-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, OUjnZn4VH7bSmpU+1UzATp8zqpaHNeg8c1rjanvjkWSNIerd/rLDZ7SvZcpSYX63 yLbF4pP+t5qOyD0KUm7bcQ== 0001144204-06-012248.txt : 20060330 0001144204-06-012248.hdr.sgml : 20060330 20060330061601 ACCESSION NUMBER: 0001144204-06-012248 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 5 CONFORMED PERIOD OF REPORT: 20050930 FILED AS OF DATE: 20060330 DATE AS OF CHANGE: 20060330 FILER: COMPANY DATA: COMPANY CONFORMED NAME: WINSONIC DIGITAL MEDIA GROUP LTD CENTRAL INDEX KEY: 0001120411 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-BUSINESS SERVICES, NEC [7389] IRS NUMBER: 522236253 STATE OF INCORPORATION: NV FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10QSB SEC ACT: 1934 Act SEC FILE NUMBER: 000-32231 FILM NUMBER: 06720544 BUSINESS ADDRESS: STREET 1: 10120 S. EASTERN AVENUE STREET 2: SUITE 200 CITY: LAS VEGAS STATE: NV ZIP: 89052 BUSINESS PHONE: (702) 492-1282 MAIL ADDRESS: STREET 1: 10120 S. EASTERN AVENUE STREET 2: SUITE 200 CITY: LAS VEGAS STATE: NV ZIP: 89052 FORMER COMPANY: FORMER CONFORMED NAME: WINSONIC DITIGAL MEDIA GROUP LTD DATE OF NAME CHANGE: 20041129 FORMER COMPANY: FORMER CONFORMED NAME: MEDIA & ENTERTAINMENT COM INC DATE OF NAME CHANGE: 20001228 10QSB 1 v038652_10qsb.htm
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-QSB

(Mark One) 
 
x QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarter ended September 30, 2005
 
o TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from _______ to _______
 
Commission file number 000-32231
 
WINSONIC DIGITAL MEDIA GROUP, LTD.
(Name of small business issuer in its charter)
 
Nevada
52-2236253
(State or other jurisdiction of incorporation or organization)
(I.R.S. Employer Identification No)

101 Marietta Street, Suite 2600
Atlanta, GA.
 
30303
(Address of principal executive offices)
 
(Zip Code)
 
Issuer’s telephone number (404) 230-5705

(not applicable)
(former name, former address, if changed since last report)

Check whether the issuer: (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for past 90 days. Yes oNo  x

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). o

The issuer had 35,543,629 shares of common stock outstanding as of September 30, 2005
 
 


Quarterly Report on Form 10-QSB
Quarter Ended September 30, 2005

Table of Contents 
 
 
Page
 
 
 
 
 
Report of Independent Registered Public Accounting Firm
   
1
 
 
     
PART I - FINANCIAL INFORMATION
     
Item 1.  Financial Statements:
     
              Balance Sheet as of September 30, 2005 (Unaudited) and December 31, 2004
   
2
 
              Statement of Operations and Accumulated Deficit (Unaudited)
     
                      for the Three and Nine Months Ended September 30, 2005 and 2004
     
                      and from inception to September 30, 2005
   
3
 
              Statements of Cash Flows (Unaudited) for the Three and Nine Months
     
                     Ended  September 30, 2005 and 2004
     
                     and from inception to September 30, 2005
   
4
 
  Statement of Stockholders Deficit
    5  
              Notes to Financial Statements
   
6
 
Item 2.  Management's Discussion and Analysis or Plan of Operation
   
19
 
Item 3.  Controls and Procedures
   
24
 
 
     
PART II - OTHER INFORMATION
     
Item 1.  Legal Proceedings
    25  
Item 2.  Unregistered Sales of Equity Securities and Use of Proceeds     27  
Item 3.  Defaults Upon Senior Securities
    27  
Item 4.  Submission of Matters to a Vote of Security Holders 
    27  
Item 5.  Other Information
    28  
Item 6.  Exhibits and Reports on Form 8-K
    28  
 
     
SIGNATURES
   
28
 
 
     
EXHIBIT INDEX
   
29
 
 
     
 

 
iii


Report of Independent Registered Public Accounting Firm

 
To the Board of Directors
Winsonic Digital Media Group, Ltd.
Atlanta, Georgia
 
We have reviewed the accompanying balance sheet of Winsonic Digital Media Group, Ltd. (A Development Stage Company) as of September 30, 2005 and the related statements of operations, stockholders’ deficit and cash flows for the three and nine months ended September 30, 2005 and Inception to September 30, 2005, included in the accompanying Securities and Exchange Commission Form 10-QSB for the period ended September 30, 2005. These financial statements are the responsibility of the Company's management.
 
We conducted our review in accordance with standards established by the Public Company Accounting Oversight Board (United States). A review of interim financial information consists principally of applying analytical procedures to financial data and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with the standards of the Public Company Accounting Oversight Board (United States), the objective of which is the expression of an opinion regarding the financial statements as a whole. Accordingly, we do not express such an opinion.
 
Based on our review, we are not aware of any material modifications that should be made to the accompanying financial statements for them to be in conformity with accounting principles generally accepted in the United States.
 
The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 5, conditions exist which raise substantial doubt about the Company's ability to continue as a going concern. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
 

/s/ De Joya Griffith & Company, LLC
De Joya Griffith & Company, LLC
Las Vegas, Nevada
March 28, 2006
 
-1-

 
PART I - FINANCIAL INFORMATION

Item 1. Financial Statements
 
WINSONIC DIGITAL MEDIA GROUP, LTD.
(A DEVELOPMENT STAGE COMPANY)
BALANCE SHEETS
AS OF SEPTEMBER 30, 2005 & DECEMBER 31, 2004 (Restated)
(UNAUDITED)
 
   
Unaudited
 
Audited
 
   
9/30/2005
 
12/31/2004
 
       
(Restated)
 
ASSETS
 
           
ASSETS:
         
           
Current assets:
             
Cash
 
$
2,596
 
$
436,749
 
Deposit
   
78,000
   
82,490
 
 Total current assets
   
80,596
   
519,239
 
               
Fixed assets:
             
Computer equipment
   
1,583,474
   
1,577,269
 
Infrastructure
   
320,000
   
320,000
 
Software
   
165,515
   
160,000
 
Furniture & fixtures
   
13,040
   
13,040
 
Less: accumulated depreciation
   
(807,755
)
 
(550,955
)
 Total fixed assets
   
1,274,274
   
1,519,354
 
               
Equity Investment
   
2,000,000
   
 
               
TOTAL ASSETS
 
$
3,354,870
 
$
2,038,593
 
               
LIABILITIES AND STOCKHOLDERS' DEFICIT
               
LIABILITIES:
             
               
Current liabilities:
             
Accounts payable and accrued expenses
 
$
1,825,393
 
$
1,514,625
 
Accrued payroll and related taxes
   
1,232,925
   
781,575
 
Legal settlement liabilities
   
1,020,000
   
1,020,000
 
Loans payable
   
376,413
   
357,506
 
Loan payable -related party
   
568,603
   
683,726
 
Note payable
   
847,000
   
847,000
 
Accrued interest on notes payable
   
139,825
   
101,640
 
Derivative liability related to convertible debentures
   
116,163
   
652,254
 
Warrant liability related to convertible debentures
   
199,670
   
614,609
 
Convertible debentures
   
991,849
   
37,871
 
 Total current liabilities
   
7,317,841
   
6,610,806
 
               
Long-Term liabilities:
   
   
 
 Total long-term liabilities
   
   
 
               
TOTAL LIABILITIES
   
7,317,841
   
6,610,806
 
               
Stockholders' deficit:
             
Common stock, $0.001 par value, 50,000,000 shares
             
authorized, 35,543,629 and 33,620,884 shares issued and
             
outstanding at September 30, 2005 and December 31, 2004, respectively
   
35,544
   
33,621
 
Additional paid-in capital
   
5,159,672
   
2,918,261
 
Common stock payable, $1.00 per share
   
820,000
   
820,000
 
Accumulated deficit during development stage
   
(9,978,187
)
 
(8,344,095
)
 Total stockholders' deficit
   
(3,962,971
)
 
(4,572,213
)
               
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT
 
$
3,354,870
 
$
2,038,593
 
 
The accompanying notes to the financial statements should be
read in conjunction with these Balance Sheets.
-2-



WINSONIC DIGITAL MEDIA GROUP, LTD.
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF OPERATIONS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2005 & 2004
AND FROM INCEPTION TO
SEPTEMBER 30, 2005
(UNAUDITED)
 

   
For the quarter ended September 30,
 
For the nine months ended September 30,
 
Inception to
 
   
2005
 
2004
 
2005
 
2004
 
September 30, 2005
 
                       
                       
REVENUE
 
$
 
$
 
$
 
$
25,000
 
$
57,811
 
                                 
COST OF GOODS SOLD
   
40,232
   
11,933
   
273,946
   
256,119
   
981,902
 
                                 
GROSS PROFIT
   
(40,232
)
 
(11,933
)
 
(273,946
)
 
(231,119
)
 
(924,091
)
                                 
EXPENSES:
                               
Selling, general and administrative
   
224,604
   
452,139
   
776,904
   
589,047
   
3,797,546
 
Selling, general and administrative, related party
   
207,500
   
49,800
   
622,500
   
149,400
   
1,174,442
 
Consulting Services - related party
   
   
   
   
   
1,125,934
 
Depreciation and amortization expense
   
85,600
   
85,589
   
256,800
   
256,767
   
807,755
 
Total expenses 
   
517,704
   
587,528
   
1,656,204
   
995,214
   
6,905,677
 
                                 
OPERATING INCOME (LOSS)
   
(557,936
)
 
(599,461
)
 
(1,930,150
)
 
(1,226,333
)
 
(7,829,768
)
                                 
OTHER INCOME/(EXPENSES):
                               
Interest expense
   
(323,208
)
 
(15,457
)
 
(916,505
)
 
(46,371
)
 
(1,974,827
)
Legal Settlement Costs
   
   
   
   
   
(1,020,000
)
Unrealized gain on adjustment of derivative and warrant
                               
liability to fair value of underlying securities
   
157,210
         
1,212,102
         
760,239
 
Interest income
   
28
   
   
461
   
   
718
 
Other income(expenses)
   
   
   
   
43,095
   
85,451
 
Total other income/(expenses) 
   
(165,970
)
 
(15,457
)
 
296,058
   
(3,276
)
 
(2,148,419
)
                                 
NET LOSS BEFORE PROVISION FOR INCOME TAXES
   
(723,906
)
 
(614,918
)
 
(1,634,092
)
 
(1,229,609
)
 
(9,978,187
)
                                 
PROVISION FOR INCOME TAXES
   
   
   
   
   
 
                                 
NET LOSS
 
$
(723,906
)
$
(614,918
)
$
(1,634,092
)
$
(1,229,609
)
$
(9,978,187
)
                                 
Basic weighted average number of
                               
common shares outstanding
   
14,906,150
   
6,004,200
   
14,906,150
   
6,004,200
       
                                 
Net loss per basic and diluted common share
 
$
(0.05
)
$
(0.10
)
$
(0.11
)
$
(0.20
)
     

The accompanying notes to the financial statements should be
read in conjunction with these Balance Sheets.
 
-3-

 

WINSONIC DIGITAL MEDIA GROUP, LTD.
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS
ENDED SEPTEMBER 30, 2005 & 2004 AND FROM INCEPTION TO
SEPTEMBER 30,2005
(UNAUDITED)
 

   
 For the nine months ended September 30, 
 
Inception to
 
   
 2005
 
2004
 
September 30, 2005
 
                
CASH FLOWS FROM OPERATING ACTIVITIES:
              
Net (loss) 
 
$
(1,634,092
)
$
(1,229,610
)
$
(9,978,187
)
Adjustments to reconcile net loss
                   
to net cash used by operations: 
                   
 Depreciation
   
256,800
   
256,767
   
807,755
 
 Accretion of principal and interest related
                   
 to convertible debentures
   
826,801
   
   
864,672
 
 Unrealized gain (loss) on adjustment of derivative and warrant
                   
 liability to fair value of underlying securities
   
(1,212,102
)
 
   
(760,240
)
 Stock based compensation
   
243,334
   
   
1,739,647
 
Change in operating assets and liabilities:
                   
 (Increase) decrease in deposit
   
4,490
   
   
(78,000
)
 Increase (decrease) in bank overdraft
   
   
(4,205
)
 
 
 Increase in accounts payable and accrued expenses
   
310,769
   
436,705
   
2,069,364
 
 Increase (decrease) in accrued payroll and related taxes
   
451,349
   
287,342
   
1,232,924
 
 Increase in legal settlement liabilities
   
   
   
1,020,000
 
 Increase in interest payable
   
38,184
   
12,705
   
139,824
 
Net cash provided by (used in) operating activities
   
(714,467
)
 
(240,296
)
 
(2,942,241
)
                     
CASH FLOWS FROM INVESTING ACTIVITIES:
                   
                     
Purchase of fixed assets 
   
(11,720
)
 
   
(2,082,029
)
Net cash used in investing activities
   
(11,720
)
 
   
(2,082,029
)
                     
CASH FLOWS FROM FINANCING ACTIVITIES:
                   
Proceeds from loans payable  
   
18,907
   
240,789
   
407,913
 
Proceeds from loan payable - related party 
   
44,877
   
   
728,603
 
Payment on note payable - related party 
   
(160,000
)
 
   
(160,000
)
Proceeds from note payable - Digital Services 
   
 
             
 International, Inc.
   
   
   
847,000
 
Proceeds from convertible debentures 
   
388,250
   
   
1,203,250
 
Proceeds from warrants for common stock 
   
   
   
2,000,100
 
Net cash provided by financing activities
   
292,034
   
240,789
   
5,026,866
 
                     
NET INCREASE (DECREASE) IN CASH
   
(434,153
)
 
493
   
2,596
 
                     
CASH, BEGINNING OF PERIOD
   
436,749
   
   
 
                     
CASH, END OF PERIOD
 
$
2,596
 
$
493
 
$
2,596
 
                     
SUPPLEMENTARY INFORMATION:
                   
Interest paid 
 
$
 
$
 
$
 
Income taxes paid 
 
$
 
$
 
$
 
                     
NON-CASH INVESTING ACTIVITIES:                    
Stock based acquisition of equity investment
 
$ 
2,000,000
 
$
 
$
2,000,000
 

The accompanying notes to the financial statements should be
read in conjunction with these Balance Sheets.

 
-4-

 
WINSONIC DIGITAL MEDIA GROUP, LTD.
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF STOCKHOLDERS DEFICIT
 
 
                           
Accumulated
     
                       
 
 
Deficit
 
 
 
           
Additional
 
Common
 
During
 
Total
 
   
Preferred Stock
 
Common Stock
 
Paid-in
 
Stock
 
Development
 
Stockholders'
 
   
Shares
 
Amount
 
Shares
 
Amount
 
 Capital
 
Payable
 
Stage
 
Deficit
 
                                   
Balance, September 10, 2002 (Inception) - No Par Stock
   
10,000,000
 
$
   
10,000,000
 
$
 
$
       
$
 
$
 
                                                   
Reverse Merger - ReAcquisition of all outstanding shares
                                                 
of Winsonic Acquisition Sub, Inc. - No Par Stock (Recasted to inception)
   
(10,000,000
)
 
   
(10,000,000
)
 
                     
 
                                                   
Issuance of common stock to founder for services
         
   
6,004,200
   
6,004
   
               
6,004
 
                                                   
Balance, September 10, 2002 (Recasted)
   
   
   
6,004,200
   
6,004
   
   
         
6,004
 
                                                   
Issuance of stock warrants (December 26, 2002)
   
   
   
   
   
   
990,600
   
   
990,600
 
                                                   
Net loss
   
   
   
   
   
   
   
(647,417
)
 
(647,417
)
                                                   
Balance, December 31, 2002 (Restated)
   
   
   
6,004,200
   
6,004
   
   
990,600
   
(647,417
)
 
349,187
 
                                                   
Issuance of stock warrants
   
   
   
   
   
   
1,009,500
   
   
1,009,500
 
                                                   
Net loss
   
   
   
   
   
   
   
(1,905,884
)
 
(1,905,884
)
                                                   
Balance, December 31, 2003 (Restated)
   
   
   
6,004,200
   
6,004
   
   
2,000,100
   
(2,553,301
)
 
(547,197
)
                                                   
Issuance of common stock for services, $0.75
                                                 
average price per share 
   
   
   
1,980,946
   
1,981
   
1,488,328
   
   
   
1,490,309
 
                                                   
Issuance of common stock in satisafaction of debts of
                                                 
$331,000 and deemed interest of $242,500 
   
   
   
758,000
   
758
   
572,742
   
   
   
573,500
 
                                                   
                                                   
Issuance of common stock, $1.00 price per share
   
   
   
921,600
   
922
   
920,678
   
(921,600
)
 
   
 
                                                   
Conversion of common stock payable to loan payable
   
   
   
   
   
60,000
   
(258,500
)
 
   
(198,500
)
                                                   
Issuance of common stock related to reverse-merger
   
   
   
23,956,138
   
23,956
   
(123,487
)
 
   
   
(99,531
)
                                                   
 
       
   
   
   
   
   
   
 
                                                   
Net loss
   
   
   
   
   
   
   
(5,790,794
)
 
(5,790,794
)
                                                   
Balance, December 31, 2004 (Restated)
   
 
$
   
33,620,884
 
$
33,621
 
$
2,918,261
 
$
820,000
 
$
(8,344,095
)
$
(4,572,213
)
                                                   
Issuance of common stock for services, $1.00 average price per share
               
94,615
   
95
   
122,905
               
123,000
 
                                                   
Issuance of common stock for services, $0.59 average price per share
               
91,463
   
91
   
74,909
               
75,000
 
                                                   
                                                   
Issuance of common stock for services, $0.68 average price per share
               
66,667
   
67
   
45,267
               
45,334
 
                                                   
                                                   
Issuance of common stock for equity investment in NATVN, $0.47 average price per share
               
1,670,000
   
1,670
   
1,998,330
               
2,000,000
 
                                                   
                                                   
Net loss
   
   
   
   
   
   
   
(1,634,092
)
 
(1,634,092
)
                                                   
Balance, September 30, 2005
   
 
$
   
35,543,629
 
$
35,544
 
$
5,159,672
 
$
820,000
 
$
(9,978,187
)
$
(3,962,971
)
 
 
-5-

 
WINSONIC DIGITAL MEDIA GROUP, LTD
 
NOTES TO THE UNAUDITED CONDENSED FINANCIAL STATEMENTS
 
NOTE 1 - BASIS OF PRESENTATION
 
The accompanying financial statements have been prepared by the Company without audit. In the opinion of management, all adjustments (which include normal recurring adjustments) necessary to present fairly the financial position, results of operations and cash flows at September 30, 2005 and for all periods presented have been made.
 
Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principals in the United States of America have been condensed or omitted for purposes of filing interim financial statements with the Securities and Exchange Commission. It is suggested that these condensed financial statements be read in conjunction with the consolidated financial statements and notes thereto included in the Company’s audited financial statements for the year ended December 31, 2004. The results of operations for the three-month and nine-month periods ended September 30, 2005 and 2004 are not necessarily indicative of the operating results for the full year.
 
Accounting Estimates: The preparation of financial statements in conformity with accounting principals generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosures of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual operating results could differ from those estimated by management.
 
Cash and Cash Equivalents: For purposes of the statement of cash flows, the Company considers all highly liquid debt instruments with maturity of three months or less to be cash equivalents. The Company had cash on hand as of September 30, 2005 and December 31, 2004, of $2,596 and $436,749, respectively, with the cash balance $327,135 in excess of federally insured limit on December 31, 2004.
 
Derivative Financial Instruments: The Company has issued convertible notes payable, which include embedded derivatives as defined by SFAS 133, EITF 98-5 and 00-27 and APB 14. These instruments are subject to fluctuations in value, arising from fluctuations in the price of the underlying stock and the number of shares of stock to be issued upon conversion or redemption”. The fluctuation in value is recorded as “Unrealized Gains and (Losses) on Embedded Derivatives and Attached Warrants consistent with the Statement of Financial Accounting Standards (SFAS) No. 133, “Accounting for Derivative Instruments and Hedging Activities” and it has the effect of adjusting the financing costs of the Convertible Note to reflect the value of the underlying stock to be issued.
 
Stock Options: The Company has stock incentive plans that provide for stock-based employee compensation, including the granting of stock options, to certain key employees and other individuals. The plans are more fully described in Note 2. The Company accounts for stock options issued to employee, officers and directors under the stock incentive plan in accordance with the recognition and measurement principals of APB Opinion No. 25, “Accounting for Stock Issued to Employees”, and related Interpretations. Under this method, compensation expense is recorded on the date of grant only if the current market price of the underlying stock exceeded the exercise price. Under the Company’s stock incentive plan, stock options are granted at exercise prices that equal or exceed the market value of the underlying common stock on the date of grant. Therefore, no compensation expense related to stock options is recorded in the Consolidated Statements of Operations.
 
-6-

During the periods presented in the accompanying financial statements the Company has granted options under the October 2004 Stock Options Plans and executive and other employment agreements. The Corporation has adopted the disclosure-only provisions of SFAS No. 123, “Accounting for Stock-Based Compensation.” Accordingly, compensation cost under SFAS No. 123 has been recognized for certain stock options issued under other agreements to non-employee and recorded in the accompanying statement of operations, but no compensation cost under SFAS No. 123 has been recognized for stock options issued under the plans and other agreements with employees.
 
Had compensation cost for stock options issued to employees under the Company’s stock option plans and agreements been determined based on the fair value at the grant date for awards in the three-months ended September 30, 2005 and 2004 consistent with the provisions of SFAS No. 123, the Company’s net income and earnings per share would have been reduced to the pro forma amounts indicated below:
 
     
For the Three-months Ended
   
For the Nine-months Ended
 
   
September 30,
2005
 
September 30,
2004
 
September 30,
2005
 
September 30,
2004
 
Net Income (Loss) as Reported
 
$
(723,906
)
$
(614,918
)
$
(1,634,092
)
$
(1,229,609
)
Add: Stock-based non-employee compensation expense included in reported net income
   
   
   
   
 
Deduct: Total stock-based employee compensation expense determined under fair value based method
   
(202,248
)
 
-0-
   
(615,913
)
 
-0-
 
                           
Net Income (loss) Pro forma
 
$
(926,154
)
$
(614,918
)
$
(2,250,005
)
$
(1,229,609
)
Pro forma earnings (loss) per share
 
$
(0.06
)
$
(0.10
)
$
(0.15
)
$
(0.20
)
 
Fixed Assets
 
Fixed assets are stated at cost. Expenditures that materially increase the life of the assets are capitalized. Ordinary maintenance and repairs are charged to expense as incurred. When assets are sold or otherwise disposed of, the cost and the related accumulated depreciation are removed from the accounts and any resulting gain or loss is recognized at that time.
 
Depreciation is computed on the declining balance method for financial statement purposes over the following estimated useful lives:
 
Telecommunications Equipment
15 years
Furniture and Fixtures
 7 years
Computer Equipment
 5 years
Software
 3 years
 
 
-7-

Depreciation expense for the three-month periods ended September 30, 2005 and 2004 was $85,600 and $85,589; for the nine-month periods ended September 30, 2005 and 2004 were $256,800 and $256,767 respectively.
 
Impairment of Long-lived Assets
 
In accordance with Statement of Financial Accounting Standards No. 144, “Accounting for the Impairment or Disposal of Long-lived Assets”, long-lived assets such as property and equipment and intangible assets subject to amortization are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset group may not be recoverable. Recoverability of asset groups to be held and used is measured by a comparison of the carrying amount of an asset group to estimated undiscounted future cash flows expected to be generated by the asset group. If the carrying amount of an asset group exceeds its estimated future cash flows, an impairment charge is recognized in the amount by which the carrying amount of an asset group exceeds fair value of the asset group.
 
Revenues and Expenses Recognition
 
The Company is a “development stage” Company and has not had significant sales or revenue to date. The Company plans to sell services originating with their software and network media distribution. Revenues will be recognized upon services rendered to customers. Costs and expenses are recognized during the period in which they are incurred.
 
Advertising Costs
 
The Company expenses all costs of advertising as incurred. There were no advertising costs incurred for the periods ended September 30, 2005 and 2004.
 
Research and Development Costs
 
The Company expenses all research and development costs as they are incurred. There were no research and development costs during the periods ended September 30, 2005 and 2004.
 
Income Taxes
 
Income taxes are generally provided for the tax effects of transactions reported in the financial statements and consist of taxes currently due plus deferred taxes related primarily to differences between the basis of fixed assets for financial and income tax reporting. The Company has no deferred tax assets and liabilities representing the future tax return consequences of those differences because currently the Company has no material temporary timing differences that give rise to these tax assets and liabilities. Currently there are no federal income taxes due.
 
Recently Issued Accounting Pronouncements
 
In September 2004, the Emerging Issues Task Force ("EITF") reached a consensus on EITF Issue 04-08 The Effect of Contingently Convertible Instruments on Diluted Earnings per Share, which requires the inclusion of shares related to contingently convertible debt instruments for computing diluted earnings per share using the if- converted method, regardless of whether the market price contingency has been met. EITF 04-08 will be effective for all periods ending after December 15, 2004 and includes retroactive adjustment to historically reported diluted earnings per share. The adoption of EITF Issue No. 04-08 does not currently have an impact on the Company's operating results or financial position.
 
In November 2004, the FASB issued Financial Accounting Standards Statement No. 151 “Inventory Costs-an amendment of ARB No. 43, Chapter 4.” This Statement clarifies the accounting for abnormal amounts of idle facility expense, freight, handling costs, and wasted material (spoilage). This Statement requires that those items be recognized as current-period charges regardless of whether they meet the criterion of "so abnormal." In addition, this Statement requires that allocation of fixed production overheads to the costs of conversion be based on the normal capacity of the production facilities. The Company does not expect SFAS 151 to have a material impact on its financial statements.
 
-8-

In December 2004, the FASB issued Financial Accounting Standards Statement No. 152 “Accounting for Real Estate Time-Sharing Transactions-an amendment of FASB Statements No. 66 and 67.” This Statement references the financial accounting and reporting guidance for real estate time-sharing transactions that is provided in AICPA Statement of Position (SOP) 04-2, Accounting for Real Estate Time-Sharing Transactions. This Statement also states that the guidance for (a) incidental operations and (b) costs incurred to sell real estate projects does not apply to real estate time-sharing transactions. This Statement is effective for financial statements for fiscal years beginning after September 15, 2005. The Company does not expect SFAS 152 to have a material impact on its financial statements.
 
In December 2004, the FASB issued Financial Accounting Standards Statement No. 153 “Exchanges of Nonmonetary Assets-an amendment of APB Opinion No. 29.” The guidance in APB Opinion No. 29, Accounting for Nonmonetary Transactions, is based on the principal that exchanges of nonmonetary assets should be measured based on the fair value of the assets exchanged. This Statement amends Opinion 29 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. The Company does not expect SFAS 153 to have a material impact on its financial statements.
 
In May 2005, the FASB issued SFAS 154, "Accounting Changes and Error Corrections - a Replacement of APB Opinion No. 20 and FASB Statement No. 3". SFAS 154 requires retrospective application to prior period financial statements of changes in accounting principal, unless it is impracticable to determine either the period-specific effects or the cumulative effect of the change. SFAS 154 also redefines "restatement" as the revising of previously issued financial statements to reflect the correction of an error. This statement is effective for accounting changes and corrections of errors made in fiscal years beginning after December 15, 2005. The Company does not believe that the adoption of SFAS 154 will have a significant impact on the consolidated financial statements.
 
In December 2004, the FASB issued SFAS No. 123(R), Share-Based Payment, which establishes standards for transactions in which an entity exchanges its equity instruments for goods or services. This standard replaces SFAS No. 123 and supersedes APB Opinion No. 25, Accounting for Stock-based compensation. This Standard requires a public entity to measure the cost of employee services received in exchange for an award of equity instruments based on the grant-date fair value of the award. This eliminates the exception to account for such awards using the intrinsic method previously allowable under APB Opinion No. 25. SFAS No. 123(R) will be effective for interim or annual reporting periods beginning on or after September 15, 2005. Accordingly the Company is unable to determine at this time the impact of SFAS No. 123(R) will have on its balance sheet or income statements.
 
NOTE 2 - COMMON STOCK
 
Issuance of Common Stock
 
First Quarter: During January and March 2005 the Company issued 94,615 and 91,463 shares respectively to a private investment partnership. The stock was issued at $1.30 per share in January and $0.82 per share in March. The stock was part of a warrant, exercisable at $0.07 per share, which was issued to compensate certain professional advisors for services rendered during 2004. The stock was issued pursuant to a “cashless exercise” wherein the warrant holder received a reduced number of shares of Common Stock upon conversion and contributed the balance to the treasury of the Company based on the current market value of the stock. For January 2005, the warrant holders received 94,615 shares of stock and contributed 5,385 shares valued at $1.30 per share worth $7,000 (the cost of their warrants). For September, the warrant holders received 91,463 shares and contributed 8,537 shares valued at $0.82 per share, worth $7,000 (the cost of their warrants).
 
Second Quarter: During June 2005 the Company issued 66,667 shares to a private investment partnership. The stock was issued at $0.68 per share. The stock, similar to that issued in January and March was paid to compensate professional advisors for services rendered during 2004 and was issued pursuant to a “cashless exercise” wherein the warrant holder received a reduced number of shares of Common Stock upon conversion and contributed the balance to the treasury of the Company based on the current market value of the stock. For June, the warrant holders received 66,667 shares of common stock and contributed 33,333 shares valued at $0.21 per share, worth $7,000 (the cost of their warrants).
 
-9-

Third Quarter: During September 2005 the Company issued 1,670,000 shares to Native American Television Network, Inc. (“NATVN”) in exchange for common stock, in accordance with a stock exchange agreement entered into by both parties. The 1,670,000 shares issued by the Company, was valued at $1.20 per share, or $2,000,000. The 4,000,000 common stock shares received from NATVN, Inc. was valued at $0.50 per share or $2,000,000 and was recorded by the Company as an Equity Investment. (See Note 6 - Equity Investment for further details regarding this transaction.)
 
NOTE 3 - RELATED PARTY TRANSACTIONS
 
Officer’s compensation for services for the three-month period ended September 30, 2005 and 2004 was $207,500 and $49,800; for the nine-month period ended September 30, 2005 and 2004 was $622,500 and 149,400 and was included in general and administrative expenses, related party. The compensation for services from inception was as follows:
 
Compensation
2003
2004 - Q1
2004 - Q2
2004 - Q3
2004 - Q4
2005 - Q1
2005 - Q2
2005 - Q3
CEO
199,200
49,800
49,800
49,800
72,500
72,500
72,500
72,500
President
0
0
0
0
62,419
67,500
67,500
67,500
Exec Vice Pres
0
0
0
0
62,419
67,500
67,500
67,500
Total
199,200
49,800
49,800
49,800
197,338
207,500
207,500
207,500
 
Loan Payable - Related Party
 
As of December 31, 2004 the Company has a loan payable totaling $683,726 to the, C.E.O., consisting of principal of $600,000, which was due September 3, 2004 , plus 80,000 shares of common stock valued at $64,000, both payable to maker of the note. Under the terms of the Note, interest will be paid at the rate of 10% annually. Accrued interest included in the loan balance of $683,726 is $19,726 as of December 31, 2004. Quarterly interest in the amount of $15,000 per quarter was accrued during the three-month periods and $44,877 for the nine-month periods ended September 30, 2005 and 2004.
 
During the 1st Quarter of 2005, the Company paid $160,000 to the CEO against this loan. At September 30, 2005 and December 31, 2004 the balance of the loan was $568,603 and $683,726 respectively.
 
(See Note 14 - Subsequent Events relating to a 4th Quarter payment against this loan from the Company in the form of common stock issuance to the CEO, valued at $231,000).
 
NOTE 4 - SUMMARY OF LEGAL PROCEEDINGS
 
Other than as described below, the Company is not currently involved in any legal proceedings that may be deemed to be material to our financial condition.
 
Callozo vs. Media and Entertainment.com
 
On March 22, 2004, the Company (in all cases cited herein known as Media and Entertainment.com, Inc.) commenced a civil lawsuit in Los Angeles Superior Court (Case No. BC312530) against Caesar Collazo, a former officer of the Company, seeking damages in excess of $40,000, punitive and exemplary damages. The Company had purchased the assets of Nexcode of which Collazo was a founder, and Collazo received 400,000 shares of the Company’s Common Stock (the “Shares”) in consideration of the sale. While still employed by the Company, Collazo allegedly formed a competing company, stole proprietary property of the Company and solicited Company clients on behalf of the competitor. The Company seeks a constructive trust, injunctive relief and the return of the Shares.
 
-10-

Prior thereto, in February 2004, Mr. Collazo had commenced a lawsuit in Los Angeles Superior Court against the Company and its transfer agent seeking to remove the restrictive legend from the Shares. The injunctive relief was denied and Mr. Collazo dismissed the Complaint. In March 2004, the Company commenced a lawsuit in U.S. District Court, Clark Country Nevada (Case No. A480587) to enjoin the transfer of the Shares. The Court issued an Order on March 19, 2004, enabling Collazo to sell 30,000 shares of Common Stock and issuing a temporary restraining order with regard to the remaining 370,000 Shares provided the Company posted a bond for the entire amount of $424,000. The Company’s principals chose not to pledge personal assets as collateral for the bond and the Nevada action was dismissed.
 
In the above-described pending litigation brought by the Company against Collazo, in July 2004, the defendant denied the allegations, asserted 21 affirmative defenses and brought a cross-complaint against the Company. Mr. Collazo alleges that the Company breached the agreement with Collazo because he had not been paid compensation due him, he had not received a percentage of gross profit earnings, and that the Company had not exercised a good faith effort to raise an additional $250,000 in capital, and that Collazo did not receive the equity promised him. The Company denied the allegations of the Cross Complaint and asserted 13 affirmative defenses. At a settlement conference on April 11, 2005, the Company agreed to issue 900,000 shares of common stock to Mr. Collazo, as well as attorney fees of $120,000. The Company also agreed to issue 900,000 shares of common stock to Mr. Nana Yalley, an officer and current shareholder, as well as an equal partner of Mr. Collazo in Nexcode. The shares of common stock were valued as of the settlement date, and accordingly the value of 900,000 shares of common stock as well as $120,000 of attorney fees was charged as current year expenses as of December 31, 2004. The settlement was not accomplished by June 10, 2005, whereby Mr. Collazo may exercise at his option the right to enforce the settlement agreement for payment of attorney fees or convert the obligation of payment for attorney fees to a demand for issuance of 200,000 shares of stock in the Company.
 
On March 16, 2006, the 900,000 shares due to Mr. Collazo have been issued by the Company to Mr. Collazo in settlement. As of March 23, 2006, neither the 900,000 shares of common stock for Yalley, nor the $120,000 or 200,000 shares for attorney’s fees have been issued and paid, respectively. The agreement had no effect on the operating results for the 1st, 2nd or 3rd Quarters of 2005 or 2004; and an estimated liability of $1,020,000 for legal settlements was recorded as of September 30, 2005 and December 31, 2004.
 
Yellowbrix, Inc. vs. Media and Entertainment.com:
 
Yellowbrix, Inc. filed a collection suit against Media and Entertainment.com regarding an alleged contract authorized by the former CEO of Media and Entertainment.com. The pending lawsuit amount in dispute is $19,800, which is expensed in general and administrative expense in the 4th Quarter of 2004 and accrued within accounts payable of the Company as of December 31, 2004. The amount is included in Accounts Payable as of September 30, 2005 and December 31, 2004.
 
Berman, Romeri and Associates, LLP vs. Media and Entertainment.com:
 
This pending collection lawsuit arises from alleged contract and services obligating the Company, which was allegedly authorized by the former CEO of Media and Entertainment.com. The disputed amount of $8,733 is expensed in general and administrative expense in December of 2004 and included in the 4th Quarter operations. The liability included in accounts payable of the Company as of September 30, 2005 and December 31, 2004.
 
On March 9, 2006, Berman, Romeri and Associates, LLP and the Company entered into a written stipulation for Judgement, whereby the Company shall pay a settlement amount of $6,500 to Berman, Romeri and Associates, LLP by April 10, 2006.
 
-11-


NOTE 5 - GOING CONCERN
 
These financial statements have been prepared in accordance with generally accepted accounting principals applicable to a going concern, which contemplates the realization of assets and the satisfaction of liabilities and commitments in the normal course of business. As of September 30, 2005, the Company has recognized $57,811 of revenues to date and had accumulated losses of approximately $9,978,000 from operations since inception. The Company’s ability to continue as a going concern is contingent upon the successful completion of additional financing arrangements and its ability to achieve and maintain profitable operations. Management plans to raise equity capital to finance the operating and capital requirements of the Company. Amounts raised will be used for further development of the Company’s products, to provide financing for marketing and promotion, to secure additional property and equipment, and for other working capital purposes. While the Company is expending its best efforts to achieve the above plans, there is no assurance that any such activity will generate funds that will be available for operations.
 
NOTE 6 - EQUITY INVESTMENT
 
Native American Television Network, Inc.
 
On September 29, 2005, in accordance with a stock exchange agreement between the two parties, the Company issued 1,670,000 shares of common stock to Native American TV Network [“NATVN”] , wherein the Company acquired 4,000,000 shares of stock in NATVN, representing 27% of the NATVN equity. The Company’s common stock of 1,670,000 shares was valued at $1.20 per share, or $2 million. NATVN’s common stock issuance to the Company of 4 million shares was valued at $0.50 per share, or $2 million. As of September 30, 2005, the Company has recorded a $2 million Equity Investment as a long-term asset, and zero as of December 31, 2004.
 
NATVN, based in Albuquerque, New Mexico is a recently formed company that intends to launch the first Western Hemisphere, pan-tribal digital cable channel. The Company will provide to NATVN its nationwide distribution platform and technical support, expertise and personnel. NATVN will provide the Company with commercial airtime on a regularly scheduled programming that offers air space to advertisers with the exception of paid programming or long form advertisements. There was no prior material relationship between the two companies or their affiliates other than in respect of the agreement.
 
The investment in NATVN will be accounted for under the “equity” method . The equity method of accounting is used if the investor has the ability to significantly influence the investee’s financial and operating policies or if an investor is accounting for an investment in a corporate joint venture, but holds less than 50% of the investee. Under the equity method, an investment is initially recorded at cost. Thereafter, the carrying amount of the investment is increased for the investor’s proportionate share of the investee’s gains or reduced for the proportionate share of the investee’s losses or for distributions received from the investee.
 

-12-

 
NOTE 7 - FIXED ASSETS
 
The major classifications of property and equipment consist of the following as of September 30, 2005 and December 31, 2004:
 
           
   
September 30, 2005
 
December 31, 2004
 
Computer Equipment
 
$
1,583,474
 
$
1,577,269
 
Infrastructure
   
320,000
   
320,000
 
Software
   
165,515
   
160,000
 
Furniture & fixtures
   
13,040
   
13,040
 
Total Fixed Assets
   
2,082,029
   
2,070,309
 
Less: accumulated depreciation
   
(807,755
)
 
(550,955
)
               
Net Fixed Assets
 
$
1,274,274
 
$
1,519,354
 
               
 
Depreciation expense for the three-month periods ended September 30, 2005 and 2004 was $85,600 and $85,589; for the nine-month periods ended September 30, 2005 and 2004 were $256,800 and $256,767 respectively.
 
In December 2005, the Company reduced computer equipment, infrastructure, and software included in the above Fixed Assets by $842,000 by renegotiating it’s equipment purchase agreement and related Note payable with Digital Service International (“DSI”). (See Note 14 - Subsequent Events for further detail regarding the subsequent transaction).
 
NOTE 8 - LOANS PAYABLE
 
The Company has loans outstanding of $376,413 and $357,506 as of September 30, 2005 and December 31, 2004, respectively, payable to certain individuals. Proceeds from these loans were used for working capital purposes. The following is a summary of the loans payable:
 
 
-13-

 
Interest Rate
 
LOANS PAYABLE
 
September 30,
2005
 
December 31, 2004
 
Unstated
   
Eight convertible promissory notes, due October 2004, convertible into shares of common stock at any time prior to maturity. No conversions were exercised.
 
$
198,500
 
$
198,500
 
6.00%
   
A loan containing principal of $108,000, with no stated interest rate, repayment terms or maturity date. Interest is imputed at 6% annually, based upon a 365-day calendar year. Accrued interest payable included in the balance is $11,627 at September 30, 2005 and $6,780 at December 31, 2004.
   
119,627
   
114,780
 
6.00%
   
A loan containing principal of $40,000, with no stated interest rate, repayment terms or maturity date. Interest is imputed at 6% annually, based upon a 365-day calendar year. Accrued interest payable included in the balance is $6,021 at September 30, 2005 and $4,226 at December 31, 2004.
   
46,021
   
44,226
 
Unstated
   
A loan, initiated during the second quarter, containing principal of $2,000 with no stated interest rate, repayment terms, or maturity date. No interest was imputed during thequarter.
   
2,000
   
-0-
 
Unstated
   
A loan, initiated during the second quarter, containing principal of $10,265, with no stated interest rate, repayment terms or maturity date. No interest was imputed during the quarter.
   
10,265
   
-0-
 
Total Loans Payable
 
$
376,413
 
$
357,506
 
 
NOTE 9 - NOTE PAYABLE AND PLEDGED ASSETS
 
Interest Rate
 
NOTES PAYABLE
 
September 30,
2005
 
December 31, 2004
 
Unstated
   
A loan due April 13, 2003, containing principal of $847,000 with no stated interest rate. The loan was secured with fixed assets (computer equipment, infrastructure and software). On December 16, 2005 the Company paid $5,000 and returned certain pledged equipment thus satisfying the note holder. Consistent with the final resolution of the agreement, no interest or finance charges have been accrued.
 
$
847,000
 
$
847,000
 
Total Note Payable
 
$
847,000
 
$
847,000
 
 
(See Note 14 - Subsequent Events for further detail regarding the December 16, 2005 transaction).
 
-14-

 
NOTE 10 - CONVERTIBLE DEBENTURES
 
During December 2004 and January 2005, the Company received proceeds of $815,000 and $200,000 respectively from a Convertible Note and Warrant Purchase Agreement [“the Agreement”]. The offering was made to accredited investors. The Convertible Notes including interest of 6% were due in December of 2005 or upon the occurrence of certain events relating to potential changes in the capital structure of the Company. The conversion feature portion of the Agreement included the right of the Note Holder to convert the face value of the note into common stock of the Company at the lower of $.70 per share or 85% of the market value of the common stock (at the time of conversion). The Agreement also included a detachable warrant, which allowed the Warrant Holders to purchase shares of common stock of the Company at $.70 per share (285,714 shares of common stock), through December 2007. On December 15, 2005, the Convertible Notes of $1,015,000 were extended to June 30, 2006. (See Note 14 - Subsequent events for further detail regarding the extension of the agreements).
 
During the 2nd and 3rd quarters of 2005, the Company received proceeds of 188,250, consisting of 6 offerings, evidenced by Convertible Note and Warrant Purchase Agreements [“the Agreement”]. The offering was made to accredited investors. Total proceeds received from the Agreements as of September 30, 2005 are $1,203,250.
 
The transactions, to the extent that it is to be satisfied with common stock of the Company would normally be included as equity obligations. However, in the instant case, due to the indeterminate number of shares which might be issued under the embedded host debt conversion feature, the Company is required to record a liability relating to both the detachable warrant and the embedded convertible feature of the note payable (included in the current liabilities as a “derivative liability”).
 
The accompanying financial statements comply with current requirements relating to warrants and embedded derivatives as described in FAS 133, EITF 98-5 and 00-27, and APB 14 as follows:
 
The Company allocated the proceeds received between the convertible debt and the detachable warrant based upon the relative fair market values on the date proceeds were received.
 
Subsequent to the initial recording, the change in the fair value of the detachable warrant, determined under the Black-Scholes option pricing formula and the change in the intrinsic value of the embedded derivative in the conversion feature of the convertible debenture, is accrued as adjustments to the liabilities at September 30, 2005 and December 31, 2004.
 
The expense relating to the change in the fair value of the Company’s stock reflected in the change in fair value of the warrants and derivatives (noted above) is included as an item of other income and expense in the form of an unrealized interest income or expense arising from convertible financing on the Company’s balance sheet.
 
Accreted interest and principal is $991,849 as of September 30, 2005 and $37,871 as of December 31, 2004.
 

-15-

 
The following table summarized the various components of the convertible debentures as of September 30, 2005 and December 31, 2004:
 
   
September 30, 2005
 
December 31, 2004
 
Derivative liability
 
$
116,163
 
$
652,254
 
Warrant liability
   
199,670
   
614,609
 
Convertible debentures
   
991,849
   
37,871
 
Subtotal
   
1,307,682
   
1,304,734
 
Adjustment of derivative and
Warrant liability to fair value
   
760,240
   
(451,863
)
Less: Accretion of principal and
interest related to convertible debenture
   
(864,672
)
 
(37,871
)
Total Proceeds from Convertible Debentures
   
1,203,250
   
815,000
 
Plus: Accrued interest
 
$
58,267
 
$
2,144
 
Total Convertible Debentures
   
1,261,517
   
817,144
 
Less: Current portion of Convertible Debentures
 
$
(1,261,517
)
$
(817,144
)
Total Non-current Convertible Debentures
 
$
-0-
 
$
-0-
 

Included in the above values is accrued interest of $58,267 at September 30, 2005 and $2,144 at December 31, 2004. The interest expense for the three-month and nine-month periods ended September 30, 2005 is $25,911 and $56,153.
 
NOTE 11 - COMMITMENTS AND CONTINGENCIES
 
Employment Agreements: On October 8, 2004, the Company entered into binding offering letters with the Chairman and CEO, the President and the Executive Vice President; as well as one former executive officer and two non-executive officers. Under the terms of the employment agreements, the Executive Officers are to receive base salaries of $290,000, for the President and $270,000 for each of the President and the Executive Vice President, with $7,000 per month deferred until the next funding occurs or January 1, 2005, whichever occurs first. Each officer is eligible for annual incentive bonuses based on performance. The CEO received 1,000,000 stock options and the remaining two officers received 500,000 stock options each to purchase common stock at $1.00 per share that vest equally over a twelve month period effective with the date of the employment agreement. The agreements are terminable at will with or without cause (as defined).
 
NOTE 12 - EARNINGS PER SHARE
 
The computations of earnings per share are based upon the weighted average number of outstanding common shares during the periods. For the periods presented the Company has incurred losses, which would make any calculation of earnings per share based on the number of shares calculated under the diluted earnings per share anti-dilutive and therefore the amount is not presented. When their effect is dilutive, additional shares assuming the exercise of certain vested stock options, reduced by the number of shares, which could be purchased from the proceeds from the exercise of the stock options assuming they were exercised, are calculated to disclose fully-diluted earnings per share.
 
-16-

NOTE 13 - FINANCIAL STATEMENT RESTATEMENTS
 
The management of the Company, have concluded that the Company should restate its consolidated financial statements for the year ended December 31, 2004. As disclosed in Note 12 to the Company’s restated consolidated financial statements for the years ended December 31, 2004 and 2003 included in the Company’s amended Annual Report on Form 10-KSB/A for the fiscal year ended December 31, 2004, filed with the SEC on March 8, 2006, the Company has restated its consolidated financial statements as of and for the years ended December 31, 2004 and 2003 to correct certain financial statement errors reported in the Form 10-K for such fiscal year as originally filed. The corrections in this restatement (i.e., fiscal year ended December 31, 2004) have a carry forward impact on the Company’s consolidated financial statements as of and for the three and nine months ended September 30, 2005.
 
 
 
The corrected financial statements will account for the convertible notes embedded derivatives as well as the detachable warrants as current liabilities, allocated between the derivative and warrant liabilities as determined by the price of the underlying common stock.
 
 
 
The classification of costs and benefits arising from the changes in the price of the underlying common stock has been changed from “other comprehensive income” (an Equity caption) to “unrealized gains and losses from derivatives” (an element of Other Income and Expense).

NOTE 14 - SUBSEQUENT EVENTS
 
Equipment paid via issuance of stock, cash payment and satisfaction of Note Payable
 
On December 16, 2005, the Company renegotiated its equipment purchase agreement and related note payable for computer equipment, software and infrastructure with Digital Service International (“DSI”). The equipment, valued at $1,667,000, was paid in this amendment by the conversion of a common stock payable to DSI for 820,000 common stock shares valued at $1.00 each, a $5,000 payment from the Company against the $847,000 DSI note payable, and the satisfaction of the remaining $842,000 note obligation by the return of $842,000 underlying pledged equipment. The effect in the fourth quarter of 2005 will be to reduce the liabilities of the Company by $847,000, reduce the value of the fixed assets of the Company by $847,000 and increase shares outstanding by 820,000 with a related credit to Par Value of $820 and Paid in Capital of $819,180.
 
The accrued finance charges of $139,825 as of September 30, 2005 relating to the note were recaptured. The credit to interest expense is included in the other income for the fourth quarter of 2005.
 
Loan Payable - Related Party
 
During the 4th Quarter of 2005, 700,000 shares of the Company’s common stock were issued to the CEO as payment to be applied against the balance of a loan (See Footnote 3 - Related Party Transactions). The agreed-to price per share of the issued common stock was $0.33 per share or $231,000, based on the market price of the stock on December 5, 2005. The balance of the related party loan was reduced by this $231,000 during the 4th Quarter.
 
Extension and Amendment of Convertible Note Agreements
 
On December 15, 2005, the Company entered into agreements with the convertible note holders to extend the maturity date and amend the conversion and repayment provisions. The maturity date of the notes were originally December 15, 2005, and were extended to June 30, 2006.
 
Additionally, the terms of conversion were amended to provide that the principal and interest will be converted at the rate of $0.40 per share or 15% below the average closing price of the Company’s common stock for the previous 20 trading days. Previously the conversion was to take place at the lower of $0.70 per share or 15% below the average closing price of the Company’s common stock for the previous 20 trading days. (See Note 10 - Convertible Debentures).
 
-17-

Automated Interiors Acquisition
 
On January 11, 2006, the Company acquired all of the outstanding shares of Automated Interiors, (a private Georgia corporation) [“Interiors”] in exchange for 411,955 shares of the Company’s common stock. The transaction will be accounted for as a purchase of the net assets of Interiors, creating a wholly-owned subsidiary, the operations of which will be included in consolidated financial statements of the Company commencing in the 1st Quarter of 2006. Non-qualifying stock options were offered to five executives of Interiors to purchase 1,200,000 shares of common stock o the Company. The value of the transaction, based on an agreed value of $0.25 for each common share of the Company in exchange for the net assets of Interiors as of the date of the transaction and cash flows, is $102,989.
 

-18-

Item 2. Management’s Discussion and Analysis or Plan of Operation.

Forward-Looking Statements

Statements in this Quarterly Report are certain statements which are not historical or current fact and constitute "forward-looking statements" within the meaning of such term in Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Such forward-looking statements may involve known and unknown risks, uncertainties and other factors that could cause the actual financial or operating results of the Company to be materially different from the historical results or from any future results expressed or implied by such forward-looking statement. Such forward-looking statements are based on our best estimates of future results, performance or achievements, based on current conditions and the most recent results of the Company. In addition to statements which explicitly describe such risks and uncertainties, readers are urged to consider statements labeled with the terms "may," "will," "potential," "opportunity," "believes," "belief," "expects," "intends," "estimates," "anticipates" or "plans" to be uncertain and forward-looking. The forward-looking statements contained herein are also subject generally to other risks and uncertainties that are described from time to time in the Company's reports and registration statements filed with the Securities and Exchange Commission. Consequently, all of the forward-looking statements made in this Quarterly Report are qualified by these cautionary statements and there can be no assurance that the actual results anticipated by the Company will be realized or, even if substantially realized, that they will have the expected consequences to or effects on the Company or its business or operations.

General

Winsonic Digital Media Group, Ltd. (“we”, “Winsonic”, or the “Company”) is a media distribution solutions company. We believe that our software and network establishes a new standard for media distribution of digital information via the Internet, ATM, SDI, HDTV, digital cable, cable TV and satellite. Our network enables users to view, interact, and listen to all types of audio, online video and digital TV, in full screen format, at high speed, high quality, and greatly reduced cost, reducing the need for expensive high-speed connections.

We are pursuing the commercialization of our products, which we believe establishes a new standard for media distribution of digital content and information, seamless compatibility with all major networks, copyright enforcement, multi-tier encryption (move files in a secure environment), wireless viewing capabilities for laptops and hand held products, such as cellular telephones and PDA devices. Winsonic facilities-based products and services in out-of-franchise markets enable communications companies such as Verizon to partner with Winsonic allowing us to provide services to their customers and share in the revenue. Other services include high-end consulting services in the areas of programming, audio research and engineering, as well as digital transport world wide telecommunications services for film and television.

-19-

Winsonic Digital Cable Systems Network ("WDCSN") concentrates on carrier-class high-speed connectivity solutions that bring together a first-class facility around the country along with network, multimedia, and content distribution communication services to its customers, without requiring substantial capital investments. Verizon and Level 3 are among the leading companies to team with Winsonic to implement a high-end facilities-based infrastructure to aid and facilitate voice transport, audio, video, data, media and broadcast content over protocol-independent multi-layered communication systems.

To better understand the effects of this digital landscape, evidenced by cable industry consolidation, cross industry completion and technical standards, we have examined the underlying drivers, both from a market and technology viewpoint. Changes in government regulation and the consumer demand for choice are driving the new environment.

Winsonic has built upon its long-term business model that incorporates reliable technical support and service levels. This offers network resilience and sustainable growth for its infrastructure and customer base. This business model is expected to provide multiple revenue streams enabling Winsonic to fully realize its expansion position and growth potential. The result is one of the most comprehensive and cost effective product portfolios for the industry: one which establishes a reputation as an established and respected facilities-based media and entertainment distribution service and network provider.

The network provides WinSonic Digital Cable's customers an enhanced gateway to national and international communication lines. With the network as a foundation, WinSonic provides its customers sophisticated, state of the art application software and hardware solutions tailored to meet their specific needs. These applications include but are not limited to: Carrier solutions for regional phone companies such as special software that provides networks the capability of accommodating all software platforms as well custom hardware platforms that facilitate consumer, medical, commercial, and government applications.

Winsonic can provide digital custom application development for Voice Over Internet Protocol “(VOIP)”, standard national and international communications, PDA, audio/video transport, e-commerce, radio frequency devices, television and satellite broadcast. Winsonic offers the exspertise for building out digital television networks that accommodate, high definition television, streaming video and real time interactive networks.

WinSonic Digital's objective is to maximize product performance while reducing cost through technology innovation. For a more detailed explanation of Winsonic Digital's capabilities we invite you to visit the WinSonic website at: www.winsonic.net.

In late September of 2005 the Company entered into an agreement with the Native American Television Network (“NATVN”), based in Albuquerque, New Mexico. NTAVN intends to launch the first Western Hemisphere, pan-tribal digital cable channel. The Company will provide to NATVN its nationwide distribution platform and technical support, expertise and personnel. NATVN will provide the Company with commercial airtime on a regularly scheduled programming that offers air space to advertisers with the exception of paid programming or long form advertisements. A more detailed description of the agreement with NATVN can be found in Note 6 of the financial statements.

-20-

In January of 2006 we acquired Automated Interiors, LLC, (“AI”), AI is an integrated, converged solutions provider for cities, communities and facilities. AI designs and/or installs electronic systems, home theaters, closed circuit television, structured wiring, lighting controls, music and video distribution, phone systems, and security automation systems. For a more detailed description of the acquisition of Automated Interiors please see Note 14 of the financial statements.

Material Changes in Results of Operations
 
As a “development stage company” we have not commenced commercial operations and have had no revenue during the quarters ended September 30, 2005 and 2004, and only $25,000 during the nine month period ende September 30, 2004. Prior to 2004, the Company has recorded $32,811 of revenue.

For the three months ended September 30, 2005, we incurred an operating loss of approximately $558,000 compared to an operating loss of approximately $599,000 in the comparable period of 2004. Total operating expenses were approximately $518,000 for the three-month period, primarily representing selling, general and administrative expenses of approximately $432,000 and depreciation expense of approximately of approximately $86,000, compared to total operating expenses of in the comparable period last year of approximately $588,000 consisting primarily of selling, general, and administrative expenses of approximately $502,000 and depreciation expense of approximately $86,000. For the nine month period, year to date, the company incurred a loss from operations of approximately $1,930,000 compared to a loss of approximately $1,226,000 in the comparable period of 2004. Total operating expenses for the nine month period ending September 30, 2005 were approximately $1,656,000 consisting primarily of selling, general, and administrative of approximately $1,399,000 and depreciation of approximately $257,000 compared to total operating expenses of approximately $995,000 consisting primarily of selling, general, and administrative of approximately $738,000 and depreciation of approximately $257,000 in the comparable period of 2004.

For the three months ended September 30, 2005, the company incurred interest expense of approximately $323,000 compared to an interest expense of approximately $15,000 in the comparable period of 2004. For the nine month period ending September 30, 2005 the company incurred an interest expense of approximately $917,000 compared to an interest expense of approximately $46,000 in the comparable period of 2004. The increase in interest expense during the three months ended September 30, 2005 is $308,000. The increase is primarily due to the accretion of $292,000 for principal and interest related to convertible promissory notes, and $15,000 increase in interest related to notes payable for operating equipment. For the nine months ended September 30, 2005, the increase in interest expense is $870,000, consisting primarily of $826,000 due to the accretion of principle and interest related to convertible promissory notes, and $30,000 due to interest on notes payable for operating equipment.

-21-

During December of 2004 and January of 2005 the company issued a total of approximately $1,015,000 in convertible debentures. The conversion feature portion of the Agreement included the right of the Note Holder to convert the face value of the note into the common stock of the Company at the lower of $0.70 per share or 85% of the market value of the common stock (at the time of conversion). The Agreement also included a detachable warrant, which allowed the Warrant Holders to purchase shares of common stock of the Company at $0.70 per share (1,450,000 shares of common stock), through December 2007. Please reference Note 10 of the financial statements titled “Convertible Debentures” for a more detailed explanation. The transaction, to the extent that it is to be satisfied with common stock of the Company would normally be classified as an equity obligation(s). However, theoretically the company could be required to issue an indeterminate number of shares of its common stock to satisfy the conversion feature of the debenture. This could theoretically cause the Company to exceed the number of shares of common stock it is authorized to issue, which would also prevent the delivery of common shares if the warrants were exercised during that period of time as well. Under Generally Accepted Accounting Principles (“GAAP”), the Company is required to record the warrants and the convertible notes as a liability. Changes in the value of the derivative liability and the warrant liability are reflected on our income statement as “Unrealized gain (loss) on adjustment of derivative and warrant liability to fair value of underlying securities.” Due to the fact that the underlying convertible debenture and associated warrants were not present in the three month period ended September, 2004 a direct comparison of the present quarter with the prior year’s quarter is not possible. During the three month period ended December 31, 2004 the Company recorded in interest expense an Unrealized loss on adjustment of derivative and warrant liability to fair value of underlying securities of approximately $452,000 relating to the adjustment of these liabilities. During the three month period ended March 31, 2005 the Company recorded a gain of approximately $1,134,000 from the adjustment of the same liabilities, during the three month period ending June 30, 2005 the Company recorded an Unrealized loss on adjustment of derivative and warrant liability to fair value of underlying securities of approximately $79,000, and for the three month period ending September 30, 2005 the company recorded an Unrealized gain on adjustment of derivative and warrant liability to fair value of underlying securities of approximately $157,000. For the nine month period ending September 30, 2005 the company recorded an Unrealized gain on adjustment of derivative and warrant liability to fair value of underlying securities of approximately $1,212,000.

For the three month period ending September 30, 2005 the Company recorded a net loss of approximately $724,000, compared to the three month period ended September 30, 2004 when the company recorded a net loss of approximately $615,000. For the nine month period ending September 30, 2005 the company recorded a net loss of approximately $1,634,000 compared to a net loss of approximately $1,230,000 in the comparable period of 2004.

-22-

The management of the company expects that due to the volatile nature of the Company’s common stock price, these liabilities will be correspondingly volatile and as a result will cause the reported net income of the Company to fluctuate in such a manner as to make direct comparisons difficult. The management of the company feels that as long as the derivative and warrant liabilities exist the reported Operating Income will be a more accurate reference for the true performance of the company.

Material Changes in Financial Condition

As of September 30, 2005, we had a working capital deficit of approximately $7,237,000, compared to a deficit of approximately $6,092,000 as of December 31, 2004.

If we are unable to generate sufficient sustainable revenues or obtain additional financing to meet our financial obligations, we will have to further reduce our operations, and we will not be able to continue as a going concern. Our independent accountants have indicated in their review report that there is substantial doubt about our ability to continue as a going concern without increased revenues and additional financing.

For the nine month period ending September 30, 2005 we used approximately $714,000 in our operating activities, compared with approximately $240,000 being used in the comparable period of 2004.

For the nine month periods ending September 30, 2005 our investing activities used approximately $12,000 for the purchase of fixed assets, compared to $0 in the comparable period of 2004.

For the nine month period ending September 30, 2005 our financing activities generated approximately $292,000 compared to approximately $241,000 being generated in the comparable period last year. The $292,000 financing activity in 2005 consists primarily of proceeds from convertible debentures of $388,000, partially offset by a payment of related party loan payable of $160,000.

For the nine month period ending September 30, 2005 the company’s net cash position decreased by approximately $434,000 compared to no net change in the comparable period of 2004.

Continuing Operations
 
Our priorities for the next twelve months of operations are to continue to develop and subsequently market our products and services to establish our business in the compression technology software industry. We are focused on our organizational activities, raising capital and establishing a business presence with vendors, business owners and referral sources. As we generate revenue from our activities, we may elect to hire salaried or hourly employees to operate certain aspects of our business.

-23-

We may be unable to compete successfully, and the competitive pressures we face might have an adverse effect on our business, results of operations and financial condition. Additionally, intensified competition could force us out of business. We require additional capital, which we intend to raise through one or more public or private offerings of equity and/or debt. There are no preliminary loan agreements or understandings between us, our officers, director affiliates or lending institutions. We have no arrangements or commitments for accounts and accounts receivable financing. We cannot guarantee any such financing can be obtained or, if obtained, that it will be on adequate or reasonable terms.

Item 3. Controls and Procedures.

Our management, with the participation of our Chief Executive Officer (our principal executive and financial officer), evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934), as of December 31, 2004. Rule 13a-15 (e) under the Securities Exchange Act of 1934, requires that disclosure controls and procedures are disclosed by an issuer in the reports that it files or submits. The Act requires information to be accumulated and communicated to the issuer’s management as appropriate to allow timely decisions regarding required disclosure.

The following are the results of the procedures adhered to regarding Winsonic Digital Media Group, Ltd. (a development stage company), yielding the following adjustments and disclosures made to the prior year ended December 31, 2003.
 
A.  
The Company undertook an organizational restructure with the merger of Winsonic Holdings, Ltd. and Winsonic Digital Cable Systems Network with Media and Entertainiment.com, Inc., thus creating Winsonic Digital Media Group, Ltd. The circumstances and transactions of the merger on October 7, 2004 were thoroughly reviewed. The merger was considered a capital transaction in substance, rather than a business combination, resulting in a reverse acquisition for accounting purposes, thereby yielding no recording of goodwill, and called for the proper recording of issuance of 6,004,200 common stock shares to the founder and CEO. Also, as mentioned in Note 1 - Organization and Purpose (on page F-7), the Company considered SAB Topic 4C in disclosing that stockholders deficit and loss per share were retroactively recast using historical data from Winsonic. The entry to record par value of $6,004 was a credit to common stock and debit to related party-selling, general and administrative expenses as of September 10, 2002 (inception).
B.  
Equity transactions, including warrants, paid-in capital, and common stock transactions of the Company were reviewed in detail to ensure proper recording of stockholders deficit. During our review of warrants, paid-in capital, and common stock transactions, it was noted that the Company in 2003 year had incorrectly capitalized stock issued for services, rather than expensing the cost of the services. The Company has now recorded and disclosed $275,000 as consulting expense in 2003, and reduced the asset by the same amount.

 
-24-

Management, in agreement with the Company’s new independent public accounting firm, De Joya & Company decided that given the complexity of the organization’s restructure, and the fact that the Company is a development stage company, it was appropriate due diligence to review all balance sheet accounts in detail. Management’s due diligence in it’s review procedures and disclosure practices contributed to the detection of one prior year adjustment, and one entry for recastment of shares and restatement of the financial statements for and as of the year ended December 31, 2003 and December 31, 2004.

Each prior period adjustment and related disclosure was appropriately confirmed as correct via a review with the previous auditors, Chavez and Koch, as evidenced in their opinion in the Report of Independent Public Registered Accounting Firm, dated August 16, 2005, filed with the Company’s Form 10KSB/A.


Part II - Other Information

Item 1. Legal Proceedings.

Other than as described below, the Company is not currently involved in any legal proceedings that may be deemed to be material to our financial condition.

Callozo vs. Media and Entertainment.com

On March 22, 2004, the Company (in all cases cited herein known as Media and Entertainment.com, Inc.) commenced a civil lawsuit in Los Angeles Superior Court (Case No. BC312530) against Caesar Collazo, a former officer of the Company, seeking damages in excess of $40,000, punitive and exemplary damages. The Company had purchased the assets of Nexcode of which Collazo was a founder, and Collazo received 400,000 shares of the Company’s Common Stock (the “Shares”) in consideration of the sale. While still employed by the Company, Collazo allegedly formed a competing company, stole proprietary property of the Company and solicited Company clients on behalf of the competitor. The Company seeks a constructive trust, injunctive relief and the return of the Shares.

Prior thereto, in February 2004, Mr. Collazo had commenced a lawsuit in Los Angeles Superior Court against the Company and its transfer agent seeking to remove the restrictive legend from the Shares. The injunctive relief was denied and Mr. Collazo dismissed the Complaint. In March 2004, the Company commenced a lawsuit in U.S. District Court, Clark Country Nevada (Case No. A480587) to enjoin the transfer of the Shares. The Court issued an Order on March 19, 2004, enabling Collazo to sell 30,000 shares of Common Stock and issuing a temporary restraining order with regard to the remaining 370,000 Shares provided the Company posted a bond for the entire amount of $424,000. The Company’s principals chose not to pledge personal assets as collateral for the bond and the Nevada action was dismissed.

-25-

In the above-described pending litigation brought by the Company against Collazo, in July 2004, the defendant denied the allegations, asserted 21 affirmative defenses and brought a cross-complaint against the Company. Mr. Collazo alleges that the Company breached the agreement with Collazo because he had not been paid compensation due him, he had not received a percentage of gross profit earnings, and that the Company had not exercised a good faith effort to raise an additional $250,000 in capital, and that Collazo did not receive the equity promised him. The Company denied the allegations of the Cross Complaint and asserted 13 affirmative defenses. At a settlement conference on April 11, 2005, the Company agreed to issue 900,000 shares of common stock to Mr. Collazo, as well as attorney fees of $120,000. The Company also agreed to issue 900,000 shares of common stock to Mr. Nana Yalley, an officer and current shareholder, as well as an equal partner of Mr. Collazo in Nexcode. The shares of common stock were valued as of the settlement date, and accordingly the value of 900,000 shares of common stock as well as $120,000 of attorney fees was charged as current year expenses as of December 31, 2004. The settlement was not accomplished by June 10, 2005, whereby Mr. Collazo may exercise at his option the right to enforce the settlement agreement for payment of attorney fees or convert the obligation of payment for attorney fees to a demand for issuance of 200,000 shares of stock in the Company.

On March 16, 2006, the 900,000 shares due to Mr. Collazo have been issued by the Company to Mr. Collazo in settlement. As of March 23, 2006, neither the 900,000 shares of common stock for Yalley, nor the $120,000 or 200,000 shares for attorney’s fees have been issued and paid, respectively. The agreement had no effect on the operating results for the 1st, 2nd or 3rd Quarters of 2005 or 2004; and an estimated liability of $1,020,000 for legal settlements was recorded as of September 30, 2005 and December 31, 2004.

Yellowbrix, Inc. vs. Media and Entertainment.com:

Yellowbrix, Inc. filed a collection suit against Media and Entertainment.com regarding an alleged contract authorized by the former CEO of Media and Entertainment.com. The pending lawsuit amount in dispute is $19,800, which is expensed in general and administrative expense in the 4th Quarter of 2004 and accrued within accounts payable of the Company as of December 31, 2004. The amount is included in Accounts Payable as of September 30, 2005 and December 31, 2004.
 
Berman, Romeri and Associates, LLP vs. Media and Entertainment.com:

-26-

This pending collection lawsuit arises from alleged contract and services obligating the Company, which was allegedly authorized by the former CEO of Media and Entertainment.com. The disputed amount of $8,733 is expensed in general and administrative expense in December of 2004 and included in the 4th Quarter operations. The liability included in accounts payable of the Company as of September 30, 2005 and December 31, 2004.

On March 9, 2006, Berman, Romeri and Associates, LLP and the Company entered into a written stipulation for Judgement, whereby the Company shall pay a settlement amount of $6,500 to Berman, Romeri and Associates, LLP by April 10, 2006.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

On June 22, 2005 we issued 66,667 shares of our common stock valued at $0.68 per share in exchange for services provided to the company.

On September 29, 2005 the Company issued 1,670,000 shares of common stock valued at approximately $1.20 per share, or $2 million. In return, Native American Television Network (NATVN) issued to the Company 4 million shares of its common stock valued at $.50 per share, or $2 million.

 
Item 3. Defaults Upon Senior Securities.

The company is not currently in default on any of its Senior Debt Agreements.
 
Item 4. Submission of Matters to a Vote of Security Holders.
-27-


There were not any matters submitted to a vote of the shareholders.

Item 5. Other Information.

Subsequent Events:

On January 11, 2006, the Company acquired all of the outstanding shares of Automated Interiors, (a private Georgia corporation) [“Interiors”] in exchange for 411,955 shares of the Company’s common stock. The transaction will be accounted for as a purchase of the net assets of Interiors, creating a wholly-owned subsidiary, the operations of which will be included in consolidated financial statements of the Company commencing in the 1st Quarter of 2006. Non-qualifying stock options were offered to five executives of Interiors to purchase 1,200,000 shares of common stock o the Company. The value of the transaction, based on an agreed value of $0.25 for each common share of the Company in exchange for the net assets of Interiors as of the date of the transaction and cash flows, is $102,989.
 
Item 6. Exhibits and Reports on Form 8-K.

None

Signatures

In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
 
     
  WINSONIC DIGITAL MEDIA GROUP, LTD.
 
 
 
 
  (Registrant)
March 28, 2006 By:   /s/ Winston Johnson 
   

Winston Johnson
CEO Chairman
     
     
     
March 28, 2006 By:   /s/ Eric Young
 
Eric Young, CFO
   

 
-28-

WINSONIC DIGITAL MEDIA GROUP, LTD
Quarterly Report on Form 10-QSB
Quarter Ended September 30, 2005

EXHIBIT INDEX

Exhibit
Number        Description

31.1               Certification pursuant to Rule 13a-14(a) or Rule 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2                Certification pursuant to Rule 13a-14(a) or Rule 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
 
32.1                Certification pursuant to 18 U.S.C.  1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

32.2                 Certification pursuant to 18 U.S.C.  1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.


-29-

 

EX-31.1 2 v038652_ex31-1.htm
EXHIBIT 31.1

I, Winston Johnson, Chief Executive Officer (Principal Executive Officer) of Winsonic Digital Media Group, Ltd., certify that:

1. I have reviewed this quarterly report on Form 10-QSB of Winsonic Digital Media Group, Ltd. for the quarter ended September 30, 2005; and

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the small business issuer as of, and for, the periods presented in this report;

4. The small business issuer's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e))* for the small business issuer and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the small business issuer, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Evaluated the effectiveness of the small business issuer's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(c) Disclosed in this report any change in the small business issuer's internal control over financial reporting that occurred during the small business issuer's most recent fiscal quarter (the small business issuer's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the small business issuer's internal control over financial reporting; and

5. The small business issuer's other certifying officer(s) I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the small business issuer's auditors and the audit committee of small business issuer's board of directors (or persons performing the equivalent functions):


(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the small business issuer's ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the small business issuers internal control over financial reporting.


March 28, 2006                                                                    S/ Winston Johnson
Winston Johnson, Chief Executive Officer
(Principal Executive Officer)

*INDICATES MATERIAL OMITTED IN ACCORDANCE WITH SEC RELEASE NOS. 33-8238 AND 34-47986.
 

EX-31.2 3 v038652_ex31-2.htm
Exhibit 31.2

I, Eric Young , Chief Financial Officer (Principal Financial Officer) of Winsonic Digital Media Group, Ltd., certify that:

1. I have reviewed this quarterly report on Form 10-QSB of Winsonic Digital Media Group, Ltd. for the quarter ended September 30, 2005; and

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the small business issuer as of, and for, the periods presented in this report;

4. The small business issuer's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e))* for the small business issuer and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the small business issuer, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Evaluated the effectiveness of the small business issuer's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(c) Disclosed in this report any change in the small business issuer's internal control over financial reporting that occurred during the small business issuer's most recent fiscal quarter (the small business issuer's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the small business issuer's internal control over financial reporting; and

5. The small business issuer's other certifying officer(s) I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the small business issuer's auditors and the audit committee of small business issuer's board of directors (or persons performing the equivalent functions):


(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the small business issuer's ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the small business issuers internal control over financial reporting.


March 28, 2006                                                                     /S/ Eric Young
Eric Young, Chief Financial Officer
(Principal Financial Officer)


*INDICATES MATERIAL OMITTED IN ACCORDANCE WITH SEC RELEASE NOS. 33-8238 AND 34-47986.
 


 
EX-32.1 4 v038652_ex32-1.htm

Exhibit 32.1

STATEMENT PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO SECTION 906
OF THE SARBANES-OXLEY ACT OF 2002

I, Winston Johnson, Chief Executive Officer of Winsonic Digital Media Group, Ltd. (the "Company"), hereby certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

(a) The Quarterly Report on Form 10-QSB of the Company for the quarter ended September 30, 2005, to which this certification accompanies (the "Annual Report"), fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(b) The information contained in this Quarterly Report fairly presents, in all material respects, the financial condition and results of operations of the Company.


March 28, 2006                /S/ Winston Johnson
Winston Johnson, Chief Executive Officer
 
 

A signed original of this written statement required by Section 906, or other document authenticating, acknowledging or otherwise adopting the signature that appears in typed form within the electronic version of this written statement required by Section 906, has been provided to Winsonic Digital Media Group, Ltd. and will be retained by Winsonic Digital Media Group, Ltd. and furnished to the Securities and Exchange Commission or its staff upon request.
 

EX-32.2 5 v038652_ex32-2.htm

 
Exhibit 32.2

STATEMENT PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO SECTION 906
OF THE SARBANES-OXLEY ACT OF 2002

I, Eric Young, Chief Financial Officer of Winsonic Digital Media Group, Ltd. (the "Company"), hereby certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

(a) The Quarterly Report on Form 10-QSB of the Company for the quarter ended September 30, 2005, to which this certification accompanies (the "Annual Report"), fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(b) The information contained in this Quarterly Report fairly presents, in all material respects, the financial condition and results of operations of the Company.


March 28, 2006                                                         /S/ Eric Young
Eric Young, Chief Financial Officer

 

A signed original of this written statement required by Section 906, or other document authenticating, acknowledging or otherwise adopting the signature that appears in typed form within the electronic version of this written statement required by Section 906, has been provided to Winsonic Digital Media Group, Ltd. and will be retained by Winsonic Digital Media Group, Ltd. and furnished to the Securities and Exchange Commission or its staff upon request.


 
 
 

 
-----END PRIVACY-ENHANCED MESSAGE-----