**UNITED
      STATES**


**SECURITIES
      AND EXCHANGE COMMISSION**


**Washington,
      D.C. 20549**





**Form
      10-KSB**





**ANNUAL
      REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE**


**SECURITIES
      EXCHANGE ACT OF 1934**




**For
      the fiscal year ended December 31, 2005**




(Mark
                One)x
            ANNUAL
                REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
                OF 1934For
                the fiscal year ended December 31, 2005o
            TRANSITION
                REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
                OF 1934For
                the transition period from _______ to
                _________







**Commission
      File Number 000-50533**









DIJJI
      CORP


**(Name
      of Small Business Issuer in Its Charter)**







**Nevada**
            **84-1407365****(State
                or Other Jurisdiction of****Incorporation
                or Organization)**
            **(I.R.S.
                Employer****Identification
                No.)****2211
                Elliott, Suite 601, Seattle, WA**
            **98121****(Address
                of principal executive offices)**
            **(Zip
                Code)**




**Issuer’s
      Telephone Number, Including Area Code: (206) 832-0600**







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




**Securities
      registered under to Section 12(g) of the Exchange Act:**





**Title
                of Each Class****Common
                Stock, par value $.001 per
                share**








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




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




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







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




State
      issuer’s revenues for its most recent fiscal year: $3,499,000




As
      of
      April 6, 2006 the aggregate market value of the voting and non-voting common
      equity held by non-affiliates (based on the closing price of our common stock)
      was $259,000.




As
      of
      April 6, 2006, the issuer had 9,574,850 shares of common stock outstanding
      and
      38,576,427 shares that may be issuable pursuant to outstanding convertible
      preferred stock and notes, warrants and options as of that date.








**PART
      I**




Throughout
      this annual report on Form 10-KSB, the terms “we,” “us,” “our,” and “our
      company” refer to Dijji Corp and, unless the context indicates otherwise, our
      wholly-owned subsidiary, OTA Acquisition Corp., on a consolidated
      basis.




**INTRODUCTORY
      COMMENT - FORWARD-LOOKING STATEMENTS**




Statements
      contained herein include “forward-looking statements.” Forward-looking
      statements involve known and unknown risks, uncertainties and other factors
      which could cause the actual results, performance and achievements, whether
      expressed or implied by such forward-looking statements, not to occur or be
      realized. Such forward-looking statements generally are based upon our best
      estimates of future results, performance or achievement, based upon current
      conditions and the most recent results of operations. Forward-looking statements
      may be identified by the use of forward-looking terminology such as “may,”
“expect,” “believe,” “estimate,” “anticipate,” “continue,” or similar terms,
      variations of such terms or the negative of such terms. Potential risks and
      uncertainties include, among other things, such factors as:




•
            our
                ability to complete the proposed reverse acquisition by New Motion,
                Inc.
                on terms acceptable to the Company, if at all, or to continue operations
                as a going concern,




•
              the
                  market acceptance and amount of sales of our
                  products,
  •
                the
                    competitive environment within the wireless
                    industry,
  •
                  the
                      other factors and information disclosed and discussed under
“Risk
                      Factors.”




Investors
      should carefully consider such risks, uncertainties and other information,
      disclosures and discussions which contain cautionary statements identifying
      important factors that could cause actual results to differ materially from
      those provided in the forward-looking statements. We undertake no obligation
      to
      update or revise any forward-looking statements, whether as a result of new
      information, future events or otherwise.




**Item
      1. Description of Business General**




Our
      company was incorporated in Nevada on May 16, 1997 under the name of Kafco
      Corp.
      On April 11, 2001, we changed our name to Woodland Hatchery, Inc. On September
      29, 2003, we acquired Dwango North America, Inc. (formerly Dwango USA, Inc.),
      which company was incorporated in Texas on November 20, 2000, by means of an
      exchange offer. Upon the closing of such exchange offer, Dwango North America,
      Inc. became a majority-owned subsidiary of our company. It has since become
      a
      wholly-owned subsidiary after the final shareholder of Dwango North America,
      Inc. elected to convert its securities into securities of our company. In that
      the security holders of Dwango North America, Inc. acquired a majority of the
      voting securities of our company, Dwango North America, Inc. was deemed to
      be
      the accounting acquiror. Unless the context otherwise requires, references
      herein to our company for periods prior to September 29, 2003 are to Dwango
      North America, Inc. On February 4, 2004, we acquired Over-the-Air Wireless,
      Inc.
      by means of a merger of such company into OTA Acquisition Corp., a wholly owned
      subsidiary of ours formed for such purpose. On December 12, 2005, we changed
      the
      name of Dwango North America Corp. and its subsidiary, Dwango North America,
      Inc., to Dijji Corp.




Our
      principal executive office is located at, 2211 Elliott Avenue, Suite 601,
      Seattle, Washington 98121. Our telephone number at such address is (206)
      832-0600.




We
      are a
      mobile media company whose products include ringtones, games, images and
      messaging services for mobile devices. We currently sell our products in North
      America through distribution agreements with major wireless operators, such
      as
      Cingular. Most of our products are sold to consumers via our branded services
      with branding from major media companies such as Napster, RollingStone Magazine
      and ESPN Bassmaster. We call our strategy of delivering mobile content under
      media brands, the mobile channel strategy. The mobile channel strategy allows
      for the distribution of branded services, using content such as ringtones,
      games
      and images, with brands for a specific lifestyle category.




1


During
      2004, we signed agreements and launched branded service applications with
      RollingStone and ESPN. In the latter part of 2004, we signed agreements with
      Playboy.com, Napster LLC and Beliefnet. We launched Beliefnet in March 2005,
      Napster in May 2005 and Playboy in October 2005. In October 2005, we terminated
      the Beliefnet agreement to focus our efforts on our other brands . In
      light
      of the proposed reverse acquisition by New Motion, Inc., we are currently in
      discussions with Playboy regarding a possible termination of our agreement
      with
      Playboy prior to the expiration of the specified term of the
      agreement. Branded
      services we provide for a particular brand may vary, but they will be some
      combination of ringtones, images, games, messaging and other content as cell
      phone technology capabilities become more advanced.




On
      February 4, 2004, we acquired Over-the-Air Wireless, Inc., a company engaged
      in
      the wireless ringtone business. The acquisition was in the form of a merger
      of
      Over-the-Air Wireless into OTA Acquisition Corp., a wholly-owned subsidiary
      of
      ours that we formed for this transaction. From Over-the-Air Wireless, we
      acquired key employees, one of which is leading our company today, as well
      as
      software which was integral to our development.




We
      have
      entered into distribution agreements with several United States wireless
      carriers. In March 2005, we entered into agreements with two Canadian wireless
      carriers and added a third in October 2005.




Since
      August 2002, we have exclusively licensed from Dwango Co., Ltd., a Japanese
      mobile entertainment supplier, or Dwango Japan, the Dwango trademark and
      technologies for use in North America.  On
      October 24, 2005, we entered into a trademark and technology termination
      agreement with Dwango North America, Inc., our wholly-owned subsidiary, and
      Dwango Japan. Under the terms of the termination agreement, Dwango Japan is
      entitled to use and license its technology in North America as of January 1,
      2006. We ceased using the Dwango trademark on December 12, 2005 when we
      announced our new company name, Dijji Corp.




**Proposed
      Acquisition of Dijji by New Motion, Inc.**




On
      April
      25, 2006, we entered into a non-binding letter of intent with New Motion, Inc.,
      or New Motion, relating to the reverse acquisition of Dijji by New Motion,
      with
      Dijji surviving as a publicly-held company. Upon the consummation of the
      proposed transaction, shareholders of Dijji would hold shares that represent
      approximately 12.5% of the issued and outstanding shares of the combined
      company’s common stock on a fully-diluted and as-converted basis. New Motion’s
      stockholders (including holders of securities convertible into New Motion stock)
      would hold shares that represent approximately 87.5% of the issued and
      outstanding shares of the combined company’s common stock on a fully-diluted and
      as-converted basis.




New
      Motion is a direct-to-consumer mobile content provider that develops, licenses,
      markets, and sells content such as polyphonic ring tones, MP3 "true tones"
      and
      voice tones, wallpapers and graphics, wireless application protocol, or WAP,
      video and Java based games. New Motion is a Delaware corporation headquartered
      in Irvine, California with a sales office in Edgecliff, Australia.





Under
      the
      terms of the letter of intent, we would issue restricted shares of newly
      designated Dijji convertible preferred stock, or Preferred Shares, to the
      existing stockholders of New Motion, or Existing Holders. In exchange for the
      Preferred Shares issued to the Existing Holders, the Existing Holders would
      transfer to Dijji 100% of the outstanding capital stock of New Motion.
      Immediately following the closing of the exchange transaction, or the Closing,
      New Motion would be a 100% wholly-owned subsidiary of Dijji.




After
      the closing of the exchange transaction, each
      of the Preferred Shares issued to the New Motion Stockholder would be
      convertible into shares of our common stock, upon the filing of an amendment
      to
      the Dijji Certificate of Incorporation to effect a reverse split of the common’s
      common stock and to authorize such number of shares of Dijji common stock that
      is sufficient for the conversion of the Preferred Shares into such common stock.
      After the conversion, our securities held by the Existing Holders of New Motion
      (including holders of securities convertible into New Motion stock) would
      represent approximately 87.5% of the issued and outstanding shares of the
      combined company’s common stock on a fully-diluted and as-converted basis.
      Securities held by our existing shareholders would represent approximately
      12.5%
      of the issued and outstanding shares of the combined company’s common stock on a
      fully-diluted and as-converted basis.




2
 
  The
          parties have not entered into a definitive agreement relating to the proposed
          exchange transaction. The letter of intent does not bind either party to
          consummate any transaction unless and until such terms are negotiated and
          set
          forth in a definitive agreement that is properly approved by the respective
          boards of directors of each party, and executed by each party. Even if
          the
          parties enter into a definitive agreement, the consummation of the transaction
          would be subject to certain conditions to closing.
 
 There
          can
          be no assurances that a definitive agreement will be reached on terms acceptable
          to both
          Dijji and
          New
          Motion ,
          if at
          all, and, if reached, that the reverse acquisition will be completed .
          If the
          proposed exchange transaction is not consummated, we may be required to
          proceed
          with the orderly liquidation and winding up of the company .
 
 **Products
          and Services**
  **Branded
          Services**
  In
          January 2004, we entered into an agreement with ESPN pursuant to which
          we have
          launched a game under the Bassmaster mobile name. Bassmaster is currently
          available to consumers through Cingular, Nextel, Alltel, Boost and T-Mobile
          wireless carriers. The first Bassmaster mobile game, Legendary Lunkers,
          features
          the Cast ‘n Wait system, which emulates real fishing by surprising the player
          with a call back when a fish is biting. In January 2006, we extended the
          agreement with existing terms for Bassmaster for an additional three (3)
          years
          to January 2009.
  In
          March
          2004, we entered into an agreement with Real Networks and RollingStone
          Magazine
          (Wenner Media) to provide a branded service for “RollingStone Ringtones,”
“RollingStone Sound Clips” and “RollingStone Games.” Since the initial launch,
          we have added these services to Boost Mobile, T-Mobile and Alltel in the
          United
          States and Telus in Canada. These products and services using our library
          of
          ringtones are promoted through RollingStone Magazine, the RollingStone
          website,
          five-digit numbers, also known as short-codes, and wireless carriers. As
          per the
          agreement, we paid a $750,000 advance royalty fee and are committed to
          quarterly
          minimum royalty payments of $250,000 beginning September 2004, for the
          five
          subsequent quarters thereafter. In addition, we agreed to advertise with
          RollingStone for a minimum of $125,000 per quarter for the duration of
          the
          agreement which expires in May 2006.
  In
          September 2004, we entered into an agreement with Beliefnet, Inc., a multi-faith
          media company and online community, to bring customers mobile media content
          under the Beliefnet Mobile brand. Under the Beliefnet Mobile brand, we
          provided
          premium polyphonic and audio ringtones, alert tones, images, spiritual-themed
          mobile games, and subscription-based content from a variety of faiths.
          We agreed
          to minimum royalty payments of $162,500 over the contract term. Additionally,
          we
          agreed to advertise through Beliefnet, a minimum of $150,000 over the one
          year
          term of the contract. The first Beliefnet Mobile application, Spiritual
          Trivia,
          a religious trivia game was released in the first quarter of 2005. Additional
          components of the Beliefnet channel launched in April 2005. In October
          2005, we
          terminated the agreement with Beliefnet to focus our efforts on our other
          brands. We were required to make any payments relating to the advertising
          commitment to Beliefnet for six months and minimum royalty earned by Beliefnet
          for the six months after launch.
  In
          October 2004, we entered into an agreement with Flow C.M.M. Inc., a European
          gaming company that focuses on providing “girl power” entertainment for teenage
          girls, to distribute mobile media content in the North American marketplace
          under the MiniFizz brand. The agreement duration was three years from the
          initial launch of the service. In October 2005, we entered into an agreement
          to
          terminate the license agreement with Flow C.M.M. Inc .
          Pursuant to the terms of the October 2005 agreement, we made a one
          time payment of $80,000 which
          was
          expensed in the fourth quarter of 2005 .
  In
          November 2004, we entered into an agreement with Napster, LLC to distribute
          mobile media content under the Napster brand. Our first launch included
          polyphonic ringtones, audiotones, and images; the images are provided by
          Napster
          and prominently feature the Napster Kitty. We are required to pay a brand
          licensing fee of $360,000 over the term of the contract. Additionally,
          we agreed
          to pay up to $200,000 within the term of the contract to sponsor certain
          events
          promoting the Napster brand subject to certain conditions. The agreement
          duration is one year from the launch date which of May 2005. In March 2006,
          Napster gave notice, per contract terms, that the existing agreement would
          be
          terminated as of May 2006. We are currently in the process of negotiating
          an
          extension to the contract which may provide for terms different than the
          original contract. We may not be successful in negotiating an
          extension.
  3
 In
          November, 2004, we entered into an agreement with Playboy.com, Inc. to
          distribute mobile media content under the Playboy brand. Our first launch
          was in
          October 2005 and included polyphonic ringtones, audiotones, and images;
          the
          images are provided by Playboy and the first launch features non-nude images
          of
          women along with other lifestyle images. In December 2005, we launched
          our
          credit card website, www.playboymobile.com ,
          which
          allows Cingular and Sprint subscribers, 18 years or older, to download
          images of
          women and other lifestyle images as well as ringtones and audiotones. The
          term
          of the agreement is three years. In
          light
          of the proposed reverse acquisition by New Motion, Inc., we are currently
          in
          discussions with Playboy regarding a possible termination of our agreement
          with
          Playboy prior to the expiration of the specified term of the agreement. We
          have
          delivered a revolving irrevocable stand-by letter of credit in the amount
          of
          $125,000 in favor of Playboy which Playboy has the right to draw upon if
          we fail
          to make any payment when due under the agreement. We paid minimum royalties
          of
          $250,000 during the first year of the contract and have agreed to pay minimum
          royalties of $250,000 during the second year of the contract, of which
          $100,000
          has been paid, and $350,000 during the third year of the contract. Additionally,
          we have agreed to spend a minimum of $100,000 each contract year to market
          and
          promote the content to be distributed by us and Rogers and Fido, who host
          the
          Playboy content, pursuant to the agreement.
  In
          July
          2005, we entered into an agreement with USAToday to provide a mobile sweepstakes
          to be promoted within the Life and Sports section of USAToday. In September
          2005, we launched the application in which the participant text messaged
          via
          premium SMS the answer to a trivia question and, by doing so, was entered
          to win
          a weekly prize and grand prize. The sweepstakes ended in November 2005.
          The
          contract duration is for a one-year term allowing for additional projects
          or
          sweepstakes to be entered into.
  **Ringtones**
  We
          hire
          professional musicians who create unique, high quality ringtones. Our catalog
          consists of approximately 3,000 polyphonic ringtones and have licensed
          over
          3,000 master tones and custom audiotones, with ongoing production and licensing
          of new ringtones every month. Our polyphonic and audio ringtone catalog
          covers
          every major musical genre from Hip Hop to Rock/Pop, Country to Classical,
          and
          R&B to World Music. We also offer sound clips featuring voice greetings,
          sound effects, and song clips from popular artists. We currently hold
          non-exclusive licenses from Sony, EMI, Warner/Chappel Hill, ASCAP, Harry
          Fox,
          BMI, Universal and BMG as well as several independent labels for the
          distribution of ringtones. We have licenses with Warner, Universal and
          several
          independent labels for the distribution of master tones as well.
  Distribution
          of ringtones occurs through our proprietary delivery platform which allows
          users
          to browse, search, sample and download from our extensive content catalog.
          The
          catalog is easily accessible, sorted by title, artist and category (genre).
          Ringtone downloads are initiated either through our branded web portals
          or
          through a mobile handset using a WAP browser, downloadable BREW ringtone
          client
          or SMS, or Short Message Service.
  **Games**
  The
          games
          we have distributed fall into one of several categories: stand-alone games,
          turn-based network games, massively multiplayer games, browser-based network
          games, and SMS or MMS games. Stand-alone games are one-player games. Turn-based
          network games are games where the player competes against other players
          on the
          network and the game involves taking turns by the players. Massively multiplayer
          games are games where the player may compete with thousands of other players
          with an ongoing play experience and evolving story line. Browser-based
          network
          games are multiplayer games where the players each play simultaneously,
          and game
          play is performed through the use of the phone’s browser, rather than an
          application running on the phone itself. SMS or MMS, or Multimedia Messaging
          Service, games are played by sending short messages in response to prompts
          from
          the game. SMS is available on digital GSM networks and allows text messages
          of
          up to 160 characters to be sent and received via the network operator's
          message
          center to or from capable mobile phones or from the Internet. MMS allows
          users
          to send messages comprising a combination of text, sounds, images and video
          to
          MMS capable handsets.
  4
 The
          following is a brief description of the games currently being distributed
          by us
          that we have developed internally:
  Bassmaster
          Legendary Lunkers is a bass fishing simulation game where players can either
          fish in real-time or more completely simulate the fishing experience by
          employing the “Cast ‘n Wait” system where, after the player casts his line, the
          application shuts itself down and will call the player back to continue
          play
          when a “bite” is received. The networked version of the game also features
          actual weather pulled from the National Weather Service, with accompanying
          art,
          and global high score tracking where players can simulate actual Bassmaster
          tournaments by posting their highest weight totals during the tournament
          period.
  RollingStone
          20 Questions is a trivia game featuring questions geared towards fans of
          music
          and pop culture. Over 600 questions are available for download every month.
  AquaX
          is
          a stand-alone game where players race through the water doing barrel rolls
          and
          double flips on a personal watercraft. Players earn points for speed, difficulty
          of tricks or a combination of both in eighteen challenges set in six different
          locations.
  Playboy
          Poker enables the user to play true Vegas style video poker games such
          as “Five
          Card Draw” or “Jacks or better”. The premise for all these games are the same,
          the user gets dealt an initial 5 cards, choose which ones they want to
          hold, and
          then draw back up to five cards. Then based on the game type and the hands
          they
          make, they are paid off according to the pay table for the given
          game.
 
 **Images**
  We
          now
          offer images for download. Images can be downloaded to mobile phones to
          be used
          as wallpapers, screensavers, calling identifier icons, and picture messages,
          which can be sent to friends along with text. We have an extensive content
          library, augmented through relationships with image providers such as Corbis
          and
          can offer the perfect images for any of our diverse brand partners. We
          currently
          have a large offering of Playboy branded images available on-deck through
          Rogers
          and Fido (non-nude) in Canada, off-deck through Cingular and Sprint (non-nude)
          and via a credit card website at PlayboyMobile.com (nude). We support a
          large
          and growing number of phone types and support a large percentage of the
          different screen sizes.
  **Distribution**
  In
          2002,
          we entered into an agreement with AT&T Wireless (now known as Cingular
          mMode) which provides the terms and conditions under which our applications
          may
          be made available to AT&T Wireless subscribers.
  In
          2002,
          we executed an agreement to become a certified BREW developer with Qualcomm.
          This agreement enables us to create and publish content on the BREW platform.
          BREW is the platform being used by Verizon, USCellular and Alltel for its
          data
          applications, including entertainment offerings. In October of 2002, we
          executed
          a BREW application license agreement with Verizon. The agreement gives
          us access
          to post for distribution BREW software applications to the online BREW
          catalog
          maintained by Qualcomm. These combined agreements give us a channel to
          publish
          content on Verizon, Alltel, Western Wireless, Metro PCS, Midwest Wireless
          and
          USCellular. Alltel has released RollingStone Ringtones, Napster and Bassmaster.
          In early 2006, we launched Napster on Western Wireless, Metro PCS, Midwest
          Wireless and USCellular.
  During
          the second and third quarter of 2004, we launched our RollingStone Ringtone
          service and several of our games: Bassmaster Legendary Lunkers, Rays of
          Aten and
          AquaX with Nextel Operations.
  5
 In
          June
          2004, we launched our RollingStone Ringtone service with Cingular Wireless
          LLC
          and in November 2004, we launched our RollingStone Ringtone service with
          Boost
          Mobile. In May 2005, we launched our Napster service with Cingular.
  In
          addition to these agreements, we have entered into a carrier agreement
          with
          Amp’d Mobile and T-Mobile USA, Inc. and launched services. In total, we have
          agreements to provide services on twelve (12) United States wireless carriers.
          In March 2005, we entered into an agreement with Wmode which allows us
          to
          provide services to two Canadian carriers, Microcell/Fido and Rogers and
          in
          October 2005, we entered into an agreement with Telus, another Canadian
          carrier,
          to provide services.
  Our
          carrier agreements provide the specification and requirements under which
          our
          applications may be made available to the subscribers of such respective
          wireless carriers. These agreements set forth the compensation methodology
          and
          processes to be utilized in connection with the release of games. The wireless
          carriers are not required to make available to their subscribers any minimum
          number of games.
  Our
          content is initially being sold for a download fee. Under this model, a
          download
          fee is charged for each download of an application or bundle of applications.
          Some applications use a subscription model, where the customer is charged
          a
          recurring fee on a monthly basis for use of the service.
  The
          fees
          for downloading content are collected by the carriers and then forwarded
          to us
          in what is known as a billing-on-behalf-of system, which is the current
          system
          employed by us. A billing-on-behalf-of system allows the fees for our
          applications to appear on a customer’s regular monthly cell phone bill. When
          games are sold through a carrier, the carrier is entitled to retain a fee.
          The
          development and implementation of billing-on-behalf-of systems enables
          wireless
          carriers to collect revenues for subsequent remittance to content providers.
          This model is critical to attract users who are comfortable paying for
          content
          as part of their regular wireless phone bill but who may be hesitant paying
          for
          content in an over-the-air credit card transaction.
  As
          part
          of the Playboy content offering, we are now billing via credit card for
          internet
          based transactions.
  **Markets**
  We
          believe that in the United States, a number of changes in the wireless
          market
          are driving the evolution to the next generation. These changes include
          the
          development of new handsets with higher resolution color screens, longer
          battery
          life and the ability to download and execute applications on the handset,
          the
          upgrade of wireless networks, the ability of wireless carriers to bill
          on behalf
          of application developers such as our company, and the development by companies
          such as our company of new wireless applications. The United States wireless
          market is growing rapidly with data and content services driving revenue
          growth.
  Our
          target market is youth, which is typically defined as consumers between
          the ages
          of 14 and 24 years old, and sometimes includes consumers through their
          late
          20’s. Wireless carriers, particularly in North America, are increasingly
          focusing on this segment, as it is the most rapidly adopting segment with
          respect to the wireless content and new account sales in the
          marketplace.
  **Marketing
          and Sales**
  Our
          success in marketing and selling our applications will rely on product
          innovation, placement in the upper tiers of the handset menus, so the
          applications are easier to find, and distribution to increase the number
          of
          carriers offering our products. In addition to marketing our products to
          wireless carriers, we have engaged the end-user consumers with offers and
          promotions. Marketing of the applications to consumers is performed through
          a
          combination of direct marketing through traditional, online, and wireless
          distribution channels, including marketing by the wireless carriers of
          wireless
          content to their subscribers and through public relations efforts.
  We
          have
          committed to a minimum of $100,000 per year over the 3 year life of the
          contract
          with Playboy and spent more than $750,000 for RollingStone since June 2004.
          We
          have promoted our brands, such as RollingStone, in print ads in RollingStone
          Magazine, web advertising on RollingStone.com, sweepstakes and events such
          as
          Voodoo Festival sponsored by RollingStone and Southern Comfort.
  6
 **Competition**
  The
          market for wireless content is highly competitive. We expect that the
          competition will increase as the market grows. We believe that our primary
          competitors in our two main product categories are as follows: Games: EA
          (Jamdat), THQ, Mobliss and Glu. Media/Music: Infospace, Verisign (Jamster),
          9
          squared, Buongiorno, Blue Frog and Moderati. Many of these competitors
          have
          released significantly more content to date than us. Many of our competitors
          have substantially greater financial resources than us, which may allow
          them to
          identify emerging trends more quickly and develop technology at a faster
          pace.
          We believe that the principal competitive factors are exclusive brand
          relationships, ability to provide a complete mobile channel solution (games
          and
          media), quality of the content, including its freshness and innovative
          differentiation, relationships with wireless carriers, the ability to have
          the
          content placed in the upper tiers of the handset menus, and the number
          of
          carriers who offer the content.
  **Dependence
          on Significant Customers**
  We
          currently rely on several key customers to generate revenue. In 2005 and
          2004,
          86% and 95% of revenue, respectively, was generated by four key customers:
          Cingular, AT&T, Boost and Nextel.
  **Government
          Regulation**
  We
          are
          not currently subject to direct federal, state, or local government regulation,
          other than regulations applicable to businesses generally. The
          telecommunications industry is subject to regulation by federal and state
          agencies, including the Federal Communications Commission, and various
          state
          public utility and service commissions. While such regulation does not
          necessarily affect us directly, the effects of these regulations on the
          wireless
          carriers that provide ours applications to their subscribers may, in turn,
          adversely affect our business, by, for example, increasing our costs or
          reducing
          our ability to continue selling our products.
  **Intellectual
          Property**
  We
          regard
          our patents, copyrights, service marks, trademarks, trade secrets, proprietary
          technology and similar intellectual property, as critical to our success,
          and we
          rely on trademark and copyright law, trade secret protection and confidentiality
          and license agreements with our employees, customers, independent contractors,
          partners and others to protect our intellectual property rights. There
          can be no
          assurance that the steps we have taken to protect our proprietary rights
          will be
          adequate to prevent third parties from infringing or misappropriating our
          proprietary rights.
  **Intellectual
          Property and Proprietary Rights**
  We
          require our employees, developers and licensees to enter into agreements
          requiring them to keep confidential all trade secrets and other confidential
          information. Our employees enter into agreements which recognize that all
          inventions, trade secrets, works of authorship, developments and other
          processes
          made by them in the course of their work for us are our property. These
          agreements establish that we have the exclusive right to those works and
          transfer any residual ownership in those works to us. There can be no assurance
          that the steps we have taken to protect our proprietary rights will be
          adequate
          to prevent third parties from infringing or misappropriating our proprietary
          rights.
  **Patent
          Protection**
  We
          currently have on file U.S. Patent Application serial # 10/744865 - A method
          and
          apparatus for a one click upgrade for mobile applications. We perform periodic
          reviews of our ongoing technology developments and intend to pursue additional
          patents as appropriate. We may not be able to successfully defend or claim
          any
          legal rights in the invention for which an application has been made but
          for
          which the Patent and Trademark Office has not issued a patent.
  7
 **Trademarks**
  We
          have a
          license to the Dijji® trademark. In addition, we have applied for two other
          trademarks relating to our company and our services. Those two trademarks
          are:
          JAMZ! and JAMZMOBILE. We may not be able to successfully defend or claim
          any
          legal rights in those trademarks for which applications have been made
          but for
          which the Patent and Trademark Office has not issued a registered
          certificate.
  **Properties**
  We
          currently maintain our executive office at 2211 Elliott Avenue Suite 601,
          Seattle, Washington 98121 and our lease expires in February 2007. The lease
          on
          our previous executive office at 200 West Mercer Street, Suite 501, Seattle,
          Washington 98119 expired in April 2005. On March 18, 2005, we announced
          the
          closing of the game studio located at 150 Spear Street Suite 1175 San Francisco,
          California 94104. The reason for the closure and relocation were to improve
          our
          development efficiencies. Our lease in San Francisco expired in December
          2005.
          In addition, we have office space at 5847 San Felipe Street, Houston, Texas
          that
          was the location of our executive offices until January 2004. Our lease
          for such
          space expires in September 2006. We have sublet our Houston
          offices.
  **Employees**
  As
          of
          December 31, 2005, we had a total of 33 employees, all but one of whom
          work
          full-time out of our Seattle, Washington office. We have one remote employee
          who
          is located in Colorado. As of April 26, we have a total of 19 employees.
          None of
          our employees are represented by unions and we are not aware of any activities
          seeking such organization. We consider our relations with our employees
          to be
          good.
  
 8
  **RISK
          FACTORS**
  In
          evaluating our business, you should carefully consider the risks and
          uncertainties described below, as well as the discussion of risks and other
          information contained in this Annual Report and in our other public filings.
          If
          any of the following risks actually occur, our business, financial condition
          or
          operating results could be materially adversely affected.
 
 **Important
          Factors That May Affect Our Operating Results, Our Business and Our Stock
          Price**
 
 Described
          below and elsewhere in this report are risks
          and uncertainties that
          we
          currently deem to be material and
          that
          we believe are specific
          to our Company and our
          industry. In addition to these risks, our business may be subject to risks
          currently unknown to us. If any of these or other risks
          actually occur, our business, financial condition or operating results
          could be
          materially adversely affected.  Prospective
          and existing investors are strongly urged to carefully consider the various
          cautionary statements and risks set forth in this annual report and our
          other
          public filings .
 
 **Risks
          Relating to Our Business**
 
 **If
          we fail to complete, or delay in completing, the reverse acquisition by
          New
          Motion we may be required to proceed with the orderly liquidation and winding
          up
          of the Company.**
  On
          April
          25, 2006, we entered into a non-binding letter of intent with New Motion,
          Inc.,
          or New Motion, relating to the reverse acquisition of Dijji by New Motion,
          with
          Dijji surviving as a publicly-held company. Upon the consummation of the
          proposed transaction, shareholders of Dijji would hold shares that represent
          approximately 12.5% of the issued and outstanding shares of the combined
          company’s common stock on a fully-diluted and as-converted basis. New Motion’s
          stockholders (including holders of securities convertible or exercisable
          into
          New Motion stock) would hold shares that represent approximately 87.5%
          of the
          issued and outstanding shares of the combined company’s common stock on a
          filly-diluted and as-converted basis.
 
 The
          parties have not entered into a definitive agreement relating to the proposed
          exchange transaction. The letter of intent entered into between the parties
          does
          not bind either party to consummate any transaction unless and until such
          terms
          are negotiated and set forth in a definitive agreement that is properly
          approved
          by the respective boards of directors of each party, and executed by each
          party.
          Even if the parties enter into a definitive agreement, the consummation
          of the
          transaction would be subject to certain significant conditions to closing.
          In
          addition, we will remain liable for significant transaction costs, including
          legal, accounting, financial advisory and other costs relating to the
          acquisition.
 
 We
          cannot
          give any assurance that we, or the combined company if the proposed
          reverse acquisition by New Motion is
          completed, will be able to generate meaningful revenues in the future.
          We have a
          history of losses and we expect to continue to incur losses for at least
          the
          next twelve months. We have historically relied on distributing, servicing,
          developing and marketing our products as a strategy to generate revenue
          and
          expand our operations .
          If we
          fail to complete the
          reverse acquisition by New Motion, without additional third party financing,
          we
          will not have the cash resources available to, among other things:
 
 ·
              enter
                  into distribution arrangements with major wireless carriers,**** ·
              enter
                  into and maintain branded service agreements, ·
              develop
                  products that keep up with that of our competitors, and ·
              achieve
                  a prominent position on application download
                  menus. 
 If
          we are
          unable to complete the reverse acquisition by New Motion, and therefore
          do not
          have resources available to distribute, service, develop or market our
          products,
          we will not be able to generate enough revenue to maintain our business
          operations for any sustained period of time, and may be required to proceed
          with
          the orderly liquidation and winding up of the Company. Even if we complete
          the
          reverse acquisition by New Motion, there can be no assurance that the combined
          company will be able to generate revenue and expand its operations.
 
 9
 **The
          disruption caused by and uncertainty over the proposed reverse acquisition
          by
          New Motion** **could materially and adversely affect our results of
          operations** **.**
 
 In
          connection with the proposed reverse acquisition by New Motion, the attention
          of
          our management and our employees may be diverted from day-to-day operations
          and
          the customer sales process may be disrupted by customer and salesperson
          uncertainty over when or if the acquisition will be consummated. In addition,
          our customers may seek to modify or terminate existing agreements, which
          may
          require us to make substantial payments to such customers in connection
          with
          such modification or termination, or prospective customers may delay entering
          into new agreements or purchasing our
          products and services as
          a
          result of the announcement of the proposed acquisition and our ability
          to retain
          existing employees may be difficult as a result of uncertainties associated
          with
          the proposed acquisition and the continued operations of the Company. As
          a
          result, our business and results of operations could be materially and
          adversely
          impacted by the current negotiations relating to a possible reverse acquisition
          by New Motion.
 
 **We
          will have to significantly curtail or cease operations if we are unable
          consummate the reverse acquisition by New Motion or to secure additional
          financing.**
 
 At
          December 31, 2004, we had working capital of $667,000 and a capital deficit
          of
          $16,226,000. In January and February 2005, we raised gross proceeds of
          $15,700,000 from private placements of our convertible preferred stock
          and
          warrants. At December 31, 2005, we had working capital of $2,656,000, a
          capital
          deficit of $15,373,000, and cash and short-term investments of $4,334,000.
          We
          believe we will require substantial additional financing to fund the cost
          of
          continued operating activities, to finance the growth of our business,
          to
          provide cash for the payment of prepaid and ongoing royalties and to buy
          advertising required pursuant to our agreements. We believe that our current
          cash resources are sufficient to fund operations through June 30, 2006.
          We may
          not be able to obtain the needed funds on terms acceptable to us or at
          all. If
          we are unable to secure financing when needed, we may have to significantly
          curtail or cease operations. Further, if additional funds are raised by
          issuing
          equity securities, the anti-dilution provisions from previous financings
          may be
          triggered and significant dilution to our current shareholders may occur
          and new
          investors may get rights that are preferential to current
          shareholders.
  **We** **have
          incurred debt, which could adversely affect our financial health and our
          ability
          to obtain financing in the future and react to changes in our
          business.**
  As
          of
          December 31, 2005, the Company’s principal debt and preferred stock obligations
          totaled approximately $26.9 million ($24.6 million face value). None of
          this
          amount is secured by any of our assets. Our debt could have important
          consequences to our stockholders. Because of our substantial debt:
  ·
              Our
                  ability to obtain additional financing for working capital, capital
                  expenditures, acquisitions, general corporate purposes, or other
                  purposes
                  may be impaired in the future;  ·
              A
                  substantial portion of our cash flow from operations may be dedicated
                  to
                  the payment of principal and interest on our indebtedness, thereby
                  reducing the funds available to us for other
                  purposes;  ·
              We
                  may be exposed to increased interest rates because certain of our
                  borrowings are at variable rates of interest;
                  and  ·
              Our
                  flexibility to adjust to changing market conditions and ability
                  to
                  withstand competitive pressures could be limited, and we may be
                  more
                  vulnerable to a downturn in general economic conditions or our
                  business or
                  be unable to carry out capital spending that is necessary or important
                  to
                  our growth strategy and productivity improvement
                  programs. 
 ·
              We
                  may be forced to renegotiate and extend our debt terms or, in the
                  event we
                  are unsuccessful, dissolve the business or file for bankruptcy
                  protection.  
 10
 **We
          have only recently commenced generating revenues and may not be prepared
          for the
          demands of growth.**
 
 Our
          revenues for 2005 and 2004 are as follows: $3,499,000 for 2005 and $1,645,000
          for 2004. The growth process places significant demands on our management
          and
          operational infrastructure. Continued growth, if any, may adversely affect
          our
          ability to maintain high quality standards, have appropriate operational,
          financial and management controls and achieve continued positive relationships
          with wireless carriers, branded service partners and customers. To achieve
          these
          ends, significant expenditures and allocation of personnel resources may
          be
          required. As of December 31, 2005, we had a total of 33 employees, down
          from 59
          employees as of December 31, 2004.
  **The
          termination of our license with** **Dwango Japan** **could
          affect our** **business
          by creating additional competition** **.**
 
 In
          August
          2002, we began exclusively licensing from Dwango Co., Ltd., a Japanese
          mobile
          entertainment supplier, or Dwango Japan, the Dwango trademark and technologies
          for use in North America. In October 2005, we entered into a trademark
          and
          technology termination agreement with Dwango North America, Inc., our
          wholly-owned subsidiary, and Dwango Japan.
 
 We
          are
          required to cease
          using Dwango Japan's technology and the "Dwango" name trademark
          in May 2006. In addition, under the terms of the Termination
          Agreement, Dwango
          Japan is entitled to use and license its technology in North America as
          of
          January 1, 2006, which
          could potentially create additional competition for us .
 
 **If
          we fail to protect our intellectual property rights, we may lose any competitive
          edge that we have and our sales and profitability may be adversely
          affected.**
 
 Our
          business depends to a significant degree on licensed and internally developed
          content and technology. To protect our proprietary products we rely on
          a
          combination of patent, copyright, trademark and trade secret laws, as well
          as
          contractual provisions relating to confidentiality and related matters.
          If our
          proprietary rights in such content or technology, or any other of our
          proprietary rights, are divulged to the public, or our competitors obtain
          access
          to our confidential information, we may lose any competitive edge that
          we have.
          We cannot assure you that our means of protecting our proprietary rights
          will be
          adequate or that competitors will not independently develop similar or
          superior
          technology.
 
 **If
          third parties claim that our products violate their intellectual property
          rights, we may be forced to take costly actions or pay significant damage
          awards
          that could adversely affect our business.**
 
 Third
          parties may make claims against us alleging infringement of patents, copyrights,
          trademarks, trade secrets or other proprietary rights. If we were to find
          that
          our products violated or potentially violated third-party proprietary rights,
          we
          might be required to obtain licenses that are costly or contain terms
          unfavorable to us, or expend substantial resources to reengineer those
          products
          so that they would not violate third party rights. Any reengineering effort
          may
          not be successful, and we cannot be certain that any such licenses would
          be
          available on commercially reasonable terms. Any third-party infringement
          claims
          against us could result in costly litigation and be time consuming to defend,
          divert management’s attention and resources, cause product and service delays,
          require us to enter into royalty and licensing agreements or result in
          significant damage awards.
 
 **If
          we publish content without appropriately licensed rights to do so, we could
          be
          subject to infringement lawsuits which could subject us to liability and
          prevent
          use of content.**
 
 We publish
          content obtained from third parties. We attempt
          to ensure that all
          content we publish has appropriate licensed rights prior to using that
          content
          in our applications. If the
          content obtained from third parties is not appropriately licensed ,
          we
          could be subject to lawsuits and resulting financial judgments and the
          prevention of our use of the content in our applications. We have
          had instances where we were required to cease using content due to licensing
          restrictions, but have not been subject to a lawsuit.
  11
 **The
          loss of certain key employees could cause us to be unable to implement
          our
          business plan.**
 
 Our
          success depends in large part upon the experience, abilities and continued
          services and contributions of a small number of employees. The loss of
          the
          services of one or more of our key employees could cause us to be unable
          to
          implement our business plan. The loss
          of one or more of our key management employees could have a material adverse
          effect on our business, financial condition or results of operations. In
          particular, on August 15, 2005, Rick J. Hennessey resigned as our Chief
          Executive Officer and as a Director. In addition, in December 2005, J.
          Paul
          Quinn resigned as our Chief Financial Officer. We replaced these individuals
          with internal candidates and, if deemed appropriate, individuals from outside
          our organization. While our internal candidates understand our business
          model,
          they must learn a new position and take on additional or new responsibilities,
          which could take time and result in the disruption to our on-going operations.
          To integrate into our company, new key management must spend a significant
          amount of time learning our business model and management systems, in addition
          to performing their regular duties. Accordingly, until new senior personnel
          become familiar with our business model and systems, their integration
          may
          result in some disruption to our on-going operations. Additionally, we
          may need
          to hire additional personnel in general or to replace internal candidates
          who
          have been promoted and as a result, we may experience increased compensation
          costs that are not offset by either improved productivity or increased
          revenue.
 
 **If
          we are unable to retain qualified management and other personnel, our ability
          to
          implement our business plan may be adversely affected.**
 
 As
          of
          December 31, 2005, we had 33 full-time employees. Most of our present management
          has limited experience in managing a business such
          as
          ours .
          In December
          2005, we reduced our headcount for a second time by approximately 30% in
          an
          effort to reduce operating expenses. This followed a head count reduction
          of
          approximately 25% in September 2005. We believe that this has had a negative
          impact on the personnel retained and on our ability to attract additional
          personnel.
 
 **Contemplated
          changes in the accounting treatment for stock options will make it expensive
          to
          maintain our current practice with respect to the granting stock
          options.**
 
 The
          granting of stock options is used by us as a significant compensation tool.
          Effective December 15, 2005, the Financial Accounting Standards Board has
          changed the accounting treatment of stock options which will require the
          recording of an expense upon each grant of a
          stock
          option .
          Given
          our current compensation practices, this will result in a significant increase
          in compensation charges. If we change our compensation practices and reduce
          or
          eliminate stock option grants, we may find it more difficult to attract,
          retain
          and motivate employees, which could adversely affect our
          operations.
 
 **Risks
          Relating to Our Common Stock**
 
 **A
          significant number of shares of our common stock are eligible for sale
          pursuant
          to an effective registration statemen** **t
          which could have an adverse effect on the market price for our common stock
          and
          could adversely affect our ability to raise capital when
          needed.**
 
 There
          are
          9,574,850 shares of our common stock issued and outstanding as of April
          6, 2006
          and 38,576,427 additional shares potentially issuable under outstanding
          convertible preferred stock and notes, warrants and options as of that
          date. Pursuant
          to an effective registration , selling
          shareholders may sell up
          to 40,594,782 shares of our common stoc k.
          In the
          event of significant sales of common stock, the market price for our common
          stock could decrease significantly and our ability to raise capital could
          be
          adversely affected.
 
 **The
          conversion of our notes or preferred stock to common stock will result
          in a
          significant charge to our earnings, which may negatively impact our share
          price
          and our ability to raise capital.**
 
 If
          the
          holders of our notes or preferred stock convert into common stock, we will
          incur
          a significant charge to our earnings in the form of a write-off of deferred
          financing costs and deferred acquisition costs. This would result in decreased
          earnings for our Company, which could have a negative impact on our share
          price
          and our ability to raise capital.
 
 12
 **Robert
          E. Huntley, the founder and a former officer and director of our Company,
          beneficially owns approximately 25% of the issued and outstanding shares
          of our
          common stock as of December 31, 2005 and accordingly has significant influence
          over the outcome of all matters submitted to the shareholders for approval,
          which influence may be exercised to the detriment of other
          shareholders.**
 
 As
          of April
          6,
          2006 ,
          Robert
          E. Huntley, the founder and a former officer and director of our Company,
          owned
          2,051,553 shares of our common stock and held warrants to purchase an additional
          421,841 shares of our common stock. These holdings represent beneficial
          ownership of approximately 25% of our shares of common stock. Accordingly,
          Mr.
          Huntley has significant influence over the outcome of all matters submitted
          to
          the shareholders for approval, including the election of directors and
          the sale
          or liquidation of the Company or the Company’s ability to satisfy certain
          conditions to closing the proposed reverse acquisition by New
          Motion.
 
 **Certain
          of our shareholders beneficially own a significant number of shares of
          our
          common stock and accordingly may have significant influence over our Company
          and
          upon the price of our common stock, which may be to the detriment of other
          shareholders.**
 
 As
          of April
          6,
          2006 , three
          entities beneficially own significant positions in our common stock as
          follows:
          (a) Alexandra Global Master Fund Ltd. ,
          or
          Alexandra, holds
          475,110 shares of our common stock and holds notes, preferred stock and
          warrants
          convertible into or exercisable for an aggregate of 12,114,463 additional
          shares
          of our common stock; (b) RH
          Capital Associates, or RH Capital, owns preferred stock and warrants convertible
          into or exercisable for an aggregate of 5,962,553 shares of our common
          stock;
          and (c) Trafelet & Company, LLC, or Trafelet, is the investment manager for
          four separate funds that own preferred stock and warrants convertible into
          or
          exercisable for an aggregate of 8,357,141 shares of our common stock. All
          of
          these shares have been
          registered for resale in currently
          effective registration
          statemen ts.
          As
          there is currently a very limited amount of shares in the public float,
          and the
          number of shares registered or to be registered on behalf of these beneficial
          owners is significant, the market price of our common stock could be adversely
          affected in the event of sales of these shares. The notes, preferred stock
          and
          warrants described in this paragraph provide that the number of shares
          of common
          stock that may be acquired at any one time by each of Alexandra,
          RH Capital or the funds managed by Trafelet shall not exceed a number that,
          when
          added to the total number of shares of common stock beneficially owned
          by it,
          would result in beneficial ownership by it of more than 9.9% of our common
          stock. But for that provision, on a fully diluted basis, Alexandra, RH
          Capital
          and Trafelet could be deemed to beneficially own, on a fully diluted basis,
          29%,
          14% and 19%, respectively, of our common stock, as of April 6, 2006. Alexandra
          has the right to nominate two directors to our board of directors and has
          exercised its right with respect to one director. Each of Alexandra, RH
          Capital
          and Trafelet may have significant influence over our Company, including
          with
          respect to the Company’s ability to satisfy certain conditions to closing the
          proposed reverse acquisition by New Motion.
  **The
          possible issuance of additional shares of our capital stock may dilute
          the
          percentage ownership of our current shareholders.**
 
 As
          of April
          6,
          2006 there are 9,574,850 shares of our common stock outstanding and 38,576,427
          shares of common stock issuable upon exercise or conversion of outstanding
          options, warrants, convertible preferred stock and convertible notes. There
          are
          100,000,000 shares of our common stock and 10,000,000 shares of our preferred
          stock authorized for issuance. All of our authorized shares in excess of
          those
          currently outstanding may be issued without any action or approval by our
          shareholders and could significantly dilute the percentage ownership of
          our
          current shareholders.
 
 **Because
          the public market for shares of our common stock is limited, you may be
          unable
          to resell your shares of common stock.**
 
 There
          is
          currently only a limited public market for our common stock on the
          Over-the-Counter Bulletin Board, and you may be unable to resell your shares
          of
          common stock. The development of an active public trading market depends
          upon
          the existence of willing buyers and sellers that are able to sell their
          shares
          and market makers that are willing to make a market in the shares. Under
          these
          circumstances, the market bid and ask prices for the shares may be significantly
          influenced by the decisions of the market makers to buy or sell the shares
          for
          their own account, which may be critical for the establishment and maintenance
          of a liquid public market in our common stock. Market makers are not required
          to
          maintain a continuous two-sided market and are free to withdraw firm quotations
          at any time. We cannot give you any assurance that an active public trading
          market for the shares will develop or be sustained.
  13
 **The
          price of our common stock is volatile, which may cause investment losses
          for our
          shareholders.**
 
 The
          market for our common stock is highly volatile. The trading price of our
          common
          stock is subject to wide fluctuations in response to, among other things,
          quarterly variations in operating and financial results, announcements
          of
          technological innovations or new products by us or our competitors, changes
          in
          our revenues and revenue growth rate and general market conditions. In
          addition,
          statements or changes in opinions, ratings, or earnings estimates made
          by
          brokerage firms or industry analysts relating to our market or relating
          to our
          Company could result in an immediate and adverse effect on the market price
          of
          our common stock. The highly volatile nature of our stock price may cause
          investment losses for our shareholders.
 
 **Our
          common stock is considered to be a “penny stock,” which may make it more
          difficult for investors to sell their shares.**
 
 Our
          common stock is considered to be a “penny stock.” The SEC has
          adopted rules that regulate broker-dealer practices in connection with
          transactions in “penny stocks.” Penny stocks generally are equity securities
          with a price of less than $5.00 (other than securities registered on certain
          national securities exchanges or quoted on NASDAQ, provided that current
          price
          and volume information with respect to transactions in such securities
          is
          provided by the exchange or system). On
          April
          25, 2006, our closing stock price, as listed on the Over-the-Counter Bulletin
          Board was $0.03 per share. Prior
          to
          a transaction in a penny stock, a broker-dealer is required to:
 
 ·
              deliver
                  a standardized risk disclosure document prepared by theSECthat provides information about penny stocks and the nature and
                  level of
                  risks in the penny stock market; 
 ·
              provide
                  the customer with current bid and offer quotations for the penny
                  stock; 
 ·
              explain
                  the compensation of the broker-dealer and its salesperson in the
                  transaction; 
 ·
              provide
                  monthly account statements showing the market value of each penny
                  stock
                  held in the customer’s account; and 
 ·
              make
                  a special written determination that the penny stock is a suitable
                  investment for the purchaser and receive the purchaser’s written agreement
                  to the transaction. 
 These
          requirements may have the effect of reducing the level of trading activity
          in
          the secondary market for our stock and investors may find it more difficult
          to
          sell their shares.
 
 **Risks
          Relating to Our Industry**
 
 **The
          market for wireless applications is a developing market that requires further
          development to support meaningful revenues for our Company, without which
          we
          will not be able to achieve profitability.**
 
 The
          market for wireless applications is an emerging market that is relatively
          new.
          Further development of this market is necessary to support meaningful levels
          of
          revenues for our Company. The success of the applications we offer will
          depend
          upon, among other things, a high level of market acceptance of the current
          generation of advanced wireless handsets. We cannot give you any assurance
          that
          the market will develop as we anticipate. In addition, in view of the battery
          drain caused by the use of certain advanced wireless applications, the
          success
          of these applications may also depend upon the development of new technology
          and/or cost effective products or accessories that extend the battery life
          of
          current wireless devices, for which there can be no assurance.
  14
 We
          will
          incur operating expenses based largely on anticipated revenue trends that
          are
          difficult to predict. We anticipate incurring substantial losses until
          such
          time, if ever, that substantial revenues are generated. Our success will
          depend
          on the market for our products developing sufficiently to support profitable
          operations, and our ability to commercialize our products and services
          in order
          to generate sufficient revenue from sales of these products and services
          to
          offset the expenses associated with developing, marketing and supporting
          them.
 
 **Wireless
          carriers have significant control over the contract terms, including pricing
          of
          applications and revenue share percentages, which could adversely affect
          market
          acceptance of applications and revenues of content
          providers.**
 
 Agreements
          with wireless carriers require content providers to obtain approval from
          these
          carriers for the pricing of the applications that they propose to offer
          to their
          subscribers. Such approvals may not be granted or the carriers may decide
          to set
          a price, higher or lower, than what content providers proposed. Content
          providers ability to change prices may also be restricted. Market acceptance
          of
          applications or the level of revenues that content providers can generate
          could
          be adversely affected by not obtaining pricing of applications sought by
          content
          providers.
 
 Agreements
          with wireless carriers provide for a revenue share percentage that dictates
          the
          percentage of the retail price remitted by consumers to the wireless carriers
          which is provided to the content providers. This revenue share percentage
          can be
          changed by the wireless carrier, in some cases, during the term of the
          contract.
          Content providers ability to control that revenue share percentage is very
          limited. Revenues that content providers can generate could be adversely
          affected by reductions in their revenue share percentage.
 
 Wireless
          carrier agreements are typically about one year in length and content providers
          cannot assure that wireless carriers will continue to rely on their content
          and
          renew their contracts.
 
 **Wireless** **carriers** **have developed their own brand of applications.**
 
 Our
          ability to generate revenue is directly affected by our position on the
          carrier
          download menus. Carriers have developed their own content and, as such,
          are
          occupying the most lucrative positions on the download menus or eliminating
          all
          third party applications altogether. Our success in the marketplace will
          be
          based, in part, on our ability to identify alternate means of marketing
          our
          applications.
 
 **If
          we do not develop wireless content and respond to changes in technology
          on a
          timely basis, we will be unable to grow our business and may never achieve
          profitability.**
 
 Our
          ability to design, develop, test and support, or obtain from third parties,
          new
          or enhanced content for wireless network technology on a timely basis to
          meet
          the changing needs of wireless phone users and respond to technological
          developments and evolving industry standards is critical to our future
          growth
          and our ability to achieve profitability. We cannot give you any assurance
          that
          we will be able to identify emerging technologies which will gain widespread
          acceptance. If we invest substantial resources in acquiring, developing
          or
          implementing wireless content that does not become widely accepted or which
          is
          delayed in introduction, we may be unable to recoup our investment. We
          cannot
          give you any assurance that others will not develop technologies that achieve
          a
          greater market acceptance than ours, that render our services obsolete
          or that
          otherwise adversely affect our competitive position.
 
 **The
          life cycle of our products may be short, which could limit the level of
          revenues
          achieved from the sale of new products.**
 
 The
          market for wireless content is an emerging market that is changing rapidly.
          The
          emergence of new wireless products and technologies, changes in consumer
          preferences and other factors may limit the life cycle of our technologies
          and
          any future products and services that we develop. This may limit the amount
          of
          revenue we are able to achieve from the products we develop. If we incur
          significant costs to develop a product and are unable to sell such product
          other
          than for a short period of time, our results of operations may be adversely
          affected. Our future performance will depend on our ability to identify
          emerging
          technological trends in the wireless content market, identify changing
          consumer
          needs, desires or tastes, develop and maintain competitive technology,
          including
          new product and service offerings, improve the performance, features and
          reliability of our products and services, particularly in response to
          technological changes and competitive offerings, and bring technology to
          the
          market quickly at cost-effective prices.
 
 15
 **The
          complexities and incompatibilities among advanced mobile phones and wireless
          technologies, as well as the continuous introduction of new models, require** **us** **to utilize substantial funds for development of a multitude of applications,
          each with short life cycles.**
 
 To
          achieve significant revenue levels, we must develop applications suitable
          for
          numerous phone models and technologies. To keep pace with rapid innovation
          and
          the continuous introduction of new, and often incompatible, mobile phone
          models
          requires us to expend significant funds for development activities. We
          expect
          these circumstances to continue and our ability to achieve profitability
          will
          depend not only on our development success, but also the ability to generate
          sufficient revenues from applications before their generally short life
          cycle is
          over.
 
 **In
          the event that there is a significant shift in the source of downloading
          applications away from the wireless carriers to other sources, we may have
          to
          incur significant expense to alter our sales and marketing approach, which
          approach may not be successful.**
 
 Our
          applications are primarily sold through the wireless carriers with whom
          we have
          contractual relationships. There are currently available, however, a small
          number of cell phone models which have operating systems that allow users
          to
          browse the Internet and, in some cases, download applications from sources
          other
          than the wireless carrier’s branded service. In the event that the situation
          evolves such that a substantial portion of application downloads occur
          away from
          the wireless carriers, we would have to incur significant expenses to market
          to
          the alternative sources. There can also be significant expenses in changing
          our
          billing model. No assurance can be given that marketing efforts involving
          alternative sales channels would be successful.
 
 **Increases
          or changes in government regulation may have an adverse effect on our
          operations.**
 
 We
          anticipate regulation of the industry in which we participate to increase.
          Our
          business operations may be adversely affected in the event that new laws
          and
          regulations are adopted that have a restrictive effect on our operations.
          Areas
          affected may include privacy, taxation, suitability of content, copyright
          and
          distribution. The adoption of new rules and regulations would result in
          increased legal and other expenses to address the new rules and may potentially
          circumvent our operations.
 
 **We
          rely on the wireless communications infrastructure, over which we have
          no
          control.**
 
 Our
          business operations depend upon the maintenance and growth of the wireless
          communications infrastructure. Accordingly, our future success will depend
          upon
          the deployment and maintenance of reliable next-generation digital networks
          with
          the requisite speed, capacity and security for providing reliable wireless
          communication services. Further, wireless communication may be adversely
          affected by viruses, worms and other break-ins and disruptions. Wireless
          services could also be disrupted by outages and infrastructure and equipment
          failures.
 
 **Item
          2. Description of Property**
  We
          lease
          office space at the following locations:
  **Location**
                
                **Purpose**
                
                **Space**
                
                **Average**
                  **Annual
                    Rental**
                
                **Expiration**2211
                    Elliott Avenue
                  Seattle,
                    Washington
                
                
                Executive,
                    development, and operations office
                
                
                15,000
                    squarefeet
                
                $
                283,000
                
                
                Feb.
                    20075847
                    San Felipe Street
                  Houston,
                    Texas
                
                
                Prior
                    Executive Office
                
                
                1,459
                    squarefeet
                
                $
                69,000
                
                
                Sept.
                    2006
   16
 In
          February 2004, we relocated our corporate office from Houston, Texas to
          Seattle,
          Washington. We have sublet our Houston office space for the duration of
          the
          lease term annually for $57,000.
  In
          February 2005, we relocated our corporate office to 2211 Elliott Avenue
          in
          Seattle, WA.
  **Item
          3. Legal Proceedings** **
  We
          are
          currently not a party to any material legal proceedings.
  **Item
          4. Submission of Matters to a Vote of Security Holders** **
  None.
  17
  **PART
          II**
  **Item
          5. Market for Common Equity, Related Shareholder Matters and Small Business
          Issuer Purchases of Equity Securities**
  **Market
          Information**
  Our
          common stock has been quoted on the Over-the-Counter Bulletin Board under
          the
          symbol “DJJI” since December 12, 2005, concurrent with our corporate name
          change. Prior to that time, since September 30, 2003, our common stock
          traded
          under the symbol “DWGN”. Prior to that time, beginning May 28, 2002 when our
          company was first listed on the Over-the-Counter Bulletin Board, our trading
          symbol was “WLDH” and the shares traded represented an interest in the former
          business of Woodland Hatchery, Inc. The volume of trading in our common
          stock
          has been limited during the period presented and the quotations provided
          reflect
          inter-dealer prices, without retail mark-up, mark-down or commission, and
          may
          not represent actual transactions. The information provided below was obtained
          from nasdaq.com.
  The
          following table sets forth the high and low closing bid prices for our
          common
          stock for the periods indicated:
  **Quarter
                    Ended**
                
                **High**
                
                **Low**March
                    31, 2004
                
                
                1.600
                
                
                0.900June
                    30, 2004
                
                
                1.400
                
                
                0.860September
                    30, 2004
                
                
                1.520
                
                
                0.650December
                    31, 2004
                
                
                1.810
                
                
                1.070March
                    31, 2005
                
                
                2.045
                
                
                1.500June
                    30, 2005
                
                
                1.780
                
                
                1.280September
                    30, 2005
                
                
                1.400
                
                
                0.320December
                    31, 2005
                
                
                0.500
                
                
                0.052
  **Holders**
  As
          of
          April 6, 2006, we have approximately 82 record holders of our common
          stock.
  **Dividends**
  We
          have
          never paid dividends on our common stock and do not anticipate paying dividends
          in the foreseeable future other than possible liquidating distributions,
          if
          any.
  18
 **Securities
          Authorized for Issuance Under Equity Compensation Plans** **
  The
          following table sets forth information relating to our compensation plan
          as of
          December 31, 2005.
  **Plan
                    Category**
                
                **Number
                    of securities to****be
                    issued upon exercise of outstanding options**
                
                **Weighted-average
                    exercise price of outstanding options**
                
                **Number
                    of securities****remaining
                    available for****future
                    issuance under****equity
                    compensation plans (excluding securities reflected in****column
                    (a)****(a)**
                
                **(b)**
                
                **(c)**Equity
                    compensation plans approved by security holders
                
                
                2,333,608
                
                $
                1.43
                
                
                4,085,135Equity
                    compensation plans not approved by security holders
                
                
                0
                
                
                0
                
                
                0Total
                
                
                2,333,608
                
                $
                1.43
                
                
                4,085,135
  **Unregistered
          Securities Sold**
  None.
  **Item
          6. Management's Discussion and Analysis or Plan of
          Operation** **
 
 **Overview**
 
 We
          produce, publish and promote mobile entertainment content for major media
          brands
          through North American wireless carriers. We generate revenue by distributing
          our content over wireless carrier networks. Our revenue model is driven
          by fees
          paid by consumers for wireless entertainment products and services. These
          fees
          may be collected by carriers, collected directly by us or some combination
          thereof. Currently, our revenue model is through collection by carriers.
          Our
          revenue model does not rely on advertising or any other revenue source
          not
          directly related to the downloading of wireless entertainment content by
          consumers. A percentage of revenue is shared with the wireless carrier
          and the
          percentages vary for each carrier, depending upon the specific carrier
          agreement.
 
 Currently,
          the majority of our content is sold for a download fee. The download fee
          model
          is based on a single fee per downloaded application or bundle of applications.
          Download fees are assessed on a per download basis for each game or bundle
          of
          games, ringtones, images and other features. Some of the download features
          will
          have expirations based on time allowing us subscription billing which we
          have
          implemented on some of our games such as ESPN Bassmaster.
 
 We
          are a
          mobile media company whose products include ringtones, games, images and
          messaging services for mobile devices. We currently sell our products in
          North
          America through distribution agreements with major wireless operators,
          such as
          Cingular. Most of our products are sold to consumers via our branded services
          with branding from major media companies such as Napster, Playboy, USA
          TODAY,
          RollingStone Magazine and ESPN Bassmaster. We call our strategy of delivering
          mobile content under media brands, the mobile channel strategy. The mobile
          channel strategy allows for the distribution of branded services, using
          content
          such as ringtones, games and images, with brands for a specific lifestyle
          category.
 
 During
          2004, we signed agreements and launched branded service applications with
          RollingStone and ESPN. In the latter part of 2004, we signed agreements
          with
          Playboy.com and Napster LLC, Beliefnet and Flow C.m.M, Inc., or MiniFizz
          and we
          have launched branded service applications for Napster LLC and Beliefnet
          in the
          second quarter of 2005 and Playboy in the fourth quarter of 2005. In October
          2005, we terminated our agreements with Beliefnet and MiniFizz in an effort
          to
          concentrate our resources with our other brand partners. In
          light
          of the proposed reverse acquisition by New Motion, Inc., we are currently
          in
          discussions with Playboy regarding a possible termination of our agreement
          with
          Playboy prior to the expiration of the specified term of the agreement. Branded
          services we provide for a particular brand may vary, but they will be some
          combination of ringtones, images, games, messaging and other content as
          cell
          phone technology capabilities become more advanced.
 
 19
 We
          have
          entered into agreements to distribute our applications on Verizon, USCellular,
          Alltel, Cingular mMode (formerly AT&T Wireless), Nextel, T-Mobile, Cingular
          Wireless MEdiaNet, Midwest Wireless, Metro PCS, Western Wireless and Boost
          Mobile which provide the terms and conditions under which our applications
          may
          be made available to end-users of these United States wireless carriers.
          In
          March 2005, we entered into agreements with two Canadian wireless carriers
          Microcell/Fido and Rogers and in September 2005 we entered into an agreement
          with another Canadian carrier, Telus.
 
 In
          August
          2002, we began exclusively licensing from Dwango Co., Ltd., a Japanese
          mobile
          entertainment supplier, or Dwango Japan, the Dwango trademark and technologies
          for use in North America. In October 2005, we entered into a trademark
          and
          technology termination agreement with Dwango North America, Inc., our
          wholly-owned subsidiary, and Dwango Japan.  Under
          the
          terms of the termination agreement with Dwango Japan, Dwango Japan is entitled
          to use and license its technology in North America as of January 1, 2006.
          We are
          required to cease
          using Dwango Japan's technology and the "Dwango" name trademark
          in 2006. In addition, under the terms of the Termination Agreement, Dwango
          Japan is able to enter the North American market which
          could potentially create additional competition for us .
          We no
          longer distribute games or technology under license from Dwango
          Japan.
  On
          September 29, 2005, we, in an effort to decrease operating expenses, reduced
          headcount by 30%. The affected employees received two weeks of severance
          pay
          amounting to approximately $34,000 in the aggregate. The reduction is expected
          to save us approximately $1.5 million over the next twelve months. On December
          19, 2005, we, in a continuing effort to decrease operating expenses, reduced
          headcount by 27% of the remaining workforce. The affected employees received
          two
          weeks of severance pay amounting to approximately $40,000 in the aggregate.
          As
          of December 31, 2005, we had 33 employees.
 
 We
          generated $3.5 million in revenues for the year ended December 31, 2005,
          compared to $1.6 million for the year ended December 31, 2004. Our net
          loss for
          this period was $2.5 million, compared to $16.0 million for the year ended
          December 31, 2004, and we are not profitable. We anticipate that we will
          continue to incur net losses and may never achieve profitability. As of
          December
          31, 2005, we had an accumulated deficit of $19.2 million. Our operating
          expenses
          are approximately $0.8 million per month, approximately 42% of which is
          for
          payroll, 19% of which is for marketing and 39% of which is for our general
          operations.
 
 On
          April
          25, 2006, we entered into a non-binding letter of intent with New Motion,
          Inc.,
          or New Motion, relating to the proposed reverse acquisition of Dijji by
          New
          Motion, with Dijji surviving as a publicly-held company. Upon the consummation
          of the proposed transaction, shareholders of Dijji would hold shares that
          represent approximately 12.5% of the issued and outstanding shares of the
          combined company’s common stock on a fully-diluted and as-converted basis. New
          Motion’s stockholders (including holders of securities convertible or
          exercisable into New Motion stock) would hold shares that represent
          approximately 87.5% of the issued and outstanding shares of the combined
          company’s common stock on a filly-diluted and as-converted basis. The parties
          have not entered into a definitive agreement relating to the proposed exchange
          transaction. The letter of intent entered into between the parties do not
          bind
          either party to consummate any transaction unless and until such terms
          are
          negotiated and set forth in a definitive agreement that is properly approved
          by
          the respective boards of directors of each party, and executed by each
          party.
          There can be no assurances that a definitive agreement will be reached
          on terms
          acceptable to the Company, if at all, and, if reached, that the acquisition
          will
          be completed.
  If
          the
          proposed exchange transaction is not closed, we may be required will be
          ready to
          proceed with the orderly liquidation and winding up of the company.
  **Application
          Development**
  At
          this
          juncture, we typically build our mobile applications (games, content delivery
          and images) internally. During 2004 and 2005, we did have relationships
          with
          several companies with respect to their development of game content on
          our
          behalf. In 2005, we partnered with Crisp Wireless, “Crisp” to develop and launch
          a mobile media application. We have since terminated our relationship with
          Crisp.
  20
 We
          have
          designed and developed our proprietary ringtone and media service, which
          allows
          consumers to download ringtones and images to their phones. We have our
          own
          catalog of approximately 3,000 polyphonic ringtones and have licensed over
          3,000
          mastertones and custom audiotones with ongoing production and licensing
          of new
          ringtones every month. We have an agreement with RollingStone and Real
          Networks
          to develop mobile content (games, ringtones and other media offerings and
          applications) using the RollingStone brand. This agreement expires in May
          2006.
          Our first product launched under the agreement was a ringtone browser,
          which was
          launched in June 2004. Currently, we are not developing any additional
          games for
          RollingStone and do not plan to develop any games in the future. We also
          have an
          agreement with Napster to provide ringtones and images via the Napster
          brand.
          Our primary target market for ringtones and media is broader than for games
          in
          North America. Ringtones and images for phones are attractive to older
          consumers
          as well as the targeted youth market. The resulting demographic includes
          youth,
          but expands beyond to encapsulate those between the ages of 14 to 35, although
          the heaviest users are still expected to be in the 14 to 24 age
          segment.
 
 In
          2005,
          we launched two games developed internally, RollingStone 20 Questions and
          Beliefnet Spiritual Trivia. Spiritual Trivia is no longer available pursuant
          to
          the termination of our agreement with Beliefnet.
 
 Our
          delivery platform incorporates a mobile ringtone catalog application that
          allows
          users to browse, search, sample and download the newest as well as the
          most
          popular ringtones, sorted by title, artist and category. Ringtone downloads
          are
          initiated through a WAP browser, a WEB browser or a downloadable BREW ringtone
          client, allowing for customers to purchase new ringtones directly from
          their
          phones. We have expanded our capabilities to include mobile messaging products.
          Mobile messaging products include text messaging, or SMS, and short-code
          provisioning for content downloads. Short code provisioning is often referred
          to
          as premium SMS, or PSMS, whereby a consumer enters a code directly on their
          handset to receive a piece of content for a fee. We launched an application
          in
          September 2005 with USA TODAY that incorporates PSMS.
 
 **Results
          of Operations**
 
 **Revenue.** During
          the year ended December 31, 2005, revenues were $3.5 million. During the
          comparable period in 2004, revenues were $1.6 million. During the comparable
          period in 2003, revenue were $22,000.
 
 The
          increase of revenues in 2005 of $1.9 million resulted from higher sales
          of
          RollingStone Ringtones and ESPN Bassmaster on various carriers. The launch
          of
          Napster in May 2005 on Cingular and later in 2005 on Alltel in the United
          States
          and Rogers, Fido and Telus in Canada provided significant revenue
          growth.
 
 Revenues
          in 2004 resulted from the launch of RollingStone Ringtones in June of 2004
          and
          ESPN Bassmaster.
  Revenues
          in 2003 resulted from the launch of games on
          Verizon and AT&T.
 
 **Cost
          of Revenues.** During
          the year ended December 31, 2005, cost of revenues were $2.8 million. During
          the
          comparable period in 2004, cost of revenues were $1 million. During the
          comparable period in 2003, cost of revenue were $0.
 
 The
          increase of cost of revenues in 2005 of $1.8 million primarily resulted
          from the
          sale of ringtones and games and the corresponding royalties/revenue share
          obligations. Also included in royalties/revenue share obligations are
          contractual minimum royalties paid out to RollingStone and Playboy in excess
          of
          royalties earned. In addition, increased sales of mastertones, or audiotones,
          which possess a higher percentage royalty over polyphonic tones, created
          an
          increase in cost of revenues. During the second quarter of 2005, we paid
          a fee
          to a carrier of $0.2 million to receive preferred deck placement. This
          fee was
          accounted for as a cost of revenue.
 
 Cost
          of
          revenues for 2004 primarily resulted from the sale of ringtones and games
          and
          the corresponding royalties/revenue share obligations to RollingStone and
          ESPN,
          music publisher royalties associated with the branded ringtones and minimum
          royalties paid out to RollingStone in excess of royalties earned.
 
 **Research
          and Development Expense.** During
          the year ended December 31, 2005, we incurred research and development
          expenses
          of $4.9 million. During the year ended December 31, 2004, we incurred research
          and development expenses of $2.6 million. These expenses consist principally
          of
          salaries, consulting and related expenses. During the year ended December
          31,
          2003, we incurred research and development expense of $0.2 million.
 
 21
 The
          increase of research and development expenses in 2005 of $2.3 million was
          primarily due to payroll related expenses and the costs associated with
          the
          development of branded content products including Napster, Playboy and
          USA
          Today. R&D expenses are expected to decrease due to lower headcount and
          streamlining and improved efficiency of developing and maintaining of core
          product offerings.
 
 Research
          and development expense for 2004 was primarily due to payroll related expenses
          and the costs associated with the development of branded content products
          including RollingStone and ESPN Bassmaster.
  Research
          and development expense for 2003 consisted
          of expenses relating to development of gaming applications.
 
 **Sales
          and Marketing Expense.** During
          the year ended December 31, 2005, we incurred sales and marketing expenses
          of
          $2.6 million. For the year ended December 31, 2004, we incurred sales and
          marketing expenses of $1.2 million. These expenses consist principally
          of
          salaries, advertising and related expenses.
 
 The
          increase in sales and marketing in 2005 of $1.4 million was primarily due
          to an
          increase in payroll related expenses due to the hiring of personal to promote
          our new channels of branded content, which amounted to an increase of
          approximately $0.5 million, and advertising related expenses due to promotion
          of
          RollingStone, Napster and Playboy, which accounted for a $0.6 million
          increase.
 
 Sales
          and
          marketing expense for 2004 was primarily due to payroll related expenses
          and
          advertising expense related to the promotion of RollingStone and
          ESPN.
  Sales
          and marketing expenses for 2003 were
          immaterial.
 
 **General
          and Administrative Expense.** During
          the year ended December 31, 2005, we incurred general and administrative
          expenses of $4.5 million. For the year ended December 31, 2004, general
          and
          administrative expenses were $3.7 million. For the year ended December
          31, 2003,
          general and administrative expenses were $3.9 million.
 
 The
          increase in sales and marketing in 2005 of $0.8 million was primarily due
          to an
          increase in professional fees, which amounted to approximately a $0.2 million
          increase. Other areas for which expenses increased were facilities, due
          to
          increased rent and depreciation amounting to approximately a $0.2 million
          increase, and trademark and licensing expense, due to a contractual commitment
          with Napster for use of the Napster brand and Dwango Japan for use of the
          name
          amounting to approximately a $0.3 million increase.
 
 General
          and administrative expense for 2004 was primarily due to facilities costs,
          payroll related expense, professional fees and trademark and licensing
          expense.
  General
          and administrative expense for 2003 was
          primarily due to payroll and facilities costs.
 
 **Interest
          Expense.** During
          the year ended December 31, 2005, we incurred interest expense of $1.5
          million.
          For the year ended December 31, 2004, interest expense was $2.0 million.
          For the
          year ended December 31, 2003, interest expense was $0.6 million.
 
 The
          decrease in interest expense in 2005 of $0.5 million is directly attributable
          to
          the conversion of notes and exercise of warrants in 2004 and related
          amortization of debt discount for converted notes and amortization of debt
          discount for exercised warrants related to the 8% senior convertible notes
          issued in 2003. In 2005, as a result of lower stock prices, conversion
          of notes
          and exercise of warrants decreased.
 
 Interest
          expense in 2004 was directly attributable to the accrual of interest,
          amortization of debt discount for converted notes and amortization of debt
          discount for exercised warrants related to the 8% senior convertible notes
          issued in 2003 and accrual of interest and amortization of debt discount
          related
          to the 9% senior convertible notes issued in 2004.
 
 **Net
          Loss Attributable to Common Stockholders.** Our
          net
          loss for the year ended December 31, 2005 was $2.5 million. Our net loss
          for the
          year ended December 31, 2004 was $16.0 million.
 
 The
          decrease in net loss attributable to common stockholders in 2005 of $13.5
          million was primarily due to the gain on the fair value of embedded derivatives.
          Per EITF 00-19, we record embedded derivatives at fair value at the end
          of each
          accounting period. Due to the decrease of our stock price from $1.85 at
          the end
          of 2004 to $.063 at the end of 2005, the fair value of all embedded derivatives
          associated with our various financings significantly decreased.
 
 22
 **Liquidity
          and Capital Resources**
 
 The
          accompanying financial statements have been prepared assuming that the
          Company
          will continue as a going concern. As reflected in the accompanying financial
          statements, the Company experienced a net loss for the year ended December
          31,
          2005 and has a capital deficit. These factors raise substantial doubt about
          the
          Company’s ability to continue as a going concern. If
          we
          fail to
          complete, or delay in completing, the proposed acquisition of Dijji by
          New
          Motion, we may be required to proceed with the orderly liquidation and
          winding
          up of the company  The
          financial statements do not include any adjustments relating to the
          recoverability or classification of recorded asset amounts or the amount
          and
          classification of liabilities that might be necessary as a result of this
          going-concern uncertainty.
 
 As
          of
          December 31, 2005, we had cash and short-term investments of $4.3 million
          and
          working capital of $2.7 million. If
          we
          fail to complete, or delay in completing, the reverse acquisition of Dijji
          by
          New Motion, we may be required to proceed with the orderly liquidation
          and
          winding up of the company.
 
 We
          have
          historically funded our operations primarily through the sale of our equity
          and/or debt securities, including sales of common stock, convertible notes,
          preferred stock and warrants. In January 2005, we completed a $0.7 million
          financing of Series C convertible preferred stock and warrants. In February
          2005, we completed a $15 million financing of Series D convertible preferred
          stock and warrants.
 
 During
          the year ended December 31, 2005, net cash used in operating activities
          totaled
          $10.2 million. During the year ended December 31, 2004, net cash used in
          operating activities totaled $7.9 million. This 29% increase is due to
          expansion
          of our business and is primarily driven by our hiring of additional
          employees.
 
 During
          the year ended December 31, 2005, net cash used in investing activities
          totaled
          $3.6 million. During the year ended December 31, 2004, net cash used in
          investing activities totaled $59,000. This increase in investing activities
          is
          primarily due to the purchase of short-term investments in the second quarter
          of
          2005, some of which have matured, and the purchase of fixed assets due
          to the
          expansion of the business.
 
 During
          the year ended December 31, 2005, net cash provided by financing activities
          totaled $15 million. During the year ended December 31, 2004, net cash
          provided
          by financing activities totaled $8.1 million. This 88% increase is due
          to
          additional financings consummated by us that were necessary to fund our
          ongoing
          operations.
 
 In
          order
          to finance our operations, we used approximately $750,000 per month in
          cash over
          the last three months of 2005. We believe that our expenses will continue
          to
          exceed our income. The Company is presently seeking to acquire an operating
          company through a reverse merger. If the Company is not successful in this
          effort, it may proceed with the orderly liquidation and winding up of the
          Company.
 
 The
          following table summarizes, as of December 31, 2005, our obligations and
          commitments to make future payments under debt and operating leases and
          pursuant
          to our agreements with RollingStone, Playboy and Napster (for royalty,
          licensing
          and advertising):
  **Payments
                    Due by
                    Period**
                  (in
                    thousands)**Total**
                
                **Less
                    Than 1**
                  **Year**
                
                **1
                    - 3 Years**
                
                **After
                    3 -Years**Long-Term
                    Debt
                
                $
                5,614
                
                $
                1,614
                
                $
                4,000
                
                
                -Capital
                    Leases
                
                
                79
                
                
                42
                
                
                37
                
                
                -Operating
                    Leases*
                
                
                434
                
                
                380
                
                
                54
                
                
                -Series
                    A
                
                
                1,250
                
                
                -
                
                
                1,250
                
                
                -Series
                    B
                
                
                3,000
                
                
                -
                
                
                3,000
                
                
                -Series
                    D
                
                
                14,703
                
                
                -
                
                
                14,703
                
                
                -Royalty
                    Expense
                
                
                550
                
                
                400
                
                
                150
                
                
                -License
                    Expense
                
                
                120
                
                
                120
                
                
                -
                
                
                -Advertising
                    Expense
                
                
                556
                
                
                473
                
                
                83
                
                
                -**Total**
                
                $
                26,306
                
                $
                3,029
                
                $
                23,277
                
                
                -
 
 23
  *Houston
          office is currently subleased for the duration of the lease term relieving
          $57,000 from Less Than 1 Year.
  Our
          outstanding long-term debt as of December 31, 2005 consists of:
  1.
 
          $1.6 million Senior Subordinated Convertible Promissory Notes bearing interest
          at the rate of 8% per annum. The principal balance of these notes, together
          with
          all interest accrued thereon, is due and payable on September 29, 2006.
  2.
 
          $1.7 million Senior Convertible Promissory Note bearing interest at the
          rate of
          9% per annum. The principal balance of this note, together with all interest
          accrued thereon, is due and payable on January 8, 2007.
  3.
 
          $2.3 million Senior Convertible Promissory Note bearing interest at the
          rate of
          9% per annum. The principal balance of this note, together with all interest
          accrued thereon, is due and payable on March 19, 2007.
  At
          December 31, 2005 and 2004, we did not have any off-balance sheet arrangements
          or relationships with unconsolidated entities or financial partnerships,
          such as
          entities often referred to as structured finance or special purposes entities,
          which are typically established for the purpose of facilitating off-balance
          sheet arrangements or other contractually narrow or limited
          purposes.
  **Critical
          Accounting Policies**
  **Software
          Development Costs**
  We
          recognize costs of software developed or purchased for internal use in
          accordance with Statement of Position (SOP) 98-1, “Accounting for Costs of
          Computer Software Developed or Obtained for Internal Use.” Under SOP 98-1, we
          expense all costs incurred that relate to planning and post-implementation
          phases of development. Costs incurred in the development and implementation
          phases are capitalized and amortized over the estimated useful life of
          the
          software.
  **Revenue
          Recognition**
  We
          recognize revenues in accordance with SEC Staff Accounting Bulletins
          Nos. 101 and 104 "Revenue Recognition." Revenue from wireless applications
          is recognized in the month in which delivery and acceptance of a purchase
          by the
          end-user occurs providing there is persuasive evidence of an arrangement,
          pricing is fixed and determinable and collectibility is probable. We recognize
          delivery and acceptance upon the occurrence of a download of an application
          to
          the end user. Persuasive evidence of an arrangement occurs when the carrier
          is
          notified of the end-user transaction and they place a charge on the end-user’s
          bill. The carrier reports to our company the product and dollar amount
          of
          revenue earned by our company which establishes that delivery and performance
          have occurred. The carriers report to our company provides evidence of
          collectibility and subsequent to the issuance of the carrier reports, the
          carrier remits the agreed upon price for each download which substantiates
          fixed
          and determinable pricing.
  In
          accordance with Emerging Issues Task Force (EITF) No. 99-19, "Reporting
          Revenue Gross as a Principal Versus Net as an Agent," we recognize as revenues
          the net amount the wireless carrier or distributor pays to us upon the
          sale of
          our applications, net of any service or other fees earned and deducted
          by the
          wireless carrier or distributor. We have evaluated our wireless carrier
          agreements and have determined that we are not the principal when selling
          our
          applications through wireless carriers.
  24
 **Derivative
          Accounting**
  We
          currently account for embedded derivatives in accordance with EITF No.
          00-19
“Accounting for Derivative Financial Instruments Indexed to, and Potentially
          Settled in, a Company’s Own Stock” which requires us to classify these
          instruments as liabilities in the event we are not sure that we have adequate
          authorized shares of common stock for the conversion or exercise of all
          outstanding instruments (due, in part, to certain conversion rates which
          vary
          with the fair value of our common stock). As a result, we are required
          to record
          the fair value of these warrants on our balance sheets as liabilities.
          Changes
          in the fair values of these instruments will result in adjustments to the
          amount
          of the recorded liabilities and the corresponding gain or loss will be
          recorded
          in our statements of operations. At the date of the conversion of each
          respective instrument or portion thereof (or exercise of the warrants or
          portion
          thereof, as the case may be), the corresponding liability will be reclassified
          as equity.
 
 **Impairment
          of Long-Lived Assets**
  We
          assess
          impairment of our intangible and long-lived assets in accordance with the
          provisions of SFAS No. 144, "Accounting for the Impairment or Disposal of
          Long-lived Assets." The carrying value of intangible assets with definite
          lives
          and other long-lived assets is reviewed on a regular basis for the existence
          of
          facts that may indicate that the assets are impaired. Such an asset is
          considered impaired when its estimated future cash flows are less than
          the
          amount of its carrying value. If the carrying value of this asset is deemed
          not
          recoverable, it is adjusted downwards to the asset’s estimated fair
          value.
  **Income
          Taxes**
  We
          periodically review the likelihood that we will realize the value of our
          deferred tax assets and liabilities to determine if a valuation allowance
          is
          necessary. We have recorded a full valuation allowance against our net
          deferred
          tax assets. We have maintained a full valuation allowance because we concluded
          that it was not likely we would realize the value of our deferred tax assets,
          in
          light of our history of net operating losses and limited operating history
          and
          potential limitations on the utilization of net operating loss
          carryovers.
  **Share-Based
          Payment**
  We
          currently account for share-based payment in accordance with APB No. 25.
          In
          December 2004, the FASB issued SFAS No. 123 (revised), “Share-Based Payment”
(FAS 123R) which replaces FAS 123 and supersedes APB No. 25. FAS 123R requires
          all share-based payments to employees, including grants of employee stock
          options, to be recognized in the financial statements based on their fair
          values
          beginning with the first interim or annual period after December 15, 2005
          for
          small business filers, with early adoption encouraged. The pro forma disclosures
          previously permitted under FAS 123 no longer will be an alternative to
          financial
          statement recognition. We are required to adopt FAS 123R beginning January
          1,
          2006. Under FAS 123R, we must determine the appropriate fair value model
          to be
          used for valuing share-based payments, the amortization method for compensation
          cost and the transition method to be used at date of adoption. The transition
          methods include prospective and retroactive adoptions. We are evaluating
          the
          requirements of FAS 123R and expect that the adoption of FAS 123R will
          have a
          material impact on our consolidated results of operations and earnings
          per
          share. We have not yet determined the effect of adopting FAS 123R and we
          have
          not yet determined whether the adoption will result in amounts that are
          similar
          to the current pro forma disclosures under FAS 123. We have not yet determined
          the impact of FAS 123R on our policies or plans, if any.
  **Principles
          of Consolidation**
  The
          accompanying consolidated financial statements include the accounts of
          Dijji
          Corp and its wholly owned subsidiaries OTA Acquisition Corp and Dijji Corp
          (Texas) for 2005 and Dwango North America Corp. and its wholly owned
          subsidiaries Dwango North America, Inc. and OTA Acquisition Corp for 2004.
          All
          significant inter-company transactions and balances have been eliminated
          in
          consolidation.
  25
 **Item
          7. Financial Statements** **
  The
          financial statements begin on page F-1 of this Form 10-KSB.
  **Item
          8. Changes in and Disagreements with Accountants on Accounting and Financial
          Disclosure** **
  None.
  **Item
          8A. Controls and Procedures**
  **Evaluation
          of Disclosure Controls and Procedures**
  Disclosure
          controls and procedures are designed to ensure that information required
          to be
          disclosed in the reports filed or submitted under the Exchange Act is recorded,
          processed, summarized and reported within the time periods specified in
          the
          SEC’s rules and forms. Disclosure controls and procedures include, without
          limitation, controls and procedures designed to ensure that information
          required
          to be disclosed in the reports filed under the Exchange Act is accumulated
          and
          communicated to management, including the Interim Chief Executive Officer
          and
          Chief Financial Officer, as appropriate, to allow timely decisions regarding
          required disclosure. Our management has carried out an evaluation, with
          the
          participation of our Interim Chief Executive Officer and Chief Financial
          Officer, of the effectiveness of the design and operation of our disclosure
          controls and procedures as of December 31, 2005.  In the course of this
          evaluation, the Company determined that it had not properly accounted for
          embedded derivatives in accordance with EITF 00-19 “Accounting for Derivative
          Financial Instruments Indexed to, and Potentially Settled in, a Company’s Own
          Stock”. Management concluded and recommended and our audit committee approved
          that restatements of financial statements for prior fiscal years and periods
          would be required to correct the improper accounting for embedded derivatives.
          Based upon the restatement, the Interim Chief Executive Officer and Chief
          Financial Officer concluded that, solely due to our restatement due to
          the
          embedded derivatives, our disclosure controls and procedures are not effective,
          as of December 31, 2004, to ensure that information required to be disclosed
          in
          the reports we file under the Exchange Act are recorded, processed, summarized
          and reported as and when required.  The Interim Chief Executive Officer and
          Chief Financial Officer have concluded that our disclosure controls and
          procedures are effective, as of December 31, 2005, to ensure that information
          required to be disclosed in the reports we file under the Exchange Act
          are
          recorded, processed, summarized and reported as and when required .
 
 **Changes
          in Internal Controls**
  In
          light
          of the guidance provided by the Securities and Exchange Commission in its
          presentation entitled “Current Developments in the Division of Corporation
          Finance” provided at the December 6, 2005 National Conference on Current SEC
& PCAOB Developments, we changed our internal controls to properly account
          for embedded derivatives in accordance with EITF 00-19 “Accounting for
          Derivative Financial Instruments Indexed to, and Potentially Settled in,
          a
          Company’s Own Stock.”
  Except
          as
          discussed above, there were no changes in our internal control over financial
          reporting that occurred during our fourth fiscal quarter that have materially
          affected, or are reasonably likely to materially affect, our internal control
          over financial reporting.
  **Limitations
          on Effectiveness of Controls**
  We
          believe that a control system, no matter how well designed and operated,
          cannot
          provide absolute assurance that the objectives of the control system are
          met,
          and no evaluation of controls can provide absolute assurance that all control
          issues and instances of fraud, if any, within a company have been
          detected.
  **Item
          8B.  Other Information** **
  None.
 26
 **Part
          III**
  **Item
          9. Directors and Executive Officers of the Registrant**
  The
          following sets forth certain information regarding the directors and executive
          officers of our company. Each director holds office until the next annual
          meeting of the stockholders and until his successor has been duly elected
          and
          qualified. Each executive officer serves at the discretion of the board
          of
          directors of our company.
  **Name**
                **Age**
                **Position**Alexander
                    U. Conrad
                36
                Director,
                    President and Interim Chief Executive OfficerMichael
                    Dunn
                38
                Chief
                    Financial Officer and TreasurerL.
                    Derrick Ashcroft
                77
                DirectorVishal
                    Bhutani
                31
                DirectorPaul
                    Eibeler
                51
                DirectorRex
                    S. Jackson
                46
                Director
  *Alexander
          U. Conrad* has been
          employed by our company since May 2003. In March 2004, Mr. Conrad was elected
          a
          director of our company. He was also elected as President, Chief Operating
          Officer and Secretary of our company in March 2004. On August 15, 2005,
          he was
          named Interim Chief Executive Officer. Mr. Conrad was the Vice President
          of
          Business Development of Over-the-Air Wireless, Inc. from June 2002 until
          our
          acquisition of such company in February 2004. Prior to such time, from
          January
          2001 through June 2002, Mr. Conrad was Senior Product Manager, New Initiatives,
          for eFunds Corporation, a company that provides transaction processing,
          risk
          management and outsourcing services. Mr. Conrad received his BA from Carleton
          College and a MBA from Seattle University.
  *Michael
          Dunn* joined
          our company as Controller in 2004. Mr. Dunn was promoted to Chief Financial
          Officer of our company in December 2005. Prior to joining our company,
          Mr. Dunn
          spent seven years in various management positions at WatchGuard Technologies,
          Inc., a network security firm. Mr. Dunn has a BS in Accounting from Central
          Washington University and is a licensed Certified Public
          Accountant.
  *L.
          Derrick Ashcroft* has been
          a director of our company since November 2000. Mr. Ashcroft is currently
          the
          owner of the Flying X Ranch, a company engaged in the breeding of cattle.
          Since
          March 2005, Mr. Ashcroft has been a director of ICOP Digital, Inc., an
          SEC
          reporting company that delivers security, surveillance, and communications
          solutions, where he serves as chairman of the audit committee. From 1990
          through
          the present, Mr. Ashcroft has been a director of Tata Technologies, Inc.,
          a
          company engaged in providing consulting services to manufacturing and
          distribution companies on the strategic use of information technology and
          a
          member of the Tata group of companies. Mr. Ashcroft previously served on
          the
          board of directors of the following public and private companies in the
          United
          States and abroad: Leasing Edge Corporation, Access West, Inc., Publistix,
          Inc.,
          Boreham Services, Ltd. (UK), Premier Laser Systems, Westergaard.com, Inc.
          and
          ICOP, Inc. Mr. Ashcroft has served as President of AARK Enterprise, Inc.,
          Senior
          Vice President of the Carteret Financial Group, Chairman of Ashcroft Rubin,
          Inc.
          and Chairman of Cardiopet, Inc.
  *Vishal
          Bhutani* has been
          a director of our company since January 2004. From August 2002 through
          the
          present, Mr. Bhutani has been the Head of Research for Alexandra Investment
          Management, LLC, and the investment advisor for Alexandra Global Master
          Fund
          Ltd, an investor in our company. From March 2002 to August 2002, Mr. Bhutani
          was
          Vice President of Magten Asset Management, a company engaged in asset
          management. From August 2000 through March 2002, Mr. Bhutani was a Corporate
          Finance Specialist for McKinsey & Company, a management consulting firm. In
          2000, Mr. Bhutani received his MBA in Finance from the NYU Stern School
          of
          Business.
  *Paul
          Eibeler* has been
          a director of our company since August 2003. Since April 2004, Mr. Eibeler
          has
          been the President and a director of Take-Two Interactive Software, Inc.,
          an SEC
          reporting company that develops, publishes and distributes interactive
          game
          software. Mr. Eibeler was also President of Take-Two Interactive Software,
          Inc.
          from July 2000 through July 2003 and a director of Take-Two Interactive
          from
          January 2001 through April 2003. From
          July
          2003 to October 2003, Mr. Eibeler was President and Chief Operating Officer
          of
          Acclaim North America, part of
          Acclaim Entertainment, Inc.,  which
          at
          the time was an SEC reporting company engaged in the development, publication,
          marketing and distribution of interactive entertainment software. From
          June 1997
          through March 2000, Mr. Eibeler was Executive Vice President and General
          Manager
          of Acclaim North America. Mr. Eibeler also was a consultant to Microsoft
          in
          connection with the development and launch of Microsoft’s Xbox.
  27
 *Rex
          S. Jackson* has been
          a director of our company since November 2005. Mr. Jackson is currently
          Senior
          Vice President and General Counsel of Avago Technologies, a leading supplier
          of
          analog, mixed-signal and optoelectronic components serving customers in
          the
          wired and wireless communications, industrial, automotive, consumer electronics
          and computing markets. Mr. Jackson joined Avago from Synopsys, Inc., where
          he
          served for three years, most recently as Senior Vice President and General
          Counsel and acting Chief Financial Officer. Prior to joining Synopsys,
          Mr.
          Jackson was an investment professional with Redleaf Group, Inc., an early
          stage
          venture capital firm, managing multiple investments in 2000-2001, and later
          serving as President and CEO of a Redleaf portfolio company from 2001-2003
          and
          leading the sale of that company to a Fortune 100 company. Mr. Jackson
          received
          his A.B. degree from Duke University, and his J.D. degree from Stanford
          University.
  In
          connection with their investment in our company, Alexandra Global Master
          Fund
          Ltd. is entitled to nominate two directors for election to the board of
          directors of our company. We have the right to approve their nominees,
          which
          approval may not unreasonably be withheld. Vishal Bhutani currently serves
          on
          our board of directors as Alexandra’s nominee.
  In
          addition, in connection with our sale of Series B, we granted WPG Select
          Technology Fund, L.P., one of the investors in such financing, the right
          to
          nominate one director for election to the board of directors of our company.
          We
          have the right to approve their nominee, which approval may not be unreasonably
          withheld. To date, WPG Select Technology Fund, L.P. has not nominated a
          director.
  L.
          Derrick Ashcroft, Paul Eibeler and Rex Jackson serve on the Audit Committee
          of
          the Board of Directors of our company. Mr. Ashcroft is the Chairman of
          such
          committee. The Audit Committee is responsible for overseeing management’s
          conduct in the financial reporting process, including reviews of our company’s
          annual, quarterly and other financial reports and its systems of internal
          accounting, bookkeeping, and financial controls. The Audit Committee is
          responsible for reviewing any non-audit services and special engagements
          to be
          performed by the independent registered public accounting firm and considering
          the effect of such performance on the their independence. The Audit Committee
          is
          also responsible for engaging and dismissing our company’s independent
          registered public accounting firm. In discharging its oversight role, the
          Audit
          Committee is empowered to meet and discuss with our company’s management and
          independent registered public accounting firm the quality and accuracy
          of our
          accounting principles, the completeness and clarity of our financial disclosures
          and other significant decisions made by management in the preparation of
          financial reports. Our Audit Committee does have an “audit committee financial
          expert” and it is Mr. Ashcroft due to his extensive business experiences
          throughout his career.
  Paul
          Eibeler, L. Derrick Ashcroft and Vishal Bhutani serve on the Compensation
          Committee of the Board of Directors of our company. Mr. Eibeler is the
          Chairman
          of such committee. The Compensation Committee of the Board of Directors
          is
          responsible for review and approval of our company’s executive compensation and
          administering our stock option plan.
  **Section
          16(a) Beneficial Ownership Reporting Compliance**
  Section
          16(a) of the Securities Exchange Act of 1934 requires our executive officers,
          directors and persons who own more than ten percent of a registered class
          of our
          equity securities to file reports of ownership and changes in ownership
          on Forms
          3, 4 and 5 with the Securities and Exchange Commission. These persons are
          required by SEC regulation to furnish us with copies of all Forms 3, 4
          and 5
          they file with the SEC. Based solely upon our review of the copies of the
          forms
          and written representations we have received, we believe that all such
          persons
          complied on a timely basis with all filing requirements applicable to them
          with
          respect to transactions during fiscal 2004.
  28
 **Code
          of Ethics**
  We
          have
          adopted a Code of Ethics applicable to our principal executive officer,
          principal financial officer, principal accounting officer and controller,
          a copy
          of which was filed as an exhibit to our Form 10-KSB for the fiscal year
          ended
          December 31, 2003 and which is incorporated herein by reference. Employees
          conform to ethical business practices which are monitored by
          management.
  **Item
          10. Executive Compensation.**
  The
          following table provides information concerning the annual and long-term
          compensation awarded, earned or paid to our chief executive officer and
          executive officers whose cash compensation exceeded $100,000 in 2005 (the
“named
          executive officers”).
  **Long-Term
                    Compensation****Annual
                    Compensation****Name
                    and Principal Position**
                
                **Year**
                
                **Salary**
                
                **Bonues**
                
                **Restricted**
                  **Stock
                    Award**
                
                **Number
                    of Securities****Underlying
                    Options**
                
                **All
                    Other****Compensation**Alexander
                    Conrad
                
                
                2005
                
                $
                163,940
                
                
                —
                
                
                —
                
                
                75,000
                
                
                —President
                    & Interim Chief Executive
                
                
                2004
                
                $
                108,750
                
                
                —
                
                
                —
                
                
                570,737
                
                $
                960(1
                )Officer
                
                
                2003
                
                $
                51,250
                
                
                —
                
                
                —
                
                
                —
                
                
                —Rick
                    J. Hennessey
                
                
                2005
                
                $
                123,944
                
                
                —
                
                
                —
                
                
                —
                
                $
                96,571(2
                )*Chief
                    Executive Officer &*
                
                
                2004
                
                $
                128,542
                
                
                —
                
                
                —
                
                
                —
                
                $
                960(1
                )*Director
                    (resigned August 2005)*
                
                
                2003
                
                $
                53,125
                
                
                —
                
                
                —
                
                
                —
                
                
                —J.
                    Paul Quinn
                
                
                2005
                
                $
                123,667
                
                $
                27,319
                
                
                —
                
                
                —
                
                
                —*Chief
                    Financial Officer*
                
                
                2004
                
                $
                95,538
                
                $
                14,250
                
                
                —
                
                
                —
                
                $
                960(1
                )*(resigned
                    December 2005)*
                
                
                2003
                
                
                —
                
                
                —
                
                
                —
                
                
                —
                
                
                —
 
 (1)
          Includes stipend for broadband and cell phone use for business purposes.
 (2)
          Severance payments pursuant to employment agreement.
 
 **Director
          Compensation**
  As
          compensation for services on our board of directors, Messrs. Bhutani and
          Ashcroft were each granted a non-qualified stock option to purchase 24,000
          shares of common stock on October 25, 2005. Mr. Ashcroft was granted a
          non-qualified stock option to purchase 12,000 shares of common stock for
          serving
          as Chairmen of the Audit Committee. Each grant was at an exercise price
          of $0.95
          per share. Each option is for a term of ten years commencing as of October
          25,
          2005 and is currently exercisable.
  Each
          of
          our directors is entitled to an annual grant of options to purchase 24,000
          shares of our common stock at an exercise price equal to the fair market
          value
          of our common stock on the day of grant, which options vest in full after
          one
          year. Each chairman of a committee of our board of directors is entitled
          to an
          annual grant of options to purchase 12,000 shares of common stock at an
          exercise
          price equal to the fair market value of our common stock on the day of
          grant,
          which options vest immediately. New directors that join our board of directors
          are entitled to an initial grant of options to purchase 44,000 shares of
          our
          common stock at an exercise price equal to the fair market value of our
          common
          stock on the day of grant, which options vest in full after one year.
  Each
          director is reimbursed for his expenses incurred in connection with the
          performance of his duties as a director. In addition, each director is
          entitled
          to $500 per in-person meeting and $250 per telephonic meeting of the board
          of
          directors or any committee thereof in which he participates.
  **Option
          Grants in Last Fiscal Year**
  The
          following table provides information concerning individual grants of stock
          options made during 2005 to our named executive officers.
  29
 
  **Name**
                
                **Number
                    of****Securities
                    Underlying****Option**
                
                **Percent
                    of****Total
                    Options****Granted
                    to****Employees**
                  **In
                    2005**
                
                **Exercise
                    Price**
                  **(in
                    $ per share)**
                
                **Expiration****Date**Alexander
                    Conrad
                
                
                75,000
                
                
                5
                %
                $
                1.94
                
                
                3/1/15J.
                    Paul Quinn
                
                
                -
                
                
                -
                
                
                -
                
                
                -
 **Options
          Exercised in 2005 and Year End Values**
  The
          following table provides information concerning the exercise of stock options
          during 2005, and the value of unexercised options owned, by our named executive
          officers.
 **Number
                      of Securities Underlying**
                    **Unexercised
                      Options (1)**
                  
                  
                  **Value
                      of Unexercised**
                    **In-the-Money**
                    **Options
                      (2)****Name(3)**
                  
                  
                  **Shares**
                        **Acquired**
                        **On****Exercise**
                  
                  
                  **Value**
                    **Realized**
                  
                  
                  **Exercisable**
                  
                  
                  **Unexercisable**
                  
                  
                  **Exercisable**
                  
                  
                  **Unexercisable**Alexander
                      Conrad
                  
                  
                  —
                  
                  
                  —
                  
                  
                  304,070
                  
                  
                  341,667
                  
                  $
                  0
                  
                  $
                  0J.
                      Paul Quinn
                  
                  
                  —
                  
                  
                  —
                  
                  
                  117,667
                  
                  
                  —
                  
                  $
                  0
                  
                  $
                  0
  (1)  Includes
          ownership of options as of February 28, 2006.
 (2)  Based
          on
          closing price of our common stock as reported on the Over-the-Counter Bulletin
          Board on December 31, 2005.
 
 **Employment
          Agreements**
  On
          March
          1, 2005, we entered into a new Employment Agreement (the “Agreement”) with
          Alexander U. Conrad, our President and Interim Chief Executive Officer.
          The
          Agreement is for a term of three years unless sooner terminated pursuant
          to the
          provisions thereof. The Agreement provides for an annual base salary of
          $170,000
          for Mr. Conrad. The Agreement also provides for the payment of an amount
          equal
          to 100% of such base salary upon achieving certain annual performance targets.
          The employment of Mr. Conrad may be terminated by our company at any time
          with
          or without cause. Mr. Conrad may also terminate his employment at any time
          with
          or without good reason. (as defined in the Agreement). If the employment
          of Mr.
          Conrad is terminated by our company without cause or by Mr. Conrad for
          good
          reason, he shall be entitled to continue to receive his base salary for
          a period
          of twelve months and a pro rata percentage of any bonus amount to which
          he would
          have otherwise been entitled. The Agreement contains confidentiality,
          noncompete, and nonsolicitation covenants for Mr. Conrad.
  In
          accordance with the Agreements, on March 1, 2005, we granted under our
          2003
          Equity Incentive Plan options (with a ten-year term) to purchase an aggregate
          of
          (i) 100,000 shares of our common stock to Mr. Hennessey and (ii) 75,000
          shares
          of our common stock to Mr. Conrad. Such options are exercisable at $1.94
          per
          share and will vest as to 1/3 of such shares on each of the first, second
          and
          third anniversaries of the date of grant. Such options will vest in full
          in the
          event of termination of employment without cause or for good
          reason.
  On
          August
          15, 2005, we entered into a Separation Agreement with Mr. Hennessey. Pursuant
          to
          the terms of the Separation Agreement, in connection with his termination
          of
          employment, we agreed to make a lump sum severance payment to Mr. Hennessey
          equivalent to six months of his base salary in effect on the separation
          date.
          This payment is subject to standard payroll deductions and withholdings.
          Additional terms and conditions of Mr. Hennessey's separation agreement
          are set
          forth in the Separation Agreement, a copy of which was filed on a current
          report
          on Form 8-K with the Securities and Exchange Commission on August 16,
          2005.
  **Provisions
          of our Charter and Bylaws**
  Our
          articles of incorporation provide that our company will indemnify any person
          who
          is or was a director, officer, employee, agent or fiduciary of our company
          to
          the fullest extent permitted by applicable law. Nevada law permits a Nevada
          corporation to indemnify its directors, officers, employees and agents
          against
          liabilities and expenses they may incur in such capacities in connection
          with
          any proceeding in which they may be involved, if (i) such director or officer
          is
          not liable to the corporation or its stockholders due to the fact that
          his or
          her acts or omissions constituted a breach of his or her fiduciary duties
          as a
          director or officer and the breach of those duties involved intentional
          misconduct, fraud or a knowing violation of law, or (ii) he or she acted
          in good
          faith and in a manner reasonably believed to be in or not opposed to our
          best
          interests, or that with respect to any criminal action or proceeding, he
          or she
          had reasonable cause to believe that his or her conduct was
          unlawful.
  30
 In
          addition, our company’s bylaws include provisions to indemnify our officers and
          directors and other persons against expenses, judgments, fines and amounts
          incurred or paid in settlement in connection with civil or criminal claims,
          actions, suits or proceedings against such persons by reason of serving
          or
          having served as officers, directors, or in other capacities, except in
          any
          action, suit or proceeding in which it is adjudged that such person was
          liable
          for negligence or misconduct in the performance of his duty. The termination
          of
          any action, suit or proceeding by judgment, order, settlement, conviction
          or
          upon a plea of nolo contendere or its equivalent will not, of itself, create
          a
          presumption that the person is liable for negligence or misconduct on the
          performance of his or her duties.
  **Item
          11. Security Ownership of Certain Beneficial Owners and Management and
          Related
          Stockholder Matters**
  The
          following table shows as of February 28, 2006 the common stock owned by
          our
          directors and “named executive officers”, by persons known by us to beneficially
          own, individually, or as a group, more than 5% of our outstanding common
          stock
          and all of our directors and executive officers as a group.
  **Name
                    and Address****of
                    Beneficial Owner (1)**
                
                **Beneficial****Ownership****of****Capital
                    Stock (2)**
                
                **Percent
                    of**
                  **Common****Stock**Robert
                    E. Huntley (3)
                
                
                2,473,394
                (4)
                
                24.7
                %Alexandra
                    Global Master Fund Ltd. (5)
                
                
                965,160
                (6)
                
                9.9
                %Weiss,
                    Peck & Greer Investments, a division of Robeco U.S.A., LLC
                    (7)
                
                
                1,052,060
                (8)
                
                9.9
                %Trafelet
                    & Company, LLC (9)
                
                
                1,052,060
                (10)
                
                9.9
                %Van
                    L. Brady (11)
                
                
                947,910
                (12)
                
                9.7
                %Meruelo
                    Capital Partners (13)
                
                
                813,757
                (14)
                
                7.8
                %James
                    Scibelli (15)
                
                
                798,443
                (16)
                
                7.8
                %Dwango
                    Co., Ltd. (17)
                
                
                542,624
                
                
                5.7
                %Silverman
                    Partners(18)
                
                
                566,114
                (19)
                
                5.6
                %HCFP/Brenner
                    Securities, LLC (20)
                
                
                526,296
                (21)
                
                5.2
                %RG
                    Securities, LLC (22)
                
                
                526,296
                (23)
                
                5.2
                %James
                    Scoroposki (24)
                
                
                502,573
                (25)
                
                5.0
                %Paul
                    Eibeler (26)
                
                
                495,783
                (27)
                
                4.9
                %Alexander
                    U. Conrad
                
                
                317,694
                (28)
                
                3.2
                %David
                    Adams (29)
                
                
                292,916
                
                
                3.1
                %Rick
                    J. Hennessey
                
                
                292,916
                
                
                3.1
                %L.
                    Derrick Ashcroft
                
                
                142,707
                (30)
                
                1.5
                %J.
                    Paul Quinn
                
                
                117,667
                (31)
                
                1.2
                %Vishal
                    Bhutani (32)
                
                
                44,000
                (33)
                
                *All
                    directors and executive officers as a group
                  (6
                    persons)
                
                
                1,117,851
                (34)
                
                10.4
                %
 ________________
 *
          Less
          than 1%
  
 (1)
                The
                    address of each person, except as otherwise noted, is c/o Dijji
                    Corp, 2211
                    Elliott Avenue, Suite 601, Seattle, WA 98121.(2)
                Except
                    as otherwise noted, each individual or entity has sole voting
                    and
                    investment power over the securities listed. Pursuant to the
                    rules and
                    regulations of the Securities and Exchange Commission, shares
                    of common
                    stock that an individual or group has a right to acquire within
                    60 days
                    pursuant to the exercise of options or warrants are deemed to
                    be
                    outstanding for the purposes of computing the percentage ownership
                    of such
                    individual or group, but are not deemed to be outstanding for
                    the purpose
                    of computing the percentage ownership of any other person shown
                    in the
                    table.
  31
  (3)
                The
                    address of Mr. Huntley is 222 Vanderpool Lane, Houston, Texas,
                    77024.(4)
                Includes
                    421,841 shares of common stock issuable upon the exercise of
                    warrants held
                    by Mr. Huntley.(5)
                The
                    address of Alexandra Global Master Fund Ltd. is c/o Alexandra
                    Investment
                    Management, LLC, 767 Third Avenue, 39th Floor, New York, NY 10017.
                    Alexandra Investment Management, LLC, a Delaware limited liability
                    company
                    (“AIM”), serves as investment adviser to Alexandra Global Master Fund
                    Ltd., a British Virgin Islands company (“Alexandra”). By reason of such
                    relationship, AIM may be deemed to share dispositive power over
                    the shares
                    of common stock stated as beneficially owned by Alexandra. AIM
                    disclaims
                    beneficial ownership of such shares of common stock. Messrs.
                    Mikhail A.
                    Filimonov (“Filimonov”) and Dimitri Sogoloff (“Sogoloff”) are managing
                    members of AIM. By reason of such relationships, Filimonov and
                    Sogoloff
                    may be deemed to share dispositive power over the shares of common
                    stock
                    stated as beneficially owned by Alexandra. Mr. Vishal Bhutani
                    (“Bhutani”)
                    is a director of our company and employed by AIM.(6)
                The
                    shares of common stock reported as beneficially owned by Alexandra
                    includes 790,900 shares of outstanding common stock. Certain
                    of the shares
                    of common stock reported as beneficially owned are shares that
                    Alexandra
                    has the right to acquire upon conversion of notes and preferred
                    stock and
                    exercise of common stock purchase warrants. The notes, preferred
                    stock and
                    common stock purchase warrants held by Alexandra contain limitations
                    on
                    the conversion or exercise thereof which makes such notes and
                    shares of
                    preferred stock inconvertible and such common stock purchase
                    warrants
                    unexercisable to the extent the holder would, upon conversion
                    or exercise,
                    beneficially own more than 9.9% of the common stock. The amount
                    reported
                    as beneficially owned is based on such limitations. In the absence
                    of such
                    limitations, Alexandra’s notes, preferred stock and common stock purchase
                    warrants would be convertible into or exercisable for an aggregate
                    of
                    12,114,462 shares of our common stock.(7)
                The
                    address of Weiss, Peck & Greer Investments, a division of Robeco USA,
                    L.L.C. (“WPG Investments”), is Robeco USA, L.L.C., One New York Plaza,
                    30th Floor, New York 10004. WPG Investments is the investment
                    manager for
                    the following funds: WPG Select Technology Fund, L.P., a Delaware
                    limited
                    partnership (“WPG Select”); WPG Select Technology Overseas, Ltd., a Cayman
                    Islands corporation (“WPG Overseas”); WPG Select Technology QP Fund, L.P.,
                    a Delaware limited partnership (“WPG QP”); WPG Software Fund, L.P., a
                    Delaware limited partnership (“WPG Software”, and together with WPG
                    Select, WPG Overseas, and WPG QP, the “WPG Funds”). By reason of such
                    relationship, WPG Investments and the WPG Funds may be deemed
                    to share
                    dispositive power over the shares of common stock stated as beneficially
                    owned by WPG Investments. Mr. George Boyd (“Boyd”) is the Head of Equity
                    of WPG Investments and each of the WPG Funds and Mr. Ben Taylor
                    (“Taylor”)
                    is a Managing Director of WPG Investments and each of the WPG
                    Funds as
                    well as portfolio manager of each of the WPG Funds. By reason
                    of such
                    relationships, Boyd and Taylor may be deemed to share dispositive
                    power
                    over the shares of common stock stated as beneficially owned
                    by WPG
                    Investments. WPG Investments has a broker-dealer
                    affiliate.(8)
                The
                    shares of common stock reported as beneficially owned by WPG
                    Investments
                    are shares that such holder has the right to acquire upon conversion
                    of
                    preferred stock and exercise of common stock purchase warrants
                    held by the
                    WPG Funds. Such preferred stock and common stock purchase warrants
                    contain
                    limitations on the conversion or exercise thereof which make
                    such shares
                    of preferred stock inconvertible and such common stock purchase
                    warrants
                    unexercisable to the extent that either WPG Investments or the
                    holder
                    would, upon conversion or exercise, beneficially own more than
                    9.9% of the
                    common stock. The amount reported as beneficially owned is based
                    on such
                    limitations. In the absence of such limitations, such preferred
                    stock and
                    common stock purchase warrants would be convertible into or exercisable
                    for an aggregate of 6,451,610 shares of our common stock. Furthermore,
                    in
                    the absence of such limitations, the preferred stock and common
                    stock
                    purchase warrants held by each of the WPG Funds would be convertible
                    into
                    or exercisable for an aggregate of the following number of shares
                    of our
                    common stock: WPG Select - 489,064 shares; WPG Overseas - 1,940,130
                    shares; WPG QP - 2,009,902 shares; and WPG Software - 2,012,514
                    shares.(9)
                The
                    address of Trafelet & Company, LLC (“Trafelet”), is 900 Third Avenue,
                    5th Floor, New York, NY 10022. Trafelet is the investment manager
                    for the
                    following funds: Delta Pleiades, LP, (“Delta Pleiades”); Delta Offshore,
                    Ltd, (“Delta Offshore”); Delta Institutional, LP, (“Delta Institutional”);
                    and Delta Onshore, LP, (“Delta Onshore”, and together with Delta Pleiades,
                    Delta Offshore and Delta Institutional, the “Delta Funds”). By reason of
                    such relationship, Trafelet and the Delta Funds may be deemed
                    to share
                    dispositive power over the shares of common stock stated as beneficially
                    owned by Trafelet. Peter J. Hofbauer (“Hofbauer”) is the Chief Operating
                    Officer of Trafelet and Remy W. Trafelet (“RWT”) is managing member of
                    Trafelet. By reason of such relationships, Hofbauer and RWT may
                    be deemed
                    to share dispositive power over the shares of common stock stated
                    as
                    beneficially owned by Trafelet.
   32
  (10)
                The
                    shares of common stock reported as beneficially owned by Trafelet
                    are
                    shares that such holder has the right to acquire upon conversion
                    of
                    preferred stock and exercise of common stock purchase warrants
                    held by the
                    Delta Funds. Such preferred stock and common stock purchase warrants
                    contain limitations on the conversion or exercise thereof which
                    make such
                    shares of preferred stock inconvertible and such common stock
                    purchase
                    warrants unexercisable to the extent that either WPG Investments
                    or the
                    holder would, upon conversion or exercise, beneficially own more
                    than 9.9%
                    of the common stock. The amount reported as beneficially owned
                    is based on
                    such limitations. In the absence of such limitations, such preferred
                    stock
                    and common stock purchase warrants would be convertible into
                    or
                    exercisable for an aggregate of 8,357,141 shares of our common
                    stock.
                    Furthermore, in the absence of such limitations, the preferred
                    stock and
                    common stock purchase warrants held by each of the Delta Funds
                    would be
                    convertible into or exercisable for an aggregate of the following
                    number
                    of shares of our common stock: Delta Pleiades - 556,231 shares;
                    Delta
                    Offshore - 3,903,640 shares; Delta Institutional - 3,309,410
                    shares; and
                    Delta Onshore - 587,860 shares.(11)
                The
                    address of Van L. Brady (“Brady”) is 44 Montgomery Street, Suite 2110, San
                    Francisco, CA 94194. Brady is the general partner of Presidio
                    Partners,
                    (“Presidio”), Geary Partners, (“Geary”), and Brady Retirement Fund, LP,
                    (“Brady Retirement Fund”, and together with Presidio and Geary, the “Brady
                    Funds”). By reason of such relationship, Brady and the Brady Funds
                    may be
                    deemed to share dispositive power over the shares of common stock
                    stated
                    as beneficially owned by Brady.(12)
                The
                    shares of common stock reported as beneficially owned by Brady
                    are shares
                    that such holder has the right to acquire upon conversion of
                    preferred
                    stock and exercise of common stock purchase warrants held by
                    the Brady
                    Funds. Such preferred stock and common stock purchase warrants
                    contain
                    limitations on the conversion or exercise thereof which make
                    such shares
                    of preferred stock inconvertible and such common stock purchase
                    warrants
                    unexercisable to the extent that either Brady or the holder would,
                    upon
                    conversion or exercise, beneficially own more than 9.9% of the
                    common
                    stock. The amount reported as beneficially owned is based on
                    such
                    limitations. In the absence of such limitations, such preferred
                    stock and
                    common stock purchase warrants would be convertible into or exercisable
                    for an aggregate of 928,571 shares of our common stock. Furthermore,
                    in
                    the absence of such limitations, the preferred stock and common
                    stock
                    purchase warrants held by each of the Brady Funds would be convertible
                    into or exercisable for an aggregate of the following number
                    of shares of
                    our common stock: Presidio - 473,571 shares; Geary - 351,910
                    shares; and
                    Brady Retirement Fund - 103,090.(13)
                The
                    address of Meruelo Capital Partners (“Meruelo”) is 9550 Firestone Blvd.
                    Suite 105, Downey, California 90241. Alex Meruelo has voting
                    and
                    investment power over these securities.(14)
                The
                    shares of common stock reported as beneficially owned by Meruelo
                    are
                    shares that such holder has the right to acquire upon conversion
                    of
                    preferred stock and exercise of common stock purchase warrants.
                    Such
                    preferred stock and common stock purchase warrants contain limitations
                    on
                    the conversion or exercise thereof which make such shares of
                    preferred
                    stock inconvertible and such common stock purchase warrants unexercisable
                    to the extent that the holder would, upon conversion or exercise,
                    beneficially own more than 9.9% of the common stock. The amount
                    reported
                    as beneficially owned is based on such limitations. In the absence
                    of such
                    limitations, such preferred stock and common stock purchase warrants
                    would
                    be convertible into or exercisable for an aggregate of 2,321,428
                    shares of
                    our common stock.(15)
                The
                    address of Mr. Scibelli is c/o RG Securities, LLC, 900 Merchants
                    Concourse, Suite 400, Westbury, NY 11590.(16)
                Includes
                    105,263 shares of common stock issuable upon conversion of senior
                    convertible notes and 83,442 shares of common stock issuable
                    upon exercise
                    of warrants held by Mr. Scibelli, and 526,296 shares of common
                    stock
                    issuable upon exercise of warrants held by RG Securities, LLC,
                    of which
                    Mr. Scibelli may be deemed to be the beneficial
                    owner.
   33
  (17)
                The
                    address of Dwango Co., Ltd. is Hamacho Center Bldg., 2-31-1,
                    Nihonbashi-Hamacho, Chuo-Ku, Tokyo, Japan 103-0007. Dwango Co.,
                    Ltd. is a
                    public company in Japan, whose securities are traded on the Tokyo
                    Stock
                    Exchange.(18)
                The
                    address of Silverman Partners is c/o Harvey Silverman, Spear,
                    Leeds &
                    Kellogg, 120 Broadway, 6th Floor, New York, NY 10271. Harvey
                    Silverman has
                    sole voting and investment power over these securities.(19)
                Consists
                    of 315,789 shares of common stock issuable upon conversion of
                    senior
                    convertible promissory notes and 250,325 shares of common stock
                    issuable
                    upon exercise of warrants held by Silverman Partners.(20)
                The
                    address of HCFP/Brenner Securities, LLC is 888 7th Avenue, 17th
                    Floor, New
                    York, New York 10106. Steven Shaffer has sole voting and investment
                    power
                    over these securities.(21)
                Consists
                    of shares of common stock issuable upon exercise of warrants
                    held by
                    HCFP/Brenner Securities, LLC.(22)
                The
                    address of RG Securities, LLC is 900 Merchants Concourse, Suite
                    400,
                    Westbury, New York 11590. James Scibelli and Robert Scibelli
                    have shared
                    voting and investment power over these securities.(23)
                Consists
                    of shares of common stock issuable upon exercise of warrants
                    held by RG
                    Securities, LLC.(24)
                The
                    address of Mr. Scoroposki is c/o Jaymar 189 South St. Oyster
                    Bay, N.Y.
                    11771.(25)
                Includes
                    210,526 shares of common stock issuable upon conversion of senior
                    convertible promissory notes and 166,883 shares of common stock
                    issuable
                    upon exercise of warrants held by Mr. Scoroposki.(26)
                The
                    address of Mr. Eibeler is c/o Take-Two Interactive Software,
                    Inc., 622
                    Broadway, New York, New York 10012.(27)
                Includes
                    52,632 shares of common stock issuable upon conversion of senior
                    convertible promissory notes, 95,485 shares of common stock issuable
                    upon
                    exercise of warrants, and 306,000 shares of common stock issuable
                    upon
                    exercise of options held by Mr. Eibeler.(28)
                Includes
                    304,070 shares of common stock issuable upon exercise of options
                    held by
                    Mr. Conrad.(29)
                The
                    address of Mr. Adams is 1221 1st Ave. #1507, Seattle, WA
                    98101.(30)
                Consists
                    of 142,707 shares of common stock issuable upon exercise of options
                    held
                    by Mr. Ashcroft.(31)
                Consists
                    of shares of common stock issuable upon exercise of options held
                    by Mr.
                    Quinn.(32)
                The
                    address of Mr. Bhutani is c/o Alexandra Investment Management,
                    LLC, 767
                    Third Avenue, 39th Floor, New York, New York 10017.(33)
                Consists
                    of shares of common stock issuable upon exercise of options held
                    by Mr.
                    Bhutani. Mr. Bhutani is the Head of Research for Alexandra Investment
                    Management, LLC, the investment advisor for Alexandra Global
                    Master Fund
                    Ltd., one of the investors in our company. No shares owned by
                    Alexandra
                    are attributed to Mr. Bhutani.(34)
                Includes
                    1,104,227 shares of common stock issuable upon conversion of
                    senior
                    convertible notes and exercise of options and warrants held by
                    the
                    directors and executive officers. Does not include options to
                    purchase
                    300,000 shares of common stock issued to Victor Cohn who was
                    elected to
                    our board of directors effective March 8,
                    2005.
  **Item
          12. Certain Relationships and Related Transactions**
  In
          connection with the founding of our company, Robert E. Huntley received
          2,887,642 shares of our common stock. Mr. Huntley provided services to
          our
          company in consideration for the receipt of such stock in our company.
          He
          subsequently transferred 696,741 shares of such common stock to Huntley
          Family
          Trust and 139,348 shares of such common stock to Huntley Trust No. 2. Such
          trusts have recently distributed such shares to the respective beneficiaries
          thereof. In connection with his serving as an officer and director of our
          company, Mr. Huntley also received options to purchase 1,030,074 shares
          of our
          common stock, which options expired in 2004 in view of his termination
          of
          services with our company.
  RG
          Securities, LLC and HCFP/Brenner Securities, LLC received placement compensation
          in connection with our sale of 250,000 shares of common stock and warrants
          to
          purchase 315,790 shares of common stock to Alexandra Global Master Fund
          Ltd. for
          an aggregate purchase price of $300,000 in December 2003. RG Securities
          and
          HCFP/Brenner Securities received an aggregate cash fee of $24,000 and warrants
          to purchase an aggregate of 50,000 shares of our common stock.
  34
 RG
          Securities, LLC, and HCFP/Brenner Securities, LLC received placement
          compensation in connection with our sale of $1,700,000 aggregate principal
          amount of 9% senior convertible notes due January 2007, convertible into
          1,827,957 shares of common stock, and 913,978 common stock purchase warrants
          to
          Alexandra Global Master Fund Ltd. in January 2004. RG Securities and
          HCFP/Brenner Securities received an aggregate cash fee of $136,000 and
          warrants
          to purchase an aggregate of 212,500 shares of our common stock.
  In
          January 2004, we issued to HCFP/Brenner Securities, LLC and RG Securities,
          LLC
          warrants to purchase an aggregate of 10,284 shares of our common stock,
          valued
          at $13,000, in consideration of their deferment of cash fees owing to
          them.
  From
          October through December 2003, Robert E. Huntley, a former officer and
          director
          of our company, and Paul Eibeler, one of our outside directors, advanced
          an
          aggregate of $392,000 and $50,000, respectively to our company. In January
          2004,
          such individuals elected to apply such amounts toward the purchase of an
          aggregate of 326,667 and 41,667 shares of our common stock ($1.20 per share),
          respectively, and warrants to purchase 421,841 and 53,764 shares of our
          common
          stock at an exercise price of $.93 per share, respectively, in full satisfaction
          of the amounts previously advanced.
  On
          February 4, 2004, we entered into a transaction with Over-the-Air Wireless,
          Inc., a company engaged in the wireless ringtone business. Rick J. Hennessey,
          Alexander U. Conrad, David Adams and Mark Sanders were the sole shareholders
          of
          Over-the Air Wireless, Inc. Mr. Hennessey was the chief executive officer,
          Mr.
          Conrad was the director of marketing and finance and David Adams was the
          President and Chief Technology Officer for Over-the-Air Wireless, Inc.
          At the
          time of the transaction, Rick J. Hennessey was our executive vice president
          and
          Alexander U. Conrad and David Adams were employees of ours. Rick J. Hennessey
          has become our chief executive officer and Alexander U. Conrad has become
          our
          president, chief operating officer and secretary. David Adams became our
          vice
          president of development. David Adams is no longer employed by us. In connection
          with the transaction, we issued (i) to Rick J. Hennessey and David Adams,
          292,916 shares of our common stock each, (ii) to Alexander U. Conrad, 13,624
          shares of our common stock, and (iii) to Mark Sanders, 81,744 shares of
          our
          common stock. We granted the former Over-the-Air Wireless, Inc. shareholders
          customary piggyback registration rights and agreed that we would include
          their
          shares of common stock in a registration statement filed within six months
          of
          our acquisition of Over-the-Air Wireless, which six-month filing requirement
          has
          been waived by Messrs. Hennessey and Conrad, the only such persons whose
          shares
          have not yet been registered. In addition, we entered into employment agreements
          with each of Messrs. Hennessey, Conrad and Adams, and issued options to
          purchase
          410,088 shares of common stock to each of Mr. Hennessey and Mr. Adams and
          options to purchase 144,737 shares of common stock to Mr. Conrad. The value
          of
          the shares of common stock issued to the former shareholders of Over-the-Air
          Wireless, Inc. was $1,000,000 and the value of the options issued was $1,217,000
          (of which $517,000 is attributable to Mr. Hennessey’s options and $183,000 is
          attributable to Mr. Conrad’s options) based upon the Black-Scholes option
          pricing model, with the following assumptions: 94% volatility, 6 year expected
          life, risk free interest rate of 3.41% and a dividend yield of 0%.
  RG
          Securities, LLC and HCFP/Brenner Securities, LLC received placement compensation
          in connection with our sale of $2,300,000 aggregate principal amount of
          9%
          senior convertible notes due March 2007, convertible into 2,473,118 shares
          of
          common stock, and 1,236,559 common stock purchase warrants to Alexandra
          Global
          Master Fund Ltd. in March 2004. RG Securities and HCFP/Brenner Securities
          received an aggregate cash fee of $184,000 and warrants to purchase an
          aggregate
          of 287,500 shares of our common stock.
  RG
          Securities, LLC and HCFP/Brenner Securities, LLC may receive placement
          compensation in connection with our sale of an aggregate of 1,250 shares
          of
          Series A and 1,345,087 common stock purchase warrants to Alexandra Global
          Master
          Fund Ltd. in June, July and August 2004. The amount of such compensation
          has not
          yet been determined, although we anticipate that the amount will not exceed
          $100,000 in the aggregate and warrants to purchase an aggregate of 208,333
          shares of our common stock.
  In
          connection with their investments in our company, Alexandra Global Master
          Fund
          Ltd. is entitled to nominate two directors for election to the board of
          directors of our company. We have the right to approve their nominees,
          which
          approval may not be unreasonably withheld. Vishal Bhutani currently serves
          on
          our board of directors as Alexandra’s nominee.
  35
 The
          conversion and exercise prices, and number of shares of common stock underlying
          the notes, warrants and preferred stock referred to above, have been adjusted
          based upon anti-dilution provisions triggered by the sale of our Series
          B and
          series D convertible preferred stock.
  **Item
          13. Exhibits, Financial Statements Schedules and Reports on Form
          8-K.**
  Number
                Description
  2
                Agreement
                    and Plan of Reorganization, dated September 19, 2003, among Woodland
                    Hatchery, Inc., Dwango North America, Inc. and the securityholders
                    of
                    Dwango listed therein (incorporated by reference to Exhibit 2.1
                    to the
                    Registrant’s Current Report on Form 8-K (Date of Report: September 29,
                    2003) filed with the Securities and Exchange Commission on October
                    7,
                    2003)
 3.1
                Articles
                    of Incorporation, as amended to date (incorporated by reference
                    to
                    Exhibits 3.1 to the Registration Statement on Form SB-2 filed
                    with the
                    Securities and Exchange Commission on September 6, 2001 and Exhibit
                    3.1 to
                    the Registrant’s Current Report on Form 8-K (Date of Report: September 29,
                    2003) filed with the Securities and Exchange Commission on October
                    7,
                    2003)
 3.2
                Certificate
                    of Designations of Series A (incorporated by reference to Exhibit
                    3.1 to
                    the Registrant’s Current Report on Form 8-K (Date of Report: June 14,
                    2004) filed with the Securities and Exchange Commission on June
                    21,
                    2004)
 3.3
                Amendment
                    to Certificate of Designations of Series A (incorporated by reference
                    to
                    Exhibit 3.1 to the Registrant’s Current Report on Form 8-K (Date of
                    Report: August 25, 2004) filed with the Securities and Exchange
                    Commission
                    on August 31, 2004
 3.4
                Certificate
                    of Designations of Series B (incorporated by reference to Exhibit
                    3.2 to
                    the Registrant’s Current Report on Form 8-K (Date of Report: August 25,
                    2004) filed with the Securities and Exchange Commission on August
                    31,
                    2004
 3.5
                Certificate
                    of Designations of Series C Convertible Preferred Stock (incorporated
                    by
                    reference to Exhibit 3.1 to the Registrant’s Current Report on Form 8-K
                    (Date of Report: January 12, 2005) filed with the Securities
                    and Exchange
                    Commission on January 18, 2005
 3.6
                Certificate
                    of Designations of Series D Convertible Preferred Stock (incorporated
                    by
                    reference to Exhibit 3.1 to the Registrant’s Current Report on Form 8-K
                    (Date of Report: February 1, 2005) filed with the Securities
                    and Exchange
                    Commission on February 3, 2005
 3.7
                Amended
                    and Restated Bylaws of the Registrant (incorporated by reference
                    to
                    Exhibit 3.2 to the Registrant’s Current Report on Form 8-K (Date of
                    Report: June 1, 2004) filed with the Securities and Exchange
                    Commission on
                    June 3, 2004)
 4.1
                Specimen
                    Common Stock Certificate (incorporated by reference to Exhibit
                    3 the Form
                    8-A filed with the Securities and Exchange Commission on June
                    3,
                    2004)
 4.2
                Form
                    of 8% Senior Convertible Promissory Note due 2006 (incorporated
                    by
                    reference to Exhibit 4.1 to the Registrant’s Current Report on Form 8-K
                    (Date of Report: September 29, 2003) filed with the Securities
                    and
                    Exchange Commission on October 7,
                    2003)
 4.3
                9%
                    Senior Convertible Note due 2007 issued to Alexandra Global Master
                    Fund
                    Ltd. dated January 8, 2004 (incorporated by reference to Exhibit
                    4.4 to
                    the Registrant’s Current Report on Form 8-K (Date of Report: December 12,
                    2003) filed with the Securities and Exchange Commission on January
                    16,
                    2004)
 4.4
                Form
                    of Warrants to purchase 41,722 shares of common stock issued
                    in August
                    2002 (incorporated by reference to Exhibit 4.2 to the Registrant’s Current
                    Report on Form 8-K (Date of Report: September 29, 2003) filed
                    with the
                    Securities and Exchange Commission on October 7,
                    2003)
 4.5
                Form
                    of Warrants to purchase an aggregate of 83,444 shares of common
                    stock
                    (incorporated by reference to Exhibit 4.3 to the Registrant’s Current
                    Report on Form 8-K (Date of Report: September 29, 2003) filed
                    with the
                    Securities and Exchange Commission on October 7,
                    2003)
 4.6
                Form
                    of Warrants to purchase an aggregate of 2,086,037 shares of common
                    stock
                    (incorporated by reference to Exhibit 4.4 to the Registrant’s Current
                    Report on Form 8-K (Date of Report September 29, 2003) filed
                    with the
                    Securities and Exchange Commission on October 7,
                    2003)
    36
  4.7
                Form
                    of Warrants to purchase an aggregate of 417,208 shares of common
                    stock
                    issued to HCFP/Brenner Securities, LLC and RG Securities, LLC
                    for acting
                    as placement agent in connection with the September 2003 private
                    placement
                    (incorporated by reference to Exhibit 4.7 to the Registrant’s Annual
                    Report on Form 10-KSB for the year ended December 31, 2003 filed
                    with the
                    Securities and Exchange Commission on April 15,
                    2004)
 4.8
                Form
                    of Bridge Warrants issued to Alexandra Global Master Fund (incorporated
                    by
                    reference to Exhibit 4.2 to the Registrant’s Current Report on Form 8-K
                    (Date of Report: December 12, 2003) filed with the Securities
                    and Exchange
                    Commission on January 16, 2004)
 4.9
                Form
                    of Warrants to purchase an aggregate of 272,784 shares of common
                    stock
                    issued to HCFP Brenner Securities and RG Securities, LLC (incorporated
                    by
                    reference to Exhibit 4.9 to the Registrant’s Annual Report on Form 10-KSB
                    for the year ended December 31, 2003 filed with the Securities
                    and
                    Exchange Commission on April 15,
                    2004)
 4.10
                Warrant
                    issued to Alexandra Global Master Fund Ltd. dated January 8,
                    2004
                    (incorporated by reference to Exhibit 4.5 to the Registrant’s Current
                    Report on Form 8-K (Date of Report: December 12, 2003) filed
                    with the
                    Securities and Exchange Commission on January 16,
                    2004)
 4.11
                Form
                    of Registration Rights Agreement relating to 834,465 shares of
                    common
                    stock and 83,444 shares of common stock underlying warrants issued
                    by the
                    registrant in October 2002 (incorporated by reference to Exhibit
                    4.11 to
                    the Registrant’s Annual Report on Form 10-KSB for the year ended December
                    31, 2003 filed with the Securities and Exchange Commission on
                    April 15,
                    2004)
 4.12
                Form
                    of Registration Rights Agreement relating to shares of common
                    stock
                    underlying 8% senior convertible notes due 2006 and related warrants
                    issued by the registrant in offering completed in September 2003
                    (incorporated by reference to Exhibit 4.12 to the Registrant’s Annual
                    Report on Form 10-KSB for the year ended December 31, 2003 filed
                    with the
                    Securities and Exchange Commission on April 15,
                    2004)
 4.13
                Registration
                    Rights Agreement, dated February 4, 2004, among Dwango North
                    America Corp.
                    and the former shareholders of Over-the-Air Wireless, Inc. (incorporated
                    by reference to Exhibit 10.2 to the Registrant’s Current Report Form 8-K
                    (Date of Report: February 4, 2004) filed with the Securities
                    and Exchange
                    Commission on February 19, 2004)
 4.14
                9%
                    Senior Convertible Note due 2007 issued to Alexandra Global Master
                    Fund
                    Ltd. dated March 19, 2004 (incorporated by reference to Exhibit
                    4.2 to the
                    Registrant’s Current Report on Form 8-K (Date of Report: March 19, 2004)
                    filed with the Securities and Exchange Commission on March 29,
                    2004)
 4.15
                Warrant
                    issued to Alexandra Global Master Fund Ltd., dated March 19,
                    2004
                    (incorporated by reference to Exhibit 4.3 to the Registrant’s Current
                    Report on Form 8-K (Date of Report: March 19, 2004) filed with
                    the
                    Securities and Exchange Commission on March 29,
                    2004)
 4.16
                Subscription
                    Agreement, dated June 14, 2004, between Dwango North America
                    Corp. and
                    Alexandra Global Master Fund Ltd. (incorporated by reference
                    to Exhibit
                    4.1 to the Registrant’s Current Report on Form 8-K (Date of Report: June
                    14, 2004) filed with the Securities and Exchange Commission on
                    June 21,
                    2004)
 4.17
                Warrant
                    issued to Alexandra Global Master Fund Ltd. dated June 14, 2004
                    (incorporated by reference to Exhibit 4.2 to the Registrant’s Current
                    Report on Form 8-K (Date of Report: June 14, 2004) filed with
                    the
                    Securities and Exchange Commission on June 21,
                    2004)
 4.18
                Subscription
                    Agreement, dated July 2, 2004, between Dwango North America Corp.
                    and
                    Alexandra Global Master Fund Ltd. (incorporated by reference
                    to Exhibit
                    4.1 to the Registrant’s Current Report on Form 8-K (Date of Report: July
                    2, 2004) filed with the Securities and Exchange Commission on
                    July 8,
                    2004)
 4.19
                Warrant
                    issued to Alexandra Global Master Fund Ltd. dated July 2, 2004
                    (incorporated by reference to Exhibit 4.2 to the Registrant’s Current
                    Report on Form 8-K (Date of Report: July 2, 2004) filed with
                    the
                    Securities and Exchange Commission on July 8,
                    2004)
 4.20
                Subscription
                    Agreement, dated August 2, 2004, between Dwango North America
                    Corp. and
                    Alexandra Global Master Fund Ltd. (incorporated by reference
                    to Exhibit
                    4.1 to the Registrant’s Current Report on Form 8-K (Date of Report: August
                    2, 2004) filed with the Securities and Exchange Commission on
                    August 5,
                    2004)
 4.21
                Warrant
                    issued to Alexandra Global Master Fund Ltd. dated August 2, 2004
                    (incorporated by reference to Exhibit 4.2 to the Registrant’s Current
                    Report on Form 8-K (Date of Report: August 2, 2004) filed with
                    the
                    Securities and Exchange Commission on August 5,
                    2004)
   37
  4.22
                  Subscription
                      Agreement, dated August 26, 2004, between Dwango North America
                      Corp. and
                      the investors named therein (incorporated by reference to Exhibit
                      4.1 to
                      the Registrant’s Current Report on Form 8-K (Date of Report: August 25,
                      2004) filed with the Securities and Exchange Commission on
                      August 31,
                      2004)4.23
                  Form
                      of Warrant issued to investors in August 2004 Series B financing
                      (incorporated by reference to Exhibit 4.2 to the Registrant’s Current
                      Report on Form 8-K (Date of Report: August 25, 2004) filed
                      with the
                      Securities and Exchange Commission on August 31, 2004)4.24
                  Subscription
                      Agreement, dated January 12, 2005, between Dwango North America
                      Corp. and
                      Alexandra Global Master Fund Ltd. (incorporated by reference
                      to Exhibit
                      4.1 to the Registrant’s Current Report on Form 8-K (Date of Report:
                      January 12, 2005) filed with the Securities and Exchange Commission
                      on
                      January 18, 2005)4.25
                  Warrant
                      issued to Alexandra Global Master Fund Ltd. dated January 12,
                      2005
                      (incorporated by reference to Exhibit 4.2 to the Registrant’s Current
                      Report on Form 8-K (Date of Report: January 12, 2005) filed
                      with the
                      Securities and Exchange Commission on January 18, 2005)4.26
                  Subscription
                      Agreement, dated February 1, 2005, between Dwango North America
                      Corp. and
                      the investors named therein (incorporated by reference to Exhibit
                      4.1 to
                      the Registrant’s Current Report on Form 8-K (Date of Report: February 1,
                      2005) filed with the Securities and Exchange Commission on
                      February 3,
                      2005)4.27
                  Form
                      of Warrant to purchase an aggregate of 3,365,035 shares of
                      common stock
                      (incorporated by reference to Exhibit 4.2 to the Registrant’s Current
                      Report on Form 8-K (Date of Report: February 1, 2005) filed
                      with the
                      Securities and Exchange Commission on February 3, 2005)10.1
                  2003
                      Equity Incentive Plan (incorporated by reference to Exhibit
                      10.1 to the
                      Registrant’s Annual Report on Form 10-KSB for the year ended December
                      31,
                      2003 filed with the Securities and Exchange Commission on April
                      15,
                      2004)10.2
                  Office
                      Lease Agreement, dated November 2002, between San Felipe Plaza,
                      Ltd. and
                      Dwango North America, Inc., as amended (incorporated by reference
                      to
                      Exhibit 10.3 to the Registrant’s Annual Report on Form 10-KSB for the year
                      ended December 31, 2003 filed with the Securities and Exchange
                      Commission
                      on April 15, 2004)10.3
                  Note
                      Purchase Agreement, dated January 8, 2004, between Dwango North
                      America
                      Corp. and Alexandra Global Master Fund Ltd. (incorporated by
                      reference to
                      Exhibit 4.3 to the Registrant’s Current Report on Form 8-K (Date of
                      Report: December 12, 2003) filed with the Securities and Exchange
                      Commission on January 16, 2004)10.4
                  Note
                      Purchase Agreement, dated March 19, 2004, between Dwango North
                      America
                      Corp. and Alexandra Global Master Fund Ltd. (incorporated by
                      reference to
                      Exhibit 4.1 to the Registrant’s Current Report on Form 8-K (Date of
                      Report: March 19, 2004) filed with the Securities and Exchange
                      Commission
                      on March 29, 2004)10.5
                  Software
                      License Agreement between ALLTEL Communications Inc. and Dwango
                      North
                      America Inc. executed December 19, 2003 (incorporated by reference
                      to
                      Exhibit 10.11 to the Registrant’s Annual Report on Form 10-KSB for the
                      year ended December 31, 2003 filed with the Securities and
                      Exchange
                      Commission on April 15, 2004)10.6
                  Direct
                      Bill Services Agreement between Cingular Wireless LLC and Dwango
                      North
                      America, Inc. executed on January 9, 2004 (incorporated by
                      reference to
                      Exhibit 10.12 to the Registrant’s Annual Report on Form 10-KSB for the
                      year ended December 31, 2003 filed with the Securities and
                      Exchange
                      Commission on April 15, 2004)10.7
                  Brew
                      Pricing Terms and Carrier Agreement between Qualcomm Incorporated
                      and
                      Dwango North America, Inc. Submitted via click through on May
                      21, 2002
                      (incorporated by reference to Exhibit 10.17 to the Registrant’s Annual
                      Report on Form 10-KSB for the year ended December 31, 2003
                      filed with the
                      Securities and Exchange Commission on April 15, 2004)10.8
                  Amendment
                      No. 1 to Brew Developer Agreement between Qualcomm Incorporated
                      and Dwango
                      North America, Inc. effective as of May 17, 2002 (incorporated
                      by
                      reference to Exhibit 10.18 to the Registrant’s Annual Report on Form
                      10-KSB for the year ended December 31, 2003 filed with the
                      Securities and
                      Exchange Commission on April 15, 2004)10.9
                  Letter
                      agreement, dated January 8, 2004 with Alexandra Global Master
                      Fund Ltd.
                      (incorporated by reference to Exhibit 10.21 to the Registrant’s Annual
                      Report on Form 10-KSB for the year ended December 31, 2003
                      filed with the
                      Securities and Exchange Commission on April 15,
                      2004)
   38
  10.10
                  Letter
                      agreement, dated March 19, 2004 with Alexandra Global Master
                      Fund Ltd.
                      (incorporated by reference to Exhibit 10.26 to the Registrant’s Annual
                      Report on Form 10-KSB for the year ended December 31, 2003
                      filed with the
                      Securities and Exchange Commission on April 15, 2004)10.11
                      *
                  Licensing
                      Agreement effective as of March 30, 2004 by and between Dwango
                      North
                      America Corp., RealNetworks, Inc. and RollingStone LLC. (incorporated
                      by
                      reference to Amendment No. 1 to the Registrant’s Registration Statement on
                      Form SB-2 (SEC File No.: 333-112371) that was declared effective
                      by the
                      Securities and Exchange Commission on August 12, 2004)10.12
                  Licensing
                      Agreement, effective as of January 14, 2004, between Dwango
                      North America
                      Corp. and ESPN Enterprises, Inc. (incorporated by reference
                      to Amendment
                      No. 1 to the Registrant’s Registration Statement on Form SB-2 (SEC File
                      No.: 333-112371) that was declared effective by the Securities
                      and
                      Exchange Commission on August 12, 2004)10.13
                      *
                  License
                      Agreement for access to wireless network, entered into on October
                      22,
                      2004, between Dwango North America Corp. and Nextel Operations
                      Inc.
                      (incorporated by reference to Exhibit 10.36 to the Registrant’s Quarterly
                      Report on Form 10-QSB for the quarter ended September 30, 2004
                      filed with
                      the Securities and Exchange Commission November 19,
                      2004)10.14
                      *
                  Wireless
                      Distribution Agreement between Dwango North America Corp. and
                      Playboy.com,
                      Inc. entered into on November 18, 2004.10.15
                      *
                  License
                      Agreement, between Dwango North America Corp. and Napster,
                      LLC entered
                      into on November 29, 2004.10.16
                  Sub-lease
                      contract between Dwango North America Corp. and Microsoft Corporation
                      entered into on December 14, 2004.10.17
                  Content
                      Provider Standard Service Agreement between Dwango North America
                      Corp. and
                      Wmode Inc. with an effective date of March 10, 2005.10.18
                  Employment
                      Agreement, dated March 1, 2005, between Dwango North America
                      Corp. and
                      Rick J. Hennessey (incorporated by reference to Exhibit 10.1
                      to the
                      Registrant’s Current Report on Form 8-K (Date of Report: March 1, 2005)
                      filed with the Securities and Exchange Commission on March
                      7,
                      2005)10.19
                  Employment
                      Agreement, dated March 1, 2005, between Dwango North America
                      Corp. and
                      Alexander U. Conrad (incorporated by reference to Exhibit 10.2
                      to the
                      Registrant’s Current Report on Form 8-K (Date of Report: March 1, 2005)
                      filed with the Securities and Exchange Commission on March
                      7,
                      2005)10.20
                  Director
                      Agreement, dated September 12, 2005, between Dwango North America
                      Corp.
                      and L. Derrick Ashcroft (incorporated by reference to Exhibit
                      10.1 to the
                      Registrant’s Current Report on Form 8-K (Date of Report: September 12,
                      2005) filed with the Securities and Exchange Commission on
                      September 16,
                      2005)10.21
                  Amendment
                      to 2003 Equity Incentive Plan (incorporated by reference to
                      Exhibit 10.1
                      to the Registrant’s Annual Report on Form 10-KSB for the year ended
                      December 31, 2003 filed with the Securities and Exchange Commission
                      on
                      June 22, 2005)10.22
                  Separation
                      agreement, dated August 15, 2005, between Dwango North America
                      Corp and
                      Rick J. Hennessey (incorporated by reference to Exhibit 10.1
                      to the
                      Registrant’s Current Report on Form 8-K (Date of Report: August 15, 2005)
                      filed with the Securities and Exchange Commission on August
                      15,
                      2005)14
                  Code
                      of Ethics (incorporated by reference to Exhibit 14 to the Registrant’s
                      Annual Report on Form 10-KSB for the year ended December 31,
                      2003 filed
                      with the Securities and Exchange Commission on April 15,
                      2004)21
                  Subsidiaries:OTA
                      Acquisition Corp. is a Washington corporation23
                  Consent
                      of Eisner LLP31.1
                  Certification
                      of Chief Executive Officer31.2
                  Certification
                      of Chief Financial Officer32
                  Certification
                      pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section
                      906 of
                      the Sarbanes-Oxley Act of 2002
  *
          Requested Confidential Treatment
   39
 **Item
          13B. Reports on Form 8-K**
  On
          October 13, 2005, we filed a Current Report on Form 8-K to report, as an
          Item
          5.02 disclosure, the resignation of Victor A. Cohn as chairman of the Company’s
          Board of Directors.
  On
          October 28, 2005, we filed a Current Report on Form 8-K to report, as an
          Item
          1.02 disclosure, the termination of a trademark and technology licensing
          agreement with Dwango Japan.
  On
          November 15, 2005, we filed a Current Report on Form 8-K to report, as
          an Item
          2.02 disclosure, the financial results for the 3 rd quarter
          ended September 30, 2005.
  On
          November 22, 2005, we filed a Current Report on Form 8-K to report, as
          an Item
          5.02 disclosure, the appointment as Rex S. Jackson as a director of our
          company.
  On
          December 12, 2005, we filed a Current Report on Form 8-K to report, as
          an Item
          5.02 and 8.01 disclosure, the resignation of J. Paul Quinn as Chief Financial
          Officer, Secretary and Treasurer of our company, the promotion of Michael
          Dunn
          to the position of Chief Financial Officer and Treasurer of our company
          and the
          execution of a change of our name from Dwango North America Corp. to Dijji
          Corp.
  On
          December 20, 2005, we filed a Current Report on Form 8-K to report, as
          an Item
          8.01 disclosure, the announcement of a reduction in the number of employees
          working for us.
  **Item
          14. Principal Accounting Fees and Services** **
  Eisner
          LLP served as our registered public accounting firm for the years ended
          December
          31, 2005 and December 31, 2004. During the two fiscal years ended December
          31,
          2005, the aggregate fees for accounting services billed to us were as
          follows:
  **Audit
          Fees**
  The
          aggregated fees billed by Eisner LLP for the year ended December 31, 2005
          for
          professional services rendered for it’s audit of our annual financial statements
          and review of our unaudited financial statements included in our Form 10-QSB
          for
          2005 were $96,000. The aggregated fees billed by Eisner LLP for the year
          ended
          December 31, 2004 for professional services rendered for it’s audit of our
          annual financial statements and review of our unaudited financial statements
          included in our Form 10-QSB for 2004 were $141,000.
  **Audit-Related
          Fees**
  Eisner
          LLP did not provide any assurance and related services in 2005 or 2004
          that are
          reasonably related to the performance of the audit or review of our financial
          statements that are not reported under the preceding paragraph.
  **Tax
          Fees**
  The
          aggregate fees billed by Eisner LLP in 2005 for professional services rendered
          for tax compliance, tax advice or tax planning was $10,000. The aggregate
          fees
          billed by Eisner LLP in 2005 for professional services rendered for tax
          compliance, tax advice or tax planning was $9,000.
  **All
          Other Fees**
  The
          aggregate fees billed by Eisner LLP in 2005 for professional services rendered
          other than those described above consisting primarily of services relating
          to
          the review of our registration statements, review of documentation pursuant
          to
          Section 404 of the Sarbanes-Oxley act and issuance of related consents
          were
          $50,000. The aggregate fees billed by Eisner LLP in 2004 for professional
          services rendered other than those described above consisting primarily
          of
          services relating to the review of our registration statements and issuance
          of
          related consents were $178,000.
  40
 **Pre-Approval
          Policies**
  Our
          Audit
          Committee has not adopted any blanket pre-approval policies. Instead, the
          Committee will specifically pre-approve the provision by Eisner LLP of
          all audit
          or non-audit services.
  Our
          Audit
          Committee approved all of the services provided by Eisner LLP and described
          in
          the preceding paragraphs.
  
  41
  **INDEX
          TO FINANCIAL STATEMENTS** **
  **Page**Report
                    of Independent Registered Public Accounting Firm
                F-2Consolidated
                    Balance Sheets as of December 31, 2005 & 2004
                F-3Consolidated
                    Statements of Operations for the Years Ended December 31, 2005
&
                    2004
                F-4Consolidated
                    Statements of Capital Deficit for the Years Ended December 31,
                    2005 &
                    2004
                F-5Consolidated
                    Statements of Cash Flows for the Years Ended December 31, 2005
&
                    2004
                F-6Notes
                    to Consolidated Financial Statements
                F-7
 
 F-1
 **REPORT
          OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM**
 
 The
          Board
          of Directors and Stockholders
 Dijji
          Corp.
 
 
 We
          have
          audited the accompanying consolidated balance sheets of Dijji Corp. (formerly
          known as Dwango North America Corp.) and subsidiaries as of December 31,
          2005 and 2004, and the related consolidated statements of operations, capital
          deficit and cash flows for the years ended December 31, 2005 and 2004.
          These financial statements are the responsibility of the Company's management.
          Our responsibility is to express an opinion on these financial statements
          based
          on our audits.
 
 We
          conducted our audits in accordance with the standards of the Public Company
          Accounting Oversight Board (United States). Those standards require that
          we plan
          and perform the audits to obtain reasonable assurance about whether the
          financial statements are free of material misstatement. An audit includes
          examining, on a test basis, evidence supporting the amounts and disclosures
          in
          the financial statements. An audit also includes assessing the accounting
          principles used and significant estimates made by management, as well as
          evaluating the overall financial statement presentation. We believe that
          our
          audits provide a reasonable basis for our opinion.
 
 In
          our
          opinion, the financial statements referred to above present fairly, in
          all
          material respects, the consolidated financial position of Dijji Corp. and
          subsidiaries as of December 31, 2005 and 2004, and the consolidated results
          of their operations and their consolidated cash flows for the years ended
          December 31, 2005 and 2004, in conformity with accounting principles
          generally accepted in the United States of America.
 
 As
          discussed more fully in Note A(1), the consolidated financial statements
          as of
          and for the year ended December 31, 2004 have been restated to reflect
          certain derivative instruments as liabilities measured at fair value and
          to
          recognize changes in their fair value in net loss.
 
 The
          accompanying financial statements have been prepared assuming that the
          Company
          will continue as a going concern. As discussed in Note 1 to the financial
          statements, the Company has experienced continuing losses from operations
          and
          had cash outflows from operating activities since inception through
          December 31, 2005 and has a capital deficit. These conditions raise
          substantial doubt about the Company's ability to continue as a going concern.
          Management's plans in regard to these matters is also described in Note
          1. The
          financial statements do not include any adjustments that might result from
          the
          outcome of this uncertainty.
 
 
 Eisner
          LLP
 
 
 New
          York,
          New York
 April
          24,
          2006
   F-2
  **Dijji
          Corp. and Subsidiaries**
 **Consolidated
              Balance Sheets**
 **(In
              Thousands Except Share Data)**
  **December
                        31,**
                    
                    **December
                        31,****2005**
                    
                    **2004****(Restated
                        - Note A)****ASSETS**Current
                        assets:Cash
                    
                    $
                    1,346
                    
                    $
                    82Short-term
                        investments
                    
                    
                    2,988Accounts
                        receivable
                    
                    
                    599
                    
                    
                    803Prepaid
                        royalties
                    
                    
                    967
                    
                    
                    793Prepaid
                        expenses
                    
                    
                    366
                    
                    
                    286Other
                        current assets
                    
                    
                    55
                    
                    
                    83Total
                        current assets
                    
                    
                    6,321
                    
                    
                    2,047Fixed
                        assets, net
                    
                    
                    548
                    
                    
                    251Deferred
                        financing costs
                    
                    
                    369
                    
                    
                    782Intangibles,
                        net
                    
                    
                    -
                    
                    
                    49Restricted
                        cash
                    
                    
                    125Prepaid
                        license
                    
                    
                    85
                    
                    
                    288$
                    7,448
                    
                    $
                    3,417**LIABILITIES
                        AND CAPITAL DEFICIT**Current
                        liabilities:Accounts
                        payable and accrued expenses
                    
                    $
                    1,890
                    
                    $
                    1,335Current
                        portion of senior convertible notes payable, net of debt
                        discount of $201
                        as of December 31, 2005
                    
                    
                    1,413Accrued
                        interest - senior convertible notes
                    
                    
                    320Current
                        portion of lease obligation
                    
                    
                    42
                    
                    
                    45Total
                        current liabilities
                    
                    
                    3,665
                    
                    
                    1,380Long-term
                        liabilities:Long
                        term portion of senior convertible notes payable, net of
                        debt discount of
                        $493 as of December 31, 2005 and of $1,547 as of December
                        31,
                        2004
                    
                    
                    3,507
                    
                    
                    4,368Accrued
                        interest - senior convertible notes
                    
                    
                    390
                    
                    
                    264Warrant
                        derivative liability
                    
                    
                    59
                    
                    
                    11,604Long
                        term portion of lease obligation
                    
                    
                    37
                    
                    
                    79Total
                        liabilities
                    
                    
                    7,658
                    
                    
                    17,695Preferred
                        stock $.001 par value, authorized 10,000,000 sharesRedeemable
                        Series A Convertible Preferred stock, $.001 par value; issued
                        and
                        outstanding 1,250 shares; including $220 of accrued dividends
                        and net of
                        debt discount and deferred financing of $385 as of December
                        31, 2005 and
                        $71 of accrued dividends and net of debt discount and deferred
                        financing
                        of $638 as of December 31, 2004.
                    
                    
                    1,085
                    
                    
                    683Redeemable
                        Series B Convertible Preferred stock, $.001 par value; issued
                        and
                        outstanding 3,000 shares; including $484 of accrued dividends
                        and net of
                        debt discount and deferred financing of $1,136 as ofDecember
                        31, 2005 and
                        $124 of accrued dividends and net of debt discount and deferred
                        financing
                        of $1,819 as of December 31, 2004.
                    
                    
                    2,348
                    
                    
                    1,305Redeemable
                        Series D Convertible Preferred stock, $.001 par value; issued
                        and
                        outstanding 14,703 shares; including $944 of accrued dividends
                        and net of
                        debt discount and deferred financing of $3,917.
                    
                    
                    11,730
                    
                    
                    -Capital
                        deficit:Common
                        stock, $.001 par value; 100,000,000 shares authorized; shares
                        issued and
                        outstanding: 9,575,000 at December 31, 2005 and 8,251,000
                        at December 31,
                        2004
                    
                    
                    10
                    
                    
                    8Additional
                        paid-in capital
                    
                    
                    3,815
                    
                    
                    5,109Accumulated
                        deficit
                    
                    
                    (19,198
                    )
                    
                    (21,383
                    )Total
                        capital deficit
                    
                    
                    (15,373
                    )
                    
                    (16,266
                    )$
                    7,448
                    
                    $
                    3,417
 See
              notes
              to Consolidated Financial Statements
   F-3
  **Dijji
            Corp. and Subsidiaries**
 Consolidated
            Statements of
            Operations
 (In Thousands, Except Per Share
          Data)    **Year
                      Ended****December
                      31,****2005**
                  
                  **2004****(Restated - Note A)**Revenue
                  
                  $
                  3,499
                  
                  $
                  1,645Cost of revenues
                  
                  
                  2,848
                  
                  
                  986Gross profit
                  
                  
                  651
                  
                  
                  659Expenses:Sales and
                      marketing
                  
                  
                  2,592
                  
                  
                  1,161Research and
                      development
                  
                  
                  4,884
                  
                  
                  2,587General and
                      administrative
                  
                  
                  4,542
                  
                  
                  3,700Operating loss
                  
                  
                  (11,367
                  )
                  
                  (6,789
                  )Other income / (expense):Interest expense,
                      includingamortization
                      of debt issuance cost,net
                      of interest income
                  
                  
                  (1,531
                  )
                  
                  (1,967
                  )Change in fair value
                      of warrant
                      derivative
                  
                  
                  15,083
                  
                  
                  (6,383
                  )Loss on impairment
                      of intangible
                      asset
                  
                  
                  
                  
                  
                  (306
                  )**Net income / (loss)**
                  
                  
                  2,185
                  
                  
                  (15,445
                  )Accretion and deemed dividends onredeemable
                      preferred stock
                  
                  
                  (4,706
                  )
                  
                  (544
                  )**Net loss attributable to****common
                      stockholders**
                  
                  $
                  (2,521
                  )
                  $
                  (15,989
                  )**Common share data:**Basic and diluted
                      loss per share
                  
                  $
                  (0.29
                  )
                  $
                  (2.27
                  )Weighted average
                      number ofbasic
                      and diluted commonshares
                      outstanding
                  
                  
                  8,719
                  
                  
                  7,058
 See
            notes
            to Consolidated Financial Statements
  F-4
 **Dijji
              Corp. and Subsidiaries**
 **Consolidated
                Statements of Capital Deficit**
 **(In
              Thousands)**
  **Common
                        Stock****$.001
                        Par Value**
                    
                    **Additional**
                    
                    
                    
                    **Total****Number
                        of**
                    
                    
                    
                    **Paid-in**
                    
                    **Accumulated**
                    
                    **Capital****Shares**
                    
                    **Amount**
                    
                    **Capital**
                    
                    **Deficit**
                    
                    **Deficit****Balance
                        at January 1, 2004, as restated (Note A)**
                    
                    
                    5,873
                    
                    $
                    5
                    
                    $
                    2,485
                    
                    $
                    (5,938
                    )
                    $
                    (3,448
                    )Conversion
                        of cash advance from related party
                    
                    
                    369
                    
                    
                    
                    
                    
                    442
                    
                    
                    
                    
                    
                    442Common
                        stock issued in connection with purchase ofsoftware
                        and covenants not to compete
                    
                    
                    681
                    
                    
                    1
                    
                    
                    529
                    
                    
                    
                    
                    
                    530Stock
                        issued in connection with employment agreements
                    
                    
                    2
                    
                    
                    
                    
                    
                    3
                    
                    
                    
                    
                    
                    3Warrants
                        issued in connection with brand licensingagreement
                    
                    
                    
                    
                    
                    
                    
                    
                    440
                    
                    
                    
                    
                    
                    440Warrants
                        issued for services
                    
                    
                    
                    
                    
                    
                    
                    
                    400
                    
                    
                    
                    
                    
                    400Common
                        stock issued for services
                    
                    
                    50
                    
                    
                    
                    
                    
                    68
                    
                    
                    
                    
                    
                    68Common
                        stock issued in payment of interest onsenior
                        convertible notes
                    
                    
                    226
                    
                    
                    
                    
                    
                    288
                    
                    
                    
                    
                    
                    288Common
                        stock issued upon conversion of principaland
                        accrued interest on senior convertible notes
                    
                    
                    679
                    
                    
                    1
                    
                    
                    646
                    
                    
                    
                    
                    
                    647Common
                        stock issued upon exercise of warrants
                    
                    
                    371
                    
                    
                    1
                    
                    
                    352
                    
                    
                    
                    
                    
                    353Accretion
                        and deemed dividend on preferred stock
                    
                    
                    
                    
                    
                    
                    
                    
                    (544
                    )
                    
                    
                    
                    
                    (544
                    )Net
                        loss for the year endedDecember
                        31, 2004
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    (15,445
                    )
                    
                    (15,445
                    )**Balance
                        at December 31, 2004, as restated (Note A)**
                    
                    
                    8,251
                    
                    
                    8
                    
                    
                    5,109
                    
                    
                    (21,383
                    )
                    
                    (16,266
                    )Beneficial
                        conversion feature in connection withissuance
                        of Series D Preferred Stock
                    
                    
                    
                    
                    
                    
                    
                    
                    1,795
                    
                    
                    
                    
                    
                    1,795Common
                        stock issued upon conversion of principaland
                        accrued interest on senior convertible notes
                    
                    
                    362
                    
                    
                    1
                    
                    
                    344
                    
                    
                    
                    
                    
                    345Common
                        stock issued upon conversion of principaland
                        deemed dividend on Series D Preferred Stock
                    
                    
                    759
                    
                    
                    1
                    
                    
                    1,061
                    
                    
                    
                    
                    
                    1,062Common
                        stock issued upon exercise of warrants
                    
                    
                    130
                    
                    
                    
                    
                    
                    123
                    
                    
                    
                    
                    
                    123Common
                        stock issued upon exercise of stock options
                    
                    
                    73
                    
                    
                    
                    
                    
                    89
                    
                    
                    
                    
                    
                    89Accretion
                        and deemed dividend on preferred stock
                    
                    
                    
                    
                    
                    
                    
                    
                    (4,706
                    )
                    
                    
                    
                    
                    (4,706
                    )Net
                        income for the year ended December 31, 2005
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    2,185
                    
                    
                    2,185**Balance
                        at December 31, 2005**
                    
                    
                    **9,575**
                    
                    **$**
                    **10**
                    
                    **$**
                    **3,815**
                    
                    **$**
                    **(19,198**
                    **)**
                    **$**
                    **(15,373**
                    **)**
 See
              notes
              to Consolidated Financial Statements
  F-5
  **Dijji
                          Corp. and Subsidiaries****Consolidated
                          Statements of Cash Flows****(In
                          Thousands)**
  **Year
                          Ended****December
                          31,****2005**
                      
                      **2004****(Restated
                          - Note A)****Cash
                          flows from operating activities:**Net
                          income / (loss)
                      
                      $
                      2,185
                      
                      $
                      (15,445
                      )Adjustments
                          to reconcile net income / (loss) tonet
                          cash used in operating activities:Depreciation
                          expense
                      
                      
                      199
                      
                      
                      106Write
                          off of fixed assets (net)
                      
                      
                      1
                      
                      
                      64Common
                          stock issued as compensation
                      
                      
                      
                      
                      
                      3Amortization
                          of debt discount
                      
                      
                      853
                      
                      
                      1,043Amortization
                          of intangible assets
                      
                      
                      49
                      
                      
                      41Write
                          off of intangible asset
                      
                      
                      
                      
                      
                      440Amortization
                          of prepaid licenses
                      
                      
                      203
                      
                      
                      152Deferred
                          financing cost
                      
                      
                      415
                      
                      
                      392Changes
                          in fair value of warrant derivative
                      
                      
                      (15,082
                      )
                      
                      6,383Changes
                          in:Accounts
                          receivable
                      
                      
                      204
                      
                      
                      (794
                      )Prepaid
                          expenses and royalties
                      
                      
                      (253
                      )
                      
                      (1,012
                      )Other
                          assets
                      
                      
                      28
                      
                      
                      (63
                      )Accounts
                          payable and accrued expenses
                      
                      
                      555
                      
                      
                      253Accrued
                          interest
                      
                      
                      488
                      
                      
                      523Net
                          cash used inoperating
                          activities
                      
                      
                      (10,155
                      )
                      
                      (7,914
                      )**Cash
                          flows from investing activities:**Deferred
                          acquisition cost
                      
                      
                      
                      
                      
                      39Restricted
                          cash
                      
                      
                      (125
                      )Purchase
                          of short-term investments
                      
                      
                      (6,948
                      )Sale
                          of short-term investments
                      
                      
                      3,960Leasehold
                          improvements
                      
                      
                      (57
                      )
                      
                      (8
                      )Purchase
                          of fixed assets
                      
                      
                      (440
                      )
                      
                      (90
                      )Net
                          cash used ininvesting
                          activities
                      
                      
                      (3,610
                      )
                      
                      (59
                      )**Cash
                          flows from financing activities:**Cash
                          overdraft
                      
                      
                      
                      
                      
                      (2
                      )Proceeds
                          from exercise of stock options
                      
                      
                      89Repayment
                          of capital lease
                      
                      
                      (44
                      )
                      
                      (25
                      )Proceeds
                          from issuance of notespayable
                          and warrants
                      
                      
                      
                      
                      
                      3,658Proceeds
                          from exercise of warrants
                      
                      
                      123
                      
                      
                      353Proceeds
                          from issuance of Series Apreferred
                          stock and warrants
                      
                      
                      
                      
                      
                      1,114Proceeds
                          from issuance of Series Bpreferred
                          stock and warrants
                      
                      
                      
                      
                      
                      2,957Proceeds
                          from issuance of Series C and Series Dpreferred
                          stock and warrants
                      
                      
                      14,861Net
                          cash providedby
                          financing activities
                      
                      
                      15,029
                      
                      
                      8,055**Net
                          increase in cash and equivalents**
                      
                      
                      1,264
                      
                      
                      82Cash
                          and equivalents at beginning of period
                      
                      
                      82
                      
                      
                      -**Cash
                          at end of period**
                      
                      $
                      1,346
                      
                      $
                      82**Supplementary
                          disclosure of cash****flow
                          information:**Interest
                          paid
                      
                      $
                      223
                      
                      $
                      9**Noncash
                          transactions:**Conversion
                          of debt to common stock
                      
                      
                      
                      
                      $
                      442Common
                          stock issued in connection with fees forinvestor
                          relations services
                      
                      
                      
                      
                      
                      68Warrants
                          issued in connection withbrand
                          licensing agreement
                      
                      
                      
                      
                      
                      440Warrants
                          issued in connection with services
                      
                      
                      
                      
                      
                      400Common
                          stock issued for purchase of software
                      
                      
                      
                      
                      
                      440Common
                          stock issued for covenant not to compete
                      
                      
                      
                      
                      
                      90Common
                          stock issued upon conversion of intereston
                          senior convertible notes
                      
                      $
                      43
                      
                      
                      288Common
                          Stock issued upon conversion ofprincipal
                          on senior convertible notes
                      
                      
                      302
                      
                      
                      646Fixed
                          assets acquired through capital lease
                      
                      
                      
                      
                      
                      134Beneficial
                          conversion charge in connection withissuance
                          of Series D preferred stock
                      
                      
                      1,795Common
                          Stock issued upon conversion ofSeries
                          D preferred stock and deemed dividend
                      
                      
                      1,062Accretion
                          of Series A preferred stock
                      
                      
                      254
                      
                      
                      122Accretion
                          of Series B preferred stock
                      
                      
                      682
                      
                      
                      227Accretion
                          of Series C preferred stock
                      
                      
                      196Accretion
                          of Series D preferred stock
                      
                      
                      2,055Deemed
                          dividend Series A preferred stock
                      
                      
                      150
                      
                      
                      71Deemed
                          dividend Series B preferred stock
                      
                      
                      360
                      
                      
                      124Deemed
                          dividend Series D preferred stock
                      
                      
                      1,005
 See notes to Consolidated Financial
            Statements
 F-6
 **Notes
          to the Financial Statements December 31, 2005 and 2004**
  **Note
          A - Summary of Significant Accounting Policies**
  **[1]**  **Description
          of business and basis of presentation:**
  Dijji
          Corp. provides wireless content and application publishing channels through
          North American wireless carriers, developing and publishing content and
          applications for wireless devices, and developing and providing wireless
          network
          technology for both content and applications developed internally and for
          partner content developers. Dijji Corp. is a media company whose products
          include ringtones, games, images, video and messaging services for mobile
          devices.
  The
          accompanying consolidated financial statements include the accounts of
          Dijji
          Corp. (“Corp.”) and its wholly owned subsidiaries OTA Acquisition Corp (“OTA”)
          and Dijji Corp. (Texas) (the “Company” collectively). All significant
          inter-company transactions and balances have been eliminated in
          consolidation.
  The
          accompanying financial statements have been prepared assuming that the
          Company
          will continue as a going concern. As reflected in the accompanying financial
          statements, the Company has experienced continuing losses from operations
          and
          had cash outflows from operating activities since inception through December
          31,
          2005 and has a capital deficit. These factors raise substantial doubt about
          the
          Company’s ability to continue as a going concern. The Company has entered into
          a
          non-binding letter of intent to be acquired in a reverse acquisition. If
          this
          transaction is not consummated, the Company, without additional financing,
          will
          not have the cash resources available to continue operations. This will
          cause
          management to consider proceeding with an orderly liquidation and the winding
          up
          of the Company. The financial statements do not include any adjustments
          relating
          to the recoverability or classification of recorded asset amounts or the
          amount
          and classification of liabilities that might be necessary as a result of
          this
          going-concern uncertainty.
 
 **Restatement
          of Consolidated Financial Statements**
 
 During
          the course of preparing the Company's consolidated financial statements
          for
          2005, the Company determined that it had not properly accounted for embedded
          derivatives in accordance with EITF 00-19 “Accounting for Derivative Financial
          Instruments Indexed to, and Potentially Settled in, a Company’s Own Stock”. The
          Company had previously accounted for warrants to purchase stock as equity.
          The
          Company is not sure that it has adequate authorized shares of common stock
          for
          the conversion or exercise of all outstanding instruments (due to anti-dilution
          conversion features), EITF No. 00-19 requires the classification of these
          instruments as liabilities. Therefore, the Company is required to record
          the
          fair value of the warrants as liabilities on its consolidated balance sheets.
          Changes in the fair values of these instruments will result in adjustments
          to
          the amount of the recorded liabilities and the corresponding gain or loss
          will
          be recorded in the consolidated statements of operations. At the date of
          the
          conversion of each respective instrument or portion thereof (or exercise
          of the
          warrants or portion thereof, as the case may be), the corresponding liability
          will be reclassified as equity. This calculation error resulted in a cumulative
          understatement of approximately $5.5 million expense, from September 2003
          through December 31, 2004. The cumulative impact on the Company's balance
          sheet
          as of December 31, 2004, was an understatement of long-term liabilities
          related
          to the fair value of embedded derivatives of $14.1 million, an understatement
          of
          preferred convertible stock in the mezzanine of $0.8 million and an
          understatement of capital deficit of $14.9 million. The changes described
          herein
          are all non-cash and has no effect on the previously accepted amounts of
          net
          cash used in operations for all the periods.
  The
          Company decided to correct the error through restatement of previously
          issued
          financial statements for the years ended December 31, 2004 and
          2003.
  F-7
  The
          following schedules reconcile the amounts as originally reported in the
          Company's consolidated balance sheets as of December 31, 2004 and 2003
          and the
          consolidated statements of operations for each year in the two years ended
          December 31, 2004 to the corresponding restated amounts in each of these
          statements (in thousands):
 Consolidated
                      Balance Sheets**December
                      31, 2004**
                  
                  
                  
                  
                  
                  **December
                      31, 2004****As
                      Previously**
                  
                  
                  
                  **Debt**
                  
                  **As****Reported**
                  
                  **Warrants**
                  
                  **Discount**
                  
                  **Restated****ASSETS**Current
                      assets:Cash
                  
                  $
                  82
                  
                  
                  
                  
                  
                  
                  
                  $
                  82Accounts
                      receivable
                  
                  
                  803
                  
                  
                  
                  
                  
                  
                  
                  
                  803Prepaid
                      royalties
                  
                  
                  793
                  
                  
                  
                  
                  
                  
                  
                  
                  793Prepaid
                      expenses
                  
                  
                  286
                  
                  
                  
                  
                  
                  
                  
                  
                  286Other
                      current assets
                  
                  
                  83
                  
                  
                  
                  
                  
                  
                  
                  
                  83Total
                      current assets
                  
                  
                  2,047
                  
                  
                  
                  
                  
                  
                  
                  
                  2,047Fixed
                      assets, net
                  
                  
                  251
                  
                  
                  
                  
                  
                  
                  
                  
                  251Deferred
                      financing costs
                  
                  
                  765
                  
                  
                  
                  
                  $
                  17
                  
                  
                  782Intangibles,
                      net
                  
                  
                  49
                  
                  
                  
                  
                  
                  
                  
                  
                  49Prepaid
                      license
                  
                  
                  288
                  
                  
                  
                  
                  
                  
                  
                  
                  288$
                  3,400
                  
                  
                  
                  
                  $
                  17
                  
                  $
                  3,417**LIABILITIES
                      AND CAPITAL DEFICIT**Current
                      liabilities:Accounts
                      payable and accrued expenses
                  
                  $
                  1,335
                  
                  
                  
                  
                  
                  
                  
                  $
                  1,335Current
                      portion of lease obligation
                  
                  
                  45
                  
                  
                  
                  
                  
                  
                  
                  
                  45Total
                      current liabilities
                  
                  
                  1,380
                  
                  
                  
                  
                  
                  
                  
                  
                  1,380Long-term
                      liabilities:Long
                      term portion of senior convertible notes payable, net
                  
                  
                  1,845
                  
                  
                  
                  
                  $
                  2,523
                  
                  
                  4,368Accrued
                      interest - senior convertible notes
                  
                  
                  264
                  
                  
                  
                  
                  
                  
                  
                  
                  264Warrant
                      derivative liability
                  
                  
                  
                  
                  $
                  11,604
                  
                  
                  
                  
                  
                  11,604Long
                      term portion of lease obligation
                  
                  
                  79
                  
                  
                  
                  
                  
                  
                  
                  
                  79Total
                      liabilities
                  
                  
                  3,568
                  
                  
                  11,604
                  
                  
                  2,523
                  
                  
                  17,695Preferred
                      stock $.001 par value, authorized 10,000,000 sharesRedeemable
                      Series A Convertible Preferred stock
                  
                  
                  199
                  
                  
                  
                  
                  
                  484
                  
                  
                  683Redeemable
                      Series B Convertible Preferred stock
                  
                  
                  966
                  
                  
                  
                  
                  
                  339
                  
                  
                  1,305Capital
                      deficit:Common
                      stock, $.001 par value; 100,000,000 shares
                  
                  
                  8
                  
                  
                  
                  
                  
                  
                  
                  
                  8Additional
                      paid-in capital
                  
                  
                  14,469
                  
                  
                  (9,476
                  )
                  
                  116
                  
                  
                  5,109Accumulated
                      deficit
                  
                  
                  (15,810
                  )
                  
                  (6,258
                  )
                  
                  685
                  
                  
                  (21,383
                  )Total
                      capital deficit
                  
                  
                  (1,333
                  )
                  
                  (15,734
                  )
                  
                  801
                  
                  
                  (16,266
                  )$
                  3,400
                  
                  $
                  (4,130
                  )
                  $
                  4,147
                  
                  $
                  3,417**December
                      31, 2003**
                  
                  
                  
                  
                  
                  
                  
                  
                  **December
                      31, 2003****As
                      Previously**
                  
                  
                  
                  
                  
                  **Debt**
                  
                  
                  **As****Reported**
                  
                  
                  **Warrants**
                  
                  
                  **Discount**
                  
                  
                  **Restated****ASSETS**Current
                      assets:Cash
                  
                  $
                  -
                  
                  
                  
                  
                  
                  
                  
                  $
                  -Accounts
                      receivable
                  
                  
                  9
                  
                  
                  
                  
                  
                  
                  
                  
                  9Prepaid
                      royalties
                  
                  
                  -
                  
                  
                  
                  
                  
                  
                  
                  
                  -Other
                      current assets
                  
                  
                  20
                  
                  
                  
                  
                  
                  
                  
                  
                  20Total
                      current assets
                  
                  
                  29
                  
                  
                  
                  
                  
                  
                  
                  
                  29Fixed
                      assets, net
                  
                  
                  175
                  
                  
                  
                  
                  
                  
                  
                  
                  175Deferred
                      acquisition costs
                  
                  
                  39
                  
                  
                  
                  
                  
                  
                  
                  
                  39Deferred
                      financing costs
                  
                  
                  456
                  
                  
                  
                  
                  $
                  41
                  
                  
                  497$
                  699
                  
                  
                  
                  
                  $
                  41
                  
                  $
                  740**LIABILITIES
                      AND CAPITAL DEFICIT**Current
                      liabilities:Cash
                      overdraft
                  
                  $
                  2
                  
                  
                  
                  
                  
                  
                  
                  $
                  2Accounts
                      payable and accrued expenses
                  
                  
                  1,083
                  
                  
                  
                  
                  
                  
                  
                  
                  1,083Related
                      party advance
                  
                  
                  442
                  
                  
                  
                  
                  
                  
                  
                  
                  442Total
                      current liabilities
                  
                  
                  1,527
                  
                  
                  
                  
                  
                  
                  
                  
                  1,527Long-term
                      liabilities:Long
                      term portion of senior convertible notes payable, net
                  
                  
                  925
                  
                  
                  
                  
                  $
                  314
                  
                  
                  1,239Accrued
                      interest - senior convertible notes
                  
                  
                  90
                  
                  
                  
                  
                  
                  
                  
                  
                  90Warrant
                      derivative liability
                  
                  
                  -
                  
                  $
                  1,332
                  
                  
                  
                  
                  
                  1,332Total
                      liabilities
                  
                  
                  2,542
                  
                  
                  1,332
                  
                  
                  314
                  
                  
                  4,188Capital
                      deficit:Preferred
                      stock
                  
                  
                  -
                  
                  
                  
                  
                  
                  
                  
                  
                  -Common
                      stock
                  
                  
                  5
                  
                  
                  
                  
                  
                  
                  
                  
                  5Additional
                      paid-in capital
                  
                  
                  4,279
                  
                  
                  (1,794
                  )
                  
                  
                  
                  
                  2,485Accumulated
                      deficit
                  
                  
                  (6,127
                  )
                  
                  125
                  
                  
                  64
                  
                  
                  (5,938
                  )Total
                      capital deficit
                  
                  
                  (1,843
                  )
                  
                  (1,669
                  )
                  
                  64
                  
                  
                  (3,448
                  )$
                  699
                  
                  $
                  (337
                  )
                  $
                  378
                  
                  $
                  740
   F-8
  Consolidated
                      Statements of Operations**December
                      31, 2004**
                  
                  
                  
                  
                  
                  **December
                      31, 2004****As
                      Previously**
                  
                  
                  
                  **Debt**
                  
                  **As****Reported**
                  
                  **Warrants**
                  
                  **Discount**
                  
                  **Restated**Revenue
                  
                  $
                  1,645
                  
                  
                  
                  
                  
                  
                  
                  $
                  1,645Cost
                      of revenues
                  
                  
                  986
                  
                  
                  
                  
                  
                  
                  
                  
                  986Gross
                      profit
                  
                  
                  659
                  
                  
                  
                  
                  
                  
                  
                  
                  659Expenses:Sales
                      and marketing
                  
                  
                  1,161
                  
                  
                  
                  
                  
                  
                  
                  
                  1,161Research
                      and development
                  
                  
                  2,587
                  
                  
                  
                  
                  
                  
                  
                  
                  2,587General
                      and administrative
                  
                  
                  3,700
                  
                  
                  
                  
                  
                  
                  
                  
                  3,700Operating
                      loss
                  
                  
                  (6,789
                  )
                  
                  
                  
                  
                  
                  
                  
                  (6,789
                  )Other
                      income / (expense):Interest
                      expense, includingamortization
                      of debt issuance cost,net
                      of interest income
                  
                  
                  (2,588
                  )
                  
                  
                  
                  $
                  621
                  
                  
                  (1,967
                  )Change
                      in fair value of warrant derivative
                  
                  
                  
                  
                  $
                  (6,383
                  )
                  
                  
                  
                  
                  (6,383
                  )Loss
                      on impairment of intangible asset
                  
                  
                  (306
                  )
                  
                  
                  
                  
                  
                  
                  
                  (306
                  )**Net
                      income / (loss)**
                  
                  
                  (9,683
                  )
                  
                  (6,383
                  )
                  
                  621
                  
                  
                  (15,445
                  )Accretion
                      and deemed dividends onredeemable
                      preferred stock
                  
                  
                  (660
                  )
                  
                  
                  
                  
                  116
                  
                  
                  (544
                  )**Net
                      income / (loss) attributable to****common
                      stockholders**
                  
                  $
                  (10,343
                  )
                  $
                  (6,383
                  )
                  $
                  737
                  
                  $
                  (15,989
                  )**Common
                      share data:**Basic
                      and diluted loss per share
                  
                  $
                  (1.47
                  )
                  
                  
                  
                  
                  
                  
                  $
                  (2.27
                  )Weighted
                      average number ofbasic
                      and diluted commonshares
                      outstanding
                  
                  
                  7,058
                  
                  
                  
                  
                  
                  
                  
                  
                  7,058**December
                      31, 2003**
                  
                  
                  
                  
                  
                  
                  
                  
                  **December
                      31, 2003****As
                      Previously**
                  
                  
                  
                  
                  
                  **Debt**
                  
                  
                  **As****Reported**
                  
                  
                  **Warrants**
                  
                  
                  **Discount**
                  
                  
                  **Restated**Revenue
                  
                  $
                  22
                  
                  
                  
                  
                  
                  
                  
                  $
                  22Cost
                      of revenues
                  
                  
                  -
                  
                  
                  
                  
                  
                  
                  
                  
                  -Gross
                      profit
                  
                  
                  22
                  
                  
                  
                  
                  
                  
                  
                  
                  22Expenses:Sales
                      and marketing
                  
                  
                  -
                  
                  
                  
                  
                  
                  
                  
                  
                  -Research
                      and development
                  
                  
                  181
                  
                  
                  
                  
                  
                  
                  
                  
                  181General
                      and administrative
                  
                  
                  3,927
                  
                  
                  
                  
                  
                  
                  
                  
                  3,927Operating
                      loss
                  
                  
                  (4,086
                  )
                  
                  
                  
                  
                  
                  
                  
                  (4,086
                  )Other
                      income / (expense):Interest
                      expense, includingamortization
                      of debt issuance costand
                      interest on convertible notes,net
                      of interest income
                  
                  
                  (564
                  )
                  
                  
                  
                  $
                  64
                  
                  
                  (500
                  )Change
                      in fair value of warrant derivative
                  
                  
                  
                  
                  $
                  125
                  
                  
                  
                  
                  
                  125**Net
                      income / (loss)**
                  
                  $
                  (4,650
                  )
                  $
                  125
                  
                  $
                  64
                  
                  $
                  (4,461
                  )**Common
                      share data:**Basic
                      and diluted loss per share
                  
                  $
                  (0.92
                  )
                  
                  
                  
                  
                  
                  
                  $
                  (0.88
                  )Weighted
                      average number ofbasic
                      and diluted commonshares
                      outstanding
                  
                  
                  5,078
                  
                  
                  
                  
                  
                  
                  
                  
                  5,078
  F-9
 **[2]**  **Revenue
          recognition:**
  The
          Company sells its content for a download fee. The download fee model is
          based on
          a single fee per downloaded application, bundle of applications or subscription.
          Download fees are assessed on a per download basis for each game or bundle
          of
          games downloaded to a consumer’s wireless handset. Ringtones and other features
          operate on the same basis. Some of the download features will have expirations
          based on time. In some cases, the Company is able to pre-load its content
          on a
          manufacturer’s handset. In that case, revenue is only earned when that content
          is activated and a fee is paid to the wireless carrier which supports the
          handset. Revenue is recognized by delivery and acceptance upon the occurrence
          of
          a download of an application to the end user. Persuasive evidence of an
          arrangement occurs when the carrier is notified of the end-user transaction
          and
          they place a charge on the end-user’s bill. The carrier reports to the company
          the product and dollar amount of revenue earned which establishes that
          delivery
          and performance have occurred, evidence of collectibility and subsequent
          to the
          issuance of the carrier reports, the carrier remits the agreed upon price
          for
          each download which substantiates fixed and determinable pricing. The Company
          records revenue net of fees retained by the carriers.
  **[3]**  **Software
          development costs:**
  The
          Company accounts for software development costs in accordance with Statement
          of
          Financial Accounting Standards (“SFAS”) No. 86, Accounting for the Costs of
          Computer Software to Be Sold, Leased, or Otherwise Marketed. Accordingly,
          costs
          incurred internally in creating a software product is charged to expense
          when
          incurred as research and development costs until technological feasibility
          has
          been established for the product. Once technological feasibility is established,
          all development cost is capitalized until the product is available for
          general
          release to customers. Judgment is required in determining when the technological
          feasibility of a product is established, in estimating the life of the
          product
          for which the capitalized costs will be amortized and in estimating if
          the
          carrying value of capitalized software costs is equal to or less than future
          operating profits from the associated products. To date, the Company has
          not
          capitalized any software development costs.
  We
          recognize costs of software developed or purchased for internal use in
          accordance with Statement of Position (SOP) 98-1, “Accounting for Costs of
          Computer Software Developed or Obtained for Internal Use.” Under SOP 98-1, we
          expense all costs incurred that relate to planning and post-implementation
          phases of development. Costs incurred in the development and implementation
          phases are capitalized and amortized over the estimated useful life of
          the
          software. In
          2005,
          the Company capitalized $278,000 in software development costs which is
          included
          in fixed assets, net.
  **[4]**  **Use
          of estimates:**
  The
          accounting and financial reporting policies of the Company conform to accounting
          principles generally accepted in the United States of America. The preparation
          of financial statements in conformity with such accounting principles requires
          management to make assumptions and estimates that impact the amounts reported
          in
          those statements. Such assumptions and estimates are subject to change
          in the
          future as additional information becomes available or as circumstances
          are
          modified. Actual results could differ from these estimates. Significant
          areas
          where estimates are used include impairment of long lived assets, software
          capitalization and valuation of options and warrants.
  F-10
 **[5]**  **Fixed
          assets:**
  Property
          and equipment are recorded at cost. Depreciation of computer and office
          equipment, furniture and fixtures and capitalized software is computed
          using the
          straight-line method over the estimated useful lives of the assets (three
          to
          seven years). Leasehold improvements are amortized over the shorter of
          the term
          of the lease or useful life of the improvements.
  **[6]**  **Income
          taxes:**
  The
          Company accounts for income taxes following the asset and liability method
          in
          accordance with Statement of Financial Accounting Standards (“SFAS”) No. 109,
“Accounting for Income Taxes.” Under such method, deferred tax assets and
          liabilities are recognized for the future tax consequences attributable
          to
          differences between the financial statement carrying amounts of existing
          assets
          and liabilities and their respective tax bases. Deferred tax assets and
          liabilities are measured using enacted tax rates expected to apply to taxable
          income in the years that the asset is expected to be recovered or the liability
          settled. The effect on deferred tax assets and liabilities of a change
          in tax
          law or rates is recognized in income in the period that includes the enactment
          date of change. A valuation allowance is recorded for deferred tax assets
          that
          cannot be currently recognized due to the Company’s cumulative losses and the
          uncertainty of future recoverability.
  **[7]**  **Stock
          Based Compensation**
  The
          Company accounts for stock-based employee and directors compensation under
          Accounting Principles Board (“APB”) Opinion No. 25, “Accounting for Stock Issued
          to Employees,” and related interpretations. The Company has adopted the
          disclosure-only provisions of SFAS No. 123, “Accounting for Stock-Based
          Compensation,” as amended by SFAS No. 148, “Accounting for Stock-Based
          Compensation - Transition and Disclosure”.
  Had
          compensation cost for the Company’s stock option grants been determined based on
          the fair value at the grant dates consistent with the methodology of SFAS
          No.
          123, the Company’s net loss and net loss per share for the periods indicated
          would have been increased to the pro forma amounts indicated as
          follows:
  **Year
                    Ended**
                  **December
                    31,**
                  **2005**
                
                **Year
                    Ended**
                  **December
                    31,**
                  **2004**
                  **(as
                    restated)**Net
                    loss attributable to common stockholders
                
                $
                (2,521,000
                )
                $
                (15,989,000
                )Stock-based
                    employee compensation determined under the fair value based
                    method
                
                
                (390,000
                )
                
                (919,000
                )Pro
                    forma net loss attributable to common stockholders
                
                $
                (2,911,000
                )
                $
                (16,908,000
                )Net
                    loss per common share (basic and diluted):As
                    reported
                
                $
                (.29
                )
                $
                (2.27
                )Pro
                    forma
                
                $
                (.33
                )
                $
                (2.40
                )
  The
          per
          share weighted average fair value of stock options granted during 2005
          and 2004
          were $1.24 and $.91, respectively, estimated on the dates of grant using
          the
          Black-Scholes option-pricing model with the following assumptions: risk-free
          interest rates of 3.8% - 4.5%, volatility of 95%-118%, dividend yield of
          0% and
          expected lives of six years.
  **[8]**  **Loss
          per share:**
  The
          Company’s basic and diluted net loss per share is computed by dividing the net
          loss by the weighted average number of outstanding common shares. Potentially
          dilutive shares, which were excluded from the computation of diluted loss
          per
          share because their inclusion would have been anti-dilutive, are as
          follows:
  F-11
  **Year
                    Ended**
                  **December
                    31,**
                  **2005**
                
                **Year
                    Ended**
                  **December
                    31,**
                  **2004**Options
                
                
                2,334,000
                
                
                3,828,000Warrants
                
                
                14,139,000
                
                
                10,602,000Convertible
                    notes
                
                
                6,000,000
                
                
                6,226,000Preferred
                    stock
                
                
                15,072,000
                
                
                4,474,000Total
                    potentially dilutive shares
                
                
                37,545,000
                
                
                25,130,000
  **[9]**  **Concentration
          of credit risk:**
  The
          Company maintains a portion of its cash balances in accounts which at times
          exceed the federally insured limits.
  **[10]**  **Valuation
          of long-lived assets:**
  Long-lived
          assets such as property, equipment and intangible assets are reviewed for
          impairment when events or changes in circumstances indicate that the carrying
          amount of the assets may not be recoverable. An impairment loss is recognized
          when estimated future undiscounted cash flows expected to result from the
          use of
          the assets and their eventual disposition are less than their carrying
          amount.
  **[11]**  **Fair
          value of financial instruments:**
  The
          fair
          values of the Company’s financial instruments, including short-term notes
          payable, approximate their carrying values because their interest rates
          approximate rates of interest which correspond to instruments with similar
          maturities. The carrying amount of the long-term debt approximates fair
          value at
          December 31, 2005 and 2004 based on the interest rates available to the
          Company
          and debt instruments with similar terms.
  Short-term
          investments consist of U.S. government securities. All of the Company’s
          investment securities are considered available-for-sale and are stated
          at fair
          value.
  **[12]**  **Derivative
          instruments:**
  The
          Company accounts for the warrants issued in connection with its loans and
          notes
          payable and its preferred stock in accordance with EITF 00-19 “Accounting for
          Derivative Financial Instruments Indexed to, and Potentially Settled in,
          a
          Company’s Own Stock”. Per the EITF, since we
          can
          not be sure that we have adequate authorized shares of common stock for
          the
          conversion or exercise of all outstanding instruments (due, in part, to
          certain
          conversion rates which may vary based
          on
          anti-dilution), we are required to classify these instruments as liabilities
          at
          their fair values. Changes
          in the fair values of these instruments will result in adjustments to the
          amount
          of the recorded liabilities and the corresponding income or loss is being
          recorded in our consolidated statements of operations until they are exercised
          or expire.
 
 **[13]**  **Advertising
          costs:**
  Advertising
          costs, which are expensed as incurred, for the year ended December 31,
          2005 and
          2004, were $846,000 and $411,000, respectively.
  **[14]**  **Research
          & Development**
  Research
          and development expenses include payroll and employee benefits associated
          with
          product development. Technological feasibility for our products is reached
          shortly before the products are released. Costs incurred after technological
          feasibility is established, are not material, and accordingly, we have
          expensed
          all research and development costs when incurred during the years ended
          December
          31, 2005 & 2004.
  F-12
 **[15]**  **Registration
          Rights**
  In
          June
          2005, the EITF issued Issue No. 05-4,"The Effect of a Liquidated Damages
          Clause
          on a Freestanding Financial Instrument Subject to EITF Issue No.00-19,
          'Accounting for Derivative Financial Instruments Indexed to, and Potentially
          Settled in, a Company's Own Stock.'" EITF No. 05-4 addresses financial
          instruments, such as convertible notes and stock purchase warrants, which
          are
          accounted for under EITF No. 00-19, that are issued at the same time and
          in
          contemplation of a registration rights agreement that includes a liquidated
          damages clause. The consensus of EITF No. 05-4 has not been finalized.
          The
          Company assessed its potential liability with respect to liquidated damages
          and
          has determined the liability not to be material.
 
 **[16]**  **Recent
          Accounting Pronouncements**
  In
          December 2004, the FASB issued SFAS No. 123 (revised), “Share-Based Payment”
(FAS 123R) which replaces FAS 123 and supersedes APB No. 25. FAS 123R requires
          all share-based payments to employees, including grants of employee stock
          options, to be recognized in the financial statements based on their fair
          values
          beginning with the first interim or annual period after December 15, 2005
          for
          small business filers, with early adoption encouraged. The pro forma disclosures
          previously permitted under FAS 123 no longer will be an alternative to
          financial
          statement recognition. The Company is required to adopt FAS 123R beginning
          January 1, 2006. Under FAS 123R, we must determine the appropriate fair
          value
          model to be used for valuing share-based payments, the amortization method
          for
          compensation cost and the transition method to be used at date of adoption.
          The
          transition methods include prospective and retroactive adoptions. We are
          evaluating the requirements of FAS 123R and expect that the adoption of
          FAS 123R
          will have a material impact on our consolidated results of operations and
          earnings per share.
  In
          May
          2005, the FASB issued SFAS No. 154, “Accounting Changes and Error Corrections—A
          Replacement of APB Opinion No. 20 and FASB Statement No. 3." SFAS No. 154
          requires retrospective application to prior periods' financial statements
          for
          changes in accounting principle, unless it is impracticable to determine
          either
          the period-specific effects or the cumulative effect of the change. SFAS
          No. 154
          also requires that retrospective application of a change in accounting
          principle
          be limited to the direct effects of the change. Indirect effects of a change
          in
          accounting principle, such as a change in non-discretionary profit-sharing
          payments resulting from an accounting change, should be recognized in the
          period
          of the accounting change. SFAS No. 154 also requires that a change in
          depreciation, amortization, or depletion method for long-lived non-financial
          assets be accounted for as a change in accounting estimate affected by
          a change
          in accounting principle. SFAS No. 154 is effective for accounting changes
          and
          corrections of errors made in fiscal years beginning after December 15,
          2005.
          Early adoption is permitted for accounting changes and corrections of errors
          made in fiscal years beginning after May 2005. The Company is required
          to adopt
          the provisions of SFAS No. 154, as applicable, beginning in fiscal
          2006.
 
 **Note
          B - Fixed Assets**
  Fixed
          assets consist of the following:
  **Estimated**
                  **Useful
                    Lives**
                
                **December
                    31,**
                  **2005**
                
                **December
                    31,**
                  **2****004**Furniture
                    and fixtures
                
                
                7
                    years
                
                $
                11,000
                
                $
                6,000Leased
                    equipment
                
                
                3
                    years
                
                
                149,000
                
                
                149,000Internal
                    use software
                
                
                3
                    years
                
                
                278,000
                
                
                -Leasehold
                    improvements
                
                
                1
                    year
                
                
                65,000
                
                
                8,000Computer
                    and office equipment
                
                
                3
                    years
                
                
                287,000
                
                
                131,000790,000
                
                
                294,000Less:
                    accumulated depreciation and amortization
                
                
                
                
                
                242,000
                
                
                43,000$
                548,000
                
                $
                251,000
   F-13
 **Note
          C - Acquisition**
  In
          2004,
          we acquired Over-the-Air Wireless, Inc., (“OTA”) and we obtained: (i) an
          intangible asset comprised of software for the downloading of our games
          and
          ringtones and the billing of these downloads, (ii) the services of and
          employment agreements with three individuals, one of whom who currently
          holds
          the position of interim chief executive officer and president of our Company,
          and (iii) two-year non-compete agreements. For accounting purposes, this
          transaction was accounted for as a purchase of assets and hiring of new
          employees with a non-compete agreement. (See Note J)
  **Note
          D - Debt**
  **[1]**  **Loans
          and notes payable:**
  During
          2003, The Company issued Senior Subordinated Convertible Promissory Notes
          totaling $2,500,000. In connection with the issuance of the notes, the
          Company
          also issued warrants to the note holders to purchase 2,083,333 shares of
          common
          stock, exercisable at $1.20 per share until September 15, 2006. The fair
          value
          of the warrants was $1,457,000, utilizing the Black Scholes option-pricing
          model
          with the following assumption: 90% volatility, three-year expected life,
          risk-free interest rate of 4% and a dividend yield ratio of 0%. In accordance
          EITF 00-19 “Accounting for Derivative Financial Instruments Indexed to, and
          Potentially Settled in, a Company’s Own Stock”, the Company recorded a liability
          for the fair value of the warrants due to their anti-dilution features.
          The
          proceeds allocated to the warrants of $1,457,000 were recorded as debt
          discount
          to be amortized over the life of the convertible note. Upon the conversion
          of
          the notes into common stock, the unamortized debt discount balance will
          be
          recognized as additional interest expense. The notes bear interest at 8%
          per
          annum and are convertible, at the option of the holder, at any time into
          shares
          of common stock at $1.20 per share, subject to certain anti-dilution provisions.
          The full principal amount of the promissory notes and the related accrued
          interest are due on September 15, 2006. The notes may be prepaid, and the
          warrants may be redeemed for $.01 per share of common stock underlying
          the
          warrants, on 30 days prior written notice to the holder thereof if the
          closing
          sales price (or closing bid price) of the Company’s common stock on its
          principal trading market is at least twice the then current conversion
          or
          exercise price, as applicable, for a period of ten consecutive trading
          days
          ending within 20 days prior to the date of the notice of prepayment or
          redemption, as applicable. $886,000 of the notes have been converted as
          of
          December 31, 2005. In connection with the sale of these notes, the Company
          incurred $578,000 in costs consisting of: placement agent fees of approximately
          $221,000 and warrants to placement agent to purchase 417,208 shares of
          common
          stock at $1.20 per share that expire in September 2006, valued at $291,000.
          The
          warrants were valued by utilizing the Black Scholes option-pricing model
          with
          the following assumptions: 90% volatility, five-year expected life, risk-free
          interest rate of 4% and a dividend yield of 0%, and legal expenses of
          approximately $66,000. All but 185,000 of the warrants underlying the notes
          remain unexercised as of December 31, 2005. $578,000 has been shown as
          deferred
          financing costs, to be amortized over 40 months, or earlier if converted
          into
          common stock. On August 26, 2004, as a result of the issuance of Series
          B per
          the terms of the note, the conversion and exercise prices have been adjusted
          to
          $.95. As a result of antidilution provisions, the Company was required
          to issue
          additional warrants to the note holder to purchase 548,246 shares of common
          stock, exercisable at $.95 per share until September 16, 2006. For the
          year
          ended December 31, 2005, interest expense and amortization of deferred
          financing
          costs on these notes were approximately $398,000 and $186,000,
          respectively.
  The
          $1,700,000 Senior Convertible Promissory Note was issued to Alexandra Global
          Master Fund Ltd on January 8, 2004. In connection with the issuance of
          the note,
          the Company also issued warrants to the note holder to purchase 708,333
          shares
          of common stock, exercisable at $1.20 per share until January 8, 2008.
          The fair
          value of the warrants was approximately $656,000 utilizing the Black Scholes
          option-pricing model with the following assumption: 88% volatility, three-year
          expected life, risk-free interest rate of 2.37% and a dividend yield ratio
          of
          0%. In accordance with EITF 00-19 “Accounting for Derivative Financial
          Instruments Indexed to, and Potentially Settled in, a Company’s Own Stock”, the
          Company recorded a liability for the fair value of the warrants due to
          their
          anti-dilution features. The proceeds allocated to the warrants of $656,000
          were
          recorded as debt discount to be amortized over the life of the convertible
          note.
          Upon the conversion of the note into common stock, the unamortized debt
          discount
          balance will be recognized as additional interest expense. The note bears
          interest at 9% per annum and is convertible, at the option of the holder,
          at any
          time into shares of common stock at $1.20 per share, subject to certain
          anti-dilution provisions. The full principal amount of the note and the
          related
          accrued interest are due on January 8, 2007. The note may be prepaid, and
          the
          warrants may be redeemed, for $.01 per share of common stock underlying
          the
          warrants, on 30 days prior written notice to the holder thereof if the
          closing
          sales price (or closing bid price) of the Company’s common stock on its
          principal trading market is at least twice the then current conversion
          or
          exercise price, as applicable, for a period of ten consecutive trading
          days
          ending within 20 days prior to the date of the notice of prepayment or
          redemption, as applicable and other conditions. In connection with the
          sale of
          this note, the Company incurred $342,000 in costs consisting of: placement
          agent
          fees of approximately $136,000 and warrants to the placement agent to purchase
          212,500 shares of common stock at $1.20 per share that expire on January
          7,
          2009, valued at $197,000, and legal expenses of approximately $9,000. The
          warrants were valued by utilizing the Black Scholes option-pricing model
          with
          the following assumptions: 88% volatility, three-year expected life, risk-free
          interest rate of 2.37% and a dividend yield of 0%. $342,000 has been shown
          as
          deferred financing costs, to be amortized over 36 months or earlier if
          converted
          into common stock. On August 26, 2004, as a result of the issuance of Series
          B
          (the preferred stock is convertible and the warrants are exercisable at
          $.95 per
          share), per the terms of the note, the conversion and exercise prices have
          been
          adjusted to $.95. As a result of antidilution provisions, the Company was
          required to issue additional warrants to the note holder to purchase 372,807
          shares of common stock, exercisable at $.95 per share until January 8,
          2008. On
          February 1, 2005, as a result of the issuance of Series D, per the terms
          of the
          note, the conversion and exercise prices have been adjusted to $.93. As
          a result
          of antidilution provisions, the Company was required to issue additional
          warrants to the note holder to purchase 38,483 shares of common stock,
          exercisable at $.93 per share. As of December 31, 2005, none of the note
          has
          been converted nor any warrants exercised. For the year ended December
          31, 2005,
          interest expense and amortization of deferred financing costs on these
          notes
          were approximately $219,000 and $114,000, respectively.
  F-14
 The
          $2,300,000 Senior Convertible Promissory Note was issued to Alexandra Global
          Master Fund Ltd on March 19, 2004. In connection with the issuance of the
          note,
          the Company also issued warrants to the note holder to purchase 958,333
          shares
          of common stock, exercisable at $1.20 per share until March 19, 2008. The
          fair
          value of the warrants was $706,000, utilizing the Black Scholes option-pricing
          model with the following assumption: 91% volatility, three-year expected
          life,
          risk-free interest rate of 1.97% and a dividend yield ratio of 0%. In accordance
          with EITF 00-19 “Accounting for Derivative Financial Instruments Indexed to, and
          Potentially Settled in, a Company’s Own Stock”, the Company recorded a liability
          for the fair value of the warrants due to their anti-dilution features.
          The
          proceeds allocated to the warrants of $706,000 were recorded as debt discount
          to
          be amortized over the life of the convertible note. Upon the conversion
          of the
          note into common stock, the unamortized debt discount balance will be recognized
          as additional interest expense. The note bears interest at 9% per annum
          and is
          convertible, at the option of the holder, at any time into shares of common
          stock at $1.20 per share, subject to certain anti-dilution provisions.
          The full
          principal amount of the note and the related accrued interest are due on
          March
          19, 2007. The note may be prepaid, and the warrants may be redeemed for
          $.01 per
          share of common stock underlying the warrants, on 30 days prior written
          notice
          to the holder thereof if the closing sales price (or closing bid price)
          of the
          Company’s common stock on its principal trading market is at least twice the
          then current conversion or exercise price, as applicable, for a period
          of ten
          consecutive trading days ending within 20 days prior to the date of the
          notice
          of prepayment or redemption, as applicable and other conditions. In connection
          with the sale of this note, the Company incurred $338,000 in costs consisting
          of: placement agent fees of approximately $184,000, and warrants issued
          to the
          placement agent to purchase 191,666 shares of common stock at $1.20 per
          share
          that expire on March 19, 2009, valued at $141,000, and legal expenses of
          approximately $13,000. $338,000 has been shown as deferred financing costs,
          to
          be amortized over 36 months or earlier if converted into common stock.
          On August
          26, 2004, as a result of the issuance of Series B (the preferred stock
          is
          convertible and the warrants are exercisable at $.95 per share), per the
          terms
          of the note, the conversion and exercise prices have been adjusted to $.95.
          In
          addition, the Company was required to issue additional warrants to the
          note
          holder to purchase 504,386 shares of common stock, exercisable at $.95
          per share
          until March 19, 2008. On February 1, 2005, as a result of the issuance
          of Series
          D, per the terms of the note, the conversion and exercise prices have been
          adjusted to $.93. In addition, the Company was required to issue additional
          warrants to the note holder to purchase 52,066 shares of common stock,
          exercisable at $.93 per share. As of December 31, 2005, none of the note
          has
          been converted nor any warrants exercised. For the year ended December
          31, 2005,
          interest expense and amortization of deferred financing costs on these
          notes
          were approximately $235,000 and $113,000, respectively.
  **Note
          E - Commitments**
  F-15
 **[1]**  **Operating
          leases:**
  The
          Company leases office space and computer equipment for its headquarters
          in
          Seattle, WA. In December 2004, the company entered into a lease for its
          new
          headquarters which commenced on March 1, 2005 for a term of two years.
          The
          Landlord has the option of terminating the lease with four months written
          notice
          providing that notice does not come prior to the fifteenth month of the
          term.
          The Company’s lease obligation for its former headquarters in Seattle expired on
          April 30, 2005.
  In
          December 2002, the Company entered into a lease for office space in Houston,
          Texas, which expires on January 31, 2006. In October 2003, the Company
          amended
          the Texas lease, which effectively cancelled the old lease. The new lease
          expires in October 2006. On July 6, 2004, the Company entered into an agreement
          to sublet the Houston office for a term of twenty-five months commencing
          on
          September 1, 2004 at the rate of $57,000 per year for the duration of the
          lease.
  Rent
          expense for the years ended December 31, 2005 and 2004 were $327,000 and
          $240,000 respectively.
  Total
          future minimum lease payments under these lease agreements are as
          follows:
  **Year
                    Ending****December
                    31,**
                
                **Amount**2006
                
                $
                380,0002007
                
                
                54,000$
                434,000
  **[2]**  **Royalties
          and Advertising:**
  On
          August
          14, 2002, the Company entered into two licensing agreements with Dwango
          Japan, a
          stockholder of the Company, to use its trademark (25-year term) and intellectual
          property (eight-year term) in North America. The agreements provide for
          royalties of 2% (intellectual property) and 0.5% (trademark) of the total
          gross
          revenue, subject to an annual minimum royalty (commencing October 1, 2002)
          of
          $50,000 per each agreement. The Company reached a termination agreement
          with
          Dwango Japan on October 24, 2005 effectively terminating the intellectual
          property and trademark agreement entered into on August 14, 2002. Per the
          terms
          of the termination agreement, the Company continued payment of royalties
          up to
          the termination date. For the years ended December 31, 2005 and 2004 royalty
          expense was $59,000 and $105,000 respectively.
  On
          March
          30, 2004, the Company entered into a licensing agreement with RollingStone
          whereby the Company licenses the RollingStone brand for use with its products.
          For the years ended December 31, 2005 and 2004, royalty expense was $1,146,000
          and $627,000 respectively.
  On
          September 7, 2004, the Company entered into a licensing agreement with
          Beliefnet
          whereby the Company licenses the Beliefnet brand for use with its products.
          The
          license agreement is for a one year term and provides for minimum royalties
          to
          be paid upon launch of the products. Products were launched in the first
          quarter
          of 2005. On October 1, 2005, the Company terminated the agreement with
          Beliefnet
          after paying the contractual six-month minimum of $73,000. For the years
          ended
          December 31, 2005 and 2004 royalty expense was $73,000 and $0
          respectively.
  On
          November 1, 2004, the Company entered into a licensing agreement with Playboy
          whereby the Company licenses the Playboy brand for use with its products.
          The
          license agreement is for a three year term and provides for minimum royalties
          to
          be paid upon launch of the products. Playboy was launched in October 2005.
          For
          the years ended December 31, 2005 and 2004, royalty expense was $71,000
          and $0
          respectively.
  On
          November 23, 2004, the Company entered into a licensing agreement with
          Napster
          whereby the Company licenses the Napster brand for use with its products.
          The
          agreement includes a licensing fee for using the Napster brand name of
          $360,000
          payable over the one year term of the contract. The license agreement is
          for a
          one year term from product launch which occurred in May 2005 and expires
          in May
          2006. For the year ended December 31, 2005, royalty expense was $291,000
          and
          licensing expense was $240,000.
  F-16
 The
          following table summarizes, as of December 31, 2005, our obligations and
          commitments to make future payments pursuant to our agreements with
          RollingStone, Napster and Playboy (for royalty, trademark and advertising):
  **Payments
                    Due By Period****Total**
                
                **Less
                    Than**
                  **1
                    Year**
                
                **1-3
                    Years**Royalty
                    Expense
                
                $
                550,000
                
                $
                400,000
                
                $
                150,000Licensing
                    Expense
                
                
                120,000
                
                
                120,000
                
                
                —Advertising
                    Expense
                
                
                556,000
                
                
                473,000
                
                
                83,000Total
                
                $
                1,226,000
                
                $
                993,000
                
                $
                233,000
  **Note
          F - Preferred Stock**
  During
          the year ended December 31, 2004, The Company issued 1,250 shares of Series
          A
          convertible preferred stock (“ **Series
          A** ”).
          The
          material terms of the Series A are as follows:
  *Dividends.* Holders
          of Series A are entitled to cumulative dividends at the rate of $120 per
          annum
          per share. Such dividends may be paid in cash or, at the company’s option and
          subject to certain limitations, accrued until the shares of Series A to
          which
          such dividends relate are redeemed or converted into shares of common
          stock.
  *Warrants.* In
          connection with the issuance of the Series A, the Company issued warrants
          to the
          holders to purchase 1,041,667 shares of common stock, exercisable at $1.20
          per
          share until August 2, 2008. The fair value of the warrants was $525,000,
          utilizing the Black Scholes option-pricing model with the following assumption:
          93% - 94% volatility, three-year expected life, risk-free interest rate
          of 1.97%
          - 3.45% and a dividend yield ratio of 0%. In accordance with EITF 00-19
          “Accounting for Derivative Financial Instruments Indexed to, and Potentially
          Settled in, a Company’s Own Stock”, the Company recorded a liability for the
          fair value of the warrants due to their anti-dilution features. The proceeds
          allocated to the warrants of $525,000 were recorded as debt discount to
          be
          amortized over the life of the preferred stock. Upon the holder’s optional
          conversion of the preferred stock into common stock, the unamortized debt
          discount balance will be recognized as additional interest expense.
  *Liquidation
          preference.* Upon any
          liquidation, dissolution or winding up of the Company, to the extent not
          converted into our common stock, the holders of Series A shall be entitled
          to
          payment of $1,000 per share plus an amount equal to any accrued and unpaid
          dividends, before any distribution is made to the holders of the common
          stock.
          If the assets to be distributed are insufficient to permit such payment,
          then
          the assets to be so distributed shall be distributed ratably among the
          holders
          of Series A.
  *Optional
          conversion.* A holder
          of shares of Series A may convert any or all of such shares and all accrued
          and
          unpaid dividends thereon, at the holder’s option at any time, into shares of our
          common stock at the lower of $0.95 per share subject to anti-dilution
          adjustments. To exercise such conversion rights, a holder must give the
          Company
          acceptable notice and the Company is then obligated to issue the number
          of
          shares of common stock into which the Series A is being converted within
          five
          trading days after the conversion notice is given.
  *Mandatory
          Redemption.* The
          Company is required to redeem the outstanding Series A on June 14, 2007.
          The
          Company must give a redemption notice to each holder not less than 30 or
          more
          than 35 business days prior to June 14, 2007. On such redemption date,
          or such
          later date as a holder shall surrender the certificate for the Series A
          being
          redeemed, the Company must pay to each holder $1,000 per share plus the
          amount
          of any accrued but unpaid dividends.
  *Optional
          Redemption.* Upon the
          occurrence of certain events, as defined in the agreement, the holders
          of Series
          A have the right, at their option, to require our company to redeem all
          or part
          of their shares.
  F-17
 *Redemption
          Limitation.* If the
          Company restricted from redeeming the Series A by reason of a restriction
          contained in the Nevada General Corporation Law, the redemption date for
          such
          shares shall be extended to the date that is 30 days after the date on
          which the
          Company is no longer so restricted from redeeming the shares.
  *Anti-Dilution
          protection.* The
          Series A is protected against dilution upon the occurrence of certain events,
          including but not limited to, sales of shares of common stock for less
          than fair
          market value or the then conversion price per share.
  *Voting
          Rights* .
          Except
          as otherwise provided by law, the holders of Series A are not entitled
          to vote
          on any matter.
  On
          February 1, 2005, as a result of the anti-dilution provisions of the Series
          A
          and the issuance of Series D convertible preferred stock, the conversion
          and
          exercise prices have been adjusted to $.93 and an additional 28,297 warrants
          have been issued.
  For
          the
          year ended December 31, 2004, the deemed dividend, amortization of deferred
          financing costs and accretion of preferred stock to liquidation value on
          the
          Series A was $71,000, $38,000 and $85,000 respectively.
  For
          the
          year ended December 31, 2005, the deemed dividend, amortization of deferred
          financing costs and accretion of preferred stock to liquidation value on
          the
          Series A was $150,000, $79,000 and $175,000 respectively.
  During
          the year ended December 31, 2004, The Company issued 3,000 shares of Series
          B
          convertible preferred stock as (“ **Series
          B** ”).
          The
          material terms of the Series B are as follows:
  *Dividends.* Holders
          of Series B are entitled to cumulative dividends at the rate of $120 per
          annum
          per share. Such dividends may be paid in cash or, at our company’s option and
          subject to certain limitations, accrued until the shares of Series B to
          which
          such dividends relate are redeemed or converted into shares of common
          stock.
  *Warrants.* In
          connection with the issuance of the Series B, the Company issued warrants
          to the
          holders to purchase 3,157,894 shares of common stock, exercisable at $.95
          per
          share until August 26, 2008. The fair value of the warrants was $2,002,000,
          utilizing the Black Scholes option-pricing model with the following assumption:
          99% volatility, three-year expected life, risk-free interest rate of 2.85%
          and a
          dividend yield ratio of 0%. In accordance with EITF 00-19 “Accounting for
          Derivative Financial Instruments Indexed to, and Potentially Settled in,
          a
          Company’s Own Stock”, the Company recorded a liability for the fair value of the
          warrants due to their anti-dilution features. The proceeds allocated to
          the
          warrants of $2,002,000 were recorded as debt discount to be amortized over
          the
          life of the preferred stock. Upon the holder’s optional conversion of the
          preferred stock into common stock, the unamortized debt discount balance
          will be
          recognized as additional interest expense.
  *Liquidation
          preference.* Upon any
          liquidation, dissolution or winding up of our company, to the extent not
          converted into our common stock, the holders of Series B shall be entitled
          to
          payment of $1,000 per share plus an amount equal to any accrued and unpaid
          dividends, before any distribution is made to the holders of our common
          stock.
          If the assets to be distributed are insufficient to permit such payment,
          then
          the entire assets available for distribution shall be distributed ratably
          among
          the holders of Series B and Series A.
  *Optional
          conversion.* A holder
          of shares of Series B may convert any or all of such shares and all accrued
          and
          unpaid dividends thereon, at the holder’s option at any time, into shares of our
          common stock at $.95 per share. To exercise such conversion rights, a holder
          must give us acceptable notice and we are then obligated to issue the number
          of
          shares of common stock into which the Series B is being converted within
          five
          trading days after the conversion notice is given.
  *Mandatory
          Redemption.* We are
          required to redeem the outstanding Series B on August 26, 2007. We must
          give a
          redemption notice to each holder not less than 30 or more than 35 business
          days
          prior to August 26, 2007. On such redemption date, or such later date as
          a
          holder shall surrender the certificate for the Series B being redeemed,
          we must
          pay to each holder $1,000 per share plus the amount of any accrued but
          unpaid
          dividends.
  F-18
 *Optional
          Redemption.* Upon the
          occurrence certain events, the holders of Series B have the right, at their
          option, to require our company to redeem all or part of their shares of
          Series
          B.
  *Redemption
          Limitation* .
          If we
          are restricted from redeeming the Series B by reason of a restriction contained
          in the Nevada General Corporation Law, the redemption date for such shares
          shall
          be extended to the date that is 30 days after the date on which we are
          no longer
          so restricted from redeeming the shares.
  *Anti-Dilution
          protection.* The
          Series B is protected against dilution upon the occurrence of certain events,
          including but not limited to, sales of shares of common stock for less
          than fair
          market value or the then conversion price per share.
  *Voting
          Rights.* Except
          as otherwise provided by law, the holders of Series B are not entitled
          to vote
          on any matter. **
  On
          February 1, 2005, as a result of the anti-dilution provisions of the Series
          B
          and the issuance of Series D convertible preferred stock, the conversion
          and
          exercise prices have been adjusted to $.93 and an additional 67,912 warrants
          have been issued.
  For
          the
          year ended December 31, 2004, the deemed dividend, amortization of deferred
          financing costs and accretion of preferred stock to liquidation value on
          the
          Series B was $124,000, $5,000 and $223,000 respectively.
  For
          the
          year ended December 31, 2005, the deemed dividend, amortization of deferred
          financing costs and accretion of preferred stock to liquidation value on
          the
          Series B was $360,000, $14,000 and $667,000 respectively.
  During
          the year ended December 31, 2005, The Company issued 700 shares of Series
          C
          convertible preferred stock as (“ **Series
          C** ”).
          The
          material terms of the Series C are as follows:
  *Dividends.* Holders
          of Series C are entitled to cumulative dividends at the rate of $70 per
          annum
          per share. Such dividends may be paid in cash or, at our company’s option and
          subject to certain limitations, accrued until the shares of Series C to
          which
          such dividends relate are redeemed or converted into shares of common
          stock.
  *Warrants.* In
          connection with the issuance of the Series C, the Company issued warrants
          to the
          holders to purchase 170,815 shares of common stock, exercisable at $1.97
          per
          share until January 12, 2009. The fair value of the warrants was $165,000,
          utilizing the Black Scholes option-pricing model with the following assumption:
          104% volatility, three-year expected life, risk-free interest rate of 3.38%
          and
          a dividend yield ratio of 0%. In accordance with EITF 00-19 “Accounting for
          Derivative Financial Instruments Indexed to, and Potentially Settled in,
          a
          Company’s Own Stock”, the Company recorded a liability for the fair value of the
          warrants due to their anti-dilution features. The proceeds allocated to
          the
          warrants of $165,000 were recorded as debt discount to be amortized over
          the
          life of the preferred stock. Upon the holder’s optional conversion of the
          preferred stock into common stock, the unamortized debt discount balance
          will be
          recognized as additional interest expense.
  *Liquidation
          preference.* Upon any
          liquidation, dissolution or winding up of our company, to the extent not
          converted into our common stock, the holders of Series C shall be entitled
          to
          payment of $1,000 per share plus an amount equal to any accrued and unpaid
          dividends, before any distribution is made to the holders of our common
          stock.
          If the assets to be distributed are insufficient to permit such payment,
          then
          the entire assets available for distribution shall be distributed after
          distribution to the holders of Series B and Series A.
  *Optional
          conversion.* A holder
          of shares of Series C may convert any or all of such shares and all accrued
          and
          unpaid dividends thereon, at the holder’s option at any time, into shares of our
          common stock at $1.64 per share. To exercise such conversion rights, a
          holder
          must give us acceptable notice and we are then obligated to issue the number
          of
          shares of common stock into which the Series C is being converted within
          five
          trading days after the conversion notice is given.
  *Mandatory
          Redemption.* We are
          required to redeem the outstanding Series C on August 26, 2007. We must
          give a
          redemption notice to each holder not less than 30 or more than 35 business
          days
          prior to August 26, 2007. On such redemption date, or such later date as
          a
          holder shall surrender the certificate for the Series C being redeemed,
          we must
          pay to each holder $1,000 per share plus the amount of any accrued but
          unpaid
          dividends.
  F-19
 *Optional
          Redemption.* Upon the
          occurrence of certain events, the holders of Series C have the right, at
          their
          option, to require our company to redeem all or part of their shares of
          Series
          C.
  *Redemption
          Limitation* .
          If we
          are restricted from redeeming the Series C by reason of a restriction contained
          in the Nevada General Corporation Law, the redemption date for such shares
          shall
          be extended to the date that is 30 days after the date on which we are
          no longer
          so restricted from redeeming the shares.
  *Anti-Dilution
          protection.* The
          Series C is protected against dilution upon the occurrence of certain events,
          including but not limited to, sales of shares of common stock for less
          than fair
          market value or the then conversion price per share.
  *Voting
          Rights.* Except
          as otherwise provided by law, the holders of Series C are not entitled
          to vote
          on any matter. **
  In
          February 2005, Alexandra elected to convert their entire Series C holdings
          and
          warrants, plus accrued dividends into 703 shares of Series D Preferred
          Stock and
          warrants to purchase 150,750 shares of Common Stock resulting in the full
          amortization of deferred financing costs and accretion of preferred stock
          to
          liquidation value.
  For
          the
          year ended December 31, 2005, the deemed dividend, amortization of deferred
          financing costs and accretion of preferred stock to liquidation value on
          the
          Series C was $3,000, $31,000 and $165,000 respectively.
  During
          the year ended December 31, 2005, The Company issued 15,703 shares of Series
          D
          convertible preferred stock as (“ **Series
          D** ”).
          The
          material terms of the Series D are as follows:
  *Dividends.* Holders
          of Series D are entitled to cumulative dividends at the rate of $70 per
          annum
          per share. Such dividends may be paid in cash or, at our company’s option and
          subject to certain limitations, accrued until the shares of Series D to
          which
          such dividends relate are redeemed or converted into shares of common
          stock.
  *Warrants.* In
          connection with the issuance of the Series D, the Company issued warrants
          to the
          holders to purchase 3,365,035 shares of common stock, exercisable at $1.68
          per
          share until February 1, 2010. The fair value of the warrants was $3,373,000,
          utilizing the Black Scholes option-pricing model with the following assumption:
          105% volatility, three-year expected life, risk-free interest rate of 3.43%
          and
          a dividend yield ratio of 0%. In accordance with EITF 00-19 “Accounting for
          Derivative Financial Instruments Indexed to, and Potentially Settled in,
          a
          Company’s Own Stock”, the Company recorded a liability for the fair value of the
          warrants due to their anti-dilution features. The proceeds allocated to
          the
          warrants of $3,373,000 were recorded as debt discount to be amortized over
          the
          life of the preferred stock. Upon the holder’s optional conversion of the
          preferred stock into common stock, the unamortized debt discount balance
          will be
          recognized as additional interest expense.
  *Liquidation
          preference.* Upon any
          liquidation, dissolution or winding up of our company, to the extent not
          converted into our common stock, the holders of Series D shall be entitled
          to
          payment of $1,000 per share plus an amount equal to any accrued and unpaid
          dividends, before any distribution is made to the holders of our common
          stock.
          If the assets to be distributed are insufficient to permit such payment,
          then
          the entire assets available for distribution shall be distributed after
          distribution to the holders of Series B and Series A.
  *Optional
          conversion.* A holder
          of shares of Series D may convert any or all of such shares and all accrued
          and
          unpaid dividends thereon, at the holder’s option at any time, into shares of our
          common stock at $1.40 per share. To exercise such conversion rights, a
          holder
          must give us acceptable notice and we are then obligated to issue the number
          of
          shares of common stock into which the Series D is being converted within
          five
          trading days after the conversion notice is given.
  *Mandatory
          Redemption.* We are
          required to redeem the outstanding Series D on February 1, 2008. We must
          give a
          redemption notice to each holder not less than 30 or more than 35 business
          days
          prior to February 1, 2008. On such redemption date, or such later date
          as a
          holder shall surrender the certificate for the Series D being redeemed,
          we must
          pay to each holder $1,000 per share plus the amount of any accrued but
          unpaid
          dividends.
  F-20
 *Optional
          Redemption.* Upon the
          occurrence of certain events, the holders of Series D have the right, at
          their
          option, to require our company to redeem all or part of their shares of
          Series
          D.
  *Redemption
          Limitation* .
          If we
          are restricted from redeeming the Series D by reason of a restriction contained
          in the Nevada General Corporation Law, the redemption date for such shares
          shall
          be extended to the date that is 30 days after the date on which we are
          no longer
          so restricted from redeeming the shares.
  *Anti-Dilution
          protection.* The
          Series D is protected against dilution upon the occurrence of certain events,
          including but not limited to, sales of shares of common stock for less
          than fair
          market value or the then conversion price per share.
  *Voting
          Rights.* Except
          as otherwise provided by law, the holders of Series D are not entitled
          to vote
          on any matter. **
  For
          the
          year ended December 31, 2005, the deemed dividend, amortization of deferred
          financing costs and accretion of preferred stock to liquidation value on
          the
          Series D was $1,005,000, $247,000 and $1,807,000 respectively.
  **Note
          G - Capital Deficit**
  **[1]**  **Stock
          issuances:**
  In
          December 2003, the Company issued 250,000 shares of common stock at $1.20
          per
          share and issued 125,000 warrants with an exercise price of $1.20 per share,
          which expire on December 12, 2007, to Alexandra Global Master Fund, Ltd,
          for
          gross proceeds of $300,000 net of financing costs paid to placement agent
          of
          $24,000. The Company issued 50,000 warrants with an exercise price of $1.20
          per
          share, which expires on December 11, 2008, to RG Securities and HCFP Brenner
          Securities, LLC, placement agent.
  In
          January 2004, the Company issued to Alexandra Global Master Fund Ltd. warrants
          to purchase 125,000 shares of common stock an exercise price of $1.20 per
          share,
          which expire on December 12, 2007, pursuant to the Bridge Agreement between
          the
          Company and Alexandra dated December 12, 2003.
  In
          February 2004, the Company issued 681,000 shares of common stock to four
          individuals in the acquisition of Over-the-Air Wireless, Inc. in consideration
          for intangible assets valued at $530,000.
  In
          March
          2004, the Company issued 2,090 shares of common stock to one individual
          pursuant
          to an employment agreement valued at approximately $3,000.
  In
          May
          2004, the Company issued 50,000 shares of common stock to an investor relations
          firm which, in addition to cash fees paid monthly, as advance compensation
          for
          investor relations services to be provided over twelve months. The value
          of the
          shares at the time of issuance was $67,500 which was amortized from May
          2004
          through April 2005.
  In
          June
          2004, the Company issued 88,861 shares of common stock to Alexandra Global
          Master Fund Ltd. as payment for accrued interest, amounting to $104,000,
          through
          May 31, 2004, on its $1.7 million and $2.3 million 9% senior convertible
          notes
          due 2007.
  In
          September 2004, the Company issued 65,674 shares of common stock to Alexandra
          Global Master Fund Ltd. as payment for accrued interest, amounting to $91,000,
          through August 31, 2004, on its $1.7 million and $2.3 million 9% senior
          convertible notes due 2007.
  F-21
 In
          December 2004, the Company issued 70,575 shares of common stock to Alexandra
          Global Master Fund Ltd. as payment for accrued interest, amounting to $92,000,
          through November 30, 2004, on its $1.7 million and $2.3 million 9% senior
          convertible notes due 2007.
  In
          December 2005, the Company issued 759,000 shares of common stock as a result
          of
          conversion of Series D. The issuance of shares was with respect to $1,062,000
          in
          principal and deemed dividends.
  For
          the
          years ended December 31, 2005 and 2004, the Company issued 130,000 and
          371,000
          shares of common stock, respectively, resulting from the exercise of warrants.
          The Company received proceeds of $123,000 and $353,000
          respectively.
  For
          the
          year ended December 31, 2005 and 2004, the Company issued 362,000 and 905,000
          shares of common stock, respectively, as a result of conversion of Senior
          Subordinated Convertible Promissory Notes. The issuance of shares was with
          respect to $345,000 and $935,000, respectively, in principal and accrued
          interest.
  **[2]**  **Stock
          option plan:**
  On
          April
          1, 2002, the Company established an Equity Incentive Plan (the “Original Plan”)
          under which stock options may be granted. The Original Plan was replaced
          by an
          Equity Incentive Plan on September 29, 2003 (the “Plan”) in connection with the
          reverse acquisition of Woodland. Options under the Original Plan were replaced
          with comparable options under the Plan. A stock option grant allows the
          holder
          of the option to purchase a share of the Company’s common stock in the future at
          a stated price. The Plan is administered by the Compensation Committee
          of the
          Board of Directors, which determines the individuals to whom the options
          shall
          be granted, as well as the terms and conditions of each option grant, the
          option
          price and the duration of each option, which cannot be more than ten
          years.
  **Year
                    Ended**
                  **December
                    31,**
                  **2005**
                
                **Year
                    Ended**
                  **December
                    31,**
                  **2004****Shares**
                
                **Weighted
                    Average Exercise**
                  **Price**
                
                **Shares**
                
                **Weighted
                    Average Exercise**
                  **Price**Options
                    outstanding at beginning of period
                
                
                3,828,000
                
                $
                1.34
                
                
                2,282,000
                
                $
                1.21Granted
                
                
                1,568,000
                
                $
                1.66
                
                
                4,018,000
                
                $
                1.35Cancelled
                
                
                (2,989,000
                )
                $
                1.44
                
                
                (2,472,000
                )
                $
                1.24Exercised
                
                
                (73,000
                )
                
                
                
                
                —Outstanding
                    at end of period
                
                
                2,334,000
                
                $
                1.43
                
                
                3,828,000
                
                $
                1.34
  The
          following summarizes information about stock options at December 31,
          2005:
  **Options
                    Outstanding**
                
                **Options
                    Exercisable****Number**
                  **Outstanding**
                
                **Exercise**
                  **Prices**
                
                **Weighted**
                  **Average**
                  **Exercise**
                  **Price**
                
                **Weighted**
                  **Average**
                  **Remaining**
                  **Life
                    in**
                  **Years**
                
                **Number**
                  **Exercisable**
                
                **Weighted**
                  **Average**
                  **Exercise**
                  **Price**63,000
                
                $
                0.80
                
                $
                0.80
                
                
                6.26
                
                
                63,000
                
                $
                0.80110,000
                
                $
                0.95
                
                $
                0.95
                
                
                9.76
                
                
                12,000
                
                $
                0.95657,000
                
                $
                1.25
                
                $
                1.25
                
                
                8.26
                
                
                337,000
                
                $
                1.25349,000
                
                $
                1.30
                
                $
                1.30
                
                
                8.76
                
                
                234,000
                
                $
                1.30130,000
                
                $
                1.41
                
                $
                1.41
                
                
                9.53
                
                
                -
                
                $
                1.41145,000
                
                $
                1.45
                
                $
                1.45
                
                
                7.29
                
                
                -
                
                $
                1.45250,000
                
                $
                1.50
                
                $
                1.50
                
                
                7.89
                
                
                145,000
                
                $
                1.5024,000
                
                $
                1.55
                
                $
                1.55
                
                
                9.09
                
                
                250,000
                
                $
                1.55177,000
                
                $
                1.69
                
                $
                1.69
                
                
                9.38
                
                
                24,000
                
                $
                1.6955,000
                
                $
                1.77
                
                $
                1.77
                
                
                9.23
                
                
                -
                
                $
                1.7732,000
                
                $
                1.81
                
                $
                1.81
                
                
                8.98
                
                
                11,000
                
                $
                1.81192,000
                
                $
                1.88
                
                $
                1.88
                
                
                9.11
                
                
                -
                
                $
                1.8875,000
                
                $
                1.94
                
                $
                1.94
                
                
                9.17
                
                
                -
                
                $
                1.9475,000
                
                $
                1.99
                
                $
                1.99
                
                
                9.19
                
                
                75,000
                
                $
                1.992,334,000
                
                
                
                
                
                
                
                
                
                
                
                1,151,000
                
                $
                1.36
   F-22
  **Note
          H - Significant Customer Concentration**
  The
          Company’s customers primarily consist of major wireless carriers. Revenue and
          accounts receivable from the Company’s customers which account for more than 10%
          of the Company’s revenues and accounts receivable are as follows:
  ****Year
                    Ended****
                  ****December
                    31,****2005****
                
                **Year
                      Ended**
                    **December
                      31,****2004**
                
                **Year
                    Ended**
                  **December
                    31,****2005**
                
                **Year
                    Ended**
                  **December
                    31,****2004**Customer
                    A
                45.4
                %
                59.5
                %
                
                53.3
                %
                
                35.2
                %Customer
                    B
                5
                
                17.2
                %
                
                4.5
                %
                
                31.1
                %Customer
                    C
                5
                
                13.3
                %
                
                16.2
                %
                
                26.7
                %Customer
                    D
                -
                
                -
                
                
                11.5
                %
                
                2.1
                %
  **Note
          I - Income Taxes**
  As
          of
          December 31, 2005, the Company had net operating loss carryforwards ("NOL")
          for
          federal income tax purposes of approximately $27,846,000, which expires
          in
          various amount through 2025. The utilization of a portion of the NOL is
          limited
          each year as a result of an "ownership change" (as defined by Section 382
          of the
          Internal Revenue Code of 1986, as amended). The Company's remaining NOL's
          may be
          subject to further limitation due to past and future issuances of stock.
          Management does not expect the Company to be taxable in the near future
          and,
          accordingly, has established a 100% valuation allowance against the deferred
          tax
          asset created by the net operating loss carryforwards at December
          31, 2005 and 2004. The valuation allowance increased $4,412,000 and $3,054,000,
          respectively for the years ended December 31, 2005, and December 31, 2004,
          respectively.
  **Note
          J - Intangible Asset**
  Intangible
          assets with definite lives, consisting of technology received in connection
          with
          acquisitions, are amortized over their estimated useful lives ranging from
          three
          to five years. In accordance with SFAS 144, “Accounting for the Impairment or
          Disposal of Long-Lived Assets,” the carrying value of intangible assets with
          definite lives and other long-lived assets is reviewed on a regular basis
          for
          the existence of facts that may indicate that the assets are impaired.
          Such an
          asset is considered impaired when its estimated future cash flows are less
          than
          the amount of its carrying value. If the carrying value of this asset is
          deemed
          not recoverable, it is adjusted downwards to the asset’s estimated fair
          value.
  **Note
          K - Subsequent Events**
  On
          March
          8, 2006, Napster gave notice, per the contract terms, that the existing
          agreement would be terminated as of May 2006. We are currently in the process
          of
          negotiating an extension of the contract which may provide for terms different
          than the original contract. We may not be successful in negotiating an
          extension.
  On
          April
          25, 2006, we entered into a non-binding letter of intent with New Motion,
          Inc.,
          relating to the reverse acquisition of the Company by New Motion, with
          Dijji
          surviving as a publicly-held company. Upon the consummation of the proposed
          transaction, stockholders of Dijji would hold shares that represent
          approximately 12.5% of the issued and outstanding shares of the combined
          company’s common stock on a fully-diluted and as-converted basis. New Motion’s
          stockholders (including holders of securities convertible or exercisable
          into
          New Motion stock) would hold shares that represent approximately 87.5%
          of the
          issued and outstanding shares of the combined company’s common stock on a
          filly-diluted and as-converted basis. The parties have not entered into
          a
          definitive agreement relating to the proposed exchange transaction. The
          letter
          of intent entered into between the parties does not bind either party to
          consummate any transaction unless and until such terms are negotiated and
          set
          forth in a definitive agreement that is properly approved by the respective
          boards of directors of each party, and executed by each party. There can
          be no
          assurances that a definitive agreement will be reached on terms acceptable
          to
          the Company, if at all, and, if reached, that the acquisition will be
          completed.
  F-23
 **Note
          L - Restatement**
  As
          described in Note A[1], the Company can not be sure that it has adequate
          authorized shares of common stock for the conversion or exercise of all
          outstanding instruments (due to anti-dilution conversion features), EITF
          No.
          00-19 requires the classification of these instruments as liabilities.
          Therefore, the Company is required to record the fair value of the warrants
          on
          our consolidated balance sheets. Changes in the fair values of these instruments
          will result in adjustments to the amount of the recorded liabilities and
          the
          corresponding gain or loss will be recorded in our consolidated statements
          of
          operations. As a result, the Company has restated its consolidated balance
          sheets and consolidated statements of operations for the years ended 2004
          and
          2003 and quarterly data for the first second and third quarter of 2005.
          The
          changes described herein are all non-cash and has no effect on the previously
          accepted amounts of net cash used in operation for all the periods.
  The
          unaudited 2005, 2004 and 2003 interim condensed consolidated balance sheets
          and
          statement of operations, as previously reported, adjusted and restated,
          are as
          follows (in thousands, except for per share data):
  **Condensed
            Consolidated Balance Sheets**
  **September
                      30,**
                  
                  **June
                      30,**
                  
                  **March
                      31,****2005**
                  
                  **2005**
                  
                  **2005****As
                      previously**
                  
                  
                  
                  
                  
                  **As**
                  
                  **As
                      previously**
                  
                  
                  
                  
                  
                  **As**
                  
                  **As
                      previously**
                  
                  
                  
                  
                  
                  **As****reported**
                  
                  **Adjustments**
                  
                  
                  
                  **restated**
                  
                  **reported**
                  
                  **Adjustments**
                  
                  
                  
                  **restated**
                  
                  **reported**
                  
                  **Adjustments**
                  
                  
                  
                  **restated**Deferred
                      financing costs
                  
                  $
                  465
                  
                  $
                  8
                  
                  
                  a
                  
                  $
                  473
                  
                  $
                  565
                  
                  $
                  11
                  
                  
                  a
                  
                  $
                  576
                  
                  $
                  665
                  
                  $
                  14
                  
                  
                  a
                  
                  $
                  679Total
                      assets
                  
                  $
                  10,145
                  
                  $
                  8
                  
                  
                  
                  
                  $
                  10,153
                  
                  $
                  12,642
                  
                  $
                  11
                  
                  
                  
                  
                  $
                  12,653
                  
                  $
                  15,799
                  
                  $
                  14
                  
                  
                  
                  
                  $
                  15,813Short-term
                      portion of seniorconvertible
                      note payableLong-term
                      portion of seniorconvertible
                      note payable
                  
                  $
                  2,599
                  
                  $
                  1,625
                  
                  
                  b
                  
                  $
                  4,224
                  
                  $
                  3,149
                  
                  $
                  1,973
                  
                  
                  b
                  
                  $
                  5,122
                  
                  $
                  2,523
                  
                  $
                  2,325
                  
                  
                  b
                  
                  $
                  4,848Warrant
                      derivative liability
                  
                  
                  
                  
                  
                  2,235
                  
                  
                  c
                  
                  
                  2,235
                  
                  
                  
                  
                  
                  9,338
                  
                  
                  c
                  
                  
                  9,338
                  
                  
                  
                  
                  
                  14,273
                  
                  
                  c
                  
                  
                  14,273Total
                      liabilities
                  
                  
                  5,862
                  
                  
                  3,860
                  
                  
                  
                  
                  
                  9,722
                  
                  
                  4,835
                  
                  
                  11,311
                  
                  
                  
                  
                  
                  16,146
                  
                  
                  3,937
                  
                  
                  16,598
                  
                  
                  
                  
                  
                  20,535Redeemable
                      Series A ConvertiblePreferred
                      stock (mezzanine)
                  
                  
                  585
                  
                  
                  399
                  
                  
                  d
                  
                  
                  984
                  
                  
                  428
                  
                  
                  456
                  
                  
                  d
                  
                  
                  884
                  
                  
                  270
                  
                  
                  513
                  
                  
                  d
                  
                  
                  783Redeemable
                      Series B ConvertiblePreferred
                      stock (mezzanine)
                  
                  
                  1,695
                  
                  
                  392
                  
                  
                  d
                  
                  
                  2,087
                  
                  
                  1,383
                  
                  
                  443
                  
                  
                  d
                  
                  
                  1,826
                  
                  
                  1,072
                  
                  
                  494
                  
                  
                  d
                  
                  
                  1,566Redeemable
                      Series D ConvertiblePreferred
                      stock (mezzanine)
                  
                  
                  10,120
                  
                  
                  1,669
                  
                  
                  d
                  
                  
                  11,789
                  
                  
                  9,169
                  
                  
                  1,847
                  
                  
                  d
                  
                  
                  11,016
                  
                  
                  8,217
                  
                  
                  2,025
                  
                  
                  d
                  
                  
                  10,242Additional
                      pain-in capital
                  
                  
                  18,856
                  
                  
                  (14,738
                  )
                  
                  e
                  
                  
                  4,118
                  
                  
                  20,232
                  
                  
                  (15,024
                  )
                  
                  e
                  
                  
                  5,208
                  
                  
                  21,572
                  
                  
                  (15,310
                  )
                  
                  e
                  
                  
                  6,262Accumulated
                      deficit
                  
                  
                  (26,982
                  )
                  
                  8,426
                  
                  
                  
                  
                  
                  (18,556
                  )
                  
                  (23,414
                  )
                  
                  978
                  
                  
                  
                  
                  
                  (22,436
                  )
                  
                  (19,278
                  )
                  
                  (4,306
                  )
                  
                  
                  
                  
                  (23,584
                  )Total
                      capital deficit
                  
                  
                  (8,117
                  )
                  
                  (6,312
                  )
                  
                  
                  
                  
                  (14,429
                  )
                  
                  (3,173
                  )
                  
                  (14,046
                  )
                  
                  
                  
                  
                  (17,219
                  )
                  
                  2,303
                  
                  
                  (19,616
                  )
                  
                  
                  
                  
                  (17,313
                  )Total
                      liabilities and capital deficit
                  
                  $
                  10,145
                  
                  $
                  8
                  
                  
                  
                  
                  $
                  10,153
                  
                  $
                  12,642
                  
                  $
                  11
                  
                  
                  
                  
                  $
                  12,653
                  
                  $
                  15,799
                  
                  $
                  14
                  
                  
                  
                  
                  $
                  15,813
  **September
                      30,**
                  
                  
                  **June
                      30,**
                  
                  
                  **March
                      31,****2004**
                  
                  
                  **2004**
                  
                  
                  **2004****As
                      previously**
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  **As
                      previously**
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  **As
                      previously****reported**
                  
                  
                  **Adjustments**
                  
                  
                  
                  
                  
                  **As
                      restated**
                  
                  
                  **reported**
                  
                  
                  **Adjustments**
                  
                  
                  
                  
                  
                  **As
                      restated**
                  
                  
                  **reported**
                  
                  
                  **Adjustments**
                  
                  
                  
                  
                  
                  **As
                      restated**Deferred
                      financing costs
                  
                  $
                  845
                  
                  $
                  20
                  
                  
                  a
                  
                  $
                  865
                  
                  $
                  970
                  
                  $
                  22
                  
                  
                  a
                  
                  $
                  992
                  
                  $
                  998
                  
                  $
                  25
                  
                  
                  a
                  
                  $
                  1,023Total
                      assets
                  
                  $
                  5,038
                  
                  $
                  20
                  
                  
                  
                  
                  $
                  5,058
                  
                  $
                  2,991
                  
                  $
                  22
                  
                  
                  
                  
                  $
                  3,013
                  
                  $
                  4,111
                  
                  $
                  25
                  
                  
                  
                  
                  $
                  4,136Long-term
                      portion of seniorconvertible
                      note payable
                  
                  $
                  1,479
                  
                  $
                  2,900
                  
                  
                  b
                  
                  $
                  4,379
                  
                  $
                  3,451
                  
                  $
                  850
                  
                  
                  b
                  
                  $
                  4,301
                  
                  $
                  3,144
                  
                  $
                  925
                  
                  
                  b
                  
                  $
                  4,069Warrant
                      derivative liability
                  
                  
                  
                  
                  
                  8,142
                  
                  
                  c
                  
                  
                  8,142
                  
                  
                  
                  
                  
                  1,860
                  
                  
                  c
                  
                  
                  1,860
                  
                  
                  
                  
                  
                  2,617
                  
                  
                  c
                  
                  
                  2,617Total
                      liabilities
                  
                  
                  2,549
                  
                  
                  11,042
                  
                  
                  
                  
                  
                  13,591
                  
                  
                  4,326
                  
                  
                  2,710
                  
                  
                  
                  
                  
                  7,036
                  
                  
                  3,877
                  
                  
                  3,542
                  
                  
                  
                  
                  
                  7,419Redeemable
                      Series A ConvertiblePreferred
                      stock (mezzanine)
                  
                  
                  50
                  
                  
                  532
                  
                  
                  d
                  
                  
                  582
                  
                  
                  74
                  
                  
                  32
                  
                  
                  d
                  
                  
                  106Redeemable
                      Series B ConvertiblePreferred
                      stock (mezzanine)
                  
                  
                  674
                  
                  
                  371
                  
                  
                  d
                  
                  
                  1,045Additional
                      pain-in capital
                  
                  
                  14,315
                  
                  
                  (9,440
                  )
                  
                  e
                  
                  
                  4,875
                  
                  
                  8,367
                  
                  
                  (3,968
                  )
                  
                  e
                  
                  
                  4,399
                  
                  
                  7,962
                  
                  
                  (3,834
                  )
                  
                  e
                  
                  
                  4,128Accumulated
                      deficit
                  
                  
                  (12,557
                  )
                  
                  (2,485
                  )
                  
                  
                  
                  
                  (15,042
                  )
                  
                  (9,782
                  )
                  
                  1,248
                  
                  
                  
                  
                  
                  (8,534
                  )
                  
                  (7,734
                  )
                  
                  317
                  
                  
                  
                  
                  
                  (7,417
                  )Total
                      capital deficit
                  
                  
                  1,765
                  
                  
                  (11,925
                  )
                  
                  
                  
                  
                  (10,160
                  )
                  
                  (1,409
                  )
                  
                  (2,720
                  )
                  
                  
                  
                  
                  (4,129
                  )
                  
                  234
                  
                  
                  (3,517
                  )
                  
                  
                  
                  
                  (3,283
                  )Total
                      liabilities and capital deficit
                  
                  $
                  5,038
                  
                  $
                  20
                  
                  
                  
                  
                  $
                  5,058
                  
                  $
                  2,991
                  
                  $
                  22
                  
                  
                  
                  
                  $
                  3,013
                  
                  $
                  4,111
                  
                  $
                  25
                  
                  
                  
                  
                  $
                  4,136**September
                      30,****2003****As
                      previously**
                  
                  
                  
                  
                  
                  
                  
                  
                  **As****reported**
                  
                  
                  **Adjustments**
                  
                  
                  
                  
                  
                  **restated**Deferred
                      financing costs
                  
                  $
                  497
                  
                  $
                  44
                  
                  
                  a
                  
                  $
                  541Total
                      assets
                  
                  $
                  815
                  
                  $
                  44
                  
                  
                  
                  
                  $
                  859Long-term
                      portion of seniorconvertible
                      note payable
                  
                  $
                  825
                  
                  $
                  334
                  
                  
                  b
                  
                  $
                  1,159Warrant
                      derivative liability
                  
                  
                  
                  
                  
                  1,574
                  
                  
                  c
                  
                  
                  1,574Total
                      liabilities
                  
                  
                  1,281
                  
                  
                  1,908
                  
                  
                  
                  
                  
                  3,189Additional
                      pain-in capital
                  
                  
                  3,775
                  
                  
                  (1,794
                  )
                  
                  
                  
                  
                  1,981Accumulated
                      deficit
                  
                  
                  (4,251
                  )
                  
                  (70
                  )
                  
                  
                  
                  
                  (4,321
                  )Total
                      capital deficit
                  
                  
                  (466
                  )
                  
                  (1,864
                  )
                  
                  
                  
                  
                  (2,330
                  )Total
                      liabilities and capital deficit
                  
                  $
                  815
                  
                  $
                  44
                  
                  
                  
                  
                  $
                  859
 F-24
 **Condensed
            Consolidated Statement of Operations**
 **For
                      the period ended****September
                      30,**
                  
                  **June
                      30,**
                  
                  **March
                      31,****2005**
                  
                  **2005**
                  
                  **2005****As
                      previously**
                  
                  
                  
                  
                  
                  **As**
                  
                  **As
                      previously**
                  
                  
                  
                  
                  
                  **As**
                  
                  **As
                      previously**
                  
                  
                  
                  
                  
                  **As****reported**
                  
                  **Adjustments**
                  
                  
                  
                  **restated**
                  
                  **reported**
                  
                  **Adjustments**
                  
                  
                  
                  **restated**
                  
                  **reported**
                  
                  **Adjustments**
                  
                  
                  
                  **restated**Net
                      revenue
                  
                  $
                  968
                  
                  
                  
                  
                  
                  
                  
                  $
                  968
                  
                  $
                  885
                  
                  
                  
                  
                  
                  
                  
                  $
                  885
                  
                  $
                  1,060
                  
                  
                  
                  
                  
                  
                  
                  $
                  1,060Gross
                      profit / (loss)
                  
                  
                  230
                  
                  
                  
                  
                  
                  
                  
                  
                  230
                  
                  
                  5
                  
                  
                  
                  
                  
                  
                  
                  
                  5
                  
                  
                  493
                  
                  
                  
                  
                  
                  
                  
                  
                  493Operating
                      income / (loss)
                  
                  
                  (2,854
                  )
                  
                  
                  
                  
                  
                  
                  
                  (2,854
                  )
                  
                  (3,413
                  )
                  
                  
                  
                  
                  
                  
                  
                  (3,413
                  )
                  
                  (2,613
                  )
                  
                  
                  
                  
                  
                  
                  
                  (2,613
                  )Interest
                      expense
                  
                  
                  (714
                  )
                  $
                  345
                  
                  
                  f
                  
                  
                  (369
                  )
                  
                  (723
                  )
                  $
                  349
                  
                  
                  f
                  
                  
                  (374
                  )
                  
                  (855
                  )
                  $
                  398
                  
                  
                  f
                  
                  
                  (457
                  )Change
                      in fair valueof
                      warrant derivative
                  
                  
                  
                  
                  
                  7,103
                  
                  
                  g
                  
                  
                  7,103
                  
                  
                  
                  
                  
                  4,935
                  
                  
                  g
                  
                  
                  4,935
                  
                  
                  
                  
                  
                  869
                  
                  
                  g
                  
                  
                  869Net
                      income / (loss)
                  
                  
                  (3,568
                  )
                  
                  7,448
                  
                  
                  
                  
                  
                  3,880
                  
                  
                  (4,136
                  )
                  
                  5,284
                  
                  
                  
                  
                  
                  1,148
                  
                  
                  (3,468
                  )
                  
                  1,267
                  
                  
                  
                  
                  
                  (2,201
                  )Accretion
                      and deemed dividends onredeemable
                      preferred stock
                  
                  
                  (1,421
                  )
                  
                  286
                  
                  
                  h
                  
                  
                  (1,135
                  )
                  
                  (1,421
                  )
                  
                  286
                  
                  
                  h
                  
                  
                  (1,135
                  )
                  
                  (1,386
                  )
                  
                  314
                  
                  
                  h
                  
                  
                  (1,072
                  )Net
                      income / (loss) attributableto
                      common stockholders
                  
                  $
                  (4,989
                  )
                  $
                  7,734
                  
                  
                  
                  
                  $
                  2,745
                  
                  $
                  (5,557
                  )
                  $
                  5,570
                  
                  
                  
                  
                  $
                  13
                  
                  $
                  (4,854
                  )
                  $
                  1,581
                  
                  
                  
                  
                  $
                  (3,273
                  )Gain
                        / (loss) per common share -basic and diluted
                  
                  $
                  (0.57
                  )
                  $
                  0.88
                  
                  
                  
                  
                  $
                  0.31
                  
                  $
                  (0.64
                  )
                  $
                  0.64
                  
                  
                  
                  
                  $
                  0.00
                  
                  $
                  (0.58
                  )
                  $
                  0.19
                  
                  
                  
                  
                  $
                  (0.39
                  )**For
                      the period ended****September
                      30,**
                  
                  **June
                      30,**
                  
                  
                  **March
                      31,****2004**
                  
                  
                  **2004**
                  
                  
                  **2004****As
                      previously**
                  
                  
                  
                  
                  
                  
                  
                  
                  **As**
                  
                  
                  **As
                      previously**
                  
                  
                  
                  
                  
                  
                  
                  
                  **As**
                  
                  
                  **As
                      previously**
                  
                  
                  
                  
                  
                  
                  
                  
                  **As****reported**
                  
                  
                  **Adjustments**
                  
                  
                  
                  
                  
                  **restated**
                  
                  
                  **reported**
                  
                  
                  **Adjustments**
                  
                  
                  
                  
                  
                  **restated**
                  
                  
                  **reported**
                  
                  
                  **Adjustments**
                  
                  
                  
                  
                  
                  **restated**Net
                      revenue
                  
                  $
                  545
                  
                  
                  
                  
                  
                  
                  
                  $
                  545
                  
                  $
                  177
                  
                  
                  
                  
                  
                  
                  
                  $
                  177
                  
                  $
                  60
                  
                  
                  
                  
                  
                  
                  
                  $
                  60Gross
                      profit / (loss)
                  
                  
                  164
                  
                  
                  
                  
                  
                  
                  
                  
                  164
                  
                  
                  90
                  
                  
                  
                  
                  
                  
                  
                  
                  90
                  
                  
                  60
                  
                  
                  
                  
                  
                  
                  
                  
                  60Operating
                      income / (loss)
                  
                  
                  (1,884
                  )
                  
                  
                  
                  
                  
                  
                  
                  (1,884
                  )
                  
                  (1,493
                  )
                  
                  
                  
                  
                  
                  
                  
                  (1,493
                  )
                  
                  (1,188
                  )
                  
                  
                  
                  
                  
                  
                  
                  (1,188
                  )Interest
                      expense
                  
                  
                  (679
                  )
                  $
                  124
                  
                  
                  f
                  
                  
                  (555
                  )
                  
                  (549
                  )
                  $
                  73
                  
                  
                  f
                  
                  
                  (476
                  )
                  
                  (419
                  )
                  $
                  50
                  
                  
                  f
                  
                  
                  (369
                  )Change
                      in fair valueof
                      warrant derivative
                  
                  
                  
                  
                  
                  (3,857
                  )
                  
                  g
                  
                  
                  (3,857
                  )
                  
                  
                  
                  
                  858
                  
                  
                  g
                  
                  
                  858
                  
                  
                  
                  
                  
                  78
                  
                  
                  g
                  
                  
                  78Net
                      income / (loss)
                  
                  
                  (2,563
                  )
                  
                  (3,733
                  )
                  
                  
                  
                  
                  (6,296
                  )
                  
                  (2,042
                  )
                  
                  931
                  
                  
                  
                  
                  
                  (1,111
                  )
                  
                  (1,607
                  )
                  
                  128
                  
                  
                  
                  
                  
                  (1,479
                  )Accretion
                      and deemed dividends onredeemable
                      preferred stock
                  
                  
                  (212
                  )
                  
                  35
                  
                  
                  h
                  
                  
                  (177
                  )
                  
                  (6
                  )
                  
                  1
                  
                  
                  h
                  
                  
                  (5
                  )Net
                      income / (loss) attributableto
                      common stockholders
                  
                  $
                  (2,775
                  )
                  $
                  (3,698
                  )
                  
                  
                  
                  $
                  (6,473
                  )
                  $
                  (2,048
                  )
                  $
                  932
                  
                  
                  
                  
                  $
                  (1,116
                  )
                  $
                  (1,607
                  )
                  $
                  128
                  
                  
                  
                  
                  $
                  (1,479
                  )Gain
                      / (loss) per common share -basic
                      and diluted
                  
                  $
                  (0.39
                  )
                  $
                  (0.52
                  )
                  
                  
                  
                  $
                  (0.91
                  )
                  $
                  (0.29
                  )
                  $
                  0.13
                  
                  
                  
                  
                  $
                  (0.16
                  )
                  $
                  (0.25
                  )
                  $
                  0.02
                  
                  
                  
                  
                  $
                  (0.23
                  )**For
                      the period ended****September
                      30,****2003****As
                      previously**
                  
                  
                  
                  
                  
                  
                  
                  
                  **As****reported**
                  
                  
                  **Adjustments**
                  
                  
                  
                  
                  
                  **restated**Net
                      revenue
                  
                  $
                  4
                  
                  
                  
                  
                  
                  
                  
                  $
                  4Gross
                      profit / (loss)
                  
                  
                  4
                  
                  
                  
                  
                  
                  
                  
                  
                  4Operating
                      income / (loss)
                  
                  
                  (1,334
                  )
                  
                  
                  
                  
                  
                  
                  
                  (1,334
                  )Interest
                      expense
                  
                  
                  (187
                  )
                  $
                  47
                  
                  
                  f
                  
                  
                  (140
                  )Change
                      in fair valueof
                      warrant derivative
                  
                  
                  
                  
                  
                  (117
                  )
                  
                  g
                  
                  
                  (117
                  )Net
                      income / (loss)
                  
                  
                  (1,521
                  )
                  
                  (70
                  )
                  
                  
                  
                  
                  (1,591
                  )Gain
                      / (loss) per common share -basic
                      and diluted
                  
                  
                  (0.30
                  )
                  
                  (0.01
                  )
                  
                  
                  
                  
                  (0.31
                  )
   F-25
  (a)
              Restatement
                  for warrants issued in connection with the Company’s Convertible
                  Promissory Notes. The fair value of the warrants was originally
                  recorded
                  as equity. Per EITF No. 00-19, the fair value of the warrants is
                  required
                  to be reclassified was recorded as deferred financing to be amortized
                  over
                  the life of the convertible notes.  (b)
              Restatement
                  for warrants issued in connection with the Company’s Convertible
                  Promissory Notes. The fair value of the warrants was originally
                  recorded
                  as equity. Per EITF No. 00-19, the fair value of the warrants is
                  required
                  to be reclassified as a liability.  (c)
              Restatement
                  for change on the fair value of warrant derivative. The fair value
                  of the
                  warrants was originally recorded as equity. Per EITF No. 00-19,
                  the fair
                  value of the warrants was recorded as a liability on the Company’s
                  consolidated balance sheet. Changes in the fair values of these
                  warrants
                  will result in adjustments to the amount of the reclassified liabilities
                  and the corresponding income or loss will be recorded in the consolidated
                  statements of operations.  (d)
              Restatement
                  for warrants issued in connection with the Company’s Convertible Preferred
                  Stock. The fair value of the warrants was originally recorded as
                  equity.
                  Per EITF No. 00-19, the fair value of the warrants is required
                  to be
                  reclassified as debt discount to be amortized over the life of
                  the
                  convertible preferred stock.  (e)
              Restatement
                  for warrants issued in connection with the Company’s Convertible Preferred
                  Stock and Convertible Promissory Notes. The fair value of the warrants
                  was
                  originally recorded as equity. Per EITF No. 00-19, the fair value
                  of the
                  warrants is required to be reclassified as debt discount to be
                  amortized
                  over the life of the convertible preferred
                  stock.  (f)
              Restatement
                  for warrants issued in connection with the Company’s Convertible
                  Promissory Notes. The fair value of the warrants was originally
                  recorded
                  as equity. Per EITF No. 00-19, the fair value of the warrants was
                  reclassified as either debt discount or deferred financing to be
                  amortized
                  over the life of the convertible notes. (Increase) / decrease in
                  interest
                  expense associated with convertible notes was $345,000, $349,000
                  and
                  $398,000 for the periods ended September 30, June 30, and March
                  31, 2005,
                  respectively, $124,000, $73,000 and $50,000 for the periods ended
                  September 30, June 30, and March 31, 2004, respectively, and $47,000
                  for
                  the period ended September 30, 2003.   F-26
  (g)
              Restatement
                  for change on the fair value of warrant derivative. The fair value
                  of the
                  warrants was originally recorded as equity. Per EITF No. 00-19,
                  the fair
                  value of the warrants is required to be recorded as a liability
                  on the
                  Company’s consolidated balance sheet. Changes in the fair values of these
                  warrants will result in adjustments to the amount of the recorded
                  liabilities and the corresponding gain or loss will be recorded
                  in the
                  consolidated statements of operations. Gain / (loss) on the fair
                  value of
                  warrant derivatives was $7,103,000, $4,935,000 and $869,000 for
                  the
                  periods ended September 30, June 30, and March 31, 2005, respectively,
                  ($3,857,000), $858,000 and $78,000 for the periods ended September
                  30,
                  June 30, and March 31, 2004, respectively, and ($117,000) for the
                  period
                  ended September 30, 2003.  (h)
              Restatement
                  for warrants issued in connection with the Company’s Convertible Preferred
                  Stock. The fair value of the warrants was originally recorded as
                  equity.
                  Per EITF No. 00-19, the fair value of the warrants was recorded
                  as either
                  debt discount to be amortized over the life of the convertible
                  preferred
                  stock. (Increase) / decrease in interest expense associated with
                  convertible notes was $286,000, $286,000 and $314,000 for the periods
                  ended September 30, June 30, and March 31, 2005, respectively,
                  $35,000 and
                  $1,000 for the periods ended September 30 and June 30, 2004,
                  respectively.  
 F-27
   SIGNATURES
  In
          accordance with Section 13 or 15(d) of the Exchange Act, the registrant
          has
          caused this report to be signed on its behalf by the undersigned, thereunto
          duly
          authorized.
   DIJJI
                    CORP.Dated: April
                    28, 2006
                  By:
                  /s/ Alexander
                    U. ConradAlexander
                      U. Conrad,
                      Interim
                        Chief Executive Officer
                      (principal
                        executive officer)DIJJI CORP.Dated:
                      April 28, 2006
                  By:
                  /s/ Michael C. DunnMichael
                        C. Dunn,
                      Chief
                        Financial Officer
                      (principal
                        financial and accounting officer)
  In
          accordance with the Exchange Act, this report has been signed below by
          the
          following persons on behalf of the registrant and in the capacities and
          on the
          dates indicated.
    **Signature**
                
                **Title**
                
                **Date**/s/
                    Rex Jackson
                
                Director
                
                April
                    27, 2006Rex
                    Jackson/s/
                    Alexander U. Conrad
                
                Director
                
                April
                    27, 2006Alexander
                    U. Conrad/s/
                    L. Derrick Ashcroft
                
                Director
                
                April
                    27, 2006Derrick
                    AshcroftDirector
                
                April
                    27, 2006Vishal
                    Bhutani/s/
                    Paul Eibeler
                
                Director
                
                April
                    27, 2006Paul
                    Eibeler
 
 
 EXHIBIT
          INDEX
  (a)
          Exhibits
  Number  Description
 2
                  Agreement
                      and Plan of Reorganization, dated September 19, 2003, among
                      Woodland
                      Hatchery, Inc., Dwango North America, Inc. and the securityholders
                      of
                      Dwango listed therein (incorporated by reference to Exhibit
                      2.1 to the
                      Registrant’s Current Report on Form 8-K (Date of Report: September 29,
                      2003) filed with the Securities and Exchange Commission on
                      October 7,
                      2003)
 3.1
                  Articles
                      of Incorporation, as amended to date (incorporated by reference
                      to
                      Exhibits 3.1 to the Registration Statement on Form SB-2 filed
                      with the
                      Securities and Exchange Commission on September 6, 2001 and
                      Exhibit 3.1 to
                      the Registrant’s Current Report on Form 8-K (Date of Report: September 29,
                      2003) filed with the Securities and Exchange Commission on
                      October 7,
                      2003)
 3.2
                  Certificate
                      of Designations of Series A (incorporated by reference to Exhibit
                      3.1 to
                      the Registrant’s Current Report on Form 8-K (Date of Report: June 14,
                      2004) filed with the Securities and Exchange Commission on
                      June 21,
                      2004)
 3.3
                  Amendment
                      to Certificate of Designations of Series A (incorporated by
                      reference to
                      Exhibit 3.1 to the Registrant’s Current Report on Form 8-K (Date of
                      Report: August 25, 2004) filed with the Securities and Exchange
                      Commission
                      on August 31, 2004
 3.4
                  Certificate
                      of Designations of Series B (incorporated by reference to Exhibit
                      3.2 to
                      the Registrant’s Current Report on Form 8-K (Date of Report: August 25,
                      2004) filed with the Securities and Exchange Commission on
                      August 31,
                      2004
 3.5
                  Certificate
                      of Designations of Series C Convertible Preferred Stock (incorporated
                      by
                      reference to Exhibit 3.1 to the Registrant’s Current Report on Form 8-K
                      (Date of Report: January 12, 2005) filed with the Securities
                      and Exchange
                      Commission on January 18, 2005
 3.6
                  Certificate
                      of Designations of Series D Convertible Preferred Stock (incorporated
                      by
                      reference to Exhibit 3.1 to the Registrant’s Current Report on Form 8-K
                      (Date of Report: February 1, 2005) filed with the Securities
                      and Exchange
                      Commission on February 3, 2005
 3.7
                  Amended
                      and Restated Bylaws of the Registrant (incorporated by reference
                      to
                      Exhibit 3.2 to the Registrant’s Current Report on Form 8-K (Date of
                      Report: June 1, 2004) filed with the Securities and Exchange
                      Commission on
                      June 3, 2004)
 4.1
                  Specimen
                      Common Stock Certificate (incorporated by reference to Exhibit
                      3 the Form
                      8-A filed with the Securities and Exchange Commission on June
                      3,
                      2004)
 4.2
                  Form
                      of 8% Senior Convertible Promissory Note due 2006 (incorporated
                      by
                      reference to Exhibit 4.1 to the Registrant’s Current Report on Form 8-K
                      (Date of Report: September 29, 2003) filed with the Securities
                      and
                      Exchange Commission on October 7,
                      2003)
 4.3
                  9%
                      Senior Convertible Note due 2007 issued to Alexandra Global
                      Master Fund
                      Ltd. dated January 8, 2004 (incorporated by reference to Exhibit
                      4.4 to
                      the Registrant’s Current Report on Form 8-K (Date of Report: December 12,
                      2003) filed with the Securities and Exchange Commission on
                      January 16,
                      2004)
 4.4
                  Form
                      of Warrants to purchase 41,722 shares of common stock issued
                      in August
                      2002 (incorporated by reference to Exhibit 4.2 to the Registrant’s Current
                      Report on Form 8-K (Date of Report: September 29, 2003) filed
                      with the
                      Securities and Exchange Commission on October 7,
                      2003)
 4.5
                  Form
                      of Warrants to purchase an aggregate of 83,444 shares of common
                      stock
                      (incorporated by reference to Exhibit 4.3 to the Registrant’s Current
                      Report on Form 8-K (Date of Report: September 29, 2003) filed
                      with the
                      Securities and Exchange Commission on October 7,
                      2003)
 4.6
                  Form
                      of Warrants to purchase an aggregate of 2,086,037 shares of
                      common stock
                      (incorporated by reference to Exhibit 4.4 to the Registrant’s Current
                      Report on Form 8-K (Date of Report September 29, 2003) filed
                      with the
                      Securities and Exchange Commission on October 7,
                      2003)
    
  4.7
                  Form
                      of Warrants to purchase an aggregate of 417,208 shares of common
                      stock
                      issued to HCFP/Brenner Securities, LLC and RG Securities, LLC
                      for acting
                      as placement agent in connection with the September 2003 private
                      placement
                      (incorporated by reference to Exhibit 4.7 to the Registrant’s Annual
                      Report on Form 10-KSB for the year ended December 31, 2003
                      filed with the
                      Securities and Exchange Commission on April 15,
                      2004)
 4.8
                  Form
                      of Bridge Warrants issued to Alexandra Global Master Fund (incorporated
                      by
                      reference to Exhibit 4.2 to the Registrant’s Current Report on Form 8-K
                      (Date of Report: December 12, 2003) filed with the Securities
                      and Exchange
                      Commission on January 16, 2004)
 4.9
                  Form
                      of Warrants to purchase an aggregate of 272,784 shares of common
                      stock
                      issued to HCFP Brenner Securities and RG Securities, LLC (incorporated
                      by
                      reference to Exhibit 4.9 to the Registrant’s Annual Report on Form 10-KSB
                      for the year ended December 31, 2003 filed with the Securities
                      and
                      Exchange Commission on April 15,
                      2004)
 4.10
                  Warrant
                      issued to Alexandra Global Master Fund Ltd. dated January 8,
                      2004
                      (incorporated by reference to Exhibit 4.5 to the Registrant’s Current
                      Report on Form 8-K (Date of Report: December 12, 2003) filed
                      with the
                      Securities and Exchange Commission on January 16,
                      2004)
 4.11
                  Form
                      of Registration Rights Agreement relating to 834,465 shares
                      of common
                      stock and 83,444 shares of common stock underlying warrants
                      issued by the
                      registrant in October 2002 (incorporated by reference to Exhibit
                      4.11 to
                      the Registrant’s Annual Report on Form 10-KSB for the year ended December
                      31, 2003 filed with the Securities and Exchange Commission
                      on April 15,
                      2004)
 4.12
                  Form
                      of Registration Rights Agreement relating to shares of common
                      stock
                      underlying 8% senior convertible notes due 2006 and related
                      warrants
                      issued by the registrant in offering completed in September
                      2003
                      (incorporated by reference to Exhibit 4.12 to the Registrant’s Annual
                      Report on Form 10-KSB for the year ended December 31, 2003
                      filed with the
                      Securities and Exchange Commission on April 15,
                      2004)
 4.13
                  Registration
                      Rights Agreement, dated February 4, 2004, among Dwango North
                      America Corp.
                      and the former shareholders of Over-the-Air Wireless, Inc.
                      (incorporated
                      by reference to Exhibit 10.2 to the Registrant’s Current Report Form 8-K
                      (Date of Report: February 4, 2004) filed with the Securities
                      and Exchange
                      Commission on February 19, 2004)
 4.14
                  9%
                      Senior Convertible Note due 2007 issued to Alexandra Global
                      Master Fund
                      Ltd. dated March 19, 2004 (incorporated by reference to Exhibit
                      4.2 to the
                      Registrant’s Current Report on Form 8-K (Date of Report: March 19, 2004)
                      filed with the Securities and Exchange Commission on March
                      29,
                      2004)
 4.15
                  Warrant
                      issued to Alexandra Global Master Fund Ltd., dated March 19,
                      2004
                      (incorporated by reference to Exhibit 4.3 to the Registrant’s Current
                      Report on Form 8-K (Date of Report: March 19, 2004) filed with
                      the
                      Securities and Exchange Commission on March 29,
                      2004)
 4.16
                  Subscription
                      Agreement, dated June 14, 2004, between Dwango North America
                      Corp. and
                      Alexandra Global Master Fund Ltd. (incorporated by reference
                      to Exhibit
                      4.1 to the Registrant’s Current Report on Form 8-K (Date of Report: June
                      14, 2004) filed with the Securities and Exchange Commission
                      on June 21,
                      2004)
 4.17
                  Warrant
                      issued to Alexandra Global Master Fund Ltd. dated June 14,
                      2004
                      (incorporated by reference to Exhibit 4.2 to the Registrant’s Current
                      Report on Form 8-K (Date of Report: June 14, 2004) filed with
                      the
                      Securities and Exchange Commission on June 21,
                      2004)
 4.18
                  Subscription
                      Agreement, dated July 2, 2004, between Dwango North America
                      Corp. and
                      Alexandra Global Master Fund Ltd. (incorporated by reference
                      to Exhibit
                      4.1 to the Registrant’s Current Report on Form 8-K (Date of Report: July
                      2, 2004) filed with the Securities and Exchange Commission
                      on July 8,
                      2004)
 4.19
                  Warrant
                      issued to Alexandra Global Master Fund Ltd. dated July 2, 2004
                      (incorporated by reference to Exhibit 4.2 to the Registrant’s Current
                      Report on Form 8-K (Date of Report: July 2, 2004) filed with
                      the
                      Securities and Exchange Commission on July 8,
                      2004)
 4.20
                  Subscription
                      Agreement, dated August 2, 2004, between Dwango North America
                      Corp. and
                      Alexandra Global Master Fund Ltd. (incorporated by reference
                      to Exhibit
                      4.1 to the Registrant’s Current Report on Form 8-K (Date of Report: August
                      2, 2004) filed with the Securities and Exchange Commission
                      on August 5,
                      2004)
 4.21
                  Warrant
                      issued to Alexandra Global Master Fund Ltd. dated August 2,
                      2004
                      (incorporated by reference to Exhibit 4.2 to the Registrant’s Current
                      Report on Form 8-K (Date of Report: August 2, 2004) filed with
                      the
                      Securities and Exchange Commission on August 5,
                      2004)
   37
  4.22
                    Subscription
                        Agreement, dated August 26, 2004, between Dwango North America
                        Corp. and
                        the investors named therein (incorporated by reference to
                        Exhibit 4.1 to
                        the Registrant’s Current Report on Form 8-K (Date of Report: August 25,
                        2004) filed with the Securities and Exchange Commission on
                        August 31,
                        2004)4.23
                    Form
                        of Warrant issued to investors in August 2004 Series B financing
                        (incorporated by reference to Exhibit 4.2 to the Registrant’s Current
                        Report on Form 8-K (Date of Report: August 25, 2004) filed
                        with the
                        Securities and Exchange Commission on August 31, 2004)4.24
                    Subscription
                        Agreement, dated January 12, 2005, between Dwango North America
                        Corp. and
                        Alexandra Global Master Fund Ltd. (incorporated by reference
                        to Exhibit
                        4.1 to the Registrant’s Current Report on Form 8-K (Date of Report:
                        January 12, 2005) filed with the Securities and Exchange
                        Commission on
                        January 18, 2005)4.25
                    Warrant
                        issued to Alexandra Global Master Fund Ltd. dated January
                        12, 2005
                        (incorporated by reference to Exhibit 4.2 to the Registrant’s Current
                        Report on Form 8-K (Date of Report: January 12, 2005) filed
                        with the
                        Securities and Exchange Commission on January 18, 2005)4.26
                    Subscription
                        Agreement, dated February 1, 2005, between Dwango North America
                        Corp. and
                        the investors named therein (incorporated by reference to
                        Exhibit 4.1 to
                        the Registrant’s Current Report on Form 8-K (Date of Report: February 1,
                        2005) filed with the Securities and Exchange Commission on
                        February 3,
                        2005)4.27
                    Form
                        of Warrant to purchase an aggregate of 3,365,035 shares of
                        common stock
                        (incorporated by reference to Exhibit 4.2 to the Registrant’s Current
                        Report on Form 8-K (Date of Report: February 1, 2005) filed
                        with the
                        Securities and Exchange Commission on February 3, 2005)10.1
                    2003
                        Equity Incentive Plan (incorporated by reference to Exhibit
                        10.1 to the
                        Registrant’s Annual Report on Form 10-KSB for the year ended December
                        31,
                        2003 filed with the Securities and Exchange Commission on
                        April 15,
                        2004)10.2
                    Office
                        Lease Agreement, dated November 2002, between San Felipe
                        Plaza, Ltd. and
                        Dwango North America, Inc., as amended (incorporated by reference
                        to
                        Exhibit 10.3 to the Registrant’s Annual Report on Form 10-KSB for the year
                        ended December 31, 2003 filed with the Securities and Exchange
                        Commission
                        on April 15, 2004)10.3
                    Note
                        Purchase Agreement, dated January 8, 2004, between Dwango
                        North America
                        Corp. and Alexandra Global Master Fund Ltd. (incorporated
                        by reference to
                        Exhibit 4.3 to the Registrant’s Current Report on Form 8-K (Date of
                        Report: December 12, 2003) filed with the Securities and
                        Exchange
                        Commission on January 16, 2004)10.4
                    Note
                        Purchase Agreement, dated March 19, 2004, between Dwango
                        North America
                        Corp. and Alexandra Global Master Fund Ltd. (incorporated
                        by reference to
                        Exhibit 4.1 to the Registrant’s Current Report on Form 8-K (Date of
                        Report: March 19, 2004) filed with the Securities and Exchange
                        Commission
                        on March 29, 2004)10.5
                    Software
                        License Agreement between ALLTEL Communications Inc. and
                        Dwango North
                        America Inc. executed December 19, 2003 (incorporated by
                        reference to
                        Exhibit 10.11 to the Registrant’s Annual Report on Form 10-KSB for the
                        year ended December 31, 2003 filed with the Securities and
                        Exchange
                        Commission on April 15, 2004)10.6
                    Direct
                        Bill Services Agreement between Cingular Wireless LLC and
                        Dwango North
                        America, Inc. executed on January 9, 2004 (incorporated by
                        reference to
                        Exhibit 10.12 to the Registrant’s Annual Report on Form 10-KSB for the
                        year ended December 31, 2003 filed with the Securities and
                        Exchange
                        Commission on April 15, 2004)10.7
                    Brew
                        Pricing Terms and Carrier Agreement between Qualcomm Incorporated
                        and
                        Dwango North America, Inc. Submitted via click through on
                        May 21, 2002
                        (incorporated by reference to Exhibit 10.17 to the Registrant’s Annual
                        Report on Form 10-KSB for the year ended December 31, 2003
                        filed with the
                        Securities and Exchange Commission on April 15, 2004)10.8
                    Amendment
                        No. 1 to Brew Developer Agreement between Qualcomm Incorporated
                        and Dwango
                        North America, Inc. effective as of May 17, 2002 (incorporated
                        by
                        reference to Exhibit 10.18 to the Registrant’s Annual Report on Form
                        10-KSB for the year ended December 31, 2003 filed with the
                        Securities and
                        Exchange Commission on April 15, 2004)10.9
                    Letter
                        agreement, dated January 8, 2004 with Alexandra Global Master
                        Fund Ltd.
                        (incorporated by reference to Exhibit 10.21 to the Registrant’s Annual
                        Report on Form 10-KSB for the year ended December 31, 2003
                        filed with the
                        Securities and Exchange Commission on April 15,
                        2004)
   
  10.10
                    Letter
                        agreement, dated March 19, 2004 with Alexandra Global Master
                        Fund Ltd.
                        (incorporated by reference to Exhibit 10.26 to the Registrant’s Annual
                        Report on Form 10-KSB for the year ended December 31, 2003
                        filed with the
                        Securities and Exchange Commission on April 15, 2004)10.11
                        *
                    Licensing
                        Agreement effective as of March 30, 2004 by and between Dwango
                        North
                        America Corp., RealNetworks, Inc. and RollingStone LLC. (incorporated
                        by
                        reference to Amendment No. 1 to the Registrant’s Registration Statement on
                        Form SB-2 (SEC File No.: 333-112371) that was declared effective
                        by the
                        Securities and Exchange Commission on August 12, 2004)10.12
                    Licensing
                        Agreement, effective as of January 14, 2004, between Dwango
                        North America
                        Corp. and ESPN Enterprises, Inc. (incorporated by reference
                        to Amendment
                        No. 1 to the Registrant’s Registration Statement on Form SB-2 (SEC File
                        No.: 333-112371) that was declared effective by the Securities
                        and
                        Exchange Commission on August 12, 2004)10.13
                        *
                    License
                        Agreement for access to wireless network, entered into on
                        October 22,
                        2004, between Dwango North America Corp. and Nextel Operations
                        Inc.
                        (incorporated by reference to Exhibit 10.36 to the Registrant’s Quarterly
                        Report on Form 10-QSB for the quarter ended September 30,
                        2004 filed with
                        the Securities and Exchange Commission November 19,
                        2004)10.14
                        *
                    Wireless
                        Distribution Agreement between Dwango North America Corp.
                        and Playboy.com,
                        Inc. entered into on November 18, 2004.10.15
                        *
                    License
                        Agreement, between Dwango North America Corp. and Napster,
                        LLC entered
                        into on November 29, 2004.10.16
                    Sub-lease
                        contract between Dwango North America Corp. and Microsoft
                        Corporation
                        entered into on December 14, 2004.10.17
                    Content
                        Provider Standard Service Agreement between Dwango North
                        America Corp. and
                        Wmode Inc. with an effective date of March 10, 2005.10.18
                    Employment
                        Agreement, dated March 1, 2005, between Dwango North America
                        Corp. and
                        Rick J. Hennessey (incorporated by reference to Exhibit 10.1
                        to the
                        Registrant’s Current Report on Form 8-K (Date of Report: March 1, 2005)
                        filed with the Securities and Exchange Commission on March
                        7,
                        2005)10.19
                    Employment
                        Agreement, dated March 1, 2005, between Dwango North America
                        Corp. and
                        Alexander U. Conrad (incorporated by reference to Exhibit
                        10.2 to the
                        Registrant’s Current Report on Form 8-K (Date of Report: March 1, 2005)
                        filed with the Securities and Exchange Commission on March
                        7,
                        2005)10.20
                    Director
                        Agreement, dated September 12, 2005, between Dwango North
                        America Corp.
                        and L. Derrick Ashcroft (incorporated by reference to Exhibit
                        10.1 to the
                        Registrant’s Current Report on Form 8-K (Date of Report: September 12,
                        2005) filed with the Securities and Exchange Commission on
                        September 16,
                        2005)10.21
                    Amendment
                        to 2003 Equity Incentive Plan (incorporated by reference
                        to Exhibit 10.1
                        to the Registrant’s Annual Report on Form 10-KSB for the year ended
                        December 31, 2003 filed with the Securities and Exchange
                        Commission on
                        June 22, 2005)10.22
                    Separation
                        agreement, dated August 15, 2005, between Dwango North America
                        Corp and
                        Rick J. Hennessey (incorporated by reference to Exhibit 10.1
                        to the
                        Registrant’s Current Report on Form 8-K (Date of Report: August 15,
                        2005)
                        filed with the Securities and Exchange Commission on August
                        15,
                        2005)14
                    Code
                        of Ethics (incorporated by reference to Exhibit 14 to the
                        Registrant’s
                        Annual Report on Form 10-KSB for the year ended December
                        31, 2003 filed
                        with the Securities and Exchange Commission on April 15,
                        2004)21
                    Subsidiaries:OTA
                        Acquisition Corp. is a Washington corporation23
                    Consent
                        of Eisner LLP31.1
                    Certification
                        of Chief Executive Officer31.2
                    Certification
                        of Chief Financial Officer32
                    Certification
                        pursuant to 18 U.S.C. Section 1350 as adopted pursuant to
                        Section 906 of
                        the Sarbanes-Oxley Act of 2002
  *
            Requested Confidential Treatment