SB-2 1 formsb2.htm FORM SB-2 formsb2.htm
As filed with the Securities and Exchange Commission on September  4, 2007
Registration No. 333-_______

UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON D.C. 20549
 
 FORM SB-2
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
 
 
PLATINUM STUDIOS, INC.
(Name of small business issuer in its charter)
California
 
2721
 
20-5611551 
(State or other Jurisdiction
 
(Primary Standard Industrial  
 
(I.R.S. Employer  
of Incorporation or Organization)
 
Classification Code Number)
 
Identification No.)
 
  11400 W. Olympic Blvd., 14th Floor
Los Angeles, California 90064
(310) 807-8100
(Address and telephone number of principal executive offices and principal place of business)
 
Scott Mitchell Rosenberg
Chief Executive Officer
PLATINUM STUDIOS, INC.
11400 W. Olympic Blvd., 14th Floor
Los Angeles, California 90064
(310) 807-8100
 (Name, address and telephone number of agent for service)

Copies to:
Gregory Sichenzia, Esq.
Sichenzia Ross Friedman Ference LLP
61 Broadway, 32nd Floor
New York, New York 10006
(212) 930-9700
(212) 930-9725 (fax)

APPROXIMATE DATE OF PROPOSED SALE TO THE PUBLIC:
From time to time after this Registration Statement becomes effective.

If any securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, other than securities offered only in connection with dividend or interest reinvestment plans, check the following box: x

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

(COVER CONTINUES ON FOLLOWING PAGE)


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

If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. o ________
 
If delivery of the prospectus is expected to be made pursuant to Rule 434, please check the following box. o ________
 
 




 

TITLE OF EACH CLASS OF SECURITIES TO BE 
REGISTERED
 
  AMOUNT TO BE 
REGISTERED (1) 
 
PROPOSED  
MAXIMUM  
OFFERING PRICE 
PER SHARE (2) 
 
  PROPOSED  
MAXIMUM 
 AGGREGATE 
OFFERING PRICE  
 
AMOUNT OF 
REGISTRATION 
FEE 
 
 
 
  
 
 
 
  
 
 
 
 Common stock, $.0001 par value
 
$
66,255,825
 
$
$0.10
 
$
$6,625,583
 
$
$203.41
 
 Total
 
 
 
 
 
    
 
$
$6,625,583
 
$
$203.41
 

 
(1) Includes 100% of the shares of our common stock, par value $.0001 per share, issued to the selling stockholders prior to the date of this prospectus, under certain Subscription Agreements dated October 12, 2006, which may be offered pursuant to this registration statement.

(2) Estimated solely for the purpose of calculating the registration fee required by Section 6(B) of the Securities Act of 1933, as amended, and computed pursuant to Rule 457 under the Securities Act.

 

2

 
THE INFORMATION CONTAINED IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. WE MAY NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED WITH THE SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS IS NOT AN OFFER TO SELL THESE SECURITIES AND IT IS NOT SOLICITING AN OFFER TO BUY THESE SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED.

PRELIMINARY PROSPECTUS SUBJECT TO COMPLETION, DATED AUGUST 31, 2007
 
PLATINUM STUDIOS, INC.
 
66,255,825 SHARES OF
 
COMMON STOCK
 
This prospectus relates to the resale by the selling stockholders of up to 66,255,825 shares of our common stock presently outstanding. The selling stockholders may be deemed underwriters of the shares of common stock, which they are offering. We will pay the expenses of registering these shares.

We are not selling any shares of common stock in this offering and therefore will not receive any proceeds from this offering. We have paid the expenses of preparing this prospectus and the related registration expenses.

The selling stockholders will sell shares from time to time at a fixed price equal $.10 per share. Our common stock is not traded on any national securities exchange and is not quoted on any over-the-counter market. If our shares become quoted on the Over-The-Counter Bulletin Board, sales will be made at prevailing market prices or privately negotiated prices.
 
INVESTING IN THESE SECURITIES INVOLVES SIGNIFICANT RISKS. SEE "RISK FACTORS"
 
BEGINNING ON PAGE 10.
 
Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or determined if this Prospectus is truthful or complete. Any representation to the contrary is a criminal offense.
 
The date of this prospectus is ________, 2007.
 
The information in this Prospectus is not complete and may be changed. This Prospectus is included in the Registration Statement that was filed by Platinum Studios, Inc. with the Securities and Exchange Commission. The selling stockholders may not sell these securities until the registration statement becomes effective. This Prospectus is not an offer to sell these securities and is not soliciting an offer to buy these securities in any state where the sale is not permitted.
 

3

TABLE OF CONTENTS 
 
 
Cautionary Note Regarding Forward-Looking Statements
5
Prospectus Summary
6
Risk Factors
8
Use Of Proceeds
16
Management’s Discussion And Analysis Of Financial Condition And Results Of Operations
19
Description Of Business
25
Description Of Property
34
Legal Proceedings
34
Management
35
Executive Compensation
37
Certain Relationships And Related Transactions
 
Security Ownership Of Certain Beneficial Owners And Management
39
Description Of Securities
40
Commission’s Position On Indemnification For Securities Act Liabilities
40
Plan Of Distribution
41
Selling Stockholders
53
Legal Matters
67
Experts
67
Available Information
67
Index to Financial Statements
F-1
 

 

4
4

 
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
 
This prospectus and any prospectus supplement contain forward-looking statements. We have based these forward-looking statements on our current expectations and projections about future events.
 
In some cases, you can identify forward-looking statements by words such as "may," "should," "expect," "plan," "could," "anticipate," "intend," "believe," "estimate," "predict," "potential," "goal," or "continue" or similar terminology. These statements are only predictions and involve known and unknown risks, uncertainties and other factors, including the risks outlined under "Risk Factors," that may cause our or our industry's actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by such forward-looking statements.
 
Unless we are required to do so under U.S. federal securities laws or other applicable laws, we do not intend to update or revise any forward-looking statements.
 

5

 
PROSPECTUS SUMMARY
 
The following summary highlights selected information contained in this prospectus. This summary does not contain all the information you should consider before investing in the securities. Before making an investment decision, you should read the entire prospectus carefully, including the "risk factors" section, the financial statements and the notes to the financial statements. As used throughout this prospectus, the terms “Platinum Studios”, the “Company”, “we”, “us” and “our” refer to Platinum Studios, Inc.
 
PLATINUM STUDIOS, INC.
 
OUR BUSINESS

We are an entertainment company that works with independent comic book creators and small publishers to form one of the world’s largest independent libraries of comic book characters which it adapts and produces for all forms of media.  Our library contains more than 3,800 characters in a full range of genre and styles.  With deals in place with the largest entertainment and new media players, we are a recognized leader in the creation of new content across all media.  Our Digital Publishing division is the company’s newest distribution outlet created to maximize revenue opportunities from its intellectual properties.

We are focused on adding titles and expanding its already substantial library with the primary goal of creating new franchise properties and characters.  In addition to in-house development and further acquisitions, we are developing content with the talent and star power of professionals outside the realm of comic books.  We have teamed up with top screenwriters, producers, directors, movie stars, and novelists to develop entertainment content and potential new franchise properties.  Our core brand offers a broader range of storylines and genres than the traditional superhero-centric genre.  Management believes this approach is maintained with Hollywood in mind, as the storylines offer the film industry fresh, high-concept brandable content as a complimentary alternative to traditional super hero storylines.

Over the next several years, we are working to become the leading independent comic book commercialization producer for the entertainment industry across all platforms including film, television, direct-to-home, publishing, and digital media, creating merchandising vehicles through all retail product lines.  This will allow us to maximize the potential and value of its owned content/content creator relationships and acquisitions, story development and character/franchise brand-building capabilities while keeping required capital investment relatively low.
 
We were founded as a California Limited Liability Company on November 20, 1996.  On September 15, 2006, we filed Articles of Incorporation with Statement of Conversion to convert to a California stock corporation.  The Plan of conversion provided for the issuance of an aggregate of 135,000,000 shares to the former members of the Limited Liability Company. Our principal offices are located at 11400 W. Olympic Blvd. Suite 1400, Los Angeles, CA 90064 and our phone number is (310) 807-8100.

6

 
 

 
 
 
 
 
 
Common stock offered by selling stockholders  
 
Up to 66,255,825 shares, including the following:  
 
 
 
 
 
      -      up to 49,047,250 shares of common stock issued prior to the date of this prospectus to certain of the selling stockholders pursuant to certain Subscription Agreements in October 2006 for an aggregate purchase price of $4,904,725, and  
 
 
 
 -    17,208,575 shares of common stock issued prior to the date of this prospectus to a selling stockholder pursuant to an agreement dated July 1, 2007 in consideration for relief of long-term debt of $1,625,000 plus interest of $95,858.
 
 
 
 
 
This number represents 32.92% of our current outstanding stock.   
     
Common stock to be outstanding after the offering  
 
Up to 201,255,825 shares  
 
 
 
Use of proceeds
 
We will not receive any proceeds from the sale  
 
 
of the common stock.
 
The above information regarding common stock to be outstanding after the offering is based on 201,255,825 shares of common stock outstanding as of August 27, 2007, which includes the shares being offered by the selling stockholders in this prospectus as such shares were issued to the selling stockholders by us upon completion of the private placement dated October 12, 2006, as applicable.  Additionally, the amount includes 17,208,575 shares issued pursuant to a cancellation of indebtedness agreement dated July 1, 2007.
 

7

 
  
TRANSACTIONS BEING REGISTERED IN THIS PROSPECTUS
 

On July 1, 2007, we entered into a Cancellation of Indebtedness Agreement with CEO Scott Mitchell Rosenberg, pursuant to which we agreed to issue 17,208,575 shares in exchange for canceling $1,625,000 in long-term debt plus $95,858 in accrued interest for said debt.  Mr. Rosenberg directed the shares to be issued in the name of Charlotte Rosenberg, his mother, from whom he personally borrowed the funds, which he then loaned to the Company’s predecessor in interest, Platinum Studios LLC.

We claim an exemption from the registration requirements of the Act for the private placement of these securities pursuant to Section 4(2) of the Act and/or Regulation D promulgated thereunder since, among other things, the transaction did not involve a public offering, the investors were accredited investors and/or qualified institutional buyers, the investors had access to information about us and their investment, the investors took the securities for investment and not resale, and we took appropriate measures to restrict the transfer of the securities.
 

8


 
This investment has a high degree of risk. Before you invest you should carefully consider the risks and uncertainties described below and the other information in this prospectus. If any of the following risks actually occur, our business, operating results and financial condition could be harmed and the value of our stock could go down. This means you could lose all or a part of your investment.
 
RISKS RELATED TO OUR BUSINESS AND INDUSTRY
 

WE HAVE A LIMITED OPERATING HISTORY UPON WHICH YOU CAN BASE AN INVESTMENT DECISION.

Our company was formed in November 1996 and has only recently begun to fully exploit its Intellectual Property (IP).  The first ten years of our existence were spent acquiring IP and building our library.  There can be no assurance at this time that we will operate profitably or that we will have adequate working capital to meet our obligations as they become due.  Management believes that our success will depend in large part on the continued shift from print to digital media as well as the ability to monetize that shift.  We intend to invest heavily in developing and marketing our intellectual property, primarily for the web and traditional media outlets, i.e. film and television, with print as a secondary medium.  However, there can be no assurance that such investments will yield the anticipated returns.

COMPETITION FROM PROVIDERS OF SIMILAR PRODUCTS AND SERVICES COULD MATERIALLY ADVERSELY AFFECT OUR REVENUES AND FINANCIAL CONDITION

The industry in which we compete is a rapidly evolving, highly competitive and fragmented market, which is based on consumer preferences and requires substantial human and capital resources. We expect competition to intensify in the future. There can be no assurance that we will be able to compete effectively.  We believe that the main competitive factors in the entertainment, media and communications industries include effective marketing and sales, brand recognition, product quality, product placement and availability, niche marketing and segmentation and value propositions. They also include benefits of one's company, product and services, features and functionality, and cost. Many of our competitors are established, profitable and have strong attributes in many, most or all of these areas. They may be able to leverage their existing relationships to offer alternative products or services at more attractive pricing or with better customer support. Other companies may also enter our markets with better products or services, greater financial and human resources and/or greater brand recognition. Competitors may continue to improve or expand current products and introduce new products. We may be perceived as relatively too small or untested to be awarded business relative to the competition. To be competitive, we will have to invest significant resources in business development, advertising and marketing.  We may also have to rely on strategic partnerships for critical branding and relationship leverage, which partnerships may or may not be available or sufficient. We cannot assure you that we will have sufficient resources to make these investments or that we will be able to make the advances necessary to be competitive. Increased competition may result in price reductions, reduced gross margin and loss of market share. Failure to compete successfully against current or future competitors could have a material adverse effect on the Company’s business, operating results and financial condition. 

9

THE SPECULATIVE NATURE OF THE ENTERTAINMENT, MEDIA AND COMMUNICATIONS INDUSTRY MAY RESULT IN OUR INABILITY TO PRODUCE PRODUCTS OR SERVICES THAT RECEIVE SUFFICIENT MARKET ACCEPTANCE FOR US TO BE SUCCESSFUL.

Certain segments of the entertainment, media and communications industry are highly speculative and historically have involved a substantial degree of risk. For example, if a property is optioned by a studio, the option may not get exercised, or if exercised, a film may still not be made, or even if a film is made, the success of a particular film, video game, program or recreational attraction depends upon unpredictable and changing factors, including the success of promotional efforts, the availability of alternative forms of entertainment and leisure time activities, general economic conditions, public acceptance and other tangible and intangible factors, many of which are beyond our control. If we are unable to produce products or services that receive sufficient market acceptance our business will be unsuccessful.

CHANGES IN TECHNOLOGY MAY REDUCE THE DEMAND FOR THE PRODUCTS OR SERVICES WE MAY OFFER FOLLOWING A BUSINESS COMBINATION.

The entertainment, media and communications industries are substantially affected by rapid and significant changes in technology. These changes may reduce the demand for certain existing services and technologies used in these industries or render them obsolete. We cannot assure you that the technologies used by or relied upon or produced by a target business with which we effect a business combination will not be subject to such occurrence. While we may attempt to adapt and apply the services provided by the target business to newer technologies, we cannot assure you that we will have sufficient resources to fund these changes or that these changes will ultimately prove successful.

THE SUCCESS OF OUR BUSINESS IS DEPENDENT ON THE ACCEPTANCE OF OUR PRODUCTS.

Certain segments of the entertainment, media and communications industries are dependent on developing and marketing new products and services that respond to technological and competitive developments and changing customer needs and tastes. We cannot assure you that our products and services will gain market acceptance. Any significant delay or failure in developing new or enhanced technology, including new product and service offerings, could result in a loss of actual or potential market share and a decrease in revenues.


WE MAY NOT BE ABLE TO SUCCESSFULLY IMPLEMENT OUR BUSINESS MODEL, WHICH IS SUBJECT TO INHERENT UNCERTAINTIES.

Our business model is predicated on our ability to control all of the rights surrounding our IP in order to properly monetize and exploit each property in the most appropriate medium.  We cannot assure that there will be a large enough audience for our IP or the media projects or merchandise based on them, or that prospective customers will agree to pay the prices that we propose to charge.  In the event our customers resist paying the prices we set for our products, our business, financial condition, and results of operations will be materially and adversely affected.

10

MANY OF OUR COMPETITORS ARE LARGER AND HAVE GREATER FINANCIAL AND OTHER RESOURCES THAN WE DO AND THOSE ADVANTAGES COULD MAKE IT DIFFICULT FOR US TO COMPETE WITH THEM.

The global media industry is competitive.  There are a substantial number of traditional and established print publishers, film studios, production companies and internet media companies with which we compete directly and indirectly, many of which have significantly greater financial resources, higher revenues, and greater economies of scale than us.  While we believe that we are unique in our utilization of web-based comics as our primary publishing option, new technologies may be developed in the future which will compete with our publishing plan, and such technology may already be in development.  We will attempt to distinguish ourselves from our competitors, but there can be no assurance that we will be able to penetrate the market.  We believe that our intellectual property is attractive to an online audience in light of the recent worldwide trend to move publishing from print to electronic media.  Nevertheless, there is no assurance that we will compete successfully with existing or future competitors in the film industry.
 
 
WE MAY BE UNABLE TO ADEQUATELY PROTECT OUR INTELLECTUAL PROPERTY FROM INFRINGEMENT BY THIRD PARTIES.

Our business plan is significantly dependent upon exploiting our IP. There can be no assurance that we will be able to control all of the rights for all of our property or that some of the rights may not revert to their original owners after the expiration of their respective option periods. We may not have the resources necessary to assert infringement claims against third parties who may infringe upon our intellectual property rights. Litigation can be costly and time consuming and divert the attention and resources of management and key personnel.

IF WE ARE UNABLE TO OBTAIN ADDITIONAL FUNDING, OUR BUSINESS OPERATIONS WILL BE HARMED AND IF WE DO OBTAIN ADDITIONAL FINANCING, OUR THEN EXISTING SHAREHOLDERS MAY SUFFER SUBSTANTIAL DILUTION.

There is no assurance that we will not incur debt in the future, that we will have sufficient funds to repay any indebtedness or that we will not default on our debt obligations, jeopardizing our business viability.  Furthermore, we may not be able to borrow or raise additional capital in the future to meet our needs or to otherwise provide the capital necessary to conduct our business. There can be no assurance that financing will be available in amounts or on terms acceptable to us, if at all. The inability to obtain additional capital will restrict our ability to grow and may reduce our ability to continue to conduct business operations. If we are unable to obtain additional financing, we will likely be required to curtail our marketing and development plans and possibly cease our operations. Any additional equity financing may involve substantial dilution to our then existing shareholders.

IF WE DO NOT MAINTAIN THE CONTINUED SERVICE OF OUR EXECUTIVE OFFICERS, OUR BUSINESS OPERATIONS MAY BE AFFECTED.

Our success is substantially dependent on the performance of our executive officers and key employees.  Given our early stage of development, we are dependent on our ability to retain and motivate high quality personnel.  Although we believe we will be able to engage qualified personnel for such purposes, an inability to do so could materially adversely affect our ability to market, sell, and enhance our products.  The loss of one or more of our key employees or our inability to hire and retain other qualified employees, including but not limited to development staff, business development staff, digital publishing staff and corporate office support staff, could have a material adverse effect on our business.

11

CONSIDERATION PAID TO MANAGEMENT WAS NOT DETERMINED BASED ON ARMS LENGTH NEGOTIATION.

The Common Stock and cash consideration being paid to management have not been determined based on arms length negotiation.  We may grant net profits interests to certain of our executive officers in addition to stock options, which may further dilute your ownership.  While management believes that the consideration paid to our executive officers is fair for the work being performed, there can be no assurance that the consideration to management reflects the true market value of their services.

WE MAY INCUR UNINSURED LOSSES IN THE OPERATION OF OUR BUSINESS.

There is no assurance that we will not incur uninsured liabilities and losses as a result of the conduct of our business.  We plan to maintain comprehensive liability and property insurance at customary levels.  We will also evaluate the availability and cost of business interruption insurance.  However, should uninsured losses occur, the Shareholders could lose their invested capital.
 
WE MAY INCUR LIABILITIES THAT WE MIGHT BE UNABLE TO REPAY IN THE FUTURE

We may have liabilities to affiliated or unaffiliated lenders.  These liabilities would represent fixed costs which would be required to be paid regardless of the level of our business or profitability.  There is no assurance that we will be able to pay all of our liabilities.  Furthermore, we are always subject to the risk of litigation from customers, suppliers, employees, and others because of the nature of our business, including but not limited to consumer lawsuits.  Litigation can cause us to incur substantial expenses and, if cases are lost, judgments, and awards can add to our costs.

WE MAY INCUR UNANTICIPATED COST OVERRUNS WHICH MAY SIGNIFICANTLY AFFECT OUR OPERATIONS.

We may incur substantial cost overruns in the development and enhancement of our electronic comics, printed comics, and merchandise.  Management is not obligated to contribute capital to us.  Unanticipated costs may force us to obtain additional capital or financing from other sources if we are unable to obtain the additional funds necessary to implement our business plan. There is no assurance that we will be able to obtain sufficient capital to implement our business plan successfully.  If a greater investment is required in the business because of cost overruns, the probability of earning a profit or a return of the Shareholders’ investment will be diminished.

12

OUR PRINCIPAL STOCKHOLDERS, OFFICERS AND DIRECTORS WILL OWN A CONTROLLING INTEREST IN OUR VOTING STOCK AND INVESTORS WILL NOT HAVE ANY VOICE IN OUR MANAGEMENT.

Our principal stockholders, officers and directors, in the aggregate, beneficially own approximately 67.08% of our outstanding common stock.  Our Chairman, Scott Rosenberg and President and Chief Operating Officer, Brian Altounian own approximately 128,250,000 and 6,750,000 shares of our outstanding common stock, respectively. As a result, our principal stockholders, officers and directors, acting together, have the ability to control substantially all matters submitted to our stockholders for approval, including:

·  
election of our board of directors;
·  
removal of any of our directors;
·  
amendment of our certificate of incorporation or bylaws; and
·  
adoption of measures that could delay or prevent a change in control or impede a merger, takeover or other business combination involving us.

As a result of their ownership and positions, our principal stockholders, directors and executive officers collectively are able to influence all matters requiring stockholder approval, including the election of directors and approval of significant corporate transactions. In addition, sales of significant amounts of shares held by our principal stockholders, directors and executive officers, or the prospect of these sales, could adversely affect the market price of our common stock. Their stock ownership may discourage a potential acquirer from making a tender offer or otherwise attempting to obtain control of us, which in turn could reduce our stock price or prevent our stockholders from realizing a premium over our stock price.

OUR ASSETS MAY BE SUBJECT TO LIENS IF WE FAIL TO TIMELY PAY FOR MATERIALS AND SERVICES.

If we fail to pay for materials and services for our business on a timely basis, our assets could be subject to materialmen’s and workmen’s liens.  We may also be subject to bank liens in the event that we default on loans from banks, if any.

WE MAY NEED TO RAISE ADDITIONAL CAPITAL, WHICH MAY NOT BE AVAILABLE ON ACCEPTABLE TERMS OR AT ALL.

While we were successful in raising $4,904,725 in the recent completed financing we may be required to raise additional funds, particularly if we are unable to generate positive cash flow as a result of our operations.   There can be no assurance that financing will be available in amounts or on terms acceptable to us, if at all.  The inability to obtain additional capital may reduce our ability to continue to conduct business operations.  If we are unable to obtain additional financing, we will likely be required to curtail our research and development plans.  Any additional equity financing may involve substantial dilution to our then existing shareholders.

13

WE MIGHT LOSE POTENTIAL SALES BECAUSE OF PIRACY OF FILMS AND RELATED PRODUCTS.
 
With technological advances, the piracy of films and related products has increased. Unauthorized and pirated copies of our films will reduce the revenue generated by those films and related products.  

RISKS RELATING TO OUR COMMON STOCK

THERE IS NO MARKET FOR OUR COMMON STOCK, WHICH MAY MAKE IT MORE DIFFICULT FOR YOU TO DISPOSE OF YOUR COMMON STOCK.

There is no established public trading market for our securities. Hence, there is no central place, such as a stock exchange or electronic trading system, to resell your common stock. If you want to resell your shares, you will have to locate a buyer and negotiate your own sale. It is our plan to utilize a market maker who will apply to have our common stock quoted on the Over-the-Counter Bulletin Board in the United States. Our shares are not and have not been listed or quoted on any exchange or quotation system. There can be no assurance that a market maker will agree to file the necessary documents with the National Association of Securities Dealers, which operates the Over-the-Counter Bulletin Board, nor can there be any assurance that such an application for quotation will be approved or that a regular trading market will develop or that if developed, will be sustained. In the absence of a trading market, an investor will be unable to liquidate his investment except by private sale.

SHOULD OUR STOCK BECOME LISTED ON THE OTC BULLETIN BOARD, IF WE FAIL TO REMAIN CURRENT ON OUR REPORTING REQUIREMENTS, WE COULD BE REMOVED FROM THE OTC BULLETIN BOARD WHICH WOULD LIMIT THE ABILITY OF BROKER-DEALERS TO SELL OUR SECURITIES AND THE ABILITY OF STOCKHOLDERS TO SELL THEIR SECURITIES IN THE SECONDARY MARKET.
 
Companies trading on the Over-The-Counter Bulletin Board, such as we are seeking to become, must be reporting issuers under Section 12 of the Securities Exchange Act of 1934, as amended, and must be current in their reports under Section 13, in order to maintain price quotation privileges on the OTC Bulletin Board. If we fail to remain current on our reporting requirements, we could be removed from the OTC Bulletin Board. As a result, the market liquidity for our securities could be severely adversely affected by limiting the ability of broker-dealers to sell our securities and the ability of stockholders to sell their securities in the secondary market. In addition, we may be unable to get re-listed on the OTC Bulletin Board, which may have an adverse material effect on our Company.

14

ONCE PUBLICLY TRADING, THE APPLICATION OF THE "PENNY STOCK" RULES COULD ADVERSELY AFFECT THE MARKET PRICE OF OUR COMMON SHARES AND INCREASE YOUR TRANSACTION COSTS TO SELL THOSE SHARES.
 
The Securities and Exchange Commission has adopted Rule 15g-9 which establishes the definition of a "penny stock," for the purposes relevant to us, as any equity security that has a market price of less than $5.00 per share or with an exercise price of less than $5.00 per share, subject to certain exceptions. For any transaction involving a penny stock, unless exempt, the rules require:
 
·
that a broker or dealer approve a person's account for transactions in penny stocks; and
 
·
the broker or dealer receive from the investor a written agreement to the transaction, setting forth the identity and quantity of the penny stock to be purchased.
 
In order to approve a person's account for transactions in penny stocks, the broker or dealer must:
 
·
obtain financial information and investment experience objectives of the person; and
 
·
make a reasonable determination that the transactions in penny stocks are suitable for that person and the person has sufficient knowledge and experience in financial matters to be capable of evaluating the risks of transactions in penny stocks.
 

The broker or dealer must also deliver, prior to any transaction in a penny stock, a disclosure schedule prescribed by the Commission relating to the penny stock market, which, in highlight form:
 
·
sets forth the basis on which the broker or dealer made the suitability determination; and
 
·
that the broker or dealer received a signed, written agreement from the investor prior to the transaction.
 
Generally, brokers may be less willing to execute transactions in securities subject to the "penny stock" rules. This may make it more difficult for investors to dispose of our common stock and cause a decline in the market value of our stock.
 
Disclosure also has to be made about the risks of investing in penny stocks in both public offerings and in secondary trading and about the commissions payable to both the broker-dealer and the registered representative, current quotations for the securities and the rights and remedies available to an investor in cases of fraud in penny stock transactions. Finally, monthly statements have to be sent disclosing recent price information for the penny stock held in the account and information on the limited market in penny stocks.

15

WE DO NOT EXPECT TO PAY DIVIDENDS IN THE FUTURE; ANY RETURN ON INVESTMENT MAY BE LIMITED TO THE VALUE OF OUR COMMON STOCK.

We do not currently anticipate paying cash dividends in the foreseeable future. The payment of dividends on our Common Stock will depend on earnings, financial condition and other business and economic factors affecting it at such time as the board of directors may consider relevant. Our current intention is to apply net earnings, if any, in the foreseeable future to increasing our capital base and development and marketing efforts. There can be no assurance that the Company will ever have sufficient earnings to declare and pay dividends to the holders of our Common Stock, and in any event, a decision to declare and pay dividends is at the sole discretion of the our Board of Directors. If we do not pay dividends, our Common Stock may be less valuable because a return on your investment will only occur if its stock price appreciates.
 
USE OF PROCEEDS

This prospectus relates to shares of our common stock that may be offered and sold from time to time by the selling stockholders. We will not receive any proceeds from the sale of shares of common stock in this offering. We have agreed to bear the expenses relating to the registration of the shares for the selling security holders. Any transfer taxes payable on these shares and any commissions and discounts payable to underwriters, agents, brokers or dealers will be paid by the selling stockholder.
 
Market for Common Stock and related Stockholders Matters

Our common stock is not traded on any national securities exchange and is not quoted on any over-the-counter market. If our shares become quoted on the Over-The-Counter Bulletin Board, sales will be made at prevailing market prices or privately negotiated prices.
 
HOLDERS
 
As of August 28, 2007, our common stock were held by 311 stockholders of record and we had 201,255,825 shares of common stock issued and outstanding, which includes the shares being offered by the selling stockholders in this prospectus as such shares were issued to the selling stockholders by us upon completion of the October 2006 private placement, as applicable. The transfer agent of our common stock is Computershare Limited, 1745 Arden Avenue, Glendale, CA 91204.

Dividends
 
We have not declared any dividends to date. We have no present intention of paying any cash dividends on our common stock in the foreseeable future, as we intend to use earnings, if any, to generate growth. The payment by us of dividends, if any, in the future, rests within the discretion of our Board of Directors and will depend, among other things, upon our earnings, our capital requirements and our financial condition, as well as other relevant factors. There are no restrictions in our articles of incorporation or bylaws that restrict us from declaring dividends.
 
16

 
Securities Authorized for Issuance Under Equity Compensation Plans
 
EQUITY COMPENSATION PLAN INFORMATION

The following table shows information with respect to each equity compensation plan under which our common stock is authorized for issuance as from inception (November 20, 1996) through June 30, 2007.
Plan category
 
Number of securities
to be issued upon
exercise of
outstanding options,
warrants and rights
 
Weighted average
exercise price of
outstanding options,
warrants and rights
 
Number of securities
remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a)
 
 
 
(a)
 
(b)
 
(c)
 
Equity compensation plans approved by security holders
 
 
30,000,000
 
 
-0-
 
 
30,000,000
 
 
 
 
 
 
 
 
 
 
 
 
Equity compensation plans not approved by security holders
 
 
0-
 
 
-0-
 
 
-0-
 
 
 
 
 
 
 
 
 
 
 
 
Total
 
 
30,000,000
 
 
-0-
 
 
30,000,000
 
 
Description of the Platinum Studios, Inc. 2007 Incentive Plan
 
The Platinum Studios, Inc. 2007 Incentive Plan (the “Plan”) has initially reserved 30,000,000 shares of common Stock for issuance. Under the Plan, options may be granted which are intended to qualify as Incentive Stock Options ("ISOs") under Section 422 of the Internal Revenue Code of 1986 (the "Code") or which are not ("Non-ISOs") intended to qualify as Incentive Stock Options thereunder. In addition, direct grants of stock or restricted stock may be awarded.
 
Purpose. The primary purpose of the Plan is to attract and retain the best available personnel in order to promote the success of our business and to facilitate the ownership of our stock by employees and others who provide services to us.
 
Administration. The Plan is administered by the compensation committee of our Board of Directors, for any period in which the Company is subject to the reporting requirements of the Exchange Act shall consist of not less than two members of the Board each of whom shall qualify as non-employee directors.
 
Eligibility. Under the Plan, options may be granted to employees, directors or consultants of the Company, as provided in the Plan.
 
17

Terms of Options. The term of each option granted under the Plan shall be for such period as may be determined by the Committee but not to exceed ten years. Each option grants shall be contained in a stock option agreement between the optionee and Platinum Studios and such terms shall be determined by the Board of Directors consistent with the provisions of the Plan, including the following:
 
(a) Purchase Price. The purchase price of the common stock subject to each stock option shall be determined by the Committee at the time the Option is granted but shall not be less than 100% fair market value on the date of grant. If any Employee to whom an option that is an incentive stock option is granted owns stock possessing more than ten percent (10%) of the total combined voting power of all classes of stock of the Company or any parent corporation, within the meaning of Section 424(e) of the Internal Revenue Code of 1986 (the “Code”), or any subsidiary corporation of the Company, within the meaning of Section 424(f) of the Code, then the exercise price per share shall not be less than one hundred ten percent (110%) of the fair market value per share on the date of grant and the option term shall not exceed five (5) years measured from the date of grant.
 
 (b) Vesting. The dates on which each option (or portion thereof) shall be exercisable and the conditions precedent to such exercise, if any, shall be fixed by the Committee, in its discretion, at the time such option is granted. All options or grants which include a vesting schedule will vest in their entirety upon a change of control transaction as described in the Plan;
 
(c) Expiration. The expiration of each option shall be fixed by the Committee, in its discretion.
 


18

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
 
Some of the information in this prospectus contains forward-looking statements that involve substantial risks and uncertainties. You can identify these statements by forward-looking words such as "may," "expect," "anticipate," "believe," "estimate" and "continue," or similar words. You should read statements that contain these words carefully because they:
 
·
discuss our future expectations;
 
·
contain projections of our future results of operations or of our financial condition; and
 
·
state other "forward-looking" information.
 
We believe it is important to communicate our expectations. However, there may be events in the future that we are not able to accurately predict or over which we have no control. Our actual results and the timing of certain events could differ materially from those anticipated in these forward-looking statements as a result of certain factors, including those set forth under "Risk Factors," "Business" and elsewhere in this prospectus. See "Risk Factors."

GENERAL

We are a comics-based entertainment company that controls one of the world’s largest libraries of comic book characters, which we adapt and produce for film, television and all other media.  Our continually expanding library consists of more than 3,800 characters that have appeared in hundreds of millions of comics in 25 languages and in more than 50 countries. Our extensive library of comics-based characters spans across multiple genres and multiple target audiences. Not only have we developed many of our characters in-house, but we have also aggregated content from several third-party comics publishers, acquiring the rights to use these characters via all media except print publishing.  We believe that the size of our library gives us a competitive edge over other comics-based libraries, as we will be able to go to market quicker with new opportunities to exploit our characters, such as electronic comics.

We seek to be a leader in producing entertainment content for all platforms including film, television, direct-to-home, publishing, and digital media based on comic book characters providing new merchandising vehicles across all retail product lines.  By combining our character commercialization strategy with our extensive storytelling, packaging, and corporate management abilities, we seek to build a strategically diversified and profitable character-based entertainment business.

Revenues are derived from a number of sources in each of our four divisions:  Print Publishing, Digital Publishing, Filmed Entertainment, and Merchandise/Licensing.  We began exploiting our IP in the 3rd quarter of 2006, creating new product for distribution in each of these divisions.

Set forth below is a discussion of the financial condition and results of operations of Platinum Studios, Inc. (the “Company”, “we”, “us,” and “our”) for the twelve months ended December 31, 2006 and 2005, and the six months ended June 30, 2007 and June 30, 2006.  The following discussion should be read in conjunction with the information set forth in the consolidated financial statements and the related notes thereto appearing elsewhere in this report.

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RESULTS OF OPERATIONS – SIX MONTHS ENDED JUNE 30, 2007 COMPARED TO THE SIX MONTHS ENDED  JUNE 30, 2006

NET REVENUE

Total Revenue increased by $1,646,300 from $30,500 for the six months ended June 30, 2006 to $1,676,800 for the six months ended June 30, 2007.  This increase is primarily due to a $1,000,000 option fee and a $450,000 first-look agreement realized in the first six months of 2007.

EXPENSES

OPERATIONS– Operating expenses increased by $1,092,535 from $1,275,419 for the six months ended June 30, 2006 to $2,367,954 for the six months ended June 30, 2007, an increase of 86%.  This increase reflects the operating expense level implemented in the second half of 2006 in establishing new sales distribution channels and increased marketing activities as well as costs for management, finance and administrative, legal, and facilities costs.

RESEARCH AND DEVELOPMENT– Research and Development expenses consist primarily of salaries and related personnel costs and independent, work-for-hire fees associated with product development.  Research and Development expenses increased from $310,205 for the six months ended June 30, 2006 to $457,854 for the six months ended June 30, 2007, an increase of $147,649 (48%).  This increase was primarily due to the development activities associated with the delivery of new comic book titles and books on multiple platforms implemented in the second quarter of 2006.

DEPRECIATION AND AMORTIZATION EXPENSE– Depreciation and Amortization expenses increased by $69,630 for the six month period, from $11,035 for the six months ended June 30, 2006 to $80,665 for the six months ended June 30, 2007.  This 631% increase consisted of $45,652 in amortization expense related to other assets which were $0 in 2006 and $23,978 in increased depreciation expense due to additional investments in computer equipment, software and furniture and fixtures.

INTEREST EXPENSE– Interest expense decreased by $51,323 (27%) from $191,710 for the six months ended June 30, 2006 to $140,387 for the six months ended June 30, 2007.  This decrease is primarily due to the conversion of $5,731,057 in principal and accrued interest into equity in September, 2006..

NET LOSS BEFORE INCOME TAXES– As a result of the factors described above, we reported a net loss before income taxes of $1,757,869 for the six months ended June 30, 2006 compared to a loss of $1,484,673 for the six months ended June 30, 2007, an improvement of $273,196.
 
20

RESULTS OF OPERATIONS – YEAR ENDED DECEMBER 31, 2006 COMPARED TO THE YEAR ENDED DECEMBER 31, 2005

NET REVENUE

Total Revenue increased by $18,000 year over year, from $162,500 for the year ended December 31, 2005 to $180,500 for the year ended December 31, 2006, an increase of 11%.  This increase reflects the continued success of Platinum Studios in securing option and rights fees for its properties.

EXPENSES

OPERATIONS– Operating expenses increased by $1,560,406 (97%), from $1,607,672 for the year ended December 31, 2005 to $3,168,078 for the year ended December 31, 2006.  The increase was primarily due to additional investments in establishing sales distribution channels and marketing activities such as the Comic Book Challenge to promote future revenue generation.  Operating costs also include expenses related to management, finance, legal, and facilities costs.

RESEARCH AND DEVELOPMENT– Research and Development expenses consist primarily of salaries and related personnel costs and independent, work-for-hire fees associated with product development.  Research and Development expenses were $243,833 and $764,282 for the years ended December 31, 2005 and December 31, 2006, respectively.  This 213% increase in year over year costs was due to the increased commitment in development activities associated with the delivery of new comic book titles and books on multiple platforms.

DEPRECIATION AND AMORTIZATION EXPENSE– Depreciation and Amortization expenses increased $66,050 year over year, from $7,436 for the year ended December 31, 2005 to $73,486 for the year ended December 31, 2006.  This 888% increase consisted of $30,435 in amortization expense related to other assets which were $0 in 2005 and $35,615 in increased depreciation expense due to additional investments in computer equipment, software and furniture and fixtures.

GAIN/(LOSS) ON DISPOSTION OF ASSETS– In the year ended December 31, 2006, the Company took in a one-time charge of $33,260 as a result of a physical inventory taken as part of the move to its new facilities.

INTEREST EXPENSE– Interest expenses remained essentially flat year over year with $390,288 for the year ended December 31, 2005 versus $391,745 for the year ended December 31, 2006.  This interest expense is primarily due to servicing the interest on debt obligations used to fund the company operations.

OTHER EXPENSE– The Company had a one-time expense of $25,000 during the year ended December 31, 2006 to write-off a deposit related to a potential acquisition target which the Company elected to not consummate.

NET LOSS BEFORE INCOME TAXES– As a result of the factors described above, we reported a net loss before income taxes of $2,080,915 for the year ended December 31, 2005 compared to a loss of $4,272,780 for the year ended December 31, 2006.
 
21

LIQUIDITY AND CAPITAL RESOURCES

As of June 30, 2007, we had working capital of $487,905 with a cash balance of $423,256.  Management believes that there will be an increase in overall expenses to expand the Company’s operations during 2007.  Although revenues are expected to increase, it is anticipated that additional cash resources will be required during the next twelve months.  We may undertake additional debt or equity financings if needed to better enable us to grow and meet our future operating and capital requirements.  However, we cannot guarantee that any additional equity or debt financing will be available in sufficient amounts or on acceptable terms when needed.  If such financing is not available in sufficient amounts or on acceptable terms, our results of operations and financial condition may be adversely affected.  In addition, equity financing may result in dilution to existing stockholders and may involve securities that have rights, preferences or privileges that are senior to or common stock, and any debt financing obtained must be repaid regardless of whether or not we generate profits or cash flows from our business activities.

Net cash used in operating activities was ($2,359,870) for the six months ended June 30, 2007 compared to ($1,133,028) for the six months ended June 30, 2006, an increase of  $1,226,842 or 108.3%.  The increase in net cash used in operating activities is primarily the result of our increased expenses with our expanded operations.

Below is a description of significant financings we completed during the fiscal year ended December 31, 2006.

OCTOBER 2006 FINANCING

On October 12, 2006, we entered into a Private Placement Memorandum pursuant to which we sold an aggregate of 49,047,250 shares of common stock to  accredited investors (the “October 2006 Financing”).  The offering closed on April 30, 2007.  The shares of common stock were sold at a price of $0.10 per share or an aggregate of $4,904,725.

We agreed to prepare and file a registration statement with the Securities and Exchange Commission registering the resale of the shares of common stock sold in the private placement on or prior to 180 days following the closing date.

Midtown Partners, registered broker-dealer, acted as placement agent for a portion of the sale of the common stock.  In connection with the closing we paid the placement agents a cash fee of an aggregate $32,102.  In addition, the Company issued to the placement agents 458,600 warrants to purchase shares of our common stock with an exercise price of $0.10 per share exercisable for a period of five years.

GOING CONCERN

The accompanying consolidated financial statements have been prepared assuming that we will continue as a going concern, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business.  Since Platinum Studios, Inc.’s inception, we have incurred losses, had an accumulated deficit, and have experienced negative cash flows from operations.  We expect this trend to continue.  The expansion and development of our business will likely require additional capital.  This condition raises substantial doubt about our ability to continue as a going concern.  We expect cash flows from operating activities to improve, primarily as a result of an increase in revenues, although there can be no assurance thereof.  The accompanying consolidated financial statements do not include any adjustments that might be necessary should we be unable to continue as a going concern.  If we fail to generate positive cash flows or obtain additional financing when required, we may have to modify, delay or abandon some or all of our business and expansion plans.

22

OFF-BALANCE SHEET ARRANGEMENTS

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

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

The policies discussed below are considered by our management to be critical to an understanding of our financial statements because their application places the most significant demands on our management’s judgment, with financial reporting results relying on estimation about the effect of matters that are inherently uncertain.  Specific risks for these critical accounting policies are described below.  For these policies, our management cautions that future events rarely develop as forecast, and that best estimates may routinely require adjustment.

The SEC has issued cautionary advice to elicit more precise disclosure about accounting policies management believes are most critical in portraying our financial results and in requiring management’s most difficult subjective or complex judgments.

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make judgments and estimates. On an on-going basis, we evaluate our estimates, the most significant of which include establishing allowances for doubtful accounts and determining the recoverability of our long-lived assets.  The basis for our estimates are historical experience and various assumptions that are believed to be reasonable under the circumstances, given the available information at the time of the estimate, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily available from other sources.  Actual results may differ from the amounts estimated and recorded in our financial statements.

We believe the following critical accounting policies affect our more significant judgments and estimates used in the preparation of our consolidated financial statements.

Reclassification:  Certain prior year amounts have been reclassified in order to conform to the current year’s presentation.  In 2006, the Company transitioned into a new accounting system that allows for a more detailed analysis of project expenses and revenues.  Financials from earlier years have been reclassified to account for this transition.

Revenue Recognition:  The Company derives its licensing revenue primarily from options to purchase rights, the purchase of rights to properties and first look deals.  For options that contain non-refundable minimum payment obligations that are not applied to the purchase price, revenue is recognized ratably over the option period, prior to the collection of all amounts ultimately due, provided all the criteria for revenue recognition under SAB 104 have been met.  Option fees that are applicable to the purchase price are deferred and recognized as revenue at the later of the expiration of the option period or in accordance with the terms of the purchase agreement.  Revenue received under first look deals is recognized ratably over the first look period, which varies by contract provided all the criteria for revenue recognition under SAB 104 have been met.  First look deals that have contingent components are deferred and recognized at the later of the expiration of the first look period or in accordance with the terms of the first look contract.

For licenses requiring material continuing involvement or performance based obligations, by the Company, the revenue is recognized as and when such obligations are fulfilled.  The Company records as deferred revenue any licensing fees collected in advance of obligations being fulfilled or if a licensee is not sufficiently creditworthy, the Company will record deferred revenue until payments are received.  License agreements typically include reversion rights which allow the Company to repurchase property rights which have not been used by the studio (the buyer) in production within a specified period of time as defined in the purchase agreement.  The cost to repurchase the rights is generally based on the costs incurred by the studio to further develop the characters and story lines.

23

Character development costs:  Character development costs consist primarily of costs to acquire properties from the creator, development of the property using internal or independent writers and artists, and the registration of a property for a trademark or copyright.  These costs are capitalized in the year incurred if the Company has executed a contract or is negotiating a revenue generating opportunity for the property.  If the property derives a revenue stream that is estimable, the capitalized costs associated with the property are expensed as revenue is recognized.  If the Company determines there is no determinable market for a property, it is deemed impaired and is written off.

Recent accounting pronouncements: In July 2006, the FASB issued Interpretation No. 48, “Accounting for Uncertainly in Income Taxes” (“FIN 48”).  FIN 48 applies to all tax positions related to income taxes subject to SFAS 109, “Accounting for Income Taxes”.  Under FIN 48 a company would recognize the benefit from a tax position only if it is more-likely-than-not that the position would be sustained upon audit based solely on the technical merits of the tax position.  FIN 48 clarifies how a company would measure the income tax benefits from the tax positions that are recognized, provides guidance as to the timing of the de-recognition of previously recognized tax benefits and describes the methods for classifying and disclosing the liabilities within the financial statements for any unrecognized tax benefits.  FIN 48 also addresses when a company should record interest and penalties related to tax positions and how the interest and penalties may be classified within the income statement and presented in the balance sheet.  FIN 48 is effective for fiscal years beginning after December 15, 2006.  For Platinum, FIN 48 will be effective for the first quarter of fiscal 2007.

In May 2005, the FASB issued SFAS No. 154, Accounting Changes and Error Corrections, which replaces APB No. 20, Accounting Changes and SFAS No. 3, Reporting Accounting Changes in Interim Financial Statements. SFAS No. 154 requires that a voluntary change in accounting principle be applied  retrospectively  with  all prior period financial statements presented as if the new accounting principle had always been used. SFAS No. 154 also requires that a change in method of depreciating or amortizing long-lived non-financial assets be accounted for prospectively, in the period of change and in future periods, if applicable, as a change in estimate, and requires the correction of errors in previously issued financial statements be termed a “restatement”. SFAS No. 154 is effective for accounting changes and correction errors made in fiscal years beginning after December 15, 2005.  The implementation of SFAS 154 is not expected to have a material impact on the Company’s financial statements.

In December 2004, the FASB issued SFAS No. 153, Exchanges of Nonmonetary Assets, which amends APB Opinion 29 (APB 29), Accounting for Nonmonetary Transactions. The guidance in APB 29 is based on the principle that exchanges of nonmonetary assets should be measured based on the fair value of the assets exchanged and included certain exceptions to that principle. SFAS No.153 amends APB29 to eliminate 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. This Statement will be effective for the Company for nonmonetary asset exchanges occurring on or after January 1, 2006.


24


BUSINESS

INTRODUCTION

Our Company was formed and operated as a California limited liability company from its inception on November 20, 1996 through September 14, 2006.  On September 15, 2006, we filed with the State of California to convert Platinum Studios, LLC into Platinum Studios, Inc., a California corporation.

We are a comics-based entertainment company that controls one of the world’s largest libraries of comic book characters, which we adapt and produce for film, television and all other media.  Our continually expanding library consists of more than 3,800 characters that have appeared in hundreds of millions of comics in 25 languages and in more than 50 countries. Our extensive library of comics-based characters spans across multiple genres and multiple target audiences. Not only have we developed many of our characters in-house, but we have also aggregated content from several third-party comics publishers, acquiring the rights to use these characters via all media except print publishing.  We believe that the size of our library gives us a competitive edge over other comics-based libraries, as we will be able to go to market quicker with new opportunities to exploit our characters, such as electronic comics.

We seek to be a leader in producing entertainment content for all platforms including film, television, direct-to-home, publishing, and digital media based on comic book characters providing new merchandising vehicles across all retail product lines.  By combining our character commercialization strategy with our extensive storytelling, packaging, and corporate management abilities, we seek to build a strategically diversified and profitable character-based entertainment business.

We believe our library has broader audience appeal than other comic character companies whose libraries comprise primarily of the traditional superhero characters. Our library includes strong characters that span all story genres, including science fiction, fantasy, horror, mystery, romance, comedy, crime, action/adventure, and family.  While our library includes superhero characters, management believes this broad spectrum allows us to be protected by any unforeseen downturn in audience reaction to any single genre.

In addition to a broad universe of more than 1,000 characters developed in-house, we also acquired the rights to the characters and storylines of Italian-based, SBE Publishing’s Horror/Sci-Fi Universe and French-based, Hexagon Comics, among others. We believe that this library gives us an established international audience for our media exploitation plans. In addition to the international exploitation of these properties, there are significant other benefits to our relationships with SBE and Hexagon comics, including providing us with the advantage of owning all content created, without the burden of overhead to run extensive publishing entities, thus providing us with a constant source of new material. As our publishing partners expand their library, our character and story lists expand as well.

Our management believes that our strategy provides numerous synergies, including:

·  
Development of individual character franchises by leveraging feature films, television programming, Internet/wireless, licensees, promotional partners, and advertisers.
·  
Development and introduction of new characters, planted spin-offs and tie-ins with branded characters.
·  
Reduced marketing and promotions costs by cross marketing the characters through different distribution media.
·  
Interactive feedback from various affiliated and co-branded online destinations.

We believe that our strategy will offer the ability to communicate with audiences from around the world providing market analysis from fan, industry and creative perspectives that gauge the appeal of new Characters and stories.

25

Recent Developments

Print Publishing
After launching our first graphic novel in December, 2006, we have published over 30 comic books and graphic novels for distribution through traditional domestic channels.  In July, 2007, we began developing an international channel for worldwide print distribution.  We entered a co-production deal with KISS Catalog to produce a new line of comic material based on the 1970’s legendary rock band, KISS, that includes a 50% ownership in all material derived from this comics line for exploitation in other merchandise and licensing opportunities.

Digital Publishing
Since the 3rd quarter of 2006, we have launched an online “e-commerce” store to sell merchandise, comic books and other products (store.platinumstudios.com), an online comics site to highlight the printed comics and graphic novels (www.platinumstudioscomics.com), a mobile storefront for distribution of digital content (www.platinumstudiosmobile.com), a web-comics site to host the digital distribution of our printed comic material and as a resource for independent comics creators to post new material (www.drunkduck.com) and we have developed multiple destination sites for individual comic properties. This digital publishing group has also created digital images that consumers can download to their mobile phones and personal computers for wallpapers and screensavers.

Filmed Entertainment
We currently have film and television development deals with several major film producers and in 2007, we successfully sold one property, Unique, to Disney Studios, with the anticipation that it will go into production in early 2008.  Additionally, in June, 2007, we entered into negotiations on a 2-year option agreement with Dreamworks, Universal Studios, Paramount Pictures, and Imagine Entertainment to acquire the film production rights to our property Cowboys & Aliens, the #1-ordered graphic novel in the U.S. in 2006 (Entertainment Weekly, January, 2007) with the goal to produce a feature film. This film’s production schedule has not been officially set yet but it is anticipated to begin pre-production sometime within the next 24 months.  In 2006, we entered into a co-production and distribution deal with Arclight Films to produce a slate of 8 feature films based on a number of our properties over the next 3 years.  We are currently in contract negotiations with various talent on our first film from that slate, Dylan Dog: Dead of Night and we hope to begin production before the end of 2007.

Merchandise/Licensing
In addition to the KISS Comics line as mentioned above, we have created a line of apparel called Number Zero Limited that takes a unique approach to t-shirt and other clothing design, highlighting images from comics on the outside of the shirt and additional story material printed on the inside.  We are negotiating with console and pc-based video game developers to create games based on our material and we are exploring a number of toys and other merchandise opportunities.  We have extended our branding philosophy to include our annual “Comic Book Challenge”, a competition that allows independent creators to pitch original comic book ideas to a panel of live judges.  The winning contestant gets a publishing deal with revenue sharing across all distribution outlets.  In 2007, we signed a 3-year corporate sponsorship deal with AT&T and secured other sponsorship arrangements with 5 other corporations to underwrite the event and expose the Company to a wide audience.
 
26

Industry Overview
The comic book market is highly sought after by the entertainment industry for the purpose of mining for new material.  As proof of this appeal, two recent trade articles have pinpointed the virtues of comics publishing as a credible source of new material in Hollywood.  Daily Variety and Hollywood Reporter have each reported separately that the big moneymakers are fresh concepts and comicbooks. “Among the better averages were pics based on comicbooks: There were only 13 such films, and the $2.8 billion total means that each comicbook hit averaged a $215 million gross.  Which explains why Hollywood is so hot to film comicbooks.” (“How to make box-office gold”, Marc Graser, Daily Variety 7/6/07).

Additionally, IDT Internet Mobile acquired comics publisher IDW in a recent transaction as reported July 24, 2007.  According to Daily Variety, the reasoning behind this acquisition was to give IDT the ability to “take IDW’s properties and sell them to traditional film and television outlets and it will develop them for new media platforms.” IDT was recently acquired by John Malone’s Liberty Media in 2007, marking an expansion of a traditional telco into the content development and media industry.  (“IDT buys comics publisher IDW”, Steven Zeitchik, Daily Variety, 7/24/07).

It was also reported in July, 2007 that UK-based sales, production and finance house Intandem is embarking on a “new corporate strategy by acquiring a 5% stake in Los Angeles-based comic book publisher Radical Publishing and sister movie company Blatant Pictures, providing the company with another source of quality commercial product for studios and top distributors.” (“Intandem has Radical idea for content”, Stuart Kemp, Hollywood Reporter, 7/17/07).  These major industry announcements all support our contention that comic-books and graphic novel publishing is a viable source for multiple forms of media exploitation.
 
Print Publishing

Every project we publish is designed for eventual adaptation to other media, including film and television.  Our core business model focuses on the exploitation of our characters in all media.  We license our characters and stories for domestic and/or international comics publishing.  In some cases, we produce our own publications under the “Platinum Studios Comics” label, but we also have agreements with other publishers and original copyright holders whereby our agreement provides for these parties to continue publishing comic books, generating new characters and stories which are added to our ever-growing library of material.  Under these agreements, the publisher retains the publishing rights and generates ongoing serial publications, maintaining large staffs within their publishing and distribution organizations to achieve these goals.  We benefit tremendously from this relationship as all new characters and story lines generated from new publications are added to our library, without the burden of carrying an entire publishing and distribution staff.  One such example of this arrangement is the Bonelli Publishing library from Italy, which has been producing comic books in printed form for over 50 years.  Popular characters from the Bonelli library include Nathan Never, Legs Weaver and Dylan Dog. Pursuant to our agreement with Bonelli Publishing characters which they develop are added to our library.
 
Print Publishing Schedule
 
After a successful launch of our inaugural graphic novel, Cowboys & Aliens, in December, 2006, we have established a steady schedule of 23 books with an additional 20 titles to be published before the end of 2007. These titles have are all published under the Platinum Studios Comics banner and they are sold directly to comic book stores through the industry’s sole distributor, Diamond Distribution.   The writers and artists of these titles are hired on a work-for-hire basis
 
27

Distribution Model
 
We currently have four distribution channels to sell our products: (1) direct to comic book stores, (2) online, (3) traditional book retail stores, and (4) international distributors.

All products offered directly to the thousands of comic book retailers throughout the United States must be listed through Diamond Comic Distributors.  Diamond was established in 1982 to provide comic book specialty retailers with wholesale, non-returnable comic books and related merchandise. Diamond has a vast network of strategically-located Distribution Centers throughout the world.

Currently, we have a distribution agreement with Top Cow Productions to list our titles in Diamond’s wholesale catalog for retail comic book stores. By capitalizing on Top Cow Production’s long-standing relationship with Diamond, we have been able to procure better placement in this wholesale catalog.  To date this has been our primary distribution chain; however, as an adjunct to our Top Cow Productions arrangement, we have also recently established a direct contractual relationship with Diamond for the listing of our properties, giving us more flexibility regarding the types and number of products we offer to this direct market.

We also distribute our products to consumers and retailers via our Web store and comic book site (www.PlatinumStudiosComics.com). The site allows the comic book fan to get a closer look at the books, the creators and sample artwork.  We have also created a strategy of launching the published book online, updating one page per day, giving the readers and fans a place to preview the book and communicate with the creators one-on-one via our webcomic hosting site, DrunkDuck (www.drunkduck.com).

We also distribute our products through established distribution companies, such as our current arrangement with Ingram.  Ingram has agreed to distribute our KISS 4K books to book stores and libraries.  Currently, they distribute to Borders, Barnes & Noble, Hastings and newsstands.  Ingram Book Company is the leading wholesale distributor of book product.

Finally, we have recently established relationships with international publishing entities to distribute translated versions of our completed series of comic books to over 100 countries throughout the world.  These publishers generally pay advances against sales royalties without charging for translations and/or printing, making this distribution option a significant way to offset the costs of the domestic distribution chain.
 
Digital Publishing

We have established ourselves as a leader in comics-based entertainment, and continue to build our already substantial library of characters and storylines.  We are currently pursuing a strategy to leverage our momentum in the entertainment space and commercialize our intellectual property through the most viable media outlets and channels, including the online content space.

Our Digital Publishing Division’s mission is to leverage our library of intellectual property across multiple online channels and distribution platforms, and create the premiere online community for fans of comic-based entertainment in all media.

We plan to aggregate several online comic properties and develop an online comics “portal,” where we can further interact with the comic-creator and -fan communities via content, reference information, community tools and other interactive features.  By engaging the community through this network/portal strategy, we believe we will increase our volume of property, story and character submissions, promote our online and offline properties, track key trends in the comic entertainment space and continue to brand the company with the comic fan base. Revenues for this portal will be derived from advertising and sponsorship and intelligently monetized through tie-ins, merchandise and other long-tail strategies.
 
28

Online Comics Community / Portal

In 2006, we acquired Drunk Duck (www.drunkduck.com), an online web comic community boasting over 3,000 strips and 10 million monthly page views. Since the acquisition, we implemented several programming and feature upgrades to enhance the functionality and user-friendly interface of Drunk Duck, including a new section for print publishers to post their printed works online as well.  In less than one year, we have seen increased numbers across the board for Drunk Duck, where as of June 30, 2007, the site hosts over 8,000 strips/stories and the monthly page views now exceed 30,000,000.

Our ongoing strategy is to create a network of sites dedicated to the online comic genre (which includes web based comic strips similar to the traditional newspaper format, online comic books and graphic novels, and streaming/electronic comics) anchored by Drunk Duck.  The goal is to aggregate the comic fan base across the internet, monetize the traffic through subscriptions, advertising and sponsored content, embedded product placement, licensed exploitation opportunities and casual gaming, as well as provide an access point for the Company to launch and promote its properties and characters in all forms of media – print, film, television, mobile/wireless and gaming.

We have identified several additional key sites as potential acquisition targets covering specific aspects of the community – original comic content, industry news, historical comic reference material, fan sites – which will be combined to create a grassroots network that speaks directly to the comic book fan-base.  By employing a technique known as a “hat”- a branded identifying navigational tool commonly found across of the top of the page (i.e. Slate.com and Fox.com are part of the MSN.com network, and MSN.com’s navigational “hat” appears across the top left of each), we believe we can combine several of these sites to form a comic content network.  The focal point of this network will be Drunk Duck which will feature our streaming electronic comics, supported by daily content updates and comic strips, industry news provided by Broken Frontier, interviews, games, podcasts, fan involvement (blogs; forums; wikis; profiles of fans and comic creators), contests, etc.

Our network of online comic sites will speak directly to the fan community and strive to offer fans a sense of ownership in the properties, with editors for much of the content selected from the fan base itself. We intend to take this one step further, where the best fan writers would be welcomed onto the official staff, creating an “it can happen to you” feeling among the loyal followers, thereby deepening their attachment to a series.

Of significant value to us is the ability to monetize the traffic generated across the entire network through several avenues, including subscriptions, advertising and sponsored content, embedded product placement, and licensed exploitation opportunities.  Each of these revenue streams can be active on every site within the network, as they work to drive traffic to one another, further maximizing the revenue potential of every visitor.  As the characters and stories themselves begin to establish a broader audience, additional revenue streams such as licensed products, merchandising and additional media outlets become viable options.

Casual Games

Due to a renewed interest in retro arcade games like pac-man, asteroids and centipede, as well as new titles inspired by retro games, card and board games, puzzle games and the like, a new gaming sector, often collectively referred to as “casual games,” has evolved. The category is loosely defined as games with simple rules, that are easy to learn and can be played in very small increments of time – perfect for a 5-10 minute break at work. The most prevalent casual game genres today are puzzles, word games, and casual-action games, followed by tile/card and board games.

Our Drunk Duck portal includes a casual gaming section, with a variety of games featuring characters and story lines from our library.  We are in discussions with leading game developers to “re-skin” an assortment of casual games with our properties (i.e. changing the cosmetic nature of the game characters without changing the underlying software of the program), and we are evaluating several ways to monetize this product. In the past few years, the dominant business model for targeting the casual games audience was offering free online games that were monetized by advertising and sponsorships. A number of business models have now emerged, including fee-based downloadable games, premium online subscription services, skill-based gaming tournaments, in-game advertising and free game play supported by video advertising and sponsorships.

29

Digital Studio Model

We are in the process of creating a “digital studio,” which management believes will be positioned to exploit our intellectual property across the web and expand our audience for comic-based entertainment. Content developed through the digital studio will be tailored to current and burgeoning web distribution platforms, including electronic comics, streaming video/video-on-demand, and instant messaging, and distributed through partnerships with premiere online portals such as AOL, MSN, Google, and Yahoo!, all of which are aggressively pursuing content plays via in-house development, acquisitions and joint ventures.  In addition, we will exploit the rapidly growing world of wireless/mobile content.

Following the lead of our broadcast entertainment studio model, our Digital Publishing team will develop several series of “tentpole” electronic comics based on characters from our intellectual property library, which combine the best elements of animation and comics. These electronic comics will be roughly 3-5 minutes in length, merging the unique visual animated template of comics with top-flight directing, writing, editing and voicing, all created to fit with the viewing habits of online users in the target demographic.

The distribution platform for our electronic comics includes establishing relationships with the online world’s premiere entertainment content portals and search destinations such as AOL, MSN, Yahoo and Google.  These portals will utilize the content within their entertainment channels, and revenues will be derived through advertising and sponsorship, managed by each individual portal.  With the continuing evolution of web-based video content delivery, broadband penetration to the home and the forecasted growth in online ad spending, this will provide Platinum with a significant revenue stream. Additionally, by providing content through any of these partners to their vast audience, the Company believes it can generate significant exposure for many of its properties and characters.

Online content/streaming content models have shifted in recent years, however ad supported and subscription models are still recognized as the most lucrative and cost-effective. There has been an upswing in the downloadable content model (i.e. – iTunes, Rhapsody, Google’s Online Video Store) in late 2005 and early 2006, and we will continue to explore these and other avenues for the distribution of content created by its digital studio.  One of the strongest components of the digital studio as part of the Company’s overall Digital Publishing Division initiative, is its ability to be self sustaining – expending capital and resources to produce the content, and generate revenue by licensing that content across the web through multiple destinations and partners.

Drunk Duck itself will provide us with not only a premiere online destination for fans of the comic genre, but also a distribution platform for content developed in the digital studio. Furthermore, this also provides a place where new stories and concepts can be critiqued and fine-tuned by an audience who not only knows the genre, but also begins to feel a sense of involvement and ownership as they contribute to the evolution of their favorite characters.

Mobile/Wireless Distribution

In June, 2006, we began pursuing a strategy to leverage our momentum in the entertainment space and commercialize our intellectual property through the most viable media outlets and channels, including the wireless and mobile content space. Our Wireless/Mobile Content group mission is to leverage our library of intellectual property across multiple mobile distribution platforms and further expand the audience for our characters and stories.  Through affiliations and partnerships with mobile content developers, syndicators, and distributors, we intend to make available an array of downloadable content, including ring tones, wallpapers, and games, featuring characters, icons and concepts from our library of characters.  We believe that utilizing the internet as a key access point to reach the mobile customer will keep production and overhead costs to a minimum and develop a very robust revenue stream.  In addition to the potentially lucrative revenue stream from the sale of each phone and service contract, we will gain an additional point of contact to reach a dedicated fan base for specific properties. The subscriber base can be offered exclusive content, promotions, early access to other media properties, and other key benefits to keep them engaged with our various content offering.

As a mobile content provider, we will focus primarily on the delivery of content in various forms, including downloadable images, ringtones, voicetones, wallpapers, video, animation, games, and interactive applications (such as e-mail, web browsing, SMS and instant messaging) to a range of wireless devices.  This will be achieved through partnerships with Mobile Content Syndicators, who aggregate and package content from multiple providers and distribute it through alliances with various channels or portals.
 
30

Filmed Entertainment:  Feature Films

We are aggressively pursuing a multi-pronged approach to create feature films:
·  
Licensing characters and stories to third-party producers and/or affiliated major studios for production
·  
Secure outside financing to produce our own slates of films
 
Licensing Deals
 
Some examples of our current projects with major studios based on previously unbranded characters include:
·  
Unique (Disney) - Based on a comic book series released in early 2007, Disney acquired the film rights to this project and tentative production schedule is set for sometime in 2008.
·  
Cowboys & Aliens (Dreamworks/Paramount/Imagine/Universal) – In June, Dreamworks agreed to option our property for development and production for joint distribution through Paramount and Universal with Imagine Entertainment as a producing partner.

Production Slate Financing

As an alternative to licensing properties to studios, independent financing arrangements are becoming more prevalent in the entertainment industry.  While there are many ways to finance films, one of the options is to create an Intellectual Property-Backed Securitization vehicle to facilitate the funding efforts.  The structure is designed to (1) isolate the Intellectual Property assets needed for the production and exploitation of theatrically released films into a bankruptcy-remote vehicle, thus protecting the financial integrity of the Company from potential adverse performance of the picture slate, and (2) mitigate the performance risk across a number of films through structural credit enhancements.

The vast majority of issuance by dollar volume has occurred in the film industry because film catalogs represent large, predictable assets with clearly defined historical cash flows and relatively little variance. Similarly, future flows transactions backed by film catalogs tend to show less volatility as the film industry has followed the same pattern for many years where a few blockbusters (perhaps 5% of the total releases) finance the rest of the releases. This “all or nothing” type of economics, where the few hits pay for the many flops, works well for slates because the catalogs behave like a portfolio of assets whose diversification smoothes the volatility of revenues.

Intellectual property backed securitization is a recent phenomenon and the total market to date remains relatively small.  In 1997 there were $380 million in known IP backed securitization transactions. In 2000 there were $1.13 billion. The total known transaction volume in those years was greater that $2 billion.  The total asset value of patents worldwide is estimated to be many trillion dollars. (Source: Bernhard H. Fischer, “New Patent Issue: BioPharm Royalty Trust”, “From Ideas to Assets: Investing  Wisely in Intellectual Property”, Bruce Berman (editor), (New York, John Wiley & Sons, Inc.)  p. 484).

We are working with Havenwood Media LLC and Arclight Films to arrange a financing slate of eight low-budget (between $6 and $12 million) motion pictures intended for theatrical release.  Together with Arclight, we will put together a combination of equity, tax incentives and other financing to fully fund the production of these films.

31

Along with our partners, Arclight and Havenwood, we have identified the following eight (8) properties for our current slate (although various circumstances may require us to substitute alternative titles for those listed):

·  
Witchblade
·  
The Darkness
·  
Dead of Night (from Dylan Dog)
·  
The Hunter
·  
Ghosting
·  
Hive
·  
Mal Chance
·  
Blood Nation

Our first project in this slate, Dead of Night, is in early stages of pre-production as of August 27 as we are in final negotiations with key talent.  We anticipate production to begin the first quarter of 2008.  The second film identified for potential 2007 production schedule is Ghosting.   In addition to this current slate with Havenwood and Arclight, we are reviewing additional slate opportunities such as direct-to-home video slate and genre-specific, low-budget slates.

Filmed Entertainment: Television                                                                

In television, we intend to (1) continue our strategy of licensing our characters and stories to third-party producers for sale to broadcast and cable television networks: and (2) secure third-party financing to produce our own specials and series.

Licensing Deals

We are currently working with several well-known producing partners in order to help bring other characters to the small screen as follows:

·  
Film 44
Peter Berg (Friday Night Lights) is directing and Raphael Alverez (The Wire) is writing the hour-long drama, Down, for NBC Universal/Television Studio based on the Top Cow Productions property by Warren Ellis.

·  
Raimi-Donen
Sam Raimi (Spider Man 1, 2 & 3) is developing Rising Stars, by J.M.S. (Babylon 5) as a mini-series.

·  
Roundtable Entertainment
Gina Matthews (13 going on 30) and Phil Stark (Dude, Where’s My Car) are working to develop Utopia, a single-camera half-hour sitcom for 20th Century Fox.

32

Merchandise/Licensing

We recognize a targeted merchandising and licensing strategy can produce significant revenues from characters who build their audience / fan base through any form of media exploitation – feature film, television, home video/DVD, print, online, wireless and gaming. We will seek to develop relationships with category leaders to help secure more retail support, increase the distribution of its products, and make us a key franchise for our licensees.

Licensees recognize the potential that comic based properties afford them in diversifying their retail mix with lines for multiple characters within one story, and, in so doing, expanding the potential consumer audience interested in their merchandise. It is not uncommon for a major theatrical release in the comic to film genre to secure over 50 licensees for an array of products, from action figures, games and trading cards, to party supplies, costumes, furniture, and packaged foods.

The opportunities within the merchandising and licensing arena for us are equally as wide ranging, including toys/games, collectibles, apparel, and numerous consumer goods.  We will pursue opportunities via the following channels:

·  
General merchandising agreements with third parties in each major territory where films, television and new media will be released.
 
·  
Collectible merchandising: cultivating the worldwide collector market by allowing licensees in other countries to break with the normal tradition of shipping only within their territory. In these agreements, we will allow such licensees to ship product to special retailers who have partnership arrangements with the Company. These items will carry a double royalty: the original royalty from the licensee and the additional royalty from the retailer allowed to carry the material.
 
·  
The licensing of the Characters for customized advertising campaigns and/or media purchase campaigns.
 
·  
Leveraging individual partners and licensees’ efforts together globally and locally to create critical mass, including promotions, contests, and third-party advertising on radio, television and new media.
 
·  
The leveraging of our relationships with hundreds of comic book publishers and distributors worldwide for the distribution of the Characters in print form.
 
Collectibles Merchandising Strategy

Our collectible merchandising strategy will be an important area for income and branding. The collectible markets worldwide will be developed through the combination of an online and offline merchandising model.  We will establish merchandise-licensing arrangements that enable individual licensees’ ability to sell merchandise outside their territories through our distribution partners. Where licensees traditionally cannot cross borders to sell products available within their own licensed territories, we will establish a global capability for individual territory merchandise licensees to make their product available worldwide over our website (including co-branded and syndicated versions of the website).

33

KISS Comics Group Venture

Spinning off from the successful marketing empire of the 70’s rock superstars, KISS, KISS 4K is a multi-platform comic property that follows the adventures of superheroes based off the KISS band personalities.  KISS 4K is the first launch of the Kiss Comics Group, a 50/50 licensing venture with KISS.  Concepts developed in KISS 4K will be spun off into separate titles, which will include appearances by the members of KISS.  The comic lends itself to unique merchandising opportunities.  KISS 4K merchandising will target higher-end product, including clothing, collectibles, cell phone accessories and plug-ins and electronics.  Additionally, there are many opportunities for sponsors to dress/equip the characters with specific products within the comic.
 
Merchandise Licensing Industry

According to License Magazine, character-based licensed products – which include entertainment, television and movie characters - generated more than $39B at retail in 2003. Licensed toy lines in the character category increased by more than 5% in 2003 to just over $5.6B (NPD Group/FunWorld).  Top action properties, including Spider-Man, Buffy the Vampire Slayer, The X-Men, Hercules, and Star Wars, have built lucrative licensing programs across all product categories. In fact, franchises such as Teenage Mutant Ninja Turtles, Star Wars Episode I, Toy Story, and even Barney have garnered over $1 billion sales each in the U.S. alone.  We are looking to expand our merchandise lines in ways that benefit our franchises beyond current licensing agreements.

Merchandise licensing can include various products including sporting goods, apparel, home furnishings, stationery, packaged goods, books, and more, but the largest segment in this industry is toys.  In the toy business, companies like Mattel and Hasbro may develop their own core brands that include characters and storylines to drive and support their toy lines. Often they look to third parties, including entertainment studios, video game companies, and book authors & publishers to bring popular storylines and characters to their products.

Through co-ventures, direct manufacturing, and merchandise licensing, we hope to expand our   franchises into a tactile world that extends consumers relationships with the characters and stories that they know and love. 

 
Our offices are located at 11400 W. Olympic Blvd., Suite 1400, Los Angeles, CA  90064, and consist of approximately 12,400 square feet.  Our lease, which expires on August 31, 2011, requires payments of $31,857 per month. On July 10, 2006, Platinum entered into a five year lease agreement which expires on August 31, 2011.  The minimum annual payments under this lease are $127,429 in 2006, $387,383 in 2007, $402,878 in 2008, $418,993 in 2009, $435,753 in 2010 and $298,147 in 2011
  
LEGAL PROCEEDINGS
 
We are not currently a party to any legal proceedings. There has been no bankruptcy, receivership or similar proceedings. 
 
There have been no material reclassifications, mergers, consolidations, or purchase or sale of a significant amount of assets not in the ordinary course of business.  As of the date of this prospectus, there are no material proceedings to which any of our directors, executive officers, affiliates or stockholders is a party adverse to us.
 
Employees
 
As of the date of this prospectus, we have twenty-two (22) full-time and eight (8) part-time employees. We have not experienced any work stoppages and we consider relations with our employees to be good.

34

MANAGEMENT 
 
EXECUTIVE OFFICERS, DIRECTORS AND KEY EMPLOYEES
 
The following table sets forth information about our executive officers, key employees and directors as of July 1, 2007.

Name
Age
Position
Scott Mitchell Rosenberg
44
 Chairman & Chief Executive Officer
Brian Kenneth Altounian
43
President & Chief Operating Officer
Jill Zimmerman
44
Director
Helene Pretsky
43
Corporate Secretary and General Counsel
__________________
 
Scott Rosenberg has been our Chairman since inception. Mr. Rosenberg served as the Chairman of Platinum Studios, LLC, our predecessor since November 1996.   Mr. Rosenberg established Platinum Studios, LLC in 1996 following a successful, high-profile career in the comic book industry. As founder and head of Malibu Comics, Rosenberg produced the Men In Black comic book, which he took to Sony to become a billion-dollar film franchise. At Malibu, Rosenberg developed an innovative grass-roots marketing approach, reaching out directly to fans, retailers, and press to allow Malibu to be distributed alongside top industry players at a fraction of what the major companies spent—notably, in the pre-Internet age, without the opportunities and advantages provided by the web. Malibu’s marketing savvy and ability to create and develop new characters and new ideas led to a fierce bidding war to acquire the company, and in 1994 Malibu was bought by Marvel Comics. Rosenberg has built Platinum Studios into Hollywood’s premier comics-to-film company. Mr. Rosenberg holds an undergraduate degree from the University of Denver.

Brian Altounian has been our Chief Operating Officer since June 2005 and was appointed to serve as President in September 2006. Mr. Altounian's background includes business development, finance, operations and administration and he has applied those skills to a variety of start-ups, Fortune 100 companies, and public and private organizations. Mr. Altounian has worked extensively in the entertainment and high-tech industries, the bread and butter of Los Angeles' commercial culture. He has held management positions including Director, Vice President, President, and CEO. He recently concluded his tenure as a Board member of Machine Talker (MTKN.OTC) and Chairman of the Board of Directors of XsunX, Inc. (XSNX.OTC) and he currently sits on the Board of Directors of Cereplast, Inc. (CERP.OTC). His expertise is in the area of developing corporate infrastructure and preparing early-stage companies to access capital through the public equity markets and he has provided marketing support to a number of technology companies such as Warp9 (WNYN.OTC), Imaging3, Inc. (IMGG.OTC) and BioSolar, Inc (BSRC.OTC).

Prior to his adventures in the high-tech arena, Mr. Altounian spent 12 years in the entertainment industry with a successful consulting practice, advising entertainment companies in the areas of finance, administration, operations and business development. His clients have included Disney Interactive, Two Oceans Entertainment Group, Papazian-Hirsch Entertainment, The Santa Barbara Grand Opera Association, International Documentary Association, In-Finn-Ity Productions and many others. He also held senior management positions in-house at Lynch Entertainment, Time Warner Interactive, National Geographic Television and WQED. Most recently, he was Consulting Producer on Random 1, a reality television series that debuted in November 2005 on the A&E Network and Executive Producer on the documentary feature film Lost in Woonsocket.

Mr. Altounian holds an MBA from Pepperdine University and an undergraduate degree from UCLA.

35

Jill M. Zimmerman has been a director since inception. Since May 2005, Ms. Zimmerman has served as a Vice President at the Alford Group, a consulting firm based in Evanston, Illinois. Ms. Zimmerman previously served as a Crisis Program Supervisor and Director of Development at Alternatives, Inc. a not-for profit corporation. Ms. Zimmerman holds a Bachelor of Arts from the University of California at Santa Barbara and a Masters degree from the University of Chicago.

Helene Pretsky has been our general counsel since January, 2006 and our corporate secretary and Executive Vice President since October 1. Ms. Pretsky, a securities/corporate attorney with expertise in intellectual property, has focused her twenty-year legal career on representing start-up, early-stage revenue companies in the high-tech, emerging technologies and entertainment industries. During her initial seven years of practice at Brobeck, Phleger & Harrison and, thereafter, at two prestigious Century City law firms, Ms. Pretsky provided the full range of corporate representation for private and public companies, including public offerings, private placements, mergers and acquisitions and preferred stock financings; complex patent, trade secret, copyright and trademark licensing and protection agreements; cooperative research, development and commercialization agreements; and domestic and international distribution and sales arrangements. Over the last five years, Ms. Pretsky served as General Counsel and VP of Business Affairs for a cutting edge mobile payment services hardware and software solutions company, which she also co-founded. Ms. Pretsky provided the full range of corporate and securities work for such company, including preparation and negotiation of private placements, technology development and license agreements and strategic partnership contracts with Motorola, Nextel, Sprint, SAfeNet and TNS. She was also instrumental in creating the company's overall business and intellectual property strategies.

Ms. Pretsky, a magna cum laude, Phi Beta Kappa graduate of the University of California, Los Angeles, received her J.D. from the UCLA School of Law, where she graduated in the top 15% of her class and was a member of its prestigious Law Review.

COMMITTEES OF THE BOARD
 
  
FAMILY RELATIONSHIPS
 
There are no family relationships among our executive officers and directors.
 
CODE OF ETHICS
 
We have not adopted a Code of Ethics within the meaning of Item 406(b) of Regulation S-B of the Securities Exchange Act of 1934.
36

EXECUTIVE COMPENSATION

The following table sets forth the cash compensation (including cash bonuses) paid or accrued by us to our Chief Executive Officer and our four most highly compensated officers other than the Chief Executive Officer from inception to December 31, 2006.
 
 
 
 
Name and
Principal Position
 
 
Year
 
 
 
 
Salary ($)
 
 
 
 
Bonus ($)
 
 
 
 
 
 
Stock Awards ($)
 
Option Awards ($)
 
 
 
 
Non-Equity Incentive Plan Compensation ($)
 
 
Change in Pension Value and Non-Qualified Deferred Compensation Earnings ($)
All Other Compensation ($)
 
 
 
Total ($)
Scott  Mitchell Rosenberg, CEO
2006
$34,616
-
 
-
-
 
-
 
-
-
$34,616
Brian K. Altounian, President/COO
2006
$46,154
-
-
-
-
-
-
$46,154
Helene Pretsky, EVP Bus. Affairs
2006
$30,769
 
 
 
 
 
 
 $30,769
 
 
Outstanding Equity Awards at Fiscal Year-End Table.

The following table sets forth information with respect to grants of options to purchase our common stock to the named executive officers from inception to December 31, 2006.

Option Awards
 
Stock Awards
 
Name    
 
  Number of
Securities
Underlying
Unexercised
Options (#) Exercisable
 
  Number of
Securities
Underlying
Unexercised
Options (#) Unexercisable
 
  Equity
Incentive
Plan Awards:
Number of
Securities Underlying
Unexercised
Unearned
Options (#)
 
  Option
Exercise
Price ($)
 
  Option
Expiration
Date
 
  Number of Shares or Units of Stock That Have Not
Vested (#)
 
  Market Value of Shares or Units of Stock That Have Not
Vested ($)
 
  Equity
Incentive
Plan Awards: Number of
Unearned
Shares,
Units or
Other Rights
That Have
Not
Vested (#)
 
  Equity Incentive
Plan Awards:
Market or Payout
Value of
Unearned
Shares, Units or
Other
Rights
That Have
Not
Vested ($)
 
Scott Mitchell Rosenberg
 
 
-0-
 
 
-0-
 
 
-0-
 
 
-0-
 
 
-0-
 
 
-0-
 
 
-0-
 
 
-0-
 
 
-0-
 
Brian Altounian
   
-0-
 
 
-0-
 
 
-0-
 
 
-0-
 
 
-0-
 
 
-0-
 
 
-0-
 
 
-0-
 
 
-0-
 
Jill Zimmerman
   
-0-
 
 
-0-
 
 
-0-
 
 
-0-
 
 
-0-
 
 
-0-
 
 
-0-
 
 
-0-
 
 
-0-
 
                                                         
 
37

Director Compensation

The following table sets forth with respect to the named directors, compensation information inclusive of equity awards and payments made from inception to December 31, 2006.
 
Name   (a)
 
Fees Earned or Paid in Cash   ($)   (b)
 
Stock Awards   ($)   (c)
 
Option   Awards ($)   (d)
 
Non-Equity Incentive Plan Compensation ($)   (e)
 
Change in Pension Value and Nonqualified Deferred Compensation Earnings   (f)
 
All Other Compensation   ($)   (g)
 
Total   ($)   (h)
 
Scott Mitchell Rosenberg
 
 
-0-
 
 
-0-
 
 
-0-
 
 
-0-
 
 
-0-
 
 
-0-
 
 
-0-
 
Brian Altounian
   
-0-
   
-0-
   
-0-
   
-0-
   
-0-
   
-0-
   
-0-
 
Jill Zimmerman
   
-0-
   
-0-
   
-0-
   
-0-
   
-0-
   
-0-
   
-0-
 
 
EMPLOYMENT AGREEMENTS
 
We currently have no employment agreements with our executive officers.
38

 
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
 
The following table sets forth, as of October 1, 2006, the number of and percent of our common stock beneficially owned by:
 
·
all directors and nominees, naming them,
 
·
our executive officers,
 
·
our directors and executive officers as a group, without naming them, and
 
·
persons or groups known by us to own beneficially 5% or more of our common stock:
 
We believe that all persons named in the table have sole voting and investment power with respect to all shares of common stock beneficially owned by them.
 
A person is deemed to be the beneficial owner of securities that can be acquired by him within 60 days from August 27, 2006 upon the exercise of options, warrants or convertible securities. Each beneficial owner's percentage ownership is determined by assuming that options, warrants or convertible securities that are held by him, but not those held by any other person, and which are exercisable within 60 days of August 27, 2006 have been exercised and converted.
 
Title of Class
 
Name of
Beneficial Owner
 
Number of Shares
Beneficially Owned
 
Percent of Total
Common Stock
 
Scott Rosenberg (1)
 
 
128,250,000
 
 
63.7%
Common Stock
 
Brian Altounian
 
 
6,750,000
 
 
3.3%
Common Stock
 
Jill Zimmerman
 
 
-0-
 
 
*
Common Stock
 
Helene Pretsky
 
 
-0-
 
 
*
                 
Common Stock
 
Charlotte Rosenberg
   
17,208,575
   
8.6%
                 
Common Stock
 
All Executive Officers and Directors as a Group (3 persons )
 
 
135,000,000
 
 
100.00%
 
*Less than one percent.    

(1)  
Includes 135,000 shares of common stock beneficially owned by Pamela Rosenberg, the wife of Scott Rosenberg. Mr. Rosenberg disclaims beneficial ownership of these shares.  Also includes 16,875,000 shared held by the Scott Mitchell Rosenberg GRIT, of which Mr. Rosenberg is the Trustee.

39

Certain Relationships and Transactions
 
We have an exclusive option to enter licensing/acquisition of rights agreements for individual characters, subject to existing third party rights, within the RIP Awesome Library of RIP Media, Inc., a related entity in which Scott Rosenberg is a majority shareholder. The Company did not exercise this right during the years ended December 3, 2006 and 2005.

Our President, Scott Mitchell Rosenberg also provides production consulting services to our customers (production companies) through Scott Mitchell Rosenberg Productions, which is wholly owned by our President, Scott Mitchell Rosenberg. At the time we enter into a purchase agreement with a production company, a separate contract may be entered into between Scott Mitchell Rosenberg Productions and the production company. In addition, consulting services regarding development of characters and storylines may also be provided to us by Scott Mitchell Rosenberg Productions by the production company.

During 2006, we repaid in full the uncollecollateralized loans of $20,000 received from RIP Media during 2004. These loans accrued interest at 5% and 6% for the years ended December 31, 2005 and 2006, respectively.

At December 31, 2006 and 2005, we owed $243,079 to Brian Altounian for consulting services provided prior to his employment and $20,000 to RIP Media, respectively.
 
DESCRIPTION OF SECURITIES
 
Our authorized capital stock consists of 500,000,000 shares of Common Stock, $0.001 par value per share, of which 201,250,000 shares were issued and outstanding as of August 27, 2006

The holders of Common Stock are entitled to one vote for each share held of record on all matters to be voted on by the stockholders. The holders of Common Stock are entitled to receive dividends ratably, when, as and if declared by the Board of Directors, out of funds legally available therefore. In the event of a liquidation, dissolution or winding-up of our business, the holders of Common Stock are entitled to share equally and ratably in all assets remaining available for distribution after payment of liabilities.
 
The holders of shares of Common Stock, as such, have no conversion, preemptive, or other subscription rights and there are no redemption provisions applicable to the Common Stock. All of the outstanding shares of Common Stock are, and the Common Stock offered hereby, when issued will be, validly issued, fully paid and non-assessable.

We have never paid any cash dividends on our Common Stock and do not anticipate paying any cash dividends in the foreseeable future. We intend to retain future earnings to fund ongoing operations and future capital requirements of our business. Any future determination to pay cash dividends will be at the discretion of the Board of Directors and will be dependent upon our financial condition, results of operations, capital requirements and such other factors as the Board of Directors deems relevant.

Transfer Agent

The transfer agent of our securities is Computershare Limited, whose address is 1745 Arden Avenue, Glendale, CA 91204.  The phone number of the transfer agent is (800) 962-4284.
 
COMMISSION'S POSITION ON INDEMNIFICATION FOR SECURITIES ACT LIABILITIES
 
Our By-laws, as amended, provide to the fullest extent permitted by California law, our directors or officers shall not be personally liable to us or our shareholders for damages for breach of such director's or officer's fiduciary duty. The effect of this provision of our By-laws, as amended, is to eliminate our right and our shareholders (through shareholders' derivative suits on behalf of our company) to recover damages against a director or officer for breach of the fiduciary duty of care as a director or officer (including breaches resulting from negligent or grossly negligent behavior), except under certain situations defined by statute. We believe that the indemnification provisions in our By-laws, as amended, are necessary to attract and retain qualified persons as directors and officers.

Insofar as indemnification for liabilities arising under the Securities Act of 1933 (the “Act” or “Securities Act”) may be permitted to directors, officers or persons controlling us pursuant to the foregoing provisions, or otherwise, we have been advised that in the opinion of the Securities and Exchange Commission, such indemnification is against public policy as expressed in the Act and is, therefore, unenforceable.  In May, 2007, the Company entered into indemnification agreements with each of the Officers and Directors of the Corporation individually.
 
40

PLAN OF DISTRIBUTION
 
The selling stockholders and any of their respective pledgees, donees, assignees and other successors-in-interest may, from time to time, sell any or all of their shares of common stock on any stock exchange, market or trading facility on which the shares are traded or in private transactions. These sales may be at fixed or negotiated prices. The selling stockholders may use any one or more of the following methods when selling shares:
 
·
ordinary brokerage transactions and transactions in which the broker-dealer solicits the purchaser;
 
·
block trades in which the broker-dealer will attempt to sell the shares as agent but may position and resell a portion of the block as principal to facilitate the transaction;
 
·
purchases by a broker-dealer as principal and resale by the broker-dealer for its account;
 
·
an exchange distribution in accordance with the rules of the applicable exchange;
 
·
privately-negotiated transactions;
 
·
broker-dealers may agree with the selling stockholders to sell a specified number of such shares at a stipulated price per share;
 
·
a combination of any such methods of sale; and
 
·
any other method permitted pursuant to applicable law.
 
The selling stockholders may also sell shares under Rule 144 under the Securities Act, if available, or Regulation S, rather than under this prospectus. The selling stockholders shall have the sole and absolute discretion not to accept any purchase offer or make any sale of shares if they deem the purchase price to be unsatisfactory at any particular time.
 
The selling stockholders or their respective pledgees, donees, transferees or other successors in interest, may also sell the shares directly to market makers acting as principals and/or broker-dealers acting as agents for themselves or their customers. Such broker-dealers may receive compensation in the form of discounts, concessions or commissions from the selling stockholders and/or the purchasers of shares for whom such broker-dealers may act as agents or to whom they sell as principal or both, which compensation as to a particular broker-dealer might be in excess of customary commissions. Market makers and block purchasers purchasing the shares will do so for their own account and at their own risk. It is possible that a selling stockholder will attempt to sell shares of common stock in block transactions to market makers or other purchasers at a price per share which may be below the then market price. The selling stockholders cannot assure that all or any of the shares offered in this prospectus will be sold by the selling stockholders. The selling stockholders and any brokers, dealers or agents, upon effecting the sale of any of the shares offered in this prospectus, may be deemed to be "underwriters" as that term is defined under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, or the rules and regulations under such acts. In such event, any commissions received by such broker-dealers or agents and any profit on the resale of the shares purchased by them may be deemed to be underwriting commissions or discounts under the Securities Act.
 
41

We are required to pay all fees and expenses incident to the registration of the shares, including fees and disbursements of counsel to the selling stockholders, but excluding brokerage commissions or underwriter discounts.
 
The selling stockholders, alternatively, may sell all or any part of the shares offered in this prospectus through an underwriter. No selling stockholder has entered into any agreement with a prospective underwriter and there is no assurance that any such agreement will be entered into.
 
The selling stockholders may pledge their shares to their brokers under the margin provisions of customer agreements. If a selling stockholders defaults on a margin loan, the broker may, from time to time, offer and sell the pledged shares. The selling stockholders and any other persons participating in the sale or distribution of the shares will be subject to applicable provisions of the Securities Exchange Act of 1934, as amended, and the rules and regulations under such act, including, without limitation, Regulation M. These provisions may restrict certain activities of, and limit the timing of purchases and sales of any of the shares by, the selling stockholders or any other such person. In the event that the selling stockholders are deemed affiliated purchasers or distribution participants within the meaning of Regulation M, then the selling stockholders will not be permitted to engage in short sales of common stock. Furthermore, under Regulation M, persons engaged in a distribution of securities are prohibited from simultaneously engaging in market making and certain other activities with respect to such securities for a specified period of time prior to the commencement of such distributions, subject to specified exceptions or exemptions.
 
We have agreed to indemnify the selling stockholders, or their transferees or assignees, against certain liabilities, including liabilities under the Securities Act of 1933, as amended, or to contribute to payments the selling stockholders or their respective pledgees, donees, transferees or other successors in interest, may be required to make in respect of such liabilities.
 
If the selling stockholders notify us that they have a material arrangement with a broker-dealer for the resale of the common stock, then we would be required to amend the registration statement of which this prospectus is a part, and file a prospectus supplement to describe the agreements between the selling stockholders and the broker-dealer.
 
PENNY STOCK
 
The Securities and Exchange Commission has adopted Rule 15g-9 which establishes the definition of a "penny stock," for the purposes relevant to us, as any equity security that has a market price of less than $5.00 per share or with an exercise price of less than $5.00 per share, subject to certain exceptions. For any transaction involving a penny stock, unless exempt, the rules require:
 
·
That a broker or dealer approve a person's account for transactions in penny stocks; and
 
·
the broker or dealer receive from the investor a written agreement to the transaction, setting forth the identity and quantity of the penny stock to be purchased.
 
In order to approve a person's account for transactions in penny stocks, the broker or dealer must
 
·
obtain financial information and investment experience objectives of the person; and
 
·
make a reasonable determination that the transactions in penny stocks are suitable for that person and the person has sufficient knowledge and experience in financial matters to be capable of evaluating the risks of transactions in penny stocks.
 
The broker or dealer must also deliver, prior to any transaction in a penny stock, a disclosure schedule prescribed by the Commission relating to the penny stock market, which, in highlight form:
 
·
Sets forth the basis on which the broker or dealer made the suitability determination; and
 
That the broker or dealer received a signed, written agreement from the investor prior to the transaction.
 
Disclosure also has to be made about the risks of investing in penny stocks in both public offerings and in secondary trading and about the commissions payable to both the broker-dealer and the registered representative, current quotations for the securities and the rights and remedies available to an investor in cases of fraud in penny stock transactions. Finally, monthly statements have to be sent disclosing recent price information for the penny stock held in the account and information on the limited market in penny stocks.
 
42

SELLING STOCKHOLDERS

The table below sets forth information concerning the resale of the shares of common stock by the selling stockholders , which we previously issued to the selling stockholders . We will not receive any proceeds from the resale of the common stock by the selling stockholders. Assuming all the shares registered below are sold by the selling stockholders, none of the selling stockholders will continue to own any shares of our common stock.
 
The following table also sets forth the name of each person who is offering the resale of shares of common stock by this prospectus, the number of shares of common stock beneficially owned by each person, the number of shares of common stock that may be sold in this offering and the number of shares of common stock each person will own after the offering, assuming they sell all of the shares offered.     
 

Beneficial Ownership Before the Offering
Number of Shares of Common Stock Included in Prospectus
Beneficial Ownership After the Offering (2)
Nelson A. Abiva
          250,000
   250,000
0
Alfredo Aceituno Jr.
           50,000
     50,000
0
Karl Adler
          100,000
   100,000
0
Jonas E. Agin
           50,000
     50,000
0
Arthur & Kelli Altounian
           50,000
     50,000
0
Niki Anagnos Trust(3)
          100,000
   100,000
0
Ross Anderson
           50,000
     50,000
0
Matt Andrews & Teresa Andrews,
           50,000
     50,000
0
Fereshteh and Sharokh Atiabi
          330,000
   330,000
0
Krystianne E. Avedian
             6,000
       6,000
0
Fred & Sandy Ayala
           10,000
     10,000
0
Kathie Baker
           50,000
     50,000
0
Jon Bales
           50,000
     50,000
0
Yvonne C. Bartling
          100,000
   100,000
0
Eric Belusa
          140,000
   140,000
0
Ronald Belusa
           50,000
     50,000
0

43

Andrew Berk
          110,000
   110,000
0
The Eugene W. Berk Living Trust dtd. 6/1/90  (4)
           50,000
     50,000
0
Michael D. Berk, Trustee of the Berk Family Trust U/D/T 2/18/93 (5)
          100,000
   100,000
0
Melissa Berler
           50,000
     50,000
0
John Joseph Bial
          315,000
   315,000
0
Connie Blankenship
           50,000
     50,000
0
Christopher V. Bonbright & Lisa C. Bonbright-TTEES O/T Christopher & Lisa Bonbright Trust Dtd. 8/2/95 (6)
          150,000
   150,000
0
Sharon Bonney
           70,000
     70,000
0
TMI Partners, LLC (7)
          500,000
   500,000
0
Edward Bouryng & Ester Bouryng
          200,000
   200,000
0
William E. Boyd
          100,000
   100,000
0
Chris Boyte
           15,000
     15,000
0
Doug Bradley
           20,000
     20,000
0
Lawrence J. Brenner, Trustee of the Lawrence J. Brenner Trust Agmt. Dtd. March 24,2005 (8)
           50,000
     50,000
0
Arthur & Margaret Briggs
          100,000
   100,000
0
Howard K. Brodwin
           20,000
     20,000
0
Lynn Elizabeth Brody Living Trust (9)
          250,000
   250,000
0
Michael Brown and Linda Engelsiepen
          100,000
   100,000
0
Scott C. Bublin
           50,000
     50,000
0
Frank L. Buckley
          250,000
   250,000
0
Jason W. Callaway
          100,000
   100,000
0
Eric M. Campbell
          500,000
   500,000
0
Michael Canales
           50,000
     50,000
0
Rachel M. Capelouto
           50,000
     50,000
0
Randolph and J. Denise Capri Trust (10)
          100,000
   100,000
0
Gary R. Carlson Trust dated 5/3/91 (11)
          100,000
   100,000
0
Christopher Jamie Carr and Susan Lettween Carr
          100,000
   100,000
0
Robert J. Castillo
           10,000
     10,000
0
Robert Cavalleri
          150,000
   150,000
0
Lisa Cheek
           50,000
     50,000
0
Jeffrey Chiprin
           50,000
     50,000
0
Keith Chow & Chui Chow
           50,000
     50,000
0
Steven Chow and Alicia Chow
          150,000
   150,000
0
Robert Christian and Yerina S. Christian
           50,000
     50,000
0
John Scott Ciganko
           50,000
     50,000
0
Patricia Clipper
           50,000
     50,000
0
Brett J. Cohen
          100,000
   100,000
0
Mitchell B. Cohen and Anna Marie Cohen
           50,000
     50,000
0
Albert Andy Cohn and Vivian Cohn
           90,000
     90,000
0

44

Joanna and Timothy Collins
          100,000
   100,000
0
Rayann Congrove and Rebecca E.M. Williams
           50,000
     50,000
0
Kimberly E. Conlin and James P. Laware
           75,000
     75,000
0
Christopher J. Cook
           50,000
     50,000
0
Klava Cousin
           50,000
     50,000
0
Crane Family Trust of 1989 (12)
          150,000
   150,000
0
Stacia Crawford
             5,000
       5,000
0
Bradford Creger
          300,000
   300,000
0
Bradford Creger or Sheri Creger, Trustees of the Brad  & Sheri Creger Living Trust dtd 10/30/04 (13)
       2,125,000
 2,125,000
0
Sheri Creger
          425,000
   425,000
0
William D. or Cheri D. Curren
           50,000
     50,000
0
Daniel S. Dagg
           50,000
     50,000
0
Erik and Merin Dahlerbruch
           50,000
     50,000
0
Randall J. Dean
          300,000
   300,000
0
Luka DeKelaita
           20,000
     20,000
0
Victor L. Delpine
          400,000
   400,000
0
Spree DeSha
          100,000
   100,000
0
Harinder Dhillon
          400,000
   400,000
0
Terry Divyak
           50,000
     50,000
0
Terry Divyak and Rosanne Balcazar
          400,000
   400,000
0
Nicholas J. Doko and Lauren A. Doko
           50,000
     50,000
0
Denny Dunlap
           50,000
     50,000
0
James H. Dupont
          200,000
   200,000
0
Scott E. Dyke
          295,750
   295,750
0
Perry Engel and Donna Engel
           15,000
     15,000
0
Paula E. Eylar Living Trust 2006 (14)
          200,000
   200,000
0
Mary E. Falso
           20,000
     20,000
0
J. Mark Ferrara and Maria A. Vachula-Ferrara
       3,000,000
 3,000,000
0
Fiorito Family Trust (15)
          150,000
   150,000
0
Robert J. Fisher
          150,000
   150,000
0
Phil Fistori and Ingrid M. Enoex-Fistori
           50,000
     50,000
0
Florence Franco
           50,000
     50,000
0
Amy L. Frazer & Franklin W. Frazer
          100,000
   100,000
0
Freedman Living Trust dated September 29, 2003 (16)
           50,000
     50,000
0
Ronald H. Friedman
          250,000
   250,000
0
Next Venture, Inc. dba:  Sierra Group (17)
          100,000
   100,000
0
Taisei Fujimura
          100,000
   100,000
0
Russell L. Furie
          100,000
   100,000
0

45

Howard and Alice Gamse
           50,000
     50,000
0
Susan B. Garber
          100,000
   100,000
0
Stephan O. Garden
          100,000
   100,000
0
Daniel A. Garrett
           30,000
     30,000
0
Dan Gense
           12,000
     12,000
0
Laura Gerritsen
           50,000
     50,000
0
Amy E. Gibbons and Claudia J. Hoover,
           50,000
     50,000
0
Aaron L. Gilbert
          150,000
   150,000
0
Jill A. Goldner
           50,000
     50,000
0
California Quintet LLC (18)
       1,000,000
 1,000,000
0
Donald A. Goldstein
           50,000
     50,000
0
Scott Goligoski
          250,000
   250,000
0
Dawn M. Gomez
           10,000
     10,000
0
Tommy P. and Dawn M. Gomez
           80,000
     80,000
0
Mruthyunjaya Gonchigar
          100,000
   100,000
0
Steven W. and Mary G. Gordon
          160,000
   160,000
0
Matthew Gross
          100,000
   100,000
0
Jeffrey A. Grossman
          300,000
   300,000
0
William L. Guggemos, Sr. & Nancy A. Guggemos
           10,000
     10,000
0
Caryl E. Hamilton
           50,000
     50,000
0
Mildred B. Hamilton
           50,000
     50,000
0
James Hammond and Linda Strout
           50,000
     50,000
0
Greg & Carol Hampson
          500,000
   500,000
0
Larry and Jeri Hannah
          100,000
   100,000
0
Robert Hanning and Amy Welsh Hanning
           50,000
     50,000
0
Lindsay and Terry Harding
           70,000
     70,000
0
C & R Consultants, Inc. Pension Plan (19)
           50,000
     50,000
0
Joel & Wendy Hecht
          125,000
   125,000
0
Software Technologies, LLC Defined Benefit Retirement Trust (20)
          125,000
   125,000
0
Jason A. Heeney
           50,000
     50,000
0
Hein Family Trust, Ronald Lee Hein / TTEE, Andrea P. Hein, TTEE (21)
           75,000
     75,000
0
Ronald D. Hejnal & Barbara A. Hejnal,
          100,000
   100,000
0
The Held Surviving Spouse Trust (22)
          500,000
   500,000
0
Tonny K. Ho
          400,000
   400,000
0
Paul Hoen and Susan Hoen
          100,000
   100,000
0

46

Christopher Horton
             5,000
       5,000
0
Hosaka Revocable Trust 2006 (23)
          100,000
   100,000
0
Shannon and Richard Howard
          120,000
   120,000
0
Lynlee Bybee-Hughes
           15,000
     15,000
0
Ben & Maureen Hunter
          400,000
   400,000
0
Brian Inerfeld
           50,000
     50,000
0
Inerfeld Family Limited Partnership (24)
          100,000
   100,000
0
Dean Janes
          118,500
   118,500
0
Donn & Candace Janes
          100,000
   100,000
0
Kathryn Janes and Wendy L. Whitaker
           50,000
     50,000
0
Michael Jaramillo
           80,000
     80,000
0
Lynn Joffe & Richard Anderson
           75,000
     75,000
0
Janet A. Johnson
          100,000
   100,000
0
James Kirk Kahla
          100,000
   100,000
0
Tim Kaiser
          100,000
   100,000
0
Gregory or Diana Kalaitzian
           50,000
     50,000
0
Jamila Kanan-Cioffi
           55,000
     55,000
0
Kevin A. Karo & Stefanie Karo
          100,000
   100,000
0
Larry J. Kaufman
          700,000
   700,000
0
Stanley K. Kawanishi and Carol M. Kawanishi
          500,000
   500,000
0
Victoria Keller
           50,000
     50,000
0
Susan Kelly
          250,000
   250,000
0
Ronald Kenny and Francine Kenny
           50,000
     50,000
0
Jesse Thomas Kerns
           75,000
     75,000
0
Gregory A. Kerrebrock
          150,000
   150,000
0
Kessler Family Trust (25)
          100,000
   100,000
0
Adrian & Nazila Khaghan
       1,000,000
 1,000,000
0
Robert D. & Pamela M. King
          200,000
   200,000
0
Ken Kirshner
           50,000
     50,000
0
Morts Associates(26)
          500,000
   500,000
0
Randyl M. Kirshner, TTE and Gaby Kirshner Living Trust u/t/d 5/16/2003 (27)
          100,000
   100,000
0
KIG Inc. Retirement Trust (28)
          200,000
   200,000
0
Coral Kline
           50,000
     50,000
0

47

Gerald Kline and Melanie Miles
           50,000
     50,000
0
Charmaine Klohe
           80,000
     80,000
0
Richard J. and Linda Klug
          100,000
   100,000
0
Alice Kofman
           60,000
     60,000
0
Jeff F. Konecke
          100,000
   100,000
0
Israel L. Kunin Living Trust dated 3/17/00 (29)
          500,000
   500,000
0
Patrick L. and Terri A. Lamontagne
           40,000
     40,000
0
Janice Lansing
          300,000
   300,000
0
Edward C. Le Cara
           50,000
     50,000
0
David D. Lee
          100,000
   100,000
0
Jeffery K. Lee and Paula J. Lee
          100,000
   100,000
0
Dana Levy
          200,000
   200,000
0
Pamela Lindsay & Mark Lindsay
          100,000
   100,000
0
Robert W. Litter
       1,100,000
 1,100,000
0
Richard Loehr
           50,000
     50,000
0
Lawrence S. Long
           50,000
     50,000
0
Jennifer Lowe & Daniel Lowe
          100,000
   100,000
0
Jennifer Lowe & Jehanne Lowe
100,000 100,000 0
Monica T. Macera
           50,000
     50,000
0
Anne H. Madden
           50,000
     50,000
0
Kenneth Mantlo
           50,000
     50,000
0
Jonathan and Jacqueline Mates-Muchin
          100,000
   100,000
0
Dea McNealy
          350,000
   350,000
0
Dane F. Medley
          160,000
   160,000
0
Armen S. Megerdichian
          400,000
   400,000
0
Mark C. Mehrali
          110,000
   110,000
0
Mehrali Family Trust (30)
          100,000
   100,000
0
Jonathan C. Milrod
           50,000
     50,000
0
Yuichiro Bryan Miyamoto
           50,000
     50,000
0
Madeleine Mizrahi
          125,000
   125,000
0
Grigor Greg Mkrtchyan and Leana Mkrtchyan
          100,000
   100,000
0
Morton Family Trust (31)
          250,000
   250,000
0
Jerome & Carol Muchin Family Trust Dated 9/15/05 (32)
          100,000
   100,000
0
Michael and Emma Muchin
          150,000
   150,000
0

48

Andrea and Neil Muchin
           50,000
     50,000
0
Peter Murietta
           50,000
     50,000
0
Mark Myers
          100,000
   100,000
0
Brian Negri
           70,000
     70,000
0
David Negri
           30,000
     30,000
0
Kari A. Negri
          200,000
   200,000
0
Joselito Neri & Daisy Neri
             5,000
       5,000
0
Cable Neuhaus & April Neuhaus
           50,000
     50,000
0
Tue Duc Nguyen and Giao Q.T. Nguyen
          300,000
   300,000
0
Diane R. Noahr
           25,000
     25,000
0
James Odell
          200,000
   200,000
0
David and Desiree Ohman
          200,000
   200,000
0
Oliver Family Trust (33)
           50,000
     50,000
0
Clive Otsuka
           30,000
     30,000
0
Clive and Mari Otsuka
          300,000
   300,000
0
Albert R. and Virginia R. Ovadia Trustees of the Ovadia Family Trust (34)
          250,000
   250,000
0
Al and Joyce Parde
           50,000
     50,000
0
Eric Parde
          200,000
   200,000
0
Kristianna M. Parde
           50,000
     50,000
0
Anthony Peckham
          250,000
   250,000
0
J. Wade Pedrotti
           50,000
     50,000
0
Zachary & Jacqueline Pennington
          100,000
   100,000
0
Charles E. Perry Jr. & Sharon M. Eley
          100,000
   100,000
0
Daniel B. Peters & Elizabeth H. Peters Trustees of The Peters Family Trust dated April 30, 2004 (35)
          200,000
   200,000
0
Richard & Madeline Peters
          100,000
   100,000
0
Richard M. Peters and Madeline I. Peters as Trustees of the Peters Family Trust dtd. 11/2/80 (36)
          300,000
   300,000
0
Richard M. Peters, O.D., an Optometric Corporation profit sharing plan (37)
          200,000
   200,000
0
Marilyn Pipp
           50,000
     50,000
0
Daniel Pitlik
           40,000
     40,000
0
David Pitlik
           30,000
     30,000
0
Michael Pitlik
           30,000
     30,000
0

49

Helen R. Pomilio
           50,000
     50,000
0
Alan M. Quon
           50,000
     50,000
0
Junaid Quraishi
           50,000
     50,000
0
Danny Lee Ramsey and Barbara E. Ramsey
          200,000
   200,000
0
Kerwin & Laveta Rice
           50,000
     50,000
0
Glenn H. Rigberg
          100,000
   100,000
0
Lionel Rodriguez Jr.
          100,000
   100,000
0
Rongine Enterprises LLC (38)
           50,000
     50,000
0
Charlotte Rosenberg
17,208,575
17,208,575,
0
William Rude
          150,000
   150,000
0
Jon & Susan Safier
           50,000
     50,000
0
Ron Salvo
           50,000
     50,000
0
Travis F. Sanchez
          100,000
   100,000
0
John A. Sanderson
           50,000
     50,000
0
Andrew Sandler 1990 Trust (39)
          150,000
   150,000
0
Lisa Sandler
          700,000
   700,000
0
Marco Daniel Santos
          150,000
   150,000
0
Frederic Scheer & Jocelyne Scheer
          100,000
   100,000
0
The Mark Scheiner Living Trust (40)
          500,000
   500,000
0
Michael Schreibman & Michelle Schreibman,
           50,000
     50,000
0
Zoe & Barry J. Schulman
       1,000,000
 1,000,000
0
James Schwartzman & Karen Maxwell
           50,000
     50,000
0
Renaurd Avery Scott
           50,000
     50,000
0
Truman L. Scott
           50,000
     50,000
0
Sandeep Sherlekar
          100,000
   100,000
0
Royce Shimamoto
          100,000
   100,000
0
Andrea B. Simon
           50,000
     50,000
0
Zamira Kanan Singer
           50,000
     50,000
0
Eric Slaim
          100,000
   100,000
0
Danon Slinkard
           75,000
     75,000
0
Damian Smith
          200,000
   200,000
0
Karen A. Smith
          110,000
   110,000
0
Howard J. Smuckler
          750,000
   750,000
0
Herbert V. Sorell & Kim C. Sorell
          200,000
   200,000
0
Sam & Nancy Spear
          100,000
   100,000
0
Sam Spear
          100,000
   100,000
0

50

Russell B. Spencer
          110,000
   110,000
0
Warren Dale Spencer
           90,000
     90,000
0
Eric David Spratt
           50,000
     50,000
0
Donald G. Sproat
           75,000
     75,000
0
Scott & Heidi Steele
           50,000
     50,000
0
Vernon Christopher Steele
           50,000
     50,000
0
Anthony R. Stella
          100,000
   100,000
0
Gary Stephenson
           50,000
     50,000
0
Kevin & Vicki Stringer
           50,000
     50,000
0
Fenway Advisory Group
       1,500,000
 1,500,000
0
Jeffrey S. Swartz & Donna F. Swartz
           50,000
     50,000
0
Stanley & Elaine Swartz Trust est. under agmt 10/7/1982 (41)
          100,000
   100,000
0
Craig M. Taggart
           20,000
     20,000
0
Bruce H. Tashjian
          100,000
   100,000
0
Bryan Tashjian
           50,000
     50,000
0
Damyon and Pattie Tashjian
           75,000
     75,000
0
Edward Tashjian
           50,000
     50,000
0
Gregory Tashjian
           50,000
     50,000
0
Sona Tashjian
           50,000
     50,000
0
Laurie & Walter Tayenaka
           30,000
     30,000
0
M. Lewis Temares & Louise Temares
          100,000
   100,000
0
Steve Timmerman & Jeannie Melancon
           70,000
     70,000
0
Scott Piwonka-Totten
           50,000
     50,000
0
April M. Tronson
           10,000
     10,000
0
Trust of Charles E. & Mary Jane Tronson dated July 20, 1982 (42)
          250,000
   250,000
0
Daniel C. Tronson & Ellen S. Tronson
          500,000
   500,000
0
Dane Tronson
           50,000
     50,000
0
David S. Tronson
          320,000
   320,000
0
Jennifer N. Tronson
           10,000
     10,000
0
John Tronson
          100,000
   100,000
*
Steven Powers Tronson and Alicia Jane Tronson
          100,000
   100,000
0
Mauricia Valadez
           50,000
     50,000
0
Wilmer Valderrama
          200,000
   200,000
0
Marika Van Adelsberg
          100,000
   100,000
0

51

Emmanuel C. Vasilomanolakis
          210,000
   210,000
0
Aaron & Dawn Vest
          100,000
   100,000
0
Scott Wagner
           20,000
     20,000
0
Carol Warfield
           50,000
     50,000
0
Thomas L. Webb and Miriam R. Webb
          200,000
   200,000
0
Richard Weingart & Elizabeth Weingart
          300,000
   300,000
0
Randy J. Weinzoff
           50,000
     50,000
0
Tammy Weinzoff
          110,000
   110,000
0
Weinzoff Family Trust
          100,000
   100,000
0
Graham G. Weiss
          250,000
   250,000
0
Faryl E. Weisser
           70,000
     70,000
0
Troy D. Wiles
          100,000
   100,000
0
Dwane Winchester
           50,000
     50,000
0
Malissa Wise
           50,000
     50,000
0
Lisa Christine Saiki Wong Revocable Trust (43)
          250,000
   250,000
0
Russell D. Wong Revocable Trust (44)
          750,000
   750,000
0
Wyman & Isaacs Profit Sharing Plan (45)
          250,000
   250,000
0
Robert Zenner
           50,000
     50,000
0

 
(1) All of the selling stockholders purchased our shares pursuant to our October 2006 Private Placement Subscription Agreement, described below.
 
(2) Assumes that all securities will be sold.
 
(3) In accordance with rule 13d-3 under the securities exchange act of 1934, Niki Anagnos, as trustee, may be deemed a control person of the shares owned by such entity, with final voting power and investment control over such shares.

(4) In accordance with rule 13d-3 under the securities exchange act of 1934, Eugene Berk, as trustee, may be deemed a control person of the shares owned by such entity, with final voting power and investment control over such shares.

52

(5) In accordance with rule 13d-3 under the securities exchange act of 1934, Michael D. Berk, as trustee, may be deemed a control person of the shares owned by such entity, with final voting power and investment control over such shares.

(6) In accordance with rule 13d-3 under the securities exchange act of 1934, Christopher Bonbright, as trustee, may be deemed a control person of the shares owned by such entity, with final voting power and investment control over such shares.

(7) In accordance with rule 13d-3 under the securities exchange act of 1934, Melissa Bordy  may be deemed a control person of the shares owned by such entity, with final voting power and investment control over such shares.

(8) In accordance with rule 13d-3 under the securities exchange act of 1934, Lawrence J. Brenner, as trustee, may be deemed a control person of the shares owned by such entity, with final voting power and investment control over such shares.

(9) In accordance with rule 13d-3 under the securities exchange act of 1934, Lynn Brody, as trustee, may be deemed a control person of the shares owned by such entity, with final voting power and investment control over such shares.

(10) In accordance with rule 13d-3 under the securities exchange act of 1934, Randolph Capri, as trustee, may be deemed a control person of the shares owned by such entity, with final voting power and investment control over such shares.

(11) In accordance with rule 13d-3 under the securities exchange act of 1934, Gary Carlson, as trustee, may be deemed a control person of the shares owned by such entity, with final voting power and investment control over such shares.

(12) In accordance with rule 13d-3 under the securities exchange act of 1934, Bryan G. Crane, as trustee, may be deemed a control person of the shares owned by such entity, with final voting power and investment control over such shares.

(13) In accordance with rule 13d-3 under the securities exchange act of 1934, Sheri A. Creger, as co-trustee, may be deemed a control person of the shares owned by such entity, with final voting power and investment control over such shares.

(14) In accordance with rule 13d-3 under the securities exchange act of 1934, Paula E. Eylar, as trustee, may be deemed a control person of the shares owned by such entity, with final voting power and investment control over such shares.

(15) In accordance with rule 13d-3 under the securities exchange act of 1934, Daniel J. Fiorito, as trustee, may be deemed a control person of the shares owned by such entity, with final voting power and investment control over such shares.

53

(16) In accordance with rule 13d-3 under the securities exchange act of 1934, Douglas M. Freedman, as co-trustee, may be deemed a control person of the shares owned by such entity, with final voting power and investment control over such shares.

(17) In accordance with rule 13d-3 under the securities exchange act of 1934, Carl Frommer may be deemed a control person of the shares owned by such entity, with final voting power and investment control over such shares.

(18) In accordance with rule 13d-3 under the securities exchange act of 1934, Russell  Goldsmith may be deemed a control person of the shares owned by such entity, with final voting power and investment control over such shares

(19) In accordance with rule 13d-3 under the securities exchange act of 1934, Carol Haskin may be deemed a control person of the shares owned by such entity, with final voting power and investment control over such shares

(20) In accordance with rule 13d-3 under the securities exchange act of 1934, Joel B. Hecht, as trustee, may be deemed a control person of the shares owned by such entity, with final voting power and investment control over such shares.

(21) In accordance with rule 13d-3 under the securities exchange act of 1934, Andrea P. Hein, as trustee, may be deemed a control person of the shares owned by such entity, with final voting power and investment control over such shares.

(22) In accordance with rule 13d-3 under the securities exchange act of 1934, Harold A. Held, as trustee, may be deemed a control person of the shares owned by such entity, with final voting power and investment control over such shares.

(23) In accordance with rule 13d-3 under the securities exchange act of 1934, Todd Hosaka, as trustee, may be deemed a control person of the shares owned by such entity, with final voting power and investment control over such shares.

(24) In accordance with rule 13d-3 under the securities exchange act of 1934, Ivan Inerfeld may be deemed a control person of the shares owned by such entity, with final voting power and investment control over such shares.

(25) In accordance with rule 13d-3 under the securities exchange act of 1934, Mort Kessler, as trustee, may be deemed a control person of the shares owned by such entity, with final voting power and investment control over such shares.

(26) In accordance with rule 13d-3 under the securities exchange act of 1934, Morton Kirshner may be deemed a control person of the shares owned by such entity, with final voting power and investment control over such shares.

54

(27) In accordance with rule 13d-3 under the securities exchange act of 1934, Randy Kirshner, as trustee, may be deemed a control person of the shares owned by such entity, with final voting power and investment control over such shares.

(28) In accordance with rule 13d-3 under the securities exchange act of 1934, Randy Kirshner, as co-trustee, may be deemed a control person of the shares owned by such entity, with final voting power and investment control over such shares.

(29) In accordance with rule 13d-3 under the securities exchange act of 1934, Israel L. Kunin, as trustee, may be deemed a control person of the shares owned by such entity, with final voting power and investment control over such shares.

(30) In accordance with rule 13d-3 under the securities exchange act of 1934, Lavender Mehrali & Mehdi Mehrali, as co- trustees, may be deemed a control person of the shares owned by such entity, with final voting power and investment control over such shares.

(31) In accordance with rule 13d-3 under the securities exchange act of 1934, Lon Morton, as trustee, may be deemed a control person of the shares owned by such entity, with final voting power and investment control over such shares.

(32) In accordance with rule 13d-3 under the securities exchange act of 1934, Jerome D. Muchin, as trustee, may be deemed a control person of the shares owned by such entity, with final voting power and investment control over such shares.

(33) In accordance with rule 13d-3 under the securities exchange act of 1934, Michael A. Oliver, as trustee, may be deemed a control person of the shares owned by such entity, with final voting power and investment control over such shares.

(34) In accordance with rule 13d-3 under the securities exchange act of 1934, Albert Ovadia and Virginia Ovadia, as co-trustees, may be deemed a control person of the shares owned by such entity, with final voting power and investment control over such shares.

(35) In accordance with rule 13d-3 under the securities exchange act of 1934, Daniel B. Peters may be deemed a control person of the shares owned by such entity, with final voting power and investment control over such shares.

(36) In accordance with rule 13d-3 under the securities exchange act of 1934, Richard Peters may be deemed a control person of the shares owned by such entity, with final voting power and investment control over such shares.

55

(37) In accordance with rule 13d-3 under the securities exchange act of 1934, Richard Peters, as trustee, may be deemed a control person of the shares owned by such entity, with final voting power and investment control over such shares.

(38) In accordance with rule 13d-3 under the securities exchange act of 1934, Rondine Volpert and Regina Modica may be deemed a control person of the shares owned by such entity, with final voting power and investment control over such shares.

(39) In accordance with rule 13d-3 under the securities exchange act of 1934, Larry Sandler, as trustee, may be deemed a control person of the shares owned by such entity, with final voting power and investment control over such shares.

(40) In accordance with rule 13d-3 under the securities exchange act of 1934, Mark Scheiner, as trustee, may be deemed a control person of the shares owned by such entity, with final voting power and investment control over such shares.

(41) In accordance with rule 13d-3 under the securities exchange act of 1934, Stanley Swartz, as trustee, may be deemed a control person of the shares owned by such entity, with final voting power and investment control over such shares.

(42) In accordance with rule 13d-3 under the securities exchange act of 1934, Charles E. Tronson, as trustee, may be deemed a control person of the shares owned by such entity, with final voting power and investment control over such shares.

(43) In accordance with rule 13d-3 under the securities exchange act of 1934, Lisa C.S. Wong, as trustee, may be deemed a control person of the shares owned by such entity, with final voting power and investment control over such shares.

(44) In accordance with rule 13d-3 under the securities exchange act of 1934, Russell D. Wong, as trustee, may be deemed a control person of the shares owned by such entity, with final voting power and investment control over such shares.

(45) In accordance with rule 13d-3 under the securities exchange act of 1934, Bruce Isaacs & Robert A. Wyman, as co-trustees, may be deemed a control person of the shares owned by such entity, with final voting power and investment control over such shares.

56

TRANSACTIONS WITH THE SELLING STOCKHOLDERS PURSUANT TO WHICH THEY ACQUIRED THEIR SHARES

OCTOBER 2006 PRIVATE PLACEMENT

In October 2006, we entered into Subscription Agreements with various accredited investors (the “October 2006 Private Placement”) pursuant to which the investors subscribed to purchase an aggregate amount up to $4,904,725 in shares of our common stock, or a total of 49,047,250 shares, which we issued to the selling stockholders prior to the date of this prospectus.  We granted registration rights to our investors in our October 2006 Private Placement.

On July 1, 2007, we entered into a Cancellation of Indebtedness Agreement with CEO Scott Mitchell Rosenberg, pursuant to which we agreed to issue 17,208,575 shares in exchange for canceling $1,625,000 in long-term debt plus $95,857.50 in accrued interest for said debt.

Mr. Rosenberg directed the shares to be issued in the name of Charlotte Rosenberg, his mother, from whom he personally borrowed the funds, which he then loaned to the Company’s predecessor in interest, Platinum Studios LLC.

LEGAL MATTERS
 
Sichenzia Ross Friedman Ference LLP, New York, New York will issue an opinion with respect to the validity of the shares of common stock being offered hereby.
  
EXPERTS
 
Our financial statements appearing in this prospectus and registration statement have been audited by HJ Associates & Consultants, LLP, independent registered public accountants, as set forth on their report thereon appearing elsewhere in this prospectus, and are included in reliance upon such report given upon the authority of such firm as experts in accounting and auditing.
AVAILABLE INFORMATION
 
We have filed a registration statement on Form SB-2 under the Securities Act of 1933, as amended, relating to the shares of common stock being offered by this prospectus, and reference is made to such registration statement. This prospectus constitutes the prospectus of Platinum Studios, Inc., filed as part of the registration statement, and it does not contain all information in the registration statement, as certain portions have been omitted in accordance with the rules and regulations of the Securities and Exchange Commission.
 
We are subject to the informational requirements of the Securities Exchange Act of 1934 which requires us to file reports, proxy statements and other information with the Securities and Exchange Commission. Such reports, proxy statements and other information may be inspected at public reference facilities of the SEC at 100 F Street N.E. Washington, D.C. 20549. Copies of such material can be obtained from the Public Reference Section of the SEC at 100 F Street N.E. Washington, D.C. 20549 at prescribed rates. Because we file documents electronically with the SEC, you may also obtain this information by visiting the SEC's Internet website at http://www.sec.gov.

57

INDEX TO FINANCIAL STATEMENTS
 
PLATINUM STUDIOS, INC.
 
FINANCIAL STATEMENTS
 
CONTENTS
 
 
 
Page  
 
 
 
 INTERIM FINANCIAL STATEMENTS: SIX MONTHS ENDED JUNE 30, 2007
 
 
  Balance Sheet as of June 30, 2007 (Unaudited)
 
F-1
  Statements of Operations for the six months ended June 30, 2007 (Unaudited)
 
F-2
  Statements of Stockholders' Equity as of June 30, 2007
 
F-3
  Statements of Cash Flows for the six months ended June 30, 2007
 
F-4
  Notes to Financial Statements
 
F-5
 
 
 
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
 
 
 FOR THE YEARS ENDED DECEMBER 31, 2006 AND 2005
 
 
   Balance Sheets as of December 31, 2006 and 2005
 
F-13
   Statements of Operations for the years ended December 31, 2006 and 2005
 
F-14
   Statements of Stockholders' Equity as of December 31, 2006
 
F-15
   Statements of Cash Flows for the years ended December 31, 2006 and 2005
 
F-16
   Notes to Financial Statements
 
F-17 
 
 



PLATINUM STUDIOS, LLC
BALANCE SHEETS
 
 
 
 
     
Platinum Studios, Inc.
     
Platinum Studios, LLC
 
   
 June 30,
2007
   
 December 31, 2006
 
   
 (unaudited)
       
             
Current assets:
           
Cash
  $
423,256
    $
331,435
 
Accounts receivable, net
   
9,518
     
-
 
Inventories, net
   
55,131
     
-
 
Prepaid expenses
   
215,224
     
105,603
 
Other Assets
   
1,994
     
12,100
 
Total current assets
   
705,123
     
449,138
 
                 
Property and equipment, at cost, net
   
295,846
     
268,981
 
Other assets
               
Web sites
   
64,000
     
64,000
 
Deposits
   
39,704
     
39,404
 
Library of character rights, net
   
273,913
     
319,565
 
Total other assets
   
377,617
     
422,969
 
                 
Total assets
  $
1,378,586
    $
1,141,088
 
                 
LIABILITIES AND STOCKHOLDERS' EQUITY/(DEFICIT)
               
                 
Current liabilities:
               
Accounts payable
  $
241,918
    $
231,849
 
Accrued expenses
   
133,410
     
192,118
 
Deferred revenue
   
-
     
750,000
 
Short-term notes payable to shareholder
   
745,850
     
745,925
 
Related party payable
   
193,079
     
243,079
 
Capital leases payable, current
   
72,190
     
55,820
 
Total current liabilities
   
1,386,447
     
2,218,791
 
                 
Long-term liabilities:
               
Long-term notes payable to shareholder
   
3,669,285
     
3,584,260
 
Accrued interest due to shareholder
   
132,271
     
75,031
 
Capital leases payable, non-current
   
142,459
     
148,721
 
Total long-term liabilities
   
3,944,015
     
3,808,012
 
                 
Total liabilities
   
5,330,462
     
6,026,803
 
                 
Stockholders' equity/(deficit):
               
Common stock, $.0001 par value, 500,000,000 shares authorized,
               
184,047,250 issued, and 158,056,000 outstanding at June 30, 2007
   
18,405
     
15,806
 
and December 31, 2006, respectively
               
Additional paid-in capital
   
1,787,172
      (628,741 )
Retained earnings/(deficit)
    (5,757,453 )     (4,272,780 )
Total stockholders' equity/(deficit)
    (3,951,876 )     (4,885,715 )
                 
Total liabilities and stockholders' equity/(deficit)
  $
1,378,586
    $
1,141,088
 
 
The accompanying footnotes are an integral part of these financial statements

F-1

 
PLATINUM STUDIOS, INC. FORMERLY
PLATINUM STUDIOS, LLC
STATEMENT OF OPERATIONS
(unaudited)


     
Platinum Studios, Inc.
     
Platinum Studios, LLC 
 
         
     
Six Months Ended June 30,    
 
     
2007 
     
2006 
 
                 
Net revenue
  $
1,676,800
    $
30,500
 
                 
Costs and expenses:
               
Cost of revenues
   
114,613
     
-
 
Operating expenses (excluding depreciation expense)
   
2,367,954
     
1,275,419
 
Research and development
   
457,854
     
310,205
 
Depreciation and amortization expense
   
80,665
     
11,035
 
Total costs and expenses
   
3,021,086
     
1,596,659
 
                 
Operating income/(loss)
    (1,344,286 )     (1,566,159 )
                 
Other income/(expense)
               
Interest income/(expense)
    (140,387 )     (191,710 )
Total other income/(expense)
    (140,387 )     (191,710 )
                 
Net income/(loss)
  $ (1,484,673 )   $ (1,757,869 )