UNITED
STATES


SECURITIES
AND EXCHANGE COMMISSION




WASHINGTON,
D.C. 20549




FORM
10-QSB




xQUARTERLY REPORT UNDER SECTION 13 OR
15(d) OF THE SECURITIES EXCHANGE


ACT
OF 1934 FOR THE QUARTERLY PERIOD ENDED JANUARY 31, 2008







 ̈ TRANSITION REPORT UNDER
SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE


ACT
OF 1934 FOR THE TRANSITION PERIOD FROM _________ TO __________




COMMISSION
FILE NUMBER 000-21785




RIM
SEMICONDUCTOR COMPANY


(Exact
name of small business issuer as specified in its charter)







UTAH
            
            95-4545704(State
      or other jurisdiction of
              incorporation
      or organization)
            
            (I.R.S.
      Employer
              identification
      no.)









305
      NE 102ND AVENUE, SUITE 350
              PORTLAND,
      OREGON 97220
            
            (503)
      257-6700(Address
      of principal executive offices)
            
            (Issuer’s
      telephone number,
              including
      area code)









Check
      whether the issuer (1) has filed all reports required to be filed by
      Section 13 or 15(d) of the Exchange Act during the past 12 months (or for
      such 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 ̈Indicate
      by check mark whether the registrant is a shell company (as defined by
      Rule 12b-2 of the Exchange Act)
            Yes
       ̈  No
      xThe
      number of shares of the issuer’s Common Stock, par value $.001 per share,
      outstanding as of March 24, 2008, was 707,683,964.Transitional
      Small Business Disclosure Format (Check one)
            Yes
       ̈  No
      x


















FORM
10-QSB




RIM
SEMICONDUCTOR COMPANY AND SUBSIDIARIES


(A
DEVELOPMENT STAGE COMPANY COMMENCING NOVEMBER 1, 2007)




JANUARY
31, 2008




TABLE
OF CONTENTS






PAGEPART
      I - FINANCIAL INFORMATION
            1ITEM
      1.  FINANCIAL STATEMENTS
            1CONDENSED
      CONSOLIDATED BALANCE SHEET (Unaudited) At January 31,
      2008
            1CONDENSED
      CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) For the Three Months
      Ended January 31, 2008 and 2007 and for the Period From November 1, 2007
      (Date of Commencement as a Development Stage Company) to January 31,
      2008
            2CONDENSED
      CONSOLIDATED STATEMENT OF STOCKHOLDERS’ DEFICIENCY (Unaudited) For
      the Three Months Ended January 31, 2008
            3CONDENSED
      CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) For the Three
      Months Ended January 31, 2008 and 2007 and for the Period From November 1,
      2007 (Date of Commencement as a Development Stage Company) to January 31,
      2008
            4NOTES
      TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
            7ITEM
      2.  MANAGEMENT’S DISCUSSION AND ANALYSIS OR PLAN OF
      OPERATION
            23ITEM
      3.  CONTROLS AND PROCEDURES
            30PART
      II - OTHER INFORMATION
            32ITEM
      2.  UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF
      PROCEEDS
            32ITEM
      5.  OTHER INFORMATION
            32ITEM
      6.  EXHIBITS
            33SIGNATURES
            34















PART
I - FINANCIAL INFORMATION




ITEM
1.  FINANCIAL STATEMENTS


RIM
SEMICONDUCTOR COMPANY AND SUBSIDIARIES


(A Development Stage Company Commencing November 1,
2007)




CONDENSED
CONSOLIDATED BALANCE SHEET


(Unaudited)




January
      31,
              2008ASSETSCurrent
      Assets:Cash
      and cash equivalents
            
            $
            13,705Other
      current assets
            
            
            112,104Assets
      of discontinued operations
            
            
            2,644TOTAL
      CURRENT ASSETS
            
            
            128,453Property
      and equipment - net
            
            
            181,124Note
      receivable
            
            
            50,000Deferred
      financing costs - net
            
            
            790,912Other
      assets
            
            
            18,482TOTAL
      ASSETS
            
            $
            1,168,971LIABILITIES AND
      STOCKHOLDERS’ DEFICIENCYCurrent
      Liabilities:Convertible
      notes payable
            
            $
            728,000Convertible
      debentures (net of debt discount of $35,254)
            
            
            696,026Derivative
      liabilities – warrants, options and embedded conversion
      options
            
            
            6,064,923Accounts
      payable and accrued expenses
            
            
            1,062,604Liabilities
      of discontinued operations
            
            
            1,376TOTAL
      CURRENT LIABILITIES
            
            
            8,552,929Long-term
      portion of convertible debentures (net of debt discount of
      $3,252,698)
            
            
            275,080TOTAL
      LIABILITIES
            
            
            8,828,009Commitments,
      Contingencies and Other mattersStockholders’
      Deficiency:Preferred
      stock - $0.01 par value; Authorized - 15,000,000 shares; Issued - 0
      shares; Outstanding - 0 shares
            
            
            -Common
      stock - $0.001 par value; Authorized - 900,000,000 shares; Issued -
      536,681,987 shares; Outstanding - 536,182,133 shares
            
            
            536,682Treasury
      Stock, at cost - 499,854 shares
            
            
            (7,498
            )Additional
      paid-in capital
            
            
            87,207,906Unearned
      compensation
            
            
            (410,700
            )Accumulated
      deficit at October 31, 2007
            
            
            (90,689,341
            )Deficit
      accumulated during the development stage
            
            
            (4,296,087
            )TOTAL
      STOCKHOLDERS’ DEFICIENCY
            
            
            (7,659,038
            )TOTAL
      LIABILITIES AND STOCKHOLDERS’ DEFICIENCY
            
            $
            1,168,971







See notes
to condensed consolidated financial statements.  1


RIM
SEMICONDUCTOR COMPANY AND SUBSIDIARIES


(A
Development Stage Company Commencing November 1, 2007)




CONDENSED
CONSOLIDATED STATEMENTS OF OPERATIONS


(Unaudited)






For
      the Three Months Ended
              January
      31,
            
            
            Period
      from
              November
      1, 2007
              (Date
      of
              Commencement
      as
              a
      Development
              Stage
      Company) to2008
            
            
            2007
            
            
            January
      31, 2008OPERATING
      EXPENSES:Acquired
      in-process research and development
            
            $
            1,340,000
            
            
            $
            -
            
            
            $
            1,340,000Amortization
      of technology licenses and capitalized software development
      costs
            
            
            -
            
            
            
            260,303
            
            
            
            -Research
      and development expenses (including stock based compensation of $10,350
      and $420,410, respectively)
            
            
            419,412
            
            
            
            647,674
            
            
            
            419,412Selling,
      general and administrative expenses (including stock based compensation of
      $712,220 and $469,409, respectively)
            
            
            1,569,084
            
            
            
            1,439,475
            
            
            
            1,569,084TOTAL
      OPERATING EXPENSES
            
            
            3,328,496
            
            
            
            2,347,452
            
            
            
            3,328,496OPERATING
      LOSS
            
            
            (3,328,496
            )
            
            
            (2,347,452
            )
            
            
            (3,328,496
            )OTHER
      EXPENSES (INCOME):Interest
      income
            
            
            (1,252
            )
            
            
            (14,543
            )
            
            
            (1,252
            )Interest
      expense
            
            
            1,115,138
            
            
            
            2,786,501
            
            
            
            1,115,138Change
      in fair value of derivative liabilities
            
            
            (276,629
            )
            
            
            1,538,647
            
            
            
            (276,629
            )Amortization
      of deferred financing costs
            
            
            137,089
            
            
            
            1,124,686
            
            
            
            137,089TOTAL
      OTHER EXPENSES
            
            
            974,346
            
            
            
            5,435,291
            
            
            
            974,346LOSS
      FROM CONTINUING OPERATIONS
            
            
            (4,302,842
            )
            
            
            (7,782,743
            )
            
            
            (4,302,842
            )INCOME
      (LOSS) FROM DISCONTINUED OPERATIONS
            
            
            6,755
            
            
            
            (7,741
            )
            
            
            6,755NET
      LOSS
            
            $
            (4,296,087
            )
            
            $
            (7,790,484
            )
            
            $
            (4,296,087
            )BASIC
      AND DILUTED NET LOSS PER COMMON SHARE
            
            $
            (0.01
            )
            
            $
            (0.02
            )WEIGHTED
      AVERAGE NUMBER OF COMMON SHARES OUTSTANDING
            
            
            474,130,430
            
            
            
            395,822,642







See notes
to condensed consolidated financial statements.  2


RIM SEMICONDUCTOR COMPANY AND
SUBSIDIARIES


(A
Development Stage Company Commencing November 1, 2007)




CONDENSED
CONSOLIDATED STATEMENT OF STOCKHOLDERS’ DEFICIENCY


For
The Three Months Ended January 31, 2008


(Unaudited)




Common
      Stock
            
            Treasury
      StockShares
            
            Amount
            
            Shares
            
            Amount
            
            Additional
              Paid-in
              Capital
            
            Unearned
      Compensation
            
            Accumulated
              Deficit
            
            Total
              Stockholders’
              DeficiencyBalance
      at November 1, 2007
            468,986,043
            
            $
            468,986
            
            (499,854
            )
            $
            (7,498
            )
            $
            85,276,802
            
            $
            (907,656
            )
            $
            (90,689,341
            )
            $
            (5,858,707
            )Issuance
      of common stock under service and consulting agreement on December 19,
      2007 ($0.021 per share)
            5,000,000
            
            
            5,000
            
            -
            
            
            -
            
            
            100,000
            
            
            (105,000
            )
            
            -
            
            
            -Issuance
      of common stock under service and consulting agreements on December 20,
      2007 ($0.021 per share)
            1,000,000
            
            
            1,000
            
            -
            
            
            -
            
            
            20,000
            
            
            (21,000
            )
            
            -
            
            
            -Issuance
      of common stock for conversion of accrued interest  on December
      31, 2007 ($0.0179 per share)
            1,295,944
            
            
            1,296
            
            -
            
            
            -
            
            
            21,837
            
            
            -
            
            
            -
            
            
            23,133Issuance
      of common stock for cash on November 6, 2007 ($0.05 per
    share)
            400,000
            
            
            400
            
            -
            
            
            -
            
            
            19,600
            
            
            -
            
            
            -
            
            
            20,000Issuance
      of common stock upon acquisition of BDSI on January 29, 2008 ($0.029 per
      share)
            60,000,000
            
            
            60,000
            
            -
            
            
            -
            
            
            1,680,000
            
            
            -
            
            
            -
            
            
            1,740,000Stock
      based compensation expense recognized for the granting and vesting of
      options to employees and advisory board members
            -
            
            
            -
            
            -
            
            
            -
            
            
            99,614
            
            
            -
            
            
            -
            
            
            99,614Reclassification
      of warrants issued in connected with restricted common stock to derivative
      liability
            -
            
            
            -
            
            -
            
            
            -
            
            
            (9,947
            )
            
            -
            
            
            -
            
            
            (9,947
            )Amortization
      of unearned compensation expense
            -
            
            
            -
            
            -
            
            
            -
            
            
            -
            
            
            622,956
            
            
            -
            
            
            622,956Net
      Loss
            -
            
            
            -
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            (4,296,087
            )
            
            (4,296,087
            )Balance
      at January 31, 2008
            536,681,987
            
            $
            536,682
            
            (499,854
            )
            $
            (7,498
            )
            $
            87,207,906
            
            $
            (410,700
            )
            $
            (94,985,428
            )
            $
            (7,659,038
            )







Accumulated
      deficit as of October 31, 2007
            
            $
            (90,689,341)Deficit
      accumulated during the development stage
            
            
            (4,296,087)Total
      Accumulated Deficit as of January 31, 2008
            
            $
            (94,985,428)




See notes
to condensed consolidated financial statements.


3


RIM
SEMICONDUCTOR COMPANY AND SUBSIDIARIES


(A
Development Stage Company Commencing November 1, 2007)




CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS


(Unaudited)




For
      the Three Months Ended
              January
      31,
            
            
            Period
      from
              November
      1, 2007
              (Date
      of Commencement as
              a
      Development
              Stage
      Company) to2008
            
            
            2007
            
            
            January
      31, 2008CASH
      FLOWS FROM OPERATING ACTIVITIESNet
      loss from continuing operations
            
            $
            (4,302,842
            )
            
            $
            (7,782,743
            )
            
            $
            (4,302,842
            )Adjustments
      to reconcile net loss from continuing operations to net cash used in
      operating activities:Consulting
      fees and other compensatory elements of stock issuances
            
            
            722,570
            
            
            
            889,819
            
            
            
            722,570Change
      in fair value of derivative liabilities
            
            
            (276,629
            )
            
            
            1,538,647
            
            
            
            (276,629
            )Acquired
      in-process research and development
            
            
            1,340,000
            
            
            
            -
            
            
            
            1,340,000Fair
      value of warrants in excess of debt discount
            
            
            369,721
            
            
            
            -
            
            
            
            369,721Amortization
      of deferred financing costs
            
            
            137,089
            
            
            
            1,124,686
            
            
            
            137,089Amortization
      of debt discount on notes
            
            
            650,826
            
            
            
            2,752,373
            
            
            
            650,826Amortization
      of technology license and capitalized software development
      fees
            
            
            -
            
            
            
            260,303
            
            
            
            -Depreciation
            
            
            8,758
            
            
            
            3,802
            
            
            
            8,758Other
      non-cash expense
            
            
            -
            
            
            
            614
            
            
            
            -Change
      in assetsOther
      current assets
            
            
            (18,744
            )
            
            
            35,153
            
            
            
            (18,744
            )Other
      assets
            
            
            -
            
            
            
            2,500
            
            
            
            -Change
      in liabilitiesAccounts
      payable and accrued expenses
            
            
            (648,649
            )
            
            
            26,899
            
            
            
            (648,649
            )NET
      CASH USED IN OPERATING ACTIVITIES
            
            
            (2,017,900
            )
            
            
            (1,147,947
            )
            
            
            (2,017,900
            )CASH
      FLOWS FROM INVESTING ACTIVITIESProceeds
      from sale of trademark rights
            
            
            -
            
            
            
            200,000
            
            
            
            -Proceeds
      from maturity of short-term investments
            
            
            -
            
            
            
            500,000
            
            
            
            -Cash
      acquired in connection with common stock issued upon acquisition of
      BDSI
            
            
            400,000
            
            
            
            -
            
            
            
            400,000Acquisition
      and costs of capitalized software and development fees
            
            
            -
            
            
            
            (377,969
            )
            
            
            -Acquisition
      of property and equipment
            
            
            (9,250
            )
            
            
            (69,657
            )
            
            
            (9,250
            )NET
      CASH PROVIDED BY INVESTING ACTIVITIES
            
            
            390,750
            
            
            
            252,374
            
            
            
            390,750CASH
      FLOWS FROM FINANCING ACTIVITIESProceeds
      from issuance of common stock
            
            
            20,000
            
            
            
            -
            
            
            
            20,000Proceeds
      from convertible debentures
            
            
            3,175,000
            
            
            
            -
            
            
            
            3,175,000Capitalized
      financing costs
            
            
            (345,000
            )
            
            
            -
            
            
            
            (345,000
            )Repayments
      of notes payable
            
            
            (1,250,000
            )
            
            
            -
            
            
            
            (1,250,000
            )NET
      CASH PROVIDED BY FINANCING ACTIVITIES
            
            
            1,600,000
            
            
            
            -
            
            
            
            1,600,000DECREASE
      IN CASH AND CASH EQUIVALENTS FROM CONTINUING OPERATIONS
            
            
            (27,150
            )
            
            
            (895,573
            )
            
            
            (27,150
            )CASH
      FLOWS FROM DISCONTINUED OPERATIONS – OPERATING CASH FLOWS
            
            
            5,487
            
            
            
            (7,741
            )
            
            
            5,487


4


RIM
SEMICONDUCTOR COMPANY AND SUBSIDIARIES


(A
Development Stage Company Commencing November 1, 2007)




CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS


(Unaudited)




For
      the Three Months Ended
              January
      31,
            
            
            Period
      from
              November
      1, 2007 (Date of Commencement as
              a
      Development
              Stage
      Company) to2008
            
            
            2007
            
            
            January
      31, 2008DECREASE
      IN CASH AND CASH EQUIVALENTS
            
            
            (21,663
            )
            
            
            (903,314
            )
            
            
            (21,663
            )CASH
      AND CASH EQUIVALENTS - BEGINNING OF PERIOD
            
            
            35,368
            
            
            
            1,090,119
            
            
            
            35,368CASH
      AND CASH EQUIVALENTS - END OF PERIOD
            
            $
            13,705
            
            
            $
            186,805
            
            
            $
            13,705




See notes
to condensed consolidated financial statements.








5


RIM
SEMICONDUCTOR COMPANY AND SUBSIDIARIES


(A
Development Stage Company Commencing November 1, 2007)




CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS


(Unaudited)




For
      the Three Months Ended January 31,
            
            
            Period
      from
              November
      1, 2007 (Date of Commencement as
              Development
              Stage
              Company)
      to2008
            
            
            2007
            
            
            January
      31, 2008Supplemental
      Disclosure of Cash Flow Information:Cash
      paid during the period for:Interest
            
            $
            27,929
            
            
            $
            25,000
            
            
            $
            27,929Non-Cash
      Investing and Financing Activities:Value
      recorded as debt discount relating to warrants issued to purchasers of
      convertible debentures
            
            $
            2,116,667
            
            
            $
            -
            
            
            $
            2,116,667Value
      assigned to conversion option liability in connection with issuance of
      convertible debentures
            
            $
            1,058,333
            
            
            $
            -
            
            
            $
            1,058,333Value
      assigned on issuance date to warrants issued to finder
            
            $
            497,277
            
            
            $
            -
            
            
            $
            497,277Common
      stock issued for conversion of convertible debentures, notes payable and
      accrued interest
            
            $
            23,133
            
            
            $
            4,069,232
            
            
            $
            23,133Issuance
      of common stock upon exercise of stock options for the settlement of
      vendor payables
            
            $
            -
            
            
            $
            19,140
            
            
            $
            -Common
      stock issued for accrued liquidated damages
            
            $
            -
            
            
            $
            68,547
            
            
            $
            -Reclassification
      of derivative liability to equity upon exercise of options
            
            $
            -
            
            
            $
            71,521
            
            
            $
            -Reclassification
      of conversion option liability to equity
            
            $
            -
            
            
            $
            1,685,266
            
            
            $
            -Issuance
      of common stock upon acquisition of BDSI:Cash
      acquired
            
            $
            400,000
            
            
            $
            -
            
            
            $
            400,000Acquired
      license to patented technology (research and development)
            
            
            1,340,000
            
            
            
            -
            
            
            
            1,340,000Fair
      value of common stock issued upon acquisition of BDSI
            
            $
            1,740,000
            
            
            $
            -
            
            
            $
            1,740,000




See notes
to condensed consolidated financial statements.









6


RIM
SEMICONDUCTOR COMPANY AND SUBSIDIARIES
 (A
Development Stage Company Commencing November 1, 2007)
  NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 (Unaudited)






NOTE
1 - PRINCIPLES OF CONSOLIDATION AND BUSINESS OPERATIONS




The
consolidated financial statements include the accounts of Rim Semiconductor
Company and its wholly-owned operating subsidiaries, NV Entertainment, Inc. (“NV
Entertainment”) and Broadband Distance Systems, Inc. (“BDSI”) (see Note 3)
(collectively, the “Company”). Top Secret Productions, LLC is a 50% owned
subsidiary of NV Entertainment. All significant intercompany balances and
transactions have been eliminated. The Company consolidates its 50% owned
subsidiary Top Secret Productions, LLC due to the Company’s control of
management and financial matters of such entity, including all of the risk of
loss.




The
accompanying unaudited condensed consolidated financial statements have been
prepared in accordance with accounting principles generally accepted in the
United States of America (“US GAAP”). In the opinion of management, the
accompanying unaudited financial statements contain all adjustments, consisting
only of those of a normal recurring nature, necessary for a fair presentation of
the Company’s financial position, results of operations and cash flows at the
dates and for the periods indicated. These financial statements should be read
in conjunction with the financial statements and notes related thereto included
in the Annual Report on Form 10-KSB/A for the fiscal year ended October 31,
2007, filed with the Securities and Exchange Commission on February 13,
2008.




These
results for the three months ended January 31, 2008 are not necessarily
indicative of the results to be expected for the full fiscal year. The
preparation of the consolidated financial statements in conformity with US GAAP
requires management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the reported amounts of
revenues and expenses during the reporting period. Actual results could differ
from those estimates.




Rim
Semiconductor Company was incorporated under the laws of the State of Utah on
December 5, 1985. In November 1999, the Company began to focus its business
activities on the development of new semiconductor technologies. Pursuant to
such plan, in February 2000, the Company acquired NV Technology, Inc. and
commenced its technology business. The Company’s technology business has
developed advanced transmission technology products that enable data to be
transmitted across copper telephone wire at speeds and over distances that
exceed those offered by leading DSL technology providers. The Company’s
technology business has generated no revenues to date.




The
Company operated in two business segments until December 2007 when the Company
discontinued the operations of its Entertainment Segment and accordingly
re-entered the development stage as defined in Statement of Financial Accounting
Standards (“SFAS”) No. 7, “Accounting and Reporting for Development Stage
Companies” (“SFAS No. 7”). The remaining segment (Semiconductor Segment) will
have no operating revenues until successful commercialization of its developed
technology and will continue to incur substantial operating expenses,
capitalized costs and operating losses. As a result of the discontinuation of
the Entertainment Segment, the Semiconductor Segment is the Company’s only
reporting segment.





The
income (loss) from discontinued operations was $6,755 and $(7,741) for the three
months ended January 31, 2008 and 2007, respectively.  Film
distribution royalties from the Entertainment Segment were $8,379 and $0 during
the three months ended January 31, 2008 and 2007, respectively, and were
recorded within the income (loss) from discontinued operations.  The
income (loss) on discontinued operations did not impact basic and diluted net
loss per common share for the three months ended January 31, 2008 and
2007.





Assets of
the Entertainment Segment consist entirely of cash and cash equivalents as of
January 31, 2008 and have been recorded as a current asset under the caption
“Assets of discontinued operations” in the accompanying balance
sheets.  Liabilities of the Entertainment Segment consist entirely of
accounts payable and accrued expenses as of January 31, 2008 and have been
recorded as a current liability under the caption “Liabilities of discontinued
operations” in the accompanying balance sheets.





Liquidity
Discussion




The
accompanying condensed consolidated financial statements have been prepared in
conformity with accounting principles generally accepted in the United States of
America, which contemplate continuation of the Company as a going concern and
the realization of assets and the satisfaction of liabilities in the normal
course of business.





7






RIM
SEMICONDUCTOR COMPANY AND SUBSIDIARIES
 (A
Development Stage Company Commencing November 1, 2007)
  NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 (Unaudited)




NOTE
1 - PRINCIPLES OF CONSOLIDATION AND BUSINESS OPERATIONS (CONTINUED)





Liquidity Discussion
(Continued)




The
carrying amounts of assets and liabilities presented in the financial statements
do not purport to represent realizable or settlement values. The Company has
suffered significant recurring operating losses, used substantial funds in its
operations, and needs to raise additional funds to accomplish its business plan.
For the three months ended January 31, 2008 and 2007 the Company incurred net
losses of approximately $4.3 million and $7.8 million, respectively, and as of
January 31, 2008 had a working capital deficiency of approximately $8.4 million
and stockholders’deficiency of approximately $7.7 million. In addition, management
believes that the Company will continue to incur net losses and cash flow
deficiencies from operating activities through at least January 31,
2009.  These conditions raise substantial doubt about the Company’s
ability to continue as a going concern.





The
Company’s ability to continue to operate as a going concern is dependent on its
ability to generate sufficient cash flows to meet its obligations on a timely
basis, to obtain additional financing and to ultimately attain
profitability.





In
December 2007, the Company received net proceeds of approximately $1.7 million
from the sale of its 10% Secured Convertible Notes and warrants (the “2007
Debentures”) (see Note 5). On January 29, 2008, the Company acquired all of the
issued and outstanding stock of BDSI (see Note 3).  Upon closing of
the acquisition transaction, BDSI had $400,000 in cash and a worldwide exclusive
license to patented technology developed by researchers at the University of
Illinois.





Management
of the Company is continuing its efforts to secure funds through equity and/or
debt instruments for its operations. The Company will require additional funds
for its operations and to pay down its liabilities, exploit the patent license
held by BDSI, and finance its expansion plans consistent with its business plan.
However, there can be no assurance that the Company will be able to secure
additional funds and that if such funds are available, whether the terms or
conditions would be acceptable to the Company and whether the Company will be
able to turn into a profitable position and generate positive operating cash
flow. The condensed consolidated financial statements do not include any
adjustments that might result from the outcome of this uncertainty and these
adjustments may be material.




NOTE
2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES




Accounting
Estimates




The
preparation of the condensed consolidated financial statements in accordance
with accounting principles generally accepted in the United States of America
requires management to make estimates and assumptions that affect the reported
amounts of assets and liabilities, disclosures of contingent assets and
liabilities in the condensed consolidated financial statements and the
accompanying notes. Significant estimates include impairment analysis for
long-lived assets, income taxes, litigation and valuation of derivative
instruments. Actual results could differ from those estimates.




Research and
Development




Research
and development costs are charged to expense as incurred. Amounts allocated to
acquired-in-process research and development costs, from business combinations,
are charged to operations at the consummation of the acquisition.




Research
and development expenses relate to the design and development of advanced
transmission technology products. In the past, the Company has outsourced its
design and development activities to independent third parties, although it is
not currently doing so. Internal development costs and payments made to
independent software developers under development agreements are capitalized to
software development costs once technological feasibility is established or if
the development costs have an alternative future use. Prior to establishing
technological feasibility, development costs and payments made are expensed to
research and development costs. Technological feasibility is evaluated on a
product-by-product basis.




Research
and development expenses generally consist of salaries, related expenses for
engineering personnel and third-party development costs incurred.









8






RIM
SEMICONDUCTOR COMPANY AND SUBSIDIARIES
 (A
Development Stage Company Commencing November 1, 2007)
  NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 (Unaudited)




NOTE
2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)




Derivative Financial
Instruments




In
connection with the issuance of certain convertible debentures (see Note 5), the
terms of the debentures included an embedded conversion feature which provided
for a conversion of the debentures into shares of the Company’s common stock at
a rate which was determined to be variable. The Company determined that the
conversion feature was an embedded derivative instrument and that the conversion
option was an embedded put option pursuant to SFAS No. 133, “Accounting for
Derivative Instruments and Hedging Activities,” as amended, and Emerging Issues
Task Force (“EITF”) Issue No. 00-19, “Accounting for Derivative Financial
Instruments Indexed to, and Potentially Settled in, a Company’s Own Stock” (“No.
00-19”).




The
accounting treatment of derivative financial instruments requires that the
Company record the conversion option and related warrants at their fair values
as of the inception date of the convertible debenture agreements and at fair
value as of each subsequent balance sheet date. In addition, under the
provisions of EITF Issue No. 00-19, as a result of entering into the convertible
debenture agreements, the Company was required to classify all other
non-employee warrants and options as derivative liabilities and record them at
their fair values at each balance sheet date. Any change in fair value was
recorded as non-operating, non-cash income or expense at each balance sheet
date. If the fair value of the derivatives was higher at the subsequent balance
sheet date, the Company recorded a non-operating, non-cash charge. If the fair
value of the derivatives was lower at the subsequent balance sheet date, the
Company recorded non-operating, non-cash income. The Company reassesses the
classification at each balance sheet date. If the classification required under
EITF Issue No. 00-19 changes as a result of events during the period, the
contract should be reclassified as of the date of the event that caused the
reclassification.




The
Company accounts for embedded conversion options that no longer meet the
conditions of EITF Issue No. 00-19 to be classified as a liability under EITF
Issue No. 06-7, “Issuer’s Accounting for a Previously Bifurcated Conversion
Option in a Convertible Debt Instrument When the Conversion Option No Longer
Meets the Bifurcation Criteria in FASB Statement No. 133, Accounting for
Derivative Instruments and Hedging Activities” (“EITF Issue No. 06-7”). Under
EITF Issue No. 06-7, when an embedded conversion option previously accounted for
as a derivative under SFAS No. 133 no longer meets the bifurcation criteria, the
Company reclassifies the amount of the embedded conversion option to
stockholders’ deficiency.




The fair
value of derivative financial instruments was estimated during the three months
ended January 31, 2008 and 2007 using the Black-Scholes model and the following
range of assumptions:






January
      31,
              2008
            
            January
      31,
              2007Expected
      dividends
            None
            
            
            NoneExpected
      volatility
            96.0
      – 140.8
            %
            
            79.7
      - 136.9
            %Risk-free
      interest rate
            2.1
      – 3.7
            %
            
            4.8
      - 5.2
            %Contractual
      term (years)
            0.4
      - 8.5
            
            
            0.7
      - 9.5





The
expected volatility is based on a blend of the Company’s industry peer group and
the Company’s historical volatility. The risk-free interest rate assumption is
based upon observed interest rates appropriate for the term of the related stock
options and warrants. The dividend yield assumption is based on the Company’s
history and expectation of dividend payouts. The expected life of stock options
and warrants represents the Company’s historical experience with regards to the
exercise behavior of its option and warrant holders and the contractual term of
the options and warrants.


9






RIM
SEMICONDUCTOR COMPANY AND SUBSIDIARIES
 (A
Development Stage Company Commencing November 1, 2007)
  NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 (Unaudited)





NOTE
2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)




Registration Payment
Arrangements




The
Company accounts for registration payment arrangements in accordance with FASB
Staff Position (“FSP”) No. EITF 00-19-2, “Accounting for Registration Payment
Arrangements” (“FSP EITF 00-19-2”), which specifies that contingent obligations
to make future payments or otherwise transfer consideration under a registration
payment arrangement, should be separately recognized and measured in accordance
with SFAS No. 5, “Accounting for Contingencies”.  SFAS No. 5 requires
loss contingencies to be accrued and expensed if they are probable and
reasonably estimable.  As of January 31, 2008, the Company has accrued
$181,003 within accounts payable and accrued expenses for liquidated damages in
connection with registration payment arrangements.




Loss Per Common
Share




Basic
loss per common share is computed based on weighted average shares outstanding
and excludes any potential dilution. Diluted loss per share reflects the
potential dilution from the exercise or conversion of all dilutive securities
into common stock based on the average market price of common shares outstanding
during the period.  The income (loss) from discontinued operations had
no significant impact on the basic and diluted net loss per common share for the
three months ended January 31, 2008 and 2007.


For the
three months ended January 31, 2008 and 2007, no effect has been given to
outstanding options, warrants, convertible notes payable, or convertible
debentures in the diluted computation, as their effect would be anti-dilutive.
The number of potentially dilutive securities excluded from the computation of
diluted loss per share was 540,276,120 and 164,287,898, for the three months
ended January 31, 2008 and 2007, respectively (see Note 7).




Stock-Based
Compensation




The
Company reports stock based compensation under accounting guidance provided by
SFAS No. 123 (revised 2004), “Share-Based Payment” (“SFAS 123(R)”), which
requires the measurement and recognition of compensation expense for all
share-based payment awards made to employees and directors, including stock
options, based on estimated fair values.




SFAS
123(R) requires companies to estimate the fair value of share-based payment
awards on the date of grant using an option-pricing model. The value of the
portion of the award that is ultimately expected to vest is recognized as
expense over the requisite service periods in the Company’s consolidated
statement of operations. The Company has continued to attribute the value of
stock-based compensation to expense on the straight-line single option
method.  Stock-based compensation expense recognized under SFAS 123(R)
related to employee stock options granted during the three months ended January
31, 2008 and 2007 was $99,614 and $110,765, respectively.





As
stock-based compensation expense recognized in the consolidated statement of
operations for the three months ended January 31, 2008 is based on awards
ultimately expected to vest, it has been reduced for estimated forfeitures. SFAS
123(R) requires forfeitures to be estimated at the time of grant and revised, if
necessary, in subsequent periods if actual forfeitures differ from those
estimates.





Reclassifications




Certain
prior period amounts have been reclassified to conform to the current period
presentation. The reclassification did not have any effect on reported losses
for any periods presented.




10




RIM
SEMICONDUCTOR COMPANY AND SUBSIDIARIES
 (A
Development Stage Company Commencing November 1, 2007)
  NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 (Unaudited)





NOTE
2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)




Impact of Recently Issued
Accounting Standards




In
September 2006, the Financial Accounting Standards Board (“FASB”) issued SFAS
No. 157, “Fair Value Measurements” (“SFAS 157”). SFAS 157 defines fair value,
establishes a framework for measuring fair value in accordance with accounting
principles generally accepted in the U.S., and expands disclosures about fair
value measurements. SFAS 157 is effective for the Company as of the beginning of
fiscal 2009, with earlier application encouraged. Any cumulative effect will be
recorded as an adjustment to the opening accumulated deficit balance, or other
appropriate component of equity. The adoption of this pronouncement is not
expected to have an impact on the Company’s consolidated financial position,
results of operations, or cash flows.





In
February 2007, the FASB issued SFAS No. 159, “The Fair Value Option for
Financial Assets and Financial Liabilities” (“SFAS 159”). SFAS 159 provides
companies with an option to report selected financial assets and liabilities at
fair value. The objective of SFAS 159 is to reduce both complexity in accounting
for financial instruments and the volatility in earnings caused by measuring
related assets and liabilities differently. Generally accepted accounting
principles have required different measurement attributes for different assets
and liabilities that can create artificial volatility in earnings. SFAS 159 also
establishes presentation and disclosure requirements designed to facilitate
comparisons between companies that choose different measurement attributes for
similar types of assets and liabilities. SFAS 159 does not eliminate disclosure
requirements included in other accounting standards, including requirements for
disclosures about fair value measurements included in SFAS 157 and SFAS No. 107,
“Disclosures about Fair Value of Financial Instruments.” SFAS 159 is effective
for the Company as of the beginning of fiscal year 2009. The Company has not yet
determined the impact SFAS 159 may have on its consolidated financial position,
results of operations, or cash flows.





In
December 2007, the FASB issued SFAS No. 141 (revised 2007), “Business
Combinations” (“SFAS 141(R)”). SFAS 141 (R) replaces SFAS No. 141, “Business
Combinations”, and is effective for the Company for business combinations for
which the acquisition date is on or after the beginning of the first annual
reporting period beginning on or after December 15, 2008. SFAS 141(R) requires
the new acquiring entity to recognize all assets acquired and liabilities
assumed in the transactions; establishes an acquisition-date fair value for
acquired assets and liabilities; and fully discloses to investors the financial
effect the acquisition will have. SFAS 141(R) would have an impact on accounting
for any businesses acquired after the effective date of this
pronouncement.





In
December 2007, the FASB issued SFAS No. 160, “Noncontrolling Interests in
Consolidated Financial Statements” (“SFAS 160”). SFAS 160 requires all entities
to report minority interests in subsidiaries as equity in the consolidated
financial statements, and requires that transactions between entities and
noncontrolling interests be treated as equity. SFAS 160 is effective for the
Company as of the beginning of fiscal 2010. The Company is evaluating the impact
of this pronouncement on the Company’s consolidated financial position, results
of operations and cash flows.




NOTE
3 – ACQUISITION OF BDSI





On
January 29, 2008, the Company completed its acquisition of all of the issued and
outstanding capital stock of BDSI, a subsidiary of UTEK Corporation (“UTEK”) in
exchange for 60,000,000 shares of unregistered common stock of the Company,
valued at $1,740,000, which are subject to certain anti-dilution
adjustments.  As a result of the transaction, BDSI became a
wholly-owned subsidiary of the Company.  BDSI was incorporated on
December 13, 2007 and its historical operations prior to acquisition were not
significant.  The
Company has accounted for this acquisition under the purchase method of
accounting.Upon closing of the
acquisition transaction, BDSI had $400,000 of cash and a worldwide exclusive
license to patented technology developed by researchers at the University of
Illinois.  The remaining purchase price of $1,340,000 was allocated to
the license.  As the Company recorded an impairment of its existing
technology licenses and capitalized software development costs during the year
ended October 31, 2007 and is currently in the development stage, management
determined it was unable to currently demonstrate alternative future uses for
the license and support the carrying amount of the license based upon estimated
future cash flows.  Accordingly, the $1,340,000 was charged to
operations, under the caption“Acquired in-process research and
development”during the
three months ended January 31, 2008.





11






RIM
SEMICONDUCTOR COMPANY AND SUBSIDIARIES
 (A
Development Stage Company Commencing November 1, 2007)
  NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 (Unaudited)


NOTE 3 – ACQUISITION OF
BDSI(CONTINUED)





The patent relates to an algorithm
designed to enhance power allocation in telecommunications systems that use
multicarrier modulation protocol.IPSL, ADSL, VDSL and DSL systems are
all examples of multicarrier modulation protocols. The algorithm serves to improve the
achievable data rate or the signal-to-noise ratio, reducing errors in the
transmission. Under the exclusive license agreement relating to such technology,
BDSI is obligated to pay theUniversity of Illinois royalties based on
achievement of certain sales levels for products utilizing the technology.
Unless earlier terminated by a party pursuant to the terms of the license
agreement, the license expires upon the expiration or termination of all of the
University of Illinois patent rights underlying the technology. The license
agreement also permits BDSI to sublicense the technology andobligates BDSI to make royalty payments
to theUniversityofIllinoisbased on a percentage of payments
received by BDSI fromsublicensees. The Company requires additional funds in order to exploit the
patent license held by BDSI.





The
results of operations of BDSI have been included in the accompanying condensed
consolidated financial statements from the date of acquisition.





Based on
our evaluation, the allocation of the purchase price for BDSI is as follows as
of January 29, 2008, the date of acquisition:





Assets
      and technology acquired:Cash
      acquired
            
            $
            400,000Acquired
      license to patented technology (research and development)
            
            
            1,340,000Total
      assets and technology acquired
            
            $
            1,740,000





NOTE
4 - DEFERRED FINANCING COSTS




As of
January 31, 2008, the deferred financing costs consist of costs incurred in
connection with the issuance of the Company’s outstanding
debt:




Deferred
      financing costs
            
            $
            4,002,725Less:
      accumulated amortization
            
            
            (3,211,813
            )Deferred
      financing costs, net
            
            $
            790,912







Costs
incurred in connection with debt financings are capitalized as deferred
financing costs and amortized over the term of the related debt. If any or all
of the related debt is converted or repaid prior to its maturity date, a
pro-rata share of the related deferred financing costs are written off and
recorded as amortization expense in the period of the conversion or repayment in
the consolidated statement of operations. During the three months ended January
31, 2008, the Company capitalized $842,277 of deferred financing costs related
to the 2007 Debentures (see Note 5). For the three months ended January 31, 2008
and 2007, amortization of deferred financing costs was $137,089 and $1,124,686,
respectively.




NOTE
5 - CONVERTIBLE DEBENTURES




2007
Debentures





On
December 5, 2007, the Company entered into a subscription agreement with certain
institutional and individual investors pursuant to which the Company sold the
2007 Debentures and warrants to purchase shares of the Company’s common stock.
The 2007 Debentures were issued on December 5, 2007, have a term of two years
and are secured by substantially all of the Company’s assets, including all of
the Company’s intellectual property. The Company has raised gross proceeds of
$3,175,000 from the private placement of secured convertible notes with an
aggregate principal amount of $3,527,778 (which amount reflects an original
issue discount of 10%, or $352,778).





12






RIM
SEMICONDUCTOR COMPANY AND SUBSIDIARIES
 (A
Development Stage Company Commencing November 1, 2007)
  NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 (Unaudited)


NOTE
5 - CONVERTIBLE DEBENTURES (CONTINUED)




2007 Debentures
(Continued)





In
connection with the issuance of the 2007 Debentures, the Company issued to the
investors warrants to purchase an aggregate of 146,532,832 shares of common
stock at an initial exercise price of $0.10 per share, valued at $2,486,388 on
the issuance date.  The warrants are immediately exercisable at a per
share exercise price of $0.10 (which is subject to adjustment) through the fifth
anniversary of the date of issuance. The warrants include a cashless exercise
provision as well as antidilution provisions with respect to certain
securities issuances.





The
Company received net cash proceeds of approximately $2,830,000, after the
payment of offering related fees and expenses of $345,000. Out of these proceeds
the Company repaid in full the $1,100,000 bridge loans issued in July 2007 (see
Note 6). Each holder has the right at any time until his note is fully paid to
convert any outstanding and unpaid principal and accrued interest into shares of
common stock at the conversion price per share equal to 75% of the average of
the closing bid prices of the Company’s common stock for the 10 trading days
preceding the conversion date, however, the conversion price shall not exceed
$0.05 per share. The conversion price and number and kind of shares or other
securities to be issued upon conversion are subject to adjustment for certain
issuances, transactions or events that would result in “full ratchet” protection
to the holders.





Interest
payable on the 2007 Debentures accrues at an annual rate of 10% and is payable
on March 31, 2008 and quarterly thereafter, and on the maturity date,
accelerated or otherwise, when the principal and remaining accrued but unpaid
interest is due and payable, unless previously converted into common stock. The
Company has the option of prepaying the outstanding principal on the 2007
Debentures, in whole or in part, by paying the holder(s) 130% of the principal
amount to be redeemed, together with accrued but unpaid interest.





The
Company paid Blumfield Investments (the “Finder”) a cash finder’s fee equal to
$317,500 (10% of the aggregate purchase price for the 2007 Debentures issued).
An additional fee equal to 10% of any cash proceeds received by the Company from
exercise of the warrants will be payable to the Finder upon exercise of the
warrants. The Company also agreed to issue to the Finder a warrant, in
substantially the same form as the warrants issued to the holders of the 2007
Debentures, pursuant to which the Finder may purchase 10 shares of common stock
for each 100 shares issuable upon conversion of the 2007 Debentures and warrants
as of the closing date. As a result, the Company has issued a warrant to the
Finder pursuant to which the Finder may purchase up to 29,306,567 shares of
common stock at an initial exercise price of $0.10 per share, valued at $497,277
on the issuance date. The fair value of these warrants of $497,277 and the
offering related fees and expenses of $345,000 were recorded as deferred
financing costs and are being charged to interest expense over the term of the
2007 Debentures.





To secure
the Company’s obligations under the 2007 Debentures, the Company has granted a
security interest in substantially all of its assets, including without
limitation, its intellectual property, in favor of the investors. The security
interest terminates upon payment or satisfaction of all of the Company’s
obligations under the 2007 Debentures.





In
connection with the sale of the 2007 Debentures, the Company agreed to prepare
and file with the SEC, within 45 days following the closing date, a registration
statement for the purpose of registering for resale a number of shares of common
stock equal to 125% of the shares issuable upon conversion of the 2007
Debentures. Should the Company fail to file such registration statement within
such time, or if the registration statement is not declared effective within 150
days from the closing date, the Company must pay liquidated damages equal to 2%
of the principal amount of the 2007 Debentures and purchase price of the related
warrants for each 30 day period. Such liquidated damages are payable in cash or
registered shares of stock valued at 75% of the average closing bid prices over
the preceding 5 day period.





The
Company has not filed a registration statement and is not in compliance with the
terms of the registration rights granted to holders of the 2007
Debentures.  However, during January 2008, the Company obtained
waivers from 9 of the 12 holders of the 2007 Debentures (representing 75.59% of
the outstanding 2007 Debenture principal) waiving such registration
rights.





13






RIM
SEMICONDUCTOR COMPANY AND SUBSIDIARIES
 (A
Development Stage Company Commencing November 1, 2007)
  NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 (Unaudited)




NOTE
5 - CONVERTIBLE DEBENTURES (CONTINUED)





2007 Debentures
(Continued)





The
Company accounts for the registration rights under FSP EITF 00-19-2, which
specifies that the contingent obligation to make future payments or otherwise
transfer consideration under a registration payment arrangement, whether issued
as a separate agreement or included as a provision of a financial instrument or
other agreement, should be separately recognized and measured in accordance with
SFAS No. 5, “Accounting for Contingencies”. FSP EITF 00-19-2 also requires
additional disclosure regarding the nature of any registration payment
arrangements, alternative settlement methods, the maximum potential amount of
consideration and the current carrying amount of the liability, if
any.





The
aggregate principal amount of $3,527,778 is recorded as a liability net of a
debt discount of $352,778, which reflects the original issue discount of 10%,
and a debt discount of $3,175,000 consisting of an allocation of the fair values
attributed to the warrants issued to investors and to the embedded conversion
feature in accordance with EITF Issue No. 00-19. The debt discount of $3,175,000
consisted of a $2,116,667 value related to the warrants issued to investors and
a value attributed to the embedded conversion feature of $1,058,333. The debt
discount was first allocated to the embedded conversion feature based on its
fair value. After reducing the gross proceeds by the value attributed to the
embedded conversion feature, the remaining unallocated debt discount of
$2,116,667 was allocated to the warrants issued to investors. The excess of the
fair value of the warrants issued to investors above the debt discount allocated
to these warrants was $369,721 and was recorded as interest
expense.





The
Company evaluates and accounts for conversion options embedded in its
convertible instruments in accordance with SFAS No. 133 and EITF Issue No.
00-19. SFAS 133 generally provides three criteria that, if met, require
companies to bifurcate conversion options from their host instruments and
account for them as free standing derivative financial instruments in accordance
with EITF Issue No. 00-19. These three criteria include circumstances in which
(a) the economic characteristics and risks of the embedded derivative instrument
are not clearly and closely related to the economic characteristics and risks of
the host contract, (b) the hybrid instrument that embodies both the embedded
derivative instrument and the host contract is not remeasured at fair value
under otherwise applicable generally accepted accounting principles with changes
in fair value reported in earnings as they occur and (c) a separate instrument
with the same terms as the embedded derivative instrument would be considered a
derivative instrument subject to the requirements of SFAS 133. SFAS 133 and EITF
Issue No. 00-19 also provide an exception to this rule when the host instrument
is deemed to be conventional (as that term is described in the implementation
guidance to SFAS 133 and further clarified in EITF Issue No. 05-2 “The Meaning
of “Conventional Convertible Debt Instrument” in EITF Issue No.
00-19”.





The
Company determined that the embedded conversion option and the warrants issued
to the investors and the Finder are derivative liabilities.




Included
in interest expense for the three months ended January 31, 2008 is $275,080
related to the amortization of the debt discount on these
debentures.




The 2007
Debentures are summarized below as of January 31, 2008:




Outstanding
              Principal
              Amount
            
            
            Unamortized
              Debt
              Discount
            
            
            Net
              Carrying
              ValueLong-term
      portion
            
            $
            3,527,778
            
            
            $
            3,252,698
            
            
            $
            275,080







2006
Debentures




On March
10, 2006, the Company raised gross proceeds of $6.0 million from a private
placement to 17 institutional and individual investors (the “Investors”) of its
two-year 7% Senior Secured Convertible Debentures (the “2006 Debentures”). The
2006 Debentures originally were due and payable on March 10, 2008, but the
maturity date was extended pursuant to agreements with the four remaining
Investors.





14




RIM
SEMICONDUCTOR COMPANY AND SUBSIDIARIES
 (A
Development Stage Company Commencing November 1, 2007)
  NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 (Unaudited)





NOTE
5 - CONVERTIBLE DEBENTURES (CONTINUED)




2006 Debentures
(Continued)




Effective
March 17, 2008, the Company entered into amendment agreements with two Investors
holding 2006 Debentures with an aggregate principal amount of $200,000 (the
“March 17 Amendments”). The March 17 Amendments amend the terms of the two
subject 2006 Debentures to:  (1) extend the maturity date until
September 17, 2008, (2) obligate the Company to pay all interest accrued on such
debentures as of June 30, 2008 in cash; (3) extend the payment date for interest
that will have accrued on such debentures as of June 30, 2008 until September
17, 2008; and (4) increase the outstanding amount of unconverted principal on
such debentures by 20%, however, the 20% principal premium and interest accruing
thereon must be paid in cash and may not be converted by such Investors into
Company common stock. The March 17 Amendments also included waivers of any event
of default that may have occurred under the terms of such 2006 Debentures prior
to the date thereof.





Effective
March 19, 2008, the Company entered into amendment agreements with the other two
Investors holding unconverted 2006 Debentures with an aggregate principal amount
of $425,000 (the “March 19 Amendments”). In exchange for aggregate cash
consideration of  $23,181, the March 19 Amendments amend the terms of
the two subject 2006 Debentures to extend the maturity date on such debentures
until April 10, 2008. The March 19 Amendments also included waivers of any event
of default relating to failure to pay amounts due that may have occurred under
the terms of such 2006 Debentures prior to the date thereof.





In
connection with the issuance of the 2006 Debentures, the Company issued to the
Investors warrants to purchase 70,955,548 shares of the Company’s common stock
at an exercise price of $0.15 per share valued at $9,036,727 on the issuance
date (subject to adjustments for stock splits, stock dividends,
recapitalizations, mergers, spin-offs, and certain other transactions). The
warrants are exercisable until the last day of the month in which the third
anniversary of the effective date of the registration statement registering the
shares underlying the warrants occurs (August 31, 2009).





The
Company received net proceeds of approximately $5.31 million from the 2006
Debentures after the payment of offering related fees and expenses of
approximately $690,000. At the same time, from these proceeds, the Company
repaid in full certain bridge loans made in December 2005 and January 2006, in
the aggregate amount of $810,000.





The 2006
Debentures are convertible into shares of common stock at a conversion price for
any such conversion equal to the lower of (x) 70% of the volume weighted average
price (“VWAP”) of the common stock for the 20 days ending on the trading day
immediately preceding the conversion date or (y) if the Company enters into
certain financing transactions, the lowest purchase price or conversion price
applicable to that transaction. The conversion price is subject to
adjustment.




Interest
on the 2006 Debentures accrues at the rate of 7% per annum, payable upon
conversion, or semi-annually (June 30 and December 31 of each year) or upon
maturity, whichever occurs first, and will continue to accrue until the 2006
Debentures are fully converted and/or paid in full. Interest is payable, at the
option of the Company, either (i) in cash, or (ii) in shares of common stock at
the then applicable conversion price.




The
Company agreed to include the shares of common stock issuable upon conversion of
the 2006 Debentures and exercise of the related warrants issued to investors and
the placement agent in a registration statement filed by the Company with the
Securities and Exchange Commission (the “SEC”). Since the registration statement
was not declared effective by the SEC by June 23, 2006, the Company was
obligated to pay liquidated damages to the holders of the 2006 Debentures. A
registration statement covering the common stock issuable upon conversion of the
2006 Debentures and the related warrants issued to investors and the placement
agent was declared effective by the SEC on August 16, 2006. These liquidated
damages aggregated $212,000. At their option, the holders of the 2006 Debentures
are entitled to be paid such amount in cash or shares of restricted common stock
at a per share rate equal to the effective conversion price of the 2006
Debentures at the time the liquidated damages became due. During the three
months ended January 31, 2007, 464,535 shares of common stock valued at $68,547
were issued as payment for liquidated damages.  Accrued liquidated
damages as of January 31, 2008 was $143,453.





15




RIM
SEMICONDUCTOR COMPANY AND SUBSIDIARIES
 (A
Development Stage Company Commencing November 1, 2007)
  NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 (Unaudited)





NOTE
5 - CONVERTIBLE DEBENTURES (CONTINUED)




2006 Debentures
(Continued)




In
connection with the placement of the 2006 Debentures, a placement agent received
a placement agent fee equal to (i) 10% of the aggregate purchase price (i.e.,
$600,000), (ii) 10% of the proceeds realized in the future from exercise of
warrants issued to the Investors, (iii) warrants to purchase an aggregate of
7,095,556 shares of common stock having an initial exercise price equal to
$0.1693 per share valued at $888,779 on the issuance date, and (iv) warrants to
purchase an aggregate of 7,095,556 shares of common stock having an initial
exercise price equal to $0.15 per share valued at $903,673 on the issuance date.
The exercise price of the placement agent warrants is subject to adjustments for
stock splits, stock dividends, recapitalizations, mergers, spin-offs, and
certain other transactions. The aggregate fair value of the placement agent’s
warrants of $1,792,452 on the issuance date was recorded as a deferred financing
cost and is being charged to interest expense over the term of the 2006
Debentures.





The gross
proceeds of $6,000,000 are recorded as a liability net of a debt discount of
$6,000,000 consisting of an allocation of the fair values attributed to the
Investors’ warrants and to the embedded conversion feature in accordance with
EITF Issue No. 00-19. The debt discount consisted of a $3,428,571 value related
to the Investors’ warrants and a value attributed to the embedded conversion
feature of $2,571,429. The debt discount was first allocated to the embedded
conversion feature based on its fair value. After reducing the gross proceeds by
the value allocated to the embedded conversion feature, the remaining
unallocated debt discount of $3,428,571 was allocated to the Investors’
warrants.





In
accordance with SFAS No. 133 and EITF Issue No. 00-19, due to the possibility
that an indeterminate number of shares could be issued upon conversion of the
2006 Debentures, the Company separately values and accounts for the embedded
conversion feature related to the 2006 Debentures, the Investors’ warrants and
the placement agent’s warrants as derivative liabilities.





During
the three months ended January 31, 2008, accrued interest on the 2006 Debentures
of $23,133 was converted into 1,295,944 shares of common stock. During the three
months ended January 31, 2007, $3,931,000 of principal amount of 2006 Debentures
plus accrued interest of $136,911 were converted into 56,376,123 shares of
common stock.




As of
January 31, 2008, the conversion option liability of $2,571,429 had been reduced
to $279,429 as a result of conversions of the 2006 Debentures.  Since
the issuance of the 2006 Debentures, an aggregate of $2,292,000 has been
recorded as a reclassification to stockholders’ equity.





Included
in interest expense for the three months ended January 31, 2008 and 2007 is
$82,057 and $2,750,588, respectively, related to the amortization of the debt
discount on these debentures.




The 2006
Debentures are summarized below as of January 31, 2008:




Outstanding
              Principal
              Amount
            
            
            Unamortized
              Debt
              Discount
            
            
            Net
      Carrying
              ValueCurrent
            
            $
            652,000
            
            
            $
            34,786
            
            
            $
            617,214







2005
Debentures




On May
26, 2005, the Company completed a private placement to certain individual and
institutional investors of $3,500,000 in principal amount of its three-year 7%
Senior Secured Convertible Debentures (the “2005 Debentures”). All principal is
due and payable on May 26, 2008. The 2005 Debentures are convertible into shares
of common stock at a conversion price equal to the lower of (x) 70% of the 5 day
volume weighted average price of the Company’s common stock immediately prior to
conversion or (y) if the Company entered into certain financing transactions
subsequent to the closing date, the lowest purchase price or conversion price
applicable to that transaction.




16




RIM
SEMICONDUCTOR COMPANY AND SUBSIDIARIES
 (A
Development Stage Company Commencing November 1, 2007)
  NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 (Unaudited)





NOTE
5 - CONVERTIBLE DEBENTURES (CONTINUED)




2005 Debentures
(Continued)




Interest
on the 2005 Debentures accrues at the rate of 7% per annum and is payable on a
bi-annual basis, commencing December 31, 2005, or on conversion and may be paid,
at the option of the Company, either in cash or in shares of common stock. The
Company may prepay the amounts outstanding on the 2005 Debentures by giving
advance notice and paying an amount equal to 120% of the sum of (x) the
principal being prepaid plus (y) the accrued interest thereon.




In
connection with the issuance of the 2005 Debentures, the Company issued to the
purchasers thereof warrants (the “Investor Warrants”) to purchase 33,936,650
shares of common stock valued at $2,000,000 on the issuance date, with warrants
for 11,312,220 shares being exercisable through the last day of the month in
which the first anniversary of the effective date of the Registration Statement
occurs (August 31, 2006) at a per share exercise price of $0.1547 and warrants
for 22,624,430 shares being exercisable through the last day of the month in
which the third anniversary of the effective date of the Registration Statement
occurs (August 31, 2008) at a per share exercise price of $0.3094.




In
connection with the issuance of the 2005 Debentures, the Company also issued to
a placement agent warrants to purchase up to 5,656,108 shares of Common Stock
(the “Compensation Warrants”) valued at $319,066 on the issuance date. This
amount was recorded as a deferred financing cost and is being charged to
interest expense over the term of the 2005 Debentures. All of the Compensation
Warrants were exercised in February 2006.




Holders
of the Investor Warrants are entitled to exercise those warrants on a cashless
basis following the first anniversary of issuance if the Registration Statement
is not in effect at the time of exercise.




The gross
proceeds of $3,500,000 were recorded net of a debt discount of $3,500,000. The
debt discount consisted of a $2,000,000 value related to the Investor Warrants
and a $1,500,000 value related to the embedded conversion feature in accordance
with SFAS No. 133 and EITF Issue No. 00-19. Due to the possibility that an
indeterminate number of shares could be issued upon conversion of the 2005
Debentures, the Company separately values and accounts for the embedded
conversion feature related to the 2005 Debentures and the Investor Warrants as
derivative liabilities.




During
the three months ended January 31, 2007, $1,284 of principal amount of 2005
Debentures plus accrued interest of $37 were converted into 18,321 shares of
common stock. As of
January 31, 2008, the conversion option liability of $1,500,000 had been reduced
to $1,834 as a result of conversions of the 2005 Debentures.  Since
the issuance of the 2005 Debentures, an aggregate of $1,498,166 has been
recorded as a reclassification to stockholders’ equity.





Included
in interest expense for the three months ended January 31, 2008 and 2007 is $356
and $1,027, respectively, related to the amortization of the debt discount
related to these debentures.




The 2005
Debentures are summarized below as of January 31, 2008:




Outstanding
              Principal
              Amount
            
            
            Unamortized
              Debt
      Discount
            
            
            Net
      Carrying
              ValueCurrent
            
            $
            4,280
            
            
            $
            468
            
            
            $
            3,812







7%
Debentures




In
December 2003, April 2004 and May 2004, the Company completed a private
placement to certain private and institutional investors of $1,350,000 in
principal amount of its three-year 7% Convertible Debentures (the “7%
Debentures”).





17






RIM
SEMICONDUCTOR COMPANY AND SUBSIDIARIES
 (A
Development Stage Company Commencing November 1, 2007)
  NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 (Unaudited)




NOTE
5 - CONVERTIBLE DEBENTURES (CONTINUED)




7% Debentures
(Continued)




Under the
agreements with the purchasers of the 7% Debentures issued in December 2003, the
Company is obligated to pay to the Debenture holders liquidated damages
associated with the late filing of the Registration Statement and the missed
Registration Statement required effective date of March 30, 2004. Liquidated
damages are equal to (x) 2% of the principal amount of all the Debentures during
the first 30-day period following late filing or effectiveness and (y) 3% of the
principal amount of all Debentures for each subsequent 30-day period (or part
thereof). These liquidated damages aggregated to $160,000. At the Company’s
option, the Debenture holders are entitled to be paid such amount in cash or
shares of Common Stock at a per share rate equal to the effective conversion
price of the Debentures, which is currently $0.0155. Accrued liquidated damages
as of January 31, 2008 was $37,550. During
the three months ended January 31, 2008 and 2007, no principal or accrued
interest was converted into shares of common stock.




Included
in interest expense for the three months ended January 31, 2008 and 2007 is $0
and $758, respectively, related to the amortization of the debt discount on
these debentures.




The 7%
Debentures are summarized below as of January 31, 2008:




Outstanding
              Principal
              Amount
            
            
            Unamortized
              Debt
      Discount
            
            
            Net
      Carrying
              ValueCurrent
            
            $
            75,000
            
            
            $
            --
            
            
            $
            75,000







The
remaining 7% Debentures outstanding at January 31, 2008, originally issued in
May 2004, were due and payable in May 2007.




NOTE
6 - NOTES PAYABLE




In July
2007, the Company entered into a bridge loan agreement with two institutional
investors pursuant to which the institutional investors loaned the Company a
total of $1,000,000. Pursuant to the bridge loan agreement, the Company issued
to each institutional investor a secured promissory note in the principal amount
of $550,000, for an aggregate of $1,100,000 (each, a “Note”), representing an
original issue discount of 10%. The difference of $100,000 between the gross
proceeds and amount due at maturity is shown as a debt discount that is
amortized as interest expense over the life of the loan. The Company received
net proceeds of approximately $895,000 after the payment of transaction related
fees and expenses of $105,000. The transaction related fees were recorded as
deferred financing costs.





In
connection with the bridge loan agreement, the Company also issued to the
institutional investors an aggregate of 10,000,000 unregistered shares of the
Company’s common stock with a relative fair value at the issuance date of
$700,000. The relative fair value of the unregistered shares of common stock is
shown as a debt discount that is amortized as interest expense over the life of
the loan. Amortization of debt discount on this bridge loan was $293,333 for the
three months ended January 31, 2008.





All
outstanding principal and interest on the Notes was repaid out of the proceeds
of the 2007 Debentures (see Note 5).





To secure
the Company’s obligations under the bridge loan agreement, the Company granted a
security interest in substantially all of its assets, including without
limitation, its intellectual property, in favor of the institutional investors
under the terms and conditions of a security agreement dated as of the date of
the bridge loan agreement. The security interest terminated upon repayment of
the Notes in December 2007.





18




RIM
SEMICONDUCTOR COMPANY AND SUBSIDIARIES
 (A
Development Stage Company Commencing November 1, 2007)
  NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 (Unaudited)







NOTE
6 - NOTES PAYABLE (CONTINUED)




In May
2007, the Company entered into a promissory note resulting in gross proceeds of
$400,000. The promissory note was originally due and payable on August 22, 2007
and bears interest at the rate of 10% per annum. The maturity date of this
promissory note was extended to October 31, 2007. Because the promissory note
was not repaid by the maturity date, the unpaid portion of the promissory note
is convertible, in whole or in part, into shares of the Company’s common stock
at a conversion price of $0.08 per share. During the three months ended January
31, 2008, the Company repaid principal of $150,000 and accrued interest of
$26,904. On March 20, 2008, the Company entered into an agreement with the note
holder. Pursuant to the agreement the maturity date of the note was extended to
July 31, 2008 and the note holder waived any default that may have existed. In
addition the Company agreed to use its best efforts to make minimum monthly
principal and interest payments of $50,000 no later than the last calendar day
of each month prior to the extended maturity date of July 31, 2008.





NOTE
7 - STOCKHOLDERS’ DEFICIENCY




Common
Stock




During
the three months ended January 31, 2008, the Company:





·
            issued
      6,000,000 shares of restricted common stock in exchange for services
      valued at $126,000;




·
            issued
      1,295,944 shares of common stock in payment of accrued interest of $23,133
      on the 2006 Debentures;




·
            issued
      400,000 shares of restricted common stock in exchange for cash proceeds of
      $20,000; and




·
            issued
      60,000,000 shares of common stock valued at $1,740,000 upon acquisition of
      BDSI.




Options
Granted




During
the three months ended January 31, 2007, the following options were
granted:




·
            Options
      to purchase 500,000 shares of common stock were granted to three employees
      under the 2006 Plan. These options were valued at $12,581 and have a ten
      year term, an exercise price of $0.027 per share, and vest over a period
      of approximately three years through January
  2011;




·
            Options
      to purchase 250,000 shares of common stock were granted to an employee
      under the 2006 Plan. These options were valued at $5,628 and have a ten
      year term, an exercise price of $0.021 per share, and vest over a period
      of approximately three years through December 2010;
  and




·
            Options
      to purchase 2,000,000 shares of common stock were granted to a director
      under the 2006 Plan.  These options were valued at $57,827 and
      have a ten year term, an exercise price of $0.031 per share, and vest over
      a period of approximately three years through January
  2011.




The
weighted-average estimated fair value of stock options granted during the three
months ended January 31, 2008 and 2007 was $0.03 and $0.09 per share,
respectively, using the Black-Scholes model with the following
assumptions:




January
      31,
              2008
            
            January
      31,
              2007Expected
      dividends
            None
            
            
            NoneExpected
      volatility
            110
            %
            
            116
            %Risk-free
      interest rate
            3.88
            %
            
            4.65
            %Expected
      life
            10
      years
            
            
            10
      years





19




RIM
SEMICONDUCTOR COMPANY AND SUBSIDIARIES
 (A
Development Stage Company Commencing November 1, 2007)
  NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 (Unaudited)







NOTE
7 - STOCKHOLDERS’ DEFICIENCY (CONTINUED)




Options
Forfeited





During
the three months ended January 31, 2008, 2,021,431 options to employees were
forfeited under the terms of their respective plans.




Warrants




In
November 2007, the Company granted warrants to purchase 400,000 shares of common
stock at an exercise price of $0.15 per share to an investor in connection with
the issuance of restricted common stock.  The fair value of the stock
warrants estimated on the date of grant using the Black-Scholes model is $0.025
per share or $9,947.





In
December 2007, the Company granted warrants to purchase 175,839,399 shares of
common stock at an exercise price of $0.10 per share to investors and the Finder
in connection with the issuance of the 2007 Debentures (see Note
5).  The fair value of the stock warrants estimated on the date of
grant using the Black-Scholes model is $0.017 per share or
$2,983,665.





Net Loss Per
Share




Securities
that could potentially dilute basic earnings per share (EPS), in the future,
that were not included in the computation of diluted EPS because to do so would
have been anti-dilutive for the periods presented, consist of the
following:




January
      31,
              2008
            
            January
      31,
              2007Warrants
      to purchase common stock
            
            
            302,852,336
            
            114,537,6042007
      Debentures and accrued interest (1)
            
            
            161,020,874
            
            -2006
      Debentures and accrued interest (2)
            
            
            30,410,212
            
            8,272,493Options
      to purchase common stock
            
            
            40,344,554
            
            39,193,750Convertible
      notes payable and accrued interest
            
            
            4,574,276
            
            1,571,0497%
      Debentures and accrued interest
            
            
            648,009
            
            613,0132005
      Debentures and accrued interest (3)
            
            
            425,859
            
            99,989Total
            
            
            540,276,120
            
            164,287,898




(1)
            Based
      on a ten average common stock price discounted by 25% as of January 31,
      2008 of $0.0224.




(2)
            Based
      on a twenty day volume weighted average common stock price discounted by
      30% as of January 31, 2008 and 2007 of $0.0216 and $0.0805,
      respectively.




(3)
            Based
      on a five day volume weighted average common stock price discounted by 30%
      as of January 31, 2008 and 2007 of $0.0195 and $0.0799,
      respectively.




In the
event all potentially dilutive securities are converted or exercised, the
Company’s currently authorized 900,000,000 shares of common stock may be
insufficient to meet the Company’s obligations.




Substantial
issuances after January 31, 2008 through March 24, 2008:





Common
      stock issued to consultants
              
              
              15,000,000Common
      stock issued in exchange for cash proceeds
              
              
              2,450,000Common
      stock issued upon conversion of convertible debentures
              
              
              4,051,831Common
      stock issued for acquisition of Multi-Carrier Communications,
      Inc.
              
              
              150,000,000


20






RIM
SEMICONDUCTOR COMPANY AND SUBSIDIARIES
 (A
Development Stage Company Commencing November 1, 2007)
  NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 (Unaudited)




NOTE
8 - COMMITMENTS, CONTINGENCIES AND OTHER MATTERS




Concentration of Credit
Risk




The
Company maintains cash balances in one financial institution. The balance is
insured by the Federal Deposit Insurance Corporation up to $100,000 per
institution.  From time to time, the Company’s balances may exceed
these limits. As of January 31, 2008, there were no uninsured balances. The
Company believes it is not exposed to any significant credit risk for
cash.





Demand
Letter





On
January 14, 2008, the Company received a demand letter on behalf of an employee
of a non-profit corporation. The employee contends that he was jointly employed
by the non-profit corporation and the Company, and that the Company is liable to
him for unpaid wages of approximately $85,000 and additional damages. The
Company disputes these claims. The Company has a note receivable from the
non-profit corporation in the principal amount of $50,000.





NOTE
9 - ACCOUNTING FOR THE UNCERTAINTY IN INCOME TAXES




In July
2006, the Financial Accounting Standards Board (FASB) issued FASB Interpretation
No. 48, “Accounting for Uncertainty in Income Taxes — an interpretation of FASB
Statement No. 109” (“FIN 48”), which clarifies the accounting and disclosure for
uncertainty in tax positions, as defined.   FIN 48 seeks to
reduce the diversity in practice associated with certain aspects of the
recognition and measurement related to accounting for income taxes.  This
interpretation is effective for fiscal years beginning after December 15, 2006
and prescribes a recognition threshold and measurement attribute for the
financial statement recognition and measurement of a tax position taken, or
expected to be taken, in a tax return, and provides guidance on derecognition,
classification, interest and penalties, accounting in interim periods,
disclosures and transition.  As a result of the implementation of FIN 48,
the Company recorded no adjustment for unrecognized income tax benefits. 
At the adoption date of November 1, 2007 and also at January 31, 2008, the
Company had no unrecognized tax benefits.  The Company classifies any
interest and penalties related to income taxes as components of income tax
expense.




The tax
years 2003 to 2006 remain open to examination by the major taxing jurisdictions
to which we are subject.  Preceding years also remain open to examination
by U.S. federal and state revenue authorities to the extent of future
utilization of net operating losses (NOLs) generated in each preceding
year.




Utilization
of the NOL may be subject to a substantial annual limitation due to ownership
change limitations that have occurred previously or that could occur in the
future as provided by Section 382 of the Internal Revenue Code of 1986 and
similar state provisions.  These ownership changes may limit the amount of
NOL that can be utilized annually to offset future taxable income and tax. 
In general, an ownership change, as defined in Section 382, results from
transactions which increase the ownership of certain 5% or greater shareholders
or public groups in the stock of a corporation by more than 50 percentage points
over a three-year period.  Since the Company’s formation, the Company has
raised capital through the issuance of capital stock and convertible debenture
on several occasions which, combined with the purchasing shareholders’
subsequent disposition of those shares, may have resulted in a change of
control, as defined in Section 382, or could result in a change of control in
the future upon subsequent disposition.  The Company’s income tax
return reflects the enitre NOL without any limitation per Section 382.




The
Company has completed a preliminary evaluation of its income tax return position
in conjunction with its adoption of FIN 48.  Based upon this analysis, the
Company believes that it is more likely than not that a change of control under
Section 382 has occurred.  As a result, effective November 1,
2007, the Company reduced the carrying amount of its Deferred Tax Asset and
related valuation allowance from approximately $25 million to $8.3 million for
the tax effect of reducing its NOL from approximately $54.5 million to $20.7
million for financial reporting purposes.




The
Company has not completed its formal evaluation of its Section 382
matters.  The effect of this change did not have any effect on the carrying
value of the deferred tax asset which is fully offset by a valuation
allowance.




21






RIM
SEMICONDUCTOR COMPANY AND SUBSIDIARIES
 (A
Development Stage Company Commencing November 1, 2007)
  NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 (Unaudited)




NOTE
10 – SUBSEQUENT EVENTS




Equity
Transactions





In
February 2008:





(i)
              1,950,000
      shares of restricted common stock were issued in exchange for cash
      proceeds of $78,000; and





(ii)
              2,098,709
      shares of common stock were issued upon conversion of 7% Debentures with a
      principal amount of $25,000 and interest of $7,530;
  and





(iii)
              15,000,000
      shares of common stock valued at $345,000 were issued to a
      consultant.





In March
2008:





(i)
              1,953,122
      shares of common stock were issued upon conversion of 2006 Debentures with
      a principal amount of $27,000 and interest of
  $2,445;





(ii)
              500,000
      shares of restricted common stock were issued in exchange for cash
      proceeds of $20,000; and





(iii)
              150,000,000
      shares of restricted common stock were issued to UTEK Corporation in
      connection with the acquisition of Multi-Carrier Communications,
      Inc.





Amendment to 2006
Debentures




Effective
March 17, 2008, the Company entered into amendment agreements with two Investors
holding 2006 Debentures with an aggregate principal amount of $200,000 (the
“March 17 Amendments”). The March 17 Amendments amend the terms of the two
subject 2006 Debentures to:  (1) extend the maturity date until
September 17, 2008, (2) obligate the Company to pay all interest accrued on such
debentures as of June 30, 2008 in cash; (3) extend the payment date for interest
that will have accrued on such debentures as of June 30, 2008 until September
17, 2008; and (4) increase the outstanding amount of unconverted principal on
such debentures by 20%, however, the 20% principal premium and interest accruing
thereon must be paid in cash and may not be converted by such Investors into
Company common stock. The March 17 Amendments also included waivers of any event
of default that may have occurred under the terms of such 2006 Debentures prior
to the date thereof.




Effective
March 19, 2008, the Company entered into amendment agreements with the other two
Investors holding unconverted 2006 Debentures with an aggregate principal amount
of $425,000 (the “March 19 Amendments”). In exchange for aggregate cash
consideration of  $23,181, the March 19 Amendments amend the terms of
the two subject 2006 Debentures to extend the maturity date on such debentures
until April 10, 2008. The March 19 Amendments also included waivers of any event
of default relating to failure to pay amounts due that may have occurred under
the terms of such 2006 Debentures prior to the date thereof.




Amendment to Promissory
Note




On March
20, 2008, the Company entered into a written letter agreement extending to July
31, 2008 the maturity date of a promissory note originally due August 22, 2007,
and subsequently extended to October 31, 2007 (see Note 5).  Prior to
this time the Company had a verbal agreement with the Lender to extend the
maturity date.


22




RIM
SEMICONDUCTOR COMPANY AND SUBSIDIARIES
 (A
Development Stage Company Commencing November 1, 2007)
  NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 (Unaudited)








NOTE
10 – SUBSEQUENT EVENTS (CONTINUED)


Acquisition of Multi-Carrier
Communciations, Inc.




On March
24, 2008, the Company completed its acquisition of all of the issued and
outstanding capital stock of Multi-Carrier Communications, Inc., (“MCCI”), a
subsidiary of UTEK Corporation (“UTEK”) in exchange for 150,000,000 shares of
unregistered common stock of the Company, which are subject to certain
anti-dilution adjustments.  As a result of the transaction, MCCI
became a wholly-owned subsidiary of the Company. Upon closing of the acquisition
transaction, the assets of MCCI included $300,000 in cash and a worldwide
exclusive license to certain technology owned by The University of Queensland
& The University of Sydney and UNIQUEST Pty Limited (“Uniquest”). The technology relates to multiple
advanced algorithms for the transmission of digital data across metallic media,
such as copper wires. Under the License Agreement (the “UniquestLicense Agreement”) relating to such
technology, MCCI is obligated to pay Uniquest an up-front fee and a patent
reimbursement fee to cover patents costs relating to the technology. MCCI made
those payments to Uniquest before the Company acquiredMCCI. TheUniquestLicense Agreement also provides that
MCCI shall payroyalties based on achievement of certain sales levels for
products utilizing the technology. Royalty obligations of MCCI are subject to
certain minimum amounts. Unless earlier terminated by a party pursuant to the
terms of the Uniquest License Agreement, the license expires upon the day before
the date of expiration of all of the patent rights underlying the technology or
20 years from the date of the Uniquest License Agreement for unpatented
technology. The Uniquest License Agreement also permits MCCI to sublicense the
technology with the consent of Uniquest and obligates MCCI to make royalty
payments to Uniquest based on a percentage of payments received by MCCI from
sublicensees. MCCI and Uniquest have also entered into a Research Agreement
pursuant to which MCCI shall fund and obtain certain rights relating to the
licensed technology developed through a research program to be implemented by
Uniquest.  MCCI funded this research before the Company acquired
MCCI.




Employment Agreement with
Ray Willenberg, Jr.




On March
20, 2008, the Company entered into an employment agreement with Mr. Willenberg
pursuant to which he continues to serve as the Company’s Executive Vice
President.  The agreement terminates on March 20, 2009, and provides for
Mr. Willenberg to receive a base salary of $20,833.33  per month,
subject to the earlier of (i) Mr. Willenberg’s death or Disability (as defined
in the agreement); (ii) the termination of the agreement by either party without
cause on written notice; or (iii) termination of the agreement by the Company
for Cause (as defined in the agreement).  The agreement also provides
that the Company will pay Mr. Willenberg a bonus equal to 2% of the total amount
paid to the Company by Top Secret Productions in respect of the film “Step Into
Liquid.”




During
Mr. Willenberg’s employment, the agreement provides for his nomination to our
Board of Directors and, if elected, his appointment as Chairman of the Board of
Directors.  Mr. Willenberg would resign from the Board upon his
termination of employment.




Under his
employment agreement, the Company also granted Mr. Willenberg a right of first
refusal to purchase the Company’s equity interest in Top Secret Productions, LLC
in the case of a bona fide third-party offer to purchase that interest or the
Company’s determination to offer that interest for sale at a specified
price.


23







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




We urge
you to read the following discussion in conjunction with our condensed
consolidated financial statements and the notes thereto included elsewhere
herein.




CAUTION
REGARDING FORWARD-LOOKING STATEMENTS




Our
prospects are subject to uncertainties and risks. In this Quarterly Report on
Form 10-QSB, we make forward-looking statements in this Item 2 and elsewhere
that also involve substantial uncertainties and risks. These forward-looking
statements are based upon our current expectations, estimates and projections
about our business and our industry, and reflect our beliefs and assumptions
based upon information available to us at the date of this report. In some
cases, you can identify these statements by words such as “if,” “may,” “might,”
“will, “should,” “expects,” “plans,” “anticipates,” “believes,” “estimates,”
“predicts,” “potential,” “continue,” and other similar terms. These
forward-looking statements include, among other things, projections of our
future financial performance and our anticipated growth, descriptions of our
strategies, our product and market development plans, the trends we anticipate
in our business and the markets in which we operate, and the competitive nature
and anticipated growth of those markets.




We
caution readers that forward-looking statements are predictions based on our
current expectations about future events. These forward-looking statements are
not guarantees of future performance and are subject to risks, uncertainties and
assumptions that are difficult to predict. Our actual results, performance or
achievements could differ materially from those expressed or implied by the
forward-looking statements as a result of a number of factors, including but not
limited to the risks and uncertainties discussed in our other filings with the
SEC. We undertake no obligation to revise or update any forward-looking
statement for any reason.




OVERVIEW




Rim
Semiconductor Company (the “Company,” “we,” “our,” or “us”), a development stage
company, has developed advanced transmission technology products to enable data
to be transmitted across copper telephone wire at speeds and over distances that
exceed those offered by leading DSL technology providers.  In
September 2005, the Company changed its name from New Visual Corporation to Rim
Semiconductor Company. Our common stock trades on the OTC Bulletin Board
under the symbol RSMI. Our corporate headquarters are located at 305 NE
102nd Avenue, Portland, Oregon 97220 and our telephone number is
(503) 257-6700.




Our first
chipset in a planned family of transport processors, the Cu5001 digital signal
processor, is commercially available in FPGA form.  We are presently
working on the ASSP version of the semiconductor. We market this technology to
leading equipment makers in the telecommunications industry. Our products are
designed to substantially increase the capacity of existing copper telephone
networks, allowing telephone companies, office building managers, and enterprise
network operators to provide enhanced and secure video, data and voice services
over the existing copper telecommunications infrastructure.




We expect
that system-level products that use our technology will have a significant
advantage over existing system-level products that use existing broadband
technologies, such as digital subscriber line (DSL), because such products will
transmit data faster, over longer distances and at a higher quality. We expect
products using our technology will offer numerous advantages to the network
operators that deploy them, including the ability to support new services, the
ability to offer existing and new services to previously unreachable locations
in their network, reduction in total cost of ownership, security and
reliability.




In
December 2007, we discontinued the operations of our entertainment
segment.  As we have not generated revenues from our semiconductor
segment, we re-entered the development stage as defined in Statement of
Financial Accounting Standards (“SFAS”) No. 7, “Accounting and Reporting for
Development Stage Companies” (“SFAS No. 7”).  As a result of the
discontinuation of the entertainment segment, the semiconductor segment is our
only reporting segment.




On
January 29, 2008, we completed the acquisition of all of the issued and
outstanding capital stock of BDSI, a subsidiary of UTEK Corporation (“UTEK”) in
exchange for 60,000,000 shares of unregistered common stock of the Company,
valued at $1,740,000, which are subject to certain anti-dilution
adjustments.  As a result of the transaction, BDSI became a
wholly-owned subsidiary of the Company.  BDSI was incorporated on
December 13, 2007 and its historical operations prior to acquisition were not
significant.  We haveaccounted for this acquisition under the purchase method of
accounting.Upon closing of the acquisition transaction, BDSI
had $400,000 of cash and a worldwide exclusive license to patented technology
developed by researchers at the University of Illinois.  The remaining
purchase price of $1,340,000 was allocated to the license.  As we
recorded an impairment of our existing technology licenses and capitalized
software development costs during the year ended October 31, 2007 and are
currently in the development stage, management determined it was unable to
currently demonstrate alternative future uses for the license and support the
carrying amount of the license based upon estimated future cash
flows.  Accordingly, the
$1,340,000 was charged to operations, under the caption “Acquiredin-process research and
development” during the
three months ended January 31, 2008.




24


The patent relates to an algorithm
designed to enhance power allocation in telecommunications systems that use
multicarrier modulation protocol.IPSL, ADSL, VDSL and DSL systems are
all examples of multicarrier modulation protocols. The algorithm serves to improve the
achievable data rate or the signal-to-noise ratio, reducing errors in the
transmission. Under the exclusive license agreement relating to such technology,
BDSI is obligated to pay theUniversity of Illinois royalties based on
achievement of certain sales levels for products utilizing the technology.
Unless earlier terminated by a party pursuant to the terms of the license
agreement, the license expires upon the expiration or termination of all of the
University of Illinois patent rights underlying the technology. The license
agreement also permits BDSI to sublicense the technology andobligates BDSI to make royalty payments
to theUniversityofIllinoisbased on a percentage of payments
received by BDSI from sublicensees.




On March
24, 2008, we completed the acquisition of all of the issued and outstanding
capital stock of Multi-Carrier Communications, Inc., (“MCCI”), a subsidiary of
UTEK Corporation (“UTEK”) in exchange for 150,000,000 shares of unregistered
common stock of the Company, which are subject to certain anti-dilution
adjustments.  As a result of the transaction, MCCI became a
wholly-owned subsidiary of the Company. Upon closing of the acquisition
transaction, the assets of MCCI included $300,000 in cash and a worldwide
exclusive license to certain technology owned by The University of Queensland
& The University of Sydney and UNIQUEST Pty Limited (“Uniquest”). The technology relates to multiple
advanced algorithms for the transmission of digital data across metallic media,
such as copper wires. Under the License Agreement (the “UniquestLicense Agreement”) relating to such
technology, MCCI is obligated to pay Uniquest an up-front fee and a patent
reimbursement fee to cover patents costs relating to the technology. MCCI made
those paymentsto Uniquest before we acquired MCCI.
TheUniquestLicense
Agreement also provides that MCCI shall payroyalties based on
achievement of certain sales levels for products utilizing the technology.
Royalty obligations of MCCI are subject to certain minimum amounts. Unless
earlier terminated by a party pursuant to the terms of the Uniquest License
Agreement, the license expires upon the day before the date of expiration of all
of the patent rights underlying the technology or 20 years from the date of the
Uniquest License Agreement for unpatented technology. The Uniquest License
Agreement also permits MCCI to sublicense the technology with the consent of
Uniquest and obligates MCCI to make royalty payments to Uniquest based on a
percentage of payments received by MCCI from sublicensees. MCCI and Uniquest
have also entered into a Research Agreement pursuant to which MCCI shall fund
and obtain certain rights relating to the licensed technology developed through
a research program to be implemented by Uniquest. MCCI funded this research
before we acquired MCCI.




CRITICAL
ACCOUNTING POLICIES




The
preparation of our condensed consolidated financial statements in conformity
with accounting principles generally accepted in the United States of America
requires us to make estimates and judgments that affect the reported amounts of
assets, liabilities, revenues and expenses, and related disclosure of contingent
assets and liabilities. Our estimates are based on historical experience, other
information that is currently available to us and various other assumptions that
we believe to be reasonable under the circumstances. Actual results may differ
from these estimates under different assumptions or conditions and the variances
could be material.




Our
critical accounting policies are those that affect our condensed consolidated
financial statements materially and involve difficult, subjective or complex
judgments by management. We have identified the following critical accounting
policies that affect the more significant judgments and estimates used in the
preparation of our condensed consolidated financial statements.




Derivative
Financial Instruments




In
connection with the issuance of certain convertible debentures, the terms of the
debentures included an embedded conversion feature that provided for a
conversion of the debentures into shares of our common stock at a rate that was
determined to be variable. We determined that the conversion feature was an
embedded derivative instrument and that the conversion option was an embedded
put option pursuant to Statement of Financial Accounting Standards (“SFAS”) No.
133, “Accounting for Derivative Instruments and Hedging Activities,” as amended,
and Emerging Issues Task Force (“EITF”) Issue No. 00-19, “Accounting for
Derivative Financial Instruments Indexed To, and Potentially Settled In, a
Company’s Own Stock.”




25


The
accounting treatment of derivative financial instruments requires that we record
the debentures and related warrants at their fair values as of the inception
date of the convertible debenture agreements and at fair value as of each
subsequent balance sheet date.  In addition, under the provisions of EITF
Issue No. 00-19, as a result of entering into the convertible debenture
agreements, we were required to classify all other non-employee warrants and
options as derivative liabilities and record them at their fair values at each
balance sheet date. Any change in fair value was recorded as non-operating,
non-cash income or expense at each balance sheet date. If the fair value of the
derivatives was higher at the subsequent balance sheet date, we recorded a
non-operating, non-cash charge.  If the fair value of the derivatives was
lower at the subsequent balance sheet date, we recorded non-operating, non-cash
income. We reassess the classification at each balance sheet date. If the
classification required under EITF Issue No. 00-19 changes as a result of events
during the period, the contract should be reclassified as of the date of the
event that caused the reclassification.




We
account for embedded conversion options that no longer meets the conditions of
EITF Issue No. 00-19 to be classified as a liability under EITF Issue No. 06-7,
“Issuer’s Accounting for a Previously Bifurcated Conversion Option in a
Convertible Debt Instrument When the Conversion Option No Longer Meets the
Bifurcation Criteria in FASB Statement No. 133, Accounting for Derivative
Instruments and Hedging Activities” (“EITF Issue No. 06-7”). Under EITF Issue
No. 06-7, when an embedded conversion option previously accounted for as a
derivative under SFAS 133 no longer meets the bifurcation criteria, we
reclassify the amount of the embedded conversion option to stockholders’
deficiency.




Registration
Payment Arrangements




We
account for registration payment arrangements in accordance with FASB Staff
Position (FSP) No. EITF 00-19-2, “Accounting for Registration Payment
Arrangements” (“FSP EITF 00-19-2”), which specifies that contingent obligations
to make future payments or otherwise transfer consideration under a registration
payment arrangement, should be separately recognized and measured in accordance
with SFAS No. 5, “Accounting for Contingencies”.  SFAS No. 5 requires
loss contingencies to be accrued and expensed if they are probable and
reasonably estimable.  As of January 31, 2008, we have accrued
$181,003 within accounts payable and accrued expenses for liquidated damages in
connection with registration payment arrangements.




Stock-Based
Compensation




We report
stock based compensation under accounting guidance provided by Statement of
Financial Accounting Standards No. 123 (revised 2004), “Share-Based Payment”
(“SFAS 123(R)”), which requires the measurement and recognition of compensation
expense for all share-based payment awards made to employees and directors,
including stock options, based on estimated fair values.




SFAS
123(R) requires companies to estimate the fair value of share-based payment
awards on the date of grant using an option-pricing model. The value of the
portion of the award that is ultimately expected to vest is recognized as
expense over the requisite service periods in our consolidated statement of
operations. We have continued to attribute the value of stock-based compensation
to expense on the straight-line single option method.  Stock-based
compensation expense recognized under SFAS 123(R) related to employee stock
options granted during the three months ended January 31, 2008 and 2007 was
$99,614 and $110,765, respectively.




As
stock-based compensation expense recognized in the consolidated statement of
operations for the three months ended January 31, 2008 is based on awards
ultimately expected to vest, it has been reduced for estimated forfeitures. SFAS
123(R) requires forfeitures to be estimated at the time of grant and revised, if
necessary, in subsequent periods if actual forfeitures differ from those
estimates.




Research
and Development




Research
and development expenses relate to the design and development of advanced
transmission technology products. Prior to establishing technological
feasibility, software development costs are expensed to research and development
costs and to cost of sales subsequent to confirmation of technological
feasibility. Internal development costs are capitalized to software development
costs once technological feasibility is established. Technological feasibility
is evaluated on a product-by-product basis. Research and development expenses
generally consist of salaries, related expenses for engineering personnel and
third-party development costs incurred. Amounts allocated to acquired in-process
research and development costs, from business combinations, are charged to
operations at the consummation of the acquisition.




We
outsourced all of the development activities with respect to our products to
independent third party developers until April 2006, when we hired our first
engineer. During the fourth fiscal quarter of 2006, we hired a Vice President to
oversee the development and marketing of our
semiconductors.  Together, our outsourced and employed engineer head
count on January 31, 2008 totaled ten full-time equivalent
personnel.  From time to time we outsource some of the development
activities with respect to our products to independent third party
developers.  During the three months ended January 31, 2008 and 2007,
we expended $419,412 and $647,674, respectively, for research and development of
our semiconductor technology.




26




Technology
Licenses




We have
entered into two technology license agreements that may impact our future
results of operations. Royalty payments, if any, under each license would be
reflected in our consolidated statements of operations as a component of cost of
sales.




In April
2002, we entered into a development and license agreement with Adaptive
Networks, Inc. (“Adaptive”), to acquire a worldwide, perpetual license to
Adaptive’s technology, intellectual property and patent portfolio. We also
jointly developed technology with Adaptive that enhanced the licensed
technology.  From April 2002 until August 2007, the licensed
technology and enhancements provided the core technology for our semiconductor
products.  Our CupriaTM
semiconductor platform no longer utilizes the technology licensed from Adaptive.
The board of directors believes that the Adaptive licenses and intellectual
property may be used in future products that we are planning.




In
consideration of the development services provided and the licenses granted to
us by Adaptive, we paid Adaptive an aggregate of $5,751,000 between 2002 and
2004 consisting of cash and our assumption of certain Adaptive liabilities. In
addition to the above payments, Adaptive is entitled to a percentage of any net
sales of products sold by us and any license revenue we receive from the
licensed and co-owned technologies less the first $5,000,000 that would
otherwise be payable to them under this royalty arrangement.




In
February 2006, we obtained a license to include HelloSoft, Inc.’s (“HelloSoft”)
integrated VoIP software suite in the CupriaTM family
of transport processors. We believe the inclusion of VoIP features in our
products will eliminate VoIP dedicated components currently needed in modems and
thereby lower their production costs by more than 20%. In consideration of this
license, we have paid HelloSoft a license fee and will pay certain royalties
based on our sale of products that include the licensed technology.




RESULTS
OF OPERATIONS




COMPARISON
OF THE THREE MONTHS ENDED JANUARY 31, 2008 AND THE THREE MONTHS ENDED JANUARY
31, 2007




REVENUES.  
No revenues were recorded in connection with our semiconductor business during
the three months ended January 31, 2008 and 2007.




OPERATING
EXPENSES.  Operating expenses primarily include acquired in-process
research and development, the amortization of technology license and capitalized
software development fees, research and development expenses in connection with
the semiconductor business, and selling, general and administrative
expenses.




Total
operating expenses increased 42% or $981,044 to $3,328,496 for the three months
ended January 31, 2008 from $2,347,452 for the three months ended January 31,
2007.  This increase in total operating expenses for the three months
ended January 31, 2008 was due primarily to the acquired in-process research and
development in connection with the acquisition of BDSI and an increase in
selling, general and administrative expenses, offset by decreases in the
amortization of technology licenses and capitalized software development fees
and research and development expenses.




There was
no amortization of technology licenses and capitalized software development fees
for the three months ended January 31, 2008 as compared to $260,303 for the
three months ended January 31, 2007.  The decrease was due to the
Company recognizing a loss on the impairment of technology licenses and
capitalized software development costs during the year ended October 31, 2007
that reduced the carrying value to $0.




Research
and development expenses decreased by 35% or $228,262 to $419,412 for the three
months ended January 31, 2008 from $647,674 for the three months ended January
31, 2007.  This decrease is primarily due to the decrease in stock
based compensation offset primarily by increases in salaries and
wages.  Stock based compensation recognized for research and
development for the three months ended January 31, 2007 was $420,410, the
majority of which was accounted for by a share-based payment valued at $395,000
to eSilicon, the initial payment required to commence pre-production work for
Release 2.0 of the Cupria product line.  For the three months ended
January 31, 2008, stock based compensation recognized for research and
development was only $10,350.  Salaries and wages related to research
and development increased during the three months January 31, 2008 due primarily
to the costs being expensed during the period, whereas during the three months
ended January 31, 2007 these costs were being capitalized as capitalized
software based on the technology’s stage of development.




27


Total
selling, general and administrative expenses increased 9% or $129,609 to
$1,569,084 for the three months ended January 31, 2008 from $1,439,475 for the
three months ended January 31, 2007. This increase is primarily due to the
increase in stock based compensation recognized for selling, general and
administrative expenses from $469,409 to $712,220, offset primarily by decreases
in travel, lodging, meals and entertainment, consulting and legal
fees.




OTHER (INCOME)
EXPENSES.  Other expenses-net included interest income, interest
expense, the change in fair value of derivative liabilities, and amortization of
deferred financing costs.  In total, other expenses - net decreased by
82% or $4,460,945 to $974,346 for the three months ended January 31, 2008 from
$5,435,291 for the three months ended January 31, 2007. Changes in individual
line items changed for the reasons below.




Interest
expense decreased 60% or $1,671,363 to $1,115,138 for the three months ended
January 31, 2008 from $2,786,501 for the three months ended January 31, 2007.
The decrease is primarily due to the amortization and write-off of debt discount
due to increased conversions of the 2006 Debentures during the three months
ended January 31, 2007 as compared to the three months ended January 31, 2008,
offset by increases in interest expense and amortization of debt discount
related to the 2007 Debentures.




We
recognized a gain of $276,629 on the change in fair value of derivative
liabilities for the three months ended January 31, 2008, an increase of
$1,815,276 from a loss of $1,538,647 for the three months ended January 31,
2007.  The gain was primarily due to a decrease in the market price of
our common stock during the three months ended January 31, 2008 as compared to
an increase during the three months ended January 31, 2007 and the warrants
issued in connection with the 2007 Debentures that were not in existence during
the three months ended January 31, 2007. The closing market price of our common
stock was $0.031 and $0.114 per share as of January 31, 2008 and 2007,
respectively. In general, increases in the market price of our common stock as
compared to the exercise price of our warrants or options results in increases
in the fair value of the warrant or option as estimated using the Black-Scholes
model.




The
amortization of deferred financing costs decreased 88% or $987,597 to $137,089
for the three months ended January 31, 2008 from $1,124,686 for the three months
ended January 31, 2007. The decrease is primarily due to significant conversions
of the 2006 Debentures during the three months January 31, 2007.  Upon
conversion or repayment of debt prior to its maturity date, a pro-rata share of
debt discount and deferred financing costs are written off and recorded as
expense.




NET LOSS.   For
the three months ended January 31, 2008 our net loss decreased 45% or $3,494,397
to $4,296,087 for the three months ended January 31, 2008 from $7,790,484 for
the three months ended January 31, 2007, primarily as the result of decreases in
interest expense, amortization of deferred financing costs, amortization of
technology licenses and capitalized software development fees, research and
development expenses, and a gain on the change in fair value of derivative
liabilities, offset by the acquired in-process research and development and an
increase in selling, general and administrative expenses. The impact of
discontinued operations was not significant for the three months ended January
31, 2008 or 2007.




LIQUIDITY
AND CAPITAL RESOURCES




Cash and
cash equivalents balances totaled approximately $306,000 as of March 24,
2008, $13,705 as of January 31, 2008, and $35,368 as of October 31,
2007.




Net cash
used in operating activities was $2,017,900 for the three months ended January
31, 2008, compared to $1,147,947 for the three months ended January 31, 2007.
The increase in cash used in operations was principally the result of the
following items:




·
              a
      decrease in the net loss from continuing operations , which was $4,302,842
      for the three months ended January 31, 2008, as compared to $7,782,743 for
      the three months ended January 31, 2007;
and




·
              a
      net decrease for the three months ended January 31, 2008 in other current
      assets, other assets, and accounts payable and accrued liabilities of
      $667,393 representing increased cash outflows, compared to a net
      increase of $64,552 for the three months ended January 31,
      2007;




impacted
primarily by the following non-cash items:




·
              decreased
      consulting fees and other compensatory elements of stock issuances, which
      were $722,570 for the three months ended January 31, 2008, compared to
      $889,819 for the three months ended January 31, 2007, principally due to
      the issuance of common stock during the three months ended January 31,
      2007 with a value of $395,000 in exchange for
  services;




28


·
              a
      gain on the change in fair value of derivative liabilities of $276,629 for
      the three months ended January 31, 2008, compared to a loss of $1,538,647
      for the three months ended January 31, 2007, due to the reasons noted
      above;




·
              the
      acquired in-process research and development of $1,340,000 in the three
      months ended January 31, 2008 which did not occur during the three months
      ended January 31, 2007;




·
              interest
      expense related to the fair value of warrants issued in connection with
      the 2007 debentures in excess of debt discount of $369,721 for the three
      months ended January 31, 2008 which did not occur during the three months
      ended January 31, 2007;




·
              decreased
      amortization of deferred financing costs, which were $137,089 for the
      three months ended January 31, 2008, compared to $1,124,686 for the three
      months ended January 31, 2007, principally due to significant conversions
      of the 2006 Debentures during the three months January 31, 2007 and the
      amortization of the related deferred financing
  costs;




·
              decreased
      amortization of debt discount on notes, which was $650,826 for the three
      months ended January 31, 2008, compared to $2,752,373 for the three months
      ended January 31, 2007, principally due to significant conversions of the
      2006 Debentures during the three months January 31, 2007 and the
      amortization of the related deferred financing costs;
  and




·
              amortization
      of technology licenses and capitalized software development fees of
      $260,303 for the three months ended January 31, 2007, compared to $0 for
      the three months ended January 31, 2008, due to the Company recognizing a
      loss on the impairment of technology licenses and capitalized software
      development costs during the year ended October 31, 2007 that reduced the
      carrying value to $0.







Net cash provided by investing activities was $390,750 for the three
months ended January 31, 2008 compared to $252,374 for the three months ended
January 31, 2007. The net increase was due to cash acquired in connection with
the acquisition of BDSI of $400,000 and reduced capital expenditures during the
three months ended January 31, 2008, as compared to proceeds from the maturity
of short-term investments and from the sale of certain trademark rights, offset
by capitalization of research and development costs and software development
fees, as well as the purchase of equipment and leasehold improvements related to
the buildout of our headquarters office facility during the three months ended
January 31, 2007.




Net cash
provided by financing activities of $1,600,000 for the three months ended
January 31, 2008 was the result of proceeds from convertible debentures of
$3,175,000 and from the issuance of common stock of $20,000, offset by
capitalized financing costs of $345,000 and the repayment of notes payable in
the amount of $1,250,000. There was no cash provided by financing activities for
the three months ended January 31, 2007.




Since
inception, we have funded our operations primarily through the issuance of our
common stock and debt securities. As a result of our issuances of debt
securities, we have significant repayment obligations in 2008 and 2009 that will
affect our liquidity position.




In
December 2003, April 2004 and May 2004, we sold $1,350,000 in aggregate
principal amount and received net proceeds of approximately $1,024,000 from the
private placement to certain private and institutional investors of our three
year 7% convertible debentures and warrants (the “7% Debentures”). As of March
17, 2008, there was $50,000 of principal amount of the 7% Debentures
outstanding.  The 7% Debentures matured in May 2007, however, they
have not yet been repaid.




In March
2006, we sold $6,000,000 in aggregate principal amount of our Senior Secured 7%
convertible debentures and warrants, receiving net proceeds of approximately
$4.5 million after the payment of offering related costs (the “2006
Debentures”). As of January 31, 2008, there was $652,000 of principal amount of
the 2006 Debentures outstanding. The 2006 Debentures originally were due and
payable on March 10, 2008, but the maturity date was extended pursuant to
agreements with the four remaining debenture holders.




Effective
March 17, 2008, we entered into amendment agreements with two Investors holding
2006 Debentures with an aggregate principal amount of $200,000 (the “March 17
Amendments”). The March 17 Amendments amend the terms of the two subject 2006
Debentures to:  (1) extend the maturity date until September 17, 2008,
(2) obligate us to pay all interest accrued on such debentures as of June 30,
2008 in cash; (3) extend the payment date for interest that will have accrued on
such debentures as of June 30, 2008 until September 17, 2008; and (4) increase
the outstanding amount of unconverted principal on such debentures by 20%,
however, the 20% principal premium and interest accruing thereon must be paid in
cash and may not be converted by such Investors into Company common stock. The
March 17 Amendments also included waivers of any event of default that may have
occurred under the terms of such 2006 Debentures prior to the date
thereof.




Effective
March 19, 2008, we entered into amendment agreements with the other two
investors holding unconverted 2006 Debentures with an aggregate principal amount
of $425,000 (the “March 19 Amendments”). In exchange for aggregate cash
consideration of  $23,181, the March 19 Amendments amend the terms of
the two subject 2006 Debentures to extend the maturity date on such debentures
until April 10, 2008. The March 19 Amendments also included waivers of any event
of default relating to failure to pay amounts due that may have occurred under
the terms of such 2006 Debentures prior to the date thereof.




29


In May
2005, we sold $3.5 million in aggregate principal amount of our Senior Secured
7% convertible debentures and warrants (the “2005 Debentures”) in a private
placement to certain private and institutional investors. As of January 31,
2008, there was $4,280 of principal amount of the 2005 Debentures outstanding.
The 2005 Debentures mature in May 2008.




In May
2007, we received $400,000 in proceeds from the issuance of a note payable which
originally matured on August 22, 2007. The maturity date on this note payable
was originally extended to October 31, 2007. As of January 31, 2008, the unpaid
balance of the note was $250,000. The lender has agreed to waive any existing
default on the promissory note and to extend the maturity date to July 31,
2008.  In addition, the Company has agreed to use its best efforts to
make monthly principal payments of at least $50,000, plus any accrued interest
on such prepayments.




In
December 2007, we sold $3,527,778 in aggregate principal amount of our 10%
Secured Convertible Notes and warrants, receiving net proceeds of approximately
$1.7 million (the “2007 Debentures”), after the payment of offering related fees
and expenses of $345,000 and after the repayment in full of $1,100,000 principal
and accrued interest on bridge loans issued in July 2007.  The 2007
Debentures mature in December 2009.




As of
March 24, 2008, we had cash on hand of approximately $306,000.  We need to
raise additional funds on an immediate basis in order to comply with the terms
of certain outstanding agreements, keep current essential suppliers and vendors,
and maintain our operations as presently conducted. Management’s plans in this
regard are to obtain other debt and equity financing until profitable operation
and positive cash flow are achieved and maintained. We may not be successful in
our efforts to raise additional funds, which may be limited by the terms of our
outstanding debt securities. Even if we are able to raise additional funds
through the issuance of debt or other means, our cash needs could be heavier
than anticipated in which case we could be forced to raise additional capital.
Even after we receive orders for our products, we do not yet know what payment
terms will be required by our customers or if our products will be successful.
At the present time, we have no commitments for any additional financing, and
there can be no assurance that, if needed, additional capital will be available
to us on commercially acceptable terms or at all.




Additional
equity financings are likely to be dilutive to holders of our Common Stock and
debt financing, if available, may involve significant payment obligations and
covenants that restrict how we operate our business.




We have
incurred significant net losses since inception, negative cash flows and
liquidity problems.  These conditions raise substantial doubt about
our ability to continue as a going concern. Due to the fact that there is
substantial doubt about our ability to continue as a going concern, our
independent registered public accounting firm’s audit report accompanying our
2007 financial statements includes an explanatory paragraph to the uncertainty
of our ability to continue as a going concern. The financial statements do not
include any adjustment that might result from the outcome of such
uncertainty. This uncertainty may make it more difficult for us to
raise additional capital than if such uncertainty did not exist.




Impact
of Recently Issued Accounting Standards




In
September 2006, the FASB issued SFAS No. 157, “Fair Value Measurements” (“SFAS
157”). SFAS 157 defines fair value, establishes a framework for measuring fair
value in accordance with accounting principles generally accepted in the U.S.,
and expands disclosures about fair value measurements. SFAS 157 is effective for
us as of the beginning of fiscal 2009, with earlier application encouraged. Any
cumulative effect will be recorded as an adjustment to the opening accumulated
deficit balance, or other appropriate component of equity. The adoption of this
pronouncement is not expected to have an impact on our consolidated financial
position, results of operations, or cash flows.




In
February 2007, the FASB issued SFAS No. 159, “The Fair Value Option for
Financial Assets and Financial Liabilities” (“SFAS 159”). SFAS 159 provides
companies with an option to report selected financial assets and liabilities at
fair value. The objective of SFAS 159 is to reduce both complexity in accounting
for financial instruments and the volatility in earnings caused by measuring
related assets and liabilities differently. Generally accepted accounting
principles have required different measurement attributes for different assets
and liabilities that can create artificial volatility in
earnings.  SFAS 159 also establishes presentation and disclosure
requirements designed to facilitate comparisons between companies that choose
different measurement attributes for similar types of assets and
liabilities.  SFAS 159 does not eliminate disclosure requirements
included in other accounting standards, including requirements for disclosures
about fair value measurements included in SFAS 157 and SFAS No. 107,
“Disclosures about Fair Value of Financial Instruments.” SFAS 159 is effective
for us as of the beginning of fiscal year 2009. We have not yet determined the
impact SFAS 159 may have on our consolidated financial position, results of
operations, or cash flows.




30


In
December 2007, the FASB issued SFAS No. 141 (revised 2007), “Business
Combinations” (“SFAS 141(R)”). SFAS 141 (R) replaces SFAS No. 141, “Business
Combinations”, and is effective for us for business combinations for which the
acquisition date is on or after the beginning of the first annual reporting
period beginning on or after December 15, 2008. SFAS 141(R) requires the new
acquiring entity to recognize all assets acquired and liabilities assumed in the
transactions; establishes an acquisition-date fair value for acquired assets and
liabilities; and fully discloses to investors the financial effect the
acquisition will have.  SFAS 141(R) would have an impact on accounting for
any business acquired after the effective date of this
pronouncement.




In
December 2007, the FASB issued SFAS No. 160, “Noncontrolling Interests in
Consolidated Financial Statements” (“SFAS 160”). SFAS 160 requires all entities
to report minority interests in subsidiaries as equity in the consolidated
financial statements, and requires that transactions between entities and
noncontrolling interests be treated as equity. SFAS 160 is effective for us as
of the beginning of fiscal 2010. We are evaluating the impact of this
pronouncement on our consolidated financial position, results of operations and
cash flows.




ITEM
3.  CONTROLS AND PROCEDURES




EVALUATION OF DISCLOSURE CONTROLS AND
PROCEDURES. The Company, under the supervision and with the participation
of the Company’s management, including the Company’s Chief Executive Officer and
Chief Financial Officer, has evaluated the effectiveness of the design and
operation of the Company’s “disclosure controls and procedures,” as such term is
defined in Rule 13a-15(e) promulgated under the Exchange Act as of this report.
The Company’s Chief Executive Officer and Chief Financial Officer has concluded
based upon his evaluation that the Company’s disclosure controls and procedures
were effective as of the end of the period covered by this report to provide
reasonable assurance that material information required to be disclosed by the
Company in reports that it files or submits under the Exchange Act is recorded,
processed, summarized and reported within the time periods specified in SEC
rules and forms.




A control
system, no matter how well conceived and operated, can provide only reasonable,
not absolute, assurance that the objectives of the control system are met.
Because of the inherent limitations in all control systems, no evaluation of
controls can provide absolute assurance that all control issues, if any, within
a company have been detected. Such limitations include the fact that human
judgment in decision-making can be faulty and that breakdowns in internal
control can occur because of human failures, such as simple errors or mistakes
or intentional circumvention of the established process.




CHANGES IN INTERNAL CONTROLS OVER
FINANCIAL REPORTING. There have been no changes in our internal controls
over financial reporting that have materially affected, or are reasonably likely
to affect these controls during the three months ended January 31,
2008.


31


PART
II - OTHER INFORMATION









ITEM
2.  Unregistered Sales of Equity Securities and Use of
Proceeds.




During
the three months ended January 31, 2008, we issued:





(i)
            400,000
      shares of common stock  to one individual for cash totaling
      $20,000;(ii)
            Warrants
      to purchase 400,000 shares of common stock at an exercise price of $0.15
      per share;(iii)
            Notes
      aggregating $3,527,778 to 12 investors, which are convertible into shares
      of our common stock at a conversion price equal to 75% of the average of
      the closing bid price of our common stock for the 10 trading days
      preceding the conversion date (which shall in no event exceed $0.05 per
      share);(iv)
            Warrants
      to purchase an aggregate of 175,839,399 shares of common stock at an
      exercise price of $0.10 per share;(v)
            6,000,000
      shares of common stock to three consultants for services valued at
      $126,000;(vi)
            60,000,000
      shares of common stock valued at $1,740,000 to UTEK in connection with the
      acquisition of BSDSI;(vii)
            Options
      to purchase 500,000 shares of common stock to three employees at an
      exercise price of $0.027 per share;(viii)
            Options
      to purchase 250,000 shares of common stock to one employee at an exercise
      price of $0.021 per share;(ix)
            1,295,944
      shares of common stock  to five holders of our 2006 Debentures
      in payment of $23,133 in accrued interest; and(x)
            Options
      to purchase 2,000,000 shares of common stock to one director at an
      exercise price of $0.031 per share.





In
February 2008, subsequent to the three months ended January 31, 2008, we
issued:




(i)
            1,950,000
      shares of common stock to three individuals for cash totaling
      $78,000;(ii)
            2,098,709
      shares of common stock to one investor upon conversion of our 7%
      Debentures with a principal amount of $25,000 and interest of $7,530;
      and(iii)
            15,000,000
      shares of common stock to one consultant for services valued at
      $345,000.


In March
2008, subsequent to the three months ended January 31, 2008, we
issued:




(i)
            1,953,122
      shares of common stock to one investor upon conversion of our 2006
      Debentures with a principal amount of $27,000 and interest of
      $2,445;(ii)
            500,000
      shares of common stock to one individual for cash totaling $20,000;
      and(iii)
            150,000,000
      shares of common stock to UTEK Corporation in connection with the
      acquisition of Multi-Carrier Communications,
  Inc.




These
securities were issued without registration under the Securities Act in reliance
upon the exemption provided in Section 4(2) of the Securities Act. Appropriate
legends were affixed to the share certificates issued in all of the above
transactions. The Company believes that each of the recipients was an
“accredited investor” within the meaning of Rule 501(a) of Regulation D under
the Securities Act, or had such knowledge and experience in financial and
business matters as to be able to evaluate the merits and risks of an investment
in our common stock. All recipients had adequate access, through their
relationships with the Company and its officers and directors, to information
about the Company. None of the transactions described above involved general
solicitation or advertising.




ITEM
5.  Other Events




Amendment to 2006
Debentures




Effective
March 17, 2008, we entered into amendment agreements with two Investors holding
2006 Debentures with an aggregate principal amount of $200,000 (the “March 17
Amendments”). The March 17 Amendments amend the terms of the two subject 2006
Debentures to:  (1) extend the maturity date until September 17, 2008,
(2) obligate the Company to pay all interest accrued on such debentures as of
June 30, 2008 in cash; (3) extend the payment date for interest that will have
accrued on such debentures as of June 30, 2008 until September 17, 2008; and (4)
increase the outstanding amount of unconverted principal on such debentures by
20%, however, the 20% principal premium and interest accruing thereon must be
paid in cash and may not be converted by such Investors into Company common
stock. The March 17 Amendments also included waivers of any event of default
that may have occurred under the terms of such 2006 Debentures prior to the date
thereof.




Effective
March 19, 2008, we entered into amendment agreements with the other two
Investors holding unconverted 2006 Debentures with an aggregate principal amount
of $425,000 (the “March 19 Amendments”). In exchange for aggregate cash
consideration of  $23,181, the March 19 Amendments amend the terms of
the two subject 2006 Debentures to extend the maturity date on such debentures
until April 10, 2008. The March 19 Amendments also included waivers of any event
of default relating to failure to pay amounts due that may have occurred under
the terms of such 2006 Debentures prior to the date thereof.




32


Amendment to Promissory
Note




On March
20, 2008, we entered into a written letter agreement extending to July 31, 2008
the maturity date of a promissory note originally due August 22, 2007, and
subsequently extended to October 31, 2007 (see Note 5).  Prior to this
time the Company had a verbal agreement with the Lender to extend the maturity
date.





Acquisition of Multi-Carrier
Communciations, Inc.




On March
21, 2008, we completed the acquisition of all of the issued and outstanding
capital stock of Multi-Carrier Communications, Inc., (“MCCI”), a subsidiary of
UTEK Corporation (“UTEK”) in exchange for 150,000,000 shares of unregistered
common stock of the Company, which are subject to certain anti-dilution
adjustments.  As a result of the ransaction,
MCCI became a wholly-owned subsidiary. Upon closing of the acquisition
transaction, the assets of MCCI included $300,000 in cash and a worldwide
exclusive license to certain technology owned by The University of Queensland
& The University of Sydney and UNIQUEST Pty Limited (“Uniquest”). The technology relates to multiple
advanced algorithms for the transmission of digital data across metallic media,
such as copper wires. Under the License Agreement (the “UniquestLicense Agreement”) relating to such
technology, MCCI is obligated to pay Uniquest an up-front fee and a patent
reimbursement fee to cover patents costs relating to the technology. MCCI made
those payments to Uniquest beforeweacquiredMCCI. TheUniquestLicense Agreement also provides that
MCCI shall payroyalties based on achievement of certain sales levels for
products utilizing the technology.  Royalty obligations of MCCI are
subject to certain minimum amounts. Unless earlier terminated by a party
pursuant to the terms of the Uniquest License Agreement, the license expires
upon the day before the date of expiration of all of the patent rights
underlying the technology or 20 years from the date of the Uniquest License
Agreement for unpatented technology. The Uniquest License Agreement also permits
MCCI to sublicense the technology with the consent of Uniquest and obligates
MCCI to make royalty payments to Uniquest based on a percentage of payments
received by MCCI from sublicensees. MCCI and Uniquest have also entered into a
Research Agreement pursuant to which MCCI shall fund and obtain certain rights
relating to the licensed technology developed through a research program to be
implemented by Uniquest.  MCCI funded this research before we acquired
MCCI.




Employment Agreement with
Ray Willenberg, Jr.




On March
20, 2008, we entered into an employment agreement with Mr. Willenberg pursuant
to which he continues to serve as our Executive Vice President.  The
agreement terminates on March 20, 2009, and provides for Mr. Willenberg to
receive a base salary of $20,833 per month, subject to the earlier of (i) Mr.
Willenberg’s death or Disability (as defined in the agreement); (ii) the
termination of the agreement by either party without cause on written notice; or
(iii) termination of the agreement by us for Cause (as defined in the
agreement).  The agreement also provides that we will pay Mr.
Willenberg a bonus equal to 2% of the total amount paid to the Company by Top
Secret Productions in respect of the film “Step Into
Liquid.”





During
Mr. Willenberg’s employment, the agreement provides for his nomination to our
Board of Directors and, if elected, his appointment as Chairman of the Board of
Directors.  Mr. Willenberg would resign from the Board upon his
termination of employment.




Under his
employment agreement, we also granted Mr. Willenberg a right of first refusal to
purchase our equity interest in Top Secret Productions, LLC in the case of a
bona fide third-party offer to purchase that interest or our determination to
offer that interest for sale at a specified price.





ITEM 6.  Exhibits




4.1
            Form
      of Secured Convertible Note issued on December 5, 2007 (incorporated by
      reference to Exhibit 4.1 of the Company’s Report on Form 8-K filed with
      the Commission on December 11, 2007 (the “December 11, 2007
      8-K”)).4.2
            Form
      of Class A Common Stock Purchase Warrant issued as of December 5, 2007
      (incorporated by reference to Exhibit 4.2 of the Company’s December 11,
      2007 8-K).10.1
            Subscription
      Agreement dated as of December 5, 2007, by and among the Company and the
      Subscribers defined therein (incorporated by reference to Exhibit 10.1 of
      the Company’s December 11, 2007 8-K).10.2
            Security
      Agreement, dated as of December 5, 2007, by and between the Company, NV
      Entertainment, Inc. and Barbara R. Mittman as collateral agent
      (incorporated by reference to Exhibit 10.2 of the Company’s December 11,
      2007 8-K).


33





10.3
            Funds
      Escrow Agreement, dated as of December 5, 2007, among the Company, the
      Subscribers and Grushko & Mittman, P.C. (incorporated by reference to
      Exhibit 10.3 of the Company’s December 11, 2007 8-K).10.4
            Form
      of Lockup Agreement, dated as of December 5, 2007 (incorporated by
      reference to Exhibit 10.4 of the Company’s December 2007
    8-K).10.5
            Agreement
      and Plan of Acquisition dated January 29, 2008, by and between Broadband
      Distance Systems, Inc. and the Company (incorporated by reference to
      Exhibit 10.1 of the Company’s Report on Form 8-K filed with the Commission
      on January 31, 2008).10.6
            Agreement
      and Plan of Acquisition dated March 24, 2008, by and between Multi-Carrier
      Communications, Inc., UTEK Corporation and the
Company.*10.7
            Amendment
      to 7% Senior Secured Convertible Debenture Series 06-01C Due March 10,
      2008 by Puritan LLC., dated March 17, 2008.*10.8
            Amendment
      to 7% Senior Secured Convertible Debenture Series 06-01C Due March 10,
      2008 by Double U Master Fund LP., dated March 17,
2008.*10.9
            Amendment
      to 7% Senior Secured Convertible Debenture Series 06-01C Due March 10,
      2008 by Professional Offshore Opportunity Fund, Ltd., dated March 18,
      2008.*10.10
            Amendment
      to 7% Senior Secured Convertible Debenture Series 06-01C Due March 10,
      2008 by Generation Capital Associates, dated March 18,
    2008.*10.11
            Employment
      Agreement dated May 20, 2008 between Ray Willenberg, Jr. and the
      Company.*(1)10.12
            Letter
      Agreement, executed March 20, 2008 between the Charles R. Cono Trust and
      the Company *31.1
            Rule
      13a-14/15d-14(a) Certification*32.1
            Section
      1350 Certification*





____________________




* Filed
herewith.




(1)
            Signifies
      a management agreement or compensatory plan or
  arrangement.


34







SIGNATURES






In
accordance with the requirements of the Exchange Act, the registrant caused this
report to be siged on its behalf by the undersigned, thereunto duly
authorized.




RIM
      SEMICONDUCTOR COMPANYDATE: 
      March 24, 2008
            BY:
            /s/ Brad
      KetchBrad
      KetchPresident
      and Chief Executive Officer (Principal Executive Officer, Financial
      and Accounting Officer and Authorized
  Signatory)