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

FORM 10-Q

[ x ]
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
    ACT OF 1934For the quarterly three month period ended March 31, 2009[   ]
    TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACTFor the transition period from [          ]
    to [          ]


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

CHINA MEDIA GROUP CORPORATION
---------------------------------------------------------------------

(Exact name of small business issuer as specified in
its charter)

Texas
    7310
    32-0034926-----------------------
    ------------------------
    ----------------------(State or other jurisdiction of incorporation or organization)
    (Primary Standard Industrial Classification Code Number)
    (I.R.S. Employer Identification No.)


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


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

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

Indicate
    by check whether the Registrant (1) has filed all reports required to be filed by Section
    13 or 15 (d) of the Securities Exchange Act of 1934 during the past 12 months (or for such
    shorter period that the registrant was required to file such reports), and (2) has been
    subject to such filing requirements for the past 90 days.


Yes [ x ]     No [   ]

Indicate by check
    mark whether the registrant has submitted electronically and posted on its corporate Web
    site, if any, every Interactive Data File required to be submitted and posted pursuant to
    Rule 405 of Regulation S-T ("232.405 of this chapter) during the preceding 12 months
    (or for such shorter period that the registrant was required to submit and post such
    files).


Yes [ x ] No [   ]

Indicate
    by check whether the Registrant is a large accelerated filer, an accelerated filer, a
    non-accelerated filer or a smaller reporting company. See the definitions of "large
    accelerated filer," "accelerated filer" and "small reporting
    company" in Rule 12b-2 of the Exchange Act. (check one)


Large Accelerated Filer [  ]  Accelerated
Filer[  ]   Non-Accelerated Filer [   ]   Smaller
Reporting Company  [ x ]

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, 2009 was 534,132,450 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.


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PART I


Item 1.
    Condensed
    Consolidated Financial Statements


cmg_logo

China Media Group Corporation
Condensed Consolidated Financial Statements
March 31, 2009
(Unaudited)(Expressed In United States Dollars)

Condensed
    Consolidated Balance Sheet as of March 31, 2009 and December 31, 2008


Condensed
    Consolidated Statements of Operations for the three months period ended March 31, 2009 and
    March 31, 2008Condensed
    Consolidated Statements of Stockholders' Equity for the years ended December 31, 2008 and
    2007, and for the three months period ended March 31, 2009


Condensed
    Consolidated Statements of Cash Flows for the three months periods ended March 31, 2009
    and 2008


Notes
    to Condensed Consolidated Financial Statements


---

CHINA
    MEDIA GROUP CORPORATIONCONSOLIDATED
    BALANCE SHEETSAS OF
    MARCH 31, 2009 AND DECEMBER 31, 2008


March 31, 2009
    
    December 31, 2008Notes
    
    -----------------
    
    ---------------------ASSETSCurrent Assets:Cash and cash
    equivalents
    
    $
    16,769
    $
    67,764Accounts
    receivables
    
    
    -
    
    5,807Loans to unrelated
    parties
    8
    
    132,535
    
    132,737Prepayments,
    deposit and other receivables
    9
    
    162,971
    
    91,227---------------------
    
    ---------------------Total current
    assets
    
    
    312,275
    
    297,535Non-current
    assetsProperty and
    equipments, net
    10
    
    36,723
    
    39,851Advance payment
    for distribution rights
    11
    
    138,000
    
    138,000Goodwill
    
    
    6,791,676
    
    6,791,676---------------------
    
    ---------------------6,966,399
    
    6,969,527---------------------
    
    ---------------------$
    7,278,674
    $
    7,267,062=============
    
    =============LIABILITIES AND
    STOCKHOLDERS' EQUITYCurrent
    liabilities:Accounts payable
    
    $
    430
    $
    430Other payables and
    accruals
    12
    
    522,596
    
    466,403Convertible
    debentures
    13
    
    -
    
    -Short term debt
    14
    
    -
    
    -Due to officer and
    directors
    15
    
    897,439
    
    1,118,674Due to a
    shareholder
    
    
    316,528
    
    16,528---------------------
    
    ---------------------Total current
    liabilities
    
    
    1,736,993
    
    1,602,035---------------------
    
    ---------------------Long-term debts
    16
    
    2,099,645
    
    2,099,645Minority
    interest
    
    
    164,496
    
    168,230Stockholders'equity:Common stock, no
    par value, 85,000,000,000 shares authorized, 534,132,450 (2008: 534,132,450) shares issued
    and outstanding
    6
    
    7,428,902
    
    7,428,902Additional
    paid-in-capital
    
    
    1,685,356
    
    1,660,183Shares issued for
    prepaid consulting services
    17
    
    -
    
    -Comprehensive
    income
    
    
    42,817
    
    43,265Accumulated
    deficits
    
    
    (5,879,535)
    
    (5,735,198)---------------------
    
    ---------------------Total
    stockholders' equity
    
    
    3,277,540
    
    3,397,152---------------------
    
    ---------------------$
    7,278,674
    $
    7,267,062============
    
    ============


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, 2009 AND 2008


Three month periods ended March 31---------------------------------------------2009
    
    2008-----------------------
    
    -----------------------Net revenue
    $
    11,608
    $
    25,275Cost of revenue
    
    (4,860)
    
    (16,157)-----------------------
    
    -----------------------Gross profit
    
    6,748
    
    9,118Operating
    expenses:Selling, general
    and administrative expenses
    
    112,302
    
    382,386-----------------------
    
    -----------------------Loss from
    operations before other expense
    
    (105,554)
    
    (373,268)Other
    income(expenses)Interest income
    
    -
    
    37Interest expense
    
    (42,517)
    
    (63,379)-----------------------
    
    -----------------------Net loss before
    minority interest
    
    (148,071)
    
    (436,610)Minority interest
    
    3,734
    
    5,387-----------------------
    
    -----------------------Net loss
    
    (144,337)
    
    (431,223)Other
    comprehensive incomeForeign currency
    translation (loss)/gain
    
    (448)
    
    35,488------------------------
    
    ------------------------Comprehensive loss
    
    (144,785)
    
    (395,735)==============
    
    ==============Basic and diluted
    loss per common share
    $
    0.00
    $
    0.01==============
    
    ==============Basic and
    diluted weighted average numberof common shares *
    
    534,132,450
    
    524,045,695==============
    
    ==============


*
    Weighted average number of shares used to compute basic and diluted loss per
    share for the three months ended March 31, 2009 and 2008 are the same since the effect of
    dilutive securities are anti-dilutive.


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

F-4

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CHINA
    MEDIA GROUP CORPORATIONCONSOLIDATED
    STATEMENTS OF STOCKHOLDERS' EQUITYFOR
    THE YEARS ENDED DECEMBER 31, 2008 AND 2007AND FOR THE
    THREE MONTHS ENDED MARCH 31, 2009


Additional
    
    
    
    TotalCommon stock
    paid-in
    Comprehensive
    Prepaid
    Accumulated
    stockholders'Shares
    Amount
    capital
    income
    Expenses
    Deficit
    equity (deficit)US$
    US$
    US$
    US$
    US$
    US$----------------
    ----------
    --------------
    ---------------
    -------------
    --------------
    ---------------Balance
    at January 1, 2007
    361,274,145
    776,670
    576,936
    -
    (55,375)
    (1,854,257)
    (556,026)Issuance
    of shares for staffs
    11,731,542
    312,232
    116,337
    -
    -
    -
    428,569Issuance
    of shares for share investment
    3,518,518
    190,000
    -
    -
    -
    -
    190,000Issuance
    of shares for acquisition of subsidiary
    125,000,000
    6,000,000
    -
    -
    -
    -
    6,000,000Issuance
    of shares for services
    17,476,666
    85,000
    603,420
    -
    (238,026)
    -
    450,394Exercise
    of warrants
    500,000
    15,000
    -
    -
    -
    -
    15,000Sell
    shares under ELOC Agreement
    2,000,000
    50,000
    -
    -
    -
    -
    50,000Issuance
    of warrants
    -
    -
    15,590
    -
    -
    -
    15,590Options
    granted
    -
    -
    62,208
    -
    -
    -
    62,208Issuance
    of convertible debenture
    
    
    75,000
    -
    -
    -
    75,000Comprehensive
    income
    -
    -
    -
    20,766
    -
    -
    20,766Net
    loss
    -
    -
    -
    -
    -
    (1,728,032)
    (1,728,032)----------------
    ----------
    --------------
    ---------------
    -------------
    --------------
    ---------------Balance
    at December 31, 2007 and January 1, 2008
    521,500,871
    7,428,902
    1,449,491
    20,766
    (293,401)
    (3,582,289)
    5,023,469Amortization
    of issuance of shares for services expenses
    -
    -
    -
    -
    293,401
    -
    293,401Amortization
    of options granted
    -
    -
    100,692
    -
    -
    -
    100,692Issuance
    of shares for extension of repayment of debenture
    2,631,579
    -
    50,000
    -
    -
    -
    50,000Issuance
    of shares for termination of ELOC Agreement
    10,000,000
    -
    60,000
    -
    -
    -
    60,000Comprehensive
    income
    -
    -
    -
    22,499
    -
    -
    22,499Net
    loss
    -
    -
    -
    -
    -
    (2,152,909)
    (2,152,909)----------------
    -----------
    --------------
    ---------------
    -------------
    --------------
    ---------------Balance
    at December 31, 2008
    534,132,450
    7,428,902
    1,660,183
    43,265
    -
    (5,735,198)
    3,397,152----------------
    -----------
    --------------
    ---------------
    -------------
    --------------
    ---------------Amortization
    of options granted
    -
    -
    25,173
    -
    -
    -
    25,173Comprehensive
    income
    -
    -
    -
    (448)
    -
    -
    (448)Net
    loss
    -
    -
    -
    -
    -
    (144,337)
    (144,337)----------------
    -----------
    --------------
    ---------------
    -------------
    --------------
    ---------------Balance
    at March 31, 2009
    534,132,450
    7,428,902
    1,685,356
    42,817
    -
    (5,879,535)
    3,277,540=========
    =======
    ========
    =========
    ========
    ========
    =========


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


F-5

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CHINA MEDIA GROUP CORPORATIONCONSOLIDATED STATEMENTS OF CASH FLOWSFOR
    THE THREE MONTHS ENDED MARCH 31, 2009 AND 2008Three months period ended March 31-------------------------------------------2009
    
    2008-----------------
    
    -----------------Cash flows from
    operating activities:Net Loss
    
    $
    (144,337)
    $
    (431,223)Adjustments to
    reconcile net loss to net cash used in operating activities:Depreciation
    
    
    3,128
    
    3,035Minority interest
    
    
    (3,734)
    
    (5,387)Common stock
    issuance for services
    
    
    -
    
    145,333Common stock
    issuance for extension of repayment of convertible debentures
    
    
    -
    
    50,000Common stock
    issuance for termination of ELOC agreementOption expenses
    for employee compensation
    
    
    25,173
    
    25,173Amortization of
    convertible debenture
    
    
    -
    
    17,742(Increase)
    decrease in assets and liabilities:Prepaid expenses,
    deposit and other receivables
    
    
    (71,744)
    
    9,453Account receivable
    
    
    5,807
    
    (11,797)Loan receivable
    
    
    202
    
    -Accounts payable
    and accrued expenses
    
    
    56,193
    
    78,634Due to related parties
    
    
    (221,235)
    
    55,585Due to a
    shareholder
    
    
    300,000
    
    -------------------
    
    ------------------Net cash used
    in operating activities
    
    
    (50,547)
    
    (63,452)Cash flows from
    investing activities:Purchase of
    property and equipment
    
    
    -
    
    (1,548)------------------
    
    ------------------Net cash used
    in investing activities
    
    
    -
    
    (1,548)Net cash
    provided by financing activities
    
    
    -
    
    -------------------
    
    ------------------


Net decrease in
    cash and cash equivalents
    
    
    (50,547)
    
    (65,000)Effect of exchange
    rate changes on cash and cash equivalents
    
    
    (448)
    
    14,722Cash and cash
    equivalents, beginning
    
    
    67,764
    
    107,903------------------
    
    ------------------Cash and cash
    equivalents, ending
    
    $
    16,769
    $
    57,625===========
    
    ===========Supplemental
    disclosure of cash flow information:Interest paid
    
    $
    42,517
    $
    63,379===========
    
    ===========Income taxes paid
    
    $
    -
    $
    -===========
    
    ===========


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


F-6

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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.The Group will
    be engaged in the media and advertising business, focusing in China, and the marketing and
    distribution of convergent devices. During the year, the Company recorded sales in mobile
    phone devices and the provision of advertising services.


NOTE
    2
    SUMMARY
    OF SIGNIFICANT ACCOUNTING POLICIES & REALIZATION OF ASSETS


Basis of
    PresentationThe
    accompanying financial statements have been prepared in conformity with accounting
    principles generally accepted in the United States 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, 2008. 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, 2008 included in the Company Form
    10-K filed with the Securities and Exchange Commission. In the opinion of the 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 year.Use of
    estimatesThe
    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.Principles
    of ConsolidationThe
    consolidated financial statements for the three months period ended March 31, 2009 include
    the financial statements of the Company and its wholly owned subsidiaries Ren Ren Media
    Group Limited and Good World Investments Limited, and a 50% subsidiary Beijing Ren Ren
    Health Culture Promotion Limited due to the sole largest shareholding status and
    controlling of the Board of Directors.The results of
    subsidiaries acquired or sold during the year are consolidated from their effective dates
    of acquisition or through their effective dates of disposition, respectively.All
    significant inter-company transactions and balances have been eliminated on consolidation.


F-7

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Net Income
    (Loss) per ShareBasic earnings
    per share were computed by dividing net loss by the weighted average number of shares of
    common stock outstanding during year. Diluted loss per common share for the three months
    ended March 31, 2009 and year ended December 31, 2008 are not presented as it would be
    anti-dilutive.Fair Value
    of Financial InstrumentsStatement of
    financial accounting standard No. 107, Disclosures about Fair Value of Financial
    Instruments, requires that the Company 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 EquivalentsThe
    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.InventoriesInventories
    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
    & equipmentProperty
    & 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
    yearsIntangible
    AssetsThe
    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.Income
    taxesThe
    Company accounts for income taxes under SFAS 109, "Accounting for Income Taxes."
    Under the asset and liability method of SFAS 109, 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 SFAS 109, 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.


F-8

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Stock-based
    compensationSFAS No. 123
    prescribes accounting and reporting standards for all stock-based compensation plans,
    including employee stock options, restricted stock, employee stock purchase plans and
    stock appreciation rights. SFAS No. 123 requires compensation expense to be recorded (i)
    using the new fair value method or (ii) using the existing accounting rules prescribed by
    Accounting Principles Board Opinion No. 25, "Accounting for stock issued to
    employees" (APB 25) and related interpretations with proforma disclosure of what net
    income and earnings per share would have been had the Company adopted the new fair value
    method. The Company has chosen to account for stock-based compensation using Accounting
    Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees" and
    has adopted the disclosure only provisions of SFAS 123. Accordingly, compensation cost for
    stock options is measured as the excess, if any, of the quoted market price of the
    Company's stock at the date of the grant over the amount an employee is required to pay
    for the stock.The Company
    accounts for stock-based compensation issued to non-employees and consultants in
    accordance with the provisions of 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". Valuation of shares for services is based on the estimated fair market
    value of the services performed.


Employees'
    benefits and pension obligationsMandatory
    contributions of five percent of gross salary payments, subject to certain minimum and
    maximum levels, are made to defined contribution Mandatory Provident Fund schemes
    ("MPF schemes") pursuant to the laws of Hong Kong. These contributions are
    charged to expense in the same period as the related salary cost. Total contributions made
    by the Company to the MPF schemes were $2,159 and 3,057 for the year December 31, 2008 and
    2007, respectively and $542 for the three months ended March 31, 2009.


Issuance of
    shares for serviceThe Company
    accounts for the issuance of equity instruments to acquire goods and services based on the
    fair value of the goods and services or the fair value of the equity instrument at the
    time of issuance, whichever is more reliably measurable.Revenue
    RecognitionThe Company
    recognizes its revenue in accordance with the Securities and Exchange Commissions
    ("SEC") Staff Accounting Bulletin No. 104, "Revenue Recognition in
    Financial Statements" ("SAB 104"). Revenue is recognized upon shipment,
    provided that evidence of an arrangement exists, title and risk of loss have passed to the
    customer, fees are fixed or determinable and collection of the related receivable is
    reasonably assured. Revenue is recorded net of estimated product returns, which is based
    upon the Company's return policy, sales agreements, management estimates of potential
    future product returns related to current period revenue, current economic trends, changes
    in customer composition and historical experience.Foreign
    Currency TranslationThe 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 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, 2009, the comprehensive income was
    $42,817, and $43,265 in 2008, differences were immaterial.


F-9

---

Recent Pronouncements


In February
    2007, the FASB issued SFAS 159, The Fair Value Option for Financial Assets and Financial
    Liabilities, which permits entities to choose to measure many financial instruments and
    certain other items at fair value. The unrealized gains and losses on items for which the
    fair value option has been elected should be reported in earnings. The decision to elect
    the fair value option is determined on an instrument-by-instrument basis, should be
    applied to an entire instrument and is irrevocable. Assets and liabilities measured at
    fair values pursuant to the fair value option should be reported separately in the balance
    sheet from those instruments measured using other measurement attributes. SFAS No. 159 is
    effective as of the beginning of the Company's 2008 fiscal year. We are currently in the
    process of evaluating the expected effect of SFAS No. 159 on our results of operations and
    financial position.


In December
    2007, the FASB issued SFAS No. 160, "Noncontrolling Interests in Consolidated
    Financial Statements, an amendment of Accounting Research Bulletin No 51" (SFAS 160).
    SFAS 160 establishes accounting and reporting standards for ownership interests in
    subsidiaries held by parties other than the parent, changes in a parent's ownership of a
    noncontrolling interest, calculation and disclosure of the consolidated net income
    attributable to the parent and the noncontrolling interest, changes in a parent's
    ownership interest while the parent retains its controlling financial interest and fair
    value measurement of any retained noncontrolling equity investment. SFAS 160 is effective
    for financial statements issued for fiscal years beginning after December 15, 2008, and
    interim periods within those fiscal years. Early adoption is prohibited. The adoption of
    SFAS No. 160 is not expected to have a material effect on its financial position, results
    of operations or cash flows.In December
    2007, the FASB issued SFAS 141R, Business Combinations ("SFAS 141R"), which
    replaces FASB SFAS 141, Business Combinations. This Statement retains the fundamental
    requirements in SFAS 141 that the acquisition method of accounting be used for all
    business combinations and for an acquirer to be identified for each business combination.
    SFAS 141R defines the acquirer as the entity that obtains control of one or more
    businesses in the business combination and establishes the acquisition date as the date
    that the acquirer achieves control. SFAS 141R will require an entity to record separately
    from the business combination the direct costs, where previously these costs were included
    in the total allocated cost of the acquisition. SFAS 141R will require an entity to
    recognize the assets acquired, liabilities assumed, and any non-controlling interest in
    the acquired at the acquisition date, at their fair values as of that date. This compares
    to the cost allocation method previously required by SFAS No. 141. SFAS 141R will require
    an entity to recognize as an asset or liability at fair value for certain contingencies,
    either contractual or non-contractual, if certain criteria are met. Finally, SFAS 141R
    will require an entity to recognize contingent consideration at the date of acquisition,
    based on the fair value at that date. This Statement will be effective for business
    combinations completed on or after the first annual reporting period beginning on or after
    December 15, 2008. Early adoption of this standard is not permitted and the standards are
    to be applied prospectively only. Upon adoption of this standard, there would be no impact
    to the Company's results of operations and financial condition for acquisitions previously
    completed. The adoption of SFAS No. 141R is not expected to have a material effect on its
    financial position, results of operations or cash flows.


F-10

---

In March
    2008, the Financial Accounting Standards Board issued Statement of Financial Accounting
    Standard ("SFAS") No. 161 "Disclosures about Derivative Instruments and
    Hedging Activities". SFAS 161 is intended to improve financial reporting about
    derivative instruments and hedging activities by requiring enhanced disclosures to enable
    investors to better understand their effects on an entity's financial position, financial
    performance, and cash flows. It is effective for financial statements issued for fiscal
    years and interim periods beginning after November 15, 2008, with early application
    encouraged. The Company is currently evaluating the impact of SFAS 161 on its consolidated
    financial statements but does not expect it to have a material effect.
    In April 2008, the FASB issued FASB Staff
    Position (FSP) FAS 142-3, Determination of the Useful Life of Intangible Assets, which
    amends the factors that should be considered in developing renewal or extension
    assumptions used to determine the useful life of a recognized intangible asset under FASB
    Statement No. 142, Goodwill and Other Intangible Assets. This Staff Position is effective
    for financial statements issued for fiscal years beginning after December 15, 2008, and
    interim periods within those fiscal years. Early adoption is prohibited. Application of
    this FSP is not currently applicable to the Company as the Company's intangible assets consist of land used rights which has a fixed
    useful life of 47 years.
    In May 2008, the FASB issued SFAS No. 163,
    Accounting for Financial Guarantee Insurance Contracts, an interpretation of FASB
    Statement No. 60 (SFAS 163). This statement clarifies accounting for financial guarantee
    insurance contracts by insurance enterprises under FASB Statement No. 60, Accounting and
    Reporting by Insurance Enterprises. SFAS 163 is effective for fiscal years and interim
    periods within those years, beginning after December 15, 2008. As the Company does not
    issue financial guarantee insurance contracts, it does not expect the adoption of this
    standard to have an effect on its financial position or results of operations.
    In May 2008, the FASB issued SFAS No. 162,
    The Hierarchy of Generally Accepted Accounting Principles. SFAS 162 identifies the sources
    of accounting principles and the framework for selecting the principles to be used in the
    preparation of financial statements of nongovernmental entities that are presented in
    conformity with GAAP. SFAS 162 directs the GAAP hierarchy to the entity, not the
    independent auditors, as the entity is responsible for selecting accounting principles for
    financial statements that are presented in conformity with GAAP. SFAS 162 is effective 60
    days following the SEC's approval of the Public Company Accounting Oversight Board
    amendments to remove the GAAP hierarchy from the auditing standards. SFAS 162 is not
    expected to have a material impact on the Company's financial statements.


Reclassifications


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


F-11

---

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, 2009, the
    Company has incurred an accumulated deficits totaling $5,879,535 and its total assets
    exceed its total liabilities by $3,277,540. 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. As at March 31, 2009, the Company has stock warrants with an exercise price of
    $0.030 for 15,125,000 shares and $0.036 for 15,625,000 shares until the expiration of the
    stock warrants on May 12, 2009. However, as at the date of this report, all these stock
    warrants expired without any exercise. The Company is also 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. However there can be no
    assurances that the Company can sell the stocks under the warrants or that sufficient
    financing will be available on terms acceptable to the Company or at all.


NOTE 4
    BUSINESS COMBINATIONS


Sale
    and Purchase Agreement between the Company and Central High Limited


On March
    13, 2007, the Company entered into a Sales and Purchase agreement (the "Purchase
    Agreement") to acquire 100% of the issued and outstanding shares of Good World
    Investments Limited ("Good World") from Central High Limited.


The
    consideration for the acquisition is 125,000,000 shares of the Company's common stock
    valued at $6,000,000 based upon the market value of shares as it traded on the
    Over-the-Counter Bulletin Board (OTCBB) at the date of acquisition. Our directors, Messrs.
    Con Unerkov and Alex Ho, each own 25% interests in Central High Limited. Good World, an
    investment holding company, owns 50% of the registered capital of Beijing Ren Ren Health
    Culture Promotion Limited (the "BRR"). BRR is a company incorporated in the
    People's Republic of China, and is working with the Chinese Government on a benevolent
    project named "Great Wall of China Project" to promote health education and
    health awareness to China.


The
    purchase price was allocated as follows:


US$Cash
    
    
    26,671Current assets
    
    416,378Current liabilities
    
    (30,008)Property, plant and
    equipment
    
    7,471Goodwill
    
    7,791,676Long-term loan
    
    (2,000,000)Minority interest
    (50%)
    
    
    (212,188)Purchase price
    
    
    6,000,000


The
    goodwill of the above transaction is measured and recognized according to SFAS 141
    (revised 2007) Business Combination which is the difference between the purchase price and
    total assets less total liabilities and minority interest. The carrying value of Goodwill
    is $7,791,676. No amortization was provided, in 2008, a $1,000,000 impairment charge was
    made.


F-12

---

NOTE 5
    STOCKHOLDERS' EQUITY


Common StockIn March
    2006, the Company issued 1,000,000 shares of common stock under the agreement for the
    acquisition of the distribution rights for M.AG.I.C. Convergent Device.In March
    2006, the Company issued 833,333 shares of common stock for $250,000.In
    November and December 2006, the Company issued a total of 3,000,000 shares of common stock
    for services valued at a total of $69,000.In
    December 2006, the Company issued 12,500,000 shares of common stock as a commitment fee
    under an Equity Line of Credit Agreement.In
    December 2006, the Company entered into an agreement to issued 4,342,464 shares of common
    stock for accrued services for $158,500. These shares were issued on January 3, 2007.


In
    January 2007, the Company entered into an agreement to acquire 18% in Guangzhou Waho
    Culture & Media Co., Ltd. for $243,000 of which $53,000 was paid in cash and $190,000
    was paid by the issuance of 3,518,518 shares of common stock in the Company. The Company
    impaired the investment made in Waho Culture & Media Co., Ltd., as of March 31, 2007,
    as the marketable value is uncertain.


In
    March 2007, the Company issued 1,700,000 shares of common stock for services valued at
    $85,000.
    In March 2007, the Company entered into an agreement
    to acquire 100% of Good World Investments Limited for a consideration of $6,000,000, which
    was settled by the issuance of 125,000,000 common stock in the Company.
    In May 2007, the Company issued a total of 2,667,095
    unrestricted shares of Common Stock to its staff and consultants in accordance with the
    Form S8 registration statements filed on March 8, 2007.
    In June 2007, the Company issued 1,230,000 shares of
    common stock for services valued at $60,550.
    In July 2007, the Company distributed S8 stocks of
    800,000 shares of common stock to its employees and consultant for their services valued
    at $34,000.
    Between August and October 2007, the Company issued
    a total of 10,846,666 shares of common stock for promotional and consulting services
    valued at a total of $406,870.
    In October 2007, the Company issued 500,000 and
    2,000,000 shares of common stock in relation to the exercise of 500,000 warrant shares at
    $0.030 per share for a total of $15,000 and sold $50,000 commons stock, respectively,
    under the ELOC Agreement.
    In November 2007, the Company issued 2,500,000
    shares of common stock for services valued at $90,000.
    In November and December 2007, the Company issued a
    total of 2,344,205 unrestricted shares of Common Stock to its staff and consultants in
    accordance with the Form S8 registration statements filed on March 8, 2007.
    In December 2007, the Company issued 2,777,778
    restricted shares of common stock for accrued services of $100,000.
    In January 2008, the Company issued 2,631,579 shares
    of common stock pursuant to a Second Amendment Agreement to extend the repayment of the
    $50,000 Convertible Debenture to March 28, 2008.
    On August 3, 2008 the Company issued 10,000,000
    shares of Common Stock pursuant to a Letter Agreement to terminate the ELOC Agreement.


F-13

---

WarrantsIn
    February 2006, the Company issued stock warrants for 1,666,666 shares of common stock to
    Central Star Holdings Limited. The warrants expired on February 21, 2008 and have an
    exercise price of $0.30 per share. The Company booked expense of $80,000. On February 21,
    2008, these warrants lapsed.The
    Company issued stock warrants for 31,250,000 shares of common stock to Tailor-Made Capital
    Limited ("TMC"), as part of the Equity Line of Credit Agreement between TMC and
    the Company, in which TMC was to invest up to $2,500,000 to purchase the Company's common
    stock. The warrants expire on or about May 12, 2009. The warrants have an exercise price
    for 15,625,000 shares of common stock at $0.030 per share and the other 15,625,000 shares
    of common stock at $0.036 per share. The Company recorded expense of $311,508. In 2007,
    500,000 warrant shares were exercised at an exercise price of $0.030 per share for a total
    of $15,000. There was no warrants exercise in the first quarter of 2009.The
    Company also issued 138,889 stock warrants as part of commission in relation to the Equity
    Line of Credit Agreement above. These warrants have an exercise price of $0.036 per share
    and expire on or about May 12, 2009.


In March
    2007, the Company issued 208,333 stock warrants as part of commission in relation to the
    issuance of $75,000 Convertible Debenture under the Debenture Purchase Agreement with TMC.
    These warrants have an exercise price of $0.036 per share and expire on or about May 12,
    2009.


In
    October 2007, the Company issued 41,666 and 138,888 stock warrants as part of commission
    in relation to the $15,000 received from the exercise of warrant and $50,000 received from
    the draw down, respectively, under the ELOC Agreement with TMC. These warrants have an
    exercise price of $0.036 per share and expire on or about May 12, 2009.


NOTE 6
    STOCK OPTIONS AND WARRANTS


Stock
    OptionsThe
    Company adopted 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.
    Share-based compensation recognized under the modified-prospective transition method of
    SFAS No. 123R includes share-based compensation based on the grant-date fair value
    determined in accordance with the original provisions of SFAS No. 123, Accounting for
    Stock-Based Compensation, for all share-based payments granted prior to and not yet vested
    as of April 1, 2006 and share-based compensation based on the grant-date fair-value
    determined in accordance with SFAS No. 123R for all share-based payments granted after
    April 1, 2006. SFAS No. 123R eliminates the ability to account for the award of these
    instruments under the intrinsic value method proscribed by Accounting Principles Board
    ("APB") Opinion No. 25, Accounting for Stock Issued to Employees, and allowed
    under the original provisions of SFAS No. 123. Prior to the adoption of SFAS No. 123R, the
    Company accounted for our stock option by using the intrinsic value method in accordance
    with the provisions of APB Opinion No. 25 and related interpretation.


F-14

---

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


On May 18, 2007, the board of directors approved to issue 12,300,000 stock
    options to employees to purchase shares of our Common Stock under the 2002 Stock Option
    Plan, at exercise price of $0.038 for a vesting period of 3 years. The Company had
    29,800,000 stock options outstanding as at March 31, 2009.


Following is a summary of the activities of the 2002 Stock Option Plan in the
    first quarter of 2009:


Options outstandingOutstanding, December
    31, 2008
    29,800,000Granted during the
    period
    -Forfeited/lapsed
    during the period
    -Exercised during the
    period
    -------------------------------Outstanding, March
    31, 2009
    29,800,000===================


Following is a
    summary of the status of options outstanding at March 31, 2009:Outstanding Options
    
    Exercisable Options------------------------------------
    
    ----------------------------------------------------------------------GrantDate
    ExercisePrice
    Number
    Average RemainingContractual Life
    Average Exercise Price
    Number
    Intrinsic Price12/23/2006
    $0.0365
    17,500,000
    0.73
    $0.0365
    17,500,000
    $0.005/18/2007
    $0.0380
    12,300,000
    1.13
    $0.0380
    12,300,000
    $0.00


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


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


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




---

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


On March 8, 2007, we registered 38,400,000 shares underlying stock options under
    the 2007 Stock Incentive Plan with the SEC pursuant to a registration statement on Form
    S-8.During the year 2007, the Company had issued a total of 5,811,300 shares to its
    staff and consultants for their service provided.No shares were issued under the registration statement on Form S8 during the year
    2008 and for the three months ended March 31, 2009. As at March 31, 2009 there were
    32,588,700 shares available underlying stock options under the 2007 Stock Incentive Plan.As of March 31, 2009, there were no outstanding stock options to purchase shares
    of our Common Stock under the 2007 Stock Incentive Plan.


Warrants


Following is a
    summary of the warrant activity in the first quarter of 2009:Outstanding, December
    31, 2008
    31,277,776Granted during the
    period
    -Forfeited during the
    period
    -Exercised during the
    period
    -------------------------Outstanding, March
    31, 2009
    31,277,776==============


Following is a summary of the
    status of warrants outstanding at March 31, 2009:


Outstanding Warrants
    
    Exercisable Warrants------------------------------------
    
    ------------------------------------------------------------------ExercisePrice
    Number
    Average Remaining Contractual Life
    Average Exercise Price
    Number
    Intrinsic Value-------------
    ---------------
    -----------------
    --------------------
    -------------------
    ---------------$0.030
    15,125,000
    0.20
    $0.030
    15,125,000
    $0.00$0.036
    15,625,000
    0.20
    $0.036
    15,625,000
    $0.00$0.036
    138,889
    0.20
    $0.036
    138,889
    $0.00$0.036
    208,333
    0.09
    $0.036
    208,333
    $0.00$0.036
    41,666
    0.14
    $0.036
    41,666
    $0.00$0.036
    138,888
    0.15
    $0.036
    138,888
    $0.00


Details of the warrants are
    specified in Note 7 (b), (c), (d), (h) and (o).


On February 13, 2008, 1,666,666 warrant shares were expired.




---

NOTE 7
    STOCK PURCHASE AGREEMENTS


a) On or about 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 territory 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.


As of December 31, 2006, the
    Company has only issued one million shares in respect of this agreement.


b) On or about February 13, 2006, the Company announced a Stock Purchase
    Agreement with Central Star Holdings Limited ("Central Star"). Under the
    agreement, Central Star will purchase 833,333 shares in the Company for $250,000 upon
    signing the agreement and thereafter purchasing an additional $1 million worth of stock of
    the Company in 4 equal tranches every 2 months over an 8 months period. Central Star is
    obliged to purchase the additional tranches provided that the share price of the 5 days
    prior to the relevant date is not below $0.33 per share. However if the share price is
    below $0.33 then Central Star still has the right, but not the obligation, to purchase the
    stock at $.30 per share. For every stock purchased, Central Star will be entitled to
    receive an option to purchase 2 additional shares in the Company at the same price that it
    paid for the shares subscribed over a one year period from the later date of the final
    payment of the last tranche to complete the $1 million additional stock purchase and
    February 21, 2007. The Company received $250,000 in February 2006. $80,000 was expensed
    for issuing the warrants.


c) On or about December 7, 2006 the Company entered into an Equity Line of Credit
    Agreement ("ELOC") with Tailor-Made Capital Limited ("TMC"). Pursuant
    to Equity Line of Credit Agreement, the Company may at its sole discretion, periodically
    sell to TMC common stock for a total purchase price of up to US$2,500,000 during the two
    year period commencing on the effective date of the registration statement but not later
    than three years from the date of the ELOC. The amount of each advance is subject to a
    maximum amount of US$250,000, and the Company may not submit an advance within 5 trading
    days of a prior notice of an advance. For each common stock purchased under the ELOC, TMC
    will pay between 90-100% of the volume weighted average price of our common stock quoted
    on the Over-the-Counter Bulletin Board for the 5 days immediately preceding the notice
    date. As part of this agreement, the Company issued to TMC 12,500,000 common stock as
    commitment fee and stock warrants for a total of 31,250,000 shares of common stock. The
    warrants expire on May 7, 2009. The warrants have an exercise price for 15,625,000 shares
    of common stock at $0.030 per share and the other 15,625,000 shares of common stock at
    $0.036 per share.


d) On December 12, 2006, the Company also issued 138,889 stock warrants as part
    of commission in relation to the issuance of $50,000 Convertible Debenture to TMC in
    respect of the Debenture Purchase Agreement. These warrants have an exercise price of
    $0.036 per share and expire on May 12, 2009.


e) On January 3, 2007, the Company issued 4,342,464 shares of common stock for
    accrued services of $158,500.


f) On January 13, 2007 the Company acquired 18% interests in Guangzhou Waho
    Culture & Media Co., Ltd. (the "GWCM") for $243,000, of which $190,000 was
    to be paid by the issuance of 3,518,518 common stock of the Company. GWCM is a company
    focused in the business of online advertising for the China market.


g) On March 13, 2007, the Company entered into a Sales and Purchase Agreement to
    acquire the entire issued share capital of Good World Investments Limited which owns 50%
    issued shares capital of Beijing Ren Ren Health Culture Promotion Limited. Pursuant to the
    agreement, the Company issued 125 million shares to Central High Limited as the
    consideration. This purchase consideration was negotiated with reference to the BRR
    accounts and the underlying projects in BRR. Our directors Messrs. Con Unerkov and Alex Ho
    each owns 25% interests in, but are not directors or officers of, Central High Limited.




---

h) On March 27, 2007, the Company issued 208,333 stock warrants as part of
    commission in relation to the issuance of $75,000 Convertible Debenture to TMC in respect
    of the Debenture Purchase Agreement. These warrants have an exercise price of $0.036 per
    share and expire on May 12, 2009.


i) On May 18, 2007, the Company issued 2,667,095 unrestricted shares of common
    stock for accrued services of $97,349. These shares were issued in accordance with the
    Form S8 registration statements.


j) On July 18, 2007, the Company issued 800,000 unrestricted shares of common
    stock to its staff and consultant for services of $34,000. These shares were issued in
    accordance with the Form S8 registration statements.


k) On August 14, 2007, the Company issued the third tranche of 1,500,000 shares
    to an independent third party for 3 months consulting services in accordance with the
    Consultant Agreement executed on December 1, 2006. The services were valued at fair market
    value of the common stock issued for $57,000.


l) On August 20, 2007, the Company entered into an agreement with a third party
    consultant to provide promotional works for the Company and, in return, the Company issued
    1,250,000 shares of Common Stock as compensation fee. The term of this agreement is for a
    period of 3 months commencing immediately after the date of this agreement. The services
    were valued at fair market value of the common stock issued for $43,750.


m) On September 19, 2007, we entered into a Financial Public Relation Agreement
    ("FPR Agreement") with a third party consultant to provide promotion services
    for the Company. Pursuant to the FPR Agreement, the term of the Agreement shall be for 30
    days commencing immediately after the date of execution. The Company issued to the
    consultant 180,000 shares of common stock as consideration pursuant to the FPR Agreement.
    The services were valued at fair market value of the common stock issued for $6,120.


n) On October 9, 2007, we entered into a Consulting Services Agreement ("CS
    Agreement") with a third party consultant to provide consulting services for the
    Company. Pursuant to the CS Agreement, The term of the CS Agreement shall be for 3 months
    commencing immediately after the date of execution. The Company issued to the consultant
    1,250,000 shares of common stock as a consideration in the CS Agreement. The services were
    valued at fair market value of the common stock issued for $60,000 of which $4,667 was
    prepaid service expense at December 31, 2007.


o) On October 15, 2007, 500,000 warrant shares were exercised at an exercise
    price of $0.030 per share under the ELOC Agreement.


p) On October 18, 2007, the Company sold 2,000,000 common stock of the Company
    for $50,000 under the ELOC Agreement.


q) On October 30, 2007, the Company entered into an Advertising Agreement
    ("Agreement") with a third party consultant to provide promotional services for
    the Company. Pursuant to the Agreement, The term of the Agreement shall be for 12 months
    commencing after the date of execution. The Company issued to the consultant 6,666,666
    shares of common stock as a consideration of the Agreement. The services were valued at
    fair market value of the common stock issued for $240,000, of which $198,667 was prepaid
    service expense at December 31, 2007.


r) On November 26, 2007, the Company issued 1,000,000 unrestricted shares of
    common stock for accrued services of $36,000, of which $27,400 was prepaid service
    expenses at December 31, 2007. These shares were issued in accordance with the Form S8
    registration statements.




---

s) On November 28, 2007, the Company entered into an agreement with a third party
    consultant to provide promotional works for the Company and, in return, the Company issued
    2,500,000 shares of Common Stock as compensation fee. The term of this agreement is for a
    period of 3 months commencing on December 3, 2007. The services were valued at fair market
    value of the common stock issued for $90,000, of which $61,000 was prepaid service expense
    at December 31, 2007.


t) On December 19, 2007, the Company issued 1,344,205 unrestricted shares of
    common stock for accrued services of $48,720. These shares were issued in accordance with
    the Form S8 registration statements.


u) On December 28, 2007, the Company issued 2,777,778 restricted shares of common
    stock for accrued services of $100,000.


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


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


NOTE 8
    LOANS TO UNRELATED PARTIES


Loans to unrelated parties
    amounted to $132,535 in 2009 (2008: $132,737). The loans are unsecured, interest free and
    repayable on or before December 31, 2010.


NOTE 9
    PREPAYMENTS, DEPOSITS AND OTHER RECEIVABLES


Prepayments, deposits and other
    receivables are summarized as follows:


As of March 31, 2009
    
    As of December 31, 2008-----------------------
    
    -----------------------Rental deposits
    $
    5,961
    $
    5,961Utility and other
    deposits
    
    634
    
    777Advance to
    suppliers
    
    98,020
    
    78,279Other receivable
    
    58,356
    
    6,210-----------------------
    
    -----------------------$
    162,971
    $
    91,227==============
    
    =============




---

NOTE 10
    PROPERTY AND EQUIPMENT, NET


Property and equipment is
    summarized as follows:


As of March 31, 2009
    
    As of December 31, 2008----------------------
    
    ----------------------CostFurniture, fixture
    and equipment
    $
    6,945
    $
    6,945Computers
    
    8,058
    
    8,058Automobile
    
    47,951
    
    47,951-----------------------
    
    -----------------------62,954
    
    62,954Accumulated
    depreciation
    
    (26,231)
    
    (23,103)-----------------------
    
    -----------------------$
    36,723
    $
    39,851==============
    
    ==============


NOTE 11
    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 valued at $138,000. The
    shares were valued at the market price on the date of issuance.




---

NOTE 12
    OTHER PAYABLES AND ACCRUALS


Other payables and accruals are
    summarized as follows:


As of March 31, 2009
    
    As of December 31, 2008-------------------
    
    ---------------Accrued salaries
    and wages
    $
    149,219
    $
    130,263Accrued interest
    
    3,321
    
    830Accrued
    accounting, legal and consulting fee
    
    101,548
    
    83,048Accrued office and
    related expenses
    
    13,512
    
    11,329Accrued audit fee
    
    40,000
    
    40,000Accrued others
    
    27,615
    
    21,170Other payables
    
    167,731
    
    160,113Deposit from
    customers
    
    19,650
    
    19,650-------------------
    
    -------------------$
    522,596
    $
    466,403===========
    
    =========


NOTE 13
    CONVERTIBLE DEBENTURES


On December 7, 2006 the Company entered into a Debenture Purchase Agreement
    ("DPA") with TMC whereby TMC agreed to purchase certain convertible securities
    issued by the Company. Pursuant to the terms of the DPA, the Company may sell and issue to
    TMC, and TMC will purchase from the Company, up to an aggregate of US$125,000 of
    convertible debenture ("Convertible Debenture") of the Company which will be due
    12 months from the date of issuance. The terms of the Convertible Debenture due one year
    from the date of issue, bears interest at a rate of 10% per annum which is payable on the
    conversion date or at maturity, and can be converted at TMC's discretion at any time prior
    to maturity date at a conversion price of US$0.024 per share. Under the DPA, the Company
    can issue the Convertible Debentures in 3 stages: 1) US$50,000 upon signing the DPA, 2)
    US$50,000 upon filing the registration statement in accordance to the SPA, and 3)
    US$25,000 upon the aforementioned registration statement being declared effective by the
    Securities Exchange Commission. On December 20, 2006, the Company issued US$50,000
    Convertible Debenture pursuant to the DPA and this was the only Convertible Debenture
    outstanding as at December 31, 2006.


On March 28, 2007, the Company
    issued US$75,000 Convertible Debenture pursuant to the DPA and as at December 31, 2007 a
    total of US$125,000 Convertible Debentures were issued and outstanding.


On January 4, 2008, the Company issued 2,631,579 common stock as consideration to
    extend the repayment date of the $50,000 Convertible Debenture to March 28, 2008. These
    common stock were registered and declared effective by the Securities Exchange Commission
    on February 13, 2008.


On April 7, 2008, the Company paid the two Convertible Debentures totaling
    $125,000 and accrued interests of $14,198.




---

NOTE 14
    SHORT-TERM DEBT


As of March 31, 2009, the Company has an outstanding short-term unsecured debt
    payable of $nil (2007: $67,600), with annual interest rate of 10%. This debt is due on
    September 30, 2008. The Company recorded accrued interest of $6,198 in 2008 (2007:
    $6,760).


NOTE 15
    DUE TO OFFICERS AND DIRECTORS


The due to directors and officers are interests free, unsecured and repayable on
    demand. The balance of due to directors and officers is $897,439 as of March 31, 2009
    (2008: $1,118,674).


NOTE 16
    LONG-TERM DEBTS


As of March 31, 2009
    
    As of December 31, 2008--------------------------
    
    --------------------------Shareholder Loan
    $
    2,000,000
    $
    2,000,000Other Loan
    
    99,645
    
    99,645---------------------------
    
    ---------------------------$
    2,099,645
    $
    2,099,645================
    
    ==============


The other loan is unsecured, accrue interest at 10% per annum and payable on May
    31, 2010.


The long term shareholder loan of $2,000,000 is unsecured, repayable on November
    25, 2010. This long term loan bears no interest for the first two years to November 25,
    2007 and thereafter 8% per annum.


NOTE 17
    SHARES ISSUED FOR PREPAID EXPENSES


As of March 31, 2009
    
    As of December 31, 2008--------------------------
    
    --------------------------Balance at January
    1
    $
    -
    $
    293,401Issue of shares
    for service during year
    
    
    
    -Less: service
    expensed during year
    
    -
    
    (293,401)---------------------------
    
    ---------------------------Balance at
    December 31
    $
    -
    $
    -================
    
    ==============


NOTE 18
    RELATED COMPANY TRANSACTIONS


The Company agreed to pay directors and officers a monthly salary for services
    performed. During the years ended December 31, 2008 and 2007, the Company paid the
    directors and its officers and their services companies a total remuneration of $162,000
    and $289,512, respectively and $12,000 for the three months period ended March 31, 2009On November 25 2005, a subsidiary of the Company signed a loan agreement with its
    major shareholder, Central High Limited for a loan of $2,000,000. This long term
    shareholder loan is unsecured and repayable on November 25, 2010, and bears no interest
    for the first two years until November 25, 2007 and thereafter 8% per annum. The accrued
    interest for 2008 was $160,000 (2007: $16,444) and $40,000 for the three months period
    ended March 31, 2009.




---

NOTE 19
    SEGMENT REPORTING


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


Advertising
    Telecommunication Device
    Other Services
    ConsolidatedFor the three months ended March 31
    For the three months ended March 31,
    For the three months ended March 31,
    For the three months 
    ended March 31,2009
    2008
    2009
    2008
    2009
    2008
    2009
    2008US$
    US$
    US$
    US$
    US$
    US$
    US$
    US$Turnover
    11,608
    20,138
    -
    5,137
    -
    -
    11,608
    25,275=========
    =========
    =========
    =========
    =========
    =========
    =========
    =========Segment results
    (6,601)
    (6,911)
    -
    (1,973)
    -
    -
    (6,601)
    (8,884)=========
    =========
    =========
    =========
    =========
    =========Unallocated
    corporate income
    
    
    
    
    
    
    --
    37Unallocated
    corporate expenses
    
    
    
    
    
    
    (95,219)
    (358,997)--------------
    --------------Loss from
    operations
    
    
    
    
    
    
    (101,820)
    (367,844)Finance costs
    
    
    
    
    
    
    (42,517)
    (63,379)Loss for the
    period
    
    
    
    
    
    
    (144,337)
    (431,223)=========
    =========As at March 31, 2009
    As at March 31, 2008ASSETSSegment assets
    6,823,936
    7,846,922
    240,483
    213,813
    -
    -
    7,064,419
    8,060,735Unallocated
    corporate assets
    
    
    
    
    
    
    214,255
    434,635--------------
    --------------Consolidated total
    assets
    
    
    
    
    
    
    7,278,674
    8,495,370=========
    =========LIABILITIESSegment
    liabilities
    164,926
    189,845
    430
    36,987
    -
    -
    165,356
    226,832Unallocated
    corporate liabilities
    
    
    
    
    
    
    3,835,778
    3,441,064--------------
    --------------Consolidated total
    liabilities
    
    
    
    
    
    
    4,001,134
    3,667,896=========
    =========Depreciation of
    fixed assets
    2,860
    2,833
    330
    237
    -
    -
    3,190
    3,070=========
    =========
    =========
    =========
    =========
    =========
    =========
    =========


Geographical SegmentsThe Group's customers are
    principally located in Hong Kong.




---

NOTE 20
    COMMITMENTS AND CONTINGENCIES


a)
    The Company leases office premises for its operations in United
    States and Hong Kong under operating leases. Rental expenses under operating lease for the
    three months ended March 31, 2009 and for the year ended December 31, 2008 was $7,737 and
    $10,000.


Future minimum rental payments under non-cancelable operating leases
    for the three month ended March 31, 2009 and the year ended December 31, 2008 are $17,050
    and $23,438.


b)
    The Company has service or employment agreements with the Directors
    and Officer and its service companies (the "Executives") for two years
    commencing on October 1, 2005 and the agreements shall continue thereafter unless
    terminated by either parties. The Executives will receive a monthly salary at a rate to be
    agreed by the Company and the Executives from time to time. In addition, the Executives
    will receive an annual management bonus to be determined by the majority of the Board
    based on the operating results of the Company and the Executives' performances, provided
    that it does not exceed 8.8 % of the net profit of the Company.


c)
    The Company will pay a 10% commission in cash and an equal amount in
    stock warrant to an independent party on any funds received under the ELOC Agreement.


d)
    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.




---



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, 2009.


---

Overview


DESCRIPTION OF BUSINESS.OUR BACKGROUND. The Company was incorporated in Texas on October 1, 2002 and was
    originally formed to be a frozen drink machine rental service. It was intended to
    specialize in renting frozen drink machines for gatherings such as wedding receptions,
    birthday parties, football parties, anniversaries, family reunions, weekend barbeques,
    social functions and fund raising events, as well as any other type of occasion. From the
    beginning, this business was at the first stage of development and the primary focus was
    on continuing to developing and revising our business strategies.In January 2005, the Company changed its name to International Debt Exchange
    Associates Inc. reflecting the Company's intent to become a diverse company through
    mergers and acquisitions and still maintained the current business as a frozen drink
    machine rental service.In September 2005, the Company changed its board of directors whom has since
    changed the Company name to China Media Group Corporation to reflect the Company's intent
    to focus all its efforts in advertising and media in the emerging China market. Under new
    management, the Company commenced to position the Company to capitalize on the growth of
    the Chinese advertising market where global companies are rushing into China to try to
    grab and hold the attention of its 1.3 billion citizens.OUR BUSINESS. Our mission is to become one of China's leading new age media
    companies through the use of new technologies and devices combined with traditional media
    of TV, Newspapers, Magazines, Billboards and Internet to reach today's mobile society. In
    order to facilitate this the Company established 5 strategic business units being
    "Television", "Advertising" "Print" "Telecommunications
    and Mobile Computing" and "Products and Services".In March 2007, we acquired the entire issued share capital of Good World
    Investments Limited ("Great World") which owns 50% of Beijing Ren Ren Health
    Culture Promotion Limited ("Beijing Ren Ren"). Good World is an investment
    holding company and Beijing Ren Ren is in the business of advertising in promoting health
    education and health awareness in China under the program Great Wall of China Project as
    further described below.We plan to offer advertising services in China. These advertising services would
    be across all media thus we will offer our customers selective advertising on specific
    media for nationwide campaign. China's advertising industry is still young and fragmented.
    We aim to differ from other advertisers so that we can provide nationwide campaigns across
    all media spectrum. To this end, we will work to secure strategic ad placements in key
    cities in China so that our customers will have the ability to launch nationwide
    campaigns.


Due to the global economic recession, the advertising expense is expected to
    decline in 2009. Many corporations are expected to reduce the advertising budget. We will
    therefore cautiously move forward in 2009. We will monitor the economic conditions before
    we deploy any activities. We will also explore other markets in the Asian region for any
    synergistic business opportunities.


Although we
    have established 5 business units, only three units have begun in operation, i.e.
    Advertising, Telecommunications and Mobile Computing and Products Services. In summary,
    some major events are extracted as follows:


Advertising Unit


On March 13, 2007, the Company acquired 100% of the issued and outstanding shares
    of Good World Investments Limited, which owns 50% of the registered capital of Beijing Ren
    Ren Health Culture Promotion Limited ("BRR"). BRR is working with the Chinese
    Government on a benevolent project named "Great Wall of China Project" to
    advertise and promote health education and health awareness in China. We believe BRR
    provides a strategic advertising platform for us to launch our advertising operations in
    China as it is can advertise in hospitals and districts in China. During the period the
    company did not derive any advertising income from the BRR project but has recorded
    $11,608 expense in relation to advertising services.


---

Telecommunications UnitOn 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. The Company received the prototype unit and is still
    conducting compliance, functional, stability, load and usability testing on the device
    prior to testing by our resellers and partners. We expect the M.A.G.I.C. Device will
    provide us with a unique device to enter the information and advertising sector of the
    mobile society. We expect to receive the final prototype for M.A.G.I.C. Shiv 1 which we
    expect to be finalized by mid 2009. Furthermore, we will endeavor to try to secure
    additional rights for the region to apply the M.A.G.I.C. devices.


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


---

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


We have cash
    and cash equivalents of $16,769 as of March 31, 2009; a decrease from the previous period
    end of December 31, 2008. 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
    fundingOn or about
    December 7, 2006, the Company entered into an Equity Line of Credit Arrangement
    ("ELOC") with a private equity firm that will purchase up to US$2.5 million of
    our Common Stock under certain conditions after we have successfully registered the
    Registration Statement with the SEC. On the same date, the Company entered into a
    Debenture Purchase Agreement with the same party a $125,000 convertible debenture under
    certain conditions. Details of both financing arrangements can be found on the Company's
    filing on the SEC website. The Company intended to use this funding to for working capital
    and to aggressively roll out its business plans. At the date of this report, the Company
    has draw down US$50,000 on the Equity Line of Credit but has received $125,000 under the
    Debenture Purchase Agreement. Furthermore the private equity firm has exercised US$15,000
    in warrants. In April 2008, the Company repaid the $125,000 Convertible Debenture. In
    August 2008, the Company terminated the ELOC agreement except for the stock warrants
    issued pursuant to the ELOC Agreement. On May 12, 2009 all the remaining 30,750,000
    unexercised stock warrants in respect of the ELOC Arrangement will be expired.


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


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


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


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


---

Results of
    operation.


FOR THE THREE
    MONTHS PERIOD ENDED MARCH 31, 2009 COMPARED TO THE THREE MONTHS PERIOD ENDED MARCH 31,
    2008


REVENUES.For the three
    months period ended March 31, 2009, the Group has realized revenue of $11,608 and a cost
    of revenue of $4,860, achieving a gross profit of $6,748. For the three month period ended
    March 31, 2008, the Group has realized revenue of $25,275 and a cost of revenue of $16,157
    achieving a gross profit of $9,118. 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, 2009, our gross profit was $6,748 and our total operating
    expenses were $112,302, all of which were selling, general and administrative expenses. We
    also had $42,517 in interest expenses, and loss attributable to minority interests of
    $3,734, so that the net loss to our shareholders for the three months period ended March
    31, 2009 was $144,337. This is in comparison to the same period ended March 31, 2008,
    where our gross profit was $9,118 and our total operating expenses were $382,386, all of
    which were selling, general and administrative expenses. We also had $37 in interest
    income, $63,379 in interest expenses and loss attributable to minority interests of
    $5,387, so that the net loss to our shareholders for the three months period ended March
    31, 2008 was $431,223.


Liquidity
    and Capital Resources


As at March
    31, 2009, the Company had cash and cash equivalents totaling $16,769, other current assets
    of $295,506 and non-current assets totaling $6,966,399 which were represented by $36,723
    in fixed assets, $138,000 in distribution rights and $6,791,676 in goodwill. The total
    assets of the Company were $7,278,674 as of March 31, 2009. We also had current
    liabilities of $1,736,993 which were represented by $430 in accounts payable, $522,596 in
    accruals, $nil in short term debt, $897,439 due to related parties, $316,528 due to a
    shareholder as of March 31, 2009. We also had $2,099,645 in long-term shareholders loan
    and $164,496 in minority interests as of March 31, 2009, made our total liabilities
    $4,001,134At 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 2009.


---

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, 2009 the Company incurred net losses of $144,337 and has
    accumulated losses of $5,879,535 as at March 31, 2009. 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, 2009, 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.


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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.


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Item 6.
    Exhibits


Exhibit Number
    Description of Exhibit2.1
    Non-Blinding
    Agreement for Sale Purchase of shares of Cody Ventures Corporation. (1)2.2
    Sales and Purchase
    Agreement with Fleming Assets Limited for the distribution rights to M.A.G.I.C. Convergent
    Phone Device.(2)2.3
    Non-Blinding
    Stock Purchase Agreement with Dongguan Zhishixin Advertising Limited to acquire 52.3%
    controlling interests in Zhishixin.(3)2.4
    Stock Purchase
    Agreement with Central Star Holdings Limited. (4)2.5
    Sales and Purchase
    Agreement to purchase the entire share capital of Good World Investments Limited. (5)3.1
    Articles
    of Incorporation (6)3.1.1
    Certificate
    of Amendment to Articles of Incorporation (7)3.1.2
    Certificate
    of Amendment to Articles of Incorporation, as amended.(15)3.2
    Bylaws
    (6)4.1
    Consultancy
    Agreement between China Media Group Corporation and Waterville Investment Research, Inc.(8)4.2
    Consultancy
    Agreement between China Media Group Corporation and Uptick Limited. (9)4.3
    Executive
    Services Agreement between China Media Group Corporation and Con Unerkov (10)4.4
    Executive
    Services Agreement between China Media Group Corporation and Alex Ho (10)4.5
    Warrants
    to Purchase Common Stock (11)(12)10.1
    ELOC
    Arrangement with Tailor-Made Capital Ltd. (11)10.2
    Debenture
    Purchase Agreement with Tailor-Made Capital Ltd.(11).10.3
    2002
    Stock Option Plan (13)10.4
    2007
    Stock Incentive Plan(14)10.5
    Second
    Amendment Agreement (16)10.6
    Termination
    Letter Agreement (18)21.1
    Subsidiaries
    of registrant.(15)31*
    Certification as
    required by Rule 13a-14(a)/15d-14(a).32*
    Certification as
    required by 18 U.S.C. Section 1350.


Notes1.
    Incorporated
    by reference to our Current Report on Form 8-K/A as filed with the SEC on October 19,
    2005.2.
    Incorporated
    by reference to our Current Report on Form 8-K as filed with the SEC on February 1, 2006.3.
    Incorporated
    by reference to our Current Report on Form 8-K as filed with the SEC on February 7, 2006.4.
    Incorporated
    by reference to our Current Report on Form 8-K as filed with the SEC on February 16, 2006.5.
    Incorporated
    by reference to our Current Report on Form 8-K as filed with the SEC on March 15, 2007.6.
    Incorporated
    by reference to our Registration Statement on Form SB-2 as filed with the SEC on April 15,
    2003.7.
    Incorporated
    by reference to our Current Report on Form 8-K as filed with the SEC on February 3, 2005.8.
    Incorporated
    by reference to our Current Report on Form 8-K as filed with the SEC on November 28, 2006.9.
    Incorporated
    by reference to our Current Report on Form 8-K as filed with the SEC on December 4, 2006.10.
    Incorporated
    by reference to our Annual Report on Form 10-KSB/A as filed with the SEC on August 11,
    2006.11.
    Incorporated
    by reference to our Current Report on Form 8-K/A as filed with the SEC on March 8, 2007.12.
    Incorporated
    by reference to our Current Report on Form 8-K as filed with the SEC on February 16, 2006.13.
    Incorporated
    by reference to our Registration Statement on Form SB-2 as filed with the SEC on April 15,
    2003.14.
    Incorporated
    by reference to our Registration Statement on Form S8 as filed with the SEC on March 8,
    2007.15.
    Incorporated
    by reference to our Registration Statement on Form SB-2 as filed with the SEC on March 16,
    2007.16.
    Incorporated
    by reference to our Current Report on Form 8-K as filed with the SEC on January 8, 2008.17.
    Incorporated
    by reference to our Annual Report on Form 10-KSB/A as filed with the SEC on August 11,
    2006.18.
    Incorporated
    by reference to our Current Report on Form 8-K as filed with the SEC on August 7, 2008.


* 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/ Con Unerkov---------------------------------------Con UnerkovPrincipal executive
    officerPresident, director


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


By:
    /s/ Con Unerkov
    May 20, 2009--------------------------------------------Con Unerkov


Its:
    Principal executive
    officerPresident, CFO,
    director


---

Exhibit 31Rule
    13a-14(a)/15d-14(a)Certification
    of Chief Executive Officer and Chief Financial Officer of the Company
    Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
    and Securities and Exchange Commission Release 34-46427I, Con
    Unerkov, certify that:1. I have
    reviewed this quarterly report on Form 10-Q of China Media Group Corporation;2. Based on my
    knowledge, this report does not contain any untrue statement of a material fact or omit to
    state a material fact necessary to make the statements made, in light of the circumstances
    under which such statements were made, not misleading with respect to the period covered
    by this report;3. Based on my
    knowledge, the financial statements, and other financial information included in this
    report, fairly present in all material respects the financial condition, results of
    operations and cash flows of the registrant as of, and for, the periods presented in this
    report;4. The small
    business issuer's other certifying officer(s) and I are responsible for establishing and
    maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e)
    and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act
    Rules 13a-15(f) and 15d-15(f)) for the registrant and have:


(a)
    Designed
    such disclosure controls and procedures, or caused such disclosure controls and procedures
    to be designed under our supervision, to ensure that material information relating to the
    registrant, including its consolidated subsidiaries, is made known to us by others within
    those entities, particularly during the period in which this report is being prepared;(b)
    Designed
    such internal control over financial reporting, or caused such internal control over
    financial reporting to be designed under our supervision, to provide reasonable assurance
    regarding the reliability of financial reporting and the preparation of financial
    statements for external purposes in accordance with generally accepted accounting
    principles;(c)
    Evaluated
    the effectiveness of the registrant's disclosure controls and procedures and presented in
    this report our conclusions about the effectiveness of the disclosure controls and
    procedures, as of the end of the period covered by this report based on such evaluation;
    and(d)
    Disclosed
    in this report any change in the registrant's internal control over financial reporting
    that occurred during the small business issuer's most recent fiscal quarter (the small
    business issuer's fourth fiscal quarter in the case of an annual report) that has
    materially affected, or is reasonably likely to materially affect, the registrant's
    internal control over financial reporting.


5. I have
    disclosed, based on our most recent evaluation of internal control over financial
    reporting, to the registrant's auditors and the audit committee of the registrant's board
    of directors (or persons performing the equivalent functions):


(a)
    All
    significant deficiencies and material weaknesses in the design or operation of internal
    control over financial reporting which are reasonably likely to adversely affect the
    registrant's ability to record, process, summarize and report financial information; and(b)
    Any
    fraud, whether or not material, that involves management or other employees who have a
    significant role in the small business issuer's internal control over financial reporting.


Date: May 20, 2009


/s/ Con Unerkov-----------------------Con UnerkovChief Executive Officer and Chief
    Financial Officer


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Exhibit 32


CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In
    connection with the Quarterly Report of China Media Group Corporation a Texas corporation
    (the "Company") on Form 10-Q for the three months period ending March 31, 2009,
    as filed with the Securities and Exchange Commission on the date hereof (the
    "Report"), Con Unerkov, Chief Executive Officer and Chief Financial Officer of
    the Company, certifies to the best of his knowledge, pursuant to 18 U.S.C. ss. 1350, as
    adopted pursuant to ss. 906 of the Sarbanes-Oxley Act of 2002, that:


(1)
    The
    Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities
    Exchange Act of 1934; and


(2)
    The
    information contained in the Report fairly presents, in all material respects, the
    financial condition and result of operations of the Company.


A signed
    original of this written statement required by Section 906 has been provided to China
    Media Group Corporation, and will be retained by China Media Group Corporation and
    furnished to the Securities and Exchange Commission or its staff upon request.


/s/ Con
    Unerkov--------------------------Con UnerkovChief
    Executive Officer and Chief Financial OfficerMay 20, 2009


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