UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-QSB
[X] QUARTERLY REPORT UNDER TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the Quarter ended January 31, 2006
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the transition period from ___________ to ____________
Commission File No. 000-49865
TRIMEDIA ENTERTAINMENT GROUP, INC.
- --------------------------------------------------------------------------------
(Name of Small Business Issuer)
DELAWARE 14-1854107
- --------------------------------- ----------------------------------
(State or other jurisdiction of (IRS Employer Identification No.)
Incorporation or Organization)
1080 N. DELAWARE AVENUE, 8TH FLOOR
PHILADELPHIA, PENNSYLVANIA 19125
- ---------------------------------------- ----------------------------
(Address of principal executive offices) (Zip Code)
(215) 426-5536
---------------------------------------------------------
(Registrant's Telephone Number, including Area Code)
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Securities Exchange Act during the past 12 months (or for
such shorter period that the registrant was required to file such reports), and
(2) has been subject to such filings requirements for the past 90 days. YES [X]
NO [ ]
Indicate by check mark whether the registrant is a shell company (as defined in
Rule 12b-2 of the Exchange Act). YES [ ] NO [X]
There were 47,060,011 issued and outstanding shares of the registrant's common
stock, par value $.0001 per share, at March 14, 2006.
TRIMEDIA ENTERTAINMENT GROUP, INC.
----------------------------------
INDEX
-----
Page
----
Part I. Financial Information
Item 1. Financial Statements
Consolidated Balance Sheets at January 31, 2006 (unaudited) and October 31,
2005 (audited)............................................................... 2
Consolidated Statements of Operations for the Three Months Ended January 31,
2006 and January 31, 2005 (unaudited)....................................... 3
Consolidated Statements of Cash Flows for the Three Months Ended January 31,
2006 and January 31, 2005 (unaudited)....................................... 4
Notes to Consolidated Financial Statements................................... 6
Item 2. Management's Discussion and Analysis......................................... 10
Item 3. Controls and Procedures...................................................... 17
Part II. Other Information
Item 1. Legal Proceedings............................................................ 17
Item 2. Changes in Securities and Use of Proceeds.................................... 17
Item 3. Defaults Upon Senior Securities.............................................. 17
Item 6. Exhibits and Reports on Form 8-K............................................. 18
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
- ------
TRIMEDIA ENTERTAINMENT GROUP, INC.
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
JANUARY 31, 2006 AND OCTOBER 31, 2005
January 31, October 31,
2006 2005
------------ ------------
(Unaudited) (Audited)
ASSETS
CURRENT ASSETS
Cash $ 32,535 $ 34,703
Miscellaneous receivables 15,615 16,547
Prepaid expenses 279,494 275,075
------------ ------------
327,644 326,325
PROPERTY AND EQUIPMENT - Net 254,311 298,737
CAPITALIZED FILM COSTS 139,481 133,910
OTHER ASSETS 9,625 27,695
------------ ------------
TOTAL ASSETS $ 731,061 $ 786,667
------------ ------------
LIABILITIES AND STOCKHOLDERS' DEFICIT
CURRENT LIABILITIES
Term loans $ 2,619,208 $ 2,144,208
Line of credit 2,901,190 -
Accounts payable and accrued expenses 1,347,589 1,223,097
Taxes payable 17,501 17,501
Advances from distributors 150,029 180,954
Due to stockholder 22,282 24,082
Deferred revenue - 3,185
------------ ------------
7,057,799 3,593,027
LONG-TERM DEBT - 2,881,820
LOANS PAYABLE - STOCKHOLDER 1,100,000 1,100,000
------------ ------------
TOTAL LIABILITIES 8,157,799 7,574,847
------------ ------------
STOCKHOLDERS' DEFICIT
Preferred stock, $0.0001 par value; 20,000,000 shares authorized;
none and 1,000,000 shares issued and outstanding in 2006 and 2005 - -
Common stock, $0.0001 par value; 100,000,000 shares
authorized; 47,060,011 and 45,560,011 shares
issued and outstanding in 2006 and 2005 4,707 4,557
Additional paid-in capital 13,236,376 13,116,527
Accumulated deficit (20,667,821) (19,909,264)
------------ ------------
TOTAL STOCKHOLDERS' DEFICIT (7,426,738) (6,788,180)
------------ ------------
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT $ 731,061 $ 786,667
============ ============
See accompanying notes to consolidated financial statements.
2
TRIMEDIA ENTERTAINMENT GROUP, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
THREE MONTHS ENDED JANUARY 31, 2006 AND 2005
(UNAUDITED)
2006 2005
----------- -----------
NET REVENUE $ 39,944 $ 2,262
DIRECT COSTS 110,982 114,668
----------- -----------
GROSS LOSS 71,038 112,406
OPERATING EXPENSES 668,276 2,565,192
----------- -----------
LOSS FROM OPERATIONS 739,314 2,677,598
OTHER INCOME (EXPENSE) (19,243) 2,848
----------- -----------
NET LOSS $ 758,557 $ 2,674,750
=========== ===========
BASIC AND DILUTED LOSS PER SHARE $ 0.02 $ 0.09
=========== ===========
WEIGHTED AVERAGE NUMBER OF SHARES 46,225,011 29,606,391
=========== ===========
See accompanying notes to consolidated financial statements.
3
TRIMEDIA ENTERTAINMENT GROUP, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
THREE MONTHS ENDED JANUARY 31, 2006 AND 2005
(UNAUDITED)
2006 2005
--------- -----------
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $(758,557) $(2,674,750)
Adjustment to reconcile net loss to net cash
used in operating activities
Foreign currency exchange loss 19,370 -
Common stock issued for services - 13,940
Depreciation and amortization 44,425 53,247
(Increase) decrease in assets
Miscellaneous receivable 932 -
Film costs (5,571) (24,468)
Prepaid expenses 115,581 (142,495)
Other assets 18,070 -
Advances to artists - (230,000)
Increase (decrease) in liabilities
Accounts payable and accrued expenses 124,492 (67,719)
Advances from (to) distributors (30,925) 84,294
Deferred revenue (3,185) (1,167)
--------- -----------
Net cash used in operating activities (475,368) (2,989,118)
--------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES
Due to (from) stockholder (1,800) 5,301
--------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES
Net borrowings on long-term debt - 3,109,585
Payments on demand notes - (93,000)
Net borrowings on term loans 475,000 -
Net proceeds from sale of stock - 127,977
--------- -----------
Net cash provided by financing activities 475,000 3,144,562
--------- -----------
NET INCREASE (DECREASE) IN CASH (2,168) 160,745
CASH - BEGINNING OF PERIOD 34,703 185,096
--------- -----------
CASH - END OF PERIOD $ 32,535 $ 345,841
========= ===========
See accompanying notes to consolidated financial statements.
4
TRIMEDIA ENTERTAINMENT GROUP, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)
THREE MONTHS ENDED JANUARY 31, 2006 AND 2005
(UNAUDITED)
2006 2005
-------- --------
SUPPLEMENTAL DISCLOSURES OF CASH
FLOW INFORMATION
CASH PAID DURING THE PERIOD FOR:
Interest $ 22,612 $ -
======== ========
SUPPLEMENTAL DISCLOSURES OF NON-CASH
INVESTING AND FINANCING ACTIVITIES:
Common stock issued for prepaid expenses $120,000 $ -
======== ========
Warrants issued for prepaid consulting services $ - $338,000
======== ========
Issuance of common stock for subscription receivable:
Common stock $ - $ 67
Additional paid-in capital - 299,933
-------- --------
Subscription receivable $ - $300,000
======== ========
See accompanying notes to consolidated financial statements.
5
TRIMEDIA ENTERTAINMENT GROUP, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JANUARY 31, 2006
(UNAUDITED)
NOTE 1 - FINANCIAL STATEMENTS
The accompanying unaudited condensed consolidated financial statements have been
prepared by Trimedia Entertainment Group, Inc. ("Trimedia") and Subsidiaries
(collectively, "the Company"). These statements include all adjustments
(consisting only of normal recurring adjustments) which management believes
necessary for a fair presentation of the statements and have been prepared on a
consistent basis using the accounting policies described in the Summary of
Accounting Policies included in the Annual Report on Form 10-KSB for the fiscal
year ended October 31, 2005 which the Company filed with the Securities and
Exchange Commission on March 1, 2006 (the "Annual Report".) Certain financial
information and footnote disclosures normally included in financial statements
prepared in accordance with accounting principles generally accepted in the
United States have been condensed or omitted pursuant to those rules and
regulations, although the Company believes that the accompanying disclosures are
adequate to make the information presented not misleading. The Notes to
Financial Statements included in the Annual Report should be read in conjunction
with the accompanying interim financial statements. The interim operating
results for the three months ended January 31, 2006 may not necessarily be
indicative of the operating results expected for the full year.
Basis of Presentation
- ---------------------
The consolidated financial statements include the accounts of Metropolitan
Recording Inc., Snipes Production, LLC and Ruffnation Films LLC. Ruffnation
Music is a wholly owned company that operates the record division of the
company. In July 2003, the Company formed TME, a wholly owned foreign production
company. In January 2004, the Company formed two Delaware corporations, Trimedia
Film Group, Inc. and TM Film Distribution, Inc., in anticipation of potential
future financing transactions. As of January 31, 2006, TME was inactive. In
October 2004, the Company formed Four Point Play Productions, LLC. All material
inter-company transactions have been eliminated in consolidation.
Loss Per Share
- --------------
The Company follows SFAS 128, "Earnings Per Share," resulting in the
presentation of basic and diluted loss per share. The basic loss per share
calculations include the change in capital structure for all periods presented.
For the three months ended January 31, 2006 and 2005, the basic and diluted loss
per share are the same, since the assumed conversion of the convertible
preferred stock (in 2005), stock options and warrants would be antidilutive
because the Company experienced a net loss for such periods.
NOTE 2 - GOING CONCERN
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern.
Since its inception, the Company has incurred significant losses and, as of
January 31, 2006 had accumulated losses of $20,667,821. For the three months
ended January 31, 2006, the Company's net loss was $758,557. In addition, the
Company had negative working capital of $3,828,965 at January 31, 2006 and
experienced negative cash flow from operations of $475,368 for the three months
ended January 31, 2006. The Company may incur further operating losses and
experience negative cash flow in the future. Achieving profitability and
positive cash flow depends on the Company's ability to generate sufficient
revenues from its films and recording studio and its ability to raise additional
capital. There can be no assurances that the Company will be able to generate
sufficient revenues or raise additional capital to achieve and sustain
profitability and positive cash flow in the future. These conditions raise
substantial doubt about the Company's ability to continue as a going concern.
The financial statements do not include any adjustments that might result from
the outcome of these uncertainties.
6
TRIMEDIA ENTERTAINMENT GROUP, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JANUARY 31, 2006
(UNAUDITED)
NOTE 2 - GOING CONCERN (Continued)
The Company has no firm commitments for funding its operations. The Company has
historically relied principally on equity financing and loans from its principal
stockholder and third parties to meet its cash requirements. The Company intends
to raise additional capital from the sale of its securities. However, there can
be no assurances that the company will be successful in raising sufficient
capital to have a material positive effect of the company's operations and cash
flow.
The Company has outstanding debt in the aggregate principal amount of
approximately $6,620,398 as of January 31, 2006. The Company has granted
security interests in substantially all of its assets to secure its obligations
to repay approximately $5,520,398 of this indebtedness. Accordingly, the Company
will require a significant amount of cash to fund the present operations and to
continue to grow the business. As the Company's operations grow, the Company's
financing requirements are expected to grow proportionately and the Company
projects the continued use of cash in operating activities for the foreseeable
future. Therefore, the Company is dependent on continued access to external
sources of financing. The current financing strategy is to pursue loans and to
sell equity securities to raise a substantial amount of working capital. The
Company also plans to leverage investment in film and music productions through
operating credit facilities, co-ventures and single-purpose production
financing. The Company plans to obtain financing commitments, including, in some
cases, foreign distribution commitments to cover, on average, at 50% of the
budgeted third-party costs of a project before commencing production. The
Company plans to outsource required services and functions whenever possible.
The Company also plans to use independent contractors and producers, consultants
and professionals to provide those services necessary to operate the corporate
and business operations in an effort to avoid build up of overhead
infrastructures, to maintain a flexible organization and financial structure for
productions and ventures and to be responsive to business opportunities
worldwide. The Company believes that it will be necessary for the Company to
raise at least $10,000,000 in order to meet the anticipated cash requirements
through January 31, 2007. There can be no assurance that the Company will be
successful in its efforts to raise this amount of additional financing. In the
event that the Company is unable to raise these funds, the Company will then be
required to delay its plans to grow its business and the Company will rely on
its net revenues to fund its operations.
There can be no assurance that such funding will be generated or available on
terms acceptable to the Company, or at all, or that the commercial exploitation
of the Company's products will be economically profitable for the Company. These
uncertainties raise substantial doubt about the ability of the Company to
continue as a going concern. Significant additional funding will be required
during fiscal 2006 to meet expected negative operating cash flows.
NOTE 3 - LOAN PAYABLE - STOCKHOLDER
Loans payable - stockholder consist of an unsecured demand note payable to
Christopher Schwartz, accruing interest at 7% per annum. Interest expense,
associated with this note for the three months ended January 31, 2006 and 2005
was $19,350 and $19,250. Christopher Schwartz does not intend to call this note
during the next fiscal year and therefore the note is reflected on the balance
sheet as a non-current liability.
7
TRIMEDIA ENTERTAINMENT GROUP, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JANUARY 31, 2006
(UNAUDITED)
NOTE 4 - TERM LOANS
During the three months ended January 31, 2006, the Company borrowed $475,000 in
additional funds as part of a convertible note payable entered into with a third
party lender in May 2005. Interest only, at 12% per annum, is due monthly with
outstanding principal to be paid in a lump sum on May 30, 2006. The holder of
the note has the right to convert all or part of the outstanding principal
amount of the note into common stock of the Company at a conversion price of
$0.50 per share. The conversion price is subject to adjustment upon occurrence
of certain events as defined in the agreement. As of January 31, 2006,
approximately $146,000 of interest is in arrears and recorded as part of accrued
expenses.
NOTE 5 - STOCKHOLDERS' EQUITY
In December 2005, the Company issued 1,500,000 shares of its common stock in
exchange for a one year consulting agreement valued at $120,000.
NOTE 6 - INCOME TAXES
There is no income tax benefit for the losses for the three months ended January
31, 2006 and 2005 since management has determined that the realization of the
net deferred tax asset is not assured and has created a valuation allowance for
the entire amount of such benefits.
8
TRIMEDIA ENTERTAINMENT GROUP, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JANUARY 31, 2006
(UNAUDITED)
NOTE 7 - BUSINESS SEGMENTS
The Company follows SFAS No. 131, "Disclosures About Segments of and Enterprise
and Related Information" which requires the Company to provide certain
information about their operating segments. The Company has two reportable
segments: recording studio and film production.
Summarized financial information concerning the Company's reportable segments,
which are based in the United States, is reflected in the following table:
Recording Film Segment Consolidated
Studio Production Total Corporate Total
--------- ---------- ---------- ---------- ------------
Three Months Ended
January 31, 2006
- ---------------------------------
Net sales $ 7,813 $ 32,131 $ 39,944 $ - $ 39,944
Loss from operations 148,375 53,497 201,872 537,442 739,314
Total assets 238,116 278,498 516,614 214,447 731,061
Depreciation and amortization 43,206 1,219 44,425 - 44,425
Capital expenditures - - - - -
Three Months Ended
January 31, 2005
- ---------------------------------
Net sales $ 1,095 $ 1,167 $ 2,262 $ - $ 2,262
Loss from operations 57,504 1,534,339 1,591,843 1,085,755 2,677,598
Total assets 339,344 691,763 1,031,107 874,615 1,905,722
Depreciation and amortization 51,625 1,622 53,247 - 53,247
Capital expenditures - - - - -
January 31,
-------------------------
Reconciliations 2006 2005
- --------------------------------- --------- ------------
Total segment operating loss $(201,872) $ (1,591,843)
Corporate overhead expenses (537,442) (1,085,755)
Other income (expense) (19,243) 2,848
--------- ------------
Total consolidated net loss $(758,557) $ (2,674,750)
========= ============
NOTE 8 - SUBSEQUENT EVENT
On March 13, 2006, the Company converted a $250,000 promissory note receivable
from Pure Games, Inc. into 250,000 shares of common stock of Pure Games, Inc.
This note receivable was written-off during the year ended October 31, 2005. The
converted shares currently do not have a determinable value.
9
CAUTIONARY STATEMENT FOR FORWARD-LOOKING STATEMENTS
This Quarterly Report on Form 10-QSB includes forward-looking
statements within the meaning of Section 27A of the Securities Act of 1933, as
amended, and Section 21E of the Securities Exchange Act of 1934, as amended. We
have based these forward-looking statements on our current expectations and
projections about future events. These forward-looking statements are subject to
known and unknown risks, uncertainties and assumptions about us that may cause
our actual results, levels of activity, performance or achievements to be
materially different from any future results, levels of activity, performance or
achievements expressed or implied by such forward-looking statements. In some
cases, you can identify forward-looking statements by terminology such as "may,"
"will," "should," "could," "would," "expect," "plan," anticipate," believe,"
estimate," continue," or the negative of such terms or other similar
expressions. Factors that might cause or contribute to such a discrepancy
include, but are not limited to, those in our other Securities and Exchange
Commission filings, including our Annual Report on Form 10-KSB filed on March 1,
2006. The following discussion should be read in conjunction with our
Consolidated Financial Statements and related Notes thereto included elsewhere
in this report.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
- ------
The following discussion and analysis of our financial condition and
results of operations should be read in conjunction with our consolidated
financial statements and related notes appearing elsewhere in this report. This
discussion and analysis contains forward-looking statements that involve risks,
uncertainties, and assumptions. The actual results may differ materially from
those anticipated in these forward-looking statements as a result of certain
factors, including but not limited to the risks discussed in this report.
OVERVIEW
- --------
We are a multimedia entertainment company that has film and music
operations. We completed production of Snipes in Fiscal 2002 and released it in
Fiscal 2003 through Charles Street, our co-venture with Sony BMG. Snipes had a
limited theatrical release followed by release of the DVD/VHS of the film. In
addition, through a distribution agreement with New Line Television, Inc.,
Snipes was aired on VH-1, the music television channel. While we continued to
recognize revenues from Snipes in Fiscal 2004, we did not recognize the same
level of revenues that we recognized in Fiscal 2003. In Fiscal 2005, we
re-released Snipes as a combination DVD/CD package through Charles Street and we
distributed Train Ride, a film produced by a third party and released a CD by
our recording artists, the Spin Doctors. In Fiscal 2006, we anticipate assisting
Gerry Anderson Productions PLC in the multimedia exploitation of the New Captain
Scarlet series, commencing production of our new movie Four Point Play and
releasing CDs by our music artists Kulcha Don and Kristy Frank.
We presently do not have sufficient cash to implement our business
plan. We have experienced this lack of liquidity throughout Fiscal 2004, Fiscal
2005 and the first quarter of Fiscal 2006, causing us to be unable to produce
any additional feature films. We believe that we need to raise or otherwise
obtain at least $10,000,000 in additional financing in order to satisfy our
existing obligations and implement our business plan. If we are successful in
obtaining such financing, we may require an additional nine to twelve months in
order to complete production of additional feature films or music projects for
release and distribution. Accordingly, in order to generate revenues in Fiscal
2006, we may need to rely on other sources of revenue such as acquiring the
rights to distribute and exploit feature films, music projects and other
entertainment content produced by third parties. If we are not successful in
obtaining additional financing, we will not be able to complete the projects we
have planned for Fiscal 2006 or continue to implement our business plan.
The following discussion and analysis should be read in conjunction
with the consolidated financial statements and the related notes thereto
included in this Form 10-QSB.
CRITICAL ACCOUNTING POLICIES
- ----------------------------
In presenting our financial statements in conformity with accounting
principles generally accepted in the United States, we are required to make
estimates and assumptions that affect the amounts reported therein. Several of
the estimates and assumptions we are required to make relate to matters that are
inherently uncertain as they pertain to future events. However, events that are
outside of our control cannot be predicted and, as such, they cannot be
contemplated in evaluating such estimates and assumptions. If there is a
significant unfavorable change to current conditions, it will likely result in a
material adverse impact to our consolidated results of operations, financial
position and in liquidity. We believe that the estimates and assumptions we used
when preparing our financial statements were the most appropriate at that time.
Presented below are those accounting policies that we believe require subjective
and complex judgments that could potentially affect reported results.
10
Revenue Recognition
--------------------
We recognize revenue from the sale or licensing of films and
nonrefundable minimum guarantees from customers upon meeting all recognition
requirements of Statement of Position ("SOP") 00-2, "Accounting by Producers or
Distributors of Films". According to SOP 00-2, an entity should recognize
revenue from a sale or licensing arrangement of a film when all of the following
conditions are met:
o persuasive evidence of a sale or licensing arrangement with a
customer exists;
o the film is complete and, in accordance with the terms of the
arrangement, has been delivered or is available for immediate and
unconditional delivery;
o the license period of the arrangement has begun and the customer
can begin its exploitation, exhibition, or sale;
o the arrangement fee is fixed or determinable; and
o collection of the arrangement fee is reasonably assured.
If we do not meet any one of the preceding conditions, then we will defer
recognizing revenue until all of the conditions are met.
Capitalized Film Costs
----------------------
Costs of making motion picture films that are produced for sale to
third parties are stated at the lower of cost, less accumulated amortization, or
fair value. In accordance with SOP 00-2, we expense film costs based on the
ratio of the current period gross revenues to estimated total gross revenues
from all sources on an individual production basis. As of January 31, 2006, the
film costs of $139,481 which we have recorded on our balance sheet were incurred
in connection with the production of seven films that are in development and
pre-production. We will commence the amortization of these capitalized film
costs upon the distribution of their respective DVDs. Once revenues from a film
commence, the decision as to what portion of the costs to amortize in a given
period is dependent on the estimate of total gross revenues from that film. A
lower estimate will result in faster amortization, while a higher estimate may
result in a disproportionate amortization in later periods if actual revenues
are lower than initial estimates.
Artist Compensation Costs
-------------------------
The amount of royalties earned by artists, as adjusted for anticipated
returns, is charged to expense in the period in which the sale of the record
takes place. Advance royalty paid to an artist is reported as an asset only if
the past performance and current popularity of the artist to whom the advance is
made provide a sound basis for estimating that the amount of the advance will be
recoverable from future royalties earned by the artist. Capitalized advances are
charged to expense as subsequent royalties are earned by the artist. Any portion
of capitalized advances that appear not to be fully recoverable from future
royalties to be earned from the artist are charged to expense during the period
in which the loss becomes evident.
11
RESULTS OF OPERATIONS
- ---------------------
Three Months Ended January 31, 2006 (Fiscal 2006-First Quarter) vs. Three Months
Ended January 31, 2005 (Fiscal 2005-First Quarter)
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
Fiscal 2006 - First Quarter Fiscal 2005 - First Quarter $ Change
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
Net Loss 758,557 2,674,750 (1,916,193)
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
Net Loss from Operations 739,314 2,677,598 (1,938,284)
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
Net Revenue 39,944 2,262 37,682
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
Direct Costs 110,982 114,668 (3,686)
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
Operating Expenses 668,276 2,565,192 (1,896,916)
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
Other Income (Expense) (19,243) 2,848 (22,091)
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
The $1,938,284 decrease in Net Loss From Operations was primarily due
to the decrease in fees related to financing activities, a decrease in operating
expenses related to the European office and operations and an increase in Net
Revenue.
The $37,682 increase in Net Revenues primarily resulted from the fact
that Net Revenue was realized from the distribution of the TrainRide DVD in
Fiscal 2006-First Quarter and there was no new DVD release during Fiscal
2005-First Quarter.
The $3,686 decrease in Direct Cost was a result of our efforts to
contain Direct Costs and the recoupment of expenses by our joint venture partner
relating to the release of the TrainRide DVD. Direct Costs are costs directly
related to the production of film or music projects that we develop or the costs
directly related to the retention of new artists and include such items as
production fees and costs, artist costs and expenses, engineering services,
equipment rentals, studio supplies and support services.
The $1,896,916 decrease in Operating Expenses was primarily due to a
decrease of approximately $1,500,000 in fees related to financing activities, a
decrease of approximately $90,000 in operating expenses related to the European
office resulting from its closure in June 2005, a decrease of approximately
$55,000 in professional and consulting fees, an approximate $60,000 decrease in
travel expenses and an approximate $60,000 decrease in office expense offset by
an increase of approximately $107,000 in interest expense an increase of
approximately $19,000 in rent and utilities expenses related to the Philadelphia
office lease that commenced in January 2005. Operating Expenses are generally
the costs of operating our business and include salaries, advertising,
professional and consulting fees, rent and utilities, and travel.
OFF-BALANCE SHEET ARRANGEMENTS
There were no off-balance sheet arrangements during the three months
ended January 31, 2006 that have, or are reasonably likely to have, a current or
future affect on our financial condition, changes in financial condition,
revenues or expenses, results of operations, liquidity, capital expenditures or
capital resources that is material to our interests.
12
CHANGES IN FINANCIAL POSITION, LIQUIDITY AND CAPITAL RESOURCES
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
Fiscal 2006 - First Quarter Fiscal 2005 - First Quarter $ Change
---------------------------- ---------------------------- ----------------------------
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
Cash Flow from Operating $(475,368) $(2,989,118) $2,513,750
Activities
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
Cash Flow from Investing $(1,800) $5,301 $(7,101)
Activities
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
Cash Flow from Financing $475,000 $3,144,562 $(2,669,562)
Activities
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
Net cash used in operating activities in Fiscal 2006 - First Quarter
was due primarily to our Net Loss, principally offset by non-cash charges for
depreciation and amortization of $44,425, a foreign currency exchange loss of
$19,370, a decrease in prepaid expenses of $115,581 and an increase in accounts
payable and accrued expenses of $124,492 offset by a decrease in advances from
distributors of $30,925.
Net cash used in investing activities in Fiscal 2006-First Quarter
represented repayment of $1,800 of monies previously advanced to us by our
principal stockholder.
Net cash provided by financing activities in Fiscal 2006-First Quarter
was due to $475,000 advanced to us through term loans. This amount is
significantly less than Fiscal 2005-First Quarter as we did not have any
borrowings on long term debt or proceeds from the sale of common stock in Fiscal
2006-First Quarter.
At January 31, 2006, we had approximately $32,500 in cash. At March 14,
2006, we had approximately $35,300 in cash. We do not believe that the amount of
cash that we had on hand at March 14, 2006 is sufficient to fund our operations
through March 31, 2007. We have principally relied on equity financing and loans
from our principal stockholder, distributions from Charles Street, our
co-venture with Sony BMG, and third party lenders to fund our operations. During
Fiscal 2006, we anticipate continuing to pursue all possible funding scenarios
that will finance our business operations. We intend to obtain financing to fund
our operations for the next twelve months and will consider sales of our
securities and/or a combination of alternative financing structures including,
but not limited to, joint or co-ventures, licensing of projects, production
subsidies, debt financing, tax structured financing, a merger with or
acquisition of a foreign listed entity and partnerships for individual or
multiple projects. However, we are not certain that these financing transactions
will close or whether we will be able to obtain additional financing. We believe
that it will be necessary for us to raise at least $10,000,000 in order to meet
our anticipated cash requirements through March 31, 2007. There can be no
assurances that we will be successful in our efforts to raise this amount of
additional financing. In the event that we are unable to raise these funds, we
will then be required to delay our plans to grow our business and we will rely
on our net revenues to fund our operations.
We derived a significant portion of our net revenues in Fiscal 2003 and
Fiscal 2004 from our Charles Street joint venture related to the sale of the
feature film Snipes, which was released on DVD/Home Video by Sony BMG on
February 25, 2003. In Fiscal 2004, there was a significant decrease in net
revenues due to the decline in revenues from Snipes and our failure to release
any new movies or entertainment content. Under the terms of the co-venture
agreement with Sony BMG, as amended on October 2, 2003, Ruffnation Films will
fund the creation, production and marketing of ten films for Charles Street.
Snipes was the first film we produced under the agreement. Sony BMG will advance
funds for manufacturing, marketing, promotion, production, distribution and
other related expenses for film and music projects. These funds are considered a
loan to Charles Street and are recoverable by Sony BMG from the sales of
products released by Charles Street. Sony BMG has the right to accept or reject
any film in its discretion. Substantially all of the $1,149,584 in Net Revenues
which we generated in Fiscal 2003 and the $239,070 of Net Revenues which we
generated in Fiscal 2004 represented revenues primarily from sales to rental
outlets and limited retail sales of the feature film Snipes.
13
Through December 31, 2005, the last quarter for which a report has been
received, Sony BMG has reported gross billings for Charles Street related to the
release of the Snipes DVD/Home Video of $2,302,083 and net profits of
$1,042,341, of which our portion is $857,516. We did not receive any payments
from Sony BMG related to Snipes in Fiscal 2005 or Fiscal 2006-First Quarter. In
November 2004, Snipes was re-released as a combination DVD-CD package in the US,
UK and various European territories. Although we may receive additional payments
from Charles Street in Fiscal 2006 related to sales of Snipes, there can be no
assurance of the amount or timing of such payments. Additionally, through
December 31, 2005, the last quarter for which a report has been received, Sony
BMG has reported gross billings for Charles Street related to the release of the
TrainRide DVD/Home Video of $210,789 and net profits of $74,606 of which our
portion is $69,104. Although we may receive payments from Charles Street in
Fiscal 2006 related to sales of TrainRide, there can be no assurance of the
amount or timing of such payments. As of the date of this report, we have not
received additional financial information from Sony BMG relating to amounts due
to Charles Street for Snipes or TrainRide.
We have entered into negotiations of agreements with licensors and
distributors of our film and music products both domestically and
internationally. Pursuant to industry standards, the terms and conditions of
these agreements provide for advances against sales of the respective film or
music product that is licensed or distributed. We use the advances for operating
capital needs. However in most cases these advances are recoverable from future
sales of our products. There is no assurance that the advances that we receive
will be recoverable from the sale of respective music or film products licensed
or distributed domestically or internationally. In addition, there is no
assurance that we will receive sufficient advances to adequately fund our
operations.
We advance funds to artists and, in some cases, to independent
producers pursuant to their respective contracts for acquisition, composition,
marketing, production, development or other related costs. In most cases, these
expenses are recoverable from the artist or independent producer upon the sale
of such party's music or film product. However, there can be no assurance that
the advances or expenses will be recoverable from the artist or producer of a
film or music project. We do not presently have any existing obligations to
advance funds to any artists or independent producers and our ability to do so
in the future is highly dependent on our ability to raise additional financing.
As we presently do not generate sufficient cash flow from our
operations to fund our working capital needs, we have been raising the funds we
need to operate our business through the offer and sale of our securities.
On December 27, 2004, TM Film Distribution, Inc., our wholly-owned
subsidiary, entered into a Loan Agreement with Fairbairn Private Bank Limited
(the "Loan Agreement"). The Loan Agreement established a loan facility in the
maximum aggregate principal amount of 1,628,055 pounds sterling (the "Facility")
that TM Film Distribution may draw down from time to time. To date, TM Film
Distribution has drawn down 1,625,000 pounds sterling of this Facility. Interest
accrues for each advance under the Facility at the rate of LIBOR on the date of
the advance plus 0.375%. Pursuant to the Loan Agreement, the lender determines
LIBOR in its sole discretion by reference to either (i) the relevant Reuters
page at or about 11:00 a.m. (London time) on the date an advance is drawn or
(ii) if no such rate can be ascertained at the relevant time, the rate offered
to lender by any leading bank in the London inter-bank market at or about 11:00
a.m. (London time) on the date an advance is drawn. Amounts drawn under the
Facility are due for repayment on that date which is 24 months after the date on
which the final draw down of the Facility is made. Interest is payable quarterly
during the term that each advance is outstanding. TM Film Distribution's
obligation to repay all loan amounts under the Facility is secured by a Deed of
Charge Over Cash and a Deed of Charge Over Deposit each created in favor of the
lender and covering funds held on deposit by TM Film Distribution with the
lender. These funds are part of the Printing and Advertising fund established by
KMM on behalf of TM Film Distribution, as more fully described in Business of
the Company - Film Division - Keydata Media & Marketing 1 LLP Distribution
Arrangement. On December 27, 2004, we received a payment of $1,468,035 from TM
Film Distribution as payment of costs and expenses in connection with its
formation and its activities in connection with the structuring of transactions
with KeyData Media & Marketing 1, LLP.
In August 2004, we engaged Brockington Securities, Inc. as our
financial advisor and investment banker pursuant to which we issued them 250,000
shares of our common stock. In January 2005, they assisted us in the completion
of a private placement offering pursuant to which we raised gross proceeds of
$300,000 and paid Brockington a commission of $30,000.
14
On August 24, 2004, we entered into an agreement with Gerry Anderson
Productions PLC ("GAP") pursuant to which we will represent GAP as its agent in
the development and multimedia exploitation of GAP's New Captain Scarlet Series
properties in the United States, Canada and such other territories as are
mutually agreed upon. In connection with this agreement, we have introduced GAP
to Sony Wonder, a group of Sony, and they have negotiated a term sheet agreement
regarding the broadcast and master licensing of the New Captain Scarlet Series
pursuant to which GAP will provide Sony Wonder with at least 13 episodes of the
series for the purpose of securing a broadcast arrangement with a major
television network and/or cable television network. In addition, Charles Street,
our co-venture with Sony, will negotiate with artists, develop and produce a
soundtrack CD/DVD for the New Captain Scarlet Series.
As consideration for services provided under this agreement, we will
receive a fee equal to five percent of the gross cash receipts realized by GAP
from Sony's exploitation of the New Captain Scarlet Series (excluding revenues
generated by sub-agents or distributors appointed by Sony, if any). In addition,
GAP is obligated to purchase an aggregate of 1,538,462 shares of our common
stock in a private placement offering at an aggregate purchase price of
$1,000,000. During the period from September 2004 through January 2005, GAP
purchased 1,505,539 of these shares and remains obligated to purchase 32,923
shares of our common stock. Pursuant to the agreement, we also have a five-year
option to purchase up to $1,000,000 of GAP's capital stock at a 15% discount to
the value of the shares on the date that the option is exercised.
On May 5, 2005, we entered into a Securities Purchase Agreement with IL
Resources, LLC ("IL Resources") pursuant to which we issued to IL Resources a
Secured Convertible Note in the aggregate principal amount of $1,590,000 and a
warrant to purchase 2,000,000 shares of our common stock. This Note accrues
interest at the rate of 12 percent per annum and has a maturity date of May 30,
2006. During Fiscal 2006-First Quarter, this Note was amended to provide for
additional advances and we received an additional $392,500 loan on the same
terms and conditions. This Note is convertible into a total of 3,965,000 shares
of our common stock at a conversion price of $0.50, subject to certain
adjustments.
On or about May 6, 2005, eight of our creditors agreed to exchange an
aggregate of $3,268,162 in indebtedness owed to them for shares of our common
stock at a price of $1.00 per share, for a total of 3,268,162 shares.
In addition to the financing that we need to implement our business
plan, we are in default on a loan in the original principal amount of $162,000
that Metropolitan, our subsidiary, received from a bank. The current principal
balance of the loan at March 15, 2006 was approximately $126,708. The original
maturity date of the loan was August 2006. The loan is payable in monthly
installments of $1,965, including accrued interest at a rate of 8% per annum,
with a lump sum payment due at maturity of $99,858. The loan is collateralized
by all assets of Metropolitan and a personal guarantee by Christopher Schwartz.
The loan agreement includes a provision that states that any change of ownership
of 25% or more of the common stock of Metropolitan without the prior written
consent of the bank is an event of default. The share exchange transaction that
occurred in October 2002 resulted in a change in ownership of all of the issued
and outstanding common stock of Metropolitan. Upon default, the bank, at its
option, may increase the interest rate four basis points, demand payment in full
of the outstanding principal balance of the loan plus all accrued interest
thereon, and may hold Metropolitan liable for all collection costs that it
incurs. On May 10, 2004, the bank demanded payment in full of the outstanding
principal balance of the loan plus all accrued interest on the loan in the
approximate amount of $14,500 for the aggregate amount of approximately $147,100
by August 17, 2004. As we presently do not have sufficient cash on hand to repay
this loan, we may be faced with the bank's election to sell a sufficient amount
of the assets of Metropolitan to raise the funds necessary to repay this loan.
Any such action would have a material adverse effect on our operations. The
total outstanding amount of this note is reflected as a current liability in our
January 31, 2006 Consolidated Balance Sheet.
In addition, we have accounts payable and accrued expenses in the
aggregate amount of approximately $1,347,589 that are presently past due.
We also have other obligations that mature or may mature in the next
twelve months.
15
On April 11, 2003, Snipes cancelled a $400,000 promissory note, a
$25,000 promissory note and $10,000 promissory note and issued an amended
promissory note in the principal amount of $435,000 to third party lenders. The
amended promissory note accrued interest at the rate of 35% per annum and was
due to mature on October 31, 2003. However, on October 30, 2003 the promissory
note was amended to extend the maturity date from October 31, 2003 until April
30, 2004. On June 2, 2004, the promissory note was further amended to extend the
maturity date from April 30, 2004 until September 30, 2004. As of June 2, 2004,
the outstanding principal and accrued interest on the promissory note was
$654,906. For the period from June 2, 2004 until September 30, 2004, the
interest rate on the promissory note was reduced from 35% to 20% and accrued on
the balance of $654,906. In June 2004, we received short-term loans in the
aggregate amount of $90,000 from a third party lender. These obligations were
documented by promissory notes that accrued interest at the rate of 10% per
annum. These promissory notes were scheduled to mature on July 1, 2005. On May
1, 2005, an outstanding balance of $1,041,524 related to these and other third
party loans was repaid by the issuance of a promissory note in the amount of
$510,000 and conversion of the remaining $531,524 into shares of our common
stock at a conversion price of $1.00 per share. This promissory note accrues
interest at the rate of 20 percent per annum and is scheduled to mature on May
9, 2006.
As described above, repayment of loans in the aggregate principal
amount of $1,982,500 from IL Resources is due on May 30, 2006. In addition, TM
Film Distribution, Inc.'s loan facility from Fairbairn Private Bank matures in
January 2007.
We have received loans in the aggregate principal amount of $1,100,000
from Christopher Schwartz, our Chairman, Chief Executive Officer and principal
stockholder. These obligations are documented by a demand note payable which
accrues interest at the rate of 7% per annum. In addition, in Fiscal 2005, Mr.
Schwartz, extended short-term loans in an aggregate principal amount of $171,682
to us and our operating subsidiaries. We have repaid $253,837 of the principal
amount of these loans.
Accordingly, approximately $7,350,000 from the net proceeds of any
additional financing will be used to satisfy our existing loans and obligations
that have matured or will mature in the next twelve months.
The nature of our business is such that significant cash outlays are
required to produce and acquire films, television programs, music soundtracks
and albums. However, net revenues from these projects are earned over an
extended period of time after their completion or acquisition. Accordingly, we
will require a significant amount of cash to fund our present operations and to
continue to grow our business. As our operations grow, our financing
requirements are expected to grow proportionately and we project the continued
use of cash in operating activities for the foreseeable future. Therefore we are
dependent on continued access to external sources of financing. Our current
financing strategy is to sell our equity securities to raise a substantial
amount of our working capital. We also plan to leverage investment in film and
music productions through operating credit facilities, co-ventures and
single-purpose production financing. We plan to obtain financing commitments,
including, in some cases, foreign distribution commitments to cover, on average,
at least 50% of the budgeted third-party costs of a project before commencing
production. We plan to outsource required services and functions whenever
possible. We plan to use independent contractors and producers, consultants and
professionals to provide those services necessary to operate the corporate and
business operations in an effort to avoid build up of overhead infrastructures,
to maintain a flexible organization and financial structure for productions and
ventures and to be responsive to business opportunities worldwide. Accordingly,
once we raise at least $10,000,000 in additional financing, we believe that the
net proceeds from that financing together with cash flow from operations,
including our share of future film production under the Charles Street
co-venture with Sony, will be available to meet known operational cash
requirements. In addition, we believe that our improved liquidity position will
enable us to qualify for new lines of credit on an as-needed basis.
These matters raise substantial doubt about our ability to continue as
a going concern. We will need to raise significant additional funding in order
to satisfy our existing obligations and to fully implement our business plan.
There can be no assurances that such funding will be available on terms
acceptable to us or at all. If we are unable to generate sufficient funds,
particularly at least $10,000,000, then we may be forced to cease or
substantially curtail operations.
We do not pay and do not intend to pay dividends on our common stock.
We believe it to be in the best interest of our stockholders to invest all
available cash in the expansion of our business. Accordingly, our stockholders
may only receive income from the appreciation in our stock price, if any.
16
ITEM 3. CONTROLS AND PROCEDURES
- ------
EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES
------------------------------------------------
As of January 31, 2006, we carried out an evaluation of the
effectiveness of the design and operation of our "disclosure controls and
procedures" (as defined in the Exchange Act Rules 13a-15(e) and 15d-15(e)) under
the supervision and with the participation of our management, including
Christopher Schwartz, our Chief Executive Officer and Chief Financial Officer.
Based upon that evaluation, Mr. Schwartz concluded that our disclosure controls
and procedures are effective.
Disclosure controls and procedures are controls and other procedures
that are designed to ensure that information required to be disclosed in our
reports filed or submitted under the Exchange Act are recorded, processed,
summarized and reported, within the time periods specified in the Securities and
Exchange Commission's rules and forms. Disclosure controls and procedures
include, without limitation, controls and procedures designed to ensure that
information required to be disclosed in our reports filed under the Exchange Act
is accumulated and communicated to management to allow timely decisions
regarding required disclosure.
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
- ------
We know of no pending legal proceedings to which we or any of our
subsidiaries are a party which are material or potentially material, either
individually or in the aggregate. We are from time to time, during the normal
course of our business operations, subject to various litigation claims and
legal disputes. We do not believe that the ultimate disposition of any of these
matters will have a material adverse effect on our consolidated financial
position, results of operations or liquidity.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
- ------
On December 20, 2005, we entered into a consulting agreement with Walt
Beach pursuant to which we issued him 1,500,000 shares of our common stock
pursuant to Section 4(2) of the Securities Act.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
- ------
We are presently in technical default on a loan in the principal amount
of $162,000 which Metropolitan, our subsidiary, received from a bank. The loan
has a maturity date of August 2006. The loan is payable in monthly installments
of $1,965, including accrued interest at a rate of 8% per annum, with a lump sum
payment due at maturity of $99,858. The loan is collateralized by all assets of
Metropolitan and a personal guarantee by Christopher Schwartz. The loan
agreement includes a provision that states that any change of ownership of 25%
or more of the common stock of Metropolitan is an event of default. The share
exchange transaction resulted in a change in ownership of all of the issued and
outstanding common stock of Metropolitan. Accordingly, Metropolitan is in
technical default of this loan agreement. Upon default, the bank, at its option,
may increase the interest rate four basis points, demand payment in full of the
outstanding principal balance of the loan plus all accrued interest thereon, and
may hold Metropolitan liable for all collection costs that it incurs. Although
the bank has not notified us that it intends to exercise any of these options,
there is no assurance that it will not elect to do so at any point in the
future. As of March 15, 2006, the total outstanding balance of this loan was
$126,708. As we presently do not have sufficient cash on hand to repay this
loan, if the bank elects to demand repayment, then we may be faced with the
bank's election to sell a sufficient amount of the assets of Metropolitan to
raise the funds necessary to repay this loan. Any such action would have a
material adverse effect on our operations. Since Metropolitan did not receive a
waiver from the bank, the total outstanding amount of this note is reflected as
a current liability in our January 31, 2006 Consolidated Balance Sheet.
17
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
- ------
2.1 Share Exchange Agreement and Plan of Reorganization dated as
of October 2, 2002 by and among US Patriot, Inc. and
Christopher Schwartz (incorporated by reference to Exhibit
1.1 of Current Report on Form 8-K filed on October 18, 2002).
2.2 Agreement and Plan of Merger between US Patriot, Inc. and
TriMedia Entertainment Group, Inc. (incorporated by reference
to Exhibit 3.4 of Current Report on Form 8-K filed on
December 2, 2002).
2.3 Articles of Merger as filed in the State of South Carolina
(incorporated by reference to Exhibit 2.1 of Current Report
on Form 8-K filed on December 2, 2002).
2.4 Certificate of Merger as filed in the State of Delaware
(incorporated by reference to Exhibit 3.5 of Current Report
on Form 8-K filed on December 2, 2002).
3.1 Certificate of Incorporation of TriMedia Entertainment Group,
Inc. (incorporated by reference to Exhibit 3.1 of Current
Report on Form 8-K filed on December 2, 2002).
3.2 Certificate of Amendment of Certificate of Incorporation
Before Payment of Capital of TriMedia Entertainment Group,
Inc. (incorporated by reference to Exhibit 3.2 of Current
Report on Form 8-K filed on December 2, 2002).
3.3 By-laws of TriMedia Entertainment Group, Inc. (incorporated
by reference to Exhibit 3.3 of Current Report on Form 8-K
filed on December 2, 2002).
4.1 Specimen Stock Certificate (incorporated by reference to
Exhibit 4.1 to the Annual Report on Form 10-KSB for the
fiscal year ended October 31, 2002 filed on March 17, 2003).
4.2 Certificate of Designations of Series A Convertible Preferred
Stock of US Patriot, Inc. (incorporated by reference to
Exhibit 4.2 to the Annual Report on Form 10-KSB for the
fiscal year ended October 31, 2002 filed on March 17, 2003).
10.1 Employment Agreement dated as of October 9, 2002 by and
between US Patriot, Inc. and Christopher Schwartz
(incorporated by reference to Exhibit 10.1 to the Annual
Report on Form 10-KSB for the fiscal year ended October 31,
2002 filed on March 17, 2003).
10.2 Co-Venture Agreement between Sony Music, a Group of Sony
Music Entertainment, Inc., Ruffnation Films, LLC and
Christopher Schwartz dated as of September 20, 2002
(incorporated by reference to Exhibit 10.2 to the Annual
Report on Form 10-KSB for the fiscal year ended October 31,
2002 filed on March 17, 2003).
10.3 Stock Purchase Warrant to purchase 33,400 shares of common
stock issued to Frank Eiffe dated November 14, 2002
(incorporated by reference to Exhibit 10.12 to the Annual
Report on Form 10-KSB for the fiscal year ended October 31,
2002 filed on March 17, 2003).
10.4 Stock Purchase Warrant to purchase 66,600 shares of common
stock issued to Dr. Wolfgang Moelzer dated November 14, 2002
(incorporated by reference to Exhibit 10.13 to the Annual
Report on Form 10-KSB for the fiscal year ended October 31,
2002 filed on March 17, 2003).
10.5 Stock Purchase Warrant to purchase 50,000 shares of common
stock issued to BKB Boston K Borg Management GmbH dated
December 12, 2002 (incorporated by reference to Exhibit 10.14
to the Annual Report on Form 10-KSB for the fiscal year ended
October 31, 2002 filed on March 17, 2003).
10.6 7% Demand Promissory Note in the principal amount of
$1,100,000 by Ruffnation Films LLC issued to Christopher
Schwartz dated May 1, 2002 (incorporated by reference to
Exhibit 10.15 to the Annual Report on Form 10-KSB for the
fiscal year ended October 31, 2002 filed on March 17, 2003).
10.7 Security Agreement issued by Ruffnation Films LLC, Snipes
Productions LLC and Metropolitan Recording Inc. to
Christopher Schwartz dated May 1, 2002 (incorporated by
reference to Exhibit 10.16 to the Annual Report on Form
10-KSB for the fiscal year ended October 31, 2002 filed on
March 17, 2003).
10.8 8% Promissory Note in the principal amount of $162,000 by
Metropolitan Recording Inc. issued to Founders Bank dated
August 21, 2001 (incorporated by reference to Exhibit 10.17
to the Annual Report on Form 10-KSB for the fiscal year ended
October 31, 2002 filed on March 17, 2003).
18
10.9 Security Agreement issued by Metropolitan Recording Inc. to
Founders Bank dated August 21, 2001 (incorporated by
reference to Exhibit 10.18 to the Annual Report on Form
10-KSB for the fiscal year ended October 31, 2002 filed on
March 17, 2003).
10.10 Loan Agreement between Metropolitan Recording, Inc. and
Founders Bank dated August 21, 2001 (incorporated by
reference to Exhibit 10.19 to the Annual Report on Form
10-KSB for the fiscal year ended October 31, 2002 filed on
March 17, 2003).
10.11 Warrants to purchase 10,000 shares of common stock issued to
Trident Growth Fund, L.P. dated March 27, 2003 (incorporated
by reference to Exhibit 10.2 of the Quarterly Report on Form
10-QSB filed on June 18, 2003).
10.12 Warrants to purchase 100,000 shares of common stock issued to
Trident Growth Fund, L.P. dated June 13, 2003 (incorporated
by reference to Exhibit 10.1 of the Quarterly Report on Form
10-QSB filed on September 17, 2003).
10.13 12% Demand Promissory Note in the principal amount of $67,102
issued to 1025 Investments, Inc. dated June 19, 2003
(incorporated by reference to Exhibit 10.2 of the Quarterly
Report on Form 10-QSB filed on September 17, 2003).
10.14 Warrants to purchase 50,000 shares of common stock issued to
Aaron Lehmann dated June 20, 2003 (incorporated by reference
to Exhibit 10.3 of the Quarterly Report on Form 10-QSB filed
on September 17, 2003).
10.15 Warrants to purchase 100,000 shares of common stock issued to
Founders Equity Securities, Inc. dated June 20, 2003
(incorporated by reference to Exhibit 10.4 of the Quarterly
Report on Form 10-QSB filed on September 17, 2003).
10.16 Warrants to purchase 25,000 shares of common stock issued to
Daryl Strickling dated July 2, 2003 (incorporated by
reference to Exhibit 10.5 of the Quarterly Report on Form
10-QSB filed on September 17, 2003).
10.17 12% Demand Promissory Note in the principal amount of $17,000
issued to 1025 Investments, Inc. dated July 25, 2003
(incorporated by reference to Exhibit 10.6 of the Quarterly
Report on Form 10-QSB filed on September 17, 2003).
10.18 Distribution Agreement between New Line Television, Inc. and
Ruffnation Films LLC dated November 26, 2002 (incorporated by
reference to Exhibit 10.7 of the Quarterly Report on Form
10-QSB filed on September 17, 2003).
10.19 Amendment to Co-Venture Agreement between Sony Music, a Group
of Sony Music Entertainment, Inc., Ruffnation Films, LLC and
Christopher Schwartz dated as of October 2, 2003
(incorporated by reference to Exhibit 10.30 to the Annual
Report on Form 10-KSB for the fiscal year ended October 31,
2003 filed on February 13, 2004).
10.20 35% Secured Promissory Note in the principal amount of
$435,000 issued by Snipes Productions, LLC to SPH
Investments, Inc., Capital Growth Trust, HMA Investment
Profit Sharing Plan and Continental Southern Resources, Inc.
dated June 27, 2002 as amended through April 11, 2003 and
October 30, 2003 (incorporated by reference to Exhibit 10.31
to the Annual Report on Form 10-KSB for the fiscal year ended
October 31, 2003 filed on February 13, 2004).
10.21 Warrants to purchase 10,000 shares of common stock issued to
Trident Growth Fund, L.P. dated September 11, 2003
(incorporated by reference to Exhibit 10.32 to the Annual
Report on Form 10-KSB for the fiscal year ended October 31,
2003 filed on February 13, 2004).
10.22 Stock Purchase Warrant to purchase 2,500 shares of common
stock issued to Middle Fork Investments Ltd. dated April 5,
2004 (incorporated by reference to Exhibit 10.2 of the
Quarterly Report on Form 10-QSB filed on June 15, 2004).
10.23 Stock Purchase Warrant to purchase 121,875 shares of common
stock issued to Middle Fork Investments Ltd. dated April 5,
2004 (incorporated by reference to Exhibit 10.3 of the
Quarterly Report on Form 10-QSB filed on June 15, 2004).
10.24 Agreement dated as of August 12, 2004 by and between Gerry
Anderson Productions PLC and TriMedia Entertainment Group,
Inc. (incorporated by reference to Exhibit 10.1 of Current
Report on Form 8-K filed on September 10, 2004).
19
10.25 Stock Purchase Warrant to purchase 50,000 shares of common
stock issued to Larry Feinstein dated June 1, 2004
(incorporated by reference to Exhibit 10.1 of the Quarterly
Report on Form 10-QSB filed on September 14, 2004).
10.26 10% Demand Promissory Note in the principal amount of $50,000
issued to 1025 Investments, Inc. dated June 1, 2004
(incorporated by reference to Exhibit 10.2 of the Quarterly
Report on Form 10-QSB filed on September 14, 2004).
10.27 10% Demand Promissory Note in the principal amount of $40,000
issued to 1025 Investments, Inc. dated June 14, 2004
(incorporated by reference to Exhibit 10.3 of the Quarterly
Report on Form 10-QSB filed on September 14, 2004).
10.28 Stock Purchase Warrant to purchase 62,500 shares of common
stock issued to K. David Stevenson dated June 25, 2004
(incorporated by reference to Exhibit 10.4 of the Quarterly
Report on Form 10-QSB filed on September 14, 2004).
10.29 10% Demand Promissory Note in the principal amount of $50,000
issued to K. David Stevenson dated June 25, 2004
(incorporated by reference to Exhibit 10.5 of the Quarterly
Report on Form 10-QSB filed on September 14, 2004).
10.30 Stock Purchase Warrant to purchase 62,500 shares of common
stock issued to K. David Stevenson dated August 13, 2004
(incorporated by reference to Exhibit 10.6 of the Quarterly
Report on Form 10-QSB filed on September 14, 2004).
10.31 10% Demand Promissory Note in the principal amount of $50,000
issued to K. David Stevenson dated August 13, 2004
(incorporated by reference to Exhibit 10.7 of the Quarterly
Report on Form 10-QSB filed on September 14, 2004).
10.32 Loan Agreement Between Fairbairn Private Bank Limited and TM
Film Distribution, Inc. (incorporated by reference to Exhibit
10.1 of Current Report on Form 8-K filed on January 5, 2005).
10.33 Lease Agreement by and between Delpar L.P. and TriMedia
Entertainment Group, Inc. (incorporated by reference to
Exhibit 10.36 to the Annual Report on Form 10-KSB for the
fiscal year ended October 31, 2004 filed on January 31,
2005).
10.34 Sale and Purchase Agreement between TriMedia Film Group, Inc.
and Keydata Media and Marketing I, LLP dated as of October
2004 (incorporated by reference to Exhibit 10.37 to the
Annual Report on Form 10-KSB for the fiscal year ended
October 31, 2004 filed on January 31, 2005).
10.35 Distribution Agreement between Keydata Media and Marketing I,
LLP and TM Film Distribution, Inc. dated as of October 2004
(incorporated by reference to Exhibit 10.38 to the Annual
Report on Form 10-KSB for the fiscal year ended October 31,
2004 filed on January 31, 2005).
10.36 Secured Convertible Term Note dated May 5, 2005 (incorporated
by reference to Exhibit 10.2 to the Current Report on Form
8-K filed on June 8, 2005).
10.37 Securities Purchase Agreement dated May 5, 2005 by and
between TriMedia Entertainment Group, Inc. and IL Resources,
LLC (incorporated by reference to Exhibit 10.1 to the Current
Report on Form 8-K filed on June 8, 2005).
10.38 Securities Pledge Agreement dated May 5, 2005 by and between
TriMedia Entertainment Group, Inc. and IL Resources, LLC
(incorporated by reference to Exhibit 10.3 to the Current
Report on From 8-K filed on June 8, 2005).
10.39 Security Agreement dated May 5, 2005 by and between TriMedia
Entertainment Group, Inc. and IL Resources, LLC (incorporated
by reference to Exhibit 10.5 to the Current Report on Form
8-K filed on June 8, 2005).
10.40 Subsidiary Guaranty dated May 5, 2005 (incorporated by
reference to Exhibit 10.4 to the Current Report on Form 8-K
filed on June 8, 2005).
10.41 Consulting Agreement dated December 20, 2005 by and between
TriMedia Entertainment Group, Inc. and Walt Beach
(incorporated by reference to Exhibit 10.41 to the Annual
Report on Form 10-KSB filed on March 1, 2006).
31.1 Certification dated March 17, 2006 pursuant to Exchange Act
Rule 13a-14(a) or 15d-14(a) as adopted pursuant to Section
302 of the Sarbanes-Oxley Act of 2002 by Christopher
Schwartz, Chief Executive Officer and Chief Financial
Officer.
20
32.1 Certification dated March 17, 2006 pursuant to 18 U.S.C.
Section 1350 as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002 made by Christopher Schwartz,
Chief Executive Officer and Chief Financial Officer.
(b) On December 22, 2005, we filed a Current Report on Form 8-K
announcing the resignation of Joseph Safina as a member of our board of
directors.
21
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on its behalf by
the undersigned thereunto duly authorized.
TRIMEDIA ENTERTAINMENT GROUP, INC.
Date: March 17, 2006 /s/ Christopher Schwartz
---------------------------------
Christopher Schwartz
Chief Executive Officer and
Chief Financial Officer
(principal financial officer
and principal accounting officer)