UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM SB-2

REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933

VALCOM, INC.
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(Exact name of registrant as specified in its charter)

Delaware 7819 58-1700840
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State or jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization Classification Code Number) Identification No.)

28309 Avenue Crocker, Valencia, California 91355
(661) 257-8000
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(Address and telephone number of registrant's principal executive offices)

Vince Vellardita, CEO
28309 Avenue Crocker, Valencia, California 91355

(661) 257-8000
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(Name, address and telephone number of agent for service)

Copy of communications to:
Darrin M. Ocasio, Esq.
Sichenzia Ross Friedman Ference LLP
1065 Avenue of Americas
New York, NY 10018
Telephone: 212-930-9700
Facsimile: 212-930-9725

Approximate date of proposed sale to the public: From time to time after the
effective date of this Registration Statement.

If this Form is filed to register additional securities for an offering pursuant
to Rule 462(b) under the Securities Act, please check the following box and list
the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ]

If this Form is a post-effective amendment filed pursuant to Rule 462(c) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]

If this Form is a post-effective amendment filed pursuant to Rule 462(d) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]

If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]

CALCULATION OF REGISTRATION FEE
- ---------------------------- ------------------- ----------------------- ---------------------- ----------------------
Title of each class Proposed maximum Proposed maximum
of securities to be Amount to be offering price aggregate offering Amount of
registered(1) registered per share price registration fee(2)
- ---------------------------- ------------------- ----------------------- ---------------------- ----------------------

Common stock 13,574,661(3) $0.25 $3,393,665.25 $429.98
- ---------------------------- ------------------- ----------------------- ---------------------- ----------------------
Common stock 1,500,000(4) $0.25 $375,000.00 $ 47.53
- ---------------------------- ------------------- ----------------------- ---------------------- ----------------------
Common stock 125,000 $0.25 $31,250.00 $ 3.96
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Total Registration Fee $481.47
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(1) Includes shares of our common stock, par value $0.001 per share, which may
be offered pursuant to this registration statement, which shares are issuable
upon conversion of convertible notes and the exercise of warrants by the selling
stockholders. We are also registering such additional shares of common stock as
may be issued as a result of stock-splits, stock dividends and similar
transactions pursuant to Rule 416. The number of shares of common stock
registered hereunder represents a good faith estimate by us of the number of
shares of common stock issuable upon conversion of the convertible notes and
upon exercise of the warrants. For purposes of estimating the number of shares
of common stock to be included in this registration statement, we calculated
200% of the number of shares of our common stock issuable upon conversion of the
convertible notes. Should the conversion ratio result in our having insufficient
shares, we will not rely upon Rule 416, but will file a new registration
statement to cover the resale of such additional shares should that become
necessary.

(2) Fee calculated in accordance with Rule 457(c) of the Securities Act.
Estimated for the sole purpose of calculating the registration fee and based
upon the average quotation of the high and low price of our common stock on
September 16, 2004, as reported on the OTC Bulletin Board.

(3) Represents common stock that may be issued upon the conversion the 8%
Callable Secured Convertible Notes, maturing August 17, 2006.

(4) Represents common stock that may be issued upon the exercise of common share
purchase warrants.

THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON THE DATE OR DATES AS
MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE A
FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT
SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF THE
SECURITIES ACT OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME EFFECTIVE ON THE
DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A), MAY DETERMINE.

PROSPECTUS
Subject to Completion
September 16, 2004

VALCOM, INC.

15,199,661 SHARES OF COMMON STOCK
---------------------------------

This prospectus relates to the resale by certain selling stockholders
of up to 15,199,661 shares of common stock of ValCom, Inc. issuable to the
selling stockholders:

- up to 13,574,661 shares of common stock issuable to certain selling
stockholders upon the conversion of principal and interest, or in
payment of interest, under 8% Callable Secured Convertible Notes; and

- up to 1,500,000 shares of common stock issuable to certain selling
stockholders assuming the exercise of outstanding common share purchase
warrants.

- up to 125,000 shares of common stock.

The selling stockholders may offer to sell the shares of common stock
being offered in this prospectus at fixed prices, at prevailing market prices at
the time of sale, at varying prices or at negotiated prices. We will not receive
any proceeds from the resale of shares of our common stock by the selling
stockholders.

Our common stock is quoted on the OTC Bulletin Board under the symbol
"VACM". On September 16, 2004 the closing bid price for one share of our common
stock was $0.25. We do not have any securities that are currently traded on any
other exchange or quotation system.

Our business is subject to many risks and an investment in our common
stock will also involve a high degree of risk. You should invest in our common
stock only if you can afford to lose your entire investment. You should
carefully consider the various Risk Factors described beginning on page 9 before
investing in our common stock.

Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined if this
prospectus is truthful or complete. Any representation to the contrary is a
criminal offense.

The information in this prospectus is not complete and may be changed.
The selling stockholder may not sell or offer these securities until this
registration statement filed with the Securities and Exchange Commission is
effective. This prospectus is not an offer to sell these securities and it is
not soliciting an offer to buy these securities in any state where the offer or
sale is not permitted.

The date of this prospectus is September __,2004.

The following table of contents has been designed to help you find important
information contained in this prospectus. We encourage you to read the entire
prospectus.

TABLE OF CONTENTS

PAGE NUMBER

PROSPECTUS SUMMARY 6

RISK FACTORS 8

FORWARD-LOOKING STATEMENTS 11

SECURITIES AND EXCHANGE COMMISSION'S PUBLIC REFERENCE 11

THE OFFERING 11

USE OF PROCEEDS 11

SELLING SHAREHOLDERS 12

PLAN OF DISTRIBUTION 16

DISCOUNTED 8% CALLABLE SECURED CONVERTIBLE NOTES 15

WARRANTS 15

LEGAL PROCEEDINGS 18

DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS 18

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT 21

DESCRIPTION OF COMMON STOCK 22

LEGAL MATTERS 23

CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE 23

INTEREST OF NAMED EXPERTS AND COUNSEL 24

EXPERTS 24

DISCLOSURE OF SEC POSITION OF INDEMNIFICATION FOR SECURITIES ACT LIABILITIES 24

DESCRIPTION OF BUSINESS 24

MANAGEMENT'S DISCUSSION AND ANALYSIS 27

RESULTS OF OPERATIONS 27

LIQUIDITY AND CAPITAL RESOURCES 29

APPLICATION OF CRITICAL ACCOUNTING POLICIES 30

DESCRIPTION OF PROPERTY 31

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS 31

MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS 32

DIVIDEND POLICY 32

EXECUTIVE COMPENSATION 32

COMPENSATION OF DIRECTORS AND EXECUTIVE OFFICERS 33

FINANCIAL STATEMENTS 37

WHERE YOU CAN FIND MORE INFORMATION 38

As used in this prospectus, the terms "we", "us", "our", and "ValCom"
mean ValCom, Inc. and its subsidiaries, unless otherwise indicated.

PROSPECTUS SUMMARY

Our Business

We are a diversified entertainment company with the following operating
activities:

1. Studio Rental. Through our subsidiary, Valencia Entertainment
International, LLC, we operated eight sound stages in Valencia, California until
June 10, 2004, when six of our eight sound stages were sold off to pay the debts
of Laurus Master Funds and Finance Unlimited. We currently lease the other two
sound stages. Beginning June 2003, we signed a one-year lease with five one-year
options for our sound stages, with an option to purchase the sound stages as
well. In addition, we acquired seven and one half acres of property in Nevada
with 162,000 square feet of buildings, which are being renovated into seven
sound stages for rental. Our subsidiary, Half Day Video, Inc., supplies
personnel, cameras, and other production equipment to various production
companies on a short-term basis.

2. Film, TV, & Animation Production. In addition to producing our own
television and motion picture programming, we have an exclusive three-year term
facilities agreement in place for productions in Los Angeles County with Woody
Fraser of Woody Fraser Productions

3. Broadcast Television. We own a 45% equity interest in ValCom
Broadcasting, LLC, a New York limited liability company, which operates KVPS
(Channel 8), an independent television broadcaster in the Palm Springs,
California market, which is strategically located in the middle of four major
markets including Los Angeles, Phoenix, Las Vegas and San Diego.

Our principal executive offices are located at 28309 Avenue Crocker,
Valencia, CA 91355. We were incorporated under the laws of the state of
Delaware. Our telephone number is (661) 257-8000.

Number of Shares Being Offered

This prospectus covers the resale by the selling stockholders named in
this prospectus of up to 15,074,661 shares of our common stock which may be
issued to certain selling stockholders upon the conversion of principal and
interest, or in payment of interest, under 8% Callable Secured Convertible
Notes, and up to 1,500,000 shares of common stock which may be issued to the
selling stockholders upon the exercise of outstanding common share purchase
warrants issued in connection with private placement of the 8% Callable Secured
Convertible Notes. In addition, up to 125,000 shares of common stock may be sold
pursuant to this prospectus. The selling stockholders may sell the shares of
common stock in the public market or through privately negotiated transactions
or otherwise. The selling stockholders may sell these shares of common stock
through ordinary brokerage transactions, directly to market makers or through
any other means described in the section entitled "Plan of Distribution".

Number of Shares Outstanding

There were 26,611,928 shares of our common stock issued and outstanding
as at August 26, 2004.

Use of Proceeds

We will not receive any of the proceeds from the sale of the shares of
common stock being offered for sale by the selling stockholder. We will,
however, incur all costs associated with this registration statement and
prospectus.

Summary of Financial Data

The summarized financial data presented below is derived from and
should be read in conjunction with our audited consolidated financial statements
for the years ended September 30, 2003 and September 30, 2002, and our unaudited
consolidated financial statements for the nine-month period ended June 30, 2004,
(in each case including the notes to those financial statements) which are
included elsewhere in this prospectus along with the section entitled
"Management's Discussion and Analysis" beginning on page 27 of this prospectus

- -------------------------------------------------- ------------------------ -------------------------
For the 9-month For the 9-month
period ended period ended
June 30, 2004 June 30, 2003
(unaudited) (unaudited)
- -------------------------------------------------- ------------------------ -------------------------

Revenue $1,714,032 $1,945,427
- -------------------------------------------------- ------------------------ -------------------------
Net Loss for the Period $(5,962,626) $1,823,955
- -------------------------------------------------- ------------------------ -------------------------
Loss Per Share - basic and diluted $(0.29) $(0.15)
- -------------------------------------------------- ------------------------ -------------------------

As at As at
June 30, 2004 June 30, 2003
(unaudited) (unaudited)
- -------------------------------------------------- ------------------------ -------------------------

Working Capital (Deficiency) $(4,170,496) $8,602,508
- -------------------------------------------------- ------------------------ -------------------------
Total Assets $4,113,030 $12,313,994
- -------------------------------------------------- ------------------------ -------------------------
Total Share Capital (including APIC) $16,026,994 $13,239,432
- -------------------------------------------------- ------------------------ -------------------------
Deficit $(16,518,976) $(9,950,145)
- -------------------------------------------------- ------------------------ -------------------------
Total Stockholders' Equity $(141,982) $2,990,574
- -------------------------------------------------- ------------------------ -------------------------

- ------------------------------------------------- ------------------------- ------------------------
For the year ended For the year ended
September 30, 2003 September 30, 2002
- ------------------------------------------------- ------------------------- ------------------------

Revenue $2,281,879 $12,211,329
- ------------------------------------------------- ------------------------- ------------------------
Net Loss for the Period $(2,430,159) $(4,827,818)
- ------------------------------------------------- ------------------------- ------------------------
Loss Per Share - basic and diluted $(0.19) $(0. 48)
- ------------------------------------------------- ------------------------- ------------------------

- -------------------------------------------------- ------------------------ ------------------------
As at As at
September 30, 2003 September 30, 2002
- -------------------------------------------------- ------------------------ ------------------------

Working Capital (Deficiency) $(8,962,906) $(594,990)
- -------------------------------------------------- ------------------------ ------------------------
Total Assets $12,463,938 $13,539,317
- -------------------------------------------------- ------------------------ ------------------------
Total Share Capital $13,257,911 $13,040,691
- -------------------------------------------------- ------------------------ ------------------------
Deficit $10,556,350 $(8,126,190)
- -------------------------------------------------- ------------------------ ------------------------
Total Stockholders' Equity $2,701,561 $4,890,979
- -------------------------------------------------- ------------------------ ------------------------

RISK FACTORS

An investment in our common stock involves a number of very significant
risks. You should carefully consider the following risks and uncertainties in
addition to other information in this prospectus in evaluating our company and
our business before purchasing shares of common stock. Our business, operating
results and financial condition could be seriously harmed due to any of the
following risks. The risks described below are not the only ones facing our
company. Additional risks not presently known to us may also impair our business
operations. You could lose all or part of your investment due to any of these
risks.

RISKS RELATED TO SOME OF OUR OUTSTANDING SECURITIES

We have issued 8% Callable Secured Convertible Notes and share purchase
warrants, and our obligations under the 8% Callable Secured Convertible Notes
and the warrants pose risks to the price of our common stock and our continuing
operations.

We have executed an agreement for the issuance of 8% Callable Secured
Convertible Notes, in the aggregate principal amount of $750,000. The 8%
Callable Secured Convertible Notes provide that in certain circumstances the
holder of the debentures may convert the outstanding principal and accrued
interest, into shares of our common stock. The purchasers of the discounted 8%
Callable Secured Convertible Notes and 8% Callable Secured Convertible Notes
also hold an aggregate of 750,000 warrants.

The terms and conditions of the 8% Callable Secured Convertible Notes
and the warrants pose unique and special risks to our continuing operations and
the price of our common stock. Some of those risks are outlined below.

There are a large number of shares underlying our 8% Callable Secured
Convertible Notes, and warrants that may be available for future sale and the
sale of these shares may depress the market price of our common stock.

As of August 26, 2004, we had 26,611,928 shares of common stock issued
and outstanding and an obligation to reserve 13,574,661 issuable upon conversion
of the Notes at current market prices. In addition, we have outstanding options
and warrants to purchase 300,000 shares of common stock through June 30, 2004.
In addition, the number of shares of common stock issuable upon conversion of
the outstanding 8% Callable Secured Convertible Notes may increase if the market
price of our stock declines. All of the shares, including all of the shares
issuable upon conversion of the debentures and upon exercise of our warrants,
may be sold without restriction. The sale of these shares may adversely affect
the market price of our common stock.

The continuously adjustable conversion price feature of our 8% Callable Secured
Convertible Notes could require us to issue a substantially greater number of
shares, which will cause dilution to our existing stockholders.

Our obligation to issue shares upon conversion of our convertible
securities is essentially limitless.

The following is an example of the amount of shares of our common stock
that are issuable, upon conversion of our 8% Callable Secured Convertible Notes,
based on market prices 25%, 50% and 75% below the market price, as of September
7, 2004 of $0.21.

With Number of Shares Percentage of
% Below Market Price Per Share Discount of 35% Issuable Outstanding Stock
- -------------- --------------- --------------- -------- -----------------

25% $0.1575 $0.1024 7,324,218 21.58%
50% $0.1050 $0.0683 10,980,966 29.21%
75% $0.0525 $0.0341 21,994,134 65.82%

As illustrated, the number of shares of common stock issuable upon
conversion of our 8% Callable Secured Convertible Notes will increase if the
market price of our stock declines, which will cause dilution to our existing
stockholders.

The continuously adjustable conversion price feature of our 8% Callable Secured
Convertible Notes may encourage investors to make short sales in our common
stock, which could have a depressive effect on the price of our common stock.

The 8% Callable Secured Convertible Notes are convertible into shares
of our common stock at a 35% discount to the trading price of the common stock
prior to the conversion. The significant downward pressure on the price of the
common stock as the selling stockholder converts and sells material amounts of
common stock could encourage short sales by investors. This could place further
downward pressure on the price of the common stock. The selling stockholder
could sell common stock into the market in anticipation of covering the short
sale by converting their securities, which could cause the further downward
pressure on the stock price. In addition, not only the sale of shares issued
upon conversion or exercise of debentures, warrants and options, but also the
mere perception that these sales could occur, may adversely affect the market
price of the common stock.

The issuance of shares upon conversion of the 8% Callable Secured Convertible
Notes and exercise of outstanding warrants may cause immediate and substantial
dilution to our existing stockholders.

The issuance of shares upon conversion of the 8% Callable Secured
Convertible Notes and exercise of warrants may result in substantial dilution to
the interests of other stockholders since the selling stockholders may
ultimately convert and sell the full amount issuable on conversion. Although the
selling stockholders may not convert their 8% Callable Secured Convertible Notes
and/or exercise their warrants if such conversion or exercise would cause them
to own more than 4.99% of our outstanding common stock, this restriction does
not prevent the selling stockholders from converting and/or exercising some of
their holdings and then converting the rest of their holdings. In this way, the
selling stockholders could sell more than this limit while never holding more
than this limit. There is no upper limit on the number of shares that may be
issued which will have the effect of further diluting the proportionate equity
interest and voting power of holders of our common stock, including investors in
this offering.

If we are required for any reason to repay our outstanding 8% Callable Secured
Convertible Notes, we would be required to deplete our working capital, if
available, or raise additional funds. Our failure to repay the 8% Callable
Secured Convertible Notes, if required, could result in legal action against us,
which could require the sale of substantial assets.

In August 2004, we entered into a Securities Purchase Agreement for the
sale of an aggregate of $750,000,000 principal amount of 8% Callable Secured
Convertible Notes. The 8% Callable Secured Convertible Notes are due and
payable, with 8% interest, two years from the date of issuance, unless sooner
converted into shares of our common stock. Although we currently have $250,000
8% Callable Secured Convertible Notes outstanding, the investor is obligated to
purchase additional 8% Callable Secured Convertible Notes in the aggregate of
$500,000. In addition, any event of default as described in the 8% Callable
Secured Convertible Notes could require the early repayment of the 8% Callable
Secured Convertible Notes, including a default interest rate of 15% on the
outstanding principal balance of the debentures if the default is not cured with
the specified grace period. We anticipate that the full amount of the 8%
Callable Secured Convertible Notes, together with accrued interest, will be
converted into shares of our common stock, in accordance with the terms of the
8% Callable Secured Convertible Notes. If we are required to repay the 8%
Callable Secured Convertible Notes, we would be required to use our limited
working capital and raise additional funds. If we were unable to repay the
debentures when required, the debenture holders could commence legal action
against us and foreclose on all of our assets to recover the amounts due. Any
such action would require us to curtail or cease operations.

RISKS RELATED TO OUR BUSINESS AND COMPANY

We require additional financing in order to continue in business as a going
concern, the availability of which is uncertain. We may be forced by business
and economic conditions to accept financing terms which will require us to issue
our securities at a discount, which could result in further dilution to our
existing stockholders.

As discussed under the heading, "Management's Discussion and Analysis -
Liquidity and Capital Resources," we require additional financing to fund our
operations. There can be no assurance that additional financing will be
available to us when needed or, if available, that it can be obtained on
commercially reasonable terms. In addition, any additional equity financing may
involve substantial dilution to our stockholders. If we fail to raise sufficient
financing to meet our immediate cash needs, we will be forced to scale down or
perhaps even cease the operation of our business, which may result in the loss
of some or all of your investment in our common stock.

In addition, in seeking debt or equity private placement financing, we
may be forced by business and economic conditions to accept terms which will
require us to issue our securities at a discount from the prevailing market
price or face amount, which could result in further dilution to our existing
stockholders.

We have a history of operating losses and fluctuating operating results, which
raise substantial doubt about our ability to continue as a going concern.

Since inception through June 30, 2004, we have incurred aggregate
losses of $16,518,976. Our loss from operations for the nine month period ended
June, 30 2004 was $5,962,626; our loss from operations for the fiscal years
ended September 30, 2003 and September 30, 2002 were, respectively, $2,430,159
and $4,827,818. There is no assurance that we will operate profitably or will
generate positive cash flow in the future. In addition, our operating results in
the future may be subject to significant fluctuations due to many factors not
within our control, such as the unpredictability of when customers will order
products, the size of customers' orders, the demand for our products, and the
level of competition and general economic conditions.

Although we are confident that revenues will increase, we also expect
an increase in development costs and operating costs. Consequently, we expect to
incur operating losses and negative cash flow until our products gain market
acceptance sufficient to generate a commercially viable and sustainable level of
sales, and/or additional products are developed and commercially released and
sales of such products made so that we are operating in a profitable manner.

Please read this prospectus carefully. You should rely only on the
information contained in this prospectus. We have not authorized anyone to
provide you with different information. You should not assume that the
information provided by the prospectus is accurate as of any date other than the
date on the front of this prospectus.

FORWARD-LOOKING STATEMENTS

This prospectus contains forward-looking statements, which relate to
future events or our future financial performance. In some cases, you can
identify forward-looking statements by terminology such as "may", "will",
"should", "expects", "plans", "anticipates", "believes", "estimates",
"predicts", "potential" or "continue" or the negative of these terms or other
comparable terminology. These statements are only predictions and involve known
and unknown risks, uncertainties and other factors, including the risks in the
section entitled "Risk Factors" on pages 8 to 11, that may cause our or our
industry's 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 these forward-looking statements.

While these forward-looking statements, and any assumptions upon which
they are based, are made in good faith and reflect our current judgment
regarding the direction of our business, actual results will almost always vary,
sometimes materially, from any estimates, predictions, projections, assumptions
or other future performance suggested herein. Except as required by applicable
law, including the securities laws of the United States, we do not intend to
update any of the forward-looking statements to conform these statements to
actual results. The safe harbor for forward-looking statements provided in the
Private Securities Litigation Reform Act of 1995 does not apply to the offering
made in this prospectus.

SECURITIES AND EXCHANGE COMMISSION'S PUBLIC REFERENCE

Any member of the public may read and copy any materials filed by us
with the Securities and Exchange Commission at the SEC's Public Reference Room
at 450 Fifth Street, N.W., Washington, D.C. 20549. Information on the operation
of the Public Reference Room may be obtained by calling the SEC at
1-800-SEC-0330. The SEC maintains an Internet web site (http://www.sec.gov) that
contains reports, proxy and information statements, and other information
regarding issuers that file electronically with the SEC.

THE OFFERING

This prospectus covers the resale by the selling stockholders named in
this prospectus by the selling stockholders named in this prospectus of:

- up to 13,574,661 shares of common stock issuable to certain selling
stockholders upon the conversion or redemption of principal under
discounted 8% Callable Secured Convertible Notes maturing August 17,
2006; and

- up to 1,500,000 shares of common stock issuable to certain selling
stockholders assuming the exercise of outstanding common share purchase
warrants.

USE OF PROCEEDS

The shares of common stock offered hereby are being registered for the
account of the selling stockholders named in this prospectus. As a result, all
proceeds from the sales of the common stock will go to the selling stockholders
and we will not receive any proceeds from the resale of the common stock by the
selling stockholders. We will, however, incur all costs associated with this
registration statement and prospectus.

SELLING SHAREHOLDERS

This prospectus relates to the offer and sale by the following selling
stockholders of the indicated number of shares, all of which are issuable
pursuant to warrants and/or convertible notes held by these selling
stockholders. The number of shares set forth in the table for the selling
stockholders represents an estimate of the number of shares of common stock to
be offered by the selling stockholders. The actual number of shares of common
stock issuable upon conversion of the notes and exercise of the related warrants
is indeterminate, is subject to adjustment and could be materially less or more
than such estimated number depending on factors which cannot be predicted by us
at this time including, among other factors, the future market price of the
common stock. The actual number of shares of common stock offered in this
prospectus, and included in the registration statement of which this prospectus
is a part, includes such additional number of shares of common stock as may be
issued or issuable upon conversion of the notes and exercise of the related
warrants by reason of any stock split, stock dividend or similar transaction
involving the common stock, in accordance with Rule 416 under the Securities Act
of 1933.

None of the following selling stockholders have held any position or
office within our company, nor has had any other material relationship with us
in the past three years, other than in connection with transactions pursuant to
which the selling stockholders acquired convertible notes and warrants.

AJW Partners, LLC is a private investment fund that is owned by its
investors and managed by SMS Group, LLC. SMS Group, LLC, of which Mr. Corey S.
Ribotsky is the fund manager, has voting and investment control over the shares
listed below owned by AJW Partners, LLC. New Millennium Capital Partners II, LLC
is a private investment fund that is owned by its investors and managed by First
Street Manager II, LLC. First Street Manager II, LLC, of which Corey S. Ribotsky
is the fund manager, has voting and investment control over the shares listed
below owned by New Millennium Capital Partners II, LLC. AJW Offshore, Ltd.,
formerly known as AJW/New Millennium Offshore, Ltd., is a private investment
fund that is owned by its investors and managed by First Street Manager II, LLC.
First Street Manager II, LLC, of which Corey S. Ribotsky is the fund manager,
has voting and investment control over the shares listed below owned by AJW
Offshore, Ltd. AJW Qualified Partners, LLC, formerly known as Pegasus Capital
Partners, LLC, is a private investment fund that is owned by its investors and
managed by AJW Manager, LLC, of which Corey S. Ribotsky and Lloyd A. Groveman
are the fund managers, have voting and investment control over the shares listed
below owned by AJW Qualified Partners, LLC. We have been notified by the selling
stockholders that they are not broker-dealers or affiliates of broker-dealers
and that they believe they are not required to be broker-dealers.

The following table also sets forth the name of each person who is
offering the resale of shares of common stock by this prospectus, the number of
shares of common stock beneficially owned by each person, the number of shares
of common stock that may be sold in this offering and the number of shares of
common stock each person will own after the offering, assuming they sell all of
the shares offered.

- ---------------------- ------------------ ------------- -------------- ------------ --------------- ------------ --------------
Total
Percentage
Total Shares of of Common Percentage
Common Stock Stock, Shares of Beneficial Beneficial of Common
Issuable Upon Assuming Common Stock Ownership Percentage of Ownership Stock Owned
Conversion of Full Included in Before the Common Stock After the After
Name Notes and/or Conversion/ Prospectus Offering Owned Before Offering Offering
Warrants Exercise (2) (1) Offering (3) (3)
- ---------------------- ------------------ ------------- -------------- ------------ --------------- ------------ --------------

AJW Qualified
Partners, LLC 3,316,425 (4) 12.46% 6,632,851 1,397,679 4.99% -- --
- ---------------------- ------------------ ------------- -------------- ------------ --------------- ------------ --------------
AJW Offshore, Ltd. 2,788,812 (5) 10.48% 5,577,624 1,397,679 4.99% -- --
- ---------------------- ------------------ ------------- -------------- ------------ --------------- ------------ --------------
AJW Partners, LLC 1,205,973 (6) 4.53% 2,411,946 1,397,679 4.99% -- --
- ---------------------- ------------------ ------------- -------------- ------------ --------------- ------------ --------------
New Millennium
Capital Partners II,
LLC 226,120 (7) 1.00% 452,240 1,397,679 4.99% -- --
- ---------------------- ------------------ ------------- -------------- ------------ --------------- ------------ --------------
Sichenzin Ross
Friedman Ference LLP 125,000 (8) * 125,000 125,000 * -- --
- ---------------------- ------------------ ------------- -------------- ------------ --------------- ------------ --------------

*Less than 1%.

The number and percentage of shares beneficially owned is determined in
accordance with Rule 13d-3 of the Securities Exchange Act of 1934, and the
information is not necessarily indicative of beneficial ownership for any other
purpose. Under such rule, beneficial ownership includes any shares as to which
the selling stockholder has sole or shared voting power or investment power and
also any shares, which the selling stockholder has the right to acquire within
60 days. The actual number of shares of common stock issuable upon the
conversion of the convertible notes is subject to adjustment depending on, among
other factors, the future market price of the common stock, and could be
materially less or more than the number estimated in the table.

(1) Represents common stock that potentially may be issued: (a)
upon the conversion of principal under the 8% Callable Secured
Convertible Notes maturing August 17, 2006; and (b) upon the
exercise of common share purchase warrants issued to the named
selling stockholders as a purchaser of 8% Callable Secured
Convertible Notes, and exercisable until August 17, 2009 at an
exercise price of $0.14 per share. Each of the 8% Callable
Secured Convertible Notes and the share purchase warrants
contains a contractual restriction on beneficial share
ownership. It provides that the holder may not convert the 8%
Callable Secured Convertible Note, or exercise the warrant, to
the extent that the conversion of the debenture, or the
exercise of the warrants, as the case may be, would result in
the holder, together with its affiliates, beneficially owning
in excess of 4.99% of our then issued and outstanding shares
of common stock. For the purposes of this table, any
contractual restriction on the number of securities the
selling stockholders may own at any point in time has been
disregarded. Pursuant to a registration rights agreement, we
have agreed to register under the Securities Act of 1933, as
amended, 200% of the shares of our common stock issuable upon
conversion of principal under the 8% Callable Secured
Convertible Notes, and 200% of the shares of our common stock
issuable upon exercise of the related warrants.

(2) A total of 26,611,928 shares of common stock were issued and
outstanding as of August 26, 2004. Accordingly, the
percentages shown are based on 41,686,589 total issued and
outstanding shares, on the assumption that all of the
15,074,661 shares of common stock offered pursuant to this
prospectus are sold.

(3) Assumes that all securities registered will be sold.

(4) Represents shares of common stock underlying an aggregate of
$330,000 principal amount convertible notes and 333,000 shares
underlying warrants exercisable at $0.14 per share.

(5) Represents shares of common stock underlying an aggregate of
$277,500 principal amount convertible notes and 277,500 shares
underlying warrants exercisable at $0.14 per share.

(6) Represents shares of common stock underlying an aggregate of
$120,000 principal amount convertible notes and 120,000 shares
underlying warrants exercisable at $0.14 per share.

(7) Represents shares of common stock underlying an aggregate of
$22,500 principal amount convertible notes and 22,500 shares
underlying warrants exercisable at $0.14 per share.

(8) Represents shares of common stock for legal services to
Sichenzia Ross Friedman Ference LLP.

OUR SECURITIES PURCHASE AGREEMENT

On August 17, 2004, we entered into a Securities Purchase Agreement
with several accredited institutional investors for the issuance of an aggregate
of $750,000 principal amount 8% Callable Secured Convertible Notes. We received
the first tranche in the gross amount of $250,000 and are to receive the balance
in two additional tranches, the first in the gross amount of $250,000 within
five days of filing this registration statement and the final tranche in the
gross amount of $250,000 within 5 days of the effective date of this
registration statement. The 8% Convertible Notes are due two years from the date
of issuance. The 8% Convertible Notes are convertible at the option of the
holders into shares of our common stock. The conversion price is equal to the
lesser of (i) $0.20 and (ii) the average of the lowest three (3) intra-day
trading prices during the twenty (20) trading days immediately prior to the
conversion date discounted by thirty-five percent (35%). In connection with the
issuance of the 8% Convertible Notes, the holders received warrants to purchase
shares of our common stock.

Theses securities purchase agreements contain covenants and
representations and warranties of the investors and us that are customary in
transactions of this type. In particular, we have agreed to have authorized a
sufficient number of shares of our common stock to provide for the full
conversion of the notes and exercise of the warrants then outstanding and to
have reserved at all times for issuance at least two times the number of shares
that is the actually issuable upon full conversion of the notes and full
exercise of the warrants. We have also agreed to provide the investors with a
monthly list to ensure we are in compliance with such reserve amount
requirement. Furthermore, we have agreed not to negotiate or contract, without
the prior written consent of a majority-in-interest of the investors, with any
party to obtain additional equity financing that involves the issuance of common
stock at a discount to the market price of the common stock on the date of
issuance or the issuance of convertible securities that are convertible into an
indeterminable number of shares of common stock or the issuance of warrants.
Moreover, our common stock must remain listed on the OTCBB or an equivalent
exchange, and must remain eligible to file a Form SB-2 or S-1 Registration
Statement and we are prohibited from merging or consolidating with or into
another company or transferring all or substantially all of our assets to
another company.

Under the terms of the securities purchase agreements, in the event the
Company breaches one or more of its covenants or representations or warranties,
the Company may be obligated to pay to the investors liquidated damages equal to
three percent (3%) of the outstanding notes per month, prorated for partial
months, in cash or unregistered shares of common stock (issued at a price equal
to the conversion price of the notes determined as of the time of payment), at
the option of the investors, for such time that the breach remains uncured.

The representations and warranties and covenants set forth in Sections
3, 4, 5 and 8 of the Securities Purchase Agreement will survive all of the
closings for a period of two (2) years from the date that the last investment is
completed. In addition, the representations, warranties and covenants are
assignable to subsequent purchasers of the convertible notes and warrants from
the original buyers.

The secured convertible notes bear interest at 8% per annum and mature
on two years from the date of issuance. The 8% notes are convertible at any time
at the option of the holder into shares of our common stock, provided at no time
may a holder of our 8% notes and its affiliates own more than 4.99% of our
outstanding common stock. However, this ownership restriction may be waived by
the holder upon 61 days notice. The conversion price of our common stock used in
calculating the number of shares issuable upon conversion, or in payment of
interest on the 8% notes, is the lesser of

o Thirty-five percent of the average of the lowest three
intra-day trading prices for our common stock during the
twenty trading day period ending one trading day prior to the
date the conversion notice is sent by the holder to the
borrower; and

o a fixed conversion price of $0.20.

We are be obligated to pay a penalty of $2,000 per day to the investors
if we fail to deliver the shares of our common stock issuable upon a conversion
of the notes within two business days following the receipt of the investors'
notice of conversion.

The number of shares of common stock issuable upon conversion of the
notes is determined by dividing that portion of the principal of the debenture
to be converted by the conversion price. For example, assuming conversion of
$750,000 of Convertible Notes on August 26, 2004, a conversion price of $0.20
per share, the number of shares issuable, ignoring the 4.9% limitation discussed
above, upon conversion would be:

$750,000/ $0.20 = 3,750,000 shares

The conversion price of the notes are subject to equitable adjustments
if we distribute a stock dividend, subdivide or combine outstanding shares of
common stock into a greater or lesser number of shares, or take such other
actions as would otherwise result in dilution of the selling stockholders'
ownership. Also, the notes fixed conversion price gets lowered in the event we
issue shares of our common stock or any rights, options, warrants to purchase
shares of our common stock at a price less than the market price of our shares
as quoted on the OTCBB. The fixed conversion price gets lowered upon such
issuance to the amount of the consideration per share received by us.

The notes are secured by a security agreement under which we pledged
substantially all of our assets, including our goods, fixtures, equipment,
inventory, contract rights and receivables.

OUR COVENANTS WITH THE 8% CALLABLE SECURED CONVERTIBLE NOTE HOLDERS

We may not, without the prior written consent of our 8% Note Holders,
do any of the following:

o pay, declare or set apart for payment any dividend or other
distribution on shares of our capital stock other than shares
issued in the form of a stock dividend;

o redeem, repurchase or otherwise acquire any shares of our
capital stock or any warrants, rights or options to purchase
or acquire our shares of capital stock;

o incur any indebtedness, except to trade creditors or financial
institutions incurred in the ordinary course of our business
or to pay the 10% notes;

o sell, lease or otherwise dispose of any significant portion of
our assets outside of the ordinary course of our business;

o lend money, give credit or make advances to any person or
entity except in the ordinary course of our business (to a
maximum of $50,000); and

DESCRIPTION OF WARRANTS

The warrants purchased by the investors pursuant to the August 17, 2004
securities purchase agreement entitle the investors to purchase 750,000 shares
of our common stock at an exercise price equal to $0.14 per share.

The warrants expire five years from the date of issuance. The warrants
are subject to exercise price adjustments upon the occurrence of certain events
including stock dividends, stock splits, mergers, reclassifications of stock or
our recapitalization. The exercise price of the warrants is also subject to
reduction if we issue shares of our common stock on any rights, options or
warrants to purchase shares of our common stock at a price less than the market
price of our shares as quoted on the OTC Bulletin Board.

PLAN OF DISTRIBUTION

The selling stockholders and any of their respective pledgees, donees,
assignees and other successors-in-interest may, from time to time, sell any or
all of their shares of common stock on any stock exchange, market or trading
facility on which the shares are traded or in private transactions. These sales
may be at fixed or negotiated prices. The selling stockholders may use any one
or more of the following methods when selling shares:

o ordinary brokerage transactions and transactions in which the broker-dealer
solicits the purchaser;

o block trades in which the broker-dealer will attempt to sell
the shares as agent but may position and resell a portion of
the block as principal to facilitate the transaction;

o purchases by a broker-dealer as principal and resale by the
broker-dealer for its account;

o an exchange distribution in accordance with the rules of the
applicable exchange;

o privately-negotiated transactions;

o short sales that are not violations of the laws and
regulations of any state or the United States;

o broker-dealers may agree with the selling stockholders to sell
a specified number of such shares at a stipulated price per
share;

o through the writing of options on the shares;

o a combination of any such methods of sale; and

o any other method permitted pursuant to applicable law.

The selling stockholders may also sell shares under Rule 144 under the
Securities Act, if available, rather than under this prospectus. The selling
stockholders shall have the sole and absolute discretion not to accept any
purchase offer or make any sale of shares if they deem the purchase price to be
unsatisfactory at any particular time.

The selling stockholders may also engage in short sales against the
box, puts and calls and other transactions in our securities or derivatives of
our securities and may sell or deliver shares in connection with these trades.

The selling stockholders or their respective pledgees, donees,
transferees or other successors in interest, may also sell the shares directly
to market makers acting as principals and/or broker-dealers acting as agents for
themselves or their customers. Such broker-dealers may receive compensation in
the form of discounts, concessions or commissions from the selling stockholders
and/or the purchasers of shares for whom such broker-dealers may act as agents
or to whom they sell as principal or both, which compensation as to a particular
broker-dealer might be in excess of customary commissions. Market makers and
block purchasers purchasing the shares will do so for their own account and at
their own risk. It is possible that a selling stockholder will attempt to sell
shares of common stock in block transactions to market makers or other
purchasers at a price per share which may be below the then market price. The
selling stockholders cannot assure that all or any of the shares offered in this
prospectus will be issued to, or sold by, the selling stockholders. The selling
stockholders and any brokers, dealers or agents, upon effecting the sale of any
of the shares offered in this prospectus, may be deemed to be "underwriters" as
that term is defined under the Securities Act of 1933, as amended, or the
Securities Exchange Act of 1934, as amended, or the rules and regulations under
such acts. In such event, any commissions received by such broker-dealers or
agents and any profit on the resale of the shares purchased by them may be
deemed to be underwriting commissions or discounts under the Securities Act.

We are required to pay all fees and expenses incident to the
registration of the shares, including fees and disbursements of counsel to the
selling stockholders, but excluding brokerage commissions or underwriter
discounts.

The selling stockholders, alternatively, may sell all or any part of
the shares offered in this prospectus through an underwriter. No selling
stockholder has entered into any agreement with a prospective underwriter and
there is no assurance that any such agreement will be entered into.

The selling stockholders may pledge their shares to their brokers under
the margin provisions of customer agreements. If a selling stockholder defaults
on a margin loan, the broker may, from time to time, offer and sell the pledged
shares. The selling stockholders and any other persons participating in the sale
or distribution of the shares will be subject to applicable provisions of the
Securities Exchange Act of 1934, as amended, and the rules and regulations under
such act, including, without limitation, Regulation M. These provisions may
restrict certain activities of, and limit the timing of purchases and sales of
any of the shares by, the selling stockholders or any other such person. In the
event that the selling stockholders are deemed affiliated purchasers or
distribution participants within the meaning of Regulation M, then the selling
stockholders will not be permitted to engage in short sales of common stock.
Furthermore, under Regulation M, persons engaged in a distribution of securities
are prohibited from simultaneously engaging in market making and certain other
activities with respect to such securities for a specified period of time prior
to the commencement of such distributions, subject to specified exceptions or
exemptions. In regards to short sells, the selling stockholder can only cover
its short position with the securities they receive from us upon conversion. In
addition, if such short sale is deemed to be a stabilizing activity, then the
selling stockholder will not be permitted to engage in a short sale of our
common stock. All of these limitations may affect the marketability of the
shares.

We have agreed to indemnify the selling stockholders, or their
transferees or assignees, against certain liabilities, including liabilities
under the Securities Act of 1933, as amended, or to contribute to payments the
selling stockholders or their respective pledgees, donees, transferees or other
successors in interest, may be required to make in respect of such liabilities.

If the selling stockholders notify us that they have a material arrangement with
a broker-dealer for the resale of the common stock, then we would be required to
amend the registration statement of which this prospectus is a part, and file a
prospectus supplement to describe the agreements between the selling
stockholders and the broker-dealer.

LEGAL PROCEEDINGS

We know of no material, active or pending legal proceedings against us,
nor are we involved as a plaintiff in any material proceedings or pending
litigation. There are no proceedings in which any of our directors, officers or
affiliates, or any registered or beneficial shareholders are an adverse party or
has a material interest adverse to us.

DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS
- ------------------------------ ---------------------------------------- ------- ------------------------------------
Date First
Name Position Held with the Company Age Elected or Appointed
- ------------------------------ ---------------------------------------- ------- ------------------------------------

Vince Vellardita CEO, President and Chairman 46 October 2000
- ------------------------------ ---------------------------------------- ------- ------------------------------------
Krishnaswamy Alladi Director 56 January 2003
- ------------------------------ ---------------------------------------- ------- ------------------------------------
Richard Shintaku Director 54 August 2003
- ------------------------------ ---------------------------------------- ------- ------------------------------------
Tracey Eland Principal Accountant and Secretary 38 April 2004
- ------------------------------ ---------------------------------------- ------- ------------------------------------

Business Experience

The following is a brief account of the education and business
experience during at least the past five years of each director, executive
officer and key employee, indicating the principal occupation during that
period, and the name and principal business of the organization in which such
occupation and employment were carried out.

Vince Vellardita:

Vince Vellardita serves the Company's President, Chief Executive
Officer and Chairman of the Board since October 2000. Mr. Vellardita was
instrumental in having ValCom, Inc. acquire a 162,000 square foot production
facility on 7.5 acres of land in Las Vegas Nevada, which houses film and
production sound stages. He was also instrumental in Valencia Entertainment
International purchasing a 180,000 square foot production facility in Valencia,
California that houses film and production sound stages that have been occupied
for the past four years by the hit CBS series JAG and Fox's Power Rangers. Mr.
Vellardita began his career in 1977 as a music producer and promoter of live
shows and is credited with bringing Duran/Duran and U2 to North America for
their first US tours. He also produced a benefit tour for the 1980 Presidential
campaign of John Anderson. Mr. Vellardita is a 25-year veteran production
executive with a successful track record. Mr. Vellardita has been involved in
over 10,000 episodes of television and 100 films. Mr. Vellardita does not
currently serve as a director of any other reporting company.

Krishnaswamy Alladi:

Krishnaswamy Alladi, Director, 56 years of age, has 30 years of
experience in the fields of Consulting, Finance, Corporate Planning and Factory
Management. He holds a Bachelor Degree in Science, Post Graduate Diploma in
Electronics Engineering from Madras University, India and an MBA from Asian
Institute of Management, Philippines. He was a Senior Consultant with Price
Waterhouse & Company, India advising various institutions and manufacturing
Companies. Subsequently he became a Finance Director of GlaxoWellcome, Indonesia
overseeing Finance, Logistics, IT and Human Resource functions and served for 7
years. He was also Vice President -Strategic Planning for a large Indonesian
Conglomerate involved in Infrastructure, Telecommunications, Plantations and
Strategic Investments.

Richard Shintaku:

Mr. Shintaku joined the Board of Directors on August 5, 2003. He is currently
President and CEO of Inter-Continental Associates Group, LLC and ICAG, Inc. ICAG
has been a leading investment and consulting firm in the Asia/Pacific region
since 1973. ICAG is a Merrill Lynch investment "Alliance Partner". He is
currently Vice President and principal of MRI International, Inc., one of the
nations largest medical receivables funding companies, Executive Vice President
and principal of JMR Nevada, Inc. (Harmon Medical Center), and KK JMR (Medical,
Japan centers). Mr. Shintaku is also Chairman and CEO of Premier Entertainment
Services, Inc., (product placement in Digatech International, Inc. (Gaming
technology) and Owner/Proprietor of The Royal Hawaiian Farms (Pistachio/Grapes).
He is a Partner of Super Nova Financial Services (NY Mercantile Exchange). He
also serves on various board of directors of many Asian and domestic firms. He
has recently been asked to serve as the first Honorary Consul General of Japan
in the State of Nevada and is presently serving as the Nevada representative on
the Republican Presidential Roundtable.

Tracey Eland:

Ms. Eland was appointed to the position of Secretary of the Corporation in April
of 2004. She has been ValCom's Principal Accountant since August 2001. Ms.
Eland's Business/Accounting education is from Glendale College; and she is
certified through a management action program. Ms. Eland has been a Full-charge
Bookkeeper since 1988. She was the Senior Accountant for The Enterprise
Interactive Group from 1999-2002 and Full-charge bookkeeper for So. Cal.
Courier/Team Delivery from 1987-2000, with additional responsibilities as Office
Manager and Human Resources for two companies.

Family Relationships

There are no family relationships between any of our company's
directors or executive officers.

Involvement In Certain Legal Proceedings

Valencia Entertainment International, LLC, a company in which Mr.
Vellardita is an executive officer, filed a voluntary chapter 11 bankruptcy
petition on April 7, 2003 and obtained the status of Debtor in Possession. After
successfully settling the debts owed to secured creditors through sale of
property as per court order dated June 3, 2004, Valencia applied to the United
States Bankruptcy Court, Central District of California, San Fernando Valley
Division for a Motion to dismiss Chapter 11 Bankruptcy case. The Court on August
3, 2004, having considered the motion and pleadings filed in support thereof,
having heard argument of counsel, finding that notice was proper, and for good
cause appearing therefore, ordered (1) The Motion granted (2) Debtor's Chapter
11 bankruptcy case dismissed.

Except as described above, none of our directors, executive officers,
promoters or control persons have been involved in any of the following events
during the past five years:

1. any bankruptcy petition filed by or against any business of which
such person was a general partner or executive officer either at the
time of the bankruptcy or within two years prior to that time;

2. any conviction in a criminal proceeding or being subject to a
pending criminal proceeding (excluding traffic violations and other
minor offences);

3. being subject to any order, judgment, or decree, not subsequently
reversed, suspended or vacated, of any court of competent jurisdiction,
permanently or temporarily enjoining, barring, suspending or otherwise
limiting his involvement in any type of business, securities or banking
activities; or

4. being found by a court of competent jurisdiction (in a civil
action), the Commission or the Commodity Futures Trading Commission to
have violated a federal or state securities or commodities law, and the
judgment has not been reversed, suspended, or vacated.

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

Principal Stockholders

The following table sets forth, as of August 26, 2004, certain
information with respect to the beneficial ownership of our common stock by each
stockholder known by us to be the beneficial owner of more than 5% of our common
stock and by each of our current directors and executive officers. Each person
has sole voting and investment power with respect to the shares of common stock,
except as otherwise indicated. Beneficial ownership consists of a direct
interest in the shares of common stock, except as otherwise indicated.

- ------------------------------------------------- --------------------------------- --------------------------------
Amount and Nature of Percentage
Name and Address of Beneficial Owner Beneficial Ownership of Class(1)
- ------------------------------------------------- --------------------------------- --------------------------------

E-Blaster International (2)
JL. H.R. Rasuna Said Kav. 3,000,000 11.27%
B-1 6th Flr.
Jakarta, 12920
Indonesia
- ------------------------------------------------- --------------------------------- --------------------------------
Great Asian Holdings Ltd. (2)
Jakarta 12920 2,110,422 7.93%
Indonesia
- ------------------------------------------------- --------------------------------- --------------------------------
Vince Vellardita
Valcom, Inc. 3,319,749 12.47%
28309 Avenue Crocker
Valencia CA 91355
- ------------------------------------------------- --------------------------------- --------------------------------
Radorm Technology Limited (2)
Jakarta 12920 567,824 2.13%
Indonesia
- ------------------------------------------------- --------------------------------- --------------------------------
Richard Shintaku
Held indirectly in "ICAG, Inc." account 812,500 3.05%
C/O Valcom, Inc.
28309 Avenue Crocker
Valencia CA 91355
- ------------------------------------------------- --------------------------------- --------------------------------
Krishnaswamy Alladi
C/O ValCom, Inc. 360,000 1.35%
28309 Avenue Crocker
Valencia CA 91355
- ------------------------------------------------- --------------------------------- --------------------------------
Tracey Eland 50,000 .0018%
- ------------------------------------------------- --------------------------------- --------------------------------
Directors and Executive Officers as a Group (4
persons) 4,542,249 common shares 17.04%
- ------------------------------------------------- --------------------------------- --------------------------------

* Represents less than 1% of our company's outstanding stock

(1) Based on 26,611,928 shares of common stock issued and outstanding as of
August 26, 2004. Beneficial ownership is determined in accordance with the rules
of the Securities and Exchange Commission and generally includes voting or
investment power with respect to securities. Except as otherwise indicated, we
believe that the beneficial owners of the common stock listed above, based on
information furnished by such owners, have sole investment and voting power with
respect to such shares, subject to community property laws where applicable.

(2) These three entities together comprise a "group" as defined in Item 403 of
Regulation S-B.

Changes in Control

We are unaware of any contract or other arrangement the operation of
which may at a subsequent date result in a change of control of ValCom.

DESCRIPTION OF COMMON STOCK

Our authorized capital stock consists of 100,000,000 shares of common
stock $0.05 par value, and 10,000,000 shares of preferred stock with a par value
of $0.05 per share. As of August 26, 2004, there were 26,611,928 shares of our
common stock issued and outstanding. Each stockholder is entitled to one vote
for each share of common stock held on all matters submitted to a vote of
stockholders, including the election of directors.

Each stockholder is entitled to receive the dividends as may be
declared by our board of directors out of funds legally available for dividends
and, in the event of liquidation, to share pro rata in any distribution of our
assets after payment of liabilities. Our board of directors is not obligated to
declare a dividend. Any future dividends will be subject to the discretion of
our board of directors and will depend upon, among other things, future
earnings, the operating and financial condition of ValCom, its capital
requirements, general business conditions and other pertinent factors. It is not
anticipated that dividends will be paid in the foreseeable future.

Stockholders do not have pre-emptive rights to subscribe for additional
shares of common stock if issued by us. There are no conversion, redemption,
sinking fund or similar provisions regarding the common stock.

Shares of our common stock are subject to rules adopted by the
Securities and Exchange Commission that regulate broker-dealer practices in
connection with transactions in "penny stocks". "Penny stock" is defined to be
any equity security that has a market price (as defined) less than $5.00 per
share or an exercise price of less than $5.00 per share, subject to certain
exceptions. For the foreseeable future, our common stock will most likely
continue to be covered by the penny stock rules, which impose additional sales
practice requirements on broker-dealers who sell to persons other than
established customers and "accredited investors." The term "accredited investor"
refers generally to institutions with assets in excess of $5,000,000 or
individuals with a net worth in excess of $1,000,000 or annual income exceeding
$200,000 or $300,000 jointly with their spouse.

The penny stock rules require a broker-dealer, prior to a transaction
in a penny stock not otherwise exempt from the rules, to deliver a standarized
risk disclosure document in a form prepared by the Securities and Exchange
Commission which provides information about penny stocks and the nature and
level of risks in the penny stock market. The broker-dealer also must provide
the customer with current bid and offer quotations for the penny stock, the
compensation of the broker-dealer and its salesperson in the transaction and
monthly account statements showing the market value of each penny stock held in
the customer's account. The bid and offer quotations, and the broker-dealer and
salesperson compensation information, must be given to the customer orally or in
writing prior to effecting the transaction and must be given to the customer in
writing before or with the customer's confirmation. In addition, the penny stock
rules require that prior to a transaction in a penny stock not otherwise exempt
from these rules, the broker-dealer must make a special written determination
that the penny stock is a suitable investment for the purchaser and receive the
purchaser's written agreement to the transaction. These disclosure requirements
may have the effect of reducing the level of trading activity in the secondary
market for the stock that is subject to these penny stock rules. Consequently,
these penny stock rules may affect the ability of broker-dealers to trade our
securities.

LEGAL MATTERS

The validity of the shares of common stock offered by the selling
stockholders was passed upon by the law firm of Sichenzia Ross Friedman Ference
LLP.

CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
ON ACCOUNTING AND FINANCIAL DISCLOSURE

On May 27, 2003, we engaged Kabani & Company, Inc., Certified Public
Accountants, as our independent accountants to report on our consolidated
balance sheet as of September 30, 2003, and the related consolidated statements
of income, stockholders' equity and cash flows for the year then ended. The
decision to appoint Kabani & Company, Inc. was approved by our Board of
Directors.

We dismissed Weinberg & Company, PA as our auditors effective May
27, 2003. WC served as our independent auditors' for our fiscal years ended
September 30, 2002, as well through the date of its dismissal. WC's report on
our consolidated financial statements for our fiscal year September 30, 2002
does not contain an adverse opinion or disclaimer of opinion and was not
qualified or modified as to uncertainty, audit scope or accounting principles,
however, it was modified to include an explanatory paragraph wherein they
expressed substantial doubt about our ability to continue as a going concern. WC
did not issue any reports on our financial statements for the fiscal year ended
September 30, 2001.

During our association with WC as our independent accountants until
WC's dismissal, there were no disagreements with WC within the meaning of item
304 of regulation S-B or any matter of accounting principles or practices,
financial disclosure, or auditing scope or procedure, which disagreements if not
resolved to WC's satisfaction, would have caused WC to make reference to the
subject matter of the disagreements in connection with its reports.

During our association with WC as our independent accountants until
WC's dismissal, there was the following "reportable event" (as such term is
defined in item 304(a) (1) (IV) (B) of regulation S-B. We did not record certain
stock and warrant issuances and the related expenses timely in our Form 10-QSB
reporting during 2002. Additionally, the stock and warrant issuances were not
documented in the minutes of the meetings of the Board of Directors. We have
taken the necessary steps to properly and timely record all stock and warrant
transactions and have documented with minutes being approved by the Board of
Directors.

On April 22, 2002, Jay J. Shapiro PC, resigned as our independent
accountants. Jay J. Shapiro served as our independent auditors' for our fiscal
years ended September 30, 2001, as well as through the date of his dismissal.
During the our fiscal years ended September 30, 2001, and until his resignation,
there were no disagreements with Jay J. Shapiro within the meaning of item 304
of regulation S-B or any matter of accounting principles or practices, financial
disclosure, or auditing scope or procedure, which disagreements if not resolved
to Jay J. Shapiro satisfaction, would have caused Jay J. Shapiro to make
reference to the subject matter of the disagreements in connection with its
reports.

During our fiscal years ended September 30, 2001 and through the
period until Jay J. Shapiro's resignation on April 22, 2002, there were no
"reportable events" (as such term is defined in item 304(a)(1)(iv)(B) of
regulation S-B).

During our two most recent fiscal years and any subsequent interim
period prior to the engagement of Kabani & Company, Inc., neither us nor anyone
on our behalf consulted with Kabani & Company, Inc. regarding either (i) the
application of accounting principles to a specified transaction, either
contemplated or proposed, or the type of audit opinion that might be rendered on
our financial statements or (ii) any matter that was either the subject of a
"disagreement" or a "reportable event."

We have requested WC to review the disclosure contained herein and have
provided WC the opportunity to furnish us with a letter addressed to the
Commission containing any new information, clarification of the Registrant's
expression of WC's views, or the respects in which WC does not agree with the
statements contained herein. WC has reviewed the disclosure contained herein and
has provided to the Registrant a letter addressed to the Securities and Exchange
Commission stating that it has reviewed the disclosure provided in this Current
Report and has no disagreement with the relevant portions of this disclosure,
pursuant to the requirements of Item 304(a)(3) of Regulation S-B. A copy of such
letter was as Exhibit 16 to the Current Report on Form 8-K filed on May 29,
2004.

INTEREST OF NAMED EXPERTS AND COUNSEL

No expert or counsel named in this prospectus as having prepared or
certified any part of this prospectus or having given an opinion upon the
validity of the securities being registered or upon other legal matters in
connection with the registration or offering of the common stock was employed on
a contingency basis or had, or is to receive, in connection with the offering, a
substantial interest, directly or indirectly, in the registrant or any of its
parents or subsidiaries. Nor was any such person connected with the registrant
or any of its parents, subsidiaries as a promoter, managing or principal
underwriter, voting trustee, director, officer or employee.

EXPERTS

Our consolidated financial statements as at September 30, 2003, and for
each of the years in the two-year period ended September 30, 2003, filed with
this prospectus and registration statement have been audited by Kabani & Company
independent chartered accountants, as set forth in their report accompanying the
consolidated financial statements and are included herein in reliance upon the
report, and upon the authority of the firm as experts in accounting and
auditing.

DISCLOSURE OF SEC POSITION OF
INDEMNIFICATION FOR SECURITIES ACT LIABILITIES

Our Articles of Incorporation, as amended, provide to the fullest
extent permitted by Delaware law, a director or officer of ValCom shall not be
personally liable to ValCom or its shareholders for damages for breach of such
director's or officer's fiduciary duty. The effect of this provision of our
Certificate of Incorporation, as amended, is to eliminate the rights of ValCom
and its shareholders (through shareholders' derivative suits on behalf of
ValCom) to recover damages against a director or officer for breach of the
fiduciary duty of care as a director or officer (including breaches resulting
from negligent or grossly negligent behavior), except under certain situations
defined by statute. ValCom believes that the indemnification provisions in its
Certificate of Incorporation, as amended, are necessary to attract and retain
qualified persons as directors and officers.

Insofar as indemnification for liabilities arising under the Securities
Act might be permitted to directors, officers or persons controlling our company
under the provisions described above, we have been informed that in the opinion
of the Securities and Exchange Commission such indemnification is against public
policy as expressed in the Securities Act and is therefore unenforceable.

DESCRIPTION OF BUSINESS

General Overview

We are a diversified entertainment company with the following operating
activities:

Our principal executive offices are located at 28309 Avenue Crocker,
Valencia, CA 91355. We were incorporated under the laws of the state of
Delaware. Our telephone number is (661) 257-8000.

Corporate Structure

We have four subsidiaries: Valencia Entertainment International, LLC, a
California limited liability company; Half Day Video, Inc., a California
corporation, ValCom Studios Las Vegas, and 45% equity interest in ValCom
Broadcasting, LLC, a New York limited liability company, which operates KVPS
(Channel 8), an independent broadcaster and ValCom Studios Las Vegas.

Business

ValCom's business includes television production for network and
syndication programming, motion pictures, and real estate holdings. However,
revenue is partially generated through the lease of two full-service sound
stages leased by Valencia Entertainment International (VEI), a subsidiary of
ValCom. This 52,000 square foot production facility on 3 acres of land in
Valencia, California, is currently the studio set for JAG, produced by Paramount
Pictures. VEI's past and present clients in addition to Paramount Pictures and
Don Belisarious Producitons, include Warner Brothers, Universal Studios, MGM,
HBO, NBC, 20th Century Fox, Disney, CBS, Sony, Showtime, and the USA Network. In
addition to leasing its sound stages, ValCom also owns a small library of
television content, which is ready for worldwide distribution, and several major
television series in advanced stages of development, as well as an
equipment/camera rental business, Half Day Video. ValCom has recently expanded
its business into the Las Vegas, Nevada booming entertainment market, with the
purchase of its new subsidiary ValCom Studios Las Vegas.

ValCom Studios Las Vegas

ValCom Studios Las Vegas is located at 41 N. Mojave, Las Vegas, NV 89101 just
minutes from the downtown area. ValCom Studios, Las Vegas consists of 162,000
square feet of building consisting of 7 production sound stages on 7.5 acres of
land and is currently being renovated into a "state of the art" entertainment
complex. The company will also offer a full complement of animation services,
broadcast facilities, recording studios and other related services for the
entertainment industry.

Half Day Video, Inc.

Our subsidiary Half Day Video, Inc. specializes in supporting the
entertainment industry with television and film equipment rentals. Half Day's
client list includes The Academy Awards, Emmy Awards, NBC, Entertainment
Tonight, MTV, Oscar Awards, General Hospital and other major entertainment and
production companies. Half Day has approximately $492,000 in assets, not
including depreciation, with current revenues of $379,000. Half Day Video has
one employee and is located at the Company's Headquarters at 28309 Ave. Crocker,
Valencia, California 91355.

Joint Venture Agreement With New Global Communications, Inc. - ValCom
Broadcasting, LLC

In May 2002, we entered into a joint venture agreement with New Global
Communications, Inc. Global agreed to contribute $500,000 to the joint venture
in exchange for a 55% equity interest in a new entity known as ValCom
Broadcasting, LLC, a New York limited liability company, and we contributed
certain fixed assets and manage the operations of the joint venture for a 45%
equity interest in ValCom Broadcasting, LLC. The joint venture operates a newly
developed low power television broadcast station K08MX-LP in Indio-Palm Springs,
California operating on Channel 8. We believe that the investment in the joint
venture adds to our infrastructure of becoming a full-service television and
motion picture company. The effectiveness of the joint venture agreement was
dependent on approval by the Federal Communications Commission (the "FCC"). On
September 20, 2002, the FCC approved the transaction.

Film Entertainment Overview

Competition in the film entertainment business is diverse and
fragmented, with scores of companies operating at various levels of product
budget and scope. The market is overwhelmingly dominated by the major Hollywood
studios, with the top-ranked company, Disney in 1999, usually commanding 15 to
20 percent of the domestic market share in any given year.

ValCom plans to succeed by choosing its projects and markets carefully,
and selecting segments and geographic areas where it can build proprietary
competitive advantages. With the proper positioning and segment focus, we
believe we can insulate ourselves from the brunt of competition in the
entertainment content business. Since the sector's revenues from foreign markets
are growing rapidly, a sound niche strategy should ensure superior
profitability.

Independent Production Companies

Consolidation through acquisition has recently reduced the number of
independent production companies in operation. However, barriers to entry remain
relatively low, and management anticipates that the market segments in which it
intends to compete will remain highly competitive.

Our Competitive Position

Our operations are in competition with all aspects of the entertainment
industry, locally, nationally and worldwide.

ValCom experiences competition from three market segments:

1) Traditional television, game shows and reality television drama
2) Movies for television and theatrical releases
3) Other entertainment/media companies

Dependence on One or a Few Major Customers

We had two customers who accounted for approximately 99% of total real
estate rental revenues for the year ended September 30, 2003.

As of September 30, 2003, all eight sound and production stages were
under non-cancelable operating leases for one year from two major production
companies. Our subsidiary, Half Day Video, Inc., does not rely on a small group
of customers. We may rent production equipment and personnel to any motion
picture studio or production company. Our television broadcast operations do not
rely on a small group of customers; rather, any advertiser who wishes to
advertise on Channel 8 in Indio-Palm Springs, California may generate revenues.

Number of Total Employees and Number of Full-time Employees

At August 26, 2004, we had 18 full-time employees, 1of whom is in
marketing and 4 of whom are administrative and executive personnel. There is no
collective bargaining agreement in place.

MANAGEMENT'S DISCUSSION AND ANALYSIS

The following discussion of our financial condition, changes in
financial condition and results of operations for the three and nine months
ended June 30, 2004 and 2003 should be read in conjunction with our most recent
audited annual financial statements for the financial year ended September 30,
2003, the unaudited interim financial statements included herein, and, in each
case, the related notes.

As of June 30, 2004, ValCom, Inc. operations were comprised of the
following divisions:

1. Studio (including equipment and personnel rental);
2. Broadcast Television;and
3. Film and Television Production.

Rental

We operate two sound stages in Valencia, California, which we lease.
Beginning June 2003, we have a newly signed one-year lease with five one-year
options for two sound stages, which will generate $700,000 annually with
cost-of-living increases. We acquired seven and one half acres of property in
Nevada with 162,000 square feet of buildings, which are being renovated into
seven sound stages for rental. Our subsidiary, Half Day Video, Inc., supplies
personnel, cameras, and other production equipment to various production
companies on a short-term basis.

Television, Film, & Animation Production

In addition to producing our own television and motion picture
programming, we have an exclusive facilities agreement in place for productions
in Los Angeles County for a three-year term with Woody Fraser/Woody Fraser
Productions.

Channel 8 In Palm Springs, California

In connection with our joint venture with New Global Communications,
Inc., we own a 45% equity interest in ValCom Broadcasting, LLC, a New York
limited liability company, which operates KVPS (Channel 8), an independent
television broadcaster in the Palm Springs, California market.

Results Of Operations

Three Months Ended June 30, 2004 vs. June 30, 2003

Revenues for the three months June 30, 2004 decreased by $87,623 or 14%
from $642,858 for the three months ended June 30, 2003 to $555,235 for the same
period in 2004. The decrease in revenue was principally due to decreased
production revenues associated with the joint venture with Woody Fraser
Productions.

Production costs for the three months ended June 30, 2004 increased by
$12,957 or 75% from $17,354 for the three months ended June 30, 2003 to $30,311
for the same period in 2004. The increase in production costs was principally
due to increased production associated with Woody Fraser Productions as
described above.

Depreciation and amortization expense for the three months ended June
30, 2004 increased by $146,410 or 171% from $85,545 for the three months ended
June 30, 2003 to $231,955 for the same period in 2004.

General and administrative expenses for the three months ended June 30,
2004 decreased by $23,256 or 6% from $408,847 for the three months ended June
30, 2003 to $385,591 for the same period in 2004. The decrease was due
principally to decreased personnel costs for the new projects.

Interest expense for the three months ended June 30, 2004 decreased by
$90,311 or 44% from $203,095 for the three months ended June 30, 2003 to
$112,784 for the same period in 2004. The decrease was due principally to the
decrease in interest rates associated with the company's mortgage loans.

Due to the factors described above, our net loss increased by $795,898
from $120,549 for the three months ended June 30, 2003 to $916,447 for the same
period in 2004.

Nine Months Ended June 30, 2004 vs. Nine Months Ended June 30, 2003

Revenues for the nine months ended June 30, 2004 decreased by $231,395
or 12% from $1,945,427 for the nine months ended June 30, 2003 to $1,714,032 for
the same period in 2004. The decrease in revenue was principally due to
decreased production revenues associated with the joint venture with Woody
Fraser Productions.

Production costs for the nine months ended June 30, 2004 decreased by
$226,056 or 83% from $273,070 for the nine months ended June 30, 2003 to $47,014
for the same period in 2004. The decrease in production costs was principally
due to decreased production associated with Woody Fraser Productions as
described above.

Impairment of property and equipment increased by $1,438,250 for the
nine months ended June 30, 2004 compared to $0 for the nine months ended June
30, 2003 primarily due to sale of property of VEI to pay off Finance Unlimited
and Laurus Notes.

The litigation costs increased by $1,405,656 for the nine months ended
June 30, 2004 compared to $0 for the nine months ended June 30, 2003 primarily
due to additional interest, penalties, and acceleration payment and lawyer's fee
paid for the settlement of Laurus Notes.

Depreciation and amortization expense for the nine months ended June
30, 2004 increased by $440,302 or 168% from $261,820or for the nine months ended
June 30, 2003 to $702,122 for the same period in 2004, mainly due to write off
of certain balance sheet items.

General and administrative expenses for the nine months ended June 30,
2004 decreased by $386,850 or 16% from $2,474,591 for the nine months ended June
30, 2003 to $2,087,741 for the same period in 2004. The decrease was due to
decreased personnel costs, legal and accounting fees, outside services and
consulting fees and bad debt expense.

Interest expense for the nine months ended June 30, 2004 increased by
$19,653 or 3% from $774,508 for the nine months ended June 30, 2003 to $794,161
for the same period ended June 30, 2004.

Other income for the nine months ended June 30, 2004 decreased by
$50,000 from $50,000 for the nine months ended June 30, 2003 to $0 for the same
period in 2004.

Due to the factors described above, the Company incurred a net loss of
$5,962,626 for the nine months ended June 30, 2004 compared to net loss of
$1,823,954 for the same period in 2003.

Fiscal Year Ended September 30, 2003 Compared To Fiscal Year Ended September 30,
2002

Revenues for the year ended September 30, 2003 decreased by $9,929,450
or 81.3% from $12,211,329 for the year ended September 30, 2002 to $2,281,879
for the same period in 2003. The decrease in revenue was principally due to
decreased production revenues associated with the joint venture with Woody
Fraser Productions and decreased rental revenues.

Production costs for the year ended September 30, 2003 decreased by
$7,351,136 or 94.7% from $7,765,360 for the year ended September 30, 2002 to
$414,224 for the same period in 2003. The decrease in production costs was
principally due to decreased production associated with Woody Fraser Productions
as described above.

Selling and promotion costs for the year ended September 30, 2003
decreased by $143,531 or 87.4% from $164,276 for the year ended September 30,
2002 to $20,745 for the same period in 2003. The decrease was due principally to
a decrease in travel and public relations expenses.

Depreciation and amortization expense for the year ended September 30,
2003 decreased by $53,135 or 13.2% from $401,512 for the year ended September
30, 2002 to $348,377 for the same period in 2003. The decrease in depreciation
and amortization expense was due to decreased amortization related to the write
off of prepaid loan fees in the prior year period.

General and administrative expenses for the year ended September 30,
2003 decreased by $2,067,956 or 48.8% from $4,235,788 for the year ended
September 30, 2002 to $2,167,832 for the same period in 2003. The decrease was
due principally to decreased personnel costs, outside services, utilities,
settlement fees, and goodwill impairment.

Consulting and professional fees for the year ended September 30, 2003
decreased by $157,537 or by 20.4% from $768,876 for the year ended September 30,
2002 to $611,339 for the same period in 2003. The decrease in consulting and
professional fees was principally due to decreased consulting fees partially
offset by an increase in legal and accounting costs.

Bad debt expense for the year ended September 30, 2003 decreased by
$1,809,122 or 95.5% from $1,889,302 for the year ended September 30, 2002 to
$80,180 for the same period in 2003.

The decrease in bad debts was primarily due to the write-off of an
uncollectible note receivable from a former officer and director of the Company
and write-offs associated with various production agreements, all occurring in
the 2002 year.

The impairment of goodwill represents goodwill associated with the
Brentwood Magazines acquisition being fully impaired in the 2002.

Interest expense for the year ended September 30, 2003 decreased by
$285,597 or 20.4% from $1,397,836 for the year ended September 30, 2002 to
$1,112,239 for the same period in 2003. The decrease was due principally to the
write off of interest associated with convertible debt in the prior year period.

Other income for the year ended September 30, 2003 increased by $62,548
from $8,437 for the year ended September 30, 2002 to $50,000 for the same period
in 2003. The increase was due to a gain recognized from the sale of fixed assets
offset by the loss recorded on equity investment of ValCom Broadcasting, LLC.

Net Loss from discontinued operations for the year ended September 30,
2003 were $28,087 compared to 0 for the same period in 2002. These expenses
represent the operating loss from discontinued operations partially offset by
the gain on disposal of discontinued operations of Brentwood Magazine.

Due to the factors described above, our net loss decreased by
$2,397,659 from $4,827,818 for the year ended September 30, 2002 to $2,430,159
for the same period in 2003.

Liquidity And Capital Resources

Our condensed consolidated financial statements have been prepared,
assuming that we will continue as a going concern. We had a net loss of
$5,962,626 and a negative cash flow from operations of $1,851,038 for the nine
months ended June 30, 2004, a working capital deficiency of $4,170,496, and an
accumulated deficit of $16,518,976 at June 30, 2004. These conditions raise
substantial doubt about our ability to continue as a going concern.

Cash totalled $73,794 on June 30, 2004 compared to $56,636 as at June
30, 2003. During the nine months ended June 30, 2004, net cash used by operating
activities totalled $1,851,038 compared to net cash used by operating activities
of $405,019 for the comparable nine-month period in 2003. A significant portion
of operating activities included payments for interest and production
development costs. Net cash provided by financing activities for the nine months
ended June 30, 2004 totalled $2,085,065 compared to $31,979 for the comparable
nine-month period in 2003. Net cash used by investing activities during the nine
months ended June 30, 2004 totalled $371,915 compared to net cash provided of
$150,260 during the comparable prior year period due to proceeds from sale of
fixed assets.

The above cash flow activities yielded a net cash decrease of $137,888
during the nine months ended June 30, 2004 compared to a decrease of $286,738
during the comparable prior year period.

Net working capital (current assets less current liabilities) was a
negative $4,170,496 as of June 30, 2004. We will need to raise funds through
various financings to maintain its operations until such time as cash generated
by operations is sufficient to meet its operating and capital requirements.
There can be no assurance that we will be able to raise such capital on terms
acceptable to us, if at all.

Future Outlook

On October 1, 2003, we entered into a joint venture agreement with
Atlas Enterprises to produce an animation movie and an animation TV series
called "New Zoo Revue" based on an American Classic of the same name, which was
highly successful. BCI/Navarre has purchased an exclusive agreement to
distribute 195 existing shows of New Zoo Revue for the retail market. We
anticipate the New Zoo Revue to be available to consumers through 4,000 Wal-Mart
retail outlets by August 31, 2004. We have already incurred start-up costs,
which have been reflected in the financial statements for the six months ended
March 31, 2004.

We have purchased additional studio facilities comprising 7.5 acres of
land and 162,000 sq. ft. of buildings in Las Vegas as part of our expansion
plans. We are undergoing a three-phase renovation.

Presently, our revenues are not sufficient to meet operating and
capital expenses. We have incurred operating losses since inception, and this is
likely to continue for the foreseeable future.

Our management projects that we will require a minimum of $3.2 million
to fund our debt repayment, ongoing operating expenses and working capital
requirements through September 30, 2005 as follows:.

Marketing $ 100,000
General and administrative $ 100,000
Capital Purchases $ 500,000
Debt repayment $2,200,000
General Working Capital $ 300,000
----------
TOTAL $3,200,000
==========

The continuation of our business is dependent upon obtaining further
financing, market acceptance of our current products and any new products that
we may introduce, the continuing successful development of our products and
related technologies, and, finally, achieving a profitable level of operations.

As discussed above under the heading "Liquidity and Capital Resources,
we plan to raise any additional capital required to meet the balance of our
estimated funding requirements through January 31, 2005, primarily through the
private placement of our securities (including shares of our common stock that
are reserved for issuance upon use of our $15M standby equity distribution
agreement entered into on May 19, 2004).

The issuance of additional equity securities by us could result in a
significant dilution in the equity interests of our current stockholders.
Obtaining commercial loans, assuming those loans would be available, will
increase our liabilities and future cash commitments.

APPLICATION OF CRITICAL ACCOUNTING POLICIES

Our consolidated financial statements and accompanying notes are
prepared in accordance with generally accepted accounting principles in the
United States. Preparing financial statements requires management to make
estimates and assumptions that affect the reported amounts of assets,
liabilities, revenue, and expenses. These estimates and assumptions are affected
by management's application of accounting policies. We believe that
understanding the basis and nature of the estimates and assumptions involved
with the following aspects of our consolidated financial statements is critical
to an understanding of our financials.

Going Concern

We require additional financing to fund our operations. We have an
accumulated deficit of $16,518,976 and deficit working capital of $ 4,170,496 as
of June 30, 2004. During the nine months ended June 30, 2004, we used
$(1,851,038) cash in operating activities and $(371,915) in investing
activities. During the nine months ended June 30, 2004, we had proceeds from
financing activities of $2,085,065 including sale of stock in the amount of
$1,024,000.

There can be no assurance that additional financing will be available
to us when needed or, if available, that it can be obtained on commercially
reasonable terms. Our consolidated financial statements have been prepared on
the going concern basis, which assumes that adequate sources of financing will
be obtained as required and that our assets will be realized, and liabilities
settled in the ordinary course of business. Accordingly, our consolidated
financial statements do not include any adjustments related to the
recoverability of assets and classification of assets and liabilities that might
be necessary should we be unable to continue as a going concern.

Revenue Recognition

DESCRIPTION OF PROPERTY

Our principal executive offices are located at 28309 Avenue Crocker,
Valencia, CA 91355. We leased this 52,000 square foot facility for a 1 year term
ending June 1, 2005 with five1 year lease renewal options or an option to buy
the property. This facility consists of an office and administration area, and
two studios and houses both Valencia Entertainment International and Half Day
Video.

Our subsidiary, ValCom Studios Las Vegas, has a 162,000 square foot
facility on 7.5 acres and located at 41 North Mojave Road, Las Vegas, Nevada
89101. This facility consists of an office and administration area and 7
studios.

Our subsidiary KVPS, Channel 8, in which ValCom has 45% ownership is
located in Palm Springs, California.

We expect that our current facilities will be sufficient for the
foreseeable future. To the extent that we require additional space in the near
future, we believe that we will be able to secure additional leased facilities
at commercially reasonable rates.

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

We have not in the past two years been a party to any transaction,
proposed transaction, or series of transactions in which the amount involved
exceeds $60,000, and in which, to our knowledge, any of our directors, officers,
five percent beneficial security holder, or any member of the immediate family
of the foregoing persons has had or will have a direct or indirect material
interest.

The promoters of our company are our directors and officers.

MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

In 1995, our common stock commenced quotation on the OTC Bulletin Board
under the symbol "VACM". In addition, our common stock is listed for trading on
the Frankfurt XETRA under the symbol "VAM."

The following quotations obtained from OTC Bulletin Board reflect the
high and low bids for our common stock based on inter-dealer prices, without
retail mark-up, mark-down or commission and may not represent actual
transactions. The high and low bid prices of our common stock for the periods
indicated below are as follows:

----------------------------------------------------------------

Quarter Ended High Low
----------------------------------------------------------------
September 30, 2004* $0.26 $0.14
----------------------------------------------------------------
June 30, 2004 $0.35 $0.09
----------------------------------------------------------------
March 31, 2004 $0.47 $0.23
----------------------------------------------------------------
December 31, 2003 $0.55 $0.30
----------------------------------------------------------------
September 30, 2003 $0.51 $0.08
----------------------------------------------------------------
June 30, 2003 $0.10 $0.06
----------------------------------------------------------------
March 31, 2003 $0.21 $0.08
----------------------------------------------------------------
December 31, 2002 $0.33 $0.14
----------------------------------------------------------------

* As of August 26, 2004.

Our common shares are issued in registered form. Continental Stock
Transfer & Trust Company, 17 Battery Place, New York, NY 10004 is the transfer
agent for our common shares.

As of August 26, 2004, we had 26,611-928 shares of common stock
outstanding and approximately 3,200 stockholders.

DIVIDEND POLICY

We have not declared or paid any cash dividends since inception and we
do not intend to pay any cash dividends in the foreseeable future. Although
there are no restrictions that limit our ability to pay dividends on our common
shares other than as described below, we intend to retain future earnings for
use in our operations and the expansion of our business.

EXECUTIVE COMPENSATION

Particulars of compensation awarded to, earned by or paid to:

(a) our company's chief executive officer (the "CEO");

(b) each of our company's four most highly compensated executive
officers who were serving as executive officers at the end of the most
recently completed fiscal year and whose total salary and bonus exceeds
$100,000 per year; and

(c) any additional individuals for whom disclosure would have been
provided under (b) but for the fact that the individual was not serving
as an executive officer of our company at the end of the most recently
completed fiscal year;

(the "Named Executive Officers") are set out in the summary compensation table
below.

During the fiscal year ended September 30, 2003, two (2) individuals
served as executive officers of our company at various times: Vince Vellardita,
and Don Magier.

=========================================================================================================================

SUMMARY COMPENSATION TABLE
- --------------------- -------- ---------------------------------- ----------------------------------------- -------------
Annual Compensation Long Term Compensation
- --------------------- -------- ---------------------------------- ----------------------------------------- -------------
Awards Payouts
- --------------------- -------- ------------ --------- ----------- ----------------------------- ----------- -------------
Name and Principal Year Salary Bonus Other Securities Restricted LTIP All Other
Position Annual Underlying Shares or Payouts Compen-sation
Compen-satioOptions/ SARs Restricted
Granted (#) Share Units
- --------------------- -------- ------------ --------- ----------- --------------- ------------- ----------- -------------

Vince Vellardita 2003 $140,000 Nil Nil Nil Nil Nil Nil
President, Chairman 2002 $ 140,00 Nil Nil Nil Nil Nil Nil
and Chief Executive 2001 $ 30,000 Nil Nil Nil Nil Nil Nil
Officer
- --------------------- -------- ------------ --------- ----------- --------------- ------------- ----------- -------------
Donald Magier 2003 $100,000 Nil Nil Nil Nil Nil Nil
2002 $ 80,000 Nil Nil Nil Nil Nil Nil
Secretary,
Treasurer and
Director
===================== ======== ============ ========= =========== =============== ============= =========== =============

(1) The value of perquisites and other personal benefits,
securities and property for the Named Executive Officers that
do not exceed the lesser of $50,000 or 10% of the total of the
annual salary and bonus is not reported herein.

The following table sets forth for each of the Named Executive Officers
certain information concerning stock options granted to them during fiscal 2003.
Our company has never issued stock appreciation rights. Our company grants
options that generally vest over two years at an exercise price equal to the
fair market value of a share of common stock as determined by its closing price
on the OTC Bulletin Board.

OPTION/SAR GRANTS IN THE LAST FISCAL YEAR
================== ============= ============== ============== ================
Name Number of % of Total Exercise Expiration Date
Securities Options/
Underlying SARs Granted
Options/ to Employees
SARs in Fiscal Price
Granted (#) Year ($/Share)
================== ============= ============== ============== ================
N/A
================== ============= ============== ============== ================

The following table sets forth for each Named Executive Officer certain
information concerning the number of shares subject to both exercisable and
unexercisable stock options as of September 30, 2003. The values for
"in-the-money" options are calculated by determining the difference between the
fair market value of the securities underlying the options as of September 30,
2003 and the exercise price of the individual's options. No Named Executive
Officer exercised options during fiscal 2003.

AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND FY-END OPTION/SAR VALUES

==================== ============= =========== ==================================== ===============================
Number of Securities Underlying Value of Unexercised
Aggregate Unexercised Options/SARs at FY-End In-the-Money Options/SARs at
Shares Value (#) FY-end ($)
Acquired on Realized
Name Exercise (#) ($) Exercisable / Unexercisable Exercisable / Unexercisable
- -------------------- ------------- ----------- ------------------------------------ -------------------------------
Exercisable Unexercisable Exercisable Unexercisable
- -------------------- ------------- ----------- ----------------- ------------------ --------------- ---------------

N/A
- -------------------- ------------- ----------- ----------------- ------------------ --------------- ---------------

EMPLOYMENT CONTRACTS AND TERMINATION OF EMPLOYMENT AND CHANGE IN CONTROL
ARRANGEMENTS

ValCom is a party to an employment agreements with Vince Vellardita and
previously with Don Magier.

Vince Vellardita

ValCom entered into an Employment Agreement with Vince Vellardita, its
Chairman of the Board, Chief Executive Officer and President, effective October
1, 2000. The term of the Agreement is for five years. The Board of Directors may
terminate Mr. Vellardita's employment at any time. The Agreement shall be
automatically renewed for successive one-year terms, unless either party gives
written notice of termination three months prior to the end of the term. The
Agreement provides for an annual salary of $120,000 for the first year, $150,000
for the second year and $200,000 for the third year, plus a bonus if authorized
by the Board of Directors. If ValCom is involved in a merger or consolidation in
which it does not survive, or if ValCom transfers substantially all of its
assets, the surviving entity in the merger or consolidation or the transferee of
ValCom's assets shall be bound by the Agreement. With the exception of ownership
of up to five percent of the equity securities of another publicly traded
corporation, the Agreement prohibits Mr. Vellardita from engaging in any
activity competitive with or adverse to ValCom's business or welfare without
ValCom's prior written consent.

Don Magier resigned from the Company in March 2004.

COMPENSATION OF DIRECTORS AND EXECUTIVE OFFICERS

Directors and executive officers receive, on an annual basis, incentive
stock options to purchase shares of our common stock as awarded by our Board of
Directors in consultation with the compensation committee.

Our Board of Directors may award special remuneration to any director
undertaking any special services on our behalf other than services ordinarily
required of a director. Other than indicated herein, no director received and/or
accrued any compensation for his services as a director, including committee
participation and/or special assignments.

There are no arrangements or plans in which we provide pension,
retirement or similar benefits for directors or executive officers.

We have a 2001 Employee Stock Compensation Plan to enhance our ability
to attract, retain and compensate experienced employees, officers, directors and
consultants. The effective date of the ESCP is January 15, 2001. A total of
2,600,000 shares of common stock were registered for issuance under the ESCP on
three Form S-8 registration statements filed January 16, 2001, March 26, 2001
and October 19, 2001. Pursuant to the ESCP, the Compensation Committee or the
Board of Directors may award registered shares of our common stock to employees,
officers, directors or consultants for cash, property, services rendered or
other form of payment constituting lawful consideration. Plan shares awarded for
other than services rendered shall be sold at not less than fair market value on
the date of grant. During the fiscal year ended September 30, 2003, we issued an
aggregate of 1,572,500 shares of registered common stock to employees, officers,
directors and consultants pursuant to the ESCP for services rendered.

To date, we have granted to directors, officers, employees and
consultants incentive stock options to purchase shares of our common stock
subject to and in accordance with the prevailing policies of the stock exchange
on which our shares were then listed. Options are granted based on the
assessment by our Board of Directors and/or compensation committee of the
optionee's past and present contribution to the success of our company. These
options are not transferable and are exercisable from the date granted until the
earliest of (i) such number of years (up to ten years) from the date of the
grant, or (ii) such number of days following the death of the optionee as is
specified in each optionee's option agreement.

Other than the management agreements, the advisory agreements and the
stock incentive plans discussed herein, we presently have no material bonus or
profit sharing plans pursuant to which cash or non-cash compensation is or may
be paid to our directors or executive officers.

FINANCIAL STATEMENTS

Our consolidated financial statements are prepared in conformity with
generally accepted accounting principles of the United States of America.

The following financial statements pertaining to ValCom are filed as
part of this prospectus:

Page

Name

Consolidated Balance Sheets at June 30, 2004 (Unaudited) and September 30, 2003 F-2

Consolidated Statements of Operations (Unaudited) - Nine Months Ended June 30, 2004 and 2003 F-3

Consolidated Statements of Stockholders' Equity and Comprehensive Loss - Nine Months Ended June 30, 2004 F-4
(Unaudited) and Year Ended September 30, 2003

Consolidated Statements of Cash Flows (Unaudited) - Nine Months Ended June 30, 2004 and 2003 F-5

Notes to Consolidated Financial Statements (Unaudited) - Nine Months Ended June 30, 2004 and 2003 F-6

Auditors' Report, dated September 13, 2004 F-16

Consolidated Balance Sheets at September 30, and September 30, 2002 F-17

Consolidated Statements of Operations - Years Ended September 30, 2003, and September 30, 2002 F-18

Consolidated Statements of Stockholders' Equity and Comprehensive Income (Loss) - Years Ended September F-19
30, 2003, and September 30, 2002

Consolidated Statements of Cash Flows - Years Ended September 30, 2003, and September 30, 2002 F-21

Notes to Consolidated Statements - Years Ended September 30, 2003, and September 30, 2002 F-22

VALCOM, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEET
JUNE 30, 2004
(UNAUDITED)
-----------

ASSETS
------
Current Assets:
Cash & Cash equivalents $ 73,794
Accounts receivable, net 10,722
-----------
Total Current Assets 84,516

Property and equipment - net 3,442,254
Deferred Compensation 209,147
Prepaid development costs 148,959
Deposits and other assets 228,154
------------
Total Assets $ 4,113,030
============

See accompanying notes to the condensed consolidated financial statements

F-2

VALCOM, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEET (CONTINUED)
JUNE 30, 2004
(UNAUDITED)

LIABILITIES AND STOCKHOLDERS' DEFICIT
------------------------------------

Liabilities Not Subject To Compromise
Current liabilities:
Accounts payable $ 350,602
Accrued interest 324,753
Accrued expenses 243,418
Advanced Rent 30,600
Due to related parties 274,246
Notes payable 14,043
----------
Total Current Liabilities not subject to compromise 1,237,662

Mortgage payable-Nevada 2,584,199

Liabilities Subject To Compromise
Prepetition trade accounts payable 206,249
Prepetition Payables due to related parties 95,000
Prepetition accrued expenses 131,902
----------

Total Current Liabilities 4,255,012

Commitments and contingencies

Stockholders' deficit:
Convertible preferred stock: all with par value $0.001; Series B, 1,000,000
shares authorized; 38,000 shares issued and outstanding 38 Series C, 5,000,000
shares authorized; 2,879,999 shares issued and outstanding 2,880 Common stock,
par value $.001; 100,000,000 shares authorized; 25,042,048 shares issued and
outstanding 25,042 Additional Paid-in capital 15,999,034 Shares to be issued
350,000

Accumulated deficit (16,518,976)

Total Stockholders' deficit (141,982)
------------
Total Liabilities and Stockholders' deficit $ 4,113,030
============

See accompanying notes to the condensed consolidated financial statements

F-3

VALCOM, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)

For the three month For the three month
period ended June period ended June
30, 2004 30, 2003
------------ ------------

Revenue:
Rental $ 525,212 $ppppp536,978
Production 28,427 182,453
Other 1,596 (76,573)
------------ ------------

555,235 642,858
------------ ------------

Cost and Expenses:
Production 30,311 17,354
Selling and promotion 75,858 4,074
Depreciation and amortization 231,955 85,545
General and administrative 385,591 408,847
Consulting and professional expenses 635,183
------------ ------------
Total Cost and Expenses 1,358,898 515,820
------------ ------------

Operating Profit (Loss) (803,663) 127,038

Other income (expense):
Interest expense (112,784) (203,095)
Gain on sale of assets
- 34,000
Loss on equity investment - (49,713)
------------ ------------
Total Other Income (Expense) (112,784) (218,808)
------------ ------------

Loss from continuing operations (916,447) (91,770)

Discontinued Operations:
Operation loss from discontinued operations - (109,167)
Net gain on disposal of discontinued operations - 80,388
------------ ------------
Total discontinued operations - (28,779)
------------ ------------

Net loss $ (916,447) $ (120,549)
============ ============

Basic and diluted loss per share from continuing
operations $ (0.04) $ (0.01)
------------ ------------
Basic and diluted loss per share from discontinued $ (0.00) (0.00)
operations
------------ ------------
Basic and diluted loss per share $ (0.04) (0.01)
------------ ------------

Weighted average shares outstanding: Basic and diluted 22,799,352 12,600,064

See accompanying notes to the condensed consolidated financial statements

F-4

VALCOM, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)

For the nine month For the nine month
period ended period ended June
June 30, 2004 30, 2003
----------- -----------
Revenue:

Rental $ 1,618,98 $ 1,560,005
Production 87,612 385,422
Other 7,433 -
----------- -----------
Total Revenue 1,714,032 1,945,427
----------- -----------

Cost and Expenses:
Production 47,014 273,070
Loss on impairment of property and equipment 1,438,250 -
Litigation 1,405,656 -
Selling and promotion 105,422 18,542
Depreciation and amortization 702,122 261,820
General and administrative
2,087,741 2,474,591
Consulting and professional services 1,149,843 -
----------- -----------

Total Cost and Expenses 6,936,048 3,028,023
----------- -----------

Operating loss (5,222,016) (1,082,596)

Other Income (Expense):
Interest expense (794,161) (774,508)
Gain on sale of assets
60,230 61,642
Impairment of property
----------- -----------
Loss on Equity Investment
(6,679) (49,713)
Other income
- 50,000
----------- -----------

----------- -----------
Total Other Income (Expense) (740,610) (712,579)
----------- -----------

Loss from continuing operations (5,962,626) (1,795,175)

Discontinued operations:
Operating loss from discontinued operations - (109,167)
Net gain on disposal of discontinued operations - 80,388
----------- -----------
Total discontinued operations - (28,779)
----------- -----------

Net Loss (5,962,626) (1,823,954)
=========== ===========

Basic and diluted loss per share from continuing
operations $ (0.29) $ (0.15)
Basic and diluted loss per share from discontinued
operations $ (0.00) $ (0.00)
----------- -----------
Basic and diluted loss per share $ (0.29) $ (0.15)
=========== ===========

Weighted average shares outstanding: Basic and diluted 20,161,930 11,858,208
=========== ===========

See accompanying notes to the condensed consolidated financial statements

F-5

VALCOM, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)

For the nine month For the nine month
period ended period ended
June 30, 2004 June 30, 2003
--------------------- --------------------

CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (5,962,626) $ (1,823,955)
Adjustments to reconcile net loss to net cash used in operating activities:
Impairment of property and equipment 1,438,250
Depreciation and amortization 702,122 261,820
Bad debt expense 56,606
Gain on sale of fixed assets (60,230) (61,642)
Stock issued for services and compensation 1,049,058 194,851
Changes in operating assets and liabilities:
Receivables 61,185 (18,973)
Prepaid expenses (148,959) (31,952)
Other assets 153060 241,897
Deferred Compensation 49,533 129,357
Deposits (112,616) (63,979)
Accounts payable and accrued expenses 980,185 710,951
--------------------- --------------------
Net cash used by operating activities (1,851,038) (405,019)
--------------------- --------------------
1.
2. CASH FLOWS FROM INVESTING ACTIVITIES
Acquisition of property & equipment (464,293) -
Notes receivable payments 35,178 66,101
Proceeds from sale of property & equipment 57,200 84,159
--------------------- --------------------
Net Cash Provided by (Used In) Investing Activities (371,915) 150,260
--------------------- --------------------

CASH FLOWS FROM FINANCING ACTIVITIES:
Cash proceeds from sale of stock 1,024,000
Principal repayment of notes (10,924) (174,807)
Cash received for options exercised 282,000
Cash received for shares to be issued 350,000
Principal borrowings on notes and mortgages 200,000 234,463
Due to related parties 239,989 (91,635)
--------------------- --------------------
Net Cash Provided By (Used In) Financing Activities 2,085,065 (31,979)
--------------------- --------------------

NET DECREASE IN CASH & CASH EQUIVALENTS (137,888) (286,738)

CASH & CASH EQUIVALENTS - BEGINNING 211,682 343,374
--------------------- --------------------
CASH & CASH EQUIVALENTS - ENDING $ 73,794 $ 56,636
===================== ====================

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Interest paid $ 470,070 $ 284,402
--------------------- --------------------

===================== ====================
Income tax paid $ - $ -
===================== ====================

See accompanying notes to the condensed consolidated financial statements

F-6

VALCOM, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)

NOTE 1 BANKRUPTCY PROCEEDINGS, DESCRIPTION OF BUSINESS AND SUMMARY OF
SIGNIFICANT ACCOUNTING POLICIES

On April 7, 2003, the Company filed on an emergency basis a voluntary Chapter 11
bankruptcy petition.

The Company requires the use of its secured creditor's cash collateral to
operate. Throughout the pendency of this case, the Company has worked with its
two real estate secured lenders, Finance Unlimited, LLC and Laurus Master Fund,
Limited on the details of cash collateral stipulation. An order approving a
global interim cash collateral stipulation with Finance Unlimited and Laurus was
entered on August 26, 2003. This stipulation permitted the Company's use of the
lenders' cash collateral through March 31, 2004.

On January 15, 2004, the Court approved two additional cash collateral
stipulations, one each with Finance Unlimited and Laurus, authorizing the
Company's continued use of cash collateral through March 31, 2004 (Second
Interim Stipulation). The Second Interim Stipulation generally grants Finance
Unlimited and Laurus relief from the automatic bankruptcy stay effective March
31, 2004, and the right to hold foreclosures sales on their real and personal
property collateral as early as April 1, 2004.

In May 2004, Laurus paid off Finance Unlimited and was subrogated to Finance's
$6,565,998 claim, which became included in the senior of Laurus' two claims.
Laurus then sought to conduct a non-judicial foreclosure sale of the Property,
and VEI objected. The Bankruptcy Court issued an order on June 3, 2004, that
while Laurus could conduct a non-judicial foreclosure sale of the Property,
Laurus would not be entitled to any deficiency claim against either VEI or
Valcom, or any other assets other than the Property itself (and the rents and
leases appurtenant thereto).

As a result of the Bankruptcy Court's order and the subsequent trustee's sale of
the Property, neither VEI nor Valcom are subject to any further liabilities on
account of the notes and deeds of trust previously held by Finance and Laurus.
Even though the senior note still technically exists, it has been rendered
non-recourse by the Bankruptcy Court's order, and could only be enforced against
the Property itself (which no longer belongs to VEI). Any liability owed to the
third party, which purchased the Property with regard to the rents collected for
June 2004, has been resolved by settlement with that party.

On August 3, 2004, the Bankruptcy Court granted the motion for dismissal of
Chapter 11 bankruptcy case against the Company.

F-7

VALCOM, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)

DESCRIPTION OF BUSINESS

ValCom, Inc. and subsidiaries (the "Company"), formerly SBI Communications,
Inc., was originally organized in the State of Utah on September 23, 1983, under
the corporate name of Alpine Survival Products, Inc. Its name was subsequently
changed to Supermin, Inc. on November 20, 1985. On September 29, 1986, Satellite
Bingo, Inc. became the surviving corporate entity in a statutory merger with
Supermin, Inc. In connection with the above merger, the former shareholders of
Satellite Bingo, Inc. acquired control of the merged entity and changed the
corporate name to Satellite Bingo, Inc. On January 1, 1993, the Company executed
a plan of merger that effectively changed the Company's state of domicile from
Utah to Delaware. Through shareholder approval dated March 10, 1998, the name
was changed to SBI Communications, Inc.

In October 2000, the Company was issued 7,570,997 shares by SBI for 100% of the
shares outstanding in Valencia Entertainment International, LLC ("VEI"), a
California limited liability company. This acquisition has been accounted for as
a reverse acquisition merger with VEI as the surviving entity. The corporate
name was changed to ValCom, Inc. effective March 21, 2001.

The Company is a diversified entertainment company with the following operating
activities:

a) Studio rental - The Company and its subsidiary, Valencia Entertainment
International, LLC, operated eight sound stages in Valencia, California until
June 10,2004 when six of the sound stages were sold off to pay the debts of
Laurus and Finance Unlimited. The Company leases the other two sound stages.
Beginning June 2003, the Company and its subsidiary signed one-year lease with
five one-year options for its sound stages. The Company has acquired seven and
one half acres of property in Nevada with 162,000 square feet of buildings,
which are being renovated into seven sound stages for rental. The Company's
subsidiary, Half Day Video, Inc., supplies personnel, cameras, and other
production equipment to various production companies on a short-term basis.

b) Film, TV, & Animation Production -The Company, in addition to producing its
own television and motion picture programming, has an exclusive facilities
agreement in place for productions in Los Angeles County for a three-year term
with Woody Fraser/Woody Fraser Productions

c) Broadcast Television - The Company owned a 45% equity interest in ValCom
Broadcasting, LLC, a New York limited liability company, which operates KVPS
(Channel 8), an independent television broadcaster in the Palm Springs,
California market, which is strategically located in the middle of four major
markets including Los Angeles, Phoenix, Las Vegas and San Diego. This interest
was sold to Eye Span Entertainment Network, Inc. on February 16, 2004.

BASIS OF PRESENTATION

The accompanying unaudited consolidated financial statements have been prepared
in accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-QSB. Accordingly,
they do not include all of the information and footnotes required by generally
accepted accounting principles for complete financial statements and related
notes included in the Company's Form 10-KSB.

The audited consolidated financial statements of the Company for the year ended
September 30, 2003 were filed on February 13, 2004 with the Securities and
Exchange Commission and are hereby referenced. In the opinion of management, the
accompanying unaudited consolidated financial statements contain all adjustments
(consisting only of normal recurring accruals) considered necessary

F-8

VALCOM, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)

for fair presentation has been included. The results of operations for the three
and nine months ended June 30, 2004 are not necessarily indicative of the
results to be expected for the entire year.

Following is a summary of the significant accounting policies followed in the
preparation of these consolidated financial statements, which policies are in
accordance with accounting principles generally accepted in the United States of
America.

PRINCIPLES OF CONSOLIDATION

The consolidated financial statements include the accounts of ValCom, Inc. and
two wholly-owned subsidiaries, Valencia Entertainment International, LLC, which
was acquired effective February 2001 and Half Day Video, Inc., which was
acquired effective March 2001.

Investments in affiliated companies over which the Company has a significant
influence or ownership of more than 20% but less than or equal to 50% are
accounted for under the equity method.

USE OF ESTIMATES

The preparation of consolidated financial statements in conformity with
accounting principles generally accepted in the United States of America.
Management is required 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 consolidated financial statements and the
reported amounts of revenue and expenses during the reporting period. Actual
results could materially differ form those estimates.

CONCENTRATIONS AND CREDIT RISK

The Company has two customers who accounted for approximately 99% of total
rental revenues for the nine months ended June 30, 2004 and 2003, respectively.
As of June 30, 2004, all sound and production stages were under non-cancelable
operating leases for one year from two major production companies.

Financial instruments that potentially subject the Company to concentrations of
risk consist of trade receivables principally arising from monthly leases from
television producers. The Company continuously monitors the credit-worthiness of
its customers to minimize its credit risk.

FAIR VALUE OF FINANCIAL INSTRUMENTS

Statement of financial accounting standard No. 107, Disclosures about fair value
of financial instruments requires that the Company disclose estimated fair
values of financial instruments. The carrying amounts reported in the statements
of financial position for current assets and current liabilities qualifying as
financial instruments are a reasonable estimate of fair value.

IMPAIRMENT OF LONG-LIVED ASSETS

Effective January 1, 2003, the Company adopted Statement of Financial Accounting
Standards No. 144, "Accounting for the Impairment or Disposal of Long-Lived
Assets" ("SFAS 144"), which addresses financial accounting and reporting for the
impairment or disposal of long-lived assets and supersedes SFAS No. 121,
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to
be Disposed Of," and the accounting and reporting provisions of APB Opinion No.
30, "Reporting the Results of Operations for a Disposal of a Segment of a

F-9

VALCOM, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)

Business." The Company periodically evaluates the carrying value of long-lived
assets to be held and used in accordance with SFAS 144. SFAS 144 requires
impairment losses to be recorded on long-lived assets used in operations when
indicators of impairment are present and the undiscounted cash flows estimated
to be generated by those assets are less than the assets' carrying amounts. In
that event, a loss is recognized based on the amount by which the carrying
amount exceeds the fair market value of the long-lived assets. Loss on
long-lived assets to be disposed of is determined in a similar manner, except
that fair market values are reduced for the cost of disposal

As per Court order dated June 3, 2004 and based on the deed of trust bearing
instrument nos. 99-2400871, 02-1209820 and 02-1209821, the property belonging to
VEI, as defined in the instruments was auctioned for sale. The properties which
were valued at Land $7,392,292 Building $4,028,785 and Building improvements
$1,154,406 and Accumulated Depreciation of $1,294,088 were sold to repay the
obligations to Laurus (Laurus having paid the obligations owed to Finance
Unlimited) under Trust Sale Nos: 8413-40 and 8414-30.Consequently the loss
incurred due to this sale is recorded as $1,405,656 under the heading
"Impairment of Property and Equipment" in the Profit and loss account of VEI for
the nine months ending June 30, 2004.

REVENUE RECOGNITION

EQUITY INVESTMENT

The Company accounts for its investments in companies over which the Company has
significant influence or ownership of more than 20% but less than or equal to
50% under the equity method.

GOING CONCERN

The accompanying consolidated financial statements have been prepared assuming
that the Company will continue as a going concern. The Company has a net loss to
date of $5,962,626 and a working capital deficiency of $1,153,146 and an
accumulated deficit of $16,518,976 at June 30, 2004. The Company had a net loss
of $5,962,626 for the nine months ended June 30, 2004.

Valencia Entertainment International, LLC, a California limited liability
company and the Registrant's subsidiary filed on April 7, 2003, a voluntary
petition in bankruptcy for reorganization under Chapter 11 of the U.S.
Bankruptcy Code in the United States Bankruptcy Court for the Southern District
of California (note 8). The main income of the Registrant is from the operations
of Valencia Entertainment International. These conditions raise doubt about the
Company's ability to continue as a going concern if suitable remedies are not
undertaken.

Management has taken various steps to revise its operating and financial
requirements, which it believes are sufficient to provide the Company with the
ability to continue on in next twelve months. Management devoted considerable
effort during the period ended June 30, 2004, towards management of liabilities
and improving the operations. The management believes that the above actions

F-10

VALCOM, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)

will allow the Company to continue its operations through the next twelve
months.

NEW ACCOUNTING PRONOUNCEMENTS

On May 15 2003, the FASB issued FASB Statement No. 150 ("SFAS 150"), Accounting
for Certain Financial Instruments with Characteristics of both Liabilities and
Equity. SFAS 150 changes the accounting for certain financial instruments that,
under previous guidance, could be classified as equity or "mezzanine" equity, by
now requiring those instruments to be classified as liabilities (or assets in
some circumstances) in the statement of financial position. Further, SFAS 150
requires disclosure regarding the terms of those instruments and settlement
alternatives. SFAS 150 affects an entity's classification of the following
freestanding instruments: a) Mandatorily redeemable instruments b) Financial
instruments to repurchase an entity's own equity instruments c) Financial
instruments embodying obligations that the issuer must or could choose to settle
by issuing a variable number of its shares or other equity instruments based
solely on (i) a fixed monetary amount known at inception or (ii) something other
than changes in its own equity instruments d) SFAS 150 does not apply to
features embedded in a financial instrument that is not a derivative in its
entirety. The guidance in SFAS 150 is generally effective for all financial
instruments entered into or modified after May 31, 2003, and is otherwise
effective at the beginning of the first interim period beginning after June 15,
2003. For private companies, mandatorily redeemable financial instruments are
subject to the provisions of SFAS 150 for the fiscal period beginning after
December 15, 2003. The adoption of SFAS No. 150 does not have a material impact
on the Company's financial position or results of operations or cash flows.

In December 2003, the Financial Accounting Standards Board (FASB) issued a
revised Interpretation No. 46, "Consolidation of Variable Interest Entities"
(FIN 46R). FIN 46R addresses consolidation by business enterprises of variable
interest entities and significantly changes the consolidation application of
consolidation policies to variable interest entities and, thus improves
comparability between enterprises engaged in similar activities when those
activities are conducted through variable interest entities. The Company does
not hold any variable interest entities.

RECLASSIFICATION

Certain prior period amounts have been reclassified to conform to the current
period's presentation.

NOTE 2 NET INCOME (LOSS) PER SHARE

The Company's net loss per share was calculated using weighted average shares
outstanding of 22,799,352 and 20,161,930 for the three and nine months ended
June 30, 2004 and 12,600,064 and 11,858,208 for the three and nine months ended
June 30, 2003, respectively. Although convertible preferred stock, convertible
debt, and warrants are common stock equivalents, they are not included in the
calculation of diluted earnings per share as their effect would be
anti-dilutive.

F-11

VALCOM, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
-----------

NOTE 3 EQUITY INVESTMENT

As of December 31, 2003, ValCom had a 45% interest in a broadcasting company in
Palm Springs, California. This interest was sold to Eye Span Entertainment
Network, Inc. (ES), a related party, in exchange for 750,000 shares of common
stock of ES on February 16, 2004. valued at $14,519. The Company distributed
shares of ES to its shareholders as dividend in their ratio of ownership as of
December 15, 2003.

NOTE 4 SEGMENT INFORMATION

As of and for the nine months
ended June 30,

Studio Rental Studio & Equip. Rental Film & TV Production Total
--------------- ------------------------ ---------------------- ------------
2004
====

Revenues $ 1,582,654 43,766 87,612 1,714,032
--------------- ------------------------ ---------------------- ------------

Operating (Loss) Income (5,996,377 (20,637) 54,388 (5,962,626)
--------------- ------------------------ ----------------------

Total Assets 4,019,349 93,681 4,113,030
--------------- ------------------------

Depreciation and Amortization 667,422 34,700 702,122
--------------- ------------------------
Capital Expenditure 464,293 - - 464,293
--------------- ------------------------ ---------------------- ------------

2003
====
Revenues. . . . . . . . . . $ 1,602,313 $ 343,114 - $ 1,945,427
--------------- ------------------------ ---------------------- ------------
Operating loss. . . . . . . (929,978) (7,692) ( 144,926) (1,082,596)
--------------- ------------------------ ---------------------- ------------
Total Assets. . . . . . . . . 12,141,320 172,674 - 12,313,994
--------------- ------------------------ ---------------------- ------------

Depreciation and Amortization 224,620 37,200 - 261,820
--------------- ------------------------ ---------------------- ------------

F-12

VALCOM, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)

NOTE 5 LITIGATION

On April 7, 2003, the Company filed on an emergency basis, a voluntary Chapter
11 bankruptcy petition. The case is pending in the United States Bankruptcy
Court, Central District of California, San Fernando Valley Division, as Case No.
SV 03-12998-GM. As of , 2004, the Company was in compliance of all of its duties
under the Bankruptcy Code and all applicable guidelines of the Office of the
United States Trustee.

On April 28, 2004 the court approved two additional cash collateral
stipulations, one each with Finance Unlimited and Laurus, authorizing the
Company's continued use of cash collateral through May 31, 2004. The court
approved an extension and granted the restructuring of notes/debt with Finance
Unlimited and Laurus for settlement and to be discharged from bankruptcy.

In May 2004, Laurus paid off Finance and was subrogated to Finance's $6,565,998
claim, which became included in the senior of Laurus' two claims. Laurus then
sought to conduct a non-judicial foreclosure sale of the Property, and VEI
objected. The Bankruptcy Court issued an order on June 3, 2004, that while
Laurus could conduct a non-judicial foreclosure sale of the Property, Laurus
would not be entitled to any deficiency claim against either VEI or ValCom, or
any other assets other than the Property itself (and the rents and leases
appurtenant thereto).

As a result of the Bankruptcy Court's order and the subsequent trustee's sale of
the Property, neither VEI nor ValCom are subject to any further liabilities on
account of the notes and deeds of trust previously held by Finance and Laurus.
Even though the senior note still technically exists, it has been rendered
non-recourse by the Bankruptcy Court's order, and could only be enforced against
the Property itself (which no longer belongs to VEI). Any liability owed to the
third party, which purchased the Property with regard to the rents collected for
June 2004, has been resolved by settlement with that party.

F-13

VALCOM, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)

NOTE 6 IMPAIRMENT OF PROPERTY AND EQUIPMENT

The property and equipment was recorded in the books at net value of $11,251,216
(net of depreciation of $ 1,324,266). On June 10, 2004, the property was
foreclosed for $ 9,812,966 and the proceeds were used to pay off the notes from
Laurus. The Company has adjusted the value of the property to its subsequent
disposal value. The Company recorded difference between the liabilities settled
from foreclosure of the property and the net book value, as an impairment of the
property and equipment and recorded impairment costs of $ 1,438,250 during the
period ending June 30, 2004.

The impaired property and equipment comprised of the following:

Land $ 7,392,292
Building 5,183,190
Accumulated depreciation (1,324,266)
11,251,216
Exchange for payment of liability (9,812,966)
Impairment loss $ (1,438,250)

NOTE 7 RELATED PARTY TRANSACTIONS

On February 16, 2004, the Company sold its 45% interest in ValCom Broadcasting,
consisting of a joint venture agreement with New Global Communications, Inc. The
joint venture operates a newly developed low power television broadcast station,
K08MX-LP, in Palm Springs, California. The February 16, 2004 Asset Purchase
Agreement with Eye Span Entertainment Network, Inc. also included the sale by
the Company of 143 titles from the ValCom, Inc. film library, along with the
copyrights, trademarks, equipment, legal options, supplies, spare parts,
inventory, and all other tangible personal property related to bingo owned and
used or useful in the operation of Latino Bingo, Satellite Bingo and all other
related items. It also included the sale of 10% ownership interest in Las Vegas
Studios located at 41 North Mojave Road, Las Vegas, Nevada 89101. The
shareholders of interest of Valcom Inc. as of December 15, 2003 received 750,000
shares of common stock of Eye Span Entertainment Network, Inc, value at $14,519,
for the sale of 45% interest in ValCom Broadcasting, LLC, 143 film and
television titles, all of the rights, title and interest in Latino Bingo and
Satellite Bingo, as well as the 10% interest in Las Vegas StudiosThe Company
distributed shares of ES to its shareholders as dividend in their ratio of
ownership as of December 15, 2003.

NOTE 8 STOCKHOLDERS' EQUITY

(A) CONVERTIBLE PREFERRED STOCK

On June 30, 2004, the Company had three series of convertible Preferred Stock:
B, C, and D. Series B Preferred Stock has no voting rights, is entitled to
receive cumulative dividends in preference to any dividend on the common stock
at a rate of 8% per share, per year. Series B Preferred Stock is to be issued if
and when declared by the Board of Directors, and can be converted at any time
into common stock on a 1 for 5 basis. In the event of any liquidation, the

F-14

VALCOM, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)

holders of shares of Series B Preferred Stock then outstanding, shall be
entitled to receive an amount equal to the purchase price per share, plus an
amount equal to declared but unpaid dividends thereon, if any, to the date of
payment. Series C Preferred Stock has no voting rights, is entitled to receive
cumulative dividends in preference to any dividend on the common stock at a rate
of 8% per share, per year, to be issued if and when declared by the Board of
Directors and can be converted at any time into common stock on a 1 for 1 basis.
In the event of any liquidation, the holders of shares of Series C Preferred
Stock then outstanding, shall be entitled to receive an amount equal to the
purchase price per share, plus an amount equal to declared but unpaid dividends
thereon, if any, to the date of payment. Series D Preferred Stock has no voting
rights, no dividends and can be converted at any time to common stock on a 1 for
1 basis. In the event of any liquidation, the holders of shares of Series D
Preferred Stock then outstanding, shall be entitled to receive an amount equal
to the purchase price per share.

With respect to rights on liquidation, Series B, C, and D Preferred Stock shall
rank senior to the common stock, but Series C Preferred Stock shall be senior to
both Series B and D Preferred Stock. Series D Preferred Stock shall be junior to
both Series B and C Preferred Stock. No dividends have been declared by the
Board of Directors for any of the Series of convertible Preferred Stock for the
nine months ended June 30, 2004.

During the period ending June 30, 2004, the Company issued 1,599,999 Series C
Preferred Stock in lieu of services and cash . The Company granted 300,000
warrants associated with the issuance of the preferred stock. The Company
recorded $ 51,568 in expenses for the warrants granted based on Black Scholes
calculation.

Assumption used (for Black Scholes calculations):

Exercise Price $ .25
Life 12 months
Volatility 125%
Interest Rate 8%

The following is the summary of warrants as of June 30, 2004:

Warrants as of September 30, 2003 0
Warrants issued during the period 300,000

F-15

VALCOM, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)

Warrants exercised during the period 0
Warrants expired during the period 0

Warrants outstanding as of June 30, 2004 300,000

During the period ending June 30, 2004, the Company received $ 350,000 for
1,400,000 Series C Preferred Stock to be issued .

(B) COMMON STOCK

During the nine months ended June 30, 2004, the Company converted the Series D
Preferred Stock to common stock by issuance of 2,800,000 shares of common stock.

During the nine months ended June 30, 2004, the Company issued 208,333 shares of
common stock in lieu of debt retirement. The value of the debt retired totaled
approximately $25,000.

During the nine months ended June 30, 2004, the Company issued 500,000 shares of
common stock in lieu of prepaid development costs. The value of the development
costs totaled approximately $215,000, which was computed based upon the market
prices of the common stock on the applicable payment dates.

During the nine months ended June, 2004, the Company issued 650,000 shares of
common stock in lieu of prepaid acquisition and development costs of the Las
Vegas Studios. The value of the development costs totaled approximately
$266,500, which was computed based upon the market prices of the common stock on
the applicable payment dates.

During the nine months ended June 30, 2004, the Company issued 1,900,000 shares
of common stock in lieu of compensation consultancy services performed and
compensation. The value of the services performed totaled approximately
$797,600, which was computed based upon the market prices of the common stock on
the applicable payment dates.

During the nine months ended June, 2004, the Company issued 30,000 shares of
common stock to a director in lieu of an interest payment of $3,000, which was
computed based upon the market price of common stock at the applicable payment
date.

During the nine months ended June, 2004, the Company issued 500,000 shares of
common stock to a director in lieu for compensation valued at $ 95,000 and
principal loan repayment for $ 50,000, which was computed based upon the market
price of common stock at the applicable payment date.

F-16

VALCOM, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)

During the nine months ended June, 2004, the Company issued 250,000 shares of
common stock to a director in lieu of services valued at $ 35,000, which was
computed based upon the market price of common stock at the applicable payment
date.

During the nine months ended June 30, 2004, the Company issued 300,000 shares of
common stock to a director in lieu of retirement of a loan which was computed
based upon the market prices of common stock on the applicable payment dates.

During the nine months ended June 30, 2004, the Company issued an aggregate of
315,750 shares of common stock in lieu of compensation, salaries and bonuses to
employees. Total value of the compensation, salaries and bonuses was
approximately $121,458, which was computed based upon the market prices of the
common stock on the applicable payment dates. This issuance of shares was exempt
from registration pursuant to Section 4(2) of the Securities Act of 1933, as
amended.

During the nine months ended June 30, 2004, the Company issued 600,000 shares of
common stock in exchange for 600,000 shares of series C preferred convertible on
a one on one basis and retired 110,000 to treasury as part of settlement
agreement.

During the nine months ended June 30, 2004, the Company issued 1,344,667 shares
of common stock for options exercised amounting to $ 282,000.

During the nine months ended June 30, 2004, the Company issued 2,792,468 shares
of common stock to individuals through a Private Placement Memorandum for
$1,024,000.

During the nine months ended June 30, 2003, the Company issued 975,000 shares of
common stock in lieu of compensation for legal and consulting services
performed. The value of the legal and consulting services performed totaled
approximately $140,376, which was computed based upon the market prices of the
common stock on the applicable payment dates.

During the nine months ended June 30, 2003, the Company issued 597,500 shares of
common stock in lieu of compensation, salaries and bonuses to employees. Total
value of the compensation, salaries and bonuses was approximately $54,475, which
was computed based upon the market prices of the common stock on the applicable
payment dates.

During the nine months ended June 30, 2003, the Company issued 26,400 shares of
common stock in lieu of debt retirement. Total value of the debt retired was
approximately $3,870, which was computed based upon the market prices of the
common stock issued on the applicable payment dates.

F-17

VALCOM, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)

NOTE 9 DISPOSAL OF BUILDING (UNDER THE ORDER OF BANKRUPTCY COURT)

VEI filed a voluntary chapter 11 bankruptcy petition on April 7, 2003. By May
2004, the Property was subject to three (3) secured claims. These were a note
and first-priority deed of trust held by Finance Unlimited, LLC ("Finance") in
the amount of $6,565,998 and two notes, secured by second-priority and
third-priority deeds of trust, both held by Laurus Master Fund, Ltd. ("Laurus").
Laurus claimed that it was owed a total of $2,978,876 plus additional penalties
and additional legal fees on the two notes but VEI disputed many of the penalty
claims by Laurus. The Finance note was solely the obligation of VEI, but ValCom,
Inc. was also an obligor on the two Laurus notes.

In May 2004, Laurus paid off Finance and was subrogated to Finance's $6,565,998
claim, which became included in the senior of Laurus' two claims. Laurus then
sought to conduct a non-judicial foreclosure sale of the Property, and VEI
objected. The Bankruptcy Court issued an order on June 3, 2004, that while
Laurus could conduct a non-judicial foreclosure sale of the Property, Laurus
would not be entitled to any deficiency claim against either VEI or valium, or
any other assets other than the Property itself (and the rents and leases
appurtenant thereto).

On June10, 2004, Laurus had the Property sold. At this sale, Laurus claimed that
its senior note had a balance of $7,407,873 and its junior note a balance of
$2,405,093. Virtually all of the disputed penalties, along with a
disproportionate share of disputed legal fees and expenses, were incorporated
into the junior balance, while the senior included the $6,565,998 million
subrogated from the Finance claim. The sale was conducted through the junior
note, and the Property was sold for $2.9 million to a third party. An affiliate
of this third party then purchased the senior note directly from Laurus, without
a second sale.
As a result of the Bankruptcy Court's order and the subsequent trustee's sale of
the Property, neither VEI nor ValCom are subject to any further liabilities on
account of the notes and deeds of trust previously held by Finance and Laurus.
Even though the senior note still technically exists, it has been rendered
non-recourse by the Bankruptcy Court's order, and could only be enforced against
the Property itself (which no longer belongs to VEI). Any liability owed to the
third party, which purchased the Property with regard to the rents collected for
June 2004, has been resolved by settlement with that party.

NOTE 10 SUBSEQUENT EVENTS

BANKRUPTCY DISMISSAL

VEI filed a voluntary chapter 11-bankruptcy petition on April 7, 2003 and
obtained the status of Debtor in Possession. After successfully settling the
debts owed to secured creditors through sale of property as per court order
dated June 3, 2004 VEI applied to the United States Bankruptcy Court, Central
District of California, San Fernando Valley Division for a Motion to dismiss
Chapter 11 Bankruptcy case ("the Motion"). The Court on August 3, 2004, having
considered the Motion and pleadings filed in support thereof, having heard
argument of counsel, finding that notice was proper, and for good cause
appearing therefore, ordered (1) The Motion granted (2) Debtor's Chapter 11
bankruptcy case dismissed.

F-18

VALCOM, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS

INTRODUCTION

PLAN OF OPERATION

As of June 30, 2004, ValCom, Inc. operations were comprised of four divisions:
(1) Studio (2) Equipment and Personnel Rental, (3) Broadcast Television and (4)
Film and Television Production.

RENTAL

The Company and its subsidiary, Valencia Entertainment International, LLC,
operates two sound stages in Valencia, California, which the Company leases.
Beginning June 2003, the Company and its subsidiary have a newly signed one-year
lease with five one-year options for two sound stages, which will generate
$2,100,000 annually with cost-of-living increases. The Company has acquired
seven and one half acres of property in Nevada with 162,000 square feet of
buildings, which are being renovated into seven sound stages for rental. The
Company's subsidiary, Half Day Video, Inc., supplies personnel, cameras, and
other production equipment to various production companies on a short-term
basis.

F-20

INDEPENDENT AUDITOR'S REPORT

Board of Directors and Shareholders
ValCom Inc,

We have audited the accompanying consolidated balance sheet of ValCom Inc,and
subsidiaries as of September 30, 2003, and the related consolidated statements
of operations, shareholders' equity, and cash flows for the years ended
September 30, 2003 and 2002. These consolidated financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these consolidated financial statements based on our audits.

We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of ValCom
Inc,and subsidiaries as of September 30, 2003, and the consolidated results of
their operations and cash flows for the years ended September 30, 2003 and 2002
in conformity with accounting principles generally accepted in the United States
of America.

The accompanying consolidated financial statements have been prepared assuming
that the Company will continue as a going concern. During the years ended
September 30, 2003 and 2002, the Company incurred net losses of $2,430,159 and
4,827,818, respectively. In addition, the Company's net cash used in operating
activities was $300,582 for the year ended September 30, 2003, and the Company's
accumulated deficit was $10,556,350 as of September 30, 2003. In addition, the
Company is in default on numerous of its debt obligations. Valencia
Entertainment International, LLC, a California limited liability company and a
subsidiary of the Company filed on April 7, 2003, a voluntary petition in
bankruptcy for reorganization under Chapter 11 of the U.S. Bankruptcy Code in
the United States Bankruptcy Court for the Southern District of California (note
10). The main income of the Company is from the operations of Valencia
Entertainment International. These factors, among others, as discussed in Note
15 to the consolidated financial statements, raise substantial doubt about the
Company's ability to continue as a going concern. Management's plans in regard
to these matters are also described in Note 15. The consolidated financial
statements do not include any adjustments that might result from the outcome of
this uncertainty.

KABANI & COMPANY, INC.

CERTIFIED PUBLIC ACCOUNTANTS
Fountain Valley, California
February 5, 2004

F-1

VALCOM, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
SEPTEMBER 30, 2003

ASSETS
------
Current Assets:
Cash & Cash equivalents $ 211,682
Accounts receivable, net 71,907
Note receivable, current 52,768
-----------
Total Current Assets 336,357

Property and equipment - net 11,600,303
Deferred Compensation 258,680
Deferred financing costs 153,060
Deposits and other assets 115,538
------------
Total Assets $ 12,463,938
============

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

F-2

VALCOM, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (CONTINUED)
September 30, 2003
-------------------

LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
Liabilities Not Subject To Compromise
Current liabilities:
Accounts payable $ 373,143
Accrued interest 672,577
Accrued expenses 365,858
Due to related parties 34,257
Notes payable 7,853,428
-----------
Total Current Liabilities 9,299,263

Liabilities Subject To Compromise
Prepetition trade accounts payable 206,249
Prepetition Payables due to related parties 124,963
Prepetition accrued expenses 131,902

-----------
Total Liabilities $ 9,762,377
-----------

Commitments and contingencies

Stockholders' equity:
Convertible preferred stock: all with par value $0.001; Series B, 1,000,000
shares authorized; 38,000 shares issued and outstanding 38 Series C, 5,000,000
shares authorized; 1,480,000 shares issued and outstanding 1,480 Series D,
1,250,000 shares authorized;1,250,000 shares issued and outstanding 1,250 Common
stock, par value $.001; 100,000,000 shares authorized; 12,925,833 shares issued
and outstanding 12,926 Additional Paid-in capital 13,242,217

Accumulated deficit (10,556,350)

Total Stockholders' Equity 2,701,561
-----------
Total Liabilities and Stockholders' Equity $12,463,938
===========

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

F-3

VALCOM, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS

For the Year Ended For the Year Ended
September 30, 2003 September 30, 2002

Revenue:
Rental $1,945,422 $3,426,405
Production 336,457 8,733,278
Other - 51,646
Total Revenue 2,281,879 12,211,329

Cost and Expenses
Production 414,224, 765,360
Selling and promotion 20,745 164,276
Depreciation and amortization 348,377 401,512
General and administrative 2,167,832 4,235,788
Consulting and professional fees 611,339 768,876
Bad debts 80,180 1,889,302
Goodwill impairment - 424,634
Total Cost and Expenses 3,642,697 15,649,748

Operating loss (1,360,818) (3,438,419)

Other Income (Expense):
Interest expense (1,112,239) (1,397,836)
Gain on sale of assets 78,750 -
Loss on Equity Investment (57,765) -
Other income 50,000 8,437
Total Other Income (Expense) (1,041,254) (1,389,399
)
Loss from continuing operations (2,402,072) (4,827,818)

Discontinued Operations
Operating loss from discontinued operations (108,445) -
Net gain on disposal of discontinued operations 80,358 -
Net loss $(2,430,159) $(4,827,818)

Basic and diluted loss per share from
Continuing operations $(0.19) $(0.48)
Basic and diluted loss per share from
discontinued operations. $0.00 $0.00
Basic and diluted loss per share $(0.19) $(0.48)
Weighted average shares outstanding:
Basic and diluted 12,100,650 10,152,597
========== ==========

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

F-4

VALCOM, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED SEPTEMBER 30, 2003 AND 2002

Common Preferred Series B Preferred Series C
------ ------------------ ------------------
Shares Amount Shares Amount Shares Amount

Balance, December 31, 2001. . 8,909,401 $ 8,909 38,000 $ 38 1,500,000 $ 1,500

Shares issued for services. . . . 440,284 440 - - - -

Shares issued for debt retirement 552,748 553 - - - -

Shares issued to employees as additional compensation . . . 759,500 760 - - - -

Stock issued for payment of fees and penalties. . . . . . . 350,000 350 - - - -

Series D preferred stock issued for cash, net - -

Warrants issued with Series D preferred stock - -

Warrants issued with convertible notes - -

Warrants issued to placement agent - -

Issuance of common stock warrants and options - -

Cancellation of series C Preferred Stock @ par. . . . . . . - - - - (100,000) (100)

Preferred stock to be issued in
connection with the acquisition of
Brentwood Magazine

Treasury Stock, 35,000

Net Loss for the year ended 9/30/02
---------- ----- ------ -- --------- -----
BALANCE SEPTEMBER 30, 2002. . . . . . . . . . . . . . . .11,011,933 11,012 38,000 38 1,400,000 1,400

Shares issued for services. . . . . . . . . . . . . . . . . 975,000 975 - - - -

Shares issued for debt retirement . . . . . . . . . . . . . .26,400 26 - - - -

Shares issued to employees as compensation. . . . . . . . . 597,500 598 - - - -

Preferred stock to be issued. . . . . . . . . . . . . . . . - - 380,000 380

Private placement issuances . . . . . . . . . . . . . . . . 350,000 350 - - - -

Reclass funds received for stock issuance . . . . . . . . . . . . - - - - - -

Treasury Stock Cancellation 35,000 shares . . . . . . . . .(35,000) (35) - - - -

Cancellation of series C Preferred Stock @ par. . . . . . . . . . - - - - (300,000) (300)

Net Loss for the year ended 9/30/03. . . . . . . . . . . . . - - - - - -
---------- ------ ------ -- --------- -----
Balance at September 30, 2003 . . . . . . . . . . . . . .12,925,833 12,926 38,000 38 1,480,000 1,480
========== ====== ====== == ========= =====

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

F-5

VALCOM, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY (CONTINUED)
FOR THE YEARS ENDED SEPTEMBER 30, 2003 AND 2002

Preferred Series D Preferred Stock to be Issued
Shares Amount Shares Amount
Balance, December 31, 2001 - $- - $-
--------- -------- -------- ----------

Shares issued for services. . . . . - - - -

Shares issued for debt retirement . .- - - -

Shares issued to employees as
additional compensation . . . . . . - - - -

Stock issued for payment of fees and penalties. . - - - 255,650

Series D preferred stock issued for cash, net . .1,250,000 1,250 - -

Warrants issued with Series D preferred stock . . . .

Warrants issued with convertible notes. . . . . . . . - - - -

Warrants issued to placement agent. . . . . . . . . . - - - -

Issuance of common stock warrants and options . . . . - - - -

Cancellation of series C Preferred Stock @ par. . . . - - - -

Preferred stock to be issued in connection
with the acquisition of Brentwood Magazine - - 380,000 239,400

Treasury Stock, 35,000. . . . . . . . . . . . . . . . - - - -

Net Loss for the year ended 9/30/02 . . . . . . . . . - - - -
--------- ----- ------- -------
BALANCE SEPTEMBER 30, 2002. . . . . . . . . . . . .1,250,000 1,250 380,000 239,400

Shares issued for services. . . . . . . . . . . . . . - - - -

Shares issued for debt retirement . . . . . . . . . . - - - -

Shares issued to employees as compensation. . . . . . - - 53,877 -

Preferred stock to be issued. . . . . . . . . . . . . - - (380,000) (239,400)

Private placement issuances . . . . . . . . . . . . . - - - -

Reclass funds received for stock issuance . . . . . . - - - -

Treasury Stock Cancellation 35,000 shares . . . . . . - - - -

Cancellation of series C Preferred Stock @ par. . . . - - - -

Net Loss for the year ended 9/30/03. . . . . . . - -
--------- ----- ------- -------
Balance at 9/30/03. . . . . . . . . . . . . . . . .1,250,000 1,250 - -
========= ===== ======= =======

Additional Paid-In Treasury Accumulated
Capital Stock Deficit Total
---------- ------- --------- ---------

Balance, December 31, 2001 $9,512,699 $- $(3,298,372) $6,224,774

Shares issued for services. . . . . . . . . . . . . 430,843 - - 431,283

Shares issued for debt retirement . . . . . . . . . 144,959 - - 145,512

Shares issued to employees as
additional compensation . . . . . . . . . . . . . . .718,846 - - 719,606

Stock issued for payment of fees and penalties. . . .255,650 - - 256,000

Series D preferred stock issued for cash, net . . . .468,797 - - 470,047

Warrants issued with Series D preferred stock 441,203 441,203

Warrants issued with convertible notes. . . . . . . . 77,300 - - 77,300

Warrants issued to placement agent. . . . . . . . . . 60,995 - - 60,995

Issuance of common stock warrants and options . . . .676,199 - - 676,199

Cancellation of series C Preferred Stock @ par. . . . . 100 - -

Preferred stock to be issued in connection
with the acquisition of Brentwood Magazine - - 239,400

Treasury Stock, 35,000. . . . . . . . . . . . . . . - (23,522) - (23,522)

Net Loss for the year ended 9/30/02 . . . . . . . . . . - - (4,827,818) (4,827,818)
---------- ------- --------- ---------
BALANCE SEPTEMBER 30, 2002. . . . . . . . . . . . 12,787,591 (23,522) (8,126,190) 4,890,979

Shares issued for services. . . . . . . . . . . . . 139,401 - - 140,376

Shares issued for debt retirement . . . . . . . . . . .3,844 - - 3,870

Shares issued to employees as compensation. . . . . . 53,877 - - 54,475

Preferred stock to be issued. . . . . . . . . . . . .239,020 - -

Private placement issuances . . . . . . . . . . . . . 41,650 - - 42,000

Reclass funds received for stock issuance . . . . . . . . 20 - - 20

Treasury Stock Cancellation 35,000 shares . . . . . .(23,487) 23,522 -

Cancellation of series C Preferred Stock @ par. . . . . .300 -

Net Loss for the year ended 9/30/03. . . . . . . . . - - (2,430,159) (2,430,159)
---------- ------- ----------- ---------
Balance at 9/30/03. . . . . . . . . . . . . . . 13,242,216 - (10,556,349) 2,701,561
========== ======= =========== =========

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

F-6

VALCOM, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS

For the Year Ended For the Year Ended
September 30, 2003 September 30, 2002

CASH FLOWS FROM OPERATING ACTIVITIES:

Net Loss $(2,430,159) $(4,827,818)
Adjustments to reconcile net loss to net cash
operating activities:
Depreciation and amortization 348,377 401,512
Bad debt expense 80,180 1,889,302
Goodwill impairment - 424,634
Gain on sale of fixed assets (78,750) -
Discount on note receivable - 16,875
Warrants and options issued for compensation 42,000 271,651
Warrants issued to placement agent - 42,245
Stock issued for payment of fees and penalties - 256,000
Stock issued for compensation - 719,606
Stock issued for services 140,376 431,283
Changes in operating assets and liabilities:
Receivables 339,180 (295,878)
Other receivables (281,471) -
Prepaid development costs - (40,233)
Related party receivables - (65,000)
Deferred Compensation 145,868 -
Deposits (76,125) (7,063)
Accounts payable and accrued expenses 1,133,996 (175,381)
Production advances - 765,656
Net Cash Used In Operating Activities (300,582) (2,005,392)
---------------- --------------
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures. . . . . . . . . . . . . . . . . . . . . - (111,658)
Notes receivable payments . . . . . . . . . 83,690 121,667
Proceeds from sale of fixed assets 101,267 -
Net Cash Provided By Investing Activities . . . . . . 184,957 10,009
---------------- --------------

CASH FLOWS FROM FINANCING ACTIVITIES:
Issuance of convertible debt. . . . . . . . . - 2,000,000
Loan costs on new debt . . . . . . . . . . . . . . - (221,999)
Principal repayment of notes . . . . . . . . . . . . . . . ..(184,395) (757,214)
Principal borrowings on notes 259,963 -
Due to related parties . . . . . . . . . . (91,635) (9,365)
Treasury stock. . . . . . . . . . . . . . . . . . - (23,522)
Issuance of preferred stock and warrants. . . . - 930,000
Net Cash Provided By (Used In) Financing Activities . . . . (16,067) 1,917,900
---------------- --------------

NET DECREASE CASH AND CASH EQUIVALENTS. . . . . . . . . . . .(131,692) (77,483)

CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR . . . . . . . .343,374 420,857

CASH AND CASH EQUIVALENTS AT END OF YEAR . . . . . . . . . . $211,682 $343,374
=============== ==============

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
=================================================

Interest paid. . . . . . . . . . . . . . $489,029 $1,371,810
Income taxes paid. . . . . . . . . . . . - $ 800
---------------- --------------

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

F-7

SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND FINANCING ACTIVITIES:

During the year ended September 30, 2003, the Company issued 26,400 shares of
common stock to convert $3,870 of principal and interest on convertible
debentures (See Note 5).

During the year ended September 30, 2003, the Company cancelled 300,000 shares
of Series C Preferred Stock for no consideration.

F-8

VALCOM, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2003 AND 2002

NOTE 1 DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The Company requires the use of its secured creditor"s cash collateral to
operate. Throughout the pendency of this case, the Company has worked with its
two real estate secured lenders, Finance Unlimited, LLC and Laurus Master Fund,
Limited on the details of cash collateral stipulation. An order approving a
global interim cash collateral stipulation with Finance Unlimited and Laurus was
entered on August 26, 2003. This stipulation permitted the Company's use of the
lenders" cash collateral through December 31, 2003.

On January 15, 2004, the Court approved two additional cash collateral
stipulations, one each with Finance Unlimited and Laurus, authorizing the
Company's continued use of cash collateral through March 31, 2004 (Second
Interim Stipulation). The Second Interim Stipulation generally grant Finance
Unlimited and Laurus relief from the automatic bankruptcy stay effective March
31, 2004, and the right to hold foreclosures sales on their real and personal
property collateral as early as April 1, 2004.

DESCRIPTION OF BUSINESS

The Company is a diversified entertainment company with the following operating
activities:

a) Studio rental - the Company leases eight sound and production stages to
production companies. Six of the eight sound and production stages are owned by
the Company, while the remaining two stages are leased from a third party under
an operating lease agreement.

b) Studio equipment and rental - operating under the name Half Day Video, Inc.,
the Company supplies and rents personnel, cameras and other production equipment
to various production companies on a short-term or long-term basis.

c) Film and TV production -The Company, in addition to producing its own
television and motion picture programming, has an exclusive facilities agreement
in place for productions in Los Angeles County for a three-year term with Woody
Fraser/Woody Fraser Productions.

d) Broadcast Television - The Company owns a 45% equity interest in ValCom
Broadcasting, LLC, a New York limited liability company, which operates KVPS
(Channel 8), an independent television broadcaster in the Palm Springs,
California market, which is strategically located in the middle of four major
markets including Los Angeles, Phoenix, Las Vegas and San Diego.

BASIS OF PRESENTATION
- -----------------------
This summary of significant accounting policies of the Company is presented to
assist in understanding the consolidated financial statements. The consolidated
financial statements and notes are representations of the Company's management,
which is responsible for their integrity and objectivity. These accounting
policies conform to accounting principles generally accepted in the United
States of America and have been consistently applied in the preparation of the
consolidated financial statements.

F-9

VALCOM, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2003 AND 2002

PRINCIPLES OF CONSOLIDATION

The consolidated financial statements include the accounts of ValCom, Inc. and
two wholly-owned subsidiaries, VEI, which was acquired effective February 2001,
and Half Day Video, Inc., which was acquired effective March 2001.

Investments in affiliated companies over which the Company has a significant
influence or ownership of more than 20% but less than or equal to 50% are
accounted for under the equity method.

USE OF ESTIMATES

The preparation of financial statements in conformity with generally accepted
accounting principles 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.

CONCENTRATIONS AND CREDIT RISK

The Company has two customers who accounted for approximately 99% of total
rental revenues for the year ended September 30, 2003. As of September 30, 2003,
all eight sound and production stages were under non-cancelable operating leases
for one year from two major production companies.

FAIR VALUE OF FINANCIAL INSTRUMENTS

Statement of financial accounting standard No. 107, Disclosures about fair value
of financial instruments, requires that the Company disclose estimated fair
values of financial instruments. The carrying amounts reported in the statements
of financial position for current assets and current liabilities qualifying as
financial instruments are a reasonable estimate of fair value.

DEPRECIATION AND AMORTIZATION

For financial and reporting purposes, the Company follows the policy of
providing depreciation and amortization on the straight-line method over the
estimated useful lives of the assets, which are as follows:

Building 39 years
Building Improvements 39 years
Production Equipment 5 years
Office Furniture and Equipment 5 to 7 years
Leasehold Improvements 5 years
Autos and Trucks 5 years

DEFERRED LOAN COSTS

Deferred loan costs represent ancillary costs incurred to obtain loans. These
are being amortized on the straight-line method over the term of the related
loan.

F-10

VALCOM, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2003 AND 2002

INCOME TAXES

Deferred income tax assets or liabilities are computed based on the difference
between the financial reporting and income tax bases of assets and liabilities
using the enacted marginal tax rate. Deferred income tax expenses or benefits
are based on the changes in the asset or liability from period to period.

STOCK-BASED COMPENSATION

The Company accounts for its stock-based employee compensation plans using the
intrinsic value based method, under which compensation cost is measured as the
excess of the stock's market price at the grant date over the amount an employee
must pay to acquire the stock. Expenses related to stock options and warrants
issued to non-employees are accounted for using the fair value based method,
under which the fair value of the security is measured at the date of grant
based on the Black-Scholes pricing model.

IMPAIRMENT OF LONG-LIVED ASSETS

Effective January 1, 2002, the Company adopted Statement of Financial Accounting
Standards No. 144, "Accounting for the Impairment or Disposal of Long-Lived
Assets" ("SFAS 144"), which addresses financial accounting and reporting for the
impairment or disposal of long-lived assets and supersedes SFAS No. 121,
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to
be Disposed Of," and the accounting and reporting provisions of APB Opinion No.
30, "Reporting the Results of Operations for a Disposal of a Segment of a
Business." The Company periodically evaluates the carrying value of long-lived
assets to be held and used in accordance with SFAS 144. SFAS 144 requires
impairment losses to be recorded on long-lived assets used in operations when
indicators of impairment are present and the undiscounted cash flows estimated
to be generated by those assets are less than the assets' carrying amounts. In
that event, a loss is recognized based on the amount by which the carrying
amount exceeds the fair market value of the long-lived assets. Loss on
long-lived assets to be disposed of is determined in a similar manner, except
that fair market values are reduced for the cost of disposal. Based on its
review, the Company believes that, as of September 30, 2003, there were no
significant impairments of its long-lived assets.

REVENUE RECOGNITION

Revenues from studio and equipment rentals are recognized ratably over the
contract terms. Revenues from the production and licensing of television
programming are recognized when the films or series are available for telecast
and certain contractual terms of the related production and licensing agreements
have been met. Advertising revenues are recognized in the period during which
the advertising is published in the Company's magazine, Brentwood Magazine. In
January 2003, the Company entered into a Memorandum of Understanding to cancel
the Agreement and Plan of Reorganization dated August 2, 2002, pursuant to which
the Company acquired PTL Productions (dba Brentwood Magazine) and sell PTL
Productions, Inc. (dba Brentwood Magazine) back to the seller.

EQUITY INVESTMENT

The Company accounts for its investments in companies over which the Company has
significant influence or ownership of more than 20% but less than or equal to
50% under the equity method. The Company's 45% investment in a recently acquired
television station has been accounted for as an investment under the equity
method (See Note 15)

F-11

VALCOM, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2003 AND 2002

TREASURY STOCK

Treasury stock is accounted for by the cost method. Issuance of treasury shares
is accounted for on a first-in, first-out basis. Differences between the cost of
treasury shares and the re-issuance proceeds are charged to additional paid-in
capital, if reissued. During July 2002, the Company purchased 35,000 shares of
its common stock at a total cost of $23,522. No shares have been reissued as of
September 30, 2003. In September 2003, the Company retired these shares back
into the treasury.

LOSS PER COMMON SHARE

Basic loss per common share is based on net loss divided by the weighted average
number of common shares outstanding. Common stock equivalents were not included
in the calculation of diluted loss per share as their effect would be
anti-dilutive.

RECLASSIFICATIONS

Certain amounts from prior periods have been reclassified to conform to the
current year presentation.

NEW ACCOUNTING PRONOUNCEMENTS

The Financial Accounting Standards Board has recently issued several new
Statements of Financial Accounting Standards ("SFAS"). Statement No. 141,
"Business Combinations" supersedes Accounting Principles Board ("APB") Opinion
No. 16 and various related pronouncements. Pursuant to the new guidance in
Statement No. 141, all business combinations must be accounted for under the
purchase method of accounting; the pooling-of-interests method is no longer
permitted. SFAS 141 also establishes new rules concerning the recognition of
goodwill and other intangible assets arising in a purchase business combination
and requires disclosure of more information concerning a business combination in
the period in which it is completed. This statement is generally effective for
business combinations initiated on or after July 1, 2001. Statement No. 142,
"Goodwill and Other Intangible Assets" supercedes APB Opinion 17 and related
interpretations. Statement No. 142 establishes new rules on accounting for the
acquisition of intangible assets acquired in a business combination and the
manner in which goodwill and all other intangibles should be accounted for
subsequent to their initial recognition in a business combination accounted for
under SFAS No. 141. Under SFAS No. 142, intangible assets should be recorded at
fair value. Intangible assets with finite useful lives should be amortized over
such period and those with indefinite lives should not be amortized. All
intangible assets being amortized as well as those that are not, are both
subject to review for potential impairment under SFAS No. 121, "Accounting for
the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed
of". SFAS No. 142 also requires that goodwill arising in a business combination
should not be amortized but is subject to impairment testing at the reporting
unit level to which the goodwill was assigned at the date of the business
combination.

In June 2001, the Financial Accounting Standards Board ("FASB") issued Statement
of Financial Accounting Standards ("SFAS") No. 143, "Accounting for Asset
Retirement Obligations". SFAS 143 addresses financial accounting and reporting
for obligations associated with the retirement of tangible long-lived assets and
the associated asset retirement costs. This Statement is effective for financial
statements issued for fiscal years beginning after June 15, 2002.

SFAS No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets,"
was issued in August 2001. SFAS No. 144 is effective for fiscal years beginning
after December 15, 2001, and addresses financial accounting and reporting for
the impairment or disposal of long-lived assets. This statement supersedes SFAS
No. 121 "Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to Be Disposed Of," and the accounting and reporting provisions of APB
Opinion No. 30, "Reporting the Results of Operations - Reporting the Effects of
Disposal of a Segment of a Business, and Extraordinary, Unusual and Infrequently
Occurring Events and Transactions," for the disposal of a segment of a business.

F-12

VALCOM, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2003 AND 2002

The adoption of above pronouncements, did not materially impact the Company's
financial position or results of operations.

In May 2002, the Board issued SFAS No. 145, Rescission of FASB Statements No. 4,
44, and 64, Amendment of FASB Statement No. 13, and Technical Corrections ("SFAS
145"). SFAS 145 rescinds the automatic treatment of gains or losses from
extinguishments of debt as extraordinary unless they meet the criteria for
extraordinary items as outlined in APB Opinion No. 30, Reporting the Results of
Operations, Reporting the Effects of Disposal of a Segment of a Business, and
Extraordinary, Unusual and Infrequently Occurring Events and Transactions. SFAS
145 also requires sale-leaseback accounting for certain lease modifications that
have economic effects that are similar to sale-leaseback transactions and makes
various technical corrections to existing pronouncements. The provisions of SFAS
145 related to the rescission of FASB Statement 4 are effective for fiscal years
beginning after May 15, 2002, with early adoption encouraged. All other
provisions of SFAS 145 are effective for transactions occurring after May 15,
2002, with early adoption encouraged. The adoption of SFAS 145 does not have a
material effect on the earnings or financial position of the Company.

In June 2002, the FASB issued SFAS No. 146 "Accounting for Costs Associated with
exit or Disposal Activities." This Statement addresses financial accounting and
reporting for costs associated with exit or disposal activities and nullifies
Emerging Issues Task Force (EITF) Issue No. 94-3, "Liability Recognition for
Certain Employee Termination Benefits and Other Costs to Exit an Activity
(including Certain Costs Incurred in a Restructuring)." This Statement requires
that a liability for a cost associated with an exit or disposal activity be
recognized when the liability is incurred. Under Issue 94-3 a liability for an
exit cost as defined, was recognized at the date of an entity's commitment to an
exit plan. The adoption of SFAS 146 does not have a material effect on the
earnings or financial position of the Company.

In October 2002, the FASB issued SFAS No. 147, "Acquisitions of Certain
Financial Institutions." SFAS No. 147 removes the requirement in SFAS No. 72 and
Interpretation 9 thereto, to recognize and amortize any excess of the fair value
of liabilities assumed over the fair value of tangible and identifiable
intangible assets acquired as an unidentifiable intangible asset. This statement
requires that those transactions be accounted for in accordance with SFAS No.
141, "Business Combinations," and SFAS No. 142, "Goodwill and Other Intangible
Assets." In addition, this statement amends SFAS No. 144, "Accounting for the
Impairment or Disposal of Long-Lived Assets," to include certain financial
institution-related intangible assets. The adoption of SFAS 147 did not have a
material effect on the earnings or financial position of the Company. In
November 2002, the FASB issued FASB Interpretation No. 45, "Guarantor's
Accounting and Disclosure Requirements for Guarantees, Including Indirect
Guarantees of Indebtedness of Others" (FIN 45). FIN 45 requires that upon
issuance of a guarantee, a guarantor must recognize a liability for the fair
value of an obligation assumed under a guarantee. FIN 45 also requires
additional disclosures by a guarantor in its interim and annual financial
statements about the obligations associated with guarantees issued. The
recognition provisions of FIN 45 are effective for any guarantees issued or
modified after December 31, 2002. The disclosure requirements are effective for
financial statements of interim or annual periods ending after December 15,
2002. The adoption of this pronouncement does not have a material effect on the
earnings or financial position of the Company.

F-13

VALCOM, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2003 AND 2002

In December 2002, the FASB issued SFAS No. 148 "Accounting for Stock Based
Compensation-Transition and Disclosure". SFAS No. 148 amends SFAS No. 123,
"Accounting for Stock Based Compensation", to provide alternative methods of
transition for a voluntary change to the fair value based method of accounting
for stock-based employee compensation. In addition, this Statement amends the
disclosure requirements of Statement 123 to require prominent disclosures in
both annual and interim financial statements about the method of accounting for
stock-based employee compensation and the effect of the method used, on reported
results. The Statement is effective for the Companies' interim reporting period
ending January 31, 2003. The Company does not expect the adoption of SFAS No.
148 would have a material impact on its financial position or results of
operations or cash flows.

On April 30, 2003, the FASB issued FASB Statement No. 149 ("SFAS 149"),
"Amendment of Statement 133 on Derivative Instruments and Hedging Activities".
FAS 149 amends and clarifies the accounting guidance on (1) derivative
instruments (including certain derivative instruments embedded in other
contracts) and (2) hedging activities that fall within the scope of FASB
Statement No. 133 ("SFAS 133"), Accounting for Derivative Instruments and
Hedging Activities. SFAS 149 also amends certain other existing pronouncements,
which will result in more consistent reporting of contracts that are derivatives
in their entirety or that contain embedded derivatives that warrant separate
accounting. SFAS 149 is effective (1) for contracts entered into or modified
after June 30, 2003, with certain exceptions, and (2) for hedging relationships
designated after June 30, 2003. The guidance is to be applied prospectively. The
Company does not expect the adoption of SFAS No. 149 to have a material impact
on its financial position or results of operations or cash flows.

On May 15 2003, the FASB issued FASB Statement No. 150 ("SFAS 150"), Accounting
for Certain Financial Instruments with Characteristics of both Liabilities and
Equity. SFAS 150 changes the accounting for certain financial instruments that,
under previous guidance, could be classified as equity or "mezzanine" equity, by
now requiring those instruments to be classified as liabilities (or assets in
some circumstances) in the statement of financial position. Further, SFAS 150
requires disclosure regarding the terms of those instruments and settlement
alternatives. SFAS 150 affects an entity's classification of the following
freestanding instruments: a) Mandatorily redeemable instruments b) Financial
instruments to repurchase an entity's own equity instruments c) Financial
instruments embodying obligations that the issuer must or could choose to settle
by issuing a variable number of its shares or other equity instruments based
solely on (i) a fixed monetary amount known at inception or (ii) something other
than changes in its own equity instruments d) SFAS 150 does not apply to
features embedded in a financial instrument that is not a derivative in its
entirety. The guidance in SFAS 150 is generally effective for all financial
instruments entered into or modified after May 31, 2003, and is otherwise
effective at the beginning of the first interim period beginning after June 15,
2003. For private companies, mandatorily redeemable financial instruments are
subject to the provisions of SFAS 150 for the fiscal period beginning after
December 15, 2003. The Company does not expect the adoption of SFAS No. 150 to
have a material impact on its financial position or results of operations or
cash flows.

F-14

VALCOM, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2003 AND 2002

NOTE 2 PROPERTY AND EQUIPMENT

Property and equipment consists of the following at:

September 30,
2003
------------

Land . . . . . . . . . . . . . $ 7,392,292
Building . . . . . . . . . . . 4,028,785
Building Improvements. . . . . 1,154,406
Production Equipment . . . . . 512,648
Leasehold Improvements . . . . 62,677
Autos and Trucks . . . . . . . 66,656
Office Furniture and Equipment 79,892
------------
13,297,356
Less: accumulated depreciation (1,697,053)

Net book value . . . . . . . . $11,600,303
===========

NOTE 3 NOTE RECEIVABLE

In September 2001, the Company sold production equipment to an unrelated third
party under an asset purchase agreement for $350,000. Under the terms of the
agreement, $150,000 was to be paid at signing and the remaining $200,000 was to
be paid in 24 monthly installments of $8,333. The $150,000 was paid to the
Company, however, none of the $8,333 monthly payments were made. In July 2002,
the Company restructured the note to forgive $40,000 of the note and extend the
maturity date one year, thereby reducing the monthly payments to $6,667. In
connection with the sale, the Company recorded a loss of $25,312, which is
included in general and administrative expenses for the fiscal year ended
September 30, 2002. Additionally, the Company recorded a $40,000 loss on the
restructuring of the note which is also included in general and administrative
expenses. The note is non-interest bearing. The Company recorded a discount on
the note amounting to $25,312 and the discount is accreted to interest income
over the term of the note. In connection with the discount, the Company recorded
interest income of $9,648 for the fiscal year ended September 30, 2003. As of
September 30, 2003, the balance due on the note is $60,000. The third party is
current with the $6,667 monthly payments on the note. The note is secured by the
equipment sold. In January 2003, the Company received $40,000 of the equipment
back from the seller.

F-15

VALCOM, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2003 AND 2002

NOTE 4 NOTES PAYABLE

September 30,
2003
------------

Promissory note payable to Finance Unlimited, formerly known as Hawthorne
Savings (formerly known as First Fidelity), monthly installments of principal
and interest of $54,648. Interest is variable based on a 6-month US T-Bill rate.
The note is secured by a Deed of Trust on the Valencia Studio property and
matures June 2004. According to the agreement, as a result of default in
installment, the whole note becomes current. The company defaulted in payments
of the note in 2002, as a result of which the note is classified as a current
liability.

$ 5,858,378

Convertible promissory note, net of discount of $25,764 at September 30, 2003.
See Note 7 for further description. 1,805,706

Promissory note payable to City National Bank, interest at 11.25%, maturing
February 28, 2006. The note is collateralized by production equipment. 106,587

Other, 8.00% - 11.00% interest, maturing from 2003 to 2006 82,757
----------
Total 7,853,428
Less current maturities (7,801,551)
----------

Long-term notes payable $ 51,877
===========

F-16

VALCOM, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2003 AND 2002

Future maturities on the notes are as follows:

Year ending September 30
2004 $ 7,801,551
2005 25,938
2006 25,939
----------
$7,853,428
==========

NOTE 5 CONVERTIBLE NOTES PAYABLE

On June 6, 2001 and September 7, 2001, the Company borrowed $750,000 and
$250,000, respectively, from the Laurus Master Fund, Ltd. The borrowings were
evidenced by convertible promissory notes due June 7, 2003 and September 7,
2003, respectively. Interest at 8% per annum was payable quarterly. Any or all
principal or interest was convertible into common stock of the Company at 80% of
the average of the lowest closing stock prices during the preceding 60 trading
days. The convertible notes were also issued with detachable warrants to
purchase up to 72,737 shares of common stock of the Company at the lesser of
$.548 per share or 120% of the average three lowest closing stock prices during
the immediately preceding 10 trading days prior to exercise of the warrants. A
discount of $375,000 was recognized on the beneficial conversion features of
this debt and the detachable warrants.

On May 24, 2002, the Company repaid the remaining $1,089,616 convertible note
due to the Laurus Master Fund, Ltd. In connection with the payoff of the note,
the Company expensed $109,000 in unamortized prepaid loan fees, $245,000 of
unamortized discounts and $295,000 of interest expense.

In May and June 2002, the Company issued to the Laurus Master Fund, Ltd. 12 %
convertible notes in the aggregate principal amount of $2,000,000. The notes
mature on May 24, 2004, are convertible into the Company's common stock at a
fixed conversion price of $.95 per share and are payable monthly over 22 months.
The interest rate escalates to 13% for the months seventh to eighteen, after
which it is 14% till maturity. In addition, in connection with the issuance of
the convertible notes, the Company issued warrants to purchase 300,000 shares of
common stock at an exercise price of $1.20 exercisable until May 24, 2007. The
convertible notes are secured by a second mortgage on the Company's properties.
The fair value assigned to the warrants amounted to $77,300 and was determined
using the Black-Scholes pricing model. Such amount is included in additional
paid-in-capital at September 30, 2002. The convertible note is presented in the
accompanying consolidated balance sheet at September 30, 2003 net of a discount
of $25,764.

During the year ended September 30, 2003, the Company issued 26,400 shares of
common stock to the holders of its convertible notes payable for payment of
principal and accrued interest. Principal and accrued interest converted during
the year ended September 30, 2003 totaled $3,870, which was computed based upon
terms stipulated in the applicable convertible notes.

During the year ended September 30, 2002, the Company issued 552,748 shares of
common stock to the holders of its convertible notes payable for payment of
principal and accrued interest. Principal and accrued interest converted during
the year ended September 30, 2002 totaled approximately $145,512, which was
computed based upon terms stipulated in the applicable convertible notes. In
connection with the repayment of the June 6, 2001 and September 7, 2001
convertible notes and the issuance of the May and June 2002 convertible notes,
the Company issued 350,000 restricted shares of its common stock to Laurus
Master Fund, Ltd. for payment of late fees and penalties. The total amount of
the late fees and penalties paid with common stock amounted to approximately
$256,000, which was computed based upon the market prices of the common stock on
the applicable conversion dates and is included in general and administrative
expenses in the accompanying consolidated statement of operations for the year
ended September 30, 2002.

F-17

VALCOM, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2003 AND 2002

NOTE 6 INCOME TAXES

No provision for Federal and state income taxes has been recorded as the Company
has incurred net operating losses through September 30, 2003. At September 30,
2003, the Company had approximately $10,201,055 of net operating loss
carryforwards for Federal income tax reporting purposes available to offset
future taxable income. Such carryforwards expire beginning in 2003. Under the
Tax Reform Act of 1986, the amounts of and benefits from net operating losses
and capital losses carried forward may be impaired or limited in certain
circumstances. Events, which may cause limitations in the amount of net
operating losses that the Company may utilize in any one year, include, but are
not limited to, a cumulative ownership change of more than 50% over a three-year
period.

Deferred tax assets at September 30, 2003 and 2002 consist primarily of the tax
effect of net operating loss carryforwards, which amounted to approximately
$2,813,027 and $1,844,079, respectively. Other deferred tax assets and
liabilities are not significant. The Company has provided a full valuation
allowance on the deferred tax assets at September 30, 2003 and 2002 to reduce
such deferred income tax assets to zero, as it is management's belief that
realization of such amounts is not considered more likely than not.

The following is a reconciliation of the provision for income taxes at the U.S.
federal income tax rate to the income taxes reflected in the Statement of
Operations:

September 30, 2003
--------------------

Tax expense (credit) at statutory rate-federal (34)%
State tax expense net of federal tax (6)
Changes in valuation allowance 40
Tax expense at actual rate -

The components of the net deferred tax asset are summarized below:

September 30, 2003
--------------------
Deferred tax asset
Net operating losses $ 2,813,027
Less: valuation allowance ( 2,813,027)
-------------------
$ -
===================

NOTE 7 RELATED PARTY TRANSACTIONS

At September 30, 2003, related party payables represent $39,220 due to the
President and $120,000 due to a director and shareholder of the Company,
resulting from a loan.

NOTE 8 COMMITMENTS

In May 2000, the Company leased additional facilities adjacent to its location
in Valencia. The lease has a term of five years. Initial monthly base rent was
$29,000 with annual increases until 2004 when base rent will be $34,585. Rent
expense for the year ended September 30, 2003 and 2002 were $430,989 and
$470,354, respectively.

F-18

VALCOM, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2003 AND 2002

NOTE 9 SEGMENT INFORMATION

The Company classifies its business interests into three fundamental areas:
Studio Rental, consisting principally of sound and production stage rentals to
production companies, Studio Equipment Rental, consisting principally of
personnel, camera and other production equipment rentals to various production
companies on a short-term or long-term basis, and Film and TV Productions,
consisting principally of television productions for the broadcast networks,
cable networks or first-run television syndication.

Studio Rental Studio Equip Rental Film & TV Production Total
--------------- --------------------- --------------------- ------------
For the year ended September 30, 2003
- --------------------------------------

Revenues $1,902,621 $379,258 $- $2,281,879
Operating (Loss) Income (1,323,245) (37,573) - (1,360,818)
Total Assets 12,013,289 191,969 - 12,205,258
Depreciation and Amortization 298,896 49,391 - 348,377

For the year ended September 30, 2002
- --------------------------------------
Revenues . . . . . . . . . . . . . $ 3,426,405 $ 1,314,797 $ 7,470,127 $12,211,329
Operating Income (Loss). . . . . . . . (3,511,871) (54,776) 128,228 (3,438,419)
Total Assets . . . . . . . . . . . . . 13,197,107 212,918 129,292 13,539,317
Depreciation and Amortization. . . . . 352,805 48,707 - 401,512

The Studio Rental segment above includes the operating activities of the
corporate division.

NOTE 10 LITIGATION

On April 7, 2003, the Company filed on an emergency basis a voluntary Chapter 11
bankruptcy petition. The case is pending in the United States Bankruptcy Court,
Central District of California, San Fernando Valley Division, as Case No. SV
03-12998-GM. As of December 31, 2003, the company was in compliance of all its
duties under the Bankruptcy Code and all applicable guidelines of the Office of
the United States Trustee.

On January 15, 2004, the Court approved two additional cash collateral
stipulations, one each with Finance Unlimited and Laurus, authorizing the
Company's continued use of cash collateral through March 31, 2004 (Second
Interim Stipulation). The Second Interim Stipulation generally grant Finance
Unlimited and Laurus relief from the automatic bankruptcy stay effective March
31, 2004, and the right to hold foreclosures sales on their real and personal
property collateral as early as April 1, 2004.

On June 26, 2003, the Company filed within its bankruptcy case an adversary
complaint against six creditors for injunctive relief and to extend the
protections of the automatic stay arising under section 362 of Bankruptcy Code.
Through this action, the Company seeks to bar temporarily the defendant
creditors from attempting to collect on their allowed claims from the Company's
key personnel.

F-19

VALCOM, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2003 AND 2002

In September 2001, a complaint was filed in the Los Angeles County Superior
Court, Russomano et al. v. VEI et al., BC 257989. The plaintiffs are Diane
Russomano and Knowledge Booster, Inc. and the defendants include Valcom, Inc.
and Valencia Entertainment International ("Valencia"), the Company's president
and others. The complaint revolves around prior litigation in which the
plaintiffs alleged, among other things, that the show "A.J.'s Time Travelers"
violated plaintiffs' rights in a children's television show called "Rickey
Rocket".

That case went to trial, and plaintiffs obtained judgments against a number of
defendants, including a judgment in the amount of $3 million against Rickey
Rocket Enterprises ("RREI") and a judgment in the amount of $1.2 million against
Time Travelers, Inc. ("TTI").

The complaint asserted two causes of action against the Company, Valencia and
other defendants. The first cause of action alleges the Company was the "alter
ego" of RREI and/or TTI and is therefore liable for the judgments against those
entities. The second cause of action was for malicious prosecution and that
cause has been dismissed with prejudice. Valencia became a distributor for A.J.
Time Travelers, Inc. but not until four years after the alleged wrongdoing
occurred.

Clay Harrison v. SBI Communications, Inc. and Valcom, Inc. (Los Angeles Superior
Court Case No. BC 035014)

On December 9, 2002, a complaint was filed by Clay Harrison against the Company
and SBI Communications, Inc. seeking damages for breach of his alleged
employment contract. The dispute involves Mr. Harrison's termination as the
President of Half Day Video, Inc., a wholly owned subsidiary of the Company.
The Parties have entered mediation to resolve the dispute.

Euromerica Capital Group v. Valcom, Inc. and Valencia Entertainment
International.

Euromerica Capital Group filed a lawsuit against ValCom, Inc. and Valencia
Entertainment International on August 26, 2002 based on alleged breach of
contract. The Plaintiff is seeking monetary damages of $47,556. ValCom filed a
cross-complaint for breach of contract, intentional misrepresentation and
concealment. ValCom asked for monetary damages in the amount of $45,000 plus
punitive damages. Valencia Entertainment subsequently filed bankruptcy under
Chapter 11 and the automatic stay has prevented the case from moving forward. It
is expected that the case will be settled upon completion of the bankruptcy
proceeding.

The Company is involved from time to time in legal proceedings incident to the
normal course of business. Management believes that the ultimate outcome, except
the cases mentioned above, of any pending or threatened litigation would not
have a material adverse effect on the Company's consolidated financial position,
results of operations or cash flows.

NOTE 11 STOCKHOLDERS' EQUITY

(A) CONVERTIBLE PREFERRED STOCK

At September 30, 2002, the Company had three series of convertible Preferred
Stock: B, C and D. Series B Preferred Stock has no voting rights, is entitled to
receive cumulative dividends in preference to any dividend on the common stock
at a rate of 10% per share, per year, to be issued if and when declared by the
Board of Directors and can be converted at any time into common stock on a 1 for
5 basis. In the event of any liquidation, the holders of shares of Series B
Preferred Stock then outstanding shall be entitled to receive an amount equal to
the purchase price per share, plus an amount equal to declared but unpaid
dividends thereon, if any, to the date of payment. Series C Preferred Stock has
no voting rights, is entitled to receive cumulative dividends in preference to
any dividend on the common stock at a rate of 10% per share, per year, to be
issued if and when declared by the Board of Directors and can be converted at
any time into common stock on a 1 for 1 basis. In the event of any liquidation,
the holders of shares of Series C Preferred Stock then outstanding shall be
entitled to receive an amount equal to the purchase price per share, plus an
amount equal to declared but unpaid dividends thereon, if any, to the date of
payment. Series D Preferred Stock has no voting rights, no dividends and can be
converted at any time to common stock on a 1 for 1 basis. In the event of any
liquidation, the holders of shares of Series C Preferred Stock then outstanding
shall be entitled to receive an amount equal to the purchase price per share.

F-20

VALCOM, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2003 AND 2002

With respect to rights on liquidation, Series B, C and D Preferred Stock shall
rank senior to the common stock but Series C Preferred Stock shall be senior to
both Series B and D Preferred Stock while Series D Preferred Stock shall be
junior to both Series B and C Preferred Stock. No dividends have been declared
by the Board of Directors for any of the Series of convertible Preferred Stock
for the fiscal year ended September 30, 2002.

On June 6, 2002, the Company received $930,000, net for the issuance of
1,250,000 shares of Series D Convertible Preferred Stock to an accredited
investor. In connection with the transaction, the Company also issued warrants
to the preferred stockholder to purchase an aggregate of 1,300,000 shares of the
Company's common stock at an exercise price of $.80 per share, expiring on June
18, 2007. The Company allocated the net proceeds received from the sale of the
preferred stock to the warrants using the Black-Scholes pricing model. The
allocation of the net proceeds to the warrants amounted to $466,908 and is
included in additional paid-in capital in the accompanying condensed
consolidated balance sheet at September 30, 2002. Also in connection with the
sale of the Series D Convertible Preferred Stock, the Company incurred a 7%
placement agent fee and also issued the placement agents 125,000 "VACM Units",
each unit comprised of one share of common stock and a warrant to purchase one
share of common stock at an exercise price of $.80 per share. The Company
recorded the $70,000 placement agent fee as a reduction of the proceeds
received, thereby reducing additional paid-in capital by $70,000 at September
30, 2002. Each VACM Unit is exercisable at $.80 per unit and the unit and the
underlying warrant expire June 18, 2007. The Company valued the VACM Unit by
apportioning value to the underlying warrant and common stock using the
Black-Scholes pricing model, and by measuring the intrinsic value of the common
stock. The value of the 125,000 VACM Units amounted to $60,745 and was recorded
as an increase in additional paid-in capital at September 30, 2002.

In connection with the Series D Preferred Stock financing, the Company has also
issued 2,800,000 shares of its common stock to be held in escrow based upon the
terms of the financing agreement. The financing agreement requires the Company
to hold in escrow 1,250,000 shares of common stock as a deposit in anticipation
of the preferred stockholder's conversion of 1,250,000 shares of Series D
Preferred Stock, an additional 1,300,000 shares of common stock as a deposit in
anticipation of the preferred stockholder's exercise of warrants to purchase
1,300,000 shares of common stock, and an additional 250,000 shares of common
stock as a deposit in anticipation of the placement agents' exercise of its VACM
Units. As discussed above, the Series D Preferred Stock can be converted at any
time to common stock on a 1 for 1 basis. At September 30, 2002, none of the
2,800,000 common shares have been released from escrow and are not considered
outstanding for purposes of computing weighted average shares outstanding.

(B) COMMON STOCK

During the fiscal year ended September 30, 2003, the Company issued 1,572,500
shares of common stock in lieu of compensation for consulting and professional
services performed. The value of the consulting and professional services
performed totaled approximately $194,851, which was computed based upon the
market prices of the common stock on the applicable payment dates.

F-21

VALCOM, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2003 AND 2002

During the fiscal year ended September 30, 2002, the Company issued 440,284
shares of common stock in lieu of compensation for consulting and professional
services performed. The value of the consulting and professional services
performed totaled approximately $431,283, which was computed based upon the
market prices of the common stock on the applicable payment dates.

See Note 5 for common stock issued for debt repayment.

During the fiscal year ended September 30, 2003, the Company issued warrants to
purchase 2,083,334 shares of the Company's common stock to a director in
connection with services provided and to be provided to the company. The
weighted average exercise price for the warrants issued was $0.12, and all of
the warrants begin to expire in September 2005. The director has exercised
350,000 warrants up to September 30, 2003.

During the fiscal year ended September 30, 2002, the Company issued warrants to
purchase 2,075,000 shares of the Company's common stock to certain individuals
and companies in connection with the issuance of Series D Preferred Stock (see
Note 13(A)) and consulting agreements. The weighted average exercise price for
the warrants issued was $0.75, and all of the warrants begin to expire in fiscal
year 2007. There were no warrants outstanding prior to fiscal year 2002.
Additionally, the Company recorded consulting expense of $271,651 in connection
with warrants issued to consultants. These warrants were valued using the Black
Scholes pricing model. The Company also recorded $324,724 of deferred
compensation in connection with the consulting agreements in the accompanying
consolidated balance sheet at September 30, 2002.

NOTE 12 EMPLOYEESTOCK COMPENSATION PLAN AND NON-QUALIFIED STOCK OPTIONS

The Company has a 2001 Employee Stock Compensation Plan (the "ESCP") to enhance
its ability to attract, retain and compensate experienced employees, officers,
directors and consultants. The effective date of the ESCP is January 2001. A
total of 2,600,000 shares of common stock were registered for issuance under the
ESCP on three Form S-8 registration statements filed January 16, 2001, March 26,
2001 and October 19, 2001. Pursuant to the ESCP, the Compensation Committee or
Board of Directors may award registered shares of the Company's common stock to
employees, officers, directors or consultants for cash, property, services
rendered or other form of payment constituting lawful consideration. Plan shares
awarded for other than services rendered shall be sold at not less than the fair
market value on the date of grant. During the fiscal year ended September 30,
2003, the Company issued an aggregate of 1,033,900 shares of registered common
stock to employees, officers, directors and consultants pursuant to the ESCP.
The expense recorded during fiscal year 2003 under the ESCP amounted to $151,722
and was based on the closing trading price of the Company's common stock on the
date granted.

NOTE 13 JOINT VENTURE

In May 2002, the Company entered into a joint venture agreement with New Global
Communications, Inc. ("Global") whereby Global would contribute $500,000 to the
joint venture in exchange for a 55% interest and the Company would contribute
certain fixed assets and manage the operations of the joint venture for a 45%
interest. The newly formed joint venture is Valcom Broadcasting, LLC. The net
book value of the fixed assets contributed are insignificant and are maintained
on the Company's premises. The joint venture operated a newly developed low
power television broadcast station K08MX-LP in Indio-Palm Springs, California
operating on Channel 8. The Company believes that the investment in the joint
venture adds to the Company's infrastructure of becoming a full service
television and motion picture company. The amount contributed to the joint
venture by Global will be used to purchase the license for the television
station from the licensee. The effectiveness of the joint venture agreement was
dependent on the approval by the Federal Communications Commission ("FCC"). On
September 20, 2002, the FCC approved the transaction. As of September 30, 2002,
Global contributed $400,000 to the joint venture.

NOTE 14 SUBSEQUENT EVENTS

Subsequent to September 30,2003, the Company issued 1,410,333 shares of common
stock at prices ranging from $0.12 to $0.25 amounting to $1,202,000 through
private placements. In addition to this the Company also issued 200,000 shares
for $0.47 per share against services rendered and 50,000 shares for $0.25 per
share as per the terms of the employment agreements.

NOTE 15 GOING CONCERN

The accompanying consolidated financial statements have been prepared assuming
that the Company will continue as a going concern. The Company has a net loss of
$2,430,159 and a negative cash flow from operations of $300,582 for the year
ended September 30, 2003, and a working capital deficiency of $8,962,906 and an
accumulated deficit of $10,556,350 at September 30, 2003. The Company had a net
loss of $4,827,818 and a negative cash flow from operations of 2,005,392 for the
year ended September 30, 2002. Valencia Entertainment International, LLC, a
California limited liability company and the Registrant's subsidiary filed on
April 7, 2003, a voluntary petition in bankruptcy for reorganization under
Chapter 11 of the U.S. Bankruptcy Code in the United States Bankruptcy Court for
the Southern District of California (note 8). The main income of the Registrant
is from the operations of Valencia Entertainment International. These conditions
raise doubt about the Company's ability to continue as a going concern.

F-22

VALCOM, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2003 AND 2002

ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
Jay J. Shapiro, C.P.A., P.C., the Company's former auditor, resigned effective
April 23, 2002. Mr. Shapiro's reports on the Company's financial statements for
the past two fiscal years did not contain an adverse opinion or disclaimer of
opinion, nor were his reports modified as to uncertainty, audit scope or
accounting principles. The Company had no disagreements with Mr. Shapiro.

This Company previously disclosed this information in its Form 8-K filed with
the Securities and Exchange Commission on April 24, 2002, its Amendment to Form
8-K filed on May 6, 2002 and its Amendment to Form 8-K filed on May 10, 2002.

Subsequently , the Board of Directors authorized the engagement of Kabani & Co,
Inc. located at 8700 Warmer Ave/ #280 Fountain Valley, CA 92708, as the new
principal auditors for the Company and all of its subsidiaries effective May 23,
2003..

WHERE YOU CAN FIND MORE INFORMATION

We are required to file annual, quarterly and current reports, proxy
statements and other information with the Securities and Exchange Commission.
Our Securities and Exchange Commission filings are available to the public over
the Internet at the SEC's website at http://www.sec.gov.

You may also read and copy any materials we file with the Securities
and Exchange Commission at the SEC's public reference room at 450 Fifth Street
N.W., Washington, D.C. 20549. Please call the SEC at 1-800-SEC-0330 for further
information on the operation of the public reference rooms.

We have filed with the Securities and Exchange Commission a
registration statement on Form SB-2, under the Securities Act with respect to
the securities offered under this prospectus. This prospectus, which forms a
part of that registration statement, does not contain all information included
in the registration statement. Certain information is omitted and you should
refer to the registration statement and its exhibits. With respect to references
made in this prospectus to any contract or other document of ValCom, the
references are not necessarily complete and you should refer to the exhibits
attached to the registration statement for copies of the actual contract or
document. You may review a copy of the registration statement at the SEC's
public reference room. Please call the SEC at 1-800-SEC-0330 for further
information on the operation of the public reference rooms. Our filings and the
registration statement can also be reviewed by accessing the SEC's website at
http://www.sec.gov.

No finder, dealer, sales person or other person has been authorized to
give any information or to make any representation in connection with this
offering other than those contained in this prospectus and, if given or made,
such information or representation must not be relied upon as having been
authorized by ValCom, Inc. This prospectus does not constitute an offer to sell
or a solicitation of an offer to buy any of the securities offered hereby by
anyone in any jurisdiction in which such offer or solicitation is not authorized
or in which the person making such offer or solicitation is not qualified to do
so or to any person to whom it is unlawful to make such offer or solicitation.
Neither the delivery of this prospectus nor any sale made hereunder shall, under
any circumstances, create any implication that the information contained herein
is correct as of any time subsequent to the date of this prospectus.

PART II - INFORMATION NOT REQUIRED IN PROSPECTUS

Item 24 INDEMNIFICATION OF DIRECTORS AND OFFICERS

Section 145 ("Indemnification of officers, directors, employees and
agents; insurance") of the Delaware General Corporation Law provides in
pertinent part as follows:

"(a) A corporation shall have power to indemnify any person who was or
is a party or is threatened to be made a party to any threatened,
pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative (other than an action by or
in the right of the corporation) by reason of the fact that he is or
was a director, officer, employee or agent of the corporation, or is or
was serving at the request of the corporation as a director, officer,
employee or agent of another corporation, partnership, joint venture,
trust or other enterprise, against expenses (including attorneys'
fees), judgments, fines and amounts paid in settlement actually and
reasonably incurred by him in connection with such action, suit or
proceeding if he acted in good faith and in a manner he reasonably
believed to be in or not opposed to the best interests of the
corporation, and with respect to any criminal action or proceeding, had
no reasonable cause to believe his conduct was unlawful. The
termination of any action, suit or proceeding by judgment, order,
settlement, conviction, or upon a plea of nolo contendere or its
equivalent, shall not, of itself, create a presumption that the person
did not act in good faith and in a manner which he reasonably believed
to be in or not opposed to the best interests of the corporation, and,
with respect to any criminal action or proceeding, had reasonable cause
to believe that his conduct was unlawful.

(b) A corporation shall have power to indemnify any person who was or
is a party or is threatened to be made a party to any threatened,
pending or completed action or suit by or in the right of the
corporation to procure a judgment in its favor by reason of the fact
that he is or was a director, officer, employee or agent of the
corporation, or is or was serving at the request of the corporation as
a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise against expenses
(including attorneys' fees) actually and reasonably incurred by him in
connection with the defense or settlement of such action or suit if he
acted in good faith and in a manner he reasonably believed to be in or
not opposed to the best interests of the corporation and except that no
indemnification shall be made in respect of any claim, issue or matter
as to which such person shall have been adjudged to be liable to the
corporation unless and only to the extent that the Court of Chancery or
the court in which such action or suit was brought shall determine upon
application that, despite the adjudication of liability but in view of
all the circumstances of the case, such person is fairly and reasonably
entitled to indemnity for such expenses which the Court of Chancery or
such other court shall deem proper.

(c) To the extent that a present and former director or officer of a
corporation has been successful on the merits or otherwise in defense
of any action, suit or proceeding referred to in subsections (a) and
(b), or in defense of any claim, issue or matter therein, he shall be
indemnified against expenses (including attorneys' fees) actually and
reasonably incurred by him in connection therewith .

(d) Any indemnification under subsections (a) and (b) (unless ordered
by a court) shall be made by the corporation only as authorized in the
specific case upon a determination that indemnification of the present
or former director, officer, employee or agent is proper in the
circumstances because he has met the applicable standard of conduct set
forth in subsections (a) and (b). Such determination shall be made,
with respect to a person who is a director or officer at the time of
such determination, (1) by a majority vote of the directors who are not
parties to such action, suit or proceeding, even though less than a
quorum, or (2) by a committee of such directors designated by majority
vote of such directors, even though less than a quorum, or (3) if there
are no such directors, or if such directors so direct, by independent
legal counsel in a written opinion, or (4) by the stockholders.

(e) Expenses (including attorneys' fees) incurred by an officer or
director in defending any civil, criminal, administrative or
investigative action, suit or proceeding may be paid by the corporation
in advance of the final disposition of such action, suit or proceeding
upon receipt of an undertaking by or on behalf of such director or
officer to repay such amount if it shall be ultimately determined that
he is not entitled to be indemnified by the corporation as authorized
in this Section. Such expenses (including attorneys' fees) incurred by
former directors and officers or other employees and agents may be so
paid upon such terms and conditions, if any, as the corporation deems
appropriate.

(f) The indemnification and advancement of expenses provided by, or
granted pursuant to, the other subsections of this section shall not be
deemed exclusive of any other rights to which those seeking
indemnification or advancement of expenses may be entitled under any
by-law, agreement, vote of stockholders or disinterested directors or
otherwise, both as to action in his official capacity and as to action
in another capacity while holding such office.

(g) A corporation shall have power to purchase and maintain insurance
on behalf of any person who is or was a director, officer, employee or
agent of the corporation, or is or was serving at the request of the
corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise
against any liability asserted against him and incurred by him in any
such capacity, or arising out of his status as such, whether or not the
corporation would have the power to indemnify him against such
liability under the provisions of this Section

(j) The indemnification and advancement of expenses provided by, or
granted pursuant to, this section shall, unless otherwise provided when
authorized or ratified, continue as to a person who has ceased to be a
director, officer, employee or agent and shall inure to the benefit of
the heirs, executors and administrators of such person "

II-1

Article Nine of the registrant's Amended and Restated Certificate of
Incorporation authorizes the registrant to indemnify any current or former
director, officer, employee, or agent of the registrant against expenses,
judgments, fines, and amounts paid in settlement incurred by him in connection
with any threatened, pending, or completed action, suit, or proceeding, whether
civil, criminal, administrative, or investigative, to the fullest extent
permitted by Section 145 of the Delaware General Corporation Law. Article Ninth
further provides that such indemnification shall not be deemed exclusive of any
other rights to which those indemnified may be entitled under any Bylaw,
agreement, vote of stockholders or disinterested directors or otherwise, both as
to action in his or her official capacity and as to action in another capacity
while holding such office, and shall continue as to a person who has ceased to
be a director, officer, employee or agent and shall inure to the benefit of the
heirs, executors and administrators of such person.

Article IX of the registrant's Bylaws provides that the registrant
"shall indemnify its officers, directors and authorized agents for all
liabilities incurred directly, indirectly or incidentally to services performed
for the Corporation, to the fullest extent permitted under Delaware law existing
now or hereinafter enacted."

II-2

Item 25 OTHER EXPENSES

The following table sets forth the costs and expenses payable by us in
connection with the issuance and distribution of the securities being registered
hereunder. No expenses shall be borne by the selling stockholder. All of the
amounts shown are estimates, except for the SEC Registration Fees.

SEC registration fees $ $500.00

Accounting fees and expenses $ 8,000.00

Legal fees and expenses $ 0,000.00

Miscellaneous $ 1,000.00

Total $ 29,500

(1) We have estimated these amounts

Item 26 RECENT SALES OF UNREGISTERED SECURITIES

During the nine months ended June 30, 2004, the Company converted the Series D
Preferred Stock to common stock by issuance of 2,800,000 shares of common stock.

During the nine months ended June 30, 2004, the Company issued 208,333 shares of
common stock in lieu of debt retirement. The value of the debt retired totaled
approximately $25,000.

II-3

During the nine months ended June 30, 2004, the Company issued 1,344,667 shares
of common stock for options exercised amounting to $ 282,000.

During the nine months ended June 30, 2004, the Company issued 2,792,468 shares
of common stock to individuals through a Private Placement Memorandum for
$1,024,000.

During the nine months ended June 30, 2004, the Company issued 600,000
shares of common stock in exchange for 600,000 shares of series C preferred
convertible on a one on one basis and retired 110,000 to treasury as part of
settlement agreement with a former employee.

During the nine months ended June 30, 2004, the Company issued
4,454,999 shares of common stock to individuals through a Private Placement
Memorandum for $1,015,000. This issuance of shares was exempt from registration
pursuant to Section 4(2) of the Securities Act of 1933, as amended.

Darrin, are you sure this isn't 583,333 for a loan by a Director of
$70,000? I am not recognizing a 538,000.
During the six months ended March 31, 2004, the Company issued 538,333
shares of common stock in lieu of debt retirement of a loan. The value of the
debt retired totalled approximately $57,959. This issuance of shares was exempt
from registration pursuant to Section 4(2) of the Securities Act of 1933, as
amended.

During the six months ended March 31, 2004, the Company issued
1,150,000 shares of common stock to individuals through a Private Placement
Memorandum for $0.25 per share or $ 288,000. This issuance of shares was exempt
from registration pursuant to Section 4(2) of the Securities Act of 1933, as
amended.

During the six months ended March 31, 2004, the Company issued 500,000
shares of common stock in lieu of prepaid development costs. The value of the
development costs totalled approximately $215,000, which was computed based upon
the market prices of the common stock on the applicable payment dates. This
issuance of shares was exempt from registration pursuant to Section 4(2) of the
Securities Act of 1933, as amended.

During the six months ended March 31, 2004, the Company issued 200,000
shares of common stock in lieu of compensation consultancy services performed.
The value of the consultancy services performed totaled approximately $94,000,
which was computed based upon the market prices of the common stock on the
applicable payment dates. This issuance of shares was exempt from registration
pursuant to Section 4(2) of the Securities Act of 1933, as amended.

During the six months ended March 31, 2004, the Company issued 200,000
shares of common stock in lieu of compensation, salaries and bonuses to
employees. Total value of the compensation, salaries and bonuses was
approximately $82,000, which was computed based upon the market prices of the
common stock on the applicable payment dates. This issuance of shares was exempt
from registration pursuant to Section 4(2) of the Securities Act of 1933, as
amended.

During the six months ended March 31, 2004, the Company issued 650,000
shares of common stock in lieu of prepaid acquisition and development costs of
the Las Vegas Studios. The value of the development costs totaled approximately
$266,000, which was computed based upon the market prices of the common stock on
the applicable payment dates. This issuance of shares was exempt from
registration pursuant to Section 4(2) of the Securities Act of 1933, as amended.

During the six months ended January 12, 2004, the Company issued an
aggregate of 115,750 shares of common stock in lieu of compensation, salaries
and bonuses to employees. Total value of the compensation, salaries and bonuses
was approximately $46,300, which was computed based upon the market prices of
the common stock on the applicable payment dates. This issuance of shares was
exempt from registration pursuant to Section 4(2) of the Securities Act of 1933,
as amended.

During the fiscal year ended September 30, 2003, the Company issued
warrants to purchase 2,083,334 shares of the Company's common stock to a
director in connection with services provided and to be provided to the company.
The weighted average exercise price for the warrants issued was $0.12, and all
of the warrants begin to expire in September 2005. The director has exercised
791,666 warrants up to March 31, 2004. This issuance of shares was exempt from
registration pursuant to Section 4(2) of the Securities Act of 1933, as amended.

II-4

On April 2, 2003, the Company issued 490,000 shares of its common stock
to directors, consultants and employees at a price of $.05 per share for
services rendered. These issuances of shares were exempt from registration
pursuant to Section 4(2) of the Securities Act of 1933, as amended.

On December 2, 2002, the Company issued 75,000 shares of its common
stock to its employees at a price of $.30 per share as a bonus for services
rendered. These issuances of shares were exempt from registration pursuant to
Section 4(2) of the Securities Act of 1933, as amended.

On August 6, 2002, the Company issued 350,000 shares of its common
stock to a director of the Company for a purchase price of $42,000. This
issuance of shares was exempt from registration pursuant to Regulation D under
the Securities Act of 1933, as amended.

On July 1, 2002, we acquired all of the outstanding shares of Digital
Cut Post, Inc. Digital Cut Post is a computer based non-linear, post-production
editorial facility specializing in independent feature film and broadcast
television. This acquisition provides for the sole shareholder of Digital Cut
Post to receive $1,100,000 and 1,400,000 of series C preferred stock over a four
(4) year period.

In June 2002, we issued to High Capital Funding, LLC 1,250,000 shares
of our series D convertible preferred stock and 1,300,000 warrants to purchase
shares of our common stock at an exercise price of $.80. The series D preferred
stock is convertible into our common stock at a ratio of one for one.

In May and June 2002, we issued to Laurus Master Fund, Ltd. 12 %
convertible notes in the aggregate principal amount of $2,000,000. The notes are
convertible into our common stock at a fixed conversion price of $.95 and is
payable on a monthly basis over 22 months. In addition, we issued warrants to
purchase 300,000 shares of our common stock at an exercise price of $1.20. The
convertible notes are secured by a second mortgage on our properties.

Except as otherwise disclosed, each of the foregoing issuances of
securities was made in reliance on Section 4(2) of the Securities Act of 1933,
as amended.

II-5

Item 27 EXHIBITS

Number Description
- ------ -----------------------------------------------------------------------

3.1 Certificate of Incorporation

3.2 By-Laws

4.1 Securities Purchase Agreement, dated August 17, 2004, by and among
ValCom, Inc. and AJW Offshore, Ltd., AJW Qualified Partners, LLC, AJW
Partners, LLC and New Millennium Capital Partners II, LLC.

4.2 Callable Secured Convertible Note issued to AJW Offshore, Ltd., dated
August 17, 2004.

4.3 Callable Secured Convertible Note issued to AJW Qualified Partners,
LLC, dated August 17, 2004.

4.4 Callable Secured Convertible Note issued to AJW Partners, LLC, dated
August 17, 2004.

4.5 Callable Secured Convertible Note issued to New Millennium Capital
Partners II, LLC, dated August 17, 2004.

4.6 Stock Purchase Warrant issued to to AJW Offshore, Ltd., dated August
17, 2004.

4.7 Stock Purchase Warrant issued to AJW Qualified Partners, LLC, dated
August 17, 2004.

4.8 Stock Purchase Warrant issued to AJW Partners, LLC, dated August 17,
2004.

4.9 Stock Purchase Warrant issued to New Millennium Capital Partners II,
LLC, dated August 17, 2004.

4.10 Registration Rights Agreement, dated as of August 17, 2004, by and
among ValCom, Inc. and AJW Offshore, Ltd., AJW Qualified Partners, LLC,
AJW Partners, LLC and New Millennium CapitalPartners II, LLC.

4.11 Security Agreement, dated as of August 17, 2004, by and among ValCom,
Inc. and AJW Offshore, Ltd., AJW Qualified Partners, LLC, AJW Partners,
LLC and New Millennium Capital Partners II, LLC.

4.12 Intellectual Property Security Agreement, dated August 17, 2004, by and
among ValCom, Inc. and AJW Offshore, Ltd., AJW Qualified Partners, LLC,
AJW Partners, LLC and New Millennium Capital Partners II, LLC.

4.13 Guaranty and Pledge Agreement, dated August 17, 2004, by and among
ValCom, Inc., Robert Petty, AJW Offshore, Ltd., AJW Qualified Partners,
LLC, AJW Partners, LLC and New Millennium Capital Partners II, LLC.

5.1 Opinion of Counsel

10.1 Material Contracts

23.1 Consent of Auditor

(1) Incorporated by reference to ValCom, Inc.'s Form 10-KSB

Item 28 UNDERTAKINGS

The undersigned Company hereby undertakes that it will:

(1) file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement to include:

(a) any prospectus required by Section 10(a)(3) of the Securities Act;

(b) reflect in the prospectus any facts or events which, individually
or together, represent a fundamental change in the information in the
registration statement. Notwithstanding the foregoing, any increase or
decrease in volume of securities offered (if the total dollar value of
securities offered would not exceed that which was registered) and any
deviation from the low or high end of the estimated maximum offering
range may be reflected in the form of prospectus filed with the
Commission pursuant to Rule 424(b) if, in the aggregate, the changes in
volume and price represent no more than a 20% change in the aggregate
offering price set forth in the "Calculation of Registration Fee" table
in the effective registration statement; and

(c) any additional or changed material information with respect to the
plan of distribution not previously disclosed in the registration
statement;

(2) for the purpose of determining any liability under the Securities Act, each
of the post-effective amendment shall be deemed to be a new registration
statement relating to the securities offered therein, and the offering of the
securities at that time shall be deemed to be the initial bona fide offering
thereof; and

(3) remove from registration by means of a post-effective amendment any of the
securities being registered which remain unsold at the termination of the
offering.

II-6

Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors,

officers and controlling persons of ValCom pursuant to the foregoing provisions,
or otherwise, ValCom has been advised that in the opinion of the Commission that
type of indemnification is against public policy as expressed in the Securities
Act and is, therefore, unenforceable. In the event that a claim for
indemnification against said liabilities (other than the payment by ValCom of
expenses incurred or paid by a director, officer or controlling person of ValCom
in the successful defense of any action, suit or proceeding) is asserted by the
director, officer or controlling person in connection with the securities being
registered, ValCom will, unless in the opinion of our counsel the matter has
been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Securities Act and will be governed by the final
adjudication of the issue.

For purposes of determining any liability under the Securities Act, the
information omitted from the form of prospectus filed as part of this
registration statement in reliance upon Rule 430A and contained in a form of
prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4) or 497(h)
under the Securities Act shall be deemed to be part of this registration
statement as of the time it was declared effective.

II-7

SIGNATURES

In accordance with the requirements of the Securities Act, the
registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements of filing on Form SB-2 and authorized this registration
statement to be signed on its behalf by the undersigned, in the City of Valencia
State of California on September 16, 2004.

VALCOM, INC.

/s/ Vince Vellardita
- -----------------------------------------------------------
By: Vince Vellardita,
President, Chief Executive Officer and Chairman

/s/ Tracey Eland
- ------------------------------------------------------------
By: Tracey Eland, Principal Accounting Officer and Secretary

POWER OF ATTORNEY

KNOW ALL PERSONS BY THESE PRESENTS, that each person who signature
appears below constitutes and appoints Vince Vellardita as his true and lawful
attorney-in-fact and agent, with full power of substitution and re-substitution,
for him and in his name, place and stead, in any and all capacities, to sign any
and all amendments (including post-effective amendments) to this registration
statement, and to file the same, with all exhibits thereto, and other documents
in connection therewith, with the Securities and Exchange Commission, granting
unto said attorney-in-fact and agent, full power and authority to do and perform
each and every act and thing requisite and necessary to be done in connection
therewith, as fully to all intents and purposes as he might or could do in
person, hereby ratifying and confirming all that said attorney-in-fact and agent
or any of them, or of their substitute or substitutes, may lawfully do or cause
to be done by virtue hereof.

Pursuant to the requirements of the Securities Act, this registration
statement has been signed by the following persons in the capacities and on the
dates stated.

SIGNATURES

/s/ Vince Vellardita
- -------------------------------------------------------
Vince Vellardita, President, CEO, Chairman and Director
September 16, 2004

/s/ Krishnaswamy Alladi
- ------------------------------------------------------
Krishnaswamy Alladi, Director
September 16, 2004

/s/ Richard Shintaku
- ------------------------------------------------------
Richard Shintaku, Director
September 16, 2004

II-8