UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549



FORM 10-KSB



[X] ANNUAL REPORT UNDER SECTION 13 OR 15 (d) OF THE SECURITIES ACT OF 1934



For the fiscal year ended October 31, 2007



| |                                                    | 
| | -------------------------------------------------- | 
| | GENER8XION ENTERTAINMENT, INC.                     | 
| | (Exact name of registrant as specified in charter) | 



|                                               |  |                          |  |                                  
|---------------------------------------------- |  | ------------------------ |  | ---------------------------------
|Delaware                                       |  | 0-15382                  |  | 13-3341562                       
|(State or other jurisdiction
of incorporation) |  | (Commission File Number) |  | (IRS Employer
Identification No.)



| |                                          | 
| | ---------------------------------------- | 
| | 2021 Lincoln Street, Burbank, CA, 91504  | 
| | (Address of principal executive offices) | 



| |                                                      | 
| | ---------------------------------------------------- | 
| | (323) 874-9888                                       | 
| | (Registrants Telephone Number, including Area Code) | 



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



Securities registered under section 12 (g) of the Exchange Act: Common Stock, $.01 par value



Check whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act during the last 12 months (or for 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 here if there is no disclosure of delinquent filers in response to Item 405 of Regulation S-B contained in this form, and no disclosure will be contained, to the best of the registrants’ knowledge, in definitive proxy or information statements incorporated by reference in Part III of this 10-KSB or any amendment to this Form 10-KSB. x



Aggregate market value of Registrants’ voting and non-voting common equity held by non-affiliates as of February 11, 2008  approximately $3,625,609.



Outstanding common stock, $.01 par value as of February 11, 2008: 18,128,045 shares



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GENER8XION, ENTERTAINMENT, INC.

TABLE OF CONTENTS



|           |  |                                                                                                                   |  |   
|---------- |  | ----------------------------------------------------------------------------------------------------------------- |  | --
|           |  | PART I                                                                                                            |  |   
|Item 1.    |  | Description of Business                                                                                           |  | 4 
|Item 2.    |  | Description of Property                                                                                           |  | 9 
|Item 3.    |  | Legal Proceedings                                                                                                 |  | 9 
|Item 4.    |  | Submission of Matters to a Vote of Security Holders                                                               |  | 9 
|           |  |                                                                                                                   |  |   
|           |  |                                                                                                                   |  |   
|           |  | PART II                                                                                                           |  |   
|Item 5.    |  | Market for Companys Common Equity and Related Stockholder Matters                                                |  | 9 
|Item 6.    |  | Managements Discussion and Analysis and Plan of Operation                                                        |  | 10
|Item 7.    |  | Consolidated Financial Statements                                                                                 |  | 17
|Item 8.    |  | Changes in and Disagreements with Accountants on Accounting and Financial Disclosure                              |  | 19
|Item 8A.   |  | Controls and Procedures                                                                                           |  | 20
|           |  |                                                                                                                   |  |   
|           |  |                                                                                                                   |  |   
|           |  | PART III                                                                                                          |  |   
|Item 9.    |  | Directors, Executive Officers, Promoters and Control Persons; Compliance with  Section 16 (a) of the Exchange Act |  | 20
|Item 10.   |  | Executive Compensation                                                                                            |  | 23
|Item 11.   |  | Security Ownership of Certain Beneficial Owners and Management                                                    |  | 23
|Item 12.   |  | Certain Relationships and Related Transactions                                                                    |  | 25
|Item 13.   |  | Exhibits and Reports on Form 8-K                                                                                  |  | 26
|Item 14.   |  | Principal Accountant Fees and Services                                                                            |  | 26
|           |  |                                                                                                                   |  |   
|           |  |                                                                                                                   |  |   
|SIGNATURES |  |                                                                                                                   |  | 27





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SAFE HARBOR FOR FORWARD-LOOKING STATEMENTS



We are including the following cautionary statement in this Annual Report on Form 10-KSB to make applicable and take advantage of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995 with respect to forward-looking statements made by, or on behalf of the Company. Forward-looking statements include statements concerning plans, objectives, goals, strategies, future events or performance and underlying assumptions and other statements that are other than statements of historical facts. From time to time, we may make written or oral statements that are forward-looking including statements contained in this report and other filings with the Securities and Exchange Commission. These forward-looking statements are principally contained in the sections captioned Business and Managements Discussion and Analysis of Operations. In those and other portions of this Form 10-KSB, the words anticipates, believes, estimates, seeks, expects, plans, intends, and similar expressions as they relate to us or our management are intended to identify forward-looking statements. All such forward-looking statements are expressly qualified by these cautionary statements.



Forward-looking statements involve risks and uncertainties that could cause actual results or outcomes to differ materially from those expressed in the forward-looking statements. The forward-looking statements contained herein are based on various assumptions, many of which are based, in turn, upon further assumptions. Our expectations, beliefs and forward-looking statements are expressed in good faith on the basis of managements views and assumptions as of the time the statements are made, but there can be no assurance that managements expectations, beliefs or projections will result or be achieved or accomplished.



In addition to other factors and matters discussed elsewhere herein, the following are important factors that, in our view, could cause actual results to differ materially from those discussed in the forward-looking statements: technological advances, impact of competition, dependence on key personnel and the need to attract new management, effectiveness of cost and marketing efforts, acceptances of products, ability to expand markets and the availability of capital or other funding on terms satisfactory to us. We disclaim any obligation to update forward-looking statements to reflect events or circumstances after the date hereof.





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PART I.



Item 1.

Description of  Business



Gener8Xion Entertainment, Inc. is an integrated media company engaged in various operating activities including film and television production and distribution, sales and rentals of film and video equipment, systems integration and studio facility management.



The Company was originally incorporated under the laws of the State of New York on March 17, 1986 under the name of Gamogen, Inc. On September 13, 2002, pursuant to an Agreement and Plan of Merger, the Company acquired CDMI Productions, Inc. and changed its name to CDMI Productions, Inc. On November 18, 2004, the Company entered into (1) an Asset Purchase Agreement whereby it issued 2,640,000 shares of its common stock to Matthew and Laurie Crouch for the acquisition of the distribution rights to the feature film One Night with the King and to the script for a proposed animated film project the Prodigal Son and (2) an Employment Agreement with Matthew Crouch whereby it issued 6,160,000 shares of common stock to Matthew Crouch. On January 10, 2005, the Company reincorporated in Delaware and changed its name to Gener8Xion Entertainment, Inc.



On September 30, 2005, the Company entered into an Asset Purchase Agreement with Merd Holdings, LLC, doing business as Cinemills Corp. (Cinemills). The transaction was consummated with cash of approximately $440,000 and the issuance of 100,000 shares of common stock. The excess of cost over the fair value of the assets acquired amounted to $439,254 and was recorded as goodwill. The Companys purchase price allocation has been finalized in accordance with SFAS No. 142, Goodwill and Other Intangible Assets. A five year carrying value for impairment loss test was performed as of October 31, 2007 and it was determined that goodwill has been impaired. The Company has elected to take full impairment as of October 31, 2007.



General



The Company is an independent entertainment company engaged in the financing, production, distribution and development of "family based" feature films, episodic television shows, animated features and documentaries. The Company currently owns the distribution rights to eight film projects and five television projects. The Company expects to evaluate other projects from time to time and to pursue those that management deems to be appropriate. The Company will undertake such projects in the manner that management determines; the Companys activities may include any of the activities described in the following description of industry practice or such other activities as management determines will further the business of the Company.



The motion picture industry may be broadly divided into two major segments: production, which involves the development, financing and other activities associated with making of motion pictures; and distribution, which involves the promotion and exploitation of completed motion pictures in a variety of media.



Historically, the largest companies, the so-called "Majors" and "Mini-Majors," have dominated the motion picture industry by both producing and distributing a majority of the motion pictures which generate significant theatrical box office receipts. Over the past 17 years "Independents" or smaller film production and/or distribution companies have played an increasingly significant and sizable role in the production and distribution of motion pictures needed to fill ever the increasing worldwide demand for filmed entertainment product.



The Majors (and Mini-Majors) include: NBC-Universal Pictures (a division of General Electric), Warner Bros. Pictures (a division of Time Warner), Metro-Goldwyn-Mayer Inc., Twentieth Century Fox Film Corporation (a division of News Corporation), Paramount Pictures Corporation (a division of Viacom), Sony Pictures Entertainment (including Columbia Pictures, Tri Star Pictures and Triumph Releasing; altogether divisions of Sony) and The Walt Disney Company (Buena Vista Pictures, Touchstone Pictures and Hollywood Pictures). Generally, the Majors own and operate private production studios (including lots, sound stages, production equipment and post-production facilities), have nationwide and/or worldwide distribution organizations, release pictures with direct production costs generally ranging from $25,000,000 to $100,000,000 and collectively provide a near continual source of motion pictures to film exhibitors.



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The Majors also have divisions that are promoted as "independent" distributors of motion pictures, often referred to as the Mini-Majors. These "independent" divisions of the Majors include Miramax Films (a division of The Walt Disney Company), Sony Classics (a division of Sony Pictures), Fox Searchlight (a division of Fox News Corporation), and New Line (a division of AOL-Time Warner) and its Fine Line distribution label. Most of these divisions were formerly private production and/or distribution companies.



In addition to the Mini-Majors, there are private or publicly held production and/or distribution companies, such as GENER8XION, (hereafter, collectively the Independents) which engage primarily in the production and/or distribution of motion pictures produced by companies other than those held by the Majors and Mini-Majors. Such Independents include, among others, Trimark Holdings, Genius Products, and Lions Gate Entertainment. The Independents typically do not own production studios nor do they employ as large a development and/or production staff as the Majors.



Motion Picture Production and Financing



The production of a motion picture requires the financing of the direct costs and indirect overhead costs of development, production and production related services. Direct production and production related service costs include film studio rental, cinematography, post-production costs and the compensation of creative, services and other production personnel. Distribution costs (including costs of advertising and release prints) are not included in direct production costs.



Majors generally have sufficient cash flow from their motion picture and related activities, or in some cases, from unrelated businesses (e.g., theme parks, publishing, electronics, and merchandising) to acquire new creative properties (e.g., screenplay and novels) and pay for the direct production costs of their motion pictures. Overhead costs are, in substantial part, the salaries and related costs of the production staff and physical facilities, which Majors maintain on a full-time basis. Majors often enter into contracts with writers, producers and other creative personnel for multiple projects or for fixed periods of time.



Independents generally avoid incurring substantial overhead costs by hiring creative, services and other production personnel, retaining only any essential elements, only when they will be required for pre-production, principal photography and post-production activities, on a project-by-project basis. Independents also typically finance their production activities from various sources, including bank loans, "pre-sales," equity offerings and joint ventures. Independents generally attempt to complete the financing of their motion picture production prior to commencement of principal photography, at which point substantial production costs begin to be incurred and require payment.



"Pre-sales" are often used by Independents to finance all or a portion of the direct production costs of a motion picture. Pre-sales consist of fees or advances paid or guaranteed to the producer by third parties in return for the right to exhibit the completed motion picture in theaters and/or to distribute it in home video, television, international and/or other ancillary markets. Payment commitments for a pre-sale are typically subject to the approval of a number of pre-negotiated factors, including script, production budget, cast and director and to the timely delivery of the completed motion picture in the agreed upon format(s).



Both Majors and Mini-Majors often acquire motion pictures for distribution through an arrangement known as a "negative pickup" under which the Major or Mini-Major agrees to acquire from another production company, often an Independent, some or all of the rights to a film upon its completion. The Independent often finances the production of a motion picture pursuant to financing arrangements it has made with banks or other lenders wherein the lender obtains a security interest in the film and in the Independent's rights under its distribution arrangement. When the Major or Mini-Major "picks up" the completed motion picture, it may assume some or all of the production financing indebtedness incurred by the production company in connection with the film. In addition, the Independent is often paid a production fee and is granted a participation in the profits from the distribution of the motion picture.



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Majors, Mini-Majors and Independents often grant third-party participations in connection with the distribution and production of a motion picture. Participations are the contractual rights of actors, directors, screenwriters, producers, owners of rights and/or other creative and/or financial contributors entitling them to share in revenues or profits (as defined in their individual respective agreements) from a particular motion picture. Except for the most sought-after talent, participations are generally payable only after all distribution and marketing fees and costs; direct production costs (including overhead) and financing costs are recouped by the producer in full.



Financing the Major Motion Picture



Majors often produce motion pictures whose direct costs exceed $20,000,000. In order for an Independent, such as GENER8XION, to produce projects that exceed their equity capabilities, they turn to various outside sources for funding. Some of those sources, which may be used in any combination, include: (1) foreign equity contributions, where a foreign company will exchange equity or the guarantee thereof for the rights to distribute a motion picture in its respective territory(s) and participation in the picture; (2) a guarantee or advance by a distributor or exhibitor for a particular right(s) in a particular territory(s); (3) a sales agent to garner contracts with actual exhibitors which state minimum guarantee(s) for particular or aggregate media; (4) a bank or lending institution will lend monies based on actual sales contract(s) which license exhibition/distribution rights; (5) a bank or lending institution which will lend monies based on its calculations of potential earnings revenue for the motion picture in question; (6) by having a third party investor fund a portion, usually from 10% to 50% of the production costs with a participation in the net profit of the motion picture as well as the reimbursement of costs and expenses; (6) and/or arrange for or with another Independent production facility to finance and produce the motion pictures. By combining (as necessary) the afore mentioned outside funding sources, the Independent can create motion pictures which are competitive with the quality and scope of those created by the Major and Mini-Major at costs which would normally exceed the Independents possible equity contribution.



Motion Picture Distribution



Distribution of a motion picture involves the domestic and international licensing of the picture for (i) theatrical exhibition, (ii) home video, (iii) presentation on television, including pay-per-view, video-on-demand, satellites, pay cable, network, basic cable and syndication, (iv) non-theatrical exhibition, which includes airlines, hotels, armed forces facilities and schools and (v) marketing of the other rights in the picture, which may include books, CD-ROMs, merchandising and soundtrack recordings.



Theatrical Distribution and Exhibition



Motion pictures are often exhibited first in theaters open to the public where an admission fee is charged. Theatrical distribution involves the manufacture of release prints, licensing of motion pictures to theatrical exhibitors, and promotion of the motion picture through advertising and promotional campaigns. The size and success of the promotional and advertising campaign may materially affect the revenues realized from its theatrical release, generally referred to as "box office gross."



Box Office Gross represents the total amounts paid by patrons at motion picture theaters for a particular film, as determined from reports furnished by exhibitors. The ability to exhibit films during summer and holiday periods, which are generally considered peak exhibition seasons, may affect the theatrical success of a film. Competition among distributors to obtain exhibition dates in theaters during these seasons is significant. In addition, the costs incurred in connection with the distribution of a motion picture can vary significantly depending on the number of screens on which the motion picture is to be exhibited and whether the motion picture is exhibited during peak exhibition season(s). Similarly, the ability to exhibit motion pictures in the most popular theaters in each area can affect theatrical revenues.



Exhibition arrangements with theater operators for the first run of a film generally provide for the exhibitor to pay the greater of 90% of ticket sales in excess of fixed amounts relating to the theater's costs of operation and overhead, or a minimum percentage of ticket sales which varies from 40% to 70% for the first week of an engagement at a particular theater, decreasing each subsequent week to 25% to 30% for the final weeks of the engagement. The length of an engagement depends principally on exhibitors evaluation of the audiences response to the film with respect to the current marketplace (e.g., the success of other films) as weighed against the opportunity cost of exhibiting a new release.



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Gener8Xion Motion Picture Acquisitions



In addition to developing its own production and production service activities, Gener8Xion acquires rights to films and other programming from Independent film producers, distribution companies and others in order to increase the number of films it can distribute and provide related services in connection with in existing and emerging delivery systems. To be successful, Gener8Xion must locate and track the development and production of numerous independent feature films.



On October 13, 2006, the Company released its first motion picture, ONE NIGHT WITH THE KING, which is based on the novel Hadassah by Tommy Tenney. To date, the Film had grossed $13,396,000 in domestic theatrical receipts, $14,052,000 in DVD sales and rental, $823,000 in foreign sales, and $100,000 in the ancillary market. Of the gross film revenues, the Company receives only net revenues after sales tax, the Exhibitors cost and the sub distributors costs are deducted. As of October 31, 2007 the Company had earned $5,525,000 in domestic theatrical revenue, $6,698,000 in DVD revenue, $633,000 in foreign revenue, $79,000 in ancillary revenue and $2,000 in soundtrack sales. Of the total revenues earned, $12 937,000, as of October 31, 2007, $12,233,000 had been received as of October 31, 2007. The first priorities for payment of the revenues received were to repay the amount advanced for prints and advertising, guild royalties, and certain other costs plus an agreed return (aggregate $8,356,000). Of the remainder of the balance, 80% is paid to the investors of the movie production, approximately 9% to outside producer and 11%, which includes distribution fee, to the Company. Production revenues for the year ended October 31, 2007 is based on the application of these agreements.



On December 7, 2007, the Company released its second motion picture, Noëlle, which was released domestically in 200 screens. The movie, Noëlle, is a story of two priests, who both have problems, failures, secrets, and questions about their lives. It's a story of people who carry guilt and shame. It also has in it the meaning of Christmas, and that is a gift. The gift is one of a new beginning. Noëlle balances wit and pathos, legalism and relationship, guilt and grace in such a way that will ring true in both your heart and your head this yuletide season. The film will amuse and enchant, reminding us that miracles, in this season more than most, really do exist, and that the true meaning of the Christmas is close at hand when we embrace the gift of grace that is a child.'"



The Company also owns distribution rights to the feature documentary. Lord save Us From Your Followers, which is scheduled to be released in March, 2008; the rights to the script for an animated feature length project entitled, The Prodigal Son, which the Company plans to enhance by applying an animation technique that incorporates 3D effects; the rights to the Omega Code (released theatrically in 1999 opening as the number Independent film of the year), Omega Code 2 (theatrically released in Sept 2001), Carman: The Champion (Theatrically released in March of 2001).  The company has also optioned the rights to the screenplay Bump & the Night which is a wonderful story of redemption that can have amazing urban appeal.



Media Production



The Company pursues three areas of concentration: a) Production, b) Distribution and c) Equipment Rentals and Sales.



Production



The Company plans on identifying and producing several projects in the next few years. These projects range from documentaries, to television talk shows, to animation projects and to full length feature films. In most cases the Company will take part in stimulating production in which case 10% to 30% of the productions budget will be incurred by the Company. The remaining balance on these projects will be funded off-balance sheet by co-production partners. Often times this 10-30% cost will be capitalized through soft dollar contribution. The Company plans on earning income on various projects by allocating Corporate employees to serve as different personnel on a specific projects, leasing of production office space, the rental of equipment and distribution fees garnered by the Companys in-house distribution division.



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Distribution



One of the most important aspects of the media industry is distribution. Once a media project is produced, it must be distributed. The Company plans to create an infrastructure to distribute our media content in-house. In this case, the Company will engage an experienced Distributor to head the Distribution efforts of the Company. The Company has been approached by several production companies looking to sell their completed film projects and use our intended Distribution arm to distribute their product.



There can be no assurance that we will be able to obtain distributors for our films; however, we believe that if we are able to obtain commitments of appropriate, internationally recognizable actors; appealing literary properties; and respected production personnel, our film properties would be suitable for distribution.



Although the likelihood of developing a distribution arrangement may be increased by addressing the above-mentioned factors, the likelihood of developing a favorable distribution arrangement is dependent upon several factors beyond our control.  Some of these factors include: the relative current demand for our type of film offering; the industry-wide supply of that type and competing types of films available for distribution; the financial strength of the potential distributors, and the ever-changing demands of the movie-going public.  Additionally, if our initial attempts to arrange for a distributor are not successful, then arranging for distribution may become more difficult because our bargaining power may have been diminished, and we may not be able to negotiate favorable terms because our film may be deemed to be undesirable.  Circumstances such as these may force us into distribution agreements with smaller distributors who may prove to be unable to effectively execute a successful marketing and distribution campaign.



Because the financing of our motion pictures may be dependent on funds from developing favorable distribution arrangements, if we are unable to arrange for distribution, we may not be able to finance the completion of our motion pictures or adequately promote our motion pictures.



Motion picture revenues are derived from the worldwide licensing of a motion picture to several distinct markets, each having its own distribution network and potential for profit. The selection of the distributor for each of our feature films will depend upon a number of factors. Our most basic criterion is whether the distributor has the ability to secure bookings for the exhibition of the film on satisfactory terms. We will consider whether, when and in what amount the distributor will make advances to us. We will also consider the amount and manner of computing distribution fees and the extent to which the distributor will guarantee certain print, advertising and promotional expenditures.



Cinemills



The Companys Cinemills division manufactures quality lighting equipment and markets its products worldwide to the motion picture, television and related industries. The Cinemills lighting equipment is used for digital imaging, film, video and still photographs. The dependable and rugged lighting equipment has great portability and is noted for its ease of operation.



Cinemills markets a broad and advanced selection of HMI and Tungsten lighting fixtures as well as quality quartz incandescent and lightweight portable equipment. The products are sold to the motion picture, television and photography industries through commission salespersons and independent distributors.



Cinemills is the exclusive distributor for the FilmGear line of lights for the motion picture industry throughout the United States. Cinemills maintains a repair and a customer technical service department to take care of all of its customers lighting problems. Cinemills has been serving the motion picture and television industry for over 25 years and it is committed to maintaining close customer relationships and to continue the technological advancement of its product line.



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Equipment Rentals and Sales



The Company purchases entertainment related equipment. The intent is to utilize this equipment for internal productions as well as rent and sell this equipment to other production entities nationally and worldwide. Some of this equipment includes post production editing suites, grip and lighting equipment, power distribution, cables, and generators and expendables.



Competition



The motion picture industry is highly competitive. The Company faces intense competition from motion picture studios and numerous independent production companies, many of which have significantly greater financial resources than the Company. All of these companies compete for motion picture projects and talent and are producing motion pictures that compete for exhibition time at theaters, on television and on home video with pictures produced or to be produced or distributed by the Company.



Employees



As of  October 31, 2007,  we seventeen  (17) employees.  Our employees are not unionized. We believe relationships with our employees and consultants are good.



Item 2.

Description of Property



As of October 31, 2007, the Company did not and currently does not own any real property.

The Companys Cinemills division occupies office and warehouse space under a three year lease for $4,400 per month from a company in which an officer of the Company has a 50% interest. The lease expired October 31, 2007.  The lease was renewed for another three years at $4,840 per month with an expiration date of October 2010. As of August 1, 2006 the Company relocated its corporate office to 2021 Lincoln Street, Burbank, CA, 91504, which houses its Cinemills division.



As of January 1, 2007, the Company leased 5,000 square feet of additional office and production space in Hollywood, California on a month to month lease at $8,500 per month, the first month and $6,000 the second month and $5,000 per month thereafter.



Item 3.

Legal Proceedings



From time to time, we may be a party to legal proceedings incidental to our business.  We do not believe that any of these proceedings will have a material adverse effect on our business or financial condition.



Item 4.

Submission of Matters to a Vote of Security Holders



None



PART II



Item 5.

Market for Companys Common Equity and Related Stockholder Matters



The Registrant is authorized to issue 50,000,000 shares of common stock, $.01 par value, of which 18,128,045 were issued and outstanding at October 31, 2007. On that date, the Companys common stock was held by approximately 186 beneficial owners.



To our knowledge there has been only minimal trading in the Companys common stock for the 2005, 2006 and 2007 fiscal years. Our common stock is traded on the Over-the Counter Bulletin Board market under the symbol GNXE since January 2005, and CDMP since September 2002. The following table sets forth the high and low closing bid quotations for the common stock as reported by Yahoo Finance for the periods indicated. These quotations represent inter-dealer prices, without retail mark-up, mark-down or commission and may not represent actual transactions.





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|        |            |  |            |  |            |  |               |  |      |  |      |  |      |  |     
|------- | ---------- |  | ---------- |  | ---------- |  | ------------- |  | ---- |  | ---- |  | ---- |  | ----
|        | YEAR ENDED |  | YEAR ENDED |  | YEAR ENDED |  | QUARTER ENDED
|        | 10/31/2005 |  | 10/31/2006 |  | 10/31/2007 |  | 01/31/2008   
|        | High       |  | Low        |  | High       |  | Low           |  | High |  | Low  |  | High |  | Low 
|1st Qtr | 3.50       |  | 0.22       |  | 1.63       |  | 1.25          |  | 0.77 |  | 0.72 |  | 0.38 |  | 0.34
|2nd Qtr | 3.00       |  | 2.15       |  | 1.70       |  | 0.75          |  | 0.72 |  | 0.68 |  |      |  |     
|3rd Qtr | 3.00       |  | 1.60       |  | 1.50       |  | 0.60          |  | 0.44 |  | 0.41 |  |      |  |     
|4th Qtr | 2.95       |  | 1.05       |  | 1.75       |  | 0.56          |  | 0.28 |  | 0.26 |  |      |  |     



The Company has not declared or paid any cash dividends on the common stock and does not anticipate that any cash dividends will be paid in the foreseeable future.



Recent Sales of Unregistered Securities



The Company sold 104,000 shares of common stock at $1 per share for total proceeds of $104,000 in November 2006. There were no warrants attached to these shares. The money was raised through a private placement to a sophisticated/accredited investor.



In February 2007 the Company sold 100,000 shares of common stock at $1 per share for total proceeds of $100,000. There were no warrants attached to these shares. The money was raised through a private placement to a sophisticated/accredited investor.



In April 2007 the Company sold 101,010 shares of common stock at $.77 per share for total proceeds of $77,778. There were no warrants attached to these shares. The money was raised through a private placement to a sophisticated/accredited investor.



In June 2007 the Company sold 150,785 shares of common stock at $1 per share for total proceeds of $150,785. There were no warrants attached to these shares. The money was raised through a private placement to a sophisticated/accredited investor.



In October 2007, the Company also issued 40,000 shares as compensation for consulting services. The shares had a market value of $9,200 at the time of issuance.



Holders of our Class A common stock, the Companys only class of common stock are entitled to one vote for each share held of record on each matter submitted to a vote of stockholders. Holders of common stock have no preemptive rights and have no rights to convert their common stock into any other securities. The outstanding common stock is duly authorized and validly issued, fully-paid, and non-assessable.



In each of the transactions described above these transactions are exempt from registration under the Securities Act pursuant to Section 4 (2) and/or Regulations D of that Act, on the basis of one or more of the following factors: we made the offers and sales to a limited number of sophisticated investors, without public advertising or solicitation; each investor had access to material information about the Company and the opportunity to obtain further information; each investor acquired the securities for investment and not with a view to resale or distribution thereof; and the certificates representing the shares bear a legend restricting their transfer except in compliance with applicable securities laws.



Item 6.

Managements Discussion and Analysis of Financial Condition and Results of Operations.



Overview



The Companys operating activities changed in November 2004. Since then, it has been engaged in film and television production and distribution, systems integration and studio facility management and rental of film and video equipment. Since September 2005, the Company has also been involved in the sales of film and video lighting equipment. The Company has not had a profit from these activities. Its ability to continue growth and develop additional sources of revenue is dependent on obtaining necessary funding. The Company is attempting to keep current costs and cash requirements to a minimum.





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This discussion, with the exception of historical financial information, may consist of forward looking statements that involve risks and uncertainties, including whether and when Registrant will have ongoing business operations. Consequently, actual results may vary from managements expectations.



Critical Accounting Policies and Use of Estimates



The financial statements of the Company are presented on a consolidated basis for all periods presented. All significant inter-company accounts and transactions have been eliminated in preparation of the consolidated financial statements.



The accompanying financial statements have been prepared in accordance with accounting principles generally accepted in the United States which requires management to make estimates and assumptions affecting the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities. On an ongoing basis, we evaluate our estimates. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances. These estimates and assumptions provide a basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions, and these differences may be material.



We believe the following critical accounting policies affect its more significant judgments and estimates used in the preparation of its consolidated financial statements.



Revenue Recognition



The Company follows the guidance of SOP-00-2, which became effective for fiscal years beginning after December 15, 2000, to account for its film distribution and its television production and distribution revenue and costs. Under the guidance of SOP-00-2, paragraph 07, an entity should recognize revenue from a sale or licensing arrangement of a film when all of the following conditions are met.



a.  Persuasive evidence of a sale or licensing arrangement with a customer exists.

b. The film is complete and, in accordance with the terms of the arrangement, has been delivered or is available for immediate and unconditional delivery.

c. The license period of the arrangement has begun and the customer can begin its exploitation, exhibition, or sale.

d. The arrangement fee is fixed or determinable.

e. Collection of the arrangement fee is reasonably assured.



If an entity does not meet any one of the preceding conditions, the entity should defer recognizing revenue until all of the conditions are met. If a licensing arrangement covering a single film provides that an entity will receive a flat fee, then the amount of that fee is considered fixed and determinable. In such instances, the entity should recognize the entire amount of the license fee as revenue when it has met all of the other conditions of paragraph .07. The company recognized film distribution revenue in 2007.



Film Costs



Film costs include the costs of licensing distribution rights and film development and production costs .  Film costs are stated at the lower of unamortized cost or market.  In accordance with Statement of Position (SOP) 00-2 Accounting by Producers or Distributors of Films, film costs are amortized using the film-forecast-computation method.  Utilizing this method, costs are amortized based on the ratio of actual current period gross revenues to estimated remaining total lifetime revenues.  These estimates are reviewed by management periodically.  Amortization is included in cost of goods sold in the Statements of Income.





11



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Participation   Costs



Estimates of unaccrued ultimate participation costs, if any, are used in the individual-film-forecast-computation to arrive at current period participation cost expense. Participation costs are determined using assumptions that are consistent with the Companys estimates of film costs, exploitation costs, and ultimate revenue.  If, at any balance sheet date, the recognized participation costs liability exceeds the estimated unpaid ultimate participation costs for an individual film, the excess liability is reduced with an offsetting credit to unamortized film costs. To the extent that an excess liability exceeds unamortized film costs for a film, it is credited to income.



Stock-based Compensation Expense



Through the end of fiscal 2005, the company measured compensation expense for stock-based incentive programs utilizing the intrinsic value method prescribed by Accounting Principles Board (APB) Opinion No. 25, Accounting for Stock Issued to Employees. Under this method, the Company did not record compensation expense when stock options were granted to eligible participants as long as the exercise price was not less than the fair market value of the stock when the option was granted. In accordance with Statement of Financial Accounting Standards (SFAS) No, 123, Accounting for Stock-Based Compensation, (SFAS 123) and SFAS No 148, Accounting for Stock-Based Compensation Transition and Disclosure, the Company disclosed the pro forma net income and net income  per share as if the fair value-based method had been applied in measuring compensation expense for stock-based incentive awards. No stock-based compensation cost was recognized in the Condensed Consolidated Statement of Operations for the nine months ended July 31, 2005 for options granted under the Companys 2005 Stock Option Plan, as all unvested options granted had an exercise price equal to the market value of the underlying common stock on the date of grant.



In December 2004, the Financial Accounting Standards Board (FASB) issued SFAS No. 123R, Share-Based Payment: An Amendment of FASB Statements No. 123 and 95 (SFAS No. 123R). This statement requires that the cost resulting from all share-based payment transactions be recognized in the Companys consolidated financial statements. In addition, in March 2005 the Securities and Exchange Commission (SEC) released SEC Staff  Accounting Bulletin No. 107, Share-Based Payment (SAB 107). SAB 107 provides the SECs staff position regarding the application of SFAS 123R and certain SEC rules and regulations, and also provides the staffs views regarding the valuation of share-based payment arrangements for public companies. Generally, the approach in SFAS 123R is similar to the approach described in SFAS 123. However, SFAS 123R requires all share-based payments to employees, including grants of employee stock options, be recognized in the statement of operations based on their fair values. Pro forma disclosure of fair value recognition, as prescribed under SFAS 123, is no longer an alternative.



In the first quarter of fiscal 2006, the Company adopted the fair value recognition provisions of SFAS 123R utilizing the modified-prospective transition method, as prescribed by SFAS 123R.



For the year ended October 31, 2007, the Company recognized stock compensation cost of $67,696.



Under SFAS 123R, the Company will continue to utilize the Black-Scholes model to estimate the fair value of options granted after November 1, 2005. The Companys assessment of the estimated compensation charges is affected by its stock price as well as assumptions regarding a number of complex and subjective variables and the related tax impact. These variables include, but are not limited to, the Companys price volatility and employee stock option exercise behaviors.



Results of operations for the year ended October 31, 2007 as compared to the year ended October 31, 2006.



Rental income amounted to $8,596 for 2007 and $51,576 for 2006. Related depreciation expense was $7,143 for the year ended October 31, 2007 and $28,571 for the year ended October 31, 2006. The rental equipment was sold during the quarter ended April 30, 2007.



Other income-related party of $100, 000 for the year ended October 31, 2006 resulted from fees earned by the Company for facilitating an investment for a company owned by an officer of the Company. No such fee was earned in 2007.





12



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Production revenue amounted to $9,010,682 for the year ended October 31, 2007 compared to $4,710,595 for the year ended October 31, 2006. The related cost of production was $5,784,732 for the year ended October 31, 2007 compared to $5,663,472 for the year ended October 31, 2006. Revenue earned from the release of the Companys first motion picture, One Night with the King, amounted to $ 8,583,588 and $4,352,929, respectively, for the years ended October 31, 2007 and October 31, 2006. Related cost of production amounted to $5,496,839 and $5,777,474, respectively, for the years ended October 31, 2007 and October 31, 2006. Costs in 2006 were reduced by production cost refund from a related party of $390,000 in 2006. The gross profit percentage was 36% for the year ended October 31, 2007. This compared to gross loss percentage of (33%) for the year ended October 31, 2006. The increase in gross profit percentage was primarily due to the prints and advertising costs of the film being expensed in 2006 in accordance with AICPA Statement of Position 93-7, Reporting on Advertising Costs.



|                                      |  |                        |            |                                                  |   |                                                    |  |                                           |            |  |   |           
|------------------------------------- |  | ---------------------- | ---------- | ------------------------------------------------ | - | -------------------------------------------------- |  | ----------------------------------------- | ---------- |  | - | ----------
|Markets the Film has been released in |  | Net Revenue to Company |            | Revenue earned by Company as of October 31,
2007 |   | Revenue received by Company as of October 31,
2007 |  | Received by Company as of January 7,
2008
|Domestic Theatrical                   |  | $                      | 5,525,442  |                                                  | $ | 5,525,442                                          |  | $                                         | 5,518,903  |  | $ | 5,523,589 
|Home Video-DVD Sales                  |  | $                      | 6,698,144  |                                                  | $ | 6,698,144                                          |  | $                                         | 6,316,164  |  | $ | 6,698,144 
|Foreign market                        |  | $                      | 632,525    |                                                  | $ | 632,525                                            |  | $                                         | 329,816    |  | $ | 329,816   
|Ancillary Market                      |  | $                      | 99,607     |                                                  | $ | 78,907                                             |  | $                                         | 64,794     |  | $ | 99,607    
|Total                                 |  | $                      | 12,955,718 |                                                  | $ | 12,935,018                                         |  | $                                         | 12,229,677 |  | $ | 12,661,156



Revenue from sale of lighting equipment amounted to $843,021 for the year ended October 31, 2007 compared to $846,159 for the year ended October 31, 2006. The related cost of sales amounted to $567,673 for the year ended October 31, 2007 compared to $439,367 for the year ended October 31, 2006.  The gross profit percentage was 33% for the year ended October 31, 2007. This compared to 48% for the year ended October 31, 2006. The decrease in gross profit percentage was primarily due to:



1.

Return on sales of $194,582 for the year ended October 31, 2007 compared to $147,864 for the year ended October 31, 2006.



2.

Cash discount of $22,496 for year ended October 31, 2007. There was none in 2006.



3.

Lower gross profit margin on installation sales, which was new in fiscal 2007. Gross profit margin was 17% for installation sales of $129,002 and related cost of installation of $107,312.



General and administrative expenses amounted to $2,718,412 for the year ended October 31, 2007, compared to $5,057,991 for the year ended October 31, 2006. The major reasons for the decrease were:



1.

Stock option expense amounted to $67,696 for the year ended October 31, 2007, compared to $2,676,758 for the year ended October 31, 2006.



2.

Salary expense amounted to $1,319,702 for the year ended October 31, 2007, compared to $950,431 for the   year ended October 31, 2006.



3.

Loss on the sale of equipment amounted to $75,797 for the year ended October 31, 2007. There were no sales of equipment during the year ended October 31, 2006.



Interest expense amounted to $945,805 for the year ended October 31, 2007, compared to $288,123 for the year ended October 31, 2006. Interest expense relates mainly to borrowings for the print and advertising for the movie, One Night with the King.



Loss on the abandonment of equipment amounted to $10,560 for the year ended October 31, 2007. There was no abandonment of equipment the year ended October 31, 2006.



13



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Loss on impairment of goodwill amounted to $439,254 for the year ended October 31, 2007, compared to $0 for the year ended October 31, 2006. The write-off was taken as a result of management's review of the annual impairment test performed on goodwill.



State income taxes were $4,678 for the year ended October 31, 2007 and $5,731 for the year ended October 31, 2006.



The Company incurred a net loss of $592,570 for the year ended October 31, 2007, compared to $5,768,432 for fiscal 2006. The loss in 2007 was primarily due to the $439,254 write-off of goodwill. The write-off was taken as a result of the annual impairment test performed on goodwill. The decrease in loss from the previous year was principally the result of the decreased stock compensation expenses discussed above, and the increase in production revenue from the release of the motion picture, One Night with the King.



Results of operations for the year ended October 31, 2006 as compared to the year ended October 31, 2005.



Rental income amounted to $51,576 for 2006 and $55,576 for 2005. Related depreciation expense was $28,571 in each of those years.



Other income-related party of $100, 000 for the year ended October 31, 2006 resulted from fees earned by the Company for facilitating an investment for a company owned by an officer of the Company. No fee was earned in 2005.



Production revenue amounted to $4,710,595 for the year ended October 31, 2006 compared to $320,000 for the year ended October 31, 2005. Revenue earned on the domestic theatrical release of the Companys first motion picture, One Night with the King amounted to $4,352,929. The related cost of production was $5,663,472 in 2006, which primarily related to print and advertising expense for the movie of $5,777,474. The Company received production cost refund from a related party of $390,000 in 2006. There was no related cost of production revenue in 2005.



The domestic theatrical revenue from One Night with the King expected to be earned subsequent to October 31, 2006 is approximately $1,210,000. Income from DVD sales and rentals is expected to exceed $5,000,000. As of April 30, 2007, the Companys sub distributor had reported net income to the Company of approximately $4,474,000. Although the Company has not received a report from its foreign sub distributor as of April 30, 2007, foreign sales revenue is estimated at $250,000.



Revenue from sale of lighting equipment amounted to $846,159 for 2006 and $75,182 for 2005. This was earned by the Companys new division, Cinemills, which was purchased September 30, 2005. The related cost of sales amounted to $439,367 in 2006 and $38,729 in 2005. Of the sales and related cost of sales in 2006, $141,890 and $84,777, respectively, represent sales to related party.



General and administrative expenses amounted to $5,057,991 for the year ended October 31, 2006, compared to $1,590,322 for the year ended October 31, 2005. The major reasons for the increase were:



1.

Accounting fees of $125,842 for the year ended October 31, 2006, compared to $33,301 for the year ended October 31, 2005.



2.

Legal fees of $90,980 for the year October 31, 2006, compared to $60,843 for the year ended October 31, 2005.



3.

Other professional services and contract labor of $335,626 for the year ended October 31, 2006, compared to $0 for the year ended October 31, 2005.



Stock option expense amounted to $2,676,758 for the year ended October 31, 2006, compared to $78,905 for the year ended October 31, 2005.





14



---

Interest expense-net  includes interest income of $7,373 and interest expense of $288,123 for the year ended October 31, 2006, compared to $399 of interest income and $3,556 of interest expense for the year ended October 31, 2005. Interest expense relates mainly to borrowings for the print and advertising for the movie, One Night with the King.



State income taxes were $6,611 for the year ended October 31, 2006 and $3,190 for the year ended October 31, 2005.



The Company incurred a net loss of $5,768,433 in fiscal 2006, compared to $1,213,213 for fiscal 2005. The increased loss was principally the result of the increased stock compensation expenses discussed above, and print and advertising expense discussed above.



Liquidity and Capital Resources



The Companys current activities and operating expenses will require raising additional capital.  During the year ended October 31, 2007, the Company raised gross proceeds $432,563 from the sale of common stocks. During the year ended October 31, 2006, the Company raised additional proceeds of $160,000 from the sale of Units (consisting of common stock and warrants) and $686,000 from the sale of common stocks with no warrants attached.



The Companys primary source of liquidity has been funds earned from its production projects, funds earned from its Cinemills division and funds raised from private placements. The Company used  $4,974,689 cash in operating activities for the year ended October 31, 2007 compared to a negative cash flow from operations of $7,297,145 for the year ended October 31, 2006.



The Company sold rental equipment with a net book value of $47,832 at a loss of $42,832 during the year ended October 31, 2007. The Company also sold lighting equipment at a loss of $32,965 during the year ended October 31, 2007.There were no purchases of equipment during the year ended October 31, 2007. During the year ended October 31, 2006 the company purchased $88,223 of equipment.



During the year ended October 31, 2007, the Company had negative cash flow of $4,814,593 from financing activities, which compares to $6,853,468 of positive cash flow during the year ended October 31, 2006. This negative cash flow during the year ended October 31, 2007 resulted from the repayment of the print and advertising loan on the movie, One Night with the King. In fiscal 2006 financing activities consisted principally of loan proceeds of $6,000,000 for print and advertising expenditures of the then newly released feature film, One Night with the King, and sale of common stock in the amount of $846,000.



In March 2006 the Company entered into an agreement with Twentieth Century Fox Home Entertainment LLC for the North American distribution by Fox of the DVD to the Company's feature film "One Night with the King". The DVD was released in retail outlets throughout North America on January 30, 2007. As of October 31, 2007 the Company earned DVD sales revenue of $6,698,144. The Company received $6,316,164 of this revenue during the year ended October 31, 2007.



In March 2007, the Company acquired the worldwide distribution rights to the film, Noëlle, in theatrical, home video and all other and ancillary markets of any kind, now existing or later created (i.e., pay TV, DVD, videos, foreign, etc) for a period of twelve years, subject to the terms and limits set forth in the agreement. The film was released domestically in 200 theatres on December 7, 2007.



If we are unable to generate sufficient funds from current operations, including future revenues from the sale of DVDs and from foreign and ancillary sales from One Night with the King, and from the sale of lighting products we will be unable to continue operations at its current level. We project that we will need to raise capital of approximately $3,000,000 to continue operations at its present level.





15



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New financing will be required to fund working capital and operations should the Company be unable to generate positive cash flow from operations in the near future.  The Company is exploring the possible sale of equity securities and/or debt financing, and believes that additional financing will be available under terms and conditions that are acceptable to the Company. In the event financing is not available in the time frame required, the Company will be forced to reduce its rate of growth, if any, reduce operating expenses, curtail sales and marketing activities and reschedule research and development projects.  In addition, the Company might be required to sell certain of its assets or license its technologies to others.  These actions, while necessary for the continuance of operations during a time of cash constraints and a shortage of working capital, could adversely affect the Companys business.



In view of the matters described in the preceding paragraph, recoverability of a major portion of the recorded asset amounts shown in the accompanying consolidated balance sheet is dependent upon continued operations of the Company, which, in turn, is dependent upon the Companys ability to continue to raise capital and generate positive cash flows from operations.  The consolidated financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts and classifications of liabilities that might be necessary should the Company be unable to continue its existence.



The Company continues to seek additional debt or equity investments to support the operating deficiency and enable the Company to fund possible business growth and development. In the event that such investments are not available when required, current operations would be curtailed by reducing expenses, deferring payment of compensation, discontinuing plans for new projects and the selling of assets. Some of those steps could cause the Company to be unable to continue as a going concern.



Market Risk



The Company can give no assurance as to when, if ever, it will have sufficient revenues to cover its operating cash requirements and to fund maturing debt. Further, we can give no assurance that we will be able to continue to obtain funds from the sale equity securities or borrowings, or that the terms of such sales or borrowings will be as favorable as the terms of prior sales and borrowings. Our ability to obtain additional financing in the coming months will depend upon a number of factors, including market conditions, our results of operations, our success in the continued DVD sales from the Film and investors perception of our business and prospects. Sales of equity securities, or sales of convertible debt securities, could materially dilute our existing shareholders.



New financing will be required to fund working capital and operations should the Company be unable to generate positive cash flow from operations in the near future.  The Company is exploring the possible sale of equity securities and/or debt financing, and believes that additional financing will be available under terms and conditions that are acceptable to the Company.  The Company is also anticipating additional revenue from its DVD release of its motion picture, One Night with the King. However, there can be no assurance that additional financing will be available.  In the event financing is not available in the time frame required, the Company will be forced to reduce its rate of growth, if any, reduce operating expenses, curtail sales and marketing activities and reschedule research and development projects.  In addition, the Company might be required to sell certain of its assets or license its technologies to others.  These actions, while necessary for the continuance of operations during a time of cash constraints and a shortage of working capital, could adversely affect the Companys business.



In view of the matters described in the preceding paragraph, recoverability of a major portion of the recorded asset amounts shown in the accompanying consolidated balance sheet is dependent upon continued operations of the Company, which, in turn, is dependent upon the Companys ability to continue to raise capital and generate positive cash flows from operations.  The consolidated financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts and classifications of liabilities that might be necessary should the Company be unable to continue its existence.



16



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Item 7.



Financial Statements





REPORTS OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRMS





To the Board of Directors

Gener8xion Entertainment Inc.





We have audited the accompanying consolidated balance sheet of Gener8xion Entertainment, Inc. as of October 31, 2007, and the related consolidated statements of operations, stockholders deficit and cash flows for the year then ended.  These consolidated financial statements are the responsibility of the Company's management.  Our responsibility is to express an opinion on these consolidated financial statements based on our audit.



We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States).  Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement.  The Company has determined that it is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Companys internal control over financial reporting.  Accordingly, we express no such opinion. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the consolidated financial statements.  An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall consolidated financial statement presentation.  We believe that our audit provides a reasonable basis for our opinion.



In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of Gener8xion Entertainment, Inc. as of October 31, 2007, and the results of their operations and their cash flows for the year then ended, in conformity with accounting principles generally accepted in the United States.



The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in the notes to the financial statements, the Company has had losses from operations, has negative working capital of approximately $988,000 and has a negative net worth of approximately $380,000. These matters raise substantial doubt about the Company's ability to continue as a going concern. Management's plans concerning these matters are also described in the notes to the consolidated financial statements. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.





/s/  Farber Hass Hurley & McEwen LLP





Camarillo, California

January 23, 2008



17



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To the Board of Directors and Stockholders

of Gener8Xion Entertainment, Inc.



We have audited the accompanying consolidated statements of operations, stockholders' deficit, and cash flows for the year October 31, 2006 of Gener8Xion Entertainment, Inc. (the Company, formerly CDMI Productions, Inc.) These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements based on our audit.



We conducted our audit in accordance with generally accepted auditing standards as established by the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement. The Company is not required to, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the consolidated financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall consolidated financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.



In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the  consolidated results of its operations and its cash flows for the year ended October 31, 2006, in conformity with accounting principles generally accepted in the United States of America.



The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 1 to the consolidated financial statements, the Company has incurred operating losses since inception. These conditions raise substantial doubt about its ability to continue as a going concern. Management's plans regarding those matters also are described in Note 1. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.



/S/ Stonefield Josephson, Inc.



Los Angeles, California

February 9, 2007



18



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Gener8Xion Entertainment, Inc.

Consolidated Balance Sheet

As of October 31, 2007

(Audited)



|                                                                                              |  |   |            
|--------------------------------------------------------------------------------------------- |  | - | -----------
|ASSETS                                                                                        |  |   |            
|Current assets:                                                                               |  |   |            
|Cash and cash equivalents                                                                     |  | $ | 322,856    
|Cash-restricted                                                                               |  |   | 207,681    
|Receivables (net of $5,000 reserve for doubtful accounts)                                     |  |   | 808,113    
|Inventory                                                                                     |  |   | 630,761    
|Prepaid expenses and other current assets                                                     |  |   | 45,056     
|Total current assets                                                                          |  |   | 2,014,466  
|Film costs                                                                                    |  |   | 468,152    
|Equipment:                                                                                    |  |   |            
|Production equipment                                                                          |  |   | 253,525    
|Other equipment                                                                               |  |   | 53,536     
|Accumulated depreciation                                                                      |  |   | 307,061    
|Equipment, net                                                                                |  |   | (167,165)  
|                                                                                              |  |   | 139,896    
|Total assets                                                                                  |  | $ | 2,622,514  
|                                                                                              |  |   |            
|LIABILITIES AND STOCKHOLDERS' DEFICIT                                                         |  |   |            
|Current liabilities:                                                                          |  |   |            
|Accounts payable                                                                              |  | $ | 570,322    
|Accrued liabilities                                                                           |  |   | 662,499    
|Accrued revenue participation                                                                 |  |   | 849,152    
|Accrued interest-prints and advertising                                                       |  |   | 17,298     
|Advance from employee and officer                                                             |  |   | 103,308    
|Loan payable - prints and advertising                                                         |  |   | 600,000    
|Loan payable - other                                                                          |  |   | 10,000     
|Line of credit                                                                                |  |   | 49,005     
|Deferred income-other                                                                         |  |   | 141,150    
|Total current liabilities                                                                     |  |   | 3,002,734  
|Total liabilities                                                                             |  |   | 3,002,734  
|                                                                                              |  |   |            
|Commitments and contingencies (Note 2)                                                        |  |   |            
|Stockholders' deficit:                                                                        |  |   |            
|Preferred stock, $0.01 par value-5,000,000 shares authorized, none
issued and outstanding     |  |   | -          
|Common stock, $0.01 par value-50,000,000 shares authorized, 18,128,045
issued and outstanding |  |   | 181,281    
|Additional paid-in capital                                                                    |  |   | 7,517,864  
|Accumulated deficit                                                                           |  |   | (8,079,365)
|Total stockholders' equity                                                                    |  |   | (380,220)  
|Total liabilities and stockholders' equity                                                    |  | $ | 2,622,514  



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



F-1



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Gener8Xion Entertainment, Inc.

Consolidated Statements of Operations

(Audited)



|                                                               |  |                        |            |      |   |            
|-------------------------------------------------------------- |  | ---------------------- | ---------- | ---- | - | -----------
|                                                               |  | Year ended October 31,
|                                                               |  | 2007                   |            | 2006
|Revenues                                                       |  |                        |            |      |   |            
|Rental income - related party                                  |  |                        | 8,596      |      |   | 51,576     
|Other income-related party                                     |  |                        | -          |      |   | 100,000    
|Production revenues                                            |  |                        | 9,010,682  |      |   | 4,710,595  
|Sales - lighting products                                      |  |                        | 843,021    |      |   | 846,159    
|Total revenues                                                 |  |                        | 9,862,299  |      |   | 5,708,329  
|Cost of revenues                                               |  |                        |            |      |   |            
|Cost of lighting products                                      |  |                        | 567,673    |      |   | 439,367    
|Cost of production                                             |  |                        | 5,784,732  |      |   | 5,663,472  
|Depreciation on rental equipment                               |  |                        | 7,143      |      |   | 28,571     
|Total cost of revenues                                         |  |                        | 6,359,548  |      |   | 6,131,410  
|Gross profit (loss)                                            |  |                        | 3,502,751  |      |   | (423,081)  
|General and administrative expenses                            |  |                        | 2,718,412  |      |   | 5,057,991  
|Loss on impairment of goodwill                                 |  |                        | 439,254    |      |   | -          
|Income (loss) from operations                                  |  |                        | 345,085    |      |   | (5,481,072)
|Other income (expense)                                         |  |                        |            |      |   |            
|Loss on abandonment of equipment                               |  |                        | (10,560)   |      |   | -          
|Interest income                                                |  |                        | 24,250     |      |   | 7,373      
|Interest expense                                               |  |                        | (945,805)  |      |   | (288,123)  
|Total other income (expense)                                   |  |                        | (932,115)  |      |   | (280,750)  
|Loss before income tax expense                                 |  |                        | (587,030)  |      |   | (5,761,822)
|Income tax expense                                             |  |                        | 5,540      |      |   | 6,611      
|Net loss                                                       |  | $                      | (592,570)  |      | $ | (5,768,433)
|Net loss per common share  basic and diluted                  |  | $                      | (0.03)     |      | $ | (0.34)     
|Weighted average common shares outstanding
 basic and diluted |  |                        | 17,917,305 |      |   | 16,896,936 



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



F-2



---

Gener8Xion Entertainment, Inc.

Consolidated Statement of Stockholder's Deficit



|                                                                 |              |  |                    |         |          |   |           |  |       |             |  |   |            
|---------------------------------------------------------------- | ------------ |  | ------------------ | ------- | -------- | - | --------- |  | ----- | ----------- |  | - | -----------
|                                                                 | Common Stock |  | Additional Paid-in |         | Retained |   |           | 
|                                                                 | Shares       |  | Amount             |         | Capital  |   | Earnings  |  | Total
|Balance at October 31, 2005                                      | 16,541,250   |  | $                  | 165,413 |          | $ | 3,170,265 |  | $     | (1,718,175) |  | $ | 1,617,503  
|Sale of common stock January, 2006                               | 75,000       |  |                    | 750     |          |   | 149,250   |  |       |             |  |   | 150,000    
|Sale of common stock February, 2006                              | 5,000        |  |                    | 50      |          |   | 9,950     |  |       |             |  |   | 10,000     
|Common stock issued to consultant for services in March 2006     | 200,000      |  |                    | 2,000   |          |   | 218,000   |  |       |             |  |   | 220,000    
|Sale of common stock May, 2006                                   | 10,000       |  |                    | 100     |          |   | 9,900     |  |       |             |  |   | 10,000     
|Common stock issued to consultant for services in May 2006       | 50,000       |  |                    | 500     |          |   | 62,000    |  |       |             |  |   | 62,500     
|Sale of common stock June, 2006                                  | 110,000      |  |                    | 1,100   |          |   | 108,900   |  |       |             |  |   | 110,000    
|Sale of common stock July, 2006                                  | 10,000       |  |                    | 100     |          |   | 9,900     |  |       |             |  |   | 10,000     
|Sale of common stock August, 2006                                | 275,000      |  |                    | 2,750   |          |   | 272,250   |  |       |             |  |   | 275,000    
|Common stock issued to consultant for services in August 2006    | 75,000       |  |                    | 750     |          |   | 48,000    |  |       |             |  |   | 48,750     
|Sale of common stock September, 2006                             | 100,000      |  |                    | 1,000   |          |   | 99,000    |  |       |             |  |   | 100,000    
|Sale of common stock October, 2006                               | 181,000      |  |                    | 1,810   |          |   | 179,190   |  |       |             |  |   | 181,000    
|Stock based compensation expense for year ended October 31, 2006 |              |  |                    |         |          |   | 2,676,758 |  |       |             |  |   | 2,676,758  
|Net loss                                                         |              |  |                    |         |          |   |           |  |       | (5,768,433) |  |   | (5,768,433)
|Balance at October 31, 2006                                      | 17,632,250   |  | $                  | 176,323 |          | $ | 7,013,363 |  | $     | (7,486,608) |  | $ | (296,922)  
|Sale of common stock November, 2006                              | 104,000      |  |                    | 1,040   |          |   | 102,960   |  |       |             |  |   | 104,000    
|Miscellaneous adjustment                                         |              |  |                    |         |          |   |           |  |       | (187)       |  |   | (187)      
|Sale of common stock February, 2007                              | 100,000      |  |                    | 1,000   |          |   | 99,000    |  |       |             |  |   | 100,000    
|Sale of common stock April, 2007                                 | 101,010      |  |                    | 1,010   |          |   | 76,768    |  |       |             |  |   | 77,778     
|Sale of common stock June, 2007                                  | 103,778      |  |                    | 1,038   |          |   | 102,740   |  |       |             |  |   | 103,778    
|Sale of common stock June, 2007                                  | 47,007       |  |                    | 470     |          |   | 46,537    |  |       |             |  |   | 47,007     
|Common stock issued to consultant for services in October 2007   | 40,000       |  |                    | 400     |          |   | 8,800     |  |       |             |  |   | 9,200      
|Stock based compensation expense for year ended October 31 2007  |              |  |                    |         |          |   | 67,696    |  |       |             |  |   | 67,696     
|Net income                                                       |              |  |                    |         |          |   |           |  |       | (592,570)   |  |   | (592,570)  
|Balance at October 31, 2007                                      | 18,128,045   |  | $                  | 181,281 |          | $ | 7,517,864 |  | $     | (8,079,365) |  | $ | (380,220)  



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





F-1



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Gener8Xion Entertainment, Inc.

Consolidated Statements of Cash Flows

(Audited)



|                                                         |  |                        |             |      |   |            
|-------------------------------------------------------- |  | ---------------------- | ----------- | ---- | - | -----------
|                                                         |  | Year ended October 31,
|                                                         |  | 2007                   |             | 2006
|Cash flows from Operating Activities:                    |  | $                      | (592,570)   |      | $ | (5,768,433)
|Net loss                                                 |  |                        |             |      |   |            
|Adjustments to reconcile net loss                        |  |                        |             |      |   |            
|to net cash provided by (used for) operations:           |  |                        |             |      |   |            
|Depreciation                                             |  |                        | 94,996      |      |   | 111,000    
|Reserve for bad debts                                    |  |                        | 5,000       |      |   | -          
|Loss on impairment of goodwill                           |  |                        | 439,254     |      |   | -          
|Stock based compensation expense                         |  |                        | 67,696      |      |   | 2,676,758  
|Stock issued for services                                |  |                        | 9,200       |      |   | 331,250    
|Loss on sale of equipment                                |  |                        | 75,797      |      |   | -          
|Loss on abandonment of equipment                         |  |                        | 10,560      |      |   | -          
|Changes in operating assets and liabilities              |  |                        |             |      |   |            
|Receivables                                              |  |                        | 3,732,662   |      |   | (4,452,078)
|Inventory                                                |  |                        | (40,963)    |      |   | (365,013)  
|Film costs                                               |  |                        | (95,849)    |      |   | (351,060)  
|Prepaid expenses and other current assets                |  |                        | (25,031)    |      |   | (7,925)    
|Accounts payable                                         |  |                        | (133,777)   |      |   | 579,009    
|Accrued liabilities                                      |  |                        | 281,042     |      |   | 317,695    
|Accrued participation costs                              |  |                        | 849,152     |      |   | -          
|Deferred income-other                                    |  |                        | (102,600)   |      |   | 243,750    
|Deferred income-related party                            |  |                        | (8,596)     |      |   | 4,298      
|Net cash provided by (used for) operating activities     |  |                        | 4,565,973   |      |   | (6,680,749)
|Cash flows from Investing Activity:                      |  |                        |             |      |   |            
|Cash - restricted                                        |  |                        | 408,716     |      |   | (616,396)  
|Purchase of equipment                                    |  |                        | -           |      |   | (88,223)   
|Proceeds from sale of equipment                          |  |                        | 5,000       |      |   | -          
|Net cash provided by (used for) investing activities     |  |                        | 413,716     |      |   | (704,619)  
|Cash flows from Financing Activities:                    |  |                        |             |      |   |            
|Advances from affiliates                                 |  |                        | 103,308     |      |   | (2,000)    
|Net proceeds from note payable                           |  |                        | 10,000      |      |   | -          
|Loan payable-prints and advertising                      |  |                        | (5,400,000) |      |   | 6,000,000  
|Proceeds from line of credit                             |  |                        | 39,537      |      |   | 9,468      
|Proceeds from sale of common stock                       |  |                        | 432,562     |      |   | 846,000    
|Net cash (used for) provided by financing activities     |  |                        | (4,814,593) |      |   | 6,853,468  
|Net decrease in cash                                     |  |                        | 165,096     |      |   | (531,900)  
|Cash at beginning of year                                |  |                        | 157,760     |      |   | 689,660    
|Cash at end of year                                      |  | $                      | 322,856     |      | $ | 157,760    
|Supplemental Disclosure of Cash Flow Information         |  |                        |             |      |   |            
|Cash paid for:                                           |  |                        |             |      |   |            
|Interest                                                 |  | $                      | 927,738     |      | $ | 280,750    
|Taxes                                                    |  | $                      | 5,540       |      | $ | 6,611      
|Supplemental Disclosure of Non-Cash financing Activities |  |                        |             |      |   |            
|Stock Issued for consulting services                     |  | $                      | 9,200       |      | $ | 268,750    

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



F-2



---

Gener8Xion Entertainment, Inc.

Notes to Consolidated Financial Statements



1. Organization and Basis of Presentation



Gener8Xion Entertainment, Inc, which changed its name from CDMI Productions, Inc. (formerly Gamogen, Inc. - Company) was incorporated on March 17, 1986 in New York and reincorporated in Delaware in January 2005. On September 13, 2002 the Company consummated an Agreement and Plan of Merger (Agreement) and the following transactions took place:



1.

The Company sold 950,000 shares of common stock to its principal shareholder and 1,500,000 shares to the parent company of CDMI Productions, Inc. (a Delaware company) (CDMI Delaware) at closing of the merger, in each case for $0.10 per share.



2.

The Company received $55,000 in December 2001 as a partial payment of a note receivable from its principal shareholder. At closing, the balance of the note was forgiven for investment banking and similar services provided by the principal shareholder. The note bore interest at 6-1⁄2 % a year and was due in November 2002.



3.

The Company issued 2,169,689 shares of common stock in exchange for all the outstanding shares of CDMI Delaware, which became a wholly owned subsidiary of the Company.





The Merger has been accounted for as a business combination using the reverse acquisition method, with CDMI - Delaware being the acquirer for accounting purposes. The assets and liabilities of the Company (primarily cash and accrued expenses) have been combined with those of CDMI Delaware at historical cost which was the same as fair value. The accounting treatment for the merger was the purchase method of accounting with no change in the recorded amount of assets and liabilities of either company since fair value and historical cost were the same. The statement of operations and of cash flows of the Company represents the operations of CDMI - Delaware since its inception on November 13, 2001 and Gamogen since the date of merger, September 13, 2002.



During fiscal 2002 the Company began leasing specialized equipment to the entertainment industry and intended to be a provider of sound stages and production facilities to the entertainment industry worldwide. In addition, the Company may expand its equipment leasing business and may develop and produce full-length motion pictures through autonomous entities.



On November 18, 2004, the Company entered into (1) an Asset Purchase Agreement whereby it issued 2,640,000 shares of common stock to Matthew and Laurie Crouch and (2) an Employment Agreement with Matthew Crouch whereby it issued 6,160,000 shares of common stock to Matthew Crouch. As a result Matthew and Laurie Crouch owned approximately 58% of the Companys issued and outstanding shares and Matthew Crouch was appointed Chief Executive Officer and Chairman of the Board of the Company. Pursuant to the Asset Purchase Agreement the Company acquired all of the worldwide distribution rights owned by Matthew and Laurie Crouch to the feature film One Night with the King and to a proposed animated film project, Prodigal Son. The term of the Employment Agreement is seven years and provides for a minimum annual salary of $350,000.



The accounting basis of the assets acquired is zero and therefore the transaction was recorded at such value on the Companys financial statements. The stock issued in the employment agreement with Matthew Crouch was valued at $0.03 per share and $184,800 was charged to compensation expense.



2. Summary of Significant Accounting Policies



Basis of Presentation



The financial statements of the Company are presented on a consolidated basis for all periods presented. All significant inter-company accounts and transactions have been eliminated in preparation of the consolidated financial statements.



F-3



---

The accompanying consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America.



Reclassifications



Certain reclassifications have been made to the 2006 financial statements to conform to the 2007 presentation.



Use of Estimates



The accompanying financial statements have been prepared in accordance with accounting principles generally accepted in the United States which requires management to make estimates and assumptions affecting the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates.



Revenue Recognition



Revenue from lighting equipment sales is recognized in the period the equipment is shipped and the other criteria of SEC Staff Accounting Bulletin 104 are met.



- Persuasive evidence of an arrangement exists

- Delivery has occurred

- The price is fixed and determinable, and

- Collectibility is reasonably assured



With respect to film revenues, the Company follows the guidance of SOP-00-2 to account for its film distribution and its television production and distribution revenue and costs. Under the guidance of SOP-00-2, paragraph 07, an entity should recognize revenue from a sale or licensing arrangement of a film when all of the following conditions are met:



- Persuasive evidence of a sale or licensing arrangement with a customer exists.

- The film is complete and, in accordance with the terms of the arrangement, has been delivered or is available for immediate and unconditional delivery.

- The license period of the arrangement has begun and the customer can begin its exploitation, exhibition, or sale.

- The arrangement fee is fixed or determinable.

- Collection of the arrangement fee is reasonably assured.



If the Company does not meet any one of the preceding conditions, the Company should defer recognizing revenue until all of the conditions are met. If a licensing arrangement covering a single film provides that an entity will receive a flat fee, then the amount of that fee is considered fixed and determinable. In such instances, the entity should recognize the entire amount of the license fee as revenue when it has met all of the other conditions of paragraph .07. The Company recognized film distribution revenue in 2007.



In the normal course of business, the Company acts as or uses an intermediary or agent in executing transactions with third parties. Pursuant to EITF No. 99-19, Reporting Revenue Gross as a Principal versus Net as an Agent, such transactions are recorded on a gross or net basis depending on whether the Company is acting as the principal in a transaction or acting as an agent in the transaction. The Company serves as the principal in transactions in which it has substantial risks and rewards of ownership and, accordingly, records revenue on a gross basis. For those transactions in which the Company does not have substantial risks and rewards of ownership, the Company is considered an agent in the transaction and, accordingly, records revenue on a net basis. To the extent that revenues are recorded on a gross basis, any commissions or other payments to third parties are recorded as expenses so that the net amount (gross revenues less expenses) is reflected in Operating Income. Accordingly, the impact on Operating Income is the same whether the Company records revenue on a gross or net basis.





F-4



---

With respect to the film, One Night with the King, revenues and costs were presented on a gross basis, as the Company assumed all risks and rewards of the film distribution. Please note that the Companys gross revenue is the sub-distributors net receipts. As of October 31, 2007,One Night with the King was the only source of film revenue for the Company.



As of October 31, 2007, the Film had grossed $13,396,000 in domestic theatrical receipts, $14,052,000 in DVD sales and rental, $823,000 in foreign sales, and $100,000 in the ancillary market. Of the gross film revenues, the Company receives only net revenues from the sub-distributors after sales tax, the Exhibitors cost and the sub distributors costs are deducted. As of October 31, 2007 the Company had earned $5,525,442 in domestic theatrical revenue, $6,698,144 in DVD revenue, $632,525 in foreign revenue, $78,907 in ancillary revenue and $1,500 in soundtrack sales. Of the total revenues of $12,936,518 earned as of October 31, 2007, $12,231,177 had been received as of October 31, 2007. The first priorities for payment of the revenues received were to repay the amount advanced for prints and advertising, guild royalties, and certain other costs plus an agreed return (aggregate $8,152,000). Of the remainder of the balance, 80% is paid to the investors of the movie production, approximately 9% to outside producer and 11%, which includes distribution fee, to the Company. Production revenues for the year ended October 31, 2007 is based on the application of these agreements.



Cash



For the purposes of the consolidated balance sheets and consolidated statements of cash flows, all highly liquid investments with original maturities of three months or less are considered cash equivalents. The Company maintains bank accounts with balances which, at times, may exceed federally insured limits. As of October 31, 2007 the bank account balances exceeded this limit by $235,331.The Company has not experienced any losses on such accounts. The Company believes it is not exposed to any significant risk on bank deposit accounts.



Restricted Cash



Restricted cash has been segregated in the financials as this cash has been restricted for the purpose of receiving loans from investors that were limited to investments in specific film projects, receiving revenue earned for the various markets the film was released in, and repaying those loans and related revenue participation costs directly associated with the film, One Night with the King. As of October 31, 2007 the restricted bank account balances of $207,573 is not insured the Federal Deposit Insurance Corporation. The Company has not experienced any losses on such accounts. The Company believes it is not exposed to any significant risk on bank deposit accounts



Accounts Receivable



Accounts receivable relating to film revenues is due from the various exhibitors. Payments are collected by an unaffiliated well known company (the Companys sub distributor), who provides the Company a monthly report of earned film revenue and the related outstanding balance, and remitted to Gener8Xion Entertainment. Accounts receivables from retailers, etc. for DVD sales are subsequently collected by the Companys sub distributor, another unaffiliated well known company, and remitted to the Company on a quarterly basis. Management believes that no allowance for bad debts was considered necessary for accounts receivable relating to the film, One Night with the King, because the number of accounts was substantial with no individual account material. The major retailers, such as Target, Wal-Mart, and Best Buy, were well known and had a history of operations which led management to believe that no allowance was necessary.  Further, managements experience was that such receivables are paid within a year. DVD, foreign, and ancillary market sales are reported to the Company by the sub distributor.

The retailers and others are generally large companies with good payment history and management believed that no allowance was necessary.





F-5



---

The following table represents the composition of the accounts receivable balance at October 31, 2007 compared to the balance at October 31, 2006. The allowance for doubtful accounts is the Companys best estimate of accounts receivable collectibility and requires managements judgment. It is at least reasonably possible that the Company's estimate of the allowance for doubtful accounts will change in the near-term.



|                               |                        |         |                        |   |          
|------------------------------ | ---------------------- | ------- | ---------------------- | - | ---------
|                               | As of October 31,
2007 |         | As of October 31,
2006
|ONWTK                          | $                      | 705,341 |                        | $ | 4,352,929
|TV Production                  |                        | -       |                        |   | 15,000   
|Cinemills Customer Receivables |                        | 107,772 |                        |   | 177,846  
|Other                          |                        | -       |                        |   | 5,823    
|Reserve for doubtful accounts  |                        | (5,000) |                        |   | -        
|Net receivables                | $                      | 808,113 |                        | $ | 4,551,598



Inventory



The following table represents the composition of the inventory balance at October 31, 2007 compared to the balance at October 31, 2006. The cost of lighting parts and finished lighting equipment is stated at the lower of cost (first-in, first-out) or market. Based on managements review of the Companys inventories, it was determined that the majority of  its inventories are not susceptible to obsolescence, and it was determined that no allowance was needed at this time.



|                             |                        |         |                        |   |        
|---------------------------- | ---------------------- | ------- | ---------------------- | - | -------
|                             | As of October 31,
2007 |         | As of October 31,
2006
|Cinemills lighting inventory | $                      | 637,168 |                        | $ | 589,798
|Total inventory              | $                      | 637,168 |                        | $ | 589,798



Film Costs



Film costs include the costs of licensing distribution rights and film development and production costs.  Film costs are stated at the lower of unamortized cost or market.  In accordance with Statement of Position (SOP) 00-2 Accounting by Producers or Distributors of Films, film costs are amortized using the film-forecast-computation method.  Utilizing this method, costs are amortized based on the ratio of actual current period gross revenues to estimated remaining total lifetime revenues.  These estimates are reviewed by management periodically.  Amortization is included in cost of goods sold in the Statements of Income.



The components of film costs consist of the following:



|                                                        |                        |         |                        |   |        
|------------------------------------------------------- | ---------------------- | ------- | ---------------------- | - | -------
|                                                        | As of October 31,
2007 |         | As of October 31,
2006
|Film and Television costs in process                    | $                      | 163,732 |                        | $ | 312,491
|Film and Television costs in development                |                        | 24,500  |                        |   | -      
|Film and Television projects completed but not released |                        | 219,920 |                        |   | -      
|Film and Television projects in library                 |                        | 60,000  |                        |   | 60,000 
|Total film costs                                        | $                      | 468,152 |                        | $ | 372,491





F-6



---

Property and Equipment



Property and equipment are carried at cost, net of accumulated depreciation and amortization. Depreciation is calculated using the straight-line method over the estimated useful lives of the related assets. Repairs and maintenance are charged to expense as incurred. Upon retirement or sale, cost and accumulated depreciation are removed from the accounts and any gain or loss is reflected in the consolidated statement of operations. The cost of normal maintenance and repairs is charged to operations as incurred. Material expenditures, which increase the life of an asset, are capitalized and depreciated over the estimated remaining life of the asset. As noted in the table below, the Company abandoned certain production equipment during the quarter ended April 30, 2007.



|                                          |                       |           |                         |   |                                |  |   |        
|----------------------------------------- | --------------------- | --------- | ----------------------- | - | ------------------------------ |  | - | -------
|                                          | Rental Equipment sold |           | Lighting Equipment sold |   | Production Equipment abandoned
|Book value at time of sale or abandonment | $                     | 200,000   |                         | $ | 59,526                         |  | $ | 17,600 
|Accumulated depreciation                  |                       | (152,168) |                         |   | (26,561)                       |  |   | (7,040)
|Sale price                                |                       | (5,000)   |                         |   | -                              |  |   | -      
|Loss on sale or abandonment               | $                     | 42,832    |                         | $ | 32,965                         |  | $ | 10,560 



The estimated useful lives of property and equipment are as follows:



|                       |             
|---------------------- | ------------
|Furniture and fixtures | 3 years     
|Computer equipment     | 3 to 5 years
|Production equipment   | 5 to 7 years



Depreciation expense amounted to $87,853 for the year ended October 31, 2007, compared to $82,429 for year ended October 31, 2006.



Depreciation expense on rental equipment to $7,143 for the year ended October 31, 2007, compared to $28,571 for year ended October 31, 2007. This rental equipment was sold April 2007.



Goodwill



Goodwill represents the excess of the cost of the acquired company (Cinemills) over the amount assigned to the assets acquired and liabilities assumed in the asset purchase agreement on September 30, 2005. The net book value of the assets purchased at September 30, 2005 was $186,684; the purchase price was $625 938; goodwill recognized was $439,254. Under SFAS No. 142, goodwill and other intangible assets with indefinite lives are no longer amortized but are reviewed annually for impairment indicators. The Company performed its annual impairment test as of October 31, 2007 in accordance with Statement on Financial Accounting Standards 142. The Company utilizes discounted cash flow models to determine fair value used in the goodwill impairment evaluation. Managements estimates of fair value are based upon factors such as projected future sales, price increases, and other uncertain elements requiring significant judgments.  As a result of the impairment test, it was determined that goodwill was fully impaired as of October 31, 2007.



Accounts Payable



Accounts payable included one major vendor that made up more than 10% of the outstanding balance of $570,323 at October 31, 2007. The major vendor, Filmgear, had an outstanding balance of $165,558 or 29% of the total accounts payable balance at October 31, 2007.



Debt



In June 2006, the Company opened a line of credit with Santa Barbara Bank for a total amount of $50,000. The line of credit bears an interest rate of variable rate, Wall Street Journal Prime plus 2.25%. As of October 31, 2007 the outstanding balance was $49,005. Accrued interest on the outstanding balance is paid monthly.





F-7



---

On August 28, 2006, the Company entered into a Loan and Security Agreement with Windfall Financial, LLC, a Delaware limited liability company (Windfall) whereby the Company and its co-borrower, One Night With The King, Inc., a California corporation, received a loan of $6,000,000 (with a commitment for an additional $2.5 million under certain circumstances) to finance the prints and advertising costs and expenses of the film One Night With The King. The Company is the principal distributor of the film. The film had its nationwide release on October 13, 2006. The terms of the loan agreement includes: a restricted collection account held by the Company for gross receipts of the Film in all media; the loan is to be repaid from collection account as monies are received; the loan is to be repaid at 120% of the total principal amount within nine months of receipt loan funds, and any balance remaining after nine months is subject to addition interest rate of prime plus 3%, with an additional 1% is added to the prime rate on any outstanding balance each year thereafter. As of October 31, 2007, the loan of $6,000,000 and accrued interest of $1,200,000 was paid in full by the Company.



In December 2006 a short term advance was made to the Company by the president of the Companys Cinemills division for working capital purposes. The balance at October 31, 2007 was $93,692. The advance is payable on demand and bears interest at a rate of 9% per year. The interest on the loan is paid monthly.



In April 2007 a short term loan of $150,000 was made to the Company by a company controlled by an officer of the Company for working capital purposes. The stated interest rate on the note was 7.750% per annum.  As of October 31, 2007, the loan of $150,000 and accrued interest of $1,539 was paid in full by the Company.



In May 2007, a short term loan of $10,000, which is payable upon demand, was made to the Company by an independent third party entity. The stated interest rate on the note was 7.750% per annum. This loan was subsequently paid in full by the Company in November 2007.



During the quarter ended October 31, 2007, the Company entered into Prints and Advertising Loan Agreements with five investors, whereby the Company received loans totaling $600,000 to finance the prints and advertising costs and expenses of the film Noelle. The Company is the principal distributor of the film. The film had its nationwide release on December 7, 2007. The terms of the loan agreement includes: the loan is to be repaid at 120% of the total principal amount no later than six months from the initial release date of the Film. As of October 31, 2007, the loan of $600,000 had accrued interest of $17,298.



Commitments and Contingencies



In connection with a distributorship agreement with a major supplier of lighting and related products (FilmGear), the Company has entered into a purchase agreement October 2005, committing to purchase $2,000,000 of lighting products per year, in exchange for exclusivity in the North American territory.  Due to a number of factors, including competition in the North American market this purchase commitment has not been fulfilled, and both parties are attempting to renegotiate the agreement.  The potential impact upon the Companys lighting sales of the loss of this contract and/or exclusivity in North America would not have a material impact on the Company. During the year ended October 31, 2007, inventory from FilmGear represented 19% of total lighting equipment sales. Pending resolution of a renegotiation with FilmGear, the Company is currently making purchases from such supplier on an as needed basis. There is no credit hold and FilmGear is supplying everything that the Company requests in inventory.



In November 2006 the Company signed an exclusive sales agreement with another California supplier (LEDZ, Inc.). The sales agreement with LEDZ, Inc. was revised in September 2007 and changed to a management sales and operational agreement whereby LEDZ will operate and sell its products from the Cinemills facilities, pay $4,000 per month to the company for the use of its facilities, and pay the Company an additional 20% commission on any net sales initiated by the efforts of the combined staff.





F-8



---

Earnings Per Share



The Company computes earnings (loss) per share in accordance with Statement of Financial Accounting Standards No. 128, Earnings per Share. Basic earnings (loss) per share are computed by dividing the net income (loss) for the period by the weighted average number of shares outstanding during the period. Diluted earnings (loss) per share is computed by dividing the net income (loss) for the period by the weighted average number of shares outstanding during the period including common stock equivalents.



Common stock equivalents, consisting of stock options for the purchase of 3,782,000 shares of common stock (3,210,000 issued year ended October 31, 2006 and 572,000 issued year ended October 31, 2005), have been excluded from the diluted weighted average shares for the years ended October 31, 2007 and 2006 because their inclusion would be anti-dilutive.



Below is a schedule of common stock equivalents excluded from the dilutive earnings per share calculation due to their anti-dilutive affect.



|                            |                                          |  |                |      |                                                     |   |                                               |  |   |     
|--------------------------- | ---------------------------------------- |  | -------------- | ---- | --------------------------------------------------- | - | --------------------------------------------- |  | - | ----
|                            | Options
Outstanding  at
October 31,
2007 |  | Exercise
Price |      | Average Fair
Value Per share as
of October 31,
2007 |   | Ending Price Per
share as of October 31,
2007
|Options Issued January 2005 | 472,000                                  |  | $              | 1.25 |                                                     | $ | 0..54                                         |  | $ | 0.50
|Options Issued January 2005 | 100,000                                  |  | $              | 2.00 |                                                     | $ | 0..54                                         |  | $ | 0.50
|Options Issued March 2006   | 3,210,000                                |  | $              | 2.00 |                                                     | $ | 0..43                                         |  | $ | 0.50



Stock-based Compensation Expense



Through the end of fiscal 2005, the company measured compensation expense for stock-based incentive programs utilizing the intrinsic value method prescribed by Accounting Principles Board (APB) Opinion No. 25, Accounting for Stock Issued to Employees. Under this method, the Company did not record compensation expense when stock options were granted to eligible participants as long as the exercise price was not less than the fair market value of the stock when the option was granted. In accordance with Statement of Financial Accounting Standards (SFAS) No, 123, Accounting for Stock-Based Compensation, (SFAS 123) and SFAS No 148, Accounting for Stock-Based Compensation Transition and Disclosure, the Company disclosed the pro forma net income and net income  per share as if the fair value-based method had been applied in measuring compensation expense for stock-based incentive awards. No stock-based compensation cost was recognized in the Condensed Consolidated Statement of Operations for the nine months ended July 31, 2005 for options granted under the Companys 2005 Stock Option Plan, as all unvested options granted had an exercise price equal to the market value of the underlying common stock on the date of grant.



In December 2004, the Financial Accounting Standards Board (FASB) issued SFAS No. 123R, Share-Based Payment: An Amendment of FASB Statements No. 123 and 95 (SFAS No. 123R). This statement requires that the cost resulting from all share-based payment transactions be recognized in the Companys consolidated financial statements. In addition, in March 2005 the Securities and Exchange Commission (SEC) released SEC Staff  Accounting Bulletin No. 107, Share-Based Payment (SAB 107). SAB 107 provides the SECs staff position regarding the application of SFAS 123R and certain SEC rules and regulations, and also provides the staffs views regarding the valuation of share-based payment arrangements for public companies. Generally, the approach in SFAS 123R is similar to the approach described in SFAS 123. However, SFAS 123R requires all share-based payments to employees, including grants of employee stock options, be recognized in the statement of operations based on their fair values. Pro forma disclosure of fair value recognition, as prescribed under SFAS 123, is no longer an alternative.



In the first quarter of fiscal 2006, the Company adopted the fair value recognition provisions of SFAS 123R utilizing the modified-prospective transition method, as prescribed by SFAS 123R.



For the year ended October 31, 2007, the Company recognized stock compensation cost of $67,696.



F-9



---

Under SFAS 123R, the Company will continue to utilize the Black-Scholes model to estimate the fair value of options granted after November 1, 2005. The Companys assessment of the estimated compensation charges is affected by its stock price as well as assumptions regarding a number of complex and subjective variables and the related tax impact. These variables include, but are not limited to, the Companys price volatility and employee stock option exercise behaviors.



No stock options were granted for the year ended October 31, 2007.  The total options outstanding at October 31, 2007 were 3,782,000 with a weighted average exercise price (WAEP) of $0.77 per share. Options exercisable at October 31, 2007 were 3,739,333 with a WAEP of $0.77 per share.



The following summarizes the activity of the Companys stock options for the years ended October 31, 2007 and 2006:



|                                |           |  |                                 |     
|------------------------------- | --------- |  | ------------------------------- | ----
|                                | Shares    |  | Weighted Average Exercise Price
|Number of shares under option:  |           |  |                                 |     
|Outstanding at October 31, 2005 | 572,000   |  | $                               | 0.61
|Granted                         | 3,210,000 |  |                                 | 0.80
|Exercised                       | -         |  |                                 | -   
|Canceled or expired             | -         |  |                                 | -   
|Outstanding at October 31, 2006 | 3,782,000 |  |                                 | 0.77
|Granted                         | -         |  |                                 | -   
|Exercised                       | -         |  |                                 | -   
|Canceled or expired             | -         |  |                                 | -   
|Outstanding at October 31, 2007 | 3,782,000 |  | $                               | 0.77
|Exercisable at October 31, 2007 | 3,739,333 |  | $                               | 0.77



There was no intrinsic value with respect to the outstanding options as of October 31, 2007.



The following summarizes the activity of the Companys stock options that have not vested for the year ended October 31, 2007:



|                               |         |  |                             |     
|------------------------------ | ------- |  | --------------------------- | ----
|                               | Shares  |  | Weighted Average Fair Value
|Non-vested at November 1, 2006 | 220,833 |  | $                           | 0.61
|Granted                        | -       |  |                             | -   
|Vested                         | 178,166 |  |                             | 0.61
|Non-vested at October 31, 2007 | 42,667  |  | $                           | 0.61



As of October 31, 2007, there was $13,309 of total unrecognized compensation cost related to non-vested share-based compensation arrangements granted under existing stock option plans. This cost is expected to be recognized over a weighted-average period of three months. The total compensation expense recognized for the fair value of shares vested during the year ended October 31, 2007 was $67,696.





F-10



---

The Black-Scholes option pricing model is used by the Company to determine the weighted average fair value of options. The fair value of options at date of grant and the assumptions utilized to determine such values are indicated in the following table:



|                                                                                   |                            |   |      |   |      
|---------------------------------------------------------------------------------- | -------------------------- | - | ---- | - | -----
|                                                                                   | Year Ended     October 31,
|                                                                                   | 2007                       |   | 2006
|Weighted average fair value at date of grant for options granted during the period | $                          | - |      | $ | 0.80 
|Risk-free interest rates                                                           |                            | - |      |   | 4.45%
|Expected stock price volatility                                                    |                            | - |      |   | 95.05
|Expected dividend yield                                                            |                            | - |      |   | 0.0% 



Income Taxes



The Company accounts for income taxes under Statement of Financial Accounting Standards No. 109, Accounting for Income Taxes (SFAS 109). SFAS 109 is an asset and liability approach that requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been recognized in the Companys financial statements or tax returns. In estimating future tax consequences, SFAS 109 generally considers all expected future events other than enactment of changes in the tax law or rates. The Companys available deferred tax asset of approximately $1,788,556 arising primarily from the accumulated operating loss carry forwards, has not been reflected in the financial statements because a deferred tax valuation allowance has been recorded for the entire amount. The Companys federal net operating losses of approximately $4,471,389 begin expiring in 2021.



The Company experienced an ownership change as defined by Internal Revenue Code section 382 on November 18, 2004 (see footnote 1). The annual limitation on pre-ownership change net operating losses, imposed by section 382, will impact the Company's ability to utilize the net operating losses.



Fair Value of Financial Instruments



For certain of the Companys financial instruments, including accounts receivable, short-term bank borrowings, capital leases, accounts payable and other accrued liabilities, the carrying amounts approximate fair value due to their short-term maturities.  The fair value of long-term obligations approximates its carrying value as the existing contract interest rates are comparable to market rates currently offered to the Company for similar debt instruments with similar maturities.



Comprehensive Income (Loss)

The company accounts for comprehensive income in accordance with SFAS No. 130, Reporting Comprehensive Income, which requires comprehensive income and its components to be reported when a company has items of comprehensive income.  Comprehensive income includes net income plus other comprehensive income (i.e. certain revenues, expenses, gains, and losses reported as separate components of stockholders equity rather than in net income).  The Company has no items that represent other comprehensive income and, therefore has not included a schedule of other comprehensive income in these consolidated financial statements.



Advertising



The company had minimal advertising costs of $5,902 in fiscal 2007 and $10,328 in fiscal 2006. Advertising costs are expensed as incurred.



Going Concern



As reflected in the accompanying consolidated financial statements, the Company has continuing losses from operations.  These matters raise doubt about the Companys ability to continue as a going concern.





F-11



---

New financing will be required to fund working capital and operations should the Company be unable to generate positive cash flow from operations in the near future.  The Company is exploring the possible sale of equity securities and/or debt financing, and believes that additional financing will be available under terms and conditions that are acceptable to the Company.  The Company is also anticipating revenue from its theatrical and DVD release of its motion picture, One Night with the King. However, there can be no assurance that additional financing will be available.  In the event financing is not available in the time frame required, the Company will be forced to reduce its rate of growth, if any, reduce operating expenses, curtail sales and marketing activities and reschedule research and development projects.  In addition, the Company might be required to sell certain of its assets or license its technologies to others.  These actions, while necessary for the continuance of operations during a time of cash constraints and a shortage of working capital, could adversely affect the Companys business.



In view of the matters described in the preceding paragraph, recoverability of a major portion of the recorded asset amounts shown in the accompanying consolidated balance sheet is dependent upon continued operations of the Company, which, in turn, is dependent upon the Companys ability to continue to raise capital and generate positive cash flows from operations.  The consolidated financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or amounts and classifications of liabilities that might be necessary should the Company be unable to continue its existence.



Recently Issued Accounting Pronouncements



In February 2007, the FASB issued SFAS No. 159, The Fair Value Option for Financial Assets and Financial Liabilities  Including an amendment of FASB Statement No. 115, which permits entities to measure many financial instruments and certain other items at fair value. The objective is to improve financial reporting by providing entities with the opportunity to mitigate volatility in reporting earnings caused by measuring related assets and liabilities differently without having to apply complex hedge accounting provisions. This Statement is expected to expand the use of fair value measurement, which is consistent with the Boards long-term measurement objectives for accounting for financial instruments. This Statement is effective as of the beginning of the Companys first fiscal year that begins after November 15, 2007.



Other recent accounting pronouncements issued by the FASB (including its Emerging Issues Task Force), the American Institute of Certified Public Accountants (AICPA) and the SEC did not or are not believed by management to have a material impact on the Companys present or future financial statements.



3. Acquisition



On September 30, 2005, The Company entered into an Asset Purchase Agreement with Merd Holdings, LLC, doing business as Cinemills (Cinemills), whereby the Company acquired substantially all of the assets of Merd Holdings, LLC. The transaction was consummated with cash of approximately $440,000 and the issuance of 100,000 shares of common stock. Cinemills manufactures quality lighting equipment marketable worldwide to the motion picture, television, and related industries.



Goodwill recorded represented the excess of the cost of the acquired company (Cinemills) over the amount assigned to the assets acquired and liabilities assumed in the asset purchase agreement on September 30, 2005. Effective January 1, 2002 with the adoption of SFAS No. 142, Goodwill and Other intangible Assets, goodwill is not amortized. The net book value of the assets purchased at September 30, 2005 was $186,684; the purchase price was $625, 938; goodwill recognized was $439,254. The Companys purchase price allocation has been finalized in accordance with SFAS No. 142.



As of October 31, 2007, the second measurement date, the Company evaluated its fair value in accordance with paragraph 24 of SFAS No. 142.  Inasmuch as quoted market prices were not available, the Company estimated the future cash flows from the Cinemills business, assuming some financing to increase inventory levels.  The Company believes that its estimates are consistent with SFAS 142.



Cinemills has not yet achieved a level of independence that allows this division to cover its expenses. However, the Company has reduced costs in that division by cutting costs in its staff and trade shows.

This will help to reduce future losses as the company grows.





F-12



---

The Company believes that at this time goodwill has been impaired and has elected to take full impairment as of October 31, 2007.



4. Related Party Transactions



The Company rented premises from a company controlled by its principal shareholder/Chairman/CEO for $12,000 per month under a six month lease which expired in April 2005 and continued thereafter on a month to month basis until April 30, 2006.As of May 1, 2006, the Company relocated to smaller offices and signed a new month to month lease with its principal shareholder for $1,000 per month. On August 1, 2006, the company moved its corporate offices to its Cinemills location in Burbank, California.



In September 2005, the Companys Cinemills division occupied office and warehouse space under a three year lease for $4,400 per month from a company in which the President of the Company has a 50% interest. The lease, which was assumed as a component of the Cinemills acquisition, expired on October 31 2007. The lease was renewed for another three years at $4,840 per month with an expiration date of October 31, 2010. As of August 1, 2006 the Company relocated its corporate office to 2021 Lincoln Street, Burbank, CA, 91504, which houses its Cinemills division.



As of January 1, 2007, the Company leased 5,000 square feet of additional office and production space in Hollywood, California on a month to month lease at $8,500 per month, the first month and $6,000 the second month and $5,000 per month thereafter.



In 2002, the Company purchased lighting equipment for $200,000 and leased the equipment under an operating lease for a five year term to a company controlled by an officer of the Company. After the expiration of the lease, pursuant to the lease agreement, the Company sold the equipment to the lessee for its fair market value of $5,000. The Company incurred a loss on the sale of $42,832.



In December 2006 a short term advance was made to the Company by the president of the Companys Cinemills division for working capital purposes. The balance at October 31, 2007 was $93,692. The advance is payable on demand and bears interest at a rate of 9% per year. The interest on the loan is paid monthly.



In April 2007 a short term loan of $150,000 was made to the Company by a company controlled by an officer of the Company for working capital purposes. The stated interest rate on the note was 7.750% per annum.  As of October 31, 2007, the loan of $150,000 and accrued interest of $1,539 was paid in full by the Company.



In November 2006 the Company signed an exclusive sales agreement with another California supplier (LEDZ, Inc.). The sales agreement with LEDZ, Inc. was revised in September 2007 and changed to a management sales and operational agreement whereby LEDZ will operate and sell its products from the Cinemills facilities, pay $4,000 per month to the company for the use of its facilities, and pay the Company an additional 20% commission on any net sales initiated by the efforts of the combined staff. In October 2007 the President of the Company made a loan in the amount of $112,000 to the two principals of LEDZ for the purposes of providing working capital to LEDZ.



In September 2007 a short term loan of $46,097 was made to the Company by the president of the Company for working capital purposes. As of October 31, 2007 the outstanding balance owed to him was $9,616. No interest was incurred to this loan.



5. Accrued liabilities



Accrued liabilities at October 31, 2007 consists the following:



|                                               |   |        
|---------------------------------------------- | - | -------
|Accrued compensation to officers and directors | $ | 560,410
|Other accrued compensation                     |   | 11,209 
|Accrued vacation                               |   | 31,536 
|Other accruals                                 |   | 59,344 
|Total                                          | $ | 662,499





F-13



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6. Accrued Revenue Participation



The accrued revenue participation amount, which is based on earned revenue as of October 31, 2007 on the distribution of the film, One Night with the King, consists of the following:



|                 |   |        
|---------------- | - | -------
|Investors        | $ | 573,164
|Guilds residuals |   | 205,125
|Producers        |   | 70,863 
|Total            | $ | 849,152



7. Stockholders equity (deficit)



The Company sold 104,000 shares of common stock at $1 per share for total proceeds of $104,000 in November 2006. There were no warrants attached to these shares. The money was raised through a private placement to a sophisticated/accredited investor.



In February 2007 the Company sold 100,000 shares of common stock at $1 per share for total proceeds of $100,000. There were no warrants attached to these shares. The money was raised through a private placement to a sophisticated/accredited investor.



In April 2007 the Company sold 101,010 shares of common stock at $.77 per share for total proceeds of $77,778. There were no warrants attached to these shares. The money was raised through a private placement to a sophisticated/accredited investor.



In June 2007 the Company sold 150,785 shares of common stock at $1 per share for total proceeds of $150,785. There were no warrants attached to these shares. The money was raised through a private placement to a sophisticated/accredited investor.



During fiscal 2007 the Company issued 40,000 shares of common stock with a fair market value of $9,200 for consulting services.



Holders of the Companys Class A common stock, the Companys only class of common stock, are entitled to one vote for each share held of record on each matter submitted to a vote of stockholders. Holders of common stock have no preemptive rights and have no rights to convert their common stock into any other securities. The outstanding common stock is duly authorized and validly issued, fully-paid, and non-assessable.



8. Deferred Liability



Deferred liability at October 31, 2007 consisted of $141,150 on unearned income on television projects not yet completed.



9. Income Tax



The Companys available deferred tax asset of approximately $1,788,556 arising primarily from the accumulated operating loss carry forwards, has not been reflected in the financial statements because a deferred tax valuation allowance has been recorded for the entire amount. The Companys federal net operating losses of approximately $4,471,389 begin expiring in 2021.



F-14



---



|                                                                                 |                             |             |                             |   |            
|-------------------------------------------------------------------------------- | --------------------------- | ----------- | --------------------------- | - | -----------
|                                                                                 | Year ended October
31, 2007 |             | Year ended October
31, 2006
|Carryforward operating loss                                                      | $                           | (4,331,941) |                             | $ | (1,623,685)
|Operating loss for the year                                                      |                             | (587,030)   |                             |   | (5,761,822)
|Additional Depreciation for tax                                                  |                             | (10,000)    |                             |   | (10,000)   
|Goodwill Impairment excess over amortization for tax purposes ($439,254-$58,568) |                             | 380,686     |                             |   | -          
|Stock Issued to consultants - nonqualify                                         |                             | 9,200       |                             |   | 331,250    
|Stock Option Expense - nonqualify                                                |                             | 67,696      |                             |   | 2,676,758  
|Total Operating Loss                                                             |                             | (4,471,389) |                             |   | (4,387,499)
|Tax rate                                                                         |                             | 40%         |                             |   | 40%        
|Deferred tax asset                                                               |                             | (1,788,556) |                             |   | (1,755,000)
|Valuation Allowance 100%                                                         |                             | 1,788,556   |                             |   | 1,755,000  
|Deferred tax asset, net                                                          | $                           | -           |                             | $ | -          



Income tax provision at the statutory rate of 34% which results in a tax benefit of $33,556 in 2007 and $1,959,020 in 2006 differs from the amount in the accompanying financial statements due primarily to net operating losses for which tax benefit is totally offset by a valuation allowance. The valuation allowance increased by $33,556 for the year ended October 31, 2007.



10. Subsequent Events



In November 2007 the Company entered into an agreement with Rocky Mountain Pictures, Inc. whereby Rocky Mountain agreed to provide distribution services for the release of the Company's feature film, "Noelle," in the U.S. Theatrical Marketplace.  The films release date was December 7, 2007. Rocky Mountain agreed to procure theatrical play dates for the film on no less than 200 screens with exhibitors in the markets directed by the Company. Rocky Mountain also agreed to provide the company with continuing reports of commitments from exhibitors with 100 screens guaranteed by November 25, 2007, and another 100 screens no later than November 30, 2007. The Company will receive all revenue after the deduction of Rocky Mountain's distribution fee and sales and marketing costs.



During November 2007, the Company entered into Prints and Advertising Loan Agreements with three additional investors, whereby the Company received loans totaling $300,000 to finance the prints and advertising costs and expenses of the film Noelle. The Company is the principal distributor of the film. The film had its nationwide release on December 7, 2007. The terms of the loan agreement includes: the loan is to be repaid at 120% of the total principal amount no later than six months from the initial release date of the Film.



During November 2007 Natrol, Inc, (Nasdaq: NTOL), a leading manufacturer and marketer of nationally branded nutritional products, and the Company executed a letter of intent for a strategic alliance to create a new Health and Wellness Division.  Natrol intends to exclusively license the Living Pure brand to Gener8Xion.



Natrol will assist GNXE in developing a Health and Wellness division and will provide products, services and strategy for GNXEs community of interest and target market.  Natrol will provide executive support services of the Natrol CEO, COO and CFO functions at no cost to GNXE.  Other Natrol support and professional services, including, but not limited to, marketing, will be provided at cost plus ten percent (10%).  In consideration for the services to be provided by Natrol, Natrol may be entitled to seats on the GNXE Board of Directors, the number of which will be decided prior to execution of a definitive written agreement, and may be entitled to participate in the day-to-day management of GNXE, the extent of which will be decided prior to execution of a definitive written agreement.



F-15



---

Within seven (7) days following execution of this letter, the Company executed a convertible note with Natrol, Inc. in the amount of $150,000, convertible at Natrols option into 750,000 shares of common stock. The note is interest fee interest free and shall mature 180 days after the date of the Note, at which time Natrol shall have the option, at its sole and absolute discretion, to either be immediately paid the full amount of the Note or to receive the Shares.  If a definitive written agreement is entered into prior to the maturity date, Natrol shall forgive the debt represented by the Note in full and the above option will be cancelled.



In addition, GNXE will issue to Natrol warrants, options or similar instruments (Warrants) to be determined equal to forty percent (40%) of the fully diluted capital of GNXE, which the parties anticipate will be approximately 12,000,000 shares.  The Warrants will have a strike price of $0.80.



11. Financial Reporting for Business Segments



The company reports its financial results in two segments: TV and Film Production and Corporate, and Lighting Equipment. The TV and Film Production and Corporate Segment is engaged in the financing, production, distribution and development of "family based" feature films, episodic television shows, animated features and documentaries, and the daily operations of the Company. The Lighting Equipment Segment, doing business as Cinemills, manufactures quality lighting equipment marketable worldwide to the motion picture, television, and related industries. The Company evaluates the performance of its business segments based on income before income taxes. Expenses under the direct control of each business segment and the expense of premises and equipment incurred to support business operations are allocated accordingly, by segment for the year ended October 31, 2007.



|                        |                                      |           |                    |   |              |  |   |          
|----------------------- | ------------------------------------ | --------- | ------------------ | - | ------------ |  | - | ---------
|                        | TV and Film Production and Corporate |           | Lighting Equipment |   | Consolidated
|Total Assets            | $                                    | 2,243,494 |                    | $ | 757,954      |  | $ | 3,001,448
|Total Liabilities       |                                      | 2,610,081 |                    |   | 771,588      |  |   | 3,381,669
|Revenue                 | $                                    | 9,019,278 |                    | $ | 843,021      |  | $ | 9,862,299
|Cost of sales           |                                      | 5,791,874 |                    |   | 567,673      |  |   | 6,359,548
|Operating Expenses      |                                      | 2,632,867 |                    |   | 524,979      |  |   | 3,157,666
|Operating Income (Loss) | $                                    | 594,537   |                    | $ | (249,451)    |  | $ | 345,085  



Item 8.

Changes in and Disagreements with Accountants on Auditing and Financial Disclosures



On February 27, 2007, Gener8Xion Entertainment, Inc. (the "Company") appointed Farber Hass Hurley & McEwen LLP (the "New Accountants") as the registered independent accounting firm to audit the financial statements of the Company for the year ending October 31, 2007. Concurrent with the appointment of the New Accountants, Stonefield Josephson, Inc. (Stonefield) were dismissed as the Company's registered independent accounting firm. The Board of Directors approved this decision on February 27, 2007.



There have been no disagreements with the Accountants on audit and financial disclosures.





19



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Item 8a.

Controls and Procedures



|    |                                                 
|--- | ------------------------------------------------
|(a) | Evaluation of Disclosure Controls and Procedures



Our Chief Executive Officer, and Principal Financial and Accounting Officer, after evaluating the effectiveness of our disclosure controls and procedures (as defined in the Securities Act of 1934 Rules 13a-14(c) and 15d-14(c) as of a date within 90 days of the filing date of this annual report on From 10-KSB (the Evaluation Date), has concluded that as of the Evaluation Date, our disclosure controls and procedures are not effective and has implemented the following steps to improve disclosure controls and procedures.



a. The Company has retained the services of an outside C.P.A. to review the financial data used in the preparation of the financial statements of our Cinemills Division in January 2007. He tests the transactions and makes recommendations where necessary. These reviews are expected to identify adjustments prior to the time the date is provided to our independent accountants for their quarterly reviews. This service will continue until additional accounting staff are hired.

b. The Company also expanded the role of our in house attorney, experienced in entertainment matters, to assist our financial personnel in analyzing agreements to determine the financial effect.  The Companys operation in the production and distribution of motion pictures, television and other media, is fairly new and each agreement often contains unique arrangements.  This assistance has been helpful in the early review and decisions regarding financial reporting matters.



PART III



Item 9.

Directors, Executive Officers, Promoters and Control Persons: Compliance with Section 16(A) of The Exchange Act



The current directors and officers of Gener8Xion Entertainment, Inc. are:



|                    |  |     |  |                                                  
|------------------- |  | --- |  | -------------------------------------------------
|NAME                |  | AGE |  | POSITION                                         
|Matthew Crouch      |  | 46  |  | Chairman of the Board and Chief Executive Officer
|Carlos D. De Mattos |  | 55  |  | President and Director                           
|Marilyn Beaubien    |  | 54  |  | Chief Financial Officer                          
|John Dempsey        |  | 36  |  | Director                                         
|Ric Wake            |  | 41  |  | Director                                         
|William B. Barnett  |  | 66  |  | Director                                         
|Richard J. Cook     |  | 36  |  | Executive Vice President                         
|Marcos M. De Mattos |  | 31  |  | Vice President                                   



Matthew Crouch (age 46). Mr. Crouch became Chairman of the Board and Chief Executive Officer on November 18, 2004. Mr. Crouch has been the President of Gener8Xion Television, Inc., an independent film production company since 1993. Prior to 1993 Mr. Crouch served as Vice President of Trinity Broadcasting Network, (an owner of TV stations throughout the world), where for 15 years he oversaw all aspects of production for both the film and television divisions.



Carlos D. De Mattos (age 55). Carlos D. De Mattos became President and a Director in January 2005. For the past five years he has been and he remains as the Chairman of CDM Interactive Inc. (CDMI Ventures). Prior to founding CDMI Ventures, Mr. De Mattos was the Founder and Principal of Hollywood Rental Production Services and Olesen which are the nation's largest independent suppliers of complete "one-stop" services to the entertainment industry. Mr. De Mattos is a co-recipient of two Technical Achievement Awards from the Academy of Motion Picture Arts and Sciences in March 1983 and March 1985. He is also a co-recipient of a Technical Achievement Award from the Academy of Television Arts and Sciences in September 1989. He is a member of the Academy of Motion Picture Arts and Sciences and the American Society of Cinematographers.





20



---

Marilyn Beaubien (age 54). Marilyn Beaubien became Chief Financial Officer of the Company in December 2004 after working as Co Producer for the movie "One Night With The King". Between June 2002 and July 2004 Ms. Beaubien was President of Grace and Mercy Entertainment a sole proprietorship that prepared financial packages for various entertainment clients. From June 1998 until June 2002, she was Line Producer for Big Ticket Productions, Inc. Prior to that, she has been an associate producer and production controller for many television and film productions. Ms. Beaubien started her career as an audit senior with Price Waterhouse & Company. She is currently a member of the Producers Guild of America, Inc. and The Academy of Television Arts and Sciences.



John R. Dempsey (age 36). Mr. Dempsey, Jr. became a director and temporary Chief Executive and Chief Financial officer effective October 18, 2004.  On November 18, 2004 Mr. Dempsey resigned as Chief Executive Officer. Mr. Dempsey is a senior consultant for Arthur Consulting Group where he performs mergers and acquisition valuation and certain tax related valuation projects. Mr. Dempsey has an undergraduate degree in finance from Villanova University and an MBA from Pepperdine University and he is a Chartered Financial Analyst (CFA) charter holder with multiple designations in Risk Management.



Ric Wake (age 41) Mr. Wake became a Director of Gener8Xion Entertainment in January, 2005. From 1999 to 2003 he served as Sony Music Entertainment's Staff Producer and Senior Vice President of A&R. He presides over The W&R Group, a production company, and Notation Music, a publishing division which oversees the work of 30 songwriters and whose success includes covers by Jennifer Lopez, Marc Anthony, and Celine Dion. A producer since the late 80s, Ric is a two-time Grammy winner for production work on Celine Dion's multi-platinum Album of the Year, "Falling Into You", and for "Best Compilation Soundtrack Album" for producing the soundtrack to the Academy Award winning Miramax film "Chicago: The Musical".



William B. Barnett (66) Mr. Barnett became a Director of Gener8Xion Entertainment in December, 2006. He is the principal in the firm of the Law Offices of William B. Barnett, where, for the past 30 years, he has represented public and private companies in the areas of corporate and securities law, mergers and acquisitions, corporate finance, and venture capital transactions.  His securities expertise includes public offerings, private placements, and '34 Act compliance.  He has extensive experience with a considerable array of entity choices, including joint ventures, limited partnerships, limited liability companies, and corporations, from formation through operations and dissolution.



Richard J. Cook (age 36). Richard J. Cook became Executive Vice President on January 1st 2005.  Mr. Cook has worked with and managed top entertaining industry professionals for over 12 years. He has over 5,000 visual effects for Television and Film in his repertoire (including being on the Academy Award winning team for "Best Visual Effects" for the feature film Independence Day).  Throughout his visual effects career, Mr. Cook has worked with over 50 different studios and production companies including Universal, Paramount, Warner Brothers, Disney and 20th Century Fox and on over 25 feature films and 30 television shows and commercials. For the last 5 years, Mr. Cook has been head of operations of an independent film and television production company in Hollywood.



Marcos M. De Mattos (age 31). Mr. De Mattos became Vice President of the Company on September 13, 2002. Mr. De Mattos has held positions in both venture capital firms as well as technology start-ups. Mr. De Mattos is the son of Carlos D. De Mattos (whose controlled company is the principal shareholder of the Company). Since January 2002, Marcos M. De Mattos has been an associate partner with such controlled company. Until 1998, Mr. De Mattos was earning his BBA degree from the University of San Diego, and between 1998 and 2002 he was employed by Venture Tech Funding Group and 24x7 Technology, Inc. in their corporate development departments.



During the year ended October 31, 2007, the Board of Directors held three meetings. During the year ended October 31, 2006, the Board of Directors held three meetings.



Each director holds office for a one-year term or until his successor has been elected and qualified at the annual meeting of the Companys shareholders. The members of the Board of Directors serve without remuneration for service on the board. Corporate officers are appointed by the Board of Directors and serve at the discretion of the Board.





21



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The Companys officers, directors and beneficial owners of more than 10% of any class of its equity securities registered pursuant to Section 12 of the Securities Act of 1934 (Reporting Persons) are required to file reports of ownership and changes in beneficial ownership of the Companys equity securities with the SEC. Copies of those reports must also be furnished to the Company. Based solely on a review of the copies furnished to the Company pursuant to that Act, the Company believes that during the year ended October 31, 2007 all filing requirements applicable to Reporting Persons were complied with.



Committees of the Board of Directors



Our Board of Directors operates with the assistance of the Audit Committee and the Compensation and Stock Option Committee.  Due to the small size of our Board, we do not presently maintain a formal nomination committee. The entire Board participates in the process of nomination candidates for the Board of Directors.



The function of the Audit Committee is to (i) make recommendations to the full Board of Directors with respect to appointment of the Companys independent public accountants, and (ii) meet periodically with our independent public accountants to review the general scope of audit coverage, including consideration of internal accounting controls and financial reporting.



The Audit Committee held one meetings during the fiscal year ended October 31, 2006.  William Barnett was appointed to the Audit Committee in 2006, and is presently a member of the committee together with John Dempsey and Ric Wake.  The Board of Directors has determined that John Dempsey is an Audit Committee Financial Expert for purposes of the SECs rules.  The Board believes that Mr. Dempsey meets the independence criteria set out in Rule 4200(a)(14) of the Marketplace Rules of the National Association of Securities Dealers and the rules and other requirements of the SEC.



The Compensation and Stock Option Committee sets compensation policy and administers the Companys cash and equity incentive programs for the purpose of attraction and retaining skilled executives who will promote the Companys business goals and build shareholder value.  The committee also administers the Companys stock option plan.  The committee is also responsible for reviewing and making recommendations to the Board regarding all forms of compensation to be provided to the Companys named executive officers, including stock compensation and bonuses.  The Compensation and Stock Option Committee did not meet during the fiscal year ended October 31, 2007.



There are no compensation committee interlocks between the members of our Compensation and Stock Option Committee and any other entity.  John Dempsey, Ric Wake, and William Barnett are the members of the Compensation and Stock Option Committee.  Neither of the current members of the committee is an officer or employee of ours, nor of any of our subsidiaries.



Code of Ethics



As of the date of this Annual Report on Form 10-KSB, we had drafted, but our Board of Directors had not ratified, a code of ethics that applies to our principal executive officer, principal financial officer and principal accounting officer and controller, or persons performing similar functions on behalf of the Company.





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Item 10.

Executive Compensation



The following table discloses the compensation paid or deferred to Gener8Xion Entertainment, Inc.s executive officers during the years ended October 31, 2007and 2006:



SUMMARY COMPENSATION TABLE

|                            |        |   |         |  |              |  |            |        |           |         |          |  |              |  |           |  |  |  |  |  | 
|--------------------------- | ------ | - | ------- |  | ------------ |  | ---------- | ------ | --------- | ------- | -------- |  | ------------ |  | --------- |  |  |  |  |  | 
|Name and
Principal Position |        |   |         |  |              |  |            | Awards |           | Payouts |          | 
|                            |        |   |         |  |              |  | Restricted |        |           |         |          |  |             
|                            |        |   |         |  | Other        |  | Stock      |        | Number of |         | Payments |  | All other   
|                            | Salary |   | Bonus   |  | Compensation |  | Awards     |        | Options   |         | Payments |  | Compensation
|Matthew Crouch,             |        |   |         |  |              |  |            |        |           |         |          |  |              | 
|CEO (1)                     |        |   |         |  |              |  |            |        |           |         |          |  |              | 
|Fiscal 2007                 |        | $ | 367,379 |  |              |  |            |        |           |         |          |  |              |  |           |  |  |  |  |  | 
|Fiscal 2006                 |        |   | 308,888 |  |              |  |            |        |           |         |          |  |              |  | 1,155,000 |  |  |  |  |  | 
|Carlos De Mattos,           |        |   |         |  |              |  |            |        |           |         |          |  |              |  |           |  |  |  |  |  | 
|President (1)               |        |   |         |  |              |  |            |        |           |         |          |  |              |  |           |  |  |  |  |  | 
|Fiscal 2007                 |        | $ | 262,413 |  |              |  |            |        |           |         |          |  |              |  |           |  |  |  |  |  | 
|Fiscal 2006                 |        |   | 220,635 |  |              |  |            |        |           |         |          |  |              |  | 825,000   |  |  |  |  |  | 
|Richard Cook,               |        |   |         |  |              |  |            |        |           |         |          |  |              |  |           |  |  |  |  |  | 
|Executive V.P.(2)           |        |   |         |  |              |  |            |        |           |         |          |  |              |  |           |  |  |  |  |  | 
|Fiscal 2007                 |        | $ | 151,031 |  |              |  |            |        |           |         |          |  |              |  |           |  |  |  |  |  | 
|Fiscal 2006                 |        |   | 73,767  |  |              |  |            |        |           |         |          |  |              |  | 525,000   |  |  |  |  |  | 
|Marilyn Beaubien            |        |   |         |  |              |  |            |        |           |         |          |  |              |  |           |  |  |  |  |  | 
|CFO (2)                     |        |   |         |  |              |  |            |        |           |         |          |  |              |  |           |  |  |  |  |  | 
|Fiscal 2007                 |        | $ | 118,875 |  |              |  |            |        |           |         |          |  |              |  |           |  |  |  |  |  | 
|Fiscal 2006                 |        |   | 83,317  |  |              |  |            |        |           |         |          |  |              |  | 375,000   |  |  |  |  |  | 
|Marcos M. De Mattos         |        |   |         |  |              |  |            |        |           |         |          |  |              |  |           |  |  |  |  |  | 
|Vice President (2)          |        |   |         |  |              |  |            |        |           |         |          |  |              |  |           |  |  |  |  |  | 
|Fiscal 2007                 |        | $ | 104,965 |  |              |  |            |        |           |         |          |  |              |  |           |  |  |  |  |  | 
|Fiscal 2006                 |        |   | 86,562  |  |              |  |            |        |           |         |          |  |              |  | 330,000   |  |  |  |  |  | 







Currently the Registrant does not pay directors fees. The Registrant reimburses officers and directors for travel and other expenses incurred on behalf of Registrant. Registrant does not have a pension or profit sharing plan.



Option Plan



There were no options granted during the year ended October 31, 2007. The Board of Directors will determine the vesting rights of remaining options to be granted.



Item 11.

Security Ownership of Certain Beneficial Owners and Management



The following table sets forth as of October 31, 2007 certain information with respect to the beneficial ownership of the Common Stock of the Registrant concerning stock ownership by (i) each director, (ii) each executive officer, (iii) the directors and officers of the Registrant as a group, (iv) and each person known by the Registrant to own beneficially more than five percent (5%) of the Common Stock. Unless otherwise indicated, the owners have sole voting and investment power with respect to their respective shares.





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Beneficial ownership is determined under the rules of the Securities Exchange Commission. In general, these rules attribute beneficial ownership of securities to persons who possess sole or shared voting power and/or investment power with respect to those securities, and includes, among other things, securities that an individual has the right to acquire within 60 days. Unless otherwise indicated, the stockholders identified in the following table have sole voting and investment power with respect to all shares shown as beneficially owned by them.



|                                     |                                           |                  |                        
|------------------------------------ | ----------------------------------------- | ---------------- | -----------------------
|NAME AND ADDRESS OF BENEFICIAL OWNER | AMOUNT AND NATURE OF BENEFICIAL OWNERSHIP | PERCENT
OF CLASS | RELATIONSHIP
TO COMPANY
|Matthew Crouch                       |                                           |                  |                        
|3400 W. Cahuenga Blvd.               |                                           |                  |                        
|Hollywood, CA 90068                  | 9,955,000(1)                              | 46%              | CEO, Director          
|Carlos D. De Mattos                  |                                           |                  |                        
|1125 North Lindero Canyon Rd.        |                                           |                  |                        
|Suite A-8 #209                       |                                           |                  |                        
|Westlake Village, CA 91362           | 3,299,689 (2)  (3)                        | 15%              | Stockholder            
|Richard Cook                         |                                           |                  |                        
|34413 Desert Road                    |                                           |                  |                        
|Acton, CA 93510                      | 820,833 (5)                               | 4%               | Exec VP                
|Marcos M. De Mattos                  |                                           |                  |                        
|1855 Industrial St. Apt #610         |                                           |                  |                        
|Los Angeles, CA 90021                | 580,000 (4)                               | 3%               | Vice President         
|Marilyn Beaubien                     |                                           |                  |                        
|6358 La Rocha Drive                  |                                           |                  |                        
|Los Angeles, CA 90068                | 433,750 (6)                               | 2%               | CFO                    
|Ric Wake                             |                                           |                  |                        
|745 5 thAve. Suite 800               |                                           |                  |                        
|New York, NY 10151                   | 17,500 (7)                                | *                | Director               
|John R. Dempsey                      |                                           |                  |                        
|14724 Ventura Blvd., 6 thFloor       |                                           |                  |                        
|Sherman Oaks, CA 91403               | 37,500 (7)                                | *                | Director               
|William B. Barnett                   |                                           |                  |                        
|21550 Oxnard Street, Ste. 200        |                                           |                  |                        
|Woodland Hills , CA 91367            | 75,000(8)                                 | *                | Director               
|All officers and directors as a      |                                           |                  |                        
|Group (8 individuals)                | 15,219,272                                | 70%              |                        

* Less than 1%



(1)Includes option to purchase 1,155,000 shares of the Registrants common stock at an exercise price of $2.00 per share. The options expire on March 1, 2011.



(2)Includes 2,224,689 shares owned by CDM Interactive, Inc., a corporation of which Mr. De Mattos is a director, officer and principal shareholder and 250,000 shares owned by Mr. DeMattos dependent son.



(3)Includes option to purchase 825,000 shares of the Registrants common stock at an exercise price of $2.00 per share. The options expire on March 1, 2011.



(4)Includes option to purchase 330,000 shares of the Registrants common stock at an exercise price of $2.00 per share. The options expire on March 1, 2011.





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(5)Includes option to purchase 145,833 shares of the Registrants common stock at an exercise price of $1.25 per share. The options expire on January 11, 2010. Also includes option to purchase 525,000 shares of the Registrants common stock at an exercise price of $2.00 per share. The options expire on March 1, 2011. Also includes warrants to purchase 75,000 shares of the Registrants common stock at an exercise price of $4.00 per share. The warrants expire on February 28, 2010.



(6)Includes option to purchase 8,750 shares of the Registrants common stock at an exercise price of $1.25 per share. The options expire on January 11, 2010. Also includes option to purchase 375,000 shares of the Registrants common stock at an exercise price of $2.00 per share. The options expire on March 1, 2011. Also includes warrants to purchase 75,000 shares of the Registrants common stock at an exercise price of $4.00 per share. The warrants expire on February 28, 2010



(7)Includes option to purchase 17,500 shares of the Registrants common stock at an exercise price of $1.25 per share. The options expire on January 11, 2010.



(8)Includes warrants to purchase 50,000 shares of the Registrants common stock at an exercise price of $.35 per share and 12,500 shares of the Registrants common stock at an exercise price of $4.00 per share. The warrants expire on November 15, 2008 and February 28, 2010, respectively.



Item 12.

Certain Relationships and Related Transactions



The Company rented premises from a company controlled by its principal shareholder/Chairman/CEO for $12,000 per month under a six month lease which expired in April 2005 and continued thereafter on a month to month basis until April 30, 2006.As of May 1, 2006, the Company relocated to smaller offices and signed a new month to month lease with its principal shareholder for $1,000 per month. On August 1, 2006, the company moved its corporate offices to its Cinemills location in Burbank, California.



In September 2005, the Companys Cinemills division occupied office and warehouse space under a three year lease for $4,400 per month from a company in which the President of the Company has a 50% interest. The lease, which was assumed as a component of the Cinemills acquisition, expired on October 31 2007. The lease was renewed for another three years at $4,840 per month with an expiration date of October 31, 2010. As of August 1, 2006 the Company relocated its corporate office to 2021 Lincoln Street, Burbank, CA, 91504, which houses its Cinemills division.



As of January 1, 2007, the Company leased 5,000 square feet of additional office and production space in Hollywood, California on a month to month lease at $8,500 per month, the first month and $6,000 the second month and $5,000 per month thereafter.



In 2002, the Company purchased lighting equipment for $200,000 and leased the equipment under an operating lease for a five year term to a company controlled by an officer of the Company. After the expiration of the lease, pursuant to the lease agreement, the Company sold the equipment to the lessee for its fair market value of $5,000. The Company incurred a loss on the sale of $42,832.26.

In December 2006 a short term advance was made to the Company by the president of the Companys Cinemills division for working capital purposes. The balance at October 31, 2007 was $93,692. The advance is payable on demand and bears interest at a rate of 9% per year. The interest on the loan is paid monthly.



In April 2007 a short term loan of $150,000 was made to the Company by a company controlled by an officer of the Company for working capital purposes. The stated interest rate on the note was 7.750% per annum.  As of October 31, 2007, the loan of $150,000 and accrued interest of $1,539 was paid in full by the Company.



In November 2006 the Company signed an exclusive sales agreement with another California supplier (LEDZ, Inc.). The sales agreement with LEDZ, Inc. was revised in September 2007 and changed to a management sales and operational agreement whereby LEDZ will operate and sell its products from the Cinemills facilities, pay $4,000 per month to the company for the use of its facilities, and pay the Company an additional 20% commission on any net sales initiated by the efforts of the combined staff. In October 2007 the President of the Company made a loan in the amount of $112,000 to the two principals of LEDZ for the purposes of providing working capital to LEDZ.





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Item 13.

Exhibits and Reports on Form 8-K



Exhibits:



|   |  |                                                                                                           
|-- |  | ----------------------------------------------------------------------------------------------------------
|31 |  | Certification of CEO/CFO                                                                                  
|   |  |                                                                                                           
|32 |  | Certification of CEO/CFO pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. Section 1350



Form 8-K:



Form 8-K filed under date of March 6, 2007 with respect to change of independent accounting firms.



Item 14.

Principal Accountant Fees And Services



Audit Fees



The aggregate fees billed by Farber Hass Hurley & McEwen LLP, the Company's independent auditors, for the audit of the Company's annual consolidated financial statements and reviews of quarterly financial statements for the year ended October 31, 2007 was $75,566. The aggregate fees billed by Stonefield Josephson, Inc. for the year ended October 31, 2007 was $5,000.



On February 27, 2007, Gener8Xion Entertainment, Inc. (the "Company") appointed Farber Hass Hurley & McEwen LLP (the "New Accountants") as the registered independent accounting firm to audit the financial statements of the Company for the year ending October 31, 2007. Concurrent with the appointment of the New Accountants, Stonefield Josephson, Inc. (Stonefield) were dismissed as the Company's registered independent accounting firm. The Board of Directors approved this decision on February 27, 2007.



Audit-related Fees



The aggregate fees billed by, Farber Hass Hurley & McEwen LLP, the Companys independent auditors, for assurance and related services for the years ended October 31, 2007 was $1,375.



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SIGNATURES



Pursuant to the requirements of Section 13 or 15 (d) of the Securities Exchange Act of 1934, Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.



|                         |  |     |                                | 
|------------------------ |  | --- | ------------------------------ | 
|                         |  |     | Gener8Xion Entertainment, Inc.
|                         |  |     |                               
|                         |  |     |                                | 
|Dated: February 13, 2008 |  | By: | /s/ Matthew Crouch             | 
|                         |  |     | Matthew Crouch                 | 
|                         |  |     | Chief Executive Officer        | 



|                         |  |     |                         | 
|------------------------ |  | --- | ----------------------- | 
|Dated: February 13, 2008 |  | By: | /s/ Marilyn Beaubien    | 
|                         |  |     | Marilyn Beaubien        | 
|                         |  |     | Chief Financial 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 on the dates indicated:



|                         |  |                    |  |                  
|------------------------ |  | ------------------ |  | -----------------
|Signature                |  | Title              |  | Date             
|                         |  |                    |  |                  
|/s/ Matthew Crouch       |  | CEO/Director       |  | February 13, 2008
|                         |  |                    |  |                  
|/s/ Carlos D. De Mattos  |  | President/Director |  | February 13, 2008
|                         |  |                    |  |                  
|/s/ John R. Dempsey, Jr. |  | Director           |  | February 13, 2008
|                         |  |                    |  |                  
|/s/ William Barnett      |  | Director           |  | February 13, 2008
|                         |  |                    |  |                  
|/s/ Ric Wake             |  | Director           |  | February 13, 2008







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