UTAH
|
|
95-4545704
|
(State
or other jurisdiction of
incorporation
or organization)
|
|
(I.R.S.
Employer
identification
no.)
|
305
NE 102ND AVENUE, SUITE 105
PORTLAND,
OREGON 97220
|
|
(503)
257-6700
|
(Address
of principal executive offices)
|
|
(Issuer’s
telephone number,
including
area code)
|
Check
whether the issuer (1) has filed all reports required to be filed
by
Section 13 or 15(d) of the Exchange Act during the past 12 months
(or for
such period that the registrant was required to file such reports),
and
(2) has been subject to such filing requirements for the past 90
days.
|
Yes
x
No¨
|
|
|
Indicate
by check mark whether the registrant is a shell company (as defined
by
Rule 12b-2 of the Exchange Act)
|
Yes
¨
No x
|
|
|
The
number of shares of the issuer’s Common Stock, par value $.001 per share,
outstanding as of June 8, 2007, was 435,143,846
|
|
|
|
Transitional
Small Business Disclosure Format (Check one)
|
Yes
¨
No x
|
|
PAGE
|
|
PART
I - FINANCIAL INFORMATION
|
||
|
|
|
ITEM
1. FINANCIAL STATEMENTS
|
||
|
|
|
|
CONDENSED
CONSOLIDATED BALANCE SHEET (Unaudited) At April 30,
2007
|
1
|
|
|
|
|
CONDENSED
CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) For the Six and
Three
Months Ended April 30, 2007 and 2006
|
2
|
|
|
|
|
CONDENSED
CONSOLIDATED STATEMENT OF STOCKHOLDERS’ DEFICIENCY (Unaudited) For
the Six Months Ended April 30, 2007
|
4
|
|
|
|
|
CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) For the Six Months
Ended April 30, 2007 and 2006
|
5
|
|
|
|
|
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
|
7
|
|
|
|
ITEM
2. MANAGEMENT’S DISCUSSION AND ANALYSIS OR PLAN OF
OPERATION
|
24
|
|
|
|
|
ITEM
3. CONTROLS AND PROCEDURES
|
33
|
|
|
|
|
PART
II - OTHER INFORMATION
|
33
|
|
|
|
|
ITEM
2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF
PROCEEDS
|
33
|
|
|
|
|
ITEM
5. OTHER INFORMATION
|
33
|
|
|
|
|
ITEM
6. EXHIBITS
|
35
|
|
|
|
|
SIGNATURES
|
36
|
|
April
30,
2007
|
|||
ASSETS
|
||||
|
||||
Current
Assets:
|
||||
Cash
and cash equivalents
|
$
|
287,272
|
||
Other
current assets
|
163,045
|
|||
TOTAL
CURRENT ASSETS
|
450,317
|
|||
|
||||
Property
and equipment - net
|
166,913
|
|||
Technology
licenses and capitalized software development costs - net
|
6,276,141
|
|||
Deferred
financing costs - net
|
142,976
|
|||
Other
assets
|
22,144
|
|||
TOTAL
ASSETS
|
$
|
7,058,491
|
||
|
||||
LIABILITIES
AND STOCKHOLDERS’ DEFICIENCY
|
||||
|
||||
Current
Liabilities:
|
||||
Convertible
notes payable
|
$
|
478,000
|
||
Notes
payable (net of debt discount of $191,110)
|
132,890
|
|||
Convertible
debentures (net of debt discount of $285,324)
|
451,676
|
|||
Derivative
liabilities - warrants, options and embedded conversion
option
|
6,346,616
|
|||
Accounts
payable and accrued expenses
|
1,293,465
|
|||
TOTAL
CURRENT LIABILITIES
|
8,702,647
|
|||
|
||||
Long-term
portion of convertible debentures (net of debt discount of
$1,540)
|
2,740
|
|||
TOTAL
LIABILITIES
|
8,705,387
|
|||
|
||||
Commitments,
Contingencies and Other matters
|
||||
|
||||
Stockholders’
Deficiency:
|
||||
|
||||
Preferred
stock - $0.01 par value; Authorized - 15,000,000 shares; Issued -
0
shares; Outstanding - 0 shares
|
--
|
|||
Common
stock - $0.001 par value; Authorized - 900,000,000 shares; Issued
-
431,913,212 shares; Outstanding - 431,413,358 shares
|
431,913
|
|||
Treasury
stock, at cost - 499,854 shares
|
(7,498
|
)
|
||
Additional
paid-in capital
|
83,012,928
|
|||
Unearned
compensation
|
(1,324,759
|
)
|
||
Accumulated
deficit
|
(83,759,480
|
)
|
||
TOTAL
STOCKHOLDERS’ DEFICIENCY
|
(1,646,896
|
)
|
||
|
||||
TOTAL
LIABILITIES AND STOCKHOLDERS’ DEFICIENCY
|
$
|
7,058,491
|
|
For
the Six Months Ended
April
30,
|
||||||
|
2007
|
2006
|
|||||
|
|||||||
REVENUES
|
$
|
--
|
$
|
58,874
|
|||
|
|||||||
OPERATING
EXPENSES:
|
|||||||
Amortization
of technology licenses and capitalized software development
costs
|
530,666
|
315,232
|
|||||
Research
and development expenses (including stock based compensation of $443,432
and $26,860, respectively)
|
809,620
|
137,600
|
|||||
Selling,
general and administrative expenses (including stock based compensation
of
$1,058,791and $983,710, respectively)
|
2,855,295
|
2,356,072
|
|||||
|
|||||||
TOTAL
OPERATING EXPENSES
|
4,195,581
|
2,808,904
|
|||||
|
|||||||
OPERATING
LOSS
|
(4,195,581
|
)
|
(2,750,030
|
)
|
|||
|
|||||||
OTHER
EXPENSES (INCOME):
|
|||||||
Interest
expense
|
2,940,517
|
7,897,769
|
|||||
Change
in fair value of derivative liabilities
|
(361,747
|
)
|
484,538
|
||||
Amortization
of deferred financing costs
|
1,165,847
|
568,819
|
|||||
Gain
on forgiveness of principal and interest on Zaiq Note
|
--
|
(1,169,820
|
)
|
||||
Loss
on exchange of notes payable into common stock
|
--
|
446,386
|
|||||
Other
|
(27,895
|
)
|
(3,000
|
)
|
|||
TOTAL
OTHER EXPENSES
|
3,716,722
|
8,224,692
|
|||||
|
|||||||
NET
LOSS
|
$
|
(7,912,303
|
)
|
$
|
(10,974,722
|
)
|
|
|
|||||||
BASIC
AND DILUTED NET LOSS PER COMMON SHARE
|
$
|
(0.02
|
)
|
$
|
(0.04
|
)
|
|
|
|||||||
WEIGHTED
AVERAGE NUMBER OF COMMON SHARES OUTSTANDING
|
410,318,226
|
267,242,791
|
|
For
the Three Months Ended
April
30,
|
||||||
|
2007
|
2006
|
|||||
|
|||||||
REVENUES
|
$
|
--
|
$
|
18,698
|
|||
|
|||||||
OPERATING
EXPENSES:
|
|||||||
Amortization
of technology licenses and capitalized software development
costs
|
270,363
|
212,536
|
|||||
Research
and development expenses (including stock based compensation of $23,022
and
$21,816, respectively)
|
161,946
|
52,556
|
|||||
Selling,
general and administrative expenses (including stock based compensation
of
$589,382
and $649,752, respectively)
|
1,408,079
|
1,549,001
|
|||||
|
|||||||
TOTAL
OPERATING EXPENSES
|
1,840,388
|
1,814,093
|
|||||
|
|||||||
OPERATING
LOSS
|
(1,840,388
|
)
|
(1,795,395
|
)
|
|||
|
|||||||
OTHER
EXPENSES (INCOME):
|
|||||||
Interest
expense
|
154,016
|
6,652,813
|
|||||
Change
in fair value of derivative liabilities
|
(1,900,394
|
)
|
460,400
|
||||
Amortization
of deferred financing costs
|
41,161
|
324,852
|
|||||
Loss
on exchange of notes payable into common stock
|
--
|
446,386
|
|||||
Other
|
(13,352
|
)
|
(3,000
|
)
|
|||
TOTAL
OTHER EXPENSES (INCOME)
|
(1,718,569
|
)
|
7,881,451
|
||||
|
|||||||
NET
LOSS
|
$
|
(121,819
|
)
|
$
|
(9,676,846
|
)
|
|
|
|||||||
BASIC
AND DILUTED NET LOSS PER COMMON SHARE
|
$
|
(0.00
|
)
|
$
|
(0.03
|
)
|
|
|
|||||||
WEIGHTED
AVERAGE NUMBER OF COMMON SHARES OUTSTANDING
|
425,197,451
|
306,633,326
|
|
Common
Stock
|
Treasury
Stock
|
|
|
|
|
|||||||||||||||||||
|
Shares
|
Amount
|
Shares
|
Amount
|
Additional
Paid-in Capital
|
Unearned
Compensation
|
Accumulated
Deficit
|
Total
Stockholders’
Deficiency
|
|||||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||||||||
Balance
at November 1, 2006
|
356,399,782
|
$
|
356,400
|
(499,854
|
)
|
$
|
(7,498
|
)
|
$
|
75,215,263
|
$
|
(1,197,034
|
)
|
$
|
(75,847,177
|
)
|
$
|
(1,480,046
|
)
|
||||||
Issuance
of common stock for cash
|
6,000,000
|
6,000
|
--
|
--
|
294,000
|
--
|
--
|
300,000
|
|||||||||||||||||
Issuance
of common stock under service and consulting agreements
|
12,054,451
|
12,054
|
--
|
--
|
1,419,470
|
(1,431,524
|
)
|
--
|
--
|
||||||||||||||||
Issuance
of common stock for conversion of convertible debentures and accrued
interest
|
56,394,444
|
56,394
|
--
|
--
|
4,012,838
|
--
|
--
|
4,069,232
|
|||||||||||||||||
Issuance
of common stock in satisfaction of liquidated damages
|
464,535
|
465
|
--
|
--
|
68,082
|
--
|
--
|
68,547
|
|||||||||||||||||
Issuance
of common stock upon exercise of stock options for the settlement
of
vendor payables
|
600,000
|
600
|
--
|
--
|
18,540
|
--
|
--
|
19,140
|
|||||||||||||||||
Stock
based compensation expense recognized for the granting and vesting
of
options to employees and advisory board members
|
--
|
--
|
--
|
--
|
227,948
|
--
|
--
|
227,948
|
|||||||||||||||||
Reclassification
of derivative liability upon exercise of options
|
--
|
--
|
--
|
--
|
71,521
|
--
|
--
|
71,521
|
|||||||||||||||||
Reclassification
of conversion option liability
|
--
|
--
|
--
|
--
|
1,685,266
|
--
|
--
|
1,685,266
|
|||||||||||||||||
Amortization
of unearned compensation expense
|
--
|
--
|
--
|
--
|
--
|
1,303,799
|
--
|
1,303,799
|
|||||||||||||||||
Net
loss
|
--
|
--
|
--
|
--
|
--
|
--
|
(7,912,303
|
)
|
(7,912,303
|
)
|
|||||||||||||||
Balance
at April 30, 2007
|
431,913,212
|
$
|
431,913
|
(499,854
|
)
|
$
|
(7,498
|
)
|
$
|
83,012,928
|
$
|
(1,324,759
|
)
|
$
|
(83,759,480
|
)
|
$
|
(1,646,896
|
)
|
|
For
the Six Months Ended
April
30,
|
||||||
|
2007
|
2006
|
|||||
CASH
FLOWS FROM OPERATING ACTIVITIES
|
|||||||
Net
loss
|
$
|
(7,912,303
|
)
|
$
|
(10,974,722
|
)
|
|
Adjustments
to reconcile net loss to net cash used in operating
activities:
|
|||||||
Consulting
fees and other compensatory elements of stock issuances
|
1,502,223
|
1,010,570
|
|||||
Change
in fair value of derivative liabilities
|
(361,747
|
)
|
484,538
|
||||
(Gain)/Loss
on disposal of property and equipment
|
614
|
--
|
|||||
Fair
value of Investors’ warrants in excess of debt discount
|
--
|
5,608,156
|
|||||
Loss
on exchange of notes payable into common stock
|
--
|
446,386
|
|||||
Gain
on forgiveness of principal and interest on Zaiq Note
|
--
|
(1,169,820
|
)
|
||||
Amortization
of deferred financing costs
|
1,165,847
|
568,819
|
|||||
Amortization
of debt discount on notes
|
2,893,510
|
2,168,904
|
|||||
Amortization
of technology license and capitalized software development
fees
|
530,666
|
315,232
|
|||||
Depreciation
|
9,438
|
1,239
|
|||||
Change
in assets
|
|||||||
Other
current assets
|
(52,779
|
)
|
(9,841
|
)
|
|||
Other
assets
|
--
|
370
|
|||||
Change
in liabilities
|
|||||||
Accounts
payable and accrued expenses
|
294,890
|
199,687
|
|||||
NET
CASH USED IN OPERATING ACTIVITIES
|
(1,929,641
|
)
|
(1,350,482
|
)
|
|||
|
|||||||
CASH
FLOWS FROM INVESTING ACTIVITIES
|
|||||||
Acquisition
of technology license and development fee
|
--
|
(200,000
|
)
|
||||
Proceeds
from sale of trademark rights
|
200,000
|
--
|
|||||
Proceeds
from maturity of short-term investments
|
1,000,000
|
--
|
|||||
Acquisition
and costs of capitalized software and development fees
|
(526,787
|
)
|
--
|
||||
Acquisition
of property and equipment
|
(112,419
|
)
|
(4,499
|
)
|
|||
NET
CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES
|
560,794
|
(204,499
|
)
|
||||
|
|||||||
CASH
FLOWS FROM FINANCING ACTIVITIES
|
|||||||
Proceeds
from issuance of common stock
|
300,000
|
--
|
|||||
Proceeds
from exercise of warrants
|
--
|
568,531
|
|||||
Purchase
of treasury stock
|
--
|
(7,498
|
)
|
||||
Proceeds
from notes payable
|
300,000
|
750,000
|
|||||
Proceeds
from convertible debentures
|
--
|
6,000,000
|
|||||
Capitalized
financing costs
|
(34,000
|
)
|
(742,450
|
)
|
|||
Repayments
of notes payable
|
--
|
(944,291
|
)
|
||||
Repayments
of convertible notes payable
|
--
|
(435,322
|
)
|
||||
NET
CASH PROVIDED BY FINANCING ACTIVITIES
|
566,000
|
5,188,970
|
|||||
|
|||||||
(DECREASE)
INCREASE IN CASH AND CASH EQUIVALENTS
|
(802,847
|
)
|
3,633,989
|
||||
|
|||||||
CASH
AND CASH EQUIVALENTS - BEGINNING OF PERIOD
|
1,090,119
|
373,481
|
|||||
|
|||||||
CASH
AND CASH EQUIVALENTS - END OF PERIOD
|
$
|
287,272
|
$
|
4,007,470
|
|
For
the Six Months Ended
April
30,
|
||||||
|
2007
|
2006
|
|||||
|
|
|
|||||
Supplemental
Disclosure of Cash Flow Information:
|
|||||||
Cash
paid during the period for:
|
|||||||
Interest
|
$
|
50,000
|
$
|
3,158
|
|||
|
|||||||
Non-Cash
Investing and Financing Activities:
|
|||||||
|
|||||||
Common
stock issued for conversion of convertible debentures, notes payable
and
accrued interest
|
$
|
4,069,232
|
$
|
3,153,226
|
|||
|
|||||||
Issuance
of common stock upon exercise of stock options for the settlement
of
vendor payables
|
$
|
19,140
|
$
|
--
|
|||
Value
assigned to warrants issued in connection with notes
payable
|
$
|
226,567
|
$
|
120,000
|
|||
|
|||||||
Value
recorded as debt discount relating to warrants issued to purchasers
of
convertible debentures
|
$
|
--
|
$
|
3,428,571
|
|||
Value
assigned on issuance date to warrants issued to placement
agent
|
$
|
--
|
$
|
1,792,452
|
|||
Value
assigned to conversion option liability in connection with issuance
of
convertible debentures
|
$
|
--
|
$
|
2,571,429
|
|||
Common
stock issued for accrued liquidated damages
|
$
|
68,547
|
$
|
--
|
|||
Deferred
compensation converted to convertible note payable
|
$
|
--
|
$
|
212,450
|
|||
|
|||||||
Reclassification
of derivative liability to equity upon exercise of options
|
$
|
71,521
|
$
|
--
|
|||
|
|||||||
Reclassification
of conversion option liability to equity
|
$
|
1,685,266
|
$
|
760,783
|
|||
|
|||||||
Common
stock issued for consulting services
|
$
|
1,431,524
|
$
|
1,870,000
|
o |
persuasive
evidence of a sale or licensing arrangement with a customer
exists;
|
o |
the
film is complete and, in accordance with the terms of the arrangement,
has
been delivered or is available for immediate and unconditional
delivery;
|
o |
the
license period of the arrangement has begun and the customer can
begin its
exploitation, exhibition or sale;
|
o |
the
arrangement fee is fixed or determinable;
and
|
o |
collection
of the arrangement fee is reasonably
assured.
|
Three
Months Ended April 30,
|
Six
Months Ended April 30,
|
|||
2007
|
2006
|
2007
|
2006
|
|
Expected
dividends
|
None
|
None
|
None
|
None
|
|
|
|
||
Expected
volatility
|
47.9-134.1%
|
144.0-158.1%
|
47.9
- 136.9%
|
95.3%
|
|
|
|
|
|
Risk-free
interest rate
|
4.6-5.0%
|
4.3
- 4.9%
|
4.6
- 5.2%
|
4.5%
|
|
|
|
|
|
Contractual
term (years)
|
0.4
-9.3
|
3.0-10.0
|
0.4
- 9.5
|
2.3-10.0
|
At
April 30,
2007
|
||||
Leasehold
improvements
|
$
|
112,032
|
||
Furniture
and fixtures
|
19,554
|
|||
Office
equipment
|
49,820
|
|||
|
181,406
|
|||
Accumulated
depreciation and amortization
|
(14,493
|
)
|
||
Total
|
$
|
166,913
|
At
April 30,
2007
|
||||
Technology
licenses
|
$
|
5,751,000
|
||
Purchased
technology
|
228,000
|
|||
Capitalized
software development cost
|
1,604,833
|
|||
|
7,583,833
|
|||
Accumulated
amortization
|
(1,307,692
|
)
|
||
Total
|
$
|
6,276,141
|
Deferred
financing costs
|
$
|
3,575,818
|
||
Less:
accumulated amortization
|
(3,432,842
|
)
|
||
|
||||
Deferred
financing costs, net
|
$
|
142,976
|
|
At
April 30,
2007
|
|||
Notes
payable (nine notes) (1)
|
$
|
468,000
|
||
Notes
payable, 9% interest, related party (2)
|
10,000
|
|||
|
||||
Total
|
$
|
478,000
|
|
Outstanding
Principal
Amount
|
Unamortized
Debt
Discount
|
Net
Carrying
Value
|
|||||||
Current
|
$
|
662,000
|
$
|
285,267
|
$
|
376,733
|
|
Outstanding
Principal
Amount
|
Unamortized
Debt
Discount
|
Net
Carrying
Value
|
|||||||
Long-term
portion
|
$
|
4,280
|
$
|
1,540
|
$
|
2,740
|
|
Outstanding
Principal
Amount
|
Unamortized
Debt
Discount
|
Net
Carrying
Value
|
|||||||
Current
|
$
|
75,000
|
$
|
57
|
$
|
74,943
|
· |
issued
56,394,444 shares of common stock upon conversion of convertible
debentures with a principal amount of $3,932,284 and accrued interest
of
$136,948;
|
· |
issued
11,736,991 shares of restricted common stock in exchange for services
valued at $1,402,000;
|
· |
issued
464,535 shares of restricted common stock to 2006 Debenture holders
in
satisfaction of $68,547 in liquidated damages;
and
|
· |
issued
600,000 shares of common stock upon exercise of stock options in
satisfaction of accrued expenses of
$19,140.
|
· |
issued
6,000,000 shares of restricted common stock for $300,000 cash;
and
|
· |
issued
317,460 shares of restricted common stock in exchange for services
valued
at $29,524.
|
· |
Options
to purchase 100,000 shares of common stock were granted to an employee
under the 2006 Plan. These options were valued at $11,344 and have
a ten
year term, an exercise price of $0.12 per share, and vest over
a period of
approximately three years through January 2010;
and
|
· |
Options
to purchase 4,250,000 shares of common stock were granted to one
director
and three executive employees under the 2006 Plan. These options
were
valued at $386,427 and have a ten year term, an exercise price
of $0.096
per share, and vest over a period of approximately three years
through
November 2009.
|
Three
Months Ended April 30,
|
Six
Months Ended April 30,
|
||||
2007
|
2006
|
2007
|
2006
|
||
Expected
dividends
|
N/A
|
None
|
None
|
None
|
|
|
|
|
|
|
|
Expected
volatility
|
N/A
|
144-158.1%
|
116%
|
144-158.1%
|
|
|
|
|
|
|
|
Risk-free
interest rate
|
N/A
|
4.34-4.58%
|
4.63-4.65%
|
4.34-4.58%
|
|
|
|
|
|
|
|
Expected
life
|
N/A
|
10
years
|
10
years
|
10
years
|
|
April
30,
2007
|
April
30,
2006
|
|||||
Warrants
to purchase common stock
|
117,870,937
|
131,888,793
|
|||||
2006
Debentures and accrued interest (1)
|
9,822,118
|
69,021,246
|
|||||
Options
to purchase common stock
|
38,893,750
|
29,393,750
|
|||||
Convertible
notes payable and accrued interest
|
1,508,927
|
1,757,414
|
|||||
7%
Debentures and accrued interest
|
621,548
|
975,204
|
|||||
2005
Debentures and accrued interest (2)
|
120,685
|
500,247
|
|||||
|
|||||||
Total
|
168,837,965
|
233,536,654
|
|
Semiconductor
Business
|
Entertainment
Business
|
Unallocable
|
Totals
|
|||||||||
For
the Three Months Ended April 30,
2007:
|
|||||||||||||
Net
Sales - Domestic
|
$
|
-
|
$
|
-
|
$
|
-
|
$
|
-
|
|||||
Net
Sales - Foreign
|
$
|
-
|
$
|
-
|
$
|
-
|
$
|
-
|
|||||
Operating
Loss
|
$
|
(1,837,948
|
)
|
$
|
(2,440
|
)
|
$
|
-
|
$
|
(1,840,388
|
)
|
||
Depreciation
and amortization
|
$
|
270,363
|
$
|
-
|
$
|
-
|
$
|
270,363
|
|
Semiconductor
Business
|
Entertainment
Business
|
Unallocable
|
Totals
|
|||||||||
For
the Three Months Ended April 30,
2006:
|
|||||||||||||
Net
Sales - Domestic
|
$
|
-
|
$
|
698
|
$
|
-
|
$
|
698
|
|||||
Net
Sales - Foreign
|
$
|
-
|
$
|
18,000
|
$
|
-
|
$
|
18,000
|
|||||
Operating
(Loss) Income
|
$
|
(213,156
|
)
|
$
|
17,397
|
$
|
(1,599,636
|
)
|
$
|
(1,795,395
|
)
|
||
Depreciation
and amortization
|
$
|
213,156
|
$
|
-
|
$
|
-
|
$
|
213,156
|
|
Semiconductor
Business
|
Entertainment
Business
|
Unallocable
|
Totals
|
|||||||||
For
the Six Months Ended April
30, 2007:
|
|||||||||||||
Net
Sales - Domestic
|
$
|
-
|
$
|
-
|
$
|
-
|
$
|
-
|
|||||
Net
Sales - Foreign
|
$
|
-
|
$
|
-
|
$
|
-
|
$
|
-
|
|||||
Operating
Loss
|
$
|
(4,181,147
|
)
|
$
|
(14,434
|
)
|
$
|
-
|
$
|
(4,195,581
|
)
|
||
Depreciation
and amortization
|
$
|
540,104
|
$
|
-
|
$
|
-
|
$
|
540,104
|
|||||
Total
Identifiable Assets
|
$
|
6,763,568
|
$
|
977
|
$
|
293,946
|
$
|
7,058,491
|
|
Semiconductor
Business
|
Entertainment
Business
|
Unallocable
|
Totals
|
|||||||||
For
the Six Months Ended April 30, 2006
|
|||||||||||||
Net
Sales - Domestic
|
$
|
-
|
$
|
6,932
|
$
|
-
|
$
|
6,932
|
|||||
Net
Sales - Foreign
|
$
|
-
|
$
|
51,942
|
$
|
-
|
$
|
51,942
|
|||||
Operating
(Loss) Income
|
$
|
(316,471
|
)
|
$
|
53,688
|
$
|
(2,487,247
|
)
|
$
|
(2,750,030
|
)
|
||
Depreciation
and amortization
|
$
|
316,471
|
$
|
-
|
$
|
-
|
$
|
316,471
|
|||||
Total
Identifiable Assets
|
$
|
8,041,340
|
$
|
-
|
$
|
4,061,196
|
$
|
12,102,536
|
(i) |
2,500,000
unregistered shares of common stock were issued in exchange for
cash of
$125,000;
|
(ii) |
30,487
unregistered shares of common stock were issued in satisfaction
of
services valued at $2,500;
|
(iii) |
Options
to purchase 100,000 shares of common stock were granted to an employee.
These options were valued at $9,339 and have a ten year term, an
exercise
price of $0.092 per share, and vest over a period of approximately
three
years through June 2010; and
|
(iv) |
Options
to purchase 200,000 shares of common stock were granted to a consultant.
These options were valued at $18,678 and have a ten year term,
an exercise
price of $0.092 per share, and vest over a period of approximately
three
years through June 2010.
|
(i) |
persuasive
evidence of a sale or licensing arrangement with a customer
exists;
|
(ii) |
the
film is complete and, in accordance with the terms of the arrangement,
has
been delivered or is available for immediate and unconditional
delivery;
|
(iii) |
the
license period of the arrangement has begun and the customer can
begin its
exploitation, exhibition or sale;
|
(iv) |
the
arrangement fee is fixed or determinable;
and
|
(v) |
collection
of the arrangement fee is reasonably
assured.
|
· |
a
decrease in the net loss, which was $7,912,303 for the six months
ended
April 30, 2007, compared to $10,974,722 for the six months ended
April 30,
2006; and
|
· |
a
net increase for the six months ended April 30, 2007 in other current
assets, other assets, and accounts payable and accrued liabilities
of
$242,111, compared to a net increase of $190,216 for the six months
ended
April 30, 2006;
|
· |
a
net increase of $491,653 in consulting fees and other compensatory
elements of stock issuances to $1,502,223 for the six months ended
April
30, 2007, as compared with $1,010,570 for the six months ended April
30,
2006; principally due to the issuance of common stock with a value
of
$395,000 in exchange for services;
|
· |
a
gain on the change in fair value of derivative liabilities of $361,747
for
the six months ended April 30, 2007, as compared to a loss of $484,538
for
the six months ended April 30,
2006;
|
· |
interest
expense related to fair value of Investors’ warrants at issuance in excess
of debt discount of $5,608,156 for the six months ended April 30,
2006
which did not occur during the six months ended April 30,
2007;
|
· |
loss
on exchange of notes payable into common stock of $446,386 for the
six
months ended April 30, 2006 which did not occur during the six months
ended April 30, 2007;
|
· |
a
gain on forgiveness of principal and interest on the promissory note
to
Zaiq Technologies, Inc. of $1,169,820 for the six months ended April
30,
2006 which did not occur during the six months ended April 30,
2007;
|
· |
a
net increase of $597,028 in amortization of deferred financing costs
to
$1,165,847 for the six months ended April 30, 2007, as compared with
$568,819 for the six months ended April 30,
2006;
|
· |
a
net increase of $724,606 in amortization of debt discount on notes
to
$2,893,510 for the six months ended April 30, 2007, as compared with
$2,168,904 for the six months ended April 30, 2006;
and
|
· |
a
net increase of $215,434 in amortization of technology license and
capitalized software development fees to $530,666 for the six months
ended
April 30, 2007, as compared with $315,232 for the six months ended
April
30, 2006.
|
(i) |
warrants
to purchase 3,333,333 shares of our common stock at an exercise price
of
$0.10 per share to one institutional investor in connection with
a bridge
loan to the Company, more fully described in Item 5 below;
and
|
(ii) |
6,000,000
shares of common stock to one investor for aggregate proceeds of
$300,000.
|
(i) |
options
to purchase 300,000 shares of common stock at an exercise price of
$0.10
per share to one employee and one consultant valued at
$30,000;
|
(ii) |
30,487
shares of common stock to one individual in payment of services valued
at
$2,500; and
|
(ii) |
2,500,000
shares of common stock to one investor in two transactions for aggregate
proceeds of $125,000.
|
10.1
|
Bridge
Loan Agreement, dated as of March 26, 2007 between Rim Semiconductor
Company and Double U Master Fund, L.P.*
|
10.2
|
Form
of Note Issued in Connection with the Bridge Loan
Agreement*
|
10.3
|
Form
of Warrant Issued in Connection with the Bridge Loan
Agreement*
|
10.4
|
Security
Interest Agreement, dated as of March 26, 2007 among Rim Semiconductor
Company, Double U Master Fund, L.P. (the “Secured Party”) and Krieger
& Prager, LLP, as agent for the Secured Party*
|
10.5
|
Convertible
Promissory Note, dated May 24, 2007, in favor of the Charles R. Cono
Trust*
|
31.1
|
Rule
13a-14/15d-14(a) Certification*
|
32.1
|
Section
1350 Certification*
|
|
|
|
|
RIM
SEMICONDUCTOR COMPANY
|
|
|
|
|
DATE:
June 12, 2007
|
BY:
|
/s/ Brad
Ketch
|
|
Brad
Ketch
|
|
|
President
and Chief Executive Officer (Principal Executive Officer, Financial
and Accounting Officer and Authorized
Signatory)
|