THREE MONTH AND NINE MONTH PERIOD ENDED DECEMBER 31, 2005 AS COMPARED TO THREE MONTH AND NINE MONTHS ENDED DECEMBER 31, 2004
RESULTS OF OPERATIONS
NET REVENUE
We generated consolidated net revenues of $148,398 for the three month period ended December 31, 2005, as compared to $167,233 for the three month period ended December 31, 2004. The decrease in revenues for this quarter when compared to the same quarter last year is due to the loss of one client of Hotel Movie Network. We generated consolidated net revenues of $419,005 for the nine month period ended December 31, 2005, as compared to $533,648 for the nine month period ended December 31, 2004. The decrease in revenues for the nine months when compared to the same period last year is due to the loss of a client of Hotel Movie Network.
COST OF SALES
We incurred cost of sales of $43,390 for the three month period ended December 31, 2005, as compared to $87,669 for the three month period ended December 31, 2004. Our cost of sales decreased for this quarter when compared to the same quarter last year is due to the loss of one client of Hotel Movie Network. We incurred cost of sales of $150,487 for the nine month period ended December 31, 2005, as compared to $248,012 for the nine month period ended December 31, 2004. Our cost of sales decreased for the nine months when compared to the same period last year is due to the loss of a client of Hotel Movie Network.
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GROSS PROFIT
We generated gross profit of $105,008 for the three month period ended December 31, 2005, as compared to $79,564 for the three month period ended December 31, 2004. The increase in gross profit for this quarter when compared to the same quarter last year is due to the decrease in programming costs. We generated gross profit of $268,518 for the nine month period ended December 31, 2005, as compared to $285,636 for the nine month period ended December 31, 2004. The decrease in gross profit for the nine months when compared to the same period last year is due to the loss of a client of Hotel Movie Network.
GENERAL, ADMINISTRATIVE AND SELLING EXPENSES
We incurred selling, general and administration costs of $389,774 for the three month period ended December 31, 2005 as compared to $1,679,284 for the three month period ended December 31, 2004, respectively. Selling, general and administration expenses in the current period decreased due to the decrease in professional and consulting fees because, in order to reduce our costs and conserve our common stock we terminated most of our consulting agreements in 2005.We incurred selling, general and administration costs of $1,000,876 for the nine month period ended December 31, 2005 as compared to $3,188,916 for the nine month period ended December 31, 2004, respectively. Selling, general and administrative expenses in the current period decreased due to the decrease in professional, consulting fees and programming costs because, in order to reduce our costs and conserve our common stock we terminated most of our consulting agreements in 2005.
NET INCOME (LOSS)
We had a loss before taxes of $318,516 for the three month period ended December 31, 2005 as compared to a loss before taxes of $1,672,330 for the three month period ended December 31, 2004. The decrease in loss is due to decrease in our expenses including professional, consulting fees and programming costs. We had a loss before taxes of $825,108 for the nine month period ended December 31, 2005 as compared to a loss of $3,037,230 for the nine month period ended December 31, 2004. The decrease in loss is due to the decrease in professional, consulting fees and programming costs.
BASIC AND DILUTED INCOME (LOSS) PER SHARE
Our basic and diluted income (loss) per share for the three month period ended December 31, 2005 was $(0.000 ) and compared to $(0.008) for the same period ended December 31, 2004. Our basic and diluted income (loss) per share for the nine month period ended December 31, 2005 was $(0.001) as compared to $(0.015) for the nine month period ended December 31, 2004 because, in order to reduce our costs and conserve our common stock we terminated most of our consulting agreements in 2005.
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LIQUIDITY AND CAPITAL RESOURCES
Our independent auditor has issued a "going concern" qualification as part of its opinion in the Audit Report dated August 1, 2005. We do not currently have sufficient capital to meet our cash needs. We will continue to need to raise additional funds to conduct our business activities in the next twelve months. We owe approximately $1,056,000 in current liabilities. Additionally, we currently estimate that we will need approximately $1,400,000 to continue operations through the end of the fiscal year 2006. These operating costs include general and administrative expenses and the deployment of inventory. Our plan is to first raise enough capital to retire our current obligations and then to raise funds which will allow us to expand the marketing of our products and services.
We are actively raising funds through equity transactions to proceed with the research and development of our business. Subsequent to December 31, 2005, in January 2006, we initiated an offering in Europe pursuant to Regulation S. Pursuant to this offering, we transferred 40,000,000 shares of common stock to a trustee for the sole purpose of selling shares in a Regulation S offering. We will receive the net proceeds from the sale of these shares and any shares of common stock not sold by the trustee will be returned to us upon our request.
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