UNITED
STATES
 SECURITIES
AND EXCHANGE COMMISSION
 Washington, D.C.
20549
 FORM
10-K
 (Mark
One)
 
 þ
              ANNUAL
      REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
      1934
 For
the fiscal year ended June 30, 2009
 
 OR
 
 o
              TRANSITION REPORT PURSUANT TO
      SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
      1934
 For
the transition period from 
to ___________
 
 Commission
file number 333-138479
 LEGEND
MEDIA, INC.
 (Exact
Name of Registrant as Specified in its Charter)
 
 Nevada
                
                87-0602435(State
      or Other Jurisdiction of
                
                (I.R.S.
      Employer Identification No.)Incorporation
      or Organization)
 
 Room
609, Gehua Tower A , Qinglong Hutong Building No. 1
 Beijing
100007, People’S Republic Of China
 (Address of Principal
Executive Offices)
 
 (86-10)
8418 7177
 (Issuer’s Telephone
Number)
 
 Securities
registered pursuant to Section 12(b) of the Exchange Act: None
 
 Securities
registered pursuant to Section 12(g) of the Exchange Act:
 
 Common
Stock, $.001 par value
 (Title of
Class)
 
 Indicate
      by check mark if the registrant is a well-known seasoned issuer, as
      defined in Rule 405 of the Securities Act.
                        Yes
      o No þIndicate
      by check mark if the registrant is not required to file reports pursuant
      to Section 13 or Section 15(d) of the Act.
                        oIndicate
      by check mark 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
      þ No oIndicate
      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
      o No oIndicate
      by check mark if disclosure of delinquent filers pursuant to Item 405
      of Regulation S-K (§229.405) is not contained herein, and will not be
      contained, to the best of registrant’s knowledge, in definitive proxy or
      information statements incorporated by reference in Part III of this
      Form 10-K or any amendment to this Form 10-K.
                        oIndicate
      by check mark 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 "smaller reporting company" in Rule 12b-2 of the Exchange Act.
      (Check one):Large
      accelerated filer    o
                          
                          Non-accelerated
      filer    o
                          (Do
      not check if smaller reporting company)
                        Accelerated
      filer    o
                          
                          Smaller
      reporting company    þIndicate
      by check mark whether the registrant is a shell company (as defined in
      Rule 12b-2 of the Act).
                        Yes
      o No þ
 
 The
aggregate market value of the registrant’s voting and non-voting common equity
held by non-affiliates was $3,713,040. The aggregate market value was calculated
using the price at which the common equity was last sold on October 12,
2009
 
 Determination
of stock ownership by non-affiliates was made solely for the purpose of this
requirement, and the registrant is not bound by these determinations for any
other purpose.
 
 On
October 12, 2009 there were 112,813,355 shares of common stock
outstanding.
  
  LEGEND
MEDIA, INC
 ANNUAL
REPORT ON FORM 10-K
 FOR
THE YEAR ENDED JUNE 30, 2009
 
 TABLE
OF CONTENTS
 
 PART
      I
                    3Item
      1.  Business
                    3Item
      1A. Risk
      Factors
                    14Item
      1B.  Unresolved Staff
      Comments
                    31Item
      2. Properties
                    31Item
      3. Legal
      Proceedings
                    31Item
      4. Submission of Matters
      to a Vote of Security Holders
                    31None.
                    31PART
      II
                    32Item
      5. Market for
      Registrant's Common Equity, Related Stockholder Matters and Issuer
      Purchases of Equity Securities
                    32Item
      6. Selected Financial
      Data
                    32Item
      7. Management’s
      Discussion and Analysis of Financial Condition and Results of
      Operations
                    32Item
      7A. Quantitative and
      Qualitative Disclosures About Market Risk
                    46Item
      8.  Financial
      Statements and Supplementary Data
                    46Item
      9. Changes In and
      Disagreements with Accountants On Accounting and Financial
      Disclosure
                    46Item
      9A(T). Controls and
      Procedures
                    46Item
      9B.Other
      Information
                    47PART
      III
                    48Item
      10. Directors, Executive
      Officers, and Corporate Governance.
                    48Item
      11. Executive
      Compensation
                    49Item
      12. Security Ownership
      Of Certain Beneficial Owners And Management And Related Stockholder
      Matters
                    52Item
      13. Certain
      Relationships and Related Transactions And Director
      Independence
                    55Item
      14. Principal Accountant
      Fees and Services
                    56Director
      Independence
                    57Item
      15. Exhibits and
      Financial Statement Schedules
                    57
  2
  PART
I
 
 Item
1.  Business
 
 Special
Note Regarding Forward-Looking Statements
 
 This
Annual Report on Form 10-K and the documents we incorporate by reference
herein include forward-looking statements. All statements other than statements
of historical facts contained in this Form 10-K and the documents we incorporate
by reference, including statements regarding our future financial position,
business strategy and plans and objectives of management for future operations,
are forward-looking statements. The words “believe,” “may,” “estimate,”
“continue,” “anticipate,” “intend,” “should,” “plan,” “could,” “target,”
“potential,” “is likely,” “will,” “expect” and similar expressions, as they
relate to us, are intended to identify forward-looking statements within the
meaning of the “safe harbor” provisions of Section 27A of the Securities
Act of 1933, as amended (the “Securities Act”), and Section 21E of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"). We based these
forward-looking statements largely on our current expectations and projections
about future events and financial trends we believe may affect our financial
condition, results of operations, business strategy and financial
needs.
 
 These
forward-looking statements are subject to a number of risks, uncertainties and
assumptions described under the caption “Risk Factors” and elsewhere in this
Annual Report on Form 10-K. In addition, our past results of operations do not
necessarily indicate our future results. New risks emerge from time to time and
it is not possible for us to predict all such risks, nor can we assess the
impact of all such risks on our business or the extent to which any risk factor,
or combination of risks, may cause actual results to differ materially from
those contained in any forward-looking statements.
 
 Except as
otherwise required by applicable laws, we undertake no obligation to publicly
update or revise any forward-looking statements or the risk factors described in
this Annual Report on Form 10-K or in the documents we incorporate by
reference, whether as a result of new information, future events, changed
circumstances or any other reason after the date of this Annual Report on
Form 10-K. You should not rely upon forward-looking statements as
predictions of future events or performance. We cannot assure you that the
events and circumstances reflected in our forward-looking statements will be
achieved or occur. Although we believe our expectations reflected in the
forward-looking statements are reasonable, we cannot guarantee future results,
levels of activity, performance or achievements.
 
 Description
of Business
 
 Legend
Media, Inc., formerly known as Noble Quests, Inc. (hereinafter referred to as
the “Company,” “Legend Media,” “we,” “us,” or “our” ), was organized as a Nevada
corporation on March 16, 1998, to sell multi-media marketing services and other
related services to network marketing groups. Specifically, we assisted network
marketers in using marketing tools such as public relations, advertising, direct
mail, collateral development, electronic communications and promotion tools to
increase product and service awareness.
 
 On
January 31, 2008, the Company entered into a Share Exchange Agreement with Ms.
Shannon McCallum-Law, the majority stockholder, sole director and Chief
Executive Officer of the Company, Well Chance Investments Limited (“Well
Chance”) and Well Chance's sole shareholder (the "Well Chance Shareholder").
Pursuant to the terms of the Share Exchange Agreement, the Company acquired all
issued and outstanding shares of Well Chance's common stock in exchange for the
Company’s issuance of 1,200,000 shares of its common stock to the Well Chance
Shareholder on the basis of 1,200 shares of common stock for each share of Well
Chance common stock. The Share Exchange Agreement closed February 5,
2008.
  Concurrently
with the closing of the transactions under the Share Exchange Agreement (the
“Share Exchange Agreement”) and as a condition thereof, Ms. McCallum-Law
returned to us for cancellation 2,419,885 of the 5,119,885 shares of our common
stock she owned. Ms. McCallum-Law was not compensated for the cancellation of
the shares. In addition, we issued (i) 4,100,000 shares of our common stock to
certain affiliates of Well Chance for $87,740 and (ii) 200,000 shares in
exchange for consulting services performed in connection with this transaction.
Upon completion of the foregoing transactions, we had 8,200,000 shares of common
stock issued and outstanding.
  3
  The share
exchange with the Well Chance Shareholder was accounted for as a reverse
acquisition under the purchase method because Well Chance obtained control of
the Company. Accordingly, the share exchange was recorded as a recapitalization
of Well Chance, with Well Chance being treated as the continuing
entity.
  Effective
February 14, 2008, the Company changed its name from Noble Quests, Inc. to
Legend Media, Inc. Well Chance was incorporated under the laws of the British
Virgin Islands as an International Business Company on February 22, 2005. Well
Chance was formed to create a business principally engaged in the development
and management of a technology platform that deploys advertisements across its
various advertising media. Well Chance expanded its business in February 2008 to
build a consumer advertising network in the People’s Republic of China (the
“PRC”) focused on the Chinese radio advertising industry and advertising media
that targets the consumer base of China.
 
 On May 8,
2008, the Company and Well Chance entered into a Share Purchase Agreement (the
“Music Radio Share Purchase Agreement”) with Music Radio Limited, a British
Virgin Islands company, and Ju Boachun and Xue Wei (the “Music Radio
Shareholders”), for the purchase of radio advertising rights in Tianjin, PRC.
Pursuant to the Music Radio Share Purchase Agreement, Well Chance  in
exchange for the issuance of (a) shares of the Company's common stock with an
aggregate value of US$7,160,714 based on the weighted average trading price of
the Company's common stock for the 90 trading days immediately preceding May 8,
2008 (1,935,528 shares), and (b) US$2,000,000, purchased 80% of the common stock
of Legend Media Tianjin Investment Company Limited, a British Virgin Islands
company and a wholly owned subsidiary of Music Radio Limited.  The
closing of the Music Radio Share Purchase Agreement occurred May 30, 2008, and
the Company secured effective control of the exclusive sales contract for the
Tianjin, PRC based radio channel. Tianjin, PRC is a city with a population over
11.5 million.  The exclusive sales contract provides the Company with
19,710 minutes per year of advertising space. The contract is up for renewal
annually and expires December 31, 2009. Because the region is one of the most
economically developed and urbanized regions in the PRC, the Company believes
the radio station is well situated to target the expanding middle and upper
class in the PRC.
  On July
21, 2008, Legend Media closed a transaction pursuant to which Well Chance
purchased 100% of the common stock of News Radio Limited, a British Virgin
Islands company, for (a) shares of the Company's common stock with an aggregate
value of 2,000,000 Chinese Renminbi ("RMB") (approximately $287,728 based on the
currency exchange rate on June 5, 2008) based on the weighted average trading
price of the common stock for the 30 trading days immediately before June 4,
2008 (104,427 shares) payable on the closing date, (b) RMB5,250,000
(approximately $755,287 based on the currency exchange rate on June 5, 2008)
payable 28 days after the closing date, and (c) RMB1,600,000 (approximately
$230,182 based on the currency exchange rate on June 5, 2008) payable 90 days
after the closing date. The transaction occurred pursuant to the terms of a
Share Purchase Agreement  (the “News Radio Share Purchase Agreement”)
the Company entered into on June 4, 2008 with Well Chance and all of the
shareholders of News Radio Limited (the “News Radio Shareholders”). The closing
gave Legend Media effective control of the PRC-based company that has the
exclusive sales contract for the Beijing, PRC based radio channel FM 90.5.
Beijing is a metropolis in northern PRC with a population of over 17 million. As
with Tianjin, it is one of four municipalities in the PRC with status as a
province in the PRC's administrative structure. Beijing is the PRC's second
largest city, after Shanghai, and is recognized as the political, educational,
and cultural center of the PRC. Beijing has a rapidly developing economy with an
expanding affluent population. In 2008, retail sales in Beijing exceeded $67
billion.
  Beijing was considered strategically
important to the Company’s objective of building a market leading brand position
in the radio advertising industry. The exclusive sales contract for Beijing FM
90.5 is for four years (two years plus a two-year option) and grants Legend
Media, through its operating affiliate, Beijing Maihesi International
Advertising Co., Ltd. (“MAIHESI”), the right to be the exclusive advertising
agent for the channel, under which the Company has the exclusive rights to
manage and sell all advertising minutes for the radio station. The contract
provides Legend Media with 45,990 of radio advertising minutes per year. The
exclusive rights to sell advertising also extend to program sponsorship which
the Company expects will provide additional advertising inventory for sale.
  4
  On August
4, 2008, MAIHESI, a company organized in the PRC and an affiliate of Legend
Media, entered into an Exclusive Advertising Rights Agreement with Beijing
Guoguang Guangrong Advertising Co., Ltd. (the "Beijing Merci Agreement"),
pursuant to which MAIHESI acquired 45,990 advertising minutes per year on FM
107.1, a news and entertainment radio station that broadcasts to the Shenzhen
region of the PRC. The Exclusive Advertising Rights Agreement closed August 31,
2008 and expires September 30, 2010.
  On
October 28, 2008, Tianjin Yinse Lingdong Advertising Co., Ltd. (“TJ YSLD”), a
company organized in the PRC and an affiliate of Legend Media, entered into an
Exclusive Advertising Rights Agreement Beijing Atis Advertising Co., Ltd.,
pursuant to which TJ YSLD acquired 19,710 advertising minutes per year on FM
95.5, a music and entertainment radio station that broadcasts to the PRC’s Xi’an
region. The exclusive contract gives Legend Media 19,710 minutes of radio
advertising targeting Shenzhen, a developing city metropolis with a population
of over eight million. Shenzhen is one of the wealthiest and most economically
diverse cities in the PRC.
  On November 28, 2008, the Company
entered into and closed an Acquisition Agreement (the "Music Radio Acquisition
Agreement") with Well Chance, Music Radio Limited, and the Music Radio
Shareholders. Pursuant to the Music Radio Acquisition Agreement, the Company
acquired control over Beijing Yinse Lingdong Advertising Co., Ltd (“YSLD”) and
caused the contribution of an airline magazine advertising business of Beijing
Hongtenglianguang Advertising Co., Ltd (“HTLG”), a PRC company 100% owned by the
Music Radio Shareholders, to YSLD. In exchange for the acquisition of control,
the Company issued 5,033,680 shares of its newly-created Series B convertible
preferred stock ("Series B Preferred Stock") to the Music Radio Shareholders and
two warrants to purchase an aggregate of 10,000,000 shares of the Company's
common stock, to Ju Baochun. The closing gave Legend Media effective control of
YSLD, a PRC-based company, and YSLD’s exclusive sales contract with Xinhua
Airline Magazine.  The airline magazine reaches a potential audience
approaching 20 million passengers per year.  The exclusive contract
with Xinhua Airline Magazine provides 80 pages of advertising per monthly
issue.  The exclusive contract expires March 31, 2010 and will be up
for renewal prior to that date.
 
 In determining the amount of
consideration to be paid in connection with the Music Radio Acquisition
Agreement, the Company reviewed and compared publicly available selected
financial data and stock trading prices for public companies chosen based on
their common participation in the Chinese advertising and media industry, and
conducted a discounted cash flow analysis. Applying the conclusions drawn
therefrom, the number of shares of Series B Preferred Stock issued in the Music
Radio Acquisition Agreement was calculated based on an aggregate purchase price
of RMB275,000,000, a currency exchange rate of RMB6.829 to U.S. $1, and a per
share issue price of 20 times the greater of (a) 75% of the weighted average
trading price of one share of common stock for the 15 trading days ended on the
third day before closing, and (b) $0.40. Because 75% of the weighted average
trading price for the common stock during the period was $0.3440, the per share
issue price used was $0.40. As more fully described below, each share of Series
B Preferred Stock is initially convertible into 20 shares of common stock, or an
aggregate of 100,673,600 shares of common stock, representing approximately
90.6% of the issued and outstanding common stock on an as-converted basis (not
including the Company's outstanding Series A convertible preferred stock,
warrants or options).
  As a
result of the Music Radio Acquisition Agreement and the reverse merger with Well
Chance, the historical financial statements presented are those of Well Chance
and YSLD.  At the time of the reverse merger, Well Chance’s historical
financials became those of the Company.  The subsequent Music Radio
Acquisition Agreement, which gave the Company control of YSLD, was between
entities under common control and, as such, accounted for similarly to a pooling
of interests.
  Well
Chance conducts its business operations through its 80% owned
subsidiary, Legend (Beijing) Consulting Co., Ltd., and its wholly owned
subsidiary, Legend (Beijing) Information and Technology Co., Ltd., each of which
are incorporated under the laws of the PRC. The amount due from the minority
interest is immaterial as June 30, 2009 and 2008.
  In
February 2009, the Company terminated the Beijing Merci Agreement and focused on
other opportunities.  The decision to do so was based on management's
decision to make a strategic shift towards larger more established
opportunities, in combination with the other factors, management determined it
best to abandon the project and focus on other opportunities.  The
Company notified Beijing Guoguang Guangrong Advertising Co., Ltd. of its
decision to terminate the agreement and made an immediate request for the return
of all deposits and payments.  Subsequent to attempts by MAIHESI and
Beijing Guoguang Guangrong Advertising Co., Ltd. to settle the dispute, MAIHESI
began arbitration in which we were requesting immediate termination of all
contractual obligations under the Beijing Merci Agreement In July 2009, the
Company terminated the agreement giving us the advertising rights to Beijing
channel FM 90.5 which is also a channel controlled by Beijing Guoguang Guangrong
Advertising Co., Ltd.  The decision was the product of several factors
including (i) management’s desire to stabilize the cash flow of the business,
(ii) overall market conditions dictated a slower growth plan, (iii) management’s
belief that more established opportunities are becoming available and (iv) the
poor handling by Beijing Guoguang Guangrong Advertising Co., Ltd. of the Beijing
Merci Agreement termination.
  5
  On July
20, 2009, MAIHESIentered into an agreement (the “Termination Agreement”) with
Beijing Guoguang Guangrong Advertising Co., Ltd. =(“Guoguang”), pursuant to
which MAIHESI and Guoguang terminated (i) the Exclusive Advertising Rights
Agreement dated May 5, 2008 by and between MAIHESI and Guoguang, under which
MAIHESI was originally granted the exclusive right to market and sell all
broadcast advertising in connection with the frequency FM90.5 of China Radio
International in Beijing (the “Beijing Agency Agreement”), and (ii) the
Exclusive Advertising Rights Agreement dated August 4, 2008 by and between
MAIHESI and Guoguang, under which MAIHESI was originally granted the exclusive
right to market and sell all broadcast advertising in connection with the
frequency FM107.1 of China Radio International in Shenzhen (the “Shenzhen Agency
Agreement”, collectively with the Beijing Agency Agreement, the “Agency
Agreements”).
  According
to the Termination Agreement, (i) MAIHESI or its affiliate shall pay Guoguang
RMB1,150,000 (which, as of June 30, 2009, equals approximately $168,360) as
compensation for the early termination of the Beijing Agency Agreement, (ii)
MAIHESI agrees to forsake the deposits of RMB2,760,000 and RMB1,050,000 under
the Beijing Agency Agreement and Shenzhen Agency Agreement, respectively (which,
as of June 30, 2009, equals approximately $404,064 and $153,720, respectively),
(iii) Guoguang agrees to forsake the accrued cost for the advertising minutes
payable to Guoguang (approximately RMB3,592,323, which, as of June
30, 2009, equaled approximately $525,916), and (iv) both MAIHESI and
Guoguang agree to waive any claims and refrain from initiating any legal
proceedings against the other party arising from or in connection with the
terminated Agency Agreements. In addition, the Termination Agreement contains
other covenants, agreements and default and confidentiality provisions customary
to agreements of this nature.
  Due to
PRC regulatory restrictions on foreign investment in the advertising industry,
we operate our business in China through TJ YSLD, MAIHESI and YSLD.  
Our relationships with these operating affiliates and their shareholders are
governed by a series of contractual arrangements that allow us to effectively
control and derive a substantial portion of the economic benefits from them.
Accordingly, we treat TJ YSLD, MAIHESI and YSLD as VIEs and have consolidated
their financial results in our financial statements in accordance with generally
accepted accounting principles in the United States.  In August 2009,
the Company began consolidating Chinese operations under one operating entity,
YSLD.  Through this process, the Company will terminate certain
agreements with the Chinese operating companies and subsequently dispose of
certain subsidiaries that no longer have an operating function.  In
doing so the Company expects to reduce administrative efforts and
costs.
 
 Business
Strategy
 
 Our
objective is to become a dominant advertising company focused on targeting the
affluent and middle class consumers in China by developing an inventory of
advertising assets that target key affluent lifestyle indicators such as car
ownership and airline travel.  To date the Company has acquired
exclusive advertising rights for the Hainan Airline group’s airline magazine and
two radio channels operating in Tianjin and Xi’an.  The strategy has a
key focus on the radio advertising sector which has been underutilized and
undervalued in the PRC.  As car ownership in China continues to expand
(China is currently the largest new car market in the world), the Company plans
to promote radio advertising in the PRC as a media targeting the affluent and
middle class consumers until it becomes a top marketing medium comparable to
television, outdoor advertising, the Internet and print.  Our plan to
achieve this objective involves five key strategic principles:
 
 I.
              Develop Scale of
      Inventory:  We intend to acquire additional advertising
      assets / inventory that has a common thread of targeting key lifestyle
      trends of the rapidly growing affluent and middle class of
      China.  The key lifestyle predictors the Company is focused on
      are car ownership, airline travel and real estate
    ownership.
 
 Our plan
calls for the expansion of media assets in three key areas:
  6
  a.
              Radio
      advertising assets;
 b.
              Airline
      magazine advertising assets; and
 c.
              Real
      estate focused opportunities
 
 Radio
Advertising
 
 Our radio expansion strategy is to
efficiently establish a national radio network.  The Company believes
a national network can be built through a combination of a few large regional
channels and a few city level channels.   The Company faced some
adversity in the process as management decided to abandon radio projects in
Beijing and Shenzhen due to market conditions; however, we are committed to the
radio advertising market and believe a new strategy focused on steady growth
will outperform the original strategy of rapid inventory expansion.
 
 As part of the process, we continuously
explore new acquisitions of radio advertising time with keen focus on existing
sales levels, cost of acquisition, expected time to breakeven and overall
potential of the channel.
 
 We expect to generate revenue growth
from building inventory of radio advertising minutes and improving the
utilization rate of those acquired minutes and benefiting from increased
advertising rates that we can charge for those minutes.
 
 The Company currently controls 19,710
minutes of radio advertising in Tianjin and 19,710 minutes in
Xi’an.  The stations have a combined reach of over 18 million
people.
 
 Airline
magazine advertising
 
 Our airline based advertising business
expansion strategy is to focus on securing additional exclusive rights for
airline magazines on other airlines.  The Company identified some
large and small airlines that use exclusive agents for their advertising
sales.  Management believes exclusive sales contracts for these
airlines will become available in the coming year.  The Company’s
airline based growth strategy is limited by a) the number of airline magazines
available in the market and b) the cost of acquiring exclusive rights to the
airline magazines.
 
 We expect to generate revenue growth
from not only building inventory but also improving the number of pages sold and
increasing the per page rate charged.
 
 Real
estate focused opportunities
 
 The Company has relationships with top
real estate organizations in China, including both developers and real estate
agents.  As property ownership is a top 5 affluent lifestyle
predictor, the Company is exploring opportunities to leverage existing
relationships to develop additional opportunities to target China’s affluent and
middle classes.
 
 For the immediate operations of the
business, the Company will leverage these relations and look to act as an agent
for other media companies.  In these cases the Company will sell other
media on behalf of the other media companies.   We expect to
generate revenue and profit growth while further developing our
relationships.
  II.
              Focus Short Term Efforts on
      Improving Existing Sales:  Our business has an existing
      revenue stream; however, there is considerable unsold advertising
      inventory.  We do not sell over 50% of the available inventory
      for sale.  Management plans to focus on increasing inventory
      utilization and in turn growth in profits as most costs are
      fixed.  The Company will focus immediate attention on improving
      sales by:
  a.
                  Creating
      a database of customers from radio and airline advertising that can be
      used to cross sell across media
types;
 b.
                  Implementing
      active training programs for all sales
people;
  7
 c.
              Reviewing
      and refining pricing and discounting
  policies;
 d.
              Tracking
      inventory utilization and providing improved information to the sales
      force; and
 e.
                Implementing
      incentive plans that effectively motivate the sales
  team.
 
 The
Company believes it is imperative to improve existing sales efforts to reach a
quick cash flow neutral position.
 
 III.
              National Sales
      Effort:As local sales efforts are being improved, the
      Company expects to build the next generation sales force.  The
      Company anticipates the new sales force will be led by a seasoned media
      sales executive and focus on:
 
 a.
                Promoting
      the value of using targeted media to reach consumers in
    China;
 b.
              Specifically
      promote the value of radio versus other media platforms;
      and
 c.
              Promoting
      the value of Legend Media as innovator in targeted media in
      China.
 
 The
advertising industry in China is young and rapidly
developing.  Airline magazine advertising works well within the
current paradigm as print media has been developed in the
market.  Radio needs to be developed and we anticipate our new sales
force will become industry promoters.  We expect they will take the
lead with major brands and advertising companies on promoting the “value
proposition” of radio advertising.  We believe our national sales team
will be in the position to close sales with major national brands as the message
is delivered and if and when interest for radio increases.  As
described above, we do not plan to launch an active national promotion until a
critical mass of inventory is acquired because we believe early promotion will
drive up the cost of the acquired inventory and bring competitors into the
space.
 
 IV.
              Promote the Radio Channels and
      Influence Content:Legend Media does not intend to be a
      content company but expects to help radio channels better understand
      consumers’ expectations.  In doing so, we expect both radio
      channels and Legend Media will benefit.  Further, Legend Media
      intends to work with radio stations to promote them through active
      community outreach programs and events.  The radio stations need
      to use the “interactivity” of radio to promote the stations and ultimately
      increase advertising value.  Legend Media plans to be an active
      consultant to radio stations on how to implement such
      strategies.  Currently, in the Chinese radio market, radio
      stations are not actively promoted through other channels such as outdoor
      advertising or event promotion.  Legend Media views the
      promotion of radio stations as a key to long term success of the
      business.
 
 V.
              Find a Use for Unsold
      Inventory:  We estimate China’s radio advertising
      industry operates at an inventory utilization rate (sold minutes divided
      by the total available advertising minutes) of less than
      25%.  Exact numbers are hard to determine as the industry’s
      reporting structure is poor.  Our management is looking to
      alternative strategies to use the unsold minutes without disrupting Legend
      Media’s core business of radio advertising sales.  The Company
      is cautious when using price to increase utilization as it is likely to
      reduce overall value of the industry.  The Company plans to look
      at several alternative uses of the unsold inventory
    including:
 
 a.
                Partnering
      with alternative media companies, such as mobile phone short message
      service (“SMS”)\marketing companies to promote the SMS service while
      building a direct marketing solution.  The SMS partner would be
      a strategic addition as it could also provide increased interactivity to
      the radio content and advertising
content;
 b.
                Partnering
      with a third party to sell products, such as working on a commission basis
      with an online retail outlet;
 c.
                Launching
      a Company owned direct marketing and product selling entity and taking
      advantage of the unsold minutes
by:
 i.
                Selling
      products;
 ii.
              Promoting
      Company owned “community” based websites;
and
 iii.
              Building
      marketing databases through radio promoted
  contests.
 d.
                Partnering
      with a charitable organization such as the Red Cross, to utilize some of
      the unsold minutes to enhance community
  relations.
  8
  Market
Overview
 
 China’s
economy is rapidly expanding and is not forecasted to slow down in the
foreseeable future
 
 From 2002
to 2008, China’s economy grew at a compound annual growth rate of 16.4% reaching
US$4.4 trillion in 2008 and became the third largest economy in the world behind
the United States and Japan.   Looking forward, Goldman Sachs
raised its China growth forecast to 8.3 percent for 2009 and 10.9 percent for
20101.  The
rapid expansion in China's economy led to increased affluence and the rise of
the middle class in China.
 
 o
              By
      2015, it is estimated there will be 27 million households in the PRC
      earning over RMB100,000 (approximately $14,650 at current exchange rates),
      growing to 41 million households by
2025;
 o
              In
      2006, the PRC had 310,000 US$ millionaires and that number is estimated to
      reach 609,000 by 2011, the highest number in the world and primarily
      consisting of first generation of US$ millionaires;
  and
 o
              By
      2011, it is estimated there will be 16 million high net-worth individuals
      in the PRC with $6.2 trillion in total assets.2
 
 The
expanding personal wealth of the Chinese population is creating the world’s
largest consumer market.  In 2008, the PRC’s retail sales grew 22% to
RMB10.9 trillion (US$1.6 trillion).
 
 
 
 China’s
emergence as the world’s fastest growing and potentially largest retail market
is driving international and domestic brands to shift strategic focus away from
mature markets and towards brand building in China.  The result has
been tremendous growth in the overall advertising market in China.
  China’s
advertising market is rapidly expanding
 
 In 2007,
China’s media expenditures hit RMB197.5 billion (US$28.9 billion at current
exchange rates) and are forecasted to exceed RMB287.9 billion (US$42.2 billion
at current exchange rates)3 by
2009.  2007’s percentage change, compared to 2006, was 18.3% and 2008
compared to 2007 is expected to be approximately 22.0% (2008 reports are still
not issued).   In 2009, the market has struggled but is showing
signs of rebounding as summer ends.  Though forecasted growth for 2009
varies widely by source, management expects a steady improvement through the
holiday season with a return to historical growth by mid to late
2010.
 1
http://www.chinadaily.com.cn/bizchina/2009-05/15/content_7780182.htm
 2 “HSBC
joins race to cash in on China's new millionaires “, Reuters March 31,
2008
 3“This
Year, Next Year China Media Forecasts 2008,, GroupM
  9
  China is
one of the most, if not the most, challenging markets in the
world.  Similar to the United States, China is large with cultural
diversity within its borders.  China can be viewed as a collection of
diverse and complex markets each with populations exceeding most
countries.  The complexity in the market creates challenges for new
and existing brands. We expect that brands, international and domestic alike,
will continue to invest in advertising in China as they look to expand ways to
reach and engage customers.
 
 Expected
trend toward targeted media
 
 Management believes there are several
pressure points that will create a shift of how advertising dollars are spent in
China:
 
 1.
              Advertising
      cost per thousand impressions will continue to
  rise;
 2.
              A
      majority of China’s population live in rural areas and have minimal
      disposable income;
 3.
              Consumer
      package goods companies will be able to tap a larger market in China but
      most new entrants are looking to target the affluent and middle
      class;
 4.
              The
      affluent and middle class will drive consumption while remaining a small
      percentage of the population;
 5.
              UBS
      economist Jonathan Anderson estimates that of the 1.3 billion Chinese,
      only 70 million have the income level to support a significant level of
      consumption4.
 
 Management
expects advertisers to shift towards efficiency versus reach.  We
expect brands to spend more per thousand impressions but buy fewer
impressions.  To do so the brands will look to media platforms that
have specific demographics and psychographics that skew to the lifestyles of the
affluent.
 
 Air
travel based marketing (back of seat airline magazines)
 
 Travel is a key lifestyle indicator of
the affluent in China.  69% of China’s affluent consumers view
domestic travel as a priority for spending free time and disposable
income.  75% of this group view outbound travel as a
priority.   17% of China’s affluent say travel is important to
social status in China.5  The
conclusion is simple:   China’s affluent consumers can be
targeted on airplanes and at airports.
 
 China
is the number one new car market in the world - radio advertising is
underutilized, undervalued and an opportunity
 
 While the
overall advertising industry has exploded, the radio industry has fallen behind
posting 2007 revenue of $426 million.6  Radio
advertising as a percentage of total advertising in China is currently 2.6% and
is forecasted to improve to 3.5% by 2009.7  Even
by 2009, the ratio is predicted to fall short of the worldwide average of 8.1%
and those of the United States, 11.8%, and Western Europe,
5.6%.  Also, while GDP of the United States is 4.3 times that of
China’s, radio advertising spending in the United States is 52.4 times that of
China’s, at US$22 billion in 2007.
 
 The
combined impact of macro level influences is the expectation that radio
advertising in China has explosive growth ahead of it as it
commercializes.
 
 Adding to
the opportunity in the radio industry is relative low cost compared to
alternative media.  2007 average cost per 1,000 impressions was $0.78
while TV, outdoor, newspapers and magazines cost advertisers materially
more.8  The
relatively low cost provides radio with an added value proposition to attract
new customers to the industry.  Further, we expect the relatively low
cost provides additional revenue growth opportunities for us as rates will
increase over time as they become more in line with alternatives.
  
 4  Bowring,
P. (2007, April 11). China’s
Middle Class: Not What You Think It Is. Retrieved from
www.asiasentinel.com
 5  MasterCard
Worldwide and HSBC (Second Quarter 2007 and Third Quarter 2007”). Insights. Retrieved
from  www.masterintelligence.com;
 6 “Global Entertainment and Media
Outlook 2007-2011,” PriceWaterhouseCoopers
 7 “This Year, Next Year China Media
Forecasts 2008,” GroupM
 8Source:  Internal
estimates based on data from ZenithOptimedia and  National Bureau of
Statistics of China
  10
  
 The radio
advertising industry’s forecasted growth is also driven by the increased
mobility of the Chinese population.  Currently, there are over 28
million privately owned vehicles in China.  This number is expected to
increase to over 48 million by 2010.9  Increased
car ownership also gave rise to radio listenership and the importance of radio
as a means to reach the affluent class in China.  As with the United
States, which has a radio advertising industry valued at US$22 billion, China’s
radio industry should increasingly become a larger portion of total advertising
spending as car ownership grows.  The increased number of cars and the
resulting increase in traffic will provide advertisers a way to reach consumers
in a captive environment with a chance for repetitive
messaging.  Management expects the coming five years to have the
largest growth rate of radio advertising sales in the history of
China.
 
 Products
and Services
 
 Legend
Media currently sells radio and airline magazine advertising.  We have
the exclusive rights to manage and sell 80 pages per month of advertising for
Hainan Airline Group’s back of seat magazine.  We also have the
exclusive rights to manage and sell 108 minutes of advertising per day or
39,420 minutes per year.  The exclusive rights to sell advertising
also extend to program sponsorship which provides additional revenue
opportunities.  The minutes are distributed between our Tianjin based
channel, FM 92.5, and our Xi’an based channel, FM 95.5.
 
 We
maintain offices in Beijing, Shanghai, Qingdao, Haikou, Sanya, Xi’an and
Tianjin. The Company manages the products as one advertising
business.
 
 Legend
Media does not plan on entering the content development business but does have
access to helping the stations gear content towards listeners’ needs and
expectations.  Content production is expensive and adds an unnecessary
level of complexity when management is focusing on steady inventory expansion.
At this time, management has no expectations of entering the content production
business but prefers the role of advisor and influencer.
 
 Customers
 Legend
targets international, national and regional brands.  Our focus has
been on real estate, automobiles and financial services, the largest of which is
the real estate sector which accounts for 67% of our revenue to
date.  The automobile industry and financial service sectors account
for 31% combined.  Our customers are top tier advertisers and include
Imported Volkswagen Car Co., Ltd., China Construction Bank Co., Ltd. Tianjin
Branch, Tianjin Wanke Realestate Co., Ltd. and Tianjin Xingguang Canlan
Entertainment Co., Ltd.
 
 Customers
purchase radio advertising either directly from us or through an advertising
agent.
 
 Management
began to establish relationships with tier 1 advertising agencies in China and
plans to use them to acquire new customers at the point Legend Media has a
significant inventory base.  Management plans to expand our real
estate advertising client base while balancing the sector mix with additional
automobile, consumer goods, and financial services brands.  The
Company relies on the real estate industry, and our large customers are
associated with that industry.  A significant downturn in the real
estate market and the subsequent loss of a few of our larger customers would
have a material adverse effect on our business.  Management looks to
diversify our customer base to minimize the impact of any one industry or
customer group on the overall performance of our business.
 
 Competition
 
 Our business is subject to significant
competition, mostly from alternative media such as TV and
Internet.  We believe our ability to effectively target car owners and
air travelers provides an advantage over alternatives and in turn over our
competitors.
 
 Air
travel focused
 
 While we have limited competition on
Hainan Airline Group’s airplanes we compete with the larger airline groups
including Air China and China Eastern.  Further, Air Media is an air
travel focused media company and competes for customers looking to reach air
travelers.
  
 9National Bureau of Statistics of
China, Xinhua Economic News, Google Finance and internal
calculations
  11
  Radio
Advertising
 
 The radio
advertising industry is highly fragmented and has not had a dominant national
force as of yet.  While there is competition amongst radio advertising
sales companies, the Company views its competition as coming from alternative
advertising media, especially outdoor advertising.  As radio is only
2.6% of the advertising industry in China, the primary competition issue is one
of promoting the value proposition of radio advertising versus the
alternatives.  One of Legend Media’s key strategic goals is to market
the industry as a whole to maximize the value of the industry.
 
 Currently,
hundreds of companies sell radio advertising.  The most successful of
which is the agency owned by the Beijing Radio Station, China’s number one radio
station.  Outside of Beijing Radio Station, the four largest
competitors to Legend Media are expected to be Yuan Chuan Radio, based in
Shanghai, Beijing Universal Chief Advertising, based in Beijing, Simulcast (a
joint venture between Beijing Radio and Phoenix Satellite TV), based in Beijing,
and Xinhua Sports and Entertainment Limited, based in Beijing.  We
believe the market remains wide open for a dominant market leader as the largest
of the competitors only controls an estimated 350,000 minutes
annually.
 
 Sales
and Marketing
 
 The
Company views all employees as part of our sales and marketing effort as our
purpose is to sell radio advertising.  The organization is structured
along those lines with the view that every point of contact from the first to
invoicing is a chance to exceed customer expectations and encourage future
sales.
 
 As of
October 12, 2009, we have a staff of 58 with 34 dedicated to sales and all of
which are full time.  Each member of the team focuses his efforts on a
specific radio channel while being managed by a common executive across the
enterprise.
 
 Legend
Media also has sales and marketing relationships that help the sales process by
using existing relationships to promote the Company’s advertising
inventory.  These customers are also added to the group level customer
management system to achieve maximum service levels and cross selling
opportunities.
 
 Seasonality
 
 The
advertising industry in China is seasonal and, for the most part, tracks
consumer spending and the resulting advertising trends.  The
advertising cycle in China typically peaks toward the end of each calendar year
with a decline during January and February due to the Chinese Lunar New
Year.  Currently, the biggest seasonal impact on advertising is the
Chinese Lunar New Year as the market is still developing and less impacted by
other seasonal influences that impact the advertising industry as a
whole.
 
 Government
Regulation
 
 The PRC government views the media
industry as one of national importance.  This means the media industry
is extensively regulated, including  radio, television, newspapers,
magazines and advertising. The regulations imposed structure our decisions and
the Company is committed to following all imposed
regulations.
 
 Key regulations relevant to the
Company’s activities in China are:
 
 o
                Laws
      and regulations that govern investments of capital, especially foreign
      capital, in the media industry.  Under the PRC laws, “foreign”
      includes Hong Kong, Taiwan and Macau.  As a result of the
      restrictions, we operate our business in China through a series of
      contractual arrangements which provide effective control over the PRC
      entities without direct
ownership;
 o
                Laws
      and regulations specifically related to advertising as whole and radio
      advertising specifically; and
 o
                Regulations
      on foreign currency
exchange.
  12
  Limitations
on Foreign Ownership in the Advertising Industry
 
 The principal regulations governing
foreign ownership in the advertising industry in China include:
 
 o
              Catalogue
      for Guiding Foreign Investment in Industry (2004);
  and
 o
              Administrative
      Regulations on Foreign-invested Advertising Enterprises
      (2004).
 
 These regulations set the guidelines by
which foreign entities may directly invest in the advertising
industry.  The regulations require foreign entities that directly
invest in China’s advertising industry to have at least two years of direct
operations in the advertising industry outside of China.  Further,
since December 10, 2005, 100% ownership in Chinese advertising companies is
allowed, but a foreign company must have at least three years of direct
operations in the advertising industry outside of China.
 
 Because we have not been involved in
advertising outside of China for the required number of years, our domestic PRC
operating subsidiaries, which are considered foreign invested, are currently
ineligible to apply for the required advertising services licenses in
China.  Our PRC operating affiliates hold the requisite licenses to
provide advertising services in China and are owned or controlled by PRC
citizens designated by us.  Our radio advertising business operates in
China though contractual arrangements with consolidated entities in
China.  The Company, Legend (Beijing) Consulting Co. Ltd, and Legend
(Beijing) Information and Technology Co., Ltd have entered into a series of
contractual arrangements with our PRC operating affiliates and their respective
shareholders under which:
 
 o
              We
      exert effective control over the PRC operating
  affiliates;
 o
              A
      substantial portion of the economic benefits of our PRC operating
      affiliates will be transferred to us;
and
 o
              We
      consolidate the results in our financial
  statements.
 
 Our PRC legal counsel reviews all
agreements entered into in China.  Our PRC counsel structured the PRC
based business and advised the Company regarding (i) the ownership structure to
operate in China and comply with existing PRC laws and
regulations  and (ii) whether the contractual arrangements between
Legend (Beijing) Consulting Co., Ltd and Legend (Beijing) Information and
Technology Co., Ltd, and their respective PRC affiliates and PRC shareholders,
are valid, binding and enforceable.
 
 Our PRC counsel advised us there are
uncertainties regarding the interpretation and application of current and future
PRC laws and regulations.  For that reason, there can be no assurance
the PRC regulatory authorities will not in the future take a view contrary to
that of our PRC counsel.  Further, PRC counsel also advised we could
be subject to severe penalties if the PRC government determines the agreements
establishing the structure for operating our PRC advertising business do not
comply with PRC government restrictions on foreign investment in the advertising
industry.
 
 Regulations
on the advertising industry
  The principal regulations governing the
PRC advertising industry include the:
 
 •
              Advertising
      Law promulgated by the National People’s Congress on October 27,
      1994;
 
 •
              Administration
      Regulations of Advertising Industry, promulgated by the State Council on
      October 26, 1987; and
 
 •
              Implementation
      Rule of Advertising Industry Administration, or the Implementation Rule,
      promulgated by the State Administration for Industry and Commence on
      January 9, 1988, amended in 1998, 2000 and 2004, and effective as of
      January 1, 2005.
 
 The
regulations stipulate companies engaging in advertising activities must obtain
from the State Administration for Industry and Commerce ("SAIC"), or its local
branches, a business license which includes operating an advertising business
within its business scope. A company conducting advertising activities without
such license may be subject to penalties, including fines, confiscation of
advertising income and orders to cease advertising operation.  The business
license of an advertising company is valid for the duration of its existence,
unless the license is suspended or revoked due to a violation of any relevant
law or regulation.
  13


We do not expect to encounter any
difficulties in maintaining our business licenses. Each of our affiliated PRC
companies obtained such a business license as required by PRC
regulations.  We work with various advertising agencies and to the
best of our knowledge these advertising agents also have the required business
licenses as required by PRC law, although it is possible one or more them may
not be in compliance at any given time.  We will terminate any
relationship deemed to be with an entity that is not properly licensed per the
PRC’s regulations.





Advertising
content





PRC advertising laws and regulations
set forth content requirements for advertisements in China, which include
prohibitions on, among other things, false or misleading content, superlative
wording, socially destabilizing content or content involving obscenities,
superstition, violence, discrimination or infringement of the public interest.
Advertisements for anesthetic, psychotropic, toxic or radioactive drugs are
prohibited. It is prohibited to disseminate tobacco advertisements via radio,
film, television, newspapers or magazines. It is also prohibited to display
tobacco advertisements in any waiting lounge, theater, cinema, conference hall,
stadium or other public area. There are also specific restrictions and
requirements regarding advertisements that relate to patented products or
processes, pharmaceuticals, medical instruments, agrochemicals, foodstuff,
alcohol and cosmetics. In addition, all advertisements relating to
pharmaceuticals, medical instruments, agrochemicals and veterinary
pharmaceuticals advertised through radio, film, television, newspapers,
magazines, out-of-home and other forms of media, together with any other
advertisements subject to censorship by administrative authorities
according to relevant laws and administrative regulations, must be submitted to
relevant administrative authorities for content approval prior to
dissemination.





Advertisers, advertising operators and
advertising distributors are required by PRC advertising laws and regulations to
ensure the content of the advertisements they prepare or distribute are true and
in compliance with applicable law. In providing advertising services,
advertising operators and distributors must review the prescribed supporting
documents provided by advertisers for advertisements and verify the content of
the advertisements comply with applicable PRC laws and regulations. In addition,
prior to distributing advertisements for certain commodities which are subject
to government censorship and approval, advertising distributors are obligated to
ensure such censorship performed and approval obtained. Violation of these
regulations may result in penalties, including fines, confiscation of
advertising income, orders to cease dissemination of the advertisements and
orders to publish an advertisement correcting the misleading information. In
circumstances involving serious violations, the SAIC or its local branches may
revoke violators’ licenses or permits for advertising business operations.
Furthermore, advertisers, advertising operators or advertising distributors may
be subject to civil liability if they infringe on the legal rights and interests
of third parties in the course of their advertising business.





The radio industry is plagued by airing
of what are termed “medical advertisements” or advertisements that promote
products with claims of specific medical benefits.  The Chinese
regulatory body has taken notice of these advertisements and such added review
led to the prohibition of such advertisements.  Though prohibited, these
advertisements still are estimated to account for more than 45% of the revenues
generated by the radio advertising industry.  Further, these
advertisements, in most cases outside of tier 1 cities, represent the majority
of revenues for radio channels.  As such, the local authorities have
taken a passive approach to enforcement and allowed channels to continue to air
the advertisements.  Not allowing such would result in radio industry
crisis and the inability of many stations to cover expenses.  Though
passively enforced, it is believed over the coming years the regulatory body
will become stricter and look to eliminate such advertisements.





Legend Media and our affiliates are
committed to the direction set forth by the regulatory body and do not sell or
air “medial advertisements.”  However, with expansion the Company
expects it may encounter new relationships with radio stations and other
advertising companies resulting in airing of such restricted
content.  The Company’s management has a strict policy of not selling
such advertisements but accepts the terms of future relationships may require
such advertisements to be aired as the Company works to eliminate and replace
the advertisements with unrestricted content.





Item
1A. Risk
Factors





The risk
factors listed in this section and other factors noted herein or incorporated by
reference could cause our actual results to differ materially from those
contained in any forward-looking statements. The following risk factors, in
addition to the information discussed elsewhere herein, should be carefully
considered in evaluating us and our business:





14




We
have a limited operating history, which may make it difficult for you to
evaluate our business and prospects.




We began
operations in China in February 8, 2008 and had our first month of revenue in
June 2008.  We entered into two Memoranda of Understanding in February
2008 and closed our first acquisition in May 2008 for radio advertising
inventory for a radio channel in Tianjin, China.  We secured our radio
advertising minutes in Beijing in July 2008.  As such, we have a very
limited operating history upon which you can evaluate the viability and
sustainability of our business and its acceptance by advertisers and consumers.
It is also difficult to evaluate the viability of radio advertising in China
because the industry is still underdeveloped and we do not have the experience
to know how the radio advertising industry will develop in
China.   In addition, due to our short operating history in China
and recent additions to our management team, some of our senior management and
employees have only worked together at the Company for a relatively short period
of time. As a result, it may be difficult for you to evaluate the effectiveness
of our senior management and other key employees and their ability to address
future challenges to our business.





We
have expanded our scope of operations to include airline magazines and plan to
further expand our scope to include media that specifically targets the affluent
of China.




Our
business previously focused on radio advertising sales but due to market
conditions and other factors we expanded our strategy to include media that
targets lifestyle trends of the affluent and middle class.  In
November 2008, we closed a transaction by which we gained exclusive rights to
sell advertising for the 4th largest
airline group in China.  We are repositioning the Company away from
solely a radio advertising company and towards a broader media company that
targets affluent consumers.  If we do not effectively manage our
re-positioning we could impact the overall expected performance of the
business.  Further, we are not sure how the market will react to a
broadening of our media offerings.  Any failure to efficiently or
effectively manage this growth of our operations may limit our future growth and
hamper our business strategy.




Our
failure to maintain relationships with radio stations and specific radio
channels would harm our business and prospects.




Our
ability to generate revenues from advertising sales depends on our ability to
air advertisements on radio channels.  Our ability to place
advertisements on specific radio channels in large part is related to our
ability to secure and maintain exclusive sales agreements with radio channels in
China.  This, in turn, requires we develop and maintain business
relationships with national, regional and local radio stations as well as with
national and local government agencies.  As of June 30, 2009, we
were in control of 54 minutes of radio advertising per day in Tianjin, China and
54 minutes in Xi’an, China.  In total, the Company controls 108
minutes of inventory per day, or 39,420 minutes per year.  We have
entered into three exclusive advertising agency arrangements with different
entities.  We cannot assure you we can maintain these relationships on
satisfactory terms, or at all.  If we fail to maintain relationships
with radio stations we would be at risk of losing our rights to be the exclusive
advertising agent for the respective channel.  In turn, we would lose
inventory and be unable to satisfy our customers’ advertising
needs.




Our
failure to maintain our relationship with the airline magazine would harm our
business and prospects.




Our
ability to generate revenues from airline magazine advertising sales depends on
our exclusive right to sell and manage advertising for the Hainan Airline
Group’s airline magazine.   We cannot assure you we can maintain
the relationship with the airline on satisfactory terms, or at
all.  If we fail to maintain relationships with the airline we would
be at risk of losing our rights to be the exclusive advertising agent for the
magazine.  In turn, we would lose the inventory and be unable to
satisfy our customers’ advertising needs.  Any failure to maintain
this relationship on a satisfactory level would severely impact our revenue and
materially impact our ability to continue to operate.




15




We
derive nearly all of our revenues from the sale of advertising, and advertising
is sensitive to overall economic trends, domestic consumption trends and
advertising trends.





Demand
for the Company’s various advertising assets, and the resulting advertising
spending by our customers, is sensitive to changes in general economic
conditions and specifically to changes in overall advertising
spending.  It is likely that a decline in overall advertising spending
in China will have a greater impact on radio advertising as it is deemed non
essential and as such customers will shift a larger portion of spending to
primary media such as television.  Advertisers may reduce their
investment in advertising for any number of reasons, including:




o
            a
      general decline in economic conditions in China that impact the growth of
      domestic consumption in China;




o
            a
      decline in economic conditions in the cities where we maintain radio
      advertising operations;




o
            a
      decline in retail sale growth in China is likely to reduce the number of
      new brands trying to enter the
market;




o
            a
      decision by customers to shift advertising investment from radio and print
      to other available advertising
media;




o
            a
      decline in advertising spending in general;
or




o
            an
      overall decrease in advertising investment in
  China.




Our
quarterly operating results are difficult to predict and may fluctuate
significantly from period to period in the future.




Our
quarterly operating results are difficult to predict and may fluctuate
significantly based on the seasonality of consumer spending and corresponding
advertising trends in China.  Revenues of our business are largely
dependent on overall advertising expenditures.  Overall advertising in
China tends to decrease during January and February each year due to the Chinese
Lunar New Year holiday.  We also expect to experience fluctuations
around overall commercial slowdowns which can be influenced by external
influences.  As radio is a support medium to other advertising media,
our operating results are likely to fluctuate as overall advertising spending
decreases.  The reduction in overall advertising spending in the
market is likely to cause advertisers to shift their marketing mix and, in turn,
reduce the percentage of advertising spending on radio
advertising.  As a result, you may not be able to rely on period to
period comparisons of our operating results as an indication of our future
performance.  A large portion of costs are fixed thus, if our revenues
for a particular quarter are lower than expected, we may be unable to reduce our
operating expenses for that quarter by a corresponding amount, which would harm
our operating results for that quarter relative to our operating results from
other quarters.





Our
business has been impacted by global economic conditions and a corresponding
decrease in global advertising spending, which may adversely affect our
financial condition, results of operations and cashflow from
operations.





Recent
global market and economic conditions have been unprecedented and challenging
with tighter credit conditions and recessions in most major economies continuing
into 2009. Continued concerns about the systemic impact of potential long-term
and wide-spread recession, the availability and cost of credit, and the global
housing and mortgage markets have contributed to increased market volatility and
diminished expectations for Western and emerging economies. These conditions,
combined with declining business and consumer confidence and increased
unemployment, have contributed to volatility of unprecedented
levels.




As a
result of these market conditions, the cost and availability of capital has been
and may continue to be adversely affected.  Concern about the
stability of markets generally and the strength of counterparties specifically
led many lenders and institutional investors to reduce, and in some cases, cease
providing credit to businesses and consumers, as well as increase the cost of
lending. These factors led to a decrease in spending by businesses and consumers
alike, and to a decline in global advertising and media spending. Furthermore,
bank borrowings are an import source of our liquidity. Continued turbulence in
the U.S. and international markets and economies and prolonged declines in
business consumer spending may adversely affect our liquidity and financial
condition, the liquidity and financial condition of our customers, and in turn
impact our accounts receivable, and our ability to raise capital needed to
expand the business.


16


Our independent registered public
accounting firm added an emphasis paragraph to their audit report contained in
our Annual Report on Form 10-K for the fiscal year ended June 30, 2009
describing an uncertainty related to our ability to continue as a going
concern.




Due to our continued losses and limited
capital resources, our independent registered public accounting firm issued a
report that describes an uncertainty related to our ability to continue as a
going concern. The auditors’ report discloses that we did not generate
significant revenues during the fiscal year ended June 30, 2009, we incurred a
net loss of approximately $6,425,846, and consumed cash in operating activities
of approximately $2,873,355. These conditions raise substantial doubt about our
ability to continue as a going concern and may make it difficult for us to raise
capital. Our financial statements do not include any adjustments that might
result from the outcome of this uncertainty.




One
of our directors and our CEO, Ju Baochun, beneficially owns a significant number
of shares of our common stock which will have an impact on all major decisions
on which our shareholders may vote and which may discourage an acquisition of
the Company.





Ju
Baochun, one of our directors and our CEO, currently owns approximately 56% of
our outstanding common stock. As a result, Mr. Ju has the ability to
significantly impact virtually all corporate actions requiring shareholder
approval, including the following:





•
              election of
      directors;
 
 •
              amendment of organizational
      documents;
 
 •
              merger of our company or the sale
      of our assets or other corporate transactions;
  and
 
 •
              control the outcome of any other
      matter submitted to the security holders for
  vote.





The
interests of Mr. Ju may differ from the interests of our other shareholders.
Further, Mr. Ju's beneficial stock ownership may discourage potential investors
from investing in our common stock due to the lack of influence they could have
on our business decisions, which in turn could reduce our stock
price.




If
advertisers or the listening public do not accept, or lose interest in, our
radio advertising, our revenues may be negatively affected and our business may
not expand or be successful.




China’a
radio advertising industry is small and underdeveloped compared to alternative
advertising media including television, outdoor, Internet, newspapers and
magazines.  We compete with these media and others for advertising
spending of our current and prospective customers.  Our success
depends upon the emergence of radio as a viable messaging medium, the continued
increase in listenership and ultimately the broader acceptance of radio by the
advertisers themselves.  Advertisers may elect not to invest in radio
advertising as a whole or not use our specific services.  If a substantial
number of advertisers lose interest in advertising on the radio or on our
channels specifically, we will be unable to generate sufficient revenues and
cash flows to operate our business, and our financial condition and results of
operations would be materially and adversely affected.




If
advertisers lose interest in print media or air travel based media, our airline
magazine advertising revenues may be negatively affected and our business may
not expand or be successful.




The air
travel advertising industry in China is still developing.  Although
there has been support for air travel based advertising as well as print media
in general, there is no certainty this will continue.  We compete with
all platforms and media types for a share of advertising spending of our current
and prospective customers.  Our success depends upon print and air
travel based media continuing to develop and garner support from the advertising
community.  If a substantial number of advertisers lose interest in
advertising in airline magazines, we will be unable to generate sufficient
revenues and cash flows to operate our business, and our financial condition and
results of operations would be materially and adversely affected.




The
process of building a relationship with a  radio channel and then
gaining exclusive rights to their advertising inventory can be time consuming
and requires resources, mostly management’s time and attention, from which we
may be unable to recognize the anticipated benefits.




Our
business plan depends largely on our ability to gain exclusive rights to radio
channels across China.  The process depends on our ability to
establish relationships with local, regional and national radio stations which
control up to 10 radio channels.  Establishing these relationships and
securing exclusive rights to radio advertising inventory can be lengthy and
often not result in securing of the exclusive rights.  We often need
to convince radio stations about the benefit of partnering with us to ensure
they maximize the value of their individual channels and station as a
whole.  We invest considerable time and effort into the process but a
radio station may decide not to partner with us.  If a majority of
targets decide not to partner with us, we will not be able to grow our business
or revenues as planned.




17




The
acquisition of additional exclusive radio advertising inventory requires
significant up front costs that may not be immediately recoverable.




Once we
sign a contract with a radio channel to acquire the exclusive sales and
marketing rights for its advertising inventory, we immediately deposit up to 25%
of the first year's contract price.  Such deposits are usually held
for the term of the contract and roll-over as contracts are
renewed.  Further, we often have to establish a new sales office to
handle the new contract.  Such deposits and investments usually come
months before any revenue is generated by the new contact.  We may
also experience further delays in revenue generation, if any, due to deployment
delays or difficulties in selling advertising time to new or current advertisers
to be aired on the new radio channels acquired.




The
acquisition of additional exclusive radio advertising inventory may result in
the Company placing advertisements that are restricted.




The
acquisition of new advertising inventory either through new contracts with
channels or the acquisition of competing businesses may result in the Company
placing advertisements that are restricted by the regulatory body.  An
estimated 40% to 50% of current radio advertising in China is sold to companies
placing “medical advertisements.” These advertisements are restricted and
per the regulatory body may not be aired without prior approval by relevant
government authorities.  However, local regulatory bodies have
overlooked strict enforcement so far due to concerns strict enforcement may lead
to a financial crisis in the radio industry.   As we expand our
inventory we are likely to be in a situation where an acquisition and / or radio
channel has existing sales derived from such advertisements.  The
Company plans to eliminate such advertisements but may not be able to
immediately as many of these advertisements are content substitutes which will
require the channels replace the content prior to eliminating the
advertisements.  Further, the Company, as part of negotiations with
radio channels, may offer a timed removal of the advertisements as they often
provide an existing source of revenue that can not be immediately replaced and
that offsets the immediate costs associated with a new contract.  The
Company, as a core principle, will follow all applicable advertising laws;
however, the Company also accepts the need at times to phase the restricted
advertisements out versus an immediate removal.




There are
no guarantees the regulatory body will not immediately eliminate all such
restricted advertisements.  If the Company through acquisitions and
new contacts implements a phase out approach to such advertisements, a change in
regulatory action would adversely impact the result of the
Company.  The Company does not currently sell any such restricted
advertisements.




We
face significant competition from alternative advertising media, and if we do
not compete successfully against new and existing competitors, we may not be
able to execute on our plan, and our profitability may be adversely
affected.




The radio
industry in China is underdeveloped and for the most underutilized by
advertisers in the market.  We compete first and foremost with
alternative advertising media to increase the level of investment in radio
advertising in China.  We compete with other mobile digital television
advertising companies and new media advertising companies in
China.  Further, if the radio advertising industry expands as expected
in the coming years, the Company is likely to face new competitors focused on
selling radio advertising.  We compete for advertising customers
primarily on the basis of cost per impression and reach of the radio channels we
have under contract.  Specifically in the radio advertising industry
we compete with Yuan Chuan Radio, Beijing Universal Chief Advertising,
Simulcast, Beijing Radio Station, Xinhua Finance Media Unlimited and numerous
other smaller radio advertising companies.  We also face competition
from radio stations that establish their own sales networks.  The
Company views its primary competition as coming from other advertising media,
such as television, outdoor, newspapers, magazines and the
Internet.  The alternative media have already established a stronger
presence in China and have a far more comprehensive and organized sales
effort.




18




Further,
we may also face competition from new entrants into radio
advertising.  Though we are working to acquire a significant amount of
exclusive radio advertising minutes, the total amount of radio advertising
inventory in China is approximately 80 million minutes.  The vast
amount of minutes across China means that as radio becomes a more viable
advertising medium, there will be plenty of inventory available for competitors
looking to enter the market.  Therefore, we cannot assure you we will
succeed in executing on our plan of gaining a market leading amount of
advertising under contract at very attractive rates.




Increased
competition could reduce our ability to secure new contracts for radio
advertising, attract new customers and maintain our planned growth
trajectory.  We cannot assure you we will successfully compete against
new or existing competitors.




The
airline magazine will continue to face competition from alternative print media
as well as alternative platforms.  Further, the Company will find
increasing competition from airport based advertising. Increased competition
could impact our revenue and profit by driving prices down and costs
up.




If
we or someone else in the radio advertising industry does not “champion” the
industry, we may not be able to execute on our sales plan, and our profitability
may be adversely affected.




We
believe the radio industry in China is underdeveloped and for the most part
underutilized by advertisers.  As such, the industry will require a
“champion” to promote the inherent benefits of adding radio advertising to
existing marketing activities.  Companies in China, to date, have not
adopted radio as part of their advertising plan as companies have done in other
parts of the world.  For the industry to meet the more aggressive
growth forecasts, we believe the medium as a whole will have to become a larger
part of the marketing spending by larger advertisers in China.  We
expect to take an active role in championing the industry but accept that this
will require an investment of time and resources.  There are no
guarantees our effort to promote the radio advertising industry will be
successful in attracting an increased market share of radio
advertising.  We cannot assure you we will be able to efficiently or
effectively promote the radio advertising industry to become a larger portion of
the total advertising spending.  Any failure to effectively develop
the radio advertising industry may materially and adversely affect our business
and future growth.





Acquisitions
of existing radio advertising businesses and new exclusive contracts with radio
channels may expose us to potential risks and have an adverse effect on our
ability to manage our business.





Selective
acquisitions and new deals directly with radio channels form a major part of our
strategy to expand our business.  As we are presented with appropriate
opportunities, we may acquire additional businesses or exclusive contracts for
radio advertising that are part of our core business.  Our integration of
the acquired entities and contacts into our business may not be successful and
may not enable us to expand into new markets.  This would
significantly affect the expected benefits of these acquisitions.
 Moreover, the integration of new acquisitions has required, and will
continue to require, significant attention from our management. Future
acquisitions will also likely present similar challenges.





The
diversion of our management’s attention and difficulties encountered in any
integration process could have an adverse effect on our ability to manage our
business. In addition, we may face challenges trying to integrate new
operations, services and personnel with our existing operations. Our recent
acquisitions and possible future acquisitions may also expose us to other
potential risks, including risks associated with unforeseen or hidden
liabilities, the diversion of resources from our existing businesses and
technologies, our inability to generate sufficient revenues to offset the costs,
expenses of acquisitions and potential loss of, or harm to, relationships with
employees and advertising customers as a result of our integration of new
businesses and new regulations governing cross-border investment by PRC
residents.





There
may be unknown risks inherent in our acquisitions and signing of new contracts
with radio channels for the exclusive sales and marketing rights of their
advertising inventory.





Although
we conduct due diligence with respect to the major acquisitions we have
undertaken and expect to do so with respect to future acquisitions, we may not
be aware of all of the risks associated with the targets of such
acquisitions.  Any discovery of adverse information concerning any
company we acquired could have a material adverse effect on our business,
financial condition and results of operations. While we are entitled to seek
indemnification in certain circumstances, successfully asserting indemnification
or enforcing such indemnification could be costly and time consuming or may not
be successful at all.




19




Failure
to manage our growth could strain our management, operational and other
resources and we may not be able to achieve anticipated levels of growth in the
new networks and media platforms we are beginning to operate, either of which
could materially and adversely affect our business and growth
potential.





We have
expanded our operations and plan to continue to expand in China.  We
must continue to expand our operations to meet our plan and the expected needs
of the emerging radio advertising industry.  We must continue to sign
new contracts for the exclusive rights to radio advertising inventory across
China.  We also need to take advantage of the current environment that
provides the opportunities to enter into such agreements.  Our
expansion has resulted, and will continue to result, in substantial demands on
our management's resources. It has also increased our need for a reliable supply
of management to handle the sales and marketing activities needed in the
expanding markets.  To manage our growth, we must develop and improve
our existing administrative and operational systems and, our financial and
management controls and further expand, train and manage our work
force.  We may not be able to manage our current or future expansion
as it extends beyond our base of operations in Beijing, China.  We
cannot assure you we will be able to efficiently or effectively manage the
growth of our operations, recruit top talent and train our personnel. Any
failure to efficiently manage our expansion may materially and adversely affect
our business and future growth.





Our
business depends substantially on the continuing efforts of our key executives.
Our business may be severely disrupted if we lose their
services.





Our
future success heavily depends upon the continued services of our key
executives, particularly Ju BaoChun our Chief Executive Officer, and Jeffrey
Dash, our Chief Financial Officer.  We rely on the expertise of our
key executives in business operations and the advertising industries and on
their relationships with our stockholders, business partners and regulators. If
one or more of our key executives is unable or unwilling to continue in his
present positions, we may not be able to replace them easily or at all.
Therefore, our business may be severely disrupted, our financial condition and
results of operations may be materially and adversely affected and we may incur
additional expenses to recruit and train personnel.




Our
senior management and employees have worked together for a short period of time,
which may make it difficult for you to evaluate their effectiveness and ability
to address challenges.




Due to
our limited operating history, certain of our senior management and employees
have worked together at the Company for a relatively short period of
time.  As a result, it may be difficult for you to evaluate the
effectiveness of our senior management and other key employees and their ability
to work with the employees of our operating groups and address future challenges
to our business.





If
we are unable to attract, train and retain key individuals, highly skilled
employees and important talent, our business may be adversely
affected.





We need
to hire additional employees, including personnel to sell our radio advertising
inventory and administrative staff to support our operations. If we are unable
to identify, attract, hire, train and retain individuals in these areas or
retain our existing employees, due to our failure to provide them with adequate
incentives or otherwise, the effectiveness of our sales efforts and overall
business management may be negatively impacted, which could adversely affect our
business, expansion and results of operations.




We
may be subject to intellectual property infringement claims, which may force us
to incur legal expenses and could potentially result in judgments against us,
which may materially disrupt our business.





We cannot
be certain our radio advertising content or other aspects of our business do not
or will not infringe upon patents, copyrights or other intellectual property
rights held by third parties. Although we are not aware of any such claims, we
may become subject to legal proceedings and claims relating to the intellectual
property of others in the ordinary course of our business. If we are found to
have violated the intellectual property rights of others, we may be enjoined
from using such intellectual property, and we may incur licensing fees or be
forced to develop alternatives. In addition, we may incur substantial expenses
in defending against these third party infringement claims, regardless of their
merit. Successful infringement or licensing claims against us may impact our
ability to place advertisement for our customers or in substantial monetary
liabilities, which may materially and adversely disrupt our
business.




20




If
we fail to implement effective internal controls required by the Sarbanes-Oxley
Act of 2002, to remedy any material weaknesses in our internal controls that we
may identify, or to obtain the attestation required by Section 404 of the
Sarbanes-Oxley Act of 2002, such failure could result in material misstatements
in our financial statements, cause investors to lose confidence in our reported
financial information and have a negative effect on the trading price of our
common stock.





Section
404 of the Sarbanes-Oxley Act of 2002 requires management of public companies to
develop and implement internal controls over financial reporting and evaluate
the effectiveness thereof, and the independent auditors to attest to the
effectiveness of such internal controls and the evaluation performed by
management.  We have not yet been required to obtain the independent
auditor attestation required by the Sarbanes-Oxley Act of
2002.





Any
failure to complete our assessment of our internal controls over financial
reporting, to remediate any material weaknesses that we may identify, or to
implement new or improved controls, or difficulties encountered in their
implementation, could harm our operating results, cause us to fail to meet our
reporting obligations or result in material misstatements in our financial
statements.  Any such failure also could adversely affect the results
of the periodic management evaluations of our internal controls and, in the case
of a failure to remediate any material weaknesses that we may identify, would
adversely affect our ability to obtain the annual auditor attestation reports
regarding the effectiveness of our internal controls over financial
reporting that are required under Section 404 of the Sarbanes-Oxley
Act.  Inadequate internal controls could also cause investors to lose
confidence in our reported financial information, which could have a negative
effect on the trading price of our common stock.





Further,
because some members of our management team have limited or no experience
operating a publicly-traded company, we may need to recruit, hire, train and
retain additional financial reporting, internal controls and other personnel in
order to develop and implement appropriate internal controls and reporting
procedures.  This may be time consuming, difficult and costly for
us.





We need
additional capital and we may not be able to obtain it, which could adversely
affect our liquidity and financial position.





We will
require additional cash to make acquisitions, secure new radio advertising
inventory and achieve our business plan.  We plan to expand through
new contracts and acquisitions.  We have identified many targets but
still many have not been identified.  The Company will need additional
capital to execute its current business plan.  The cost of
acquisitions and the cost of signing new contracts for radio advertising is not
known until the opportunities are analyzed, due diligence has commenced and
negotiations are underway.  The Company will need to raise additional
capital to expand at its planned rate. The sale of additional equity securities
could result in additional dilution to our stockholders. The incurrence of
indebtedness would result in increased debt service obligations and could result
in operating and financing covenants that would restrict our operations. We may
not be able to obtain financing in amounts or on terms acceptable to us, if at
all. As a result, our operating results and financial condition could be
adversely affected.





Our
ability to obtain additional capital on acceptable terms is subject to a variety
of uncertainties, including:




o
            Investors’
      perception of, and demand for, securities of radio advertising
      companies;




o
            A
      decline in economic conditions in China leading to reduced demand for
      securities of Chinese advertising companies
  overall;




o
            Conditions
      of the U.S. and other capital markets in which we may seek to raise
      funds;




o
            Our
      future results of operations, financial condition and cash flows;
      and




o
            PRC
      governmental regulation of foreign investment in advertising services
      companies in China.





We cannot
assure you financing will be available in amounts or on terms acceptable to us,
if at all. Any failure by us to raise additional funds on terms favorable to us
could have a material adverse effect on our liquidity and financial
condition.




21




We
have limited insurance coverage for our operations in China.




The
insurance industry in China is still at an early stage of development. Insurance
companies in China offer limited insurance products. We determined that the
risks of disruption or liability from our business, the loss or damage to our
property, including our facilities, equipment and office furniture, the cost of
insuring for these risks, and the difficulties associated with acquiring such
insurance on commercially reasonable terms make it impractical for us to have
such insurance. As a result, we do not have any business liability, disruption,
litigation or property insurance coverage for our operations in
China.  Any uninsured occurrence of loss or damage to property, or
litigation or business disruption may result in the incurrence of substantial
costs and the diversion of resources, which could have an adverse effect on our
operating results.





Risks
related to the regulation of our business and to our
structure





If
the PRC government finds that the agreements that establish the structure for
operating our China business do not comply with PRC governmental restrictions on
foreign investment in the advertising industry, we could be subject to severe
penalties.




The PRC
government requires foreign entities that invest in PRC companies providing
advertising services to have at least two years of direct operations in the
advertising industry outside of China.  We recently entered the radio
advertising industry and have not operated any advertising business outside of
China and therefore, we do not qualify to directly invest in or provide
advertising services in China.  We are a Nevada based company with
subsidiaries in the British Virgin Islands and Hong Kong and therefore treated
as foreign entity under Chinese law.  Accordingly, our China based
subsidiaries Legend (Beijing) Consulting Co., Ltd and Legend (Beijing)
Information and Technology Co., Ltd are currently ineligible to apply for the
required licenses to provide advertising services in China.  Our
business is currently operated through our contractual arrangements with our
consolidated affiliated entities, TJ YSLD and MAIHESI.  Both TJ YSLD
and MAIHESI are currently owned by Ju Baochun and Xue Wei and hold the requisite
licenses to provide advertising services in China.




TJ YSLD
and MAIHESI directly operate our advertising business, sell advertising to our
customers and enter into sales and marketing agreements with radio
stations.  We have been and will continue to depend on the two PRC
companies to operate and build our business.  We do not have any
equity interest in TJ YSLD and MAIHESI, but receive the economic benefits of
ownership through contractual arrangements.  We entered into
contractual arrangements with PRC operating affiliates and their respective
subsidiaries, pursuant to which we, through our PRC operating subsidiaries,
provide technical support and consulting services to our PRC operating
affiliates and their subsidiaries. In addition, we made agreements with our PRC
operating affiliates and each of their shareholders which provide us with the
substantial ability to control these affiliates and their existing and future
subsidiaries.





If we, or
our existing or future PRC operating subsidiaries and affiliates, are found to
violate any existing or future PRC law or regulation or fail to obtain or
maintain any of the required permits or approvals, the relevant PRC regulatory
authorities, including the SAIC, which regulates the registration and operation
of advertising companies, would have broad discretion in dealing with such
violations, including:




o
            Revoking
      the business and operating licenses of our PRC subsidiaries and
      affiliates;




o
            Discontinuing
      or restricting our PRC subsidiaries’ and affiliates’
      operations;




o
            Imposing
      fines, confiscating the income of our PRC subsidiaries and affiliates or
      our income, or imposing conditions or requirements with which we or our
      PRC subsidiaries and affiliates may not be able to
  comply;




o
            Requiring
      us or our PRC subsidiaries and affiliates to restructure the relevant
      ownership structure or operations;
or




o
            Restricting
      or prohibiting our use of the proceeds from our initial public offering or
      private placement to finance our business and operations in
      China.





The
imposition of any of these penalties would result in a material and adverse
effect on our ability to conduct our business.




22




We
rely on contractual arrangements with our PRC operating affiliates and their
subsidiaries and shareholders for our China operations, which may not be as
effective in providing operational control as direct ownership.




We rely
on contractual arrangements with several affiliated PRC entities and their
respective shareholders to operate our advertising business in
China.  Our contractual arrangements may not be as effective in
providing us with control over our PRC operating affiliates and their
subsidiaries as direct ownership. If we had direct ownership of our PRC
operating affiliates and their respective subsidiaries, we could exercise our
rights as a shareholder to effect changes in the board of directors of those
companies, which in turn could effect changes, subject to any applicable
fiduciary obligations, at the management level. However, under the current
contractual arrangements, as a legal matter, if our PRC operating affiliates or
any of their subsidiaries and shareholders fails to perform its or his
respective obligations under these contractual arrangements, we may have to
incur substantial costs and resources to enforce such arrangements, and rely on
legal remedies under PRC law, including seeking specific performance or
injunctive relief, and claiming damages, which we cannot assure you to be
effective.  For example, if shareholders of TJ YSLD refused to
transfer equity interests in TJ YSLD to us or our designated persons when we
exercise the purchase option pursuant to these contractual arrangements, or if
the shareholders were otherwise to act in bad faith toward us, then we may have
to take legal action to compel them to fulfill their contractual
obligations.  Accordingly, it may be difficult for us to change our
corporate structure or to bring claims against our PRC operating affiliates if
they do not perform their obligations under their contracts with us or if
any of the PRC citizens who hold the equity interest in our PRC operating
affiliates do not cooperate with any such actions.





Many of
these contractual arrangements are governed by PRC laws and provide for
resolution of disputes through arbitration in Hong Kong. Accordingly, these
contracts would be interpreted in accordance with PRC law and any disputes would
be resolved in accordance with PRC laws. The legal environment in the PRC is not
as developed as in other jurisdictions, such as the United States. As a result,
uncertainties in the PRC legal system could limit our ability to enforce these
contractual arrangements. If we are unable to enforce these contractual
arrangements, we may not be able to exert effective control over our operating
entities, and our ability to conduct our business may be negatively
affected





Our
contractual arrangements with our subsidiaries and affiliated entities may be
subject to scrutiny by the PRC tax authorities and a finding we owe additional
taxes, could substantially increase our taxes owed, and reduce our net
income.




Under
applicable PRC laws, rules and regulations, arrangements and transactions among
related parties may be subject to audits or challenges by the PRC tax
authorities.  We are not able to determine whether any of these
transactions will be regarded by the PRC tax authorities as arm’s length
transactions.  Based on our knowledge, the PRC tax authorities
have not issued a ruling or interpretation in respect of the type of transaction
structure similar to ours.  The relevant tax authorities may determine
our contractual relationships were not entered into on an arm’s length
basis.  If any of the transactions are determined not to have been
entered into on an arm’s length basis, or are found to result in an
impermissible reduction in taxes under PRC law, the PRC tax authorities may
adjust our profits and losses and assess more taxes on it. Further, the PRC tax
authorities may impose late payment surcharges and other penalties for underpaid
taxes. Our business may be  materially and adversely affected if tax
liabilities increase or if it is found to be subject to late payment surcharges
or other penalties.





Our
PRC affiliated entities are beneficially controlled by Ju BaoChun, the Company’s
largest shareholder, and the Chairman and CEO of the Company, which means our
business depends on our continued relationship with Mr. Ju. Mr. Ju may have
potential conflicts of interest with us, and we may not be able to enter further
agreements to extract economic benefits from these entities, which may
materially and adversely affect our business and financial
condition.




Our
operating entities in China, due to regulatory restrictions, are owned by Ju
BaoChun and related parties to him.  These entities have contractual
relationships that provide effectively all of the economic benefit to the
Company.  Conflicts of interests between Mr. Ju’s roles as beneficial
owner of the PRC operating companies and the Company may arise. We cannot assure
you conflicts of interest will not arise between the Mr. Ju and minority
shareholders.  In addition, any such conflict may breach or cause the
operating companies to breach or refuse to renew the existing contractual
arrangements that allow us to effectively control PRC companies and receive
economic benefits from them.  If Mr. Ju chose to leave the Company and
/ or we could not resolve any such disputes Mr. Ju we would have to rely on
legal proceedings, the outcome of which is uncertain and which could be
disruptive to our business.




23




Our
business operations may be affected by legislative or regulatory
changes.





Changes
in laws and regulations or interpretations therein, or the enactment of new laws
and regulations governing placement or content radio advertising, our business
licenses or otherwise affecting our business in China may materially and
adversely affect our business prospects, expansion plans and results of
operations. For example, the PRC government promulgated regulations allowing
foreign companies to hold a 100%-interest in PRC advertising companies starting
from December 10, 2005.





Risks
Relating to Doing Business in the PRC





Adverse
changes in political and economic policies of the PRC government could have a
material adverse effect on the overall economic growth of China, which could
reduce the demand for our products and materially and adversely affect our
ability to execute on our plan and grow the business.





Substantially
all of our business operations are conducted in China and substantially all of
our sales are made in China.  Further, our entire growth plan is
currently based on expanding our radio advertising business in
China.   Accordingly, our business, financial condition, results
of operations and prospects are affected significantly by economic, political
and legal developments in China. The Chinese economy differs from the economies
of most developed countries in many respects, including:




o
            The
      degree of government involvement;




o
            The
      uncertainty and lack of visibility into the future plans of the
      government;




o
            The
      forecasted growth rate of the
economy;




o
            The
      forecasted growth rate of domestic
consumption;




o
            The
      control of foreign exchange; and




o
            Access
      to financing.




While the
Chinese economy has grown significantly in the past 30 years, the growth has
been uneven, both geographically and among various sectors of the economy. The
PRC government implemented various measures to encourage economic growth and
guide the allocation of resources. Some of these measures benefit the overall
Chinese economy, but may also have a negative effect on us.  For
example, our financial condition and results of operations may be materially and
adversely affected by government control over capital investments or changes in
tax regulations that are applicable to us.  At the same time, the very
same policies can generate opportunity as the government works to spread the
wealth more evenly across China.




The PRC
economy has been transitioning from a planned economy to a more market-oriented
economy.  Although the PRC government has in recent years implemented
measures emphasizing the utilization of market forces for economic reform, the
reduction of state ownership of productive assets and the establishment of sound
corporate governance in business enterprises, a substantial portion of the
productive assets in China is still owned by the PRC government.  The
continued control of these assets and other aspects of the national economy by
the PRC government could materially and adversely affect our
business.  The Company depends on the ability to work with the
government controlled radio stations to generate substantially all of their
revenue.




A
substantial portion of our assets are located in China and substantially all of
our revenues are derived from our operations in China. Accordingly, our
business, financial condition, results of operations and prospects are subject,
to a significant extent, to economic, political and legal developments in
China.




There
are uncertainties with respect to the PRC legal system that could limit the
protections available to you and us.




The PRC
legal system is a civil law system based on written statutes. Unlike common law
systems, it is a system in which decided legal cases have little precedential
value.  Each of our PRC operating subsidiaries and affiliates is
subject to PRC laws and regulations.  However, since the PRC legal
system continues to evolve, the interpretations of many laws, regulations and
rules are not always uniform and enforcement of these laws, regulations and
rules involve uncertainties, which may limit legal protections available to us.
 For example, we may have to resort to administrative and court proceedings
to enforce the legal protection that we enjoy either by law or
contract.  However, since PRC administrative and court authorities
have significant discretion in interpreting and implementing statutory and
contractual terms, it may be more difficult to evaluate the outcome of
administrative and court proceedings and the level of legal protection we enjoy
than in more developed legal systems.  These uncertainties, including the
inability to enforce our contracts, could materially and adversely affect our
business and operation.  Further, intellectual property rights and
confidentiality protections in China may not be as effective as in the United
States or other countries. Accordingly, we cannot predict the effect of future
developments in the PRC legal system, particularly with regard to the
advertising industry, including the promulgation of new laws, changes to
existing laws or the interpretation or enforcement thereof, or the preemption of
local regulations by national laws. These uncertainties could limit the legal
protections available to us and other foreign investors, including
you.  In addition, any litigation in China may be protracted and
result in substantial costs and diversion of our resources and management
attention.




24




You
may experience difficulties effecting service of legal process, enforcing
foreign judgments or bringing original actions in China based on United States
or other foreign laws, against us, our management or the experts named in this
Annual Report on Form 10-K.




We
conduct substantially all of our operations in China and a substantial portion
of our assets are located in China. In addition, most of our senior executive
officers reside within China.  As a result, it may not be possible to
effect service of process within the United States or elsewhere outside China
upon our senior executive officers, including with respect to matters arising
under U.S. federal securities laws or applicable state securities laws.
Moreover, the PRC does not have treaties with the United States or many other
countries providing for the reciprocal recognition and enforcement of civil
judgments of court.




Recent
PRC regulations relating to offshore investment activities by PRC residents may
increase our administrative burden and restrict our overseas and cross-border
investment activity.  If our stockholders who are PRC residents fail to
make any required applications and filings under such regulations, we may be
unable to distribute profits and may become subject to liability under PRC
laws.




SAFE has
promulgated several regulations, including SAFE Circular No. 75 issued in
November 2005 and its implementation rule issued in May 2007, that require PRC
residents and PRC corporate entities to register with local branches of SAFE in
connection with their direct or indirect offshore investment in an overseas
special purpose vehicles, or SPV, for the purposes of overseas equity financing
activities. These regulations apply to our stockholders who are PRC residents
and may apply to any offshore acquisitions that we make in the future.




Under the
SAFE regulations, PRC residents who make, or previously made, direct or indirect
investments in a SPV will be required to register those investments. In
addition, any PRC resident who is a direct or indirect shareholder of a SPV is
required to file with the local branch of SAFE, with respect to that offshore
company, any material change involving capital variation, such as an increase or
decrease in capital, transfer or swap of shares, merger, division, long term
equity or debt investment or creation of any security interest over the assets
located in China. If any PRC shareholder fails to make the required SAFE
registration, the PRC subsidiaries of that offshore parent company may be
prohibited from distributing their profits and the proceeds from any reduction
in capital, share transfer or liquidation, to their offshore parent company, and
the offshore parent company may also be prohibited from injecting additional
capital into their PRC subsidiaries. Moreover, failure to comply with the
various SAFE registration requirements described above could result in liability
under PRC laws for evasion of applicable foreign exchange
restrictions.




We cannot
assure you all of our stockholders who are PRC residents will comply with or
obtain any registrations or approvals required under these regulations or other
related legislation. It is unclear how these regulations, and any future
legislation concerning offshore or cross-border transactions, will be
interpreted, amended and implemented by the relevant government authorities. The
failure or inability of our PRC resident stockholders to comply with these
regulations may subject us to fines and legal sanctions, restrict our overseas
or cross-border investment activities, limit our ability to inject additional
capital into our PRC subsidiaries, to make distributions or pay dividends, or
materially and adversely affect our ownership structure. If any of the foregoing
events occur, our acquisition strategy and business operations and our
ability to distribute profits to you could be materially and adversely
affected.




25




If
any of our PRC affiliates become the subject of a bankruptcy or liquidation
proceeding, we may lose the ability to use and enjoy those assets, which could
reduce the size of our advertising network and materially and adversely affect
our business, ability to generate revenues and the market price of our common
stock.





To comply
with PRC laws, rules and regulations relating to foreign ownership restrictions
in the advertising business, we currently conduct our operations in China
through contractual arrangements with TJ YSLD and MAIHESI, its shareholders and
subsidiaries. As part of these arrangements, TJ YSLD and MAIHESI hold some of
the assets that are important to the operation of our business. If any of these
entities become bankrupt and all or part of their assets become subject to liens
or rights of third party creditors, we may be unable to continue some or all of
our business activities, which could materially and adversely affect our
business, financial condition and results of operations. If TJ YSLD or MAHESI,
or any of their subsidiaries, undergo a voluntary or involuntary liquidation
proceeding, its shareholders or unrelated third party creditors may claim rights
to some or all of their assets, thereby hindering our ability to operate our
business, which could materially and adversely affect our business, our ability
to generate revenues and the market price of our common stock.





The
PRC tax authorities may require us to pay additional taxes in connection with
our acquisitions of offshore entities that conducted their PRC operations
through their affiliates in China.





Our
operations and transactions are subject to review by the PRC tax authorities
pursuant to relevant PRC laws and regulations. However, these laws, regulations
and legal requirements change frequently, and their interpretation and
enforcement involve uncertainties. For example, in the case of some of our
acquisitions of offshore entities that conducted their PRC operations through
their affiliates in China, we cannot assure you the PRC tax authorities will not
require us to pay additional taxes in relation to such acquisitions, in
particular where the PRC tax authorities take the view that the previous
taxable income of the PRC affiliates of the acquired offshore entities needs to
be adjusted and additional taxes be paid. In the event the sellers failed to pay
any taxes required under PRC law in connection with these transactions, the PRC
tax authorities might require us to pay the tax, together with late-payment
interest and penalties.





Restrictions
on currency exchange may limit our ability to utilize our revenues
effectively.




The PRC
government imposes controls on the convertibility of the Renminbi into foreign
currencies and, in certain cases, the remittance of currency out of China. We
receive all our revenues in Renminbi.  Under our current corporate
structure, our income is primarily derived from dividend payments from our PRC
subsidiaries TJ YSLD and MAIHESI.  Shortages in the availability of
foreign currency may restrict the ability of our PRC subsidiary to remit
sufficient foreign currency to pay dividends or other payments to us, or
otherwise satisfy their foreign currency-denominated obligations. Under existing
PRC foreign exchange regulations, payments of current account items, including
profit distributions, interest payments and expenditures from trade related
transactions, can be made in foreign currencies without prior approval from SAFE
by complying with certain procedural requirements. However, approval from SAFE
or its local branch is required where Renminbi is to be converted into foreign
currency and remitted out of China to pay capital expenses such as the
repayment of loans denominated in foreign currencies. The PRC government
may also, at its discretion, restrict access in the future to foreign currencies
for current account transactions. If the foreign exchange control system
prevents us from obtaining sufficient foreign currency to satisfy our currency
demands, we may not be able to pay dividends in foreign currencies to our
stockholders.





Fluctuations
in exchange rates could result in foreign currency exchange losses.




The
exchange rate between the Renminbi and the U.S. dollar, Euro and other foreign
currencies is affected by, among other things, changes in China’s political and
economic conditions.  Since July 2005, the Renminbi is no longer
pegged solely to the U.S. dollar. Instead, it is reported to be pegged against a
basket of currencies, determined by the People’s Bank of China.  Under
the new policy, the Renminbi is permitted to fluctuate within a narrow and
managed band. This change in policy has resulted in significant appreciation of
the Renminbi against the U.S. dollar.  The Renminbi may appreciate or
depreciate significantly in value against the U.S. dollar in the long term,
depending on the fluctuation of the basket of currencies against which it is
currently valued or it may be permitted to enter into a full float, which may
also result in a significant appreciation or depreciation of the Renminbi
against the U.S. dollar. Fluctuations in the exchange rate will also affect the
relative value of any dividend we issue in the future which will be exchanged
into U.S. dollars and earnings from and the value of any U.S. dollar-denominated
investments we make in the future.




26




Very
limited hedging options are available in China to reduce exposure to exchange
rate fluctuations. To date, we have not entered into any hedging transactions to
reduce our exposure to foreign currency exchange risk. While we may decide to
enter into hedging transactions in the future, the availability and
effectiveness of these hedges may be limited and we may not be able to
successfully hedge our exposure at all. In addition, our currency exchange
losses may be aggravated by PRC exchange control regulations that restrict our
ability to convert Renminbi into foreign currency.





We
may be treated as a resident enterprise for PRC tax purposes under the new
Enterprise Income Tax Law (“EIT Law”), which may subject us to PRC income
tax for any dividends we receive from our subsidiary and withholding for any
dividends we pay to our non-PRC stockholders.




Under the
EIT Law, enterprises established outside of China whose “de facto management
bodies” are located in China are considered “resident enterprises,” and are
generally subject to the uniform 25% enterprise income tax rate for their global
income. Under the implementation regulations to the EIT Law issued by the PRC
State Council, “de facto management body” is defined as a body that has material
and overall management and control over the manufacturing and business
operations, personnel and human resources, finances, treasury or properties and
other assets of an enterprise. If we are required to pay income tax for any
dividends we receive from our subsidiary, the amount of dividends we can pay to
our stockholders could be materially reduced.




Furthermore,
the EIT Law and implementation regulations provide an income tax rate of 10% is
normally applicable to dividends payable to non-PRC enterprise investors which
are derived from sources within China, although such income tax may be exempted
or reduced pursuant to a tax treaty between China and the jurisdictions in
which our non-PRC enterprise stockholders reside. If we were considered a PRC
resident enterprise under the EIT Law, our non-PRC enterprise investors who are
deemed non-resident enterprises may be subject to the EIT at the rate of 10%
upon the dividends payable by us or upon any gains realized from the transfer of
our common shares, if such income is deemed derived from China, provided that
(i) such non-PRC enterprise investors has no establishment or premises in China,
or (ii) it has establishment or premises in China but its income derived from
China has no real connection with such establishment or premises.





If we are
required under the EIT Law to withhold income tax on dividends payable to our
non-PRC enterprise stockholders or any gains realized from the transfer of our
common shares, the value of your investment may be materially and adversely
affected.





Our
subsidiaries and affiliated entities are subject to restrictions on paying
dividends and making other payments to us.


We are a
holding company incorporated in Nevada and do not have any assets or conduct any
business operations other than our investments in our subsidiaries and
affiliated entities. As a result of our holding company structure, we currently
rely entirely on dividends from our subsidiaries in China after they receive
payments from our consolidated affiliated entities, TJ YSLD and MAIHESI, under
various service and other contractual arrangements. However, PRC regulations
currently permit payment of dividends only out of accumulated profits, as
determined in accordance with PRC accounting standards and regulations. Our
subsidiaries and consolidated affiliated entities in China are also required to
set aside a portion of their after-tax profits according to PRC accounting
standards and regulations to fund certain reserve funds. Furthermore, if our
subsidiaries or consolidated affiliated entities in China incur debt on their
own in the future, the instruments governing the debt may restrict their ability
to pay dividends or make other payments. If we or any of our subsidiaries in
China are unable to receive all of the revenues from our operations through
these contractual or dividend arrangements, we may be unable to pay dividends on
our common stocks.





Any
future outbreak of severe acute respiratory syndrome or avian flu in China, or
similar adverse public health developments, may severely disrupt our business
and operations.





From
December 2002 to June 2003, China and other countries experienced an
outbreak of a new and highly contagious form of atypical pneumonia now known as
severe acute respiratory syndrome, or SARS. On July 5, 2003, the World
Health Organization declared that the SARS outbreak had been contained. Since
September 2003, however, a number of isolated new cases of SARS have
been reported, most recently in central China in April 2004. During May and
June 2003, many businesses in China were closed by the PRC government to prevent
transmission of SARS. In addition, many countries, including China, have
encountered incidents of the H5N1 strain of bird flu, or avian flu. This
disease, which is spread through poultry populations, is capable in some
circumstances of being transmitted to humans and is often fatal. A new outbreak
of SARS or an outbreak of avian flu may result in health or other government
authorities requiring the closure of our offices or other businesses, including
office buildings, retail stores and other commercial venues, which could reduce
the number of people commuting and reduce the appeal of radio
advertising.  Any recurrence of the SARS outbreak, an outbreak of
avian flu or a development of a similar health hazard in China, may impact the
economy, the advertising industry as a whole and the radio advertising industry
specifically.  Such occurrences could severely impact the value of
radio advertising, reduce the advertising time purchased by advertisers and
severely disrupt our business and operations.


27


The new PRC Property Rights Law may
affect the perfection of the pledge in our equity pledge agreements with our
consolidated affiliated entities and their individual shareholders.




Under the equity pledge agreements among
Legend (Beijing) Consulting Co., Ltd.,Legend (Beijing) Information and
Technology Co., Ltd. and our consolidated affiliated entities,TJ YSLDandMAIHESI,and their respective individual
shareholdershave pledged
all of their equity interests therein to Legend (Beijing) Consulting Co.,
Ltd.,andLegend (Beijing) Information and
Technology Co., Ltd.,respectively,by recording the pledge on the
shareholder registrars of the respective
entities.  However, according to the PRC Property Rights
Law, which became effective October 1, 2007, a pledge is not effective without
being registered with the relevant local administration for industry and
commerce. To our knowledge, no application for registration ofshare pledgewasprocessed by the local administration
for industry and commerce in Beijingand Tianjin, due to a lack of registration
procedures.TJ
YSLDandMAIHESIwill make efforts to register the
equity pledge when the local administration for industry and commerce implements registration
procedures.  We cannot assure youthey will be able to register the
pledges.  Ifweare unable to do so, the pledges may be
deemed ineffective under the PRC Property Rights Law.  If any
individual shareholder ofTJ YSLDorMAIHESIbreaches his or her obligations under
the agreement with Legend (Beijing) Consulting Co., Ltd.andLegend (Beijing) Information and
Technology Co., Ltd.,respectively,there is a risk that Legend (Beijing)
Consulting Co., Ltd.orLegend (Beijing) Information and Technology Co.,
Ltd.may not be able to successfully enforce
the pledge and would need to resort to legal proceedings to enforce its
contractual rights.





We may incur substantialadministrativeand staffing cost due to the
promulgation of the
newChina LaborContractLaw.





On June 29, 2007, the Standing Committee of the National
People’s Congressof Chinaenacted the Labor Contract Law, which
became effective onJanuary1, 2008.The Labor Contract Law contains
substantial provisions with
a view to improve job securityandto protect the rights and interests of
employees.In order to fully complywiththe legal requirements under the Labor
Contract Law, we may incur substantial administrative and staffing
cost.





A regulation adopted inAugust 2006 establishes more
complex procedures for acquisitions conducted by foreign investors, which could
make it more difficult for us to pursue growth through
acquisitions.





On August 8, 2006, six PRC
regulatory agencies, namely, the PRC Ministry ofCommerce, or the MOC, the State Assets
Supervision and Administration Commission, the State Administration for
Taxation, the SAIC, the China Securities Regulatory Commission and SAFE, jointly
adopted the Regulations on Mergers and Acquisitions of DomesticEnterprises by Foreign Investors, which
became effective on September 8, 2006. Among other things, the regulations
established additional procedures and requirements that could make merger and
acquisition activities by foreign investors more time-consumingand complex, including requirements in
some instances that the MOC be notified in advance of any change-of-control
transaction in which a foreign investor takes control of a PRC domestic
enterprise.If
we grow our business in
part by directly acquiring complementary businesses in the PRC.
Complying with the requirements of theseregulations to complete such
transactions could be time-consuming, and any required approval processes,
including obtaining approval from the MOC, may delay or inhibit our abilityto complete such
transactions, which could affect our ability to expand our business or maintain
our market share.




Risks Related to our Common
Stock




There is not an active trading market
for our common stock, and if a market for our common stock does notdevelop, our investors may be unable to
sell their shares.


28


Our common stock is currently quoted on
theOver-The-Counter Bulletin Board
(the  “OTCBB”)trading system. TheOTCBBis not a listing service or exchange,
but is instead a dealer quotation servicefor subscribing members. TheOTCBBtends to be highly illiquid, in part
because there is no national quotation system by which potential investors can
track the market price of shares except through information received or
generated by a limited number ofbroker-dealers that make markets in
particular stocks. There is a greater chance of market volatility for securities
that trade on theOTCBBas opposed to a national exchange or
quotation system. This volatility may be caused by a variety of factors
including:




·
            Lack of readily
      available price quotations;


·
            Absence of
      consistent administrative supervision of “bid”and
      “ask”quotations;


·
            Lower trading
      volume;


·
            Market
      conditions;


·
            Innovations or
      new products and services by us or our
  competitors;


·
            Regulatory, legislative
      or other developments affecting us or our industry
      generally;


·
            Limited
      availability of freely-tradable “unrestricted”shares of our
      common stock to satisfy purchase orders and
  demand;


·
            Industry
      developments;


·
            Economic and
      other externalfactors;
      and


·
            Period-to-period
      fluctuations in our financial
results.




In addition, the value of our common
stock could be affected by:




·
            Actual or
      anticipated variations in our operating
  results;


·
            Changes in the
      market valuations of other companiesoperating in our
      industry;


·
            Announcements by
      us or our competitors of significant acquisitions, strategic partnerships,
      joint ventures or capital
commitments;


·
            Adoption of new
      accounting standards affecting our
  industry;


·
            Additions or
      departures of keypersonnel;


·
            Introduction of
      new services or technology by our competitors or
  us;


·
            Sales of our
      common stock or other securities in the open
  market;


·
            Changes in
      financial estimates by securities
  analysts;


·
            Conditions or
      trends in the market in which weoperate;


·
            Changes in
      earnings estimates and recommendations by financial
      analysts;


·
            Our ability to execute our
      business plan;


·
            Operating results that fall below
      expectations;


·
            Our failure to
      meet financial analysts’performance
      expectations; and


·
            Other events or
      factors, many of which are beyond our
  control.




In addition, the securities markets have
experienced significant price and volume fluctuations that are unrelated to the
operating performance of particular companies. These market
fluctuations may also
significantly affect the market price of our common stock.




In a volatile market,
you may experience wide fluctuations in the market price of our securities.
These fluctuations may have an extremely negative effect on the market price of
our securities and may prevent
you from obtaining a market price equal to your purchase price when you attempt
to sell our securities in the open market. In these situations, you may be
required either to sell our securities at a market price which is lower
thanyour purchase price, or
to hold our securities for a longer period of time than you planned. An inactive
market may also impair our ability to raise capital by selling shares of capital
stock and may impair our ability to acquire other companies or
technologies by using common
stock as consideration.


29


Because we do not intend to pay any
dividends on our common stock, purchases of our common stock may not be suited
for investors seeking dividend income.




We do not anticipate declaring and
paying dividendsto our
stockholders in the near future. It is our current intention to apply net
earnings in the foreseeable future to the needs of our business. Prospective
investors seeking or needing dividend income or liquidity fromcommon stock should therefore, notpurchase our common stock.
There can be no assurancewe will have sufficient
earnings to declare and pay dividends to the holders of our shares, and in any
event, a decision to declare and pay dividends is at the sole discretion of our
board of directors,who do not intend to paydividends on our common
shares for the foreseeable future.




We cannot assure you we will list our
common stock on NASDAQ or any other national securities system or
exchange.




Although we intend to list our common
stock on NASDAQ orthe
American Stock Exchange in the future, we do not currently meet the initial
listing standards of either of those markets and cannot assure you we will be
able to qualify for and maintain a listing of our common stock on either of
those markets or anyother stock system or exchange in the
future. Furthermore, incaseour application is approved, there can
be no assurance that trading of our common stock on such market will reach or
maintain desired liquidity. If we are unable to list our common stock
onNASDAQ, the American
Stock Exchange or another stock system or exchange, or to maintain the listing,
we expect our common stock will be eligible to trade on theOTCBB, maintained by NASDAQ, another
over-the-counter quotation system, or on the “pink sheets,”where an investor may find it more
difficult, or impossible, to dispose of shares or obtain accurate quotations as
to the market value of our common stock. Under such circumstances, the
probability of reduced liquidity would hinder investors’ability toobtain accurate quotations for our
common stock, and our common stock could become substantially less attractive to
investors.




Securities analysts may not initiate
coverage or continue to cover our common stock, and this may have a negative
impact onour common
stock’s market price.




The trading market for our common stock
will depend, in part, on the research and reports that securities analysts
publish about us and our business. We do not have any control over these
analysts. Currently there is nocoverage of our common stock and there
is no guarantee securities analysts will cover our common stock in the future.
If securities analysts do not cover our common stock, the lack of research
coverage may adversely affect its market price. If we are covered by securities analysts, and our
stock is downgraded, our stock price would likely decline. If one or more of
these analysts ceases to cover us or fails to publish regular reports on us, we
could lose visibility in the financial markets, which could cause our stock price or trading volume to
decline.




We
have raised substantial amounts of capital in private placements, and if we fail
to comply with the applicable securities laws, ensuing rescission rights or
lawsuits would severely damage our financial
position.


Our private placements consist of
securities that were not registered under the Securities Act or any state
“blue sky”law as a result of exemptions from such
registration requirements. Such exemptions are highly technical in nature and if
we inadvertently failed to
comply with any of such exemptive provisions, investors could have the right to
rescind their purchase of
our securities andsue for
damages. If any investors were to successfully seek such rescission or prevail
in any such suit,we could
face severe financial demands that could have significant, adverse affects on
our financial position. Future financings may involve sales of our common stock
at prices below prevailing market prices on theOTCBBor exchange on which our common
stock is quoted or listed
at that time, as well as the issuance of warrants or convertible securities at a
discount to market price.





The application of the “penny stock”rules could adversely affect the market
price of our common stock and increase your transaction costs to sell those shares
..





The SecuritiesExchangeCommission (the “SEC”)adopted regulations which generally
define a “penny
stock”to be an equity
security that has a market price of less than $5.00 per share or an exercise
price of less than $5.00
per share, subject to specific exemptions.The last reported trade ofthe Company’sstock on theOTCBBwas at a price below $5.00 per
share, our common stockisconsidered a penny stock and there can
be no assurance our common stock willevertradeat a price above $5.00 per share in the
future. The SEC’s penny stock rules require a
broker-dealer, before a transaction in a penny stock not otherwise exempt from
the rules, to deliver a standardized risk disclosure document that provides
information about penny stocks and the risks in the
penny stock market. The broker-dealer must also provide the customer with
current bid and offer quotations for the penny stock, the compensation of the
broker-dealer and the salesperson in the transaction, and monthlyaccount statements showing the market
value of each penny stock held in the customer’s account. In addition, the penny stock
rules generally require that before a transaction in a penny stock, the
broker-dealer make a special written determination that thepenny stock is a suitable investment
for the purchaser and receive the purchaser’s agreement to the transaction. If
applicable in the future, these rules may restrict the ability of
brokers-dealers to sell our common stock and may affect the ability of
investors to sell their shares, until our
common stock no longer is considered a penny stock.


30


Item
1B.  Unresolved
Staff Comments





Not
applicable to smaller reporting companies.





Item 2.Properties





We lease
office space in the locations and on the terms described in the table
below:




Location
                        
                        Purpose
                        
                        Approximate
                          Size in
                          Square Feet
                        
                        
                        Monthly
                          Rent
                          (USD)
                        
                        Lease
                          Expires*Beijing, China
                        
                        Headquarters
                        
                        
                        7,104
                        
                        
                        
                        15,241
                        
                        12/31/2009Beijing, China
                        
                        Finance and Accounting Office
                        
                        
                        2,000
                        
                        
                        
                        4,656
                        
                        6/30/2009
                        *Tianjin,
      China
                        
                        Area
      Sales and Marketing Office
                        
                        
                        3,300
                        
                        
                        
                        4,400
                        
                        11/1/2009Shanghai,
      China
                        
                        Area
      Sales and Marketing Office
                        
                        
                        1,350
                        
                        
                        
                        6,234
                        
                        1/9/2011Haikou.
      China
                        
                        Area
      Sales and Marketing Office
                        
                        
                        1,040
                        
                        
                        
                        500
                        
                        12/31/2009Sanya,
      China
                        
                        Area
      Sales and Marketing Office
                        
                        
                        926
                        
                        
                        
                        307
                        
                        10/4/2009
                        *Qingdao,
      China
                        
                        Area
      Sales and Marketing Office
                        
                        
                        678
                        
                        
                        
                        1,098
                        
                        3/15/2010Shenzhen,
      China
                        
                        Area
      Sales and Marketing Office
                        
                        
                        484
                        
                        
                        
                        630
                        
                        3/15/2009
                        *





* in cases where the leases have expiredandhavenot beenrenewed, the Company operates on a month
to month basis





Item 3.Legal
Proceedings





The
Company is, from time to time, involved in legal proceedings arising in the
normal course of business. As of the date of this Annual Report on Form 10-K,
the Company is not involved in any material legal proceeding.





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





None.


31


PART
II





Item
5.  Market for
Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of
Equity Securities





Market
Information





Our
common stock is quoted on the OTCBB, as of September 26, 2007,and trades under the symbol “LEGE.”  No active public or
private market developed for our common shares until February 12, 2008, after
the merger with Well Chance.  The following table represents the high
and low closing prices for our common stock on the OTCBB during the years ended
June 30, 2009 and 2008.





— Quarter Ended
      —30-Sep
                      
                      
                      31-Dec
                      
                      
                      31-Mar
                      
                      
                      30-Jun
                      
                      
                      Year2009Common stock price per
      shareHigh
                      
                      $
                      3.00
                      
                      
                      $
                      1.50
                      
                      
                      $
                      0.49
                      
                      
                      $
                      0.51
                      
                      
                      $
                      3.00Low
                      
                      $
                      1.35
                      
                      
                      $
                      0.28
                      
                      
                      $
                      0.10
                      
                      
                      $
                      0.12
                      
                      
                      $
                      0.102008Common stock price per
      shareHigh
                      
                      
                      n/a
                      
                      
                      
                      n/a
                      
                      
                      $
                      4.97
                      
                      
                      $
                      4.79
                      
                      
                      $
                      4.97Low
                      
                      
                      n/a
                      
                      
                      
                      n/a
                      
                      
                      $
                      2.90
                      
                      
                      $
                      2.40
                      
                      
                      $
                      2.40





The
quarterly highs and lows are based on daily market closing prices during each
respective period.  The quotations reflect inter-dealer prices,
without retail mark-up, mark-down or commission and may not represent actual
transactions.





As ofOctober 12, 2009, the closing sales price of our common
stock was$0.27per share on theOTCBB.





Stockholders





As ofOctober 12, 2009, we had approximately112,813,355shares ofcommon stock issued and
outstanding, which were
held by approximately160stockholders of record based upon
the stockholder list provided by our transfer agent.





Dividend Policy





We do not intend to pay any cash
dividends in the foreseeable future on ourcommon stock and, instead, intend to
retain earnings, if any, for future operation and expansion. Any decision to
declare and pay dividends will be at the discretion of our board of directors
and will depend on, among other things, our results of operations, cash requirements, financial
condition, contractual restrictions and other factors that our board of
directors may deem relevant.




Item
6.  Selected
Financial Data





Not
applicable.





Item 7.
Management’s Discussion and
Analysis of Financial Condition and Results of Operations





The following discussion and analysis of
the results of operations and financial condition of Legend Media for the year
ended June 30, 2009should be read in conjunction with
Legend Media’s financial statements and the notes to those financial statements
that are included elsewhere in thisAnnualReport on Form 10-K. Our discussion
includes forward-looking statements based upon current expectations that involve
risks and uncertainties, such as our plans, objectives, expectations and
intentions. Actual results and the timing of events could differ materially from
those anticipated in these forward-looking statements as a result of a number of
factors, including those set forth under the "Risk Factors," "Special Note Regarding Forward
Looking Statements" and "Description of Business" sections in this report. We
use words such as “anticipate,” “estimate,” “plan,” “project,” “continuing,”
“ongoing,” “expect,” “believe,” “intend,” “may,” “will,” “should,” “could,” and
similar expressions to identify forward-looking
statements.


32





Executive Overview





Legend Media, formerly known as Noble
Quests, Inc., was organized as a Nevada corporation on March 16, 1998, for the
purpose of selling multi-media marketing services and other related services to
network marketing groups. Specifically, we assisted network marketers in using
marketing tools such as public relations, advertising, direct mail, collateral
development, electronic communications and promotion tools to increase product
and service awareness.





On January 31, 2008, we entered intotheShare Exchange Agreement with Ms.
Shannon McCallum-Law, the majority stockholder, sole director and Chief
Executive Officer of the Company, Well Chance and the Well Chance Shareholder.
Pursuant to the terms of the Share Exchange Agreement, weacquiredall of the issued and outstanding
shares of Well Chance's common stock for the issuance of 1,200,000 shares of our
common stock to the Well Chance Shareholder on the basis of 1,200 shares of our
common stock for every one share of Well Chance common stock
held.





Concurrently with the closing of the
transactions under the Share Exchange Agreement and as a condition thereof, Ms.
McCallum-Law returned to us for cancellation 2,419,885 of the 5,119,885 shares
of our common stocksheowned. Ms. McCallum-Law was
not compensated forcanceling theshares. In addition, we issued 4,100,000
shares of our common stock to certain affiliates of Well Chance for $87,740 and
200,000 shares in exchange for consulting services performed in connection with
this transaction. Upon completion of the foregoing transactions, we had an
aggregate of 8,200,000 shares of common stock issued and
outstanding.





Well Chance was incorporated under the
laws of the British Virgin Islands as an International Business Company on
February 22, 2005. Well Chance was formed to create a business that principally
engaged in the development and management of a technology platform that deploys
advertisements across its various advertising media.





We expanded our business in February
2008 to focus on building a consumer advertising network in the PRC focused on
the Chinese radio advertisingand air travel based
advertising. We conduct our
business operations through our 80% owned subsidiary   Legend (Beijing)
Consulting Co., Ltd. and our wholly owned subsidiary Legend (Beijing)
Information and Technology Co., Ltd., each of which are incorporated under the
laws of the PRC.





As ofOctober 12, 2009, we secured the exclusive rights
to 39,420 minutes of radio advertisingannually Tianjin andXi’an.  The Company also has
rights to sell advertising content for an airline magazine which has the
potential to reach 20 million Chinese consumers.Management has identified several other
opportunities to acquire additional advertising rights and expects continued
expansion ofboth air
travel and radio advertising assets as well as other targeted media platforms in
China.





Critical
Accounting Policies and Estimates




While our
significant accounting policies are more fully described in Note 2 to our
consolidated financial statements in this Annual Report on Form 10-K, we believe
that the accounting policies described below are the most critical to aid you in
fully understanding and evaluating this management discussion and
analysis.




Use of
Estimates




The
preparation of financial statements in conformity with United States 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. Areas that
require estimates and assumptions include valuation of accounts receivable and
determination of useful lives of property and equipment.


33




Principles of
Consolidation




The accompanying consolidated financial
statements include the accounts of Legend Media and its subsidiaries as
follows:




Subsidiary
                  
                  Place
                    Incorporated
                  
                  % OwnedWell Chance
                  
                  United
    States
                  
                  100Legend Media Investment Company
      Limited
                  
                  BVI
                  
                  80Three subsidiaries of Legend Media
      Investment Company LimitedLegend Media Tianjin
      HK Limited
                  
                  Hong Kong
                  
                  80Legend Media (Beijing)
      Consulting Company Limited
                  
                  PRC
                  
                  80Tianjin Yinse Lingdong
      Advertising Co., Ltd
                  
                  PRC
                  
                  80
                  *News Radio
      Limited
                  
                  BVI
                  
                  100Four subsidiaries of News Radio
      LimitedCRI News Radio
      Limited
                  
                  Hong Kong
                  
                  100Legend Media (Beijing)
      Information and Technology Co., Ltd.
                  
                  PRC
                  
                  100Beijing
      Maihesi Advertising
      International Co., Ltd.
                  
                  PRC
                  
                  100
                  *Beijing Yinse Lingdong
      Advertising Co., Ltd.
                  
                  PRC
                  
                  100
                  *





*Variable Interest Entities: See heading
entitled “Variable Interest Entities” below.




Variable Interest
Entities




In
January 2003, the Financial Accounting Standards Board (the “FASB”) issued
Statement of Financial Accounting Standards Board Interpretation No. 46,
"Consolidation of Variable Interest Entities, an Interpretation of Accounting
Research Bulletin ("ARB") No. 51" ("FIN 46"). In December 2003, the FASB
modified FIN 46 (“FIN 46R”) to make certain technical corrections and address
certain implementation issues that had arisen. FIN 46 provides a new framework
for identifying VIEs and determining when a company should include the assets,
liabilities, non-controlling interests and results of activities of a VIE in its
consolidated financial statements.




FIN 46R
states that in general, a VIE is a corporation, partnership, limited liability
corporation, trust or any other legal structure used to conduct activities or
hold assets that either (1) has an insufficient amount of equity to carry out
its principal activities without additional subordinated financial support, (2)
has a group of equity owners that are unable to make significant decisions about
its activities, or (3) has a group of equity owners that do not have the
obligation to absorb losses or the right to receive returns generated by its
operations.




On May
30, 2008, the Company purchased 80% of the common stock of Legend Media Tianjin
Investment Company Limited, and on July 21, 2008, the Company purchased 100% of
the common stock of News Radio Limited. Additionally, on November 28, 2008, the
Company entered into and closed the Music Radio Acquisition Agreement with Well
Chance, Music Radio Limited, , and the Music Radio Shareholders, pursuant to
which the Company acquired control of YSLD, another VIE. Due to certain
restrictions imposed upon Chinese advertising companies, direct investment and
ownership of media and advertising companies in the PRC is prohibited.
Therefore, the Company acquired control of TJ YSLD, and the Company acquired
control of MAIHESI (through its purchase of News Radio Limited). The Company
structured the Music Radio Limited and News Radio Limited transactions to comply
with such restrictions.


34


The
principal regulations governing foreign ownership in the advertising industry in
China include:




·
            The
      Catalogue for Guiding Foreign Investment in Industry (2004);
      and




·
            The
      Administrative Regulations on Foreign-invested Advertising Enterprises
      (2004).




These
regulations set the guidelines by which foreign entities can directly invest in
the advertising industry.  The regulations require foreign entities that
directly invest in the China advertising industry to have at least two years of
direct operations in the advertising industry outside of China.  Further,
since December 10, 2005, 100% ownership in Chinese advertising companies is
allowed, but the foreign company must have at least three years of direct
operations in the advertising industry outside of China.




Because
the Company has not been involved in advertising outside of China for the
required number of years, the Company’s domestic PRC operating subsidiaries,
which are considered foreign-invested, are currently ineligible to apply for the
required advertising services licenses in China.  The Company’s PRC
operating affiliates hold the requisite licenses to provide advertising services
in China and they are owned or controlled by PRC citizens designated by the
Company.  The Company’s radio advertising business operates in China though
contractual arrangements with consolidated entities in China.  The Company
and its newly acquired PRC subsidiaries entered into contractual arrangements
with TJ YSLD, MAIHESI and YSLD as well as their respective shareholders under
which:




·
              the
      Company is able to exert significant control over significant decisions
      about the activities of TJ YSLD,  MAIHESI and
    YSLD,
  ·
              a
      substantial portion of the economic benefits and risks of the operations
      of TJ YSLD, MAIHESI and YSLD have been transferred to the Company through
      a revenue assignment agreement, and
  ·
              The
      equity owner of TJ YSLD, MAIHESI and YSLD does not have the obligation to
      absorb the losses of TJ YSLD, MAIHESI or
YSLD.




As the Company is able to exert
significant control over the PRC operating affiliates and a substantial portion
of the economic benefits and risks have been transferred to the Company, it has
determined that the advertising entities,TJ YSLD,MAIHESIandYSLDmeet the definition of a VIE. Further,
the Company is considered to be the primary beneficiary of the risks and
benefits of equity ownership ofTJ YSLD,MAIHESIandYSLDand thus consolidated these entities in
its accompanying financial statements as ofJune 30, 2009.




Intangible
Assets




Intangible
assets consist of contract rights purchased in the acquisition of Legend Media
Tianjin Investment Company Limited, the entity controlling the advertising
rights to Tianjin FM 92.5, on May 30, 2008 and the acquisition of News Radio
Limited, the entity controlling the advertising rights to Beijing FM 90.5 on
July 21, 2008.   In July 2009, the Company terminated the Beijing
FM 90.5 contract and on June 30, 2009 recognized an impairment loss for the
entire amount of the intangible asset.    Further, the
Company recognized an impairment loss on the Tianjin (see Long-Lived
Assets).  Intangible assets consist of the following at the dates
indicated:





June 30,2009
                
                
                2008FM 92.5 Contract
      rights
                
                $
                1,422,854
                
                
                $
                2,174,428Exclusivity
      agreement
                
                
                7,388,731
                
                
                
                6,999,3538,811,585
                
                
                
                9,173,781Less Accumulated
      amortization
                
                
                (1,517,496
                )
                
                
                (128,471
                )Intangibles,
      net
                
                $
                7,294,089
                
                
                $
                9,045,310


35





The FM
92.5 contract rights primarily arise from an exclusive contract acquired in
connection with the acquisition of Legend Media Tianjin Investment Company
Limited, which is amortized over the 31 month contract period, from June 1,
2008, the first day of operations by the Company, based on the duration of the
existing advertising agreement that expired December 31, 2008 plus renewal of
the advertising agreement. The agreement was renewed on January 1,
2009.  The contract is with Tianjin FM 92.5 and provides exclusive
rights to 54 advertising minutes per day or 19,710 minutes per year. The channel
is Beijing-based and through a relay facility airs in Tianjin. Legend Media’s
contract is with the Beijing channel’s exclusive agent, which has a national
exclusive contract with the channel. The exclusive agent subcontracted the
rights for the Tianjin market to Legend Media. The value was derived as the net
present value of the contract’s earnings before interest, tax, depreciation and
amortization (“EBITDA”) over the contract’s expected term from May 30, 2008
through December 31, 2010, using a 15% discount rate. The change in value of the
FM92.5 contract and the exclusivity agreement from June 30, 2008 to December 31,
2008 is a result of foreign currency translation at each balance sheet date and
a reallocation of the value between these two intangible assets subsequent to
June 30, 2008.  At the May 30, 2008 purchase date, the Company
initially applied a 10% discount rate to calculate the net present value of the
FM 92.5 contract’s EBITDA. However, the Company subsequently determined a 15%
discount rate more accurately reflects the rate of return the Company expects to
earn on the contract, which resulted in a contract value of
$1,709,888.   The $1,709,888 was reduced by $201,524 on June 30,
2009 to recognize an impairment after forecasting the remaining value of the
agreement through December 31, 2010.




Amortization
expense on this contract for the year ended June 30, 2009 was
$656,597.




The
remainder of the purchase price of $7,388,731 was allocated to an Operating
Agreement among Legend Media (Beijing) Consulting Co., Ltd., TJ YSLD and Ju
Baochun (the "Music Radio Operating Agreement"), entered into in connection with
the Music Radio Share Purchase Agreement. Mr. Ju, through a company he owns and
operates, is the 80% owner of Music Radio Limited, which is the 20% owner of the
post-acquisition VIE, TJ YSLD Pursuant to the terms of the Music Radio Operating
Agreement, TJ YSLD and Mr. Ju are prohibited from:




·
            Borrowing
      money from any third party or assuming any
debt;




·
            Selling
      to any third party or acquiring from any third party any assets,
      including, without limitation, any intellectual
  rights;




·
            Granting
      any security interests for the benefit of any third party through
      collateralization of TJ YSLD's
assets;




·
            Assigning
      to any third party the Music Radio Operating Agreement;
  and




·
            Selling,
      transferring and disposing of any license held by TJ
  YSLD.




Amortization
expense on this contract for the year ended June 30, 2009 was
$732,428.




The FM
90.5 contract rights capitalized in July 2008 and impaired on June 30, 2009
primarily relate to an exclusive contract acquired in connection with the
acquisition of News Radio Limited which is being amortized over the 48-month
contract period, beginning July 1, 2008. The contract was with the Beijing FM
90.5 radio station and provides 126 advertising minutes per day or 45,990
minutes per year. Amortization expense on this contract for the year ended
June 30, 2009 was $241,678 and included in amortization expense in the
accompanying consolidated statements of operations and other comprehensive
income (loss). See Note 12.




Amortization
expense for the Company’s intangible assets for the years ended June 30, 2009
and 2008 was $1,630,702 and $0, respectively.


36


Revenue
Recognition




The
Company’s revenue recognition policies comply with SEC Staff Accounting
Bulletin (“SAB”) 104. The Company purchases (i) advertising inventory in the
form of advertising airtime, the unit being minutes, from radio stations and
(ii) advertising pages from airline magazines. The Company then distributes
these minutes and pages under various sales agreements. We recognize advertising
revenue over the term of each sales agreement, provided evidence of an
arrangement exists, the fees are fixed or determinable and collection of the
resulting receivable is reasonably assured. We recognize deferred revenue when
cash has been received on a sales agreement, but the revenue has not yet been
earned. Under these policies, no revenue is recognized unless persuasive
evidence of an arrangement exists, delivery has occurred, the fee is fixed or
determinable, and collection is reasonably assured.   Barter advertising revenues and the
offsetting expense are recognized at the fair value of the advertising as
determined by similar cash transactions.Barter revenue for theyearsendedJune 30, 2009and 2008was $3,247,565and$111,833,
respectively.   Barterexpense foryearsendedJune 30, 2009and 2008was $2,205,597and$80,494,
respectively.Under PRC regulations, the Company must
pay certain taxes on revenues generated. These taxes include:




·
            Business
      tax: 5% of revenues generated net of fees paid to advertising agencies and
      media companies for services and advertising
  inventory;




·
            Construction
      tax:  3% of revenues generated net of fees paid to advertising
      agencies and media companies for services and advertising
      inventory;




·
            Education
      tax:  7% of the calculated business
  tax;




·
            Urban
      development tax:  3% of the calculated business tax;
      and




·
            Flood
      insurance tax:  1% of the calculated business
    tax.




The
Company recognizes these taxes in cost of revenue in the period
incurred.




Cost of
Revenue




The
Company expenses advertising costs monthly according to the terms of the
underlying contracts. The contract is expensed evenly over the term of the
agreement from the date advertising is first expected to take place. As the
advertising inventory does not carry forward, all minutes are expensed whether
sold or not.  Cost of revenue for the years ended June 30, 2009 and
2008 was $5,115,998 and $2,789,490, respectively.




Recent
Pronouncements




In
December 2007, the SEC issued SAB 110, which expresses the views of the SEC
staff regarding the use of a “simplified” method, as discussed in the previously
issued SAB 107, in developing an estimate of expected term of “plain
vanilla” share options in accordance with Statement of Financial Accounting
Standards ("SFAS") No. 123(R), “Share-Based Payment” ("SFAS No. 123(R)").
In particular, the SEC staff indicated in SAB 107 that it will accept a
company’s election to use the simplified method, regardless of whether the
company has sufficient information to make more refined estimates of expected
term. At the time SAB 107 was issued, the SEC staff believed that more
detailed external information about employee exercise behavior (e.g., employee
exercise patterns by industry and/or other categories of companies) would, over
time, become readily available to companies. Therefore, the SEC staff stated in
SAB 107 that it would not expect a company to use the simplified method for
share option grants after December 31, 2007. The SEC staff understands that
such detailed information about employee exercise behavior may not be widely
available by December 31, 2007. Accordingly, the SEC staff will continue to
accept, under certain circumstances, the use of the simplified method beyond
December 31, 2007. Upon the Company’s adoption of
SFAS No. 123(R), the Company elected to use the simplified method to
estimate the Company’s expected term.




In December 2007, the FASB issued SFAS
No. 141 (Revised 2007), “BusinessCombinations”(“SFAS 141R”).SFAS 141Rchanges how a reporting enterprise
accounts for the acquisition of a business. SFAS No.141Rrequires an acquiring entity to
recognize all the assets acquired and liabilities assumed in a transaction at
the acquisition-date fair value, with limited exceptions, and applies to a wider
range of transactions or events. SFAS141R is effective for fiscal years
beginning on or after December 15, 2008 and early adoption and
retrospective application is prohibited. The Company believes adopting SFAS 141R
will significantly affect its financial statements for any business combination
completed after June 30, 2009. In February 2007, the FASB issued SFAS No. 159,
“The Fair Value Option for Financial Assets and Financial Liabilities” (“SFAS
159”).SFAS 159 permits entities to choose to
measure many financial assets and financial liabilities at fair value.
Unrealized gains and losses on items for which the fair value option has been
elected are reported in earnings. SFAS 159 is effective as of the beginning of
an entity’s first fiscal year that begins after November 15, 2007. The Company
adopted SFAS 159 on July 1, 2008. The Company chose not to elect the option to
measure the fair value of eligible financial assets and
liabilities.


37


In December 2007, the FASB issued SFAS
No. 160, “Noncontrolling Interests in Consolidated FinancialStatements,”(“SFAS 160”) which is an amendment of
ARB No. 51.  This statement clarifies that a noncontrolling interest
in a subsidiary is an ownership interest in the consolidated entity that should
be reported as equity in the consolidated financial statements.  This
statement changes the way the consolidated income statement is presented, thus
requiring consolidated net income to be reported at amounts that include the
amounts attributable to both parent and the noncontrolling
interest.  This statement is effective for the fiscal years, and
interim periods within those fiscal years, beginning on or after December 15,
2008.  Based on current conditions, the Company does not expect the
adoption of SFAS 160 to have a significant effect on its results of operations
or financial position.




In June 2007, the FASB issued FASB Staff
Position No. EITF 07-3, “Accounting for Nonrefundable Advance Payments for Goods
or Services Received for use in Future Research and Development Activities”,
which addresses whether nonrefundable advance payments for goods or services
that used or rendered for research and development activities should be expensed
when the advance payment is made or when the research and development activity
has been performed.. This statement will not have an
impact on the Company’s financial statements.




In March 2008, the FASB issued SFAS No.
161, “Disclosures about Derivative Instruments and Hedging Activities, an
amendment of FASB Statement No. 133” (“SFAS 161”).SFAS 161changes the disclosure requirements for
derivative instruments and hedging activities. Entities are required to provide
enhanced disclosures about (a) how and why an entity uses derivative
instruments, (b) how derivative instruments and related hedged items are
accounted for under Statement 133 and its related interpretations, and (c) how
derivative instruments and related hedged items affect an entity’s financial
position, financial performance, and cash flows. Based on current conditions,
the Company does not expect the adoption of SFAS 161 to have a significant
impact on its results of operations or financial position.




In May 2008, the FASB issued SFAS No.
162, “The Hierarchy of Generally Accepted Accounting Principles”(“SFAS 162”).SFAS 162identifies the sources of accounting
principles and the framework for selecting the principles to be used in the
preparation of financial statements of nongovernmental entities that are
presented in conformity with US GAAP. This statement will not have an impact on
the Company’s financial statements.




In May 2008, the FASB issued SFAS No.
163, “Accounting for Financial Guarantee Insurance Contracts, an interpretation
of FASB Statement No. 60”(“SFAS 163”).The scope of SFAS 163 is
limited to financial guarantee insurance (and reinsurance) contracts, as
described in this statement, issued by enterprises included within the scope of
Statement No. 60. Accordingly, this statement does not apply to financial
guarantee contracts issued by enterprises excluded from the scope ofFASBStatement No. 60 or to some insurance
contracts that seem similar to financial guarantee insurance contracts issued by
insurance enterprises (such as mortgage guaranty insurance or credit insurance
on trade receivables). SFAS 163 also does not apply to financial guarantee
insurance contracts that are derivative instruments included within the scope of
FASB Statement No. 133, “Accounting for Derivative Instruments and Hedging
Activities.” This statement will not have an effect on the Company’s financial
statements.




In June 2008, the FASB issued EITF Issue
07-5 “Determining whether an Instrument (or Embedded Feature) is indexed to an
Entity’s Own Stock” (“EITF No. 07-5”). EITF No. 07-5 is effective for financial
statements issued for fiscal years beginning after December 15, 2008, and
interim periods within those fiscal years. Early application is not permitted.
Paragraph 11(a) of SFAS 133 “Accounting for Derivatives and Hedging Activities”
specifies that a contract that would otherwise meet the definition of a
derivative but is both (a) indexed to the Company’s own stock and
(b) classified in stockholders’ equity in the statement of financial
position would not be considered a derivative financial instrument. EITF No.
07-5 provides a new two-step model to be applied in determining whether a
financial instrument or an embedded feature is indexed to an issuer’s own stock
and thus able to qualify for the SFAS 133 paragraph 11(a) scope exception. This
statement will not have an impact on the Company’s financial
statements.


38


In April 2008, the FASB issued FSP 142-3
“Determination of the Useful Life of Intangible Assets” (“FSP 142-3”), which
amends the factors a company should consider when developing renewal assumptions
used to determine the useful life of an intangible asset under SFAS 142. FSP
142-3 is effective for financial statements issued for fiscal years beginning
after December 15, 2008, and interim periods within those fiscal years. SFAS 142
requires companies to consider whether renewal can be completed without
substantial cost or material modification of the existing terms and conditions
associated with the asset. FSP 142-3 replaces the previous useful life criteria
with a new requirement—that an entity consider its own historical experience in
renewing similar arrangements. If historical experience does not exist then the
Company would consider market participant assumptions regarding renewal
including 1) highest and best use of the asset by a market participant, and 2)
adjustments for other entity-specific factors included in SFAS 142. This
statement will not have an impact on the Company’s financial
statements.




On October 10, 2008, the FASB issued FSP
157-3, “Determining the Fair Value of a Financial Asset When the Market for That
Asset Is Not Active,” ("FSP 157-3") which clarifies the application of SFAS 157
in a market that is not active and provides an example to illustrate key
considerations in determining the fair value of a financial asset when the
market for that financial asset is not active. FSP 157-3 became effective on
October 10, 2008, and its adoption did not have a material impact on the
financial position or
results for the year ended June 30, 2009.




In January 2009, the FASB issued FSP
EITF 99-20-1, “Amendments to the Impairment Guidance of EITF Issue No. 99-20,
Recognition of Interest Income and Impairment on Purchased and Retained
Beneficial Interests in Securitized Financial Assets”(“FSP EITF 99-20-1”).FSP EITF 99-20-1 changes the impairment
model included within EITF 99-20 to be more consistent with the impairment model
of SFAS No. 115. FSP EITF 99-20-1 achieves this by amending the impairment
model in EITF 99-20 to remove its exclusive reliance on “market participant”
estimates of future cash flows used in determining fair value. Changing the cash
flows used to analyze other-than-temporary impairment from the “market
participant” view to a holder’s estimate of whether there has been a “probable”
adverse change in estimated cash flows allows companies to apply reasonable
judgment in assessing whether an other-than-temporary impairment has occurred.The adoption of FSP EITF 99-20-1 did not
have a material impact on our consolidated financial
statements.




In April 2009, the FASB issued FSP FAS
157-4, “Determining Fair Value When the Volume and Level of Activity for the
Asset or Liability Have Significantly Decreased and Identifying Transactions
That Are Not Orderly”(“FSP
FAS 157-4”).FSP FAS 157-4
amends SFAS 157 and provides additional guidance for estimating fair value in
accordance with SFAS 157 when the volume and level of activity for the asset or
liability have significantly decreased and also includes guidance on identifying
circumstances that indicate a transaction is not orderly for fair value
measurements. FSPFAS
157-4is to applied
prospectively with retrospective application not permittedandis effective for interim and annual
periods ending after June 15, 2009, with early adoption permitted for
periods ending after March 15, 2009. An entity early adoptingFSP FAS 157-4must also early adopt FSP FAS 115-2 and
FAS 124-2, “Recognition and Presentation of Other-Than-Temporary Impairments.”
Additionally, if an entity elects to early adopt either FSP FAS 107-1 and APB
28-1, “Interim Disclosures about Fair Value of Financial Instruments” or FSP FAS
115-2 and FAS 124-2, it must also elect to early adopt FSPFAS 157-4. We are currently evaluating
FSPFAS 157-4but do not believe that it will have a
significant impact on the Company’s consolidated financial
statements.




In May 2009, the FASB issued SFAS 165,
“Subsequent Events”(“SFAS
165”)which provides
guidance to establish general standards of accounting for and disclosures of
events that occur after the balance sheet date but before financial statements
are issued or are available to be issued. SFAS 165 also requires entities to
disclose the date through which subsequent events were evaluated as well as the
rationale for why that date was selected. SFAS 165 is effective for interim and
annual periods ending after June 15, 2009, and accordingly, the Company adopted
SFAS 165 during the second quarter of 2009. SFAS 165 requires that public
entities evaluate subsequent events through the date that the financial
statements are issued. We have evaluated subsequent events through the time of
filing these financial statements with the SEC.




In June 2009, the FASB issued SFAS 167,
“Amendments to FASB Interpretation No. 46(R)”(“SFAS 167”),which modifies how a company determines
when an entity that is insufficiently capitalized or is not controlled through
voting (or similar rights) should be consolidated. SFAS 167 clarifies that the
determination of whether a company is required to consolidate an entity is based
on, among other things, an entity’s purpose and design and a company’s ability
to direct the activities of the entity that most significantly impact the
entity’s economic performance. SFAS 167 requires an ongoing reassessment of
whether a company is the primary beneficiary of aVIE. SFAS 167 also requires additional
disclosures about a company’s involvement inVIEsand any significant changes in risk
exposure due to that involvement. SFAS 167 is effective for fiscal years
beginning after November 15, 2009, and the Company is currently assessing the
impact of adopting SFAS 167.


39


In June 2009, the FASB issued SFAS 168,
“The FASB Accounting Standards CodificationTM and the Hierarchy of Generally
Accepted Accounting Principles - A Replacement of FASB Statement No.
162”(“SFAS
168”).SFAS 168 establishes
the FASB Accounting Standards CodificationTM (the “Codification”) as the source
of authoritative accounting principles recognized by the FASB to be applied by
nongovernmental entities in the preparation of financial statements in
conformity with U.S. GAAP. The Codification does not change current U.S. GAAP,
but is intended to simplify user access to all authoritative U.S. GAAP by
providing all the authoritative literature related to a particular topic in one
place. The Codification is effective for interim and annual periods ending after
September 15, 2009, and as of the effective date, all existing accounting
standard documents will be superseded. The Codification is effective for the
Company in thefirst
quarterof 2010 fiscal year, and accordingly, the Quarterly Report
on Form 10-Q for the quarter ending September 30, 2009 and all subsequent public
filings will reference the Codification as the sole source of authoritative
literature.


40





Results
of Operations




The
exchange of shares with the Well Chance Shareholder in February 2008 was
accounted for as a reverse acquisition of the Company under the purchase method
of accounting because Well Chance obtained control of the Company. Accordingly,
the share exchange was recorded as a recapitalization of Well Chance, with Well
Chance being treated as the continuing entity at the
time.  Subsequently, the Music Radio Acquisition Agreement, leading to
the control of YSLD in November 2008, was accounted for similarly to a pooling
of interest as there was common control.  Therefore, the Company's
historical financial information includes that of YSLD.




Comparison
of the Fiscal Years Ended June 30, 2009 and June 30, 2008





The
following table sets forth the results of our operations for the years indicated
as a percentage of revenues:




2009
                                              
                                              
                                              2008Amount
                                              
                                              
                                              % of
                                                Revenue
                                              
                                              
                                              Amount
                                              
                                              
                                              % of
                                                Revenue(in
      dollars, except percentages)REVENUE
                                              
                                              $
                                              9,990,373
                                              
                                              
                                              
                                              100.0
                                              %
                                              
                                              $
                                              4,726,040
                                              
                                              
                                              
                                              100.0
                                              %COST
      OF REVENUE
                                              
                                              
                                              5,115,998
                                              
                                              
                                              
                                              51.2
                                              %
                                              
                                              
                                              2,789,490
                                              
                                              
                                              
                                              59.0
                                              %GROSS
      PROFIT
                                              
                                              
                                              4,874,375
                                              
                                              
                                              
                                              48.8
                                              %
                                              
                                              
                                              1,936,550
                                              
                                              
                                              
                                              41.0
                                              %OPERATING
      EXPENSES
                                              
                                              
                                              10,315,141
                                              
                                              
                                              
                                              103.3
                                              %
                                              
                                              
                                              2,884,724
                                              
                                              
                                              
                                              61.0
                                              %LOSS
      FROM OPERATIONS
                                              
                                              
                                              (5,440,766
                                              )
                                              
                                              
                                              (54.5
                                              )%
                                              
                                              
                                              (948,174
                                              )
                                              
                                              
                                              (20.0
                                              )%OTHER
      EXPENSE, NET
                                              
                                              
                                              (579,870
                                              )
                                              
                                              
                                              (5.8
                                              )%
                                              
                                              
                                              (469,328
                                              )
                                              
                                              
                                              (9.9
                                              )%LOSS
      BEFORE PROVISION FOR INCOME TAXES
                                              
                                              
                                              (6,020,636
                                              )
                                              
                                              
                                              (60.3
                                              )%
                                              
                                              
                                              (1,417,502
                                              )
                                              
                                              
                                              (29.9
                                              )%PROVISION
      FOR INCOME TAXES
                                              
                                              
                                              411,425
                                              
                                              
                                              
                                              4.1
                                              %
                                              
                                              
                                              132,419
                                              
                                              
                                              
                                              2.8
                                              %NET
      LOSS ATTRIBUTABLE TO LEGEND MEDIA, INC. COMMON
SHAREHOLDERS
                                              
                                              
                                              (6,425,846
                                              )
                                              
                                              
                                              (64.3
                                              )%
                                              
                                              
                                              (1,540,484
                                              )
                                              
                                              
                                              (32.6
                                              )%OTHER
      COMPREHENSIVE INCOME AND (LOSS)Foreign
      currency translation adjustment
                                              
                                              
                                              (72,717
                                              )
                                              
                                              
                                              (0.7
                                              )%
                                              
                                              
                                              97,363
                                              
                                              
                                              
                                              2.1
                                              %COMPREHENSIVE
      LOSS
                                              
                                              $
                                              (6,498,563
                                              )
                                              
                                              
                                              (65.0
                                              )%
                                              
                                              $
                                              (1,443,121
                                              )
                                              
                                              
                                              (30.5
                                              )%




Revenues.  Our
revenue included revenues from sales radio advertising and airline magazine
advertising.  During the fiscal year ended June 30, 2009, we had
revenues of were $9,990,373 compared to revenues of $4,726,040 for the fiscal
year ended June 30, 2008, an increase of $5,264,333. The increase is
attributable to the increase in sales of both airline magazine advertising and
radio advertising, with airline magazine advertising sales driving a majority of
the growth.  Details of the changes for the fiscal years ended June
30, 2009 and 2008 are as follows:


41




Change2009
                                
                                2008
                                
                                Amount
                                
                                
                                %(in
      dollars, except percentages)RevenueAirline
      magazine advertising sales
                                
                                $
                                7,201,535
                                
                                
                                $
                                3,532,822
                                
                                
                                $
                                3,668,713
                                
                                
                                
                                103.8
                                %Radio
      advertising sales
                                
                                
                                2,788,838
                                
                                
                                
                                1,184,174
                                
                                
                                
                                1,604,664
                                
                                
                                
                                135.5
                                %Other
      product lines
                                
                                
                                0
                                
                                
                                
                                9,044
                                
                                
                                
                                (9,044
                                )
                                
                                
                                *$
                                9,990,373
                                
                                
                                $
                                4,726,040
                                
                                
                                $
                                5,264,333
                                
                                
                                
                                111.4
                                %


*not meaningful




Management
believes sales will continue to build as we expand our sales efforts and look
for opportunities with larger scale.




Cost of Sales.Cost of revenue increased to $5,115,998 for the year ended June 30, 2009,
compared to $2,789,490 for the year ended June 30, 2008, an increase of
$2,326,508 or  83.4%.  The majority of the increase is a
result of the expansion of the Company’s radio advertising
inventory.  The airline magazines costs also increased but at a much
slower rate.  The details for fiscal years ended June 30, 2009 and
2008 are as follows:




Change2009
                  
                  2008
                  
                  Amount
                  
                  
                  %(in
      dollars, except percentages)Cost
      of RevenueAirline
      magazine advertising
                  
                  $
                  2,783,148
                  
                  
                  $
                  1,916,972
                  
                  
                  $
                  866,176
                  
                  
                  
                  45.2
                  %Radio
      advertising
                  
                  
                  2,332,850
                  
                  
                  
                  659,813
                  
                  
                  
                  1,673,037
                  
                  
                  
                  253.6
                  %Other
      product lines
                  
                  
                  -
                  
                  
                  
                  212,705
                  
                  
                  
                  (212,705
                  )
                  
                  
                  *$
                  5,115,998
                  
                  
                  $
                  2,789,490
                  
                  
                  $
                  2,326,508
                  
                  
                  
                  83.4
                  %


*not meaningful




The
increase in radio advertising costs increase is largely a result of expanding
inventory.  Since July 1, 2008, the Company signed three contracts for
additional radio advertising minutes.  The increase in airline
magazine costs can be attributed to (i) increased advertising inventory and (ii)
the costs to print magazines, which are paid by the
Company.   Management expects costs to lower in the coming
quarter as the Company works to restructure existing contracts.  The
costs that remain fixed are expected to grow slowly in the coming quarters as a
large portion of the costs are fixed.   If the Company contracts
for additional advertising assets the costs of revenues will increase more
rapidly than currently expected.




Gross
Profit.  Gross profit was $4,874,375 for the fiscal year ended
June 30, 2009 as compared to $1,936,550 for the fiscal year ended June 30, 2008,
an increase of $$2,937,825 or 151.7%.  The overall gross profit
increase for the fiscal year ended June 30, 2009 is attributable to a
significant increase for the airline magazine advertising sales product line
offset by a year over year decrease for the radio advertising sales product
line, the details of which are as follows:




Change2009
                  
                  2008
                  
                  Amount
                  
                  
                  %(in
      dollars, except percentages)Gross
      ProfitAirline
      magazine advertising
                  
                  $
                  4,418,387
                  
                  
                  $
                  1,615,850
                  
                  
                  $
                  2,802,537
                  
                  
                  
                  173.4
                  %Radio
      advertising
                  
                  
                  455,988
                  
                  
                  
                  524,361
                  
                  
                  
                  (68,373
                  )
                  
                  
                  *Other
      product lines
                  
                  
                  -
                  
                  
                  
                  (203,661
                  )
                  
                  
                  203,661
                  
                  
                  
                  *$
                  4,874,375
                  
                  
                  $
                  1,936,550
                  
                  
                  $
                  2,937,825
                  
                  
                  
                  151.7
                  %




*not
meaningful


42




Radio
advertising’s year over year decrease is attributable to the increase of fixed
costs versus the previous year.  The expansion of the radio business,
a key strategic objective, requires the increase of fixed costs for media
assets.  The Company purchases radio advertising minutes on a "use it
or lose it" basis which means a large portion of costs of revenue are
fixed.  Management is working to restructure existing contracts and
add more cost advantageous contracts in the coming quarters; management expects
radio advertising gross profit to improve as sales improve and fixed costs are
reduced.




The gross
margin for the years ended June 30, 2009 and 2008 are  48.8% and
41.0%, respectively.  As with the overall gross profit, the gross
margin decrease was the product of an improved airline magazine advertising
margin offset by a decrease of the radio advertising product line, the details
of which are as follows:




2009
                                
                                
                                2008
                                
                                
                                ChangeGross
      MarginAirline
      magazine advertising
                                
                                
                                61.4
                                %
                                
                                
                                45.7
                                %
                                
                                
                                15.6
                                %Radio
      advertising
                                
                                
                                16.4
                                %
                                
                                
                                44.3
                                %
                                
                                
                                (27.9
                                )%Other
      product lines
                                
                                
                                -
                                
                                
                                
                                (2,251.9
                                )%
                                
                                
                                *48.8
                                %
                                
                                
                                41.0
                                %
                                
                                
                                7.8
                                %




Management
expects margins to quickly improve for the radio advertising product line as
sales increase and fixed costs are reduced.  The airline magazine
gross margin is also expected to increase as a large portion of direct costs are
fixed.




Operating
Expenses.Operating expenses increased to $10,315,141
for the year ended June 30, 2009, as compared to $2,727,413 for the year ended
June 30, 2008.  The increase is related to (a) increased selling,
general and administrative expenses, (b) increased amortization
expenses,  (c) goodwill impairment and (d) losses related to the
termination of contracts.   The following table summarizes the
year over year increases.




2009
                        
                        
                        2008
                        
                        
                        ChangeSelling,
      General and Administrative
                        
                        $
                        6,912,125
                        
                        
                        $
                        2,727,413
                        
                        
                        $
                        4,184,712Depreciation
      and amortization expense
                        
                        
                        1,659,823
                        
                        
                        
                        131,418
                        
                        
                        
                        1,528,405Goodwill
      impairment
                        
                        
                        1,061,562
                        
                        
                        
                        0
                        
                        
                        
                        1,061,562Loss
      on termination of contracts
                        
                        
                        692,811
                        
                        
                        
                        0
                        
                        
                        
                        692,811Loss
      (gain) on disposal of fixed assets
                        
                        
                        (11,180
                        )
                        
                        
                        25,893
                        
                        
                        
                        (37,073
                        )$
                        10,315,141
                        
                        
                        $
                        2,884,724
                        
                        
                        $
                        7,430,417




Selling,
general and administrative expenses increased to $6,912,125 for the year ended
June 30, 2009, as compared to $2,727,413 for the year ended June 30, 2008, an
increase of $4,184,712 or 153.4%.  The increase is due to the overall
expansion of the business and the resulting expansion of selling costs, staff
costs and other overhead.  Selling expenses increases accounted for
70% or $2,9136,332 of the year over year difference.  The increase is
a combination of increased marketing costs associated with promoting the
business in China and the increased selling costs associated with the revenue
growth.   These costs will continue to raise as the business
grows albeit at a slower growth rate.  General and Administrative
expenses increased by $1,271,079.   As a percentage of revenue,
General and Administrative expenses dropped from 38.4% of revenue for the year
ended June 30, 2008 to 30.9% for the year ended June 30,
2009.   The dollar increase is largely attributable to the
expansion of the China operations.  Further, the year ended June 30,
2009 was the first full year operating as a public Company; professional
services increased by $172,154 .  The Company expensed $294,705
related to the vesting of options to purchase common stock
during  year ended June 30, 2009.   Management expects
selling, general and administrative expenses to grow as the business
expands.  As a percentage of revenue, we believe selling, general and
administrative will steadily decrease as some of the costs will not need to
increase to handle future growth.


43




Depreciation
and amortization increased to $1,659,823 for the year ended June 30, 2009, as
compared to $131,418 for the year ended June 30, 2008, an increase of
$1,528,405.  The majority of the difference is related to a $1,502,232
increase of amortization expense related to intangible
assets.   With the impairment charges taken for the year ended
June 30, 2009, management expects a decrease in amortization.




Goodwill
impairment of $1,061,562 and loss on termination of contracts of $692,811 was
recorded for the year ended June 30, 2009.   The majority of
these expenses are related to the July 2009 decision to terminate the exclusive
sales contract for the Beijing FM 90.5 channel which was acquired July 21,
2008.




Loss from Operations.As a
result of the above, loss from operations totaled $5,440,766 for the year ended
June 30, 2009 as compared to loss from operations of $948,174 for the year ended
June 30, 2008, a difference of $4,492,592. As a percentage of revenues, loss
from operations was (54.5)% for the year ended June 30, 2009, as compared to
(20.1)% for the comparable period ending June 30, 2008.




Non-operating Expense.
Non-operating expense for the fiscal years ended June 30, 2009 and 2008 was
$579,870 and $469,328, respectively.  The difference, $110,542, can be
largely attributed to an increase of interest expense.




Income (Loss) before Provision
for Income Taxes. As a result of the foregoing, loss before provision for
income taxes was $6,020,636 for the year ended June 30, 2009 as compared to a
loss of $1,417,502 for year ended June 30, 2008, a decrease of
$4,603,134.




Net Loss attributable to Legend
Media, Inc. common shareholders. As a result of the foregoing
and the net loss attributable to the noncontrolling interest, net loss
attributable to Legend Media, Inc. common shareholders increased to $6,425,846
for the year ended June 30, 2009 as compared to a net loss of $1,540,484 for the
year ended June 30, 2008, a decrease of $4,885,362.  The respective
net margins are (64.3)% and (32.6) % for the years ended June 30, 2009 and 2008,
respectively. The loss for the year ended June 30, 2009 was mainly due to the
increase of fixed advertising costs related to the radio advertising product
line, less than expected radio advertising sales, the overall increase in
selling, general and administrative expenses, goodwill impairment and the losses
on the disposal of contracts.  Management believes the Company's
operations will generate net income at an increasing rate due to fixed nature of
many of the expenses and expectations of continued revenue
growth.


44





Liquidity
and Capital Resources




Cash
Flows




The
following table sets forth a summary of our cash flows for the periods indicated
below:




Years ended June 30,2009
                
                
                2008Net
      cash used in operating activities
                
                $
                (2,873,355
                )
                
                $
                (267,964
                )Net
      cash used in investing activities
                
                
                (1,769,082
                )
                
                
                (465,831
                )Net
      cash provided by financing activities
                
                
                1,434,066
                
                
                
                3,923,709Effect
      of exchange rate changes on cash and cash equivalents
                
                
                5,215
                
                
                
                18,485Net
      increase (decrease)  in cash and cash
equivalents
                
                
                (3,203,156
                )
                
                
                3,208,399Cash
      and cash equivalents at the beginning of year
                
                
                3,372,499
                
                
                
                164,100Cash
      and cash equivalents at the end of year
                
                
                169,343
                
                
                
                3,372,499




Operating
Activities




Net cash
used in operating activities was $2,885,334 in the year ended June 30, 2009
compared with net cash used in operating activities of $267,964 in the year
ending June 30, 2008. Our revenues have not reached a level sufficient to
support our operations.  We funded our losses through available cash
in part from the issuance of Series A convertible preferred stock.




Cash
flows from Investing and Financing Activities




Cash used
in investing activities in the year ended June 30, 2009 was $1,759,082 compared
with $465,831 for the comparable period for the previous year and consisted
primarily of a $740,010 payment against amounts due for the acquisition of
Legend Media Tianjin Investment Company and a $749,990 payment against amounts
due for the acquisition of News Radio Limited.  Cash provided by
financing activities was $1,450,343 for the year ended June 30,
2009.  The cash provided by financing activities was obtained by the
issuance of $2,000,000 in its Series A convertible preferred stock to Maoming
China Fund and $60,513 of contributed capital from payment of obligations by
shareholders, offset by $360,000 in repayments on notes payable and $250,170 in
dividends paid to the shareholders of YSLD as part of the Music Radio
Acquisition Agreement.  Although the business is expected to develop
and generate an increasing amount of cash, the Company may have to raise
additional funds to finance any continued losses and the existing
commitments.  The Company has outstanding notes payables of $431,733
which are due; $375,733 of which amount is a loan from a related party, RMK
Emerging Growth Fund LP, from which the Company expects to receive continued
support and extension.  As of June 30, 2009, no demand letters for
payment have been received by the Company.  Further, the Company will
have to raise additional funds to finance further expansion in
China.




Off-Balance
Sheet Arrangements




We have
not entered into any other financial guarantees or other commitments to
guarantee the payment obligations of any third parties. We have not entered into
any derivative contracts that are indexed to our shares and classified as
stockholder's equity or that are not reflected in our consolidated financial
statements. Furthermore, we do not have any retained or contingent interest in
assets transferred to an unconsolidated entity that serves as credit, liquidity
or market risk support to such entity. We do not have any variable interest in
any unconsolidated entity that provides financing, liquidity, market risk or
credit support to us or engages in leasing, hedging or research and development
services with us.


45





Item
7A.  Quantitative
and Qualitative Disclosures About Market Risk





Not
applicable to smaller reporting companies.




Foreign Exchange
Rates





All of
our sales are denominated in Renminbi or other currencies. As a result, changes
in the relative values of U.S. Dollars, Renminbi and other currencies affect our
reported levels of revenues and profitability as the results are translated into
U.S. Dollars for reporting purposes. In particular, fluctuations in currency
exchange rates could have a significant impact on our financial stability due to
a mismatch among various foreign currency-denominated sales and costs.
Fluctuations in exchange rates, particularly between the U.S. dollar and
Renminbi, affect our gross and net profit margins and could result in foreign
exchange and operating losses.





Our
exposure to foreign exchange rate risk primarily relates to currency gains or
losses resulting from timing differences between signing of sales contracts and
settling of these contracts. Furthermore, we translate monetary assets and
liabilities denominated in other currencies into Renminbi, the functional
currency of our operating business. Our results of operations and cash flow are
translated at average exchange rates during the period, and assets and
liabilities are translated at the unified exchange rate as quoted by the
People's Bank of China at the end of the period. Translation adjustments
resulting from this process are included in accumulated other comprehensive
income in our statement of stockholders' equity. We recorded net foreign
currency gain of $4,826 and net foreign currency loss of $0 in the years ended
June 30, 2009 and 2008, respectively. We have not used any forward contracts,
currency options or borrowings to hedge our exposure to foreign currency
exchange risk. We cannot predict the impact of future exchange rate fluctuations
on our results of operations and may incur net foreign currency losses in the
future. As our sales denominated in foreign currencies, continue to grow, we
will consider using arrangements to hedge our exposure to foreign currency
exchange risk.





Our
financial statements are expressed in U.S. dollars but the functional currency
of our operating subsidiary is Renminbi. The value of your investment in our
stock will be affected by the foreign exchange rate between U.S. dollars and
Renminbi. To the extent we hold assets denominated in U.S. dollars, any
appreciation of the Renminbi against the U.S. dollar could result in a change to
our statement of operations and a reduction in the value of our U.S. dollar
denominated assets. On the other hand, a decline in the value of Renminbi
against the U.S. dollar could reduce the U.S. dollar equivalent amounts of our
financial results, the value of your investment in the Company and the dividends
we may pay in the future, if any, all of which may have a material adverse
effect on the price of our stock.





Item
8.  Financial
Statements and Supplementary Data




See
"Index to Financial Statements" beginning on page F-1 below for our financial
statements included in this Form 10-K.




Item
9. Changes In and
Disagreements with Accountants On Accounting and Financial
Disclosure





None.





Item
9A(T). Controls and
Procedures





(a) Evaluation of
Disclosure Controls and Procedures





Our Chief
Executive Officer and Chief Financial Officer (collectively, the "Certifying
Officers") are responsible for establishing and maintaining disclosure controls
and procedures (as defined in Rules 13a-15(e) and 15d-15(e) promulgated under
the Exchange Act) for us. Based on their evaluation of our disclosure controls
and procedures as of the end of the period covered by this Annual Report on Form
10-K, have concluded that (a) our disclosure controls and procedures are
effective for ensuring that information required to be disclosed by us in the
reports that we file or submit under the Exchange Act is recorded, processed,
summarized and reported within the time periods specified in the SEC’s rules and
forms; and (b) our disclosure controls and procedures include, without
limitation, controls and procedures designed to ensure that information required
to be disclosed by us under the Exchange Act is accumulated and communicated to
our management, including our principal executive and principal financial
officers, or persons performing similar functions, as appropriate to allow
timely decisions regarding required disclosure.


46





(b) Management’s Annual
Report on Internal Control over Financial Reporting





The
Certifying Officers' are responsible for establishing and maintaining adequate
internal control over financial reporting, as such term is defined in Rule
13a-15(f) and 15d-15(f) promulgated under the Exchange Act.  The
Certifying Officers' evaluation of our internal control over financial reporting
concluded that they were effective and that there have been no occurrences
during the period covered by this Annual Report on Form 10-K that has materially
affected or is reasonably likely to materially affect, our internal control over
financial reporting.





(c) Attestation Report by
Registered Public Accounting Firm





This
Annual Report on Form 10-K does not include an attestation report of the
Company’s registered public accounting firm regarding internal control over
financial reporting. Management’s report was not subject to attestation by the
Company’s registered public accounting firm pursuant to temporary rules of the
SEC that permit the Company to provide only management’s report in this Annual
Report on Form 10-K.





(d) Changes in Internal
Control over Financial Reporting





There
were no changes in our internal control over financial reporting that occurred
during our last fiscal quarter that have materially affected, or are reasonably
likely to materially affect, our internal control over financial
reporting.





(e) Inherent Limitations of
Controls and Procedures





Our
management, including each of the Certifying Officers, does not expect that our
disclosure controls or our internal controls will prevent all error and fraud. A
control system, no matter how well conceived and operated, can provide only
reasonable, not absolute, assurance that the objectives of the control system
are met. In addition, the design of a control system must reflect the fact that
there are resource constraints, and the benefits of controls must be considered
relative to their costs. Because of the inherent limitations in all control
systems, no evaluation of controls can provide absolute assurance that all
control issues and instances of fraud, if any, within a company have been
detected. These inherent limitations include the realities that judgments in
decision-making can be faulty, and that breakdowns can occur because of simple
error or mistake. Additionally, controls can be circumvented by the individual
acts of some persons, by collusion of two or more people or by management
override of the control. The design of any systems of controls also is based in
part upon certain assumptions about the likelihood of future events, and there
can be no assurance that any design will succeed in achieving its stated goals
under all potential future conditions. Over time, controls may become inadequate
because of changes in conditions, or the degree of compliance with the policies
or procedures may deteriorate. Because of these inherent limitations in a
cost-effective control system, misstatements due to error or fraud may occur and
not be detected.




(f)
Certifications





We have
attached as exhibits to this annual report on Form 10-K the certifications of
our Chief Executive Officer and Chief Financial Officer, which are required
pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. We recommend that
this Item 8A(T) be read in conjunction with the certifications for a more
complete understanding of the subject matter presented.





Item
9B.Other
Information





None.


47


PART
III





Item 10.Directors,
Executive Officers, and Corporate Governance.





Identity
and Background of our Executive Officers and Directors




The
following individuals serve as our directors and/or executive officers, as
indicated:




Name
                          
                          Age
                          
                          PositionJu
      BaoChun
                          
                          39
                          
                          Chief
      Executive Officer and DirectorJeffrey
      Dash
                          
                          40
                          
                          Chief
      Financial Officer and DirectorXin
      Jin
                          
                          39
                          
                          DirectorIvan
      Qi
                          
                          46
                          
                          DirectorJulien
      Moulin
                          
                          31
                          
                          Director





Ju
Baochun, age 39, has been our Chief Executive Officer since August 26, 2009 and
a Director since December 22, 2008.   Mr. Ju is a Chinese
entrepreneur with over 11 years of experience in the Chinese advertising
industry.  Since 2001, Mr. Ju has been the chief executive officer of HTLG,
a company primarily dedicated to developing the radio advertising market and the
airline magazine advertising industry. He has personally led the initiative to
secure the exclusive advertising rights for several radio channels and airline
magazine. Prior to joining HTLG, Mr. Ju held numerous positions in the Chinese
advertising industry, including with Beijing Jin Shi Advertising, a company
primarily engaged in advertising for TV stations, and Beijing Wen Shi
Advertising, a company primarily engaged in marketing and sales
services.




Jeffrey
Dash has been our Chief Financial Officer and a director since February 2008 and
served as our Chief Executive Officer from February 1,  2008 until
August 26, 2009.  He has spent his career building businesses and has
held positions in Germany, Switzerland, Czech Republic and
Russia.  Mr. Dash has over 16 years of finance and operation
experience.  Since August 2007, Mr. Dash has been working as a
consultant and developing the business plan for Legend Media.  He was
employed by Xyience Incorporated, a consumer packaged good company from May 2006
to May 2007.  From May 2001 to April 2006, Mr. Dash worked for Viking
River Cruises where he held numerous positions including President of U.S.
Division, Managing Director of the European division in Germany and Senior Vice
President of Worldwide sales and marketing.




Jin Xin,
age 38, is a Chinese management executive with extensive experience building
sales organizations for multiple location operations. From September 2000 to
October 2008, Mr. Jin worked for Beijing Huayuan Real Estate Co. Ltd., a real
estate sales and development company, where he the majority of time served as
Deputy General Manager and Director.  Since November 2008, Jin Xin has
provided consulting services to the Company as an independent
consultant.   Jin Xin became a director on December 21,
2008.




Ivan Qi,
age 46, is one of three managing partners of Maoming Investment Manager Ltd., an
investment management company investing globally in listed and unlisted
companies with a significant focus on Chinese companies.  He has
served in this position since August 2005.  In May 1995 he co-founded
StarCapital Corp, a privately held project development company and held the
position of President.  Prior to StarCapital Corp, Mr. Qi held
positions with Chase Manhattan Bank, Swiss Bank Corp and Moore Capital
Management.   He graduated from The Cooper Union with a degree in
Electrical Engineering (BS) and received his MBA in Finance from Hofstra
University in New York. Mr. QI became a director on September 15,
2008.




Julien
Moulin, age 31, is co-Founder of Maoming Investment Manager Ltd., an investment
management company investing globally in listed and unlisted companies with a
significant focus on Chinese companies. He has served as Managing Partner of
Maoming Investment Manager Ltd. since February 2006.  From October 2004 to
December 2007, Mr. Moulin was the investment adviser of the Global China Fund, a
European-based investment fund focusing on identifying undervalued Chinese
companies.  From September 2003 to June 2004, Mr. Moulin was an
Investment Manager at SKI Capital, a London-based market neutral fund. From May
2002 to September 2003, Mr. Moulin was an Investment Analyst at UBS Global Asset
Management in charge of the European telecom sector.  Mr. Moulin holds
a BA in Economics and Business Sciences from Sorbonne University and a Master
Degree in Asset Management and financial markets from the University of
Paris-Dauphine.   Mr. Moulin became a director on August 26,
20090.


48




Board
Committees





We are
not a "listed issuer" as defined in Rule 10A-3 promulgated under the Exchange
Act and are not currently required to have an audit, compensation, or nominating
committee.  However, our board of directors has future plans to form
these committees and approve their charters.  When the audit committee
is formed, our board of directors expects to determine if it has a member that
qualifies as an "audit committee financial expert" as defined in Item
407(d)(5)(ii) of Regulation S-B promulgated under the Exchange Act.





Code
of Ethics




We have adopted a code of ethics for
our principal executive and financial officers. Our code of ethics is filed as
an exhibit to this Annual Report on Form 10-K. Our Company undertakes to provide
to any person without charge, upon request, a copy of the code of
ethics.  The code of ethics may be requested by providing a written
request to Legend Media, Inc, Room 609, Gehua Tower A, Qinglong HuTong Building
No. 1, Beijing, China 100007.





Compliance
with Section 16(a) of the Securities Exchange Act of 1934





At this time, the Company is not
subject to the provisions of Section 16(a) of the Exchange Act.





Item
11. Executive
Compensation





The
following summary compensation table indicates the cash and non-cash
compensation earned during the fiscal years ended June 30, 2008 and June 30,
2007 by our Chief Executive Officer, Chief Operating Officer, and each of our
other highest paid executives, if any, whose total compensation exceeded
$100,000 during such fiscal year ends.





SUMMARY COMPENSATION
TABLE




Non-equityIncentive
                                                                
                                                                
                                                                NonqualifiedStock
                                                                
                                                                
                                                                Option
                                                                
                                                                
                                                                Plan
                                                                
                                                                
                                                                DeferredSalary
                                                                
                                                                
                                                                Bonus
                                                                
                                                                
                                                                Awards
                                                                
                                                                
                                                                Awards
                                                                
                                                                
                                                                Compensation
                                                                
                                                                
                                                                CompensationName and principal position
                                                                
                                                                Year
                                                                
                                                                ($)
                                                                
                                                                
                                                                ($)
                                                                
                                                                
                                                                ($)
                                                                
                                                                
                                                                ($) (7)
                                                                
                                                                
                                                                ($)
                                                                
                                                                
                                                                Earnings ($)
                                                                
                                                                
                                                                Total ($)Ju
      BaoChun,
                                                                
                                                                2009
                                                                
                                                                
                                                                —
                                                                
                                                                
                                                                
                                                                —
                                                                
                                                                
                                                                
                                                                —
                                                                
                                                                
                                                                
                                                                —
                                                                
                                                                
                                                                
                                                                —
                                                                
                                                                
                                                                
                                                                —
                                                                
                                                                
                                                                
                                                                —Chief
      Executive Officer (1)
                                                                
                                                                2008
                                                                
                                                                
                                                                —
                                                                
                                                                
                                                                
                                                                —
                                                                
                                                                
                                                                
                                                                —
                                                                
                                                                
                                                                
                                                                —
                                                                
                                                                
                                                                
                                                                —
                                                                
                                                                
                                                                
                                                                —
                                                                
                                                                
                                                                
                                                                —Jeffrey
      Dash,
                                                                
                                                                2009
                                                                
                                                                
                                                                —
                                                                
                                                                
                                                                
                                                                —
                                                                
                                                                
                                                                
                                                                —
                                                                
                                                                
                                                                $
                                                                36
                                                                (5)
                                                                
                                                                
                                                                —
                                                                
                                                                
                                                                
                                                                —
                                                                
                                                                
                                                                $
                                                                36Chief
      Financial Officer (2)
                                                                
                                                                2008
                                                                
                                                                
                                                                —
                                                                
                                                                
                                                                
                                                                —
                                                                
                                                                
                                                                $
                                                                12,840
                                                                (4)
                                                                
                                                                $
                                                                36
                                                                (5)
                                                                
                                                                
                                                                —
                                                                
                                                                
                                                                
                                                                —
                                                                
                                                                
                                                                $
                                                                12,876Dr.
      William Lee,
                                                                
                                                                2009
                                                                
                                                                $
                                                                50,000
                                                                
                                                                
                                                                
                                                                —
                                                                
                                                                
                                                                
                                                                —
                                                                
                                                                
                                                                $
                                                                94,943
                                                                (6)
                                                                
                                                                
                                                                —
                                                                
                                                                
                                                                
                                                                —
                                                                
                                                                
                                                                $
                                                                144,943Chief
      Operating Officer (3)
                                                                
                                                                2008
                                                                
                                                                $
                                                                37,500
                                                                
                                                                
                                                                
                                                                —
                                                                
                                                                
                                                                
                                                                —
                                                                
                                                                
                                                                $
                                                                65,277
                                                                (6)
                                                                
                                                                
                                                                —
                                                                
                                                                
                                                                
                                                                —
                                                                
                                                                
                                                                $
                                                                102,777





(1)
            Mr.
      Ju became Chief Executive Officer on August 26, 2009 and is the majority
      shareholder of the Company.  At this time he does not have an
      employment agreement and is not being compensated for his services to the
      Company.


49





(2)
            Mr.
      Dash has not taken a salary since he began with the Company; all
      previously accrued expenses have been eliminated as he has agreed to forgo
      any cash compensation until such time the Company is cash flow
      positive





(3)
            Dr.
      Lee was the Chief Operating Officer until October 1,
  2008.





(4)
            Mr.
      Jeffrey Dash received 600,000 shares of common stock at the time he became
      our Chief Executive Officer and Chief Financial Officer in February
      2008.  The value of each share of our common stock at such time
      was $0.0214.





(5)
            On
      January 31, 2008, the Company granted Mr. Dash options to purchase 400,000
      shares of our common stock at an exercise price of $2.50 per share, with
      25% vesting at the end of the first three months and options to purchase
      30,000 shares of common stock vesting at the end of each three months
      thereafter.  The Company used the Black Scholes model to value
      the options at the time they were issued, based on volatility of 100%,
      dividend yield of 0%, the stated exercise prices and expiration dates of
      the instruments and using an average risk-free rate of
      4.5%.  Because the Company does not have a history of issuing
      employee stock options, the estimated life is based on the vesting
      period.  This is the same as assuming that the options are
      exercised at the end of the vesting
period.





(6)
            On
      April 8, 2008, the Company granted Dr. Lee options to purchase 400,000
      shares of our common stock at an exercise price of $3.25 per share, with
      12.5% vesting at the end of the first three months and options to purchase
      30,000 shares of common stock vesting at the end of each three months
      thereafter.  The Company used the Black Scholes model to value
      the options at the time they were issued, based on volatility of 100%,
      dividend yield of 0%, the stated exercise prices and expiration dates of
      the instruments and using an average risk-free rate of
      4.5%.  Because the Company does not have a history of employee
      stock options, the estimated life is based on the vesting
      period.  This is the same as assuming that the options are
      exercised at the end of the vesting
period.





(7)
            Reflects
      the dollar amount expensed by the Company during the applicable fiscal
      year for financial statement reporting purposes pursuant to FAS 123R. FAS
      123R requires the Company to determine the overall value of the options as
      of the date of grant based upon the Black-Scholes method of valuation, and
      to expense that value over the service period over which the options
      become exercisable (vested). As a general rule, for time in service based
      options, the Company will immediately expense any option or portion
      thereof which is vested upon grant, while expensing the balance on a pro
      rata basis over the remaining vesting term of the
  option.





Employment
Agreements





On
January 31, 2008, we entered into an Employment Agreement with our Chief
Executive Officer and Chief Financial Officer, Jeffrey Dash, effective February
1, 2008.  Mr. Dash’s annual base salary is $200,000 and he is eligible
to receive a bonus of up 75% of his base salary at the discretion of our board
of directors.   Mr. Dash resigned his position as Chief Executive
Officer on August 26, 2009.  Further, Mr. Dash has agreed to forgo any
compensation related to the Employment Agreement and expects to enter into a new
employment agreement with the Company.  Mr. Dash serves at the
discretion of our board of directors.





We have
not entered into employment agreements with any of our other executive
officers.


50





Outstanding
Equity Awards





OUTSTANDING EQUITY AWARDS AT
FISCAL YEAR-END





Option AwardsName
                                                
                                                Number of
                                                  Securities
                                                  Under lying
                                                  Unexercised
                                                  Options(#)
                                                  Exercisable
                                                
                                                
                                                Number of
                                                  Securities
                                                  Underlying
                                                  Unexercised
                                                  Options (#)
                                                  Un exercisable
                                                
                                                
                                                Equity
                                                  Incentive
                                                  Plan
                                                  Awards:
                                                  Number of
                                                  Securities
                                                  Under lying
                                                  Un exercised
                                                  Unearned
                                                  Options(#)
                                                
                                                
                                                Option
                                                  Exercise
                                                  Price ($)
                                                
                                                Option
                                                  Expiration
                                                  DateJeffrey
      Dash
                                                
                                                
                                                240,000
                                                
                                                
                                                
                                                160,000
                                                1
                                                
                                                
                                                0
                                                
                                                
                                                $
                                                2.50
                                                
                                                02/01/2018William
      Lee
                                                
                                                
                                                81,820
                                                
                                                
                                                
                                                0
                                                2
                                                
                                                
                                                0
                                                
                                                
                                                $
                                                3.25
                                                
                                                04/08/2018





1
            Pursuant
      to the Employment Agreement with Jeffrey Dash, 25% of his options vest at
      the end of the first three months of employment with the remaining vesting
      at 30,000 options at the end of each three months
    thereafter.


2
            Pursuant
      to the agreement with William Lee, 12.5% of his options vest at the end of
      his first three months with the  Company with the remaining
      vesting at 30,000 options at the end of each three months
      thereafter.





Director
Compensation





The
following table provides compensation information for our directors during the
fiscal year ended June 30, 2009:





Name
                        
                        
                        
                        
                        Fees
                          Earned
                          or
                          Paid in
                          Cash
                          ($)
                        
                        
                        Stock
                          Awards
                          ($)
                        
                        
                        Option
                          Awards
                          ($)1
                        
                        
                        Non-Equity
                          Incentive Plan
                          Compensation
                          ($)
                        
                        
                        Non-
                          Qualified
                          Deferred
                          Compensation
                          Earnings ($)
                        
                        
                        All Other
                          Consideration
                          ($)
                        
                        
                        Total
                          ($)Ivan
      Qi
                        
                        
                        (2)
                        
                        
                        
                        -
                        
                        
                        
                        -
                        
                        
                        
                        -
                        
                        
                        
                        -
                        
                        
                        
                        -
                        
                        
                        
                        -
                        
                        
                        
                        -Julien
      Moulin
                        
                        
                        (2)
                        
                        
                        
                        -
                        
                        
                        
                        -
                        
                        
                        
                        -
                        
                        
                        
                        -
                        
                        
                        
                        -
                        
                        
                        
                        -
                        
                        
                        
                        -Xin
      Jin
                        
                        
                        (2)
                        
                        
                        
                        -
                        
                        
                        
                        -
                        
                        
                        
                        -
                        
                        
                        
                        -
                        
                        
                        
                        -
                        
                        
                        
                        -
                        
                        
                        
                        -Ju
      BaoChun
                        
                        
                        (2)
                        
                        
                        
                        -
                        
                        
                        
                        -
                        
                        
                        
                        -
                        
                        
                        
                        -
                        
                        
                        
                        -
                        
                        
                        
                        -
                        
                        
                        
                        -Jeffrey
      Dash
                        
                        
                        (2)
                        
                        
                        
                        -
                        
                        
                        
                        -
                        
                        
                        
                        -
                        
                        
                        
                        -
                        
                        
                        
                        -
                        
                        
                        
                        -
                        
                        
                        
                        -Michael
      Bonner
                        
                        
                        (3)
                        
                        
                        
                        -
                        
                        
                        
                        -
                        
                        
                        $
                        88,772
                        
                        
                        
                        -
                        
                        
                        
                        -
                        
                        
                        
                        -
                        
                        
                        $
                        88,772Andre
      Nair
                        
                        
                        (4)
                        
                        
                        
                        -
                        
                        
                        
                        -
                        
                        
                        $
                        77,664
                        
                        
                        
                        -
                        
                        
                        
                        -
                        
                        
                        
                        -
                        
                        
                        $
                        77,664Richard
      Vogel
                        
                        
                        (5)
                        
                        
                        
                        -
                        
                        
                        
                        -
                        
                        
                        $
                        33,290
                        
                        
                        
                        -
                        
                        
                        
                        -
                        
                        
                        
                        -
                        
                        
                        $
                        33,290








(1)
            Reflects
      the dollar amount expensed by the Company during the fiscal year for
      financial statement reporting purposes pursuant to FAS 123R. FAS 123R
      requires the Company to determine the overall value of the options as of
      the date of grant based upon the Black-Scholes method of valuation, and to
      expense that value over the service period over which the options become
      exercisable (vested). As a general rule, for time in service based
      options, the Company will immediately expense any option or portion
      thereof which is vested upon grant, while expensing the balance on a pro
      rata basis over the remaining vesting term of the
  option.





(2)
            None
      of the current board members are receiving any consideration for serving
      on the board.  The board has plans to offer an option package to
      board members during the fiscal year ended June 30,
  2010.


51





(3)
            On
      February 13, 2008, the Company granted Mr. Bonner options to purchase
      80,000 shares of our common stock at an exercise price of $2.50 per share,
      that vest at a rate of 10,000 options at the end of each three month
      period following the date of grant.  The Company used a Black
      Scholes model to value the options at the time they were issued, based on
      volatility of 90%, dividend yield of 0%, the stated exercise prices and
      expiration dates of the instruments and using an average risk-free rate of
      4.5%.  Because the Company does not have a history of employee
      stock options, the estimated life is based on the vesting
      period.  This is the same as assuming that the options are
      exercised at the end of the vesting period.  As of June 30,
      2009, 33,783 of Mr. Bonner's options were outstanding.  Mr.
      Bonner resigned from the board in August
2009.





(4)
            On
      April 10, 2008, the Company granted Mr. Nair options to purchase 80,000
      shares of our common stock at an exercise price of $3.70 per share, that
      vest at a rate of 10,000 options at the end of each three month period
      following the date of grant.  The Company used a Black Scholes
      model to value the options at the time they were issued, based on
      volatility of 96%, dividend yield of 0%, the stated exercise prices and
      expiration dates of the instruments and using an average risk-free rate of
      4.5%.  Because the Company does not have a history of employee
      stock options, the estimated life is based on the vesting
      period.  This is the same as assuming that the options are
      exercised at the end of the vesting period.  As of June 30,
      2009, 17.690 of Mr. Nair's options were outstanding.   Mr.
      Nair resigned from the board in August
2009.





(5)
            On
      February 1, 2008, the Company granted Mr. Vogel options to purchase 80,000
      shares of our common stock at an exercise price of $2.50 per share, that
      vest at a rate of 10,000 options at the end of each three month period
      following the date of grant.  The Company used a Black Scholes
      model to value the options at the time they were issued, based on
      volatility of 96%, dividend yield of 0%, the stated exercise prices and
      expiration dates of the instruments and using an average risk-free rate of
      4.5%.  Because the Company does not have a history of employee
      stock options, the estimated life is based on the vesting
      period.  This is the same as assuming that the options are
      exercised at the end of the vesting period.  As of June 30,
      2009, 36,742 of Mr. Vogel's options were outstanding.  Mr. Vogel
      resigned from the board in November
2008.





Compensation
Committee Interlocks and Insider Participation





During
the fiscal year ended June 30, 2009, the Company did not have a Compensation
Committee.   During the last fiscal year ended June 30, 2009 no
deliberations concerning executive officer compensation took place.





During
the fiscal year ended June 30, 2009:





(i) none
of our executive officers served as a member of the compensation committee (or
other board committee performing equivalent functions or, in the absence of any
such committee, the entire board of directors) of another entity, one of whose
executive officers served on our Compensation Committee;





(ii) none
of our executive officers served as a director of another entity, one of whose
executive officers served on our Compensation Committee; and





(iii)
none of our executive officers served as a member of the compensation committee
(or other board committee performing equivalent functions or, in the absence of
any such committee, the entire board of directors) of another entity, one of
whose executive officers served as a member of our Board of
Directors.





Item
12. Security Ownership Of
Certain Beneficial Owners And Management And Related Stockholder
Matters




Security
Ownership of Certain Beneficial Owners and Management




The
following table sets forth information regarding the beneficial ownership of our
common stock as of September 22, 2009 for each of the following
persons:


52





•
   each of our directors and officers;


•
   all directors and officers as a group; and


•
   each person who is known by us to own beneficially five percent or
more of our common stock.




Beneficial
ownership is determined in accordance with the rules of the SEC. Unless
otherwise indicated in the table, the persons and entities named in the table
have sole voting and sole investment power with respect to the shares set forth
opposite the stockholder’s name.  The percentage of shares of common
stock beneficially owned set forth below is based on 127,544,427 shares of
common stock as of September 22, 2009 which includes 111,013,355 shares of
common stock outstanding, 2,083,333 preference shares currently convertible to
common shares and 14,447,739 warrants and options currently exercisable and
exercisable over the next 60 days as of September 22, 2009.





Number
      ofShares
      of
                  
                  
                  Percent
      ofCommon
      Stock
                  
                  
                  SharesBeneficially
                  
                  
                  BeneficiallyName of Beneficial
      Owner
                  
                  Owned (1)
                  
                  
                  OwnedExecutive
      Officers and/or Directors:Ju
      BaoChun, Chief Executive Officer and Director (2)
                  
                  
                  70,150,000
                  
                  
                  
                  58.7
                  %Jeffrey
      Dash, Chief Financial Officer and Director (3)
                  
                  
                  820,000
                  
                  
                  
                  *Xin
      Jin, Director (4)
                  
                  
                  1,625,000
                  
                  
                  
                  1.4
                  %Julien
      Moulin, Director (5)
                  
                  
                  39,644,688
                  
                  
                  
                  34.3
                  %Ivan
      Qi (6)
                  
                  
                  -
                  
                  
                  
                  *All
      Executive Officers and Directors  as a Group
      (5 persons)
                  
                  
                  112,239,688
                  
                  
                  
                  89.1
                  %5%
      Beneficial Owners:Music
      Radio Limited (6)
                  
                  
                  61,650,000
                  
                  
                  
                  55.5
                  %Maoming
      China Fund (7)
                  
                  
                  39,644,688
                  
                  
                  
                  34.3
                  %





* Denotes
less than 1%





(1)
            Under
      Rule 13d-3, a beneficial owner of a security includes any person who,
      directly or indirectly, through any contract, arrangement, understanding,
      relationship, or otherwise has or shares: (i) voting power, which includes
      the power to vote, or to direct the voting of shares; or (ii) investment
      power, which includes the power to dispose or direct the disposition of
      shares. Certain shares may be deemed to be beneficially owned by more than
      one person (if, for example, persons share the power to vote or the power
      to dispose of the shares). In addition, shares are deemed to be
      beneficially owned by a person if the person has the right to acquire the
      shares (for example, upon exercise of an option) within 60 days of the
      date as of which the information is provided. In computing the percentage
      ownership of any person, the amount of shares outstanding is deemed to
      include the amount of shares beneficially owned by such person (and only
      such person) by reason of these acquisition rights. As a result, the
      percentage of outstanding shares of any person as shown in this table does
      not necessarily reflect the person's actual ownership or voting power with
      respect to the number of shares of common stock actually
      outstanding.





(2)
            Includes
      61,650,000 shares of our common stock that were issued to Music Radio
      Limited, a company controlled by Ju BaoChun, and 8,500,000 shares of our
      common stock issuable upon exercise of warrants held by Ju
      BaoChun..


53





(3)
            Includes
      550,000 shares of common stock and vested portion of stock options to
      purchase 270,000 shares of common
stock.





(4)
            Includes
      vested portion of stock options to purchase 1,625,000 shares of common
      stock.





(5)
            Includes
      2,083,333 shares of our common stock issuable upon conversion of our
      Series A Convertible Preferred Stock and 2,500,000 shares of our common
      stock issuable upon exercise of warrants.  All shares are held
      by Maoming China Fund and Julien Moulin controls Maoming China
      Fund.  The address of this stockholder is Clifton House, 75 Fort
      Street, PO Box 1350GT, Grand Cayman, Cayman
  Islands.





(6)
            Music
      Radio Limited is majority owned and Controlled by Ju
      BaoChun.  The address of Music Radio Limited is Room 8-3-101,
      Guanyuan Plaza, No.1 Cuihua Street, Xicheng District, Beijing
      PRC





(7)
            Includes
      2,083,000 shares of our common stock issuable upon conversion of our
      Series A Convertible Preferred Stock and 2,500,000 shares of our common
      stock issuable upon exercise of warrants.  The stockholder owns
      100% of our issued and outstanding Series A Convertible Preferred
      Stock.  Based solely on information provided by the stockholder
      and related transaction documents.   The address of this
      stockholder is Clifton House, 75 Fort Street, PO Box 1350GT, Grand Cayman,
      Cayman Islands.





Securities
Authorized for Issuance under Equity Compensation Plans or Individual
Compensation Arrangements





The
following table sets forth, as of June 30, 2009, certain information related to
our compensation plans under which shares of our common stock are authorized for
issuance.





Plan Category
                        
                        Number of Securities
                          to be Issued upon
                          Exercise of
                          Outstanding Options
                          Warrants and Rights
                          (a)
                        
                        
                        Weighted-Average
                          Exercise Price of
                          Outstanding Options,
                          Warrants and Rights
                        
                        
                        Number of Securities
                          Remaining Available
                          For Future Issuance
                          Under Equity
                          Compensation Plans
                          (excluding securities
                          reflected in column
                          (a))Equity
      compensation plans  approvedby
      security holders
                        
                        
                        641,820
                        
                        
                        $
                        2.75
                        
                        
                        
                        858,180Equity
      compensation plans not  approved by security
    holders
                        
                        
                        -
                        
                        
                        
                        -
                        
                        
                        
                        -





On
December 22, 2008, our board of directors approved the Stock Incentive Plan (the
“Plan”), which was also approved by a majority of our shareholders at our annual
shareholder meeting held on December 22, 2008.  All of our employees,
officers, and directors, and those of our consultants and advisors who (i) are
natural persons and (ii) provide bona fide services to the Company are eligible
to be granted options or restricted stock awards (each, an “Award”) under the
Plan.  The Plan is administered by our board, and the board
establishes certain terms of option awards, including the exercise price and
duration, in the applicable option agreement.  Awards may be made
under the Plan for up to 15,000,000 shares of our common stock, and the maximum
number of shares of common stock with respect to which Awards may be granted to
any participant under the Plan is 5,000,000 shares of common
stock.  The Plan allows for adjustments for changes in common stock
and certain other events, including, but not limited to, any stock split,
reverse stock split, stock dividend, recapitalization, combination of shares,
reclassification of shares, spin-off, any distribution to holders of common
stock other than a normal cash dividend, and liquidation or
dissolution.


54





Item
13. Certain Relationships and
Related Transactions And Director Independence








Ju
BaoChun  with his wife, Wei Xue, control Music Radio Limited
and Ju BaoChun beneficially owns 58.7% of the Company’s shares of common
stock.





On May 8,
2008, the Company and Well Chance entered into the Music Radio Share Purchase
Agreement with Music Radio Limited and the Music Radio Shareholders,
for the purchase of radio advertisiang rights in Tianjin,
PRC.  Pursuant to the Music Radio Share Purchase Agreement, Well
Chance,  in exchange for the issuance of (a) shares of the Company's
common stock with an aggregate value of US$7,160,714 (1,935,528 shares) and (b)
US$2,000,000, purchased 80% of the common stock of Legend Media Tianjin
Investment Company Limited.  (See Item 1. “Description of
Business” for
more detail.)





On July
21, 2008, Legend Media closed a transaction with Ju BaoChun, through Music Radio
Limited, pursuant to which the Company gained effective control of the PRC-based
company that has the exclusive sales contract for the Beijing, PRC based radio
channel FM 90.5 for (a) shares of the Company's common stock with an aggregate
value of RMB2,000,000 (approximately $287,728 based on the currency exchange
rate on June 5, 2008) based on the weighted average trading price of the common
stock for the 30 trading days immediately before June 4, 2008 (104,427 shares)
payable on the closing date and (b) RMB6,850,000 (approximately $985,469 based
on the currency exchange rate on June 5, 2008).  (See Item 1. “Description of
Business” for
more detail.)





On
November 28, 2008, the Company entered into and closed the Music Radio
Acquisition Agreement with Well Chance, Music Radio Limited, and the Music Radio
Shareholders. Pursuant to the Music Radio Acquisition Agreement, the Company
acquired control over YSLD and caused the contribution of an airline magazine
advertising business of HTLG to YSLD. In exchange for the acquisition of
control, the Company issued 5,033,680 shares of its Series B Preferred Stock to
the Music Radio Shareholders and two warrants to purchase an aggregate of
10,000,000 shares of the Company's common stock, to Ju Baochun. The closing gave
Legend Media effective control of YSLD and YSLD’s exclusive sales contract with
Xinhua Airline Magazine.  (See Item 1. “Description of
Business” for
more detail.)





During the year ended June 30, 2009, Ju
BaoChun paid expenses on behalf of the Company and provided short term working
capital advances when needed.   These transactions were
documented on an individual basis and happened throughout the year.  For
the year ended June 30, 2009, Ju BaoChun paid expenses of $117,332 and made
advances of $244,467.





As of June 30, 2009, the Company owed
Ju BaoChun  $1,667,679 which was distributed as follows:





May
      8, 2008 transaction
                  
                  $
                  800,000July
      21, 2008 transaction
                  
                  
                  256,275November
      28, 2008 transaction
                  
                  
                  512,760Expense
      payment and advances
                  
                  
                  98,644$
                  1,667,679




55





HTLG




HTLG is
owned and controlled by Ju BaoChun and Xue Wei.   At the time of
the closing of Music Radio Acquisition Agreement, HTLG had sales agreements with
clients and contracts with suppliers that were determined to be too difficult to
transfer.  Pursuant to the agreements HTLG would pay the expenses and
receive the cash on the Company’s behalf.  During the year ended June
30, 2009, the Company recorded expenses paid by HTLG of $1,108,087 and cash
receipts collected by HTLG of $993,340.





HTLG also
provided sales services to the Company in July, August and September
2009.  HTLG provided all sales and sales support to our clients during
the same period.  The total service paid for the year ended June 30,
2009 is $76,097.





HTLG, at
the direction of Ju BaoChun,  provided short term advances for working
capital shortfalls.  These advances were individually
documented.  During the year ended June 30, 2009, HTLG advanced the
Company  $658,094.





As of
June 30, 2009, HTLG owes the Company $335,154.




Director
Independence
  Our board
of director follows the standards of independence established under the Nasdaq
rules in determining if directors are independent and has determined there to be
no independent directors for all purposes under such rules.


Item
14. Principal Accountant Fees
and Services




Goldman
Parks Kirkland Mohidin served as our independent registered public accounting
firm for the years ended June 30, 2009 and 2008.  The following table
shows the fees that were billed for the audit and other services provided by
these respective firms for the years ended June 30, 2009 and 2008.





Fiscal 2009
                  
                  
                  Fiscal 2008Audit
      Fees (a)
                  
                  $
                  243,500
                  
                  
                  $
                  56,512Audit-Related
      Fees (b)
                  
                  
                  -
                  
                  
                  
                  -Tax
      Fees (c)
                  
                  
                  -
                  
                  
                  
                  1,350All
      Other Fees (d)
                  
                  
                  -
                  
                  
                  
                  -Total
                  
                  $
                  243,500
                  
                  
                  $
                  57,562





(a)
            Audit Fees  — This
      category consists of fees billed for professional services rendered by our
      independent auditors for the audit of our annual financial statements,
      review of financial statements included in our Form 10-Q Quarterly Reports
      and services that are normally provided by the independent auditors in
      connection with engagements for those fiscal years. This category also
      includes advice on audit and accounting matters that arose during, or as a
      result of, the audit or the review of interim financial
      statements.





(b)
            Audit-Related Fees — This category consists of fees billed for professional
      services rendered by our independent auditors for assurance and related
      services that are reasonably related to the performance of the audit or
      review of our financial statements and are not reported above under "Audit
      Fees."  The services for the fees disclosed under this category
      include consultation regarding our correspondence with the SEC and other
      accounting consulting.





(c)
            Tax Fees — This
      category consists of fees billed for professional services rendered by our
      independent auditors for tax compliance and tax advice.  The
      services for the fees disclosed under this category include tax return
      preparation and technical tax
advice.


56





(d)
            All Other Fees —
      This category consists of fees billed for professional services rendered
      by our independent auditors for other miscellaneous
  items.




Pre-Approval
Policies and Procedures





Prior to
engaging its accountants to perform particular services, our board of directors
obtains an estimate for the service to be performed.  All of the
services described above were approved by the board of directors in accordance
with its procedure.





Under
applicable SEC rules, the Audit Committee is required to pre-approve the audit
and non-audit services performed by the independent auditors in order to ensure
that they do not impair the auditors’ independence. The SEC’s rules specify the
types of non-audit services that an independent auditor may not provide to its
audit client and establish the Audit Committee’s responsibility for
administration of the engagement of the independent auditors. Until such time as
we have an Audit Committee in place, our board of directors will pre-approve the
audit and non-audit services performed by the independent auditors.




Item
15. Exhibits and Financial
Statement Schedules




Exhibit
                  #
                
                Description
                
                
                
                Reference2.1
                
                Share
      Exchange Agreement dated January 31, 2008, by and among Noble Quests,
      Inc., the majority shareholder of Noble Quests, Inc., Well Chance
      Investments Limited and the shareholders of Well Chance Investments
      Limited
                
                
                
                Incorporated
      by reference to the Company's Current Report on Form 8-K filed on February
      11, 2008.3.1
                
                Amended
      and Restated Articles of Incorporation of Noble Quests, Inc., filed on
      November 1, 2006
                
                
                
                Filed
      herewith.3.2
                
                Certificate
      of Amendment to Articles of Incorporation of Noble Quests, Inc., effective
      February 18, 2008
                
                
                
                Filed
      herewith.3.3
                
                Certificate
      of Amendment to Articles of Incorporation of Legend Media, Inc., filed on
      December 22, 2008
                
                
                
                Filed
      herewith.3.4
                
                Certificate
      of Designation of the Preferences, Rights, Limitations, Qualifications and
      Restrictions of the Series A Convertible Preferred Stock of Legend Media,
      Inc.
                
                
                
                Filed
      herewith.3.5
                
                Certificate
      of Designation of the Preferences, Rights, Limitations, Qualifications and
      Restrictions of the Series B Convertible Preferred Stock of Legend Media,
      Inc.
                
                
                
                Filed
      herewith.3.6
                
                Bylaws
                
                
                
                Incorporated
      by reference to the Company's Registration Statement on Form SB-2 filed on
      November 7, 2006.




57





4.1
                
                Form
      of Stock Certificate
                
                
                
                Incorporated
      by reference to the Company's Registration Statement on Form SB-2 filed on
      November 7, 2006.4.2
                
                Form
      of Common Stock Purchase Warrant
                
                
                
                Incorporated
      by reference to the Company's Current Report on Form 8-K filed on April 4,
      2008.4.3
                
                Form
      of $.40 Common Stock Purchase Warrant
                
                
                
                Incorporated
      by reference to the Company's Current Report on Form 8-K filed on December
      3, 2008.4.4
                
                Form
      of $.80 Common Stock Purchase Warrant
                
                
                
                Incorporated
      by reference to the Company's Current Report on Form 8-K filed on December
      3, 2008.10.1
                
                Loan
      Agreement by and between Well Chance Investments Limited and RMK Emerging
      Growth Opportunity Fund LP, dated January 31, 2008
                
                
                
                Incorporated
      by reference to the Company's Current Report on Form 8-K filed on February
      11, 2008.10.2
                
                First
      Amendment to Loan Agreement, dated August 23, 2008, between Well Chance
      Investmetns Limited and RMK Emerging Growth Opportunity Fund,
      LP
                
                
                
                Incorporated
      by reference to the Company's Current Report on Form 8-K filed on August
      28, 2008.10.3
                
                Loan
      Agreement by and between Legend Media, Inc. and Jonathan Kantor, dated
      March 30, 2008
                
                
                
                Incorporated
      by reference to the Company's Current Report on Form 8-K filed on April 3,
      2008.10.4
                
                Loan
      Agreement by and between Legend Media, Inc. and Blueday Limited, dated
      March 30, 2008
                
                
                
                Incorporated
      by reference to the Company's Current Report on Form 8-K filed on April 3,
      2008.10.5
                
                Loan
      Agreement, dated as of April 21, 2008, between Well Chance Investments
      Limited and Newport Capital Asset Management Group
                
                
                
                Incorporated
      by reference to the Company's Current Report on Form 8-K filed on April
      24, 2008.10.6
                
                Securities
      Purchase Agreement, dated as of March 31, 2008, among Legend Media, Inc.
      and Maoming China Fund
                
                
                
                Incorporated
      by reference to the Company's Current Report on Form 8-K filed on April 4,
      2008.10.7
                
                Share
      Purchase Agreement, dated as of May 8, 2008, among Legend Media, Inc.,
      Well Chance Investments Limited, Music Radio Limited, Ju Baochun and Xue
      Wei
                
                
                
                Incorporated
      by reference to the Company's Current Report on Form 8-K filed on May 12,
      2008.10.8
                
                Amendment
      to Share Purchase Agreement , dated as of June 19, 2008, among Legend
      Media, Inc., Well Chance Investmetns Limited, Music Radio Limited, Ju
      Baochun and Xue Wei
                
                
                
                Incorporated
      by reference to the Company's Current Report on Form 8-K filed on June 26,
      2008.10.9
                
                Share
      Purchase Agreement, dated as of June 4, 2008, among Legend Media, Inc.,
      Well Chance Investments Limited, Jue Baochun and Xue Wei
                
                
                
                Incorporated
      by reference to the Company's Current Report on Form 8-K filed on June 6,
      2008.




58





10.10
              
              Acquisition
      Agreement, dated as of November 28, 2008, among Legend Media, Inc., Well
      Chance Investment Limited, Music Radio Limited, Ju Baochun and Xue
      Wei
              
              
              
              Incorporated
      by reference to the Company's Current Report on Form 8-K filed on December
      3, 2008.10.11
              
              Secured
      Promissory Note by and between Well Chance Investments Limited and RMK
      Emerging Growth Opportunity Fund, LP, dated January 31,
    2008
              
              
              
              Incorporated
      by reference to the Company's Current Report on Form 8-K filed on February
      11, 2008.10.12
              
              Voting
      Agreement, dated as of March 31, 2008, by and among Legend Media, Inc.,
      ARC Investment Partners LLC, Tapirdo Enterprises LLC, Loeb Enterprises II
      LLC, Jeffrey Dash, Aries Equity Corp. and Nalp Capital LLC and Maoming
      China Fund
              
              
              
              Incorporated
      by reference to the Company's Current Report on Form 8-K filed on April 4,
      2008.10.13
              
              Promissory
      Note, dated March 30, 2008, in favor of Jonathan Kantor
              
              
              
              Incorporated
      by reference to the Company's Current Report on Form 8-K filed on April 3,
      2008.10.14
              
              Promissory
      Note, dated March 30, 2008, in favor of Blueday Limited
              
              
              
              Incorporated
      by reference to the Company's Current Report on Form 8-K filed on April 3,
      2008.10.15
              
              Secured
      Convertible Promissory Note, dated as of April 21, 2008, issued by Well
      Chance Investmetns Limited in favor of Newport Capital Asset Management
      Group
              
              
              
              Incorporated
      by reference to the Company's Current Report on Form 8-K filed on April
      24, 2008.10.16
              
              Security
      Agreement by and between Well Chance Investments Limited and RMK Emerging
      Growth Opportunity Fund LP, dated January 31, 2008
              
              
              
              Incorporated
      by reference to the Company's Current Report on Form 8-K filed on February
      11, 2008.10.17
              
              First
      Amendment to Security Agreement, dated August 23, 2008, between Well
      Chance Investments Limited and RMK Emerging Growth Opportunity Fund,
      LP
              
              
              
              Incorporated
      by reference to the Company's Current Report on Form 8-K filed on August
      28, 2008.10.18
              
              Security
      Agreement, dated as of April 21, 2008, between Well Chance Investments
      Limited and Newport Capital Asset Management Group
              
              
              
              Incorporated
      by reference to the Company's Current Report on Form 8-K filed on April
      24, 2008.10.19
              
              Common
      Stock Purchase Warrant issued to RMK Emerging Growth Opportunity Fund LP,
      dated January 31, 2008
              
              
              
              Incorporated
      by reference to the Company's Current Report on Form 8-K filed on February
      11, 2008.10.20
              
              Common
      Stock Purchase Warrant issued to Jonathan Kantor, dated March 30,
      2008
              
              
              
              Incorporated
      by reference to the Company's Current Report on Form 8-K filed on April 3,
      200810.21
              
              Common
      Stock Purchase Warrant issued to Blueday Limited, dated March 30,
      2008
              
              
              
              Incorporated
      by reference to the Company's Current Report on Form 8-K filed on April 3,
      2008.10.22
              
              Common
      Stock Purchase Warrant, dated as of April 21, 2008, issued by Well Chance
      Investments Limited to Newport Capital Asset Management
    Group
              
              
              
              Incorporated
      by reference to the Company's Current Report on Form 8-K filed on April
      24, 2008.




59





10.23
              
              Form
      of Stock Purchase Agreement
              
              
              
              Incorporated
      by reference to the Company's Current Report on Form 8-K filed on February
      11, 2008.10.24
              
              Exclusive
      Technical, Operational, Business Consulting and Services Agreement, dated
      as of May 30, 2008, among Legend Media (Beijing) Consulting Co., Ltd.,
      Tianjin Yinse Lingdong Advertising Co., Ltd., Ju Baochun and Xue
      Wei
              
              
              
              Incorporated
      by reference to the Company's Current Report on Form 8-K filed on June 5,
      2008.10.25
              
              Exclusive
      Technical, Operational, Business Consulting and Services Agreement, dated
      as of July 3, 2008, by and among Legend Media (Beijing) Information and
      Technology Co., Ltd., Beijing Maihesi Advertising International Co., Ltd.,
      Ju Baochun and Xue Wei
              
              
              
              Incorporated
      by reference to the Company's Current Report on Form 8-K filed on July 25,
      2008.10.26
              
              Exclusive
      Technical, Operational, Business Consulting and Services Agreement, dated
      a sof November 28, 2008, by and among Legend Media (Beijing) Information
      and Technology Co., Ltd., Beijing Yinselingdong Advertising Co., Ltd., Ju
      Bingzhen and Xue Wei
              
              
              
              Incorporated
      by reference to the Company's Current Report on Form 8-K filed on December
      3, 2008.10.27
              
              Operating
      Agreement, dated as of May 30, 2008, among Legend Media (Beijing)
      consulting Co., Ltd., Tianjin Yinse Lingdong Advertising Co., Ltd., Jue
      Baochun and Xue Wei
              
              
              
              Incorporated
      by reference to the Company's Current Report on Form 8-K filed on June 5,
      2008.10.28
              
              Operating
      Agreement, dated as of July 3, 2008, by and among Legend Media (Beijing)
      Information and Technology Co., Ltd., Beijing Maihesi Advertising
      International Co., Ltd., Ju Baochun and Xue Wei
              
              
              
              Incorporated
      by reference to the Company's Current Report on Form 8-K filed on July 25,
      2008.10.29
              
              Operating
      Agreement, dated as of November 28, 2008, by and among Legend Media
      (Beijing) Information and Technology Co., Ltd. Beijing Yinselingdong
      Advertising Co., Ltd., Ju Bingzhen and Xue Wei
              
              
              
              Incorporated
      by reference to the Company's Current Report on Form 8-K filed on December
      3, 2008.10.30
              
              Authorization
      Agreement, dated as of May 30, 2008, by Ju Baochun
              
              
              
              Incorporated
      by reference to the Company's Current Report on Form 8-K filed on June 5,
      2008.10.31
              
              Authorization
      Agreement, dated as of July 3, 2008, between Xue Wei and Jeffrey
      Dash
              
              
              
              Incorporated
      by reference to the Company's Current Report on Form 8-K filed on July 25,
      2008.10.32
              
              Authorization
      Agreement, dated as of July 3, 2008, between Ju Baochun and Jeffrey
      Dash
              
              
              
              Incorporated
      by reference to the Company's Current Report on Form 8-K filed on July 25,
      2008.10.33
              
              Authorization
      Agreement, dated as of November 28, 2008, between Xue Wei and Jeffrey
      Dash
              
              
              
              Incorporated
      by reference to the Company's Current Report on Form 8-K filed on December
      3, 2008.




60





10.34
              
              Authorization
      Agreement, dated as of November 28, 2008, between Ju Bingzhen and Jeffrey
      Dash
              
              
              
              Incorporated
      by reference to the Company's Current Report on Form 8-K filed on December
      3, 2008.10.35
              
              Marketing
      Service Agreement, dated as of June 1, 2008, between Beijing Hongteng
      Lianguang Advertising Co., Ltd. and Tianjin Yinse Lingdong Advertising
      Co., Ltd.
              
              
              
              Incorporated
      by reference to the Company's Current Report on Form 8-K filed on December
      30, 2008.10.36
              
              Revenue
      Assignment Agreement, dated as of May 30, 2008, among Well Chance
      Investments Limited, Beijing Hongteng Lianguang Advertising Co., Ltd.,
      Tianjin Yinse Lingdong Advertising Co., Ltd., Ju Baochun and Xue
      Wei
              
              
              
              Incorporated
      by reference to the Company's Current Report on Form 8-K filed on June 5,
      2008.10.37
              
              Exclusive
      Advertising Rights Agreement
              
              
              
              Incorporated
      by reference to the Company's Current Report on Form 8-K filed on
      Setpember 11, 2008.10.38
              
              Finder's
      Agreement by and between Noble Quests, Inc. and Fiona E LLC dated January
      31, 2008
              
              
              
              Incorporated
      by reference to the Company's Current Report on Form 8-K filed on February
      11, 2008.10.39
              
              Investor
      Relations Agreement by and between Noble Quests, Inc. and Aries Equity
      Corp., dated January 31, 2008
              
              
              
              Incorporated
      by reference to the Company's Current Report on Form 8-K filed on February
      11, 2008.10.40
              
              Legend
      Media Stock Option Plan
              
              
              
              Incorporated
      by reference to the Company's Current Report on Form 8-K filed on December
      30, 2008.10.41
              
              Termination
      Agreement
              
              
              
              Incorporated
      by reference to the Company's Current Report on Form 8-K filed on
      September 2, 2009.10.42
              
              FM
      92.5 Agency Agreement
              
              
              
              Incorporated
      by reference to the Company's Current Report on Form 8-K filed on
      September 2, 2009Report on Form 8-K filed on December 30,
      2008.10.43
              
              FM
      95.5 Agency Agreement
              
              
              
              Incorporated
      by reference to the Company's Current Report on Form 8-K filed on
      September 2, 2009.14.1
              
              Code
      of Ethics
              
              
              
              Filed
      herewith.21.1
              
              List
      of Subsidiaries
              
              
              
              Filed
      herewith.`31.1
              
              Rule
      13a-14(a)/15d-14(a) - Certification of Chief Executive
    Officer
              
              
              
              Filed
      herewith.31.2
              
              Rule
      13a-14(a)/15d-14(a) - Certification of Chief Financial
    Officer
              
              
              
              Filed
      herewith.32.1
              
              Section
      1350 Certification Pursuant to 18 U.S.C. Section 1350
              
              
              
              Furnished
      herewith.32.2
              
              Section
      1350 Certification Pursuant to 18 U.S.C. Section 1350
              
              
              
              Furnished
      herewith.




61


SIGNATURES





Pursuant to the requirements of Section
13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.




LEGEND
      MEDIA, INC.Date:  October 13, 2009
              By:
              /s/
      Ju BaoChunJu
      BaoChunChief
      Executive Officer





Pursuant to the requirements of the
Securities Exchange Act of 1934, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated.





/s/ Ju BaoChun
            
            Chief
      Executive Officer  and DirectorJu
      BaoChun
            
            Date:  October
      13, 2009/s/ Jeffrey Dash
            
            Chief
      Financial Officer  and DirectorJeffrey
      Dash
            
            Date:  October
      13, 2009/s/ Jin XinJin
      Xin
            
            Date:  October
      13, 2000/s/ Ivan Qi
            
            DirectorIvan
      Qi
            
            Date:  October
      13, 2009/s/ Julien Moulin
            
            DirectorJulien
      Moulin
            
            Date:  October
      13, 2009




62




Report of
Independent Registered Public Accounting Firm
  
 Board of
Directors and Stockholders of
 Legend
Media, Inc.
  We have
audited the accompanying consolidated balance sheets of Legend Media, Inc. (a
Nevada corporation) and subsidiaries as of June 30, 2009 and 2008, and the
related consolidated statements of operations and other comprehensive loss,
stockholders' equity, and cash flows for the years then ended.  These
consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audits.
  We
conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audits to obtain reasonable assurance about whether the
consolidated financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by management, as well
as evaluating the overall consolidated financial statements presentation. We
believe that our audits provide a reasonable basis for our opinion.
  In our
opinion, the consolidated financial statements referred to above present fairly,
in all material respects, the consolidated financial position of Legend Media,
Inc. and Subsidiaries as of June 30, 2009 and 2008, and the consolidated results
of their operations and their consolidated cash flows for the years then ended,
in conformity with U.S. generally accepted accounting principles.
 
 The
accompanying consolidated financial statements have been prepared assuming that
the Company will continue as a going concern. As discussed in Note 1 to the
financial statements,  the Company has incurred a loss of $6,432,061
and has a working capital deficit of $2,989,916 that raise substantial doubt
about the Company’s ability to continue as a going concern. Management's plans
in regard to these matters are also described in Note 1. The financial
statements do not include any adjustments that might result from the outcome of
this uncertainty.
  
  
  Goldman
Parks Kurland Mohidin LLP
 Encino,
California
 October
2, 2009




63




LEGEND
MEDIA, INC. AND SUBSIDIARIES


CONSOLIDATED
BALANCE SHEETS


AS
OF JUNE 30, 2009 AND JUNE 30, 2008





2009
                            
                            
                            2008ASSETSCURRENT
      ASSETS:Cash
      & cash equivalents
                            
                            $
                            169,343
                            
                            
                            $
                            3,372,499Accounts
      receivable, net of allowance for doubtful accounts of $278,043 and $0 for
      2009 and 2008, respectively
                            
                            
                            1,640,226
                            
                            
                            
                            1,194,005Vendor
      deposits
                            
                            
                            111,682
                            
                            
                            
                            17,464Prepaid
      expenses
                            
                            
                            165,100
                            
                            
                            
                            313,735Deferred
      costs
                            
                            
                            1,583,115
                            
                            
                            
                            14,538Other
      receivables
                            
                            
                            5,789
                            
                            
                            
                            1,033Total
      current assets
                            
                            
                            3,675,255
                            
                            
                            
                            4,913,274Long
      term deposits, contract guarantees and transaction
deposits
                            
                            
                            -
                            
                            
                            
                            500,000Property
      and equipment, net
                            
                            
                            113,824
                            
                            
                            
                            26,430Intangible
      assets, net
                            
                            
                            7,294,089
                            
                            
                            
                            9,045,310TOTAL
      ASSETS
                            
                            $
                            11,083,168
                            
                            
                            $
                            14,485,014LIABILITIES AND STOCKHOLDERS'
      EQUITYCURRENT
      LIABILITIES:Accounts
      payable
                            
                            $
                            1,934,080
                            
                            
                            $
                            517,980Accrued
      liabilities
                            
                            
                            894,046
                            
                            
                            
                            605,468Accrued
      interest
                            
                            
                            502,168
                            
                            
                            
                            282,686Unearned
      revenue
                            
                            
                            1,130,662
                            
                            
                            
                            86,659Short
      term notes payable, net of discount of $0 and $100,364,
      respectively
                            
                            
                            56,000
                            
                            
                            
                            315,636Related
      party note payable, net of discount of $0 and $68,438,
      respectively
                            
                            
                            375,733
                            
                            
                            
                            307,294Related
      party payables
                            
                            
                            1,332,524
                            
                            
                            
                            2,592,321Other
      payables
                            
                            
                            439,958
                            
                            
                            
                            81,771Total
      current liabilities
                            
                            
                            6,665,171
                            
                            
                            
                            4,789,815Commitments
      and contingencies
                            
                            
                            -
                            
                            
                            
                            -STOCKHOLDERS'
      EQUITYLegend
      Media, Inc. stockholders' equitySeries
      A convertible preferred stock - 20,000,000 shares authorized, par value
      $0.001, 2,083,333 and 1,250,000 shares issued and outstanding at June 30,
      2009 and June 30, 2008, respectively
                            
                            
                            2,083
                            
                            
                            
                            1,250Series
      B convertible preferred stock - 6,000,000 shares authorized, par value
      $0.001 0 and 5,033,680 shares issued and outstanding at June 30, 2009 and
      June 30, 2008, respectively
                            
                            
                            -
                            
                            
                            
                            5,034Common
      stock - 127,000,000 shares authorized, par value $0.001, 111,013,355 and
      10,235,328 shares issued and outstanding at June 30, 2009 and June 30,
      2008, respectively
                            
                            
                            111,013
                            
                            
                            
                            10,235Additional
      paid-in capital
                            
                            
                            69,165,562
                            
                            
                            
                            11,180,217Accumulated
      deficit, deemed dividends related to entities under common
      control
                            
                            
                            (56,854,346
                            )
                            
                            
                            -Accumulated
      deficit, from operations
                            
                            
                            (8,030,961
                            )
                            
                            
                            (1,605,115
                            )Total
      Accumulated deficit
                            
                            
                            (64,885,307
                            )
                            
                            
                            (1,605,115
                            )Other
      comprehensive income
                            
                            
                            24,646
                            
                            
                            
                            97,363Total
      Legend Media, Inc stockholders' equity
                            
                            
                            4,417,997
                            
                            
                            
                            9,688,984Non-controlling
      interest
                            
                            
                            -
                            
                            
                            
                            6,215Total
      stockholders' equity
                            
                            
                            4,417,997
                            
                            
                            
                            9,695,199TOTAL
      LIABILITIES AND STOCKHOLDERS' EQUITY
                            
                            $
                            11,083,168
                            
                            
                            $
                            14,485,014





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


64





LEGEND
MEDIA, INC. AND SUBSIDIARIES


CONSOLIDATED
STATEMENTS OF OPERATIONS AND OTHER COMPREHENSIVE LOSS


YEARS
ENDED JUNE 30, 2009 AND 2008





2009
                    
                    
                    2008Revenue
                    
                    $
                    9,990,373
                    
                    
                    $
                    4,726,040Cost
      of revenue
                    
                    
                    5,115,998
                    
                    
                    
                    2,789,490Gross
      profit
                    
                    
                    4,874,375
                    
                    
                    
                    1,936,550Operating
      expenses:Selling
      expenses
                    
                    
                    3,828,015
                    
                    
                    
                    914,382General
      and administrative expenses
                    
                    
                    3,084,110
                    
                    
                    
                    1,813,031Depreciation
      and amortization expense
                    
                    
                    1,659,823
                    
                    
                    
                    131,418Goodwill
      impairment
                    
                    
                    1,061,562
                    
                    
                    
                    -Loss
      on termination of contracts
                    
                    
                    692,811
                    
                    
                    
                    -Loss
      (gain) on disposal of fixed assets
                    
                    
                    (11,180
                    )
                    
                    
                    25,893Total
      operating expenses
                    
                    
                    10,315,141
                    
                    
                    
                    2,884,724Loss
      from Operations
                    
                    
                    (5,440,766
                    )
                    
                    
                    (948,174
                    )Non-operating
      income (expense):Interest
      income
                    
                    
                    981
                    
                    
                    
                    947Interest
      expense
                    
                    
                    (225,178
                    )
                    
                    
                    (262,171
                    )Related
      party interest expense
                    
                    
                    (334,444
                    )
                    
                    
                    (195,256
                    )Foreign
      exchange gain (loss)
                    
                    
                    4,698
                    
                    
                    
                    -Other
                    
                    
                    (25,927
                    )
                    
                    
                    (12,848
                    )Total
      non-operating expense
                    
                    
                    (579,870
                    )
                    
                    
                    (469,328
                    )Loss
      before income tax
                    
                    
                    (6,020,636
                    )
                    
                    
                    (1,417,502
                    )Income
      tax
                    
                    
                    411,425
                    
                    
                    
                    132,419Net
      Loss
                    
                    
                    (6,432,061
                    )
                    
                    
                    (1,549,921
                    )Less:
      Net loss attributable to the noncontrolling interest
                    
                    
                    6,215
                    
                    
                    
                    9,437Net
      Loss attributable to Legend Media, Inc. common
shareholders
                    
                    
                    (6,425,846
                    )
                    
                    
                    (1,540,484
                    )Other
      comprehensive income (loss)Foreign
      currency translation gain (loss)
                    
                    
                    (72,717
                    )
                    
                    
                    97,363Comprehensive
      Loss
                    
                    $
                    (6,498,563
                    )
                    
                    $
                    (1,443,121
                    )Comprehensive
      Income (loss) attributable to the noncontrolling interest
                    
                    
                    302
                    
                    
                    
                    (230
                    )Comprehensive
      Losss attributable to Legend Media, Inc. common
    shareholders
                    
                    $
                    (6,498,261
                    )
                    
                    $
                    (1,443,351
                    )Weighted
      average shares outstanding :Basic
                    
                    
                    63,015,287
                    
                    
                    
                    4,392,917Diluted
                    
                    
                    63,015,287
                    
                    
                    
                    4,392,917Earnings
      (Loss) per share:Basic
                    
                    $
                    (0.102
                    )
                    
                    $
                    (0.351
                    )Diluted
                    
                    $
                    (0.102
                    )
                    
                    $
                    (0.351
                    )





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


65




LEGEND
MEDIA, INC.


CONSOLIDATED
STATEMENTS OF SHAREHOLDERS' EQUITY


YEARS ENDED JUNE
30, 2009 AND 2008





Accumulated
                        
                        
                        
                        
                        
                        
                        
                        
                        Pooling
      of BeijingAdditonal
                        
                        
                        Other
                        
                        
                        
                        
                        
                        
                        
                        
                        Yinse
      Lingdong-
                        
                        
                        TotalSeries
      A Preferred Stock
                        
                        
                        Series
      B Preferred Stock
                        
                        
                        Common
      Stock
                        
                        
                        Paid-in
                        
                        
                        Comprehensive
                        
                        
                        Non
      Controlling
                        
                        
                        Accumulated
                        
                        
                        Accumulated
                        
                        
                        Stockholders'Shares
                        
                        
                        Amount
                        
                        
                        Shares
                        
                        
                        Amount
                        
                        
                        Shares
                        
                        
                        Amount
                        
                        
                        Capital
                        
                        
                        Income
                        
                        
                        Interest
                        
                        
                        Deficit
                        
                        
                        Deficit
                        
                        
                        EquityBalance,
      July 1, 2007
                        
                        
                        -
                        
                        
                        $
                        -
                        
                        
                        
                        5,033,680
                        
                        
                        $
                        5,034
                        
                        
                        
                        1,200,000
                        
                        
                        $
                        1,200
                        
                        
                        $
                        202,945
                        
                        
                        $
                        1,938
                        
                        
                        $
                        -
                        
                        
                        $
                        (64,631
                        )
                        
                        $
                        -
                        
                        
                        $
                        146,486Shares
      issued in connection with Noble Quest merger
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        2,700,000
                        
                        
                        
                        2,700
                        
                        
                        
                        5,634
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        8,334Common
      stock issued for cash
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        4,100,000
                        
                        
                        
                        4,100
                        
                        
                        
                        83,640
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        87,740Common
      stock issued for services
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        300,000
                        
                        
                        
                        300
                        
                        
                        
                        252,980
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        253,280Convertible
      Series A Preferred stock issued for cash
                        
                        
                        1,250,000
                        
                        
                        
                        1,250
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        2,998,750
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        3,000,000Common
      stock issued for investment in Tianjin Investment Company
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        1,935,328
                        
                        
                        
                        1,935
                        
                        
                        
                        7,158,779
                        
                        
                        
                        
                        
                        
                        
                        15,652
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        7,176,366Fair
      value of warrants issued with notes payable
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        232,918
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        232,918Fair
      value of benefical conversion feature for convertible debt
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        44,626
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        44,626Fair
      value of employee/director options
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        155,987
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        155,987Contribution
      of Capital by Shareholder through the assumption of
      obligations
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        43,958
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        43,958Foreign
      currency translation adjustment
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        95,425
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        95,425Net
      loss
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        (9,437
                        )
                        
                        
                        (1,540,484
                        )
                        
                        
                        
                        
                        
                        
                        (1,549,921
                        )Balance,
      June 30, 2008
                        
                        
                        1,250,000
                        
                        
                        $
                        1,250
                        
                        
                        
                        5,033,680
                        
                        
                        $
                        5,034
                        
                        
                        
                        10,235,328
                        
                        
                        $
                        10,235
                        
                        
                        $
                        11,180,217
                        
                        
                        $
                        97,363
                        
                        
                        $
                        6,215
                        
                        
                        $
                        (1,605,115
                        )
                        
                        $
                        -
                        
                        
                        $
                        9,695,199Series
      A Preferred shares issued, second tranche
                        
                        
                        833,333
                        
                        
                        
                        833
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        1,999,167
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        2,000,000Common
      shares issued for investment in News Radio Limited
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        104,427
                        
                        
                        
                        104
                        
                        
                        
                        293,697
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        293,801Deemed
      dividend in pooling of Beijing Yinse Lingdong
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        51,561,046
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        (51,561,046
                        )
                        
                        
                        -Fair
      value warrants issued in merger with Beijing Yinse
Lingdong
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        4,387,923
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        (4,387,923
                        )
                        
                        
                        -Dividend
      to shareholders of Beijing Hongtenglianguang Advertising Co.,
      Ltd  related to transaction
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        (905,377
                        )
                        
                        
                        (905,377
                        )Deemed
      Dividend to shareholders of Beijing Yinse Lingdong, related to
      transaction
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        (512,760
                        )
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        (512,760
                        )Fair
      value of employee/director options
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        294,705
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        294,705Contribution
      of Capital by Shareholder through the assumption of
      obligations
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        57,207
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        57,207Conversion
      of Series B Preferred Stock to common stock
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        (5,033,680
                        )
                        
                        
                        (5,034
                        )
                        
                        
                        100,673,600
                        
                        
                        
                        100,674
                        
                        
                        
                        (95,640
                        )
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        -Foreign
      currency translation adjustment
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        (72,717
                        )
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        (72,717
                        )Net
      loss
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        (6,215
                        )
                        
                        
                        (6,425,846
                        )
                        
                        
                        
                        
                        
                        
                        (6,432,061
                        )Balance,
      December 31, 2009
                        
                        
                        2,083,333
                        
                        
                        $
                        2,083
                        
                        
                        
                        -
                        
                        
                        $
                        -
                        
                        
                        
                        111,013,355
                        
                        
                        $
                        111,013
                        
                        
                        $
                        69,165,562
                        
                        
                        $
                        24,646
                        
                        
                        $
                        -
                        
                        
                        $
                        (8,030,961
                        )
                        
                        $
                        (56,854,346
                        )
                        
                        
                        4,417,997





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


66




LEGEND
MEDIA, INC. AND SUBSIDIARIES
 CONSOLIDATED
STATEMENTS OF CASH FLOWS
 YEARS
ENDED JUNE 30, 2009 AND 2008
 
 2009
                  
                  
                  2008CASH
      FLOWS FROM OPERATING ACTIVITIES:Net
      loss
                  
                  $
                  (6,425,846
                  )
                  
                  $
                  (1,540,484
                  )Adjustments
      to reconcile net loss to net cash provided by (used in) operating
      activities:Depreciation
      and amortization
                  
                  
                  1,659,823
                  
                  
                  
                  131,418Amortization
      of debt discounts
                  
                  
                  168,803
                  
                  
                  
                  108,742Goodwill
      Impairment
                  
                  
                  1,061,562
                  
                  
                  
                  -Fair
      value of stock options under SFAS 123R
                  
                  
                  294,705
                  
                  
                  
                  155,987Common
      stock issued for services
                  
                  
                  -
                  
                  
                  
                  253,280Loss
      from minority interest in subsidiary
                  
                  
                  (6,215
                  )
                  
                  
                  (9,437
                  )Loss
      on disposal of assets
                  
                  
                  539,539
                  
                  
                  
                  25,893Change
      in allowance for uncollectible accounts
                  
                  
                  278,043
                  
                  
                  
                  -Barter
      revenues
                  
                  
                  (3,221,795
                  )
                  
                  
                  (111,833
                  )Barter
      expenses
                  
                  
                  2,343,573
                  
                  
                  
                  80,494Changes
      in operating assets and liabilities:Accounts
      receivable
                  
                  
                  (1,166,998
                  )
                  
                  
                  (634,763
                  )Vendor
      deposits
                  
                  
                  (94,046
                  )
                  
                  
                  (4,586
                  )Prepaid
      expenses
                  
                  
                  121,505
                  
                  
                  
                  (15,726
                  )Other
      receivables
                  
                  
                  (2,742
                  )
                  
                  
                  4,657Accounts
      payable
                  
                  
                  1,406,204
                  
                  
                  
                  434,572Accrued
      liabilities
                  
                  
                  592,763
                  
                  
                  
                  437,863Other
      payables
                  
                  
                  459,457
                  
                  
                  
                  233,869Related
      party payables
                  
                  
                  (1,088,358
                  )
                  
                  
                  (145,785
                  )Unearned
      revenue
                  
                  
                  (12,814
                  )
                  
                  
                  45,189Accrued
      interest
                  
                  
                  219,482
                  
                  
                  
                  282,686Net
      cash used in operating activities
                  
                  
                  (2,873,355
                  )
                  
                  
                  (267,964
                  )CASH
      FLOWS FROM INVESTING ACTIVITIES:Long
      term deposits, cotnract guarantees and transaction
deposits
                  
                  
                  (153,916
                  )
                  
                  
                  (500,000
                  )Purchase
      of property and equipment
                  
                  
                  (125,452
                  )
                  
                  
                  (1,334
                  )Cash
      acquired in acquisition of variable interest entity
                  
                  
                  -
                  
                  
                  
                  35,503Payment
      on acquisition of Music Radio Limited
                  
                  
                  (740,010
                  )
                  
                  
                  -Cash
      paid for acquisition of News Radio Limited
                  
                  
                  (749,704
                  )
                  
                  
                  -Net
      cash used in investing activities
                  
                  
                  (1,769,082
                  )
                  
                  
                  (465,831
                  )CASH
      FLOWS FROM FINANCING ACTIVITIES:Proceeds
      from  notes payable
                  
                  
                  -
                  
                  
                  
                  925,733Repayment
      of notes payable
                  
                  
                  (360,000
                  )
                  
                  
                  (134,000
                  )Proceeds
      from sale of common stock
                  
                  
                  -
                  
                  
                  
                  87,740Proceeds
      from sale of convertible preferred stock
                  
                  
                  2,000,000
                  
                  
                  
                  3,000,000Contributed
      capital from assumption of obligations
                  
                  
                  44,236
                  
                  
                  
                  44,236Dividend
      to shareholders of HTLG
                  
                  
                  (250,170
                  )
                  
                  
                  -Net
      cash provided by financing activities
                  
                  
                  1,434,066
                  
                  
                  
                  3,923,709Effect
      of exchange rate changes on cash and cash eqiuvalents
                  
                  
                  5,215
                  
                  
                  
                  18,485NET
      DECREASE IN CASH & CASH EQUIVALENTS
                  
                  
                  (3,203,156
                  )
                  
                  
                  3,208,399CASH
      & CASH EQUIVALENTS, BEGINNING BALANCE
                  
                  
                  3,372,499
                  
                  
                  
                  164,100CASH
      & CASH EQUIVALENTS, ENDING BALANCE
                  
                  $
                  169,343
                  
                  
                  $
                  3,372,499SUPPLEMENTAL
      DISCLOSURE OF CASH FLOW INFORMATION:Interest
      paid
                  
                  $
                  170,000
                  
                  
                  $
                  -Income
      taxes paid
                  
                  $
                  -
                  
                  
                  $
                  -SUPPLEMENTAL
      DISCLOSURE OF NON-CASH INVESTING AND FINANCING ACTIVITIES:Issuance
      of preferred shares for acquisition of Beijing Tianjing Yinse Lingdong
      through VIE agreements
                  
                  $
                  51,561,046
                  
                  
                  $
                  5,034Issuance
      of warrants for acquisition of Beijing Tianjing Yinse Lingdong through VIE
      agreements
                  
                  $
                  4,387,923
                  
                  
                  $
                  -Issuance
      of common shares for purchase of News Radio Limited
                  
                  $
                  293,801
                  
                  
                  $
                  -
 
 The
accompanying notes are an integral part of these consolidated financial
statements.
  67


LEGEND
MEDIA, INC. AND SUBSIDIARIES
 
 NOTES TO
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 YEARS
ENDED JUNE 30, 2009 AND 2008
 
 Note 1 - Organization and Basis
of Presentation
  Organization and Line of
Business
  Legend
Media, Inc., formerly known as Noble Quests, Inc. (hereinafter referred to as
the “Company,” “Legend Media,” “we,” “us,” or “our”), was organized as a Nevada
corporation on March 16, 1998, to sell multi-media marketing services and other
related services to network marketing groups. Specifically, we assisted network
marketers in using marketing tools such as public relations, advertising, direct
mail, collateral development, electronic communications and promotion tools to
increase product and service awareness.
  On
January 31, 2008, the Company entered into a Share Exchange Agreement with Ms.
Shannon McCallum-Law, the majority stockholder, sole director and Chief
Executive Officer of the Company, Well Chance Investments Limited (“Well
Chance”) and Well Chance's sole shareholder (the "Well Chance Shareholder").
Pursuant to the terms of the Share Exchange Agreement, the Company acquired all
issued and outstanding shares of Well Chance's common stock in exchange for the
Company’s issuance of 1,200,000 shares of its common stock to the Well Chance
Shareholder on the basis of 1,200 shares of common stock for each share of Well
Chance common stock. The Share Exchange Agreement closed February 5,
2008.
  Concurrently
with the closing of the transactions under the Share Exchange Agreement and as a
condition thereof, Ms. McCallum-Law returned to us for cancellation 2,419,885 of
the 5,119,885 shares of our common stock she owned. Ms. McCallum-Law was not
compensated for the cancellation of the shares. In addition, we issued (i)
4,100,000 shares of our common stock to certain affiliates of Well Chance for
$87,740 and (ii) 200,000 shares in exchange for consulting services performed in
connection with this transaction. Upon completion of the foregoing transactions,
we had 8,200,000 shares of common stock issued and outstanding.
  The share
exchange with the Well Chance Shareholder was accounted for as a reverse
acquisition under the purchase method because Well Chance obtained control of
the Company. Accordingly, the share exchange was recorded as a recapitalization
of Well Chance, with Well Chance being treated as the continuing
entity.
  Effective
February 14, 2008, the Company changed its name from Noble Quests, Inc. to
Legend Media, Inc. Well Chance was incorporated under the laws of the British
Virgin Islands (BVI) as an International Business Company on February 22, 2005.
Well Chance was formed to create a business principally engaged in the
development and management of a technology platform that deploys advertisements
across its various advertising media. Well Chance expanded its business in
February 2008 to focus on building a consumer advertising network in the
People’s Republic of China (the “PRC”) focused on the Chinese radio advertising
industry and advertising media that targets the consumer base of
China.
  68
  On May 8,
2008, the Company and Well Chance entered into a Share Purchase Agreement (the
“Music Radio Share Purchase Agreement”) with Music Radio Limited, a BVI company,
and all of the shareholders of Music Radio Limited (the “Music Radio
Shareholders”), for the purchase of radio advertising rights in Tianjin, PRC.
Pursuant to the Music Radio Share Purchase Agreement, Well Chance (a) shares of
the Company's common stock with an aggregate value of US$7,160,714 based on the
weighted average trading price of the Company's common stock for the 90 trading
days immediately preceding May 8, 2008 (1,892,559 shares), and (b) US$2,000,000,
agreed to purchase 80% of the common stock of Legend Media Tianjin Investment
Company Limited, a BVI company and a wholly owned subsidiary of Music Radio
Limited.  The closing of the Music Radio Share Purchase Agreement
occurred May 30, 2008, and the Company secured effective control of the
exclusive sales contract for the Tianjin, PRC based radio channel. Tianjin, PRC
is a city with a population over 11.5 million.  The exclusive sales
contract provides the Company with 19,710 minutes per year of advertising space.
The contract is up for renewal annually and expires December 31,
2009.
  On July
21, 2008, Legend Media closed a transaction pursuant to which Well Chance
purchased 100% of the common stock of News Radio Limited, a BVI company, for (a)
shares of the Company's common stock with an aggregate value of 2,000,000
Chinese Renminbi ("RMB") (approximately $287,728 based on the currency exchange
rate on June 5, 2008) based on the weighted average trading price of the common
stock for the 30 trading days immediately before June 4, 2008 (67,388 shares)
payable on the closing date, (b) RMB5,250,000 (approximately $755,287 based on
the currency exchange rate on June 5, 2008) payable 28 days after the closing
date, and (c) RMB1,600,000 (approximately $230,182 based on the currency
exchange rate on June 5, 2008) payable 90 days after the closing date. The
transaction occurred pursuant to the terms of a Share Purchase
Agreement  (the “News Radio Share Purchase Agreement”) the Company
entered into on June 4, 2008 with Well Chance and all of the shareholders of
News Radio Limited (the “News Radio Shareholders”). The closing gave Legend
Media effective control of the PRC-based company that has the exclusive sales
contract for the Beijing, PRC based radio channel FM 90.5.
  The exclusive sales contract for
Beijing FM 90.5 is for four years (two years plus a two year option) and grants
Legend Media, through its operating affiliate, Beijing Maihesi International
Advertising Co., Ltd., the right to be the exclusive advertising agent for the
channel, under which the Company has the exclusive rights to manage and sell all
advertising minutes for the radio station. The contract provides Legend Media
with an additional 45,990 of radio advertising minutes per year. The exclusive
rights to sell advertising also extend to program sponsorship which the Company
expects will provide additional advertising inventory for sale.
  On August
4, 2008, Beijing Merci International Advertising Co., Ltd., a company organized
in the PRC and an affiliate of Legend Media, entered into an Exclusive
Advertising Rights Agreement with Beijing Guo Guangrong Advertising Co., Ltd.
(the "Beijing Merci Agreement"), pursuant to which Beijing Merci International
Advertising Co., Ltd. acquired 45,990 advertising minutes per year on FM 107.1,
a news and entertainment radio station that broadcasts to the Shenzhen region of
the PRC. The Exclusive Advertising Rights Agreement closed on August 31, 2008
and expires on September 30, 2010.
  On
October 28, 2008, Tianjin Yinse Lingdong Advertising Co. Ltd. (“TJ YSLD”) , a
company organized in the PRC and an affiliate of Legend Media, entered into an
Exclusive Advertising Rights Agreement Beijing Attis Advertising Co., Ltd.,
pursuant to which TJ YSLD acquired 19,710 advertising minutes per year on FM
95.5, a music and entertainment radio station that broadcasts to the Xi’an
region of the PRC. The exclusive contract gives Legend Media an additional
19,710 minutes of radio advertising targeting Shenzhen.
  69
  On
November 28, 2008, the Company entered into and closed an Acquisition Agreement
(the "Music Radio Acquisition Agreement") with Well Chance, Music Radio Limited,
and the Music Radio shareholders, Ju Baochun and Xue Wei (the "Music Radio
Shareholders"). Pursuant to the Music Radio Acquisition Agreement, the Company
acquired control over Beijing Yinse Lingdong Advertising Co., Ltd (“YSLD”) and
caused the contribution of an airline magazine advertising business of Beijing
Hongtenglianguang Advertising Co., Ltd (“HTLG”), a PRC company 100% owned by the
Music Radio Shareholders, to YSLD. In exchange for the acquisition of control,
the Company issued 5,033,680 shares of its newly-created Series B convertible
preferred stock ("Series B Preferred Stock") to the Music Radio Shareholders and
two warrants to purchase an aggregate of 10,000,000 shares of the Company's
common stock, to Ju Baochun. The closing gives Legend Media effective control of
YSLD, a PRC-based company, and YSLD’s exclusive sales contract with Xinhua
Airline Magazine.  The airline magazine reaches a potential audience
approaching 20 million passengers per year.  The exclusive contract
with Xinhua Airline Magazine provides 80 pages of advertising per monthly
issue.  The exclusive contract expires March 31, 2010 and will be up
for renewal prior to that date.
  The number of shares of Series B
Preferred Stock issued in the Music Radio Acquisition Agreement was calculated
based on an aggregate purchase price of RMB275,000,000, a currency exchange rate
of RMB6.829 to U.S. $1, and a per share issue price of 20 times the greater of
(a) 75% of the weighted average trading price of one share of common stock for
the 15 trading days ended on the third day before closing, and (b) $0.40.
Because 75% of the weighted average trading price for the common stock during
the period was $0.3440, the per share issue price used was $0.40. As more fully
described below, each share of Series B Preferred Stock was initially
convertible into 20 shares of common stock, or an aggregate of 100,673,600
shares of common stock, representing approximately 90.6% of the issued and
outstanding common stock on an as-converted basis (not including the Company's
outstanding Series A convertible preferred stock, warrants or options).
  As a
result of the Music Radio Acquisition Agreement and the reverse merger
transaction with Well Chance, the historical financial statements presented are
those of Well Chance and YSLD.  At the time of the reverse merger,
Well Chance’s historical financials became those of the Company.  The
subsequent Music Radio Acquisition Agreement, which gave the Company control of
YSLD, was between entities under common control and, as such, accounted for
similarly to a pooling of interests.
  Well
Chance conducts its business operations through its 80% owned
subsidiary, Legend (Beijing) Consulting Co., Ltd., and its wholly owned
subsidiary, Legend (Beijing) Information and Technology Co., Ltd., each of which
are incorporated under the laws of the PRC.
  In
February 2009, the Company terminated the Beijing Merci
Agreement.  The Company notified Beijing Guo Guangrong Advertising
Co., Ltd. of its decision to terminate the agreement and made an immediate
request for the return of all deposits and payments.  Subsequent to
attempts by Beijing Merci International and Beijing Guo Guangrong Advertising
Co., Ltd. to settle the dispute, Beijing Merci International Advertising Co.,
Ltd began arbitration in which we were requesting immediate termination of all
contractual obligations under the Beijing Merci Agreement.
  70
  In July
2009, the Company terminated the agreement giving them the advertising rights to
Beijing channel FM 90.5 which is also a channel controlled by Beijing Guo
Guangrong Advertising Co., Ltd.
  On July
20, 2009, Beijing Maihesi International Advertising Co., Ltd. ("Maihesi"), a
company organized in the People’s Republic of China and an affiliate of Legend
Media, Inc. (the "Company"), entered into an agreement (the “Termination
Agreement”) with Beijing Guoguang Guangrong Advertising Co., Ltd. (“Guoguang”),
pursuant to which Maihesi and Guoguang terminated (i) the Exclusive Advertising
Rights Agreement dated May 5, 2008 by and between Maihesi and Guoguang, under
which Maihesi was originally granted the exclusive right to market and sell all
broadcast advertising in connection with the frequency FM90.5 of China Radio
International in Beijing (the “Beijing Agency Agreement”), and (ii) the
Exclusive Advertising Rights Agreement dated August 4, 2008 by and between
Maihesi and Guoguang, under which Maihesi was originally granted the exclusive
right to market and sell all broadcast advertising in connection with the
frequency FM107.1 of China Radio International in Shenzhen (the “Shenzhen Agency
Agreement”, collectively with the Beijing Agency Agreement, the “Agency
Agreements”).
  According
to the Termination Agreement, (i) Maihesi or its affiliate shall pay Guoguang
RMB1,150,000 (which, as of June 30,2009, was approximately $168,360) as
compensation for the early termination of the Beijing Agency Agreement, (ii)
Maihesi agrees to forsake the deposits of RMB2,760,000 and RMB1,050,000 under
the Beijing Agency Agreement and Shenzhen Agency Agreement, respectively (which,
as of June 30, 2009, equals approximately $404,064 and $153,720 respectively),
(iii) Guoguang agrees to forsake the accrued cost for the advertising minutes
payable to Guoguang (approximately RMB 3,592,323, which, as of June
30, 2009, was approximately $525,916), and (iv) both Maihesi and
Guoguang agree to waive any claims and refrain from initiating any legal
proceedings against the other party arising from or in connection with the
terminated Agency Agreements. In addition, the Termination Agreement contains
other covenants, agreements and default and confidentiality provisions that the
reader is encouraged to review.
  As of
September 25, 2009, the Company had exclusive sales rights for one airline
..
 Today,
the Company is building a consumer advertising network in China focused on
reaching the affluent and mass affluent consumers in China through radio and
airline travel.   Management is focused on key lifestyles of the
affluent as a strategic guide for their advertising asset development.
Management has established relationships in China that are expected to provide
access to key sales outlets and additional advertising assets. The Company
continues to develop a network of relationships that are expected to allow the
Company to expand sales efforts quickly as new inventory is
acquired.
  Going
Concern
  The
accompanying consolidated financial statements were prepared on a going concern
basis, which contemplates the realization of assets and the satisfaction of
liabilities in the normal course of business. As shown in the accompanying
consolidated financial statements for the year ended June 30, 2009, the Company
incurred a net loss of $6,425,846 and has a working capital deficit of
$2,989,916 as of June 30, 2009.  The working capital deficit includes
$1,708,257 of related party payables.  These factors among others may
indicate the Company may be unable to continue as a going concern for a
reasonable period of time.
  71
  In view
of these matters, realization of profitability is dependent upon the success of
its future operations and the Company's ability to meet its financial
requirements and raise additional capital. Management's plans include further
marketing of its advertising network and the expansion of its advertising sales
for both the Chinese radio stations and the airline magazine.  If the
Company is unsuccessful in these efforts and cannot attain sufficient revenue to
permit profitable operations, or if it cannot obtain a source of funding or
investment, it may be required to substantially curtail or terminate its
operations.
  Basis of
Presentation
  The
accompanying unaudited consolidated financial statements have been prepared in
conformity with US GAAP. The Company’s functional currency is the Chinese Yuan
Renminbi ("RMB"), however, the accompanying consolidated financial statements
have been translated and presented in United States Dollars ($).
  Note
2 - Summary of Significant Accounting Policies
  Use of
Estimates
  The
preparation of financial statements in conformity with US GAAP 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. Areas that require estimates and assumptions include valuation of
accounts receivable and determination of useful lives of property and
equipment.
  Reclassification
  Certain
prior period account descriptions were reclassified to conform to the years
ended June 30, 2009 and 2008.
  Principles of
Consolidation
  The
accompanying consolidated financial statements include the accounts of Legend
Media and its subsidiaries as follows:
  Subsidiary
                        
                        Place
                          Incorporated
                        
                        % OwnedWell
      Chance
                        
                        United
      States
                        
                        
                        100Legend
      Media Investment Company Limited
                        
                        BVI
                        
                        
                        80Three
      subsidiaries of Legend Media Investment Company LimitedLegend
      Media Tianjin HK Limited
                        
                        Hong
      Kong
                        
                        
                        80Legend
      Media (Beijing) Consulting Company Limited
                        
                        PRC
                        
                        
                        80Tianjin
      Yinse Lingdong Advertising Co., Ltd
                        
                        PRC
                        
                        
                        80
                        *News
      Radio Limited
                        
                        BVI
                        
                        
                        100Four
      subsidiaries of News Radio LimitedCRI
      News Radio Limited
                        
                        Hong
      Kong
                        
                        
                        100Legend
      Media (Beijing) Information and Technology Co., Ltd.
                        
                        PRC
                        
                        
                        100Beijing
      Mahiesi Advertising International Co., Ltd.
                        
                        PRC
                        
                        
                        100
                        *Beijing
      Yinse Lingdong Advertising Co., Ltd.
                        
                        PRC
                        
                        
                        100
                        *
 
 *Variable
Interest Entities: See heading entitled “Variable Interest Entities”
below.
  72
  Cash and Cash
Equivalents
  Cash and
cash equivalents include cash on hand and cash in time deposits, certificates of
deposit and all highly liquid debt instruments with original maturities of three
months or less.
  Accounts
Receivable
  The
allowance for doubtful accounts is the Company's best estimate of the amount of
probable credit losses in the Company's existing accounts
receivable.  Management reviews the composition of accounts receivable
and analyzes historical bad debts, customer concentrations, customer credit
worthiness, current economic trends and changes in customer payment patterns to
evaluate the adequacy of these reserves.  For the year ended June 30,
2009 the Company recorded a reserve for bad debt of
$278,043.  Accounts receivable in the balance sheet are stated net of
such allowance, if necessary.
  At times,
the Company will record receivables, which have not yet been invoiced, from
revenues on advertising contracts.  These receivables are recorded in
the accompanying consolidated balance sheet and included in accounts
receivable.  The unbilled accounts receivable balance at June 30, 2009
and June 30, 2008 were $1,285,587   and $195,680,
respectively
  Prepaid
Expenses
  Prepaid
expenses consist of prepayments for legal and consulting services. Prepaid
expenses are amortized over the period in which the services are performed. See
Note 3.
  Property and
Equipment
  Property
and equipment are stated at cost. Expenditures for maintenance and repairs are
charged to earnings as incurred, and additions, renewals and betterments are
capitalized. When property and equipment are retired or otherwise disposed of,
the related cost and accumulated depreciation are removed from the respective
accounts, and any gain or loss is included in
operations.  Depreciation of property and equipment is provided using
the straight-line method for substantially all assets with estimated lives
of:
  73
  Computer
      Equipment
                  3
      yearsOffice
      equipment and furniture
                  3
      yearsLeasehold
      improvements
                  1
      year
  The
following is a summary the property and equipment as of the dates
indicated:
  June
      30,2009
                      
                      
                      2008Computer
      Equipment
                      
                      $
                      85,026
                      
                      
                      $
                      5,278Office
      equipment and furniture
                      
                      
                      58,820
                      
                      
                      
                      17,379Leasehold
      improvements
                      
                      
                      8,463
                      
                      
                      
                      8,573$
                      152,309
                      
                      
                      $
                      31,230Less:  Accumulated
      depreciation
                      
                      
                      (38,485
                      )
                      
                      
                      (4,800
                      )$
                      113,824
                      
                      
                      $
                      26,430
  Depreciation
expense for the years ended June 30, 2009 and 2008 was $29,120 and $3,682
respectively.
  Long-Lived
Assets
  The
Company applies the provisions of Statement of Financial Accounting Standards
(“SFAS”) No. 144, “Accounting for the Impairment or Disposal of Long-Lived
Assets” (“SFAS 144”), which addresses financial accounting and reporting for the
impairment or disposal of long-lived assets and supersedes SFAS No. 121,
“Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to
be Disposed Of,” and the accounting and reporting provisions of Accounting
Principles Board Opinion No. 30, “Reporting the Results of Operations for a
Disposal of a Segment of a Business.” The Company periodically evaluates the
carrying value of long-lived assets to be held and used in accordance with SFAS
144. SFAS 144 requires impairment losses to be recorded on long-lived assets
used in operations when indicators of impairment are present and the
undiscounted cash flows estimated to be generated by those assets are less than
the assets’ carrying amounts. In that event, a loss is recognized based on the
amount by which the carrying amount exceeds the fair market value of the
long-lived assets. Loss on long-lived assets to be disposed of is determined in
a similar manner, except that fair market values are reduced for the cost of
disposal.
  In July
2009, the Company decided and executed a plan to terminate the exclusive sales
contract for the Beijing FM 90.5 channel which was acquired July 21,
2008.  As part of this transaction the Company capitalized $1,016,206
as an intangible asset to recognize the believed value of the
contract.  On June 30, 2009 the Company recognized an impairment of
$774,528 based on the net book value of the asset as of June 30,
2009.
  74
  Based on
its review, the Company believes that, at June 30, 2009, there were no other
significant impairments of its long-lived assets.
  Intangible
Assets
  Intangible
assets consist of contract rights purchased in the acquisition of Legend Media
Tianjin Investment Company Limited, the entity controlling the advertising
rights to Tianjin FM 92.5, on May 30, 2008 and the acquisition of News Radio
Limited, the entity controlling the advertising rights to Beijing FM 90.5 on
July 21, 2008.   In July 2009, the Company terminated the Beijing
FM 90.5 contract and on June 30, 2009 recognized an impairment loss for the
entire amount of the intangible asset.    Further, the
Company recognized an impairment loss on the Tianjin (see Long-Lived Assets).Intangible
assets consist of the following at the dates indicated:
  June
      30,2009
                        
                        
                        2008FM
      92.5 Contract rights
                        
                        $
                        1,422,854
                        
                        
                        $
                        2,174,428Exclusivity
      agreement
                        
                        
                        7,388,731
                        
                        
                        
                        6,999,3538,811,585
                        
                        
                        
                        9,173,781Less
      Accumulated amortization
                        
                        
                        (1,517,496
                        )
                        
                        
                        (128,471
                        )Intangibles,
      net
                        
                        $
                        7,294,089
                        
                        
                        $
                        9,045,310
  The FM
92.5 contract rights primarily arise from an exclusive contract acquired in
connection with the acquisition of Legend Media Tianjin Investment Company
Limited, which is amortized over the 31 month contract period, from June 1,
2008, the first day of operations by the Company, based on the duration of the
existing advertising agreement that expired December 31, 2008 plus renewal of
the advertising agreement. The agreement was renewed on January 1,
2009.  The contract is with Tianjin FM 92.5 provides exclusive rights
to 54 advertising minutes per day or 19,710 minutes per year. The channel is
Beijing-based and through a relay facility airs in Tianjin. Legend Media’s
contract is with the Beijing channel’s exclusive agent, which has a national
exclusive contract with the channel. The exclusive agent subcontracted the
rights for the Tianjin market to Legend Media. The value was derived as the net
present value of the contract’s earnings before interest, tax, depreciation and
amortization (“EBITDA”) over the contract’s expected term from May 30, 2008
through December 31, 2010, using a discount rate of 15%. The change in value of
the FM92.5 contract and the exclusivity agreement from June 30, 2008 to December
31, 2008 is a result of foreign currency translation at each balance sheet date
and a reallocation of the value between these two intangible assets subsequent
to June 30, 2008.  At the May 30, 2008 purchase date, the Company
initially applied a 10% discount rate to calculate the net present value of the
FM 92.5 contract’s EBITDA. However, the Company subsequently determined that a
15% discount rate more accurately reflects the rate of return the Company
expects to earn on the contract, which resulted in a contract value of
$1,709,888.   The $1,709,888 was reduced by $201,524 on June 30,
2009 to recognize an impairment loss after forecasting the remaining value of
the agreement through December 31, 2010.
  Amortization
expense on this contract for the year ended June 30, 2009 was
$656,597.
  75
  The
remainder of the purchase price of $7,388,731 was allocated to an Operating
Agreement among Legend Media (Beijing) Consulting Co., Ltd., TJ YSLD and Ju
Baochun (the "Music Radio Operating Agreement"), entered into in connection with
the Music Radio    Share Purchase Agreement. Mr. Baochun,
through a company he owns and operates, is the 80% owner of Music Radio Limited,
which is the 20% owner of the post-acquisition variable interest entity ("VIE"),
TJ YSLD. Pursuant to the terms of the Operating Agreement, TJ YSLD and Mr.
Baochun are prohibited from:
  ·
              Borrowing
      money from any third party or assuming any
debt;
 
 ·
              Selling
      to any third party or acquiring from any third party any assets,
      including, without limitation, any intellectual
  rights;
 
 ·
              Granting
      any security interests for the benefit of any third party through
      collateralization of TJ YSLD's
assets;
 
 ·
              Assigning
      to any third party the Music Radio Operating Agreement;
  and
 
 ·
              Selling,
      transferring and disposing of any license held by TJ
  YSLD.
  Amortization
expense on this contract for the year ended June 30, 2009 was
$732,428.
  The FM
90.5 contract rights that were capitalized in July 2008 and subsequently
impaired on June 30, 2009 primarily relate to an exclusive contract acquired in
connection with the acquisition of News Radio Limited which is being amortized
over the 48-month contract period, beginning on July 1, 2008. The contract wass
with the Beijing FM 90.5 radio station and provides 126 advertising minutes per
day or 45,990 minutes per year. Amortization expense on this contract for
year ended June 30, 2009 was $241,678 and has been included in amortization
expense in the accompanying consolidated statements of operations and other
comprehensive income (loss). See Note 12.
  Amortization
expense for the Company’s intangible assets for the years ended June 30, 2009
and 2008 was $1,630,702 and $0, respectively.
  Revenue
Recognition
  The
Company’s revenue recognition policies are in compliance with SEC Staff
Accounting Bulletin (“SAB”) 104. The Company purchases (i) advertising inventory
in the form of advertising airtime, the unit being minutes, from radio stations
and (ii) advertising pages from airline magazines. The Company then distributes
these minutes and pages under various sales agreements. We recognize advertising
revenue over the term of each sales agreement, provided evidence of an
arrangement exists, the fees are fixed or determinable and collection of the
resulting receivable is reasonably assured. We recognize deferred revenue when
cash has been received on a sales agreement, but the revenue has not yet been
earned. Under these policies, no revenue is recognized unless persuasive
evidence of an arrangement exists, delivery has occurred, the fee is fixed or
determinable, and collection is reasonably assured.   Barter advertising
revenues and the offsetting expense are recognized at the fair value of the
advertising as determined by similar cash transactions.  Barter revenue for
the years ended June 30, 2009 and 2008 was $3,247,565 and $111,833,
respectively.   Barter expense for years ended June 30, 2009 and
2008 was $2,205,597 and $80,494, respectively.   Under PRC
regulations, the Company is required to pay certain taxes on revenues generated.
These taxes include:
  76
  ·
              Business
      tax: 5% of revenues generated net of fees paid to advertising agencies and
      media companies for services and advertising
  inventory;
  ·
              Construction
      tax:  3% of revenues generated net of fees paid to advertising
      agencies and media companies for services and advertising
      inventory;
  ·
              Education
      tax:  7% of the calculated business
  tax;
  ·
              Urban
      development tax:  3% of the calculated business tax;
      and
  ·
              Flood
      insurance tax:  1% of the calculated business
    tax.
  The
Company recognizes these taxes in cost of revenue in the period
incurred.
  Cost of
Revenue
  The
Company expenses advertising cost monthly according to the terms of the
underlying contracts. The entire cost of the contract is expensed evenly over
the term of the agreement starting on the date advertising is first expected to
take place. As the advertising inventory does not carry forward, all minutes are
expensed whether sold or not.
  Stock-Based
Compensation
  The
Company accounts for its stock-based compensation in accordance with SFAS No.
123R, “Share-Based Payment, and an Amendment of Financial Accounting Standards
Board ("FASB") Statement No. 123.” The Company recognizes in its statements
of operations and other comprehensive income (loss) the grant-date fair
value of stock options and other equity-based compensation issued to employees
and non-employees. As of June 30, 2009, there were outstanding options to
purchase 641,820 shares of common stock and warrants to purchase 11,180,294
shares of common stock.
  Income
Taxes
  The
Company utilizes SFAS No. 109, “Accounting for Income Taxes,” which requires the
recognition of deferred tax assets and liabilities for the expected future tax
consequences of events that have been included in the financial statements or
tax returns. Under this method, deferred income taxes are recognized for the tax
consequences in future years of differences between the tax bases of assets and
liabilities and their financial reporting amounts at each period end based on
enacted tax laws and statutory tax rates applicable to the periods in which the
differences are expected to affect taxable income. Valuation allowances are
established, when necessary, to reduce deferred tax assets to the amount
expected to be realized.
  77
  The
Company adopted the provisions of FASB Interpretation No. 48, Accounting for
Uncertainty in Income Taxes, (“FIN 48”) on January 1, 2007. As a result of the
implementation of FIN 48, the Company made a comprehensive review of its
portfolio of tax positions in accordance with recognition standards established
by FIN 48. As a result of the implementation of FIN 48, the Company recognized
no material adjustments to liabilities or stockholders’ equity. When tax returns
are filed, it is highly certain that some positions taken would be sustained
upon examination by the taxing authorities, while others are subject to
uncertainty about the merits of the position taken or the amount of the position
that would be ultimately sustained. The benefit of a tax position is recognized
in the financial statements in the period during which, based on all available
evidence, management believes it is more likely than not that the position will
be sustained upon examination, including the resolution of appeals or litigation
processes, if any. Tax positions taken are not offset or aggregated with other
positions. Tax positions that meet the more-likely-than-not recognition
threshold are measured as the largest amount of tax benefit that is more than 50
percent likely of being realized upon settlement with the applicable taxing
authority. The portion of the benefits associated with tax positions taken that
exceeds the amount measured as described above is reflected as a liability for
unrecognized tax benefits in the accompanying balance sheets along with any
associated interest and penalties that would be payable to the taxing
authorities upon examination. Interest associated with unrecognized tax benefits
are classified as interest expense and penalties are classified in selling,
general and administrative expenses in the statements of operations and other
comprehensive income (loss). The adoption of FIN 48 did not have a material
impact on the Company’s financial statements.
  Concentration of credit
risk
  Cash
includes cash on hand and demand deposits in accounts maintained within the PRC
and the United States. Certain financial instruments, which subject the Company
to concentration of credit risk, consist of cash. The Company maintains balances
at financial institutions which, from time to time, may exceed Federal Deposit
Insurance Corporation (“FDIC”) insured limits for the banks located in the
Unites States. Balances at financial institutions within the PRC are not covered
by insurance. As of June 30, 2009 and June 30, 2008, the Company had deposits in
excess of federally insured limits totaling $7,907 and $2,354,139 (based on the
June 30, 2008 FDIC insurance limit of $100,000), respectively. The Company has
not experienced any losses in such accounts and believes it is not exposed to
any significant risks on its cash in bank accounts.
  Foreign Currency
Transactions and Comprehensive Income
  US GAAP
requires recognized revenue, expenses, gains and losses are included in net
income. Certain statements, however, require entities to report specific changes
in assets and liabilities, such as gain or loss on foreign currency translation,
as a separate component of stockholders’ equity.  Such items, along
with net income, are components of comprehensive income. Translation gains of
$24,646 and $97,363 at June 30, 2009 and June 30, 2008, respectively, are
classified as an item of other comprehensive income in the stockholders’ equity
section of the consolidated balance sheets.
  78
  Basic and Diluted Earnings
(Loss) Per Share
  Earnings
per share is calculated in accordance with SFAS No. 128 “Earnings Per Share”
("SFAS 128"),  Net earnings per share for all periods presented has
been restated to reflect the adoption of SFAS 128.  Basic earnings per
share is based upon the weighted average number of common shares outstanding.
Diluted earnings per share is based on the assumption that all dilutive
convertible shares and stock options were converted or exercised. Dilution is
computed by applying the treasury stock method. Under this method, options and
warrants are assumed to be exercised at the beginning of the period (or at the
time of issuance, if later), and as if funds obtained thereby were used to
purchase common stock at the average market price during the period. There were
options to purchase 641,820 and 1,040,000 shares of common stock and warrants to
purchase 11,480,294 and 1,480,294 shares of common stock outstanding as of June
30, 2009 and 2008, respectively.  The Company had issued and outstanding
convertible preferred stock that converted to 2,083,333 and
100,673,600 shares of common stock as of June 30, 2009 and 2008,
respectively.  For the year ended June 30, 2009, the Company incurred
a net loss in the accompanying statements of operations and other
comprehensive income (loss) of $6,425,846.   For the same period
in 2008, the Company incurred a net loss in the accompanying statements
of operations and other comprehensive income of
$1,540,484.  Therefore, the effect of options and warrants outstanding
is anti-dilutive during the years ended June 30, 2009 and 2008.  On
June 30, 2009 and 2008 the following potentially dilutive shares were excluded
from diluted loss per share for all periods presented because of their
anti-dilutive effect:
  2009
                            
                            2008Options
                            
                            
                            641,820
                            
                            1,040,000Warrants
                            
                            
                            11,880,294
                            
                            1,480,294Convertible
      preferred stock
                            
                            
                            2,083,333
                            
                            101,923,60014,605,447
                            
                            104,443,894
  The
following is an analysis of the differences between basic and diluted earnings
per common share in accordance with SFAS No. 128. For the years ended June 30,
2009 and 2008:
  2009
                      
                      
                      2008Net
      loss
                      
                      $
                      (6,425,846
                      )
                      
                      $
                      (1,540,484
                      )Weighted
      average shares outstanding
                      
                      
                      63,015,287
                      
                      
                      
                      4,392,917Diluted
      effect of convertible preferred stocks, options  and
      warrants
                      
                      
                      -
                      
                      
                      
                      -Weighted
      average shares - diluted
                      
                      
                      63,015,287
                      
                      
                      
                      4,392,917Earnings
      (loss) per share:Basic
                      
                      $
                      (0.102
                      )
                      
                      $
                      (0.351
                      )Diluted
                      
                      $
                      (0.102
                      )
                      
                      $
                      (0.351
                      )
  79
  Statement of Cash
Flows
  In
accordance with SFAS No. 95, “Statement of Cash Flows,” cash flows from the
Company’s operations are calculated based upon the local currencies. As a
result, amounts related to assets and liabilities reported on the statement of
cash flows will not necessarily agree with changes in the corresponding balances
on the balance sheets.
  Segment
Reporting
  SFAS No.
131, “Disclosure about Segments of an Enterprise and Related Information”
requires use of the “management approach” model for segment reporting. The
management approach model is based on the way a company’s management organizes
segments within the company for making operating decisions and assessing
performance. The Company determined it has one operating segment. (See Note
15).
  Minority Interest in
Subsidiaries
  On May
30, 2008, the Company purchased 80% of the common stock of Legend Media Tianjin
Investment Company Limited, a BVI company and a wholly-owned subsidiary of Music
Radio Limited. As a result of this purchase, the Company recognized initial
minority interest on its consolidated balance sheet of $15,524. The income
(loss) attributed to minority interest has been separately designated in the
accompanying statements of operations and other comprehensive income
(loss).
  Variable Interest
Entities
  In
January 2003, the FASB issued Statement of Financial Accounting Standards Board
Interpretation No. 46, "Consolidation of Variable Interest Entities, an
Interpretation of Accounting Research Bulletin ("ARB") No. 51" ("FIN 46"). In
December 2003, the FASB modified FIN 46 (“FIN 46R”) to make certain technical
corrections and address certain implementation issues that had arisen. FIN 46
provides a new framework for identifying VIEs and determining when a company
should include the assets, liabilities, non-controlling interests and results of
activities of a VIE in its consolidated financial statements.
  FIN 46R
states that in general, a VIE is a corporation, partnership, limited liability
corporation, trust or any other legal structure used to conduct activities or
hold assets that either (1) has an insufficient amount of equity to carry out
its principal activities without additional subordinated financial support, (2)
has a group of equity owners that are unable to make significant decisions about
its activities, or (3) has a group of equity owners that do not have the
obligation to absorb losses or the right to receive returns generated by its
operations.
  On May
30, 2008, the Company purchased 80% of the common stock of Legend Media Tianjin
Investment Company Limited, and on July 21, 2008, the Company purchased 100% of
the common stock of News Radio Limited. Additionally, on November 28, 2008, the
Company entered into and closed the Music Radio Acquisition Agreement with Well
Chance, Music Radio Limited, and the Music Radio Shareholders, pursuant to which
the Company acquired control of YSLD, another variable interest entity. Due to
certain restrictions imposed upon Chinese advertising companies, direct
investment and ownership of media and advertising companies in the PRC is
prohibited. Therefore, the Company acquired control of TJ YSLD and the Company
acquired control of Beijing Mahiesi Advertising International Co., Ltd. (through
its purchase of News Radio Limited). The Company structured the Music Radio
Limited and News Radio Limited transactions to comply with such
restrictions.
  80
  The
principal regulations governing foreign ownership in the advertising industry in
China include:
  ·
              The
      Catalogue for Guiding Foreign Investment in Industry (2004);
      and
 ·
                The
      Administrative Regulations on Foreign-invested Advertising Enterprises
      (2004).
  These
regulations set the guidelines by which foreign entities can directly invest in
the advertising industry.  The regulations require foreign entities that
directly invest in the China advertising industry to have at least two years of
direct operations in the advertising industry outside of China.  Further,
since December 10, 2005, 100% ownership in Chinese advertising companies is
allowed, but the foreign company must have at least three years of direct
operations in the advertising industry outside of China.
  Because
the Company has not been involved in advertising outside of China for the
required number of years, the Company’s domestic PRC operating subsidiaries,
which are considered foreign-invested, are currently ineligible to apply for the
required advertising services licenses in China.  The Company’s PRC
operating affiliates hold the requisite licenses to provide advertising services
in China and they are owned or controlled by PRC citizens designated by the
Company.  The Company’s radio advertising business operates in China though
contractual arrangements with consolidated entities in China.  The Company
and its newly acquired PRC subsidiaries have entered into contractual
arrangements with TJ YSLD, Beijing Mahiesi Advertising International Co., Ltd.
and YSLD as well as their respective shareholders under which:
  ·
              the
      Company is able to exert significant control over significant decisions
      about the activities of TJ YSLD,  Beijing Mahiesi Advertising
      International Co., Ltd. and YSLD,
 
 ·
              a
      substantial portion of the economic benefits and risks of the operations
      of TJ YSLD, Beijing Mahiesi Advertising International Co., Ltd. and YSLD
      have been transferred to the Company through a revenue assignment
      agreement, and
 
 ·
              The
      equity owner of TJ YSLD, Beijing Mahiesi Advertising International Co.,
      Ltd. and YSLD does not have the obligation to absorb the losses of TJ YSLD
      Beijing Mahiesi Advertising International Co., Ltd. or
    YSLD.
  As the
Company is able to exert significant control over the PRC operating affiliates
and a substantial portion of the economic benefits and risks have been
transferred to the Company, it has determined that the advertising entities, TJ
YSLD, Beijing Mahiesi Advertising International Co., Ltd. and YSLD meet the
definition of a VIE. Further, the Company is considered to be the primary
beneficiary of the risks and benefits of equity ownership of TJ YSLD, Beijing
Mahiesi Advertising International Co., Ltd. and YSLD and thus has consolidated
these entities in its accompanying financial statements as of June 30,
2009.
  81


Fair Value of Financial
Instruments and Concentrations




On
January 1, 2008, the Company adopted SFAS No. 157, “Fair Value Measurements”
(“SFAS 157”) SFAS 157 defines fair value, establishes a three-level valuation
hierarchy for disclosures of fair value measurement and enhances disclosures
requirements for fair value measures. The carrying amounts reported in the
balance sheets for receivables and current liabilities each qualify as financial
instruments and are a reasonable estimate of fair value because of the short
period of time between the origination of such instruments and their expected
realization and their current market rate of interest. The three levels are
defined as follow:




·
            Level
      1 inputs to the valuation methodology are quoted prices (unadjusted) for
      identical assets or liabilities in active
  markets.




·
            Level
      2 inputs to the valuation methodology include quoted prices for similar
      assets and liabilities in active markets, and inputs that are observable
      for the asset or liability, either directly or indirectly, for
      substantially the full term of the financial
  instrument.




·
            Level
      3 inputs to the valuation methodology are unobservable and significant to
      the fair value measurement.




As of
June 30, 2009, the Company did not identify any assets and liabilities that are
required to be presented on the balance sheets at fair value.




Recent
Pronouncements




In
December 2007, the SEC issued SAB 110, which expresses the views of the SEC
staff regarding the use of a “simplified” method, as discussed in the previously
issued SAB 107, in developing an estimate of expected term of “plain
vanilla” share options in accordance with Statement of Financial Accounting
Standards ("SFAS") No. 123(R), “Share-Based Payment” ("SFAS No. 123(R)").
In particular, the SEC staff indicated in SAB 107 that it will accept a
company’s election to use the simplified method, regardless of whether the
company has sufficient information to make more refined estimates of expected
term. At the time SAB 107 was issued, the SEC staff believed that more
detailed external information about employee exercise behavior (e.g., employee
exercise patterns by industry and/or other categories of companies) would, over
time, become readily available to companies. Therefore, the SEC staff stated in
SAB 107 that it would not expect a company to use the simplified method for
share option grants after December 31, 2007. The SEC staff understands that
such detailed information about employee exercise behavior may not be widely
available by December 31, 2007. Accordingly, the SEC staff will continue to
accept, under certain circumstances, the use of the simplified method beyond
December 31, 2007. Upon the Company’s adoption of
SFAS No. 123(R), the Company elected to use the simplified method to
estimate the Company’s expected term.


82


In
December 2007, the FASB issued SFAS No. 141 (Revised 2007), “Business
Combinations” (“SFAS 141R”).  SFAS 141R  changes how a
reporting enterprise accounts for the acquisition of a business. SFAS
No. 141R  requires an acquiring entity to recognize all the
assets acquired and liabilities assumed in a transaction at the acquisition-date
fair value, with limited exceptions, and applies to a wider range of
transactions or events. SFAS 141R is effective for fiscal years beginning on or
after December 15, 2008 and early adoption and retrospective application is
prohibited. The Company believes adopting SFAS 141R will significantly affect
its financial statements for any business combination completed after June 30,
2009. In February 2007, the FASB issued SFAS No. 159, “The Fair Value Option for
Financial Assets and Financial Liabilities” (“SFAS 159”). SFAS 159 permits
entities to choose to measure many financial assets and financial liabilities at
fair value. Unrealized gains and losses on items for which the fair value option
has been elected are reported in earnings. SFAS 159 is effective as of the
beginning of an entity’s first fiscal year that begins after November 15, 2007.
The Company adopted SFAS 159 on July 1, 2008. The Company chose not to elect the
option to measure the fair value of eligible financial assets and
liabilities.




In
December 2007, the FASB issued SFAS No. 160, “Noncontrolling Interests in
Consolidated Financial Statements,” (“SFAS 160”) which is an amendment of ARB
No. 51.  This statement clarifies that a noncontrolling interest in a
subsidiary is an ownership interest in the consolidated entity that should be
reported as equity in the consolidated financial statements.  This
statement changes the way the consolidated income statement is presented, thus
requiring consolidated net income to be reported at amounts that include the
amounts attributable to both parent and the noncontrolling
interest.  This statement is effective for the fiscal years, and
interim periods within those fiscal years, beginning on or after December 15,
2008.  Based on current conditions, the Company does not expect the
adoption of SFAS 160 to have a significant effect on its results of operations
or financial position.




In June
2007, the FASB issued FASB Staff Position No. EITF 07-3, “Accounting for
Nonrefundable Advance Payments for Goods or Services Received for use in Future
Research and Development Activities”, which addresses whether nonrefundable
advance payments for goods or services that used or rendered for research and
development activities should be expensed when the advance payment is made or
when the research and development activity has been
performed.    . This statement will not have an impact on
the Company’s financial statements.




In March
2008, the FASB issued SFAS No. 161, “Disclosures about Derivative Instruments
and Hedging Activities, an amendment of FASB Statement No. 133” (“SFAS 161”).
SFAS 161 changes the disclosure requirements for derivative instruments and
hedging activities. Entities are required to provide enhanced disclosures about
(a) how and why an entity uses derivative instruments, (b) how derivative
instruments and related hedged items are accounted for under Statement 133 and
its related interpretations, and (c) how derivative instruments and related
hedged items affect an entity’s financial position, financial performance, and
cash flows. Based on current conditions, the Company does not expect the
adoption of SFAS 161 to have a significant impact on its results of operations
or financial position.




In May
2008, the FASB issued SFAS No. 162, “The Hierarchy of Generally Accepted
Accounting Principles” (“SFAS 162”). SFAS 162 identifies the sources of
accounting principles and the framework for selecting the principles to be used
in the preparation of financial statements of nongovernmental entities that are
presented in conformity with US GAAP. This statement will not have an impact on
the Company’s financial statements.


83


In May
2008, the FASB issued SFAS No. 163, “Accounting for Financial Guarantee
Insurance Contracts, an interpretation of FASB Statement No. 60” (“SFAS
163”).The scope of SFAS 163 is limited to financial guarantee insurance (and
reinsurance) contracts, as described in this statement, issued by enterprises
included within the scope of Statement No. 60. Accordingly, this statement does
not apply to financial guarantee contracts issued by enterprises excluded from
the scope of FASB Statement No. 60 or to some insurance contracts that seem
similar to financial guarantee insurance contracts issued by insurance
enterprises (such as mortgage guaranty insurance or credit insurance on trade
receivables). SFAS 163 also does not apply to financial guarantee insurance
contracts that are derivative instruments included within the scope of FASB
Statement No. 133, “Accounting for Derivative Instruments and Hedging
Activities.” This statement will not have an effect on the Company’s financial
statements.




In June
2008, the FASB issued EITF Issue 07-5 “Determining whether an Instrument (or
Embedded Feature) is indexed to an Entity’s Own Stock” (“EITF No. 07-5”). EITF
No. 07-5 is effective for financial statements issued for fiscal years beginning
after December 15, 2008, and interim periods within those fiscal years. Early
application is not permitted. Paragraph 11(a) of SFAS 133 “Accounting for
Derivatives and Hedging Activities” specifies that a contract that would
otherwise meet the definition of a derivative but is both (a) indexed to
the Company’s own stock and (b) classified in stockholders’ equity in the
statement of financial position would not be considered a derivative financial
instrument. EITF No. 07-5 provides a new two-step model to be applied in
determining whether a financial instrument or an embedded feature is indexed to
an issuer’s own stock and thus able to qualify for the SFAS 133 paragraph 11(a)
scope exception. This statement will not have an impact on the Company’s
financial statements.




In April
2008, the FASB issued FSP 142-3 “Determination of the Useful Life of Intangible
Assets” (“FSP 142-3”), which amends the factors a company should consider when
developing renewal assumptions used to determine the useful life of an
intangible asset under SFAS 142. FSP 142-3 is effective for financial statements
issued for fiscal years beginning after December 15, 2008, and interim periods
within those fiscal years. SFAS 142 requires companies to consider whether
renewal can be completed without substantial cost or material modification of
the existing terms and conditions associated with the asset. FSP 142-3 replaces
the previous useful life criteria with a new requirement—that an entity consider
its own historical experience in renewing similar arrangements. If historical
experience does not exist then the Company would consider market participant
assumptions regarding renewal including 1) highest and best use of the asset by
a market participant, and 2) adjustments for other entity-specific factors
included in SFAS 142. This statement will not have an impact on the Company’s
financial statements.




On
October 10, 2008, the FASB issued FSP 157-3, “Determining the Fair Value of a
Financial Asset When the Market for That Asset Is Not Active,” ("FSP 157-3")
which clarifies the application of SFAS 157 in a market that is not active and
provides an example to illustrate key considerations in determining the fair
value of a financial asset when the market for that financial asset is not
active. FSP 157-3 became effective on October 10, 2008, and its adoption did not
have a material impact on the financial position or results for the year ended
June 30, 2009.




In
January 2009, the FASB issued FSP EITF 99-20-1, “Amendments to the Impairment
Guidance of EITF Issue No. 99-20, Recognition of Interest Income and Impairment
on Purchased and Retained Beneficial Interests in Securitized Financial Assets”
(“FSP EITF 99-20-1”). FSP EITF 99-20-1 changes the impairment model included
within EITF 99-20 to be more consistent with the impairment model of SFAS No.
115. FSP EITF 99-20-1 achieves this by amending the impairment model in
EITF 99-20 to remove its exclusive reliance on “market participant” estimates of
future cash flows used in determining fair value. Changing the cash flows used
to analyze other-than-temporary impairment from the “market participant” view to
a holder’s estimate of whether there has been a “probable” adverse change in
estimated cash flows allows companies to apply reasonable judgment in assessing
whether an other-than-temporary impairment has occurred.   The
adoption of FSP EITF 99-20-1 did not have a material impact on our consolidated
financial statements.


84


In April
2009, the FASB issued FSP FAS 157-4, “Determining Fair Value When the Volume and
Level of Activity for the Asset or Liability Have Significantly Decreased and
Identifying Transactions That Are Not Orderly” (“FSP FAS 157-4”). FSP FAS 157-4
amends SFAS 157 and provides additional guidance for estimating fair value in
accordance with SFAS 157 when the volume and level of activity for the asset or
liability have significantly decreased and also includes guidance on identifying
circumstances that indicate a transaction is not orderly for fair value
measurements. FSP FAS 157-4 is to applied prospectively with retrospective
application not permitted and is effective for interim and annual periods ending
after June 15, 2009, with early adoption permitted for periods ending after
March 15, 2009. An entity early adopting FSP FAS 157-4 must also early
adopt FSP FAS 115-2 and FAS 124-2, “Recognition and Presentation of
Other-Than-Temporary Impairments.” Additionally, if an entity elects to early
adopt either FSP FAS 107-1 and APB 28-1, “Interim Disclosures about Fair Value
of Financial Instruments” or FSP FAS 115-2 and FAS 124-2, it must also elect to
early adopt FSP FAS 157-4. We are currently evaluating FSP FAS 157-4 but do not
believe that it will have a significant impact on the Company’s consolidated
financial statements.




In May
2009, the FASB issued SFAS 165, “Subsequent Events” (“SFAS 165”) which provides
guidance to establish general standards of accounting for and disclosures of
events that occur after the balance sheet date but before financial statements
are issued or are available to be issued. SFAS 165 also requires entities to
disclose the date through which subsequent events were evaluated as well as the
rationale for why that date was selected. SFAS 165 is effective for interim and
annual periods ending after June 15, 2009, and accordingly, the Company adopted
SFAS 165 during the second quarter of 2009. SFAS 165 requires that public
entities evaluate subsequent events through the date that the financial
statements are issued. We have evaluated subsequent events through the time of
filing these financial statements with the SEC.




In June
2009, the FASB issued SFAS 167, “Amendments to FASB Interpretation No. 46(R)”
(“SFAS 167”), which modifies how a company determines when an entity that is
insufficiently capitalized or is not controlled through voting (or similar
rights) should be consolidated. SFAS 167 clarifies that the determination of
whether a company is required to consolidate an entity is based on, among other
things, an entity’s purpose and design and a company’s ability to direct the
activities of the entity that most significantly impact the entity’s economic
performance. SFAS 167 requires an ongoing reassessment of whether a company is
the primary beneficiary of a VIE. SFAS 167 also requires additional disclosures
about a company’s involvement in VIEs and any significant changes in risk
exposure due to that involvement. SFAS 167 is effective for fiscal years
beginning after November 15, 2009, and the Company is currently assessing the
impact of adopting SFAS 167.


85


In June
2009, the FASB issued SFAS 168, “The FASB Accounting Standards CodificationTM and
the Hierarchy of Generally Accepted Accounting Principles - A Replacement of
FASB Statement No. 162” (“SFAS 168”). SFAS 168 establishes the FASB Accounting
Standards CodificationTM (the “Codification”) as the source of authoritative
accounting principles recognized by the FASB to be applied by nongovernmental
entities in the preparation of financial statements in conformity with U.S.
GAAP. The Codification does not change current U.S. GAAP, but is intended to
simplify user access to all authoritative U.S. GAAP by providing all the
authoritative literature related to a particular topic in one place. The
Codification is effective for interim and annual periods ending after September
15, 2009, and as of the effective date, all existing accounting standard
documents will be superseded. The Codification is effective for the Company in
the first quarter of 2010 fiscal year, and accordingly, the Quarterly Report on
Form 10-Q for the quarter ending September 30, 2009 and all subsequent public
filings will reference the Codification as the sole source of authoritative
literature.




Note
3 – Prepaid Expenses




The
Company prepaid expenses at June 30, 2009 and 2008 were as follows:




2009
                  
                  
                  2008Accounting
      services
                  
                  $
                  -
                  
                  
                  $
                  14,749Capital
      raising
                  
                  
                  60,000
                  
                  
                  
                  9,362Computers,
      furniture and office equipment
                  
                  
                  -
                  
                  
                  
                  20,200Insurance
                  
                  
                  -
                  
                  
                  
                  7,966Investor
      relations
                  
                  
                  93,534
                  
                  
                  
                  34,619Legal
      Services
                  
                  
                  1,642
                  
                  
                  
                  2,368Other
                  
                  
                  9,924
                  
                  
                  
                  -Rent
                  
                  
                  -
                  
                  
                  
                  11,687Selling
      expense including commissions and marketing services
                  
                  
                  -
                  
                  
                  
                  212,784$
                  165,100
                  
                  
                  $
                  313,735




Capital
raising of $60,000 for the year ended June 30, 2009 relates to a retainer
payment made to Susquehanna
Financial Group, LLLP (“SFG”), an investment banker who has been engaged to
assist the Company with raising additional capital.  Investor
relations at June 30, 2009 of $93,534 represents prepayments made to consultants
engaged to assist with the promotion of the Company.




Note
4 - Deferred Costs and Unearned Revenues




Deferred
costs at June 30, 2009 arise from barter transactions by which the Company
received services for future period use in exchange for
advertising.   Unearned revenue at June 30, 2009 arises from both
normal trade sales and barter trade sales.  For barter sales, unearned
revenue arises when the Company enters into a barter sales agreement, pursuant
to which the delivery of the service crosses financial reporting
periods.   For normal trade sales, unearned revenue arises when a
customer prepays for advertising to be delivered in subsequent
periods




Note
5 - Long term deposits, contract guarantees and transaction
deposits




The
Company secures advertising rights from radio channels and airline
magazines.  In cases where the radio channel or airline magazine
requires a deposit to secure the contract, the Company records such deposits and
presents them in the balance sheet as long term deposits, contract guarantees
and transaction deposits.   The transaction deposits presented in
this account relate to payments made to acquisition targets prior to the
completion of transaction.


86


Long term
deposits, contract guarantees and transaction deposits consisted of the
following:




June 30,2009
                    
                    
                    2008Deposit
      for Music Radio Acquisition
                    
                    $
                    -
                    
                    
                    $
                    500,000$
                    -
                    
                    
                    $
                    500,000




Note
6 - Accrued Liabilities




Accrued
liabilities in the accompanying consolidated balance sheets at June 30, 2009 and
2008 consisted of the following:




2009
                  
                  
                  2008Compensation
                  
                  $
                  79,439
                  
                  
                  $
                  120,833Revenue
      and tax levies
                  
                  
                  171,343
                  
                  
                  
                  102,612Legal
      fees
                  
                  
                  161,303
                  
                  
                  
                  161,303Commissions
                  
                  
                  -
                  
                  
                  
                  41,669Payroll
      taxes and employee welfare expenses
                  
                  
                  12,617
                  
                  
                  
                  19,778Other
      accrued expenses
                  
                  
                  32,621
                  
                  
                  
                  21,092Rent
                  
                  
                  4,482
                  
                  
                  
                  3,056Income
      taxes (PRC)
                  
                  
                  424,574
                  
                  
                  
                  135,125Cost
      of advertising media
                  
                  
                  7,667
                  
                  
                  
                  -$
                  894,046
                  
                  
                  $
                  605,468




Note
7 - Notes Payable




RMK
Emerging Growth Opportunity Fund LP Note Agreement




On
January 31, 2008, in connection with the Share Exchange Agreement discussed
under Note 1, Well Chance entered into a loan agreement by and between Well
Chance and RMK Emerging Growth Opportunity Fund LP (“RMK”) pursuant to which
Well Chance had the right to borrow $375,733 from RMK as a short-term bridge
loan. The advances on the loan occurred in February 2008, and are due one year
from the date of the initial advance along with all applicable loan fees.
Notwithstanding the foregoing, in the event of the issuance and sale of equity
or equity-linked securities by Well Chance or the Company to investors (other
than investors who are stockholders of Well Chance at the time of the loan),
which issuance and sale results in gross proceeds to Well Chance of at least
$3,000,000 prior to the maturity date, then full repayment of the loan amount,
the loan fee and any additional loan fee owed to RMK as of the closing date of
such financing (as calculated above) shall be payable by the Company to RMK no
later than five business days after the closing date of the equity financing. On
July 1, 2008, the Company raised $3,000,000 through an unregistered sale of its
Series A convertible preferred stock. As of June 30, 2009, the note had not been
repaid and the full $375,733 principal balance and $360,991 of accrued interest
is outstanding on the RMK note. The Company has classified the loan as
short-term in the accompanying balance sheets.


87


In
addition, pursuant to the RMK loan agreement, Well Chance executed and delivered
to RMK a security agreement to secure the repayment of the loan by granting RMK
a continuing security interest in all presently existing and subsequently
acquired assets and property of Well Chance of whatever nature and wherever
located (except for any such assets for which, by the terms of any agreement in
existence on the date of the loan agreement does not permit the granting of a
security interest, in which case Well Chance shall grant to RMK a security
interest in all proceeds received by Well Chance generated by such assets). In
connection with this loan the Company issued warrants to purchase 150,294 shares
of common stock with an exercise price of $2.50 per share. See Note 10 for
description of warrants.




The due
date on this loan was February 10, 2009.  The Company has worked
diligently with RMK to extend the note.  As of this filing, the
Company expects to have a finalized extension in place in December
2009.  Related party interest expense of $334,444 has been included in
the accompanying statements of operations and other comprehensive loss for
the year ended June 30, 2009.   Related party interest expense of
$195,256 has been included in the accompanying statements of operations and
other comprehensive loss for the year ended June 30, 2008.  Of the
$375,733 original loan amount, the full $375,733 is outstanding and is
classified as related party note payable in the amount of $375,333, net of debt
discount of $0 in the accompanying consolidated balance sheets at June 30, 2009.
RMK is a fund controlled by a shareholder who is also the CEO of ARC Investment
Partners, LLC, a shareholder of the Company. (See Note 14)




Kantor
and Blueday Loan Agreements




On March
30, 2008, the Company entered into a loan agreement (the "Kantor Loan") with
Jonathan Kantor of $100,000. In connection with the Kantor Loan, the Company
issued warrants to purchase 40,000 shares of common stock with an exercise price
of $2.50 per share. See Note 10.




Also on
March 30, 2008, the Company entered into a loan agreement (the "Blueday Loan”)
with Blueday Limited ("Blueday"), of $250,000. In connection with the Blueday
Loan, the Company issued warrants to purchase 50,000 shares of common stock with
an exercise price of $2.50 per share. See Note 10.


88


Pursuant
to the terms of the Kantor Loan and Blueday Loan, the Company was to repay the
loans plus applicable loan fees (described below) by June 30, 2008. If the
Company had repaid the outstanding principal amount of each of the loans by
April 1, 2008, then the loan fees would have been $50,000 for the Kantor Loan
and $125,000 for the Blueday Loan. Any partial repayments delivered to Mr.
Kantor or Blueday after April 1, 2008 will be applied in accordance with a
formula set forth in the applicable loan agreement by dividing such partial
repayments between the outstanding principal amount, the outstanding loan fee,
and the applicable additional loan fee due on the date of repayment. In the
event that the Company does not pay a loan in full, including the outstanding
loan fee, on or before April 1, 2008, then, in addition to the outstanding
principal amount and loan fee due, the Company must also pay to Mr. Kantor and
Blueday, as applicable, an additional loan fee based on a percentage of the
outstanding principal amount of the loan at the time repayment is made. If the
Company does not repay a loan by April 1, 2008 but repays such loan in
full, including the outstanding loan fee, on April 2, 2008 or the 44-day period
thereafter, the applicable additional loan fee will be 10% of the outstanding
principal amount of the loan at the time repayment is made. The additional
loan fee percentage amount is an additional 10% for each 45-day period
subsequent to the initial 45-day period and will continue to accrue until the
Company pays such loan in full. In the event that the Company does not
repay a loan in full, including the outstanding loan fee and the applicable
additional loan fee, on or before June 30, 2008, then the additional loan fee
will continue to increase, and Mr. Kantor or Blueday will have the right to
terminate the applicable loan agreement and declare any amounts owed on such
loan due and payable. The Company has classified the Kantor Loan and the Blueday
Loan as short-term in the accompanying balance sheets.




On June
30, 2008, waivers of default were executed on the Kantor and Blueday loans,
extending the term of the loans to August 31, 2008.  The Company has
continued dialogue with the note holders and no formal request for payment has
been made.  As of June 30, 2009, the Company owed $83,367, on the
Kantor Loan representing $33,000 of principal and $50,367 of interest and
additional fees. As of June 30, 2009, the Company owed $113,811, on the Blueday
Loan representing $23,000 of principal and $90,811 of interest and additional
expenses.




Newport
Loan Agreement




On April
21, 2008, the Company entered into a loan agreement with Newport Capital Asset
Management Group, a California corporation ("Newport"), pursuant to which
Newport loaned the Company $200,000. Pursuant to the terms of the loan
agreement, the Company must repay the loan amount plus the loan fee and any
additional loan fee (each as described below) on or before 180 days following
the loan date. If the Company repays the loan amount on or before 120 days
following the loan date, then the loan will be subject to a loan fee equal to
$60,000. In the event the loan amount and the loan fee are not repaid in full on
or before the 120th day after the loan date, then, in addition to the loan
amount and the loan fee, the total amount due and payable to Newport under the
loan agreement shall also include an additional loan fee that shall be a
percentage of the remaining outstanding loan amount at the time repayment is
made. If any repayment is made on the 121st calendar day after the loan date and
for the 29-day period thereafter, the additional loan fee shall be 10% of the
remaining outstanding loan amount at the time repayment is made. In addition,
the additional loan fee shall increase to 20% for the 30-day period
subsequent to the initial 30-day period and shall continue to increase by 2%
increments for each 30-day period thereafter until the Company makes full
repayment of the remaining outstanding loan amount, the loan fee and any
additional loan fee due to Newport. Any partial repayment made by the Company
prior to the maturity date will be applied in accordance with a formula set
forth in the loan agreement by dividing such partial repayments between the
outstanding loan amount, the loan fee and any additional loan fee due on the
date of repayment. In the event the Company does not repay the loan in full,
including the loan amount, the loan fee and any additional loan fee, on or
before the maturity date, then (a) the Company will be in default of its
obligations under the loan agreement, (b) the additional loan fee will continue
to increase by 2% increments for each 30-day period until the loan is
repaid in full and (c) Newport will have the right to terminate the loan
agreement and declare all amounts owed on the loan immediately due and payable.
Notwithstanding the foregoing, in the event of the issuance and sale of equity
or equity-linked securities by Well Chance or the Company to investors (other
than investors who are stockholders of Well Chance at the time of the loan),
which issuance and sale results in gross proceeds to Well Chance of at least
$3,000,000 prior to the maturity date, then full repayment of the loan amount,
the loan fee and any additional loan fee owed to Newport as of the closing date
of such financing (as calculated above) shall be payable by the Company to
Newport no later than five business days after the closing date of such
financing. On September 26, 2008 ,the Company repaid the
$200,000 principal of the note and $60,000 of loan
premium.


89


In
addition, pursuant to the terms of the loan agreement, all (but not less than
all) of the outstanding loan amount, the loan fee and any additional loan fee
may be converted at any time by Newport into shares of the Company's common
stock based upon the following: (a) in the event the conversion takes place
within 120 days of the loan date, the conversion price per share of common stock
shall be $4.50; (b) in the event the conversion takes place between 121 and 150
days after the loan date, the conversion price per share of common stock shall
be $5.50; and (c) in the event the conversion takes place 150 or more days after
the loan date, the conversion price per share of common stock shall be
$6.50.




On the
loan date, and pursuant to the terms of the loan agreement, the Company issued
to Newport a warrant to purchase 40,000 shares of the Company's common stock at
an exercise price equal to $2.50 per share, subject to adjustment under the
terms of the warrant. The warrant is exercisable upon issuance and until the
third anniversary of the loan date. The warrant may be exercised in a cashless
manner.




On
September 26, 2008, the Company repaid $260,000 to Newport Capital which
represents a repayment of $200,000 principal balance, plus $60,000 of interest
expense. As of June 30, 2009, the Company owed Newport Capital $0.




Original Note
                      Balance
                    
                    
                    Balance as of
                      June 30, 2009Kantor
                    
                    $
                    100,000
                    
                    
                    $
                    33,000Blueday
                    
                    
                    250,000
                    
                    
                    
                    23,000Newport
                    
                    
                    200,000
                    
                    
                    
                    0Gross
      notes payable
                    
                    $
                    550,000
                    
                    
                    $
                    56,000Debt
      discounts
                    
                    
                    
                    
                    
                    
                    -Notes
      payable, net
                    
                    
                    
                    
                    
                    $
                    56,000


90




Interest
expense in the accompanying statements of operations and other
comprehensive loss was $225,178 and $262,171 for the years ended June 30, 2009
and 2008, respectively.




Note
8 - Other Payables




Following
is a summary of other payables at June 30, 2009 and 2008:




2009
                        
                        
                        2008Insurance
                        
                        $
                        6,455
                        
                        
                        $
                        -Office
      Expenses
                        
                        
                        4,483Service
      commitment to provide advertising pages
                        
                        
                        74,957
                        
                        
                        
                        74,496Due
      related to termination of radio contracts
                        
                        
                        168,360
                        
                        
                        
                        -Duties
      and levies
                        
                        
                        185,703
                        
                        
                        
                        -Other
                        
                        
                        -
                        
                        
                        
                        7,275$
                        439,958
                        
                        
                        $
                        81,771




Note
9 - Variable Interest Entities




At June
30, 2009, the Company consolidated the balance sheets and operations of TJ YSLD,
the VIE controlled under the May 30, 2008 Music Radio Limited acquisition. On
July 21, 2008, the Company completed the acquisition of News Radio Limited, and
with the purchase the Company acquired control of Beijing Mahiesi Advertising
International Co., Ltd., another VIE. On November 28, 2008, the Company entered
into and closed the Music Radio Share Purchase Agreement with Well Chance, Music
Radio Limited, and the Music Radio Shareholders pursuant to which the Company
acquired control of YSLD, HTLG another VIE. See Note 12 for acquisition details.
TJ YSLD, YSLD and HTLG have been consolidated with the Company’s financial
statements at March 31, 2009.




The
following is the condensed balance sheet of Beijing Mahiesi Advertising
International Co., Ltd., the VIE consolidated on the Company’s balance sheet in
connection with the acquisition of News Radio Limited, as of the July 21, 2008
date of acquisition:




Book value
                                
                                
                                Fair valueAssets:Cash
                                
                                $
                                286
                                
                                
                                $
                                286Accounts
      receivable
                                
                                
                                11,752
                                
                                
                                
                                11,752Prepaid
      expenses
                                
                                
                                6,292
                                
                                
                                
                                6,292Deferred
      costs
                                
                                
                                43,064
                                
                                
                                
                                43,064Other
      receivables
                                
                                
                                3,294
                                
                                
                                
                                3,294Fixed
      assets, net
                                
                                
                                5,480
                                
                                
                                
                                5,480Contract
      deposits
                                
                                
                                522,964
                                
                                
                                
                                522,964FM
      90.5 Contract rights
                                
                                
                                -
                                
                                
                                
                                1,016,196Total
      Assets
                                
                                $
                                593,132
                                
                                
                                $
                                1,609,328Liabilities:Accounts
      payable
                                
                                $
                                6,337
                                
                                
                                $
                                6,337Accrued
      expenses
                                
                                
                                5,658
                                
                                
                                
                                5,658Other
      payables
                                
                                
                                297,269
                                
                                
                                
                                297,269Total
      Liabilities
                                
                                
                                309,264
                                
                                
                                
                                309,264Equity
                                
                                
                                283,868
                                
                                
                                
                                1,300,064Total
      Liabilities and Equity
                                
                                $
                                593,132
                                
                                
                                $
                                1,609,328





91




The
intangible assets acquired have been recorded at fair value, as required under
FIN 46R. The Company consolidated all balances in the accompanying March 31,
2009 consolidated balance sheets. The operations of the VIE for the period from
July 21, 2008 (date of acquisition) through June 30, 2009 have been included in
the Company’s consolidated statements of operations and other comprehensive
income (loss). See Note 12 for details of the acquisition.




The
Company has accounted for the acquisition of YSLD in a manner similar to a
pooling of interests due to VIE common control at the time of the transaction.
This accounting treatment requires the Company to restate its historical
consolidated financial statements from July 1, 2007 through the date of
acquisition that includes a consolidation of YSLD from that date. Fair value of
the variable interest entity associated with YSLD is not considered when
accounting for the acquisition in a manner similar to a pooling of interests.
The operations of the VIE for the years ended June 30, 2009 and 2008 have been
included in the Company’s consolidated statements of operations and other
comprehensive income (loss). See Note 12 for required disclosures for the
acquisition of YSLD.




Note
10 - Stock Options and Warrants




Stock
Options




The
Company entered into an employment agreement with Mr. Jeffrey Dash on January
31, 2008. Effective January 31, 2008, Mr. Dash was appointed President and Chief
Executive Officer of the Company. Pursuant to the employment agreement Mr. Dash
was granted options to purchase 400,000 shares of the Company’s common stock at
an exercise price of $2.50 per share. The options vest over 33 months, with 25%
of the options vesting after the first three months and the remaining 75% of the
options vesting equally every three months at a rate of 30,000 shares per month.
The fair value of the options was $120. The fair value was computed using the
Black-Scholes model under the following assumptions: (1) expected life of three
years; (2) volatility of 100%, (3) risk free interest of 4.5% and (4) dividend
rate of 0%.




92




On May
19, 2008, the Company entered into an employment agreement with Mr. William Lee.
Effective June 2, 2008, Mr. Lee was appointed the Chief Operating Officer of the
Company. Pursuant to the employment agreement, Mr. Lee was granted options to
purchase 400,000 shares of the Company’s common stock at an exercise price of
$3.25 per share. The options vest over 33 months, with 12.5% of the options
vesting after the first three months and the remaining 75% of the options
vesting equally every three months at a rate of 30,000 shares per three months.
The fair value of the options was $783,280. The fair value was computed using
the Black-Scholes model under the following assumptions: (1) expected life of
three years; (2) volatility of 92%, (3) risk free interest of 4.5% and (4)
dividend rate of 0%. On October 31, 2008, Mr. Lee left the Company. At that time
of his departure from the Company he held 81,820 fully vested options and
forfeited 318,180 options.   The Company’s board of directors
agreed to grant Mr. Lee two years from the date of his departure to exercise the
fully vested options.




On March
28, 2008, the Company granted to each of two of its directors options to
purchase 80,000 shares of the Company’s common stock with an exercise price of
$2.50 per share. The options vest on a quarterly basis (in arrears) over a 24
month period commencing on the date of each director's appointment to the board.
The fair value of the options was $355,088. The fair value was computed using
the Black-Scholes model under the following assumptions: (1) expected life of
two years; (2) volatility of 90%, (3) risk free interest of 4.5% and (4)
dividend rate of 0%.




On May
19, 2008, the Company granted options to another director to purchase 80,000
shares of the Company’s common stock with an exercise price of $3.70 per share.
The options vest on a quarterly basis (in arrears) over a 24 month period
commencing on the date of the director's appointment to the board. The fair
value of the options was $155,328. The fair value was computed using the
Black-Scholes model under the following assumptions: (1) expected life of two
years; (2) volatility of 96%, (3) risk free interest of 4.5% and (4) dividend
rate of 0%.




On
November 15, 2008, Richard Vogel resigned as a director of the
Company.  At the time of his resignation, he held 31,556 fully vested
options and all were forfeited.




Following
is a summary of the stock option activity:




Weighted
                  
                  
                  AggregateNumber of
                  
                  
                  Average
                  
                  
                  IntrinsicOptions
                  
                  
                  Exercise Price
                  
                  
                  ValueOutstanding
      as of July 1, 2008
                  
                  
                  1,040,000
                  
                  
                  $
                  2.88
                  
                  
                  $
                  -Granted
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -Forfeited
                  
                  
                  398,180
                  
                  
                  
                  3.10
                  
                  
                  
                  -Exercised
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -Outstanding
      as of June 30, 2009
                  
                  
                  641,820
                  
                  
                  $
                  2.75
                  
                  
                  
                  -Exercisable
      options:June
      30, 2008
                  
                  
                  194,224
                  
                  
                  $
                  2.69
                  
                  
                  
                  -June
      30, 2009
                  
                  
                  426,153
                  
                  
                  $
                  2.78
                  
                  
                  
                  -


93




Warrants




Under the
loan agreement with RMK described in Note 7 at the closing of the share exchange
agreement described in Note 1 the Company issued RMK a warrant to purchase
150,294 shares of the Company’s common stock. The warrant was exercisable upon
issuance and is exercisable until the third anniversary of the issuance date of
the warrant. The warrant exercise price is $2.50 per share. The relative fair
value of the warrants was $108,261 and was determined using the Black-Scholes
option pricing model and the following assumptions:  term
of three years, a risk free interest rate of 4.5%, and a dividend
yield of 0% and volatility of 90%. Of the $375,733 proceeds from the loan,
the fair value of the warrants are recorded as debt discounts and are being
amortized over the term of the loan.




On March
30, 2008, and pursuant to the terms of the Kantor Loan and Blueday Loan
described in Note 7, the Company issued to Mr. Kantor and Blueday warrants to
purchase 40,000 and 50,000 shares of the Company's common stock, respectively,
at an exercise price of $2.50 per share, subject to adjustments under the terms
of the warrants. The warrants are exercisable upon issuance and until the third
anniversary of the issuance date of the warrants. The warrants may be exercised
in a cashless manner. The relative fair value of the warrants issued in
connection with the Kantor Loan was $28,082 and was determined using the
Black-Scholes option pricing model and the following assumptions:  (1)
term of three years, (2) a risk free interest rate of 4.5%, (3) a
dividend yield of 0% and (4) volatility of 97%. Of the $100,000 proceeds
from the loan, the fair value of the warrants is recorded as debt discounts and
are being amortized over the term of the loan. The relative fair value of the
warrants issued in connection with the Blueday Loan was $40,837 and was
determined using the Black-Scholes option pricing model and the following
assumptions:  (a) term of three years, (b) a risk free interest
rate of 4.5%, (c) a dividend yield of 0% and (d) volatility of 97%. Of
the $250,000 proceeds from the Blueday note, the relative fair value of the
warrants is recorded as debt discounts and will be amortized over the term of
the loan.




On April
21, 2008, and pursuant to the terms of a loan agreement with Newport Capital
Group ("Newport"), the Company issued Newport a warrant to purchase 40,000
shares of the Company's common stock at an exercise price of $2.50 per share,
subject to adjustment under the terms of the warrant. The warrant is exercisable
upon issuance and until the third anniversary of the loan date. The warrant may
be exercised in a cashless manner. The relative fair value of the warrant was
$554,536 and was determined using the Black-Scholes option pricing model and the
following assumptions:  (1) term of four months, (2) a risk free
interest rate of 0.9%, (3) a dividend yield of 0% and (4) volatility
of 96%. Of the $200,000 proceeds from the loan, the relative fair value of
the warrant is recorded as a debt discount and has been amortized over the term
of the loan. In addition, since this warrant is exercisable into shares of
common stock at a one to one ratio, an embedded beneficial conversion feature
was recorded in accordance with EITF 00-19, “Accounting for Derivative Financial
Instruments Indexed to, and Potentially Settled in, a Company’s Own Stock.” The
relative fair value of the beneficial conversion feature was $44,626 and has
been classified in additional paid-in capital in the June 30, 2009 consolidated
balance sheets.


94


On July
1, 2008, the Company issued warrants to purchase 600,000 shares of the Company's
common stock to Maoming China Fund ("Maoming") in connection with a preferred
stock placement that closed on the same date. The warrants are immediately
exercisable at an exercise price of $2.50 per share until their expiration on
June 30, 2011 and are exercisable on a cashless basis at any time after July 1,
2009 and until June 30, 2011, if the common stock underlying the warrants has
not been registered with the SEC by such date. The relative fair value of the
600,000 warrants issued with the Series A convertible preferred stock was
$554,536. The relative fair value was computed using the Black-Scholes model
under the following assumptions: (1) expected life of three years; (2)
volatility of 69%, (3) risk free interest of 2.9% and (4) dividend rate of $0%.
In addition, since the Series A convertible preferred stock is convertible into
shares of common stock at a one to one ratio, an embedded beneficial conversion
feature was recorded as a discount to additional paid in capital in accordance
with Emerging Issues Task Force No. 00-27, “Application of Issue No. 98-5 to
Certain Convertible Instruments.” The intrinsic value of the beneficial
conversion feature was $604,536. The beneficial conversion feature is considered
a deemed dividend, but the Company has an accumulated deficit; therefore, the
entry is not recorded as the accounting entry would be both a debit and a credit
to additional paid in capital.




On August
29, 2008, the Company issued warrants to purchase 300,000 shares of the
Company's common stock to Maoming in connection with a preferred stock placement
that took place on the same date (see Note 11) and in connection with its
preferred placement on July 1 2008. The warrants are immediately exercisable at
an exercise price of $2.50 per share until their expiration on August 28, 2011
and are exercisable on a cashless basis at any time after August 29, 2009 and
until August 28, 2011, if the common stock underlying the warrants has not been
registered with the SEC by such date. The relative fair value of the 300,000
warrants issued with the Series A convertible preferred stock was $189,670. The
relative fair value was computed using the Black-Scholes model under the
following assumptions: (1) expected life of 1.5 years; (2) volatility of 92%,
(3) risk free interest of 2.4% and (4) dividend rate of $0%. In addition, since
this convertible preferred stock is convertible into shares of common stock at a
one to one ratio, an embedded beneficial conversion feature would be calculated
as a discount to additional paid in capital in accordance with Emerging Issues
Task Force No. 00-27, “Application of Issue No. 98-5 to Certain Convertible
Instruments.” However, the conversion price on the issuance date was greater
than the stock price on that date and thus no intrinsic value arose from the
issuance of the convertible preferred shares. Therefore, no beneficial
conversion feature was recognized on the Company’s accompanying consolidated
balance sheets.




On
November 28, 2008, the Company issued warrants to purchase 10,000,000 shares of
the Company's common stock to BaoChun Ju in connection with the Music Radio
Acquisition Agreement dated November 28, 2008 that gave effective control of
YSLD to Legend Media, Inc.  See Note 11. The warrants were issued in
two tranches of 5,000,000 warrants per tranche.  Tranche 1 warrants
are immediately exercisable at an exercise price of $0.40 per share until their
expiration on November 28, 2011 and are exercisable on a cashless basis at any
time after November 28, 2009 and until November 28, 2011, if the common stock
underlying the warrants has not been registered with the SEC by such
date.   The relative fair value of the 5,000,000 warrants issued
in connection with the Music Radio Acquisition Agreement was $2,123,992. The
relative fair value was computed using the Black-Scholes model under the
following assumptions: (1) expected life of three years; (2) volatility of 147%,
(3) risk free interest of 4.5% and (4) dividend rate of $0%.  The
Tranche 2 warrants are immediately exercisable at an exercise price of $0.80 per
share until their expiration on November 28, 2013 and are exercisable on a
cashless basis at any time after November 28, 2009 and until November 28, 2013,
if the common stock underlying the warrants has not been registered with the SEC
by such date.  The relative fair value of the 5,000,000 warrants
issued with the Music Radio Acquisition Agreement was $2,263,931. The relative
fair value was computed using the Black-Scholes model under the following
assumptions: (1) expected life of five years; (2) volatility of 147%, (3) risk
free interest of 4.5% and (4) dividend rate of $0%.  The Company
recorded the relative fair value of the warrants as a deemed dividend related to
pooling of subsidiary, resulting from the Music Radio Acquisition Agreement for
YSLD.


95




Note
11 - Stockholders Equity




Unregistered
Sale of Series A Convertible Preferred Stock




On August
29, 2008, the Company completed the sale of 625,000 shares of the Company's
Series A convertible Stock preferred stock, and warrants to purchase 300,000
shares of the Company's common stock to Maoming for gross proceeds of
$1,500,000. Subsequently, on March 4, 2009, the Company completed the sale of
62,500 shares of the Company's Series A convertible Stock preferred stock, and
warrants to purchase 30,000 shares of the Company's common stock to Maoming for
gross proceeds to the Company of $150,000.  On April 14, the Company
completed the sale of 104,167 shares of the Company's Series A convertible Stock
preferred stock, and warrants to purchase 50,000 shares of the Company's common
stock to Maoming for gross proceeds to the Company of $250,000.  On June
23, the Company completed the sale of 41,667 shares of the Company's Series A
convertible Stock preferred stock, and warrants to purchase 20,000 shares of the
Company's common stock to Maoming for gross proceeds to the Company of $100,000.
The sale of the Series A convertible preferred stock and warrants to Maoming
occurred pursuant to the terms of a Securities Purchase Agreement (the "Maoming
Purchase Agreement") dated March 31, 2008. The Maoming Purchase Agreement closed
in connection with the Company’s previously announced acquisition of its second
media advertising business operating in the China, PRC News Radio
Limited.




The
warrants issued to Maoming are immediately exercisable at an exercise price of
$2.50 per share until their expiration on August 28, 2011 and are exercisable on
a cashless basis at any time after August 29, 2009 until August 28, 2011 if the
common stock underlying the warrants has not been registered with the SEC by
such date. See Note 10.




Common
Shares Issued for Investment in News Radio, Limited




On July
21, 2008, the Company closed the acquisition of News Radio Limited, under the
terms of the News Radio Share Purchase Agreement that the Company entered into
on June 4, 2008. As part of the purchase price, the Company delivered to the
News Radio Shareholders shares of the Company's common stock, with an aggregate
value of 2,000,000 RMB. On July 21, 2008, the acquisition was closed and the
amount was settled at 104,427 common shares with a value of $293,800 based on
the currency exchange rate used. See Note 12 for acquisition of News Radio
Limited.


96


Series
B Convertible Preferred Stock Issued in connection with YSLD and Conversion to
Common Stock




As
consideration for the acquisition of YSLD, the Company issued 5,033,680 shares
of its newly created Series B convertible preferred stock to Ju Baochun, the
owner of YSLD. Each share of the Series B convertible preferred stock was
initially convertible into 20 shares of common stock, or an aggregate of
100,673,600 shares of common stock, representing 90.6% of the issued and
outstanding common stock of the Company on an as-converted basis (not including
the Company’s outstanding Series A convertible preferred stock, warrants or
options). Under the terms of the Series B convertible preferred stock, all
shares of this Series B convertible preferred stock are to be automatically
converted into fully paid and non assessable shares of common stock on the date
that the Company amends its Articles of Incorporation such that there is a
sufficient number of shares of common stock authorized by the Company to allow
full conversion of all outstanding shares of the Series B convertible preferred
stock into shares of common stock. Further, the holders of the Series B
convertible preferred stock are entitled to the same voting rights as if they
were common stockholders of the Company, based on the number of shares of common
stock into which the holder’s aggregate number of shares of the Series B
convertible preferred stock are convertible. The Series B convertible preferred
stock was converted into common stock on December 21, 2008, the date that the
Company amended its Articles of Incorporation and authorized a sufficient number
of shares to satisfy the conversion.  The Series B convertible preferred
stock converted into 100,673,600 shares of common stock.




Deemed
Dividend Arising from the Acquisition Agreement for the effective control of
YSLD




The
Company recorded the Music Radio Acquisition Agreement, pursuant to which the
Company obtained effective control of YSLD, as a deemed dividend in the amount
of $51,561,046, which represents the $51,343,536 value of the 100,673,600 shares
of common stock into which the Series B Preferred Stock was convertible, less
the net book value of YSLD net assets of ($217,510) on the date of acquisition.
The closing gives Legend Media effective control of YSLD, a PRC-based company
that has the exclusive sales contract for Xinhua Airline Magazine, the airline
magazine for Hainan Airline Group.




Dividend
Paid to Owner for Account Balances Retained After Acquisition of
YSLD




Pursuant
to the Music Radio Acquisition Agreement, the HTLG balances for cash, accounts
receivable, related party payables remained with HTLG after the HTLG airline
business became controlled by YSLD on November 30, 2008.  The net debit
balance of the transaction was $1,322,226 which was recorded against retained
earnings as a dividend.   On March 31, 2009, the $1,322,226 dividend
was reduced by $429,957 to $892,510 to reflect the tax obligations of HTLG that
were to remain with HTLG.  The $429,957 credit to retained earnings was
offset against accrued liabilities and payables.




Note
12 - Acquisition




Acquisition
of News Radio Limited




On July
21, 2008, the Company closed a transaction pursuant to which Well Chance
purchased 100% of the common stock of News Radio Limited. The transaction
occurred pursuant to the terms of the News Radio Share Purchase Agreement that
the Company entered into on June 4, 2008 with Well Chance and the News Radio
Shareholders. As a result of the acquisition, the Company obtained control of
the following subsidiaries the Company


97




•
            CRI
      News Radio Limited (100%-owned)




•
            Legend
      Media (Beijing) Information and Technology Co., Ltd.
      (100%-owned)




•
            Beijing
      Maihesi Advertising International Co., Ltd. (100%-controlled as
      VIE)




At the
closing of the purchase. July 21, 2008,  of News Radio Limited, the Company
delivered to the News Radio Shareholders shares of the Company's common stock,
with an aggregate value of 2,000,000 RMB (on June 5, 2008, $287,728 based on the
currency exchange rate on that date). The amount was settled at $293,800 based
on the currency exchange rate on July 21, 2008.  The purchase price was
based on the weighted average trading price of the common stock for the 30
trading days immediately before June 4, 2008 (68,388 shares were actually
delivered).) In addition, (i) within 28 days after closing of the purchase of
News Radio Limited, the Company is obligated to deliver RMB 5,250,000 (on June
5, 2008, this was $755,287 based on the currency exchange rate on that date).
Subsequently on July 21, 2008, the acquisition was closed and the amount was
settled at $771,225, based on the currency exchange rate on that date, and (ii)
within 90 days after closing of the acquisition the Company is obligated to
deliver RMB 1,600,000 (on June 5, 2008, this was approximately $230,182 based on
the currency exchange rate on that date.) Subsequently on July 21, 2008, the
acquisition was closed and the amount was settled at approximately $235,040
based on the currency exchange rate on that date. As of March 31, 2009, the
Company delivered the 104,427 shares associated with the News Radio Share
Purchase Agreement.




During
the year ended June 30, 2009, the Company paid $749,990 towards the purchase of
News Radio Limited, and at June 30, 2009, the Company recognized the remaining
$256,275 in Related Party Payables in its consolidated balance sheets. See Note
14.




In
addition, the News Radio Shareholders will receive additional, performance-based
consideration within 30 days of each of  year-end 2008, 2009 and 2010 based
on the net revenues and net income for such periods of Beijing Maihesi
Advertising International Co., Ltd., a company limited by shares, organized in
the PRC and wholly owned by the News Radio Shareholders, as follows: (a) if for
the seven-month period ending December 31, 2008, net revenues equal or exceed
90% of RMB 12,000,000 and net income equals or exceeds RMB 0, the News Radio
Shareholders will receive shares of the Company’s common stock with an aggregate
value of RMB 2,500,000 (approximately $359,660 based on the currency exchange
rate on June 5, 2008) with a price per share equal to the weighted average
trading price for the 30 trading days immediately prior to the date such amount
becomes payable; (b) if for the 12-month period ending December 31, 2009, net
revenues equal or exceed 80% of RMB 30,000,000 and net income equals or exceeds
RMB 6,000,000, the News Radio Shareholders will receive RMB 4,000,000
(approximately $575,457 based on the currency exchange rate on June 5, 2008) in
the form of cash, the number of shares of the Company’s common stock as
determined by a price per share equal to the weighted average trading price for
the 30 trading days immediately prior to the date such amount becomes payable,
or a combination of the two, at the election of the News Radio Shareholders and
(c) if for the 12-month period ending December 31, 2010, net revenues equal or
exceed 80% of RMB 34,000,000 and net income equals or exceeds RMB 8,000,000, the
News Radio Shareholders will receive RMB 8,000,000 (approximately $1,150,914
based on the currency exchange rate on June 5, 2008) in the form of cash, the
number of shares of the Company’s common stock as determined by a price per
share equal to the weighted average trading price for the 30 trading days
immediately prior to the date such amount becomes payable, or a combination of
the two, at the election of the News Radio Shareholders. Pursuant to the terms
of the News Radio Share Purchase Agreement, Well Chance and the News Radio
Shareholders will mutually select an impartial auditor to audit and determine,
according to US GAAP, the Beijing Maihesi Advertising International Co., Ltd.
net revenues and net income for the relevant time-periods. For the seven-month
period from the acquisition date to December 31, 2008, the net revenues of
Beijing Maihesi Advertising International Co., Ltd. were RMB 3,334,050 and net
loss was RMB 6,131,817 RMB.


98




After the
closing of the News Radio Share Purchase Agreement the Company became the
indirect beneficiary of several agreements entered into by the Company's
affiliates.




In
connection with the closing of the News Radio Share Purchase Agreement CRI News
Radio Limited, a Hong Kong company wholly owned by News Radio Limited through
its subsidiary, a company organized in China, Legend Media (Beijing) Information
and Technology Co., Ltd. ("Legend Media IT"), entered into an Exclusive
Technical, Operational, Business Consulting and Services Agreement (the "News
Radio Service Agreement") with Beijing Maihesi Advertising International Co.,
Ltd. and the News Radio Shareholders pursuant to which Legend Media IT became
the exclusive provider of technical, operational, business consulting and other
services to Beijing Maihesi Advertising International Co., Ltd. in exchange for
a service fee and bonus as described in more detail in the News Radio Service
Agreement. The term of the News Radio Service Agreement is 10 years with an
automatic renewal for another 10-year term unless a party provides written
notice that it does not wish to renew the News Radio Service Agreement. Beijing
Maihesi Advertising International Co., Ltd. agreed to several important
covenants in the News Radio Service Agreement, including (but not limited to),
agreeing not to appoint any member of Beijing Maihesi Advertising International
Co., Ltd.’s senior management without Legend Media IT's consent and to grant
Legend Media IT certain informational rights. In addition, in the News Radio
Service Agreement, each of the News Radio Shareholders (a) pledged his 100%
equity interest in Beijing Maihesi Advertising International Co., Ltd. to Legend
Media IT as a guarantee of Beijing Maihesi Advertising International Co., Ltd.’s
fulfillment of its obligations under the News Radio Service Agreement; (b)
granted to Legend Media IT or its designee an option to purchase any or all of
his equity interest in Beijing Maihesi Advertising International Co., Ltd. at
nominal value; and (c) agreed not to dispose of or encumber any of his equity
interest in Beijing Maihesi Advertising International Co., Ltd. without Legend
Media IT prior written consent.




During
the year ended June 30, 2009, the Company paid $749,990 towards the purchase of
News Radio Limited, and at June 30, 2009, the Company recognized the remaining
$256,275 in Related Party Payables in its consolidated balance sheets. See Note
14.


99


Acquisition
Agreement for the effective control of YSLD




On
November 28, 2008, the Company entered into and closed the Music Radio
Acquisition Agreement with Well Chance, Music Radio Limited, and the Music Radio
Shareholders. Pursuant to the Music Radio Acquisition Agreement, the Company
acquired control over YSLD and caused the contribution of the airline
advertising business of HTLG to YSLD.  YSLD and HTLG were under common
control. In exchange for the acquisition of control, the Company issued
5,033,680 shares of its newly-created Series B convertible Preferred Stock, to
the Music Radio Shareholders and two warrants to purchase an aggregate of
10,000,000 shares of the Company's common stock, to Ju Baochun.   As a
result of the acquisition, the Company obtained 100% control of
YSLD.




In
determining the amount of consideration to be paid in the Music Radio
Acquisition Agreement the Company reviewed and compared publicly available
selected financial data and stock trading prices for public companies chosen
based on their common participation in the Chinese advertising and media
industry, and conducted a discounted cash flow analysis. Applying the
conclusions drawn therefrom, the number of shares of Series B convertible
preferred stock issued in the Music Radio Acquisition Agreement was calculated
based on an aggregate purchase price of RMB275,000,000, a currency exchange rate
of RMB6.829 to U.S. $1, and a per share issue price of 20 times the greater of
(a) 75% of the weighted average trading price of one share of common stock for
the 15 trading days ended on the third day before closing, and (b) $0.40.
Because 75% of the weighted average trading price for the common stock during
the period was $0.3440, the per share issue price used was $0.40. As more fully
described below, each share of Series B convertible preferred stock is initially
convertible into 20 shares of common stock or an aggregate of 100,673,600 shares
of common stock representing approximately 90.6% of the issued and outstanding
common stock on an as-converted basis (not including the Company's outstanding
Series A convertible preferred stock warrants or options). The Series B
convertible preferred stock converted into 100,673,600 shares of common stock on
December 21, 2008.




One of
the warrants issued to Ju Baochun upon closing of the Music Radio Acquisition
Agreement is immediately exercisable for 5,000,000 shares of common stock at an
exercise price of $0.40 per share until November 28, 2011 (the "First Expiration
Date") and is exercisable on a cashless basis at any time after November 28,
2009 and until the First Expiration Date if the shares of common stock
underlying the warrant have not been registered with the SEC by such date. The
other warrant issued to Ju Baochun upon closing of the Music Radio Acquisition
Agreement is immediately exercisable for 5,000,000 shares of common stock at an
exercise price of $0.80 per share until November 28, 2013 (the "Second
Expiration Date") and is exercisable on a cashless basis at any time after
November 28, 2009 and until the Second Expiration Date if the shares of common
stock underlying the warrant have not been registered with the SEC by such
date.


100


Upon the
closing of the Music Radio Acquisition Agreement the Company became the
beneficiary of several agreements. As a condition to closing, Legend Media IT
entered into an Exclusive Technical, Operational, Business Consulting and
Services Agreement (the “Music Radio Services Agreement”) with YSLD, a company
owned by Xue Wei and Ju Bingzhen, the father of Ju Baochun. Ju Bingzhen and Xue
Wei are also parties to the Music Radio Services Agreement. Pursuant to the
Music Radio Services Agreement, Legend Media IT became the exclusive provider of
technical, operational, business consulting and other services to YSLD in
exchange for a service fee and bonus as described in more detail in the Music
Radio Services Agreement. The financial results of YSLD will be consolidated
with the Company's financial statements. The term of the Music Radio Services
Agreement is 10 years with an automatic renewal for another 10-year term unless
either party provides written notice to the other party that it does not wish to
renew the Music Radio Services Agreement. YSLD agreed to several important
covenants in the Music Radio Services Agreement, including (but not limited to),
agreeing not to appoint any member of YSLD’s senior management without Legend
Media IT’s consent and to grant Legend Media IT certain informational rights. In
addition, pursuant to the Music Radio Services Agreement, each of Ju Bingzhen
and Xue Wei: (a) pledged their equity interests (representing 100% of the equity
interest) in YSLD to Legend Media IT as a guarantee of YSLD’s fulfillment of its
obligations under the Music Radio Services Agreement; (b) granted to Legend
Media IT or its designee an option to purchase any or all of their equity
interest in YSLD at nominal value to the extent permitted under applicable laws
and regulations; and (c) agreed not to dispose of or encumber any of their
equity interest in YSLD without Legend Media IT’s prior written
consent.




Legend
Media IT also entered into the Music Radio Operating Agreement with YSLD and the
Music Radio Shareholders to secure the performance of the parties' obligations
under the Music Radio Services Agreement. Pursuant to the terms of the Music
Radio Operating Agreement: (a) YSLD, Ju Bingzhen and Xue Wei agreed not to, or
to cause YSLD not to, conduct any transactions which may have a material adverse
effect on YSLD's assets, obligations, rights or operations without Legend Media
IT’s prior written consent; (b) YSLD, Ju Bingzhen and Xue Wei granted Legend
Media IT certain informational rights; (c) YSLD, Ju Bingzhen and Xue Wei agreed
to (i) submit YSLD’s annual budget and monthly cash requirement plans to Legend
Media IT for approval, (ii) obtain Legend Media’s approval for withdrawals from
YSLD’s bank accounts, and (iii) accept corporate policies and guidance from
Legend Media IT with respect to the appointment and dismissal of senior
management, daily operations and management and financial administrative
systems; (d) YSLD, Ju Bingzhen and Xue Wei agreed to appoint or cause to be
appointed the individuals nominated by Legend Media IT to become directors,
general manager, chief financial officer or other senior management of YSLD and
(e) each of Ju Bingzhen and Xue Wei entered into an Authorization Agreement (the
"Music Radio Authorization Agreement") pursuant to which each authorized Jeffrey
Dash, the Company's Chief Financial Officer, to exercise his voting rights with
respect to shares of YSLD at YSLD’s stockholders' meetings. The term of the
Music Radio Operating Agreement is 10 years with an automatic renewal for
another 10-year term unless any party provides written notice to the other
parties that it does not wish to renew the Music Radio Operating Agreement. The
term of each of the Music Radio Authorization Agreements is 10 years but it
terminates automatically upon the earlier termination of the Music Radio
Services Agreement.


101


For the
purpose of this combination between YSLD and HTLG and pursuant the Music Radio
Acquisition Agreement, the account receivables and accounts payable of HTLG
related to the airline advertising business that occurred on or prior to
November 30, 2008 shall remain with HTLG. The transaction is between parties
under common control and has been accounted for in a manner similar to a pooling
of interests. As a result of the transaction described above, the historical
financial statements presented are a combination of YSLD and the airline
magazine advertising business of HTLG, and the financial statements of the
Company have been restated to report the results of operations for the period in
which the transfer occurs as though the transfer of net assets or exchange of
equity interests had occurred at July 1, 2007. The Company’s consolidated
balance sheets at December 31, 2008 and June 30, 2008, and the results of
operations presented in the accompanying consolidated statements of operations
and other comprehensive income (loss) for the years ended June 30, 2009 and 2008
are composed of the previously separate entities combined beginning July 1,
2007. This required the historical financial statements of the Company be
restated to reflect the consolidation of YSLD under a method similar to a
pooling of interests. The Company recorded the acquisition as a deemed dividend
in the amount of $51,561,046, which represents the $51,343,536 value of the
100,673,600 common stock into which the Series B convertible preferred stock was
convertible, less the net book value of YSLD net assets of ($217,510) on the
date of acquisition. The closing of the Music Radio Acquisition Agreement gives
the Company effective control of YSLD, a PRC-based company that has the
exclusive sales contract for Xinhua Airline Magazine, the airline magazine for
Hainan Airline Group.




Note
13 - Commitments and Contingencies




Leases




On May 1,
2008, the Company entered into a 19-month lease for premises in Tianjin, China.
Under the terms of the lease, the Company is required to make monthly payments
of RMB 29,437 (approximately $4,310 per month, based on the exchange
rate as of June 30, 2009)




On June
13, 2008, the Company entered into a two-year lease for premises in Beijing,
China. Under the terms of the lease, the Company is required to make monthly
payments of RMB 31,800 (approximately $4,656 per month, based on the exchange
rate as of June 30, 2009).




On
October 27, 2008, the company entered into a one-year lease for corporate
housing in Sanya, China.  Under the terms of the lease, the Company is
required to make monthly payments of RMB 1,600 (approximately $234 per month,
based on the exchange rate as of June 30, 2009).




On
December 1, 2008, the company entered into a one-year lease for premises in
Beijing, China.  Under the terms of the lease, the Company is required to
make monthly payments of RMB 104,103 (approximately $15,240 per month, based on
the exchange rate as of June 30, 2009).




On
January 1, 2009, the company entered into a one-year lease for premises in
Haikou, China.  Under the terms of the lease, the Company is required to
make monthly payments of RMB 3,412 (approximately $500 per month, based on the
exchange rate as of June 30, 2009).




On
January 10, 2009, the Company entered into a two-year lease for premises in
Shanghai, China.  Under the terms of the lease, the Company is required to
make monthly payments of RMB 42,580 (approximately $6,234 per month, based on
the exchange rate as of June 30, 2009).




On
February 28, 2009, the company entered into a one-year lease for corporate
housing in Qingdao, China.  Under the terms of the lease, the Company is
required to make monthly payments of RMB 1,667 (approximately $244 per month,
based on the exchange rate as of June 30, 2009).


102




On March
15, 2009, the company entered into a one-year lease for premises in Qingdao,
China.  Under the terms of the lease, the Company is required to make
monthly payments of RMB 7,500 (approximately $1,098 per month, based on the
exchange rate as of June 30, 2009).




On March
18, 2009, the company entered into a one-year lease for corporate housing in
Haikou, China.  Under the terms of the lease, the Company is required to
make monthly payments of RMB 1,800 (approximately $264 per month, based on the
exchange rate as of June 30, 2009).




At June
30, 2009, total future minimum lease payments under operating leases were as
follows:




AmountYear
      ending June 30, 2010
                  
                  
                  197,108Year
      ending June 30, 2011
                  
                  
                  37,404Thereafter
                  
                  
                  0$
                  234,512




During
years ended June 30, 2009 and 2008, the Company had rent expense in the amount
of $331,160 and $111,073, respectively




Note 14 - Related Party
Transactions




Significant
balances and transactions and balances with related parties are as
follows:




a. 
 Amounts due to related parties




June 30,Party
                                                                      
                                                                      Relationship
                                                                      
                                                                      2009
                                                                      
                                                                      
                                                                      2008Classified
      as Related Party PayableBaoChun Ju and
      affiliates (including his wife, Wei Xue, and Music Radio,
      Ltd.)
                                                                      
                                                                      majority
      Shareholder
                                                                      
                                                                      $
                                                                      1,667,679
                                                                      
                                                                      
                                                                      $
                                                                      2,029,679
                                                                      1Beijing Hongtenglianguang
      Advertising Co., Ltd,
                                                                      
                                                                      common
      control PRC entity
                                                                      
                                                                      
                                                                      -
                                                                      
                                                                      
                                                                      
                                                                      562,642
                                                                      21,667,679
                                                                      
                                                                      
                                                                      
                                                                      2,592,321Related
      party receivables offset against related party payablesBeijing
      Hongtenglianguang Advertising Co., Ltd,
                                                                      
                                                                      common
      control PRC entity
                                                                      
                                                                      
                                                                      (335,155
                                                                      )
                                                                      
                                                                      
                                                                      -
                                                                      3$
                                                                      1,332,524
                                                                      
                                                                      
                                                                      $
                                                                      2,592,321Classified
      as Related Party Note PayableRMK Emerging Growth
      Fund,
                                                                      
                                                                      controlled
      by a shareholder who is also the CEO of ARC Investment
      Partners
                                                                      
                                                                      
                                                                      375,733
                                                                      
                                                                      
                                                                      
                                                                      307,294
                                                                      4$
                                                                      1,708,257
                                                                      
                                                                      
                                                                      $
                                                                      2,899,615


103




1
            BaoChun
      Ju and his wife Ms. Wei Xue, pursuant to the Music Radio Acquisition
      Agreement, became the beneficial owners of 90.6% of the Company’s common
      stock.  Mr. Ju and Ms. Xue Wei are also controlling shareholders of
      HTLG, YSLD and TJ YSLD.




2
            HTLG is
      controlled by BaoChun Ju and his wife, Ms. Xue Wei.  Further,
      pursuant to the Music Radio Acquisition Agreement dated November 28, 2008,
      the Company gained effective control over the airline magazine advertising
      product line of HTLG. HTLG, as a related company under common control, has
      paid expenses on behalf of the Company.  In connection with the TJ
      YSLD contracts acquired with the May 30, 2008 acquisition, the Company
      pays advertising minutes contract costs of RMB208,833 per month to HTLG as
      pass-through to the counterparties in the contracts.  Further, for a
      period of time HTLG was providing sales and marketing support to the TJ
      YSLD for a fee equal to RMB105,000 per month and a variable portion equal
      15% of revenues earned and collected per
month.




3
            HTLG
      is controlled by BaoChun Ju and his wife, Ms. Xue Wei.  HTLG
      performed sales functions for YSLD prior to the Music Radio Acquisition
      Agreement.  Some sales agreements dated prior to this agreement where
      in the name of HTLG and left as such for ease of customer service and
      administration.  As of June 30, 2009 the Company has a receivable
      balance from HTLG; however, since HTLG is controlled by BaoChun Ju and his
      wife, Ms. Xue Wei it shown as an offset to the amount due BaoChun
      Ju.




4
            RMK
      is a fund controlled by a shareholder. RMK made advances to the Company in
      February and March 2008 for a total note issued of $375,733. The balances
      presented are net of the note discount and the movement relates to the
      amortization of such note.  See Note
7.




b.          
During the periods indicated below, the Company closed three acquisitions with a
related party; those transactions created related party payables as
follows:




Year ended June 30,Party
                          
                          
                          
                          2009
                          
                          
                          2008BaoChun Ju and
      affiliates (including his wife, Wei Xue, and Music Radio,
      Ltd.)
                          
                          majority
      Shareholder
                          
                          $
                          1,528,966
                          
                          
                          $
                          2,000,000




c. 
During the periods indicated below, services, mostly sales related, where
provided by a related party that generated related party payables:




Year ended June 30,Party
                          
                          
                          
                          2009
                          
                          
                          2008Beijing
      Hongtenglianguang Advertising Co., Ltd,
                          
                          common
      control PRC entity
                          
                          $
                          76,097
                          
                          
                          $
                          39,786




d.
Related parties paid for expenses on behalf of the company; the expenses paid
included rent, commission and media related expenses:


104




Year ended June 30,Party
                                
                                
                                
                                2009
                                
                                
                                2008BaoChun Ju and
      affiliates (including his wife, Wei Xue, and Music Radio,
      Ltd.)
                                
                                majority
      Shareholder
                                
                                $
                                117,332
                                1
                                
                                $
                                828Beijing
      Hongtenglianguang Advertising Co., Ltd,
                                
                                common
      control PRC entity
                                
                                $
                                1,108,087
                                
                                
                                $
                                411,126


1 
Includes $106,612 for an office in Beijing that the Company rents from BaoChun
Ju; the rent per month is $15,241 which is based on fair market
value.




e. 
Related party collected cash from clients on the Company’s behalf:




Year ended June 30,Party
                          
                          
                          
                          2009
                          
                          
                          2008Beijing
      Hongtenglianguang Advertising Co., Ltd,
                          
                          common
      control PRC entity
                          
                          $
                          993,340
                          
                          
                          $
                          -




f.
Related parties provided short term loans / advances to the Company to assist
with working capital shortfalls:




Year ended June 30,Party
                            
                            
                            2009
                            
                            
                            2008BaoChun Ju and
      affiliates (including his wife, Wei Xue, and Music Radio,
      Ltd.)
                            
                            majority
      Shareholder
                            
                            $
                            244,467
                            
                            
                            $
                            189,750Beijing Hongtenglianguang
      Advertising Co., Ltd,
                            
                            common
      control PRC entity
                            
                            
                            658,094
                            
                            
                            $
                            -




g. 
Related party borrowed cash from the Company:




Year ended June 30,Party
                          
                          
                          
                          2009
                          
                          
                          2008BaoChun Ju and
      affiliates (including his wife, Wei Xue, and Music Radio,
      Ltd.)
                          
                          majority
      Shareholder
                          
                          $
                          -
                          
                          
                          $
                          273,696




Note
15 – Income Taxes




On
March 16, 2007, the National People’s Congress adopted the Enterprise
Income Tax Law (the “New Income Tax Law”), effective on January 1, 2008,
replaced the separate income tax laws for domestic enterprises and
foreign-invested enterprises, which are PRC subsidiaries of the Company, by
adopting unified income tax rate of 25% for most enterprises. In accordance with
the implementation rules of the New Income Tax Law, the preferential tax
treatments granted to various of the Company’s PRC entities did not continue and
they are subject to the statutory 25% tax rate.


As income
taxes are not calculated on a consolidated basis the individual entities may be
subject to tax in cases where the group is not profitable.  Pursuant to the
law the Company’s Chinese entities are subject to 25% tax.  During the year
ended June 30, 2009, two of the Company’s Chinese operating entities, Beijing
Yinse Lingdong Advertising Co., Ltd. and TJ YSLD, recognized a tax liability of
$516,899 and $4,095, respectively.   For the year ending June 30,
2008, Beijing Lingdong Advertising Co., Ltd. recognized a tax liability of
$132,419.


105




No
provision for taxation has been made for Legend Media (Beijing) Consulting
Company Limited, Legend Media (Beijing) Information and Technology Co., Ltd. and
Beijing Mahiesi Advertising International Co., Ltd. for the years ended June 30,
2009 and 2008, as they did not generate any taxable profits during the
periods.




Net
operating losses for tax purposes of approximately $8,400,000 at June
30, 2009 are available for carryover in the PRC. We have provided a 100%
valuation allowance for the deferred tax benefit resulting from the net
operating loss carryover. In addressing the realizability of deferred tax
assets, management considers whether it is more likely than not that some
portion or all of the deferred tax assets will not be realized. The
ultimate realization of deferred tax assets is dependent upon the generation of
future taxable income during the periods in which those temporary differences
are deductible. When we demonstrate a history of profitable operation we will
reduce our valuation allowance at that time.




A
reconciliation of the statutory Federal income tax rate and the effective income
tax rate for the years ended June 30, 2009 and 2008 follows:




2009
                  
                  
                  2008U.S.
      statutory tax rate
                  
                  
                  (34
                  )%
                  
                  
                  (34
                  )%Tax
      rate difference
                  
                  
                  9
                  %
                  
                  
                  9
                  %Utilization
      of net operating loss
                  
                  
                  0
                  %
                  
                  
                  0
                  %Valuation
      allowance
                  
                  
                  25
                  %
                  
                  
                  25
                  %Effective
      income tax rate
                  
                  
                  0
                  %
                  
                  
                  0
                  %




Significant
components of deferred tax assets and liabilities are as follows:





Deferred
      tax assets:Bad
      debt allowance
                  
                  $
                  69,511Net
      operating loss carryforwards
                  
                  
                  2,100,000Total
      deferred tax assets:
                  
                  
                  2,169,511Valuation
      allowance
                  
                  
                  (2,169,511
                  )Net
      deferred tax assets
                  
                  $
                  0




The
Company adopted FIN No. 48 on January 1, 2007. There were no unrecognized tax
benefits as of the date of adoption and there are no unrecognized tax benefits
included in the balance sheet at June 30, 2009, that would, if recognized,
affect the effective tax rate.


106


Note
16 – Segment Information




Based on
FAS 131, the Company identified one operating segment. The Company is only able
to disaggregate revenue and cost of revenue data by product line. Further
disaggregation is impracticable, because the Company’s customers and
distribution methods overlap and management reviews its business as a single
operating segment. Assets overlap between the two product lines as well. Thus,
discrete financial information is not available by more than one operating
segment.




Years ended June 30,2009
                
                
                2008(in dollars)RevenueAirline
      magazine advertising sales
                
                $
                7,201,535
                
                
                $
                3,532,822Radio
      advertising sales
                
                
                2,788,838
                
                
                
                1,184,174Other
      product lines
                
                
                -
                
                
                
                9,044$
                9,990,373
                
                
                $
                4,726,040Cost
      of RevenueAirline
      magazine advertising sales
                
                $
                2,783,148
                
                
                $
                1,916,972Radio
      advertising sales
                
                
                2,332,850
                
                
                
                659,813Other
      product lines
                
                
                -
                
                
                
                212,705$
                5,115,998
                
                
                $
                2,789,490Gross
      ProfitAirline
      magazine advertising sales
                
                $
                4,418,387
                
                
                $
                1,615,850Radio
      advertising sales
                
                
                455,988
                
                
                
                524,361Other
      product lines
                
                
                -
                
                
                
                (203,661
                )$
                4,874,375
                
                
                $
                1,936,550




Note
17- Subsequent Events (unaudited)




Considering
the potential business opportunities available and the likelihood that certain
radio business would continue to cause negative cash flow in the near future due
to the global economic depression, management believes it’s for the best
interest of the Company to restructure its current business assets and formulate
a tailored business plan in response to the global and domestic economic
changes, including (i) the disposal of FM90.5 and FM107.1 radio business and
(ii) the assignment of FM92.5 and FM95.5 radio business to BJ YSLD (as defined
below).




1.
Termination Agreement with respect to the Radio Frequency FM90.5 and
FM107.1




On July
20, 2009, Beijing Maihesi International Advertising Co., Ltd. ("Maihesi"),
a company organized in the PRC and an affiliate of Legend Media, Inc. (the
"Company"), entered into an agreement (the “Termination Agreement”) with Beijing
Guoguang Guangrong Advertising Co., Ltd. (“Guoguang”), pursuant to which Maihesi
and Guoguang terminated (i) the Exclusive Advertising Rights Agreement dated May
5, 2008 by and between Maihesi and Guoguang, under which Maihesi was originally
granted the exclusive right to market and sell all broadcast advertising in
connection with the frequency FM90.5 of China Radio International in Beijing
(the “Beijing Agency Agreement”), and (ii) the Exclusive Advertising Rights
Agreement dated August 4, 2008 by and between Maihesi and Guoguang, under which
Maihesi was originally granted the exclusive right to market and sell all
broadcast advertising in connection with the frequency FM107.1 of China Radio
International in Shenzhen (the “Shenzhen Agency Agreement”, collectively
with the Beijing Agency Agreement, the “Agency Agreements”).


107




According
to the Termination Agreement, (i) Maihesi or its affiliate shall pay Guoguang
RMB1,150,000 (which, as of June 30,2009, equaled approximately $168,360) as
compensation for the early termination of the Beijing Agency Agreement, (ii)
Maihesi agrees to forsake the deposits in the amount of RMB2,760,000 and
RMB1,050,000 under the Beijing Agency Agreement and Shenzhen Agency Agreement,
respectively (which, as of June 30, 2009, was approximately $404,064 and
$153,720 respectively), (iii) Guoguang agrees to forsake the accrued cost for
the advertising minutes payable to Guoguang (approximately RMB 3,592,323, which,
as of June 30,2009, was approximately $525,916), and (iv) both Maihesi and
Guoguang agree to waive any claims and refrain from initiating any legal
proceedings against the other party arising from or in connection with the
terminated Agency Agreements. In addition, the Termination Agreement contains
other covenants, agreements and default and confidentiality provisions that the
reader is encouraged to review.




2. 
Business Assignment with respect to the Radio Frequency FM95.5 and
FM92.5.




Atis (as
defined below) used to have existing agreements with TJ YSLD,with respect to the
exclusive right to market and sell all broadcast advertising in connection with
the frequency FM92.5 and FM95.5 of China National Radio Station Music Radio in
Tianjin and Xi’ an, respectively. To optimize the operations of the Company and
save administrative expenses, the management determines to cause such agreements
be assigned to BJ YSLD.




YSLD
entered into a cooperation agreement (the “FM95.5 Agency Agreement”) with
Beijing Atis Advertising Co., Ltd. (“Atis”), a company organized in the
PRC, pursuant to which (i) BJ YSLD is granted exclusive right to market and
sell all broadcast advertising in connection with the frequency FM95.5 of China
National Radio Station Music Radio in Xi’an for a term commencing from June 16,
2009 and ending on December 31, 2010; (ii) the annual cost for the advertising
minutes in the year of 2009 and 2010 is RMB595,835 and RMB1.1 million
respectively (which, as of the date hereof, equal to approximately
USD87,217 and USD161,016, respectively); (iii) BJ YSLD has the right of first
refusal to renew the FM 95.5 Agency Agreement upon expiration;
and (iv) BJ YSLD is required to deposit RMB356,667 (which, as of the date
hereof, equal to approximately USD52,208). In addition, the FM95.5 Agency
Agreement contains other covenants, agreements and default and
confidentiality provisions that the reader is encouraged to review.




BJ YSLD
entered into a cooperation agreement (the “FM92.5 Agency Agreement”) with
Atis, pursuant to which (i) BJ YSLD is granted exclusive right to market and
sell all broadcast advertising in connection with the frequency FM92.5 of China
National Radio Station Music Radio in Tianjin for a term commencing from June
15, 2009 and ending on December 31, 2010; (ii) the 12-month period cost for
advertising minutes is RMB2.5 million (which, as of the date hereof,
equal to approximately USD365,946); (iii) BJ YSLD has the right of first refusal
to renew the FM 92.5 Agency Agreement upon expiration; and (iv) BJ YSLD is
required to deposit RMB500,000 (which, as of the date hereof, equal to
approximately USD73,189). In addition, the FM92.5 Agency Agreement contains
other covenants, agreements and default and confidentiality provisions that the
reader is encouraged to review.




In
reviewing subsequent events, management considers events that take place up to
and including the date of approval of the financial statements by management on
October 2, 2009.


108