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 September 30, 2008[    ]
    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.




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

Indicate
    by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the
    Exchange Act).


Yes [   ]     No

The
    number of common equity shares outstanding as of November 10, 2008 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 the Private
    Securities Litigation Reform Act of 1995. These statements relate to future events or
    our future financial performance. In some cases, you can identify forward-looking
    statements by terminology such as "may", "will", "should",
    "expects", "plans", "anticipates", "believes",
    "estimates", "predicts", "potential" or "continue"
    or the negative of these terms or other comparable terminology. These statements are only
    predictions and involve known and unknown risks, uncertainties and other factors,
    including the risks in the section entitled "Risk Factors", that may cause our
    or our industry's actual results, levels of
    activity, performance or achievements to be materially different from any future results,
    levels of activity, performance or achievements expressed or implied by these
    forward-looking statements.Although
    we believe that the expectations reflected in the forward-looking statements are
    reasonable, we cannot guarantee future results, levels of activity, performance or
    achievements. Except as required by applicable law, including the securities laws of the
    United States, we do not intend to update any of the forward-looking statements to conform
    these statements to actual results.Our
    financial statements are stated in United States Dollars and are prepared in accordance
    with United States Generally Accepted Accounting Principles. In this quarterly report,
    unless otherwise specified, all dollar amounts are expressed in United States Dollars.As used
    in this quarterly report, the terms "we", "us", "our",
    "CHMD", and "the Company" mean China Media Group Corporation and its
    subsidiaries unless otherwise indicated.


---

PART I


Item 1.
    Condensed Consolidated
    Financial Statements


cmg_logo.gif (20479 ??)

China Media Group Corporation
Condensed Consolidated Financial Statements
September 30, 2008
(Unaudited)(Expressed In United States Dollars)

Condensed
    Consolidated Balance Sheet as of September 30, 2008 and December 31, 2007


Condensed Consolidated Statements of Operations for the 3-months and 9-months periods
    ended September 30, 2008 and 2007


Condensed Consolidated Statements of Stockholders' Equity/(Deficit)
    for the years ended December 31, 2007 and 2006, and for the 9-months periods ended
    September 30, 2008


Condensed Consolidated Statements of Cash Flows for the 9-months periods ended September
    30, 2008 and 2007


Notes to Condensed Consolidated Financial Statements


---

CHINA
    MEDIA GROUP CORPORATIONCONSOLIDATED
    BALANCE SHEETAS
    OF SEPTEMBER 30, 2008 AND DECEMBER 31, 2007


September 30,
    
    December 31,2008
    
    2007(Unaudited)
    
    (Audited)Notes
    
    -----------------
    
    ---------------------ASSETSCurrent Assets:Cash and cash
    equivalents
    
    $
    25,163
    $
    107,903Accounts
    receivables
    
    
    14,396
    
    -Loans to unrelated
    parties
    7
    
    369,019
    
    343,487Prepayments,
    deposit and other receivables
    8
    
    96,834
    
    114,980---------------------
    
    -----------------------Total current
    assets
    
    
    505,412
    
    566,370Non-current
    assetsProperty and
    equipments, net
    
    
    42,978
    
    48,745Advance payment
    for distribution rights
    
    
    138,000
    
    138,000Goodwill
    9
    
    6,791,676
    
    7,791,676---------------------
    
    ---------------------Total non-current
    assets
    
    
    6,972,654
    
    7,978,421---------------------
    
    ---------------------TOTAL ASSETS
    
    $
    7,478,066
    $
    8,544,791===============
    
    ===============LIABILITIES AND
    STOCKHOLDERS' EQUITYCurrent
    liabilities:Accounts payable
    
    $
    10,718
    $
    32,806Other payables and
    accruals
    10
    
    422,519
    
    374,393Convertible
    debentures
    11
    
    -
    
    107,258Short term debt
    12
    
    96,270
    
    67,600Due to directors
    and officers
    13
    
    1,092,230
    
    727,861Due to a
    shareholder
    
    
    137,759
    
    ----------------------
    
    ---------------------Total current
    liabilities
    
    
    1,759,496
    
    1,309,918---------------------
    
    ---------------------Long-term debts
    14
    
    2,000,000
    
    2,023,600Minority
    interest
    
    
    171,892
    
    187,804Stockholders'equityCommon stock, no
    par value, 85,000,000,000 shares authorized, 534,132,450 (2007: 521,500,871) shares
    issued and outstanding
    4 &5
    
    7,428,902
    
    7,428,902Additional
    paid-in-capital
    
    
    1,635,010
    
    1,449,491Shares issued for
    prepaid consulting services
    15
    
    (18,668)
    
    (293,401)Comprehensive
    income
    
    
    47,171
    
    20,766Accumulated
    deficits
    
    
    (5,545,737)
    
    (3,582,289)---------------------
    
    ---------------------Total
    stockholders'equity
    
    
    3,546,678
    
    5,023,469---------------------
    
    ---------------------TOTAL LIABILITIES
    AND STOCKHOLDERS' EQUITY
    
    $
    7,478,066
    $
    8,544,791===============
    
    ===============


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

---

CHINA MEDIA GROUP CORPORATION
    CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
    FOR THE THREE MONTHS AND NINE MONTHS PERIODS ENDED SEPTEMBER 30, 2008 AND 2007


Three months periods
    Ended September 30
    Nine months periods
    Ended September 30----------------------------------------------
    ----------------------------------------------2008
    
    2007
    
    2008
    
    2007-----------------
    
    -----------------
    
    -----------------
    
    -----------------US$
    
    US$
    
    US$
    
    US$Net revenue
    
    26,314
    
    38,341
    
    77,715
    
    99,642Cost of revenue
    
    11,811
    
    35,694
    
    39,771
    
    79,083-----------------
    
    -----------------
    
    -----------------
    
    -----------------Gross profit
    
    14,503
    
    2,647
    
    37,944
    `
    20,559Operating
    expenses:Impairment of
    investment
    
    -
    
    -
    
    -
    
    243,000Impairment on
    goodwill
    
    1,000,000
    
    -
    
    1,000,000
    
    -Selling, general
    and administrative expenses
    
    253,725
    
    347,029
    
    869,715
    
    1,032,692-----------------
    
    -----------------
    
    -----------------
    
    -----------------Loss from
    operations before other expense
    
    (1,239,222)
    
    (344,382)
    
    (1,831,771)
    
    (1,255,133)Other income /
    (expenses)Interest income
    
    -
    
    32
    
    37
    
    156Interest expenses
    
    (41,723)
    
    (24,042)
    
    (147,626)
    
    (52,629)-----------------
    
    -----------------
    
    -----------------
    
    -----------------Net loss before
    minority interests
    
    (1,280,945)
    
    (368,392)
    
    (1,979,360)
    
    (1,307,606)Minority interest
    
    4,192
    
    9,168
    
    15,912
    
    13,700-----------------
    
    -----------------
    
    -----------------
    
    -----------------Net loss
    
    (1,276,753)
    
    (359,224)
    
    (1,963,448)
    
    (1,293,906)-----------------
    
    -----------------
    
    -----------------
    
    -----------------Other
    comprehensive incomeForeign currency
    translation gain
    
    459
    
    2,160
    
    26,405
    
    7,906-----------------
    
    -----------------
    
    -----------------
    
    -----------------Comprehensive loss
    
    (1,276,294)
    
    (357,064)
    
    (1,937,043)
    
    (1,286,000)=============
    
    =============
    
    =============
    
    =============Basic and diluted
    loss per common shares
    $
    (0.00)
    $
    (0.00)
    $
    (0.00)
    $
    (0.00)=============
    
    =============
    
    =============
    
    =============Basic and diluted
    weighted average number of common shares *
    
    530,762,885
    
    501,215,157
    
    526,329,914
    
    463,703,677=============
    
    =============
    
    =============
    
    =============


* Basic and diluted weighted average number of shares is same since the effect of dilutive
    securities are anti-dilutive.


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

---

CHINA
    MEDIA GROUP CORPORATIONCONSOLIDATED
    STATEMENTS OF STOCKHOLDERS' EQUITY/ (DEFICIT)FOR
    THE YEARS ENDED DECEMBER 31, 2007 AND 2006 ANDFOR
    THE NINE MONTHS PERIODS ENDED SEPTEMBER 30, 2008


Common stock
    Additional
    
    
    
    Total-----------------------
    paid-in
    Comprehensive
    Prepaid
    Accumulated
    stockholdersShares
    Amount
    capital
    income
    Expenses
    Deficit
    equity (deficit)----------------
    -------------
    --------------
    ---------------
    -------------
    --------------
    ---------------US$
    US$
    US$
    US$
    US$
    US$Balance
    at January 1, 2006
    343,940,812
    162,170
    -
    -
    -
    (338,514)
    (176,344)Issuance
    of shares for distribution right
    1,000,000
    138,000
    -
    -
    -
    -
    138,000Issuance
    of shares and warrants for cash
    833,333
    170,000
    80,000
    -
    -
    -
    250,000Issuance
    of shares for services
    3,000,000
    69,000
    -
    -
    (55,375)
    -
    13,625Issuance
    of shares for commitment fee for equity line of credit agreement
    12,500,000
    237,500
    -
    -
    -
    -
    237,500Options
    granted
    -
    -
    184,276
    -
    -
    -
    184,276Issuance
    of warrants
    -
    -
    312,660
    -
    -
    -
    312,660Net
    loss
    -
    -
    -
    -
    -
    (1,515,743)
    (1,515,743)----------------
    -------------
    --------------
    ---------------
    -------------
    --------------
    ---------------Balance
    at December 31, 2006 and January 1, 2007
    361,274,145
    776,670
    576,936
    -
    (55,375)
    (1,854,257)
    (556,026)Issuance
    of shares for staffs
    11,731,542
    312,232
    116,337
    -
    -
    -
    428,569Issuance
    of shares for share investment
    3,518,518
    190,000
    -
    -
    -
    -
    190,000Issuance
    of shares for acquisition of subsidiary
    125,000,000
    6,000,000
    -
    -
    -
    -
    6,000,000Issuance
    of shares for services
    17,476,666
    85,000
    603,420
    -
    (238,026)
    -
    450,394Exercise
    of warrants
    500,000
    15,000
    -
    -
    -
    -
    15,000Sell
    shares under ELOC Agreement
    2,000,000
    50,000
    -
    -
    -
    -
    50,000Issuance
    of warrants
    -
    -
    15,590
    -
    -
    -
    15,590Options
    granted
    -
    -
    62,208
    -
    -
    -
    62,208Issuance
    of convertible debenture
    -
    -
    75,000
    -
    -
    -
    75,000Comprehensive
    income
    -
    -
    -
    20,766
    -
    -
    20,766Net
    loss
    -
    -
    -
    -
    -
    (1,728,032)
    (1,728,032)----------------
    -------------
    --------------
    ---------------
    -------------
    --------------
    ---------------Balance
    at December 31, 2007 and January 1, 2008
    521,500,871
    7,428,902
    1,449,491
    20,766
    (293,401)
    (3,582,289)
    5,023,469Amortization
    of issuance of shares for services expenses
    -
    -
    -
    -
    274,733
    -
    274,733Amortization
    of options granted
    -
    -
    75,519
    -
    -
    -
    75,519Issuance
    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
    -
    -
    -
    26,405
    -
    -
    26,405Net
    loss
    -
    -
    -
    -
    -
    (1,963,448)
    (1,963,448)----------------
    -------------
    --------------
    ---------------
    -------------
    --------------
    ---------------Balance
    at September 30, 2008
    534,132,450
    7,428,902
    1,635,010
    47,171
    (18,668)
    (5,545,737)
    3,546,678=========
    =======
    ========
    =========
    =======
    ========
    =========


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

---

CHINA MEDIA GROUP CORPORATIONCONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)FOR THE NINE MONTHS PERIODS ENDED SEPTEMBER 30, 2008 AND
    2007Nine months periods ended September 30---------------------------------------------------------------------2008
    
    2007-----------------
    
    ------------------Cash flows from
    operating activities:
    
    
    US$
    
    US$Net Loss
    
    
    (1,963,448)
    
    (1,293,906)Adjustments to
    reconcile net loss to net cash used in operating activities:Depreciation
    
    
    9,152
    
    7,911Amortization of convertible debentures
    
    
    17,742
    
    38,508Minority interest
    
    
    (15,912)
    
    (13,700)Impairment in investment
    
    
    -
    
    243,000Impairment on goodwill
    
    
    1,000,000
    
    -Issuance warrants for services
    
    
    -
    
    10,592Option expenses for employee compensation
    
    
    75,519
    
    37,035Common stock issuance for extension of repayment of convertible debentures
    
    
    50,000
    
    -Common stock issuance for termination of ELOC agreement
    
    
    60,000
    
    -Common stock issuance for employees
    
    
    -
    
    121,349Common stock issuance for services
    
    
    274,733
    
    248,580(Increase)/decrease
    in assets:Prepaid expenses, deposit and other receivables
    
    
    (7,386)
    
    (19,182)Due from a director in subsidiary
    
    
    -
    
    28,390Accounts receivable
    
    
    (14,396)
    
    (2,873)Increase in
    liabilities:Accounts payable and accrued expenses
    
    
    26,038
    
    232,287Short term debt
    
    
    5,070
    
    -Due to related parties
    
    
    364,369
    
    220,612Due to a shareholder
    
    
    137,759
    
    ---------------------
    
    -------------------Net cash used in operating activities
    
    
    19,240
    
    (141,397)--------------------
    
    -------------------Cash flows from
    investing activities:Increase in investment
    
    
    -
    
    -Purchase of property and equipment
    
    
    (3,385)
    
    (1,851)--------------------
    
    --------------------Net cash used in investing activities
    
    
    (3,385)
    
    (1,851)--------------------
    
    --------------------Cash flows from
    financing activities:Proceeds from issuance of debt
    
    
    -
    
    75,000Acquisition of subsidiary, net of cash
    
    
    -
    
    26,671Repayment of convertible debentures
    
    
    (125,000)
    
    ----------------------
    
    ---------------------Net cash provided by financing activities
    
    
    (125,000)
    
    101,671---------------------
    
    ---------------------Net decrease in
    cash and cash equivalents
    
    
    (109,145)
    
    (41,577)Effect of
    exchange rate changes on cash and cash equivalents
    
    
    26,405
    
    7,906Cash and cash
    equivalents, beginning
    
    
    107,903
    
    63,039---------------------
    
    ---------------------Cash and cash
    equivalents, ending
    
    
    25,163
    
    29,368===============
    
    ===============Supplemental
    disclosure of cash flow information:Interest paid
    
    
    -
    
    -===============
    
    ===============Income taxes paid
    
    
    -
    
    -===============
    
    ===============


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

---

CHINA MEDIA GROUP CORPORATIONNOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)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, British Virgin Islands corporation that holds 50% of Beijing Ren Ren Health
    Culture Promotion Limited, a company incorporated in China in the advertising and media
    business in China.The Company is engaged in the media and advertising business, focusing in China, and the
    marketing and distribution of convergent devices.


NOTE 2
    SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES & REALIZATION OF ASSETS


Unaudited Interim Financial InformationThe
    accompanying unaudited interim consolidated financial statements have been prepared in
    accordance with accounting principles generally accepted in the United States of America
    and the rules of the U.S. Securities and Exchange Commission, and should be read in
    conjunction with the audited consolidated financial statements and notes thereto for the
    year ended December 31, 2007. They do not include all information and footnotes required
    by accounting principles generally accepted in the United States of America for completing
    the consolidated financial statements. However, except as disclosed herein, there has been
    no material change in the information disclosed in the notes to the consolidated financial
    statements for the year ended December 31, 2007 included in the Company Form 10-KSB filed
    with the Securities and Exchange Commission. In the opinion of management,all
    adjustments (consisting of normal recurring accruals) considered necessary for a fair
    presentation of financial position and the results of operations for the interim periods
    presented have been included. Operating results for the interim periods are not
    necessarily indicative of the results that may be expected for the respective full year.Use
    of EstimatesThe
    preparation of financial statements in conformity with generally accepted accounting
    principles requires management to make estimates and assumptions that affect the reported
    amounts of assets and liabilities and disclosure of contingent assets and liabilities at
    the date of the financial statements and the reported amounts of revenues and expenses
    during the reporting period. Actual results could differ from those estimates.Principles
    of ConsolidationThe
    consolidated financial statements include the financial statements of the Company and its
    wholly owned subsidiaries Ren Ren Media Group Limited and Good World Investments Limited,
    and a 50% subsidiary Beijing Ren Ren Health Culture Promotion Limited. Good World
    Investments Limited and Beijing Ren Ren Health Culture Promotion Limited were both
    acquired by the Group in March 2007.The
    results of subsidiaries acquired during the period are consolidated from their effective
    dates of acquisition.All
    significant inter-company transactions and balances have been eliminated on consolidation.


Intangible
    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 are 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.


---

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


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.


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 in Renmenbi, 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 Hong Kong
    dollar and the Renmenbi as the functional currencies. 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 period. The resulting
    translation adjustments are reported under other comprehensive income in accordance with
    SFAS No. 130, "Reporting Comprehensive Income. As of September 30, 2008, the
    accumulated comprehensive income was $47,171. For the nine months ended September 30,
    2008, the comprehensive income was $26,405 and at the corresponding period in the prior
    year the comprehensive income was a loss of $7,906.


Recent PronouncementsIn June
    2006, the Financial Accounting Standards Board (FASB) issued FASB Integration No. 48,
    "Accounting for Uncertainty in Income Taxes, an interpretation of FASB Statements No.
    109" (FIN 48). FIN 48 clarifies the accounting for uncertainty in income taxes by
    prescribing a two-step method of first evaluating whether a tax position has met a more
    likely than not recognition threshold and second, measuring that tax position to determine
    the amount of benefit to be recognized in the financial statements. Fin 48 provides
    guidance on the presentation of such positions within a classified statement of financial
    position as well as on de-recognition, interest and penalties, accounting in interim
    periods, disclosure and transition. FIN 48 is effectively for fiscal years beginning after
    December 15, 2006. The adoption of this standard is not expected to have a material effect
    on the Company's results of operations or financial condition.


---

NOTE
    2
    SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES &
    REALIZATION OF ASSETS (Continued)Recent
    Pronouncements (Continued)FASB
    issued SFAS No. 155, "Accounting for Certain Hybrid Financial Instruments". SFAS
    No. 155 amends SFAS No 133, "Accounting for Derivative Instruments and Hedging
    Activities", and SFAS No. 140, "Accounting for Transfers and Servicing of
    Financial Assets and Extinguishments of Liabilities". SFAS No. 155, permits fair
    value re-measurement for any hybrid financial instrument that contains an embedded
    derivative that otherwise would require bifurcation, clarifies which interest-only strips
    and principal-only strips are not subject to the requirements of SFAS No. 133, establishes
    a requirement to evaluate interest in securitized financial assets to identify interests
    that are freestanding derivatives or that are hybrid financial instruments that contain an
    embedded derivative requiring bifurcation, clarifies that concentrations of credit risk in
    the form of subordination are not embedded derivatives, and amends SFAS No. 140 to
    eliminate the prohibition on the qualifying special-purpose entity from holding a
    derivative financial instrument that pertains to a beneficial interest other than another
    derivative financial instrument. This statement is effective for all financial instruments
    acquired or issued after the beginning of theCompany's
    first fiscal year that begins after September 15, 2006. The Company has not evaluated the
    impact of this pronouncement on its financial statements.


In May 2005, the FASB issued SFAS No. 154, entitled Accounting Changes and Error
    Corrections -a replacement of APB Opinion No. 20 and FASB
    Statement No. 3. This Statement replaces APB Opinion No. 20, Accounting Changes, and FASB
    Statement No. 3, Reporting Accounting Changes in Interim Financial Statements, and changes
    the requirements for the accounting for and reporting of a change in accounting principle.
    This Statement applies to all voluntary changes in accounting principle. It also applies
    to changes required by an accounting pronouncement in the unusual instance that the
    pronouncement does not include specific transition provisions. Opinion 20 previously
    required that most voluntary changes in accounting principle be recognized by including in
    net income of the period of the change the cumulative effect of changing to the new
    accounting principle. This Statement requires retrospective application to prior periods'
    financial statements of changes in accounting principle, unless it is
    impracticable to determine either the period-specific effects or the cumulative effect of
    the change. This Statement defines retrospective application as the application of a
    different accounting principle to prior accounting periods as if that principle had always
    been used or as the adjustment of previously issued financial statements to reflect a
    change in the reporting entity. This Statement also redefines restatement as the revising
    of previously issued financial statements to reflect the correction of an error. The
    provisions of SFAS No. 154 are effective for accounting changes and correction of errors
    made in fiscal years beginning after December 15, 2005. The adoption of SFAS 154 did not
    impact the consolidated financial statements.


In September 2006, the FASB issued Statement of Financial Accounting Standards("SFAS")
    No. 157, "Fair Value Measurements," or SFAS 157, which defines fair value,
    establishes a framework for measuring fair value in U.S. GAAP, and expands disclosures
    about fair value measurements. SFAS 157 applies under other accounting pronouncements that
    require or permit fair value measurements, where fair value is the relevant measurement
    attribute. The standard does not require any new fair value measurements. SFAS 157 is
    effective for financial statements issued for fiscal years beginning after November 15,
    2007, and interim periods within those fiscal years. The Company is currently evaluating
    the impact of adopting SFAS 157 on its consolidated financial statements.In February 2007, the FASB issued Statement of Financial Accounting Standards
    ("SFAS") 159, "The Fair Value Option for Financial Assets and Financial
    Liabilities - Including an Amendment of FASB Statement No. 115," or SFAS 159. SFAS
    159 permits entities to choose to measure many financial instruments and certain other
    items at fair value. Entities that elect the fair value option will report unrealized
    gains and losses in earnings at each subsequent reporting date. The fair value option may
    be elected on an instrument-by-instrument basis, with a few exceptions. SFAS 159 also
    establishes presentation and disclosure requirements to facilitate comparisons between
    entities that choose different measurement attributes for similar assets and liabilities.
    The requirements of SFAS 159 are effective for theCompany's fiscal year beginning on October 1, 2008. The Company's management is
    in the process of evaluating this guidance and therefore has not yet determined the impact
    that SFAS 159 will have on its financial statements upon adoption.In September 2006, the SEC issued Staff Accounting Bulletin ("SAB")No.
    108, or SAB 108, which provides guidance on the process of quantifying financial statement
    misstatements. In SAB 108, the SEC staff establishes an approach that requires
    quantification of financial statement errors, under both the iron-curtain and the
    roll-over methods, based on the effects of the error on each of our financial statements
    and the related financial statement disclosures. SAB 108 is generally effective for annual
    financial statements in the first fiscal year ending after November 15, 2006. The
    transition provisions of SAB 108 permits existing public companies to record the
    cumulative effect in the first year ending after November 15, 2006 by recording correcting
    adjustments to the carrying values of assets and liabilities as of the beginning of that
    year with the offsetting adjustment recorded to the opening balance of retained earnings.
    We do not expect that the adoption of SAB 108 would have a material effect on our
    consolidated financial statements.


---

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


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


Segment ReportingStatement
    of Financial Accounting Standards No. 131 ("SFAS 131"), "Disclosure About
    Segments of an Enterprise and Related Information" requires use of the
    "management approach" model for segment reporting. The management approach model
    is based on the way a company's management organizes segments within the company for
    making operating decisions and assessing performance. Reportable segments are based on
    products and services, geography, legal structure, management structure, or any other
    manner in which management disaggregates a company. The Company's operations are
    classified into three principal reporting segments that provide different products or
    services.
    .


NOTE 3
    UNCERTAINTY OF ABILITY TO CONTINUE AS A GOING CONCERNThe 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 September 30, 2008, the
    Company has incurred an accumulated deficits totaling $5,545,737 and its total current
    liabilities exceed its total current assets by $1,254,084. 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 has filed a registered statement to sell up to
    $2,500,000 of its common stock under an Equity Line of Credit Agreement
    ("ELOC"), which was declared effective by the SEC in May 2007. During 2007, the
    Company has sold $50,000 of its common stock under the ELOC agreement and in August 2008
    the Company terminated the ELOC agreement except for the Stock Warrants under the ELOC
    Agreement. The Company is also actively pursuing additional funding and potential merger
    or acquisition candidates and strategic partners, which would enhance stockholders'
    investment. Management believes that the above actions will allow the Company to continue
    operations through the next fiscal year. However there can be no assurances that the
    Company can sell any of its Stock Warrants or that sufficient financing will be available
    on terms acceptable to the Company or at all.


NOTE 4
    STOCKHOLDERS' EQUITY


Common Stock


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


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


Warrants


There were no movements in the warrants during the nine months ended September 30, 2008.
    During the nine months period ended September 30, 2008, the only movements in the warrants
    related to the issue of stock warrants in February 2006 when the Company issued stock
    warrants for 1,666,666 shares of common stock exercisable for a two year period to
    February 21, 2008 at an exercise price of $0.30 per share to Central Star Holdings
    Limited. The warrants expired on February 21, 2008.


---

NOTE 5
    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 plans using the intrinsic value method in
    accordance with the provisions of APB Opinion No. 25 and related interpretation2002 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. The Company had 29,800,000 stock options
    outstanding as at September 30, 2008.Following
    is a summary of the activities of the 2002 Stock Option Plan for the six months ended
    September 30, 2008:


Options outstanding--------------------------------Outstanding, December
    31, 2007
    29,800,000Granted during the
    period
    -Forfeited/lapsed
    during the period
    -Exercised during the
    period
    ---------------------------------Outstanding,
    September 30, 2008
    29,800,000======================


Following is a
    summary of the status of options outstanding September 30, 2008: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
    1.23
    $0.0365
    17,500,000
    $0.005/18/2007
    $0.0380
    12,300,000
    1.63
    $0.0380
    12,300,000
    $0.00


---

NOTE 5
    STOCK OPTIONS AND WARRANTS (Continued)


Stock Options (Continued)


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


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


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


2007 Stock Incentive PlanOn February 19,
    2007, the Company adopted the 2007 Stock Incentive Plan (the "2007 Plan")
    allowing for the awarding of options to acquire shares of common stock. This plan provides
    for the grant of incentive stock options to key employees, directors and consultants.
    Options issued under this plan will expire over a maximum term of ten years from the date
    of grant. The Company had not issued any stock options under this plan since inception to
    September 30, 2008.


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. As of September 30, 2008,
    there were 32,588,700 shares underlying the stock options under the 2007 Stock Incentive
    Plan.


Warrants


Following is a summary of the
    warrant activity for the nine months ended September 30, 2008:


Outstanding, December
    31, 2007
    32,944,442Granted during the
    period
    -Forfeited during the
    period
    1,666,666Exercised during the
    period
    ---------------------------------Outstanding,
    September 30, 2008
    31,277,776======================


---

NOTE 5
    STOCK OPTIONS AND WARRANTS (Continued)


Warrants (Continued)


Following is a summary of the status of warrants outstanding at September 30, 2008:


Outstanding Warrants
    
    Exercisable Warrants---------------------------------
    
    ------------------------------------------------------------------Exercise
    Price
    Number
    Average
    Remaining Contractual Life
    Average
    Exercise Price
    Number
    Intrinsic Value$0.030
    15,125,000
    0.70
    $0.030
    15,125,000
    $0 .00$0.036
    15,625,000
    0.70
    $0.036
    15,625,000
    $0 .00$0.036
    138,889
    0.70
    $0.036
    138,889
    $0 .00$0.036
    208,333
    0.59
    $0.036
    208,333
    $0 .00$0.036
    41,666
    0.64
    $0.036
    41,666
    $0 .00$0.036
    138,888
    0.65
    $0.036
    138,888
    $0 .00


Details of the warrants are specified in Note 6 (b), (c), (d), (h), and (o).


NOTE 6
    STOCK PURCHASE AGREEMENTS


The significant Stock Purchase Agreements entered into by the Company during the past year
    are highlighted below.


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 March 31, 2008, 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.
    The stock warrants for 1,666,666 shares of Common Stock exercisable for a year period to
    February 21, 2008 expired on the date without any of the stock warrants being exercised.


---

NOTE 6
    STOCK PURCHASE AGREEMENTS (Continued)


c) On or about December 7, 2006 the Company entered into an Equity Line of Credit
    Agreement ("ELOC") with Tailor-Made Capital Limited ("TMC"). Pursuant
    to Equity Line of Credit Agreement, the Company may at its sole discretion, periodically
    sell to TMC common stock for a total purchase price of up to US$2,500,000 during the two
    year period commencing on the effective date of the registration statement but not later
    than three years from the date of the ELOC. The amount of each advance is subject to a
    maximum amount of US$250,000, and the Company may not submit an advance within 5 trading
    days of a prior notice of an advance. For each common stock purchased under the ELOC, TMC
    will pay between 90-100% of the volume weighted average price of our common stock quoted
    on the Over-the-Counter Bulletin Board for the 5 days immediately preceding the notice
    date. As part of this agreement, the Company issued to TMC 12,500,000 common stock as
    commitment fee and stock warrants for a total of 31,250,000 shares of common stock. The
    warrants expire on May 7, 2009. The warrants have an exercise price for 15,625,000 shares
    of common stock at $0.030 per share and the other 15,625,000 shares of common stock at
    $0.036 per share. At the date of this report, the Company has draw down US$50,000 on the
    Equity Line of Credit and in August 2008, the ELOC Agreement was terminated. Furthermore
    on the date of this report, TMC has exercised 500,000 stock warrants as per Note 6 (o)
    below.


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


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


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


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


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


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


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


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


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


m) On September 19, 2007, we entered into a Financial Public Relation Agreement ("FPR
    Agreement") with a third party consultant to provide 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.


---

NOTE 6
    STOCK PURCHASE AGREEMENTS (Continued)


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


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


s) On November 28, 2007, the Company entered into an agreement with a third party
    consultant to provide services 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 7
    LOANS TO UNRELATED PARTIES


The loans to unrelated parties are interest free, non secured and due on December 31,
    2008.


NOTE 8
    PREPAYMENTS, DEPOSITS AND OTHER RECEIVABLES


Prepayments, deposits and other receivables are summarized as follows:


As of September 30, 2008
    
    As of December 31, 2007---------------------------------------
    
    -------------------------------------Rental deposits
    $
    5,949
    $
    21,334Utility and other
    deposits
    
    633
    
    9,860Advance to
    suppliers
    
    78,118
    
    82,337Other receivables
    
    12,134
    
    1,449---------------------------------------
    
    -------------------------------------$
    96,834
    $
    114,980==========================
    
    =========================


---

NOTE 9
    GOODWILL


The goodwill is account for in the outdoor advertising segment. Due to the recent global
    economic crisis, the Company estimate that the advertising sector will slow down in a down
    turn in the Chinese economy. This will affect our roll out of the outdoor advertising
    segment and our goodwill. After this impairment recognition, we expect that it will be
    adequate and no further provision is necessary in the near future.


Goodwill acquired in
    Good World Investments Limited 
        transaction at March 13, 2007
    
    $
    7,791,676Goodwill impairment
    at the quarter ended September 30, 2008
    
    ($
    1,000,000)------------------------Goodwill balance as
    at September 30, 2008
    
    $
    6,791,676============


NOTE 10
    OTHER PAYABLES AND ACCRUALS


Other payables and accruals are summarized as follows:


As of September 30, 2008
    
    As of December 31, 2007---------------------------------------
    
    ---------------------------------------Accrued salaries
    and wages
    $
    114,733
    $
    93,955Accrued interest
    
    1,770
    
    27,325Accrued
    accounting, audit, legal and consulting fee
    
    87,548
    
    45,191Accrued office and
    related expenses
    
    21,105
    
    39,799Accrued others
    
    14,132
    
    16,578Other payables
    
    163,622
    
    121,544Deposit from
    customers
    
    19,609
    
    30,001---------------------------------------
    
    ---------------------------------------$
    422,519
    $
    374,393==========================
    
    ==========================


NOTE 11
    CONVERTIBLE DEBENTURES


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


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


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


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


NOTE 12
    SHORT-TERM DEBT


As of September 30, 2008, the Company has an outstanding short-term unsecured debt payable
    of $96,270, with annual interest rate of 10%.


---

NOTE 13
    DUE TO DIRECTORS AND OFFICERS


The due
    to directors and officers are interests free, unsecured and due on demand. The balance of
    due to directors and officers is $1,092,230 as of September 30, 2008.


NOTE 14
    LONG TERM DEBTS


September 30, 2008
    
    December 31, 2007-----------------------------
    
    -----------------------------Shareholder Loan
    $
    2,000,000
    $
    2,000,000Other Loan
    
    -
    
    23,600-----------------------------
    
    -----------------------------$
    2,000,000
    $
    2,023,600====================
    
    ====================


The other loan is unsecured, accrue interest at 10% per annum and payable on March 31,
    2009.


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


NOTE 15
    SHARES ISSUED FOR PREPAID EXPENSES


Nine months ended
    September 30, 2008
    
    Year ended 
    December 31, 2007-------------------------------
    
    -------------------------------Balance at the
    beginning of period
    $
    293,401
    $
    55,375Issue of shares
    for service during period
    
    -
    
    603,420Less: service
    expensed during period
    
    (274,733)
    
    (365,394)-------------------------------
    
    -------------------------------Balance at the end
    of period
    $
    18,668
    $
    293,401=====================
    
    =====================


NOTE 16
    RELATED PARTIES TRANSACTIONS


There were no transactions with related parties for the three months and nine months ended
    September 30, 2008 and year ended December 31, 2007 other than as noted below.


The Company agreed to pay directors and officers a monthly salary and consultation fee for
    services performed. During the three and nine months periods ended September 30, 2008, the
    Company paid the directors and its officers and their services companies a total
    remuneration of $42,000 (three months ended September 30, 2007 $93,515), and $150,000
    (nine months ended September 30, 2007 $303,530) respectively.


---

NOTE 17
    SEGMENT REPORTING


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


Advertising
    Telecommunication Device
    Other Services
    ConsolidatedFor nine months period 
    ended September 30,
    For nine months period 
    ended September 30,
    For nine months period 
    ended September 30,
    For nine months period 
    ended September 30,2008
    2007
    2008
    2007
    2008
    2007
    2008
    2007US$
    US$
    US$
    US$
    US$
    US$
    US$
    US$Turnover
    67,609
    -
    5,137
    87,008
    4,969
    12,634
    77,715
    99,642================================================================================================Segment results
    (1,012,809)
    (32,930)
    (1,973)
    (3,460)
    (1,031)
    (238,225)
    (1,015,813)
    (274,615)=================================================================Unallocated corporate income
    
    
    
    
    
    
    37
    156Unallocated corporate expenses
    
    
    
    
    
    
    (800,046)
    (966,818)-------------------------
    -------------------------Loss from operations
    
    
    
    
    
    
    (1,815,822)
    (1,241,277)Finance costs
    
    
    
    
    
    
    (147,626)
    (52,629)-------------------------
    -------------------------Loss for the period
    
    
    
    
    
    
    (1,963,448)
    (1,293,906)=============
    =============ASSETS
    
    
    
    
    
    
    As at September 
    30, 2008
    As at December 
    31, 2007Segment assets
    6,843,926
    7,837,922
    221,242
    212,350
    -
    -
    7,065,168
    8,050,272Unallocated corporate assets
    
    
    
    
    
    
    412,898
    494,519-------------------------
    -------------------------Consolidated total assets
    
    
    
    
    
    
    7,478,066
    8,544,791=============
    =============LIABILITIESSegment liabilities
    171,892
    187,804
    10,718
    32,806
    -
    -
    182,610
    220,610Unallocated corporate liabilities
    
    
    
    
    
    
    3,748,778
    3,300,712-------------------------
    -------------------------Consolidated total liabilities
    
    
    
    
    
    
    3,931,388
    3,521,322=============
    =============Depreciation of fixed assets
    8,528
    6,395
    757
    2,224
    -
    -
    9,285
    8,619Impairment ofgoodwill/investments
    1,000,000
    -
    -
    -
    -
    243,000
    1,000,000
    243,000Geographical SegmentsThe Group's customers are principally located in Hong Kong.


---

NOTE 18
    COMMITMENTS AND CONTINGENCIES


a)
    The Company leases office premises for its operations in United States, Hong Kong and
    China under operating leases. Rental expenses under operating lease for the three months
    ended September 30, 2008 was $7,749 (for three months ended September 30, 2007 :$15,200).Future minimum rental payments under non-cancellable operating leases for the
    year ended December 31, 2008 is $10,211.b)
    The Company has service or employment agreements with the Directors and
    Officer and its service companies (the "Executives") for two years commencing on
    October 1, 2005 and the agreements shall continue thereafter unless terminated by either
    parties. The Executives will receive a monthly salary at a rate to be agreed by the
    Company and the Executives from time to time. In addition, the Executives will receive an
    annual management bonus to be determined by the majority of the Board based on the
    operating results of the Company and the Executives' performances, provided that it does
    not exceed 8.8 % of the net profit of the Company.c)
    The Company will pay a 10% commission in cash and an equal amount in stock
    warrant to an independent party on any funds received as a result of any exercise of stock
    warrants issued pursuant to the ELOC Agreement.d)
    On or about May 7, 2008, the Company received a correspondence from a law
    firm regarding complaints on some transmission of unsolicited facsimile allegedly from the
    Company in 2006, and advised of potential litigation. The Company has never sent or
    authorized any unsolicited facsimile transmission, and the Company has taken every
    possible effort to distance from these unauthorized transmission. 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.


NOTE 19
    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:


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


---

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 September 30, 2008.


---

Overview


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


In summary, the update of some of the events are as follows:Advertising
    Unit
    On or about December 5, 2005, the Company announced
    that it has been appointed as the advertising agent for Beijing Ren Ren Health Culture
    Promotion Co. Limited which has since become our subsidiary company. Beijing Ren Ren had
    obtained approval for signs in Chao Yuan District in Beijing. Due to the Olympics, the
    Central Government banned all outdoor billboards in all Olympic cities until after the
    Olympics. Moreover, with the recent global financial crisis, we expect that this will
    affect China's advertising sector as China's economic growth is expected to slow in the coming year, affecting Chinese
    industries and consumer spendings. Therefore no revenue is expected to be obtained from
    outdoor media advertising until 2009. We will concentrate on second tier cities on
    district signs for the health promotion and awareness campaigns. During the period, the
    Company has earned $26,314 in relation to advertising services.Furthermore
    on or about December 7, 2005 the Company entered into a cooperation agreement with Harbin
    Shendong Advertising Co. Limited on developing adverting revenue in Harbin, which then
    progress to discussions on acquisition of 9 signs from Harbin Shengdong. The Company is
    having on going discussion with Harbin Shendong on the acquisition of the 9 signs. No
    revenue has been generated from these signs.


---

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


As announced on or about January 25, 2006 the Company entered into a distribution
    agreement for the territory of China and Hong Kong for the M.A.G.I.C. Convergent Device.
    The Company has acquired the rights to M.A.G.I.C. convergent device which is expected to
    be commercially available for sales in the coming months. M.A.G.I.C. is a next generation
    convergent device that has the full capabilities of a notebook computer shrink to a size
    of a PDA phone. The Company received the initial prototype unit in May 2006 and have
    completed conducting compliance, functional, stability, load and usability testing on the
    device. In May 2008, the Company has received the final prototype, and after certain
    modifications to the device expects to start the commercial sale of the M.A.G.I.C.
    convergent devices in Q1 of 2005. No revenue has been generated from this M.A.G.I.C.
    convergent device at the date of this report.


The Company has commenced selling mobile devices through certain distribution channels in
    Hong Kong in advance of selling the MAGIC device. For this year the Group has earned
    $5,137 on selling mobile devices but did not make any revenue for this quarter due to
    unfavorable market condition in mobile devices.


Print Unit
    On or about January 13, 2007, the Company acquired
    18% interests in Guangzhou Waho Culture Co., Ltd. ("Waho"), a company in the
    business of online advertising with specifically a contract to do the print and online
    edition of Yellow Pages for Guangdong Province for China Tietong Communications Co., Ltd.,
    one of the licensed telecommunications carriers in China. We will actively monitor this
    investment and will hold discussions with management to determine if certain collaboration
    between Waho's online portal with our advertising and technology platforms. We have
    written off this investment in the accounts, but we are still actively working on this
    investment to bring the project into our Group. For this fiscal year, we have generated
    $11,790 revenue for printing services from the publishing the 2008 China Tietong Guangdong
    Yellow Pages. We did not generate any revenue from the printing unit in this quarter.


Hospital Advertising Unit
    On or about February 27, 2006 the Company announced
    that it has been appointed to undertake the advertising placement work for Beijing Number
    6 Hospital. We have erected 9 sign boards for sale and our staff continues to work to
    secure advertising customers for this hospital. No revenue has been generated from the
    placement from this hospital at the date of this report.


It is the Company's intention to increase the Company's size and earning potential through
    internal growth, joint venture, acquisitions and mergers with similar businesses to gain a
    greater foothold in the marketplace. We are continuing to search for possible acquisition
    and\or merger candidates to be identified and this will be competitors, business
    associates and other similar businesses that would help strengthen the Company.


---

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 $25,163 as of September 30, 2008; a decrease from the
    previous period end of December 31, 2007. 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 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.


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 NINE MONTHS PERIODS ENDED SEPTEMBER 30, 2008 COMPARED TO THE
    THREE MONTHS AND NINE MONTHS PERIODS ENDED SEPTEMBER 30, 2007.


REVENUES.
    For the three months period ended September 30,
    2008, the Group has realized revenue of $26,314 and a cost of revenue of $11,811,
    achieving a gross profit of $14,503. For the three months period ended September 30, 2007,
    the Group has realized revenue of $38,341 and a cost of revenue of $35,694, achieving a
    gross profit of $2,647.


For the nine months period ended September 30, 2008, the Group has realized revenue of
    $77,715 and a cost of revenue of $39,771, achieving a gross profit of $37,944. For the
    nine months period ended September 30, 2007, the Group has realized revenue of $99,642 and
    a cost of revenue of $79,083, achieving a gross profit of $20,559. 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 September 30, 2008,
    our gross profit was $14,503 and our total operating expenses were $253,725, all of which
    were selling, general and administrative expenses. We also had $41,723 in interest
    expenses, $1,000,000 in impairment on goodwill and loss attributable to minority interests
    of $4,192, so that the net loss to our shareholders for the three months period ended
    September 30, 2008 was $1,276,753. This is in comparison to the same period ended
    September 30, 2007, where our gross profit was $2,647 and our total operating expenses
    were $347,029, all of which were selling, general and administrative expenses. We also had
    $32 in interest income, $24,042 in interest expenses and loss attributable to minority
    interests of $9,168, so that the net loss to our shareholders for the three months period
    ended September 30, 2007 was $359,224.


For the nine month period ended September 30, 2008, our gross profit was $37,944 and our
    total operating expenses were $869,715, all of which were selling, general and
    administrative expenses. We also had $37 in interest income, $147,626 in interest
    expenses,, $1,000,000 in impairment on goodwill and loss attributable to minority
    interests of $15,912, so that the net loss to our shareholders for the nine months period
    ended September 30, 2008 was $1,963,448. This is in comparison to the same period ended
    September 30, 2007, where our gross profit was $20,559 and our total operating expenses
    were $1,032,692, all of which were selling, general and administrative expenses. We also
    had $156 in interest income, $52,629 in interest expenses, $243,000 in impairment in
    investment and loss attributable to minority interest of $13,700, so that the net loss to
    our shareholders for the nine months period ended September 30, 2007 was $1,293,906.


Liquidity and Capital Resources


As at September 30, 2008, the Company had cash and cash equivalents totaling $25,163,
    other current assets of $480,249 and non-current assets totaling $6,972,654 which were
    represented by $42,978 in fixed assets, $138,000 in distribution rights and $6,791,676 in
    goodwill. The total assets of the Company were $7,478,066 as of September 30, 2008. We
    also had current liabilities of $1,759,496 which were represented by $10,718 in accounts
    payable, $422,519 in accruals, $96,270 in short term debt, $1,092,230 due to related
    parties, $137,759 due to a shareholder as of September 30, 2008. We also had $2,000,000 in
    long-term shareholders loan and $171,892 in minority interests as of September 30, 2008,
    making our total liabilities $3,931,388
    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 2008.


---

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 September 30, 2008
    the Company incurred net losses of $1,276,753 and has accumulated losses of $5,545,737 as
    at September 30, 2008. 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 September 30, 2008, there were no off balance sheet arrangements.The Company
    has no off-balance sheet obligations nor guarantees and has not historically used special
    purpose entities for any transactions.


---

Item 3.
    Quantitative and Qualitative
    Disclosure About Market Risk.


Quantitative and Qualitative Disclosures about Market Risk:


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


Item 4.
    Controls and Procedures.


Evaluation of Disclosure Controls and Procedures:


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


Changes in Internal Controls over Financial Reporting:


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


---

PART
    II - OTHER INFORMATION


Item 1.
    Legal Proceedings


None.Item 2.
    Unregistered Sales of Equity Securities and Use of Proceeds


None.


Item 3.
    Defaults Upon Senior Securities


None.


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


None.


Item 5.
    Other Information


None.


---

Item 6.
    Exhibits


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


1.
    Incorporated by reference to our Current Report on Form 8-K/A as filed with the SEC on
    October 19, 2005.2.
    Incorporated by reference to our Current Report on Form 8-K as filed with the
    SEC on February 1, 2006.3.
    Incorporated by reference to our Current Report on Form 8-K as filed with the
    SEC on February 7, 2006.4.
    Incorporated by reference to our Current Report on Form 8-K as filed with the
    SEC on February 16, 2006.5.
    Incorporated by reference to our Current Report on Form 8-K as filed with the
    SEC on March 15, 2007.6.
    Incorporated by reference to our Registration Statement on Form SB-2 as filed
    with the SEC on April 15, 2003.7.
    Incorporated by reference to our Current Report on Form 8-K as filed with the
    SEC on February 3, 2005.8.
    Incorporated by reference to our Current Report on Form 8-K as filed with the
    SEC on November 28, 2006..9.
    Incorporated by reference to our Current Report on Form 8-K as filed with the
    SEC on December 4, 2006.10.
    Incorporated by reference to our Annual Report on Form 10-KSB/A as filed with
    the SEC on August 11, 2006.11.
    Incorporated by reference to our Current Report on Form 8-K/A as filed with
    the SEC on March 8, 2007.12.
    Incorporated by reference to our Current Report on Form 8-K as filed with the
    SEC on February 16, 2006.13.
    Incorporated by reference to our Registration Statement on Form SB-2 as filed
    with the SEC on April 15, 2003.14.
    Incorporated by reference to our Registration Statement on Form S8 as filed
    with the SEC on March 8, 2007.15.
    Incorporated by reference to our Registration Statement on Form SB-2 as filed
    with the SEC on March 16, 2007.16.
    Incorporated by reference to our Current Report on Form 8-K as filed with the
    SEC on January 8, 2008.17.
    Incorporated by reference to our Annual Report on Form 10-KSB/A as filed with
    the SEC on August 11, 2006.18.
    Incorporated by reference to our Current Report on Form 8-K as filed with the
    SEC on August 7, 2008.


* Filed herewith.


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


China Media Group
    Corporationa Texas corporation/s/ Con Unerkov---------------------------------------Con UnerkovPrincipal executive
    officerPresident, director


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


By:
    /s/ Con Unerkov
    November 18, 2008--------------------------------------------Con UnerkovIts:
    Principal executive officerPresident, CFO,
    director


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Exhibit
    31Rule
    13a-14(a)/15d-14(a)Certification
    of Chief Executive Officer and Chief Financial Officer of the Company
    Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
    and Securities and Exchange Commission Release 34-46427I, Con
    Unerkov, certify that:1. I
    have reviewed this annual 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 small business issuer 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)) for the small business issuer 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 small business issuer, 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)
    Evaluated the effectiveness of the small business issuer'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(c)
    Disclosed in this report any change in the small business issuer'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 small business issuer's internal control over financial reporting.


5. I
    have disclosed, based on our most recent evaluation of internal control over financial
    reporting, to the small business issuer's auditors and the audit committee of the small
    business issuer'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 small business issuer'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: November 18, 2008/s/ Con Unerkov-----------------------Con UnerkovChief Executive Officer and Chief
    Financial Officer


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Exhibit 32


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

In
    connection with the Annual Report of China Media Group Corporation a Texas corporation
    (the "Company") on Form 10-Q for the three months period ending September 30,
    2008, as filed with the Securities and Exchange Commission on the date hereof (the
    "Report"), Con Unerkov, Chief Executive Officer and Chief Financial Officer of
    the Company, certifies to the best of his knowledge, pursuant to 18 U.S.C. ss. 1350, as
    adopted pursuant to ss. 906 of the Sarbanes-Oxley Act of 2002, that:


(1)
    The Report fully complies with the requirements of Section 13(a) or 15(d) of the
    Securities Exchange Act of 1934; and(2)
    The information contained in the Report fairly presents, in all material
    respects, the financial condition and result of operations of the Company.


A signed original of this written statement required by Section 906 has been provided to
    China Media Group Corporation, and will be retained by China Media Group Corporation and
    furnished to the Securities and Exchange Commission or its staff upon request./s/ Con
    Unerkov--------------------------Con
    UnerkovChief
    Executive Officer and Chief Financial OfficerNovember
    18, 2008