        $1,162,053
   Office furniture                                   7             34,556            12,270
                                                                -----------      ------------
                                                                 1,166,264         1,174,323
   Less:  Accumulated depreciation                                 867,527           718,188
                                                                -----------      ------------

                                                                $  298,737        $  456,135
                                                                ===========      ============
</TABLE>

Related depreciation and amortization expenses were $179,485 and $188,897 for
the years ended October 31, 2005 and 2004.

On August 31, 2004, the Company's office and studio space leases expired. On
November 22, 2004, the Company entered into an agreement to assign its rights
and obligations of the studio lease to a third party ("Successor"). As part of
the agreement, the Company is entitled to utilize one-third of the monthly
studio time during the term of the three year agreement, with the Successor
having access for the remaining time. The Successor pays the monthly rent
directly to the landlord. The Company receives no monetary compensation from the
Successor.

Based on the fact that the Company assigned its studio lease obligation to a
third-party and that the majority, if not all, of the studio improvements cannot
be removed, that it will not be feasible to remove the studio improvements upon
the expiration of the Successor's three year lease, and that it is highly
unlikely that the carrying amount is recoverable from future undiscounted cash
flow, the Company recorded a loss on impairment of the total net carrying amount
of the studio improvements of $673,205. However, management believes that the
remaining carrying amount of the studio equipment does not exceed its fair
value.


NOTE 4 - INVESTMENT IN AFFILIATED COMPANY

In March 2005, the Company issued 2,000,000 shares of its common stock and stock
purchase warrants to purchase 1,000,000 shares of its common stock at an
exercise price of $0.45 per share, expiring in 5 years, pursuant to Section 4(2)
of the Securities Act as part of the purchase of a 10% investment in a company.
In accordance with the fair value method as described in accounting requirements
of SFAS No. 123, the warrants issued were valued at $250,000. The 2,000,000
shares of common stock were valued at $780,000, which represents the fair market
value of the common stock at date of issuance. This investment was accounted for
by the cost method since the Company's investment is less than 20%. In June
2005, the Company entered into a convertible promissory note with this
affiliated company, under which the Company loaned $250,000 to the affiliated
company. The promissory note accrues interest at 10% which is due on the
maturity date, June 21, 2006. The promissory note is convertible into 250,000
shares of the common stock of the affiliated company at the option of either
party.

Management was unable to assess the fair value of the investment and the
collectibility of the note by estimating its cash flow since the launch date of
the intended product has been postponed indefinitely. Since the fair value is
less than the cost method, the decline in the investment and advance is
considered to be other than temporary, and an impairment charge of $1,305,000
was recorded to write-down the carrying value of the investment of $1,055,000
and note of $250,000 to zero.

                                      F-11

<PAGE>

               TRIMEDIA ENTERTAINMENT GROUP, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                            OCTOBER 31, 2005 AND 2004


NOTE 5 - TERM LOANS

In August 2001, Metropolitan entered into a term loan with a bank in the amount
of $162,000. The term loan matures in August 2006. The loan is payable in
monthly installments of $1,965, including interest at 8%, with a lump sum
payment due at maturity of $99,858. The loan is collateralized by all assets of
Metropolitan and a personal guarantee by Christopher Schwartz, the Company's
Chief Executive Officer. The loan agreement allows for prepayment of the loan in
full without penalty. The loan agreement has a provision that states any change
of ownership of 25% or more of the common stock of Metropolitan without the
waiver and consent of the bank is an event of default. The share exchange
agreement entered into on October 2, 2002 resulted in a change of ownership of
greater than 25% of the common stock of Metropolitan, without the prior written
consent of the lender, and therefore Metropolitan is in technical default of
this loan agreement.

Upon default, the bank, at its option, may increase the interest rate four basis
points, demand payment in full of the outstanding principal balance plus accrued
interest and hold Metropolitan liable for all collection costs incurred by the
bank. Since Metropolitan did not obtain a waiver from the bank regarding the
change of ownership that resulted from the share exchange the total outstanding
amount of this note is reflected as a current liability. The bank has filed a
Complaint for Confession on Judgment for the outstanding principal balance plus
interest and attorney fees of approximately $5,800, which is included in accrued
expenses. At October 31, 2005 and 2004, the total outstanding balance of the
term loan was $126,708.

In June 2002, the Company entered into a loan agreement with related party
lenders pursuant to which the Company borrowed $400,000. Principal and accrued
interest, at a rate of 24% per annum, was payable on demand or the date ten
calendar days after the date on which the Company conducts a closing of at least
$5,000,000 in a private placement offering. The note was secured by a lien
interest in the film "Snipes." During September 2002, the Company entered into
another loan agreement with the same lenders in which the Company borrowed
$35,000. Principal and accrued interest, at a rate of 10% per annum, was payable
upon demand. The note was unsecured.

In April 2003, the Company consolidated these two loans into one promissory note
for $435,000, with principal and accrued interest, at a rate of 35% per annum,
due in full on October 31, 2003. This note is secured by a second lien security
interest in the film "Snipes." On October 30, 2003, pursuant to a letter
agreement, the parties amended the promissory note to extend the maturity date
to April 30, 2004. On June 2, 2004, pursuant to a letter agreement, the parties
amended the promissory note to extend the maturity date through October 31,
2005, convert the accrued interest payable of $281,141 into the outstanding
principal balance and reduce the interest rate to 20% per annum.

In May 2005, certain related party lenders entered into an agreement with the
Company to have debt owed to the lenders repaid with a combination of a note
payable and conversion of debt to equity. The lenders were owed a total of
$1,041,524, which consists of term loans of $654,906, demand notes of $91,602,
accrued interest of $140,016 and accrued expenses of $155,000. As part of the
agreement, during May 2005, the lenders converted $531,524 of debt into 531,524
share of the Company's common stock. In addition, the Company entered into a
promissory note for the remaining balance of $510,000. The principal and accrued
interest, at 20%, is payable in full or the earlier of the closing of the next
equity financing that the Company undertakes of May 9, 2006.


                                      F-12
<PAGE>

               TRIMEDIA ENTERTAINMENT GROUP, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                            OCTOBER 31, 2005 AND 2004


NOTE 5 - TERM LOANS (Continued)

In May 2005, the Company entered into a convertible term note payable with a
third party lender. The note states that the third party lender will lend the
Company $1,590,000. Interest only, at 12% per annum, is due monthly with the
outstanding principal to be paid in a lump sum on May 30, 2006. The holder of
the note has the right to convert all or part of the outstanding principal
amount of the note into common stock of the Company at a conversion price of
$0.50 per share. The conversion price is subject to adjustment upon occurrence
of certain events as defined in the agreement. As of October 31, 2005, the
Company has borrowed $1,507,500 of the $1,590,000 available credit. In addition,
approximately $48,000 of interest was in arrears and recorded as accrued
interest.


NOTE 6 - DEMAND NOTES PAYABLE

As of October 31, 2004, the Company owed a related party lender $184,602, with
interest accruing at 10% and 12%. During fiscal 2005, the Company repaid $93,000
towards the outstanding principal balance. In May 2005, the remaining
outstanding principal and accrued interest was repaid as part of an overall
agreement with certain related party lenders (see Note 10).


NOTE 7 - LONG-TERM DEBT

On December 20, 2004, TM Film Distribution, Inc., a wholly-owned subsidiary,
entered into a loan agreement with a foreign bank, Fairbairn Private Bank
Limited, under which the bank provides a line of credit facility for a maximum
of (pound)1,628,055. Interest is payable quarterly at the London Interbank
Offered Rate ("LIBOR") plus 0.375%. The line is secured by funds, advanced by a
third party, held on deposit with the lender. The outstanding principal balance
of the line is due in full twenty-four months after the final draw down of the
line. In December 2004 and January 2005, TM Film Distribution, Inc. was advanced
an aggregate of (pound)1,628,055 (U.S. $2,881,820) under this line of credit. A
portion of these funds were used to satisfy expenses related to this transaction
in the amount of approximately $1,494,000. TM Film Distribution, Inc. recognized
a foreign currency exchange gain of $230,116 for the year ended October 31,
2005.

In addition, the third-party assigned a cash account in the amount of
approximately $3,006,000, restricted for use in promotion and advertising upon
certain conditional and the third-party's approval which amount is offset as a
loan to the third party.


NOTE 8 - DUE TO STOCKHOLDER

Due to stockholder represents loans to the Company from its stockholder that are
due and payable on demand with no stated interest rate.


NOTE 9 - LOAN PAYABLE - STOCKHOLDER

As of October 31, 2004, the loans payable - stockholder consisted of an
unsecured demand note payable to Christopher Schwartz in the amounts of
$1,100,000, accruing interest at 7% per annum, and $99,040, accruing interest at
12% per annum. In April 2005, the $99,040 loan was converted into common stock
of the Company at a conversion rate of $1.00 per share (Note 10). Interest
expense, associated with these notes for the years ended October 31, 2005 and
2004 was $77,000 and $80,449. Christopher Schwartz does not intend to call the
note during the next fiscal year and therefore the note is reflected on the
balance sheet as a non-current liability.


                                      F-13
<PAGE>


               TRIMEDIA ENTERTAINMENT GROUP, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                            OCTOBER 31, 2005 AND 2004



NOTE 10 - STOCKHOLDERS' EQUITY

Common Stock
------------
During the year ended October 31, 2004 the Company sold an aggregate of
2,952,209 shares of its common stock in a series of private offerings and
received net proceeds of $2,501,683.

In addition, the holder of a $168,787 convertible note submitted the note for
conversion at $1 per share into 168,787 shares of the Company's common stock.

In March 2004, a holder of a warrant to purchase 62,500 shares of the Company's
common stock exchanged this warrant in a cashless transaction for 16,318 shares
of the Company's common stock. The warrant was originally issued on November 1,
2002. Upon issuance, the Company recognized expense of $63,200 based on the fair
value method as described in accounting requirements of Statement of Financial
Accounting Standards ("SFAS") No. 123. Since the valuation of the exchange of
the warrant for 16,318 shares of common stock did not exceed the previously
recognized expense of $63,200, no additional cost was recorded.

In August 2004, the Company issued 250,000 shares of its common stock in
exchange for consulting services valued at $222,500.

During the year ended October 31, 2005, the Company sold an aggregate of 863,556
shares of its common stock in a series of private offerings and received net
proceeds of $427,977. Included in a January 2005 private offering to purchase
666,667 shares of the Company's common stock at $0.45 per share were warrants to
purchase 666,667 shares of the Company's common stock at an exercise price of
$1.25 per share, expiring in 3 years and warrants to purchase 666,667 shares of
the Company's common stock at an exercise price of $0.75 per share, expiring in
one year.

During the year ended October 31, 2005, the Company issued 21,446 shares of its
common stock in exchange for services valued at $13,940.

In March 2005, the Company issued 2,000,000 shares of its Common Stock and Stock
Purchase Warrants to purchase 1,000,000 shares of its common stock at an
exercise price of $ $0.45 per share, expiring in 5 years, pursuant to Section
4(2) of the Securities Act as part of the purchase of a 10% investment in an
affiliated company. In accordance with the fair value method as described in
accounting requirements of SFAS No. 123(R), the warrants issued were valued at
$250,000. The 2,000,000 shares of common stock were valued at $780,000, which
represents the fair market value of the common stock at date of issuance. This
investment is accounted for by the cost method since the Company's investment is
less that 20%.

In April 2005, 1,000,000 shares of Preferred Stock were converted into
10,000,000 shares of common stock.


                                      F-14

<PAGE>
               TRIMEDIA ENTERTAINMENT GROUP, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                            OCTOBER 31, 2005 AND 2004


NOTE 10 - STOCKHOLDERS' EQUITY (Continued)

In April 2005, the major stockholder of the Company, certain employees of the
Company and certain related parties converted $2,632,171 of liabilities due to
them into stock subscriptions for 2,632,171 shares of the Company's common
stock. The shares of common stock were issued in May 2005.

As discussed in Note 5, in May 2005, certain related party lenders entered into
an agreement with the Company to have debt owed to the lenders repaid with a
combination of a note payable and conversion of debt to equity. As part of the
agreement, during May 2005, the lenders converted $531,524 of debt into 531,524
share of the Company's common stock.

Options
-------
Pursuant to the terms of his Employment Agreement, Christopher Schwartz received
options to purchase 5,786,707 shares of the Companies' common stock. The
exercise price per share of these options is calculated based on the closing
price of the Company's common stock on the respective dates that the options
vest pursuant to the Employment Agreement as follows:

     o  750,000 shares vested upon the commencement of Christopher Schwartz'
        employment on October 9, 2002 at an exercise price of $1.50 per share;
     o  825,000 shares vested on October 9, 2003 at an exercise price of $1.09
        per share;
     o  907,500 shares vested on October 9, 2004 at an exercise price of $0.75
        per share;
     o  998,250 shares on October 9, 2005 at an exercise price of $0.13 per
        share;
     o  1,098,075 shares on October 9, 2006; and
     o  1,207,882 shares on October 9, 2007

In order to be eligible to exercise the options, Christopher Schwartz must be
employed by the Company on the option vesting dates. The options may be
exercised for ten years from the date the options vest. None of the options have
been exercised by Christopher Schwartz.

In March 2004, the Company entered into an employment agreement with Mr. Taylor,
the new President of Trimedia Entertainment Group, Inc. and Chief Executive
Officer of European Operations. The agreement is for the period April 12, 2004
through April 12, 2006. Pursuant to his employment agreement, this employee is
entitled to annual compensation of $540,000 plus health insurance and vacation
time. Mr. Taylor resigned on June 14, 2005.

                                      F-15

<PAGE>
               TRIMEDIA ENTERTAINMENT GROUP, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                            OCTOBER 31, 2005 AND 2004


NOTE 10 - STOCKHOLDERS' EQUITY (Continued)

The option may be exercised for ten years from the date the options vest. None
of the options have been exercised as of October 31, 2005. This employment
agreement was terminated in June 2005.

The Company applies ABP Opinion 25, "Accounting for Stock Issued to Employees,"
and related interpretations in accounting for the issuance of its stock options.
Accordingly, no compensation cost has been recognized for its stock options
issued during the years ended October 31, 2005 and 2004. Had compensation cost
for the Company's issuance of vested stock options been determined based on the
fair value at grant dates for options consistent with the method of FASB
Statement 123, the Company's net loss and net loss per share would have been
increased to the pro forma amounts indicated below. Fair value amounts were
estimated using the Black-Scholes model with the following assumptions: no
dividend yield, expected volatility of 80%, and a risk-free interest rate of
4.35% for 2005 and 4.15% for 2004.
<TABLE>
<CAPTION>
                                                        2005                2004
                                                     ----------          ----------
           <S>                       <C>                 <C>                 <C>
         Net loss                 As reported        $5,415,537          $4,687,612
                                  Pro forma          $5,522,537          $5,255,612

         Net loss per share       As reported        $     0.14          $     0.17
                                  Pro forma          $     0.14          $     0.19
</TABLE>

Warrants
--------
In March 2004, the Company issued Stock Purchase Warrants to purchase 124,375
shares of its common stock at an exercise price of $1.00 per share pursuant to
Section 4(2) of the Securities Act in exchange for consulting services. The
Warrants are exercisable until March 2007. In accordance with the fair value
method as described in accounting requirements of SFAF No. 123, the Company
recognized consulting expense of $164,300.

In June 2004, the Company issued Stock Purchase Warrants to purchase 50,000
shares of its common stock at an exercise price of $1.06 per share pursuant to
Section 4(2) of the Securities Act in exchange for consulting services. The
Warrants are exercisable until June 2007. In accordance with the fair value
method as described in accounting requirements of SFAF No. 123, the Company
recognized consulting expense of $28,000.

In June 2004, the Company issued Stock Purchase Warrants to purchase 62,500
shares of its common stock at an exercise price of $0.80 per share pursuant to
Section 4(2) of the Securities Act in exchange for a financing fee. The Warrants
are exercisable until June 2007. In accordance with the fair value method as
described in accounting requirements of SFAF No. 123, the Company recognized
financing fee expense of $32,000.

In August 2004, the Company issued Stock Purchase Warrants to purchase 62,500
shares of its common stock at an exercise price of $0.80 per share pursuant to
Section 4(2) of the Securities Act in exchange for a financing fee. The Warrants
are exercisable until August 2007. In accordance with the fair value method as
described in accounting requirements of SFAF No. 123, the Company recognized
financing fee expense of $23,000.

On December 21, 2004, the Company issued Stock Purchase Warrants to purchase
1,000,000 shares of its common stock at an exercise price of $0.49 per share
pursuant to section 4(2) of the Securities Act as compensation for a twelve
month consulting agreement. The Warrants are exercisable until December 2009. In
accordance with the fair value method as described in accounting requirements of
SFAS No. 123, the Company recognized prepaid consulting expense of $338,000, of
which $281,700 was expensed for the year ended October 31, 2005.

                                      F-16
<PAGE>

               TRIMEDIA ENTERTAINMENT GROUP, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                            OCTOBER 31, 2005 AND 2004


NOTE 10 - STOCKHOLDERS' EQUITY (Continued)

Warrants (Continued)
--------------------
In February 2005, the Company replaced 120,000 Stock Purchase Warrants
originally issued during Fiscal 2003 with Stock Purchase Warrants to purchase
274,000 of the Company's common stock, due to an anti-dilative clause in the
original agreement. The originally issued warrants had exercise prices between
$1.13 and $1.50 per share. The revised warrants have an exercise price of $0.45
and expire in October 2007, which was the original expiration date. The issuance
of the replacement warrants were accounted for as a variable stock option plan,
however no additional expense was required to be recognized during the year
ended October 31, 2005.

As discussed in Note 5, in May 2005, the Company entered into a convertible term
note payable with a third party lender for up to $1,590,000. As part of the loan
agreement the Company issued Stock Purchase Warrants to purchase 2,000,000
shares of its common stock at an exercise price of $0.50 per share pursuant to
Section 4(2) of the Securities Act. The Warrants are exercisable until May 2010.
In accordance with the fair value method as described in accounting requirements
of SFAS No. 123, the Company recognized a deferred financing fee of $195,000, of
which $90,000 was expensed for the year ended October 31, 2005.

A summary of the warrants issued by the Company are as follows:
<TABLE>
<CAPTION>

                                                            Number of        Option Price Per          Weighted Average
                                                             Shares             Share Range             Exercise Price
                                                         --------------     --------------------     -------------------
<S>                                                             <C>                <C>                      <C>
   Warrants outstanding at October 31, 2003                    757,500        $1.13 to $1.50               $1.33

   Warrants granted                                            299,375        $0.80 to $1.06               $0.88

   Warrants exercised                                          (62,500)            $1.50                   $1.50
                                                         --------------     -----------------             -------

   Warrants outstanding at October 31, 2004                    994,375        $0.80 to $1.50               $1.20

   Warrants granted                                          5,607,334        $0.45 to $1.25               $0.52

   Warrants expired                                           (120,000)       $1.13 to $1.50               $0.02

   Warrants exercised                                                -                     -                   -
                                                         --------------     -----------------             -------

   Warrants outstanding at October 31, 2005                  6,481,709        $0.45 to $1.50               $0.69
                                                         ==============     =================             =======
</TABLE>


                                      F-17
<PAGE>

               TRIMEDIA ENTERTAINMENT GROUP, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                            OCTOBER 31, 2005 AND 2004



NOTE 10 - STOCKHOLDERS' EQUITY (Continued)

Warrants (Continued)
--------------------
The warrants that are exercisable at October 31, 2005 are summarized as follows
<TABLE>
<CAPTION>
                                         Weighted
                                         Average             Number of Warrants
                                         Remaining               Currently               Weighted Average
             Warrant Price           Contractual Life           Exercisable               Exercise Price
         -----------------------    -------------------    ------------------------    ---------------------
                  <S>                      <C>                      <C>                          <C>
             $0.45 to $1.50             3.27 years               6,481,709                      $0.69
</TABLE>

NOTE 11 - INCOME TAXES

As discussed in Note 1, the Company utilizes the asset and liability method of
accounting for income taxes in accordance with SFAS 109. The effective tax rates
differ from the statutory rate primarily due to the Company's historical
corporate structure. The reconciliation of the statutory federal rate to the
Company's historical income tax expense (benefit) is as follows:
<TABLE>
<CAPTION>
                                                                Year Ended              Year Ended
                                                             October 31, 2005        October 31, 2004
                                                             -----------------       ----------------
                   <S>                                               <C>                    <C>
              Income tax benefit at
                U.S. federal income tax rate                    $ 2,411,000             $ (1,624,000)
              Tax benefit not recognized                         (2,411,000)               1,624,000
                                                                ------------            -------------
              Income tax benefit                                $         -             $          -
                                                                ============            =============

              Income tax benefit consists
                of the following:
              Current tax benefit
                Federal                                         $         -             $          -
                State                                                     -                        -
                                                                ------------            -------------
                                                                $         -             $          -
                                                                ============            =============

              Deferred tax benefit
                Federal                                         $ 6,274,000             $  3,863,000
                Valuation allowance                              (6,274,000)              (3,863,000)
                                                                ------------            -------------
                                                                          -                        -
                                                                ------------            -------------
                                                                $         -             $          -
                                                                ============            =============
</TABLE>

                                      F-18
<PAGE>


               TRIMEDIA ENTERTAINMENT GROUP, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                            OCTOBER 31, 2005 AND 2004


NOTE 11 - INCOME TAXES (Continued)

The components of the deferred assets (liabilities) are as follows:
<TABLE>
<CAPTION>
                                                     2005                      2004
                                                 ------------              ------------
                     <S>                              <C>                       <C>
               Net operating loss                 $6,274,000                $3,863,000
               Valuation allowance                (6,274,000)               (3,863,000)
                                                 ------------              ------------

                                                  $        -                $        -
                                                 ============              ============
</TABLE>

The valuation allowance for deferred tax assets as of October 31, 2005 and 2004
was $6,274,000 and $3,863,000. The change in the total valuation allowance for
the years ended October 31, 2005 and 2004 was an increase of $2,411,000 and an
increase of $1,624,000. In assessing the realizability of deferred tax assets,
management considers whether it is more likely than not that some portion or all
of the deferred tax assets will not be realized. The ultimate realization of
deferred tax assets is dependent upon the generation of future taxable income
during the periods in which the net operating losses and temporary differences
become deductible. Management considered projected future taxable income and tax
planning strategies in making this assessment. At October 31 2005, the Company
had net operating loss carry forwards for Federal and State income tax purposes
of approximately $18,453,000 (the "NOL carry forwards"), which were available to
offset future taxable income, if any, through 2025. However, due to a
substantial change in ownership in prior years, the use of any NOL carryforward
may be limited. Based upon the limited operating history of the Company and
losses incurred to date, management has fully reserved the deferred tax asset.


NOTE 12 - LEASE COMMITMENTS

The Company leases its office space for $9,625 per month, under a lease
agreement. The lease expires on December 31, 2008 and contains an option for an
additional two years.

Future minimum lease payments required under this lease are as follows:

                      Years Ending
                      October 31,                     Amount
                    -----------------              -------------

                          2006                         $115,500
                          2007                          115,500
                          2008                          115,500
                          2009                           19,250
                                                      ----------

                                                       $365,750
                                                      ==========

Rent expense for the years ended October 31, 2005 and 2004 amounted to
approximately $111,000 and $149,000.


                                      F-19

<PAGE>
               TRIMEDIA ENTERTAINMENT GROUP, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                            OCTOBER 31, 2005 AND 2004


NOTE 13 - EMPLOYMENT AGREEMENTS

The Company entered into an employment agreement with Christopher Schwartz, the
chairman and chief executive officer, which provides for an annual base salary
of $300,000, with annual increases of at least 10%, for a period of five years.
In addition, Mr. Schwartz received option grants described in Note 10.

The Company also may enter into employment agreements with certain other key
employees.


NOTE 14 - JOINT VENTURE

The Company entered into a 50/50 joint venture agreement as of September 20,
2002 with Sony Music, a group of Sony Music Entertainment Inc. ("Sony"), to form
Charles Street, a Delaware limited liability company. Charles Street is
comprised of two separate but interrelated business operations: Film venture and
label venture.

Under the terms of the joint venture agreement, as amended, the Company will
fund the creation, production and marketing of ten films and Sony, on behalf of
the joint venture, will have the exclusive worldwide right to manufacture,
market and distribute DVD's of the film intended for home use. The motion
picture entitled "Snipes" is considered the first film under the film venture.
The Company released the film entitled "Train Ride" through Charles Street in
fiscal 2005.

The label venture requires the Company to refer recording artists to the joint
venture and gives Sony the exclusive worldwide right, on behalf of the label
venture, to manufacture, market and distribute records embodying the musical
performances of artists approved by Sony.

In exchange for providing distribution services for the film and label ventures,
Sony will receive a distribution fee based on a percentage of the net billings
of the ventures, as defined in the agreement.


NOTE 15 - BUSINESS SEGMENTS

The Company follows SFAS No. 131, "Disclosures About Segments of and Enterprise
and Related Information" which requires the Company to provide certain
information about their operating segments. The Company has two reportable
segments: recording studio and film production.



                                      F-20

<PAGE>


               TRIMEDIA ENTERTAINMENT GROUP, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                            OCTOBER 31, 2005 AND 2004




NOTE 15 - BUSINESS SEGMENTS (Continued)

Summarized financial information concerning the Company's reportable segments,
which are based in the United States, is reflected in the following table:
<TABLE>
<CAPTION>
      For The Year Ended           Recording        Film          Segment                       Consolidated
       October 31, 2005              Studio       Production        Total         Corporate         Total
-------------------------------   -----------   -------------   -------------   ------------    -------------
<S>                                    <C>             <C>            <C>             <C>             <C>
Net sales                         $    1,095      $    4,939      $    6,034     $        -       $    6,034
Loss from operations               1,060,501       1,819,278       2,879,779      4,456,612        7,336,391
Total assets                         284,832         297,538         582,370        204,297          786,667
Depreciation and amortization        172,992           6,493         179,485              -          179,485
Capital expenditures              $   22,288      $        -      $        -     $        -       $   22,288
</TABLE>
<TABLE>
<CAPTION>
      For The Year Ended          Recording         Film          Segment                       Consolidated
       October 31, 2004             Studio       Production        Total         Corporate         Total
-------------------------------   -----------   -------------   -------------   ------------    -------------
<S>                                   <C>              <C>            <C>             <C>             <C>
Net sales                         $   21,020      $  218,050      $  239,070     $        -       $  239,070
Loss from operations                 866,785         153,590       1,020,375      3,761,937        4,782,312
Total assets                         451,093          89,864         540,957        222,301          763,258
Depreciation and amortization        182,405           6,492         188,897              -          188,897
Capital expenditures              $        -      $        -      $        -     $        -       $        -
</TABLE>
<TABLE>
<CAPTION>
                                                         Year Ended
                                                         October 31,
                                             ----------------------------------
            Reconciliations                       2005               2004
-----------------------------------------    ---------------     --------------
<S>                                                 <C>                 <C>
Total segment operating loss                    $ 2,879,779        $ 1,020,375
Corporate overhead expenses                       4,456,612          3,761,937
Other income                                       (246,086)            (4,700)
                                             ---------------     --------------

Total consolidated net loss                     $ 7,090,305        $ 4,777,612
                                             ===============     ==============
</TABLE>

NOTE 16 - SUBSEQUENT EVENTS

In December 2005, the Company issued 1,500,000 shares of its common stock for
consulting services.

As part of a consulting agreement entered into in December 2004, the Company was
obligated to issue Stock Purchase Warrants to purchase 1,000,000 shares of its
common stock contingent on this agreement still being in effect in December
2005. Since this agreement was terminated in December 2005, the Company was no
longer obligated to issue these warrants.



                                      F-21

<PAGE>




                                   SIGNATURES

         Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, the registrant has duly caused this Annual Report on Form 10-KSB to be
signed on its behalf by the undersigned thereunto duly authorized, in the City
of Philadelphia, Commonwealth of Pennsylvania.

Date: February 28, 2006
                                        TriMedia Entertainment Group, Inc.


                                        By: /s/ Christopher Schwartz
                                           -----------------------------------
                                            Christopher Schwartz
                                            Chief Executive Officer and
                                            Chief Financial Officer
                                            (principal financial officer and
                                             principal accounting officer)