UNITED
STATES
 SECURITIES
AND EXCHANGE COMMISSION
 Washington,
D.C. 20549
    FORM 10-Q
   (Mark
One)
 x
              QUARTERLY
      REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
      1934
  For
the quarterly period ended October 31, 2008
  o
              TRANSITION
      REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
      1934
  For
the transition period from ___________ to ___________
 
 Commission
File number 000-28881
 
 MEGA
MEDIA GROUP, INC.
 (Exact
name of registrant as specified in its charter)
  Nevada
              88-0403762(State
      or other jurisdiction of incorporation or organization)
              (I.R.S.
      Employer Identification No.)
  1122 Coney Island Avenue, Brooklyn,
      NY
              11235(Address
      of principal executive offices)
              (Zip
      Code)
 
 (718) 947-1100(Registrant’s
      telephone number, including area
code)
  Indicate
by check mark if the registrant (1) has filed reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding
12 months (or for such shorter period that the Company was required to file such
reports), and (2) has been subject to such filing requirements for the past 90
days.
 Yes xNo o
 
 Indicate
by check mark whether the Registrant is a large accelerated filer, an
accelerated filer, or a non-accelerated filer. See definition of “accelerated
filer and large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check
one):
  Large
      Accelerated Filer o
              Accelerated
      Filer  o
              Non
      Accelerated Filer  oSmaller
      Reporting Company x
  Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Act).
 oYes     xNo
 
 As of
October 31, 2008, we had 95,831,470 outstanding shares of Common Stock, $0.001
par value.
  
  
   MEGA
MEDIA GROUP, INC.
 TABLE OF CONTENTS
 
 PART I - FINANCIAL
      INFORMATIONItem
      1. Financial Statements
              1Item
      2. Management’s Discussion and Analysis of Financial Condition and Results
      of Operation
              20Item
      3. Quantitative and Qualitative Disclosures About Market
    Risk
              23Item
      4T. Controls and Procedures
              23PART
      II - OTHER INFORMATIONItem
      1. Legal Proceedings
              24Item
      1A. Risk Factors
              24Item
      2. Unregistered Sales of Equity Securities and Use of
    Proceeds
              24Item
      3. Defaults Upon Senior Securities
              24Item
      4. Submission of Matters to a Vote of Security Holders
              24Item
      5. Other Information
              24Item
      6. Exhibits
              24SIGNATURES
              25
 
   
   
 Except as
otherwise required by the context, all references in this report to "we", "us”,
"our", “MMDA”, “Mega Media Group”, “MMG” or "Company" refer to the consolidated
operations of Mega Media Group, Inc., a Nevada corporation, and its wholly-owned
subsidiaries.
 
 Forward-Looking
Statements and Associated Risks
  The Private Securities Litigation
Reform Act of 1995 provides a "safe harbor" for certain forward-looking
statements. Some of the statements contained in this annual report of the
Company discuss future expectations, contain projections of our operations
or financial condition or state other forward-looking information. Some
statements contained in this quarterly report on Form 10-QSB that are not
historical facts (including without limitation statements to the effect that we
"believe," "expect," "anticipate," "plan," "intend," "foresee," or other similar
expressions) and are forward-looking statements. These forward-looking
statements are based on our current expectations and beliefs concerning future
developments and their potential effects on us. There can be no assurance that
future developments affecting us will be those anticipated by us. All comments
concerning our expectations for future revenue and operating results are based
on our forecasts of our plan of operation and do not include the potential
impact of any future acquisitions or operations. These forward-looking
statements involve significant risks and uncertainties (some of which are beyond
our control) and assumptions. Should one or more of these risks or uncertainties
materialize, or should any of our assumptions prove incorrect, actual results
may vary in material respects from those projected in the forward-looking
statements.
    
    PART I - FINANCIAL
INFORMATION
 
 Item
1. Financial Statements










MEGA
      MEDIA GROUP, INC. AND SUBSIDIARIESCONSOLIDATED
      BALANCE SHEETSOctober
      31,
              
              
              January
      31,ASSETS
              
              2008
              
              
              2008Current
      Assets
              
              (Unaudited)Cash
              
              $
              -
              
              
              $
              396Accounts
      receivable, net (Note3)
              
              
              172,874
              
              
              
              68,036Accrued
      revenues
              
              
              38,193
              
              
              
              -Prepaid
      Expenses
              
              
              26,613
              
              
              
              76,222Note
      Receivable
              
              
              10,000
              
              
              
              -Total
      Current Assets
              
              
              247,680
              
              
              
              144,654Fixed
      assets, net (Note 4)
              
              
              270,689
              
              
              
              391,244Master
      records, net (Note 5)
              
              
              125,000
              
              
              
              125,000Other
      intangible assets, net (Note 5)
              
              
              -
              
              
              
              176,667Advances
              
              
              20,000
              
              
              
              20,000Note
      Receivable-Golden Gate Investors (Note 14)
              
              
              1,400,000
              
              
              
              -Deposits
              
              
              183,486
              
              
              
              183,486Other
              
              
              16,010
              
              
              
              16,010TOTAL
      ASSETS
              
              $
              2,262,865
              
              
              $
              1,057,061LIABILITIES
      AND STOCKHOLDERS' DEFICITCurrent
      LiabilitiesAccounts
      payable
              
              $
              1,762,895
              
              
              $
              458,009Bank
      overdraft
              
              
              3,981
              
              
              
              -Sales
      tax payable
              
              
              616
              
              
              
              616Payroll
      taxes payable (Note 13)
              
              
              1,032,239
              
              
              
              728,350Accrued
      Offices' Compensation
              
              
              498,795
              
              
              
              473,786Equipment
      loan - current portion (Note 9)
              
              
              7,248
              
              
              
              8,304Equipment
      lease - current portion (Note 10)
              
              
              19,440
              
              
              
              19,440Loans
      payable (Note 7)
              
              
              1,065,488
              
              
              
              795,000Due
      to related party (Note 6)
              
              
              386,283
              
              
              
              398,783Deferred
      revenues
              
              
              182,302
              
              
              
              301,661Accrued
      expenses
              
              
              145,570
              
              
              
              24,508Payable
      to shareholders (Note 6)
              
              
              609,148
              
              
              
              239,148Stock
      Payable (Note 10)
              
              
              -
              
              
              
              -Total
      Current Liabilities
              
              
              5,714,005
              
              
              
              3,447,605Equipment
      Loan Payable (Note 9)
              
              
              4,843
              
              
              
              4,767Equipment
      Lease Payable (Note 10)
              
              
              16,200
              
              
              
              30,780Note
      Payable (Note 14)
              
              
              1,499,000
              
              
              
              -TOTAL
      LIABILITIES
              
              
              7,234,048
              
              
              
              3,483,152Commitments
      and contingencies
              
              
              -
              
              
              
              -Stockholders'
      DeficitPreferred
      stock, $.001 par value, 20,000,000 shares authorized, 0shares
      issued and
                outstanding
      as of 10/31/08 and 01/31/08 (Note 8)
              
              
              -
              
              
              
              -Common
      stock, $.001 par value, 500,000,000 shares authorized, 97,486,337 shares
                issued
      and outstanding as of 10/31/08 and 80,552,254 shares issued and
      outstanding as of 01/31/08 (Note 8)
              
              
              97,486
              
              
              
              80,552Additional
      paid-in capital
              
              
              8,996,337
              
              
              
              7,233,835Deferred
      compensation
              
              
              (255,091
              )
              
              
              (435,009
              )Accumulated
      Deficit
              
              
              (13,809,916
              )
              
              
              (9,305,469
              )Total
      Stockholders' Deficit
              
              
              (4,971,183
              )
              
              
              (2,426,091
              )TOTAL
      LIABILITIES AND STOCKHOLDERS' DEFICIT
              
              $
              2,262,865
              
              
              $
              1,057,061




The
accompanying notes are an integral part of these financial
statements.
 
  1






MEGA
      MEDIA GROUP, INC. AND SUBSIDIARIESCONSOLIDATED
      STATEMENTS OF OPERATIONSNine
      Months Ended October 31,
              
              
              Three
      Months Ended October 31,2008
              
              
              2007
              
              
              2008
              
              
              2007(unaudited)
              
              
              (unaudited)
              
              
              (unaudited)
              
              
              (unaudited)Revenues:Advertising revenues
              
              $
              996,091
              
              
              $
              3,104,846
              
              
              $
              389,545
              
              
              $
              1,229,034Other revenues
              
              
              68,709
              
              
              
              280,101
              
              
              
              22,551
              
              
              
              87,893Total
      Revenues
              
              
              1,064,800
              
              
              
              3,384,947
              
              
              
              412,096
              
              
              
              1,316,927Operating expenses
              
              
              2,218,479
              
              
              
              2,517,366
              
              
              
              677,467
              
              
              
              977,508Interest expense
              
              
              261,689
              
              
              
              54,464
              
              
              
              86,163
              
              
              
              14,325Selling, general and administrative
              
              
              2,135,433
              
              
              
              2,405,616
              
              
              
              802,744
              
              
              
              710,233Depreciation and amortization
              
              
              150,368
              
              
              
              338,949
              
              
              
              44,855
              
              
              
              50,500Stock compensation expense
              
              
              -
              
              
              
              308,333
              
              
              
              -
              
              
              
              8,3334,765,969
              
              
              
              5,624,728
              
              
              
              1,611,229
              
              
              
              1,760,899Net
      loss from operations
              
              
              (3,701,169
              )
              
              
              (2,239,781
              )
              
              
              (1,199,133
              )
              
              
              (443,972
              )Other
      Expenses:Loss
      on sale of intangible assets
              
              
              40,168
              
              
              
              -
              
              
              
              
              
              
              
              -Loss
      on disposition of fixed assets
              
              
              -
              
              
              
              60,025
              
              
              
              -
              
              
              
              60,025Gain
      on extinguishment of debt
              
              
              -
              
              
              
              (403,400
              )
              
              
              -
              
              
              
              (403,400
              )Beneficial
      conversion expense
              
              
              763,110
              
              
              
              -
              
              
              
              19,579
              
              
              
              -Net
      loss
              
              $
              (4,504,447
              )
              
              $
              (1,896,406
              )
              
              $
              (1,218,712
              )
              
              $
              (100,597
              )Basic
      and diluted loss per share
              
              $
              (0.05
              )
              
              $
              (0.05
              )
              
              $
              (0.01
              )
              
              $
              (0.00
              )Weighted-Average
      shares used in computation of basic and diluted loss per
    share
              
              
              86,249,364
              
              
              
              38,816,721
              
              
              
              95,473,782
              
              
              
              74,139,866






The
accompanying notes are an integral part of these financial
statements.
 
 2






MEGA
      MEDIA GROUP, INC. AND SUBSIDIARIESCONSOLIDATED
      STATEMENTS OF CASH FLOWSOctober
      31,
              
              
              October
      31,2008
              
              
              2007(Unaudited)
              
              
              (Unaudited)CASH
      FLOWS FROM OPERATING ACTIVITIES:Net
      loss
              
              $
              (4,504,447
              )
              
              $
              (1,896,406
              )Adjustments
      to reconcile net loss to net cashused
      by operating activities:Depreciation
      and amortization
              
              
              150,368
              
              
              
              338,949Loss
      on sale of intangible assets
              
              
              40,168
              
              
              
              -Loss
      on disposal of fixed assets
              
              
              -
              
              
              
              60,025Beneficial
      conversion of loans from shareholders
              
              
              763,110
              
              
              
              -Stock
      options issued to officers for services
              
              
              6,720
              
              
              
              -Stock
      options issued to lenders in exchange for loans
              
              
              6,250
              
              
              
              -Stock
      compensation for consulting services
              
              
              188,918
              
              
              
              1,000Stock
      issued for air lease rent
              
              
              92,000Non-cash
      stock based compensation
              
              
              -
              
              
              
              308,333Extinguishment
      of Debt
              
              
              -
              
              
              
              (403,400
              )Changes
      in operating assets and liabilities:(Increase)
      in note receivable
              
              
              (10,000
              )
              
              
              -(Increase)
      in accounts receivable
              
              
              (104,838
              )
              
              
              (22,728
              )(Increase)
      decrease in accrued revenues
              
              
              (38,193
              )
              
              
              -(Increase)
      decrease in prepaid expenses
              
              
              49,609
              
              
              
              68,985Increase
      in accounts payable
              
              
              1,304,886
              
              
              
              67,642Increase
      in bank overdraft
              
              
              3,981
              
              
              
              -Increase
      in sales tax payable
              
              
              -
              
              
              
              (276
              )Increase
      in accrued officers' compensation
              
              
              25,009
              
              
              
              27,054Increase
      in accrued expenses
              
              
              152,583
              
              
              
              17,092Increase
      in deferred revenue
              
              
              474
              
              
              
              186,305Increase
      in payroll liabilities
              
              
              303,889
              
              
              
              383,621Increase
      in other current liabilities
              
              
              -
              
              
              
              (7,565
              )Total
      adjustments
              
              
              2,934,934
              
              
              
              1,025,038NET
      CASH USED BY OPERATING ACTIVITIES
              
              
              (1,569,513
              )
              
              
              (871,368
              )CASH
      FLOWS FROM INVESTING ACTIVITIES:Master
      records
              
              
              
              
              
              
              (14,000
              )Fixed
      assets
              
              
              (13,146
              )
              
              
              (16,015
              )Deposits
              
              
              -
              
              
              
              42,000CASH
      PROVIDED (USED) BY INVESTING ACTIVITIES
              
              
              (13,146
              )
              
              
              11,985CASH
      FLOWS FROM FINANCING ACTIVITIES:Loan
      proceeds
              
              
              1,097,000
              
              
              
              355,000Equipment
      loan repayments
              
              
              (981
              )
              
              
              (8,005
              )Proceeds
      from loans from shareholders
              
              
              375,000
              
              
              
              254,030Repayments
      of loans from shareholders
              
              
              (5,000
              )
              
              
              (146,600
              )Repayments
      of loans from related parties
              
              
              (12,500
              )
              
              
              (5,000
              )Equipment
      lease repayments
              
              
              (14,580
              )
              
              
              (14,580
              )Capital
      Contributions
              
              
              88,228
              
              
              
              -Sale
      of common stock
              
              
              -
              
              
              
              400,000Options
      exercised by officers
              
              
              55,096
              
              
              
              -CASH
      PROVIDED BY FINANCING ACTIVITIES
              
              
              1,582,263
              
              
              
              834,845NET
      INCREASE IN CASH
              
              
              (396
              )
              
              
              (24,538
              )CASH:
      Beginning of period
              
              
              396
              
              
              
              37,444End
      of period
              
              $
              -
              
              
              $
              12,906Supplemental
      disclosure of noncash financing and investing activities:Cash
      paid during the period for income taxes
              
              $
              2,275
              
              
              $
              2,275Cash
      paid during the period for interest
              
              $
              44,874
              
              
              $
              49,977Non
      Cash Financing and Investing Activities:Stock
      issued for conversion of loans to shareholders
              
              $
              -
              
              
              $
              877,000Stock
      issued for conversion of loans from third parties
              
              
              724,512
              
              
              
              -Increase
      in note payable
              
              $
              1,400,000
              
              
              $
              -(Increase)
      in note receivable
              
              $
              (1,400,000
              )
              
              $
              -Preferred
      stock issued for services
              
              $
              -
              
              
              $
              1,100




The
accompanying notes are an integral part of these financial
statements.




3






MEGA
      MEDIA GROUP, INC. AND SUBSIDIARIESCONSOLIDATED
      STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIT)UNAUDITEDTotalPreferred
      Stock
              
              
              Common
      Stock
              
              
              Additional
              
              
              Deferred
              
              
              
              
              
              Stockholders'($.001
      par value)
              
              
              ($.001
      par value)
              
              
              Paid-In
              
              
              Stock
              
              
              Accumulated
              
              
              EquityShares
              
              
              Amount
              
              
              Shares
              
              
              Amount
              
              
              Capital
              
              
              Comp
              
              
              Deficit
              
              
              (Deficit)Balance
      January 31, 2007
              
              
              14,492,000
              
              
              $
              14,492
              
              
              
              5,277,446
              
              
              $
              5,277
              
              
              $
              4,067,546
              
              
              $
              (1,392
              )
              
              $
              (6,146,720
              )
              
              $
              (2,060,797
              )Sale
      of common stock
              
              
              
              
              
              
              
              
              
              
              50,000
              
              
              
              50
              
              
              
              49,950
              
              
              
              
              
              
              
              
              
              
              
              50,000Cancellation
      of restricted stock awardto
      officers and shareholders
              
              
              (1,175,000
              )
              
              
              (1,175
              )
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              1,175
              
              
              
              
              
              
              
              -Restricted
      stock award
              
              
              1,100,000
              
              
              
              1,100
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              (100
              )
              
              
              
              
              
              
              1,000to
      officers and shareholdersEffect
      of reversed merger
              
              
              (14,417,000
              )
              
              
              (14,417
              )
              
              
              67,651,248
              
              
              
              67,651
              
              
              
              857,726
              
              
              
              
              
              
              
              (103,288
              )
              
              
              807,672Sale
      of common stock
              
              
              
              
              
              
              
              
              
              
              1,000,000
              
              
              
              1,000
              
              
              
              599,000
              
              
              
              
              
              
              
              
              
              
              
              600,000Sale
      of common stock
              
              
              
              
              
              
              
              
              
              
              166,667
              
              
              
              167
              
              
              
              58,167
              
              
              
              
              
              
              
              
              
              
              
              58,334Capital
      contribution
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              79,737
              
              
              
              
              
              
              
              -
              
              
              
              79,737Beneficial
      conversion of loans from shareholders
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              51,810
              
              
              
              
              
              
              
              
              
              
              
              51,810Stock
      issued in exchange for air lease rent
              
              
              
              
              
              
              
              
              
              
              3,000,000
              
              
              
              3,000
              
              
              
              897,000
              
              
              
              
              
              
              
              
              
              
              
              900,000Stock
      issued in exchange for legal services
              
              
              
              
              
              
              
              
              
              
              406,893
              
              
              
              407
              
              
              
              95,898
              
              
              
              
              
              
              
              
              
              
              
              96,305Restricted
      stock award to contractorfor
      future consulting services
              
              
              
              
              
              
              
              
              
              
              3,000,000
              
              
              
              3,000
              
              
              
              477,000
              
              
              
              (480,000
              )
              
              
              
              
              
              
              -Restricted
      stock award to contractorfor
      earned services during the three months endedJanuary
      31, 2008
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              45,308
              
              
              
              
              
              
              
              45,308Loss
      for the year endedJanuary
      31, 2008
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              (3,055,461
              )
              
              
              (3,055,461
              )Balance
      January 31, 2008
              
              
              -
              
              
              
              -
              
              
              
              80,552,254
              
              
              
              80,552
              
              
              
              7,233,834
              
              
              
              (435,009
              )
              
              
              (9,305,469
              )
              
              
              (2,426,092
              )Stock
      options issued to officers for services
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              6,720
              
              
              
              
              
              
              
              
              
              
              
              6,720Stock
      options issued to lenders in exchange for loans
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              6,250
              
              
              
              
              
              
              
              
              
              
              
              6,250Stock
      issued in exchange for air lease rent
              
              
              
              
              
              
              
              
              
              
              1,000,000
              
              
              
              1,000
              
              
              
              91,000
              
              
              
              
              
              
              
              
              
              
              
              92,000Stock
      issued in exchange for consulting services
              
              
              
              
              
              
              
              
              
              
              100,000
              
              
              
              100
              
              
              
              8,900
              
              
              
              
              
              
              
              
              
              
              
              9,000Beneficial
      conversion of loans payable
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              763,110
              
              
              
              
              
              
              
              
              
              
              
              763,110Stock
      issued for conversion ofloans
      payable
              
              
              
              
              
              
              
              
              
              
              15,656,353
              
              
              
              15,656
              
              
              
              743,377
              
              
              
              
              
              
              
              
              
              
              
              759,033Restricted
      stock award to contractorfor
      earned services during the nine months endedOctober
      31, 2008
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              179,918
              
              
              
              
              
              
              
              179,918Capital
      contribution
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              88,228
              
              
              
              
              
              
              
              -
              
              
              
              88,228Stock
      options exercised by officers
              
              
              
              
              
              
              
              
              
              
              177,730
              
              
              
              178
              
              
              
              54,918
              
              
              
              
              
              
              
              
              
              
              
              55,096Loss
      for nine months endedOctober
      31, 2008
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              (4,504,447
              )
              
              
              (4,504,447
              )Balance
      October 31, 2008
              
              
              -
              
              
              $
              -
              
              
              
              97,486,337
              
              
              $
              97,486
              
              
              $
              8,996,337
              
              
              $
              (255,091
              )
              
              $
              (13,809,916
              )
              
              $
              (4,971,183
              )


The
accompanying notes are an integral part of these financial
statements.


4




MEGA
MEDIA GROUP, INC. AND SUBSIDIARIES
 NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
 (Amounts
and Disclosures at and for the nine months
 Ended
October 31, 2008 and 2007 Are Unaudited)
 
 
 
 NOTE 1 -
ORGANIZATION AND NATURE OF BUSINESS
  Mega
Media Group, Inc. (the “MMG”) was incorporated in New York State on February 3,
2004. The Company is a multi-media holding company with five wholly owned
subsidiaries. The Company’s focus is mainstream entertainment and media. The
corporate headquarters is located in Brooklyn, NY.  All references to
the year ending January 31, 2005 are for the period February 3, 2004 (date of
inception) to January 31, 2005.
 
 As
reflected in the accompanying combined financial statements, the Company has an
accumulated deficit of $9,305,469 at January 31, 2008 that includes losses of
$3,055,461 for the year ended January 31, 2008 and a working deficit of
$3,302,951 at January 31, 2008. Also, as reflected in the accompanying combined
financial statements, the Company has an accumulated deficit of $13,809,916 and
$8,134,331 at October 31, 2008 and 2007 respectively that includes losses of
$4,504,447 and $1,896,406 for nine months ended October 31, 2008 and 2007
respectively and a working deficit of $5,466,325 and $3,263,209 at October 31,
2008 and 2007 respectively. The Company’s shareholders have funded the losses
and cash shortfalls allowing management to develop sales and contingencies
plans. The Company’s also arranging for additional funding. The financial
statements do not include any adjustments relating to the recoverability and
classification of recorded asset amounts or amounts and classification of
liabilities that might be necessary should the Company be unable to continue as
a going concern.
 
 Management
has taken the following steps to revise its operating and financial
requirements, which it believes are sufficient to provide the Company with the
ability to continue as a going concern. The Company is actively pursing
additional funding and a potential merger or acquisition candidate and strategic
partners, which would enhance stockholders’ investment. Management believes that
the above actions will allow the Company to continue operations through the next
fiscal year.
  NOTE-2 –
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
 
 Preparation of Interim
Financial Statements
 
 The
accompanying unaudited consolidated financial statements were prepared by Mega
Media Group, Inc. pursuant
to the rules and regulations of the Securities and Exchange Commission (“SEC”)
and, in the opinion of management, include all adjustments (consisting of normal
recurring accruals and adjustments necessary for adoption of new accounting
standards) necessary to present fairly the results of the interim periods shown.
Certain information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting principles
in the United States have been condensed or omitted pursuant to such SEC rules
and regulations. Management believes that the disclosures made are adequate to
make the information presented not misleading. Due to seasonality and other
factors, the results for the interim periods are not necessarily indicative of
results for the full year. The financial statements contained herein should be
read in conjunction with the consolidated financial statements and notes thereto
included in the Company’s 2007 Annual Report on Form 10-K and Form 8-K filed on
May 15, 2008.
 
 Basis Of
Consolidation
 
 The
accompanying consolidated financial statements include the accounts of the Mega
Media Group Inc., and its subsidiary Mega Media Film, Inc., Mega Media Studios,
Inc., Mega Media Records, Inc., VSE Magazine, Inc., and Echo Broadcasting Group,
Inc. All significant intercompany balances and transactions have been
eliminated.
    5
  
 Estimates
 
 The
preparation of financial statements in conformity with accounting principles
generally accepted in the United States of America requires management to make
estimates and assumptions that effects the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the of the combined financial statements and the reported amounts of revenue and
expenses during the reported period. Actual results could differ from these
estimates.
 
 Cash And Cash
Equivalents
  Short-term
investments with an original maturity of three months or less are considered to
be cash equivalents.
 
 Depreciation and
Amortization
 
 The cost
of furniture and equipment is depreciated over the estimated useful lives of the
related assets. The cost of leaseholds improvements is amortized over the lesser
of the length of the related lease or the estimated useful life of the assets.
Depreciation is computed on a straight line basis, with lives ranging from 3 to
7 years.  Leasehold improvements are amortized over the life of the
lease.
 
 Master
Records
 
 The
Company records the cost of a record master borne by the Company as an asset if
the past performance and current popularity of the artist provides a sound basis
for estimating that the cost will be recovered from future sales. Otherwise,
that cost is charged to expense. The amount recognized as an asset is amortized
over the estimated life of the recorded performance.
 
 Accounts
Receivable
 
 Accounts
receivable are stated at the amount management expects to collect from
outstanding balances.  Management provides for probable uncollected
amounts through a charge to earnings and a credit to an allowance for bad debts
based on its assessment of the current status of individual
accounts.  Balances that are still outstanding after management has
used reasonable collection efforts are written off through a charge to the
allowance for bad debts and a credit to accounts receivable.
 
 Revenue
Recognition
 
 The
Company recognizes revenue for broadcast advertising when the commercial is
broadcast and is reported, net of agency and outside sales representative
commissions, in accordance with Staff Accounting Bulletin (“SAB”) No. 104,
Topic 13, “Revenue
Recognition, Revised and Updated.” Agency and outside sales
representative commissions are calculated based on a stated percentage applied
to gross billing. Generally, clients remit the gross billing amount to the
agency or outside sales representative, and the agency or outside sales
representative remits the gross billing, less their commission, to the
Company.
 
 Financial
Instruments
 
 Due to their short maturity, the
carrying amounts of accounts and notes receivable, accounts payable, accrued
liabilities, and short-term borrowings approximated their fair values atOctober 31, 2008 andJanuary 31, 2008.
 
 Income
Taxes
 
 The Company accounts for income taxes
using the liability method. Under this method, deferred tax assets and
liabilities are determined based on differences between financial reporting
bases and tax bases of assets and liabilities and are measured using the enacted
tax rates expected to apply to taxable income in the periods in which the
deferred tax asset or liability is expected to be realized or settled. Deferred
tax assets are reduced by valuation allowances if the Company believes it is
more likely than not that some portion or all of the assetswill not be
realized.
   6
   
 Certain
Reclassifications
 
 The
Company has reclassified a portion of prior quarters selling, general and
administrative expense to be included as a separate component of operating
expenses.
 
 Barter
Transactions
 
 The Company provides broadcast
advertising time in exchange foradvertising time in other media, as well
ascertaingoods andservices. The terms of the exchanges
generally permit the Company to preempt such broadcast time in favor of
advertisers who purchase time in exchange for cash. The Company includes the
value of such exchanges in both broadcasting net revenues and station operating
expenses. The valuation of barter time is based upon the fair value of theadvertisingtime providedandgoods andservices received. For theyearendedJanuary31, 2008, barter transactions reflected in net
broadcast revenue,operatingexpenses and selling, general and
administrative expenses were approximately$290,896.For thenine monthsendedOctober31, 2008 and2007, barter transactions reflected in net
broadcast revenue,operatingexpenses and selling, general and
administrative expenses were approximately $103,761 and $178,178
respectively.
 
 New
Accounting Pronouncements
 
 In
March 2008, the FASB issued SFAS 161, “Disclosures about Derivative
Instruments and Hedging Activities”. The new standard is intended to improve
financial reporting about derivative instruments and hedging activities by
requiring enhanced disclosures to enable investors to better understand their
effects on an entity’s financial position, financial performance, and cash
flows. It is effective for financial statements issued for fiscal years and
interim periods beginning after November 15, 2008, with early application
encouraged. The Company is currently evaluating the impact of adopting SFAS 161
on its consolidated financial statements.
 
 On
December 4, 2007, the FASB issued SFAS No. 160, Noncontrolling interest in
Consolidated Financial Statements(SFAS No. 160).  SFAS No. 160
requires all entities to report noncontrolling (minority) interests in
subsidiaries as equity in the consolidated financial statements.  The
statement establishes a single method of accounting for changes in a parent’s
ownership interest in a subsidiary that do not result in deconsolidation and
expands disclosures in the consolidated financial statements.  SFAS
No. 160 is effective for fiscal years beginning after December 15, 2008 and
interim periods within those fiscal years.  We have not yet determined
the impact of the adoption of SFAS No. 160 on our consolidated financial
statements and footnote disclosures.
 
 On
December 4, 2007, the FASB issued SFAS No.141R, Business Combinations (SFAS
No. 141R).  SFAS No. 141R requires the acquiring entity in a business
combination to recognize all the assets acquired and liabilities assumed,
establishes the acquisition date fair value as the measurement objective for all
assets acquired and liabilities assumed, and requires the acquirer to expand
disclosures about the nature and financial effect of the business
combination.  SFAS No. 141R is effective for business combinations for
which the acquisition date is on or after the beginning of the first annual
reporting period beginning on or after December 15, 2008.  We have not
yet determined the impact of the adoption of SFAS No. 141R on our consolidated
financial statements and footnote disclosures.
 
 In
September 2006, the FASB issued Statement of Financial Accounting Standards
(“SFAS”) No. 157, “Fair Value Measurements”, which establishes a framework for
reporting fair and expands disclosure about fair value measurements. SFAS No.
157 is effective for financial statements issued for fiscal years beginning
after November 15, 2007 and interim periods within those fiscal years. The
adoption of this standard had no impact on the Company’s financial position or
results of operations.
 
 In
February 2007, the FASB issued Statement of Financial Accounting Standards
No. 159, “The Fair Value Option for Financial Assets and Financial
Liabilities-Including an amendment of FASB Statement No. 115,
(“SFAS No. 159”). SFAS No. 159 permits entities to choose to
measure many financial instruments and certain other items at fair value. Most
of the provisions of this Statement apply only to entities that elect the fair
value option. However, the amendment to FASB Statement No. 115, “Accounting
for Certain Investments in Debt and Equity Securities,”
(“SFAS No. 115”), applies to all entities with available-for-sale and
trading securities. SFAS No. 159 is effective for the Company’s
consolidated financial statements for the annual reporting period beginning
after November 15, 2007. The Company has not elected the fair value option
for any assets or liabilities under SFAS No. 159.
   7
   
 NOTE 3 –
ACCOUNTS RECEIVABLE
 
 Accounts
      receivable consist of the following:
              
              October
      31, 2008
              
              
              January
      31, 2008Accounts
      receivable-trade
              
              $
              185,874
              
              
              $
              81,036Allowance
      for doubtful accounts
              
              
              (13,000
              )
              
              
              (13,000
              )$
              172,874
              
              
              $
              68,036
 
 NOTE 4 –
FIXED ASSETS
  October 31,
                  2008
                
                
                January
      31,
                  2008Fixed Assets consist
      of the following:Equipment
                
                $
                518,210
                
                
                $
                505,065Leasehold
                
                
                230,969
                
                
                
                230,969Furniture
                
                
                38,162
                
                
                
                38,162Trucks
                
                
                41,188
                
                
                
                41,188Computer
      software
                
                
                43,989
                
                
                
                43,989872,518
                
                
                
                859,373Less accumulated
      depreciation
                
                
                601,829
                
                
                
                468,129$
                270,689
                
                
                $
                391,244
 Depreciation
expense was $133,701 and $129,939 for the nine months ended October 31, 2008 and
2007.
 
 In August
2007 Company disposed one of its trucks. In addition, in August 2007 Company
abandoned leasehold improvements for one of its office locations, since the
lease agreement was terminated.
  NOTE 5 –
INTANGIBLE ASSETS
  October 31,
                  2008
                
                
                January
      31,
                  2008Intangible Assets
      consist of the following:Master
    records
                
                $
                320,676
                
                
                $
                320,676Other intangible
      assets (see Notes 2 & 16)
                
                
                0
                
                
                
                200,000Less accumulated
      amortization
                
                
                (195,676
                )
                
                
                (219,009
                )$
                125,000
                
                
                $
                301,667
 Amortization expense was $16,667
and $209,010 for the nine months ended October 31, 2008 and 2007.
   8
     NOTE 6 –
LOANS FROM SHARESHOLDERS AND RELATED PARTY TRANSACTIONS
 
 In June,
2007 the company entered into debt conversion agreements with company's
shareholders according to which loans from shareholders and certain loans due to
related party in the amount of $877,000 were converted into shares of common
stock at the conversion prices of $0.30 and $0.25 per share. These conversion
agreements were part of the reverse merger agreement between the company and
Family Healthcare Solutions,
Inc., a Nevada
Corporation(see note
12).
 
 In
January 2008 the company borrowed two loans of $100,000 each from the
shareholders. Each loan has a beneficial conversion clause proving the option
that the loan can be converted into the company’s common shares at a discount of
20% to market value, with a conversion price limit not to exceed $.40 per share.
The company recognizes beneficial conversion features in accordance with the
FASB Emerging Issues Task Force Issue 98-5. Accordingly, the company fully
amortized the discount through the interest expense in the amount of $51,810 at
the date of issuance of the loans.
 
 At
January 31, 2008 total loans payable to shareholders of $239,148 and due to
related party of $398,783 mature in various amounts from July 11, 2008 to
January 24, 2009 and have a stated interest rate of 9%.
 
 During
nine months ended 10/31/08, the Company borrowed from its shareholders three
loans of $50,000, $50,000, $75,000, $50,000 and $150,000 a total of $375,000.
Loans from shareholders mature in various amounts from November 23, 2008 to
January 20, 2009 and have a stated interest rate of 9%.
 
 At
October 31, 2008 total loans payable to shareholders of $409,148 and due to
related party of $386,283 mature in various amounts from November 23, 2008 to
January 24, 2009 and have a stated interest rate of 9%.
 
 Certain
founding shareholders of Echo Broadcasting Group Inc. have received free
advertising time on Radio VSE. The fair market value of these services was $0
and $176,130 at October 31, 2008 and January 31, 2008 respectively.
  On July
14th, 2008 the Company entered into an asset purchase agreement with Dr. Lev
Paukman, a director of the Company (see Note 15).
  NOTE 7 -
LOANS PAYABLE
 
 During
fiscal 2006, the Company borrowed two loans of $220,000 each, a total of
$440,000 payable on June 7, 2008.   ("STATUS") Extended for 12
months. The interest rate is the UBS Rate plus 5.5%.
 
 During
2007, the Company borrowed $250,000 from First Capital Invest Corp (“FCIC”),
Swiss-based financial institution. Loan is payable in six months from the
inception.
  On July
15, 2008, the Company issued to FCIC 2,729,014 shares in exchange for
satisfaction of the Loan Agreement dated March 14, 2007, for the principal of
$250,000 and accrued interest of $29,301.37, at conversion price 0.10 per
share.
 
 In August
2007, the Company borrowed $105,000 from Ocean Bridge, Inc. Loan has interest
payable on the unpaid balance at the rate of 12%. Loan matures on February 28,
2008.
 
 In
February 2008 the Company borrowed $90,000 from ESJA Enterprises Inc. Loan has
interest payable on the unpaid balance at the rate of 9%. Loan matures on August
20, 2008. Loan has a beneficial conversion clause proving the option that the
loan can be converted into the company’s common shares at a discount of 20% to
market value, with a conversion price limit not to exceed $.40 per share. The
company recognizes beneficial conversion features in accordance with the FASB
Emerging Issues Task Force Issue 98-5. Accordingly, the company fully amortized
the discount through the interest expense in the amount of $58,171 at the date
of issuance of the loan.
 
 In
February 2008 the Company borrowed $100,000 from FD Import & Export Corp.
Loan has interest payable on the unpaid balance at the rate of 9%. Loan matures
on September 28, 2008. Loan has a beneficial conversion clause proving the
option that the loan can be converted into the company’s common shares at a
discount of 20% to market value, with a conversion price limit not to exceed
$.40 per share. The company recognizes beneficial conversion features in
accordance with the FASB Emerging Issues Task Force Issue 98-5. Accordingly, the
company fully amortized the discount through the interest expense in the amount
of $145,665 at the date of issuance of the loan.
   9
   On August
29, 2008 the Company issued to FD Import & Export Corp. 3,519,308 shares to
satisfy in part the Loan Agreement dated February 28, 2008, for principle of
$71,512.33, at a conversion price 0.02032 per share.
 
 In March
2008 the Company borrowed another $100,000 from FD Import & Export Corp.
Loan has interest payable on the unpaid balance at the rate of 9%. Loan matures
on September 28, 2008. Loan has a beneficial conversion clause proving the
option that the loan can be converted into the company’s common shares at a
discount of 20% to market value, with a conversion price limit not to exceed
$.40 per share. The company recognizes beneficial conversion features in
accordance with the FASB Emerging Issues Task Force Issue 98-5. Accordingly, the
company fully amortized the discount through the interest expense in the amount
of $39,286 at the date of issuance of the loan.
 
 On March
25, 2008 the Company borrowed $75,000 from Tangiers Investors LP. Loan has
interest payable on the unpaid balance at the rate of 9.9%. Loan matures on
March 24, 2010. Loan has a beneficial conversion clause proving the option that
the loan can be converted into the company’s common shares at a discount of 30%
to market value, with a conversion price limit not to exceed $.50 per share. The
company recognizes beneficial conversion features in accordance with the FASB
Emerging Issues Task Force Issue 98-5. Accordingly, the company fully amortized
the discount through the interest expense in the amount of $24,668 at the date
of issuance of the loan.
  On
October 2, 2008, the Company issued to Tangiers Investors LP 443,656 shares in
exchange for partial satisfaction of the Loan Agreement dated March 25, 2008,
for the principal of $5,000, at conversion price 0.01127 per share.
 
 On May
29, 2008 the Company borrowed $100,000 from Jaworek Capital LLC. Loan had
interest payable on the unpaid balance at the rate of 9% with the initial
maturity date as of May 28, 2009. Loan had a beneficial conversion clause
proving the option that the loan can be converted into the company’s common
shares at a discount of 20% to market value, with a conversion price limit not
to exceed $.40 per share. The company recognizes beneficial conversion features
in accordance with the FASB Emerging Issues Task Force Issue 98-5. Accordingly,
the company fully amortized the discount through the interest expense in the
amount of $22,283 at the date of issuance of the loan.
  On July
2, 2008, the Company issued to Jaworek Capital LLC 1,229,435 shares in exchange
for satisfaction of the Loan Agreement dated May 29, 2008, for the principal of
$100,000 and accrued interest of $813.70, at conversion price 0.0820 per
share.
 
 On June
16, 2008 the Company borrowed another $100,000 from Jaworek Capital LLC. Loan
had interest payable on the unpaid balance at the rate of 9% with the initial
maturity date as of June 15, 2009. Loan had a beneficial conversion clause
proving the option that the loan can be converted into the company’s common
shares at a discount of 20% to market value, with a conversion price limit not
to exceed $.40 per share. The company recognizes beneficial conversion features
in accordance with the FASB Emerging Issues Task Force Issue 98-5. Accordingly,
the company fully amortized the discount through the interest expense in the
amount of $15,741 at the date of issuance of the loan.
  On July
2, 2008, the Company issued to Jaworek Capital LLC 1,224,023 shares in exchange
for satisfaction of the Loan Agreement dated June 16, 2008, for the principal of
$100,000 and accrued interest of $369.86, at conversion price 0.0820 per
share.
 
 On July
1, 2008 the Company borrowed another $100,000 from Jaworek Capital LLC. Loan had
interest payable on the unpaid balance at the rate of 9% with the initial
maturity date as of June 30, 2009. Loan had a beneficial conversion clause
proving the option that the loan can be converted into the company’s common
shares at a discount of 20% to market value, with a conversion price limit not
to exceed $.40 per share. The company recognizes beneficial conversion features
in accordance with the FASB Emerging Issues Task Force Issue 98-5. Accordingly,
the company fully amortized the discount through the interest expense in the
amount of $36,139 at the date of issuance of the loan.
  Also, the
Company entered into a Stock Purchase Agreement with the lender which entitles
the lender to purchase 500,000 shares of the Company's common stock at a price
of $0.11 cents per share for a period of 12 months from the time of the
agreement. The total cost of the stock options granted was $4,350.
  On August
6, 2008, the Company issued to Jaworek Capital LLC 3,241,099 shares in exchange
for satisfaction of the Loan Agreement dated July 1, 2008, for the principal of
$100,000 and accrued interest of $863.01, at conversion price 0.0311 per
share.
    10
  
 On July
31, 2008 the Company borrowed another $100,000 from Jaworek Capital LLC. Loan
had interest payable on the unpaid balance at the rate of 9% with the initial
maturity date as of June 30, 2009. Loan had a beneficial conversion clause
proving the option that the loan can be converted into the company’s common
shares at a discount of 20% to market value, with a conversion price limit not
to exceed $.40 per share. The company recognizes beneficial conversion features
in accordance with the FASB Emerging Issues Task Force Issue 98-5. Accordingly,
the company fully amortized the discount through the interest expense in the
amount of $19,048 at the date of issuance of the loan.
  Also, the
Company entered into a Stock Purchase Agreement with the lender which entitles
the lender to purchase 150,000 shares of the Company's common stock at a price
of $0.075 cents per share for a period of 12 months from the time of the
agreement. The total cost of the stock options granted was $0.
  On August
8, 2008, the Company issued to Jaworek Capital LLC 3,138,239 shares in exchange
for satisfaction of the Loan Agreement dated July 31, 2008, for the principal of
$100,000 and accrued interest of $172.60, at conversion price 0.0319 per
share.
 
 On August
29, 2008 the Company borrowed $110,000 from Steven Fruman. Loan had interest
payable on the unpaid balance at the rate of 9% with the initial maturity date
as of June 25, 2009. Loan had a beneficial conversion clause proving the option
that the loan can be converted into the company’s common shares at a discount of
20% to market value, with a conversion price limit not to exceed $.20 per share.
The company recognizes beneficial conversion features in accordance with the
FASB Emerging Issues Task Force Issue 98-5. Accordingly, the company fully
amortized the discount through the interest expense in the amount of $0 at the
date of issuance of the loan.
  Also, the
Company entered into a Stock Purchase Agreement with the lender which entitles
the lender to purchase 1,000,000 shares of the Company's common stock at a price
of $0.05 cents per share for a period of 12 months from the time of the
agreement. The total cost of the stock options granted was $0.
 
 On
September 11, 2008 the Company borrowed $62,000 from Jaworek Capital LLC. Loan
had interest payable on the unpaid balance at the rate of 9% with the initial
maturity date as of September 25, 2009. Loan had a beneficial conversion clause
proving the option that the loan can be converted into the company’s common
shares at a discount of 20% to market value, with a conversion price limit not
to exceed $.20 per share. The company recognizes beneficial conversion features
in accordance with the FASB Emerging Issues Task Force Issue 98-5. Accordingly,
the company fully amortized the discount through the interest expense in the
amount of $19,579 at the date of issuance of the loan.
  Also, the
Company entered into a Stock Purchase Agreement with the lender which entitles
the lender to purchase 85,000 shares of the Company's common stock at a price of
$0.05 cents per share for a period of 12 months from the time of the agreement.
The total cost of the stock options granted was $0.
 
 On
October 24, 2008 the Company borrowed $50,000 from Inga Fruman. Loan had
interest payable on the unpaid balance at the rate of 9% with the initial
maturity date as of November 24, 2008.
 
 NOTE 8 -
PREFERRED AND COMMON STOCK
 
 During
the fiscal year ended January 31, 2008:
 
 In April
2007 the Company sold 50,000 of its $.001 par value common shares to unrelated
investors in private placements for $1.00 per share for proceeds of
$50,000.
 
 In June
2007 the company entered into stock conversion agreements with company's
shareholders according to which all preferred shares issued to shareholders in
the amount of $14,417 shall be converted into shares of common stock at the par
value of 0.001 per share. These conversion agreements were part of the exchange
agreement between the company and Family Healthcare Solutions, Inc., a
Nevada Corporation (see Note 6).
 
 In June
2007 as discussed, in Note 6, the company entered into debt conversion
agreements with company's shareholders according to which loans from
shareholders and certain loans from related party in the amount of $877,000
shall be converted into shares of common stock at the conversion prices of $0.30
and 0.25 per share.
 
 In July
2007 the Company sold 1,000,000 of its $.001 par value common shares to
unrelated investors for $0.30 per share for proceeds of $300,000. Market value
of the stock at the time of sale was $0.60 per share.
   11
  
 In August
2007 the Company sold 166,667 of its $.001 par value common shares to unrelated
investors for $0.30 per share for proceeds of $50,000. Market value of the stock
at the time of sale was $0.35 per share.
 
 On
November 1, 2007, the Company issued to its attorney 177,420 unrestricted shares
of common stock in pay of past and future legal services. Market value of the
stock at the time of agreement was $0.31 per share.
 
 On
November 9, 2007, the Company issued to Island Broadcasting Company 3,000,000
restricted shares of common stock as a part of new Time Brokerage Agreement (see
Note 10). Market value of the stock at the time of agreement was $0.30 per
share.
 
 On
November 23, 2007, the Company issued to Ronn Torrossian, an independent
consultant, 3,000,000 restricted shares of common stock as a part of new
Consulting Agreement (see Note 11). Market value of the stock at the time of
agreement was $0.16 per share.
 
 On
January 16, 2008, the Company issued to its attorney 229,473 unrestricted shares
of common stock in pay of past and future legal services. Market value of the
stock at the time of agreement was $0.18 per share.
 
 During
nine months ended October 31, 2008:
 
 On
February 6, 2008 certain officers and directors of the Company were granted a
total of 3,200,000 stock options to purchase company’s $.001 par value common
shares for $0.31 per share. The total cost of the stock options granted was
$6,720.
 
 In March
2008 certain officers of the Company exercised their options and purchased a
total of 177,730 of the company’s $.001 par value common shares for $0.31 per
share for a total of $55,096.
 
 In May
2008 the Company issued 100,000 shares to its contractor in exchange for
consulting services worth $20,000. Market value of the stock at the time of
agreement was $0.09 per share.
 
 On July
1, 2008, as discussed in the Note 10, the Company issued to Island Broadcasting,
Inc 1,000,000 of the company’s $.001 shares for $0.11 per share for satisfaction
of the payment postponement agreement.
 
 On July
2, 2008, as discussed in the Note 7, the Company issued to Jaworek Capital LLC
1,224,023 shares in exchange for satisfaction of the Loan Agreement dated May
29, 2008, for the principal of $100,000 and accrued interest of $369.86, at
conversion price 0.0820 per share.
 
 On July
2, 2008, as discussed in the Note 7, the Company issued to Jaworek Capital LLC
1,224,023 shares in exchange for satisfaction of the Loan Agreement dated June
16, 2008, for the principal of $100,000 and accrued interest of $369.86, at
conversion price 0.0820 per share.
 
 During
the nine months ended October 31, 2008, Dr. Paukman, a director of the Company
made capital contributions in the amount of $88,228 to VSE Magazine, Inc as
additional paid-in capital.  No common stock was issued.
 
 On July
15, 2008, as discussed in the Note 7, the Company issued to FCIC 2,729,014
shares in exchange for satisfaction of the Loan Agreement dated March 14, 2007,
for the principal of $250,000 and accrued interest of $29,301.37, at conversion
price 0.10 per share.
 
 On August
6, 2008, as discussed in the Note 7, the Company issued to Jaworek Capital LLC
3,241,099 shares in exchange for satisfaction of the Loan Agreement dated July
1, 2008, for the principal of $100,000 and accrued interest of $863.01, at
conversion price 0.0311 per share.
 
 On August
8, 2008, as discussed in the Note 7, the Company issued to Jaworek Capital LLC
3,138,239 shares in exchange for satisfaction of the Loan Agreement dated July
31, 2008, for the principal of $100,000 and accrued interest of $172.60, at
conversion price 0.0319 per share.
   12
  
 On August
29, 2008, as discussed in the Note 7, the Company issued to FD Import &
Export Corp. 3,519,308 shares to in partial satisfaction of the Loan Agreement
dated February 28, 2008, for principle of $71,512.33, at a conversion price
0.02032 per share.
 
 On
October 2, 2008, as discussed in the Note 7, the Company issued to Tangiers
Investors LP 443,656 shares in exchange for partial satisfaction of the Loan
Agreement dated March 25, 2008, for the principal of $5,000, at conversion price
0.01127 per share.
 
 On
October 13, 2008, as discussed in the Note 14, the Company issued to Golden Gate
Investors, Inc 131,579 shares in exchange for partial satisfaction of the Loan
Agreement dated April 18, 2008, for the principal of $1,000, at conversion price
0.0076 per share.
 
 NOTE 9 –
EQUIPMENT LOANS PAYABLE
  October 31,
                  2008
                
                
                January
      31,
                  2008Equipment loans
      consist of the following:Raritan Bay FCU
      ("RBFCU")
                
                $
                0
                
                
                $
                0Chrysler Credit
      ("CC")
                
                
                12,091
                
                
                
                13,07112,091
                
                
                
                13,071Less current
      portion
                
                
                7,248
                
                
                
                8,304$
                4,843
                
                
                $
                4,767
 
 The loan
from RBFCU is payable in 72 monthly loan payments of $899 that include principal
and interest at 6.75% per annum and matures on September 1, 2011.  The
loan is secured by the vehicle purchased. The August 2007 loan was terminated
and vehicle was returned to the lender.
 
 The loan
payable CC is payable in 60 monthly payments of $782 which includes principal
and interest at 6.75% per annum and matures on July 9, 2010.  The loan
is secured by the truck purchased.
 
 
 NOTE 10 -
COMMITMENTS AND CONTINGENCIES
 
 Airtime Agreement
(Lease)
 
 The
Company has an agreement (the "Agreement") with Island Broadcasting Company (the
"Licensee") for airtime.  Pursuant to the Agreement the Company has
purchased airtime for the period November 1, 2005 to July 1,
2010.  However, after July 1, 2006 the Licensee may terminate the
Agreement upon 90 days notice to the Company.  Per the Agreement the
airtime is paid monthly.
 
 On
November 9, 2007, Echo Broadcasting Group, Inc. ("Echo Broadcasting "), a
subsidiary of the Company, amended its Time Brokerage Agreement, originally
dated November 1, 2005, with Island Broadcasting Company. In particular, Echo
extended the term of the Time Brokerage Agreement through December 31, 2012 at
12:00 a.m. EST, modified the events of defaults for both Echo and Island
Broadcasting Company, and converted the $170,000 escrow amount currently being
held by Island Broadcasting Company into a payment from Echo to Island
Broadcasting Company. Additionally, Company issued to Island Broadcasting
Company 3,000,000 restricted shares of common stock, at the price of $0.30 per
share.
 
 Finally,
the amended Time Brokerage Agreement now requires Echo to pay Island
Broadcasting Company five percent of the gross receipts received by or credited
to Echo and derived from advertising payments, sponsorships and other sources
relating to the Station's activities. Echo must make such payments within sixty
days following the close of each of Echo's full fiscal quarter from October 1,
2008 through December 31, 2012.
 
 During
the year ended January 31, 2008 the company paid $2,853,775 for
airtime.
 
 On April
28, 2008 Echo Broadcasting made a payment postponement agreement with Island
Broadcasting Company. According to this provision, Echo Broadcasting will pay an
annual interest rate charge of 8% on all outstanding monthly balances. In
addition Echo Broadcasting will pay a fee of 200,000 restricted shares of the
Company’s common stock per month for each month for which payment is not made.
All shares are due to be issued on July 1, 2008. Accordingly, on July 1, 2008
the Company issued 1,000,000 of its $.001 par value common shares Island
Broadcasting. Market value of the stock at the time when additional provision to
the Time Brokerage Agreement was adopted was $0.11 per share.
   13
  
 During
the nine months ended October 31, 2008 and 2007 company paid $1,909,577 and
$1,700,414 for airtime respectively.
 
 Remaining
commitments under the Agreement are as follows:
  Year
      Ending January 31,2009
                
                $
                750,0002010
                
                
                3,100,0002011
                
                
                3,410,0002012
                
                
                3,751,0002013
                
                
                3,670,075$
                14,681,075
 
 Premises and
Equipment
 
 The
Company has entered into lease agreements for office space and equipment, which
expire at various times through April 2009. During the year ended January 31,
2008 the Company paid $155,249 in rent expense. During nine months ended October
31, 2008 and 2007 the Company paid $109,123 and $228,372 in rent expense
respectfully. Remaining commitments under the operating leases mature as
follows:
  Year
      Ending January 31,2009
                
                $
                16,6422010
                
                
                15,105$
                31,747
 On May 1,
2006 the Company has entered into a new lease agreement for office space, which
was originally expected to expire on April 30, 2011.
 
 On May 1,
2007 the Company and the lessor of the premises, mutually terminated a lease
agreement for office space, which was originally due to expire on April 30,
2011. All prior commitments under the original lease are terminated. The company
continued to rent the office space on the month-to-month basis. During the year
ended January 31, 2008 the Company paid $72,400 in rent expense. As of February
1, 2008 the Company vacated the premises.
 
 Capital
Lease
 
 On
October 4, 2006 the Company has entered into a lease agreement of the equipment,
which expire on April 30, 2011. During the year ended January 31, 2008 the
company paid $19,440 in lieu of the lease. During the nine months ended October
31, 2008 the company paid $14,580 in lieu of the lease. The commitments under
the lease agreement mature as follows:
   14
   Year
      Ending January 31,2009
                
                $
                4,8602010
                
                
                19,4402011
                
                
                11,340$
                35,640
 Legal
Contingencies
 
 On
September 3, 2008, we were served with a Notice of Motion for Summary Judgment
in Lieu of Complaint filed by David Kokakis.  In this Motion, filed in
Supreme Court of the State of New York on September 3, 2008, David Kokakis
alleged that the Company has filed to make payments due on a series of notes
issued by the Company, and filed to make payments of interest due on these
notes.  David Kokakis asked the court to enter judgment in his favor
in the total amount of $329,500 allegedly due under the notes, plus accrued
interest. See Note 17 for updated information.
 
 On
October 7, 2008, the Company and our CEO Aleksandr Shvarts (collectively, the
"Defendants") were served with a summons and complaint filed by AJW Partners,
LLC, AJW Offshore, Ltd., AJW Qualified Partners, LLC, and New Millennium Capital
Partners II, LLC (collectively, the "Plaintiffs"). The complaint alleged that
the Company has failed to make payments due on a series of notes from 2004 to
2006 issued by the Company, and failed to make payments of interest due on these
notes, and other unlawful conducts by the Company. The case was filed in the
Supreme Court of the State of New York, County of New York. The plaintiffs seek
all sums due from the notes and other agreements, prejudgment interest,
compensatory damages, punitive damages, and attorneys' fees to be in excess of
$650,000.
 The
Company and Mr. Shvarts deny the allegations made in the complaint and intend to
vigorously contest the allegations. We believe that we did not enter into any of
the above referenced notes with the Plaintiffs and none of the notes or related
legal documents were signed or executed on behalf of the Company or our CEO. We
are in the process of retaining counsel to represent us in this matter and to
file a counterclaim for damages based on breach of contract by the
Plaintiffs.
 
 NOTE 11 -
STOCK-BASED COMPENSATION
 
 The
Company accounts for its employee stock-based compensation for all such
compensation awarded beginning February 1, 2006 under FASB Statement No. 123R,
Accounting for Stock-Based Compensation. For employee stock-based compensation
awarded prior to January 1, 2006, we accounted for such compensation under
Accounting Principles Board ("APB") Opinion No. 25, Accounting for Stock Issued
to Employees.
 
 In
February 2007, the Company canceled 1,175,000 preferred shares, $.001 par value,
with a market value of $1,175 that were priorly awarded to employees and were
part of deferred compensation in the equity section.
 
 Also, In
February 2007, the Company has issued 1,100,000, $.001 par value, preferred
shares for past and future services performed by its officers, directors,
employees and consultants. The preferred stock is convertible into common shares
in 18 months after the issuance based upon a 2 to 1 conversion ratio. The shares
of preferred stock have preferential treatment in case of liquidation. Each
share of the preferred stock has 5 voting rights. Out of 1,100,000 preferred
shares, 1,000,000 shares, with market value of $1,000, are fully vested and
expensed under selling, general and administrative expenses. 100,000 of
preferred shares, with market value of $100 are included in deferred
compensation in the equity section of the balance sheets at January 31,
2008.
 
 On
November 23, 2007, the Company has issued 3,000,000, $.001 par value, common
shares for future consulting services performed by Ronn Torrosian over a period
two years. Market value of the stock at the time of agreement was $0.16 per
share for a total cost of $480,000. At October 31, 2008, Ronn Torrosian earned
consulting fees in the amount of $225,225.72. The remaining value of the Ronn
Torrosian’s future services in the amount of $254,774.28 are included in
deferred compensation in the equity section of the balance sheets at October 31,
2008.
    15
 
 NOTE 12 –
REVERSED MERGER
 
 On June 20, 2007,the companyentered into a Stock Purchase and Share
Exchange Agreement (the “Exchange Agreement”) Family Healthcare Solutions, Inc.,
a Nevada Corporation (“FHCS”), pursuant to which FHCS
acquired100% of the issued and outstanding
capital stock ofthe
companyand wholly owned
subsidiaries, makingthe
companya wholly owned
subsidiary of FHCS, and convert into equity $877,000 in convertible debentures
from thecompany. Note Holders, in exchange for the
issuance byFHCS to thecompany Shareholders andthe companyNote Holders of 49,990,406 shares of
FHCS common stock, par value $0.001 per share, which constituted68.50% of the company’s issued and
outstanding fully diluted common stock after the transaction is closed. As
additional consideration, theFHCS’s Shareholders agreed to cancel
13,161,033 shares of common stock.  TheFHCS’s stockholders own 28.50% of the issued
and outstanding fully diluted common stock ofthe companyafter the transactionwasclosed.
 
 NOTE 13 -
PAYROLL TAXES
 
 The
company has outstanding payroll taxes payable as of October 31, 2008 and January
31, 2008. As of October 31, 2008 the company has recorded an estimate for
interest and penalties that are due to the company’s failure to timely pay
payroll taxes for prior periods. The outstanding payroll tax liability is as
following:
  October 31,
                  2008
                
                
                January
      31,
                  2008Payroll taxes
      payable
                
                $
                933,530
                
                
                $
                728,350Penalties and
      interest
                
                
                98,709
                
                
                
                0Accrued payroll and
      payroll taxes
                
                $
                1,032,239
                
                
                $
                728,350
 The
Company is in the process of negotiating a payment plan with Internal Revenue
Service.
 
 NOTE 14 –
NOTE PAYABLE AND NOTE RECEIVABLE
 
 On April
18, 2008, the Company entered into a Securities Purchase Agreement with Golden
Gate Investors, Inc. The aggregate purchase price was $1,500,000 for the initial
tranche and the investment was as follows:
 
 The
Securities Purchase Agreement includes two tranches. The initial tranche
consists of a 7.00% convertible
debenture (the "Debenture")issued by the Company, in exchange for
$100,000 in cash and a 7.25% Secured Promissory Note  for $1,400,000
issued by the Golden Gate Investors, Inc which matures on May 31, 2012. The
Promissory Note contains a prepayment provision which requires the Golden Gate
Investors, Inc to make prepayments of interest and principal of $200,000 monthly
upon satisfaction of certain conditions. One of the conditions to prepayment is
that shares of the Company's common stock issued pursuant to the conversion
rights under the debenture must be freely tradable under Rule 144 of the
Securities Act of 1933, as amended. Pursuant to the terms of the debenture, the
Golden Gate Investors, Inc shall have the right from time to time, and at any
time on or prior to maturity to convert all or any part of the outstanding and
unpaid principal amount of this debenture into fully paid and non-assessable
shares of the Company's Common Stock, $.001 par value per share. The number of
shares of Common Stock to be issued upon each conversion of the debenture shall
be determined by dividing the amount of principal and accrued interest to be
converted ("Conversion Amount") by the applicable conversion price then in
effect on the date specified in the notice of conversion, as set forth in
Exhibit A to the Debenture (the "Notice of Conversion"). The conversion price
shall be equal to the lesser of: (i)$0.50 or (ii) the average of the lowest
three (3) volume weighted average prices of the Company's Common Stock as
reported on the OTC Bulletin Board (the "Volume Weighted Average Price") during
the twenty (20) trading days prior to the date of the Conversion Notice (the
"Conversion Date") multiplied by .75. As described in the respective
instruments, the Debenture provides for an upward adjustment of the interest
rate under certain circumstances and the Promissory Note provides for a downward
adjustment of the interest rate under certain circumstances. In addition the
Golden Gate Investors, Inc is required to prepay $250,000 of the Promissory Note
issued on April 18, 2008 on the five month anniversary of the purchase of the
Debenture that occurred on April 18, 2008, provided that certain conditions set
forth in the Securities Purchase Agreement are satisfied.
   16
  
 Provided
that no event of default exists, as defined in the Debenture, the second tranche
of the financing consists of the Company selling and the Golden Gate Investors,
Inc purchasing a Debenture in the principal amount of $1,500,000 in exchange for
a purchase price of $1,500,000 (the "Second Debenture"), with such purchase
price paid via a cash payment of $250,000 and the issuance of a promissory note
in the principal amount of $1,250,000 (the "Second Promissory Note"), with the
form of and terms of the Second Debenture and the Second Promissory Note and
payment of the purchase price subject to the same terms and conditions of the
Securities Purchase Agreement, the Debenture and the Promissory Note, provided
that the Discount Multiplier (as defined in the Second Debenture) for the Second
Debenture shall be 90%, and when the Second Debenture is issued, the term
"Debenture" as used in the Securities Purchase Agreement shall be deemed to
include the Second Debenture in all respects and when the Second Promissory Note
is issued, the term "Promissory Note" as used in the Securities Purchase
Agreement shall be deemed to include the Second Promissory Note in all respects.
Pursuant to the Securities Purchase Agreement, the Golden Gate Investors, Inc
may eliminate the requirement to purchase the Second Debenture by a payment to
the Company of $25,000, which payment shall be reduced under certain conditions
to $5,000 or $0. As also set forth in the Securities Purchase Agreement, the
Company has the right, during a specified ten trading day period prior to the
Golden Gate Investors, Inc's purchase of the Second Debenture, subject to the
satisfaction of certain conditions set forth in the Securities Purchase
Agreement, to terminate the right of the Golden Gate Investors, Inc to purchase
the Second Debenture.
  If the
Golden Gate Investors, Inc elects to convert a portion of the Debenture and, on
the day that the election is made, the Volume Weighted Average Price per share
of the Company's Common Stock is below $0.04 per share, the Company shall have
the right to prepay that portion of the Debenture that the Golden Gate
Investors, Inc elected to convert, plus any accrued and unpaid interest, at 125%
of such amount. In the event that the Company elects to prepay that portion of
the Debenture, the Golden Gate Investors, Inc shall have the right to withdraw
its Conversion Notice. Pursuant to its terms, the Golden Gate Investors, Inc may
not convert the principal amount of the Debenture to the extent that, following
such conversion, the Golden Gate Investors, Inc would beneficially own in excess
of 4.99% of the Company's outstanding Common Stock, which cap may be increased
to 9.99% or entirely removed by the Investor on not less than 61 days' prior
notice.
 
 Finally,
in the event that the Company obtains a commitment for any other financing
(either debt, equity, or a combination thereof) which is to close during the
term of the Debenture, Golden Gate Investors shall be entitled to a right of
first refusal to enable it to, at Golden Gate Investors, Inc’s option, either:
(i) match the terms of the other financing, or (ii) add additional principal to
the Debenture, in the amount of such other financing, on the same terms and
conditions as the Debenture.
  Pursuant
to the terms of the Securities Purchase Agreement, the Golden Gate Investors,
Inc does not have any registration rights.
  Other
than their relationship as a result of the Securities Purchase Agreement, there
is no material relationship between the Company and the Golden Gate Investors,
Inc.
 
 The
company recognizes beneficial conversion features in accordance with the FASB
Emerging Issues Task Force Issue 98-5. Accordingly, the company fully amortized
the discount through the interest expense in the amount of $382,530 at the date
of issuance of the loan.
  The
Company’s Common stock as of August 15, 2008 had traded on the Trading Market
(as defined in the Debenture) for ten consecutive days at a price per share that
was less than 0.039. Therefore, the interest rate was increased to 9.75 % as of
August 15, 2008. In addition, under the terms of the Note, the interest rate
applicable to the Note was decreased to 4.75 % effective as of August 15,
2008.
 
 On
October 13, 2008, the Company issued to Golden Gate Investors, Inc 131,579
shares in exchange for partial satisfaction of the Loan Agreement dated April
18, 2008, for the principal of $1,000, at conversion price 0.0076 per
share.
  NOTE 15 –
SALE OF INTANGIBLE ASSETS
  On July
14th, 2008 the Company entered into an asset purchase agreement with Dr. Lev
Paukman, a director of the Company (the "Buyer").
  Pursuant
to the terms of the agreement, the Company sold certain business assets of its
wholly-owned subsidiary, VSE Magazine, to the Buyer. The Buyer will assume an
advertising credit of $109,832 owed to KSP. The Buyer will also assume
advertising credits in the magazine from clients that the Company or Echo
Broadcasting Group, a wholly-owned subsidiary of the Company, might direct up to
the amount of $50,000. In the event there are no advertising client credits then
the buyer will pay the seller $10,000 cash within 90 days of this
agreement.
   17
   VSE
Magazine, Inc. is a Russian language publication currently operating under the
trade name "METPO" that is distributed in the greater New York metro
area.
 
 As a
result of the above-mentioned assets and share purchase agreement, the Company
incurred losses from the proceeds of the sale of the assets in the amount of
$40,168.
  NOTE 16 -
SEGMENT DATA
 
 Currently
the Company has three reportable segments, which it believes best reflects how
the Company is currently managed – radio broadcasting, recorded music and
corporate divisions. The category “other” includes audio & video recording
studios, METRO magazine and other general support services and initiatives.
Revenue and expenses earned and charged between segments are recorded at fair
value and eliminated in consolidation.
  
  Year
Ended January 31, 2008
  Radio
                
                
                Recorded
      Music
                
                
                Corporate
                
                
                Metro
                
                
                Other
                
                
                TotalRevenue
                
                $
                4,227,883
                
                
                $
                70,000
                
                
                $
                38,345
                
                
                $
                155,806
                
                
                $
                43,421
                
                
                $
                4,535,455Direct operating
      expenses
                
                
                3,605,862
                
                
                
                70,838
                
                
                
                150
                
                
                
                227,888
                
                
                
                12,170
                
                
                
                3,916,908Selling, general and
      administrative expenses
                
                
                1,579,994
                
                
                
                504,223
                
                
                
                1,027,644
                
                
                
                44,305
                
                
                
                31,988
                
                
                
                3,188,154Depreciation and
      amortization
                
                
                52,077
                
                
                
                205,962
                
                
                
                108,525
                
                
                
                23,333
                
                
                
                363
                
                
                
                390,260Loss on disposal of
      fixed assets
                
                
                (4,960
                )
                
                
                64,985
                
                
                
                0
                
                
                
                0
                
                
                
                0
                
                
                
                60,025Stock compensation
      expense
                
                
                0
                
                
                
                0
                
                
                
                308,333
                
                
                
                0
                
                
                
                0
                
                
                
                308,333Gain on
      extinguishment of debt
                
                
                0
                
                
                
                0
                
                
                
                (403,400
                )
                
                
                0
                
                
                
                0
                
                
                
                (403,400
                )Interest
      expenses
                
                
                64,019
                
                
                
                0
                
                
                
                66,617
                
                
                
                0
                
                
                
                0
                
                
                
                130,636Operating income
      (loss)
                
                $
                (1,069,109
                )
                
                $
                (776,008
                )
                
                $
                (1,069,524
                )
                
                $
                (139,720
                )
                
                $
                (1,100
                )
                
                $
                (3,055,461
                )
 Nine Months Ended October 31,
2008
 Radio
                  
                  
                  Recorded
      Music
                  
                  
                  Corporate
                  
                  
                  Metro
                  
                  
                  Other
                  
                  
                  TotalRevenue
                  
                  $
                  914,270
                  
                  
                  $
                  3,213
                  
                  
                  $
                  45,979
                  
                  
                  $
                  101,338
                  
                  
                  $
                  0
                  
                  
                  $
                  1,064,800Direct operating
      expenses
                  
                  
                  2,086,950
                  
                  
                  
                  0
                  
                  
                  
                  0
                  
                  
                  
                  131,530
                  
                  
                  
                  0
                  
                  
                  
                  2,218,479Selling, general and
      administrative expenses
                  
                  
                  1,311,002
                  
                  
                  
                  417
                  
                  
                  
                  791,698
                  
                  
                  
                  31,478
                  
                  
                  
                  837
                  
                  
                  
                  2,135,433Depreciation and
      amortization
                  
                  
                  48,238
                  
                  
                  
                  7,170
                  
                  
                  
                  78,020
                  
                  
                  
                  16,667
                  
                  
                  
                  273
                  
                  
                  
                  150,368Loss on sale of
      intangible assets
                  
                  
                  0
                  
                  
                  
                  0
                  
                  
                  
                  0
                  
                  
                  
                  40,168
                  
                  
                  
                  0
                  
                  
                  
                  40,168Interest
      expenses
                  
                  
                  75,595
                  
                  
                  
                  0
                  
                  
                  
                  949,204
                  
                  
                  
                  0
                  
                  
                  
                  0
                  
                  
                  
                  1,024,799Operating income
      (loss)
                  
                  $
                  (2,607,515
                  )
                  
                  $
                  (4,374
                  )
                  
                  $
                  (1,772,943
                  )
                  
                  $
                  (118,505
                  )
                  
                  $
                  (1,110
                  )
                  
                  $
                  (4,504,447
                  )
    18
  Three
Months Ended October 31, 2008
 Radio
                  
                  
                  Recorded
      Music
                  
                  
                  Corporate
                  
                  
                  Metro
                  
                  
                  Other
                  
                  
                  TotalRevenue
                  
                  $
                  394,040
                  
                  
                  $
                  0
                  
                  
                  $
                  18,056
                  
                  
                  $
                  0
                  
                  
                  $
                  0
                  
                  
                  $
                  412,096Direct operating
      expenses
                  
                  
                  677,467
                  
                  
                  
                  0
                  
                  
                  
                  0
                  
                  
                  
                  0
                  
                  
                  
                  0
                  
                  
                  
                  677,467Selling, general and
      administrative expenses
                  
                  
                  579,071
                  
                  
                  
                  0
                  
                  
                  
                  223,672
                  
                  
                  
                  0
                  
                  
                  
                  0
                  
                  
                  
                  802,744Depreciation and
      amortization
                  
                  
                  16,079
                  
                  
                  
                  2,930
                  
                  
                  
                  25,862
                  
                  
                  
                  0
                  
                  
                  
                  91
                  
                  
                  
                  44,855Interest
      expenses
                  
                  
                  22,439
                  
                  
                  
                  0
                  
                  
                  
                  83,304
                  
                  
                  
                  0
                  
                  
                  
                  0
                  
                  
                  
                  105,742Operating income
      (loss)
                  
                  $
                  (901,016
                  )
                  
                  $
                  (2,390
                  )
                  
                  $
                  (470,845
                  )
                  
                  $
                  0
                  
                  
                  $
                  (91
                  )
                  
                  $
                  (1,218,712
                  )
 NOTE
      17 – SUBSEQUENT EVENTS
  As
previously discussed in Note 10, on September 3, 2008, we were served with a
Notice of Motion for Summary Judgment in Lieu of Complaint filed by David
Kokakis ("Plaintiff"). In this Motion, filed in Supreme Court of the State of
New York on September 3, 2008, Plaintiff alleged that the Company has failed to
make payments due on a series of notes issued by the Company, and filed to make
payments of interest due on these notes. Plaintiff asked the court to enter
judgment in his favor in the total amount of $329,500 allegedly due under the
notes, plus accrued interest.
  On
November 11, 2008, the Company settled this litigation and entered into a
settlement agreement (the "Stipulation of Settlement") with Plaintiff. The
Company signed two (2) confessions of judgment (the "Confession of Judgment")
which is in favor of Plaintiff. Pursuant to the first Confession of Judgment, in
the event of default of the Stipulation of Settlement, the Company agrees to pay
Plaintiff a total of $388,810, consisting of a principal amount of $329,500 plus
accrued interests of $59,310. Pursuant to the second Confession of Judgment, in
the event of default of the Stipulation of Settlement , the Company agreed to
pay Plaintiff deferred compensation in the sum of $125,962. The second claim
would be the basis of a second action brought by Plaintiff against the Company,
which Plaintiff was about to commence.
  Both
Confessions of Judgment will be held in escrow by Plaintiff's counsel pending
the Company's compliance with its agreement pursuant to the schedule detailed in
the Stipulation of Settlement. The payments have a maximum of a
five
  (5) day
grace period, that is, they must be in Plaintiff's attorney's possession by no
later than the 6th day of the month.
  If the
Company makes all of the payments, which is $316,955 in total, pursuant to the
payment schedule, the two (2) Confessions of Judgment will not be filed and will
be waived and returned to the Company's attorney. Failing to make the payments,
or failing to pay on time, as aforedescribed, will be deemed a default and
permit Plaintiff's counsel to file both Confessions of Judgment and Affidavits
of Confession of Judgments with the Clerk of the Court without further
notice.










19




Item
2.    Management’s Discussion and Analysis of Financial
Condition and Results of Operation.
  Forward-Looking
Statements
  The
discussion in this section contains certain statements of a forward-looking
nature relating to future events or our future performance. Words such as
“anticipates,” “believes,” “expects,” “intends,” “future,” “may” and similar
expressions or variations of such words are intended to identify forward-looking
statements, but are not the only means of identifying forward-looking
statements. Such statements are only predictions and that actual events or
results may differ materially. In evaluating such statements, you should
specifically consider various factors identified in this report, including the
matters set forth under the caption “business risks,” which could cause actual
results to differ materially from those indicated by such forward-looking
statements.
 
 The
following discussion is provided to afford the reader an understanding of the
material matters of the Company's financial condition, results of operation,
capital resources and liquidity. It should be read in conjunction with the
financial statements and notes thereto and other information appearing elsewhere
in this report.
 
 Background
 
 On June
20, 2007, Mega Media Group, Inc., a Nevada corporation, (formerly named Family
Healthcare Solutions, Inc.) (“the Company”), entered into a Stock Purchase and
Share Exchange Agreement (the “Exchange Agreement”) pursuant to which the
Company acquired 100% of the issued and outstanding capital stock of Mega
Media Group, Inc., a New York corporation ("MMG-NY"), and its wholly owned
subsidiaries, making MMG-NY a wholly owned subsidiary of the Company, and
converted into equity $877,000 in convertible debentures from the MMG-NY Note
Holders, in exchange for the issuance by the company to the MMG-NY Shareholders
and MMG-NY Group Note Holders of 49,990,406 shares of MMDA common stock, par
value $0.001 per share, which constituted 68.50% of the Company’s issued and
outstanding fully diluted common stock after the transaction closed. As
additional consideration, the Company’s Shareholders agreed to cancel 13,161,033
shares of common stock.  The Company’s stockholders immediately prior
to the Closing Date owned 28.50% of the issued and outstanding fully diluted
common stock of MMDA after the transaction closed.  After the closing
of the Share Exchange Agreement, the Company succeeded to the business of MMG-NY
and MMG-NY's wholly-owned subsidiaries as its sole business. The transaction was
accounted for as a reverse acquisition.
 
 Results of
Operations
 
 Results
of operations for the Three Months Ended October 31, 2008 Compared with the
Three Months Ended October 31, 2007
 
 Revenue
 
 We derive revenue from sales of
advertisements and program
sponsorships to local advertisers, independent promotion agreements, ticket and
other revenue related to special events we sponsor throughout the year and
management fees from our subsidiaries. Advertising revenue is affected primarily
by the advertising rates our radio stations and
magazine are able to charge as well as the overall demand for radio advertising
time in a market. For the three months ended October 31, 2008our revenuedecreased by$904,831to $412,096as compared to $1,316,927for the three months ended October 31,
2007.The decrease results primarily from
programming format change.
  Operating
Expenses
 
 Our significant operating expenses are
broadcast expenses, consisting of (i) employee salaries and commissions, (ii)
programming expenses, (iii)
advertising and promotion expenses, (iv) rental of premises for studios, (v)
rental of transmission tower space and (vi) freelance consultants. We strive to
control these expenses by centralizing certain functions such as finance,
accounting, legal, human resources and management
information systems and the overall programming management function. For the
three months ended October 31, 2008operating expensesdecreased by $300,041to $677,467as compared to $977,508for the three months ended
October 31, 2007. Thedecrease is principally attributable todecreased broadcasting
expenses.
 
 Selling,
General and Administrative Expenses
  Selling, General and Administrative
expensesincreased by $92,511to $802,744for the three months ended October 31,2008from $710,233in 2007. Theincrease is attributable tohighercorporate expenses.Selling expenses are a significant part
of our expenditures and relate directly to the marketing and development of
products. We anticipate similar expenditures for theforeseeable future.
   20
    Depreciation
and Amortization Expenses
  Depreciation and Amortization expensesdecreased by $5,645to $44,855for the three months endedOctober 31, 2008 from $50,500 in 2007
due to the decrease infixed assets.
 
 Loss
on Disposition of Fixed Assets
  Loss on disposition of fixed assetsdecreased by $60,025 to $0for the three months ended October 31,
2008from $60,025in 2007as result of the
abandonment of leasehold improvements due to the termination of the lease
agreement in 2007.
 
 Stock
Compensation Expense
  Non-cash stock compensation expensedecreased by $8,333 to $0for the three months ended October 31,
2008from $8,333in 2007as result ofthe decrease insale of common stock below the market
price.
 
 Interest Expense
  Interest expense increased
by$71,838
to $86,163 for the three months ended October 31, 2008 from $14,325 in 2007
due to the additional borrowings.
 
 Beneficial Conversion
Expense
  Beneficial
conversion expenseincreased by $19,579 to $19,579 for the
three monthsended October 31, 2008 from $0 in
2007 due to the increase of borrowings with the attached beneficial conversion
provisions.
 
 Net
Loss
  We have a net loss of$1,218,712for three months ended October 31,
2008as compared to a net loss of
$100,597for the three months endedOctober 31, 2007. The increase in net
loss is primarily attributable to the decrease in our revenues and increase in
interest expense.
 
 For
the Nine Months Ended October 31, 2008 Compared with the Nine Months Ended
October 31, 2007
 
 Revenue
 
 We derive revenue from sales of
advertisements and program sponsorships to local advertisers, independent
promotion agreements, ticket and other revenue related to special events we
sponsor throughout the year and management fees from our subsidiaries.
Advertising revenue is
affected primarily by the advertising rates our radio stations and magazine are
able to charge as well as the overall demand for radio advertising time in a
market. For the nine months ended October 31, 2008 our revenuedecreased by$2,320,147to $1,064,800as compared to $3,384,947for the nine months ended October 31,
2007.The decrease results primarily from
programming format change.
 
 Operating
Expenses
 
 Our significant operating expenses are
broadcast expenses, consisting of (i) employee salaries and commissions,
(ii) programming expenses, (iii) advertising and promotion expenses, (iv) rental
of premises for studios, (v) rental of transmission tower space and (vi)
freelance consultants We strive to control these expenses by centralizing certain functions such as
finance, accounting, legal, human resources and management information systems
and the overall programming management function. For the nine months ended
October 31, 2008operating expensesdecreased by $298,887to $2,218,479as compared to $2,517,366for the nine months ended October 31,
2007. Thedecrease is principally attributable todecreasedbroadcasting
expenses.
 
 Selling,
General and Administrative Expenses
  Selling, General and Administrative
expensesdecreased by $270,183to $2,135,433for the nine months ended October 31,
2008from $2,405,616in 2007. Thedecrease is attributable tolowercorporate expenses. Selling expenses
are a significant part of our expenditures and relate directly to the marketing
and development of
products. We anticipate similar expenditures for the foreseeable
future.
   21
   Depreciation
and Amortization Expenses
  Depreciation and Amortization expensesdecreased by $188,581to $150,368for the nine months ended October 31,
2008from $338,949in 2007due todecrease in the intangible assets.
 
 Loss
on Sale of Intangible Assets
  Loss on sale of intangible assets
increased by $40,168 to $40,168 for theninemonths endedOctober31, 2008 from $0 in 2007as
result of the sale of business assets of VSE Magazine, a whole-owed
subsidiary.
 
 Loss
on Disposition of Fixed Assets
  Loss on disposition of fixed assetsdecreased by $60,025 to $0 for the ninemonths ended October 31,
2008from $60,025in 2007as result of the
abandonment of leasehold improvements due to the termination of the lease
agreement in 2007.
 
 Stock
Compensation Expense
  Non-cash stock compensation expensedecreased by $308,333 to $0for theninemonths ended October 31,
2008from $308,333in 2007as result ofthe decrease insale ofcommon stock below the market
price.
 
 Interest Expense
  Interest expense
increased by$207,225 to $261,689
for the nine months ended October 31, 2008 from $54,464 in 2007 due to the
additional borrowings.
 
 Beneficial Conversion
Expense
  Beneficial
conversion expenseincreased by $763,110 to
$763,110 for the nine months ended October 31, 2008 from $0 in 2007 due to
the increase of borrowings with the attached beneficial conversion
provisions.
 
 Net
Loss
  We have a net loss of $4,504,447for nine months ended October 31, 2008as compared to a net loss of
$1,896,406for the nine months ended October 31,
2007. The increase in net loss is primarily
attributable to the decrease in our revenues and increase in interest
expense.
 
 Liquidity and Capital
Resources
 
 As of October 31, 2008, our Working Capital deficiency is
$5,466,325.
  Cash used in operating activities was
$1,569,513for the nine months ended October 31,
2008as compared to $871,368during the nine months ended October
31, 2007. The decrease in cash used
inoperating activities
reflects the reduced outlays necessary to achieve the growth in revenues, which
should ultimately result in positive operating cash flow.
 
 Cashusedininvesting activities was $13,146for the nine months period ended
October 31, 2008as compared to $11,985cashprovided byinvesting activities for the nine
months period ended October 31, 2007. Theincrease in cash used by investing
activities is primarily due tothe abandonment of rent security
deposit.
 
 Cash provided by financing activities
was $1,582,263for the nine months period ended
October 31, 2008as compared to $834,845for the nine months ended October 31,
2007. Theincrease in cash provided by financingactivities is primarily due
to the additional borrowings.
 
 Going
Concern
 
 As
reflected in the Company’s Financial Statements which accompany this report, our
consolidated financial statements have been prepared on a going concern basis,
which contemplates the realization of assets and liabilities and commitments in
the normal course of business. In the near term, we expect operating costs to
continue to exceed funds generated from operations. As a result, we expect to
continue to incur operating losses and we may not have sufficient funds to grow
our business in the future. We can give no assurance that we will achieve
profitability or be capable of sustaining profitable operations. As a result,
operations in the near future are expected to continue to use working
capital.
   22
  
 To
successfully grow the individual segments of the business, we must decrease our
cash burn rate, improve our cash position and the revenue base of each segment,
and succeed in our ability to raise additional capital through a combination of
public or private debt and equity offerings or strategic alliances. We also
depend on certain third party contractors and our executives.
  We
incurred net losses of $4,504,447 and $1,896,406 for the nine months ended
October 31, 2008 and 2007, respectively, and have an accumulated deficit of
$13,809,916 at October 31, 2008. As of October 31, 2008, we had total current
assets of $247,680 and total current liabilities of $5,714,005 creating a
working capital deficiency of $5,466,325. The Company currently has bank
overdraft of approximately $3,981 as of October31, 2008.
  Off-Balance Sheet
Arrangements
 
 We do not
have off-balance sheet arrangements, financings, or other relationships with
unconsolidated entities or other persons, also known as “special purpose
entities” (SPEs).
 
 Critical Accounting
Policies
  Our
financial statements and related public financial information are based on the
application of accounting principles generally accepted in the United States
(“GAAP”). GAAP requires the use of estimates; assumptions, judgments and
subjective interpretations of accounting principles that have an impact on the
assets, liabilities revenue and expense amounts reported. These estimates can
also affect supplemental information contained in our external disclosures
including information regarding contingencies, risk and financial condition. We
believe our use of estimates and underlying accounting assumptions adhere to
GAAP and are consistently and conservatively applied. We base our estimates on
historical experience and on various other assumptions that we believe to be
reasonable under the circumstances. Actual results may differ materially from
these estimates under different assumptions or conditions. We continue to
monitor significant estimates made during the preparation of our financial
statements.
  Our
significant accounting policies are summarized in the summary “Background and
Significant Accounting Policies” accompanying our financial statements. While
all these significant accounting policies impact our financial condition and
results of operations, we view certain of these policies as critical. Policies
determined to be critical are those policies that have the most significant
impact on our financial statements and require management to use a greater
degree of judgment and estimates. Actual results may differ from those
estimates. Our management believes that given current facts and circumstances,
it is unlikely that applying any other reasonable judgments or estimate
methodologies would cause effect on our consolidated results of operations,
financial position or liquidity for the periods presented in this
report.
 
 Item
3.                      Quantitative
and Qualitative Disclosures About Market Risk.
  Not
applicable to smaller reporting companies.
 
 Item
4T.                      Controls
and Procedures.
  Evaluation of Disclosure
Controls and Procedures
  Based
on their evaluation as of the end of the period covered by this Quarterly Report
on Form 10-Q, our Chief Executive Officer and Chief Financial Officer have
concluded that our disclosure controls and procedures (as defined in Rules
13a-15(e) and 15d-15(e) under the Exchange Act) are effective to ensure that
information required to be disclosed by us in reports that we file or submit
under the Exchange Act is recorded, processed, summarized and reported within
the time periods specified in the Securities and Exchange Commission's rules and
forms. Recent communications from the Securities and Exchange Commission brought
to current management’s attention that several required filings were delinquent
and current management recognized that Company’s prior management and executive
team did not have adequate controls in place to ensure that filings were made in
an accurate and timely manner.
 
 Changes in Internal
Controls
  There have been no changes in the Company's internal control over
financial reporting during the latest fiscal quarter that have materially
affected, or are reasonably likely to materially affect, the Company's internal
control over financial reporting.
   23
    PART
II - OTHER INFORMATION
 
 Item
1.                      Legal
Proceedings.
  Except
as stated below, neither the Company nor any of its subsidiaries is a party to
any pending or threatened legal proceedings.
 
 As
disclosed on our Form 8-K filed on October 14, 2008, on October 7, 2008, we, the
Company, and our CEO Aleksandr Shvarts (collectively, the “Defendants”) were
served with a summons and complaint filed by AJW Partners, LLC, AJW Offshore,
Ltd., AJW Qualified Partners, LLC, and New Millennium Capital Partners II, LLC
(collectively, the “Plaintiffs”).  The complaint alleged that the
Company has failed to make payments due on a series of notes from 2004 to 2006
issued by the Company, and failed to make payments of interest due on these
notes, and other unlawful conducts by the Company. The case was filed in the
Supreme Court of the State of New York, County of New York. The Plaintiffs seek
all sums due from the notes and other agreements, prejudgment interest,
compensatory damages, punitive damages, and attorneys' fees to be in excess of
$650,000. The Company and Mr. Shvarts deny the allegations made in the complaint
and intend to vigorously contest the allegations. We believe that we did not
enter into any of the above referenced notes with the Plaintiffs and none of the
notes or related legal documents were signed or executed on behalf of the
Company or our CEO. We are in the process of retaining counsel to represent us
in this matter and to file a counterclaim for damages based on breach of
contract by the Plaintiffs.
  As
disclosed in our Form 8-K filed on November 21, 2008, on September 3, 2008, we
were served with a Notice of Motion for Summary Judgment in Lieu of Complaint
filed by David Kokakis (“Plaintiff”).  On November 11, 2008, the
Company settled this litigation and entered into a settlement agreement (the
“Stipulation of Settlement”) with Plaintiff. The Company signed two (2)
confessions of judgment (the “Confession of Judgment”) which is in favor of
Plaintiff.  Pursuant to the first Confession of Judgment, in the event
of default of the Stipulation of Settlement, the Company agrees to pay Plaintiff
a total of $388,810, consisting of a principal amount of $329,500 plus accrued
interests of $59,310. Pursuant to the second Confession of Judgment, in the
event of default of the Stipulation of Settlement, the Company agreed to pay
Plaintiff deferred compensation in the sum of $125,962. The second claim would
be the basis of a second action brought by Plaintiff against the Company, which
Plaintiff was about to commence.
 
 On
October 9, 2008, the Company and Echo (collectively, the “Defendants”) were
served with a summons and complaint filed by Eric Schwartz, the former Director
and Vice President of the Company until January 27, 2008
(“Plaintiff”).  The complaint alleged that during Plaintiff’s
employment by the Company and Echo, Plaintiff is owed the sum of not less than
$119,621 plus accrued interest with respect to the unpaid base salary for 2006,
2007 and January 2008. The case was filed in the Supreme Court of the State of
New York, County of Kings. The plaintiffs seek all sums for the unpaid base
salary plus interest, compensation, liquidated damages equal to 25% of the total
amount of wages due, attorneys’ fees, and a sum not exceeding $50 for expenses
which may be taxed as costs, all in the sum of not less than $149,526.25. The
Company and Echo deny the allegations made in the complaint and intend to
vigorously contest the allegations. We are in the process of retaining counsel
to represent us in this matter.
 
 Item
1A.                            Risk
Factors.
 
 Not
applicable to smaller reporting companies.
 
 Item
2.                      Unregistered Sales of Equity
Securities and Use of Proceeds.
  The description of unregistered sales
of securities is incorporated in our Current Report Form 8-K.
 
 As
disclosed in our Form 8-K filed on December 5, 2008, on December 1, 2008, we
entered into a $250,000 10% convertible secured promissory note (the “Note”)
with Robert Catell or its permitted assigns.   This Note is being
issued in reliance on the exemption under Section 4(2) of the Securities Act of
1933, as amended (the “Act”).
 
 Item
3.                       Defaults
Upon Senior Securities.
  None.
 
 Item
4.                      Submission of Matters to a Vote of
Security Holders.
  None.
 
 Item
5.                       Other
Information.
 
 None.
   24
      Item
6.                       Exhibits.
  Exhibit No.
              
              Title
      of Document
              
              Location31.1
              
              Certification
      of Chief Executive Officer Pursuant to Rule 13a-14(a) of the
      Securities Exchange Act of 1934
              
              Filed
      herewith31.2
              
              Certification
      of Chief Financial Officer Pursuant to Rule 13a-14(a) of the
      Securities Exchange Act of 1934
              
              Filed
      herewith32.1
              
              Certification
      of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted
      pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
              
              Filed
      herewith32.2
              
              Certification
      of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted
      pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
              
              Filed
      herewith
     SIGNATURES
  Pursuant
to the requirements of Section 13 or 15(d) of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on its behalf by
the undersigned, thereunto duly authorized.
 
 MEGA
      MEDIA GROUP, INC.Date: 
      December 22, 2008
              By:
              /s/ Aleksandr
      ShvartsALEKSANDR
      SHVARTS