**UNITED
      STATES**


**SECURITIES
      AND EXCHANGE COMMISSION**


**Washington,
      D.C. 20549**





**Form
      10-KSB**




x
              
              UNDER
                  SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
                  1934




For
      the
      fiscal year ended December 31, 2006




o
            
            REPORT
                UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
                1934




For
      the
      transition period from _______ to _______




Commission
      file number 000-32231








**WINSONIC
      DIGITAL MEDIA GROUP, LTD.**


(Name
      of
      small business issuer in its charter)





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




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




Issuer's
      telephone number (404) 230-5705





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




NONE




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




Common
      stock, $0.001 par value




(Title
      of
      class)




Check
      whether the issuer is not required to file reports pursuant to Section 13 or
      15(d) of the Exchange Act. o




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




Check
      if
      there is no disclosure of delinquent filers in response to Item 405 of
      Regulation S-B contained in this form, and no disclosure will be contained,
      to
      the best of registrant's knowledge, in definitive proxy or information
      statements incorporated by reference in Part III of this Form 10-KSB or any
      amendment to this Form 10-KSB. o





Indicate
      by checkmark whether the registrant is a shell company (as defined in Rule
      12b-2
      of the Exchange Act). Yes oNo þ




The
      issuer's revenues for the fiscal year ended December 31, 2006 were
      $759,495.




The
      aggregate market value of the issuer's voting and non-voting common equity
      held
      by non-affiliates as of April 25, 2007, was $14,873,417. On such date, the
      closing price for the issuer's common stock, as quoted on the OTC-Pink Sheets
      was $0.30.




The
      issuer had 49,578,057 shares of common stock outstanding as of June 1,
      2007.







TABLE
      OF
      CONTENTS





PART
                I**Item
                1.**
            Description
                of Business
            3**Item
                2.**
            Description
                of Property
            10**Item
                3.**
            Legal
                Proceedings
            11**Item
                4.**
            Submission
                of Matters To a Vote of Security Holders
            14PART
                II**Item
                5.**
            Market
                for Common Equity and Related Stockholder Matters
            14**Item
                6.**
            Management’s
                Discussion and Analysis or Plan of Operation
            19**Item
                7.**
            Financial
                Statements
            34**Item
                8.**
            Changes
                In and Disagreements With Accountants on Accounting and Financial
                Disclosure
            34**Item
                8A.**
            Controls
                and Procedures
            34**Item
                8B.**
            Other
                Information
            35PART
                III**Item
                9.**
            Directors,
                Executive Officers, Promoters, Control Persons and Corporate Governance;
                Compliance with Section 16(a) of the Exchange Act
            35**Item
                10.**
            Executive
                Compensation
            38**Item
                11.**
            Security
                Ownership of Certain Beneficial Owners and Management and Related
                Stockholder Matters
            41**Item
                12.**
            Certain
                Relationships and Related Transactions, and Director
                Independence
            42**Item
                13.**
            Exhibits
            43**Item
                14.**
            Principal
                Accountant Fees and Services
            47




SIGNATURES
            48REPORT
                OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
            F1BALANCE
                SHEETS
            F2STATEMENTS
                OF OPERATIONS
            F3STATEMENTS
                OF CASH FLOWS
            F4STATEMENTS
                OF STOCKHOLDERS’ DEFICIT
            F5NOTES
                TO FINANCIALS
            F11





2


**PART
      I**




Throughout
      this Annual Report on Form 10-KSB, the terms “the Company,” “we,” “us,” “our,”
“our company,” and “Winsonic” refer to Winsonic Digital Media Group, Ltd., and
      includes our subsidiaries, Winsonic Digital Cable Systems Network, Ltd.,
      Automated Interiors, LLC, Tytess Design & Development, LLC, Winsonic Digital
      Store, Ltd., and Winsonic Diversity, LLC, unless the context indicates
      otherwise.




**Forward-Looking
      Statements**




This
      annual report contains forward-looking statements within the meaning of the
      Private Securities Litigation Reform Act of 1995. When used in this annual
      report, words such as, “believe,” “expect,” “intend,” “plan,” “anticipate,”
“foresee,” “likely,” “will,” “goal,” “target,” “project,” “estimate” and similar
      expressions are intended to identify forward-looking statements, although there
      may be certain forward-looking statements not accompanied by such expressions.





Forward-looking
      statements about our business, financial condition and prospects reflect
      management's assumptions and beliefs based on information currently available
      to
      it. We can give no assurance that the expectations indicated by such
      forward-looking statements will be realized. If any of these assumptions should
      prove incorrect, or if any of the risks and uncertainties underlying such
      expectations should materialize, our actual results may differ materially from
      those indicated by the forward-looking statements.




Additional
      information about factors that could lead to material changes in performance
      is
      contained Item 6. Management’s Discussion and Analysis or Plan of Operation—Risk
      Factors. Such factors may include:





·
            our
                ability to raise capital and the relative illiquidity of shares of
                our
                common stock;


·
              our
                  ability to achieve and sustain profitable
                  operations;
 ·
                the
                    existence of unknown liabilities stemming from our
                    acquisitions;
 ·
                  our
                      ability to successfully integrate the operations of companies
                      we have
                      acquired into our existing
                      operations;
 ·
                    the
                        loss of existing customers;
 ·
                      our
                          ability to attract and retain key employees;
                          ;
 ·
                          our
                              ability to develop products and technologies that attract
                              customers, and
                              customers’ long-term acceptance of our products and
                              technologies;
 ·
                              intense
                                  competition in our industry;
 ·
                                  our
                                      reliance on networks operated by others and
                                      which we cannot control; and
 ·
                                      our
                                          ability to protect our intellectual
                                          property.
  Any
                                forward-looking statement speaks only as of the date
                                on which such statement is
                                made, and, except as required by law, we undertake
                                no obligation to update any
                                forward-looking statement to reflect events or circumstances
                                after the date on
                                which such statement is made or to reflect the occurrence
                                of unanticipated
                                events. New factors emerge from time to time and
                                it is not possible for
                                management to predict all such
                                factors.





**Item
                1.**
            **Description
                of Business.**




**BUSINESS**





Winsonic
      Digital Media Group, Ltd. is a digital media solutions company which
      historically has focused on distributing digital content to the public and
      providing high-speed, high-quality, low-cost solutions that enable users to
      view, interact, and listen to all types of audio, online video and digital
      TV in
      full screen format. ******




As
      described in more detail below, during fiscal year 2006, the Company holds
      a 49%
      equity interest in Winsonic Diversity, LLC and completed the acquisitions of
      Automated Interiors, LLC, Tytess Design and Development, Inc., and DV Photo
      Shop. These actions represent a series of strategic investments in new markets
      and new services that expand the offerings of the Company while complimenting
      our existing business. Together with our existing digital distribution platform,
      comprised of the Winsonic Digital Cable Systems Network, Ltd’s network, we are
      now able to deliver customized, bundled solutions to a wider range of customers
      that include custom wiring, centrally-located utilities, project management,
      telephone, internet, audio/video and digital TV.




3




We
      expect
      the digital distribution industry to continue to grow at a rapid rate and
      believe that customers will gravitate toward companies that can deliver the
      most
      powerful and flexible converged solutions that will save time and money and
      boost productivity. We believe our actions in fiscal year 2006 have positioned
      us well to develop further and to take advantage of these
      opportunities.




The
      Company was incorporated on April 27, 2000 in the state of Nevada as Media
      and
      Entertainment, Inc. On September 14, 2000, Media and Entertainment, Inc. changed
      its name to Media and Entertainment.com, Inc., and on November 24, 2004, Media
      and Entertainment.com, Inc. changed its name to Winsonic Digital Media Group,
      Ltd.





The
      Company maintains a website at: ***www.winsonic.net*** .
      The
      information contained on our website is not incorporated by reference in this
      annual report and should not be considered a part of this annual
      report.





**Winsonic
      Digital Cable Systems Network, Ltd.**




Winsonic
      Digital Cable Systems Network, Ltd., a wholly owned subsidiary of the Company,
      (“WDCSN”), maintains and runs the Company’s facilities-based network (the
“Network”) which has been the historic focus of the Company. The Network
      concentrates on carrier-class, high-speed, digital connectivity solutions. While
      the
      Network is a state-of-the-art digital distribution platform, it has been in
      development for many years and has been involved in projects that date back
      over
      twenty-five years. With a shift to more market-based policies, due in part
      to
      the implementation of the Telecommunications Act of 1996, a new competitive
      and
      robust marketplace with diverse participants has developed and the Company,
      through WDCSN and the Network is capable of providing access to advanced
      communications services at affordable prices a wide customer base.




**Automated
      Interiors, LLC**




The
      Company acquired Automated Interiors, LLC (“AI”), a Georgia limited liability
      company effective April 18, 2006. AI is a
      systems integration company, which plans
      and
      engineers the installation of electronic components to facilitate “smart”
buildings. As a result of the acquisition, AI has the capability to help
      developers of all sizes manage the transformation in technology and migrate
      from
      their traditional voice and data services to feature-rich digital services
      and
      solutions.




The
      acquisition of AI creates significant new opportunities for us. The combination
      of our Network with AI’s capabilities allowed AI to migrate from serving single
      homeowners to partnering with developers and builders in offering the latest
      technological innovations in home and security automation. We expect that as
      we
      continue to integrate AI with our existing business, that we will realize
      significant benefuts from the acquisition.




**Tytess
      Design & Development, LLC**





The
      Company acquired Tytess Design and Development, Inc. (“Tytess”), a Georgia
      corporation, on November 2, 2006. Tytess provides architectural, engineering,
      construction and construction management services to residential and commercial
      customers. Specifically, this includes site analysis, pre-design, schematic
      design, bidding and negotiation services. Tytess has developed a consortium
      of
      architects, engineers, realtors, mortgage brokers and other contractors who
      provide solutions for the design and construction of commercial buildings,
      institutional facilities and residential communities. The acquisition of Tytess
      further complements the capabilities of AI and we believe additional expansion
      opportunities may be available as we continue to adapt these services to meet
      the requirements of supporting traditional telecommunications companies in
      the
      design and construction of their facilities.





4




**Winsonic
      Digital Store, Ltd.**





The
      Company acquired DV
      Photo
      Shop on November 20, 2006. Following the acquisition, the Company changed the
      name of DV Photo Shop to Winsonic Digital Store, Ltd. (the “Store”), and
      incorporated it in the State of Georgia on December 8, 2006. The Store is an
      urban retail store located at Centennial Tower, 101 Marietta Street, Atlanta,
      Georgia, and specializes in photography development, digital photography and
      the
      sale of mobile phones, accessories, and wireless communications services. The
      Store provides service to downtown Atlanta, specifically those in need of
      convenience for uploading, developing and printing digital photographs and
      activating mobile phone services. The acquisition of the Store provides an
      opportunity to create new and expanded consumer services in areas such as
      wireless communications, digital downloads, digital content development,
      mobility services and Voice over internet protocol (VOIP). The Store continues
      to offer the same products and services it offered before the acquisition;
      however, its future offerings will be expanded to include music downloads,
      digital photo depot, on-line storage, video conferencing, content development,
      a
      music lab for mixing and mastering, and film, video and photo editing.




**Winsonic
      Diversity, LLC**




Winsonic
      Diversity, LLC (“Winsonic Diversity”) was formed on May 22, 2006 in the State of
      Georgia by the Company and Mr. Winston Johnson, the Chairman and CEO of the
      Company. Mr. Johnson believed that the formation of Winsonic Diversity would
      enable the Company to qualify for and pursue opportunities with various entities
      including the Federal Communications Commission, Public Utilities Commission,
      Universal Service, National Telecommunications and Information Administration,
      National Information Infrastucture and the Department of Commerce that focus
      on
      providing services to people from all economic backgrounds. After careful review
      and consideration, the Company’s Board of Directors determined that it was
      advisable and in the best interests of the Company and its stockholders to
      form
      Winsonic Diversity. The Company owns 49% of the equity interests of Winsonic
      Diversity and Mr. Johnson owns the remaining 51% of the equity interests. Winsonic
      Diversity is focused on developing urban and rural communities by providing
      resources and services that improve quality of life. Since its inception,
      Winsonic Diversity has identified, and is currently working on, several urban
      community initiatives that include NATV, Morris Brown College in Atlanta,
      Georgia, West Angeles Community Development Corporation in Los Angeles,
      California, and Sweet Auburn at Renaissance Walk, in Atlanta, Georgia. Winsonic
      Diversity offers a full portfolio of public and private network access points,
      media distribution solutions, and products to consumers and businesses.
      Additionally, Winsonic Diversity offers thorough information technology
      analysis, creative architectural and software designs, and a full range of
      technical and professional expertise .
      As a
      certified Minority Business Enterprise, Winsonic Diversity has access to major
      enterprises that have diversity initiatives. This has resulted in several new
      opportunities with companies such as Verizon Wireless, Verizon Communications,
      Verizon Business, AT&T, and Bank of America.




**PRODUCTS
      & SERVICES**





**Our
      Network.**





In
      1994
      and 1995, Winsonic Holdings, Ltd., the Company’s predecessor, and WDCSN
      coordinated and integrated the first video telephone and video e−mail “store and
      forward” application. This application was based on a Pacific Bell (SBC) ATM
      Network, and was implemented in partnership with Pacific Telesis Inc., in
      cooperation with the Whittaker Corporation. As a carriers' communications
      solutions provider, the Company has provided facilities−based products
      and services to communications companies such as Verizon, SBC, Time Warner,
      MCI,
      Level−3, AOL, MSN and Sony. We also provide other services including high−end
      consulting services in the areas of programming, software development,
      communications research and engineering, as well as, digital transport worldwide
      and digital distribution services for film and television.





Today,
      the Network remains Winsonic’s key strategic advantage. Our Network is in
      operation in Los Angeles, New York, Dallas, Chicago, Atlanta, and collocations
      in various central offices throughout the United States. We concentrate on
      carrier−class high−speed connectivity solutions that bring together a
      first−class facility, along with network and multimedia communication services
      to its customers, without requiring substantial capital investments. The Company
      has implemented a high−end, facilities−based infrastructure to facilitate voice
      transport, audio, video, data, media and broadcast content over
      protocol−independent multi−layered communication systems.





5




The
      Network is a new global infrastructure for the delivery of converged
      entertainment, media and distribution services that facilitates the
      distribution, digitization, and transport of content, and enhances the
      performance of systems and software in the media, technology and
      telecommunications sectors. When creating variations in the core network, we
      are
      in effect broadening the number of product applications, as well as, expanding
      markets for our products. These applications include java soft phones, sun
      rays,
      digital distribution, professional engineering services, media and entertainment
      services, and education media services.





In
      addition to the services and products described below, we also have capabilities
      of providing new applications that open market opportunities to companies
      looking to expand revenues and broaden sales and look forward to creating
      revenue sharing partnerships with companies that would benefit from WDCSN
      solutions.





Specifically,
      we offer the following services:





**The
      Telecommunications Industry** .





We
      offer
      an enhanced gateway to national and international communication lines. With
      the
      Network as a foundation, Winsonic provides sophisticated, state of the art
      application software and hardware solutions tailored to meet the specific needs
      of participants in the telecommunications industry. These applications include
      carrier solutions for regional phone companies, such as special software that
      provides networks the capability of accommodating all platforms.




As
      telecommunication companies increasingly outsource portions of their network
      responsibilities, we are able to respond with solutions that bring together
      proven experience, a first-class facility and network, multimedia and content
      distribution communication services that do not require substantial capital
      investments to implement. Verizon, Nortel, AT&T, Sun Microsystems and Level
      3 are among the leading companies to team with Winsonic to implement a high-end
      facilities-based infrastructure to aid and facilitate voice transport, audio,
      video, data, media and broadcast content over protocol-independent multi-layered
      communication systems.




As
      traditional telecommunication companies seek to expand their product portfolio
      by bundling internet services and video distribution services, Winsonic is
      capable of assisting in the design and construction of the new facilities
      required to provide these services. In addition, we are expanding our fleet
      of
      vehicles to accommodate demand for installing converged solutions in homes
      throughout several states.




**The
      Construction Industry.**





Our
      objective is to provide services to participants in the construction industry
      that will allow maximization of profits through our vision, technological
      innovations and experience. Winsonic has built upon its long-term business
      model
      that incorporates the use of our Network to create a technologically superior
      home by converging audio, video, security and internet services. Services we
      provide to this industry include:





·
            Coordination
                with a design team to identify main points of entry and common areas
                for
                various utility companies that provide the greatest benefits and
                options
                available for a project.


·
            Investigating
                the ability for the project to have redundancy capability and Synchronous
                Optical Networks (SONET),astandardfor connectingfiber-optictransmission systems***.***


·
            Coordination
                with utility companies to provide non-exclusive services to a project
                including gas and power.


·
            Program
                management services.


·
            Solution
                integration services.


·
            Implementation
                services.


·
            Network
                integration & testing services.


·
            Business
                management services.


·
            Operations
                planning support.


·
            BISCI,
                RCDD Certified telecommunications engineering
                support.


·
            Construction
                management support.





6




**The
      Media and Entertainment Industry.**





Winsonic’s
      StreamStar solution provides scalable on-demand video streaming with 100,000
      hours of MPEG2 content, 10K to 100K+ MPEG2 streams, and up to 80,000 MPEG2
      streams from the desktop or set-top. Our Cyberhollywood.net
      solution allows
      both radio broadcast programming and television broadcast programming to be
      sent
      to your desktop or set-top. Other services include high-end consulting in the
      areas of programming, audio research and engineering, as well as digital
      transport services for film and television.





**The**  **Business
      Services Industry.**





We
      provide participants in the business services industry with specific market
      applications and/or integrated solutions, and offer hardware/software
      combinations over our Network. As a Certified Sun Partner and reseller, we
      generate contractually repeating revenues for services delivered to customers
      over our Network, including accommodations for the cost of the infrastructure
      to
      deliver the service (e.g., hardware, software, datacenter, labor, and
      intellectual property).





Our
      information technology skills allow us
      to provide complete end-to-end custom integrated solutions, consulting services,
      resale to end-users systems, platform-based solutions, supply implementation,
      deployment, post-sales support for third party hardware and software,
      e-business, database, data warehousing, web applications, network design,
      security, back-up/recovery, performance tuning, systems management, asset
      tracking, procurement, inventory and configuration management
      services.





**Consumer
      Products and Services.**





In
      the
      consumer market, our Network provides a strategic advantage for Winsonic. The
      Network enables us to expand our media services to accommodate a broad and
      diversified customer base, which should enhance our ability to increase sales
      in
      a highly competitive market. We are pursuing the commercialization of many
      products, which will provide media distribution of digital content and
      information, seamless compatibility with all major networks, copyright
      enforcement, multi-tier encryption (moving files in a secure environment) and
      wireless viewing capabilities for laptops and hand held products, such as
      cellular telephones and PDA devices.





This
      network build up also should benefit our position in the online gaming
      networking, video and audio streaming, packet- over-optical services, online
      encryption solutions and VOIP markets.





The
      acquisition of AI and Tytess provides us with an opportunity to penetrate the
      residential market and provide consumers access to technological advances.
      By
      incorporating fiber optics inside the home, homeowners are able to take
      advantage of the digital revolution. As an example, Winsonic cinema services
      can
      be integrated into wireless networks allowing end-users to use their PDA's,
      cell
      phones, gameboys, computers, and TV's to watch digital video, TV, and
      interactive multi-media files.





In
      addition, with the acquisition of Winsonic Digital Store, we now have a physical
      store where consumers will have access to a broad selection of digital products
      and services including:





·
            digital
                photography;


·
            digital
                printing;


·
            mobile
                phone services;


·
            music
                downloads;


·
            on-line
                storage;


·
            video
                conferencing;


·
            digital
                content development;


·
            music
                lab for mixing and mastering; and


·
            film,
                video and photo editing.




7




**Research
      and Development**




The
      Company is in the process of (1) developing next-generation products and
      services, (2) creating a solid platform to grow our business in the future
      and
      (3) delivering value to our customers and stockholders. In 2007, for example,
      we
      expect to introduce new digital offerings for consumers, including a hosted
      platform and integrated digital data solutions that work on a single network.
      We
      expect to introduce several  fee-based offerings which will
      include:




·
            A
                private site where subscribers can interact with other
                members;


·
            Office
                tools such as word processing, spreadsheet, database and
                presentation;


·
            Media
                (Audio and Video) downloads;


·
            Online
                storage for media;


·
            Online
                broadcast quality TV that features original shows, live events, music
                videos, movies and talk shows;


·
            Long
                distance****telephone
                service with voicemail;


·
            Exclusive
                pay-per-view live events ;


·
            Mobile
                media downloads (audio ringtones, ringbacks, video, video ringtones,
                voice
                tones, and mobile broadcasts); and


·
            Movies,
                shows and events on demand.





We
      are
      also focusing on the next generation of digital and analog set−top terminal
      interfaces and have developed plans to be a part of the new improved consumer
      features in the digital TV domain. In addition, we are working with local
      exchange carriers and interexchange carriers to deliver digital cable transport
      over Multi Protocol Label Switching (MPLS), which plays an important role in
      the
      growth of international markets utilizing both analog and digital applications
      and technologies to deliver video, audio, voice and data.





**Licenses
      and Certifications**





During
      the 2006 fiscal year, the Company obtained a number of certifications from
      various local, state and federal regulatory bodies that will enable us to
      provide products and services in the covered areas.





On
      May
      30, 2006 and August 15, 2006, the Company obtained an FCC Registration Number
      (FRN) and registered as an IXC with the Federal Communications Commission (FCC),
      respectively. Registration with the FCC allows the Company to conduct business
      with the FCC, and the FRN enables us to offer interstate long distance services
      throughout the United States.





On
      July
      21, 2006, the FCC approved the Company’s Section 214 application,which enables
      the Company to provide international facilities-based and resold
      telecommunications services between the U.S. and foreign points. This
      certification is particularly important to the Company’s ability to compete in a
      global digital content market.





Additionally,
      on August 15, 2006, the Company was granted approval by the Georgia Public
      Service Commission (PSC) as (1) a Competitive Local Exchange Carrier (CLEC),
      (2)
      an Other Common Carrier (OCC), and (3) an IntereXchange Carrier (IXC). As a
      certified CLEC, the Company is able to offer local exchange services within
      the
      local calling areas (IntraLATA) throughout the State of Georgia, and is in
      a
      position to compete with Local Exchange Carriers (LECs) through use of LEC
      infrastructure. Through this certification, the Company has the ability to
      collocate with various LECs (i.e., connect its switches with the LECs’ switches)
      to gain access to their unbundled network elements (UNE)- e.g., facilities,
      equipment, features and functions. Essentially, this certification provides
      the
      Company access to LEC customers, and enables us to provide voice, data and
      video
      services in each of the calling areas in the State of Georgia. As an OCC, the
      Company can offer facilities-based services and extend the provisioning of
      services beyond that of a reseller within the State of Georgia; while our IXC
      status allows us to offer long distance services in the State of Georgia.





In
      its
      efforts to move forward with its “Have and Have-Nots” initiative (a program
      established by the Company to deliver affordable digital services to inner-city
      communities), the Company sought designation as an Eligible Telecommunications
      Provider (ETP), and in September 2006, obtained a Service Provider
      Identification Number (SPIN) from the Universal Service Administration Company
      (USAC), the administrator of the federal Universal Service Fund (USF).
      Registration with, and approval by, USAC will allow the Company to participate
      in the High Cost, Low Income, Rural Health Care Providers, and Schools and
      Libraries programs sponsored by the USF. Under these programs, consumers, at
      discounted rates, will have access to enhanced digital services and new
      technology that are comparable to those available to more privileged consumers.




8




On
      September 15, 2006, the Company was certified by the FCC to operate an Open
      Video System (OVS) in metropolitan Atlanta and Athens, Georgia. With this
      certification, the Company is authorized to offer video services in the service
      areas by distributing programming as a cable television provider or by
      establishing an open video system (OVS) to deliver video programming to the
      home
      or business. Services such as “on-demand” and other video programming can be
      made available on a point-to-point basis to the Company’s customers through its
      OVS. The offering of cable services expands the Company’s ability to serve the
      consumer market and differentiates the Company from other competitors.





On
      December 22, 2006, Winsonic Diversity received its Minority Business Enterprise
      (MBE) certification from the Georgia Minority Supplier Development Council,
      Inc
      (“GMSDC”) which qualifies it as a minority-owned, managed, and controlled
      company meeting the certification criteria established by the GMSDC and adopted
      by its Board of Directors.





During
      the first quarter of 2007, the Company obtained additional CLEC and IXC
      certifications in the states of Alabama and North Carolina. The Company is
      able
      to offer local exchange services within the local calling areas (IntraLATA)
      throughout the States of Alabama and North Carolina, to offer long distance
      services, and is in a position to compete with Local Exchange Carriers (LECs)
      through use of LEC infrastructure. This certification allows the Company access
      to LEC customers, and enables us to provide voice, data and video services
      in
      each of these calling areas.





**BellSouth
      Telecommunications, Inc.**





On
      September 27, 2006, the Company executed an Interconnection Agreement with
      BellSouth Telecommunications, Inc. (“BellSouth”). The agreement is effective for
      a period of five years, and applies to the BellSouth territory in the State
      of
      Georgia. The execution of this agreement allows the Company to (1) interconnect
      with BellSouth at the Winsonic network located at 55 Marietta Street in Atlanta,
      Georgia to provide local, long distance or other network services to its
      customers; (2) collocate with BellSouth in its central offices to access
      unbundled services at discounted rates and provide them to the Company’s
      customers at its tariffed rates; (3) gain nondiscriminatory access to any pole,
      duct, conduit, or right-of-way owned or controlled by BellSouth; and (4) resell
      services from the BellSouth Resale Tariff, which includes most local services,
      private line services and connection charges. Additionally, the Company’s
      customers can be listed in the BellSouth telephone directory and have access
      to
      BellSouth’s operator services (0), directory assistance (411) and emergency
      services (911).





On
      December 21, 2006, the Company and BellSouth entered into an MBR Marketing
      Agreement, which applies to the BellSouth territories in the State of Georgia.
      The agreement has a one year term; but is subject to automatic renewals for
      consecutive six month periods, unless either party provides the requisite notice
      indicating otherwise. The agreement will allow the Company to purchase certain
      services not covered under section 251 of the Telecommunications Act of
      1996.





On
      March
      13, 2007, BellSouth established on the Company’s behalf a Master Account (“Q”
Account) for BellSouth billing purposes, a CLEC Care Team to support the Company
      with its simple resale and UNE product orders and an Account Team for support
      of
      the Company’s premium and complex resale product orders.





**Sun
      iForce Partner**





On
      May
      27, 2005, the Company signed a Contract with Sun Microsystems, Inc. (“Sun”) as a
      Sun iForce Partner. Sun's partner model will help the Company build on a sales
      strategy and to deliver innovative solutions. Sun's partner model provides
      partners with a clear role definition and supports them with unparalleled
      partner development support, stronger go−to−market partnering, and more
      opportunities to transact business/orders via streamlined and web−enabled
      interfaces. The iForce Partner programs will incorporate a portfolio of products
      and services offered by Sun Enterprise Services around the globe, including
      Sun
      Professional Services, Sun Educational Services and Sun Support
      Services.




9




On
      September 25, 2006, Winsonic received its Letter of Authorization from Sun
      Microsystems, Inc., appointing Winsonic as a Sun Partner Advantage Business
      Partner and Technology Integrator. This authorization permits Winsonic to
      distribute Sun products including hardware, software, support services and
      client services by contracting directly with Sun or through a Channel
      Development Provider (CDP). The primary business model is to sell and supply
      value added services such as architecture planning, technical design, deployment
      and/or post sales support services for Sun and 3 rd party
      hardware and software solutions.




**Intellectual
      Property**





On
      September 12, 2006, the Company’s application for the registration of the
“WINSONIC” trademark and service mark was approved pursuant to the Trademark Act
      of 1946, as amended. The approval of the mark entitles the Company to use the
      “WINSONIC” mark on its products and services and in its marketing and
      advertising campaigns. :





**Employees**





As
      of
      December 31, 2006, we had 29 employees, all of which were employed on a
      full-time basis.




**Item
                2.**
            **Description
                of Property.**





**Network
      Operations and Office Lease Agreements**




***Centennial
      Tower Office Lease Agreement***




On
      October 12, 2005, the Company entered into a 132 month commercial lease
      agreement effective as of November 1, 2005 with Atlanta Centennial, LLC for
      approximately 9,415 square feet of rentable space. The space is located in
      Suite
      2600 on the 26 th floor of
      the Centennial Tower, located at 101 Marietta Street in Atlanta, Georgia and
      is
      used as the Company’s corporate headquarters. The lease agreement was amended on
      February 23, 2006, to include expanded rental space of 9,415 square feet,
      bringing the total rental square feet to 18,830.





Under
      the
      terms of the lease, the Company was obligated to make rental payments for the
      2006 fiscal year in the amount of $188,045. The Company is required to make
      annual rental payments to the landlord in the following amounts:





Year
      ending December 31,





2007
            
            $
            424,9422008
            
            $
            435,6592009
            
            $
            446,6462010
            
            $
            457,9312011
            
            $
            469,5602012
                through 2016
            
            $
            2,219,935





Concurrently
      with the execution of this lease, the Company issued a fixed price secured
      convertible note in the principal sum of $250,000 as a security deposit on
      the
      office space and on October 12, 2005, the Company paid $16,476 as an additional
      security deposit. On December 14, 2005, the fixed price secured convertible
      note
      was converted into 925,927 shares of the Company’s common stock valued at
      $250,000 or $0.27 per share.




10




***55
      Marietta Street Office Lease Agreements***





On
      May
      17, 2006, the Company entered into a Sublease Agreement with Rogers Telecom
      Inc., pursuant to which the Company leased a portion of the 16 th floor of
      the building located at 55 Marietta Street, Atlanta, Georgia 30303. The lease
      commenced on June 1, 2006 and continued through April 29, 2007, the day before
      the master lease expired. On February 8, 2007, the Company entered into a direct
      lease agreement with Bank Building Limited Partnership, the original landlord
      to
      Rogers Telecom, for approximately 12,080 square feet of rentable space located
      at 55 Marietta Street in Atlanta, Georgia. This lease commenced on May 1, 2007,
      two days after the expiration of the sublease between the Company and Rogers
      Telecom, and expires on April 30, 2017. An improvement allowance of $123,000
      has
      been provided to the Company, of which the unused portion after May 1, 2008
      may
      be applied to base monthly rental at the Company’s sole option.





Upon
      execution of this lease, the Company remitted to the landlord a security deposit
      in the amount of $17,566 and the first month’s rental payment in the amount of
      $8,778. Thereafter, the Company is obligated to make monthly rental payments
      in
      the amount of $8,778 from May 1, 2007 to February 28, 2008; $17,566 from March
      1, 2008 to April 30, 2012; and $19,126 from May 1, 2012 through termination.
      In
      addition to the monthly rent, the Company is responsible for its share of the
      operating expenses, utilities, taxes and other costs and expenses associated
      with the Leased Premises.





The
      Company will use this space to operate our Network operations, data center,
      broadcast controls, switch site and application development lab. In addition,
      the space shall be utilized by the Company to house its Network services billing
      and provisioning departments and for training its current and future
      staff.





Additionally,
      on June 22, 2006, the Company entered into a two-year lease agreement with
      JT
      Communications, LLC for the exclusive right to use a cabinet and the
      non-exclusive right to use the office space located on JT Communications’
premises on the 5 th floor of
      55 Marietta Street in Atlanta, Georgia. The term of the lease commenced on
      July
      1, 2006 and expires on June 30, 2008; however, it is subject to automatic
      renewals for one-year periods on the same terms and conditions, unless the
      Company notifies JT Communications that it does not want to renew. Under the
      lease, the Company will make monthly rental payments in the amount of $1,350
      for
      the first year; $1,418 in the second year; and $1,488 in the third year of
      the
      Lease.




**Additional
      Locations**





The
      Company also maintains offices at 10120 S. Eastern Avenue, Suite 200, Las Vegas,
      Nevada 89052. This office space is provided by one of our executive officers
      at
      no cost to us. We pay for our own telephone service at this location.





We
      maintain network, collocation and interconnection offices at no leasehold cost
      at the following locations: New York City, Atlanta, Dallas, Chicago and Los
      Angeles. Winsonic Cinema and Cyberhollywood.net production offices and hub
      are
      located at 8255 Beverly Blvd., Suite 130, Los Angeles, California
      90048.





We
      believe that we have adequate facilities to conduct our current operations;
      however, we expect to seek additional administrative offices and facilities
      in
      the next 12 months for our future operations. We have no current proposed
      programs for the renovation, improvement or development of our current
      facilities.




**Item
                3.**
            **Legal
                Proceedings.**





An
      estimated liability of $775,000 and $1,020,000 for legal settlements was
      recorded as of December 31, 2006 and 2005, respectively. Other than as described
      below and in “Note 13 - Subsequent Events” in the Notes to the Financial
      Statements, the Company is not currently involved in any legal proceedings
      that
      it deems to be material to its financial condition.




11


**Collazo
      vs.
      Media and Entertainment.com**(Superior
      Court of CA, Los Angeles County - complaint filed March 22,
      2004)




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




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





In
      the
      above-described litigation brought by the Company against Mr. Collazo, the
      defendant denied the allegations, asserted 21 affirmative defenses and bought
      a
      cross-complaint against the Company. Mr. Collazo alleged that the Company
      breached the employment agreement with him because he had not been paid
      compensation due him, he had not received a percentage of gross profit earnings,
      the Company had not exercised a good faith effort to raise an additional
      $250,000 in capital, and he did not receive the equity promised him. The Company
      denied the allegations of the cross complaint and asserted 13 affirmative
      defenses. At a settlement conference on April 11, 2005, the Company agreed
      to
      issue 900,000 shares of common stock to Mr. Collazo as of September 20, 2002
      and
      to pay attorney fees of $120,000. The Company also agreed to issue 900,000
      shares of common stock to Mr. Nana Yalley, who was then an officer and current
      shareholder, as well as an equal partner of Mr. Collazo in Nexcode. The shares
      of common stock were valued as of the settlement date, and accordingly, 900,000
      shares of common stock, as well as, $120,000 of attorney fees, were charged
      as
      expenses in 2004. The settlement was not finalized by June 10, 2005; therefore,
      Mr. Collazo could have exercised, at his option, the right to enforce the
      settlement agreement for the issuance of the 900,000 shares of the Company’s
      stock to him and the payment of his attorneys’ fees or the issuance of 200,000
      shares of stock to his attorney in lieu of payment.





On
      March
      16, 2006, the Company issued 900,000 restricted shares to Mr. Collazo in
      settlement of this matter. However, this matter remains unresolved, as Mr.
      Collazo is seeking to have the Company reissue the 900,000 shares without
      restrictions.





On
      May 4,
      2006, the Court relieved Mr. Collazo’s former attorneys from their
      representation of Mr. Collazo in this action as a result of a dispute between
      them.  In an attempt to force the Company to reissue without
      restrictions the 900,000 restricted shares already issued to
      him, Mr. Collazo, through his new attorneys, moved the Court to
      enforce the terms of the April 11, 2005 settlement agreement, wherein
      the Company agreed to issue the 900,000 shares to Mr. Collazo as of
      September 20, 2002.  The motion was heard, and the Court ordered the
      Company to reissue the 900,000 shares to Mr. Collazo as of
      September 20, 2002 without restrictions.





On
      July
      7, 2006, Mr. Collazo’s former attorneys, Wilshire Palisades Law Group, P.C.,
      filed an attorney lien on any and all judgments rendered in favor of Mr.
      Collazo.  Under advisement of counsel, the Company has not reissued the
      900,000 shares, nor has it made any additional payments to Mr. Collazo. As
      of the
      date of this report, no further action has been taken in this
      matter.





**Yellowbrix,
      Inc. vs. Media and Entertainment.com** (Superior
      Court of CA, Los Angeles County - complaint filed September 16,
      2004)





Yellowbrix,
      Inc. filed a collection suit against Media and Entertainment.com regarding
      an
      alleged contract authorized by the former CEO of Media and Entertainment.com.
      The pending lawsuit amount in dispute is $19,800, which was expensed in general
      and administrative expense in 2004 and accrued within accounts payable of the
      Company as of the
      fiscal years ended December 31, 2006 and 2005 .




12




On
      July
      25, 2006, the Company learned that a judgment had been entered against it in
      this matter on February 15, 2006. The judgment amount included the $19,800
      in
      controversy, plus $3,000 in attorney fees. As of the
      date
      of this report ,
      Yellowbrix has not sought to enforce the judgment.





**Dell
      Marketing, LP vs. Winsonic Holdings, Ltd.** (District Court of Travis County, Texas - complaint filed December 13,
      2004)





On
      or
      about April 17, 2006, the Company was notified of a default judgment rendered
      against it in a collection suit in Travis County, Texas in the amount of
      $474,285. An additional charge of $90,000 in attorney fees was entered in the
      judgment; however, the Company is negotiating a forgiveness of the attorney
      fees
      based on timely payment of the judgment. The $474,285 in dispute was expensed
      as
      a general and administrative expense in 2005 and accrued within accounts payable
      of the Company as of December 31, 2006. The $90,000 in attorney fees has also
      been expensed and accrued.





On
      July
      27, 2006, the Company received notice that the judgment had been domesticated
      in
      the state of Georgia as of July 21, 2006. As of the date of this report, no
      further significant action has been taken in this matter.





**Netscaler
      Inc. vs. Winsonic Holdings, Ltd.** (Superior
      Court of CA, Los Angeles County - complaint filed May 16, 2005)





The
      disputed amount of $75,000 in this collection lawsuit was expensed as a general
      and administrative expense in 2004 and accrued within accounts payable as of
      September 30, 2006 and 2005. Pursuant to a Stipulation for Entry of Judgment,
      the Company agreed to pay the sum of $75,000 in three (3) installment payments
      of $25,000, commencing in June 2006, in exchange for the dismissal of the
      action. The stipulation also provided that, in the event of a breach by the
      Company, plaintiff could seek to collect the $100,769 sought in the complaint.
      As of December 31, 2006, the Company has accrued an additional $25,000 accounts
      payable to reflect the breach.





On
      August
      15, 2006, Netscaler filed a declaration to set aside the dismissal and to enter
      judgment in the amount of $100,769 against the Company pursuant to the
      Stipulation for Entry of Judgment. As of the date of this report, no further
      action has been taken in this matter.





**Attorney
      Collection Services vs. Winsonic Holdings, Ltd.** (Superior
      Court of CA, Los Angeles County - complaint filed June 30, 2004)





The
      disputed amount of $25,000 in this collection lawsuit was expensed as a general
      and administrative expense in 2005 and accrued within accounts payable as of
      the
      fiscal years ended December 31, 2006 and 2005. On
      September 15, 2006, this matter was dismissed by the court; however, Plaintiff
      has indicated that it will either file a Motion to Set Aside the Dismissal
      or
      bring a new action. As of the
      date
      of this report ,
      no
      further action has been taken in this matter.





**Crown
      Office Suites, Inc. vs. Winsonic Digital Media Group, Ltd.** (State
      Court of Cobb County, Georgia - complaint filed November 23, 2005)





This
      is
      an action for breach of a lease agreement against the Company. The disputed
      amount of $50,193 was expensed as a general and administrative expense in 2005
      and accrued within accounts payable of the Company as of December 31, 2006.
      On
      April 5, 2006, Crown filed a motion to change venue from Cobb County to Fulton
      County. On April 18, 2006, the Company, through its attorneys, filed an Answer
      contesting service, a Motion to Open Default and a Brief in Support of the
      Motion to Open Default. As
      of the
      date
      of this report ,
      no
      further significant action has been taken in this matter.





**Lefkowitz
      vs. Winsonic Digital Media Group, Ltd.** (Superior
      Court of CA, Los Angeles County - complaint filed May 18, 2006)





This
      is
      an action for breach of contract brought by David Lefkowitz, Caesar Collazo’s
      attorney in Collazo vs. Media and Entertainment.com. Mr. Lefkowitz seeks payment
      of $125,000 in attorney fees, which he asserts he is entitled to pursuant to
      the
      Settlement Agreement of April 11, 2005 in the Collazo matter. The disputed
      amount was charged as expenses in 2004. (For further background information
      on
      this matter, see “Item 3. Legal Proceedings, Collazo vs. Media and
      Entertainment.com.” above)




13




On
      June
      22, 2006, the Company filed its answer to the unverified complaint denying
      each
      allegation and asserting various affirmative defenses, including, failure to
      state a claim, waiver, ratification, etc. On July 17, 2006, Mr. Lefkowitz filed
      an offer to compromise requesting that the Company agree to a judgment in his
      favor in the amount of $120,000. (See “Note 13 - Subsequent Events” of the Notes
      to the Financials for further details regarding this lawsuit.)




**Yalley
      vs. Winsonic Digital Media Group, Ltd.** (District
      Court of Nevada, Clark County - complaint filed October 13, 2006)





This
      is
      an action for declaratory and injunctive relief brought by Nana Yalley, a former
      director and officer of the Company, requesting that the court grant a
      declaratory judgment ordering the Company and its stock transfer agent to remove
      the restrictive legends from 2,724,998 restricted shares of common stock of
      the
      Company owned by Mr. Yalley, pursuant to Rule 144(k) of the Securities Act
      of
      1993. In addition to the foregoing, Mr. Yalley seeks an indeterminate amount
      of
      attorneys’ fees and costs. The Company and its stock transfer agent were each
      served with a summons and complaint on October 17, 2006.





On
      November 7, 2006, the Company, through local counsel in the State of Nevada,
      filed responses to the complaint on behalf of itself and the stock transfer
      agent, whom the Company has agreed to indemnify in this action. On November
      13,
      2006, Mr. Yalley filed a Motion for Partial Summary Judgment; Ex Parte Request
      for Order Shortening Time, wherein he requested that the Court hear his motion
      as soon as possible, and order the Company to remove the restrictive legends
      from his shares. The Company filed an opposition to this request soon thereafter
      and Mr. Yalley filed a reply to the opposition on December 13, 2006. During
      the
      hearing which was scheduled for December 19, 2006, the Court ordered the Company
      to remove the restrictive legends from Mr. Yalley’s shares, but did not set any
      particular deadline to do so. (See “Note 13 - Subsequent Events” of the Notes to
      the Financials for further details regarding this lawsuit.)





**Eric
      Young vs. Winsonic Digital Media Group, Ltd** .
      (Superior Court of Georgia, Fulton County - complaint filed January 11,
      2006)





On
      November 29, 2006, the Company was notified by legal counsel for Mr. Eric Young,
      a former financial officer of the Company, that Mr. Young would be seeking
      compensation and severance for accounting services rendered during 2005 and
      2006 **.** (See
      “Note 13 - Subsequent Events” of the Notes to the Financials for further details
      regarding this lawsuit.)




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





No
      matters were submitted to a vote of security holders during the quarter ended
      December 31, 2006.





**PART
      II**




**Item
                5.**
            **Market
                for Common Equity and Related Stockholder
                Matters.**





Our
      common stock is quoted on the OTC-Pink Sheets, as WDMG. The following table
      sets
      forth the high and low closing bid quotations for our common stock for each
      fiscal quarter during the last two fiscal years, as reported on the Pink
      Sheets:





**2006**
            
            **High
                Bid**
            
            **Low
                Bid**Jan.
                1 through Mar. 31
            
            $
            0.45
            
            $
            0.20Apr.
                1 through June 30
            
            
            0.44
            
            
            0.25July
                1 through Sept. 30
            
            
            0.70
            
            
            0.33Oct.
                1 through Dec. 31
            
            
            0.75
            
            
            0.32




14




**2005**
            
            
            **High
                Bid**
            
            
            **Low
                Bid**Jan.
                1 through Mar. 31
            
            $
            1.35
            
            $
            0.45Apr.
                1 through June 30
            
            
            0.78
            
            
            0.32July
                1 through Sept. 30
            
            
            0.68
            
            
            0.37Oct.
                1 through Dec. 31
            
            
            0.48
            
            
            0.19





The
      above
      quotations represent prices between dealers and do not include retail markups,
      markdowns or commissions, nor do they represent actual
      transactions.





The
      Company has 50,000,000 shares of common stock authorized with a par value of
      $0.001 per share. As of December 31, 2006, there were 138 record holders of
      our
      common stock.





We
      have
      not declared any cash dividends on our common stock since our inception and
      do
      not anticipate paying such dividends in the foreseeable future. We plan to
      retain earnings, if any, to support the development of our business. Payment
      of
      future dividends, if any, will be at the discretion of our Board of Directors
      after taking into account various factors, including our financial condition,
      operating results, current and anticipated cash needs and plans for
      expansion.




**Recent
      Sales of Unregistered Securities**





**2006**




The
        Company issued 900,000 shares of its common stock during the quarter ending
        March 31, 2006. These 900,000 shares issued in the first quarter of 2006,
        were
        issued at $0.50 per share in settlement of a legal action. The settlement
        and
        the credit to stockholders’ equity were valued at $450,000. (See “Note 6 -
        Summary of Significant Legal Proceedings” for further details.)
 
 During
        2006, the Company issued 3,184,899 shares of its common stock at $0.20 per
        share
        in connection with conversions of various convertible notes payable that
        had
        been issued during the year.
 
 During
        April 2006, 500,000 shares of common stock were issued to the former chief
        financial officer of the Company in connection with employment incentive
        options, which were granted to him in connection with his employment during
        2005. In accordance with the accounting treatment under SFAS No. 124(R) and
        SFAS
        No. 125, the Company had previously recognized compensation expenses of $185,000
        upon the grant and vesting of the options during the fourth quarter of 2005
        and
        the first quarter of 2006.
 
 In
        April
        2006, the Company issued 411,956 shares of its common stock for the acquisition
        of Automated Interiors at $0.41 per share.




15




During
        the quarter ended June 30, 2006, the Company issued 411,956 shares of common
        stock at $0.41 per share as consideration for the acquisition of all of the
        outstanding equity of AI. Also, in connection with the acquisition of AI
        and as
        an employment incentive, the Company issued 750,000 shares of common stock,
        valued at $0.40, to five key employees of AI during April 2006.
 
 In
        May
        2006, 82,051 shares of restricted common stock were issued at $0.39 per share
        pursuant to a “cashless exercise” of options held by an advisor. The advisor had
        received options for services rendered during 2004. Based on the current
        market
        value of the stock, the option holder received a reduced number of shares
        of
        common stock upon exercise.
 
 During
        the third quarter of 2006, the Company issued 489,850 shares of its common
        stock
        in repayment of funds loaned to the Company at $0.53 per share.
 
 During
        the second, third and fourth quarters of 2006, the Company issued 2,153,010
        shares of its common stock upon exercise of convertible notes at $0.40 per
        share.
 
 During
        the third quarter of 2006, the Company issued 89,231 shares of its common
        stock
        upon the exercise of options issued for services at $0.65 per
        share.
 
 During
        2006, the Company issued 410,000 shares of its common stock to various financial
        consultants for services at fair market values ranging from $0.01 to $0.53
        per
        share.
 
 During
        2006, the Company issued 300,000 shares of its common stock upon the exercise
        of
        a warrant issued to a consultant at $0.01 per share.
 
 During
        2006, the Company issued 62,504 shares of its common stock as repayment of
        various loans valued at $0.40 per share.
 
 During
        December of 2006, the Company issued 40,000 shares of its common stock to
        a
        financial consultant, valued at $0.40 per share, whose services were employed
        to
        assist the Company in its financial reporting and disclosures.
 
 During
        the first and second quarter of 2006, the Company raised additional proceeds
        of
        $504,200 and $310,000, respectively, through the issuance of 59 convertible
        notes with attached warrants to accredited investors in denominations of
        $1,000
        to $100,000. (For a more detailed discussion, see “Note 10 - Convertible
        Debentures” and “Note 13 - Subsequent Events” in the Notes to the Financial
        Statements.)
 
 During
        the third and fourth quarter of 2006, the Company raised proceeds of $250,000
        and $759,192, respectively, through the issuance of 58 notes with attached
        warrants to accredited investors in denominations of $3,000 to $75,000. (For
        a
        more detailed discussion, see “Note 11 - Convertible Debentures” and “Note 13 -
        Subsequent Events” in the Notes to the Financial Statements.)
 
 In
        November 2006, the Company committed to issue 1,146,593 shares of common
        stock
        in connection with the acquisition of Tytess.
 
 In
        December 2006, the Company issued a $60,000 principal amount convertible
        promissory note which is convertible into the Company’s common stock convertible
        at a rate of $0.58 per share and an aggregate of 241,379 shares of the Company’s
        common stock in connection with the acquisition of the Store.
 
 We
        neither received nor paid any commissions in connection with the issuances
        of
        securities described above. We believe that the issuance of such securities
        was
        exempt from the registration requirements of the Securities Act of 1933,
        as
        amended, pursuant to the provisions of Section 4(2) of the Securities
        Act.


**2005**





During
      2005, the Company issued 252,745 shares of common stock to a private limited
      partnership. The Company issued 94,615 of these shares at $1.30 per share during
      January, 91,463 of these shares at $0.82 per share in March, and 66,667 of
      these
      shares at $0.68 per share in June, all pursuant to a warrant exercisable at
      $0.07 per share. The warrant had been issued as compensation to certain
      professional advisors for services rendered during 2004. These 2005 issuances
      were made pursuant to a “cashless exercise” of a warrant where the warrant
      holder received a reduced number of shares of common stock upon conversion
      based
      on the current market value of the stock.





During
      January 2005, the Company issued convertible notes with detachable warrants
      in
      connection with a loan for $200,000. The notes included interest of 6% and
      were
      due on December 15, 2005, or upon the occurrence of certain events relating
      to
      the capital structure of the Company. To date, neither these warrants nor the
      conversion rights have been exercised.





During
      fiscal year 2005, the Company issued 1,670,000 shares to Native American
      Television Network, Inc. (“NATVN”) in exchange for 4,000,000 shares of common
      stock, in accordance with a stock exchange agreement entered into by both
      parties. This transaction was recorded in accordance with Staff Accounting
      Bulletin (SAB) Topic 5(g), which states that the transfer of non-monetary assets
      by shareholders should be recorded at the transferor’s historical cost basis as
      determined under Generally Accepted Accounting Principals (GAAP). The President
      of the Company and a Company shareholder were also shareholders and co-founders
      in NATVN, owning approximately 9% of the total outstanding equity in NATVN.




16




During
      fiscal year 2005, the Company issued 700,000 shares of common stock to its
      founder to relieve related party loan payable due him valued at $231,000 or
      $0.33 average price per share.





During
      fiscal year 2005, the Company issued 500,000 shares of common stock to its
      founder for services valued at $165,000 or $0.33 average price per share.





During
      fiscal year 2005, the Company issued 900,000 shares of common stock to two
      consultants for services valued at $630,000 or $0.70 average price per share.





During
      fiscal year 2005, the Company issued 225,000 shares of common stock to two
      consultants for services valued at $108,000 or $0.48 average price per share.





During
      fiscal year 2005, the Company issued 590,000 shares of common stock to four
      investors in satisfaction of convertible debenture obligations of $118,000
      at
      $0.20 average price per share.





During
      fiscal year 2005, the Company issued 925,927 shares of common stock to its
      landlord for a lease deposit valued at $250,000 or $0.27 average price per
      share.





During
      fiscal year 2005, the Company issued 820,000 shares of common stock to one
      company as a result of the conversion of common stock payable valued at $820,000
      or $1.00 per share.




During
      fiscal year 2005, the Company recorded the vesting of 500,000 shares of common
      stock award for an officer for the net vested value of $185,000.





During
      fiscal year 2005, the Company recorded a common stock payable of 818,182 common
      shares valued at $270,000 or $0.33 average price per share to an officer per
      a
      separation agreement.





During
      fiscal year 2005, the Company recorded the vesting of stock options to purchase
      500,000 shares of the Company’s common stock per a separation agreement, valued
      at $131,068 at December 31, 2005 using the Black Scholes valuation method.





During
      December 2005, the Company received proceeds of $388,250 from the issuance
      of a
      convertible notes and detachable warrants consisting of 6 offerings to
      accredited investors.





We
      neither received nor paid any commissions in connection with the issuances
      of
      securities described above. We believe that the issuance of such securities
      was
      exempt from the registration requirements of the Securities Act of 1933, as
      amended, pursuant to the provisions of Section 4(2) of the Securities
      Act.





**2004**





During
      fiscal year 2004, the Company issued as part of the merger transaction on
      October 7, 2004 6,004,200 shares of common stock to its founder and Chairman/CEO
      for past services, totaling $6,004 or $0.001 price per share.





During
      fiscal year 2004, the Company issued 23,956,138 shares of common stock related
      to the merger with Media & Entertainment.com, Inc. This represented shares
      outstanding of the Media & Entertainment.com, Inc. as of the date of the
      merger, and are reflected as a recapitalization of Winsonic the Company as
      of
      October 7, 2004, the Winsonic transaction date.





During
      fiscal year 2004, the Company issued 1,980,946 shares of common stock to eleven
      individuals and one company for consulting services rendered totaling $1,490,309
      or $0.75 average price per share.





During
      fiscal year 2004, the Company issued 758,000 shares of common stock to eleven
      individuals and one company in satisfaction of debts totaling $331,000 and
      accrued interest of $242,500.





During
      fiscal year 2004, the Company issued 921,600 shares of common stock to eight
      individuals and one company as a result of stock warrants exercised at $1.00
      per
      share.




17




During
      fiscal year 2004, the Company converted 258,000 of outstanding stock warrants
      into $198,000 of debts and $60,000 of additional paid in capital related to
      seven individuals and one company.




During
      December 2004, the Company received proceeds of $815,000 from the issuance
      of
      convertible notes and detachable warrants.  The offering was made to 21
      accredited investors.





We
      neither received nor paid any commissions in connection with the issuances
      of
      securities described above. We believe that the issuance of such securities
      was
      exempt from the registration requirements of the Securities Act of 1933, as
      amended, pursuant to the provisions of Section 4(2) of the Securities
      Act.





The
      following table summarizes the Company’s detachable stock warrant activities for
      the period ending December 31, 2006:




**Number
                of**
              **Warrants**
            
            **Exercise
                Price**Balance
                as of December 31, 2003
            
            
            -
            
            
            -Warrants
                issued
            
            
            1,164,286
            
            
            0.70Warrants
                cancelled/expired
            
            
            -
            
            
            -Warrants
                exercised
            
            
            -
            
            
            -Balance
                as of December 31, 2004
            
            
            1,164,286
            
            
            0.70Warrants
                issued
            
            
            285,714
            
            
            0.70Warrants
                cancelled due to extension agreement
            
            
            (1,450,000
            )
            
            0.70Warrants
                replaced due to extension agreement
            
            
            2,537,500
            
            
            0.40Warrants
                issued
            
            
            941,250
            
            
            0.20Warrants
                exercised
            
            
            -
            
            
            -Balance
                as of December 31, 2005
            
            
            3,478,750
            
            
            0.35Warrants
                issued
            
            
            8,598,210
            
            
            0.21Warrants
                exercised
            
            
            -
            
            
            -Balance
                as of December 31, 2006
            
            
            12,076,960
            
            $
            0.25





**Equity
      Compensation Plans**





The
      following table summarizes information with respect to options under our equity
      compensation plans as of December 31, 2006:





Number
                of securities to be
              issued
                upon exercise of
              outstanding
                options,
              warrants
                and rights
              (a)
            
            Weighted-average
              exercise
                price of
              outstanding
                options,
              warrants
                and rights
              (b)
            
            Number
                of securities
              remaining
                available for
              future
                issuance under
              equity
                compensation plans
              (excluding
                securities
              reflected
                in column (a))
              (c)Equity
                compensation plans approved by security holders
            
            
            3,585,000
            
            $
            0.73
            
            
            850,000Equity
                compensation plans not approved by security holders (1)
            
            
            3,725,000
              
              1,999,304
            
            $
              
              $
            1.00
              
              0.01
            
            
            0
              
              0Total
            
            
            9,309,304
            
            $
            0.68
            
            
            850,000




(1)  Reflects
      stock options the Company is obligated to issue to certain employees pursuant
      to
      the terms of their respectve employment agreements. The Company has not yet
      issued such stock options.




18




**Item
                6.**
            **Management's
                Discussion and Analysis or Plan of
                Operation.**




**General**




In
      fiscal
      year 2006 the Company had revenues of $759,495, but we will continue to be
      a
      development stage company until we receive significant revenue from our
      operations and achieve a sustained level of profitability over multiple years.
      Until that time, we will continue to depend on financing resources for all
      or a
      portion of the cash flows necessary to meet our operating expenses. There can
      be
      no assurance of our financial success or economic survival until we have a
      sustainable revenue stream.




In
      fiscal
      year 2006, our operating plan focused on increasing our presence in the consumer
      market through strategic acquisitions. As discussed above, we acquired AI,
      Tytess, and Winsonic Digital Store. We also hold a 49% equity interest in
      Winsonic Diversity. These actions have aided the Company in developing inner
      city agendas and pursuing diversity initiatives in the high demand digital
      services market.




In
        addition to offering our products and services to customers in the consumer
        market, construction industry and telecommunications markets, we began expansion
        into the financial services industry. While
        we
        have grown through acquisitions and are considering other acquisition
        opportunities, management plans for our long-term growth to be achieved through
        organic sales growth. Indicators of our ability to accomplish this are as
        follows:


**Native
      American Television Network**





On
      September 29, 2005, the Company consummated a stock exchange agreement with
      the
      Native American Television Network (“NATVN”), based in Albuquerque, New Mexico.
      NATVN intends to launch the first Western Hemisphere, pan-tribal digital cable
      channel. The Company will provide to NATVN its nationwide distribution platform
      and technical support, expertise and personnel. NATVN will provide the Company
      with commercial airtime on regularly scheduled programming that offers air
      space
      to advertisers with the exception of paid programming or long form
      advertisements.





In
      accordance with the stock exchange agreement between the two parties, the
      Company issued 1,670,000 shares of its Common Stock to NATVN, and the Company
      acquired 4,000,000 shares of stock in NATVN, representing 27% of the NATVN
      equity.





The
      value
      of the investment to the Company is based upon the promising mutually beneficial
      opportunities of the relationship between the Company, NATVN and a significant
      number of potential digital-services subscribers within the American Indian
      community; however, currently there are no signed agreements in place. The
      Company has made tangible progress toward contractually capturing the target
      market, and NATVN is currently negotiating with representatives of the potential
      digital-services subscribers. As of yet, contractual agreements with the
      potential subscribers have not been secured. Without the agreements in place,
      the final number of subscribers to be serviced, the actual services to be
      provided (i.e. cable television, digital television, advertising revenues,
      telephony services, and high-speed internet) and the prices to be charged for
      the services are not certain.





This
      transaction was recorded in accordance with Staff Accounting Bulletin (SAB)
      Topic 5(g), which states that the transfer of non-monetary assets by
      shareholders should be recorded at the transferor’s historical cost basis as
      determined under Generally Accepted Accounting Principles (GAAP). The previous
      President of the Company and a Company shareholder are also shareholders and
      co-founders of NATVN, owning approximately 9% of the total outstanding equity
      in
      NATVN. Since NATVN is an early development stage company and there are no
      tangible or intangible assets or signed agreements in place, the historical
      cost
      and initial value of the non-monetary asset received was valued at zero as
      of
      December 31, 2006.




19




The
      Company and NATVN are currently in ongoing discussions to consider alternatives
      in the structure of the existing agreement, with the goal of providing both
      parties with an optimal structure and enhanced opportunities to service
      customers. Until then, the ongoing investment in NATVN will be accounted for
      under the “equity” method. The equity method of accounting is used if the
      investor has the ability to significantly influence the investee’s financial and
      operating policies or if an investor is accounting for an investment in a
      corporate joint venture, but holds less than 50% of the investee. Under the
      equity method, an investment is initially recorded at cost. Thereafter, the
      carrying amount of the investment is increased for the investor’s proportionate
      share of the investee’s gains or reduced for the proportionate share of the
      investee’s losses or for distributions received from the investee.





Subsequently,
      NATVN, working in conjunction with the Company, entered into a Memorandum of
      Understanding (“MOU”) with the Navajo Nation Office of Broadcast Services, and
      Diné College. Under the MOU the parties intend to collaborate and
      explore:




·
            The
                need for building a local education and training program that can
                provide
                Navajo Nation residents interested in entering the film and/or television
                industry with up-to-date digital media
                training.


·
            How
                to best utilize local workforce training and other resources so as
                to
                build and retain within the Navajo Nation an up-to-date well-trained
                media
                workforce.


·
            The
                need to assess the current state of the Navajo Nation’s communications
                infrastructure, as well as how to improve upon
                it.


·
            The
                establishment of a state-of -the-art digital news bureau/content
                production facility.





**Construction
      Agreement for Tytess Design and Development, Inc.**





On
      September 21, 2006, Tytess replaced View Point Group, LLC as the
      designer/builder in a design and construction agreement with Siloam Korean
      Church of Atlanta, Inc., which was originally executed on May 18, 2006. Pursuant
      to the agreement, Tytess agreed to design, engineer and build a sanctuary,
      fellowship hall, multipurpose room, classrooms, administrative offices and
      kitchen for the church within 365 days of the date of execution of the
      agreement. For its services, Tytess will be paid the sum of $2,000,000, which
      is
      payable in increments based on a work completion percentage
      schedule.





**Agreement
      for Project/FiOS Installation Services with Verizon**





On
      November 7, 2006, Winsonic Diversity and Verizon executed a FiOS Installation
      Services Agreement, pursuant to which Winsonic Diversity agreed to perform
      project management services, installation services, or both, as authorized
      by
      work orders issued by Verizon during the term of the agreement. The agreement
      became effective on January 1, 2007 and will continue in effect until December
      31, 2009 unless terminated or extended. This agreement will permit Verizon
      to employ the services of Winsonic Diversity on a nonexclusive basis for
      services identified in the agreement.





FiOS
      is a
      fiber to the premises (FTTP) telecommunications service offered in the United
      States by Verizon and has attracted consumer and media attention in the area
      of
      broadband Internet access as the first major carrier to offer such a
      service.





**Construction
      Agreement for Tytess Design and Development, Inc.**





On
      December 5, 2006, Tytess replaced View Point Group, LLC as the designer/builder
      in two design and construction agreements, which were originally executed in
      June and August of 2006. Pursuant to the agreements, Tytess will design,
      engineer and construct a 7,200 square foot single family residence in Atlanta,
      Georgia and a 4,200 square foot single family residence in Smryna, Georgia.
      Tytess’ compensation under these agreements will total $642,000, payable to
      Tytess in accordance with draw schedules determined by the percentage of work
      completed.





20




**Marketing
      Agreement with Point Source, LLC**





On
      February 6, 2007, the Company, Winsonic Diversity, and Point Source, LLC (“Point
      Source”), a construction and engineering firm specializing in residential
      developments in the southeast region, entered into a Marketing Agreement,
      pursuant to which Point Source was appointed by the Company as its non-exclusive
      marketing agent for a period of twenty (20) years.





Under
      the
      Agreement, Point Source will market the Company’s products and services to
      corporations and businesses using its network of affiliations with builders,
      developers, contractors, banks, accountants, lawyers, politicians and senior
      executives of corporations. Pursuant to the Agreement, Point Source is obligated
      to reasonably ensure that, for all projects owned and managed by Point Source
      for which the Company is selected as a provider, the Company will be the
      exclusive provider of said product/service. As consideration for its services,
      the Company agreed to pay to Point Source a 20% commission of the net profits
      from all sales referred to the Company by Point Source for the life of the
      service agreement between the Company and the referred customer.





**Construction
      Services Agreement with Verizon**





On
      February 15, 2007, Winsonic Diversity and Verizon Services Corporation
      (“Verizon”) executed a 2-year Construction Services Agreement, pursuant to which
      Winsonic Diversity has agreed to serve as a general contractor for Verizon
      in
      the construction of facilities at various sites. This agreement will permit Verizon
      to employ the services of Winsonic Diversity on a nonexclusive basis for
      services identified in the agreement. Upon receipt of an authorization letter
      from an authorized Verizon representative, the scope of work that Winsonic
      Diversity may be asked to perform and/or supervise includes the following:





*General
      Contractor:*




·
            Cell
                site construction on raw land;


·
            Cell
                site construction on existing telecommunications structures;
                and


·
            Cell
                site construction as rooftop
                additions.




*Site
      Construction*




·
            Site
                access roads;


·
            Fencing
                and gates;


·
            Site
                electrical;


·
            Construction
                stakeout;


·
            Foundations;


·
            Equipment
                shelters;


·
            Warehousing
                and material planning;


·
            Crane
                services;


·
            Tower;
                and


·
            Equipment
                installation services.




*Rigger*




·
            Installation
                of base antenna;


·
            Installation
                of coax cable;


·
            Installation
                of grounding system;


·
            Installation
                of pressurized antenna system; and


·
            Directional
                antenna mounting.





In
      addition to the services described above, Verizon may, by authorization letter,
      order additional services not listed in the agreement, at prices quoted to
      Verizon in writing.  Under
      the
      agreement, Verizon shall compensate Winsonic Diversity at the rates quoted
      by
      Winsonic Diversity for each specific service and/or skill set. Verizon can
      terminate the agreement or any authorization letters issued without cause,
      effective immediately, upon written notice to Winsonic Diversity.





21




**General
      A & E Services Agreement with Verizon**





On
      February 28, 2007, Winsonic Diversity executed a General Architectural and
      Engineering Services Agreement with Verizon) to provide architectural &
engineering and site analysis services to Verizon for an initial term of one
      (1)
      year; provided that such agreement is automatically renewable for subsequent
      one
      year periods at each annual anniversary. Upon
      receipt of an authorization letter from an authorized Verizon representative,
      and according to the schedule agreed to in advance by both parties, the scope
      of
      services that Winsonic Diversity may be asked to perform include the following:





·
            Architecture
                and Engineering Services for cell sites on raw
                land;


·
            Architecture
                and Engineering Services for cell sites on existing
                structures;


·
            Architecture
                and Engineering Services for cell sites as rooftop additions;
                and


·
            Structural
                analysis for cell sites on existing
                structures.





Winsonic
      Diversity may also be asked to perform the following services:




·
            Site
                visits;


·
            Project
                management;


·
            Evaluation
                of Verizon ‘s program, schedule and construction budget
                requirements;


·
            Review
                of alternate approaches to design and
                construction;


·
            Prepare
                schematic design documents;


·
            Document
                review;


·
            Tower
                appurtenance cataloging;


·
            Perform
                detailed structural analysis;


·
            Provide
                structural analysis report;


·
            Provide
                design development documents;


·
            Provide
                construction documents; and


·
            Provide
                administration of the construction
                contract.





Under
      the
      agreement, Verizon shall compensate Winsonic Diversity at the rates quoted
      by
      Winsonic Diversity for each specific service. Verizon can terminate the
      agreement or any authorization letter issued without cause, effective
      immediately, upon written notice to Winsonic Diversity.





**Memorandum
      of Understanding with Comtel Telcom Assets LP** ****





On
      March
      26, 2007 the Company and Comtel Telcom Assets LP (“Comtel”), executed a
      Memorandum of Understanding pursuant to which both parties agreed to enter
      into
      good faith, non-binding, non-exclusive negotiations to facilitate the purchase
      of five (5) of Comtel’s switch sites by the Company.





It
      is the
      Company’s intention to purchase from Comtel certain operating TDM systems
      (Nortel and Tellabs equipment) currently deployed and in-service with the
      understanding that the Company will arrange for any required licensing or RTUs
      from the manufacturer(s). Additionally the Company intends to purchase other
      miscellaneous telephony equipment, test gear, including, but not limited to
      DS1
      or DS3 patch panels, fiber patch panels, equipment/site alarming equipment
      and
      the existing switch site tool compliment. A detailed inventory of all purchased
      assets will be developed to determine the final pricing of the
      assets.





It
      is
      also the Company’s intention to purchase from Comtel certain installed power
      systems which will include the existing DC power plant with all rectifiers,
      batteries, distribution devices and cabling, plus the existing ACV power
      distribution system including any dedicated service, emergency generator and
      existing fueling systems.





As
      part
      of any agreement entered into with Comtel, the Company intends to develop a
      collocation agreement that will grant Comtel rack space for both current and
      future equipment requirements and grant access to employees of Comtel to the
      collocation site. The Company intends to provide Comtel with a service contract
      as part of the collocation agreement to support Comtel as may be required during
      certain specified periods.





The
      locations currently being considered for acquisition by the Company are located
      in the Atlanta, Georgia, Houston, Texas, Chicago, Illinois, Los Angeles,
      California, and Denver, Colorado markets. The Company has an interest in
      developing a reciprocal agreement with Comtel in markets the Company elects
      not
      to pursue a full switch site, but wishes to aggregate customer
      traffic.





22




**Critical
      Accounting Policies**





Basis
      of Accounting





The
      Company's policy is to prepare its financial statements pursuant to the accrual
      basis of accounting. The Company’s fiscal year end is December 31.





Use
      of
      Estimates





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




Stock
      Based Compensation





In
      December 2004, the FASB issued SFAS No. 123(R), “Share-Based Payment,” which
      establishes standards for transactions in which an entity exchanges its equity
      instruments for goods or services. This standard replaces SFAS No. 123 and
      supersedes APB Opinion No. 25, “Accounting for Stock-based compensation.” This
      standard requires a public entity to measure the cost of employee services
      received in exchange for an award of equity instruments based on the grant-date
      fair value of the award. This eliminates the exception to account for such
      awards using the intrinsic method previously allowable under APB Opinion No.
      25.
      SFAS No. 123(R) will be effective for interim or annual reporting periods
      beginning on or after June 15, 2005.





The
      Company has a stock incentive plan that provides for stock-based employee
      compensation, including the granting of stock options at $1.00 and $0.01 per
      share to certain key employees and other individuals. For stock options and
      warrants issued as compensation and reported in periods beginning after December
      15, 2005, the Company applies SFAS No. 123(R), “Share-Based Payment,” which
      requires the recognition of compensation cost based upon the fair value of
      stock
      options at the grant date (using option pricing models), and recognizing the
      cost over the period during which the services are provided (vesting period).




During
        the years ended December 31, 2006 and 2005, the Company granted options for
        7,159,304 and 1,250,000 shares of common stock, respectively, to its employees.
        4,058,506 of such options vested during the year ended December 31, 2006
        and
        2,369,041 of such options vested during the year ended December 31, 2005.
        For
        the vested portion of such options, the Company accrued compensation expense
        of
        $1,167,419 for the year ended December 31, 2006. The compensation expense
        is
        based on the fair market value of the options utilizing the Black-Scholes
        option
        pricing model. The Black-Scholes estimate includes the following assumptions,
        risk free rate of return of 3.5% and 4.5 ***%*** ;
        no
        dividend yield, volatility factors of the expected market price of the Company’s
        common stock of 185% to 197%; with a weighted average expected life of 3
        years
        for the $1.00 stock options and 1 year for the $0.01 stock options.




Revenues
      and Expenses Recognition





The
      Company is a development stage company and has not had significant revenues
      to
      date. Revenues for the Company are recognized upon rendering services to
      customers. Costs and expenses are recognized during the period in which they
      are
      incurred





Tytess
      has elected to recognize revenue on a percentage of contract completion method.
      This method requires Tytess to do progress billings based upon completion of
      preset milestones. Revenues and expenses for each milestone are recognized
      as
      each milestone has been completed.





AI
      has
      elected to recognize revenue on a completed contract method. The completed
      contract **** method
      requires AI to defer revenue and expense recognition until the contract has
      been
      substantially completed. Management has determined that the completed contract
      method of accounting more accurately reflects the nature of AIs business. Due
      to
      the volatile nature of electronic components, significant uncertainty may exist
      with respect to the total cost of performing a contract and the ultimate amount
      of profit to be recognized thereon. AI has developed criteria for determining
      whether a project should be recorded as a sale or as a deferred sale (a balance
      sheet liability). The criteria for recording a sale are that the installation
      has been completed, all costs of design and installation have been accrued
      or
      paid and there are no material contingent obligations outstanding.





23




AI
      Work
      in Process **** Account :
      In
      connection with the utilization of the completed contract method of revenue
      recognition for the consolidated financial statements, AI maintains a work
      in
      progress account for costs of jobs in progress. All costs directly associated
      with the completion of a contract are accumulated as charges to work in progress
      prior to completion of the jobs. Upon completion of a contract, all related
      costs charged to work in progress are transferred to cost of goods sold.





Revenues
      for Winsonic Digital Store are recognized upon rendering services to customers.
      Costs and expenses are recognized during the period in which they are
      incurred.





Recently
      Issued Accounting Pronouncements




In
      March
      2006, the FASB issued SFAS No. 156, “Accounting for Servicing of Financial
      Assets,” which amends SFAS No. 140. SFAS No. 156 may be adopted as early as
      January 1, 2006 by calendar year-end entities, provided that no interim
      financial statements have been issued. Those not choosing to early adopt are
      required to apply the provisions as of the beginning of the first fiscal year
      that begins after September 15, 2006 (e.g., January 1, 2007 for calendar
      year-end entities). The intention of the new statement is to simplify accounting
      for separately recognized servicing assets and liabilities, such as those common
      with mortgage securitization activities, as well as, to simplify efforts to
      obtain hedge-like accounting. SFAS No. 156 permits a servicer using derivative
      financial instruments to report both the derivative financial instrument and
      related servicing asset or liability by using a consistent measurement attribute
      or fair value. We do not expect the adoption of SFAS No. 156 to have a material
      impact on our consolidated financial position, results of operations or cash
      flows.




In
      September 2006, the FASB issued SFAS No. 157, *Fair
      Value Measurements" ("SFAS 157)* ,
      which
      provides guidance on how to measure assets and liabilities that use fair value.
      SFAS 157 will apply whenever another US GAAP standard requires (or permits)
      assets or liabilities to be measured at fair value but does not expand the
      use
      of fair value to any new circumstances. This standard also will require
      additional disclosures in both annual and quarterly reports. SFAS 157 will
      be
      effective for fiscal years beginning after November 15, 2007 (January 1, 2008
      for the Company). The Company is currently evaluating the impact, if any, the
      adoption of FIN 157 will have on its financial statements. Based on the analysis
      done so far, we do not expect SFAS 157 to have a material impact on our
      financial statements.




In
      September 2006, the FASB issued SFAS 158, *Employers’
      Accounting for Defined Benefit Pension and Other Postretirement Plans - an
      amendment of FASB Statements No. 87, 88, 106, and 132(R) (“SFAS 158”) and SFAS
      87, Employers’ Accounting for Pensions* (“SFAS
      87”). SFAS 158 requires the recognition of an asset or liability for the
      overfunded or underfunded status of all defined benefit plans included in our
      2006 year-end financial statements. The Company does not have a defined benefit
      plan currently and we do not expect SFAS 158 to have a material impact on our
      financial statements.




In
      June
      2006, the FASB issued FASB Interpretation No. 48, *Accounting
      for Uncertainty in Income Taxes - an interpretation of FASB Statement
      109* (“FIN
      48”), which prescribes a recognition threshold and measurement attribute for the
      financial statement recognition and measurement of a tax position taken or
      expected to be taken in a tax return. Under FIN 48, the benefit of a tax
      position may be recognized only if it is more likely than not that the tax
      position will be sustained, based on the technical merits of the position,
      by a
      taxing authority having full knowledge of all relevant information. We do not
      expect FIN 48 to have a material impact on our financial statements.




24




In
        February 2007, the FASB issued SFAS 159, *The
        Fair Value Option for Financial Assets and Financial Liabilities, including
        an
        amendment of FASB Statement No. 115* (“SFAS
        159”) which permits entities to choose to measure eligible items at fair value
        at specified election dates. Unrealized gains and losses on items for which
        the
        fair value option has been elected will be reported in earnings at each
        subsequent reporting date. The following balance sheet items are within the
        scope of SFAS 159:




·
            Recognized
                financial assets and financial liabilities unless a special exception
                applies




·
            Firm
                commitments that would otherwise not be recognized at inception and
                that
                involve only financial instruments




·
            Non-financial
                insurance contracts




·
            Host
                financial instruments resulting from separation of an embedded
                non-financial derivative instrument from a non-financial hybrid instrument




SFAS
      159
      will be effective for fiscal years beginning after November 2007 with early
      adoption possible but subject to certain requirements. We do not plan early
      adoption and we do not expect a material impact on our financial statements
      from
      the eventual adoption of SFAS 159.




**Material
      Changes in Results of Operations**




As
      a
      development stage company, we have not received significant revenues from our
      commercial operations. During the year ended December 31, 2006, the consolidated
      operations of the Company, combined with AI, Tytess and Winsonic Digital Store
      (“WDS”) yielded revenue of $759,495.





The
      following pro forma information includes the separate and consolidating
      information for the operations of our consolidated operations for the fiscal
      year ended December 31, 2006:





**WDMG**
            
            **AI**
            
            **Tytess**
            
            **WDS**
            
            **Combined**Revenue
            
            $
            19,759
            
            $
            737,072
            
            $
            1,300
            
            $
            1,363
            
            $
            759,495Gross
                Profit
            
            
            (5,907
            )
            
            264,072
            
            
            1,228
            
            
            1,363
            
            
            260,756SG
                & A expenses
            
            
            5,669,940
            
            
            549,128
            
            
            1,414
            
            
            1,211
            
            
            6,221,693Profit
                (Loss ) from operations
            
            
            (5,675,847
            )
            
            (285,057
            )
            
            (185
            )
            
            152
            
            
            (5,960,937
            )Net
                Income (Loss)
            
            $
            (7,953,640
            )
            $
            (290,458
            )
            $
            (185
            )
            $
            152
            
            $
            (8,244,131
            )Income
                (loss) per share - basic and diluted
            
            $
            -
            
            $
            -
            
            $
            -
            
            $
            -
            
            $
            (0.18
            )





For
      the
      fiscal year ended December 31, 2006, we had gross consolidated revenue of
      $759,495 with a gross profit of $260,756. The consolidated operations, however,
      continued to generate an operating loss in the amount of $5,960,937 for the
      fiscal year ended December 31, 2006. The operating losses for the fiscal year
      ended December 31, 2006, primarily represent selling, general and administrative
      expenses of approximately $1,800,000 for SG&A payroll expenses of
      approximately $1,892,000, related party operating expenses for payroll of
      $2,015,000 and consulting services of $352,000. Depreciation expense was
      approximately $163,000 for the fiscal year ended December 31, 2006. Total
      operating expenses were approximately $3,889,000 for the fiscal year ended
      December 31, 2005, which consisted primarily of selling, general, and
      administrative expenses of approximately $1,262,000, SG&A related party
      expenses for payroll of $1,337,000, consulting services of $945,000 and
      depreciation and amortization expense of $345,000.





During
      the period ended December 31, 2006, the Company applied SFAS No. 123(R), which
      requires the Company to recognize the expense of employee incentive options
      that
      vested during the reported period.  The selling, general and administrative
      expenses for the twelve months ended December 31, 2006 include compensation
      expenses of $1,130,000 arising from vested employee stock options committed
      to
      employees during the year.  (For additional information, see “Note 2 -
      Summary of Significant Accounting Policies, Stock Based Compensation” in the
      Notes to the Financial Statements.)





25




For
      the
      year ended December 31, 2006, the Company incurred interest expense and finance
      cost of $1,177,000 compared to an interest expense and finance cost of
      approximately $1,198,000 in the comparable period of 2005 which reflects a
      decrease of approximately $21,000. (See “Note 11 - Convertible Debentures” in
      the Notes to the Financial Statements for more information.)





During
      December of 2004 and January of 2005, the Company issued approximately
      $1,015,000 in convertible debentures. The conversion feature of the debentures
      included the right of the note holder to convert the face value of the note
      into
      common stock of the Company at the lower of $0.70 per share or 85% of the market
      value of the common stock (at the time of conversion). The agreement also
      included a detachable warrant, which allowed the warrant holders to purchase
      shares of common stock of the Company at $0.70 per share (1,450,000 shares
      of
      common stock), through December 2006. During 2005, the debentures were
      renegotiated and extended to June 2006, and the conversion price was decreased
      from $0.70 to $0.40 or 85% of the market price of the stock at the time of
      conversion. (Please reference “Note 11 - Convertible Debentures” in the Notes to
      the Financial Statements for a more detailed explanation.) The transaction,
      to
      the extent that it is to be satisfied with common stock of the Company, would
      normally be classified as an equity obligation. However, the Company could
      be
      required to issue an indeterminate number of shares of its common stock to
      satisfy the optional (85% of market value) conversion feature of the debentures.
      This could cause the Company to exceed the number of shares of common stock
      it
      is authorized to issue, which would also prevent the delivery of common shares
      if the warrants were exercised during that period of time. Under GAAP, the
      Company is required to record the warrants and the convertible notes as a
      liability. Changes in the value of the derivative liability and the warrant
      liability are reflected on our income statement as *“* unrealized
      gain (loss) on adjustment of derivative and warrant liability to fair value
      of
      underlying securities. *”* During
      the fiscal year ended December 31, 2006, the Company recorded an unrealized
      loss
      of approximately $1,968,000 compared to a gain of approximately $1,422,000
      during the fiscal year ended December 31, 2005 from the adjustment of these
      liabilities.





Management
      of the Company expects that, due to the volatile nature of the price of the
      Company’s common stock, liabilities related to the convertible debentures and to
      employee costs will continue to be correspondingly volatile and, as a result,
      will cause the reported net income (loss) of the Company to fluctuate in such
      a
      manner as to make direct comparisons between reporting periods difficult. The
      management of the Company feels that as long as the derivative and warrant
      liabilities exist, the reported operating income (loss) will be a more accurate
      reference for the true performance of the Company.





**Liquidity
      and Capital Resources**




As
      of
      December 31, 2006, we had a working capital deficit of $7,723,000 compared
      to a
      deficit of $6,513,000 as of December 31, 2005.





For
      fiscal year 2006, we used total cash of $1,457,000 in operating activities
      of
      the Company. Approximately $956,000 was used in operations in 2005. Net cash
      used by investing activities during 2006 was $176,144 compared to cash provided
      during 2005, of $815,000. During 2006, total financing activities resulted
      in
      $1,636,000, primarily as a result of sharenote proceeds of approximately
      $1,707,000. In Fiscal 2005, financing activities resulted in a net cash use
      of
      $296,000. For Fiscal 2006, we experienced a net increase in cash of $ 3,557
      compared with a net decrease in cash of $437,000 for Fiscal 2005.





Our
      ability to implement our business plan is dependent upon expanding our current
      revenues from sales of our products and services and obtaining additional
      financing.





If
      we are
      unable to generate sufficient sustainable revenues or obtain additional
      financing to meet our financial obligations, we will have to further reduce
      our
      operations, and we will not be able to continue as a going concern. Our
      independent auditors have indicated in their audit report, dated May 22,
      2007 ****** that
      there is substantial doubt about our ability to continue as a going concern
      without additional financing and achieving and maintaining profitable
      operations. The financial statements that accompany this annual report do not
      include any adjustments that might result from this uncertainty.




26




**Continuing
      Operations**




The
      markets in which the Company operates include a large number of companies vying
      for customers and market share both domestically and internationally. The
      Company’s competitors include other digital service providers, home automation
      companies, and architectural and design firms. Some of the Company’s competitors
      may develop competing products and services that offer better pricing or that
      reach the market in advance of the Company’s offerings. Some competitors also
      have or may develop greater financial and other resources than the Company,
      with
      enhanced ability to compete for market share, in some instances through
      significant economic incentives to secure contracts. Some also may be better
      able to compete for skilled professionals. Any of these factors could have
      an
      adverse effect on the Company’s business. Future results will depend on the
      Company’s ability to mitigate the effects of aggressive competition on revenues,
      pricing and margins and on the Company’s ability to attract and retain talented
      people.





The
      Company’s future results will depend in part on the success of its ability to
      profitably grow revenues under the existing contracts and to control costs
      through the development and use of low-cost subcontractors, partnering and
      sourcing models. The Company’s current contracts are multiyear engagements under
      which the Company will provide project management, site construction,
      architectural and engineering services, and installation services for larger
      digital service providers. The planned expansion includes, among other things,
      commercial operations where the Company will deliver digital services across
      several platforms, the integration and continued growth of AI, Tytess, Winsonic
      Diversity, and Winsonic Digital Store. With potential joint ventures, such
      as
      NATVN, the Company’s facilities-based network and current service contracts are
      expected to provide a base of recurring revenue. The Company will need to have
      available sufficient financial resources in order to take on these obligations
      and make these investments.





The
      Company has, to date, focused almost exclusively upon the startup phase of
      its
      operations. To that end, management has focused on identifying and retaining
      key
      employees to provide the support necessary as operations move to revenue
      generation and expansion. The Company’s priorities for the next twelve months of
      operations are to expand our human resources to adequately service our existing
      contracts and to reach a sustainable profitability level. As we expand our
      operations with the expectation of growing revenue from our activities, we
      may
      elect to hire additional salaried or hourly employees to operate certain aspects
      of our business. While we will attempt to attract and retain qualified employees
      under terms similar to those currently in place, we may not be able to obtain
      agreements allowing for deferral of payroll or payment of portions of
      compensation in the form of equity.





While
      management expects revenue generation to increase, the Company expects to
      operate with a deficit in cash flows for at least the next few months. The
      deficit, which arises primarily from payroll obligations, may be satisfied
      through a combination of employee salary deferrals of approximately $57,000
      per
      month and through cash raised primarily from the placement of the Company’s
      securities (either directly or through convertible debt offerings). Management
      intends to focus substantial efforts on the funding of the current projects
      and
      operational deficit during the next few months. The funding effort will proceed
      at the same time as commercial operations continue. The Company believes that
      the current management team has the applicable skills to handle the challenge
      of
      covering the cash deficit and developing profitable operations. There is no
      guarantee that any such financings can be obtained or, if obtained, that such
      financings will be on adequate or reasonable terms.




**Off-Balance
      Sheet Arrangements**





As
      of
      December 31, 2006, the Company has not engaged in any off-balance sheet
      arrangements, and management does not anticipate that the Company will be
      engaged in off-balance sheet arrangements in the foreseeable
      future.




**Risk
      Factors**





We
      are
      subject to various risks that may materially harm our business, financial
      condition and results of operations. **** These
      are
      not the only risks and uncertainties that we face. If any of these risks or
      uncertainties actually occurs, our business, financial condition or operating
      results could be materially harmed.




27




**Risks
      Relating to our Company**





***We
      have an immediate need for additional financing.***





The
      Company has limited operating funds and has nominal cash on hand. The Company
      has an immediate need for funds in order to finance its business operations.
      As
      of December 31, 2006, the Company had a working capital deficit of approximately
      $7,723,000.





Our
      working capital requirements in the foreseeable future will depend on a variety
      of factors, including the Company's ability to implement its business plan.
      In
      the event that our plans change, our assumptions change or prove to be
      inaccurate, or our cash flow proves to be insufficient to fund our operations
      (due to unanticipated expenses, delays, problems, difficulties or otherwise),
      we
      will be required to seek additional financing sooner than anticipated or have
      to
      curtail our activities.





We
      have
      issued $2,412,272 of short-term indebtedness as of December 31, 2006. To the
      extent that we incur additional indebtedness or any other transaction, we will
      be subject to risks associated with incurring substantial indebtedness,
      including the risks that interest rates may fluctuate and cash flow may be
      insufficient to pay principal and interest on any such indebtedness. We
      currently have limited sources of revenue from which we can repay our
      indebtedness. We have no current arrangements with respect to, or sources of,
      additional financing, and it is not anticipated that existing stockholders
      will
      provide any portion of our future financing requirements. There can be no
      assurance that additional financing will be available to us on commercially
      reasonable or acceptable terms, if at all. Our ability to obtain additional
      capital will be dependent in part on market conditions, the economy and other
      factors outside of our control. Our failure to secure necessary financing would
      have a material adverse effect on us and could require us to delay or modify
      our
      business plan.





***Our
      auditor’s report contains a “going concern” qualification.***





We
      have
      incurred operating losses and negative cash flow from operations since our
      inception. Our auditors issued an unqualified report on our Financial Statements
      as of and for the year ended December 31, 2006. However, the report states
      that
      our ability to continue as a going concern is contingent upon the successful
      completion of additional financing arrangements and our ability to achieve
      and
      maintain profitable operations. (See “Independent Auditors' Report” and “Note 7
      - Going Concern” in the Notes to the Financial Statements.) The Financial
      Statements which accompany this annual report do not include any adjustments
      that might result from this uncertainty.





***We
      have incurred significant and continuing losses and may not be able to generate
      revenues to sustain our operations.***





The
      Company incurred net losses of approximately $8,244,000 and $4,106,000 for
      the
      years ended December 31, 2006 and 2005, respectively, and $20,694,000 for the
      period from inception through December 31, 2006. The Company has recorded total
      revenues of only $817,306 since inception.





The
      Company will continue to have a high level of operating expenses and is required
      to make significant expenditures including, but not limited to, salaries of
      executives and marketing, engineering and other personnel. The Company expects
      to incur additional losses until such time as it is able to generate sufficient
      revenues to finance its operations and the costs of expansion. There can be
      no
      assurance that the Company will be able to generate such revenues and operate
      profitably.





***Our
      limited operating history subjects us to the risks of a new
      business.***





There
      is
      only a limited operating history upon which to evaluate our performance and
      prospects. Our prospects must be considered in light of the risks, expenses,
      delays, problems and difficulties frequently encountered in the establishment
      of
      a new business in the industries in which we operate.





***There
      may be potential liabilities associated with the Company that we were not aware
      of at the time of the merger with Media and Entertainment.com, Inc. or at the
      time of the consummation of other acquisitions.***




The
      Company may be responsible for certain liabilities related to our acquisitions
      of other entities. It is possible that we did not discover or may have been
      unable to discover certain liabilities of acquisition targets during our
      pre-acquisition investigation of these targets. A court could conclude that
      we
      assumed such liabilities either by contract or as a matter of law. While we
      have
      attempted to limit our liability through indemnification provisions and
      warranties contained in acquisition agreements, these provisions may not fully
      protect us due to their limited scope, amount, or duration, the financial
      limitations of the indemnitor or warrantor, or for other reasons. Therefore,
      in
      the event we are held responsible for such liabilities, the Company's operations
      may be materially and adversely affected.




28




***We
      may not be able to realize the benefits we expect from the acquisitions of
      Tytess, Automated Interiors and the Winsonic Digital Store and our equity stake
      in Winsonic Diversity.***





We
      have
      already expended, and expect to continue to expend, considerable resources
      and
      management time in connection with the acquisitions of Tytess, AI and the
      Winsonic Digital Store and our investment in Winsonic Diversity. While we expect
      that these transactions will be beneficial to us, it is not certain whether
      we
      will realize any material benefits from these transactions. Furthermore, because
      these transactions involve business from various industries, it may be difficult
      for us to integrate such businesses and we may not see a positive return on
      management time and company resources invested in realizing these synergies.
      Our
      failure to successfully integrate such businesses into the operations of the
      Company could have a material and adverse affect on our financial condition
      and
      operations.





***We
      have a limited number of customers, and loosing one or more of them could
      substantially harm our business.***




Our
      operations largely depend upon our relationship with a small number of
      customers. The termination of business by any of our initial customers will
      have
      a material adverse effect on our operations. There is no guaranty that we will
      be able to retain our existing customers or development relationships with
      new
      customers.





***We
      depend on Winston Johnson, our Chairman and CEO, as well as other executive
      officers and key employees, and may have difficulty attracting and retaining
      the
      additional skilled employees we need to execute our growth
      plans.***





Our
      future success depends on the continued services of Winston Johnson, our CEO,
      as
      well as our other executive officers and key employees. We do not carry key
      person life insurance on any of our personnel. Given our early stage of
      operations and plans for expansion, the loss of the services of any of our
      executive officers or other key employees could have a material adverse effect
      on our business and financial results. Our future success also depends on our
      ability to attract, retain and motivate highly skilled employees, particularly
      marketing, sales, engineering and technical personnel. Competition for employees
      in the industries in which we operate is intense. We may not be able to attract,
      assimilate or retain other highly qualified employees in the future. Failure
      to
      attract or retain such employees could have a material adverse affect on our
      business and financial results.





**Risks
      Relating to our Business**





***The
      success of our business depends on new products and
      technologies.***





We
      operate in rapidly evolving industries and the market for our services is
      characterized by rapid technological advances, evolving industry standards,
      changes in customer requirements and frequent new product and service
      introductions and enhancements. Our industry is characterized by frequent
      introduction of new products and services. In order for us to achieve market
      acceptance for our products and services, we require substantial marketing
      efforts and the expenditure of significant funds to create both awareness and
      demand by marketing retailers and consumers. If technologies or standards
      applicable to our products or services become obsolete or fail to gain
      widespread consumer acceptance and we are unable to adapt to such changes,
      then
      our business and financial results will be materially and adversely
      affected.





Technological
      advances, the introduction of new products, and new design and construction
      techniques could adversely affect our business unless we are able to adapt
      to
      the changing conditions. As a result, we will be required to expend substantial
      funds for and commit significant resources to keep pace with such advancements,
      including in respect of the following:





·
            designing
                and developing new products and product enhancements that appeal
                to
                consumers;


·
            expanding
                our construction and installation capabilities;





29


·
            research
                and development activities on existing and potential products;


·
            engaging
                additional engineering and other technical
                personnel;


·
            purchasing
                advanced design, production, and test equipment;
                and


·
            maintaining
                and enhancing our technological capabilities.





We
      may be
      unable to recover any expenditures we make relating to one or more new products
      or technologies that ultimately prove to be unsuccessful for any reason. In
      addition, any investments or acquisitions made to enhance our products, sales
      channels, or technologies may prove to be unsuccessful.





Our
      future operating results also depend to a significant extent on our ability
      to
      provide new products that compare favorably on the basis of time to
      introduction, cost, and performance with the products of competitive suppliers
      and evolving technologies. Our success in attracting new customers and
      developing new business depends on a number of factors, including our ability
      to
      develop innovative new products, our ability to efficiently and timely
      manufacture our products in a cost effective manner, our ability to utilize
      advances in technology and the acceptance of our products in the markets in
      which we operate.





In
      addition, our future success depends on our ability to address the rapidly
      changing needs of our customers by developing, acquiring, and introducing new
      products and product updates on a timely basis. We must also extend the
      operation of our products to new formats and keep pace with technological
      developments and emerging industry standards. We intend to commit substantial
      resources to developing new products, product features, and technological
      advances in the markets in which we operate. These markets are relatively new,
      and industry standards for them are evolving and changing.





The
      failure to adapt to these evolving markets or the ability to address the needs
      of our customers will have a material adverse affect on our financial condition
      and our operations.





***We
      face intense competition in the industries in which we operate, and our
      competitors may be better positioned to capitalize on growing consumer demand
      for our products.***




The
      markets in which we operate are highly competitive and our current and
      prospective competitors are numerous. Our competitors may have substantially
      greater financial, technical, marketing, distribution, personnel and other
      resources, larger customer bases, longer operating histories, greater name
      recognition and more established relationships in the industry than we do.
      In
      addition, if the marketplace for streaming media over the internet or any of
      our
      other operations substantially expands and becomes more commercially viable,
      then any of these competitors may expand their services and seek to dominate
      the
      marketplace, thereby preventing us from obtaining any meaningful market share.
      We intend to compete on the terms of price, customer support, technical
      expertise, ease of use, variety of value added services and reliability, but
      the
      failure to do so will have a material adverse affect on our financial condition
      and our operations.





***Our
      ability to attract and retain customers depends on factors we cannot
      control.***





Our
      ability to increase the number of our customers, and our ability to retain
      customers, will depend on a number of factors, many of which are beyond our
      control. These factors include, our ability to obtain financing, the
      availability of a commercially viable market for our products and services,
      our
      ability to successfully market our products and services, our ability to provide
      reliable service to customers and our ability to develop a profitable business.





***We
      depend on carrier networks, such as Local Exchange Carriers (“LECs”), and Inter
      Exchange Carriers (“IXCs”) which is a developing
      market.***





Our
      ability to derive revenues by providing online commerce, ATM, SDI, and SONET
      Internet services depends, in part, upon a developed and robust industry and
      the
      infrastructure for providing these services and carrying network traffic. There
      can be no assurance that the necessary infrastructure or complementary products
      will be developed or that the Internet will become a viable commercial
      marketplace in those segments that we target. Critical issues concerning the
      commercial use of carrier networks, including security, reliability, cost,
      ease
      of use and access, and quality of service remain unresolved, and may impact
      the
      growth of network use. In the event that the necessary infrastructure or
      complementary products are not developed or the Internet does not become a
      viable commercial marketplace for our services, our future business, operating
      results and financial condition could be adversely affected.




31





***We
      depend on a data transmission infrastructure largely maintained by third
      parties, which may be subject to disruption by events outside our
      control.***





Our
      success will depend upon the capacity, reliability and security of the
      infrastructure used to carry data between our customers and the internet. A
      significant portion of that infrastructure is owned by third parties including
      Level 3 Communications, Inc. Accordingly, we have limited control over its
      quality and maintenance. Our operations also depend on our ability to avoid
      damages from power losses, telecommunications failures, network software flaws,
      transmission cable cuts, fires, earthquakes, floods and similar events. The
      occurrence of any of these events could interrupt our services. The failure
      of
      the internet backbone, our servers, or any other link in the delivery chain,
      whether from operational disruption, natural disaster or otherwise, resulting
      in
      an interruption in our operations, could have a material adverse effect on
      our
      business and financial results.





***Unauthorized
      use of our intellectual property by third parties may adversely affect our
      business.***




We
      regard
      our intellectual property as critical to our success. Unauthorized use of our
      intellectual property by third parties may adversely affect our business and
      our
      reputation. We rely on trademark, patent and copyright law, trade secret
      protection and confidentiality and/or license agreements with our employees,
      customers, partners and others to protect our intellectual property rights.
      Despite our precautions, it may be possible for third parties to obtain and
      use
      our intellectual property without authorization. Furthermore, the validity,
      enforceability and scope of protection of intellectual property in
      internet-related industries are uncertain and still evolving. The laws of some
      foreign countries are uncertain or do not protect intellectual property rights
      to the same extent as do the laws of the United States.





***Defending
      against intellectual property infringement claims could be time consuming and
      expensive and, if we are not successful, could subject us to significant damages
      and disrupt our business.***




We
      cannot
      be certain that our products and services do not or will not infringe on valid
      patents, copyrights or other intellectual property rights held by third parties.
      We may be subject to legal proceedings and claims from time to time relating
      to
      the intellectual property of others in the ordinary course of business. We
      may
      incur substantial expenses in defending against these third-party infringement
      claims, regardless of their merit. Successful infringement claims against us
      may
      result in substantial monetary liability or may materially disrupt the conduct
      of our business.





**Risks
      Relating to an Investment in our Securities**




***To
      date, we have not paid any cash dividends and no cash dividends will be paid
      in
      the foreseeable future.***




We
      have
      never paid any dividends on shares of our common stock and do not anticipate
      that we will pay dividends in the foreseeable future. We intend to apply any
      earnings to fund the development of our business. Investment in our Company
      is
      inappropriate if you are seeking current or near term income.




***You
      may expect difficulty of trading and obtaining quotations for our common
      stock.***




Our
      common stock is currently quoted on the OTC-Pink Sheets under the symbol “WDMG.”
As a result of trading on the Pink Sheets, an investor would likely find it
      more
      difficult to purchase, dispose of, or to obtain quotations as to the price
      of
      the common stock. There can be no assurance that a more active trading market
      will develop, or if developed, that it will be maintained.




***The
      application of the “Penny Stock” rules could adversely affect the market price
      of our common stock and increase your transaction costs to sell shares of our
      common stock.***




The
      trading of our common stock is currently subject to Rule 15g-9 promulgated
      under
      the Securities Exchange Act of 1934 (the “Exchange Act”), as amended, for
      non-NASDAQ and non-exchange listed securities. Under such rule, brokers-dealers
      who recommend such securities to persons other than established customers and
      accredited investors must make a special written suitability determination
      for
      the purchaser and receive the purchaser's written agreement to a transaction
      prior to sale. Securities are exempt from this rule if the market price is
      at
      least $5.00 per share.




32





The
      SEC
      has adopted regulations that generally define a “penny stock” to be an equity
      security that has a market price of less than $5.00 per share or an exercise
      price of less than $5.00 per share subject to certain exceptions. Such
      exceptions include equity securities listed on NASDAQ and equity securities
      issued by an issuer that has (i) net tangible assets of at least $2,000,000,
      if
      such issuer has been in continuous operation for more than three years, or
      (ii)
      net tangible assets of at least $5,000,000, if such issuer has been in
      continuous operation for less than three years, or (iii) average revenue of at
      least $6,000,000 for the preceding three years. Unless an exception is
      available, the regulations require the delivery, prior to any transaction
      involving a penny stock, of a risk disclosure schedule explaining the penny
      stock market and the risks associated therewith.




Our
      common stock is currently a penny stock as defined in the Exchange Act and,
      as
      such, the market liquidity for the common stock is limited to the ability of
      broker-dealers to sell common stock in compliance with the above-mentioned
      disclosure requirements.




***Preferred
      stock may act as an anti-takeover device.***




We
      are
      authorized to issue 5,000,000 shares of preferred stock, $0.001 par value.
      The
      Company has no shares of preferred stock issued and outstanding. The preferred
      stock may be issued in series from time to time with such designations, rights,
      preferences and limitations as our Board of Directors may determine by
      resolution. Unless the nature of a particular transaction and applicable
      statutes require such approval, the Board of Directors has the authority to
      issue these shares without stockholder approval. The potential exists,
      therefore, that preferred stock might be issued which would grant dividend
      preferences, liquidation preferences, voting and other rights to preferred
      stockholders over common stockholders. The issuance of preferred stock may
      have
      the effect of delaying or preventing a change in control of the Company without
      any further action by stockholders.





***A
      majority of the outstanding shares of our common stock are restricted
      securities.***





Of
      the
      shares of the Company's common stock outstanding as of April 11, 2007,
      approximately 30,622,413 are “restricted securities,” as that term is defined in
      the Securities Act, and may only be sold in compliance with the provisions
      of
      Rule 144 of the Securities Act.





**S** ***hares
      of our common stock are thinly traded and you may be unable to sell at or near
      ask prices or at all if you need to sell your shares to raise money or otherwise
      desire to liquidate your shares.***





The
      Company cannot predict the extent to which a more active public market for
      our
      common stock will develop or be sustained. Our common shares have historically
      been sporadically or “thinly-traded” on the pink sheets, meaning that the number
      of persons interested in purchasing our common shares at or near bid prices
      at
      any given time may be relatively small. This situation is attributable to a
      number of factors, including the fact that we are a small company which is
      relatively unknown to stock analysts, stock brokers, institutional investors
      and
      others in the investment community that generate or influence sales volume,
      and
      that even if we came to the attention of such persons, they tend to be
      risk-averse and would be reluctant to follow an unproven company such as ours
      or
      purchase or recommend the purchase of our shares until such time as we became
      more seasoned and viable. As a consequence, there may be periods of several
      days
      or more when trading activity in our shares is minimal, as compared to other
      issuers which have a large and steady volume of trading activity that will
      generally support continuous sales without an adverse effect on share price.
      We
      cannot give you any assurance that a broader or more active public trading
      market for our common stock will develop or be sustained, or that current
      trading levels will be sustained.





The
      market price for our common stock is particularly volatile given our status
      as a
      relatively small company with a small and thinly traded “float” and lack of
      current revenues that could lead to wide fluctuations in our share price. The
      price at which you purchase our common stock may not be indicative of the price
      that will prevail in the trading market. You may be unable to sell your common
      stock at or above your purchase price if at all, which may result in substantial
      losses to you.




33




**Item
                7. **Financial
                Statements.****




Our
      audited financial statements and related notes required by this Item 7 begin
      on
      page F-1, following Part III of this report.





**Item
                8.****Changes
                In and Disagreements With Accountants on Accounting and Financial
                Disclosure.**




None.





**Item
                8A.****Controls
                and Procedures.**





Our
      management team, under the leadership and with the participation of our Chief
      Executive Officer, evaluated the effectiveness of our disclosure controls and
      procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities
      Exchange Act of 1934), as of December 31, 2006. Based on this evaluation, our
      management concluded that our disclosure controls and procedures were not
      effective as of December 31, 2006 to ensure that information required to be
      disclosed by us in the reports that we file or submit to the SEC is recorded,
      processed, summarized and reported within the time periods specified in the
      SEC’s rules and forms.





Our
      management team is diligently developing and implementing disclosure controls
      and procedures to ensure that such information required for disclosure is
      recorded, processed, summarized and reported timely and accurately. To date,
      our
      efforts have focused upon replacing our Chief Financial Officer, who resigned
      on
      August 1, 2006. The resignation of our CFO has exacerbated an existing problem
      of sufficiency of accounting personnel. During fiscal year 2006, we have hired
      a
      Chief Operating Officer, a Vice President of Accounting Compliance &
Disclosure, and a Vice President of Finance and Accounting. We are interviewing
      candidates to fill the CFO position and certain other accounting
      positions.





In
      connection with the growth of the Company, we have instituted a policy of early
      review of accounting systems and personnel of all potential acquirees to discern
      their reporting systems and the effect such reporting will have on the
      consolidation of operations. The companies that we have considered for
      acquisitions have been private companies and have not typically maintained
      the
      types of control and reporting procedures that are required of public companies.
      As such, depending upon the materiality of the operations of the acquiree,
      compared to our total assets and revenues, it is possible that the acquisition
      of private subsidiaries may lead to errors in reporting.




As
      discussed above, we consummated the acquisitions of AI, Tytess, and Winsonic
      Digital Store in 2006, and our consolidated results of operations and financial
      condition for fiscal year 2006 are included in this annual report. We have
      integrated these businesses into our financial reporting procedures and are
      focusing our efforts on identifying weaknesses in accounting controls, doing
      additional internal inspection of material transactions and financial accounts,
      and improving our internal control over financial reporting. The total assets
      and total net income of AI, Tytess and Winsonic Digital Store collectively
      represent approximately 70% and 4% respectively, of our consolidated total
      assets and total net income, as of, and for, the year ended December 31, 2006.





We
      have
      identified two control deficiencies with regard to AI that represent material
      weaknesses in AI’s controls:





AI
      did
      not maintain effective controls over the accounting for the existence, accuracy
      and valuation of sales and cost of goods sold. Specifically, adequate controls
      were not designed over (1) the recording of revenue and related accounts
      receivable and (2) the existence and accuracy of costs assigned to the matching
      of costs of sales by period and by customer.





These
      weaknesses resulted in material internal adjustments of sales, accounts
      receivable and costs of sales. The internal controls relating to the
      identification of, and accounting for, contractual sales terms, the amount
      and
      timing of revenue, related costs of sales, the recording of accounts receivable,
      and the qualitative analysis of the collectibility of certain accounts were
      not
      in place. The weakness could result in a misstatement of the Company’s revenue,
      cost of sales or assets that could result in a material misstatement to the
      Company’s interim or annual consolidated financial statements, which would not
      be prevented or detected.




34





There
      was
      no change in the Company’s internal control over financial reporting during the
      fiscal year ended December 31, 2006, that has materially affected, or was
      reasonably likely to materially affect, the Company’s internal control over
      financial reporting.





Notwithstanding
      the above-mentioned weaknesses, we believe that the consolidated financial
      statements included in this report fairly present our consolidated financial
      position.





There
      was
      no change in the Company’s internal control over financial reporting during the
      fiscal year ended December 31, 2006, that has materially affected, or was
      reasonably likely to materially affect, the Company’s internal control over
      financial reporting.





Our
      management, including our Chief Executive Officer, does not expect that our
      disclosure controls and procedures or our internal controls over financial
      reporting are or will be capable of preventing or detecting all errors and
      all
      fraud. Any control system, no matter how well designed and operated, can provide
      only reasonable, not absolute, assurance that the control system’s objectives
      will be met. The design of a control system must reflect the fact that there
      are
      resource constraints, and the benefits of controls must be considered relative
      to their costs. Further, because of the inherent limitations in all control
      systems, no evaluation of controls can provide absolute assurance that
      misstatements due to error or fraud will not occur or that all control issues
      and instances of fraud, if any, have been detected. These inherent limitations
      include the realities that judgments in decision-making can be faulty and that
      breakdowns can occur because of simple error or mistake. Controls can also
      be
      circumvented by the individual acts of some persons, by collusion of two or
      more
      people, or by management’s override of the controls. The design of any system of
      controls is based in part on certain assumptions about the likelihood of future
      events, and there can be no assurance that any design will succeed in achieving
      our stated goals under all potential future conditions. Projections of any
      evaluation of controls effectiveness to future periods are subject to
      risks.





**Item
                8B.****Other
                Information.**




None.




**PART
      III**





**Item
                9.****Directors,
                Executive Officers, Promoters, Control Persons and Corporate Governance;
                Compliance with Section 16(a) of the Exchange
                Act.**




Our
      directors and executive officers are as follows:





**Name**
            
            **Age**
            
            **Principal
                Positions and Offices with our Company**Winston
                Johnson
            
            49
            
            Chairman
                of the Board and Chief Executive OfficerJon
                Janotta
            
            56
            
            President
                and DirectorDr.
                Thomas Mensah
            
            57
            
            DirectorEric
                Leufroy
            
            53
            
            DirectorJoseph
                Morris
            
            53
            
            Chief
                Operating OfficerJeffrey
                Burke
            
            52
            
            Executive
                Vice President




35




A
      majority vote of the directors who are in office is required to fill vacancies
      on the board of directors. Each director holds office for a term of one year,
      or
      until a successor has been duly elected and qualified, or until his earlier
      death, resignation or removal. Our executive officers are appointed annually
      by
      our Board of Directors and serve at the discretion of the Board of Directors.
      Set forth below is a brief description of the background of each of our
      executive officers and directors, based on information provided to us by
      them.




**Directors
      and Officers**





**Winston
      Johnson** has been
      the Chairman of the Board and Chief Executive Officer of the Company since
      December 2003. Mr. Johnson, who started in the music, computer science, and
      communications industries in the 1970s, pioneered technological innovations
      in
      music, computer and sound engineering, such as the Winsonic Process. The
      Winsonic Process, a digital compression technology that produces a superior
      sounding product, has been used to enable record and film companies to record
      and distribute high-end voice, data, text, audio and video files throughout
      the
      world. Mr. Johnson's education includes a B.S. from FAMU and additional labs
      and
      studies which include FSU, UCLA, Berkley, Stetson University, Dartmouth, NASA,
      USC ETC, Nortel Network, Cisco, Sonet, Stn, Atm, Star Hub, DMS 200/300, DMS
      500,
      DSL, PPOE, PPOA, MPLS, OSPF, BGP4, VOIP, HDTV transport, e911, video
      switching, ss7 signaling, cable plant, catv, emergency disaster planning,
      satellite, voice, data, video, fiber optics, micro wave, two-way radio,
      management systems, and billing systems.





**Jon
      J. Jannotta** was
      appointed to the Board of Directors of the Company in October 2004, and served
      as the President of the Company from October 2004 until June 13, 2006 at which
      time he resigned from the position. In addition, on February 7, 2007, Mr.
      Jannotta resigned from his position as a director.





**Dr.
      Thomas Mensah** was
      appointed to the Board of Directors of the Company on January 25, 2007. Dr.
      Mensah is a world renowned inventor whose contributions have had national and
      global impact in the development and distribution of new age media.
      Specifically, Dr. Mensah’s work contributed to the replacement of copper wire
      cables with optical fibers; thereby enabling the launching of various Internet
      platforms such as DSL. Dr. Mensah holds a PhD in Chemical Engineering from
      Montpelier University (1978) and a Certificate in Modeling of Chemical Processes
      from the Massachusetts Institute of Technology (1977). He has held high level
      engineering positions at various US companies, including, Air Products &
Chemicals (1980-1983) and Corning Glass Works (1983-1986). Additionally, Dr.
      Mensah joined AT&T Bell Laboratories in 1986 and led the program to develop
      the fiber optic reels used in the guided missile program until 1989. This effort
      led to the development of a system that was successfully deployed at missile
      speeds up to Mach 1 (the speed of sound). In 1992. Dr. Mensah founded and served
      as the chairman of Supercond Technology in Norcross, Georgia, which specializes
      in Aerospace and Communication products. Supercond Technology focuses on
      advanced structural materials development for supersonic US fighter aircraft
      such as the F-22. In 2004, Dr. Mensah became president of Georgia Aerospace
      Systems and continues to serve in this role today. Dr. Mensah is also a founding
      member of the Emerging Technologies section of the American Institute of
      Chemical Engineers (AIChE). He is the first and only black person to serve
      as
      the national chairman of the Materials and Engineering Sciences Division of
      the
      AIChE. He has edited two book volumes for the AIChE -- Fiber Optics Engineering
      (1987) and Superconductor Engineering (1992).





**Mr.
      Eric Leufroy** was
      appointed to the Board of Directors of the Company on February 9, 2007. He
      is
      currently the Western Region Controller for United Parcel Service in Leawood,
      Kansas. In his position at United Parcel Service, his responsibilities include
      the management of all the finance and accounting activities for the western
      region of the United States, which consists of thirteen states and nine
      districts. Mr. Leufroy directs a team of over 220 district controllers, office
      managers, supervisors, and administrative employees; provides oversight of
      activities related to payroll, tax, account payables/receivables and customer
      billing; and monitors and maintains full adherence to UPS accounting/procurement
      procedures and Sarbanes-Oxley standards. Mr. Leufroy has been employed with
      United Parcel Service since 1986 and has held the following titles, Southwest
      Region Controller Coordinator (2003 - 2004), Post Profitability Controller
      (2001
      - 2002), District Controller, Secaucus, NJ (1994 - 1999), District Controller,
      Houston, TX (1991 - 1994) and Office Manager, Phoenix, AZ (1986 - 1991). The
      Company expects, subject to formal appointment by the Board, that Mr. Leufroy
      will serve on its Audit Committee.




36




**Mr.
      Joseph Morris** has been
      the Chief Operating Officer of the Company since his appointment on June 7,
      2006.  Mr. Morris has served as Chief Financial Officer, Director of
      Construction, Regional Vice President for an insurance/securities firm and
      Dean
      of Students/Assistant Headmaster for an educational institution during his
      professional career. Prior to his appointment as Chief Operating Officer of
      the
      Company, Mr. Morris was the Chief Operating Officer for Automated Interiors,
      LLC, a wholly owned subsidiary of the Company.





**Mr.
      Jeffrey L. Burke** has been
      the Executive Vice President of the Company since his appointment on August
      8,
      2006. Mr. Burke, a former United States Marine, Naval Aviator and entrepreneur,
      has 20+ years of experience in sales, marketing and sales management. Over
      a
      period of 36 months, Mr. Burke, as the Southeast Regional Manager for Strategic
      Technologies, Inc., built an extraordinary sales team and implemented new sales
      processes that focused on more profitable revenue targets, thereby taking the
      region’s revenue model from a five-year loss to $30 million in sales.
      Additionally, as a sales manager for GE Capital, Mr. Burke rebuilt the company’s
      sales program in the Richmond area to achieve $70 million in sales revenues.
      Among his other accomplishments, Mr. Burke has developed business plans for
      major companies that enabled them to increase their profits by millions of
      dollars while, at the same time, reducing their sales expenses to tens of
      thousands of dollars, created new sales prospects and revamped stagnant
      accounts.




**Board
      Committees**




We
      currently have no formal audit, compensation or nominating committee or other
      board committee performing equivalent functions. Currently, the entire board
      of
      directors participates in discussions concerning executive officer compensation
      and the consideration of director nominees. Once committees are established,
      the
      Company expects that Mr. Leufroy will serve on its audit committee as its
      qualified financial expert within the meaning of paragraph (c) (2) of Item
      402
      of Regulation S-B. There has been no material change to the procedures by which
      stockholders may recommend nominees to our board of directors.





**Legal
      Proceedings**





No
      officer, director, or persons nominated for such positions, and no promoter
      or
      significant employee has been involved in legal proceedings that would be
      material to an evaluation of our management.




**Compliance
      with Section 16(a) of the Exchange Act**




Pursuant
      to Section 16 of the Securities Exchange Act of 1934, our directors and
      executive officers and beneficial owners of more than 10% of our common stock
      are required to file certain reports, within specified time periods, indicating
      their holdings of, and transactions in, the common stock and derivative
      securities. Based solely on a review of such reports provided to us and written
      representations from such persons regarding the necessity to file such reports,
      we are not aware of any failures to file reports or report transactions in
      a
      timely manner during the fiscal year ended December 31, 2006, except the
      following: Winston Johnson, Chairman and CEO, did not timely file Form 4s to
      reflect changes in his beneficial ownership interests during the 2005 and 2006
      fiscal years; Eric Young, former Director and CFO and COO, did not file a Form
      4
      for common stock received during fiscal year 2006; Joseph Morris, COO, did
      not
      timely file a Form 3 for his promotion and his receipt of common stock and
      stock
      options during fiscal year 2006; Jeffrey Burke, Executive Vice-President, did
      not timely file a Form 3 for his appointment, receipt of options and warrants
      and his ownership of various convertible debentures during the 2006 fiscal
      year;
      Gary Peterson, Vice President of Accounting, Compliance and Disclosure, did
      not
      timely file a Form 3 for his appointment and receipt of common stock during
      the
      2006 fiscal year; William H. Mann, President and CEO of Automated Interiors
      (a
      wholly-owned subsidiary of the Company), did not timely file a Form 3 for common
      stock issued to him during fiscal year 2006; Cedric Drayton, President and
      CEO
      of Tytess Design & Development, Ltd. (a wholly-owned subsidiary of the
      Company) did not timely file a Form 3 to reflect stock granted (but not yet
      issued) to him and options he received during the 2006 fiscal year; and Sung
      (Scott) Yoon, Vice-President of Winsonic Digital Store, Ltd. (a wholly-owned
      subsidiary) did not timely file a Form 3 for stock granted (but not yet issued)
      to him and options he received during the 2006 fiscal year.




37




**Code
      of Ethics**





We
      have
      adopted a Code of Business Conduct and Ethics designed to comply with Item
      406
      of Regulation S-B. A copy of our Code of Business Conduct and Ethics is filed
      as
      an exhibit to our Annual Report on Form 10-KSB for December 31, 2003. We will
      provide a copy of the Code of Ethics, without charge, to any person who sends
      a
      written request addressed to the CEO, Winston Johnson, at 101 Marietta Street,
      NW, Centennial Tower, Suite 2600, Atlanta, GA 30303.




The
      Company intends to disclose any waivers or amendments to its Code of Ethics
      in a
      report on Form 8-K.





**Item
                10.****Executive
                Compensation.**




Our
      overall compensation philosophy is to provide an executive compensation package
      that enables us to attract, retain and motivate executive officers to achieve
      our short-term and long-term business goals. We strive to apply a uniform
      philosophy regarding compensation of all employees, including members of
      executive management. This philosophy is based upon the premise that the
      achievements of the Company result from the combined and coordinated efforts
      of
      all employees working toward common goals and objectives in a competitive,
      evolving market place. The goals of our compensation program are to align
      remuneration with business objectives and performance and to enable us to retain
      and competitively reward executive officers and employees who contribute to
      our
      long-term success. We attempt to pay our executive officers and employees
      competitively in order to be able to retain the most capable people in the
      industry. In making executive compensation and other employment compensation
      decisions, we consider achievement of certain criteria, some of which relate
      to
      our performance and others of which relate to the performance of the individual
      employee. Awards to executive officers are based on achievement of company
      and
      individual performance criteria.





The
      following table sets forth all compensation awarded to, earned by, or paid
      for
      all services rendered to us during the fiscal year ended December 31, 2006
      by
      our named executive officers.




SUMMARY
      COMPENSATION TABLE





Name
                andPrincipal
                Position(a)
            
            Year
              (b)
            
            Salary
              ($)
              (c)
            
            Bonus($)
              (d)
            
            Stock
                Awards ($)
              (e)
            
            Option
                Awards
              ($)
              (f)
            
            Non-Equity
                Incentive Plan Compensation ($)
              (g)
            
            Nonqualified
                Deferred Compensation
              ($)
              (h)
            
            All
                Other Compensation ($)
              (i)
            
            Total
              ($)
              (j)Winston
                Johnson
              CEO
                and Chairman
            
            
            2006
            
            
            290,000
            (1)
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            290,000Joseph
                Morris COO
            
            
            2006
            
            
            157,308
            (2)
            
            -
            
            
            -
            
            
            31,568
            (5)
            
            -
            
            
            -
            
            
            -
            
            
            188,876Jeffrey
                Burke
              Executive
                Vice President
            
            
            2006
            
            
            175,935
            (3)
            
            -
            
            
            -
            
            
            183,660
            (6)
            
            -
            
            
            -
            
            
            -
            
            
            359,595Eric
                Young
              CFO/COO
            
            
            2006
            
            
            133,579
            (4)
            
            -
            
            
            -
            
            
            121,038
            (7)
            
            -
            
            
            -
            
            
            -
            
            
            254,617





(1)  Salary
      consists of $118,500 paid in cash and $171,500 accrued and unpaid as of December
      31, 2006.




(2)  Reflects
      salary received since date of hire. Salary consists of $58,317 paid in cash
      and
      $98,991 accrued and unpaid as of December 31, 2006.




(3)  Reflects
      salary received since date of hire. Salary consists of $55,154 paid in cash
      and
      $120,781 accrued and unpaid as of December 31, 2006.




(4)  Mr.
      Young
      resigned on August 1, 2006.




(5)  In
      January 2006, Mr. Morris was granted stock options to purchase (a) 50,000 shares
      of common stock at $0.01 per share in which 1/3 vested upon the signing of
      his
      employment agreement, 1/3 will vest at the closing of the next round of
      financing, and the remaining 1/3 when the Company’s common stock resumes trading
      on the OTCBB and (b) 100,000 shares of common stock at $1.00 per share in which
      ten percent of the options vested immediately upon the signing of his employment
      agreement and the remaining options vest at the rate of 1/12th per month for
      12
      months.




38




(6)  In
      August
      2006, Mr. Burke was granted stock options to purchase (a) 750,000 shares of
      common stock at $0.01 per share in which 1/3 vested upon the signing of his
      employment agreement, 1/3 will vest at the closing of the next round of
      financing, and the remaining 1/3 when the Company’s common stock resumes trading
      on the OTCBB and (b) 500,000 shares of common stock at $1.00 per share in which
      ten percent of the options vested immediately upon the signing of his employment
      agreement and the remaining options vest at the rate of 1/12th per month for
      12
      months.




(7)  In
      November 2005, Mr. Young was granted stock options to purchase 750,000 shares
      of
      common stock at $0.01 per share and stock options to purchase 500,000 shares
      of
      common stock at $1.00 per share. The Company is currently in litigation with
      Mr.
      Young concerning the number of options that vested upon his resignation and
      the
      expiration of the exercise period of said options.





OUTSTANDING
      EQUITY AWARDS AT FISCAL YEAR-END




Option
                Awards
            
            Stock
                AwardsName(a)
            
            Number
                of Securities Underlying Unexercised Options
              (#)
              Exercisable
              (b)
            
            Number
                of Securities Underlying Unexercised Options
              (#)
              Unexercisable
              (c)
            
            Equity
                Incentive Plan Awards; Number of Securities Underlying Unexercised
                Unearned Options
              (#)
              (d)
            
            Option
                Exercise Price
              ($)
              (e)
            
            OptionExpirationDate
              (f)
            
            Number
                of Shares or Units of Stock That Have Not Vested
              (#)
              (g)
            
            Market
                Value of Shares or Units of Stock That Have Not Vested ($)
              (h)
            
            Equity
                Incentive Plan Awards; Number of Unearned Shares, Units or Other
                Rights
                That Have Not Vested
              (#)
              (i)
            
            Equity
                Incentive Plan Awards; Market or Payout Value of Unearned Shares,
                Units or
                Other Rights That Have Not Vested
              ($)
              (j)Winston
                Johnson
              CEO
                and Chairman
            
            
            1,000,000
            
            
            
            
            
            
            
            $
            1.00
            
            
            10-8-2014Joseph
                Morris
              COO
                (1)
            
            
            74,250
              
              16,667
            
            
            25,750
              
              33,333
            
            
            
            
            $
              
              $
            1.00
              
              0.01
            
            
            4-18-2016
              
              4-18-2016Jeffrey
                Burke
              Executive
                Vice President (2)
            
            
            231,250
              
              250,000
            
            
            268,750
              
              500,000
            
            
            
            
            $
              
              $
            1.00
              
              0.01
            
            
            8-8-2016
              
              5-8-2016Eric
                Young
              CFO/COO
            
            
            500,000
              
              185,000
            
            
            
            
            
            
            
            $
              
              $
            1.00
              
              0.01
            
            
            11-15-2015
              
              11-15-2015





(1)  In
      January 2006, Mr. Morris was granted stock options to purchase (a) 50,000 shares
      of common stock at $0.01 per share in which 1/3 vested upon the signing of
      his
      employment agreement, 1/3 will vest at the closing of the next round of
      financing, and the remaining 1/3 when the Company’s common stock resumes trading
      on the OTCBB and (b) 100,000 shares of common stock at $1.00 per share in which
      ten percent of the options vested immediately upon the signing of his employment
      agreement and the remaining options vest at the rate of 1/12th per month for
      12
      months.




(2)  In
      August
      2006, Mr. Burke was granted stock options to purchase (a) 750,000 shares of
      common stock at $0.01 per share in which 1/3 vested upon the signing of his
      employment agreement, 1/3 will vest at the closing of the next round of
      financing, and the remaining 1/3 when the Company’s common stock resumes trading
      on the OTCBB and (b) 500,000 shares of common stock at $1.00 per share in which
      ten percent of the options vested immediately upon the signing of his employment
      agreement and the remaining options vest at the rate of 1/12th per month for
      12
      months.




39




**Director
      Compensation**




We
      currently do not have a policy regarding compensation for serving on our board
      of directors. However, we do reimburse our directors for their reasonable
      expenses incurred in attending meetings of our board.





**Employment
      Agreements**




On
      October 8, 2004, the Company entered into binding offer letters with Winston
      Johnson, as Chairman and CEO, Jon Jannotta, as President and Nana Yalley, as
      Executive Vice President. Under the terms of employment, Messrs. Johnson,
      Jannotta and Yalley were to receive base salaries of $290,000, $270,000 and
      $270,000 per annum, respectively, with $7,000 per month deferred until the
      next
      funding occurs or January 1, 2005, whichever occurred first. Each officer was
      eligible for annual incentive bonuses based on performance. The agreements
      were
      terminable at will with or without cause (as defined in the respective offer
      letters).




The
      employment agreements of October 8, 2004 also provided for the grant of an
      aggregate of 3,000,000 incentive or non-statutory stock options for the three
      executive officers to purchase 1,000,000 shares each of common stock for $1.00
      per share. These options primarily vest equally over a twelve-month period
      effective with date of the employment agreement.





On
      December 9, 2005, Mr. Yalley entered into a separation agreement with the
      Company, which
      nullified and voided his October 8, 2004 employment agreement with the
      Company .
      Pursuant to the separation agreement, Mr. Yalley agreed to a reduction to
      500,000 stock options in lieu of the 1,000,000 options he was to receive under
      the 2004 agreement.





Additionally,
      on June 13, 2006, Jon Jannotta resigned from his position as President of the
      Company; however, he continued to serve as a member of the Board of Directors
      of
      the Company until his resignation from the Board on February 7, 2007. Mr.
      Jannotta has agreed to forgive all accrued salary as well as the 1,000,000
      options he had received pursuant to the employment agreement. (See “Item 12 -
      Certain Relationships and Related Transactions” for further
      details.)





On
      November 5, 2005, the Company entered into a binding offer letter with Eric
      Young, as Chief Operating Officer and Chief Financial Officer. Under the terms
      of his employment, Mr. Young was to receive a base salary of $200,000 per annum,
      with $5,000 per month deferred until the next funding occurs or January 1,
      2006,
      whichever occurred first. Mr. Young was eligible for an annual incentive bonus
      based on performance. The agreement was terminable at will with or without
      cause
      (as defined therein). Mr. Young received non-qualified incentive stock options
      to purchase 500,000 shares of common stock at an exercise price of $1.00 per
      share in accordance with the Company's Employee Stock Option Plan. 10% of the
      options vested immediately upon the signing of the employment agreement and
      the
      remaining options were to vest at the rate of 1/12th per month for 12 months.
      In
      addition, upon his execution of the employment agreement, Mr. Young received
      additional options to purchase 750,000 shares of common stock of the Company
      at
      a purchase price of $0.01 per share, in which 1/3 vested upon the signing of
      the
      employment agreement, 1/3 vested at the closing of the next round of financing
      or January 1, 2006, whichever occurred earlier, and the remaining 1/3 would
      vest
      when the Company’s Common Stock resumed trading on the OTCBB. As was disclosed
      on the Company’s Form 8-K filed on August 24, 2006, Mr. Young resigned on August
      1, 2006 to pursue other opportunities.





Effective
      June 6, 2006, Joseph Morris succeeded Eric Young as Chief Operating Officer
      of the Company. Previously, Mr. Morris served as Chief Operating
      Officer of AI, which was acquired on April 18, 2006.  Mr. Morris' base
      salary is $150,000 per annum. As an employment incentive, Mr. Morris was granted
      stock options to purchase 50,000 shares of the Company’s Common Stock at an
      exercise price of $0.01, of which 1/3 vested immediately upon the signing of
      the
      Employment Agreements, 1/3 at the closing of the next round of funding, and
      the
      remaining 1/3 when the Company’s Common Stock resumes trading on the OTCBB. Additionally,
      Mr. Morris was granted stock options to purchase 100,000 of the Company's Common
      Stock at an average price of $1.00 per share, of which 10% vested immediately
      upon signing the employment agreement and the remaining 90% will vest at the
      rate of 1/12 th per
      month for twelve months.




40




Effective
      August 8, 2006, Jeffrey L. Burke succeeded Mr. Yalley as Executive Vice
      President of the Company. Mr. Burke's base salary is $270,000 per annum. As
      an
      employment incentive, Mr. Burke was granted stock options to purchase 750,000
      shares of the Company’s Common Stock at an
      exercise price of $0.01, of which 1/3 vested immediately upon the signing of
      the
      Employment Agreements, 1/3 at the closing of the next round of funding, and
      the
      remaining 1/3 when the Company’s Common Stock resumes trading on the OTCBB.
      Additionally, Mr.
      Burke
      was granted options to purchase 500,000 of the Company's Common Stock at an
      average price of $1.00 per share, of which 10% vested immediately upon signing
      the employment agreement and the remaining 90% will vest at the rate of
      1/12 th per
      month for twelve months.





**Item
                11.****Security
                Ownership of Certain Beneficial Owners and Management and Related
                Stockholder Matters.**




Our
      common stock is the only class of voting securities presently
      outstanding.





The
      following table sets forth information with respect to the beneficial ownership
      of shares of our common stock as of December 31, 2006, on which date there
      were
      49,578,057 shares outstanding, by:




·
            each
                person known by us to beneficially own 5% or more of the outstanding
                shares of such class of stock, based on filings with the Securities
                and
                Exchange Commission and certain other
                information,




·
            each
                of our “named executive officers” and directors,
                and




·
            all
                of our executive officers and directors as a
                group.




Beneficial
      ownership is determined in accordance with the rules of the SEC and includes
      voting and investment power. In addition, under SEC rules, a person is deemed
      to
      be the beneficial owner of securities, which may be acquired by such person
      upon
      the exercise of options and warrants or the conversion of convertible securities
      within 60 days from the date on which beneficial ownership is to be
      determined.




Except
      as
      otherwise indicated in the notes to the following table, we believe that all
      shares are beneficially owned, and investment and voting power is held by the
      persons named as owners, and the address for each beneficial owner listed in
      the
      table, except where otherwise noted, is c/o Winsonic Digital Media Group, Ltd.
      101 Marietta Street, Suite 2600, Atlanta, GA 30303.


**Name
                and Address**
            
            **Amount
                and Nature**
              **Of
                Beneficial Ownership**
            
            **Percentage
                of**
              **Outstanding**
              **Shares
                Owned**Winston
                Johnson
            
            
            8,987,700
            (1)
            
            22.5
            %Jon
                J. Jannotta
            
            
            6,208,690
            
            
            14.2
            %Joseph
                Morris
            
            
            200,000
            (2)
            
            0.4
            %Jeffrey
                Burke
            
            
            1,879,924
            (3)
            
            3.7
            %Thomas
                Mensah
            
            
            150,000
            (4)
            
            0.3
            %All
                current directors and executive officers as a group (5
                persons)
            
            
            
            
            
            41.1
            %





(1)
            Includes
                7,987,700 shares of common stock and 1,000,000 stock options exercisable
                at $1.00.






41




(2)
            Includes
              50,000 shares of common stock, 50,000 stock options exercisable at
              $0.01
              and 100,000 stock options exercisable at $1.00.


(3)
            Includes
                500,000 stock options exercisable at $1.00, 750,000 stock options
                exercisable at $0.01, and 629,924 shares of common stock that convertible
                notes, warrants and loans are convertible or exercisable into, as
                applicable.


(4)
            Reflects
                granted but unissued shares of common stock pursuant to a consulting
                agreement.





See
      Part
      II, Item 5 for certain information regarding securities authorized for issuance
      under equity compensation plans.





**Item
                12.**
            **Certain
                Relationships and Related Transactions, and Director
                Independence.**





**Loans
      from Founder**





**2006:** During
      2006, the CEO of the Company made a $20,000 interest-free loan to the Company.
      During 2006, $15,000 was repaid leaving an unpaid obligation of $5,000 as of
      December 31, 2006





**2005:** On
      September 15, 2005, the CEO of the Company loaned the Company $80,000. As of
      July 20, 2006, the loan balance totaled $88,074, consisting of principal of
      $80,000 and accrued interest of $8,074. Under the terms of the loan, interest
      will be paid at the rate of 10% annually, with principal and interest payable
      on
      December 1, 2005. Unpaid principal and interest after December 1, 2005 is
      subject to interest of five percent (5%) in excess of the rate otherwise
      applicable to the unpaid balance. The principal portion of the loan was repaid
      with 400,000 shares of restricted stock issued on July 20, 2006 and $13,074
      remains outstanding in accrued interest.




**2004:** As
      of
      December 31, 2006 and December 31, 2005, respectively, the Company had a loan
      payable totaling $316,496 and $352,726 to the CEO, consisting of principal
      of
      $209,000 as of December 31, 2006 and 2005. The Company is also obligated to
      issue to the CEO 80,000 shares of common stock valued at $64,000. Under the
      terms of the Note, interest will be paid at the rate of 10% annually. Accrued
      interest included in the loan balances as of December 31, 2006 and December
      31,
      2005 was $43,496 and $79,726, respectively.




During
      the first quarter of 2004, the Company paid $160,000 to the CEO against this
      loan. Additionally, on December 5, 2004, 700,000 shares of the Company’s Common
      Stock were issued to the CEO as payment to be applied against the balance of
      the
      loan. The price per share of the common stock was $0.33 per share or $231,000.




During
      the year ended December 31, 2006, the Company paid $76,000, to the CEO against
      this loan. The Company also accrued $39,770 in interest for the twelve months
      ended December 31, 2006.





**Native
      American Television Network, Inc (“NATVN”)**





During
      the third quarter of 2005, the Company issued 1,670,000 shares of common stock
      to NATVN in exchange for 4,000,000 shares of NATVN common stock. The former
      president of the Company and a Company shareholder are shareholders in NATVN,
      owning 9% of the total outstanding equity in NATVN.





The
      investment in NATVN is accounted for under the “equity” method. The equity
      method of accounting is used if the investor has the ability to significantly
      influence the investee’s financial and operating policies, or if an investor is
      accounting for an investment in a corporate joint venture, but holds less than
      50% of the investee. Under the equity method, an investment is initially
      recorded at cost. Thereafter, the carrying amount of the investment is increased
      for the investor’s proportionate share of the investee’s gains, or is reduced
      for the proportionate share of the investee’s losses or for distributions
      received from the investee. As of March 31, 2007, there has been no significant
      operations commenced by NATVN.




42




**Winsonic
      Diversity, LLC**





On
      May
      22, 2006, Winsonic Diversity, LLC (“Winsonic Diversity”) was organized in the
      State of Georgia by Winston D. Johnson and the Company. Mr. Johnson holds a
      majority of the ownership interests and is responsible for the management of
      Winsonic Diversity, while the Company holds a minority interest. As of December
      31, 2006, there have been no material transactions entered into by Winsonic
      Diversity.


.


**Item
                13.****Exhibits.**




**Exhibit
                No.**
            
            **Description**2.1
            
            Agreement
                and Plan of Reorganization by and among Media and Entertainment.com,
                Inc.,
                Winsonic Acquisition Sub, Inc., Winsonic Holdings, Ltd and Winston
                Johnson, dated July 16, 2004, as amended.(6)2.2
            
            Amended
                and Restated Acquisition and Share Exchange Agreement by and among
                Winsonic Digital Media Group, Ltd and Automated Interiors, LLC and
                William
                H. Mann and Jeffrey Fischer executed on May 15, 2006 and effective
                as of
                April 18, 2006.(13)2.3
            
            Acquisition
                and Share Exchange Agreement by and among Winsonic Digital Media
                Group,
                Ltd., Tytess Design and Development, Inc., and Cedric T. Drayton
                executed
                on November 2, 2006.(20)2.4
            
            Asset
                and Goodwill Purchase Agreement among Winsonic Digital Media Group,
                Ltd.,
                DV Photo Shop and Sung Yeol “Scott” Yoon, dated November 20, 2006.(21)3.1
            
            Articles
                of Incorporation of Media and Entertainment.com, Inc., dated April
                27,
                2000, as amended through October 17, 2002.(1)3.2
            
            Certificate
                of Amendment to the Articles of Incorporation dated November 5, 2003.(4)3.3
            
            By-laws
                of Media and Entertainment.com, Inc.(2)4.1
            
            Winsonic
                Digital Media Group, Ltd. 9% Convertible Subordinated Promissory
                Note with
                Atlanta Centennial, LLC dated October 12, 2005 in the amount of $250,000.(10)4.2
            
            Winsonic
                Digital Media Group, Ltd. Warrant Certificate with Atlanta Centennial,
                LLC
                dated October 12, 2005.(10)4.3
            
            Winsonic
                Digital Media Group, Ltd. 6% Convertible Subordinated Promissory
                Note with
                JungSook Yoon, HeungWoo Park, and SunWoo Park dated November 20,
                2006 in
                the amount of $60,000.(21)4.4
            
            Form
                of Winsonic Digital Media Group, Ltd. 6% Convertible Subordinated
                Promissory Note.(23)4.5
            
            Form
                of Winsonic Digital Media Group, Ltd. Warrant Certificate.(23)10.1
            
            Form
                of Employment Agreement entered into with each of Roger Paglia, Jon
                Jannotta, Benedict Paglia, and Bernard Grossman on October 1,
                2001.(1)




43




10.2
            
            Service
                Agreement by and between Media and Entertainment.com, Inc. and Winsonic
                Holdings, Ltd., dated as of July 18, 2003.(3)10.3
            
            Stock
                Purchase Agreement by and between Media and Entertainment.com, Inc.
                and
                Winsonic Holdings, Ltd., dated as of July 18, 2003.(3)10.4
            
            Addendum
                to the Existing Agreement between Media and Entertainment.com, Inc.
                and
                Winsonic Holdings, Ltd., dated December 11, 2003.(3)10.5
            
            Amendment
                Agreement between Media and Entertainment.com, Inc. and Winsonic
                Holdings,
                Ltd., dated January 27, 2004.(3)10.6
            
            Amendment
                Agreement between Media and Entertainment.com, Inc. and Winsonic
                Holdings,
                Ltd., dated March 29, 2004.(3)10.7
            
            Subcontractor
                Master Consulting Agreement with C12,
                Inc., dated December 10, 2004.(5)10.8
            
            Joint
                Marketing and Development Agreement with C12,
                Inc., dated December 10, 2004.(5)10.9
            
            Modification
                of the Master Purchase Agreement between C12and Winsonic Holdings, dated December 10, 2004.(5)10.10
            
            Shareholder
                Agreement dated October 6, 2004, by and among Media and Entertainment.com,
                Inc., Winston Johnson, Nana Yalley and Jon Jannotta.(6)10.11
            
            Form
                of Exchange Agreement.(6)10.12
            
            Memorandum
                of Understanding dated February 17, 2005, by and between Winsonic
                Digital
                Media Group, Ltd. and Native American Television Network, Inc.(7)10.13
            
            Letter
                of Agreement dated as of March 1, 2005, by and between Winsonic Digital
                Media Group Ltd. and The Titan Network, LLC.(7)10.14
            
            Memorandum
                of Understanding dated March 12, 2005, by and between Winsonic Digital
                Media Group, Ltd. and Proactive Media Group, Inc.(7)10.15
            
            Agreement
                dated March 17, 2005, by and between Winsonic Digital Media Group,
                Ltd.
                and Lantern Hill Capital.(7)10.16
            
            Exchange
                Agreement dated as of March 15, 2005, by and among Winsonic Digital
                Media
                Group, Ltd., Winsonic Digital Cable Systems Network, Ltd., Winston
                Johnson
                and A. Scott Roderick Investments, LLC.(7)10.17
            
            Office
                Services Agreement dated May 12, 2005 by and between Interactive
                Worldwide
                Atlanta - 260 Peachtree LLC and Winsonic Digital Media Group.(9)




44




10.18
            
            Office
                Sublease and Services Agreements between Crowne Office Suites, Inc.
                at
                Peachtree Center and Winsonic Digital Media Group, Ltd. dated December
                22,
                2004, December 28, 2004 and January 7, 2005.(9)10.19
            
            Standard
                Industrial/ Commercial Multi-Tenant Lease - dated January 10, 2005,
                by and
                between Beverly Lion LLC and Winsonic Digital Media Group.(9)10.20
            
            Binding
                Employment Offering Letter dated October 8, 2004 by and between the
                Registrant and Winston Johnson.(9)10.21
            
            Binding
                Employment Offering Letter dated October 8, 2004 by and between the
                Registrant and Jon Jannotta.(9)10.22
            
            Binding
                Employment Offering Letter dated October 8, 2004 by and between the
                Registrant and Nana Yalley.(9)10.23
            
            Addendum
                to the June 9, 2003 Master Service Agreement with Level 3 Communications
                keeping the agreement in full effect dated August 22, 2004.(9)10.24
            
            Service
                schedule for (3) LinkSMGlobal Wavelength Service - IRU dated August 17, 2004.(9)10.25
            
            Contract
                with Sun Micro Systems as a Sun iForce Partner dated May 24, 2005.(9)10.26
            
            Office
                Lease Agreement for Centennial Tower, 101 Marietta Street, Atlanta,
                Georgia, by and between Atlanta Centennial, LLC and Winsonic Digital
                Media
                Group, Ltd., dated October 12, 2005.(10)10.27
            
            Binding
                Employment Offer Letter dated November 2, 2005 by and between Winsonic
                Digital Media Group, Ltd. and Eric D. Young.(11)10.28
            
            Sublease
                Agreement between Rogers Telecom, Inc. and Winsonic Digital Media
                Group,
                Ltd., dated May 17, 2006.(14)10.29
            
            Lease
                Agreement between Winsonic Digital Media Group, Ltd. and JT
                Communications, LLC, dated June 22, 2006.(14)10.30
            
            Binding
                Employment Offer Letter dated June 7, 2006 by and between Winsonic
                Digital
                Media Group, Ltd. and Joseph Morris as COO.(15)10.31
            
            Separation
                Agreement and Release dated December 9, 2005 by and between Winsonic
                Digital Media Group, Ltd. and Nana Yalley.(16)10.32
            
            Consulting
                Agreement by and between FraserNet, Inc. and Winsonic Digital Media
                Group,
                Ltd., dated July 28, 2006.(17)10.33
            
            Employment
                Agreement by and between Jeffrey Burke and Winsonic Digital Media
                Group,
                Ltd., dated August 8, 2006.(17)10.34
            
            Employment
                Agreement by and between Lamar Williams and Winsonic Digital Media
                Group,
                Ltd., dated August 4, 2006.(17)10.35
            
            Employment
                Agreement by and between Gary Peterson and Winsonic Digital Media
                Group,
                Ltd., dated August 9, 2006.(17)




45




10.36
            
            Employment
                Agreement by and between Darrin Johnson and Winsonic Digital Media
                Group,
                Ltd., dated August 14, 2006.(17)10.37
            
            Amendment
                to Office Lease Agreement for Centennial Tower, 101 Marietta Street,
                Atlanta, Georgia, by and between Atlanta Centennial, LLC and Winsonic
                Digital Media Group, Ltd., dated February 23, 2006.(18)10.38
            
            Interconnection
                Agreement between BellSouth Telecommunications, Inc. and Winsonic
                Digital
                Media Group, Ltd., dated September 27, 2006.(19)10.39
            
            Memorandum
                of Understanding between Winsonic Digital Media Group, Ltd., Winsonic
                Digital Cable Systems Network, Ltd. and James E. Thomas, dated October
                2,
                2006.(19)10.40
            
            Telecom/Office
                Lease Agreement between Bank Building Limited Partnership, LLC and
                Winsonic Digital Media Group, Ltd., dated as of February 8,
                2007.(22)10.41
            
            First
                Amendment to Telecom/Office Lease Agreement between Bank Building
                Limited
                Partnership, LLC and Winsonic Digital Media Group, Ltd., dated as
                of
                February 8, 2007.(22)14.1
            
            Code
                of Business Conduct and Ethics.(3)16.1
            
            Letter
                from Chavez and Koch dated March 31, 2005.(8)16.2
            
            Letter
                from DeJoya & Griffith, Changes in Registrant’s Certifying Accountant
                dated March 10, 2005.(12)*21.1
            
            List
                of subsidiaries of Registrant.*31.1
            
            Certification
                of the Chief Executive Officer and Chief Financial Officer required
                by
                Rule 13a-14(a) or Rule 15d-14(a).*32.1
            
            Certification
                of the Chief Executive Officer and Chief Financial Officer required
                by
                Rule 13a-14(b) or Rule 15d-14(b) and 18 U.S.C. 1350.




*  Filed
      herewith.




(1)
            Incorporated
                herein by reference to the Registrant’s Annual Report on Form 10-KSB for
                the year ended December 31, 2002.(2)
            Incorporated
                herein by reference to the Registrant’s Form 10-SB12G filed on January 17,
                2001.





(3)
            Incorporated
                herein by reference to the Registrant’s Annual Report on Form 10-KSB for
                the year ended December 31, 2003.(4)
            Incorporated
                herein by reference to the Registrant’s Form 8-K filed November 30,
                2004.





(5)
            Incorporated
                herein by reference to the Registrant’s Form 8-K filed December 17,
                2004.(6)
            Incorporated
                herein by reference to the Registrant’s Form 8-K/A Amendment No. 1 filed
                October 19, 2004.





(7)
            Incorporated
                herein by reference to the Registrant’s Form 8-K filed March 31,
                2005.(8)
            Incorporated
                herein by reference to the Registrant’s Form 8-K filed March 31,
                2005.





(9)
            Incorporated
                herein by reference to the Registrant’s Annual Report on Form 10-KSB for
                the year ended December 31, 2004.




46




(10)
            Incorporated
                herein by reference to the Registrant’s Form 8-K filed October 18,
                2005.(11)
            Incorporated
                herein by reference to the Registrant’s Form 8-K filed November 14,
                2005.(12)
            Incorporated
                herein by reference to the Registrant’s Form 8-K filed March 16,
                2006.(13)
            Incorporated
                herein by reference to the Registrant’s Form 8-K filed May 16,
                2006.(14)
            Incorporated
                herein by reference to the Registrant’s Form 8-K filed June 27,
                2006.





(15)
            Incorporated
                herein by reference to the Registrant’s Form 8-K filed June 29,
                2006.(16)
            Incorporated
                herein by reference to the Registrant’s Form 8-K filed July 25,
                2006.(17)
            Incorporated
                herein by reference to the Registrant’s Form 8-K filed August 24,
                2006.(18)
            Incorporated
                herein by reference to the Registrant’s Form 10-QSB for the quarter ended
                March 31, 2006.(19)
            Incorporated
                herein by reference to the Registrant’s Form 8-K filed October 4,
                2006.(20)
            Incorporated
                herein by reference to the Registrant’s Form 8-K filed November 3,
                2006.(21)
            Incorporated
                herein by reference to the Registrant’s Form 8-K filed December 22,
                2006.(22)
            Incorporated
                herein by reference to the Registrant’s Form 8-K filed February 14,
                2007.(23)
            Incorporated
              herein by reference to the Registrant’s Annual Report on Form 10-KSB/A for
              the year ended December 31, 2004, filed January 6,
              2006





**Item
                14.**
            **Principal
                Accountant Fees and Services.**




The
      aggregate fees billed and paid to our independent auditors, DeJoya &
Griffith, for each of our last two fiscal years are as follows:


**2006**
              
              **2005**Audit
                  Fees
              
              $
              93,000
              
              $
              45,000Audit-Related
                  Fees
              
              $
              -
                  0 -
              
              $
              -
                  0 -Tax
                  Fees
              
              $
              -
                  0 -
              
              $
              -
                  0 -All
                  Other Fees
              
              $
              -
                  0 -
              
              $
              -
                  0 -




We
      do not
      currently have in place audit committee pre-approval policies and procedures
      described in paragraph (c)(7)(i) of Rule 2-01 of Regulation S-X.




47


**Signatures**





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




WINSONIC
                DIGITAL MEDIA GROUP, LTD.(Registrant)June
                21, 2007
            By:
            /s/
                Winston JohnsonWinston
                Johnson
              CEO
                and CFO




48


REPORT
        OF
        INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
 
 
 
 
 To
        the
        Board of Directors and Stockholders
 Winsonic
        Digital Media Group, Ltd.
 Atlanta,
        Georgia
 
 We
        have
        audited the accompanying balance sheets of Winsonic Digital Media Group,
        Ltd. (A
        Development Stage Company) as of December 31, 2006 and 2005, and the related
        statements of operations, stockholders’ deficit, and cash flows for the years
        ended December 31, 2006 and 2005, and from inception (September 10, 2002)
        to
        December 31, 2006. These financial statements are the responsibility of the
        Company’s management. Our responsibility is to express an opinion on these
        financial statements based on our audit.
 
 We
        conducted our audit in accordance with the standards of the Public Company
        Accounting Oversight Board (United States). ** Those
        standards require that we plan and perform the audit to obtain reasonable
        assurance about whether the financial statements are free of material
        misstatement. An audit includes examining, on a test basis, evidence supporting
        the amounts and disclosures in the financial statements. An audit also includes
        assessing the accounting principles used and significant estimates made by
        management, as well as evaluating the overall financial statement presentation.
        We believe that our audit provides a reasonable basis for our
        opinion.
 
 In
        our
        opinion, based on our audit, the financial statements referred to above present
        fairly, in all material respects, the financial position of Winsonic Digital
        Media Group, Ltd. (A Development Stage Company) as of December 31, 2006 and
        2005, and the results of its operations and cash flows for the years ended
        December 31, 2006 and 2005, and from inception (September 10, 2002) to December
        31, 2006 in conformity with accounting principles generally accepted in the
        United States.
 
 The
        accompanying financial statements have been prepared assuming that the Company
        will continue as a going concern. As discussed in Note 7 to the financial
        statements, the Company has suffered losses from operations, current liabilities
        exceed current assets, and accumulated deficit of $20,693,839 all of which
        raise
        substantial doubt about its ability to continue as a going concern. Management’s
        plans in regards to these matters are also described in Note 7. The financial
        statements do not include any adjustments that might result from the outcome
        of
        this uncertainty.
 
 
 
 /s/
        De
        Joya Griffith & Company, LLC
 Henderson,
        Nevada
 
 
 May
        22,
        2007





F1


WINSONIC
      DIGITAL MEDIA GROUP, LTD.


(A
      DEVELOPMENT STAGE COMPANY)


**BALANCE
      SHEETS**


AS
      OF
      DECEMBER 31, 2006 & 2005


**Dec
                  31, 2006**
              
              **Dec
                  31, 2005****ASSETS**ASSETS:Cash
              
              $
              3,506
              
              $
              -Accounts
                  receivable
              
              
              464,612
              
              
              -Prepaid
                  expense
              
              
              67,667
              
              
              16,476Inventory
              
              
              5,387
              
              
              -Construction
                  in process
              
              
              254,640
              
              
              -**Total
                  current assets**
              
              
              **795,812**
              
              
              **16,476**Fixed
                  assets:Computer
                  equipment
              
              
              1,114,994
              
              
              977,669Infrastructure
              
              
              158,400
              
              
              158,400Software
              
              
              89,970
              
              
              82,899Furniture
                  & fixtures
              
              
              84,503
              
              
              36,682Automobiles
              
              
              74,631
              
              
              -Equipment
                  and tools
              
              
              44,935
              
              
              -Less:
                  accumulated depreciation
              
              
              (784,318
              )
              
              (614,194
              )**Total
                  fixed assets**
              
              
              **783,115**
              
              
              **641,456**-Goodwill
              
              
              984,291
              
              
              -Other
                  assets
              
              
              25,000
              
              
              -**TOTAL
                  ASSETS**
              
              **$**
              **2,588,218**
              
              **$**
              **657,932****LIABILITIES
                  AND STOCKHOLDERS' DEFICIT**LIABILITIES:Current
                  liabilities:Accounts
                  payable and accrued expenses
              
              $
              2,859,371
              
              $
              2,094,824Bank
                  overdraft
              
              
              -
              
              
              14,468Billings
                  on construction in process
              
              
              489,261
              
              
              -Accrued
                  payroll and related taxes
              
              
              2,138,152
              
              
              1,353,053Legal
                  settlement liabilities
              
              
              775,000
              
              
              1,020,000Loans
                  payable
              
              
              347,743
              
              
              383,357Loans
                  payable -related party
              
              
              414,555
              
              
              435,398Derivative
                  liability related to convertible debentures
              
              
              339,450
              
              
              82,483Warrant
                  liability related to convertible debentures
              
              
              300,420
              
              
              23,406Convertible
                  debentures
              
              
              257,469
              
              
              1,095,114Share
                  notes, net of debt discount totaling $794,784 and $46,212,
                  respectively
              
              
              507,524
              
              
              27,525Current
                  portion of long term liabilities
              
              
              90,197
              
              
              -**Total
                  current liabilities**
              
              
              **8,519,142**
              
              
              **6,529,628****Long
                  term debt**
              
              
              **44,822**
              
              
              -**TOTAL
                  LIABILITIES**
              
              
              **8,563,964**
              
              
              **6,529,628**Stockholders'
                  deficit:Preferred
                  stock, $0.001 par value, 5,000,000 shares authorized, 0 and 0 shares
                  issued and outstanding at December 31, 2006 and December 31, 2005,
                  respectively.
              
              
              -
              
              
              -Common
                  stock, $0.001 par value, 50,000,000 shares authorized, 49,578,057
                  and
                  40,204,556 shares issued and outstanding at December 31, 2006 and
                  December
                  31, 2005, respectively.
              
              
              49,578
              
              
              40,205Additional
                  paid-in capital
              
              
              13,609,264
              
              
              6,517,807Common
                  stock advance for future services
              
              
              (48,175
              )
              
              -Common
                  stock payable
              
              
              1,107,426
              
              
              20,000Accumulated
                  deficit during development stage
              
              
              (20,693,839
              )
              
              (12,449,708
              )**Total
                  stockholders' deficit**
              
              
              **(5,975,746**
              **)**
              
              **(5,871,696**
              **)****TOTAL
                  LIABILITIES AND STOCKHOLDERS' DEFICIT**
              
              **$**
              **2,588,218**
              
              **$**
              **657,932**




*The
      accompanying notes to the financial statements should be*


*read
      in conjunction with these Balance Sheets.*




F2


WINSONIC
      DIGITAL MEDIA GROUP, LTD.


(A
      DEVELOPMENT STAGE COMPANY)


**STATEMENTS
      OF OPERATIONS**


FOR
      THE YEARS ENDED DECEMBER 31, 2006 & 2005


AND
      FROM INCEPTION (SEPTEMBER 10, 2002) TO


DECEMBER
      31, 2006


**For
                  the years ended December 31,**
              
              **Inception
                  (September 10, 2002) to****2006**
              
              **2005**
              
              **December
                  31, 2006**REVENUE
              
              $
              759,495
              
              $
              -
              
              $
              817,306COST
                  OF GOODS SOLD
              
              
              498,739
              
              
              441,204
              
              
              1,647,899GROSS
                  PROFIT
              
              
              260,756
              
              
              (441,204
              )
              
              (830,593
              )EXPENSES:Selling,
                  general and administrative
              
              
              1,800,055
              
              
              1,089,455
              
              
              5,910,152Payroll
                  expense
              
              
              1,892,273
              
              
              172,823
              
              
              2,065,096Payroll
                  expense - related party
              
              
              2,014,714
              
              
              1,336,502
              
              
              3,903,158Consulting
                  services - related party
              
              
              352,029
              
              
              945,334
              
              
              2,423,297Depreciation
                  expense
              
              
              162,622
              
              
              344,720
              
              
              1,058,297Total
                  expenses
              
              
              6,221,693
              
              
              3,888,834
              
              
              15,360,000OPERATING
                  LOSS
              
              
              (5,960,937
              )
              
              (4,330,038
              )
              
              (16,190,593
              )OTHER
                  INCOME/(EXPENSES):Interest
                  expense and finance costs
              
              
              (882,765
              )
              
              (1,198,096
              )
              
              (3,139,183
              )Interest
                  expense - related party
              
              
              (294,165
              )
              
              -
              
              
              (294,165
              )Unrealized
                        gain (loss) on adjustment of derivative and warrant liability
                        to fair
                        value of underlying securities
              
              
              (942,757
              )
              
              1,422,048
              
              
              27,428Legal
                  settlement costs
              
              
              (198,000
              )
              
              -
              
              
              (1,218,000
              )Interest
                  income
              
              
              -
              
              
              473
              
              
              730Other
                  income (loss)
              
              
              34,493
              
              
              -
              
              
              119,944Total
                  other income/(expenses)
              
              
              (2,283,194
              )
              
              224,425
              
              
              (4,503,246
              )NET
                  LOSS BEFORE PROVISION FOR INCOME TAXES
              
              
              (8,244,131
              )
              
              (4,105,613
              )
              
              (20,693,839
              )PROVISION
                  FOR INCOME TAXES
              
              
              -
              
              
              -
              
              
              -NET
                  LOSS
              
              $
              **(8,244,131**
              **)**
              $
              **(4,105,613**
              **)**
              $
              **(20,693,839**
              **)**Basic
                  weighted average number of common shares outstanding
              
              
              44,454,006
              
              
              34,529,012Net
                  loss per basic and diluted common share
              
              $
              (0.19
              )
              $
              (0.12
              )


*The
      accompanying notes to the financial statements should be*


*read
      in conjunction with these Statements of Operations.*




F3




WINSONIC
      DIGITAL MEDIA GROUP, LTD.


(A
      DEVELOPMENT STAGE COMPANY)


**STATEMENTS
      OF CASH FLOWS**


FOR
      THE YEARS ENDED DECEMBER 31, 2006 & 2005 AND FROM INCEPTION (SEPTEMBER 10,
      2002) TO DECEMBER 31, 2006




**For
                    the years ended December 31**
                
                **Inception
                    (September 10, 2002) to****2006**
                
                **2005**
                
                **December
                    31, 2006****CASH
                    FLOWS FROM OPERATING ACTIVITIES:**Net
                    loss
                
                $
                (8,244,131
                )
                $
                (4,105,613
                )
                $
                (20,693,839
                )Adjustments
                    to reconcile net lossto
                    net cash used by operations:Depreciation
                
                
                162,622
                
                
                344,720
                
                
                1,058,297Accretion
                      of principal and interest related to convertible
                      debentures
                
                
                806,517
                
                
                1,073,547
                
                
                1,917,935Unrealized
                        (gain) loss on adjustment of derivative and warrant liability
                        to fair
                        value of underlying securities
                
                
                942,757
                
                
                (1,422,048
                )
                
                (27,428
                )Stock
                    based employee expenses
                
                
                1,167,419
                
                
                1,732,402
                
                
                4,396,634Operating
                    expenses paid with stock, options and warrants
                
                
                1,036,822
                
                
                -
                
                
                1,036,822Operating
                    expenses paid by note payable
                
                
                60,000
                
                
                -
                
                
                60,000Interest
                    expense paid with stock
                
                
                185,621
                
                
                
                
                
                185,621Interest
                    accrued and added to notes
                
                
                179,561
                
                
                -
                
                
                179,561Forgiveness
                    of accrued interest - Digital Services International, Inc.
                
                
                -
                
                
                152,592
                
                
                152,592Change
                    in operating assets and liabilities:Increase
                    in accounts receivable
                
                
                (273,829
                )
                
                -
                
                
                (273,829
                )Increase
                    in prepaid expenses
                
                
                (48,871
                )
                
                (16,476
                )
                
                (65,347
                )Decrease
                    in deposit
                
                
                -
                
                
                82,490
                
                
                -Increase
                    in work in process
                
                
                (224,676
                )
                
                -
                
                
                (224,676
                )Increase
                    in other assets
                
                
                (25,000
                )
                
                
                
                
                (25,000
                )(Decrease)
                    increase in bank overdraft
                
                
                (14,468
                )
                
                14,468
                
                
                -Increase
                    in accounts payable and accrued expenses
                
                
                734,392
                
                
                580,201
                
                
                3,072,687Increase
                    in accrued payroll and related taxes
                
                
                1,546,801
                
                
                862,132
                
                
                3,190,508Increase
                    in billings in excess on work in process
                
                
                346,940
                
                
                -
                
                
                346,940Increase
                    in legal settlement liabilities
                
                
                205,000
                
                
                -
                
                
                1,225,000Decrease
                    in interest payable
                
                
                -
                
                
                (101,640
                )
                
                -**Net
                    cash used in operating activities**
                
                
                (1,456,523
                )
                
                (803,225
                )
                
                (4,487,522
                )**CASH
                    FLOWS FROM INVESTING ACTIVITIES:**Cash
                    acquired through business acquisition
                
                
                16,670
                
                
                -
                
                
                16,670Purchase
                    of fixed assets
                
                
                (192,814
                )
                
                (27,341
                )
                
                (1,448,464
                )**Net
                    cash used in investing activities**
                
                
                (176,144
                )
                
                (27,341
                )
                
                (1,431,794
                )**CASH
                    FLOWS FROM FINANCING ACTIVITIES:**Proceeds
                    from loans payable
                
                
                15,678
                
                
                30,567
                
                
                435,251Payment
                    on loans payable
                
                
                (23,335
                )
                
                
                
                
                (23,335
                )Proceeds
                    from loan payable - related party
                
                
                114,985
                
                
                140,000
                
                
                938,711Payment
                    on loan payable - related party
                
                
                (117,970
                )
                
                (160,000
                )
                
                (277,970
                )Payment
                    on note payable - Digital Services International, Inc.
                
                
                -
                
                
                (5,000
                )
                
                -Proceeds
                    from convertible debentures
                
                
                -
                
                
                200,000
                
                
                1,203,250Proceeds
                    from sharenotes
                
                
                1,646,815
                
                
                188,250
                
                
                1,646,815Proceeds
                    from common stock issued
                
                
                -
                
                
                -
                
                
                2,000,100**Net
                    cash (used in) provided by financing activities**
                
                
                **1,636,173**
                
                
                **393,817**
                
                
                **5,922,822****NET
                    (DECREASE) INCREASE IN CASH**
                
                **$**
                **3,
                    506**
                
                **$**
                **(436,749**
                **)**
                **$**
                **3,506****CASH,
                    BEGINNING OF PERIOD**
                
                
                -
                
                
                **436,749**
                
                
                -**CASH,
                    END OF PERIOD**
                
                **$**
                **3,506**
                
                **$**
                **-**
                
                **$**
                **3,506****SUPPLEMENTARY
                    INFORMATION:**Interest
                    paid
                
                $
                47,124
                
                $
                -
                
                $
                47,124Income
                    taxes paid
                
                $
                -
                
                $
                -
                
                $
                -**NON-CASH
                    ACTIVITIES:**Issuance
                    of common stock for common stock payable
                
                **$**
                
                
                $
                820,000
                
                $
                820,000Forgiveness
                    of salary payable to officer
                
                **$**
                432,644
                
                $
                270,000
                
                $
                702,644Forgiveness
                    of payroll tax for officer
                
                **$**
                
                
                $
                20,655
                
                $
                20,655Issuance
                    of common stock as deposit on lease obligation
                
                **$**
                
                
                $
                250,000
                
                $
                250,000Issuance
                    of common stock as payment on notes payable - related
                    party
                
                **$**
                80,000
                
                $
                231,000
                
                $
                311,000Issuance
                    of common stock and warrants for salary payable
                
                **$**
                329,058
                
                **$**
                
                
                $
                515,679Issuance
                    of common stock upon conversion of debentures
                
                **$**
                1,523,186
                
                $
                118,000
                
                $
                1,641,184Issuance
                    of common stock for legal settlement
                
                **$**
                450,000
                
                
                
                
                $
                450,000Adjustment
                    to paid in capital for Accumulated Depreciation
                
                **$**
                -
                
                $
                281,481
                
                $
                281,481Issuance
                    of common stock and stock payable as payment for subsidiaries
                    acquired
                
                **$**
                939,528
                
                **$**
                
                
                $
                939,528




*The
      accompanying notes to financial statements should be*


*read
      in conjunction with these Statements of Cash Flows.*




F4







WINSONIC
      DIGITAL MEDIA GROUP, LTD.


(A
      DEVELOPMENT STAGE COMPANY)


**STATEMENT
      OF STOCKHOLDERS' DEFICIT**


CommonStock
              
              AccumulatedAdvance
              
              DeficitAdditional
              
              Common
              
              for
              
              During
              
              TotalPreferred
                  Stock
              
              Common
                  Stock
              
              Paid-in
              
              Stock
              
              Future
              
              Development
              
              Stockholders'Shares
              
              Amount
              
              Shares
              
              Amount
              
              Capital
              
              Payable
              
              Services
              
              Stage
              
              Deficit**Balance,
                  September 10, 2002 (Inception) - No Par Stock**
              
              
              **10,000,000**
              
              **$**
              **-**
              
              
              **10,000,000**
              
              **$**
              **-**
              
              **$**
              **-**
              
              
              **-**
              
              
              **-**
              
              **$**
              **-**
              
              **$**
              **-**Reverse
                  Merger - Reacquisition of all outstanding shares of Winsonic Acquisition
                  Sub, Inc. - No Par Stock (Recasted to inception)
              
              
              (10,000,000
              )
              $
              -
              
              
              (10,000,000
              )
              $
              -
              
              $
              -
              
              
              -
              
              
              -
              
              $
              -
              
              $
              -$Issuance
                  of common stock to founder for services
              
              
              -
              
              $
              -
              
              
              6,004,200
              
              $
              6,004
              
              $
              -
              
              
              -
              
              
              -
              
              $
              -
              
              $
              6,004**Balance,
                  September 10, 2002 (Recasted)**
              
              
              **-**
              
              **$**
              **-**
              
              
              **6,004,200**
              
              **$**
              **6,004**
              
              **$**
              **-**
              
              
              **-**
              
              
              **-**
              
              **$**
              **-**
              
              **$**
              **6,004**Issuance
                  of stock warrants (December 26, 2002)
              
              
              -
              
              **$**
              -
              
              
              -
              
              **$**
              -
              
              **$**
              -
              
              
              990,600
              
              
              -
              
              **$**
              -
              
              **$**
              990,600Net
                  loss
              
              
              -
              
              **$**
              -
              
              
              -
              
              **$**
              -
              
              **$**
              -
              
              
              -
              
              
              -
              
              **$**
              (647,417
              )
              **$**
              (647,417
              )**Balance,
                  December 31, 2002 (Restated)**
              
              
              **-**
              
              **$**
              **-**
              
              
              **6,004,200**
              
              
              **6,004**
              
              
              **-**
              
              
              **990,600**
              
              
              **-**
              
              
              **(647,417**
              )
              
              **349,187**Issuance
                  of stock warrants
              
              
              -
              
              **$**
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              1,009,500
              
              
              -
              
              
              -
              
              
              1,009,500Net
                  loss
              
              
              -
              
              **$**
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              (1,905,884
              )
              
              (1,905,884
              )**Balance,
                  December 31, 2003 (Restated)**
              
              
              **-**
              
              
              **-**
              
              
              **6,004,200**
              
              
              **6,004**
              
              
              **-**
              
              
              **2,000,100**
              
              
              **-**
              
              
              **(2,553,301**
              **)**
              
              **(547,197**
              **)**Issuance
                  of common stock for services, $0.75 average price per
                  share
              
              
              -
              
              
              -
              
              
              1,980,946
              
              
              1,981
              
              
              1,488,328
              
              
              -
              
              
              -
              
              
              -
              
              
              1,490,309
  F5
  Issuance
                  of common stock in satisfaction of debts of $331,000 and deemed
                  interest
                  of $242,500
              
              
              -
              
              
              -
              
              
              758,000
              
              
              758
              
              
              572,742
              
              
              -
              
              
              -
              
              
              -
              
              
              573,500Issuance
                  of common stock, $1.00 price per share
              
              
              -
              
              
              -
              
              
              921,600
              
              
              922
              
              
              920,678
              
              
              (921,600
              )
              
              **-**
              
              
              -
              
              
              -Conversion
                  of common stock payable to loan payable
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              60,000
              
              
              (258,500
              )
              
              **-**
              
              
              -
              
              
              (198,500
              )Issuance
                  of common stock related to reverse-merger
              
              
              -
              
              
              -
              
              
              23,956,138
              
              
              23,956
              
              
              (123,487
              )
              
              -
              
              
              -
              
              
              -
              
              
              (99,531
              )Net
                  loss
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              (5,790,794
              )
              
              (5,790,794
              )**Balance,
                  December 31, 2004 (Restated)**
              
              
              **-**
              
              **$**
              **-**
              
              
              **33,620,884**
              
              **$**
              **33,621**
              
              **$**
              **2,918,261**
              
              **$**
              **820,000**
              
              **$**
              **-**
              
              **$**
              **(8,344,095**
              **)**
              $
              **(4,572,213**
              **)**Issuance
                  of common stock for services, $1.30 average price per
                  share
              
              
              **-**
              
              **$**
              **-**
              
              
              94,615
              
              
              95
              
              
              122,905
              
              
              **-**
              
              
              **-**
              
              
              **-**
              
              
              123,000Issuance
                  of common stock for services, $0.82 average price per
                  share
              
              
              **-**
              
              **$**
              **-**
              
              
              91,463
              
              
              91
              
              
              74,909
              
              
              **-**
              
              
              **-**
              
              
              **-**
              
              
              75,000Issuance
                  of common stock for services, $0.68 average price per
                  share
              
              
              **-**
              
              **$**
              **-**
              
              
              66,667
              
              
              67
              
              
              45,267
              
              
              **-**
              
              
              **-**
              
              
              **-**
              
              
              45,334Issuance
                  of common stock for equity investment in NATVN
              
              
              **-**
              
              **$**
              **-**
              
              
              1,670,000
              
              
              1,670
              
              
              (1,670
              )
              
              **-**
              
              
              **-**
              
              
              **-**
              
              
              -Issuance
                  of common stock founder to relieve related party note payable due
                  him, at
                  $0.33 average price per share
              
              
              **-**
              
              **$**
              **-**
              
              
              700,000
              
              
              700
              
              
              230,300
              
              
              **-**
              
              
              **-**
              
              
              **-**
              
              
              231,000Issuance
                  of common stock to founder for services, $0.33 average price per
                  share
              
              
              **-**
              
              **$**
              **-**
              
              
              500,000
              
              
              500
              
              
              164,500
              
              
              **-**
              
              
              **-**
              
              
              **-**
              
              
              165,000
  F6
  Issuance
                  of common stock for services, $0.70 average price per
                  share
              
              
              **-**
              
              **$**
              **-**
              
              
              900,000
              
              
              900
              
              
              629,100
              
              
              **-**
              
              
              **-**
              
              
              **-**
              
              
              630,000Issuance
                  of common stock for services, $0.48 average price per
                  share
              
              
              **-**
              
              **$**
              **-**
              
              
              225,000
              
              
              225
              
              
              107,775
              
              
              **-**
              
              
              **-**
              
              
              **-**
              
              
              108,000Issuance
                  of common stock in satisfaction of convertible debentures debts
                  of
                  $118,000, at $0.20 average price per share
              
              
              **-**
              
              **$**
              -
              
              
              590,000
              
              
              590
              
              
              117,410
              
              
              **-**
              
              
              **-**
              
              
              **-**
              
              
              118,000Issuance
                  of common stock as lease deposit, $0.27 average price per
                  share
              
              
              **-**
              
              **$**
              **-**
              
              
              925,927
              
              
              926
              
              
              249,074
              
              
              (250,000
              )
              
              **-**
              
              
              **-**
              
              
              -Issuance
                  of common stock for common stock payable, $1.00 average price per
                  share
              
              
              **-**
              
              **$**
              **-**
              
              
              820,000
              
              
              820
              
              
              819,180
              
              
              (820,000
              )
              
              **-**
              
              
              **-**
              
              
              -Return
                  of pledged assets, reversal of accumulated depreciation, and forgiveness
                  of debt - related party
              
              
              **-**
              
              **$**
              **-**
              
              
              **-**
              
              
              **-**
              
              
              281,481
              
              
              **-**
              
              
              **-**
              
              
              **-**
              
              
              281,481Forgiveness
                  of interest expense - related party
              
              
              **-**
              
              **$**
              **-**
              
              
              **-**
              
              
              **-**
              
              
              152,592
              
              
              **-**
              
              
              **-**
              
              
              **-**
              
              
              152,592Vested
                  common stock award for officer
              
              
              **-**
              
              
              **-**
              
              
              **-**
              
              
              **-**
              
              
              185,000
              
              
              **-**
              
              
              **-**
              
              
              **-**
              
              
              185,000Common
                  stock payable to officer for separation agreement, $0.33 average
                  price per
                  share
              
              
              **-**
              
              
              **-**
              
              
              **-**
              
              
              **-**
              
              
              -
              
              
              270,000
              
              
              **-**
              
              
              **-**
              
              
              270,000Record
                  forgiveness of accrued salary for officer per separation
                  agreement
              
              
              **-**
              
              
              **-**
              
              
              **-**
              
              
              **-**
              
              
              270,000
              
              
              **-**
              
              
              **-**
              
              
              **-**
              
              
              270,000
  F7
  Record
                  adjustment for accrued payroll taxes for officer per separation
                  agreement
              
              
              **-**
              
              
              **-**
              
              
              **-**
              
              
              **-**
              
              
              20,655
              
              
              **-**
              
              
              **-**
              
              
              **-**
              
              
              20,655Vested
                  stock options granted to officer for separation agreement
              
              
              **-**
              
              
              **-**
              
              
              **-**
              
              
              
              
              
              131,068
              
              
              -
              
              
              -
              
              
              -
              
              
              131,068Net
                  loss
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              (4,105,613
              )
              
              (4,105,613
              )**Balance,
                  December 31, 2005**
              
              
              **-**
              
              **$**
              **-**
              
              
              **40,204,556**
              
              **$**
              **40,205**
              
              **$**
              **6,517,807**
              
              
              **20,000**
              
              
              **-**
              
              $
              **(12,449,708**
              **)**
              $
              **(5,871,696**
              **)**Issuance
                  of common stock in accordance with mutual general release and settlement
                  agreement at $0.50 average price per share
              
              
              **-**
              
              
              **-**
              
              
              900,000
              
              
              900
              
              
              449,100
              
              
              -
              
              
              -
              
              
              -
              
              
              450,000Issuance
                  of common stock in conversion of shareholder note payable, 0.20
                  per share
              
              
              **-**
              
              
              **-**
              
              
              3,184,899
              
              
              3,185
              
              
              633,795
              
              
              -
              
              
              -
              
              
              -
              
              
              636,980Shares
                  issued to employee for services
              
              
              **-**
              
              
              **-**
              
              
              500,000
              
              
              500
              
              
              4,500
              
              
              -
              
              
              -
              
              
              -
              
              
              5,000Issuance
                  of stock in acquisition of subsidiary
              
              
              **-**
              
              
              **-**
              
              
              411,956
              
              
              412
              
              
              168,490
              
              
              -
              
              
              -
              
              
              -
              
              
              168,902Issuance
                  of stock to employees
              
              
              **-**
              
              
              **-**
              
              
              750,000
              
              
              750
              
              
              299,250
              
              
              -
              
              
              -
              
              
              -
              
              
              300,000Issuance
                  of common stock subject to conversion of option for services at
                  $0.39
                  average price per share
              
              
              **-**
              
              
              **-**
              
              
              82,051
              
              
              82
              
              
              31,918
              
              
              -
              
              
              -
              
              
              -
              
              
              32,000Incentive
                  stock options for employees
              
              
              **-**
              
              
              **-**
              
              
              -
              
              
              -
              
              
              1,167,419
              
              
              -
              
              
              -
              
              
              -
              
              
              1,167,419Discount
                  allocated to warrant on convertible debt
              
              
              **-**
              
              
              **-**
              
              
              -
              
              
              -
              
              
              1,248,688
              
              
              -
              
              
              -
              
              
              -
              
              
              1,248,688Initial
                  fair value of embedded derivative related to convertible
                  debt
              
              
              **-**
              
              
              **-**
              
              
              -
              
              
              -
              
              
              605,479
              
              
              -
              
              
              -
              
              
              -
              
              
              605,479
  F8
  Fair
                  market value of options to purchase shares of common stock at $0.01
                  to
                  $0.53 per share, issued to consultants for financial consulting
                  services
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              197,847
              
              
              -
              
              
              -
              
              
              -
              
              
              197,847To
                  record forgiveness of accrued salary for officer
              
              
              **-**
              
              
              **-**
              
              
              -
              
              
              -
              
              
              399,919
              
              
              -
              
              
              -
              
              
              -
              
              
              399,919Issuance
                  of stock to shareholder in repayment of funds loaned to Company
                  at $0.53
                  per share
              
              
              **-**
              
              
              **-**
              
              
              489,850
              
              
              490
              
              
              259,129
              
              
              -
              
              
              -
              
              
              -
              
              
              259,619To
                  record forgiveness of debt by related party
              
              
              **-**
              
              
              **-**
              
              
              
              
              
              
              
              
              6,000
              
              
              -
              
              
              -
              
              
              -
              
              
              6,000Issuance
                  of shares upon exercise of convertible notes at $0.40 per
                  share
              
              
              **-**
              
              
              **-**
              
              
              2,153,010
              
              
              2,153
              
              
              859,051
              
              
              -
              
              
              -
              
              
              -
              
              
              861,204Issuance
                  of common stock subject to conversion of option for services at
                  $0.65 per
                  share
              
              
              **-**
              
              
              **-**
              
              
              89,231
              
              
              89
              
              
              57,911
              
              
              -
              
              
              -
              
              
              -
              
              
              58,000Fair
                  market value of shares issued to financial consultant for services
                  at fair
                  market value ranging from $0.01 to $0.53 per share
              
              
              **-**
              
              
              **-**
              
              
              410,000
              
              
              410
              
              
              160,940
              
              
              -
              
              
              (42,875
              )
              
              -
              
              
              118,475Shares
                  issued upon exercise of warrant by consultant at $0.01 per
                  share
              
              
              -
              
              
              -
              
              
              300,000
              
              
              300
              
              
              2,700
              
              
              -
              
              
              -
              
              
              -
              
              
              3,000Shares
                  issued as repayment of loans valued at $0.40 and $0.21 per
                  share
              
              
              -
              
              
              -
              
              
              62,504
              
              
              62
              
              
              24,940
              
              
              -
              
              
              -
              
              
              -
              
              
              25,002Discount
                  of beneficial conversion feature on convertible notes
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              97,475
              
              
              -
              
              
              -
              
              
              -
              
              
              97,475
  F9
  Forgiveness
                  of salary by related party
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              32,725
              
              
              -
              
              
              -
              
              
              -
              
              
              32,725Fair
                  market value of warrants issued to employees for services
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              324,058
              
              
              -
              
              
              -
              
              
              -
              
              
              324,058Fair
                  market value of warrants issued as interest payment for cash
                  advance
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              44,163
              
              
              -
              
              
              -
              
              
              -
              
              
              44,163Fair
                  market value of shares issued for consulting services at $0.40
                  per
                  share
              
              
              -
              
              
              -
              
              
              40,000
              
              
              40
              
              
              15,960
              
              
              -
              
              
              -
              
              
              -
              
              
              16,000Stock
                  to be issued in acquisition of subsidiary
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              630,626
              
              
              -
              
              
              -
              
              
              630,626Stock
                  to be issued for consulting services
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              316,800
              
              
              (5,300
              )
              
              -
              
              
              311,500Stock
                  to be issued in acquisition of subsidiary
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              140,000
              
              
              -
              
              
              -
              
              
              140,000Net
                  loss
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              (8,244,131
              )
              
              (8,244,131
              )**Balance,
                  December 31, 2006**
              
              
              **-**
              
              **$**
              **-**
              
              
              **49,578,057**
              
              **$**
              **49,578**
              
              **$**
              **13,609,264**
              
              **$**
              **1,107,426**
              
              **$**
              **(48,175**
              **)**
              $
              **(20,693,839**
              )
              $
              **(5975,746**
              **)**




F10




**WINSONIC
      DIGITAL MEDIA GROUP, LTD**




**NOTES
      TO THE FINANCIAL STATEMENTS**





**NOTE
      1 - ORGANIZATION AND PURPOSE**





Media
      and
      Entertainment.com, Inc., (the “Public Company”) was incorporated on April 27,
      2000. On October 7, 2004, the Public Company consummated an Agreement and Plan
      of Reorganization to acquire all of the outstanding capital stock of Winsonic
      Holdings, Ltd. (the “Private Company”), a closely held private company, in an
      exchange for 8,000,000 shares of the Public Company's common stock (the
“Winsonic Transaction”). Prior to the Winsonic Transaction, the Public Company
      had no operations or assets and 23,956,138 shares of common stock issued and
      outstanding. Following the transaction, the Public Company changed its name
      from
      Media and Entertainment.com, Inc. to Winsonic Digital Media Group, Ltd. (the
      “Company”).





The
      accounting treatment of the Winsonic Transaction was determined by the following
      considerations:





1.
            The
                Public Company was a non-operating public company (having no operations
                or
                assets);





2.
            The
                former sole shareholder and CEO of the Private Company became the
                controlling shareholder of the combined company,
                and;





3.
            The
                management and operations of the combined company continue to be
                those of
                the Private Company.





For
      accounting purposes, the Winsonic Transaction is considered to be a capital
      transaction in substance, rather than a business combination. As a result,
      the
      Winsonic Transaction is treated in the accompanying financial statements as
      the
      equivalent of the issuance of shares by a private company (Winsonic Holdings)
      for the non-monetary assets of a non-operational public company (Media and
      Entertainment.com), accompanied by a recapitalization. The accounting treatment
      for the Winsonic Transaction is similar to that of a reverse acquisition.
      Accordingly, the historical financial information of the accompanying financial
      statements is that of the Private Company. All shares included in the Statement
      of Stockholders' Deficit have been presented as if the acquisition had occurred
      at the date of inception of the Private Company, September 10,
      2002.





The
      shares of common stock of the Public Company outstanding prior to the merger
      -i.e., 24 million shares - have been shown in the accompanying financial
      statements as a recapitalization of the Company as of October 7,
      2004.





As
      part
      of the Agreement and Plan of Reorganization, the Public Company issued a total
      of 8 million shares of its common stock. Of these 8 million shares,
      approximately 2 million shares were issued to various creditors of the Private
      Company in accordance with exchange agreements between those creditors and
      the
      Private Company.





The
      Company is a media distribution solutions company which historically has focused
      on distributing digital content to the public and providing high-speed,
      high-quality, low-cost solutions that enable users to view, interact, and listen
      to all types of audio, online video and digital TV in full screen
      format.





During
      fiscal year 2006, Winsonic holds a 49% equity interest in Winsonic Diversity,
      LLC and completed the acquisitions of Automated Interiors, LLC (“AI”), Tytess
      Design and Development, Inc. (“Tytess”), and DV Photo Shop, Ltd., (the “Store”).
      These actions represent a series of strategic investments in new markets and
      new
      services that expand the offerings of the Company while complimenting our
      existing business. Together with our existing digital distribution platform,
      comprised of the Winsonic Digital Cable Systems Network, Ltd.’s network, we are
      now able to deliver customized, bundled solutions to a wider range of customers
      that include custom wiring, centrally-located utilities, project management,
      telephone, internet, audio/video and digital TV.




**A
      Development Stage Company**





The
      accompanying financial statements have been prepared in accordance with the
      Statement of Financial Accounting Standards (“SFAS”) No. 7 “Accounting and
      Reporting by Development Stage Enterprises.” A development stage enterprise is
      one in which planned principal operations have not commenced; or if its
      operations have commenced, there has been no significant revenues derived
      therefrom. As of December 31, 2006, the Company has not fully commenced nor
      has
      it received significant revenues from its planned principal
      operations.




F11




**NOTE
      2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES**





**Principles
      of Consolidation:** The
      attached consolidated financial statements include the accounts of the Company
      and its wholly owned subsidiaries. All significant inter-company transactions
      have been eliminated in consolidation. ****





**Basis
      of Presentation**





Certain
      prior year amounts in the financial statements have been reclassified to conform
      with the current year presentation. These reclassifications had no effect on
      previously reported net loss.





**Definition
      of Fiscal Year:**





The
      Company’s fiscal year end is December 31.





**Cash
      and Cash Equivalents:**





Cash
      equivalents consist of highly liquid investments with maturities of three months
      or less when purchased. Cash and cash equivalents are on deposit with financial
      institutions without any restrictions.





**Concentration
      of Credit Risk:**





The
      Company maintains its cash and cash equivalents in bank accounts in two
      financial institutions. The Federal Deposit Insurance Corporation insures
      deposits up to $100,000 per account. As of December 31, 2006, the Company did
      not have any accounts with balances in excess of the insured balances. As of
      December 31, 2006 and December 31, 2005, the Company had a balance of $3,657
      and
      ($14,467), respectively, in its cash accounts. Currently, cash management is
      handled by Company management. Typically, the cash balances are less than
      $100,000 per account.





**Accounts
      Receivable:**





Accounts
      receivable is uncollateralized customer obligations due under normal trade
      terms
      requiring payment within 30 days from the invoice date. The carrying amount
      of
      accounts receivable is reviewed for collectibility. Should management determine
      that collection is unlikely, an allowance that reflects management’s best
      estimate of the amounts that will not be collected will be provided. Management
      reviews each accounts receivable balance that exceeds 30 days from the invoice
      date and, based on an assessment of creditworthiness, estimates the portion,
      if
      any, of the balance that will not be collected. At December 31, 2006 and
      December 31, 2005, there was no reserve for doubtful accounts.




**Use
      of Estimates:**





The
      preparation of financial statements in conformity with generally accepted
      accounting principles requires management to make estimates and assumptions
      that
      affect the reported amounts of assets and liabilities and disclosures of
      contingent assets and liabilities at the date of the financial statements and
      the reported amounts of revenue and expense during the reported period. Actual
      results could differ from these estimates.





**Fair
      Value of Financial Instruments**





SFAS
      No.
      107, “Disclosures About Fair Value of Financial Instruments,” requires the
      Company to disclose, when reasonably attainable, the fair market values of
      its
      assets and liabilities that are deemed to be financial instruments. The carrying
      amounts and estimated fair values of the Company’s financial instruments
      approximate their fair value due to their short-term nature.





F12




**Earnings
      (Loss) Per Share Calculations**





Basic
      earnings (loss) per share exclude any dilutive effects of options, warrants
      and
      convertible securities. Basic earnings (loss) per share are computed using
      the
      weighted-average number of outstanding common stocks during the applicable
      period. Diluted earnings per share are computed using the weighted-average
      number of common and common stock equivalent shares outstanding during the
      period. Common stock equivalent shares are excluded from the computation if
      their effect is antidilutive. For all periods presented, the Company has
      sustained losses, which would make use of equivalent shares antidilutive and,
      as
      such, the calculation has not been included.





**Stock
      Based Compensation: Stock Options:**





The
      Company has a stock incentive plan that provides for stock-based employee
      compensation, including the granting of stock options to certain key employees
      and other individuals. For stock options and warrants issued as compensation
      and
      reported in periods beginning after December 15, 2005, the Company applies
      SFAS
      No. 123(R), “Share-Based Payment,” which requires the recognition of
      compensation cost based upon the fair value of stock options at the grant date
      (using option pricing models), and recognizing the cost over the period during
      which the services are provided (vesting period).




During
        the years ended December 31, 2006 and 2005, the Company granted options for
        7,159,304 and 1,250,000 shares of common stock, respectively, to employees.
        Of
        these granted options, 4,058,506 and 2,369,041 vested during the periods
        ended
        December 31, 2006 and 2005, respectively. For the vested portion, there was
        a
        related accrual of compensation expense of $356,973 and $472,957 for the
        respective periods ended 2006 and 2005. The compensation expense is based
        on the
        fair market value of the options utilizing the Black-Scholes option pricing
        model. The Black-Scholes estimate includes the following assumptions, risk
        free
        rate of return of 4.5% and 3.5%; no dividend yield, volatility factors of
        the
        expected market price of the Company’s common stock of 197% to 149%; with a
        weighted average expected life of 3 years for the $1.00 warrant and 1 year
        for
        the $0.01 warrant.





Prior
      to
      December 15, 2005, the Company applied Accounting Principles Board (“APB”)
      Opinion No. 25, “Accounting for Stock Issued to Employees,” and related
      interpretations, in accounting for stock options issued to employees. Under
      APB
      Opinion No. 25, employee compensation cost is recognized when estimated fair
      value of the underlying stock on the date of the grant exceeds exercise price
      of
      the stock option. For stock options and warrants issued to non-employees, the
      Company applied SFAS No. 123, “Accounting for Stock-Based Compensation,” which
      requires the recognition of compensation cost based upon the fair value of
      stock
      options at the grant date using the Black Scholes option pricing model.





Employee
      Agreements effective as of October 8, 2004, provided for the grant of 3,000,000
      incentive or non-statutory stock options for three officers to purchase
      1,000,000 shares each of common stock for $1.00 per share. These options
      primarily vest equally over a twelve-month period effective with the date of
      the
      employment agreement. The agreements are terminable at will with or without
      cause.





Subsequently,
      on December 9, 2005, Nana Yalley entered into a separation agreement with the
      Company, thereby rendering his employment agreement with the Company, signed
      October 8, 2004, null and void. In this separation agreement, Mr. Yalley agreed
      to a reduction of his stock options to purchase common stock of the Company
      from
      1,000,000 to 500,000 shares. These options are vested and immediately
      exercisable for five years from the date of the grant at $1.00 per share. Mr.
      Yalley’s 500,000 stock options were valued using the Black Scholes valuation
      model, and recorded at $131,068 as of December 31, 2005, in accordance with
      SFAS
      No. 123(R) “Accounting for Stock Based Compensation.”





Per
      an
      employment agreement dated November 5, 2005, Mr. Eric Young was named Chief
      Operating Officer and Chief Financial Officer of the Company. Mr. Young received
      stock options to purchase 500,000 shares of common stock at an exercise price
      of
      $1.00 per share, which would vest equally over a twelve-month period effective
      with the date of the employment agreement. Additionally, Mr. Young received
      stock options to purchase 750,000 shares of the Company’s common stock at an
      exercise price of $0.01 per common share. The stock options vest one-third
      immediately, one-third at the closing of the next round of funding or January
      1,
      2006, whichever is earlier, and the remaining one-third when the Company’s
      common stock resumes trading on the OTCBB per the terms of his employment
      agreement.





F13




In
      prior
      years, the Company followed APB Opinion No. 25, “Accounting for Stock Issued to
      Employees,” and the related interpretations, in accounting for its employee
      stock options because the alternative fair value accounting provided for under
      SFAS No. 123, “Accounting for Stock-Based Compensation,” required the use of
      option valuation models that were not developed for use in valuing employee
      stock options. Under APB Opinion No. 25, if the exercise price of the Company’s
      employee stock options were equal to or greater than the market price of the
      underlying stock on the date of the grant, no compensation expense was
      recognized. The following pro forma information summarizes the effect on
      earnings for the twelve-month periods ended December 31, 2005, had the Company
      followed SFAS No. 123(R) for the earlier period:




**For
                  the Year Ended December 31,****2005**Net
                  Income (Loss) as Reported
              
              $
              (4,105,613
              )Add:
                  Stock-based non-employee compensation expense included in reported
                  net
                  income
              
              
              —Deduct:
                  Total stock-based employee compensation expense determined under
                  fair
                  value based method
              
              
              (797,610
              )Net
                  Income (loss) Pro forma
              
              $
              (4,903,223
              )Pro
                  forma earnings (loss) per share
              
              $
              (0.14
              )




Pro
      forma
      information regarding net income and earnings per share is required by FASB
      123,
      which also requires that the information be determined as if the Company has
      accounted for its employee stock options granted beginning in the fiscal year
      subsequent to December 31, 1994 under the fair value method of that Statement.
      The fair value for these options was estimated at the date of grant using a
      Black-Scholes option pricing model with the following weighted-average
      assumptions for the year ended December 31, 2005: risk free rate of 4.5%; no
      dividend yield; volatility factors of the expected market price of the Company's
      common stock of 189% to 194%; and weighted-average expected life of the options
      of three years (for options issued at $1.00 per share strike price) and one
      and
      one-half years (for options issued at $0.01 per share strike price).





The
      Company’s Employee Stock Option activity for the years ended December 31, 2006
      and 2005 is presented below:


**December
                  31, 2006**
              
              
              **December
                  31, 2005**Options
              
              
              Weighted
                  Average
                Exercise
                  Price
              
              
              Options
              
              
              Weighted
                  Average
                Exercise
                  PriceOutstanding
                  - Beginning of Period
              
              
              3,750,000
              
              $
              0.84
              
              
              3,000,000
              
              $
              1.00Granted
                  or committed
              
              
              7,159,304
              
              
              0.61
              
              
              1,250,000
              
              
              0.41Exercised
              
              
              (600,000
              )
              
              0.01
              
              
              -
              
              
              -Cancelled
              
              
              (1,000,000
              )
              
              1.00
              
              
              (500,000
              )
              
              -Outstanding
                  - End of Period
              
              
              9,309,304
              
              $
              0.68
              
              
              3,750,000
              
              $
              0.80Exercisable
                  - End of Period
              
              
              5,577,547
              
              $
              0.78
              
              
              3,119,041
              
              $
              0.84




Future
      stock compensation expense related to the above stock options outstanding is
      $1,441,840 and the weighted average period over which the expense is expected
      to
      be recognized is 8.72 months.




F14


**Fixed
        Assets:**
 
 Fixed
        assets are stated at cost. Expenditures that materially increase the life
        of the
        assets are capitalized. Ordinary maintenance and repairs are charged to expense
        as incurred. When assets are sold or otherwise disposed of, the cost and
        the
        related accumulated depreciation are removed from the accounts, and any
        resulting gain or loss is recognized at that time. Depreciation is computed
        primarily on the declining balance method for financial statement purposes
        over
        the following estimated useful lives:




Telecommunication
                Equipment
            
            
            15
                YearsFurniture
                & Fixtures
            
            
            7
                YearsComputer
                Equipment
            
            
            5
                YearsTransportation
                Equipment
            
            
            5
                YearsSoftware
            
            
            3
                Years




Depreciation
      expense for the years ended December 31, 2006 and December 31, 2005 was $162,622
      and $344,720, respectively.





**Impairment
      of Long-Lived Assets:**





In
      accordance with SFAS No. 144, “Accounting for the Impairment or Disposal of
      Long-Lived Assets," long-lived assets, such as property and equipment and
      intangible assets subject to amortization, are reviewed for impairment whenever
      events or changes in circumstances indicate that the carrying amount of an
      asset
      group may not be recoverable. Recoverability of asset groups to be held and
      used
      is measured by a comparison of the carrying amount of an asset group to
      estimated undiscounted future cash flows expected to be generated by the asset
      group. If the carrying amount of an asset group exceeds its estimated future
      cash flows, an impairment charge is recognized by the amount by which the
      carrying amount of an asset group exceeds fair value of the asset
      group.





**Revenues
      and Expenses Recognition:**





Revenues
      for the Company will be recognized upon rendering services to customers. Costs
      and expenses are recognized during the period in which they are
      incurred





Tytess,
      a
      subsidiary of the Company, has elected to recognize revenue on a percentage
      of
      contract completion method. This method requires Tytess to do progress billings
      based upon completion of preset milestones. Revenues and expenses for each
      milestone are recognized as each milestone has been completed.





AI,
      another subsidiary of the Company, has elected to recognize revenue on a
      completed contract method, due to the short duration of its contracts. The
      completed contract **** method
      requires AI to defer revenue and expense recognition until the contract has
      been
      substantially completed.





Revenues
      for the Store will be recognized upon rendering services to customers. Costs
      and
      expenses are recognized during the period in which they are
      incurred.





**Advertising
      Costs:**





The
      Company expenses all costs of advertising as incurred. There were no advertising
      costs incurred for the years ended December 31, 2006 and 2005.





**Research
      and Development Costs:**





Research
      and development costs are charged to expenses as incurred. There were no
      research and development costs incurred for the years ended December 31, 2006
      and 2005.




F15




**Income
      Taxes:**





Income
      taxes are generally provided for the tax effects of transactions reported in
      the
      financial statements, and consist of taxes currently due plus deferred taxes
      related primarily to differences between the basis of fixed assets for financial
      and income tax reporting. The Company has no deferred tax assets and liabilities
      representing the future tax return consequences of those differences because,
      currently, the Company has no material temporary timing differences that give
      rise to these tax assets and liabilities. Currently there are no federal income
      taxes due.





**Recently
      Issued Accounting Pronouncements:**





In
      March
      2006, the FASB issued SFAS No. 156, “Accounting for Servicing of Financial
      Assets,” which amends SFAS No. 140. SFAS No. 156 may be adopted as early as
      January 1, 2006 by calendar year-end entities, provided that no interim
      financial statements have been issued. Those not choosing to early adopt are
      required to apply the provisions as of the beginning of the first fiscal year
      that begins after September 15, 2006 (e.g., January 1, 2007 for calendar
      year-end entities). The intention of the new statement is to simplify accounting
      for separately recognized servicing assets and liabilities, such as those common
      with mortgage securitization activities, as well as, to simplify efforts to
      obtain hedge-like accounting. SFAS No. 156 permits a servicer using derivative
      financial instruments to report both the derivative financial instrument and
      related servicing asset or liability by using a consistent measurement attribute
      or fair value. We do not expect the adoption of SFAS No. 156 to have a material
      impact on our consolidated financial position, results of operations or cash
      flows.




In
      September 2006, the FASB issued SFAS No. 157, *Fair
      Value Measurements" ("SFAS 157)* ,
      which
      provides guidance on how to measure assets and liabilities that use fair value.
      SFAS 157 will apply whenever another US GAAP standard requires (or permits)
      assets or liabilities to be measured at fair value but does not expand the
      use
      of fair value to any new circumstances. This standard also will require
      additional disclosures in both annual and quarterly reports. SFAS 157 will
      be
      effective for fiscal years beginning after November 15, 2007 (January 1, 2008
      for the Company). The Company is currently evaluating the impact, if any, the
      adoption of FIN 157 will have on its financial statements. Based on the analysis
      done so far, we do not expect SFAS 157 to have a material impact on our
      financial statements.




In
      September 2006, the FASB issued SFAS 158, *Employers’
      Accounting for Defined Benefit Pension and Other Postretirement Plans - an
      amendment of FASB Statements No. 87, 88, 106, and 132(R) (“SFAS 158”) and SFAS
      87, Employers’ Accounting for Pensions* (“SFAS
      87”). SFAS 158 requires the recognition of an asset or liability for the
      overfunded or underfunded status of all defined benefit plans included in our
      2006 year-end financial statements. The Company does not have a defined benefit
      plan currently and we do not expect SFAS 158 to have a material impact on our
      financial statements.




In
      June
      2006, the FASB issued FASB Interpretation No. 48, *Accounting
      for Uncertainty in Income Taxes - an interpretation of FASB Statement
      109* (“FIN
      48”), which prescribes a recognition threshold and measurement attribute for the
      financial statement recognition and measurement of a tax position taken or
      expected to be taken in a tax return. Under FIN 48, the benefit of a tax
      position may be recognized only if it is more likely than not that the tax
      position will be sustained, based on the technical merits of the position,
      by a
      taxing authority having full knowledge of all relevant information. We do not
      expect FIN 48 to have a material impact on our financial statements.




In
      February 2007, the FASB issued SFAS 159, *The
      Fair Value Option for Financial Assets and Financial Liabilities, including
      an
      amendment of FASB Statement No. 115* (“SFAS
      159”) which permits entities to choose to measure eligible items at fair value
      at specified election dates. Unrealized gains and losses on items for which
      the
      fair value option has been elected will be reported in earnings at each
      subsequent reporting date. The following balance sheet items are within the
      scope of SFAS 159:




Recognized
      financial assets and financial liabilities unless a special exception applies




Firm
      commitments that would otherwise not be recognized at inception and that involve
      only financial instruments




Non-financial
      insurance contracts




F16




Host
      financial instruments resulting from separation of an embedded non-financial
      derivative instrument from a non-financial hybrid instrument




SFAS
      159
      will be effective for fiscal years beginning after November 2007 with early
      adoption possible but subject to certain requirements. We do not plan early
      adoption and we do not expect a material impact on our financial statements
      from
      the eventual adoption of SFAS 159.




**NOTE
      3 - MERGERS AND ACQUISITIONS**





During
      the year ended December 31, 2006, the Company acquired three subsidiaries,
      which
      include purchases of Automated Interiors, LLC on April 18. 2006, Tyess Design
      and Development, Inc. on November 2, 2006 and DV Photo Shop on November 20,
      2006. The purchases were facilitated by the issuance or the promise to issue
      common stock of the Company, as follows:





Purchase
                Price
            
            Shares
                Issued
            
            Unissued
                Shares
            
            Other
                ConsiderationAutomated
                Interiors, LLC
            
            $
            168,902
            
            
            411,956
            
            
            -
            
            
            -Tytess
                Design and Development
            
            $
            630,626
            
            
            -
            
            
            1,146,593
            
            
            -DV
                Photo Shop
            
            $
            200,000
            
            
            -
            
            
            241,379
            
            $
            60,000
                (a
            )





(a)
            Convertible
                Note Payable issued, convertible at $0.58 per
                share.





**Automated
      Interiors:**





Effective
      as of April 18, 2006, the Company purchased the membership interests of AI
      for
      411,956 shares of restricted common stock, valued at $0.41 per share for a
      total
      price of $168,902.





AI
      was
      established on November 17, 2003 in the State of Georgia, and has offices and
      design facilities located in Atlanta, Georgia. AI designs and engineers the
      installation of electronic components to facilitate “smart” buildings. It has
      partnered with developers and builders who now offer structured wiring in newly
      constructed homes and buildings as a result of a dramatic increase in broadband
      use and consumer demand for the latest technological innovations in home and
      security automation. AI’s operations are centered primarily in the Southeast
      region of the United States. AI has, through December 31, 2006, utilized the
      services of independent subcontractors for staffing needs. Consistent with
      the
      business plan of AI, the operations have started to employ, subsequent to
      December 31, 2006, the core staff. The employees are being employed through
      at-will employment agreements, which may include offers of equity as part of
      the
      incentive to be employed. Due to the training and the expected growth of the
      business, management feels that it will become progressively more important
      for
      AI to retain experienced staff.





The
      purchase price was allocated as follows:





Net
                tangible assets acquired
            
            $
            65,131Intangible
                assets acquired
            
            
            -Goodwill
            
            
            103,771Total
                purchase price
            
            $
            168,902





The
      following table summarizes the components of the tangible assets acquired at
      fair value:




Cash
            
            $
            20,511Accounts
                receivable
            
            
            190,783Fixed
                assets
            
            
            66,532Other
                assets
            
            
            6,775Current
                liabilities
            
            
            (87,569
            )Long-term
                liabilities
            
            
            (131,901
            )Net
                tangible assets acquired
            
            $
            65,131




F17




**Tytess
      Design and Development:**





Effective
      as of November 2, 2006 the Company purchased the ownership rights of the sole
      shareholder in Tytess for 1,146,593 shares of restricted common stock, valued
      at
      $0.55 per share, for a total purchase price of $630,626. Tytess thereby became
      a
      wholly owned subsidiary of the Company.





Tytess
      was incorporated on May 16, 2003 in the State of Georgia, and has offices and
      design facilities located in Atlanta, Georgia. The operations of Tytess,
      consisting of contracts for the building of two residential homes and one church
      facility, were transferred to the corporation from a partnership at the time
      of
      the acquisition. Tytess designs, engineers and provides project management
      services for construction projects, primarily buildings. In addition to the
      construction projects currently being designed and managed by Tytess, the
      combined operation of Tytess and Winsonic have successfully contracted with
      a
      major telephone network to design (architectural and engineering services)
      and
      manage the construction and installation of telephone infrastructure and the
      design and deployment of network services. Tytess will also provide engineering
      services to facilitate the deployment of telecommunication services being
      offered by the Company and the Company’s network. Tytess’s operations are
      centered primarily in the Southeast region of the United States. Tytess has,
      to
      date, utilized the services of independent subcontractors for staffing needs.





The
      purchase price was allocated as follows:





Net
                tangible assets (liabilities) acquired
            
            $
            (90,141
            )Intangible
                assets acquired
            
            
            -Goodwill
            
            
            720,767Total
                purchase price
            
            $
            630,626





The
      following table summarizes the components of the tangible assets acquired at
      fair value:




Cash
            
            $
            (3,840
            )Accounts
                receivable
            
            
            -0-Fixed
                assets
            
            
            10,075Other
                assets
            
            
            25,510Current
                liabilities
            
            
            (121,886
            )Long-term
                liabilities
            
            
            -0-Net
                tangible assets (liabilities) acquired
            
            $
            (90,141
            )




**DV
      Photo Shop** **:**





On
      November 20, 2006 the Company purchased the net assets of DV Photo Shop. The
      net
      assets and operations acquired were transferred to a new Georgia corporation
      and
      the name was changed to Winsonic Digital Store, Ltd. The net assets were
      purchased for 241,379 shares of restricted common stock, valued at $0.58 per
      share and a convertible note payable of $60,000, for a total purchase price
      of
      $200,000. The note is convertible into shares of the Company’s restricted common
      stock at $0.58 per share.





The
      store
      has its only retail facilities located in Atlanta, Georgia. The operations
      of
      the store, included an urban retail store located in downtown Atlanta, which
      specialized in photography development, digital photography and the sale of
      mobile phones, accessories, and wireless communications services. The Store,
      of
      which the Company is now a one hundred percent (100%) equity owner, will offer
      the same products and services it offered before the acquisition; however,
      its
      future offerings will include music downloads, digital photo depot, on-line
      storage, video conferencing, content development, a music lab for mixing and
      mastering, and film, video and photo editing.





The
      purchase price was allocated as follows:





Net
                tangible assets acquired
            
            $
            40,247Intangible
                assets acquired
            
            
            -Goodwill
            
            
            159,753Total
                purchase price
            
            $
            200,000




F18




The
      following table summarizes the components of the tangible assets acquired at
      fair value:




Cash
            
            $
            5,387Accounts
                receivable
            
            
            -0-Fixed
                assets
            
            
            34,860Current
                liabilities
            
            
            -0-Long-term
                liabilities
            
            
            -0-Net
                tangible assets acquired
            
            $
            40,247





**Goodwill:**





Goodwill,
      which represents the excess of the purchase price over the fair value of
      tangible and identified intangible assets acquired, is not being amortized
      but
      will be reviewed annually for impairment, or more frequently if impairment
      indicators arise, in accordance with Statement of Financial Accounting Standards
      No. 142, “Goodwill and Other Intangible Assets” (“SFAS 142”). In part, goodwill
      reflects the competitive advantages the Company expects to realize from the
      synergy of AI and Tytess services, the expanded product offerings through the
      Store facilities, and the Winsonic product line. The Company will review
      Goodwill annually to determine if impairment has occurred, and if so, to what
      extent. As of December 31, 2006, there was no impairment cost recognized.
      Goodwill is not expected to be deducted for tax purposes.





The
      results of operations of AI, Tytess and the Store have been included in the
      Company’s consolidated financial statements subsequent to the date of each
      acquisition. The financial information in the table below summarizes the
      combined results of operations of the Company and AI. The operations of Tytess
      and the Store have not been included as they were immaterial to the operations
      of the Company, have an immaterial affect on the current operations of the
      consolidated group, and in the case of Tytess, was included in the operations
      of
      a private partnership. Further, the Company anticipates expanding the range
      of
      services and products to be offered by both Tytess and the Store to include
      those which are synergistic with the business plan of the Company and the value
      attributed to the acquisition price.





On
      an
      unaudited pro forma basis, the combined information represents the combined
      operations of the Company and AI, as though both of the companies had been
      combined as of the beginning of each of the periods presented:


**For
                  the twelve months ended December 31,****2006**
              
              
              **2005****(unaudited)**
              
              
              **(unaudited)**Total
                  pro forma revenues
              
              
              1,182,000
              
              
              1,017,000Pro
                  forma net loss
              
              
              (9,324,000
              )
              
              (3,942,000
              )Pro
                  forma net loss per share - basic and diluted
              
              
              0.21
              
              
              0.11Reported
                  net loss
              
              
              (9,374,000
              )
              
              (4,105,613
              )




**NOTE
      4 - STOCKHOLDERS’ EQUITY**





The
      Company has 50,000,000 shares of common stock authorized with a par value of
      $0.001 per share.





During
      fiscal year 2002, the Company issued 990,600 stock warrants, of which 509,600
      warrants were issued to four individuals for consulting services, 385,000
      warrants were issued to three individuals to settle debts, and 96,000 warrants
      were issued to six individuals and one company for cash, all with a conversion
      price of $1.00 per share.





During
      fiscal year 2003, the Company committed 820,000 shares of common stock as part
      of a payable of $820,000 for shares of stock valued at $1.00 per share to a
      company as part of the consideration for purchase of computer equipment and
      infrastructure valued at $1,667,000. The remaining balance of $847,000 has
      been
      financed through a promissory note payable. (See “Note 10 - Loans Payable.”)




F19




During
      fiscal year 2003, the Company issued 189,500 stock warrants, of which 87,000
      were issued to one individual for consulting services, and 102,500 were issued
      to four individuals for cash, all with a conversion price of $1.00 per
      share.





During
      fiscal year 2004, the Company issued 6,004,200 shares of common stock to the
      Chairman/CEO for past services.





During
      fiscal year 2004, as discussed in Note 1, the Company issued 23,956,138 shares
      of common stock related to the reverse merger with Media &
Entertainment.com, Inc. These shares represent issued and outstanding shares
      of
      the Public Company prior to the merger, and have been reflected as a
      recapitalization of Winsonic as of October 7, 2004 -- the date of the
      merger.





During
      fiscal year 2004, the Company issued 1,980,946 shares of common stock to eleven
      individuals and one company for consulting services rendered totaling $1,490,309
      or $0.75 average price per share.





During
      fiscal year 2004, the Company issued 758,000 shares of common stock to eleven
      individuals and one company in satisfaction of debts totaling $331,000 and
      accrued interest of $242,500.





During
      fiscal year 2004, the Company issued 921,600 shares of common stock to eight
      individuals and one company as a result of stock warrants exercised at $1.00
      per
      share.





During
      fiscal year 2004, the Company converted 258,000 of outstanding stock warrants
      into $198,000 of debts and $60,000 of additional paid in capital related to
      seven individuals and one company.





During
      fiscal year 2005, the Company issued 252,745 shares of common stock to a private
      limited partnership. The Company issued 94,615 of these shares at $1.30 per
      share during January, 91,463 of these shares at $0.82 per share in March, and
      66,667 of these shares at $0.68 per share in June, all pursuant to a warrant
      exercisable at $0.07 per share. The warrant had been issued as compensation
      to
      certain professional advisors for services rendered during 2004. These 2005
      issuances were made pursuant to a “cashless exercise” of a warrant where the
      warrant holder received a reduced number of shares of common stock upon
      conversion based on the current market value of the stock. For January 2005,
      the
      warrant holders received 94,615 shares of stock and contributed 5,385 shares
      valued at $1.30 per share worth $7,000 (the cost of their warrants). For
      September, the warrant holders received 91,463 shares and contributed 8,537
      shares valued at $0.82 per share, worth $7,000 (the cost of their warrants).
      For
      June, the warrant holders received 66,667 shares of common stock and contributed
      8,333 shares valued at $0.68 per share, worth $5,666 (the cost of their
      warrants).





During
      fiscal year 2005, the Company issued 1,670,000 shares to Native American
      Television Network, Inc. (“NATVN”) in exchange for 4,000,000 shares of common
      stock, in accordance with a stock exchange agreement entered into by both
      parties. This transaction was recorded in accordance with Staff Accounting
      Bulletin (SAB) Topic 5(g), which states that the transfer of non-monetary assets
      by shareholders should be recorded at the transferor’s historical cost basis as
      determined under Generally Accepted Accounting Principles (GAAP). The President
      of the Company and a Company shareholder were also shareholders and co-founders
      in NATVN, owning approximately 9% of the total outstanding equity in NATVN.
      Because NATVN is an early development stage company, the historical cost, and
      therefore, initial value of the non-monetary asset received is valued at zero
      as
      of December 31, 2005, since there were no tangible or intangible assets and
      signed agreements in place. (See “Note 12 - Equity Investment” for further
      details regarding this transaction.)





During
      fiscal year 2005, the Company issued 700,000 shares of common stock to its
      founder to relieve related party loan payable due him valued at $231,000 or
      $0.33 average price per share. (See “Note 5 - Related Party Transactions” for
      further details regarding this transaction.)





F20




During
      fiscal year 2005, the Company issued 500,000 shares of common stock to its
      founder for services valued at $165,000 or $0.33 average price per share. (See
      “Note 5 - Related Party Transactions” for further details regarding this
      transaction.)





During
      fiscal year 2005, the Company issued 900,000 shares of common stock to two
      consultants for services valued at $630,000 or $0.70 average price per share.





During
      fiscal year 2005, the Company issued 225,000 shares of common stock to two
      consultants for services valued at $108,000 or $0.48 average price per share.





During
      fiscal year 2005, the Company issued 590,000 shares of common stock to four
      investors in satisfaction of convertible debenture obligations of $118,000
      at
      $0.20 average price per share. (See “Note 11 - Convertible Debentures” for
      further details regarding this transaction.)





During
      fiscal year 2005, the Company issued 925,927 shares of common stock to its
      landlord for lease deposits valued at $250,000 or $0.27 average price per share.





During
      fiscal year 2005, the Company issued 820,000 shares of common stock to one
      company as a result of conversion of common stock payable valued at $820,000
      or
      $1.00 per share.





During
      fiscal year 2005, the Company credited additional paid-in capital for a $281,481
      adjustment to accumulated depreciation for the return of computer equipment,
      infrastructure and software. (See “Note 9 - Property And Equipment, Net” for
      further detail regarding this transaction).





During
      fiscal year 2005, the Company recorded the vesting of 500,000 shares of a common
      stock award for an officer for the net vested value of $185,000. (See “Note 5 -
      Related Party Transactions” for further detail regarding this
      transaction).





During
      fiscal year 2005, the Company recorded common stock payable for 818,182 common
      shares valued at $270,000 or $0.33 average price per share to an officer per
      a
      separation agreement,. (See “Note 8 - Commitments and Contingencies” for further
      detail regarding this transaction).





During
      fiscal year 2005, the Company recorded forgiveness of accrued salary to an
      officer per a separation agreement by crediting additional paid in capital
      for
      $270,000. (See “Note 8 - Commitments and Contingencies” for further detail
      regarding this transaction).





During
      fiscal year 2005, the Company recorded forgiveness of accrued payroll taxes
      for
      an officer per a separation agreement by crediting additional paid in capital
      for $59,982. (See “Note 8 - Commitments and Contingencies” for further detail
      regarding this transaction).





During
      fiscal year 2005, the Company recorded the vesting of stock options to purchase
      500,000 shares of the Company’s common stock per a separation agreement valued
      at $131,068 at December 31, 2005, using the Black Scholes valuation method.
      (See
“Note 2 - Summary of Significant Accounting Policies” and “Note 8 - Commitments
      and Contingencies” for further detail regarding this transaction).





During
      fiscal year 2005, the Company recorded the forgiveness of interest expense
      of a
      related party by crediting additional paid in capital for $152,592. (See “Note
      10 - Loans Payable” for further detail regarding this transaction).




The
        Company issued 900,000 shares of its common stock during the quarter ending
        March 31, 2006. These 900,000 shares issued in the first quarter of 2006,
        were
        issued at $0.50 per share in settlement of a legal action. The settlement
        and
        the credit to stockholders’ equity were valued at $450,000. (See “Note 6 -
        Summary of Significant Legal Proceedings” for further details.)
 
 During
        2006, the Company issued 3,184,899 shares of its common stock at $0.20 per
        share
        in connection with conversions of various convertible notes payable that
        had
        been issued during the year.


F21




During
        April 2006, 500,000 shares of common stock were issued to the former chief
        financial officer of the Company in connection with employment incentive
        options, which were granted to him in connection with his employment during
        2005. In accordance with the accounting treatment under SFAS No. 124(R) and
        SFAS
        No. 125, the Company had previously recognized compensation expenses of $185,000
        upon the grant and vesting of the options during the fourth quarter of 2005
        and
        the first quarter of 2006.
 
 In
        April
        2006, the Company issued 411,956 shares of its common stock for the acquisition
        of Automated Interiors at $0.41 per share.
 
 During
        the quarter ended June 30, 2006, the Company issued 411,956 shares of common
        stock at $0.41 per share as consideration for the acquisition of all of the
        outstanding equity of AI. Also, in connection with the acquisition of AI
        and as
        an employment incentive, the Company issued 750,000 shares of common stock,
        valued at $0.40, to five key employees of AI during April 2006.
 
 In
        May
        2006, 82,051 shares of restricted common stock were issued at $0.39 per share
        pursuant to a “cashless exercise” of options held by an advisor. The advisor had
        received options for services rendered during 2004. Based on the current
        market
        value of the stock, the option holder received a reduced number of shares
        of
        common stock upon exercise.
 
 During
        the third quarter of 2006, the Company issued 489,850 shares of its common
        stock
        in repayment of funds loaned to the Company at $0.53 per share.
 
 During
        the second, third and fourth quarters of 2006, the Company issued 2,153,010
        shares of its common stock upon exercise of convertible notes at $0.40 per
        share.
 
 During
        the third quarter of 2006, the Company issued 89,231 shares of its common
        stock
        upon the exercise of options issued for services at $0.65 per
        share.
 
 During
        2006, the Company issued 410,000 shares of its common stock to various financial
        consultants for services at fair market values ranging from $0.01 to $0.53
        per
        share.
 
 During
        2006, the Company issued 300,000 shares of its common stock upon the exercise
        of
        a warrant issued to a consultant at $0.01 per share.
 
 During
        2006, the Company issued 62,504 shares of its common stock as repayment of
        various loans valued at $0.40 per share.
 
 During
        December of 2006, the Company issued 40,000 shares of its common stock to
        a
        financial consultant, valued at $0.40 per share, whose services were employed
        to
        assist the Company in its financial reporting and disclosures.
 
 During
        the first and second quarter of 2006, the Company raised additional proceeds
        of
        $504,200 and $310,000, respectively, through the issuance of 59 convertible
        notes with attached warrants to accredited investors in denominations of
        $1,000
        to $100,000. (For a more detailed discussion, see “Note 10 - Convertible
        Debentures” and “Note 13 - Subsequent Events” in the Notes to the Financial
        Statements.)


F22




During
        the third and fourth quarter of 2006, the Company raised proceeds of $250,000
        and $759,192, respectively, through the issuance of 58 notes with attached
        warrants to accredited investors in denominations of $3,000 to $75,000. (For
        a
        more detailed discussion, see “Note 11 - Convertible Debentures” and “Note 13 -
        Subsequent Events” in the Notes to the Financial Statements.)
 
 In
        November 2006, the Company committed to issue 1,146,593 shares of common
        stock
        in connection with the acquisition of Tytess.
 
 In
        December 2006, the Company issued a $60,000 principal amount convertible
        promissory note which is convertible into the Company’s common stock convertible
        at a rate of $0.58 per share and an aggregate of 241,379 shares of the Company’s
        common stock in connection with the acquisition of the Store.
 
 We
        neither received nor paid any commissions in connection with the issuances
        of
        securities described above. We believe that the issuance of such securities
        was
        exempt from the registration requirements of the Securities Act of 1933,
        as
        amended, pursuant to the provisions of Section 4(2) of the Securities
        Act.
 
 **Stock
        Warrants/Common Stock Payables**
 
 Certain
        stock warrants and common stock payables have been issued in exchange of
        cash
        proceeds, services and fixed assets at a conversion price of $1.00 per common
        share. The stock warrants have a life of three years.
 
 The
        following table summarizes the Company’s stock warrants and common stock payable
        activity with a conversion price of $1.00:




Number
                of
              Warrants/Common
              stock
                payable
            
            Exercise
                PriceBalance
                as of September 10, 2002 (Inception)
            
            
            -
            
            $
            -Warrants
                issued
            
            
            990,600
            
            
            1.00Warrants
                canceled/expired
            
            
            -
            
            
            -Warrants
                exercised
            
            
            -
            
            
            -Balance
                as of December 31, 2002
            
            
            990,600
            
            
            1.00Warrants/stock
                payable issued
            
            
            1,009,500
            
            
            1.00Warrants
                canceled/expired
            
            
            -
            
            
            -Warrants
                exercised
            
            
            -
            
            
            -Balance
                as of December 31, 2003
            
            
            2,000,100
            
            
            1.00Warrants
                issued
            
            
            -
            
            
            -Warrants
                canceled/expired
            
            
            -
            
            
            -Warrants
                exercised
            
            
            (1,180,100
            )
            
            1.00Balance
                as of December 31, 2004
            
            
            820,000
            
            
            1.00Warrants
                issued
            
            
            -
            
            
            -Warrants
                canceled/expired
            
            
            -
            
            
            -Common
                stock payable exercised
            
            
            (820,000
            )
            
            1.00Balance
                as of December 31, 2005
            
            
            -
            
            $
            -





Certain
      detachable stock warrants have been granted related to convertible debentures
      discussed in Note 11 - Convertible Debentures.





The
      following table summarizes the Company’s detachable stock warrant
      activities:





Number
                of
              Warrants
            
            Exercise
                PriceBalance
                as of September 10, 2002
            
            
            -
            
            $
            -Warrants
                issued
            
            
            -
            
            
            -Warrants
                cancelled/expired
            
            
            -
            
            
            -Warrants
                exercised
            
            
            -
            
            
            -Balance
                as of December 31, 2002
            
            
            -
            
            
            -Warrants
                issued
            
            
            -
            
            
            -Warrants
                cancelled/expired
            
            
            -
            
            
            -Warrants
                exercised
            
            
            -
            
            
            -Balance
                as of December 31, 2003
            
            
            -
            
            
            -Warrants
                issued
            
            
            1,164,286
            
            
            0.70Warrants
                cancelled/expired
            
            
            -
            
            
            -Warrants
                exercised
            
            
            -
            
            
            -Balance
                as of December 31, 2004
            
            
            1,164,286
            
            
            0.70Warrants
                issued
            
            
            285,714
            
            
            0.70Warrants
                cancelled due to extension agreement
            
            
            (1,450,000
            )
            
            0.70Warrants
                replaced due to extension agreement
            
            
            2,537,500
            
            
            0.40Warrants
                issued
            
            
            941,250
            
            
            0.20Warrants
                cancelled/expired
            
            
            -
            
            
            -Balance
                as of December 31, 2005
            
            
            3,478,750
            
            
            0.35Warrants
                issued
            
            
            8,598,210
            
            
            0.21Warrants
                converted
            
            
            -
            
            
            -Warrants
                cancelled/expired
            
            
            -
            
            
            -Balance
                as of December 31, 2006
            
            
            12,076,960
            
            $
            0.25





F23




**NOTE
      5 - RELATED PARTY TRANSACTIONS**





**Officer’s
      Compensation**





Officer’s
      compensation for services was $601,520 and $935,434, and was included in general
      and administrative expenses-related party as of December 31, 2006 and 2005,
      respectively.





Two
      individuals who acted as consultants prior to becoming officers of the Company
      received a total of 1,521,532 shares of common stock valued at $1,125,934.
      This
      value was included as consulting services-related party in the statement of
      operations for the year ended December 31, 2004.





During
      fiscal year 2005, the Company issued 500,000 shares of common stock to its
      founder for services valued at $165,000 or $0.33 average price per
      share.





During
      fiscal year 2005, the Company recorded the vesting of 500,000 shares of a common
      stock award for an officer, for the net vested value of $185,000.





During
      fiscal year 2006, the Company issued 2,825,000 options to officers and related
      parties of the Company allowing them to purchase common stock at prices of
      $0.01
      and $1.00. During 2006, 1,503,864 options were vested. The value of the options
      was $576,338 and is included in the compensation reported above. Three of the
      related party employees also received 650,000 shares of stock valued at $260,000
      based on fair market value of the shares.





**Loans
      Payable - Related Party**





During
      2003, the Company received loans from related parties with a current balance
      of
      $36,419, bearing interest annually at 7%, in accordance with a loan agreement
      that the Company had executed. For the period from inception to December 30,
      2003, the Company had accrued interest expense of $29,706 related to this note.
      During 2004, the loan of $36,419 was forgiven and included in 2004 operating
      results. The reversal of related accrued interest of $29,706 was also included
      in 2004 operating results.




F24




During
      2006, the Company received two non-interest bearing convertible notes from
      an
      officer of the Company in the amounts of $78,192 and $1,793. Under the terms
      of
      the note, the officer has the option of converting the note into restricted
      shares of common stock at $0.20 per share. Subsequent to December 31, 2006
      the
      note was converted to 399,924 restricted shares. (See “Note 13 - Subsequent
      Events” of the Notes to the Financials for further details regarding this
      transaction.)




**Loan
      from Founder (2004)**




As
      of
      December 31, 2004 the Company had a loan payable totaling $683,726 to the CEO,
      consisting of principal of $600,000, which was due September 3, 2004, plus
      80,000 shares of common stock valued at $64,000, both payable to the CEO. Under
      the terms of the Note, interest will be paid at the rate of 10% annually.
      Accrued interest included in the loan balance of $683,726 is $19,726 as of
      December 31, 2004.




During
      the 1 st Quarter
      of 2005, the Company paid $160,000 to the CEO against this loan. On December
      5,
      2005, 700,000 shares of the Company’s common stock were issued to the CEO as
      payment to be applied against the balance of the loan. The price per share
      of
      the common stock was $0.33 per share or $231,000.




On
      December 31, 2005, the balance of the loan was $352,726, consisting of principal
      of $209,000, 80,000 shares of common stock valued at $64,000, and accrued
      interest of $79,726.





During
      the fiscal year ended December 31, 2006, the Company accrued interest expense
      of
      $39,770. The Company made payments of $81,000 against the open balance of the
      note leaving a balance of $331,496 at December 31, 2006, consisting of principal
      of $224,000, 80,000 shares of common stock valued at $64,000 and accrued
      interest of $43,496.





**Loan
      from Founder**  **(2005)**





On
      September 15, 2005, the CEO of the Company loaned the Company $80,000. As of
      July 20, 2006, the loan balance totaled $88,074, consisting of principal of
      $80,000 and accrued interest of $8,074. Under the terms of the loan, interest
      will be paid at the rate of 10% annually, with principal and interest payable
      on
      December 1, 2005. Unpaid principal and interest after December 1, 2005 is
      subject to interest of five percent (5%) in excess of the rate otherwise
      applicable to the unpaid balance. The principal portion of the loan was repaid
      with 400,000 shares of restricted stock issued on July 20, 2006 and $13,074
      remains outstanding in accrued interest.





**NOTE
      6 - SUMMARY OF LEGAL PROCEEDINGS**




An
      estimated liability of $775,000 and $1,020,000 for legal settlements was
      recorded as of December 31, 2006 and 2005, respectively. Other than as described
      below and in “Note 13 - Subsequent Events” of the Notes to the Financials, the
      Company is not currently involved in any legal proceedings that it deems to
      be
      material to its financial condition.




**Colla** **zo
      vs. Media and Entertainment.com** (Superior
      Court of CA, Los Angeles County - complaint filed March 22, 2004)





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




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





F25




In
      the
      above-described litigation brought by the Company against Mr. Collazo, the
      defendant denied the allegations, asserted 21 affirmative defenses and bought
      a
      cross-complaint against the Company. Mr. Collazo alleged that the Company
      breached the employment agreement with him because he had not been paid
      compensation due him, he had not received a percentage of gross profit earnings,
      the Company had not exercised a good faith effort to raise an additional
      $250,000 in capital, and he did not receive the equity promised him. The Company
      denied the allegations of the cross complaint and asserted 13 affirmative
      defenses. At a settlement conference on April 11, 2005, the Company agreed
      to
      issue 900,000 shares of common stock to Mr. Collazo as of September 20, 2002
      and
      to pay attorney fees of $120,000. The Company also agreed to issue 900,000
      shares of common stock to Mr. Nana Yalley, who was then an officer and current
      shareholder, as well as an equal partner of Mr. Collazo in Nexcode. The shares
      of common stock were valued as of the settlement date, and accordingly, 900,000
      shares of common stock, as well as, $120,000 of attorney fees, were charged
      as
      expenses in 2004. The settlement was not finalized by June 10, 2005; therefore,
      Mr. Collazo could have exercised, at his option, the right to enforce the
      settlement agreement for the issuance of the 900,000 shares of the Company’s
      stock to him and the payment of his attorneys’ fees or the issuance of 200,000
      shares of stock to his attorney in lieu of payment.





On
      March
      16, 2006, the Company issued 900,000 restricted shares valued at $450,000 to
      Mr.
      Collazo in settlement of this matter. However, this matter remains unresolved,
      as Mr. Collazo is seeking to have the Company reissue the 900,000 shares without
      restrictions.





On
      May 4,
      2006, the Court relieved Mr. Collazo’s former attorneys from their
      representation of Mr. Collazo in this action as a result of a dispute between
      them.  In an attempt to force the Company to reissue without
      restrictions the 900,000 restricted shares already issued to
      him, Mr. Collazo, through his new attorneys, moved the Court to
      enforce the terms of the April 11, 2005 settlement agreement, wherein
      the Company agreed to issue the 900,000 shares to Mr. Collazo as of
      September 20, 2002.  The motion was heard, and the Court ordered the
      Company to reissue the 900,000 shares to Mr. Collazo as of
      September 20, 2002 without restrictions.





On
      July
      7, 2006, Mr. Collazo’s former attorneys, Wilshire Palisades Law Group, P.C.,
      filed an attorney lien on any and all judgments rendered in favor of Mr.
      Collazo.  Under advisement of counsel, the Company has not reissued the
      900,000 shares, nor has it made any additional payments to Mr. Collazo. As
      of the
      date of this report, no further action has been taken in this
      matter.





**Yellowbrix,
      Inc. vs. Media and Entertainment.com** (Superior
      Court of CA, Los Angeles County - complaint filed September 16,
      2004)





Yellowbrix,
      Inc. filed a collection suit against Media and Entertainment.com regarding
      an
      alleged contract authorized by the former CEO of Media and Entertainment.com.
      The pending lawsuit amount in dispute is $19,800, which was expensed in general
      and administrative expense in 2004 and accrued within accounts payable of the
      Company as of the
      fiscal years ended December 31, 2006 and 2005 .





On
      July
      25, 2006, the Company learned that a judgment had been entered against it in
      this matter on February 15, 2006. The judgment amount included the $19,800
      in
      controversy, plus $3,000 in attorney fees. As of the
      date
      of this report ,
      Yellowbrix has not sought to enforce the judgment.





**Dell
      Marketing, LP vs. Winsonic Holdings, Ltd.** (District Court of Travis County, Texas - complaint filed December 13,
      2004)





On
      or
      about April 17, 2006, the Company was notified of a default judgment rendered
      against it in a collection suit in Travis County, Texas in the amount of
      $474,285. An additional charge of $90,000 in attorney fees was entered in the
      judgment; however, the Company is negotiating a forgiveness of the attorney
      fees
      based on timely payment of the judgment. The $474,285 in dispute was expensed
      in
      2005 and accrued within accounts payable of the Company as of December 31,
      2006.
      The $90,000 in attorney fees has also been expensed and accrued.




F26





On
      July
      27, 2006, the Company received notice that the judgment had been domesticated
      in
      the state of Georgia as of July 21, 2006. As of the date of this report, no
      significant action has been taken in this matter.





**Netscaler
      Inc. vs. Winsonic Holdings, Ltd.** (Superior
      Court of CA, Los Angeles County - complaint filed May 16, 2005)





The
      disputed amount of $75,000 in this collection lawsuit was expensed as a general
      and administrative expense in 2004 and accrued within accounts payable as of
      September 30, 2006 and 2005. Pursuant to a Stipulation for Entry of Judgment,
      the Company agreed to pay the sum of $75,000 in three (3) installment payments
      of $25,000, commencing in June 2006, in exchange for the dismissal of the
      action. The stipulation also provided that, in the event of a breach by the
      Company, plaintiff could enforce the entire amount sought in the complaint
      -i.e., $100,769. As of December 31, 2006, the Company has accrued an additional
      $25,000 accounts payable to reflect the breach.





On
      August
      15, 2006, Netscaler filed a declaration to set aside the dismissal and to enter
      judgment in the amount of $100,769 against the Company pursuant to the
      Stipulation for Entry of Judgment. As of the date of this report, no further
      action has been taken in this matter.





**Attorney
      Collection Services vs. Winsonic Holdings, Ltd.** (Superior
      Court of CA, Los Angeles County - complaint filed June 30, 2004)





The
      disputed amount of $25,000 in this collection lawsuit was expensed as a general
      and administrative expense in 2005 and accrued within accounts payable as of
      the
      fiscal years ended December 31, 2006 and 2005. On
      September 15, 2006, this matter was dismissed by the court; however, Plaintiff
      has indicated that it will either file a Motion to Set Aside the Dismissal
      or
      bring a new action. As of the
      date
      of this report ,
      no
      further action has been taken in this matter.





**Crown
      Office Suites, Inc. vs. Winsonic Digital Media Group, Ltd.** (State
      Court of Cobb County, Georgia - complaint filed November 23, 2005)





This
      is
      an action for breach of a lease agreement against the Company. The disputed
      amount of $50,193 was expensed as a general and administrative expense in 2005
      and accrued within accounts payable of the Company as of December 31, 2006.
      On
      April 5, 2006, Crown filed a motion to change venue from Cobb County to Fulton
      County. On April 18, 2006, the Company, through its attorneys, filed an Answer
      contesting service, a Motion to Open Default and a Brief in Support of the
      Motion to Open Default. As
      of the
      date
      of this report ,
      no
      significant action has been taken in this matter.




**Lefkowitz
      vs. Winsonic Digital Media Group, Ltd.** (Superior
      Court of CA, Los Angeles County - complaint filed May 18, 2006)





This
      is
      an action for breach of contract brought by David Lefkowitz, Caesar Collazo’s
      attorney in Collazo vs. Media and Entertainment.com. Mr. Lefkowitz seeks payment
      of $125,000 in attorney fees, which he asserts he is entitled to pursuant to
      the
      Settlement Agreement of April 11, 2005 in the Collazo matter. The disputed
      amount was charged as expenses in 2004. (For further background information
      on
      this matter, see “Item 3. Legal Proceedings, Collazo vs. Media and
      Entertainment.com.”)




On
      June
      22, 2006, the Company filed its answer to the unverified complaint denying
      each
      allegation and asserting various affirmative defenses, including, failure to
      state a claim, waiver, ratification, etc. On July 17, 2006, Mr. Lefkowitz filed
      an offer to compromise requesting that the Company agree to a judgment in his
      favor in the amount of $120,000. (See “Note 13 - Subsequent Events” of the Notes
      to the Financials for further details regarding this lawsuit.)




F27




**Yalley
      vs. Winsonic Digital Media Group, Ltd.** (District
      Court of Nevada, Clark County - complaint filed October 13, 2006)





This
      is
      an action for declaratory and injunctive relief brought by Nana Yalley, a former
      director and officer of the Company, requesting that the court grant a
      declaratory judgment ordering the Company and its stock transfer agent to remove
      the restrictive legends from 2,724,998 restricted shares of common stock of
      the
      Company owned by Mr. Yalley, pursuant to Rule 144(k) of the Securities Act
      of
      1993. In addition to the foregoing, Mr. Yalley seeks an indeterminate amount
      of
      attorneys’ fees and costs. The Company and its stock transfer agent were each
      served with a summons and complaint on October 17, 2006.





On
      November 7, 2006, the Company, through local counsel in the State of Nevada,
      filed responses to the complaint on behalf of itself and the stock transfer
      agent, whom the Company has agreed to indemnify in this action. On November
      13,
      2006, Mr. Yalley filed a Motion for Partial Summary Judgment; Ex Parte Request
      for Order Shortening Time, wherein he requested that the Court hear his motion
      as soon as possible, and order the Company to remove the restrictive legends
      from his shares. The Company filed an opposition to this request soon thereafter
      and Mr. Yalley filed a reply to the opposition on December 13, 2006. During
      the
      hearing which was scheduled for December 19, 2006, the Court ordered the Company
      to remove the restrictive legends from Mr. Yalley’s shares, but did not set any
      particular deadline to do so. (See “Note 13 - Subsequent Events” of the Notes to
      the Financials for further details regarding this lawsuit.)





**Eric
      Young vs. Winsonic Digital Media Group, Ltd.**





On
      November 29, 2006, the Company was notified by legal counsel for Mr. Eric Young,
      a former financial officer of the Company, that Mr. Young would be seeking
      compensation and severance for accounting services rendered during 2005 and
      2006 **.** (See
      “Note 13 - Subsequent Events” of the Notes to the Financials for further details
      regarding this lawsuit.)





**NOTE
      7 - GOING CONCERN**





These
      financial statements have been prepared in accordance with generally accepted
      accounting principles applicable to a going concern, which contemplates the
      realization of assets and the satisfaction of liabilities and commitments in
      the
      normal course of business. As of December 31, 2006, the Company has recognized
      $817,000 of revenues, and has had accumulated losses of approximately
      $20,694,000 from operations since inception. The Company’s ability to continue
      as a going concern is contingent upon the successful completion of additional
      financing arrangements and its ability to achieve and maintain profitable
      operations. Management plans to raise equity capital to finance the operating
      and capital requirements of the Company. Amounts raised will be used for further
      development of the Company’s products, to provide financing for marketing and
      promotion, to secure additional property and equipment, and for other working
      capital purposes. While the Company is expending its best efforts to achieve
      the
      above plans, there is no assurance that any such activity will generate funds
      that will be available for operations. The Company’s financial statements do not
      include any adjustments that might result from the outcome of this
      uncertainty.





**NOTE
      8 - COMMITMENTS AND CONTINGENCIES**





**EMPLOYMENT
      AGREEMENTS**





On
      October 8, 2004, the Company entered into binding offer letters with Winston
      Johnson, as Chairman and CEO, Jon Jannotta, as President and Nana Yalley, as
      Executive Vice President. Under the terms of employment, Messrs. Johnson,
      Jannotta and Yalley were to receive base salaries of $290,000, $270,000 and
      $270,000 per annum, respectively, with $7,000 per month deferred until the
      next
      funding occurs or January 1, 2005, whichever occurred first. Each officer was
      eligible for annual incentive bonuses based on performance. The agreements
      were
      terminable at will with or without cause (as defined in the respective offer
      letters).




The
      employment agreements of October 8, 2004 also provided for the grant of an
      aggregate of 3,000,000 incentive or non-statutory stock options for the three
      executive officers to purchase 1,000,000 shares each of common stock for $1.00
      per share. These options primarily vest equally over a twelve-month period
      effective with date of the employment agreement.





F28




On
      December 9, 2005, Mr. Yalley entered into a separation agreement with the
      Company, which
      nullified and voided his October 8, 2004 employment agreement with the
      Company .
      Pursuant to the separation agreement, Mr. Yalley agreed to a reduction to
      500,000 stock options in lieu of the 1,000,000 options he was to receive under
      the 2004 agreement.





Additionally,
      on June 13, 2006, Jon Jannotta resigned from his position as President of the
      Company; however, he continued to serve as a member of the Board of Directors
      of
      the Company until his resignation from the Board on February 7, 2007. Mr.
      Jannotta has agreed to forgive all accrued salary as well as the 1,000,000
      options he had received pursuant to the employment agreement. (See “Item 12 -
      Certain Relationships and Related Transactions” for further
      details.)





On
      November 5, 2005, the Company entered into a binding offer letter with Eric
      Young, as Chief Operating Officer and Chief Financial Officer. Under the terms
      of his employment, Mr. Young was to receive a base salary of $200,000 per annum,
      with $5,000 per month deferred until the next funding occurs or January 1,
      2006,
      whichever occurred first. Mr. Young was eligible for an annual incentive bonus
      based on performance. The agreement was terminable at will with or without
      cause
      (as defined therein). Mr. Young received non-qualified incentive stock options
      to purchase 500,000 shares of common stock at an exercise price of $1.00 per
      share in accordance with the Company's Employee Stock Option Plan. 10% of the
      options vested immediately upon the signing of the employment agreement and
      the
      remaining options were to vest at the rate of 1/12th per month for 12 months.
      In
      addition, upon his execution of the employment agreement, Mr. Young received
      additional options to purchase 750,000 shares of common stock of the Company
      valued at $438,883, at a purchase price of $0.01 per share, in which 1/3 vested
      upon the signing of the employment agreement, 1/3 vested at the closing of
      the
      next round of financing or January 1, 2006, whichever occurred earlier, and
      the
      remaining 1/3 would vest when the Company’s Common Stock resumed trading on the
      OTCBB. As was disclosed on the Company’s Form 8-K filed on August 24, 2006, Mr.
      Young resigned on August 1, 2006 to pursue other opportunities. The Company
      is
      currently in litigation with Mr. Young concerning the number of options that
      vested upon his resignation and the expiration of the exercise period of said
      options.





Effective
      June 6, 2006, Joseph Morris succeeded Eric Young as Chief Operating Officer
      of the Company. Previously, Mr. Morris served as Chief Operating
      Officer of AI, which was acquired on April 18, 2006.  Mr. Morris' base
      salary is $150,000 per annum. As an employment incentive, Mr. Morris was granted
      stock options to purchase 50,000 shares of the Company’s Common Stock valued at
      $53,329,at an
      exercise price of $0.01, of which 1/3 vested immediately upon the signing of
      the
      Employment Agreements, 1/3 at the closing of the next round of funding, and
      the
      remaining 1/3 when the Company’s Common Stock resumes trading on the OTCBB. Additionally,
      Mr. Morris was granted stock options to purchase 100,000 of the Company's Common
      Stock at an average price of $1.00 per share, of which 10% vested immediately
      upon signing the employment agreement and the remaining 90% will vest at the
      rate of 1/12 th per
      month for twelve months.





Effective
      August 8, 2006, Jeffrey L. Burke succeeded Mr. Yalley as Executive Vice
      President of the Company. Mr. Burke's base salary is $270,000 per annum. As
      an
      employment incentive, Mr. Burke was granted stock options to purchase 750,000
      shares of the Company’s Common Stock valued at $481,492, at an
      exercise price of $0.01, of which 1/3 vested immediately upon the signing of
      the
      Employment Agreements, 1/3 at the closing of the next round of funding, and
      the
      remaining 1/3 when the Company’s Common Stock resumes trading on the OTCBB.
      Additionally, Mr.
      Burke
      was granted options to purchase 500,000 of the Company's Common Stock at an
      average price of $1.00 per share, of which 10% vested immediately upon signing
      the employment agreement and the remaining 90% will vest at the rate of
      1/12 th per
      month for twelve months.





Options
      granted to officers of the Company beginning September 10, 2002 were treated
      in
      accordance with APB Opinion No. 25, “Accounting for Stock Issued to Employees.”
Under APB 25, if the exercise price of the Company’s employee stock options is
      equal to or greater than the market price of the underlying stock on the date
      of
      the grant, no compensation expense is recognized. . For stock options and
      warrants issued as compensation and reported in periods beginning after December
      15, 2005, the Company applies SFAS No. 123(R), “Share-Based Payment,” which
      requires the recognition of compensation cost based upon the fair value of
      stock
      options at the grant date (using option pricing models), and recognizing the
      cost over the period during which the services are provided (vesting period).
      (See “Note 2 - Summary of Significant Accounting Policies,” for further details
      regarding stock options issued to employees of the Company.)





F29




In
      addition to the employment agreements with the officers and directors, the
      Company also signed employment agreements with 48 other employees. Under the
      terms of these agreements, the Company has committed to compensation expenses
      of
      approximately $4,075,000, of which $956,000 will be deferred until the Company
      has completed its next round of financing and its common stock is traded on
      the
      OTCBB.




During
        fiscal year 2006, the Company issued 2,875,000 options to these employees,
        allowing them to purchase common stock at prices of $0.01 and $1.00. During
        2006, 2,554,641 options vested, which were valued at $554,023.





**SERVICE
      AGREEMENTS**





***Interconnection
      Agreement with BellSouth Telecommunications, Inc*** *.*





On
      September 27, 2006, the Company executed an Interconnection Agreement with
      BellSouth Telecommunications, Inc. (“BellSouth”). The agreement is effective for
      a period of five years and shall apply to the BellSouth territory in the State
      of Georgia. The execution of this agreement will allow the Company to (1)
      interconnect with BellSouth at the Winsonic network located at 55 Marietta
      Street in Atlanta, Georgia to provide local, long distance or other network
      services to its customers; (2) collocate with BellSouth in its central offices
      to access unbundled services at discounted rates and provide them to the
      Company’s customers at its tariffed rates; (3) gain nondiscriminatory access to
      any pole, duct, conduit, or right-of-way owned or controlled by Bellsouth;
      and
      (4) resell services from the BellSouth Resale Tariff, which includes most local
      services, private line services and connection charges. Additionally, the
      Company’s customers can be listed in the BellSouth telephone directory and have
      access to Bellsouth’s operator services (0), directory assistance (411) and
      emergency services (911).





***Consulting
      Contracts***





During
      the first quarter of 2006, the Company engaged a financial consultant to assist
      management with accounting and reporting issues. The contract included an hourly
      fee of $100 per hour, as well as, warrants to purchase up to 150,000 shares
      of
      the Company’s restricted Common Stock at $0.28 per share, based upon the
      completion of certain milestones. Additionally, during the first quarter, the
      Company contracted with three consultants to perform services. The Company
      has
      issued 125,000 options, exercisable at $0.01 per share to one of the consultants
      as consideration for financial planning services rendered. (The options were
      subsequently converted during the third quarter). 150,000 warrants were also
      issued, exercisable at $0.01 per share for services performed in assisting
      the
      Company in locating and securing office space under favorable terms; and 10,000
      warrants exercisable at $0.01 were issued to a financial consultant for services
      rendered in assisting with accounting matters. The Company has recorded an
      expense of $130,106, based upon the fair market value of the vested warrants.





During
      the second quarter of 2006, the Company entered into consulting agreements
      with
      three contractors. The first agreement was executed on April 12, 2006 between
      the Company and a financial consultant, who was engaged to assist the Company
      with its accounting and reporting issues. The contract included an hourly fee
      of
      $100 per hour, as well as, warrants to purchase up to 25,000 shares of the
      Company’s restricted Common Stock at $0.50 per share, based upon the completion
      of certain milestones. The milestones were accomplished by September 30, 2006,
      and the Company has accrued expense of $9,359 based upon the fair market value
      of the vested warrants. The second agreement, which was executed on May 26,
      2006
      for strategic and long-term financial advisory services, provided for the
      issuance of 185,000 shares of common stock of the Company. The agreement had
      a
      three-month term, and the Company issued the shares to the consultant on August
      23, 2006. The shares, when issued were valued at the market price of the
      Company’s stock, at the date of the agreement, in the amount of $48,100, ($0.26
      per share) of which the Company recognized consulting expenses of $19,867 during
      the second quarter and the remaining balance of $28,233 in the third quarter.
      (See “Item 5 - Market for Common Equity and Related Stockholder Matters” for
      further details.) The third agreement was executed on June 12, 2006 between
      the
      Company and Dennis James for switch management and consulting services. The
      agreement has an indefinite term; but can be terminated by either party upon
      30
      days written notice. Additionally, it provides for a minimum of ten (10) hours
      per week and includes an hourly fee of $25.00.





F30




During
      the third quarter of 2006, the Company entered into three consulting agreements.
      The first agreement was executed on July 28, 2006 for business development
      and
      financial advisory services in exchange for 150,000 shares of the Company’s
      Common Stock. The agreement has a one year term. The second agreement, which
      was
      executed on August 1, 2006 for strategic and long-term financial advisory
      services, has a six-month term and provides for the issuance of 60,000 shares
      of
      the Company’s Common Stock. To date, the stock has not been issued to the
      consultant. Also during the third quarter, the Company issued 75,000 shares
      of
      common stock and a warrant to purchase 50,000 shares of common stock at $0.28
      per share as consideration for consulting services rendered during 2006. The
      warrants and stock have been included in selling, general and administrative
      expense for the third quarter, $155,110 being charged to expense.





On
      October 17, 2006, the Company entered into a consulting agreement with Coral
      Capital Partners, in which Coral agreed to provide various reports and opinions
      on a number of issues, including the merger between Winsonic Holdings, Ltd.
      and
      Winsonic Digital Cable Systems, Ltd. and Media and Entertainment, Inc. As
      compensation for the services provided, the Company agreed to compensate Coral
      Capital a fee equal to $75,000, of which included a note to Coral Capital for
      $60,000, as well as, the issuance of 40,000 shares of the Company’s Common Stock
      in lieu of the remaining $15,000 cash. The shares issued to Coral Capital
      Partners carry “piggy back” registration rights allowing their inclusion in the
      shares to be registered should an appropriate registration statement be planned.
      The agreement has an indefinite term; but can be terminated by either party
      upon
      written notice. Additionally, it provides for all reasonable out-of-pocket
      expenses limited to no more than $1,000 per month, unless approved in writing
      by
      the company. The stock was issued to the consultant on December 19, 2006.
      Additionally, during October, the Company retained the services of a software
      engineer to provide services and expertise in developing special applications
      for the Company. As part of his engagement, the Company agreed to issue 500,000
      shares of restricted stock to him. The obligation was recognized during the
      fourth quarter when the commitment was made and the expense, based upon the
      fair
      market value of the stock at the time of the issuance was included in the
      operating results. Finally, during December of 2006, the Company secured the
      services of one of the directors. As inducement to join the board of directors,
      the Company issued 150,000 shares of restricted common stock. The shares and
      options issued during the fourth quarter were included in the operations and
      the
      selling, general and administrative expenses were charged $301,000.





***Insurance
      Binder***





On
      November 3, 2006, the Company, through its broker/agent, Gaston &
Associates, entered into a Binder of Insurance with Beazley Insurance Company,
      Inc. for Director’s and Officer’s Liability Insurance. The total premium is
      $30,310. To facilitate payment, the Company has entered into a finance agreement
      with Premium Assignment Corporation, wherein, the Company agreed to a
      down-payment of $10,010, and ten monthly payments of $2,115.





**Network
      Operations and Office Lease Agreements**





***Centennial
      Tower Office Lease Agreement***





On
      October 12, 2005, the Company entered into a 132 month commercial lease
      agreement effective as of November 1, 2005 with Atlanta Centennial, LLC for
      approximately 9,415 square feet of rentable space. The space is located in
      Suite
      2600 on the 26 th floor of
      the Centennial Tower, located at 101 Marietta Street in Atlanta, Georgia and
      will be used as the Company’s corporate headquarters to house its executives and
      general, clerical and administrative personnel.




F31


Under
        the
        terms of the lease, the Company was obligated to make rental payments for
        the
        2006 fiscal year in the amount of $188,045. Thereafter, the Company is required
        to make annual rental payments to the landlord in the following
        amounts:




Year
      ending December 31,





2007
            
            $
            424,9422008
            
            $
            435,6592009
            
            $
            446,6462010
            
            $
            457,9312011
            
            $
            469,5602012
                through 2016
            
            $
            2,219,935




There
      is
      no option to renew this lease. Notwithstanding the foregoing, the monthly base
      rent was abated for 6 months following the commencement date of the lease,
      provided there is no default by the Company under the lease.





Concurrently
      with the execution of the Lease, the Company issued a Fixed Price Secured
      Convertible Note in the principal sum of $250,000 representing an increased
      security deposit requirement bearing simple interest at 9% per annum, payable
      monthly in arrears in cash or registered stock at the Company’s option, from
      December 1, 2005 through the earlier of (a) the maturity date, i.e., June 1,
      2006, (b) the prepayment date, i.e., the date on which the outstanding principal
      amount of the Note is repaid in full prior to the maturity date, or (c) the
      date
      on which the outstanding principal amount of the Note is automatically
      converted.





On
      October 12, 2005, the Company paid $16,476 as deposit on the office space.
      On
      December 14, 2005, the note was converted into 925,927 shares of the Company’s
      common stock valued at $250,000 or $0.27 per share.





The
      lease
      agreement was amended on February 23, 2006, to include expanded rental space
      of
      9,415 square feet, bringing the total rental square feet to 18,800.





***55
      Marietta Street Office Lease Agreements***





On
      May
      17, 2006, the Company entered into a Sublease Agreement with Rogers Telecom
      Inc., wherein the Company leased a portion of the 16 th floor of
      the building located at 55 Marietta Street, Atlanta, Georgia 30303. The lease
      commenced on June 1, 2006 and continues through April 29, 2007, the day before
      the due date of the master lease. The Company will use the space to house one
      of
      its telecom switches and to demonstrate the functionality of its telecom
      equipment. The space provides the Company exposure for the typical high-end
      automation and communication equipment. The Company is obligated to pay monthly
      rents of $8,397 per month through April 30, 2007.





Additionally,
      on June 22, 2006, the Company entered into a two-year lease agreement with
      JT
      Communications, LLC for the exclusive right to use a cabinet and the
      non-exclusive right to use the office space located on JT Communications’
premises on the 5 th floor of
      55 Marietta Street in Atlanta, Georgia. The term of the lease commenced on
      July
      1, 2006 and expires on June 30, 2008; however, it is subject to automatic
      renewals for a one-year periods on the same terms and conditions, unless the
      Company notifies JT Communications that it does not want to renew. Under the
      lease, the Company will make monthly rental payments in the amount of $1,350
      for
      the first year; $1,418 in the second year; and $1,488 in the third year of
      the
      lease.




On
      February 8, 2007, the Company entered into a direct lease agreement with Bank
      Building Limited Partnership, the original landlord to Rogers Telecom, for
      approximately 12,080 square feet of rentable space located at 55 Marietta Street
      in Atlanta, Georgia. This lease commences on May 1, 2007, two days after the
      expiration of the sublease between the Company and Rogers Telecom, and expires
      on April 30, 2017. However, the landlord has agreed to provide the Company
      with
      access to the premises for the limited purpose of making improvements. An
      improvement allowance of $123,000 has been provided to the Company, of which
      the
      unused portion after May 1, 2008 may be applied to base monthly rental at the
      Company’s sole option.





Upon
      execution of the lease, the Company remitted to the landlord a security deposit
      in the amount of $17,566 and first month’s rental payment in the amount of
      $8,778. Thereafter, the Company is obligated to make monthly rental payments
      in
      the amount of $8,778 from May 1, 2007 to February 28, 2008; $17,566 from March
      1, 2008 to April 30, 2012; and $19,127 from May 1, 2012 through termination.
      In
      addition to the monthly rent, the Company is responsible for its share of the
      operating expenses, utilities, taxes and other costs and expenses associated
      with the leased premises.




F32





The
      Company will use this space to operate our network operations, data center,
      broadcast controls, switch site and application development lab. In addition,
      the space shall be utilized by the Company to house its network services billing
      and provisioning departments and for training its current and future
      staff.





S **ubcontractor
      Master Consulting Agreement with CI2**





On
      December 10, 2004, the Company and CI2, Inc. (“CI2”) entered into a
      Subcontractor Master Consulting Agreement (the “SMCA”). A prior material
      relationship existed between the two parties because CI2 had entered into a
      Master Purchase and Services Agreement (the “MPSA”) with Winsonic Digital Cable
      Systems Network, Ltd. f/k/a Winsonic Holdings, Ltd., a now wholly owned
      subsidiary of the Company, dated May 5, 2004, which was prior to the Private
      Company's merger with the Company. The MPSA provided CI2 the ability to purchase
      and/or license various products and services for delivery and installation
      from
      the Company, to be used for CI2's own internal use and for resale.





Pursuant
      to the SMCA, CI2 will subcontract services to the Company through individual
      agreements. CI2 will compensate the Company in a manner consistent with the
      terms of the applicable agreements.





**Joint
      Marketing and Development Agreement**





On
      December 10, 2004, the Company and CI2 also entered into a Joint Marketing and
      Development Agreement (the “JMDA”). Pursuant to the JMDA, the Company and CI2
will cooperate in the development and testing of certain Company products set
      forth in the JMDA (the “Company Products”), which run on a combination of
      certain listed CI2 hardware and software (the “CI2 Products”) creating a
      modified product (the “Modified Product”). Each party will bear all costs and
      expenses associated with its activities under the JMDA.





The
      term
      of the JMDA commenced on December 10, 2004 and will remain in effect for two
      (2)
      years, unless earlier terminated by a party.





In
      addition, on December 10, 2004, the Company agreed to take over the obligations
      of the Company under the MPSA. Therefore, the MPSA was modified to replace
      the
      name of the contracting party, Winsonic Holdings, Ltd., to that of the Company.
      In addition, the MPSA was modified to extend the period in which CI2 may
      exercise its right of first refusal to purchase the networks for $9.7 million
      dollars as described in the MPSA for an additional ninety (90) days until
      February 1, 2005. While the option to purchase was not exercised by CI2, all
      other terms and conditions of the MPA remain in full force and effect.





**The
      Titan Network, LLC.**





On
      March
      1, 2005, the Company and The Titan Network, LLC (“Titan”) entered into a Letter
      of Agreement regarding venture financing, as well as business, financial and
      marketing consulting services to be provided by Titan to the Company for $20,000
      per month. As additional compensation, the Company agreed to grant Titan stock
      options to purchase 1 million shares of common stock of the Company. The options
      were exercisable at $0.75 per share for a period of seven years. The options
      were to vest in 10 equal monthly installments of 100,000 shares commencing
      on
      March 1, 2005. During 2005, the Company made one payment of $20,000 for services
      rendered. The agreement has been mutually discontinued with all terms considered
      null and void.





**PMG
      Media**





On
      March
      12, 2005, the Company and Proactive Media Group, Inc. d/b/a PMG Media entered
      into a Memorandum of Understanding (“MOU”). PMG Media provides high quality
      service in the area of Indoor and Outdoor Advertising Media anywhere in the
      U.S.
      in more than 500 markets. PMG Media was to provide the Company with outdoor
      advertising of all types of media, as well as indoor digital plasma advertising.
      PMG Media will enable the Company to reach its targeted markets via digital
      cable, satellite, broadband and fiber optic delivery platforms. The parties
      had
      planned to work on a revenue sharing model for the receipt of proceeds from
      subscriber fees, to be finalized in thirty days in a detailed formal agreement.
      No formal agreement between the two parties was completed, and the MOU has
      been
      considered null and void.





F33




**Lantern
      Hill Capital**





On
      March
      17, 2005, the Company entered into an agreement with Lantern Hill Capital,
      a
      management consultant firm, regarding consulting services to be provided to
      the
      Company for a two-year period primarily by James Anderson, a former director
      of
      the Company. Lantern Hill serves as a long-term financial advisor to the
      Company, including meeting and discussing the Company's operating strategy,
      assisting the Company in formulating strategic and financial plans and assisting
      in development of capitalization plans. Under the terms of the agreement, Mr.
      Anderson received for services rendered 150,000 shares of common stock valued
      at
      $105,000 or $0.70 per share on December 5, 2005.





**A.
      Scott Roderick Investments, LLC**





On
      March
      15, 2005, the Company and Winston Johnson entered into an Exchange Agreement
      with A. Scott Roderick Investments, LLC (“ASRI”), a creditor of WDCSN, a
      wholly-owned subsidiary of the Company. Winston Johnson, the Company’s CEO,
      assumed an obligation of $562,500 from the subsidiary to ASRI in exchange for
      750,000 shares of the Company’s common stock then held by Mr. Johnson, or an
      exchange price of $0.75 per share.





The
      750,000 shares were transferred by Mr. Johnson to ASRI pursuant to the
      Assumption of Liabilities and Escrow Agreement dated as of October 7, 2004,
      which was entered into by Mr. Johnson at the time of the merger of the
      subsidiary with Media and Entertainment.com, Inc. In consideration of the
      transfer of the shares to ASRI, A. Scott Roderick, the sole shareholder of
      ASRI,
      executed a general release in favor of the Company, the subsidiary and Mr.
      Johnson.





On
      December 5, 2005, the Company issued 750,000 shares of its common stock shares
      to Mr. Roderick in satisfaction of the obligation.





**Scott
      Roderick**





On
      September 27, 2005, the Company entered into an agreement with Scott Roderick,
      a
      consultant for development-stage companies, to provide consulting services
      to
      the Company for a period of ninety days, including assistance in formulating
      strategic and financial planning objectives, assistance in the development
      of
      capitalization plans, and financial advisement to the Company. On December
      5,
      2005, Mr. Roderick was issued 150,000 shares of the Company’s common stock
      valued at $72,000 or $0.48 per share for services rendered.





**Richard
      Watteyne**





On
      September 27, 2005, the Company entered into an agreement with Richard Watteyne
      for business development, management and financial consulting services for
      a
      period of forty-five days. On December 5, 2005, Mr. Watteyne was issued 75,000
      shares of the Company’s common stock valued at $36,000 or $0.48 per share for
      services rendered.





**NOTE
      9 - PROPERTY AND EQUIPMENT, NET**





The
      major
      classifications of property and equipment consist of the following as of
      December 31:





**2006**
            
            **2005**Computer
                Equipment
            
            $
            1,114,994
            
            $
            977,669Infrastructure
            
            
            158,400
            
            
            158,400Software
            
            
            89,970
            
            
            82,899Furniture
                & Fixtures
            
            
            84,503
            
            
            36,682Automobile
            
            
            74,631
            
            
            -Equipment
                & Tools
            
            
            44,935
            
            
            -Total
                Fixed Assets
            
            
            1,567,433
            
            
            1,255,650Less:
                Accumulated Depreciation
            
            
            (784,318
            )
            
            (614,194
            )Total
                Property and Equipment, Net
            
            $
            783,115
            
            $
            641,456





F34




In
      December 2005, the Company renegotiated its equipment purchase agreement and
      related Note Payable with Digital Service International (“DSI”). After receiving
      a $5,000 payment on the Note, and in exchange for the return pledged equipment,
      DSI agreed to forgive the remaining $842,000 of the Note Payable.





Depreciation
      expense for the years ended December 31, 2006 and 2005 was $162,622 and
      $344,720, respectively.





**NOTE
      10 - LOANS PAYABLE**





The
      Company had loans outstanding of $347,728 and $383,357 as of December 31, 2006
      and December 31, 2005, respectively, payable to certain individuals. Proceeds
      from these loans were used for working capital purposes. The following is a
      summary of the loans payable:




**Interest
                Rate**
            
            **Loans
                Payable**
            
            **December
                31****,**
              **2006**
            
            **December
                31,**
              **2005**Unstated
            
            
            The
                Company issued eight convertible promissory notes, due October 2005,
                convertible into shares of common stock at any time prior to maturity.
                During 2006, the Company and the creditors agreed to convert three
                of the
                notes into 6% convertible debenture with an attached warrant. The
                exchanged debentures and the warrants are both exercisable at $0.40
                per
                share. ( See Note 11 - Convertible Debentures). Currently five of
                the
                original notes are still are delinquent. No interest has been accrued
                upon
                the remaining notes.
            
            $
            111,000
            
            $
            198,5006.00%
            
            
            A
                loan consisting of principal of $108,000 with no stated interest
                rate,
                repayment terms or maturity date. Interest is imputed at 6% annually,
                based upon a 365-day calendar year. Accrued interest payable as of
                December 31, 2006 and 2005 is $19,723 and $6,780,
                respectively.
            
            
            127,723
            
            
            121,2616.00%
            
            
            A
                loan consisting of principal of $40,000 with no stated interest rate,
                repayment terms or maturity date. Interest is imputed at 6% annually,
                based upon a 365-day calendar year. Accrued interest payable as of
                December 31, 2006 and 2005 is $9,020 and $6,626,
                respectively.
            
            
            49,020
            
            
            46,626Unstated
            
            
            A
                loan consisting of principal of $16,970. The principal was repaid
                during
                2006 via an issuance of common stock to the creditor. The loan has
                no
                stated interest rate, repayment terms or maturity date. No interest
                was
                imputed during either 2006 or 2005.
            
            
            -
            
            
            16,970Unstated
            
            
            The
                Company issued a promissory note to a financial consultant in connection
                with services rendered advising the Company on public market issues.
                The
                note is non-interest bearing, with no repayment terms or maturity
                date. No
                interest was imputed during 2006..
            
            
            60,000
            
            
            -Total
                Loans Payable
            
            $
            347,743
            
            $
            383,357





Long
      Term
      Liabilities: Effective as of April 18, 2006, the Company acquired the net assets
      of AI, including long term liabilities of $131,901 The long term liabilities
      are
      due to an officer of AI representing cash he advanced to AI operations and
      the
      obligations for two vehicles purchased by AI. Following is a summary of AI’s
      long-term debt at December 31, 2006, with current maturities determined based
      upon the net reduction of debt arising from AI making the minimum agreed-to
      payments.




F35




**December
                31,****2006**15.25%
                loan payable to an officer for the purchase of a vehicle; monthly
                payments
                of $575 through August 2011, secured by the vehicle
                purchased.
            
            $
            23,12919.50%
                loan payable to an officer for the purchase of a vehicle;
                monthly payments of $897 through January 3, 2011, secured by the
                vehicle purchased.
            
            
            30,940Unsecured,
                interest free loan payable to an officer for various cash advances,
                expenses paid and assets transferred to AI by the creditor; payoff
                due on
                December 4, 2007; 6% interest to be paid on any outstanding balance
                as of
                December 4, 2007.
            
            
            80,950Total
                long term debt
            
            
            135,019Less:
                Current portion of long-term debt
            
            
            (90,197
            )Net
                Long Term Debt
            
            $
            44,822




Under
      the
      terms of the loans described above, AI is obligated to pay at least the
      following principal amounts in the years specified below:





**Year**
            
            **Amount**2007
            
            
            90,1972008
            
            
            10,7192009
            
            
            12,7962010
            
            
            14,4132011
            
            
            6,894Total
            
            $
            135,019




**NOTE
      11 - CONVERTIBLE DEBENTURES**





**2004/2005
      Agreements** :
      During
      December 2004 and January 2005, the Company received proceeds of $815,000 and
      $200,000, respectively, from Convertible Note and Warrant Purchase Agreements
      (“the 2004/2005 Agreements”). The offering was made to accredited investors. The
      Convertible Notes, including interest of 6% were due in December 2005 or upon
      the occurrence of certain events relating to potential changes in the capital
      structure of the Company. The conversion feature portion of the 2004/2005
      Agreements included the right of the note holder to convert the face value
      of
      the note into common stock of the Company at the lower of $0.70 per share or
      85%
      of the market value of the common stock (at the time of conversion). The
      2004/2005 Agreements also included a detachable warrant, which allowed the
      warrant holders to purchase shares of common stock of the Company at $0.70
      per
      share (potentially, 1,450,000 shares of common stock) through December
      2007.





On
      December 15, 2005, the maturity dates of the 2004/2005 Agreements were extended
      to June 30, 2006. The conversion feature portion of the amended 2004/2005
      Agreements included the right of the note holders to convert the face value
      of
      the notes into common stock of the Company at the lower of $0.40 per share
      or
      85% of the market value of the common stock at the time of conversion.
      Additionally, the amended 2004/2005 Agreements reduced the purchase price of
      the
      warrants to $0.40 per share.





During
      the third quarter of 2006, following the expiration of the extension of the
      maturity dates of the 2004/2005 Agreements (i.e., June 30, 2006), all but three
      of the note holders agreed to convert their notes, plus accrued interest, into
      common stock of the Company at the rate of $0.40 per share. One note holder
      has
      requested that he be repaid in cash. The Company has continued to calculate
      interest on the notes through December 31, 2006 and subsequently, up to the
      date
      of conversion (or in one case, repayment), which was determined to be the date
      that the note holders signed their conversion agreements. The Company has,
      based
      upon the notes and the accrued interest, issued a total of approximately
      2,153,011 shares of its restricted common stock.





F36




The
      transactions, to the extent that they are to be satisfied with common stock
      of
      the Company, would normally be included as equity obligations. However, as
      of
      December 31, 2006, due to the indeterminate number of shares which might be
      issued under the embedded host debt conversion feature of the note, the Company
      is required to record a liability relating to both the detachable warrant and
      the embedded convertible feature of the note (included in the current
      liabilities as “derivative liability”). As of December 31, 2006, the contingency
      in share pricing which caused the determinate share calculation was resolved
      with the final conversion agreements for all but two of the note holders. During
      2006, the Company transferred the derivative and warrant liabilities to paid-in
      capital. The following table summarizes the remaining embedded derivatives
      at
      December 31, 2006:




**December
                31****2006**
            
            **2005**Derivative
                liability
            
            $
            339,450
            
            $
            82,483Warrant
                liability
            
            
            300,420
            
            
            23,406Convertible
                debentures
            
            
            257,469
            
            
            1,095,114Subtotal
            
            
            897,339
            
            
            1,201,003Adjustment
                of derivative and warrant liability to fair value
            
            
            27,428
            
            
            970,185Less:
                Accretion of principal and interest related to convertible
                debentures
            
            
            90,233
            
            
            (1,156,188
            )Total
                Proceeds from convertible debentures
            
            
            1,015,000
            
            
            1,015,000Plus:
                Accrued interest
            
            
            103,673
            
            
            80,114Less:
                Notes and interest converted
            
            
            (861,204
            )
            
            -Total
                Convertible debentures
            
            
            257,469
            
            
            1,095,114Less:
                Current portion of convertible debentures
            
            
            (257,469
            )
            
            (1,095,114
            )Total
                Non-current Convertible Debentures
            
            $
            -
            
            $
            -





**2005/2006
      Debentures:** During
      the third quarter of 2005 and during 2006, the Company entered into a series
      of
      agreements with accredited investors, wherein the Company borrowed $1,835,064
      and issued convertible debentures with detachable warrants to the creditors.
      The
      debentures, which include interest of 6.0%, are due in 12 months, and are
      convertible into Company stock at $0.20 per share for notes issued for cash
      and
      $0.40 per share for notes issued to the five creditors converting the
      outstanding notes. Additionally, the creditors also received a warrant, which
      is
      exercisable for a period of three years and can be exercised at $0.20 (and
      $0.40
      per share for the converted notes). During the third quarter of 2005, the
      Company placed six convertible debentures ranging in value from $15,000 to
      $53,000, individually, and with a total principal amount of $188,250. During
      the
      fourth quarter of 2005, the debentures were converted into 590,000 restricted
      shares of common stock, and $118,000 in debentures was retired. At December
      31,
      2005, the balance of the notes outstanding was approximately $73,737 - which
      represented interest of $3,487 and principal of $70,250.





During
      2006, the Company continued to raise funds via issuance of convertible
      debentures under the same terms as the debentures issued during 2005. During
      2006, the Company raised $1,835,064 through the issuance of 123 debentures
      ranging in value from $1,000 to $100,000. During 2006, 40 of the investors
      elected to exercise the conversion feature of the notes and converted $632,477
      in principal plus accrued interest into 3,162,385 shares of restricted common
      stock.





At
      December 31, 2006, the Company has outstanding 79 convertible debentures
      (sharenotes). The total includes 74 notes exchanged for cash, 3 notes exchanged
      for short-term loans, 1 note exchanged for an account payable and 1 note issued
      as part of the acquisition of DV Photo. The combined notes represented a
      principal balance of $1,302,308.





F37




Additionally,
      the Company has issued detachable warrants which are attached to the convertible
      notes and provide the note holders with the right to subscribe to shares of
      restricted common stock at the $0.20 (and $0.40 for the warrants attached to
      the
      notes issued to the five creditors). The total shares available for issue under
      the terms of the warrants as of December 31, 2006 is 9,539,460 shares in
      exchange for investments of $2,011,642. The Warrants will expire during the
      period of July 5, 2008 through December 29, 2009.





The
      following table summarizes the outstanding notes and warrants:





**Convertible
                Notes**
            
            **Warrants****Summary
                  of 2005/2006 Debentures & Warrants**
            
            **Proceeds**
            
            **Shares**
            
            **Proceeds**
            
            **Shares**Proceeds
                received during third quarter of 2005
            
            $
            188,250
            
            
            941,250
            
            $
            -
            
            
            941,250Conversions
                during fourth quarter of 2005
            
            
            (118,000
            )
            
            (590,000
            )
            
            -
            
            
            -Total
                outstanding at December 31, 2005
            
            
            70,250
            
            
            351,250
            
            
            -
            
            
            941,250Proceeds
                received during 2006
            
            
            1,646,815
            
            
            8,234,075
            
            
            -
            
            
            8,234,075Accounts
                payable and loans converted to convertible notes
            
            
            176,577
            
            
            467,584
            
            
            -
            
            
            364,135Conversions
                during 2006
            
            
            (632,477
            )
            
            (3,162,385
            )
            
            -
            
            
            -Accrued
                Interest
            
            
            41,143
            
            
            212,110
            
            
            -
            
            
            -Total
                outstanding at December 31, 2006
            
            $
            1,302,308
            
            
            6,102,634
            
            $
            -
            
            
            9,539,460





The
      Company has determined that the Notes contain a beneficial conversion feature
      and qualify for treatment under Emerging Issue Task Force No. 00-27. The
      estimated fair value of the detachable warrants of $3,890,310 has been
      determined using Black-Scholes option pricing model under the following
      assumptions: stock price volatility ranging from 131% to 189%; risk free
      interest rate of 4.5%; dividend yield of 0%; and a three year term. The face
      amount of the Notes (i.e., $1,982,642) was proportionately allocated to the
      Notes and the Warrants in the amount of $702,953 and $1,269,863, respectively.
      The Notes proportionate allocation factor was then further allocated between
      the
      Notes and the beneficial conversion feature, which the entire remaining value
      of
      $702,953 was allocated to the beneficial conversion feature. The combined total
      value of the Warrants and the beneficial conversion feature amounting to
      $2,011,641 has been accounted for as a debt discount which is being amortized
      and treated as interest expense over the term of the Notes. For the year ended
      December 31, 2006, the Company amortized a total of $405,660. The discounts
      and
      amortization are summarized in the following table:





**December
                31,**
              **2006**
            
            **December
                31,**
              **2005**BCF
                discount to Paid in capital
            
            $
            (702,953
            )
            $
            (79,365
            )Warrant
                Discount to Paid in capital
            
            
            (1,248,688
            )
            
            (108,885
            )Proceeds
                from convertible debentures
            
            
            2,011,641
            
            
            188,250Subtotal
            
            
            60,000
            
            
            -Deduct
                value converted to common stock
            
            
            (734,250
            )
            
            (118,000
            )Total
                discount to accrete
            
            
            1,277,391
            
            
            70,250Interest
                expense on convertible debentures - Amortized
            
            
            (405,660
            )
            
            (24,038
            )Interest
                expense on convertible debentures - Accrued
            
            
            (41,864
            )
            
            (3,487
            )Convertible
                debt from acquisition not subject to accretion
            
            
            (60,000
            )
            
            -Total
                Current Liability
            
            $
            (507,524
            )
            $
            (27,525
            )





F38




**Defaults
      on Convertible Debentures**





As
      of
      June 30, 2006, and subsequently, the Company had several of their convertible
      notes mature without conversion or repayment. During the fourth quarter,
      nineteen note holders converted their notes and three notes totaling $230,000
      currently remain in default.




**NOTE
      12 - EQUITY INVESTMENT**




**Native
      American Television Network, Inc.**





On
      September 29, 2005, in accordance with a stock exchange agreement between the
      two parties, the Company issued 1,670,000 shares of common stock to NATVN and
      the Company acquired 4,000,000 shares of stock in NATVN, representing 27% of
      the
      NATVN equity. This transaction was recorded in accordance with Staff Accounting
      Bulletin (SAB) Topic 5(g), which states that the transfer of non-monetary assets
      by shareholders should be recorded at the transferor’s historical cost basis as
      determined under Generally Accepted Accounting Principals (GAAP). The President
      of the Company and a Company shareholder were also shareholders and co-founders
      in NATVN, owning approximately 9% of the total outstanding equity in
      NATVN.  Because NATVN is an early development stage company, the historical
      cost, and therefore, initial value of the non-monetary asset received is valued
      at zero as of December 31, 2006 and 2005.




The
      expected value of the investment to the Company is based upon the promising
      mutually beneficial opportunities that exist between the Company, NATVN and
      a
      significant number of potential digital-services subscribers within the American
      Indian community; however, there are currently no signed agreements in place.
      NATVN is currently negotiating with representatives of the potential
      digital-services subscribers; however, contractual agreements with the potential
      subscribers have not been secured. Without the agreement in place, the final
      number of subscribers to be serviced, the actual services to be provided (i.e.
      cable television, digital television, advertising revenues, telephony services,
      and high-speed internet) and the prices to be charged for the services are
      not
      certain.





NATVN,
      based in Albuquerque, New Mexico, is a recently formed company that intends
      to
      launch the first Western Hemisphere, pan-tribal digital cable channel. The
      Company will provide to NATVN its nationwide distribution platform and technical
      support, expertise and personnel. NATVN will provide the Company with commercial
      airtime on a regularly scheduled program that offers air space to advertisers
      with the exception of paid programming or long form advertisements.




The
      investment in NATVN will be accounted for under the “equity” method. The equity
      method of accounting is used if the investor has the ability to significantly
      influence the investee’s financial and operating policies, or if an investor is
      accounting for an investment in a corporate joint venture, but holds less than
      50% of the investee. Under the equity method, an investment is initially
      recorded at cost. Thereafter, the carrying amount of the investment is increased
      for the investor’s proportionate share of the investee’s gains, or is reduced
      for the proportionate share of the investee’s losses or for distributions
      received from the investee. As of March 31, 2006, there were no significant
      operations commenced by NATVN.





**NOTE
      13 - SUBSEQUENT EVENTS**





**Convertible
      Notes and Other Financing Agreements**





During
      2007, the Company continued to raise funds via issuance of convertible
      debentures under the same terms as the debentures issued during 2005 and 2006.
      Through May 22, 2007, the Company raised $548,000 through the issuance of 23
      convertible debentures ranging in value from $5,000 to $250,000. The debentures
      have various due dates and provide for warrants totaling 1,965,000 shares.





F39




The
      Company also raised funds from another investor, due 6-27-07 in the amount
      of
      $40,000. The loan agreement provides for payment of the $40,000 and issuance
      of
      200,000 shares of stock.





In
      addition, the founder of the Company has raised capital and has loaned an
      additional $262,530 to the Company. As a condition of the capital raised, the
      Founder has assigned or committed to assign 2,068,333 of his personal shares.
      These shares are repayable by the Company to the Founder.





**Marketing
      Agreement with Point Source, LLC**





On
      February 6, 2007, the Company, Winsonic Diversity, and Point Source, LLC, a
      construction and engineering firm specializing in residential developments
      in
      the southeast region (“Point Source”), entered into a Marketing Agreement,
      wherein, Point Source was appointed by the Company as its non-exclusive
      marketing agent for a period of twenty (20) years.





Under
      the
      Agreement, Point Source will market the Company’s products and services to
      corporations and businesses using its network of affiliations with builders,
      developers, contractors, banks, accountants, lawyers, politicians and senior
      executives of corporations; and will reasonably ensure that, for all projects
      owned and managed by it for which the Company is selected and agrees to provide
      a particular product and/or service, the Company will be the exclusive provider
      of said product/service for that particular project. As consideration for its
      services, the Company agreed to pay to Point Source a twenty percent (20%)
      commission of the net profits from all sales referred by Point Source for the
      life of the service agreement between the Company and the referred customer.





**Service
      Agreements**





***Tytess
      Design and Development, Inc.***





On
      February 27, 2007, Tytess executed a design and construction agreement with
      a
      couple for the design and renovation of their 3200 square foot single-family
      home located in Lithonia, Georgia. The contract provides for a $119,016 payment
      to Tytess in accordance with a specific draw schedule.





***Automated
      Interiors, LLC***





During
      January and February of 2007, AI executed three agreements with three Georgia
      developers. Under these agreements, AI agreed to provide materials and labor
      for
      the construction and installation of various home automated entertainment and
      security systems, including phone lines, surround sound, key pads, motion and
      volume controls, etc. These agreements are valued at $137,239, and are payable
      to AI in accordance with various schedules identified by AI.





***Winsonic
      Diversity, LLC***





On
      February 15, 2007, Winsonic Diversity and Verizon Services Corporation
      (“Verizon”) executed a 2-year Construction Services Agreement, wherein Winsonic
      Diversity has agreed to serve as a general contractor for Verizon in the
      construction of facilities at various sites. This agreement will permit Verizon
      to employ the services of Winsonic Diversity on a nonexclusive basis for
      services identified in the agreement; however, Verizon
      may, by Authorization Letter, order additional services not listed in the
      agreement, at prices quoted to Verizon in writing.  Under
      the
      agreement, Verizon shall compensate Winsonic Diversity at the rates quoted
      by
      Winsonic Diversity for each specific service and/or skill set.





Additionally,
      on February 28, 2007, Winsonic Diversity executed a General Architectural and
      Engineering Services Agreement with Verizon to provide architectural &
engineering and site analysis services to Verizon for a period of one (1) year;
      however, said agreement is automatically renewable for subsequent one year
      periods at each annual anniversary. Under the agreement, Winsonic Diversity
      will
      design, engineer and construct cell sites on raw land, existing cell cite
      structures and roof top additions.





F40




**Legal
        Proceedings**


**Lefkowitz
      vs. Winsonic Digital Media Group, Ltd.** (Superior
      Court of CA, Los Angeles County - complaint filed May 18, 2006)





The
      January 26 th 2007
      mediation scheduled in this matter was canceled and the Court ordered the
      parties to either settle the claim or prepare for trail to be held some time
      in
      May 2007. The parties entered into a settlement agreement on May 4, 2007,
      wherein the Company agreed to issue 200,000 unrestricted shares to Plaintiff
      and
      $160,000 in installments, which would be discounted upon the sale of the stock.
      As of the date of this filing, the Company has not made any payments, nor has
      it
      issued any stock to the Plaintiff. Other than as described herein, no other
      significant events have occurred in this matter as of the date of this
      report.





**Yalley
      vs. Winsonic Digital Media Group, Ltd.** (District
      Court of Nevada, Clark County - complaint filed October 13, 2006)





In
      January of 2007, the restri ctions
      were removed from Mr. Yalley’s shares. On March 19, 2007, the Court granted Mr.
      Yalley’s motion to amend his complaint to include allegations of breach of
      contract, and the amended complaint was filed on March 20, 2007. The Company’s
      response was filed on April 6, 2007, and included a counter-claim for fraud
      against Mr. Yalley. The Company’s position is that Mr. Yalley deliberately
      withheld critical information from the Company during the negotiations of the
      reverse merger with Media and Entertainment.com and participated in fraudulent
      acts immediately preceding and after the merger. Other than as provided herein,
      no other significant events have occurred in this matter as of the date of
      this
      filing.





**Young
      v. Winsonic Digital Media Group** (Superior Court of Georgia, Fulton County - Complaint filed January 11,
      2006)





On
      January 16, 2007, the Company was served with a summons and complaint in a
      breach of contract action brought by Eric Young, a former Chief Financial
      Officer and Director of the Board of Directors of the Company. Mr. Young seeks
      damages totaling $354,784, which includes $103,934 in unpaid wages, $50,850
      in
      unpaid consulting fees and an additional $200,000 in severance payments. The
      Company filed its response and counterclaim on February 12, 2007, wherein,
      it
      asserted claims that included breach of fiduciary duty and breach of contract.
      As of the date of this filing no significant action has been taken in this
      matter.





**McKinney’s,
      Inc. vs. Winsonic Digital Media Group, Ltd.** (State
      Court of Fulton County, Georgia - Complaint filed March 21, 2007)





This
      is
      an action for breach of contract against the Company. The disputed amount of
      $56,527.34 was capitalized as computer equipment in 2006 and accrued within
      accounts payable of the Company as of December 31, 2006. The Company filed
      its
      answer to the complaint and defenses on May 15, 2007. As of the date of this
      filing no significant action has been taken in this matter.





**Network
      and Facilities Lease**





On
      February 8, 2007, the Company entered into a Telecom/Office Lease Agreement
      and
      First Amendment to Lease agreement with Bank Building Limited Partnership for
      approximately 12,080 square feet of rentable space located at 55 Marietta Street
      in Atlanta, Georgia.





The
      term
      of the lease shall commence on May 1, 2007 and expires on April 30, 2017.
      However, the landlord has agreed to provide the Company with access to the
      premises for the limited purpose of making improvements. An improvement
      allowance of $123,000 has been provided to the Company, of which the unused
      portion after May 1, 2008 may be applied to base monthly rental at the Company’s
      sole option.




Under
      this lease, the Company is required to remit to the landlord, upon execution
      of
      the lease, a security deposit in the amount of $17,566 and first month’s rental
      payment in the amount of $8,778. Thereafter, the Company is obligated to make
      monthly rental payments in the amount of $8,778 from May 1, 2007 to February
      28,
      2008; $17,566 from March 1, 2008 to April 30, 2012; and $19,127 from May 1,
      2012
      through termination. In addition to the monthly rent, the Company is responsible
      for its share of the operating expenses, utilities, taxes and other costs and
      expenses associated with the Leased Premises.




The
      Company will use this space to operate WDCSN’s
      network operations, data center, broadcast controls, switch site and application
      development lab. In addition, the space shall be utilized by the Company to
      house its network services billing and provisioning departments and for training
      its current and future staff.




F41