UNITED
      STATES


SECURITIES
      AND EXCHANGE COMMISSION


Washington,
      D.C. 20549





**FORM
      10-QSB**





(Mark
      One) ****




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


for
      the
      quarter ended September 30, 2007




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


for
      the
      transition period from _______ to _______




Commission
      file number 000-32231





**WINSONIC
      DIGITAL MEDIA GROUP, LTD.**


(Name
      of small business issuer in its charter)





Nevada
            
            52-2236253(State
                or other jurisdiction of incorporation or organization)
            
            (I.R.S.
                Employer Identification No.)





101
                Marietta Street, Suite 2600Atlanta,
                Georgia
              (Address
                of principal executive offices)
            
            30303
              (Zip
                Code)





Issuer’s
      telephone number (404) 230-5705





(not
      applicable)


(former
      name, former address, if changed since last report)





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


Yes x No  ̈





Indicate
      by check mark whether the registrant is a shell company (as defined in Rule
      12b-2 of the Exchange Act). Yes  ̈ No x





The
      issuer had 68,828,844 shares of common stock outstanding as of November 13,
      2007.





Transitional
      Small Business Disclosure Format (Check one): Yes  ̈ No x









**Quarterly
      Report on Form 10-QSB**


**Quarter
      Ended September 30, 2007**





**Table
      of Contents**




PagePART
                I FINANCIAL INFORMATIONItem
                1. Consolidated Financial Statements:Consolidated
                Balance Sheets, September 30, 2007 (Unaudited) and December 31,
                2006
            2Consolidated
                Statements of Operations, for the three months and nine months
                endedSeptember 30, 2007 and 2006 and frominception
                (September 10, 2002) to September 30, 2007 (Unaudited)
            3Consolidated
                Statements of Cash Flows, for the nine months ended September 30,
                2007 and
                2006 and from inception(September
                10, 2002) to September 30, 2007 (Unaudited)
            4Statement
                of Stockholders’ Deficit (Unaudited)
            5Notes
                to the Financial Statements (Unaudited)
            9Item
                2. Management’s Discussion and Analysis
            30Item
                3. Controls and Procedures
            37PART
                II OTHER INFORMATIONItem
                1. Legal Proceedings
            38Item
                2. Unregistered Sales of Equity Securities and Use of Proceeds
            38Item
                3. Defaults Upon Senior Securities
            38Item
                6. Exhibits
            38SIGNATURES
            39EXHIBIT
                INDEX





**PART
      I - FINANCIAL INFORMATION**





**Item
      1. Financial Statements.**





WINSONIC
      DIGITAL MEDIA GROUP, LTD.


(A
      DEVELOPMENT STAGE COMPANY)


**CONSOLIDATED
      BALANCE SHEETS**


AS
      OF
      SEPTEMBER 30, 2007 (UNAUDITED) & DECEMBER 31, 2006 (AUDITED)




**Unaudited**
                **9/30/2007**
              
              
              **Audited**
                **12/31/2006****ASSETS**ASSETS:Cash
              
              $
              415
              
              $
              3,506Accounts
                  receivable
              
              
              374,699
              
              
              464,612Prepaid
                  expense
              
              
              127,601
              
              
              67,667Inventory
              
              
              6,743
              
              
              5,387Construction
                  in process
              
              
              210,580
              
              
              254,640**Total
                  current assets**
              
              
              **720,038**
              
              
              **795,812**Fixed
                  assets, net of accumulated depreciation of $868,871 and $784,318,
                  respectively
              
              
              777,700
              
              
              783,115Goodwill
              
              
              984,291
              
              
              984,291Other
                  assets
              
              
              85,816
              
              
              25,000**TOTAL
                  ASSETS**
              
              **$**
              **2,567,845**
              
              **$**
              **2,588,218****LIABILITIES
                  AND STOCKHOLDERS' DEFICIT**LIABILITIES:Current
                  liabilities:Accounts
                  payable and accrued expenses
              
              $
              3,958,596
              
              $
              2,859,371Bank
                  overdraft
              
              
              7,829
              
              
              -Billings
                  on construction in process
              
              
              398,316
              
              
              489,261Accrued
                  payroll and related taxes
              
              
              4,395,449
              
              
              2,138,152Legal
                  settlement liabilities
              
              
              1,877,000
              
              
              775,000Due
                  to other related parties
              
              
              48,570
              
              
              -Loans
                  payable
              
              
              354,384
              
              
              347,743Loans
                  payable -related party
              
              
              542,279
              
              
              414,555Derivative
                  liability related to convertible debentures
              
              
              32,411
              
              
              339,450Warrant
                  liability related to convertible debentures
              
              
              28,122
              
              
              300,420Convertible
                  debentures - 2004/2005 Agreements
              
              
              35,025
              
              
              257,469Convertible
                  debentures, net of debt discount totaling $355,200 and $794,784,
                  respectively
              
              
              1,074,504
              
              
              507,524Current
                  portion of long term liabilities
              
              
              80,950
              
              
              90,197**Total
                  current liabilities**
              
              
              **12,833,435**
              
              
              **8,519,142****Long
                  term debt**
              
              
              **-**
              
              
              **44,822****TOTAL
                  LIABILITIES**
              
              
              **12,833,435**
              
              
              **8,563,964**Stockholders'
                  deficit:Preferred
                  stock, $0.001 par value, 20,000,000 shares authorized, no shares
                  issued
                  and outstanding at September 30, 2007 and December 31, 2006,
                  respectively.
              
              
              -
              
              
              -Common
                  stock, $0.001 par value, 200,000,000 shares authorized, 66,312,433
                  and
                  49,578,057 shares issued and outstanding at September 30, 2007
                  and
                  December 31, 2006, respectively.
              
              
              66,312
              
              
              49,578Additional
                  paid-in capital
              
              
              23,425,377
              
              
              13,609,264Common
                  stock payable
              
              
              358,724
              
              
              1,107,426Common
                  stock advance for future services
              
              
              -
              
              
              (48,175
              )Accumulated
                  deficit during development stage
              
              
              (34,116,003
              )
              
              (20,693,839
              )**Total
                  stockholders' deficit**
              
              
              **(10,265,590**
              **)**
              
              **(5,975,746**
              **)****TOTAL
                  LIABILITIES AND STOCKHOLDERS' DEFICIT**
              
              **$**
              **2,567,845**
              
              **$**
              **2,588,218**




*The
      accompanying notes to the financial statements should be*


*read
      in conjunction with these Balance Sheets.*


2


WINSONIC
      DIGITAL MEDIA GROUP, LTD.


(A
      DEVELOPMENT STAGE COMPANY)


**CONSOLIDATED
      STATEMENTS OF OPERATIONS**


FOR
      THE
      THREE MONTHS & NINE MONTHS ENDED SEPTEMBER 30, 2007 & 2006


AND
      FROM
      INCEPTION (September 10, 2002) TO SEPTEMBER 30, 2007 (UNAUDITED)




**For
                the three months ended**
              **September
                30,**
            
            **For
                the nine months ended**
              **September,
                30**
            
            **Inception
                (September 10, 2002) to September****2007**
            
            **2006**
            
            **2007**
            
            **2006**
            
            **30,
                2007**REVENUE
            
            $
            233,181
            
            $
            310,364
            
            $
            1,368,865
            
            $
            547,140
            
            $
            2,186,171COST
                OF GOODS SOLD
            
            
            824,780
            
            
            284,993
            
            
            1,760,235
            
            
            440,942
            
            
            3,408,134GROSS
                PROFIT
            
            
            (591,599
            )
            
            25,371
            
            
            (391,370
            )
            
            106,198
            
            
            (1,221,963
            )EXPENSES:Selling,
                general and administrative
            
            
            935,122
            
            
            477,531
            
            
            2,041,920
            
            
            1,190,788
            
            
            7,952,072Payroll
                expense
            
            
            1,094,482
            
            
            984,366
            
            
            4,539,179
            
            
            2,854,260
            
            
            10,507,433Consulting
                services - related party
            
            
            20,930
            
            
            -
            
            
            20,930
            
            
            -
            
            
            2,444,227Depreciation
                and amortization expense
            
            
            13,301
            
            
            35,176
            
            
            84,554
            
            
            107,170
            
            
            1,142,851Total
                expenses
            
            
            2,063,835
            
            
            1,497,073
            
            
            6,686,583
            
            
            4,152,218
            
            
            22,046,583OPERATING
                LOSS
            
            
            (2,655,434
            )
            
            (1,471,702
            )
            
            (7,077,953
            )
            
            (4,046,020
            )
            
            (23,268,546
            )OTHER
                INCOME/(EXPENSES):Interest
                expense
            
            
            (3,240,611
            )
            
            (417,687
            )
            
            (5,646,865
            )
            
            (844,054
            )
            
            (8,786,048
            )Interest
                expense - related party
            
            
            (41,824
            )
            
            (27,021
            )
            
            (116,683
            )
            
            (66,391
            )
            
            (410,848
            )Legal
                settlement costs
            
            
            (1,100,000
            )
            
            13,500
            
            
            (1,160,000
            )
            
            2,000
            
            
            (2,378,000
            )Unrealized
                gain (loss) on adjustments of derivative and warrant liability to
                fair
                value of underlying securities
            
            
            345,454
            
            
            (520,006
            )
            
            579,337
            
            
            (814,709
            )
            
            606,765Interest
                income
            
            
            -
            
            
            29
            
            
            -
            
            
            321
            
            
            730Other
                income
            
            
            -
            
            
            (1,033
            )
            
            -
            
            
            28
            
            
            119,944Total
                other income/(expenses)
            
            
            (4,036,981
            )
            
            (952,218
            )
            
            (6,344,211
            )
            
            (1,722,805
            )
            
            (10,847,457
            )NNET
                LOSS BEFORE PROVISION FOR INCOME TAXES
            
            
            (6,692,415
            )
            
            (2,423,920
            )
            
            (13,422,164
            )
            
            (5,768,825
            )
            
            (34,116,003
            )PROVISION
                FOR INCOME TAXES
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -**NET
                LOSS**
            
            $
            (6,692,415
            )
            **$**
            (2,423,920
            )
            **$**
            (13,422,164
            )
            **$**
            (5,768,825
            )
            **$**
            (34,116,003
            )Basic
                weighted average number of common shares outstanding
            
            
            56,053,950
            
            
            46,539,328
            
            
            51,787,515
            
            
            43,218,180Net
                loss per basic and diluted common share
            
            $
            (0.12
            )
            $
            (0.05
            )
            $
            (0.26
            )
            $
            (0.13
            )





*The
      accompanying notes to the financial statements should be*


*read
      in conjunction with these Statements of Operations.*


3


WINSONIC
      DIGITAL MEDIA GROUP, LTD.


(A
      DEVELOPMENT STAGE COMPANY)


**CONSOLIDATED
      STATEMENTS OF CASH FLOWS**


FOR
      THE
      NINE MONTHS ENDED SEPTEMBER 30, 2007 & 2006


AND
      FROM
      INCEPTION (September 10, 2002) TO SEPTEMBER 30, 2007 (UNAUDITED)




**For
                the nine months ended**
              **September
                30,**
            
            
            **September
                10, 2002**
              **(Inception)
                to****2007**
            
            
            **2006**
            
            
            **September
                30, 2007****CASH
                FLOWS FROM OPERATING ACTIVITIES:**Net
                loss
            
            **$**
            (13,422,164
            )
            **$**
            (5,768,825
            )
            **$**
            (34,116,003
            )Adjustments
                to reconcile net loss to net cash used in operating activities:Depreciation
            
            
            84,554
            
            
            107,170
            
            
            1,142,851Accretion
                of principal and interest related to convertible debentures
            
            
            1,612,939
            
            
            (756,052
            )
            
            3,530,874Unrealized
                gain on adjustment of derivative and warrant liability to fair value
                of
                underlying securities
            
            
            (579,337
            )
            
            814,709
            
            
            (606,765
            )Stock
                based compensation
            
            
            1,626,001
            
            
            1,810,819
            
            
            6,022,635Operating
                expenses paid with stock, options and warrants
            
            
            -
            
            
            -
            
            
            1,036,822Operating
                expenses paid by note payable
            
            
            -
            
            
            -
            
            
            60,000Interest
                expense paid with stock
            
            
            -
            
            
            -
            
            
            185,621Financing
                costs paid with stock and stock payable
            
            
            3,647,523
            
            
            -
            
            
            3,647,523Financing
                costs related to conversion of notes and related party notes to
                stock
            
            
            285,424
            
            
            -
            
            
            285,424Consulting
                services paid with stock and stock payable
            
            
            165,850
            
            
            -
            
            
            165,850Amortization
                of common stock advances for future services
            
            
            48,175
            
            
            -
            
            
            48,175Interest
                accrued and added to notes
            
            
            96,719
            
            
            -
            
            
            276,280Forgiveness
                of accrued interest - Digital Services International, Inc.
            
            
            -
            
            
            -
            
            
            152,592Other
                non-cash financing costs
            
            
            29,732
            
            
            -
            
            
            29,732Change
                in operating assets and liabilities:Decrease
                (increase) in accounts receivable
            
            
            89,913
            
            
            (153,586
            )
            
            (183,916
            )Increase
                in prepaid expenses
            
            
            (59,934
            )
            
            (16,101
            )
            
            (125,281
            )Increase
                in inventory
            
            
            (1,356
            )
            
            -
            
            
            (1,356
            )Decrease
                (increase) in construction in process
            
            
            44,060
            
            
            (74,687
            )
            
            (180,616
            )Increase
                in other assets
            
            
            (60,816
            )
            
            (27,843
            )
            
            (85,816
            )Increase
                in advances to related companies
            
            
            48,570
            
            
            -
            
            
            48,570Increase
                in accounts payable and accrued expenses
            
            
            1,099,225
            
            
            391,867
            
            
            4,171,912(Decrease)
                increase in billings on construction in process
            
            
            (90,945
            )
            
            86,986
            
            
            255,995Increase
                in accrued payroll and related taxes
            
            
            2,257,297
            
            
            1,257,664
            
            
            5,447,805Increase
                in legal settlement liabilities
            
            
            1,160,000
            
            
            5,000
            
            
            2,385,000**Net
                cash used in operating activities**
            
            
            **(1,918,570**
            **)**
            
            **(2,322,879**
            **)**
            
            **(6,406,092**
            **)****CASH
                FLOWS FROM INVESTING ACTIVITIES:**Cash
                acquired through business acquisitions
            
            
            -
            
            
            20,511
            
            
            16,670Purchase
                of fixed assets
            
            
            (140,269
            )
            
            (180,691
            )
            
            (1,588,733
            )**Net
                cash used in investing activities**
            
            
            **(140,269**
            **)**
            
            **(160,180**
            **)**
            
            **(1,572,063**
            **)****CASH
                FLOWS FROM FINANCING ACTIVITIES:**Increase
                (decrease) in bank overdraft
            
            
            7,829
            
            
            (8,909
            )
            
            7,829Proceeds
                from loans payable
            
            
            40,000
            
            
            69,666
            
            
            475,251Payment
                on loans payable
            
            
            -
            
            
            -
            
            
            (23,335
            )Proceeds
                from loan payable - related party
            
            
            395,893
            
            
            20,082
            
            
            1,334,604Payment
                on note payable - related party
            
            
            (37,000
            )
            
            (120,830
            )
            
            (314,970
            )Payment
                on convertible debentures
            
            
            (39,448
            )
            
            
            
            
            (39,448
            )Proceeds
                from convertible debentures
            
            
            1,688,474
            
            
            1,233,950
            
            
            4,538,539Proceeds
                from common stock issued
            
            
            -
            
            
            1,289,100
            
            
            2,000,100**Net
                cash provided by financing activities**
            
            
            **2,055,748**
            
            
            **2,483,059**
            
            
            **7,978,570****NET
                (DECREASE) INCREASE IN CASH**
            
            
            **(3,091**
            **)**
            
            **-**
            
            
            **415********CASH,
                BEGINNING OF PERIOD**
            
            
            **3,506**
            
            
            **-**
            
            
            **-********CASH,
                END OF PERIOD**
            
            **$**
            **415**
            
            $
            -
            
            **$**
            **415****SUPPLEMENTARY
                INFORMATION:**Interest
                paid
            
            $
            4,448
            
            
            47,695
            
            $
            51,572Income
                taxes paid
            
            $
            -
            
            $
            -
            
            $
            -**NON-CASH
                ACTIVITIES:**Issuance
                of common stock for common stock payable
            
            $
            -
            
            $
            19,867
            
            $
            820,000Forgiveness
                of salary payable to officer
            
            $
            -
            
            $
            399,919
            
            $
            702,644Forgiveness
                of payroll tax for officer
            
            $
            -
            
            $
            -
            
            $
            20,655Issuance
                of common stock as deposit on lease obligation
            
            $
            -
            
            $
            -
            
            $
            250,000Issuance
                of common stock and stock payable as payment for subsidiaries acquired
            
            $
            -
            
            $
            168,902
            
            $
            939,528Issuance
                of common stock as payment on loans payable and loan payable - related
                party
            
            $
            585,984
            
            $
            -
            
            $
            896,984Issuance
                of common stock and warrants for salary payable
            
            $
            -
            
            $
            314,823
            
            $
            515,679Issuance
                of common stock upon conversion of debentures
            
            $
            1,827,115
            
            $
            889,709
            
            $
            3,468,299Adjustment
                to paid in capital for accumulated depreciation
            
            $
            -
            
            $
            -
            
            $
            281,481Issuance
                of common stock for legal settlement
            
            $
            58,000
            
            $
            450,000
            
            $
            508,000




*The
      accompanying notes to financial statements should be*


*read
      in conjunction with these Statements of Cash Flows.*


4


WINSONIC
      DIGITAL MEDIA GROUP, LTD.


(A
      DEVELOPMENT STAGE COMPANY)


**STATEMENT
      OF STOCKHOLDERS' DEFICIT**


(UNAUDITED)




Common
              
              AccumulatedStock
              
              DeficitAdditional
              
              Common
              
              Advance
                  for
              
              During
              
              TotalPreferred
                  Stock
              
              Common
                  Stock
              
              Paid-in
              
              Stock
              
              Future
              
              Development
              
              Stockholders'Shares
              
              Amount
              
              Shares
              
              Amount
              
              Capital
              
              Payable
              
              Services
              
              Stage
              
              Deficit**Balance,
                  September 10, 2002 (Inception) - No Par Stock**
              
              
              **10,000,000**
              
              $
              -
              
              
              **10,000,000**
              
              **$**
              **-**
              
              **$**
              **-**
              
              **$**
              **-**
              
              **$**
              **-**
              
              **$**
              **-**
              
              **$**
              **-**Reverse
                  Merger - Reacquisition of all outstanding shares of Winsonic Acquisition
                  Sub, Inc. - No Par Stock (Recasted to inception)
              
              
              (10,000,000
              )
              
              -
              
              
              (10,000,000
              )
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -Issuance
                  of common stock to founder for services
              
              
              -
              
              
              -
              
              
              6,004,200
              
              
              6,004
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              6,004**Balance,
                  September 10, 2002 (Recasted)**
              
              
              **-**
              
              $
              -
              
              
              **6,004,200**
              
              **$**
              **6,004**
              
              **$**
              **-**
              
              **$**
              **-**
              
              **$**
              **-**
              
              **$**
              **-**
              
              **$**
              **6,004**Issuance
                  of stock warrants (December 26, 2002)
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              990,600
              
              
              -
              
              
              -
              
              
              990,600Net
                  loss
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              (647,417
              )
              
              (647,417
              )**Balance,
                  December 31, 2002 (Restated)**
              
              
              **-**
              
              $
              -
              
              
              **6,004,200**
              
              **$**
              **6,004**
              
              **$**
              **-**
              
              **$**
              **990,600**
              
              **$**
              **-**
              
              **$**
              **(647,417**
              **)**
              **$**
              **349,187**Issuance
                  of stock warrants
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              1,009,500
              
              
              -
              
              
              -
              
              
              1,009,500Net
                  loss
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              (1,905,884
              )
              
              (1,905,884
              )**Balance,
                  December 31, 2003 (Restated)**
              
              
              **-**
              
              $
              -
              
              
              **6,004,200**
              
              **$**
              **6,004**
              
              **$**
              **-**
              
              **$**
              **2,000,100**
              
              **$**
              **-**
              
              $
              **(2,553,301**
              **)**
              $
              **(547,197**
              **)**Issuance
                  of common stock for services, $0.75 average price per
                  share
              
              
              -
              
              
              -
              
              
              1,980,946
              
              
              1,981
              
              
              1,488,328
              
              
              -
              
              
              -
              
              
              -
              
              
              1,490,309Issuance
                  of common stock in satisfaction of debts of $331,000 and deemed
                  interest
                  of $242,500
              
              
              -
              
              
              -
              
              
              758,000
              
              
              758
              
              
              572,742
              
              
              -
              
              
              -
              
              
              -
              
              
              573,500Issuance
                  of common stock, $1.00 price per share
              
              
              -
              
              
              -
              
              
              921,600
              
              
              922
              
              
              920,678
              
              
              (921,600
              )
              
              **-**
              
              
              -
              
              
              -Conversion
                  of common stock payable to loan payable
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              60,000
              
              
              (258,500
              )
              
              **-**
              
              
              -
              
              
              (198,500
              )Issuance
                  of common stock related to reverse-merger
              
              
              -
              
              
              -
              
              
              23,956,138
              
              
              23,956
              
              
              (123,487
              )
              
              -
              
              
              -
              
              
              -
              
              
              (99,531
              )Net
                  loss
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              (5,790,794
              )
              
              (5,790,794
              )**Balance,
                  December 31, 2004 (Restated)**
              
              
              **-**
              
              $
              -
              
              
              **33,620,884**
              
              **$**
              **33,621**
              
              **$**
              **2,918,261**
              
              **$**
              **820,000**
              
              **$**
              **-**
              
              $
              **(8,344,095**
              )
              **$**
              **(4,572,213**
              **)**




5




WINSONIC
        DIGITAL MEDIA GROUP, LTD.
 (A
        DEVELOPMENT STAGE COMPANY)
 **STATEMENT
        OF STOCKHOLDERS' DEFICIT**
 (UNAUDITED)




Common
              
              AccumulatedStock
              
              DeficitAdditional
              
              Common
              
              Advance
                  for
              
              During
              
              TotalPreferred
                  Stock
              
              Common
                  Stock
              
              Paid-in
              
              Stock
              
              Future
              
              Development
              
              Stockholders'Shares
              
              Amount
              
              Shares
              
              Amount
              
              Capital
              
              Payable
              
              Services
              
              Stage
              
              DeficitIssuance
                  of common stock for services, $1.30 average price per
                  share
              
              
              **-**
              
              
              **-**
              
              
              94,615
              
              
              95
              
              
              122,905
              
              
              **-**
              
              
              **-**
              
              
              **-**
              
              
              123,000Issuance
                  of common stock for services, $0.82 average price per
                  share
              
              
              **-**
              
              
              **-**
              
              
              91,463
              
              
              91
              
              
              74,909
              
              
              **-**
              
              
              **-**
              
              
              **-**
              
              
              75,000Issuance
                  of common stock for services, $0.68 average price per
                  share
              
              
              **-**
              
              
              **-**
              
              
              66,667
              
              
              67
              
              
              45,267
              
              
              **-**
              
              
              **-**
              
              
              **-**
              
              
              45,334Issuance
                  of common stock for equity investment in NATVN
              
              
              **-**
              
              
              **-**
              
              
              1,670,000
              
              
              1,670
              
              
              (1,670
              )
              
              **-**
              
              
              **-**
              
              
              **-**
              
              
              -Issuance
                  of common stock to founder to relieve related party note payable
                  due him,
                  at $0.33 average price per share
              
              
              **-**
              
              
              **-**
              
              
              700,000
              
              
              700
              
              
              230,300
              
              
              **-**
              
              
              **-**
              
              
              **-**
              
              
              231,000Issuance
                  of common stock to founder for services, $0.33 average price per
                  share
              
              
              **-**
              
              
              **-**
              
              
              500,000
              
              
              500
              
              
              164,500
              
              
              **-**
              
              
              **-**
              
              
              **-**
              
              
              165,000Issuance
                  of common stock for services, $0.70 average price per
                  share
              
              
              **-**
              
              
              **-**
              
              
              900,000
              
              
              900
              
              
              629,100
              
              
              **-**
              
              
              **-**
              
              
              **-**
              
              
              630,000Issuance
                  of common stock for services, $0.48 average price per
                  share
              
              
              **-**
              
              
              **-**
              
              
              225,000
              
              
              225
              
              
              107,775
              
              
              **-**
              
              
              **-**
              
              
              **-**
              
              
              108,000Issuance
                  of common stock in satisfaction of convertible debentures debts
                  of
                  $118,000, at $0.20 average price per share
              
              
              **-**
              
              
              -
              
              
              590,000
              
              
              590
              
              
              117,410
              
              
              **-**
              
              
              **-**
              
              
              **-**
              
              
              118,000Issuance
                  of common stock as lease deposit, $0.27 average price per
                  share
              
              
              **-**
              
              
              **-**
              
              
              925,927
              
              
              926
              
              
              249,074
              
              
              (250,000
              )
              
              **-**
              
              
              **-**
              
              
              -Issuance
                  of common stock for common stock payable, $1.00 average price per
                  share
              
              
              **-**
              
              
              **-**
              
              
              820,000
              
              
              820
              
              
              819,180
              
              
              (820,000
              )
              
              **-**
              
              
              **-**
              
              
              -Return
                  of pledged assets, reversal of accumulated depreciation, and forgiveness
                  of debt - related party
              
              
              **-**
              
              
              **-**
              
              
              **-**
              
              
              **-**
              
              
              281,481
              
              
              **-**
              
              
              **-**
              
              
              **-**
              
              
              281,481Forgiveness
                  of interest expense - related party
              
              
              **-**
              
              
              **-**
              
              
              **-**
              
              
              **-**
              
              
              152,592
              
              
              **-**
              
              
              **-**
              
              
              **-**
              
              
              152,592Vested
                  common stock award for officer
              
              
              **-**
              
              
              **-**
              
              
              **-**
              
              
              **-**
              
              
              185,000
              
              
              **-**
              
              
              **-**
              
              
              **-**
              
              
              185,000Common
                  stock payable to officer for separation agreement, $0.33 average
                  price per
                  share
              
              
              **-**
              
              
              **-**
              
              
              **-**
              
              
              **-**
              
              
              -
              
              
              270,000
              
              
              **-**
              
              
              **-**
              
              
              270,000Record
                  forgiveness of accrued salary for officer per separation
                  agreement
              
              
              **-**
              
              
              **-**
              
              
              **-**
              
              
              **-**
              
              
              270,000
              
              
              **-**
              
              
              **-**
              
              
              **-**
              
              
              270,000Record
                  adjustment for accrued payroll taxes for officer per separation
                  agreement
              
              
              **-**
              
              
              **-**
              
              
              **-**
              
              
              **-**
              
              
              20,655
              
              
              **-**
              
              
              **-**
              
              
              **-**
              
              
              20,655Vested
                  stock options granted to officer for separation agreement
              
              
              **-**
              
              
              **-**
              
              
              **-**
              
              
              
              
              
              131,068
              
              
              -
              
              
              -
              
              
              -
              
              
              131,068Net
                  loss
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              (4,105,613
              )
              
              (4,105,613
              )**Balance,
                  December 31, 2005**
              
              
              **-**
              
              **$**
              **-**
              
              
              **40,204,556**
              
              **$**
              **40,205**
              
              **$**
              **6,517,807**
              
              **$**
              **20,000**
              
              **$**
              **-**
              
              **$**
              **(12,449,708**
              )
              **$**
              **(5,871,696**
              **)**




6
  WINSONIC
            DIGITAL MEDIA GROUP, LTD.
 (A
            DEVELOPMENT STAGE COMPANY)
 **STATEMENT
            OF STOCKHOLDERS' DEFICIT**
 (UNAUDITED)
 Common
                    
                    AccumulatedStock
                    
                    DeficitAdditional
                    
                    Common
                    
                    Advance
                        for
                    
                    During
                    
                    TotalPreferred
                        Stock
                    
                    Common
                        Stock
                    
                    Paid-in
                    
                    Stock
                    
                    Future
                    
                    Development
                    
                    Stockholders'Shares
                    
                    Amount
                    
                    Shares
                    
                    Amount
                    
                    Capital
                    
                    Payable
                    
                    Services
                    
                    Stage
                    
                    DeficitIssuance
                        of common stock in accordance with mutual general release
                        and settlement
                        agreement at $0.50 average price per share
                    
                    
                    **-**
                    
                    
                    
                    
                    
                    **-**
                    
                    
                    
                    
                    
                    900,000
                    
                    
                    900
                    
                    
                    449,100
                    
                    
                    -
                    
                    
                    -
                    
                    
                    -
                    
                    
                    450,000Issuance
                        of common stock in conversion of shareholder note payable,
                        0.20 per share
                    
                    
                    **-**
                    
                    
                    
                    
                    
                    **-**
                    
                    
                    
                    
                    
                    3,184,899
                    
                    
                    3,185
                    
                    
                    633,795
                    
                    
                    -
                    
                    
                    -
                    
                    
                    -
                    
                    
                    636,980Shares
                        issued to employee upon exercise of warrant at $0.01 per
                        share
                    
                    
                    **-**
                    
                    
                    
                    
                    
                    **-**
                    
                    
                    
                    
                    
                    500,000
                    
                    
                    500
                    
                    
                    4,500
                    
                    
                    -
                    
                    
                    -
                    
                    
                    -
                    
                    
                    5,000Issuance
                        of stock in acquisition of subsidiary
                    
                    
                    **-**
                    
                    
                    
                    
                    
                    **-**
                    
                    
                    
                    
                    
                    411,956
                    
                    
                    412
                    
                    
                    168,490
                    
                    
                    -
                    
                    
                    -
                    
                    
                    -
                    
                    
                    168,902Issuance
                        of stock for services to employees
                    
                    
                    **-**
                    
                    
                    
                    
                    
                    **-**
                    
                    
                    
                    
                    
                    750,000
                    
                    
                    750
                    
                    
                    299,250
                    
                    
                    -
                    
                    
                    -
                    
                    
                    -
                    
                    
                    300,000Issuance
                        of common stock subject to conversion of option for services
                        at $0.39
                        average price per share
                    
                    
                    **-**
                    
                    
                    
                    
                    
                    **-**
                    
                    
                    
                    
                    
                    82,051
                    
                    
                    82
                    
                    
                    31,918
                    
                    
                    -
                    
                    
                    -
                    
                    
                    -
                    
                    
                    32,000Incentive
                        stock options for employees
                    
                    
                    **-**
                    
                    
                    
                    
                    
                    **-**
                    
                    
                    
                    
                    
                    -
                    
                    
                    -
                    
                    
                    1,167,419
                    
                    
                    -
                    
                    
                    -
                    
                    
                    -
                    
                    
                    1,167,419Discount
                        allocated to warrant on convertible debt
                    
                    
                    **-**
                    
                    
                    
                    
                    
                    **-**
                    
                    
                    
                    
                    
                    -
                    
                    
                    -
                    
                    
                    1,248,688
                    
                    
                    -
                    
                    
                    -
                    
                    
                    -
                    
                    
                    1,248,688Initial
                        fair value of embedded derivative related to convertible
                        debt
                    
                    
                    **-**
                    
                    
                    
                    
                    
                    **-**
                    
                    
                    
                    
                    
                    -
                    
                    
                    -
                    
                    
                    605,479
                    
                    
                    -
                    
                    
                    -
                    
                    
                    -
                    
                    
                    605,479Fair
                        market value of options to purchase shares of common stock
                        at $0.01 to
                        $0.53 per share, issued to consultants for financial consulting
                        services
                    
                    
                    -
                    
                    
                    
                    
                    
                    -
                    
                    
                    
                    
                    
                    -
                    
                    
                    -
                    
                    
                    197,847
                    
                    
                    -
                    
                    
                    -
                    
                    
                    -
                    
                    
                    197,847To
                        record forgiveness of accrued salary for officer
                    
                    
                    **-**
                    
                    
                    
                    
                    
                    **-**
                    
                    
                    
                    
                    
                    -
                    
                    
                    -
                    
                    
                    399,919
                    
                    
                    -
                    
                    
                    -
                    
                    
                    -
                    
                    
                    399,919Issuance
                        of stock to shareholder in repayment of funds loaned to Company
                        at $0.53
                        per share
                    
                    
                    **-**
                    
                    
                    
                    
                    
                    **-**
                    
                    
                    
                    
                    
                    489,850
                    
                    
                    490
                    
                    
                    259,129
                    
                    
                    -
                    
                    
                    -
                    
                    
                    -
                    
                    
                    259,619To
                        record forgiveness of debt by related party
                    
                    
                    **-**
                    
                    
                    
                    
                    
                    **-**
                    
                    
                    
                    
                    
                    -
                    
                    
                    -
                    
                    
                    6,000
                    
                    
                    -
                    
                    
                    -
                    
                    
                    -
                    
                    
                    6,000Issuance
                        of shares upon exercise of convertible notes at $0.40 per
                        share
                    
                    
                    **-**
                    
                    
                    
                    
                    
                    **-**
                    
                    
                    
                    
                    
                    2,153,010
                    
                    
                    2,153
                    
                    
                    859,051
                    
                    
                    -
                    
                    
                    -
                    
                    
                    -
                    
                    
                    861,204Issuance
                        of common stock subject to conversion of option for services
                        at $0.65 per
                        share
                    
                    
                    **-**
                    
                    
                    
                    
                    
                    **-**
                    
                    
                    
                    
                    
                    89,231
                    
                    
                    89
                    
                    
                    57,911
                    
                    
                    -
                    
                    
                    -
                    
                    
                    -
                    
                    
                    58,000Fair
                        market value of shares issued to financial consultant for
                        services at fair
                        market value ranging from $0.01 to $0.53 per share
                    
                    
                    **-**
                    
                    
                    
                    
                    
                    **-**
                    
                    
                    
                    
                    
                    410,000
                    
                    
                    410
                    
                    
                    160,940
                    
                    
                    -
                    
                    
                    (42,875
                    )
                    
                    -
                    
                    
                    118,475Shares
                        issued upon exercise of warrant by consultant at $0.01 per
                        share
                    
                    
                    -
                    
                    
                    
                    
                    
                    -
                    
                    
                    
                    
                    
                    300,000
                    
                    
                    300
                    
                    
                    2,700
                    
                    
                    -
                    
                    
                    -
                    
                    
                    -
                    
                    
                    3,000Shares
                        issued as repayment of loans valued at $0.40 per share
                    
                    
                    -
                    
                    
                    
                    
                    
                    -
                    
                    
                    
                    
                    
                    62,504
                    
                    
                    62
                    
                    
                    24,940
                    
                    
                    -
                    
                    
                    -
                    
                    
                    -
                    
                    
                    25,002Discount
                        of beneficial conversion feature on convertible notes
                    
                    
                    -
                    
                    
                    
                    
                    
                    -
                    
                    
                    
                    
                    
                    -
                    
                    
                    -
                    
                    
                    97,475
                    
                    
                    -
                    
                    
                    -
                    
                    
                    -
                    
                    
                    97,475Forgiveness
                        of salary by related party
                    
                    
                    -
                    
                    
                    
                    
                    
                    -
                    
                    
                    
                    
                    
                    -
                    
                    
                    -
                    
                    
                    32,725
                    
                    
                    -
                    
                    
                    -
                    
                    
                    -
                    
                    
                    32,725Fair
                        market value of warrants issued to employees for services
                    
                    
                    -
                    
                    
                    
                    
                    
                    -
                    
                    
                    
                    
                    
                    -
                    
                    
                    -
                    
                    
                    324,058
                    
                    
                    -
                    
                    
                    -
                    
                    
                    -
                    
                    
                    324,058Fair
                        market value of warrants issued as interest payment for cash
                        advance
                    
                    
                    -
                    
                    
                    
                    
                    
                    -
                    
                    
                    
                    
                    
                    -
                    
                    
                    -
                    
                    
                    44,163
                    
                    
                    -
                    
                    
                    -
                    
                    
                    -
                    
                    
                    44,163Fair
                        market value of shares issued for consulting services at
                        $0.40 per
                        share
                    
                    
                    -
                    
                    
                    
                    
                    
                    -
                    
                    
                    
                    
                    
                    40,000
                    
                    
                    40
                    
                    
                    15,960
                    
                    
                    -
                    
                    
                    -
                    
                    
                    -
                    
                    
                    16,000Stock
                        to be issued in acquisition of subsidiary
                    
                    
                    -
                    
                    
                    
                    
                    
                    -
                    
                    
                    
                    
                    
                    -
                    
                    
                    -
                    
                    
                    -
                    
                    
                    630,626
                    
                    
                    -
                    
                    
                    -
                    
                    
                    630,626Stock
                        to be issued for consulting services
                    
                    
                    -
                    
                    
                    
                    
                    
                    -
                    
                    
                    
                    
                    
                    -
                    
                    
                    -
                    
                    
                    -
                    
                    
                    316,800
                    
                    
                    (5,300
                    )
                    
                    -
                    
                    
                    311,500Stock
                        to be issued in acquisition of subsidiary
                    
                    
                    -
                    
                    
                    
                    
                    
                    -
                    
                    
                    
                    
                    
                    -
                    
                    
                    -
                    
                    
                    -
                    
                    
                    140,000
                    
                    
                    -
                    
                    
                    -
                    
                    
                    140,000Net
                        loss
                    
                    
                    -
                    
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    -
                    
                    
                    -
                    
                    
                    -
                    
                    
                    -
                    
                    
                    (8,244,131
                    )
                    
                    (8,244,131
                    )**Balance,
                        December 31, 2006**
                    
                    
                    **-**
                    
                    
                    
                    
                    $
                    -
                    
                    
                    
                    
                    
                    **49,578,057**
                    
                    **$**
                    **49,578**
                    
                    **$**
                    **13,609,264**
                    
                    **$**
                    **1,107,426**
                    
                    **$**
                    **(48,175**
                    **)**
                    **$**
                    **(20,693,839**
                    **)**
                    **$**
                    **(5,975,746**
                    )
 7
 WINSONIC
          DIGITAL MEDIA GROUP, LTD.
 (A
          DEVELOPMENT STAGE COMPANY)
 **STATEMENT
          OF STOCKHOLDERS' DEFICIT**
 (UNAUDITED)
  Common
              
              AccumulatedStock
              
              DeficitAdditional
              
              Common
              
              Advance
                  for
              
              During
              
              TotalPreferred
                  Stock
              
              Common
                  Stock
              
              Paid-in
              
              Stock
              
              Future
              
              Development
              
              Stockholders'Shares
              
              Amount
              
              Shares
              
              Amount
              
              Capital
              
              Payable
              
              Services
              
              Stage
              
              DeficitIncentive
                  stock options for employees
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              1,626,001
              
              
              -
              
              
              -
              
              
              -
              
              
              1,626,001Stock
                  and stock payable for financing costs
              
              
              -
              
              
              -
              
              
              6,930,238
              
              
              6,930
              
              
              3,368,019
              
              
              272,574
              
              
              -
              
              
              -
              
              
              3,647,523Amortization
                  of common stock advance for future services
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              48,175
              
              
              -
              
              
              48,175Issuance
                  of stock in satisfaction of convertible debentures
              
              
              **-**
              
              
              **-**
              
              
              6,162,909
              
              
              6,163
              
              
              1,820,952
              
              
              -
              
              
              -
              
              
              -
              
              
              1,827,115Issuance
                  of stock in satisfaction of loan payable and loan payable - related
                  party
              
              
              -
              
              
              -
              
              
              1,133,257
              
              
              1,133
              
              
              584,851
              
              
              -
              
              
              -
              
              
              -
              
              
              585,984Issuance
                  of stock and stock payable for consulting services
              
              
              **-**
              
              
              **-**
              
              
              210,000
              
              
              210
              
              
              99,490
              
              
              66,150
              
              
              -
              
              
              -
              
              
              165,850Issuance
                  of stock as payment of stock payable
              
              
              **-**
              
              
              **-**
              
              
              2,097,972
              
              
              2,098
              
              
              1,085,328
              
              
              (1,087,426
              )
              
              -
              
              
              -
              
              
              -Discount
                  allocated to warrant on convertible debt
              
              
              **-**
              
              
              **-**
              
              
              -
              
              
              -
              
              
              971,831
              
              
              -
              
              
              -
              
              
              -
              
              
              971,831Initial
                  fair value of embedded derivative related to convertible
                  debt
              
              
              **-**
              
              
              **-**
              
              
              -
              
              
              -
              
              
              183,515
              
              
              -
              
              
              -
              
              
              -
              
              
              183,515Issuance
                  of stock warrants
              
              
              **-**
              
              
              **-**
              
              
              -
              
              
              -
              
              
              18,326
              
              
              -
              
              
              -
              
              
              -
              
              
              18,326Issuance
                  of common stock for legal settlement liability
              
              
              -
              
              
              -
              
              
              200,000
              
              
              200
              
              
              57,800
              
              
              -
              
              
              -
              
              
              -
              
              
              58,000Net
                  loss
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              (13,422,164
              )
              
              (13,422,164
              )**Balance,
                  September 30, 2007**
              
              
              -
              
              **$**
              **-**
              
              
              **66,312,433**
              
              **$**
              **66,312**
              
              **$**
              **23,425,377**
              
              **$**
              **358,724**
              
              **$**
              **-**
              
              **$**
              **(34,116,003**
              **)**
              **$**
              **(10,265,590**
              **)**


*The
      accompanying notes to the financial statements should be*


*read
      in conjunction with this Statement of Stockholders’ Deficit.*


8


**WINSONIC
      DIGITAL MEDIA GROUP, LTD**




**NOTES
      TO THE UNAUDITED FINANCIAL STATEMENTS**




**NOTE
      1 - BASIS OF PRESENTATION**





Winsonic
      Digital Media Group, Ltd. (the “Company”) is a media
      distribution solutions company which historically has focused on distributing
      digital content to the public and providing high-speed, high-quality, low-cost
      solutions that enable users to view, interact, and listen to all types of audio,
      online video and digital TV in full screen format.





During
      2006, the Company acquired a 49% equity interest in Winsonic Diversity, LLC
      and
      completed the acquisitions of Automated Interiors, LLC (“AI”), Tytess Design and
      Development, Inc. (“Tytess”) and Winsonic Digital Store, Ltd. (formerly DV Photo
      Shop, Ltd.) (the “Store” or “WDS”). These actions represent a series of
      strategic investments in new markets and new services that expand the offering
      of the Company, while complimenting our existing business. Together with our
      existing digital distribution platform comprised of the Winsonic Digital Cable
      Systems Network, Ltd. networks, we are now able to deliver customized, bundled
      solutions to a wider range of customers that include custom wiring, centrally
      located utilities, project management, telephone, internet, audio/video and
      digital TV.





The
      accompanying financial statements have been prepared in accordance with the
      Statement of Financial Accounting Standards (“SFAS”) No. 7 “Accounting and
      Reporting by Development Stage Enterprises.” A development stage enterprise is
      one in which planned principal operations have not commenced; or if its
      operations have commenced, there has been no significant revenues derived
      therefrom. As of September 30, 2007, the Company has not fully commenced nor
      has
      it received significant revenues from its planned principal
      operations.





The
      accompanying consolidated financial statements have been prepared by the Company
      without audit. In the opinion of management, all adjustments (which include
      normal recurring adjustments) necessary to present fairly the financial
      position, results of operations and cash flows as of and for the nine months
      ended September 30, 2007 and for all periods presented have been made.





Certain
      information and footnote disclosures normally included in financial statements
      prepared in accordance with generally accepted accounting principles in the
      United States have been condensed or omitted for purposes of filing interim
      financial statements with the Securities and Exchange Commission. The condensed
      financial statements included in this report should be read in conjunction
      with
      the consolidated financial statements and notes thereto included in the
      Company’s audited financial statements for the year ended December 31, 2006 and
      the supplementary information filed in connection with the acquisition of AI.
      The results of operations for the nine months ended September 30, 2007 are
      not
      necessarily indicative of the operating results for the full year.





**NOTE
      2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES**





**Principles
      of Consolidation**





The
      consolidated financial statements included in this report include the accounts
      of the Company and its wholly owned subsidiaries. All significant inter-company
      transactions have been eliminated in consolidation. ****





**Use
      of Estimates**





The
      preparation of financial statements in conformity with generally accepted
      accounting principles requires management to make estimates and assumptions
      that
      affect the reported amounts of assets and liabilities and disclosures of
      contingent assets and liabilities at the date of the financial statements and
      the reported amounts of revenue and expense during the reported period. Actual
      results could differ from those estimates.




9




**Cash
        and Cash Equivalents**


Cash
      equivalents consist of highly liquid investments with maturities of three months
      or less when purchased. Cash and cash equivalents are on deposit with financial
      institutions without any restrictions.





**Concentration
      of Credit Risk**





The
      Company maintains its cash and cash equivalents in bank accounts in three
      financial institutions. The Federal Deposit Insurance Corporation insures
      deposits up to $100,000 per account. As of September 30, 2007, the Company
      did
      not have any accounts with balances in excess of the insured balances. As of
      September 30, 2007 and December 31, 2006, the Company had a balance of $415
      and
      $3,506 respectively, in its cash accounts. Currently, cash management is handled
      by Company management.





**Accounts
      Receivable**





Accounts
      receivable is uncollateralized customer obligations due under normal trade
      terms
      requiring payment within 30 days from the invoice date. The carrying amount
      of
      accounts receivable is reviewed for collectability on a monthly basis. If
      management determines that collection is unlikely, an allowance that reflects
      management’s best estimate of the amounts that will not be collected is
      recorded. Management reviews each accounts receivable balance that exceeds
      30
      days from the invoice date and, based on an assessment of creditworthiness,
      estimates the portion, if any, of the balance that will not be collected. At
      September 30, 2007 and December 31, 2006 there was no reserve for doubtful
      accounts.





**Fixed
      Assets**





Fixed
      assets are stated at cost. Expenditures that materially increase the life of
      the
      assets are capitalized. Ordinary maintenance and repairs are charged to expense
      as incurred. When assets are sold or otherwise disposed of, the cost and the
      related accumulated depreciation are removed from the accounts, and any
      resulting gain or loss is recognized at that time. Depreciation is computed
      primarily on the straight-line method for financial statement purposes over
      the
      following estimated useful lives:





Telecommunication
                Equipment
            5
                YearsFurniture
                & Fixtures
            7 YearsComputer
                Equipment
            5 YearsTransportation
                Equipment
            5 YearsSoftware
            3 Years





**Impairment
      of Long-Lived Assets**





In
      accordance with SFAS No. 144, “Accounting for the Impairment or Disposal of
      Long-Lived Assets," long-lived assets, such as property and equipment and
      intangible assets subject to amortization, are reviewed for impairment whenever
      events or changes in circumstances indicate that the carrying amount of an
      asset
      group may not be recoverable. Recoverability of asset groups to be held and
      used
      is measured by a comparison of the carrying amount of an asset group to
      estimated undiscounted future cash flows expected to be generated by the asset
      group. If the carrying amount of an asset group exceeds its estimated future
      cash flows, an impairment charge is recognized for the amount by which the
      carrying amount of an asset group exceeds fair value of the asset group.





**Revenues
      and Expenses Recognition**





Revenues
      for the Company are recognized upon rendering services to customers. Costs
      and
      expenses are recognized during the period in which they are
      incurred.





Tytess,
      a subsidiary of the Company, has elected to recognize revenue on a percentage
      of
      contract completion method. This method requires Tytess to do progress billings
      based upon completion of preset milestones. Revenues and expenses for each
      milestone are recognized as each milestone has been completed.




10





AI,
      another subsidiary of the Company, has elected to recognize revenue on a
      completed contract method, due to the short duration of its contracts. The
      completed contract **** method
      requires AI to defer revenue and expense recognition until the contract has
      been
      substantially completed.





Revenues
      for the Store are recognized upon rendering services to customers. Costs and
      expenses are recognized during the period in which they are
      incurred.




**Stock
      Based Compensation: Stock Options**





The
      Company has a stock incentive plan that provides for stock-based employee
      compensation, including the granting of stock options to certain key employees
      and other individuals. For stock options and warrants issued as compensation
      and
      reported in periods beginning after December 15, 2005, the Company applies
      SFAS
      No. 123(R), “Share-Based Payment,” which requires the recognition of
      compensation cost based upon the fair value of stock options at the grant date
      (using option pricing models), and recognizing the cost over the period during
      which the services are provided (vesting period).




During
      the nine months ended September 30, 2007, the Company committed to issue options
      for 3,475,000 shares of common stock to employees and recorded a related compensation expense of $854,000 for the vested portion
      of such options. The
      compensation expense is based on the fair market value of the options utilizing
      the Black-Scholes option pricing model. The Company’s employee stock option
      activity for the nine months ended September 30, 2007 and September 30, 2006
      is
      presented below:




**Nine
                  months ended**
              
              **Nine
                  months ended****September
                  30, 2007**
              
              **September
                  30, 2006**Weighted
                  Average
              
              
              
              Weighted
                  AverageOptions
              
              Exercise
                  Price
              
              Options
              
              Exercise
                  PriceOutstanding
                  - Beginning of Period
              
              
              9,309,304
              
              $
              0.78
              
              
              4,000,000
              
              $
              0.82Granted
                  or committed
              
              
              3,475,000
              
              
              0.65
              
              
              4,800,000
              
              
              0.66Exercised
              
              
              -
              
              
              -
              
              
              (600,000
              )
              
              0.01Cancelled
              
              
              (1,335,793
              )
              
              0.65
              
              
              (1,000,000
              )
              
              1.00Outstanding
                  - End of Period
              
              
              11,448,511
              
              $
              0.68
              
              
              7,200,000
              
              $
              0.69Exercisable
                  - End of Period
              
              
              9,493,456
              
              $
              0.73
              
              
              3,992,894
              
              $
              0.80


**Option
      Pricing Model**





The
      Company has elected to utilize the Black-Scholes option valuation model in
      deriving fair market values for stock based compensation and embedded
      derivatives. The Black-Scholes option valuation model was developed for use
      in
      estimating the fair value of traded options that have no vesting restrictions
      and are fully transferable. In addition, option valuation models require the
      input of highly subjective assumptions including the expected stock price
      volatility. Since the Company’s employee stock options and warrants have
      characteristics significantly different from those of traded options, and
      because changes in the subjective input assumptions can materially affect the
      fair value estimate, in management’s opinion, the existing models do not
      necessarily provide a reliable single measure of the fair value of its employee
      stock options.





In
      accordance with SFAS No. 123(R) titled "Share-Based Payment," the Company
      recognized the fair value of the options in the statement of operations on
      the date of grant.   Fair value was determined using
      the Black-Scholes option pricing model
      based on the following assumptions: risk free interest rate of 4.00%
      to
      4.95%; no dividend yield; volatility factors of the expected market price of
      the
      Company’s stock of 166% to 233%; and weighted average expected life of the
      options of three years (for options issued at $1.00 per share strike price)
      and
      one and one-half years (for options issued at $0.01 per share strike
      price).  The fair value recognized during the nine months ended September
      30, 2007 was $1,626,001.




11




**Income
      Taxes**





Income
      taxes are generally provided for the tax effects of transactions reported in
      the
      financial statements, and consist of taxes currently due plus deferred taxes
      related primarily to differences between the basis of fixed assets for financial
      and income tax reporting. The Company has no deferred tax assets and liabilities
      representing the future tax return consequences of those differences because,
      currently, the Company has no material temporary timing differences that give
      rise to these tax assets and liabilities. Currently there are no federal income
      taxes due.





**Earnings
      (Loss) Per Share Calculations**





Basic
      earnings (loss) per share excludes any dilutive effects of options, warrants
      and
      convertible securities. Basic earnings (loss) per share are computed using
      the
      weighted-average number of outstanding shares of common stocks during the
      applicable period. Diluted earnings per share are computed using the
      weighted-average number of common and common stock equivalent shares outstanding
      during the period. Common stock equivalent shares are excluded from the
      computation if their effect is antidilutive. For all periods presented, the
      Company has sustained losses, which would make use of equivalent shares
      antidilutive and, as such, the calculation has not been included.





**Recently
      Issued Accounting Pronouncements**




In
      February 2007, the FASB issued SFAS 159, *The
      Fair Value Option for Financial Assets and Financial Liabilities, including
      an
      amendment of FASB Statement No. 115* (“SFAS
      159”) which permits entities to choose to measure eligible items at fair value
      at specified election dates. Unrealized gains and losses on items for which
      the
      fair value option has been elected will be reported in earnings at each
      subsequent reporting date. The following balance sheet items are within the
      scope of SFAS 159:






-
      Recognized financial assets and financial liabilities unless a special exception
      applies






-
      Firm
      commitments that would otherwise not be recognized at inception and that involve
      only financial instruments






-
      Non-financial insurance contracts






-
      Host
      financial instruments resulting from separation of an embedded non-financial
      derivative instrument from a non-financial hybrid instrument






SFAS
      159
      will be effective for fiscal years beginning after November 2007 with early
      adoption possible but subject to certain requirements. We do not plan early
      adoption and we do not expect a material impact on our financial statements
      from
      the eventual adoption of SFAS 159.




**NOTE
      3 - ACQUISITIONS**





During
      the year ended December 31, 2006, the Company acquired three subsidiaries,
      consisting of the acquisition of Automated Interiors, LLC on April 18, 2006,
      Tytess Design and Development, Inc. on November 2, 2006 and DV Photo Shop on
      November 20, 2006. The purchase price of the acquisitions consisted of the
      following:





Purchase
                Price
            
            Shares
              Issued
            
            Other
              ConsiderationAutomated
                Interiors, LLC
            
            $
            168,902
            
            
            411,956
            
            
            -Tytess
                Design and Development
            
            $
            630,626
            
            
            1,146,593
            
            
            -DV
                Photo Shop
            
            $
            200,000
            
            
            241,379
            
            $
            60,000
                (a
            )





(a)
            Convertible
                Note Payable issued, convertible at $0.58 per
                share.




12




Automated
      Interiors:


Effective
      as of April 18, 2006, the Company acquired the membership interests of AI for
      411,956 shares of the Company’s restricted common stock, valued at $0.41 per
      share, for a total purchase price of $168,902.





AI
      was
      established on November 17, 2003 in the State of Georgia, and has offices and
      design facilities located in Atlanta, Georgia. AI designs and engineers the
      installation of electronic components to facilitate “smart” buildings. It has
      partnered with developers and builders who now offer structured wiring in newly
      constructed homes and buildings as a result of a dramatic increase in broadband
      use and consumer demand for the latest technological innovations in home and
      security automation. AI’s operations are centered primarily in the Southeast
      region of the United States.





The
      purchase price was allocated as follows:




Net
                  tangible assets acquired
              
              $
              65,131Intangible
                  assets acquired
              
              
              -Goodwill
              
              
              103,771Total
                  Purchase Price
              
              $
              168,902





The
      following table summarizes the components of the tangible assets acquired at
      fair value:




Cash
              
              $
              20,511Accounts
                  receivable
              
              
              190,783Fixed
                  assets
              
              
              66,532Other
                  assets
              
              
              6,775Current
                  liabilities
              
              
              (87,569
              )Long-term
                  liabilities
              
              
              (131,901
              )Net
                  Tangible Assets Acquired
              
              $
              65,131





**Tytess
      Design and Development:**





Effective
      as of November 2, 2006, the Company acquired the outstanding share capital
      of
      Tytess from its sole shareholder for 1,146,593 shares of the Company’s
      restricted common stock, valued at $0.55 per share, for a total purchase price
      of $630,626.





Tytess
      was incorporated on May 16, 2003 in the State of Georgia, and has offices and
      design facilities located in Atlanta, Georgia. Tytess designs, engineers and
      provides project management services for construction projects, primarily
      buildings. In addition to the construction projects currently being designed
      and
      managed by Tytess, the combined operation of Tytess and Winsonic have
      successfully contracted with a major telephone network to design (architectural
      and engineering services) and manage the construction and installation of
      telephone infrastructure and the design and deployment of network services.
      Tytess will also provide engineering services to facilitate the deployment
      of
      telecommunication services being offered by the Company and the Company’s
      network. Tytess’s operations are centered primarily in the Southeast region of
      the United States. Tytess has, to date, utilized the services of independent
      subcontractors for staffing needs.





The
      purchase price was allocated as follows:




Net
                  tangible assets (liabilities) acquired
              
              $
              (90,141
              )Intangible
                  assets acquired
              
              
              -Goodwill
              
              
              720,767Total
                  Purchase Price
              
              $
              630,626




13




The
      following table summarizes the components of the tangible assets acquired at
      fair value:




Cash
              
              $
              (3,840
              )Accounts
                  receivable
              
              
              -Fixed
                  assets
              
              
              10,075Other
                  assets
              
              
              25,510Current
                  liabilities
              
              
              (121,886
              )Long-term
                  liabilities
              
              
              -Net
                  Tangible Assets Acquired
              
              $
              (90,141
              )





**DV
      Photo Shop** **:**





On
      November 20, 2006 the Company acquired the assets of DV Photo Shop. The assets
      and operations acquired were transferred to a newly created Georgia corporation
      and the store’s name was changed to Winsonic Digital Store, Ltd. (“the Store”).
      The assets were acquired for 241,379 shares of the Company’s restricted common
      stock, valued at $0.58 per share and a convertible note payable of $60,000,
      for
      a total purchase price of $200,000. The note is convertible into shares of
      the
      Company’s restricted common stock at a conversion price of $0.58 per
      share.





The
      Store
      has its only retail facility in Atlanta, Georgia. The operations of the Store
      include an urban retail store located in downtown Atlanta, which specializes
      in
      photography development, digital photography and the sale of mobile phones,
      accessories, and wireless communications services. The Store continues to offer
      the same products and services it offered before the acquisition; however,
      its
      future offerings may be expanded to include music downloads, digital photo
      depot, on-line storage, video conferencing, content development, a music lab
      for
      mixing and mastering, and film, video and photo editing.





The
      purchase price was allocated as follows:




Net
                  tangible assets acquired
              
              $
              40,247Intangible
                  assets acquired
              
              
              -Goodwill
              
              
              159,753Total
                  Purchase Price
              
              $
              200,000





The
      following table summarizes the components of the tangible assets acquired at
      fair value:




Cash
              
              $
              5,387Accounts
                  receivable
              
              
              -Fixed
                  assets
              
              
              34,860Other
                  assets
              
              
              -Current
                  liabilities
              
              
              -Long-term
                  liabilities
              
              
              -Net
                  tangible assets acquired
              
              $
              40,247




**Goodwill:**





Goodwill,
      which represents the excess of the purchase price over the fair value of
      tangible and identified intangible assets acquired, is not being amortized
      but
      will be reviewed annually for impairment, or more frequently if impairment
      indicators arise, in accordance with Statement of Financial Accounting Standards
      No. 142, “Goodwill and Other Intangible Assets” (“SFAS 142”). In part, goodwill
      reflects the competitive advantages the Company expects to realize from the
      synergy of AI and Tytess services, the expanded product offerings through the
      Store facilities, together with the Winsonic product line. As of September
      30,
      2007, there was no impairment cost recognized. Goodwill is not expected to
      be
      deducted for tax purposes.




14




The
      results of operations of AI, Tytess and the Store have been included in the
      Company’s consolidated financial statements subsequent to the date of each
      acquisition. The financial information in the table below summarizes the
      combined results of operations of the Company and AI. The operations of Tytess
      and the Store have not been included as they were immaterial to the operations
      of the Company, have an immaterial affect on the current operations of the
      consolidated group, and in the case of Tytess, was included in the operations
      of
      a private partnership. Further, the Company anticipates expanding the range
      of
      services and products to be offered by both Tytess and the Store to include
      those which are synergistic with the business plan of the Company and the value
      attributed to the acquisition price.





On
      an
      unaudited pro forma basis, the combined information for the three and nine
      months ended September 30, 2007 and September 30, 2006 represents the combined
      operations of the Company and AI as though both of the companies had been
      combined as of the beginning of each of the periods presented:




**Three
                  months ended****September
                  30,****2007**
              
              **2006**(unaudited)
              
              (unaudited)Total
                  pro forma revenues
              
              $
              161,772
              
              $
              310,364Pro
                  forma net loss
              
              $
              (5,768,883
              )
              $
              (2,423,920
              )Pro
                  forma net loss per share - basic and diluted
              
              $
              (0.10
              )
              $
              (0.05
              )Reported
                  net loss
              
              $
              (6,692,415
              )
              $
              (2,423,920
              )




**Nine
                  months ended****September
                  30,****2007**
              
              **2006**(unaudited)
              
              (unaudited)Total
                  pro forma revenues
              
              $
              703,639
              
              $
              972,647Pro
                  forma net loss
              
              $
              (11,318,117
              )
              $
              (5,712,201
              )Pro
                  forma net loss per share - basic and diluted
              
              $
              (0.21
              )
              $
              (0.12
              )Reported
                  net loss
              
              $
              (13,422,164
              )
              $
              (5,768,825
              )




**NOTE
      4 - STOCKHOLDERS’ EQUITY**




Effective
      June 22, 2007, the Company increased the number of shares of common stock the
      Company is authorized to issue from 50,000,000 to 200,000,000 and increased the
      number of shares of preferred stock the Company is authorized to issue from
      5,000,000 to 20,000,000.





**Issuance
      of Common Stock**





During
      the nine months ended September 30, 2007, the Company issued 6,930,238
      restricted shares of the Company’s common stock in connection with certain
      financing transactions. In addition, fifty holders of the Company’s convertible
      debentures agreed in writing to convert their debentures into restricted shares
      of the Company’s common stock at prices ranging from $0.20 to $0.50 per share
      (See “Note 11 - Convertible Debentures” of the Notes to the Financials for
      further details regarding these conversions.). Based on these agreements, the
      Company converted $1,765,760 of principal and $61,355 of accrued interest on
      these debentures in exchange for the issuance of 6,162,909 restricted shares
      of
      the Company’s common stock.




15





During
      the nine months ended September 30, 2007, the Company repaid loans payable
      and
      loans payable - related party amounts of $40,605 and $259,956, respectively.
      Specifically, the Company repaid these loans payable by issuing 1,133,257
      restricted shares of the Company’s common stock at prices ranging from $0.20 to
      $0.31 and, in connection therewith, incurred financing costs of $285,424.





During
      the nine months ended September 30, 2007, the Company issued an aggregate of
      420,000 restricted shares of its common stock as payment for consulting
      services, 210,000 of such restricted shares were previously recorded as common
      stock payable. In addition, the Company issued 241,379, 1,146,593 and 500,000
      restricted shares of common stock, in each case, which were previously recorded
      as a common stock payable for the acquisition of DV Photo Shop, Tytess and
      technology from James E. Thomas, respectively.





During
      the nine months ended September 30, 2007, the Company issued 200,000 restricted
      shares of its common stock in partial settlement of a lawsuit (See “Note 6-
      Summary of Legal Proceedings”).





In
      addition, the Company has issued restricted shares of its common stock
      subsequent to September 30, 2007 (See “Note 13 - Subsequent
      Events.”).





**Convertible
      Notes and Warrants:**





Since
      inception, the Company has issued convertible notes together with warrants
      to
      fund current operations and other transactions. The notes accrue interest at
      6%
      per annum and mature on various dates or upon the occurrence of certain events
      relating to the capital structure of the Company. To date, no warrants have
      been
      exercised. During the first, second and third quarters of 2007, the Company
      raised $179,500, $373,500 and $ 1,135,474 ,
      respectively, in connection with offering of convertible notes and warrants.
      (For a more detailed discussion, see “Note 11 - Convertible Debentures” and
“Note 13 - Subsequent Events.”)





The
      following table summarizes the Company’s warrant activities for the period
      ending September 30, 2007:




**Number
                  of**
              
              **Weighted
                  Average****Warrants**
              
              **Exercise
                  Price**Balance
                  as of December 31, 2003
              
              
              -
              
              $
              -Warrants
                  issued
              
              
              1,164,286
              
              
              0.70Warrants
                  cancelled/expired
              
              
              -
              
              
              -Warrants
                  exercised
              
              
              -
              
              
              -Balance
                  as of December 31, 2004
              
              
              1,164,286
              
              
              0.70Warrants
                  issued
              
              
              285,714
              
              
              0.70Warrants
                  cancelled due to extension agreement
              
              
              (1,450,000
              )
              
              (0.70
              )Warrants
                  replaced due to extension agreement
              
              
              2,537,500
              
              
              0.40Warrants
                  issued
              
              
              941,250
              
              
              0.20Warrants
                  exercised
              
              
              -
              
              
              -Balance
                  as of December 31, 2005
              
              
              3,478,750
              
              
              0.35Warrants
                  issued
              
              
              8,603,510
              
              
              0.21Warrants
                  exercised
              
              
              -
              
              
              -Balance
                  as of December 31, 2006
              
              
              12,082,260
              
              
              0.25Warrants
                  issued
              
              
              5,415,082
              
              
              0.31Warrants
                  exercised
              
              
              -
              
              
              -Balance
                  as of September 30, 2007
              
              
              17,497,342
              
              $
              0.27





In
      addition, the Company has issued warrants in connection with certain consulting
      agreements. The following table summarizes the Company’s warrant activities
      related to consulting agreements for the period ending September 30,
      2007:




16





**Number
                  of**
              
              **Weighted
                  Average****Warrants**
              
              **Exercise
                  Price**Balance
                  as of December 31, 2004
              
              
              -
              
              $
              -Warrants
                  issued
              
              
              600,000
              
              
              0.41Warrants
                  exercised
              
              
              -
              
              
              -Balance
                  as of December 31, 2005
              
              
              600,000
              
              
              0.41Warrants
                  issued
              
              
              702,354
              
              
              0.14Warrants
                  exercised
              
              
              -
              
              
              -Balance
                  as of December 31, 2006
              
              
              1,302,354
              
              
              0.26Warrants
                  issued
              
              
              -
              
              
              -Warrants
                  exercised
              
              
              -
              
              
              -Balance
                  as of September 30, 2007
              
              
              1,302,354
              
              $
              0.26




**NOTE
      5 - RELATED PARTY TRANSACTIONS**




**Loans
      Payable - Related Party**





During
      2006, the Company issued two non-interest bearing notes to an officer of the
      Company in the amounts of $78,192 and $1,793. Under the terms of the notes,
      the
      officer had the right to demand repayment prior to September 29, 2007 and the
      Company had the right to repay the amounts by issuing shares of the Company’s
      restricted common stock at a per share price of $0.20. During the second quarter
      of 2007, the officer requested repayment and the Company issued 399,924 shares
      of restricted common stock in the third quarter of 2007.




**Loans
      from Founder:**





**2007** :
      During
      the nine months ended September 30, 2007, the CEO of the Company entered into
      certain loan transactions with certain third parties and in turn has loaned
      an
      aggregate of $428,392 to the Company. During the nine months ended September
      30,
      2007, the Company accrued interest on the outstanding principal balance of
      these
      loans in the amount of $5,933. As a condition to the loan transactions with
      such
      third parties, the CEO has assigned or committed to assign to such third parties
      an aggregate of 2,948,474 of his personal shares of the Company’s common stock.
      During the nine months ended September 30 2007, the Company repaid loan amounts
      of $37,000 and issued 600,000 shares of the Company’s common stock to third
      parties on behalf of the CEO in exchange for debt forgiveness from the CEO
      in
      the amount of $179,971. As of September 30, 2007, the outstanding balance of
      these loans was $216,393 in principal and $962 in accrued interest. In addition,
      as of September 30, 2007, the CEO is committed to issue 570,743 shares of the
      Company’s common stock in connection with these loans.





**2006:** During
      2006, the CEO of the Company loaned $20,000 to the Company on an interest-free
      basis. During 2006, $15,000 was repaid leaving an unpaid obligation of $5,000
      as
      of September 30, 2007.





**2005** : On
      September 15, 2005, the Company received a loan of $80,000 from the CEO. Under
      the terms of the promissory note governing the loan, interest accrues at 10%
      per
      annum, with principal and interest payable on December 1, 2005. Unpaid principal
      and interest after December 1, 2005 is subject to additional interest of 5%
      in
      excess of the rate otherwise applicable to the unpaid balance. During the fiscal
      year 2006, the Company issued 400,000 shares of restricted common stock to
      repay
      the principal of the loan and the balance of the accrued interest does not
      accrue additional interest. The balance of the accrued interest payable at
      September 30, 2007 was $13,074.




**2004:** As
      of
      September 30, 2007 and December 31, 2006, the Company had a loan payable
      totaling $306,850 and $316,496, respectively, to the CEO which included
      principal of $209,000. Under the terms of the loan, interest accrues at the
      rate
      of 10% per annum. During the nine months ended September 30 2007, the Company
      paid $32,500 to the CEO as repayment of this loan. The Company is also obligated
      to issue to the CEO 80,000 shares of common stock valued at $64,000 in
      connection with the repayment of this loan. Accrued interest included in the
      loan balances as of September 30, 2007 and December 31, 2006 was $33,850 and
      $43,496, respectively.




17





**Native
      American Television Network, Inc (“NATVN”)**





During
      the third quarter of 2005, the Company issued 1,670,000 shares of common stock
      to NATVN in exchange for 4,000,000 shares of NATVN common stock. The former
      president of the Company and a Company shareholder are shareholders in NATVN,
      owning 9% of the total outstanding equity in NATVN.





The
      investment in NATVN is accounted for under the “equity” method. The equity
      method of accounting is used if the investor has the ability to significantly
      influence the investee’s financial and operating policies, or if an investor is
      accounting for an investment in a corporate joint venture, but holds less than
      50% of the investee. Under the equity method, an investment is initially
      recorded at cost. Thereafter, the carrying amount of the investment is increased
      for the investor’s proportionate share of the investee’s gains, or is reduced
      for the proportionate share of the investee’s losses or for distributions
      received from the investee. As of September 30, 2007, there has been no
      significant operations commenced by NATVN.





**Winsonic
      Diversity, LLC**





On
      May
      22, 2006, Winsonic Diversity was organized in the State of Georgia by Winston
      D.
      Johnson and the Company. Mr. Johnson holds a majority of the ownership interests
      (51%) and is responsible for the management of Winsonic Diversity, while the
      Company holds a minority interest (49%). As
      of
      September 30, 2007, there has been no significant operations commenced by
      Winsonic Diversity.





**NOTE
      6 - SUMMARY OF LEGAL PROCEEDINGS**





An
      estimated liability of
      $1,877,000 and $775,000 for legal settlements was recorded as of September 30, 2007 and
      December 31, 2006, respectively. Other than as described below and in Note
      13
“Subsequent Events”, the Company is not currently involved in any legal
      proceedings that may be deemed to be material to our financial condition.





**Colla** **zo
      vs. Media and Entertainment.com** (Superior
      Court of CA, Los Angeles County - complaint filed March 22, 2004)





This
      is
      an action brought by the Company seeking a constructive trust and injunctive
      relief against Ceasar Collazo, a former officer of the Company, who allegedly
      stole proprietary property and solicited the Company’s clients. In his response
      to the complaint, Mr. Collazo counter-sued for breach of employment agreement.
      The parties reached a settlement on April 11, 2005, wherein, the Company agreed
      to issue 900,000 shares of common stock to Mr. Collazo as of September 20,
      2002
      and to pay his attorney fees of $120,000. The shares of common stock were valued
      as of the settlement date, and accordingly, 900,000 shares of common stock,
      as
      well as, $120,000 of attorney fees, were charged as expenses in 2004.





On
      March
      16, 2006, the Company issued 900,000 restricted shares of common stock to Mr.
      Collazo in settlement of this matter; however, pursuant to a motion filed by
      Mr.
      Collazo, the Court
      ordered the Company to reissue the 900,000 shares of common stock to
      Mr. Collazo as of September 20, 2002 without the restrictions. As
      of the date of this report, the Company has not reissued the stock to Mr.
      Collazo due to the existence of an attorney’s lien on Mr. Collazo’s judgment in
      this matter.





**Yellowbrix,
      Inc. vs. Media and Entertainment.com** (Superior
      Court of CA, Los Angeles County - complaint filed September 16,
      2004)





This
      is a collection suit for $19,800. The disputed amount was expensed in general
      and administrative expense in 2004 and accrued within accounts payable of the
      Company as of September
      30, 2007 .




18





On
      July 25, 2006, the Company learned that a judgment had been entered against
      it
      in this matter on February 15, 2006. The judgment amount included the $19,800
      in
      controversy, plus $3,000 in attorney fees. As of the
      date
      of this report ,
      Yellowbrix has not sought to enforce the judgment.





**Dell
      Marketing, LP vs. Winsonic Holdings, Ltd.** (District Court of Travis County, Texas - complaint filed December 13,
      2004)





On
      or
      about April 17, 2006, the Company was notified of a default judgment rendered
      against it in a collection suit in Travis County, Texas in the amount of
      $474,285 plus $90,000 in attorney fees. The entire amount of the judgment and
      attorney’s fees have been expensed as a general and administrative expense and
      accrued within accounts payable as of September 30, 2007.





On
      July
      27, 2006, the Company received notice that the judgment had been domesticated
      in
      the state of Georgia as of July 21, 2006. As of the date of this report, no
      other significant action has been taken in this matter.





**Netscaler
      Inc. vs. Winsonic Holdings, Ltd.** (Superior
      Court of CA, Los Angeles County - complaint filed May 16, 2005)





The
      disputed amount of $75,000 in this collection lawsuit was expensed as a general
      and administrative expense in 2004 and accrued within accounts payable as of
      September 30, 2007. The parties reached a settlement in March of 2006, pursuant
      to which the Company agreed to pay the sum of $75,000 in three (3) installment
      payments of $25,000, commencing in June 2006, in exchange for the dismissal
      of
      the action. On August 15, 2006, Netscaler filed a declaration to set aside
      the
      dismissal and to enter judgment in the amount of $100,769 against the Company.
      As of the date of this report, no further action has been taken in this
      matter.





**Attorney
      Collection Services vs. Winsonic Holdings, Ltd.** (Superior
      Court of CA, Los Angeles County - complaint filed June 30, 2004)





The
      disputed amount of $25,000 in this collection lawsuit was expensed as a general
      and administrative expense in 2005 and accrued within accounts payable as of
      September 30, 2007. On
      September 15, 2006, this matter was dismissed by the court; however, the
      plaintiff has indicated that it will either file a motion to set aside the
      dismissal or bring a new action. As of the
      date
      of this report ,
      no further action has been taken in this matter.





**Crown
      Office Suites, Inc. vs. Winsonic Digital Media Group, Ltd.** (State
      Court of Cobb County, Georgia - complaint filed November 23, 2005)





This
      is
      an action for breach of a lease agreement against the Company. The disputed
      amount of $50,193 was expensed as a general and administrative expense in 2005
      and accrued within accounts payable of the Company as of September 30, 2007.
      The
      Company filed its Answer contesting service and a Motion to Open Default on
      April 18, 2006. See
      “Note 13 - Subsequent Events” of the Notes to the Financials for further details
      regarding this matter.





**Lefkowitz
      vs. Winsonic Digital Media Group, Ltd.** (Superior
      Court of CA, Los Angeles County - complaint filed May 18, 2006)





This
      is
      an action for breach of contract brought by David Lefkowitz, Caesar Collazo’s
      attorney in Collazo vs. Media and Entertainment.com matter. Mr. Lefkowitz seeks
      payment of $125,000 in attorney fees, which he asserts he is entitled to
      pursuant to the Settlement Agreement of April 11, 2005 in the Collazo matter.
      The disputed amount was charged as expenses in 2004.




The
      parties entered into a settlement agreement on May 4, 2007, pursuant to which
      the Company agreed to issue 200,000 unrestricted shares of the Company’s common
      stock to Mr. Lefkowitz and pay $160,000 in installments, which would be
      discounted upon the sale of the stock. The Company issued the 200,000
      unrestricted shares on May 17, 2007, but did not make any cash payments to
      Mr.
      Lefkowitz. On June 15, 2007, Mr. Lefkowitz filed a motion for leave to file
      an
      amended complaint, which was denied by the Court. On July 2, 2007, Mr. Lefkowitz
      filed a complaint for fraudulent inducement and breach of the settlement
      agreement executed between the parties in the Lefkowitz matter. Mr. Lefkowitz
      seeks $100,000 in damages under the fraudulent inducement claim and $100,000
      under the breach of contract claim. The complaint was dismissed for failure
      to
      plead the propriety of the Court’s jurisdiction. The plaintiff filed an amended
      complaint on August 21, 2007. Plaintiff’s amended complaint was dismissed on
      September 25, 2007, pursuant to the Company’s motion for failing to plead fraud
      with the requisite particularity. See “Note 13 - Subsequent Events” of the Notes
      to the Financials for further details regarding this matter.




19





**Yalley
      vs. Winsonic Digital Media Group, Ltd.** (District
      Court of Nevada, Clark County - complaint filed October 13, 2006)





This
      is an action for declaratory and injunctive relief brought by Nana Yalley,
      a
      former director and officer of the Company, requesting that the court grant
      a
      declaratory judgment ordering the Company and its stock transfer agent to remove
      the restrictive legends from 2,724,998 restricted shares of common stock of
      the
      Company owned by Mr. Yalley, pursuant to Rule 144(k) of the Securities Act
      of
      1993. In addition to the foregoing, Mr. Yalley seeks an indeterminate amount
      of
      attorneys’ fees and costs.





On
      November 7, 2006, the Company, through local counsel in the State of Nevada,
      filed responses to the complaint on behalf of itself and the stock transfer
      agent, whom the Company has agreed to indemnify in this action. On November
      13,
      2006, Mr. Yalley filed a motion for partial summary judgment; ex parte request
      for order shortening time, wherein he requested that the Court hear his motion
      as soon as possible, and order the Company to remove the restrictive legends
      from his shares. The Company filed an opposition to this request soon thereafter
      and Mr. Yalley filed a reply to the opposition on December 13, 2006. During
      the
      hearing which was scheduled for December 19, 2006, the Court ordered the Company
      to remove the restrictive legends from Mr. Yalley’s shares, but did not set any
      particular deadline to do so.




In
      January of 2007, the restrictions
      were removed from Mr. Yalley’s shares. On March 19, 2007, the Court granted Mr.
      Yalley’s motion to amend his complaint to include allegations of breach of
      contract, and the amended complaint was filed on March 20, 2007.





On
      April 6, 2007, the Company filed its response to the amended complaint, which
      included a counter-claim for fraud against Mr. Yalley. The Company’s position is
      that Mr. Yalley deliberately withheld critical information from the Company
      during the negotiations of the reverse merger with Media and Entertainment.com
      and participated in fraudulent acts immediately preceding and after the merger.
      During the nine months ending September 30, 2007, the Company accrued additional
      costs of $1,100,000 related to this matter. See “Note 13 - Subsequent Events” of
      the Notes to the Financials for further details regarding this
      matter.





**Eric
      Young vs. Winsonic Digital Media Group, Ltd.** (State
      Court of Fulton County, Georgia - complaint filed January 11, 2007)





This
      is
      an action for breach of contract brought by Eric Young, a former chief financial
      officer and Director of the Board of Directors of the Company. Mr. Young seeks
      damages totaling $354,784, which includes $103,934 in unpaid wages, $50,850
      in
      unpaid consulting fees and an additional $200,000 in severance payments. The
      Company filed its response to the complaint on February 12, 2007, in which
      the
      Company asserted a counterclaim for breach of fiduciary duty and unjust
      enrichment. See “Note 13 - Subsequent Events” of the Notes to the Financials for
      further details regarding this matter.





**McKenney’s,
      Inc. vs. Winsonic Digital Media Group, Ltd.** (State
      Court of Fulton County, Georgia - complaint filed March 21, 2007)





This
      is
      an action for breach of contract against the Company. The disputed amount of
      $56,527 was capitalized as computer equipment in 2006 and accrued within
      accounts payable of the Company as of September 30, 2007. The Company was served
      with the summons and complaint on April 4, 2007 and filed its answer and
      defenses on May 15, 2007. Plaintiff subsequently filed a motion to strike the
      Company’s answer and moved for summary judgment. During the third quarter of
      2007, the Company responded to the motions to strike the Company’s answer and
      for summary judgment and has requested oral arguments on the summary judgment
      motion. As of the date of this filing no other significant action has been
      taken
      in this matter.




20





**Rosemary
      Nguyen v. WinSonic Digital Media Group, Ltd. and Winston
      Johnson** (Superior Court of Ca., Orange County - complaint filed August 1,
      2007)





This
      is a
      collection action for $432,897. The disputed amount originates from a loan
      agreement entered into between plaintiff and defendants on or about November
      30,
      2004. The complaint alleges that plaintiff is due 80,000 shares of the Company’s
      common stock pursuant to the loan. As of the date of this filing, no other
      significant action has been taken in this matter.





**NOTE
      7 - GOING CONCERN**





The
      financial statements included in this report have been prepared in accordance
      with generally accepted accounting principles applicable to a going concern,
      which contemplates the realization of assets and the satisfaction of liabilities
      and commitments in the normal course of business. As of September 30, 2007,
      the
      Company has recognized approximately $2,186,000 of revenues, and has had
      accumulated losses from operations of approximately $34,116,000 since inception.
      The Company’s ability to continue as a going concern is contingent upon the
      successful completion of additional financing arrangements and its ability
      to
      achieve and maintain profitable operations. Management plans to raise capital
      to
      finance the operating and capital requirements of the Company. Amounts raised
      will be used for further development of the Company’s products, to provide
      financing for marketing and promotion, to secure additional property and
      equipment, and for other working capital purposes. While the Company is
      expending its best efforts to achieve the above plans, there is no assurance
      that any such activity will generate funds that will be available for
      operations. The Company’s financial statements do not include any adjustments
      that might result from the outcome of this uncertainty.





**NOTE
      8 - PROPERTY AND EQUIPMENT, NET**





The
      major classifications of property and equipment consist of the following as
      of
      September 30, 2007 and December 31, 2006:




**September
                  30,**
              
              **December
                  31,****2007**
              
              **2006**Computer
                  equipment
              
              $
              1,131,208
              
              $
              1,114,994Infrastructure
              
              
              158,400
              
              
              158,400Software
              
              
              101,775
              
              
              89,970Furniture
                  & fixtures
              
              
              87,478
              
              
              84,503Automobiles
              
              
              13,500
              
              
              74,631Equipment
                  and tools
              
              
              154,210
              
              
              44,935Less:
                  accumulated depreciation
              
              
              (868,871
              )
              
              (784,318
              )Net
                  Fixed Assets
              
              **$**
              **777,700**
              
              **$**
              **783,115**





Depreciation
      expense for the three months and nine months ended September 30, 2007 was
      $13,301 and $84,554, respectively. For the three months and nine months ended
      September 30, 2006, depreciation expense was $35,176 and $107,170, respectively.
      Depreciation expense from inception to September 30, 2007 was
      $1,142,851.




**NOTE
      9 - ACCOUNTS PAYABLE AND ACCRUED EXPENSES**





The
      Company has projected losses on the completion of two residential construction
      contracts and one commercial construction contract for Tytess and has accrued
      approximately $363,000 as additional cost of goods sold in the accompanying
      statements of operations.




21




NOTE
      10 - LOANS PAYABLE




The
      Company had outstanding loans payable to certain individuals who are not related
      parties of $354,384 and $347,743 as of September 30, 2007 and December 31,
      2006,
      respectively. Proceeds from these loans were used for working capital purposes.
      The following is a summary of the loans payable:




**September
                  30,**
              
              **December
                  31,****Interest
                  Rate**
              
              **Loans
                  Payable**
              
              **2007**
              
              **2006**Unstated
              
              
              The
                  Company issued eight convertible promissory notes, due October
                  2005,
                  convertible into shares of common stock at any time prior to maturity.
                  During 2006, the Company and the creditors agreed to convert three
                  of the
                  notes into 6% convertible debenture with an attached warrant. The
                  exchanged debentures and the warrants are both exercisable at $0.40
                  per
                  share. (See Note 10 – Convertible Debentures). Currently five of the
                  original notes are still delinquent and in default. No interest
                  has been
                  accrued upon the remaining notes.
              
              $
              111,000
              
              $
              111,0006.00%
              
              
              A
                  loan consisting of principal of $108,000 with no repayment terms
                  or
                  maturity date. Accrued interest payable as of September 30, 2007
                  and
                  December 31, 2006 is $24,569 and $19,723, respectively.
              
              
              132,569
              
              
              127,7236.00%
              
              
              A
                  loan consisting of principal of $40,000 with no repayment terms
                  or
                  maturity date. Accrued interest payable as of September 30, 2007
                  and
                  December 31, 2006 is $10,815 and $9,020, respectively.
              
              
              50,815
              
              
              49,020Unstated
              
              
              The
                  Company issued a promissory note to a financial consultant in connection
                  with services rendered advising the Company on public market issues.
                  The
                  note is non-interest bearing, with no repayment terms or maturity
                  date. No
                  interest has been imputed.
              
              
              60,000
              
              
              60,000Total
                  Loans Payable
              
              $
              354,384
              
              $
              347,743


In
      addition, during first quarter of 2007, the Company borrowed $40,000 from an
      unrelated party with an interest rate of 6% which began accruing five days
      after
      the maturity date of June 25, 2007. During the third quarter of 2007, the
      Company was in default on this loan and issued an aggregate of 208,333 shares
      of
      its common stock, valued at $0.69 per share, to cure the default and to repay
      the outstanding principal balance of the note and $605 of accrued interest.
      In
      connection with the repayment of the loan, the Company recorded financing costs
      totaling $103,145.





**Long
      Term Liabilities:** Effective as of April 18, 2006, the Company acquired the outstanding membership
      interests of AI, which included the assumption of long term liabilities of
      $131,901. The long term liabilities are due to an officer of AI and represented
      cash he advanced to fund AI’s operations and the obligations for two vehicles
      purchased by AI. In the third quarter of 2007, the net book value of the two
      vehicles and the related debt at the date of purchase were transferred to the
      officer of AI and all payments made by the Company on the vehicle obligations
      were recorded as officer compensation. Following is a summary of AI’s long-term
      debt at September 30, 2007 and December 31, 2006:




22


**September
                  30,**
              
              **December
                  31,****2007**
              
              **2006**15.25%
                  loan payable to a third party lender for the purchase of a vehicle;
                  monthly payments of $575 through August 2011, secured by the vehicle
                  purchased. The balance of loan was transferred to an officer of
                  AI during
                  the third quarter of 2007.
              
              $
              -
              
              $
              23,12919.50%
                  loan payable to a third party lender for the purchase of a vehicle;
                  monthly payments of $897 through January 3, 2011, secured by the
                  vehicle purchased. The balance of loan was transferred to an officer
                  of AI
                  during the third quarter of 2007.
              
              
              -
              
              
              30,940Unsecured,
                  interest free loan payable to an officer for various cash advances,
                  expenses paid and assets transferred to AI by the creditor; payoff
                  due on
                  December 4, 2007; 6% interest to be paid on any outstanding balance
                  as of
                  December 4, 2007.
              
              
              80,950
              
              
              80,950Total
                  long term debt
              
              
              80,950
              
              
              135,019Less:
                  Current portion of long-term debt
              
              
              (80,950
              )
              
              (90,197
              )Net
                  Long Term Debt
              
              $
              -
              
              $
              44,822




**NOTE
      11 - CONVERTIBLE DEBENTURES**





**2004/2005
      Agreements** :
      During
      December 2004 and January 2005, the Company received an aggregate of $1,015,000
      from the issuance of convertible notes and warrants. The offering was made
      to
      accredited investors. The convertible notes, which accrued interest of 6% per
      annum, were due in December 2005 or upon the occurrence of certain events
      relating to potential changes in the capital structure of the Company. In
      connection with the issuance of the convertible notes, warrants to purchase
      up
      to 1,450,000 shares of the Company’s common stock at an exercise price of $0.70
      per share were issued to the accredited investors.





On
      December 15, 2005, the maturity dates of these convertible notes were extended
      to June 30, 2006. Following the amendments to the convertible notes, the note
      holders had the right to convert the face value of the notes into common stock
      of the Company at the lower of $0.40 per share or 85% of the market value of
      the
      common stock at the time of conversion. Additionally, the amendments reduced
      the
      exercise price of the warrants to $0.40 per share.





During
      the third quarter of 2006, following the expiration of the amended maturity
      dates of the convertible notes, all but three of the note holders agreed to
      convert their notes, plus accrued interest, into common stock of the Company
      at
      the rate of $0.40 per share. During the third quarter of 2007, two of the
      remaining three note holders agreed to convert their notes, plus accrued
      interest into common stock of the Company at the rate of $0.40 per share. The
      Company has continued to accrue interest on the one remaining note through
      September 30, 2007. In the aggregate, the Company has issued a total of
      2,653,010 shares of its restricted common stock in connection with the
      conversion of these notes.





The
      issuance of these convertible notes and warrants would normally be recorded
      as
      equity obligations. However, due to the indeterminate number of shares which
      might be issued upon conversion, the Company is required to record a liability
      relating to the outstanding warrants and the embedded derivative of the
      convertible notes (included in the current liabilities as “derivative
      liability”). As of September 30, 2007, the contingency related to the conversion
      pricing which caused the indeterminate share calculation was resolved with
      the
      conversion of all but one of the convertible notes. For all but one of the
      convertible notes, the Company transferred the derivative and warrant
      liabilities to paid-in capital. The following table summarizes the convertible
      notes and related warrant and embedded derivative liabilities at September
      30,
      2007 and December 31, 2006:




23




**September
                  30,**
              
              **December
                  31,****2007**
              
              **2006**Derivative
                  liability
              
              $
              32,411
              
              $
              339,450Warrant
                  liability
              
              
              28,122
              
              
              300,420Convertible
                  debentures
              
              
              35,025
              
              
              257,469Subtotal
              
              
              95,558
              
              
              897,339Adjustment
                  of derivative and warrant liability to fair value
              
              
              606,765
              
              
              27,428Accretion
                  of principal and interest related to convertible
                  debentures
              
              
              312,677
              
              
              90,233Total
                  Proceeds from convertible debentures
              
              
              1,015,000
              
              
              1,015,000Plus:
                  Accrued interest
              
              
              112,462
              
              
              103,673Less:
                  Notes and interest converted
              
              
              (1,092,437
              )
              
              (861,204
              )Total
                  Convertible debentures
              
              
              35,025
              
              
              257,469Less:
                  Current portion of convertible debentures
              
              
              (35,025
              )
              
              (257,469
              )Total
                  Non-current Convertible Debentures
              
              $
              -
              
              $
              -





**2005/2006/2007
      Debentures:** During
      the third quarter of 2005 and during 2006, the Company entered into a series
      of
      agreements with accredited investors, pursuant to which the Company issued
      an
      aggregate of approximately $1.8 million of convertible debentures, as further
      described below. The debentures, which include interest of 6.0% per annum,
      mature 12 months from the issue date, and are convertible into restricted shares
      of the Company’s common stock at conversion prices between $0.20 and $0.40 per
      share. In connection with the issuance of the debentures, warrants were issued
      to the accredited investors which are exercisable for a period of three years
      at
      exercise prices between $0.20 and $0.40 per share.





Specifically,
      during the third quarter of 2005, the Company issued six convertible debentures
      with a total principal amount of $188,250. During the fourth quarter of 2005,
      an
      aggregate of $118,000 of these convertible debentures were converted into
      590,000 restricted shares of common stock. During 2006, the Company issued
      an
      aggregate of approximately $1.6 million of convertible debentures. During 2006,
      40 of these investors elected to convert an aggregate of $632,477 in principal
      plus accrued interest of the convertible debentures into 3,162,385 shares of
      restricted common stock.





In
      the
      first and second quarters of 2007, the Company raised an additional $553,000
      through the issuance of 24 convertible debentures with various due dates and
      other terms that were substantially similar to the debentures issued during
      2005
      and 2006. In connection with the issuance of these debentures, the Company
      issued warrants exercisable into 1,990,000 shares of the Company’s common
      stock. In addition, the Company issued 900,000 shares of its restricted common
      stock in connection with the issuance of three of the convertible debentures.
      These restricted shares, valued at $301,000, were recorded as financing costs
      in
      the accompanying statements of operations.




In
      addition, in the second quarter of 2007, 31 convertible debentures were
      converted into an aggregate of 2,099,992 shares payable. In connection therewith
      the Company reclassified $419,999 in debentures and accrued interest to common
      stock payable. The Company issued these restricted shares of common stock in
      the
      third quarter. In addition, the Company repaid one convertible debenture,
      including accrued interest, in the amount of $11,348 and made partial payment
      of
      another convertible debenture, including accrued interest, in the amount of
      $7,000. The Company also increased its convertible debentures balance to $10,000
      with one investor in exchange for the investor agreeing to extend the maturity
      date of its $5,000 convertible debenture plus interest of $590. The increase
      of
      $4,410 has been recorded as financing costs in the accompanying statements
      of
      operations. In addition, the Company issued warrants to purchase up to 62,500
      shares of its common stock to one investor to extend the maturity date of its
      convertible debenture. The fair value of the warrants issued totaled $18,326
      which has been recorded as financing costs in the accompanying statements of
      operations.




24




During
      the third quarter of 2007, the Company continued to raise funds via issuances
      of
      convertible debentures with substantially similar terms as the debentures
      previously issued. For the three months ended September 30, 2007, the Company
      raised approximately $1.1 million through the issuance of 25 convertible
      debentures. These convertible debentures have various maturity dates and in
      connection with the issuance of such convertible debentures, the Company issued
      warrants to purchase up to 3,362,582 shares of its common stock to the
      investors. In addition, the Company issued 126,007 shares of its restricted
      common stock in connection with the issuance of one of the convertible
      debentures. These restricted shares, valued at $83,165, were recorded as
      financing costs in the accompanying statements of operations. Also during the
      third quarter of 2007, 17 holders of convertible debentures converted $1,164,060
      in principal and $11,886 of accrued interest into an aggregate of 4,062,917
      shares of restricted common stock. The Company also repaid one convertible
      debenture, including accrued interest, in the amount of $21,100.





As
      a
      result of the foregoing, as of September 30, 2007, the Company had 77
      convertible debentures outstanding. The outstanding convertible debentures
      represented a principal balance of $1,429,704 and a potential obligation for
      the
      Company to issue 5,918,342 shares of common stock.





In
      connection with the convertible debentures described above, as of September
      30,
      2007, the Company has issued warrants to purchase 14,959,842 shares of common
      stock at exercise prices ranging from $0.20 to $0.50, equaling a potential
      aggregate funding for the Company of $3,646,176. These warrants have expiration
      dates between July 5, 2008 and July 26, 2010.





The
      following table summarizes the outstanding convertible debentures and related
      warrants:


**Summary
                  of 2005/2006/2007****Debentures
                  & Warrants**
              
              **Convertible
                  Notes**
              
              **Warrants****Proceeds**
              
              **Shares**
              
              **Proceeds**
              
              **Shares**Proceeds
                  received during third quarter of 2005
              
              $
              188,250
              
              
              941,250
              
              $
              -
              
              
              941,250Conversions
                  during fourth quarter of 2005
              
              
              (118,000
              )
              
              (590,000
              )
              
              -
              
              
              -Total
                  outstanding at December 31, 2005
              
              
              70,250
              
              
              351,250
              
              
              -
              
              
              941,250Proceeds
                  received during 2006
              
              
              1,647,875
              
              
              8,239,374
              
              
              -
              
              
              8,239,374Accounts
                  payable and loans converted to convertible notes
              
              
              176,577
              
              
              467,584
              
              
              -
              
              
              364,136Conversions
                  during 2006
              
              
              (632,477
              )
              
              (3,162,385
              )
              
              -
              
              
              -Accrued
                  Interest
              
              
              41,143
              
              
              212,110
              
              
              -
              
              
              -Total
                  outstanding at December 31, 2006
              
              
              1,303,368
              
              
              6,107,933
              
              
              -
              
              
              9,544,760Proceeds
                  received during 2007
              
              
              1,688,474
              
              
              5,352,582
              
              
              -
              
              
              5,352,582Increase
                  for payment term extension during 2007
              
              
              4,410
              
              
              22,050
              
              
              -
              
              
              62,500Accrued
                  Interest
              
              
              68,844
              
              
              295,926
              
              
              -
              
              
              -Conversions
                  during 2007
              
              
              (1,595,944
              )
              
              (5,662,909
              )
              
              -
              
              
              -Payments
                  during 2007
              
              
              (39,448
              )
              
              (197,240
              )
              
              -
              
              
              -Total
                  outstanding at September 30, 2007
              
              $
              1,429,704
              
              
              5,918,342
              
              $
              -
              
              
              14,959,842




The
      Company has determined that the convertible debentures contain a beneficial
      conversion feature and qualify for treatment under Emerging Issue Task Force
      No.
      00-27. The estimated fair value of the warrants of $6,606,401 has been
      determined using Black-Scholes option pricing model under the following
      assumptions: stock price volatility ranging from 131% to 219%; risk free
      interest rate of 3.5% to 4.5%; dividend yield of 0%; and a two to three year
      term. The face amount of the convertible debentures (i.e., $3,706,176) was
      proportionately allocated to the convertible debentures and the warrants in
      the
      amount of $1,487,109 and $2,219,067, respectively. The convertible debentures
      proportionate allocation factor was then further allocated between the
      convertible debentures and the beneficial conversion feature and $883,983 was
      allocated to the beneficial conversion feature and the balance of $603,126
      was
      allocated to the convertible debentures. The combined total value of the
      warrants and the beneficial conversion feature amounting to $3,103,050 has
      been
      accounted for as a debt discount which is being amortized and treated as
      interest expense over the term of the convertible debentures. For the nine
      months ended September 30, 2007, the Company amortized a total of $1,612,939.
      The discounts and amortization are summarized in the following
      table:




25


**September
                  30,**
              
              **December
                  31,****2007**
              
              **2006**BCF
                  discount to Paid in capital
              
              $
              (883,983
              )
              $
              (702,953
              )Warrant
                  Discount to Paid in capital
              
              
              (2,219,067
              )
              
              (1,248,688
              )Proceeds
                  from convertible debentures
              
              
              3,706,176
              
              
              2,011,641Subtotal
              
              
              603,126
              
              
              60,000Deduct
                  value converted to common stock
              
              
              (1,944,415
              )
              
              (734,250
              )Convertible
                  debt not subject to accretion converted to stock
              
              
              (355,596
              )
              
              -Principal
                  payments made
              
              
              (35,000
              )
              
              -Balance
                  of convertible debt not subject to accretion per above
              
              
              (247,530
              )
              
              (60,000
              )Total
                  discount to accrete
              
              
              1,123,635
              
              
              1,217,391Interest
                  expense on convertible debentures - Amortized
              
              
              (768,435
              )
              
              (405,660
              )Interest
                  expense on convertible debentures - Accrued
              
              
              (58,539
              )
              
              (41,864
              )Convertible
                  debt not subject to accretion
              
              
              (247,530
              )
              
              (60,000
              )Total
                  Current Liability
              
              $
              (1,074,504
              )
              $
              (507,524
              )




**Defaults
      on Convertible Debentures**





Fifteen
      of the Company’s convertible debentures have matured without conversion or
      repayment. As of September 30, 2007, 14 convertible debenture holders agreed
      to
      extend the terms of their convertible debentures and one convertible debenture
      totaling $30,000 currently remains in default.





**NOTE
      12 - COMMITMENTS AND CONTINGENCIES**





**Network
      Operations and Office Lease Agreement**





***55
      Marietta Street Office Lease Agreements***





On
      February 8, 2007, the Company entered into a Telecom/Office Lease Agreement
      and
      First Amendment to Lease agreement with Bank Building Limited Partnership for
      approximately 12,080 square feet of rentable space located at 55 Marietta Street
      in Atlanta, Georgia.





The
      term
      of the lease commenced on May 1, 2007 and expires on April 30, 2017. However,
      the landlord has agreed to provide the Company with access to the premises
      for
      the limited purpose of making improvements. An improvement allowance of $123,000
      has been provided to the Company, of which the unused portion after May 1,
      2008
      may be applied to base monthly rental at the Company’s sole option.





Under
      this lease, the Company is required to remit to the landlord, upon execution
      of
      the lease, a security deposit in the amount of $17,566 and first month’s rental
      payment in the amount of $8,778. Thereafter, the Company is obligated to make
      monthly rental payments in the amount of $8,778 from May 1, 2007 to February
      28,
      2008; $17,566 from March 1, 2008 to April 30, 2012; and $19,127 from May 1,
      2012
      through termination. In addition to the monthly rent, the Company is responsible
      for its share of the operating expenses, utilities, taxes and other costs and
      expenses associated with the leased premises.





The
      Company will use this space to operate WDCSN’s network operations, data center,
      broadcast controls, switch site and application development lab. In addition,
      the space shall be utilized by the Company to house its network services billing
      and provisioning departments and for training its current and future
      staff.





Additionally,
      on June 22, 2006, the Company entered into a two-year lease agreement with
      JT
      Communications, LLC for the exclusive right to use a cabinet and the
      non-exclusive right to use the office space located on JT Communications’
premises on the 5 th floor of
      55 Marietta Street in Atlanta, Georgia. The term of the lease commenced on
      July
      1, 2006 and expires on June 30, 2008; however, it is subject to automatic
      renewals for a one-year periods on the same terms and conditions, unless the
      Company notifies JT Communications that it does not want to renew. This lease
      was canceled in May of 2007.




26





***ProLogis-Macquarie
      U.S. LLC Office Lease Agreement***





On
      May
      23, 2007, AI entered into a Lease Agreement with ProLogis-Macquarie U.S. LLC
      for
      approximately 11,006 square feet of rentable space located at 5290 Westgate
      Drive Suite B, Atlanta, Georgia 30336. The lease commenced on June 1, 2007
      and
      continues through May 31, 2012. AI will use the space to house its Logistics
      Management Center and for training purposes. Under the lease, AI is obligated
      to
      pay base monthly rents of $2,430 per month in the first year, $2,503 per month
      in the second year, $2,579 per month in the third year, $2,656 per month in
      the
      fourth year and $2,736 per month in the fifth year.




***Landquest
      IV, LLC Office Lease Agreement***





In
      June
      2007, the Company entered into a Lease Agreement with Landquest IV, LLC for
      approximately 2,490 square feet of rentable space located at 3560 Camp Creek
      Parkway, Suite 130, East Point, Georgia 30344. The lease commences in October
      2007 and continues through September of 2012. The Company will use the space
      for
      retail sale of electronic equipment. Under the lease, the Company is obligated
      to pay base monthly rents of $5,810 per month.




As
      of
      September 30, 2007, approximate future commitments under the Company’s leases
      are as follows:




**Year**
              
              **Amount**2007
              
              $
              173,1012008
              
              
              749,2352009
              
              
              778,6952010
              
              
              790,8992011
              
              
              803,4742012
                  through 2017
              
              
              3,521,256Total
              
              $
              6,816,660





**Employment
      Agreements/Employee Matters**





On
      October 8, 2004, the Company entered into a binding offer letter with Winston
      Johnson, as Chairman and CEO. Under the terms of employment, Mr. Johnson was
      to
      receive a base salary of $290,000 per annum with $7,000 per month deferred
      until
      the next funding occurs or January 1, 2005, whichever occurred first. Mr.
      Johnson is eligible for annual incentive bonuses based on performance. The
      agreement is terminable at will with or without cause (as defined therein).
      As
      of March 30, 2007, Mr. Johnson’s salary was further reduced to zero until the
      Company has completed its next round of financing and its common stock is traded
      on the OTCBB.




Mr.
      Johnson’s employment agreement also provided for the grant of incentive or
      non-statutory stock options to purchase 1,000,000 shares each of common stock
      for $1.00 per share. These options primarily vest equally over a twelve-month
      period effective with date of the employment agreement.





On
      November 5, 2005, the Company entered into a binding offer letter with Eric
      Young, as Chief Operating Officer and Chief Financial Officer. Under the terms
      of his employment, Mr. Young was to receive a base salary and certain stock
      options, in each case, as set forth in the offer letter. As was disclosed on
      the
      Company’s Form 8-K filed on August 24, 2006, Mr. Young resigned on August 1,
      2006 to pursue other opportunities. Thereafter, Mr. Young filed suit against
      the
      Company concerning the number of options that vested upon his resignation and
      the expiration of the exercise period of said options. See “Note 6 - Summary of
      Legal Proceedings” and Note 13 - “Subsequent Events” of the Notes to the
      Financials for details regarding the legal proceedings with Mr.
      Young.




27





Effective
      June 6, 2006, Joseph Morris succeeded Eric Young as Chief Operating Officer
      of the Company. Previously, Mr. Morris served as Chief Operating
      Officer of AI, which was acquired on April 18, 2006.  Mr. Morris'
      initial base salary was $150,000 per annum. As an employment incentive, Mr.
      Morris was granted stock options to purchase 50,000 shares of the Company’s
      Common Stock at an
      exercise price of $0.01, of which 1/3 vested immediately, 1/3 at the closing
      of
      the next round of funding, and the remaining 1/3 when the Company’s common stock
      resumed trading on the OTCBB. Additionally,
      Mr. Morris was granted stock options to purchase 100,000 of the Company's common
      stock at an average price of $1.00 per share, of which 10% vested immediately
      and the remaining 90% vested at the rate of 1/12 th per
      month for twelve months. The fair value of the options granted totaled $53,329.
      On March 12, 2007, Mr. Morris’ base salary was increased to $200,000 per annum
      and he was granted additional stock options to purchase 200,000 shares of the
      Company’s common stock at an
      exercise price of $0.01, of which 1/3 vested immediately, 1/3 at the closing
      of
      the next round of funding, and the remaining 1/3 when the Company’s common stock
      resumed trading on the OTCBB. Additionally,
      on March 12, 2007, Mr. Morris was granted additional stock options to purchase
      400,000 of the Company's common stock at an average price of $1.00 per share,
      of
      which 10% vested immediately and the remaining 90% will vest at the rate of
      1/12 th per
      month for twelve months. The fair value of the additional options granted
      totaled $232,441.





Effective
      August 8, 2006, Jeffrey L. Burke succeeded Mr. Yalley as Executive Vice
      President of the Company. Mr. Burke's base salary is $270,000 per annum. As
      an
      employment incentive, Mr. Burke was granted stock options to purchase 750,000
      shares of the Company’s common stock at an
      exercise price of $0.01, of which 1/3 vested immediately, 1/3 at the closing
      of
      the next round of funding, and the remaining 1/3 when the Company’s common stock
      resumed trading on the OTCBB. Additionally, Mr.
      Burke
      was granted options to purchase 500,000 of the Company's Common Stock at an
      average price of $1.00 per share, of which 10% vested immediately and the
      remaining 90% vested at the rate of 1/12 th per
      month for twelve months. The fair value of the options granted totaled $481,492.





In
      addition to the employment agreements with the officers and directors, the
      Company also signed employment agreements with 26 employees. Under the terms
      of
      all its employment agreements, the Company has committed to compensation
      expenses of approximately $3,312,637, of which $1,259,375 will be deferred
      until
      the financial condition of the Company improves.





During
      the nine months ended September 30, 2007, the Company gave notice to its
      employees that the terms of their employment agreements would change effective
      immediately. The change consisted of ceasing all salary deferrals until such
      time as the financial condition of the Company improves. In addition, all
      vacation grants for employees were reduced from four weeks to two weeks.
      Deferred salary amounts not accrued by March 30, 2007 were considered to be
      forfeited. This action taken by the Company is expected to result in an
      annualized savings of approximately $1,259,000. In addition, the Company
      terminated seven employees, adjusted the salaries of five employees and
      cancelled the contract of a consultant. These actions are expected to result
      in
      additional savings of approximately $1,244,000 per year.




**NOTE
      13 - SUBSEQUENT EVENTS**





**Legal
      Proceedings**





**Crown
      Office Suites, Inc. vs. Winsonic Digital Media Group, Ltd.** (State
      Court of Cobb County, Georgia - complaint filed November 23, 2005)





The
      parties entered into a Consent Order on October 3, 2007, pursuant to which
      the
      Company issued the plaintiff $15,000 of restricted shares of the Company’s
      common stock and paid the plaintiff $10,000. The Company also paid the plaintiff
      an additional $10,000 on November 5, 2007. Upon full payment by the Company,
      the
      plaintiff is to return to the Company all property that remained on the leased
      premises and dismiss the complaint without prejudice. As of the date of this
      filing, no other significant action has been taken in this matter.




28
 
  **Lefkowitz
          vs. Winsonic Digital Media Group, Ltd** .
          (United
          States District Court of the Central District of CA - complaint filed July
          2,
          2007)


On
      October 9, 2007, Plaintiff filed a Second Amended Complaint. The Company
      answered the Second Amended Complaint on October 25, 2007. As of the date of
      this filing, no other significant action has been taken in this
      matter.





**Yalley
      vs. Winsonic Digital Media Group, Ltd.** (District Court of Nevada, Clark County - complaint filed October 13,
      2006)





On
      October 5, 2007, the parties entered into a settlement agreement pursuant to
      which the Company agreed to issue to Mr. Yalley an aggregate of 1,964,286
      restricted shares of the Company’s common stock and a stock option to purchase
      up to 500,000 shares of restricted shares of the Company’s common stock at the
      price of $1.00 per share up to December 9, 2010. During the nine months ending
      September 30, 2007, the Company accrued additional costs related to this matter
      in the amount of $1,100,000 based on this settlement agreement. Simultaneously
      with the execution of the settlement agreement, the parties executed a
      stipulation and order for dismissal.





**Phillip
      Ghee v. WinSonic Digital Media Group, Ltd. and Winsonic Diversity,
      LLC** (Superior Court of Ga., Fulton County - complaint filed October 19,
      2007).





This
      is
      an action for breach of contract by Phillip Ghee, a former employee of the
      Company. Mr. Ghee seeks damages of $236,000, which includes amounts for alleged
      salary, alleged deferred earnings, and an alleged severance package as set
      forth
      in Mr. Ghee’s written employment agreement with the Company dated March 25,
      2006. The complaint also seeks damages for the undetermined value of alleged
      unused vacation time and vested stock options. The complaint further alleges
      that on or about October 2, 2006, Mr. Ghee entered into new employment
      agreements with defendants that split the responsibilities outlined in the
      March
      2006 employment agreement between the two defendants. As of the date of this
      filing, no other significant action has been taken in this matter.





**Eric
      Young v. WinSonic Digital Media Group, Ltd.** (State
      Court of Fulton County, Ga. - complaint filed January 11, 2007)





The
      parties entered into a settlement and release agreement on November 5, 2007,
      pursuant to which the Company issued to plaintiff a warrant to purchase up
      to
      380,000 shares of restricted shares of the Company’s common stock with an
      exercise price of $1.00 per share with an expiration date of December 9, 2010.
      In addition, the Company is required to pay:


(a)  on
      or
      before November
      7, 2007, (i) $15,000.00
      to Mr. Young and (ii) $1,000.00 to Mr. Young’s counsel, Beverly Adams;


(b)  on
      or
      before November 27, 2007, (i) $15,000.00 to Mr. Young and (ii) $1,000.00 to
      Mr.
      Young’s counsel;


(c)  on
      or
      before December 27, 2007, (i) $15,000.00 to Mr. Young and (ii) $1,000.00 to
      Mr.
      Young’s counsel;


(d)  on
      or
      before January 27, 2008, (i) $25,000.00 to Mr. Young and (ii) $1,000.00 to
      Mr. Young’s counsel; and


(e)  on
      or
      before February 27, 2008, (i) $180,000.00 to Mr. Young and (ii) $1,000.00 to
      Mr.
      Young’s counsel.





**Private
      Placement**





On
      October 12, 2007, the Company issued to six accredited investors an aggregate
      of
      $365,000 in 6% Convertible Subordinated Promissory Notes and warrants to
      purchase up to 912,500 shares of the Company’s common stock. The convertible
      notes, which accrue interest at 6%, mature on October 11, 2008. The investors
      have the option, at any time prior to payment or conversion, to convert any
      unpaid principal and interest into shares of common stock at a price per share
      equal to $0.20. In addition, the notes are convertible if the Company completes
      an equity financing which raises proceeds of at least $3,000,000 or if the
      Company completes certain specified transactions. The notes include covenants
      and events of default which are customary for promissory notes of this nature.
      The notes also provide the investors certain piggy-back registration rights
      with
      respect to the shares of common stock into which the notes are convertible.
      The
      warrants, which have an exercise price of $0.40 per share, expire on October
      11,
      2009. The warrants may be exercised at any time prior to expiration and provide
      the investors certain piggy-back registration rights with respect to the shares
      of common stock into which the warrants are exercisable.




29




**Stock
      Issuances**





Subsequent
      to the end of the third quarter of 2007, the Company issued 451,145 shares
      of
      its restricted common stock (of which 262,129 shares were previously recorded
      as
      common stock payable) in
      connection with certain financing agreements. In addition,  two
      of the 77 holders of the Company’s convertible debentures agreed in writing to
      exercise their conversion option at $0.20 per share. Based on these agreements,
      the Company converted $15,000 of principal and $434 of accrued interest in
      exchange for 77,170 shares of its restricted common stock. The
      Company also issued 1,964,286 and 23,810 to Nana Yalley and Crowne Office
      Suites, Inc., respectively, pursuant to their settlement agreements described
      above.





**Item
      2. Management’s Discussion and Analysis**





**Forward-Looking
      Statements**





This
      report contains forward-looking statements about our business, financial
      condition and prospects that reflect management’s assumptions and beliefs based
      on information currently available. We can give no assurance that the
      expectations indicated by such forward-looking statements will be realized.
      If
      any of our management’s assumptions should prove incorrect, or if any of the
      risks and uncertainties underlying such expectations should materialize, our
      actual results may differ materially from those indicated by the forward-looking
      statements.





The
      key factors that are not within our control and that may have a direct bearing
      on operating results include, but are not limited to, acceptance of our
      services, our ability to attract customers, our ability to raise capital, the
      retention of key employees and changes in the regulation of our industry.





There
      may be other risks and circumstances that management may be unable to predict.
      When used in this Interim Report, words such as, “believe,” “expect,” “intend,”
“plan,” “anticipate,” “foresee,” “likely,” “will,” “goal,” “target,” “estimate”
and similar expressions are intended to identify forward-looking statements,
      as
      defined in Section 21E of the Securities Exchange Act of 1934, although there
      may be certain forward-looking statements not accompanied by such expressions.




**General**





Winsonic
      Digital Media Group, Ltd. is a digital media solutions company which
      historically has focused on distributing digital content to the public and
      providing high-speed, high-quality, low-cost solutions that enable users to
      view, interact, and listen to all types of audio, online video and digital
      TV in
      full screen format. ******




As
      described in more detail below, during fiscal year 2006, the Company acquired
      a
      49% equity interest in Winsonic Diversity, LLC and completed the acquisitions
      of
      Automated Interiors, LLC (“AI”), Tytess Design and Development, Inc. (“Tytess”),
      and DV Photo Shop. These actions represent a series of strategic investments
      in
      new markets and new services that expand the offerings of the Company while
      complimenting our existing business. Together with our existing digital
      distribution platform, comprised of the Winsonic Digital Cable Systems Network,
      Ltd’s network, we are now able to deliver customized, bundled solutions to a
      wider range of customers that include custom wiring, centrally-located
      utilities, facility construction, project management, telephone, internet,
      audio/video and digital TV distribution.




The
      Company was incorporated on April 27, 2000 in the state of Nevada as Media
      and
      Entertainment, Inc. On September 14, 2000, Media and Entertainment, Inc. changed
      its name to Media and Entertainment.com, Inc. On November 24, 2004, Media and
      Entertainment.com, Inc. changed its name to Winsonic Digital Media Group,
      Ltd.





The
      Company maintains a website at: ***www.winsonic*** ***.net*** .
      The
      information contained on our website is not incorporated by reference in this
      interim report and should not be considered a part of this interim
      report.




30




Winsonic
      Digital Cable Systems Network, Ltd.




Winsonic
      Digital Cable Systems Network, Ltd., a wholly owned subsidiary of the Company,
      (“WDCSN”), maintains and runs the Company’s facilities-based network (the
“Network”) which has been the historic focus of the Company. The Network
      concentrates on carrier-class, high-speed, digital connectivity solutions. While
      the Network is a state-of-the-art digital distribution platform, it has been
      in
      development for many years and has been involved in projects that date back
      over
      twenty-five years. With a shift to more market-based policies, due in part
      to
      the implementation of the Telecommunications Act of 1996, a new competitive
      and
      robust marketplace with diverse participants has developed and the Company,
      through WDCSN and the Network is capable of providing access to advanced
      communications services at affordable prices to a wide customer base.




**Automated
      Interiors, LLC**




The
      Company acquired Automated Interiors, LLC (“AI”), a Georgia limited liability
      company effective April 18, 2006. AI is a systems integration company, which plans
      and
      engineers the installation of electronic components to facilitate “smart”
buildings. As a result of the acquisition, AI has the capability to help
      developers of all sizes manage the transformation in technology and migrate
      from
      their traditional voice and data services to feature-rich digital services
      and
      solutions.




**Tytess
      Design & Development, LLC**





The
      Company acquired Tytess Design and Development, Inc. (“Tytess”), a Georgia
      corporation, on November 2, 2006. Tytess provides architectural, engineering,
      construction and construction management services to residential and commercial
      customers. Specifically, this includes site analysis, pre-design, schematic
      design, bidding and negotiation services. Tytess has developed a consortium
      of
      architects, engineers, realtors, mortgage brokers and other contractors who
      provide solutions for the design and construction of commercial buildings,
      institutional facilities and residential communities. The acquisition of Tytess
      further complements the capabilities of AI and we believe additional expansion
      opportunities may be available as we continue to adapt these services to meet
      the requirements of supporting traditional telecommunications companies in
      the
      design and construction of their facilities.





**Winsonic
      Digital Store, Ltd.**





The
      Company acquired DV
      Photo
      Shop on November 20, 2006. Following the acquisition, the Company changed the
      name of DV Photo Shop to Winsonic Digital Store, Ltd. (the “Store” or “WDS”),
      and incorporated it in the State of Georgia on December 8, 2006. The Store
      is an
      urban retail store located at Centennial Tower, 101 Marietta Street, Atlanta,
      Georgia, and specializes in photography development, digital photography and
      the
      sale of mobile phones, accessories, and wireless communications services. The
      acquisition of the Store provides an opportunity to create new and expanded
      consumer services in areas such as wireless communications, digital downloads,
      digital content development, mobility services and Voice over internet protocol
      (VOIP).





**Winsonic
      Diversity, LLC**




Winsonic
      Diversity, LLC (“Winsonic Diversity”) was formed on May 22, 2006 in the State of
      Georgia by the Company and Mr. Winston Johnson, the Chairman and CEO of the
      Company. The Company owns 49% of the equity interests of Winsonic Diversity
      and
      Mr. Johnson owns the remaining 51% of the equity interests. Winsonic
      Diversity is focused on developing urban and rural communities by providing
      resources and services that improve quality of life. Winsonic Diversity offers
      thorough information technology analysis, creative architectural and software
      designs, and a full range of technical and professional expertise .
      As a
      certified Minority Business Enterprise, Winsonic Diversity has access to major
      enterprises that have diversity initiatives. This has resulted in several new
      opportunities with companies such as Verizon Wireless, Verizon Communications,
      Verizon Business, AT&T, and Bank of America.




31




**Discussion
        of Certain Transactions and Developments**
 
 **Sassy
        Development Corporation, Inc.**


On
      May
      23, 2007, the Company entered into an agreement with Sassy Development
      Corporation, Inc. (“SDC”) to provide consulting services to the Company for a
      period of ninety days, including assistance in formulating strategic and
      financial planning objectives, assistance in the development of capitalization
      plans, and financial advisement to the Company. SDC provided the services in
      exchange for 100,000 shares of the Company’s common stock (valued at $0.35 per
      share) which were issued in September 2007.





**Scott
      Roderick Consulting Agreement**





As
      of
      August 27, 2007, the Company entered into an agreement with Scott Roderick
      to
      provide consulting services to the Company, including assistance in development
      of capitalization plans which will provide capital resources necessary to
      accomplish the Company’s operating and strategic plans. Mr. Roderick provided
      the services in exchange for 150,000 shares of the Company’s common stock
      (valued at $0.62 per share).





**Material
      Changes in Results of Operations**





As
      a
“development stage company” the Company has not commenced material commercial
      operations. As of September 30, 2007, the Company has recorded $2,186,000 of
      revenue since inception. During the nine months ended September 30, 2007, the
      consolidated operations of the Company, combined with WDCSN, AI, Tytess and
      WDS
      yielded revenue of $1,369,000.





**Three
      Months Ended September 30, 2007 Compared to Three Months Ended September 30,
      2006**





The
      following schedules include the separate and consolidated information for the
      operations of the Company for the three months ended September 30, 2007 and
      2006:




**For
                  the three months ended****September
                  30, 2007****WDMG**
              
              **WDCSN**
              
              **AI**
              
              **Tytess**
              
              **WDS**
              
              **Combined**Revenue
              
              $
              6,500
              
              $
              -
              
              $
              155,272
              
              $
              64,382
              
              $
              7,027
              
              $
              233,181Gross
                  Profit
              
              
              6,500
              
              
              -
              
              
              (94,532
              )
              
              (507,267
              )
              
              3,700
              
              
              (591,599
              )SG
                  & A expenses
              
              
              1,269,869
              
              
              296,681
              
              
              374,252
              
              
              87,885
              
              
              35,147
              
              
              2,063,834Loss
                  from operations
              
              
              (1,263,370
              )
              
              (296,681
              )
              
              (468,784
              )
              
              (595,152
              )
              
              (31,447
              )
              
              (2,655,434
              )Net
                  Loss
              
              $
              (5,281,762
              )
              $
              (296,681
              )
              $
              (487,121
              )
              $
              (595,404
              )
              $
              (31,447
              )
              $
              (6,692,415
              )Loss
                  per share – basic and diluted
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              $
              (0.12
              )
  **For
                  the three months ended S****eptember
                  30, 2006****WDMG**
              
              **WDCSN**
              
              **AI**
              
              **Tytess**
              
              **WDS**
              
              **Combined**Revenue
              
              $
              -
              
              $
              -
              
              $
              310,364
              
              $
              -
              
              $
              -
              
              $
              310,364Gross
                  Profit
              
              
              -
              
              
              -
              
              
              25,371
              
              
              -
              
              
              -
              
              
              25,371SG
                  & A expenses
              
              
              1,318,112
              
              
              -
              
              
              178,961
              
              
              -
              
              
              -
              
              
              1,497,073Loss
                  from operations
              
              
              (1,318,112
              )
              
              -
              
              
              (153,590
              )
              
              -
              
              
              -
              
              
              (1,471,702
              )Net
                  Loss
              
              $
              (2,263,446
              )
              $
              -
              
              $
              (160,474
              )
              $
              -
              
              $
              -
              
              $
              (2,423,920
              )Loss
                  per share – basic and diluted
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              $
              (0.05
              )


For
      the three months ended September 30, 2007, the Company incurred an operating
      loss of $2,655,000 compared to an operating loss of $1,472,000 for the same
      period in 2006. Total operating expenses for the three months ended September
      30, 2007 primarily consisted of selling, general and administrative expenses
      of
      $935,000, payroll expense of $1,094,000, consulting services - related party
      of
      $21,000 and depreciation expense of $13,000, compared to selling, general and
      administrative expenses of $477,000, payroll expense of $984,000 and
      depreciation expense of $35,000, in the same period of 2006. The increases
      in
      the expenses are related to the acquisitions of Tytess and WDS in 2006 and
      the
      addition of personnel and occupancy costs related to the planned expansion
      of
      the Company’s business operations for WDCSN, which is expected to be fully
      operational in the first quarter of 2008.




32





Pursuant
      to SFAS No. 123(R), the Company recognizes the expense of employee incentive
      options that vest during the reported period.  The combined payroll expense
      for the three months ended September 30, 2007 and 2006 include compensation
      expenses of $541,000 and $ 323,507 ,
      respectively, arising from vested employee stock options committed to employees
      during each quarter.  For additional information, see “Note 2 - Summary of
      Significant Accounting Policies, Stock Based Compensation” of the financial
      statements.





For
      the three months ended September 30, 2007, the Company incurred interest expense
      of $3,282,000 compared to an interest expense of $445,000 for the same period
      in
      2006. The increase of $2,837,000 is primarily due to financing costs of
      $2,260,000 which are related to shares of the Company’s common stock which were
      issued in certain financing arrangements as well as shares of the Company’s
      common stock used to repay a loan payable and loans payable - related party
      at a
      discounted price. In addition, the accretion of debt discount on convertible
      debentures increased by $513,000 in the three months ended September 30, 2007.
      This increase is due primarily to several holders of the convertible debentures
      issued in the current quarter converting such debentures to shares of the
      Company’s common stock during the quarter, resulting in acceleration of the
      amortization of the related debt discount. Interest expense - related party
      increased to $42,000 for the three months ended September 30, 2007 from $27,000
      for the same period in 2006. The increase is related to the increase in the
      balance of related party notes payable and convertible debentures.





Under
      Generally Accepted Accounting Principles (“GAAP”), the Company is required to
      record the warrants and the embedded derivative of the related convertible
      debentures as liabilities. Changes in the value of these liabilities are
      reflected in the Company’s income statement as “ *Unrealized
      gain (loss) on adjustment of derivative and warrant liability to fair value
      of
      underlying securities.* ”
      During the three months ended September 30, 2007 the Company recorded an
      unrealized gain of approximately $345,000 compared to an unrealized loss of
      approximately $520,000 for the same period ended September 30, 2006 from the
      adjustment of such liabilities.





For
      the three months ended September 30, 2007, the Company recorded legal settlement
      costs of $1,100,000 compared to $(13,500) for the same period in 2006. The
      increase for the three months ended September 30, 2007 was related to the costs
      of the Nana Yalley settlement which was settled in October 2007.





For
      the three months ended September 30, 2007, the Company recorded a net loss
      of
      $6,692,000, compared to the same period in 2006 when the Company recorded a
      net
      loss of approximately $2,424,000.





The
      increased loss recognized during the three months ended September 30, 2007
      was
      primarily due to an increase in operating expenses in the amount of $567,000,
      an
      increase in other income (expense) of $3,085,000 and a decrease in gross profit
      of $617,000. The gross profit reduction relates to a decrease in AI gross profit
      in the amount of $120,000 and a gross loss for Tytess in the amount of $507,000
      offset by gross profit in the amount of $4,000 for the busi ness
      operations of WDS which was acquired in 2006 and gross profit in the amount
      of
      $6,000 for WDMG. The decrease in AI gross margin was due to cost over-runs
      on
      several large projects. The negative gross margin on Tytess is due to the
      recognition of cost over-runs in excess of future revenue associated with two
      residential construction contracts. The increase in operating expenses is
      primarily comprised of $420,000 related to expenses of WDCSN, Tytess and WDS
      and
      $105,000 in payroll tax late payment penalty assessments for AI. The increase in other income (expense) relates to the charge to financing costs
      of $2,260,000 which are related to shares of the Company’s common stock which
      were issued in certain financing arrangements as well as shares of the Company’s
      common stock used to repay a loan payable and loans payable - related party
      at a
      discounted price, an increase in the accretion of debt discount on convertible
      debentures increased by $513,000 and an increase in legal settlement costs
      of
      $1,100,000. These were partially offset by a decrease in the “unrealized
      gain/loss on adjustment of derivative and warrant liability to fair value of
      underlying securities” in the amount of $865,000.




33




**Nine
        months Ended September 30, 2007 Compared to Nine months Ended September 30,
        2006**
 
 The
        following schedules include the separate and consolidated information for
        the
        operations of the Company for the nine months ended September 30, 2007 and
        2006:
 **For
                  the nine months ended September 30, 2007****WDMG**
              
              **WDCSN**
              
              **AI**
              
              **Tytess**
              
              **WDS**
              
              **Combined**Revenue
              
              $
              6,500
              
              $
              4,000
              
              $
              697,139
              
              $
              646,696
              
              $
              14,530
              
              $
              1,368,865Gross
                  Profit
              
              
              6,500
              
              
              4,000
              
              
              34,666
              
              
              (443,307
              )
              
              6,771
              
              
              (391,370
              )SG
                  & A expenses
              
              
              3,910,768
              
              
              1,329,885
              
              
              1,104,655
              
              
              242,371
              
              
              98,904
              
              
              6,686,583Loss
                  from operations
              
              
              (3,904,268
              )
              
              (1,325,885
              )
              
              (1,069,989
              )
              
              (685,678
              )
              
              (92,133
              )
              
              (7,077,953
              )Net
                  Loss
              
              $
              (10,225,531
              )
              $
              (1,325,885
              )
              $
              (1,092,586
              )
              $
              (686,029
              )
              $
              (92,133
              )
              $
              (13,422,164
              )Loss
                  per share – basic and diluted
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              $
              (0.26
              )
  **For
                  the nine months ended September 30, 2006****WDMG**
              
              **WDCSN**
              
              **AI**
              
              **Tytess**
              
              **WDS**
              
              **Combined**Revenue
              
              $
              -
              
              $
              -
              
              $
              547,140
              
              $
              -
              
              $
              -
              
              $
              547,140Gross
                  Profit
              
              
              -
              
              
              -
              
              
              106,198
              
              
              -
              
              
              -
              
              
              106,198SG
                  & A expenses
              
              
              3,878,072
              
              
              -
              
              
              274,146
              
              
              -
              
              
              -
              
              
              4,152,218Loss
                  from operations
              
              
              (3,878,072
              )
              
              -
              
              
              (167,948
              )
              
              -
              
              
              -
              
              
              (4,046,020
              )Net
                  Loss
              
              $
              (5,597,654
              )
              $
              -
              
              $
              (171,171
              )
              $
              -
              
              $
              -
              
              $
              (5,768,825
              )Loss
                  per share – basic and diluted
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              $
              (0.13
              )




For
      the
      nine months ended September 30, 2007, the Company incurred an operating loss
      of
      $7,078,000 compared to an operating loss of $4,046,000 for the same period
      in
      2006. Total operating expenses for the nine month period ended September 30,
      2007 primarily consisted of selling, general and administrative expenses of
      $2,042,000, payroll expense of $4,539,000, consulting
      services - related party of $21,000 and depreciation expense of $85,000,
      compared to selling, general and administrative expenses of $1,191,000, payroll
      expense of $2,854,000 and depreciation expense of $107,000, for the same period
      in 2006. The increases in the expenses are primarily related to the acquisitions
      of AI, Tytess, and WDS in 2006 and the addition of personnel and occupancy
      costs
      related to the planned expansion of the Company’s business operations for WDCSN
      which is expected to be fully
      operational in the first quarter of 2008.





Pursuant
      to SFAS No. 123(R), the Company recognizes the expense of employee incentive
      options that vest during the reported period.  The combined payroll expense
      for the nine months ended September 30, 2007 and 2006 include compensation
      expenses of $ 1,626,000 and $744,000, respectively, arising from vested employee stock options committed
      to employees during each quarter.  For additional information, see “Note 2
      - Summary of Significant Accounting Policies, Stock Based Compensation” of the
      financial statements.





For
      the nine months ended September 30, 2007, the Company incurred interest expense
      of $5,764,000 compared to an interest expense of $910,000 for the same period
      in
      2006. The increase of $4,854,000 is primarily due to financing costs of
      $3,956,000, which are related to shares of the Company’s common stock issued in
      connection with certain financing arrangements, as well as shares of the
      Company’s common stock used to repay a loan payable and loans payable - related
      party at a discounted price and the accretion of interest related to convertible debentures
      in the amount of $1,613,000 during the nine months ended September 30, 2007
      compared to accretion of interest related to convertible debentures of $759,000
      for the same period in 2006. Interest expense - related party increased to
      $117,000 for the  nine
      months ended September 30, 2007 compared to $66,000 for the same period in
      2006.
      The increase is related to the increase in the balance of related party notes
      payable and convertible debentures.





Under
      GAAP, the Company is required to record the warrants and the embedded derivative
      of the related convertible debentures as liabilities. Changes in the value
      of
      these liabilities are reflected on the Company’s income statement as
“ *Unrealized
      gain (loss) on adjustment of derivative and warrant liability to fair value
      of
      underlying securities.* ”
      During the nine months ended September 30, 2007 the Company recorded an
      unrealized gain of approximately $579,000 compared to an unrealized loss of
      approximately $815,000 for the same period in 2006 from the adjustment of the
      same liabilities.




34




For
      the nine
      months ended September 30, 2007, the Company recorded legal settlement costs
      of
      $1,160,000 compared to $(2,000) for the same period in 2006. The increase for
      the nine months ended September 30, 2007 was primarily related to the costs
      of
      the Nana Yalley settlement which was settled in October 2007.





For
      the
      nine months ended September 30, 2007, the Company recorded a net loss of
      $13,422,000, compared to the same period in 2006 when the Company recorded
      a net
      loss of approximately $5,769,000.





The
      increased loss recognized during the nine months ended September 30, 2007
      compared to the same period in 2006 was primarily related to an increase in
      operating expenses in the amount of $2,534,000, an increase in other income
      (expense) of $4,621,000 and a decrease in gross profit of $497,000. The gross
      profit relates to a decrease in AI gross profit in the amount of $71,000 and
      a
      gross loss for Tytess in the amount $443,000 partially offset by a gross profit
      in the amount of $7,000 for the business operations of WDS, gross profit of
      $6,000 for WDMG and gross profit in the amount of $4,000 for WDCSN. The
      decrease in AI gross margin was due to cost over-runs on several large projects.
      The negative gross margin on Tytess is due to the recognition of cost over-runs
      in excess of future revenue associated with two residential construction
      contracts. The
      increase in operating expenses is comprised of $1,671,000 related to expenses
      of
      WDCSN, Tytess and WDS and an increase in AI expenses of $830,000 related to
      a
      full year of expenses in 2007 compared to approximately five and one-half months
      in 2006. The increase in other income (expense) is primarily due to financing
      costs of $3,956,000, which are related to shares of the Company’s common stock
      which were issued in certain financing arrangements, as well as shares of the
      Company’s common stock used to repay a loan payable and loans payable - related
      party at a discounted price, the accretion of debt discount on convertible
      debentures increased by $854,000 in the nine months ended September 30, 2007
      and
      an increase in legal settlement costs of $1,160,000. These were partially offset
      by a decrease in the “unrealized gain/loss on adjustment of derivative and
      warrant liability to fair value of underlying securities” in the amount of
      $1,394,000.





Management
      of the Company expects that, due to the volatile nature of the price of the
      Company’s common stock price, the Company’s derivative and warrant liabilities
      will be correspondingly volatile and as a result will cause the reported net
      income (loss) of the Company to fluctuate in such a manner as to make direct
      comparisons, between reporting periods, difficult. Therefore as long as the
      derivative and warrant liabilities exist, the reported operating income (loss)
      should be a more accurate reference for the true performance of the Company.





**Material
      Changes in Financial Condition**





As
      of September 30, 2007, the Company had a working capital deficit of
      $12,113,000, compared to a deficit of $7,723,000 as of December 31, 2006.





If
      the Company is unable to generate sufficient sustainable revenues or obtain
      additional financing to meet its financial obligations, it will have to further
      reduce its operations, and the Company will not be able to continue as a going
      concern. The Company’s independent accountants have indicated in their report
      for the year ended December 31, 2006 that there is substantial doubt about
      the
      Company’s ability to continue as a going concern without increased revenues and
      additional financing.





During
      the nine months ended September 30, 2007 the Company used $1,919,000 in its
      operating activities, compared with $2,323,000 for the same period in 2006.





During
      the nine months ended September 30, 2007 the Company’s investing activities used
      $140,000 for the purchase of fixed assets, compared to $160,000 for the same
      period in 2006.





During
      the nine months ended September 30, 2007 the Company’s financing activities
      generated $2,056,000 compared to $2,483,000 for the same period in 2006. The
      funds generated from the Company’s financing activities during the nine months
      ended September 30, 2007 consists primarily of proceeds from loans payable,
      loans payable - related party and convertible debentures of $2,124,000 and
      an
      increase in the bank overdraft in the amount of $8,000 which was partially
      offset by repayments of $76,000 on loan obligations. For the same period in
      2006, the Company raised $1,324,000 from loans payable, loans payable - related
      party and convertible notes and $1,289,000 from the issuance of shares of the
      Company’s common stock which was partially offset by a decrease in the bank
      overdraft in the amount of $9,000 and by the payment of a related party loan
      payable of $121,000.




35





From
      inception, the Company has raised $7,978,000 to fund operations.  Of the
      total funds raised, $6,406,000 was used to provide the necessary resources
      for
      the development stage operations of the Company and $1,589,000 was used to
      purchase fixed assets. The funds include cash of $4,499,000 which was raised
      through convertible debentures and warrants (net of repayments); and cash of
      $1,472,000 which was raised through loans (net of repayments).  The Company
      also raised $2,000,000 from the issuance of common stock.





During
      the nine months ended September 30, 2007 the Company’s net cash position
      decreased by $3,100 compared to zero for the same period in 2006.





**Continuing
      Operations**




The
      markets in which the Company operates include a large number of companies vying
      for customers and market share both domestically and internationally. The
      Company’s competitors include other digital service providers, home automation
      companies, and architectural and design firms. Some of the Company’s competitors
      may develop competing products and services that offer better pricing or that
      reach the market in advance of the Company’s offerings. Some competitors also
      have or may develop greater financial and other resources than the Company,
      with
      enhanced ability to compete for market share, in some instances through
      significant economic incentives to secure contracts. Some also may be better
      able to compete for skilled professionals. Any of these factors could have
      an
      adverse effect on the Company’s business. Future results will depend on the
      Company’s ability to mitigate the effects of aggressive competition on revenues,
      pricing and margins and on the Company’s ability to attract and retain talented
      people.





The
      Company’s future results will depend in part on the success of its ability to
      profitably grow revenues under the existing contracts and to control costs
      through the development and use of low-cost subcontractors, partnering and
      sourcing models. The Company’s current contracts are multiyear engagements under
      which the Company will provide project management, site construction,
      architectural and engineering services, and installation services for larger
      digital service providers. The planned expansion includes, among other things,
      commercial operations where the Company will deliver digital services across
      several platforms, the integration and continued growth of AI, Tytess, Winsonic
      Diversity, and Winsonic Digital Store. With potential joint ventures, such
      as
      Native American Television Network, Inc., the Company’s facilities-based network
      and current service contracts are expected to provide a base of recurring
      revenue. The Company will need to have available sufficient financial resources
      in order to take on these obligations and make these investments.





The
      Company has, to date, focused almost exclusively upon the startup phase of
      its
      operations. To that end, management has focused on identifying and retaining
      key
      employees to provide the support necessary as operations move to revenue
      generation and expansion. The Company’s priorities for the next twelve months of
      operations are to expand our human resources to adequately service our existing
      contracts and to reach a sustainable profitability level. As we expand our
      operations with the expectation of growing revenue from our activities, we
      may
      elect to hire additional salaried or hourly employees to operate certain aspects
      of our business. While we will attempt to attract and retain qualified employees
      under similar terms to those terms currently in place, we may not be able to
      obtain agreements allowing for deferral of payroll or payment of portions of
      compensation in the form of equity.





While
      management expects revenue generation to increase, the Company expects to
      operate with a deficit in cash flows for the next few months. The deficit,
      which
      arises primarily from payroll obligations, may be satisfied through a
      combination of employee salary deferrals and through cash raised primarily
      from
      the placement of the Company’s securities (either directly or through
      convertible debt offerings). On March 30, 2007, the Company gave notice to
      its
      employees that the terms of their employment agreements would change effective
      immediately. The change consisted of ceasing all salary deferrals until deferred
      until the financial condition of the Company improves. In addition, all vacation
      grants for employees were reduced from four weeks to two weeks. Deferred salary
      amounts not accrued by March 30, 2007 were considered to be forfeited. This
      action taken by the Company is expected to result in an annualized savings
      of
      approximately $1,235,000. In addition, the Company terminated seven employees,
      adjusted the salaries of five employees and cancelled the contract of a
      consultant. This action taken by the Company is expected to result in additional
      savings of approximately $1,244,215 per year.  Management
      intends to focus substantial efforts on the funding of the current projects
      and
      operational deficit during the next few months. The funding effort will proceed
      at the same time as commercial operations continue. The Company believes that
      the current management team has the applicable skills to handle the challenge
      of
      covering the cash deficit and developing profitable operations. There is no
      guarantee that any such financings can be obtained or, if obtained, that such
      financings will be on adequate or reasonable terms.




36




**Off-Balance
      Sheet Arrangements**





As
      of September 30, 2007, the Company has not engaged in any off-balance sheet
      arrangements. Currently, management does not anticipate that the Company will
      be
      engaging in off-balance sheet arrangements in the foreseeable future.





**Item
      3. Controls and Procedures.**





Our
      management team, under the leadership and with the participation of our Chief
      Executive Officer, evaluated the effectiveness of our disclosure controls and
      procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities
      Exchange Act of 1934), as of September 30, 2007. Based on this evaluation,
      our
      management concluded that our disclosure controls and procedures were not
      effective as of September 30, 2007 to ensure that information required to be
      disclosed by us in the reports that we file or submit to the SEC is recorded,
      processed, summarized and reported within the time periods specified in the
      SEC’s rules and forms.





Our
      management team is diligently developing and implementing disclosure controls
      and procedures to ensure that such information required for disclosure is
      recorded, processed, summarized and reported timely and accurately. To date,
      our
      efforts have focused upon replacing our Chief Financial Officer, who resigned
      on
      August 1, 2006. The resignation of our CFO has exacerbated an existing problem
      of sufficiency of accounting personnel. To date, we have hired a Chief Operating
      Officer, Controller and a Vice President of Finance. We are interviewing
      candidates to fill the CFO position and certain other accounting
      positions.





In
      connection with the growth of the Company, through mergers and acquisitions,
      we
      have instituted a policy of early review of accounting systems and personnel
      of
      all companies to be acquired to discern their reporting systems and the effect
      such reporting will have on the consolidation of operations. The companies
      that
      we have considered for acquisition have been private companies and have not
      typically maintained the types of control and reporting procedures that are
      required of public companies. Although we attempt to perform a thorough
      inspection of accounting records and reporting controls when we do our due
      diligence, it is likely that the companies to be acquired will not have the
      type
      of control and reporting procedures required by public companies. As such,
      depending upon the materiality of the operations of the companies to be
      acquired, compared to our total assets and revenues, it is possible that the
      acquisition of private subsidiaries may lead to errors in
      reporting.




There
      was
      no change in the Company’s internal control over financial reporting during the
      period ended September 30, 2007, that has materially affected, or was reasonably
      likely to materially affect, the Company’s internal control over financial
      reporting.





Notwithstanding
      the above-mentioned weaknesses in our disclosure of controls and procedures,
      we
      believe that the consolidated financial statements included in this report
      fairly present our consolidated financial position.




Our
      management, including our Chief Executive Officer, does not expect that our
      disclosure controls and procedures or our internal controls over financial
      reporting are or will be capable of preventing or detecting all errors and
      all
      fraud. Any control system, no matter how well designed and operated, can provide
      only reasonable, not absolute, assurance that the control system’s objectives
      will be met. The design of a control system must reflect the fact that there
      are
      resource constraints, and the benefits of controls must be considered relative
      to their costs. Further, because of the inherent limitations in all control
      systems, no evaluation of controls can provide absolute assurance that
      misstatements due to error or fraud will not occur or that all control issues
      and instances of fraud, if any, have been detected. These inherent limitations
      include the realities that judgments in decision-making can be faulty and that
      breakdowns can occur because of simple error or mistake. Controls can also
      be
      circumvented by the individual acts of some persons, by collusion of two or
      more
      people, or by management’s override of the controls. The design of any system of
      controls is based in part on certain assumptions about the likelihood of future
      events, and there can be no assurance that any design will succeed in achieving
      our stated goals under all potential future conditions. Projections of any
      evaluation of controls effectiveness to future periods are subject to
      risks.




37




**Part
      II - Other Information**





**Item
      1. Legal Proceedings**





See
      “Note 6 - Summary of Legal Proceedings” and “Note 13 - Subsequent Events” for a
      description of the Company’s legal proceedings. Other than as described in such
      notes, the Company is not currently involved in any legal proceedings that
      may
      be deemed to be material to our financial condition.





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





During
      the quarter ended September 30, 2007, the Company received proceeds of
      $1,135,474 from the issuance of convertible debentures to 25 accredited
      investors. In connection with the issuance of such convertible debentures,
      the
      Company also issued warrants to purchase an aggregate of up to 3,362,582 shares
      of common stock of the Company. We neither received nor paid any commissions
      in
      connection with the issuance of these securities. We believe that the issuance of such securities was exempt from the registration
      requirements of the Securities Act of 1933, as amended, pursuant to the
      provisions of Section 4(2) of the Securities Act.





During
      the quarter ended September 30, 2007, the Company issued an aggregate of
      16,534,376 restricted shares of common stock as further described below. The
      Company issued 6,930,238 restricted shares of common stock in connection with
      certain financing transactions. The Company issued an aggregate of 6,162,909
      restricted shares of common stock to fifty holders of the Company’s convertible
      debentures who converted such debentures. The Company repaid certain loans
      payable and loans payable - related party amounts by issuing 1,133,257
      restricted shares of common stock. The Company issued 420,000 restricted shares
      of common stock as payment for consulting services. The Company issued 241,379,
      1,146,593 and 500,000 restricted shares of common stock for the acquisition
      of
      DV Photo Shop, Tytess and technology from James E. Thomas, respectively. We
      neither received nor paid any commissions in connection with the issuance of
      these securities. We believe that the issuance of such securities was exempt from the registration
      requirements of the Securities Act of 1933, as amended, pursuant to the
      provisions of Section 4(2) of the Securities Act.





**Item
      3. Defaults Upon Senior Securities**





Fifteen
      of the Company’s convertible debentures have matured without conversion or
      repayment. As of September 30, 2007, 14 convertible debenture holders agreed
      to
      extend the terms of their convertible debentures and one convertible debenture
      totaling $30,000 currently remains in default. Five of the Company's notes
      payable totaling $111,000 remain in default.


.


**Item
      6. Exhibits.**




10.1
            
            Warrant
                to purchase 1,400,000 shares of the Company’s Common Stock dated August
                27, 2007.(1)10.2
            
            $700,000
                6% Convertible Subordinated Promissory Note dated August 27,
                2007.(1)*31.1
            
            Certification
                pursuant to 17 CFR 240.13a-14 promulgated under Section 302 of the
                Sarbanes-Oxley Act of 2002.*32.1
            
            Certification
                pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section
                906 of
                the Sarbanes-Oxley Act of 2002.


_______________


*
      Filed herewith


(1)  Incorporated
      by reference from the Company’s current report on Form 8-K filed with the
      Securities and Exchange Commission on August 31, 2007.




38


**Signatures**





In
      accordance with the requirements of the Exchange Act, the registrant caused
      this
      report to be signed on its behalf by the undersigned,
      thereunto duly authorized.




WINSONIC
                DIGITAL MEDIA GROUP, LTD.
              (Registrant)November
                14, 2007
            By:
            /s/
                Winston JohnsonWinston
              JohnsonChairman
                & CEO
              (Principal
                Executive Officer and Principal Financial
                Officer)


39