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

FORM 10-Q

[ x ]
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
    SECURITIES EXCHANGE ACT OF 1934For the quarterly three month period ended March 31, 2011[  
    ]
    TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE
    EXCHANGE ACTFor the transition period from [    ] to [ 
       ]


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Commission File Number: 000-50431

CHINA MEDIA GROUP CORPORATION

---------------------------------------------------------------------

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

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


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


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

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

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


Yes [ x ]   No [  
]

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


Yes [ x ]    No [  
]

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


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

SEC 1296 (03-10)
    
    Potential persons who are to respond to the collection of information contained in this
    form are not required to respond unless the form displays a currently valid OMB control
    number.


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

Yes [   ]
   No[ x ]
The
    number of common equity shares outstanding as of April 30, 2011 was 554,132,450 shares of
    Common Stock, no par value.

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


PART
    I


Item 1.
    Condensed
    Consolidated Financial StatementsChina Media Group Corporation

China Media Group Corporation
Condensed Consolidated Financial Statements
March 31, 2011
(Unaudited)(Expressed In United States Dollars)
Condensed
    Consolidated Balance Sheets as of March 31, 2011 and December 31, 2010Condensed
    Consolidated Statements of Operations for the three months period ended March 31, 2011 and
    2010Condensed
    Consolidated Statements of Stockholders' Equity for the years ended December 31, 2010 and
    2009, and for the three months period ended March 31, 2011Condensed
    Consolidated Statements of Cash Flows for the three months periods ended March 31, 2011
    and 2010Notes
    to Condensed Consolidated Financial Statements

CHINA
    MEDIA GROUP CORPORATIONCONSOLIDATED
    BALANCE SHEETSAS
    OF MARCH 31, 2011 AND DECEMBER 31, 2010March 31, 2011
    
    December 31, 2010(Unaudited)
    
    (Audited)US$
    
    US$Notes
    
    --------------------
    
    ---------------------ASSETSCurrent
    Assets:Cash and
    cash equivalents
    
    
    23,877
    
    17,654Investment
    available for sale
    21
    
    170,000
    
    170,000Due from
    related parties
    7
    
    338,281
    
    339,715Prepayments,
    deposit and other receivables
    
    
    136,888
    
    128,990---------------------
    
    ---------------------Total
    current assets
    
    
    669,046
    
    656,359Non-current
    assetsProperty
    and equipments, net
    8
    
    11,903
    
    15,044Advance
    payment for distribution rights
    9
    
    138,000
    
    138,000Investment
    in shares
    16
    
    81,556
    
    ----------------------
    
    ---------------------231,459
    
    153,044---------------------
    
    ---------------------900,505
    
    809,403=============
    
    =============LIABILITIES
    AND STOCKHOLDERS' EQUITYCurrent
    liabilities:Other
    payables and accruals
    11
    
    599,232
    
    547,654Short
    term debt
    12
    
    214,591
    
    214,591Due to
    officer and directors
    13
    
    1,065,976
    
    1,085,855Due to
    related parties
    14
    
    931,800
    
    855,388Option
    liabilities
    5
    
    231,577
    
    202,014---------------------
    
    ---------------------Total
    current liabilities
    
    
    3,043,176
    
    2,905,502---------------------
    
    ---------------------Long-term
    debts
    20
    
    2,000,000
    
    2,000,000Stockholders'equity:Common
    stock, no par value, 85,000,000,000 shares authorized, 544,132,450 (2009: 534,132,450)
    shares issued and outstanding
    6
    
    7,773,902
    
    7,773,902Additional
    paid-in-capital
    
    
    1,799,358
    
    1,799,358Shares
    to be issued
    16
    
    52,510
    
    -Comprehensive
    income
    
    
    67,030
    
    67,176Accumulated
    deficits
    
    
    (13,963,062)
    
    (13,867,043)Uncontrolled
    interest
    
    
    127,591
    
    130,508----------------------
    
    ---------------------Total
    stockholders' equity
    
    
    (4,142,671)
    
    (4,096,099)----------------------
    
    ---------------------900,505
    
    809,403=============
    
    ============

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

F-3

CHINA
    MEDIA GROUP CORPORATIONCONSOLIDATED
    STATEMENTS OF OPERATIONSFOR
    THE THREE MONTHS ENDED MARCH 31, 2011 AND 2010(UNAUDITED)Three months periodsEnded March 31---------------------------------------------2011
    
    2010-----------------
    
    ---------------US$
    
    US$Net revenue
    
    
    
    
    
    28,889
    
    15,532Cost of revenue
    
    
    
    
    
    (12,559)
    
    (6,240)----------------
    
    ---------------Gross profit
    
    
    
    
    
    16,330
    
    9,292Operating expenses:Selling, general and administrative expenses
    
    
    
    
    
    68,646
    
    101,740---------------
    
    ---------------Loss from operations before other expense
    
    
    
    
    
    (52,316)
    
    (92,448)Other income / (expenses)Interest income
    
    
    
    
    
    -
    
    -Interest expenses
    
    
    
    
    
    (46,620)
    
    (42,491)-----------------
    
    --------------Net loss before uncontrolled interests
    
    
    
    
    
    (98,936)
    
    (134,939)Uncontrolled interest
    
    
    
    
    
    2,917
    
    7,116-----------------
    
    --------------Net loss
    
    
    
    
    
    (96,019)
    
    (127,823)-----------------
    
    --------------Other comprehensive incomeForeign currency translation gain
    
    
    
    
    
    (146)
    
    2,030-----------------
    
    --------------Comprehensive loss
    
    
    
    
    
    (96,165)
    
    (125,793)=========
    
    =========Basic and diluted loss per common share
    
    
    
    
    
    (0.00)
    
    (0.00)=========
    
    =========Basic and diluted weighted average number of common shares *
    
    
    
    
    
    554,132,450
    
    534,132,450=========
    
    ===============*
    Weighted average number of shares used to compute basic and diluted loss per
    share for the three months ended March 31, 2011 and 2010 are the same since the effect of
    dilutive securities are anti-dilutive.

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

F-4

CHINA
    MEDIA GROUP CORPORATIONCONSOLIDATED
    STATEMENTS OF STOCKHOLDERS' EQUITYFOR
    THE YEARS ENDED DECEMBER 31, 2010 AND 2009AND
    FOR THE THREE MONTHS ENDED MARCH 31, 2011(UNAUDITED)Common
    Additional
    
    
    
    
    TotalStock
    Paid-in
    Comprehensive
    Shares to
    Accumulated
    Uncontrolled
    Stockholders'Shares
    Amount
    Capital
    Income
    be issued
    Deficit
    Interest
    EquityUS$
    US$
    US$
    US$
    US$
    US$
    US$--------------
    ----------
    -------------
    --------------
    -------------
    -------------
    -------------
    --------------January 1, 2009
    534,132,450
    7,428,902
    1,660,183
    43,265
    -
    (5,735,198)
    168,230
    3,565,382Amortization of options granted
    -
    -
    100,691
    -
    -
    -
    
    100,691Comprehensive income
    -
    -
    -
    883
    -
    -
    
    883Net loss
    -
    -
    -
    -
    -
    (2,534,104)
    (20,255)
    (2,554,359))--------------
    -----------
    --------------
    ---------------
    -------------
    --------------
    --------------
    ---------------December 31, 2009
    534,132,450
    7,428,902
    1, 760,874
    44,148
    -
    (8,269,302)
    147,975
    1,112,597Amortization of options granted
    -
    -
    38,484
    -
    -
    -
    -
    38,484Comprehensive income
    -
    -
    -
    23,028
    -
    -
    -
    23,028Issuance of shares for acquisition of share investments
    20,000,000
    345,000
    -
    -
    -
    -
    -
    345,000Gain on disposal of subsidiary
    -
    -
    -
    -
    -
    -
    5,110
    5,110Net loss
    -
    -
    -
    -
    -
    (5,597,741)
    (22,577)
    (5,620,318)-------------
    -----------
    --------------
    ---------------
    -------------
    --------------
    --------------
    ---------------December 31, 2010
    554,132,450
    7,773,902
    1,799,358
    67,176
    -
    (13,867,043)
    130,508
    (4,096,099)Shares to be issued foracquisition
    of share investment
    -
    -
    -
    -
    52,510
    -
    -
    52,510Comprehensive income
    -
    -
    -
    (146)
    -
    -
    -
    (146)Net loss
    -
    -
    -
    -
    -
    (96,019)
    (2,917)
    (98,936)-------------
    -----------
    --------------
    ---------------
    -------------
    --------------
    --------------
    ---------------March 31, 2011
    554,132,450
    7,773,902
    1,799,358
    67,030
    52,510
    (13,963,062)
    127,591
    (4,142,671)=======
    =======
    ========
    =========
    ========
    ========
    ========
    =========

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

F-5

CHINA
    MEDIA GROUP CORPORATIONCONSOLIDATED
    STATEMENTS OF CASH FLOWSFOR
    THE THREE MONTHS ENDED MARCH 30, 2011 AND 2010(UNAUDITED)For the Three Months ended March 31, 
    2011
    
    For the Three Months ended March 31, 
    2010US$
    
    US$--------------------
    
    --------------------Cash flows from
    operating activities:Net loss
    
    
    (96,019)
    
    (127,823)Adjustment to reconcile
    net loss to net cash used in operating activities:Depreciation
    
    
    3,141
    
    3,140Uncontrolled interest
    
    
    (2,917)
    
    (7,116)Option expenses for
    employee compensation
    
    
    -
    
    25,173(Increase) / decrease
    in assets and liabilities:Prepaid expenses,
    deposit and other receivables
    
    
    (7,898)
    
    6,773Due from former
    subsidiary company
    
    
    13
    
    -Due from related
    parties
    
    
    (27,625)
    
    -Accounts payable and
    accrued expenses
    
    
    51,578
    
    44.068Option liabilities
    
    
    29,563
    
    -Due to directors and
    officers
    
    
    (19,879)
    
    (2,720)Due to related parties
    
    
    76,412
    
    39,881--------------------
    
    --------------------Net cash provided by
    / (used in) operating activities
    
    
    6,369
    
    (18,624)--------------------
    
    --------------------Cash flows from
    investing activities:Purchase of property
    and equipment
    
    
    -
    
    ---------------------
    
    --------------------Net cash used in
    investing activities
    
    
    -
    
    ---------------------
    
    --------------------Cash flows from
    financing activities :Issue of shares for
    acquisition of subsidiary
    
    
    -
    
    ---------------------
    
    --------------------Net cash provided by
    financing activities
    
    
    -
    
    ---------------------
    
    --------------------Net increase /
    (decrease) in cash and cash equivalents
    
    
    6,369
    
    (18,624)Effect of exchange rate
    changes on cash and cash equivalents
    
    
    (146)
    
    2,030Cash and cash
    equivalents, beginning
    
    
    17,654
    
    32,860--------------------
    
    --------------------Cash and cash equivalents, ending
    
    
    23,877
    
    16,266============
    
    ============Supplemental disclosure
    of cash flow information:Interests paid
    
    
    46,620
    
    42,491============
    
    ============Income tax paid
    
    
    -
    
    -============
    
    ============

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

F-6

CHINA MEDIA GROUP CORPORATIONNOTES TO CONSOLIDATED FINANCIAL
    STATEMENTSNOTE 1
    ORGANIZATIONChina
    Media Group Corporation (the "Company") is a Texas corporation, incorporated on
    October 1, 2002.In
    January 2006, the Company established a wholly owned subsidiary Ren Ren Media Group
    Limited, a company incorporated in Hong Kong, as its operating company in Hong Kong. In
    March 2007, the Company acquired all the outstanding shares of Good World Investments
    Limited, a British Virgin Islands corporation that holds 50% of Beijing Ren Ren Health
    Culture Promotion Limited, a company incorporated in China in the advertising and media
    business in China.In
    May 2009, the Group established a 50/50 joint venture company, ATC Marketing Limited,
    which is to be in the business of marketing and distributing of convergent multimedia
    communication and internet devices.The
    Group will be engaged in the media and advertising business, focusing mainly in China, and
    the marketing and distribution of convergent devices and the sale and marketing of organic
    fertilizers and produce. During the period, the Group recorded sales in the provision of
    advertising services.NOTE 2
    SUMMARY
    OF SIGNIFICANT ACCOUNTING POLICIESBasis
    of PresentationThe accompanying
    unaudited interim consolidated financial statements have been prepared in accordance with
    accounting principals generally accepted in the United States of America and the rules of
    the U.S. Securities and Exchange Commission, and should be read in conjunction with the
    audited financial statements and notes thereto for the year ended December 31, 2010. They
    do not include all information and footnotes required by accounting principles generally
    accepted in the United States of America for complete financial statements. However,
    except as disclosed herein, there has been no material change in the information disclosed
    in the notes to the financial statements for the year ended December 31, 2010 included in
    the Company Form 10-K filed with the Securities and Exchange Commission. In the opinion of
    management, all adjustments (consisting of normal recurring accruals) considered necessary
    for a fair presentation of financial position and results of operations for the interim
    period presented have been included. Operating results for the interim period are not
    necessary indicative of the results that may be expected for the respective full.Principles
    of ConsolidationThe
    consolidated financial statements for the year ended March 31, 2011 include the financial
    statements of the Company, its wholly owned subsidiaries Ren Ren Media Group Limited, Good
    World Investments Limited, 51% subsidiary Premium Multimedia Sdn. Bhd., and two 50%
    subsidiaries, namely Beijing Ren Ren Health Culture Promotion Limited and ATC Marketing
    Limited. ATC Marketing Limited was established on the date of May 21, 2009 and Premium
    Multimedia Sdn. Bhd. was acquired on September 26, 2009 and the disposal in October 2010.
    The Company consolidated both of these 50% ownership companies during the period of
    control because of the sole largest shareholding status and/or controlling of the Board of
    Directors. On June 18, 2010, the Group acquired a 50% subsidiary, AX Organic Limited and
    then disposed of this investment in December 2010 and the Company consolidates this
    subsidiary into the Group accounts during this period as the Group has control of the
    Board of Directors.The
    results of subsidiaries acquired or sold during the year are consolidated from their
    effective dates of acquisition or through their effective dates of disposition,
    respectively.All
    significant inter-company transactions and balances have been eliminated on consolidation.

F-7

CHINA MEDIA GROUP CORPORATIONNOTES TO CONSOLIDATED FINANCIAL
    STATEMENTSNOTE 2
    SUMMARY
    OF SIGNIFICANT ACCOUNTING POLICIES (Continued)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.Net
    Income (Loss) per ShareBasic
    earnings per share were computed by dividing net loss by the weighted average number of
    shares of common stock outstanding during the year. Diluted loss per common share for the
    year ended December 31, 2010 and 2009 are not presented as it would be anti-dilutive.Fair
    Value Measurements and DisclosuresASC
    820 "Fair Value Measurements and Disclosures" codified SFAS No. 107,
    "Disclosures about Fair Value of Financial Instruments". ASC 820 applies to all
    entities, transactions, and instruments that require or permit fair value measurements,
    with specific exceptions and qualifications. The Company is required to disclose estimated
    fair values of financial instruments. Unless otherwise indicated, the fair values of all
    reported assets and liabilities, which represent financial instruments, none of which are
    held for trading purposes, approximate are carrying values of such amounts.Cash and Cash EquivalentsThe Company
    considers all liquid investments with a maturity of three months or less from the date of
    purchase that are readily convertible into cash to be cash equivalents.InventoriesInventories are
    stated at the lower of cost or market, cost being determined on the first-in, first-out
    method. Inventories are written down if the estimated net realizable value is less than
    the recorded value.Property & equipmentProperty
    & equipment is stated at costs. Depreciation are computed using the straight-line
    method over the estimated economic useful lives of the related assets as follows:Leasehold improvements
    5 yearsFurniture, fixture and
    equipment
    5 yearsIntangible AssetsThe Company
    evaluates intangible assets for impairment, at least on an annual basis and whenever
    events or changes in circumstances indicate that the carrying value may not be recoverable
    from its estimated future cash flows. Recoverability of intangible assets, other
    long-lived assets and, goodwill is measured by comparing their net book value to the
    related projected undiscounted cash flows from these assets, considering a number of
    factors including past operating results, budgets, economic projections, market trends and
    product development cycles. If the net book value of the asset exceeds the related
    undiscounted cash flows, the asset is considered impaired, and a second test is performed
    to measure the amount of impairment loss.

F-8

CHINA MEDIA GROUP CORPORATIONNOTES TO CONSOLIDATED FINANCIAL
    STATEMENTSNOTE 2
    SUMMARY
    OF SIGNIFICANT ACCOUNTING POLICIES (Continued)Income taxesThe Company
    accounts for income taxes under ASC 740 "Income Taxes" which codified SFAS 109,
    "Accounting for Income Taxes." Under the asset and liability method of ASC 740,
    deferred tax assets and liabilities are recognized for the future tax consequences
    attributable to differences between the financial statements carrying amounts of existing
    assets and liabilities and their respective tax bases. Deferred tax assets and liabilities
    are measured using enacted tax rates expected to apply to taxable income in the years in
    which those temporary differences are expected to be recovered or settled. Under ASC 740,
    the effect on deferred tax assets and liabilities of a change in tax rates is recognized
    in income in the period the enactment occurs. A valuation allowance is provided for
    certain deferred tax assets if it is more likely than not that the Company will not
    realize tax assets through future operations.Stock-based
    compensationASC
    718 "Compensation - Stock Compensation" codified SFAS No. 123 prescribes
    accounting and reporting standards for all stock-based payments award to employees,
    including employee stock options, restricted stock, employee stock purchase plans and
    stock appreciation rights. , may be classified as either equity or liabilities. The
    Company should determine if a present obligation to settle the share-based payment
    transaction in cash or other assets exists. A present obligation to settle in cash or
    other assets exists if: (a) the option to settle by issuing equity instruments
    lacks commercial substance or (b) the present obligation is implied because of an
    entity's past practices or stated policies. If a present obligation exists, the
    transaction should be recognized as a liability; otherwise, the transaction should be
    recognized as equity.The
    Company accounts for stock-based compensation issued to non-employees and consultants in
    accordance with the provisions of ASC 505-50 "Equity - Based Payments to
    Non-Employees" which codified SFAS 123 and the Emerging Issues Task Force consensus
    in Issue No. 96-18 ("EITF 96-18"), "Accounting for Equity Instruments that
    are Issued to Other Than Employees for Acquiring or in Conjunction with Selling, Goods or
    Services". Measurement of share-based payment transactions with non-employees shall
    be based on the fair value of whichever is more reliably measurable: (a) the goods
    or services received; or (b) the equity instruments issued. The fair value of the
    share-based payment transaction should be determined at the earlier of performance
    commitment date or performance completion date.Employees'
    benefits and pension obligationsMandatory
    contributions of five percent of gross salary payments, subject to certain minimum and
    maximum levels, are made to defined contribution Mandatory Provident Fund schemes
    ("MPF schemes") pursuant to the laws of Hong Kong. These contributions are
    charged to expense in the same period as the related salary cost. Total contributions made
    by the Company to the MPF schemes were $nil and $542 for the year December 31, 2010 and
    2009, respectively.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.

F-9

CHINA MEDIA GROUP CORPORATIONNOTES TO CONSOLIDATED FINANCIAL
    STATEMENTSNOTE 2
    SUMMARY
    OF SIGNIFICANT ACCOUNTING POLICIES (Continued)Foreign Currency TranslationThe accounts of
    the Company's Hong Kong and China subsidiaries are maintained, in the Hong Kong dollars
    (HK) and Chinese Renminbi, respectively. Such financial statements are translated into
    U.S. Dollars (USD) in accordance with ASC 830 "Foreign Currency Translation"
    which codified Statement of Financial Accounts Standards ("SFAS") No. 52,
    "Foreign Currency Translation," with the respective currency as the functional
    currency. According to the Statement, all assets and liabilities were translated at the
    exchange rate on the balance sheet date, stockholder's equity are translated at the
    historical rates and statement of operations items are translated at the weighted average
    exchange rate for the year. The resulting translation adjustments are reported under other
    comprehensive income in accordance with SFAS No. 130, "Reporting Comprehensive
    Income. As of March 31, 2011, the comprehensive income was $67,030.Recent
    PronouncementsRecently Implemented StandardsASC
    105, Generally Accepted Accounting Principles ("ASC 105") (formerly
    Statement of Financial Accounting Standards No.168, The FASB Accounting Standards
    Codification and the Hierarchy of Generally Accepted Accounting Principles a replacement
    of FASB Statement No.162) reorganized by topic existing accounting and reporting
    guidance issued by the Financial Accounting Standards Board ("FASB") into a
    single source of authoritative generally accepted accounting principles ("GAAP")
    to be applied by nongovernmental entities. All guidance contained in the Accounting
    Standards Codification ("ASC") carries an equal level of authority. Rules and
    interpretive releases of the Securities and Exchange Commission ("SEC") under
    authority of federal securities laws are also sources of authoritative GAAP for SEC
    registrants. Accordingly, all other accounting literature will be deemed
    "non-authoritative". ASC 105 is effective on a prospective basis for financial
    statements issued for interim and annual periods ending after September15, 2009. The
    Company has implemented the guidance included in ASC 105 as of July1, 2009. The
    implementation of this guidance changed the Company's references to GAAP authoritative
    guidance but did not impact the Company's financial position or results of operations.ASC
    855, Subsequent Events ("ASC 855") (formerly Statement of Financial Accounting
    Standards No.165, Subsequent Events) includes guidance that was issued by the FASB in May
    2009, and is consistent with current auditing standards in defining a subsequent event.
    Additionally, the guidance provides for disclosure regarding the existence and timing of a
    company's evaluation of its subsequent events. ASC 855 defines two types of subsequent
    events, "recognized" and "non-recognized". Recognized subsequent
    events provide additional evidence about conditions that existed at the date of the
    balance sheet and are required to be reflected in the financial statements. Non-recognized
    subsequent events provide evidence about conditions that did not exist at the date of the
    balance sheet but arose after that date and, therefore; are not required to be reflected
    in the financial statements. However, certain non-recognized subsequent events may require
    disclosure to prevent the financial statements from being misleading. This guidance was
    effective prospectively for interim or annual financial periods ending after June15, 2009.
    The Company implemented the guidance included in ASC 855 as of April1, 2009. The effect of
    implementing this guidance was not material to the Company's financial position or results
    of operations.ASC
    944, Financial Services - Insurance ("ASC 944") contains guidance that was
    previously issued by the FASB in May 2008 as Statement of Financial Accounting Standards
    No.163, Accounting for Financial Guarantee Insurance Contracts - an interpretation of FASB
    Statement No.60 that provides for changes to both the recognition and measurement of
    premium revenues and claim liabilities for financial guarantee insurance contracts that do
    not qualify as a derivative instrument in accordance with ASC 815, Derivatives and Hedging
    (formerly included under Statement of Financial Accounting Standards No.133, Accounting
    for Derivative Instruments and Hedging Activities). This financial guarantee insurance
    contract guidance also expands the disclosure requirements related to these contracts to
    include such items as a company's method of tracking insured financial obligations with
    credit deterioration, financial information about the insured financial obligations, and
    management's policies for placing and monitoring the insured financial obligations. ASC
    944, as it relates to financial guarantee insurance contracts, was effective for fiscal
    years beginning after December15, 2008, except for certain disclosures related to the
    insured financial obligations, which were effective for the third quarter of 2008. The
    Company does not have financial guarantee insurance products, and, accordingly, the
    implementation of this portion of ASC 944 did not have an effect on the Company's results
    of operations or financial position.

F-10

CHINA MEDIA GROUP CORPORATIONNOTES TO CONSOLIDATED FINANCIAL
    STATEMENTSNOTE 2
    SUMMARY
    OF SIGNIFICANT ACCOUNTING POLICIES (Continued)Recent
    Pronouncements (Continued)Recently Implemented Standards (Continued)ASC 805,
    Business Combinations ("ASC 805") (formerly included under Statement of
    Financial Accounting Standards No.141 (revised 2007), Business Combinations) contains
    guidance that was issued by the FASB in December 2007. It requires the acquiring entity in
    a business combination to recognize all assets acquired and liabilities assumed in a
    transaction at the acquisition-date fair value, with certain exceptions. Additionally, the
    guidance requires changes to the accounting treatment of acquisition related items,
    including, among other items, transaction costs, contingent consideration, restructuring
    costs, indemnification assets and tax benefits. ASC 805 also provides for a substantial
    number of new disclosure requirements. ASC 805 also contains guidance that was formerly
    issued as FSP FAS 141(R)-1, Accounting for Assets Acquired and Liabilities Assumed in a
    Business Combination That Arise from Contingencies which was intended to provide
    additional guidance clarifying application issues regarding initial recognition and
    measurement, subsequent measurement and accounting, and disclosure of assets and
    liabilities arising from contingencies in a business combination. ASC 805 was effective
    for business combinations initiated on or after the first annual reporting period
    beginning after December15, 2008. The Company implemented this guidance effective
    January1, 2009. Implementing this guidance did not have an effect on the Company's
    financial position or results of operations; however it will likely have an impact on the
    Company's accounting for future business combinations, but the effect is dependent upon
    acquisitions, if any, that are made in the future.ASC
    810, Consolidation ("ASC 810") includes new guidance issued by the FASB in
    December 2007 governing the accounting for and reporting of noncontrolling interests
    (previously referred to as minority interests). This guidance established reporting
    requirements which include, among other things, that noncontrolling interests be reflected
    as a separate component of equity, not as a liability. It also requires that the interests
    of the parent and the noncontrolling interest be clearly identifiable. Additionally,
    increases and decreases in a parent's ownership interest that leave control intact shall
    be reflected as equity transactions, rather than step acquisitions or dilution gains or
    losses. This guidance also requires changes to the presentation of information in the
    financial statements and provides for additional disclosure requirements. ASC 810 was
    effective for fiscal years beginning on or after December15, 2008. The Company implemented
    this guidance as of January1, 2009. The effect of implementing this guidance was not
    material to the Company's financial position or results of operations.ASC
    825, Financial Instruments ("ASC 825") includes guidance which was issued in
    February 2007 by the FASB and was previously included under Statement of Financial
    Accounting Standards No.159, The Fair Value Option for Financial Assets and Financial
    Liabilities Including an amendment of FASB Statement No.115. The related sections within
    ASC 825 permit a company to choose, at specified election dates, to measure at fair value
    certain eligible financial assets and liabilities that are not currently required to be
    measured at fair value. The specified election dates include, but are not limited to, the
    date when an entity first recognizes the item, when an entity enters into a firm
    commitment or when changes in the financial instrument causes it to no longer qualify for
    fair value accounting under a different accounting standard. An entity may elect the fair
    value option for eligible items that exist at the effective date. At that date, the
    difference between the carrying amounts and the fair values of eligible items for which
    the fair value option is elected should be recognized as a cumulative effect adjustment to
    the opening balance of retained earnings. The fair value option may be elected for each
    entire financial instrument, but need not be applied to all similar instruments. Once the
    fair value option has been elected, it is irrevocable. Unrealized gains and losses on
    items for which the fair value option has been elected will be reported in earnings. This
    guidance was effective as of the beginning of fiscal years that began after November15,
    2007. The Company does not have eligible financial assets and liabilities, and,
    accordingly, the implementation of ASC 825 did not have an effect on the Company's results
    of operations or financial position.

F-11

CHINA MEDIA GROUP CORPORATIONNOTES TO CONSOLIDATED FINANCIAL
    STATEMENTSNOTE 2
    SUMMARY
    OF SIGNIFICANT ACCOUNTING POLICIES (Continued)Recent
    Pronouncements (Continued)Recently Implemented Standards (Continued)ASC 820, Fair
    Value Measurements and Disclosures ("ASC 820") (formerly included under
    Statement of Financial Accounting Standards No.157, Fair Value Measurements) includes
    guidance that was issued by the FASB in September 2006 that created a common definition of
    fair value to be used throughout generally accepted accounting principles. ASC 820 applies
    whenever other standards require or permit assets or liabilities to be measured at fair
    value, with certain exceptions. This guidance established a hierarchy for determining fair
    value which emphasizes the use of observable market data whenever available. It also
    required expanded disclosures which include the extent to which assets and liabilities are
    measured at fair value, the methods and assumptions used to measure fair value and the
    effect of fair value measures on earnings. ASC 820 also provides additional guidance for
    estimating fair value when the volume and level of activity for the asset or liability
    have significantly decreased. The emphasis of ASC 820 is that fair value is the price that
    would be received to sell an asset or paid to transfer a liability in an orderly
    transaction between willing market participants, under current market conditions. ASC 820
    also further clarifies the guidance to be considered when determining whether or not a
    transaction is orderly and clarifies the valuation of securities in markets that are not
    active. This guidance includes information related to a company's use of judgment, in
    addition to market information, in certain circumstances to value assets which have
    inactive markets.Fair
    value guidance in ASC 820 was initially effective for fiscal years beginning after
    November15, 2007 and for interim periods within those fiscal years for financial assets
    and liabilities. The effective date of ASC 820 for all non-recurring fair value
    measurements of nonfinancial assets and nonfinancial liabilities was fiscal years
    beginning after November15, 2008. Guidance related to fair value measurements in an
    inactive market was effective in October 2008 and guidance related to orderly transactions
    under current market conditions was effective for interim and annual reporting periods
    ending after June15, 2009.The
    Company applied the provisions of ASC 820 to its financial assets and liabilities upon
    adoption at January1, 2008 and adopted the remaining provisions relating to certain
    nonfinancial assets and liabilities on January1, 2009. The difference between the carrying
    amounts and fair values of those financial instruments held upon initial adoption, on
    January1, 2008, was recognized as a cumulative effect adjustment to the opening balance of
    retained earnings and was not material to the Company's financial position or results of
    operations. The Company implemented the guidance related to orderly transactions under
    current market conditions as of April1, 2009, which also was not material to the Company's
    financial position or results of operations.Recently Issued StandardsIn August 2009,
    the FASB issued ASC Update ("ASU") No.2009-05, Fair Value Measurements and
    Disclosures (Topic 820): Measuring Liabilities at Fair Value ("ASC Update
    No.2009-05"). This update amends ASC 820, Fair Value Measurements and Disclosures
    and provides further guidance on measuring the fair value of a liability. The guidance
    establishes the types of valuation techniques to be used to value a liability when a
    quoted market price in an active market for the identical liability is not available, such
    as the use of an identical or similar liability when traded as an asset. The guidance also
    further clarifies that a quoted price in an active market for the identical liability at
    the measurement date and the quoted price for the identical liability when traded as an
    asset in an active market when no adjustments to the quoted price of the asset are
    required are both Level 1 fair value measurements. If adjustments are required to be
    applied to the quoted price, it results in a level 2 or 3 fair value measurement. The
    guidance provided in the update is effective for the first reporting period (including
    interim periods) beginning after issuance. The Company does not expect that the
    implementation of ASC Update No.2009-05 will have a material effect on its financial
    position or results of operations.

F-12

CHINA MEDIA GROUP CORPORATIONNOTES TO CONSOLIDATED FINANCIAL
    STATEMENTSNOTE 2
    SUMMARY
    OF SIGNIFICANT ACCOUNTING POLICIES (Continued)Recent
    Pronouncements (Continued)Recently Issued Standards (continued)In
    September 2009, the FASB issued ASC Update ("ASU") No.2009-12, Fair Value
    Measurements and Disclosures (Topic 820): Investments in Certain Entities that Calculate
    Net Asset Value per Share (or Its Equivalent) ("ASU No.2009-12"). This
    update sets forth guidance on using the net asset value per share provided by an investee
    to estimate the fair value of an alternative investment. Specifically, the update permits
    a reporting entity to measure the fair value of this type of investment on the basis of
    the net asset value per share of the investment (or its equivalent) if all or
    substantially all of the underlying investments used in the calculation of the net asset
    value is consistent with ASC 820. The update also requires additional disclosures by each
    major category of investment, including, but not limited to, fair value of underlying
    investments in the major category, significant investment strategies, redemption
    restrictions, and unfunded commitments related to investments in the major category. The
    amendments in this update are effective for interim and annual periods ending after
    December15, 2009 with early application permitted. The Company does not expect that the
    implementation of ASC Update No.2009-12 will have a material effect on its financial
    position or results of operations.In
    October 2009, the FASB issued FASB issued ASU No. 2009-13, Revenue Recognition (Topic
    605): Multiple-Deliverable Revenue Arrangements (a consensus of the FASB Emerging Issues
    Task Force). ( "ASC Update No. 2009-13"). This updates set forth the guidance on
    the existing multiple-element arrangement currently in FASB Topic 605-25 (Revenue
    Recognition - Multiple-Element Arrangements). This new guidance eliminates the requirement
    that all undelivered elements have objective evidence of fair value before a company can
    recognize the portion of the overall arrangement fee that is attributable to the items
    that have already been delivered. Further, companies will be required to allocate revenue
    in arrangements involving multiple deliverables based on the estimated selling price of
    each deliverable, even though such deliverables are not sold separately by either company
    itself or other vendors. This new guidance also significantly expands the disclosures
    required for multiple-element revenue arrangements. The revised guidance will be effective
    for the first annual period beginning on or after June 15, 2010. The Company does not
    expect that the implementation of ASU No. 2009-13 will have a material effect on its
    financial statements.In
    2010, the FASB issued ASC Update ("ASU") No. 2010-01, Equity (Topic 505): Accounting for
    Distributions to Shareholders with Components of Stock and Cash. This update clarify that the
    stock portion of a distribution to shareholders that allows them to elect to receive cash or
    stock with a potential limitation on the total amount of cash that all shareholders can elect
    to receive in the aggregate is considered a share issuance that is reflected in earnings per
    share prospectively and is not a stock dividend. This ASU codified the consensus reached in
    EITF Issue No. 09-E "Accounting for Stock Dividends, Including Distributions to Shareholders
    with Components of Stock and Cash". ASU 2010-01 is effective for interim and annual periods
    ending on or after December 15, 2009, and should be applied on a retrospective basis. The
    adoption of this update did not have any impact on the Company's financial statements.In 2010,  the FASB
    issued ASC Updated ("ASU") No. 2010-02, Consolidation (Topics 810) - Accounting and Reporting
    for Decreases in Ownership of a Subsidiary - A Scope Clarification  This updated provides
    guidance for noncontrolling interests and changes in ownership interests of a subsidiary. An
    entity is required to deconsolidate a subsidiary when the entity ceases to have a controlling
    financial interest in the subsidiary. Upon deconsolidation of a subsidiary, an entity recognizes
    a gain or loss on the transaction and measures any retained investment in the subsidiary at fair
    value. The gain or loss includes any gain or loss associated with the difference between the
    fair value of the retained investment in the subsidiary and its carrying amount at the date the
    subsidiary is deconsolidated. In contrast, an entity is required to account for a decrease in
    its ownership interest of a subsidiary that does not result in a change of control of the
    subsidiary as an equity transaction.  The adoption of this update did not have any impact on
    the Company's financial statements.

F-13

CHINA MEDIA GROUP CORPORATIONNOTES TO CONSOLIDATED FINANCIAL
    STATEMENTSNOTE 2
    SUMMARY
    OF SIGNIFICANT ACCOUNTING POLICIES (Continued)Recent
    Pronouncements (Continued)Accounting Standards Issued
    But Not Yet EffectiveIn 2010, the FASB issued ASC Update ("ASU") No. 2010-13, Compensation - Stock Compensation
    (Topic 718): Effect of Denominating the Exercise Price of a Share-Based Payment Award in the
    Currency of the Market in Which the Underlying Equity Security Trades. This update is to
    codify the consensus reached in EITF Issue No. 09-J, "Effect of Denominating the Exercise
    Price of a Share-Based Payment Award in the Currency of the Market in Which the Underlying
    equity Security Trades" The amendments to the Codification clarify that an employee share-based
    payment award with an exercise price denominated in the currency of a market in which a
    substantial portion of the entity's equity shares trades should not be considered to contain a
    condition that is not a market, performance, or services condition. Therefore, an entity would
    not classify such an award as a liability if it otherwise qualifies as equity. The adoption of
    this update did not have any impact on the Company's financial statements.In 2010, the FASB issued ASC Update ("ASU") No. 2010-21, Accounting for Technical Amendments
    to Various SEC Rules and Schedules. This update amends various SEC paragraphs in the FASB
    Accounting Standards Codification pursuant to SEC Final Rule, "Technical Amendments to Rules
    Forms, Schedules and Codification of Financial Reporting Policies". The adoption of this update
    did not have any impact on the Company's financial statements.In 2010, the FASB issued ASC Update ("ASU") No. 2010-22, Accounting for Various Topics. This
    update amends various SEC paragraphs in the FASB Accounting Standards Codification based on
    external comments received and the issuance of Staff Accounting Bulletin (SAB) No. 112 which
    amends or rescinds portion of certain SAB topics. SAB 112 was issued to being existing SEC
    guidance into conformity with ASC 805 "Business Combination" and ASC 810 "Consolidation".
    The adoption of this update did not have any impact on the Company's financial statements.ReclassificationsCertain comparative
    amounts have been reclassified to conform to the current period's presentation.

F-14

CHINA MEDIA GROUP CORPORATIONNOTES TO CONSOLIDATED FINANCIAL
    STATEMENTSNOTE 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 March 31, 2011, the
    Company has incurred an accumulated deficits totaling $13,963,062 and its current
    liabilities exceed its current assets by $2,374,130. In view of the matters described
    above, recoverability of a major portion of the recorded asset amounts shown in the
    accompanying balance sheets is dependent upon continued operations of the Company, which
    in turn is dependent upon the Company's ability to raise additional capital, obtain
    financing and to succeed in its future operations. The financial statements do not include
    any adjustments relating to the recoverability and classification of recorded asset
    amounts or amounts and classification of liabilities that might be necessary should the
    Company be unable to continue as a going concern.Management
    has taken the following steps to revise its operating and financial requirements, which it
    believes are sufficient to provide the Company with the ability to continue as a going
    concern. The Company is actively pursuing additional funding and potential merger or
    acquisition candidates and strategic partners, which would enhance stockholders'
    investment. Management believes that the above actions will allow the Company to continue
    operations through the next fiscal year.NOTE 4
    STOCKHOLDERS'
    EQUITYCommon StockOn June 18, 2010
    the Company issued 10,000,000 shares of Common Stock pursuant to a Stock Purchase
    Agreement to acquire 50% controlling interests in AX Organic Limited.On October 8,
    2010 the Group completed the transaction to acquire 69% interests in China Integrated
    Media Corporation Limited ("CIMC"), a public company in Australia, by the
    issuance of 10,000,000 shares in the Company as part of the purchase consideration. CIMC
    is in the business of television media and digital signage boards.NOTE 5
    STOCK
    OPTIONS AND WARRANTSStock OptionsThe Company
    adopted ASC 718 "Compensation - Stock Compensation" codified SFAS No. 123
    (Revised 2004), Share Based Payment ("SFAS No. 123R"), under the
    modified-prospective transition method on April 1, 2006. SFAS No. 123R requires companies
    to measure and recognize the cost of employee services received in exchange for an award
    of equity instruments based on the grant-date fair value.2002 Stock Option
    PlanEffective on
    October 11, 2002, the Company adopted the 2002 Stock Option Plan (the "2002
    Plan") allowing for the awarding of options to acquire shares of common stock. This
    plan provides for the grant of incentive stock options to key employees and directors.
    Options issued under this plan will expire over a maximum term of ten years from the date
    of grant.On
    May 18, 2007, the board of directors approved to issue 12,300,000 stock options to
    employees to purchase shares of our Common Stock under the 2002 Stock Option Plan, at
    exercise price of $0.038 for a vesting period of 3 years. The 12,300,000 stock options
    expired on May 17, 2010.On
    April 16, 2010, the board of directors approved to issue 19,000,000 stock options to
    employees to purchase shares of our Common Stock under the 2002 Stock Option Plan, at
    exercise price of $0.010 for an option period of 5 years, and for these options 50% of the
    entitlement is vested immediately to option holders and the remaining 50% shall be vested
    in one year from the date of issue of the option.As
    of March 31,2011, the Company has 19,000,000 stock options outstanding and the option
    liabilities is $231,577.

F-15

CHINA MEDIA GROUP CORPORATIONNOTES TO CONSOLIDATED FINANCIAL
    STATEMENTSNOTE 5
    STOCK
    OPTIONS AND WARRANTS (Continued)Following
    is a summary of the activities of the 2002 Stock Option Plan for the period ended
    September 30, 2010:Options outstandingOutstanding,
    December 31, 2010
    19,000,000Granted
    during the period
    -Forfeited/lapsed
    during the period
    -Exercised
    during the period
    ----------------------------Outstanding,
    March 31, 2011
    19,000,000================Following is a summary of the status of options outstanding at March 31, 2011:Outstanding Options
    
    Exercisable Options-----------------------
    
    -----------------------------------------------------Grant
    Date
    Exercise
    Price
    Number
    Average Remaining
    Contractual Life
    Average 
    Exercise Price
    Number
    Intrinsic Price4/16/2010
    $0.010
    19,000,000
    4.04
    $0.010
    19,000,000
    $0.00During the period on May 17, 2010, 12,300,000 stock options expired and on April 16, 2010,
    the Company granted 19,000,000 stock options to 5 qualified persons. As of March 31, 2011,
    there were 19,000,000 outstanding stock options.The assumptions used in
    calculating the fair value of options granted using the Black-Scholes option pricing model
    are as follows:i) The 17,500,000 stock options granted on December 23, 2006 were expired on December 22,
    2009:Grant
    date:
    12/23/2006Risk-free interest rate
    4.63%Expected
    life of the options
    3.00 yearsExpected
    volatility
    95%Expected
    dividend yield
    0ii) The 12,300,000 stock options granted on May 18, 2007 were expired on May 17, 2010:Grant
    date:
    5/18/2007Risk-free interest rate
    4.63%Expected
    life of the options
    3.00 yearsExpected
    volatility
    139%Expected
    dividend yield
    0ii) The
    outstanding 19,000,000 stock options granted on April 16, 2010 and will expire on April
    16, 2015:Grant
    date:
    4/16/2010Risk-free interest rate
    3.25%Expected
    life of the options
    5.00 yearsExpected
    volatility
    250%Expected
    dividend yield
    0

F-16

CHINA MEDIA GROUP CORPORATIONNOTES TO CONSOLIDATED FINANCIAL
    STATEMENTSNOTE 5
    STOCK
    OPTIONS AND WARRANTS (Continued)2007 Stock Incentive
    PlanOn
    February 19, 2007, the Company adopted the 2007 Stock Incentive Plan (the "2007
    Plan") allowing for the awarding of options to acquire shares of common stock. This
    plan provides for the grant of incentive stock options to key employees, directors and
    consultants. Options issued under this plan will expire over a maximum term of ten years
    from the date of grant. The Company had not issued any stock options under this scheme.On March 8,
    2007, we registered 38,400,000 shares underlying stock options under the 2007 Stock
    Incentive Plan with the SEC pursuant to a registration statement on Form S-8.During the year
    2007, the Company had issued a total of 5,811,300 shares to its staff and consultants for
    their service provided.No shares were
    issued under the registration statement on Form S-8 during the year 2009 and 2008. As at
    June 30, 2010 there were 32,588,700 shares available underlying stock options under the
    2007 Stock Incentive Plan.As of March 31,
    2011, there were no outstanding stock options to purchase shares of our Common Stock under
    the 2007 Stock Incentive Plan.WarrantsIn December
    2006, the Company entered into an Equity Line of Credit Agreement ("ELOC") to
    sell commons stock of the Company up to $2,500,000. As part of this agreement, the Company
    issued, inter alia, stock warrants for a total of 31,250,000 shares of Common Stock in the
    Company. In October 2007, 500,000 warrant shares were exercised. The remaining 30,750,000
    stock warrants expired in May 2009.As part of the
    ELOC agreement above, the Company also issued 527,776 stock warrants as part of commission
    in relation to the draw down of the Debenture Purchase Agreement. All these stock warrants
    expired in May 2009.As
    at March 31, 2011, there is no warrant share outstanding.

F-17

CHINA MEDIA GROUP CORPORATIONNOTES TO CONSOLIDATED FINANCIAL
    STATEMENTSNOTE 6
    STOCK
    PURCHASE AGREEMENTSa)
    On
    June 18, 2010 the Company issued 10,000,000 shares of Common Stock pursuant to a Stock
    Purchase Agreement to acquire 50% controlling interests in AX Organic Limited.b)
    On
    October 8, 2010 the Company issued 10,000,000 shares of Common Stock as part of the
    purchase consideration pursuant to a Sale and Purchase Agreement to acquire 69%
    controlling interests in China Integrated Media Corporation Limited.c)
    On
    February 22, 2011 the Company entered into an agreement to issue 2,205,376 shares in the
    Company as part of the consideration to acquire share investment..NOTE 7
    DUE
    FROM RELATED PARTIESDue from related
    parties are summarized as follows:March 31, 2011
    
    December 31, 2010US$
    
    US$Advance to supplier
    (a)
    241,288
    
    231,424Due from investment
    company
    (b)
    1,470
    
    12,143Due from former
    subsidiary company
    (c)
    95,523
    
    95,535Due from director of
    subsidiary company
    (d)
    -
    
    613----------------
    
    ----------------338,281
    
    339,715===========
    
    ===========a)
    Advance
    to suppliers is the deposit for the purchases of M.A.G.I.C. phone paid to AdvanceTech
    Communications Sdn. Bhd. ("ATC"). Our director, Mr. LOI Cheng Pheng is a
    director and shareholder of ATC.b)
    Due
    from investment company is an amount due from China Integrated Media Corporation Ltd in which
    our director Mr. Con Unerkov is a shareholder.c)
    This
    is amount due from a former subsidiary company, AX Organic Limited, which was disposed
    during the year.d)
    The
    amount due from director of subsidiary company was repaid during the period.NOTE 8
    PROPERTY
    AND EQUIPMENT, NETProperty and equipment
    is summarized as follows:March
    31, 2011
    
    December
    31, 2010US$
    
    US$CostFurniture, fixtures and
    equipment
    
    7,216
    
    7,216Computers
    
    7,797
    
    8,058Automobile
    
    47,951
    
    47,951---------------
    
    ---------------62,964
    
    63,225Additional cost :Furniture, fixtures and
    equipment
    
    -
    
    -Accumulated
    depreciation
    
    (51,061)
    
    (48,181)---------------
    
    ---------------Balance at end of
    period
    
    11,903
    
    15,044===========
    
    ===========

F-18

CHINA MEDIA GROUP CORPORATIONNOTES TO CONSOLIDATED FINANCIAL
    STATEMENTSNOTE 9
    ADVANCE
    PAYMENT FOR DISTRIBUTION RIGHTSOn
    January 25, 2006, the Company entered into an agreement with Fleming Assets Limited
    ("Fleming") to acquire the distribution rights for the M.A.G.I.C. Convergent
    Communications Device for the territories of China and Hong Kong. Under the agreement the
    Company will issue the following shares to Fleming:*
    Within one month of signing the agreement, one million shares of the Company;*
    Within one
    month of receiving the prototype devices, one million shares of the Company;*
    Within one
    month of receiving the product from commercial production, two million shares of the
    Company; and*
    A royalty
    payment of 100,000 shares of the Company for every 5,000 devices sold for the next 3
    years.The
    Company issued 1,000,000 shares of common stock in 2006 upon signing the agreement.NOTE 10
    GOODWILLMarch 31, 2011
    
    December 31, 2010US$
    
    US$Balance at beginning of
    period /year
    
    -
    
    4,791,676Impairment charge
    during period / year
    
    -
    
    (4,791,676)Goodwill on acquisition
    of subsidiary during period / year
    
    -
    
    --------------------
    
    -------------------Balance at end of
    period / year
    
    -
    
    -===========
    
    ===========NOTE 11
    OTHER
    PAYABLES AND ACCRUALSOther payables and accruals are summarized as follows:March
    31, 2011
    
    December
    31, 2010US$
    
    US$Accrued salaries and
    wages
    
    19,746
    
    25,694Accrued interest
    
    17,844
    
    12,629Accrued accounting,
    legal and consulting fee
    
    235,323
    
    218,823Accrued office and
    related expenses
    
    92,230
    
    96,182Other payables
    (a)
    137,570
    
    97,804Other payables to staff
    
    76,950
    
    76,951Deposit from customers
    
    19,569
    
    19,571-----------------
    
    -----------------Balance at end of
    period / year
    
    599,232
    
    547,654===========
    
    ===========a)
    Other
    payables are Company expenses such as postage, sundries, etc., and advanced on behalf of
    the Company from various parties.

F-19

CHINA MEDIA GROUP CORPORATIONNOTES TO CONSOLIDATED FINANCIAL
    STATEMENTSNOTE 12
    SHORT
    -TERM DEBTAs
    of December 31, 2010, the Company had two short term debts for a total amount of $214,591
    which consisted of a debt of $114,591 and $100,000 as further described below.
    The Company had an outstanding
    unsecured debt payable, of $114,591 (December 31, 2009: $99,645), with annual interest
    rate of 10%. This debt is due on May 31, 2011. The Company recorded accrued interest of
    $6,684 for the year ended December 31, 2010 (year ended December 31, 2009: $9,964).
    The Company also had during the
    year entered into two loan agreements of $50,000 each for a total of $100,000. Both the
    loans are unsecured, bears interest at 10% per annum, repayable on June 3, 2011 and July
    5, 2011. Initially, the holder of these loans can convert the loan into Common Stock of
    the Company at any time prior to the maturity of the loan and at a conversion price of
    US$0.02 per share. Subsequent to the year end in April 2011, the terms of the loan was
    amended as follows: i) the interest rate was increased to 12% with effect from January 1,
    2011, and ii) the loan was extended for one more year and the convertible feature was
    cancelled with effect December 30, 2010.NOTE 13
    DUE
    TO OFFICERS AND DIRECTORSThe
    amounts due to directors and officers are interests free, unsecured and repayable on
    demand. The balance of due to directors and officers is $1,065,976 as of March 31, 2011
    (December 31, 2010: $1,085,855).NOTE 14
    DUE
    TO RELATED PARTIESDue to related parties are
    summarized as follows:March
    31, 2011
    
    December
    31, 2010US$
    
    US$Due to shareholders
    (a)
    740,124
    
    698,889Due to investment
    company
    (b)
    32,908
    
    -Due to directors of
    subsidiary companies
    (c)
    158,768
    
    156,499-----------------
    
    -------------------931,800
    
    855,388===========
    
    ===========(a)
    The amounts due to shareholders are unsecured, repayable on demand and is interest free
    except for the $50,000 which bears interests at 6% per annum. Included in the amount is
    $229,281 (2010: $229,435) which is due to our beneficial shareholder and director of the
    Company Mr. PK Lam.(b)
    The amount due to an investment company is interest free, unsecured and repayable on demand.(c)
    The amount due to directors of subsidiary companies is interest free, unsecured and repayable on demand.

F-20

CHINA MEDIA GROUP CORPORATIONNOTES TO CONSOLIDATED FINANCIAL
    STATEMENTSNOTE 15
    LONG-TERM
    DEBTSMarch 31, 2011
    
    December 31, 2010US$
    
    US$Shareholder Loan
    
    2,000,000
    
    2,000,000Other Loan
    
    -
    
    -------------
    
    ------------2,000,000
    
    2,000,000===========
    
    ===========The
    long term shareholder loan of $2,000,000 is unsecured, bears interest at 8% per annum,
    repayable on November 25, 2010. On November 25, 2009 the repayment of the loan was
    extended for a further two years to November 25, 2012.The
    other loan is unsecured, accrue interest at 10% per annum and payable on May 31, 2011. At
    the balance sheet date, this loan was reclassified to short term loan (note 12).NOTE 16
    INVESTMENT IN SHARESInvestment in shares relates to acquisition of 5% interests in Advance Tech Communications
    Sdn. Bhd.("ATC") for US$81,556 as announced in Form 8K filed on February 22, 2011.  In
    accordance to the agreement, the Company shall issue the 2,205,376 shares as part of the
    consideration within two months from the completion date.  As at the date of this report,
    the Company still has not issued the shares as it is pending the delivery of the ATC shares,
    which is expected in June 2011.NOTE 17
    INCOME
    TAXESNo provision was made for income tax for the year ended December 31, 2010 and 2009, since the
    Company and its subsidiaries had significant net operating loss. In the year ended December
    31, 2010 and 2009, the Company and its subsidiaries incurred net operating losses for tax purposes
    of approximately $5,597,741 and $2,534,104, respectively. Total net operating losses carry forward
    at December 31, 2010 and 2009, (i) for Federal and State purpose were $11,063,748 and $6,113,311,
    respectively and (ii) for its entities outside of the United States were $1,707,655 and $1,454,671,
    respectively for the two years. The net operating loss carry-forwards may be used to reduce taxable
    income through the year 2025. The availability of the Company's net operating loss carry-forwards
    are subject to limitation if there is a 50% or more change in the ownership of the Company's stock.There was no significant difference between reportable income tax and statutory income tax. The
    gross deferred tax asset balance as of December 31, 2010 and 2009 was approximately $4,624,137
    and $2,601,000, respectively. A 100% valuation allowance has been established against the deferred
    tax assets, as the utilization of the loss carry-forwards cannot reasonably be assured.A reconciliation between the income tax computed at the Hong Kong and PRC China statutory rate
    and the Group's provision for income tax is as follows:2010
    
    2009----------------------
    
    ----------------------Hong Kong statutory rate
    
    16.5%
    
    16.5%Valuation allowance - Hong Kong rate
    
    (16.5%)
    
    (16.5%)PRC China Enterprise Income Tax
    
    (25%)
    
    (25%)Valuation allowance - PRC rate
    
    (25%)
    
    (25%)----------------------
    
    ----------------------Provision for income tax
    
    -
    
    -=============
    
    =============

F-21

CHINA MEDIA GROUP CORPORATIONNOTES TO CONSOLIDATED FINANCIAL
    STATEMENTSNOTE 18
    SEGMENT
    REPORTINGBusiness
    Segments
    For management purposes, the
    Group currently organized into three operating units - advertising, telecommunication
    devices, and product services. Turnover represents the net amounts received and receivable
    for goods sold or services provided by the Group during the period. These units are the
    basis on which the Group reports its primary segment information.
    Segment information about these
    businesses is presented below.Advertising
    Telecommunication Device
    Product Services
    ConsolidatedFor the three months ended March 31,
    For the three months ended March 31,
    For the three months ended March 31,
    For the three months ended March 31,2011
    2010
    2011
    2010
    2011
    2010
    2011
    2010US$
    US$
    US$
    US$
    US$
    US$
    US$
    US$Turnover
    28,889
    15,532
    -
    -
    -
    -
    28.889
    15,532=======
    =======
    =======
    ======
    ======
    ======
    =========
    =========Segment results
    13,413
    (2,919)
    -
    (4,521)
    -
    -
    13,413
    (7,440)=======
    =======
    =======
    ======
    ======
    ======Unallocated corporate income
    
    
    
    
    
    
    -
    -Unallocated corporate expenses
    
    
    
    
    
    
    (62,812)
    (77,892)--------------
    --------------Loss from operations
    
    
    
    
    
    
    (49,399)
    (85,332)Finance costs
    
    
    
    
    
    
    (46,620)
    (42,491)--------------
    --------------Loss for the period
    
    
    
    
    
    
    (96,019)
    (127,823)=========
    =========As at March 312011
    2010ASSETSSegment assets
    9,881
    4,812,746
    355,152
    239,416
    -
    -
    365,033
    5,052,162Unallocated corporate assets
    
    
    
    
    
    
    535,472
    165,324--------------
    --------------Consolidated total assets
    
    
    
    
    
    
    900,505
    5,217,486=========
    =========LIABILITIESSegment liabilities
    127,591
    140,859
    -
    -
    -
    -
    127,591
    140,859Unallocated corporate liabilities
    
    
    
    
    
    
    5,043,176
    4,212,625--------------
    --------------Consolidated total liabilities
    
    
    
    
    
    
    5,170,767
    4,353,484=========
    =========Depreciation of fixed assets
    2,797
    2,797
    343
    343
    -
    -
    3,140
    3,140=======
    =======
    =======
    ======
    ======
    ======
    =========
    =========

F-22

CHINA MEDIA GROUP CORPORATIONNOTES TO CONSOLIDATED FINANCIAL
    STATEMENTSNOTE 19
    COMMITMENTS
    AND CONTINGENCIES(a)
    The
    Company leases office premises for its operations in United States and Hong Kong under
    operating leases. Rental expenses under operating lease for the three month ended March
    31, 2011 and for the year ended December 31, 2010 was $5,825 and $24,404, respectively.
    Future minimum rental payments
    under non-cancelable operating leases for the three month ended March 31, 2011 and for the
    year ended December 31, 2010 are $18,652 and $25,023, respectively.(b)
    On
    or about May 7, 2008, the Company received a correspondence from a law firm regarding
    complaints on some transmission of unsolicited facsimile allegedly from the Company in
    2006, and advised of potential litigation. The Company has never sent or authorized any
    unsolicited facsimile transmission, and the Company has taken every possible effort to
    distance from these unauthorized transmissions. The Company firmly believes that the
    complaint is frivolous and without basis, and is consulting with its legal attorney. The
    Company would vigorously defend any such legal action if pursued.(c)
    Under
    the Distribution Rights Agreement for M.A.G.I.C. Convergent Device, the Company is
    committed to issue shares under certain conditions as set out in Note 9.NOTE 20
    RELATED
    COMPANY TRANSACTIONSThe Company agreed to pay
    directors and officers a monthly salary for services performed. During the year ended December
    31, 2010 and 2009, the Company paid the directors and its officers and their services companies
    a total remuneration of $9,000 and $12,000, respectively.  During the period under review, the
    Directors and officers did not receive any remuneration from the Group.On November 25 2005, a subsidiary of the
    Company signed a loan agreement with one of its major shareholder, Central High Limited for a
    loan of $2,000,000. This long term shareholder loan is unsecured and repayable on November 25,
    2010, and bears interest of 8% per annum.  On November 25, 2009 the repayment of the loan was
    extended for a further two years to November 25, 2012.  The accrued interest for 2010 was
    $160,000 (2009: $160,000) and $40,000 for the three months period ended March 31, 2011.NOTE 21
    SUBSEQUENT
    EVENTS(a)
    As
    disclosed in the Form 8-K filed with the SEC on April 14, 2011 the Group disposed 51%
    interests in its investment held for resale in Jademan International Limited
    ("Jademan") for HK$1,377,000 (about US$176,538). The Group realized a gross
    profit of about $89,000 on the sale of this investment in shares. Jademan's main asset
    was its equity holding in China Integrated Media Corporation Limited.(b)
    The
    Group has evaluated all other subsequent events through May 19, 2011, the date these
    consolidated financial statements were issued, and determined that there were no other
    additional subsequent events or transactions that require recognition or disclosures in
    the financial statements.

F-23


Item 2.
    Management's
    Discussion and Analysis of Financial Condition and Results of Operations.Forward Looking StatementsTHIS 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 EstimatesOur Management's Discussion and Analysis of Consolidated Financial Condition and Results
    of Operations section discusses our consolidated financial statements, which have been
    prepared in accordance with accounting principles generally accepted in the United States
    of America. The preparation of these consolidated financial statements requires management
    to make estimates and assumptions that affect the reported amounts of assets and
    liabilities at the date of the consolidated financial statements and the reported amounts
    of revenues and expenses during the reporting period. On an on-going basis, management
    evaluates its estimates and judgments, including those related to revenue recognition,
    accrued expenses, financing operations, and contingencies and litigation. Management bases
    its estimates and judgments on historical experience and on various other factors that are
    believed to be reasonable under the circumstances, the results of which form the basis for
    making judgments about the carrying value of assets and liabilities that are not readily
    apparent from other sources. Actual results may differ from these estimates under
    different assumptions or conditions. The most significant accounting estimates inherent in
    the preparation of our consolidated financial statements include estimates as to the
    appropriate carrying value of certain assets and liabilities which are not readily
    apparent from other sources. These accounting policies are described at relevant sections
    in this discussion and analysis and in the notes to the consolidated financial statements
    included in our Quarterly Report on Form 10-Q for the period ended March 31, 2011.

OverviewDESCRIPTION OF BUSINESS.OUR BACKGROUND. The Company was incorporated in Texas on October 1, 2002 and was
    originally formed to be a frozen drink machine rental service. It was intended to
    specialize in renting frozen drink machines for gatherings such as wedding receptions,
    birthday parties, football parties, anniversaries, family reunions, weekend barbeques,
    social functions and fund raising events, as well as any other type of occasion. From the
    beginning, this business was at the first stage of development and the primary focus was
    on continuing to developing and revising our business strategies.In January 2005, the Company changed its name to International Debt Exchange Associates
    Inc. reflecting the Company's intent to become a diverse company through mergers and
    acquisitions and still maintained the current business as a frozen drink machine rental
    service.In September 2005, the Company changed its board of directors whom has since changed the
    Company name to China Media Group Corporation to reflect the Company's intent to focus all
    its efforts in advertising and media in the emerging China market. Under new management,
    the Company commenced to position the Company to capitalize on the growth of the Chinese
    advertising market where global companies are rushing into China to try to grab and hold
    the attention of its 1.3 billion citizens.OUR BUSINESS. Our mission is to become one of China's leading new age media companies
    through the use of new technologies and devices combined with traditional media of TV,
    Newspapers, Magazines, Billboards and Internet to reach today's mobile society. In order
    to facilitate this, the Company established 4 strategic business units being
    "Advertising" "Print" "Telecommunications and Mobile
    Computing" and "Products and Services".In March 2007, we acquired the entire issued share capital of Good World Investments
    Limited ("Good World") which owns 50% of Beijing Ren Ren Health Culture
    Promotion Limited ("Beijing Ren Ren"). Good World is an investment holding
    company and Beijing Ren Ren is in the business of advertising in promoting health
    education and health awareness in China under the program Great Wall of China Project as
    further described below.We plan to offer advertising services in China. These advertising services would be across
    all media thus we will offer our customers selective advertising on specific media for
    nationwide campaign. China's advertising industry is still young and fragmented. We aim to
    differ from other advertisers so that we can provide nationwide campaigns across all media
    spectrum. To this end, we will work to secure strategic ad placements in key cities in
    China so that our customers will have the ability to launch nationwide campaigns.Due to the recent global economic recession, companies have been more cautious in their
    discretionary spending. We believe that the China advertising market has rebounded with
    the continued growth of its economy. We will look to re-launch the outdoor advertising
    markets and to raise the adequate capital to roll out the Beijing Ren Ren outdoor project.
    We will also explore other markets in the Asia region for any synergistic business
    opportunities.Although we have established 4 business units, only three units have begun in operation,
    i.e.: Advertising, Telecommunications and Mobile Computing and Products Services. In
    summary, some major events during this quarter were as follows:Advertising UnitOn March 13, 2007, the Company acquired 100% of the issued and outstanding shares of Good
    World Investments Limited, which owns 50% of the registered capital of Beijing Ren Ren
    Health Culture Promotion Limited ("BRR"). BRR is working with the Chinese
    Government on a benevolent project named "Great Wall of China Project" to
    advertise and promote health education and health awareness in China. We believe BRR
    provides a strategic advertising platform for us to launch our advertising operations in
    China as it can advertise in hospitals and districts in China. During the period the
    Company did not derive any advertising income from the BRR project but has recorded
    $10,298 in relation to other advertising services.

Telecommunications UnitOn or about January 23, 2006, the Company announced the establishment of the
    Telecommunications and Mobile Computing Division to focus on the new media advertising
    where we would take advantage of new convergent devices for telecommunications
    advertising. The business of selling advertising through telecommunications media and
    devices is still at an early stage as we are developing strategies to effectively enter
    the market. No revenue has been generated from advertising through telecommunications
    media and devices at the date of this report.Advertising through mobile devices is becoming more prominent to reach the mobile society
    of today. The goal of the Telecommunications and Mobile Computing Unit is to provide the
    Company with entry into the new sector of advertising through telecommunication media and
    devices. Our strategy on gaining access in telecommunication media is through cooperation
    with existing networks or establishes select networks. However our longer term strategy is
    to partner with network operators to provide extensive network access for our advertising
    media. We have secured the distribution rights for M.A.G.I.C. Convergent Device for the
    territory of China and Hong Kong. M.A.G.I.C. is a next generation convergent device that
    has the full capabilities of a notebook computer shrink to a size of a PDA phone. In 2009,
    we have also entered into a joint venture with AdvanceTech Communications Sdn. Bhd.
    ("ATC") to market and distribute the devices developed by ATC worldwide other
    than the countries already under distribution by the Company. The current device under
    development, M.A.G.I.C. W3 is being positioned as the high end convergent device for
    professionals running special applications. We expect the M.A.G.I.C. W3 to enter the
    information and advertising sector of the mobile phone market. We expect to receive the
    final prototype for M.A.G.I.C. W3 by Q3 2011. There has been no other significant update
    for the M.A.G.I.C. W3.Products Services UnitsWe have commenced a Products Services Unit to build brands recognition and to take
    advantage of our contacts networks, distribution channel and trading partners. We will
    leverage off our advertising platform to develop our own brands name for select products.
    This will uniquely position our Product Services for brand awareness as well as develop a
    long term business unit that will serve both consumers and industries markets. During this
    quarter, we did not realize any revenue from this business unit. However the Group is in
    discussion and exploring other products that can be distributed in our product services
    unit.As announced in the Form 8K in April 2010, the Company entered into an agreement to
    acquire controlling interests in AX Organic Limited, a company that is in the business of
    marketing, sales and distribution of organic fertilizers and vegetables. This agreement,
    closed in June 2010. Through this initial agreement, we expect that this new product line
    of organic fertilizers and produce will enable us to promote healthy living and healthy
    products under the Population Great Wall of China project as described in Advertising
    business unit above. During the period, we have started the preparation for the soil
    remediation for the project in Huangpi, China. However due to poor weather conditions in
    the quarter and financial difficulties encountered by our customer, we are waiting for
    clearance to continue our work. We expect to know the status of the Huangpi soil
    remediation project before the end of the year.

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 $23,877 as of March 31, 2011; an increase from the
    previous period end of December 31, 2010. In the opinion of management, these funds will
    not satisfy our working capital requirements to operate at our current level of activity
    for the next twelve months. To effectuate our business plan, during the next twelve
    months, we must arrange for adequate funding to implement our plans of increasing our
    advertising offerings and promote our advertising services, through cooperation agreements
    and otherwise.Financing and fundingManagement intends to continue to raise additional financing through debt and equity
    financing or other means and interests that it deems necessary, with a view to
    implementing our business plan and building a revenue base. We plan to use the proceeds of
    such financings to provide working capital to our operations and increase our capital
    expenditure for marketing and working with our co-operative partners. There can be no
    assurances that sufficient financing will be available on terms acceptable to us or at
    all. Our forecast for the period for which financial resources will be needed to support
    our operations involves risks and uncertainties and actual results could fail as a result
    of a number of factors.Specifically, we hope to accomplish the steps listed below to implement our business plan.
    We estimate that we will require approximately $500,000 to commence operations as
    envisioned below during the next twelve months. The figures and steps outlined below are
    estimates only, and our actual progress and cost may vary from these estimates and is
    subject to our ability to obtain adequate funding. Such additional capital may be raised
    through public or private equity financing, borrowings, or other sources, such as
    contributions from our officers and directors. If we are unable to obtain funds necessary
    to implement our business plan, we may revise or scale back our business plan.Over the course of the next two years, subject to available resources, we propose to build
    up our advertising presences to over 5 regional offices in China. Over the next two years,
    we also propose to acquire strategic partners that have existing operations in cities or
    regions to grow our business by acquisition and through cooperation agreements and
    otherwise, subject to available funding. In addition, we plan to devote more resources to
    the Products Division in our newly founded organic products. We plan to support the
    organic products division, subject to available resources, and to combine it with our
    benevolent program in Beijing. Additional support staff may be hired as necessity and
    resources dictate within the next twelve months.We are not currently conducting any research and development activities, other than the
    continual development of our website in both English and Chinese. We do not anticipate
    conducting such activities in the near future. In the event that we expand our business
    scope, then we may need to hire additional employees or independent contractors as well as
    purchase or lease additional equipment.

Results
    of operation.FOR THE THREE MONTHS PERIOD ENDED MARCH 31, 2011 COMPARED TO THE THREE MONTHS PERIOD ENDED
    MARCH 31, 2010REVENUES.
    For the three months period ended
    March 31, 2011, the Group has realized revenue of $28,889 and a cost of revenue of
    $12,559, achieving a gross profit of $16,330. For the three month period ended March 31,
    2010, the Group has realized revenue of $15,532 and a cost of revenue of $6,240 achieving
    a gross profit of $9,292. We hope to generate additional revenues when we begin to receive
    contracts from clients or through acquisitions. Depending upon the availability of
    operating capital, we intend to expand our operations in the next 12 months.OPERATING EXPENSES.
    For the three month period ended
    March 31, 2011, our gross profit was $16,330 and our total operating expenses were
    $68,646, all of which were selling, general and administrative expenses. We also had
    $46,620 in interest expenses, and loss attributable to uncontrolled interests of $2,917, so
    that the net loss to our shareholders for the three months period ended March 31, 2011 was
    $96,019. This is in comparison to the same period ended March 31, 2010, where our gross
    profit was $9,292 and our total operating expenses were $101,740, all of which were
    selling, general and administrative expenses. We also had $$42,491 in interest expenses
    and loss attributable to uncontrolled interests of $7,116, so that the net loss to our
    shareholders for the three months period ended March 31, 2010 was $127,823.Liquidity and Capital ResourcesAs at March 31, 2011, the Company had cash and cash equivalents totaling $23,877, other
    current assets of $645,169 and non-current assets totaling $231,459 which were represented
    by $11,903 in fixed assets, $138,000 in distribution rights and $81,556 in investment in
    shares. The total assets of the Company were $900,505 as of March 31, 2011. We also had
    current liabilities of $3,043,176 which were represented by $599,232 in accruals, $214,591
    in short term debt, $1,065,976 due to directors and officers, $931,800 due to related
    parties, $231,577 in option liabilities as of March 31, 2011. We also had $2,000,000 in
    long-term shareholders loan and $127,591 in uncontrolled interests as of March 31, 2011, made
    our total liabilities $5,170,767.
    At present the Company does not
    have sufficient cash resources to provide for all general corporate operations in the
    foreseeable future. The Company will be required to raise additional capital in order to
    continue to operate in fiscal 2011.

Going
    ConcernThe Company's financial statements are presented on a going concern basis, which
    contemplates the realization of assets and satisfaction of liabilities in the normal
    course of business. The Company has experienced significant losses from operations in
    recent periods. For the three months ended March 31, 2011 the Company incurred net losses
    of $96,019 and has accumulated losses of $13,963,062 as at March 31, 2011. The Company's
    ability to continue as a going concern must be considered in light of the problems,
    expenses and complications frequently encountered in developing markets and the
    competitive environment in which the Company operates. The Company is pursuing financing
    for its operations and seeking additional investment. In addition, the Company is seeking
    to expand its revenue base by adding new customers and to start out its advertising
    business. Failure to secure such financing, to raise additional equity capital and to
    expand its revenue based may result in the Company depleting its available funds and not
    being able to pay its obligations. These financial statements do not include any
    adjustments to reflect the possible future effects on the recoverability and
    classification of assets or the amounts and classification of liabilities that may result
    from the possible inability of the Company to continue as a going concern.Off Balance Sheet ArrangementsAs of March 31, 2011, there were no off balance sheet arrangements. The Company has no off
    balance sheet obligations nor guarantees and has not historically used special purpose
    entities for any transactions.



Item 3.
    Quantitative
    and Qualitative Disclosure About Market Risk.Quantitative and Qualitative Disclosures about Market Risk:The Company is exposed to various market risks, including changes in interest rates.
    Market risk is the potential loss arising from adverse changes in market rates and prices,
    such as interest rates and foreign currency exchange rates. The Company does not enter
    into derivatives or other financial instruments for trading or speculative purposes. The
    Company also has not entered into financial instruments to manage and reduce the impact of
    changes in interest rates and foreign currency exchange rates, although we may enter into
    such transactions in the future.Item 4.
    Controls and Procedures.Evaluation of 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 INFORMATIONItem 1.
    Legal ProceedingsNone.Item 2.
    Unregistered Sales of Equity Securities and Use of ProceedsAs disclosed in the Form 8-K filed with the SEC on February 22, 2010 the Group acquired 5%
    equity interests in Advance Tech Communications Sdn. Bhd. for RM293,000 (about US$96,642)
    which was paid by RM87,900 cash and the balance paid by the issuance of 2,205,376 common shares
    of the Company.Item 3.
    Defaults Upon Senior SecuritiesNone.Item 4.
    Submissions
    of Matters to a Vote of Security HoldersNone.Item 5.
    Other InformationNone.



Item 6.
    ExhibitsExhibit No.
    Description of Exhibit2.1
    Shareholders' Agreement between Good World Investments
    Limited, Advance Tech Communications Sdn. Bhd. and ATC Marketing Limited(7)2.2
    Operational Agreement between AX Organic Limited and
    Huangpi High Yield Cultivation Experiment Base (8)2.3
    Sale and Purchase Agreement between Good World Investments
    Limited, Tidewell Limited and the Company(9)2.4
    Sale and Purchase Agreement entered by Good World
    Investments Limited to acquire 5% equity interest in Advance Tech Communications Sdn. Bhd.
    (11)2.5
    Sale and Purchase Agreement between Good World Investments
    Limited and Keen Star International (HK) Limited(10)3.1
    Articles of Incorporation (1)3.1.1
    Certificate of Amendment to Articles of Incorporation (2)3.1.2
    Certificate of Amendment to Articles of Incorporation, as
    amended.(6)3.2
    Bylaws (1)4.1
    Executive Services Agreement between China Media Group
    Corporation and Con Unerkov (3)10.3
    2002 Stock Option Plan (4)10.4
    2007 Stock Incentive Plan(5)31.1*
    Certification of Chief Executive Officer pursuant to
    Section 302 of the Sarbanes-Oxley Act of 2002.31.2*
    Certification of Chief Financial Officer pursuant to
    Section 302 of the Sarbanes-Oxley Act of 2002.32.1*
    Certification of Chief Executive Officer pursuant to
    Section 906 of the Sarbanes-Oxley Act of 2002.32.2*
    Certification of Chief Financial Officer pursuant to
    Section 906 of the Sarbanes-Oxley Act of 2002.1.
    Incorporated
    by reference to our Registration Statement on Form SB-2 as filed with the SEC on April 15,
    2003.2.
    Incorporated
    by reference to our Current Report on Form 8-K as filed with the SEC on February 3, 2005.3.
    Incorporated
    by reference to our Annual Report on Form 10-KSB/A as filed with the SEC on August 11,
    2006.4.
    Incorporated
    by reference to our Registration Statement on Form SB-2 as filed with the SEC on April 15,
    2003.5.
    Incorporated
    by reference to our Registration Statement on Form S8 as filed with the SEC on March 8,
    2007.6.
    Incorporated
    by reference to our Registration Statement on Form SB-2 as filed with the SEC on March 16,
    2007.7.
    Incorporated
    by reference to our Current Report on Form 8-K as filed with the SEC on May 26, 2009.8.
    Incorporated
    by reference to our Current Report on Form 8-K as filed with the SEC on June 23, 2010.9.
    Incorporated
    by reference to our Current Report on Form 8-K as filed with the SEC on September 22,
    2010.10.
    Incorporated
    by reference to our Current Report on Form 8-K as filed with the SEC on April 14, 2011.11.
    Incorporated
    by reference to our Current Report on Form 8-K as filed with the SEC on February 22, 2011.* Filed herewith.

SIGNATURESPursuant
    to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 34, the
    registrant has duly caused this report to be signed on its behalf by the undersigned,
    thereunto duly authorized.China Media Group Corporationa Texas
    corporation/s/
    Cheng Pheng Loi---------------------------------------Cheng Pheng
    LoiChief
    Executive OfficerChina Media Group Corporationa Texas
    corporation/s/ Con
    Unerkov---------------------------------------Con UnerkovChief
    Financial OfficerIn accordance with the Exchange Act, this report has been signed below by the following
    persons on behalf of the registrant and in the capacities and on the dates indicated.By:
    /s/ Cheng Pheng Loi
    May 20, 2011--------------------------------------------Cheng Pheng
    LoiIts:
    Principal
    executive officer,President,
    DirectorBy:
    /s/ Con Unerkov
    May 20, 2011--------------------------------------------Con UnerkovIts:
    Chief
    financial officer,DirectorBy:
    /s/ Lam Pui Kit
    May 20, 2011--------------------------------------------Lam Pui KitIts:
    Secretary,
    Treasurer,Director