It is believed the recorded music industry is undergoing significant change, with the primary means of distribution transitioning from physical formats like compact disc to digital formats over the Internet and wireless and cable networks. It is believed this change is occurring as a result of the popularity of portable digital music players and consumer acceptance and the music industry’s endorsement of legitimate digital music sales.

The legitimate digital music industry emerged in 2003 with the introduction of iTunes and other online music stores. Since iTunes introduction, there have been over 21 million iPods sold, with 6.2 million sold in the quarter ended June 25, 2005. iTunes is the dominant online music store with over 75% market share. The digital music market consists of primarily five significant online music stores offering music recordings in over 20 countries.

Industry sources estimate that the worldwide recorded music market was approximately $32 billion in 2004 and the digital music segment of this market represented approximately 1% in 2004 and it is expected to represent approximately 25% in 2009. The emergence of digital music has created additional outlets such as the purchase of digital music and other sound recordings through mobile phones. Consumers now purchase music in many different formats, including physical formats such as compact disc from traditional music and e-commerce retailers and digital formats through download or subscription services from online music stores.

Purchase of music in digital format offers many advantages to consumers over compact disc. Online music stores generally offer a larger music selection than traditional music retailers and also offer the ability to sample all of their digital music selections before purchase; are accessible 24-hours every day; offer the ability to purchase digital music as a single instead of an entire album; and enable the purchase of music in an easily portable format.

The Company acts as a volume supplier that aggregates digital music recordings from numerous content owners for the online music stores. The Company also increases the number and diversity of music recordings available for sale by the online music stores.

The Company actively seeks to identify the owners of music and other sound recordings and attempt to acquire the digital rights to such recordings worldwide. The Company focuses on acquisition by purchase or license of music recordings from owners of large numbers of recordings. The Company also allows smaller content owners to provide the Company with their music recordings for distribution in a cost-effective manner through its web-based self-service application called the Digital OnRamp. The Company uses its network of contacts in the music industry to identify and locate owners of content.

The Company generates revenue from its digital music rights by entering into agreements with online music stores that sells its music recordings to consumers. The Company currently has contractual relationships with leading online music stores, including those offering digital downloads and digital music subscription services.

The Company creates theme-based compilations and other combinations of the Company’s recordings for sales at the online music stores to increase the number of digital download of certain of its music recordings. The Company’s experience has been that such efforts has provided a competitive advantage when negotiating agreements with content owners and have increased the placement of its content on certain of the online music stores.

The Company seeks to purchase additional technology and expand and develop its own technologies for use in the business to process and market its contents and prepare summary reports. The Company’s executive offices are located in Sacramento, California.

Cost of revenue increased from $1.2 thousand, or 73.4% of revenue, for the period from inception to June 30, 2004 to $212.7 thousand, or 95.1% of revenue, for the six months ended June 30, 2005.

Operating expenses increased from $8.6 thousand, or 503.7% of revenue, for the period from inception to June 30, 2004, to $871.5 thousand, or 389.6 % of revenue, for the six months ended June 30, 2005.

Net loss increased from $9.0 thousand, or 523.4% of revenue for the period from inception to June 30, 2004, to $866.1 thousand, or 387.3% of revenue, for the six months ended June 30, 2005.