**SECURITIES AND EXCHANGE COMMISSION****Washington, D.C. 20549**** FORM 10-QSB**

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

** For the quarterly period ended July 31, 2006**
| **000-29921**          |
|------------------------|
|                        |
| Commission file number |
|                                                              |
|-------------------------------------------------------------------|
| **MAGIC MEDIA NETWORKS, INC.**                                    |
|                                                                   |
| (Exact name of small business issuer as specified in its charter) |
| **Delaware**             |   | **65-0494581**                       |
|--------------------------|--------|--------------------------------------|
|                          |   |                                      |
| (State of incorporation) |   | (IRS Employer Identification Number) |
| **530 North Federal Highway**** Fort Lauderdale, Florida 33301** |
|-----------------------------------------------------------------------|
|                                                                       |
| (Address of principal executive office)                               |
| **(954) 764-0579**          |
|-----------------------------|
|                             |
| (Issuer's telephone number) |
| **Check whether the issuer:**                                                                                                                                                                                                                            |
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter period that the registrant was required to file such reports)

** Yes [X] No[ ]**                              |
| and                                                                                                                                                                                                                                                      |
| (2) has been subject to such filing requirements for the past 90 days.

** Yes [X] No [ ]**

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

** Yes [ ] No  [X]** |
|                                                                                                                                                              |
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| **Applicable only to corporate issuers**                                                                                                                          |
| As of September 19, 2006 (the most recent practicable date), there were 43,117,658 shares of the issuer's Common Stock, $0.0001 par value per share, outstanding. |
|  Transitional Small Business Disclosure Format (check one)

** Yes [ ] No [X]** |
|-------------------------------------------------------------------------------------------|

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| **MAGIC MEDIA NETWORKS, INC.**** FORM 10-QSB**** TABLE OF CONTENTS** |
|--------------------------------------------------------------------------------|
|                                                                           |   |   |
| **PART I**                                                                     |   | **FINANCIAL INFORMATION** |
| Item 1                                                                         |   | Financial Statements |
|                                                                           |   |      Consolidated          Balance Sheets |
|                                                                           |   |      Consolidated          Statements of Operations |
|                                                                           |   |      Consolidated          Statements of Cash Flows |
|                                                                           |   |      Notes          to Financial Statements |
| Item 2                                                                         |   | Management's Discussion and          Analysis of Financial Condition and Results of Operations |
| Item 3                                                                         |   | Controls and Procedures |
|                                                                           |   |   |
| **PART II**                                                                    |   | **OTHER INFORMATION** |
| Item 1                                                                         |   | Legal Proceedings |
| Item 2                                                                         |   | Unregistered Sales of Equity          Securities and Use of Proceeds |
| Item 6                                                                         |   | Exhibits and Reports on Form 8-K |
|                                                                           |   |   |
| **SIGNATURES**                                                                 |

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**PART I**

** FINANCIAL INFORMATION**

** ITEM 1 - FINANCIAL STATEMENTS**

|                                                                                                                                                                                    |   | **July 31,****2006****(unaudited)** |   |   | **October 31,****2005** |
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|-------------------------------------|--------|--------|-------------------------|
|                                                                                                                                                                                    |        |                                |   |        |
| ASSETS                                                                                                                                                                                  |   |                                |   |   |                    |   |   |
|                                                                                                                                                                                    |   |                                |   |   |                    |   |   |
| Current Assets:                                                                                                                                                                         |   |                                |   |   |                    |   |   |
|    Cash and cash          equivalents                                                                                                                                    | $      | 9,751                               |   |   | $                       | 38,735 |   |
|    Cash - restricted                                                                                                                                                          |   | 100,000                             |   |   |                    | 0 |   |
|                                                                                                                                                                                    |   |                                     |   |   |                    |  |   |
|       Total          Current Assets                                                                                                                       |   | 109,751                             |   |   |                    | 38,735 |   |
|                                                                                                                                                                                    |   |                                |   |   |                    |   |   |
| Property and equipment - net                                                                                                                                                            |   | 146,396                             |   |   |                    | 165,992 |   |
| Acquired amortizable intangible          assets                                                                                                                                         |   | 2,455                               |   |   |                    | 2,680 |   |
|                                                                                                                                                                                    |   |                                     |   |   |                    |  |   |
|       Total          Assets                                                                                                                               | $      | 258,602                             |   |   | $                       | 207,407 |   |
|                                                                                                                                                                                    |   |                                     |   |   |                    |  |   |
| LIABILITIES AND STOCKHOLDERS'          DEFICIT                                                                                                                                          |   |                                |   |   |                    |   |   |
|                                                                                                                                                                                    |   |                                |   |   |                    |   |   |
| Current Liabilities:                                                                                                                                                                    |   |                                |   |   |                    |   |   |
|    Accounts and          accrued expenses payable                                                                                                                             | $      | 321,411                             |   |   | $                       | 247,022 |   |
|    Payroll taxes          payable                                                                                                                                        |   | 235,727                             |   |   |                    | 171,104 |   |
|    Convertible          notes payable - related party                                                                                                                    |   | 400,000                             |   |   |                    | 200,000 |   |
|                                                                                                                                                                                    |   |                                     |   |   |                    |  |   |
|       Total          Current Liabilities                                                                                                                  |   | 957,138                             |   |   |                    | 618,126 |   |
|                                                                                                                                                                                    |   |                                     |   |   |                    |  |   |
|                                                                                                                                                                                    |   |                                |   |   |                    |   |   |
| Stockholders' Deficit                                                                                                                                                                   |   |                                |   |   |                    |   |   |
|    Preferred          stock, Series B convertible ($0.0001 par value)                 3,750,000          shares authorized and issued |   | 150,000                             |   |   |                    | 150,000 |   |
|    Common Stock                                                                                                                                                          |   |                                |   |   |                    |   |   |
|       46,250,000          ($0.0001 par value) shares authorized                                                                                           |   |                                |   |   |                    |   |   |
|                41,717,658 shares issued (38,194,257 in 2005)                                                                                                   |   | 5,515,295                           |   |   |                    | 4,829,288 |   |
|    Deficit          accumulated since quasi-reorganization October 31, 1999                                                                                         |   | (6,322,164                          | )      |   |                    | (5,323,340 | ) |
|    Deferred compensation                                                                                                                                                      |   | (41,667                             | )      |   |                    | (66,667 | )  |
|                                                                                                                                                                                    |   |                                     |   |   |                    |  |   |
|       Total          Stockholders' Deficit                                                                                                                |   | (698,536                            | )      |   |                    | (410,719 | ) |
|                                                                                                                                                                                    |   |                                     |   |   |                    |  |   |
|       Total          Liabilities and Stockholders' Deficit                                                                                                | $      | 258,602                             |   |   | $                       | 207,407 |   |
|                                                                                                                                                                                    |   |                                     |   |   |                    |  |   |
|                                                                                                                                                                                         |        |                                     |        |        |                         |  |  |  |  |  |

See Notes to Financial Statements.

The interim financial statements      include all adjustments, which, in the opinion of management, are necessary in      order to make the financial statements not misleading.

F-1

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| **MAGIC MEDIA NETWORKS, INC.**

** Consolidated Statements of Operations****(unaudited)** |
|------------------------------------------------------------------------------------------------|
|                                                                                           |   | **Three Months Ended** |   | **Nine Months Ended** |
|                                                                                           |   |  |   |  |
|                                                                                           |   | **July 31,****2006** |   | **July 31,****2005** |   | **July 31,****2006** |   | **July 31,****2005** |   |
|                                                                                           |   |  |   |  |   |  |   |  |   |
| Net sales                                                                                      |   | $ | 4,924 |   |   | $ | 59,028 |   |   | $ | 13,502 |   |   | $ | 68,128 |   |   |   |
|                                                                                           |   |   |  |   |   |   |  |   |   |   |  |   |   |   |  |   |   |   |
| Selling, general and          administrative expenses                                          |   |   | 229,844 |   |   |   | 282,160 |   |   |   | 707,611 |   |   |   | 717,494 |   |   |   |
| Consulting expenses                                                                            |   |   | 35,000 |   |   |   | 3,000 |   |   |   | 74,807 |   |   |   | 249,875 |   |   |   |
| Interest expense                                                                               |   |   | 112,350 |   |   |   | 7,000 |   |   |   | 229,909 |   |   |   | 29,396 |   |   |   |
|                                                                                           |   |   |  |   |   |   |  |   |   |   |  |   |   |   |  |   |   |   |
| Total expenses                                                                                 |   |   | 377,194 |   |   |   | 292,160 |   |   |   | 1,012,327 |   |   |   | 996,765 |   |   |   |
|                                                                                           |   |   |  |   |   |   |  |   |   |   |  |   |   |   |  |   |   |   |
| Net loss before income taxes                                                                   |   |   | (372,270 | ) |   |   | (233,132 | ) |   |   | (998,825 | ) |   |   | (928,637 | ) |   |   |
|                                                                                           |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Income tax expense                                                                             |   |   | 0 |   |   |   | 0 |   |   |   | 0 |   |   |   | 0 |   |   |   |
|                                                                                           |   |   |  |   |   |   |  |   |   |   |  |   |   |   |  |   |   |   |
| Net loss                                                                                       |   | $ | (372,270 | ) |   | $ | (233,132 | ) |   | $ | (998,825 | ) |   | $ | (928,637 | ) |   |   |
|                                                                                           |   |   |  |   |   |   |  |   |   |   |  |   |   |   |  |   |   |   |
|                                                                                           |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Basic and diluted loss per share                                                               |   | $ | (0.01 | ) |   | $ | (0.01 | ) |   | $ | (0.02 | ) |   | $ | (0.03 | ) |   |   |
|                                                                                           |   |   |  |   |   |   |  |   |   |   |  |   |   |   |  |   |   |   |
| Weighted average common share equivalent                 outstanding  |   |   | 45,371,462 |   |   |   | 40,732,636 |   |   |   | 44,363,296 |   |   |   | 35,462,512 |   |   |   |
|                                                                                           |   |   |  |   |   |   |  |   |   |   |  |   |   |   |  |   |   |   |

See Notes to Financial Statements.

The interim financial statements      include all adjustments, which, in the opinion of management, are necessary in order      to make the financial statements not misleading.

F-2

----

| **MAGIC MEDIA NETWORKS, INC.**** Consolidated Statements of Cash Flows** |
|-------------------------------------------------------------------------------|
|                                                                          |   |   |
|                                                                          |   | **Nine Months Ended** |
|                                                                          |   | **July 31,****2006**** (unaudited)** |   | **July 31,****2005****(unaudited)** |
|                                                                          |   |  |   |  |
| Operating Activities:                                                         |   |   |   |   |   |   |   |   |
| Net loss                                                                      |   | $ | (998,825 | ) |   | $ | (928,637 | ) |
| Adjustments to reconcile net          loss to cash:                           |   |   |   |   |   |   |   |   |
| Non-cash expenses included in          net loss                               |   |   |   |   |   |   |   |   |
|                                                                          | Depreciation and amortization |   |   | 31,725 |   |   |   | 18,225 |   |
|                                                                          | Stock issued for services |   |   | 250,507 |   |   |   | 271,500 |   |
|                                                                          | Recognition of deferred          compensation |   |   | 25,000 |   |   |   | 25,000 |   |
|                                                                          | Extension of stock options for          consulting services |   |   | 0 |   |   |   | 79,875 |   |
|                                                                          | Discount arising from beneficial          conversion feature included                  in          interest expense |   |   | 200,000 |   |   |   | 0 |   |
|                                                                          | Change in operating assets and          liabilities |   |   |   |   |   |   |   |   |
|                                                                          |       Increase in restricted          cash for payment of payroll taxes |   |   | 100,000 |   |   |   | 0 |   |
|                                                                          |                Increase in payables and accrued expenses |   |   | 169,012 |   |   |   | 87,144 |   |
|                                                                          |   |   |  |   |   |   |  |   |
| Cash used by operating          activities                                    |   |   | (422,581 | ) |   |   | (446,893 | ) |
|                                                                          |   |   |   |   |   |   |   |   |
| Financing Activities:                                                         |   |   |   |   |   |   |   |   |
|                                                                          | Proceeds from issuance of common          stock |   |   | 205,500 |   |   |   | 832,500 |   |
|                                                                          | Proceeds note payable - related          party |   |   | 200,000 |   |   |   | 0 |   |
|                                                                          | Repayment note payable - La          Jolla Cove Investors |   |   | 0 |   |   |   | (300,000 | )  |
|                                                                          |   |   |  |   |   |   |  |   |
| Cash generated by financing          activities                               |   |   | 405,500 |   |   |   | 532,500 |   |
|                                                                          |   |   |   |   |   |   |   |   |
| Investing Activities:                                                         |   |   |   |   |   |   |   |   |
|                                                                          | Acquisition of fixed assets |   |   | (11,903 | ) |   |   | (34,367 | ) |
|                                                                          | Acquisition of National Hotel          Network |   |   | 0 |   |   |   | (100,000 | ) |
|                                                                          | Acquisition of ALW          Communications |   |   | 0 |   |   |   | (21,835 | )  |
|                                                                          |   |   |  |   |   |   |  |   |
| Cash used by investing          activities                                    |   |   | (11,903 | ) |   |   | (156,202 | ) |
|                                                                          |   |   |  |   |   |   |  |   |
| Increase (decrease) in cash                                                   |   |   | (29,984 | )  |   |   | (70,595 | )  |
| Cash and cash equivalents -          beginning                                |   |   | 38,735 |   |   |   | 233,810 |   |
|                                                                          |   |   |  |   |   |   |  |   |
| Cash and cash equivalents -          ending                                   |   | $ | 9,751 |   |   | $ | 163,215 |   |
|                                                                          |   |   |  |   |   |   |  |   |

See Notes to Financial Statements.

The interim financial statements      include all adjustments, which, in the opinion of management, are necessary in      order to make the financial statements not misleading.

F-3

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**MAGIC MEDIA NETWORKS, INC.** Notes to Interim Consolidated Financial Statements July 31, 2006  (Unaudited)

**Note 1 -** **Basis of Presentation**

**           ** The interim consolidated financial statements of Magic Media Networks, Inc. ("the Company") include all adjustments, which, in the opinion of management, are necessary in order to make the financial statements not misleading. The accompanying unaudited financial statements have been prepared in accordance with the instructions to Form 10-QSB and do not include all of the information and footnotes required by Generally Accepted Accounting Principles in the United States for complete financial statements. The financial statements presented herein have been prepared in accordance with the accounting policies described in the Company's October 31, 2005 Annual Report on Form 10-KSB and should be read in conjunction with the Notes to financial statements which appear in that report. The consolidated financial statements include the results of the Company's wholly-owned subsidiaries; Bar TV, Inc., Destination Television, Inc., and Hotel TV, Inc., which were incorporated in Florida in November 2002, August 2003, and November 2004, respectively. Also included, from the date of acquisition (December 31, 2004) are the results of ALW Communications, Inc. and National Hotel Television Network, Inc. All significant inter-company account balances and transactions between the Company and its subsidiaries have been eliminated in consolidation.

**N****ote 2 - Cash - Restricted**

**           ** In connection with the issuance by the Company in March 2006 of a secured convertible note, described below in *Note 3 - Convertible Note Payable*, the proceeds were deposited in a restricted cash trust account to be used for payment of withheld payroll taxes.

**Note 3 - Notes Payable**

**            Convertible Notes Payable - Dr. Terry**

**           ** On April 15, 2003, the Company issued to Dr. H. K. Terry a $100,000 unsecured promissory note originally due April 15, 2004, which has been extended to April 15, 2005 and further extended to April 15, 2007. On October 12, 2003, the Company issued an additional one-year promissory note for up to $100,000 of which $60,000 had been advanced as of October 31, 2003 and an additional $40,000 was advanced on November 24, 2003. The maturity date of this note was extended to October 12, 2005 and further extended to October 12, 2006. The notes are unsecured and bear interest at 6%. The notes, including any accrued interest, are convertible, at the holder's option, into common stock at the average closing price of the Company's common stock for the five trading days prior to the date of receipt of election to convert but not less than $0.05 per share. On October 13, 2004, Dr. Terry advanced the Company an additional $125,000 for which the Company issued a one-year promissory note that was convertible, at the holder's option, at $0.10 per share. The notes were issued to document Dr. Terry's loans to the Company. The proceeds of the loans were used for working capital. In January 2005, Dr. Terry exercised the right to convert the $125,000 note issued on October 13, 2004 into 1,250,000 shares of the Company's common stock.

**           ** On March 27, 2006, the Company issued a 6%, one-year, $100,000 secured convertible note to Dr. Terry for $100,000 cash.  The note is convertible into common stock at $0.10 per share. The note is collateralized by all of the Company's assets, both tangible and intangible and is restricted as to transferability. The proceeds of the note were to be used for payment of withheld payroll taxes.*  See Note 2 - Cash - Restricted.*

**           ** On May 10, 2006, the Company issued an additional 6%, one-year secured convertible note, restricted as to transferability, in the principal amount of $100,000 to Dr. Terry for $100,000 cash. The proceeds of the note were for working capital.

**           ** Pursuant to the requirements *of Emerging Issues Task Force ("EITF") 98-5 "Accounting for Convertible Securities with Beneficial Conversion Features or Contingently Adjustable Conversion Ratios" and EITF 00-27"Application of Issue No. 98-5 to Certain Convertible Instruments,"*   the issuance of the March 27, 2006 $100,000 convertible note resulted in a discount being recorded in the amount of $100,000 arising from an embedded beneficial conversion feature. The note conversion formula provides for a $0.15 per share discount from fair market value. The total discount was limited to the principal amount of the note, $100,000, which was fully amortized as interest expense at the time of issuance of the note; correspondingly, *Shareholders' equity - Common stock* was increased by a like amount. The issuance of the May 10, 2006, $100,000 convertible note also resulted in a discount in the amount of $100,000 arising from an embedded beneficial conversion feature. The total discount was limited to the principal amount of the note, $100,000, which was fully amortized as interest expense at the time of issuance of the note; correspondingly, *Shareholders' equity - Common stock* was increased by a like amount.

**           ** The convertible notes have not been registered under the Securities Act of 1933, as amended, and therefore, may not be transferred in the absence of an exemption from registration under such laws and will be considered "restricted securities" as that term is defined in Rule 144 adopted under the Securities Act, and may be sold only in compliance with the resale provisions set forth therein.

**Note 4** - **Stockholders' Deficit**

**           ****Stock Issued for Cash**

**           ** During the three months ended January 31, 2006, the Company issued 1,000,000 shares of restricted common stock to Dr. Terry for $100,000 or $0.10 per share.

**           ** During the three months ended April 30, 2006, the Company issued to three persons, for $103,000 cash, a total of 953,333 shares of restricted common stock of which 500,000 were issued for $0.07 per share and 453,333 shares were issued for $0.15 per share.

**           ** During the three months ended July 31, 2006, the Company issued to one person, for $2,500 cash, 50,000 shares of restricted common stock for $0.05 per share.

**           ** None of these shares has been registered under the Securities Act of 1933, as amended, and therefore, may not be transferred in the absence of an exemption from registration under such laws and will be considered "restricted securities" as that term is defined in Rule 144 adopted under the Securities Act, and may be sold only in compliance with the resale provisions set forth therein.

**           ****Stock Issued for Services and Payment of Liability**

**           ** During the three months ended January 31, 2006, the Company issued a total of 320,068 shares of common stock to two persons for consulting services. The shares were valued at $32,068 or $0.10 per share which was representative of the approximate market value at the dates of issuance.

**           ** During the three months ended April 30, 2006, the Company issued a total of 675,000 shares of common stock for services and 300,000 shares in payment of an account payable, which had originally been incurred for the purchase of television screens. Of the shares that were issued for services, 100,000 shares were issued as directors' fees (50,000 to each of the Company's two directors) and 575,000 shares were issued to seven employees and independent contractors. The shares that were issued for services were valued at $0.25 per share, which was the approximate market value at the issuance date, for a total of $168,750, and the shares issued in payment of the debt were valued at $0.10 per share or $30,000, the amount of the debt.

**           ** During the three months ended July 31, 2006, the Company issued a total of 225,000 shares of common stock for services. Of the shares that were issued for services, 150,000 shares were issued to two consultants and 75,000 shares were issued to two employees and independent contractors. The shares were valued as follows: 125,000 @$0.23 per share and 100,000 @$0.21 per share, which were the approximate market values at the issuance dates, for a total of $49,750.

**           ** None of these shares has been registered under the Securities Act of 1933, as amended, and therefore, may not be transferred in the absence of an exemption from registration under such laws and will be considered "restricted securities" as that term is defined in Rule 144 adopted under the Securities Act, and may be sold only in compliance with the resale provisions set forth therein.

**            Acquisition of ALW Communications and National Hotel Television**

**           ** On December 31, 2004, the Company completed the acquisition of all of the issued and outstanding stock of National Hotel Television Network, Inc. ("NHN") and ALW Communications, Inc. ("ALW"). The purchase price of the transactions was $100,000 cash (for the stock of NHN) and 1,282,354 shares of the Company's common stock, valued at $128,235 (for the stock of ALW) for a total consideration of $228,235. The financial statements of the acquired companies, at the date of acquisition, reported total assets of the combined acquired companies, at December 31, 2004, of $12,693; total liabilities of $23,401; and shareholders' deficit of $10,708. The amount by which the purchase price exceeded the net assets of the acquired companies, $238,943, was recorded by the Company as *Goodwill,* and was to be the subject of impairment review when events or changes in circumstances occur that indicate that the carrying value of the asset may not be recoverable.

**           ** In May 2005, the Company commenced a lawsuit regarding its acquisition of ALW and NHN. In accordance with the Company's policy, it considered the commencement of this lawsuit an event that may have indicated a change in the carrying value of the acquired assets. After review, the Company determined that a permanent impairment of the value of the assets acquired had occurred. As a result, the accompanying consolidated balance sheet reflects a write-down of long-lived assets in the amount of $250,070 as of October 31, 2005.

**Note 5 - Commitments**

**            Facilities**

**           ** The Company leases from a stockholder, Dr. H. K. Terry, pursuant to an oral agreement on a month-to-month basis, an 8,500 square foot building in Fort Lauderdale, Florida, which serves as its administrative offices and computer operations center. The rent is $4,500 per month and the Company is responsible for utilities. Rent expense for the three months and nine months ended July 31, 2006 was $13,500 and $40,500, respectively. Rent expense for the three months and nine months ended July 31, 2005 was $13,500 and $40,500, respectively.

**           ****Employment Agreements**

**           ** Gordon Scott Venters is employed as the Company's President and Chief Executive Officer, pursuant to an employment agreement, which began October 1, 1997 and provided for a base salary of $75,000, $100,000 and $133,000 for years one, two and three, respectively and which was renewed to October 31, 2004. On November 15, 2004, effective November 1, 2004, the employment agreement was extended until October 31, 2007, and provides for an annual salary of $133,000, which is the same as in previous years; annual increases of a minimum of 5%; and participation in incentive or bonus plans at the discretion of the Board of Directors. Mr. Venters also received 1,000,000 shares of the Company's common stock, which were restricted as to transferability. The shares were valued at $100,000, ($0.10 per share), which was charged to *Deferred Compensation,* to be expensed over the 36-month term of the agreement at $2,778 per month.  The agreement additionally provides for certain confidentiality and non-competition provisions and a minimum payment of 18 months salary in the event of a change of control or termination "without cause," or if the employee terminates for "good reason." As of July 31, 2006, Mr. Venters was due $1,662 for accrued unpaid salary.

**Note 6 - Related Party Transactions**

**           ** In January 2006, Dr. Harold Terry, a major shareholder of the Company's common stock, acquired 1,000,000 shares of common stock from the Company for cash consideration of $100,000. The shares, which are restricted as to transferability, were issued at $0.10 per share. His ownership of the Company's Convertible Notes Payable is described above Note 3 - *Notes Payable - Convertible Notes Payable - Dr. Terry.*  Dr. Terry, who assumed the Company's contractual obligation to acquire the building housing its office facilities in 2002 for $480,000, has continued to lease the building to the Company, on a month-to-month basis, at $4,500 per month, which has been accrued by the Company but not paid. Dr. Terry had also consented to the use of the property as collateral for the $300,000 La Jolla promissory note, which was paid in April 2005 and the collateral was then released. As of July 31, 2006 and October 31, 2005, the Company was indebted to Dr. Terry for accrued rent in the amounts of $193,500 and $153,000, respectively and for accrued interest in the amounts of $39,644 and $27,735, respectively. These amounts are included in the accompanying balance sheets as accounts and accrued expenses payable.

**           ** On February 28, 2006, the Company issued 50,000 shares to each of its two directors as payment for service as directors. The shares were valued at $0.25 per share or a total of $12,500 for each director. The shares are restricted as to transferability.

**Note 7 - Litigation  Settlements and Accrued Contingent Expense**

**           ** In June 2006, the *Lindenauer* case was settled with the exchange of mutual releases and the payment of $25,000 by a third-party to the Company. In July 2006, plaintiff was awarded judgment against the Company in the *Franco* case for approximately $65,000. In August 2006, the Company paid $50,000 in full settlement of the judgment and accrued the $50,000 expense in the quarter ended July 31, 2006. The Company was named defendant is suit in which the plaintiff seeks $53,000 for breach of contract. The Company plans to vigorously defend the suit and has accrued $10,000 as expense in connection with the possible outcome of this litigation. For the quarter ended July 31, 2006 the Company recorded total litigation expense of $35,000 which consists of the sum of $50,000 (paid in August 2006); $10,000 (estimated and accrued in July 2006); reduced by $25,000 (recovery received in June 2006).

           The financial statements have been prepared assuming that the Company will continue as a going concern. The Company has had only nominal revenue in the ordinary course of its business. The lack of sales and recurring losses from operations, lack of working capital, shareholders' deficit and delinquent payroll taxes raise substantial doubt about the Company's ability to continue as a going concern. Management's plan in regard to these matters is to seek further equity or debt funding to allow it to pursue its business plan which involves the sale of advertising on the Company's Bar TV, Gym TV and Hotel TV networks; the licensing and affiliation with other networks; and the possible acquisition of companies in related or unrelated businesses. The Company intends to increase its revenues by concentrating its sales efforts on attracting national advertisers to its Gym TV and other networks; to negotiate a plan of payment of its payroll tax liability; and to reduce its fixed cash operating expenses so that sales exceed its fixed expenses. If the Company is unable to raise additional capital it may be required to curtail its operations, abandon its business plan, or file for reorganization or liquidation.

**Note 9 - Subsequent Events**

** **           On August 8, 2006, the Company entered into a stock purchase agreement, with Integrated Media Systems, Inc. d/b/a Be Media ("Be Media"), a privately held California based audiovisual systems integrator, and Be Media's sole shareholder. Under the terms of the agreement, the Company will purchase from the sole shareholder all of the outstanding capital stock of Be Media in exchange for shares of a new series of the Company's Preferred stock. The number of common shares into which such Preferred stock will be convertible shall equal 49.9% of the total common and preferred shares outstanding, as adjusted for certain share issuances, and may further be adjusted in accordance with a formula based on Be Media's June 30, 2006 balance sheet. Conversion of the new series of preferred stock is subject to the approval of an increase in the Company's authorized common stock. Completion of the proposed transaction is subject to various conditions that are set forth in the stock purchase agreement and there is no assurance that the conditions for closing will be met or that the transaction will be completed.

**           ** In September 2006, the Company issued to its president, as additional compensation, 1,300,000 shares of common stock, and also issued 100,000 shares of common stock to a consultant for services. The shares are restricted as to transferability.

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

** GENERAL**

           Magic Media Networks, Inc. ("we" or "the Company") is a media production and promotion company focused primarily on the television advertising industry. Our subsidiary, Destination Television Inc., provides remote, edit and delivery platforms to our private digital signage and television networks, Bar TV, Gym TV and Hotel TV that deliver national, regional, and local short format entertainment and advertising content to high traffic leisure destinations. In addition, Destination Television, Inc. has agreements with "affiliate networks" which grant them the right to place national advertisements on our networks and, reciprocally, grant our networks the right to place national ads on their networks. We currently have three affiliate networks, Wild Blue Yonder on Frontier Airlines; the GETV networks; and the Boondoggle sports networks.

           Our wholly owned subsidiary Destination Television, Inc.'s core business is the implementation of private television networks and digital signage in high traffic leisure destinations. Destination Television looks to provide additional revenue streams for our company as an "out-of-home" ("OOH") television syndicator by providing national advertising on third-party OOH networks.

           Destination Television's current network broadcasts Bar TV, Gym TV and Hotel TV, and airs first run Hollywood movie trailers and new music videos that are strategically placed next to quality digital advertising, creating our unique brand of "Advertainment."

            Our primary business is the creating and implementing out-of-home (OOH) distribution network platforms and the syndication of third-party OOH networks to reach captive audience viewers, primarily in high traffic OOH leisure destinations. We provide proprietary advertising and marketing concepts, which we produce, as well as advertising content provided by our advertisers. Our digital networks allow for content that can be specific for each targeted demographic group. We promote our networks as being able to increase exposure and brand recognition and strengthen the influence of consumer purchasing decisions, both at the point-of-purchase as well as at the retail level. Our digital technology and premium locations can provide advertisers with instant delivery and flexibility of content that can be unique to each location, which allows our clients the ability to change their programming or select a specific location to target-market potential consumers. Our private television networks are not currently regulated by the FCC, which offers distribution opportunities to companies that are unable to advertise their products on conventional networks or cable television.

            Our revenue is now derived from the production and sale of custom advertising and the subsequent airing of the ads on our Bar TV, Gym TV and Hotel TV networks and, in the future, we expect revenue from third-party OOH affiliate networks. We offer leisure destinations, primarily bars, taverns and nightclubs, for Bar TV; and health clubs and gyms, for Gym TV; and hotels and resorts, for Hotel TV, a system consisting of hardware and software and if necessary, television monitors to distribute our programming.

            Our executive offices are located at 530 North Federal Highway, Fort Lauderdale, Florida 33301 and our telephone number is (954) 764-0579. Our website address is www.magicmedia.com.           

**            Strategy**

**           ** We have revised our business model to concentrate on the concept that "leisure destinations drive traffic to retail locations." We have developed relationships with leisure destinations such as bars, taverns and nightclubs; gyms and health clubs; and in hotels and resorts in desirable tourist areas.

           Beginning in January 2006, we have consolidated our sales operations and re-positioned our company as an "out-of-home television syndicator."

           We intend to focus our core operations on executing joint agreements with other companies and licensing from them certain rights to their pre-existing on-premises prime digital networks for the placement of mutually beneficial advertisements in their high traffic captive audience locations.

           We have secured new hotel locations through these agreements, as well as new gym and airline locations, gaming and entertainment and sports bar locations which are referred to in the jargon of the advertising industry as "digital real estate" and we intend to secure additional agreements for "out-of home" digital locations. We believe that by increasing our portfolio of these digital locations, we will be able to enter into substantive third party agreements with major advertising agencies, media representation firms and other independent contractors interested in purchasing national, regional and local advertising slots on our three "out-of-home" television network platforms.

           We plan to limit our active solicitation of advertising customers for our Bar TV and Gym TV networks until we have sufficient locations to draw critical mass for national advertisers but will for now concentrate on promotional events whether it is, for example, the launch of a new alcoholic beverage that we can promote in nightclubs or a new vitamin enriched health drink that can be sold in gyms. We believe we can acquire the national commercial via "promo only" while we are expanding Gym TV and Bar TV locations. In addition, we intend to derive the majority of our revenues from strategic alliances and agreements with retail locations whereby they pay a fee to be on our network and "pass-through" certain national advertisers that currently pay the retailer "slotting" fees or "co-op dollars." We also will direct our attention to obtaining our business through national and regional advertising agencies and promotion and public relation firms. Our strategy is that it does not matter whether the ultimate sale takes place in the location that is part of our network or it brings the customer out of our leisure destination to an off-premises retail establishment.

           On March 1, 2006, we began to re-tool our Bar TV and Gym TV locations to a subscription based service where locations pay us a monthly service fee for the network(s). New locations would pay a monthly fee per location in exchange for custom advertisement of the location's brand, product or service to its customers.  

           We are retiring, consolidating and implementing new locations as a result of the conversion to the subscription based service. We currently have a total of approximately 53 locations installed and broadcasting Bar TV on a daily basis that have up until now served as the beta test for the advertising platform. We have approximately 34 locations in Fort Lauderdale, West Palm Beach and the South Beach entertainment district in Miami Beach. We believe that this base of anchor locations has established our regional footprint in the Southeast Florida corridor, which covers the highly populated and affluent counties of Palm Beach, Broward and Miami-Dade. We also have approximately 15 locations in Central Florida (metropolitan Orlando and Tampa) and three in the Florida Keys. Some of these locations are not actively engaged in our network and may be removed by us, may discontinue their association with Bar TV or may again become active participants. In March 2006, we attended the national Nightclub and Bar Convention and Tradeshow as a co-exhibitor with Be Media. At the tradeshow, we had meetings with representatives of regional and national chains of bars, pubs and bar-themed restaurants in connection with our national roll-out of the Bar TV network to the mass market and the creation of a distribution platform that is necessary to attract national advertisers. Our revised business model is now focused on appealing to regional and national chains as a subscription based service in contrast to pursuing individual locations. At the tradeshow, we were also introduced to major advertisers that have expressed an interest in reaching that sector of the population that patronizes these establishments.   

            We believe that our business model can only be successful if we are able to attract enough subscribers and locations to reach critical mass where national and major regional advertisers that are interested in reaching the demographics of our advertiser platforms. In order to accomplish this goal, we must continue to place our broadcast in high traffic locations in the entertainment districts throughout the United States. There is no assurance that we will able to enter into agreements with a sufficient number of business locations within the United States to interest the advertisers that we are seeking.

            In order to interest viewers to watch our monitors and see and pay attention to our advertisements, we must provide entertaining content. We use the same approach as network television which provides content, which may be situation comedies, quiz, reality, talent or late-night talk shows to draw viewers and keep them entertained and focused on their television sets so that during the commercial breaks they watch the ads and eventually buy the products. Just as an "ads-only" channel has not proven to be popular, we believe that to be successful in presenting advertisements, we must provide some form of entertainment and we have chosen first-run motion picture trailers and new music videos and quality digital advertisements creating our brand of "Advertainment." We have not taken any surveys as to whether our locations' patrons like being exposed to ads or movie trailers or music videos.

           We utilize as "backbone" or "core" content, movie trailers of first-run motion pictures from the major motion picture studios, including Twentieth Century Fox, Columbia Pictures, MGM, Warner Bros., Paramount Pictures, Dreamworks and Universal highlighting upcoming releases, and new music videos from the major record labels including Geffen, Universal Atlantic, Capitol, EMI, Epic, Electra, Def Jam, Island, J Records and Maverick. The movie trailers, which are rated as suitable for general audiences, are supplied to us, without charge, by Fahlgren Entertainment, Inc., an Atlanta based entertainment oriented advertising and public relations agency.  Fahlgren Entertainment, Inc. has agreements with the studios to receive print and ad ("P & A") marketing materials, which they provide to third-party entertainment companies such as our company to expand the "P & A" promotion of upcoming theatrical releases. The music videos, which are promotions for upcoming album releases, are provided to us for promotional purposes as well.

           We then schedule local, regional and national advertisements, before and after the filmed movie trailers.  Because music is generally played in our locations by disk jockeys or juke boxes, it is necessary that our broadcasts of movie trailers and music videos and ads be graphically intensive and sometimes aired without sound.

            We currently do not receive any direct revenues from these trailers and videos, but we are free to use them as core content in our broadcasts to the locations that comprise our network. However, a recent industry shift is appearing where the "promo-only" music videos are now being represented to the OOH marketplace as "content," whereas the distributors of this "content" may expect a monthly fee per location for providing these videos. In exchange for allowing us to broadcast our ads and content to their location to be viewed by their patrons, we provide free advertisements, which includes producing a five-second static advertisement for the retail location utilizing its logo, address, website address and phone number. We also provide an "event calendar" featuring the locations' products and services and optional digital photographs of patrons and employees and allocate up to two to four minutes of airtime per hour of broadcast to their location.

            We maintain a similar relationship with our Gym TV locations, except that in addition to providing the businesses with free advertisements, we previously have entered into agreements to pay the locations, on a pro-rata basis, from 10% to 33% of the gross ad revenue. We may or may not continue revenue sharing when a national rollout of the Gym TV network is implemented.

            **Industry Background**

            The point-of-purchase market together with the out-of-home advertising business is currently estimated at $6 billion annually. The advertising industry is diverse and includes television, newspapers, magazines, radio, specialty media, the Internet, billboards, direct mail and telephone directories. Approximately $460 billion was spent on worldwide advertising in 2000, including over $240 billion in the United States alone.

            In recent years, non-traditional media, particularly digital technology, has brought in an era of change, providing advertisers new forms and formats by which they can connect with and impact their target audience.  Many industry analysts believe that the relative importance of traditional advertising media will decrease as advertisers look for more creative solutions to reach consumers.

            Through our networks, we have created advertising distribution channels that permit advertisers to effectively reach their audience in an out-of-home environment. We intend to capture an increasing share of the total advertising market. We believe that point-of-purchase advertising networks appeal to out-of-home advertisers who today employ a broad range of advertising mediums.

**            Network Program**

            Our "networks," which is the term we use to describe our groups of locations that permit their patrons to view our broadcasts, offer advertisers the ability to target specific demographics on a site-by-site basis. Placing monitors in high traffic leisure destinations such as sports bars, taverns, nightclubs, gyms and health clubs, hotels and airlines increases exposure and ad impressions. The monitors are profiled based on specific characteristics of their audience, including age, gender, race and income. This is not accomplished scientifically, but by word-of-mouth and anecdotal observation, which we believe to be reliable. Some examples of the type of information which may be helpful for advertisers are the price of drinks in a bar, which gives information as to patrons' income; the breakdown by sexes, which might indicate the type of drink, which would appeal to a particular gender; the types of cars and trucks in the parking lot, are all items of information that may be useful to advertisers in determining the demographics make-up of the viewing population.  This information availability allows us to appeal to both local advertisers targeting a small geographic area within a major city, as well as national advertisers targeting a wide range of demographic groups.

            Our advertising monitor plays a repeating or looping sequence of advertising and programming.  As currently configured, a broadcast consists of 120 thirty-second advertising spots per hour.  The broadcast in each specific area can support 240 thirty-second airing slots, including entertainment spots, on the DVD or forward storage media player installed at each location. New technology has been announced that may make available to us a high definition and Blue Ray and double-layered DVDs that can provide increased storage and broadcast quality and availability. We have researched this technology and elected to convert all current locations to a forward storage media player on all new installations and deliver the content via the Internet.

            Installation costs for a new site include the cost of acquiring hardware and the cost of installing equipment.  The fully installed average per site cost for a typical location with a single video monitor is approximately $800.  Some sites may contain multiple monitors that would be supported from a single forward storage media player. We secure three to five year location agreements. We do not permit ads of competing bars, gyms, hotels or airlines to be broadcast to the retail locations on our network.  The retail establishment is responsible for supplying electricity to the equipment and keeping the designated monitor on during normal business hours. As compensation for allowing us to place our monitors or networks in their business location, which at present is generally a busy bar, tavern, nightclub, gym, or hotel, the location receives monthly advertising spots. We usually provide the business location with at least one minute of advertisements that air, without charge, at least twice per hour. The location may display its monthly event calendar, five-second static ad and photo gallery or the locations' products or services that are all updated monthly at minimal cost to the location.  

**            Advertising Sales**

            Our strategy is to derive a significant portion of our revenue from advertisements placed on our network.  We are attempting to procure national advertisers, primarily through advertising and promotion agencies and public relations firms that have the ability to direct promotion funds to our networks. Examples of products that are constantly having special promotions are automobile, fashion and entertainment. We are also seeking advertisers that are looking for alternate media to promote their products that are limited by law or tradition as to their advertising options. We also look for opportunities for advertisers whose products can be sold immediately on an impulse basis such as beverages in a Bar TV location and health foods and supplements in Gym TV locations. Recent surveys have shown that 61% of people leaving gym locations make an immediate purchase, with 55% purchasing goods from a supermarket or drugstore (source: Health Club Panel). We intend to target advertisers that relate to this mentality of "leisure destinations driving traffic to retail locations" as we have implemented this tag line in our marketing efforts.

           We believe that advertising and product demonstrations at the point-of-purchase could significantly influence which products consumers purchase. Advertising rates are based upon the availability of space for the desired location, the size and demographic make-up of the market served by the screens and the availability of alternative advertising media in the area. Advertising sales are generally made pursuant to contracts with local, regional or national advertisers.

            As we grow, we may license territories to individuals or corporations to sell the local, regional and national advertisements for their territory. We intend to operate the new locations and network broadcast remotely, utilizing a "forward storage media player" consisting of a digital Internet/ethernet connected hard drive, located at the out-of-home location that uses "pull" not "push" technology, to deliver the content to the location. Utilizing this "real-time" technology, we can update content on-demand, track data from the location, including commercial spot line-up, frequency and rotation, one-time advertisements, play lists and other digital signage data and configurations. We may, in the future, establish an in-house sales force that would be paid a base salary plus incentive compensation. If we are unable to operate the new territories remotely, it could have a substantial and adverse impact on our expansion and capital plan. We have engaged a media analyst to compose a current Company pro-forma outlining our proposed advertising metrics, measurement evaluation, reach and demographics, and cost per thousand (cpms) to provide to potential advertisers and related parties.

**            Competition**

            Competition for advertisers is intense. We will be competing with similar networks and also with radio, television and cable companies and other forms of advertising including newspapers, magazines, the Internet, direct mail and billboards. We believe that our strategy of offering advertising in leisure destinations provides particular advertisers with access to a select clientele at attractive rates with favorable brand recall and significant point-of-purchase potential. We expect to compete with these forms of advertising on the basis of price and our ability to reach potential customers at the point of purchase. A large number of companies that provide advertising in the point-of-purchase segment of the advertising industry and other sectors have significantly greater financial, marketing, technical and other resources than we have. Potential competitors may be able to devote greater resources to marketing promotional campaigns, adopt more aggressive pricing policies and devote more resources to technology than we can. Increased competition may reduce our market share and may require us to reduce advertising rates and therefore lower our operating margins. We may not be able to compete successfully against current and future competitors. There can be no assurances that we will be able to obtain the desired results from our business strategy or to be profitable.

**            Bar TV and Gym TV**           

**           ** We plan to expand the Bar TV concept, which is directed at a specific demographic population focused on chain or multiple location bars, taverns and entertainment destinations. We look to work with the locations utilizing their relationships with vendors to provide us with early advertisement and promotion tie-ins on the network. We plan to convert suitable current locations to a forward storage media player and a monthly subscription service fee. 

            We have completed the beta testing of our Gym TV network at locations with Gold's Gym franchisees and World Gyms and independent gyms throughout Florida. We have attended the National Fitness Trade Shows, and were able to execute new agreements for Gym TV locations in several additional states as part of our currently planed national rollout. We are converting suitable current locations to a forward storage media player and a monthly subscription service fee. We now broadcast to approximately 34 locations and are awaiting installation of our equipment at approximately 19 new additional facilities. On June 12, 2006, Gym TV presented at the Club Industry East Trade Show. Gym TV signed at the convention four new Gym TV locations as subscribers for Gym TV. We are currently following up leads and intend to expand Gym TV as a subscription service. We believe that upon obtaining critical mass, manufacturers and retailers that market health related products such as vitamins, health foods, bicycles, athletic equipment and sporting events will consider directing  part of their promotional/advertising  budget to a specific sector of the population. We believe that the health club/gym market is well suited to our concept that "leisure destinations drive traffic to retail locations." 

            In addition to having made application to register the trademark for Bar TV, we have made application to register the trademark of the Gym TV and Hotel TV brands with the United States Patent and Trademark Office under Section 038 of narrowcast media/audio in out-of- home (OOH) locations.

            **Hotel TV**

**            Acquisition of National Hotel Network and ALW Communications **

**           ** On December 31, 2004, we completed the acquisition of all of the issued and outstanding stock of National Hotel Network, Inc. ("NHN") and ALW Communications, Inc. ("ALW"). The combined purchase price of the transactions was $100,000 cash (for the stock of NHN) and 1,282,354 shares of our common stock (for the stock of ALW). We planned to integrate the new acquisitions, under the brand Hotel TV, Inc., with our existing operations, Bar TV and Gym TV so as to offer national advertisers an opportunity to reach a targeted audience at leisure destinations at relatively reasonable advertising rates. In May 2005, we commenced a lawsuit regarding the acquisition of ALW and NHN. The lawsuit was settled on June 19, 2006 with payment of $25,000 to us by a third-party, and the exchange of mutual releases.

**           ****Description of the Acquired Companies **

**           ** ALW Communications, Inc. was formed in August 2002 and shortly thereafter, the concept for the City Traveler television program was introduced to South Florida's largest and most well known hotels. The show is an in-room television program designed to be a hotel guest's visual guide to the area. Each episode runs in a continuous loop on a dedicated channel, giving guests 24-hour access to an "insider's look" at the area's finest restaurants, attractions and shopping destinations. In May 2003, the show went live and now airs in approximately 19 premier hotels in the Greater Miami and Fort Lauderdale areas. At the time of our acquisition, we had understood that the show aired in 30 hotels. The City Traveler television show is currently offered at no cost to hotels and is broadcast from equipment installed in each hotel by independent contractors paid by ALW Communications, Inc. Hotels traditionally grant City Traveler exclusive broadcast rights for this type of programming.

**           ** Unlike traditional television shows with conventional commercials, City Traveler attracts advertisers by offering advertisements that are actual pieces of a television show. Our production staff works with each client to create a unique 60- to 120-second "advertorial" to entertain, educate and motivate targeted hotel guests. City Traveler episodes consist of 15 to 30 of these individual segments, each highlighting a specific destination.

**           ** In early 2004, in order to attract national advertisers, the National Hotel Network was formed as a sales organization to represent five companies (including ALW Communications, Inc.) that operated City Traveler-type channels in 11 U.S. cities. Through these local affiliates, the network had a viewer base in more than 470 hotels and 135,000 hotel rooms. Each affiliate independently produces their own travel show, however the National Hotel Television Network has contracts with each to sell customary 30, 60, and 90-second commercials. These contracts require that affiliates may not join a competing network, and that National Hotel Television Network not represent competitors airing programming in the affiliates' local markets. Shortly after completing our acquisition of ALW and NHN, we were notified that the largest of the five companies, City Explorer TV, cancelled its agreement with NHN. This cancellation resulted in a reduction of the number of affiliates from 11 to five and the reduction of the number of hotels to 228 and the number of hotel rooms to 37,715 and virtually all the major demographic market areas "DMAs" of the National Hotel Television network. Because we believe the former owners of ALW and NHN knew of the impending cancellation as well as the reduction of the ALW locations being 21 not 30, we commenced litigation which is detailed in our Annual Report on Form 10-KSB for the fiscal year ended October 31, 2005,*  Item 3 - Legal Proceedings-Lindenauer and Wolfson* . The lawsuit was settled on June 19, 2006 with payment of $25,000 to us by a third-party, and the exchange of mutual releases.

**           ** In light of the litigation and in accordance with our accounting policies, and after a comprehensive review of the assets obtained in the acquisition of ALW Communications and National Hotel Television Network, we determined that a permanent impairment of the value of the assets acquired had occurred. As a result, effective October 31, 2005, we removed from our consolidated assets, goodwill acquired in the transaction in the amount of $250,070*. ** ***

**         Government Regulation**

          Because we operate private networks at retail locations, we are not currently restricted by licensing program content and related regulations of the Federal Communications Commission.  In addition, the advertising industry is subject to regulation by the Federal Trade Commission, the Food and Drug Administration and other federal and state agencies and is reviewed by various civic groups and trade organizations.  The introduction of new laws, regulations or interpretation of existing regulations governing advertising could have a material adverse effect on our business.

**          Employees**

          We currently have five full-time employees and also employ independent commission representatives. We typically enter into independent contractor agreements or work-for-hire agreements with individuals to provide services on an as-needed basis.

          **Mergers and Acquisitions**

          In addition to pursuing our revised business model, we are seeking to acquire companies or enter into joint ventures with companies that are in the advertising or promotion fields, especially companies that have in-house or affiliated sales departments. We believe that our concept of leisure destinations driving traffic to retail locations is relevant to all forms of advertising, whether in digital or print or sound format. We believe that there are companies, in Florida and elsewhere, that could benefit from our capabilities and industry relationships and that can also complement our existing network structure. In light of our limited cash position and relatively high debt load, there is no assurance that we will be able to complete the acquisition of any company.

          **Agreement to Acquire Be Media**

**           ** On August 8, 2006, we entered into a stock purchase agreement with Integrated Media Systems, Inc. d/b/a Be Media ("Be Media"), a privately held California based audiovisual systems integrator, and Be Media's sole shareholder. Under the terms of the stock purchase agreement, we will purchase all of the outstanding capital stock of Be Media in exchange for shares of a new series of our Preferred stock.** ** The number of common shares into which such Preferred stock will be convertible shall equal 49.9% of the total common and preferred shares outstanding, as adjusted for certain share issuances, and may further be adjusted in accordance with a formula based on Be Media's June 30, 2006 balance sheet.****Completion of the proposed transaction is subject to various conditions that are set forth in the stock purchase agreement, including the condition that we raise, on terms that are satisfactory to us, from the offer and sale of our equity securities, in a transaction not involving a public offering, that amount, which, after the payment of applicable expenses and fees, results in our receiving $3,000,000 of which $1,000,000 shall be distributed to Be Media and $1,000,000 to Destination Television, Inc. The stock purchase agreement also provides for the filing of a registration statement; employment agreements for key executives; corporate governance changes and other matters. There is no assurance that the conditions for closing will be met and consequently there can be no assurance that the transaction will be completed.

**RESULTS OF OPERATIONS**

*Results of operations for the Three Months Ending July 31, 2006 and July 31, 2005*

            The following discussion and analysis provides information that our management believes is relevant to an assessment and understanding of our results of operations and financial condition. The discussion should be read in conjunction with the financial statements and footnotes that appear elsewhere in this report.

** Sales and Other Revenues**

             In the three months ending July 31, 2006, we had incidental sales in the nominal amount of $4,924. This compares to the nominal sales of $59,028 in the three months ended July 31, 2005. Our sales in both periods were primarily of an experimental nature in which we tested and refined different concepts and approaches for potential advertisers. We do not expect any sum of revenues other than nominal amounts until we have in place a sufficient number of broadcast locations paying us a subscription service fee which in turn maximizes screen distribution and attracts potential revenue streams from national and regional advertisers. In addition, we will have to establish quantifiable measurements and metrics regarding our networks, as required by media buyers, prior to receiving national advertisements.

**Expenses**

             Total expenses in the quarter ended July 31, 2006 were $377,194, which was an increase of $85,034 from total expenses of $292,160 in the quarter ended July 31, 2005.

            **Selling, general and administrative expenses** for the fiscal quarter ended July 31, 2006 decreased $52,316 or 19% to $229,844 from $282,160 in the fiscal three months ended July 31, 2005. The 2006 quarter included $54,053 paid to production employees and independent sales personnel, of which $17,250 was paid for in stock, in lieu of cash; and officer's compensation, $43,246, of which $8,333 was the allocation of expense of previously issued shares . Other significant expenses in the 2006 quarter included $35,000 for net settlement and accrual of estimated litigation expense; professional fees, $20,512;  rent expense, $13,500; and approximately $16,000 for the cost of exhibiting at industry tradeshows,

            In the July 2005 quarter, our major expenses included $58,828 for independent sales and production personnel; $13,500 for rent; $87,414 for professional expenses, $66,000 of which was paid in stock in lieu of cash; and $41,583 for officer's compensation.

            **Consulting expenses** in the July 31, 2006 quarter were $35,000, of which $2,500 was paid in cash and $32,500 was paid in stock, in lieu of cash. This compares to $3,000 consulting expense in the quarter ending July 31, 2005, all of which was paid in stock.

            **Interest expense** for the quarter ended July 31, 2006 was $112,350, which included $100,000 that represented the embedded value of the beneficial conversion of the secured convertible note payable issued in May 2006. The remaining $12,350 of interest expense was for the stated interest on our convertible notes and accrued interest on payroll taxes payable. Interest expense in the July 2005 quarter was $7,000.

**Income Tax Expense (Benefit)**

            We have substantial net operating loss carry-forwards, which may be used to offset operating profits in the future. In the periods covered by this report, there was no income tax expense or benefit reported on our financial statements. We determined that it was more likely than not that our net operating loss carry-forwards would not be utilized; therefore, we have provided a valuation allowance against the related deferred tax asset.

**Losses**

            Our net loss before taxes for the fiscal quarter ended July 31, 2006 increased $139,138 or 59,7% to $372,270 from $233,132 in the comparable fiscal 2005 quarter. This increase in loss before taxes was primarily the result of including the beneficial conversion feature of the secured convertible note payable issued in March 2006.as interest expense and the reduction of nominal revenue.             

            Although we believe our revised business model may provide for an increase in revenue and a reduction in losses, there can be no assurance that we will achieve or maintain profitability or that revenues will be generated or that growth can be sustained in the future. The viability of our business plan necessitates that we significantly expand the number of locations that are part of our network to reach that level of critical mass of locations needed to attract advertisers. Without required funding, we will not be able to increase the number of locations and, consequently, we will be unable to secure the necessary advertisers.  If we do not receive the required funding, we may be required to curtail our operations, abandon our business plan, or file for reorganization or liquidation.

**Loss per Share**

            The basic and diluted loss per share of common stock was $0.01 in the fiscal quarter ended July 31, 2006 compared to $0.01 in the fiscal quarter ended July 31, 2005. Loss per share was computed by dividing the net loss, by the weighted average common shares outstanding. In the fiscal 2006 quarter, the weighted average of outstanding common shares which includes the weighted average number of common shares into which the preferred stock is convertible was 45,371,462 compared to 40,732,636 in the fiscal year 2005 quarter. For the purpose of computing loss per share of common stock, the Preferred Stock is treated as if it were a separate class of common stock with rights and attributes identical to the common shares in all respects except voting rights.

*Nine months ended July 31, 2006* and *nine months ended July 31, 2005*

**Sales**

            In the nine months ended July 31, 2006, our sales were $13,502 compared to $68,128 in the nine months ended July 31, 2005.

**Expenses**

           Total expenses for the nine months ended July 31, 2006 were $1,012,327, which was an increase of $15,562, or 1.6%, from total expenses of $996,765 in the nine months ended July 31, 2005.

            **Selling, general and administrative expenses** for the nine months ended July 31, 2005, excluding consulting expenses, decreased $9,883 or 1.4%, to $707,611 from $717,494 in the comparable 2005 nine-month period. In the nine months ended July 31, 2006, our major expenses included payroll and independent sales and production personnel expense of $269,320 of which, $171,000 was paid in stock in lieu of cash; $40,500 for rent; and $129,737 for officer's compensation, of which $25,000 included the allocation of expense of previously issued shares. Depreciation and amortization expense, for the 2006 nine months was $31,725, which was a 74% increase or $13,500 over $18,225 in the 2005 fiscal period, which resulted primarily from the purchase of television screens. In the comparable July 2005 nine months, our major expenses included $197,196, of which $37,500 was paid in stock in lieu of cash, for payroll and independent sales and production personnel; $40,500 for rent; $109,439 for professional expenses, of which $66,000 was paid in stock; and $124,500 for officer's compensation, of which $25,000 included the allocation of expense of previously issued shares.

           **Consulting expenses** were $74,807 for the nine months ended July 31, 2006, of which $10,300 was paid in cash and $64,507 was paid in stock, in lieu of cash. For the nine months ended July 31, 2005, consulting expense was $249,875, of which $12,000 was paid in cash; $158,000 was paid in stock, in lieu of cash; and $79,875 was a non-cash expense, representing the fair value of the extension of consultants' options.   

            **Interest expense** for the nine months ended July 31, 2006 was $229,909, which included $200,000 that represented the embedded value of the beneficial conversion of the $200,000 principal amount of secured convertible notes payable issued in March and May 2006. The remaining $29,909 of interest expense was for the stated interest on our convertible notes and accrued interest on payroll taxes payable. Interest expense for the nine months ended July 31, 2005 was $29,396 which consisted of accrued interest on convertible notes and payroll taxes payable.

**Losses**

            Our net loss, before taxes, increased $70,188 from $928,637, in the July 31, 2005 nine-month period, to $998,825 in the July 31, 2006 nine-month period. Included in the loss in the 2006 period was the non-cash charge for the discount recorded in the amount of $200,000 arising from an embedded beneficial conversion feature in our secured convertible notes. In the 2005 period, a non-cash expense of $79,875 was recorded upon the extension of consultants' options. Although we have substantial tax carry-forwards, we have not reduced our net loss for the nine-month period by any tax benefit because we determined that it was more likely than not that our net operating loss carry-forwards would not be utilized; therefore, we have provided a valuation allowance against the related deferred tax asset and, consequently, our net loss before taxes and after taxes is the same.

**Loss per Share**

            The basic and diluted loss per share of common stock, in the nine months ended July 31, 2006, was $0.02, compared to $0.03 in the like nine-month period of fiscal 2005. The loss per share was computed by dividing the net loss, by the weighted average common and equivalent shares outstanding. In the fiscal 2006 nine-month period, the weighted average, which includes the weighted average number of common shares into which the preferred stock is convertible, was 44,363,296 compared to 35,462,512 in the fiscal 2005 nine-month period. For the purpose of computing loss per share of common stock, the Series B Preferred Stock was treated as if it were a separate class of common stock as the rights and attributes of the common shares and preferred shares are identical in all respects except for voting rights.

**Liquidity and Capital Resources**

             We have not generated cash from operations in the period November 1, 1999 through July 31, 2006. Operating activities consumed cash of $422,581 in the nine months ended July 31, 2006 and $446,893 in the nine months ended July 31, 2005.

            We have been able to continue in business primarily from the receipt of cash from financing activities. During the nine months ended July 31, 2006, our financing activities provided total funds of $405,500. Similarly, our financing activities provided total funds of $446,893 in the July 31, 2005 nine-month period. During fiscal years 2005, and 2004, our financing activities provided total funds of $532,500 and $915,000, respectively.

            Our liabilities, all of which are current liabilities (due within one year) were $957,138 at July 31, 2006. Of that amount, Dr. Terry was owed $400,000 pursuant to secured and unsecured convertible notes; $193,500 for accrued rent; and $39,644 for accrued interest. Our liability, including accrued interest and estimated penalties for payroll taxes has increased to approximately $236,000 at July 31, 2006. We recognize the high priority of resolving this debt in an orderly manner. We have retained an accounting firm that is experienced in negotiating with the Internal Revenue Service regarding payroll tax liabilities. We have also delivered to be held in escrow $100,000 to be used for payment of withheld payroll taxes. There is no assurance that we will be able to reach a settlement of our payroll tax liabilities that will be acceptable to us.

            We have been funding our cash needs through the issuance of our common stock and convertible notes for cash. We also have used our common stock, in lieu of cash, to obtain professional and employment services. We intend to cover our cash needs over the next 12 months through the sale of additional shares of our common stock and/or convertible securities.  There is no assurance that we will be able to raise any additional funds from the sale of our securities or from borrowings or from any other source.

**Capital Expenditures**

             We expect that our only significant capital expenditure in the upcoming year will be for television screens to be placed in various locations, primarily Gym TV locations that receive and transmit our programming and advertising. We estimate that the total expenditures for the next 12 months will not exceed $500,000. We have been in discussion with manufacturers and distributors of plasma screens and expect to reach an agreement for the purchase or lease of screens in the near future. There is no assurance that we will be able to reach an acceptable agreement or if we do reach an agreement that we will be able to arrange suitable financing.

**Ability to Continue as a Going Concern and Management Plan**

            Our financial statements have been prepared assuming that we will continue as a going concern. We have generated only nominal revenue in the ordinary course of our business. The lack of sales and recurring losses, lack of working capital, shareholders' deficit and delinquent payroll taxes raise substantial doubt about our ability to continue as a going concern. Our management's plan in regard to these matters is to seek further equity or debt funding to allow us to pursue our business plan which involves the sale of advertising on our Bar TV, Gym TV and Hotel TV networks; the licensing of and affiliation with other networks; and the possible acquisition of companies in related or unrelated businesses. We intend to increase our revenues by concentrating our sales efforts on attracting national advertisers to our Gym TV network and other networks; to negotiate a plan of payment of our payroll tax liability and to reduce our fixed cash operating expenses so that sales exceed our fixed expenses. If we are unable to raise additional capital we may be required to curtail our operations, abandon our business plan, or file for reorganization or liquidation.

**ITEM 3 - CONTROLS AND PROCEDURES**

**           ** (a) Evaluation of disclosure controls and procedures

**           ** As of July 31, 2006, we carried out an evaluation, under the supervision and with participation of our management, including the Chief Executive Officer, who also acts as our chief financial officer and principal accounting officer, of the effectiveness of the design and operation of our disclosure controls and procedures pursuant to Exchange Act Rules 13a-15(e) and 15d-15(e).  Based upon that evaluation, the Chief Executive Officer concluded that our disclosure controls and procedures are effective in timely alerting him to material information relating to the Company required to be included in our periodic SEC filings.

            (b) Changes in internal controls

            There were no changes to internal controls in the 90-day period prior to July 31, 2006, the end of our fiscal quarter, or in the period from August 1, 2006 to the date of the filing of our report on Form 10Q-SB.

----

** PART II**

** OTHER INFORMATION**

** ITEM 1 - LEGAL PROCEEDINGS**

**           ** On June 19, 2006, as previously reported in Form 10-QSB for the period ending April 30, 2006, the *Lindenauer* case was settled with the exchange of mutual releases and the payment of $25,000 to us by a third-party.

**           ** As reported in Form 8-K, filed July 7, 2006, judgment was entered against Magic Media Networks, Inc. in favor of plaintiff, *Franco*, for approximately $65,000 and possibly an additional amount for attorneys' fees.  The parties agreed to settle the judgment for $50,000, which amount we paid in August 2006 and was accrued by us as an expense for the quarter ended July 31, 2006 and recorded as a liability on our balance as of July 31, 2006.

**           ** As previously reported in Form 10-QSB for the period ending April 30, 2006, we were sued in an action entitled *More + Life et al v. Magic Media Networks, Inc. and Destination Television, Inc. * for breach of contract. The complaint asserts damages of $53,000 related to advertising materials provided by us. We plan to vigorously defend the suit and although, we believe it is too early in the litigation process to assess the validity of the claims, we have accrued $10,000 as expense in connection with the possible outcome of this litigation.

**           ** For the quarter ended July 31, 2006 the Company recorded total litigation expense of $35,000 which consists of the sum of $50,000 in the *Franco* case (paid in August 2006); $10,000 in the *More+Life* case (estimated and accrued in July 2006); reduced by $25,000 recovered by us in the Lindenauer case (received in June 2006).

** ITEM 2 - UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS**

**           ** During the three months ended July 31, 2006, we issued to a consultant to our company, for $2,500 cash, 50,000 shares of restricted common stock at $0.05 per share. The proceeds were used for working capital.         

**           ** Also during the three months ended July 31, 2006, we issued a total of 225,000 shares of common stock for services. Of the shares that were issued for services, 150,000 shares were issued to two consultants and 75,000 shares were issued to two employees and independent contractors. The shares were valued as follows: 125,000 @$0.23 per share and 100,000 @$0.21 per share, which were the approximate market values at the issuance dates, for a total of $49,750.

**           ** The above issuances were made in reliance on Section 4(2) of the Securities Act of 1933 and were made without general solicitation or advertising. The recipients had access to all relevant information necessary to evaluate the investment and they represented to us that the securities were being acquired for investment purposes.

**           ** We also issued on May 10, 2006, a 6%, one-year, $100,000 secured convertible note to Dr. Terry for $100,000 cash.  The note is convertible into common stock at $0.10 per share and is restricted as to transferability. The proceeds were used for working capital. Pursuant to the requirements *of Emerging Issues Task Force ("EITF") 98-5 "Accounting for Convertible Securities with Beneficial Conversion Features or Contingently Adjustable Conversion Ratios" and EITF 00-27"Application of Issue No. 98-5 to Certain Convertible Instruments,"* the issuance of the $100,000 convertible note resulted in a discount being recorded in the amount of $100,000 arising from an embedded beneficial conversion feature. The total discount was limited to the principal amount of the note, $100,000, which was fully amortized as interest expense at the time of issuance of the note; correspondingly, *Shareholders' equity - Common stock* was increased by a like amount.

            The issuance to Dr. Terry was made in reliance on Section 4(2) of the Securities Act of 1933 and was made without general solicitation or advertising. The purchaser is a sophisticated "accredited" investor with access to all relevant information necessary to evaluate the investment and he represented to us that the securities were being acquired for investment purposes.

            As of July 31, 2006, we had 41,717,658 shares of common stock outstanding and 3,750,000 shares of Series B Preferred Stock outstanding.

** ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K**

|   | (a)    |   | Exhibits

Exhibit 31.1 - Certification Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 of the Principal Executive Officer and Principal Financial Officer and Principal Accounting Officer

Exhibit 32.1 - Certification Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 of the Principal Executive Officer and Principal Financial Officer and Principal Accounting Officer |
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|   |   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |
|   | (b)    |   | Reports on Form 8-K                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |
|   |   |   | On July 7, 2006, we reported on Form 8-K, under Item 8.01, that final judgment had been entered against Magic Media Networks, Inc. in the *Franco* litigation.

On August 10, 2005, we reported on Form 8-K, under Item 1.01, that we entered into a stock purchase agreement to acquire Be Media.                                                                                                                                                                                             |

** SIGNATURES**

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

|   |               |   |      | **MAGIC MEDIA NETWORKS, INC.**                                                                                                                                                                                                                                                     |
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|   |               |   |      |                                                                                                                                                                                                                                                                               |
|   | September 19, 2006 |   | By:  | /s/ Gordon Scott Venters                                                                                                                                                                                                                                                           |
|   |               |   |      |                                                                                                                                                                                                                                                                                    |
|   |               |   |      | Gordon Scott Venters           President and Chief Executive Officer           (Principal Executive Officer) and           Acting Chief Financial Officer           (Principal Financial Officer and           Principal Accounting Officer) and Director |