10KSB 1 ravenmoon10ksb123105.txt PERIOD ENDED 12-31-05 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-KSB [X] Annual Report under Section 13 or 15(d) of the Securities Exchange Act of 1934 For the fiscal year ended December 31, 2005 [ ] Transition report under Section 13 Or 15(d) of the Securities Exchange Act of 1934 For the transition period from to ----------- ------------ Commission file number 000-24727 Raven Moon Entertainment, Inc. ---------------------------------------------------- (Exact name of registrant as specified in its charter) Florida 59-348779 ---------------------- ----------------- (State of incorporation) (I.R.S. Employer Identification No.) 2005 Tree Fork Lane, Suite 101 Longwood, Florida 32750 -------------------------------------- -------- (Address of principal executive offices) (Zip Code) Issuer's telephone number, including area code: (407) 304-4764 Securities registered pursuant to Section 12(g) of the Act: Title of Class: Name of each exchange on which registered: Common Stock, par value $.0001 None Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter 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 if disclosure of delinquent filers pursuant to Item 405 of Regulation S-B is not contained herein, and will not be contained, to the best of Registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-KSB or any amendment to this Form 10-KSB. |X| Issuer's gross revenues for its most recent fiscal year are $10,160. The aggregate market value of the voting stock held by non-affiliates of the registrant based on the closing sale price on April 14, 2005 was approximately $ 1,813,932. The approximate number of shares outstanding of the registrant's Common Stock as of April 14 was 6,226,617,947. Transitional Small Business Disclosure Format: Yes | | No | X | TABLE OF CONTENTS Part I Page Item 1 Description of Business.......................................... 1 Item 2 Properties....................................................... 7 Item 3 Legal Proceedings................................................ 8 Item 4 Submission of Matters to a Vote of Security Holders.............. 8 Part II Item 5 Market for Company's Common Equity and Related Stockholder Matters........................................ 8 Item 6 Management Discussion and Analysis............................... 10 Item 7 Financial Statements............................................. 12 Independent Auditors Consent 12 Balance Sheet 13 Statement of Operations 14 Stockholders Equity (Stockholders' Deficit) 15 Statement of Cash Flows 16 Statement of Cash Flows - Net Loss Reconciliation 17 Notes to Financial Statements 18 Item 8 Changes in and Disagreements with Accountants on Accounting and Financial Disclosure...................................... 33 Part III Item 9 Directors, Executive Officers, Promoters, and Control Persons; Compliance with Section 16(a) of the Exchange Act............. 33 Item 10 Executive Compensation.......................................... 36 Item 11 Security Ownership of Certain Beneficial Owners and Management.. 38 Item 12 Certain Relations and Related Transactions...................... 38 Item 13 Exhibits and Reports on Form 8-K................................ 44 Item 14. Principal Accountant Fees and Services.......................... 44 i FORWARD LOOKING STATEMENT INFORMATION Certain statements made in this Annual Report on Form 10-KSB are "forward-looking statements"(within the meaning of the Private Securities Litigation Reform Act of 1995) regarding the plans and objectives of management for future operations. Such statements involve known and unknown risks, uncertainties and other factors that may cause our actual results, performance or achievements of the Company to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. The forward-looking statements included herein are based on current expectations that involve numerous risks and uncertainties. Our plans and objectives are based, in part, on assumptions involving judgments with respect to, among other things, future economic, competitive and market conditions and future business decisions, all of which are difficult or impossible to predict accurately and many of which are beyond our control. Although we believe that our assumptions underlying the forward-looking statements are reasonable, any of the assumptions could prove inaccurate and, therefore, there can be no assurance that the forward-looking statements included in this report will prove to be accurate. In light of the significant uncertainties inherent in the forward-looking statements included herein particularly in view of the current state of our operations, the inclusion of such information should not be regarded as a statement by us or any other person that our objectives and plans will be achieved. Factors that could cause actual results to differ materially from those expressed or implied by such forward-looking statements include, but are not limited to, the factors set forth herein under the headings "Business," "Risk Factors" and "Management's Discussion and Analysis of Financial Condition and Results of Operations." ii PART I Item 1. Description of Business. General ------- The primary business focus of Raven Moon Entertainment, Inc. (the "Company" or "Raven Moon") is the development and production of children's television programs and videos, CD music production, Internet websites focused on the entertainment industry and music publishing and talent management. Raven Moon Entertainment is well on its way to 40 episodes of "Gina D's Kids Club." As of December 31, we have produced 24 episodes of the half hour program. The production of "Gina D's Kids Club" has resulted in 24 DVD titles, a music library of over 160 original songs, and a cast of characters which are suitable for licensing and merchandising opportunities. Raven Moon's future revenue stream is dependant on its nationwide syndication of "Gina D's Kids Club" and its ability to continue to finance the production of the remaining 16 episodes of "Gina D's Kids Club". Once the company has the program in a position where it's airing 5 days a week on a station which is considered a destination for kids, management believes there are numerous opportunities in a billion dollar licensing and merchandising market for preschool kids. Raven Moon management has already explored these opportunities and has met with prominent industry leaders who have recommended the company adapt a strategy which will allow Raven Moon to build upon the "Gina D's Kids Club" brand. In addition to "Gina D's Kids Club", Raven Moon has begun developing a movie called "GINA D & THE TRANSISTOR SISTERS"(R) and has launched "GINA D'S READING ACROSS AMERICA PROGRAM"(R) LIVE. The Company has already produced a "Mr. Bicycle Man" Public Service Announcement and a trailer for the "BoBo Blocks" television series. The "Gina D's Kids Club" began airing on television once a week in September 2004, through the efforts of our syndicator Role Entertainment. In order to maximize our airtime exposure to five days like programs such as "Sesame Street", "Arthur" and "Barney", we decided to move the program to PBS public television stations. Recently the Company signed an exclusive 27 month agreement with WPBT-PBS, Miami to be our presenting station through American Public Television (APT), so that we can get our programs on public television stations beginning with a June 2006. launch date. In order to fulfill the contract with public television, we will have to produce an additional 16 half-hour episodes at an approximate cost of $4,000,000. It is anticipated that 6 of those programs planned for delivery to public television stations in June will be produced in February 2006. It is an assumption that as part of our business plan, the completion of a total of 40 episodes and saturated visibility on public television stations could create multiple revenue streams which includes worldwide licensing and merchandising opportunities for DVD's, CD's, and toys that have been inspired by the show. This of course is if the programs 1 are accepted for airing by the public stations, are well received by the viewers, the licensees and the retailers. Parents told us that they wanted better programming for their children, and we are committed to our goal of providing the very best in family values children's entertainment. In 2002, Raven Moon Entertainment, Inc. created a wholly owned subsidiary called JB Toys, LLC which will control the exclusive licensing and merchandising rights to the following product lines for a period of ten years: The "Cuddle Bug", "The Christmas Cuddle Bug", "The Cuddle Bug Cousins", "The Birthday Cuddle Bugs", "The BoBo Blocks", "Mr. Bicycle Man". Raven Moon will receive 15% of gross profits received by JB Toys, LLC for ten years. In 2002, Raven Moon Entertainment, Inc, formed a subsidiary named Raven Moon Home Video Products, LLC, which was spun-off into a separate corporation known as Clubhouse Videos, Inc. in 2003. In exchange, Raven Moon Entertainment, Inc. received a small minority stock interest in Clubhouse Videos, Inc. which was distributed to its shareholders and was to be initially paid $1,000,000 and a royalty from DVD sales from the first three GINA D'S KIDS CLUB(R) episodes. To date, Clubhouse Videos, Inc. has not paid anything to Raven Moon Entertainment, Inc. Competitive Business Conditions ------------------------------- The main competition in our industry comes from the major studios, such as Disney and Universal Studios that produce a large percentage of children's programming plus producers of such shows as "Barney," "Sesame Street," and the "Muppets." The next level of competition is from other independents production companies. To be competitive, we must produce high quality creative productions and must develop the reputation and contacts to meet with the principal players in this industry. Once we obtain a distributor, we expect that they will provide the support necessary to enable us to compete in this marketplace. Creative Talent --------------- We have been able to obtain the talent necessary to develop and produce this programming, including actors, set designers and builders, television production crews, scriptwriters, and musicians, from sub-contractors available in the metropolitan Orlando, Florida area, many of whom presently develop and produce materials and productions for Disney and Universal Studios. Raven Moon Entertainment recently formed Raven Animation, Inc., a wholly owned subsidiary, to work on three G-Rated movies called "GINA D & THE TRANSISTOR SISTERS"(R), "THE BOBO BLOCKS MOVIE" AND "DINO BUGS - THE MOVIE". Joey and Bernadette DiFrancesco, the Company's principle creative officers and directors have spent a substantial time developing these properties and products during the last two fiscal years. They are in charge of the production of the product on an ongoing basis. 2 Intellectual Property --------------------- We have determined to focus our primary efforts on audio and video production for television and Family Values Videos and more specifically on the present development of the "Gina D's Kids Club" children's videos. On April 11, 2001, we acquired from Joseph and Bernadette DiFrancesco a One (1) year option for the rights to the program "Gina D's Kids Club," the cartoon characters "TV Ted", "Baby and the Transistor Sisters" and other characters from the show including: "Simon," "Fishy," "Kitty," "Hammy," "Miss Muffin," and the music publishing rights to songs written by Mr. and Mrs. DiFrancesco, in exchange for 1,200,000 split adjusted shares of our common stock at par value. Because the Company failed to have produced the required number of programs and videos by April 1, 2002, the Option was extended for an additional year in exchange for 800,000 split adjusted shares of common stock to J&B DiFrancesco. On March 4th & March 5th 2004, the Company's Board of Directors renegotiated a new ten-year agreement with Joey & Bernadette DiFrancesco, the copyright and trademark owners, to be effective beginning January 1, 2004 and ending December 31, 2014. In the agreement, the Company must pay J&B DiFrancesco, in addition to their salaries as officers of the company, a creative license fee of $750,000 or 10% of gross revenues, whichever is greater, each year for ten years. The Company shall own these rights provided that the Company does not file for bankruptcy or is taken over by an unfriendly party. Marketing and Distribution -------------------------- To facilitate direct marketing to consumers, the Company established a wholly owned subsidiary, Raven Moon Home Video Products, LLC ("Video LLC"). The Video LLC filed its Articles of Organization with the Florida Department of State on September 26, 2001. The Company granted the Video LLC a limited, ten-year license to manufacture and market a series of videos and music CD's of the "Gina D's Kids Club" program. In 2002, we raised approximately $900,000 in LLC private offering. The spin off of the LLC resulted in the elimination of the $900,000 debt, which was classified as an advance to Raven Moon from class B members of the LLC. 3 Research and Development ------------------------ During 2004, we spent approximately $ 4,500,000 on the development and production of 16 additional episodes and the promotional PSA announcements for the "Gina D's Kid's Club" program. Customers --------- The Company is not dependant on a few major customers because every television station in the country is involved in filling its production day and is constantly seeking quality program material to enable it to meet that demand. The Company intends to allow the television stations to keep 80% of the commercial advertising and a small percentage of licensing and merchandising monies received by Raven Moon Entertainment, Inc., provided that they air the programs consistently each week for a period of two years beginning September 2004. Personnel --------- We currently have 3 full-time employees and no part-time employees. We have no plan to hire any additional employees in the immediate future. We expect to meet our additional personnel needs through the hiring of independent contractors. The Company relies heavily on the use of outside consulting services. The source of independent contractors is readily available in Central Florida from many different sources including the talent pool of professionals who have worked with companies such as Disney/MGM, Universal Studios and Nickelodeon. Recently the Company signed a new additional $4,760,000 financing agreement with MG Studios to produce of the remaining "Gina D's Kids Club"(R) episodes for public television. Government Regulation --------------------- There is no need for any governmental approval of products or services of this type. The Federal Communications Commission Rules of Broadcast mandate that broadcasters must broadcast educational programs for children or lose their broadcast license. The programs that Raven Moon Entertainment, Inc. produces are educationally sound, original with fresh characters, have new music along with interesting and appealing promotional tie-in concepts for children and their parents and will thus comply fully with those Rules of Broadcast. Accordingly, the Company believes that any governmental regulation on the business will have a positive effect on the Company's business activities. Company History --------------- Ybor City Shuttle Service, Inc. was formed on January 7, 1998, pursuant to the Articles of Incorporation filed with the Office of Secretary of State of the State of Florida on January 8, 1998. On December 31, 1998, Articles of Merger for the merger of Ybor City Shuttle Service, Inc., Raven Moon Entertainment, Inc. and International Resorts and Entertainment Group, Inc. were filed with the State of Florida merging those three corporations. The name of the surviving entity, Ybor City Shuttle Services, Inc., was changed to Raven 4 Moon International, Inc. as a part of the merger. The original business of Ybor City Shuttle Service, Inc. was intended to be the operation of a shuttle bus service initially operating in Tampa, Florida, and intended to be expanded throughout the Tampa Bay area and ultimately to other cities. Management of the company has subsequently determined not to pursue that line of business. During 1998 the company was involved in the vacation resort business formerly operated by International Resorts and Entertainment Group, Inc. On June 1, 1998, that business was sold to North American Resorts, Inc. because this company determined it to be unprofitable. Our principal executive offices are located at 2005 Tree Fork Lane, Ste - 101 Longwood, Florida 32750. Our telephone number at that address is (407) 304-4764. Risk Factors ------------ A purchase of our common stock is speculative and involves a high degree of risk. You should carefully consider the risks described below together with all of the other information included or incorporated by reference in this report before making an investment decision. The risks and uncertainties described below are not the only ones we face. If any of the following risks actually occur, our business, financial condition or operating results could be harmed. In such case, the trading price of our common stock could decline and you could lose all or part of your investment. We have experienced operating losses in prior years. ---------------------------------------------------- For the year ended December 31, 2005, our gross revenues increased to $10,160 from $1,693 resulting in a net loss of $7,699,142 as compared with a net loss of $10,643,419 in the prior year. We have limited marketing and sales capabilities ------------------------------------------------ Our future success depends, to a great extent, on our ability to successfully market our products to television syndications and TV stations. We currently have limited sales and marketing capabilities. We cannot assure you that any marketing and sales efforts undertaken by us will be successful or will result in any significant sales. Our industry is intensely competitive, which may adversely affect our operations -------------------------------------------------------------------------------- and financial results. ---------------------- All our markets are intensely competitive and numerous companies offer products that compete with our products. We anticipate that this competition will continue to increase. Many of our competitors have substantially greater capital resources, sales and marketing resources and experience. We cannot assure you that we will be able to effectively compete with our competitors in effecting our business expansion plans. 5 We depend on the continued services of our President. ----------------------------------------------------- Our future success depends, in large part, on the continuing efforts of our president, Joey DiFrancesco, our principal creative officer, who also developed our strategic plan and who is responsible for executing that plan. The loss of Mr. DiFrancesco would adversely affect our business. At this time we do not have any "key man" insurance on Mr. DiFrancesco. If we lose the services of Mr. DiFrancesco, our business, operations and financial condition would be materially adversely affected. Our stock price is volatile and could be further affected by events not within ------------------------------------------------------------------------------ our control. ------------ The trading price of our common stock has been volatile and will continue to be subject to: o volatility in the trading markets generally; o significant fluctuations in our quarterly operating results; and o announcements regarding our business or the business of our competitors. Statements or changes in opinions, ratings or earnings estimates made by brokerage firms or industry analysts relating to the markets in which we operate or expect to operate could also have an adverse effect on the market price of our common stock. In addition, the stock market as a whole has from time to time experienced extreme price and volume fluctuations which have particularly affected the market price for the securities of many small cap companies and which often have been unrelated to the operating performance of these companies. The liquidity of our stock is severely reduced because we are classified as a ----------------------------------------------------------------------------- "penny stock". -------------- The Securities and Exchange Commission (SEC) has adopted regulations which generally define a "penny stock" to be any non-Nasdaq equity security that has a market price (as therein defined) of less than $5.00 per share or with an exercise price of less than $5.00 per share. Our securities are subject to the existing rules on penny stocks and, accordingly, the market liquidity for our securities could be severely adversely affected. For any transaction involving a penny stock, unless exempt, the rules require substantial additional disclosure obligations and sales practice obligations on broker-dealers where the sale is to persons other than established customers and accredited investors (generally, those persons with assets in excess of $1,000,000 or annual income exceeding $200,000, or $300,000 together with their spouse). For transactions covered by these rules, the broker-dealer must make a special suitability determination for the purchase of the common stock and have received the purchaser's written consent to the transaction prior to the purchase. Additionally, for any transaction involving a penny stock, unless exempt, the rules require the delivery, prior to the transaction, of a risk disclosure document mandated by the SEC relating to the penny stock market. The broker-dealer also must disclose the commissions payable to both the broker-dealer and the registered 6 representative, current quotations for the securities and, if the broker-dealer is the sole market-maker, the broker-dealer must disclose this fact and the broker-dealer's presumed control over the market. Finally, monthly statements must be sent disclosing recent price information for the penny stock held in the account and information on the limited market in penny stocks. Consequently, the "penny stock" rules may restrict the ability of broker-dealers to sell our common stock and accordingly the market for our common stock. The Commission generally defines a penny stock to be any equity security that has a market price less than $5.00 per share, as well as the shares of companies that are considered blind pools or blank check companies, subject to certain exceptions. Rule 3a51-1 provides that any equity security is considered to be a penny stock unless that security is: registered and traded on a national securities exchange meeting specified criteria set by the Commission; authorized for quotation on one of the trading systems (not including the OTC Bulletin Board) of The NASDAQ Stock Market; issued by a registered investment company; excluded from the definition on the basis of price (at least $5.00 per share) or the issuer's net tangible assets; or exempted from the definition by the Commission. If the Company's shares are deemed to be a penny stock, trading in the shares will be subject to additional sales practice requirements on broker-dealers who sell penny stocks to persons other than established customers and accredited investors, generally persons with assets in excess of $1,000,000 or annual income exceeding $200,000, or $300,000 together with their spouse. In addition, several states restrict or prohibit trading in penny stocks and shares of blank check and blind pool companies. For transactions covered by the penny stock rules, broker-dealers must make a special suitability determination for the purchase of such securities and must have received the purchaser's written consent to the transaction prior to the purchase. Additionally, for any transaction involving a penny stock, unless exempt, the rules require the delivery, prior to the first transaction, of a risk disclosure document relating to the penny stock market. A broker-dealer also must disclose the commissions payable to both the broker-dealer and the registered representative, and current quotations for the securities. Finally, monthly statements must be sent to customers purchasing penny stocks disclosing recent price information for the penny stocks held in their account and information on the limited market in penny stocks. These rules may make it less likely that a broker-dealer will act as a market maker for our shares or agree to engage in transactions for the purchase and sale of our shares. Item 2. Description of Properties We presently lease a small, one-room office located at 2005 Tree Fork Lane, Longwood, Florida,for a monthly rental of $450. The lease is on a month-to-month basis. We believe these facilities will be adequate for our purposes because our primary business is conducted in rented professional recording studios and facilities of subcontractors used in the television, motion picture, and recording business. 7 Item 3. Legal Proceedings. On April 7, 2006, we received a demand from John G. Pierce, as Trustee, for a payment of $137,752.62 as a satisfaction of the principle amount plus interest on certain promissory notes, issued by the Company. The Company disputes this claim and intends to defend itself vigorously against it. Item 4. Submission Of Matters To A Vote Of Security Holders On March 1, 2005, the stockholders voted to amend Raven Moon's Certificate of Incorporation to increase the authorized common shares from 400 million to 20 billion shares. The additional shares will be made available to conduct a variety of corporate transactions, such as public offerings, private placements, employee and consultant compensation plans. The company is currently engaged in ongoing negotiations with several different syndication partners. On July 1, 2005, the stockholders voted to amend Raven Moon's Certificate of Incorporation to increasing the authorized number of the shares of Common Stock to 100,000,000. As a result of a 1:1000 reverse stock split, the existing total authorized shares did not cover the contractual obligations of the Company. Therefore, on August 8, 2005, the stockholders voted to amend Raven Moon's Certificate of Incorporation to increase the number of authorized shares of Common Stock of the Company to 5,000,000,000 shares. On October 25, 2005, the stockholders voted to amend Raven Moon's Certificate of Incorporation, increasing the number of authorized shares of Common Stock of the Company to 20,000,000,000 shares. The Company needs the additional shares of Common Stock to accommodate the conversions of outstanding preferred shares and the exercise of warrants. PART II Item 5. Market For Registrant's Common Equity And Related Stockholder Matters Our common stock began trading on the NASDAQ over-the-counter bulletin board under the symbol "RMOO" on December 1, 2000. The symbol was changed to "RVMO" in 2005. Historical Market Price Data for Common Stock of Raven Moon Entertainment, Inc. --------------------------------------------------------------------------- The following table sets forth the range of high and low bid prices for the common stock for the period beginning January 1, 2004 and ending December 31, 2005, as reported by NASDAQ. These over-the-counter market quotations reflect 8 inter-dealer prices, without retail mark-up, markdown or commission, and may not necessarily represent actual transactions. The prices do reflect the 1000-for-1 reverse-split. Common Stock High ($) Low ($) 1st Quarter 2005 $73.50 $ 3.00 2nd Quarter 2005 $52.50 $ 1.50 3rd Quarter 2005 $ 3.00 $ 0.03 4th Quarter 2005 $ .195 $ .0075 1st Quarter 2004 $ .110 $ .0215 2nd Quarter 2004 $ .049 $ .024 3rd Quarter 2004 $ .032 $ .017 4th Quarter 2004 $ .019 $ .003 Number of Shareholders and Total Outstanding Shares As of April 13, 2006, approximately 6,226,617,947 shares of our common stock were outstanding and, as far as we can determine, were held by approximately 573 holders of record. Dividends --------- We have not paid any cash dividends since our inception and do not anticipate paying cash dividends in the foreseeable future. We did pay a dividend of one share of restricted common stock for each outstanding share of common stock on September 1, 2003. Our common stock is traded in the over-the-counter market, and the shares are subject to the provisions of Section 15(g) and Rule 15g-9 of the Securities Exchange Act of 1934, commonly referred to as the "penny stock" rule. Section 15(g) sets forth certain requirements for transactions in penny stocks and Rule 15g9(d)(1) incorporates the definition of penny stock as that term is used in Rule 3a51-1 of the Exchange Act. As of March 25, 2005, the Company had 1,835,000 shares of preferred stock outstanding. Holders of Preferred Stock are entitled to one vote for each share of Common Stock into which the number of shares of Preferred Stock held of record would be convertible on the record date. Holders of Preferred Stock are entitled to vote on all matters submitted to a vote of stockholders and may not cumulate their votes for the election of directors. The shares Preferred Stock are not entitled to any dividend or distribution in preference to the Common Stock. Preferred Stock may be converted at any time by the holder of the shares of Preferred Stock, but conversion shall occur automatically at the discretion of the Company at any time after a registration statement to register the shares of the Common Stock underlying both the shares of Preferred Stock has been declared 9 effective by the United States Securities and Exchange Commission. Each share of Preferred Stock shall be entitled to convert into $10.00 in value of the Company's Common Stock. The value of the Common Stock for this purpose shall be determined based on the average of the closing trade price for the Company's common stock for each of the ten (10) consecutive trading days immediately prior to the date the holder or Company, as the case may be, gives notice of conversion of the shares of Preferred Stock, less a discount of twenty percent (20%). All shares of Preferred Stock issued and outstanding are fully paid and nonassessable, with no personal liability attaching to the ownership thereof. Item 6. Management's Discussion and Analysis of Financial Condition and Results Operations Cautionary statement identifying important factors that could cause our actual results to differ from those projected in forward looking statements. Pursuant to the "safe harbor" provisions of the Private Securities Litigation Reform Act of 1995, readers of this report are advised that this document contains both statements of historical facts and forward looking statements. Forward looking statements are subject to certain risks and uncertainties, which could cause actual results to differ materially from those indicated by the forward looking statements. Examples of forward looking statements include, but are not limited to (i) projections of revenues, income or loss, earnings per share, capital expenditures, dividends, capital structure and other financial items, (ii) statements of our plans and objectives with respect to business transactions and enhancement of shareholder value, (iii) statements of future economic performance, and (iv) statements of assumptions underlying other statements and statements about our business prospects. Results of Operations - ended December 31, 2004 and 2005 -------------------------------------------------------- Revenue ------- Revenues are generated from the sale of rights, licenses, and toys inspired by the children entertainment productions of Raven Moon Entertainment. Total revenues for the period ending December 31, 2004 and December 31, 2005 were $1,693 and $10,160, respectively. We were able to complete 18 episodes of "Gina D's Kids Club" for television syndication. If we're able to syndicate "Gina D's Kids Club" nationally and get airtime saturation five days a week on public television stations, the value for our future video, CD, DVD, and Toy Rights will increase. In addition, television syndication for "Gina D's Kids Club" will assist the company in the development of future projects for which it has the rights to including "Mr. Bicycle Man", "BO BO Blocks, and "Cuddle Bug Cousins". 10 Cost of Goods Sold ------------------ Cost of goods sold increased from $0.00 in 2004 to $534.00 in 2005 and consists primarily of the cost of manufacturing the "Cuddle Bug" toys for JB Toys, LLC., a wholly owned subsidiary of Raven Moon Entertainment. Expenses -------- Expenses for the period ended December 31, 2004 and December 31, 2005 were $10,640,012 and $7,699,142, respectively. Consulting fees and production expenses accounted for the majority of the expenses incurred by the Company. The Company only has two full time employees and relies heavily on outside consultants and production facilities to operate on a daily basis. Net Loss -------- During the period ended December 31, 2005, the company recorded a Net Loss of $7,614,400 as compared to a loss $10,643,419 for period ending December 31, 2004. The decrease is primarily attributable to the increase in sales and decrease in costs and expenses. Income Taxes ------------ As a result of the loss made during the period ended December 31, 2005 no provision was made for income taxes for the period. Assets and Liabilities ---------------------- At December 31, 2005 the Company has $76,279 in cash, total assets of $153,276; a increase from $41,841 from the same period ending December 31, 2004. Raven Moon increased its total liabilities from $933,404 in 2004 to $2,595,633 in 2005. These circumstances raise substantial doubt about the Company's ability to continue as a going concern. The Company's ability to continue as a going concern is dependent upon positive cash flows from operations and ongoing financial support. Adequate funds may not be available when needed or may not be available on terms favorable to the Company. If the Company is unable to secure sufficient funding, the Company may be unable to develop or enhance its products and services, take advantage of business opportunities, respond to competitive pressures or grow the Company's business in the manner that the Company's management believes is possible. This could have a negative effect on the Company's business, financial condition and results of operations. Without such support, the Company may not be able to meet its working capital requirements and accordingly the Company and its subsidiaries may need to reorganize and seek protection from its creditors. 11 Item 7. Financial Statements. REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Board of Directors and Stockholders of Raven Moon Entertainment, Inc.: We have audited the accompanying consolidated balance sheets of Raven Moon Entertainment, Inc. and subsidiaries (Raven Moon) as of December 31, 2005 and 2004, and the related consolidated statements of operations, deficit in stockholders' equity, and cash flows for the years then ended. These consolidated financial statements are the responsibility of the Raven Moon'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 of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, 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, such consolidated financial statements referred to above present fairly, in all material respects, the financial position of Raven Moon as of December 31, 2005 and 2004, and the results of its operations and its cash flows for the years then ended, 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. As discussed in Note 3 to the consolidated financial statements, the Company has suffered losses from operations and has a net capital deficiency that raises substantial doubt about its ability to continue as a going concern. Management plans in regard to these matters are described in Note 3. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty. /s/ RICHARD L. BROWN & COMPANY, P.A. --------------------------------------- RICHARD L. BROWN & COMPANY, P.A. Tampa, Florida April 4, 2006 12
RAVEN MOON ENTERTAINMENT, INC. Consolidated Balance Sheets December 31, 2005 and 2004 ASSETS 2005 2004 ------------ ------------ Cash $ 76,289 $ 18,641 Accounts receivable 880 -- Other receivables 500 23,200 Inventory 75,607 -- ------------ ------------ $ 153,276 $ 41,841 ============ ============ LIABILITIES AND DEFICIT IN STOCKHOLDERS' EQUITY LIABILITIES Accrued salaries and fees to officers (note 6) $ 1,718,823 $ 546,404 Accrued interest payable to third parties 36,000 30,000 Notes payable to third parties (note 5) 60,000 60,000 Loans from shareholders (note 5) 62,000 62,000 Advances from related parties 238,000 -- Advances from third parties 263,310 -- Loans from officers 20,000 37,500 Advance from Class B Members of LLC (J & B Toys, LLC) (note 5) 197,500 197,500 ------------ ------------ Total liabilities 2,595,633 933,404 COMMITMENTS AND CONTINGENCIES (note 7) DEFICIT IN STOCKHOLDERS' EQUITY Preferred stock, $.0001 par value, authorized 800,000,000 shares; issued and outstanding 9,934 in 2005 and 2004 1 1 Convertible series B preferred stock, $.0001 par value, authorized 2,000,000 shares; issued and outstanding 490,750 in 2005 and 421,500 in 2004 49 42 Common stock, $.0001 par value, authorized 15,000,000,000 shares; shares issued and outstanding 112,407,557 in 2005 and 25,836 in 2004 11,240 2 Additional paid-in capital 33,125,526 27,073,165 Accumulated deficit (35,579,173) (27,964,773) ------------ ------------ Total deficit in stockholders' equity (2,442,357) (891,563) ------------ ------------ $ 153,276 $ 41,841 ============ ============ See notes to Consolidated Financial Statements. 13
RAVEN MOON ENTERTAINMENT, INC. CONSOLIDATED STATEMENTS OF OPERATIONS For the years ended December 31, 2005 and 2004 2005 2004 ------------ ------------ REVENUES: Sales of plush toys $ 2,750 $ 1,693 Sale of advertising 7,410 -- ------------ ------------ 10,160 1,693 COST OF GOODS SOLD 534 -- ------------ ------------ Gross Profit 9,626 1,693 EXPENSES: Consulting fees 1,087,149 4,970,620 Interest expense 61,750 6,000 Option rights to intellectual properties -- 740,000 Production expense 4,134,494 4,513,316 General and administrative expense 2,415,749 410,076 ------------ ------------ Total costs and expenses 7,699,142 10,640,012 ------------ ------------ Net Loss before proportionate share of Clubhouse Video, Inc.'s loss and recovery of loan from Clubhouse Videos, Inc. (7,689,516) (10,638,319) Proportionate share of Clubhouse Videos, Inc.'s loss (see note 4) -- (5,100) Recovery of loan from Clubhouse Videos, Inc. 75,116 -- ------------ ------------ Net loss $ (7,614,400) $(10,643,419) ============ ============ Net loss per share before proportionate share of Clubhouse Videos, Inc. 's loss and recovery of loan from Clubhouse Videos, Inc. $ (0.76) $ (844.98) ============ ============ Proportionate share of Clubhouse Videos, Inc.'s loss per share $ -- $ (0.41) ============ ============ Recovery of loan to Clubhouse Videos, Inc. $ 0.01 $ -- ============ ============ Net loss per share $ (0.75) $ (845.39) ============ ============ See notes to Consolidated Financial Statements. 14
CONSOLIDATED STATEMENTS OF DEFICIT IN STOCKHOLDERS' EQUITY For the years ended December 31, 2005 and 2004 Preferred Stock ---------------------------- Preferred Stock Series B ---------------------------- ---------------------------- Shares Amount Shares Amount ------------ ------------ ------------ ------------ Balance December 31, 2003 119,895 $ 12 -- $ -- Preferred stock retired (109,961) (11) -- -- Private placement -- -- 86,500 9 Private placement - related party -- -- 15,000 1 Preferred stock granted to related party -- -- 320,000 32 Common stock options granted to related party -- -- -- -- Common stock options granted to senior consultants -- -- -- -- Exercise of options -- -- -- -- Exercise of options by related party -- -- -- -- Shares issued for accounts payable -- -- -- -- Shares issued to related party for expenses -- -- -- -- Shares issued to senior consultant for expenses -- -- -- -- Net loss for the year -- -- -- -- ------------ ------------ ------------ Balance December 31, 2004 9,934 1 421,500 42 Private placement -- -- 25,500 3 Private placement purchased by related party -- -- 18,500 2 Preferred stock converted to common stock -- -- (6,000) (1) Preferred stock converted to common stock by related party -- -- (43,250) (4) Preferred stock granted to elated party -- -- 75,000 7 Common stock options granted to senior consultants -- -- -- -- Common stock options granted to related party -- -- -- -- Common stock warrants granted -- -- -- -- Common stock warrants granted to related party -- -- -- -- Exercise of options -- -- -- -- Exercise of options by related party -- -- -- -- Exercise of warrants -- -- -- -- Exercise of warrants by related party -- -- -- -- Shares issued for expenses to related parties -- -- -- -- Shares issued to senior consultant for expenses -- -- -- -- Net loss for the period -- -- -- -- ------------ ------------ ------------ ------------ Balance December 31, 2005 9,934 $ 1 490,750 $ 49 ============ ============ ============ ============ 15
CONSOLIDATED STATEMENTS OF DEFICIT IN STOCKHOLDERS' EQUITY For the years ended December 31, 2005 and 2004 (Continued) Common Stock Additional --------------------------- paid-in Accumulated Shares Amount capital deficit Total ------------ ------------ ------------ ------------ ------------ Balance December 31, 2003 4,153 $ -- $ 16,908,103 $(17,321,354) $ (413,239) Preferred stock retired -- -- 11 -- -- Private placement -- -- 864,991 -- 865,000 Private placement - related party -- -- 149,999 -- 150,000 Preferred stock granted to related party -- -- 3,199,968 -- 3,200,000 Common stock options granted to related party -- -- 573,009 -- 573,009 Common stock options granted to senior consultants -- -- 872,494 -- 872,494 Exercise of options 2,032 -- 816,660 -- 816,660 Exercise of options by related party 1,282 -- 458,070 -- 458,070 Shares issued for accounts payable 121 -- 82,204 -- 82,204 Shares issued to related party for expenses 9,992 1 1,912,059 -- 1,912,060 Shares issued to senior consultant for expenses 8,256 1 1,235,597 -- 1,235,598 Net loss for the year -- -- -- (10,643,419) (10,643,419) ------------ ------------ ------------ ------------ ------------ Balance December 31, 2004 25,836 2 27,073,165 (27,964,773) (891,563) Private placement -- -- 254,997 -- 255,000 Private placement purchased by related party -- -- 174,998 -- 175,000 Preferred stock converted to common stock 1,408,539 141 (140) -- -- Preferred stock converted to common stock by related party 9,747,884 975 (971) -- -- Preferred stock granted to elated party -- -- 749,993 -- 750,000 Common stock options granted to senior consultants -- -- 99,202 -- 99,202 Common stock options granted to related party -- -- 15,000 -- 15,000 Common stock warrants granted -- -- 62,000 -- 62,000 Common stock warrants granted to related party -- -- 1,163,000 -- 1,163,000 Exercise of options 31,045 3 22,004 -- 22,007 Exercise of options by related party 8,889 1 3,333 -- 3,334 Exercise of warrants 494,786 49 90,964 -- 91,013 Exercise of warrants by related party 9,117,095 912 388,596 -- 389,508 Shares issued for expenses to related parties 48,503,441 4,850 1,679,360 -- 1,684,210 Shares issued to senior consultant for expenses 43,070,042 4,307 1,350,025 -- 1,354,332 Net loss for the period -- -- -- (7,614,400) (7,614,400) ------------ ------------ ------------ ------------ ------------ Balance December 31, 2005 112,407,557 $ 11,240 $ 33,125,526 $(35,579,173) $ (2,442,357) ============ ============ ============ ============ ============ See notes to Consolidated Financial Statements 15(Con't)
RAVEN MOON ENTERTAINMENT, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS For the years ended December 31, 2005 and 2004 2005 2004 ------------ ------------ CASH FLOWS FROM OPERATING ACTIVITIES Net loss $ (7,614,400) $(10,643,419) Recovery of loan from Clubhouse Videos, Inc. (75,116) -- Proportionate share of Club House Videos, Inc.'s loss -- 5,100 Adjustments to reconcile net loss to net cash used by operating activities: (Increase) in accounts receivables (880) -- Decrease in other receivables 22,700 -- (Increase) in inventory (75,607) -- (Decrease) in accounts payable to third parties -- (29,500) Increase in accrued salaries and wages and production fees to officers 1,372,419 294,708 (Increase) in accrued interest payable to officers and related parties 6,000 6,000 Common stock options granted to related party for expenses 15,000 573,009 Common stock options granted for expenses 99,202 872,494 Common stock warrants granted to related party for expenses 1,163,000 -- Common stock warrants granted for expenses 62,000 -- Preferred stock issued to related party for expenses 750,000 3,200,000 Common stock issued to related parties for expenses 1,684,210 1,912,060 Common stock issued to senior consultants for expenses 1,354,332 1,235,598 ------------ ------------ Net cash used by operations (1,237,140) (2,573,950) ------------ ------------ CASH FLOW TO INVESTMENT ACTIVITIES Decrease (increase) in investment in Club House Videos, Inc. 75,116 (5,100) ------------ ------------ Net cash provided (used) by investing activities 75,116 (5,100) ------------ ------------ CASH FLOWS FROM FINANCING ACTIVITIES Advances from Class B Membership Units -- 192,500 Proceeds from sale of convertible preferred stock 355,000 865,000 Proceeds from sale of convertible preferred stock related party 75,000 150,000 Proceeds from exercise of options 22,007 816,660 Proceeds from exercise of options by related parties 3,334 458,070 Proceeds from exercise of warrants 91,013 -- Proceeds from exercise of warrants by related parties 189,498 Proceeds from notes payable to officers and affiliated companies -- 37,500 Proceeds from advances from third parties 263,310 -- Proceeds from advances from related parties 238,000 -- Repayments of notes payable - officers and affiliated companies (17,500) -- ------------ ------------ Net cash provided by financing activities 1,219,662 2,519,730 ------------ ------------ Net increase (decrease) in cash 57,638 (59,320) Cash at beginning of period 18,641 77,961 ------------ ------------ Cash at end of period $ 76,279 $ 18,641 ============ ============ See notes to Consolidated Financial Statements. 16
RAVEN MOON ENTERTAINMENT, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS For the years ended December 31, 2005 and 2004 2005 2004 --------- --------- NON CASH FINANCING ACTIVITIES ------------------------------- Shares issued for accounts payable $ -- $ 82,204 ========= ========= Warrants exercised by reduction of accrued salaries and production fees to officers $ 200,000 $ -- ========= ========= See notes to Consolidated Financial Statements. 17 RAVEN MOON ENTERTAINMENT, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 2005 and 2004 Note 1 -- DESCRIPTION OF THE COMPANY Raven Moon Entertainment, Inc. and its wholly owned subsidiaries are primarily engaged in the production and development of Family Values television programs that convey good morals and positive attitudes to children. The market for these products is worldwide, although the Company devotes most of its efforts within the continental United States. Note 2 -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES PRINCIPLES OF CONSOLIDATION -- The accompanying consolidated financial statements include the accounts of Raven Moon Entertainment, Inc. and its wholly owned subsidiaries JB Toys, LLC, Raven Animation, Inc. and Raven Moon Sales, Inc. (the Company). JB Toys, LLC will cease to exist on December 5, 2012. Inter-company transactions and balances have been eliminated in consolidation. REVENUE RECOGNITION -- Revenues from distribution of plush toys and CD's are recognized upon receipt of payment or delivery of product, which does not vary significantly from the time the products are shipped. Revenue from the distribution of videos is recognized as earned under the criteria established by SOP 00-2. The Company's revenue cycle is generally one to three years, with the expectation that substantially all revenue will be recognized in the first two years of individual videos. In accordance with SOP 00-2, the Company considers revenue earned when all of the following have occurred: o The Company has a valid sale or licensing agreement in place. o The video is complete and in accordance with the agreement with the customer. o The video has been delivered or is deliverable. o The license period has begun. o The revenue is fixed or determinable and collection is reasonably assured. PRODUCTION COSTS -- Production costs includes costs to develop and produce video entertainment products. These costs were paid primarily to companies and individuals hired to perform a specific task. The Company out-sources these activities in order to reduce overhead costs. Production costs are amortized by the ratio of current year's revenue bear to management's estimated ultimate revenue. Because the Company cannot demonstrate through its experience the ultimate revenue from the video entertainment products, it has elected to expense all production costs. STOCK FOR COMPENSATION -- The Company accounts for the issuance of common or preferred stock for goods and services at the fair market value of the goods or services provided or the fair market value of the common or preferred stock issued, whichever is more reliably determined. 18 RAVEN MOON ENTERTAINMENT, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 2005 and 2004 Note 2 -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) UNCLASSIFIED BALANCE SHEET -- In accordance with the provisions of SOP 00-2, the Company has elected to present an unclassified balance sheet. INVENTORY -- Inventory consists of plush toys and CDs. The plush toys and CDs are stated at the lower of cost or market determined using the first-in-first method (FIFO). INTELLECTUAL PROPERTY -- Intellectual property is recorded at the lower of cost or net realizable value. The Company performs an impairment test of intellectual property quarterly. SFAS 142 requires the Company to compare the fair value of the intellectual property to its carrying amount to determine if there is potential impairment. If the carrying amount of the intellectual property exceeds its fair value, an impairment loss is recognized. Fair values for intellectual properties are determined based on discounted cash flows, market multiples or appraised values as appropriate. Because the Company cannot demonstrate through its experience the ultimate revenue from intellectual property it has elected to expense all costs associated with intellectual property. MANAGEMENT ESTIMATES -- The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect certain reported amounts and disclosures. Actual results could differ from those estimates. STOCK-BASED COMPENSATION -- The Company accounts for stock options issued to employees under Statement of Financial Accounting Standards 123, wherein such options are valued based upon the Black-Scholes option-pricing model. CASH EQUIVALENTS -- The Company considers all highly liquid investments with original maturities of three months or less to be cash equivalents. NET (LOSS) PER SHARE -- Primary earnings-per-share computations are based on the weighted average number of shares outstanding during the period. On October 19, 2004, the Board of Directors amended the Articles of Incorporation to give full voting rights to all preferred shareholders. The weighted-average number of shares outstanding was 10,148,627 and 12,590 for the years ended December 31, 2005 and 2004, respectively. INCOME TAXES -- The Company has incurred approximately $35,600,000 of net operating losses which may be carried forward and used to reduce taxable income in future years. Deferred tax assets created by the net operating losses are offset by an equal valuation allowance. RECLASSIFICATIONS -- Certain amounts reported in previous years have been reclassified to the 2005 financial statement presentation. 19 RAVEN MOON ENTERTAINMENT, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 2005 and 2004 CREDIT RISKS -- Financial instruments, which potentially subject the Company to concentrations of credit risk, consist of cash and cash equivalents. The Company maintains its cash in bank deposit accounts, which, at times, may exceed federally insured limits. It has not experienced any losses in such accounts. The Company believes that it is not exposed to any significant credit risk on cash and cash equivalents. STOCK SPLITS -- The Company adopted a 1000 to 1 reverse stock split on July 15, 2005 for common stock. The Company adopted a 5 to 1 forward spilt for common stock for the stockholders of record on December 30, 2005, with an effective date of January 30, 2006. The Company adopted a 75 to 1 reverse stock split effective February 17, 2006 for common stock. All applicable share and per-share data in these consolidated financial statements have been restated to give effect to these stock splits. RECENT ACCOUNTING PRONOUNCEMENTS -- In December 2004, the FASB issued SFAS No. 153, "Exchanges of Nonmonetary Assets", which eliminates the exception for nonmonetary exchanges of similar productive assets and replaces it with a general exception for exchanges of nonmonetary assets that do not have commercial substance. SFAS No. 153 will be effective for nonmonetary asset exchanges occurring in fiscal periods beginning after June 15, 2005. Adoption of SFAS No. 153 did not significantly affect Raven Moon's financial condition or results of operations. In March 2005, the FASB issued FASB Interpretation No. 47 ("FIN No. 47"),"Accounting for Conditional Asset Retirement Obligations." FIN No. 47 clarifies that an entity must record a liability for a "conditional" asset retirement obligation if the fair value of the obligation can be reasonably estimated. The provision is effective no later than the end of fiscal years ending after December 15, 2005. There is no current financial impact to Raven Moon as a result of FIN No. 47. In May 2005, the FASB issued SFAS No. 154, "Accounting Changes and Error Corrections." SFAS No. 154 establishes retrospective application as the required method for reporting a change in accounting principle in the absence of explicit transition requirements specific to the newly adopted accounting principle. SFAS No. 154 also provides guidance for determining whether retrospective application of a change in accounting principle is impracticable and for reporting a change when retrospective application is impracticable. SFAS No. 154 is effective for accounting changes and corrections of errors made in fiscal years beginning after December 15, 2005. Raven Moon does not expect the adoption of SFAS No. 154 to significantly affect it's financial condition or results of operations. In June 2005, the FASB ratified the consensus reached by the Task Force in EITF No. 05-6. The Task Force reached a consensus that leasehold improvements that are placed in service significantly after and not contemplated at or near the beginning of the lease term should be amortized over the shorter of the useful life of the assets or a term that includes required lease periods and renewals 20 RAVEN MOON ENTERTAINMENT, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 2005 and 2004 that are deemed to be reasonably assured at the date of the leasehold improvements are purchased. In addition, leasehold improvements acquired in a business combination should be amortized over the shorter of the useful lives of the assets or a term that includes required lease periods and renewals that are deemed to be reasonably assured at the date of acquisition. EITF No. 05-6 is effective for leasehold improvements (within the scope of this issue) that are purchased or acquired in the reporting period beginning after June 29, 2005. Adoption of EITF No. 05-6 did not affect Raven Moon's financial condition or results of operations. Note 3 -- BUSINESS AND OPERATIONS The Company is currently working to establish the following lines of business: Home Video and Television Productions Internet Retail Sales Music CDs Plush Toys These financial statements are prepared on a going concern basis that assumes that the Company will be able to realize assets and discharge liabilities in the normal course of business. Accordingly, it does not give effect to adjustments, if any, that would be necessary should the Company be unable to continue as a going concern and therefore be required to realize assets and liquidate its liabilities, contingent obligations and commitments in other than the normal course of business and the amounts which may be different from those shown in these financial statements. The ability to continue as a going concern is dependent on its ability to: Obtain additional debt and equity financing. Generate profitable operations in the future. The Company has initiated several actions to generate working capital and improve operating performances, including equity and debt financing and cost reduction measures. There can be no assurance that the Company will be able to successfully implement its plan, or if successfully implemented the Company will achieve its goals. Furthermore, if the Company is unable to raise additional funds it may be required to reduce its workforce, reduce compensation levels, reduce dependency on outside consultants, modify its growth and operating plans, and even be forced to terminate operations completely. 21 RAVEN MOON ENTERTAINMENT, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 2005 and 2004 Note 4 -- INVESTMENT IN CLUBHOUSE VIDEOS, INC. At December 31, 2003, the Company had purchased a total of 36.8 units of Raven Moon Home Video Products, LLC for $368,000. These purchases were converted into common stock of Clubhouse Video, Inc. (Clubhouse) as a result of the spin-off of the former wholly owned subsidiary. Also, the Company has loaned Clubhouse approximately $82,000 since 2003. The investment in Clubhouse and the loan have been written-off as the Company's proportionate share of Clubhouse 's loss. Clubhouse has ceased operations during 2005 and the investment has no value. Clubhouse had an advance from a third party, which Raven Moon has agreed to repay. The advance of $125,000 is included on the balance sheet in advances from third parties and was charged to production expense in the current year. On July 27, 2005, the Company entered into an agreement with Clubhouse Videos, Inc. in which Clubhouse Videos, Inc. transferred its inventory of "Cuddle Bugs" to the Company in exchange for loans of approximately $82,000 made by the Company to Clubhouse Videos, Inc. The inventory was recorded at the lower of cost or market determined using the first-in-first method (FIFO) and was recognized as a recovery of a loan to Clubhouse Videos, Inc. Note 5 -- DEBT Debt for the company consists of the following: Notes payable to third parties bear interest at 10% annually. These are demand notes, and are unsecured. Loans from shareholders are non-interest bearing, but the shareholders received additional shares of preferred stock and common stock in 2000 and are also entitled to gross revenue royalty fees of the gross revenue of the Company for ten years. The royalties range from .0125% to .5% of gross revenues. No royalties were earned in 2005 and 2004. There are two types of Class B units: 1) The cash investments for Class B members of LLC are non-interest bearing loans. The members are entitled to receive all distributions from gross profits of the LLC until the members have received an amount equal to their initial cash investment. Once the Class B members, who invested cash have been repaid, the Class B members are entitled to annually receive 85% of all gross profits of the LLC derived from the sale of products. The Company has received $275,000 of cash investments from Class B members and has repaid $77,500 as of December 31, 2005. 2) The members who exchange services or rights to intellectual property for Class B units are not entitled to receive any distributions from gross profits of the LLC until the members who invested cash have received an amount equal to their initial investment. Once the Class B members, who 22 RAVEN MOON ENTERTAINMENT, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 2005 and 2004 invested cash have been repaid, the Class B members are entitled to receive 85% of all gross profits of the LLC derived from the sale of product on an annual basis. As of December 31, 2005, the Company has exchanged 100 units to WEE-OOO, LTD, a related party, for a ten year extension of the option agreement for the rights to Gina D's, 50 units to Mike Gibilisco for the rights to the BoBo Blocks, 200 units to Bernadette DiFrancesco, a related party, for the rights to the Cuddle Bugs, 7.50 units to members of the Board of Directors for services provided in 2002, 2003 and 2004, and 15 units to Joseph and Bernadette DiFrancesco for a 10 year license for Mr. Bicycle Man. The Class B members have no voting rights. The cash advances from Class B members who contributed cash have been recorded as a liability because all advances must be repaid prior to any distributions to the parent company. Note 6 -- RELATED PARTY TRANSACTIONS The Company is affiliated through ownership of shares of the Company's common stock by the following companies: J. & B. DiFrancesco, Inc. WEE-OOO, LTD. Beyond the Kingdom, Inc. T.V. Toys, Inc. 2221 Music Clubhouse Videos, Inc. The Company has incurred aggregate consulting, production, marketing and management fees with officers, directors and other related parties for the years ended December 31, 2005 and 2004: 2005 2004 ---- ---- $3,587,425 $7,614,947 ========== ========== The Company paid Gina Mouery, who is the hostess for the "Gina D's Kids Club Show" and the daughter of Joseph DiFrancesco, President and Chief Executive Officer of the Company, $26,000 and $24,000 as an advance on future royalties for the years ended December 31, 2005 and 2004, respectively. The advance on future royalties - related party was charged to production expense because the Company cannot demonstrate through its experience the ultimate revenue from the video entertainment products. The Company agreed to pay or reimburse Ms. Mouery $752 a month for a leased car. The Company paid approximately $9,000 for the years ended December 31, 2005 and 2004, respectively. This reimbursement is included in the general and administrative expenses. 23 RAVEN MOON ENTERTAINMENT, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 2005 and 2004 On May 1, 2004, Gina Mouery entered into a ten-month consulting agreement with JB Toys, LLC and Raven Animation, Inc. Ms. Mouery is to assist the Company as a Co-executive Producers and Promotional Celebrity Talent for promotion and production of the Company's products and services. Ms. Mouery will be paid $1,000,000 of registered shares of common stock in ten equal installments priced at a 50% discount from the closing bid price for the preceding ten days. On February 4, 2005, the Board of Directors amended the agreement with Gina Mouery. The Board granted a three-month extension and shall pay Gina Mouery $80,000 for the three-month period. The payments were made with registered shares of common stock at a 33% discount from the closing bid price. During the year ended December 31, 2005, Gina Mouery was not granted options. During the year ended December 31, 2004, Gina Mouery was granted options for 1,282 shares of common stock for talent fees. The fair value of these options at December 31, 2004, was $573,008 and was charged to production expense because the Company cannot demonstrate through its experience the ultimate revenue from the video entertainment products. During the year ended December 31, 2004, Gina Mouery exercised 1,282 options for $458,070. During the year ended December 31, 2005, Gina Mouery was granted 34,010,371 shares of common stock for talent fees. The fair value of these shares of common stock was $1,035,371. During the year ended December 31, 2004, Gina Mouery was granted 5,691 shares of common stock. The fair value of these shares of common stock was $1,022,000. The fair value of the common stock was charged to production expense because the Company cannot demonstrate through its experience the ultimate revenue from the video entertainment products. On October 21, 2005 Gina Mouery converted 5,000 shares of the convertible series B preferred stock into 500,000 shares of common stock. On September 13, 2005 Gina Mouery granted warrant for 66,667 shares of common stock for interest expense. The fair value of the warrants was $8,500. On April 11, 2001, the Company entered into an agreement with Joseph and Bernadette DiFrancesco in exchange for a one year exclusive option to the program, certain cartoon characters and music publishing rights related to songs written and used in "Gina D's Kids Club Show", ("Gina D's") which were created by Joseph and Bernadette DiFrancesco, in exchange for 80 shares of common stock. The Company was not able to meet its requirements under the option agreement, and the option expired April 11, 2002. On May 17, 2002, the Company made an addendum to the expired Option Agreement, in exchange for $100,000 note payable to Joseph and Bernadette DiFrancesco and a non-refundable grant of 53 shares of common stock, valued at $390,000, and provided that the terms, conditions and payment due in the Agreement dated April 11, 2001, are met and fulfilled by April 11, 2003, the option agreement granted to the Company on April 11, 2001, shall be in force for a period of twenty (20) years. Because the Company cannot demonstrate through its experience the ultimate revenue from the video entertainment products it has elected to charge option rights to intellectual properties $490,000 during 2002. 24 RAVEN MOON ENTERTAINMENT, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 2005 and 2004 On March 4, 2004, the Board of Directors approved extending the option agreement which expires April 11, 2004, with Joseph and Bernadette DiFrancesco, for rights to " Gina D's". The extension is for a ten-year period without restrictions or requirements, except for bankruptcy, insolvency or takeover of the Company by a person or entity not approved by the CEO. As part of extending the option agreement on April 10, 2004, Joseph and Bernadette DiFrancesco received 100 units of JB Toys, LLC. These units were issued to WEE-OOO, LTD, a limited partnership owned by Joseph and Bernadette DiFrancesco. (See Note 5.) Also, Joseph and Bernadette DiFrancesco received 667 restricted shares of Raven Moon Entertainment, Inc. common stock. Joseph and Bernadette DiFrancesco shall also receive a fee of $750,000 per year for ten years beginning in January 2004, or 10% of all gross revenues from worldwide licensing and merchandising revenues received by Raven Moon Entertainment, Inc. or JB Toys, LLC, whichever is greater. The shares of stock were valued at $195,000, and charged to intellectual property expense. On June 1, 2004, the agreement with Joseph and Bernadette DiFrancesco for the rights to "Gina D's" was further amended. If the Company grants a license to any third party for "Gina D's", the Company will pay Joseph and Bernadette DiFrancesco 50% of any revenues derived from the license. On June 1, 2004, the Company, through its subsidiary JB Toys, LLC, agreed to pay Joseph and Bernadette DiFrancesco $100,000 and 15 units of Class B memberships of JB Toys for the rights to Mr. Bicycle Man. (See Note 5.) The $100,000 was charged to option rights to intellectual property for the year ended December 31, 2004, because the Company cannot demonstrate through its experience the ultimate revenue from the video entertainment products. In addition, Joseph and Bernadette DiFrancesco are to receive 15% of the revenues of JB Toys, LLC for a ten-year period. Also, if JB Toys grants a license to any third party for Mr. Bicycle Man, the Company will pay Joseph and Bernadette DiFrancesco 50% of any revenues derived from the license. On June 1, 2004, the Company, through its subsidiary JB Toys, LLC, agreed to pay Joseph and Bernadette DiFrancesco $250,000 and 667 shares of common restricted stock of the Company for the rights to "The Search for the Amazon Queen." The fair value of the common stock was $195,000, which was charged to option rights to intellectual property for the year ended December 31, 2004, because the Company cannot demonstrate through its experience the ultimate revenue from the video entertainment products. In addition, Joseph and Bernadette DiFrancesco are to receive $100,000 per year beginning year two through year ten plus 25% of gross revenue derived by JB Toys for "The Search for the Amazon Queen". Also, if JB Toys grants a license to any third party for "The Search for the Amazon Queen," the Company will pay Joseph and Bernadette DiFrancesco 50% of any revenues derived from the license. Joseph and Bernadette DiFrancesco were granted 4,840,637 shares of common stock during the year ended December 31, 2005. The fair value of these shares was $96,609. During the year ended December 31, 2004, Joseph and Bernadette DiFrancesco were granted 2,751 shares of common stock. The fair value of these shares was $617,602. The fair value was charged to consulting fees because the Company cannot demonstrate through its experience the ultimate revenue from the video entertainment products. Joseph and Bernadette DiFrancesco were granted 75,000 and 320,000 shares of convertible preferred stock during the years ended December 31, 2005 and 2004,respectively. The stock was granted to TV Toys, Inc. The fair value of 25 RAVEN MOON ENTERTAINMENT, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 2005 and 2004 these shares was $750,000 and $3,200,000 and the fair value was charged to consulting fees because the Company cannot demonstrate through its experience the ultimate revenue from the video entertainment products. During the year ended December 31, 2005, TV Toys, Inc converted 43,250 shares of convertible preferred stock and received 9,747,884 shares of restricted common stock. During the year ended December 31, 2005, Joseph and Bernadette DiFrancesco were granted 8,998,428 warrants for common stock. The fair value of these warrants was $1,147,300 and was charged to production expense. On April 14, 2005, the Company, through its subsidiary JB Toys, LLC, agreed to pay Bernadette DiFrancesco $100,000 per year for ten years and 3.75 units of Class B memberships of JB Toys, LLC for the rights to the "Dino Bugs." In addition Bernadette DiFrancesco is to receive 10% of all gross revenue derived by JB Toys, LLC for the "Dino Bugs." On May 1, 2004, David Mouery entered into a twelve month consulting agreement with JB Toys, LLC and Raven Animation, Inc. Mr. Mouery is to assist the Company as entertainment attorney for legal matters and contracts for the Company's products and services. Mr. Mouery will be paid $120,000 of registered shares in twelve equal installments of common stock priced at a 50% discount from the closing bid price for the preceding ten days. During the year ended December 31, 2005, David Mouery was granted 8,889 options valued at $15,000. During the year ended December 31, 2004 David Mouery was not granted any options. During the year ended December 31, 2005, David Mouery was granted 5,821,577 shares of common stock with a fair value of $188,932. During the year ended December 31, 2004 David Mouery was granted 311 shares of common stock with a fair value of $73,810. The fair value of the common stock was charged to consulting expense because the Company cannot demonstrate through its experience the ultimate revenue from the video entertainment products. On August 9, 2005, the Company entered into an agreement with David Mouery (the son in law of Joseph DiFrancesco, Chairman of the Board) to provide legal services for three years. He is to be paid a retainer of $10,000 per month, if payment is made in S-8 stock it will be at a 25% discount of the bid price on the day the stock is issued. 26 RAVEN MOON ENTERTAINMENT, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 2005 and 2004 The directors were granted the following common stock options for a ten-year term: Date Common Stock Options Exercise Price per Share November 29, 2002 133 $ 1,950.00 These options were valued at $170,000 and charged to general and administrative expense. The outside Board of Directors were granted 275,300 and 973 shares of common stock during the years ended December 31, 2005 and 2004, respectively. The fair value of these shares was $28,425 and $173,290 for the year ended December 31, 2005 and 2004, respectively. Also, the outside Board of Directors were paid $94,050 and $90,500 for directors fees for the years ended December 31, 2005 and 2004, respectively. The fair value of the common stock granted and director fees paid were charged to consulting fees for the year ended December 31, 2005 and 2004. During the years ended December 31, 2005 and 2004, loans from officers, directors and related parties are summarized as follows: 2005 2004 ---- ---- Balance at beginning of year $ 37,500 $ -- Increase in loans 20,000 37,500 Payments on loans (37,500) -- --------- --------- Balance at end of period $ 20,000 $ 37,500 ========= ========= On June 1, 2004, the Company and the four songwriters (two of the songwriters are Joseph and Bernadette DiFrancesco) with 2221 Music amended their agreement. The amendment calls for each songwriter to receive 167 shares of common stock by September 1, 2004, and to receive $2,500 per month from September 1, 2004 through October 31, 2005. During the year ended December 31, 2005, Raven Moon paid $130,000 to 2221 Music. The payments were charged to general and administrative expenses because the Company cannot demonstrate through its experience the ultimate revenue from the video entertainment products. On August 12, 2004, the Board of Directors granted Joseph and Bernadette DiFrancesco, the officers of the Company, a bonus of 667 shares of common restricted non-diluting stock to be delivered on September 1, 2004, and then each year on the first day of September for the next two years as an extension of their employment agreement. These shares were valued at $130,000 and were charged to consulting fees for the years ended December 31, 2004. Following is a schedule that summarizes the activity in accruals and payments related to Joseph and Bernadette DiFrancesco, the officers of the Company, for the year ended December 31, 2005 and 2004: 27 RAVEN MOON ENTERTAINMENT, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 2005 and 2004 2005 2004 ---- ---- Beginning balance $ 546,404 $ 251,697 Accrued for administrative salary 734,552 612,128 Accrued production fee 850,000 1,295,000 Payments to Officers (212,133) (1,237,420) Exercise of warrants (200,000) -- Refund of fees collected by officers -- 375,000 Forgiveness of accruals -- (750,000) ---------- ---------- Ending balance $1,718,823 $ 546,604 ========== ========== Note 7 -- COMMITMENTS AND CONTINGENCIES The Company has entered into an employment contract with the officers, Joseph and Bernadette DiFrancesco. On October 19, 2004, the Board of Directors extended Joseph and Bernadette DiFrancesco's contract an additional seven years after the current contract expires in exchange for a signing bonus of non-diluting preferred shares. The preferred shares shall be convertible to common stock at a 20% discount to market based upon the previous 10 day average and will carry non-diluting rights equivalent to 40% of the common shares issued and outstanding as long as the shares are held by Joseph and Bernadette DiFrancesco or their assigns. Under the terms of the agreement, the Company is obligated to make the following annual payments through November 15, 2012: 2006 $ 881,462 2007 $1,057,775 2008 $1,269,306 2009 $1,523,167 2010 $1,827,800 2011 $2,193,360 2012 $2,632,032 In addition, the officers are to receive a "Founders" royalty of 10% for any entertainment revenue received by the Company for any entertainment project developed and or produced by the Company during the term of this agreement. This royalty will be paid between November 16th and December 31st in perpetuity. The Company has entered into various month-to-month verbal agreements with unrelated third parties to provide production, marketing and administrative services. Payments are made based on invoices rendered for specific services provided. On May 1, 2004, the Company entered into two consulting agreements. These agreements require the individuals to provide executive assistants advice and production services to the Company for a ten-month period. The individuals are to be paid $500,000 each. The payments will be made with registered trading shares of common stock issued in ten equal installments at a 50% discount from the closing bid price for the preceding ten days, commencing on May 1, 2004, and every month thereafter for nine months. On October 4, 2004, the Board of 28 RAVEN MOON ENTERTAINMENT, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 2005 and 2004 Directors amended these agreements increasing the compensation for November, December 2004, and January 2005 to $100,000 per month for each consulting agreement. On February 4, 2005, the Board of Directors amended these consulting agreements. The Company granted a three month extension and shall pay the consultants $100,000 each for the three-month period. The payment will be made with shares of registered common stock at a 33% discount from the closing bid price. On February 4, 2005, the Board of Directors approved the following: o Three-month consulting agreement. This agreement requires the individual to provide executive assistants advice to the Company for three months. The individual is to be paid $189,000 for the three-month period. The payments will be registered common shares issued in three equal installments of common stock at a 33% discount from the closing bid price for the day prior to issuing the shares. o Three-month consulting agreement. This agreement requires Big Apple Consulting U.S.A., Inc. (Big Apple) to market and promote the Company to brokers and other investors. Big Apple is to be paid $120,000 for the three-month period. The payments will be registered common shares issued in three equal installments of common stock at a 33% discount from the closing bid price for the day prior to issuing the shares. On August 12, 2004, the Board of Directors approved a new consultant compensation plan for 90,000 registered shares of common stock for key consultants currently under contract and new consultants that may be hired in the future. The Company has amended the consultant compensation plan and has issued the following common stock under the terms of this plan: Date Shares of Common Stock August 20, 2004 1,333 September 9, 2004 1,333 October 15, 2004 2,000 November 15, 2004 2,200 December 10, 2004 3,267 January 14, 2005 6,333 February 7, 2005 13,066 March 4, 2005 19,133 March 28, 2005 19,133 April 11, 2005 91,710 May 31, 2005 206,120 August 11, 2005 833,333 September 16, 2005 800,000 September 23, 2005 5,333,333 October 28, 2005 13,333,333 November 18, 2005 26,666,667 December 15, 2005 26,666,667 December 30, 2005 53,333,333 January 13, 2006 53,333,333 January 27, 2006 53,333,333 February 6, 2006 42,666,667 February 22, 2006 5,333,333 March 8, 2006 600,000,000 March 20, 2006 800,000,000 29 RAVEN MOON ENTERTAINMENT, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 2005 and 2004 Note 8 -- STOCK OPTION PLAN The Company established a stock option plan for its executives, consultants, key employees, directors and its affiliates. (The "2001 Stock Option Plan".) The 2001 Stock Option Plan allows for incentive stock options to be granted to future participants at a price not less than 100% of the market value per share on the date of the grant. No options have been granted to employees under this plan. Non-statutory options are granted at prices and terms determined by the board of directors. The following is a summary of options, granted, exercised, and outstanding: Weighted Average Shares Exercise Price ------ -------------- Outstanding at December 31, 2003 133 $1,875.00 Granted 3,314 $ 436.50 Exercised 3,314 $ 382.50 ----- Outstanding at December 31, 2004 133 $1,875.00 Granted 40,572 $ 18.00 Exercised 39,934 $ 18.00 ------ Outstanding at December 31, 2005 771 $ 338.34 === 30 RAVEN MOON ENTERTAINMENT, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 2005 and 2004 The exercise price and the market value for common stock options granted in 2005 and 2004 is as follows: Options granted Exercise Price Fair Market Value --------------- -------------- ----------------- 2005 572 $ 18.00 $ 33.00 40,000 $ .38 $ 3.00 2004 492 1/2 of previous 10 days average price $ 600.00 832 1/2 of previous 10 days average price $ 750.00 1,326 1/2 of previous 10 days average price $ 900.00 536 1/2 of previous 10 days average price $1,050.00 127 1/2 of previous 10 days average price $1,200.00 The weighted average fair value of options granted during 2005 and 2004 is $18.00 and $436.50, respectively. The weighted-average remaining life of options granted is 6.92 and 7.92 years at December 31, 2005 and 2004, respectively. The fair value of these options was estimated at the date of grant using a Black-Scholes option pricing model with the following weighted average assumptions for 2005 and 2004: Risk free interest rate of 3.0%, a dividend yield of zero and a volatility factor of .50, respectively. NOTE 9 -- PRIVATE PLACEMENT OFFERING The Company has plans to raise $5,000,000 in a private placement offering to be used for working capital. The Company is offering units that consist of one share convertible Series B Preferred Stock and a warrant to purchase one-tenth of a share of common stock at a price of $10.00 per unit. The minimum purchase is $10,000. The conversion right may be exercised at any time by the holder of the shares, but shall occur automatically at the Company's discretion at any time after a registration statement to register the shares of common stock underlying both the preferred share and the warrant. Each preferred share shall convert to $10.00 in value of common stock. The value of the common stock will be based upon the average closing price of the Company's common stock for each of the ten consecutive trading days prior to the date of conversion, less a 20% discount. The preferred shares have a preference over common stock in any liquidation of the Company. The preferred shares are not entitled to any dividend or distribution in preference to common stock. The warrant, which will permit the holder to purchase one-tenth of a share of common stock at $.10 expired May 31, 2005. Also, the warrants will be subject to redemption at the Company's option for $.05 per warrant provided the closing the notice. As of December 31, 2005, the Company has sold $2,204,000 of the private placement offerings. Note 10 - WARRANTS On August 12, 2005, the Board of Directors approved granting each shareholder of record as of August 31, 2005, a warrant entitling the holder to purchase one share of common stock for $.02. The warrant per share is exercisable for a one-year period from the date of issue. On October 31, 2005 the Board of Directors reduced the exercise price to $.0015 per share. 31
RAVEN MOON ENTERTAINMENT, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 2005 and 2004 Weighted Average Shares Exercise Price Outstanding At December 31, 2003 0 $ .00 Granted 600 $1,500.00 Exercised 0 $ .00 --------- Outstanding at December 31, 2004 600 $1,500.00 Granted 9,612,034 $ .05 Expired 753 $1,500.00 Exercised 9,611,881 $ .02 --------- Outstanding at December 31, 2005 0 $ .00 ========= The weighted average fair value of options granted during 2005 and 2004 is $.05 and $1,500.00, respectively. The weighted-average remaining life of options granted is .00 and .42 years at December 31, 2005 and 2004, respectively. The fair value of these options was estimated at the date of grant using a Black-Scholes option pricing model with the following weighted average assumptions for 2005 and 2004: Risk free interest rate of 3.0%, a dividend yield of zero and a volatility factor of .50, respectively. Note 11 -SUBSEQUENT EVENT On January 6, 2006 the Board of Directors approved a 75 to 1 common stock warrant to be granted to every shareholder of record on February 10, 2006. The warrant is exercisable at a 25% discount of the closing bid price on the day the warrants are exercised. The period for exercising warrants begins February 18, 2006 and expires on April 18, 2006. Note 12 - Quarterly Financial Results (unaudited): Quarterly financial results for the year ended December 31, 2005 as originally reported and as restated are as follows: Three months ended ---------------------------------------- March 31, June 30, September 30, December 31, 2005 2005 2005 2005 ----------- ----------- ----------- ----------- Net revenues $ -- $ 653 $ 1,684 $ -- =========== =========== =========== =========== Net loss, originally reported $(1,238,949) $(2,512,515) $(1,129,373) $(7,614,400) =========== Adjustment for: Stock-based compensation -- 588,504 (213,509) -- ----------- ----------- ----------- ----------- Net loss, as restated $(1,238,949) (1,924011) $(1,342,882) $(7,614,400) =========== =========== =========== =========== Net loss per share, originally reported: $ (.00) $ (.97) $ (.01) Adjustment for: Stock-based compensation (.00) .23 (.00) ----------- ----------- ----------- Net loss per share, as restated $ (.00) $ (.74) $ (.01) =========== =========== =========== The unaudited quarterly financial information in 2005, as originally reported, has been restated to change the valuation of stock-based compensation. Stock-based compensation is measured at the fair value of the securities issued or the fair market value of the goods or services provided. 32
Following is a schedule of common stock issued since December 31, 2005: Common shares issued for conversion of preferred stock 350,558,821 Common stock issued to David Mouery 118,051,283 Common stock issued to Gina Mouery 1,122,917,953 Common stock issued for expenses 1,380,533,341 Common stock issued to Joseph DiFrancesco 117,125,496 Common stock issued for exercise of warrants 333,762,926 Item 8. Changes in and Disagreements on Accounting and Financial Disclosure. None. PART III Item 9. Directors, Executive Officers, Promoters and Control Persons; Compliance with Section 16(a) of the Exchange Act. Set forth below are the names and certain information regarding the individuals elected as directors of the Company. Name Age Positions Held ---- --- -------------- Joseph DiFrancesco 63 President and a Director Bernadette DiFrancesco 61 Vice President, Secretary and a Director Lawrence C. Oakley 80 Director Janice K. Battenberg 59 Director Robert J. McCarthy 51 Director The directors of the Company are elected annually by the shareholders for a term of one year, or until their successors are elected and qualified. The Officers are appointed by the Board of Directors at the annual meeting of directors immediately following each annual meeting of shareholders of the Company and serve at the pleasure of the Board of Directors. Background of Directors and Executive Officers ---------------------------------------------- Joey DiFrancesco has served as a director and the President of the Company since November 1999. Mr. DiFrancesco has been a producer and director of children's television programs for more than 20 years. Prior to that, he was employed in 33 the music publishing and record production business in New York City with Laurie Records, RCA, Columbia/Sony and MCA. From 1994 to November 1997, Mr. DiFrancesco served as the president and a director of St. Anthony's Entertainment, Inc., an entertainment company he founded. From January 1997 to January 1999, Mr. DiFrancesco served as president and a director of International Resorts and Entertainment, Inc., a Florida corporation in the vacation club business. This company was merged into Raven Moon in December 1998. Mr. DiFrancesco has been self-employed in the fields of television, audio and video programming for more than the past ten years. From November 1999 to date, Mr. DiFrancesco has served as President of Raven Moon Entertainment, Inc., a Florida corporation in the entertainment industry. Mr. DiFrancesco also serves as director of this company. Bernadette DiFrancesco has served as Vice President and a director of the Company since November of 1999. Mrs. DiFrancesco has been self-employed for more than 20 years during which time she and Mr. DiFrancesco have produced television programs, developed the "Praise-R-cise" alternative to aerobic dancing, and produced 26 half hour episodes of "Curly's Kids" with former Harlem Globetrotter star Curly Neil, among other ventures. She has been actively involved in development of all of our present intellectual properties above. From January 1994 to January 1997, Mrs. DiFrancesco served as vice president of St. Anthony's Entertainment, Inc., a Florida corporation in the entertainment business. From January 1997 to January 1999, Mrs. DiFrancesco served as vice president of International Resorts and Entertainment, Inc., a vacation club company that merged into Raven Moon Entertainment, Inc. in December 1998. Robert J. McCarthy is the President and Chief Executive Officer of Children's Rights Foundation, Inc., a non-profit, tax-exempt charity he founded in 1990, providing services in the field of child abuse prevention. From 1988 to 1991, Mr. McCarthy served as Executive Director of the Ursula Sunshine Child Abuse Prevention Organization. Between 1988 and 1993, Mr. McCarthy worked in commercial sales with NASCO, Inc. where he was consistently ranked among the top performers. Mr. McCarthy holds a Bachelor of Science degree form Springfield College, MA. In 1997, Mr. McCarthy was ordained a priest in the Order of Melchizedek. Larry Oakley a featured speaker at numerous international investment conferences, created www.WallStreetCorner.com in 1998 with his wife Rosanne as the new editorial venue for his Conservative Speculator newsletter. Investors in 65 countries now regularly read Conservative Speculator, his editorial columns, & the Special Situation profiles. From 1984 to 1998 Mr. Oakley served as CEO of Guidera Communication Corp., a broker relations firm. He is a member of Raven Moon's Board of Advisors and his knowledge in accounting qualifies him according to Sarbane-Oxley as a candidate for the position of Chairman of the Finance Committee. Mr. Oakley holds a degree in Mechanical Engineering from George Washington University and management and accounting degree from College of the City of New York. Janice K. Battenberg, Ed.D. is an Educational Psychologist and Business and Educational Consultant. Dr. Battenberg has a full range of experiences within the public and private corporate and educational industries. A few of her 34 activities include: Executive Director of a not-for-profit private school (Academy Plus), fifteen years as manager of the Learning Support Center for St. Vincent Hospital and Stress Center, private practice, past university instructor, creator of touch sensitive and audible computer software for preschool through adults, and recipient of the Sagamore of the Wabash (Indiana's highest honor awarded by Indiana Governors). From 1968 to 1981, Dr. Battenberg held several teaching, administrative and consulting positions within the Indiana Public School System. From 1982 to present, Dr. Battenberg served in several senior management positions with a number of entities active in the field of education, learning and development. She has been on the Board of Advisors of Raven Moon Entertainment, Inc. for the past three years and has published a report on how the "Gina D's Kids Club" television programs meet FCC requirements. At the request of the Executive Producers she also has been instrumental this past year in reviewing and evaluating all new scripts prior to production so that they meet educational requirements and guidelines mandated by the FCC for children's programming. She has also broken ground with educators in China to have the "Gina D's Kids Club" videos and DVD's distributed to schools and other outlets and is planning a trip to meet with representatives in October 2004. Dr. Battenberg holds Bachelor degree in Psychology and Master Degree in Education from Butler University and doctorate in Special Education and Educational Psychology from Ball State University. Meetings and Committees of the Board The Board of Directors met during the 2005 fiscal year, and took action by written consent numerous times. The Board of Directors has an audit committee consisting of Ms. Battenberg and Messrs Oakley (Chairman) and McCarthy. Compensation of Directors Ms. Battenberg and Messrs. Oakley and McCarthyreceive, each, $2,080. per month for their services as directors. Our policy is to reimburse non-employee directors for expenses actually incurred in connection with attending meetings of our board of directors. Directors and executive officers are also eligible for stock and option grants under our stock option plans as determined by our board of directors. Each directors received 150,000 shares of stock in September 2003 in exchange for canceling options and warrants. Stock was value at $53,625 each. Section 16(a) Beneficial Ownership Reporting Compliance Pursuant to Section 16(a) of the Securities Exchange Act of 1934, our directors and officers, and persons who own more than ten percent of the Company's Common Stock, are required to file with the Securities and Exchange Commission initial reports of ownership and reports of changes in ownership of common stock and other equity securities of the Company. Officers, directors and greater than ten-percent shareholders are required by regulation to furnish us with copies of all Section 16(a) reports they file. To our knowledge, based 35
solely on a review of the copies of such reports furnished to the Company and written representations that no other reports were required during the fiscal year ended December 31, 2003, except as set forth below, directors, officers and greater than ten percent beneficial owners complied with all applicable Section 16(a) filing requirements. Each of the directors filed their Form 4's during the year 2005; however, these forms were not timely filed. None of the directors timely filed Form 5 for the year 2005. Item 10. Executive Compensation. The following table sets forth the annual compensation of persons serving as executive officers of the Company. Name and Other Compensation Principal Position Age Year Salary Paid Joseph DiFrancesco 63 President 2003 382,579 $58,692 2004 459,095 2005 550,914 Bernadette DiFrancesco Vice President 61 2003 127,526 58,691 2004 153,032 2005 183,638 The Company leases two automobiles for use by Joey and Bernadette DiFrancesco. Each lease was recently renewed for a three-year term. One lease is for $832 per month, and the other is for $952 per month. Option Grants Individual Grants ----------------------------------------------------------------------------------------------------------- Name Number of Shares %of Total Options Underlying Granted to Employees Options * in Fiscal Year Exercise Price Expiration Date Joey DiFrancesco 400,000 20% 12.5 (cent) Nov 2012 Bernadette DiFrancesco 400,000 20% 12.5 (cent) Nov 2012 Stephen Chrystie 400,000 0 12.5 (cent) Nov 2012 Anthony Arcari 400,000 0 12.5 (cent) Nov 2012 Norman Weinstock 400,000 0 12.5 (cent) Nov 2012 ----------------------------------------------------------------------------------------------------------- Split - adjusted 36
In May 2004, each director received $25,000 per year for each of the last 3 years ($75,000 total) for service on the Board during that period, payable in the form of cash and units of JB Toys, LLC. Options Exercised --------------------------------------------------------------------------------------------------------------- Number of Shares * Value of Unexercised Shares Underlying Unexercised In-The-Money Options at Acquired Value Options at Fiscal Year End Fiscal Year End (1) Name on Exercise Realized Exercisable/Unexercisable Exercisable/Unexercisable Joey DiFrancesco 0 0 400,000 0 Bernadette 0 0 400,000 0 DiFrancesco Stephen Chrystie 0 0 400,000 0 Anthony Arcari 0 0 400,000 0 Norman Weinstock 0 0 400,000 0 --------------------------------------------------------------------------------------------------------------- * Split - adjusted Employment Agreements The Company has entered into an employment contract with Joseph and Bernadette DiFrancesco. At the October 19, 2004 Board of Directors meeting, the Board approved extending Joseph and Bernadette DiFrancesco's contract for an additional seven years after the current contract expires in exchange for a signing bonus of non-diluting preferred shares. The preferred shares shall be convertible to common stock at a 20% discount to market based upon the previous 10 day average and will carry non-diluting rights equivalent to 40% of the common shares issued and outstanding as long as the shares are held by Joseph and Bernadette DiFrancesco or their assigns. Under the terms of the agreement, the Company is obligated to make annual payments through November 15, 2012 as follows: 2005 $ 734,552 2006 $ 881,462 2007 $1,057,775 2008 $1,269,306 2009 $1,523,167 2010 $1,827,800 2011 $2,193,360 2012 $2,632,032 37
In addition, Joseph and Bernadette DiFrancesco are to receive a Founders" royalty of 10% for any entertainment revenue received by the Company for any entertainment project developed and or produced by the Company during the term of this agreement. This royalty will be paid between November 16th and December 31st in perpetuity. Item 11. Security Ownership of Certain Beneficial Owners and Management. The following table sets forth information known to the company with respect to beneficial ownership of our common stock as of April 14, 2005. The table lists: (i) each stockholder known by us to be the beneficial owner of more than five percent (5%) of our common stock, (ii) each director, (iii) each executive officer, and (iv) all of our directors and executive officer(s) as a group. Except as noted, each of the persons named in the table has sole voting and investment power with respect to common stock beneficially owned by such person. -------------------------------------------------------- --------------------- ---------------- Name and Address of Beneficial Owner Number of Shares % Ownership -------------------------------------------------------- --------------------- ---------------- Joseph & Bernadette DiFrancesco(1) 2221 Springs Landing Blvd. 138,595,758 2.23% Longwood, FL 32779 -------------------------------------------------------- --------------------- ---------------- Janice K. Battenberg 11135 Rolling Spring Dr. 13,859,586 0.22% Carmel, IN 46033 -------------------------------------------------------- --------------------- ---------------- Robert J. McCarthy 615 Benedict Way 13,859,666 0.22% Casselberry, FL 32707 -------------------------------------------------------- --------------------- ---------------- Lawrence Oakley 103 Ft. Beauregard Ln. 13,859,666 0.22% Blufton, SC 29909 -------------------------------------------------------- --------------------- ---------------- All executive officers and 180,174,676 2.89% directors as a group (1), (2) -------------------------------------------------------- --------------------- ---------------- * Less than 1% Item 12. Certain Relationships and Related Transactions. Company is affiliated through ownership of shares of the Company's common stock with the following companies: J. & B. DiFrancesco, Inc. WEE-OOO, LTD. Beyond the Kingdom, Inc. T.V. Toys, Inc. 2221 Music Clubhouse Videos, Inc. 38
The Company has incurred aggregate consulting, production, marketing and management fees with officers, directors and other related parties for the year ended December 31, 2004 and 2005: 2004 2005 $7,614,947 $3,587,425 The Company paid Gina Mouery, the hostess for the "Gina D's Kids Club Show" and the daughter of Joey DiFrancesco, President and Chief Executive Officer of the Company, $24,000 advance on future royalties for the years ended December 31, 2004 and 2005, respectively. The Company agreed to pay or reimburse Ms. Mouery $752 a month for a leased car. The Company paid approximately $9,000 for the years ended December 31, 2004 and 2005, respectively. On May 1, 2004, Gina Mouery entered into a ten-month consulting agreement with JB Toys, LLC and Raven Animation, Inc. Ms. Mouery is to assist the Company as a Co-executive Producers and Promotional Celebrity Talent for promotion and production of the Company's products and services. Ms. Mouery will be paid $1,000,000 of registered shares of common stock in ten equal installments priced at a 50% discount from the closing bid price for the preceding ten days. On February 4, 2005, the Board of Directors voted to amend the agreement with Gina Mouery. The Board granted a three-month extension and shall pay Gina Mouery $80,000 for the three-month period. The payments were made with registered shares of common stock at a 33% discount from the closing bid price. No options were granted to Gina Mouery during the year ended December 31, 2005. During the year ended December 31, 2004, Gina Mouery was granted options for 1,282 shares of common stock for talent fees. The fair value of these options at December 31, 2004, was $573,008 and was charged to production expense because the Company cannot demonstrate through its experience the ultimate revenue from the video entertainment products. During the year ended December 31, 2004, Gina Mouery exercised 1,282 options for $458,070. During the year ended December 30, 2005, Gina Mouery was granted 34,010,371 shares of common stock for talent fees. The fair value of these shares of common stock was $1,035,371. During the year ended December 31, 2004, Gina Mouery was 39 granted 5,691 shares of common stock. The fair value of these shares of common stock was $1,022,000. The fair value of the common stock was charged to production expense because the Company cannot demonstrate through its experience the ultimate revenue from the video entertainment products. On October 21, 2005 Gina Mouery converted 5,000 shares of the convertible series B preferred stock into 500,000 shares of common stock. On September 13, 2005 Gina Mouery granted warrant for 66,667 shares of common stock for interest expense. The fair value of the warrants was $8,500. On April 11, 2001, the Company entered into an agreement with Joseph and Bernadette DiFrancesco in exchange for a one year exclusive option to the program, certain cartoon characters and music publishing rights related to songs written and used in "Gina D's Kids Club Show", ("Gina D's") which were created by Joseph and Bernadette DiFrancesco. The Company was not able to meet its requirements under the option agreement, and the option expired April 11, 2002. On May 17, 2002 the Company made an addendum to the Option Agreement, in exchange for $100,000 note payable to Joseph and Bernadette DiFrancesco and a non-refundable grant of 800,000 shares of common stock, valued at $390,000, and provided that the terms, conditions and payment due in the Agreement dated April 11, 2001 are met and fulfilled by April 11, 2003, the option agreement granted to the Company on April 11, 2001 shall be in force for a period of twenty (20) years. On March 4, 2004 the Board of Directors approved extending the option agreement which expires April 11, 2004, with Joseph and Bernadette DiFrancesco, for rights to " Gina D's". The extension is for a ten-year period without restrictions or requirements, except for bankruptcy, insolvency or takeover of the Company by a person or entity not approved by the CEO. Joseph and Bernadette DiFrancesco received 100 units of JB Toys, LLC on March 5, 2004. These units were issued to WEE-OOO, LTD, a limited partnership owned by Joseph and Bernadette DiFrancesco. On April 10, 2004, Joseph and Bernadette DiFrancesco received 10,000,000 restricted shares of Raven Moon Entertainment, Inc. common stock. Joseph and Bernadette DiFrancesco shall also receive a fee of $750,000 per year for ten years beginning in January 2004, or 10% of all gross revenues from worldwide licensing and merchandising revenues received by Raven Moon Entertainment, Inc. or JB Toys, LLC, whichever is greater. On June 1, 2004, the agreement with Joseph and Bernadette DiFrancesco for the rights to "Gina D's" was further amended. If the Company grants a license to any third party for "Gina D's", the Company will pay Joseph and Bernadette DiFrancesco 50% of any revenues derived from the license. 40 On August 13, 2003 the Company, through its subsidiary JB Toys, LLC, granted Bernadette DiFrancesco 200 units of Class B memberships for the rights to the "Cuddle Bugs". In addition Bernadette DiFrancesco is to receive 15% of the revenues of JB Toys, LLC for a ten-year period. On October 10, 2003 the Board of directors granted to WEE-OOO, LTD 400,000 shares of common stock for consulting services rendered. On June 1, 2004 the Company, through its subsidiary JB Toys, LLC, agreed to pay Joseph and Bernadette DiFrancesco $100,000 and 15 units of Class B memberships of JB Toys for the rights to Mr. Bicycle Man. In addition, Joseph and Bernadette DiFrancesco are to receive 15% of the revenues of JB Toys, LLC for a ten-year period. On June 1, 2004 the Company, through its subsidiary JB Toys, LLC, agreed to pay Joseph and Bernadette DiFrancesco $250,000 and 10,000,000 of common restricted stock of Raven Moon Entertainment, Inc. for the rights to "The Search for the Amazon Queen." In addition, Joseph and Bernadette DiFrancesco are to receive $100,000 per year beginning year two through year ten plus 25% of gross revenue derived by JB Toys for "The Search for the Amazon Queen". Also, if JB Toys grants a license to any third party for Mr. Bicycle Man, the Company will pay Joseph and Bernadette DiFrancesco 50% of any revenues derived from the license. Joseph and Bernadette DiFrancesco were granted 4,840,367 and 2,751 shares of common stock during the years ended December 31, 2005 and 2004, respectively. Joseph and Bernadette DiFrancesco were granted 75,000 and 320,000 shares of convertible preferred stock during the year ended December 31, 2005 and 2004, respectively. The stock was granted to TV Toys, Inc. The fair value of these shares was $750,000 and $3,200,000 and the fair value was charged to consulting fees because the Company cannot demonstrate through its experience the ultimate revenue from the video entertainment products. During the year ended December 31, 2005, TV Toys, Inc converted 101,000 shares of convertible preferred stock and received 9,747,884 shares of restricted common stock. During the year ended Joseph and Bernadette DiFrancesco were granted 8,998,428 warrants for common stock. The fair value of these warrants was $1,147,300 and was charged to interest expense. 41 On August 14, 2002 the Company entered into a Consulting and Marketing Agreement with David Mouery, the son-in-law of Joseph DiFrancesco, President and Chief Executive Officer of the Company. The Company issued 600,000 shares of common stock and options for 3,600,000 shares of common stock to David Mouery. The option exercise price of the common stock is calculated at a 50% discount from the closing bid price for the ten trading days immediately preceding the date of exercise. On May 1, 2004, David Mouery entered into a twelve month consulting agreement with JB Toys, LLC and Raven Animation, Inc. Mr. Mouery is to assist the Company as entertainment attorney for legal matters and contracts for the Company's products and services. Mr. Mouery will be paid $120,000 of registered shares in twelve equal installments of common stock priced at a 50% discount from the closing bid price for the preceding ten days. During the year ended December 31, 2004, David Mouery was not granted any options. During the year ended December 31, 2003, David Mouery was granted options for 3,100,124 shares of common stock for production services. On September 16, 2003, the agreement with David Mouery was amended, all options and warrants outstanding were replaced with a grant of 250,000 options for common stock. During the year ended December 31, 2004, David Mouery did not exercise any options. During the year ended December 31, 2003, David Mouery exercised 3,984,018 options for common stock for $218,130. During the year ended December 31, 2004 David Mouery was granted 8,658,148 shares of common stock valued at $95,810. During the year ended December 31, 2005, David Mouery was granted 8,889 options valued at $15,000. During the year ended December 31, 2004 David Mouery was not granted any options. During the year ended December 31, 2005, David Mouery was granted 5,821,577 shares of common stock with a fair value of $188,932. During the year ended December 31, 2004 David Mouery was granted 311 shares of common stock with a fair value of 73,810. The fair value of the common stock was charged to consulting expense because the Company cannot demonstrate through its experience the ultimate revenue from the video entertainment products. On August 9, 2005 the Company entered into an agreement with David Mouery (the son in law of Joseph DiFrancesco, Chairman of the Board) to provide legal services for three years. He is to be paid a retainer of $10,000 per month, if payment is made in S-8 stock it will be at a 25% discount of the bid price on the day the stock is issued. The directors were granted the following common stock options for a ten-year term: Date Common Stock Options Exercise Price per Share November 29, 2002 133 $ 1,950.00 42 These options were valued at $170,000 and charged to general and administrative expense. In February 2003, $40,000 of Class B Member Investment loan was repaid to WEE-OOO, LTD from gross profits of JB Toys, LLC. In March an additional $51,000 of Class B Member Investment profit distribution was paid to WEE-OOO, LTD from gross profits of JB Toys, LLC. On June 1, 2004, the Company and the four songwriters (two of the songwriters are Joseph and Bernadette DiFrancesco) with 2221 Music amended their agreement. The amendment calls for each songwriter to receive 2,500,000 shares of common stock by September 1, 2004, and to receive $2,500 per month from September 1, 2004 through October 31, 2005. During the year ended December 31, 2004, Raven Moon paid $80,000 to 2221 Music. At the August 12, 2004 Board of Directors meeting, the Board granted Joseph and Bernadette DiFrancesco, the officers of the Company, a bonus of 10,000,000 shares of common restricted non-diluting stock to be delivered on September 1, 2004 and then each year on the first day of September for the next two years as an extension of their employment agreement. Through the spinoff of Raven Moon Home Video Products, LLC and the subsequent reclassification of net liabilities to discontinued operations the Company retired its debt of $1,958,800 to the Raven Moon Home Video Products, LLC Class B Members on December 31, 2002. The retirement of debt was accomplished by exchanging shares of common stock of the Company for the Class B Members debt. In addition, debt of the Company to Clubhouse Videos, Inc. for $810,018 was retired in exchange for the rights to manufacture, market and sell the first nine video, CD and DVD products produced by the Company. The rights to future products purchased by the Clubhouse Videos, Inc. from the Company will approximate $300,000 per DVD and $100,000 per CD plus 25% of the gross sales of the product. On July 27, 2005, the Company entered into an agreement with Clubhouse Videos, Inc. in which Clubhouse Videos, Inc. transferred its inventory of "Cuddle Bugs" to the Company in exchange for loans of approximately $82,000 made by the Company to Clubhouse Videos, Inc. Clubhouse has ceased operations during 2005. Clubhouse had an advance from a third party, which Raven Moon has agreed to repay. The advance of $125,000 is included on the balance sheet in advances from third parties and was charged to production expense in the current year. 43 Item 13. Exhibits and Reports on Form 8-K. (a) Exhibits. See Index to Exhibits for a list of those exhibits filed as part of this report. (b) Reports on Form 8-K. No reports were filed on Form 8-K for the year ended December 31, 2005. Item 14. Principal Accountant Fees and Services. Audit Fees Audit fees billed to the Company by Richard L. Brown & Company, P.A. ("Brown & Company") for auditing the Company's annual consolidated financial statements for the fiscal year ended December 31, 2005, were $27,677., and for reviewing the consolidated financial statements included in the Company's Quarterly Reports on Form 10-Q $10,850. All Other Fees All other fees, billed by Brown & Company with respect to the fiscal year ended December 31, 2005 amounted to $2,950. 44 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. RAVEN MOON ENTERTAINMENT, INC. By: /s/ Joseph DiFrancesco Date: April 14, 2006 ----------------------------------------- Joseph DiFrancesco, President Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated. Signature and Title By: /s/ Joseph DiFrancesco Date: April 14, 2006 ----------------------------------------- Joseph DiFrancesco President and Director (Principal Executive Officer and Principal Financial Officer) By: /s/ Lawrence C. Oakley Date: April 14, 2006 ----------------------------------------- Lawrence C. Oakley Director By: /s/ Janice K. Battenberg Date: April 14, 2006 ----------------------------------------- Janice K. Battenberg Director By: /s/ Robert J. McCarthy Date: April 14, 2006 ----------------------------------------- Robert J. McCarthy Director 45
INDEX TO EXHIBITS ------------------ ------------------------------------------------ --------------------------------------------- EXHIBIT DESCRIPTION LOCATION ------------------ ------------------------------------------------ --------------------------------------------- 3.1 Articles of Incorporation of Incorporated by reference from Exhibit 3(i) YBOR CITY SHUTTLE SERVICE, INC., as filed with to the Company's Registration Statement on the Florida Department of State on January 7, Form 10-SB filed with the SEC on August 3, 1998, effective January 8, 1998 1998 ------------------ ------------------------------------------------ --------------------------------------------- 3.2 Bylaws of YBOR CITY SHUTTLE SERVICE, INC. Incorporated by reference from Exhibit 3(ii) to the Company's Registration Statement on Form 10-SB filed with the SEC on August 3, 1998 ------------------ ------------------------------------------------ --------------------------------------------- 3.3 Plan of Merger dated October 21, 1998, and Incorporated by reference from the Company Articles of Merger by and among Raven Moon Report on Form 10-QSB filed with the SEC on Entertainment, Inc., Ybor City Shuttle November 19, 2001 Service, Inc. and International Resorts and Entertainment Group, Inc. dated December 18, 1998 ------------------ ------------------------------------------------ --------------------------------------------- 3.4 Amendment to the Articles of Incorporation of Incorporated by reference from the Company Raven Moon International, Inc. filed with the Report on Form 8-K filed with the SEC on Florida Department of State on June 30, 1999 March 30, 1999 ------------------ ------------------------------------------------ --------------------------------------------- 3.5 Amendment to the Articles of Incorporation of Incorporated by reference from Exhibit A to Raven Moon International, Inc. filed with the the Company's Information Statement on Florida Department of State on December 4, Schedule 14-C filed with the SEC on 2000, effective January 1, 2001 November 30, 2001. ------------------ ------------------------------------------------ --------------------------------------------- 3.6 Amendment to the Articles of Incorporation of Incorporated by reference from Exhibit A to Raven Moon International, Inc. filed with the the Company's Information Statement on Florida Department of State on March 9, 2001, Schedule 14-C filed with the SEC on March effective March 25, 2001 6, 2001. ------------------ ------------------------------------------------ --------------------------------------------- 3.7 Amendment to the Articles of Incorporation of Incorporated by reference from Exhibit A to Raven Moon International, Inc. filed with the the Company's Information Statement on Florida Department of State on May 24, 2001, Schedule 14-C filed with the SEC on May 2, effective May 25, 2001 2001. ------------------ ------------------------------------------------ --------------------------------------------- 3.8 Amendment to the Articles of Incorporation of Incorporated by reference from Exhibit A to Raven Moon International, Inc. filed with the the Company's Information Statement on Florida Department of State on August 7, 2001, Schedule 14-C filed with the SEC on August effective September 1, 2001 6, 2001. ------------------ ------------------------------------------------ --------------------------------------------- 46
------------------ ------------------------------------------------ --------------------------------------------- EXHIBIT DESCRIPTION LOCATION ------------------ ------------------------------------------------ --------------------------------------------- 3.9 Articles of Correction to the Articles of Incorporated by reference from the Company Incorporation of Raven Moon International, Report on Form 10-QSB filed with the SEC on Inc. filed with the Florida Department of State November 19, 2001 on August 21, 2001. ------------------ ------------------------------------------------ --------------------------------------------- 4.1 Specimen copy of stock certificate for Common Incorporated by reference from Exhibit 99 Stock of YBOR CITY SHUTTLE SERVICE, INC. to the Company's Registration Statement on Form 10-SB filed with the SEC on August 3, 1998 ------------------ ------------------------------------------------ --------------------------------------------- 10.1 2001 Raven Moon Entertainment Stock Option Plan Incorporated by reference from the Company Report on Form 10-QSB filed with the SEC on November 19, 2001 ------------------ ------------------------------------------------ --------------------------------------------- 10.2 Agreement between The KnightLights Foundation, Incorporated by reference from the Company Inc. and the Company dated July 11, 2001, Report on Form 10-QSB filed with the SEC on including Addendum dated October 11, 2001 November 19, 2001 ------------------ ------------------------------------------------ --------------------------------------------- 10.3 Consulting Agreement between Management Incorporated by reference from the Company Solutions International, Inc. and the Company Report on Form 10-QSB filed with the SEC on dated September 17, 2001 November 19, 2001 ------------------ ------------------------------------------------ --------------------------------------------- 10.4 Promotion Agreement between Big Apple Incorporated by reference from the Company Consulting U.S.A., Inc. and the Company dated Report on Form 10-QSB filed with the SEC on September 17, 2001 November 19, 2001 ------------------ ------------------------------------------------ --------------------------------------------- 10.5 Raven Moon International, Inc. License Incorporated by reference from the Company Agreement dated September 26, 2001 between the Report on Form 10-QSB filed with the SEC on Company and Raven Moon Home Video Products, LLC November 19, 2001 ------------------ ------------------------------------------------ --------------------------------------------- 10.6 Talent Agreement between the Company and Gina Incorporated by reference from the Mouery, dated January 1, 2001. Company's registration statement on Form S-8 filed with the SEC on March 21, 2002 ------------------ ------------------------------------------------ --------------------------------------------- 10.7 Option Agreement between the Company and Gina Incorporated by reference from the Mouery, dated January 1, 2001. Company's registration statement on Form S-8 filed with the SEC on March 21, 2002 ------------------ ------------------------------------------------ --------------------------------------------- 47
------------------ ------------------------------------------------ --------------------------------------------- EXHIBIT DESCRIPTION LOCATION ------------------ ------------------------------------------------ --------------------------------------------- 10.8 Limited Duration License Agreement dated Incorporated by reference from the January 1, 2002 between the Company and Beyond Company's Report on Form 10-KSB filed with The Kingdom, Inc. and Raven Moon Home Video the SEC on April 16, 2002 Products, LLC ------------------ ------------------------------------------------ --------------------------------------------- 10.9 Consulting Agreement between the Company and Incorporated by reference from the Donald Hacker. Company's registration statement on Form S-8 filed with the SEC on March 19, 2002 ------------------ ------------------------------------------------ --------------------------------------------- 10.10 Consulting Agreement between the Company and Incorporated by reference from the Royce Rumsey. Company's registration statement on Form S-8 filed with the SEC on March 19, 2002 ------------------ ------------------------------------------------ --------------------------------------------- 10.11 Production Agreement between the Company and Incorporated by reference from the MG Studios, Inc., dated March 1, 2002. Company's Report on Form 10-KSB filed with the SEC on April 16, 2002 ------------------ ------------------------------------------------ --------------------------------------------- 10.12 Letter Agreement between the Company and David Incorporated by reference from the H. Popper. Company's registration statement on Form S-8 filed with the SEC on May 21, 2002 ------------------ ------------------------------------------------ --------------------------------------------- 10.13 Consulting Agreement between Farrell Gordon Incorporated by reference from the and the Company, dated as of May 8, 2002. Company's registration statement on Form S-8 filed with the SEC on June 27, 2002 ------------------ ------------------------------------------------ --------------------------------------------- 10.14 Escrow Agreement among the Company, Charles W Incorporated by reference from the Cramer and Farrell Gordon. Company's registration statement on Form S-8 filed with the SEC on June 27, 2002 ------------------ ------------------------------------------------ --------------------------------------------- 10.15 Consulting Agreement between the Company and Incorporated by reference from the J. Bennett Grocock, dated as of April 29, 2002. Company's registration statement on Form S-8 filed with the SEC on June 27, 2002 ------------------ ------------------------------------------------ --------------------------------------------- 10.16 Consulting Agreement between the Company and Incorporated by reference from the David H. Popper, dated as of June 20, 2002. Company's registration statement on Form S-8 filed with the SEC on June 27, 2002 ------------------ ------------------------------------------------ --------------------------------------------- 10.17 Production Consultant Agreement between the Incorporated by reference from the Company and Mike Gibilisco Production Company's registration statement on Form Consultant. S-8 filed with the SEC on June 27, 2002 ------------------ ------------------------------------------------ --------------------------------------------- 48
------------------ ------------------------------------------------ --------------------------------------------- EXHIBIT DESCRIPTION LOCATION ------------------ ------------------------------------------------ --------------------------------------------- 10.18 Co-Publishing Agreement between 2221 MUSIC Incorporated by reference from the (ASCAP Publisher) and Roynart Music (BMI Company's Report on Form 10-QSB filed with Publisher) dated as of June 10, 2002. the SEC on August 14, 2002 ------------------ ------------------------------------------------ --------------------------------------------- 10.19 Work for Hire Agreement with A&S Animation, Incorporated by reference from the Inc. cited February 4, 2002 for the production Company's Report on Form 10-QSB filed with of the animated PSA "Mr. Bicycle Man". the SEC on August 14, 2002 ------------------ ------------------------------------------------ --------------------------------------------- 10.20 Distribution and sales agreement with Seahorse Incorporated by reference from the Worldwide for "A Message from God". Company's Report on Form 10-QSB filed with the SEC on August 14, 2002 ------------------ ------------------------------------------------ --------------------------------------------- 10.21 General Business Affairs Consulting Agreement Incorporated by reference from the between the Company and David Mouery, dated as Company's registration statement on Form of August 18, 2002. S-8 filed with the SEC on August 21, 2002 ------------------ ------------------------------------------------ --------------------------------------------- 10.22 Consulting Agreement between the Company and Incorporated by reference from the Jackie Joyner Kersee, dated as of July 14, Company's registration statement on Form 2002. S-8 filed with the SEC on August 27, 2002 ------------------ ------------------------------------------------ --------------------------------------------- 10.23 Consulting Agreement between the Company and Incorporated by reference from the Richard C. Popper, dated as of July 12, 2002. Company's registration statement on Form S-8 filed with the SEC on August 27, 2002 ------------------ ------------------------------------------------ --------------------------------------------- 10.24 Executive Sales and Marketing Consulting Incorporated by reference from the Company's Agreement between Raven Moon Entertainment, Inc. registration statement on Form S-8 filed with and Marc Jablon, dated as of August 12, 2002. the SEC on March 26, 2003. ------------------ ------------------------------------------------ --------------------------------------------- 10.25 Consulting Agreement between the Registrant and Incorporated by reference from the Company's J. Bennett Grocock, dated as of March 20, 2003. registration statement on Form S-8 filed with the SEC on March 26, 2003. ------------------ ------------------------------------------------ --------------------------------------------- 10.26 Amended General Business Affairs Consulting Incorporated by reference from the Agreement between Raven Moon Entertainment, Company's registration statement on Form Inc. and David D. Mouery, J.D., dated as of S-8 filed with the SEC on March 04, 2003. August 14, 2002, amended on December 1, 2002. ------------------ ------------------------------------------------ --------------------------------------------- 49
------------------ ------------------------------------------------ --------------------------------------------- 10.27 2004 Equity Compensation Plan Incorporated by reference from the Company's registration statement on Form S-8 filed with the SEC on January 16, 2004. ------------------ ------------------------------------------------ --------------------------------------------- 10.28 Amended and Restated Fiscal 2004 Equity Incorporated by reference from the Compensation Plan Company's registration statement on Form S-8 filed with the SEC on December 10, 2004. ------------------ ------------------------------------------------ --------------------------------------------- 23.2 Consent of Richard L. Brown & Company, P.A., Filed herewith. independent public accountants. ------------------ ------------------------------------------------ --------------------------------------------- 31 Section 302 Certification Filed herewith. ------------------ ------------------------------------------------ --------------------------------------------- 32 Certification Pursuant to 18 Filed herewith. U.S.C. Section 1350, as Adopted by Section 906 of the Sarbanes-Oxley Act of 2002. ------------------ ------------------------------------------------ --------------------------------------------- 50