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**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 June 30, 2005




o
            TRANSITION
                REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
                1934
                For the transition period from _______ to
                _______




Commission
      file number 000-32231




**WINSONIC
      DIGITAL MEDIA GROUP, LTD.**


(Name
      of
      small business issuer in its charter)


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





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




Issuer’s
      telephone number (404) 230-5705





MEDIA
      AND ENTERTAINMENT.COM, INC., 10120 S. Eastern Ave., Suite 200, Las Vegas, NV
      89052


(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  ̈ No





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





The
      issuer had 33,873,629 shares of common stock outstanding as of June 30,
      2005.








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**Quarterly
      Report on Form 10-QSB**


**Quarter
      Ended June 30, 2005**





**Table
      of Contents******


Report
                  of Independent Registered Public Accounting
                  Firm
              3PART
                  I - FINANCIAL INFORMATIONItem
                  1.  Financial Statements:Balance
                  Sheet as of June 30, 2005 (Unaudited) and December 31,
                  2004
              4Statement
                  of Operations and Accumulated Deficit
                  (Unaudited)for
                  the Three and Six Months Ended June 30, 2005 and
                  2004and
                  from inception to June 30, 2005
              5Statements
                  of Cash Flows (Unaudited) for the Three and Six
                  MonthsEnded
 June
                  30, 2005 and 2004and
                  from inception to June 30, 2005
              6Statements
                  of Stockholders' Deficit
              7Notes
                  to Financial Statements
              8Item
                  2.  Management's Discussion and Analysis or Plan
                  of Operation
              20Item
                  3.  Controls and Procedures
              24PART
                  II - OTHER INFORMATIONItem
                  1. Legal ProceedingsItem
                2. Unregistered Sales of Equity Securities and Use of
                Proceeds
              26Item
                3. Defaults Upon Senior Securities
              27Item
                4. Submission of Matters to a Vote of Security
                Holders
              28Item
                5 Other Information
              28Item
                    6.  Exhibits and Reports on Form 8-K
              28SIGNATURES
              28EXHIBIT
                  INDEX
              29
   -2-
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            Contents**
  **REPORT
      OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING
      FIRM**








To
        the Board of Directors
 Winsonic
        Digital Media Group, Ltd.
 Atlanta,
        Georgia
  We
        have reviewed the accompanying balance sheet of Winsonic Digital Media Group,
        Ltd. (A Development Stage Company) as of June 30, 2005 and the related
        statements of operations, stockholders’ deficit and cash flows for the three and
        six months ended June 30, 2005 and Inception to June 30, 2005, included in
        the
        accompanying Securities and Exchange Commission Form 10-QSB for the period
        ended
        June 30, 2005. These financial statements are the responsibility of the
        Company's management.
  We
        conducted our review in accordance with standards established by the Public
        Company Accounting Oversight Board (United States). A review of interim
        financial information consists principally of applying analytical procedures
        to
        financial data and making inquiries of persons responsible for financial
        and
        accounting matters. It is substantially less in scope than an audit conducted
        in
        accordance with the standards of the Public Company Accounting Oversight
        Board
        (United States), the objective of which is the expression of an opinion
        regarding the financial statements as a whole. Accordingly, we do not express
        such an opinion.
  Based
        on our review, we are not aware of any material modifications that should
        be
        made to the accompanying financial statements for them to be in conformity
        with
        accounting principles generally accepted in the United States.
  The
        accompanying financial statements have been prepared assuming that the Company
        will continue as a going concern. As discussed in Note 6, conditions exist
        which
        raise substantial doubt about the Company's ability to continue as a going
        concern. The financial statements do not include any adjustments that might
        result from the outcome of this uncertainty.
  
 /s/
        De
        Joya Griffith & Company, LLC
 De
        Joya
        Griffith & Company, LLC
 Las
        Vegas, Nevada
 March
        18,
        2006
 
  -3-
 **Back
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            Contents**
  **PART
      I - FINANCIAL INFORMATION**





**Item
      1. Financial Statements**




WINSONIC
      DIGITAL MEDIA GROUP, LTD.


(A
      DEVELOPMENT STAGE COMPANY)


**BALANCE
      SHEETS**


AS
      OF
      JUNE 30, 2005 & DECEMBER 31, 2004 (Restated)(UNAUDITED)


**6/30/2005**
            
            **12/31/2004**(Restated)**ASSETS**ASSETS:Current
              assets:Cash
            
            $
            —
            
            $
            436,749Deposit
            
            
            78,000
            
            
            82,490**Total
                current assets**
            
            
            **78,000**
            
            
            **519,239**Fixed
                assets:Computer
                equipment
            
            
            1,583,474
            
            
            1,577,269Infrastructure
            
            
            320,000
            
            
            320,000Software
            
            
            165,515
            
            
            160,000Furniture
                & fixtures
            
            
            13,040
            
            
            13,040Less:
                accumulated depreciation
            
            
            (722,155
            )
            
            (550,955
            )Total
                fixed assets
            
            
            1,359,874
            
            
            1,519,354TOTAL
                ASSETS
            
            **$**
            **1,437,874**
            
            **$**
            **2,038,593****LIABILITIES
                AND STOCKHOLDERS' DEFICIT**LIABILITIES:Current
                liabilities:Accounts
                payable and accrued expenses
            
            $
            1,738,898
            
            $
            1,514,625Bank
                overdraft
            
            
            9,053
            
            
            —Accrued
                payroll and related taxes
            
            
            1,033,198
            
            
            781,575Legal
                settlement liabilities
            
            
            1,020,000
            
            
            1,020,000Loans
                payable
            
            
            364,690
            
            
            357,506Loan
                payable -related party
            
            
            553,479
            
            
            683,726Note
                payable
            
            
            847,000
            
            
            847,000Accrued
                interest on notes payable
            
            
            127,015
            
            
            101,640Derivative
                liability related to convertible debentures
            
            
            130,625
            
            
            652,254Warrant
                liability related to convertible debentures
            
            
            281,345
            
            
            614,609Convertible
                debentures
            
            
            571,636
            
            
            37,871**Total
                current liabilities**
            
            
            **6,676,939**
            
            
            **6,610,806**Long-Term
                liabilities:
            
            
            —
            
            
            —Total
                long-term liabilities
            
            
            —
            
            
            —**TOTAL
                LIABILITIES**
            
            
            **6,676,939**
            
            
            **6,610,806**Stockholders'
                deficit:Common
                stock, $0.001 par value, 50,000,000 sharesauthorized,33,873,629and 33,620,884shares
                issued andoutstanding
                at June 30, 2005 and December 31, 2004, respectively
            
            
            33,874
            
            
            33,621Additional
                paid-in capital
            
            
            3,161,342
            
            
            2,918,261Common
                Stock Payable, $1.00 per share
            
            
            820,000
            
            
            820,000Accumulated
                deficit during development stage
            
            
            (9,254,281
            )
            
            (8,344,095
            )**Total
                stockholders' deficit**
            
            
            (5,239,065
            )
            
            (4,572,213
            )**TOTAL
                LIABILITIES AND STOCKHOLDERS' DEFICIT**
            
            **$**
            **1,437,874**
            
            **$**
            **2,038,593**




*The
      accompanying notes to financial statements should be*


*read
      in conjunction with these Balance Sheets.*







-4-
 **Back
          to Table of Contents**




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


**For
                the quarter ended**
              **June
                30,**
            
            **For
                the six months ended**
              **June
                30,**
            
            **Inception
                to****2005**
            
            **2004**
            
            **2005**
            
            **2004**
            
            **June
                30, 2005**REVENUE
            
            $
            —
            
            **$**
            **25,000**
            
            $
            —
            
            $
            25,000
            
            $
            57,811COST
                OF GOODS SOLD
            
            
            **110,607**
            
            
            **119,172**
            
            
            233,714
            
            
            244,186
            
            
            941,670GROSS
                PROFIT
            
            
            (110,607
            )
            
            (94,172
            )
            
            (233,714
            )
            
            (219,186
            )
            
            (883,859
            )EXPENSES:Selling,
                general and administrative
            
            
            314,390
            
            
            71,375
            
            
            552,300
            
            
            136,908
            
            
            3,572,942Selling,
                general and administrative, related party
            
            
            207,500
            
            
            49,800
            
            
            415,000
            
            
            99,600
            
            
            966,942Consulting
                Services - related party
            
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            
            1,125,934Depreciation
                and amortization expense
            
            
            85,600
            
            
            85,589
            
            
            171,200
            
            
            171,178
            
            
            722,155Total
                expenses
            
            
            607,490
            
            
            206,764
            
            
            1,138,500
            
            
            407,686
            
            
            6,387,973OPERATING
                INCOME (LOSS)
            
            
            (718,097
            )
            
            (300,936
            )
            
            (1,372,214
            )
            
            (626,872
            )
            
            (7,271,832
            )OTHER
                INCOME/(EXPENSES):Interest
                expense
            
            
            (302,987
            )
            
            (15,457
            )
            
            (593,297
            )
            
            (30,914
            )
            
            (2,103,482
            )Unrealized
                gain (loss) on adjustment of derivative and warrant
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            —liability
                to fair value of underlying securities
            
            
            (78,944
            )
            
            
            
            
            1,054,892
            
            
            
            
            
            1,054,892Legal
                Settlement Costs
            
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            
            (1,020,000
            )Interest
                income
            
            
            13
            
            
            —
            
            
            433
            
            
            —
            
            
            690Other
                income(expenses)
            
            
            —
            
            
            43,095
            
            
            —
            
            
            43,095
            
            
            85,451Total
                other income/(expenses)
            
            
            (381,918
            )
            
            27,638
            
            
            462,028
            
            
            12,181
            
            
            (1,982,449
            )NET
                LOSS BEFORE PROVISION FOR INCOME TAXES
            
            
            (1,100,015
            )
            
            (273,298
            )
            
            (910,186
            )
            
            (614,691
            )
            
            (9,254,281
            )PROVISION
                FOR INCOME TAXES
            
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            
            —NET
                LOSS
            
            **$**
            **(1,100,015**
            **)**
            **$**
            **(273,298**
            **)**
            **$**
            **(910,186**
            **)**
            $
            (614,691
            )
            **$**
            **(9,254,281**
            **)**Basic
                weighted average number ofcommon
                shares outstanding
            
            
            14,906,150
            
            
            6,004,200
            
            
            14,906,150
            
            
            6,004,200Net
                loss per basic and diluted common share
            
            $
            (0.07
            )
            $
            (0.05
            )
            $
            (0.06
            )
            $
            (0.10
            )


*The
        accompanying notes to financial statements should be*
 *read
        in conjunction with these Statements of Operations.*




-5-
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          to Table of Contents**




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


**For
                  the six months ended**
                **June
                  30,**
              
              **Inception
                  to****2005**
              
              **2004**
              
              **June
                  30, 2005****CASH
                  FLOWS FROM OPERATING ACTIVITIES:**Net
                  (loss)
              
              **$**
              (910,186
              )
              $
              (614,691
              )
              $
              (8,796,414
              )Adjustments
                  to reconcile net lossto
                  net cash used by operations:Depreciation
              
              
              171,200
              
              $
              171,178
              
              
              722,155Accretion
                  of principal and interest relatedto
                  convertible debentures
              
              
              533,765
              
              $
              —
              
              
              571,636Unrealized
                  gain (loss) on adjustment of derivative and warrantliability
                  to fair value of underlying securities
              
              
              (1,054,892
              )
              $
              —
              
              
              (1,054,892
              )Stock
                  based compensation
              
              
              243,334
              
              $
              —
              
              
              1,734,143Change
                  in operating assets and liabilities:(Increase)
                  decrease in deposit
              
              
              4,490
              
              $
              —
              
              
              (78,000
              )Increase
                  (decrease) in bank overdraft
              
              
              9,053
              
              $
              (4,205
              )
              
              9,053Increase
                  in accounts payable and accrued expenses
              
              
              224,271
              
              $
              210,722
              
              
              1,982,366Increase
                  (decrease) in accrued payroll and related taxes
              
              
              251,623
              
              $
              221,145
              
              
              1,033,197Increase
                  in legal settlement liabilities
              
              
              —
              
              $
              —
              
              
              1,020,000Increase
                  in interest payable
              
              
              25,375
              
              $
              25,410
              
              
              127,015**Net
                  cash provided by (used in) operating activities**
              
              
              (501,967
              )
              
              **9,559**
              
              
              (2,729,741
              )**CASH
                  FLOWS FROM INVESTING ACTIVITIES:**Purchase
                  of fixed assets
              
              
              (11,720
              )
              $
              —
              
              
              (2,082,029
              )**Net
                  cash used in investing activities**
              
              
              (11,720
              )
              
              —
              
              
              (2,082,029
              )**CASH
                  FLOWS FROM FINANCING ACTIVITIES:**Proceeds
                  from loans payable
              
              
              7,184
              
              $
              (11,528
              )
              
              396,190Proceeds
                  from loan payable - related party
              
              
              29,754
              
              $
              —
              
              
              713,480Proceeds
                  fron note payable - related party
              
              
              —
              
              $
              —
              
              
              5,450Payment
                  on note payable - related party
              
              
              (160,000
              )
              $
              —
              
              
              (165,450
              )Proceeds
                  from note payable - Digital ServicesInternational,
                  Inc.
              
              
              —
              
              $
              —
              
              
              847,000Proceeds
                  from convertible debentures
              
              
              200,000
              
              $
              —
              
              
              1,015,000Proceeds
                  from warrants for common stock
              
              
              —
              
              $
              —
              
              
              2,000,100**Net
                  cash provided by financing activities**
              
              
              **76,938**
              
              
              (11,528
              )
              
              **4,811,770****NET
                  INCREASE (DECREASE) IN CASH**
              
              
              (436,749
              )
              
              (1,969
              )
              
              **0****CASH,
                  BEGINNING OF PERIOD**
              
              
              **436,749**
              
              
              —
              
              
              —**CASH,
                  END OF PERIOD**
              
              **$**
              **0**
              
              **$**
              (1,969
              )
              **$**
              **0****SUPPLEMENTARY
                  INFORMATION:**Interest
                  paid
              
              $
              —
              
              $
              —
              
              $
              —Income
                  taxes paid
              
              $
              —
              
              $
              —
              
              $
              —
  *The
        accompanying notes to financial statements should be*
 *read
        in conjunction with these Statements of Cash Flows.*


-6-
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          to Table of Contents**




WINSONIC
      DIGITAL MEDIA GROUP, LTD.


(A
      DEVELOPMENT STAGE COMPANY)


STATEMENT
      OF STOCKHOLDER'S DEFICIT


Preferred
                  Stock
              
              
              Common
                    Stock
              
              
              AdditionalPaid-in
              
              
              Common
                Stock
              
              
              AccumulatedDeficit
                  DuringDevelopment
              
              
              TotalStockholders'Shares
              
              
              Amount
              
              
              Shares
              
              
              Amount
              
              
              Capital
              
              
              Payable
              
              
              Stage
              
              
              Deficit**Balance,
                  September 10, 2002 (Inception) - No Par Stock**
              
              
              **10,000,000**
              
              **$**
              **—**
              
              
              **10,000,000**
              
              **$**
              **—**
              
              **$**
              **—**
              
              
              
              
              **$**
              **—**
              
              **$**
              **—**Reverse
                  Merger - ReAcquisition of all outstanding shares of Winsonic Acquisition
                  Sub, Inc. - No Par Stock (Recasted to inception)
              
              
              (10,000,000
              )
              
              **—**
              
              
              (10,000,000
              )
              
              **—**
              
              
              
              
              
              
              
              
              
              
              
              **—**Issuance
                  of common stock to founder for services
              
              
              
              
              
              **—**
              
              
              6,004,200
              
              
              6,004
              
              
              **—**
              
              
              
              
              
              
              
              
              6,004**Balance,
                  September 10, 2002 (Recasted)**
              
              
              **—**
              
              
              **—**
              
              
              **6,004,200**
              
              
              **6,004**
              
              
              **—**
              
              
              **—**
              
              
              
              
              
              **6,004**Issuance
                  of stock warrants (December 26, 2002)
              
              
              **—**
              
              
              **—**
              
              
              **—**
              
              
              **—**
              
              
              **—**
              
              
              990,600
              
              
              **—**
              
              
              990,600Net
                  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 satisafaction 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**
              **)**Issuance
                  of common stock for services, $1.00 average
                price
                  per share
              
              
              
              
              
              
              
              
              94,615
              
              
              95
              
              
              122,905
              
              
              
              
              
              
              
              
              123,000Issuance
                  of common stock for services, $0.59 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
              
              
              
              
              
              
              
              
              45,334Net
                  loss
              
              
              **—**
              
              
              **—**
              
              
              **—**
              
              
              **—**
              
              
              **—**
              
              
              **—**
              
              
              (910,186
              )
              
              (910,186
              )**Balance,
                  June 30 2005**
              
              
              **—**
              
              **$**
              **—**
              
              
              **33,873,629**
              
              **$**
              **33,874**
              
              **$**
              **3,161,342**
              
              **$**
              **820,000**
              
              **$**
              **(9,254,281**
              **)**
              **$**
              **(5,239,065**
              **)**




-7-
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            Contents**




**WINSONIC
      DIGITAL MEDIA GROUP, LTD**


**NOTES
      TO THE UNAUDITED CONDENSED FINANCIAL STATEMENTS**






**NOTE
      1 - BASIS OF PRESENTATION**


The
        accompanying financial statements have been prepared by the Company without
        audit. In the opinion of management, all adjustments (which include normal
        recurring adjustments) necessary to present fairly the financial position,
        results of operations and cash flows at June 30, 2005 and for all periods
        presented have been made.
  Certain
        information and footnote disclosures normally included in financial statements
        prepared in accordance with generally accepted accounting principals in the
        United States of America have been condensed or omitted for purposes of filing
        interim financial statements with the Securities and Exchange Commission.
        It is
        suggested that these condensed financial statements be read in conjunction
        with
        the consolidated financial statements and notes thereto included in the
        Company’s audited financial statements for the year ended December 31, 2004. The
        results of operations for the three-month and six-mont periods ended June
        30,
        2005 and 2004 are not necessarily indicative of the operating results for
        the
        full year.
  **Accounting
        Estimates:** The
        preparation of financial statements in conformity with accounting principals
        generally accepted in the United States of America requires management to
        make
        estimates and assumptions that affect the reported amounts of assets and
        liabilities, the disclosures of contingent assets and liabilities at the
        date of
        the financial statements, and the reported amounts of revenues and expenses
        during the reporting period. Actual operating results could differ from those
        estimated by management.
  **Cash
        and Cash Equivalents:** For
        purposes of the statement of cash flows, the Company considers all highly
        liquid
        debt instruments with maturity of three months or less to be cash equivalents.
        The Company had a net cash deficit of $9,053 at June 30, 2005 and total cash
        of
        $436,749 at December 31, 2004, with a cash balance of $327,135 in excess
        of
        federally insured cash balances at December 31, 2004.
  **Derivative
        Financial Instruments:** The
        Company has issued convertible notes payable, which include embedded derivatives
        as defined by SFAS 133, EITF 98-5 and 00-27 and APB 14. These instruments
        are
        subject to fluctuations in value, arising from fluctuations in the price
        of the
        underlying stock and the number of shares of stock to be issued upon conversion
        or redemption”. The fluctuation in value is recorded as “Unrealized Gains and
        (Losses) on Embedded Derivatives and Attached Warrants consistent with the
        Statement of Financial Accounting Standards (SFAS) No. 133, “Accounting for
        Derivative Instruments and Hedging Activities” and it has the effect of
        adjusting the financing costs of the Convertible Note to reflect the value
        of
        the underlying stock to be issued.
  **Stock
        Options:** The
        Company has stock incentive plans that provide for stock-based employee
        compensation, including the granting of stock options, to certain key employees
        and other individuals. The plans are more fully described in Note 2. The
        Company
        accounts for stock options issued to employee, officers and directors under
        the
        stock incentive plan in accordance with the recognition and measurement
        principals of APB Opinion No. 25, “Accounting for Stock Issued to Employees”,
        and related Interpretations. Under this method, compensation expense is recorded
        on the date of grant only if the current market price of the underlying stock
        exceeded the exercise price. Under the Company’s stock incentive plan, stock
        options are granted at exercise prices that equal or exceed the market value
        of
        the underlying common stock on the date of grant. Therefore, no compensation
        expense related to stock options is recorded in the Consolidated Statements
        of
        Operations.
  During
        the periods presented in the accompanying financial statements the Company
        has
        granted options under the October 2004 Stock Options Plans and executive
        and
        other employment agreements. The Corporation has adopted the disclosure-only
        provisions of SFAS No. 123, “Accounting for Stock-Based Compensation.”
Accordingly, compensation cost under SFAS No. 123 has been recognized for
        certain stock options issued under other agreements to non-employee and recorded
        in the accompanying statement of operations, but no compensation cost under
        SFAS
        No. 123 has been recognized for stock options issued under the plans and
        other
        agreements with employees.
  -8-
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            to Table of Contents**
  Had
        compensation cost for stock options issued to employees under the Company’s
        stock option plans and agreements been determined based on the fair value
        at the
        grant date for awards in the three-months ended June 30, 2005 and 2004
        consistent with the provisions of SFAS No. 123, the Company’s net income and
        earnings per share would have been reduced to the pro forma amounts indicated
        below:
   **For
                  the Three-months Ended**
              
              **For
                  the Six-months Ended****June
                  30,**
                **2005**
              
              **June
                  30,**
                **2004**
              
              **June
                  30,**
                **2005**
              
              **June
                  30,**
                **2004**Net
                  Income (Loss) as Reported
              
              $
              (1,100,015
              )
              $
              (273,298
              )
              $
              (910,186
              )
              $
              (614,691
              )Add:
                  Stock-based non-employee compensation expense included in reported
                  net
                  income
              
              
              —
              
              
              —
              
              
              —
              
              
              —Deduct:
                  Total stock-based employee compensation expense determined under
                  fair
                  value based method
              
              
              (413,665
              )
              
              -0-
              
              
              (413,665
              )
              
              -0-Net
                  Income (loss) Pro forma
              
              $
              (1,513,680
              )
              $
              (273,298
              )
              $
              (1,323,851
              )
              $
              (614,691
              )Pro
                  forma earnings (loss) per share
              
              $
              (10.1
              )
              $
              (0.04
              )
              $
              (8.9
              )
              $
              (0.09
              )
  **Fixed
        Assets**
  Fixed
        assets are stated at cost. Expenditures that materially increase the life
        of the
        assets are capitalized. Ordinary maintenance and repairs are charged to expense
        as incurred. When assets are sold or otherwise disposed of, the cost and
        the
        related accumulated depreciation are removed from the accounts and any resulting
        gain or loss is recognized at that time.
  Depreciation
        is computed on the declining balance method for financial statement purposes
        over the following estimated useful lives:
  **Telecommunications
                  Equipment**
              **15
                  years****Furniture
                  and Fixtures**
              **7
                  years****Computer
                  Equipment**
              **5
                  years****Software**
              **3
                  years**
  Depreciation
        expense for the three-month periods ended June 30, 2005 and 2004 was $85,600
        and
        $85,589; for the six-month periods ended June 30, 2005 and 2004 were $171,200
        and $171,178 respectively.
  -9-
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  **Impairment
        of Long-lived Assets**
  In
        accordance with Statement of Financial Accounting Standards No. 144, “Accounting
        for the Impairment or Disposal of Long-lived Assets”, long-lived assets such as
        property and equipment and intangible assets subject to amortization are
        reviewed for impairment whenever events or changes in circumstances indicate
        that the carrying amount of an asset group may not be recoverable.
        Recoverability of asset groups to be held and used is measured by a comparison
        of the carrying amount of an asset group to estimated undiscounted future
        cash
        flows expected to be generated by the asset group. If the carrying amount
        of an
        asset group exceeds its estimated future cash flows, an impairment charge
        is
        recognized in the amount by which the carrying amount of an asset group exceeds
        fair value of the asset group.
  **Revenues
        and Expenses Recognition**
  The
        Company is a “development stage” Company and has not had significant sales or
        revenue to date. The Company plans to sell services originating with their
        software and network media distribution. Revenues will be recognized upon
        services rendered to customers. Costs and expenses are recognized during
        the
        period in which they are incurred.
  **Advertising
        Costs**
  The
        Company expenses all costs of advertising as incurred. There were no advertising
        costs incurred for the periods ended June 30, 2005 and 2004.
  **Research
        and Development Costs**
  The
        Company expenses all research and development costs as they are incurred.
        There
        were no research and development costs during the periods ended June 30,
        2005
        and 2004.
  **Income
        Taxes**
  Income
        taxes are generally provided for the tax effects of transactions reported
        in the
        financial statements and consist of taxes currently due plus deferred taxes
        related primarily to differences between the basis of fixed assets for financial
        and income tax reporting. The Company has no deferred tax assets and liabilities
        representing the future tax return consequences of those differences because
        currently the Company has no material temporary timing differences that give
        rise to these tax assets and liabilities. Currently there are no federal
        income
        taxes due.
  **Recently
        Issued Accounting Pronouncements**
  In
        September 2004, the Emerging Issues Task Force ("EITF") reached a consensus
        on
        EITF Issue 04-08 The Effect of Contingently Convertible Instruments on Diluted
        Earnings per Share, which requires the inclusion of shares related to
        contingently convertible debt instruments for computing diluted earnings
        per
        share using the if- converted method, regardless of whether the market price
        contingency has been met. EITF 04-08 will be effective for all periods ending
        after December 15, 2004 and includes retroactive adjustment to historically
        reported diluted earnings per share. The adoption of EITF Issue No. 04-08
        does
        not currently have an impact on the Company's operating results or financial
        position.
  In
        November 2004, the FASB issued Financial Accounting Standards Statement No.
        151
“Inventory Costs-an amendment of ARB No. 43, Chapter 4.” This Statement
        clarifies the accounting for abnormal amounts of idle facility expense, freight,
        handling costs, and wasted material (spoilage). This Statement requires that
        those items be recognized as current-period charges regardless of whether
        they
        meet the criterion of "so abnormal." In addition, this Statement requires
        that
        allocation of fixed production overheads to the costs of conversion be based
        on
        the normal capacity of the production facilities. The Company does not expect
        SFAS 151 to have a material impact on its financial statements.
  In
        December 2004, the FASB issued Financial Accounting Standards Statement No.
        152
“Accounting for Real Estate Time-Sharing Transactions-an amendment of FASB
        Statements No. 66 and 67.” This Statement references the financial accounting
        and reporting guidance for real estate time-sharing transactions that is
        provided in AICPA Statement of Position (SOP) 04-2, Accounting for Real Estate
        Time-Sharing Transactions. This Statement also states that the guidance for
        (a)
        incidental operations and (b) costs incurred to sell real estate projects
        does
        not apply to real estate time-sharing transactions. This Statement is effective
        for financial statements for fiscal years beginning after June 15, 2005.
        The
        Company does not expect SFAS 152 to have a material impact on its financial
        statements.
  -10-
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  In
        December 2004, the FASB issued Financial Accounting Standards Statement No.
        153
“Exchanges of Nonmonetary Assets-an amendment of APB Opinion No. 29.” The
        guidance in APB Opinion No. 29, Accounting for Nonmonetary Transactions,
        is
        based on the principal that exchanges of nonmonetary assets should be measured
        based on the fair value of the assets exchanged. This Statement amends Opinion
        29 to eliminate the exception for nonmonetary exchanges of similar productive
        assets and replaces it with a general exception for exchanges of nonmonetary
        assets that do not have commercial substance. The Company does not expect
        SFAS
        153 to have a material impact on its financial statements.
  In
        May
        2005, the FASB issued SFAS 154, "Accounting Changes and Error Corrections
        - a
        Replacement of APB Opinion No. 20 and FASB Statement No. 3". SFAS 154 requires
        retrospective application to prior period financial statements of changes
        in
        accounting principal, unless it is impracticable to determine either the
        period-specific effects or the cumulative effect of the change. SFAS 154
        also
        redefines "restatement" as the revising of previously issued financial
        statements to reflect the correction of an error. This statement is effective
        for accounting changes and corrections of errors made in fiscal years beginning
        after December 15, 2005. The Company does not believe that the adoption of
        SFAS
        154 will have a significant impact on the consolidated financial
        statements.
  In
        December 2004, the FASB issued SFAS No. 123(R), Share-Based Payment, which
        establishes standards for transactions in which an entity exchanges its equity
        instruments for goods or services. This standard replaces SFAS No. 123 and
        supersedes APB Opinion No. 25, Accounting for Stock-based compensation. This
        Standard requires a public entity to measure the cost of employee services
        received in exchange for an award of equity instruments based on the grant-date
        fair value of the award. This eliminates the exception to account for such
        awards using the intrinsic method previously allowable under APB Opinion
        No. 25.
        SFAS No. 123(R) will be effective for interim or annual reporting periods
        beginning on or after June 15, 2005. Accordingly the Company is unable to
        determine at this time the impact of SFAS No. 123(R) will have on its balance
        sheet or income statements.
  **NOTE
        2 - COMMON STOCK**
  **Issuance
        of Common Stock for Services**
  **First
        Quarter:** During
        January and March 2005 the Company issued 94,615 and 91,463 shares respectively
        to a private investment partnership. The stock was issued at $1.30 per share
        in
        January and $0.82 per share in March. The stock was part of a warrant,
        exercisable at $0.07 per share, which was issued to compensate certain
        professional advisors for services rendered during 2004. The stock was issued
        pursuant to a “cashless exercise” wherein the warrant holder received a reduced
        number of shares of Common Stock upon conversion and contributed the balance
        to
        the treasury of the Company based on the current market value of the stock.
        For
        January 2005, the warrant holders received 94,615 shares of stock and
        contributed 5,385 shares valued at $1.30 per share worth $7,000 (the cost
        of
        their warrants). For June, the warrant holders received 91,463 shares and
        contributed 8,537 shares valued at $0.82 per share, worth $7,000 (the cost
        of
        their warrants).
  **Second
        Quarter:** During
        June 2005 the Company issued 66,667 shares to a private investment partnership.
        The stock was issued at $0.68 per share. The stock, similar to that issued
        in
        January and March was paid to compensate professional advisors for services
        rendered during 2004 and was issued pursuant to a “cashless exercise” wherein
        the warrant holder received a reduced number of shares of Common Stock upon
        conversion and contributed the balance to the treasury of the Company based
        on
        the current market value of the stock. For June, the warrant holders received
        66,667 shares of common stock and contributed 33,333 shares valued at $0.21
        per
        share, worth $7,000 (the cost of their warrants).
  -11-
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  **Stock
        Exchanged for Equipment**
  During
        January 2003, the Company agreed to issue 820,000 shares of common stock
        to
        Digital Service International [“DSI”] as partial payment for computer equipment,
        infrastructure and software. The equipment, valued at an agreed value of
        $1,667,000, was to be paid for by issuing 820,000 shares of stock and a payment
        of $847,000 in cash (represented by a Note Payable of $847,000). The common
        stock was valued at $1.00 per share. On December 16, 2005 the agreement was
        amended. As part of the amended agreement, the Company issued 820,000 shares
        of
        common stock to DSI. (See Note 14 - Subsequent Events).
  **Convertible
        Notes and Warrants**
  During
        January of 2005, the Company borrowed $200,000 in connection with a convertible
        note payable with detachable warrants. The notes included interest of 6%
        and
        were due on December 15, 2005 or upon the occurrence of certain events relating
        to the capital structure of the Company. To date none of the warrants or
        conversion rights have been exercised. (See Note 10 - Convertible Notes and
        Note
        14 - Subsequent Events).
  **NOTE
        3 - RELATED PARTY TRANSACTIONS**
  Officer’s
        compensation for services for the three-month period ended June 30, 2005
        and
        2004 was $207,500 and $49,800; for the nine-month period ended June 30, 2005
        and
        2004 was $415,000 and 99,600 and was included in general and administrative
        expenses, related party. The compensation for services from inception was
        as
        follows:
  Compensation
              2003
              2004
                  - Q1
              2004
                  - Q2
              2004
                  - Q3
              2004
                  - Q4
              2005
                  - Q1
              2005
                  - Q2CEO
              199,200
              49,800
              49,800
              49,800
              72,500
              72,500
              72,500President
              0
              0
              0
              0
              62,419
              67,500
              67,500Exec
                  Vice Pres
              0
              0
              0
              0
              62,419
              67,500
              67,500Total
              199,200
              49,800
              49,800
              49,800
              197,338
              207,500
              67,500
  The
        year
        to date consulting services consists of 4 th Quarter
        2004 expenses to two individuals who acting as consultants prior to becoming
        officers of Winsonic received a total of 1,521,532 shares of common stock
        valued
        at $1,125,934 for consulting services regarding the merger. This value was
        included as consulting expense in the statements of operations for the quarter
        and the year ended December 31, 2004.
  During
        2003 the Company received a loan with a balance of $36,419, bearing interest
        annually at 7%, in accordance with a loan agreement that the Company had
        executed. For the period from inception to December 31, 2003, the Company
        had
        accrued interest expense of $29,706 related to these notes. During 2004,
        the
        loan of $36, 419 was forgiven, and included in the current period (4 th Quarter)
        operating results. The write off of the related interest accrued of $29,706
        was
        also included in the 4 th Quarter
        operating results and in the “Inception-to-date” transactions.
  As
        of
        December 31, 2004 the Company has a loan payable totaling $683,726 to the,
        C.E.O., consisting of principal of $600,000, which was due September 3, 2004
        ,
        plus 80,000 shares of common stock valued at $64,000, both payable to maker
        of
        the note. Under the terms of the Note, interest will be paid at the rate
        of 10%
        annually. Accrued interest included in the Note balance of $683,726 is $19,726
        as of December 31, 2004. Quarterly interest in the amount of $15,000 per
        quarter
        was accrued during the three-month periods and $30,000 for the six-month
        periods
        ended June 30, 2005 and 2004.
  During
        the 1 st Quarter
        of 2005, the Company paid $160,000 to the CEO against this loan. At June
        30,
        2005 and December 31, 2004 the balance of the loan was $553,479 and $683,726
        respectively. (See Note 14 - Subsequent Events relating to a payment in the
        form
        of common stock during the 4 th Quarter).
  -12-
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  **NOTE
        4 - SUMMARY OF LEGAL PROCEEDINGS**
  Other
        than as described below, the Company is not currently involved in any legal
        proceedings that may be deemed to be material to our financial condition.
  Callozo
        vs. Media and Entertainment.com
  On
        March
        22, 2004, the Company (in all cases cited herein known as Media and
        Entertainment.com, Inc.) commenced a civil lawsuit in Los Angeles Superior
        Court
        (Case No. BC312530) against Caesar Collazo, a former officer of the Company,
        seeking damages in excess of $40,000, punitive and exemplary damages. The
        Company had purchased the assets of Nexcode of which Collazo was a founder,
        and
        Collazo received  400,000
        shares of the Company’s Common Stock (the “Shares”) in consideration of the
        sale. While still employed by the Company, Collazo allegedly formed a competing
        company, stole proprietary property of the Company and solicited Company
        clients
        on behalf of the competitor. The Company seeks a constructive trust, injunctive
        relief and the return of the Shares.
  Prior
        thereto, in February 2004, Mr. Collazo had commenced a lawsuit in Los Angeles
        Superior Court against the Company and its transfer agent seeking to remove
        the
        restrictive legend from the Shares. The injunctive relief was denied and
        Mr.
        Collazo dismissed the Complaint. In March 2004, the Company commenced a lawsuit
        in U.S. District Court, Clark Country Nevada (Case No. A480587) to enjoin
        the
        transfer of the Shares. The Court issued an Order on March 19, 2004, enabling
        Collazo to sell 30,000 shares of Common Stock and issuing a temporary
        restraining order with regard to the remaining 370,000 Shares provided the
        Company posted a bond for the entire amount of $424,000. The Company’s
        principals chose not to pledge personal assets as collateral for the bond
        and
        the Nevada action was dismissed.
  In
        the
        above-described pending litigation brought by the Company against Collazo,
        in
        July 2004, the defendant denied the allegations, asserted 21 affirmative
        defenses and bought a cross-complaint against the Company. Mr. Collazo alleges
        that the Company breached the agreement with Collazo because he had not been
        paid compensation due him, he had not received a percentage of gross profit
        earnings, and that the Company had not exercised a good faith effort to raise
        an
        additional $250,000 in capital, and that Collazo did not receive the equity
        promised him. The Company denied the allegations of the Cross Complaint and
        asserted 13 affirmative defenses. At a settlement conference on April 11,
        2005,
        the Company agreed to issue 900,000 shares of common stock to Mr.  Collazo,
        as well as attorney fees of $120,000. The Company also agreed to issue 900,000
        shares of common stock to Mr. Nana Yalley, an officer and current shareholder,
        as well as an equal partner of Mr. Collazo in Nexcode. The shares of common
        stock were valued as of the settlement date, and accordingly the value of
        900,000 shares of common stock as well as $120,000 of attorney fees was charged
        as current year expenses as of December 31, 2004. The settlement was not
        accomplished by June 10, 2005, whereby Mr. Collazo may exercise at his option
        the right to enforce the settlement agreement for payment of attorney fees
        or
        convert the obligation of payment for attorney fees to a demand for issuance
        of
        200,000 shares of stock in the Company. As of March 18, 2006, neither the
        900,000 shares of common stock for Yalley, nor the $120,000 of attorney’s fees
        have been issued and paid, respectively. However, the 900,000 shares due
        to Mr.
        Collazo have been subsequently issued in settlement. The agreement had no
        effect
        on the operating results for the 1 st or
        2 nd Quarters
        of 2005 or 2004; and an estimated liability of $1,020,000 for legal settlements
        was recorded as of June 30, 2005 and December 31, 2004.
  Yellowbrix,
        Inc. vs. Media and Entertainment.com:
  Yellowbrix,
        Inc. filed a collection suit against Media and Entertainment.com regarding
        an
        alleged contract authorized by the former CEO of Media and Entertainment.com.
        The pending lawsuit amount in dispute is $19,800, which is expensed in general
        and administrative expense in the 4 th Quarter
        of 2004 and accrued within accounts payable of the Company as of December
        31,
        2004. The amount is included in Accounts Payable as of June 30, 2005 and
        December 31, 2004.
  -13-
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  Berman,
        Romeri and Associates, LLP vs. Media and Entertainment.com:
  This
        pending collection lawsuit arises from alleged contract and services obligating
        the Company, which was allegedly authorized by the former CEO of Media and
        Entertainment.com. The disputed amount of $8,733 is expensed in general and
        administrative expense in December of 2004 and included in the 4 th Quarter
        operations. The liability included in accounts payable of the Company as
        of June
        30, 2005 and December 31, 2004.
  **NOTE
        6 - GOING CONCERN**
  These
        financial statements have been prepared in accordance with generally accepted
        accounting principals applicable to a going concern, which contemplates the
        realization of assets and the satisfaction of liabilities and commitments
        in the
        normal course of business. As of June 30, 2005, the Company has recognized
        $57,811 of revenues to date and had accumulated losses of approximately
        $9,254,000 from operations since inception. The Company’s ability to continue as
        a going concern is contingent upon the successful completion of additional
        financing arrangements and its ability to achieve and maintain profitable
        operations. Management plans to raise equity capital to finance the operating
        and capital requirements of the Company. Amounts raised will be used for
        further
        development of the Company’s products, to provide financing for marketing and
        promotion, to secure additional property and equipment, and for other working
        capital purposes. While the Company is expending its best efforts to achieve
        the
        above plans, there is no assurance that any such activity will generate funds
        that will be available for operations.
  **NOTE
        7 - ACCOUNTS RECEIVABLE AND DEPOSITS**
  As
        of
        June 30, 2005 and 2004 there were no accounts receivable.
  The
        Company did have a Deposit on hand with a major vendor to secure network
        availability. At June 30, 2005 the deposit was $78,000. At December 31, 2004
        the
        Deposit amount was $82,490. The reduction in the deposit amount arose from
        rental deposits, which were written off by the Company during the first quarter
        of 2005.
  **NOTE
        8 - FIXED ASSETS**
  As
        of
        June 30, 2005 and December 31, 2004, the Company has a Note Payable in the
        amount of $847,000, which is secured by equipment. During the fourth quarter
        of
        2005 (see subsequent event footnote) the Company renegotiated the equipment
        purchase agreement and the Note; wherein the Company paid $5,000, returned
        most
        of the underlying equipment to the vendor, and reduced its liabilities and
        its
        Fixed Assets by $842,000.
  The
        following table presents the Net Fixed Assets as of June 30, 2005 and December
        31, 2004 and a pro forma presentation of Net Fixed Assets adjusted for the
        assets returned in connection with the write-off of the Note Payable:
  **Adjusted
                  for Renegotiated Note****June
                  30,**
                **2005**
              
              **December
                  31, 2004**
              
              **Adjustment
                  for Note Write-off**
              
              **June
                  30,**
                **2005**
              
              **December
                  31, 2004**Computer
                  Equipment
              
              $
              1,583,474
              
              $
              1,577,269Infrastructure
              
              
              320,000
              
              
              320,000Software
              
              
              165,515
              
              
              160,000Furniture
                  & fixtures
              
              
              13,040
              
              
              13,040Total
                  Fixed Assets
              
              
              2,082,029
              
              
              2,070,309
              
              
              (842,000
              )
              
              1,238,954
              
              
              1,228,309Less:
                  accumulated depreciation
              
              
              (722,155
              )
              
              (550,955
              )
              
              292,199
              
              
              (378,990
              )
              
              (326,880
              )Net
                  Fixed Assets
              
              $
              1,359,874
              
              $
              1,519,354
              
              $
              549,801
              
              $
              859,964
              
              $
              901,429
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            to Table of Contents**
 
 **NOTE
        9 - NOTES PAYABLE, LOANS PAYABLE AND PLEDGED ASSETS**
  The
        following is a summary of long-term debt:
  **Interest
                  Rate**
              
              LOANS
                  PAYABLE
              
              **June
                  30,**
                **2005**
              
              **December
                  31,**
                **2004**Unstated
              
              
              Eight
                  convertible promissory notes, due October 2004, convertible into
                  shares of
                  common stock at any time prior to maturity. No conversions were
                  exercised.
              
              $
              198,500
              
              $
              198,5006.00%
              
              
              A
                  loan containing principal of $108,000, with no stated interest
                  rate,
                  repayment terms or maturity date. Interest is imputed at 6% annually,
                  based upon a 365-day calendar year. Accrued interest payable included
                  in
                  the balance is $10,020 at June 30, 2005 and $6,780 at December
                  31,
                  2004.
              
              
              118,020
              
              
              114,7806.00%
              
              
              A
                  loan containing principal of $40,000, with no stated interest rate,
                  repayment terms or maturity date. Interest is imputed at 6% annually,
                  based upon a 365-day calendar year. Accrued interest payable included
                  in
                  the balance is $5,418 at June 30, 2005 and $4,226 at December 31,
                  2004.
              
              
              45,418
              
              
              44,2266.00%
              
              
              A
                  loan containing principal of $2,000 with 6% stated interest rate,
                  90 day
                  maturity. Interest is calculated at 6% annually, based upon a 365-day
                  calendar year. Accrued interest payable included in the balance
                  is $21 at
                  June 30, 2005 and -0- at December 31, 2004.
              
              
              2,021
              
              
              -0-Total
                  Loans Payable
              
              $
              364,690
              
              $
              357,506
   Interest
                  Rate
              
              NOTES
                  PAYABLE
              
              **June
                  30,**
                **2005**
              
              **December
                  31,**
                **2004**Unstated
              
              
              A
                  loan due April 13, 2003, containing principal of $847,000 with
                  no stated
                  interest rate. The loan was secured with fixed assets (computer
                  equipment,
                  infrastructure and software). On December 16, 2005 the Company
                  paid $5,000
                  and returned certain pledged equipment thus satisfying the note
                  holder.
                  Consistent with the final resolution of the agreement, no interest
                  or
                  finance charges have been accrued.
              
              $
              847,000
              
              $
              847,000Total
                  Notes Payable
              
              $
              847,000
              
              $
              847,000
  
 -15-
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            to Table of Contents**
  On
        December 16,2005 the Company renegotiated the note payable relating to certain
        fixed assets wherein $5,000 was paid to the vendor and the balance of the
        note
        was cancelled in connection with the return of the underlying equipment.
        There
        was no adjustment for finance charges or for carrying costs relating to the
        note
        and therefore the Company recaptured $101,640 in accrued interest charges
        relating to interest expensed during the period from January 2003 through
        December 31, 2004. The credit to interest expense is included in the other
        income for the fourth quarter of 2005.
  **NOTE
        10 - CONVERTIBLE DEBENTURES**
  During
        December 2004 and January 2005, the Company received proceeds of $815,000
        and
        $200,000 respectively from a Convertible Note and Warrant Purchase Agreement
        [“the Agreement”]. The offering was made to accredited investors. The
        Convertible Notes including interest of 6% were due in December of 2005 or
        upon
        the occurrence of certain events relating to potential changes in the capital
        structure of the Company. The conversion feature portion of the Agreement
        included the right of the Note Holder to convert the face value of the note
        into
        common stock of the Company at the lower of $.70 per share or 85% of the
        market
        value of the common stock (at the time of conversion). The Agreement also
        included a detachable warrant, which allowed the Warrant Holders to purchase
        shares of common stock of the Company at $.70 per share (285,714 shares of
        common stock), through December 2007.
  The
        transaction, to the extent that it is to be satisfied with common stock of
        the
        Company would normally be included as equity obligations. However, in the
        instant case, due to the indeterminate number of shares which might be issued
        under the embedded host debt conversion feature, the Company is required
        to
        record a liability relating to both the detachable warrant and the embedded
        convertible feature of the note payable (included in the current liabilities
        as
        a “derivative liability”).
  The
        accompanying financial statements comply with current requirements relating
        to
        warrants and embedded derivatives as described in FAS 133, EITF 98-5 and
        00-27,
        and APB 14 as follows:
  The
        Company allocated the proceeds received between the convertible debt and
        the
        detachable warrant based upon the relative fair market values on the date
        proceeds were received (December 2004 and January 2005).
  Subsequent
        to the initial recording, the change in the fair value of the detachable
        warrant, determined under the Black-Scholes option pricing formula and the
        change in the intrinsic value of the embedded derivative in the conversion
        feature of the convertible debenture, is accrued as adjustments to the
        liabilities at June 30, 2005 and December 31, 2004.
  The
        expense relating to the change in the fair value of the Company’s stock
        reflected in the change in fair value of the warrants and derivatives (noted
        above) is included as an item of other income and expense in the form of
        an
        unrealized interest income or expense arising from convertible financing
        on the
        Company’s balance sheet.
  Accreted
        interest and principal is $571,636 as of June 30, 2005 and $37,871 as of
        December 31, 2004.
  -16-
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            to Table of Contents**
  The
        following table summarized the various components of the convertible debentures
        as of June 30, 2005 and December 31, 2004:
  June
                  30,
                2005
              
              December
                  31,
                2004Derivative
                  liability
              
              $
              130,625
              
              $
              652,254Warrant
                  liability
              
              
              281,345
              
              
              614,609Convertible
                  debentures
              
              
              571,636
              
              
              37,871983,606
              
              
              1,304,734Adjustment
                  of derivative andWarrant
                  liability to fair value
              
              
              603,029
              
              
              (451,863
              )Less:
                  Accretion of principal andinterest
                  related to convertible debenture
              
              
              (571,636
              )
              
              (37,871
              )Plus:
                  Accrued interest
              
              
              32,356
              
              
              2,144Total
                  Convertible Debentures
              
              $
              1,047,355
              
              $
              817,144Less:
                  Current portion of Convertible Debentures
              
              
              (1,047,355
              )
              
              (817,144
              )Total
                  Convertible Debentures
              
              $
              -0-
              
              $
              -0-
  Included
        in the above values is accrued interest of $32,356 at June 30, 2005 and $2,144
        at December 31, 2004. The interest expense for the three-month and six-month
        periods ended June 30, 2005 were: $15,461 and $30,211
  On
        December 15, 2005, the Convertible Notes were extended to June 30, 2006 and
        amended to potentially reduce the price of conversion. (See Note 14 - Subsequent
        Events).
  **NOTE
        11 - COMMITMENTS AND CONTINGENCIES**
  Employment
        Agreements: On October 8, 2004, the Company entered into binding offering
        letters with the Chairman and CEO, the President and the Executive Vice
        President; as well as one former executive officer and two non-executive
        officers. Under the terms of the employment agreements, the Executive Officers
        are to receive base salaries of $290,000, for the President and $270,000
        for
        each of the President and the Executive Vice President, with $7,000 per month
        deferred until the next funding occurs or January 1, 2005, whichever occurs
        first. Each officer is eligible for annual incentive bonuses based on
        performance. The CEO and each officer received stock options to purchase
        1,000,000 shares and 500,000 shares, respectively of common stock at $1.00
        per
        share that vest equally over a twelve month period effective with the date
        of
        the employment agreement. The agreements are terminable at will with or without
        cause (as defined).
  **Native
        American Television Network, Inc.**
  On
        February 17, 2005, the Company entered into a Memorandum of Understanding
        (“MOU”) with Native American Television Network, Inc. (“NATVN”). NATVN, based in
        Albuquerque, New Mexico is a recently formed company that intends to launch
        the
        first Western Hemisphere, pan-tribal digital cable channel. The Company will
        provide to NATVN its nationwide distribution platform and technical support,
        expertise and personnel. There was no prior material relationship between
        the
        two companies or their affiliates other than in respect of the
        agreement.
  The
        companies intend to enter into an operating agreement pursuant to which they
        will share all net revenues on a 50/50 basis generated from subscriber fees,
        less all net costs, such as regulatory and interconnection fees. NATVN will
        provide the Company with up to two minutes of commercial airtime, per hour,
        per
        day, on regularly scheduled programming that offers air space to advertisers
        with the exception of paid programming or long form advertisements. The Company
        will provide its expertise and guidance to NATVN in obtaining and filing
        all
        permits and licenses required. The companies have signed a Stock Purchase
        Agreement, under which the Company will issue 1,670,000 shares of common
        stock
        valued at approximately $1.20 per share, or $2 million. In return, NATVN
        will
        issue to the Company 4 million shares of its common stock valued at $.50
        per
        share, or $2 million.
  -17-
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  The
        investment in NATVN will be accounted for under the “equity” method . The equity
        method of accounting is used if the investor has the ability to significantly
        influence the investee’s financial and operating policies or if an investor is
        accounting for an investment in a corporate joint venture, but holds less
        than
        50% of the investee. Under the equity method, an investment is initially
        recorded at cost. Thereafter, the carrying amount of the investment is increased
        for the investor’s proportionate share of the investee’s gains or reduced for
        the proportionate share of the investee’s losses or for distributions received
        from the investee. (See Footnote 14 - Subsequent Events).
  **NOTE
        12 - EARNINGS PER SHARE**
  The
        computations of earnings per share are based upon the weighted average number
        of
        outstanding common shares during the periods. For the periods presented the
        Company has incurred losses, which would make any calculation of earnings
        per
        share based on the number of shares calculated under the diluted earnings
        per
        share anti-dilutive and therefore the amount is not presented. When their
        effect
        is dilutive, additional shares assuming the exercise of certain vested stock
        options, reduced by the number of shares, which could be purchased from the
        proceeds from the exercise of the stock options assuming they were exercised,
        are calculated to disclose fully-diluted earnings per share.
  **NOTE
        13 - FINANCIAL STATEMENT RESTATEMENTS**
  The
        management of the Company, have concluded that the Company should restate
        its
        consolidated financial statements for the year ended December 31, 2004. As
        disclosed in Note 12 to the Company’s restated consolidated financial statements
        for the years ended December 31, 2004 and 2003 included in the Company’s amended
        Annual Report on Form 10-KSB/A for the fiscal year ended December 31, 2004,
        filed with the SEC on March 8, 2006, the Company has restated its consolidated
        financial statements as of and for the years ended December 31, 2004 and
        2003 to
        correct certain financial statement errors reported in the Form 10-K for
        such
        fiscal year as originally filed. The corrections in this restatement (i.e.,
        fiscal year ended December 31, 2004) have a carry forward impact on the
        Company’s consolidated financial statements as of and for the three months ended
        June 30, 2005.
  •
              
              The
                  corrected financial statements will account for the convertible
                  notes
                  embedded derivatives as well as the detachable warrants as current
                  liabilities, allocated between the derivative and warrant liabilities
                  as
                  determined by the price of the underlying common stock. (Pending
                  exercise
                  of the note conversion rights or the warrants
                  conversion).•
              
              The
                  classification of costs and benefits arising from the changes in
                  the price
                  of the underlying common stock has been changed from “other comprehensive
                  income” (an Equity caption) to “unrealized gains and losses from
                  derivatives” (an element of Other Income and
                  Expense).
 
 **NOTE
        14 - SUBSEQUENT EVENTS**
  **Convertible
        Notes Payable and Debentures**
  In
        January 2005, pursuant to a Convertible Note and Warrant Purchase Agreement,
        the
        Company sold the remaining $185,000 of an aggregate of $1,000,000 of 6%
        convertible promissory notes and warrants to purchase common stock. In a
        second
        round of the same offering, the Company sold an additional $15,000 of 6%
        convertible promissory notes and warrants to purchase common stock. The notes
        are due the earlier of December 15, 2005, or upon the occurrence of certain
        events. The warrants are convertible at the lower of $.70 per share or 15%
        below
        market.
  Note
        payable and common stock obligation for purchase of equipment. During 2005
        the
        Company renegotiated the note and the stock to be issued as consideration
        for
        operating assets of the Company (see Note 11). The renegotiation included
        a
        cancellation of the note payable for $847,000, the issuance at $1.00 per
        share
        of the common stock relating to 820,000 shares of the Company’s common stock and
        the elimination of a portion of the equipment originally sold to the Company.
        The effect in the fourth quarter of 2005 will be to reduce the liabilities
        of
        the Company by $847,000, reduce the value of the fixed assets of the Company
        by
        $847,000 and increase shares outstanding by 820,000 with a related credit
        to Par
        Value of $820 and Paid in Capital of $819,180.
  -18-
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            to Table of Contents**
  **Related
        Party Note Payment**
  During
        the 4th Quarter of 2005, 700,000 shares of the Company’s common stock were
        issued to the CEO as payment to be applied against the balance of a note
        (See
        Footnote 3 - Related Party Transactions). The agreed-to price per share of
        the
        issued common stock was $0.33 per share, based on the market price of the
        stock
        on December 5, 2005. The balance of the note was reduced by $231,000 during
        the
        4th Quarter.
  **NATVN
        Share Exchange**
  On
        September 29, 2005, the Company issued 1,670,000 shares of common stock to
        Native American TV Network in an exchange of common stock, wherein the Company
        acquired 4,000,000 shares of stock in NATVN. (See Footnote11 - Commitments
        and
        Contingencies).
  **Extension
        and Amendment of Convertible Note Agreements**
  On
        December 15, 2005, the Company entered into agreements with the convertible
        note
        holders to extend the maturity date and amend the conversion and repayment
        provisions. The maturity date of the notes, originally December 15, 2005
        and
        January 15, 2006, were extended to June 30, 2006.
  Additionally,
        the terms of conversion were amended to provide that the principal and interest
        will be converted at the rate of $0.40 per share or 15% below the average
        closing price of the Company’s common stock for the previous 20 trading days.
        Previously the conversion was to take place at $0.70 per share or 15% below
        the
        average closing price of the Company’s common stock for the previous 20 trading
        days. (See Note 10 - Convertible Debentures).
  **Automated
        Interiors Acquisition**
  On
        January 11, 2006, the Company acquired all of the outstanding shares of
        Automated Interiors, (a private Georgia corporation) [“Interiors”] in exchange
        for 411,955 shares of the Company’s common stock. The transaction will be
        accounted for as a purchase of the net assets of Interiors, creating a
        wholly-owned subsidiary, the operations of which will be included in
        consolidated financial statements of the Company commencing in the 1 st Quarter
        of 2006. Non-qualifying stock options were offered to five executives of
        Interiors to purchase 1,200,000 shares of common stock of the Company. The
        value
        of the transaction, based on an agreed value of $0.25 for each common share
        of
        the Company and for the net assets of Interiors as of the date of the
        transaction plus projected cash flows is $102,989. During the year ended
        2005, Interiors had gross sales of $994,725.




-19-
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**Item
      2. Management’s Discussion and Analysis or Plan of
      Operation.**





**Forward-Looking
      Statements**





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





**General**





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





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




-20-
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Winsonic
      Digital Cable Systems Network ("WDCSN") concentrates on carrier-class high-speed
      connectivity solutions that bring together a first-class facility around the
      country along with network, multimedia, and content distribution communication
      services to its customers, without requiring substantial capital investments.
      Verizon and Level 3 are among the leading companies to team with Winsonic to
      implement a high-end facilities-based infrastructure to aid and facilitate
      voice
      transport, audio, video, data, media and broadcast content over
      protocol-independent multi-layered communication systems.





To
      better understand the effects of this changing landscape, evidenced by cable
      industry consolidation, cross industry completion and technical standards,
      we
      have examined the underlying drivers, both from a market and technology
      viewpoint. The market dynamics underlying the local distribution of video,
      voice
      and data are a result of historically non-competing industries, including cable,
      long distance and regional telephone operating companies. Changes in government
      regulation and the consumer demand for choice are driving the new
      environment.





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





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





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





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




-21-
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**Material
      Changes in Results of Operations**




As
      a “development stage company” we have not commenced operations and have had no
      revenue during the quarter ended September 30, 2005, and $25,000 in revenue
      for
      the quarter ended September 30, 2004. Prior to 2004, the Company has recorded
      $32,811 of revenue.





For
      the three months ended June 30, 2005, the Company incurred an operating of
      approximately $718,000 ,compared to an operating loss of approximately $301,000
      $25,000 in the comparable period of 2004. Total operating expenses were
      approximately $607,000 for the three-month period, primarily representing
      selling, general and administrative expenses of approximately $522,000, and
      depreciation expense of approximately of approximately $86,000 compared to
      total
      operating expenses of in the comparable period last year of approximately
      $207,000 consisting primarily of selling, general, and administrative expenses
      of approximately $121,000 and depreciation expense of approximately $86,000.
      For
      the six month period year to date, the Company incurred an operating loss
      $1,372,000 , compared to an operating loss of approximately $627,000 in the
      comparable period of 2004. Total operating expenses for the six month period
      ending June 30, 2005 were approximately $1,139,000 consisting primarily of
      selling, general, and administrative of approximately $937,000 and depreciation
      of approximately $171,000 compared to total operating expenses of approximately
      $408,000 consisting primarily of selling, general, and administrative of
      approximately $237,000 and depreciation of approximately $171,000 in the
      comparable period of 2004.





For
      the three months ended June 30, 2005, the company incurred interest expense
      of
      approximately $303,000 compared to an interest expense of approximately $15,000
      in the comparable period of 2004. For the six month period ending June 30,
      2005
      the company incurred an interest expense of approximately $593,000 compared
      to
      an interest expense of approximately $31,000 during 2004. The increase in
      interest expense during the three months ended June 30, 2005 compared to June
      30, 2004 is $288,000. The increase is primarily due to the accretion of $273,000
      of interest and principal related to convertible promissory notes, and $15,000
      increase of interest related to notes payable for loan payable - related party.
      For the six months ended June 30, 2005, the increase in interest expense is
      $562,000, due to the accretion of interest and principal related to convertible
      promissory notes $534,000 and $30,000 due to increase in interest for loans
      payable - related party.




-22-
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During
      December of 2004 and January of 2005 the company issued a total of approximately
      $1,015,000 in convertible debentures. The conversion feature portion of the
      Agreement included the right of the Note Holder to convert the face value of
      the
      note into the common stock of the Company at the lower of $0.70 per share or
      85%
      of the market value of the common stock (at the time of conversion). The
      Agreement also included a detachable warrant, which allowed the Warrant Holders
      to purchase shares of common stock of the Company at $0.70 per share
      ( 1,450,000 shares
      of common stock), through December 2007. Please reference Note 10 of the
      financial statements titled “ *Convertible
      Debentures* ”
      for a more detailed explanation. The transaction, to the extent that it is
      to be
      satisfied with common stock of the Company would normally be classified as
      an
      equity obligation(s). However, theoretically the company could be required
      to
      issue an indeterminate number of shares of its common stock to satisfy the
      conversion feature of the debenture. This could theoretically cause the Company
      to exceed the number of shares of common stock it is authorized to issue, which
      would also prevent the delivery of common shares if the warrants were exercised
      during that period of time as well. Under Generally Accepted Accounting
      Principles (“GAAP”), the Company is required torecord the warrants and the
      convertible notes as a liability. Changes in the value of the derivative
      liability and the warrant liability are reflected on our income statement as
      “ *Unrealized
      gain(loss) on adjustment of derivative and warrant liability to fair value
      of
      underlying securities.* ”
      Due to the fact that the underlying convertible debenture and associated
      warrants were not present in the three month period ended June, 2004 a direct
      comparison of the present quarter with the prior year’s quarter is not possible
      During the three month period ended December 31, 2004 the Company recorded
      in
      interest expense an *Unrealized
      loss on adjustment of derivative and warrant liability to fair value of
      underlying securities* of approximately $452,000 relating to the adjustment of these liabilities.
      During the three month period ended March 31, 2005 the Company recorded a gain
      of approximately $1,134,000 from the adjustment of the same liabilities, and
      during the three month period ending June 30, 2005 the Company recorded an *Unrealized
      loss on adjustment of derivative and warrant liability to fair value of
      underlying securities* of approximately $79,000. For the six month period ending June 30, 2005 the
      company recorded an *Unrealized
      gain on adjustment of derivative and warrant liability to fair value of
      underlying securities* of approximately $1,055,000.




For
      the three month period ending June 30, 2005 the Company recorded a net loss
      of
      approximately $1,100,000, compared to the three month period ended June 30,
      2004
      when the company recorded net income of approximately $273,000. For the six
      month period ending June 30, 2005 the company recorded a net loss of
      approximately $911,000 compared to a net loss of approximately $615,000 in
      the
      comparable period of 2004.





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





**Material
      Changes in Financial Condition**





As
      of June 30, 2005, the Company had a working capital deficit of approximately
      $6,599,000, compared to a deficit of approximately $6,092,000 as of December
      31,
      2004.





If
      we are unable to generate sufficient sustainable revenues or obtain additional
      financing to meet our financial obligations, we will have to further reduce
      our
      operations, and we will not be able to continue as a going concern. Our
      independent accountants have indicated in their review report, dated March
      18,
      2006, that there is substantial doubt about our ability to continue as a going
      concern without increased revenues and additional financing.




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For
      the six month period ending June 30, 2005 we used approximately $502,000 in
      our
      operating activities, compared with approximately $10,000 being generated by
      operations in the comparable period of 2004.





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





For
      the six month period ending June 30, 2005 our financing activities generated
      approximately $77,000 compared to approximately $12,000 being used in the
      comparable period last year.





For
      the six month period ending June 30, 2005 the company’s net cash position
      decreased by approximately $437,000 compared to a net decrease of approximately
      $2,000 in the comparable period of 2004.




**Continuing
        Operations**




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





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





**Item
      3. Controls and Procedures.**





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




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The
      following are the results of the procedures adhered to regarding Winsonic
      Digital Media Group, Ltd. (a development stage company), yielding the following
      adjustments and disclosures made to the prior year ended December 31,
      2003.




A.
            The
                Company undertook an organizational restructure with the merger of
                Winsonic Holdings, Ltd. and Winsonic Digital Cable Systems Network
                with
                Media and Entertainiment.com, Inc., thus creating Winsonic Digital
                Media
                Group, Ltd. The circumstances and transactions of the merger on October
                7,
                2004 were thoroughly reviewed. The merger was considered a capital
                transaction in substance, rather than a business combination, resulting
                in
                a reverse acquisition for accounting purposes, thereby yielding no
                recording of goodwill, and called for the proper recording of issuance
                of
                6,004,200 common stock shares to the founder and CEO. Also, as mentioned
                in Note 1 - Organization and Purpose (on page F-7), the Company considered
                SAB Topic 4C in disclosing that stockholders deficit and loss per
                share
                were retroactively recasted using historical data from Winsonic.
                The entry
                to record par value of $6,004 was a credit to common stock and debit
                to
                related party-selling, general and administrative expenses as of
                September
                10, 2002 (inception).


B.
            Equity
                transactions, including warrants, paid-in capital, and common stock
                transactions of the Company were reviewed in detail to ensure proper
                recording of stockholders deficit. During our review of warrants,
                paid-in
                capital, and common stock transactions, it was noted that the Company
                in
                2003 year had incorrectly capitalized stock issued for services,
                rather
                than expensing cost of the services. The Company has now recorded
                and
                disclosed $275,000 as consulting expense in 2003, and reduced the
                asset by
                the same amount.





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





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




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**Part
      II - Other Information**





**Item
      1. Legal Proceedings.**





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





Callozo
      vs. Media and Entertainment.com





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





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





In
      the
      above-described pending litigation brought by the Company against Collazo,
      in
      July 2004, the defendant denied the allegations, asserted 21 affirmative
      defenses and bought a cross-complaint against the Company. Mr. Collazo alleges
      that the Company breached the agreement with Collazo because he had not been
      paid compensation due him, he had not received a percentage of gross profit
      earnings, and that the Company had not exercised a good faith effort to raise
      an
      additional $250,000 in capital, and that Collazo did not receive the equity
      promised him. The Company denied the allegations of the Cross Complaint and
      asserted 13 affirmative defenses. At a settlement conference on April 11, 2005,
      the Company agreed to issue 900,000 shares of common stock to Mr. Collazo,
      as
      well as attorney fees of $120,000. The Company also agreed to issue 900,000
      shares of common stock to Mr. Nana Yalley, an officer and current shareholder,
      as well as an equal partner of Mr. Collazo in Nexcode. The shares of common
      stock were valued as of the settlement date, and accordingly the value of
      900,000 shares of common stock as well as $120,000 of attorney fees was charged
      as current year expenses as of December 31, 2004. The settlement was not
      accomplished by June 10, 2005, whereby Mr. Collazo may exercise at his option
      the right to enforce the settlement agreement for payment of attorney fees
      or
      convert the obligation of payment for attorney fees to a demand for issuance
      of
      200,000 shares of stock in the Company. As of March 18, 2006, neither the
      900,000 shares of common stock for Yalley, nor the $120,000 of attorney’s fees
      have been issued and paid, respectively. However, the 900,000 shares due to
      Mr.
      Collazo have been subsequently issued in settlement. The agreement had no effect
      on the operating results for the 1 st Quarter
      of 2004 or 2005; and an estimated liability of $1,020,000 for legal settlements
      was recorded as of March 31, 2005 and December 31, 2004.




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





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





Berman,
      Romeri and Associates, LLP vs. Media and Entertainment.com:





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





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





On
      January 20, 2005 we issued 94,615 shares of our common stock valued at $1.30
      per
      share in exchange for services provided to the company.





On
      March
      30, 2005 we issued 91,463 shares of our common stock valued at $0.82 per share
      in exchange for services provided to the company.





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





On
      December 16, 2005 as part of a revised agreement including the cancellation
      of
      $842,000 of Notes Payable and return of certain pledged equipment, 820,000
      shares were issued to DSI in exchange for the operating equipment.. (See Note
      15
      - Subsequent Events).




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





On
      January 11, 2006, the Company acquired all of the outstanding shares of
      Automated Interiors, (a private Georgia corporation) [“Interiors”] in exchange
      for 207,297 shares of the Company’s common stock.





**Item
      3. Defaults Upon Senior Securities.**





The
      company is not currently in default on any of its Senior Debt
      Agreements.





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





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





**Item
      5. Other Information.**





Subsequent
      Events:





On
      January 11, 2006, the Company acquired all of the
      outstanding shares of Automated Interiors, (a private Georgia corporation)
      [“Interiors”] in exchange for 411,955 shares of the Company’s common stock. The
      transaction will be accounted for as a purchase of the net assets of Interiors,
      creating a wholly-owned subsidiary, the operations of which will be included
      in
      consolidated financial statements of the Company commencing in the 1 st Quarter
      of 2006. Non-qualifying stock options were offered to five executives of
      Interiors to purchase 1,200,000 shares of common stock of the Company. The
      value
      of the transaction, based on an agreed value of $0.25 for each common share
      of
      the Company and for the net assets of Interiors as of the date of the
      transaction plus projected cash flows is $102,989. During the year ended
      2005, Interiors had gross sales of $994,725.




**Item
      6. Exhibits and Reports on Form 8-K.**





None





**Signatures**





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




**WINSONIC
                DIGITAL MEDIA GROUP, LTD.**
              **(Registrant)**Date: March
              22, 2006
            By:
            /s/ WINSTON
              JOHNSONName:  
                Winston Johnson
              Title:     
                CEO Chairman




Date: March
                22, 2006
              By:
              /s/ ERIC
                YOUNGName:  
                  Eric Young
                Title:    
                  CFO


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**WINSONIC
      DIGITAL MEDIA GROUP, LTD.**





**Quarterly
      Report on Form 10-QSB**


**Quarter
      Ended June 30, 2005**





**EXHIBIT
      INDEX**


ExhibitNumber
            
            Description31.1
            
            Certification
                pursuant to Rule 13a-14(a) or Rule 15d-14(a), as adopted pursuant
                to
                Section 302 of the Sarbanes-Oxley Act of 2002.31.2
            
            Certification
                pursuant to Rule 13a-14(a) or Rule 15d-14(a), as adopted pursuant
                to
                Section 302 of the Sarbanes-Oxley Act of 2002.32.1
            
            Certification
                pursuant to 18 U.S.C.  1350, as adopted pursuant to Section 906 of
                the Sarbanes-Oxley Act of 2002.32.2
            
            Certification
                pursuant to 18 U.S.C.  1350, as adopted pursuant to Section 906 of
                the Sarbanes-Oxley Act of 2002.








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