UNITED
STATES


SECURITIES
AND EXCHANGE COMMISSION


WASHINGTON,
D.C. 20549





FORM
10-K


(Mark
One)





T   
ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE
FISCAL YEAR ENDED DECEMBER 31, 2007




 ̈    TRANSITION
REPORT UNDER SECTION13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE
TRANSITION PERIOD FROM __________ TO __________


COMMISSION FILE NUMBER: 333-145871





PLATINUM STUDIOS,
INC.


(Name of
registrant in its charter)





CALIFORNIA
              (State
      or other jurisdiction of incorporation or organization)
            20-5611551
              (I.R.S.
      Employer Identification No.)





11400 W. Olympic Blvd.,
14thFloor, Los Angeles, CA
90064


(Address
of principal executive offices) (Zip Code)





Issuer’s
telephone Number: (310)
807-8100





Securities
registered under Section 12(b) of the Exchange Act: None.





Securities
registered under Section 12(g) of the Exchange Act: Common Stock:
None





Indicate by check mark whether the registrant is a
well-known seasoned issuer, as defined in Rule 405 of the Securities
Act. Yes o No x




Indicate
by check mark if the registrant is not required to file reports pursuant to
Section 13 or Section 15(d) of the Exchange
Act. Yes o  No x





Indicate by check mark whether the
registrant (1) has filed all reports required by Section 13 or
15(d) of the Securities Exchange Act of 1934 during the preceding
12 months (or for such shorter period that the registrant was required to
file such reports), and (2) has been subject to such filing requirements
for the past 90 days. YesxNoo




Indicate
by check mark if disclosure of delinquent filers pursuant to Item 405 of
Regulation S-K is not contained herein, and will not be contained, to the
best of registrant’s knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. o




Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer or a non-accelerated filer. See definition of “accelerated
filer and large accelerated filer” in Rule 12b-2 of the Exchange
Act.




Large
      accelerated filer   o
            Accelerated
      fileroNon-accelerated
      filero
            Smaller
      reporting company x





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




The
aggregate market value of the common stock held by non-affiliates of the
registrant, based upon the last sale price of the common stock reported on the
OTC-Bulletin Board on December 31, 2007 was n/a.




The
number of shares of registrant’s common stock outstanding, as of March 28,
2008  was 216,921,227.




DOCUMENTS
INCORPORATED BY REFERENCE




None.













TABLE
OF CONTENTS







PagePART IItem
      1.       Description of
      Business
            3Item
      1A.    Risk Factors
            10Item
      2.       Properties
            14Item
      3.       Legal
    Proceedings
            14Item
      4.       Submission of Matters to a
      Vote of Security Holders
            14PART IIItem
      5.       Market for Common Equity and
      Related Stockholder Matters
            15Item
      6.       Selected Financial
      Data
            15Item
      7.       Management’s Discussion and
      Analysis or Plan of Operation
            15Item
      7A.    Quantitative and Qualitative Disclosures about
      Market Risks
            15Item
      8.       Financial Statements and
      Supplementary Data
            19Item
      9.       Changes In and Disagreements
      with Accountants on Accounting and Financial Disclosure
            19Item
      9A.    Controls and Procedures
            19Item
      9B.    Other Information
            1919PART IIIItem
      10.       Directors, Executive
      Officers, Promoters and Control Persons;
            20Compliance
      With Section 16(a) of the Exchange ActItem
      11.     Executive Compensation
            23Item
      12.     Security Ownership of Certain Beneficial
      Owners and Management
            26and
      Related Stockholder MattersItem
      13.     Certain Relationship and Related
      Transactions
            27Item
      14.     Principal Accountant Fees and
      Services
            27Item
      15.     Exhibits
            28SIGNATURES
            29


1





PART
I





ITEM
1.       DESCRIPTION OF
BUSINESS.








Corporate
History





We were
formed as a California Limited Liability Company on November 20, 1996. On
September 15, 2006 we filed Articles of Incorporation with Statement of
Conversion to convert to a California stock corporation. The Plan of Conversion
provided for the issuance of an aggregate of 135,000,000 shares to the former
Members of the Limited Liability Company. From October 12, 2006 through April
30, 2007, we offered common shares in the Company to private accredited
investors through a private offering, whereby we sold 49,047,250 shares. On
September 4, 2007 we filed a FORM SB-2 registration statement with the
Securities and Exchange Commission, which was declared effective on January 10,
2008.





On
January 31, 2008, FINRA issued the ticker symbol PDOS for the Company to trade
the stock registered under the SB-2 on the Over The Counter Bulletin Board and
on February 1, 2008, the Company’s stock began trading on the
OTC:BB.





Introduction





We are a
comics-based entertainment company.  We own the rights to a library of
over 5,600 comic book characters, which we adapt and produce for film,
television and all other media. Our continually expanding library consists of
characters that have appeared in comics in 25 languages and in more than 50
countries. Our library of comics-based characters spans across multiple genres
and multiple target audiences. Not only have we developed many of our characters
in-house, but we have also aggregated content from several third-party comics
publishers, acquiring the rights to use these characters via all media except
print publishing.  We believe that the size of our library gives us a
competitive edge over other comics-based libraries, as we will be able to go to
market quicker with new opportunities, such as electronic comics and other
avenues to exploit our characters. In preparation for securing a library asset
valuation from an independent valuation firm, we took a new inventory count on
our character list to account for all characters and properties. The revised
number of characters increased to 5,622 as of December 31, 2007 from
approximately 3,800 characters as previously disclosed.





We seek
to be a leader in producing entertainment content for all platforms including
film, television, direct-to-home, publishing, interactive games, and digital
media based on comic book characters providing new merchandising vehicles across
all retail product lines.  By combining our character
commercialization strategy with our extensive storytelling, packaging, and
corporate management abilities, we seek to build a strategically diversified and
profitable character-based entertainment business.





We
believe our library has broader audience appeal than other comic character
companies whose libraries comprise primarily of the traditional superhero
characters. Our library includes characters that span all story genres,
including science fiction, fantasy, horror, mystery, romance, comedy, crime,
action/adventure, and family.  While our library includes superhero
characters, management believes this broad spectrum allows us to be protected by
any unforeseen downturn in audience reaction to any single genre.







In addition to a broad universe of more than 1,000 characters
developed in-house, we also acquired the rights to the characters and storylines
of Italian-based, SBE Publishing’s Horror/Sci-Fi Universe and French-based,
Hexagon Comics, as well as U.S.-based Top Cow. We believe that this library
gives us an established international audience for our media exploitation plans.
In addition to the international exploitation of these properties, there are
significant other benefits to our relationships with SBE and Hexagon Comics,
including providing us with the advantage of owning all content created, without
the burden of overhead to run extensive publishing entities, thus providing us
with a constant source of new material. As our publishing partners expand their
library, our character and story lists expand as well.  Our management
believes that our strategy provides numerous synergies,
including:





·
            Development
      of individual character franchises by leveraging feature films, television
      programming, Internet/wireless, licensees, promotional partners, and
      advertisers.·
            Development
      and introduction of new characters, planted spin-offs and tie-ins with
      branded characters.·
            Reduced
      marketing and promotions costs by cross marketing the characters through
      different distribution media.·
            Interactive
      feedback from various affiliated and co-branded online
      destinations.





We
believe that our strategy will offer the ability to communicate with audiences
from around the world providing market analysis from fan, industry and creative
perspectives that gauge the appeal of new Characters and stories.




Library
of Characters




Universe
      of Characters
            Origins
            #
      of CharactersSBE
      Horror / Sci-Fi
            Europe
            1,050
      + (ongoing)Awesome
      Comics
            North
      America
            400
      + (ongoing)Top
      Cow Comics
            North
      America
            570
      + (ongoing)Hexagon
      Comics
            Europe
            700+
      (ongoing)Platinum
      Studios Macroverse
            Worldwide
            1,200
      + (ongoing)Platinum
      Studios Acquisitions
            Worldwide
            1,680+
      (ongoing)





SBE
Horror/Sci-Fi




This
library comprises of the following characters:





·
            Characters:
      1,048


Dylan Dog acquired from SBE:  319 characters


Legs Weaver acquired from SBE:  271 characters


Nathan Never acquired from SBE:  456 characters





Our rights: On the SBE
properties, we have acquired all right, title and interest in and to all 3
properties (Dylan Dog, Legs Weaver, Nathan Never), excluding only comic book
print publication rights.  The Company originally had 10 years in which to
produce a motion picture or television program based on these properties to
preclude a reversion of rights.  This 10-year period expired July 2,
2007.  In connection therewith, on February 29, 2008, Platinum received a
notice of reversion; However, the Company has 12 months from the date of such
notice to commence principal photography on a picture, whereupon reversion
rights would be terminated.  The Company has a reasonable belief that
it will commence principal photography on a picture by February 28, 2009 thereby
terminating any reversion rights.


2


Awesome Comics/RIP
Media


·
            Characters:
      404





Our rights: We have all
rights worldwide, not including print comic publishing rights. Currently, we
have the exclusive right to enter into agreements related to the licensing of
motion picture rights and allied/ancillary rights until the date upon which
Platinum Studios’ CEO, Scott Mitchell Rosenberg is no longer at least one of the
following: (a) an executive officer of the Company; (b) a member of the Board of
Directors of the Company, or (c) holds at least 30% of the outstanding capital
stock of the Company.





Top Cow


·
            Characters:
      573





Our rights: We have all
rights for film and television worldwide. Publishing is excluded and certain
non-film ancillary rights subject to preexisting deals (certain properties only)
are also excluded.  Currently, we have the exclusive right to enter into
agreements related to the licensing of motion picture rights and
allied/ancillary rights through January 30, 2010. If we pay an additional
$350,000 on or before June 30, 2010, these rights are extended through January
30, 2011.





Hexagon Library from Mosaic
Multimedia


·
            Characters:
      702





Our rights: We have all
rights worldwide, not including print comic publishing rights, contingent on
verification of chain-of-title and European legal documentation (on completion
of paperwork, Platinum will have a long-term, exclusive option, with provision
to buy out all restrictions and third-party approvals). Currently, we have the
exclusive right to enter into agreements related to the licensing of motion
picture rights and allied/ancillary rights through January 1, 2014.  If we
pay $196k on or before January 1, 2011, we then have until January 1, 2016. If
we pay $600,000 by January 1, 2016, we then have the right in perpetuity. 
The agreement requires the formation of an LLC that is co-owned by Mosaic
Multimedia and Platinum Studios with Platinum acting as manager.  Company
will move forward on formation of the LLC when it appears likely that
exploitation will occur on one or more of the properties.





Recent
Developments





Print
Publishing





After
launching our first graphic novel in December, 2006, we have published over 40
comic books and graphic novels for distribution through traditional domestic
channels.  In July, 2007, we began developing an international channel
for worldwide print distribution.  We entered a co-production deal
with KISS Catalog to produce a new line of comic material based on the 1970’s
legendary rock band, KISS, that includes a 50% ownership in all material derived
from this comics line for exploitation in other merchandise and licensing
opportunities. In addition, the Company signed a publishing deal with Harper
Collins to distribute its debut graphic novel, Cowboys &
Aliens.





Digital
Publishing





We
expanded our digital publishing exploitation plan in 2007, launching an online
“e-commerce” store to sell merchandise, comic books and other products
(store.platinumstudios.com), an online comics site to highlight the printed
comics and graphic novels ( www.platinumstudioscomics.com
), a mobile storefront for distribution of digital content ( www.platinumstudiosmobile.com
), and we expanded and upgraded DrunkDuck (www.drunkduck.com).
Our web-comics site that hosts the digital distribution of our printed comic
material and which serves as a major resource for independent comics creators to
post new material. In addition, we have developed multiple destination sites for
individual comic properties. In 2007, the Company partnered with Comflix to
create an online comics video player named Splastik (www.splastk.com) that
can be syndicated over a large number of affiliate websites. The Splastk player
can serve a large amount of content, delivered over across a wide network of
affiliated websites that will eventually serve over 100,000,000 monthly page
views.





3




Filmed
Entertainment




We
currently have film and television development deals with several major film
producers and in 2007, we successfully sold one property, Unique, to Disney Studios,
with the anticipation that it will go into production in
2009.  Additionally, effective as of June, 2007, we entered into a
2-year option agreement with Dreamworks, Universal Studios, Paramount Pictures,
and Imagine Entertainment to acquire the film production rights to our property
Cowboys & Aliens ,
the #1-ordered graphic novel in the U.S. in 2006 (Entertainment Weekly, January,
2007) with the goal to produce a feature film. This film’s production
schedule has not been officially set yet but it is anticipated to begin
pre-production sometime within the next 24 months.


Merchandise/Licensing




We have
extended our branding philosophy to include our annual “The Comic Book
ChallengeTM”, a competition that allows independent creators to pitch original
comic book ideas to a panel of live judges.  The winning contestant
gets a publishing deal with revenue sharing across all distribution
outlets.  In 2007, we signed a sponsorship deal with AT&T and
secured other sponsorship arrangements with 5 other corporations to underwrite
the event and expose the Company to a wide audience.


Industry
Overview





The comic
book market is highly sought after by the entertainment industry for the purpose
of mining for new material.  As proof of this appeal, two recent trade
articles have pinpointed the virtues of comics publishing as a credible source
of new material in Hollywood.  Daily Variety and Hollywood Reporter
have each reported separately that the big moneymakers are fresh concepts and
comic books. “Among the better
averages were pics based on comic books: There were only 13 such films, and the
$2.8 billion total means that each comic book hit averaged a $215 million
gross.  Which explains why Hollywood is so hot to film comic
books.” (“How to make box-office gold”, Marc Graser, Daily Variety
7/6/07).





Additionally,
IDT Internet Mobile acquired comics publisher IDW in a recent transaction as
reported July 24, 2007.  According to Daily Variety, the reasoning
behind this acquisition was to give IDT the ability to “take IDW’s properties and sell them
to traditional film and television outlets and it will develop them for new
media platforms.” IDT was recently acquired by John Malone’s Liberty
Media in 2007, marking an expansion of a traditional telco into the content
development and media industry.  (“IDT buys comics publisher IDW”,
Steven Zeitchik, Daily
Variety, 7/24/07).





It was
also reported in July, 2007 that UK-based sales, production and finance house
Intandem is embarking on a “newcorporate strategy by acquiring a
5% stake in Los Angeles-based comic book publisher Radical Publishing and sister
movie company Blatant Pictures, providing the company with another source of
quality commercial product for studios and top distributors.” (“Intandem
has Radical idea for content”, Stuart Kemp, Hollywood Reporter,
7/17/07).  These industry announcements all support our contention
that comic-books and graphic novel publishing is a viable source for multiple
forms of media exploitation.




4


Print
Publishing





Every
project we publish is designed for eventual adaptation to other media, including
film and television.  Our core business model focuses on the
exploitation of our characters in all media.  We license our
characters and stories for domestic and/or international comics
publishing.  In some cases, we produce our own publications under the
“Platinum Studios Comics” label, but we also have agreements with other
publishers and original copyright holders whereby our agreement provides for
these parties to continue publishing comic books, generating new characters and
stories which are added to our ever-growing library of
material.  Under these agreements, the publisher retains the
publishing rights and generates ongoing serial publications, maintaining large
staffs within their publishing and distribution organizations to achieve these
goals.  We benefit tremendously from this relationship as all new
characters and story lines generated from new publications are added to our
library, without the burden of carrying an entire publishing and distribution
staff.  One such example of this arrangement is the Bonelli Publishing
library from Italy, which has been producing comic books in printed form for
over 50 years.  Popular characters from the Bonelli library include
Nathan Never, Legs
Weaver and Dylan
Dog. Pursuant to our agreement with Bonelli Publishing characters which
they develop are added to our library.




Print Publishing
Schedule




After a
successful launch of our inaugural graphic novel, Cowboys & Aliens, in
December, 2006, we established a steady schedule of books and graphic novels,
publishing a total of 43 books by December 2007. These titles are all published
under the Platinum Studios Comics banner and they are sold directly to comic
book stores through the industry’s sole distributor, Diamond
Distribution.   The writers and artists of these titles are hired
on a work-for-hire basis.




Distribution
Model




We
currently have four distribution channels to sell our print products: (1) direct
to comic book stores, (2) online, (3) traditional book retail stores, and (4)
international distributors.





All
products offered directly to the thousands of comic book retailers throughout
the United States must be listed through Diamond Comic
Distributors.  Diamond was established in 1982 to provide comic book
specialty retailers with wholesale, non-returnable comic books and related
merchandise. Diamond has a vast network of strategically-located Distribution
Centers throughout the world.





For our
first year of publishing, we established a distribution agreement with Top Cow
Productions to list our titles in Diamond’s wholesale catalog for retail comic
book stores. By capitalizing on Top Cow Production’s long-standing relationship
with Diamond, we were able to procure better placement in this wholesale
catalog.  While this was our primary distribution chain, however, we
recently established a direct contractual relationship with Diamond for the
listing of our properties, giving us more flexibility regarding the types and
number of products we offer to this direct market.





We also
distribute our products to consumers and retailers via our Web store and comic
book site (www.PlatinumStudiosComics.com).
The site allows the comic book fan to get a closer look at the books, the
creators and sample artwork.  We have also created a strategy of
launching the published book online, updating one page per day, giving the
readers and fans a place to preview the book and communicate with the creators
one-on-one via our webcomic hosting site, Drunk Duck
(www.drunkduck.com).





We also
distribute our products through established distribution companies, such as our
current arrangement with Ingram.  Ingram has agreed to distribute our
KISS 4K books to book stores and libraries.  Currently, they
distribute to Borders, Barnes & Noble, Hastings and
newsstands.  Ingram Book Company is the leading wholesale distributor
of book product.We
have signed a publishing deal with Harper Collins for Cowboys & Aliens and we
will continue to pursue one-off publishing arrangements for specific titles,
increasing the visibility of our titles and the potential for greater revenue
streams.





Finally,
we have recently established relationships with international publishing
entities to distribute translated versions of our completed series of comic
books to over 100 countries throughout the world.  These publishers
generally pay advances against sales royalties without charging for translations
and/or printing, making this distribution option a significant way to offset the
costs of the domestic distribution chain.




5


Digital
Publishing





We have
established ourselves as a leader in comics-based entertainment, and continue to
build our already substantial library of characters and
storylines.  We are currently pursuing a strategy to leverage our
momentum in the entertainment space and commercialize our intellectual property
through the most viable media outlets and channels, including the online content
space.







Our Digital Publishing Division’s mission is to leverage our
library of intellectual property across multiple online channels and
distribution platforms, and create an online community for fans of comic-based
entertainment in all media.





We plan
to aggregate several online comic properties and develop an online comics
“portal,” where we can further interact with the comic-creator and -fan
communities via content, reference information, community tools and other
interactive features.  By engaging the community through this
network/portal strategy, we believe we will increase our volume of property,
story and character submissions, promote our online and offline properties,
track key trends in the comic entertainment space and continue to brand the
company with the comic fan base. Revenues for this portal will be derived from
advertising and sponsorship and intelligently monetized through tie-ins,
merchandise and other long-tail strategies.




Online Comics Community /
Portal




In 2006,
we acquired Drunk Duck (www.drunkduck.com), an online web comic community
boasting over 3,000 strips and 10 million monthly page views. Since the
acquisition, we implemented several programming and feature upgrades to enhance
the functionality and user-friendly interface of Drunk Duck, including a new
section for print publishers to post their printed works online as
well.  In less than one year, we have seen increased numbers across
the board for Drunk Duck, where as of December 31, 2007, the site hosts over
12,000 strips/stories and the monthly page views now exceed
20,000,000.




Our
ongoing strategy is to create a network of sites dedicated to the online comic
genre (which includes web based comic strips similar to the traditional
newspaper format, online comic books and graphic novels, and
streaming/electronic comics) anchored by Drunk Duck.  The goal is to
aggregate the comic fan base across the internet, monetize the traffic through
subscriptions, advertising and sponsored content, embedded product placement,
licensed exploitation opportunities and casual gaming, as well as provide an
access point for the Company to launch and promote its properties and characters
in all forms of media – print, film, television, mobile/wireless and
gaming.




We have
identified several additional key sites as potential acquisition targets
covering specific aspects of the community – original comic content, industry
news, historical comic reference material, fan sites – which will be combined to
create a grassroots network that speaks directly to the comic book
fan-base.  By employing a technique known as a “hat”- a branded
identifying navigational tool commonly found across of the top of the page (i.e.
Slate.com and Fox.com are part of the MSN.com network, and MSN.com’s
navigational “hat” appears across the top left of each), we believe we can
combine several of these sites to form a comic content network.  The
focal point of this network will be Drunk Duck which will feature our streaming
electronic comics, supported by daily content updates and comic strips, industry
news provided by Broken Frontier, interviews, games, podcasts, fan involvement
(blogs; forums; wikis; profiles of fans and comic creators), contests,
etc.





Our
network of online comic sites will speak directly to the fan community and
strive to offer fans a sense of ownership in the properties, with editors for
much of the content selected from the fan base itself. We intend to take this
one step further, where the best fan writers would be welcomed onto the official
staff, creating an “it can happen to you” feeling among the loyal followers,
thereby deepening their attachment to a series.





Of
significant value to us is the ability to monetize the traffic generated across
the entire network through several avenues, including subscriptions, advertising
and sponsored content, embedded product placement, and licensed exploitation
opportunities.  Each of these revenue streams can be active on every
site within the network, as they work to drive traffic to one another, further
maximizing the revenue potential of every visitor.  As the characters
and stories themselves begin to establish a broader audience, additional revenue
streams such as licensed products, merchandising and additional media outlets
become viable options.





6


Casual
Games





Due to a
renewed interest in retro arcade games like Pac-Man, Asteroids and Centipede, as
well as new titles inspired by retro games, card and board games, puzzle games
and the like, a new gaming sector, often collectively referred to as “casual
games,” has evolved. The category is loosely defined as games with simple rules,
that are easy to learn and can be played in very small increments of time –
perfect for a 5-10 minute break at work. The most prevalent casual game genres
today are puzzles, word games, and casual-action games, followed by tile/card
and board games.





Our Drunk
Duck portal includes a casual gaming section, with a variety of games featuring
characters and story lines from our library.  We are in discussions
with leading game developers to “re-skin” an assortment of casual games with our
properties (i.e. changing the cosmetic nature of the game characters without
changing the underlying software of the program), and we are evaluating several
ways to monetize this product. In the past few years, the dominant business
model for targeting the casual games audience was offering free online games
that were monetized by advertising and sponsorships. A number of business models
have now emerged, including fee-based downloadable games, premium online
subscription services, skill-based gaming tournaments, in-game advertising and
free game play supported by video advertising and sponsorships.







Digital
Studio Model





We are in
the process of creating a “digital studio,” which management believes will be
positioned to exploit our intellectual property across the web and expand our
audience for comic-based entertainment. Content developed through the digital
studio will be tailored to current and burgeoning web distribution platforms,
including electronic comics, streaming video/video-on-demand, all of which will
be distributed through our own syndication network, Splastk.





Following
the lead of our broadcast entertainment studio model, our Digital Publishing
team will develop several series of “tentpole” electronic comics based on
characters from our intellectual property library, which combine the best
elements of animation and comics. These electronic comics will be roughly 3-5
minutes in length, merging the unique visual animated template of comics with
top-flight directing, writing, editing and voicing, all created to fit with the
viewing habits of online users in the target demographic.





The
distribution platform for our electronic comics will be our own Splastk network
of affiliate sites, where revenues will be derived through advertising and
sponsorship. With the continuing evolution of web-based video content
delivery, broadband penetration to the home and the forecasted growth in online
ad spending, this will provide Platinum with a significant revenue stream.
Additionally, by providing content through this network of sites to their vast
audience, the Company believes it can generate significant exposure for many of
its properties and characters.





Online
content/streaming content models have shifted in recent years, however ad
supported and subscription models are still recognized as the most lucrative and
cost-effective. There has been an upswing in the downloadable content model
(i.e. – iTunes, Rhapsody, Google’s Online Video Store) in late 2005 and early
2006, and we will continue to explore these and other avenues as an extension of
the Splastk network.  One of the strongest components of the digital
studio as part of the Company’s overall Digital Publishing Division initiative,
is its ability to be self sustaining – expending capital and resources to
produce the content, and generate revenue by licensing that content across the
web through this wide distribution network.




Drunk
Duck itself will provide us with not only an online destination for fans of the
comic genre, but also a distribution platform for content developed in the
digital studio. Furthermore, this also provides a place where new stories and
concepts can be critiqued and fine-tuned by an audience who not only knows the
genre, but also begins to feel a sense of involvement and ownership as they
contribute to the evolution of their favorite characters.





7


Mobile/Wireless
Distribution





In June,
2006, we began pursuing a strategy to leverage our momentum in the entertainment
space and commercialize our intellectual property through the most viable media
outlets and channels, including the wireless and mobile content space. Our
Wireless/Mobile Content group mission is to leverage our library of intellectual
property across multiple mobile distribution platforms and further expand the
audience for our characters and stories.  Through affiliations and
partnerships with mobile content developers, syndicators, and distributors, we
intend to make available an array of downloadable content, including ring tones,
wallpapers, and games, featuring characters, icons and concepts from our library
of characters.  We believe that utilizing the internet as a key access
point to reach the mobile customer will keep production and overhead costs to a
minimum and develop a very robust revenue stream.  In addition to the
potentially lucrative revenue stream from the sale of each phone and service
contract, we will gain an additional point of contact to reach a dedicated fan
base for specific properties. The subscriber base can be offered exclusive
content, promotions, early access to other media properties, and other key
benefits to keep them engaged with our various content offering.





As a
mobile content provider, we will focus primarily on the delivery of content in
various forms, including downloadable images, ringtones, voicetones, wallpapers,
video, animation, games, and interactive applications (such as e-mail, web
browsing, SMS and instant messaging) to a range of wireless
devices.  This will be achieved through partnerships with Mobile
Content Syndicators, who aggregate and package content from multiple providers
and distribute it through alliances with various channels or
portals.




Filmed
Entertainment:  Feature Films





We are
aggressively pursuing a multi-pronged approach to create feature
films:




·
            Licensing
      characters and stories to third-party producers and/or affiliated major
      studios for production·
            Secure
      outside financing to produce our own slates of
  films




Licensing
Deals


Some
examples of our current projects with major studios based on previously
unbranded characters include:




·
            Unique (Disney) - Based
      on a comic book series released in early 2007, Disney acquired the film
      rights to this project and tentative production schedule is set for
      sometime in 2009.·
            Cowboys & Aliens
      (Dreamworks/Paramount/Imagine/Universal) – In June, Dreamworks agreed to
      option our property for development and production for joint distribution
      through Paramount and Universal with Imagine Entertainment as a producing
      partner.





Production Slate
Financing





As an
alternative to licensing properties to studios, independent financing
arrangements are becoming more prevalent in the entertainment
industry.  While there are many ways to finance films, one of the
options is to create an Intellectual Property-Backed Securitization vehicle to
facilitate the funding efforts.  The structure is designed to (1)
isolate the Intellectual Property assets needed for the production and
exploitation of theatrically released films into a bankruptcy-remote vehicle,
thus protecting the financial integrity of the Company from potential adverse
performance of the picture slate, and (2) mitigate the performance risk across a
number of films through structural credit enhancements.





The vast
majority of issuance by dollar volume has occurred in the film industry because
film catalogs represent large, predictable assets with clearly defined
historical cash flows and relatively little variance. Similarly, future flows
transactions backed by film catalogs tend to show less volatility as the film
industry has followed the same pattern for many years where a few blockbusters
(perhaps 5% of the total releases) finance the rest of the releases. This “all
or nothing” type of economics, where the few hits pay for the many flops, works
well for slates because the catalogs behave like a portfolio of assets whose
diversification smoothes the volatility of revenues.





Intellectual
property backed securitization is a recent phenomenon and the total market to
date remains relatively small.  In 1997 there were $380 million in
known IP backed securitization transactions. In 2000 there were $1.13 billion.
The total known transaction volume in those years was greater that $2
billion.  The total asset value of patents worldwide is estimated to
be many trillion dollars. (Source: Bernhard H. Fischer, “New
Patent Issue: BioPharm Royalty Trust”, “From Ideas to Assets:
Investing  Wisely in Intellectual Property”, Bruce Berman (editor),
(New York, John Wiley & Sons, Inc.)  p. 484).




We have
been working with Havenwood Media LLC and Arclight Films to arrange a financing
slate of low-budget (between $6 and $12 million) motion pictures intended for
theatrical release.  Together with Arclight, we will put together a
combination of equity, tax incentives and other financing to fully fund the
production of these films. We are also simultaneously pursuing parallel slate
deals with other partners and we are reviewing additional format opportunities
such as an animation slate, a direct-to-home video slate and genre-specific,
low-budget slates - we hope to enter into specific production deals on these
slates in 2008.


Filmed
Entertainment:
Television





In
television, we intend to (1) continue our strategy of licensing our characters
and stories to third-party producers for sale to broadcast and cable television
networks: and (2) secure third-party financing to produce our own specials and
series.





Licensing
Deals





We are
currently working with several well-known producing partners in order to help
bring other characters to the small screen.  As with the normal
business flow in the entertainment industry, projects constantly move up and
down priority lists at networks based on a number of variables such as
programming mix, audience taste, etc.




8





Merchandise/Licensing





We
recognize a targeted merchandising and licensing strategy can produce
significant revenues from characters who build their audience / fan base through
any form of media exploitation – feature film, television, home video/DVD,
print, online, wireless and gaming. We will seek to develop relationships with
category leaders to help secure more retail support, increase the distribution
of its products, and make us a key franchise for our licensees.





Licensees
recognize the potential that comic based properties afford them in diversifying
their retail mix with lines for multiple characters within one story, and, in so
doing, expanding the potential consumer audience interested in their
merchandise. It is not uncommon for a major theatrical release in the comic to
film genre to secure over 50 licensees for an array of products, from action
figures, games and trading cards, to party supplies, costumes, furniture, and
packaged foods.





The
opportunities within the merchandising and licensing arena for us are equally as
wide ranging, including toys/games, collectibles, apparel, and numerous consumer
goods.  We will pursue opportunities via the following
channels:




·
            General
      merchandising agreements with third parties in each major territory where
      films, television and new media will be released.·
            Collectible
      merchandising: cultivating the worldwide collector market by allowing
      licensees in other countries to break with the normal tradition of
      shipping only within their territory. In these agreements, we will allow
      such licensees to ship product to special retailers who have partnership
      arrangements with the Company. These items will carry a double royalty:
      the original royalty from the licensee and the additional royalty from the
      retailer allowed to carry the material.·
            The
      licensing of the Characters for customized advertising campaigns and/or
      media purchase campaigns.·
            Leveraging
      individual partners and licensees’ efforts together globally and locally
      to create critical mass, including promotions, contests, and third-party
      advertising on radio, television and new media.·
            The
      leveraging of our relationships with hundreds of comic book publishers and
      distributors worldwide for the distribution of the Characters in print
      form.







Collectibles Merchandising
Strategy




Our
collectible merchandising strategy will be an important area for income and
branding. The collectible markets worldwide will be developed through the
combination of an online and offline merchandising model.  We will
establish merchandise-licensing arrangements that enable individual licensees’
ability to sell merchandise outside their territories through our distribution
partners. Where licensees traditionally cannot cross borders to sell products
available within their own licensed territories, we will establish a global
capability for individual territory merchandise licensees to make their product
available worldwide over our website (including co-branded and syndicated
versions of the website).




KISS Comics Group
Venture





Spinning
off from the successful marketing empire of the 70’s rock superstars, KISS,
KISS 4K is a
multi-platform comic property that follows the adventures of superheroes based
off the KISS band personalities.   KISS 4K is the first launch
of the Kiss Comics Group, a 50/50 licensing venture with
KISS.  Concepts developed in KISS 4K will be spun off into
separate titles, which will include appearances by the members of
KISS.  The comic lends itself to unique merchandising
opportunities.   KISS 4K merchandising will
target higher-end product, including clothing, collectibles, cell phone
accessories and plug-ins and electronics.  Additionally, there are
many opportunities for sponsors to dress/equip the characters with specific
products within the comic.




Merchandise Licensing
Industry





According
to License Magazine,
character-based licensed products – which include entertainment, television and
movie characters - generated more than $39B at retail in 2003. Licensed toy
lines in the character category increased by more than 5% in 2003 to just over
$5.6B (NPDGroup/FunWorld).  Top action properties, including Spider-Man, Buffy the Vampire Slayer ,
The X-Men , Hercules, and Star Wars, have built
lucrative licensing programs across all product categories. In fact,
franchises such as Teenage
Mutant Ninja Turtles, Star Wars Episode I, Toy Story, and even Barney have garnered over $1
billion sales each in the U.S. alone.  We are looking to expand our
merchandise lines in ways that benefit our franchises beyond current licensing
agreements.





Merchandise
licensing can include various products including sporting goods, apparel, home
furnishings, stationery, packaged goods, books, and more, but the largest
segment in this industry is toys.  In the toy business, companies like
Mattel and Hasbro may develop their own core brands that include characters and
storylines to drive and support their toy lines. Often they look to third
parties, including entertainment studios, video game companies, and book authors
& publishers to bring popular storylines and characters to their
products.





Through
co-ventures, direct manufacturing, and merchandise licensing, we hope to expand
our   franchises into a tactile world that extends consumers
relationships with the characters and stories that they know and
love.




EMPLOYEES





As of
March 22, 2008, we have 23 full-time and 3 part-time
employees.   We have not experienced any work stoppages and we
consider relations with our employees to be good.





9





ITEM
1A.       RISK FACTORS





This investment has a high degree of risk. Before you
invest you should carefully consider the risks and uncertainties described below
and the other information in this prospectus. Each of the following risks may
materially and adversely affect our business, results of operations and
financial condition. These risks may cause the market price of our common stock
to decline, which may cause you to lose all or a part of the money you paid to
buy our common stock





RISKS RELATED TO OUR BUSINESS AND
INDUSTRY




WE
HAVE A LIMITED OPERATING HISTORY UPON WHICH YOU CAN BASE AN INVESTMENT
DECISION.





Our
company was formed on November 20, 1996 and has only recently begun to fully
exploit our library of characters.  The first ten years of our
existence were spent acquiring and building our library.  There can be
no assurance at this time that we will operate profitably or that we will have
adequate working capital to meet our obligations as they become
due.  Management believes that our success will depend in large part
on the continued shift from print to digital media as well as the ability to
monetize that shift.  We intend to invest heavily in developing and
marketing our library of characters, primarily for the web and traditional media
outlets, i.e. film and television, with print as a secondary
medium.  However, there can be no assurance that such investments will
yield the anticipated returns.





COMPETITION
FROM PROVIDERS OF SIMILAR PRODUCTS AND SERVICES COULD MATERIALLY ADVERSELY
AFFECT OUR REVENUES AND FINANCIAL CONDITION





The
industry in which we compete is a rapidly evolving, highly competitive and
fragmented market, which is based on consumer preferences and requires
substantial human and capital resources. We expect competition to intensify in
the future. There can be no assurance that we will be able to compete
effectively.  We believe that the main competitive factors in
the entertainment, media and communications industries include
effective marketing and sales, brand recognition, product quality, product
placement and availability, niche marketing and segmentation and value
propositions. They also include benefits of one's company, product and
services, features and functionality, and cost. Many of our competitors are
established, profitable and have strong attributes in many, most or all of
these areas. They may be able to leverage their existing relationships
to offer alternative products or services at more attractive pricing or
with better customer support. Other companies may also enter our markets
with better products or services, greater financial and human resources and/or
greater brand recognition. Competitors may continue to improve or expand current
products and introduce new products. We may be perceived as relatively too small
or untested to be awarded business relative to the competition. To be
competitive, we will have to invest significant resources in
business development, advertising and marketing.  We may also have to
rely on strategic partnerships for critical branding and relationship leverage,
which partnerships may or may not be available or sufficient. We cannot assure
you that we will have sufficient resources to make these investments or that we
will be able to make the advances necessary to be competitive. Increased
competition may result in price reductions, reduced gross margin and loss
of market share. Failure to compete successfully against current or future
competitors could have a material adverse effect on the Company’s business,
operating results and financial condition.




THE
SPECULATIVE NATURE OF THE ENTERTAINMENT, MEDIA AND COMMUNICATIONS INDUSTRY MAY
RESULT IN OUR INABILITY TO PRODUCE PRODUCTS OR SERVICES THAT RECEIVE SUFFICIENT
MARKET ACCEPTANCE FOR US TO BE SUCCESSFUL.





Certain
segments of the entertainment, media and communications industry are highly
speculative and historically have involved a substantial degree of risk. For
example, if a property is optioned by a studio, the option may not get
exercised, or if exercised, a film may still not be made, or even if a film is
made, the success of a particular film, video game, program or recreational
attraction depends upon unpredictable and changing factors, including the
success of promotional efforts, the availability of alternative forms of
entertainment and leisure time activities, general economic conditions, public
acceptance and other tangible and intangible factors, many of which are beyond
our control. If we are unable to produce products or services that receive
sufficient market acceptance we may not generate sufficient revenues to maintain
our operations and our business will be unsuccessful.





CHANGES
IN TECHNOLOGY MAY REDUCE THE DEMAND FOR THE PRODUCTS OR SERVICES WE MAY OFFER
FOLLOWING A BUSINESS COMBINATION.





The
entertainment, media and communications industries are substantially affected by
rapid and significant changes in technology. These changes may reduce the demand
for certain existing services and technologies used in these industries or
render them obsolete. We cannot assure you that the technologies used by or
relied upon or produced by a target business with which we effect a business
combination will not be subject to such occurrence. While we may attempt to
adapt and apply the services provided by the target business to newer
technologies, we cannot assure you that we will have sufficient resources to
fund these changes or that these changes will ultimately prove successful. If we
are unable to respond to quickly to changes in technology our business will
fail.





WE MAY NOT BE ABLE TO SUCCESSFULLY
IMPLEMENT OUR BUSINESS MODEL, WHICH  IS SUBJECT TO INHERENT
UNCERTAINTIES.





Our
business model is predicated on our ability to control all of the rights
surrounding our IP in order to properly monetize and exploit each property in
the most appropriate medium.  We cannot assure that there will be a
large enough audience for our IP or the media projects or merchandise based on
them, or that prospective customers will agree to pay the prices that we propose
to charge.  In the event our customers resist paying the prices we set
for our products, our business, financial condition, and results of operations
will be materially and adversely affected.




MANY
OF OUR COMPETITORS ARE LARGER AND HAVE GREATER FINANCIAL AND OTHER RESOURCES
THAN WE DO AND THOSE ADVANTAGES COULD MAKE IT DIFFICULT FOR US TO COMPETE WITH
THEM.





The
global media industry is competitive.  There are a substantial number
of traditional and established print publishers, film studios, production
companies and internet media companies with which we compete directly and
indirectly, many of which have significantly greater financial resources, higher
revenues, and greater economies of scale than us.  While we believe
that we are unique in our utilization of web-based comics as our primary
publishing option, new technologies may be developed in the future which will
compete with our publishing plan, and such technology may already be in
development.  We will attempt to distinguish ourselves from our
competitors, but there can be no assurance that we will be able to penetrate the
market.  We believe that our intellectual property is attractive to an
online audience in light of the recent worldwide trend to move publishing from
print to electronic media.  Nevertheless, there is no assurance that
we will compete successfully with existing or future competitors in the film
industry. If we are not successful in competing with these traditional and
established businesses we will be unable to generate any
revenues.




10





WE MAY BE UNABLE TO ADEQUATELY PROTECT OUR INTELLECTUAL PROPERTY
FROM INFRINGEMENT BY THIRD PARTIES.





Our
business plan is significantly dependent upon exploiting our intellectual
property. There can be no assurance that we will be able to control all of the
rights for all of our property or that some of the rights may not revert to
their original owners after the expiration of their respective option periods.
We may not have the resources necessary to assert infringement claims against
third parties who may infringe upon our intellectual property rights. Litigation
can be costly and time consuming and divert the attention and resources of
management and key personnel. We cannot assure you that we can adequately
protect our intellectual property or successfully prosecute potential
infringement of our intellectual property rights. Also, we cannot assure you
that others will not assert rights in, or ownership of, trademarks and other
proprietary rights of ours or that we will be able to successfully resolve these
types of conflicts to our satisfaction. Our failure to protect our intellectual
property rights may result in a loss of revenue and could materially adversely
affect our operations and financial condition.





OUR
FILMS MIGHT BE LESS SUCCESSFUL ECONOMICALLY THAN WE ANTICIPATE.





We cannot
predict the economic success of any of our films because the revenue derived
from the distribution of a film depends primarily upon its acceptance by the
public, which cannot be accurately predicted. The economic success of a film
also depends upon the public’s acceptance of competing films, critical reviews,
the availability of alternative forms of entertainment and leisure time
activities, piracy and unauthorized recording, transmission and distribution of
films, general economic conditions, weather conditions and other tangible and
intangible factors, none of which can be predicted with certainty. We expect to
release a limited number of films per year as part of our film slate. The
commercial failure of just one of those films could have a material adverse
effect on our results of operations in both the year of release and in the
future.





OUR
FILMS MIGHT BE MORE EXPENSIVE TO MAKE THAN WE ANTICIPATE.





We expect
that future financing which we may obtain will provide the capital required to
produce our film slate. Expenses associated with producing the films could
increase beyond projected costs because of a range of factors such as an
escalation in compensation rates of talent and crews working on the films or in
the number of personnel required to work on films, or because of creative
problems or difficulties with technology, special effects and equipment. In
addition, unexpected circumstances sometimes cause film production to exceed
budget.





WE
MIGHT BE DISADVANTAGED BY CHANGES OR DISRUPTIONS IN THE WAY FILMS ARE
DISTRIBUTED.





The
manner in which consumers access film content has undergone rapid and dramatic
changes. Some ancillary means of distribution, such as the DVD market, have
gained importance, while others have faded. We cannot provide any assurance that
new distribution channels will be as profitable for the film industry as today’s
channels or that we will successfully exploit any new channels. We can also not
provide any assurance that current distribution channels, such as the DVD
market, will maintain their profitability. In addition, films and related
products are distributed internationally and are subject to risks inherent in
international trade including war and acts of terrorism, instability of foreign
governments or economies, fluctuating foreign exchange rates and changes in laws
and policies affecting the trade of movies and related products.





WE
MIGHT LOSE POTENTIAL SALES BECAUSE OF PIRACY OF FILMS AND RELATED
PRODUCTS.





With
technological advances, the piracy of films and related products has increased.
Unauthorized and pirated copies of our films will reduce the revenue generated
by those films and related products.





OUR
SUCCESS IS DEPENDENT UPON AUDIENCE ACCEPTANCE OF OUR ENTERTAINMENT CONTENT
WHICH IS DIFFICULT TO PREDICT





The
production and distribution of comic books, online publishing, television
programs, motion pictures and other entertainment content are inherently risky
businesses because the revenues we derive and our ability to distribute and
license rights to our content depend primarily upon its acceptance by the
public, which is difficult to predict. Audience tastes change frequently
and it is a challenge to anticipate what content will be successful at a certain
point in time.  In addition, the commercial success of our content
also depends upon the quality and acceptance of competing programs, motion
pictures and other content available or released into the marketplace at or
near the same time. Other factors, including the availability of alternative
forms of entertainment and leisure time activities, general economic
conditions, piracy, digital and on-demand distribution and growing competition
for consumer discretionary spending may also affect the audience for our
content. Furthermore, the theatrical success of a feature film may impact
not only the theatrical revenues we receive but also those from other
distribution channels, such as DVD sales, pay television and sales of licensed
consumer products. A poor theatrical performance may also impact our negotiating
strength with distributors and retailers, resulting in less desirable product
promotion. Consequently, reduced public acceptance of our entertainment
content has the ability to affect all of our revenue streams and would have
an adverse effect on our results of operations.







WE MUST RESPOND TO AND CAPITALIZE ON RAPID CHANGES IN CONSUMER
BEHAVIOR RESULTING FROM NEW TECHNOLOGIES AND DISTRIBUTION PLATFORMS IN ORDER TO
REMAIN COMPETITIVE AND EXPLOIT NEW OPPORTUNITIES





Technology
in the online and mobile arenas is changing rapidly. We must adapt to advances
in technologies, distribution outlets and content transfer and storage (legally
or illegally) to ensure that our content remains desirable and widely
available to our audiences while protecting our intellectual property interests.
The ability to anticipate and take advantage of new and future sources of
revenue from these technological developments will affect our ability to
continue to increase our revenue and expand our business. We may not have the
right, and may not be able to secure the right, to distribute some of our
licensed content across these, or any other, new platforms and must adapt
accordingly. Similarly, we also must adapt to changing consumer behavior
driven by technological advances such as video-on-demand and a desire for
more short form and user-generated and interactive content. These technological
advances may impact traditional distribution methods, such as reducing the
demand for DVD product and the desire to see motion pictures in theaters. If we
cannot ensure that our content is responsive to the lifestyles of our target
audiences and capitalize on technological advances, our revenues will decline
which may cause us to curtail operations.





11


A
DECLINE IN ADVERTISING EXPENDITURES COULD CAUSE OUR REVENUES AND OPERATING
RESULTS TO DECLINE SIGNIFICANTLY IN ANY GIVEN PERIOD OR IN SPECIFIC
MARKETS





We
anticipate deriving revenues from the sale of advertising in print and on our
digital media outlets. A decline in advertising expenditures generally or
in specific markets could significantly adversely affect our revenues and
operating results in any given period. Declines can be caused by the
economic prospects of advertisers or the economy in general could alter
current or prospective advertisers’ spending priorities. Disasters, acts of
terrorism, political uncertainty or hostilities could lead to a reduction
in advertising expenditures as a result of economic uncertainty. Our
advertising revenues may also be adversely affected by changes in audience
traffic, which advertisers rely upon in making decisions to purchase
advertising. A decrease  in our advertising revenues will adversely
impact our results of operations.





WE
COULD BE ADVERSELY AFFECTED BY STRIKES AND OTHER UNION ACTIVITY





We and
our suppliers engage the services of writers, directors, actors and other
talent, trade employees and others who are subject to collective bargaining
agreements. If we or our suppliers are unable to renew expiring
collective bargaining agreements, certain of which are expiring in the next
year or two, it is possible that the affected unions could take action in
the form of strikes or work stoppages. Such actions, higher costs in connection
with these agreements or a significant labor dispute could adversely affect
our business by causing delays in the production, the release date or by
reducing the profit margins of our programming or feature films.





IF
WE ARE UNABLE TO OBTAIN ADDITIONAL FUNDING, OUR BUSINESS OPERATIONS WILL BE
HARMED AND IF WE DO OBTAIN ADDITIONAL FINANCING, OUR THEN EXISTING SHAREHOLDERS
MAY SUFFER SUBSTANTIAL DILUTION.





There is
no assurance that we will not incur debt in the future, that we will have
sufficient funds to repay any indebtedness or that we will not default on our
debt obligations, jeopardizing our business viability.  Furthermore,
we may not be able to borrow or raise additional capital in the future to meet
our needs or to otherwise provide the capital necessary to conduct our business.
There can be no assurance that financing will be available in amounts or on
terms acceptable to us, if at all. The inability to obtain additional capital
will restrict our ability to grow and may reduce our ability to continue to
conduct business operations. If we are unable to obtain additional financing, we
will likely be required to curtail our marketing and development plans and
possibly cease our operations. Any additional equity financing may involve
substantial dilution to our then existing shareholders.





IF
WE DO NOT MAINTAIN THE CONTINUED SERVICE OF OUR EXECUTIVE OFFICERS, OUR BUSINESS
OPERATIONS MAY BE AFFECTED.





Our
success is substantially dependent on the performance of our executive officers
and key employees.  Given our early stage of development, we are
dependent on our ability to retain and motivate high quality
personnel.  Although we believe we will be able to engage qualified
personnel for such purposes, an inability to do so could materially adversely
affect our ability to market, sell, and enhance our products.  The
loss of one or more of our key employees or our inability to hire and retain
other qualified employees, including but not limited to development staff,
business development staff, digital publishing staff and corporate office
support staff, could have a material adverse effect on our
business.








WE MAY INCUR UNINSURED LOSSES IN THE OPERATION OF OUR
BUSINESS.





There is
no assurance that we will not incur uninsured liabilities and losses as a result
of the conduct of our business.  We plan to maintain comprehensive
liability and property insurance at customary levels.  We will also
evaluate the availability and cost of business interruption
insurance.  However, should uninsured losses occur we may be unable to
cover these losses from our existing work capital which may cause us to incur
significant losses.




WE
MAY INCUR LIABILITIES THAT WE MIGHT BE UNABLE TO REPAY IN THE
FUTURE





We may
incur liabilities with affiliated or unaffiliated lenders.  These
liabilities would represent fixed costs which would be required to be paid
regardless of the level of our business or profitability.  Our current
liabilities as of December 31, 2007 were as follows:  accounts payable
$663,848, accrued expenses $788,868, short-term notes payable $1,889,908,
related party payable $193,079, bank overdraft of $89,665 and capital lease
obligations of $73,282 for total current liabilities of $3,798,650.  
There is no assurance that we will be able to pay all of our
liabilities.  Furthermore, we are always subject to the risk of
litigation from customers, suppliers, employees, and others because of the
nature of our business, including but not limited to consumer
lawsuits.  Litigation can cause us to incur substantial expenses and,
if cases are lost, judgments, and awards can add to our costs. An increase in
our costs may cause us to increase the prices at which we charge our customers
which may lead to our customers to seek alternatives to our products. In such
event, our revenues will decrease and we may be forced to curtail our
operations.




WE
MAY INCUR UNANTICIPATED COST OVERRUNS WHICH MAY SIGNIFICANTLY AFFECT OUR
OPERATIONS.





We may
incur substantial cost overruns in the development and enhancement of our
electronic comics, printed comics, and merchandise.  Management is not
obligated to contribute capital to us.  Unanticipated costs may force
us to obtain additional capital or financing from other sources if we are unable
to obtain the additional funds necessary to implement our business plan. There
is no assurance that we will be able to obtain sufficient capital to implement
our business plan successfully.  If a greater investment is required
in the business because of cost overruns, the probability of earning a profit or
a return of the Shareholders’ investment will be diminished.





12




OUR
PRINCIPAL STOCKHOLDERS, OFFICERS AND DIRECTORS WILL OWN A CONTROLLING INTEREST
IN OUR VOTING STOCK AND INVESTORS WILL NOT HAVE ANY VOICE IN OUR
MANAGEMENT.





Our
principal stockholders, officers and directors, in the aggregate, beneficially
own approximately 69.10% of our outstanding common stock.Our
Chairman, Scott Rosenberg and President and Chief Operating Officer, Brian
Altounian beneficially own approximately 128,250,000 and 19,940,000 shares of
our outstanding common stock, respectively. As a result, our principal
stockholders, officers and directors, acting together, have the ability to
control substantially all matters submitted to our stockholders for approval,
including:





·
            election
      of our board of directors;·
            removal
      of any of our directors;·
            amendment
      of our certificate of incorporation or bylaws; and·
            adoption
      of measures that could delay or prevent a change in control or impede a
      merger, takeover or other business combination involving
    us.





As a
result of their ownership and positions, our principal stockholders, directors
and executive officers collectively are able to influence all matters requiring
stockholder approval, including the election of directors and approval of
significant corporate transactions. In addition, sales of significant amounts of
shares held by our principal stockholders, directors and executive officers, or
the prospect of these sales, could adversely affect the market price of our
common stock. Their stock ownership may discourage a potential acquirer from
making a tender offer or otherwise attempting to obtain control of us, which in
turn could reduce our stock price or prevent our stockholders from realizing a
premium over our stock price.





WE
MAY NEED TO RAISE ADDITIONAL CAPITAL, WHICH MAY NOT BE AVAILABLE ON ACCEPTABLE
TERMS OR AT ALL.





While we
were successful in raising $4,904,725, less offering costs of $168,345 in
the recent completed financing we may be required to raise additional funds,
particularly if we are unable to generate positive cash flow as a result of our
operations.   We estimate that our capital requirements in the
next six months will be approximately $2,600,000. There can be no assurance that
financing will be available in amounts or on terms acceptable to us, if at
all.  The inability to obtain additional capital may reduce our
ability to continue to conduct business operations.  If we are unable
to obtain additional financing, we will likely be required to curtail our
research and development plans.  Any additional equity financing may
involve substantial dilution to our then existing shareholders.







BECAUSE OF OUR DEPENDENCE ON A LIMITED NUMBER OF TRADITIONAL
MEDIA OUTLETS, ANY SIGNIFICANT REDUCTION IN DEALS WITH MAJOR FILM STUDIOS AND
TELEVISION/CABLE NETWORKS MAY IMPAIR OUR ABILITY TO OPERATE
PROFITABLY.




Our
business to date has been dependent upon a small number of licensing
transactions with major studios and television/cable networks. For the first
nine months of 2007 and the year ended December 31, 2006, a very small number of
transactions accounted for a disproportionately large percentage of our revenue.
As of September 30, 2007, two transactions, one to each of two customers
accounted for 82% of our revenues.  An acquisition sale and a rights
option agreement provided 60% and 27% of the year to date revenues,
respectively.  For the year ended December 31, 2006, three
transactions (two rights options and an acquisition deal) accounted for 100% of
our revenue. The loss of or significant reduction in transactions to any of
these traditional media outlets could impair our ability to operate profitably
and that we may not be able to replace any decline in revenue.









RISKS
RELATING TO OUR COMMON STOCK




BECAUSE
THERE IS A LIMITED MARKET IN OUR COMMON STOCK, STOCKHOLDERS MAY HAVE DIFFICULTY
IN SELLING OUR COMMON STOCK AND OUR COMMON STOCK MAY BE SUBJECT TO SIGNIFICANT
PRICE SWINGS.





There is
a very limited market for our common stock. Since trading commenced in January
2008, there has been little activity in our common stock and on some days there
is no trading in our common stock. Because of the limited market for our common
stock, the purchase or sale of a relatively small number of shares may have an
exaggerated effect on the market price for our common stock. We cannot assure
stockholders that they will be able to sell common stock or, that if they are
able to sell their shares, that they will be able to sell the shares in any
significant quantity at the quoted price.





IF
WE FAIL TO REMAIN CURRENT ON OUR REPORTING REQUIREMENTS, WE COULD BE REMOVED
FROM THE OTC BULLETIN BOARD WHICH WOULD LIMIT THE ABILITY OF BROKER-DEALERS TO
SELL OUR SECURITIES AND THE ABILITY OF STOCKHOLDERS TO SELL THEIR SECURITIES IN
THE SECONDARY MARKET.




Companies
trading on the Over-The-Counter Bulletin Board, such as we are seeking to
become, must be reporting issuers under Section 12 of the Securities Exchange
Act of 1934, as amended, and must be current in their reports under Section 13,
in order to maintain price quotation privileges on the OTC Bulletin Board. If we
fail to remain current on our reporting requirements, we could be removed from
the OTC Bulletin Board. As a result, the market liquidity for our securities
could be severely adversely affected by limiting the ability of broker-dealers
to sell our securities and the ability of stockholders to sell their securities
in the secondary market. In addition, we may be unable to get re-listed on the
OTC Bulletin Board, which may have an adverse material effect on our
Company.




13


OUR
COMMON STOCK IS SUBJECT TO THE “PENNY STOCK” RULES OF THE SEC AND THE TRADING
MARKET IN OUR SECURITIES IS LIMITED, WHICH MAKES TRANSACTIONS IN OUR STOCK
CUMBERSOME AND MAY REDUCE THE VALUE OF AN INVESTMENT IN OUR STOCK.




The
Securities and Exchange Commission has adopted Rule 15g-9 which establishes the
definition of a "penny stock," for the purposes relevant to us, as any equity
security that has a market price of less than $5.00 per share or with an
exercise price of less than $5.00 per share, subject to certain exceptions. For
any transaction involving a penny stock, unless exempt, the rules
require:




·
            that
      a broker or dealer approve a person's account for transactions in penny
      stocks; and




·
            the
      broker or dealer receive from the investor a written agreement to the
      transaction, setting forth the identity and quantity of the penny stock to
      be purchased.




In order
to approve a person's account for transactions in penny stocks, the broker or
dealer must:





·
            obtain
      financial information and investment experience objectives of the person;
      and




·
            make
      a reasonable determination that the transactions in penny stocks are
      suitable for that person and the person has sufficient knowledge and
      experience in financial matters to be capable of evaluating the risks of
      transactions in penny stocks.




The
broker or dealer must also deliver, prior to any transaction in a penny stock, a
disclosure schedule prescribed by the Commission relating to the penny stock
market, which, in highlight form:




·
            sets
      forth the basis on which the broker or dealer made the suitability
      determination; and




·
            that
      the broker or dealer received a signed, written agreement from the
      investor prior to the transaction.




Generally,
brokers may be less willing to execute transactions in securities subject to the
"penny stock" rules. This may make it more difficult for investors to dispose of
our common stock and cause a decline in the market value of our
stock.




Disclosure
also has to be made about the risks of investing in penny stocks in both public
offerings and in secondary trading and about the commissions payable to both the
broker-dealer and the registered representative, current quotations for the
securities and the rights and remedies available to an investor in cases of
fraud in penny stock transactions. Finally, monthly statements have to be sent
disclosing recent price information for the penny stock held in the account and
information on the limited market in penny stocks.





THE
EXERCISE OF OUTSTANDING OPTIONS AND WARRANTS MAY HAVE A DILUTIVE EFFECT ON THE
PRICE OF OUR COMMON STOCK.





To the
extent that outstanding stock options and warrants are exercised, dilution to
our stockholders will occur. Moreover, the terms upon which we will be able to
obtain additional equity capital may be adversely affected, since the holders of
the outstanding options and warrants can be expected to exercise them at a time
when we would, in all likelihood, be able to obtain any needed capital on terms
more favorable to us than the exercise terms provided by the outstanding options
and warrants.





WE
DO NOT EXPECT TO PAY DIVIDENDS IN THE FUTURE; ANY RETURN ON INVESTMENT MAY BE
LIMITED TO THE VALUE OF OUR COMMON STOCK.





We do not
currently anticipate paying cash dividends in the foreseeable future. The
payment of dividends on our Common Stock will depend on earnings, financial
condition and other business and economic factors affecting it at such time as
the board of directors may consider relevant. Our current intention is to apply
net earnings, if any, in the foreseeable future to increasing our capital base
and development and marketing efforts. There can be no assurance that the
Company will ever have sufficient earnings to declare and pay dividends to the
holders of our Common Stock, and in any event, a decision to declare and pay
dividends is at the sole discretion of the our Board of Directors. If we do not
pay dividends, our Common Stock may be less valuable because a return on your
investment will only occur if its stock price appreciates.











ITEM
2.      PROPERTIES.





Our
offices are located at 11400 W. Olympic Blvd., Suite 1400, Los Angeles,
CA  90064, and consist of approximately 12,400 square
feet.  We entered into a five year lease for our offices which
requires payments of $31,857 per month or minimum annual payments of $127,429 in
2006, $387,383 in 2007, $402,878 in 2008, $418,993 in 2009, $435,753 in 2010 and
$298,147 in 2011. Our lease expires on August 31, 2011.





ITEM
3.       LEGAL PROCEEDINGS.





We are not currently a party to, nor is any of our
property currently the subject of, any pending legal proceeding that will have a
material adverse effect on our business. None of our directors, officers or
affiliates is involved in a proceeding adverse to our business or has a material
interest adverse to our business.











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





No matter
was submitted to a vote of security holders during the fourth quarter of the
fiscal year covered by this report.








14


PART
II





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





Our
common stock was approved for quotation on the OTC Bulletin Board under the
symbol “PDOS” on January 10, 2008. For the periods indicated, the following
table sets forth the high and low bid prices per share of common stock. These
prices represent inter-dealer quotations without retail markup, markdown, or
commission and may not necessarily represent actual transactions.





Fiscal
      2008Quarter
      Ended
            High
            LowMarch
      31
            $0.23
            $0.09








As of
March 31, 2008, our shares of common stock were held by approximately 351
stockholders of record. The number of record holders was determined from the
records of our transfer agent and does not include beneficial owners common
stock whose shares are held in the names of various securities brokers, dealers
and registered clearing agencies.





The
transfer agent of our common stock is Computershare Limited, whose address is
1745 Arden Avenue, Glendale, CA 91204.  The phone number of the
transfer agent is (800) 962-4284.





DIVIDENDS





We have
not declared any dividends to date. We have no present intention of paying any
cash dividends on our common stock in the foreseeable future, as we intend to
use earnings, if any, to generate growth. The payment by us of dividends, if
any, in the future, rests within the discretion of our Board of Directors and
will depend, among other things, upon our earnings, our capital requirements and
our financial condition, as well as other relevant factors. There are no
restrictions in our articles of incorporation or bylaws that restrict us from
declaring dividends











RECENT
SALES OF UNREGISTERED SECURITIES





We
sold the following equity securities during the fiscal year ended December 31,
2007 that were not registered under the Securities Act of 1933, as amended (the
"Securities Act").





On July
1, 2007, we entered into a Cancellation of Indebtedness Agreement with CEO Scott
Mitchell Rosenberg, pursuant to which we agreed to issue 17,208,575 shares in
exchange for canceling $1,625,000 in long-term debt and $95,857 in interest
expense.





For each
of the above transactions exempt from registration requirements under Rule 506,
the individuals and entities to whom we issued securities are unaffiliated with
us. For each of such sales, no advertising or general solicitation was employed
in offering the securities. The offerings and sales were made to a limited
number of persons, all of whom were accredited investors, business associates of
ours or our executive officers, and transfer was restricted by us in accordance
with the requirements of the Securities Act. Each of such persons represented to
us that they were accredited or sophisticated investors, that they were capable
of analyzing the merits and risks of their investment, and that they understood
the speculative nature of their investment. Furthermore, all of the
above-referenced persons had access to our Securities and Exchange Commission
filings.





ITEM
6.       SELECTED FINANCIAL DATA


N/A




ITEM
7.       MANAGEMENT’S DISCUSSION AND ANALYSIS
OR PLAN OF OPERATION.





FORWARD-LOOKING
STATEMENTS





Some of
the information in this prospectus contains forward-looking statements that
involve substantial risks and uncertainties. You can identify these statements
by forward-looking words such as "may," "expect," "anticipate," "believe,"
"estimate" and "continue," or similar words. You should read statements that
contain these words carefully because they:




·
            discuss
      our future expectations;·
            contain
      projections of our future results of operations or of our financial
      condition; and·
            state
      other "forward-looking"
information.




We
believe it is important to communicate our expectations. However, there may be
events in the future that we are not able to accurately predict or over which we
have no control. Our actual results and the timing of certain events could
differ materially from those anticipated in these forward-looking statements as
a result of certain factors, including those set forth under "Risk Factors,"
"Business" and elsewhere in this prospectus. See "Risk Factors."





15


GENERAL





We are a
comics-based entertainment company.  We own the rights to a library of
over 5,600 of comic book characters, which we adapt and produce for film,
television and all other media. Our library contains characters in a full range
of genre and styles.  With deals in place with film studios and media
players, our management believes we are positioned to become a leader in the
creation of new content across all media.





We are
focused on adding titles and expanding our library with the primary goal of
creating new franchise properties and characters.  In addition to
in-house development and further acquisitions, we are developing content with
professionals outside the realm of comic books.  We have teamed up
with screenwriters, producers, directors, movie stars, and novelists to develop
entertainment content and potential new franchise properties.  We
believe our core brand offers a broader range of storylines and genres than the
traditional superhero-centric genre.  Management believes this
approach is maintained with Hollywood in mind, as the storylines offer the film
industry fresh, high-concept brandable content as a complimentary alternative to
traditional super hero storylines.





Over the
next several years, we are working to become the leading independent comic book
commercialization producer for the entertainment industry across all platforms
including film, television, direct-to-home, publishing, and digital media,
creating merchandising vehicles through all retail product lines.  Our
management believes this will allow us to maximize the potential and value of
our owned content creator relationships and acquisitions, story development and
character/franchise brand-building capabilities while keeping required capital
investment relatively low.





We derive
revenues from a number of sources in each of the following
areas:  Print Publishing, Digital Publishing, Filmed Entertainment,
and Merchandise/Licensing.




Set forth
below is a discussion of the financial condition and results of operations of
Platinum Studios, Inc. (the “Company”, “we”, “us,” and “our”) for the twelve
months ended December 31, 2007 and 2006.  The following discussion
should be read in conjunction with the information set forth in the consolidated
financial statements and the related notes thereto appearing elsewhere in this
report.





RESULTS
OF OPERATIONS - YEAR ENDED DECEMBER 31, 2007 COMPARED TO THE YEAR ENDED DECEMBER
31, 2006





NET
REVENUE




Net
revenue for the year ended December 31, 2007 was $1,956,054 compared to $180,500
for the year ended December 31, 2006. The increased net revenue was primarily
attributable to an increase in option fee revenue of $860,500 and first look
revenue of $450,000. The Company is currently focused on exploiting its large
library of intellectual property. The option fee revenue is the result of
interest in one of these properties. The option fee revenue was related to the
acquisition of all right, title and interest in and to a graphic novel written
and owned by Platinum. The first look revenue was related to an option to have
the right of first refusal over (5) properties meaning the Company could still
market these properties to other buyers. If another buyer expressed an interest
to option of the (5) properties, this client had the right to exercise its
option to purchase the property.


EXPENSES





Cost
of revenues





For the
year ended December 31, 2007 cost of revenues was $278,442 compared to $0 for
the year ended December 31, 2006. The increase is primarily due to printing
costs for comic books. In 2006 printing costs were included as part of the
licensing agreement with Top Cow Productions, Inc. Therefore, printing costs
were not incurred by the company in 2006.





Operating
expenses





Operating
expenses increased $2,008,064 or 63% for the year ended December 31, 2007 to
$5,176,142, as compared to $3,168,078 for the year ended December 31, 2006. The
increase was due to increases in payroll, promotion and merchandising costs.
These additional costs were incurred to support the growth of the
Company.





Research
and development





Research
and development costs increased $196,114 or 26% for the year ended December 31,
2007 to $960,396, as compared to $764,282 for the year ended December 31, 2006.
The increase was due to development of additional intellectual
properties.





Depreciation
and amortization





For the
year ended December 31, 2007 depreciation and amortization was $165,861 compared
to $73,486 for the year ended December 31, 2006. The increase is due to
amortization of character rights and addition capital leases for computer
equipment.





As a
result of the foregoing, the net loss increased by $920,035 for the year ended
December 31, 2007, to $5,192,815, as compared to $4,272,780 for
2006.





16


LIQUIDITY
AND CAPITAL RESOURCES





Net cash
used in operations during the twelve months ended December 31, 2007 was
$4,301,842, primarily due to the net loss of the company.





Net cash
used by investing activities was $15,672 for the year ended December 31,
2007.





Net cash
provided by financing activities was $3,990,524 primarily attributed to capital
contributions in exchange for common stock.





At
December 31, 2007 the Company had cash balances of $4,445. The Company will
issue additional equity and may consider debt financing to fund future growth
opportunities and support operations. Although the Company believes its unique
intellectual content offers the opportunity for significantly improved operating
results in future quarters, no assurance can be given that the Company will
operate on a profitable basis in 2008, or ever, as such performance is subject
to numerous variables and uncertainties, many of which are out of the Company’s
control.




MARKET
RISKS




We
conduct our operations in primary functional currencies: the United States
dollar, the British pound and the Australian dollar. Historically, neither
fluctuations in foreign exchange rates nor changes in foreign economic
conditions have had a significant impact on our financial condition or results
of operations. We currently do not hedge any of our foreign currency exposures
and are therefore subject to the risk of exchange rate fluctuations. We invoice
our international customers primarily in U.S. dollars, except in the United
Kingdom and Australia, where we invoice our customers primarily in British
pounds and Australian dollars, respectively. In the future we anticipate billing
certain European customers in Euros, though we have not done so to
date.






We are
exposed to foreign exchange rate fluctuations as the financial results of
foreign subsidiaries are translated into U.S. dollars in consolidation and as
our foreign currency consumer receipts are converted into U.S. dollars. Our
exposure to foreign exchange rate fluctuations also arises from payables and
receivables to and from our foreign subsidiaries, vendors and customers. Foreign
exchange rate fluctuations did not have a material impact on our financial
results in the years ended December 31, 2007, 2006 and 2005.






Financial
instruments which potentially subject us to concentrations of credit risk
consist principally of cash and cash equivalents and trade accounts receivable.
We place our cash and cash equivalents with high credit quality institutions to
limit credit exposure. We believe no significant concentration of credit risk
exists with respect to these investments.






Financial
instruments that potentially subject the Company to concentrations of credit
risk consist primarily of uninsured cash balances.  The Company
maintains its cash balances with what management believes to be a high credit
qualityfinancial institution. At times, balances within the Company’s cash
accounts may exceed the Federal Deposit Insurance Corporation (FDIC) limit of
$100,000.






During
the years ended December 31, 2007 2006, and 2005, the Company had customer
revenues representing a concentration of the Company’s total revenues. In 2007,
two customers represented approximately 51% and 23% of total
revenues.  In 2006, two customers represented approximately 82% and
14% of the Company’s total revenues. In 2005, three customers represented
approximately 64%, 19% and 17% of the Company’s total revenues.







GOING
CONCERN





The
accompanying financial statements have been prepared on a going concern basis,
which contemplates the realization of assets and the satisfaction of liabilities
in the normal course of business.  The Company has incurred
significant losses which have resulted in an accumulated deficit of $9,465,595
as of December 31, 2007.  The Company plans to seek additional
financing in order to execute its business plan, but there is no assurance the
Company will be able to obtain such financing on terms favorable to the Company
or at all.  These items raise substantial doubt about the Company’s
ability to continue as a going concern.  The accompanying financial
statements do not include any adjustments to reflect the possible future effects
related to recovery and classification of assets, or the amounts and
classifications of liabilities that might result from the outcome of this
uncertainty.





OFF-BALANCE
SHEET ARRANGEMENTS





We do not
have any off balance sheet arrangements that are reasonably likely to have a
current or future effect on our financial condition, revenues, results of
operations, liquidity or capital expenditures.











17


CRITICAL
ACCOUNTING POLICIES AND ESTIMATES





REVENUE
RECOGNITION.
Revenue  from  the  licensing  of  characters  and  storylines  (“the
properties”) owned by the Company are recognized in accordance with guidance
provided in Securities and Exchange Commission Staff Accounting Bulletin No. 104
“Revenue Recognition” (an amendment of Staff Accounting Bulletin No. 101
“Revenue Recognition”) (“SAB 104”).  Under the SAB 104 guidelines,
revenue is recognized when the earnings process is complete.  This is
considered to have occurred when persuasive evidence of an agreement between the
customer and the Company exists, when the properties are made available to the
licensee and the Company has satisfied its obligations under the agreement, when
the fee is fixed or determinable and when collection is reasonably assured. The
Company derives its licensing revenue primarily from options to purchase rights,
the purchase of rights to properties and first look deals.  For
options that contain non-refundable minimum payment obligations that are not
applied to the purchase price, revenue is recognized ratably over the option
period, prior to the collection of all amounts ultimately due, provided all the
criteria for revenue recognition under SAB 104 have been met.  Option
fees that are applicable to the purchase price are deferred and recognized as
revenue at the later of the expiration of the option period or in accordance
with the terms of the purchase agreement.  Revenue received under
first look deals is recognized ratably over the first look period, which varies
by contract provided all the criteria for revenue recognition under SAB 104 have
been met.  First look deals that have contingent components are
deferred and recognized at the later of the expiration of the first look period
or in accordance with the terms of the first look contract. For licenses
requiring material continuing involvement or performance based obligations, by
the Company, the revenue is recognized as and when such obligations are
fulfilled. The Company records as deferred revenue any licensing fees collected
in advance of obligations being fulfilled or if a licensee is not sufficiently
creditworthy, the Company will record deferred revenue until payments are
received. License agreements typically include reversion rights which allow the
Company to repurchase property rights which have not been used by the studio
(the buyer) in production within a specified period of time as defined in the
purchase agreement.  The cost to repurchase the rights is generally
based on the costs incurred by the studio to further develop the characters and
story lines.




CHARACTER
DEVELOPMENT COSTS. Character development costs consist primarily of costs to
acquire properties from the creator, development of the property using internal
or independent writers and artists, and the registration of a property for a
trademark or copyright.  These costs are capitalized in the year
incurred if the Company has executed a contract or is negotiating a revenue
generating opportunity for the property.  If the property derives a
revenue stream that is estimable, the capitalized costs associated with the
property are expensed as revenue is recognized. If the Company determines there
is no determinable market for a property, it is deemed impaired and is written
off.





PURCHASED
INTANGIBLE ASSETS AND LONG-LIVED ASSETS. Intangible assets are capitalized at
acquisition costs and intangible assets with definite lives are amortized on the
straight-line basis.  The Company periodically reviews the carrying
amounts of intangible assets and property in conformance with the Statement of
Financial Accounting Standards No. 144, Accounting for the Impairment or
Disposal of Long-Lived Assets (SFAS 144).  Under SFAS 144, long-lived
assets, such as property and equipment, and purchased intangibles subject to
amortization, are reviewed for impairment whenever events or changes in
circumstances indicate that the carrying amount of an asset may not be
recoverable. Recoverability of assets to be held and used is measured by a
comparison of the carrying amount of an asset to the estimated undiscounted
future cash flows expected to be generated by the asset. If the carrying amount
of an asset exceeds its estimated future cash flows, the impairment charge to be
recognized is measured by the excess of the carrying amount over the fair value
of the asset.





ADVERTISING
COSTS. Advertising costs are expensed the later of when incurred or when the
advertisement is first run.  For the years ended December 31, 2007 and
2006, advertising expenses were $426,332 and $14,017, respectively.





RESEARCH
AND DEVELOPMENT. Research and development costs, primarily character development
costs and design not associated with an identifiable revenue opportunity, are
charged to operations as incurred.  For the years ended December 31,
2007 and 2006, research and development expenses were $960,396 and $764,282,
respectively.





INCOME
TAXES. From inception thru September 14, 2006 the Company operated as a limited
liability company and elected to be taxed similar to a
partnership.  Accordingly, each member was responsible for reporting
its  respective  share  of  the  Company’s  net
income  or  loss  for  Federal  and
California income tax purposes and the Company did not pay Federal income
tax.  From September 15, 2006 forward the Company has accounted for
income taxes using the liability method, whereby deferred tax assets and
liability account balances are determined based on differences between financial
reporting and tax basis of assets and liabilities and are measured using the
enacted tax rates and laws that will be in effect when the differences are
expected to reverse.  The Company was subject to an annual minimum tax
of $800 and a fee based on gross receipts in California from inception through
September 14, 2006.





RECENTLY
ISSUED ACCOUNTING STANDARDS




In July
2006, the FASB issued Interpretation No. 48, “Accounting for Uncertainly in
Income Taxes” (“FIN 48”).  FIN 48 applies to all tax positions related
to income taxes subject to SFAS 109, “Accounting for Income
Taxes”.  Under FIN 48 a company would recognize the benefit from a tax
position only if it is more-likely-than-not that the position would be sustained
upon audit based solely on the technical merits of the tax
position.  FIN 48 clarifies how a company would measure the income tax
benefits from the tax positions that are recognized, provides guidance as to the
timing of the de-recognition of previously recognized tax benefits and describes
the methods for classifying and disclosing the liabilities within the financial
statements for any unrecognized tax benefits.  FIN 48 also addresses
when a company should record interest and penalties related to tax positions and
how the interest and penalties may be classified within the income statement and
presented in the balance sheet.  FIN 48 is effective for fiscal years
beginning after December 15, 2006.  For Platinum, FIN 48 will be
effective for the first quarter of fiscal 2007.





In May
2005, the FASB issued SFAS No. 154, Accounting Changes and Error Corrections,
which replaces APB No. 20, Accounting Changes and SFAS No. 3, Reporting
Accounting Changes in Interim Financial Statements. SFAS No. 154 requires that a
voluntary change in accounting principle be applied retrospectively with all
prior period financial statements presented as if the new accounting principle
had always been used. SFAS No. 154 also requires that a change in method of
depreciating or amortizing long-lived non-financial assets be accounted for
prospectively, in the period of change and in future periods, if applicable, as
a change in estimate, and requires the correction of errors in previously issued
financial statements be termed a “restatement”. SFAS No. 154 is effective for
accounting changes and correction errors made in fiscal years beginning after
December 15, 2005.  The implementation of SFAS 154 is not expected to
have a material impact on the Company’s financial statements.





On July
1, 2007, we adopted Statement of Financial Accounting Standards No. 123 (revised
2004), “Share-Based Payment,” (“SFAS 123(R)”) which requires the measurement and
recognition of compensation expense for all share-based payments to employees
and directors including employee stock option s and stock purchases related to
the Company’s employee stock option and award plans based on estimated fair
values.  In March 2005, the Securities and Exchange Commission issued
Staff Accounting Bulletin No. 107 (“SAB 107”) relating to SFAS
123(R).  We have applied the provision of SAB 107 in our adoption of
SFAS 123(R).





We have
selected the Black-Scholes method of valuation for share-based compensation and
have adopted the modified prospective transition method under SFAS 123R, which
requires that compensation cost be recorded, as earned, for all unvested stock
options and warrants outstanding at the beginning of the first quarter of
adoption of SFAS 123R.  The charge is being recognized in non cash
compensation, which is included in stock-based compensation expense, on a
straight-line basis over the remaining service period after the adoption date
based on the options or warrants original estimate of fair value.  As
permitted by SFAS 123(R), the Company elected the disclosure only requirements
of SFAS 123(R).





On July
1, 2007, principal and interest of $1,720,857 were converted into common stock
of the Company.  As an incentive to convert the outstanding debt
obligation, warrants were issued to the debt-holder, Charlotte
Rosenberg.  Based on the Black-Scholes method of valuation, $195,507
of interest expense was recorded as the fair value of the warrants issued as
part of this debt conversion.





18


ITEM
8.       FINANCIAL STATEMENTS.





All
financial information required by this Item is attached hereto at the end of
this report beginning on page F-1 and is hereby incorporated by
reference.








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





None





ITEM
9A.     CONTROLS AND PROCEDURES.





As of the
end of the period covered by this report, we conducted an evaluation, under the
supervision and with the participation of our chief executive officer and chief
financial officer of our disclosure controls and procedures (as defined in Rule
13a-15(e) and Rule 15d-15(e) of the Exchange Act). In making this evaluation,
our management considered controls related to the proper accrual
of  salaries payable to our executive officers to be a material
weakness. In light of this material weakness, we performed additional analyses
and other procedures to ensure that our financial statements included in this
Annual Report were prepared in accordance with generally accepted accounting
principals (“GAAP”). These measures included, among other things, expansion of
our year-end closing procedures, including the expanded review and analysis of
all accruals, including executive compensation.





Based
upon this additional evaluation, our chief executive officer and chief financial
officer concluded that our disclosure controls and procedures, with the
exception of the material weakness described in the preceding paragraph, are
effective to ensure that information required to be disclosed by us in the
reports that we file or submit under the Exchange Act is: (1) accumulated and
communicated to our management, including our chief executive officer and chief
financial officer, as appropriate to allow timely decisions regarding required
disclosure; and (2) recorded, processed, summarized and reported, within the
time periods specified in the Commission's rules and forms.





Management’s
Report on Internal Control over Financial Reporting





This
annual report does not include a report of management's assessment regarding
internal control over financial reporting or an attestation report of the
company's registered public accounting firm due to a transition period
established by rules of the Securities and Exchange Commission for newly public
companies.








ITEM
9B.       OTHER INFORMATION.





None.





19




PART
III





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





The
following table sets forth information about our executive officers, key
employees and directors as of January 9, 2008.




Name
            
            Age
            
            PositionScott
      Mitchell Rosenberg
            
            45
            
            Chairman
      & Chief Executive OfficerBrian
      Kenneth Altounian
            
            44
            
            President,
      Chief Operating Officer and DirectorJill
      Zimmerman
            
            45
            
            DirectorHelene
      Pretsky
            
            44
            
            Corporate
      Secretary and General Counsel


__________________




Scott Rosenberg has been our
Chairman and Chief Executive Officer since September 15, 2006 and Mr. Rosenberg
served as the Chairman and Chief Executive Officer of Platinum Studios, LLC, our
predecessor, since November 1996.   Mr. Rosenberg established
Platinum Studios, LLC in 1996 following a successful, high-profile career in the
comic book industry. As founder and head of Malibu Comics, Rosenberg produced
the Men In Black comic
book, which he took to Sony to become a billion-dollar film franchise. At
Malibu, Rosenberg developed an innovative grass-roots marketing approach,
reaching out directly to fans, retailers, and press to allow Malibu to be
distributed alongside top industry players at a fraction of what the major
companies spent—notably, in the pre-Internet age, without the opportunities and
advantages provided by the web. Malibu’s marketing savvy and ability to create
and develop new characters and new ideas led to a fierce bidding war to acquire
the company, and in 1994 Malibu was bought by Marvel Comics. Mr. Rosenberg holds
an undergraduate degree from the University of Denver.





Brian Altounian has been our
Chief Operating Officer since June 2005 and was appointed to serve as President
and Director in September 2006. Mr. Altounian's background includes business
development, finance, operations and administration and he has applied those
skills to a variety of start-ups, Fortune 100 companies, and public and private
organizations. Mr. Altounian has worked extensively in the entertainment and
high-tech industries, the bread and butter of Los Angeles' commercial
culture.





From May,
2005 through mid-January, 2008, he sat on the Board of Directors of Cereplast,
Inc. (CERP.OTC), a manufacturer of proprietary bio-based, renewable plastics,
where he has also served as the Audit Committee Chairman.  From
August, 2004 through June, 2006, he sat on the Board of Directors of Machine
Talker (MTKN.OTC), which has created a breakthrough technology in smart security
wireless networks.  From May, 2003 through June, 2006, he sat as
Chairman of the Board of Directors of XsunX, Inc. (XSNX.OTC), a developer of
revolutionary thin film photovoltaic solar cell technology. His expertise is in
the area of developing corporate infrastructure and assisting early-stage
companies to execute on their business plans and grow, often through the access
of capital through the public equity markets and from December, 2003 through
June, 2007, he has provided advisory support to a number of these early-stage
technology companies such as Warp9 (WNYN.OTC), Imaging3, Inc. (IMGG.OTC),
BioSolar, Inc (BSRC.OTC), Carbon Sciences, Inc. (CABN.OTC) and Origin Oil, Inc.
(private).  His first foray in the high-tech space came as Executive
Vice President of Main Course Technologies, a wireless applications developer
which he co-founded in January 2000 and ran until May, 2003.







Prior to his adventures in the high-tech arena, Mr. Altounian
spent 12 years in the entertainment industry with a successful consulting
practice, advising entertainment companies in the areas of finance,
administration, operations and business development. His clients have included
Disney Interactive, Two Oceans Entertainment Group, The Santa Barbara Grand
Opera Association, International Documentary Association, In-Finn-Ity
Productions and many others.  He also held senior management positions
in-house at Lynch Entertainment, a television production company where he held
the position of Vice President, Finance from January 1998 through December
1999;  Time Warner Interactive, a CD-ROM and interactive game company
where he served as Vice President, Finance from July, 1995 – May, 1996; National
Geographic Television, serving as Finance Director for this world-renown
documentary film production company, specifically for the National Geographic
Specials for the NBC Television Network from July, 1992 – June, 1996; and from
1987 through June, 1992, as Business Services Manager for WQED, the country’s
first community-owned Public Television stations where he oversaw the finances
and operations for numerous television documentary series.





Most
recently, he was Consulting Producer on Random 1, a reality
television series that debuted in November 2005 on the A&E Network and
Executive Producer on the documentary feature film Lost in Woonsocket
..  Mr. Altounian also recently founded a non-profit media
organization, Lost & Found in America, Inc., where he currently sits as
Chairman of the Board for this company that creates media projects that support
local community-based non-profit groups serving underserved segments of the US
population.





Mr.
Altounian holds an MBA from Pepperdine University and an undergraduate degree
from UCLA.




Jill M. Zimmerman has been a
director since September 16, 2006.  Since May 2005, Ms. Zimmerman has
served as a Vice President at the Alford Group, a consulting firm based in
Evanston, Illinois. Ms. Zimmerman previously served as a Crisis Program
Supervisor and Director of Development at Alternatives, Inc. a not-for profit
corporation from November 1994 through May 2005. Ms. Zimmerman holds a Bachelor
of Arts from the University of California at Santa Barbara and a Masters degree
from the University of Chicago.




Helene Pretsky has been our
general counsel since January, 2006 and our corporate secretary and Executive
Vice President since October 1 2006. Ms. Pretsky, a securities/corporate
attorney with expertise in intellectual property, has focused her twenty-year
legal career on representing start-up, early-stage revenue companies in the
high-tech, emerging technologies and entertainment industries. Ms Pretsky was an
associate at Brobeck, Phleger & Harrison from 1987 to 1994,  and
associate at Kinsella, Boesch, Fujikawa & Towle from 1994 to 2000 where
Ms. Pretsky provided the full range of corporate representation for private and
public companies, including public offerings, private placements, mergers and
acquisitions and preferred stock financings; complex patent, trade secret,
copyright and trademark licensing and protection agreements; cooperative
research, development and commercialization agreements; and domestic and
international distribution and sales arrangements. From 2000 to 2005, Ms.
Pretsky served as General Counsel and VP of Business Affairs of Virtual Fonlink,
Inc., a cutting edge mobile payment services hardware and software solutions
company, which she also co-founded.  Ms. Pretsky provided the full range of
corporate and securities work for such company, including preparation and
negotiation of private placements, technology development and license agreements
and strategic partnership contracts with Motorola, Nextel, Sprint, SAfeNet and
TNS. She was also instrumental in creating the company's overall business and
intellectual property strategies.




Ms.
Pretsky, a magna cum laude, Phi Beta Kappa graduate of the University of
California, Los Angeles, received her J.D. from the UCLA School of Law, where
she graduated in the top 15% of her class and was a member of its prestigious
Law Review.





20








SIGNIFICANT
EMPLOYEES




Norman
“Hank” Lambert
 Executive
Vice President, Business Development
 Hank
Lambert came to Platinum as VP of Business Development in November 2006 and has
served as Executive Vice President, Business Development since August 2007. From
1995 through 2006, as CEO of 3Notch, Inc., Mr. Lambert consulted with C-level
executives and start-up entrepreneurs developing new strategic initiatives and
business models for organizations such as Dot Hill Systems, TeraGlobal
Communications, Universal Home Video, New South Federal Savings Bank, and Mother
and Me. In addition to strategy development services, 3Notch, Inc provided
implementation and execution strategies for their clients and shared in the
revenue growth they generated.


Mr.
Lambert has a BS degree in Business from the University of Alabama and his MBA
from the University of Southern California.





Sean
O’Reilly


Vice
President, Publishing and Animation


Sean
O’Reilly joined Platinum Studios as VP, Publishing & Animation in August,
2007.  In 2004, Sean created Arcana Studios, where he released five
original comic titles, all of which have now been translated and distributed
throughout the world.  The company won the Shuster Award for
Outstanding Publisher, as voted by the retailers and readers throughout
Canada.  Arcana Studio was nominated for a Harvey Award in its first
year, a feat unprecedented in the quarter century tenure of the
award.





Sean
earned his B.Sc. in Biology from Simon Fraser University in Vancouver, B.C.
Canada in 1997.  Sean received a second degree in 1999 with his B.Ed.
from the University of British Columbia in Vancouver, B.C. and then completed
his M.Sc. in Leadership and Administration at the University of Oregon in 2002.
Sean is currently pursuing his Ph.D. in a Doctoral of Management Information
Services and Technology.





Richard
Marincic


Director
of Film/Television Development


Mr.
Marincic also worked in the literary management department of Management 360,
whose client roster includes Toby Maguire, Reese Witherspoon, director James
Mangold ( Walk the Line
), and director Frank Coraci ( Wedding Singer ). Mr.
Marincic worked at the company from the day it opened the doors of its Beverly
Hills offices until he started with Platinum Studios, in 2004.  He has
worked in almost all aspects of the Film and TV business over the last decade
including a stint as Associate Producer Bravo in 2003, Production Assistant for
Spelling Entertainment in 2000 and various other production positions since
June, 1999.





Mr.
Marincic earned his Bachelors degrees in Television and Film Production as well
as Theater from Southern Illinois University in 1999. He has also written and
directed several plays in his hometown of Chicago.





Dan
Forcey


Vice
President, Content Development


Mr.
Forcey has served as Platinum’s Vice President of Content Development since
January of 2007.  Prior to that, he served as Platinum’s Communications
Manager from December of 2002, coordinating their public relations efforts and
managing multiple websites for the company, including the corporate site
platinumstudios.com, the fan portal, jeremiahportal.com, and the Unique
Experience alternative reality game.




For the
past 10 years, Mr. Forcey has worked extensively across the United States
and Canada as a stuntman, fight choreographer, and teacher of movement and stage
combat and is a world-recognized expert in fencing and swordfighting. Mr. Forcey
's stunt work includes multiple television shows and feature films both in the
U.S. and abroad, including Oscar-nominated movies like Master and Commander: The Far Side
of the World , Flags of
Our Fathers, and Letters from Iwo Jima
..





From 1997
through 2002, Mr. Forcey has held faculty positions at York University, the
Centre for Indigenous Theatre, the University of Southern California, Cal State
University, Long Beach, Cal Poly Pomona, and the Cerritos Center for the
Performing Arts. During his various tenures, he has instructed students in
acting, movement for actors, stage combat and clowning.





On 1996,
Mr. Forcey graduated cum laude from the University of Southern California with
an undergraduate degree in theatre with a minor in
philosophy.   Mr. Forcey graduated Magna cum laude from York
University while receiving his graduate degree in acting and movement, writing
his master's thesis on the use of the British quarterstaff.





Zachary
Pennington


Vice
President, Creative Design


Mr.
Pennington is a multiple award-winning designer, editor and art director who has
spent the last 14 years designing projects for both the entertainment and
Internet industries and has worked on projects for almost every major studio in
Hollywood. Prior to joining Platinum Studios in 2006 he was Senior Art Director
at The Cimarron Group from 2002-2006, an advertising agency serving the
entertainment industry.   From 1998 to 2002 he worked as a freelance
art director and creative director for entertainment agencies and Internet
companies, including NeoPets, an on-line community games site, and CUShopper, an
Inc 500 company.





Mr.
Pennington’s designs have earned him acclaim and numerous awards including a
Hollywood Reporter Key Art Award and three nominations, an Andy Award and two
nominations, and a feature in Print Magazine’s The Big Event. His work includes
the home video and DVD campaigns for To Kill a Mockingbird, Rocky 1-5, The Omen (the film
collection), X-Men 1, 2 and 3, Minority Report, Casino, Dune, The Bourne
Supremacy, Dawn of the Dead (2004), Night of the Living Dead, Million Dollar
Baby, Platoon, The Terminator, Fantastic Four, The Devil Wears Prada, The
Sentinel, Look, Up in the Sky! The Amazing Story of Superman, the
best-selling Riddick
Trilogy and the multi-award-wining campaign for The Texas Chainsaw Massacre
as well as the multi-award winning campaign for Titanic. He also received
much acclaim for his work designing the DVD release of the original Star Wars
Trilogy.




Amongst the many theatrical campaigns he has worked on are
Disney’s Mulan, Hercules, The
Little Mermaid , as well as Species, Saw 3, Blue Streak
and Ripley Under Ground
..   Mr. Pennington is also well respected in the entertainment
and comic book industries for his work for the Independent Spirit Awards and the
Hero Initiative.





21


CONFLICT
OF INTEREST





Our
officers and directors devote 100% of their time to our business.  Our Chief Executive
officer, Scott Mitchell Rosenberg , is permitted to enter into separate producer
agreements for our productions through his own loan-out corporation, Scott
Mitchell Rosenberg Productions, Inc., provided that all compensation that he
receives through these agreements are considered as compensation he receives as
CEO of the Company and therefore taken into account in setting his annual
compensation. The Producer agreements are standard in the industry for heads of
media companies and in no way can negatively impact, impede or affect the
Company’s ability to make deals with production companies for its properties.
Mr. Rosenberg did not receive any compensation under this arrangement for the
years ended December 31, 2005 and 2006. A loan-out company is use in the
entertainment industry and is used for actors, musicians, directors, producers,
writers and other key individuals. In a typical loan-out company arrangement,
the individual forms the corporation which he controls. The corporation hires
the individual with the salary to be set from time to time to reflect the
activity of the corporation. Instead of the individual being hired directly, a
deal is made with the loan-out company which in turn lends the services of its
employee. In order to give the hiring company comfort that the individual will
be committed to doing the work the individual may be asked to sign an inducement
letter, which confirms that he or she will look only to the loan-out corporation
for compensation.





TERM
OF OFFICE





Pursuant
to our bylaws, our directors are elected at our annual meeting of stockholders
and each director holds office until his successor is elected and qualified.
Officers are elected by our Board of Directors and hold office until an
officer's successor has been duly appointed and qualified unless an officer
sooner dies, resigns or is removed by the Board.





COMMITTEES
OF THE BOARD




We
currently do not have an audit committee, compensation committee, nominations
and governance committee of our board of directors.





FAMILY
RELATIONSHIPS




There are
no family relationships among our executive officers and directors.




CODE
OF ETHICS




We have
adopted our Code of Ethics and Business Conduct for Officers, Directors and
Employees that applies to all of our executive officers and directors. Our Code
of Business Conduct and Ethics is posted on our corporate website at www.platinumstudios.com, under the
corporate tab on the Company’s home page.  Upon request, we will
provide to any person without charge a copy of our Code of Ethics. Any such
request should be made to the Company, 11400 W. Olympic Blvd. 14th Floor,
Los Angeles, California, 90064, and Attention: Brian Altounian.





ITEM
11.     EXECUTIVE COMPENSATION.





The
following table sets forth the compensation paid or accrued by us to our Chief
Executive Officer and President and Chief Operating Officer and each of our
other officers whose compensation exceeded $100,000 for each of the Company’s
last two completed fiscal years.





Name
      and
              Principal
      Position
            Year
            
            Salary ($)
            
            
            Bonus
      ($)
            
            
            Stock Awards
      ($)
            
            
            Option Awards
      ($)
            
            
            Non-Equity Incentive Plan
      Compensation ($)
            
            
            Change in Pension Value and
      Non-Qualified Deferred Compensation Earnings ($)
            
            
            All
      Other Compensation ($)
            
            
            Total ($)Scott  Mitchell
      Rosenberg,
            2007
            
            $
            300,000
            (1)
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            $
            300,000CEO
            2006
            
            
            34,615
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            $
            34,6152005
            
            $
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -Brian
      K. Altounian,
            2007
            
            $
            300,000
            (2)
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            $
            300,000President/COO
            2006
            
            $
            299,039
            (3)
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            $
            299,0392005
            
            $
            63,961
            (4)
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            $
            63,961Helene
      Pretsky, EVP
            2007
            
            $
            185,000
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            $
            185,000Bus.
      Affairs
            2006
            
            $
            161,187
            (5)
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            $
            161,1872005
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -




(1)
$300,000 of Mr. Rosenberg’s 2007 salary was deferred.


(2)
$300,000 of Mr. Altounian’s 2007 salary was deferred.


(3)
$250,000 (of which 243,079 was deferred) of Mr. Altounian’s compensation
for 2006 was paid in his capacity as an independent contractor, $49,039 as paid
in his capacity as an employee of the Company.


(4) Mr.
Altounian’s compensation for 2005 was paid in his capacity as an independent
contractor.


(5)
$130,417 of Ms. Pretsky’s compensation in 2006 was paid in her capacity as an
independent contractor and $30,770 in her capacity as an employee of the
Company.





22


Outstanding
Equity Awards at Fiscal Year-End Table.





The
following table sets forth information with respect to grants of options to
purchase our common stock to the named executive officers at December 31,
2006.





Option
      Awards
            
            Stock
      AwardsName
            
            Number of
              Securities
              Underlying
              Unexercised
              Options
      (#) Exercisable
            
            Number of
              Securities
              Underlying
              Unexercised
              Options
      (#) Unexercisable
            
            Equity
              Incentive
              Plan
      Awards:
              Number
      of
              Securities
      Underlying
              Unexercised
              Unearned
              Options
      (#)
            
            Option
              Exercise
              Price
      ($)
            
            Option
              Expiration
              Date
            
            Number of Shares or Units of Stock That Have Not
              Vested
      (#)
            
            Market Value of Shares or Units of Stock That Have Not
              Vested
      ($)
            
            Equity
              Incentive
              Plan
      Awards: Number of
              Unearned
              Shares,
              Units
      or
              Other
      Rights
              That
      Have
              Not
              Vested
      (#)
            
            Equity Incentive
              Plan
      Awards:
              Market
      or Payout
              Value
      of
              Unearned
              Shares,
      Units or
              Other
              Rights
              That
      Have
              Not
              Vested
      ($)Scott
      Mitchell Rosenberg
            
            
            -0-
            
            
            -0-
            
            
            -0-
            
            
            -0-
            
            
            -0-
            
            
            -0-
            
            
            -0-
            
            
            -0-
            
            
            -0-Brian
      Altounian
            
            
            -0-
            
            
            -0-
            
            
            -0-
            
            
            -0-
            
            
            -0-
            
            
            -0-
            
            
            -0-
            
            
            -0-
            
            
            -0-






Director
Compensation





The
following table sets forth with respect to the named directors, compensation
information inclusive of equity awards and payments made for the fiscal year
ended December 31, 2006.




Name
        (a)
            
            Fees
      Earned or Paid in Cash   ($)   (b)
            
            Stock
      Awards   ($)   (c)
            
            Option
        Awards ($)   (d)
            
            Non-Equity
      Incentive Plan Compensation ($)   (e)
            
            Change
      in Pension Value and Nonqualified Deferred Compensation Earnings  
      (f)
            
            All
      Other Compensation   ($)   (g)
            
            Total
        ($)   (h)Scott
      Mitchell Rosenberg
            
            
            -0-
            
            
            -0-
            
            
            -0-
            
            
            -0-
            
            
            -0-
            
            
            -0-
            
            
            -0-Brian
      Altounian
            
            
            -0-
            
            
            -0-
            
            
            -0-
            
            
            -0-
            
            
            -0-
            
            
            -0-
            
            
            -0-Jill
      Zimmerman
            
            
            -0-
            
            
            -0-
            
            
            -0-
            
            
            -0-
            
            
            -0-
            
            
            -0-
            
            
            -0-




EMPLOYMENT
AGREEMENTS




We currently
have no employment agreements with our executive officers.





23








SECURITIES
AUTHORIZED FOR ISSUANCE UNDER EQUITY COMPENSATION PLANS





EQUITY
COMPENSATION PLAN INFORMATION





The
following table shows information with respect to each equity compensation plan
under which our common stock is authorized for issuance as from inception
(November 20, 1996) through December 31, 2007.





Plan
      category
            Number
      of securities
              to
      be issued upon
              exercise
      of
              outstanding
      options,
              warrants
      and rights
            Weighted
      average
              exercise
      price of
              outstanding
      options,
              warrants
      and rights
            Number
      of securities
              remaining
      available for future issuance under equity compensation plans (excluding
      securities reflected in column (a)(a)
            (b)
            (c)Equity
      compensation plans approved by security holders
            -0-
            -0-
            30,000,000Equity
      compensation plans not approved by security holders
            -0-
            -0-
            -0-Total
            -0-
            -0-
            30,000,000





24


Description of the Platinum Studios,
Inc. 2007 Incentive Plan




The
Platinum Studios, Inc. 2007 Incentive Plan (the “Plan”) has initially reserved
30,000,000 shares of common Stock for issuance. Under the Plan, options may be
granted which are intended to qualify as Incentive Stock Options ("ISOs") under
Section 422 of the Internal Revenue Code of 1986 (the "Code") or which are not
("Non-ISOs") intended to qualify as Incentive Stock Options thereunder. In
addition, direct grants of stock or restricted stock may be
awarded.




Purpose . The primary
purpose of the Plan is to attract and retain the best available personnel in
order to promote the success of our business and to facilitate the ownership of
our stock by employees and others who provide services to us.




Administration . The
Plan is administered by the compensation committee of our Board of Directors,
for any period in which the Company is subject to the reporting requirements of
the Exchange Act shall consist of not less than two members of the Board each of
whom shall qualify as non-employee directors.




Eligibility .  Under the
Plan, options may be granted to employees, directors or consultants of the
Company, as provided in the Plan.




Terms of Options .
The term of each option granted under the Plan shall be for such period as may
be determined by the Committee but not to exceed ten years. Each option
grants shall be contained in a stock option agreement between the optionee
and Platinum Studios and such terms shall be determined by the Board of
Directors consistent with the provisions of the Plan, including the
following:




(a)
Purchase Price. The purchase price of the common stock subject to each stock
option shall be determined by the Committee at the time the Option is granted
but shall not be less than 100% fair market value on the date of grant. If any
Employee to whom an option that is an incentive stock option is granted owns
stock possessing more than ten percent (10%) of the total combined voting power
of all classes of stock of the Company or any parent corporation, within the
meaning of Section 424(e) of the Internal Revenue Code of 1986 (the “Code”), or
any subsidiary corporation of the Company, within the meaning of Section 424(f)
of the Code, then the exercise price per share shall not be less than one
hundred ten percent (110%) of the fair market value per share on the date of
grant and the option term shall not exceed five (5) years measured from the date
of grant.




(b)
Vesting. The dates on which each option (or portion thereof) shall be
exercisable and the conditions precedent to such exercise, if any, shall be
fixed by the Committee, in its discretion, at the time such option is granted.
All options or grants which include a vesting schedule will vest in their
entirety upon a change of control transaction as described in the
Plan;





(c)
Expiration. The expiration of each option shall be fixed by the Committee, in
its discretion.








25





Item
12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT





The
following table sets forth, as of January 18, 2008, the number of and percent of
our common stock beneficially owned by:




·
            all
      directors and nominees, naming
them,




·
            our
      executive officers,




·
            our
      directors and executive officers as a group, without naming them,
      and




·
            persons
      or groups known by us to own beneficially 5% or more of our common
      stock:




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.




A person
is deemed to be the beneficial owner of securities that can be acquired by him
within 60 days from January 18, 2008 upon the exercise of options, warrants or
convertible securities. Each beneficial owner's percentage ownership is
determined by assuming that options, warrants or convertible securities that are
held by him, but not those held by any other person, and which are exercisable
within 60 days of January 18, 2008 have been exercised and
converted.




Title
      of Class
            
            Name
      of
              Beneficial
      Owner
            
            Number
      of Shares
              Beneficially
      Owned
            
            Percent
      of TotalCommon
      Stock
            
            Scott
      Rosenberg (1)
            
            
            128,250,000
            
            
            63.7%Common
      Stock
            
            Brian
      Altounian (2)
            
            
            19,940,000
            
            
            9.2%Common
      Stock
            
            Jill
      Zimmerman (3)
            
            
            500,000
            
            
            *Common
      Stock
            
            Helene
      Pretsky (4)
            
            
            8,000,000
            
            
            3.7%Common
      Stock
            
            Charlotte
      Rosenberg
            
            
            17,208,575
            
            
            8.6%Common
      Stock
            
            All
      Executive Officers and Directors as a Group (3 persons )
            
            
            135,000,000
            
            
            76.6%




*Less
than one percent.





(1)
            Includes
      135,000 shares of common stock beneficially owned by Pamela Rosenberg, the
      wife of Scott Rosenberg. Mr. Rosenberg disclaims beneficial ownership of
      these shares.  Also includes 16,875,000 shared held by the Scott
      Mitchell Rosenberg GRIT, of which Mr. Rosenberg is the
      Trustee.(2)
            Includes
      6,750,000 shares previously owned by Brian Altounian as well as 5,250,000
      shares of restricted stock granted January 9, 2008 under the Company’s
      2007 Employee Incentive Program and 7,965,000 options granted on January
      9, 2008 under the Company’s 2007 Employee Incentive Program which are
      fully vested and presently exercisable.(3)
            Jill
      Zimmerman was granted 500,000 options on January 9, 2008 under the
      Company’s 2007 Employee Incentive Program, which are fully vested and
      presently exercisable.(4)
            Includes
      2,000,000 shares of restricted stock granted January 9, 2008 under the
      Company’s 2007 Employee Incentive Program and 6,000,000 options granted on
      January 9, 2008 under the Company’s 2007 Employee Incentive Program which
      are fully vested and presently
exercisable.








26





ITEM
13.       CERTAIN RELATIONSHIPS AND RELATED
TRANSACTIONS.







We have
an exclusive option to enter licensing/acquisition of rights agreements for
individual characters, subject to existing third party rights, within the RIP
Awesome Library of RIP Media, Inc., a related entity in which Scott Rosenberg is
a majority shareholder. The Company did not exercise this right during the years
ended December 31, 2006 and 2005.





Our Chief
Executive officer, Scott Mitchell Rosenberg, is permitted to enter into separate
producer agreements for our productions through his own loan-out corporation,
Scott Mitchell Rosenberg Productions, Inc., provided that all compensation that
he receives through these agreements are considered as compensation he receives
as CEO of the Company and therefore taken into account in setting his annual
compensation. The Producer agreements are standard in the industry for heads of
media companies and in no way can negatively impact, impede or affect the
Company’s ability to make deals with production companies for its
properties.  Mr. Rosenberg did not receive any compensation under this
arrangement for the years ended December 31, 2005 and 2006.







At
December 31, 2005, we owed RIP Media $20,000 in uncollateralized
loans.  During 2006, we repaid in full the $20,000 uncollateralized
loans received during 2004. These loans accrued interest at 5% and 6% for the
years ended December 31, 2005 and 2006, respectively.





At
December 31, 2007, we owed $193,079 to Brian Altounian for consulting services
provided prior to his employment.








ITEM
14.         PRINCIPAL ACCOUNTANT FEES
AND SERVICES.





AUDIT
FEES





The
aggregate fees billed for professional services rendered by our principal
accountants for the audit of our financial statements, for the reviews of the
financial statements included in our annual report on Form 10-KSB, and for other
services normally provided in connection with statutory filings were $71,133 and
$30,000 for the years ended December 31, 2007 and December 31, 2006,
respectively.





AUDIT-RELATED
FEES





We did
not incur any audit-related fees rendered by our principal accountants during
the years ended December 31, 2007 and December 31, 2006.





ALL
OTHER FEES





We did
not incur any fees for other professional services rendered by our principal
accountants during the years ended December 31, 2007 and December 31,
2006.





AUDIT
COMMITTEE PRE-APPROVAL POLICIES AND PROCEDURES





The board
of directors acts as the audit committee, and consults with respect to audit
policy, choice of auditors, and approval of out of the ordinary financial
transactions.





27


ITEM
15.      EXHIBITS.








Exhibit
      No.
            
            Description3.1
            
            Articles
      of Incorporation of Platinum Studios, Inc. filed with the Secretary of
      State of the State of California on September 15, 2006. (Incorporated by
      reference to the Registrant’s registration statement on Form SB-2 as filed
      on September 4, 2007)3.2
            
            Certificate
      of Amendment of Articles of Incorporation filed with the Secretary of
      State of the State of California on October 16, 2006 (Incorporated by
      reference to the Registrant’s registration statement on Form SB-2 as filed
      on September 4, 2007)3.3
            
            Bylaws
      of Platinum Studios, Inc. (Incorporated by reference to the Registrant’s
      registration statement on Form SB-2 as filed on September 4,
      2007)4.1
            
            Platinum
      Studios, Inc. 2007 Incentive Plan (Incorporated by reference to the
      Registrant’s registration statement on Form SB-2 as filed on October 31,
      2007)5.1
            
            Opinion
      of Sichenzia Ross Friedman Ference LLP. * (Incorporated by reference
      to the Registrant’s registration statement on From SB-2 as filed on
      December 14, 2007)10.1
            
            Form
      of Subscription Agreement dated as of October 12, 2006. (Incorporated by
      reference to the Registrant’s registration statement on Form SB-2 as filed
      on September 4, 2007)10.2
            
            Distribution
      Agreement between Platinum Studios, Inc. and Top Cow Productions, Inc.
      effective as of January 1, 2007 (Incorporated by reference to the
      Registrant’s registration statement on Form SB-2 as filed on October 31,
      2007)10.3
            
            Publisher
      Distribution Agreement between Ingram Periodicals Inc. and Platinum
      Studios, Inc.  dated as of 7/13/07 (Incorporated by reference to
      the Registrant’s registration statement on Form SB-2 as filed on October
      31, 2007)10.4
            
            Co-Development,
      Financing and Production Agreement dated as of December 19, 2006 between
      Platinum Studios, Inc. and Arclight Films International PTY, LTD.
      (Incorporated by reference to the Registrant’s registration statement on
      Form SB-2 as filed on October 31, 2007)10.5
            
            Cancellation
      of Indebtedness Agreement dates as of July 1, 2007 (Incorporated by
      reference to the Registrant’s registration statement on Form SB-2 as filed
      on September 4, 2007)10.6
            
            Option
      Agreement between Platinum Studios, LLC and Top Cow Productions dated as
      of August 1, 2004. (Incorporated by reference to the Registrant’s
      registration statement on Form SB-2 as filed on October 31,
      2007)10.7
            
            Publishing
      License Agreement between Kiss Catalog Ltd. and Platinum Studios LLC dated
      April 28, 2005. (Incorporated by reference to the Registrant’s
      registration statement on Form SB-2 as filed on October 31,
      2007)10.8
            
            Lease
      Agreement between Douglas Emmett 1995, LLC and Platinum Studios, LLC dated
      July 10, 2006. (Incorporated by reference to the Registrant’s registration
      statement on Form SB-2 as filed on October 31, 2007)10.9
            
            Bonelli
      Rights Agreements dated as of July 2, 1997. (Incorporated by reference to
      the Registrant’s registration statement on Form SB-2 as filed on October
      31, 2007)10.10
            
            Agreement
      between Diamond Comic Distributors, Inc. and Platinum Studios, Inc. dated
      August 30, 2007. (Incorporated by reference to the Registrant’s
      registration statement on Form SB-2 as filed on October 31,
      2007)10.11
            
            Licensing
      Services and Sponsorship Agreement dated May 29, 2007 between AT&T and
      Platinum Studios, Inc. (Incorporated by reference to the Registrant’s
      registration statement on Form SB-2 as filed on October 31,
      2007)10.12
            
            Option
      Agreement dated September 16, 2006 by and among Scott Mitchell Rosenberg,
      RIP Media and Platinum Studios, Inc. (Incorporated by reference to the
      Registrant’s registration statement on Form SB-2 as filed on October 31,
      2007)





10.13
            
            Agreement
      with Escape Artists Productions, LLC dated as of February 15, 2002
      (Incorporated by reference to the Registrant’s registration statement on
      Form SB-2 as filed on October 31, 2007)10.14
            
            Option
      Acquisition of Rights Agreement with Walt Disney Pictures dated as of
      December 11, 2003 (Incorporated by reference to the Registrant’s
      registration statement on Form SB-2 as filed on October 31,
      2007)10.15
            
            Title
      and Option Agreement with Dimensions Films dated as of November 2, 2004
      (Incorporated by reference to the Registrant’s registration statement on
      Form SB-2 as filed on October 31, 2007)10.16
            
            First
      Look Agreement with Miramax Film Corp dated as of December 15, 1998.
      (Incorporated by reference to the Registrant’s registration statement on
      Form SB-2 as filed on October 31, 2007)31.1*
            
            Certification
      by Chief Executive Officer, required by Rule 13a-14(a) or Rule 15d-14(a)
      of the Exchange Act31.2*
            
            Certification
      by Interim Chief Financial Officer, required by Rule 13a-14(a) or Rule
      15d-14(a) of the Exchange Act32.1*
            
            Certification
      by Chief Executive Officer, required by Rule 13a-14(b) or Rule 15d-14(b)
      of the Exchange Act and Section 1350 of Chapter 63 of Title 18 of the
      United States Code32.2*
            
            Certification
      by Interim Chief Financial Officer, required by Rule 13a-14(b) or Rule
      15d-14(b) of the Exchange Act and Section 1350 of Chapter 63 of Title 18
      of the United States Code


*Filed herewith






28




SIGNATURES





In
accordance with Section 13 or 15(d) of the Exchange Act, the registrant caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Los Angeles, State of California, on
March  31, 2008.




Platinum
      Studios, Inc.By:
            /s/
      Scott Mitchell RosenbergScott
      Mitchell RosenbergChief
      Executive Officerand
      Chairman of the BoardBy:
            /s/
      Brian AltounianBrian
      AltounianPresident,
      Chief Operating Officer
              &
      Principal Financial and Accounting Officer





Pursuant
to the requirements of the Securities Act of 1933, this registration statement
has been signed by the following persons in the capacities and on the date
indicated:




Signature
            Title
            Date/s/ Scott Mitchell Rosenberg
              
              Scott
      Mitchell Rosenberg
            Chief
      Executive Officer and Chairman of the Board
            March
      31, 2008/s/Brian
      Altounian
              Brian
      Altounian
            President,
      Chief Operating Officer
              &
      Principal Financial and Accounting Officer
            March
      31, 2008/s/ Jill Zimmerman
              Jill
      Zimmerman
            Director
            March
      31, 2008


29





REPORT OF INDEPENDENT
REGISTERED PUBLIC ACCOUNTING FIRM





To the
Board of Directors


Platinum
Studios, Inc.


Los
Angeles, California





We have
audited the balance sheets of Platinum Studios, Inc. as of December 31, 2007 and
2006, and the related statements of operations, stockholders’ deficit and cash
flows for each of the years ended December 31, 2007, 2006 and
2005.  These financial statements are the responsibility of the
Company's management.  Our responsibility is to express an opinion on
these financial statements based on our audits.





We
conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States).  Those standards require
that we plan and perform the audit to obtain reasonable assurance about whether
the 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 financial statements referred to above present fairly, in all
material respects, the financial position of Platinum Studios, Inc. as of
December 31, 2007 and 2006, and the results of their operations and their cash
flows for each of the years ended December 31, 2007, 2006 and 2005, in
conformity with U.S. generally accepted accounting principles.





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
which have resulted in a significant accumulated deficit.  This raises
substantial doubt about the Company's ability to continue as a going
concern.  Management's plans in regard to these matters are also
described in Note 2.  The financial statements do not include any
adjustments that might result from the outcome of this uncertainty.








/s/ HJ
Associates & Consultants, LLP





HJ
Associates & Consultants, LLP


Salt Lake
City, Utah


March 29,
2008


F-1





PLATINUM
STUDIOS, INC





BALANCE
SHEETS




December
      31, 2007
              
              
              December
      31, 2006ASSETSCurrent
      assets:Cash
      and cash equivalents
              
              $
              4,445
              
              
              $
              331,435Accounts
      receivable
              
              
              44,695
              
              
              
              -Other
      receivable
              
              
              20,000
              
              
              
              -Prepaid
      expenses
              
              
              109,124
              
              
              
              105,603Inventory
              
              
              59,528
              
              
              
              -Other
      current assets
              
              
              -
              
              
              
              12,100Total
      current assets
              
              
              237,792
              
              
              
              449,138Property
      and equipment, net
              
              
              257,130
              
              
              
              268,981Web
      sites
              
              
              40,000
              
              
              
              64,000Character
      rights, net
              
              
              228,261
              
              
              
              319,565Deposits
      and other
              
              
              39,118
              
              
              
              39,404Total
      assets
              
              $
              802,301
              
              
              $
              1,141,088LIABILITIES AND
      STOCKHOLDERS' DEFICITCurrent
      liabilities:Accounts
      payable
              
              $
              663,848
              
              
              $
              231,849Accrued
      expenses and other current liabilities
              
              
              788,868
              
              
              
              192,118Bank
      overdraft
              
              
              89,665
              
              
              
              -Deferred
      revenue
              
              
              100,000
              
              
              
              750,000Short
      term notes payable
              
              
              1,889,908
              
              
              
              1,004,078Related
      party payable
              
              
              193,079
              
              
              
              243,079Capital
      leases payable, current
              
              
              73,282
              
              
              
              55,820Total
      current liabilities
              
              
              3,798,650
              
              
              
              2,476,944Long
      term notes payable to shareholder
              
              
              2,531,464
              
              
              
              3,326,107Accrued
      interest due to shareholder
              
              
              60,479
              
              
              
              75,031Capital
      leases payable, non-current
              
              
              106,395
              
              
              
              148,721Total
      liabilities
              
              
              6,496,988
              
              
              
              6,026,803Common
      stock, $.0001 par value; 500,000,000 shares authorized; 201,255,825 and
      158,056,000 issued and outstanding, respectively
              
              
              20,126
              
              
              
              15,806Additional
      paid in capital
              
              
              3,750,782
              
              
              
              (628,741
              )Accumulated
      deficit
              
              
              (9,465,595
              )
              
              
              (4,272,780
              )Total
      shareholders' deficit
              
              
              (5,694,687
              )
              
              
              (4,885,715
              )Total
      liabilities and shareholders' deficit
              
              $
              802,301
              
              
              $
              1,141,088







The
accompanying footnotes are an integral part of these financial
statements


F-2


PLATINUM
STUDIOS, INC.





STATEMENTS
OF OPERATIONS








Platinum
      Studios, Inc.
              
              
              Platinum
      Studios, LLCYears
      Ended December 31,2007
              
              
              2006
              
              
              2005Net
      revenue
              
              $
              1,956,054
              
              
              $
              180,500
              
              
              $
              162,500Costs
      and expenses:Cost
      of revenues (excluding depreciation expense)
              
              
              278,442
              
              
              
              -
              
              
              
              -Operating
      expenses
              
              
              5,176,142
              
              
              
              3,168,078
              
              
              
              1,607,672Research
      and development
              
              
              960,396
              
              
              
              764,282
              
              
              
              243,833Depreciation
      and amortization
              
              
              165,861
              
              
              
              73,486
              
              
              
              7,436Total
      costs and expenses
              
              
              6,580,841
              
              
              
              4,005,846
              
              
              
              1,858,941Operating
      loss
              
              
              (4,624,787
              )
              
              
              (3,825,346
              )
              
              
              (1,696,441
              )Other
      income (expense):Other
      income
              
              
              -
              
              
              
              2,571
              
              
              
              5,814Loss
      on disposition of assets
              
              
              (24,000
              )
              
              
              (33,260
              )
              
              
              -Interest
      income
              
              
              21
              
              
              
              -
              
              
              
              -Interest
      expense
              
              
              (544,049
              )
              
              
              (391,745
              )
              
              
              (390,288
              )Other
      expense
              
              
              -
              
              
              
              (25,000
              )
              
              
              -Total
      other income (expense):
              
              
              (568,028
              )
              
              
              (447,434
              )
              
              
              (384,474
              )Loss
      before provision for income taxes
              
              
              (5,192,815
              )
              
              
              (4,272,780
              )
              
              
              (2,080,915
              )Provision
      for income taxes
              
              
              -
              
              
              
              -
              
              
              
              -Net
      loss
              
              $
              (5,192,815
              )
              
              $
              (4,272,780
              )
              
              $
              (2,080,915
              )Basic
      and diluted loss per share:Net
      loss per share
              
              $
              (0.03
              )
              
              $
              (0.03
              )Basic
      and diluted weighted average shares
              
              
              201,255,825
              
              
              
              145,908,250





The
accompanying footnotes are an integral part of these financial
statements





F-3


PLATINUM
STUDIOS, INC.





STATEMENTS
OF STOCKHOLDERS’ DEFICIT





Three
Years Ended December 31, 2007





Members'
      Deficit
              
              
              Common
      Stock Shares
              
              
              Common
      Stock Amount
              
              
              Additional
      Paid-In Capital
              
              
              Retained
      Deficit
              
              
              TotalBalance
      at December 31, 2004
              
              $
              (7,068,677
              )
              
              
              -
              
              
              $
              -
              
              
              $
              -
              
              
              $
              -
              
              
              $
              (7,068,677
              )Net
      loss
              
              
              (2,080,915
              )
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              (2,080,915
              )Balance
      at December 31, 2005
              
              
              (9,149,592
              )
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              (9,149,592
              )Capital
      contribution - B. Altounian
              
              
              500,000
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              500,000Capital
      contribution - S. Rosenberg
              
              
              5,731,057
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              5,731,057Conversion
      of LLC interest to common stock
              
              
              2,918,535
              
              
              
              135,000,000
              
              
              
              13,500
              
              
              
              (2,932,035
              )
              
              
              -
              
              
              
              -Common
      stock issued in private placement at
                $0.10
      per share,0.0001
      par value
              
              
              -
              
              
              
              23,056,000
              
              
              
              2,306
              
              
              
              2,303,294
              
              
              
              -
              
              
              
              2,305,600Net
      loss
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              (4,272,780
              )
              
              
              (4,272,780
              )Balance
      at December 31, 2006
              
              
              -
              
              
              
              158,056,000
              
              
              
              15,806
              
              
              
              (628,741
              )
              
              
              (4,272,780
              )
              
              
              (4,885,715
              )Common
      stock issued in private placement at
                $0.10
      per share,$0.0001
      par value
              
              
              -
              
              
              
              25,991,250
              
              
              
              2,599
              
              
              
              2,596,526
              
              
              
              -
              
              
              
              2,599,125Common
      stock issued in debt conversion at
                $0.10
      per share,$0.0001
      par value
              
              
              -
              
              
              
              17,208,575
              
              
              
              1,721
              
              
              
              1,719,136
              
              
              
              -
              
              
              
              1,720,857Warrants
      issued for services
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              36,699
              
              
              
              -
              
              
              
              36,699Warrants
      issued for debt conversion
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              195,507
              
              
              
              -
              
              
              
              195,507Stock
      offering costs
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              (168,345
              )
              
              
              -
              
              
              
              (168,345
              )Net
      loss
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              (5,192,815
              )
              
              
              (5,192,815
              )Balance
      at December 31, 2007
              
              $
              -
              
              
              
              201,255,825
              
              
              $
              20,126
              
              
              $
              3,750,782
              
              
              $
              (9,465,595
              )
              
              $
              (5,694,687
              )


The
accompanying footnotes are an integral part of these financial
statements


F-4


PLATINUM
STUDIOS, INC.





STATEMENTS
OF CASH FLOWS





Year
      Ended December 31,2007
              
              
              2006
              
              
              2005Cash
      flows from operating activitiesNet
      loss
              
              $
              (5,192,815
              )
              
              $
              (4,272,780
              )
              
              $
              (2,080,915
              )Adjustments
      to reconcile net loss to net cash from operating
    activities:Depreciation
              
              
              74,557
              
              
              
              43,051
              
              
              
              7,436Amortization
              
              
              91,304
              
              
              
              30,435
              
              
              
              -Loss
      on disposal of assets
              
              
              24,000
              
              
              
              33,260
              
              
              
              -Warrants
      issued for services and debt conversion
              
              
              232,206
              
              
              
              -
              
              
              
              -Decrease
      (increase) in operating assets:Accounts
      receivable
              
              
              (44,695
              )
              
              
              -
              
              
              
              -Other
      receivable
              
              
              (20,000
              )
              
              
              -
              
              
              
              -Inventories
              
              
              (59,528
              )
              
              
              -
              
              
              
              -Prepaid
      expenses and other current assets
              
              
              9,865
              
              
              
              (7,918
              )
              
              
              (89,544
              )Other
      assets
              
              
              -
              
              
              
              (113,943
              )
              
              
              322,649Increase
      (decrease) in operating liabilities:Accounts
      payable
              
              
              449,497
              
              
              
              92,381
              
              
              
              29,667Accounts
      payable related party
              
              
              (50,000
              )
              
              
              243,079
              
              
              
              -Bank
      overdraft
              
              
              89,665
              
              
              
              -
              
              
              
              -Accrued
      expenses
              
              
              662,797
              
              
              
              118,320
              
              
              
              51,442Accrued
      interest
              
              
              81,305
              
              
              
              258,805
              
              
              
              345,915Deferred
      revenue
              
              
              (650,000
              )
              
              
              (175,000
              )
              
              
              300,000Net
      cash flows used in operating activities
              
              
              (4,301,842
              )
              
              
              (3,750,310
              )
              
              
              (1,113,350
              )Cash
      flows from investing activitiesInvestment
      in property and equipment
              
              
              (14,672
              )
              
              
              (283,311
              )
              
              
              (58,997
              )Other
      assets - website acquisition
              
              
              (1,000
              )
              
              
              -
              
              
              
              -Net
      cash flows used in investing activities
              
              
              (15,672
              )
              
              
              (283,311
              )
              
              
              (58,997
              )Cash
      flows from financing activitiesProceeds
      from non-related loans
              
              
              743,975
              
              
              
              -
              
              
              
              -Proceeds
      from related party loans
              
              
              1,229,000
              
              
              
              2,609,457
              
              
              
              1,170,010Payments
      on related party loans
              
              
              (340,333
              )
              
              
              (1,246,354
              )
              
              
              -Payments
      on non-related party loans
              
              
              -
              
              
              
              -
              
              
              
              (5,852
              )Origination
      of capital leases
              
              
              -
              
              
              
              203,833
              
              
              
              21,922Payments
      on capital leases
              
              
              (72,898
              )
              
              
              (19,323
              )
              
              
              (1,890
              )Issuance
      of common stock, net of offering costs
              
              
              2,430,780
              
              
              
              2,305,600
              
              
              
              -Capital
      contributions
              
              
              -
              
              
              
              500,000
              
              
              
              -Net
      cash flows provided by financing activities
              
              
              3,990,524
              
              
              
              4,353,213
              
              
              
              1,184,190Net
      increase/(decrease) in cash
              
              
              (326,990
              )
              
              
              319,592
              
              
              
              11,843Cash,
      at beginning of year
              
              
              331,435
              
              
              
              11,843
              
              
              
              -Cash,
      at end of period
              
              $
              4,445
              
              
              $
              331,435
              
              
              $
              11,843Supplemental
      disclosure of cash flow information:Cash
      paid for interest
              
              $
              501,999
              
              
              $
              307,267
              
              
              $
              390,288Cash
      paid for taxes
              
              $
              600
              
              
              $
              -
              
              
              $
              -Non-cash
      financing activities related to the conversion of debt
              
              $
              1,720,857
              
              
              $
              -
              
              
              $
              -


The
accompanying footnotes are an integral part of these financial
statements


F-5


PLATINUM
STUDIOS, INC.


NOTES
TO FINANCIAL STATEMENTS


DECEMBER
31, 2007 AND 2006











(
1 )         Description of
business





Nature of operations
      –  The Company controls a library consisting of more than 3,800
      characters and is engaged principally as a comics-based entertainment
      company adapting characters and storylines for production in film,
      television, publishing and all other
media.





Platinum
      Studios, LLC was formed and operated as a California limited liability
      company from its inception on November 20, 1996 through September 14,
      2006.  On September 15, 2006, Platinum Studios, LLC filed with
      the State of California to convert Platinum Studios, LLC into Platinum
      Studios, Inc., (“the Company”, “Platinum”) a California
      corporation.





This
      change to the Company structure was made in preparation of a private
      placement memorandum and common stock offering in October, 2006 (Note
      12).








(
      2 )
            Going
      concern





The
accompanying financial statements have been prepared on a going concern basis,
which contemplates the realization of assets and the satisfaction of liabilities
in the normal course of business.  The Company has incurred
significant losses which have resulted in an accumulated deficit of $9,465,595
as of December 31, 2007.  The Company plans to seek additional
financing in order to execute its business plan, but there is no assurance the
Company will be able to obtain such financing on terms favorable to the Company
or at all.  These items raise substantial doubt about the Company’s
ability to continue as a going concern.  The accompanying financial
statements do not include any adjustments to reflect the possible future effects
related to recovery and classification of assets, or the amounts and
classifications of liabilities that might result from the outcome of this
uncertainty.





(
      3 )
            Summary of significant
      accounting policies





Reclassifications–
      Certain prior year amounts have been reclassified in order to conform to
      the current year’s presentation.





Revenue recognition-
      Revenue  from  the  licensing  of  characters  and  storylines  (“the
      properties”) owned by the Company are recognized in accordance with
      guidance provided in Securities and Exchange Commission Staff Accounting
      Bulletin No. 104 “Revenue Recognition” (an amendment of Staff Accounting
      Bulletin No. 101 “Revenue Recognition”) (“SAB 104”).  Under the
      SAB 104 guidelines, revenue is recognized when the earnings process is
      complete.  This is considered to have occurred when
      persuasive





F-6


(
      3 )
            Summary of significant
      accounting policies
(continued)


evidence
      of an agreement between the customer and the Company exists, when
      the


properties
      are made available to the licensee and the Company has satisfied its
      obligations under the agreement, when the fee is fixed or determinable and
      when collection is reasonably
assured.





The
      Company derives its licensing revenue primarily from options to purchase
      rights, the purchase of rights to properties and first look
      deals.  For options that contain non-refundable minimum payment
      obligations that are not applied to the purchase price, revenue is
      recognized ratably over the option period, prior to the collection of all
      amounts ultimately due, provided all the criteria for revenue recognition
      under SAB 104 have been met.  Option fees that are applicable to
      the purchase price are deferred and recognized as revenue at the later of
      the expiration of the option period or in accordance with the terms of the
      purchase agreement.  Revenue received under first look deals is
      recognized ratably over the first look period, which varies by contract
      provided all the criteria for revenue recognition under SAB 104 have been
      met.  First look deals that have contingent components are
      deferred and recognized at the later of the expiration of the first look
      period or in accordance with the terms of the first look
      contract.





For
licenses requiring material continuing involvement or performance based
obligations, by the Company, the revenue is recognized as and when such
obligations are fulfilled.





The
Company records as deferred revenue any licensing fees collected in advance of
obligations being fulfilled or if a licensee is not sufficiently creditworthy,
the Company will record deferred revenue until payments are
received.





License
agreements typically include reversion rights which allow the Company to
repurchase property rights which have not been used by the studio (the buyer) in
production within a specified period of time as defined in the purchase
agreement.  The cost to repurchase the rights is generally based on
the costs incurred by the studio to further develop the characters and story
lines.





Use of estimates - The
      preparation of financial statements in conformity with accounting
      principles generally accepted in the United States requires management to
      make estimates and assumptions that affect the reported amounts of assets
      and liabilities and disclosure of contingent assets and liabilities at the
      date of financial statements, and the reported amounts of revenues and
      expenses during the reporting periods. Actual results could differ from
      those estimates.





Cash and cash
      equivalents – The Company considers all highly liquid investment
      securities with an original maturity date of three months or less to be
      cash equivalents.





Accounts receivable–
      Trade receivables are carried at original invoice amount. The company does
      not regularly issue credit to its customers. The Company performs ongoing
      reviews of its receivables for collectability. Trade receivables are
      written off when deemed






F-7





(
      3 )
            Summary of significant
      accounting policies
(continued)


uncollectable.
      Recoveries of trade receivables previously written off are recorded
      as


income
      when received. No trade receivables were written off for the years ended
      December 31, 2007, 2006 and 2005. The Company’s allowance for doubtful
      accounts was $0 as of December 31, 2007 and
  2006.





Concentrations of risk -
      Financial instruments that potentially subject the Company to
      concentrations of credit risk consist primarily of uninsured cash
      balances.  The Company maintains its cash balances with what
      management believes to be a high credit
quality


financial
      institution. At times, balances within the Company’s cash accounts may
      exceed the Federal Deposit Insurance Corporation (FDIC) limit of
      $100,000.





During
      the years ended December 31, 2007 2006, and 2005, the Company had customer
      revenues representing a concentration of the Company’s total revenues. In
      2007, two customers represented approximately 51% and 23% of total
      revenues.  In 2006, two customers represented approximately 82%
      and 14% of the Company’s total revenues. In 2005, three customers
      represented approximately 64%, 19% and 17% of the Company’s total
      revenues.











Depreciation -
      Depreciation is computed on the straight-line method over the following
      estimated useful lives:





Fixed
      assets
            UsefulLives





Furniture
      and fixtures
            7
      years


Computer
      equipment
            5
      years


Office
      equipment
            5
      years


Software
            3
      yearsLeasehold
      improvements
            Shorter
      of lease term or useful economic life








Character development
      costs - Character development costs consist primarily of costs to
      acquire properties from the creator, development of the property using
      internal or independent writers and artists, and the registration of a
      property for a trademark or copyright.  These costs are
      capitalized in the year incurred if the Company has executed a contract or
      is negotiating a revenue generating opportunity for the
      property.  If the property derives a revenue stream that is
      estimable, the capitalized costs associated with the property are expensed
      as revenue is recognized.





If the
Company determines there is no determinable market for a property, it is deemed
impaired and is written off.





Purchased intangible assets and
      long-lived assets– Intangible assets are capitalized at
      acquisition costs and intangible assets with definite lives are amortized
      on the straight-line





F-8


(
      3 )
            Summary of significant
      accounting policies
(continued)


basis.  The
      Company periodically reviews the carrying amounts of intangible assets
      and


property
in conformance with the Statement of Financial Accounting Standards No. 144,
Accounting for the Impairment
or Disposal of Long-Lived Assets (SFAS 144).  Under SFAS 144,
long-lived assets, such as property and equipment, and purchased intangibles
subject to amortization, are reviewed for impairment whenever events or changes
in circumstances indicate that the carrying amount of an asset may not be
recoverable. Recoverability of assets to be held and used is measured by a
comparison of the carrying amount of an asset to the estimated undiscounted
future cash flows expected to be generated by the asset. If the carrying amount
of an asset exceeds its estimated future cash flows, the impairment charge to be
recognized is measured by the excess of the carrying amount over the fair value
of the asset.





Advertising costs -
      Advertising costs are expensed the later of when incurred or when the
      advertisement is first run.  For the years ended December 31,
      2007, 2006 and 2005 advertising expenses were $426,332,  $14,017
      and $8,042, respectively.





Research and development- Research and development costs, primarily character development
      costs and design not associated with an identifiable revenue opportunity,
      are


charged
to operations as incurred.  For the years ended December 31, 2007,
2006 and 2005 research and development expenses were $960,396, $764,282 and
$243,833, respectively.


Incomes
Taxes:
  Deferred
income taxes are provided using the liability method whereby deferred tax assets
are recognized for deductible temporary differences and operating loss and tax
credit carryforwards and deferred tax liabilities are recognized for taxable
temporary differences.  Temporary differences are the differences
between the reported amounts of assets and liabilities and their tax
bases.  Deferred tax assets are reduced by a valuation allowance when,
in the opinion of management, it is more likely than not that some portion or
all of the deferred tax assets will not be realized.  Deferred tax
assets and liabilities are adjusted for the effects of the changes in tax laws
and rates of the date of enactment.
  When tax
returns are filed, it is highly certain that some positions taken would be
sustained upon examination by the taxing authorities, while others are subject
to uncertainty about the merits of the position taken or the amount of the
position that would be ultimately sustained.  The benefit of a tax
position is recognized in the financial statements in the period during which,
based on all available evidence, management believes it is more likely than not
that the position will be sustained upon examination, including the resolution
of appeals or litigation processes, if any.  Tax positions taken are
not offset or aggregated with other positions.  Tax positions that
meet the more-likely-than-not recognition threshold are measured as the
largest amount of tax benefit that is more than 50 percent likely of being
realized upon settlement with the applicable taxing authority.  The
portion of the benefits associated with tax positions taken that exceeds the
amount measured as described above is reflected as a liability for unrecognized
tax benefits in the accompanying balance sheet along with any associated
interest and penalties that would be payable to the taxing authorities upon
examination.
  Interest
and penalties associated with unrecognized tax benefits are classified as
additional income taxes in the statement of income.


Net income/(loss) per share –
In accordance with SFAS No. 128 “Earnings Per Share”, basic income per share is
computed by dividing net income (loss) available to common stockholders by the
weighted average number of shares of common stock outstanding during the
periods, excluding shares subject to repurchase or
forfeiture.  Diluted income per share increases the shares outstanding
for the assumption of the vesting of restricted stock and the exercise of
dilutive stock options and warrants, using the treasure stock method, unless the
effect is anti-dilutive.








F-9





Use of estimates– The
preparation of the financial statements in conformity with U.S. generally
accepted accounting principals requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.





Recent accounting
pronouncements – In July 2006, the FASB issued Interpretation No. 48,
“Accounting for Uncertainly in Income Taxes” (“FIN 48”).  FIN 48
applies to all tax positions related to income taxes subject to SFAS 109,
“Accounting for Income Taxes”.  Under FIN 48 a company would recognize
the benefit from a tax position only if it is more-likely-than-not that the
position would be sustained upon audit based solely on the technical merits of
the tax position.  FIN 48 clarifies how a company would measure the
income tax benefits from the tax positions that are recognized, provides
guidance as to the timing of the de-recognition of previously recognized tax
benefits and describes the methods for classifying and disclosing the
liabilities within the financial statements for any unrecognized tax
benefits.  FIN 48 also addresses when a company should record interest
and penalties related to tax positions and how the interest and penalties may be
classified within the income statement and presented in the balance
sheet.  FIN 48 is effective for fiscal years beginning after December
15, 2006.  For Platinum, FIN 48 will be effective for the first
quarter of fiscal 2007.





In May
2005, the FASB issued SFAS No. 154, Accounting Changes and Error
Corrections, which replaces APB No. 20, Accounting Changes and SFAS
No. 3, Reporting Accounting
Changes in Interim Financial Statements. SFAS No. 154 requires that a
voluntary change in accounting principle be applied retrospectively with all
prior period financial statements presented as if the new accounting principle
had always been used. SFAS No. 154 also requires that a change in method of
depreciating or amortizing long-lived non-financial assets be accounted for
prospectively, in the period of change and in future periods, if applicable, as
a change in estimate, and requires the correction of errors in previously issued
financial statements be termed a “restatement”. SFAS No. 154 is effective for
accounting changes and correction errors made in fiscal years beginning after
December 15, 2005.  The implementation of SFAS 154 is not expected to
have a material impact on the Company’s financial statements.





On
      July 1, 2007, we adopted Statement of Financial Accounting Standards No.
      123 (revised 2004), “Share-Based Payment,” (“SFAS 123(R)”) which requires
      the measurement and recognition of compensation expense for all
      share-based payments to employees and directors including employee stock
      option s and stock purchases related to the Company’s employee stock
      option and award plans based on estimated fair values.  In March
      2005, the Securities and Exchange Commission issued Staff Accounting
      Bulletin No. 107 (“SAB 107”) relating to SFAS 123(R).  We have
      applied the provision of SAB 107 in our adoption of SFAS
      123(R).








F-10


(
      3 )
            Summary of significant
      accounting policies
(continued)


We
      have selected the Black-Scholes method of valuation for share-based
      compensation and have adopted the modified prospective transition method
      under SFAS 123R, which requires that compensation cost be recorded, as
      earned, for all unvested stock options and warrants outstanding at the
      beginning of the first quarter of adoption of SFAS
      123R.  The


charge
      is being recognized in non cash compensation, which is included in
      stock-based


compensation
expense, on a straight-line basis over the remaining service period after the
adoption date based on the options or warrants original estimate of fair
value.  As permitted by SFAS 123(R), the Company elected the
disclosure only requirements of SFAS 123(R).





In
December 2007, the FASB  issued SFAS 160, Noncontrolling Interests in
Consolidated Financial Statements.  This statement applies to all
entities that prepare consolidated financial statements, except not-for-profit
organizations, and amends Accounting Research Bulletin (“ARB”) 51 to establish
accounting and reporting standards for the noncontrolling interest in a
subsidiary and for the decon-solidation of a subsidiary.  It also
amends certain of ARB 51’s consolidation procedures for consistency with the
requirements of SFAS No. 141 (revised 2007).  This statement will be
effective for fiscal years, and interim periods within those fiscal years,
beginning on or after December 15, 2008, or the Company’s fiscal year beginning
January 1, 2009.  Earlier adoption is prohibited.  The
Company currently is unable to determine what impact the future application of
this pronouncement may have on our financial statements.





In
      February 2007, the FASB issued SFAS No. 159, The Fair Value Option for
      Financial Assets and Financial Liabilities – Including an Amendment of
      FASB Statement No. 115.  This statement permits entities to
      choose to measure many financial instruments and certain other items at
      fair value.  Most of the provisions of SFAS No.159 apply only to
      entities that elect the fair value option.  However, the
      amendment to SFAS No. 115 Accounting for Certain Investments in Debt and
      Equity Securities applies to all entities with available-for-sale and
      trading securities.  SFAS No. 159 is effective as of the
      beginning of an entity’s first fiscal year that begins after November 15,
      2007.  The Company adopted SFAS No. 159 on January 1, 2008,
      resulting in no financial statement
impact.





In
September 2006, the FASB issued SFAS Statement No. 158, Employers’ Accounting
for Defined Benefit Pension and Other Postretirement
Plans.   This new standard will require employers to fully
recognize the obligations associated with single-employer defined benefit
pension, retiree healthcare and other postretirement plans in their financial
statements.  The Company adopted SFAS No. 158 on December 31, 2007,
resulting in no financial statement impact since the Company currently does not
sponsor the defined benefit pension or postretirement plans within the scope of
the standard.





In
      September 2006, the FASB issued SFAS No. 157, Fair Value
      Measurements.  SFAS No. 157  defines fair value,
      establishes a framework for measuring fair value,
  and






F-11





( 3 )
            Summary
      of significant accounting policies
  (continued)


requires
      enhanced disclosures about fair value measurements.  SFAS No.
      157 requires


companies
to disclose the fair value of their financial instruments according to a fair
value hierarchy as defined in the standard.  Additionally, companies
are required to provide enhanced disclosure regarding financial instruments in
one of the categories, including a reconciliation of the beginning and ending
balances separately for each major category of assets and
liabilities.  In February 2008, the FASB issued FASB Staff Position
(FSP) No. FAS 157-2, which delays by one year the effective date of SFAS No. 157
for certain types of non-financial assets and non-financial
liabilities.  As a result, SFAS No. 157 will be effective for
financial statements issued for fiscal years beginning after November 15, 2007,
or the company’s fiscal year beginning January 1, 2008, for financial assets and
liabilities carried at fair value on a recurring basis, and on January 1, 2009,
for non-recurring non-financial assets and liabilities that are recognized or
disclosed at fair value.  The Company adopted SFAS No. 157 on January
1, 2008, for financial assets and liabilities carried at fair value on a
recurring basis, with no material impact on its financial
statements.  The Company is currently unable to determine what impact
the application of SFAS No. 157 on January 1, 2009, for non-recurring
non-financial assets and liabilities that are recognized or disclosed at fair
value, will have on its financial statements.





In
      March 2006, the FASB issued SFAS No. 156, Accounting for Servicing of
      Financial Assets.  This statement amends SFAS 140, Accounting
      for Transfers and Servicing of Financial Assets and Extinguishments of
      Liabilities,  a replacement of FASB Statement 125, or SFAS 140,
      regarding (1) the circumstances under which a servicing asset or servicing
      liability must be recognized (2) the initial and subsequent measurement of
      recognized servicing assets and liabilities, and (3) information required
      to be disclosed relating to servicing assets and
      liabilities.  The Company adopted this standard on January 1,
      2007, with no impact on its consolidated financial
    statements.In
      February 2006, the FASB issued SFAS No. 155, Accounting for Certain Hybrid
      Financial Instruments, or SFAS 155.   This statement amends
      SFAS No. 133, Accounting for Derivative Instruments and Hedging
      Activities, to narrow the scope exception for interest-only and
      principal-only strips on debt instruments to include only such strips
      representing rights to receive a specified portion of the contractual
      interest or principal cash flows.  SFAS 155 also amends SFAS 140
      to allow qualifying special-purpose entities to hold a passive derivative
      financial instrument pertaining to beneficial interests that itself is a
      derivative financial instrument.  The Company adopted this
      standard on January 1, 2007, with no impact on its consolidated financial
      statements.EITFNo. 07-3, Accounting for Nonrefundable Advance Payments for Goods
      or Services Received for Use in Future Research and Development
      Activities, was issued in June 2007. The EITF reached a consensus that
      nonrefundable payments for goods and services that will be used or
      rendered for future research and development activities should be deferred
      and capitalized.  Such amounts should be recognized as an
      expense as the related goods are delivered and the related services are
      performed.  Entities should continue to evaluate whether they
      expect the goods to be delivered or services to
  be





F-12





(
      3 )
            Summary of significant
      accounting policies
(continued)


rendered.  If
      the entity does not expect the goods to be delivered or services to be
      rendered, the capitalized advance payment should be charged to
      expense.  This pronouncement is effective for financial
      statements issued for fiscal years beginning after December 15, 2007 (the
      Company’s fiscal year beginning January 1, 2008) and interim periods
      within those fiscal years.  Earlier application is not
      permitted.  Entities are required to report the effects of
      applying this pronouncement prospectively for new contracts entered into
      on or after the effective date of this pronouncement.  The
      Company


currently
is not a party to research and development arrangements that include
nonrefundable advance payments.





Non-cash financing
activities





On July
1, 2007, principal and interest of $1,720,857 were converted into common stock
of the Company.  As an incentive to convert the outstanding debt
obligation, warrants were issued to the debt-holder, Charlotte
Rosenberg.  Based on the Black-Scholes method of valuation, $195,507
of interest expense was recorded as the fair value of the warrants issued as
part of this debt conversion.





( 4 )
            Inventory




Inventory
is stated at the lower of cost (computed on a first-in, first-out basis) or
market. The inventory consists of finished goods purchase for
resale.




December
      31,2007
              
              
              2006Kiss
      merchandise
              
              
              59,528
              
              
              
              -$
              59,528
              
              
              $
              -






For
      the years ended December 31, 2007, 2006 and 2005, the Company recorded no
      inventory impairment or inventory reserve
  expense.




( 5 )
            Property
      and equipment





Property
      and equipment are recorded at cost. The cost of repairs and maintenance
      are expensed when incurred, while expenditures refurbishments and
      improvements that significantly add to the productive capacity or extend
      the useful life of an asset are capitalized.  Upon asset
      retirement or disposal, any resulting gain or loss is included in the
      results of operations.






F-13




December
      31,2007
              
              
              2006Property
      and equipment, cost:Office
      equipment
              
              $
              10,804
              
              
              $
              10,804Furniture
      and fixtures
              
              
              118,140
              
              
              
              107,317Computer
      equipment
              
              
              151,220
              
              
              
              105,054Software
              
              
              91,292
              
              
              
              85,576Leasehold
      improvements
              
              
              20,557
              
              
              
              20,557392,013
              
              
              
              329,308Less
      accumulated depreciation
              
              
              (134,883
              )
              
              
              (60,327
              )Net
      property and equipment
              
              $
              257,130
              
              
              $
              268,981




For
      the years ended December 31, 2007, 2006 and 2005, property and equipment
      at cost includes assets acquired under capital leases of $87,547,
      $203,833, and $21,922 respectively.   Depreciation expense
      charged to operations for the years ended December 31, 2007, 2006 and 2005
      were $74,556, $43,051 and $7,436 including $53,347, $26,429 and $1,679
      applicable to assets acquired under capital leases,
      respectively.





(
6 )          Other
assets





Other
assets are recorded at cost. The company evaluates the carrying value of other
assets as of December 31 of each year and between annual evaluations if events
occur or circumstances change that would more likely than not reduce the fair
value of the asset below its carrying amount. Such circumstances could include,
but are not limited to: (1) a significant adverse change in legal factors or in
business climate, (2) unanticipated competition, or (3) an adverse action or
assessment by a regulator.








F-14





(
6 )          Other asset
(continued)




December
      31,2007
              
              
              2006Web
      Sites
              
              
              40,000
              
              
              
              64,000Deposits
              
              
              38,118
              
              
              
              39,404Intellectual
      Property
              
              
              1,000
              
              
              
              -Character
      Library - Top Cow
              
              
              350,000
              
              
              
              350,000Character
      Library Amortization - Top Cow
              
              
              (121,739
              )
              
              
              (30,435
              )$
              307,379
              
              
              $
              422,969


Amortization
expense for the years ended December 31, 2007, 2006 and 2005 was $91,304,
$30,435 and none, respectively. All amortization is related to the character
library which is amortized using the straight line method over the term of the
contract as disclosed in footnote 10.





At
December 31, 2007, future amortization of character rights is as
follows:





Years Ending December 31,
              
              
              Other Assets Amortization2008
              
              
              $
              91,3042009
              
              
              
              91,3042010
              
              
              
              45,653Thereafter
              
              
              
              -Total Amortization
              
              
              $
              228,261





(
7 )          Due to related
party







During
2006, the Company repaid in full the uncollateralized loans received from
Rosenberg IP during 2004.  These loans accrued interest at 5% and 6%
for the years ended December 31, 2005 and 2006, respectively.





December
      31,2007
              
              
              2006B.Altounian
      - Consulting prior to employment
              
              
              193,079
              
              
              
              243,079$
              193,079
              
              
              $
              243,079


(
8 )         Short-term and long-term
debt




December
      31,Short-term
      debt
              
              2007
              
              
              2006Loan
      payable to member - uncollateralized; payable in monthly installments of
      interest only at variable interest rates. At December 31, 2007 and
      2006, the interest rates were 7.15% and 7.90%, respectively. Due upon
      demand
              
              $
              740,011
              
              
              $
              745,925Loan
      payable to 3rd party - uncollateralized; payable in annual installments of
      interest only at 6%. Due upon demand
              
              
              17,676
              
              
              
              -








F-15







(
8 )           Short-term and long-term
debt (continued)




December
      31,Short-term
      debt
              
              2007
              
              
              2006Loan
      payable to member - uncollateralized; payable in monthly installments of
      interest only at 5%. Due upon demand.
              
              
              160,964
              
              
              
              -Loan
      payable to member - uncollateralized; payable in monthly installments of
      principal and interest at varying rates. The rate at December 31, 2007 was
      3.99%. Due upon demand.
              
              
              120,570
              
              
              
              -Loan
      payable to member - uncollateralized; payable in monthly installments of
      principal and interest at varying rates. The rate at December 31, 2007 was
      17.49%. Due upon demand.
              
              
              15,917
              
              
              
              -Loan
      payable to member - uncollateralized; interest only at 5%. Due upon
      demand.
              
              
              10,000
              
              
              
              -Loan
      payable to shareholder - uncollateralized; payable in monthly installments
      of interest only at 5%. Payable on demand.
              
              
              510
              
              
              
              -Loan
      payable to shareholder - uncollateralized; payable in monthly installments
      of interest only at 12%. Due March, 2008.
              
              
              213,315
              
              
              
              -Loan
      payable to shareholder - uncollateralized; payable in monthly installments
      of interest only at 18%. Due April, 2008.
              
              
              27,573
              
              
              
              -Loan
      payable to shareholder - uncollateralized; payable in monthly installments
      of interest only at 18%. Due April, 2008.
              
              
              110,290
              
              
              
              -Loan
      payable to shareholder - uncollateralized; payable in monthly installments
      of interest only at 12%. Due June, 2008.
              
              
              106,658
              
              
              
              -Loan
      payable to shareholder - uncollateralized; payable in monthly installments
      of interest only at 12%. Due June, 2008.
              
              
              26,697
              
              
              
              -Loan
      payable to shareholder - uncollateralized; payable in monthly installments
      of interest only at 12%. Due June, 2008.
              
              
              26,673
              
              
              
              -Loan
      payable to shareholder - uncollateralized; payable in monthly installments
      of interest only at 12%. Due March, 2008.
              
              
              54,149
              
              
              
              -







F-16


(
8 )           Short-term and long-term
debt (continued)





December
      31,Short-term
      debt
              
              2007
              
              
              2006Loan
      payable to shareholder - uncollateralized; payable in monthly installments
      of interest only at 12%. Due June, 2008.
              
              
              16,033
              
              
              
              -Loan
      payable to shareholder - uncollateralized; payable in monthly installments
      of interest only at 12%. Due March, 2008.
              
              
              109,195
              
              
              
              -Loan
      payable to shareholder - uncollateralized; payable in monthly installments
      of interest only at 12%. Due May, 2008.
              
              
              26,755
              
              
              
              -Loan
      payable to shareholder - uncollateralized; payable in monthly installments
      of interest only at 12%. Due June, 2008.
              
              
              106,922
              
              
              
              -Total
      short-term debt
              
              $
              1,889,908
              
              
              $
              745,925Long-term
      debtLoan
      payable to member - uncollateralized; payable in monthly installments of
      interest only at variable interest rates. At December 31, 2007 and 2006,
      the interest rates were 7.487% and 7.708%,
      respectively.  Monthly payments of principal and interest begin
      on July 1, 2009; final payment due June 1, 2034.
              
              $
              1,293,989
              
              
              $
              1,294,260Loan
      payable to member - uncollateralized; principal includes interest accrued
      at variable interest rates.  At December 31, 2007 and 2006, the
      interest rate was 5.0%. The loans are due June 30, 2010.
              
              
              1,237,475
              
              
              
              665,000Loans
      payable to member - uncollateralized;  Effective January 1,
      2006, interest became fixed at 3.8%.  Monthly payments of
      principal and interest to begin on July 1, 2007; final payment due June
      30, 2010.  Converted to equity July 1, 2007.
              
              
              -
              
              
              
              1,625,000Total
      long-term debt
              
              $
              2,531,464
              
              
              $
              3,584,260Total
      short-term and long-term debt
              
              $
              4,421,372
              
              
              $
              4,330,185The
      following summarizes future cash payment obligations:






F-17




(
8 )           Short-term and long-term
debt (continued)
  Years Ending December
      31,
                
                December
      31, 2007-2008
                
                $
                1,889,9082009
                
                
                8,6992010
                
                
                1,255,9092011
                
                
                19,9072012
                
                
                21,496Thereafter
                
                
                1,225,453Total
      short-term and long-term debt obligations
                
                $
                4,421,372





( 9 )
            Operating and capital
      leasesThe
      Company has entered into operating leases having expiration dates through
      2011 for real estate and various equipment needs, including office
      facilities, computers, office equipment and a
  vehicle.





On July
10, 2006, the Company entered into an operating agreement for the lease of real
property located in Los Angeles, California.  The agreement has a five
year term, commencing September 1, 2006 and ending August 31, 2011.





Rent
expense under non-cancelable operating leases were $421,990, $220,623 and
$114,669 for the years ended December 31, 2007, 2006 and 2005,
respectively.





At
      December 31, 2007, future minimum rental payments required under
      non-cancelable operating leases that have initial or remaining terms in
      excess of one year are as follows:








Years Ending December
      31,
              
              Operating
      Leases2008
              
              $
              108,0082009
              
              
              431,4942010
              
              
              430,2932011
              
              
              442,8152012
              
              
              302,855Thereafter
              
              
              -Total
      minimum obligations
              
              $
              1,715,465


F-18





(
      9 )
            Operating and capital
      leases (continued)





The
      Company has various non-cancelable leases for computers, software, and
      furniture, at a cost of $87,547 and $203,833 at December 31, 2007 and
      2006, respectively. The capital leases are secured by the assets which
      cannot be freely sold until the maturity date of the lease. Accumulated
      amortization for equipment under capital lease totaled $81,454 and $11,026
      at December 31, 2007 and 2006, respectively. Future required payments at
      December 31, 2006 under these leases are as
  follows:




Years Ending December
      31,
              
              Capital Leases2008
              
              $
              88,6692009
              
              
              56,8542010
              
              
              36,8382011
              
              
              24,705Thereafter
              
              
              -Total
      minimum obligations
              
              
              207,066Less
      amounts representing interest
              
              
              27,390Present
      value of net minimum obligations
              
              
              179,676Less
      current portion
              
              
              73,282Long-term
      portion
              
              $
              106,394





(
      10 )
            Commitments





During
2004, the Company entered into an agreement with Top Cow Productions, Inc. to
acquire certain rights in and to certain comic books, related characters,
storylines and intellectual property (the properties).  The current
agreement period expires on June 30, 2010.  The Company has the right
to extend the agreement for an additional twelve month period for an additional
$350,000 and has pre-paid $75,000 toward this extended period.  If the
Company enters into production on a particular property, additional fees based
on a percentage of the adjusted gross revenue resulting from the production, as
defined in the agreement, will be due to the owner.  The agreement is
collateralized by a security interest in and to all rights licensed or granted
to the Company under this agreement including the right to receive
revenue.  The current agreement period cost of $350,000 is included in
Other Assets on the balance sheet (Note 7) and is being amortized on a
straight-line basis beginning in 2006 when the rights became available for
exploitation.





(
      11 )
            Related party
      transactions





The
      Company has an exclusive option to enter licensing/acquisition of rights
      agreements for individual characters, subject to existing third party
      rights, within the RIP Awesome Library of RIP Media, Inc., a related
      entity in which Scott Rosenberg is a
majority





F-19


( 11 )
            Related
      party transactions
(continued)





shareholder.
      The Company did not exercise this right during the years ended December
      31,


2007
      and 2006.  During 2006, the Company repaid uncollateralized
      loans of $20,000 in full (Note 8).





Scott
      Mitchell Rosenberg also provides production consulting services to the
      Company’s customers (production companies) through Scott Mitchell
      Rosenberg Productions (another related entity) wholly owned by Scott
      Mitchell Rosenberg. At the time the Company enters into a purchase
      agreement with a production company, a separate contract may be entered
      into between the related entity and the production company. In addition,
      consulting services regarding development of characters and storylines may
      also be provided to the Company by this related entity.  Revenue
      would be paid directly to the related entity by the production
      company.





(
      12 )
              Stockholders
      equity


As of May
1, 2006, the Company issued a five percent (5.0%) ownership interest in Platinum
Studios, LLC to Brian Altounian in consideration of a capital contribution in
the amount of $500,000.





On
September 14, 2006, Scott Mitchell Rosenberg converted $5,731,057 in outstanding
principal and interest as a capital contribution in Platinum Studios, LLC in
fulfillment of commitments made to the Company prior to the issuance to Brian
Altounian.





Platinum
Studios LLC filed Articles of Incorporation with the Secretary of the State of
California on September 15, 2006, by which Platinum Studios, LLC converted from
a California limited liability company into Platinum Studios, Inc., a California
corporation.  On September 15, 2006, 135,000,000 common shares were
issued for conversion of LLC interests as all members of the limited liability
company became shareholders of the corporation, maintaining their same
percentage ownership, with no additional contribution required by any of the
members to the corporation.





A Private
Placement Memorandum was issued on October 12, 2006, offering up to 50,000,000
shares of common stock, $0.0001 par value per share, for sale to Accredited
Investors (as defined in the memorandum), at a price of $0.10 per share on a
“best efforts” basis, for a total offering price to investors of
$5,000,000.  The proceeds of the offering are expected to be used for
property acquisitions, marketing and general and administrative
expenses.  The offering was closed on April 30, 2007 with the Company
having sold 49,047,250 shares resulting in proceeds of $4,904,725 and net
proceeds of $4,682,207 after related costs.





On July
1, 2007, the Board of Directors approved the cancellation/conversion of
$1,720,857 in debt due to Scott Mitchell Rosenberg consisting of $1,625,000 in
principal and $95,857 of accrued interest through conversion of the debt into
17,208,575 shares of





(
      12 )
              Stockholders
      equity




common
stock of the Company valued at $0.10 per share.  In addition, Mr.
Rosenberg received a warrant to purchase 2,437,500 additional shares of common
stock for his


agreement
to accept this offer from the Company rather than demanding repayment of the
debt amount.





Effective
July 12, 2007, the Company obtained board approval of an incentive plan under
which equity incentives would be granted to officers, employees, non-employee
directors and consultants of the Company.  The board further resolved
for 30,000,000 shares of the Company’s common stock, $0.0001 par value, be
reserved for issuance in accordance with the requirements of this
plan.  No grants were approved or issued under this plan as of
December 31, 2007.




(
      13 )
              Common Stock Purchase
      Warrants




Warrants outstanding at December 31,
2007 are summarized as follows:





As of
December 31, 2007, no warrants have been exercised.




(
      14 )
              Income
      taxes





The
Company or one of its subsidiaries files income tax returns in the U.S. federal
jurisdiction, and the state of California.  With few exceptions, the
Company is no longer subject to U.S. federal, state and local, or non-U.S.
income tax examinations by tax authorities for years before 2006.
  The
Company adopted the provisions of FASB Interpretation No. 48, Accounting for Uncertainty in Income
Taxes, on January 1, 2007. Included in the balance at December 31,
2007, are no tax positions for which the ultimate deductibility is highly
certain but for which there is uncertainty about the timing of such
deductibility.
  The
Company has not filed a tax return for the December 31, 2006 year
end.
  Minimum
state tax payments have accrued in states for which the company has operated
since 2006.  Upon filing all amounts paid will be subject to penalties
and interest according to the state tax jurisdiction.  The statue of
limitations remains open on all years from 2006 going forward.  The
statute will not begin to run until the Company files the tax
return.  Once the returns have been filed the IRS will have three
years to examine and adjust the amounts reported.
 
 The
Company operates at a loss and will only be liable for minimum state tax
payments once a return is filed.  No unrecognized liability will be
added to The Company’s balance sheet for the un-filed returns as the amounts
reported are an immaterial amount.
 
  The
Company’s policy is to recognize interest accrued related to unrecognized tax
benefits in interest expense and penalties in operating expenses.


F-20




(
      14 )
              Income taxes
      (continued)





tax
assets will not be realized. Deferred tax assets and liabilities are adjusted
for the effects of changes in the tax laws and rates on the date of
enactment.





Income tax benefit (provision) is computed as follows:





Outstanding
              
              
              ExercisableRange
      of Exercise Prices
              
              
              Number
      Outstanding
              
              
              Weighted
      Average Remaining Contractual Life
              
              
              Weighted
      Average Exercise Price
              
              
              Number
      Exercisable
              
              
              Weighted
      Average Exercise PriceWarrants$
              0.10
              
              
              
              2,896,100
              
              
              
              4.34
              
              
              $
              0.10
              
              
              
              2,896,100
              
              
              $
              0.10$
              0.10
              
              
              
              2,896,100
              
              
              
              4.34
              
              
              $
              0.10
              
              
              
              2,896,100
              
              
              $
              0.10


The total
tax benefit (provision) is recorded as follows:





Twelve
      months ended December 31, 2007
              
              
              Period
      from September 15, through December 31, 2006Current:Federal
              
              $
              -
              
              
              $
              -State
              
              
              -
              
              
              
              -$
              -
              
              
              $
              -Deferred:Federal
              
              $
              -
              
              
              $
              -State
              
              
              -
              
              
              
              -$
              -
              
              
              $
              -


The total
tax benefit (provision) is recorded as follows:




Twelve
      months ended December 31, 2007
                
                
                Period
      from September 15, through December 31, 2006Continuing
      operations
                
                $
                -
                
                
                $
                -Discontinued
      operations
                
                
                -
                
                
                
                -$
                -
                
                
                $
                -





F-21


(
14 )       Income taxes
(continued)





The
components of deferred tax assets at December 31, 2007 and 2006 are composed of
the following:




December
      31, 2007
              
              
              December
      31, 2006Depreciation
              
              
              17,900
              
              
              
              -Reserves,
      allowances and accruals
              
              $
              442,300
              
              
              $
              142,227Basis
      in acquired intangible assets
              
              
              -
              
              
              
              12,123Net
      operating loss carryforwards
              
              
              2,151,300
              
              
              
              593,8282,611,500
              
              
              
              748,178Less:
      deferred tax asset valuationallowance
              
              
              (2,611,500
              )
              
              
              (748,178
              )$
              -
              
              
              $
              -








As of
December 31, 2007, the Company had available net operating loss carryforwards
for federal and state purposes of $5,500,000, each, which begin to expire in
2026 and 2016, respectively.





The
income tax benefit (provision) related to continuing operations for the twelve
months ended December 31, 2007 and the period from September 15, 2006 through
December 31, 2006 differs from the amount of income tax determined by applying
the applicable U.S. statutory federal income tax rate to pre-tax loss as a
result of the following differences:




Twelve
      months ended December 31, 2007
              
              
              %
              
              
              Period
      from September 15, thru December 31, 2006
              
              
              %Statutory
      federal tax rate
              
              $
              1,765,556
              
              
              
              34
              
              
              $
              534,925
              
              
              
              34Expected
      state tax, net of federal
              
              
              259,640
              
              
              
              5
              
              
              
              91,793
              
              
              
              6Effect
      of permanent differences
              
              
              (90,560
              )
              
              
              -
              
              
              
              (1,785
              )
              
              
              -Effect
      of deferred tax assetvaluation
      allowance
              
              
              (1,863,322
              )
              
              
              (43)
              
              
              
              (666,288
              )
              
              
              (43)Other
              
              
              71,314
              
              
              
              3
              
              
              
              41,355
              
              
              
              3$
              -
              
              
              
              -
              
              
              $
              -
              
              
              
              -






(
15 )       Subsequent
events





On
January 9, 2008, under the Company's 2007 Incentive Plan, the Company granted
stock options to purchase up to an aggregate of 20,050,000 shares of its common
stock to employees and consultants and granted 9,950,000 of restricted to
employees and consultants.





F-22





(
15 )       Subsequent events
(continued)





Of the
stock options granted, the following were granted to executive
officers





Brian
Altounian    7,965,000 shares


Helene
Pretsky     6,000,000 shares





Of the
restricted stock issued, the following were issued to executive
officers:





Brian
Altounian    5,250,000 shares


Helene
Pretsky     2,000,000 shares











On
January 10, 2008, the Securities and Exchange Commission declared effective the
FORM SB-2 Registration Statement originally filed by the Company on September 4,
2007.





On
January 31, 2008, FINRA issued the ticker symbol PDOS for the Company to trade
the stock registered under the SB-2 on the Over The Counter Bulletin Board and
on February 1, 2008, the Company's stock registered under the SB-2 began trading
on the OTC:BB.





On
January 18, 2008, the Company commenced a Regulation D private placement for the
sale of up to 15,000,000 shares of the Company's common stock at a purchase
price of $0.15 per share, for an aggregate purchase price of up to
$2,250,000.  Through March 27, 2008, 7,565,402 shares have been
purchased under this private placement.





As a
result of issuing the above described stock options and restricted stock, the
Company intends to record the related non-cash stock-based compensation expense
of approximately $1.8 million during the first quarter ending March 31,
2008.