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

FORM 10-Q

[  x
      ]
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
    SECURITIES EXCHANGE ACT OF 1934For the quarterly three month period ended March 31, 2010[
        ]
    TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE
    EXCHANGE ACTFor the transition period from [     
    ] to [       ]


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Commission File Number: 000-50431

CHINA MEDIA GROUP CORPORATION
---------------------------------------------------------------------
(Exact name of small business issuer as specified in its charter)

Texas
    
    32-0034926-----------------------
    
    ----------------------(State or other jurisdiction of incorporation or organization)
    
    (I.R.S. Employer Identification No.)


1403 Wan Chai Commercial Center, 204 Johnston Road, Wanchai, Hong Kong
    --------------------------------------------------------------------------
    ----------------(Address of Company's principal executive offices)
    (Zip Code)


+011 852 3171 1208 (ext.222)
-------------------------------------------------
(Company's Telephone Number, Including Area Code)

Not Applicable
(Former Name, Former Address and Former Fiscal Year if Changed Since Last Report)

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


Indicate by check mark whether the registrant has submitted electronically and posted on
    its corporate Web site, if any, every Interactive Data File required to be submitted and
    posted pursuant to Rule 405 of Regulation S-T (§32.405 of this chapter) during the
    preceding 12 months (or for such shorter period that the registrant was required to submit
    and post such files).Yes [ x ]   No [    ]


Indicate by check mark whether the registrant is a large accelerated filer, an accelerated
    filer, a non-accelerated filer or a smaller reporting company. See the definitions of
    "large accelerated filer," "accelerated filer" and "small
    reporting company" in Rule 12b-2 of the Exchange Act.Large Accelerated Filer [    ]     Accelerated Filer[   
    ]       Non-Accelerated Filer [ ]      
    Smaller Reporting Company  [ x ]


SEC 1296 (03-10)
    Potential persons who are to respond to the collection of information contained in this
    form are not required to respond unless the form displays a currently valid OMB control
    number.


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


The number of common equity shares outstanding as of April 30, 2010 was 534,132,450 shares
    of Common Stock, no par value.


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FORWARD-LOOKING
    STATEMENTSThis quarterly report contains forward-looking statements as that term is defined in thePrivate Securities Litigation Reform Act of 1995. These statements relate to future
    events or our future financial performance. In some cases, you can identify
    forward-looking statements by terminology such as "may", "will",
    "should", "expects", "plans", "anticipates",
    "believes", "estimates", "predicts", "potential"
    or "continue" or the negative of these terms or other comparable terminology.
    These statements are only predictions and involve known and unknown risks, uncertainties
    and other factors, including the risks in the section entitled "Risk Factors",
    that may cause our or our industry's actual results, levels of activity, performance or
    achievements to be materially different from any future results, levels of activity,
    performance or achievements expressed or implied by these forward-looking statements.Although we believe that the expectations reflected in the forward-looking statements are
    reasonable, we cannot guarantee future results, levels of activity, performance or
    achievements. Except as required by applicable law, including the securities laws of the
    United States, we do not intend to update any of the forward-looking statements to conform
    these statements to actual results.Our financial statements are stated in United States Dollars and are prepared in
    accordance with United States Generally Accepted Accounting Principles. In this quarterly
    report, unless otherwise specified, all dollar amounts are expressed in United States
    Dollars.As used in this quarterly report, the terms "we", "us",
    "our", "CHMD", and "the Company" mean China Media Group
    Corporation and its subsidiaries unless otherwise indicated.


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PART
    I


Item 1.
    Condensed Consolidated Financial Statements


China Media Group Corporation

China Media Group Corporation
Condensed Consolidated Financial Statements
March 31, 2010
(Unaudited)
(Expressed In United States Dollars)

Condensed
    Consolidated Balance Sheets as of March 31, 2010 and December 31, 2009


Condensed Consolidated Statements of Operations for the three months period ended March
    31, 2010 and March 31, 2009Condensed Consolidated Statements of Stockholders' Equity for the years ended December 31,
    2009 and 2008, and for the three months period ended March 31, 2010


Condensed Consolidated Statements of Cash Flows for the three months periods ended March
    31, 2010 and 2009


Notes to Condensed Consolidated Financial Statements


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CHINA
    MEDIA GROUP CORPORATIONCONSOLIDATED
    BALANCE SHEETSAS
    OF MARCH 31, 2010 AND DECEMBER 31, 2009


March 31, 2010
    
    December 31, 2009(Unaudited)
    
    (Audited)US$
    
    US$Notes
    
    -----------------
    
    ---------------------ASSETSCurrent
    Assets:Cash and
    cash equivalents
    
    
    16,266
    
    32,860Prepayments,
    deposit and other receivables
    7
    
    247,078
    
    253,851---------------------
    
    ---------------------Total
    current assets
    
    
    263,344
    
    286,711Non-current
    assetsProperty
    and equipments, net
    8
    
    24,466
    
    27,606Advance
    payment for distribution rights
    9
    
    138,000
    
    138,000Goodwill
    10
    
    4,791,676
    
    4,791,676---------------------
    
    ---------------------4,954,142
    
    4,957,282---------------------
    
    ---------------------5,217,486
    
    5,243,993=============
    
    =============LIABILITIES
    AND STOCKHOLDERS' EQUITYCurrent
    liabilities:Other
    payables and accruals
    11
    
    732,386
    
    688,318Short
    term debt
    12
    
    99,645
    
    99,645Due to
    officer and directors
    13
    
    1,080,966
    
    1,083,686Due to a
    shareholder
    14
    
    299,628
    
    259,747---------------------
    
    ---------------------Total
    current liabilities
    
    
    2,212,625
    
    2,131,396---------------------
    
    ---------------------Long-term
    debts
    15
    
    2,000,000
    
    2,000,000Minority
    interest
    
    
    140,859
    
    147,975Stockholders'equity:Common
    stock, no par value, 85,000,000,000 shares authorized, 534,132,450 (2009: 534,132,450)
    shares issued and outstanding
    6
    
    7,428,902
    
    7,428,902Additional
    paid-in-capital
    
    
    1,786,047
    
    1,760,874Comprehensive
    income
    
    
    46,178
    
    44,148Accumulated
    deficits
    
    
    (8,397,125)
    
    (8,269,302)---------------------
    
    ---------------------Total
    stockholders' equity
    
    
    864,002
    
    964,622---------------------
    
    ---------------------5,217,486
    
    5,243,993============
    
    ============


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

F-3

---

CHINA
    MEDIA GROUP CORPORATIONCONSOLIDATED
    STATEMENTS OF OPERATIONSFOR
    THE THREE MONTHS ENDED MARCH 31, 2010 AND 2009(UNAUDITED)


For the Three Months ended March 31, 
    2010
    
    For the Three Months ended March 31, 
    2009US$
    
    US$--------------------
    
    --------------------Net revenue
    
    
    15,532
    
    11,608Cost of revenue
    
    
    (6,240)
    
    (4,860)--------------------
    
    --------------------Gross profits
    
    
    9,292
    
    6,748Operating expenses:Selling, general and
    administrative expenses
    
    
    101,740
    
    112,302--------------------
    
    --------------------(92,448)
    
    (105,554)Other income /
    (expenses)Interests income
    
    
    -
    
    -Interests expense
    
    
    (42,491)
    
    (42,517)--------------------
    
    --------------------Net loss before
    minority interest
    
    
    (134,939)
    
    (148,071)Minority interests
    
    
    7,116
    
    3,734--------------------
    
    --------------------Net loss
    
    
    (127,823)
    
    (144,337)Other comprehensive
    income:Foreign currency
    translation (loss) / gain
    
    
    2,030
    
    (448)--------------------
    
    --------------------(125,793)
    
    (144,785)============
    
    ============Basic and diluted loss
    per common share
    
    
    US$0.00
    
    US$0.00============
    
    ============Basic and diluted
    weighted average number of common shares *
    
    
    534,132,450
    
    534,132,450============
    
    ============


*
    Weighted average number of shares used to compute basic and diluted loss per share for the
    three months ended March 31, 2010 and 2009 are the same since the effect of dilutive
    securities are anti-dilutive.


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

F-4

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CHINA
    MEDIA GROUP CORPORATIONCONSOLIDATED
    STATEMENTS OF STOCKHOLDERS' EQUITYFOR
    THE YEARS ENDED DECEMBER 31, 2009 AND 2008AND
    FOR THE THREE MONTHS ENDED MARCH 31, 2010(UNAUDITED)


Additional
    
    
    
    TotalCommon stock
    paid-in
    Comprehensive
    Prepaid
    Accumulated
    stockholders'Shares
    Amount
    capital
    income
    Expenses
    Deficit
    equityUS$
    US$
    US$
    US$
    US$
    US$----------------
    ----------
    --------------
    ---------------
    -------------
    --------------
    ---------------Balance
    at January 1, 2008
    521,500,871
    7,428,902
    1,449,491
    20,766
    (293,401)
    (3,582,289)
    5,023,469Amortization
    of issuance of shares for services expenses
    -
    -
    -
    -
    293,401
    -
    293,401Amortization
    of options granted
    -
    -
    100,692
    -
    -
    -
    100,692Issuance
    of shares for extension of repayment of debenture
    2,631,579
    -
    50,000
    -
    -
    -
    50,000Issuance
    of shares for termination of ELOC Agreement
    10,000,000
    -
    60,000
    -
    -
    -
    60,000Comprehensive
    income
    -
    -
    -
    22,499
    -
    -
    22,499Net loss
    -
    -
    -
    -
    -
    (2,152,909)
    (2,152,909)----------------
    -----------
    --------------
    ---------------
    -------------
    --------------
    ---------------Balance
    at December 31, 2008 and January 1, 2009
    534,132,450
    7,428,902
    1,660,183
    43,265
    -
    (5,735,198)
    3,397,152Amortization
    of options granted
    -
    -
    100,691
    -
    -
    -
    100,691Comprehensive
    income
    -
    -
    -
    883
    -
    -
    883Net loss
    -
    -
    -
    -
    -
    (2,534,104)
    (2,534,104)----------------
    -----------
    --------------
    ---------------
    -------------
    --------------
    ---------------December
    31, 2009
    534,132,450
    7,428,902
    1, 760,874
    44,148
    -
    (8,269,302)
    964,622Amortization
    of options granted
    -
    -
    25,173
    -
    -
    -
    25,173Comprehensive
    income
    -
    -
    -
    2,030
    -
    -
    2,030Net loss
    -
    -
    -
    -
    -
    (127,823)
    (127,823)----------------
    -----------
    --------------
    ---------------
    -------------
    --------------
    ---------------March
    31, 2010
    534,132,450
    7,428,902
    1,786,047
    46,178
    -
    (8,397,125)
    864,002=========
    =======
    ========
    =========
    ========
    ========
    =========


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

F-5

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CHINA
    MEDIA GROUP CORPORATIONCONSOLIDATED
    STATEMENTS OF CASH FLOWSFOR
    THE THREE MONTHS ENDED MARCH 31, 2010 AND 2009(UNAUDITED)


For the Three Months ended March 31, 
    2010
    
    For the Three Months ended March 31, 
    2009US$
    
    US$--------------------
    
    --------------------Cash flows from
    operating activities:Net loss
    
    
    (127,823)
    
    (144,337)Adjustment to reconcile
    net loss to net cash used in operating activities:Depreciation
    
    
    3,140
    
    3,128Minority interest
    
    
    (7,116)
    
    (3,734)Option expenses for
    employee compensation
    
    
    25,173
    
    25,173(Increase) / decrease
    in assets and liabilities:Prepaid expenses,
    deposit and other receivables
    
    
    6,773
    
    (71,744)Account receivable
    
    
    -
    
    5,807Loan receivable
    
    
    -
    
    202Accounts payable and
    accrued expenses
    
    
    44,068
    
    56,193Due to related parties
    
    
    (2,720)
    
    (221,235)Due to a shareholder
    
    
    39,881
    
    300,000--------------------
    
    --------------------Net cash used in
    operating activities
    
    
    (18,624)
    
    (50,547)--------------------
    
    --------------------Cash flows from
    investing activities:Purchase of property
    and equipment
    
    
    -
    
    ---------------------
    
    --------------------Net cash used in
    investing activities
    
    
    -
    
    ---------------------
    
    --------------------Cash flows from
    financing activities :Issue of shares
    
    
    -
    
    ---------------------
    
    --------------------Net cash provided by
    financing activities
    
    
    -
    
    ---------------------
    
    --------------------Net decrease in cash
    and cash equivalents
    
    
    (18,624)
    
    (50,547)Effect of exchange rate
    changes on cash and cash equivalents
    
    
    2030
    
    (448)Cash and cash
    equivalents, beginning
    
    
    32,860
    
    67,764--------------------
    
    --------------------16,266
    
    16,769============
    
    ============Supplemental disclosure
    of cash flow information:Interests paid
    
    
    42,491
    
    42,517============
    
    ============Income tax paid
    
    
    -
    
    -============
    
    ============


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

F-6

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CHINA MEDIA GROUP CORPORATIONNOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS


NOTE 1
    ORGANIZATION


China Media Group Corporation (the "Company") is a Texas corporation,
    incorporated on October 1, 2002.


In January 2006, the Company established a wholly owned subsidiary Ren Ren Media Group
    Limited, a company incorporated in Hong Kong, as its operating company in Hong Kong. In
    March 2007, the Company acquired all the outstanding shares of Good World Investments
    Limited, a British Virgin Islands corporation that holds 50% of Beijing Ren Ren Health
    Culture Promotion Limited, a company incorporated in China in the advertising and media
    business in China.In May 2009, the Company established a 50/50 joint venture company, ATC Marketing Limited,
    which is to be in the business of marketing and distributing of convergent multimedia
    communication and internet devicesIn September 2009, the Company acquired a 51% interest in Premium Multimedia Sdn. Bhd.,
    which is to be in the business of outdoor media businessThe Group will be engaged in the media and advertising business, focusing mainly in China,
    and the marketing and distribution of convergent devices. During the period, the Company
    recorded sales in the provision of advertising services.


NOTE 2
    SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES & REALIZATION OF ASSETS


Basis of Presentation


These financial statements and related notes are presented in accordance with accounting
    principals generally accepted in the United States, and are expressed in U.S. dollars. The
    Company 's fiscal year end is December 31.


Principles of Consolidation


The consolidated financial statements for the three months ended March 31, 2010 include
    the financial statements of the Company, its wholly owned subsidiaries Ren Ren Media Group
    Limited, Good World Investments Limited, 51% subsidiary Premium Multimedia Sdn. Bhd., and
    two 50% subsidiaries, namely Beijing Ren Ren Health Culture Promotion Limited and ATC
    Marketing Limited. ATC Marketing Limited was established on the date of May 21, 2009 and
    Premium Multimedia Sdn. Bhd. was acquired on September 26, 2009. The Company consolidated
    both of these 50% ownership companies because of the sole largest shareholding status
    and/or controlling of the Board of Directors.


The results of subsidiaries acquired or sold during the year are consolidated from their
    effective dates of acquisition or through their effective dates of disposition,
    respectively.


All significant inter-company transactions and balances have been eliminated on
    consolidation.


F-7

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CHINA MEDIA GROUP CORPORATIONNOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS


NOTE 2
    SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES & REALIZATION OF ASSETS (Continued)


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 disclosure of contingent assets and liabilities at
    the date of the financial statements and the reported amounts of revenues and expenses
    during the reporting period. Actual results could differ from those estimates.


Net Income (Loss) per Share


Basic earnings per share were computed by dividing net loss by the weighted average number
    of shares of common stock outstanding during the year. Diluted loss per common share for
    the three months ended March 31,2010 and year ended December 31, 2009 are not presented as
    it would be anti-dilutive.


Fair Value Measurements and DisclosuresASC 820 "Fair Value Measurements and Disclosures" codified SFAS No. 107,
    "Disclosures about Fair Value of Financial Instruments". ASC 820 applies to all
    entities, transactions, and instruments that require or permit fair value measurements,
    with specific exceptions and qualifications. The Company is required to disclose estimated
    fair values of financial instruments. Unless otherwise indicated, the fair values of all
    reported assets and liabilities, which represent financial instruments, none of which are
    held for trading purposes, approximate are carrying values of such amounts.


Cash and Cash Equivalents


The Company considers all liquid investments with a maturity of three months or less from
    the date of purchase that are readily convertible into cash to be cash equivalents.


Inventories


Inventories are stated at the lower of cost or market, cost being determined on the
    first-in, first-out method. Inventories are written down if the estimated net realizable
    value is less than the recorded value.


Property & equipment


Property & equipment is stated at costs. Depreciation are computed using the
    straight-line method over the estimated economic useful lives of the related assets as
    follows:Leasehold improvements
    5 yearsFurniture, fixture and
    equipment
    5 years


Intangible Assets


The Company evaluates intangible assets for impairment, at least on an annual basis and
    whenever events or changes in circumstances indicate that the carrying value may not be
    recoverable from its estimated future cash flows. Recoverability of intangible assets,
    other long-lived assets and, goodwill is measured by comparing their net book value to the
    related projected undiscounted cash flows from these assets, considering a number of
    factors including past operating results, budgets, economic projections, market trends and
    product development cycles. If the net book value of the asset exceeds the related
    undiscounted cash flows, the asset is considered impaired, and a second test is performed
    to measure the amount of impairment loss.


F-8

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CHINA MEDIA GROUP CORPORATIONNOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS


NOTE 2
    SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES & REALIZATION OF ASSETS (Continued)


Income taxes


The Company accounts for income taxes under ASC 740 "Income Taxes" which
    codified SFAS 109, "Accounting for Income Taxes." Under the asset and liability
    method of ASC 740, deferred tax assets and liabilities are recognized for the future tax
    consequences attributable to differences between the financial statements carrying amounts
    of existing assets and liabilities and their respective tax bases. Deferred tax assets and
    liabilities are measured using enacted tax rates expected to apply to taxable income in
    the years in which those temporary differences are expected to be recovered or settled.
    Under ASC 740, the effect on deferred tax assets and liabilities of a change in tax rates
    is recognized in income in the period the enactment occurs. A valuation allowance is
    provided for certain deferred tax assets if it is more likely than not that the Company
    will not realize tax assets through future operations.


Stock-based compensationASC 718 "Compensation - Stock Compensation" codified SFAS No. 123 prescribes
    accounting and reporting standards for all stock-based payments award to employees,
    including employee stock options, restricted stock, employee stock purchase plans and
    stock appreciation rights. , may be classified as either equity or liabilities. The
    Company should determine if a present obligation to settle the share-based payment
    transaction in cash or other assets exists. A present obligation to settle in cash or
    other assets exists if: (a) the option to settle by issuing equity instruments
    lacks commercial substance or (b) the present obligation is implied because of an
    entity's past practices or stated policies. If a present obligation exists, the
    transaction should be recognized as a liability; otherwise, the transaction should be
    recognized as equity.The Company accounts for stock-based compensation issued to non-employees and consultants
    in accordance with the provisions of ASC 505-50 "Equity - Based Payments to
    Non-Employees" which codified SFAS 123 and the Emerging Issues Task Force consensus
    in Issue No. 96-18 ("EITF 96-18"), "Accounting for Equity Instruments that
    are Issued to Other Than Employees for Acquiring or in Conjunction with Selling, Goods or
    Services". Measurement of share-based payment transactions with non-employees shall
    be based on the fair value of whichever is more reliably measurable: (a) the goods
    or services received; or (b) the equity instruments issued. The fair value of the
    share-based payment transaction should be determined at the earlier of performance
    commitment date or performance completion date.


Employees' benefits and pension obligationsMandatory contributions of five percent of gross salary payments, subject to certain
    minimum and maximum levels, are made to defined contribution Mandatory Provident Fund
    schemes ("MPF schemes") pursuant to the laws of Hong Kong. These contributions
    are charged to expense in the same period as the related salary cost. Total contributions
    made by the Company to the MPF schemes were $542 and $2,159 for the 3 months ended March
    31, 2010 and for the year December 31, 2009, respectively.


Issuance of shares for serviceThe Company accounts for the issuance of equity instruments to acquire goods and services
    based on the fair value of the goods and services or the fair value of the equity
    instrument at the time of issuance, whichever is more reliably measurable.Revenue RecognitionThe Company recognizes its revenue in accordance with the Securities and Exchange
    Commissions ("SEC") Staff Accounting Bulletin No. 104, "Revenue Recognition
    in Financial Statements" ("SAB 104"). Revenue is recognized upon shipment,
    provided that evidence of an arrangement exists, title and risk of loss have passed to the
    customer, fees are fixed or determinable and collection of the related receivable is
    reasonably assured. Revenue is recorded net of estimated product returns, which is based
    upon the Company's return policy, sales agreements, management estimates of potential
    future product returns related to current period revenue, current economic trends, changes
    in customer composition and historical experience.


F-9

---

CHINA MEDIA GROUP CORPORATIONNOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS


NOTE 2
    SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES & REALIZATION OF ASSETS (Continued)


Foreign Currency Translation


The accounts of the Company's Hong Kong and China subsidiaries are maintained, in the Hong
    Kong dollars (HK) and Chinese Renminbi, respectively. Such financial statements are
    translated into U.S. Dollars (USD) in accordance with ASC 830 "Foreign Currency
    Translation" which codified Statement of Financial Accounts Standards
    ("SFAS") No. 52, "Foreign Currency Translation," with the respective
    currency as the functional currency. According to the Statement, all assets and
    liabilities were translated at the exchange rate on the balance sheet date, stockholder's
    equity are translated at the historical rates and statement of operations items are
    translated at the weighted average exchange rate for the year. The resulting translation
    adjustments are reported under other comprehensive income in accordance with SFAS No. 130,
    "Reporting Comprehensive Income. As of March 31, 2010, the comprehensive income was
    $46,178, and $42,817 in March 31, 2009, differences were immaterial.


Recent PronouncementsRecently Implemented Standards


ASC
    105, Generally Accepted Accounting Principles ("ASC 105") (formerly
    Statement of Financial Accounting Standards No. 168, The FASB Accounting Standards
    Codification and the Hierarchy of Generally Accepted Accounting Principles a replacement
    of FASB Statement No. 162) reorganized by topic existing accounting and reporting
    guidance issued by the Financial Accounting Standards Board ("FASB") into a
    single source of authoritative generally accepted accounting principles ("GAAP")
    to be applied by nongovernmental entities. All guidance contained in the Accounting
    Standards Codification ("ASC") carries an equal level of authority. Rules and
    interpretive releases of the Securities and Exchange Commission ("SEC") under
    authority of federal securities laws are also sources of authoritative GAAP for SEC
    registrants. Accordingly, all other accounting literature will be deemed
    "non-authoritative". ASC 105 is effective on a prospective basis for financial
    statements issued for interim and annual periods ending after September 15, 2009. The
    Company has implemented the guidance included in ASC 105 as of July 1, 2009. The
    implementation of this guidance changed the Company's references to GAAP authoritative
    guidance but did not impact the Company's financial position or results of operations.


ASC 855, Subsequent Events ("ASC 855") (formerly Statement of Financial
    Accounting Standards No. 165, Subsequent Events) includes guidance that was issued by
    the FASB in May 2009, and is consistent with current auditing standards in defining a
    subsequent event. Additionally, the guidance provides for disclosure regarding the
    existence and timing of a company's evaluation of its subsequent events. ASC 855 defines
    two types of subsequent events, "recognized" and "non-recognized".
    Recognized subsequent events provide additional evidence about conditions that existed at
    the date of the balance sheet and are required to be reflected in the financial
    statements. Non-recognized subsequent events provide evidence about conditions that did
    not exist at the date of the balance sheet but arose after that date and, therefore; are
    not required to be reflected in the financial statements. However, certain non-recognized
    subsequent events may require disclosure to prevent the financial statements from being
    misleading. This guidance was effective prospectively for interim or annual financial
    periods ending after June 15, 2009. The Company implemented the guidance included in
    ASC 855 as of April 1, 2009. The effect of implementing this guidance was not
    material to the Company's financial position or results of operations.


ASC 944, Financial Services - Insurance ("ASC 944") contains guidance that was
    previously issued by the FASB in May 2008 as Statement of Financial Accounting Standards
    No. 163, Accounting for Financial Guarantee Insurance Contracts - an interpretation
    of FASB Statement No. 60 that provides for changes to both the recognition and
    measurement of premium revenues and claim liabilities for financial guarantee insurance
    contracts that do not qualify as a derivative instrument in accordance with ASC 815,
    Derivatives and Hedging (formerly included under Statement of Financial Accounting
    Standards No. 133, Accounting for Derivative Instruments and Hedging Activities).
    This financial guarantee insurance contract guidance also expands the disclosure
    requirements related to these contracts to include such items as a company's method of
    tracking insured financial obligations with credit deterioration, financial information
    about the insured financial obligations, and management's policies for placing and
    monitoring the insured financial obligations. ASC 944, as it relates to financial
    guarantee insurance contracts, was effective for fiscal years beginning after December 15,
    2008, except for certain disclosures related to the insured financial obligations, which
    were effective for the third quarter of 2008. The Company does not have financial
    guarantee insurance products, and, accordingly, the implementation of this portion of ASC
    944 did not have an effect on the Company's results of operations or financial position.


F-10

---

CHINA MEDIA GROUP CORPORATIONNOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS


NOTE 2
    SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES & REALIZATION OF ASSETS (Continued)


Recent Pronouncements (Continued)Recently Implemented Standards (Continued)


ASC 805, Business Combinations ("ASC 805") (formerly included under Statement of
    Financial Accounting Standards No. 141 (revised 2007), Business Combinations)
    contains guidance that was issued by the FASB in December 2007. It requires the acquiring
    entity in a business combination to recognize all assets acquired and liabilities assumed
    in a transaction at the acquisition-date fair value, with certain exceptions.
    Additionally, the guidance requires changes to the accounting treatment of acquisition
    related items, including, among other items, transaction costs, contingent consideration,
    restructuring costs, indemnification assets and tax benefits. ASC 805 also provides for a
    substantial number of new disclosure requirements. ASC 805 also contains guidance that was
    formerly issued as FSP FAS 141(R)-1, Accounting for Assets Acquired and Liabilities
    Assumed in a Business Combination That Arise from Contingencies which was intended to
    provide additional guidance clarifying application issues regarding initial recognition
    and measurement, subsequent measurement and accounting, and disclosure of assets and
    liabilities arising from contingencies in a business combination. ASC 805 was effective
    for business combinations initiated on or after the first annual reporting period
    beginning after December 15, 2008. The Company implemented this guidance effective
    January 1, 2009. Implementing this guidance did not have an effect on the Company's
    financial position or results of operations; however it will likely have an impact on the
    Company's accounting for future business combinations, but the effect is dependent upon
    acquisitions, if any, that are made in the future.


ASC 810, Consolidation ("ASC 810") includes new guidance issued by the FASB in
    December 2007 governing the accounting for and reporting of noncontrolling interests
    (previously referred to as minority interests). This guidance established reporting
    requirements which include, among other things, that noncontrolling interests be reflected
    as a separate component of equity, not as a liability. It also requires that the interests
    of the parent and the noncontrolling interest be clearly identifiable. Additionally,
    increases and decreases in a parent's ownership interest that leave control intact shall
    be reflected as equity transactions, rather than step acquisitions or dilution gains or
    losses. This guidance also requires changes to the presentation of information in the
    financial statements and provides for additional disclosure requirements. ASC 810 was
    effective for fiscal years beginning on or after December 15, 2008. The Company
    implemented this guidance as of January 1, 2009. The effect of implementing this
    guidance was not material to the Company's financial position or results of operations.


ASC 825, Financial Instruments ("ASC 825") includes guidance which was issued in
    February 2007 by the FASB and was previously included under Statement of Financial
    Accounting Standards No. 159, The Fair Value Option for Financial Assets and
    Financial Liabilities Including an amendment of FASB Statement No. 115. The related
    sections within ASC 825 permit a company to choose, at specified election dates, to
    measure at fair value certain eligible financial assets and liabilities that are not
    currently required to be measured at fair value. The specified election dates include, but
    are not limited to, the date when an entity first recognizes the item, when an entity
    enters into a firm commitment or when changes in the financial instrument causes it to no
    longer qualify for fair value accounting under a different accounting standard. An entity
    may elect the fair value option for eligible items that exist at the effective date. At
    that date, the difference between the carrying amounts and the fair values of eligible
    items for which the fair value option is elected should be recognized as a cumulative
    effect adjustment to the opening balance of retained earnings. The fair value option may
    be elected for each entire financial instrument, but need not be applied to all similar
    instruments. Once the fair value option has been elected, it is irrevocable. Unrealized
    gains and losses on items for which the fair value option has been elected will be
    reported in earnings. This guidance was effective as of the beginning of fiscal years that
    began after November 15, 2007. The Company does not have eligible financial assets
    and liabilities, and, accordingly, the implementation of ASC 825 did not have an effect on
    the Company's results of operations or financial position.


F-11

---

CHINA MEDIA GROUP CORPORATIONNOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS


NOTE 2
    SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES & REALIZATION OF ASSETS (Continued)


Recent Pronouncements (Continued)Recently Implemented Standards (Continued)


ASC 820, Fair Value Measurements and Disclosures ("ASC 820") (formerly included
    under Statement of Financial Accounting Standards No. 157, Fair Value Measurements)
    includes guidance that was issued by the FASB in September 2006 that created a common
    definition of fair value to be used throughout generally accepted accounting principles.
    ASC 820 applies whenever other standards require or permit assets or liabilities to be
    measured at fair value, with certain exceptions. This guidance established a hierarchy for
    determining fair value which emphasizes the use of observable market data whenever
    available. It also required expanded disclosures which include the extent to which assets
    and liabilities are measured at fair value, the methods and assumptions used to measure
    fair value and the effect of fair value measures on earnings. ASC 820 also provides
    additional guidance for estimating fair value when the volume and level of activity for
    the asset or liability have significantly decreased. The emphasis of ASC 820 is that fair
    value is the price that would be received to sell an asset or paid to transfer a liability
    in an orderly transaction between willing market participants, under current market
    conditions. ASC 820 also further clarifies the guidance to be considered when determining
    whether or not a transaction is orderly and clarifies the valuation of securities in
    markets that are not active. This guidance includes information related to a company's use
    of judgment, in addition to market information, in certain circumstances to value assets
    which have inactive markets.


Fair value guidance in ASC 820 was initially effective for fiscal years beginning after
    November 15, 2007 and for interim periods within those fiscal years for financial
    assets and liabilities. The effective date of ASC 820 for all non-recurring fair value
    measurements of nonfinancial assets and nonfinancial liabilities was fiscal years
    beginning after November 15, 2008. Guidance related to fair value measurements in an
    inactive market was effective in October 2008 and guidance related to orderly transactions
    under current market conditions was effective for interim and annual reporting periods
    ending after June 15, 2009.


The Company applied the provisions of ASC 820 to its financial assets and liabilities upon
    adoption at January 1, 2008 and adopted the remaining provisions relating to certain
    nonfinancial assets and liabilities on January 1, 2009. The difference between the
    carrying amounts and fair values of those financial instruments held upon initial
    adoption, on January 1, 2008, was recognized as a cumulative effect adjustment to the
    opening balance of retained earnings and was not material to the Company's financial
    position or results of operations. The Company implemented the guidance related to orderly
    transactions under current market conditions as of April 1, 2009, which also was not
    material to the Company's financial position or results of operations.


Recently Issued Standards


In August 2009, the FASB issued ASC Update ("ASU") No. 2009-05, Fair
    Value Measurements and Disclosures (Topic 820): Measuring Liabilities at Fair Value
    ("ASC Update No. 2009-05"). This update amends ASC 820, Fair Value
    Measurements and Disclosures and provides further guidance on measuring the fair value
    of a liability. The guidance establishes the types of valuation techniques to be used to
    value a liability when a quoted market price in an active market for the identical
    liability is not available, such as the use of an identical or similar liability when
    traded as an asset. The guidance also further clarifies that a quoted price in an active
    market for the identical liability at the measurement date and the quoted price for the
    identical liability when traded as an asset in an active market when no adjustments to the
    quoted price of the asset are required are both Level 1 fair value measurements. If
    adjustments are required to be applied to the quoted price, it results in a level 2 or 3
    fair value measurement. The guidance provided in the update is effective for the first
    reporting period (including interim periods) beginning after issuance. The Company does
    not expect that the implementation of ASC Update No. 2009-05 will have a material
    effect on its financial position or results of operations.


F-12

---

CHINA MEDIA GROUP CORPORATIONNOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS


NOTE 2
    SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES & REALIZATION OF ASSETS (Continued)


Recent Pronouncements (Continued)Recently Issued Standards (continued)


In September 2009, the FASB issued ASC Update ("ASU") No. 2009-12, Fair
    Value Measurements and Disclosures (Topic 820): Investments in Certain Entities that
    Calculate Net Asset Value per Share (or Its Equivalent) ("ASU No. 2009-12").
    This update sets forth guidance on using the net asset value per share provided by an
    investee to estimate the fair value of an alternative investment. Specifically, the update
    permits a reporting entity to measure the fair value of this type of investment on the
    basis of the net asset value per share of the investment (or its equivalent) if all or
    substantially all of the underlying investments used in the calculation of the net asset
    value is consistent with ASC 820. The update also requires additional disclosures by each
    major category of investment, including, but not limited to, fair value of underlying
    investments in the major category, significant investment strategies, redemption
    restrictions, and unfunded commitments related to investments in the major category. The
    amendments in this update are effective for interim and annual periods ending after
    December 15, 2009 with early application permitted. The Company does not expect that
    the implementation of ASC Update No. 2009-12 will have a material effect on its
    financial position or results of operations.In October 2009, the FASB issued FASB issued ASU No. 2009-13, Revenue Recognition (Topic
    605): Multiple-Deliverable Revenue Arrangements (a consensus of the FASB Emerging Issues
    Task Force)." ("ASC Update No. 2009-13). This updates set forth the guidance on
    the existing multiple-element arrangement currently in FASB Topic 605-25 (Revenue
    Recognition - Multiple-Element Arrangements). This new guidance eliminates the requirement
    that all undelivered elements have objective evidence of fair value before a company can
    recognize the portion of the overall arrangement fee that is attributable to the items
    that have already been delivered. Further, companies will be required to allocate revenue
    in arrangements involving multiple deliverables based on the estimated selling price of
    each deliverable, even though such deliverables are not sold separately by either company
    itself or other vendors. This new guidance also significantly expands the disclosures
    required for multiple-element revenue arrangements. The revised guidance will be effective
    for the first annual period beginning on or after June 15, 2010. The Company does not
    expect that the implementation of ASU No. 2009-13 will have a material effect on its
    financial statements.In June 2009, FASB issued Statement of Financial Accounting Standards No. 167, Amendments
    to FASB Interpretation No. 46(R)("Statement No. 167"). Statement
    No. 167 amends FASB Interpretation No. 46R, Consolidation of Variable
    Interest Entities an interpretation of ARB No. 51 ("FIN 46R") to
    require an analysis to determine whether a company has a controlling financial interest in
    a variable interest entity. This analysis identifies the primary beneficiary of a variable
    interest entity as the enterprise that has a) the power to direct the activities of a
    variable interest entity that most significantly impact the entity's economic performance
    and b) the obligation to absorb losses of the entity that could potentially be significant
    to the variable interest entity or the right to receive benefits from the entity that
    could potentially be significant to the variable interest entity. The statement requires
    an ongoing assessment of whether a company is the primary beneficiary of a variable
    interest entity when the holders of the entity, as a group, lose power, through voting or
    similar rights, to direct the actions that most significantly affect the entity'>s
    economic performance. This statement also enhances disclosures about a company's
    involvement in variable interest entities. Statement No. 167 is effective as of the
    beginning of the first annual reporting period that begins after November 15, 2009.
    Although Statement No. 167 has not been incorporated into the Codification, in
    accordance with ASC 105, the standard shall remain authoritative until it is integrated.
    The Company does not expect the adoption of Statement No. 167 to have a material
    impact on its financial position or results of operations.


In June 2009, the FASB issued Statement of Financial Accounting Standards No. 166, Accounting
    for Transfers of Financial Assets an amendment of FASB Statement No. 140
    ("Statement No. 166"). Statement No. 166 revises FASB Statement of
    Financial Accounting Standards No. 140, Accounting for Transfers and
    Extinguishment of Liabilities a replacement of FASB Statement 125 ("Statement No. 140")
    and requires additional disclosures about transfers of financial assets, including
    securitization transactions, and any continuing exposure to the risks related to
    transferred financial assets. It also eliminates the concept of a "qualifying
    special-purpose entity", changes the requirements for derecognizing financial assets,
    and enhances disclosure requirements. Statement No. 166 is effective prospectively,
    for annual periods beginning after November 15, 2009, and interim and annual periods
    thereafter. Although Statement No. 166 has not been incorporated into the
    Codification, in accordance with ASC 105, the standard shall remain authoritative until it
    is integrated. The Company does not expect the adoption of Statement No. 166 will
    have a material impact on its financial position or results of operations.


In March 2010, the FASB issued new accounting guidance on embedded credit derivatives.
    This new accounting guidance clarifies the scope exception for embedded credit derivatives
    and defines which embedded credit derivatives should be evaluated for bifurcation and
    separate accounting. The Company does not expect that the implementation of this new
    accounting guidance will have a material effect on its financial position or results of
    operations.


F-13

---

CHINA MEDIA GROUP CORPORATIONNOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS


NOTE 2
    SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES & REALIZATION OF ASSETS (Continued)


Recent Pronouncements (Continued)


Accounting Standards Issued But Not Yet Effective


In January 2010, the Financial Accounting Standards Board ("FASB") issued an
    accounting standard update, Fair Value Measurements and Disclosures (Topic 820), Improving
    Disclosures about Fair Value Measurements. The Update would affect all entities that are
    required to make disclosures about recurring and nonrecurring fair value measurements. The
    Board concluded that users will benefit from improved disclosures in this Update and that
    the benefits of the increased transparency in financial reporting will outweigh the costs
    of complying with the new requirements. The new disclosures and clarifications of existing
    disclosures are effective for interim and annual reporting periods beginning after
    December 15, 2009, except for the disclosures about purchases, sales, issuances, and
    settlements in the roll forward of activity in Level 3 fair value measurements. Those
    disclosures are effective for fiscal years beginning after December 30, 2010, and for
    interim periods within those fiscal years. We are currently evaluating the impact this
    update will have on our financial statements.In January 2010,  the Financial Accounting Standards Board ("FASB")
    issued an accounting standard update to address implementation issues related to the
    changes in ownership provisions in the Consolidation- Overall Subtopic (Subtopic 810-10)
    of the FASB Accounting Standards CodificationTM, originally issued as FASB Statement
    No. 160, Noncontrolling Interests in Consolidated Financial Statements. Subtopic 810-10
    establishes the accounting and reporting guidance for noncontrolling interests and changes
    in ownership interests of a subsidiary. An entity is required to deconsolidate a
    subsidiary when the entity ceases to have a controlling financial interest in the
    subsidiary. Upon deconsolidation of a subsidiary, an entity recognizes a gain or loss on
    the transaction and measures any retained investment in the subsidiary at fair value. The
    gain or loss includes any gain or loss associated with the difference between the fair
    value of the retained investment in the subsidiary and its carrying amount at the date the
    subsidiary is deconsolidated. In contrast, an entity is required to account for a decrease
    in its ownership interest of a subsidiary that does not result in a change of control of
    the subsidiary as an equity transaction.In December 2009, the Financial Accounting Standards Board ("FASB") issued an
    accounting standard update for improvements to financial reporting by enterprises involved
    with Variable Interest Entities. The subsections clarify the application of the General
    Subsections to certain legal entities in which equity investors do not have the
    characteristics of a controlling financial interest or do not have sufficient equity at
    risk for the legal entity to finance its activities without additional subordinated
    financial support [FIN 46(R), paragraph 1, sequence 55.1] or, as a group, the holders of
    the equity investment at risk lack any one of the following three characteristics: [FIN
    46(R), paragraph 1, sequence 55.2].a. The power, through voting rights or similar rights, to direct the activities of a legal
    entity that most significantly impact the entity's economic performance [FIN 46(R),
    paragraph 1, sequence 55.2.1].b. The obligation to absorb the expected losses of the legal entity [FIN 46(R), paragraph
    1, sequence 55.2.2].c. The right to receive the expected residual returns of the legal entity. [FIN 46(R),
    paragraph 1, sequence 55.2.3].The amendments in this update to the Accounting Standards Codification are the result of
    FASB Statement No. 167, Amendments to FASB Interpretation No. 46(R). The adoption of this
    update to improving the financial reporting by enterprises involved with Variable Interest
    Entities, as codified in ASC 810, did not have any impact on the Company's financial
    statements.In December 2009, the Financial Accounting Standards Board ("FASB") issued an
    accounting standard update, Transfers and Servicing (Topic 860) Accounting for Transfers
    of Financial Assets. The amendments in this update to the Accounting Standards
    Codification are the result of FASB Statement No. 166, Accounting for Transfers of
    Financial Assets. The adoption of this update did not have any impact on the Company's
    financial statements.


Reclassifications


Certain comparative amounts have been reclassified to conform to the current period's
    presentation.


F-14

---

CHINA MEDIA GROUP CORPORATIONNOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS


NOTE 3
    UNCERTAINTY OF ABILITY TO CONTINUE AS A GOING CONCERN


The Company's financial statements are prepared using the generally accepted accounting
    principles applicable to a going concern, which contemplates the realization of assets and
    liquidation of liabilities in the normal course of business. As of March 31, 2010, the
    Company has incurred an accumulated deficits totaling $8,397,125 and its current
    liabilities exceed its current assets by $1,949,281. In view of the matters described
    above, recoverability of a major portion of the recorded asset amounts shown in the
    accompanying balance sheets is dependent upon continued operations of the Company, which
    in turn is dependent upon the Company's ability to raise additional capital, obtain
    financing and to succeed in its future operations. The financial statements do not include
    any adjustments relating to the recoverability and classification of recorded asset
    amounts or amounts and classification of liabilities that might be necessary should the
    Company be unable to continue as a going concern.Management has taken the following steps to revise its operating and financial
    requirements, which it believes are sufficient to provide the Company with the ability to
    continue as a going concern. The Company is actively pursuing additional funding and
    potential merger or acquisition candidates and strategic partners, which would enhance
    stockholders' investment. Management believes that the above actions will allow the
    Company to continue operations through the next fiscal year.


NOTE 4
    STOCKHOLDERS' EQUITY


Common Stock


In January 2008, the Company issued 2,631,579 shares of common stock pursuant to a Second
    Amendment Agreement to extend the repayment of the $50,000 Convertible Debenture to March
    28, 2008.


On August 3, 2008 the Company issued 10,000,000 shares of Common Stock pursuant to a
    Letter Agreement to terminate the ELOC Agreement.


There were no shares issued during the period.


NOTE 5
    STOCK OPTIONS AND WARRANTS


Stock Options


The Company adopted ASC 718 "Compensation - Stock Compensation" codified SFAS
    No. 123 (Revised 2004), Share Based Payment ("SFAS No. 123R"), under the
    modified-prospective transition method on April 1, 2006. SFAS No. 123R requires companies
    to measure and recognize the cost of employee services received in exchange for an award
    of equity instruments based on the grant-date fair value.


2002 Stock Option PlanEffective
    on October 11, 2002, the Company adopted the 2002 Stock Option Plan (the "2002
    Plan") allowing for the awarding of options to acquire shares of common stock. This
    plan provides for the grant of incentive stock options to key employees and directors.
    Options issued under this plan will expire over a maximum term of ten years from the date
    of grant.


On May 18, 2007, the board of directors approved to issue 12,300,000 stock options to
    employees to purchase shares of our Common Stock under the 2002 Stock Option Plan, at
    exercise price of $0.038 for a vesting period of 3 years. The Company had 12,300,000 stock
    options outstanding as at March 31, 2010.


Subsequent to the balance sheet date, on April 16, 2007, the board of directors approved
    to issue 19,000,000 stock options to employees to purchase shares of our Common Stock
    under the 2002 Stock Option Plan, at exercise price of $0.010 and 50% of the entitlement
    is vested immediately to option holders and the remaining 50% shall be vested in one year
    from the date of issue of the option.


F-15

---

CHINA MEDIA GROUP CORPORATIONNOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS


NOTE 5
    STOCK OPTIONS AND WARRANTS (Continued)


Following is a summary of the activities of the 2002 Stock Option Plan for the period
    ended March 31, 2010:


Options outstandingOutstanding,
    December 31, 2009
    12,300,000Granted
    during the period
    -Forfeited/lapsed
    during the period
    -Exercised
    during the period
    ---------------------------------Outstanding,
    March 31, 2010
    12,300,000===================


Following is a summary of the status of options outstanding at March 31, 2010:Outstanding Options
    
    Exercisable Options------------------------------------
    
    ----------------------------------------------------------------------Grant
    Date
    Exercise
    Price
    Number
    Average Remaining
    Contractual Life
    Average Exercise Price
    Number
    Intrinsic Price5/18/2007
    $0.0380
    12,300,000
    0.13
    $0.0380
    12,300,000
    $0.00


On December 22, 2009, 17,500,000 stock options expired. As of March 31, 2010, there were
    12,300,000 outstanding stock options.


The assumptions used in calculating the fair value of options granted using the
    Black-Scholes option pricing model are as follows:


i) The 17,500,000 stock options granted on December 23, 2006 were expired on December 22,
    2009:Grant
    date:
    12/23/2006Risk-free interest rate
    4.63%Expected
    life of the options
    3.00 yearsExpected
    volatility
    95%Expected
    dividend yield
    0


ii) The outstanding 12,300,000 stock options granted on May 18, 2007:Grant
    date:
    5/18/2007Risk-free interest rate
    4.63%Expected
    life of the options
    3.00 yearsExpected
    volatility
    139%Expected
    dividend yield
    0


F-16

---

CHINA MEDIA GROUP CORPORATIONNOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS


NOTE 5
    STOCK OPTIONS AND WARRANTS (Continued)


2007 Stock Incentive PlanOn February 19, 2007, the Company adopted the 2007 Stock Incentive Plan (the "2007
    Plan") allowing for the awarding of options to acquire shares of common stock. This
    plan provides for the grant of incentive stock options to key employees, directors and
    consultants. Options issued under this plan will expire over a maximum term of ten years
    from the date of grant. The Company had not issued any stock options under this scheme.


On March 8, 2007, we registered 38,400,000 shares underlying stock options under the 2007
    Stock Incentive Plan with the SEC pursuant to a registration statement on Form S-8.
    During the year 2007, the Company
    had issued a total of 5,811,300 shares to its staff and consultants for their service
    provided.
    No shares were issued under the
    registration statement on Form S-8 during the year 2009 and 2008. As at March 31, 2010
    there were 32,588,700 shares available underlying stock options under the 2007 Stock
    Incentive Plan.
    As of March 31, 2010, there were
    no outstanding stock options to purchase shares of our Common Stock under the 2007 Stock
    Incentive Plan.


Warrants


In December 2006, the Company entered into an Equity Line of Credit Agreement
    ("ELOC") to sell commons stock of the Company up to $2,500,000. As part of this
    agreement, the Company issued, inter alia, stock warrants for a total of 31,250,000 shares
    of Common Stock in the Company. In October 2007, 500,000 warrant shares were exercised.
    The remaining 30,750,000 stock warrants expired in May 2009.


As part of the ELOC agreement above, the Company also issued 527,776 stock warrants as
    part of commission in relation to the draw down of the Debenture Purchase Agreement. All
    these stock warrants expired in May 2009.


As at December 31, 2009 and as at March 31, 2010, there is no warrant share outstanding.


F-17

---

CHINA MEDIA GROUP CORPORATIONNOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS


NOTE 6
    STOCK PURCHASE AGREEMENTS


a)
    In January 2008 the Company issued 2,631,579 shares pursuant to a Second Amendment
    Agreement to extend the repayment of the $50,000 Convertible Debenture to March 28, 2008.


b)
    On August 3, 2008 the Company issued 10,000,000 shares of Common Stock pursuant to a
    Letter Agreement to terminate the ELOC Agreement.


NOTE 7
    PREPAYMENTS, DEPOSITS AND OTHER RECEIVABLES


Prepayments, deposits and other receivables are summarized as follows:


March
    31, 2010
    
    December
    31, 2009US$
    
    US$Rental deposits
    
    6,360
    
    6,369Utilities and other
    deposits
    
    19,822
    
    19,850Advance to suppliers
    a
    215,609
    
    215,918Other receivable
    
    5,287
    
    11,714-------------------
    
    -------------------247,078
    
    253,851===========
    
    ===========Advance to suppliers is the deposit for the purchases of M.A.G.I.C. phone paid to
    AdvanceTech Communications Sdn. Bhd.


NOTE 8
    PROPERTY AND EQUIPMENT, NET


Property and equipment is summarized as follows:


March
    31, 2010
    
    December
    31, 2009US$
    
    US$CostFurniture, fixtures and
    equipment
    
    7,216
    
    6,945Computers
    
    8,058
    
    8,058Automobile
    
    47,951
    
    47,951-------------------
    
    -------------------63,225
    
    62,954Additional cost :Furniture, fixtures and equipment
    
    -
    
    271Accumulated
    depreciation
    
    (38,759)
    
    (35,619)-------------------
    
    -------------------Balance at March 31
    
    24,466
    
    27,606===========
    
    ===========


F-18

---

CHINA MEDIA GROUP CORPORATIONNOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS


NOTE 9
    ADVANCE PAYMENT FOR DISTRIBUTION RIGHTS


On January 25, 2006, the Company entered into an agreement with Fleming Assets Limited
    ("Fleming") to acquire the distribution rights for the M.A.G.I.C. Convergent
    Communications Device for the territories of China and Hong Kong. Under the agreement the
    Company will issue the following shares to Fleming:


*
    Within one month of signing the agreement, one million shares of the Company;*
    Within one month of receiving the prototype devices, one million shares of the
    Company;*
    Within one month of receiving the product from commercial production, two million
    shares of the Company; and*
    A royalty payment of 100,000 shares of the Company for every 5,000 devices sold
    for the next 3 years.


The Company issued 1,000,000 shares of common stock in 2006 upon signing the agreement.


NOTE 10
    GOODWILL


March 31, 2010
    
    December 31, 2009US$
    
    US$Balance at beginning of
    period /year
    
    4,791,676
    
    6,791,676Impairment charge
    during period / year
    
    -
    
    2,000,000-------------------
    
    -------------------Balance at end of
    period / year
    
    4,791,676
    
    4,791,676===========
    
    ===========


NOTE 11
    OTHER PAYABLES AND ACCRUALS


Other payables and accruals are summarized as follows:March 31, 2010
    
    December 31, 2009US$
    
    US$Accrued salaries and
    wages
    
    26,927
    
    33,049Accrued interest
    
    13,286
    
    10,795Accrued accounting,
    legal and consulting fee
    
    151,066
    
    153,654Accrued office and
    related expenses
    
    46,715
    
    78,901Other accrued expenses
    
    14,550
    
    15,926Other payables
    a
    460,230
    
    376,211Deposit from customers
    
    19,612
    
    19,782-------------------
    
    -------------------Balance at March 31 /
    December 31
    
    732,386
    
    688,318===========
    
    ===========Other payables are Company expenses such as postage, sundries, etc., advanced on behalf of
    the Company from various parties.


F-19

---

CHINA MEDIA GROUP CORPORATIONNOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS


NOTE 12
    SHORT - TERM DEBT


As of March 31, 2010, the Company has an outstanding unsecured debt payable, which was
    reclassified from long term debts (Note 16), of $99,645 (December 31, 2009: $99,645), with
    annual interest rate of 10%. This debt is due on May 31, 2010. The Company recorded
    accrued interest of $2,491 for the three months ended March 31, 2010 (December 31, 2009:
    $9,964).


NOTE 13
    DUE TO OFFICERS AND DIRECTORS


The amounts due to directors and officers are interests free, unsecured and repayable on
    demand. The balance of due to directors and officers is $1,080,966 as of March 31, 2010
    (December 31, 2009: $1,083,686).


NOTE 14
    DUE TO A SHAREHOLDER


The amount due to a shareholder is interests free, unsecured and repayable on demand. The
    balance of due to a shareholder is $299,628 as of March 31, 2010 (December 31, 2009:
    $259,747).


NOTE 15
    LONG-TERM DEBTS


March 31, 2010
    
    December 31, 2009US$
    
    US$Shareholder Loan
    
    2,000,000
    
    2,000,000Other Loan
    
    -
    
    --------------------
    
    -------------------2,000,000
    
    2,000,000===========
    
    ===========


The long term shareholder loan of $2,000,000 is unsecured, bears interest at 8% per annum,
    repayable on November 25, 2010. On November 25, 2009 the repayment of the loan was
    extended for a further two years to November 25, 2012.


The other loan is unsecured, accrue interest at 10% per annum and payable on May 31, 2010.
    At the balance sheet date, this loan was reclassified to short term loan (note 12).


NOTE 16
    RELATED COMPANY TRANSACTIONS


The Company agreed to pay directors and officers a monthly salary for services performed.
    During the three months ended March 31, 2010 and 2009, the Company paid the directors and
    its officers and their services companies a total remuneration of $9,000 and $12,000,
    respectively.
    On November 25 2005, a subsidiary
    of the Company signed a loan agreement with its major shareholder, Central High Limited
    for a loan of $2,000,000. This long term shareholder loan is unsecured and repayable on
    November 25, 2010, and bears interest of 8% per annum. On November 25, 2009 the repayment
    of the loan was extended for a further two years to November 25, 2012. The accrued
    interest for 2009 was $160,000 (2008: $160,000) and $40,000 for the three months period
    ended March 31, 2010.


F-20

---

CHINA MEDIA GROUP CORPORATIONNOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS


NOTE 17
    SEGMENT REPORTING


Business Segments
    For management purposes, the
    Group currently organized into three operating units - advertising, telecommunication
    devices, and other services. Turnover represents the net amounts received and receivable
    for goods sold or services provided by the Group during the period. These units are the
    basis on which the Group reports its primary segment information.
    Segment information about these
    businesses is presented below.


Advertising
    Telecommunication Device
    Other Services
    ConsolidatedFor the three months ended March 31
    For the three months ended March 31,
    For the three months ended March 31,
    For the three months 
    ended March 31,2010
    2009
    2010
    2009
    2010
    2009
    2010
    2009US$
    US$
    US$
    US$
    US$
    US$
    US$
    US$Turnover
    15,532
    11,608
    -
    -
    -
    -
    15,532
    11,608=========
    =========
    =========
    =========
    =========
    =========
    =========
    =========Segment
    results
    (2,919)
    (6,601)
    (4,521)
    -
    -
    -
    (7,440)
    (6,601)=========
    =========
    =========
    =========
    =========
    =========Unallocated
    corporate income
    
    
    
    
    
    
    -
    -Unallocated
    corporate expenses
    
    
    
    
    
    
    (77,892)
    (95,219)--------------
    --------------Loss
    from operations
    
    
    
    
    
    
    (85,332)
    (101,820)Finance
    costs
    
    
    
    
    
    
    (42,491)
    (42,517)--------------
    --------------Loss for
    the period
    
    
    
    
    
    
    (127,823)
    (144,337)=========
    =========As at March
    31, 2010
    As at March
    31, 2009ASSETSSegment
    assets
    4,812,746
    6,823,936
    239,416
    240,483
    
    -
    5,052,162
    7,064,419Unallocated
    corporate assets
    
    
    
    
    
    
    165,324
    214,255--------------
    --------------Consolidated
    total assets
    
    
    
    
    
    
    5,217,486
    7,278,674=========
    =========LIABILITIESSegment
    liabilities
    164,496
    164,926
    -
    430
    -
    -
    140,859
    165,356Unallocated
    corporate liabilities
    
    
    
    
    
    
    4,212,625
    3,835,778--------------
    --------------Consolidated
    total liabilities
    
    
    
    
    
    
    4,353,484
    4,001,134=========
    =========Depreciation
    of fixed assets
    2,797
    2,860
    343
    330
    -
    -
    3,140
    3,190=========
    =========
    =========
    =========
    =========
    =========
    =========
    =========


F-21

---

CHINA MEDIA GROUP CORPORATIONNOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS


NOTE 18
    COMMITMENTS AND CONTINGENCIES


(a)
    The Company leases office premises for its operations in United States and Hong Kong under
    operating leases. Rental expenses under operating lease for the three month ended March
    31, 2010 and for the year ended December 31, 2009 was $5,788 and $24,060, respectively.
    Future minimum rental payments
    under non-cancelable operating leases for the three month ended March 31, 2010 and for the
    year ended December 31, 2009 are $37,767 and $50,509, respectively.


(b)
    On or about May 7, 2008, the Company received a correspondence from a law firm regarding
    complaints on some transmission of unsolicited facsimile allegedly from the Company in
    2006, and advised of potential litigation. The Company has never sent or authorized any
    unsolicited facsimile transmission, and the Company has taken every possible effort to
    distance from these unauthorized transmissions. The Company firmly believes that the
    complaint is frivolous and without basis, and is consulting with its solicitor. The
    Company would vigorously defend any such legal action if pursued.


(c)
    Under the Distribution Rights Agreement for M.A.G.I.C. Convergent Device, the Company is
    committed to issue shares under certain conditions as set out in Note 9.


NOTE 19
    SUBSEQUENT EVENTS


(a)
    10,000 shares of the subsidiary, Premium Multimedia Sdn. Bhd., will be allotted and issued
    to Good World Investment Limited and Allan Gallyot by May 31, 2010..


(b)
    On April 27, 2010 and as announced in the Form 8K filed with the SEC on April 30, 2010,
    the Group entered into a conditional agreement to acquire a controlling interests in AX
    Organic Limited by the initial share consideration of 10 million common stock in the
    Company and a performance shares consideration based on the profits derived by AX over a
    period of two years. As at the date of this report this transaction has not yet closed.


F-22

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Item 2.
    Management's
    Discussion and Analysis of Financial Condition and Results of Operations.


Forward Looking Statements


THIS FOLLOWING INFORMATION SPECIFIES CERTAIN FORWARD-LOOKING STATEMENTS OF MANAGEMENT OF
    THE COMPANY. FORWARD-LOOKING STATEMENTS ARE STATEMENTS THAT ESTIMATE THE HAPPENING OF
    FUTURE EVENTS AND ARE NOT BASED ON HISTORICAL FACT. FORWARD-LOOKING STATEMENTS MAY BE
    IDENTIFIED BY THE USE OF FORWARD-LOOKING TERMINOLOGY, SUCH AS "MAY",
    "SHALL", "COULD", "EXPECT", "ESTIMATE",
    "ANTICIPATE", "PREDICT", "PROBABLE", "POSSIBLE",
    "SHOULD", "CONTINUE", OR SIMILAR TERMS, VARIATIONS OF THOSE TERMS OR
    THE NEGATIVE OF THOSE TERMS. THE FORWARD-LOOKING STATEMENTS SPECIFIED IN THE FOLLOWING
    INFORMATION HAVE BEEN COMPILED BY OUR MANAGEMENT ON THE BASIS OF ASSUMPTIONS MADE BY
    MANAGEMENT AND CONSIDERED BY MANAGEMENT TO BE REASONABLE. OUR FUTURE OPERATING RESULTS,
    HOWEVER, ARE IMPOSSIBLE TO PREDICT AND NO REPRESENTATION, GUARANTY, OR WARRANTY IS TO BE
    INFERRED FROM THOSE FORWARD-LOOKING STATEMENTS.
    THE ASSUMPTIONS USED FOR PURPOSES
    OF THE FORWARD-LOOKING STATEMENTS SPECIFIED IN THE FOLLOWING INFORMATION REPRESENT
    ESTIMATES OF FUTURE EVENTS AND ARE SUBJECT TO UNCERTAINTY AS TO POSSIBLE CHANGES IN
    ECONOMIC, LEGISLATIVE, INDUSTRY, AND OTHER CIRCUMSTANCES. AS A RESULT, THE IDENTIFICATION
    AND INTERPRETATION OF DATA AND OTHER INFORMATION AND THEIR USE IN DEVELOPING AND SELECTING
    ASSUMPTIONS FROM AND AMONG REASONABLE ALTERNATIVES REQUIRE THE EXERCISE OF JUDGMENT. TO
    THE EXTENT THAT THE ASSUMED EVENTS DO NOT OCCUR, THE OUTCOME MAY VARY SUBSTANTIALLY FROM
    ANTICIPATED OR PROJECTED RESULTS, AND, ACCORDINGLY, NO OPINION IS EXPRESSED ON THE
    ACHIEVABILITY OF THOSE FORWARD-LOOKING STATEMENTS. WE CANNOT GUARANTY THAT ANY OF THE
    ASSUMPTIONS RELATING TO THE FORWARD-LOOKING STATEMENTS SPECIFIED IN THE FOLLOWING
    INFORMATION ARE ACCURATE, AND WE ASSUME NO OBLIGATION TO UPDATE ANY SUCH FORWARD-LOOKING
    STATEMENTS.


Critical Accounting Policy and Estimates


Our Management's Discussion and Analysis of Consolidated Financial Condition and Results
    of Operations section discusses our consolidated financial statements, which have been
    prepared in accordance with accounting principles generally accepted in the United States
    of America. The preparation of these consolidated financial statements requires management
    to make estimates and assumptions that affect the reported amounts of assets and
    liabilities at the date of the consolidated financial statements and the reported amounts
    of revenues and expenses during the reporting period. On an on-going basis, management
    evaluates its estimates and judgments, including those related to revenue recognition,
    accrued expenses, financing operations, and contingencies and litigation. Management bases
    its estimates and judgments on historical experience and on various other factors that are
    believed to be reasonable under the circumstances, the results of which form the basis for
    making judgments about the carrying value of assets and liabilities that are not readily
    apparent from other sources. Actual results may differ from these estimates under
    different assumptions or conditions. The most significant accounting estimates inherent in
    the preparation of our consolidated financial statements include estimates as to the
    appropriate carrying value of certain assets and liabilities which are not readily
    apparent from other sources. These accounting policies are described at relevant sections
    in this discussion and analysis and in the notes to the consolidated financial statements
    included in our Quarterly Report on Form 10-Q for the period ended March 31, 2010.


---

Overview


DESCRIPTION OF BUSINESS.OUR BACKGROUND. The Company was incorporated in Texas on October 1, 2002 and was
    originally formed to be a frozen drink machine rental service. It was intended to
    specialize in renting frozen drink machines for gatherings such as wedding receptions,
    birthday parties, football parties, anniversaries, family reunions, weekend barbeques,
    social functions and fund raising events, as well as any other type of occasion. From the
    beginning, this business was at the first stage of development and the primary focus was
    on continuing to developing and revising our business strategies.In January 2005, the Company changed its name to International Debt Exchange Associates
    Inc. reflecting the Company's intent to become a diverse company through mergers and
    acquisitions and still maintained the current business as a frozen drink machine rental
    service.In September 2005, the Company changed its board of directors whom has since changed the
    Company name to China Media Group Corporation to reflect the Company's intent to focus all
    its efforts in advertising and media in the emerging China market. Under new management,
    the Company commenced to position the Company to capitalize on the growth of the Chinese
    advertising market where global companies are rushing into China to try to grab and hold
    the attention of its 1.3 billion citizens.OUR BUSINESS. Our mission is to become one of China's leading new age media companies
    through the use of new technologies and devices combined with traditional media of TV,
    Newspapers, Magazines, Billboards and Internet to reach today's mobile society. In order
    to facilitate this the Company established 4 strategic business units being
    "Advertising" "Print" "Telecommunications and Mobile
    Computing" and "Products and Services".In March 2007, we acquired the entire issued share capital of Good World Investments
    Limited ("Great World") which owns 50% of Beijing Ren Ren Health Culture
    Promotion Limited ("Beijing Ren Ren"). Good World is an investment holding
    company and Beijing Ren Ren is in the business of advertising in promoting health
    education and health awareness in China under the program Great Wall of China Project as
    further described below.
    We plan to offer advertising
    services in China. These advertising services would be across all media thus we will offer
    our customers selective advertising on specific media for nationwide campaign. China's
    advertising industry is still young and fragmented. We aim to differ from other
    advertisers so that we can provide nationwide campaigns across all media spectrum. To this
    end, we will work to secure strategic ad placements in key cities in China so that our
    customers will have the ability to launch nationwide campaigns.


Due to the global economic recession, the advertising expense is expected to decline in
    2009. Many corporations are expected to reduce the advertising budget. We will therefore
    cautiously move forward in 2010. We believe that the China advertising market will
    re-bound and provide opportunities for the Group. We will look to re-launch the outdoor
    advertising markets and to raise an adequate capital to roll out the Beijing Ren Ren
    outdoor project We will also explore other markets in the Asia region for any synergistic
    business opportunities.


Although we have established 4 business units, only three units have begun in operation,
    i.e.: Advertising, Telecommunications and Mobile Computing and Products Services. In
    summary, some major events are as follows:


Advertising Unit


On March 13, 2007, the Company acquired 100% of the issued and outstanding shares of Good
    World Investments Limited, which owns 50% of the registered capital of Beijing Ren Ren
    Health Culture Promotion Limited ("BRR"). BRR is working with the Chinese
    Government on a benevolent project named "Great Wall of China Project" to
    advertise and promote health education and health awareness in China. We believe BRR
    provides a strategic advertising platform for us to launch our advertising operations in
    China as it is can advertise in hospitals and districts in China. During the period the
    Company did not derive any advertising income from the BRR project but has recorded
    $15,532 in relation to advertising services. In the coming months, the Group is expected
    to generate revenues from advertising sales for the digital interactive kiosks.


In late 2009, the Group was appointed as an exclusive advertising agent for interactive
    digital media kiosk in Hong Kong. There are plans to have these kiosks deployed in tourist
    attractions, hotels and shopping malls in 2010. These kiosks offer 2 dimensions and 3
    dimensions city map of Hong Kong targeting tourists. The kiosks also provide location
    based directory listing with interactive searches. Video ads are also made available on
    these kiosks. In the coming months, the Group expects to receive advertising revenues from
    these digital kiosks.


---

Telecommunications
    Unit
    On or about January 23, 2006, the
    Company announced the establishment of the Telecommunications and Mobile Computing
    Division to focus on the new media advertising where we would take advantage of new
    convergent devices for telecommunications advertising. The business of selling advertising
    through telecommunications media and devices is still at an early stage as we are
    developing strategies to effectively enter the market. No revenue has been generated from
    advertising through telecommunications media and devices at the date of this report.


Advertising through mobile devices is becoming more prominent to reach the mobile society
    of today. The goal of the Telecommunications and Mobile Computing Unit is to provide the
    Company with entry into the new sector of advertising through telecommunication media and
    devices. Our strategy on gaining access in telecommunication media is through cooperation
    with existing networks or establishes select networks. However our longer term strategy is
    to partner with network operators to provide extensive network access for our advertising
    media. We have secured the distribution rights for M.A.G.I.C. Convergent Device for the
    territory of China and Hong Kong. M.A.G.I.C. is a next generation convergent device that
    has the full capabilities of a notebook computer shrink to a size of a PDA phone. In 2009,
    we have also entered into a joint venture with AdvanceTech Communications Sdn. Bhd.
    ("ATC") to market and distribute the devices developed by ATC worldwide other
    than the countries already under distribution by the Company. The current device under
    development, M.A.G.I.C. W3 is being positioned as the high end convergent device for
    professional users running special applications. We expect the M.A.G.I.C. W3 to enter the
    information and advertising sector of the mobile phone market. We expect to receive the
    final prototype for MATIC W23, the second generation of W3, by Q3 2010.


Products Services Units
    We have commenced a Products
    Services Unit to build brands recognition and to take advantage of our contacts networks,
    distribution channel and trading partners. We will leverage off our advertising platform
    to develop our own brands name for select products. This will uniquely position our
    Product Services for brand awareness as well as develop a long term business unit that
    will serve both consumers and industries markets. In the meantime, no revenue was derived
    from this business unit.


Subsequent to the balance sheet date, in April 2010, the Company entered into an agreement
    to acquire controlling interests in AX Organic Limited, a company that is in the business
    of marketing, sales and distribution of organic fertilizers and vegetables. Upon
    completion of the agreement, we expect that this product line will enable us to promote
    healthy living and healthy products under the Great Wall of China project as described in
    Advertising business unit above. We expect that this line of products will deliver revenue
    by this coming quarter.


---

Plan of operationsOUR PLAN OF OPERATION FOR THE NEXT TWELVE MONTHS.
    We hope to generate additional
    revenues in the next twelve months by engaging business operations through internal growth
    and through strategic acquisitions and cooperative advertising agreements, as described
    more fully under "Overview" above.


We have cash and cash equivalents of $16,266 as of March 31, 2010; a decrease from the
    previous period end of December 31, 2009. In the opinion of management, these funds will
    not satisfy our working capital requirements to operate at our current level of activity
    for the next twelve months. To effectuate our business plan, during the next twelve
    months, we must arrange for adequate funding to implement our plans of increasing our
    advertising offerings and promote our advertising services, through cooperation agreements
    and otherwise.


Financing and funding


Management intends to continue to raise additional financing through debt and equity
    financing or other means and interests that it deems necessary, with a view to
    implementing our business plan and building a revenue base. We plan to use the proceeds of
    such financings to provide working capital to our operations and increase our capital
    expenditure for marketing and working with our co-operative partners. There can be no
    assurances that sufficient financing will be available on terms acceptable to us or at
    all. Our forecast for the period for which financial resources will be needed to support
    our operations involves risks and uncertainties and actual results could fail as a result
    of a number of factors.


Specifically, we hope to accomplish the steps listed below to implement our business plan.
    We estimate that we will require approximately $2,000,000 to commence operations as
    envisioned below during the next twelve months. The figures and steps outlined below are
    estimates only, and our actual progress and cost may vary from these estimates and is
    subject to our ability to obtain adequate funding. Such additional capital may be raised
    through public or private equity financing, borrowings, or other sources, such as
    contributions from our officers and directors. If we are unable to obtain funds necessary
    to implement our business plan, we may revise or scale back our business plan.


Over the course of the next two years, subject to available resources, we propose to build
    up our advertising presences over 5 regions in China. We also propose to acquire strategic
    partners that have existing operations in cities or regions to grow our business, by
    acquisition, through cooperation agreements and/or otherwise, subject to availability of
    funding. Additional supporting staff may be hired as necessity upon resources available
    within the next twelve months.


We are not currently conducting any research and development activities, other than the
    continual development of our website in both English and Chinese. We do not anticipate
    conducting such activities in the near future. In the event that we expand our business
    scope, then we may need to hire additional employees or independent contractors as well as
    purchase or lease additional equipment.


---

Results
    of operation.


FOR THE THREE MONTHS PERIOD ENDED MARCH 31, 2010 COMPARED TO THE THREE MONTHS PERIOD ENDED
    MARCH 31, 2009


REVENUES.
    For the three months period ended
    March 31, 2010, the Group has realized revenue of $15,532 and a cost of revenue of $6,240,
    achieving a gross profit of $9,292. For the three month period ended March 31, 2009, the
    Group has realized revenue of $11,608 and a cost of revenue of $4,860 achieving a gross
    profit of $6,748. We hope to generate additional revenues when we begin to receive
    contracts from clients or through acquisitions. Depending upon the availability of
    operating capital, we intend to expand our operations in the next 12 months.


OPERATING EXPENSES.
    For the three month period ended
    March 31, 2010, our gross profit was $9,292 and our total operating expenses were
    $101,740, all of which were selling, general and administrative expenses. We also had
    $42,491 in interest expenses, and loss attributable to minority interests of $7,116, so
    that the net loss to our shareholders for the three months period ended March 31, 2010 was
    $127,823. This is in comparison to the same period ended March 31, 2009, where our gross
    profit was $6,748 and our total operating expenses were $112,302, all of which were
    selling, general and administrative expenses. We also had $$42,517 in interest expenses
    and loss attributable to minority interests of $3,734, so that the net loss to our
    shareholders for the three months period ended March 31, 2009 was $144,337.


Liquidity and Capital Resources


As at March 31, 2010, the Company had cash and cash equivalents totaling $16,266, other
    current assets of $247,078 and non-current assets totaling $4,954,142 which were
    represented by $24,466 in fixed assets, $138,000 in distribution rights and $4,791,676 in
    goodwill. The total assets of the Company were $5,217,486 as of March 31, 2010. We also
    had current liabilities of $2,212,625 which were represented by $732,386 in accruals,
    $99,645 in short term debt, $1,080,966 due to related parties, $299,628 due to a
    shareholder as of March 31, 2010. We also had $2,000,000 in long-term shareholders loan
    and $140,859 in minority interests as of March 31, 2010, made our total liabilities
    $4,353,484
    At present the Company does not
    have sufficient cash resources to provide for all general corporate operations in the
    foreseeable future. The Company will be required to raise additional capital in order to
    continue to operate in fiscal 2010.


---

Going Concern


The Company's financial statements are presented on a going concern basis, which
    contemplates the realization of assets and satisfaction of liabilities in the normal
    course of business. The Company has experienced significant losses from operations in
    recent periods. For the three months ended March 31, 2010 the Company incurred net losses
    of $127,823 and has accumulated losses of $8,397,125 as at March 31, 2010. The Company's
    ability to continue as a going concern must be considered in light of the problems,
    expenses and complications frequently encountered in developing markets and the
    competitive environment in which the Company operates. The Company is pursuing financing
    for its operations and seeking additional investment. In addition, the Company is seeking
    to expand its revenue base by adding new customers and to start out its advertising
    business. Failure to secure such financing, to raise additional equity capital and to
    expand its revenue base may result in depleting its available funds and not being able to
    pay its obligations. These financial statements do not include any adjustments to reflect
    the possible future effects on the recoverability and classification of assets or the
    amounts and classification of liabilities that may result from the possible inability of
    the Company to continue as a going concern.


Off Balance Sheet Arrangements


As of March 31, 2010, there were no off balance sheet arrangements. The Company has no off
    balance sheet obligations nor guarantees and has not historically used special purpose
    entities for any transactions.


---

Item 3.
    Quantitative
    and Qualitative Disclosure About Market Risk.


Quantitative and Qualitative Disclosures about Market Risk:


The Company is exposed to various market risks, including changes in interest rates.
    Market risk is the potential loss arising from adverse changes in market rates and prices,
    such as interest rates and foreign currency exchange rates. The Company does not enter
    into derivatives or other financial instruments for trading or speculative purposes. The
    Company also has not entered into financial instruments to manage and reduce the impact of
    changes in interest rates and foreign currency exchange rates, although we may enter into
    such transactions in the future.


Item 4.
    Controls and Procedures.


Evaluation of Disclosure Controls and Procedures:


Our disclosure controls and procedures are designed to ensure that information required to
    be disclosed in reports that we file or submit under the Securities Exchange Act of 1934
    is recorded, processed, summarized and reported within the time periods specified in the
    rules and forms of the United States Securities and Exchange Commission. Our principal
    executive and financial officer have reviewed the effectiveness of our "disclosure
    controls and procedures" (as defined in the Securities Exchange Act of 1934 Rules
    13a-14(c) and 15d-14(c)) within the end of the period covered by this Quarterly Report on
    Form 10-Q and have concluded that the disclosure controls and procedures are effective to
    ensure that material information relating to the Company is recorded, processed,
    summarized, and reported in a timely manner. There were no significant changes in our
    internal controls or in other factors that could significantly affect these controls
    subsequent to the last day they were evaluated by our principal executive and financial
    officers.


Changes in Internal Controls over Financial Reporting:


There have been no changes in the Company's internal control over financial reporting
    during the last quarterly period covered by this report that have materially affected, or
    are reasonably likely to materially affect, the Company's internal control over financial
    reporting.


---

PART
    II - OTHER INFORMATION


Item 1.
    Legal Proceedings


None.


Item 1A.
    Risk Factors


Smaller reporting companies are not required to provide the information required by this
    item.


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


None.


Item 3.
    Defaults Upon Senior Securities


None.


Item 4.
    (Removed and Reserved).





Item 5.
    Other Information


None.


---

Item 6.
    Exhibits


Exhibit Number
    Description of Exhibit2.1
    Shareholders' Agreement between Good World Investments
    Limited, Advance Tech Communications Sdn. Bhd. and ATC Marketing Limited(11)2.2
    Shareholders' Agreement between Good World Investments
    Limited, Allan Gallyot and Premium Multimedia Sdn. Bhd.(12)3.1
    Articles of Incorporation (1)3.1.1
    Certificate of Amendment to Articles of Incorporation (2)3.1.2
    Certificate of Amendment to Articles of Incorporation, as
    amended.(8)3.2
    Bylaws (1)4.1
    Executive Services Agreement between China Media Group
    Corporation and Con Unerkov (3)4.2
    Executive Services Agreement between China Media Group
    Corporation and Alex Ho (3)4.3
    Warrants to Purchase Common Stock (4)(5)10.1
    ELOC Arrangement with Tailor-Made Capital Ltd. (4)10.2
    Debenture Purchase Agreement with Tailor-Made Capital Ltd.(4).10.3
    2002 Stock Option Plan (6)10.4
    2007 Stock Incentive Plan(7)10.5
    Second Amendment Agreement (9)10.6
    Termination Letter Agreement (10)21.1
    Subsidiaries of small business issuer (13)31.1*
    Certification of Chief Executive Officer pursuant to
    Section 302 of the Sarbanes-Oxley Act of 2002.31.2*
    Certification of Chief Financial Officer pursuant to
    Section 302 of the Sarbanes-Oxley Act of 2002.32.1*
    Certification of Chief Executive Officer pursuant to
    Section 906 of the Sarbanes-Oxley Act of 2002.32.2*
    Certification of Chief Financial Officer pursuant to
    Section 906 of the Sarbanes-Oxley Act of 2002.


1.
    Incorporated by reference to our Registration Statement on Form SB-2 as filed with the SEC
    on April 15, 2003.2.
    Incorporated
    by reference to our Current Report on Form 8-K as filed with the SEC on February 3, 2005.3.
    Incorporated
    by reference to our Current Report on Form 10-KSB/A as filed with the SEC on August 11,
    2006.4.
    Incorporated
    by reference to our Current Report on Form 8-K/A as filed with the SEC on March 8, 2007.5.
    Incorporated
    by reference to our Current Report on Form 8-K as filed with the SEC on February 16, 2006.6.
    Incorporated
    by reference to our Registration Statement on Form SB-2 as filed with the SEC on April 15,
    2003.7.
    Incorporated
    by reference to our Registration Statement on Form S8 as filed with the SEC on March 8,
    2007.8.
    Incorporated
    by reference to our Registration Statement on Form SB-2 as filed with the SEC on March 16,
    2007.9.
    Incorporated
    by reference to our Current Report on Form 8-K as filed with the SEC on January 8, 2008.10.
    Incorporated
    by reference to our Current Report on Form 8-K as filed with the SEC on August 7, 2008.11.
    Incorporated
    by reference to our Current Report on Form 8-K as filed with the SEC on May 26, 2009.12.
    Incorporated
    by reference to our Current Report on Form 8-K as filed with the SEC on September 30,
    2009.13.
    Incorporated
    by reference to our Current Report on Form 10-K as filed with the SEC on April 14, 2010.


* Filed herewith.


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SIGNATURESPursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of
    1934, the registrant has duly caused this report to be signed on its behalf by the
    undersigned, thereunto duly authorized.


China Media Group Corporationa Texas
    corporationDate: May 20, 2010
    /s/ Cheng Pheng LOI---------------------------------------Cheng Pheng
    LOIPrincipal
    executive officerPresident,
    director


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


By:
    /s/ Cheng Pheng LOI
    May 20, 2010--------------------------------------------Cheng Pheng
    LOI


Its:
    Principal executive officerPresident,
    CFO, director