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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, 2006
    
    Commission File No. 000-49865
 TriMedia Entertainment Group, Inc.
  DELAWARE
    
    14-1854107(State or other jurisdiction of incorporation or organization)
    
    (IRS Employer Identification No.)
 333 E. Lancaster Avenue, Suite 411
Wynnewood, Pennsylvania 19096
 (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.
 Securities registered pursuant to 
Section 12(g) of the Act:
    
    Name of Each Exchange on Which Registered:Common Stock, par value $.0001 per share
    
    None
 o
 þ o
 þ
 o þ




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##### 



PagePART I
    
    
    1ITEM 1. DESCRIPTION OF BUSINESS
    
    
    18ITEM 2. DESCRIPTION OF PROPERTY
    
    
    19ITEM 3. LEGAL PROCEEDINGS
    
    
    19ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERSPART IIITEM 5. MARKET FOR COMMON EQUITY AND RELATED SHAREHOLDER MATTERS
    
    
    19ITEM 6. MANAGEMENTS DISCUSSION AND ANALYSIS
    
    
    22ITEM 7. FINANCIAL STATEMENTS
    
    
    28ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
    
    
    28ITEM 8A. CONTROLS AND PROCEDURES
    
    
    28ITEM 8B. OTHER INFORMATION
    
    
    28PART IIIITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS; COMPLIANCE WITH 16 (a) OF THE EXCHANGE ACT
    
    
    28ITEM 10. EXECUTIVE COMPENSATION
    
    
    30ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
    
    
    32ITEM 12. CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS
    
    
    32ITEM 13. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
    
    
    33ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES
    
    
    36FINANCIAL STATEMENTS
    
    
    F-1Letter AgreementThird Amended and Restated Convertible Term NoteLetter Agreement by and among TrimediaSubsidiaries of Trimedia EntertainmentCEO AND CFO CERTIFICATION PURSUANT TO SECTON 302CEO AND CFO CERTIFICATION PURSUANT TO SECTON 906




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FORWARD LOOKING STATEMENTS
  
 PART I
 
 ITEM 1. DESCRIPTION OF BUSINESS
 BUSINESS OF THE COMPANY
 General
  
    
    Ruffnation Music, Inc. (Ruffnation Music);
    
    Metropolitan Recording Inc. (Metropolitan);
    
    Ruffnation Films LLC (Ruffnation Films);
    
    Snipes Production, LLC (Snipes);
    
    TM Film Distribution, Inc. (TMF);
    
    TriMedia Film Group, Inc (TFG); and
    
    Ruffnation Films Releasing, LLC (RFR).




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Films
    Universal Music Group Distribution, Corp./Vivendi Visual Entertainment Manufacturing and
Distribution Agreement
    2




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Money, Power,
Respect Death Before
Dishonor
 Film Production
  Music
   3




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Fontana Distribution Agreement
 Spin Doctors Nice Talking to Me . Kulcha
Don Its All About You, Kristy Frank Kristy Frank
  Artist Recording Contracts
     4




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Promotion and Marketing
      
    
    radio;
    
    television;
    
    artist/websites;
    
    newspaper and magazine advertising;
    
    distribution of posters featuring our artists and records;
    
    street teams;
    
    wrapped vans and trucks;
    
    bus backs, bus stops and benches;
    
    billboards;
    
    marquee style movie lights at label sponsored events and artists shows; and
    
    coordinated promotions with retail stores such as in-store displays and
appearances by performers.
  5




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Licensing of Recordings
   Copyright
      6




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Music Publishing
   Copyright Royalty Tribunal.
  Studio Operations
   
    
    a 72-input SSL Series 9000;
    
    a top-of-the-line recording/mixing console;
    
    two Studer A-827 2-inch tape machines;
    
    two ProTools 5.1 Mix Plus Cubes; and
    
    Quested Q212s monitors.
 7




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INDUSTRY BACKGROUND
 The Recorded Music Industry
  
    
    Universal Music Group;
    
    Warner Music Group;
    
    Sony BMG Corp.; and
    
    EMI Group
     The Feature Film Industry
 General
  
    
    Universal Pictures, Warner Bros. (including New Line Cinema and Castle
Rock Entertainment);
    
    Twentieth Century Fox, Sony BMG Pictures Entertainment (including
Columbia Pictures and Columbia Tristar Motion Picture Group);
    
    Paramount Pictures;
    
    The Walt Disney Company (including Buena Vista Pictures, Touchstone
Pictures and Miramax Film Corp.); and
    
    Metro-Goldwyn-Mayer Inc. (including MGM Pictures, United Artists Pictures
Inc., Orion Pictures Corporation and Goldwyn Entertainment Company).
 8




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Independent Feature Film Production and Financing
  Independent Feature Film Distribution
  COMPETITION
   9




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EMPLOYEES
  RISK FACTORS
  We need to obtain financing in order to continue our operations.
  As of October 31, 2006, we had approximately $8,298,376 in indebtedness and approximately
$1,471,073 in accounts payable and accrued expenses; if we are unable to satisfy these obligations,
then our business will be adversely effected.
  10




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We are dependent on our relationships with Universal Music Group Distribution and Fontana
Distribution, LLC for a substantial portion of our revenues.
   We have a limited operating history in the entertainment industry.
  We have a history of losses and expect that losses may continue in the future.
  Independent distributors will be a significant element of our growth strategy.
  11




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Shares of our common stock lack a significant trading market.
  Our success will depend on external factors in the music and film industries.
  
    
    the quality and acceptance of other competing records or films released
into the marketplace at or near the same time;
    
    critical reviews;
    
    the availability of alternative forms of entertainment and leisure activities;
    
    general economic conditions; and
    
    other tangible and intangible factors.
  Our success will be largely dependent upon our key executive officers and other key personnel.
  Unauthorized use of our intellectual property and trade secrets may affect our market share
and profitability.
  12




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
    
    enforce intellectual property rights;
    
    to protect our trade secrets;
    
    to determine the validity and scope of the rights of others; or
    
    to defend against claims of infringement or invalidity.
  Protecting and defending against intellectual property claims may have a material adverse
effect on our business.
  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.
  Advances in technology may have a material adverse effect on our revenues.
  13




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Our success will depend on our artists.
  We will depend on the continued popularity of pop or urban music.
  Our growth as a multimedia entertainment company depends on the success and increased use of
entertainment products and services.
  We will be in competition with companies that are larger, more established and better
capitalized than we are.
  
    
    greater financial, technical, personnel, promotional and marketing resources;
    
    longer operating histories;
    
    greater name recognition; and
    
    larger consumer bases than us.
 14




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Future sales of our securities will dilute the ownership interest of our current stockholders.
  We might expand through acquisitions which may cause dilution of our common stock and
additional debt and expenses.
  Operating internationally may expose us to additional and unpredictable risks.
  
    
    potentially weaker intellectual property rights;
    
    changes in laws and policies affecting trade;
    
    difficulties in obtaining foreign licenses;
    
    changes in regulatory requirements;
    
    instability of foreign economies and governments;
    
    instances of war or terrorists activities;
    
    unexpected changes in regulations and tariffs;
    
    fluctuations in the value of foreign currencies;
    
    intricate investment and tax laws, including laws and policies relating
to the repatriation of funds and to withholding taxes; and
    
    uncertain market acceptance and difficulties in marketing efforts due to
language and cultural differences.
  Our shares of common stock are subject to penny stock regulation.
  15




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
    
    a description of the nature and level of risk in the market for penny
stocks in both public offerings and secondary trading;
    
    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;
    
    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;
    
    a toll-free telephone number for inquiries on disciplinary actions;
    
    definitions of significant terms in the disclosure document or in the
conduct of trading in penny stocks; and
    
    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.
  
    
    the bid and offer quotations for the penny stock;
    
    the compensation of the broker-dealer and its salesperson in the transaction;
    
    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
    
    monthly account statements showing the market value of each penny stock
held in the customers account.
  Budget overruns may adversely affect our business.
  16




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Our operating results may fluctuate significantly.
  
    
    the timing of domestic and international releases of future music projects, or films we produce;
    
    the success of our future music projects or films;
    
    the timing of the release of related products into their respective markets;
    
    the costs to distribute and promote the future music projects and films;
    
    the success of our distributors in marketing our future music projects and films;
    
    the timing of receipt of proceeds generated by the music projects, and films from distributors;
    
    the introduction of new music projects, and films by our future competitors;
    
    the timing and magnitude of operating expenses and capital expenditures;
    
    the level of unreimbursed production costs in excess of budgeted maximum amounts;
    
    the timing of the recognition of advertising costs for accounting
purposes under generally accepted accounting principles; and
    
    general economic conditions, including continued slowdown in advertiser
spending.
  We do not intend to pay cash dividends on our shares of common stock.
  There may be downward pressure on our pricing and our profit margins.
  Our prospects and financial results may be adversely affected if we fail to identify, sign and
retain artists and songwriters.
  17




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We may have difficulty addressing the threats to our business associated with home copying and
Internet downloading.
  Organized industrial piracy may lead to decreased sales.
  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.
  
 ITEM 2. DESCRIPTION OF PROPERTY
  18




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ITEM 3. LEGAL PROCEEDINGS
  
 ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
  
 PART II
 
 ITEM 5. MARKET FOR COMMON EQUITY AND RELATED SHAREHOLDER MATTERS
  Market Information
   High Bid
    
    Low BidQuarter ended:January 31, 2006
    
    
    .085
    
    
    
    .07April 30, 2006
    
    
    .078
    
    
    
    .06July 31, 2006
    
    
    .062
    
    
    
    .041October 31, 2006
    
    
    .042
    
    
    
    .03
 19




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High Bid
    
    Low BidQuarter ended:January 31, 2005
    
    
    .50
    
    
    
    .33April 30, 2005
    
    
    .30
    
    
    
    .19July 31, 2005
    
    
    .195
    
    
    
    .15October 31, 2005
    
    
    .13
    
    
    
    .07
  Holders
  Dividends
  Recent Sales of Unregistered Securities and Use of Proceeds
      20




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21




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ITEM 6. MANAGEMENTS DISCUSSION AND ANALYSIS
  Overview
 Kulcha Don Money, Power, Respect Kristy Frank
 Death Before Dishonor Turntable
   Critical Accounting Policies
  22




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Revenue Recognition
  
    
    persuasive evidence of a sale or licensing arrangement with a customer
exists;
    
    the film is complete and, in accordance with the terms of the arrangement,
has been delivered or is available for immediate and unconditional delivery;
    
    the license period of the arrangement has begun and the customer can begin
its exploitation, exhibition, or sale;
    
    the arrangement fee is fixed or determinable; and
    
    collection of the arrangement fee is reasonably assured.
  Capitalized Film Costs
 Train
Ride
 Artist Compensation Costs
  23




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Results of Operations
  Fiscal 2006
    
    Fiscal 2005
    
    $Change
    
    % ChangeNet Loss
    
    
    (3,586,013
    )
    
    
    (7,090,305
    )
    
    
    3,504,292
    
    
    
    49.4Net Loss From Operations
    
    
    (3,361,603
    )
    
    
    (7,336,391
    )
    
    
    3,974,788
    
    
    
    54.2Net Revenues
    
    
    74,438
    
    
    
    6,034
    
    
    
    68,404
    
    
    
    1113.6Direct Costs
    
    
    866,117
    
    
    
    990,482
    
    
    
    (124,365
    )
    
    
    <12.6>Operating Expenses
    
    
    2,569,924
    
    
    
    6,351,943
    
    
    
    (3,782,019
    )
    
    
    <59.5>Other Income
    
    
    (224,410
    )
    
    
    246,086
    
    
    
    (470,496
    )
    
    
    <191.2>
  Money, Power,
Respect Train Ride
   Changes in Financial Position, Liquidity and Capital Resources
 Fiscal 2006
    
    Fiscal 2005
    
    $Change
    
    % ChangeCash Flows From
Operating Activities
    
    $
    <1,981,277>
    
    
    $
    <5,050,282>
    
    
    $
    3,069,005
    
    
    
    60.8Cash Flows From
Investing
Activities
    
    $
    29,641
    
    
    $
    <22,121>
    
    
    $
    51,762
    
    
    
    234.0Cash Flows From
Financing
Activities
    
    $
    1,947,189
    
    
    $
    4,922,010
    
    
    $
    <2,974,821>
    
    
    
    <60.4>
     24




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Off-Balance
Sheet Arrangements
  
 ITEM 7. FINANCIAL STATEMENTS
  
 ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
  
 ITEM 8A. CONTROLS AND PROCEDURES
 Evaluation of Disclosure Controls and Procedures
   Changes in Internal Controls
  
 ITEM 8B. OTHER INFORMATION
  
 PART III
 
 ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS; COMPLIANCE WITH 16 (a) OF
THE EXCHANGE ACT
  28




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Name
    
    Age
    
    Current Position(s) with CompanyChristopher Schwartz
    
    
    46
    
    
    Chief Executive Officer, Chief Financial Officer, Treasurer and DirectorRichard Murray
    
    
    48
    
    
    President of Ruffnation Films LLC
   Christopher Schwartz, Chairman of the Board of Directors and CEO  Snipes
 Richard Murray, President of Ruffnation Film LLC Snipes
  Compliance with Section 16(a) of the Exchange Act
   29




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Audit
Committee
  Code of Ethics
  
 ITEM 10. EXECUTIVE COMPENSATION
  SUMMARY COMPENSATION TABLE
 Long-TermCompensation AwardsAnnual Compensation
    
    Number ofName and Principal Position
    
    Fiscal Year Ended
    
    Salary
    
    Bonus
    
    OptionsChristopher Schwartz (1)
    
    October 31, 2006
    
    $
    130,000
    
    
    $
    0
    
    
    
    0Chief
Executive Officer, President, Treasurer
    
    October 31, 2005
    
    $
    176,899
    
    
    $
    0
    
    
    
    0October 31, 2004
    
    $
    332,750
    
    
    $
    0
    
    
    
    0Richard Murray (2)
    
    October 31, 2006
    
    $
    123,500
    
    
    $
    0
    
    
    
    0President of Ruffnation Films LLC
    
    October 31, 2005
    
    $
    163,913
    
    
    $
    0
    
    
    
    0October 31, 2004
    
    $
    221,834
    
    
    $
    0
    
    
    
    0
 
 (1)
    
    Mr. Schwartz was paid $121,000 of his Fiscal 2006 salary and the remaining salary for Fiscal
2006 is represented in accrued expenses. 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. 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. Murray was paid $102,000 of his Fiscal 2006 salary and the remaining salary for Fiscal
2006 is represented in accrued expenses. 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. In
Fiscal 2006, Mr. Murray agreed to reduce his annual salary from the prior agreed amount. As
of the date of this report, his annual salary is $102,000. Option Grants For the Fiscal Year Ended October 31, 2006
   30




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Fiscal Year End Option Values
 Value of UnexercisedNumber of Unexercised Options
    
    
    In-the-Money Optionsat Fiscal Year End
    
    
    at Fiscal Year EndName
    
    
    Exercisable
    
    
    Unexercisable
    
    
    Exercisable
    
    
    UnexercisableChristopher Schwartz
    
    
    4,578,825
    (1)
    
    
    1,207,882
    
    
    $
    0
    
    
    $
    0
 
 (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
$0.75 per share, options to purchase 998,250 shares of common stock at an exercise price of
$0.13 per share and options to purchase 1,098,075 shares of common stock at an exercise price
of $0.03 per share. Long Term Incentive Plans
  Compensation of Directors
  Employment Agreements
  Repricing of Options
  31




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ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
 Securities Authorized for Issuance Under Equity Compensation Plans
  Owners of our Common Stock
  
    
    each person known to us to be the beneficial owner of more than 5% of our common stock;
    
    each of our directors;
    
    each of our executive officers; and
    
    all of our executive officers and directors as a group.
  Amount and Nature ofName and Address
    
    Beneficial Ownership(1)
    
    
    Percent of ClassChristopher Schwartz (2)
1080 N. Delaware Avenue, 8th Floor
Philadelphia, PA 19125
    
    
    22,292,001
    
    
    
    42.63Richard Murray (3)
1080 N. Delaware Avenue, 8th Floor
Philadelphia, PA 19125
    
    
    227,101
    
    
    
    0.48All directors and executive officers as a
group (2) people)
    
    
    22,519,102
    
    
    
    43.07
 
 (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. 4,578,825 shares of common stock are issuable upon exercise of vested stock options
held by Mr. Schwartz.(3)
    
    President of Ruffnation Films LLC. 
 ITEM 12. CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS
  32




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ITEM 13. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
  ExhibitNumber
    
    Description2.1
    
    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).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).
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ExhibitNumber
    
    Description10.6
    
    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).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).
 34




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##### Table of Contents



ExhibitNumber
    
    Description10.21
    
    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).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).
 35




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##### Table of Contents



ExhibitNumber
    
    Description10.38
    
    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.10.42
    
    Amended and Restated Convertible Term Note dated as of June 13, 2006
(incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K
filed on June 16, 2006).10.43
    
    Second Amended and Restated Convertible Term Note dated as of September 13,
2006 (incorporated by reference to Exhibit 10.43 to the Quarterly Report on
Form 10-Q filed on September 14, 2006).10.44
    
    Letter Agreement dated August 15, 2006 by and between TriMedia Entertainment
Group, Inc. and Philip F. and Sandra Bogatin Charitable Remainder Unitrust.10.45
    
    Third Amended and Restated Convertible Term Note dated as of February 12, 2007.10.46
    
    Letter Agreement by and among TriMedia Entertainment Group, Inc., Snipes
Productions, LLC, Capital Growth Investment Trust, SPH Investments, Inc., HMA
Investments, Inc. Profit Sharing Plan, 1025 Investments, Inc. and CSOR
Preferred Liquidation, LLC dated February 12, 2007.21
    
    Subsidiaries of TriMedia Entertainment Group, Inc.31.1
    
    Certification dated February 13, 2007 pursuant to Exchange Act Rule 13a-14(a)
or 15d-14(a) of the Principal Executive Officer and Principal Financial
Officer as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
by Christopher Schwartz, Chief Executive Officer and Chief Financial Officer.32.1
    
    Certification dated February 13, 2007 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.
  
 ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES
  Audit Fees
  Audit-Related Fees
  36




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##### Table of Contents



Tax Fees
  All Other Fees
  Audit Committee Approval
  37




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##### Table of Contents



CONTENTS
 PAGEREPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
    
    F-1CONSOLIDATED BALANCE SHEETS
    
    F-2CONSOLIDATED STATEMENTS OF OPERATIONS
    
    F-3CONSOLIDATED STATEMENTS OF STOCKHOLDERS DEFICIT
    
    F-4CONSOLIDATED STATEMENTS OF CASH FLOWS
    
    F-5  F-6NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
    
    F-7  F-20




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F-1




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##### Table of Contents



2006
    
    
    2005ASSETSCURRENT ASSETSCash
    
    $
    30,256
    
    
    $
    34,703Miscellaneous receivables
    
    
    
    
    
    
    16,547Prepaid expenses
    
    
    18,070
    
    
    
    275,07548,326
    
    
    
    326,325PROPERTY AND EQUIPMENT  Net
    
    
    15,883
    
    
    
    298,737CAPITALIZED FILM COSTS
    
    
    
    
    
    
    133,910OTHER ASSETS
    
    
    
    
    
    
    27,695TOTAL ASSETS
    
    $
    64,209
    
    
    $
    786,667LIABILITIES AND STOCKHOLDERS DEFICITCURRENT LIABILITIESConvertible term loans
    
    $
    4,091,396
    
    
    $
    2,144,208Line of credit
    
    
    3,106,980
    
    
    
    Accounts payable and accrued expenses
    
    
    1,471,073
    
    
    
    1,223,097Taxes payable
    
    
    17,501
    
    
    
    17,501Advances from distributors
    
    
    424,932
    
    
    
    180,954Due to stockholder
    
    
    53,723
    
    
    
    24,082Deferred revenue
    
    
    12,800
    
    
    
    3,1859,178,405
    
    
    
    3,593,027LONG-TERM DEBT
    
    
    
    
    
    
    2,881,820LOANS PAYABLE  STOCKHOLDER
    
    
    1,100,000
    
    
    
    1,100,000TOTAL LIABILITIES
    
    
    10,278,405
    
    
    
    7,574,847STOCKHOLDERS DEFICITPreferred stock, $0.0001 par value; 20,000,000 shares authorized;
no shares issued and outstanding in 2006 and 2005
    
    
    
    
    
    
    Common stock, $0.0001 par value; 100,000,000 shares
authorized; 47,710,011 and 45,560,011 shares
issued and outstanding in 2006 and 2005
    
    
    4,769
    
    
    
    4,557Additional paid-in capital
    
    
    13,276,312
    
    
    
    13,116,527Accumulated deficit
    
    
    (23,495,277
    )
    
    
    (19,909,264
    )TOTAL STOCKHOLDERS DEFICIT
    
    
    (10,214,196
    )
    
    
    (6,788,180
    )TOTAL LIABILITIES AND STOCKHOLDERS DEFICIT
    
    $
    64,209
    
    
    $
    786,667
  F-2




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##### Table of Contents



2006
    
    
    2005NET REVENUE
    
    $
    74,438
    
    
    $
    6,034DIRECT COSTS
    
    
    866,117
    
    
    
    990,482GROSS PROFIT (LOSS)
    
    
    (791,679
    )
    
    
    (984,448
    )LOSS ON IMPAIRMENT
    
    
    105,155
    
    
    
    1,305,000OPERATING EXPENSES
    
    
    2,464,769
    
    
    
    5,046,943LOSS FROM OPERATIONS
    
    
    (3,361,603
    )
    
    
    (7,336,391
    )OTHER INCOME (EXPENSE)Foreign currency exchange gain (loss)
    
    
    (225,160
    )
    
    
    230,116Miscellaneous income
    
    
    750
    
    
    
    15,970(224,410
    )
    
    
    246,086NET LOSS
    
    $
    (3,586,013
    )
    
    $
    (7,090,305
    )BASIC AND DILUTED LOSS PER SHARE
    
    $
    (0.08
    )
    
    $
    (0.18
    )WEIGHTED AVERAGE NUMBER OF SHARES
    
    
    47,457,511
    
    
    
    38,447,349
  F-3




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##### Table of Contents



AdditionalPreferred
    
    
    Common
    
    
    Paid-in
    
    
    AccumulatedStock
    
    
    Stock
    
    
    Capital
    
    
    Deficit
    
    
    TotalBALANCE 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
    
    
    
    
    
    
    
    3,163,695Conversion of preferred stock
    
    
    (100
    )
    
    
    1,000
    
    
    
    (900
    )
    
    
    
    
    
    
    Issuance of common stock
    
    
    
    
    
    
    88
    
    
    
    427,891
    
    
    
    
    
    
    
    427,979Issuance of common stock for services
    
    
    
    
    
    
    2
    
    
    
    13,938
    
    
    
    
    
    
    
    13,940Issuance of common stock for investment
    
    
    
    
    
    
    200
    
    
    
    779,800
    
    
    
    
    
    
    
    780,000Issuance of warrants for investment
    
    
    
    
    
    
    
    
    
    
    250,000
    
    
    
    
    
    
    
    250,000Issuance of warrants for consulting services
    
    
    
    
    
    
    
    
    
    
    338,000
    
    
    
    
    
    
    
    338,000Issuance of warrants for financing fees
    
    
    
    
    
    
    
    
    
    
    195,000
    
    
    
    
    
    
    
    195,000Net 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
    )Issuance of warrants for services
    
    
    
    
    
    
    
    
    
    
    1,000
    
    
    
    
    
    
    
    1,000Issuance of common stock for services and expenses
    
    
    
    
    
    
    212
    
    
    
    158,785
    
    
    
    
    
    
    
    158,997Net loss for the year ended October 31, 2006
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (3,586,013
    )
    
    
    (3,586,013
    )BALANCE AT OCTOBER 31, 2006
    
    $
    
    
    
    $
    4,769
    
    
    $
    13,276,312
    
    
    $
    (23,495,277
    )
    
    $
    (10,214,196
    )
  F-4




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##### Table of Contents



2006
    
    
    2005CASH FLOWS FROM OPERATING ACTIVITIESNet loss
    
    $
    (3,586,013
    )
    
    $
    (7,090,305
    )Adjustment to reconcile net loss to net cash
used in operating activitiesForeign currency exchange gain (loss)
    
    
    225,160
    
    
    
    (230,116
    )Write-off of capitalized film costs
    
    
    197,955
    
    
    
    (2,724
    )Loss on impairment
    
    
    105,155
    
    
    
    1,055,000Common stock issued for services and expenses
    
    
    38,997
    
    
    
    13,940Warrants issued for expenses
    
    
    1,000
    
    
    
    Amortization of film costs
    
    
    
    
    
    
    41,035Depreciation and amortization
    
    
    177,699
    
    
    
    179,485(Increase) decrease in assetsMiscellaneous receivable
    
    
    16,547
    
    
    
    (16,547
    )Film costs
    
    
    (64,045
    )
    
    
    (91,805
    )Prepaid expenses
    
    
    377,004
    
    
    
    287,191Other assets
    
    
    27,695
    
    
    
    (18,070
    )Increase in liabilitiesAccounts payable and accrued expenses
    
    
    247,976
    
    
    
    652,750Advances from distributors
    
    
    243,978
    
    
    
    167,866Deferred revenue
    
    
    9,615
    
    
    
    2,018Net cash used in operating activities
    
    
    (1,981,277
    )
    
    
    (5,050,282
    )CASH FLOWS FROM INVESTING ACTIVITIESDue to stockholder
    
    
    29,641
    
    
    
    22,242Purchase of investment in affiliated company
    
    
    
    
    
    
    (25,000
    )Proceeds from sale of equipment
    
    
    
    
    
    
    2,925Purchse of equipment
    
    
    
    
    
    
    (22,288
    )Net cash provided by (used in) investing activities
    
    
    29,641
    
    
    
    (22,121
    )CASH FLOWS FROM FINANCING ACTIVITIESNet borrowings on long-term debt
    
    
    
    
    
    
    3,111,936Net borrowings on demand notes
    
    
    
    
    
    
    19,500Net borrowings on convertible term loans
    
    
    1,947,189
    
    
    
    1,362,595Net proceeds from sale of stock
    
    
    
    
    
    
    427,979Net cash provided by financing activities
    
    
    1,947,189
    
    
    
    4,922,010NET DECREASE IN CASH
    
    
    (4,447
    )
    
    
    (150,393
    )CASH  BEGINNING OF YEAR
    
    
    34,703
    
    
    
    185,096CASH  END OF YEAR
    
    $
    30,256
    
    
    $
    34,703SUPPLEMENTAL DISCLOSURES OF CASH
FLOW INFORMATIONCASH PAID DURING THE YEAR FOR:Interest
    
    $
    76,191
    
    
    $
    81,088
  F-5




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##### Table of Contents



2006
    
    
    2005SUPPLEMENTAL DISCLOSURES OF NON-CASHINVESTING AND FINANCING ACTIVITIES:Warrants issued for prepaid consulting services
    
    $
    120,000
    
    
    $
    338,000Warrants issued for deferred financing fee
    
    $
    
    
    
    $
    195,000Conversion of liabilities to common stock:Accounts payable and accrued expenses
    
    $
    
    
    
    $
    2,855,252Due to stockholder
    
    
    
    
    
    
    5,301Loan payable  stockholder
    
    
    
    
    
    
    99,040Demand note payable
    
    
    
    
    
    
    204,102$
    
    
    
    $
    3,163,695Warrants issued for investment in affiliated company
    
    $
    
    
    
    $
    250,000Common stock issued for investment in affiliated company
    
    
    
    
    
    
    780,000Investment in affiliated company
    
    $
    
    
    
    $
    1,030,000Conversion of preferred stock to common stock:Preferred stock
    
    $
    
    
    
    $
    (100
    )Additional paid-in capital
    
    
    
    
    
    
    (900
    )Common stock
    
    $
    
    
    
    $
    1,000
  F-6




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##### Table of Contents



Nature of the Business
  Basis of Presentation
  Revenue Recognition and Accounting for Exploitation Costs
 Accounting by Producers or Distributors of Films
  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; ando
    
    collection of the arrangement fee is reasonably assured.
  Royalty Advances
 Finance Reporting in the Record and
Music Industry
  F-7




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##### Table of Contents



Comprehensive Income
 Reporting Comprehensive Income
 Fair Value of Financial Instruments
   Concentration of Credit Risk Involving Cash
  Film Costs
  Cost Method Investments
   Depreciation
  F-8




---



##### Table of Contents



Income Taxes
 Accounting for Income Taxes
 Loss Per Share
 Earnings Per Share
 Estimates
  Recoverability of Long Lived Assets
 Accounting for the Impairment or Disposal of Long-Lived Assets
 Recently Issued Accounting Pronouncements
 Share-Based
Payment Share-Based Payment
 F-9




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##### Table of Contents



F-10




---



##### Table of Contents



F-11




---



##### Table of Contents



YEARS
    
    
    2006
    
    
    2005Studio equipment
    
    
    5  7
    
    
    $
    1,131,708
    
    
    $
    1,131,708Office furniture
    
    
    7
    
    
    
    34,556
    
    
    
    34,5561,166,264
    
    
    
    1,166,264Less: Accumulated
depreciation
    
    
    
    
    
    
    1,150,381
    
    
    
    867,527$
    15,883
    
    
    $
    298,737
        F-12




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##### Table of Contents



F-13




---



##### Table of Contents



F-14




---



##### Table of Contents



Options
  §
    
    750,000 shares vested upon the commencement
of Christopher Schwartz employment on October 9, 2002
at an exercise price of $1.50 per share;§
    
    825,000 shares vested on October 9, 2003 at an exercise price of $1.09 per share;§
    
    907,500 shares vested on October 9, 2004 at an exercise price of $0.75 per share;§
    
    998,250 shares vested on October 9, 2005 at an exercise price of $0.13 per share;§
    
    1,098,075 shares vested on October 9, 2006 at an exercise price of $0.03 per share and;§
    
    1,207,882 shares vested on October 9, 2007.
   Shares
    
    
    Option Price Per
    
    
    Weighted AverageOutstanding
    
    
    Share Expense
    
    
    Exercise PriceOptions outstanding,
October 31, 2005
    
    
    8,036,707
    
    
    $0.03 to $1.50
    
    $
    0.62Granted
    
    
    
    
    
    
    
    
    
    
    Expires
    
    
    
    
    
    
    
    
    
    
    Exercised
    
    
    
    
    
    
    
    
    
    
    8,036,707
    
    
    $0.03 to $1.50
    
    $
    0.62
  WeightedAverage
    
    
    Number of OptionsRemaining
    
    
    Currently
    
    
    Weighted AverageOption Price
    
    Contractual Life
    
    
    Exercisable
    
    
    Exercise Price$0.03 to $1.50
    
    8.09 years
    
    
    
    6,828,825
    
    
    $
    0.72
 F-15




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##### Table of Contents



Options (Continued)
  2006
    
    
    2005Net loss
    
    As reported
    
    $
    3,586,013
    
    
    $
    5,415,537Pro forma
    
    $
    3,610,013
    
    
    $
    5,522,537Net loss per share
    
    As reported
    
    $
    0.08
    
    
    $
    0.14Pro forma
    
    $
    0.08
    
    
    $
    0.14
 Warrants
     F-16




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##### Table of Contents



Warrants (Continued)
 Number of
    
    
    Option Price Per
    
    
    Weighted AverageShares
    
    
    Share Range
    
    
    Exercise PriceWarrants outstanding at October 31, 2004
    
    
    994,375
    
    
    $0.80 to $1.50
    
    $
    1.20Warrants granted
    
    
    5,607,334
    
    
    $0.45 to $1.25
    
    $
    0.52Warrants expired
    
    
    (120,000
    )
    
    $1.13 to $1.50
    
    $
    0.02Warrants exercised
    
    
    
    
    
    
    
    
    
    
    Warrants outstanding at October 31, 2005
    
    
    6,481,709
    
    
    $0.45 to $1.50
    
    $
    0.69Warrants granted
    
    
    100,000
    
    
    $
    0.50
    
    
    $
    0.01Warrants expired
    
    
    (666,667
    )
    
    $
    0.75
    
    
    $
    0.08Warrants exercised
    
    
    
    
    
    
    
    
    
    
    Warrants outstanding at October 31, 2006
    
    
    5,915,042
    
    
    $0.45 to $1.50
    
    $
    0.68
  WeightedAverage
    
    
    Number of WarrantsRemaining
    
    
    Currently
    
    
    Weighted AverageWarrant Price
    
    Contractual Life
    
    
    Exercisable
    
    
    Exercise Price$0.45 to $1.50
    
    2.61 years
    
    
    
    5,915,042
    
    
    $
    0.68
 F-17




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##### Table of Contents



Year Ended
    
    
    Year EndedOctober 31, 2006
    
    
    October 31, 2005Income tax benefit at
U.S. federal income tax rate
    
    $
    (1,219,000
    )
    
    $
    (2,411,000
    )Non-deductible warrants
    
    $
    55,000
    
    
    $
    126,000Change in valuation allowance
    
    
    1,164,000
    
    
    
    2,285,000Income tax benefit
    
    $
    
    
    
    $
    Income tax benefit consists
of the following:Current tax benefitFederal
    
    $
    
    
    
    $
    State
    
    
    
    
    
    
    $
    
    
    
    $
    Deferred tax benefitFederal
    
    $
    7,312,000
    
    
    $
    6,148,000Valuation allowance
    
    
    (7,312,000
    )
    
    
    (6,148,000
    )
    
    
    
    $
    
    
    
    $
    
  2006
    
    
    2005Net operating loss
    
    $
    7,312,000
    
    
    $
    6,148,000Valuation allowance
    
    
    (7,312,000
    )
    
    
    (6,148,000
    )$
    
    
    
    $
    
 F-18




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##### Table of Contents



Years EndingOctober 31,
    
    Amount2007
    
    $
    48,0002008
    
    
    48,0002009
    
    

    8,000$
    104,000
     F-19




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##### Table of Contents



Disclosures About Segments of and Enterprise and Related
Information
  For The Year Ended
    
    Recording
    
    
    Film
    
    
    Segment
    
    
    
    
    
    
    ConsolidatedOctober 31, 2006
    
    Studio
    
    
    Production
    
    
    Total
    
    
    Corporate
    
    
    TotalNet sales
    
    $
    
    
    
    $
    74,438
    
    
    $
    74,438
    
    
    $
    
    
    
    $
    74,438Loss from operations
    
    
    873,946
    
    
    
    567,841
    
    
    
    1,441,787
    
    
    
    1,919,816
    
    
    
    3,361,603Total assets
    
    
    1,194
    
    
    
    59,429
    
    
    
    60,623
    
    
    
    3,586
    
    
    
    64,209Depreciation and amortization
    
    
    172,822
    
    
    
    4,877
    
    
    
    177,699
    
    
    
    
    
    
    
    177,699Capital expenditures
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
 For The Year Ended
    
    Recording
    
    
    Film
    
    
    Segment
    
    
    
    
    
    
    ConsolidatedOctober 31, 2005
    
    Studio
    
    
    Production
    
    
    Total
    
    
    Corporate
    
    
    TotalNet sales
    
    $
    1,095
    
    
    $
    4,939
    
    
    $
    6,034
    
    
    $
    
    
    
    $
    6,034Loss from operations
    
    
    1,060,501
    
    
    
    1,819,278
    
    
    
    2,879,779
    
    
    
    4,456,612
    
    
    
    7,336,391Total assets
    
    
    284,832
    
    
    
    297,538
    
    
    
    582,370
    
    
    
    204,297
    
    
    
    786,667Depreciation and amortization
    
    
    172,992
    
    
    
    6,493
    
    
    
    179,485
    
    
    
    
    
    
    
    179,485Capital expenditures
    
    $
    22,288
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    22,288
 Years EndedOctober 31,Reconciliations
    
    2006
    
    
    2005Total segment operating loss
    
    $
    1,441,787
    
    
    $
    2,879,779Corporate overhead expenses
    
    
    1,919,816
    
    
    
    4,456,612Other expenses
    
    
    224,410
    
    
    
    246,086Total consolidated net loss
    
    $
    3,586,013
    
    
    $
    7,582,477
 F-20




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##### Table of Contents



SIGNATURES
 
 TriMedia Entertainment Group, Inc.By:
    /s/ Christopher SchwartzChristopher SchwartzChief Executive Officer and
Chief Financial Officer
(principal financial officer and principal
accounting officer)