UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                   ----------

                                   FORM 1O-QSB

                                   ----------

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

                      QUARTERLY PERIOD ENDED JUNE 30, 2007

|_|   TRANSITION  REPORT  PURSUANT  TO  SECTION  13 OR 15(d)  OF THE  SECURITIES
____ to _______

               For the Transition Period From ________ to _______

                        Commission File Number 000-18689

                                   ----------

                       CONNECTED MEDIA TECHNOLOGIES, INC.
             (Exact name of registrant as specified in its charter)

                                   ----------

             Delaware                                     06-1238435
             --------                                     ----------
  (State or Other Jurisdiction                 (IRS Employer Identification No.)
of Incorporation or Organization)

                          80 SW 8th Street, Suite 2230
                                 Miami, FL 33130
                                 ---------------
                    (Address of Principal Executive Offices)

                                 (786) 425-0028
                                 --------------
                (Issuer's Telephone Number, Including Area Code)

                                       N/A
                                 --------------
          (Former Name or Former Address, if Changed Since Last Report)

Check  whether the Issuer (1) filed all reports  required to be filed by Section
13 or l5( d) of the  Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports),  and (2) has been
subject to such filing requirements for the past 90 days. Yes |X| No |_|

Check whether the  registrant  filed all  documents  and reports  required to be
filed by Section 12, 13 or l5(d) of the Exchange Act after the  distribution  of
securities under a plan confirmed by a court. Yes |X| No |_|

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

Yes |_| No |X|

State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date:  1,381,367,430 shares of common stock
were outstanding as of August 24, 2007.

* This number excludes  15,241,223 shares that have been redeemed by the Company
and held as treasury shares.

--------------------------------------------------------------------------------

<PAGE>

               CONNECTED MEDIA TECHNOLOGIES, INC. AND SUBSIDIARIES
                                   FORM 10QSB
                  FOR THE QUARTERLY PERIOD ENDING JUNE 30, 2007

PART I  FINANCIAL INFORMATION

Item 1.   Consolidated Financial Statements
          Consolidated Balance Sheet (Unaudited)                          3
          Consolidated Statements of Operations (Unaudited)               4
          Consolidated Statements of Cash Flows (Unaudited)               5
          Unaudited Notes to Consolidated Financial Statements            6 - 16

Item 2.   Management's Discussion and Analysis or Plan of Operations      17

Item 3.   Controls and Procedures                                         25

Part II OTHER INFORMATION

Item 1.   Legal Proceedings                                               26

Item 2.   Unregistered Sales of Equity Securities and Use of Proceeds     26

Item 3.   Defaults Upon Senior Securities                                 26

Item 4.   Submission of Matters to a Vote of Security Holders             26

Item 5.   Other Information                                               26

Item 6.   Exhibits                                                        27

Signatures                                                                28


                                       -2-

--------------------------------------------------------------------------------

<PAGE>

PART I - FINANCIAL INFORMATION

Item 1. Financial Statements:

              CONNECTED MEDIA TECHNOLOGIES, INC. AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEET
                           June 30, 2007 (Unaudited)

                                     ASSETS

CURRENT ASSETS:
    Cash                                                           $        847
    Accounts receivable                                                  32,615
    Accounts receivable  - related party                                 35,000
                                                                   ------------

        Total Current Assets                                             68,462
                                                                   ------------

PROPERTY AND EQUIPMENT - Net                                            231,394
                                                                   ------------

OTHER ASSETS
    Intangible assets, net                                               90,000
    Non-marketable securities, at cost                                  164,817
    Debt issue costs, net                                                10,150
                                                                   ------------

        Total Other Assets                                              264,967
                                                                   ------------

        Total Assets                                               $    564,823
                                                                   ============

                    LIABILITIES AND STOCKHOLDERS' DEFICIENCY

CURRENT LIABILITIES:
    Convertible debentures payable,
      net of discount of $234,167                                  $  1,443,133
    Loan payable - bank                                                  38,271
    Due to related party                                                143,450
    Overdraft liability                                                  19,933
    Accounts payable                                                    229,601
    Accounts payable - related parties                                  262,990
    Accrued expenses                                                    120,478
    Accrued compensation - officer                                      329,741
    Accrued interest payable                                            266,502
    Accrued interest payable - related party                             28,044
    Deferred revenue - related party                                     35,000
    Notes payable - related party                                       452,000
    Warrant liability                                                     6,541
    Embedded conversion option liability                              4,359,160
                                                                   ------------

        Total Current Liabilities                                     7,734,844
                                                                   ------------

        Total Liabilities                                             7,734,844
                                                                   ------------

Commitments and contingencies (see Note 6)

STOCKHOLDERS' DEFICIENCY:
    Preferred stock ($0.0001 Par Value;
      10,000,000 shares authorized;  No
      shares issued and outstanding)                                         --
    Common Stock ($0.0001 Par Value;
      2,000,000,000 shares authorized;
      871,449,733 shares issued and
      856,208,510 shares outstanding)                                    87,145
    Additional paid-in capital                                       14,383,513
    Accumulated deficit                                             (21,240,854)
    Less: treasury stock (15,241,223
      common shares, at cost)                                          (399,825)
                                                                   ------------

      Total Stockholders' Deficiency                                 (7,170,021)
                                                                   ------------

      Total Liabilities and Stockholders'
        Deficiency                                                 $    564,823
                                                                   ============

     See accompanying unaudited notes to consolidated financial statements.


                                      -3-
<PAGE>

               CONNECTED MEDIA TECHNOLOGIES, INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>
                                                              For the Three Months Ended               For the Six Months Ended
                                                                       June 30,                                June 30,
                                                          ---------------------------------       ---------------------------------
                                                              2007                2006                2007                2006
                                                          -------------       -------------       -------------       -------------
                                                           (Unaudited)         (Unaudited)         (Unaudited)         (Unaudited)
<S>                                                       <C>                 <C>                 <C>                 <C>
REVENUES:
   Net revenues                                           $     234,708       $      40,000       $     469,102       $      40,000
   Net revenues - related party                                  36,500                  --              36,500                  --
                                                          -------------       -------------       -------------       -------------

     Total Revenues                                             271,208              40,000             505,602              40,000

COST OF REVENUES                                                119,207               9,362             204,326               9,362
                                                          -------------       -------------       -------------       -------------

GROSS PROFIT                                                    152,001              30,638             301,276              30,638
                                                          -------------       -------------       -------------       -------------

OPERATING EXPENSES:
   Depreciation and amortization                                 39,100               1,306              78,200               2,532
   Bad debt                                                       2,700                  --               2,700                  --
   Professional fees                                             80,922              62,795             116,951              99,210
   Rent                                                          19,000                 482              33,000               1,220
   Payroll, contract services and
     stock-based compensation                                   158,938             122,909             403,936             562,342
   Other selling, general and
     administrative                                              10,998              43,494              95,986             333,898
                                                          -------------       -------------       -------------       -------------

     Total Operating Expenses                                   311,658             230,986             730,773             999,202
                                                          -------------       -------------       -------------       -------------

LOSS FROM OPERATIONS                                           (159,657)           (200,348)           (429,497)           (968,564)
                                                          -------------       -------------       -------------       -------------

OTHER INCOME (EXPENSES):
   Other income                                                      --                 616                  --                 616
   Gain on settlement and transfer
     of property with officer                                        --             450,577                  --             450,577
   Change in fair market value of
     embedded conversion option liability                    (1,623,243)            612,480          (3,128,666)           (351,797)
   Change in fair market value of
     warrant liability                                            5,712             622,480              79,388             142,276
   Interest expense - related party                              (7,020)                 --             (14,040)             (4,126)
   Interest expense                                            (268,387)           (231,366)           (679,180)           (411,940)
                                                          -------------       -------------       -------------       -------------

     Total Other Income (Expenses)                           (1,892,938)          1,454,787          (3,742,498)           (174,394)
                                                          -------------       -------------       -------------       -------------

NET (LOSS) INCOME                                         $  (2,052,595)      $   1,254,439       $  (4,171,995)      $  (1,142,958)
                                                          =============       =============       =============       =============

NET (LOSS) INCOME PER COMMON
   SHARE - Basic and Diluted                              $          --       $          --       $       (0.01)      $          --
                                                          =============       =============       =============       =============

WEIGHTED AVERAGE COMMON SHARES
   OUTSTANDING - Basic and Diluted                          683,242,243         291,066,443         658,996,815         292,639,980
                                                          =============       =============       =============       =============
</TABLE>

     See accompanying unaudited notes to consolidated financial statements.


                                      -4-
<PAGE>

               CONNECTED MEDIA TECHNOLOGIES, INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
                                                                                                       For the Six Months Ended
                                                                                                              June 30,
                                                                                                   --------------------------------
                                                                                                      2007                 2006
                                                                                                   -----------          -----------
                                                                                                   (Unaudited)          (Unaudited)
<S>                                                                                                <C>                  <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
   Net Loss                                                                                        $(4,171,995)         $(1,142,958)
   Adjustments to Reconcile Net Loss to Net Cash Flows
      Used in Operating Activities:
         Depreciation and amortization                                                                  78,200                2,533
         Amortization of discount on convertible notes payable                                         557,750              369,385
         Stock-based compensation                                                                       11,426              305,489
         Gain on settlement and transfer of property                                                        --             (450,577)
         Recognition of equity line commitment fee expense                                                  --              134,417
         Stock issued as restructuring fee                                                                  --               76,000
         Amortization of deferred compensation and consulting                                               --               14,460
         Amortization of stock options                                                                      --               38,273
         Amortization of debt issuance cost                                                                935               11,878
         Change in fair value of derivatives                                                         3,049,277              209,521
         (Increase) Decrease in:
            Accounts receivable                                                                         55,901                   --
            Accounts receivable - related party                                                          6,500                   --
            Accrued interest receivable - related party                                                     --                 (616)
            Prepaid expenses                                                                               503              (20,446)
         Increase (Decrease) in:
            Accounts payable                                                                          (114,484)             (12,849)
            Accounts payable - related parties                                                         213,433               18,557
            Accrued expenses                                                                            (2,183)              60,475
            Accrued compensation - officer                                                                 342              114,984
            Deferred revenue                                                                           (26,500)                  --
            Accrued interest payable                                                                   116,802                 (857)
            Accrued interest payable - related party                                                    14,040                4,007
                                                                                                   -----------          -----------

Net Cash Flows Used in Operating Activities                                                           (210,053)            (268,324)
                                                                                                   -----------          -----------

CASH FLOWS FROM FINANCING ACTIVITIES:
   Cash overdraft                                                                                       16,425                   --
   Debt issued cost and lender fees                                                                    (10,500)             (85,950)
   Proceeds (Payments) on loans payable                                                                133,450              (50,000)
   Proceeds from convertible notes                                                                      70,000              400,000
   Proceeds from insurance financing                                                                        --               10,446
   Proceeds from line of credit                                                                             --                1,625
                                                                                                   -----------          -----------

Net Cash Flows Provided by Financing Activities                                                        209,375              276,121
                                                                                                   -----------          -----------

Net Increase (Decrease) in Cash                                                                           (678)               7,797

Cash - Beginning of Year                                                                                 1,525                1,408
                                                                                                   -----------          -----------

Cash - End of Period                                                                               $       847          $     9,205
                                                                                                   ===========          ===========

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:

Cash paid during the period for:
   Interest                                                                                        $     3,692          $        --
                                                                                                   ===========          ===========
   Income Taxes                                                                                    $        --          $        --
                                                                                                   ===========          ===========

NON-CASH INVESTING AND FINANCING ACTIVITIES:

   Derivative liability reclassified to equity upon conversion of debt                             $   216,910          $        --
                                                                                                   ===========          ===========
   Common stock issued for debt conversion                                                         $    70,700          $        --
                                                                                                   ===========          ===========
   Reclassification of warrant fair value from equity to liability                                 $        --          $     3,365
                                                                                                   ===========          ===========
   Initial recording of debt discount                                                              $        --          $ 1,068,000
                                                                                                   ===========          ===========
   Restructuring of note, accrued interest and liquidated damages                                  $        --          $   718,000
                                                                                                   ===========          ===========
</TABLE>

     See accompanying unaudited notes to consolidated financial statements.


                                      -5-
<PAGE>

               Connected Media Technologies, Inc. and Subsidiaries
              Unaudited Notes to Consolidated Financial Statements
                                  June 30, 2007

Note 1 - Nature of Operations and Basis of Presentation

(A) Nature of Business

On January 31, 2006,  Connected Media  Technologies,  Inc., a Delaware  publicly
held  corporation,  ("Connected  Media",  "we",  "us",  "our" or the  "Company")
entered into a preliminary  Stock  Purchase  Agreement  and Share  Exchange (the
"Agreement") with Natcom Marketing International,  Inc., a privately held Puerto
Rican based full-service  marketing  communications  agency ("NMI"), and the NMI
shareholders. The closing of the transaction was completed on July 10, 2006 (the
"Acquisition  Date"). On the Acquisition  Date,  Connected Media acquired all of
the outstanding  shares of NMI in exchange for a total of 300,507,663  shares or
approximately 50% of Connected  Media's issued and outstanding  common stock. As
additional consideration, on the Acquisition Date, Connected Media Technologies,
Inc.  reserved  up to $250,000 of the  funding  received  by  Montgomery  Equity
Partners,  LP for  distribution  to NMI to be used toward the  acquisition  of a
majority  interest in  NewsProNet  Interactive,  LLC. On the  Acquisition  Date,
Connected  Media  also  provided  funding  to NMI for  the  payment  of  certain
outstanding  debts,  which included  relief of the  promissory  note and accrued
interest.  Pursuant to the  Agreement,  on the  Acquisition  Date,  NMI became a
wholly owned subsidiary of Connected Media.

The  transaction  was  accounted  for as a reverse  acquisition  with NMI as the
acquirer for accounting  purposes using the purchase method of accounting  since
both  Companies  are  considered  operating  entities and  management of NMI has
obtained control through (i) holding  approximately a 50% interest with no other
shareholder or group of shareholders  holding  equivalent rights; and (ii) Board
control.  Accordingly,  the consolidated  financial statements subsequent to the
acquisition  will consist of the balance  sheet of NMI at historical  cost,  the
balance  sheet of  Connected  Media  marked to fair value based on the  purchase
price,  the historical  operations of NMI and the operations of Connected  Media
Technologies  from  the  acquisition  date.  The  new  consolidated   entity  is
hereinafter referred to as the "Company."

On  October  4,  2006,  the  Company's   wholly-owned   subsidiary,   NPN  Asset
Acquisitions,  Inc.  ("NPNAA")  entered into an Assignment  Agreement  (the "NBC
Assignment") with NBC-NPN Holding, Inc. ("NBC") and NewsProNet Interactive,  LLC
("NPN"),  whereby NBC assigned approximately $2.365 million in secured debt (the
"Secured  Debt") against NPN to the Company's  subsidiary  NPNAA.  As additional
consideration for the assignment of the Secured Debt, the parties entered into a
Securities  Purchase  Agreement  whereby the Company issued 15,000,000 shares of
Connected  Media common  stock to NBC.  Also on October 4, 2006,  the  Company's
subsidiary  NPNAA  entered  into an  Assignment  Agreement  with NPN  (the  "NPN
Assignment"), pursuant to which NPNAA exercised certain security rights with the
consent of NPN.

Connected  Media is a sales and marketing  company focused on digital media that
offers a broad  spectrum of services and solutions  across  current and emerging
media  platforms,  including print,  television,  radio,  Internet,  CD, DVD and
mobile devices such as mobile phones and personal digital  assistants (PDAs). As
a  combined  entity,   the  services  the  Company  currently  provide  includes
consulting,  advertising, media selection and placement, sales promotion, direct
marketing,  collateral development,  television production and placement,  radio
production and placement,  point-of-sale displays, trade shows, barter programs,
Internet  site  development,  and  patented  technology  solutions.  NPNAA is an
Atlanta  based  provider of converged  media content  solutions and  interactive
branding strategies for local broadcasters.


                                      -6-
<PAGE>

               Connected Media Technologies, Inc. and Subsidiaries
        Unaudited Notes to Consolidated Financial Statements (continued)
                                  June 30, 2007

(B) Basis of Presentation

The accompanying  unaudited consolidated financial statements have been prepared
in accordance with accounting principles generally accepted in the United States
of America and the rules and  regulations  of the United States  Securities  and
Exchange Commission for interim financial information.  Accordingly, they do not
include  all  the  information  and  footnotes  necessary  for  a  comprehensive
presentation of consolidated financial position and results of operations.

It is management's opinion,  however, that all material adjustments  (consisting
of normal recurring  adjustments)  have been made which are necessary for a fair
consolidated  financial  statement  presentation.  The  results  for the interim
period are not  necessarily  indicative  of the results to be  expected  for the
year.

For further information,  refer to the audited consolidated financial statements
and footnotes of the company for the year ending December 31, 2006,  included in
the Company's Form 10-KSB.

Note 2 - Going Concern

As reflected in the accompanying  unaudited  consolidated  financial statements,
the  Company has a net loss of  $4,171,995  and net cash used in  operations  of
$210,053  for  the six  months  ended  June  30,  2007,  and a  working  capital
deficiency of  $7,666,382,  a  stockholders'  deficiency  of  $7,170,021  and an
accumulated deficit of $21,240,854 at June 30, 2007.

The  Company has  incurred  cumulative  losses  since  inception  and has funded
operations  primarily  through  related-party  loans and investor  capital.  The
ability of the  Company to  continue  as a going  concern  is  dependent  on the
Company's  ability to further  implement its business plan,  raise capital,  and
generate  revenues.  The  consolidated  financial  statements do not include any
adjustments  that might be  necessary  if the company is unable to continue as a
going concern.

The Company is  dependent  upon the ability to resolve its  liquidity  problems,
principally by obtaining additional debt financing and/or equity capital. In May
and August 2007, the Company obtained $70,000 and $65,000, respectively, in debt
financing.

Note 3 - Related Party Transactions

Accounts Receivable - Related Party

At June 30, 2007, the Company has an accounts receivable from a company owned by
the Company's Vice Chairman and principal  shareholder  amounting to $35,000. In
connection  with this  receivable,  the  Company  recorded  deferred  revenue of
$35,000 from progress  invoices billed to this related  company  relating to the
performance of services which will be recognized as revenue upon completion.  At
June  30,  2007,   deferred  revenue  of  $35,000  has  been  reflected  on  the
accompanying consolidated balance sheet.


                                      -7-
<PAGE>

               Connected Media Technologies, Inc. and Subsidiaries
        Unaudited Notes to Consolidated Financial Statements (continued)
                                  June 30, 2007

Accounts Payable - Related Parties

At June 30,  2007,  the  Company  had  $42,189 of  accounts  payable to National
Communications,  Inc.,  a  company  owned by the  Company's  Vice  Chairman  and
principal  shareholder  Robert  Rodriguez.  Additionally,  at June 30, 2007, the
Company had $177,923 of accounts  payable to a law firm related to the Company's
former  director/executive  officer.  Subsequent to the issuance of this report,
the Company disengaged this related party as its corporate counsel.

At June 30,  2007,  the  Company  had  outstanding  accounts  payable to various
related parties amounting to $42,878.

Due to Related Party

National  Communications  Inc.,  from  time to time,  provided  advances  to the
Company for operating  expenses.  At June 30, 2007, the Company had a payable to
National   Communications  Inc.  amounting  to  $143,450.   These  advances  are
short-term in nature and non-interest bearing.

Notes Payable - Related party and Accrued Interest - Related Party

At June 30, 2007, the Company has a note payable to Irrevocable  Trust Agreement
Number  III  ("Trust  III") in the  amount of  $452,000.  This note  matured  on
December 9, 2006 pursuant to a Loan Extension  Agreement dated January 31, 2006.
In December 2006,  the Company  defaulted on the Line of Credit (see Note 4) and
it was repaid to the bank with proceeds from the  Certificate of Deposit held by
Trust III (the  "Guarantor") in the amount of $250,000.  Leigh M. Rothschild,  a
Director  of the Company  until  January 30,  2007  (resignation  date),  is the
primary beneficiary of Trust III. Accordingly, at June 30, 2007, the Company has
notes payable outstanding to Trust III of $452,000 and accrued interest payable,
related party of $28,044.

Other

The Company  subleases  office space, on a month-to-month  basis,  from National
Communications,  Inc.,  a  company  owned by the  Company's  Vice  Chairman  and
principal  shareholder Robert Rodriguez.  For the six months ended June 30, 2007
and 2006,  rent  expense to this  related  party  amounted  to  $15,000  and $0,
respectively,  and is included in rent expense on the accompanying  consolidated
statement of operations.

For the six months ended June 30, 2007, the Company  recorded revenue of $36,500
for the  performance  of services to National  Communications,  Inc.,  a company
owned by the Company's Vice Chairman and principal  shareholder.  The amount was
fully collected as of June 30, 2007.

The  Company  engaged  McLaughlin  & Stern,  LLP a law firm  whereby  one of the
partners is the father of a former director and executive  officer.  The Company
had total  expenses of $6,275 for legal fees to this  related  party for the six
months ended June 30, 2007. The Company has used the services of the law firm to
handle  various  transactions  and general SEC related  matters,  including  the
preparation of annual and quarterly  reports.  Subsequent to June 30, 2007, this
director resigned and the law firm was disengaged.


                                      -8-
<PAGE>

               Connected Media Technologies, Inc. and Subsidiaries
        Unaudited Notes to Consolidated Financial Statements (continued)
                                  June 30, 2007

Note 4 - Financing Arrangements

Convertible Debentures Payable

The convertible debenture liability is as follows at June 30, 2007:

Convertible debentures payable                                       $1,677,300
Less: unamortized discount on debentures                               (234,167)
                                                                     ----------
Convertible debentures, net                                          $1,443,133
                                                                     ==========

On July 10,  2006,  in  connection  with the  reverse  acquisition,  the Company
assumed two secured convertible debentures with Montgomery Equity Partners, Ltd.
("Montgomery").  Under the terms of the financing agreement with Montgomery, the
Company  issued to Montgomery a secured  convertible  debenture in the amount of
$718,000 as well as an additional secured convertible debenture in the amount of
$400,000.  Both convertible debentures have an interest rate of 14% and maturity
dates of April 30, 2007, and are convertible into shares of the Company's common
stock at a conversion price equal to the lesser of (a) $0.04 or (b) seventy five
percent (75%) of the lowest Closing Bid Price of the Common Stock,  as quoted by
Bloomberg, LP, of the ten (10) trading days immediately preceding the Conversion
Date. The Conversion  Price may be adjusted  pursuant to the other terms of this
Debenture.  The note was  amended on June 28,  2007 with an  amended  conversion
price equal to the lesser of (a) $0.01 or (b) sixty  percent (60%) of the lowest
Closing Bid Price of the Common Stock.

On July 13, 2006, in connection  with the "Second  Closing"  contemplated by the
Securities  Purchase  Agreement by and between the Company and  Montgomery,  the
Company  issued to Montgomery a secured  convertible  debenture in the amount of
$300,000.  The convertible  debenture has an interest rate of 14% and a maturity
date of October 14, 2007, and is convertible into shares of the Company's common
stock at a  conversion  price  equal to the lesser of (a) $0.016 or (b)  seventy
five  percent  (75%) of the lowest  Closing  Bid Price of the Common  Stock,  as
quoted by Bloomberg,  LP, of the ten (10) trading days immediately preceding the
Conversion  Date.  The  Conversion  Price may be adjusted  pursuant to the other
terms of this Debenture.  In addition,  upon an "Event of Default" (as that term
is defined in the debenture),  the conversion  price will permanently be reduced
to $ 0.0001. In connection with the debt issuance on July 13, 2006,  $32,250 was
deducted  from the gross  proceeds  of which  $30,000 is being  deferred as debt
discount and amortized over the life of the convertible  debentures.  Other fees
taken from the $300,000 in gross proceeds include $2,250 of structuring fees and
related  costs  and fees,  which are  treated  as debt  issue  costs and will be
amortized to debt issue cost expense over the remaining life of the debenture.

On August 30, 2006, in connection with the "Third  Closing"  contemplated by the
Securities  Purchase  Agreement by and between the Company and  Montgomery,  the
Company  issued to Montgomery a secured  convertible  debenture in the amount of
$300,000.  The convertible  debenture has an interest rate of 14% and a maturity
date of November  30,  2007,  and is  convertible  into shares of the  Company's
common  stock at a  conversion  price  equal to the  lesser of (a) $0.016 or (b)
seventy five percent (75%) of the lowest  Closing Bid Price of the Common Stock,
as quoted by Bloomberg,  LP, of the ten (10) trading days immediately  preceding
the Conversion Date. The Conversion Price may be adjusted  pursuant to the other
terms of this Debenture.  In addition,  upon an "Event of Default" (as that term
is defined in the debenture),  the conversion  price will permanently be reduced
to $ 0.0001.

In connection  with the debt  issuance on August 30, 2006,  $30,000 was deducted
from the gross  proceeds and is being  deferred as debt  discount and  amortized
over the life of the convertible debentures.

The  Convertible  Debentures  are secured by a first priority lien on all of the
Company's  assets.  As further security for the Company's  obligations under the
Convertible  Debentures,  the Company  executed an Amended and  Restated  Pledge
Agreement, pursuant to which the Company pledged 60,000,000 shares of its common
stock to Montgomery which are held in escrow.


                                      -9-
<PAGE>

               Connected Media Technologies, Inc. and Subsidiaries
        Unaudited Notes to Consolidated Financial Statements (continued)
                                  June 30, 2007

Pursuant to the funding  transaction,  Montgomery  was also issued a warrant for
8,000,000 shares of the Company's common stock. The warrant is exercisable for a
period of three years from the date of issuance, which was January 31, 2006. The
exercise  price per share  under the warrant is $0.0001 per share and the shares
issuable  upon  exercise of the  warrant  are to be  included in a  registration
statement.

Pursuant  to the  terms of a  Registration  Rights  Agreement,  the  Company  is
required to register the shares underlying the Convertible  Debentures,  as well
as the  shares  to be issued  pursuant  to the  Warrant  within 60 days from the
Closing Date of the Stock  Purchase  Agreement  with NMI and is required to have
the registration  statement  declared effective 90 days from the date of filing.
In the event that the registration  statement is not filed or declared effective
within these time limits,  the Company may be subject to  liquidated  damages in
the  amount of 2% of the  entire  funding  amount per month and may be deemed in
default of the operative  agreements.  Based on discussions  with Montgomery and
the  subsequent  loan  modification  Agreement,  the  Company did not accrue any
liquidating damages as of June 30, 2007.

In connection  with the assumption of these  debentures,  the Company  assumed a
debt discount  $723,818  which is being  deferred as debt discount and amortized
over  the  remaining  life  of  the  convertible  debentures.  Additionally,  in
connection with the assumed secured convertible debentures,  the Company assumed
debt issue costs of $23,272  funds which are  recorded as an asset.  These costs
are fees and expenses  incurred in  connection  with  obtaining the debt funding
from  entities  other than the  lender.  The debt issue  costs  assumed  will be
amortized to debt issue cost expense over the remaining life of the debentures.

During the six months ended June 30, 2007,  amortization of debt issue costs was
$11,436. The remaining balance of debt issue costs at June 30, 2007 was $10,150.
The  amortization  of debt discounts for the six months ended June 30, 2007, was
$558,686. The balance of the discount is $234,167 at June 30, 2007.

In 2006, the Company evaluated whether or not the secured convertible debentures
contain embedded  conversion  options,  which meet the definition of derivatives
under SFAS 133  "Accounting for Derivative  Instruments and Hedging  Activities"
and  related  interpretations.  The  Company  concluded  that since the  secured
convertible  debentures  had a variable  conversion  rate the Company  could not
guarantee  it would have enough  authorized  shares  pursuant to the criteria of
EITF 00-19 and therefore the embedded conversion option must be accounted for as
a  derivative.  In  addition,  all  non-employee  options  or  warrants  must be
classified as liabilities for the same reason.  On acquisition date, the Company
assumed an embedded  conversion  options  liability  of  $1,248,189  and warrant
liability relating to 8,200,000 warrants of $15,543.

In December 2006, the FASB issued FSP EITF 00-19-2, "Accounting for Registration
Payments" which was effective immediately. This FSP amends EITF 00-19 to require
potential  registration  payment  arrangements  to be treated  as a  contingency
pursuant to FASB Statement 5 rather than at fair value. We considered the effect
of  this  standard  on  the  above  embedded   conversion   option  and  warrant
classification  as a liability and determined that the accounting would not have
changed as a result of this standard; since the variable rate on the convertible
debentures still cause derivative treatment.  Therefore,  there was no effect of
implementing this standard.

On March 21,  2007,  the  Company  entered  into a Loan  Modification  Agreement
effective  February  2007,  with  Montgomery  pursuant  to which the due date on
outstanding  promissory  notes was  extended  to June 30,  2007,  with  interest
accruing at 14%. The  Agreement  also  provides  that the Company may redeem the
notes for a payment of $1 million with the  convertible  promissory  note in the
amount of  $678,000,  still  remaining  outstanding  as of June 30,  2007.  Upon
payment of the $1 million, Montgomery will release all liens and encumbrances it
holds on the  assets of the  Company  and will hold back for a period of 90 days
from  converting  or  selling  and  shares   underlying  the  convertible  note.
Thereafter,  Montgomery may convert and sell shares under the convertible  notes
in amount not to exceed $56,500 per calendar month. The conversion price changed
to $0.01 per share and a discount on the conversion  price will change to 60% of
the  lowest  bid  price  of the  Company's  common  stock  during  the  10  days
immediately


                                      -10-
<PAGE>

               Connected Media Technologies, Inc. and Subsidiaries
        Unaudited Notes to Consolidated Financial Statements (continued)
                                  June 30, 2007

preceding the  conversion  rate.  Upon payment of the full  Restated  Redemption
Price,  the Company  will issue to  Montgomery  a warrant to purchase 10% of the
outstanding  Secured  Convertible  Debentures on June 30, 2007, in shares of the
Company's  common  stock.  The warrant will have an exercise  price equal to one
cent  ($0.01).  The  warrant  will have a seven  year  maturity  date and demand
Registration  Rights. In addition,  all currently  outstanding  warrants held by
Montgomery are reset to a $.0001 exercise price on the modification date.

On May 15, 2007, in connection  with the  Securities  Purchase  Agreement by and
between the Company and Cornell Capital Partners,  the Company issued to Cornell
Capital Partners a secured convertible  debenture in the amount of $70,000.  The
convertible  debenture has an interest rate of 18% and a maturity date of August
1, 2007,  and is  convertible  into shares of the  Company's  common  stock at a
conversion price equal to the lesser of (a) $0.002 or (b) sixty percent (60%) of
the lowest Closing Bid Price of the Common Stock, as quoted by Bloomberg, LP, of
the ten (10)  trading  days  immediately  preceding  the  Conversion  Date.  The
Conversion Price may be adjusted  pursuant to the other terms of this Debenture.
In  addition,  upon an  "Event  of  Default"  (as that  term is  defined  in the
debenture),  the entire principal balance,  accrued interest outstanding and all
other   obligation   under  the  debenture  is  immediately   due  and  payable;
additionally, the default interest is accrued on the unpaid principal balance at
24% or the highest rate  permitted by  applicable  law, if lower.  In connection
with the debt  issuance  on May 15,  2007,  fees taken from the $70,000 in gross
proceeds  include $10,500 of structuring fees and related costs and fees paid to
an  affiliate  of the  lender,  which are treated as debt  discount  and will be
amortized to debt issue cost expense over the remaining life of the debenture.

On June 28, 2007,  the Company  entered  into a Loan  Extension  Agreement  with
Montgomery and Cornell Capital  Partners.  Under the terms of the loan extension
agreement,  the maturity date of each debenture above was extended to August 22,
2007.  The  annual  interest  rate  in the  original  notes  remains  unchanged.
Additionally,  the conversion price was amended such that each of the debentures
is convertible  into shares of the Company's  common stock at a conversion price
equal to the  lesser  of (a)  $0.01 or (b)  sixty  percent  (60%) of the  lowest
Closing Bid Price of the Common Stock,  as quoted by  Bloomberg,  LP, of the ten
(10) trading days immediately preceding the Conversion Date.

At June 30, 2007, the Company revalued the embedded  conversion option liability
and warrants  resulting in a loss on derivative  liability of  $3,128,666  and a
gain on warrant  liability  of $79,388,  primarily  due to  fluctuations  in the
Company's  stock  price.  At June  30,  2007,  the fair  value  of the  embedded
conversion  option  liability and warrant  liability  were  estimated  using the
Black-Scholes  option  pricing model with the following  assumptions:  estimated
volatility  of 404%;  risk-free  interest  rate  ranging  from  4.54% to  4.91%;
estimated  life  of 1  year  based  on the  remaining  contractual  life  and no
dividends. At June 30, 2007, the estimated fair value of the embedded conversion
option liability and warrant liability was $4,359,160 and $6,541,  respectively,
and are reflected on the accompanying consolidated balance sheet.

In August 2007,  the  maturity  date of the above loans was extended to November
30, 2007 (See Note 7).

On March 9,  2007,  Montgomery  converted  $24,000 of the  $718,000  convertible
debenture  issued to  Montgomery  on January  31,  2006,  into an  aggregate  of
30,000,000 shares of common stock. The conversion price was $.0008 per share and
the conversion reduced the principal amount of this debenture to $654,000.

On June 15,  2007,  Montgomery  converted  $28,700 of the  $718,000  convertible
debenture  issued  to  Montgomery  on  January  31,  2006 into an  aggregate  of
154,301,074 shares of common stock. The conversion price was $.000186 per share.
On June 29,  2007,  Montgomery  converted  $18,000 of the  $718,000  convertible
debenture  issued  to  Montgomery  on  January  31,  2006 into an  aggregate  of
60,000,000  shares of common stock.  The conversion  price was $.0003 per share.
The two conversions reduced the principal amount of this debenture to $607,300.

As a result of the conversions, the fair value of the embedded conversion option
liability totaling $267,525 at the conversion date was reclassified to equity.


                                      -11-
<PAGE>

               Connected Media Technologies, Inc. and Subsidiaries
        Unaudited Notes to Consolidated Financial Statements (continued)
                                  June 30, 2007

Line of Credit

The Company entered into a transaction with a bank pursuant to which the Company
had access to a two hundred fifty thousand dollar  ($250,000) line of credit. In
general,  all or any portion of the $250,000 may be drawn down at any time,  and
must be repaid in full by October 25, 2006, with interest at prime plus 1.5%. In
addition,  each  consecutive  month,  the Company  must pay accrued  interest on
outstanding  amounts  owed.  The  Company  used the line of credit  for  general
working capital.  The credit line was guaranteed by a stockholder and secured by
a  Certificate  of Deposit  owned by a director of the  Company.  On October 25,
2006,  the $250,000 Line of Credit  became due and payable in full.  The Company
did not repay  the  amount  due on the due  date.  In March  2007,  the  Company
received  notice from the bank that the amounts due under the line of credit had
been assigned on December 5, 2006, to  Irrevocable  Trust  Agreement  Number III
(See Note 3).

Loan Payable

The  Company  has a loan with a bank.  The loan  bears  interest  at  9.75%,  is
renewable annually, and is secured by accounts receivable. At June 30, 2007, the
principal  amount due under the loan amounted to $38,271.  During the six months
ended June 30,  2007,  National  Communications,  Inc.,  a company  owned by the
Company's Vice Chairman and principal  shareholder paid down $10,000 of the bank
loan and the paid down amount was recorded in due to related party.

The weighted  average interest rate on the Company's  short-term  obligation was
approximately 9%.

Note 5 - Stockholders' Deficiency

Common Stock

On March 9,  2007,  Montgomery  converted  $24,000 of the  $718,000  convertible
debenture  issued  to  Montgomery  on  January  31,  2006 into an  aggregate  of
30,000,000  shares of  common  stock.  On June 15,  2007,  Montgomery  converted
$28,700 of the remaining principal of the $718,000 convertible  debenture issued
to Montgomery on January 31, 2006,  into an aggregate of  154,301,074  shares of
common stock. On June 29, 2007,  Montgomery  converted an additional  $18,000 of
the  remaining  principal  of  the  $718,000  convertible  debenture  issued  to
Montgomery on January 31, 2006, into an aggregate of 60,000,000 shares of common
stock.  The  conversions  reduced  the  principal  amount of this  debenture  to
$607,300.

Stock Options

On March 5, 2007, the Company granted an aggregate of 2,700,000 stock options to
purchase  2,700,000  shares  of the  Company's  common  stock to  employees  and
consultants at an exercise price of $.0014. The options expire on March 5, 2017.
The Company valued these options at $3,780  utilizing the  Black-Scholes  option
pricing model.  The Company used the following  assumptions  for determining the
fair value of options  granted under the  Black-Scholes  option  pricing  model:
expected volatility of 371% (based on historical volatility); expected term of 8
years; risk free interest rate of 4.54%; and a dividend yield of 0%. The Company
uses historical  data to estimate option exercise term and employee  termination
within the valuation model. The expected term of options granted  represents the
period of time that options granted are expected to be outstanding.

For the six  months  ended  June 30,  2007,  the  Company  recorded  stock-based
compensation related to stock options of $11,426 pursuant to SFAS 123R which was
based on vesting provisions.

At June 30, 2007, there was $51,730 of total unrecognized  compensation  expense
related to non-vested option-based compensation arrangements.


                                      -12-
<PAGE>

               Connected Media Technologies, Inc. and Subsidiaries
        Unaudited Notes to Consolidated Financial Statements (continued)
                                  June 30, 2007

A summary of the status of the  Company's  outstanding  stock options as of June
30, 2007, and changes during the period then ended are as follows:

                                                  Number of     Weighted Average
                                                   Options       Exercise Price
                                                  ----------    ----------------
Balance at December 31, 2006                      32,100,000        $ 0.016
Granted                                            2,700,000         0.0014
Exercised                                                 --             --
Forfeited                                                 --             --
                                                  ----------        -------
Balance at June 30, 2007                          34,800,000        $ 0.015
                                                  ==========        =======

Options exercisable at end of period              26,325,000        $ 0.018
                                                  ==========        =======
                                                                    $0.0014

Weighted average fair value of options granted during the period

The following table summarizes  information about employee and consultants stock
options outstanding at June 30, 2007:

<TABLE>
<CAPTION>
                   Options Outstanding                         Options Exercisable
---------------------------------------------------------   -------------------------
                                    Weighted
                                    Average      Weighted                    Weighted
                     Number        Remaining      Average      Number         Average
   Range of      Outstanding at   Contractual    Exercise   Exercisable at   Exercise
Exercise Price   June 30, 2007    Life (Years)     Price    June 30, 2007      Price
--------------   --------------   ------------   --------   --------------   --------
<S>                <C>                <C>         <C>         <C>             <C>
   $  0.02         21,000,000         1.25        $  0.02     21,000,000      $  0.02
   $ 0.009         10,800,000         9.25          0.009      5,400,000        0.009
   $0.0014          2,700,000         9.75         0.0014        337,500       0.0014
   $  0.04            300,000         0.75           0.04        300,000         0.04
                   ----------                     -------     ----------      -------
                   34,800,000                     $ 0.015     27,037,500      $ 0.018
                   ==========                     =======     ==========      =======
</TABLE>

Common Stock Warrants

A summary of the status of the Company's  outstanding  stock warrants as of June
30, 2007, and changes during the period then ended are as follows:

                                                  Number of     Weighted Average
                                                   Options       Exercise Price
                                                  ---------     ----------------
Balance at December 31, 2006                      8,200,000         $0.0003
Granted                                                  --              --
Exercised                                                --              --
Forfeited                                                --              --
                                                  ---------         -------
Balance at June 30, 2007                          8,200,000         $0.0003
                                                  =========         =======

Warrants exercisable at end of period             8,200,000         $0.0003
                                                  =========         =======


                                      -13-
<PAGE>

               Connected Media Technologies, Inc. and Subsidiaries
        Unaudited Notes to Consolidated Financial Statements (continued)
                                  June 30, 2007

The following table summarizes  information  about warrants  outstanding at June
30, 2007:

<TABLE>
<CAPTION>
                  Warrants Outstanding                        Warrants Exercisable
---------------------------------------------------------   -------------------------
                                    Weighted
                                    Average      Weighted                    Weighted
                     Number        Remaining      Average      Number         Average
   Range of      Outstanding at   Contractual    Exercise   Exercisable at   Exercise
Exercise Price   June 30, 2007    Life (Years)     Price    June 30, 2007      Price
--------------   --------------   ------------   --------   --------------   --------
<S>                <C>                <C>         <C>         <C>             <C>
    $.0001         8,000,000          1.75        $.0001      8,000,000       $.0001
    $ 0.01           200,000          1.75           .01        200,000          .01
                   ---------                      ------      ---------       ------
                   8,200,000                      $.0003      8,200,000       $.0003
                   =========                      ======      =========       ======
</TABLE>

Note 6 - Commitments and Contingencies

Agreements with Rothschild Trust Holdings, LLC

On January 31, 2006,  Connected Media entered into a Purchase and Sale Agreement
with Rothschild Trust Holdings, LLC (the "Trust" or "RTH"), a related party, for
the sale of certain  issued and pending  patents in  exchange  for the return of
13,241,223  shares of  Connected  Media's  common  stock  held by the Trust (the
"Shares").  As additional  consideration,  the Trust granted  Connected  Media a
license  to use the  patents  pursuant  to the  terms of a License  and  Royalty
Agreement,  which grants  Connected  Media a  twelve-month  right of election to
license the patents.  If Connected  Media  exercises the right of election,  the
Trust shall grant  Connected Media a two-year  exclusive  license for the use of
the  patents  that is  renewable  subject to  performance,  and the Trust  shall
receive  10%  royalties  on all gross  receipts  as defined in the  License  and
Royalty Agreement.

On January 31, 2006, Connected Media, the Trust, Montgomery, and David Gonzalez,
as the Escrow Agent, entered into an Escrow Agreement,  whereby the Trust agreed
to place  the  13,241,223  shares  that were  returned  to  Connected  Media and
Connected Media agreed to deposit royalties  otherwise payable to the Trust into
an escrow  account  held by the Escrow  Agent  until such time as  royalties  of
$690,000 have been  deposited  into the escrow  account or until  Montgomery has
been repaid and/or  converted  $690,000 of the Convertible  Debentures.  At such
time,  the Trust shall have 30 days to replace the Shares with  $728,267,  which
shall be distributed to the Company in exchange for the Shares;  otherwise,  the
Escrow  Agent shall  release the Shares to the Company and the  royalties to the
Trust.

Litigation

On March 23, 2007, the Company and its wholly owned  subsidiary Trust Licensing,
Inc., were each served with a lawsuit from  Irrevocable  Trust Agreement  Number
III. The lawsuit was commenced in the Circuit Court of the 17th Judicial Circuit
in and for Broward County,  Florida. The lawsuit relates to amounts claimed owed
to Irrevocable  Trust Agreement  Number III in the  approximate  total principal
amount of $500,000,  and also seeks various interest,  costs, and fees (see Note
3). These amounts are in dispute and the case is scheduled for trial on November
26, 2007.

On March 21,  2007,  Rothschild  Trust  Holdings,  LLC,  the licensor of various
patents to the Company,  alleged, among other things, that the Company's license
to these patents has been  terminated.  The patents licensed to the Company were
included in the License and Royalty  Agreement,  by and between Rothschild Trust
Holdings,  LLC and the Company,  dated as of January 31, 2006,  The licensor has
now claimed all right, title and interest in the subject  intellectual  property
and has further  asserted that any  subsequent  use or sublicense of the subject
intellectual property will constitute  infringement.  The Company disagrees with
the licensor's assertions concerning the Company's rights in


                                      -14-
<PAGE>

               Connected Media Technologies, Inc. and Subsidiaries
        Unaudited Notes to Consolidated Financial Statements (continued)
                                  June 30, 2007

the intellectual  property, and is currently evaluating its options with counsel
with respect to the continued use of the subject  intellectual  property rights.
The dispute relates,  in part, to the parties' differing  interpretations of the
terms of the License  and  Royalty  Agreement,  and the  subsequent  actions and
conduct between the parties  relating  thereto.  Although the Company intends to
assert its rights to the intellectual  property,  the patents do not represent a
material portion of the Company's operating revenue.

From time to time we may become subject to proceedings,  lawsuits and unasserted
claims in the  ordinary  course of  business.  Such  matters are subject to many
uncertainties,  and outcomes are not predictable with assurance.  As of the date
of this report,  we do not believe  that any of these  matters would be material
to the Company's financial condition or operation.

Note 7 - Subsequent Events

In July 2007, Montgomery converted $59,500 of the $718,000 convertible debenture
issued to  Montgomery  on January 31, 2006,  into an  aggregate of  184,973,684,
shares of common stock.

In  August  2007,  Montgomery  converted  $34,400  of the  $718,000  convertible
debenture  issued to  Montgomery  on January  31,  2006,  into an  aggregate  of
233,842,672 shares of common stock.

On July 30, 2007,  Connected  Media issued a  promissory  note in the  principal
amount of $336,611 (the "First Promissory Note") (to be amended and corrected to
$286,611) in the name of Roma Financial Services, Inc. ("Roma"), a related party
company owned by the Company's  Vice Chairman and principal  shareholder  Robert
Rodriguez.  The First Promissory Note accrues interest at 14% per annum with all
principal and accrued  interest  payable in full on the earlier to occur of: (i)
the Company  receiving a bridge loan or equity  investment  with net proceeds to
the Company of at least $1 million or (ii)  August 31,  2008.  In  general,  the
Company  agrees to utilize  payments  received  from its  customers to repay the
amounts  outstanding  under this promissory  note. The First  Promissory Note is
subordinated only to the notes of YA Global. Additionally,  at any and all times
that amounts are outstanding  under this note,  borrower shall grant to lender a
non-exclusive  license to utilize,  market,  sell products and/or services based
upon any and all intellectual property owned or licensed by borrower, subject to
mutually agreed upon terms and conditions, including the payment of royalties to
borrower which borrower agrees to utilize for the repayment of the  indebtedness
represented  by the note.  If borrower is unable to repay any amounts owed under
the note when due, lender may, at its option,  offset such amounts with payments
due to borrower  under the above  mentioned  license.  In addition,  the Company
agreed to pay Roma half of the interest  rate due,  equal to seven percent (7%),
every month starting October 1, 2007 and every month thereafter.  The balance of
the interest rate due, equal to seven percent (7%), will be accrued and added to
amounts owed under the promissory  note. As part of the principal owed under the
First  Promissory  Note, Roma will pay-off (i) all current  liabilities that the
Company has with  National  Communications  Ltd.  and (ii) the  balance  owed to
United Bank. At closing,  approximately $198,810 was used to pay off all current
liabilities  the Company had with National  Communications  Ltd.,  approximately
$50,000  was used to pay off the  United  Bank  loan,  $7,500 was used to prepay
three months of rent for its office spaces  leased from National  Communications
Ltd.,  $5,301  was used to  prepay  interest  expense  related  to this note and
$25,000  was  reduced  from  the  gross  proceeds  as a loan  fee  and  expensed
immediately.

On August 9, 2007, the Company issued a promissory note in the principal  amount
of  $100,000  (the  "Second  Promissory  Note") in the name of Roma.  The Second
Promissory Note accrues interest at a rate equal to ten percent (10%) per annum,
with all principal and accrued  interest due  thereunder  payable in full at the
time receivables  pertaining to the advances have been paid to the Company.  The
Second  Promissory  Note states that it  evidences a line of credit  arrangement
between  the  Company  and  Roma.  Roma  agrees  to  provide  a line  of  credit
collateralized by the Company and its wholly-owned  subsidiary,  Newsponet Asset
Acquisition, Inc. receivables. The term of the Second Promissory Note is through
December 31, 2008 or at the time that either the Company or Roma  cancels.  Upon
cancellation  by  either  party,  all  amounts  owed to Roma  under  the  Second
Promissory Note must be paid in full.

On August 15, 2007,  the Company  entered  into an  Amendment to Loan  Extension
Agreement with Montgomery and YA Global Investments, L.P. (f/k/a Cornell Capital
Partners, L.P.) ("YA Global"),  amending that the Loan Extension Agreement dated
June 28,  2007,  by the  Company,  Montgomery  and YA  Global,  with  respect to
extending  the maturity  date of  previously  issued  debentures to November 30,
2007.


                                      -15-
<PAGE>

               Connected Media Technologies, Inc. and Subsidiaries
        Unaudited Notes to Consolidated Financial Statements (continued)
                                  June 30, 2007

On August  15,  2007,  the  Company  entered  into an  Agreement  with YA Global
pursuant  to which the Company  issued a secured  convertible  debenture  in the
principal  amount of $65,000  (the  "Convertible  Debenture").  The Company paid
$8,000 in fees to an  affiliate  of the lender to be treated as a debt  discount
and amortized  over the loan term.  The  Convertible  Debenture is due April 13,
2009 and accrues interest at an annual rate equal to eighteen percent (18%). The
Convertible  Debenture is convertible  into shares of the Company's common stock
at a price per share equal to the lesser of (i) $0.01 or (ii) an amount equal to
sixty percent (60%) of the lowest  closing bid price of the common stock for the
ten (10) trading days  immediately  preceding a conversion date. The Convertible
Debenture is secured by a security  interest in all of the assets of the Company
pursuant to that certain Amended and Restated  Security  Agreement dated January
31, 2006, by and between the Company and YA Global.


                                      -16-
<PAGE>

Item 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION

      This  quarterly  report  on  Form  10-QSB,   including  this  Management's
Discussion  and  Analysis  or  Plan  of  Operations,   contains  forward-looking
statements  regarding  future events and our future  results that are subject to
the safe harbors  created under the  Securities  Act of 1933 and the  Securities
Exchange  Act of 1934.  These  statements  are  based on  current  expectations,
estimates,  forecasts,  and projections about the industries in which we operate
and the beliefs and  assumptions  of our  management.  Words such as  "expects,"
"anticipates,"  "targets," "goals," "projects,"  "intends," "plans," "believes,"
"seeks," "estimates,"  "continues," "may," variations of such words, and similar
expressions  are  intended  to  identify  such  forward-looking  statements.  In
addition,  any  statements  that refer to  projections  of our future  financial
performance,  our  anticipated  growth  and  trends  in our  business  and other
characterizations   of  future  events  or  circumstances  are   forward-looking
statements. Readers are cautioned that these forward-looking statements are only
predictions and are subject to risks,  uncertainties,  and assumptions  that are
difficult to predict.

      Therefore,  actual results may differ  materially and adversely from those
expressed in any  forward-looking  statements.  We undertake  no  obligation  to
revise or update any forward-looking statements for any reason.

OUR BUSINESS

      We are a sales and marketing  company focused on digital media that offers
a  broad  spectrum  of  digital  services  across  current  and  emerging  media
platforms,  including print,  television,  radio,  Internet,  CD, DVD and mobile
devices  such as  mobile  phones  and PDAs.  Our  customers  include  companies,
government agencies,  advertising  agencies,  advertisers and content owners who
seek to leverage  opportunities in this age of "digital  convergence." Thanks to
the advent of digital  technology,  different  media  platforms  have  converged
causing many changes in the way entertainment content, advertising and marketing
messages are delivered to their audience.  Companies are faced with a fragmented
marketplace,  where  consumers  are reached  through  multiple  channels  and on
multiple  devices - from  televisions and radios,  to computers,  game consoles,
mobile phones,  personal digital  assistants  (PDA's) and portable media players
(such as the iPOD and other  devices).  We offer  creative  services,  marketing
communications,  content creation and  distribution,  and technology to help our
clients navigate through this "new media" landscape.

      On October 4, 2006, we acquired the assets of NewsProNet Interactive,  LLC
("NPN"), a leader in converged media content solutions and interactive  branding
strategies  for local  television  broadcasters.  These assets  include  several
intellectual  property  assets,  including a library of  broadcast  content.  We
intend to use these assets to both service current clients of NPN (which include
several  broadcast media companies),  and to develop numerous  cross-selling and
business development opportunities using our assets and the assets of NMI.

      Technology Licenses

      Through  the license  agreement  with  Rothschild  Trust  Holdings,  LLC.,
("RTH")  the  Company is the  exclusive  licensee  of United  States  Patent No.
6,101,534,  "Interactive, Remote, Computer Interface System" ("'534 Patent") and
a second patent, "A Media Validation  System",  U.S. Patent No.  6,952,697.  The
company  also  has  certain  exclusive  rights  to  several   additional  patent
applications filed with the United States Patent and Trademark Office.

      In general,  the claims of the 534 patent relate to technology that allows
multimedia content stored on a removable local media (including, but not limited
to CD-ROM and DVD-ROM discs) to be  "controlled" or "released" for access by the
user by visiting a related website on the Internet.


                                      -17-
<PAGE>

Sales Strategy

      In addition to the ongoing  business of NMI and NPN, we are leveraging the
established  customer base and experience of NMI as it relates to  opportunities
for our patent licenses.  For example, NMI has been hired by a tourism bureau in
Europe to  implement  an Internet  marketing  campaign to promote  travel to the
destination.  In the past NMI has created and placed an online marketing program
for this customer.

      We have an in-house  sales staff,  currently  consisting of four employees
that target  customers in travel,  advertising,  cable  television and broadcast
media, training education, film, music and video.

      The  goal  of our  sales  staff  is to  utilize  some  or all of our  core
competencies  to craft a solution to meet the needs of each  individual  client.
This can range from the creation of marketing  collateral or a digital  branding
strategy,  to a full-blown  turnkey solution  involving content creation,  media
placement,  web  development  and  creation  of an  interactive  CD-Rom  or  DVD
utilizing patented technology.

      We have  developed a special focus on helping our  customers  leverage the
many  changes  that have  occurred in the areas of  marketing,  advertising  and
content  delivery in the age of digital  convergence  and  converged  media.  We
believe that government agencies as well as private sector companies across many
industries  and target  markets are faced with new  challenges  as more and more
consumers  use the  Internet  and a wide range of  digital  media  platforms  to
receive their entertainment and information. We offer digital media services and
technology  solutions to help our customers meet such challenges in a constantly
changing environment.

      We believe that if potential revenue streams materialize from our services
and  applications  in a timely  and  meaningful  fashion,  it will  enable us to
increase  shareholder  value.  However,  we do not  believe  that cash flow from
operations  alone  will be  sufficient  to fund  our  activities  in the next 12
months. As of June 30, 2007, we had total assets of approximately $530,000 ($847
of which is  cash),  and  total  liabilities  of  approximately  $7,591,000.  As
described  below,  we will need to obtain  additional  financing  for us to both
implement our plans and to continue as a going concern.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

      The  preparation  of  financial  statements  and  related  disclosures  in
conformity with accounting  principles  generally  accepted in the United States
requires  us to make  judgments,  assumptions,  and  estimates  that  affect the
amounts  reported in the  Consolidated  Financial  Statements  and  accompanying
notes. Note 1 to the audited  Consolidated  Financial Statements included in the
Company's  annual  report on Form  10-KSB for the year ended  December  31, 2006
describe the significant accounting policies and methods used in the preparation
of the Consolidated Financial Statements. These critical accounting policies are
affected  significantly  by judgments,  assumptions,  and estimates  used in the
preparation of the  Consolidated  Financial  Statements and actual results could
differ materially from the amounts reported based on these policies.

Accounting for Derivatives - We evaluate our convertible debt, options, warrants
or other  contracts to determine if those  contracts or embedded  components  of
those  contracts  qualify as  derivatives  to be separately  accounted for under
Statement of Financial  Accounting  Standards  133  "Accounting  for  Derivative
Instruments and Hedging Activities" and related  interpretations  including EITF
00-19  "Accounting  for  Derivative   Financial   Instruments  Indexed  to,  and
Potentially  Settled in, a Company's Own Stock".  The result of this  accounting
treatment is that the fair value of the embedded  derivative is marked-to-market
each balance sheet date and recorded as a liability.

      In the event that the fair value is recorded as a liability, the change in
fair value is recorded in the  consolidated  statement  of  operations  as other
income or expense. Upon conversion or exercise of a derivative  instrument,  the
instrument  is marked to fair  value at the  conversion  date and then that fair
value  is  reclassified  to  equity.   Equity  instruments  that  are  initially
classified as equity that become subject to reclassification  under SFAS 133 are
reclassified   to  liability  at  the  fair  value  of  the  instrument  on  the
reclassification date.


                                      -18-
<PAGE>

      In  December  2006,  the FASB  issued FSP EITF  00-19-2,  "Accounting  for
Registration  Payments"  which was effective  immediately.  This FSP amends EITF
00-19 to require  potential  registration  payment  arrangements be treated as a
contingency  pursuant  to  FASB  Statement  5  rather  than at  fair  value.  We
considered the effect of this standard on the above embedded  conversion  option
and warrant  classification  as a liability and  determined  that the accounting
would not have changed as a result of this standard;  since the variable rate on
the convertible  debentures still cause derivative treatment.  Therefore,  there
was no effect of implementing this standard.

Revenue  Recognition.  We follow the  guidance of the  Securities  and  Exchange
Commission's  Staff  Accounting  Bulletin  No. 104 for revenue  recognition.  In
general,  we record revenue when persuasive  evidence of an arrangement  exists,
services have been rendered or product delivery has occurred, the sales price to
the customer is fixed or determinable, and collectibility is reasonably assured.
The  following  are the specific  revenue  recognition  policies for the revenue
streams of the Company:

Content  revenue -  subscription  based:  The Company  produces and  distributes
broadcast and digital content for customers that subscribe to such service under
monthly fixed fee  arrangements.  Revenue is recognized when the minimum content
required to be delivered monthly under the agreement is finalized, and delivered
or made available to the customers for unconditional use.

Content  revenue - revenue sharing  arrangements:  When content is provided on a
revenue  sharing  basis,  the  revenue  is not  determinable  until the  Company
receives  payment from the customer.  Accordingly,  revenue is  recognized  upon
receipt of payment.  There has been no revenue  sharing  revenues during the six
months ended June 30, 2007.

Content revenue - barter arrangements:  Revenue from barter transactions will be
valued at the fair value of the goods  provided or goods  received  whichever is
more readily  determinable  and  recognized  upon delivery of the content by the
Company. There have been no barter revenues during the six months ended June 30,
2007.

Digital media services  revenue:  The Company  creates and  distributes  digital
marketing  content  and  advertising  services  on a project  basis.  Revenue is
recognized  when projects are  completed and made  available to the customer for
unconditional use.

Impairment  of  Long-Lived  Assets.  Our  long-lived  assets  consist of patents
(having a fair value of zero for GAAP  purposes)  a video  content  library  and
equipment.  We review long-lived assets and certain  identifiable assets related
to those assets for impairment whenever circumstances and situations change such
that there is an indication that the carrying amounts may not be recoverable. If
the  undiscounted  future cash flows of the long-lived  assets are less that the
carrying  amount,  their  carrying  amount  is  reduced  to  fair  value  and an
impairment loss is recognized.  On July 10, 2006 (the  "Acquisition  Date"),  we
acquired  all  of  the  outstanding  shares  of  NMI  in  exchange  for a  total
300,507,663 or  approximately  50% of the issued and  outstanding  shares of the
Company's common stock. Pursuant to the Agreement,  on the Acquisition Date, NMI
became a wholly-owned subsidiary of Connected Media Technologies, Inc.

      The  transaction  was  accounted  for as a reverse  acquisition  using the
purchase  method  of  accounting  in  accordance  with SFAS No.  141 since  both
Companies are considered  operating  entities and management of NMI has obtained
control through (i) holding a controlling  interest with no other shareholder or
group  of  shareholders  holding  equivalent  rights  and  (ii)  Board  control.
Accordingly, the consolidated financial statements subsequent to the acquisition
will consist of the balance sheet of NMI at historical  cost,  the balance sheet
of Connected Media Technologies, Inc. marked to fair value based on the purchase
price,  the historical  operations of NMI and the operations of Connected  Media
Technologies, Inc. from the acquisition date. The purchase price is based on the
average fair value of the  Company's  shares  during the period before and after
the date of the  agreement  and the date of the  announcement.  This amounted to
approximately $13,476,000. The purchase price was allocated to the net assets of
Connected  Media  Technologies  Inc.  based on their fair values.  Since we have
minimal  revenues,  have incurred losses and used cash in operations,  we deemed
the  acquired  goodwill  to be  impaired  and  wrote-off  the  goodwill  on  the
acquisition date. Accordingly, for the year ended December 31, 2006, we recorded
an  impairment  of goodwill of  $16,227,967  on the  accompanying  statement  of
operations.


                                      -19-
<PAGE>

Contingencies  and  Litigation.  We  record  a  reserve  for  contingencies  and
litigation  when an adverse  outcome is probable and the amount of the potential
liability is reasonably estimable.

      On March 23,  2007,  the Company  and its  wholly-owned  subsidiary  Trust
Licensing,  Inc.,  were  each  served  with a  lawsuit  from  Irrevocable  Trust
Agreement Number III. The lawsuit was commenced in the Circuit Court of the 17th
Judicial  Circuit in and for Broward  County,  Florida.  The lawsuit  relates to
amounts  claimed  owed  to  Irrevocable   Trust  Agreement  Number  III  in  the
approximate total principal amount of $500,000, and also seeks various interest,
costs, and fees.

      From time to time we may  become  subject  to  proceedings,  lawsuits  and
unasserted  claims in the ordinary course of business.  Such matters are subject
to many  uncertainties,  and outcomes are not predictable with assurance.  As of
the date of this report,  we do not believe that any of these  matters  would be
material to the Company's financial condition or operation.

RESULTS OF OPERATIONS

SIX MONTHS ENDED JUNE 30, 2007 COMPARED TO SIX MONTHS ENDED JUNE 30, 2006

Revenue.  Our net sales were  $505,602 and $40,000 for the six months ended June
30, 2007 and 2006, respectively, an increase of $465,602 or 1164%. This increase
was primarily attributed to the acquisition of NPN Acquisition,  Inc. in October
2006.

Cost of sales.  For the six months  ended June 30, 2007 and 2006,  cost of sales
amounted  to  $204,326  and  $9,362,  respectively,  and  included  the  cost of
independent contractors and production costs.

Operating  Expenses.  Operating  expenses for the six months ended June 30, 2007
were $730,773 compared to operating  expenses of $999,202 for the same period in
2006,  a decrease of  $268,429 or 26.86%.  The  decrease in  operating  expenses
results primarily from the following:

      o     For  the  six  months   ended  June  30,  2007,   depreciation   and
            amortization  expense  amounted to $78,200 as compared to $2,532 for
            the six  months  ended  June 30,  2006,  an  increase  of $75,688 or
            2988.47%.   This   increase  was  primarily   attributable   to  the
            amortization of $33,750 on the intangible assets acquired in October
            2006 and  depreciation  on the fixed assets  acquired in  connection
            with NMI acquisition in July 2006.

      o     For the six months ended June 30, 2007,  professional  fees amounted
            to $116,951 as compared to $99,210 for the six months ended June 30,
            2006, an increase of $17,741.  This increase was  attributable to an
            increase in legal fees associated  with our financings,  acquisition
            activities,   and   registration   statements  and  an  increase  in
            accounting fees.

      o     For the six months  ended June 30, 2007,  rent  expense  amounted to
            $33,000 as  compared  to $1,220  for the six  months  ended June 30,
            2006, an increase of $31,780 or 2605%.  We sublease office space, on
            a month-to-month basis, from National Communications, Inc, a company
            owned by the  Company's  Vice  Chairman  and  principal  shareholder
            Robert  Rodriguez.  For the six  months  ended June 30,  2007,  rent
            expense paid to this related party  amounted to $15,000.  Additional
            rent expense is related to space in Alpharetta,  Georgia occupied by
            NPNAA.

      o     For the six months ended June 30, 2007,  payroll,  contract  service
            and  stock-based  compensation  amounted  to $403,936 as compared to
            $562,342  for the six months  ended  June 30,  2006,  a decrease  of
            $158,406 or 28.17%.  This decrease was attributable to a decrease in
            stock-based compensation related to the vesting of stock options and
            offset by an increase in compensation due to our prior acquisitions.

      o     For the six months ended June 30, 2007,  other selling,  general and
            administrative  expenses amounted to $95,986 as compared to $333,898
            for the six months  ended June 30,  2006,  a decrease of $237,912 or
            71.25%.  This decrease is due to no  acquisitions  in the six months
            ended June 30, 2007.


                                      -20-
<PAGE>

      Other  expenses.  For the six months ended June 30, 2007,  other  expenses
amounted to $3,742,498 as compared to $174,394 for the six months ended June 30,
2006. For the six months ended June 30, 2007, we recorded a loss from the change
in fair value of embedded  conversion option  liabilities of $3,128,666,  a gain
from the  change in fair  market  value of warrant  liability  of  $79,388,  and
interest  expense of $679,180  related  primarily  to the  amortization  of debt
discount and accrued interest on our debt financings.  Additionally, for the six
months ended June 30, 2007, we recorded  interest expense of $ 14,040 related to
a related party loan.

      Net  Loss.  Our net  loss  for the six  months  ended  June  30,  2007 was
$4,171,995 or $0.01 per common share  compared to $1,142,958 or $0.00 per common
share for the same period in 2006.

LIQUIDITY AND CAPITAL RESOURCES

      At June 30, 2007,  we had minimal  cash.  We have no other liquid  assets,
except for accounts receivable.  We intend to finance our activities through use
of the private and public debt and equity financing.

      Prior to the January 2006 Montgomery transaction (described below) and May
and August 2007 funding,  Connected  Media financed their  activities  primarily
through a prior loan from  Montgomery  Equity Partners and loans from, and loans
secured by, related parties.

      Our cash  requirements for the next twelve months are  approximately  $2.5
million,   including   requirements   for  working  capital   (estimated  to  be
approximately  $1.1  million),   research  and  development   (estimated  to  be
approximately  $100,000),  personnel  additions  (estimated to be  approximately
$300,000),  licensing  activities  (estimated to be approximately  $100,000) and
debt service and repayment (estimated to be approximately $900,000). The Company
expects  to obtain the  necessary  funds  during the course of the  twelve-month
period and will manage its activities accordingly.  However, no assurance can be
given that the Company will be successful in its fundraising activities.  In the
event that the  Company is not  successful,  the Company may have to curtail its
business operations.

      In the event we are not able to generate  sufficient funds from operations
or financing from  Montgomery,  we will seek to obtain funding from other means,
including the use of private and public debt and equity financing.

      We do not believe that cash flow from  operations  will be  sufficient  to
fund our activities over the next 12 months.  Our ability to continue as a going
concern is dependent  upon  obtaining  additional  public and private equity and
debt  financing,  (which we do not  anticipate in the  foreseeable  future).  We
cannot be certain that additional  funding will be available as needed,  or upon
terms that are favorable.  If we are unable to obtain the necessary funding,  we
may need to curtail the implementation of our core business  activities and risk
going out of business.

      On January 31, 2006,  prior to the reverse  acquisition,  Connected  Media
completed a financing  agreement  for  $1,718,000  with  Montgomery.  The amount
included the original principal amount of $718,000 previously funded pursuant to
the April 2005 Note plus  accrued  interest  and a 10%  termination  fee. Of the
remaining  $1,000,000  balance of the note,  $400,000  was funded on January 31,
2006, $300,000 was funded on July 10, 2006 and an additional $300,000 was funded
during October 2006.  Under the terms of the agreement,  we issued to Montgomery
secured  convertible  debentures in the amount of  $1,718,000.  The  convertible
debentures  have an interest  rate of 14% and maturity  dates of April 30, 2007,
and are convertible  into shares of our common stock at a conversion price equal
to the  lesser of (a) $0.04 or (b)  seventy  five  percent  (75%) of the  lowest
Closing Bid Price of the Common Stock,  as quoted by  Bloomberg,  LP, of the ten
(10) trading days  immediately  preceding the  Conversion  Date.  The conversion
price may be adjusted pursuant to the other terms of this debenture. On November
3, 2006, Montgomery converted $40,000 of the $718,000 convertible debenture into
an  aggregate  of  5,333,333  shares  of  common  stock  and on March  9,  2007,
Montgomery  converted  $24,000 of the  $718,000  convertible  debenture  into an
aggregate of  30,000,000  shares of common stock.  On June 15, 2007,  Montgomery
converted  $28,700  of  the  remaining  principal  of the  $718,000  convertible
debenture  issued  to  Montgomery  on  January  31,  2006 into an  aggregate  of
154,301,074 shares of common stock. The conversion price was $.000186 per share.
On June 29, 2007, Montgomery converted $18,000 of the remaining principal of the
$718,000 convertible  debenture issued to Montgomery on January 31, 2006 into an
aggregate of 60,000,000 shares of common stock.


                                      -21-
<PAGE>

      The convertible  debentures are secured by a first priority lien on all of
our  assets.  As further  security  for our  obligations  under the  convertible
debentures,  we executed an Amended and Restated Pledge  Agreement,  pursuant to
which we re-pledged the 60,000,000 shares of our common stock to Montgomery that
were originally pledged pursuant to the April 2005 Note.

      Pursuant to the funding transaction,  Montgomery was also issued a warrant
for 8,000,000  shares of our common stock.  The warrant is  exercisable  through
January 31, 2009.  The exercise price per share under the warrant is $0.0001 per
share and the shares issuable upon exercise of the warrant are to be included in
the registration statement.

      Pursuant to the terms of a Registration Rights Agreement,  we are required
to register the shares  underlying the  convertible  debentures,  as well as the
shares to be issued pursuant to the warrant within 60 days from the Closing Date
of the Stock Purchase Agreement with NMI and to have the registration  statement
declared  effective  90 days  from  the  date  thereof.  In the  event  that the
registration  statement  is not filed or declared  effective  within  these time
limits,  we may be  subject  to  liquidated  damages  in the amount of 2% of the
entire  funding  amount per month and may be deemed in default of the  operative
agreements.  We filed an SB-2 registration statement on September 1, 2006, which
has not yet been declared effective. Based on communications with the lender and
the February 2007,  loan  modification  agreement,  the lender did not intend to
enforce this liquidated damages provision as of December 31, 2006.

      On March 21, 2007, we entered into a Loan Modification Agreement effective
February  2007,  with  Montgomery  pursuant to which the due date on outstanding
promissory  notes was extended to June 30, 2007, with interest  accruing at 14%.
The  Agreement  also  provides  that we may redeem the notes for a payment of $1
million with the  convertible  promissory  note in the amount of $607,300  still
remaining  outstanding  as of June 30,  2007.  Upon  payment of the $1  million,
Montgomery will release all liens and encumbrances it holds on the assets of the
Company  and will hold back for a period of 90 days from  converting  or selling
and shares underlying the convertible note.  Thereafter,  Montgomery may convert
and sell shares under the convertible  notes in amount not to exceed $56,500 per
calendar month.  The conversion  price changes to $0.01 per share and a discount
on the  conversion  price  will  change  to 60% of the  lowest  bid price of the
Company's common stock during the 10 days  immediately  preceding the conversion
rate. Upon payment of the full-restated redemption price, the Company will issue
to Montgomery a warrant to purchase 10% of the outstanding  secured  convertible
debentures on June 30, 2007, in shares of the Company's common stock.

      In July 2007,  Montgomery  converted  $59,500 of the $718,000  convertible
debenture  issued  to  Montgomery  on  January  31,  2006 into an  aggregate  of
184,973,684,  shares  of common  stock.  In August  2007,  Montgomery  converted
$34,400 of the $718,000  convertible  debenture  issued to Montgomery on January
31, 2006 into an aggregate of 233,842,672 shares of common stock.

      The warrant  will have an exercise  price equal to one cent  ($0.01).  The
warrant will have a seven-year maturity date and demand registration  rights. In
addition,  all currently  outstanding warrants held by Montgomery are reset to a
$.0001 exercise price on the modification date.

      On May 15, 2007, in connection with the Securities  Purchase  Agreement by
and between the Company and  Cornell  Capital  Partners,  the Company  issued to
Cornell  Capital  Partners  a secured  convertible  debenture  in the  amount of
$70,000.  The  convertible  debenture has an interest rate of 18% and a maturity
date of August 1, 2007, and is convertible  into shares of the Company's  common
stock at a  conversion  price  equal to the  lesser  of (a)  $0.002 or (b) sixty
percent (60%) of the lowest Closing Bid Price of the Common Stock,  as quoted by
Bloomberg, LP, of the ten (10) trading days immediately preceding the Conversion
Date. The Conversion  Price may be adjusted  pursuant to the other terms of this
Debenture.  In addition,  upon an "Event of Default" (as that term is defined in
the debenture),  the entire principal balance,  accrued interest outstanding and
all other  obligation  under  the  debenture  is  immediately  due and  payable;
additionally, the default interest is accrued on the unpaid principal balance at
24% or the highest rate  permitted by  applicable  law, if lower.  In connection
with the debt  issuance  on May 15,  2007,  fees taken from the $70,000 in gross
proceeds  include $10,500 of structuring fees and related costs and fees paid to
an  affiliate  of the  lender,  which are treated as debt  discount  and will be
amortized to debt issue cost expense over the remaining life of the debenture.


                                      -22-
<PAGE>

      On  June  28,  2007,  we  entered  into a Loan  Extension  Agreement  with
Montgomery and Cornell Capital  Partners.  Under the terms of the loan extension
agreement,  the maturity date of each debenture  above is extended to August 22,
2007.

      On August  15,  2007,  we  entered  into an  Amendment  to Loan  Extension
Agreement with Montgomery and YA Global Investments, L.P. (f/k/a Cornell Capital
Partners, L.P.) ("YA Global"),  amending that the Loan Extension Agreement dated
June 28, 2007, by us,  Montgomery  and YA Global,  with respect to extending the
maturity date of previously issued debentures to November 30, 2007.

      On July 30, 2007, we issued a promissory  note in the principal  amount of
$336,611 (the "First Promissory Note") (to be amended and corrected to $286,611)
in the name of Roma Financial Services,  Inc. ("Roma"),  a related party company
owned by the Company's Vice Chairman and principal shareholder Robert Rodriguez.
The First  Promissory Note accrues  interest at 14% per annum with all principal
and accrued interest payable in full on the earlier to occur of: (i) the Company
receiving a bridge loan or equity investment with net proceeds to the Company of
at least $1 million or (ii) August 31, 2008. In general,  the Company  agrees to
utilize  payments  received from its customers to repay the amounts  outstanding
under this promissory  note. The First  Promissory Note is subordinated  only to
the notes of YA  Global.  Additionally,  at any and all times that  amounts  are
outstanding  under this note,  borrower  shall  grant to lender a  non-exclusive
license to utilize, market, sell products and/or services based upon any and all
intellectual property owned or licensed by borrower,  subject to mutually agreed
upon terms and conditions,  including the payment of royalties to borrower which
borrower agrees to utilize for the repayment of the indebtedness  represented by
the note.  If borrower  is unable to repay any amounts  owed under the note when
due,  lender may,  at its  option,  offset such  amounts  with  payments  due to
borrower under the above mentioned license.  In addition,  the Company agreed to
pay Roma half of the interest rate due, equal to seven percent (7%), every month
starting October 1, 2007 and every month thereafter. The balance of the interest
rate due, equal to seven percent (7%), will be accrued and added to amounts owed
under  the  promissory  note.  As part of the  principal  owed  under  the First
Promissory Note, Roma will pay-off (i) all current  liabilities that the Company
has with National  Communications Ltd. and (ii) the balance owed to United Bank.
At closing,  approximately $198,810 was used to paid off all current liabilities
the Company had with National  Communications  Ltd.,  approximately  $50,000 was
used to pay off the United Bank loan,  $7,500 was used to prepay three months of
rent for its office spaces leased from National  Communications Ltd., $5,301 was
used to prepay  interest  expense  related to this note and  $25,000 was reduced
from the gross proceeds as a loan fee and expensed immediately.

On August  9,  2007,  we issued a  promissory  note in the  principal  amount of
$100,000  (the  "Second  Promissory  Note")  in the  name of  Roma.  The  Second
Promissory Note accrues interest at a rate equal to ten percent (10%) per annum,
with all principal and accrued  interest due  thereunder  payable in full at the
time receivables  pertaining to the advances have been paid to the Company.  The
Second  Promissory  Note states that it  evidences a line of credit  arrangement
between we and Roma. Roma agrees to provide a line of credit  collateralized  by
we and its subsidiary,  Newsponet Asset Acquisition,  Inc. receivables. The term
of the Second  Promissory Note is through  December 31, 2008 or at the time that
either we or Roma cancels.  Upon  cancellation by either party, all amounts owed
to Roma under the Second Promissory Note must be paid in full.

      On August 15, 2007,  the Company  entered into an Agreement with YA Global
pursuant  to which the Company  issued a secured  convertible  debenture  in the
principal  amount of $65,000  (the  "Convertible  Debenture").  The Company paid
$8,000 in fees to the lender to be treated as a debt discount and amortized over
the loan term.  The  Convertible  Debenture  is due April 13,  2009 and  accrues
interest at an annual  rate equal to eighteen  percent  (18%).  The  Convertible
Debenture is  convertible  into shares of the Company's  common stock at a price
per share  equal to the  lesser  of (i)  $0.01 or (ii) an amount  equal to sixty
percent  (60%) of the lowest  closing bid price of the common  stock for the ten
(10)  trading days  immediately  preceding a conversion  date.  The  Convertible
Debenture is secured by a security  interest in all of the assets of the Company
pursuant to that certain Amended and Restated  Security  Agreement dated January
31, 2006 by and between the Company and YA Global.

      We received an audit  opinion for the fiscal year ended  December 31, 2006
that includes a "going concern" risk, which raises  substantial  doubt regarding
our  ability to continue as a going  concern.  We do not believe  that cash flow
from  operations  will be  sufficient  to fund our  activities  over the next 12
months.  Our ability to continue as a going concern is dependent  upon obtaining
additional  financing.  Until we can  generate  sufficient  cash  flow  from our
operations  (which we do not anticipate in the foreseeable  future) we expect to
finance  future  cash needs  through  private and public  financings,  including
equity  financings.  We  cannot  be  certain  that  additional  funding  will be
available as needed, or upon terms that are favorable.  In addition, we may need
to curtail  the  implementation  of our core  business  activities  and plans if
funding is not available.


                                      -23-
<PAGE>

CAPITAL EXPENDITURES AND COMMITMENTS

We did not  acquire a  material  amount of fixed  assets  during  the period and
currently do not plan to do so during fiscal 2007.

OFF-BALANCE SHEET ARRANGEMENTS

We do not currently have any off-balance sheet arrangements.

Recent Pronouncements

      In March 2006, the FASB issued SFAS No. 156,  "Accounting for Servicing of
Financial  Assets,  an  amendment  of FASB  Statement  No. 140,  Accounting  for
Transfers and Servicing of Financial Assets and Extinguishments of Liabilities".
This statement requires all separately recognized servicing assets and servicing
liabilities be initially measured at fair value, if practicable, and permits for
subsequent  measurement using either fair value measurement with changes in fair
value reflected in earnings or the amortization  and impairment  requirements of
Statement No. 140. The subsequent measurement of separately recognized servicing
assets and  servicing  liabilities  at fair value  eliminates  the necessity for
entities  that  manage the risks  inherent  in  servicing  assets and  servicing
liabilities  with  derivatives  to qualify for hedge  accounting  treatment  and
eliminates  the  characterization  of declines in fair value as  impairments  or
direct write-downs.  SFAS No. 156 is effective for an entity's first fiscal year
beginning  after September 15, 2006. The adoption of this statement did not have
a  significant   effect  on  our  reported  financial  position  or  results  of
operations.

      In July 2006, the Financial  Accounting Standards Board (FASB) issued FASB
Interpretation  (FIN) No. 48,  "Accounting  for  Uncertainty in Income  Taxes-an
interpretation of FASB Statement No. 109." This interpretation provides guidance
for  recognizing and measuring  uncertain tax positions,  as defined in SFAS No.
109,  "Accounting for Income Taxes." FIN No. 48 prescribes a threshold condition
that a tax  position  must  meet  for any of the  benefit  of an  uncertain  tax
position to be recognized in the financial statements. Guidance is also provided
regarding  de-recognition,  classification,  and  disclosure  of  uncertain  tax
positions. FIN No. 48 is effective for fiscal years beginning after December 15,
2006. We do not expect that this  interpretation  will have a material impact on
our financial position, results of operations, or cash flows.

      In September  2006, FASB issued SFAS 157 `Fair Value  Measurements'.  This
Statement  defines fair value,  establishes a framework for measuring fair value
in generally accepted  accounting  principles  (GAAP),  and expands  disclosures
about fair value  measurements.  This Statement  applies under other  accounting
pronouncements that require or permit fair value measurements,  the Board having
previously  concluded in those accounting  pronouncements that fair value is the
relevant measurement attribute. Accordingly, this Statement does not require any
new fair value measurements. However, for some entities, the application of this
Statement  will  change  current  practice.  This  Statement  is  effective  for
financial  statements issued for fiscal years beginning after November 15, 2007,
and  interim  periods  within  those  fiscal  years.   Management  is  currently
evaluating the effect of this pronouncement on financial statements.

      In December 2006,  FASB Staff Position No. EITF 00-19-2,  "Accounting  for
Registration  Payment  Arrangements,"  was issued.  The FSP  specifies  that the
contingent   obligation   to  make  future   payments  or   otherwise   transfer
consideration  under a  registration  payment  arrangement,  whether issued as a
separate agreement or included as a provision of a financial instrument or other
agreement,  should be separately recognized and measured in accordance with SFAS
No. 5, "Accounting for Contingencies." Webelieves that its current accounting is
consistent with the FSP.  Accordingly,  adoption of the FSP had no effect on our
consolidated financial statements.


                                      -24-
<PAGE>

      In February 2007, the FASB issued SFAS No. 159, "The Fair Value Option for
Financial  Assets and  Financial  Liabilities,  Including  an  Amendment of FASB
Statement No. 115", under  which  entities will now be permitted to measure many
financial  instruments and certain other assets and liabilities at fair value on
an  instrument-by-instrument  basis.  This  Statement  is  effective  as of  the
beginning of an entity's  first fiscal year that begins after November 15, 2007.
Early  adoption is permitted as of the beginning of a fiscal year that begins on
or before  November  15,  2007,  provided  the entity  also  elects to apply the
provisions  of SFAS 157. We are  currently  assessing  the impact,  if any,  the
adoption of SFAS 159 will have on its consolidated financial statements.

Item 3 CONTROLS AND PROCEDURES.

Evaluation of disclosure controls and procedures

Our principal  executive  officer and principal  financial officer evaluated our
disclosure  controls and  procedures (as defined in rule 13a-14(c) and 15d-14(c)
under the  Securities  Exchange  Act of 1934,  as  amended) as of the end of the
period covered by this Quarterly  Report on Form 10-QSB (the  Evaluation  Date).
Based  on  that  evaluation,  our  principal  executive  officer  and  principal
financial  officer  concluded  that, as of the  Evaluation  Date, the disclosure
controls  and  procedures  in place were  adequate  to ensure  that  information
required to be disclosed by us,  including  our  consolidated  subsidiaries,  in
reports that we file or submit under the Exchange  Act, is recorded,  processed,
summarized and reported on a timely basis in accordance  with  applicable  rules
and  regulations.   Although  our  principal  executive  officer  and  principal
financial  officer believe our existing  disclosure  controls and procedures are
adequate to enable us to comply with our  disclosure  obligations,  we intend to
formalize  and  document  the  procedures  already  in  place  and  establish  a
disclosure committee.

Changes in internal controls

We have not made any significant  changes to our internal controls subsequent to
the  Evaluation  Date. We have not identified any  significant  deficiencies  or
material  weaknesses  or other  factors  that could  significantly  affect these
controls, and therefore, no corrective action was taken.


                                      -25-
<PAGE>

                            PART II OTHER INFORMATION

Item 1 Legal Proceedings

      On March 21, 2007, Rothschild Trust Holdings, LLC, the licensor of various
      patents  to the  Company,  has  alleged,  among  other  things,  that  the
      Company's  license  to these  patents  has been  terminated.  The  patents
      licensed  to  the  Company  were  included  in  the  License  and  Royalty
      Agreement,  by and between Rothschild Trust Holdings, LLC and the Company,
      dated as of January  31,  2006,  The  licensor  has now claimed all right,
      title and  interest in the subject  intellectual  property and has further
      asserted that any subsequent use or sublicense of the subject intellectual
      property will  constitute  infringement.  The Company  disagrees  with the
      licensor's  assertions concerning the Company's rights in the intellectual
      property,  and is  currently  evaluating  its options  with  counsel  with
      respect to the continued use of the subject intellectual  property rights.
      The dispute relates, in part, to the parties' differing interpretations of
      the terms of the License and Royalty Agreement, and the subsequent actions
      and conduct  between the parties  relating  thereto.  Although the Company
      intends to assert its rights to the intellectual  property, the patents do
      not represent a material portion of the Company's operating revenue.

      On March 23,  2007,  the Company  and its  wholly-owned  subsidiary  Trust
      Licensing,  Inc., were each served with a lawsuit from  Irrevocable  Trust
      Agreement  Number III.  Irrevocable  Trust  Agreement III. The lawsuit was
      commenced  in the Circuit  Court of the 17th  Judicial  Circuit in and for
      Broward  County,  Florida.  The lawsuit relates to amounts claimed owed to
      Irrevocable  Trust Agreement Number III in the approximate total principal
      amount of $500,000, and also seeks various interest,  costs, and fees. The
      claimed  amounts,  which  are in  dispute,  relate  primarily  to  certain
      promissory  notes  and for the  reimbursement  of  business  expenses.  As
      previously reported by the Company,  during the time in which these claims
      arose, Leigh M. Rothschild was a Director of the Company and a beneficiary
      of Irrevocable Trust Agreement Number III. The case is scheduled for trial
      on November 26, 2007.

            The Company notes that, for purposes of fiscal conservatism,  it has
      previously included portions of the claimed amounts as related party Notes
      Payable in its financial statements.

Item 2 Unregistered Sales of Equity Securities and Use of Proceeds

      On May 15, 2007, in connection with the Securities  Purchase  Agreement by
      and between the Company and Cornell Capital  Partners,  the Company issued
      to Cornell Capital Partners a secured convertible  debenture in the amount
      of $70,000.

Item 3. Defaults Upon Senior Securities.

      Not applicable.

Item 4 Submission of Matters to a Vote of Security Holders

      None.

Item 5 Other Information

      By letters  dated  January 30, 2007 and January  31,  2007,  Mr.  Leigh M.
      Rothschild   and  Mr.  Adam  Bauman   resigned  as  Directors,   effective
      immediately.

      As previously  disclosed,  Mr.  Rothschild is a beneficiary of Irrevocable
      Trust  Agreement  Number III  ("Trust"),  a  creditor  of  Registrant.  In
      correspondence   accompanying  his  resignation   letter,  Mr.  Rothschild
      indicated  that his  resignation  was  related in part to past due amounts
      owed to Trust.

      Mr. Rothschild was a member of the Registrant's Compensation Committee.


                                      -26-
<PAGE>

      In  correspondence   accompanying  his  resignation   letter,  Mr.  Bauman
      indicated  that  his   resignation   was  related,   in  part,  to  unpaid
      compensation  for Board  service and  Registrant's  failure to pay certain
      other unsecured debt obligations.

      Mr. Bauman was a member of the Registrant's Audit Committee.

      On May 4, 2007, Mr.  Jeffrey W. Sass,  our CEO,  resigned as CEO and as an
      employee of the Company effective immediately. He remains as a Director of
      the Company,  and will be available  as a  consultant.  The reason for the
      resignation was to pursue other opportunities that were available to him.

      On August 10, 2007, Mr. Jeffrey Sass resigned as a director of the Company
      effective immediately.

Item 6 Exhibits

      31.1  Certification of the Chief Executive Officer pursuant to Section 302
            of the Sarbanes- Oxley Act of 2002

      31.2  Certification of the Chief Financial Officer pursuant to Section 302
            of the Sarbanes-Oxley Act of 2002

      32.1  Certification of Chief Executive Officer  Certification  pursuant to
            Section 906 of the Sarbanes-Oxley Act of 2002

      32.2  Certification of Chief Financial Officer  Certification  pursuant to
            Section 906 of the Sarbanes-Oxley Act of 2002


                                      -27-
<PAGE>

                                   SIGNATURES

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

                                              Connected Media Technologies, Inc.

                                              By: /s/ Isidro Gonzalez
                                              ----------------------------------
Dated: September 12, 2007                     Isidro Gonzalez
                                              President

                                              By: /s/ Mark Mayo
                                              ----------------------------------
Dated: September 12, 2007                     Mark Mayo
                                              Chief Financial Officer
                                              Chief Accounting Officer


                                      -28-