SECURITIES
AND EXCHANGE COMMISSION


WASHINGTON,
D.C.  20549




FORM
10-Q




þ
            Quarterly
      Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of
      1934




For the
quarterly period ended March 31, 2010.




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 001-33746




CHINA
MEDIAEXPRESS HOLDINGS, INC.


(Exact
name of registrant as specified in its charter)





Delaware
              
              20-8951489(State
      or Other Jurisdiction of
                Incorporation
      or Organization)
              
              (I.R.S.
      Employer
                Identification
      No.)




Room
2805, Central Plaza, Wanchai, Hong Kong


(Address
of Principal Executive Offices including zip code)




+852 2827
6100


(Registrant’s
Telephone Number, Including Area Code)




Indicate
by check mark whether the Registrant (1) has filed all reports required to be
filed by Section 13 or 15(d) of the Exchange Act during the preceding 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 þNo o




Indicate
by check mark whether the registrant has submitted electronically and posted on
its corporate Web site, if any, every, Interactive Data File required to be
submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this
chapter) during the preceding 12 months (or for such shorter period that the
registrant was required to submit and post such files). Yes o  No
þ




Indicate
by check mark if the registrant is a large accelerated filer, an accelerated
filer, a non-accelerated filer or a smaller reporting company





Large Accelerated Filer  ̈
            Accelerated Filer þ
            Non-Accelerated Filer  ̈
              (Do not check if a smaller
              reporting company)
            Smaller reportingcompany  ̈




Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Securities Exchange Act).  Yes o  No þ




As of May
5, 2010, 33,290,452 shares of the issuer’s common stock, par value $0.001, were
outstanding.





Table of
Contents





PagePART
      I FINANCIAL INFORMATIONITEM
      1
                FINANCIAL
      STATEMENTS
                iiITEM
      2
                MANAGEMENT’S
      DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
      OPERATIONS
                13ITEM
      3
                QUANTITATIVE
      AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
                17ITEM
      4T.
                CONTROLS
      AND PROCEDURES.
                18PART
      II OTHER INFORMATIONITEM
      1
                LEGAL
      PROCEEDINGS
                19ITEM
      1A.
                RISK
      FACTORS
                19ITEM
      2
                UNREGISTERED
      SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
                19ITEM
      3
                DEFAULTS
      UPON SENIOR SECURITIES
                19ITEM
      4
                (REMOVED
      AND RESERVED)
                19ITEM
      5
                OTHER
      INFORMATION
                19ITEM
      6
                EXHIBITS
                19


i


Part
I


FINANCIAL
INFORMATION




ITEM
      1
            FINANCIAL
      STATEMENTS


CONDENSED
CONSOLIDATED BALANCE SHEETS


(Amounts in thousands of
United States ("U.S.") dollars ("$'000"), except number of shares and per share
amounts)


(Unaudited)




March 31,
                              
                              
                              December 31,2010
                              
                              
                              2009ASSETSCurrent
      Assets:Cash
                              
                              $
                              114,396
                              
                              
                              $
                              57,151Accounts
      receivable
                              
                              
                              18,805
                              
                              
                              
                              12,569Prepaid
      expenses and other current assets
                              
                              
                              1,929
                              
                              
                              
                              251Total
      current assets
                              
                              $
                              135,130
                              
                              
                              $
                              69,971Non-current
      Assets:Property
      and equipment, net
                              
                              $
                              11,525
                              
                              
                              $
                              11,065Long
      term prepayment
                              
                              
                              7,051
                              
                              
                              
                              -Deferred
      tax assets
                              
                              
                              3,605
                              
                              
                              
                              1,943Total
      non-current assets
                              
                              $
                              22,181
                              
                              
                              $
                              13,008Total
      assets
                              
                              $
                              157,311
                              
                              
                              $
                              82,979LIABILITIES
      AND SHAREHOLDERS' EQUITYCurrent
      Liabilities:Accounts
      payable
                              
                              $
                              2,571
                              
                              
                              $
                              2,179Amounts
      due to related parties
                              
                              
                              3,364
                              
                              
                              
                              13,315Payables
      for acquisitions of equipment
                              
                              
                              1,579
                              
                              
                              
                              2,071Income
      tax payable
                              
                              
                              8,333
                              
                              
                              
                              5,765Accrued
      expenses and other current liabilities
                              
                              
                              4,992
                              
                              
                              
                              4,144Accrued
      concession fees - current
                              
                              
                              1,809
                              
                              
                              
                              1,134Total
      current liabilities
                              
                              $
                              22,648
                              
                              
                              $
                              28,608Non-current
      Liabilities:Accrued
      concession fees - non-current
                              
                              
                              12,610
                              
                              
                              
                              6,639Total
      non-current liabilities
                              
                              $
                              12,610
                              
                              
                              $
                              6,639Total
      liabilities
                              
                              $
                              35,258
                              
                              
                              $
                              35,247CommitmentShareholders'
      equityCommon shares($0.001 par
      value:40,000,000
      shares authorized;  24,859,368 and33,275,517
      shares issued and outstanding as ofDecember
      31, 2009 and March 31, 2010, respectively)
                              
                              $
                              33
                              
                              
                              $
                              24Preferred Shares($0.001
      par value:1,000,000
      shares authorized; 0 and1,000,000
      shares issued and outstanding as ofDecember 31, 2009 and March 31,
      2010, respectively)
                              
                              
                              22,095
                              
                              
                              
                              -Additional
      paid-in capital
                              
                              
                              62,781
                              
                              
                              
                              1,960Subscription
      receivable from shareholders
                              
                              
                              -
                              
                              
                              
                              (3,350
                              )Accumulated
      other comprehensive income
                              
                              
                              1,382
                              
                              
                              
                              1,346Statutory
      reserve
                              
                              
                              8,834
                              
                              
                              
                              8,834Retained
      earnings
                              
                              
                              26,928
                              
                              
                              
                              38,918Total
      shareholders' equity
                              
                              $
                              122,053
                              
                              
                              $
                              47,732TOTAL
      LIABILITIES AND SHAREHOLDERS' EQUITY
                              
                              $
                              157,311
                              
                              
                              $
                              82,979




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


ii


CONDENSED
CONSOLIDATED STATEMENTS OF OPERATIONS


(Amounts in thousands of
U.S. dollars ("$'000"), except number of shares and per share
amounts)


(Unaudited)





Three months ended March 31,2010
                      
                      
                      2009Revenue,
      net
                      
                      $
                      44,525
                      
                      
                      $
                      18,769Cost
      of revenue
                      
                      
                      (17,931
                      )
                      
                      
                      (7,133
                      )Gross
      profit
                      
                      
                      26,594
                      
                      
                      
                      11,636Selling
      expenses
                      
                      
                      (1,756
                      )
                      
                      
                      (265
                      )Administrative
      expenses
                      
                      
                      (597
                      )
                      
                      
                      (836
                      )Total
      operating expenses
                      
                      
                      (2,353
                      )
                      
                      
                      (1,101
                      )Income
      from operations
                      
                      
                      24,241
                      
                      
                      
                      10,535Interest
      income
                      
                      
                      61
                      
                      
                      
                      22Income
      before income tax expense
                      
                      
                      24,302
                      
                      
                      
                      10,557Income
      tax expense
                      
                      
                      (6,160
                      )
                      
                      
                      (3,102
                      )Net
      income
                      
                      $
                      18,142
                      
                      
                      $
                      7,455Deemed
      dividend on convertible preferred shares
                      
                      
                      (9,242
                      )
                      
                      
                      -Income
      attributable to holders of common shares
                      
                      $
                      8,900
                      
                      
                      $
                      7,455Earnings
      per share:Basic
                      
                      $
                      0.28
                      
                      
                      $
                      0.36Diluted
                      
                      $
                      0.27
                      
                      
                      $
                      0.36Weighted
      average number of shares used in calculating:Basic
                      
                      
                      31,275,245
                      
                      
                      
                      20,915,000Diluted
                      
                      
                      33,499,826
                      
                      
                      
                      20,915,000





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


iii


CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS


(Amounts in thousands of
U.S. dollars ("$'000"), except number of shares and per share
amounts)


(Unaudited)




Three months ended March 31,2010
                              
                              
                              2009Cash
      flows from operating activities:Net
      income
                              
                              $
                              18,142
                              
                              
                              $
                              7,455Adjustments
      to reconcile net income to net cash provided byoperating
      activities:Depreciation
      of property and equipment
                              
                              
                              930
                              
                              
                              
                              760Amortization
      of long term prepayment
                              
                              
                              142
                              
                              
                              
                              -Deferred
      tax
                              
                              
                              (1,660
                              )
                              
                              
                              (82
                              )Changes
      in operating assets and liabilities:Accounts
      receivable
                              
                              
                              (6,245
                              )
                              
                              
                              (1,223
                              )Prepaid
      expenses and other current assets
                              
                              
                              (9,103
                              )
                              
                              
                              24Accounts
      payable
                              
                              
                              393
                              
                              
                              
                              217Amounts
      due to related parties
                              
                              
                              49
                              
                              
                              
                              307Income
      tax payable
                              
                              
                              2,563
                              
                              
                              
                              628Accrued
      expenses and other current liabilities
                              
                              
                              1,082
                              
                              
                              
                              79Accrued
      concession fees
                              
                              
                              6,653
                              
                              
                              
                              295Accrued
      severance payment
                              
                              
                              -
                              
                              
                              
                              35Net
      cash provided by operating activities
                              
                              $
                              12,946
                              
                              
                              $
                              8,495Cash
      flows used in investing activities:Acquisitions
      of property and equipment, net of related payables
                              
                              $
                              (1,875
                              )
                              
                              $
                              (456
                              )Cash
      flows from/(used in) financing activities:Dividend
      paid to shareholders
                              
                              $
                              -
                              
                              
                              $
                              (17,555
                              )Exercise
      of warrants
                              
                              
                              47,616
                              
                              
                              
                              -Issuance
      of preferred shares and warrants
                              
                              
                              30,000
                              
                              
                              
                              -Payment
      of additional consideration in relation to the Share
    Exchange
                              
                              
                              (20,890
                              )
                              
                              
                              -Repayment
      of promissory note in connection with Share Exchange
                              
                              
                              (10,000
                              )
                              
                              
                              -Transaction
      cost paid for issuance of preferred shares and warrants
                              
                              
                              (583
                              )
                              
                              
                              -Net
      cash from/(used in) financing activities
                              
                              $
                              46,143
                              
                              
                              $
                              (17,555
                              )Effect
      of foreign currency translation adjustments on cash
                              
                              $
                              31
                              
                              
                              $
                              (65
                              )Net
      increase (decrease) in cash
                              
                              $
                              57,245
                              
                              
                              $
                              (9,581
                              )Cash
      at the beginning of the period
                              
                              
                              57,151
                              
                              
                              
                              29,997Cash
      at the end of the period
                              
                              $
                              114,396
                              
                              
                              $
                              20,416Supplemental
      disclosure of cash flow information:Income
      taxes paid
                              
                              $
                              5,259
                              
                              
                              $
                              2,560Interest
      paid
                              
                              $
                              -
                              
                              
                              $
                              -Supplemental
      schedule of non-cash investing and financing activities:Deemed
      dividend on convertible preferred shares
                              
                              $
                              9,242
                              
                              
                              
                              -Acquisitions
      of property and equipment included in accruedliabilities
                              
                              $
                              1,579
                              
                              
                              $
                              526





The
accompanying notes are an integral part of these condensed consolidated
financial information


iv




CHINA
MEDIAEXPRESS HOLDING, INC.


(Amounts
in thousands of U.S. dollars ("$'000), except number of shares and per share
amountsand unless
otherwise stated)


(Unaudited)





Note
1    BASIS OF
PRESENTATION


Hong Kong
Mandefu Holding Limited ("HKMDF") and China MediaExpress Holdings, Inc. (the
"Company") entered into a Share Exchange Agreement on May 1, 2009, as amended on
September 30, 2009 (the "Share Exchange") under which the Company acquired all
of the issued and outstanding shares of HKMDF in exchange
for:





i)
              The
      issuance of 20,915,000 newly issued common shares of the Company to the
      shareholders of HKMDF (the
"Sellers");


ii)
              The
      payment of $10,000 to the Sellers in three years. These promissory notes
      are non-interest bearing;


iii)
              The
      issuance of up to 15,000,000 common shares of the Company ("Earn-out
      Shares") to the Sellers if certain performance targets as calculated based
      on the terms as stipulated in the Share Exchange Agreement are met in
      fiscal 2009, 2010 and 2011
and


iv)
              The
      payment of up to $20,890 of cash proceeds from the exercise of the
      Company's publicly held warrants  to the Sellers to the extent a
      sufficient number of these warrants are
  exercised.


The Share
Exchange was approved at the Company's special meeting of shareholders on
October 15, 2009. As explained in the Company's annual report on Form 10-K filed
with the Securities and Exchange Commission on March 31, 2010, the accompanying
consolidated financial statements for periods prior to the consummation of the
Share Exchange are those of HKMDF and its subsidiary and variable interest
entity, except the equity section.
  The
promissory notes of $10,000 as part of the Share Exchange were accounted for as
a distribution to shareholders and the payable was fully repaid in February
2010.
  The
Earn-out Shares in relation to the fiscal year 2009 will be issued and
distributed in the second quarter of fiscal year 2010 as the Company achieved
the performance target as stipulated in the Share Exchange Agreement for the
year ended December 31, 2009.
  During
the three months ended March 31, 2010, a sufficient number of Public Warrants
(see Note 9) were exercised and $20,890 was paid to the Sellers, and this
payment was accounted for as a distribution to shareholders.





Note 2   SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES





(a)
            Basis
      of presentation





The
condensed consolidated financial information of the Company have been prepared
in accordance with the accounting principles generally accepted in the U.S.
("U.S. GAAP"). These condensed consolidated financial information should be read
in conjunction with the consolidated financial statements and accompanying notes
contained in the Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 2009 (the "2009 Form 10-K").





The
accompanying unaudited condensed consolidated financial information include, in
the opinion of the management, all adjustments, consisting of normal recurring
adjustments, necessary to summarize fairly the Company's financial position,
results of operations and cash flows for the interim period. The interim period
results and cash flows reported in these condensed consolidated financial
information should not be taken as indicative of results or cash flows that
may be expected for the entire year.


3





(b)
            Use
      of estimates





The
preparation of condensed consolidated financial information in conformity with
U.S. GAAP requires the Group's management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and the disclosure of
contingent assets and liabilities at the date of the condensed consolidated
financial information and the reported amounts of revenues and expenses during
the reporting periods.  Actual results could differ from those
estimates.  On an ongoing basis, management reviews its estimates,
including those related to useful lives and residual values of long-lived
assets, the recoverability of the carrying values of long-lived assets,
increment rate of concession fees and valuation allowance for deferred tax
assets.  Changes in facts and circumstances may result in revised
estimates.





(c)
            Long term
      prepayments





The Group
signed framework agreements with some media companies to acquire the exclusive
operating right to operate television screens on the inter-city or airport
express buses in different cities and region in China. A lump sum concession fee
is required to be paid to these media companies who have exclusive agreements
with the bus operators, and the amount will be amortized to the profit or loss
in accordance with the terms of the contracts.  The portion of the
prepaid media costs that will be amortized within one year is classified as
current assets, and the portion that will not be amortized over one year is
classified as non-current assets.





(d)
            Income
      taxes





Income
taxes related to ordinary income for interim periods are computed at an
estimated annual effective tax rate and the income taxes related to all other
items are individually computed and recognized when the items occur. The
estimated effective tax rate is used in providing for income taxes on a current
year-to-date basis.





The
Company recognizes the effect of income tax positions only if those positions
are more likely than not of being sustained.  Recognized income tax
positions are measured at the largest amount that is greater than 50% likely of
being realized.  Changes in recognition or measurement are reflected
in the period in which the change in judgment occurs.  The Company
records interest related to unrecognized tax benefits and penalties, if any, in
income tax expense.





(e)
            Earnings
      per share





Basic
earnings per share are computed by dividing net income of the Company by the
weighted average number of ordinary shares outstanding during the
period.





Diluted
earnings per share reflects the potential dilution that could occur if
securities or other contracts to issue common shares were exercised or converted
into common shares.





For the
purpose of calculating earnings per share for the three months ended March 31,
2009, the number of ordinary shares outstanding is determined on the basis of
HKMDF's historical number of ordinary shares outstanding multiplied by the share
exchange ratio established in the Share Exchange.


4





(f)
            Preferred
      Shares and Warrants





Convertible
preferred shares and warrants issued during the three months ended March 31,
2010 are classified as equity (see Note 4)





(g)
            Comprehensive
      Income (loss)





Comprehensive
income (loss) includes net income and foreign currency translation
adjustments.  Comprehensive income is defined as the change in equity
during a period from transactions and other events and circumstances except for
transactions resulting from investments by shareholders and distributions to
shareholders and is reported in the consolidated statements of shareholders'
equity and comprehensive income.





For the
three months ended March 31, 2009 and 2010, comprehensive income of the Group
were 7,390 and 18,178, respectively.


5


Note
3   RECENTLY ISSUED ACCOUNTING STANDARDS





In April
2010, the Financial Accounting Standards Board issued Accounting Standard Update
("ASU") 2010-13, Compensation – Stock Compensation (Topic 718); Effect of
Denominating the Exercise Price of a Share-Based Payment Award in the Currency
of the Market in Which the Underlying Equity Security Trades.  The
objective of this ASU is to address the classification of an employee
share-based payment award with an exercise price denominated in the currency of
a market in which the underlying equity security trades. FASB Accounting
Standards Codification Topic 718, Compensation—Stock Compensation, provides
guidance on the classification of a share-based payment award as either equity
or a liability. A share-based payment award that contains a condition that is
not a market, performance, or service condition is required to be classified as
a liability. Under Topic 718, awards of equity share options granted to an
employee of an entity’s foreign operation that provide a fixed exercise price
denominated in (1) the foreign operation’s functional currency or (2) the
currency in which the employee’s pay is denominated should not be considered to
contain a condition that is not a market, performance, or service condition.
However, U.S. GAAP do not specify whether a share-based payment award with an
exercise price denominated in the currency of a market in which the underlying
equity security trades has a market, performance, or service condition.
Diversity in practice has developed on the interpretation of whether such an
award should be classified as a liability when the exercise price is not
denominated in either the foreign operation’s functional currency or the
currency in which the employee’s pay is denominated. ASU 2010-13 clarifies that
an employee share-based payment award with an exercise price denominated in the
currency of a market in which a substantial portion of the entity's equity
securities trades should not be considered to contain a condition that is not a
market, performance or service condition.  Therefore, an entity would
not classify such an award as a liability if it otherwise qualifies as
equity.  This ASU is effective for fiscal years and interim periods
within those fiscal years, beginning on or after December 15,
2010.  The adoption of ASU 2010-13 is not expected to have a material
impact on the Company's financial position, results of operations and cash
flows.





Note
4   STARR SECURITIES PURCHASE AGREEMENT





On
January 12, 2010, the Company entered into a securities purchase agreement with
Starr Investments Cayman II, Inc. ("Starr").  Under this agreement,
Starr purchased from the Company 1,000,000 shares of Series A Convertible
Preferred Stock with par value US$0.001 (the "Preferred Shares"), and warrants
(the "Starr Warrants") to purchase 1,545,455 shares of the common shares of
the Company, for an aggregate purchase price of $30,000. Concurrently, certain
shareholders of the Company transferred 150,000 common shares to Starr for
no additional cash consideration (the "Transferred Shares").  The
$30,000 consideration received from Starr has been allocated to the Preferred
Shares, Starr Warrants and Transferred Shares on a relative fair value
basis.





The
Transferred Shares have been accounted for as deemed contribution from
shareholders.





The
holder of the Preferred Shares have various rights and preferences as
follows:





Conversion


Each
Preferred Share is convertible into three common shares of the Company at
the discretion of the holder anytime and shall be automatically converted into
common shares of the Company upon the earliest of the following to occur: (1)
the fourth year anniversary of the original issuance date of the Preferred
Shares, (2) the Company’s market capitalization is at least US$ 1.2 billion, or
(3) the closing price of the Company’s common shares has been at least $25 for a
period of 20 consecutive trading days over any 30 consecutive trading
days.


6





Liquidation


(a)           Voluntary
or Involuntary Liquidation. In the event of any liquidation, dissolution or
winding up of the affairs of the Company, whether voluntary or involuntary,
holders of Preferred Stock shall be entitled to receive for each share of
Preferred Stock, out of the assets of the Company or proceeds thereof (whether
capital or surplus) available for distribution to shareholders of the Company,
and after satisfaction of all liabilities and obligations to creditors of the
Company, before any distribution of such assets or proceeds is made to or set
aside for the holders of common stock any any other class or series of capital
stock that ranks junior to the Preferred Stock, an amount (the “Liquidation
Preference”) equal to the greater of (1) the sum of $30 per share and (2) the
per share amount of all cash, securities and other property (such securities or
other property having a value equal to its fair market value as reasonably
determined by the board of directors of the Company) to be distributed in
respect of common stock such holder would have been entitled to receive had it
converted such Preferred Stock immediately prior to the date fixed for such
liquidation, dissolution or winding up of the Company.





(b)           Partial
Payment. If in connection with any distribution described in above the assets of
the Company or proceeds thereof are not sufficient to pay the Liquidation
Preference in full to all holders of Preferred Stock, the amounts paid to the
holders of Preferred Stock shall be paid pro rata in accordance with the
respective aggregate Liquidation Preferences of the holders of Series A
Preferred Stock.





Anti-dilution
provision


In the
event the number of common shares of shall be increased by a subdividsion of the
outstanding common shares, stock dividends, stock distribution, recapitalization
or similar event, the conversion price of the Preferred Stock ("Conversion
Price") shall be proportionately decreased. In the event the number of common
shares shall be decreased by a combination of the outstanding common shares, the
Conversion Price then in effect immediately before the combination shall be
proportionately increased.





Voting
rights


Each
holder of Preferred Shares shall have the right to one vote for each common
share into which such Preferred Shares could be converted, with full voting
rights and powers equal to the voting rights and powers of holders of common
shares.





Dividends
rights


The
Preferred Shares are not entitled to any dividend.





Redemption


There is
no redemption rights for the Preferred Shares holders.





The
difference between the effective conversion price of the Preferred Shares and
the fair value of the Company's common shares as of the date of the agreement of
$9,242 is accounted for as deemed dividend to the Preferred Shares
holder.





The Starr
Warrants are exercisable until the earlier of the fifth year anniversary of the
original issuance date of the Starr Warrants and the date of redemption of the
Starr Warrants.  The exercise price for the Starr Warrants is $6.47
per share.  The Company may redeem the Starr Warrants at $0.01
per warrant if the last sales price of the Company's common share has been
at least $14 per share for a period of 20 consecutive trading days over any 30
consecutive trading days.





During
the 6-month period following the closing, no transfer by Starr of shares of
Preferred Shares, common shares issued upon conversion of Preferred Shares,
Warrants and common shares issued upon exercise of its Warrants and the 150,000
common shares transferred from certain shareholders of the Company (other than
to Starr's permitted transferees or pursuant to certain other customary
exception).


7




Note
5   EARNINGS PER SHARE





Earnings
per share for the period prior to the Share Exchange have been restated to
effect the Share Exchange.  For the purpose of calculating earnings
per share for the prior period presented, the number of ordinary shares
outstanding is determined on the basis of HKMDF's historical number of ordinary
shares outstanding multiplied by the share exchange ratio established in the
Share Exchange Agreement.





The
calculations of basic earnings per share are computed as follows:





Three months ended March 312010
                  
                  
                  2009Numerator:Net
      income
                  
                  $
                  18,142
                  
                  
                  $
                  7,455Less:
      deemed dividend on convertible preferred shares
                  
                  
                  (9,242
                  )
                  
                  
                  -Net
      income used for basic and diluted earnings per share
                  
                  
                  8,900
                  
                  
                  $
                  7,455Denominator:Denominator
      for basic earnings per share-
      Weighted-average ordinary shares outstanding during the
    period
                  
                  
                  31,275,245
                  
                  
                  
                  20,915,000Effect
      of dilutive securities:-
      Warrants
                  
                  
                  1,224,204
                  
                  
                  
                  --  Pali
      Options
                  
                  
                  377
                  
                  
                  
                  --
      Earn-out Shares for fiscal year 2009
                  
                  
                  1,000,000
                  
                  
                  
                  -Denominator
      used for diluted earnings per share
                  
                  
                  33,499,826
                  
                  
                  
                  20,915,000Basic
      earnings per share
                  
                  $
                  0.28
                  
                  
                  $
                  0.36Diluted
      earnings per share
                  
                  $
                  0.27
                  
                  
                  $
                  0.36




The
impact of Earn-out Shares for fiscal year 2009 was included in the calculation
of the diluted earnings per share as the Company achieved the performance target
for fiscal year 2009 as stipulated in the Share Exchange
Agreement.  The Earn-out Shares for fiscal year 2009 will be issued in
the second quarter of fiscal year 2010.





The
1,000,000 Preferred Shares were excluded in the computation of diluted earnings
per share for the three months ended March 31, 2010 as their effects were
anti-dilutive.




8


Note
6   PROPERTY AND EQUIPMENT, NET




Property
and equipment consist of the following:


March 31,
                    
                    
                    December 31,2010
                    
                    
                    2009Buildings
                    
                    $
                    229
                    
                    
                    $
                    228Electronic
      and office equipment
                    
                    
                    116
                    
                    
                    
                    105Motor
      vehicles
                    
                    
                    190
                    
                    
                    
                    190Display
      network equipment
                    
                    
                    20,643
                    
                    
                    
                    19,259Sub-total
                    
                    $
                    21,178
                    
                    
                    $
                    19,782Less:
      accumulated depreciation
                    
                    
                    (9,653
                    )
                    
                    
                    (8,717
                    )Total
                    
                    $
                    11,525
                    
                    
                    $
                    11,065





Depreciation
expense was $760 and $930 for the three months ended March 31, 2009 and 2010,
respectively.





Note
7    CAPITAL STRUCTURE





Common
Shares





During
the three months ended March 31, 2010, 8,050,577 common shares were issued as a
result of the exercises of Public Warrants (see Note 9 below) and 365,572 common
shares were issued as a result of the exercises of Insider Warrants (see Note 9
below).





Preferred
Shares





The
Company is authorized to issue 1,000,000 preferred shares of par value of $0.001
each, with such designations, voting and other rights and preference as may be
determined from time to time by the board of directors of the
Company.





As stated
in Note 4, on January 12, 2010, the Company entered into a securities purchase
agreement with Starr and the Company issued 1,000,000 Preferred Shares and Starr
Warrants to purchase 1,545,455 shares of the common shares of the Company for a
consideration of $30,000.





Note
8    DIVIDENDS





On
February 5, 2009, the board of directors of HKMDF approved and paid a dividend
of $17,570 (equivalent to RMB120 million) or $1,757 per share (before the effect
of Share Exchange) payable to Cheng Zheng, the sole shareholder of HKMDF at the
date of dividend declaration.


9


Note9WARRANTS





Public Warrants





On
October 17, 2007 (“IPO Date”), the date that the Company completed its initial
public offering (“IPO”), the Company sold 10,255,000 units in the IPO at a price
of $8.00 per unit.  Each unit consists of one share of the Company's
common share and one redeemable common stock purchase warrant ("Public
Warrant(s)").  Each Public Warrant will entitle the holder to purchase
from the Company one share of common share at an exercise price of $5.50
commencing on the later of the completion of a business combination and one year
from IPO Date and expires four years from IPO Date.





The
Company announced the redemption of all the public warrants on December 29, 2009
and extinguished all the outstanding Public Warrants at a price of $0.01 per
warrants after January 29, 2010.





During
the three months ended March 31, 2010:





i)
            8,050,577
      Public Warrants were exercised and converted into common shares of the
      Company


ii)
            27,718
      Public Warrants were redeemed by the Company at $0.01 as at January 29,
      2010




As a
result, no Public Warrants were outstanding as of March 31, 2010.





No Public
Warrants were exercised during the three months ended March 31,
2009.





Insider
Warrants





The
Company's initial officers and initial directors purchased a total of 2,100,000
warrants ("Insider Warrants") at $1.00 per warrant (for an aggregate purchase
price of $2,100,000) concurrently with the consummation of the IPO pursuant to a
private placement agreement with the Company.  The Insider Warrants
are identical to the Public Warrants except that the Insider Warrants may not be
called for redemption and the Insider Warrants are exercisable on cashless
basis, at the holder's option, so long as such securities are held by such
purchaser or his affiliates.





Furthermore,
the purchasers have agreed that the Insider Warrants will not be sold or
transferred by them, except for estate planning purposes, until after the
Company has completed a business combination.  The sale of the Insider
Warrants to management did not result in the recognition of any stock-based
compensation expense because they were sold above fair market
value.  The holder of Insider Warrants will not have any right to any
liquidation distributions with respect to shares underlying Insider Warrants if
the Company fails to consummate a business combination, in which event Insider
Warrants will expire worthless.





During
thethree
monthsendedMarch31,2010,604,656Insider
Warrants were exercisedand
converted into 365,572 common shares, while no Insider Warrants were exercised
during the three months ended March 31, 2009..During
the three months ended March 31, 2009 and 2010,noneof the
Insider Warrants wereforfeited.





Starr
Warrants


Pursuant
to the agreement with Starr, the Company issued 1,545,455 Starr Warrants (see
Note 4).


10




Note
10    COMMITMENTS





(a)
            Lease
      commitments





The Group
has entered into certain leasing arrangements relating to office premises that
are classified as operating leases.





Future
minimum lease payments for non-cancellable operating leases during the remained
of the fiscal year ending December 31, 2010 and over the next fiscal year are as
follows:





April
      1, 2010 to December 31, 2010
                    
                    $
                    582011
                    
                    
                    5$
                    63





Total
rental expenses were approximately $53 and $26 during the three months ended
March 31, 2009 and 2010, respectively, and were charged to the consolidated
statements of operations.





(b)
            Concession
      fees





The Group
has entered into concession right agreements with passenger bus
operators.  The contract terms of such concession rights range from
five years to eight years.





Future
minimum concession fee payments under non-cancelable concession right agreements
during the remained of the fiscal year ending December 31, 2010 and over the
next five fiscal years are as follows:





April
      1, 2010 to December 31, 2010
                  
                  $
                  23,5892011
                  
                  
                  34,9532012
                  
                  
                  25,6362013
                  
                  
                  18,5932014
                  
                  
                  14,2062015
                  
                  
                  438$
                  117,415





There
were no material capital commitments as at March 31, 2010.





Note
11       SEGMENT REPORTING





The Group
is engaged in the selling of advertising time slots on its advertising network
of television screens placed in passenger buses traveling on the highways
throughout the PRC.  The Group's chief operating decision maker has been
identified as the Chief Executive Officer, who reviews the consolidated results
when making decisions about allocating resources and assessing performance of
the Group.





Geographic
information


The Group
operates in the PRC and all of the Group's identifiable assets are located in
the PRC.


11


Although
the Group operates in multiple cities in the PRC which include Fujian, Beijing
Shanghai, Guangzhou, Tianjin, Chengdu and other cities, the chief operating
decision maker evaluates the Group's performance as a single reportable segment
and thus the Group believes it operates in one segment as it provide services to
customers irrespective of their locations.





Major
customers


In the
three months ended March 31, 2009 and 2010, there were no single customers that
contributed for 10% or more of the Group's revenue.





Note
12     RELATED PARTY TRANSACTIONS


Other
than the dividends paid as described in Note 9, the Group has the following
transactions and balances with its related parties.
  Related
parties balances


March 31,
                  
                  
                  December 31,2010
                  
                  
                  2009Amounts
      due to:Cheng
      Zheng (Note a)
                  
                  $
                  3,364
                  
                  
                  $
                  6,515Thousand
      Space Holdings Limited (Note b)
                  
                  
                  -
                  
                  
                  
                  6,800$
                  3,364
                  
                  
                  $
                  13,315


Notes:





(a)
              The
      amount as of December 31, 2009 included a promissory note of $3,200, which
      was unsecured, non-interest bearing and repayable in 3
      years.  The promissory note was fully repaid during the three
      months ended March 31, 2010.
                
                The remaining amount as of December 31, 2009 and the amount as of
      March 31, 2010 were unsecured, non-interest bearing and repayable on
      demand.




(b)
            Thousand
      Space Holdings Limited was one of the shareholders of HKMDF prior to the
      Share Exchange, and is a shareholder of the Company after the Share
      Exchange.  The amount as of December 31, 2009 represented a
      promissory note of $6,800, which was unsecured, non-interest bearing and
      repayable in 3 years.  The promissory note was fully repaid
      during the three months ended March 31,
2010.


12




ITEM
2                MANAGEMENT’S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS




The
following discussion should be read in conjunction with the condensed financial
statements and footnotes thereto contained in this report.




Forward Looking Statements




This
quarterly report on Form 10-Q includes “forward-looking statements” within the
meaning of Section 27A of the Securities Act of 1933 (the “Securities
Act”), as amended, and Section 21E of the Securities Exchange Act of 1934,
as amended (the “Exchange Act”). The forward-looking statements include, but are
not limited to statements regarding the Company’s expectations, hopes, beliefs,
intentions or strategies regarding the future. In addition, any statements that
refer to projections, forecasts or other characterizations of future events or
circumstances, including any underlying assumptions, are forward-looking
statements. The words “anticipate,” “believe,” “continue,” “could,” “estimate,”
“expect,” “intend,” “may,” “might,” “plan,” “possible,” “potential,” “predict,”
“project,” “should,” “would” and similar expressions may identify
forward-looking statements, but the absence of these words does not mean that a
statement is not forward-looking.




The
forward-looking statements contained or incorporated by reference in this
quarterly report on Form 10-Q are based on our current expectation and beliefs
concerning future developments and their potential effects on us and speak only
as of the date of such statements. There can be no assurance that future
developments affecting us will be those that we have anticipated. These
forward-looking statements involve a number of risks, uncertainties (some of
which are beyond our control) or other assumptions that may cause actual results
or performance to be materially different from those expressed or implied by
these forward-looking statements. These risks and uncertainties include, but are
not limited to, those factors described under the heading “Risk Factors” in our
Annual Report on Form 10-K for the year ended December 31,
2009.  Should one or more of these risks or uncertainties materialize,
or should any of our assumptions prove incorrect, actual results may vary in
material respects from those projected in these forward-looking statements. We
undertake no obligation to update or revise any forward-looking statements,
whether as a result of new information, future events or otherwise, except as
may be required under applicable securities laws.




References
in this report as to “we,” “us” or “our Company” refer to China MediaExpress
Holdings, Inc. (f/k/a TM Entertainment and Media, Inc.).




Overview





The
Company, through contractual arrangements with Fujian Fenzhong, an entity
majority owned by CME’s majority shareholder, operates the largest television
advertising network on inter-city express buses in China.  Our operations
in general and similar connotations, refer to Fujian Fenzhong, an entity which
is controlled by the Company through contractual agreements and which operates
the advertising network. While we have no direct equity ownership in Fujian
Fenzhong, through the contractual agreements we receive the economic benefits of
Fujian Fenzhong’s operations.  We generate revenues by selling advertising
on its network of television displays installed on inter-city express buses in
China.





CME’s
extensive and growing network covers inter-city express bus services originating
in China’s most prosperous regions. As of March 31, 2010, our network covered
inter-city express bus services originating in fourteen regions, including the
five municipalities of Beijing, Shanghai, Tianjin, Guangzhou and Chongqing and
nine economically prosperous provinces, namely Guangdong, Jiangsu, Fujian,
Sichuan, Anhui, Hubei, Hebei, Shandong and Shanxi. These fourteen regions
in aggregate generated over half of China’s gross domestic product, or GDP.
CME’s network is capable of reaching a substantial and growing audience. Many of
the cities connected in our network are major transportation hubs, which serve
as points of transfer for large numbers of leisure, business and other travelers
in China to other modes of transportation. CME’s network also includes airport
buses connecting major cities to airports and tour buses traveling on routes
that connect major cities with popular tourist destinations in China. As of
March 31, 2010, our network covered all transportation hubs designated by the
Ministry of Transport, and we expect to further increase this percentage as it
continues to expand the geographic coverage of its network. In addition to major
transportation hubs, the network also covers small to medium-sized cities in
China, some of which rely on highway transportation as the primary
transportation option for connection outside these
cities.


13





Fujian
Fenzhong has entered into long-term framework agreements with 54 bus operator
partners for terms ranging from three to eight years. Pursuant to these
agreements, we pays the bus operators concession fees for the right to install
its displays and automated control systems inside their buses and display
entertainment content and advertisements. CME’s entertainment content is
provided by third parties and advertisements provided by its clients. CME
obtains a wide range of free entertainment content from Fujian SouthEastern
Television Channel and Hunan Satellite Television each month and purchases a
limited amount of copyrighted programs from time to time.





In
October 2007, Fujian Fenzhong entered into a five-year cooperation agreement
with an entity affiliated with the Ministry of Transport of the People’s
Republic of China to be the sole strategic alliance partner in the establishment
of a nationwide in-vehicle television system that displays copyrighted programs
on buses traveling on highways in China. The cooperation agreement also gave CME
exclusive rights to display advertisements on the system. In November 2007, this
entity issued a notice regarding the facilitation of implementation of the
system contemplated under the cooperation agreement to municipalities,
provinces and transportation enterprises in China. CME believes its status as
the sole strategic alliance partner designated by an entity affiliated with the
Ministry of Transport and the exclusive rights to display advertisements on the
system has facilitated its historical expansion and is expected to continue to
provide them with a competitive advantage in the future.





We
believe our network is a highly effective advertising medium. The network is
capable of reaching audiences on inter-city express buses while they remain in a
comfortable and enclosed environment with minimal distraction. The majority of
the inter-city express buses within the network are equipped with leather seats
and air-conditioning, providing a comfortable environment which makes the
audiences more receptive to the content displayed on CME’s network. Inter-city
travel in China typically takes a number of hours. Audiences are therefore
exposed to the content displayed on its advertising platform for a significantly
longer period of time than on shorter-distance travel. In addition, our patented
automated control systems ensure that the programs and advertisements are
displayed continuously throughout the journey.





CME has
grown significantly since it commenced its advertising services business in
November 2003. During the year ended December 31, 2009, more than 400
advertisers had purchased advertising time on CME’s network either through
advertising agents or directly from CME. Some of these clients have purchased
advertising time from CME for more than three years, including Hitachi, China
Telecom, Toyota, Siemens and China Pacific Life Insurance. CME has attracted
several well-known international and national brands to its advertising network,
including Coca Cola, Pepsi, Wahaha, Siemens, Hitachi, China Telecom, China
Mobile, China Post, Toyota, Bank of China and China Pacific Life Insurance. For
the years ended December 31, 2007, 2008 and 2009, CME generated total net
revenues of $25.8 million, $63.0 million and $96.0 million,
respectively. During the same periods, CME had net income of $7.0 million,
$26.4 million and $41.7 million, respectively.





Critical Accounting
Policies




The
preparation of financial statements in accordance with accounting principles
generally accepted in the United States of America requires management to adopt
accounting policies and make significant judgments and estimates to develop
amounts reflected and disclosed in the financial statements. In many cases,
there are alternative policies or estimation techniques that could be used. We
maintain a process to review the application of our accounting policies and to
evaluate the appropriateness of the many estimates that are required to prepare
the financial statements of a large, global corporation. However, even under
optimal circumstances, estimates routinely require adjustment based on changing
circumstances and the receipt of new or better information. There have been no
significant changes to our critical accounting policies and estimates as
discussed in our Annual Report on Form 10-K for the fiscal year ended December
31, 2009


14


Results
of Operations





Three
months ended March 31, 2010 Compared to Three months ended March 31,
2009





Net
revenues.  CME’s sales, net of business tax and related
surcharges increased to $44.5 million for the three months ended March 31,
2010 from $18.8 million for the three months ended March 31, 2009. The
increase was primarily attributable to the increased total amount of advertising
time that CME sold, an increase in average rates per second, increase in CME’s
advertising base, expansion of the geographic coverage of CME’s network,
increase in the portion of the direct sales to the advertisers, additional
revenue generated from the embedded advertisement which was displayed during the
broadcasting of the content for the three months ended March 31,
2010.  In addition, CME started to separate out the airport express
buses from the original inter-cities buses and sold the timeslots and the
embedded advertisement separately to the advertisers and agencies in the first
quarter of 2010.  For the three months ended March 31, 2010, CME
covers Beijing, Fuzhou, Guangzhou, Qingdao airports in the PRC.  The
charge rates for these airport express buses route were higher than those
inter-cities buses, which partially contributes to the increase in CME’s
sales.  The net revenue generated from the airport express buses for
the three months ended March 31, 2010 was approximately $7.0
million.





Cost of
sales.  CME’s cost of sales increased to $17.9 million for
the three months ended March 31, 2010 from $7.1 million for the three
months ended March 31, 2009 due to the following reasons:





Concession
fees.  Concession fees charged by inter-city express bus
operators increased to $14.3 million for the three months ended March
31, 2010 from $5.3 million for the three months ended March 31, 2009.
The increase was attributable to the increase in the concession fees payable to
the group of bus operators participating in CME’s network through the execution
of long-term framework agreements for the three months ended March 31,
2010, an increase in the number of inter-city express buses carrying CME’s
network as a result of the increase in number of buses operators that
signed contracts with CME and the amortization of lump sum prepayment to the
media company in order to obtain the operating right of some buses
route.





Depreciation.  Depreciation
for CME’s digital television displays and hard disk drives increased to $0.9
million for the three months ended March 31, 2010 from $0.8 million for the
three months ended March 31, 2009. The increase was attributable to installation
of new equipment and control systems in connection with the increase in the
number of inter-city express buses in the CME’s networks.





Business
tax.  Business tax increased to $1.7 million for the three
months ended March 31, 2010 from $1.0 million for the three months ended March
31, 2009. The increase was primarily attributable to business taxes arising from
consulting services Fujian Express provided to Fujian Fenzhong in the three
months ended March 31, 2010.





Production cost for embedded
advertisement.Production costs increased to $0.3 million for
the three months ended March 31, 2010 from nil for the three months ended March
31, 2009 as CME started to produce the embedded advertisements inside the
content.





Gross profit.  As a
result of the foregoing, CME’s gross profit increased to $26.6 million for the
three months ended March 31, 2010 from $11.6 million for the three months ended
March 31, 2009. CME’s gross profit margin for the three months ended March 31,
2010 was 59.7% compared to the gross profit margin of 62.0% for the
three months ended March 31, 2009.





Operating
expenses.  CME’s operating expenses increased to $2.4 million
for the three months ended March 31, 2010 from $1.1 million for the three months
ended March 31, 2009 due to the following reasons:





Selling
expenses.  Selling expenses were $1.8 million and $0.3 million
for the three months ended March 31, 2010 and 2009, respectively.  The
majority of selling expenses consisted of the salary and staff welfare of the
sales force and the promotion expenses. There were no significant differences in
the size of the sales force for the three months ended March 31, 2010 and 2009.
The significant increase of the selling expenses is mainly a result of the
addition of commissions expense added during the current
quarter.  Starting July 1, 2009 the Company began paying commissions
to the sales people, which is calculated based upon a percentage of the
monthly advertising revenue. Salaries, commission and welfare expenses increased
to $1.6 million for the three months ended March 31, 2010, from $0.2 million for
the three months ended March 31, 2009.  Promotion expenses increased
to $0.2 million for the three months ended March 31, 2010, from $0.1 million for
the three months ended March 31, 2009.


15





General and administrative
expenses.  General and administrative expenses decreased by 29%
to $0.6 million for the three months ended March 31, 2010 from $0.8 million for
the three months ended March 31, 2009. The decrease was primarily attributable
to the decrease of professional fees.





Operating
income.  As a result of the foregoing, CME’s operating income
increased by 130% to $24.2 million for the three months ended March 31, 2010
from $10.5 million for the three months ended March 31, 2009.





Interest
income.  CME’s interest income increased by 177% to $61,000 for
the three months ended March 31, 2010 from $22,000 for the three months ended
March 31, 2009, primarily as a result of higher interest rate from the bank
deposit.





Income tax
expenses.  CME’s income tax expenses increased by 98.6% to $6.2
million for the three months ended March 31, 2010 from $3.1 million for the
three months ended March 31, 2009. The increase was primarily attributable to
the increase in income before income taxes, which were partially offset by the
recognition of the deferred tax credit of $1.7 million in relationship to the
accrued concession fee for the three months ended March 31, 2010.





Net income.  As a
result of the foregoing, CME’s net income increased by 143% to $18.1 million for
the three months ended March 31, 2010 from $7.5 million for the three months
ended March 31, 2009. CME’s net profit margin increased to 40.7% for the three
months ended March 31, 2010 from 39.7% for the three months ended March 31,
2009, primarily attributable to an increase in gross profit in the three months
ended March 31, 2010.





Liquidity
and capital resources.





As of
March 31, 2010, CME had net cash of $114.4 million. CME’s cash primarily
consists of cash on hand and cash deposited in banks and interest-bearing
savings accounts. CME’s liquidity requirements primarily include cash required
to install its equipment and control systems on the inter-city express buses
carrying its network, concession fees payable to the inter-city express bus
operators participating in its network and its working capital
needs.





For the
three months ended March 31, 2010 and December 31, 2009, CME has financed its
liquidity needs primarily through cash flows from operating activities and
capital financing from the preferred shares and warrants from the
Starr.





As
of March 31, 2010 and December 31, 2009, CME’s accounts receivable, one of
the principal components of CME’s current assets, were $18.8 million and
$12.6 million, respectively. CME’s accounts receivable relate to
advertising fees payable by its clients. CME expects its accounts receivable to
increase as it continues to grow its business. CME intends to maintain its
current policies for collections of accounts receivable, which provide a
30-60-day credit period following the month in which the advertisements are
displayed. CME mitigates its collection risk by evaluating the creditworthiness
of its clients and monitoring outstanding balances payable by its clients. In
addition, as of March 31, 2010 and December 31, 2009, CME’s accounts
payable, one of the principal components of its current liabilities, were
$2.6 million and $2.2 million, respectively. CME’s accounts payable
relate to concession fees payable to the inter-city express bus operators
participating in CME’s networks. CME expects its accounts payable to increase as
the number of inter-city express buses carrying its network increases. CME
settles such concession fees on a monthly basis based on the actual number of
buses carrying its network in the preceding month. Moreover, as of March 31,
2010 and December 31, 2009, CME’s accrued liabilities for the purchase of
property, plant and equipment were $1.6 million and $2.1 million,
respectively. Such liabilities relate to CME’s purchase of equipment and control
systems.  CME believes the cash it generates from its customers, will be
sufficient to fund its expansions and payment obligations to the inter-city
express bus operators and CME’s equipment supplier.


16





CME
believes that its existing cash resources, the anticipated cash flows from
operating activities, will be sufficient to meet both its short-term and
long-term liquidity needs, including capital expenditure requirements to achieve
its expansion plans and the potential increase in costs as a result of becoming
a public reporting company.





Net cash
provided by operating activities during the three months ended March 31, 2010
increased $4.5 million compared with the prior year comparable period primarily
due to:


l
              significant
      increase in net income;


l
              increased
      in accrued concession fees due to increase in bus lines; partially offset
      by


l
              increase
      in deferred tax


l
              increase
      in accounts receivable





Net cash
used in investing activities during the three months ended March 31, 2010
increased $1.4 million compared with the prior year comparable period primarily
due to increase in capital expenditures for business
expansion.





Net cash
provided by financing activities of $46.1 million was noted during the three
months ended March 31, 2010 while it was net cash used in financing activities
of $17.6 million during the prior year comparable period primarily due
to:


l
              no
      dividend paid out in the current period comparing to $17.6 million
      dividend payment in the prior year comparable
  period;


l
              $47.6
      million cash from exercises of warrants;
and


l
              $30
      million cash from issuance of preferred shares and warrants; offset
      by


l
              $30,890
      cash paid in relation to the Share
Exchange





ITEM
      3
            QUANTITATIVE
      AND QUALITATIVE DISCLOSURES ABOUT MARKET
RISK




Foreign
Exchange Risk




All of
CME’s revenue, and majority of costs and expenses are denominated in Reminbi, or
RMB. Although the conversion of the RMB is highly regulated in China, the value
of the RMB against the value of the  United States dollar, or U.S.
dollar or any other currency nonetheless may fluctuate and be affected by, among
other things, changes in China’s political and economic conditions. Under
current policy, the value of the RMB is permitted to fluctuate within a narrow
band against a basket of certain foreign currencies. China is currently under
significant international pressures to liberalize this government currency
policy, and if such liberalization were to occur, the value of the RMB could
appreciate or depreciate against the U.S. dollar.




Because
all of CME’s earnings and cash assets are denominated in RMB, appreciation or
depreciation in the value of the RMB relative to the U.S. dollar would affect
CME’s financial results reported in U.S. dollar terms without giving effect to
any underlying change in CME’s business or results of operations. Fluctuations
in the exchange rate will also affect the relative value of any dividend CME
issues after this offering that will be exchanged into U.S. dollars and earnings
from, and the value of, any U.S. dollar-denominated investments CME makes in the
future.  If the RMB vs USD exchange rate increase/decrease by 1%, the
net income will increase/decrease by 1% correspondingly as most of the assets,
liabilities, revenue and expenses are dominated by RMB.




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


17




Interest
Rate Risk




CME has
not been, nor does it anticipate being, exposed to material risks due to changes
in interest rates. CME’s risk exposure to changes in interest rates relates
primarily to the interest income generated by cash deposited in interest-bearing
savings accounts. CME has not used, and does not expect to use in the future,
any derivative financial instruments to hedge its interest risk exposure.
However, CME’s future interest income may fall short of its expectation due to
changes in interest rates in the market.




Credit
Risk




The
Company is exposed to credit risk from its cash in bank and accounts receivable.
The credit risk on cash in bank and fixed deposits is limited because the
counterparties are recognized financial institutions. Accounts receivable are
subjected to credit evaluations. An allowance would be made, if necessary, for
estimated irrecoverable amounts by reference to past default experience, if any,
and by reference to the current economic environment.




Inflation




Inflationary
factors, such as increases in the cost of our products and overhead costs, could
impair our operating results. Although we do not believe that inflation has had
a material impact on our financial position or results of operations to date, a
high rate of inflation in the future may have an adverse effect on our ability
to maintain current levels of gross margin and selling, general and
administrative expenses as a percentage of sales revenue if the selling prices
of our products do not increase with these increased costs.




Company’s
Operations are Substantially in Foreign Countries




Substantially
all of our operations are conducted in China and are subject to various
political, economic, and other risks and uncertainties inherent in conducting
business in China. Among other risks, the Company and its subsidiaries’
operations are subject to the risks of restrictions on transfer of funds; export
duties, quotas, and embargoes; domestic and international customs and tariffs;
changing taxation policies; foreign exchange restrictions; and political
conditions and governmental regulations. Additional information regarding such
risks can be found under the heading “Risk Factors” in our Annual Report on Form
10-K for the year ended December 31, 2009.




ITEM
4T.               CONTROLS
AND PROCEDURES.




We
maintain “disclosure controls and procedures,” as such term is defined under
Exchange Act Rule 13a-15(e), that are designed to ensure that information
required to be disclosed in our Exchange Act reports is recorded, processed,
summarized, and reported within the time periods specified in the SEC’s rules
and forms, and that such information is accumulated and communicated to our
management, including our Chief Executive Officer and Chief Financial Officer,
as appropriate, to allow timely decisions regarding required disclosures. In
designing and evaluating the disclosure controls and procedures, our management
recognized that any controls and procedures, no matter how well designed and
operated, can provide only reasonable assurance of achieving the desired control
objectives and in reaching a reasonable level of assurance our management
necessarily was required to apply its judgment in evaluating the cost-benefit
relationship of possible controls and procedures. We have carried out an
evaluation as required by Rule 13a-15(d) under the supervision and with the
participation of our management, including our Chief Executive Officer and Chief
Financial Officer, of the effectiveness of the design and operation of our
disclosure controls and procedures as of March 31, 2010. Based upon their
evaluation and subject to the foregoing, the Chief Executive Officer and Chief
Financial Officer concluded that as of March 31, 2010 our disclosure controls
and procedures were effective in ensuring that material information relating to
us, is made known to the Chief Executive Officer and Chief Financial Officer by
others within our company during the period in which this report was being
prepared.




There
were no changes in our internal controls over financial reporting identified in
connection with the evaluation that occurred during the quarter ended March 31,
2010 that has materially affected, or is reasonably likely to materially affect,
our internal controls over financial reporting.


18




Part
II




OTHER
INFORMATION




ITEM
      1
            LEGAL
      PROCEEDINGS




None.




ITEM
      1A.
            RISK
      FACTORS




There
have been no material changes to the risk factors previously disclosed in our
Annual Report on Form 10-K for the year ended December 31, 2009 in response
to Item 1A to Part I of Form 10-K.




ITEM
      2
            UNREGISTERED
      SALES OF EQUITY SECURITIES AND USE OF
PROCEEDS




Not
applicable.




ITEM
      3
            DEFAULTS
      UPON SENIOR SECURITIES




Not
applicable.




ITEM
      4
            Removed
      and reserved




Not
applicable.




ITEM
      5
            OTHER
      INFORMATION




Not
applicable.




ITEM
      6
            EXHIBITS




The
exhibits listed on the Exhibit Index are filed as part of this
report.




(a)          Exhibits:




31.1        Certification
by Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley
Act of 2002.




31.2        Certification
by Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley
Act of 2002.




32.1        Certification
by Chief Executive Officers and Chief Financial Officer pursuant to 18 U.S.C.
Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002.


19




SIGNATURES




Pursuant
to the requirements 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.




Dated:
May 14, 2010


CHINA
      MEDIAEXPRESS HOLDINGS, INC.By:
            /s/
      Cheng ZhengName:
      Cheng ZhengTitle:
      Chairman Chief Executive Officer




20




EXHIBIT
INDEX





Exhibit
      No.
            
            Description31.1
            
            Certification
      by Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley
      Act of 2002.31.2
            
            Certification
      by Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley
      Act of 2002.32.1
            
            Certification
      by Chief Executive Officers and Chief Financial Officer pursuant to 18
      U.S.C. Section 1350, as adopted pursuant to Section 906 of the
      Sarbanes-Oxley Act of 2002.


21