FORM 10-Q

[ x ]
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
    ACT OF 1934For the quarterly three month period ended March 31, 2012[    ]
    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.)


1402 Wan Chai Commercial Center, 204 Johnston Road, Wanchai, Hong Kong
    --------------------------------------------------------------------------
    ----------------(Address of Company's principal executive offices)
    (Zip Code)


+011 852 3171 1208

-------------------------------------------------
(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 April 30, 2012 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


cmg_logo.gif

China Media Group Corporation
Condensed Consolidated Financial Statements
March 31, 2012
(Unaudited)(Expressed In United States Dollars)

Condensed
    Consolidated Balance Sheets as of March 31, 2012 and December 31, 2011


Condensed Consolidated Statements of Operations for the three months period ended March
    31, 2012 and 2011


Condensed Consolidated Statements of Stockholders' Equity for the years ended December 31,
    2011 and 2010, and for the three months period ended March 31, 2012


Condensed Consolidated Statements of Cash Flows for the three months periods ended March
    31, 2012 and 2011


Notes to Condensed Consolidated Financial Statements


---

CHINA MEDIA
    GROUP CORPORATIONCONSOLIDATED
    BALANCE SHEETSAS OF MARCH
    31, 2012 AND DECEMBER 31, 2011


March 31, 2012
    
    December 31,
    2011Notes
    
    (Unaudited)
    
    (Audited)ASSETS
    
    
    US$
    
    US$Current Assets:Cash and cash equivalents
    
    
    45,237
    
    15,600Due from related parties
    7
    
    372,466
    
    372,541Prepayments, deposit and other
    receivables
    
    
    169,164
    
    169,152---------------
    
    ---------------Total current assets
    
    
    586,867
    
    557,293Non-current assetsProperty and equipments, net
    8
    
    451
    
    2,232Advance payment for distribution
    rights
    9
    
    69,000
    
    69,000Investment in shares
    16
    
    81,556
    
    81,556---------------
    
    ---------------151,007
    
    152,788---------------
    
    ---------------737,874
    
    710,081=========
    
    =========LIABILITIES AND STOCKHOLDERS'
    EQUITYCurrent liabilities:Other payables and accruals
    10
    
    471,634
    
    424,396Short term debt
    11
    
    100,000
    
    100,000Due to officer and directors
    12
    
    449,548
    
    448,145Due to related parties
    13
    
    1,714,692
    
    1,656,981Option liabilities
    
    
    236,504
    
    236,504---------------
    
    ---------------Total current liabilities
    
    
    2,972,378
    
    2,866,026---------------
    
    ---------------Long-term debts
    14
    
    2,000,000
    
    2,000,000Stockholders'equity:Common stock, no par value,
    85,000,000,000 shares authorized, 554,132,450 (2011: 554,132,450) shares issued and
    outstanding
    4
    
    7,773,902
    
    7,773,902Additional paid-in-capital
    
    
    1,799,358
    
    1,799,358Shares to be issued
    
    
    52,510
    
    52,510Comprehensive income
    
    
    65,885
    
    66,176Accumulated deficits
    
    
    (14,043,774)
    
    (13,966,347)Uncontrolled interest
    
    
    117,615
    
    118,456---------------
    
    ---------------Total stockholders' equity
    
    
    (4,234,504)
    
    (4,155,945)---------------
    
    ---------------737,874
    
    710,081=========
    
    =========


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

F-3

---

CHINA MEDIA
    GROUP CORPORATIONCONSOLIDATED
    STATEMENTS OF OPERATIONSFOR THE
    THREE MONTHS ENDED MARCH 31, 2012 AND 2011(UNAUDITED)


Three months periodsEnded March 31--------------------------------------------------2012
    
    2011-----------------
    
    ---------------US$
    
    US$Net
    revenue
    
    
    
    
    
    22,829
    
    28,889Cost of
    revenue
    
    
    
    
    
    (8,990)
    
    (12,559)----------------
    
    ----------------Gross
    profit
    
    
    
    
    
    13,839
    
    16,330Operating
    expenses:Selling,
    general and administrative expenses
    
    
    
    
    
    48,307
    
    68,646---------------
    
    ---------------Loss
    from operations before other expense
    
    
    
    
    
    (34,468)
    
    (52,316)Other
    income / (expenses)Interest income
    
    
    
    
    
    33
    
    -Interest expenses
    
    
    
    
    
    (43,833)
    
    (46,620)-----------------
    
    -----------------Net loss
    before uncontrolled interests
    
    
    
    
    
    (78,268)
    
    (98,936)Uncontrolled
    interest
    
    
    
    
    
    841
    
    2,917-----------------
    
    -----------------Net loss
    
    
    
    
    
    (77,427)
    
    (96,019)-----------------
    
    -----------------Other comprehensive incomeForeign currency translation gain
    
    
    
    
    
    (291)
    
    (146)-----------------
    
    -----------------Comprehensive
    loss
    
    
    
    
    
    (77,718)
    
    (96,165)=========
    
    =========Basic
    and diluted loss per common share
    
    
    
    
    
    (0.00)
    
    (0.00)=========
    
    =========Basic
    and diluted weighted average number of common shares *
    
    
    
    
    
    554,132,450
    
    554,132,450=========
    
    ===============


*
    Weighted
    average number of shares used to compute basic and diluted loss per share for the three
    months ended March 31, 2012 and 2011 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, 2011 AND 2010AND FOR THE
    THREE MONTHS ENDED MARCH 31, 2012(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, 2010
    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)--------------
    -----------
    --------------
    ---------------
    -------------
    --------------
    --------------
    ---------------Balance
    at December 31, 2010
    554,132,450
    7,773,902
    1,799,358
    67,176
    -
    (13,867,043)
    130,508
    (4,096,099)Comprehensive
    income
    -
    -
    -
    (1,000)
    -
    -
    -
    (1,000)Shares
    to be issued for acquisition of share investments
    -
    -
    -
    -
    52,510
    -
    -
    52,510Net loss
    -
    -
    -
    -
    -
    (99,304)
    (12,052)
    (111,356)--------------
    -----------
    --------------
    ---------------
    -------------
    --------------
    --------------
    ---------------Balance
    at December 31, 2011
    554,132,450
    7,773,902
    1,799,358
    66,176
    52,510
    (13,966,347)
    118,456
    (4,155,945)Comprehensive
    income
    -
    -
    -
    (291)
    -
    -
    -
    (291)Net loss
    -
    -
    -
    -
    -
    (77,427)
    (841)
    (78,268)--------------
    -----------
    --------------
    ---------------
    -------------
    --------------
    --------------
    ---------------Balance
    at March 31, 2012
    554,132,450
    7,773,902
    1,799,358
    65,885
    52,510
    (14,043,774)
    117,615
    (4,234,504)========
    =======
    ========
    =========
    ========
    ========
    ========
    =========


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

F-5

---

CHINA MEDIA
    GROUP CORPORATIONCONSOLIDATED
    STATEMENTS OF CASH FLOWSFOR THE
    THREE MONTHS ENDED MARCH 30, 2012 AND 2011(UNAUDITED)


For the Three
    Months ended March 31, 
    2012
    
    For the Three
    Months ended March 31, 
    2011US$
    
    US$--------------------
    
    --------------------Cash flows from operating
    activities:Net loss
    
    
    (77,427)
    
    (96,019)Adjustment to reconcile net loss to
    net cash used in operating activities:Depreciation
    
    
    1,781
    
    3,141Uncontrolled interest
    
    
    (841)
    
    (2,917)Option expenses for employee
    compensation
    
    
    -
    
    -(Increase) / decrease in assets and
    liabilities:Prepaid expenses, deposit
    and other receivables
    
    
    (12)
    
    (7,898)Due from former subsidiary
    company
    
    
    (41)
    
    13Due from related parties
    
    
    116
    
    (27,625)Accounts payable and accrued
    expenses
    
    
    47,238
    
    51,578Option liabilities
    
    
    -
    
    29,563Due to directors and
    officers
    
    
    1,403
    
    (19,879)Due to related parties
    
    
    57,711
    
    76,412--------------------
    
    --------------------Net cash provided by operating
    activities
    
    
    29,928
    
    6,369--------------------
    
    --------------------Cash flows from investing
    activities:Purchase of property and equipment
    
    
    -
    
    ---------------------
    
    --------------------Net cash used in investing
    activities
    
    
    -
    
    ---------------------
    
    --------------------Cash flows from financing
    activities :Issue of shares for acquisition of
    subsidiary
    
    
    -
    
    ---------------------
    
    --------------------Net cash provided by
    financing activities
    
    
    -
    
    ---------------------
    
    --------------------Net increase in cash and cash
    equivalents
    
    
    29,928
    
    6,369Effect of exchange rate changes on
    cash and cash equivalents
    
    
    (291)
    
    (146)Cash and cash equivalents,
    beginning
    
    
    15,600
    
    17,654--------------------
    
    --------------------45,237
    
    23,877============
    
    ============Supplemental disclosure of cash
    flow information:Interests paid
    
    
    43,833
    
    46,620============
    
    ============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.


In March 2012, the Group entered into a condition sales and purchase agreement to acquire
    100% equity interest of A-Team Resources Sdn. Bhd., an manufacturer and distributor of
    electronics and light appliances, at a consideration price equal to the net asset value of
    ATeam for $2,011,607 by the issuance of 558,779,837 shares in the Company. As the date of
    this report, this transaction still has not completed as the Company is still conducting
    its due diligence.


NOTE 2
    SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES & REALIZATION OF ASSETS


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, 2011. 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, 2011 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 March 31, 2012 include the
    financial statements of the Company, its wholly owned subsidiaries Ren Ren Media Group
    Limited, Good World Investments Limited, 51% subsidiary Premium Multimedia Sdn. Bhd., and
    two 50% subsidiaries, namely Beijing Ren Ren Health Culture Promotion Limited and ATC
    Marketing Limited. ATC Marketing Limited was established on the date of May 21, 2009 and
    Premium Multimedia Sdn. Bhd. was acquired on September 26, 2009 and the disposal in
    October 2010. The Company consolidated both of these 50% ownership companies during the
    period of control because of the sole largest shareholding status and/or controlling of
    the Board of Directors. On June 18, 2010, the Group acquired a 50% subsidiary, AX Organic
    Limited and then disposed of this investment in December 2010 and the Company consolidates
    this subsidiary into the Group accounts during this period as the Group has control of the
    Board of Directors.


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


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


F-7

---

CHINA MEDIA GROUP CORPORATIONNOTES TO CONSOLIDATED FINANCIAL STATEMENTS


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


Use of estimates


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


Net Income (Loss) per Share


Basic earnings per share were computed by dividing net loss by the weighted average number
    of shares of common stock outstanding during the year. Diluted loss per common share for
    the year ended December 31, 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 & REALIZATION OF ASSETS (Continued)


Income taxes


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


Stock-based compensationASC 718 "Compensation - Stock Compensation" codified SFAS No. 123 prescribes
    accounting and reporting standards for all stock-based payments award to employees,
    including employee stock options, restricted stock, employee stock purchase plans and
    stock appreciation rights. , may be classified as either equity or liabilities. The
    Company should determine if a present obligation to settle the share-based payment
    transaction in cash or other assets exists. A present obligation to settle in cash or
    other assets exists if: (a) the option to settle by issuing equity instruments
    lacks commercial substance or (b) the present obligation is implied because of an
    entity's past practices or stated policies. If a present obligation exists, the
    transaction should be recognized as a liability; otherwise, the transaction should be
    recognized as equity.


The Company accounts for stock-based compensation issued to non-employees and consultants
    in accordance with the provisions of ASC 505-50 "Equity - Based Payments to
    Non-Employees" which codified SFAS 123 and the Emerging Issues Task Force consensus
    in Issue No. 96-18 ("EITF 96-18"), "Accounting for Equity Instruments that
    are Issued to Other Than Employees for Acquiring or in Conjunction with Selling, Goods or
    Services". Measurement of share-based payment transactions with non-employees shall
    be based on the fair value of whichever is more reliably measurable: (a) the goods
    or services received; or (b) the equity instruments issued. The fair value of the
    share-based payment transaction should be determined at the earlier of performance
    commitment date or performance completion date.


Employees' benefits and pension 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 Company to the MPF schemes were $1,628 and $nil for the year December 31, 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 & REALIZATION OF ASSETS (Continued)


Foreign Currency Translation


The accounts of the Company's Hong Kong and China subsidiaries are maintained, in
    the Hong Kong dollars (HK) and Chinese Renminbi, respectively. Such financial statements
    are translated into U.S. Dollars (USD) in accordance with ASC 830 "Foreign Currency
    Translation" which codified Statement of Financial Accounts Standards
    ("SFAS") No. 52, "Foreign Currency Translation," with the respective
    currency as the functional currency. According to the Statement, all assets and
    liabilities were translated at the exchange rate on the balance sheet date, stockholder's
    equity are translated at the historical rates and statement of operations items are
    translated at the weighted average exchange rate for the year. The resulting translation
    adjustments are reported under other comprehensive income in accordance with SFAS No. 130,
    "Reporting Comprehensive Income. As of March 31, 2012, the comprehensive income was
    $65,885.


Recent PronouncementsRecently Implemented Standards


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


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


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


F-10

---

CHINA MEDIA GROUP CORPORATIONNOTES TO CONSOLIDATED FINANCIAL STATEMENTS


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


Recent Pronouncements (Continued)Recently Implemented Standards (Continued)


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


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


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


F-11

---

CHINA MEDIA GROUP CORPORATIONNOTES TO CONSOLIDATED FINANCIAL STATEMENTS


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


Recent Pronouncements (Continued)Recently Implemented Standards (Continued)


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


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


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


Recently Issued Standards


In 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 & REALIZATION OF ASSETS (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 & REALIZATION OF ASSETS (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 March 31,
    2012, the Company has incurred an accumulated deficits totaling $14,043,774 and its
    current liabilities exceed its current assets by $2,385,511. In view of the matters
    described above, recoverability of a major portion of the recorded asset amounts shown in
    the accompanying balance sheets is dependent upon continued operations of the Company,
    which in turn is dependent upon the Company's ability to raise additional capital, obtain
    financing and to succeed in its future operations. The financial statements do not include
    any adjustments relating to the recoverability and classification of recorded asset
    amounts or amounts and classification of liabilities that might be necessary should the
    Company be unable to continue as a going concern.


Management has taken the following steps to revise its operating and financial
    requirements, which it believes are sufficient to provide the Company with the ability to
    continue as a going concern. The Company is actively pursuing additional funding and
    potential merger or acquisition candidates and strategic partners, which would enhance
    stockholders' investment. Management believes that the above actions will allow the
    Company to continue operations through the next fiscal year.


NOTE 4
    STOCKHOLDERS' EQUITY


Common Stock


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. CIMC is in the business of television media and digital signage boards.


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 March 31, 2012, the Company has 19,000,000 stock options outstanding and the
    option liability 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 March 31, 2012:


Options outstandingOutstanding, December
    31, 2010
    19,000,000Granted during the
    period
    -Forfeited/lapsed during
    the period
    -Exercised during the
    period
    ----------------------------Outstanding, March 31,
    2012
    19,000,000================


Following is a summary
    of the status of options outstanding at March 31, 2012:Outstanding Options
    
    Exercisable Options------------------------------------
    
    ----------------------------------------------------------------------GrantDate
    ExercisePrice
    Number
    Average
    RemainingContractual Life
    Average
    Exercise Price
    Number
    Intrinsic
    Price4/16/2010
    $0.010
    19,000,000
    3.04
    $0.010
    19,000,000
    $0.00


On April 16, 2010, the Company granted 19,000,000 stock options to 5 qualified
    persons. As of March 31, 2012, 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 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 March 31, 2012 there were 32,588,700 shares available underlying
    stock options under the 2007 Stock Incentive Plan.


As of March 31, 2012, there were no outstanding stock options to purchase shares of
    our Common Stock under the 2007 Stock Incentive Plan.


Subsequent to the quarter ended March 31, 2012, on May 7, 2012 the Company issued
    711,009 shares at an options price of $0.0218 per share for a total amount of $15,500
    under the 2007 Stock Incentive Plan to its consultant for the services rendered to the
    Company for the first quarter of 2012.


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:


March 31, 2012
    
    December 31, 2011US$
    
    US$Advance to supplier
    (a)
    255,095
    
    254,985Due from investment company
    (b)
    21,634
    
    21,860Due from former subsidiary company
    (c)
    95,737
    
    95,696-------------------
    
    -------------------372,466
    
    372,541===========
    
    ===========


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.


NOTE 8
    PROPERTY AND EQUIPMENT, NET


Property and equipment is summarized as follows:


March 31, 2012
    
    December 31, 2011US$
    
    US$CostFurniture, fixtures and equipment
    
    4,824
    
    4,824Computers
    
    8,058
    
    8,058Automobile
    
    47,951
    
    47,951-------------------
    
    -------------------60,833
    
    60,833Accumulated depreciation
    
    (60,382)
    
    (58,601)-------------------
    
    -------------------Balance at end of period
    
    451
    
    2,232===========
    
    ===========


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
    OTHER PAYABLES AND ACCRUALS


Other payables and accruals are summarized as follows:March 31, 2012
    
    December 31, 2011US$
    
    US$Accrued salaries and wages
    
    25,740
    
    25,715Accrued interest
    
    20,294
    
    17,294Accrued accounting, legal and
    consulting fee
    
    261,824
    
    245,323Accrued office and related expenses
    
    3,753
    
    3,685Other payables
    a
    140,411
    
    112,775Deposit from customers
    
    19,612
    
    19,604-------------------
    
    -------------------Balance at end of period / year
    
    471,634
    
    424,396===========
    
    ===========


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 11
    SHORT - TERM DEBT


As of December 31, 2011, the Company had two short term debts for a total amount of
    $100,000 which relates to two loan agreements of $50,000 each entered into by the Company
    in 2010. 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 December 2010 , 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 loans were extended for one more year to be repayable on June 3, 2012
    and July 5, 2012, respectively, and the convertible feature was cancelled with effect
    December 30, 2010.


NOTE 12
    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 $449,548 as of March
    31, 2012 (December 31, 2011: $448,145).


NOTE 13
    DUE TO RELATED PARTIES


Due to related parties are summarized as follows:


March 31, 2012
    
    December 31, 2011US$
    
    US$Due to shareholders
    (a)
    1,555,380
    
    1,497,634Due to directors of subsidiary
    companies
    (b)
    159,312
    
    159,347-------------------
    
    -------------------1,714,692
    
    1,656,981===========
    
    ===========


(a) The amounts due to beneficial shareholders are unsecured, repayable on demand
    and are interest free except for the $50,000 which bears interests at 6% per annum.


(b) 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 14
    LONG - TERM DEBTS


March 31, 2012
    
    December 31, 2011US$
    
    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. On March 19, 2012 the loan was
    extended for a further one year to November 25, 2013.


NOTE 15
    RELATED COMPANY TRANSACTIONS


The Company agreed to pay directors and officers a monthly salary for services
    performed. For the three months ended December 31, 2012 and 2011, the Company paid the
    directors and its officers and their services companies a total remuneration of $1,351 and
    $1,348, respectively.


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. On March 19, 2012 the loan was extended for a further one year
    to November 25, 2013. The accrued interest for the three months ended March 31, 2012 was
    $40,000 (2011: $40,000).


NOTE 16
    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 has been extended to October 2012.


NOTE 17
    INCOME TAXES


No provision was made for income tax for the year ended December 31, 2011 and 2010,
    since the Company and its subsidiaries had significant net operating loss. In the year
    ended December 31, 2011 and 2010, the Company and its subsidiaries incurred net operating
    losses for tax purposes of approximately $99,304 and $5,597,741, respectively. Total net
    operating losses carry forward at December 31, 2011 and 2010, (i) for Federal and State
    purpose were $11,228,165 and $11,063,748, respectively and (ii) for its entities outside
    of the United States were $1,730,470 and $1,707,655, 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, 2011 and 2010 was approximately $4,694,677 and $4,624,137, 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:


2011
    
    2010-----------------------
    
    --------------------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 18
    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 three monthsended March 31,
    For the three monthsended March 31,
    For the three monthsended March 31,
    For the three monthsended March 31,2012
    2011
    2012
    2011
    2012
    2011
    2012
    2011US$
    US$
    US$
    US$
    US$
    US$
    US$
    US$Turnover
    22,829
    28,889
    -
    -
    -
    -
    22,829
    28,889=======
    =======
    =======
    =======
    ======
    ======
    =========
    =========Segment
    results
    12,998
    13,413
    -
    -
    -
    -
    12,998
    13,413=======
    =======
    =======
    =======
    ======
    ======Unallocated
    corporate income
    
    
    
    
    
    
    33
    -Unallocated
    corporate expenses
    
    
    
    
    
    
    (46,625)
    (62,812)--------------
    --------------Loss
    from operations
    
    
    
    
    
    
    (33,594)
    (49,399)Finance
    costs
    
    
    
    
    
    
    (43,833)
    (46,620)--------------
    --------------Loss for
    the period
    
    
    
    
    
    
    (77,427)
    (96,019)=========
    =========As at March 312012
    2011ASSETSSegment
    assets
    -
    9,881
    285,061
    355,152
    -
    -
    285,061
    365,033Unallocated
    corporate assets
    
    
    
    
    
    
    452,813
    535,472--------------
    --------------Consolidated
    total assets
    
    
    
    
    
    
    737,874
    900,505=========
    =========LIABILITIESSegment
    liabilities
    117,615
    127,591
    -
    -
    -
    -
    117,615
    127,591Unallocated
    corporate liabilities
    
    
    
    
    
    
    4,972,378
    5,043,176--------------
    --------------Consolidated
    total liabilities
    
    
    
    
    
    
    5,089,993
    5,170,767=========
    =========Depreciation
    of fixed assets
    1,682
    2,797
    99
    343
    -
    -
    1,781
    3,140=======
    =======
    =======
    ======
    ======
    ======
    =========
    =========


F-22

---

CHINA MEDIA GROUP CORPORATIONNOTES TO CONSOLIDATED FINANCIAL STATEMENTS


NOTE 19
    COMMITMENTS AND CONTINGENCIES


(a)
    The Company leases office premises for its operations in United States and Hong
    Kong under operating leases. Rental expenses under operating lease for the three month
    ended March 31, 2012 and for the year ended December 31, 2011 was $11,776 and $28,564,
    respectively.
    Future minimum rental payments under
    non-cancelable operating leases for the three month ended March 31, 2012 and for the year
    ended December 31, 2011 are $73,616 and $84,977, respectively.


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


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


(d)
    As disclosed in Note 16 above, the Company has agreed to issue 2,205,376 shares for
    the acquisition of 5% of ATC. 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 has been extended
    to October 2012.


(e)
    As announced in a Form 8K filed on March 16, 2012, on March 15, 2012 the Group
    entered into a conditional agreement to purchase A-Team Resources Sdn. Bhd. for a total
    consideration of about $2,011,607 which shall be satisfied by the issuance of 558,779,837
    shares in the Company, representing 51% of the enlarged share capital of the Company. The
    agreement is conditional to the successful completion of the due diligence by the Group to
    be determined by the sole discretion of the Group on or before April 18, 2012 or a date
    agreed by the parties. On April 17, 2012 the parties agreed to extend the closing dated to
    be on or before May 31, 2012.


NOTE 20
    SUBSEQUENT EVENTS


(a)
    The Group has evaluated all subsequent events through May 15, 2012, the date these
    consolidated financial statements were issued, and determined that, other than as
    disclosed below, there were no subsequent events or transactions that require recognition
    or disclosures in the financial statements.


(b)
    Subsequent to the quarter ended March 31, 2012, on May 7, 2012 the Company issued
    711,009 shares at an options price of $0.0218 per share for a total amount of $15,500
    under the 2007 Stock Incentive Plan to its consultant for the services rendered to the
    Company for the first quarter of 2012.


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
    March 31, 2012.


---

Overview


DESCRIPTION OF BUSINESS.


OUR BACKGROUND. The Company was incorporated in Texas on October 1, 2002 and in
    2005 changed its business focus to 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 today is to become one of China's 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 3 strategic business units being
    "Advertising", "Telecommunications and Mobile Computing", and
    "Products and Services".


We plan to offer advertising services in China. These advertising services would be
    targeted 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.


As announced in a Form 8K filed on March 16, 2012, on March 15, 2012 the Group
    entered into a conditional agreement to purchase A -Team Resources Sdn. Bhd. for a total
    consideration of about $2,011,607 which shall be satisfied by the issuance of 558,779,837
    shares in the Company, representing 51% of the enlarged share capital of the Company. The
    agreement is conditional to the successful completion of the due diligence by the Group to
    be determined by the sole discretion of the Group on or before April 18, 2012 or a date
    agreed by the parties. On April 17, 2012 the parties agreed to extend the closing dated to
    be on or before May 31, 2012. This acquisition will strengthen the Products and Services
    division by providing for sale a range of products in the electronic and light appliance
    segment and possibly extending the marketing to new markets in China and India. This
    company will also provide a steady revenue base to the Group.
    This transaction is expected to close in May 2012.


A-Team was established in 2001 specialized in the
    manufacturing and assembling of home appliances products (white goods). Currently this
    company is operating from Selangor, which is located in the central part of Western
    Malaysia.Their main markets are in North America, Southeast Asia, Africa, Oceania, Mid
    East and Eastern Asia.


2011 Products & Services OverviewAlthough we have established 4 business units, we have only started
    activities in two of them; those are "Advertising", "Telecommunication and
    Mobile" and "Product Services". A brief review and description of these
    three business units' strategies and operations are described below.


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. Given the capital
    requirement to activate this project on the national and provincial level will require us
    to raise at least US$2 million which is difficult given the financial situation of the
    Group today. Therefore we have determined to defocus from the BRR program and to focus on
    other advertising activities going forward. During the period, the Company did not derive
    any advertising income from the BRR project but it has recorded $22,829 and $142,132 for
    the three months ended 31 March 2012 and year ended 31 December 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, 2012. 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. In March
    2012, the Group entered into an agreement to acquire a company that manufactures and
    distributes electronics and light electronics. If we are successful in acquiring this
    company then we will have a range of products for the Group, and with opportunities to
    expand this range of products to sell into China.The potential acquisition was established
    in 2001 and have 5 production lines being "Washing Machines",
    Refrigerators", Chest Freezers" "Wine Chillers" and "Display
    Chillers". Their main markets are in North America, Southeast Asia, Africa, Oceania,
    Mid East and Eastern Asia. 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.


Other Investments


In 2011 the Group disposed its investment in Jademan International Limited for
    $421,538 realizing a profits of $251,538 in order to raise some funds to pay its
    outstanding professional fees and other liabilities.


---

Marketing & Sales OverviewOur plan is to work with advertising agents in
    Hong Kong and Guangdong initially to work on a plan to secure some outdoor media boards
    with the limited resources available to the Group. We will discuss with our contacts in
    Hong Kong and China regarding securing outdoor media boards. Once we have started some
    advertising boards and have secured certain minimum funding for the BRR program, we then
    plan to secure ad/sign placements in districts in China under our Great Wall of China
    Project. We plan to co-operate with international advertising firms to place out the
    advertising on these ad/sign placements on either an agent or outsourced basis. We will
    recruit a team to manage the 10 largest cities in China where we would secure, manage and
    administer ad/sign placements for these cities. For the other cities we will look for
    partners or agents to work with us to secure ad/sign placements. Once we have certain
    ad/sign placements network for the second-tier cities, we will approach advertising
    agencies to sell these ad/sign placements to their customers.
    For our M.A.G.I.C. Convergent devices, we
    will sell through distribution channels, network operators and small enterprises. We will
    approach distribution channels and network operators in Hong Kong and China, initially and
    then in other territories to sell the M.A.G.I.C. Device. We will also sell to certain
    enterprises that will take advantage of the special functions in M.A.G.I.C. Device and
    customize to their operational needs. Select firms that we will target are transportation
    and logistic companies, courier companies, and direct sales companies. We will also target
    corporate and financial executives to customize the M.A.G.I.C. Device to their
    requirements. To sell this high value product with innovative applications, we plan to
    employ business development teams focused on creating high-value strategic customers and
    business alliances.
    For our Products Services unit, we will work
    with our advertisers to cross promote and sell their products on our advertising platform,
    once we have built up. In some cases, we will look to develop our own brands. We will
    employ a small team to handle enquires and to provide support to our advertising
    customers. For our recently announced potential acquisition of A-Team Resources, the
    organization has an existing marketing and sales department / channels. We also plan to
    take much more of a focus on the China market and work together to open up additional
    growing markets. The potential acquisition is currently generating revenues and these
    revenues will be used to grow into additional markets.


Industry Overview and CompetitionThe key to our success in the advertising business is the occupation of prime
    advertising locations throughout China. The premium locations with heavy pedestrian
    traffic are not common but are the focus of all advertising agencies and media owners.
    However you need to have the outdoor media to be able to compete for the premium sites.
    Many of our competitors have established outdoor billboards to offer to their clients
    where it would be difficult to compete since they are already in the market place and
    working with advertising agents already. We will need to build up some outdoor media
    boards to show a presence in the market place before we can get commitments from
    advertising agents and customers. However, we believe there is ample room for our Company
    to grow in the China market.
    There are many competitors in the market
    place offering a variation of the M.A.G.I.C W3, however not one that offers full computer
    operability in full Windows 7 OS with phone functionality. With the emergence of newer
    convergent device technologies, there is an opportunity for us to offer convergent devices
    and applications and solutions that have more functionality than traditional mobile
    devices. The new devices are easier to integrate with existing data and video applications
    and systems, and are easier to maintain and administer. We believe that the rate of
    adoption of convergent device and its applications and solutions by corporate executives
    and innovative applications will accelerate the adaptation of our M.A.G.I.C. Convergent
    device is recognized as more secure, and more functional in internet-based applications.
    We believe mobile executives will recognize the benefit of having notebook functionality
    in a handheld device combined with video and data capabilities.


---

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 $45,237 as of March 31, 2012; an increase from
    the previous period end of December 31, 2011. 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 $1,500,000 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.


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


---

Results of
    operation.


FOR THE THREE MONTHS PERIOD ENDED MARCH 31, 2012 COMPARED TO THE THREE MONTHS
    PERIOD ENDED MARCH 31, 2011


REVENUES.
    For the three months period ended March 31,
    2012, the Group has realized revenue of $22,829 and a cost of revenue of $8,990, achieving
    a gross profit of $13,839. For the three month period ended March 31, 2011, the Group has
    realized revenue of $28,889 and a cost of revenue of $12,559 achieving a gross profit of
    $16,330. We hope to generate additional revenues when we begin to receive contracts from
    clients or through acquisitions. Depending upon the availability of operating capital, we
    intend to expand our operations in the next 12 months.


OPERATING EXPENSES.
    For the three month period ended March 31,
    2012, our gross profit was $13,839 and our total operating expenses were $48,307, all of
    which were selling, general and administrative expenses. We also had $43,833 in interest
    expenses, $33 in interest income and loss attributable to uncontrolled interests of $841,
    so that the net loss to our shareholders for the three months period ended March 31, 2012
    was $77,427. This is in comparison to the same period ended March 31, 2011, where our
    gross profit was $16,330 and our total operating expenses were $68,646, all of which were
    selling, general and administrative expenses. We also had $$46,620 in interest expenses
    and loss attributable to uncontrolled interests of $2,917, so that the net loss to our
    shareholders for the three months period ended March 31, 2011 was $96,019.


Liquidity and Capital Resources


As at March 31, 2012, the Company had cash and cash equivalents totaling $45,237,
    other current assets of $541,630 and non-current assets totaling $151,007 which were
    represented by $451 in fixed assets, $69,000 in distribution rights and $81,556 in
    investment in shares. The total assets of the Company were $737,874 as of March 31, 2012.
    We also had current liabilities of $2,972,378 which were represented by $471,634 in
    accruals, $100,000 in short term debt, $449,548 due to directors and officers, $1,714,692
    due to related parties, $236,504 in option liabilities as of March 31, 2012. We also had
    $2,000,000 in long-term shareholders loan and $117,615 in uncontrolled interests as of
    March 31, 2012, made our total liabilities $5,089,993.
    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 2012.


---

Going Concern


The Company's financial statements are presented on a going concern basis, which
    contemplates the realization of assets and satisfaction of liabilities in the normal
    course of business. The Company has experienced significant losses from operations in
    recent periods. For the three months ended March 31, 2012 the Company incurred net losses
    of $77,427 and has accumulated losses of $14,043,774 as at March 31, 2012. 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 March 31, 2012, there were no off balance sheet arrangements. The Company has
    no off balance sheet obligations nor guarantees and has not historically used special
    purpose entities for any transactions.


---

Item 3.
    Quantitative and
    Qualitative Disclosure About Market Risk.


Quantitative and Qualitative Disclosures about Market Risk:


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


Item 4.
    Controls and Procedures.


Evaluation of Disclosure Controls and Procedures:


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


Changes in Internal Controls over Financial Reporting:


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


---

PART II -
    OTHER INFORMATION


Item 1.
    Legal Proceedings


None.


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


None.


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(6)2.2
    Sale
    and Purchase Agreement between Good World Investments Limited, Tidewell Limited and the
    Company(7)2.3
    Sale
    and Purchase Agreement entered by Good World Investments Limited to acquire 5% equity
    interest in Advance Tech Communications Sdn. Bhd. (9)2.4
    Sale
    and Purchase Agreement between Good World Investments Limited and Keen Star International
    (HK) Limited(8)2.5
    Sale
    and Purchase Agreement between Good World Investments Limited and ECE Technologies Sdn.
    Bhd.(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.(5)3.2
    Bylaws
    (1)10.3
    2002
    Stock Option Plan (3)10.4
    2007
    Stock Incentive Plan(4)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 Registration Statement on Form SB-2 as filed with the SEC on April 15,
    2003.4.
    Incorporated by
    reference to our Registration Statement on Form S8 as filed with the SEC on March 8, 2007.5.
    Incorporated by
    reference to our Registration Statement on Form SB-2 as filed with the SEC on March 16,
    2007.6.
    Incorporated by
    reference to our Current Report on Form 8-K as filed with the SEC on May 26, 2009.7.
    Incorporated by
    reference to our Current Report on Form 8-K as filed with the SEC on September 22, 2010.8.
    Incorporated by
    reference to our Current Report on Form 8-K as filed with the SEC on April 14, 2011.9.
    Incorporated by
    reference to our Current Report on Form 8-K as filed with the SEC on February 22, 2011.10.
    Incorporated by
    reference to our Current Report on Form 8-K as filed with the SEC on March 16, 2012..


* 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 OfficerChina Media Group
    Corporationa Texas corporation/s/ Con Unerkov---------------------------------------Con UnerkovChief Financial 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
    May 16, 2012--------------------------------------------Cheng Pheng LoiIts:
    Principal executive
    officer,President, Director


By:
    /s/ Con Unerkov
    May 16, 2012--------------------------------------------Con UnerkovIts:
    Chief financial
    officer,Director


By:
    /s/ Lam Pui Kit
    May 16, 2012--------------------------------------------Lam Pui KitIts:
    Secretary, Treasurer,Director


By:
    /s/ Mohd Khairudin Bin Ramli
    May 16, 2012--------------------------------------------Mohd Khairudin Bin
    RamliIts:
    Director