UNITED
STATES




SECURITIES
AND EXCHANGE COMMISSION


WASHINGTON,
DC  20549


___________________________




FORM
10-K






(mark
one)




[X]
              ANNUAL
      REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
      1934For
      the fiscal year ended December 31,
    2008[  
      ]
              TRANSITION
      REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
      1934




For
      the transition period from _______ to
_______




Commission
File No. 000-52363




SAHARA MEDIA HOLDINGS,
INC.


(Exact
Name of registrant as specified in its charter)




Delaware
                      74-2820999(State
      or Other Jurisdiction of Incorporation
                        or
      Organization)
                      (I.R.S.  Employer
      Identification No.)81
      Greene Street, 4thFloor,
      New York, New York
                      10012(Address
      of Principal Executive Offices)
                      (Zip
      Code)(212) 343-9200(Issuer’s
      Telephone Number, Including Area
Code)





Securities
registered pursuant to Section 12(b) of the Exchange Act:





Title
      of Each Class
                  to be so Registered:
                Name of each exchange on which
      registeredNone
                None





Securities
registered under Section 12(g) of the Act:





Common Stock, Par Value
$.003


(Title of
Class)





Indicate
by check mark if the registrant is a well-known seasoned issuer, as defined in
Rule 405 of the Securities Act.


Yes
[_]     No [X]





Indicate
by check mark if the registrant is not required to file reports pursuant to
Section 13 or Section 15(d) of the Exchange Act.    Yes
[_]    No [X]





Indicate
by check mark whether the registrant:  (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Exchange Act of 1934 during
the preceding 12 months, (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.  Yes [X]No
[]





Indicate
by check mark if disclosure of delinquent filers pursuant to Item 405 of
Regulation S-K is not contained herein, and will not be contained, to the best
of the registrant’s knowledge, in the definitive proxy or information statement
incorporated by reference in Part III of this Form 10-K or amendment to Form
10-K. Yes []No [X]










Indicate
by check mark whether the registrant is a large accelerated filer, and
accelerated filer, a non-accelerated filer, or a small reporting
company.  See definitions of “large accelerated filer”, “accelerated
filer”, and “smaller reporting company” in Rule 12b-2 of the Exchange
Act.  (Check One):





Large
Accelerated Filer
[_]                                                                Accelerated
Filer [_]


Non-accelerated
Filer     [_]                                                                Smaller
reporting company [X]





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





As of
June 30, 2008, the aggregate market value of the issued and outstanding common
stock held by non-affiliates of the registrant, based upon the closing price of
the common stock, under the symbol  “SHHD” as quoted on the National
Association of Securities Dealers Inc. OTC Bulletin Board was approximately
$91,000.   For purposes of the statement in the preceding
statement, all directors, executive officers and 10% shareholders are assumed to
be affiliates.  This determination of affiliate status is not
necessarily a conclusive determination for any other purpose.








(ISSUERS
INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE PAST FIVE YEARS)





Check
whether the issuer has filed all documents and reports required to be filed by
Section 12, 13 or 15(d) of the Exchange Act after the distribution of securities
under a plan confirmed by a court. Yes [_] No [_]





State the
number of shares outstanding of each of the issuer’s classes of common equity,
as of the latest practicable date: The Registrant’s common stock as of March 26,
2009, was 30,812,042 shares of common stock.









SAHARA
MEDIA HOLDINGS, INC.






PART
      IItem 1.
                                                    Business
                                                    2Item 1A.
                                                    Risk Factors
                                                    9Item 1B.
                                                    Unresolved Staff Comments
                                                    15Item 2.
                                                    Properties.
                                                    15Item 3.
                                                    Legal Proceedings.
                                                    15Item 4.
                                                    Submission of Matters to a Vote of Security
      Holders.
                                                    15PART
      IIItem 5.
                                                    Market For Registrant’s Common Equity, Related Stockholder
      Matters and Issuer Purchases of Equity Securities.
                                                    16Item 6.
                                                    Selected Financial Data.
                                                    17Item 7.
                                                    Management’s Discussion and Analysis of Financial
      Condition and Results of Operations.
                                                    18Item 7A.
                                                    Quantitative and Qualitative Disclosures About Market
      Risk.
                                                    19Item 8.
                                                    Financial Statements and Supplementary Data.
                                                    19Item 9.
                                                    Changes in and Disagreements With Accountants on
      Accounting and Financial Disclosure.
                                                    19Item 9A.
                                                    Controls and Procedures.
                                                    20Item 9B.
                                                    Other Information.
                                                    20PART
      IIIItem 10.
                                                    Directors, Executive Officers, and Corporate
      Governance.
                                                    20Item 11.
                                                    Executive Compensation.
                                                    22Item 12.
                                                    Security Ownership of Certain Beneficial Owners and
      Management and Related Stockholder Matters.
                                                    24Item 13.
                                                    Certain Relationships and Related Transactions, and
      Director Independence.
                                                    25Item 14.
                                                    Principal Accounting Fees and Services.
                                                    26PART
      IVItem 15.
                                                    Exhibits and Financial Statement Schedules.
                                                    26Consolidated Financial
    Statements
                                                    29SIGNATURES
                                                    30




i


FORWARD-LOOKING
STATEMENTS





Certain
statements made in this report on Form 10-K are "forward-looking statements"
regarding the plans and objectives of management for future operations. Such
statements involve known and unknown risks, uncertainties and other factors that
may cause actual results, performance or achievements of Sahara Media Holdings,
Inc. (the "Company", “we”, “us”, or “our”) to be materially different from any
future results, performance or achievements expressed or implied by such
forward-looking statements. The forward-looking statements included herein are
based on current expectations that involve numerous risks and uncertainties. The
Company's plans and objectives are based, in part, on assumptions involving
judgments with respect to, among other things, future economic, competitive and
market conditions and future business decisions, all of which are difficult or
impossible to predict accurately and many of which are beyond the control of the
Company. Although the Company believes its assumptions underlying the
forward-looking statements are reasonable, any of the assumptions could prove
inaccurate and, therefore, there can be no assurance the forward-looking
statements included in this report will prove to be accurate. In light of the
significant uncertainties inherent in the forward-looking statements included
herein, the inclusion of such information should not be regarded as a
representation by the Company or any other person that the objectives and plans
of the Company will be achieved.














1




PART
I




Item 1. Business.




Sahara
Media Holdings, Inc. (the “Company”) is a Delaware corporation organized on
September 26, 1997 under the name Keystone Entertainment, Inc. On January 14,
1998, the Company’s corporate name was changed to Mac Filmworks, Inc.
(“MFI”).   On September 26, 2008, the Company’s corporate name
was changed to Sahara Media Holdings, Inc.   References in this
report on Form 10-K to, “we,” “us,” “our” and similar words refer to the Company
and its wholly-owned subsidiary, “Sahara”, unless the context indicates
otherwise, and, prior to the effectiveness of the reverse acquisition discussed
below, these terms refer to Sahara Media, Inc. References to MFI relate to the
Company prior to the reverse acquisition.




From
October 2007 until its acquisition of Sahara Media, Inc. in September 2008, MFI
was not engaged in any active business. Prior to October 2007, MFI had a limited
operating history engaged in the development, marketing and sales of a library
of feature films, television series, and made-for-television movies for sale
through various channels. The Company did not generate any revenues during the
years ended December 31, 2007 and December 31, 2006. In October 2007, MFI
completed an asset sale transaction whereby it issued 276,674 shares of MFI’s
common stock and transferred substantially all of MFI’s assets net of accounts
payable to Jim McCullough, its then Chief Executive Officer, in exchange for
McCullough forgiving $405,673 in debt owed by MFI to Mr. McCullough and his
affiliates. Effective upon the completion of the asset sale, MFI ceased all
active business operations.





On
September 17, 2008, the Company entered into an Agreement and Plan of Merger
(the “Merger Agreement”), with Sahara Media Acquisitions, Inc., a Delaware
corporation and wholly-owned subsidiary of the Company (the “Subsidiary”) and
Sahara Media, Inc., a Delaware corporation.  Pursuant to the Merger
Agreement, which closed on September 17, 2008 (the “Closing Date”), the
Subsidiary merged into Sahara Media, Inc. and Sahara Media, Inc. became a
wholly-owned subsidiary of the Company. Pursuant to the Merger Agreement, the
Company issued 18,150,000 shares of the Company’s Common Stock to the
shareholders of Sahara Media, Inc. (the “Acquisition Shares”) (subject to the
placement of 5,000,000 Acquisition Shares in escrow pursuant to the Securities
Escrow Agreement (defined below), representing approximately 58.9% of the
Company’s aggregate issued and outstanding common stock following the closing of
the Merger Agreement and the Private Placement (defined below) that closed in
September and October of 2008, and the outstanding shares of common stock of
Sahara Media, Inc. were cancelled and converted into the right to receive the
Acquisition Shares. The 18 shareholders of Sahara Media, Inc. who were issued
the 18,150,000 Acquisition Shares were all accredited investors.





In
connection with the recapitalization, on September 17, 2008, October 8, 2008,
and October 20, 2008, the Company entered into a series of identical
subscription agreements (the “Subscription Agreements”) with accredited
investors (the “Investors”), pursuant to which, the Company issued and sold
approximately 79.44 units, with each unit consisting of 100,000 shares of Common
Stock and five-year warrants to purchase 100,000 shares of common stock with an
exercise price of $2.50, for a purchase price of $125,000 per unit (the “Private
Placement”). Pursuant to the Private Placement, the Company issued and sold to
the Investors an aggregate of 7,944,034 shares of common stock (the “Common
Shares”) and five-year warrants to purchase 7,944,034 shares of Common
Stock  with an exercise price of $2.50 (the “Investor Warrants”), for
an aggregate purchase price of approximately $9,930,000. The Investor Warrants
may not be exercised to the extent such exercise would cause the holder of the
warrant, together with its affiliates, to beneficially own a number of shares of
common stock which would exceed 4.99% of the Company’s then outstanding shares
of common stock following such exercise. Pursuant to the Subscription
Agreements, the Company agreed to use its reasonable best efforts to file a
registration statement registering the Common Shares and the shares of common
stock underlying the Investor Warrants, subject to Securities and Exchange
Commission (“SEC”) limitations, within 45 days of the filing by the Company with
the SEC of its report on Form 8K reporting the reverse acquisition (which filing
occurred on September 24, 2008).




2





John
Thomas Financial, Inc. (“JTF”) was retained as the exclusive placement agent for
the Private Placement.  JTF received a commission of approximately
$993,000 (equal to 10% of the gross proceeds) and a non-accountable expense
allowance of approximately $297,900 (equal to 3% of the gross proceeds). JTF
also received a finder’s fee of $200,000 in connection with the reverse
acquisition, and a success fee of $400,000, based on the receipt of gross
proceeds of at least $8,000,000. Upon exercise of the Investor Warrants, JTF
will receive a 10% commission and a 3% non-accountable expense allowance. In
addition, we have retained JTF to assist us with our investment banking
requirements on an exclusive basis for a period of one year, pursuant to which,
on the Closing Date, the placement agent was issued five-year warrants to
purchase 1,000,000 shares of common stock of the Company with an exercise price
of $1.30 (the “Broker Warrants”). The Broker Warrants are exercisable on a
cashless basis. JTF will also be issued one share of common stock of the Company
for every four Investor Warrants that are exercised within 12 months of the date
on which the registration statement registering the resale of the common stock
underlying such Investor Warrants has been declared effective by the SEC, and we
retained JTF as a consultant for a monthly fee of $10,000. Also, in connection
with the reverse acquisition, on the Closing Date, JTF was issued 3,000,000
shares of the Company’s common stock. The Company also paid an additional
finder’s fee of $120,000 to Aubry Consulting Group, Inc. in connection with the
reverse acquisition.





In
connection with the foregoing, the Company relied upon the exemption from
securities registration afforded by Rule 506 of Regulation D as promulgated by
the United States Securities and Exchange Commission under the Securities Act of
1933, as amended (the “Securities Act”) and/or Section 4(2) of the Securities
Act. No advertising or general solicitation was employed in offering the
securities. The offerings and sales were made to a limited number of persons,
all of whom were accredited investors, and transfer was restricted by the
Company in accordance with the requirements of the Securities Act of
1933.





In
connection with the reverse acquisition, the following occurred:





(i) MFI
completed a 30-to-1 reverse stock split of its common stock, pursuant to which
MFI’s issued and outstanding shares of common stock, was reduced to 818,000
(prior to the Merger and the Private Placement). All share and per share
information in this report on Form 10-K give retroactive effect to the reverse
split.





(ii) The
Company entered into a securities escrow agreement (the “Securities Escrow
Agreement”) with Sahara Media, Inc., the shareholders of Sahara named therein
(the “Sahara Escrow Shareholders”), and Sichenzia Ross Friedman Ference LLP, as
escrow agent. Pursuant to the Securities Escrow Agreement, the Sahara Escrow
Shareholders agreed to place 5,000,000 Acquisition Shares (the “Escrow Shares”)
into an escrow account. The Escrow Shares will either be released to the Sahara
Escrow Shareholders, or returned to the Company for cancellation, based upon the
achievement of certain performance thresholds as set forth therein





(iii)
Sahara Media, Inc. entered into an indemnification agreement (the
“Indemnification Agreement”) with John Thomas Bridge & Opportunity Fund
(“JTO”), pursuant to which JTO agreed to indemnify Sahara for any breaches of
the representations and warranties made by the Company under the Merger
Agreement, in an amount up to $400,000, for up to two years. Sahara paid JTO a
fee of $400,000 upon the execution of the Indemnification
Agreement.








Pursuant
to the reverse acquisition, Sahara Media Holdings, Inc. became the parent
company of Sahara Media, Inc., a Delaware corporation formed in January 2005.
Sahara is a development-stage company located in New York City. Since its
formation, Sahara has concentrated on the development of its business strategy.
Until March 2004, Vanguarde Media, an entity not affiliated with Sahara,
published Honey Magazine, a publication aimed at the 18-34 urban female
demographic. As a result of financial difficulties of Vanguarde Media, Honey
Magazine ceased publishing in 2004.  Vanguarde Media filed for
bankruptcy in November 2003, and in February 2005 Sahara, through the
bankruptcy proceedings, purchased the “Honey” trademark for the class of paper
goods and printed matter (which relates to printed publications).





Although
Vanguarde Media (which also owned Savoy and Heart & Soul magazines in
addition to Honey) filed for bankruptcy, we believe we can succeed with the
Honey brand. Honey magazine had circulation of 400,000, the largest of
Vanuarde’s three publications (source: “Vanguarde media files for bankruptcy;
Savoy, Heart & Soul, and Honey fold due to lack of capital, flawed business
strategy”, Black Enterprise, February 2004, available at
http://findarticles.com/p/articles/mi_m1365/is_7_34/ai_n6065782). While Honey
under Vanguarde was a print publication, we plan to launch Honey online. Online
advertising has been growing as a percentage of total advertising, reaching 7.6%
in 2007 from 5.3% in 2004 (source: TNS Media Intelligence, “TNS Media
Intelligence Reports U.S. Advertising Expenditures Grew 0.2 Percent in 2007”,
March 25, 2008, available at  http://www.tns.mi.com/news/03252008).
For the first nine months of 2008, internet advertising spending grew 7%
compared to the same period in 2007, even as total advertising spending declined
1.7% (source: TNS Media Intelligence, “TNS Media Intelligence Reports U.S.
Advertising Expenditures Declined 1.7 Percent in First Nine Months of 2008”,
available at http://www.tns-mi.com/news/1211208.htm).
In addition, our online magazine will leverage user generated content through
our social network Hivespot.com.  Furthermore, by launching as an
online rather than print magazine, we will avoid the printing and labor costs of
print publications.





We expect
that the primary components of our business will be:





·           The
online magazine Honeymag.com


·           The
social network Hivespot.com


·           Our
database of approximately 3.9 million names in the 18-34 urban female
demographic (the “Honey Database”)





With the
Honey brand and the Honey Database we will seek to connect with audiences and
secure brand leadership for our target demographic.





3





The
online magazine Honeymag.com and the social network Hivespot.com are currently
operating websites, and were officially launched on March 05, 2009. We believe
this strategy will allow us to exploit the synergies of our online magazine and
social networking site as well as live events.





Commencing
in the second half of 2009, we plan to extend the Honey brand to other platforms
such as radio, television, and product licensing to add value for our
advertising partners and to increase Honey’s brand equity, online readership and
membership in the social network. We will seek to attract visitors to our
website through sponsorship deals done on a partnership basis and licensing
deals with product vendors who would pay a fee for the use of the Honey brand
name. We would not incur any costs in manufacturing or distribution of products
for which licensing deals have been implemented, but would be paid a licensing
fee for the use of the name.




We
anticipate that our primary source of revenue will be the sale of advertising on
our online magazine Honeymag.com and our social network Hivespot.com. We plan to
sell advertising both through ad aggregators, and through direct sales, which
generally provide for greater potential revenues. We do not currently have any
arrangements with advertisers, but we have an advertising sales team in place.
We are currently under contract with BET and GLAM Media to serve as our ad
aggregators. We anticipate that the ads on the website will be filled through
these aggregators.  The amount of revenue that will be generated
through these initial ads, as well as future ads, will depend on the amount of
traffic the site will generate. However, we have generated de minimis revenues to date
and there can be no assurance our revenue estimates are accurate. We have begun
efforts to license the Honey Database; however, we do not anticipate generating
significant revenue from the licensing of our Honey Database or other sources in
2009.




The
Market Opportunity




We
believe there is an unmet market need for a marketing product that integrates
online and offline media.  Online advertising as a percentage of
advertising budgets has been increasing over the years, reaching 7.6% in 2007
from 5.3% in 2004 (source: TNS Media Intelligence, “TNS Media Intelligence
Reports U.S. Advertising Expenditures Grew 0.2 Percent in 2007”, March 25, 2008,
available at http://www.tns.mi.com/news/03252008). For the first nine months of
2008, internet advertising spending grew 7% compared to the same period in 2007,
even as total advertising spending declined 1.7% (source: TNS Media
Intelligence, “TNS Media Intelligence Reports U.S. Advertising Expenditures
Declined 1.7 Percent in First Nine Months of 2008”, available at
http://www.tns-mi.com/news/1211208.htm).




Market
Positioning and the Honey Database




Commencing
with the launch of our online magazine and social network in March 2009, we plan
to develop and use Honey’s online presence, the Honey Database and other
cost-effective marketing to reconnect with the Honey audience.




Sahara
acquired approximately 3,660,000 of the 4,050,000 names (approximately 3,900,000
names after database was scrubbed), included in the Honey Database pursuant to
an asset purchase agreement (the “Database Purchase Agreement”), by and between
Sahara Media, Inc. and BPA Associates, LLC (“BPA”). The remaining portion of the
Honey Database, including approximately 390,000 names, was already owned by
Sahara prior to entering into the Database Purchase Agreement. BPA is an entity
owned by Bertha Anderson, who is the mother of Philmore Anderson IV, our chief
executive officer. Under the Database Purchase Agreement, we paid BPA $825,000
in cash, of which $50,000 was paid upon the closing of a bridge loan in July
2008, and an additional $775,000 was paid upon the closing of the Private
Placement on September 17, 2008. In addition, pursuant to the Database Purchase
Agreement, upon the closing of the Private Placement, we issued BPA 1,425,000
shares of common stock. The closing under the Database Purchase Agreement
occurred upon the closing of the Private Placement on September 17,
2008.




Commencing
with the launch of our online magazine and social network in March 2009, we will
seek to attract unique visitors to the online magazine and develop our
advertising base by developing and refining our editorial and production
standards to provide consistently fresh, relevant content.





Commencing
in the first half of 2010, we will seek to expand the reach of the Honey brand
through licensing to radio, television, consumer products, and other platforms
as appropriate to reach our target demographic. We do not have any such
licensing deals in place and cannot assure you that we will be successful in
implementing and generating revenues from these plans.





We do not
anticipate incurring additional expenses in connection with these plans, apart
from our ongoing operational expenditures as set forth under “Business Model”
below.




4




Market
Size and Analysis




African-American
Consumer Profile: Young, Increasingly Affluent and Educated




The
African-American population skews younger than the U.S. population. In 2005, the
median age of the African-American population was 31.3 compared to 40.4 for
non-Hispanic whites (source: U.S. Census Bureau, 2005).  In addition,
females represent a greater percentage of the African-American population than
of the general U.S. population (Source: U.S. Census Bureau, 2004).




Snapshot of the African-American
Market




The
following trends provide specific evidence of the size, growth, and viability of
Honey’s target market:




African-American
influence pervades American culture—fashion, music, dance and language are just
a few examples of the power that this market segment has on
America.




From 1990
to 2012, the African-American population is projected to grow by 35.3% compared
to a 26.6% increase for the total U.S. population (source: Jeffrey M. Humphreys,
“The Multicultural economy 2007”, Georgia Business and Economic Conditions,
Volume 67, Number 3, available
at  http://www.selig.uga.edu/forecast/GBEC/GBEC0703Q.pdf). Currently,
the African-American population comprises 13% of the total U.S. population. The
percent of African-Americans who are new immigrants continues to grow and
contribute to the vitality of the community. The market research firm Synovate
estimated in 2006 that 8.5% of the African-American population was foreign born.
This represents an increase from the 7.4% of the African-American population who
were immigrants in 1990 (Source: U.S. Census Bureau, 2004).




The
buying power of African-Americans rose 166% in 17 years, from $318 billion in
1990 to $845 billion in 2007 (source: Jeffrey M. Humphreys, “The Multicultural
economy 2007”, Georgia Business and Economic Conditions, Volume 67, Number 3,
Third Quarter 2007, available at
http://www.selig.uga.edu/forecast/GBEC/GBEC0703Q.pdf) . By 2012, the buying
power of African-Americans is projected to grow to more than $1 trillion
(source: Jeffrey M. Humphreys, “The Multicultural economy 2007”, Georgia
Business and Economic Conditions, Volume 67, Number 3, Third Quarter 2007,
available at http://www.selig.uga.edu/forecast/GBEC/GBEC0703Q.pdf).




Honey targets a significant
segment within the African-American market





·                 
There are 5.027 million African-American women between the ages of 18 – 34
(source: U.S. Census Bureau, 2004)





·                 86%
of African-Americans adults are regular magazine readers, compared to 85% of all
U.S. adults, as of the fall of 2007 (source: Magazine Publishers of America,
“African-American/Black Market Profile” (2008), available at
http://www.magazine.org/ASSETS/2457647D5D0A45F7B1735B8ABCFA3C26/market_profile_black.pdf
(the “MPA Report”).





·                 
The median number of magazine issues read in a month by African-American
magazine readers is 10.7, compared to 7.5 per month for all U.S. adults, as of
the fall of 2007 (source: MPA Report).




Competition




We face
formidable competition in every aspect of our business, and particularly from
other companies that seek to connect people with information and entertainment
on the web. We intend to leverage the Honey brand by integrating our online
magazine and the Honey Database, and working with our operational, PR and
professional partners to effectively compete. Below is a breakdown of the
competition that we face in our three main planned business
segments.




Competition
in the Social Networking Space





Online
social networking services are used regularly by millions of people. We believe
that the principal competitive factors in the social networking market are
name recognition, functionality, performance, ease of use, value-added services
and features, and quality of support.





We will
seek to reach our core target demographic of African-American women in the 18-34
age bracket through content that integrates our social networks Hivespot.com and
the full version of our online magazine. We will exploit content and brand
equity from Honey’s six-year run as a print publication.  We also plan
to attract users to our social network through use of our Honey Database of
approximately 3.9 million women in our target demographic.




5





Competition
in the Online Magazine Space





We plan
to launch Honeymag.com as an online magazine and social network. Honeymag.com is
currently an operating website, having recently emerged from “beta” or test
stage. We believe there is not currently a pure online magazine especially
targeting urban women. Accordingly, we believe the principal competition for the
online magazine will be the websites of print publications targeted at
African-Americans.





We will
attempt to distinguish Honey from its competition through unique and
original content developed for our Honey brand, as well as through content that
integrates our social networks Hivespot.com and the full version of our online
magazine. In addition, we plan to exploit content and brand equity acquired from
Honey’s six year run as a print publication. We also plan to attract readers to
our online magazine by use of our Honey Database of approximately 3.9 million
women in our target demographic. In addition, by launching as an online rather
than print magazine, we will avoid the printing and labor costs of print
publications.





Competition
in the Database Management Business




Our main
asset besides our Honey brand is our proprietary Honey Database. We believe the
Honey Database will be integral to our business  by generating revenue
through the licensing of the Honey Database to advertisers, political parties,
and others.





We do not
anticipate that competition in the database management business will materially
affect our operations. We will seek to compete in the database management
business by continually enhancing and growing our database through individual
registration on our online magazine and social network websites.




Honey
Brand Name




The Honey
brand is aimed at the 18-34 year old black female. It aims to address the
lifestyle and interests of this demographic by providing editorial content that
is relevant, entertaining, informative, and inspiring.





Description
of the Brand





We intend
to re-establish the Honey brand with a focus on the issues and lifestyle that
affect the black female--what she wears, what she wants out of her career, how
she connects to others, what she aspires to in life, and how she feels about
herself.





To
re-establish the Honey brand, we intend to create and provide content such as
skin care tips, make-up techniques, club fashion, clothing reviews, shopping
advice, sexual columns, and health news, all from a young, black, female
perspective.





We
believe that at this time, there is not a single online publication exclusively
targeting the 18-34 urban female market.





Honey’s
closest competition is Essence magazine. However, Essence’s audience base is
older, married, and has a higher percentage of men.





Other
competition includes magazines targeting African-American readership in general:
Ebony, Vibe, Vixen, Jet, Source, and Black Enterprise. However, these
publications have had a different editorial focus.





Business
Model




Bringing
the Online and Offline Models Together




We will
seek to combine online  advertising and live events under one
roof.  To this end, the Honey Database will be used to maximize
Honey’s brand awareness and to drive traffic to our social network, online
magazine and to events.





Commencing
in the first half of 2009, we plan to hold live events through partnerships with
sponsors seeking to reach Honey’s target demographic, such as, for example, a
record launch sponsored by a liquor company, or a hairstyle-related event
sponsored by a cosmetics company. If we are successful in implementing such
plans, the sponsor of the event would pay us a fee for holding the event, for
the exposure to Honey’s target demographic. We do not have any arrangements
in place for any live events and there is no assurance we will succeed in
implementing and generating revenue from these plans.





Through
online advertising, direct marketing, events and social networking, we will seek
to leverage the Honey brand name and the Honey Database.





We will
seek to quickly connect with Honey’s past advertisers while forging new agency
and corporate relationships.





We will
also seek to create advertising impact, such that advertising agencies and
brands will view Honey as the best way to reach our highly targeted audience.
Ads should appear in the relevant editorial context to maximize receptivity.
Online quality and ad layout should exceed sponsor expectations.  We
will seek to integrate Honey’s online content with the social network
Hivespot.com to maximize our target marketing potential.





Finally,
we will seek to make all production and distribution dates in a timely fashion
while exercising cost discipline in all areas of the business.





Content
for the magazine will be driven by the full-time and freelance editorial staff,
re-purposed past content from the Honey print publication, and user generated
content through our proprietary social network Hivespot.com.




6





Ongoing
operational expenditures related to content development fall under the following
categories:




§                 Editorial
staff salaries (approximately $250,000 annually)


§                 Server
hosting (approximately $7,500 annually)


§                 Software
design (approximately $30,000 annually)


§                 Software
applications (approximately $3,000 annually)


§                 Office
rent (approximately $108,000 annually)


§                 Office
supplies (approximately $12,000 annually)


§                 Insurance
(approximately $23,000 annually)


§                 Utilities
(approximately $3,000 annually)




We
believe our existing capital, together with anticipated revenues, will be
sufficient to fund our content generation. However, we cannot assure you that
our cost estimates are accurate, that anticipated revenues will materialize, or
that unforeseen events will not occur that would cause us to seek
additional funding to meet our need for working capital. There can be no
assurance that financing, if and when needed, will be available in amounts or on
terms acceptable to us, or at all.





Expansion
Plan




We
anticipate that the foundation for our expansion, will
involve:





·                 Commencing
with the launch of our online magazine and social network in February 2009,
utilization of the Honeymag.com website and its integration with the social
network Hivespot.com to drive web traffic;





·                 The
licensing of our Honey Database for potential revenue generation (we have begun
efforts to license the Honey Database, although we do not anticipate generating
significant revenue from licensing the Honey Database prior to
2010);





·                 Commencing
in the first half of 2009, holding live events in partnership with sponsors,
such as, for example, a record launch sponsored by a liquor company;
and





·                 Commencing
in the second half of 2009, our use of direct mail and email to contact names on
our Honey Database,




Commencing
in the third quarter of 2009, we also plan to launch Honey as a quarterly,
limited edition online magazine, after we have re-established the Honey brand
through the online magazine and provided there is sufficient advertising
demand.





We do not
anticipate incurring additional expenses in connection with our expansion plans,
apart from our ongoing operational expenditures as set forth under “Business
Model” above.




We do not
believe our expansion plan set forth above will require us to seek additional
funding. However, there can be no assurance that our cost estimates are
accurate, that anticipated revenues will materialize, or that unforeseen events
will not occur that would cause us to seek additional funding to meet our
need for working capital. There can be no assurance that financing, if and when
needed, will be available in amounts or on terms acceptable to us, or at
all.





Sales
Strategy





We plan
to generate revenues by (1) selling online advertising to corporate and agency
clients, and (2) licensing our Honey Database.





We
anticipate that we will begin generating advertising revenues in the second half
of 2009. We plan to sell advertising both through ad aggregators, and through
direct sales, which generally provide for greater potential revenues. We do not
currently have any arrangements with advertisers, but we have an advertising
sales team in place. We have retained BET and GLAM Media as our ad aggregator.
We anticipate that the available ad space on our site will be filled through
these aggregators. The amount of revenue that will be generated through these
initial ads, as well as future ads, will depend on the amount of traffic the
site will generate. We anticipate that we will begin generating advertising
revenues in the third quarter of 2009. We estimate that we will generate revenue
of $250,000 in the third quarter of 2009, and $750,000 in the fourth quarter of
2009, from the sale of advertising on our website. However, we have generated
de minimis revenues to
date and there can be no assurance our revenue estimates are accurate. We have
begun efforts to license the Honey Database; however, we do not anticipate
generating significant revenue from the licensing of our Honey Database or other
sources in 2009.





We plan
to target both brands, including both past Honey advertisers and new prospects;
and agencies, including African-American focused and other agencies, to secure
advertising sales.





For both
brands and agencies, we will offer a range of sponsorships, including online
ads, special issues, special sections, branded promotions, and other integrated
media as appropriate.




7





The
following are priorities for our sales effort, commencing with the launching or
our online magazine and social network in February 2009:




·Connect with
advertisers who have supported Honey in the past





·Leverage special
issues and promotions for increased ad sales





Honey
will use a range of special issues, sections, and promotions to add value for
advertising partners and attract new sponsors.





Special
issues currently planned include Holiday Gift Guide, Automotive, Travel, and
Health. These issues will be complemented by a range of promotional
opportunities such as travel contests, beauty makeover contests, technology
giveaway contests, and others as appropriate.





·Develop rate
incentive program for new and valued advertising partners





Charter
advertiser incentives will be developed for advertising partners who commit to
long-term insertions. Currently, we plan to offer a rate break for those who
commit to nine or more insertions.





·Provide integrated,
multi-platform solutions to complement online offering





The focus
of our initial media programs will be the online magazine and social network
supplemented by off-line promotion.





We
believe that in the coming years, advertisers will increasingly demand
integrated media solutions that combine print, web, events, and broadcast media.
To meet this demand, we anticipate the development of a number of other media
options, including Honey Radio, Honey TV, Honey Music, and other brand
extensions. Our success does not rely on these extensions. However, we believe
that they will be a highly cost effective way to enhance brand equity while
creating additional sponsorship value for our advertising partners.




As noted
above, we also plan to generate revenue from the Honey Database, which targets a
highly specific demographic group, by licensing it to advertisers as well as
non-profit organizations. We have begun efforts to license the Honey Database,
however, we do not anticipate generating significant revenues from the licensing
of the Honey Database prior to 2010. We do not currently have any licensing
deals in place and we cannot assure you that we will be successful in licensing
and generating revenues from the Honey Database.




Project
Development





Pursuant
to a project order agreement with Dogmatic, Inc. (“Dogmatic”), dated July 8,
2008, we retained Dogmatic, a creative production services agency with offices
in New York City and Venice, CA, to develop and launch our online magazine and
social networking site. We paid Dogmatic $550,000 for their services under the
agreement, including an initial deposit of $75,000 upon execution of the
agreement. No further amounts are due to Dogmatic under the
agreement.





In
addition, pursuant to a master services agreement, dated July 11, 2008, we
retained Ripple6, Inc. (“Ripple”), to provide ongoing maintenance and support
services for our online magazine and social networking site. Pursuant to the
master services agreement, we agreed to pay Ripple a minimum monthly fee of
$5,000, which may increase to $9,500 or $17,500 based on the monthly pageviews
on the websites.




Hivespot.com—Social
Networking Functionality





Web
branding and design will allow us to select and coordinate available components
so as to create an efficient layout and structure. Dogmatic will design a web
shell that is simple and flexible to display content according to various user
preferences (both front-end (users who have registered for the site) and
back-end (users who are part of the administrative staff of the magazine)).
Creating an appropriate balance between eye-catching design and
engaging/informative content will reinforce the Honey web brand. This
combination will encourage visitors to become accustomed to and ultimately
return to our website for new content and information posted since the user’s
previous visit.




Government
Regulation




We are
subject to a number of foreign and domestic laws and regulations that affect
companies conducting business on the internet. In addition, laws and regulations
relating to user privacy, freedom of expression, content, advertising,
information security and intellectual property rights are being debated and
considered for adoption by many countries throughout the world. We face risks
from some of the proposed legislation that could be passed in the
future.




In the
U.S., laws relating to the liability of providers of online services for
activities of their users and other third parties are currently being tested by
a number of claims, which include actions for defamation, libel, invasion of
privacy and other data protection claims, tort, unlawful activity, copyright or
trademark infringement and other theories based on the nature and content of the
materials searched, the ads posted or the content generated by users. Certain
foreign jurisdictions are also testing the liability of providers of online
services for activities of their users and other third parties. Any court ruling
that imposes liability on providers of online services for activities of their
users and other third parties could harm our business.




8





Likewise,
a range of other laws and new interpretations of existing laws could have an
impact on our business. For example, in the U.S. the Digital Millennium
Copyright Act has provisions that limit, but do not necessarily eliminate, our
liability for listing, linking or hosting third-party content that includes
materials that infringe copyrights or other rights. The Child Online Protection
Act and the Children’s Online Privacy Protection Act restrict the distribution
of materials considered harmful to children and impose additional restrictions
on the ability of online services to collect information from children under 13.
In addition, the Protection of Children from Sexual Predators Act of 1998
requires online service providers to report evidence of violations of federal
child pornography laws under certain circumstances. The costs of compliance with
these laws may increase in the future as a result of changes in interpretation.
Furthermore, any failure on our part to comply with these laws may subject us to
significant liabilities.





Similarly,
the application of existing laws prohibiting, regulating or requiring licenses
for certain businesses of our advertisers, including, for example, online
gambling, distribution of pharmaceuticals, adult content, financial services,
alcohol or firearms, can be unclear. Application of these laws in an
unanticipated manner could expose us to substantial liability and restrict our
ability to deliver services to our users. For example, some French courts have
interpreted French trademark laws in ways that would, if upheld, limit the
ability of competitors to advertise in connection with generic
keywords.





We are
also subject to federal, state and foreign laws regarding privacy and protection
of user data. Any failure by us to comply with our posted privacy policies or
privacy-related laws and regulations could result in proceedings against us by
governmental authorities or others, which could potentially harm our business.
In addition, the interpretation of data protection laws, and their application
to the internet, in Europe and other foreign jurisdictions is unclear and in a
state of flux. There is a risk that these laws may be interpreted and applied in
conflicting ways from country to country and in a manner that is not consistent
with our current data protection practices. Complying with these varying
international requirements could cause us to incur additional costs and to have
to change our business practices. Further, any failure by us to protect our
users’ privacy and data could result in a loss of user confidence in our
services and ultimately in a loss of users, which could adversely affect our
business.





In
addition, because our services are accessible worldwide, certain foreign
jurisdictions may claim that we are required to comply with their laws, even
where we have no local entity, employees or infrastructure.




Intellectual
Property





Our Honey
Database, trademarks, trade secrets, copyrights and other intellectual property
rights are important assets for us. In particular, we consider the “Honey”
trademark and our related trademarks to be valuable to us and will aggressively
seek to protect them. We have registered the following trademarks in the United
States for the class of paper goods and printed matter (which relates to printed
publications): Honey, and Honey Hair & Beauty. In addition, we have U.S.
trademark applications pending for the class of paper goods and printed matter
for the following trademarks: Honey Bride, and Honey Teen; and have U.S.
trademark applications pending for the class of education and entertainment for
the following trademarks: Honey, Honey Bride, Honey Teen, and Honey Hair &
Beauty.





Employees




We have
approximately fifteen employees (all except one is full-time). None of our
employees are represented by a labor union. We consider our employees relations
to be good.




Research
and Development





For the
years ended December 31, 2008 and 2007 we incurred $243,114  and
$143,351, respectively, on research and development.




Item 1A.
              Risk
      Factors


We
have a limited operating history upon which an evaluation of our prospects can
be made.




We have
had only limited operations since our inception upon which to evaluate our
business prospects. As a result, an investor does not have access to the same
type of information in assessing his or her proposed investment as would be
available to purchasers in a company with a history of prior operations. We face
all the risks inherent in a new business, including the expenses, difficulties,
complications and delays frequently encountered in connection with conducting
operations, including capital requirements and management’s potential
underestimation of initial and ongoing costs. We also face the risk that we may
not be able to effectively implement our business plan. If we are not effective
in addressing these risks, we may not operate profitably and we may not have
adequate working capital to meet our obligations as they become
due.




9





We
have a history of losses and a large accumulated deficit and we may not be able
to achieve profitability in the future.





For the
years ended December 31, 2008 and 2007 we incurred net losses of $2,034,056 and
$728,729, respectively. From the date of inception (January 18, 2005)
through December 31, 2008, we have accumulated net losses of $3,994,456 . There
can be no assurance that we will be profitable in the future. If we are not
profitable and cannot obtain sufficient capital we may have to cease our
operations.




Additional
financing may be necessary for the implementation of our strategy, which we may
be unable to obtain.





Our
capital requirements in connection with our development activities and
transition to commercial operations have been and will continue to be
significant. We believe that our available capital together with anticipated
revenues will be sufficient to continue the development of our business for the
foreseeable future. However, we cannot assure you that our cost estimates are
accurate, that anticipated revenues will materialize, or that unforeseen events
will not occur that would cause us to seek additional funding to meet our
need for working capital. There can be no assurance that financing, if and when
needed, will be available in amounts or on terms acceptable to us, or at
all.





We
may not be able to effectively control and manage our growth, which would
negatively impact our operations.




If our
business and markets grow and develop it will be necessary for us to finance and
manage expansion in an orderly fashion. We may face challenges in managing
expanding service offerings and in integrating any acquired businesses with our
own. Such eventualities will increase demands on our existing management,
workforce and facilities. Failure to satisfy increased demands could interrupt
or adversely affect our operations or cause administrative
inefficiencies.





We
may be unable to successfully execute any of our identified business
opportunities or other business opportunities that we determine to
pursue.




We
currently have a limited corporate infrastructure. In order to pursue business
opportunities, we will need to continue to build our infrastructure and
operational capabilities. Our ability to do any of these successfully could be
affected by any one or more of the following factors:





·
              our
      ability to raise substantial additional capital to fund the implementation
      of our business plan;


·
              our
      ability to execute our business
strategy;


·
              the
      ability of our products and services to achieve market
      acceptance;


·
              our
      ability to manage the expansion of our operations and any acquisitions we
      may make, which could result in increased costs, high employee turnover or
      damage to customer
relationships;


·
              our
      ability to attract and retain qualified
  personnel;


·
              our
      ability to manage our third party relationships effectively;
      and


·
              our
      ability to accurately predict and respond to the rapid technological
      changes in our industry and the evolving demands of the markets we
      serve.




Our
failure to adequately address any one or more of the above factors could have a
significant adverse effect on our ability to implement our business plan and our
ability to pursue other opportunities that arise.





Our
business depends on the development of a strong brand, and if we do not develop
and enhance our brand, our ability to attract and retain subscribers may be
impaired and our business and operating results may be harmed.





We
believe that our “Honey” brand will be a critical part of our business.
Re-establishing, developing and enhancing the “Honey” brand may require us to
make substantial investments with no assurance that these investments will be
successful. If we fail to re-establish, promote and develop the ‘‘Honey’’ brand,
or if we incur significant expenses in this effort, our business, prospects,
operating results and financial condition may be harmed. We anticipate that
re-establishing, developing, maintaining and enhancing our brand will become
increasingly important, difficult and expensive.





Our
intellectual property rights are valuable, and any inability to protect them
could reduce the value of our services and brand.





Our
trademarks, trade secrets, copyrights and other intellectual property rights are
important assets for us. In particular, we consider the “Honey” trademark and
our related trademarks to be valuable to us and will aggressively seek to
protect them. We have registered the following trademarks in the United States
for the class of paper goods and printed matter (which relates to printed
publications) : Honey, and Honey Hair & Beauty. In addition, we have U.S.
trademark applications pending for the class of paper goods and printed matter
for the following trademarks: Honey Bride, and Honey Teen; and have U.S.
trademark applications pending for the class of education and entertainment for
the following trademarks: Honey, Honey Bride, Honey Teen, and Honey Hair &
Beauty. Various events outside of our control pose a threat to our intellectual
property rights as well as to our services. For example, effective intellectual
property protection may not be available in every country in which our services
are made available through the internet. Also, the efforts we have taken to
protect our proprietary rights may not be sufficient or effective. Any
significant impairment of our intellectual property rights could harm our
business or our ability to compete. Also, protecting our intellectual property
rights is costly and time consuming. Any unauthorized use of our intellectual
property could make it more expensive to do business and harm our operating
results.




10




We
may be unable to protect our intellectual property from infringement by third
parties.




Our
business plan is significantly dependent upon exploiting our intellectual
property. There can be no assurance that we will be able to control all of the
rights for all of our intellectual property. We may not have the resources or
capital necessary to assert infringement claims against third parties who
may infringe upon our intellectual property rights. Litigation can be costly and
time consuming and divert the attention and resources of management and key
personnel.





In
providing our services we could infringe on the intellectual property rights of
others, which may cause us to engage in costly litigation and, if we do not
prevail, could also cause us to pay substantial damages and prohibit us from
selling our services.





Third
parties may assert infringement or other intellectual property claims against
us. We may have to pay substantial damages, if it is ultimately determined that
our services infringe on a third party’s proprietary rights. Even if claims are
without merit, defending a lawsuit takes significant time, may be expensive and
may divert management’s attention from our other business concerns.





Traffic
levels on our Website can fluctuate, which could materially adversely affect our
business.





Traffic
levels to our Website can fluctuate significantly as a result of social,
political and financial news events.  The demand for advertising,
cross promotion and subscriptions on our Website as well as on the Internet in
general can cause changes in rates paid for Internet advertising. This could
impede our ability to obtain or renew marketing or advertising agreements and
raise budgeted marketing and advertising costs.





Our
business may be adversely affected by malicious applications that interfere
with, or exploit security flaws in, our services.





Our
business may be adversely affected by malicious applications that make changes
to our users’ computers and interfere with the Honeymag.com experience. These
applications may attempt to change our users’ internet experience. The
interference may occur without disclosure to or consent from users, resulting in
a negative experience that users may associate with Honeymag.com. These
applications may be difficult or impossible to uninstall or disable, may
reinstall themselves and may circumvent other applications’ efforts to block or
remove them. In addition, we plan to offer a number of services that our users
will download to their computers or that they will rely on to store information
and transmit information to others over the internet. These services are subject
to attack by viruses, worms and other malicious software programs, which could
jeopardize the security of information stored in a user’s computer or in our
computer systems and networks. The ability to reach users and provide them with
a superior experience is critical to our success. If our efforts to combat these
malicious applications are unsuccessful, or if our services have actual or
perceived vulnerabilities, our reputation may be harmed and our user traffic
could decline, which would damage our business.





We
may face liability for information displayed on or accessible via our website,
and for other content and commerce-related activities, which could reduce our
net worth and working capital and increase our operating losses.





Because
materials may be downloaded by the services that we operate or facilitate and
the materials may be subsequently distributed to others, we could face claims
for errors, defamation, negligence or copyright or trademark infringement based
on the nature and content of such materials, which could adversely affect our
financial condition. Even to the extent that claims made against us do not
result in liability, we may incur substantial costs in investigating and
defending such claims.





We may be
subjected to claims for defamation, negligence, copyright or trademark
infringement or based on other theories relating to the information we publish
on our website. These types of claims have been brought, sometimes successfully,
against marketing and media companies in the past. We may be subject to
liability based on statements made and actions taken as a result of
participation in our chat rooms or as a result of materials posted by members on
bulletin boards on our website. Based on links we provide to third-party
websites, we could also be subjected to claims based upon online content we do
not control that is accessible from our website.




Although
we plan to carry general liability insurance, our insurance may not cover all
potential claims to which we are exposed or may not be adequate to indemnify us
for all liabilities to which we are exposed. Any imposition of liability that is
not covered by insurance or is in excess of insurance coverage would reduce our
net worth and working capital and increase our operating losses.





Changing
laws, rules and regulations and legal uncertainties could increase the
regulation of our business and therefore increase our operating
costs.





We are
subject to a number of foreign and domestic laws and regulations that affect
companies conducting business on the internet. In addition, laws and regulations
relating to user privacy, freedom of expression, content, advertising,
information security and intellectual property rights are being debated and
considered for adoption by many countries throughout the world. We face risks
from some of the proposed legislation that could be passed in the
future.




11





In the
U.S., laws relating to the liability of providers of online services for
activities of their users and other third parties are currently being tested by
a number of claims, which include actions for defamation, libel, invasion of
privacy and other data protection claims, tort, unlawful activity, copyright or
trademark infringement and other theories based on the nature and content of the
materials searched, the ads posted or the content generated by users. Certain
foreign jurisdictions are also testing the liability of providers of online
services for activities of their users and other third parties. Any court ruling
that imposes liability on providers of online services for activities of their
users and other third parties could harm our business.





Likewise,
a range of other laws and new interpretations of existing laws could have an
impact on our business. For example, in the U.S. the Digital Millennium
Copyright Act has provisions that limit, but do not necessarily eliminate, our
liability for listing, linking or hosting third-party content that includes
materials that infringe copyrights or other rights. The Child Online Protection
Act and the Children’s Online Privacy Protection Act restrict the distribution
of materials considered harmful to children and impose additional restrictions
on the ability of online services to collect information from children under 13.
In addition, the Protection of Children from Sexual Predators Act of 1998
requires online service providers to report evidence of violations of federal
child pornography laws under certain circumstances. The costs of compliance with
these laws may increase in the future as a result of changes in interpretation.
Furthermore, any failure on our part to comply with these laws may subject us to
significant liabilities. Similarly, the application of existing laws
prohibiting, regulating or requiring licenses for certain businesses of our
advertisers, including, for example, online gambling, distribution of
pharmaceuticals, adult content, financial services, alcohol or firearms, can be
unclear. Application of these laws in an unanticipated manner could expose us to
substantial liability and restrict our ability to deliver services to our users.
For example, some French courts have interpreted French trademark laws in ways
that would, if upheld, limit the ability of competitors to advertise in
connection with generic keywords.





We are
also subject to federal, state and foreign laws regarding privacy and protection
of user data. Any failure by us to comply with our posted privacy policies or
privacy-related laws and regulations could result in proceedings against us by
governmental authorities or others, which could potentially harm our business.
In addition, the interpretation of data protection laws, and their application
to the internet, in Europe and other foreign jurisdictions is unclear and in a
state of flux. There is a risk that these laws may be interpreted and applied in
conflicting ways from country to country and in a manner that is not consistent
with our current data protection practices. Complying with these varying
international requirements could cause us to incur additional costs and to have
to change our business practices. Further, any failure by us to protect our
users’ privacy and data could result in a loss of user confidence in our
services and ultimately in a loss of users, which would adversely affect our
business.





We
could face liability for breaches of security on the Internet.





To the
extent that our activities or the activities of third-party contractors involve
the storage and transmission of information, such as credit card numbers, social
security numbers or other personal information, security breaches could disrupt
our business, damage our reputation and expose us to a risk of loss or
litigation and possible liability. We could be liable for claims based on
unauthorized purchases with credit card information, impersonation or other
similar fraud claims. We could also be liable for claims relating to security
breaches under recently-enacted or future data breach legislation. These claims
could result in substantial costs and a diversion of our management’s attention
and resources.





We
are dependent on third party databases and computer systems.




We depend
on the delivery of information over the Internet, a medium that depends on
information contained primarily in an electronic format, in databases and
computer systems maintained by third parties and us. A disruption of third-party
systems or our systems interacting with these third party systems could prevent
us from delivering services in a timely manner, which could have a material
adverse effect on our business and results of operations.





Our
systems are also heavily reliant on the availability of electricity. If we were
to experience a major power outage, we would have to rely on back-up generators.
These back-up generators may not operate properly and their fuel supply could be
inadequate during a major power outage. This could result in a temporary
disruption of our business.





Our
business depends on continued and unimpeded access to the Internet by us and our
users. Internet access providers may be able to block, degrade or charge for
access to certain of our services, which could lead to additional expenses and
the loss of users and advertisers.





Our
planned services depend on the ability of our users to access the internet, and
certain of our services will require significant bandwidth to work effectively.
Currently, this access is provided by companies that have significant and
increasing market power in the broadband and internet access marketplace,
including existing telephone companies, cable companies and mobile
communications companies. Some of these providers have stated that they may take
measures that could degrade, disrupt or increase the cost of user access to
certain of our anticipated services by restricting or prohibiting the use of
their infrastructure to support or facilitate our offerings, or by charging
increased fees to us or our users to provide our offerings. These activities may
be permitted in the U.S. after recent regulatory changes, including recent
decisions by the U.S. Supreme Court and Federal Communications Commission and
under legislation being considered by the U.S. Congress. While interference with
access to our planned services seems unlikely, such carrier interference could
result in a loss of existing users and advertisers, increased costs, and impair
our ability to attract new users and advertisers, thereby harming our revenue
and growth.




12





We
face intense competition from social networking sites and other Internet
businesses and may not be able to successfully compete.





We face
formidable competition in every aspect of our planned business, and particularly
from other companies that seek to connect people with information and
entertainment on the web. Such competitors include Blackplanet, YouTube, My
Space, Craig’s List, Evite, and Facebook.





In
addition, we will be competing with other Internet companies, including general
purpose consumer online services, such as America Online and Microsoft Network;
and other web “portal” companies, such as Excite, Infoseek, Yahoo!, Google and
Lycos.





We will
also face competition from the online versions of newsstand magazines, such as
EbonyJet.com (the online version of Ebony and Jet magazines), Essence.com, and
Blackenterprise.com.





Our
competitors have longer operating histories and more established relationships
with customers and end users. They can use their experience and resources
against us in a variety of competitive ways, including by making acquisitions,
investing more aggressively in research and development and competing more
aggressively for advertisers and web sites. They may have a greater ability to
attract and retain users than we do because they operate internet portals with a
broader range of content products and services. If our competitors are
successful in providing similar or better web sites, more relevant
advertisements or in leveraging their platforms or products to make their web
services easier to access, our user traffic and the size of our network could be
negatively affected, which could negatively affect our revenues.





We
face competition from traditional media companies, and we may not be included in
the advertising budgets of large advertisers, which could harm our operating
results.





In
addition to Internet companies and online magazines, we face competition from
companies that offer traditional media advertising opportunities, including
television, radio and print. This would include such companies as News Corp.,
Time, Inc. and CBS, among others.  Most large advertisers have set
advertising budgets, a portion of which is allocated to internet advertising. We
expect that large advertisers will continue to focus most of their advertising
efforts on traditional media. If we fail to convince these companies to spend a
portion of their advertising budgets with us, our operating results would be
harmed.





If
we do not innovate and provide services that are useful to users, we may not be
able to effectively compete, and our revenues and operating results could
suffer.





Our
success depends on providing services that make using the internet a more useful
and enjoyable experience for our users. Our competitors are constantly
developing innovations in web based services. As a result, we must invest
significant resources in research and development in order to introduce and
enhance services that people can easily and effectively use. If we are unable to
provide quality services, then we will fail to attract users, or our users may
become dissatisfied and move to a competitor’s services. Our operating results
would also suffer if our anticipated services are not responsive to the needs of
our users and members, are not appropriately timed with market opportunities or
are not effectively brought to market. As internet broadcasting technology and
social networks continue to develop, our competitors may be able to offer
services that are, or that are seen to be, substantially similar to or better
than ours. This may force us to compete in different ways and expend significant
resources in order to remain competitive.




We
need to enter into strategic relationships with other Websites. If we are unable
to do so, our revenues and operating results will suffer.





We will
need to establish and maintain strategic relationships with other Websites to
attract users, advertisers and compelling content.  There is intense
competition for placements and cross promotion on these sites, and we may not be
able to enter into relationships on commercially reasonable terms or not at
all.  In addition, we may have to pay significant fees to establish
and maintain these relationships.





Our
business model is dependent upon continued growth in the use of the Internet by
our target demographic, and acceptance of our services by our target
demographic. If such growth and acceptance do not occur, our business will
suffer.





Our
business model depends on creating and increasing demand for our content and
e-commerce initiatives from our 18-34 urban female target demographic. This in
turn depends on this demographic continuing to increase its use of the Internet
for obtaining information pertaining to social, political, financial and
lifestyle events. There can be no assurance that such growth will continue, or
that our services will be accepted by this demographic. If such growth and
acceptance do not occur, our business will be materially adversely
affected.





Existing
technologies can block our ads, which would harm our business.





We expect
that much of our revenues will be derived from fees paid by advertisers in
connection with the display of ads on web pages. There are existing technologies
that can block display of some of the ads which we anticipate will be displayed
on our website. As a result, ad-blocking technology could adversely affect our
operating results.





We
rely on key personnel and, if we are unable to retain or motivate key personnel
or hire qualified personnel, we may not be able to grow
effectively.





Our
success depends in large part upon the abilities and continued service of our
executive officers and other key employees, particularly Mr. Philmore Anderson
IV, Chief Executive Officer, Mr. Larry J. Stinson, Chief Financial Officer, and
Mr. Timothy Kelly, President. There can be no assurance that we will be able to
retain the services of such officers and employees.  Our failure to
retain the services of our key personnel could have a material adverse effect on
us.   In order to support our projected growth, we will be
required to effectively recruit, hire, train and retain additional qualified
management personnel.  Our inability to attract and retain the
necessary personnel could have a material adverse effect on us.




13





The current
and continued downturn in United States economic conditions could adversely
affect our business and our ability to raise capital, if and when
needed.





The
U.S. economy is currently experiencing a significant contraction, and it is
expected that we will see further economic deterioration in the immediate
future. We expect that much of our revenues will be derived from fees paid by
advertisers in connection with the display of ads on web pages, including from
companies whose success is dependent upon consumers’ willingness to spend money
on entertainment and other discretionary items. Weakening economic conditions or
outlook could reduce the consumption of discretionary products and services and,
thus, reduce advertising for such products and services. This may adversely
affect our ad revenues which would adversely affect our business and financial
results.





Furthermore,
during challenging economic times, we may face greater difficulties gaining
timely access to financings, if and when needed, which could result in an
impairment of our ability to continue our business activities.




Risks Related to our Common
Stock:





There
is no active, liquid trading market for our common stock.




Our common
stock is registered under the Securities Exchange Act of 1934, as amended, and
is currently listed on the OTC Bulletin Board. However, there is no regular
active trading market in our common stock, and we cannot give an assurance
that an active trading market will develop. If an active market for our common
stock develops, there is a significant risk that our stock price may
fluctuate dramatically in the future in response to any of the following
factors, some of which are beyond our control:




·
            variations
      in our quarterly operating results;


·
            announcements
      that our revenue or income are below analysts’
    expectations;


·
            general
      economic slowdowns;


·
            sales
      of large blocks of our common
stock;


·
            announcements
      by us or our competitors of significant contracts, acquisitions, strategic
      partnerships, joint ventures or capital commitments;
  and


·
            fluctuations
      in stock market prices and volumes, which are particularly common among
      highly volatile securities of early stage technology
      companies.




The
ownership of our common stock is highly concentrated in our officers and
directors.




Our
current executive officers and directors beneficially own approximately 51.5% of
the Company’s outstanding common stock, including approximately 45% of our
outstanding shares which are beneficially owned by our Chief Executive Officer
and Chairman Philmore Anderson IV. As a result, if they act in concert, our
executive officers and directors will control all of the issues submitted to a
vote of the Company’s shareholders.  Such concentration of share
ownership may have the effect of discouraging, delaying or preventing a change
in control of the Company.




Our common
stock is subject to the “penny stock” rules of the SEC, which may make it more
difficult for stockholders to sell our common stock.




The
Securities and Exchange Commission has adopted Rule 15g-9 which establishes the
definition of a "penny stock," for the purposes relevant to us, as any equity
security that has a market price of less than $5.00 per share or with an
exercise price of less than $5.00 per share, subject to certain exceptions. For
any transaction involving a penny stock, unless exempt, the rules
require:





·
            that
      a broker or dealer approve a person's account for transactions in penny
      stocks; and


·
            the
      broker or dealer receive from the investor a written agreement to the
      transaction, setting forth the identity and quantity of the penny stock to
      be purchased.





In order
to approve a person's account for transactions in penny stocks, the broker or
dealer must:





·
            obtain
      financial information and investment experience objectives of the person;
      and


·
            make
      a reasonable determination that the transactions in penny stocks are
      suitable for that person and the person has sufficient knowledge and
      experience in financial matters to be capable of evaluating the risks of
      transactions in penny stocks.




14




The
broker or dealer must also deliver, prior to any transaction in a penny stock, a
disclosure schedule prescribed by the Commission relating to the penny stock
market, which, in highlight form:





·
            sets
      forth the basis on which the broker or dealer made the suitability
      determination; and


·
            that
      the broker or dealer received a signed, written agreement from the
      investor prior to the transaction.





Disclosure
also has to be made about the risks of investing in penny stocks in both public
offerings and in secondary trading and about the commissions payable to both the
broker-dealer and the registered representative, current quotations for the
securities and the rights and remedies available to an investor in cases of
fraud in penny stock transactions. Finally, monthly statements have to be sent
disclosing recent price information for the penny stock held in the account and
information on the limited market in penny stocks.





The
regulations applicable to penny stocks may severely affect the market liquidity
for the Company’s common stock and could limit an investor’s ability to sell the
Company’s common stock in the secondary market.





As
an issuer of “penny stock,” the protection provided by the federal securities
laws relating to forward looking statements does not apply to us.





Although
federal securities laws provide a safe harbor for forward-looking statements
made by a public company that files reports under the federal securities laws,
this safe harbor is not available to issuers of penny stocks. As a result, the
Company will not have the benefit of this safe harbor protection in the event of
any legal action based upon a claim that the material provided by the Company
contained a material misstatement of fact or was misleading in any material
respect because of the Company’s failure to include any statements necessary to
make the statements not misleading. Such an action could hurt our financial
condition.




We
have not paid dividends in the past and do not expect to pay dividends for the
foreseeable future.  Any return on investment may be limited to the
value of our common stock.




No cash
dividends have been paid on the Company’s common stock. We expect that any
income received from operations will be devoted to our future operations and
growth. The Company does not expect to pay cash dividends in the near future.
Payment of dividends would depend upon our profitability at the time, cash
available for those dividends, and other factors as the Company’s board of
directors may consider relevant. If the Company does not pay dividends, the
Company’s common stock may be less valuable because a return on an investor’s
investment will only occur if the Company’s stock price
appreciates.





The
sale of a significant number of shares could depress the price of our common
stock.





Because
there is not an active, liquid public market for our common stock, there may be
significant downward pressure on our stock price caused by the sale or potential
sale of a significant number of shares of our common stock, which could allow
short sellers of our stock an opportunity to take advantage of any decrease in
the value of our stock. The presence of short sellers in our common stock may
further depress the price of our common stock.





If a
significant number of shares of our common stock are sold, the market price of
our common stock may decline.





Our
issuance of common stock upon exercise of outstanding warrants may depress the
price of our common stock.





As of
March 30, 2009, we have 30,812,042 shares of common stock and warrants to
purchase 10,294,034 shares of common stock outstanding. The issuance of shares
of common stock upon exercise of outstanding warrants could result in
substantial dilution to our stockholders, which may have a negative effect on
the price of our common stock.


Item 1B.
                Unresolved Staff
      Comments


Not
applicable.




Item 2.
            Properties.




Our principal executive offices
are located at 81 Greene Street, 4th Floor, New York, New York 10012. The
offices consist of approximately 2,750 square feet. Our current monthly rent is
$9,000 (which will increase to $9,600 by October 2010) under a three year
lease that commenced in October 2008. We believe that our properties are
adequate for our current and immediately foreseeable operating
needs.




Item 3.
            Legal
      Proceedings.




We are
not subject to any pending or threatened legal proceedings, nor is our property
the subject of a pending or threatened legal proceeding. None of our directors,
officers or affiliates are involved in a proceeding adverse to our business or
has a material interest adverse to our business.




Item 4.
            Submission
      Of Matters To A Vote Of Security
Holders.




None.




15




PART
II




Item 5.
            Market
      For Common Equity, Related Stockholder Matters and Issuer Purchases of
      Equity Securities




Our common stock is currently traded
on the OTC-BB under the symbol “SHHD.OB”.The Company’s Common Stock is
listed on the Over-the-Counter Bulletin Board (“OTC.BB”) under the symbol
“SHHD.”  Trading in the Common Stock is very limited. The following
table sets forth the range of high and low bid prices of our common stock as
reported and summarized on the OTC.BB for the periods
indicated.  These prices are based on inter-dealer bid and asked
prices, without markup, markdown, commissions, or adjustments and may not
represent actual transactions.





Calendar
      Quarter
                                
                                High
      Bid
                                
                                
                                Low
      Bid2007
      First Quarter
                                
                                $
                                7.50
                                
                                
                                $
                                7.502007
      Second Quarter
                                
                                $
                                12.00
                                
                                
                                $
                                3.602007
      Third Quarter
                                
                                $
                                3.00
                                
                                
                                $
                                0.902007
      Fourth Quarter
                                
                                $
                                0.90
                                
                                
                                $
                                0.602008
      First Quarter
                                
                                $
                                0.90
                                
                                
                                $
                                0.602008
      Second Quarter
                                
                                $
                                0.30
                                
                                
                                $
                                0.302008
      Third Quarter
                                
                                $
                                4.50
                                
                                
                                $
                                0.302008
      Fourth Quarter
                                
                                $
                                4.00
                                
                                
                                $
                                2.002009
      First Quarter
                                
                                $
                                3.00
                                
                                
                                $
                                3.00






As of
March 30, 2009, the last sale price reported on the OTC.BB for the Company’s
Common Stock was $3.00 per share.





As of
March 30, 2009, there were approximately 300 holders of record of the Company’s
Common Stock.




Dividends.




We have not declared any dividends on our Common Stock to
date and we do not anticipate declaring or paying any cash dividends on our
Common Stock in the foreseeable future.





16


Securities
Authorized for Issuance Under Equity Compensation Plan





In
January 1998, MFI’s board of directors approved a stock option plan under which
16,667 shares of common stock have been reserved for issuance. The following
table shows information with respect to each equity compensation plan under
which the Company’s common stock is authorized for issuance as of December 31,
2008.














EQUITY
COMPENSATION PLAN INFORMATION





Plan
      category
                                                        
                                                        Number
      of securities
                                                          to
      be issued upon
                                                          exercise
      of
                                                          outstanding
      options,
                                                          warrants
      and rights
                                                        
                                                        
                                                        Weighted
      average
                                                          exercise
      price of
                                                          outstanding
      options,
                                                          warrants
      and rights
                                                        
                                                        
                                                        Number
      of securities
                                                          remaining
      available for future issuance under equity compensation plans (excluding
      securities reflected in column (a))(a)
                                                        
                                                        
                                                        (b)
                                                        
                                                        
                                                        (c)Equity
      compensation plans approved by security holders
                                                        
                                                        
                                                        0
                                                        
                                                        
                                                        
                                                        0
                                                        
                                                        
                                                        
                                                        16,667Equity
      compensation plans not approved by security holders
                                                        
                                                        
                                                        N/A
                                                        
                                                        
                                                        
                                                        N/A
                                                        
                                                        
                                                        
                                                        N/ATotal
                                                        
                                                        
                                                        N/A
                                                        
                                                        
                                                        
                                                        N/A
                                                        
                                                        
                                                        
                                                        16,667






Recent
Sales Of Unregistered Shares.




On
October 20, 2008, Sahara Media Holdings, Inc. (the “Company”) issued and sold
4,000 shares of common stock and five-year warrants to purchase 4,000 shares of
common stock at an exercise price of $2.50, to an accredited investor, for a
purchase price of $5,000.





John
Thomas Financial, Inc. was the exclusive placement agent for the private
placement and received a commission of $500 (equal to 10% of the gross proceeds)
and a non-accountable expense allowance of $150 (equal to 3% of the gross
proceeds).





In
connection with the foregoing, the Company relied upon the exemption from
securities registration afforded by Rule 506 of Regulation D as promulgated by
the Securities and Exchange Commission under the Securities Act of 1933, as
amended (the “Securities Act”) and Section 4(2) of the Securities Act. No
advertising or general solicitation was employed in offering the securities. The
offerings and sales were made to a limited number of persons, all of whom were
accredited investors, and transfer was restricted by the Company in accordance
with the requirements of the Securities Act of 1933.





Other
than as reported in this item, all other sales of our restricted stock have been
reported in a Current Report on Form 8-K or in a Quarterly Report on Form
10-Q.





Item 6.
            Selected
      Financial Data





Not
      Applicable.





17





Item 7.
            Management's
      Discussion And Analysis Of Financial Condition and Results of Operations.





Forward-Looking Statements and Associated
Risks.





Some of
the statements contained in this report on Form 10-K that are not historical
facts are "forward-looking statements" which can be identified by the use of
terminology such as "estimates," "projects," "plans," "believes," "expects,"
"anticipates," "intends," or the negative or other variations, or by discussions
of strategy that involve risks and uncertainties. We urge you to be cautious of
the forward-looking statements, that such statements, which are contained in
this report on Form 10-K, reflect our current beliefs with respect to future
events and involve known and unknown risks, uncertainties and other factors
affecting our operations, market growth, services, products and licenses. No
assurances can be given regarding the achievement of future results, as actual
results may differ materially as a result of the risks we face, and actual
events may differ from the assumptions underlying the statements that have been
made regarding anticipated events. Factors that may cause actual results, our
performance or achievements, or industry results, to differ materially from
those contemplated by such forward-looking statements include without
limitation:




·
            Our
      ability to attract and retain management, and to integrate and maintain
      technical information and management information
  systems;





·
            Our
      ability to raise capital when needed and on acceptable terms and
      conditions;





·
            The
      intensity of competition; and





·
            General
      economic conditions.




All
written and oral forward-looking statements made in connection with this report
that are attributable to us or persons acting on our behalf are expressly
qualified in their entirety by these cautionary statements. Given the
uncertainties that surround such statements, you are cautioned not to place
undue reliance on such forward-looking statements.




Plan
of Operation




We are a
development-stage company located in New York. Since our formation, we have
concentrated on developing our business strategy and obtaining financing. We
re-launched Honey as an online magazine and social network on March 5, 2009 . We
expect that the primary components of our business will be:





·
            The
      online magazine Honeymag.com


·
            The
      social network Hivespot.com


·
            Our
      database of approximately 3.9 million names in the 18-34 urban female
      demographic (the “Honey Database”).




Honeymag.com
and Hivespot.com are currently operating websites. We officially launched
Honeymag.com and Hivespot.com on March 5, 2009.





We plan
to generate revenues through: (i) advertising sales from our online magazine and
social network web sites; (ii) licensing of our database; and, (iii) direct
marketing and sponsorships.





We
anticipate that we will begin generating advertising revenues in the second half
of 2009. We plan to sell advertising both through ad aggregators, and through
direct sales, which generally provide for greater potential revenues. We do not
currently have any arrangements with advertisers, but we have an advertising
sales team in place. We have retained BET and GLAM Media as our ad aggregator.
We anticipate that the available ad space on our site will be filled through
these aggregators. The amount of revenue that will be generated through these
initial ads, as well as future ads, will depend on the amount of traffic the
site will generate. We anticipate that we will begin generating advertising
revenues in the third quarter of 2009. We estimate that we will generate revenue
of $250,000 in the third quarter of 2009, and $750,000 in the fourth
quarter of 2009, from the sale of advertising on our website. However, we have
generated de minimis
revenues to date and there can be no assurance our revenue estimates are
accurate. We have begun efforts to license the Honey Database; however, we do
not anticipate generating significant revenue from the licensing of our Honey
Database or other sources in 2009.




Results
of Operations





Since
inception, Sahara has generated de minimisrevenue from
advertising and the licensing of its database.  In the same period,
Sahara has incurred expenses related to securing the “Honey” Brand trademarks,
funding the development of a business plan, and raising capital.




Year
Ended December 31, 2008 Compared to the Year Ended December 31,
2007





Revenues
for the year ended December 31, 2008 were $8,183 compared to $2,347 for the year
ended December 31, 2007.   We generated on-line revenue from
several clients. Although the website Honeymag.com had not yet been launched as
our online magazine, ads were sold on a prior version of the Honeymag.com
website (which had much less content than our planned online magazine and did
not include a social network).





Product
development expenses for the year ended December 31, 2008 was $243,114 compared
to $143,351 for the year ended December 31, 2007.We attribute the increase of
$99,763 (70%) to website development and licensing expenses.




18





Selling
and marketing expenses for the year ended December 31, 2008 were $133,468
compared to $74,482 for the year ended December 31, 2007. We attribute the
increase of $58,986 (79%) to consulting fees.





General
and administrative expenses for the year ended December 31, 2008 were $1,582,323
compared to $456,254 for the year ended December 31, 2007. We attribute the
increase of $1,126,069 (247%) to professional fees of approximately $673,000
paid for accounting, legal and financial advisory services related our required
SEC filings; payroll and management consultant costs of approximately $369,000;
rent of $81,600.





Interest
expense to a related party for the year ended December 31, 2008 was $17,053
compared to $37,663 for the year ended December 31, 2007. The decrease of
$20,610 (55%) is attributed to the settlement of promissory notes and advances
due prior to the Company’s reorganization.





Interest
expense for the year ended December 31, 2008 was $90,889 compared to $19,326 for
the year ended December 31, 2007.  We attribute the increase of
$71,563 (370%) to interest on two bridge loans for working capital purposes as
well as the value of warrants issued as additional compensation for one of the
loans.  These notes were satisfied in June 2008.





We earned
interest income of $24,608 for the year ended December 31, 2008 from cash
received from the sale of our common stock (see below). We had no earned
interest income for the year ended December 31, 2007.





As a
result of the foregoing, the net loss for the year ended December 31, 2008 was
$2,034,056 compared to $728,729 for the year ended December 31,
2007.




Liquidity
and Capital Resources





On
September 17, 2008, October 8, 2008, and October 20, 2008, we entered into a
series of identical subscription agreements (the “Subscription Agreements”) with
accredited investors (the “Investors”), pursuant to which, the Company issued
and sold approximately 79.44 units, with each unit consisting of 100,000 shares
of Common Stock and five-year warrants to purchase 100,000 shares of common
stock with an exercise price of $2.50 per share, for a purchase price of
$125,000 per unit (the “Private Placement”). Pursuant to the Private Placement,
the Company issued and sold to the Investors an aggregate of 7,944,034 shares of
common stock (the “Common Shares”) and five-year warrants to purchase 7,944,034
shares of Common Stock  with an exercise price of $2.50 (the “Investor
Warrants”), for an aggregate purchase price of approximately $9,930,000.
Following payment of expenses and costs related to the Private Placement and the
acquisition of Sahara Media, Inc., and repayment of bridge loans, we received
net proceeds of approximately $6,990,000. We used a portion of the net proceeds
for operational expenses of $600,000, purchase of our database at a cost of
$775,000, and the development of our software platform at a cost of $550,000.
Our short term capital needs were greater than our anticipated future capital
needs due to the expenses related to setting up our company and its core
products and services, including the acquisition and verification of the email
and target demographic database, acquisition of office space, technology
equipment and recruitment of key personnel.





As of
December 31, 2008, we have cash and cash equivalents available of approximately
$4,437,000, of which approximately $2,300,000 will be used in the next
twelve months for operational expenses.




We
anticipate that our long term capital needs will be met from our remaining
available capital raised in the Private Placement and from anticipated revenues
as well as from our existing line of credit. However, there can be no assurance
that our cost estimates are accurate, that anticipated revenues will
materialize, or that unforeseen events will not occur that would cause us to
seek additional funding to meet our need for working capital. There can be no
assurance that financing, if and when needed, will be available in amounts or on
terms acceptable to us, or at all.   The current economic crisis
could make it more difficult to obtain financing if and when needed





Off-Balance
Sheet Arrangements





None.


Item 7A.
              Quantitative
      and Qualitative Disclosure About Market
Risk





Not
applicable.


Item 8.
              Financial Statements and Supplementary
  Data.


Our
financial statements, together with the independent registered public accounting
firm's report of Weiser LLP begin on page F-1, immediately after the signature
page.


Item 9.
              Changes
      in and Disagreements With Accountants on Accounting and Financial
      Disclosure.
  None.
  19


Item 9A(T).
              Controls
      and Procedures.


Evaluation
of Disclosure Controls and Procedures.




Our
management is responsible for establishing and maintaining a system of
disclosure controls and procedures (as defined in Rule 13a-15(e)) under the
Exchange Act) that is designed to ensure that information required to be
disclosed by the Company in the reports that it files or submits under the
Exchange Act is recorded, processed, summarized and reported, within the time
specified in the Commission's rules and forms. Disclosure controls and
procedures include, without limitation, controls and procedures designed to
ensure that information required to be disclosed by an issuer in the reports
that it files or submits under the Securities Exchange Act of 1934 (the
“Exchange Act”), as amended, is accumulated and communicated to the issuer's
management, including its principal executive officer or officers and principal
financial officer or officers, or persons performing similar functions, as
appropriate to allow timely decisions regarding required
disclosure.




Pursuant
to Rule 13a-15(b) under the Exchange Act, the Company carried out an evaluation
with the participation of the Company’s management, including Philmore Anderson,
IV, the Company’s Chief Executive Officer (“CEO”) and Larry Stinson, the
Company’s Chief Financial Officer (“CFO”), of the effectiveness of the Company’s
disclosure controls and procedures (as defined under Rule 13a-15(e) under the
Exchange Act) as of the year ended December 31, 2008.  Based upon that
evaluation, the Company’s CEO and CFO concluded that the Company’s disclosure
controls and procedures were not completely effective, due to a lack of internal
resources to account for the completeness of transactions, to ensure that
information required to be disclosed by the Company in the reports that the
Company files or submits under the Exchange Act, is recorded, processed,
summarized and reported, within the time periods specified in the SEC’s rules
and forms, and that such information is accumulated and communicated to the
Company’s management, including the Company’s CEO and CFO, as appropriate, to
allow timely decisions regarding required disclosure. The Company is in the
process of working with third parties to address these matters and expects to
have these items addressed during the first quarter of 2009.





Management’s
Report on Internal Control over Financial Reporting





We are
responsible for establishing and maintaining adequate internal control over
financial reporting in accordance with Exchange Act Rule 13a-15. With the
participation of our chief executive officer and chief financial officer, our
management conducted an evaluation of the effectiveness of our internal control
over financial reporting as of December 31, 2008 based on the criteria
established in Internal Control-Integrated Framework issued by the Committee of
Sponsoring Organizations of the Treadway Commission. Based on this evaluation,
management concluded that our internal control over financial reporting was
ineffective as of December 31, 2008, based on those criteria. A control system,
no matter how well conceived and operated, can provide only reasonable, not
absolute, assurance that the objectives of the control system are met. Because
of the inherent limitations in all control systems, no evaluation of controls
can provide absolute assurance that all control issues and instances of fraud,
if any, within the Company have been detected.




This
annual report does not include an attestation report of the Company’s registered
accounting firm regarding internal control over financial reporting.
Management’s report was not subject to attestation by the Company’s registered
public accounting firm pursuant to temporary rules of the Securities and
Exchange Commission




Changes
in internal controls




Our
management, with the participation our chief executive officer and chief
financial officer, performed an evaluation as to whether any change in our
internal controls over financial reporting occurred during the three months
ended December 31, 2008.  Based on that evaluation, our CEO and CFO
concluded that no change occurred in the Company's internal controls over
financial reporting during the three months ended December 31, 2008 that has
materially affected, or is reasonably likely to materially affect, the Company's
internal controls over financial reporting


Item 9B.
              Other
      Information
  None.





PART
III




Item 10.
            Directors,
      Executive Officers, And Corporate
Governance.




The
following persons were members of the Company’s Board of Directors (the “Board”)
and/or executive officers, in the capacities indicated, as of  the
year ended December 31, 2008:




Directors
      and Executive Officers
                    
                    Age
                    
                    PositionPhilmore
      Anderson IV
                    
                    44
                    
                    Chief
      Executive Officer and Chairman of the BoardLarry
      J. Stinson
                    
                    61
                    
                    Chief
      Financial OfficerTimothy
      Kelly
                    
                    42
                    
                    President/Chief
      Operating OfficerPhilmore
      Anderson III
                    
                    66
                    
                    DirectorTamera
      Reynolds
                    
                    40
                    
                    Director




20




Family
Relationships.




Philmore
Anderson IV is the son of Philmore Anderson III.




Background
of Executive Officers and Directors





Philmore
Anderson IV





Philmore
Anderson IV has been Chief Executive Officer of the Company since September
2008, and Chairman of the Company since October 2008. Mr. Anderson has been
Chief Executive Officer, Chairman, and Director of Sahara Media, Inc. since its
inception in January 2005.





From 2003
to 2004, Mr. Anderson was a partner at Gotham Entertainment, a music management
company.





Mr.
Anderson holds a BA in economics from Lake Forest College.





Philmore
Anderson IV is the son of Philmore Anderson III, a director of the
Company.




Larry
J. Stinson, Chief Financial Officer





Larry J.
Stinson has been Chief Financial Officer of the Company since September 2008.
Mr. Stinson has been chief financial officer of Sahara Media, Inc. since July
2008.





Since
January 2003, Mr. Stinson has operated a private financial
consultancy.





Mr.
Stinson is a graduate of the Wharton School of the University of
Pennsylvania.





Timothy
Kelly, President





Timothy
Kelly has been President of the Company since September 2008. Mr. Kelly has been
President of Sahara Media, Inc. since July 2008.





Prior to
joining Sahara, Mr. Kelly was the president of KLM, a real estate development
firm focusing on residential development of homes in the $3 to $10 million
dollar range, from its inception in 2002.





Mr. Kelly
is a graduate of the Duke Fuqua School of Business.





Philmore
Anderson III, Director





Philmore
Anderson III has been a director of the Company since October 2008. Mr. Anderson
has been a director of Sahara Media, Inc. since July 2005.





Mr.
Anderson has been semi-retired since 2005, during which time he has assisted in
the management of BPA Associates, LLC (“BPA”), a company owned by Mr. Anderson’s
wife that provides consulting services to minority-owned and small businesses
who have or are interested in securing federal and state supplier contracts.
Prior to the inception of BPA in 2005, Mr. Anderson served for 13 years as the
State Purchasing Agent for the Commonwealth of Massachusetts.





Mr.
Anderson holds a BS in accounting from Central State University in
Wilberforce, Ohio, and attended the
Harvard Business School.





Philmore
Anderson III is the father of Philmore Anderson IV, the chief executive officer
and chairman of the Company.




Tamera
Reynolds, Director





Tamara
Reynolds has been a director of the Company since October 2008. Mrs. Reynolds
has been a director of Sahara Media, Inc. since its inception in January 2005.
Mrs. Reynolds also served as Sahara’s chief operating officer from 2005 to
2007.




21





Since
2007, Mrs. Reynolds has been director of development and operations of Glam
Media’s new African American women’s channel within glam.com. Mrs. Reynolds is
responsible for all aspects of development and the ongoing operations of the
channel, including design, content, network expansion, staffing, business
development and strategic partnerships.





In
addition, since 2003, Mrs. Reynolds has owned and operated headed TMR
Entertainment, LLC, a consulting firm Mrs. Reynolds founded that provides
general business and management services to individuals and businesses primarily
in the entertainment and related industries.





Mrs.
Reynolds received her Bachelors Degree from
Pennsylvania State University and her JD from the University of
Colorado Law School.




Legal
Proceedings.
  None
Noted




Committees;
Audit Committee Financial Expert.




Currently,
the Company does not have an executive, audit or any standing committee of the
Board.  The Company does not have an audit committee, or an audit
committee financial expert.





Director
Independence





None of
our directors are independent as that term is defined under the Nasdaq
Marketplace Rules.




Compliance
with Section 16(a) of the Exchange Act




Section
16(a) of the Securities Exchange Act of 1934 requires that our officers and
directors, and persons who own more that ten percent of a registered class of
our equity securities, file reports of ownership and changes in ownership with
the Securities and Exchange Commission and with any exchange on which the
Company's securities are traded. Officers, directors and persons owning more
than ten percent of such securities are required by Commission regulation to
file with the Commission and furnish the Company with copies of all reports
required under Section 16(a) of the Exchange Act. To our knowledge, based solely
upon our review of the copies of such reports furnished to us, during the fiscal
year ended December 31, 2008, all Section 16(a) filing requirements applicable
to our officers, directors and greater than 10% beneficial owners were complied
with.




Code
of Ethics




The
Company has not adopted a Code of Ethics but expects to do so in the near
future.




Changes
in Nominating Procedures




None.




Item 11.
            Executive
      Compensation.




The
Company accrued or paid compensation to the executive officers as a group for
services rendered to the Company in all capacities during the 2008 and 2007
fiscal years as shown in the following table.  No cash bonuses were or
are to be paid to such persons for services rendered in the fiscal years ended
December 31, 2008, and 2007.




22





Summary
Compensation Table





The
following table sets forth all compensation paid to our Chief Executive Officer
for our last two completed fiscal years. No other officer of ours received
compensation in excess of $100,000 for either of our last two completed fiscal
years.




Name
      & Principal
                          Position
                        
                        Year
                        
                        Salary
      ($)
                        
                        Bonus
      ($)
                        
                        Stock
                          Awards
      ($)
                        
                        
                        Option
                          Awards
      ($)
                        
                        
                        Non-Equity
                          Incentive
      Plan
                          Compensation
      ($)
                        
                        
                        Change
      in Pension
                          Value
      and Non-
                          Qualified
                          Deferred
                          Compensation
                          Earnings
                        
                        All
                          Other
                          Compensation
      ($)
                        
                        Total
      ($)Philmore
      Anderson IV
                        
                        2008
                        
                        
                        200,000
                        
                        
                        
                        
                        525,000
      (1)
                        
                        
                        
                        0
                        
                        
                        
                        0
                        
                        
                        
                        0
                        
                        
                        
                        $
                        725,000Chief
      Executive Officer, Chairman and Director
                        
                        2007
                        
                        
                        150,000
                        
                        __
                        
                        
                        0
                        
                        
                        
                        0
                        
                        
                        
                        0
                        
                        
                        
                        0
                        
                        
                        
                        $
                        150,000




(1)
Represents 100,000 shares of common stock of Sahara Media, Inc. issued on June
10, 2008 in exchange for Mr. Anderson’s foregoing of $525,000 in
salary.





The
following table sets forth compensation data for executive officers of MFI for
the fiscal year ended December 31, 2007:





Name
      & Principal
                        Position
                      
                      Year
                      
                      Salary
      and Consulting Payments ($)
                      
                      Bonus
      ($)
                      
                      Stock
                        Awards
      ($)
                      
                      
                      Option
                        Awards
      ($)
                      
                      
                      Non-Equity
                        Incentive
      Plan
                        Compensation
      ($)
                      
                      
                      Change
      in Pension
                        Value
      and Non-
                        Qualified
                        Deferred
                        Compensation
                        Earnings
      ($)
                      
                      All
                        Other
                        Compensation
      ($)
                      
                      Total
      ($)Jim
      McCullough
                      
                      2007
                      
                      
                      99,682
                      
                      --
                      
                      
                      --
                      
                      
                      
                      --
                      
                      
                      
                      --
                      
                      
                      
                      --
                      
                      --
                      
                      $
                      99,682President
      (1)Dwayne
      Deslatte
                        President
      (2)_
                      
                      2007
                      
                      
                      --
                      
                      --
                      
                      
                      2,000
                      
                      
                      
                      --
                      
                      
                      
                      --
                      
                      
                      
                      --
                      
                      --
                      
                      $
                      2,000





(1) Mr.
McCullough served as MFI’s president until October 2007.





(2) Mr.
Deslatte replaced Mr. McCullough as MFI’s president in October
2007.





Employment
Agreements




Director
Compensation for Year Ending December 31, 2008





No
director of the Company received any compensation for services as director for
the year ending December 31, 2008.




Employment
Agreements





On
February 18, 2009 the Company  entered into an employment agreement
(the “Employment Agreement”) with Philmore Anderson IV, the Company’s chief
executive officer and chairman.





Pursuant
to the Employment Agreement, Mr. Anderson will serve as the Company’s chief
executive officer for a term of three years, commencing on the Commencement
Date, subject to earlier termination as provided therein (the
“Term”).




23





Mr.
Anderson will receive a base salary of $300,000 during the first year of the
Term, $325,000 during the second year of the Term, and $350,000 during the third
year of the Term. Mr. Anderson will be eligible to receive bonus payments during
the Term in the sole discretion of the Company’s Board of Directors. Pursuant to
the Employment Agreement, Mr. Anderson also received a signing bonus of
$155,000.





Pursuant
to the Employment Agreement, the Company agreed to grant Mr. Anderson an option
to purchase 3,000,000 shares of the Company’s common stock at an exercise price
of $2.00 per share, as soon as practicable following the Commencement
Date.





The
Employment Agreement may be terminated prior to the expiration of the Term upon
thirty days’ written notice by Mr. Anderson. In addition, the Employment
Agreement may be terminated prior to the expiration of the Term by the Company.
If the Company terminates the Employment Agreement for any reason other than a
Termination for Cause (as defined therein), or if Mr. Anderson terminates the
Employment Agreement due to a change of control of the Company, Mr. Anderson
will be entitled to a severance payment equal to the greater of (a) the balance
of Mr. Anderson’s salary payable, and benefits to which Mr. Anderson is
entitled, for the balance of the Term, and (b) an amount equal to two and
one-half (2.5) times the highest cash compensation paid to Mr. Anderson during
any 12 month period prior to termination.




We are
not party to any other employment agreements.




Outstanding
Equity Awards at December 31, 2008





The
Company did not have any equity awards outstanding as of December 31,
2008.




Compensation
Committee Interlocks and Insider Participation





Sahara
did not have a compensation committee during the year ended December 31, 2008.
During the year ended December 31, 2008, none of our officers and employees
participated in deliberations of our board of directors concerning executive
compensation. During the fiscal year ended December 31, 2008, none of our
executive officers served on the board of directors of any entities whose
directors or officers serve on our board of directors.




MFI did
not have a compensation committee during the year ended December 31, 2008.
During the year ended December 31, 2008, none of MFI’s officers and employees
participated in deliberations of MFI’s board of directors concerning executive
compensation. During the fiscal year ended December 31, 2008, none of MFI’s
executive officers served on the board of directors of any entities whose
directors or officers serve on MFI’s board of directors.


Item 12.
              Security
      Ownership of Certain Beneficial Owners and
  Management.


SECURITY
OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT







The
following table sets forth certain information, as of January 31, 2009 with
respect to the beneficial ownership of the Company’s outstanding Common Stock by
(i) any holder of more than five (5%) percent; (ii) each of the Company’s
executive officers and directors; and (iii) the Company’s directors and
executive officers as a group. Except as otherwise indicated, each of the
stockholders listed below has sole voting and investment power over the shares
beneficially owned.





Name
      of Beneficial Owner (1)
                
                Common
      Stock
                  Beneficially
      Owned
                
                
                Percentage
      of
                  Common
      Stock (2)Directors
      and Officers:Philmore
      Anderson IV
                
                
                13,863,390
                (3)
                
                
                44.99
                %Timothy
      Kelly
                
                
                0
                
                
                
                --Larry
      J. Stinson
                
                
                0
                
                
                
                --Philmore
      Anderson III
                  208
      Common Street
                  Watertown,
      MA 02742
                
                
                1,877,000
                (4)
                
                
                6.09
                %Tamera
      Reynolds
                  29
      2nd Avenue, 3rd Floor
                  New
      York, NY 10003
                
                
                120,000
                
                
                
                *All
      officers and directors as a group
                
                
                15,860,390
                
                
                
                51.47
                %Beneficial
      owners of more than 5%:Sahara
      Entertainment, LLC (5)
                
                
                13,763,390
                
                
                
                44.67
                %John
      Thomas Financial Inc.
                  14
      Wall Street, 5th Floor
                  New
      York, NY 10005
                
                
                4,000,000
                (6)
                
                
                12.57
                %Steven
      Benkovsky
                  80
      Rayner Avenue
                  Ronkonkoma,
      NY 11779
                
                
                3,200,000
                (7)
                
                
                9.87
                %Timothy
      Marks
                  Amber
      Barnes Poole Keynes
                  Cirencester
      Gloucesterchire UK GL76EG
                
                
                3,200,000
                (7)
                
                
                9.87
                %


* Less
than 1%




24





(1)
            Except
      as otherwise indicated, the address of each beneficial owner is c/o Sahara
      Media Holdings, Inc., 81 Greene Street, 4th Floor, New York, NY
      10012.


(2)
            Applicable
      percentage ownership is based on 30,812,042 shares of Common Stock
      outstanding as of January 31, 2009, together with securities exercisable
      or convertible into shares of Common Stock within 60 days of January 31,
      2009 for each stockholder.  Beneficial ownership is determined
      in accordance with the rules of the Securities and Exchange Commission and
      generally includes voting or investment power with respect to
      securities.  Shares of Common Stock that are currently
      exercisable or exercisable within 60 days of January 31, 2009 are deemed
      to be beneficially owned by the person holding such securities for the
      purpose of computing the percentage of ownership of such person, but are
      not treated as outstanding for the purpose of computing the percentage
      ownership of any other person.


(3)
            Includes
      13,763,390 shares held by Sahara Entertainment, LLC, an entity owned by
      Philmore Anderson IV.


(4)
            Includes
      1,425,000 shares held by BPA Associates, LLC, an entity owned by Bertha
      Anderson, Philmore Anderson III’s
wife.


(5)
            Sahara
      Entertainment, LLC is owned by Philmore Anderson IV, our chief executive
      officer and chairman.


(6)
            Includes
      1,000,000 shares underlying warrants with an exercise price of
      $1.30. Thomas Belesis has investment and voting power over the
      securities of the Company owned by John Thomas Financial, Inc. Mr. Belesis
      disclaims beneficial ownership of the
  securities.


(7)
            Includes
      1,600,000 shares of Common Stock issuable upon exercise of Investor
      Warrants issued in the Private
Placement.


Item 13.
              Certain
      Relationships And Related Transactions, and Director
      Independence.
  Certain Relationships and
Related Transactions





Certain
Relationships and Related Transactions





Sahara
Media, Inc. is party to an asset purchase agreement, dated as of May 15, 2008,
amended on August 1, 2008 (as amended, the “Database Purchase Agreement”) with
BPA Associates, LLC (“BPA”). BPA is an entity owned by Bertha Anderson, who is
the mother of Philmore Anderson IV, our chief executive officer and chairman,
and the wife of Philmore Anderson III, our director. Pursuant to the Database
Purchase Agreement, we purchased from BPA a database including approximately
3,660,000 names, for a purchase price of $825,000 in cash, of which $50,000 was
paid in cash upon the closing of a bridge loan in July 2008, and an additional
$775,000 was paid upon the closing of the reverse acquisition on September 17,
2008, and 1,425,000 shares of common stock valued at $1,781,250, which shares
were issued on September 17, 2008. The closing of the sale of the database
occurred upon the closing of the reverse acquisition on September 17,
2008.





Sahara
Media, Inc. is party to a surrender agreement, dated as of June 10, 2008, with
Philmore Anderson IV, our Chief Executive Officer. Pursuant to the surrender
agreement, Mr. Anderson agreed to forego $525,000 in salary owed to him in
exchange for 100,000 shares of Sahara common stock.





Sahara
Media, Inc. is party to a surrender agreement, dated as of June 17, 2008, with
SE, LLC, an entity owned by Philmore Anderson IV, our Chief Executive Officer.
Pursuant to the surrender agreement, SE, LLC agreed to forego $1,303,843 in debt
and expenses owed to it in exchange for 13,363,390 shares of Sahara common
stock.





We are
party to a surrender agreement, dated as of June 10, 2008, with Philmore
Anderson III, our Director. Pursuant to the surrender agreement, Mr. Anderson
agreed to forego $139,242 in debt owed to him in exchange for 452,000 shares of
Sahara common stock.





Pursuant
to the Private Placement that closed in September and October 2008, we paid John
Thomas Financial, Inc., the placement agent for the Private Placement, a
commission of $993,000 (equal to 10% of the aggregate purchase price) and an
expense allowance of $297,000 (equal to 3% of the aggregate purchase price), for
its services as the placement agent for the Private Placement. We also issued
John Thomas Financial, Inc., on September 17, 2008, 3,000,000 shares of common
stock and five-year warrants to purchase 1,000,000 shares of common stock with
an exercise price of $1.30.  As of the date of this report, John
Thomas Financial, Inc. is the beneficial owner of approximately 12.6% or
outstanding common stock.




25





On
September 17, 2008, we issued to John Thomas Bridge & Opportunity Fund
500,000 shares of common stock and five-year warrants to purchase 500,000 shares
of common stock with an exercise price of $1.50. The shares of common stock and
warrants were issued as additional consideration for a bridge loan to Sahara
Media, Inc. that closed in July 2008 and was repaid following the closing under
the Merger Agreement.





We have
been advised by counsel to John Thomas Financial, Inc. that John Thomas
Financial, Inc. and John Thomas Bridge & Opportunity Fund are not affiliates
of each other. We have further been advised by counsel to JTF as follows, with
respect to the relationship between JTF and JTO:




(a)
            Neither
      JTF nor any of its affiliates has any direct or indirect ownership or
      management interest in JTO.


(b)
            Neither
      JTO nor any of its affiliates has any direct or indirect ownership or
      management interest in JTF.


(c)
            From
      time to time JTF has served as placement agent for JTO in connection with
      offers and sales of JTO securities.


(d)
            Pursuant
      to a placement agent agreement, dated as of July 19, 2007, between JTF and
      JTO, JTO has been granted a trademark license to use the name “John
      Thomas” and variants thereof in connection with, among other things, the
      operation of JTO.


(e)
            JTF
      from time to time receives compensation with respect to companies it
      introduces to JTO and which obtain loans from
  JTO.




Director
Independence





None of
our directors are independent as that term is defined under the Nasdaq
Marketplace Rules.


Item 14.
              Principal Accounting Fees And
Services


Audit
Fees





Audit
Fees represent the aggregate fees for professional services for the audit of our
annual financial statements and review of financial statements included in our
quarterly reports on Form 10-Q or services that are normally provided in
connection with statutory and regulatory filings or engagements for those fiscal
years.   For the years ended December 31, 2008 and 2007, MFI,
paid Malone & Bailey, P.C. $16,680 and $28,000, respectively. For the years
ended December 31, 2008 and 2007, we paid Weiser LLP $127,575 and $0,
respectively.





Tax Fees





For the
years ended December 31, 2008 and 2007, MFI did not pay any tax fees to Malone
& Bailey.  For the years ended December 31, 2008 and 2007, we did
not pay Weiser LLP any fees for tax related services.





All Other
Fees.




For the
years ended December 31, 2008 and 2007, MFI did not pay any fees other than
audit fees to Malone & Bailey.  For the years ended December 31,
2008 and 2007, we did not pay Weiser LLP any fee other than audit
fees.





The Board
of Directors serves as the audit committee of the Company. The Board of
Directors on an annual basis reviews audit and non-audit services performed by
the independent registered public accounting firm. All audit and non-audit
services are pre-approved by the Board of Directors, which considers, among
other things, the possible effect of the performance of such services on the
auditors' independence. The Board of Directors has considered the role of Weiser
LLP in providing services to us for the fiscal year ended December 31, 2008 and
has concluded that such services are compatible with Weiser LLP’s independence
as the Company's  independent registered public accounting
firm.




PART
IV


Item 15.
              Exhibits
      and Financial Statement Schedules.


The
      following documents are filed as a part of this report or incorporated
      herein by reference:




(1)
            Our
      Consolidated Financial Statements are listed on page F-1 of this Annual
      Report.(2)
            Financial
      Statement Schedules:




None




26




(3)
            Exhibits:




The
following documents are included as exhibits to this Annual Report:





Exhibit
      Number
              
              Description3.1
              
              Articles
      of Incorporation (1)3.2
              
              Certificate
      of Amendment to Certificate of Incorporation, filed with the Delaware
      Secretary of State on January 7, 1998 (1)3.3
              
              Certificate
      of Amendment to Certificate of Incorporation, filed with the Delaware
      Secretary of State on August 27, 2008 (2)3.4
              
              Certificate
      of Ownership and Merger, filed with the Delaware Secretary of State on
      September 26, 2008 (3)3.5
              
              Amended
      and Restated Bylaws (1)10.1
              
              Agreement
      and Plan of Merger, dated September 17, 2008, among the Company, Sahara
      Media, Inc., and Sahara Media Acquisitions, Inc.
  (4)10.2
              
              Indemnification
      Agreement, dated September 17, 2008, between Sahara Media, Inc. and John
      Thomas Bridge & Opportunity Fund (4)10.3
              
              Securities
      Escrow Agreement, dated September 17, 2008, among the Company, Sahara
      Media, Inc., the shareholders of Sahara Media, Inc. named therein, and
      Sichenzia Ross Friedman Ference LLP, as escrow agent
    (4)10.4
              
              Form
      of Subscription Agreement (4)10.5
              
              Form
      of Investor Warrant (4)10.6
              
              Purchase
      Agreement, dated July 1, 2008, between Sahara Media, Inc. and John Thomas
      Bridge & Opportunity Fund (4)10.7
              
              Debenture,
      dated July 1, 2008, in favor of John Thomas Bridge & Opportunity Fund
      (4)10.8
              
              Security
      Agreement, dated July 1, 2008, between Sahara Media, Inc. and John Thomas
      Bridge & Opportunity Fund (4)10.9
              
              Security
      Agreement, dated July 1, 2008, between BPA, LLC and John Thomas Bridge
      & Opportunity Fund (4)10.10
              
              Purchase
      Agreement, dated September 3, 2008, between Sahara Media, Inc. and Cheryl
      Keeling (4)10.11
              
              Debenture,
      dated September 3, 2008, in favor of Cheryl Keeling
    (4)10.12
              
              Asset
      Purchase Agreement, dated May 15, 2008, between Sahara Media, Inc. and
      BPA, LLC (4)10.13
              
              Amendment
      to Asset Purchase Agreement, dated August 1, 2008, between Sahara Media,
      Inc. and BPA, LLC (4)10.14
              
              Letter
      agreement, dated May 21, 2008, between Sahara Media, Inc. and John Thomas
      Financial, Inc. (4)10.15
              
              Amendment
      to letter agreement, dated August 1, 2008, between Sahara Media, Inc. and
      John Thomas Financial, Inc. (4)10.16
              
              Finder’s
      Fee Agreement, dated July 21, 2008, between Sahara Media, Inc. and Aubry
      Consulting Group, Inc. (4)10.17
              
              Engagement
      Agreement, dated July 1, 2008, between Sahara Media, Inc. and Marathon
      Advisors (4)10.18
              
              Consulting
      Agreement, dated August 13, 2008, between Sahara Media, Inc. and Aurelian
      Investments, LLC (4)10.19
              
              Surrender
      Agreement, dated June 10, 2008, between Sahara Media, Inc. and Philmore
      Anderson IV (4)10.20
              
              Surrender
      Agreement, dated June 17, 2008, between Sahara Media, Inc. and Sahara
      Entertainment, LLC (4)10.21
              
              Master
      Services Agreement, dated July 11, 2008, between Sahara Media, Inc. and
      Ripple6, Inc. (2)10.22
              
              Purchase
      Agreement, dated June 9, 2008, between Sahara and Kevan Walker
      (5)10.23
              
              Amendment
      No. 2 to letter agreement, dated August 11, 2008, between Sahara Media,
      Inc. and John Thomas Financial, Inc. (2)10.24
              
              Agreement
      with Dogmatic, Inc, dated July 8, 2008 (6)10.25
              
              Agreement
      of Termination and Release, dated December 31, 2008, among Sahara Media,
      Inc., Sahara Media Holdings, Inc., Marathon Advisors, and Brian Rodriguez
      (7)10.26
              
              Employment
      Agreement, dated February 18, 2009, between Sahara Media Holdings, Inc.
      and Philmore Anderson IV(9)21
              
              Subsidiaries
      of Sahara Media Holdings, Inc. (5)31.1
              
              Certificate of the Chief Executive Officer pursuant to
      Rule 13a-14 of the Securities Exchange Act of
    193431.2
              
              Certificate of the Chief Financial Officer pursuant to
      Rule 13a-14 of the Securities Exchange Act of
    193432.1
              
              Certification of Chief Executive Officer pursuant to
      Section 1350 (8)32.2
              
              Certificate of Chief Financial Officer pursuant to
      Section 1350 (8)




27




(1)
            Filed
      as an exhibit to the Company’s registration statement on Form SB-2 (No.
      333-70526), filed with the SEC on September 28, 2001, and incorporated
      herein by reference.(2)
            Filed
      as an exhibit to the Company’s 8-K (No. 000-52363) filed with the SEC
      on August 29, 2008, and incorporated herein by
  reference.(3)
            Filed
      as an exhibit to the Company’s 8-K (No. 000-52363) filed with the SEC
      on September 30, 2008, and incorporated herein by
    reference.(4)
            Filed
      as an exhibit to the Company’s 8-K (No. 000-52363) filed with the SEC
      on September 24, 2008, and incorporated herein by
    reference.(5)
            Filed
      as an exhibit to the Company’ registration statement on Form S-1 (No.
      333-155205) filed with the SEC on November 7, 2008.(6)
            Filed
      as an exhibit to the Company’s amendment no.1 to registration statement on
      Form S-1 (No. 333-155205), filed with the SEC on December 31, 2008, and
      incorporated herein by reference.




(7)
                Filed
      as an exhibit to the Company’s 8-K (No. 000-52363) filed with the SEC
      on January 6, 2009, and incorporated herein by
  reference.(8)
                Filed
      herewith.(9)
                Filed
      as an exhibit to the Company’s 8-K (No. 000-52363) filed with the SEC on
      February 19, 2009, and incorporated herein by
  reference.







28





Sahara
      Media Holdings, Inc.(a
      development stage enterprise)For
      the years ended December 31, 2008, 2007, and for the the Period
      from inception (January 18, 2005) through December 31,
      2008Financial
      StatementsReport
      of Independent Registered Public Accounting Firm
                                  
                                  F-1Consolidated Balance Sheets
                                  
                                  F-2Consolidated Statements of
    Operations
                                  
                                  F-3Consolidated Statement of Changes in
      Stockholders' Equity
                                  
                                  F-4
      - F-5Consolidated Statements of Cash
    Flows
                                  
                                  F-6
      - F-7Notes to Consolidated Financial
    Statements
                                  
                                  F-8
      - F-21





29






REPORT
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
 
  To the
Board of Directors and
 Stockholders
of Sahara Media Holdings, Inc. (a development stage company).
 
 
 We have
audited the accompanying consolidated balance sheets of Sahara Media Holdings,
Inc. (a development stage company) as of December 31, 2008 and 2007 and the
related statements of operations, changes in stockholders' equity (deficiency)
and cash flows for the years then ended and the period January 18, 2005 (date of
inception) through December 31, 2008. These consolidated financial statements
are the responsibility of the Company's management. Our responsibility is to
express an opinion on these consolidated financial statements based on our
audits.
 
 We
conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audits to obtain reasonable assurance about whether the
consolidated financial statements are free of material
misstatement.  The Company is not required to have, nor were we
engaged to perform, an audit of its internal control over financial
reporting.  Our audits included consideration of internal control over
financial reporting as a basis for designing audit procedures that are
appropriate in the circumstances, but not for the purpose of expressing an
opinion on the effectiveness of the Company’s internal control over financial
reporting.  Accordingly, we express no such opinion.  An
audit also includes examining, on a test basis, evidence supporting the amounts
and disclosures in the consolidated financial statements, assessing the
accounting principles used and significant estimates made by management, as well
as evaluating the overall financial statement presentation.  We
believe that our audits provide a reasonable basis for our opinion.
 
 In our
opinion, the consolidated financial statements referred to above present fairly,
in all material respects, the financial position of Sahara Media Holdings, Inc.
as of December 31, 2008 and 2007, and the results of its operations and its cash
flows for the years then ended and the period January 18, 2005 (date of
inception) through December 31, 2008 in conformity with U.S. generally accepted
accounting principles.
   Weiser
LLP
 Edison,
New Jersey
 March 30,
2009


F-1


Sahara
      Media Holdings, Inc.(a
      development stage enterprise)Consolidated Balance Sheets


December
      31, 2008
                              
                              
                              December
      31, 2007AssetsCurrent
      assets:Cash
      and cash equivalents
                              
                              $
                              4,437,465
                              
                              
                              $
                              1,530Accounts
      receivable
                              
                              
                              -
                              
                              
                              
                              2,347Prepaid
      expenses and other
                              
                              
                              44,988
                              
                              
                              
                              -Total
      current assets
                              
                              
                              4,482,453
                              
                              
                              
                              3,877Cash
      in escrow
                              
                              
                              40,000
                              
                              
                              
                              -Property
      and equipment, net
                              
                              
                              26,481
                              
                              
                              
                              -Intangible
      assets, net
                              
                              
                              3,424,425
                              
                              
                              
                              356,556Security
      deposits
                              
                              
                              37,200
                              
                              
                              
                              -Total
      assets
                              
                              $
                              8,010,559
                              
                              
                              $
                              360,433Liabilities
      and stockholders' equity (deficiency)Current
      liabilities:Accounts
      payable and accrued expenses
                              
                              $
                              134,228
                              
                              
                              $
                              197,771Share
      liability
                              
                              
                              87,500
                              
                              
                              
                              -Accrued
      expenses, related parties
                              
                              
                              -
                              
                              
                              
                              450,000Subscription
      liability
                              
                              
                              -
                              
                              
                              
                              406,000Advances
      payable, related parties
                              
                              
                              -
                              
                              
                              
                              180,888Notes
      payable, related parties
                              
                              
                              -
                              
                              
                              
                              588,180Notes
      payable
                              
                              
                              -
                              
                              
                              
                              302,992Total
      current liabilities
                              
                              
                              221,728
                              
                              
                              
                              2,125,831Commitments
      and contingencies
                              
                              
                              -
                              
                              
                              
                              -Stockholders'
      equity (deficiency):Preferred
      stock, $0.001 par value; 10,000,000shares
      authorized; no shares issued or outstanding
                              
                              
                              -
                              
                              
                              
                              -Common
      stock, $0.003 par value; 50,000,000 shares authorized;30,812,042
      shares issued and outstanding at December 31, 2008;$0.00001
      par value; 50,000,000 shares authorized;1,977,100
      shares issued and outstanding at December 31, 2007
                              
                              
                              92,436
                              
                              
                              
                              20Additional
      paid-in capital
                              
                              
                              11,690,851
                              
                              
                              
                              194,982Deficit
      accumulated during the development stage
                              
                              
                              (3,994,456
                              )
                              
                              
                              (1,960,400
                              )Total
      stockholders' equity (deficiency)
                              
                              
                              7,788,831
                              
                              
                              
                              (1,765,398
                              )Total
      liabilities and stockholders' equity (deficiency)
                              
                              $
                              8,010,559
                              
                              
                              $
                              360,433






F-2




Sahara
      Media Holdings, Inc.(a
      development stage enterprise)Consolidated Statements of Operations





Year
      Ended
                        
                        
                        Year
      Ended
                        
                        
                        Period from
      inception(January 18, 2005) throughDecember
      31,
                        
                        
                        December
      31,
                        
                        
                        December
    31,2008
                        
                        
                        2007
                        
                        
                        2008Revenue
                        
                        $
                        8,183
                        
                        
                        $
                        2,347
                        
                        
                        $
                        35,530Costs
      and expenses:Product
      development
                        
                        
                        243,114
                        
                        
                        
                        143,351
                        
                        
                        
                        655,594Selling
      and marketing
                        
                        
                        133,468
                        
                        
                        
                        74,482
                        
                        
                        
                        249,950General
      and administrative
                        
                        
                        1,582,323
                        
                        
                        
                        456,254
                        
                        
                        
                        2,938,434Loss
      from operations
                        
                        
                        (1,950,722
                        )
                        
                        
                        (671,740
                        )
                        
                        
                        (3,808,448
                        )Interest
      income
                        
                        
                        24,608
                        
                        
                        
                        -
                        
                        
                        
                        24,608Interest
      expense- related party
                        
                        
                        (17,053
                        )
                        
                        
                        (37,663
                        )
                        
                        
                        (96,735
                        )Interest
      expense
                        
                        
                        (90,889
                        )
                        
                        
                        (19,326
                        )
                        
                        
                        (113,881
                        )Net
      loss
                        
                        $
                        (2,034,056
                        )
                        
                        $
                        (728,729
                        )
                        
                        $
                        (3,994,456
                        )Basic
      and diluted loss per share
                        
                        $
                        (0.15
                        )
                        
                        $
                        (0.37
                        )Weighted
      average common shares-
      basic and diluted
                        
                        
                        13,389,404
                        
                        
                        
                        1,974,391







F-3




Sahara
      Media Holdings, Inc.(a
      development stage enterprise)Consolidated Statements of Changes in
      Stockholders' Equity (Deficiency)
                            For
      the years ended December 31, 2008, 2007, and for the the Period
      from inception (January 18, 2005) through December 31,
      2008





DeficitAccumulated
                  
                  
                  TotalAdditional
                  
                  
                  During
      the
                  
                  
                  Stockholders'Common
      Stock
                  
                  
                  Paid-in
                  
                  
                  Development
                  
                  
                  EquityShares
                  
                  
                  Amount
                  
                  
                  Capital
                  
                  
                  Stage
                  
                  
                  (Deficiency)Issuance
      of common stock to founder net of cancellation
                  
                  
                  1,147,500
                  
                  
                  $
                  12
                  
                  
                  $
                  194,368
                  
                  
                  
                  
                  
                  $
                  194,380Issuance
      of common stock to director
                  
                  
                  120,000
                  
                  
                  
                  1
                  
                  
                  
                  119
                  
                  
                  
                  
                  
                  
                  120Issuance
      of common stock to investors
                  
                  
                  499,800
                  
                  
                  
                  5
                  
                  
                  
                  495
                  
                  
                  
                  
                  
                  
                  500Issuance
      of common stock to investor
                  
                  
                  15,000
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  
                  
                  
                  -Net
      loss
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  $
                  (405,269
                  )
                  
                  
                  (405,269
                  )Balance
      at December 31, 2005
                  
                  
                  1,782,300
                  
                  
                  
                  18
                  
                  
                  
                  194,982
                  
                  
                  
                  (405,269
                  )
                  
                  
                  (210,269
                  )Issuance
      of common stock to consultant
                  
                  
                  30,000
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -Net
      loss
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  (826,402
                  )
                  
                  
                  (826,402
                  )Balance
      at December 31, 2006
                  
                  
                  1,812,300
                  
                  
                  
                  18
                  
                  
                  
                  194,982
                  
                  
                  
                  (1,231,671
                  )
                  
                  
                  (1,036,671
                  )Issuance
      of common stock on exercise of warrant
                  
                  
                  164,800
                  
                  
                  
                  2
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  2Net
      loss
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  (728,729
                  )
                  
                  
                  (728,729
                  )Balance
      at December 31, 2007
                  
                  
                  1,977,100
                  
                  
                  
                  20
                  
                  
                  
                  194,982
                  
                  
                  
                  (1,960,400
                  )
                  
                  
                  (1,765,398
                  )Issuance
      of common stock to founder to settle notepayable
      and advances to related parties
                  
                  
                  13,363,390
                  
                  
                  
                  134
                  
                  
                  
                  1,303,709
                  
                  
                  
                  
                  
                  
                  
                  1,303,843Cancellation
      of common stock on settlement
                  
                  
                  (1,147,500
                  )
                  
                  
                  (11
                  )
                  
                  
                  -
                  
                  
                  
                  
                  
                  
                  
                  (11
                  )Issuance
      of common stock to founder in lieu of salary
                  
                  
                  100,000
                  
                  
                  
                  1
                  
                  
                  
                  524,999
                  
                  
                  
                  
                  
                  
                  
                  525,000Issuance
      of common stock to a director to settle notepayable
      to a related party and accrued interest
                  
                  
                  452,000
                  
                  
                  
                  5
                  
                  
                  
                  139,237
                  
                  
                  
                  
                  
                  
                  
                  139,242Issuance
      of common stock to a consultant to settleaccrued
      consulting fees to a related party
                  
                  
                  210,000
                  
                  
                  
                  2
                  
                  
                  
                  142,418
                  
                  
                  
                  
                  
                  
                  
                  142,420Cancellation
      of common stock on settlement
                  
                  
                  (30,000
                  )
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  
                  
                  
                  
                  -Cancellation
      of common stock issued to investors
                  
                  
                  (312,300
                  )
                  
                  
                  (3
                  )
                  
                  
                  -
                  
                  
                  
                  
                  
                  
                  
                  (3
                  )Issuance
      of common stock to a consultant to settleacrrued
      consulting fees to a related party
                  
                  
                  5,500
                  
                  
                  
                  -
                  
                  
                  
                  8,197
                  
                  
                  
                  
                  
                  
                  
                  8,197Issuance
      of common stock to settle accrued charges on note payable
                  
                  
                  724,000
                  
                  
                  
                  7
                  
                  
                  
                  11,993
                  
                  
                  
                  
                  
                  
                  
                  12,000Cancellation
      of common stock on settlement of accrued charges
                  
                  
                  (164,800
                  )
                  
                  
                  (2
                  )
                  
                  
                  -
                  
                  
                  
                  
                  
                  
                  
                  (2
                  )Issuance
      of common stock to settle note payable and accrued
interest
                  
                  
                  140,000
                  
                  
                  
                  1
                  
                  
                  
                  111,392
                  
                  
                  
                  
                  
                  
                  
                  111,393Issuance
      of common stock to settle accrued consulting fees
                  
                  
                  480,000
                  
                  
                  
                  5
                  
                  
                  
                  25,782
                  
                  
                  
                  
                  
                  
                  
                  25,787Issuance
      of common stock to settle note payable and accrued
interest
                  
                  
                  19,610
                  
                  
                  
                  -
                  
                  
                  
                  19,610
                  
                  
                  
                  
                  
                  
                  
                  19,610Issuance
      of common stock to an investor
                  
                  
                  100,000
                  
                  
                  
                  1
                  
                  
                  
                  49,999
                  
                  
                  
                  
                  
                  
                  
                  50,000Issuance
      of common stock to consultant
                  
                  
                  200,000
                  
                  
                  
                  2
                  
                  
                  
                  3,998
                  
                  
                  
                  
                  
                  
                  
                  4,000Issuance
      of common stock to settle note payable and accrued
interest
                  
                  
                  31,000
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  
                  
                  
                  
                  -Issuance
      of common stock to settle note payable
                  
                  
                  27,000
                  
                  
                  
                  -
                  
                  
                  
                  25,000
                  
                  
                  
                  
                  
                  
                  
                  25,000









F-4




Sahara
      Media Holdings, Inc.(a
      development stage enterprise)Consolidated
      Statements of Changes in Stockholders' Equity (Deficiency)
                            For
      the years ended December 31, 2008, 2007, and for the the Period
      from inception (January 18, 2005) through December 31,
      2008




DeficitAccumulated
                                                                                                                                  
                                                                                                                                  TotalAdditional
                                                                                                                                  
                                                                                                                                  
                                                                                                                                  During
      the
                                                                                                                                  
                                                                                                                                  Stockholders'Common
      Stock
                                                                                                                                  
                                                                                                                                  
                                                                                                                                  Paid-in
                                                                                                                                  
                                                                                                                                  
                                                                                                                                  Development
                                                                                                                                  
                                                                                                                                  EquityShares
                                                                                                                                  
                                                                                                                                  
                                                                                                                                  Amount
                                                                                                                                  
                                                                                                                                  
                                                                                                                                  Capital
                                                                                                                                  
                                                                                                                                  
                                                                                                                                  Stage
                                                                                                                                  
                                                                                                                                  (Deficiency)Issuance
      of common stock to an investor
                                                                                                                                  
                                                                                                                                  
                                                                                                                                  100,000
                                                                                                                                  
                                                                                                                                  
                                                                                                                                  
                                                                                                                                  1
                                                                                                                                  
                                                                                                                                  
                                                                                                                                  
                                                                                                                                  49,999
                                                                                                                                  
                                                                                                                                  
                                                                                                                                  
                                                                                                                                  
                                                                                                                                  
                                                                                                                                  50,000Issuance
      of common stock to founder's company as considerationfor
      consulting services
                                                                                                                                  
                                                                                                                                  
                                                                                                                                  400,000
                                                                                                                                  
                                                                                                                                  
                                                                                                                                  
                                                                                                                                  4
                                                                                                                                  
                                                                                                                                  
                                                                                                                                  
                                                                                                                                  (4
                                                                                                                                  )
                                                                                                                                  
                                                                                                                                  
                                                                                                                                  
                                                                                                                                  
                                                                                                                                  -Issuance
      of common stock to a related party as additionalconsideration
      for purchase of database
                                                                                                                                  
                                                                                                                                  
                                                                                                                                  1,425,000
                                                                                                                                  
                                                                                                                                  
                                                                                                                                  
                                                                                                                                  14
                                                                                                                                  
                                                                                                                                  
                                                                                                                                  
                                                                                                                                  1,781,236
                                                                                                                                  
                                                                                                                                  
                                                                                                                                  
                                                                                                                                  
                                                                                                                                  
                                                                                                                                  1,781,250Issuance
      of common stock to a stockholder asconsideration
      for a bridge loan
                                                                                                                                  
                                                                                                                                  
                                                                                                                                  50,000
                                                                                                                                  
                                                                                                                                  
                                                                                                                                  
                                                                                                                                  150
                                                                                                                                  
                                                                                                                                  
                                                                                                                                  
                                                                                                                                  62,350
                                                                                                                                  
                                                                                                                                  
                                                                                                                                  
                                                                                                                                  
                                                                                                                                  
                                                                                                                                  62,500Par
      value of common shares under plan of merger
                                                                                                                                  
                                                                                                                                  
                                                                                                                                  818,000
                                                                                                                                  
                                                                                                                                  
                                                                                                                                  
                                                                                                                                  2,454
                                                                                                                                  
                                                                                                                                  
                                                                                                                                  
                                                                                                                                  (2,454
                                                                                                                                  )
                                                                                                                                  
                                                                                                                                  
                                                                                                                                  
                                                                                                                                  
                                                                                                                                  -Cancellation
      of common shares under plan of merger
                                                                                                                                  
                                                                                                                                  
                                                                                                                                  (18,150,000
                                                                                                                                  )
                                                                                                                                  
                                                                                                                                  
                                                                                                                                  (181
                                                                                                                                  )
                                                                                                                                  
                                                                                                                                  
                                                                                                                                  181
                                                                                                                                  
                                                                                                                                  
                                                                                                                                  
                                                                                                                                  
                                                                                                                                  
                                                                                                                                  -Issuance
      of common shares and recapitalization under plan of merger
                                                                                                                                  
                                                                                                                                  
                                                                                                                                  18,150,000
                                                                                                                                  
                                                                                                                                  
                                                                                                                                  
                                                                                                                                  54,450
                                                                                                                                  
                                                                                                                                  
                                                                                                                                  
                                                                                                                                  (54,450
                                                                                                                                  )
                                                                                                                                  
                                                                                                                                  
                                                                                                                                  
                                                                                                                                  
                                                                                                                                  -Issuance
      of common stock to investors net of issuance costsof
      $2,370,478 for private placement
                                                                                                                                  
                                                                                                                                  
                                                                                                                                  6,526,159
                                                                                                                                  
                                                                                                                                  
                                                                                                                                  
                                                                                                                                  19,578
                                                                                                                                  
                                                                                                                                  
                                                                                                                                  
                                                                                                                                  5,768,310
                                                                                                                                  
                                                                                                                                  
                                                                                                                                  
                                                                                                                                  
                                                                                                                                  
                                                                                                                                  5,787,888Issuance
      of common stock as additional consideration for bridge
loan
                                                                                                                                  
                                                                                                                                  
                                                                                                                                  500,000
                                                                                                                                  
                                                                                                                                  
                                                                                                                                  
                                                                                                                                  1,350
                                                                                                                                  
                                                                                                                                  
                                                                                                                                  
                                                                                                                                  (1,350
                                                                                                                                  )
                                                                                                                                  
                                                                                                                                  
                                                                                                                                  
                                                                                                                                  
                                                                                                                                  -Issuance
      of common stock as additional consideration forfor
      private placement brokerage
                                                                                                                                  
                                                                                                                                  
                                                                                                                                  3,000,000
                                                                                                                                  
                                                                                                                                  
                                                                                                                                  
                                                                                                                                  9,000
                                                                                                                                  
                                                                                                                                  
                                                                                                                                  
                                                                                                                                  (9,000
                                                                                                                                  )
                                                                                                                                  
                                                                                                                                  
                                                                                                                                  
                                                                                                                                  
                                                                                                                                  -Issuance
      of common stock to consultant for services
                                                                                                                                  
                                                                                                                                  
                                                                                                                                  100,000
                                                                                                                                  
                                                                                                                                  
                                                                                                                                  
                                                                                                                                  300
                                                                                                                                  
                                                                                                                                  
                                                                                                                                  
                                                                                                                                  (300
                                                                                                                                  )
                                                                                                                                  
                                                                                                                                  
                                                                                                                                  
                                                                                                                                  
                                                                                                                                  -Issuance
      of common stock to consultant for servicesrelated
      to private placement
                                                                                                                                  
                                                                                                                                  
                                                                                                                                  50,000
                                                                                                                                  
                                                                                                                                  
                                                                                                                                  
                                                                                                                                  150
                                                                                                                                  
                                                                                                                                  
                                                                                                                                  
                                                                                                                                  (150
                                                                                                                                  )
                                                                                                                                  
                                                                                                                                  
                                                                                                                                  
                                                                                                                                  
                                                                                                                                  -Issuance
      of common stock as additional considerationfor
      legal services related to private placement
                                                                                                                                  
                                                                                                                                  
                                                                                                                                  250,000
                                                                                                                                  
                                                                                                                                  
                                                                                                                                  
                                                                                                                                  750
                                                                                                                                  
                                                                                                                                  
                                                                                                                                  
                                                                                                                                  (750
                                                                                                                                  )
                                                                                                                                  
                                                                                                                                  
                                                                                                                                  
                                                                                                                                  
                                                                                                                                  -Issuance
      of common stock to investors net of issuance costsof
      $242,897 for private placement
                                                                                                                                  
                                                                                                                                  
                                                                                                                                  1,417,883
                                                                                                                                  
                                                                                                                                  
                                                                                                                                  
                                                                                                                                  4,254
                                                                                                                                  
                                                                                                                                  
                                                                                                                                  
                                                                                                                                  1,525,102
                                                                                                                                  
                                                                                                                                  
                                                                                                                                  
                                                                                                                                  
                                                                                                                                  
                                                                                                                                  1,529,356Stock
      based compensation for warrants issued to consultant
                                                                                                                                  
                                                                                                                                  
                                                                                                                                  -
                                                                                                                                  
                                                                                                                                  
                                                                                                                                  
                                                                                                                                  -
                                                                                                                                  
                                                                                                                                  
                                                                                                                                  
                                                                                                                                  10,815
                                                                                                                                  
                                                                                                                                  
                                                                                                                                  
                                                                                                                                  
                                                                                                                                  
                                                                                                                                  10,815Net
      loss
                                                                                                                                  
                                                                                                                                  
                                                                                                                                  
                                                                                                                                  
                                                                                                                                  
                                                                                                                                  
                                                                                                                                  
                                                                                                                                  
                                                                                                                                  
                                                                                                                                  
                                                                                                                                  
                                                                                                                                  
                                                                                                                                  
                                                                                                                                  (2,034,056)
                                                                                                                                  
                                                                                                                                  
                                                                                                                                  (2,034,056
                                                                                                                                  )Balance
      at December 31, 2008
                                                                                                                                  
                                                                                                                                  
                                                                                                                                  30,812,042
                                                                                                                                  
                                                                                                                                  
                                                                                                                                  $
                                                                                                                                  92,436
                                                                                                                                  
                                                                                                                                  
                                                                                                                                  $
                                                                                                                                  11,690,851
                                                                                                                                  
                                                                                                                                  $
                                                                                                                                  (3,994,456)
                                                                                                                                  
                                                                                                                                  $
                                                                                                                                  7,788,831







F-5





Sahara
      Media Holdings, Inc.(a
      development stage company)Consolidated Statements of Cash Flows




Period
      frominception(January
      18, 2005)Years
      Ended
                                                                
                                                                
                                                                throughDecember
      31.
                                                                
                                                                
                                                                December
      31,2008
                                                                
                                                                
                                                                2007
                                                                
                                                                
                                                                2008Cash
      flows from operating activities:Net
      loss
                                                                
                                                                $
                                                                (2,034,056
                                                                )
                                                                
                                                                $
                                                                (728,729
                                                                )
                                                                
                                                                $
                                                                (3,994,456
                                                                )Adjustments
      to reconcile net loss to net cash used inoperating
      activities:Depreciation
      and amortization expense
                                                                
                                                                
                                                                89,709
                                                                
                                                                
                                                                
                                                                88,382
                                                                
                                                                
                                                                
                                                                351,826Issuance
      of stock as additional consideration for bridge loan
                                                                
                                                                
                                                                62,500
                                                                
                                                                
                                                                
                                                                -
                                                                
                                                                
                                                                
                                                                62,500Stock-based
      consulting expense
                                                                
                                                                
                                                                10,815
                                                                
                                                                
                                                                
                                                                -
                                                                
                                                                
                                                                
                                                                10,815Share
      liability
                                                                
                                                                
                                                                87,500
                                                                
                                                                
                                                                
                                                                -
                                                                
                                                                
                                                                
                                                                87,500Amortization
      of debt discount
                                                                
                                                                
                                                                3,500
                                                                
                                                                
                                                                
                                                                7,000
                                                                
                                                                
                                                                
                                                                21,000Changes
      in assets and liabilities:Accounts
      receivable
                                                                
                                                                
                                                                2,347
                                                                
                                                                
                                                                
                                                                (2,347
                                                                )
                                                                
                                                                
                                                                -Prepaid
      expenses and other
                                                                
                                                                
                                                                (44,988
                                                                )
                                                                
                                                                
                                                                -
                                                                
                                                                
                                                                
                                                                (44,988
                                                                )Security
      deposits
                                                                
                                                                
                                                                (37,200
                                                                )
                                                                
                                                                
                                                                -
                                                                
                                                                
                                                                
                                                                (37,200
                                                                )Accounts
      payable and accrued expenses
                                                                
                                                                
                                                                73,036
                                                                
                                                                
                                                                
                                                                127,952
                                                                
                                                                
                                                                
                                                                270,806Accrued
      expenses, related parties
                                                                
                                                                
                                                                50,804
                                                                
                                                                
                                                                
                                                                162,814
                                                                
                                                                
                                                                
                                                                235,193Accrued
      salary, related parties
                                                                
                                                                
                                                                75,000
                                                                
                                                                
                                                                
                                                                150,000
                                                                
                                                                
                                                                
                                                                525,000Subscription
      liability
                                                                
                                                                
                                                                -
                                                                
                                                                
                                                                
                                                                -
                                                                
                                                                
                                                                
                                                                406,000Net
      cash used in operating activities
                                                                
                                                                
                                                                (1,661,033
                                                                )
                                                                
                                                                
                                                                (194,928
                                                                )
                                                                
                                                                
                                                                (2,106,004
                                                                )Cash
      flows from investing activities:Acquisition
      of trademark intangibles
                                                                
                                                                
                                                                -
                                                                
                                                                
                                                                
                                                                (3,533
                                                                )
                                                                
                                                                
                                                                (618,673
                                                                )Acquisition
      of intangible assets, related party
                                                                
                                                                
                                                                (825,000
                                                                )
                                                                
                                                                
                                                                -
                                                                
                                                                
                                                                
                                                                (825,000
                                                                )Acquisition
      of intangible assets
                                                                
                                                                
                                                                (550,000
                                                                )
                                                                
                                                                
                                                                -
                                                                
                                                                
                                                                
                                                                (550,000
                                                                )Acquisition
      of property and equipment
                                                                
                                                                
                                                                (27,809
                                                                )
                                                                
                                                                
                                                                -
                                                                
                                                                
                                                                
                                                                (27,809
                                                                )Cash
      in escrow
                                                                
                                                                
                                                                (40,000
                                                                )
                                                                
                                                                
                                                                -
                                                                
                                                                
                                                                
                                                                (40,000
                                                                )Net
      cash used in investing activities
                                                                
                                                                
                                                                (1,442,809
                                                                )
                                                                
                                                                
                                                                (3,533
                                                                )
                                                                
                                                                
                                                                (2,061,482
                                                                )Cash
      flows from financing activities:Issuance
      of common stock, net of issuance costs $2,613,375
                                                                
                                                                
                                                                7,491,886
                                                                
                                                                
                                                                
                                                                -
                                                                
                                                                
                                                                
                                                                7,686,886Proceeds from
      issuance of notes payable, related parties
                                                                
                                                                
                                                                13,553
                                                                
                                                                
                                                                
                                                                30,664
                                                                
                                                                
                                                                
                                                                601,734Proceeds
      from issuance of notes payable
                                                                
                                                                
                                                                34,338
                                                                
                                                                
                                                                
                                                                44,327
                                                                
                                                                
                                                                
                                                                316,331Net
      cash provided by financing activities
                                                                
                                                                
                                                                7,539,777
                                                                
                                                                
                                                                
                                                                74,991
                                                                
                                                                
                                                                
                                                                8,604,951Net
      increase (decrease) in cash and cash equivalents
                                                                
                                                                
                                                                4,435,935
                                                                
                                                                
                                                                
                                                                (123,470
                                                                )
                                                                
                                                                
                                                                4,437,465Cash
      and cash equivalents, beginning of period
                                                                
                                                                
                                                                1,530
                                                                
                                                                
                                                                
                                                                125,000
                                                                
                                                                
                                                                
                                                                -Cash
      and cash equivalents, end of period
                                                                
                                                                $
                                                                4,437,465
                                                                
                                                                
                                                                $
                                                                1,530
                                                                
                                                                
                                                                $
                                                                4,437,465Cash
      paid for:Interest
                                                                
                                                                $
                                                                -
                                                                
                                                                
                                                                $
                                                                -
                                                                
                                                                
                                                                $
                                                                -Income
      Taxes
                                                                
                                                                $
                                                                -
                                                                
                                                                
                                                                $
                                                                -
                                                                
                                                                
                                                                $
                                                                -




F-6
 
 Sahara
      Media Holdings, Inc.(a
      development stage company)Consolidated
      Statements of Cash Flows
 
 Period
      frominception(January
      18, 2005)Years
      Ended
                      
                      
                      throughDecember
      31.
                      
                      
                      December
      31,2008
                      
                      
                      2007
                      
                      
                      2008Supplemental
      disclosures of cash flow information:Noncash
      Financing ActivitiesIssuance
      of common shares to settle:Notes
      payable and accrued interest, related parties
                      
                      $
                      601,734
                      
                      
                      $
                      -
                      
                      
                      $
                      601,734Note
      payable and accrued interest
                      
                      
                      337,331
                      
                      
                      
                      -
                      
                      
                      
                      337,331Advances.
      accrued expenses and other, related party
                      
                      
                      1,156,660
                      
                      
                      
                      -
                      
                      
                      
                      1,156,660Accounts
      payable and accrued expenses
                      
                      
                      181,323
                      
                      
                      
                      -
                      
                      
                      
                      181,323$
                      2,277,048
                      
                      
                      $
                      -
                      
                      
                      $
                      2,277,048Noncash
      Investing ActivitiesIssuance
      of common shares to acquire intangible asset
                      
                      $
                      1,781,250
                      
                      
                      $
                      -
                      
                      
                      $
                      1,781,250
    F-7
  Sahara
Media Holdings, Inc.
  Notes to Consolidated Financial Statements
  For
the Years ended December 31, 2008 and 2007
 
 1.
                Nature
      of Business
 
 Sahara
Media Holdings, Inc. (the “Company”) is a Delaware corporation organized on
September 26, 1997 under the name Keystone Entertainment, Inc. On January 14,
1998, the corporate name was changed to Mac Filmworks, Inc. On September 26,
2008, the corporate name was changed to Sahara Media Holdings,
Inc.
 
 Sahara
Media Holdings, Inc. is the parent company of Sahara Media, Inc., a Delaware
corporation formed in January 2005 (“Sahara”), which is a development-stage
company located in New York City. Since its formation, Sahara has concentrated
on the development of its business strategy. Until March 2004, Vanguarde Media,
an entity not affiliated with Sahara, published Honey Magazine, a publication
aimed at the 18-34 urban female demographic. As a result of financial
difficulties of Vanguarde Media, Honey Magazine ceased
publishing.  Vanguarde Media filed for bankruptcy and in February 2005
Sahara through the bankruptcy proceedings purchased the “Honey” trademark for
the class of paper goods and printed matter. Sahara plans to re-launch Honey as
an online magazine and social network targeting the 18-34 urban female
demographic.  We expect that the primary components of our business
will be:
  ●
              The
      online magazine Honeymag.com●
              The
      social network Hivespot.com●
              Our
      database of approximately 3.9 million names in the 18-34 urban female
      demographic (the “Honey Database")
 
 On
September 17, 2008, the Company entered into an Agreement and Plan of Merger
(the “Merger Agreement”), with Sahara Media Acquisitions, Inc., a Delaware
corporation and wholly-owned subsidiary of the Company (the “Subsidiary”) and
Sahara, a Delaware corporation.  Pursuant to the Merger Agreement,
which closed on September 17, 2008 (the “Closing Date”), the Subsidiary merged
into Sahara and Sahara became a wholly-owned subsidiary of the Company. Pursuant
to the Merger Agreement, the Company issued 18,150,000 shares of the Company’s
Common Stock to the shareholders of Sahara. (the “Acquisition Shares”) (subject
to the placement of 5,000,000 Acquisition Shares in escrow pursuant to the
Escrow Agreement (defined below)), representing approximately 58.9% of the
Company’s aggregate issued and outstanding common stock following the closing of
the Merger Agreement and the Private Placement (defined below), and the
outstanding shares of common stock of Sahara Media were cancelled and converted
into the right to receive the Acquisition Shares.
  The
acquisition of Sahara was treated as a recapitalization, and the business of
Sahara became the business of the Company. At the time of the reverse
acquisition, the Company was not engaged in any active business.
 
 The
accounting rules for reverse acquisitions require that beginning September 17,
2008, the date of the reverse acquisition, the balance sheet reflects the assets
and liabilities of Sahara Media and the equity accounts were recapitalized to
reflect the newly capitalized company. The results of operations reflect the
operation of Sahara Media, Inc. for the periods presented.
 
 F-8
  2.
                Summary
      of Significant Accounting
Policies
 
 Principlesof Consolidation
 The
consolidated financial statements include the accounts of the Company and its
wholly-owned subsidiary, Sahara Media, Inc.  All significant
intercompany  accounts and transactions have been
eliminated.
 
 Use
of Estimates
 The
preparation of the consolidated financial statements in accordance with U. S.
generally accepted accounting principles, requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
the disclosure of contingent assets and liabilities at the date of the
consolidated financial statements and the reported amounts of revenues and
expenses during the reporting period.  Actual results may differ from
these estimates. The significant estimates and assumptions made by the
Company are in the area of valuation allowances for deferred tax assets,
valuation of share-based payments, and the carrying value of the intangible
assets.
 
 Cash
and Cash Equivalents
 We
consider all highly liquid investments, with a maturity of three months or less
when purchased, to be cash equivalents.
 
 Property
and Equipment
 Property
and equipment are carried at cost less accumulated
depreciation.  Depreciation and amortization is recorded on the
straight-line method over five years, which approximates the estimated useful
lives of the assets.  Routine maintenance and repair costs are charged
to expense as incurred and renewals and improvements that extend the useful life
of the assets are capitalized.  Upon sale or retirement, the cost and
related accumulated depreciation and amortization are eliminated from the
respective accounts and any resulting gain or loss is reported in the statement
of operations.
 
 Intangible
Assets
 The
intangible assets, initially recorded at cost, are considered to approximate
fair value  at the time of purchase. Amortization is provided for on a
straight-line basis over the estimated useful life of the asset. The Company
evaluates the recoverability of its intangible asset periodically and takes into
account events or circumstances that warrant revised estimates of its useful
life or that indicate that an impairment exists. Management believes that
because the Company is in the earlier stages of its business life cycle, the
current conditions noted above do not constitute reliable impairment
indicators. During 2008, the Company acquired a database for cash and
issuance of common stock.  In addition, a website is currently being
developed.  Amortization of the capitalized database and website costs
will begin when they have been placed into service, which is expected in
mid-2009.
  Category
                  LivesTrademark
      Costs
                  7
      yearsWebsite
      Costs and Database
                  7
      years
 
 Revenue
Recognition
 Revenue
is recognized when all of the following criteria are met:  (1)
persuasive evidence that an arrangement exists; (2) delivery has occurred or
services have been rendered; (3) the seller’s price to the buyer is fixed and
determinable; and, (4) collectability is reasonably assured.
  Subscriptions
will be recorded as unearned revenue and recognized as revenue ratably over the
subscription periods. The Company expects to begin generating revenues in 2009
once the online magazine and social networking sites are launched.
  Income
Taxes
 The
Company accounts for income taxes using the asset and liability
method.  Deferred taxes are determined based on the difference between
the financial statement and tax bases of assets and liabilities using enacted
tax rates in effect in the years in which the differences are expected to
reverse.  Valuation allowances are provided if, based upon the weight
of available evidence, it is more likely than not that some or all of the
deferred tax assets will not be realized.
 
 Effective
January 1, 2007, the Company adopted Financial Interpretation No. 48,
“Accounting for Uncertainty in Income Taxes”, (“FIN 48”). The impact of the
adoption of FIN 48 had no material effect on the Company’s results of operations
or financial position.
 
 
 F-9
 
 Concentration
of Credit Risk
 Financial
instruments that potentially subject the Company to significant concentrations
of credit risk consist principally of cash, cash equivalents and trade accounts
receivable.
 
 The
Company maintains its cash and cash equivalents in accounts with two  major
financial institutions in the United States in the form of demand deposits and
liquid money market funds.  Deposits in these institutions may exceed
the amounts of insurance provided on such deposits.  As of December
31, 2008, the Company had approximately $4.3 million in deposits subjected to
such risk.  The Company has not experienced any losses on deposits of
cash and cash equivalents.
 
 Loss
Per Share
 Basic
loss per share is computed by dividing the net loss by the weighted average
number of common shares outstanding during the year. The dilutive effect of the
outstanding stock warrants is computed using the treasury stock method. For the
year ended December 31, 2008, diluted loss per share does not include the effect
of 10,294,034 stock warrants outstanding as their effect would be anti-dilutive.
For the year ended December 31, 2007, diluted loss per share does not include
the effect of 200,000 stock warrants as their effect would be
anti-dilutive.
 
 Stock
Based Compensation
 The
Company accounts for equity instrument issuance to its employees in accordance
with Statement of Financial Accounting Standards (“SFAS”) No. 123R, “Share based
payments”.  Such equity issuances encompass transactions in which the
Company exchanges its equity instruments for services. The Company recorded a
charge of approximately $11,000 for the year ended December 31, 2008 and for the
period from inception (January 18, 2005) through December 31, 2008,
respectively.
 
 Equity
instruments issued to non-employees are accounted for under Emerging Issues Task
Force (“EITF”) Statement No. 96-18, “Accounting for Equity Instruments that are
issued to Other than Employees for acquiring or in conjunction with goods and
services”.
 
 Advertising
Expense
 The
Company expenses advertising costs as incurred. No significant advertising costs
were incurred in the years ended December 31, 2008 and 2007, and for the period
from inception (January 18, 2005) through December 31, 2008.
 
 Product
Development Costs
 The
Company expenses product development costs, which primarily relate to website
development costs, as incurred. The Company accounts for these costs under the
provisions of Statement of Position (“SOP”) No. 98-1, “Accounting for the Costs
of Computer Software Developed or Obtained for Internal Use” and EITF No. 00-2,
“Accounting for Website Development Costs”. Product development costs for the
years ended December 31, 2008 and 2007, and for the period from inception
(January 18, 2005) through December 31, 2008 approximated $243,000, $143,000 and
$656,000, respectively.
 
 Recently
Adopted Pronouncements
 In
September 2006, the FASB issued SFAS No. 157, “Fair Value Measurements” (“SFAS
157”).  SFAS 157 defines fair value, establishes a framework for
measuring fair value, and expands disclosure requirements regarding fair value
measurement. Where applicable, SFAS 157 simplifies and codifies fair value
related guidance previously issued within U.S. generally accepted accounting
principles.  SFAS 157 is effective for financial statements issued for
fiscal years beginning after November 15, 2007, and interim periods within those
fiscal years.  The Company adopted SFAS 157 on January 1, 2008 and it
did not have a material impact on the Company’s results of operations or
financial condition.
  In
December 2007, the SEC issued Staff Accounting Bulletin No. 110 (“SAB
110”).  SAB 110 expresses the views of the staff regarding the use of a
“simplified” method, as discussed in SAB No. 107, in developing an estimate of
the expected term of “plain vanilla” share options in accordance with SFAS No.
123 (revised 2004).  SAB 110 did not have a material impact on the
Company’s results of operations or financial condition.
 
 
 F-10
 
  3.
              Recent
      Accounting Pronouncements
 
 In
December 2007, the Financial Accounting Standards Board (“FASB”) issued
Statement of Financial Accounting Standards (“SFAS”) No. 160, “Noncontrolling
Interests in Consolidated Financial Statements - an amendment of ARB No.
51”.  The objective of this Statement is to improve the relevance,
comparability, and transparency of the financial information that a reporting
entity provides in its consolidated financial statements by establishing
accounting and reporting standards that require the following
changes.  The ownership interests in subsidiaries held by parties,
other than the parent, be clearly identified, labeled, and presented in the
consolidated statement of financial position within equity, but separate from
the parent's equity.  The amount of consolidated net income
attributable to the parent and to the noncontrolling interest be clearly
identified and presented on the face of the consolidated statement of income.
When a subsidiary is deconsolidated, any retained noncontrolling equity
investment in the former subsidiary is initially measured at fair
value.  The gain or loss on the deconsolidation of the subsidiary is
measured using the fair value of any noncontrolling equity investment rather
than the carrying amount of that retained investment and entities provide
sufficient disclosures that clearly identify and distinguish between the
interests of the parent and the interests of the noncontrolling
owners.  The changes to current practice resulting from the
application of SFAS No. 160 is effective for financial statements issued for
fiscal years beginning after December 15, 2008, and interim periods within those
fiscal years.  The adoption of SFAS No. 160 before December 15, 2008
is prohibited.  The Company has not evaluated the effect, if any, that
SFAS No. 160 will have on its consolidated financial statements.
 
 In
December 2007, the FASB issued SFAS No. 141(R), “Business Combinations -
Revised,” that improves the relevance, representational faithfulness, and
comparability of the information that a reporting entity provides in its
financial reports about a business combination and its
effects.   To accomplish that, this statement establishes
principles and requirements how the acquirer recognizes and measures in its
financial statements the identifiable assets acquired, the liabilities assumed,
and any noncontroling interest in the acquiree, recognizes and measures the
goodwill acquired in the business combination or a gain from a bargain purchase,
and determines what information to disclose to enable users of the financial
statements to evaluate the nature and financial effects of the business
combination.  The changes to current practice resulting from the
application of SFAS No. 141(R) are effective for financial statements issued for
fiscal years beginning after December 15, 2008.  The adoption of SFAS
No. 141(R) before December 15, 2008 is prohibited.  The Company does
not expect the adoption of SFAS No. 141(R) to have a material effect on its
consolidated financial statements.
 
 In May
2008, the FASB issued SFAS No. 162, "The Hierarchy of Generally Accepted
Accounting Principles." SFAS 162 became effective November 15,
2008.  The standard is intended to improve financial reporting by
identifying a consistent framework, or hierarchy, for selecting accounting
principles to be used in preparing financial statements that are presented in
conformity with U.S. generally accepted accounting principles (GAAP) for
non-governmental entities.
  In June
2008, the FASB issued EITF 07-5, “Determining whether an Instrument (or Embedded
Feature) is Indexed to an Entity’s own stock” (“EITF 07-5”). EITF 07-5 provides
guidance in assessing whether an equity-linked financial instrument (or embedded
feature is indexed to an entity’s own stock for purposes of determining whether
the appropriate accounting treatment falls under the scope of SFAS 133,
“Accounting for Derivative Instruments and Hedging Activities” and/or EITF
00-19, “Accounting for Derivative Financial Instrument Indexed to, and
Potentially Settled in, a Company’s own Stock.” EITF 07-5 is effective for
financial statements issued for fiscal years beginning after December 15, 2008
and early adoption is not permitted. We have not yet determined what, if any,
affect EITF 07-5 will have on our results of operations or financial
conditions.
 F-11
 
 
 
 4.
              Intangible
      Assets
  December
      31,
                          
                          
                          December
      31,2008
                          
                          
                          2007Magazine
      trademark
                          
                          $
                          618,673
                          
                          
                          $
                          618,673List
      database
                          
                          
                          2,606,250
                          
                          
                          
                          -Website
      development costs
                          
                          
                          550,000
                          
                          
                          
                          -Total
      intangible assets
                          
                          
                          3,774,923
                          
                          
                          
                          618,673Less:
      accumulated amortization
                          
                          
                          350,498
                          
                          
                          
                          262,117Intangibles,
      net
                          
                          $
                          3,424,425
                          
                          
                          $
                          356,556
  The
list database and website development costs which total $3,156,250 are
not included in the estimated future amortization as they have not been placed
in service as of December 31, 2008. Once placed in service, they will be
amortized over their expected useful life which approximates 7
years. Amortization expense on the magazine trademark for the years ended
December 31, 2008 and 2007 amounted to approximately $88,000 and $88,000,
respectively.
 
 Estimated
amortization expense for the next four years is a follows:
 
 December 31,2009
                  
                  $
                  88,0002010
                  
                  
                  88,0002011
                  
                  
                  88,0002012
                  
                  
                  4,000$
                  268,000
 
 5.
              Property
      and Equipment
  December
      31,
                    
                    
                    December
      31,2008
                    
                    
                    2007Office
      furniture and equipment
                    
                    $
                    27,809
                    
                    
                    $
                    --Less
      accumulated depreciation
                    
                    
                    1,328
                    
                    
                    
                    --Property
      and equipment, net
                    
                    $
                    26,481
                    
                    
                    
                    --
 
 Depreciation
expense for the year ended December 31, 2008 amounted to $1,328.
 
 F-12
 
 
 6.
              Stockholders’
      Equity
  Overview
 The
Company’s Certificate of Incorporation originally authorized the issuance of
1,500,000 shares of common stock, no par value. On January 12, 2007, the
authorized shares of common stock were increased to 10,000,000. On June 18,
2008, the total number of authorized shares was increased to 50,000,000 shares
of common stock having a par value of $0.00001 per share.
 
 On June
1, 2008, the Board of Directors approved a thousand-for-one stock split of the
Corporation’s common stock. Stockholders’ equity and common stock activity for
all periods presented have been restated to give retroactive recognition to the
stock split. In addition, all references in the consolidated financial
statements and notes to the consolidated financial statements about the
Company’s common stock have been restated to give retroactive recognition to the
stock split.
  On
September 17, 2008, Mac Filmworks, Inc.  (now known as Sahara Media
Holdings, Inc.) (the “Company”), entered into an Agreement and Plan of Merger
(the “Merger Agreement”) with Sahara Media Acquisitions, Inc. a Delaware
corporation.  Pursuant to the Merger Agreement, Sahara Media
Acquisitions, Inc. merged into Sahara Media, Inc.  ("Sahara") such
that Sahara Media Inc., became a wholly-owned subsidiary of the Company.
Pursuant to the Merger Agreement, the Company  issued 18,150,000
shares of their common stock to the shareholders of Sahara (the “Acquisition
Shares”) (subject to the placement of 5,000,000 Acquisition Shares in escrow
pursuant to the Escrow Agreement (defined below)), representing approximately
58.9% of the Company’s aggregate issued and outstanding common stock following
the closing of the Merger and the Private Placement (defined below), and the
outstanding shares of common stock of Sahara were transferred to the Company and
cancelled.
  In
connection with the Merger, the Company entered into a series of identical
subscription agreements (the “Subscription Agreements”) with accredited
investors (the “Investors”), pursuant to which, concurrent with the closing of
the Merger on the Closing Date, the Company issued and sold units, with each
unit consisting of 100,000 shares of common stock and five-year warrants to
purchase 100,000 shares of common stock with an exercise price of $2.50 per
share, for a purchase price of $125,000 per unit (the “Private Placement”).
Pursuant to the Private Placement, the Company issued and sold to the Investors
an aggregate of 6,526,159 shares of common stock (the “Common Shares”) and
five-year warrants to purchase 6,526,159 shares of common stock (the
“Investor Warrants”), for an aggregate purchase price of $8,158,366. The
Investor Warrants may not be exercised to the extent such exercise would cause
the holder of the warrant, together with its affiliates, to beneficially own a
number of shares of common stock which would exceed 4.99% of the Company's then
outstanding shares of common stock following such exercise. Pursuant to the
Subscription Agreements, the Company agreed to file a registration statement
registering the Common Shares and the shares of common stock underlying the
Investor Warrants, subject to Securities and Exchange Commission (“SEC”)
limitations, within 45 days of the filing of this report with the
SEC.  The Company filed the registration November 7,
2008.
  In
addition, the Company issued 2,550,000 warrants with exercise prices ranging
from $1.10 to $1.50 per share with a value of $2,068,205, that has been recorded
as capital raising cost as an offset to additional paid-in capital.
  Common
stock issuances
  In
2005, Sahara issued 634,800 shares of common stock as founder shares.
Additionally Sahara issued 1,147,500 shares to one of the founders in settlement
of $194,380 of advances made.
 
 On
January 7, 2006, Sahara issued to a consultant, 30,000 shares in settlement for
services rendered.
 
 On June
15, 2008, Sahara issued 100,000 common shares to an investor at $.50 per share
for $50,000.
 
 F-13
 
 On June
10, 2008, Sahara issued common shares, as follows:
 
 19,610
      shares, valued at $1.00 per share, to settle $19,610 note payable,
      including accrued interest of
$1,610.
 724,000
      shares, valued at $0.02 per share, to settle accrued interest payable of
      $12,000.  In connection with this transaction 164,800 previously
      issued shares were cancelled.
 480,000
      shares, valued at $0.05 per share, to settle $25,787 of accrued consulting
      fees.  In addition, warrants for a 5% per-money interest in the
      Company were cancelled.27,000
      shares, valued at $0.93 per share, to settle note payable of
      $25,000.
 452,000
      shares, valued at $0.31 per share, to a director, a related party, to
      settle a note payable of $139,242 including accrued interest of
      $14,242.
 100,000
      shares, valued at $5.25 per share, to the founder and chief executive
      officer, a related party, in exchange for $525,000 of accrued
      salary.
 210,000
      shares, valued at $0.44 per share, to a consultant, a related party, in
      exchange for accrued consulting fees of $142,420.  In connection
      with this transaction, 30,000 previously issued shares were
      cancelled.
 5,500
      shares valued at $1.49 per share to a consultant in settlement of accrued
      consulting fees of $8,197.
 
 On June
12, 2008, Sahara issued 140,000 common shares, valued at $0.80 per share, to
settle a note payable of $111,393 including accrued interest of
$11,393.
  On June
16, 2008, Sahara issued 200,000 common shares, valued at $.02 per share, to
settle $4,000 of accrued consulting fees.  In addition, warrants for a
5% pre-money interest in the Company were cancelled.
 
 On June
17, 2008, Sahara issued 13,363,390 common shares, valued at $0.10 per share, to
Sahara Entertainment, LLC, a related party, to settle a note payable and
advances aggregating $1,303,843 in the amount of $462,074 including accrued
interest of $61,074 and assumption of liabilities on behalf of the Company
amounting to $841,769.  In connection with this transaction 1,147,500
previously issued shares were cancelled.
 
 Additionally,
on June 17, 2008, Sahara issued 31,000 common shares in exchange for
fees.
 
 On July
31, 2008, Sahara issued 100,000 common shares to an investor at $0.50 per share
for $50,000.
 
 On July
31, 2008, Sahara issued 400,000 common shares, valued at $0.50 per share, to
Sahara Entertainment, LLC, a related party, as payment for consulting relating
to the Company’s financing.  The Company recorded $200,000 as an
offset to additional paid-in capital as this issuance related to costs of
raising capital.
 
 Cheryl
Keeling
 
 On
September 3, 2008, Sahara issued 50,000 common shares, valued at $1.25 per
share, to Cheryl Keeling, as additional consideration for a $100,000 bridge loan
made on the same date.  The loan was repaid upon the closing of the
Merger and Private Placement on September 17, 2008.
 
 The
Company recorded $107,942, $56,989 and $210,616 of interest expense for the
years ended December 31, 2008 and 2007 and the period from inception (January
18, 2005) through December 31, 2008, respectively.
 
 F-14
 
 BPA
Associates, LLC
 
 On
September 17, 2008, pursuant to a Purchase Agreement dated July 1, 2008, Sahara
issued 1,425,000 common shares, valued at $1.25 per share, which approximates
the fair value of the intangible less the cash paid to BPA Associates LLC,
(“BPA”) a related party, as additional consideration for the purchase of
their database. Sahara’s consideration for this purchase is as follows:
$50,000 in cash which was paid on July 1, 2008 in consideration of BPA pledging
the database in connection with the sale by the Company of a $500,000 debenture
to an Investor, $775,000 in cash and 1,425,000 common shares on consummation of
the reorganization.
 
 The
Company recorded $2,606,250 as an intangible which is comprised of the
$1,781,250 value of the common shares plus $825,000 of cash
paid.
 
 Reverse
Split
 
 The
Company completed a 1 for 30 reverse stock split of its common shares, pursuant
to which MFI’s issued and outstanding shares of common shares, was reduced to
818,000 (prior to the Merger and the Private Placement).
  Shares
issued to investors in the private placement
  In
September 2008, the Company issued 6,526,159 shares of common stock and
five-year warrants to purchase 6,526,159 shares of common stock with an exercise
price of $2.50 per share in a private placement for an aggregate amount of
$8,158,366.  The Company recorded $19,578 to the par value of the
common shares and $5,768,310, net of $2,370,478 in placement costs, to
additional paid-in capital.  The raise costs were allocated as
follows: John Thomas Financial (JTF) $65,000, Mac Filmworks $25,000, Aubrey
Consultants for a finders fee $20,000, JTF for legal fees of $13,000, placement
legal fees of $187,000, JTF 10%  fee of $992,996, JTF non-accountable
expenses of $67,482, JTF success fee of $400,000, JTF finders fee of $200,000
and JTF for indemnification fee of  $400,000.
  The
warrants were valued using the Black-Scholes pricing model with the following
weighted average assumptions 0% dividend yield; risk free interest of
2.52%:  volatility of 94.80%; and an expected life of 5 years. The
warrants vest immediately.
 
 On
October 8, 2008, the Company issued an aggregate of 1,413,883 shares of
common stock and five-year warrants to purchase 1,413,883 shares of common
stock with an exercise price of $2.50 per share to accredited investors,
for an aggregate amount of $1,767,253. JTF acted as the exclusive placement
agent for the private placement.
 
 On
October 20, 2008, the Company issued 4,000 shares of common stock and five-year
warrants to purchase 4,000 shares of common stock with exercise price of $2.50
per share to an accredited investor for a purchase price of $5,000. JTF acted as
the exclusive placement agent for the private placement.
  The
Company received $1,529,356 from the October 2008 transactions net of raise
costs of approximately $243,000.
 
 The stock
warrants issued in October 2008 were valued using the Black-Scholes pricing
model using the following weighted average assumptions: dividend yield of 0%;
risk free interest rate of 2.70%; volatility of 94.80%; and an expected life of
5 years. The warrants vest immediately and are exercisable on a cashless basis,
which represents stock settled stock appreciation rights.
 
 Shares
held in Escrow
 
 The
Company entered into a securities escrow agreement (the “Securities Escrow
Agreement”) with Sahara, the shareholders of Sahara named in the escrow
agreement (the “Sahara Escrow Shareholders”), and the Company’s corporate
counsel, as escrow agent.  Pursuant to the Securities Escrow
Agreement, the Sahara Escrow Shareholders agreed to place 5,000,000 of the
Acquisition Shares (the “Escrow Shares”) into an escrow account. The Escrow
Shares will be released to the Sahara Escrow Shareholders, or returned to the
Company for cancellation if not released, based upon the achievement of certain
performance thresholds as set forth below:
 
 F-15
 
  (a)
              If
      the Company launches the online magazine Honeymag.com six months after the
      Closing Date (the “First Performance Threshold”), 20% of the Escrow Shares
      will be released to the Escrow Shareholders.  If the First
      Performance Threshold is not met, 20% of the Escrow Shares will be
      returned to the Company for
cancellation
 
 (b)
              If
      the Company launches the social network Hivesport.com seven months after
      the closing date (the “Second Performance Threshold”), 2o% of the Escrow
      Shares will be released to the Sahara Escrow Shareholders.  If
      the Second Performance Threshold is not met, 20% of the Escrow Shares will
      be returned to the Company for
cancellation.
 
 (c)
              In
      the event that, from the period from the launch of the online magazine
      Honeymag.com, until nine months after the Closing Date, the average number
      of monthly viewed impressions of the Company’s online magazine
      Honeymag.com is at least 300,000 (the “Third Performance Threshold”), 20%
      of the Escrow Shares will be released to the Sahara Escrow Shareholders.
      If the Third Performance Threshold is not met, 20% of the Escrow Shares
      will be returned to the Company for
  cancellation.
 
 (d)
              In
      the event that the Company’s social networking site Hivespot.com has at
      least 200,000 registered users on September 30, 2009 (the “Fourth
      Performance Threshold”), 20% of the Escrow Shares will be released to
      Sahara Escrow Shareholders. If the Fourth Performance Threshold is not
      met, 20% of the Escrow Shares will be returned to the Company for
      cancellation.
 
 (e)
              In
      the event that the Company either has revenue of at least $1,000,000 for
      the year ending December 31, 2009, or accounts receivable of at least
      $1,000,000 as of December 31, 2009, as disclosed in the Company’s audited
      financial statements included in the Company’s Form 10-K for the year
      ending December 31, 2009 filed with the Securities and Exchange Commission
      (the “Fifth Performance Threshold”), 20% of the Escrow Shares will be
      released to the Sahara Escrow Shareholders. If the Fifth Performance
      Threshold is not met, 20% of the Escrow Shares will be returned to the
      Company for
cancellation.
 
 John Thomas Bridge
and Opportunity Fund
 
 On
September 17, 2008, the Company issued 500,000 common shares, valued at $1.25
per share, and five year warrants, with a fair value of $439,128 to purchase
500,000 shares of common stock at an exercise price of $1.50 per share to the
John Thomas Bridge and Opportunity Fund, as additional consideration to complete
the equity financing. The warrants vest immediately and are exercisable on a
cashless basis, which represents stock settled stock appreciation
rights.
 
 The
Company entered into a Securities Purchase Agreement, also dated July 1, 2008,
pursuant to which the Company issued a 12% Senior Secured Debenture
(“Debenture”) in the principal amount of $500,000, bearing interest at the rate
of 12% per annum, $80,000, of which, such proceeds were subsequently released to
third parties to pay fees with the balance of $420,000 remitted to the
Company.
 
 The
Security Purchase Agreement secured certain U.S. trademark registrations for all
of the Company’s publications, and all the Company’s databases as collateral
security for the prompt payment in full when due.  In addition, for
consideration of a $50,000 payment, a Security Agreement with BPA Associates,
under common ownership, was executed whereby BPA agreed to secure the payment on
the Debenture with certain assets of the Company, including the database which
contains information vital to the business of the Company.
  John
Thomas Financial, Inc.
 
 On
September 17, 2008 the Company issued 3,000,000 common shares, valued at $1.25
per share, and five year warrants to purchase 1,000,000 common shares with a
fair value of $904,018 as in at an exercise price of $1.30 per share to the John
Thomas Financial, Inc. as additional consideration for private placement
services.  The warrants vested immediately and are exercisable on a
cashless basis, which represents stock settled stock appreciation
rights.
 F-16
  Marathon
Advisors
 
 On
September 17, 2008, the Company issued 100,000 common shares, valued at $1.25
per share, and five-year warrants, to purchase 300,000 common shares with a fair
value of $263,054 at an exercise price of $1.10, to Marathon Advisors
(“Marathon”), to complete the equity financing.  The warrants are
exercisable on a cashless basis which represents stock settled stock
appreciation rights. The warrants vest over a three year period on the
anniversary of the issuance date.  In accordance with EITF No. 96-18,
equity instruments issued to non-employees are recognized pro-rata over the
vesting period.
 
 The
Company recorded $128,017 as a capital raising cost as an offset to additional
paid-in capital.
 
 Effective
December 31, 2008, the contract with Marathon was terminated.  Per the
termination agreement, 200,000 of the original warrants were
canceled.  The Company recorded approximately $11,000 of equity based
expenses for the year ended December 31, 2008.
 
 Aurelian
Investments, LLC
 
 On
September 17, 2008, the Company issued 50,000 common shares, valued at $1.25 per
share, to Aurelian Investments Inc., as a finders fee related to the equity
raise. The Company recorded $62,500 as capital raise costs as an offset to
additional paid in capital.
 
 Sichenzia
Ross
 
 On
September 17, 2008, the Company issued 250,000 common shares (see “common
share issuance"), valued at $1.25 per share, and five-year warrants with a fair
value of $219,564 to purchase 250,000 shares of common stock, with an exercise
price of $1.50, to its corporate counsel Sichenzia Ross for legal
services.  The warrants vest immediately and are exercisable on a
cashless basis which represents stock settled stock appreciation rights. The
Company recorded $532,064 as capital raise costs as an offset to additional
paid-in capital.
 
 Warrant
issuances
 
 Warrants
issued to promissory note holders
 
 The
Company issued warrants to certain holders at various date of promissory notes
that entitle them to purchase common shares of the Company.  All
warrants granted vested immediately.  The fair value of the warrants
is estimated using the intrinsic value method.  The fair value of the
common stock related to these warrant issuances approximated $0.02 as determined
based on services rendered by a consultant in the amount of $4,000 in exchange
for 200,000 warrants in 2006.  The Company has ascribed a value of
approximately $9,000 to these warrants.
 
 Aubrey
Consulting – Warrants dated September 17, 2008
 
 On
September 17, 2008, the Company issued five-year warrants to purchase 500,000
common shares with an exercise price of $1.50 to Aubrey Consulting as additional
consideration for a finder’s fee relating to the private
placement.  The Company recorded $439,000 as a capital raise cost as
an offset to additional paid-in capital. The warrants vest immediately and are
exercisable on a cashless basis, which represents stock settled stock
appreciation rights.
  The above
warrants were valued using the Block-Scholes pricing model with the following
weighted average assumptions; 0% divided yield; risk free interest rate 2.52%;
volatility of 94.8%; and an expected life of 5 years. The warrants vest
immediately.
  F-17
  Warrant
activity for non-employees during the period of inception (January 18, 2005)
through December 31, 2008 are as follows:
 
 WeightedWeighted-
                                      
                                      AverageNumber
      of
                                      
                                      
                                      Average
                                      
                                      Remaining
                                      
                                      AggregateWarrant
                                      
                                      
                                      Exercise
                                      
                                      Contractual
                                      
                                      IntrinsicWarrants
                                      
                                      Shares
                                      
                                      
                                      Price
                                      
                                      Term
      (Years)
                                      
                                      ValueGranted
      during 2006
                                      
                                      
                                      200,000
                                      
                                      
                                      $
                                      0.005Balance
      at December 31, 2006
                                      
                                      
                                      200,000
                                      
                                      
                                      $
                                      0.005Granted
      during 2007
                                      
                                      
                                      -Balance
      at December 31, 2007
                                      
                                      
                                      200,000
                                      
                                      
                                      $
                                      0.005Granted
                                      
                                      
                                      10,494,034
                                      
                                      
                                      $
                                      2.23Exercised
                                      
                                      
                                      -
                                      
                                      
                                      $Forfeited/cancelled
      during 2008
                                      
                                      
                                      (400,000
                                      )
                                      
                                      $
                                      0.76Outstanding,
      December 31, 2008
                                      
                                      
                                      10,294,034
                                      
                                      
                                      $
                                      2.25
                                      
                                      4.70
                                      
                                      7,737,017Exercisable,
      December 31, 2008
                                      
                                      
                                      10,194,034
                                      
                                      
                                      $
                                      2.26
                                      
                                      4.51
                                      
                                      7,547,017
 
 WeightedAverageWarrant
                      
                      
                      Grant-DateNon-vested Warrants
                      
                      Shares
                      
                      
                      Fair
      ValueGranted
      during the 2006 (none granted 2007)
                      
                      
                      200,000
                      
                      
                      $
                      0.02Non-vested
      December 31, 2007 and 2006
                      
                      
                      200,000
                      
                      
                      
                      0.02Granted
      during 2008
                      
                      
                      10,494,034
                      
                      
                      
                      0.79Vested
      during 2008
                      
                      
                      (10,194,034
                      )
                      
                      
                      0.80Forfeited
      during 2008
                      
                      
                      (400,000
                      )
                      
                      
                      0.11Non-vested,
      December 31, 2008
                      
                      
                      100,000
                      
                      
                      
                      0.22
  Equity Compensation
Plan
 
 In
January 1998, the Company’s board of directors approved a stock option plan
under which 16,667 shares of common stock have been reserved for
issuance.  The following table shows information with respect to the
stock options available under the equity compensation plan under which the
Company’s common stock is authorized for issuance as of the fiscal year ended
December 31, 2008.
 
 Balance
      at December 31, 2006
                  
                  
                  16,667Granted
      during December 2007
                  
                  
                  --Balance
      at December 31, 2007
                  
                  
                  16,667Granted
      during 2008
                  
                  
                  --Outstanding,
      December 31, 2008
                  
                  
                  --Available
      for issuance – December 31, 2008
                  
                  
                  16,667
 
 F-18
  7        Income
Taxes
 
 The
Company has provided a valuation allowance for the full amount of its net
deferred tax assets because the Company has determined that it is more likely
than not that they will not be realized.
 
 At
December 31, 2008, the Company has federal and state net operating loss
carryforwards of approximately $2,590,000 available to reduce future taxable
income which expire at various dates ranging from 2025 to 2028.
 
 Under the
provisions of Section 382 of the Internal Revenue Code, certain substantial
changes in the Company’s ownership may result in a limitation on the amount of
net operating loss carry forwards which can be used in future
years.
 December31,
                            
                            
                            December
      31,2008
                            
                            
                            2007Net
      operating loss carryforwards
                            
                            $
                            1,184,000
                            
                            
                            $
                            384,000Amortization
      of intangible assets
                            
                            
                            (62,000
                            )
                            
                            
                            (41,000
                            )Net
      deferred tax assets
                            
                            
                            1,122,000
                            
                            
                            
                            343,000Valuation
      allowance
                            
                            
                            (1,122,000
                            )
                            
                            
                            (343,000
                            )Net
      deferred tax assets
                            
                            $
                            --
                            
                            
                            $
                            --
 
 The
valuation allowance increased by approximately $779,000, $110,000, and
$1,122,000 in the years ended December 31, 2008 and 2007 and the period
from inception (January 18, 2005) through December 31, 2008
respectively..
  8
              Related
      Party Transactions
  Advances
Payable, Related Party
 
 December
      31,
                    
                    
                    December
      31,2008
                    
                    
                    2007Advance
      due Sahara Entertainment, LLC,related
      party, unsecured, due on demand
                    
                    $
                    -
                    
                    
                    $
                    174,568Advance
      due a director of the Company, arelated
      party, unsecured, due on
    demand
                    
                    
                    -
                    
                    
                    
                    6,320$
                    -
                    
                    
                    $
                    180,888
  The
outstanding balance on these advances amounted to $0 and $180,888 at December
31, 2008 and December 31, 2007, respectively.  See Note
6.  Sahara Entertainment, LLC, a related party, advanced amounts on
behalf of the Company as a working capital line of credit.  These
advances were due on demand and were non-interest bearing.  Such
advances have been discounted at a rate of 5.5% which was the Company’s
incremental borrowing rate during the periods of the
advances.  Interest amounting to $3,500, $7,000 and $21,000 was
accreted and included in the accompanying statements of operations for the years
ended December 31, 2008 and 2007 and the period from inception (January 18,
2005) through December 31, 2008, respectively.
  
 
 F-19
 
 Notes
      Payable, Related Parties
  December
      31,
                              
                              
                              December
      31,2008
                              
                              
                              2007$401,000
      note payable due to Sahara Entertainment, LLC, a related
      party,with
      interest at 5.5% per annum.  Amount was due on demand and
      wasunsecured
      (see Note 6).
                              
                              $
                              --
                              
                              
                              $
                              452,074$125,000
      note payable due Sahara Entertainment, LLC, a related
      party,with
      interest at 5.5% per annum.  Amount was due on demand and
      was
                              
                              
                              --
                              
                              
                              
                              136,106unsecured
      (see Note 6)$
                              --
                              
                              
                              $
                              588,180
 
 The
Company recorded related party interest expense of $17,053, $37,663 and $96,735
in the years ended December 31, 2008 and 2007, and the period from inception
(January 18, 2005) through December 31, 2008, respectively.
 
 9.       Notes
payable
  December
      31,
                      
                      
                      December
      31,2008
                      
                      
                      2007Note
      payable to a third party bearing interest at 5.5% , per annum,
      includingaccrued
      interest of $12,000, due September 30, 2008,
    unsecured.
                      
                      $
                      -
                      
                      
                      $
                      162,000Note
      payable, to a third party, bearing interest at 5.5% per
      annum,including
      accrued interest of $8,884, due on demand.
                      
                      
                      -
                      
                      
                      
                      108,884Note
      payable to a third party, bearing interest at 5.5%
    perannum,
      including accrued interest of $6,833, due on demand,
      unsecured.
                      
                      
                      -
                      
                      
                      
                      26,883Note
      payable, to a third party, bearing interestat
      5.5% per annum, due on demand, unsecured.
                      
                      
                      -
                      
                      
                      
                      5,155$
                      -
                      
                      
                      $
                      302,922
  The
Company recorded interest expense of $90,889, $19,326 and $113,881 in the years
ended December 31, 2008 and 2007, and the period from inception (January 18,
2005) through December 31, 2008, respectively.
 
 10.     Commitments
and Contingencies
  Dogmatic/Ripple
6
 As
of December 31, 2008, the Company was contractually obligated to pay an
additional $75,000 to Dogmatic/Ripple 6 for the development of the Honey online
magazine and Hivespot.com social networking site.
 
 Rent
expense
 In
October 2008, the Company entered into a new three year lease for office space,
expiring in September 2011. Monthly payments under the lease commence at $9,000
per month and increase to $9,600 per month. The lease commitment is guaranteed
by an officer of the Company. In conjunction with this lease the Company has
recorded a security deposit of $37,200. Prior to the inception of this lease
agreement, the Company leased office space on a month-to-month basis at an
amount of approximately $4,000 per month.
 
 Rent
expense was approximately $82,000, $52,000 and $232,000 for the years ended
December 31, 2008 and 2007 and the period from inception (January 18, 2005)
through December 31, 2008, respectively.
 
 F-20
  Approximate
future minimum annual lease payments are as follows:
  Years
      EndedDecember 31,2009
                    
                    $
                    108,9002010
                    
                    
                    112,5002011
                    
                    
                    86,400$
                    307,800
 
 The
Investors Relation Group
 
 In late
September 2008, the Company entered into a one year agreement with an investor
relations group.  The agreement provides for the Company issuing the
equivalent of $300,000 of their common stock, which will be earned pro rata over
the twelve month contract period.  Additionally, the Company is
obligated to pay a maintenance fee of $10,000 per month.  The Company
has not issued any shares of their common stock under the agreement and expects
to do so in April 2009. As of December 31, 2008, the Company has recorded a
liability of $87,500 relating to the common stock required to be issued under
this agreement.
 
 11.     Subsequent
Events
  Line
of Credit
 In
February 2009, the Company secured a $500,000 line of credit with a financial
institution bearing interest at the prime rate (3.25% as of December 31, 2008)
and due in February 2010. As of March 30, 2008, the Company has not borrowed
against this facility.
 
 Employment
Agreement
 Effective
February 18, 2009, the Company entered into an employment agreement with its
Chief Executive Officer (“CEO”).  Terms of the Agreement
include:  an annual salary of $300,000, $325,000 and $350,000 over the
three year period; a signing bonus of $155,000; grant of an option to purchase
3,000,000 shares of company common stock at an exercise price of $2.00 per
share.  The options are expected to be granted in April 2009, and vest
immediately.
 
 Consulting
Agreement
 In
February 2009, the Company entered into a consulting agreement with Hanover
Capital Corporation (“Hanover”). Terms of the agreement include an initial
payment of $5,000 and $4,000 per month during the one year term of the
agreement.  Additionally, the Company will issue Hanover a total of
450,000 restricted common shares on a pro rata basis over a period of six months
during the term of the agreement.  The shares of stock are expected to
be granted in April 2009.
 
 F-21


SIGNATURES





In
accordance with Section 13 or 15(d) of the Exchange Act, the registrant caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized on this 31 day of March, 2009.





SAHARA
      MEDIA HOLDINGS, INC.By:
              /s/ Philmore
      Anderson IVPhilmore
      Anderson IVChief Executive Officer
                (Principal Executive Officer)





By:
                /s/ Larry
      J. StinsonLarry
      J. StinsonChief
      Financial Officer
                  (Principal Financial and Accounting
    Officer)




In
accordance with the Exchange Act, this report has been signed below by the
following persons on  March 31, 2009, on behalf of the registrant and in
the capacities Indicated.




/s/
      Philmore
      Anderson IVPhilmore
      Anderson IV
                                    
                                    
                                    March
      31,2009CEO
      and Chairman/s/
      Larry
      J. StinsonLarry
      J. Stinson
                                    
                                    
                                    March
      31, 2009Principal
      Financial and Accounting Officer/s/
      Philmore
      Anderson IIIPhilmore
      Anderson III
                                    
                                    
                                    March
      31, 2009Director






30