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 six month period ended June 30, 2011[
        ]
    TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE
    EXCHANGE ACTFor the transition period from [    ] to [
        ]


--------------------------------------------------------------------
Commission File Number: 000-50431

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

Texas
    7310
    32-0034926-----------------------
    ------------------------
    ----------------------(State or other jurisdiction of incorporation or organization)
    (Primary Standard Industrial Classification Code Number)
    (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 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 past 12 months (or for such
    shorter period that the registrant was required to file such reports), and (2) has been
    subject to such filing requirements for the past 90 days.


Yes [ x ] No [    ]

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 (§232.405 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 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. (check one)


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 June 30, 2011 was 554,132,450 shares of
    Common Stock, no par value.


---

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.


---

PART
    I


Item 1.
    Condensed
    Consolidated Financial Statements


China Media Group Corporation

China Media Group Corporation
Condensed Consolidated Financial Statements
June 30, 2011
(Unaudited)(Expressed In United States Dollars)

Condensed
    Consolidated Balance Sheets as of June 30, 2011 and December 31, 2010


Condensed Consolidated Statements of Operations for the three and six months period ended
    June 30, 2011 and 2010


Condensed Consolidated Statements of Stockholders' Equity for the years ended December 31,
    2010 and 2009, and for the six months period ended June 30, 2011


Condensed Consolidated Statements of Cash Flows for the six months periods ended June 30,
    2011 and 2010


Notes to Condensed Consolidated Financial Statements


---

CHINA
    MEDIA GROUP CORPORATIONCONSOLIDATED
    BALANCE SHEETSAS
    OF JUNE 30, 2011 AND DECEMBER 31, 2010


June 30, 2011
    
    December 31, 2010(Unaudited)
    
    (Audited)US$
    
    US$Notes
    
    --------------------
    
    ---------------------ASSETSCurrent
    Assets:Cash and
    cash equivalents
    
    
    29,376
    
    17,654Investment
    available for sale
    
    
    83,300
    
    170,000Due from
    related parties
    7
    
    349,584
    
    339,715Prepayments,
    deposit and other receivables
    
    
    154,146
    
    128,990---------------------
    
    ---------------------Total
    current assets
    
    
    616,406
    
    656,359Non-current
    assetsProperty
    and equipments, net
    8
    
    8,243
    
    15,044Advance
    payment for distribution rights
    9
    
    138,000
    
    138,000Investment
    in shares
    17
    
    81,556
    
    ----------------------
    
    ---------------------227,799
    
    153,044---------------------
    
    ---------------------844,205
    
    809,403=============
    
    =============LIABILITIES
    AND STOCKHOLDERS' EQUITYCurrent
    liabilities:Other
    payables and accruals
    11
    
    487,351
    
    547,654Short
    term debt
    12
    
    214,591
    
    214,591Due to
    officer and directors
    13
    
    452,760
    
    1,085,855Due to
    related parties
    14
    
    1,562,908
    
    855,388Option
    liabilities
    5
    
    236,504
    
    202,014---------------------
    
    ---------------------Total
    current liabilities
    
    
    2,954,114
    
    2,905,502---------------------
    
    ---------------------Long-term
    debts
    15
    
    2,000,000
    
    2,000,000Stockholders'equity:Common
    stock, no par value, 85,000,000,000 shares authorized, 544,132,450 (2009: 534,132,450)
    shares issued and outstanding
    4
    
    7,773,902
    
    7,773,902Additional
    paid-in-capital
    
    
    1,799,358
    
    1,799,358Shares
    to be issued
    17
    
    52,510
    
    -Comprehensive
    income
    
    
    67,444
    
    67,176Accumulated
    deficits
    
    
    (13,927,245)
    
    (13,867,043)Uncontrolled
    interest
    
    
    124,122
    
    130,508----------------------
    
    ---------------------Total
    stockholders' equity
    
    
    (4,109,909)
    
    (4,096,099)----------------------
    
    ---------------------844,205
    
    809,403=============
    
    ============


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

F-3

---

CHINA
    MEDIA GROUP CORPORATIONCONSOLIDATED
    STATEMENTS OF OPERATIONSFOR
    THE THREE AND SIX MONTHS ENDED JUNE 30, 2011 AND 2010(UNAUDITED)


Three months periods
    
    Six months periodsEnded June 30
    
    Ended June 30------------------------------
    
    ------------------------------2011
    
    2010
    
    2011
    
    2010------------
    
    ----------
    
    -----------
    
    -----------US$
    
    US$
    
    US$
    
    US$Net
    revenue
    
    30,930
    
    11,042
    
    59,819
    
    26,574Cost of
    revenue
    
    (9,702)
    
    (7,116)
    
    (22,261)
    
    (13,356)--------------
    
    -------------
    
    --------------
    
    -------------Gross
    profit
    
    21,228
    
    3,926
    
    37,558
    
    13,218Operating
    expenses:Selling,
    general and administrative expenses
    
    44,253
    
    227,897
    
    112,899
    
    329,637---------------
    
    ---------------
    
    ---------------
    
    ---------------Loss
    from operations before other expense
    
    (23,025)
    
    (223,971)
    
    (75,341)
    
    (316,419)Other
    income / (expenses)Gain on
    disposal of investment
    
    89,838
    
    -
    
    89,838
    
    -Other
    income
    
    12,150
    
    -
    
    12,150
    
    -Interest
    expenses
    
    (46,615)
    
    (43,047)
    
    (93,235)
    
    (85,538)-----------------
    
    --------------
    
    -----------------
    
    --------------Net
    profit / (loss) before uncontrolled interest
    
    32,348
    
    (267,018)
    
    (66,588)
    
    (401,957)Uncontrolled
    interest
    
    3,469
    
    4,497
    
    6,386
    
    11,613-----------------
    
    --------------
    
    -----------------
    
    --------------Net
    profit / (loss)
    
    35,817
    
    (265,521)
    
    (60,202)
    
    (390,344)-----------------
    
    --------------
    
    -----------------
    
    --------------Other
    comprehensive incomeForeign
    currency translation gain
    
    414
    
    6,981
    
    268
    
    9,011-----------------
    
    --------------
    
    -----------------
    
    --------------Comprehensive
    loss
    
    36,231
    
    (255,540)
    
    (59,934)
    
    (381,333)=========
    
    =========
    
    =========
    
    =========Basic
    and diluted loss per common share
    
    (0.00)
    
    (0.00)
    
    (0.00)
    
    (0.00)=========
    
    =========
    
    =========
    
    =========Basic
    and diluted weighted average number of common shares *
    
    554,132,450
    
    535,451,131
    
    554,132,450
    
    534,795,433=========
    
    ===============
    
    =========
    
    ===============


*
    Weighted average number of shares used to compute basic and diluted loss per share for the
    three and six months ended June 30, 2011 and 2010 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

---

CHINA
    MEDIA GROUP CORPORATIONCONSOLIDATED
    STATEMENTS OF STOCKHOLDERS' EQUITYFOR
    THE YEARS ENDED DECEMBER 31, 2010 AND 2009AND
    FOR THE SIX MONTHS ENDED JUNE 30, 2011(UNAUDITED)


Common
    Additional
    
    
    
    
    TotalStock
    Paid-in
    Comprehensive
    Shares to
    Accumulated
    Uncontrolled
    Stockholders'Shares
    Amount
    Capital
    Income
    be issued
    Deficit
    Interest
    EquityUS$
    US$
    US$
    US$
    US$
    US$
    US$----------
    --------
    ----------
    -----------
    -----------
    -----------
    -----------
    -----------January 1, 2009
    534,132,450
    7,428,902
    1,660,183
    43,265
    -
    (5,735,198)
    168,230
    3,565,382Amortization of options granted
    -
    -
    100,691
    -
    -
    -
    
    100,691Comprehensive income
    -
    -
    -
    883
    -
    -
    
    883Net loss
    -
    -
    -
    -
    -
    (2,534,104)
    (20,255)
    (2,554,359))----------
    ---------
    ----------
    -----------
    -----------
    -----------
    -----------
    -----------December 31, 2009
    534,132,450
    7,428,902
    1, 760,874
    44,148
    -
    (8,269,302)
    147,975
    1,112,597Amortization of options granted
    -
    -
    38,484
    -
    -
    -
    -
    38,484Comprehensive income
    -
    -
    -
    23,028
    -
    -
    -
    23,028Issuance of shares for acquisition of share investments
    20,000,000
    345,000
    -
    -
    -
    -
    -
    345,000Gain on disposal of subsidiary
    -
    -
    -
    -
    -
    -
    5,110
    5,110Net loss
    -
    -
    -
    -
    -
    (5,597,741)
    (22,577)
    (5,620,318)---------
    ---------
    ----------
    -----------
    -----------
    -----------
    -----------
    -----------December 31, 2010
    554,132,450
    7,773,902
    1,799,358
    67,176
    -
    (13,867,043)
    130,508
    (4,096,099)Shares to be issued foracquisition
    of share investment
    -
    -
    -
    -
    52,510
    -
    -
    52,510Comprehensive income
    -
    -
    -
    268
    -
    -
    -
    268Net loss
    -
    -
    -
    -
    -
    (60,202)
    (6,386)
    (66,588)---------
    ---------
    ----------
    -----------
    -----------
    -----------
    -----------
    -----------June 30, 2011
    554,132,450
    7,773,902
    1,799,358
    67,444
    52,510
    (13,927,245)
    124,122
    (4,109,909)=======
    =======
    ========
    =========
    ========
    ========
    ========
    =========


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

F-5

---

CHINA
    MEDIA GROUP CORPORATIONCONSOLIDATED
    STATEMENTS OF CASH FLOWSFOR
    THE SIX MONTHS ENDED JUNE 30, 2011 AND 2010(UNAUDITED)


For the Six Months ended June 30, 2011
    
    For the Six Months ended June 30, 2010US$
    
    US$--------------------
    
    --------------------Cash flows from
    operating activities:Net loss
    
    
    (60,202)
    
    (390,344)Adjustment to reconcile
    net loss to net cash used in operating activities:Depreciation
    
    
    6,801
    
    6,280Uncontrolled interest
    
    
    (6,386)
    
    (11,613)Option expenses for
    employee compensation
    
    
    -
    
    38,484Goodwill on acquisition
    of subsidiary
    
    
    -
    
    (245,095)(Increase) / decrease
    in assets and liabilities:Prepaid expenses,
    deposit and other receivables
    
    
    (25,156)
    
    (23,765)Due from former
    subsidiary company
    
    
    14
    
    -Due from related
    parties
    
    
    (38,929)
    
    -Accounts payable and
    accrued expenses
    
    
    (60,303)
    
    97,255Short term debt
    
    
    -
    
    14,946Convertible loan
    
    
    -
    
    50,000Option liabilities
    
    
    34,490
    
    142,888Due to directors and
    officers
    
    
    (633,095)
    
    2,208Due to related parties
    
    
    707,520
    
    79,649--------------------
    
    --------------------Net cash used in
    operating activities
    
    
    (75,246)
    
    (239,107)--------------------
    
    --------------------Cash flows from
    investing activities:Disposal of investment
    
    
    86,700
    
    ---------------------
    
    --------------------Net cash provided by
    investing activities
    
    
    86,700
    
    ---------------------
    
    --------------------Cash flows from
    financing activities :Issue of shares for
    acquisition of subsidiary
    
    
    -
    
    225,000--------------------
    
    --------------------Net cash provided by
    financing activities
    
    
    -
    
    225,000--------------------
    
    --------------------Net increase /
    (decrease) in cash and cash equivalents
    
    
    11,454
    
    (14,107)Effect of exchange rate
    changes on cash and cash equivalents
    
    
    268
    
    9,011Cash and cash
    equivalents, beginning
    
    
    17,654
    
    32,860--------------------
    
    --------------------Cash and cash
    equivalents, ending
    
    
    29,376
    
    27,764============
    
    ============Supplemental disclosure
    of cash flow information:Interests paid
    
    
    93,235
    
    85,538============
    
    ============Income tax paid
    
    
    -
    
    -============
    
    ============


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

F-6

---

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 Group 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 devices.


The
    Group will be engaged in the media and advertising business, focusing mainly in China, and
    the marketing and distribution of convergent devices and the sale and marketing of organic
    fertilizers and produce. During the period, the Group recorded sales in the provision of
    advertising services.


NOTE 2
    SUMMARY
    OF SIGNIFICANT ACCOUNTING POLICIES


Basis
    of Presentation


The accompanying
    unaudited interim consolidated financial statements have been prepared in accordance with
    accounting principals generally accepted in the United States of America and the rules of
    the U.S. Securities and Exchange Commission, and should be read in conjunction with the
    audited financial statements and notes thereto for the year ended December 31, 2010. They
    do not include all information and footnotes required by accounting principles generally
    accepted in the United States of America for complete financial statements. However,
    except as disclosed herein, there has been no material change in the information disclosed
    in the notes to the financial statements for the year ended December 31, 2010 included in
    the Company Form 10-K filed with the Securities and Exchange Commission. In the opinion of
    management, all adjustments (consisting of normal recurring accruals) considered necessary
    for a fair presentation of financial position and results of operations for the interim
    period presented have been included. Operating results for the interim period are not
    necessary indicative of the results that may be expected for the respective full.


Principles
    of Consolidation


The
    consolidated financial statements for the year ended June 30, 2011 include the financial
    statements of the Company, its wholly owned subsidiaries Ren Ren Media Group Limited, Good
    World Investments Limited, and two 50% subsidiaries, namely Beijing Ren Ren Health Culture
    Promotion Limited and ATC Marketing Limited. The Company consolidated both of these 50%
    ownership companies during the period of control because has control of the Board of these
    companies.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

---

CHINA MEDIA GROUP CORPORATIONNOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS


NOTE 2
    SUMMARY
    OF SIGNIFICANT ACCOUNTING POLICIES (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 and six months period ended June 30, 2011 and 2010 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

---

CHINA MEDIA GROUP CORPORATIONNOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS


NOTE 2
    SUMMARY
    OF SIGNIFICANT ACCOUNTING POLICIES (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 obligations


Mandatory
    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 Group to the MPF schemes were $671 and $nil for the six months year June 30, 2011
    and 2010, respectively.


Issuance
    of shares for service


The
    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
    Recognition


The
    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 (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 ASC 220 "Comprehensive Income" which
    codified SFAS No. 130, "Reporting Comprehensive Income. As of June 30, 2011, the
    comprehensive income was $67,444.


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 (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 (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 June 2011, the Financial
    Accounting Standard Board ("FASB") issued Accounting Standard Update
    ("ASU") 2011-05, Presentation of Comprehensive Income, which requires an
    entity to present the total of comprehensive income, the components of net income, and the
    components of other comprehensive income either in a single continuous statement of
    comprehensive income, or in two separate but consecutive statements. ASU 2011-05
    eliminates the option to present components of other comprehensive income as part of the
    statement of equity. ASU 2011-05 will be effective for the Company beginning after
    December 15, 2011. The Company does not expect the adoption of ASU 2011-05 to have a
    material effect on its operating results or financial position. However, it will impact
    the presentation of comprehensive income.


In May 2011, the FASB issued ASU
    2011-04, Fair Value Measurement (Topic 820): Amendments to Achieve Common Fair Value
    Measurement and Disclosure Requirements in U.S. GAAP and International Financial Reporting
    Standards ("IFRS").ASU 2011-04 clarifies some existing concepts, eliminates
    wording differences between U.S. GAAP and IFRS, and in some limited cases, changes some
    principles to achieve convergence between U.S. GAAP and IFRS. ASU 2011-04 results in a
    consistent definition of fair value and common requirements for measurement of and
    disclosure about fair value between U.S. GAAP and IFRS. ASU 2011-04 also expands the
    disclosures for fair value measurements that are estimated using significant unobservable
    (Level 3) inputs. ASU 2011-04 will be effective for the Company beginning after December
    15, 2011. The Company does not expect the adoption of ASU 2011-04 to have a material
    effect on its operating results or financial position.


F-12

---

CHINA MEDIA GROUP CORPORATIONNOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS


NOTE 2
    SUMMARY
    OF SIGNIFICANT ACCOUNTING POLICIES (Continued)


Recent
    Pronouncements (Continued)


Recently Issued Standards (continued)


In April 2011, the
    FASB issued ASU 2011-03, Consideration of Effective Control on Repurchase Agreements,
    which deals with the accounting for repurchase agreements and other agreements that both
    entitle and obligate a transferor to repurchase or redeem financial assets before their
    maturity. ASU 2011-03 changes the rules for determining when these transactions should be
    accounted for as financings, as opposed to sales. The guidance in ASU 2011-03 is effective
    for the first interim or annual period beginning on or after December 15, 2011. The
    guidance should be applied prospectively to transactions or modifications of existing
    transactions that occur on or after the effective date. Early adoption is not permitted.
    The adoption of ASU 2011-03 is not expected to have a material impact on the Company's
    financial condition or results of operation.In April 2011, the
    FASB issued ASU 2011-02, "A Creditor's Determination of Whether a Restructuring is a
    Troubled Debt Restructuring", which clarifies when creditors should classify loan
    modifications as troubled debt restructurings. The guidance is effective for interim and
    annual periods beginning on or after June 15, 2011, and applies retrospectively to
    restructurings occurring on or after the beginning of the year. The guidance on measuring
    the impairment of a receivable restructured in a troubled debt restructuring is effective
    on a prospective basis. A provision in ASU 2011-02 also ends the FASB's deferral of the
    additional disclosures about troubled debt restructurings as required by ASU 2010-20. The
    adoption of ASU 2011-02 is not expected to have a material impact on the Company's
    financial condition or results of operations.


In
    2010, the FASB issued ASC Update ("ASU") No. 2010-01, Equity (Topic 505):
    Accounting for Distributions to Shareholders with Components of Stock and Cash.This
    update clarify that the stock portion of a distribution to shareholders that allows them
    to elect to receive cash or stock with a potential limitation on the total amount of cash
    that all shareholders can elect to receive in the aggregate is considered a share issuance
    that is reflected in earnings per share prospectively and is not a stock dividend. This
    ASU codified the consensus reached in EITF Issue No. 09-E "Accounting for Stock
    Dividends, Including Distributions to Shareholders with Components of Stock and
    Cash". ASU 2010-01 is effective for interim and annual periods ending on or after
    December 15, 2009, and should be applied on a retrospective basis. The adoption of this
    update did not have any impact on the Company's financial statements..


In
    2010, the FASB issued ASC Updated ("ASU") No. 2010-02, Consolidation (Topics
    810) - Accounting and Reporting for Decreases in Ownership of a Subsidiary - A Scope
    Clarification This updated provides 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. The adoption of this update did not have any
    impact on the Company's financial statements.


F-13

---

CHINA MEDIA GROUP CORPORATIONNOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS


NOTE 2
    SUMMARY
    OF SIGNIFICANT ACCOUNTING POLICIES (Continued)


Recent
    Pronouncements (Continued)


Accounting Standards Issued
    But Not Yet Effective


In 2010, the FASB issued ASC Update ("ASU") No. 2010-13, Compensation
    - Stock Compensation (Topic 718): Effect of Denominating the Exercise Price of a
    Share-Based Payment Award in the Currency of the Market in Which the Underlying Equity
    Security Trades.This update is to codify the consensus reached in EITF Issue No.
    09-J, "Effect of Denominating the Exercise Price of a Share-Based Payment Award in
    the Currency of the Market in Which the Underlying equity Security Trades" The
    amendments to the Codification clarify that an employee share-based payment award with an
    exercise price denominated in the currency of a market in which a substantial portion of
    the entity's equity shares trades should not be considered to contain a condition that is
    not a market, performance, or services condition. Therefore, an entity would not classify
    such an award as a liability if it otherwise qualifies as equity. The adoption of this
    update did not have any impact on the Company's financial statements.


In 2010, the FASB issued ASC Update ("ASU") No. 2010-21, Accounting
    for Technical Amendments to Various SEC Rules and Schedules.This update amends
    various SEC paragraphs in the FASB Accounting Standards Codification pursuant to SEC Final
    Rule, "Technical Amendments to Rules Forms, Schedules and Codification of Financial
    Reporting Policies". The adoption of this update did not have any impact on the
    Company's financial statements.


In 2010, the FASB issued ASC Update ("ASU") No. 2010-22, Accounting
    for Various Topics.This update amends various SEC paragraphs in the FASB Accounting
    Standards Codification based on external comments received and the issuance of Staff
    Accounting Bulletin (SAB) No. 112 which amends or rescinds portion of certain SAB topics.
    SAB 112 was issued to being existing SEC guidance into conformity with ASC 805
    "Business Combination" and ASC 810 "Consolidation". 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 June 30, 2011, the
    Company has incurred an accumulated deficits totaling $13,927,245 and its current
    liabilities exceed its current assets by $2,337,708. 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 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


On June 18, 2010
    the Company issued 10,000,000 shares of Common Stock pursuant to a Stock Purchase
    Agreement to acquire 50% controlling interests in AX Organic Limited.


On October 8,
    2010 the Group completed the transaction to acquire 69% interests in China Integrated
    Media Corporation Limited ("CIMC"), a public company in Australia, by the
    issuance of 10,000,000 shares in the Company as part of the purchase consideration.


On February 22,
    2011 the Group entered into an agreement to issue 2,205,376 shares in the Company as part
    of the consideration to acquire share investment. As at the date of this report, the
    Company still has not issued the Company shares as it is pending the delivery of the
    acquisition shares.


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 12,300,000 stock options
    expired on May 17, 2010.


On
    April 16, 2010, 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 for an option period of 5 years, and for these options 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.


As
    of June 30, 2011, the Company has 19,000,000 stock options outstanding and the option
    liabilities is $236,504.


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 June 30,
    2011:


Options outstandingOutstanding,
    December 31, 2010
    19,000,000Granted
    during the period
    -Forfeited/lapsed
    during the period
    -Exercised
    during the period
    ----------------------------Outstanding,
    June 30, 2011
    19,000,000================


Following is a summary of the status of options outstanding at June 30, 2011:Outstanding Options
    
    Exercisable Options---------------------
    
    --------------------------------------------Grant
    Date
    Exercise
    Price
    Number
    Average Remaining
    Contractual Life
    Average Exercise Price
    Number
    Intrinsic Price4/16/2010
    $0.010
    19,000,000
    3.79
    $0.010
    19,000,000
    $0.00


During the period on May 17, 2010, 12,300,000 stock options expired and on April 16, 2010,
    the Company granted 19,000,000 stock options to 5 qualified persons. As of March 31, 2011,
    there were 19,000,000 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 12,300,000 stock options granted on May 18, 2007 were expired on May 17, 2010:Grant
    date:
    5/18/2007Risk-free interest rate
    4.63%Expected
    life of the options
    3.00 yearsExpected
    volatility
    139%Expected
    dividend yield
    0


ii) The outstanding 19,000,000 stock options granted on April 16, 2010 and will expire on
    April 16, 2015:Grant
    date:
    4/16/2010Risk-free interest rate
    3.25%Expected
    life of the options
    5.00 yearsExpected
    volatility
    250%Expected
    dividend yield
    0


F-16

---

CHINA MEDIA GROUP CORPORATIONNOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS


NOTE 5
    STOCK
    OPTIONS AND WARRANTS (Continued)


2007 Stock Incentive
    Plan


On
    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
    June 30, 2010 there were 32,588,700 shares available underlying stock options under the
    2007 Stock Incentive Plan.


As of June 30,
    2011, 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 June 30, 2011, there is no warrant share outstanding.


F-17

---

CHINA MEDIA GROUP CORPORATIONNOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS


NOTE 6
    STOCK
    PURCHASE AGREEMENTS


a)
    On
    June 18, 2010 the Company issued 10,000,000 shares of Common Stock pursuant to a Stock
    Purchase Agreement to acquire 50% controlling interests in AX Organic Limited.


b)
    On
    October 8, 2010 the Company issued 10,000,000 shares of Common Stock as part of the
    purchase consideration pursuant to a Sale and Purchase Agreement to acquire 69%
    controlling interests in China Integrated Media Corporation Limited.


c)
    On
    February 22, 2011 the Company entered into an agreement to issue 2,205,376 shares in the
    Company as part of the consideration to acquire share investment.


NOTE 7
    DUE
    FROM RELATED PARTIES


Due from related
    parties are summarized as follows:


June 30, 2011
    
    December 31, 2010US$
    
    US$Advance to supplier
    
    252,592
    
    231,424Due from investment
    company
    
    1,470
    
    12,143Due from former
    subsidiary company
    a
    95,522
    
    95,535Due from director of
    subsidiary company
    
    -
    
    613----------------
    
    ----------------349,584
    
    339,715===========
    
    ===========


a)
    Advance
    to suppliers is the deposit for the purchases of M.A.G.I.C. phone paid to AdvanceTech
    Communications Sdn. Bhd. ("ATC"). Our director, Mr. LOI Cheng Pheng is a
    director and shareholder of ATC.


b)
    Due
    from investment company is an amount due from a company in which our director Mr. Con
    Unerkov is a shareholder.


c)
    This
    is amount due from a former subsidiary company, AX Organic Limited, which was disposed in
    2010


NOTE 8
    PROPERTY
    AND EQUIPMENT, NET


Property and equipment
    is summarized as follows:


June
    30, 2011
    
    December
    31, 2010US$
    
    US$CostFurniture, fixtures and
    equipment
    
    3,836
    
    7,216Computers
    
    3,520
    
    8,058Automobile
    
    47,951
    
    47,951----------------
    
    ----------------55,307
    
    63,225Additional cost :Accumulated
    depreciation
    
    (47,064)
    
    (48,181)----------------
    
    ----------------Balance at end of
    period / year
    
    8,243
    
    15,044===========
    
    ===========


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


June
    30, 2011
    
    December
    31, 2010US$
    
    US$Balance at beginning of
    period /year
    
    -
    
    4,791,676Impairment charge
    during period / year
    
    -
    
    (4,791,676)----------------
    
    ----------------Balance at end of
    period / year
    
    -
    
    -===========
    
    ===========


NOTE 11
    OTHER
    PAYABLES AND ACCRUALS


Other payables and accruals are summarized as follows:June
    30, 2011
    
    December
    31, 2010US$
    
    US$Accrued salaries and
    wages
    
    18.138
    
    25,694Accrued interest
    
    23,709
    
    12,629Accrued accounting,
    legal and consulting fee
    
    193,323
    
    218,823Accrued office and
    related expenses
    
    13,698
    
    96,182Other payables
    a
    132,327
    
    97,804Other payables to staff
    
    76,950
    
    76,951Deposit from customers
    
    29,206
    
    19,571----------------
    
    ----------------Balance at end of
    period / year
    
    487,351
    
    547,654===========
    
    ===========


a)
    Other
    payables are Company expenses such as postage, sundries, etc., and 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 June 30, 2011 and December 31, 2010, the Company had two short term debts for a total
    amount of $214,591 which consisted of a debt of $114,591 and $100,000 as further described
    below.
    The Company has an outstanding
    unsecured debt payable, of $114,591 (December 31, 2009: $99,645), with annual interest
    rate of 10%. This debt is due on May 31, 2011 and thereafter has been accrued monthly. The
    Company recorded accrued interest of $6,684 for the year ended December 31, 2010 (year
    ended December 31, 2009: $9,964).
    The Company also had during the
    year entered into two loan agreements of $50,000 each for a total of $100,000. Both the
    loans are unsecured, bears interest at 10% per annum, repayable on June 3, 2011 and July
    5, 2011. Initially, the holder of these loans can convert the loan into Common Stock of
    the Company at any time prior to the maturity of the loan and at a conversion price of
    US$0.02 per share. In April 2011, the terms of the loan was amended as follows: i) the
    interest rate was increased to 12% with effect from January 1, 2011, and ii) the loan was
    extended for one more year and the convertible feature was cancelled with effect December
    30, 2010.


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 $452,760 as of June 30, 2011
    (December 31, 2010: $1,085,855 ).


NOTE 14
    DUE
    TO RELATED PARTIES


Due to related parties are summarized as follows:


June
    30, 2011
    
    December
    31, 2010US$
    
    US$Due to beneficial
    shareholders
    (a)
    1,392,141
    
    698,889Due to investment
    company
    (b)
    12,777
    
    -Due to directors of
    subsidiary companies
    (c)
    157,990
    
    156,499----------------
    
    ----------------1,562,908
    
    855,388===========
    
    ===========


(a) The amounts due to beneficial shareholders are unsecured, repayable on demand and is
    interest free except for the $50,000 which bears interests at 6% per annum.(b) The amount due to an investment company is interest free, unsecured and repayable on
    demand.(c) The amount due to directors of subsidiary companies is interest free, unsecured and
    repayable on demand.


F-20

---

CHINA MEDIA GROUP CORPORATIONNOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS


NOTE 15
    LONG-TERM
    DEBTS


June
    30, 2011
    
    December
    31, 2010US$
    
    US$Shareholder 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.


NOTE 16
    RELATED
    COMPANY TRANSACTIONS


The
    Company agreed to pay directors and officers a monthly salary for services performed.
    During the year ended December 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. During the period under review, the Company paid the Directors and officers
    a total remuneration of $1,350.


On
    November 25, 2005, a subsidiary of the Company signed a loan agreement with one of 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 2010 was $160,000 (2009: $160,000)
    and $80,000 for the six months period ended June 30, 2011 ($80,000 for the six months
    period ended June 30, 2010).


NOTE 17
    INVESTMENT
    IN SHARES


Investment
    in shares relates to acquisition of 5% interests in Advance Tech Communications Sdn. Bhd.
    ("ATC") for US$81,556 as announced in Form 8K filed on February 22, 2011.
    Pursuant to the agreement, the Company shall issue the 2,205,376 shares as part of the
    consideration within two months from the completion date. As at the date of this report,
    the Company still has not issued the shares as it is pending the delivery of the ATC
    shares, which is expected in September 2011.


NOTE 18
    INCOME
    TAXES


No
    provision was made for income tax for the year ended December 31, 2010 and 2009, since the
    Company and its subsidiaries had significant net operating loss. In the year ended
    December 31, 2010 and 2009, the Company and its subsidiaries incurred net operating losses
    for tax purposes of approximately $5,597,741 and $2,534,104, respectively. Total net
    operating losses carry forward at December 31, 2010 and 2009, (i) for Federal and State
    purpose were $11,063,748 and $6,113,311, respectively and (ii) for its entities outside of
    the United States were $1,707,655 and $1,454,671, respectively for the two years. The net
    operating loss carry-forwards may be used to reduce taxable income through the year 2025.
    The availability of the Company's net operating loss carry-forwards are subject to
    limitation if there is a 50% or more change in the ownership of the Company's stock.
    There was no significant
    difference between reportable income tax and statutory income tax. The gross deferred tax
    asset balance as of December 31, 20 10 and 2009 was approximately $4,624,137 and
    $2,601,000, respectively. A 100% valuation allowance has been established against the
    deferred tax assets, as the utilization of the loss carry-forwards cannot reasonably be
    assured.
    A reconciliation between the
    income tax computed at the Hong Kong and PRC China statutory rate and the Group's
    provision for income tax is as follows:


2010
    
    2009-----------------
    
    ---------------Hong Kong statutory
    rate
    
    16.5%
    
    16.5%Valuation allowance -
    Hong Kong rate
    
    (16.5%)
    
    (16.5%)PRC China Enterprise
    Income Tax
    
    25%
    
    25%Valuation allowance -
    PRC rate
    
    (25%)
    
    (25%)-----------------
    
    ---------------Provision for income
    tax
    
    -
    
    -=============
    
    ============


F-21

---

CHINA MEDIA GROUP CORPORATIONNOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS


NOTE 19
    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
    Product Services
    ConsolidatedFor the six months 
    ended June 30,
    For the six months 
    ended June 30,
    For the six months 
    ended June 31,
    For the six months 
    ended June 31,2011
    2010
    2011
    2010
    2011
    2010
    2011
    2010US$
    US$
    US$
    US$
    US$
    US$
    US$
    US$Turnover
    59,819
    26,574
    -
    -
    -
    -
    59,819
    26,574=======
    =======
    =======
    ======
    ======
    ======
    =========
    =========Segment
    results
    31,195
    (11,759)
    (23)
    (4,650)
    -
    (1,217)
    31,172
    (17,625)=======
    =======
    =======
    ======
    ======
    ======Unallocated
    corporate income
    
    
    
    
    
    
    101,988
    -Unallocated
    corporate expenses
    
    
    
    
    
    
    (100,127)
    (287,181)--------------
    --------------Profit /
    (Loss) from operations
    
    
    
    
    
    
    33,033
    (304,806)Finance
    costs
    
    
    
    
    
    
    (93,235)
    (85,538)--------------
    --------------Loss for
    the period
    
    
    
    
    
    
    (60,202)
    (390,344)=========
    =========As at June 302011
    2010ASSETSSegment
    assets
    6,551
    4,809,949
    354,819
    356,059
    -
    260,025
    361,370
    5,426,033Unallocated
    corporate assets
    
    
    
    
    
    
    482,835
    75,444--------------
    --------------Consolidated
    total assets
    
    
    
    
    
    
    844,205
    5,501,477=========
    =========LIABILITIESSegment
    liabilities
    124,122
    147,071
    -
    (9,492)
    -
    -
    124,122
    136,362Unallocated
    corporate liabilities
    
    
    
    
    
    
    4,954,114
    4,518,342--------------
    --------------Consolidated
    total liabilities
    
    
    
    
    
    
    5,078,236
    4,654,704=========
    =========Depreciation
    of fixed assets
    6,127
    5,594
    673
    686
    -
    -
    6,800
    6,280=======
    =======
    =======
    ======
    ======
    ======
    =========
    =========


F-22

---

CHINA MEDIA GROUP CORPORATIONNOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS


NOTE 20
    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 six month ended June 30,
    2011 and for the year ended December 31, 2010 was $11,678 and $24,404 respectively.
    Future minimum rental payments
    under non-cancelable operating leases as at June 30, 2011 is $12,280.


(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 21
    SUBSEQUENT
    EVENTS


(a)
    The
    Group has evaluated all subsequent events through August 19, 2011, the date these
    consolidated financial statements were issued, and determined that there were no
    subsequent events or transactions that require recognition or disclosures in the financial
    statements.


F-23

---

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 June 30, 2011.


---

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 ("Good 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.


We believe that the China advertising market has rebounded from the recent economic
    downturn with the continued growth of its economy. We will look to re-launch the outdoor
    advertising markets and to raise the adequate capital to roll out the Beijing Ren Ren
    outdoor project, subject to available funding. 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 during this quarter were 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 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
    $30,930 and $59,819 for the three months and six months period ended 30 June 2011 in
    relation to other advertising services.


---

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
    professionals 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 M.A.G.I.C. W3 by Q3 2011. There has been no other significant update
    for the M.A.G.I.C. W3.


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. During this
    quarter, we did not realize any revenue from this business unit. However the Group is in
    discussion and exploring other products that can be distributed in our product services
    unit.


---

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 $29,376 as of June 30, 2011; an increase from the
    previous period end of December 31, 2010. 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 $500,000 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 to over 5 regional offices in China. Over the next two years,
    we also propose to acquire strategic partners that have existing operations in cities or
    regions to grow our business by acquisition and through cooperation agreements and
    otherwise, subject to available funding. Additional support staff may be hired as
    necessity and resources dictate 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 AND SIX MONTHS PERIOD ENDED JUNE 30, 2011 COMPARED TO THE THREE
    MONTHS AND SIX MONTHS PERIOD ENDED JUNE 30, 2010


REVENUES.
    For the three months period ended
    June 30, 2011, the Group has realized revenue of $30,930 and a cost of revenue of $9,702,
    achieving a gross profit of $21,228. For the three month period ended June 30, 2010, the
    Group has realized revenue of $11,042 and a cost of revenue of $7,116 achieving a gross
    profit of $3,926. 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.For the six months period ended June 30, 2011, the Group has realized revenue of $59,819
    and a cost of revenue of $22,261, achieving a gross profit of $37,558. For the six month
    period ended June 30, 2010, the Group has realized revenue of $26,574 and a cost of
    revenue of $13,356 achieving a gross profit of $13,218.


OPERATING
    EXPENSES.
    For the three month period ended
    June 30, 2011, our gross profit was $21,228 and our total operating expenses were $44,253,
    all of which were selling, general and administrative expenses. We also had $46,615 in
    interest expenses, $89,838 in gain on disposal of investment, $12,150 in other income and
    loss attributable to uncontrolled interest of $3,469, so that the net profit to our
    shareholders for the three months period ended June 30, 2011 was $35,817. This is in
    comparison to the same period ended June 30, 2010, where our gross profit was $3,926 and
    our total operating expenses were $227,897, all of which were selling, general and
    administrative expenses. We also had $43,047 in interest expenses and loss attributable to
    uncontrolled interest of $4,497, so that the net loss to our shareholders for the three
    months period ended June 30, 2010 was $262,521.


For the six month period ended June 30, 2011, our gross profit was $37,558 and our total
    operating expenses were $112,899, all of which were selling, general and administrative
    expenses. We also had $93,235 in interest expenses, $89,838 in gain on disposal of
    investment, $12,150 in other income and loss attributable to uncontrolled interest of
    $6,386, so that the net loss to our shareholders for the six months period ended June 30,
    2011 was $60,202. This is in comparison to the same period ended June 30, 2010, where our
    gross profit was $13,218 and our total operating expenses were $329,637, all of which were
    selling, general and administrative expenses. We also had $85,538 in interest expenses and
    loss attributable to uncontrolled interest of $11,613, so that the net loss to our
    shareholders for the six months period ended June 30, 2010 was $390,344.


Liquidity and Capital Resources


As at June 30, 2011, the Company had cash and cash equivalents totaling $29,376, other
    current assets of $587,030 and non-current assets totaling $227,799 which were represented
    by $8,243 in fixed assets, $138,000 in distribution rights and $81,556 in investment in
    shares. The total assets of the Company were $844,205 as of June 30, 2011. We also had
    current liabilities of $2,954,114 which were represented by $487,351 in accruals, $214,591
    in short term debt, $452,760 due to directors and officers, $1,562,908 due to related
    parties, $236,504 in option liabilities as of June 30, 2011. We also had $2,000,000 in
    long-term shareholders loan and $124,122 in uncontrolled interest as of June 30, 2011,
    making our total liabilities $5,078,236.
    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 2011.


---

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 June 30, 2011 the Company incurred net profit
    of $35,817 and has accumulated losses of $13,927,245 as at June 30, 2011. 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 based may result in the Company 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 June 30, 2011, 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 Controls and Procedures:


In accordance with Exchange Act Rules 13a-15 and 15d-15, our management is required to
    perform an evaluation under the supervision and with the participation of the Company's
    management, including the Company's principal executive officer and principal financial
    officer, of the effectiveness of the design and operation of the Company's disclosure
    controls and procedures as of the end of the period.


Evaluation of Disclosure Controls and Procedures:


Based on their evaluation of our disclosure controls and procedures (as defined in Rules
    13a-15(e) and 15d-15(e) under the Exchange Act) as of June 30, 2011, our Principal
    Executive Officer and Principal Financial Officer have concluded that our disclosure
    controls and procedures were not effective to ensure that the information required to be
    disclosed by us in this Report was (i) recorded, processed, summarized and reported within
    the time periods specified in the SEC's rules and instructions for Form 10-Q.
    Our Principal Executive Officer and Principal Financial Officer have concluded that our
    disclosure controls and procedures had the following deficiency:


*
    We were unable to maintain any segregation of duties within our business operations due to
    our reliance on limited personnel. While this control deficiency did not result in any
    audit adjustments to our interim or annual financial statements, it could have resulted in
    a material misstatement that might have been prevented or detected by a segregation of
    duties. Accordingly we have determined that this control deficiency constitutes a material
    weakness.


To the extent reasonably possible, given our limited resources, our goal is to separate
    the responsibilities of Principal Executive Officer and Principal Financial Officer,
    intending to rely on two or more individuals. We will also seek to expand our current
    board of directors to include additional individuals willing to perform directorial
    functions. Since the recited remedial actions will require that we hire or engage
    additional personnel, this material weakness may not be overcome in the near term due to
    our limited financial resources. Until such remedial actions can be realized, we will
    continue to rely on the advice of outside professionals and consultants.


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 2.
    Unregistered Sales of Equity Securities and Use of Proceeds


As disclosed in the Form 8-K filed with the SEC on February 22, 2011 the Group acquired 5%
    equity interests in Advance Tech Communications Sdn. Bhd. for RM293,000 (about US$96,642)
    which was paid by RM87,900 cash and the balance paid by the issuance of 2,205,376 shares
    in the Company. As at the date of this report, the shares have not been issued pending the
    receipt of the acquired shares.


Item 3.
    Defaults Upon Senior Securities


None.


Item 4.
    Submissions of Matters to a Vote of Security Holders


None.


Item 5.
    Other Information


None.


---

Item 6.
    Exhibits


Exhibit No.
    Description of Exhibit2.1
    Shareholders' Agreement between Good World Investments
    Limited, Advance Tech Communications Sdn. Bhd. and ATC Marketing Limited(7)2.2
    Operational Agreement between AX Organic Limited and
    Huangpi High Yield Cultivation Experiment Base (8)2.3
    Sale and Purchase Agreement between Good World Investments
    Limited, Tidewell Limited and the Company(9)2.4
    Sale and Purchase Agreement entered by Good World
    Investments Limited to acquire 5% equity interest in Advance Tech Communications Sdn. Bhd.
    (11)2.5
    Sale and Purchase Agreement between Good World Investments
    Limited and Keen Star International (HK) Limited(10)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.(6)3.2
    Bylaws (1)4.1
    Executive Services Agreement between China Media Group
    Corporation and Con Unerkov (3)10.3
    2002 Stock Option Plan (4)10.4
    2007 Stock Incentive Plan(5)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 Annual Report on Form 10-KSB/A as filed with the SEC on August 11,
    2006.4.
    Incorporated
    by reference to our Registration Statement on Form SB-2 as filed with the SEC on April 15,
    2003.5.
    Incorporated
    by reference to our Registration Statement on Form S8 as filed with the SEC on March 8,
    2007.6.
    Incorporated
    by reference to our Registration Statement on Form SB-2 as filed with the SEC on March 16,
    2007.7.
    Incorporated
    by reference to our Current Report on Form 8-K as filed with the SEC on May 26, 2009.8.
    Incorporated
    by reference to our Current Report on Form 8-K as filed with the SEC on June 23, 2010.9.
    Incorporated
    by reference to our Current Report on Form 8-K as filed with the SEC on September 22,
    2010.10.
    Incorporated
    by reference to our Current Report on Form 8-K as filed with the SEC on April 14, 2011.11.
    Incorporated
    by reference to our Current Report on Form 8-K as filed with the SEC on February 22, 2011.


* Filed herewith.


---

SIGNATURESPursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 34,
    the registrant has duly caused this report to be signed on its behalf by the undersigned,
    thereunto duly authorized.


China Media Group Corporationa Texas
    corporation/s/
    Cheng Pheng Loi---------------------------------------Cheng Pheng
    LoiChief
    Executive Officer
    Principal executive officerChina Media
    Group Corporationa Texas
    corporation/s/ Con
    Unerkov---------------------------------------Con UnerkovChief
    Financial Officer
    Principal executive officer


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
    August 22,
    2011--------------------------------------------Cheng Pheng
    LoiIts:
    Principal
    executive officer,President,
    Director


By:
    /s/ Con
    Unerkov
    August 22,
    2011--------------------------------------------Con UnerkovIts:
    Chief
    financial officer,Director


By:
    /s/ Lam Pui
    Kit
    August 22,
    2011--------------------------------------------Lam Pui KitIts:
    Secretary,
    Treasurer,Director