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, 2006





Commission
      File Number 0-15382





GENER8XION
      ENTERTAINMENT, INC.


(Exact
      name as specified in its charter)





Delaware
            13-3341562(State
                or other jurisdiction of
            (IRS
                Employerincorporation
                or organization)
            Identification
                No.)





2021
                Lincoln StreetBurbank,
                CA
            91504(Address
                of principal executive office)
            (Zip
                Code)





Registrant’s
      telephone number:  (818)
      843-4560





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 (
      )





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 9, 2007 - approximately
      $4,233,000 .





Outstanding
      common stock, $.01 par value as of February 9, 2007: 17,836,250 shares










GENER8XION
      ENTERTAINMENT, INC.


TABLE
      OF
      CONTENTS




PART I
            
            2Item 1.
            Description of Business
            2Item 2.
            Description of Property
            8Item 3.
            Legal Proceedings
            8Item 4.
            Submission of Matters to a Vote of Security
              Holders
            8PART II
            
            8Item 5.
            Market for Company’s Common Equity and
              Related Stockholder Matters
            8Item 6.
            Management’s Discussion and Analysis and Plan
              of Operation
            9Item 7.
            Consolidated
              Financial Statements
            15Item 8.
            Changes in and Disagreements with Accountants
              on Accounting and Financial Disclosure
            33Item 8A.
            Controls and Procedures
            33PART III
            
            34Item 9.
            Directors, Executive Officers, Promoters
              and
              Control Persons; Compliance with Section 16 (a) of the Exchange Act
            34Item 10.
            Executive Compensation
            36Item 11.
            Security Ownership of Certain Beneficial
              Owners and Management
            38Item 12.
            Certain Relationships and Related
              Transactions
            40Item 13.
            Exhibits and Reports on Form
              8-K
            41Item 14.
            Principal Accountant Fees and
              Services
            41SIGNATURES
            
            41EXHIBITS











**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.





**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 and it was determined the no impairment
      loss
      was required.





2


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 rights to seven 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 15 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.





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 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.





3


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.





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.





4


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.





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.





The
      Company has distribution rights to a feature film project, “One Night with the
      King,” which is based on the novel “Hadassah” by Tommy Tenney. T he
      theatrical release of its epic feature film "One Night with the King" (the
”Film”) on October 13, 2006, has grossed over $4 million in its debut weekend,
      landing the film in the top ten bracket of highest grossing Films in the
      country. In addition, the Film placed 4 th amongst
      this weekend’s nationally released films for the coveted ‘per-screen’ average
      number. This average is a good indicator of overall audience enthusiasm for
      a
      film and subsequent word-of-mouth marketing that occurs among movie going
      audiences. To date, the Film had grossed nearly $13,400,000 in domestic
      theatrical receipts. The Film was released on DVD January 30, 2007, with 250,000
      DVD's sold in the first week of release.





5


“One
      Night with the King” chronicles the life of the young Jewish girl, Hadassah,
      played by Hollywood newcomer, Tiffany Dupont. Dupont portrays the rags-to-riches
      heroine who goes on to become the Biblical Esther, the Queen of Persia (400-322
      B.C.), who saves the Jewish nation from annihilation at the hands of its arch
      enemy Haman (played by James Callis; “Helen of Troy,” 2003) while winning the
      heart of the fiercely handsome King Xerxes, played by Luke Goss (“Blade II,”
2002; “ZigZag,” 1999). The Film also stars Hollywood Legends, Peter O’Toole and
      Omar Sharif.





The
      Company also owns the complete rights to produce and distribute a novel by
      the
      late Dr. Bill Bright, entitled, “The Blessed Child;” 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.





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, the Company believes that if it is able to obtain commitments of
      appropriate, internationally recognizable actors; appealing literary properties;
      and respected production personnel, its 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 the Company's initial attempts to arrange for a
      distributor are not successful, then arranging for distribution may become
      more
      difficult because the Company's bargaining power may have been diminished,
      and
      it may not be able to negotiate favorable terms because its film may be
      deemed to be undesirable.  Circumstances such as these may force the
      Company into distribution agreements with smaller distributors who may prove
      to
      be unable to effectively execute a successful marketing and distribution
      campaign.





6


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 the Company's feature
      films will depend upon a number of factors. The Company's most basic criterion
      is whether the distributor has the ability to secure bookings for the exhibition
      of the film on satisfactory terms. The Company will consider whether, when
      and
      in what amount the distributor will make advances to us. The Company 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.





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.





7


**Item
      2. Description of Property**





As
      of
      October 31, 2006, the Company did not and currently does not own any real
      property. Through approximately March 2004, the Registrant occupied office
      space
      on a month to month basis for $500 per month from a company controlled by Carlos
      D. De Mattos, the Company’s President; between April 2004 and October 2004 the
      Company did not occupy office space on a regular basis.





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 expires October 2007. 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 per month thereafter.




At
      October 31, 200 6 ,
      the
      Company owned lighting equipment, which is being leased to a company controlled
      by an
      officer of the Company .
      The
      lighting equipment was purchased in 2002 for $200,000 and leased under an
      operating lease for a five year term. The lease provides an option for the
      lessee to purchase the equipment at the end of the lease for its then fair
      market value.





**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 17,632,250 were issued and outstanding at October 31, 2006.
      On
      that date, the Company’s common stock was held by approximately 188 beneficial
      owners.





To
      our
      knowledge there has been only minimal trading in the Company’s common stock for
      the 2004, 2005 and 2006 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.





8





YEAR
                ENDED
            
            YEAR
                ENDED
            
            YEAR
                ENDED
            
            QUARTER
                ENDED10/31/2004
            
            10/31/2005
            
            10/31/2006
            
            01/31/2007High
            
            Low
            
            High
            
            Low
            
            High
            
            Low
            
            High
            
            Low1stQtr
            1.05
            
            0.20
            
            3.50
            
            0.22
            
            1.63
            
            1.25
            
            1.01
            
            0.612ndQtr
            1.01
            
            0.20
            
            3.00
            
            2.15
            
            1.70
            
            0.753rdQtr
            0.70
            
            0.20
            
            3.00
            
            1.60
            
            1.50
            
            0.604thQtr
            1.01
            
            0.15
            
            2.95
            
            1.05
            
            1.75
            
            0.56





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**





In
      January 2006 the Company sold 75,000 Units
      to
      one investor at $2.00 per Unit with gross proceeds of $150,000. Each Unit
      consists of one share of common stock and a warrant for the purchase of one
      share at $3.00 per share for five years. The Company has the option to redeem
      the warrants under certain conditions.





In
      February 2006 the Company sold 5,000 shares of common stock and warrants
      for $10,000 to one investor. The warrants are exercisable at $4.00 per share
      for
      five years and may be redeemed by the Company under certain
      conditions.





During
      the year ended October 31, 2006 the
      Company also sold 686,000 shares of common stock at $1 per share to ten
      investors. There were no warrants attached to these shares. The money was raised
      through a private placement.





During
      the year, the Company also issued 325,000 shares as compensation for consulting
      services. The shares had a market value of $331,250 at the time of
      issuance.





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.**





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.





**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 a production cost refund from a related party
      of $390,000 in 2006. There was no related cost of production revenue in
      2005.





9


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:


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


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


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.





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.





**Results
      of operations for the year ended October 31, 2005 as compared to the year ended
      October 31, 2004.**





Rental
      income amounted to $55,576 for 2005 and $51,576 for 2004. Related depreciation
      expense was approximately $29,000 in each of those years.





Other
      income of $320,000 for the year ended 31, 2005 resulted from production and
      distribution services rendered by the Company to a joint venture in which the
      Company’s Chief Executive Officer has a minority interest. This was the first
      revenue the Company earned from these services.





Revenue
      from sale of lighting equipment amounted to $75,182 for the year ended October
      31, 2005. This was earned by the Company’s new division, Cinemills, which was
      purchased September 30, 2005. The related cost of sales amounted to $38,729.





General
      and administrative expenses amounted to $1,590,322 for the year ended October
      31, 2005, compared to $92,019 for the year ended October 31, 2004. The major
      reasons for the increase were:


Compensation
      expenses of $1,004,096 for the year ended October 31, 2005, compared to $49,300
      for the year ended October 31, 2004.


Rent
      expense of $148,400 for the year ended October 31, 2005, compared to $2,500
      for
      the year ended October 31, 2004.





10


Interest
      expense amounted to $3,158 for the year ended October 31, 2005, compared to
      $5,908 for the year ended October 31, 2004. Interest expense relates to notes
      payable to affiliates for borrowings.





State
      income taxes were $3,190 for the year ended October 31, 2005 and $1,450 for
      the
      year ended October 31, 2004.





The
      Company incurred a net loss of $1,213,213 in fiscal 2005, compared to $77,381
      for fiscal 2004. The increased loss was principally the result of the increased
      compensation expenses discussed above, offset by the increase in production
      income and lighting products sales.





**Liquidity
      and Capital Resources**





The
      Company’s current activities and operating expenses will require raising
      additional capital. During the year ended October 31, 2005, the Company raised
      gross proceeds of $2,525,000 from the sale of Units (consisting of common stock
      and warrants) in a private placement. 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 television
      production projects, funds earned from its Cinemills division and funds raised
      from private placements. The Company used $7,297,145 cash in operating
      activities in fiscal 2006 and $970,813 in fiscal 2005.  The Company
      used $88,223 in fiscal 2006 and $717,898 in fiscal 2005 in investing
      activities for the purchase of lighting and production equipment. In fiscal
      2006
      financing activities consisted principally of loan proceeds of $6,000,000 for
      print and advertising expenditures of the newly released feature film, “One
      Night with the King,” and sale of common stock in the amount of $846,000. In
      fiscal 2005 financing activities consisted principally of the sale of common
      stock totaling $2,418,480.





In
      order
      to reduce expenses and conserve cash, effective March 1, 2006, the officers
      of
      the Company agreed to an aggregate annual reduction of their compensation of
      approximately $321,000. This includes officers whose compensation were the
      subject of formal written agreements.





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. Form 8K was filed on August 28, 2006.





As
      of
      January 31, 2007, the Company had earned an additional $1,300,000 in theatrical
      rental revenue, which will continue to draw down the outstanding secured loan.
      The Film was also released on DVD on January 30, 2007. During the first week
      of
      DVD release, 250,000 DVD's were sold.





**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 DVD release of 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.





11


**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
      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.





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. Under that transition method, compensation cost
      recognized during the year ended October 31, 2006 includes: (a) compensation
      cost for all share-based payments granted prior to, but not yet vested as of
      November 1, 2005, based on the grant date fair value estimated in accordance
      with SFAS 123, adjusted for an estimated future forfeiture rate, and (b)
      compensation cost for all share-based payments granted subsequent to November
      1,
      2005, based on the grant-date fair value estimated in accordance with the
      provisions of SFAS 123R. Under the modified-prospective-transition method,
      results for the prior periods have not been restated. Stock options were granted
      March 01, 2006. (See Note 6)





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 2006.




**Recent
      Accounting Pronouncements**





In
      March
      2005, the SEC released Staff Accounting Bulletin No. 107, “Share-Based Payment”
(“SAB 107”), which provides interpretive guidance related to the interaction
      between SFAS 123(R) and certain SEC rules and regulations. It also provides
      the
      SEC staff’s views regarding valuation of share-based payment arrangements. In
      April 2005, the SEC amended the compliance dates for SFAS 123(R), to allow
      companies to implement the standard at the beginning of their next fiscal year,
      instead of the next reporting period beginning after June 15, 2005. The Company
      adopted the fair value recognition provisions of SFAS 123R in the first quarter
      of fiscal 2006.





In
      March
      2005, the FASB issued FASB Interpretation No. 47, “Accounting for Conditional
      Asset Retirement Obligations” (“FIN 47”). FIN 47 provides guidance relating to
      the identification of and financial reporting for legal obligations to perform
      an asset retirement activity. The Interpretation requires recognition of a
      liability for the fair value of a conditional asset retirement obligation when
      incurred if the liability’s fair value can be reasonably estimated. FIN 47 also
      defines when an entity would have sufficient information to reasonably estimate
      the fair value of an asset retirement obligation. The provision is effective
      no
      later than the end of fiscal years ending after December 15, 2005. Management
      adopted FIN 47 the beginning of fiscal year 2006. The adoption did not have
      a
      material impact on its consolidated financial position or results of operations
      or cash flows.





12


In
      May
      2005, the FASB issued FASB Statement No. 154, “Accounting Changes and Error
      Corrections.” This new standard replaces APB Opinion No. 20, “Accounting
      Changes, and FASB Statement No. 3, Reporting Accounting Changes in Interim
      Financial Statements,” and represents another step in the FASB’s goal to
      converge its standards with those issued by the IASB. Among other changes,
      Statement 154 requires that a voluntary change in accounting principle be
      applied retrospectively with all prior period financial statements presented
      on
      the new accounting principle, unless it is impracticable to do so. Statement
      154
      also provides that (1) a change in method of depreciating or amortizing a
      long-lived non-financial asset be accounted for as a change in estimate
      (prospectively) that was effected by a change in accounting principle, and
      (2)
      correction of errors in previously issued financial statements should be termed
      a “restatement.” The new standard is effective for accounting changes and
      correction of errors made in fiscal years beginning after December 15, 2005.
      The
      adoption of this standard did not have a material impact on the Company’s
      consolidated financial position or results of operations or cash
      flows.





In
      March
      2006 the FASB issued SFAS No. 156, “Accounting for Servicing of Financial
      Assets, an amendment of FASB Statements No. 140”.  Companies are required
      to apply SFAS No. 156 as of the first annual reporting period that begins after
      September 15, 2006.  The Company does not believe adoption of SFAS No. 156
      will have a material effect on its financial statements.




In
      September 2006, the FASB issued SFAS No. 157 “Fair Value Measurements”
(“SFAS 157”). SFAS 157 provides a new single authoritative definition of fair
      value and provides enhanced guidance for measuring the fair value of assets
      and
      liabilities and requires additional disclosures related to the extent to which
      companies measure assets and liabilities at fair value, the information used
      to
      measure fair value, and the effect of fair value measurements on earnings.
      SFAS
      157 is effective for us as of January 28, 2008. We are currently assessing
      the impact, if any, of SFAS 157 on our financial position, results of operation,
      or cash flows.




In
      July
      2006, the FASB issued FASB Interpretation No. 48 (“FIN 48”), Accounting for
      Uncertainty in Income Taxes, which prescribes a recognition threshold and
      measurement process for recording in the financial statements uncertain tax
      positions taken or expected to be taken in a tax return. Additionally, FIN
      48
      provides guidance on the de-recognition, classification, interest and penalties,
      accounting in interim periods and disclosure requirements for uncertain tax
      positions. The accounting provisions of FIN 48 are effective for reporting
      periods beginning after December 15, 2006. The Company is currently
      assessing the impact of the adoption of FIN 48 and its impact on our financial
      position, results of operations, or cash flows.




In
      September 2006, the SEC released Staff Accounting Bulletin No. 108
“Considering the Effects of Prior Year Misstatements When Quantifying
      Misstatements in Current Year Financial Statements” (“SAB 108”). SAB 108
      provides interpretative guidance on how public companies quantify financial
      statement misstatements. There have been two common approaches used to quantify
      such errors. Under an income statement approach, the “roll-over” method, the
      error is quantified as the amount by which the current year income statement
      is
      misstated. Alternatively, under a balance sheet approach, the “iron curtain”
method, the error is quantified as the cumulative amount by which the current
      year balance sheet is misstated.  In SAB 108, the SEC established an
      approach that requires quantification of financial statement misstatements
      based
      on the effects of the misstatements on each of the company’s financial
      statements and the related financial statement disclosures. This model is
      commonly referred to as a “dual approach” because it requires quantification of
      errors under both the roll-over and iron curtain methods. SAB 108 is effective
      for the us as of January 1, 2007. The adoption of SAB 108 is not expected
      to have a material impact on our financial position, results of operations,
      or
      cash flows.




13


In
      September 2006, the FAS issued SFAS No. 158, Employers’ Accounting for Defined
      Benefit Pension and Other Postretirement Plans, which requires employers to
      recognize the over-funded or under-funded status of a defined benefit
      postretirement plan (other than a multiemployer plan) as an asset or liability
      in its statement of financial position and to recognize changes in that funded
      status in the year in which the changes occur through comprehensive income
      of a
      business entity. The Company does not believe that the pronouncement will have
      a
      material affect on its financial statements as it does not participate in
      defined benefit pension plans.




In
      July
      2006, the Emerging Issues Task Force Reached Consensus on Issue No. 06-03 “How
      Taxes Collected from Customers and Remitted to Governmental Authorities Should
      Be Presented in the Income Statement (That Is, Gross Versus Net Presentation),”
that provides guidance on how sales tax collected from customers should be
      presented in the income statement. The Company will adopt this statement
      immediately, and will disclose the caption in which sales tax is recorded in
      accordance with the consensus reached in this issue when sales tax has been
      collected.




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.




14




**Item
      7 - FINANCIAL STATEMENTS**








**REPORT
      OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM**







To
      the
      Board of Directors and Stockholders


of
      Gener8Xion Entertainment, Inc.




We
      have
      audited the accompanying consolidated balance sheet of Gener8Xion Entertainment,
      Inc. (the “Company,” formerly CDMI Productions, Inc.) as of October 31, 2006,
      and the related consolidated statements of operations, stockholders' deficit,
      and cash flows for each of the two years in the period ended October 31,
      2006. 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 financial position of Gener8Xion
      Entertainment, Inc. as of October 31, 2006, and the consolidated results of
      its
      operations and its cash flows for each of the two years in the period 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





15




********Gener8Xion
                Entertainment,
                Inc.********
              ******Consolidated
                Balance Sheet******
              ****As
                of October 31, 2006****ASSETSCurrent
                assets:Cash
                and cash equivalents
            
            
            
            
            $
            157,760Cash-restricted
            
            
            
            
            
            616,396Receivables
                (includes $107,129 due from related party)
            
            
            
            
            
            4,551,598Inventory
                (includes $60,000 related party purchase)
            
            
            
            
            
            962,289Prepaid
                expenses and other current assets
            
            
            
            
            
            14,200Total
                current assets
            
            
            
            
            
            6,302,243Equipment:Rental
                equipment
            
            
            
            
            
            200,000Production
                equipment
            
            
            
            
            
            271,125Lighting
                equipment
            
            
            
            
            
            59,526Other
                equipment
            
            
            
            
            
            53,536584,187Accumulated
                depreciation
            
            
            
            
            
            (257,938
            )Equipment,
                net
            
            
            
            
            
            326,249Goodwill
            
            
            
            
            
            439,254Total
                assets
            
            
            
            
            **$**
            **7,067,746**LIABILITIES
                AND STOCKHOLDERS' DEFICITCurrent
                liabilities:Accounts
                payable
            
            
            
            
            $
            704,099Accrued
                liabilities
            
            
            
            
            
            398,754Loan
                payable - prints and advertising
            
            
            
            
            
            6,000,000Line
                of credit
            
            
            
            
            
            9,469Deferred
                income-related party
            
            
            
            
            
            8,596Deferred
                income-other
            
            
            
            
            
            243,750Total
                current liabilities
            
            
            
            
            
            7,364,668Total
                liabilities
            
            
            
            
            
            7,364,668Commitments
                and contingencies (Note 1)
            
            
            
            
            
            -Stockholders'
                deficit:Preferred
                stock, $0.01 par value-5,000,000 shares authorized, none issued nor
                outstandingCommon
                stock, $0.01 par value-50,000,000 shares authorized, 17,632,250 issued
                and
                outstanding
            
            
            
            
            
            176,323Additional
                paid-in capital
            
            
            
            
            
            7,013,363Accumulated
                deficit
            
            
            
            
            
            (7,486,608
            )Total
                stockholders' deficit
            
            
            
            
            
            (296,922
            )Total
                liabilities and stockholders' deficit
            
            
            
            
            **$**
            **7,067,746**




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


16




**Gener8Xion
                    Entertainment, Inc.****Consolidated
                  Statements of Operations****Year
                ended October 31,****2006**
            
            **2005**RevenuesRental
                income - related party
            
            $
            51,576
            
            $
            55,576Other
                income - related party
            
            
            100,000
            
            
            -Production
                revenues
            
            
            4,710,595
            
            
            320,000Sales
                - lighting products (includes $141,890 of sales to related
                party)
            
            
            846,159
            
            
            75,182Total
                revenues
            
            
            5,708,330
            
            
            450,758Cost
                of revenuesCost
                of lighting products (includes $84,777 of costs related to sales
                to
                related party)
            
            
            439,367
            
            
            38,729Cost
                of production, net of expense reimbursement from related party of
                $390,000
            
            
            5,663,472
            
            
            -Depreciation
                on rental equipment
            
            
            28,572
            
            
            28,572Total
                cost of revenues
            
            
            6,131,411
            
            
            67,301Gross
                profit (loss)
            
            
            (423,081
            )
            
            383,457General
                and administrative expenses
            
            
            5,057,991
            
            
            1,590,322Loss
                from operations before interest expense and income tax
                expense
            
            
            (5,481,072
            )
            
            (1,206,865
            )Interest
                expense, net of interest income
            
            
            (280,750
            )
            
            (3,158
            )Loss
                before income tax expense
            
            
            (5,761,822
            )
            
            (1,210,023
            )Income
                tax expense
            
            
            6,611
            
            
            3,190Net
                loss
            
            $
            (5,768,433
            )
            $
            (1,213,213
            )Net
                loss per common share - basicand
                diluted
            
            $
            (0.34
            )
            $
            (0.08
            )Weighted
                average common sharesoutstanding
                - basic and diluted
            
            
            16,896,936
            
            
            14,928,783






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


17




**Gener8Xion
        Entertainment, Inc.**
 **Consolidated
        Statements of Stockholder's Deficit**


**Common
                stock - $0.01
                par****Shares**
            
            
            **Amount**
            
            
            **Additional**
              **Paid-in**
              **Capital**
            
            
            **Accumulated****Deficit**
            
            
            **Total****Balance
                at October 31, 2004**
            
            
            **6,358,750**
            
            **$**
            **63,588**
            
            **$**
            **407,905**
            
            **$**
            **(504,962**
            **)**
            **$**
            **(33,469**
            **)**Common
                stock issued in asset purchase agreement to Matt and Laurie Crouch
                November 18, 2004
            
            
            2,640,000
            
            
            26,400
            
            
            (26,400
            )
            
            
            
            
            -Common
                stock issued to Officer in employment agreement November 18,
                2004
            
            
            6,160,000
            
            
            61,600
            
            
            123,200
            
            
            
            
            
            184,800Common
                stock issued to consultant for services
            
            
            20,000
            
            
            200
            
            
            1,800
            
            
            
            
            
            2,000Sale
                of common stock August, 2005, net of $114,145 offering
                cost
            
            
            762,500
            
            
            7,625
            
            
            1,410,855
            
            
            
            
            
            1,418,480Common
                stock issued to owners of Merd Holdings in asset purchase agreement
                September 30, 2005
            
            
            100,000
            
            
            1,000
            
            
            179,000
            
            
            
            
            
            180,000Sale
                of common stock October, 2005
            
            
            500,000
            
            
            5,000
            
            
            995,000
            
            
            
            
            
            1,000,000Stock
                based compensation expense
            
            
            
            
            
            
            
            
            78,905
            
            
            
            
            
            78,905Net
                loss for the year ended October 31, 2005
            
            
            
            
            
            
            
            
            
            
            
            (1,213,213
            )
            
            (1,213,213
            )**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
            
            
            
            
            
            150,000Sale
                of common stock February, 2006
            
            
            5,000
            
            
            50
            
            
            9,950
            
            
            
            
            
            10,000Common
                stock issued to consultant for services in March 2006
            
            
            200,000
            
            
            2,000
            
            
            218,000
            
            
            
            
            
            220,000Sale
                of common stock May, 2006
            
            
            10,000
            
            
            100
            
            
            9,900
            
            
            
            
            
            10,000Common
                stock issued to consultant for services in May 2006
            
            
            50,000
            
            
            500
            
            
            62,000
            
            
            
            
            
            62,500Sale
                of common stock June, 2006
            
            
            110,000
            
            
            1,100
            
            
            108,900
            
            
            
            
            
            110,000Sale
                of common stock July, 2006
            
            
            10,000
            
            
            100
            
            
            9,900
            
            
            
            
            
            10,000Sale
                of common stock August, 2006
            
            
            275,000
            
            
            2,750
            
            
            272,250
            
            
            
            
            
            275,000Common
                stock issued to consultant for services in August 2006
            
            
            75,000
            
            
            750
            
            
            48,000
            
            
            
            
            
            48,750Sale
                of common stock September, 2006
            
            
            100,000
            
            
            1,000
            
            
            99,000
            
            
            
            
            
            100,000Sale
                of common stock October, 2006
            
            
            181,000
            
            
            1,810
            
            
            179,190
            
            
            
            
            
            181,000Stock
                based compensation expense
            
            
            
            
            
            
            
            
            2,676,758
            
            
            
            
            
            2,676,758Net
                loss for the year ended October 31, 2006
            
            
            
            
            
            
            
            
            
            
            
            (5,768,433
            )
            
            (5,768,433
            )**Balance
                at October 31, 2006**
            
            
            **17,632,250**
            
            **$**
            **176,323**
            
            **$**
            **7,013,363**
            
            **$**
            **(7,486,608**
            **)**
            **$**
            **(296,922**
            **)**






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


18




**Gener8Xion
          Entertainment, Inc.**
 **Consolidated
          Statements of Cash Flows**


**Year
                ended October 31,****2006**
            
            **2005**Cash
                flows from Operating Activities:Net
                loss
            
            $
            (5,768,433
            )
            $
            (1,213,213
            )Adjustments
                to reconcile net lossto
                net cash provided by (used for) operations:Depreciation
            
            
            111,000
            
            
            64,023Stock
                based compensation expense
            
            
            2,676,758
            
            
            78,905Stock
                issued for services
            
            
            331,250
            
            
            2,000Stock
                issued for employment agreement
            
            
            -
            
            
            184,800Changes
                in operating assets and liabilitiesCash
                - restricted
            
            
            (616,396
            )
            
            -Receivables
            
            
            (4,452,078
            )
            
            (25,781
            )Inventory
            
            
            (716,073
            )
            
            (13,628
            )Prepaid
                expenses and other current assets
            
            
            (7,925
            )
            
            (11,422
            )Accounts
                payable
            
            
            579,009
            
            
            -Accrued
                liabilities
            
            
            317,695
            
            
            (36,497
            )Deferred
                income-other
            
            
            243,750
            
            
            -Deferred
                income-related party
            
            
            4,298
            
            
            -Net
                cash used for operating activities
            
            
            (7,297,145
            )
            
            (970,813
            )Cash
                flows from Investing Activities:Purchase
                of Cinemills
            
            
            -
            
            
            (442,590
            )Purchase
                of equipment
            
            
            (88,223
            )
            
            (275,308
            )Net
                cash used for investing activities
            
            
            (88,223
            )
            
            (717,898
            )Cash
                flows from Financing Activities:Advances
                from affiliates
            
            
            (2,000
            )
            
            -Net
                proceeds from repayment on borrowing from related parties
            
            
            -
            
            
            (43,314
            )Loan
                payable-prints and advertising
            
            
            6,000,000
            
            
            -Proceeds
                from line of credit
            
            
            9,468
            
            
            -Proceeds
                from sale of common stock
            
            
            846,000
            
            
            2,418,480Net
                cash provided by financing activities
            
            
            6,853,468
            
            
            2,375,166Net
                decrease in cash
            
            
            (531,900
            )
            
            686,455Cash
                at beginning of year
            
            
            689,660
            
            
            3,205Cash
                at end of year
            
            **$**
            **157,760**
            
            **$**
            **689,660**Supplemental
                Disclosure of Cash Flow InformationCash
                paid for:Interest
            
            $
            280,750
            
            $
            3,158Taxes
            
            $
            6,611
            
            $
            3,190Supplemental
                Disclosure of Non-Cash Financing ActivitiesStock
                Issued for consulting services
            
            $
            268,750
            
            $
            2,000Stock
                issued for Cinemills purchase
            
            $
            -
            
            $
            180,000Stock
                issued for employment agreement
            
            $
            -
            
            $
            184,800






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


19





**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 61⁄2% 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.







20


**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.





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





**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 2006.





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.





21


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.





**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. 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 represent mainly $4,352,929 of theatrical rentals due on the release
      of the feature film, "One Night with the King," and $107,129 of receivable
      due
      from related party. The allowance for doubtful accounts is the Company’s best
      estimate of accounts receivable collectibility and requires management’s
      judgment. The company had no reserve at October 31, 2006. It is at least
      reasonably possible that the Company's estimate of the allowance for doubtful
      accounts will change in the near-term.





**Inventory**





Inventory
      principally consists of television and film productions not yet completed,
      and
      lighting parts and finished lighting equipment. The cost of lighting parts
      and
      finished lighting equipment is stated at the lower of cost (first-in, first-out)
      or market. Television and film inventory amounted to $372,491 at October 31,
      2006. Lighting parts and finished lighting equipment amounted to $589,798 at
      October 31, 2006.





**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.





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





Furniture
                and fixtures
            3
                yearsComputer
                equipment
            3
                to 5 yearsLighting
                equipment
            5
                to 7 years





Depreciation
      expense amounted to $82,429 for the year ended October 31, 2006, compared to
      $35,451 for year ended October 31, 2005.


Depreciation
      expense on rental equipment to $28,572 for the year ended October 31, 2006,
      compared to $28,572 for year ended October 31, 2005.





22


**Goodwill**





Goodwill
      represent s 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. The Company’s purchase price allocation has been
      finalized as of October 31, 200 6.




Total
                current assets
            
            $
            304,554Fixed
                assets
            
            
            12,813Current
                Liabilities
            
            
            (
                130,683
            )Net
                worth
            
            $
            186,684





Purchase
                priceCash
            
            $
            438,498Cash
                paid for legal and accounting
            
            
            7,440Common
                stock ($1.80 per share)
            
            
            180,000Total
                purchases price
            
            $
            625,938Goodwill
            
            $
            439,254





**Accounts
      Payable**





Accounts
      payable included one major vendor that made up more than 10% of the outstanding
      balance of $704,099 at October 31, 2006. The major vendor, FilmGear, had an
      outstanding  balance
      of $165,558 or 24% of the total accounts payable balance at October 31,
      2006.





**Debt**





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 or principal and
      interest 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. The loan agreement expires October
      13,
      2011.





**Commitments
      and Contingencies**





In
      connection with a distributorship agreement with a major supplier of lighting
      and related products, the Company has entered into a purchase agreement
      committing to purchase $2,000,000 of products per year, in exchange for
      exclusivity in the North American territory.  Due to a number of factors,
      this purchase commitment has not been fulfilled, and both parties are attempting
      to renegotiate the agreement.  Management does not believe that any
      material liability will result from its failure to meet this purchase
      commitment, and that there will be no adverse financial impact to the
      company.





23


**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 is 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, 2006 and 2005 because
      their inclusion would be anti-dilutive.





**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. Under that transition method, compensation cost
      recognized during the year ended October 31, 2006 includes: (a) compensation
      cost for all share-based payments granted prior to, but not yet vested as of
      November 1, 2005, based on the grant date fair value estimated in accordance
      with SFAS 123, adjusted for an estimated future forfeiture rate, and (b)
      compensation cost for all share-based payments granted subsequent to November
      1,
      2005, based on the grant-date fair value estimated in accordance with the
      provisions of SFAS 123R. Under the modified-prospective-transition method,
      results for the prior periods have not been restated. Stock options were granted
      March 01, 2006. (See Note 6)





For
      the
      year ended October 31, 2006, the Company recognized stock compensation cost
      of
      $2,676,758, as a result of the adoption of SFAS 123R. The effect of the change
      in applying SFAS 123R resulted in increasing operating loss, loss before taxes,
      net loss and basic and diluted earnings per share.





24


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.





At
      October 31, 2006, the Company has outstanding options for the purchase of
      472,000 shares of common stock at $1.25 per share and 3,310,000 shares of common
      stock at $2.00 per share. These options were all issued in 2005. The fair value
      of these non employee options and options issued for services rendered was
      charged to general and administrative expenses over the vesting period of the
      options. No compensation expense related to options granted to directors and
      employees was recognized because the exercise price of our employee stock
      options equaled the market price of the underlying stock on the grant date.
      The
      pro forma impact of accounting for these awards will continue to be disclosed
      until the last of the awards are vested in 2010.




Pro
                Forma EarningsYear
                ended October 31, 2005Net
                loss - as reported
            
            $
            (1,213,213
            )Stock-based
                employee compensation expenseincluded
                in reported net earningsStock-based
                employee compensation expensedetermined
                under fair value based method,net
                of tax
            
            
            (72,183
            )Net
                loss - pro forma
            
            $
            (1,285,396
            )Loss
                per share:Basic
                - as reported
            
            
            (0.08
            )Basic
                - pro forma
            
            
            (0.09
            )Shares
                used in computing net loss per share - basic and diluted
            
            
            14,928,783





25


The
      following summarizes the activity of the Company’s stock options for the years
      ended October 31, 2006 and 2005:





**Shares**
            
            **Weighted**
              **Average**
              **Exercise**
              **Price**
            
            **Weighted**
              **Average**
              **Remaining
                Contractual**
              **Term**
            
            **Aggregate**
              **Intrinsic**
              **Value**Number
                of shares under option:**Outstanding
                at October 31, 2004**
            
            
            **-**
            
            
            **-**Granted
            
            
            572,000
            
            
            0.61Exercised
            
            
            -
            
            
            -Canceled
                or expired
            
            
            -
            
            
            -**Outstanding
                at October 31, 2005**
            
            
            **572,000**
            
            
            **0.61**Granted
            
            
            3,210,000
            
            
            0.80Exercised
            
            
            -
            
            
            -Canceled
                or expired
            
            
            -
            
            
            -**Outstanding
                at October 31, 2006**
            
            
            **3,782,000**
            
            **$**
            **0.80**
            
            
            
            
            
            **0****Exercisable
                at October 31, 2006**
            
            
            **3,561,167**
            
            **$**
            **0.80**
            
            **$**
            **0.61**
            
            
            **0**





As
      of
      October 31, 2006, there was $81,005 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 one year. The total compensation expense recognized
      for the fair value of shares vested during the year ended October 31, 2006
      as a
      result of the adoption of SFAS
      123R was
      $2,637,531. Total compensation expense for the year ended October 31, 2006
      was
      $2,676,758.





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 31,2006
            
            2005Weighted
                average fair value at date of grant for options granted during the
                period
            
            $
            0.80
            
            $
            0.61Risk-free
                interest rates
            
            
            4.45
            %
            
            2.04
            %Expected
                stock price volatility
            
            
            95.05
            
            
            54.71Expected
                dividend yield
            
            
            0.0
            %
            
            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 $1,755,000 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 $4,387,499 begin expiring in 2021.





26


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 $10,327 in fiscal 2006 and $5,425
      in
      fiscal 2005. Advertising costs are expensed as incurred.





**Going
      Concern**





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





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.





27


**Recently
      Issued Accounting Pronouncements**





In
      March
      2005, the SEC released Staff Accounting Bulletin No. 107, “Share-Based Payment”
(“SAB 107”), which provides interpretive guidance related to the interaction
      between SFAS 123(R) and certain SEC rules and regulations. It also provides
      the
      SEC staff’s views regarding valuation of share-based payment arrangements. In
      April 2005, the SEC amended the compliance dates for SFAS 123(R), to allow
      companies to implement the standard at the beginning of their next fiscal year,
      instead of the next reporting period beginning after June 15, 2005. The Company
      adopted the fair value recognition provisions of SFAS 123R in the first quarter
      of fiscal 2006.





In
      March
      2005, the FASB issued FASB Interpretation No. 47, “Accounting for Conditional
      Asset Retirement Obligations” (“FIN 47”). FIN 47 provides guidance relating to
      the identification of and financial reporting for legal obligations to perform
      an asset retirement activity. The Interpretation requires recognition of a
      liability for the fair value of a conditional asset retirement obligation when
      incurred if the liability’s fair value can be reasonably estimated. FIN 47 also
      defines when an entity would have sufficient information to reasonably estimate
      the fair value of an asset retirement obligation. The provision is effective
      no
      later than the end of fiscal years ending after December 15, 2005. The Company
      adopted FIN 47 in the first quarter of fiscal year 2006 and noted that the
      adoption did not have a material impact on its consolidated financial position
      or results of operations or cash flows.





In
      May
      2005, the FASB issued FASB Statement No. 154, “Accounting Changes and Error
      Corrections.” This new standard replaces APB Opinion No. 20, “Accounting
      Changes, and FASB Statement No. 3, Reporting Accounting Changes in Interim
      Financial Statements,” and represents another step in the FASB’s goal to
      converge its standards with those issued by the IASB. Among other changes,
      Statement 154 requires that a voluntary change in accounting principle be
      applied retrospectively with all prior period financial statements presented
      on
      the new accounting principle, unless it is impracticable to do so. Statement
      154
      also provides that (1) a change in method of depreciating or amortizing a
      long-lived non-financial asset be accounted for as a change in estimate
      (prospectively) that was effected by a change in accounting principle, and
      (2)
      correction of errors in previously issued financial statements should be termed
      a “restatement.” The new standard is effective for accounting changes and
      correction of errors made in fiscal years beginning after December 15, 2005.
      Early adoption of this standard is permitted for accounting changes and
      correction of errors made in fiscal years beginning after June 1, 2005. The
      adoption of this standard did not have a material impact on the Company’s
      consolidated financial position or results of operations or cash
      flows.




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. Under that transition method, compensation cost
      recognized during the nine months ended July 31, 2006 includes: (a) compensation
      cost for all share-based payments granted prior to, but not yet vested as of
      November 1, 2005, based on the grant date fair value estimated in accordance
      with SFAS 123, adjusted for an estimated future forfeiture rate, and (b)
      compensation cost for all share-based payments granted subsequent to November
      1,
      2005, based on the grant-date fair value estimated in accordance with the
      provisions of SFAS 123R. Under the modified-prospective-transition method,
      results for the prior periods have not been restated. Stock options were granted
      March 1, 2006. (See Note 6)




In
      March
      2006 the FASB issued SFAS No. 156, “Accounting for Servicing of Financial
      Assets, an amendment of FASB Statements No. 140.”  Companies are required
      to apply SFAS No. 156 as of the first annual reporting period that begins after
      September 15, 2006.  The Company does not believe adoption of SFAS No. 156
      will have a material effect on its financial statements.




In
      September 2006, the FASB issued SFAS No. 157 “Fair Value Measurements”
(“SFAS 157”). SFAS 157 provides a new single authoritative definition of fair
      value and provides enhanced guidance for measuring the fair value of assets
      and
      liabilities and requires additional disclosures related to the extent to which
      companies measure assets and liabilities at fair value, the information used
      to
      measure fair value, and the effect of fair value measurements on earnings.
      SFAS
      157 is effective for us as of January 28, 2008. The company is currently
      assessing the impact, if any, of SFAS 157 on its consolidated financial
      position, results of operation, or cash flows.




28


In
      July
      2006, the FASB issued FASB Interpretation No. 48 (“FIN 48”), Accounting for
      Uncertainty in Income Taxes, which prescribes a recognition threshold and
      measurement process for recording in the financial statements uncertain tax
      positions taken or expected to be taken in a tax return. Additionally, FIN
      48
      provides guidance on the de-recognition, classification, interest and penalties,
      accounting in interim periods and disclosure requirements for uncertain tax
      positions. The accounting provisions of FIN 48 are effective for reporting
      periods beginning after December 15, 2006. The Company is currently
      assessing the impact of the adoption of FIN 48 and its impact on the Company’s
      financial position, results of operations, or cash flows.




In
      September 2006, the SEC released Staff Accounting Bulletin No. 108
“Considering the Effects of Prior Year Misstatements When Quantifying
      Misstatements in Current Year Financial Statements” (“SAB 108”). SAB 108
      provides interpretative guidance on how public companies quantify financial
      statement misstatements. There have been two common approaches used to quantify
      such errors. Under an income statement approach, the “roll-over” method, the
      error is quantified as the amount by which the current year income statement
      is
      misstated. Alternatively, under a balance sheet approach, the “iron curtain”
method, the error is quantified as the cumulative amount by which the current
      year balance sheet is misstated.  In SAB 108, the SEC established an
      approach that requires quantification of financial statement misstatements
      based
      on the effects of the misstatements on each of the company’s financial
      statements and the related financial statement disclosures. This model is
      commonly referred to as a “dual approach” because it requires quantification of
      errors under both the roll-over and iron curtain methods. SAB 108 is effective
      for the us as of January 1, 2007. The adoption of SAB 108 is not expected
      to have a material impact on the Company’s financial position, results of
      operations, or cash flows.




In
      September 2006, the FAS issued SFAS No. 158, Employers’ Accounting for Defined
      Benefit Pension and Other Postretirement Plans, which requires employers to
      recognize the over-funded or under-funded status of a defined benefit
      postretirement plan (other than a multiemployer plan) as an asset or liability
      in its statement of financial position and to recognize changes in that funded
      status in the year in which the changes occur through comprehensive income
      of a
      business entity. The Company does not believe that the pronouncement will have
      a
      material affect on its financial statements as it does not participate in
      defined benefit pension plans.




In
      July
      2006, the Emerging Issues Task Force Reached Consensus on Issue No. 06-03 “How
      Taxes Collected from Customers and Remitted to Governmental Authorities Should
      Be Presented in the Income Statement (That Is, Gross Versus Net Presentation),”
that provides guidance on how sales tax collected from customers should be
      presented in the income statement. The Company will adopt this statement
      immediately, and will disclose the caption in which sales tax is recorded in
      accordance with the consensus reached in this issue when sales tax has been
      collected.




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.





29


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. The annual impairment test was
      performed per SFAS 142 and it was determined that there was no impairment as
      of
      October 31, 2006.





**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 expires October 2007.





In
      January 2006 the Company made a short term loan of $40,000 to a company
      controlled by an officer of the Company. The loan was repaid to the company
      in
      February 2006.





In
      January 2006 the Company accrued reimbursable compensation costs of $46,767
      for
      production service performed for a company controlled by its principal
      shareholder/Chairman/CEO. The amount was received March 2006.





In
      January 2006 the Company was assigned the rights, title and interest in two
      television projects by a company controlled by its principal
      shareholder/Chairman/CEO. There was no dollar amount recorded for this
      transaction as they were recorded at the transferor’s carryover
      basis.





In
      quarter ended April 30, 2006, the Company accrued a receivable of
      $390,000  for
      reimbursable production expenses from a company controlled by its principal
      shareholder/Chairman/CEO. These costs include but are not limited to: executive
      and staff compensation, related payroll taxes and employee fringe benefits,
      facility rentals, parking, workers’ compensation, property and comprehensive
      liability insurance, business travel and entertainment, business legal and
      professional services, and directly allocable administrative overhead. The
      total
      amount was received as of October 31, 2006.





In
      quarter ended April 30, 2006, the Company received $100,000  in
      fee
      income for facilitating the financing for a company controlled by its principal
      shareholder/Chairman/CEO. This fee was part of an agreement to provide financing
      for the film "One Night with the King," in which the Company gave up 1% of
      its
      future revenues in exchange for the financing. The fee was recorded as deferred
      income until the release of the film per SOP 00-2. The movie was released in
      October 2006 and income was recorded at that time.





In
      May
      2006 a short term loan of $100,000 was made to the Company by a related party
      for working capital purposes. The stated interest rate on the note was 7.750%
      per annum. The loan was repaid with interest in August 2006.





In
      October 2006 the Company was assigned the rights, and interest in three
      previously released film projects by a company controlled by its principal
      shareholder/Chairman/CEO. The Company paid $60,000, which was the value assigned
      to this transaction, as payment in full, and recorded the purchase as inventory
      for future use.





30


As
      of
      October 31, 2006, DR&A, a related party, represented $107,129 of the
      Company’s accounts receivable balance of $4,551,598. Total sales to DR&A
      represented $141,890 or 17% of total lighting product sales of $846,159. Related
      cost of sales represented $84,777 or 17% of total cost of sales of
      $439,367.





**5.
      Accrued liabilities**





Accrued
      liabilities at October 31, 2006 consists the following





Accrued
                compensation to officers and directors
            
            $
            17,567Other
                accrued compensation
            
            
            9,884Accrued
                interest on print and advertising loan
            
            
            285,714Other
                accruals
            
            
            85,589Total
            
            $
            398,754





**6.
      Stockholders’ equity (deficit)**





The
      Company sold 75,000 shares of common stock at $2 per share on January 6, 2006
      for $150,000. Each share was sold with a warrant attached with an exercise
      price
      of $3.00 per share. The warrants are exercisable for a period of five years
      but
      may be redeemed by the Registrant under certain conditions. The money was raised
      through a private placement. There were no offering costs connected with this
      offering.





In
      the
      quarter ended April 30, 2006 the Company sold 5,000 shares of common stock
      at $2
      per share for $10,000 with attached warrants, which are exercisable at
      $4.00 per share for five years and may be redeemed by the Company under certain
      conditions.





In
      the
      quarter ended July 31, 2006, the Company sold 130,000 shares of common stock
      at
      $1 per share for $130,000 in a private placement to four
      sophisticated/accredited investors. There were no warrants attached to these
      shares.





In
      the
      quarter ended October 31, 2006, the Company sold 556,000 shares of common stock
      at $1 per share for $556,000 in a private placement to six
      sophisticated/accredited investors. There were no warrants attached to these
      shares.





During
      fiscal 2006 the Company issued 325,000 shares of common stock with a fair market
      value of $331,250 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.





In
      March
      2006, the Company's Board of Directors adopted an equity incentive plan, which
      was approved by the stockholders at the stockholders meeting held May 5, 2006.
      The plan expires in ten years and provides for the granting of a maximum of
      5,000,000 shares. Options granted under the plan are at prices not less than
      market price at date of grants and are exercisable for five years. Further,
      in
      March 2006, options were granted under the plan for the purchase of an aggregate
      of 3,210,000 shares of the Company's common stock at $2.00 per share, which
      was
      in excess of market price on that date. As the stock was fully vested at the
      date of issuance, the total measurement fair value of options in the amount
      of
      $2,575,893 was expensed during the quarter ended April 30, 2006. The Board
      of
      Directors will determine the vesting rights of remaining options to be
      granted.





31


**7.
      Inventory**





Inventory
      principally consists of television and film productions not yet completed,
      lighting parts, and finished lighting equipments for sale. Film costs represent
      $197,148 or 20% of total inventory at October 31, 2006, television production
      costs represent $175,343 or 18% of total inventory and lighting equipment costs
      represent $589,798 or 62% of total inventory. Included in the film inventory
      is
      $60,000 of film inventory purchased from a related party. The cost of lighting
      parts and finished lighting equipment is determined principally at the lower
      of
      cost (first-in, first-out) or market.





**8.
      Deferred Liability**





Deferred
      liability consists of $243,750 on unearned income on television projects not
      yet
      completed, and $8,596 of unearned rental income from related party.





**9.
      Income Tax**





The
      Company’s available deferred tax asset of approximately $1,755,000 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 $4,387,499 begin expiring in 2021.


Carryforward
                  operating loss 10/31/05
              
              $
              1,623,685Operating
                  loss for the year ended 10/31/06
              
              
              5,761,822Additional
                  Depreciation for tax
              
              
              10,000Stock
                  Issued to consultants - nonqualify
              
              
              (331,250
              )Stock
                  Option Expense - nonqualify
              
              
              (2,676,758
              )Total
                  Operating Loss
              
              
              4,387,499Tax
                  rate
              
              
              40
              %Deferred
                  tax asset
              
              
              1,755,000Valuation
                  Allowance 100%
              
              
              (1,755,000
              )Deferred
                  tax asset, net
              
              $
              -




**10.
      Subsequent Events**





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 through
      the Target department store chain on January 23, 2007, and was released in
      all
      other retail outlets throughout North America on January 30, 2007. The DVD
      will
      be featured in Wal-Mart stores in a joint advertising program for Fox's release
      of the "definitive" edition of "The Passion of the Christ." The Company will
      receive all revenue after the deduction of Fox's distribution fee and sales
      and
      marketing costs.





In
      November 2006, the Company signed an exclusive sales agreement with Burbank
      based, LEDZ, Inc. The agreement will add the patent pending technology, "LED
      Mini Par" daylight and tungsten lighting system to the current product line
      of
      high quality lighting equipment offered through the Company's lighting division,
      Cinemills. LED's are durable, energy efficient, cool to the touch and last
      more
      than 100 times longer than conventional incandescent lights. The solid-state
      semiconductors are typically used in automobile dashboards and electronic
      devices, such as mobile phones. LEDZ, Inc. has developed proprietary LED
      lighting products with Motion Picture, Broadcast and Sanctuary applications
      that
      are innovative, affordable and user friendly.





32


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
      November, 2006, the Company entered into an International Sales Agency Agreement
      with Media 8 Entertainment, Inc. regarding the exclusive international sale
      of
      its epic feature film "One Night with the King" (the "Film"). Previously, the
      Company announced the closing of a major home video entertainment deal for
      the
      film throughout North America with Twentieth Century Fox Home Entertainment,
      LLC. Under the terms of the agreement, Media 8 will handle international
      distribution and licensing for the Company's biblical saga "One Night With
      the
      King," directed by Michael O. Sajbel and featuring screen legends Peter O'Toole
      and Omar Sharif, which is based on the best-selling novel "Hadassah: One Night
      With the King" by Tommy Tenney and Mark Andrew Olsen, this dramatic big-screen
      adaptation chronicles a young woman's rise from peasant to princess. Media
      8
      subsequently introduced the Film to international buyers at the American Film
      Market.




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
      for the first month and $6,000 per month thereafter.




As
        of
        January 30, 2007, the Company had earned an additional $1,300,000 in theatrical
        rental revenue, which will continue to draw down the outstanding secured
        loan.
        The Film was also released on DVD on January 31, 2007. During the first week
        of
        DVD release, 250,000 DVD's were sold.





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




**Item
      8. Changes in and Disagreements with Accountants on Auditing and Financial
      Disclosures**





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




**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 Form 10-KSB (the
      “Evaluation Date”), has concluded that as of the Evaluation Date, our disclosure
      controls and procedures were ineffective due to a significant amount of
      adjustments arising from the audit process. It was, therefore, recommended
      that
      material information relating to us would be made known to them by others within
      the Company, particularly during the period in which this annual report on
      Form
      10-KSB was being prepared, and that additional staff be hired to facilitate
      accounting needs.





(b)
            Changes
                in Internal Controls.





Based
      on
      the deficiencies noted in the evaluation above, corrective actions have been
      taken to hire additional staff to facilitate accounting needs, and to receive
      important information on a timely basis from others in the company.





33




**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
            45
            Chairman
                of the Board and Chief Executive OfficerCarlos
                D. De Mattos
            54
            President
                and DirectorMarilyn
                Beaubien
            53
            Chief
                Financial OfficerJohn
                Dempsey
            35
            DirectorTom
                Newman
            51
            Director
                *Ric
                Wake
            40
            DirectorWilliam
                B. Barnett
            65
            DirectorRichard
                J. Cook
            35
            Executive
                Vice PresidentMarcos
                M. De Mattos
            30
            Vice
                President





Matthew
      Crouch (age 45). 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 54). 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.





Marilyn
      Beaubien (age 53). Marilyn Beaubien became Chief Financial Officer of the
      Company in December 2004 after working as Production Controller 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 35). 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.




34


Tom
      Newman (age 51), Mr. Newman became a director in January 2005. Mr. Newman is
      the
      president of Impact Productions, Inc., which he founded in 1982. For the past
      22
      years he has produced numerous works for film, television and stage. During
      the
      past three years he has received numerous awards for his corporate, video and
      nationally broadcasted television commercials. Mr. Newman resigned from the
      Board of Directors October 2006.





Ric
      Wake
      (age 40) 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 (65) 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 35). 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 30). 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, 2006, the Board of Directors held three meetings.
      During the year ended October 31, 2005, the Board of Directors held two
      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.




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, 2006 all filing
      requirements applicable to Reporting Persons were complied with.





35


**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 two 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 met one time. during the
      fiscal year ended October 31, 2006.





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.





**Item
      10. Executive Compensation**





The
      following table discloses the compensation paid to Gener8Xion Entertainment,
      Inc.’s executive officers during the years ended October 31, 2006 and 2005:





36




SUMMARY
      COMPENSATION TABLE




Awards
            
            PayoutsName
                and
            
            
            
            
            
            
            
            RestrictedPrincipal
            
            
            
            
            
            Other
            
            Stock
            
            Number
                of
            
            Payments
            
            All
                otherPosition
            
            Salary
            
            Bonus
            
            Compensation
            
            Awards
            
            Options
            
            Payment
            
            ompensationMatthew
                Crouch,CEO
                (1)Fiscal
                2006
            
            $
            308,888
            
            $
            2,500
            
            
            
            
            $
            -
            
            
            1,155,000Fiscal
                2005
            
            
            331,154
            
            
            
            
            
            
            
            
            184,000Carlos
                De Mattos,President
                (1)Fiscal
                2006
            
            $
            220,635
            
            $
            2,500
            
            
            
            
            
            
            
            
            825,000Fiscal
                2005
            
            
            207,629Richard
                Cook,Executive
                V.P.(2)Fiscal
                2006
            
            $
            73,767
            
            $
            2,000
            
            
            
            
            
            
            
            
            525,000Fiscal
                2005
            
            
            74,769Marilyn
                BeaubienCFO
                (2)Fiscal
                2006
            
            $
            83,317
            
            $
            2,000
            
            
            
            
            
            
            
            
            375,000Fiscal
                2005
            
            
            74,769Marcos
                M. De MattosVicePresident
                (2)Fiscal
                2006
            
            $
            86,562
            
            $
            2,000
            
            
            
            
            
            
            
            
            330,000Fiscal
                2005
            
            
            74,769





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**





In
      March
      2006, the Company's Board of Directors adopted an equity incentive plan, which
      was approved by the stockholders at the stockholders meeting held May 5, 2006.
      The plan expires in ten years and provides for the granting of a maximum of
      5,000,000 shares. Options granted under the plan are at prices not less than
      market price at date of grants and are exercisable for five years. Further,
      in
      March 2006 options were granted under the plan for the purchase of an aggregate
      of 3,210,000 shares of the Company's common stock at $2.00 per share, which
      was
      in excess of market price on that date. As the stock was fully vested at the
      date of issuance, the total measurement fair value of options in the amount
      of
      $2,575,893 was expensed during the quarter ended April 30, 2006. The Board
      of
      Directors will determine the vesting rights of remaining options to be
      granted.





37





**Item
      11. Security Ownership of Certain Beneficial Owners and Management**





The
      following table sets forth as of October 31, 2006 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.





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.




AMOUNT
                AND
              NATURE
                OFNAME
                  AND ADDRESS
                OF
                  BENEFICIAL OWNER
            
            BENEFICIAL
              OWNERSHIP
            
            PERCENTOF
                CLASS
            
            RELATIONSHIPTO
                COMPANYMatthew
                Crouch3400
                W. Cahuenga Blvd.Hollywood,
                CA 90068
            
            
            9,955,000(1)
            
            
            47%
            
            
            CEO,
                DirectorCarlos
                D. De Mattos1125
                North Lindero Canyon Rd.Suite
                A-8 #209Westlake
                Village, CA 91362
            
            
            3,299,689(2)
                (3)
            
            
            16%
            
            
            President,
                DirectorYale
                Farar, trusteeHillshire
                Trust23679
                Calabasas Rd. #412Calabasas,
                CA 91302
            
            
            1,232,100
            
            
            6%
            
            
            StockholderMarcos
                M. De Mattos1855
                Industrial St. Apt #610Los
                Angeles, CA 90021
            
            
            580,000(4)
            
            
            3%
            
            
            Vice
                PresidentRichard
                Cook34413
                Desert RoadActon,
                CA 93510
            
            
            820,833(5)
            
            
            4%
            
            
            Exec
                VPMarilyn
                Beaubien6358
                La Rocha DriveLos
                Angeles, CA 90068
            
            
            433,750(6)
            
            
            2%
            
            
            CFO




38




Tom
                Newman3939
                S. Harvard Ave.Tulsa,
                OK 74135
            
            
            17,500(7)
            
            
            *
            
            
            DirectorRic
                Wake745
                5thAve.
                Suite 800New
                York, NY 10151
            
            
            17,500(7)
            
            
            *
            
            
            DirectorJohn
                R. Dempsey14724
                Ventura Blvd., 6thFloorSherman
                Oaks, CA 91403
            
            
            37,500(7)
            
            
            *
            
            
            DirectorWilliam
                B. Barnett21550
                Oxnard Street, Ste. 200Woodland
                Hills , CA 91367
            
            
            75,000(8)
            
            
            *
            
            
            DirectorAll
                officers and directors as aGroup
                (9 individuals)
            
            
            16,451,372(9)
            
            
            78%





*
      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.





(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.




39




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





(9)
            Does
                not include Tom Newman, who resigned as a director in October,
                2006.





**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 expires October 2007.





In
      January 2006 the Company made a short term loan of $40,000 to a company
      controlled by an officer of the Company. The loan was repaid to the company
      in
      February 2006.





In
      January 2006 the Company accrued reimbursable compensation costs of $46,767
      for
      production service performed for a company controlled by its principal
      shareholder/Chairman/CEO. The amount was received March 2006.





In
      January 2006 the Company was assigned the rights, title and interest in two
      television projects by a company controlled by its principal
      shareholder/Chairman/CEO. There was no dollar amount
      recorded for this transaction as they were recorded at the transferor’s
      carryover basis.





In
      quarter ended April 30, 2006, the Company accrued a receivable of
      $390,000  for
      reimbursable production expenses from a company controlled by its principal
      shareholder/Chairman/CEO. These costs include but are not limited to: executive
      and staff compensation, related payroll taxes and employee fringe benefits,
      facility rentals, parking, workers’ compensation, property and comprehensive
      liability insurance, business travel and entertainment, business legal and
      professional services, and directly allocable administrative overhead. The
      total
      amount was received as of October 31, 2006.





In
      quarter ended April 30, 2006, the Company received $100,000  in
      fee
      income for facilitating the financing for a company controlled by its principal
      shareholder/Chairman/CEO. This fee was part of an agreement to provide financing
      for the film "One Night with the King," in which the Company gave up 1% of
      its
      future revenues in exchange for the financing. The fee was recorded as deferred
      income until the release of the film per SOP 00-2. The movie was released in
      October 2006 and income was recorded at that time.





In
      May
      2006 a short term loan of $100,000 was made to the Company by a related party
      for working capital purposes. The stated interest rate on the note was 7.750%
      per annum. The loan was repaid with interest in August 2006.





In
      October 2006 the Company was assigned the rights, and interest in three
      previously released film projects. by a company controlled by its principal
      shareholder/Chairman/CEO. The Company paid $60,000, which was the value assigned
      to this transaction, as payment in full, and recorded the purchase as inventory
      for future use.





40





**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
      PRE
      14A filed under date of March 15, 2006 with respect to Items 6.





Form
      8-K
      filed under date of August 31, 2006 with respect to Items 1.





**Item
      14. Principal Accountant Fees and Services**





**Audit
      Fees**





The
      aggregate fees billed by Stonefield Josephson, Inc., the Company’s independent
      auditors, for the audit of the Company's annual consolidated financial
      statements and reviews of quarterly financial statements for the years ended
      October 31, 2006 and 2005 were $ 66,000 and
      $26,600, respectively.





**Audit-related
      Fees**


The
      aggregate fees billed by Stonefield Josephson, Inc., the Company’s independent
      auditors, for assurance and related services for the years ended October 31,
      2006 and 2005 were $ 5 ,000
      and
      $22,000, respectively.





**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.





/s/ Matthew Crouch


Matthew
      Crouch, Chief Executive Officer





/s/ Marilyn Beaubien


Marilyn
      Beaubien, Chief Financial Officer





Dated:
      February 09, 2007





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/s/
                Carlos D. De Mattos
            President/Director/s/
                John R. Dempsey, Jr.
            Director/s/
                William Barnett
            Director/s/
                Ric Wake
            Director






41