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UNITEDSTATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C.20549

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Form  10-QSB

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|   | QUARTERLY REPORT PURSUANT TO SECTION 13OR 15(d) OF THE SECURITIES AND EXCHANGE ACT OF 1934 |

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|   | For the quarterly period ended March 31,2005 |

or

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|   | TRANSITION REPORTPURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES AND EXCHANGE ACT OF1934 |

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|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   | For the transition period from                 to                . |

CommissionFile No.  333-96257

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TAG Entertainment Corp.

(Exact name of Small Business Issuer asspecified in itscharter)

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| Delaware                                                    |  | 13-3851304                         |
| (Stateor other jurisdiction ofincorporation ororganization) |  | (I.R.S. EmployerIdentificationNo.) |
|                                                             |

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9916 SouthSanta Monica Boulevard, 1st Floor Beverly Hills,California 90212

(Address of principalexecutiveoffices)

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Registrant'stelephone number, including area code:(310)  277-3700

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Check whether the issuer (1)  filedall reports required to be filed by Section  13 or 15(d) of theExchange Act during the preceding 12  months (or for such shorterperiod that the registrant was required to file such reports), and(2)  has been subject to such filing requirements for the past90  days. Yes  No 

APPLICABLE ONLY TOCORPORATE ISSUERS

State the number of shares outstanding ofeach of the issuer's classes of common equity, as of the latestpracticable date: The registrant had 21,062,000 shares of common stock,$0.001 par value, issued and outstanding as of May 13, 2005.

Transitional Small Business Disclosure Format (Check one):Yes [    ] No [x]

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TABLEOF CONTENTS

PART I – FINANCIALINFORMATION

|                                     |  |                                                            |  |        |    |        |  |  |  |  |
|-------------------------------------|--|------------------------------------------------------------|--|--------|----|--------|--|--|--|--|
| Item1.                              |  | UnauditedConsolidated Condensed FinancialStatements        |  |   | 3  |   |
| Item2.                              |  | Management's Discussion and Analysis or Plan ofOperation   |  |   | 12 |   |
| Item 3.                             |  | Controls andProcedures                                     |  |   | 19 |   |
|                                |  |
| **PARTII – OTHERINFORMATION** |  |
|                                |  |
| Item1.                              |  | Legal Proceedings                                          |  |   | 21 |   |
| Item2.                              |  | Unregistered Sales of Equity Securities and Use ofProceeds |  |   | 21 |   |
| Item 3.                             |  | Defaults UponSenior Securities                             |  |   | 23 |   |
| Item4.                              |  | Submission of Matters to a Vote of SecurityHolders         |  |   | 23 |   |
| Item 5.                             |  | OtherInformation                                           |  |   | 23 |   |
| Iem6.                               |  | Exhibits                                                   |  |   | 24 |   |
|                                     |

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FORWARD LOOKING STATEMENTS

Thisreport on Form 10-QSB for TAG Entertainment Corp. (the"Company" or "TAG")contains "forward-looking statements" withinthe meaning of the Private Securities Litigation Reform Act of 1995. Insome cases, forward-looking statements may be identified by terms suchas "may," "intend,""will," "should,""could," "would,""expect,""believe,""estimate,""expect" or the negative of these terms, andsimilar expressions intended to identify forward-lookingstatements.

These forward-looking statements reflect theCompany's current views with respect to future events and arebased on assumptions and are subject to risks and uncertainties. Also,these forward-looking statements present estimates and assumptions onlyas of the date of this report. Except for the ongoing obligation todisclose material information as required by federal securities laws,the Company does not intend to update readers concerning any futurerevisions to forward-looking statements to reflect events orcircumstances occurring after the date of this report. Some of thefactors that could cause actual results to vary from theforward-looking statements include:

|              |                                                                                                                       |
|--------------|-----------------------------------------------------------------------------------------------------------------------|
| •  | theCompany's inability to generate revenues sufficient to sustainoperations or to raise capital as and when required; |

|              |                                                                                                                      |
|--------------|----------------------------------------------------------------------------------------------------------------------|
| •  | unanticipated increases in development,production or marketing expenses related to the Company'sbusiness activities; |

|              |                                                                                  |
|--------------|----------------------------------------------------------------------------------|
| •  | theCompany's inability to effectively compete with otherentertainment providers; |

|              |                                                                                         |
|--------------|-----------------------------------------------------------------------------------------|
| •  | theCompany's inability to protect its intellectual property frominfringement by others; |

|              |                                                                               |
|--------------|-------------------------------------------------------------------------------|
| •  | theCompany's inability to fully implement its business plan for anyreason; or |

|              |                                                                                        |
|--------------|----------------------------------------------------------------------------------------|
| •  | the loss of the services ofthe Company's Chief Executive Officer or other key persons. |

In evaluating forward-looking statements, readers should considerthe factors identified above as well as those risks outlined in thesection of this report titled "Management'sDiscussion and Analysis or Plan of Operation". Althoughthe Company believes that expectations reflected in the forward-lookingstatements are reasonable, future results, levels of activity, orachievements are not assured.

2

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Part I

Item  1. Financial Statements

TAG ENTERTAINMENTCORP.

CONSOLIDATED CONDENSED BALANCE SHEETS(unaudited)

|                                                                                          |  |              |            |                 |  |        |            |         |  |  |
|------------------------------------------------------------------------------------------|--|--------------|------------|-----------------|--|--------|------------|---------|--|--|
|                                                                                     |  | March31,2005 |            | December31,2004 |
| **ASSETS**                                                                               |  |
|                                                                                     |  |
| **CURRENTASSETS**                                                                        |  |
| Cash                                                                                     |  | $            | 599,000    |            |  | $      | 23,000     |    |
| Accountsreceivable                                                                       |  |         | 307,000    |            |  |   | 531,000    |    |
| Notesreceivable                                                                          |  |         | 255,000    |            |  |   | 5,000      |    |
| Totalcurrentassets                                                                       |  |         | 1,161,000  |            |  |   | 559,000    |    |
| **CAPITALIZEDFILM COSTS,NET**                                                            |  |         | 1,955,000  |            |  |   | 2,053,000  |    |
| **INVESTMENTSIN LIMITEDPARTNERSHIPS**                                                    |  |         | 688,000    |            |  |   | 688,000    |    |
| **EQUIPMENT,NET**                                                                        |  |         | 161,000    |            |  |   | 162,000    |    |
| **OTHERASSETS**                                                                          |  |         | 79,000     |            |  |   | 41,000     |    |
|                                                                                     |  | $            | 4,044,000  |            |  | $      | 3,503,000  |    |
|                                                                                     |  |
| **LIABILITIESAND STOCKHOLDERS' EQUITY(DEFICIT)**                                         |  |
|                                                                                     |  |
| **CURRENTLIABILITIES**                                                                   |  |
| Accountspayable                                                                          |  | $            | 621,000    |            |  | $      | 828,000    |    |
| Bankoverdrafts                                                                           |  |         | 240,000    |            |  |   | 124,000    |    |
| Amountspayable to affiliatedpartnerships                                                 |  |         | 1,861,000  |            |  |   | 1,871,000  |    |
| Deferredrevenue                                                                          |  |         | —    |            |  |   | 81,000     |    |
| Due torelatedparty                                                                       |  |         | 78,000     |            |  |   | —    |    |
| Notespayable                                                                             |  |         | 846,000    |            |  |   | 495,000    |    |
| Deferredproductionfunding                                                                |  |         | 244,000    |            |  |   | 191,000    |    |
| Accruedresiduals                                                                         |  |         | 53,000     |            |  |   | 51,000     |    |
| Accruedsalaries                                                                          |  |         | 390,000    |            |  |   | 370,000    |    |
| Accruedpayrolltaxes                                                                      |  |         | 168,000    |            |  |   | 168,000    |    |
| Totalcurrentliabilities                                                                  |  |         | 4,501,000  |            |  |   | 4,179,000  |    |
| **MINORITYINTEREST**                                                                     |  |         | 2,322,000  |            |  |   | 2,338,000  |    |
| **STOCKHOLDERS'EQUITY (DEFICIT)**                                                        |  |
| Preferred stock, $.001par value: 500,000 shares authorized, noneoutstanding              |  |         | —    |            |  |   | —    |    |
| Commonstock, $.001 par value: 50,000,000 shares authorized, 21,062,000 sharesoutstanding |  |         | 21,000     |            |  |   | 21,000     |    |
| Additionalpaid-incapital                                                                 |  |         | 3,805,000  |            |  |   | 3,167,000  |    |
| Commonstockcommitted                                                                     |  |         | 60,000     |            |  |   | —    |    |
| Accumulateddeficit                                                                       |  |         | (6,665,000 | )          |  |   | (6,202,000 | )  |
| Totalstockholders' equity(deficit)                                                       |  |         | (2,779,000 | )          |  |   | (3,014,000 | )  |
|                                                                                     |  | $            | 4,044,000  |            |  | $      | 3,503,000  |    |
|                                                                                          |

Seeaccompanying notes to consolidated financial statements.

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TAG ENTERTAINMENT CORP.

CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONSFOR THE THREEMONTHS ENDED MARCH 31 (unaudited)

|                                            |  |        |            |         |  |        |            |         |  |  |
|--------------------------------------------|--|--------|------------|---------|--|--------|------------|---------|--|--|
|                                       |  | 2005   |            | 2004    |
| REVENUE                                    |  |
| Filmrevenue                                |  | $      | 231,000    |    |  | $      | 240,000    |    |
| Managementfees.                            |  |   | 90,000     |    |  |   | 113,000    |    |
| Overheadfees                               |  |   | 60,000     |    |  |   | 60,000     |    |
| Studiorentalincome                         |  |   | —    |    |  |   | 100,000    |    |
| Totalrevenue                               |  |   | 381,000    |    |  |   | 513,000    |    |
| OPERATINGEXPENSES                          |  |
| Amortization of filmcosts                  |  |   | 144,000    |    |  |   | 176,000    |    |
| Studiorent and otherexpenses               |  |   | 33,000     |    |  |   | 132,000    |    |
| Selling,general and administrativeexpenses |  |   | 670,000    |    |  |   | 728,000    |    |
| Totaloperatingexpenses                     |  |   | 847,000    |    |  |   | 1,036,000  |    |
| LOSSFROMOPERATIONS.                        |  |   | (466,000   | )  |  |   | (523,000   | )  |
| INTERESTAND OTHERINCOME                    |  |   | 4,000      |    |  |   | 3,000      |    |
| NETLOSS BEFORE MINORITYINTEREST            |  |   | (462,000   | )  |  |   | (520,000   | )  |
| MINORITYINTEREST                           |  |   | (1,000     | )  |  |   | 1,000      |    |
| NETLOSS                                    |  | $      | (463,000   | )  |  | $      | (519,000   | )  |
| NETLOSS PER COMMON SHARE-BASIC ANDDILUTED  |  | $      | (0.02      | )  |  | $      | (0.03      | )  |
| WEIGHTEDAVERAGE SHARES-BASIC ANDDILUTED    |  |   | 21,062,000 |    |  |   | 17,185,000 |    |
|                                            |

Seeaccompanying notes to consolidated financial statements.

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TAG ENTERTAINMENT CORP.

CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWSFOR THE THREEMONTHS ENDED MARCH 31 (unaudited)

|                                                                           |  |        |           |         |  |        |           |         |  |  |
|---------------------------------------------------------------------------|--|--------|-----------|---------|--|--------|-----------|---------|--|--|
|                                                                      |  | 2005   |           | 2004    |
| **CASHFLOWS FROM OPERATING ACTIVITIES**                                   |  |
| Net lossbefore minorityinterest                                           |  | $      | (462,000  | )  |  | $      | (520,000  | )  |
| Adjustmentsto reconcile net loss to net cash used in operatingactivities: |  |
| Amortization of filmcosts                                                 |  |   | 144,000   |    |  |   | 176,000   |    |
| Depreciation                                                              |  |   | 13,000    |    |  |   | 12,000    |    |
| Changes inoperating assets and liabilities:                               |  |
| Accountsreceivable                                                        |  |   | 224,000   |    |  |   | (237,000  | )  |
| Investmentsinfilms                                                        |  |   | (46,000   | )  |  |   | (433,000  | )  |
| Bankoverdrafts                                                            |  |   | 116,000   |    |  |   | 108,000   |    |
| Accountspayable                                                           |  |   | (207,000  | )  |  |   | (332,000  | )  |
| Amountspayable to affiliatedpartnerships                                  |  |   | (10,000   | )  |  |   | 766,000   |    |
| Deferredrevenue                                                           |  |   | (81,000   | )  |  |   | 175,000   |    |
| Accruedsalaries                                                           |  |   | 20,000    |    |  |   | 125,000   |    |
| Otherassets andliabilities                                                |  |   | (36,000   | )  |  |   | (18,000   | )  |
| Netcash used in operatingactivities                                       |  |   | (325,000  | )  |  |   | (178,000  | )  |
|                                                                      |  |
| **CASHFLOWS FROM INVESTING ACTIVITIES**                                   |  |
| Issuanceof note for proposedacquisition                                   |  |   | (250,000  | )  |  |   | —   |    |
| Purchasesofequipment                                                      |  |   | (12,000   | )  |  |   | (11,000   | )  |
| Netcash used in investmentactivities                                      |  |   | (262,000  | )  |  |   | (11,000   | )  |
|                                                                      |  |
| **CASHFLOWS FROM FINANCING ACTIVITIES**                                   |  |
| Proceedsfrom issuance of notespayable                                     |  |   | 1,025,000 |    |  |   | —   |    |
| Paymenton notespayable                                                    |  |   | (36,000   | )  |  |   | —   |    |
| Proceedsfrom relatedparty                                                 |  |   | 85,000    |    |  |   | —   |    |
| Paymentsto relatedparty                                                   |  |   | (7,000    | )  |  |   | —   |    |
| Proceedsfor filmproduction                                                |  |   | 53,000    |    |  |   | 65,000    |    |
| Proceedsfrom private placement due toofficer                              |  |   | —   |    |  |   | 331,000   |    |
| Proceedsfrom private placementofferings                                   |  |   | 60,000    |    |  |   | 358,000   |    |
| Offeringcosts for privateplacement                                        |  |   | —   |    |  |   | (31,000   | )  |
| Returnof capital of minorityinterest                                      |  |   | (17,000   | )  |  |   | (2,000    | )  |
| Netcash provided by financingactivities.                                  |  |   | 1,163,000 |    |  |   | 721,000   |    |
|                                                                      |  |
| Netincrease incash                                                        |  |   | 576,000   |    |  |   | 532,000   |    |
|                                                                      |  |
| Cashat beginning ofperiod                                                 |  |   | 23,000    |    |  |   | 685,000   |    |
|                                                                      |  |
| Cashat end ofperiod                                                       |  | $      | 599,000   |    |  | $      | 1,217,000 |    |
|                                                                      |  |
| Supplementaldisclosure of cash flow information:                          |  |
| Interestpaid                                                              |  | $      | 2,000     |    |  | $      | 2,000     |    |
|                                                                           |

Seeaccompanying notes to consolidated financialstatements.

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TAG ENTERTAINMENTCORP.

NOTES TO CONSOLIDATED CONDENSED FINANCIALSTATEMENTS (unaudited)

NOTE 1 – SUMMARY OF SIGNIFICANTACCOUNTING POLICIES

Basis of Presentation

Theaccompanying consolidated condensed financial statements for the threemonth periods ended March 31, 2005 and 2004 have been prepared inaccordance with accounting principles generally accepted in the UnitedStates ("GAAP") and with the instructions toForm 10-QSB and Item 310 of Regulation S-B. These financial statementshave not been audited by independent public accountants, but includeall adjustments (consisting of normal recurring adjustments) which are,in the opinion of management, necessary for a fair presentation of thefinancial condition, results of operations and cash flows for suchperiods. However, these results are not necessarily indicative ofresults for any other interim period or for the full year. Theaccompanying consolidated condensed balance sheet as of December 31,2004 has been derived from the audited financial statements, but doesnot include all disclosures required by GAAP.

Certaininformation and footnote disclosure normally included in financialstatements prepared in accordance with GAAP have been omitted pursuantto guidelines of the Securities and Exchange Commission (the"SEC"). Management believes that thedisclosures included in the accompanying interim financial statementsand footnotes are adequate to make the information not misleading, butthe disclosures contained herein should be read in conjunction with theconsolidated financial statements and notes thereto included in theCompany's Annual Report on Form 10-KSB for the year endedDecember 31, 2004.

The preparation of the financial statements inaccordance with GAAP requires management to make estimates andassumptions that affect reported amounts of assets and liabilities anddisclosure of contingent assets and liabilities at the date of thefinancial statements and the reported amounts of revenues and expensesduring the reporting period. Actual results could differ from those andother estimates.

Nature of Operations

TAG EntertainmentCorp. (the "Company" or"TAG") is a Delaware corporationheadquartered in Beverly Hills, California. The Company is engaged inthe development, production and distribution of motion pictures and themanagement of studio facilities. The Company also acquires thecopyrights and/or distribution rights to already completed films formedia exhibition. In order to finance film production, the Companyraises funds through the establishment of single purpose limitedpartnerships and through the sale of equity or debt securities. TAGEntertainment USA, Inc. ("TAG USA"), theCompany's wholly-owned subsidiary, serves as the sole generalpartner of the following four limited partnerships: Majestic FilmPartners, LP, Majestic Film Partners II, LP, Majestic Film PartnersIII, LP and Majestic Film Partners IV, LP (the "LimitedPartnerships"). TAG USA is also the distributor of filmsproduced by numerous other limited partnerships as well as assists infacilitating the production and distribution of films produced bylimited partnerships for which it receives an overhead and/orproduction fee. Five of these other limited partnerships have as theirgeneral partner an entity owned and controlled by Steve Austin, ourChief Executive Officer.

The Company's revenues are derivedfrom motion picture distribution, which includes theatrical, homeentertainment, television and international distribution. Theatricalrevenues are derived from the domestic theatrical release of motionpictures in North America. Home entertainment revenues are derived fromthe sale of video and DVD releases of the Company's ownproductions and acquired films, including theatrical releases anddirect-to-video releases. Television revenues are primarily derivedfrom the licensing of the Company's productions and acquiredfilms to the domestic cable, free and pay television markets.International revenues are derived from the licensing of theCompany's productions and acquired films to international marketson a territory-by-territory basis. 

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The Company's primary operating expensesinclude the following: direct operating expenses, which includeamortization of production or acquisition costs, participation andresidual expenses; distribution and marketing expenses; which primarilyinclude the costs of theatrical "prints andadvertising" and of video and DVD duplication andmarketing; and general and administration expenses, which includesalaries and other overhead.

Merger

On November 22, 2004,TAG USA was acquired by Power Marketing, Inc., a Delaware corporation.In the transaction, TAG USA merged with a subsidiary of PowerMarketing, Inc. and became a wholly-owned subsidiary of PowerMarketing, Inc., now operating as a separate entity. As a result ofthis transaction, the stockholders and other security holders of TAGUSA became the owner of approximately 90% of the Company'soutstanding shares of common stock. In connection with the merger,Power Marketing changed its corporate name to TAG Entertainment Corp.,obtained the new trading symbol TAGE.OB and all of the officers anddirectors of Power Marketing resigned and Mr. Austin, who was themajority shareholder, Chief Executive Officer and sole director of TAGUSA became the Company's Chief Executive Officer, Chief FinancialOfficer and sole director. As discussed below, we recently appointedfive additional individuals to our board of directors. The transactionwas treated as a reverse merger and a recapitalization of the Companyfor reporting purposes. The holders of approximately 1,122,000 sharesof common stock of TAG USA that did not consent in writing to theCompany's acquisition of TAG USA are entitled to exerciseappraisal rights under the California Corporations Code. In the eventsuch holders elect to exercise these rights, the Company would berequired to purchase the shares of common stock of TAG USA held by themin lieu of issuing shares of the Company's common stock at theexchange ratio applicable to the transaction.

Going Concern andManagement Plans

The Company's financial statements havebeen presented on the basis that it is a going concern, whichcontemplates the realization of assets and the satisfaction ofliabilities in the normal course of business. The Company hasexperienced recurring losses and negative cash flows from operationsand has a working capital deficit and a stockholder deficit, whichraises substantial doubt about its ability to continue as a goingconcern and the Company's independent auditors have included a"going concern" explanatory paragraph intheir report on the Company's financial statements for the yearended December 31, 2004. The Company is currently devoting its effortsto raising additional capital and ultimately achieving profitableoperations. The Company's ability to continue as a going concernis dependent upon its ability to develop additional sources of capital.The accompanying financial statements do not include any adjustmentsthat might result from the outcome of these uncertainties. The Companyclosed on a bridge financing in the amount of $1,000,000 onMarch  30,  2005. On May 4, 2005, the Company completed a$5,000,000 preferred stock financing and retired the bridge loan.

On March 30, 2005, the Company entered into a letter of intent toacquire 100% of the outstanding common stock of Myriad Pictures,Inc., which is engaged in the film production and distributionbusiness. The letter of intent provides for a purchase price ofapproximately $4,000,000, including an earnout payment of up to$2,000,000 to be negotiated prior to closing of the transaction. Theearnout may be paid in cash or in shares of the Company's commonstock, at its option. In addition, the Company intends to invest anadditional $750,000 to provide Myriad with working capital and debtrepayment after the closing. Included in the purchase price, a$1,000,000 promissory note will be issued, payable over 12 monthsfollowing the closing.

In connection with the execution of theletter of intent, the Company provided Myriad with a short term loan of$250,000, bearing interest at the rate of 3% per annum, whichMyriad will use for working capital and transition costs pending theclosing. After closing of the transaction, the loan will convert intoadditional investment in Myriad. The loan is secured by a lien on theassets of Myriad.

In order to satisfy future cash requirements,management is actively pursuing and has entered into discussionsregarding additional financing to support the proposed acquisition,related expansion plans, and ongoing operations. The Company currentlyhas no firm agreements with any third parties for any futuretransactions and future financings.

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Principles of Consolidation

Theaccompanying consolidated financial statements of the Company includethe accounts of TAG and of the Limited Partnerships which TAG USA isthe sole general partner. The General Partner has the full andexclusive control of the management and operation of the business ofeach partnership. TAG USA in its capacity as General Partnerparticipates in 1% of the losses of the limited partnerships butshares in 60% of any profits. All significant inter-companybalances and transactions have been eliminated in consolidation.

Minority Interests

TAG consolidates the LimitedPartnerships for which TAG USA is the sole general partner. The amountof minority interest represents the aggregate net limited partnershipcapital of each partnership offset by 99% of accumulated LimitedPartnership losses.

Revenue Recognition

Revenue fromthe sale or licensing of films and television programs is recognizedupon meeting all recognition requirements of SOP 00-2. Revenue from thetheatrical release of feature films is recognized at the time ofexhibition based on the Company's participation in box officereceipts. Revenue from the sale of videocassettes and digital videodisks ("DVDs") in the retail market isrecognized on the "street date" when it isavailable for sale by the customer. Revenues from televisions licensingare recognized when the feature film or television program is availableto the licensee for telecast. Revenues from sales to internationalterritories are recognized when the feature film or television programis available to the distributor for exploitation and no conditions fordelivery exist.

As facilitator or producer of various filmsthrough limited partnerships established for the sole purpose offinancing the production of motion pictures, the Chief ExecutiveOfficer of the Company has assigned to TAG his management fee rightsduring the production period.

Rental revenue from short-termoperating leases studio facilities is recognized over the term of thelease.

Cash payments received which may include minimumguarantees are recorded as deferred revenue until all conditions ofrevenue recognition have been met.

Cash Equivalents

Forpurposes of reporting cash flows, the Company considers all short-term,interest bearing deposits with original maturities of three months orless to be cash equivalents.

Capitalized Film Costs

Capitalized film costs consist of investments in films which includethe unamortized costs of completed films which have been produced bythe Company or for which the Company has acquired distribution rightsor film libraries.

For films produced by the Company,capitalized costs include all direct production and financing costs,and production overhead. For acquired films, these capitalized costsconsist of minimum guarantee payments to acquire the distributionrights.

Costs of acquiring and producing films and of acquiredlibraries are amortized using the individual-film-forecast method,whereby these costs are amortized and participation and residual costsare accrued in the proportion that current year's revenue bearsto management's estimate of ultimate revenue at the beginning ofthe current year expected to be recognized from the exploitation,exhibition or sale of the films.

Ultimate revenue includesestimates over a period not to exceed ten years following the date ofinitial release. For titles included in acquired libraries, ultimaterevenue includes estimates over a period not to exceed ten yearsfollowing the date of acquisition.

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Capitalized film costs are stated at thelower of amortized cost or estimated fair value on an individual filmbasis. The valuation of investment in films is reviewed on atitle-by-title basis, when an event or changes in circumstancesindicated that the fair value of a film is less than its unamortizedcost. The fair value of the film is determined using management'sfuture revenue and cost estimates. Additional amortization is recordedin the amount by which the unamortized costs exceed the estimated fairvalue of the film. Estimates of future revenue involve measurementuncertainty and it is therefore possible that reductions in thecarrying value of investment in films may be required as a consequenceof changes in management's future revenue estimates.

Filmsin progress include the accumulated costs of production, which have notyet been completed by the Company.

Films in development includecosts of acquiring film rights to original screenplays and costs toadapt such projects. Such costs are capitalized and, upon commencementof production, are transferred to production costs. Projects indevelopment are written off at the earlier of the date determined notto be recoverable or when abandoned, or three years from the date ofthe initial investment.

Equipment

Equipment is carriedat cost and is depreciated on the straight-line basis over theirestimated useful lives of three to eight years. Repairs and maintenanceare expensed as incurred. When assets are retired or otherwise disposedof, the property accounts are relieved of costs and accumulateddepreciation and any existing gain or loss is credited or charged tooperations.

Stock-Based Compensation

The Companyaccounts for stock-based compensation in accordance with Statement ofFinancial Accounting Standards No. 123, "Accounting forStock-Based Compensation" ("SFAS123"). This standard requires the Company to adopt the"fair value" method with respect tostock-based compensation of consultants and other non-employees. TheCompany did not change its method of accounting with respect toemployee stock options; the Company continues to account for theseunder the "intrinsic value" method and tofurnish the pro-forma disclosures required by SFAS 123.

Valuation of the Company's Common Stock

Unlessotherwise disclosed, all stock-based transactions entered into by theCompany have been valued at the market value of the Company'scommon stock on the date the transaction was entered into or have beenvalued using the Black-Scholes to estimate the fair market value.

Concentrations of Risk

The Company's financialinstruments that are exposed to concentrations of credit risk consistof cash and receivables. The Company invests its cash in banks withhigh credit ratings; however, certain account balances have beenmaintained at levels in excess of federally insured limits. The Companyhas not experienced a loss in such accounts.

The Company extendscredit based on an evaluation of the customer's financialcondition, generally without collateral. Exposure to losses onreceivables is principally dependent on each customer's financialcondition. The Company monitors its exposure for credit losses andmaintains allowances for anticipated losses, as required. The Companysub-distributes titles in both the domestic and international markets.The Company is typically paid an advance or minimum guarantee for theserights. Any overages (revenue in excess of the minimum guarantee) arereported to the Company 45 to 90 days after the reporting period.Because of the minimum guarantees and short reporting periods accountsreceivables are minimized and outstanding balances are generallycollected within 45 to 90 days.

Income Taxes

Deferredincome taxes are recorded to reflect the tax consequences in futureyears of temporary differences between the tax basis of the assets andliabilities and their financial statement amounts at 

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the end of each reporting period. Valuationallowances are established when necessary to reduce deferred tax assetsto the amount expected to be realized. Income tax expense is the taxpayable for the current period and the change during the period indeferred tax assets and liabilities. The deferred tax assets andliabilities have been netted to reflect the tax impact of temporarydifferences. A full valuation allowance has been established for netdeferred tax assets as management believes that it is more likely thannot that a tax benefit will not be realized.

Earnings perCommon Share

The Company computes earnings per common share inaccordance with Statement of Financial Accounting Standards No. 128,"Earnings per Share" (SFAS No. 128). TheStatement requires dual presentation of basic and diluted EPS on theface of the income statement for all entities with complex capitalstructures and requires a reconciliation of the numerator anddenominator of the basic EPS computation to the numerator anddenominator of the diluted EPS computation. Basic loss per share iscomputed by dividing loss available to common shareholders by theweighted average number of common shares outstanding. The computationof diluted loss per share is similar to the basic loss per sharecomputation except the denominator is increased to include the numberof additional shares that would have been outstanding if the dilutivepotential common shares had been issued. In addition, the numerator isadjusted for any changes in income or loss that would result from theassumed conversions of those potential shares. However, suchpresentation is not required if the effect is anti-dilutive.Accordingly, the diluted per share amounts do not reflect the impact ofwarrants and options totaling 5,567,000 and 4,339,000 at March 31, 2005and 2004, respectively as the effects would be anti-dilutive.

NOTE 2 – AMOUNTS PAYABLE TO AFFILIATED PARTNERSHIPS

Net amounts payable to affiliated partnerships resulted from theadvancement of funds by certain partnerships to TAG which were requiredduring the course of managing the Company's operations andfacilitating the activities of the partnerships. In addition, to meetthe cash flow needs of other affiliated partnerships, funding transfershave also occurred between and among TAG and the affiliatedpartnerships. The amounts payable to affiliated partnerships includevarious receivable and payable balances between TAG and theseaffiliated entities.

TAG USA in its capacity as general partnerand distributor of various films produced by the limited partnershipsis allowed to charge monthly overhead and production fees which getrecorded to accounts with the affiliated partnerships. The Companyplans on making a formal purchase offer to the various partnerships inreturn for TAG stock thus settling outstanding balances owed to thepartnerships.

The Company has recorded interest on amountsborrowed from related entities at the prime lending rate and hasincluded accrued interest in the amounts due to and from the relatedentities.

NOTE 3 – DEFERRED PRODUCTION FUNDING

TAG deposited funds obtained from third party producers for thepurpose of producing specific films. In exchange for an ownership orparticipation percentage in the film, the third party producer hasagreed to finance a portion of the production. Since no funds directlyrelated to the production had been expended at March 31, 2005, theamounts received have been included as a liability until such time asthe production costs are incurred.

NOTE 4 – FINANCINGACTIVITIES

As previously reported, on March 30, 2005, theCompany entered into a Securities Purchase Agreement with SatelliteStrategic Finance Associates, LLC and an affiliated investor underwhich the Company issued $1,000,000 in aggregate principal amount ofSenior Secured Notes ("Notes") and warrantsto purchase 500,000 shares of its common stock in a private placementto accredited investors under Regulation D of the Securities Act of1933, as amended. The Company received gross 

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proceeds of $1,000,000 which were intendedfor the film production and general working capital requirements. Theaggregate principal amount of the Notes was $1,150,000 with a15% yield funded as original issuance discount. The Company alsoentered into a Registration Rights Agreement and a Security Agreementwith the investors and its subsidiary, TAG Entertainment USA, Inc.co-signed the Security Agreement and agreed to guaranty its obligationspursuant to the financing agreements. Pursuant to the SecurityAgreement, the Company granted the investors a first priority lien onall of its assets, other than certain previously issued liens, in orderto secure its obligations. The Notes mature on March 30, 2006 and aresooner payable in full in the event the Company consummates asubsequent financing event, with certain exceptions, or upon theoccurrence of an event of default. The warrants are exercisable at$1.00 per share, subject to adjustment upon certain events, includingas a result of its sale of equity securities at a price below theexercise price. The warrants are exercisable at any time on or beforeMarch 30, 2010. In connection with the issuance of the Notes and therelated warrants, the Company allocated the net proceeds between theinstruments based on the relative fair value of the warrants and theNotes. The fair value of the warrants was determined using theBlack-Scholes pricing model and the following assumptions: contractualterms of five years, an average risk free interest rate of 2.5%,a dividend yield of 0%, and a volatility of 95.3%.Accordingly, the Company recorded an increase in additional paid-incapital and note payable discount of $638,000 in connection with theissuance of the Notes and warrants. The discount will be amortized overthe life of the Notes.

On May 4, 2005 the Company consummated asubsequent financing transaction with the holders of the Notes,pursuant to which the Notes were repaid in full and the Companyfulfilled its obligations under the Security Agreement and Guaranty.The original issue discount and discount associated with the allocationof value between the Notes and the warrants will be expensed in thesecond quarter of 2005 as a result of the repayment of the Notes. Inthis financing transaction, the Company completed a private placementof shares of its Series A Convertible Preferred Stock, par value $.001per share, and warrants to purchase shares of TAG's common stock.The placement was made pursuant to a Securities Purchase Agreement,dated May 3, 2005 and the gross proceeds of this transaction were$5,000,000. After payment of the Notes and offering expenses in theamount of approximately $350,000, the Company received net proceeds ofapproximately $3,500,000 from this financing. The Company plans to usethe net proceeds for the production, acquisition and distribution offeature films, and general working capital.

In this financing,the Company issued 5,000 shares of Series A Preferred Stock,convertible at the option of the holder into an initial aggregateamount of 2,000,000 shares of common stock, par value $.001 per share,at an initial conversion price of $2.50 per share, and warrants topurchase an initial aggregate amount of 2,000,000 shares of commonstock at an initial exercise price of $2.50 per share, which areimmediately exercisable and expire in seven years. Each share ofPreferred Stock, which has a stated value of $1,000 per share, earnscumulative dividends at a rate of 6% per annum and matures threeyears from the date of issuance. The dividend and liquidation rights ofthe Preferred Stock are senior to those of its common stock. ThePreferred Stock does not carry voting rights.

As previouslyreported, in January 2005 the Company commenced a private placementoffering under Rule 506, promulgated under the Securities Act of 1933.As of March 31, 2005 approximately $60,000 had been deposited in escrowfor the purchase of 20,000 shares from the offering and has beenclassified as common stock committed in stockholders' equity.

NOTE 5 – INCOME TAXES

The Company accounts for incometaxes in accordance with SFAS 109, Accounting for Income Taxes. Due tothe Company having incurred losses in each year since inception, therewas no provision for income taxes during these periods. A valuationallowance has been recorded for the net deferred tax assets as a resultof uncertainties regarding realization of the asset based upon the lackof profitability and the uncertainty of future profitability. TheCompany has unused net operating loss carry forwards totaling $6.3million, which expire at various dates from 2005 to 2025.

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NOTE 6 – LITIGATION

TheCompany is involved in various claims and other legal proceedings thatarise from time to time in the ordinary course of business. The Companydoes not believe any of them will have a material adverse affect on theCompany's financial position or results of operations. Litigationis inherently unpredictable and excessive verdicts do occur. Althoughthe Company believes is has valid defenses in these matters, theCompany could in the future incur judgments or enter into settlementsof claims that could have a material adverse affect on theCompany's financial position or results of operations in anyparticular period.

An arbitration was filed on July 20, 2004;Philipson vs. Animal Partners, LP, et al, with the American ArbitrationAssociation ("AAA") which named TAG as arespondent. An amended petition initiating the Arbitration (the"Petition") allegedly arises out of thePetitioners' purchase of several units of the Animal PartnersLimited Partnership (the "LP"). Theallegation of the Petition is that "Respondents have neverfully reported any financial information to thePetitioners". TAG has sent the matter to its legalcounsel; however, TAG is neither a Limited Partner nor General Partnerof the "LP". TAG's association with the"LP" is as distributor of the motion pictureMiracle Dogs produced by the LP. The case was settled in March 2005 andTAG was released from any claims. TAG, however, intends to purchase theoutstanding LP shares currently owned by the Philipsons for$200,000.

NOTE 7 – PROPOSED ACQUISITION

On March30, 2005, the Company entered into a letter of intent to acquire100% of the outstanding common stock of Myriad Pictures, Inc.,which is engaged in the film production and distribution business. Theletter of intent provides for a purchase price of approximately$4,000,000, including an earnout payment of up to $2,000,000 to benegotiated prior to closing of the transaction. The earnout may be paidin cash or in shares of the Company's common stock, at itsoption. In addition, the Company intends to invest an additional$750,000 to provide Myriad with working capital and debt repaymentafter the closing. Included in the purchase price, a $1,000,000promissory note will be issued, payable over 12 months following theclosing.

In connection with the execution of the letter ofintent, the Company provided Myriad with a short term loan of $250,000,bearing interest at the rate of 3% per annum, which Myriad willuse for working capital and transition costs pending the closing. Afterclosing of the transaction, the loan will convert into additionalinvestment in Myriad. The loan is secured by a lien on the assets ofMyriad.

Item 2.    Management's Discussion and Analysisor Plan of Operation

This management's discussion andanalysis of financial condition and results of operations discusses theCompany's consolidated financial statements, which have beenprepared in accordance with accounting principles generally accepted inthe United States. The preparation of these financial statementsrequires management to make estimates and assumptions that affect thereported amounts of assets and liabilities and the disclosure ofcontingent assets and liabilities at the date of the financialstatements and the reported amounts of revenues and expenses during thereporting period. On an on-going basis, management evaluates itsestimates and judgments. Management bases its estimates and judgmentson historical experience and on various other factors that are believedto be reasonable under the circumstances. This discussion also containsforward-looking statements that involve risks and uncertainties. Thefollowing discussion should be read in conjunction with theCompany's consolidated financial statements and the notes theretoincluded elsewhere in this report. Actual results may differ from theseestimates under different assumptions or conditions.

Natureof Operations

TAG Entertainment Corp. (the"Company" or "TAG")is a Delaware corporation headquartered in Beverly Hills, California.The Company is engaged in the development, production and distributionof motion pictures and the management of studio facilities. The Companyalso acquires the copyrights 

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and/or distribution rights to alreadycompleted films for media exhibition. In order to finance filmproduction, the Company raises funds through the establishment ofsingle purpose limited partnerships and through the sale of equity ordebt securities. TAG Entertainment USA, Inc. ("TAGUSA"), the Company's wholly-owned subsidiary, servesas the sole general partner of the following four limited partnerships:Majestic Film Partners, LP, Majestic Film Partners II, LP, MajesticFilm Partners III, LP and Majestic Film Partners IV, LP (the"Limited Partnerships"). TAG USA is also thedistributor of films produced by numerous other limited partnerships aswell as assists in facilitating the production and distribution offilms produced by limited partnerships for which it receives anoverhead and/or production fee. Certain of these other limitedpartnerships have as their general partner an entity owned andcontrolled by Steve Austin, our Chief Executive Officer.

TheCompany's revenues are derived from motion picture distribution,which includes theatrical, home entertainment, television andinternational distribution. Theatrical revenues are derived from thedomestic theatrical release of motion pictures in North America. Homeentertainment revenues are derived from the sale of video and DVDreleases of the Company's own productions and acquired films,including theatrical releases and direct-to-video releases. Televisionrevenues are primarily derived from the licensing of theCompany's productions and acquired films to the domestic cable,free and pay television markets. International revenues are derivedfrom the licensing of the Company's productions and acquiredfilms to international markets on a territory-by-territory basis. TheCompany's primary operating expenses include the following:direct operating expenses, which include amortization of production oracquisition costs, participation and residual expenses; distributionand marketing expenses; which primarily include the costs of theatrical"prints and advertising" and of video and DVDduplication and marketing; and general and administration expenses,which include salaries and other overhead.

Merger

OnNovember 22, 2004, TAG USA was acquired by Power Marketing, Inc., aDelaware corporation. In the transaction, TAG USA merged with asubsidiary of Power Marketing, Inc. and became a wholly-ownedsubsidiary of Power Marketing, Inc., now operating as a separateentity. As a result of this transaction, the stockholders and othersecurity holders of TAG USA became the owner of approximately90% of the Company's outstanding shares of common stock.In connection with the merger, Power Marketing changed its corporatename to TAG Entertainment Corp., obtained the new trading symbolTAGE.OB and all of the officers and directors of Power Marketingresigned and Mr. Austin, who was the majority shareholder, ChiefExecutive Officer and sole director of TAG USA became theCompany's Chief Executive Officer, Chief Financial Officer andsole director. As discussed below, we recently appointed fiveadditional individuals to our board of directors. The transaction wastreated as a reverse merger and a recapitalization of the Company forreporting purposes. The holders of approximately 1,122,000 shares ofcommon stock of TAG USA that did not consent in writing to theCompany's acquisition of TAG USA are entitled to exerciseappraisal rights under the California Corporations Code. In the eventsuch holders elect to exercise these rights, the Company would berequired to purchase the shares of common stock of TAG USA held by themin lieu of issuing shares of the Company's common stock at theexchange ratio applicable to the transaction.

Going Concern andManagement Plans

The Company's financial statements havebeen presented on the basis that it is a going concern, whichcontemplates the realization of assets and the satisfaction ofliabilities in the normal course of business. The Company hasexperienced recurring losses and negative cash flows from operationsand has a working capital deficit and a stockholder deficit, whichraises substantial doubt about its ability to continue as a goingconcern and the Company's independent auditors have included anexplanatory paragraph in their report on the Company's financialstatements for the year ended December 31, 2004. The Company iscurrently devoting its efforts to raising additional capital andultimately achieving profitable operations. The Company's abilityto continue as a going concern is dependent upon its ability to developadditional sources of capital. The accompanying financial statements donot include any adjustments that might result from the outcome of theseuncertainties.

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The Company closed on a bridge financingin the amount of $1,000,000 on March  30,  2005. On May 4,2005, the Company completed a $5,000,000 preferred stock financing andretired the bridge loan.

On March 30, 2005, the Company enteredinto a letter of intent to acquire 100% of the outstandingcommon stock of Myriad Pictures, Inc., which is engaged in the filmproduction and distribution business. The letter of intent provides fora purchase price of approximately $4,000,000, including an earnoutpayment of up to $2,000,000 to be negotiated prior to closing of thetransaction. The earnout may be paid in cash or in shares of theCompany's common stock, at its option. In addition, the Companyintends to invest an additional $750,000 to provide Myriad with workingcapital and debt repayment after the closing. Included in the purchaseprice, a $1,000,000 promissory note will be issued, payable over 12months following the closing.

In connection with the executionof the letter of intent, the Company provided Myriad with a short termloan of $250,000, bearing interest at the rate of 3% per annum,which Myriad will use for working capital and transition costs pendingthe closing. After closing of the transaction, the loan will convertinto an additional investment in Myriad. The loan is secured by a lienon the assets of Myriad.

In order to satisfy future cashrequirements, management is actively pursuing and has entered intodiscussions regarding additional financing to support the proposedacquisition, related expansion plans, and ongoing operations. TheCompany currently has no firm agreements with any third parties for anyfuture transactions and future financings.

Critical AccountingPolicies

The application of the following accounting policies,which are important to the Company's financial position andresults of operations, requires significant judgments and estimates onthe part of management. For a summary of all of the Company'saccounting policies, including the accounting policies discussed below,see Note 1 to the Company's audited consolidated financialstatements.

Use of Estimates

The preparation of thefinancial statements in accordance with accounting principles generallyaccepted in the United States requires management to make estimates andassumptions that affect reported amounts of assets and liabilities anddisclosure of contingent assets and liabilities at the date of thefinancial statements and the reported amounts of revenues and expensesduring the reporting period. Actual results could differ from those andother estimates.

Principles of Consolidation

Theaccompanying consolidated financial statements of the Company includethe accounts of TAG USA and of the Limited Partnerships for which TAGUSA is the sole general partner. The General Partner has the full andexclusive control of the management and operation of the business ofeach partnership. TAG USA in its capacity as General Partnerparticipates in 1% of the losses of the limited partnerships butshares in 60% of any profits. All significant inter-companybalances and transactions have been eliminated in consolidation.

Minority Interests

TAG consolidates four limitedpartnerships for which TAG USA is the sole general partner. The amountof minority interest represents the aggregate net limited partnershipcapital of each limited partnership along with a reduction of99% of the losses incurred directly by the LimitedPartnerships.

Revenue Recognition

Revenue from the saleor licensing of films and television programs is recognized uponmeeting all recognition requirements of SOP 00-2. Revenue from thetheatrical release of feature films is recognized at the time ofexhibition based on the Company's participation in box officereceipts. 

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Revenue from the sale of videocassettes anddigital video disks ("DVDs") in the retailmarket is recognized on the "street date"when it is available for sale by the customer. Revenues fromtelevisions licensing are recognized when the feature film ortelevision program is available to the licensee for telecast. Revenuesfrom sales to international territories are recognized when the featurefilm or television program is available to the distributor forexploitation and no conditions for delivery exist.

Asfacilitator or producer of various films through limited partnershipsestablished for the sole purpose of financing the production of motionpictures, the Chief Executive Officer of the Company has assigned toTAG his management fee rights during the production period.

Rental revenue from short-term operating leases studio facilities isrecognized over the term of the lease.

Cash payments receivedwhich may include minimum guarantees are recorded as deferred revenueuntil all conditions of revenue recognition have been met.

CashEquivalents

For purposes of reporting cash flows, the Companyconsiders all short-term, interest bearing deposits with originalmaturities of three months or less to be cash equivalents.

Capitalized Film Costs

Capitalized film costs consist ofinvestments in films which include the unamortized costs of completedfilms which have been produced by the Company or for which the Companyhas acquired distribution rights or film libraries.

For filmsproduced by the Company, capitalized costs include all directproduction and financing costs, and production overhead. For acquiredfilms, these capitalized costs consist of minimum guarantee payments toacquire the distribution rights.

Costs of acquiring andproducing films and of acquired libraries are amortized using theindividual-film-forecast method, whereby these costs are amortized andparticipation and residual costs are accrued in the proportion thatcurrent year's revenue bears to management's estimate ofultimate revenue at the beginning of the current year expected to berecognized from the exploitation, exhibition or sale of the films.

Ultimate revenue includes estimates over a period not to exceed tenyears following the date of initial release. For titles included inacquired libraries, ultimate revenue includes estimates over a periodnot to exceed ten years following the date of acquisition.

Capitalized film costs are stated at the lower of amortized cost orestimated fair value on an individual film basis. The valuation ofinvestment in films is reviewed on a title-by-title basis, when anevent or changes in circumstances indicated that the fair value of afilm is less than its unamortized cost. The fair value of the film isdetermined using management's future revenue and cost estimates.Additional amortization is recorded in the amount by which theunamortized costs exceed the estimated fair value of the film.Estimates of future revenue involve measurement uncertainty and it istherefore possible that reductions in the carrying value of investmentin films may be required as a consequence of changes inmanagement's future revenue estimates.

Films in progressinclude the accumulated costs of production, which have not yet beencompleted by the Company.

Films in development include costs ofacquiring film rights to original screenplays and costs to adapt suchprojects. Such costs are capitalized and, upon commencement ofproduction, are transferred to production costs. Projects indevelopment are written off at the earlier of the date determined notto be recoverable or when abandoned, or three years from the date ofthe initial investment.

Equipment

Equipment is carriedat cost and is depreciated on the straight-line basis over theirestimated useful lives of three to eight years. Repairs and maintenanceare expensed as incurred. When assets 

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are retired or otherwise disposed of, theproperty accounts are relieved of costs and accumulated depreciationand any existing gain or loss is credited or charged to operations.

Stock-Based Compensation

The Company accounts forstock-based compensation in accordance with Statement of FinancialAccounting Standards No. 123, "Accounting for Stock-BasedCompensation" ("SFAS 123"). Thisstandard requires the Company to adopt the "fairvalue" method with respect to stock-based compensation ofconsultants and other non-employees. The Company did not change itsmethod of accounting with respect to employee stock options; theCompany continues to account for these under the"intrinsic value" method and to furnish thepro-forma disclosures required by SFAS 123.

Valuation of theCompany's Common Stock

Unless otherwise disclosed, allstock-based transactions entered into by the Company have been valuedat the market value of the Company's common stock on the date thetransaction was entered into or have been valued using the ModifiedBlack-Scholes to estimate the fair market value.

Concentrationsof Risk

The Company's financial instruments that areexposed to concentrations of credit risk consist of cash andreceivables. The Company invests its cash in banks with high creditratings; however, certain account balances have been maintained atlevels in excess of federally insured limits. The Company has notexperienced a loss in such accounts.

The Company extends creditbased on an evaluation of the customer's financial condition,generally without collateral. Exposure to losses on receivables isprincipally dependent on each customer's financial condition. TheCompany monitors its exposure for credit losses and maintainsallowances for anticipated losses, as required. The Companysub-distributes titles in both the domestic and international markets.The Company is typically paid an advance or minimum guarantee for theserights. Any overages (revenue in excess of the minimum guarantee) arereported to the Company 45 to 90 days after the reporting period.Because of the minimum guarantees and short reporting periods accountsreceivables are minimized and outstanding balances are generallycollected within 45 to 90 days.

Income Taxes

Deferredincome taxes are recorded to reflect the tax consequences in futureyears of temporary differences between the tax basis of the assets andliabilities and their financial statement amounts at the end of eachreporting period. Valuation allowances are established when necessaryto reduce deferred tax assets to the amount expected to be realized.Income tax expense is the tax payable for the current period and thechange during the period in deferred tax assets and liabilities. Thedeferred tax assets and liabilities have been netted to reflect the taximpact of temporary differences. At December 31, 2004, a full valuationallowance has been established for the deferred tax asset as managementbelieves that it is more likely than not that a tax benefit will not berealized.

Earnings per Common Share

The Companycomputes earnings per common share in accordance with Statement ofFinancial Accounting Standards No. 128, "Earnings perShare" (SFAS No. 128). The Statement requires dualpresentation of basic and diluted EPS on the face of the incomestatement for all entities with complex capital structures and requiresa reconciliation of the numerator and denominator of the basic EPScomputation to the numerator and denominator of the diluted EPScomputation. Basic loss per share is computed by dividing lossavailable to common shareholders by the weighted average number ofcommon shares outstanding. The computation of diluted loss per share issimilar to the basic loss per share computation except the denominatoris increased to include the number of additional shares that would havebeen outstanding if the dilutive potential common shares had been

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issued. In addition, the numerator isadjusted for any changes in income or loss that would result from theassumed conversions of those potential shares. However, suchpresentation is not required if the effect is anti-dilutive.Accordingly, the diluted per share amounts do not reflect the impact ofwarrants and options totaling 5,567,000 and 4,339,000 at March 31, 2005and 2004 as the effects would be anti-dilutive.

Results ofOperations

Three Months Ended March 31, 2005 as compared toMarch 31,  2004

Revenue

Grossrevenues for the three months ended March 31, 2005 and 2004 were$381,000 and $513,000, respectively; a decrease of $132,000. Thedecrease in revenues was principally attributable to the decrease instudio rental income. Rent arising from film production activity washigher in the prior year. In addition, film revenue and management feesalso decreased slightly.

Expenses

Expenses for the three months ended March 31, 2005 were $847,000compared to $1,036,000 in the prior year period, a decrease of$189,000. The decrease in expenses is primarily attributed to decreasedamortization of film costs, decreased studio overhead expenses, and adecrease in selling, general and administrative expenses. The decreasein amortization costs is directly related to the decrease in filmrevenue as amortization of film costs matches film revenuerecognition.

Selling, general and administrative expenses forthe three months ended March 31, 2005 were $670,000 compared to$728,000 in the prior year period, a decrease of $58,000. The decreasein selling, general and administrative expenses is primarily due toreduced employee salaries offset by increased professional feesassociated with the Company's recent transition as a publiccompany.

Liquidity and Capital Resources

Sinceinception, the Company has financed its operations primarily throughthe sale of equity securities and issuance of debt instruments. ThroughMarch 31, 2005 the Company had received in excess of $7 million fromsuch offerings.

As of December 31, 2004, the Company had minimalcash and cash equivalents as the Company was in the process ofcompleting various financing arrangements. In March 2005, the Companycompleted a secured debt financing transaction which provided thecompany with cash of $1,000,000. The secured note matures March 30,2006 and the principal amount of the note is $1,150,000 with a15% yield funded as original issuance discount. The Company alsogranted the investor warrants to purchase a total of 500,000 shares ofits common stock, exercisable at $1.00 per share, subject to adjustmentupon certain events, including as a result of its sale of equitysecurities at a price below the exercise price. The warrants areexercisable at any time on or before March 30, 2010.

On May 4,2005 the Company consummated a subsequent financing transaction withthe holders of these notes, pursuant to which these secured notes wererepaid in full and the Company fulfilled its obligations thereunder. Inthis financing transaction, the Company completed a private placementof shares of its Series A Convertible Preferred Stock, par value $.001per share, and warrants to purchase shares of TAG's common stock.The placement was made pursuant to a Securities Purchase Agreement,dated May 3, 2005 and the gross proceeds of this transaction were$5,000,000. The Company repaid out of the gross proceeds the securednotes the Company issued to the investors in the bridge financingcompleted March 30, 2005. After payment of the notes and offeringexpenses in the amount of approximately $350,000, the Company receivednet proceeds of approximately $3,500,000 from this financing. TheCompany plans to use the net proceeds for the production, acquisitionand distribution of feature films and general working capital.

In this financing, the Company issued 5,000 shares of PreferredStock, convertible at the option of the holder into an initialaggregate amount of 2,000,000 shares of common stock, par value $.001per 

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share, at an initial conversion price of$2.50 per share, and warrants to purchase an initial aggregate amountof 2,000,000 shares of common stock at an initial exercise price of$2.50 per share, which are immediately exercisable and expire in sevenyears. Each share of Preferred Stock, which has a stated value of$1,000 per share, earns cumulative dividends at a rate of 6% perannum and matures three years from the date of issuance. The dividendand liquidation rights of the Preferred Stock are senior to those ofits common stock. The Preferred Stock does not carry voting rights.

The securities issued in these transactions were issued pursuant toSection 4(2) of the Securities Act of 1933 and Rule 506, promulgatedthereunder, are restricted securities and may not be offered or sold inthe United States absent registration or an applicable exemptiontherefrom.

Net cash used for operating activities for the threemonths ended March 31, 2005 was $325,000 which primarily consisted of anet loss of $462,000 along with film investments of $46,000 andreductions of accounts payable. This was partially offset by increasesin receivables and bank overdrafts.

Net cash used for operatingactivities for the three months ended March 31, 2004 was $178,000 whichprimarily consisted of a net loss of $520,000 along with filminvestments of $433,000. The use of cash was partially offset byincreases in amounts payable to affiliated partnerships of $766,000 anddeferred revenue of $175,000.

Net cash used in investingactivities for the 2005 quarter was $262,000, compared to $11,000 inthe prior year. In 2005, the Company issued a note for $250,000 inconnection with a proposed acquisition.

Net cash provided byfinancing activities for the 2005 quarter was $1,163,000 whichprimarily consisted of $1,000,000 proceeds from the bridge financingcompleted in March 2005.

Net cash provided by financingactivities in the first quarter of 2004 was $721,000 which primarilyincluded proceeds from the issuance of common stock and privateplacement proceeds payable to the chief executive officer of theCompany.

Cash Requirements and Need for Additional Funds

With the completion of the recent $5 million preferred stockfinancing, the Company received net proceeds of approximately $3.5million after retirement of the $1 million bridge loan and payment ofoffering expenses and closing costs. The proceeds will be used to fundits near term working capital requirements and business modelobjectives. In connection with the execution of its business strategyand related expansion plans, including the recently announced proposedacquisition of Myriad Pictures, the Company intends to either undertakeprivate placements of its securities, either as a self-offering or withthe assistance of registered broker-dealers, or negotiate a privatesale of its securities to one or more institutional investors. However,the Company currently has no firm agreements with any third-parties forsuch transactions and no assurances can be given that the Company willbe successful in raising sufficient capital from any of these proposedfinancings. Further, the Company cannot assure you that any additionalfinancing will be available or, even if it is available that it will beon terms acceptable to us. Any inability to obtain required financingon sufficiently favorable terms could have a material adverse effect onthe Company's business, results of operations and financialcondition. If the Company is unsuccessful in raising additional capitaland increasing revenues from operations, the Company will need toreduce costs and operations substantially. Further, if expendituresrequired to achieve the Company's plans are greater thanprojected or if revenues are less than, or are generated more slowlythan projected, the Company will need to raise a greater amount offunds than currently expected.

Off-Balance SheetArrangements

The Company has not created, and is not party to,any special-purpose or off-balance sheet entities for the purpose ofraising capital, incurring debt or operating parts of its business thatare not consolidated into its financial statements, except as describedherein. Except as described herein, the Company do not have anyarrangements or relationships with entities that are not consolidatedinto its financial statements that are reasonably likely to materiallyaffect its liquidity or the availability of its capital resources.

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The Company has incurred debt tounconsolidated partnerships in the aggregate amount of $1.8 million asof March 31, 2005, which the Company required during the course ofmanaging its operations and facilitating the activities of thepartnerships. In addition, cash transfers were required betweenaffiliated partnerships to meet cash flow needs and otherobligations.

TAG USA in its capacity as general partner anddistributor of various films produced by the limited partnerships isallowed to charge monthly overhead and production fees which arerecorded to and against related party transactions. The Company alsoplans on making a formal purchase offer to the various partnerships inreturn for shares of its stock, which if consummated, would eliminateany current and future outstanding balances owed to the partnerships.The Company has recorded interest on amounts borrowed from relatedentities at the prime lending rate.

The Company has entered intovarious agreements by which the Company may be obligated to indemnifythe other party with respect to certain matters. Generally, theseindemnification provisions are included in contracts arising in thenormal course of business under which the Company customarily agrees tohold the indemnified party harmless against losses arising from abreach of representations related to such matters as intellectualproperty rights. Payments by the Company under such indemnificationclauses are generally conditioned on the other party making a claim.Such claims are generally subject to challenge by the Company and todispute resolution procedures specified in the particular contract.Further, the Company's obligations under these arrangements maybe limited in terms of time and/or amount and, in some instances, theCompany may have recourse against third parties for certain paymentsmade by us. It is not possible to predict the maximum potential amountof future payments under these indemnification agreements due to theconditional nature of the Company's obligations and the uniquefacts of each particular agreement. Historically, the Company has notmade any payments under these agreements that have been materialindividually or in the aggregate. As of March 31, 2005, the Company wasnot aware of any obligations under such indemnification agreements thatwould require material payments.

Item 3.    Controls andProcedures

Disclosure Controls

As of the end of theperiod covered by this report, the Company carried out an evaluation,under the supervision and with the participation of the Company'smanagement, including the Chief Executive Officer and Chief FinancialOfficer, of the effectiveness of the Company's disclosurecontrols and procedures as defined in Exchange Act Rule 13a-15(e).Based upon that evaluation, the Company's Chief Executive Officerand Chief Financial Officer has concluded that current disclosurecontrols and procedures are effective as of the end of the periodcovered by this quarterly report on Form 10-QSB.

InternalControls

In connection with the merger of Power Marketing andTAG USA in November 2004, the Company's management has adoptedand implemented numerous measures in connection with its ongoingefforts to improve the Company's control processes and corporategovernance. These changes are required to effect the transition of thecompany from a privately-held corporation to a public company thatfiles periodic reports under the Securities Exchange Act of 1934, asamended. As a private company, the Company was not required to adoptthe types of internal control procedures that a public company mustadopt and maintain. Accordingly, since the merger, the Company hastaken numerous steps to enhance existing policies, or implement newones, so as to have an effective system of internal controls overfinancial reporting. These measures included thefollowing:

|              |                                                                                                                                                                                                                                                                                                        |
|--------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| •  | The Company increased themembership of its board of directors to consist of six person, four ofwhom are independent, as such term is defined in the Marketplace Rulesof the Nasdaq Stock Market. The Company will designated one of itsindependent directors as its "Audit Committee FinancialExpert." |

|              |                                                                                                     |
|--------------|-----------------------------------------------------------------------------------------------------|
| •  | The Companyplans to hire an individual to serve as its Chief Financial Officer ona full-time basis. |

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|              |                                                                                                                                                                                                                                                                                                    |
|--------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| •  | The Companyhas formalized a Code of Ethics and Business Conduct. Its Code ofEthics is designed to promote ethical conduct and full, fair andaccurate disclosure in its periodic reports. The Company hasre-emphasized to its finance and accounting personnel the importance ofthese requirements. |

|              |                                                                                                                                                                                                                                                                                                   |
|--------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| •  | The Company hasrecruited new personnel to its finance organization who have expertisein financial controls and reporting, including a corporate controller,and made other changes in finance personnel to improve the overallquality and level of experience of its finance organizationglobally. |

|              |                                                                                                                |
|--------------|----------------------------------------------------------------------------------------------------------------|
| •  | The Company has reorganizedits finance and general and administrative functions to improvefinancial oversight. |

|              |                                                                                                                                                                                                                                                                                            |
|--------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| •  | The Company hasmade changes in its organizational structure to provide a clearersegregation of responsibilities in connection with accountreconciliations, manual journal entries, and the preparation and reviewof documentation to support its quarterly and annual financialstatements. |

|              |                                                                                                                                                                                                                                                                             |
|--------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| •  | The Company has adoptedand implemented standard financial policies and procedures on acomprehensive basis. These policies provide finance and accountingguidance and include process documentation designed to ensureconsistent application of its policies and procedures. |

TheCompany continues to implement additional measures in response tospecific accounting and reporting weaknesses, including personnel andorganizational changes to improve supervision and increased trainingfor finance and accounting personnel. The Company will continue todevelop new policies and procedures and educate and train its employeeson its existing policies and procedures in its effort to constantlyimprove its internal controls and control environment.

Exceptfor the improvements described above, there have been no other changesin the Company's internal control over financial reporting duringthe quarter ended March 31, 2005 that have materially affected, or arereasonably likely to materially affect, its internal control overfinancial reporting.

The Company does not expect that itsdisclosure controls or internal controls over financial reporting willprevent all errors or all instances of fraud. A control system, nomatter how well designed and operated, can provide only reasonable, notabsolute, assurance that the control system's objectives will bemet. Further, the design of a control system must reflect the fact thatthere are resource constraints, and the benefits of controls must beconsidered relative to their costs. Because of the inherent limitationsin all control systems, no evaluation of controls can provide absoluteassurance that all control issues and instances of fraud, if any,within its company have been detected. These inherent limitationsinclude the realities that judgments in decision-making can be faulty,and that breakdowns can occur because of simple error or mistake.Controls can also be circumvented by the individual acts of somepersons, by collusion of two or more people, or by management overrideof the controls. The design of any system of controls is based in partupon certain assumptions about the likelihood of future events, and anydesign may not succeed in achieving its stated goals under allpotential future conditions. Over time, controls may become inadequatebecause of changes in conditions or deterioration in the degree ofcompliance with policies or procedures. Because of the inherentlimitation of a cost-effective control system, misstatements due toerror or fraud may occur and not bedetected.

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Part II

Item 1.    Legal Proceedings

The Company is not currentlya party to any lawsuit or proceeding which, in the opinion of itsmanagement, is likely to have a material adverse effect on us, exceptas set forth below.

The Company was named in an administrativeproceedings with the securities regulatory agency in the state of Texasregarding a private placement of limited partnership interests ofSupercross the Movie, L.P. made to investors in that state bySupercross the Movie, L.P. On or about February 16, 2005, the TexasSecurities Bureau and counsel for TAG and Supercross agreed thatSupercross the Movie, L.P. would undertake a rescission offer for thelimited partnership interests of Supercross sold in Texas and to makeall the required filings in that state. Counsel for Supercross is inthe process of drafting the rescission offer to the investors in Texaswho subscribed for Supercross, the Movie L.P. interests.

Anarbitration was filed on July 20, 2004, Philipson vs. AnimalPartners, LP, et al, with the American Arbitration Associationwhich named TAG USA as a respondent. The arbitration allegedly arisesout of the petitioners' purchase of several units of the AnimalPartners Limited Partnership. The petition alleges that respondentshave never fully reported any financial information pertaining to thelimited partnership to the petitioners. TAG USA was named as arespondent despite the fact that it is neither a limited partner northe general partner of the limited partnership. TAG USA has adistribution arrangement with the limited partnership whereby it servesas the distributor of the motion picture Miracle Dogs, which wasproduced by the limited partnership. This matter was settled in March2005 and TAG USA was released from any claims. In connection with thisarrangement, however, TAG USA, intends to purchase the outstandinglimited partnership interests owned by the claimants for $200,000.

The Company is involved in various claims and other legalproceedings that arise from time to time in the ordinary course ofbusiness. The Company does not believe any of theses matters will havea material adverse affect on its financial position or results ofoperations. Litigation is inherently unpredictable and excessiveverdicts do occur. Although the Company believes it has valid defensesin these matters, the Company could in the future incur judgments orenter into settlements of claims that could have a material adverseaffect on its financial position or results of operations in anyparticular period.

Item 2.    Unregistered Sales of EquitySecurities and Use of Proceeds

Bridge Financing

Aspreviously reported, on March 30, 2005, the Company entered into aSecurities Purchase Agreement with Satellite Strategic FinanceAssociates, LLC and an affiliated investor under which the Companyissued $1.0 million in aggregate principal amount of Senior SecuredNotes and Warrants to purchase 500,000 shares of its common stock in aprivate placement to accredited investors under Regulation D of theSecurities Act of 1933, as amended. The Company received gross proceedsof $1,000,000 which are intended to be used for the production anddistribution of films, including acquisition of additional productand/or distribution assets and for general working capital. Theaggregate principal amount of the Notes is $1,150,000 with a 15%yield funded as original issuance discount. The Company also enteredinto a Registration Rights Agreement and a Security Agreement with theinvestors and its subsidiary, TAG Entertainment USA, Inc. co-signed theSecurity Agreement and agreed to guaranty its obligations pursuant tothe financing agreements. Pursuant to the Security Agreement, theCompany granted the investors a first priority lien on all of itsassets, other than certain previously issued liens, in order to secureits obligations. The Notes mature on March 30, 2006 and are soonerpayable in full in the event the Company consummates a subsequentfinancing event, with certain exceptions, or upon the occurrence of anevent of default. The warrants are exercisable at $1.00 per share,subject to adjustment upon certain events, including as a result of itssale of equity securities at a price below the exercise price. Thewarrants are exercisable at any time on or before March 30, 2010.

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Pursuant to the Registration RightsAgreement, the Company agreed to (1) file with the Securities andExchange Commission a shelf registration statement covering the resaleof the shares of TAG common stock issuable upon exercise of theWarrants within 90 days of the closing date and (2)  use its bestefforts to have the registration statement declared effective by theCommission 120 days following the closing date or in the event theCommission reviews the registration statement, 150 days followingclosing. The Company will be required to make certain payments to theholder of the Warrants if these deadlines are not met or the shelfregistration statement is otherwise unavailable for the resale of thesecurities. The issuance of these securities was exempt fromregistration pursuant to Rule 506 promulgated under Section 4(2) of theSecurities Act of 1933, as amended, and may not be offered or sold inthe United States absent registration or an applicable exemption fromsuch registration requirement. 

On May 4, 2005, theCompany consummated a subsequent financing transaction with the holdersof these notes, pursuant to which these secured notes were repaid infull and the Company fulfilled its obligations under the SecurityAgreement and Guaranty. The terms of this financing are discussed belowunder the caption "Preferred StockFinancing."

Preferred Stock Financing

Aspreviously reported, on May 4, 2005, the Company completed a privateplacement with Satellite Strategic Finance Associates, LLC andSatellite Strategic Finance Partners, Ltd. of shares of its Series AConvertible Preferred Stock, par value $.001 per share, and warrants topurchase shares of TAG's common stock. The placement was madepursuant to a Securities Purchase Agreement, dated May 3, 2005 and thegross proceeds of this transaction were $5,000,000. The Company repaidout of the gross proceeds the secured notes the Company issued to theinvestors in the bridge financing completed March 30, 2005 anddescribed above. After payment of the notes and offering expenses inthe amount of approximately $350,000, the Company received net proceedsof approximately $3,500,000 from this financing. The Company plans touse the net proceeds for the production, acquisition and distributionof feature films and general working capital.

In this financing,the Company issued 5,000 shares of Preferred Stock, convertible at theoption of the holder into an initial aggregate amount of 2,000,000shares of common stock, par value $.001 per share, at an initialconversion price of $2.50 per share, and warrants to purchase aninitial aggregate amount of 2,000,000 shares of common stock at aninitial exercise price of $2.50 per share, which are immediatelyexercisable and expire in seven years. Each share of Preferred Stock,which has a stated value of $1,000 per share, earns cumulativedividends at a rate of 6% per annum and matures three years fromthe date of issuance. The dividend and liquidation rights of thePreferred Stock are senior to those of its common stock. The PreferredStock does not carry voting rights.

The Company has the right torequire the investors to convert their shares of Preferred Stock intoshares of common stock under certain conditions, as described in theCertificate of Designations, Rights and Preferences of Series APreferred Stock. In addition, the Company will be required to redeemthe Preferred Stock on its maturity date, which is three years from theclosing date, at its stated value plus any accrued and unpaiddividends. The Company will also be required to redeem the PreferredStock upon a default of the financing agreements or a change of controlat redemption prices that vary, depending on the circumstances andtiming of the redemption, between 101% and 120% of thesated value of the Preferred Stock, plus unpaid dividends.

Boththe Preferred Stock and the warrants contain anti-dilution protectionin the event that the Company issues shares of common stock orsecurities convertible into shares of common stock at a price less than(a) the conversion price of the Preferred Stock, (b) the exercise priceof the warrants or (c) the then-current market price of its commonstock. In addition, if at any time the conversion price for thePreferred Stock is less than an amount equal to 80% of thethen-current market price of the common stock, the conversion pricewill be reset to be equal to such amount. The Preferred Stock willprovide, however, that the conversion price cannot be adjusted to anamount that is less than $1.00, except for an event such as a stocksplit, stock dividend or similar events. The Company has also grantedto the investors a participation right in future financings and agreedthat for a period of 

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at least 90 days from closing that theCompany will not effect subsequent placements of its securities,subject to certain exemptions from these restrictions.

TheCompany has agreed to file a registration statement within the 45 dayperiod following the closing of the financing to provide for the resaleof the shares of common stock underlying the Preferred Stock andwarrants, and to obtain the effectiveness of the registration statementwithin 120 days from the closing. The Company will incur a penalty of$75,000 for each 30 day period in which these deadlines are notsatisfied. The sale of the Preferred Stock and warrants to theInvestors was exempt from the registration provisions of the SecuritiesAct of 1933 pursuant to Section 4(2) of the Securities Act and/orRegulation D. Accordingly, these securities may not be offered or soldin the United States absent registration or an applicable exemptionfrom such registration requirement. 

StockRepurchases

During the period ended March 31, 2005, the Companydid not repurchase any shares of its common stock.

Item3.    Defaults Upon Senior Securities

None.

Item4.    Submission of Matters to a Vote of Security Holders

Inconnection with the Company's consummation of the sale of 5,000shares of Series A Preferred Stock and warrants on May 4, 2005, asdescribed above, the holder of a majority of the Company'soutstanding shares of common stock executed a written consent approvingthe terms of the transaction, including the anti-dilution provisions ofthe Certificate of Designations, Rights and Preferences of Series APreferred Stock.

Item 5.    Other Information

On May2, 2005, the Company appointed the following five persons to serve asmembers of the Company's board of directors: Mr. John Botti, Mr.Carl McCall, Mr. Marvin Rosen, Mr. James Schneider and Mr. RaymondSkiptunis. Messrs. Schneider, McCall and Rosen were also appointed tothe compensation committee of the board on such date and Mr. Schneiderwas named Chairman of this committee. The Company also disclosed onsuch date that its board intends to form audit and nominatingcommittees and appoint each of Messrs. Botti, McCall, Rosen andSchneider to serve on one or more of such committees. Each of Messrs.Botti, McCall, Rosen and Schneider are independent members of the boardof directors. Mr. Skiptunis presently provides services to TAG pursuantto a consulting agreement.

As previously disclosed, on March 30,2005, the Company entered into a Letter of Intent to acquire aprivately held company, Myriad Pictures, Inc., which is engaged in thefilm distribution business. The Letter of Intent provides for apurchase price of approximately $4,000,000, including an earn outpayment of up to $2,000,000 which will be negotiated by the partiesprior to closing of the transaction. The earnout may be paid in cash orin shares of its common stock, at its option. In addition, the Companyhas committed to use an additional $750,000 to provide Myriad withworking capital and debt repayment after the closing. Of the purchaseprice, $1,000,000 will be evidenced by a promissory note, payable over12 months following the closing. In connection with the execution ofthe Letter of Intent, the Company provided Myriad with a short termloan of $250,000 which Myriad will use for working capital and to payfor its acquisition costs pending the closing. In the event thetransaction is completed, the loan will be an intercompany debt andthereafter be converted into additional equity in Myriad. The loan issecured by a lien on the assets of Myriad. The parties have agreed touse their best efforts to complete the transaction on or before July 1,2005, unless such date is extended by the parties. Closing of thetransaction is subject to numerous conditions, including: (i)negotiation and execution of a definitive acquisition agreement, aswell as ancillary agreements such as employment agreements for certainprinciples of Myriad and the terms of the earn out 

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payment; (ii) completion of due diligence bythe parties; and (iii) completion of financial statements for Myriad inaccordance with SEC requirements. Accordingly, there can be noassurance that the transaction will be completed, or completed upon theterms as described above.

As previously disclosed, during thequarter ended March 31, 2005 the Company changed its independentregistered public accounting firm on two occasions. On January 17,2005, the Company dismissed Pritchett, Siler & Hardy, P.C. as itsindependent public accountants, who had served as its independentregistered accounting firm prior to the acquisition of TAGEntertainment, Inc. On that date the Company engaged Grobstein, Horwath& Company LLP as its new independent public accountants to auditits financial statements for the fiscal year ended December 31, 2004.However, as reported on its Current Report on Form 8-K of February 16,2005, on February 9, 2005, Grobstein, Horwath & Company, LLPresigned as the Company's independent accountants. Grobstein didnot report on the Company's consolidated financial statements forany fiscal year. As previously reported, effective February 24, 2005,the Company engaged AJ. Robbins, PC as its new independent registeredpublic accounting firm to audit the financial statements for the fiscalyear ending December 31, 2004 and 2005.

Item6.    Exhibits

The exhibits designated with an asterisk (*)are filed herewith. All other exhibits have been previously filed withthe Commission and, pursuant to 17 C.F.R. Section 230.411, areincorporated by reference to the document referenced in bracketsfollowing the descriptions of suchexhibits.

|               |  |                                                                                                                                                                                                               |  |  |  |  |
|---------------|--|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--|--|--|--|
| ExhibitNumber |  | DescriptionofDocument                                                                                                                                                                                         |
| 3.1           |  | Certificateof Designations, Rights and Preferences of Series A Preferred Stock(Previously filed as exhibit 3.1 to Current Report on Form 8-K filedMay 5,2005).                                                |
|          |  |                                                                                                                                                                                                          |
| 4.1           |  | Formof Secured Note Issued by TAG Entertainment Corp., dated March 30, 2005(Previously filed as exhibit 4.1 to Current Report on Form 8-K filedApril 4,2005).                                                 |
|          |  |                                                                                                                                                                                                          |
| 4.2           |  | Formof Warrant Issued by TAG Entertainment Corp., dated March 30, 2005(Previously filed as exhibit 4.2 to Current Report on Form 8-K filedApril 4,2005).                                                      |
|          |  |                                                                                                                                                                                                          |
| 4.3           |  | Formof Warrant Issued by TAG Entertainment Corp., dated May 4, 2005(Previously filed as exhibit 4.1 to Current Report on Form 8-K filedMay 5,2005).                                                           |
|          |  |                                                                                                                                                                                                          |
| 10.1          |  | Formof Securities Purchase Agreement between TAG Entertainment Corp., andInvestors, dated March 30, 2005 (Previously filed as exhibit 10.1 toCurrent Report on Form 8-K filed April 4,2005)                   |
|          |  |                                                                                                                                                                                                          |
| 10.2          |  | Formof Security Agreement between TAG Entertainment Corp., TAGEntertainment USA, Inc. and Investors, dated March 30, 2005 (Previouslyfiled as exhibit 10.2 to Current Report on Form 8-K filed April 4,2005). |
|          |  |                                                                                                                                                                                                          |
| 10.3          |  | SubsidiaryGuarantee by TAG Entertainment USA, Inc., dated March 30, 2005(Previously filed as exhibit 10.3 to Current Report on Form 8-K filedApril 4,2005).                                                   |
|          |  |                                                                                                                                                                                                          |
| 10.4          |  | Formof Registration Rights Agreement between TAG Entertainment Corp. andInvestors, dated March 30, 2005 (Previously filed as exhibit 10.4 toCurrent Report on Form 8-K filed April 4,2005).                   |
|          |  |                                                                                                                                                                                                          |
| 10.5          |  | Formof Secured $250,000 Note Issued by Myriad Pictures, Inc., dated March30, 2005 (Previously filed as exhibit 10.1 to Current Report on Form8-K filed April 5, 2005).                                        |
|               |

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|               |  |                                                                                                                                                                                               |  |  |  |  |
|---------------|--|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--|--|--|--|
| ExhibitNumber |  | DescriptionofDocument                                                                                                                                                                         |
|          |  |                                                                                                                                                                                          |
| 10.6          |  | Formof Securities Purchase Agreement between TAG Entertainment Corp. andInvestors, dated May 3, 2005 (Previously filed as exhibit 10.1 toCurrent Report on Form 8-K filed May 5,2005).        |
|          |  |                                                                                                                                                                                          |
| 10.7          |  | Formof Registration Rights Agreement between TAG Entertainment Corp. andInvestors, dated May 3, 2005 (Previously filed as exhibit 10.2 toCurrent Report on Form 8-K filed May 5,2005).        |
|          |  |                                                                                                                                                                                          |
| 31.1*         |  | Certificationof Chief Executive Officer and Chief Financial Officer pursuant toExchange Act Rules 13a-14(a) and 15(d)-14(a), adopted pursuant toSection 302 of the Sarbanes-Oxley Act of2002. |
|          |  |                                                                                                                                                                                          |
| 32.1*         |  | Certificationof Chief Executive Officer and Chief Financial Officer pursuant to 18U.S.C. Section 1350, adopted pursuant to Section 906 of theSarbanes-Oxley Act of 2002.                      |
|               |

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SIGNATURES

In accordance withSection 13 or 15(d) of the Exchange Act, TAG caused this Report to besigned on its behalf by the undersigned, thereunto duly authorized.

Date: May 18, 2005

**TAGENTERTAINMENT CORP.**

By:   /s/ SteveAustin                                            

|  | SteveAustinPresident and Chief Executive Officer, Chief FinancialOfficer |
|--|--------------------------------------------------------------------------|

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