SECURITIES
AND EXCHANGE COMMISSION


Washington,
D.C. 20549










FORM
10-Q











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





For
the quarterly period ended March 31, 2009





OR





r TRANSITION REPORT
PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF
1934





For the
transition period from __________________ to ___________________




Commission
file number: 000-50292





MM2
GROUP, INC.


(Exact
name of registrant as specified in its charter)








New
      Jersey
              20-2554835(State or other
      jurisdiction of incorporation or organization)
              (I.R.S. Employer
      Identification No.)
   5
      Regent Street, Suite 520, Livingston,
      NJ
              07039(Address
      of Principal Executive
      Offices)
              (Zip
      Code)
  Registrant’s
Telephone Number, Including Area Code:  (732)
290-0019





Indicate
by check mark whether the registrant (1) has filedall
reports required to be filed by Section 13 or 15 (d) of
the Securities Exchange Act of 1934 during the preceding 12 months (or for such
shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90
days.          YES x      NO
r




Indicate by check mark
whether the registrant has submitted electronically and posted on its Web site,
if any, every Interactive Data File required to be submitted and posted pursuant
to Rule 405 of Regulation S-T during the preceding 12 months (or for such
shorter period that the registrant was required to submit and post such
files).       YES r      NO
x




Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated files, or a smaller reporting company. See
the definitions of “large accelerated filer”, “accelerated filer” and “smaller
reporting company” in Rule 12b-2 of the exchange
act.





Large
Accelerated filer  r   Accelerated
filer  rNon-accelerated
filer  r(Do not check if
a smaller reporting company)   Smaller reporting
company  x




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





Number of
shares of outstanding Class A, Common Stock,


No par
value, outstanding as of May 13, 2009: 449,999,999






Table of Content




MM2
GROUP, INC. and SUBSIDIARIES


CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS


MARCH
31, 2009




TABLE OF CONTENTS




Page
      No.PART
      I.
                FINANCIAL
      INFORMATIONItem
      1.
                Condensed Consolidated Financial Statements
      (Unaudited)
                3Balance Sheets – March 31, 2009 and June 30,
      2008
                3Statements of Operations – For the nine months and three months
      ended March 31, 2009 and 2008
                5Statements of Cash Flows – For the nine months ended March
      31, 2009 and 2008
                6Notes to Condensed Consolidated Financial
      Statements
                8Item
      2.
                Management’s Discussion and Analysis of Financial Condition and
      Results of Operations
                19Item
      4T.
                Controls and Procedures
                21PART
      II.
                OTHER
      INFORMATIONItem
      3.
                Defaults Upon Senior Securities
                21Item
      5.
                Other information
                21Item
      6.
                Exhibits
                21






Table of Content




MM2
GROUP, INC. and SUBSIDIARIES


CONDENSED
CONSOLIDATED BALANCESHEETS


(UNAUDITED)




March
      31,
                          
                          
                          June
      30,2009
                          
                          
                          2008(Restated)ASSETSCURRENT
      ASSETSCash
      and cash equivalents
                          
                          $
                          41,581
                          
                          
                          $
                          130,814Securities
      available for sale
                          
                          
                          1,200
                          
                          
                          
                          5,200Accounts
      receivable, net of allowance for doubtful accounts of $0
                          
                          
                          161,155
                          
                          
                          
                          483,617Inventory
                          
                          
                          103,058
                          
                          
                          
                          107,901Deferred
      financing costs
                          
                          
                          --
                          
                          
                          
                          15,625Prepaid
      expenses
                          
                          
                          29,520
                          
                          
                          
                          26,700Total
      current assets
                          
                          
                          336,514
                          
                          
                          
                          769,857PROPERTY
      AND EQUIPMENT, net
                          
                          
                          5,161
                          
                          
                          
                          6,834OTHER
      ASSETSDeposits
      and other assets
                          
                          
                          3,183
                          
                          
                          
                          3,183TOTAL
      ASSETS
                          
                          $
                          344,858
                          
                          
                          $
                          779,874LIABILITIES AND STOCKHOLDERS'
      DEFICITCURRENT
      LIABILITIESAccounts
      payable and accrued expenses
                          
                          $
                          1,809,354
                          
                          
                          $
                          1,559,566Due
      to related parties
                          
                          
                          1,483,474
                          
                          
                          
                          1,031,002Convertible
      debentures payable, net of discount of $0 and $156,250,
      respectively
                          
                          
                          1,719,058
                          
                          
                          
                          1,582,508Derivative
      liability
                          
                          
                          1,799,472
                          
                          
                          
                          1,912,227Warrant
      liability
                          
                          
                          440
                          
                          
                          
                          17,113Total
      current liabilities
                          
                          
                          6,811,798
                          
                          
                          
                          6,102,416TOTAL
      LIABILITIES
                          
                          
                          6,811,798
                          
                          
                          
                          6,102,416COMMITMENTS
      AND CONTINGENCIES




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




3
 Table of Content




MM2
GROUP, INC. and SUBSIDIARIES


CONDENSED
CONSOLIDATED BALANCE SHEETS (Continued)


(UNAUDITED)




March
      31,
                      
                      
                      June
      30,2008
                      
                      
                      2009(Restated)STOCKHOLDERS'
      DEFICITPreferred
      stock, $1.00 par value; authorized 1,000,000 shares;no
      shares issued and outstanding
                      
                      
                      --
                      
                      
                      
                      --Common
      stock:Class
      A – no par value; authorized 490,000,000 shares;March
      31, 2009: 449,999,999 shares issued and outstandingJune
      30, 2008: 377,105,051 shares issued and outstanding
                      
                      
                      1,430,401
                      
                      
                      
                      1,404,648Class
      B - no par value; authorized 10,000,000 shares; 10,000,000 shares
      issued;March
      31, 2009: 9,977,254 shares outstandingJune
      30, 2008: 9,985,375 shares outstanding
                      
                      
                      998
                      
                      
                      
                      999Additional
      paid-in capital
                      
                      
                      750,000
                      
                      
                      
                      750,000Accumulated
      deficit
                      
                      
                      (8,648,339
                      )
                      
                      
                      (7,478,189
                      )Total
      stockholders’ deficit
                      
                      
                      (6,466,940
                      )
                      
                      
                      (5,322,542
                      )TOTAL
      LIABILITIES AND STOCKHOLDERS’ DEFICIT
                      
                      $
                      344,858
                      
                      
                      $
                      779,874




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


4


MM2
GROUP, INC. and SUBSIDIARIES


CONDENSED
CONSOLIDATED STATEMENTS OF OPERATIONS


(UNAUDITED)




For
      the nine monthsended March 31,
                      
                      
                      For
      the three monthsended March 31,2009
                      
                      
                      2008
                      
                      
                      2009
                      
                      
                      2008(Restated)
                      
                      
                      
                      
                      
                      (Restated)SALES,
      net
                      
                      $
                      755,423
                      
                      
                      $
                      1,888,499
                      
                      
                      $
                      89,157
                      
                      
                      $
                      685,663COST
      OF SALES
                      
                      
                      468,614
                      
                      
                      
                      1,463,814
                      
                      
                      
                      34,729
                      
                      
                      
                      498,373GROSS
      PROFIT
                      
                      
                      286,809
                      
                      
                      
                      424,685
                      
                      
                      
                      54,428
                      
                      
                      
                      187,290GENERAL
      AND ADMINISTRATION EXPENSESSelling
      and marketing expenses
                      
                      
                      --
                      
                      
                      
                      23,186
                      
                      
                      
                      --
                      
                      
                      
                      424General
      and administrative expenses
                      
                      
                      964,366
                      
                      
                      
                      1,076,789
                      
                      
                      
                      308,254
                      
                      
                      
                      327,673Depreciation
      expenses
                      
                      
                      1,673
                      
                      
                      
                      1,426
                      
                      
                      
                      557
                      
                      
                      
                      558Amortization
      of financing costs
                      
                      
                      15,625
                      
                      
                      
                      23,438
                      
                      
                      
                      --
                      
                      
                      
                      7,813Total
      general and administration expenses
                      
                      
                      981,664
                      
                      
                      
                      1,124,839
                      
                      
                      
                      308,811
                      
                      
                      
                      336,468(LOSS)
      FROM OPERATIONS
                      
                      
                      (694,855
                      )
                      
                      
                      (700,154
                      )
                      
                      
                      (254,383
                      )
                      
                      
                      (149,178
                      )OTHER
      (INCOME) EXPENSESOther
      income
                      
                      
                      (149
                      )
                      
                      
                      (9,782
                      )
                      
                      
                      (1
                      )
                      
                      
                      (1,490
                      )Interest
      expense
                      
                      
                      129,139
                      
                      
                      
                      147,526
                      
                      
                      
                      42,388
                      
                      
                      
                      47,387Liquidated
      damages
                      
                      
                      309,430
                      
                      
                      
                      333,423
                      
                      
                      
                      103,143
                      
                      
                      
                      108,275Gain
      on revaluation of derivatives and warrants
                      
                      
                      (129,428
                      )
                      
                      
                      (4,158,129
                      )
                      
                      
                      (1,876,531
                      )
                      
                      
                      (2,833,820
                      )Fair
      value adjustment on securities available for sale
                      
                      
                      4,000
                      
                      
                      
                      206,000
                      
                      
                      
                      (400
                      )
                      
                      
                      20,000Beneficial
      interest expense
                      
                      
                      6,053
                      
                      
                      
                      165,152
                      
                      
                      
                      --
                      
                      
                      
                      165,074Amortization
      of discount on debt conversion
                      
                      
                      156,250
                      
                      
                      
                      670,033
                      
                      
                      
                      --
                      
                      
                      
                      223,344Total
      other (income) expenses
                      
                      
                      475,295
                      
                      
                      
                      (2,645,777
                      )
                      
                      
                      (1,731,401
                      )
                      
                      
                      (2,271,230
                      )INCOME
      (LOSS) BEFORE PROVISION FORINCOME
      TAXES
                      
                      
                      (1,170,150
                      )
                      
                      
                      1,945,623
                      
                      
                      
                      1,477,018
                      
                      
                      
                      2,122,052PROVISION
      FOR INCOME TAXES
                      
                      
                      --
                      
                      
                      
                      --
                      
                      
                      
                      --
                      
                      
                      
                      --NET
      INCOME (LOSS) APPLICABLE TOCOMMON
      SHARES
                      
                      $
                      (1,170,150
                      )
                      
                      $
                      1,945,623
                      
                      
                      $
                      1,477,018
                      
                      
                      $
                      2,122,052NET
      INCOME (LOSS) PER COMMON SHAREBasic
                      
                      $
                      (0.00
                      )
                      
                      $
                      0.01
                      
                      
                      $
                      0.00
                      
                      
                      $
                      0.01Diluted
                      
                      $
                      (0.00
                      )
                      
                      $
                      0.00
                      
                      
                      $
                      0.00
                      
                      
                      $
                      0.00WEIGHTED
      AVERAGE SHARES OUTSTANDINGBasic
                      
                      
                      445,069,005
                      
                      
                      
                      173,416,986
                      
                      
                      
                      449,999,999
                      
                      
                      
                      196,783,162Diluted
                      
                      
                      445,069,005
                      
                      
                      
                      450,000,000
                      
                      
                      
                      450,000,000
                      
                      
                      
                      450,000,000




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




5
 Table of Content




MM2
GROUP, INC. and SUBSIDIARIES


CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)


FOR
THE NINE MONTHS ENDED MARCH 31,




2009
                        
                        
                        2008(Restated)CASH
      FLOW FROM OPERATING ACTIVITIESNet
      income (loss)
                        
                        $
                        (1,170,150
                        )
                        
                        $
                        1,945,623Adjustments
      to reconcile net income (loss) to net cash (used in)operating
      activitiesDepreciation
                        
                        
                        1,673
                        
                        
                        
                        1,426Common
      stock issued for services and compensation
                        
                        
                        --
                        
                        
                        
                        81,377Amortization
      of discount on debt conversion
                        
                        
                        156,250
                        
                        
                        
                        670,033Amortization
      of deferred financing costs
                        
                        
                        15,625
                        
                        
                        
                        23,438Gain
      on revaluation of derivatives and warrants
                        
                        
                        (129,428
                        )
                        
                        
                        (4,158,129
                        )Beneficial
      interest expense
                        
                        
                        6,053
                        
                        
                        
                        165,152Fair
      value adjustment on securities available for sale
                        
                        
                        4,000
                        
                        
                        
                        206,000Changes
      in operating assets and liabilities:Accounts
      receivable
                        
                        
                        322,462
                        
                        
                        
                        125,692Inventory
                        
                        
                        4,843
                        
                        
                        
                        57,304Prepaid
      expenses and other assets
                        
                        
                        (2,820
                        )
                        
                        
                        23,477Accounts
      payable and accrued liabilities
                        
                        
                        249,787
                        
                        
                        
                        400,811Due
      to related parties
                        
                        
                        452,472
                        
                        
                        
                        158,970Total
      cash (used in) operating activities
                        
                        
                        (89,233
                        )
                        
                        
                        (298,826
                        )CASH
      FLOW FROM INVESTING ACTIVITIESPurchase
      of property and equipment
                        
                        
                        --
                        
                        
                        
                        (4,532
                        )NET
      (DECREASE) IN CASH AND CASH EQUIVALENTS
                        
                        
                        (89,233
                        )
                        
                        
                        (303,358
                        )CASH
      AND CASH EQUIVALENTS – BEGINNING OF PERIOD
                        
                        
                        130,814
                        
                        
                        
                        457,599CASH
      AND CASH EQUIVALENTS – END OF PERIOD
                        
                        $
                        41,581
                        
                        
                        $
                        154,241SUPPLEMENTAL CASH FLOW
      INFORMATIONCash
      paid during the period for:Interest
      expense
                        
                        $
                        --
                        
                        
                        $
                        --Income
      taxes
                        
                        $
                        --
                        
                        
                        $
                        --





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




6
 Table of Content




MM2
GROUP, INC. and SUBSIDIARIES


CONDENSED CONSOLIDATED STATEMENTS OF
CASH FLOWS (UNAUDITED) (Continued)


FOR
THE NINE MONTHS ENDED MARCH 31, 2009 AND 2008




SUPPLEMENTAL
SCHEDULE OF NON-CASH FINANCING ACTIVITIES:





For the nine months ended
March 31, 2009:








The
Company issued 36,801,932 shares of its Class A Common Stock to YA Global
Investments (f/k/a Cornell Capital Partners) (“YA Global”), valued at $25,753,
for conversion of $19,700 of Secured Convertible Debentures issued on April 7,
2005 and subsequently amended on July 20, 2006. A beneficial interest expense of
$6,053 was charged to operations.




The
Company issued 16,093,016 shares of Class A Common to Mark Meller, President and
CEO, upon the conversion of 3,621 shares of Class B Common
Stock.


The
Company issued 20,000,000 shares of Class A Common to Jerome Mahoney,
Non-executive Chairman of the Board, upon the conversion of 4,500 shares of
Class B Common Stock.







For the nine months ended
March 31, 2008:








The
Company issued 4,738,148 shares of its Class A Common Stock valued at $38,458,
as compensation to Meritz & Muenz LLP for repayment of legal services valued
at $38,380, which was provided during the year ended June 30, 2006, pursuant to
the terms of the MM2 Plan. A beneficial interest expense of $78 was charged to
operations.








The
Company issued 2,999,600 shares of its Class A Common Stock valued at $42,997,
as compensation to officers of Genotec Nutritionals for bonuses pursuant to the
provisions of the Genotec Plan.





The
Company issued 72,750,890 shares of its Class A Common Stock to YA Global
Investments (f/k/a Cornell Capital Partners) (“YA Global”), valued at $291,324,
for conversion of $126,250 of Secured Convertible Debentures issued on April 7,
2005 and subsequently amended on July 20, 2006. A beneficial interest expense of
$165,074 was charged to operations.




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




7
 Table of Content




MM2
GROUP, INC. AND SUBSIDIARIES
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 (UNAUDITED)
 MARCH
31, 2009 AND 2008




NOTE
1 – DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION





Description of
business


MM2
Group, Inc. (“MM2”, or the “Company”), was incorporated in New York on March 18,
1968 under the name John DeNegris Associates, Inc.  In 1974, John
DeNegris Associates, Inc. changed its name to Wien Group, Inc. (“Wien
(NY)”).  Wien (NY) conducted a public relations business and traded in
the public market until December 1991 when the corporation ceased
operations.  Wien (NY) remained inactive until September 1998 when it
reacquired its good standing status with the State of New York. Wien (NY) did
not conduct any business prior to July 2001, at which time it initiated its
business of providing corporate financial advisory services to small and
emerging companies that require advisory services to continue their growth
within their respective industries.  Wien (NY) primarily focused on
the manufacturing, retail, music & entertainment, and health care
industries.  These services include: general corporate finance, merger
and acquisition advisory services, consulting on overall corporate strategy,
facilitating asset-based lending, and arranging equipment leasing
contracts.





On
September 23, 2005, Wien (NY) reincorporated in the state of New Jersey pursuant
to a Plan and Agreement of Merger.  Pursuant to such Plan and
Agreement of Merger, Wien (NY) merged with and into its wholly owned subsidiary
(“Wien (NJ)”) with Wien (NJ) being the surviving entity.  Wien (NJ)'s
charter provided for the authorization of Class A Common Stock (the "Wien (NJ)
Class A Common"), Class B Common Stock ("Wien (NJ) Class B Common"), and
Preferred Stock ("Wien (NJ) Preferred").  Pursuant to the Plan and
Agreement of Merger, each holder of Wien (NY)’s Common Stock received one share
of Wien (NJ) Class A Common in exchange for each share of such holder's Common
Stock.





On
October 19, 2005, Wien (NJ) completed its previously disclosed acquisition (the
"Acquisition") of all of the outstanding shares of MM2 Group, Inc., a New Jersey
corporation ("OldMM2"). The Acquisition was effected pursuant to the terms of
the Acquisition Agreement dated July 8, 2005 (the "Acquisition Agreement")
between Wien (NY), Wien (NJ), Stephen Wien, OldMM2 and the stockholders of
OldMM2 as of the date of the Acquisition Agreement. Prior to the closing of the
Acquisition, certain terms and conditions of the Acquisition Agreement were
amended by the parties thereto. The primary changes were to (i) allow
fractional shares of Wien (NJ) to be issued in connection with the Acquisition
(ii) correctly state the authorized capital stock of Wien (NJ) and Wien (NY) and
(iii) specify the authorized stock of Wien (NJ) following the
reincorporation.





The
Company had nominal operations immediately before and after the
Acquisition.  OldMM2 was a corporation formed on December 8,
2004.  Other than the Acquisition, no significant business activity
has been conducted by OldMM2 from the date of its creation to the date of the
consummation of the Acquisition.  The primary activity of OldMM2
involved seeking merger or acquisition candidates with whom it could either
merge or acquire.





The
Company is publicly traded and is currently traded on the NASD Over The Counter
Bulletin Board (“OTCBB”) under the symbol “MMGP”.




Basis of
presentation


The
Acquisition was accounted for as a reverse merger under the purchase method of
accounting. Accordingly, MM2 Group, Inc. will be treated as the continuing
entity for accounting purposes. The accompanying financial statements include
the accounts of Old MM2, Wien (NY) and its wholly owned subsidiary Wien (NJ).
These condensed consolidated financial statements have been prepared in
accordance with accounting principles generally accepted in the United States
for financial information and with the instructions to Form 10-Q and Regulation
S-X. Accordingly, they do not include all of the information and footnotes
required by generally accepted accounting principles for complete financial
statements. In the opinion of management, all adjustments (consisting only of
normal recurring adjustments) considered necessary for a fair presentation have
been included. It is suggested that these condensed consolidated financial
statements be read in conjunction with the June 30, 2008 audited financial
statements and the accompanying notes thereto filed with the Securities and
Exchange Commission on Form 10-KSB.





On
September 21, 2006, the Company completed the acquisition of Genotec
Nutritionals, Inc, a New York based manufacturer and distributor of nutritional
supplements and vitamins. Pursuant to the Asset Purchase Agreement, the Company
issued 10,000,000 shares of Class A common stock valued at $300,000 to George
Kontonotas, Joseph Freedman, Susan Blancato, Michael Logerfo, Maureen
McLaughlin, Paula Daddone, Maureen Bridges and Robert Blancato. In addition, the
Company executed three-year employment agreements with Mr. Kontonotas, Mr.
Freedman and Ms Blancato and purchased $75,000 of Genotec’s Series A Convertible
Preferred Stock, which was used to fund the working capital.





The
result of operations for the nine months ending March 31, 2009 are not
necessarily indicative of the results to be expected for the full year. For
further information, refer to the financial statements and footnotes included in
Form 10-KSB for the year ended June 30, 2008. References to the “Company,” “we,”
“us” and “our” refer to MM2 Group Inc.





NOTE
2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES





Principles of
Consolidation


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





Use of
Estimates


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




8
 Table of Content




MM2
GROUP, INC. AND SUBSIDIARIES
 NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 (UNAUDITED)
 MARCH
31, 2009 AND 2008


Cash and Cash
Equivalents


The
Company considers all highly liquid investments purchased with original
maturities of three months or less to be cash equivalents. The Company had cash
equivalents at March 31, 2009 and June 30, 2008 of $0 and 25,543, respectively.
The cash equivalents represent investments in Triple A credit rated money market
funds that have 7-day auction rates competitive with current market conditions.
Total cash and cash equivalents at March 31, 2009 and June 30, 2008 are $41,581
and $130,814, respectively.


Concentration of Credit
Risk





Financial
instruments that potentially subject the Company to credit risk consist of cash
equivalents and accounts receivable.





The
Company places its cash in what it believes to be credit-worthy financial
institutions. However, cash balances may exceed FDIC insured levels at various
times during the year. The Company has uninsured cash balances at March 31, 2009
and June 30, 2008 of $0 and $31,843, respectively.





The
Company provides credit terms to its corporate customers based on their
negotiated contracts, which range from “payment on delivery” to “90 days” terms.
Our two largest customers represent approximately 77% and 97% of our receivables
at March 31, 2009 and June 30, 2008, respectively. Both of these customers have
excellent payment histories and we do not expect to experience any losses on
these collections.





Marketable
Securities


The
Company has evaluated its investment policies consistent with FAS No. 115,
Accounting for Certain Investments in Debt and Equity Securities, and determined
that all of its investment securities are to be classified as
available-for-sale. Available-for-sale securities are carried at fair value,
with the unrealized gains and losses reported in Stockholders' Equity under the
caption Accumulated Other Comprehensive Loss.





Fair Value of Financial
Instruments


The
Company estimates that the fair value of all financial instruments at March 31,
2009 and June 30, 2008, as defined in FAS 107, does not differ materially from
the aggregate carrying values of its financial instruments recorded in the
accompanying consolidated balance sheets. The estimated fair value amounts have
been determined by the Company using available market information and
appropriate valuation methodologies. Considerable judgment is required in
interpreting market data to develop the estimates of fair value, and
accordingly, the estimates are not necessarily indicative of the amounts that
the Company could realize in a current market exchange.





Effective
this quarter, we implemented Statement of Financial Accounting Standards No.
157, Fair Value Measurements, or SFAS 157, for our nonfinancial assets and
liabilities that are re-measured at fair value on a non-recurring basis. The
adoption of SFAS 157 for our nonfinancial assets and liabilities that are
re-measured at fair value on a non-recurring basis did not impact our financial
position or results of operations; however, could have an impact in future
periods. In addition, we may have additional disclosure requirements in the
event we complete an acquisition or incur impairment of our assets in future
periods.




Revenue
Recognition


The
Company recognizes revenues when products are shipped from its warehouse or when
the Company is notified that product has been drop-shipped from the suppliers or
from our outsourced packagers.





Our
largest customer at March 31, 2009 and 2008, represented approximately 50% and
80%, respectively, of our product sales for the nine months ended March 31, 2009
and 2008.





Accounts
Receivables


Accounts
receivables consist primarily of uncollected invoices for product sales. Payment
terms vary from customer to customer and range from “payment on delivery” to “90
days” terms. In addition, collection on credit card sales is generally settled
in 5 days. The Company does not provide for customer returns, but will
accommodate customers in special circumstances. Management has determined that,
based on its experience, that no provision for product returns is required at
March 31, 2009 and June 30, 2008.





Inventory


Inventory
primarily consists of bulk supplies of capsules and sealed powders, bottles,
caps and shipping containers are stored in our on-site warehouse.  In
addition, we have supplies of purchased product and finished goods bottled
on-site. Inventory is valued at the average cost of all purchases.





Inventory
reserves are estimated for excess and slow-moving inventory. These estimates are
based on current assessments about future demands, market conditions and related
management initiatives.  If market conditions and actual demands are
less favorable than those projected by management, inventory write-downs may be
required. Management has determined that no provision for excess and slow-moving
inventory is required at March 31, 2009 and June 30, 2008.





Financing
Costs


Financing
costs consist primarily of commitment fees and broker fees relating to the
issuance of the Company’s convertible debentures.  These costs are
generally capitalized and amortized over the term of the debenture. In some
cases, these fees are expensed immediately if they relate to expired or
terminated debentures.




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GROUP, INC. AND SUBSIDIARIES
 NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 (UNAUDITED)
 MARCH
31, 2009 AND 2008




As of
March 31, 2009 and June 30, 2008, the costs and accumulated amortization for the
deferred financing costs is as follows:


March
      31,
                    
                    
                    June
      30,2009
                    
                    
                    2008(Restated)Deferred
      financing costs
                    
                    $
                    62,500
                    
                    
                    $
                    62,500Less:
      Accumulated amortization
                    
                    
                    (62,500
                    )
                    
                    
                    (46,875
                    )Net
      deferred financing costs
                    
                    $
                    --
                    
                    
                    $
                    15,625





Basic and Diluted Earnings
Per Common Share


SFAS No.
128, “Earnings Per Share” requires presentation of basic earnings per share
(“basic EPS”) and diluted earnings per share (“diluted EPS”).





The
computation of basic EPS is computed by dividing income (loss) available to
common stockholders by weighted average number of common shares during the
period. Diluted earnings per share gives effect to all dilutive potential common
shares outstanding during the period. The computation of diluted EPS does not
assume conversion, exercise, or contingent exercise of securities that would
have an anti-dilutive effect on earnings resulting from the Company's net loss
position.





The
shares used in the computations are as follows:





Nine months ended March
      31,2009
                      
                      
                      2008
                        (Restated)Basic net income (loss) per share
      computation:Net
      income (loss) attributable to common stockholders
                      
                      $
                      (1,170,150
                      )
                      
                      $
                      1,945,623Weighted-average
      common shares outstanding
                      
                      
                      445,069,005
                      
                      
                      
                      173,416,986Basic
      net income (loss) per share attributable to common
      stockholders
                      
                      $
                      (0.00
                      )
                      
                      $
                      0.01Diluted net income (loss) per share
      computation:Net
      income (loss) attributable to common stockholders
                      
                      $
                      (1,170,150
                      )
                      
                      $
                      1,945,623Weighted-average
      common shares outstanding
                      
                      
                      445,069,005
                      
                      
                      
                      173,416,986Incremental
      shares attributable to the assumed conversion of Class
      B   common stock, convertible debentures and
      warrants
                      
                      
                      N/A
                      
                      
                      
                      276,583,014Total
      adjusted weighted-average shares
                      
                      
                      445,069,005
                      
                      
                      
                      450,000,000Diluted
      net income (loss) per share attributable to common
      stockholders
                      
                      $
                      (0.00
                      )
                      
                      $
                      0.00





The
Company has common stock equivalents of approximately 70 billion and 11 billion
at March 31, 2009 and 2008. These amounts are in excess of the authorized
capital of the Company.





Derivative
Liabilities


During
April 2003, the Financial Accounting Standards Board issued SFAS 149, "Amendment
of Statement 133 on Derivative Instruments and Hedging
Activities."  SFAS 149 amends and clarifies accounting for derivative
instruments, including certain derivative instruments embedded in other
contracts, and for hedging activities under SFAS 133, "Accounting for Derivative
Instruments and Hedging Activities." The statement requires that contracts with
comparable characteristics be accounted for similarly and clarifies when a
derivative contains a financing component that warrants special reporting in the
statement of cash flows.  SFAS 149 is effective for contracts entered
into or modified after June 30, 2003, except in certain circumstances, and for
hedging relationships designated after June 30, 2003. The financial statements
for the nine months ended March 31, 2009 and 2008 include the recognition of the
derivative liability on the underlying securities issuable upon conversion of
the YA Global Convertible Debentures.





Recent Accounting
Pronouncements


In
December 2007, the FASB issued SFAS No. 160, “Non-controlling Interests in
Consolidated Financial Statements, an amendment of ARB No. 51,” which
changes the accounting and reporting for minority interests. Minority interests
will be re-characterized as non-controlling interests and will be reported as a
component of equity separate from the parent’s equity, and purchases or sales of
equity interests that do not result in a change in control will be accounted for
as equity transactions. In addition, net income attributable to the
non-controlling interest will be included in consolidated net income on the face
of the income statement and, upon a loss of control, the interest sold, as well
as any interest retained, will be recorded at fair value with any gain or loss
recognized in earnings. The SFAS is effective for fiscal years beginning after
December 15, 2008 and for interim periods within those years. SFAS No. 160
is effective for the Company beginning July 1, 2009. The Company adopted
SFAS No. 160 on January 1, 2009 and there was no effect on the results of
operations of the Company.




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GROUP, INC. AND SUBSIDIARIES
 NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 (UNAUDITED)
 MARCH
31, 2009 AND 2008




In
February 2008, FASB Staff Position ("FSP") FAS No. 157-2, "Effective Date of
FASB Statement No. 157" ("FSP No. 157-2") was issued. FSP No. 157-2 defers the
effective date of SFAS No. 157 to fiscal years beginning after December 15,
2008, and interim periods within those fiscal years, for all nonfinancial assets
and liabilities, except those that are recognized or disclosed at fair value in
the financial statements on a recurring basis (at least annually). Examples of
items within the scope of FSP No. 157-2 are nonfinancial assets and nonfinancial
liabilities initially measured at fair value in a business combination (but not
measured at fair value in subsequent periods), and long-lived assets, such as
property, plant and equipment and intangible assets measured at fair value for
an impairment assessment under SFAS No. 144. The partial adoption of SFAS No.
157 on July 1, 2008 with respect to financial assets and financial liabilities
recognized or disclosed at fair value in the financial statements on a recurring
basis did not have a material impact on the Company's condensed consolidated
financial statements. See Note 3 for the fair value measurement disclosures for
these assets and liabilities. The Company adopted SFAS No. 157 on January 1,
2009.





In April
2008, the FASB issued FSP No. 142-3, Determination of the Useful Life of
Intangible Assets. FSP 142-3 amends the factors an entity should consider in
developing renewal or extension assumptions used in determining the useful life
of recognized intangible assets under SFAS 142, Goodwill and Other Intangible
Assets, and adds certain disclosures for an entity’s accounting policy of the
treatment of the costs, period of extension, and total costs
incurred.  FSP 143-3 must be applied prospectively to intangible
assets acquired after January 1, 2009.  The Company’s adoption of FSP
142-3 did not have a material impact on the Company’s condensed consolidated
financial statements.





In June
2008, the FASB ratified Emerging Issues Task Force (EITF) Issue No. 08-3,
Accounting for Lessees for Maintenance Deposits Under Lease Arrangements ("EITF
08-3"). EITF 08-3 provides guidance for accounting for nonrefundable maintenance
deposits. It also provides revenue recognition accounting guidance for the
lessor. EITF 08-3 is effective for fiscal years beginning after December 15,
2008. The Company’s adoption of EITF 08-3 is not expected to have a material
impact on the Company’s condensed consolidated financial
statements.





In June
2008, the FASB issued FASB Staff Position (“FSP”) Emerging Issues Task Force
(“EITF”) No. 03-6-1, “Determining Whether Instruments Granted in Share-Based
Payment Transactions Are Participating Securities.” Under the FSP, unvested
share-based payment awards that contain rights to receive non forfeitable
dividends (whether paid or unpaid) are participating securities, and should be
included in the two-class method of computing EPS. The FSP is effective for
fiscal years beginning after December 15, 2008 and for interim periods within
those years The implementation of this standard will not have a material impact
on the Company's condensed consolidated financial statements.





In
November 2008, the FASB issued EITF Issue No. 08-7, Accounting for Defensive
Intangible Assets (“EITF 08-7”). EITF 08-7 addresses the accounting for assets
acquired in a business combination or asset acquisition that an entity does not
intend to actively use, otherwise referred to as a ‘defensive asset.’ EITF 08-7
requires defensive intangible assets to be initially accounted for as a separate
unit of accounting and not included as part of the cost of the acquirer’s
existing intangible asset(s) because it is separately identifiable. EITF 08-7
also requires that defensive intangible assets be assigned a useful life in
accordance with paragraph 11 of SFAS 142 and is effective for financial
statements issued for fiscal years beginning after December 15, 2008. The
Company’s adoption of this EITF is not expected to have a material impact on the
Company’s condensed consolidated financial statements.





In April
2009, the FASB issued FSP FAS 115-2 and FAS 124-2, Recognition and Presentation
of Other-Than-Temporary Impairments. This FSP amends the other-than-temporary
impairment guidance for debt securities to make the guidance more operational
and to improve the presentation and disclosure of other-than-temporary
impairments in the financial statements. The most significant change the FSP
brings is a revision to the amount of other-than-temporary loss of a debt
security recorded in earnings. FSP FAS 115-2 and FAS 124-2 is effective for
interim and annual reporting periods ending after June 15, 2009. The Company
does not believe that the implementation of this standard will have a material
impact on its condensed consolidated financial statements.





In April
2009, the FASB issued FSP FAS 157-4, Determining Fair Value When the Volume and
Level of Activity for the Asset or Liability Have Significantly Decreased and
Identifying Transactions That Are Not Orderly. This FSP provides additional
guidance for estimating fair value in accordance with FASB Statement No. 157,
Fair Value Measurements, when the volume and level of activity for the asset or
liability have significantly decreased. This FSP also includes guidance on
identifying circumstances that indicate a transaction is not orderly. This FSP
emphasizes that even if there has been a significant decrease in the volume and
level of activity for the asset or liability and regardless of the valuation
technique(s) used, the objective of a fair value measurement remains the same.
Fair value is the price that would be received to sell an asset or paid to
transfer a liability in an orderly transaction (that is, not a forced
liquidation or distressed sale) between market participants at the measurement
date under current market conditions. FSP FAS 157-4 is effective for interim and
annual reporting periods ending after June 15, 2009, and is applied
prospectively. The Company does not believe that the implementation of this
standard will have a material impact on its consolidated financial
statements.





In April
2009, the FASB issued FSP FAS 107-1 and APB 28-1, Interim Disclosures about Fair
Value of Financial Instruments. This FSP amends FASB Statement No. 107,
Disclosures about Fair Value of Financial Instruments, to require disclosures
about fair value of financial instruments for interim reporting periods of
publicly traded companies as well as in annual financial statements. This FSP
also amends APB Opinion No. 28, Interim Financial Reporting, to require those
disclosures in summarized financial information at interim reporting periods.
FSP FAS 107-1 and APB 28-1 is effective for interim and annual reporting periods
ending after June 15, 2009. The Company does not believe that the implementation
of this standard will have a material impact on its consolidated financial
statements.





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GROUP, INC. AND SUBSIDIARIES
 NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 (UNAUDITED)
 MARCH
31, 2009 AND 2008


NOTE
3 – FAIR VALUE MEASUREMENTS





In
September 2006, the FASB issued SFAS 157, which defines fair value, establishes
a framework for measuring fair value, and expands disclosures about fair value
measurements. The provisions of SFAS 157 were effective January 1, 2008. The
FASB has also issued Staff Position (FSP) SFAS 157-2 (FSP No. 157-2), which
delays the effective date of SFAS 157 for nonfinancial assets and liabilities,
except for items that are recognized or disclosed at fair value in the financial
statements on a recurring basis (at least annually), until fiscal years
beginning after November 15, 2008.





As
defined in SFAS 157, fair value is the price that would be received to sell an
asset or paid to transfer a liability in an orderly transaction between market
participants at the measurement date (exit price). The Company utilizes market
data or assumptions that market participants would use in pricing the asset or
liability, including assumptions about risk and the risks inherent in the inputs
to the valuation technique. These inputs can be readily observable, market
corroborated, or generally unobservable. The Company classifies fair value
balances based on the observability of those inputs. SFAS 157 establishes a fair
value hierarchy that prioritizes the inputs used to measure fair value. The
hierarchy gives the highest priority to unadjusted quoted prices in active
markets for identical assets or liabilities (level 1 measurement) and the lowest
priority to unobservable inputs (level 3 measurement).





SFAS 157
classifies these inputs into the following hierarchy:





Level
      1 Inputs– Quoted prices are available in active markets for identical
      assets or liabilities as of the reporting date. Active markets are those
      in which transactions for the asset or liability occur in sufficient
      frequency and volume to provide pricing information on an ongoing basis.
      Level 1 primarily consists of financial instruments such as
      exchange-traded derivatives, marketable securities and listed
      equities.


Level
      2 Inputs– Pricing inputs are other than quoted prices in active markets
      included in level 1, which are either directly or indirectly observable as
      of the reported date. Level 2 includes those financial instruments that
      are valued using models or other valuation methodologies. These models are
      primarily industry-standard models that consider various assumptions,
      including quoted forward prices for commodities, time value, volatility
      factors, and current market and contractual prices for the underlying
      instruments, as well as other relevant economic measures. Substantially
      all of these assumptions are observable in the marketplace throughout the
      full term of the instrument, can be derived from observable data or are
      supported by observable levels at which transactions are executed in the
      marketplace. Instruments in this category generally include
      non-exchange-traded derivatives such as commodity swaps, interest rate
      swaps, options and collars.


Level
      3 - Pricing inputs include significant inputs that are generally less
      observable from objective sources. These inputs may be used with
      internally developed methodologies that result in management’s best
      estimate of fair value.





The
following table sets forth by level within the fair value hierarchy the
Company’s financial assets and liabilities that were accounted for at fair value
as of March 31, 2009 and June 30, 2008. As required by SFAS 157, financial
assets and liabilities are classified in their entirety based on the lowest
level of input that is significant to the fair value measurement. The Company’s
assessment of the significance of a particular input to the fair value
measurement requires judgment, and may affect the valuation of fair value assets
and liabilities and their placement within the fair value hierarchy
levels.




March 31,
2009:




Assets
                      
                      Level
      I
                      
                      
                      Level II
                      
                      
                      Level III
                      
                      
                      TotalSecurites
      available for sale
                      
                      $
                      1,200
                      
                      
                      $
                      -
                      
                      
                      $
                      -
                      
                      
                      $
                      1,200Total
      Assets
                      
                      $
                      1,200
                      
                      
                      $
                      -
                      
                      
                      $
                      -
                      
                      
                      $
                      1,200Convertible
      debentures
                      
                      $
                      -
                      
                      
                      $
                      1,719,058
                      
                      
                      $
                      -
                      
                      
                      $
                      1,719,058Derivative
      liabilities
                      
                      
                      -
                      
                      
                      
                      1,799,472
                      
                      
                      
                      -
                      
                      
                      
                      1,799,472Warrant
      liability
                      
                      
                      -
                      
                      
                      
                      440
                      
                      
                      
                      -
                      
                      
                      
                      440Total
      Liabilities
                      
                      $
                      -
                      
                      
                      $
                      3,518,970
                      
                      
                      $
                      -
                      
                      
                      $
                      3,518,970





June 30,
2008 (Restated):




Assets
                    
                    Level
      I
                    
                    
                    Level II
                    
                    
                    Level III
                    
                    
                    Total(Restated)
                    
                    
                    
                    
                    
                    (Restated)Securites
      available for sale
                    
                    $
                    5,200
                    
                    
                    $
                    -
                    
                    
                    $
                    -
                    
                    
                    $
                    5,200Total
      Assets
                    
                    $
                    5,200
                    
                    
                    $
                    -
                    
                    
                    $
                    -
                    
                    
                    $
                    5,200Convertible
      debentures
                    
                    $
                    -
                    
                    
                    $
                    1,582,508
                    
                    
                    $
                    -
                    
                    
                    $
                    1,582,508Derivative
      liabilities
                    
                    
                    -
                    
                    
                    
                    1,912,227
                    
                    
                    
                    -
                    
                    
                    
                    1,912,227Warrant
      liability
                    
                    
                    -
                    
                    
                    
                    17,113
                    
                    
                    
                    -
                    
                    
                    
                    17,113Total
      Liabilities
                    
                    $
                    -
                    
                    
                    $
                    3,511,848
                    
                    
                    $
                    -
                    
                    
                    $
                    3,511,848




The
Company’s derivatives are classified within Level 2 of the valuation hierarchy.
The Company’s derivatives are valued using internal models that use as their
basis readily observable market inputs, such as time value, forward interest
rates, and volatility factors. Refer to Note 9 for more discussion on
derivatives.




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 NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 (UNAUDITED)
 MARCH
31, 2009 AND 2008


NOTE
4 – INVENTORIES





As of
March 31, 2009 and June 30, 2008, inventory is as follows:





March
      31,
                        
                        
                        June
      30,2009
                        
                        
                        2008(Restated)Purchased
      goods for resale
                        
                        $
                        23,100
                        
                        
                        $
                        38,287Raw
      materials
                        
                        
                        52,662
                        
                        
                        
                        53,356Finished
      goods for resale
                        
                        
                        27,296
                        
                        
                        
                        16,258Net
      inventory
                        
                        $
                        103,058
                        
                        
                        $
                        107,901




NOTE
5 – SECURITIES AVAILABLE FOR SALE





On
February 13, 2007, the Company received 4,000,000 shares of Deep Field
Technologies Class A Common Stock as compensation pursuant to the Consulting
Agreement with Deep Field Technologies, valued at $1,120,000. The Company
provided general corporate finance advisory and other similar consulting
services for a period of six (6) months from the date of the agreement.
Subsequent to the issue date of these securities, circumstances had changed
which impaired the expected fair value of the shares and management reduced the
fair value to $1,200 at March 31, 2009. For the nine months ended March 31, 2009
and March 31, 2008, the fair value of these securities been impaired by $4,000
and $276,000, respectively. The President and CEO of the Company was also the
President and CEO of Deep Field Technologies prior to execution of the
Consulting Agreement.





NOTE
6 - INCOME TAXES





Deferred
tax assets and liabilities reflect the net tax effect of temporary differences
between the carrying amount of assets and liabilities for financial reporting
purposes and amounts used for income tax purposes.  Significant
components of the Company's deferred tax assets and liabilities are summarized
as follows:




March
      31,
                    
                    
                    June
      30,2008
                    
                    
                    2008(Restated)Deferred
      tax asset
                    
                    $
                    1,580,000
                    
                    
                    $
                    1,220,000Less:
      Valuation allowance
                    
                    
                    (1,580,000
                    )
                    
                    
                    (1,220,000
                    )Net
      deferred tax assets
                    
                    $
                    -
                    
                    
                    $
                    -




As of
March 31, 2009 and June 30, 2008, the Company has net operating loss carry
forwards of approximately $4,600,000 and $3,600,000, respectively, which can be
utilized to offset future taxable income for Federal income tax purposes through
2028. Utilization of these net loss carry forwards is subject to the limitations
of Internal Revenue Code Section 382.  Because of the current
uncertainty of realizing the benefit of the tax carry forward, a valuation
allowance equal to the tax benefit for deferred taxes has been established. The
full realization of the tax benefit associated with the carry forward depends
predominantly upon the Company's ability to generate taxable income during the
carry forward period.





NOTE
7 - RELATED PARTY TRANSACTIONS





As of
March 31, 2009 and June 30, 2008, the Company has accrued $1,483,474 and
$1,031,002, respectively, of deferred compensation for the Non-executive
Chairman and the President of the Company. These deferrals will remain unpaid
until the Board of Directors determines that the Company has sufficient
liquidity to make such payments. The Non-executive Chairman and the President of
the Company have further agreed, however, to accept payment or partial payment,
from time to time, in the form of the Company’s Class A Common Stock and/or the
Company’s Class B Company Stock, at such time as the Board of Directors
determines to issue such shares in satisfaction of these accrued
liabilities.





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 NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 (UNAUDITED)
 MARCH
31, 2009 AND 2008


NOTE
8 - CONVERTIBLE DEBENTURES PAYABLE





On April
1, 2005, we entered into a Securities Purchase Agreement with YA Global for the
sale of $2,500,000 of secured convertible debentures. The agreement was amended
and restated on July 20, 2006 and January 4, 2007 to reflect the change in the
funding formulas.  Pursuant to the terms of the agreement with YA
Global, on April 1, 2005 we issued a secured convertible debenture in the
principal amount of $1,250,000.  On July 20, 2006, the secured
convertible debenture was amended and restated and reissued in an aggregate
principal amount of $1,330,308, which included accrued and unpaid interest on
the original convertible debenture of $80,308.  Interest on the
outstanding principal balance of the Secured Convertible Debentures accrues at
the annual rate of 10%. Payment of principal and accrued interest shall be paid
on or before July 1, 2008 on the July 20, 2006 debenture. During the year ended
June 30, 2007, we issued 3,086,420 shares of Class A common stock as repayment
of principal of $50,000. During the year ended June 30, 2008, we issued
158,639,780 shares of Class A common stock as repayment of principal of
$166,550. During the nine months ended March 31, 2009, we issued 36,801,932
shares of Class A common stock as repayment of principal of $19,700. As of March
31, 2009 the remaining principal balance of the convertible debenture was
$1,094,058 plus $326,407 of accrued interest. As of June 30, 2008 the remaining
principal balance of the convertible debenture was $1,113,758 plus $244,186 of
accrued interest.





As of the
date of this filing, the Company is in default of the repayment terms of the
July 20, 2006 YA Global Convertible Debenture. Per the terms of the debenture,
in the event of a default, the full principal amount of this Debenture, together
with interest and other amounts owing, shall be due and payable in cash,
provided however, the holder of the debenture may request payment of such
amounts in Common Stock of the Obligor at the Conversion Price then in-effect.”
As of the date of this filing, YA Global has not demanded payment and management
is in negotiations to restructure the debt.




On
January 4, 2007, we issued a secured convertible debenture in the principal
amount of $625,000. Interest on the outstanding principal balance of this
Secured Convertible Debentures accrues at the annual rate of 10%. Payment of
principal and accrued interest shall be paid on or before January 1, 2009. As of
March 31, 2009 the remaining principal balance of the convertible debenture was
$625,000 plus $139,897 of accrued interest. As of June 30, 2008 the remaining
principal balance of the convertible debenture was $625,000 plus $92,979 of
accrued interest.





The
Company has the option to redeem a portion or all of the outstanding debentures
at 120% of the amount redeemed plus accrued interest. The holder shall be
entitled to convert in whole or in part at any time and from time to time, any
amount of principal and accrued interest at a price equal to 90% of the lowest
closing bid price of the Common Stock during the 30 trading days immediately
preceding the conversion date, as quoted by Bloomberg, LP (“Conversion
Price”).





In the
event of a default, the full principal amount of this Debenture, together with
interest and other amounts owing, shall be due and payable in cash, provided
however, the holder of the debenture may request payment of such amounts in
Common Stock of the Obligor at the Conversion Price then in-effect. A holder of
the debenture may not convert this Debenture or receive shares of Common Stock
as payment of interest hereunder to the extent such conversion or receipt of
such interest payment would result in the holder of the debenture beneficially
owning in excess of 4.9% of the then issued and outstanding shares of Common
Stock, including shares issuable upon conversion of, and payment of interest on,
this Debenture.





Upon
execution of the above agreements, the Company issued to YA Global 1,849,689
shares of Class A common stock, in accordance with the Termination Agreement of
July 20, 2006, and another certificate for 3,150,311 shares of Class A common
stock, for the aggregate total of 5,000,000 shares of Common Stock
(collectively, the “Commitment Shares”).





The
aggregate principal value of the Amended and Restated Secured Convertible
Debenture is $1,719,058 and $1,738,758 at March 31, 2009 and June 30, 2008,
respectively. These amounts are shown net of the unamortized portion of the
discount on conversion of $0 and $156,250, respectively. The discounts are being
amortized over the life of the debenture and is being recorded as a charge to
amortization of discount on debt conversion on the statement of
operations.





Pursuant
to the terms of the Amendment Number 1 to Amended and Restated Investor
Registration Rights Agreement with YA Global, the Company shall use its best
efforts (i) to have the Initial Registration Statement declared effective by the
SEC no later than ninety (90) days from the Scheduled Filing Deadline and (ii)
to insure that the Initial Registration Statement and any subsequent
Registration Statement remains in effect until all of the Registrable Securities
have been sold, subject to the terms and conditions of this Agreement. In the
event of default of the registration rights agreement, the Company will pay
liquidated damages, either in cash or shares of the Company’s Common Stock, at
2% of the liquidated value of the Convertible Debentures outstanding for each
thirty (30) day period after the Scheduled Filing Deadline or the Scheduled
Effective Deadline as the case may be. Any Liquidated Damages payable hereunder
shall not limit, prohibit or preclude the Investor from seeking any other remedy
available to it under contract, at law or in equity. For the nine months ended
March 31, 2009 and 2008, the Company has accrued $309,430 and $333,423,
respectively, of liquidated damages for failing to have the registration
statement declared effective by the SEC. As of March 31, 2009 and June 30, 2008
the Company has accumulated liquidated damages of $1,006,277 and $696,846,
respectively.





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 NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 (UNAUDITED)
 MARCH
31, 2009 AND 2008




NOTE
9 - DERIVATIVE LIABILITY





In
accordance with SFAS 133, "Accounting for Derivative Instruments and Hedging
Activities" and EITF 00-19, "Accounting for Derivative Financial Instruments
Indexed to, and Potentially Settled in, a Company’s Own Stock", the conversion
feature associated with the YA Global Secured Convertible Debentures represents
embedded derivatives. As such, the Company had recognized embedded derivatives
in the aggregate amount of $2,642,352 as a liability in the accompanying
condensed consolidated balance sheets. As of March 31, 2009 and June 30, 2008,
the derivative liability was measured at its estimated fair value of $1,799,472
and $1,912,227, respectively.




The
estimated fair value of the embedded derivative has been calculated based on a
Black-Scholes pricing model using the following assumptions:





Mar 31, 2009
                  
                  
                  June 30, 2008Fair
      market value of stock
                  
                  $
                  0.00010
                  
                  
                  $
                  0.00090Lowest
      closing bid price last 30 trading days
                  
                  $
                  0.00010
                  
                  
                  $
                  0.00090Exercise
      price
                  
                  $
                  0.00009
                  
                  
                  $
                  0.00081Dividend
      yield
                  
                  
                  0.00
                  %
                  
                  
                  0.00
                  %Risk
      free interest rate
                  
                  
                  3.20
                  %
                  
                  
                  5.60
                  %Expected
      volatility
                  
                  
                  213.81
                  %
                  
                  
                  291.08
                  %Expected
      life
                  
                  3
      Years
                  
                  
                  3
      Years




The
derivative value of the January 4, 2007 debenture exceeded the face amount of
the debenture and as such, the excess value of $855,597 was charged to the Loss
on revaluation of derivatives on the consolidated statements of operations in
the year ended June 30, 2007.





Changes
in the fair value of the embedded derivatives are calculated at each reporting
period and recorded in (gain) loss on revaluation of derivatives in the
consolidated statements of operations. During the nine months ended March 31,
2009, there was a change in the fair value of the embedded derivatives, which
resulted in a total gain of $112,755. During the nine months ended March 31,
2008, there was a change in the fair value of the embedded derivatives, which
resulted in a total gain of $3,212,437.





In
accordance with SFAS 133, SFAS 150 and EITF 00-19, the initial fair market value
of the derivatives is recorded as a debt discount.  The initial value
of the debt discount of $1,786,755 is being amortized over the life of the
convertible debentures. Amortization expense on the derivative for the nine
months ending  March 31, 2009 and 2008 was $156,250 and $670,033,
respectively.





NOTE
10 – STOCKHOLDERS’ DEFICIT





In
accordance with its Certificate of Incorporation as filed on July 7, 2005, the
Company is authorized to issue 1,000,000 shares of Preferred stock, $1.00 par
value, 490,000,000 shares of Class A common stock, no par value; and 10,000,000
shares of Class B Common Stock, no par value.  See Note 14 –
Subsequent Events for pending changes to the Certificate of Incorporation to be
made in subsequent periods.





PREFERRED
STOCK





Preferred
Stock consists of 1,000,000 shares of authorized preferred stock with $1.00 par
value. As of March 31, 2009 and June 30, 2008, no shares were issued or
outstanding.




CLASS A
COMMON STOCK





Class A
Common Stock consists of 490,000,000 shares of authorized common stock with no
par value. Each holder of Class A common stock is entitled to receive ratably
dividends, if any, as may be declared by the Board of Directors out of funds
legally available for the payment of dividends.  The Company has never
paid any dividends on its common stock and does not contemplate doing so in the
foreseeable future.  The Company anticipates that any earnings
generated from operations will be used to finance the growth
objectives.





As of
March 31, 2009 and June 30, 2008, 449,999,999 and 377,105,051 shares of Class A
Common Stock were issued and outstanding.





For the nine months ended
March 31, 2009, the Company had the following transactions in its Class A common
stock:





The
Company issued 36,801,932 shares of its Class A Common Stock to YA Global,
valued at $25,753, for conversion of $19,700 of Secured Convertible Debentures
issued on April 7, 2005 and subsequently amended on July 20, 2006. A beneficial
interest expense of $6,053 was charged to operations.





The
Company issued 16,093,016 shares of Class A Common to Mark Meller, President and
CEO, upon the conversion of 3,621 shares of Class B Common Stock.




15
 Table of Content




MM2
GROUP, INC. AND SUBSIDIARIES
 NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 (UNAUDITED)
 MARCH
31, 2009 AND 2008




The
Company issued 20,000,000 shares of Class A Common to Jerome Mahoney,
Non-executive Chairman of the Board, upon the conversion of 4,500 shares of
Class B Common Stock.





For the nine months ended
March 31, 2008, the Company had the following transactions in its Class A common
stock:





The
Company issued 4,737,148 shares of its Class A Common Stock valued at $38,458,
as compensation to Meritz & Muenz LLP for the repayment of legal services
valued at $38,380, which was provided during the year ended June 30, 2006,
pursuant to the terms of the MM2 Plan. A beneficial interest expense of $78 was
charged to operations.




The
Company issued 2,999,600 shares of its Class A Common Stock valued at $42,997,
as compensation to officers of Genotec Nutritionals for bonuses pursuant to the
provisions of the Genotec Plan.


The
Company issued 72,750,890 shares of its Class A Common Stock to YA Global,
valued at $291,324, for conversion of $126,250 of Secured Convertible Debentures
issued on April 7, 2005 and subsequently amended on July 20, 2006. A beneficial
interest expense of $165,074 was charged to operations.





CLASS B
COMMON STOCK





Class B
Common Stock consisted of 10,000,000 shares of authorized common stock with no
par value. Class B stock has voting rights of 100 to 1 with respect to Class A
Common Stock. Class B common stockholders are entitled to receive dividends in
the same proportion as the Class B Common Stock conversion and voting rights
have to Class A Common Stock.  A holder of Class B Common Stock has
the right to convert each share of Class B Common Stock into the number of
shares of Class A Common Stock determined by dividing the number of Class B
Common Stock being converted by a 50% discount of the lowest price that the
Company had ever issued its Class A Common Stock.  Upon the
liquidation, dissolution, or winding-up of the Company, holders of Class B
Common Stock will be entitled to receive distributions.





As of
March 31, 2009, 10,000,000 shares were issued and 9,977,254 shares were
outstanding. As of June 30, 2008, 10,000,000 shares were issued and 9,985,375
shares were outstanding.





For the nine months ended
March 31, 2009, the Company had the following transactions in its Class B Common
Stock:





The
Company issued 16,093,016 shares of Class A Common to Mark Meller, President and
CEO, upon the conversion of 3,621 shares of Class B Common Stock.





The
Company issued 20,000,000 shares of Class A Common to Jerome Mahoney,
Non-executive Chairman of the Board, upon the conversion of 4,500 shares of
Class B Common Stock.





NOTE
11 – WARRANTS





On April
1, 2005, the Company sold to YA Global Capital a warrant to purchase 750,000
shares of its common stock for a purchase price of $10. This warrant had an
exercise price of $.07 per share, was vested immediately and expires two years
from the date of issue. On July 20, 2006, the Company issued an Amended and
Restated warrant which changed the exercise price to $.05 per share and extended
the redemption period to five years from the date of issuance. The fair value of
the amended warrant of $44,625 was estimated using the Black-Scholes
option-pricing model with the following weighted-average assumptions: dividend
yield of 0%; expected volatility of 142.21%; risk-free interest rates of 4.60%;
and expected life of 5 years. The gain on the disposition of the initial warrant
was credited to other income for $40,192 in the same period. The expense for the
amended warrant of $44,625 was charged to financing costs in the same
period.





On March
16, 2006, the Company issued to YA Global a warrant to purchase 20,000,000
shares of its common stock pursuant to the Waiver and Extension Agreement
between the Company and YA Global.  The exercise price is $.05 per
share (and may be subsequently adjusted if the Company issued or sold, or is
deemed to have issued or sold, any shares of the Company’s Common Stock at a
lower price). The warrants were vested immediately and expire five years from
the date of issue. The fair value of $964,812 was estimated at date of grant
using the Black-Scholes option-pricing model with the following weighted-average
assumptions: dividend yield of 0%; expected volatility of 185%; risk-free
interest rates of 4.00%; and expected life of 5 years. The expense was charged
to financing costs in the same period.





As of
March 31, 2009 and March 31, 2008, the estimated fair value of the warrants was
$440 and $19,675, respectively.





The
estimated fair value of the warrants has been calculated based on a
Black-Scholes option pricing model using the following assumptions:





Mar 31, 2009
                    
                    
                    Mar 31, 2008(Restated)Fair
      market value of stock
                    
                    $
                    0.0001
                    
                    
                    $
                    0.001Exercise
      price
                    
                    $
                    0.05
                    
                    
                    $
                    0.05Dividend
      yield
                    
                    
                    0.00
                    %
                    
                    
                    0.00
                    %Risk
      free interest rate
                    
                    
                    3.20
                    %
                    
                    
                    5.60
                    %Expected
      volatility
                    
                    
                    213.81
                    %
                    
                    
                    297.49
                    %Expected
      life
                    
                    2-2.33
      Years
                    
                    
                    3-3.33
      Years




Changes
in the fair value of the warrants are calculated at each reporting period and
recorded in (gain) loss on revaluation of derivatives and warrants in the
condensed consolidated statements of operations. During the nine months ended
March 31, 2009 and 2008, there was a change in the fair value of the warrants
which resulted in a total gain of $16,673 and $945,692,
respectively.




16
 Table of Content




MM2
GROUP, INC. AND SUBSIDIARIES
 NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 (UNAUDITED)
 MARCH
31, 2009 AND 2008


NOTE
12 -  COMMITMENTS AND CONTINGENCIES





The
Company entered into two employment agreements with Jerome Mahoney, its
Non-executive Chairman of the Board and Mark Meller, its President and Board
Member, as of December 15, 2004. Each of the employment agreements is for a term
through December 31, 2011 and provides for annual compensation of $200,000 with
an annual increase of 10%. In addition, each executive shall be entitled to
Company sponsored fringe benefits and annual bonuses in accordance with the
Company policies and plans in effect for Executive officers of the Company. The
executives shall also be granted stock options under the Company’s stock option
plan as adopted by the Board of Directors and the shareholders of the
Company.  The executives will each receive a $750,000 bonus for the
successful completion of the registration of the Company’s stock on Form S-1,
SB-2 and any other such form of registration statement declared effective by the
Securities and Exchange Commission. This bonus shall be paid in a lump sum on
the date the registration statement is declared effective, or alternately, at
the discretion of the Company and with the agreement of the Executive, in shares
of the Company’s Class B Common Stock.





On
February 1, 2005, our wholly owned subsidiary, Genotec Nutritionals amended its
operating lease for office and warehouse space at 450 Commack Road, Deer Park,
NY.  The term of the lease is four years commencing March 1, 2005.
Monthly base rental payments under the new lease range from $3,067 to $3,354 per
month. We are required to pay property taxes, utilities, insurance and other
costs relating to the leased facilities to include allocated common area
maintenance charges, snow removal charges and landlord insurance charges as
deemed necessary. This lease expired on March 1, 2009 and the Company is
currently leasing the space on a month-to-month basis at $3,354 per
month.





NOTE
13 – RESTATEMENT





The
Company has restated and amended its previously issued financial statements for
the three months and nine months ended March 31, 2008 and for the balance sheet
date June 30, 2008.  The Company had amended these financial
statements to include the adjustment to the fair value of the warrants issued on
March 16, 2006 and July 20, 2006 and to record the loss on the fair value of the
securities available for sale in the same periods. Listed below are the restated
values for the accounts and time period listed.




As Reported
                    
                    
                    RestatedFor
      the balance sheet date of June 30, 2008:Warrant
      liability
                    
                    $
                    1,009,437
                    
                    
                    $
                    17,113Accumulated
      comprehensive loss
                    
                    
                    (274,800
                    )
                    
                    
                    --Accumulated
      deficit
                    
                    
                    (8,195,713
                    )
                    
                    
                    (7,478,189
                    )Total
      shareholders’ deficit
                    
                    
                    (6,314,866
                    )
                    
                    
                    (5,322,542
                    )For
      the nine months ended March 31, 2008:(Gain)
      on revaluation of derivatives and warrants
                    
                    
                    (3,212,437
                    )
                    
                    
                    (4,158,129
                    )Fair
      value adjustment on securities available for sale
                    
                    
                    (70,000
                    )
                    
                    
                    206,000Net
      income per common share
                    
                    
                    1,275,931
                    
                    
                    
                    1,945,623Earnings
      per share – basis
                    
                    $
                    0.01
                    
                    
                    $
                    0.01Earnings
      per share – diluted
                    
                    $
                    0.00
                    
                    
                    $
                    0.00For
      the three months ended March 31, 2008:(Gain)
      on revaluation of derivatives and warrants
                    
                    
                    (2,714,630
                    )
                    
                    
                    (2,833,820
                    )Fair
      value adjustment on securities available for sale
                    
                    
                    --
                    
                    
                    
                    20,000Net
      income per common share
                    
                    
                    2,019,862
                    
                    
                    
                    2,122,052Earnings
      per share – basis
                    
                    $
                    0.01
                    
                    
                    $
                    0.01Earnings
      per share – diluted
                    
                    $
                    0.00
                    
                    
                    $
                    0.00




There was
no effect on total cash (used in) operating activities or total cash and cash
equivalents.




17
 Table of Content




MM2
GROUP, INC. AND SUBSIDIARIES
 NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 (UNAUDITED)
 MARCH
31, 2009 AND 2008


NOTE 14
- GOING CONCERN





The
accompanying condensed consolidated financial statements have been prepared in
conformity with accounting principles generally accepted in the United States of
America, which contemplates continuation of the Company as a going
concern.





The
Company has suffered recurring losses and experiences deficiencies in cash flow
from operations.  These matters raise substantial doubt about the
Company's ability to continue as a going concern.  The recoverability
of a major portion of the recorded asset amounts shown in the accompanying
condensed consolidated balance sheet is dependent upon continued operations of
the Company, which in turn, is dependent upon the Company's ability to raise
capital and/or generate positive cash flows from operations.





The
Company is seeking additional operating income opportunities through potential
acquisitions or investments. Such acquisitions or investments may consume cash
reserves or require additional cash or equity.  Our working capital
and additional funding requirements will depend upon numerous factors,
including: (i) strategic acquisitions or investments; (ii) an increase to
current company personnel; (iii) the level of resources that we devote to sales
and marketing capabilities; (iv) technological advances; and (v) the activities
of competitors.





These
condensed consolidated financial statements do not include any adjustments
relating to the recoverability and classification of recorded assets, or the
amounts and classification of liabilities that might be necessary in the event
the Company cannot continue in existence.





NOTE
15 – PENDING SHAREHOLDER ACTION





●
            On
      January 13, 2009, the Company filed with the SEC an information statement,
      titled “Notice of Shareholders Action by Written Consent to be Effective
      on or about February 27, 2009”, to notify the shareholders of the
      following actions taken by the holders of a majority of the aggregate of
      our Class A Common Stock and our voting Class B Common Stock (herein
      referred to as the “Voting Stock”) approving, by written consent dated
      November 25, 2008, the following:




1. An
Amendment to the Certificate of Incorporation whereby the authorized number of
Class A Common Stock is increased to Four Billion (4,000,000,000)
shares;





2. The
MM2 Group, Inc. 2007 Stock Incentive Plan (the “2007 Incentive Plan”);
and





3. The
Genotec Nutritionals, Inc. 2007 Stock Incentive Plan (“2007 Genotec
Plan”).




4. A reverse
split of our Common Stock whereby the total issued and outstanding number of
Class A Common Sock shares shall equal 10 million (10,000,000) shares and an
Amendment to the Certificate of Incorporation to   effect this reverse
split.




5. Election
of the Board of Directors.





As of the
date of this filing, the Company is in the process of amending the Certificate
of Incorporation and is awaiting a Tax Clearance Certificate from the State of
New Jersey to proceed with the amendment.




18
 Table of Content




ITEM 2 - MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS





You
should read the following discussion in conjunction with our financial
statements and related notes included elsewhere in this filing as well as our
audited statements and related notes for the fiscal year ended June 30, 2008
filed with Form 10-KSB.  The following discussion contains
forward-looking statements.  Please see “Forward Looking Statements -
Cautionary Factors” for a discussion of uncertainties, risks and assumptions
associated with these statements





Results
of Operations





Nine months ended March 31,
2009 compared to nine months ended March 31, 2008





Total
sales for the nine months ended March 31, 2009 and 2008 were $755,423 and
$1,888,499, respectively. The $1,133,076 decrease is primarily the result of the
reductions in shipments of fish oil products as the customer experiences a
slow-down related to the worsening economy.





Cost of
sales for the nine months ended March 31, 2009 and 2008 were $468,614 and
$1,463,814, respectively, for a reduction in costs of $995,200. The costs
represent the costs of bulk supplies of capsules and sealed powders, bottles,
caps, shipping containers, packaging and shipping of nutritional supplements by
Genotec. The decrease is primarily the result of the reductions in shipments of
fish oil products as discussed above.





Total
operating expenses for the nine months ended March 31, 2009 and 2008, were
$981,664 and $1,124,839, respectively. The decrease of $143,175 was primarily
due to reductions of consulting fees for advertising programs and management
services instituted in 2008 but not repeated in 2009. The Company also has
reduced or deferred insurance costs, travel expenses and payroll costs until
sales revenues increase. In addition, the Company incurred $42,997 in executive
bonuses for the Genotec management team in 2008 but not repeated in
2009.





The other
(income) expense for the nine months ended March 31, 2009 was an expense of
$475,295. This total was primarily comprised of liquidated damages of $309,430,
amortization of the discount on debt conversion of $156,250, interest expense of
$129,139, beneficial interest on stock issuance of $6,053 and fair value
adjustment on securities available for sale of $4,000. These expenses were
offset by a gain on revaluation of derivatives and warrants of $129,428. Total
other (income) expense for the nine months ended March 31, 2008 was income of
$2,645,777. This total was primarily comprised of gains on revaluation of
derivatives and warrants of $4,158,129 and interest income of $9,782. These
amounts are offset by amortization of the discount on debt conversion of
$670,033, liquidated damages of $333,423, fair value adjustment on securities
available for sale of $206,000, beneficial interest expense of $165,152 on debt
conversions to stock and interest expense of $147,526. Interest expense is
related to accrued interest on the YA Global Convertible Debentures and interest
income is related to interest on the cash accounts.





Net
income (loss) for the nine months ending March 31, 2009 and 2008, was a loss of
$1,170,150 and income of $1,945,623, respectively. The decrease in net income in
2008 to a net loss in 2009 of $3,115,773 is primarily due to unfavorable change
in the revaluation of derivatives of $4,028,701 and loss on gross profit of
$137,876 on lower sales, offset by lower operating expenses of $143,175, lower
amortization of debt discount of $513,783 and lower interest expenses of
$177,486.





Three months ended March 31,
2009 compared to three months ended March 31, 2008





Total
sales for the three months ended March 31, 2009 and 2008 were $89,157 and
$685,663, respectively. The $596,506 decrease is primarily the result of the
reductions in shipments of fish oil products as the customer experiences a
slow-down related to the worsening economy.





Cost of
sales for the three months ended March 31, 2009 and 2008 were $34,729 and
$498,373, respectively, for a reduction in costs of $463,644. The costs
represent the costs of bulk supplies of capsules and sealed powders, bottles,
caps, shipping containers, packaging and shipping of nutritional supplements by
Genotec. The decrease is primarily the result of the reductions in shipments of
fish oil products as discussed above.





Total
operating expenses for the three months ended March 31, 2009 and 2008, were
$308,811 and $336,468, respectively. The decrease of $27,657 was primarily due
to reductions of consulting fees, insurance costs, travel expenses and payroll
costs as the Company tightens up spending until sales revenues
increase.





The other
(income) expense for the three months ended March 31, 2009 and 2008 were an
income of $1,731,401 and $2,271,230, respectively. The total income for the
three months ended March 31, 2009 was primarily comprised of a gain on
revaluation of derivatives and warrants of $1,876,531 offset by liquidated
damages of $103,144 and interest expense of $42,388. Total total income for the
three months ended March 31, 2008 was comprised of a gain on revaluation of
derivatives and warrants of $2,833,820 and interest income of $1,490 offset by
amortization of the discount on debt conversion of $223,344, liquidated damages
of $108,275, beneficial interest on debt conversions to stock of $165,074,
interest expense of $47,387 and fair value adjustment on securities available
for sale of $20,000. Interest expense is related to accrued interest on the YA
Global Convertible Debentures and interest income is related to interest on the
cash accounts.





Net
income for the three months ending March 31, 2009 and 2008 was $1,477,018 and
$2,122,052, respectively. The decrease in net income of $645,034 is primarily
due to unfavorable change in the revaluation of derivatives and warrants of
$957,289 and loss on gross profit of $132,862 on lower sales, offset by lower
operating expenses of $27,657, lower amortization of debt discount of $223,344
and lower interest expenses of $170,073.





19
 Table of Content




Liquidity
and Capital Resources





On April
1, 2005, we entered into a Securities Purchase Agreement with YA Global for the
sale of $2,500,000 of secured convertible debentures. The agreement was amended
and restated on July 20, 2006 and January 4, 2007 to reflect the change in the
funding formulas.  Pursuant to the terms of the agreement with YA
Global, on April 1, 2005 we issued a secured convertible debenture in the
principal amount of $1,250,000.  On July 20, 2006, the secured
convertible debenture was amended and restated and reissued in an aggregate
principal amount of $1,330,308, which included accrued and unpaid interest on
the original convertible debenture of $80,308.  On January 4, 2007, we
issued a second secured convertible debenture to YA Global in the principal
amount of $625,000. These debentures are convertible into Class A common stock
at the discretion of the holders. These transactions required the Company to
register for resale a number of shares to facilitate these financial
transactions. The Company was unable to complete the registration statement in
the time specified in the Registration Rights Agreement and as such, continues
to incur liquidated damage charges as specified therein.





The
Company is seeking additional operating income opportunities through potential
acquisitions or investments. Such acquisitions or investments may consume cash
reserves or require additional cash or equity.  Our working capital
and additional funding requirements will depend upon numerous factors,
including: (i) strategic acquisitions or investments; (ii) an increase to
current company personnel; (iii) the level of resources that we devote to sales
and marketing capabilities; (iv) technological advances; and (v) the activities
of competitors.





To date,
the Company has incurred substantial losses, and will require financing for
working capital to meet its operating obligations.  While we have
raised sufficient working capital to fund our operations for what we believe
should be sufficient for the next three months, we will subsequently need to
raise additional capital to fund our future operations.  We anticipate
that we will require financing on an ongoing basis for the foreseeable future to
fund our working capital needs.





During
the nine months ended March 31, 2009, the Company had a net decrease in cash of
$89,233 and during the nine months ended March 31, 2008, the Company had a net
decrease in cash of $303,358.  The Company’s principal use of funds
during these periods was as follows:




Cash flows from operating
activities.  The Company used $89,233 and $298,826 in cash from
operations in the nine months ended March 31, 2009 and 2008, respectively. The
net reduction of $209,593 was primarily the result of a lower utilization of
cash in operations (net operating loss after adding back non-cash items but
before considering changes in certain assets and liabilities), an increase in
collections of accounts receivable and deferrals of executive compensation
offset by increases in inventory and the paydown of trade payables.




Cash flows from investing
activities.  The Company has no investing activities for the
nine months ended March 31, 2009. For the nine months ending March 31, 2008, the
Company invested $4,532 to create a trade show booth for exhibitions and to
upgrade their back office network.





Off-balance
Sheet Arrangements





The
Company has no off-balance sheet arrangements that have or are reasonably likely
to have a current or future effect on our financial condition, changes in
financial condition, revenues or expenses, results of operations, liquidity,
capital expenditures or capital resources that is material to
investors.





Forward
Looking Statements - Cautionary Factors





Certain
information included in this Form 10-Q and other materials filed or to be filed
by us with the Securities and Exchange Commission (as well as information
included in oral or written statements made by us or on our behalf), may contain
forward-looking statements about our current and expected performance trends,
growth plans, business goals and other matters.  These statements may
be contained in our filings with the Securities and Exchange Commission, in our
press releases, in other written communications, and in oral statements made by
or with the approval of one of our authorized officers.  Information
set forth in this discussion and analysis contains various “forward-looking
statements” within the meaning of Section 27A of the Securities Act of 1933 and
Section 21E of the Securities Exchange Act of 1934.  The Private
Securities Litigation Reform Act of 1995 (the “Act”) provides certain “safe
harbor” provisions for forward-looking statements.  The reader is
cautioned that such forward-looking statements are based on information
available at the time and/or management’s good faith belief with respect to
future events, and are subject to risks and uncertainties that could cause
actual performance or results to differ materially from those expressed in the
statements.  Forward-looking statements speak only as of the date the
statement was made.  We assume no obligation to update forward-looking
information to reflect actual results, changes in assumptions or changes in
other factors affecting forward-looking information.  Forward-looking
statements are typically identified by the use of terms such as “anticipate,”
“believe,” “could,” “estimate,” “expect,” “intend,” “may,” “might,” “plan,”
“predict,” “project,” “should,” “will,” and similar words, although some
forward-looking statements are expressed differently.  Although we
believe that the expectations reflected in such forward-looking statements are
reasonable, we can give no assurance that such expectations will prove to be
correct.






20
 Table of Content




ITEM
4T.       CONTROLS AND
PROCEDURES


Management's
report on internal control over financial reporting.





Management
of the Company has evaluated, with the participation of the Chief Executive
Officer and Chief Financial Officer of the Company, the effectiveness of the
Company's disclosure controls and procedures (as defined in Rules 13a-15(e) or
15d-15(e) promulgated by the Securities and Exchange Commission pursuant to the
Securities Exchange Act of 1934, as amended (the "Exchange Act")) as of the end
of the period covered by this Quarterly Report on Form 10-Q. Based on that
evaluation, the Chief Executive Officer and Chief Financial Officer of the
Company had concluded that the Company's disclosure controls and procedures as
of the period covered by this Quarterly Report on Form 10-Q were not effective
for the following reasons:





a)           A
deficiency was identified as the Company's limited segregation of duties amongst
the Company's employees with respect to the Company's control activities. This
deficiency is the result of the Company's limited number of employees. This
deficiency may affect management's ability to determine if errors or
inappropriate actions have taken place. Management is required to apply its
judgment in evaluating the cost-benefit relationship of possible changes in our
disclosure controls and procedures.





b)           A
deficiency was identified in respect to the Company's Board of Directors. This
deficiency is the result of the Company's limited number of external board
members. This deficiency may give the impression to the investors that the board
is not independent from management. Management and the Board of Directors are
required to apply their judgment in evaluating the cost-benefit relationship of
possible changes in the organization of the Board of Directors.





Changes
in internal control over financial reporting.





Management
of the Company has also evaluated, with the participation of the Chief Executive
Officer of the Company, any change in the Company’s internal control over
financial reporting that occurred during the period covered by this Quarterly
Report on Form 10-Q and determined that there was no change in the Company’s
internal control over financial reporting that has materially affected, or is
reasonably likely to materially affect, the Company’s internal control over
financial reporting.





PART
II – OTHER INFORMATION




ITEM 3.
            DEFAULTS UPON SENIOR
      SECURITIES.




On April
1, 2005, we entered into a Securities Purchase Agreement with YA Global for the
sale of $2,500,000 of secured convertible debentures. The agreement was amended
and restated on July 20, 2006 and January 4, 2007 to reflect the change in the
funding formulas.  Pursuant to the terms of the agreement with YA
Global, on April 1, 2005 we issued a secured convertible debenture in the
principal amount of $1,250,000.  On July 20, 2006, the secured
convertible debenture was amended and restated and reissued in an aggregate
principal amount of $1,330,308, which included accrued and unpaid interest on
the original convertible debenture of $80,308.  Interest on the
outstanding principal balance of the Secured Convertible Debentures accrues at
the annual rate of 10%. Payment of principal and accrued interest shall be paid
on or before July 1, 2008 on the July 20, 2006 debenture. During the year ended
June 30, 2008, we issued 158,639,780 shares of Class A common stock as repayment
of principal of $166,550. During the nine months ended March 31, 2009, we issued
36,801,932 shares of Class A common stock as repayment of principal of $19,700.
As of March 31, 2009 the remaining principal balance of the convertible
debenture was $1,094,058 plus $326,407 of accrued interest. As of June 30, 2008
the remaining principal balance of the convertible debenture was $1,113,758 plus
$244,186 of accrued interest.





As of the
date of this filing, the Company is in default of the repayment terms of the
July 20, 2006 YA Global Convertible Debenture. Per the terms of the debenture,
in the event of a default, the full principal amount of this Debenture, together
with interest and other amounts owing, shall be due and payable in cash,
provided however, the holder of the debenture may request payment of such
amounts in Common Stock of the Obligor at the Conversion Price then in-effect.”
As of the date of this filing, YA Global has not demanded payment and management
is in negotiations to restructure the debt.





ITEM
      5.
            OTHER
    INFORMATION




(b)
            The
      Company does not have a standing nominating committee or a committee
      performing similar functions as the Company’s Board of Directors consists
      of only two members and therefore there would be no benefit in having a
      separate nominating committee that would consist of the same number of
      members as the full board of directors.  Both members of the
      Board of Directors participate in the consideration of director
      nominees.




ITEM
      6.
            EXHIBITS





31.1
            Rule 13a-14(a)/15d-14(a) Certifications.





32.1
            Certification pursuant to 18 U.S.C. Section 1350, as
      adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
      2002.







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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.









MM2
      GROUP, INC.Date:
      May 20, 2009
                By:
                /s/MarkMellerMark
      MellerPresident,
      Chief
      Executive Officer andPrincipal
      Accounting Officer


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Index
of Exhibits








31.1
            Rule 13a-14(a)/15d-14(a)
    Certifications.





32.1
            Certification pursuant to 18 U.S.C. Section 1350, as
      adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
      2002.
















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