UNITED STATES


SECURITIES AND EXCHANGE COMMISSION


Washington, D.C. 20549





FORM 10-Q (Amendment No. 1)





(Mark One)





x
QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934





For the quarterly period ended July 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
 ̈
Accelerated filer
 ̈Non-accelerated filer
 ̈
Smaller reporting company
x(Do not check if a smaller reporting company)





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


Yes  o    No x





As of July 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
19Item 3. Quantitative and Qualitative Disclosures About Market Risk
23Item 4. 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 1.  FINANCIAL INFORMATION





Item 1.             Financial Statements.











MEGA MEDIA GROUP, INC. AND SUBSIDIARIESCONSOLIDATED BALANCE SHEETSJuly 31,


January 31,ASSETS

2008


2008Current Assets

(Unaudited)(Restated)Cash

$
12,274


$
396Accounts receivable, net (Note 4)


149,400



68,036Accrued revenues


20,137



-Prepaid Expenses


39,920



76,222Note Receivable


10,000



-Total Current Assets


231,731



144,654Fixed assets, net (Note 5)


313,043



391,244Master records, net (Note 6)


125,000



125,000Other intangible assets, net (Note 6)


-



176,667Advances


20,000



20,000Note Receivable-Golden Gate Investors (Note 15)


1,400,000



-Deposits


183,486



183,486Other


16,010



16,010TOTAL ASSETS

$
2,289,270


$
1,057,061LIABILITIES AND STOCKHOLDERS' DEFICITCurrent LiabilitiesAccounts payable

$
1,295,244


$
458,009Bank overdraft


-



-Sales tax payable


616



616Payroll taxes payable (Note 14)


951,062



728,350Accrued Offices' Compensation


469,062



473,786Equipment loan - current portion (Note 10)


8,304



8,304Equipment lease - current portion (Note 11)


19,440



19,440Loans payable (Note 8)


1,120,000



795,000Due to related party (Note 7)


386,283



398,783Deferred revenues


132,332



301,661Accrued expenses


86,421



24,508Payable to shareholders (Note 7)


409,148



239,148Total Current Liabilities


4,877,912



3,447,605Equipment Loan Payable (Note 10)


1,307



4,767Equipment Lease Payable (Note 11)


21,060



30,780Note Payable (Note 15)


1,500,000



-TOTAL LIABILITIES


6,400,279



3,483,152Commitments and contingencies (Note 11)


-



-Stockholders' DeficitPreferred stock, $.001 par value, 20,000,000 shares authorized, 0 shares issued and outstanding as of 07/31/08 and 01/31/08 (Note 9)


-



-Common stock, $.001 par value, 500,000,000 shares authorized, 87,012,456 shares issued and outstanding as of 07/31/08 and 80,552,254 shares issued and outstanding as of 01/31/08 (Note 9)


87,012



80,552Additional paid-in capital


8,584,781



7,233,835Deferred compensation


(315,501
)


(435,009
)Accumulated Deficit


(12,467,301
)


(9,305,469
)Total Stockholders' Deficit


(4,111,009
)


(2,426,091
)TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT

$
2,289,270


$
1,057,061








1




MEGA MEDIA GROUP, INC. AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF OPERATIONSSix Months Ended July 31,


Three Months Ended July 31,2008


2007


2008


2007(unaudited)


(unaudited)


(unaudited)


(unaudited)(Restated)





(Restated)Revenues:Advertising revenues

$
606,547


$
1,875,812


$
369,297


$
920,571Other revenues


46,158



192,208



38,194



78,865Total Revenues


652,705



2,068,020



407,491



999,436Operating expenses


1,541,013



1,551,325



770,380



792,827Selling, general and administrative


1,332,689



1,683,917



723,320



797,559Depreciation and amortization


105,513



288,449



51,090



244,071Stock compensation expense


-



300,000



-



300,0002,979,215



3,823,691



1,544,790



2,134,457Net loss from operations


(2,326,510
)


(1,755,670
)


(1,137,299
)


(1,135,022
)Other Expenses:Loss on sale of intangible assets


40,168



-



40,168



-Interest expense


175,526



40,139



93,851



14,983Beneficial conversion expense


619,628



-



93,986



-Net loss

$
(3,161,832
)

$
(1,795,809
)

$
(1,365,304
)

$
(1,150,004
)Basic and diluted loss per share

$
(0.04
)

$
(0.06
)

$
(0.02
)

$
(0.03
)Weighted-Average shares used in computation of basic and diluted loss per share


81,637,155



30,367,419



82,605,441



34,787,305





2




MEGA MEDIA GROUP, INC. AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF CASH FLOWSJuly 31,


July 31,2008


2007(Unaudited)


(Unaudited)(Restated)CASH FLOWS FROM OPERATING ACTIVITIES:Net loss

$
(3,161,832
)

$
(1,795,809
)Adjustments to reconcile net loss to net cashused by operating activities:Depreciation and amortization


105,513



288,449Loss on sale of intangible assets


40,168Beneficial conversion of loans from shareholders


619,628



-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


128,508



1,000Stock issued for air lease rent


92,000Non-cash stock based compensation


-



300,000Changes in operating assets and liabilities:(Increase) in note receivable


(10,000
)


-(Increase) in accounts receivable


(81,364
)


14,646(Increase) decrease in accrued revenues


(20,137
)


-(Increase) decrease in prepaid expenses


36,302



45,990Increase in accounts payable


837,235



(8,794
)Increase in sales tax payable


-



(276
)Increase in accrued officers' compensation


(4,724
)


57,693Increase in accrued expenses


92,398



3,292Increase in deferred revenue


(49,497
)


48,176Increase in payroll liabilities


222,712



271,872Increase in other current liabilities


-



5,902Total adjustments


2,021,712



1,027,950NET CASH USED BY OPERATING ACTIVITIES


(1,140,120
)


(767,860
)CASH FLOWS FROM INVESTING ACTIVITIES:Master records






(14,000
)Fixed assets


(10,646
)


(16,015
)Deposits


-



42,000CASH PROVIDED (USED) BY INVESTING ACTIVITIES


(10,646
)


11,985CASH FLOWS FROM FINANCING ACTIVITIES:Loan proceeds, net of repayments


875,000



250,000Equipment loan repayments


(3,460
)


(9,958
)Proceeds from loans from shareholders


175,000



254,030Repayments of loans from shareholders


(5,000
)


-Repayments of loans from related parties


(12,500
)


(5,000
)Equipment lease repayments


(9,720
)


(9,720
)Capital Contributions


88,228



-Sale of common stock


-



350,000Options exercised by officers


55,096



-CASH PROVIDED BY FINANCING ACTIVITIES


1,162,644



829,352NET INCREASE IN CASH


11,877



73,477CASH: Beginning of period


396



37,444End of period

$
12,274


$
110,921Supplemental 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

$
27,945


$
30,945Non Cash Financing and Investing Activities:Stock issued for conversion of loans to shareholders

$
-


$
877,000Stock issued for conversion of loans from third parties

$
450,000


$
-Increase in note receivable

$
1,400,000


$
-Increase in note payable

$
1,400,000


$
-Preferred stock issued for services

$
-


$
1,100


3




MEGA MEDIA GROUP, INC. AND SUBSIDIARIES
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 (Amounts and Disclosures at and for the three and  six months
 Ended July 31, 2008 and 2007 Are Unaudited)
 
 NOTE 1 - RESTATEMENT
 
 On September 16, 2009 Kempisty & Company Certified Public Accountants, P.C. (“Kempisty & Company”), independent registered public accounting firm of Mega Media, a Nevada corporation (the “Company”), informed the Company and the management, the Audit Committee, and the Board of Directors of the Company
concluded, that the Company’s previously issued financials statements as of and for six and three months ended July 31, 2008, as included in the Current Report on Form 10-Q filed with the Security Exchange Commission (the “Commission”) on September 19, 2008 (the “September 19, 2008 Form 10-Q”), should not be relied upon.
 
 The following are explanations of the restatement adjustments and presentation of the affected accounts in the consolidated balance sheet and statement of operations as previously reported and restated.
 
 The Company restated its previously reported revenue, operating expenses and selling, general and administrative expenses due to the additional information regarding VSE Magazine, Inc, (Company’s wholly-owned subsidiary) and a contract with the ESJA Enterprises, Inc. The Company also restated its previously reported interest
expense as a result of the incorrect calculations of beneficial conversion feature interest expense on notes issued for the six and three months ended July 31, 2008.
 
 The consolidated financial statements have been restated to include items identified in the above. The following financial statement line items were impacted.
  Consolidated Balance Sheet
  As previously


Restatedreported six months


six monthsended July 31, 2008


ended July 31, 2008Current AssetsCash

$
7,705


$
12,273Prepaid expenses


30,231



39,920Stockholders’ DeficitCommon stock

$
86,912


$
87,012Additional paid-in capital


8,664,276



8,584,781Accumulated deficit


(12,560,950
)


(12,467,301
)
  Consolidated Statement of Operations
  As previously


Restated


As previously


Restatedreported six months


six months


reported three months


three monthsended July 31, 2008


ended July 31, 2008


ended July 31, 2008


ended July 31, 2008Advertising revenue

$
606,547


$
566,921


$
329,671


$
369,297Total Revenues


613,079



652,705



367,865



407,491Operating expenses


1,481, 246



1,541,013



710,614



770,380Selling general andadministrative expenses


1,322, 577



1,322, 689



713, 207



723, 320Net loss from operations


(2,471, 782
)


(2,326,510
)


(1,200, 897
)


(1,137, 299
)Beneficial conversion expenses


743,531



619,628



93,211



93,986Net loss


(3,255, 481
)


(3, 161, 832
)


(1, 334, 276
)


(1, 365, 304
)
 4
 
 NOTE 2 - 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 $12,467,301 and $8,045,817 at July 31, 2008 and 2007 respectively that includes losses of $3,161,832 and 1,795,809 for six months ended July 31, 2008 and 2007 respectively and a working deficit of $4,646,182 and $3,347,265 at July 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 3 – 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/A filed on May 20, 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 a 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 at July 31, 2008 and January 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 asset will 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 for advertising time in other media, as well as certain goods and services. 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 the advertising time provided and goods and services received. For the year ended January 31, 2008, barter transactions reflected in net broadcast revenue, operating expenses and selling, general and administrative expenses were approximately $290,896. For the six months ended July 31, 2008 and 2007, barter transactions reflected in net broadcast revenue, operating expenses and selling,
general and administrative expenses were approximately $84,396 and $127,668 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 adoption of SFAS 159 is not expected to have impact on the consolidated financial position or results of operations.
   7
 
 NOTE 4 – ACCOUNTS RECEIVABLE
 
 Accounts receivable consist of the following:

July 31, 2008


January 31, 2008Accounts receivable-trade

$
162,400


$
81,036Allowance for doubtful accounts


(13,000
)


(13,000
)$
149,400


$
68,036
 NOTE 5 – FIXED ASSETS
 
 July 31, 2008


January 31,2008Fixed Assets consist of the following:Equipment

$
515,711


$
505,066Leasehold


230,969



230,969Furniture


38,162



38,162Trucks


41,188



41,188Computer software


43,988



43,988870,018



859,373Less accumulated depreciation


(556,975
)


(468,129
)$
313,043


$
391,244
 Depreciation expense was $88,846 and $89,439 for the six months ended July 31, 2008 and 2007.
 
 In August 2007 the Company disposed one of its trucks. In addition, in August 2007 the Company abandoned leasehold improvements for one of its office locations, since the lease agreement was terminated.
  NOTE 6 – INTANGIBLE ASSETS
  July 31, 2008


January 31,2008Intangible Assets consist of the following:Master records

$
320,676


$
320,676Other intangible assets (see Notes 3 & 16)


-



200,000Less accumulated amortization


(195,676
)


(219,009
)$
125,000


$
301,667
 Amortization expense was $16,667 and $199,010 for the six months ended July 31, 2008 and 2007.
 
 
 NOTE 7 – LOANS FROM SHARESHOLDERS AND RELATED PARTY TRANSACTIONS
 
 In June, 2007 the Company entered into debt conversion agreements with the 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 13).
 
 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.
  8
  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 six months ended July 31, 200 8 , the Company borrowed from its shareholders three loans of $50,000, $50,000 and $75,000, a total of $175,000. Loans from shareholders mature in various amounts from July 12, 2008 to September 18, 2008 and have a stated interest rate of 9%.
 
 At July 31, 2008 total loans payable to shareholders of $409,148 and due to related party of $386,283 mature in various amounts from July 11, 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 July 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 16).
  NOTE 8 - LOANS PAYABLE
 
 During fiscal 2006, the Company borrowed two loans of $220,000 each, a total of $440,000 payable on June 7, 2008. The loans were for 12 months.
 
 The interest rate on the loans 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%. The l oan 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 providing 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 $ 0 .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 $77,894 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 providing 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 $ 0 .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 $100,000 at the date of issuance of the loan.
 
 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 providing 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 $ 0 .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 $64,031 at the date of issuance of the loan.
  9
  In March 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 providing 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 $ 0 .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 $0 at the date of issuance of the loan.
 
 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 providing 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 $24,309 at the date of issuance of the loan.
 
 On July 2, 2008, the Company issued to Jaworek Capital LLC 1,229,435 common shares in exchange for satisfaction of the Loan Agreement dated May 29, 2008, for the principal of $100,000 and accrued interest of $814, 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 providing 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 $ 0 .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 $14,679 at the date of issuance of the loan.
 
 On July 2, 2008, the Company issued to Jaworek Capital LLC 1,224,023 common shares in exchange for satisfaction of the Loan Agreement dated June 16, 2008, for the principal of $100,000 and accrued interest of $3 70 , 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 providing 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 $ 0 .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 $34,804 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 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 providing 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 $ 0 .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 $20,192 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 per share for a period of 12 months from the time of the agreement. The total cost of the stock options granted was $0.
  10
 
 NOTE 9 - 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 the 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 7).
 
 In June 2007 as discussed, in Note 7, the Company entered into debt conversion agreements with the 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 $ 0 .001 par value common shares to unrelated investors for $0.30 per share for proceeds of $300,000. Market value of the common stock at the time of sale was $0.60 per share.
 
 In August 2007 the Company sold 166,667 of its $0.001 par value common shares to unrelated investors for $0.30 per share for proceeds of $50,000. Market value of the common 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 common 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 11). Market value of the common 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 12). Market value of the common 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 common stock at the time of agreement was $0.18 per share.
 
 During six months ended July 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 $0.001 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 $0.001 par value common shares for $0.31 per share for a total of $55,096.
 
 In May 2008 the Company issued 100,000 common shares to its contractor in exchange for consulting services worth $20,000. Market value of the common stock at the time of agreement was $0.09 per share.
 
 On July 1, 2008, as discussed in the Note 11, the Company issued to Island Broadcasting, Inc 1,000,000 of the Company’s $0.001 common shares for $0.11 per share for satisfaction of the payment postponement agreement.
 
 On July 2, 2008, as discussed in the Note 8, the Company issued to Jaworek Capital LLC 1,224,023 common shares in exchange for satisfaction of the Loan Agreement dated May 29, 2008, for the principal of $100,000 and accrued interest of $370, at conversion price $0.0820 per share.
 
 On July 2, 2008, as discussed in the Note 8, the Company issued to Jaworek Capital LLC 1,224,023 common shares in exchange for satisfaction of the Loan Agreement dated June 16, 2008, for the principal of $100,000 and accrued interest of $370, at conversion price $ 0.0820 per
share.
 
 On July 15, 2008, as discussed in the Note 8, the Company issued to FCIC 2,729,014 common 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, at conversion price $0.10 per share.
 
 Dr. Paukman, a director of the Company made capital contributions to VSE Magazine, Inc as additional paid-in capital. No common stock issued.
   11
  NOTE 10 – EQUIPMENT LOANS PAYABLE
 July 31, 2008


January 31,2008Equipment loans consist of the following:Raritan Bay FCU ("RBFCU")

$
-


$
-Chrysler Credit ("CC")


9,611



13,0719,611



13,071Less current portion


(8,304
)


(8,304
)$
1,307


$
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. In 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 11 - 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, the 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 $ 0 .001 par value common shares Island Broadcasting. Market value of the common stock at the time when additional provision to the Time Brokerage Agreement was adopted was $0.11 per share.
  12
  During the six months ended July 31, 2008 and 2007 the  Company paid $1,292,243 and $1,142,997 for airtime respectively.
 
 Remaining commitments under the Agreement are as follows:
  Year Ending January 31,2009

$
1,400,0002010


3,100,0002011


3,410,0002012


3,751,0002013


3,670,075$
15,331,075
 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 six months ended July 31, 2008 and 2007 the Company paid $71,159 and $78,069 in rent expense respectfully. Remaining
commitments under the operating leases mature as follows:
  Year Ending January 31,2009

$
54,6062010


15,105$
69,711
 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 six months ended July 31, 2008 the Company paid $9,720 in lieu of the lease. The commitments under the lease agreement mature
as follows:
  Year Ending January 31,2009

$
9,7202010


19,4402011


11,340$
40,500
 13
 
 NOTE 12 - 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, $0.001 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, $0.001 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, $0.001 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 July 31, 2008, Ronn Torrosian
earned consulting fees in the amount of $119,507.53. The remaining value of the Ronn Torrosian’s future services in the amount of $362,492.47 are included in deferred compensation in the equity section of the balance sheets at July 31, 2008.
  NOTE 13 – REVERSED MERGER
 
 On June 20, 2007, the Company entered into a Stock Purchase and Share Exchange Agreement (the “Exchange Agreement”) Family Healthcare Solutions, Inc., a Nevada Corporation (“FHCS”), pursuant to which FHCS acquired 100% of the issued and outstanding capital stock of the Company and wholly owned subsidiaries,
making the Company a wholly owned subsidiary of FHCS, and convert into equity $877,000 in convertible debentures from the Company. Note Holders, in exchange for the issuance by FHCS to the Company Shareholders and the Company Note Holders of 49,990,406 shares of FHCS 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 is closed. As additional consideration, the FHCS’s Shareholders agreed to cancel
13,161,033 shares of common stock.  The FHCS’s stockholders own 28.50% of the issued and outstanding fully diluted common stock of the Company after the transaction was closed.
 
 NOTE 14 - PAYROLL TAXES
 
 The Company has outstanding payroll taxes payable as of July 31, 2008 and January 31, 2008. As of July 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:
  July 31, 2008


January 31,2008Payroll taxes payable

$
869,289


$
728,350Penalties and interest


81,773



-Accrued payroll and payroll taxes

$
951,062


$
728,350
 The Company is in the process of negotiating a payment plan with Internal Revenue Service.
  14
  NOTE 15 – 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.
 
 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.
  15
  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 $285,715 at the date of issuance of the loan.
  NOTE 16 – 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.
  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 17 - 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
  RecordedRadio


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



-



-



-



60,025Stock compensation expense


-



-



308,333



-



-



308,333Gain on extinguishment of debt


-



-



(403,400
)


-



-



(403,400
)Interest expenses


64,019



-



66,617



-



-



130,636-Operating income (loss)

$
(1,069,109
)

$
(776,008
)

$
(1,069,524
)

$
(139,720
)

$
1,100


$
(3,055,461
)








16


Six Months Ended July 31, 2008
  RecordedRadio


Music


Corporate


Metro


Other


TotalRevenue

$
520,231


$
3,213


$
27,923


$
101,338


$
-


$
652,705Direct operating expenses


1,409,483



-



-



131,530



-



1,541,013Selling, general and
administrative expenses


731,931



417



568,024



31,479



837



1,322,688Depreciation and amortization


32,159



4,780



51,726



16,667



182



105,514Loss on on sale of intangible assets


-



-



-



40,168



-



40,168Interest expense


53,156



-



122,370



-



-



175,526Beneficial conversion expense


-



-



619,628



-



-



619,628-Operating income (loss)

$
(1,706,498
)

$
(1,984
)

$
(1,333,825
)

$
(118,506
)

$
(1,019
)

$
(3,161,832
)
 
 Three Months Ended July 31, 2008
  RecordedRadio


Music


Corporate


Metro


Other


TotalRevenue

$
339,951


$
3,213


$
24,701


$
39,626


$
-


$
407,491Direct operating expenses


710,614



-



-



59,766



-



770,380Selling, general and
administrative expenses


410,623



-



301,89 5



10,802



-



723,320Depreciation and amortization


16,079



2, 390



25,863



6,667



91



51,090Loss on on sale of intangible assets


-



-



-



40,168



-



40,168Interest expense


19,961



-



73,890



-



-



93,851Beneficial conversion expense


-



-



93,986



-



-



93,986-Operating income (loss)

$
(817,326
)

$
(823
)

$
(470,933
)

$
(77,777
)

$
(91
)

$
(1,365,304
)
   On August 6, 2008, the Company issued to Jaworek Capital LLC 3,241,099 common 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, the Company issued to Jaworek Capital LLC 3,138,239 common 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 20, 2008, the Company entered into a $50,000 9% Promisory Note Agreement with Eugene Khavinson (the “Lender”). Loan matures on October 20, 2008. In addition, Lender agrees to extend the loan dated May 12, 2008 in the amount of $75,000.00 at the rate of 9% per annum upon the same. Therefore, a total loan of $125,000
to be rapid in full by October 20, 2008. On May 12, 2008, the Company granted to the Lender the right to purchase 500,000 of the Company's common shares at $0.11 per share (the "Option") for a period of 12 months. In further consideration of the extension of such loan and the additional loan made by the Lender, the option price has been reduced to $0.05 per share and the Option shall expire on August 19, 2009.
 
 On August 29, 2008, the Company entered into a $110,000 9% convertible promissory note (individually, the "Note") with Steven Fruman (the "Holder"). Pursuant to the terms of the Note, the Holder 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 Note into fully paid and non-assessable shares of Common Stock, $.001 par value per share. The number of shares of Common Stock to be issued upon each conversion of this Note 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, in the form attached hereto as Exhibit A (the "Notice of Conversion"). The Conversion Price shall be equal to
the average closing bid price of the Common Stock (as reported by Bloomberg L.P.) on the OTC Bulletin Board for the ten (10) trading days prior to the date of the Conversion Notice (the "Conversion Date") multiplied by .80 provided that the Notice of Conversion is submitted by to our Company before 6:00 p.m., New York, New York time on such Conversion Date.
 
  17
  Further, the Company grants the Holder the right to purchase 1,000,000 of our common shares at $0.05 per share (the "Option") on or before September 1, 2009. The common stock underlying the Option shall have no registration rights, and no "piggy back" registration rights.
 
 On February 28, 2008, the Company entered into a $100,000 9% convertible promissory note with FD Import Export Corp. On August 29, 2008, the Company issued to FD Import Export Corp for an aggregate of 3,519,308 common stocks underlying such convertible promissory notes at conversion price $0.02032.
 
 On September 11, 2008 the Company entered into a $62,000 9% convertible promissory note with Jaworek Capital, LLC, or its registered assignees. Pursuant to the terms of the Note, the Holder shall have the right from time to time, and at any time on or prior to September 25, 2009 (the "Maturity Date") to convert all or any part of the
outstanding and unpaid principal amount of this Note into fully paid and non-assessable shares of Common Stock, $.001 par value per share. The number of shares of Common Stock to be issued upon each conversion of this Note shall be determined by dividing the amount of principal and accrued interest to be converted by the applicable Conversion Price then in effect on the date specified in the notice of conversion. The Conversion Price shall be equal to the average closing bid price of the Common Stock (as reported
by Bloomberg L.P.) on the OTC Bulletin Board for the ten (10) trading days prior to the date of the Conversion Notice multiplied by .80 provided that the Notice of Conversion is submitted by to our Company before 6:00 p.m., New York, New York time on such Conversion Date.
 
 Further, the Company grants the Holder the right to purchase 85,000 of our common shares at $0.05 per share on or before September 1, 2009. The common stock underlying the Option shall have no registration rights, and no "piggy back" registration rights.
 
 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.
 
 The motion will be held on October 15, 2008.  We believe that we have meritorious defenses and counterclaims to the claims asserted by David Kokakis, and we will defend our Company to full efforts.




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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 July 31, 2008 Compared with the Three Months Ended July 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 July 31, 2008 our revenue decreased by $591,945 to $407,491 as compared to $999,436 for the three months ended July 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 July 31, 2008 operating expenses decreased by $22,447 to $770,380 as compared to $792,827 for the three months ended July 31, 2007. The decrease is principally attributable to decreased broadcasting expenses.





Selling, General and Administrative Expenses





Selling, General and Administrative expenses decreased by $74,239 to $723,320 for the three months ended July 31, 2008 from $797,559 in 2007. The decrease is attributable to lower corporate expenses, as well as decrease in compensation of officers. 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.





Depreciation and Amortization Expenses





Depreciation and Amortization expenses decreased by $192,981 to $51,090 for the three months ended July 31, 2008 from $244,071 in 2007 due to the decrease in the write off of the impaired master records.




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Loss on Sale of Intangible Assets





Loss on sale of intangible assets increased by $40,168 to $40,168 for the three months ended July 31, 2008 from $0 in 2007 as result of the sale of business assets of VSE Magazine, a whole-owed subsidiary.





Stock Compensation Expense





Non-cash stock compensation expense decreased by $300,000 to $0 for the three months ended July 31, 2007 from $300,000 in 2007 as result of decrease in sale of common stock below the market price.





Interest Expense





Interest expense increased by $78,868 to $93,851 for the three months ended July 31, 2008 from $14,983 in 2007 due to the additional borrowings.





Beneficial Conversion Expense





Beneficial conversion expenseincreased by $93,986 to $93,986 for the three months ended July 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 $1,365,304 for three months ended July 31, 2008 as compared to a net loss of $1,150,004 for the three months ended July 31, 2007. The increase in net loss is primarily attributable to the decrease in our revenues and increase in interest expense.





Results of operations for the Six Months Ended July 31, 2008 Compared with the Six Months Ended July 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 six months ended July 31, 2008 our revenue decreased by $1,415,315 to $652,705 as compared to $2,068,020 for the six months ended July 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 six months ended July 31, 2008 operating expenses decreased by $10,312 to $1,541,013 as compared to $1,551,325 for the six months ended July 31, 2007. The decrease is principally attributable to decreased broadcasting expenses.





Selling, General and Administrative Expenses





Selling, General and Administrative expenses decreased by $351,228 to $1,332,689 for the six months ended July 31, 2008 from $1,683,917 in 2007. The decrease is attributable to lower corporate expenses, as well as decrease in compensation of officers. 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.





Depreciation and Amortization Expenses





Depreciation and Amortization expenses decreased by $182,936 to $105,513 for the six months ended July 31, 2008 from $288,449 in 2007 due to the decrease in the write off of the impaired master records.




20




Loss on Sale of Intangible Assets





Loss on sale of intangible assets increased by $40,168 to $40,168 for the six months ended July 31, 2008 from $0 in 2007 as result of the sale of business assets of VSE Magazine, a whole-owed subsidiary.





Stock Compensation Expense





Non-cash stock compensation expense decreased by $300,000 to $0 for the six months ended July 31, 2008 from $300,000 in 2007 as result of decrease in sale of common stock at discount.





Interest Expense





Interest expense increased by $135,387 to $175,526 for the six months ended July 31, 2008 from $40,139 in 2007 due to the additional borrowings.





Beneficial Conversion Expense





Beneficial conversion expenseincreased by $619,628 to $619,628 for the six months ended July 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 $ 3,161,832 for six months ended July 31, 2008 as compared to a net loss of $1,795,809 for the six months ended July 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 July 31, 2008, our Working Capital deficiency is $4,646,18 1 .





Cash used in operating activities was $1,140,120 for the six months ended July 31, 2008 as compared to $767,860 during the six months ended July 31, 2007. The increase in cash used in operating activities is primarily the result of company expansion.





Cash used in investing activities was $10,646 for the six months period ended July 31, 2008 as compared to $11,985 cash provided by investing activities for the six months period ended July 31, 2007. The decrease in cash provided by investing activities is primarily due to reduction
in security deposits.





Cash provided by financing activities was $1,162,644 for the six months period ended July 31, 2008 as compared to $829,352 for the six months ended July 31, 2007. The increase in cash provided by financing activities 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.





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 $3,161,832 and $1,795,809 for the six months ended July, 31 2008 and 2007, respectively, and have an accumulated deficit of $12,467,301 at July 31, 2008. As of July 31, 2008, we had total current assets of $231,731 and total current liabilities of $4,877,912 creating a working capital
deficiency of $4,646,181. The Company currently has approximately $12,274 in cash as of July 31, 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).




21




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.







22


Item 3.    Quantitative and Qualitative Disclosures About Market Risk.





Our exposure to market risk is principally confined to cash in bank which has short maturities and therefore we believe to be minimal and immaterial market risk.





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-QSB, 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 in our 8-K filing on June 26, 2007, we are subject to a debt collection lawsuit in the Supreme Court of New York, Kings County, filed on May 14, 2007 by Harris Publications, Inc. for not paying for advertising services rendered.  Plaintiff seeks judgment in the amount of $7,713.00 with interest from March 1,
2005.  We are working to resolve this matter.  In the opinion of our management, this matter is not reasonably expected to have a material adverse effect on our business and financial condition.  The resolution of this matter is still pending.





As disclosed in our 8-K filing dated September 12, 2008, 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.





The motion will be held on October 15, 2008.  We believe that we have meritorious defenses and counterclaims to the claims asserted by David Kokakis, and we will defend our company to full efforts.





Item 1A.   Risk Factors.





Not Applicable.





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.





Item 3.      Defaults Upon Senior Securities.





None.





Item 4.    Submission of Matters to a Vote of Security Holders.





None.





Item 5.     Other Information.





None.





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









24








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:  September 29, 2009
By:
/s/Aleksandr ShvartsALEKSANDR SHVARTS