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 June 30, 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 July 31, 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.


---



PART I


Item 1.
    Condensed
    Consolidated Financial Statements


cmg_logo

China Media Group Corporation
Condensed Consolidated Financial Statements
June 30, 2009
(Unaudited)(Expressed In United States Dollars)

Condensed
    Consolidated Balance Sheets as of June 30, 2009 and December 31, 2008


Condensed Consolidated Statements of Operations for the three months period ended June 30,
    2009 and June 30, 2008


Condensed Consolidated Statements of Stockholders' Equity for the years ended December 31,
    2008 and 2007, and for the six months period ended June 30, 2009


Condensed Consolidated Statements of Cash Flows for the six months periods ended June 30,
    2009 and 2008


Notes to Condensed Consolidated Financial Statements


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CHINA MEDIA GROUP CORPORATIONCONSOLIDATED BALANCE SHEETSAS OF JUNE 30, 2009 AND DECEMBER 31, 2008


June 30, 2009
    
    December 31, 2008(Unaudited)
    
    (Audited)Notes
    
    -----------------
    
    ---------------------US$
    
    US$ASSETSCurrent
    Assets:Cash and
    cash equivalents
    
    
    21,800
    
    67,764Accounts
    receivables
    
    
    -
    
    5,807Loans to
    unrelated parties
    8
    
    132,588
    
    132,737Prepayments,
    deposit and other receivables
    9
    
    198,160
    
    91,227---------------------
    
    ---------------------Total
    current assets
    
    
    352,548
    
    297,535Non-current
    assetsProperty
    and equipments, net
    10
    
    33,596
    
    39,851Advance
    payment for distribution rights
    11
    
    138,000
    
    138,000Goodwill
    
    
    6,791,676
    
    6,791,676---------------------
    
    ---------------------6,963,272
    
    6,969,527---------------------
    
    ---------------------7,315,820
    
    7,267,062=============
    
    =============LIABILITIES
    AND STOCKHOLDERS' EQUITYCurrent
    liabilities:Accounts
    payable
    
    
    430
    
    430Other
    payables and accruals
    12
    
    568,671
    
    466,403Convertible
    debentures
    13
    
    -
    
    -Short
    term debt
    14
    
    99,645
    
    -Due to
    officer and directors
    15
    
    982,888
    
    1,118,674Due to a
    shareholder
    
    
    356,528
    
    16,528---------------------
    
    ---------------------Total
    current liabilities
    
    
    2,008,162
    
    1,602,035---------------------
    
    ---------------------Long-term
    debt
    16
    
    2,000,000
    
    2,099,645Minority
    interest
    
    
    159,979
    
    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
    
    
    1,710,529
    
    1,660,183Shares
    issued for prepaid consulting services
    17
    
    -
    
    -Comprehensive
    income
    
    
    43,030
    
    43,265Accumulated
    deficits
    
    
    (6,034,782)
    
    (5,735,198)---------------------
    
    ---------------------Total
    stockholders' equity
    
    
    3,147,679
    
    3,397,152---------------------
    
    ---------------------7,315,820
    
    7,267,062============
    
    ============




F-3

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CHINA MEDIA GROUP CORPORATIONCONSOLIDATED STATEMENTS OF OPERATIONSFOR THE THREE MONTHS AND SIX MONTHS PERIOD ENDED JUNE 30, 2009 AND
    2008


Three months periods
    Six months periodsEnded June 30
    Ended June 30------------------------------------------------
    ---------------------------------------------2009
    
    2008
    
    2009
    
    2008-----------------
    
    -----------------
    
    -----------------
    
    ---------------US$
    
    US$
    
    US$
    
    US$Net revenue
    
    30,148
    
    26,126
    
    41,756
    
    51,401Cost of revenue
    
    (31,937)
    
    (11,803)
    
    (36,797)
    
    (27,960)-----------------
    
    -----------------
    
    ----------------
    
    ---------------Gross (loss) / profit
    
    (1,789)
    
    14,323
    
    4,959
    
    23,441Operating expenses:Selling, general and administrative expenses
    
    114,534
    
    233,603
    
    226,836
    
    615,989-----------------
    
    -----------------
    
    ---------------
    
    ---------------Loss from operations before other expense
    
    (116,323)
    
    (219,280)
    
    (221,877)
    
    (592,548)Other income / (expenses)Interest income
    
    -
    
    -
    
    -
    
    37Interest expenses
    
    (43,441)
    
    (42,524)
    
    (85,958)
    
    (105,903)-----------------
    
    -----------------
    
    -----------------
    
    --------------Net loss before minority interests
    
    (159,764)
    
    (261,804)
    
    (307,835)
    
    (698,414)Minority interest
    
    4,517
    
    6,333
    
    8,251
    
    11,720-----------------
    
    -----------------
    
    -----------------
    
    --------------Net loss
    
    (155,247)
    
    (255,471)
    
    (299,584)
    
    (686,694)-----------------
    
    -----------------
    
    -----------------
    
    --------------Other comprehensive incomeForeign currency translation gain
    
    213
    
    11,224
    
    (235)
    
    25,946-----------------
    
    -----------------
    
    -----------------
    
    --------------Comprehensive loss
    
    (155,034)
    
    (244,247)
    
    (299,819)
    
    (660,748)==========
    
    ==========
    
    =========
    
    =========Basic and diluted loss per common share
    
    (0.00)
    
    (0.00)
    
    (0.00)
    
    (0.00)==========
    
    ==========
    
    =========
    
    =========Basic and diluted weighted average number of common shares *
    
    524,132,450
    
    524,132,450
    
    534,132,450
    
    524,089,072==========
    
    ==========
    
    =========
    
    ===============


*
    Weighted average number of shares used to compute basic and diluted
    loss per share for the three months ended June 30, 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 SIX MONTHS ENDED JUNE 30, 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 staff
    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
    -
    -
    50,346
    -
    -
    -
    50,346Comprehensive income
    -
    -
    -
    (235)
    -
    -
    (235)Net loss
    -
    -
    -
    -
    -
    (299,584)
    (299,584)----------------
    -----------
    --------------
    ---------------
    -------------
    --------------
    ---------------Balance at June 30, 2009
    534,132,450
    7,428,902
    1,710,529
    43,030
    -
    (6,034,782)
    3,147,679=========
    =======
    ========
    =========
    ========
    ========
    =========






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CHINA MEDIA GROUP CORPORATIONCONSOLIDATED STATEMENTS OF CASH FLOWSFOR THE SIX MONTHS ENDED JUNE 30, 2009 AND 2008Six months period ended June 30-------------------------------------------2009
    
    2008-----------------
    
    -----------------US$
    
    US$Cash
    flows from operating activities:Net Loss
    
    
    (299,584)
    
    (686,694)Adjustments
    to reconcile net loss to net cash used in operating activities:Depreciation
    
    
    6,255
    
    6,082Minority
    interest
    
    
    (8,251)
    
    (11,720)Common
    stock issuance for services
    
    
    -
    
    214,733Common
    stock issuance for extension of repayment of convertible debentures
    
    
    -
    
    50,000Option
    expenses for employee compensation
    
    
    50,346
    
    50,346Amortization
    of convertible debenture
    
    
    -
    
    17,742Changes
    in assets and liabilities:Prepaid
    expenses, deposit and other receivables
    
    
    (106,933)
    
    1,454Account
    receivable
    
    
    5,807
    
    (11,774)Loan
    receivable
    
    
    149
    
    -Accounts
    payable and accrued expenses
    
    
    102,268
    
    133,141Short
    term debt
    
    
    99,645
    
    -Long
    term debt
    
    
    (99,645)
    
    -Due to related parties
    
    
    (135,786)
    
    282,257Due to a
    shareholder
    
    
    340,000
    
    -------------------
    
    ------------------Net
    cash (used in) / generated from operating activities
    
    
    (45,729)
    
    45,567Cash
    flows from investing activities:Purchase
    of property and equipment
    
    
    -
    
    (2,250)------------------
    
    ------------------Net
    cash used in investing activities
    
    
    -
    
    (2,250)Cash
    flows from financing activities:Repayment
    of convertible debenture
    
    
    -
    
    (125,000)------------------
    
    ------------------Net
    cash used in financing activities
    
    
    -
    
    (125,000)------------------
    
    ------------------


Net
    decrease in cash and cash equivalents
    
    
    (45,729)
    
    (81,683)Effect
    of exchange rate changes on cash and cash equivalents
    
    
    (235)
    
    25,946Cash and
    cash equivalents, beginning
    
    
    67,764
    
    107,903------------------
    
    ------------------Cash and
    cash equivalents, ending
    
    
    21,800
    
    52,166===========
    
    ===========Supplemental
    disclosure of cash flow information:Interest
    paid
    
    
    85,958
    
    105,903===========
    
    ===========Income
    taxes paid
    
    
    -
    
    -===========
    
    ===========




F-6

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CHINA MEDIA GROUP CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1
    ORGANIZATION


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


In January 2006, the Company established a wholly owned subsidiary Ren Ren Media Group
    Limited, a company incorporated in Hong Kong, as its operating company in Hong Kong. In
    March 2007, the Company acquired all the outstanding shares of Good World Investments
    Limited, a British Virgin Islands corporation that holds 50% of Beijing Ren Ren Health
    Culture Promotion Limited, a company incorporated in China in the advertising and media
    business in China.


In May 2009, the Company established a 50/50 joint venture company, ATC Marketing Limited,
    which is to be in the business of marketing and distributing of convergent multimedia
    communication and internet devices.


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


NOTE 2
    SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES & REALIZATION OF ASSETS


Basis of Presentation


The 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 estimates


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


Principles of Consolidation


The consolidated financial statements for the six months period ended June 30, 2009
    include the financial statements of the Company, its wholly owned subsidiaries Ren Ren
    Media Group Limited, Good World Investments Limited, and two 50% subsidiaries, namely
    Beijing Ren Ren Health Culture Promotion Limited and ATC Marketing Limited. ATC Marketing
    Limited was established on the date of May 21, 2009. The Company consolidated both of
    these 50% ownership companies because of the sole largest shareholding status and/or
    controlling of the Board of Directors.


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


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


F-7

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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 six months ended June 30, 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 six months ended June 30, 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 June 30,
    2009, the comprehensive income was $43,030, and $43,265 in 2008, differences were
    immaterial.


F-9

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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." Diversity exists in practice in accounting for financial guarantee
    insurance contracts by insurance enterprises under FASB Statement No. 60, Accounting and
    Reporting by Insurance Enterprises. This results in inconsistencies in the recognition and
    measurement of claim liabilities. This Statement requires that an insurance enterprise
    recognize a claim liability prior to an event of default (insured event) when there is
    evidence that credit deterioration has occurred in an insured financial obligation. This
    Statement requires expanded disclosures about financial guarantee insurance contracts. The
    accounting and disclosure requirements of the Statement will improve the quality of
    information provided to users of financial statements. SFAS 163 is effective for financial
    statements issued for fiscal years beginning after December 15, 2008, and interim periods
    within those fiscal years. The adoption of FASB 163 is not expected to have a material
    impact on the Company's financial position.
    In May 2009, the FASB issued SFAS No. 165,
    "Subsequent Events." This Statement sets forth: 1) the period after the balance
    sheet date during which management of a reporting entity should evaluate events or
    transactions that may occur for potential recognition or disclosure in the financial
    statements; 2) the circumstances under which an entity should recognize events or
    transactions occurring after the balance sheet date in its financial statements; and 3)
    the disclosures that an entity should make about events or transactions that occurred
    after the balance sheet date. This Statement is effective for interim and annual periods
    ending after June 15, 2009. The company adopted this Statement in the quarter ended June
    30, 2009. This Statement is not expected to have a material impact on the Company's
    consolidated financial results.
    In June 2009, the FASB issued SFAS No. 166
    amends SFAS No. 140 by removing the exemption from consolidation for Qualifying Special
    Purpose Entities (QSPEs). This Statement also limits the circumstances in which a
    financial asset, or portion of a financial asset, should be derecognized when the
    transferor has not transferred the entire original financial asset to an entity that is
    not consolidated with the transferor in the financial statements being presented and/or
    when the transferor has continuing involvement with the transferred financial asset. The
    adoption of these standards is not expected to have any material impact on the Company's
    Consolidated Financial Statements.
    In June 2009, the FASB issued SFAS No.
    167, "Amendments to FASB Interpretation No. 46(R)," SFAS No. 167 amends FASB
    Interpretation 46(R) to eliminate the quantitative approach previously required for
    determining the primary beneficiary of a variable interest entity and requires ongoing
    qualitative reassessments of whether an enterprise is the primary beneficiary of a
    variable interest entity. The adoption of these standards is not expected to have any
    material impact on the Company's Consolidated Financial Statements.
    In June 2009, the Financial Accounting
    Standards Board (FASB) issued Statement of Financial Accounting Standards (SFAS) No. 168,
    "The FASB Accounting Standards Codification TM and the Hierarchy of Generally
    Accepted Accounting Principles, a replacement of FASB Statement No. 162" (the
    Codification). The Codification, which was launched on July 1, 2009, became the single
    source of authoritative nongovernmental U.S. GAAP, superseding existing FASB, American
    Institute of Certified Public Accountants (AICPA), Emerging Issues Task Force (EITF) and
    related literature. The Codification eliminates the GAAP hierarchy contained in SFAS No.
    162 and establishes one level of authoritative GAAP. All other literature is considered
    non-authoritative. This Statement is effective for financial statements issued for interim
    and annual periods ending after September 15, 2009. The implementation of this Statement
    is not expected to have change to the company's Consolidated Financial Statements.


Reclassifications


Certain comparative amounts have been reclassified to conform to the current period'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 June 30, 2009, the
    Company has incurred an accumulated deficits totaling $6,034,782 and its total assets
    exceed its total liabilities by $3,147,679. In view of the matters described above,
    recoverability of a major portion of the recorded asset amounts shown in the accompanying
    balance sheets is dependent upon continued operations of the Company, which in turn is
    dependent upon the Company's ability to raise additional capital, obtain financing and to
    succeed in its future operations. The financial statements do not include any adjustments
    relating to the recoverability and classification of recorded asset amounts or amounts and
    classification of liabilities that might be necessary should the Company be unable to
    continue as a going concern.Management has taken the following steps to revise its operating
    and financial requirements, which it believes are sufficient to provide the Company with
    the ability to continue as a going concern. The Company is actively pursuing additional
    funding and potential merger or acquisition candidates and strategic partners, which would
    enhance stockholders' investment. Management believes that the above actions will allow
    the Company to continue operations through the next fiscal year.


NOTE 4
    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 2007 and 2008. In 2008 a $1,000,000
    impairment charge was made.


F-12

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NOTE 5
    STOCKHOLDERS' EQUITY


Common Stock


In 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 2009, this investment was
    disposed for a nominal value of $10,000 as this company was in a net deficit position.


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
    half of 2009 to May 12, 2009 when all the remaining stock warrants expired.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 expired on 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 expired on 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 expired on 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 June 30, 2009.


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


Options outstandingOutstanding,
    December 31, 2008
    29,800,000Granted
    during the period
    -Forfeited/lapsed
    during the period
    -Exercised
    during the period
    ---------------------------------Outstanding,
    June 30, 2009
    29,800,000===================


Following is a summary of the status of options outstanding at June 30, 2009:Outstanding Options
    
    Exercisable Options------------------------------------
    
    ----------------------------------------------------------------------Grant
    Date
    Exercise
    Price
    Number
    Average Remaining
    Contractual Life
    Average Exercise Price
    Number
    Intrinsic Price12/23/2006
    $0.0365
    17,500,000
    0.48
    $0.0365
    17,500,000
    $0.005/18/2007
    $0.0380
    12,300,000
    0.88
    $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


F-15

---

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


On March 8, 2007, we registered 38,400,000 shares underlying stock
    options under the 2007 Stock Incentive Plan with the SEC pursuant to a registration
    statement on Form S-8.
    During the year 2007, the Company had
    issued a total of 5,811,300 shares to its staff and consultants for their service
    provided.
    No shares were issued under the
    registration statement on Form S-8 during the year 2008 and for the six months ended June
    30, 2009. As at June 30, 2009 there were 32,588,700 shares available underlying stock
    options under the 2007 Stock Incentive Plan.
    As of June 30, 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 second quarter of 2009:Outstanding,
    December 31, 2008
    31,277,776Granted
    during the period
    -Forfeited
    during the period
    -Exercised
    during the period
    -Expired
    during the period
    (31,277,776)------------------------Outstanding,
    June 30, 2009
    0==============


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.


In May 2009, a total of 31,277,776 warrant shares were expired. As
    at June 30, 2009, there is no warrant share outstanding.


F-16

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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 expired on May 7, 2009. The warrants had 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 had an exercise price of $0.036 per
    share and were expired 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.


F-17

---

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 had an exercise price of
    $0.036 per share and were expired 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.


F-18

---

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 $132,588 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 June 30, 2009
    
    As of December 31, 2008-----------------------
    
    -----------------------US$
    
    US$Rental
    deposits
    
    5,961
    
    5,961Utility
    and other deposits
    
    633
    
    777Advance
    to suppliers
    
    139,954
    
    78,279Other
    receivable
    
    51,612
    
    6,210-----------------------
    
    -----------------------198,160
    
    91,227==============
    
    =============


F-19

---

NOTE 10
    PROPERTY AND EQUIPMENT, NET


Property and equipment is summarized as follows:


As of June 30, 2009
    
    As of December 31, 2008----------------------
    
    ----------------------Cost
    
    US$
    
    US$Furniture,
    fixture and equipment
    
    6,035
    
    6,945Computers
    
    8,058
    
    8,058Automobile
    
    47,951
    
    47,951-----------------------
    
    -----------------------62,044
    
    62,954Accumulated
    depreciation
    
    (28,448)
    
    (23,103)-----------------------
    
    -----------------------33,596
    
    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.


F-20

---

NOTE 12
    OTHER PAYABLES AND ACCRUALS


Other payables and accruals are summarized as follows:


As of June 30, 2009
    
    As of December 31, 2008-------------------
    
    ---------------US$
    
    US$Accrued
    salaries and wages
    
    150,557
    
    130,263Accrued
    interest
    
    5,812
    
    830Accrued
    accounting, legal and consulting fee
    
    120,998
    
    83,048Accrued
    office and related expenses
    
    14,323
    
    11,329Accrued
    audit fee
    
    40,000
    
    40,000Accrued
    others
    
    31,942
    
    21,170Other
    payables
    
    185,389
    
    160,113Deposit
    from customers
    
    19,650
    
    19,650-------------------
    
    -------------------568,671
    
    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.


F-21

---

NOTE 14
    SHORT-TERM DEBT


As of June 30, 2009, the Company has an outstanding unsecured debt payable, which was
    reclassifies from long term debts (Note 16), of $99,645(2008: $91,200), with annual
    interest rate of 10%. This debt is due on May 31, 2010. The Company recorded accrued
    interest of $4,982 in 2009 (2008: $4,560).


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 $982,888 as of June 30, 2009 (2008:
    $1,118,674).


NOTE 16
    LONG-TERM DEBTS


As of June 30, 2009
    
    As of December 31, 2008--------------------------
    
    --------------------------US$
    
    US$Shareholder
    Loan
    
    2,000,000
    
    2,000,000Other
    Loan
    
    -
    
    99,645---------------------------
    
    ---------------------------2,000,000
    
    2,099,645================
    
    ==============


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.


The other loan is unsecured, accrue interest at 10% per annum and payable on May 31, 2010.
    In this period, this loan was reclassified to short term loan (note 14).


NOTE 17
    SHARES ISSUED FOR PREPAID EXPENSES


As of June 30, 2009
    
    As of December 31, 2008--------------------------
    
    --------------------------US$
    
    US$Balance
    at January 1
    
    -
    
    293,401Issue
    of shares for service during period/year
    
    -
    
    -Less:
    service expensed during period/year
    
    -
    
    (293,401)---------------------------
    
    ---------------------------Balance
    at June 30/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 $24,000 for the six months period ended June 30, 2009
    On November 25 2005, a subsidiary of the
    Company signed a loan agreement with its major shareholder, Central High Limited for a
    loan of $2,000,000. This long term shareholder loan is unsecured and repayable on November
    25, 2010, and bears 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
    $80,000 for the six months period ended June 30, 2009.


F-22

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NOTE 19
    SEGMENT REPORTING


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


Advertising
    Telecommunication Device
    Other Services
    ConsolidatedFor the six months ended June 30
    For the six months ended June 30
    For the six months ended June 30
    For the six months
    ended June 302009
    2008
    2009
    2008
    2009
    2008
    2009
    2008US$
    US$
    US$
    US$
    US$
    US$
    US$
    US$Turnover
    12,189
    41,296
    29,567
    5,137
    -
    4,968
    41,756
    51,401========
    =======
    =======
    =======
    =======
    =======
    =========
    =========Segment results
    (22,410)
    (13,504)
    201
    (1,973)
    -
    4,968
    (22,209)
    (10,509)========
    =======
    =======
    =======
    =======
    =======Unallocated corporate income
    
    
    
    
    
    
    --
    37Unallocated corporate expenses
    
    
    
    
    
    
    (191,417)
    (570,319)--------------
    --------------Loss from operations
    
    
    
    
    
    
    (213,626)
    (580,791)Finance costs
    
    
    
    
    
    
    (85,958)
    (105,903)Loss for the period
    
    
    
    
    
    
    (299,584)
    (686.694)=========
    =========As at June 30, 2009
    As at June 30, 2008ASSETSSegment assets
    6,821,138
    7,844,102
    282,087
    220,067
    -
    -
    7,103,225
    8,064,169Unallocated corporate assets
    
    
    
    
    
    
    212,595
    431,373--------------
    --------------Consolidated total assets
    
    
    
    
    
    
    7,315,820
    8,495,542=========
    =========LIABILITIESSegment liabilities
    159,979
    176,084
    430
    30,952
    -
    -
    160,409
    207,036Unallocated corporate liabilities
    
    
    
    
    
    
    4,007,732
    3,610,706--------------
    --------------Consolidated total liabilities
    
    
    
    
    
    
    4,168,141
    3,817,742=========
    =========Depreciation of fixed assets
    5,711
    5,677
    660
    485
    -
    -
    6,371
    6,162=======
    =======
    =======
    =======
    =======
    =======
    =========
    =========


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


F-23

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NOTE 20
    COMMITMENTS AND CONTINGENCIES


a)
    The Company leases office premises for its operations in United States and Hong Kong under
    operating leases. Rental expenses under operating lease for the six months ended June 30,
    2009 and for the year ended December 31, 2008 was $13,150 and $33,215.Future minimum rental payments under non-cancelable operating leases for the six month
    ended December 31, 2009 and the year ended June 30, 2010 are $11,089 and $23,438,
    respectively.


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)
    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.


F-24

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


Forward Looking Statements


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


Critical Accounting Policy and Estimates


Our Management's Discussion and Analysis of Consolidated Financial Condition and Results
    of Operations section discusses our consolidated financial statements, which have been
    prepared in accordance with accounting principles generally accepted in the United States
    of America. The preparation of these consolidated financial statements requires management
    to make estimates and assumptions that affect the reported amounts of assets and
    liabilities at the date of the consolidated financial statements and the reported amounts
    of revenues and expenses during the reporting period. On an on-going basis, management
    evaluates its estimates and judgments, including those related to revenue recognition,
    accrued expenses, financing operations, and contingencies and litigation. Management bases
    its estimates and judgments on historical experience and on various other factors that are
    believed to be reasonable under the circumstances, the results of which form the basis for
    making judgments about the carrying value of assets and liabilities that are not readily
    apparent from other sources. Actual results may differ from these estimates under
    different assumptions or conditions. The most significant accounting estimates inherent in
    the preparation of our consolidated financial statements include estimates as to the
    appropriate carrying value of certain assets and liabilities which are not readily
    apparent from other sources. These accounting policies are described at relevant sections
    in this discussion and analysis and in the notes to the consolidated financial statements
    included in our Quarterly Report on Form 10-Q for the period ended June 30, 2009.


---

Overview


DESCRIPTION OF BUSINESS.


OVERVIEW
    In September 2005, the Company refocused
    the efforts in advertising and media in the emerging China market where global companies
    are rushing into China to try to grab and hold the attention of its 1.3 billion citizens.
    Our objective is to be a new age media company 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. The Company will initially focus on two main
    business units being "Advertising" and "Telecommunications and Mobile
    Computing" and "Product Services."..


OUR BUSINESS.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.
    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 and faced extreme uncertainty, advertisers in most
    sectors planned for the worst and cut their costs in anticipation of steep drops in
    revenue. In uncertain times, advertising expenditure is often treated as discretionary
    spending and easily reduced. It is reported that China to be the fourth largest ad market
    in 2009 and that China ad market will experience growth of 5.4% in 2009. These are
    cautiously optimistic prediction of the ad revenue, however many corporations are still
    facing uncertain economic times and we will need to monitor signs of economic recovery. We
    will move cautiously in the second half of 2009. We will monitor the economic conditions
    before we deploy any activities. We will also explore other markets in the Asia region for
    any synergistic business opportunities.


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 $581
    in relation to advertising services.During the period we have published two editions of the Hong Kong Tourist Maps "Hong
    Kong Fantasy Map". Although we have received modest ad revenue from these two initial
    subscriptions, the ad customer responses have been very positive. We plan to issue at
    least 2 more editions before the end of the year. Our aim is to cater to the large number
    of China tourists. In future, we plan to explore working with local Chinese partners to
    expand to China, as we expect the tourism sector in China to grow.


---

Telecommunications Unit
    In January 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.


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,
    mobile computing and other convergent 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. 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. As announced in our Form 8-K of May 21, 2009, we entered into an agreement
    with Advance Tech Communications Sdn. Bhd. ("ATC"), the developer of M.A.G.I.C.,
    to establish a joint venture company to market the convergent devices worldwide (other
    than China and Hong Kong) developed by ATC.The Company has recently received the latest prototype unit, know as M.A.G.I.C. S1, and it
    is now at the final stage of conducting compliance, functional, stability, load and
    usability testing on the device prior to testing by our resellers and partners. After such
    testing, we expect to enter into commercial production of the M.A.G.I.C. S1 unit in Q4. We
    are now working with potential retailers in Malaysia, India and Thailand to launch our
    M.A.G.I.C. S1 which is based on our S1 Platform. There will be further new release of
    other convergent devices based on the S1 Platform in Q1 2010.During this period under review, the Group sold US$29,567 of netbooks in China as a
    prelude to selling the M.A.G.I.C. True Convergent Devices and other Multimedia Internet
    Devices ("MIDs") in China. We will endeavor to continue to sell other convergent
    devices in Hong Kong and China in the upcoming quarter to start to prepare the
    distribution channels for M.A.G.I.C.


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


---

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 $21,800 as of June 30, 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 funding
    On 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 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 AND SIX MONTHS PERIOD ENDED JUNE 30, 2009 COMPARED TO THE THREE
    MONTHS AND SIX MONTHS PERIOD ENDED JUNE 30, 2008


REVENUES.
    For the three months period ended June 30,
    2009, the Group has realized revenue of $30,148 and a cost of revenue of $31,937,
    achieving a gross loss of $1,789. For the three months period ended June 30, 2008, the
    Group has realized revenue of $26,126 and a cost of revenue of $11,803 achieving a gross
    profit of $14,323. We hope to generate additional revenues when we begin to receive
    contracts from clients or through acquisitions. Depending upon the availability of
    operating capital, we intend to expand our operations in the next 12 months.


For the six months period ended June 30, 2009, the Group has realized revenue of $41,756
    and a cost of revenue of $36,797, achieving a gross profit of $4,959. For the six months
    period ended June 30, 2008, the Group has realized revenue of $51,401 and a cost of
    revenue of $27,960 achieving a gross profit of $23,441. 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 June 30,
    2009, our gross loss was $1,789 and our total operating expenses were $114,534, all of
    which were selling, general and administrative expenses. We also had $43,441 in interest
    expenses, and loss attributable to minority interests of $4,517, so that the net loss to
    our shareholders for the three months period ended June 30, 2009 was $155,247. This is in
    comparison to the same period ended June 30, 2008, where our gross profit was $14,323 and
    our total operating expenses were $233,603, all of which were selling, general and
    administrative expenses. We also had $42,524 in interest expenses and loss attributable to
    minority interests of $6,333, so that the net loss to our shareholders for the three
    months period ended June 30, 2008 was $255,471.


For the six month period ended June 30, 2009, our gross profit was $4,959 and our total
    operating expenses were $226,836, all of which were selling, general and administrative
    expenses. We also had $85,958 in interest expenses, and loss attributable to minority
    interests of $8,251, so that the net loss to our shareholders for the six months period
    ended June 30, 2009 was $299,584. This is in comparison to the same period ended June 30,
    2008, where our gross profit was $23,441 and our total operating expenses were $615,989,
    all of which were selling, general and administrative expenses. We also had $37 in
    interest income, $105,903 in interest expenses and loss attributable to minority interests
    of $11,720, so that the net loss to our shareholders for the six months period ended June
    30, 2008 was $686,694.


Liquidity and Capital Resources


As at June 30, 2009, the Company had cash and cash equivalents totaling $21,800, other
    current assets of $330,748 and non-current assets totaling $6,963,272 which were
    represented by $33,596 in fixed assets, $138,000 in distribution rights and $6,791,676 in
    goodwill. The total assets of the Company were $7,315,820 as of June 30, 2009. We also had
    current liabilities of $2,008,162 which were represented by $430 in accounts payable,
    $568,671 in accruals, $99,645 in short term debt, $982,888 due to related parties,
    $356,528 due to a shareholder as of June 30, 2009. We also had $2,000,000 in long-term
    shareholders loan and $159,979 in minority interests as of June 30, 2009, made our total
    liabilities $4,168,141.
    At present the Company does not have
    sufficient cash resources to provide for all general corporate operations in the
    foreseeable future. The Company will be required to raise additional capital in order to
    continue to operate in fiscal 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 June 30, 2009 the Company incurred net losses
    of $155,247 and has accumulated losses of $6,034,782 as at June 30, 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 June 30, 2009, there were no off balance sheet arrangements. The Company has no off
    balance sheet obligations or guarantees and has not historically used special purpose
    entities for any transactions.


---



Item 3.
    Quantitative
    and Qualitative Disclosure About Market Risk.


Quantitative and Qualitative Disclosures about Market Risk:


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


Item 4.
    Controls and Procedures.


Evaluation of Disclosure Controls and Procedures:


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


Changes in Internal Controls over Financial Reporting:


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


---



PART II - OTHER INFORMATION


Item 1.
    Legal Proceedings


None.


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


None.


Item 3.
    Defaults Upon Senior Securities


None.


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


None.


Item 5.
    Other Information


None.


---

Item
    6.
    Exhibits


Exhibit Number
    Description of Exhibit2.1
    Non-Blinding Stock Purchase Agreement with Dongguan Zhishixin
    Advertising Limited to acquire 52.3% controlling interests in Zhishixin.(1)2.2
    Stock
    Purchase Agreement with Central Star Holdings Limited. (2)2.3
    Sales
    and Purchase Agreement to purchase the entire share capital of Good World Investments
    Limited. (3)3.1
    Articles of Incorporation (4)3.1.1
    Certificate of Amendment to Articles of Incorporation (5)3.1.2
    Certificate of Amendment to Articles of Incorporation, as amended.(13)3.2
    Bylaws (4)4.1
    Consultancy Agreement between China Media Group Corporation and
    Waterville Investment Research, Inc.(6)4.2
    Consultancy Agreement between China Media Group Corporation and
    Uptick Limited. (7)4.3
    Executive Services Agreement between China Media Group Corporation
    and Con Unerkov (8)4.4
    Executive Services Agreement between China Media Group Corporation
    and Alex Ho (8)4.5
    Warrants to Purchase Common Stock (9)(10)10.1
    ELOC Arrangement with Tailor-Made Capital Ltd. (9)10.2
    Debenture Purchase Agreement with Tailor-Made Capital Ltd.(9).10.3
    2002 Stock Option Plan (11)10.4
    2007 Stock Incentive Plan(12)10.5
    Second Amendment Agreement (14)10.6
    Termination Letter Agreement (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 as
    filed with the SEC on February 7, 2006.2.
    Incorporated by reference to our Current Report on Form 8-K as
    filed with the SEC on February 16, 2006.3.
    Incorporated by reference to our Current Report on Form 8-K as
    filed with the SEC on March 15, 2007.4.
    Incorporated by reference to our Registration Statement on Form
    SB-2 as filed with the SEC on April 15, 2003.5.
    Incorporated by reference to our Current Report on Form 8-K as
    filed with the SEC on February 3, 2005.6.
    Incorporated by reference to our Current Report on Form 8-K as
    filed with the SEC on November 28, 2006.7.
    Incorporated by reference to our Current Report on Form 8-K as
    filed with the SEC on December 4, 2006.8.
    Incorporated by reference to our Annual Report on Form 10-KSB/A as
    filed with the SEC on August 11, 2006.9.
    Incorporated by reference to our Current Report on Form 8-K/A as
    filed with the SEC on March 8, 2007.10.
    Incorporated by reference to our Current Report on Form 8-K as
    filed with the SEC on February 16, 2006.11.
    Incorporated by reference to our Registration Statement on Form
    SB-2 as filed with the SEC on April 15, 2003.12.
    Incorporated by reference to our Registration Statement on Form S8
    as filed with the SEC on March 8, 2007.13.
    Incorporated by reference to our Registration Statement on Form
    SB-2 as filed with the SEC on March 16, 2007.14.
    Incorporated by reference to our Current Report on Form 8-K as
    filed with the SEC on January 8, 2008.15.
    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/
    Cheng Pheng Loi---------------------------------------Cheng
    Pheng LoiChief
    Executive OfficerChina
    Media Group Corporationa
    Texas corporation/s/
    Con Unerkov---------------------------------------Con
    UnerkovChief
    Financial Officer


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


By:
    /s/ Cheng Pheng Loi
    August 12, 2009--------------------------------------------Cheng
    Pheng Loi


Its:
    Principal executive officerPresident,
    director


---

Exhibit 31.1Rule 13a-14(a)/15d-14(a)Certification of Chief Executive Officer of the Company
    Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
    and Securities and Exchange Commission Release 34-46427I, Cheng Pheng Loi, 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: August 12, 2009


/s/ Cheng Pheng
    Loi-----------------------Cheng Pheng LoiChief Executive
    Officer


---

Exhibit 31.2Rule 13a-14(a)/15d-14(a)Certification of 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: August 12, 2009


/s/ Con Unerkov-----------------------Con UnerkovChief Financial
    Officer


---

Exhibit 32.1




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 June
    30, 2009, as filed with the Securities and Exchange Commission on the date hereof (the
    "Report"), Con Unerkov, Chief Executive 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/ Cheng Pheng Loi--------------------------Cheng Pheng LoiChief Executive OfficerAugust 12, 2009


---

Exhibit 32.2




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 June
    30, 2009, as filed with the Securities and Exchange Commission on the date hereof (the
    "Report"), Con Unerkov, 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 Financial OfficerAugust 12, 2009