8-K: Current report filing

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

FORM 8-K

CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934

Date of Report (Date of earliest event reported): December 29, 2005

Digicorp
(Exact name of registrant as specified in its charter)

Utah 000-33067 87-0398271
(State or Other Jurisdiction (Commission File (I.R.S. Employer
of Incorporation) Number) Identification Number)

4143 Glencoe Avenue, Marina Del Rey, CA 90292
(Address of principal executive offices) (zip code)

(310) 728-1450
(Registrant's telephone number, including area code)

100 Wilshire Blvd., Ste. 1750, Santa Monica, CA 90401
(Former name or former address, if changed since last report)

Copies to:
Marc J. Ross, Esq.
Sichenzia Ross Friedman Ference LLP
1065 Avenue of the Americas
New York, New York 10018
Phone: (212) 930-9700
Fax: (212) 930-9725

Check the appropriate box below if the Form 8-K filing is intended to
simultaneously satisfy the filing obligation of the registrant under any of the
following provisions (see General Instruction A.2. below):

|_| Written communications pursuant to Rule 425 under the Securities Act (17
CFR 230.425)
|_| Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR
240.14a-12)
|_| Pre-commencement communications pursuant to Rule 14d-2(b) under the
Exchange Act (17 CFR 240.14d-2(b))
|_| Pre-commencement communications pursuant to Rule 13e-4(c) under the
Exchange Act (17 CFR 240.13e-4(c))


This Current Report responds to the following items on Form 8-K:

Item 1.01 Entry into a Material Definitive Agreement.
Item 2.01 Completion of Acquisition or Disposition of Assets.
Item 2.03 Creation of a Direct Financial Obligation or an Obligation under an
Off-Balance Sheet Arrangement of a Registrant. Item 3.02 Unregistered Sales of
Equity Securities.
Item 5.01 Changes in Control of Registrant.
Item 5.02 Departure of Directors or Principal Officers; Election of Directors;
Appointment of Principal Officers.
Item 5.03 Amendments to Articles of Incorporation or Bylaws; Change in Fiscal
Year.
Item 5.06 Change in Shell Company Status.
Item 9.01 Financial Statements and Exhibits.

ENTRY IN A MATERIAL DEFINITIVE AGREEMENT; COMPLETION OF ACQUISITION OF ASSETS;
CREATION OF A DIRECT FINANCIAL OBLIGATION; UNREGISTERED SALES OF EQUITY
SECURITIES; CHANGE IN CONTROL OF REGISTRANT; CHANGE IN FISCAL YEAR; CHANGE IN
SHELL COMPANY STATUS

In a Form 8-K of Digicorp (the "Company") dated December 20, 2005, the
Company reported that it entered into a Stock Purchase Agreement to acquire (the
"Acquisition") all of the issued and outstanding capital stock of Rebel Crew
Films, Inc. a California corporation ("Rebel Crew Films"). On December 29, 2005,
the transaction closed and the Company completed the acquisition of Rebel Crew
Films. In connection with the Acquisition, the Company changed its fiscal year
from June 30 to December 31.

The Company issued 21,207,080 shares of common stock (the "Purchase
Price") to the shareholders of Rebel Crew Films as compensation for the issued
and outstanding capital stock of Rebel Crew Films. From the Purchase Price,
4,000,000 shares are held in escrow pending satisfaction of certain performance
milestones. In addition, from the Purchase Price, 16,666,667 shares are subject
to lock up agreements as follows: (a) 3,333,333 shares are subject to lockup
agreements for one year; (b) 6,666,667 shares are subject to lockup agreements
for two years; and (c) 6,666,667 shares, of which the 4,000,000 escrowed shares
are a component, are subject to lockup agreements for three years. The issuance
of the foregoing shares of common stock was exempt from registration
requirements pursuant to Section 4(2) of the Securities Act of 1933, as amended
(the "Securities Act"), and Rule 506 promulgated thereunder.

In addition, on December 29, 2005 the Company entered into a Securities
Purchase Agreement with one of the shareholders of Rebel Crew Films, Rebel
Holdings, LLC, pursuant to which the Company purchased a $556,306.53 principal
amount loan receivable owed by Rebel Crew Films to Rebel Holdings, LLC in
exchange for the issuance of a $556,306.53 principal amount secured convertible
note to Rebel Holdings, LLC. The secured convertible note accrues simple
interest at the rate of 4.5%, matures on December 29, 2010 and is secured by all
of the Company's assets now owned or hereafter acquired. The secured convertible
note is convertible into 500,000 shares of common stock of the Company at the
rate of $1.112614 per share. Jay Rifkin, the Company's present Chief Executive
Officer and a Director Nominee of the Company, is the sole managing member of
Rebel Holdings, LLC. The issuance of the foregoing secured convertible note was
exempt from registration requirements pursuant to Section 4(2) of the Securities
Act and Rule 506 promulgated thereunder.

The Company agreed to prepare and file a registration statement with the
Securities and Exchange Commission registering the resale of the shares
comprising the Purchase Price and the shares issuable upon conversion of the
secured convertible note no later than March 29, 2006.

In connection with the Acquisition, Jay Rifkin and certain other
shareholders of the Company entered into a voting agreement authorizing Mr.
Rifkin to vote the shares of the Company's common stock owned by such parties to
designate or elect a simple majority of the Company's Board of Directors, one of
whom will be Mr. Rifkin, and to designate or elect the remaining directors
chosen by Milton "Todd" Ault, III, former Chairman and Chief Executive Officer
of the Company.

1

DEPARTURE OF DIRECTORS OR PRINCIPAL OFFICERS; ELECTION OF DIRECTORS;
APPOINTMENT OF PRINCIPAL OFFICERS

Effective December 29, 2005, the following persons resigned from the
indicated positions as executive officers and/or directors of the Company: (1)
William B. Horne, Chief Executive Officer; (2) Kathryn Macenzie Queen, President
of Operations; (3) Lynne Silverstein, Secretary and Director; (4) Melanie
Glazer, Director and Vice Chairman of the Board of Directors; and (5) Darrell
Grimsley, Jr., Director. Ms. Glazer was a member of the Company's Audit
Committee at the time of her resignation. No other resigning director was a
member of any committee of the Company's Board of Directors at the time he or
she resigned.

The Company's Board of Directors appointed Jay Rifkin Chief Executive
Officer of the Company effective as of September 30, 2005, which is the date Mr.
Rifkin began acting as interim President of the Company.

The Board of Directors also nominated the following directors to fill
vacancies created by the resignations of Ms. Silverstein, Ms. Glazer and Mr.
Grimsley: Jay Rifkin, Alan Morelli and David M. Kaye. The Company plans to
appoint Messrs. Rifkin, Morelli and Kaye to its Board of Directors approximately
ten days after the date the Company transmits to all holders of record of the
Company's common stock information required by Rule 14f-1 under the Exchange
Act, at which time Mr. Rifkin will serve as Chairman of the Company's Board of
Directors.

Except as described under "Certain Relationships and Related Transactions"
beginning on page 13 of this report, there has been no transaction during the
last two years, or any proposed transaction, to which the Company was or is to
be a party, and in which any of Messrs. Rifkin, Morelli or Kaye had or is to
have a direct or indirect material interest.

Below are the names and certain information regarding the Company's
executive officers, directors and director nominees following the Acquisition.

- ----------------------- ------- ------------------------------------------------
Name Age Position
- ----------------------- ------- ------------------------------------------------
Jay Rifkin 50 Chief Executive Officer, Director Nominee
- ----------------------- ------- ------------------------------------------------
William B. Horne 37 Chief Financial Officer and Director
- ----------------------- ------- ------------------------------------------------
Philip Gatch 41 Chief Technology Officer
- ----------------------- ------- ------------------------------------------------
Alice M. Campbell 55 Director
- ----------------------- ------- ------------------------------------------------
Alan Morelli 44 Director Nominee
- ----------------------- ------- ------------------------------------------------
David M. Kaye 51 Director Nominee
- ----------------------- ------- ------------------------------------------------

Officers are elected annually by the Board of Directors (subject to the
terms of any employment agreement), to hold such office until an officer's
successor has been duly appointed and qualified, unless an officer sooner dies,
resigns or is removed by the Board. Some of the Company's directors, director
nominees and executive officers also serve in various capacities with the
Company's subsidiaries. There are no family relationships among any of the
Company's directors, director nominees and executive officers.

Background of Executive Officers and Directors

Jay Rifkin, Chief Executive Officer and Director Nominee. Effective
September 30, 2005, the Board of Directors of the Company appointed Mr. Rifkin
interim President of the Company pending closing of the Acquisition. On December
29, 2005, Mr. Rifkin's title was changed to Chief Executive Officer of the
Company effective as of September 30, 2005. From 2004 to Present, Mr. Rifkin has
been the sole Managing Member of Rebel Holdings, LLC, through which he is also
the majority shareholder of Rebel Crew Films, Inc. In 1995, Mr. Rifkin founded
Mojo Music, Inc., a music publishing company, and he has been President of Mojo
Music, Inc. since it was founded. Mr. Rifkin is Chairman and a founder of Media
Revolution, a marketing agency founded in 1977 that has executed marketing
campaigns for major Hollywood studios. Mr. Rifkin has served as Producer and
Executive Producer on various motion pictures with his most recent production
"Waiting" (Lion's Gate) released on October 7, 2005. Mr. Rifkin is also a music
producer, engineer and songwriter. Mr. Rifkin received a Grammy Award for Best
Children's Album and an American Music Award for Favorite Pop/Rock Album for his
work on Disney's "The Lion King," and received a Tony nomination for "The Lion
King" on Broadway. From 1988 to 2004, Mr. Rifkin, through Mojo Music, Inc.,
served as a Managing Member of Media Ventures, LLC, an entertainment cooperative
founded by Mr. Rifkin and composer Hans Zimmer. In 1995, Mr. Rifkin founded Mojo
Records, LLC, which in 1996 became a joint venture with Universal Records, and
was subsequently sold to Zomba/BMG Records in 2001. Mr. Rifkin also serves as
President of Cyberia Holdings, Inc. which is the majority owner of Media
Revolution. In 2004, Cyberia Holdings, Inc. filed for bankruptcy under Chapter 7
which cased was dismissed in May 2005.

2

William B. Horne, Chief Financial Officer and Director. Mr. Horne has been
the Company's Chief Financial Officer and a director since July 20, 2005. From
September 30, 2005 until December 29, 2005, Mr. Horne also served as the
Company's Chief Executive Officer and Chairman of the Company's Board of
Directors. Since July 5, 2005, Mr. Horne has been the Chief Financial Officer
and a director of Ault Glazer Bodnar & Company, Inc. Since July 5, 2005, Mr.
Horne has also been Chief Financial Officer of Patient Safety Technologies, Inc.
and its subsidiaries. From May 2002 to April 2005, Mr. Horne held the position
of Chief Financial Officer of Alaska Wireless Communications, a privately held
advanced cellular communications company. Since January 2002, Mr. Horne has also
provided strategic financial consulting services to both private and public
companies. From November 1996 to December 2001, Mr. Horne held the position of
Chief Financial Officer of The Phoenix Partners, a venture capital limited
partnership located in Seattle, Washington.

Philip Gatch, Chief Technology Officer. Mr. Gatch has been the Company's
Chief Technology Officer since June 30, 2005. From June 30, 2005 until October
14, 2005, Mr. Gatch was also Chief Technology Officer of Patient Safety
Technologies, Inc. Since May 12, 2005, Mr. Gatch has been President and owner of
Cinapse Digital Media, LLC, a company that operates a production and
post-production media content facility. From September 2003 to June 2005, Mr.
Gatch was Director of Technical Services of The DR Group. From February 2002 to
April 2003, Mr. Gatch was Director of Research and Development for Media.net.
From 1999 to 2002, Mr. Gatch was Director of Research and Development for
Digital Entertainment Solutions.

Alice M. Campbell, Director. Ms. Campbell has been a member of the
Company's Board of Directors since July 16, 2005. Since June 23, 2005, Ms.
Campbell has been a director of IPEX, Inc., a public company quoted on the OTC
Bulletin Board. Since October 22, 2004, Ms. Campbell has been a director of
Patient Safety Technologies, Inc., a public company listed on the American Stock
Exchange. Since 2001, Ms. Campbell has been, and is currently, an investigator
and consultant, specializing in research and litigation services, financial
investigations and computer forensics, for major companies and law firms
throughout the United States. Ms. Campbell is a certified fraud specialist, as
well as a certified instructor for the Regional Training Center of the United
States Internal Revenue Service and for the National Business Institute. From
1979 to 2001, Ms. Campbell served as a special agent for the United States
Treasury Department where she conducted criminal investigations and worked
closely with the United States Attorney's Office and with several federal
agencies, including the Internal Revenue Service, Federal Bureau of
Investigation, Secret Service, Customs Service, State Department, Drug
Enforcement Agency, Bureau of Alcohol, Tobacco and Firearms and U.S. Postal
Service.

Alan Morelli, Director Nominee. Mr. Morelli is a consultant who has served
as Managing Director of Analog Ventures, LLC, a consulting firm located in
Pacific Palisades, California, since 1997. Mr. Morelli is also currently serving
as a director of PT Holdings, Inc., RADD Holdings, Inc. and Precise Exercise
Equipment. PT Holdings, Inc. is a development-stage company in the physical
therapy industry. RADD Holdings licenses intellectual property to retail
distributors. Precise develops innovative commercial fitness or rehabilitation
technology currently used in most health clubs today. Mr. Morelli received a
B.S. from Rutgers University (1983) and a J.D. from Georgetown University Law
Center (1986).

David M. Kaye, Director Nominee. Mr. Kaye is an attorney and has been a
partner in the law firm of Danzig Kaye Cooper Fiore & Kay, LLP located in
Florham Park, New Jersey, since the firm's inception in February 1996. Since
1980, Mr. Kaye has been a practicing attorney in the New York City metropolitan
area specializing in corporate and securities matters. He is currently a
director of Dionics, Inc., a company which designs, manufactures and sells
semiconductor electronic products. Mr. Kaye received his B.A. from George
Washington University (1976) and his J.D. from the Benjamin N. Cardozo School of
Law, Yeshiva University (1979).


3

Audit Committee

The Audit Committee is appointed by the Board of Directors in fulfilling
its responsibilities to oversee: (1) the integrity of the Company's financial
statements and disclosure controls; (2) the qualifications and independence of
our independent accountants; (3) the performance of our independent accountants;
and (4) compliance with legal and regulatory requirements. Alice M. Campbell is
presently the only member of the Company's Audit Committee and she is Chairman
of the Audit Committee. The Board has determined that Ms. Campbell is an "audit
committee financial expert" as defined under Item 401 of Regulation S-B
promulgated pursuant to the Exchange Act.

Compensation Committee

The Compensation Committee is appointed by the Board of Directors to
discharge the responsibilities of the Board relating to compensation of the
Company's executive officers. Alice M. Campbell is currently the only member of
the Compensation Committee and she is Chairman of the Compensation Committee.

Employment Agreements

On September 20, 2005, the Company entered into an employment agreement
with Philip Gatch documenting the terms of his employment as the Company's Chief
Technology Officer. The term of the employment continues for 36 months from
September 20, 2005 and automatically renews for successive one-year terms unless
either party delivers to the other party written notice of termination at least
30 days before the end of the then current term. Mr. Gatch's base compensation
under the agreement is $95,000 in cash per year and $45,000 in a restricted
stock grants each year. Prior to signing the employment agreement, the Company
granted Mr. Gatch options entitling him to purchase 250,000 shares of common
stock vesting annually over three years with a strike price of $0.25 per share,
which stock options are reflected in the employment agreement. Mr. Gatch is also
eligible to receive an annual performance bonus determined by the Company's
chief executive officer. In addition, Mr. Gatch was granted rights for three
years to (a) veto a chief executive officer candidate as a replacement to Milton
"Todd" Ault, III, and (b) veto a decision to sell the Company or any of the
Company's core assets or technologies related to the iCodemedia Assets in the
event the Company is sold for less than $50,000,000. If Mr. Gatch's employment
is terminated for any reason, the veto rights will be forfeited. The agreement
also contains customary provisions for disability, death, confidentiality,
indemnification and non-competition. If Mr. Gatch voluntarily terminates the
agreement or if the Company terminates the agreement for cause, Mr. Gatch will
not be entitled to any compensation for the period between the effective
termination date and the end of the employment term and all unvested restricted
stock and stock options will be forfeited. If the Company voluntarily terminates
the agreement without cause, the Company must pay Mr. Gatch a cash sum equal to
(a) all accrued base salary through the date of termination plus all accrued
vacation pay and cash bonuses, if any, plus (b) as severance compensation,
500,000 unrestricted shares of common stock and $250,000 cash. In the event of a
merger, consolidation, sale, or change of control, the surviving or resulting
company is required to honor the terms of the agreement with Mr. Gatch.

In connection with the Acquisition, on December 29, 2005, the Company
entered into an employment agreement with Jay Rifkin as the Company's Chief
Executive Officer effective as of September 30, 2005. The term of the employment
continues for three years from September 30, 2005 and automatically renews for
successive one-year terms unless either party delivers to the other party
written notice of termination at least 30 days before the end of the then
current term. Mr. Rifkin's base compensation in the first year of the term is
$150,000, will increase at least 10% in the second year of the term and at least
10% more in the third year of the employment term. Mr. Rifkin was granted
options to purchase 4,400,000 shares of the Company's common stock with an
exercise price equal to the FMV of the Company's common stock on September 30,
2005 and vesting annually over a period of three years from December 29, 2005.
Mr. Rifkin is also eligible to receive shares of common stock and stock options
from time to time and an annual bonus as determined by the Company's Board of
Directors. The agreement also contains customary provisions for disability,
death, confidentiality, indemnification and non-competition. If Mr. Rifkin
voluntarily terminates the agreement without good reason or if the Company
terminates the agreement for cause, the Company must pay Mr. Rifkin all accrued
compensation through the date of termination and provide life, accident and
disability insurance, and health, dental and vision benefits to Mr. Rifkin and
his dependents for a period of three months after termination. If the Company
terminates the agreement without cause, if Mr. Rifkin terminates the agreement
for good reason or if the agreement is terminated upon the death or disability
of Mr. Rifkin, then the Company must pay Mr. Rifkin or his estate all unpaid
compensation through the duration of the three-year employment term and must
provide insurance and health benefits through the duration of such term. "Good
Reason" is defined in the agreement as: (i) material breach of the agreement by
the Company including, without limitation, any diminution in title, office,
rights and privileges of Mr. Rifkin or failure to receive base salary payments
on a timely basis; (ii) relocation of the principal place for Mr. Rifkin to
provide his services to any location more than 20 miles away from 100 Wilshire
Boulevard, Santa Monica, California 90401; (iii) failure of the Company to
maintain in effect directors' and officers' liability insurance covering Mr.
Rifkin; (iv) any assignment or transfer by the Company of any of its rights or
obligations under the agreement; or (v) any change in control of the Company
including, without limitation, if Mr. Rifkin shall cease to own a majority of
the voting securities of the Company.

4

Involvement in Certain Legal Proceedings

Jay Rifkin serves as President of Cyberia Holdings, Inc. which is the
majority owner of Media Revolution. In 2004, Cyberia Holdings, Inc. filed for
bankruptcy under Chapter 7 which cased was dismissed in May 2005.

Except as described above, no director, person nominated to become a
director, executive officer or control person of the Company:

(1) was a general partner or executive officer of any business against
which any bankruptcy petition was filed, either at the time of the
bankruptcy or two years prior to that time;
(2) was convicted in a criminal proceeding or named subject to a pending
criminal proceeding (excluding traffic violations and other minor
offenses);
(3) was 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) was found by a court of competent jurisdiction (in a civil action),
the Securities and Exchange 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.

No director, officer or 5% or other shareholder of the Company is a party
to any legal proceeding in which such person is adverse to the Company or has an
interest adverse to the Company.

BUSINESS OF THE COMPANY AFTER THE ACQUISITION

FORWARD-LOOKING STATEMENTS

Except for historical information, matters discussed in this report are
forward-looking statements based on management's estimates, assumptions and
projections. In addition, from time to time, the Company may make
forward-looking statements relating to such matters as anticipated business
prospects, new products, research and development activities, plans for
expansion, acquisitions and similar matters. Words such as "expects,"
"anticipates," "targets," "goals," "projects," "intends," "plans," "believes,"
"seeks," "estimates," "continue," or the negatives thereof, or variations on
such words, and similar expressions are intended to identify such forward
looking statements. The Company notes that a variety of factors could cause the
Company's actual results and experience to differ materially from the
anticipated results or other expectations expressed in the Company's
forward-looking statements. These forward-looking statements are mere
predictions and are uncertain. These forward-looking statements speak only as of
the date of this report. The Company expressly disclaims any obligation or
undertaking to disseminate any updates or revisions to any forward-looking
statement contained herein to reflect any change in its expectations with regard
thereto or any change in events, conditions or circumstances on which any such
statement is based.

ORGANIZATIONAL HISTORY

Digicorp was incorporated on July 19, 1983 under the laws of the State of
Utah for the purpose of developing and marketing computer software programs.
From 1983 to 1995, the Company's sales and investments were attributable to the
sale of computer software and investments related to oil, gas and mining.

On June 30, 1995, the Company became a development stage enterprise when
the Company sold its assets and changed its business plan. Since June 30, 1995,
the Company has been in the developmental stage and until September 19, 2005 has
had no operations other than issuing shares of common stock for financing the
preparation of financial statements and for preparing filings for the SEC. In
August 2001, the Company elected to file a Form 10-SB registration statement
with the SEC on a voluntary basis in order to become a reporting company under
the Exchange Act.

5

Acquisition of iCodemedia Assets

On September 19, 2005, the Company entered into an asset purchase
agreement with Philip Gatch, the Company's Chief Technology Officer, and thereby
completed the purchase of certain assets from Mr. Gatch consisting of the
iCodemedia suite of websites and internet properties and all related
intellectual property (the "iCodemedia Assets"). The iCodemedia suite of
websites consists of the websites www.icodemedia.com, www.iplaylist.com,
www.tunecast.com, www.tunebucks.com, www.podpresskit.com and www.tunespromo.com.
Since completing the Acqusition, the Company may sell the iCodemedia Assets or
use the websites to provide applications and services to enable content creators
to publish and deliver content to existing and next generation devices such as
the Apple iPod and the Sony PSP. As consideration for the iCodemedia Assets, the
Company issued Mr. Gatch 1,000,000 shares of common stock. The issuance of
shares of common stock to Mr. Gatch was exempt from registration requirements
pursuant to Section 4(2) of the Securities Act of 1933, as amended.

Acquisition of Rebel Crew Films

As further described on page 1 of this report, on December 29, 2005, the
Company acquired all of the issued and outstanding capital stock of Rebel Crew
Films in consideration for the issuance of 21,207,080 shares of common stock to
the shareholders of Rebel Crew Films. The Acquisition was exempt from
registration requirements pursuant to Section 4(2) of the Securities Act and
Rule 506 promulgated thereunder. Rebel Crew Films was organized under the laws
of the State of California on August 7, 2002 to distribute Latino home
entertainment products. Rebel Crew Films currently maintains more than 200
Spanish language films and plans to serve the nation's largest wholesale,
retail, catalog, and e-commerce accounts.

Except as specifically stated otherwise, in the remainder of this report
references to "the Company" refer to Digicorp together with its wholly owned
subsidiary Rebel Crew Films, Inc.

OVERVIEW

The Company currently maintains more than 200 Spanish language films and
serves some of the nation's largest wholesale, retail, catalog, and e-commerce
accounts. The Company's titles can be found at Wal-Mart, Best Buy, Blockbuster,
K-Mart, and hundreds of independent video outlets across the United States of
America and Canada. The Company's diverse programming includes: New Releases,
Classic Mexican Cinema, animation, cult, sports, martial arts, family
entertainment, and more.

The Company generates revenue through either licensing agreements with
third parties that distribute the Company's licensed content or through direct
sales. The Company's typical licensing agreements consist of a three to
five-year contract that carries a 15% - 50% royalty on gross sales of licensed
product. The Company is currently expanding its sales force to focus on direct
sales of its licensed content.

The Company is organized in a single operating segment. All of the
Company's revenues are generated in the United States, and the Company has no
long-lived assets outside the United States.

CUSTOMERS

For direct sales, the Company's sales associates focus on small retail
stores across the country. Currently, the sales force manages over 1,100 active
retail store customers. For other licensing activities, there are two companies,
BCI Eclipse LLC, which has licensed 20 titles, and VAS Entertainment/Rise Above
Entertainment ("VAS/RA") which has licensed 17 titles from the Company. They
function as manufacturers for the Company's DVD inventory for those titles, as
well as a distributor to large retailers like Wal-Mart. The agreements with
these companies consist of a term of three to five years granting the companies
the right to manufacture, promote, and distribute the licensed movies for a 15%
- - 50% royalty on gross sales, depending on title.

6

Besides its direct selling effort through telemarketing, the Company
markets its products by placing print ads in a variety of Latino trade magazines
as well as through its website. The Company has a dedicated 1-800 toll free
number for sales inquiries.

SUPPLIERS

The Company has three categories of suppliers - movie licensors, DVD
manufacturers, and finished goods suppliers. Movie licensors consist of Spanish
language movie license holders primarily from Mexico who enter licensing
agreements with the Company to manufacture and distribute their movies. The
Company is currently in contract with eight different licensors of content. From
these agreements, the Company has manufactured ten titles. Agreements with these
companies consist of either a fixed license fee or a 40-60% royalty on net
revenues for the right to manufacture, promote and distribute the films for four
to five years, depending on title.

For the manufacture of DVD's, the Company's principal supplier is a
company called Reptek. The Company does not have a written agreement with this
supplier. There is no dependency on this supplier as the supply of DVD
manufacturing companies is broad and there are many potential firms that can be
employed to supply the Company's products.

For DVD titles not owned or licensed by the Company, a number of finished
goods vendors are utilized. Among them are Ventura Distribution Inc., Cozumel
Films, Venevision International, and Universal (UMVD). Ventura Distribution
currently supplies the Company with 21 movies distributed by Unicine, a division
of Univision. Venevision International has the highest number of titles,
providing the Company with 51 films. Universal (UMVD) currently supplies the
Company with 36 films and Cozumel Films provides the Company with three films.
There are no written agreements with any of these companies to supply the
Company with films.

The Company is currently expanding its sales force to focus on direct
sales of its licensed content. The Company is shifting its efforts on direct
selling due to two primary reasons: (1) poor reliability of third party
distributors generally to pay royalties on time; and (2) to eliminate dependence
on third party distributors to distribute the Company's product as one of many
other products they also sell.

COMPETITION

Although accurate numbers are difficult to obtain due to the hesitation of
privately owned distribution companies to divulge sales figures, it is generally
estimated by an independent study by Estrenos magazine (a Latin Entertainment
Trade Journal) that the Latino home video distribution market for the first six
months of 2005 sold over three million units in the U.S. According to Estrenos
magazine, of that number three distributors accounted for approximately 80% of
those sales - Laguna Films (43%), Ventura/Studio Latino (26%), and
Xenon/Televisa (13%) (data provided by each distributor or source). Other
players include Image Entertainment (7%), Latin Vision (5%), Brentwood Home
Video (3%), Pro-Active Entertainment (2%), and Vanguard Latino (1%) (Source:
Estros magazine, September/October 2005). Based on these sales performance
figures, the Company's monthly sales average currently represents approximately
1.25% of the monthly average of DVD sales volume in the Latino video
entertainment industry

Major U.S. movie studios have ventured into servicing the Latino home
video market as well, selling approximately 1.5 million units in the first half
of 2005. Of that amount, approximately 60% of sales were dominated by three
studios - MGM Home Entertainment (26%), Columbia Tri-Star (18%) and Lions Gate
Films (16%). Other such competitors include UMVD/Visual Entertainment (12%),
BVHE/Disney (8%), Warner Home Video (8%), and Fox Home Entertainment (3%).
(Source: Estros magazine, September/October 2005)

The Company also competes with retail music and video stores, including
online stores, dominated by large companies such as Netflix, Blockbuster, Trans
World Entertainment, and Movie Gallery Inc.

The Company competes in the Latino home video market primarily by offering
competitive prices on a wide variety of quality titles through its direct
selling efforts targeted at retail stores across the entire United States.


7

GOVERNMENT REGULATION

The Company is not aware of any existing or probable governmental
regulations that may have a material effect on the normal operations of the
Company's business. There also are no relevant environmental laws that require
compliance by the Company that may have a material effect on the normal
operations of the business.

EMPLOYEES

As of January 4, 2006, the Company employed eight full time employees and
three part time employees. None of the Company's employees are covered by a
collective bargaining agreement. The Company believes that relations with its
employees are good.

DESCRIPTION OF PROPERTY

The Company leases its principal executive office located at 4143 Glencoe
Avenue, Marina Del Rey, California 90292. The leased office space is
approximately 3,800 rentable square feet. The lease contract term is seven years
and two months commencing August 1, 2005 and ending September 30, 2012. Base
rent under the lease is $5,890 per month payable on the first day of each month
commencing August 15, 2005. Additionally, the first two months (August to
September 2005) had a base rent of $8,835 and a security deposit of $5,890 was
required upon signing.

LEGAL PROCEEDINGS

The Company is not a party to any pending legal proceeding, nor is its
property the subject of a pending legal proceeding that is not in the ordinary
course of business or otherwise material to the financial condition of the
Company's business.

MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Off-Balance Sheet Arrangements

We do not have any off balance sheet arrangements that are reasonably
likely to have a current or future effect on our financial condition, revenues,
results of operations, liquidity or capital expenditures.

Critical Accounting Policies

A discussion and analysis of our financial condition and results of
operations are based upon our financial statements, which have been prepared in
accordance with accounting principles generally accepted in the United States.
The preparation of these financial statements requires management to make
estimates and assumptions that affect the reported amounts of assets,
liabilities, revenues and expenses and related disclosure of contingent assets
and liabilities. Note 2 to our audited financial statements included as an
exhibit to this Form 8-K describes the significant accounting policies and
methods used in the preparation of the financial statements. On an ongoing
basis, management evaluates its estimates, the most critical are those that are
both important to the presentation of our financial condition and results of
operations and require management's most difficult, complex, or subjective
judgments.

Accounting Developments

In December 2004, Statement of Financial Accounting Standards ("SFAS") No.
123(R), "Share-Based Payment," which addresses the accounting for employee stock
options, was issued. SFAS 123(R) revises the disclosure provisions of SFAS 123,
"Accounting for Stock Based Compensation" and supersedes Accounting Principles
Board ("APB") Opinion No. 25, "Accounting for Stock Issued to Employees." SFAS
123(R) requires that the cost of all employee stock options, as well as other
equity-based compensation arrangements, be reflected in the financial statements
based on the estimated fair value of the awards. This statement is effective for
us as of the beginning of the first interim or annual reporting period that
begins after December 15, 2005. The impact on our operating results or financial
position based on the adoption of SFAS No. 123(R) has not yet been determined.

8

Liquidity and Capital Resources

Our total assets were $519,442 at September 30, 2005 versus $195,981 at
December 31, 2004. The change in total assets is primarily attributable to an
increase in our intangible assets and inventory of $240,175 and $36,243,
respectively. The increases in intangible assets and inventory were primarily
financed through monies loaned from related parties in the amount of $552,321.

At September 30, 2005 and December 30, 2004, we had $3,404 and $7,856 in
cash and cash equivalents, respectively. During the nine months ended September
30, 2005, we borrowed $519,321 from Rebel Holdings, LLC, a California limited
liability company ("Rebel Holdings"), an entity that during 2005 acquired
approximately 90% of the outstanding shares of the our common stock. In
September 2005, we borrowed an additional $33,000 from the sole member of Rebel
Holdings. At September 30, 2005 and December 31, 2004, the Company had a
combined liability of $601,307 and $48,986, respectively, due to either Rebel
Holdings or the sole member of Rebel Holdings. On December 29, 2005, we issued a
promissory note in the amount of $73,000 to the sole member (the "Promissory
Note") of Rebel Holdings. The Promissory Note represented the outstanding amount
borrowed at September 30, 2005 as well as additional funds borrowed during the
fourth quarter of 2005. The Promissory Note has a term of approximately six
months and bears 5.0% simple interest. On December 29, 2005, in connection with
the closing of the Acquisition we also issued a convertible note in the amount
of $556,307 to Rebel Holdings (the "Note"). The Note has a term of five years
from December 29, 2005, bears 4.5% simple interest and is convertible into
shares of our common stock at a conversion price of $1.112614 per share.

We have primarily relied upon loans from related parties to fund our
operations and, to a lesser extent, revenues generated from licensing our film
content, on a non-exclusive basis, to other distributors of Latino home
entertainment content. We believe that future revenues combined with either
loans or direct equity investments into the Company will be sufficient to fund
our operations for the 12 months subsequent to September 30, 2005. We expect to
undertake additional debt or equity financings to better enable us to grow and
meet our future operating and capital requirements, however, there is no
assurance that we will be successful in obtaining such financing.

Operating activities provided $336,762 of cash for the nine months ended
September 30, 2005, compared to providing $161,856 and $62,765 for the years
ended December 31, 2004 and 2003, respectively.

Cash used in investing activities for the nine months ended September 30,
2004 and the years ended December 31, 2004 and 2003, of $341,214, $154,000, and
$72,000, respectively, resulted almost exclusively from the purchases of
licensed Spanish language film content that was capitalized.

Results of Operations

Revenues

We recognized revenues of $140,333 and $27,963 for the nine months ended
September 30, 2005 and the year ended December 31, 2004, respectively. During
2004 all of our revenues were generated through licensing agreements. The
licensing agreements provide for us to receive advance payments as consideration
for rights granted to third parties that distribute our licensed content. The
advance payments are initially recorded as deferred revenue and subsequently
recognized in income as royalties are earned upon shipment of licensed content
to customers by the sub-licensor. Deferred revenue balances of $75,411 and
$162,971 at September 30, 2005 and December 31, 2004, respectively, represent
advance royalty payments that are expected to be earned over the subsequent
twelve month periods.

During the nine months ended September 30, 2005, licensing revenue of
$85,205 accounted for approximately 61% of our total revenue. The remaining
revenue of $55,128 represents revenue generated through the direct sales of our
licensed content. We expect that direct sales, as a percentage of total revenue,
will significantly increase over the next year as we focus our efforts on
expanding our existing sales force. Further, we anticipate that licensing
revenues will significantly be reduced or eliminated in future years as we shift
our focus away from licensing agreements with third parties

9

Expenses

Operating expenses were $247,854 and $80,889 in the nine months ended
September 30, 2005 and 2004, respectively and $144,434 and $112,364 in the
fiscal years ended December 31, 2004 and 2003, respectively. Operating expenses
in all periods primarily consisted of professional fees, rent expense,
amortization expense and general and administrative expenses.

Professional fees were approximately $40,000 higher in the nine months
ended September 30, 2005 compared to the nine months ended September 30, 2004
due to significant increases in amounts paid to consultants as well as legal and
accounting fees. Amounts paid to various consultants increased by approximately
$24,000 and related to services to locate Spanish language content for
acquisition, technical assistance in preparing the content for production, and
sales and marketing of the titles. Legal fees increased by approximately $12,000
due to the preparation and review of an increased amount of license agreements.
Accounting fees, which increased by approximately $4,000, relate to costs
incurred to update our accounting system to facilitate a larger volume of
transactions.

Professional fees were approximately $36,000 higher in the year ended
December 31, 2004 compared to the year ended December 31, 2003 due to
significant increases in amounts paid to consultants as well as legal fees.
Amounts paid to various consultants during 2003 related solely for services to
locate Spanish language content for acquisition whereas during 2004 we incurred
expenses related not only for services to locate Spanish language content, but
also technical assistance in preparing the content for production, and sales and
marketing of the titles. Legal fees increased by approximately $8,000 due to the
preparation and review of an increased amount of license agreements.

Rent expense increased by approximately $15,000 in the nine months ended
September 30, 2005 compared to the nine months ended September 30, 2004 due in
part to our relocation into commercial office space in August 2005, with base
rent of $5,890 per month combined with periods of low rates of rent during the
nine months ended September 30, 2004.

Rent expense increased by approximately $4,000 in the year ended December
31, 2004 compared to the year ended December 31, 2003 and is attributed to
periods of low rates of rent during 2003.

Amortization expense increased by approximately $56,000 in the nine months
ended September 30, 2005 compared to the nine months ended September 30, 2004
due to an increased number of license agreements.

Amortization expense increased by approximately $26,000 in the year ended
December 31, 2004 compared to the year ended December 31, 2003 due to an
increased number of license agreements.

General and administrative expense increased by approximately $50,000 in
the nine months ended September 30, 2005 compared to the nine months ended
September 30, 2004 and is attributed to the overall expansion of the business
during the nine months ended September 30, 2005 combined with the financial
constraints placed on us as a result of limited amounts of available working
capital in the nine months ended September 30, 2004.

General and administrative expense decreased by approximately $15,000 in
the year ended December 31, 2004 compared to the year ended December 31, 2003
due to financial constraints placed on us as a result of limited amounts of
available working capital in the year ended December 31, 2004. During the year
ended December 31, 2003, as reflected by our deferred revenue balance of
approximately $40,000 and licensing revenues of approximately $116,000, we
received a large amount of advance payments from our licensing agreements with
third parties. These advance payments exceeded the cost of our licensed content
in 2003, thus, providing an adequate amount of working capital for general and
administrative purposes. During 2004 the amount of advance payments approximated
the cost of our licensed content thus eliminating a source of funds for general
and administrative expenses.


10


Taxes

We are taxed under Title 26, Chapter 1, Subchapter C of the Internal
Revenue Code of 1986, as amended, and therefore subject to federal income tax on
the portion of our taxable income.

At December 31, 2004, we had a net operating loss carryforward of
approximately $27,000 to offset future taxable income for federal income tax
purposes. The utilization of the loss carryforward to reduce any future income
taxes will depend on our ability to generate sufficient taxable income prior to
the expiration of the net operating loss carryforwards. The carryforward expires
beginning in 2024.

A change in the ownership of a majority of the fair market value of our
common stock can delay or limit the utilization of existing net operating loss
carryforwards pursuant to Internal Revenue Code Section 382. We believe that
such a change occurred during the year ended December 31, 2005 and are
evaluating the amount that our net operating loss carryforward utilization will
be limited to.


EXECUTIVE COMPENSATION

The following table sets forth information concerning the total
compensation that the Company has paid or that has accrued on behalf of the
Company's chief executive officer and other executive officers with annual
compensation exceeding $100,000 during the years ended December 31, 2005, 2004
and 2003.

SUMMARY COMPENSATION TABLE