UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 Amendment No: 2 FORM 10-KSB/A oANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended[          ]þTRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT
For the transition period from October 1, 2005 to March 31, 2006 Commission File Number:000-26347 NextMart, Inc. (Name of small business issuer as specified in its charter)  DELAWARE410985135(State or other jurisdiction of incorporation)(IRS Employer
Identification No.)  Oriental Plaza Bldg. W3, Twelfth Floor
1 East Changan Avenue, Dongcheng District
Beijing, 100738 PRC100738(Address of principal executive offices)(Zip Code)  Issuers telephone number+86 (0)10 8518 9669 Securities Registered under Section 12(b) of the Exchange Act: None Securities Registered pursuant to Section 12(g) of the Act: Common Stock, par value $0.01 per share (Title of class) This Annual Report on Form 10-KSB/A amend and restates in its entirety the Registrants Annual Report on Form10-KSB for the fiscal year ended March 31, 2006 as filed with the Securities and Exchange Commission on June 30, 2006. Check whether the issuer is not required to file reports pursuant to Section 13 or 15(d) of the Exchange Act. Check whether the Registrant (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past12 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. þYes     Noo Check if there is no disclosure of delinquent filers pursuant to Item 405 of Regulation S-B contained herein this form, and no disclosure will be contained, to the best of the registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-KSB or any amendment to this Form 10-KSB. o Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). oYes     Noþ State Registrant’s revenues for its most recent fiscal year:$402,173 State the aggregate market value of the voting and non-voting common equity held by non-affiliates computed by reference to the price at which the common equity was sold, or the average bid and asked prices of such common equity, as of a specified date within the past 60 days: $160,337,106.50 (1)Based on last trade price on June 16, 2006 State the number of shares outstanding of each of the Registrants classes of common stock, as of the latest practicable date. 103,689,630 common shares issued and outstanding as of June 18, 2006. DOCUMENTS INCORPORATED BY REFERENCE None. Transitional Small Business Disclosure Format (Check one): Yes o     No þ             TABLE OF CONTENTS PagePART I4Item 1. Description of Business4Item 1A. Risk Factors11Item 2. Properties22Item 3. Legal Proceedings22Item 4. Submissions of Matters to a Vote of Security Holder22PART II23Item 5. Market for Common Equity and Related Shareholder Matters23Item 6. Management Discussion and Analysis24Item 7. Financial Statements27Item 8. Changes In and Disagreements With Accountants on Accountingand Financial Disclosure49Item 8A. Controls and Procedures49Item 8B. Other Information49PART III50Item 9. Directors and Executive Officers of the Registrant50Item 10. Executive Compensation52Item 11. Security Ownership of Certain Beneficial Owners and Management53Item 12. Certain Relationships and Related Transactions55Item 13. Exhibits55Item 14. Principal Accountant Fees and Services58SIGNATURES59EXHIBIT 23.1EXHIBIT 31.1EXHIBIT 31.2EXHIBIT 32.1EXHIBIT 32.2         Table of Contents  FORWARD LOOKING INFORMATION This annual report contains forward-looking statements as that term is defined in the Private Securities Litigation Reform Act of1995. These statements relate to future events or our future financial performance. In some cases, you can identify forward-looking statements by terminology such as may, will, should, expects, plans, anticipates, believes, estimates, predicts, potential or continue or the negative of these terms or other comparable terminology. These statements are only predictions and involve known and unknown risks, uncertainties and other factors, including the risks in the section entitled Risk Factors, that may cause our or our industrys actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by these forward-looking statements. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements. Except as required by applicable law, including the securities laws of the United States, we do not intend to update any of the forward-looking statements to conform these statements to actual results. Our financial statements are stated in United States Dollars and are prepared in accordance with United States Generally Accepted Accounting Principles. In this annual report, unless otherwise specified, all dollar amounts are expressed in United States Dollars. As used in this annual report, the terms we, us, our, and SNMD mean Sun New Media, Inc. and its wholly-owned subsidiaries Sun New Media Group Limited, SE Global Capital, Inc. (formerly SE Global Direct, Inc.) and Global-American Investments, Inc., unless otherwise indicated.  3       Table of Contents    EXPLANATORY NOTE We filed our Form 10-KSB for the transition period ended March 31, 2006 with the Securities and Exchange Commission on June 30, 2006 (Form 10-KSB), and we filed a our first amendment to the Form 10-KSB with the Securities and Exchange Commission on September 5, 2006. This Amendment No 2 to the Form 10-KSB is filed in response to a comment letter received by us from the staff of the Securities and Exchange Commission (Staff) dated March 6, 2007.  Except to the extent expressly set forth herein, this amended Form 10-KSB speaks as of the filing date of the original Form 10-KSB and has not been updated to reflect events occurring subsequent to the original filing date other than those required to reflect the effects of the comments received by the Staff. Accordingly, this amended Form 10-KSB should be read in conjunction with our filings made with the Securities and Exchange Commission subsequent to the filing of the original Form 10-KSB, including any amendments to those filings.  PART I Item 1. Description of Business Overview Sun New Medias goal is to become one of Chinas leading multi-media marketing and channel management companies, leveraging the combined powers of interactive marketing, information services and e-transaction capabilities. Our principal focus is on our China-based business-to-business (B2B) interactive marketing, channel management and on-line distribution business in specific industry verticals. We are creating this business through the ongoing acquisition of various entities and assets. To date we have completed acquisitions that have enabled us to serve the beverages and handheld electronics verticals. We have also entered into agreements which we expect will allow us to enter into the womens apparel and electronics components and parts verticals. We expect to close these acquisitions during the second half of 2006. We expect to enter into other verticals using the same strategy. We were originally incorporated under the laws of Minnesota in 1972 and were previously known as SE Global Equity. In September 2005, SE Global Equity acquired 100% of the issued and outstanding share capital of Sun New Media Group Limited and changed the company name to Sun New Media, Inc. The acquisition was treated as a reverse acquisition for accounting purposes, and we adopted the September 30 fiscal year of the accounting acquirer, Sun New Media Group Limited as a result of the reverse acquisition. In February, 2006 we changed our fiscal year-end date from September 30th to March 31st. We maintain and operate our corporate internet website athttp://www.sunnewmedia.net. The information contained in our website is not incorporated by reference into this Report. Background China has experienced rapid economic growth over the past decade. Chinas central bank estimates that economic growth for 2006 at 10 per cent this year, surpassing the 2005 rate. Further, Chinas entry into the WTO, accompanied by a proliferation of private businesses and an increase in the number of foreign multinational companies in China, has led to increased market liberalization and competition. In this competitive environment, companies in China are increasingly recognizing the need for improved methods of doing business. As a result of economic growth and liberalization, the number of business entities operating in China has increased significantly. These new businesses are competing in an economy traditionally dominated by state owned or controlled enterprises at one end and serviced by millions of small local businesses on the other end. These dynamics have generally led to a very stratified market with inefficient systems for channel marketing and distribution. A significant opportunity exists to leverage internet-based technologies to enhance communication across distribution networks, promoting accountability, transparency, and efficiency through centralized information management systems. The opportunity is particularly salient in industries characterized but multiple-layers of fragmented distribution systems like the beverage and apparel industries.  4       Table of Contents  Corporate Strategy Our goal is to be one of Chinas first integrated business media and channel management companies. We are in the process of building e-enabled distribution systems, media platforms, and electronic exchanges in a number of Chinas key industries, connecting buyers and sellers with a suite of turnkey digital media, e-commerce, and information management solutions. Key elements to our strategy include the following: Integrate our acquired businesses. We completed our first acquisitions in the first half of calendar 2006. During fiscal 2007 we intend to complete the integration of all of our acquisitions and leverage the efficiencies that we believe can be obtained by providing services to multiple verticals.Increase our value to customers by developing broader service offerings.We intend to develop additional services to offer to our customers. Among other projects, we are developing an integrated business communications software application that integrates industry information, database access, and secure communication tools on a single platform, accessible via PC or mobile device.Increase our brand awareness.We intend to increase market awareness of our brand and services through leveraging our presence in Chinas business media industry and dedicated marketing services team to promote integrated brand solutions for the Sun New Media brand.Continue to explore complimentary acquisitions. We intend to continue to seek acquisition of companies or strategic relationships that will allow us to offer services in additional verticals. Services The Company is divided into two principal divisions: the Transactional Services Division and the Information Services Division. The Transactional Services Divisionworks to enhance distribution systems by bringing buyers and sellers together on integrated electronic platforms. Our goal is to use electronic trading systems to help to eliminate inefficiencies and multi-layered distribution systems, enhance margins, and consolidate fragmented distribution systems and verticals. Currently, we serve two verticals in China: beverages and handheld electronics. We have also announced plans to acquire 100% of William Brand, a Shanghai based company that will be responsible for managing a Womens Apparel vertical. We expect that the acquisition will be completed in July 2006. Finally, we have also announced plans to form a joint-venture with the state-owned China Electronics and Appliances Corporation (CEAC) that will be effectively 64% controlled by us and will manage an electronics parts vertical. Subject to obtaining all required government approvals, we expect this acquisition to be completed in the second quarter ending September 30, 2006. Our strategy is to further expand through acquisition or joint-venture with existing distribution companies in two to three additional major verticals in the current fiscal year. Our goal is to identify verticals with strong growth potential and target companies that will be able to effectively utilize our suite of electronic trading platforms and management systems. The bulk of our revenue in the first phase of strategic development will come from transactional services related fees. Through our Transactional Services Division, we develop and manage back-end systems for distribution companies in the beverage and handheld electronics industries in Central China in exchange for management fees equivalent to between 5% and 12% of the gross revenue of our distributor clients. Among the services provided by our Transactional Services Division are an internet-based ordering and purchasing system, integrated financial control systems that link wholesaler, sub-wholesaler and retailer accounts, sales support systems for expanding distribution network reach, and below the line marketing support programs designed to enhance communication across distribution networks. Our suite  5       Table of Contents  of services can be deployed in multiple verticals through customizing its core product offerings to meet the industry-specific needs of distributors. We plan to expand the revenue of this division both through increasing the suite of service offerings and expanding our client base in and around the Wuhan region. We intend to leverage our company wide product development and nationwide sales support services to enhance the regional and vertical-specific competitive advantages of our Transactional Services Division. By the end of the first quarter of our current fiscal year, we expect to begin recognizing revenue contribution from William Brand and Beijing CEAC Trans Global Logistics commencing the second quarter. Through these two acquisitions, we plan to develop vertical specific, nationwide transactional services (akin to those we are currently deploying in the beverage vertical) that target the Womens Apparel and Electronics Components industries respectively. Through our Information Services Division, we plan to leverage our long experience in Chinas media industry to build sticky, web-based communities of business users with targeted trade media, industry intelligence, and interactive marketing platforms. Our current strategy is to build one of Chinas largest and most accurate multi-vertical databases of businesses while simultaneously aggregating the digital distribution rights for industry-specific business publications and other business media products. Later we expect to distribute content generating advertising and service revenue. We plan to focus particular attention on aggregating media and data related to the vertical industries in which our Transactional Services Division operates. We believe this will allow us to expand our distribution systems in particular regions and further enhance the credibility and stickiness of both the exchange and information platforms. Our Information Services division also owns a number of proprietary technologies that it markets to business, government, and media clients across China. The key service is the divisions DJVU scanning and compression technology. The service is a digital archiving and publishing service. As we expand our database and media offerings, we plan to cross-promote the digital compression technology as a value-added service for customers. Our expanding business database and media services offer a number of important revenue streams that will have a major impact on future performance. We are currently developing a business information destination portal that will combine paid and advertising-supported services including database access, media and industry intelligence, and paid media services. Among our key information services are a suite of proprietary technologies that we markets to business, government, and media clients across China, including digital archiving and publishing service based around the DJVU compression technology. As we expand our database and media offerings, we plan to cross-promote the digital compression technology as a value-added service for customers. We expect that as our transactional and information services mature, a greater percentage of our revenue will come through the provision of b2b marketing services. Our information and transactional services will give us proprietary access to critical information about the state of Chinas b2b marketplace which we believe will allow us to create customized integrated marketing solutions for business clients looking for effective communication channels with specific target groups. Media Investments We maintain a number of investmentsin consumer media and marketing companies that we believe will allow us to offer business customers one-stop-shop interactive marketing solutions that reach directly to Chinas key consumer groups. As of March 31, 2006, we owned a 30% interest in Global Woman Multimedia, Ltd., a web and television production company that targets professional women in mainland China. Also, we have a 16% interest in Sun Business Network, a Singapore-based lifestyle and business publishing company that distributes 13 monthly and weekly magazines and newspapers in China and Southeast Asia. In addition, we own the digital version of Chinas leading weekly newspaper,China Business Post, a national advertising sales & marketing operation under Sun Global Marketing Network and 6 consumer lifestyle magazines published in Singapore.  6       Table of Contents  Competition The private business media and information services industry in China is highly fragmented. The main competitors in the industry continue to be state-owned media groups, industry associations, and government agencies. In the private sector, our principal competitor is Hui Cong, an information services and business search company that focuses on the domestic market. We also face indirect competition from Global Sources, a business information service companies that are primarily focused on the import-export marketplace. Although we are not currently aware of any other company that offers the same services as our Transactional Services Division, we may face future competition from horizontal service providers such as Alibaba.com, Hui Cong and Global Sources. We also face competition from traditional advertising media, such as newspapers, magazines, yellow pages, billboards and other forms of outdoor media, television and radio. Most large companies in China allocate, and will likely continue to allocate, the bulk of their marketing budgets to traditional advertising media and only a small portion of their budgets to online marketing. If these companies do not devote a larger portion of their marketing budgets to online marketing services provided by us, or if our existing customers reduce the amount they spend on online marketing, our results of operations and future growth prospects could be adversely affected. Most of our existing and potential competitors have significantly greater financial resources than we do. They also have longer operating histories and more experience in attracting and retaining users and managing customers than we do. They may use their experience and resources to compete with us in a variety of ways, including by competing more heavily for users, customers, distributors and networks of third-party websites, investing more heavily in research and development and making acquisitions. Proprietary Rights We regard our intellectual property rights, such as copyrights, trademarks, trade secrets, practices and tools, as important to the success of our business. To protect our intellectual property rights, we intend to rely on a combination of trademark and copyright law, trade secret protection, confidentiality agreements and other contractual arrangements with our employees, affiliates, clients, strategic partners, acquisition targets and others. Effective trademark, copyright and trade secret protection may not be available in every country in which we intend to offer our services. And the steps we take to protect our intellectual property rights may not be adequate. Third parties may infringe or misappropriate our intellectual property rights or we may not be able to detect unauthorized use and take appropriate steps to enforce our rights. In addition, other parties may assert infringement claims against us. Such claims, regardless of merit, could result in the expenditure of significant financial and managerial resources. Future patents may limit our ability to use processes covered by such patents or expose us to claims of patent infringement or otherwise require us to obtain related licenses. Such licenses may not be available on acceptable terms. The failure to obtain such licenses on acceptable terms could have a negative effect on our businesses. Governmental Regulation All television broadcast media in China are government-controlled networks. The television and broadcasting industry in China operates under a legal regime that consists of the State Council, which is the highest authority of the executive branch of the PRC central government, and the various ministries and agencies under its leadership. These ministries and agencies mainly include: the Ministry of Culture;the Ministry of Information Industry;the State Press and Publications Administration;the State Copyright Bureau;the State Administration for Industry and Commerce;  7       Table of Contents  the Ministry of Public Security; andthe Bureau of State Secrecy. The State Council and these ministries and agencies have issued a series of rules that regulate a number of different substantive areas of our proposed businesses. We believe we have all necessary governmental approvals to conduct our interactive marketing and sales services businesses. In compliance with PRCs foreign investment restrictions on media industry and other laws and regulations, we conduct all our media services in China via the following significant domestic Variable Interest Entities (VIEs): Sun China Media (Beijing) Technology Co., Ltd. (SCMBT), a PRC company controlled through us by contract and is owned equally by Qiong Zhou and Yuling Li, each of whom are non-executive employees of the Company.Suizhou Focus Trading Development Co., Ltd. (SFC), a PRC company controlled by us by contract and is engaged in marketing, information and technology services to beverage and electronic device distributors. It is 60% owned by Qi Yang, one of our officers and directors and 25% and 15% owned by Bingwei Wu and QuanyiMao, two employees of the Company respectively.Shanghai Shengji Technology Co., Ltd (Shengji), a PRC company controlled by us by contract, and is engaged in wireless mobile services. It is 40% owned by Hui Yan, 40% owned by Min Lin and 20% owned by Kezhou Luan, each employees of the Company.Sun China Media (Beijing) International Advertising Co. Ltd (SCMIA), a China company controlled by us by contract and is engaged in advertising business. It is 50% owned by Qiong Zhou, and 50% owned by Yuling Li, non-executive PRC employees of the Company. The capital investment in these VIEs is funded by the Company and registered as interest-free loans to these PRC employees. As of March 31, 2006, the total amount of interest-free loans to the employee shareholders of the VIEs listed above wasUS$262,500. Under various contractual agreements, employee shareholders of the VIEs are required to transfer their ownership in these entities to our subsidiaries in China when permitted by PRC laws and regulations or to our designees at any time for the amount of outstanding loans, and all voting rights of the VIEs are assigned to us. We have the power to appoint all directors and senior management personnel of the VIEs. Through our wholly-owned subsidiaries in China, we have also entered into exclusive technical agreements and other service agreements with the VIEs, under which these subsidiaries provide technical services. Employees As of March 31, 2006, we had 104 employees. Of our employees, 15 were in management, 26 were in finance, legal &administration, 3 in business development and research & development and 58 in sales and marketing. Recent Developments Board Changes The following Board appointments were made after April 1, 2006: William Adamopoulos, May 11, 2006;Yang Qi, May 11, 2006;Mark Newburg, May 31, 2006; andRicky Gee Hing Ang, June 29, 2006 And, the following members resigned: Chauncey Shey, May 11, 2006; andJohn Zongyang Li, June 28, 2006. We have been actively pursuing a number of new acquisition transactions. As of June 29, 2006, we have entered into the following transactions: On June 29, 2006, our wholly owned subsidiary, Sun New Media Holdings Limited entered into an agreement with MIDGET Limited and divested our interest in Compass Multimedia Holdings Limited for a consideration of approximately RMB5.3 million (US$0.67 million).  On June 14, 2006, we entered into a Sales & Purchase Agreement (the Credit 114 Purchase Agreement)with Sun Media Investment Holdings Ltd. (SMIH) to acquire 100% of the outstanding  8       Table of Contents  shares of Credit Network 114 Limited (Credit 114). Credit 114 is incorporated in the British Virgin Islands and is engaged in the business of data collection and management. As a part of the Credit 114 Purchase Agreement, we will also be given exclusive on-line rights for the release of several business media information products. Included in these products will be exclusive authorization byDragon List for its on-line Music Sales Report andMusic Radio Report, an exclusive authorization by the Ministry of Culture and China Audio and Video Press for the release of on-line CVA News, and exclusive authorization by the Information Office of State Council and China Media Report for the release of China Website Newsletter. Pursuant to the Credit 114 Purchase Agreement, we will also acquire a credit database business. We also entered into a Supplemental Agreement, dated June 14, 2006 with SMIH to acquire search engine technology and additional on-line business media content from SMIH. The entire Credit 114 Acquisition will take place over a 90-day period, during which time we will pay SMIH a total ofUS$2.5 million for 100% ownership of the outstanding shares of Credit 114 and the assets described above. The first of four equal payments of US$625,000 has been made within 10-days of signing the Purchase Agreement, with the remaining three payments being made within 30, 60 and 90 days of signing the Credit 114 Purchase Agreement, respectively. On June 8, 2006, we entered into an agreement with Mr. Ren Huiliang (the Seller) to purchase 100% of William Brand Administer Limited and its subsidiary, William Textiles Limited, collectively William Brand. William Brand is a China-based producer and distributor of womens luxury apparel. The consideration for the acquisition is to be satisfied in full through the issuance of 4,655,172 shares of our common stock. The Company will issue the shares to the Seller in four installments: the first installment of 1,163,793 shares to be issued within thirty days of the completion of the deal and the remaining shares to be issued in thirds at the end of each of the next three years, subject to William Brand achieving minimum revenue and profit targets in each of the3 years, commencing June 1, 2006. These revenue and profit targets are as follows: revenue of US$15 million in year one, US$17.5 million in year two, and US$20 million in year three, and minimum after-tax profit of US$3 million,US$3.5 million, and US$4 million in years one, two and three, respectively.  On May 23, 2006, we signed a strategic cooperative and sales purchase agreement (the CEAC Agreement) with China Electronic Appliances Corporation (CEAC), a subsidiary of the state-owned China Electronics Corporation (CEC), and two individuals, Mr. Yong Li and Mr. Mianchun Wang, management designees from CEAC (collectively, the Sellers). The CEAC Agreement provides that we will purchase a 49% interest in Beijing Trans Global Logistics (BTGL) and its subsidiary, Beijing CEAC Trans Global Logistics (BCTG) from Messrs. Wang and Li and a 31% stake in BTGL from CEAC. As a result, we will effectively own 80% of shares of BTGL and will effectively own 64% of the shares in BCTG. The consideration for the acquisition is to be satisfied through a combination of cash and shares as follow: RMB 9 million in cash and the remaining through the issuance of 138,066 shares of our common stock. Pursuant to the terms of the CEAC Agreement, the Sellers will receive an additional 138,066 shares per year for an aggregate of 414,198 shares for the next 3 years if BTGL achieves revenue and net margin targets of US$50 million and a net margin of2% per year. If the targets are met for the three years, total consideration for the acquisition will be RMB 9 million in cash and554,264 shares. On April 20, 2006, we entered into an agreement (the Purchase Agreement) with Sun Media Investment Holdings Ltd. (SMIH). The Purchase Agreement provides that we will purchase various assets, including real estate, automobiles, office equipment, and program rights, as well as approximately 48.6 million shares in Asia Premium Television Group (OTCBB: ASTV, ASTV) for a total consideration of US$3,442,587, to be satisfied by the issuance of 860,647 shares of our common stock.  9       Table of Contents   On April 20, 2006, we divested 100% of Global American Investments Inc., our legacy brokerage business, to Kingston Capital Group Limited for US$40,000 in cash.  On January 27, 2006, we completed the acquisition of China Focus Channel Development Co. Ltd.(Focus), pursuant to a Sale and Purchase agreement (the Focus Purchase Agreement)dated November 22, 2005 with Yang Qi, Mao Quan Yi and Wu Bing Wei (collectively, the Sellers) in exchange for 14,900,000 shares of our common stock. We have based our beverages vertical business on the business of Focus. The terms of the Focus Purchase Agreement also provide that we must issue an additional 2,000,000 shares of its common stock to the Sellers, if: a)the audited net profit after tax (PAT) of Suizhou Focus Channel Development Limited(SFC), wholly owned subsidiary of Focus, is in excess of $4.5 million for the fiscal year ending December 31, 2006,b)the audited PAT of SFC is in excess of $5.0 million for the fiscal year ending December 31, 2007; andc)the audited PAT of SFC for the fiscal year ending December 31, 2008 is in excess of $5.5 million. In the event that the audited PAT is less than the guaranteed amounts for each of the fiscal years, the Sellers shall either make-up the shortfall in cash, or forfeit their rights to receive the shares of our common stock. Under the terms of the Focus Purchase Agreement, Sellers also agreed to transfer to SFC the business and assets of Hubei Zhengyuan Trade Development Ltd., a separate PRC company (HZTD). At closing (January 27, 2006), the parties entered into a supplemental agreement which provided for a 90-day period from closing to effect the transfer of the HZTD business and assets.  On March 31, 2006, SFC and HZTD, entered into a management services agreement (the New Agreement)which took effect on April 1, 2006. Under the terms of the New Agreement, HZTD will pay SFC and/or its nominees a management fee equal to 12% of its total cash sales. In addition, the Sellers will guarantee SFC that the management fee payable to SFC arising from this New Agreement shall not be less than RMB4 million (approximately US$500,000) per month, and that the operating costs of SFC including staff costs shall not be more than RMB8 million (approximately US$1 million) per annum subject to an inflationary cost increase of no more than 10% per annum for the duration of the New Agreement. Notwithstanding the above, the profit guarantees as provided by the Sellers as per the original Purchase Agreement remained unchanged. In addition to the New Agreement, the Company and the Sellers have entered into a separate Supplemental Agreement (the New Supplemental Agreement) to the original Purchase Agreement to alter the following terms: a)the profit related shares shall be reduced to 700,000 shares per year from the original 2,000,000 shares per year for which the profit guarantees are met;b)the Company shall pay the Sellers a cash component of RMB40 million (approximately US$5 million); andc)the business and assets of HZTD shall remain with HZTD and will not be transferred to SFC as provided in the original Purchase Agreement. In summary, assuming that profit guarantee for each of the three years are met, total consideration for the acquisition of Focus shall be 17 million shares and cash of RMB40 million (approximately US$5 million) instead of 20.9 million shares.  10       Table of Contents  Reports to Securities Holders We are required to file annual reports on Form 10-KSB and quarterly reports on Form 10-QSB with the Securities Exchange Commission on a regular basis, and will be required to timely disclose certain material events (e.g., changes in corporate control; acquisitions or dispositions of a significant amount of assets other than in the ordinary course of business; and bankruptcy) in a current report on Form 8-K. You may read and copy any materials we file with the Securities and Exchange Commission at their Public Reference Room at 450 Fifth Street, N.W., Washington, D.C. 20549. You may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. Additionally, the SEC maintains an Internet site (http://www.sec.gov) that contains reports, proxy and information statements and other information regarding issuers that file electronically with the SEC. Item 1A. Risk Factors You should consider carefully all of the information in this Annual Report on Form 10-KSB, including the risks and uncertainties described below, before making an investment in our common stock. Any of the following risks could have a material adverse effect on our business, financial condition and results of operations. In any such case, the market price of our common stock could decline, and you may lose all or part of your investment. Risks Related to Our Business The development of our business is dependent upon the completion of a number of acquisitions and other transactions that have only recently or not yet closed. Our principal focus is on our China based interactive marketing and sales services business. We are creating this business through the acquisition of various entities and assets. If we are unable to successfully operate and integrate the businesses we acquire, our business will not be successful. Through March 31, 2006, there have been no meaningful operating results relating to our acquired business. Accordingly, there is no a limited basis upon which our business can be evaluated. Our short operating history and rapidly evolving business makes it difficult for us to accurately forecast revenues and expenses. We commenced our interactive marketing and sales services operations in June 2005 and have a very limited operating history for this division. Our operating results to date relate principally to the legacy brokerage business that we operated prior to the reverse acquisition. Such business was disposed of subsequent to March 31, 2006. Accordingly, you should consider our future prospects in light of the risks and uncertainties experienced by early stage companies in evolving industries in China. Since inception, we have announced a number of proposed transactions to develop this business and which will have a material impact on our operations for the fiscal year ending March 31, 2007 and beyond. As a result, it is difficult for us to predict future revenues and operating expenses. We based our expense levels, in part, on our expectations of future revenues from these transactions. If our interactive marketing and sales services business develops slower than we expect, our losses may be higher than anticipated and may cause our stock price to decline. Some of the other risks and uncertainties of our business relate to our ability to: offer new and innovative products and services to attract and retain a larger consumer base;attract customers;  11       Table of Contents  increase awareness of our brand and continue to develop consumer and customer loyalty;respond to competitive market conditions;respond to changes in our regulatory environment;manage risks associated with intellectual property rights;maintain effective control of our costs and expenses;raise sufficient capital to sustain and expand our business;attract, retain and motivate qualified personnel; andupgrade our technology to support increased traffic and expanded services. If we are unsuccessful in addressing any of these risks and uncertainties, our business may be materially and adversely affected. If the Internet and, in particular, interactive marketing are not broadly adopted in China, our ability to increase revenue and sustain profitability could be materially and adversely affected. The use of the Internet as a marketing channel is at an early stage in China. Internet and broadband penetration rates in China are both relatively low compared to those in most developed countries. Many of our current and potential customers have limited experience with the Internet as a marketing channel, and have not historically devoted a significant portion of their marketing budgets to online marketing and promotion. As a result, they may not consider the Internet effective in promoting their products and services as compared to traditional print and broadcast media. Our ability to generate significant revenues may be negatively impacted by a number of factors, many of which are beyond our control, including: difficulties associated with developing a larger consumer base with demographic characteristics attractive to customers;increased competition and potential downward pressure on online marketing prices;ineffectiveness of our online marketing delivery, tracking and reporting systems; andlack of increase in Internet usage in China. We face significant competition and may suffer from a loss of users and customers as a result. We expect to face significant competition in our interactive marketing and sales services business, particularly from other companies that seek to provide online marketing services. Our main competitors include Sohu.com, Tom Online, Beijing Mediain China and Next Media Group in Hong Kong. Many of these competitors have significantly greater financial resources than we do. They also have longer operating histories and more experience in attracting and retaining users and managing customers than we do. They may use their experience and resources to compete with us in a variety of ways, including by competing more heavily for users, customers, distributors and networks of third-party websites, investing more heavily in research and development and making acquisitions. We also face competition from traditional advertising media, such as newspapers, magazines, yellow pages, billboards and other forms of outdoor media, television and radio. Most large companies in China allocate, and will likely continue to allocate, the bulk of their marketing budgets to traditional advertising media and only a small portion of their budgets to online marketing. If these companies do not devote a larger portion of their marketing budgets to online marketing services provided by us, or if our  12       Table of Contents  existing customers reduce the amount they spend on online marketing, our results of operations and future growth prospects could be adversely affected. Our business depends on a strong brand, and if we are not able to maintain and enhance our brand, our business and operating results may be harmed. We believe that recognition of our brand will contribute significantly to the success of our business. We also believe that maintaining and enhancing our brand is critical to expanding our base of consumers and customers. As our market becomes increasingly competitive, maintaining and enhancing our brand will depend largely on our ability to remain as an Internet marketing leader in China, which may be increasingly difficult and expensive. If we fail to continue to innovate and provide relevant services, we may not be able to generate sufficient user traffic levels to remain competitive. We must continue to invest significant resources in research and development to enhance services and introduce additional high quality services to attract and retain consumers. If we are unable to anticipate consumer preferences or industry changes, or if we are unable to modify our services on a timely basis, we may lose consumers and customers. Our operating results would also suffer if our innovations do not respond to the needs of our consumers and customers, are not appropriately timed with market opportunities or are not effectively brought to market. If we fail to keep up with rapid technological changes, our future success may be adversely affected. The online marketing industry is subject to rapid technological changes. Our future success will depend on our ability to respond to rapidly changing technologies, adapt our services to evolving industry standards and improve the performance and reliability of our services. Our failure to adapt to such changes could harm our business. New marketing media could also adversely affect us. For example, the number of people accessing the Internet through devices other than personal computers, including mobile telephones and hand-held devices, has increased in recent years. If we are slow to develop products and technologies that are more compatible with non-PC communications devices, we may not be successful in capturing a significant share of this increasingly important market for media and other services. In addition, the widespread adoption of new Internet, networking or telecommunications technologies or other technological changes could require substantial expenditures to modify or adapt our products, services or infrastructure. If we fail to keep up with rapid technological changes to remain competitive in our rapidly evolving industry, our future success may be adversely affected. We may face intellectual property infringement claims and other related claims, that could be time-consuming and costly to defend and may result in our inability to continue providing certain of our existing services. Internet, technology and media companies are frequently involved in litigation based on allegations of infringement of intellectual property rights, unfair competition, invasion of privacy, defamation and other violations of third-party rights. The validity, enforceability and scope of protection of intellectual property in Internet-related industries, particularly in China, are uncertain and still evolving. In addition, many parties are actively developing and seeking protection for Internet-related technologies, including seeking patent protection. There may be patents issued or pending that are held by others that cover significant aspects of our technologies, products, business methods or services. As we face increasing competition and as litigation becomes more common in China for resolving commercial disputes, we face a higher risk of being the subject of intellectual property infringement claims. Intellectual property litigation is expensive and time consuming and could divert resources and management attention from the operations of our businesses. If there is a successful claim of infringement, we may be required to pay substantial fines and damages or enter into royalty or license agreements that may not be available on commercially acceptable terms, if at all. Our failure to obtain a license of the rights on a timely basis could harm our business. Any intellectual property litigation could have a material adverse effect on our business, financial condition or results of operations.  13       Table of Contents  We may not be able to prevent others from unauthorized use of our intellectual property, which could harm our business and competitive position. We rely on a combination of copyright, trademark and trade secret laws, as well as nondisclosure agreements and other methods to protect our intellectual property rights. The protection of intellectual property rights in China may not be as effective as those in the United States or other countries. The steps we have taken may be inadequate to prevent the misappropriation of our technology. Reverse engineering, unauthorized copying or other misappropriation of our technologies could enable third parties to benefit from our technologies without paying us. From time to time, we may have to enforce our intellectual property rights through litigation. Such litigation may result in substantial costs and diversion of resources and management attention. If we fail to attract customers for our online marketing services, our business and growth prospects could be seriously harmed. Our online marketing customers will not maintain a business relationship with us if their investment does not generate sales leads and ultimately consumers. Failure to retain our existing online marketing customers or attract new customers for our online marketing services could seriously harm our business and growth prospects. Because we primarily rely on distributors in providing our e-marketing services, our failure to retain key distributors or attract additional distributors could materially and adversely affect our business. Online marketing is at an early stage of development in China and is not as widely accepted by or available to businesses in China as in the United States. As a result, we rely heavily on a nationwide distribution network of third-party distributors for our sales to, and collection of payment from, our corporate and consumer customers. If our distributors do not provide quality services to our consumer customers or otherwise breach their contracts with our consumer customers, we may lose customers and our results of operations may be materially and adversely affected. We do not have long-term agreements with any of our distributors, including our key distributors, and cannot assure you that we will continue to maintain favorable relationships with them. Our distribution arrangements are non-exclusive. Furthermore, some of our distributors may have contracts with our competitors or potential competitors and may not renew their distribution agreements with us. In addition, as new methods for accessing the Internet, including the use of wireless devices, become available, we may need to expand our distribution network to cater to the new technologies. If we fail to retain our key distributors or attract additional distributors on terms that are commercially reasonable, our business and results of operations could be materially and adversely affected. Our strategy of acquiring complementary businesses, assets and technologies may fail. As part of our business strategy, we have pursued, and intend to continue to pursue, selective strategic acquisitions of businesses, assets and technologies that complement our existing business. Our acquisitions involve uncertainties and risks, including: potential ongoing financial obligations and unforeseen or hidden liabilities;failure to achieve the intended objectives, benefits or revenue-enhancing opportunities;costs and difficulties of integrating acquired businesses and managing a larger business; anddiversion of resources and management attention. Our failure to address these risks successfully may have a material adverse effect on our financial condition and results of operations. Any such acquisition may require a significant amount of capital investment, which would decrease the amount of cash available for working capital or capital expenditures. In addition, if we use our equity securities to pay for acquisitions, we may dilute the value of our common stock. If we borrow funds to finance acquisitions, such debt instruments may contain restrictive covenants that could, among other things, restrict us from distributing dividends. Such acquisitions may also generate significant amortization expenses related to intangible assets.  14       Table of Contents  We may not be able to manage our expanding operations effectively. We commenced our interactive marketing and sales services operations in 2005 and are expanding our operations rapidly. We anticipate significant continued expansion of our business as we address growth in our consumer and customer base and market opportunities. To manage the potential growth of our operations and personnel, we will be required to improve operational and financial systems, procedures and controls, and expand, train and manage our growing employee base. Furthermore, our management will be required to maintain and expand our relationships with other websites, Internet companies, and other third parties. We cannot assure you that our current and planned personnel, systems, procedures and controls will be adequate to support our future operations. Our operating results may fluctuate, which makes our results difficult to predict and could cause our results to fall short of expectations. Our operating results may fluctuate as a result of a number of factors, many of which are outside of our control. For these reasons, comparing our operating results on a period-to-period basis may not be meaningful, and you should not rely on our past results as an indication of our future performance. Our quarterly and annual revenues and costs and expenses as a percentage of our revenues may be significantly different from our historical or projected rates. Our operating results in future quarters may fall below expectations. Any of these events could cause the price of our Common Stock to fall. Any of the risk factors listed in this Risk Factors section, and in particular, the following risk factors, could cause our operating results to fluctuate from quarter to quarter: general economic conditions in China and economic conditions specific to the Internet, Internet search and online marketing;our ability to attract additional customers;the announcement or introduction of new or enhanced products and services by us or our competitors;the amount and timing of operating costs and capital expenditures related to the maintenance and expansion of our businesses, operations and infrastructure;the results of our acquisitions of, or investments in, other businesses or assets;PRC regulations or actions pertaining to activities on the Internet, including gambling, online games and other forms of entertainment; andgeopolitical events or natural disasters such as war, threat of war, Severe Acute Respiratory Syndrome, or SARS, or other epidemics. Because of our limited operating history and our rapidly growing business, our historical operating results may not be useful to you in predicting our future operating results. Advertising spending in China has historically been cyclical, reflecting overall economic conditions as well as budgeting and buying patterns. Our rapid growth has lessened the impact of the cyclicality and seasonality of our business. As we continue to grow, we expect that the cyclicality and seasonality in our business may cause our operating results to fluctuate. The successful operation of our business depends upon the performance and reliability of the Internet infrastructure and fixed telecommunications networks in China. Our business depends on the performance and reliability of the Internet infrastructure in China. Almost all access to the Internet is maintained through state-owned telecommunication operators under the administrative control and regulatory supervision of the Ministry of Information Industry of China. In addition, the national networks in China are connected to the Internet through international gateways controlled by the PRC government. These international gateways are the only channels through which a domestic user can connect to the Internet. We cannot assure you that a more sophisticated Internet  15       Table of Contents  infrastructure will be developed in China. We may not have access to alternative networks in the event of disruptions, failures or other problems with Chinas Internet infrastructure. In addition, the Internet infrastructure in China may not support the demands associated with continued growth in Internet usage. Our success depends on the continuing efforts of our senior management team and other key personnel and our business maybe harmed if we lose their services. Our future success depends heavily upon the continuing services of the members of our senior management team, in particular our chairman Dr. Bruno Wu. If one or more of our senior executives or other key personnel are unable or unwilling to continue in their present positions, we may not be able to replace them easily or at all, and our business may be disrupted and our financial condition and results of operations may be materially and adversely affected. Competition for senior management and key personnel is intense, the pool of qualified candidates is very limited, and we may not be able to retain the services of our senior executives or key personnel, or attract and retain high-quality senior executives or key personnel in the future. In addition, if any member of our senior management team or any of our other key personnel joins a competitor or forms a competing company, we may lose customers, distributors, know-how and key professionals and staff members. Each of our executive officers and key employees has entered into an employment agreement with us, which contains confidentiality and non-competition provisions. If any disputes arise between any of our senior executives or key personnel and us, we cannot assure you the extent to which any of these agreements may be enforced. We rely on highly skilled personnel and, if we are unable to retain or motivate key personnel or hire qualified personnel, we may not be able to grow effectively. Our performance and future success depends on the talents and efforts of highly skilled individuals. We will need to continue to identify, hire, develop, motivate and retain highly skilled personnel for all areas of our organization. Competition in our industry for qualified employees is intense. Our continued ability to compete effectively depends on our ability to attract new employees and to retain and motivate our existing employees. As competition in our industry intensifies, it may be more difficult for us to hire, motivate and retain highly skilled personnel. If we do not succeed in attracting additional highly skilled personnel or retaining or motivating our existing personnel, we maybe unable to grow effectively. Interruption or failure of our information technology and communications systems could impair our ability to effectively provide our products and services, which could damage our reputation and harm our operating results. Our ability to provide our services depends on the continuing operation of our information technology and communications systems. Any damage to or failure of our systems could interrupt our service. Service interruptions could reduce our revenues and profits, and damage our brand if our system is perceived to be unreliable. Our systems are vulnerable to damage or interruption as a result of terrorist attacks, war, earthquakes, floods, fires, power loss, telecommunications failures, computer viruses, interruptions in access to our websites through the use of denial of service or similar attacks, hacking or other attempts to harm our systems, and similar events. Our servers, which are hosted at third-party Internet data centers, are also vulnerable to break-ins, sabotage and vandalism. Some of our systems are not fully redundant, and our disaster recovery planning does not account for all possible scenarios. The occurrence of a natural disaster or a closure of an Internet data center by a third-party provider without adequate notice could result in lengthy service interruptions. Our business could be adversely affected if our software contains bugs. Our online systems, including our websites, and other software applications and products, could contain undetected errors or bugs that could adversely affect their performance. We regularly update and enhance our websites and our other online systems and introduce new versions of our software products  16       Table of Contents  and applications. The occurrence of errors in any of these may cause us to lose market share, damage our reputation and brand name, and materially and adversely affect our business. Concerns about the security of electronic commerce transactions and confidentiality of information on the Internet may reduce use of our network and impede our growth. A significant barrier to electronic commerce and communications over the Internet in general has been public concern over security and privacy, including the transmission of confidential information. If these concerns are not adequately addressed, they may inhibit the growth of the Internet and other online services generally, especially as a means of conducting commercial transactions. If a well-publicized Internet breach of security were to occur, general Internet usage could decline, which could reduce traffic to our destination websites and impede our growth. We have limited business insurance coverage. The insurance industry in China is still at an early stage of development. Insurance companies in China offer limited business insurance products. We do not have any business liability or disruption insurance coverage for our operations in China. Any business disruption, litigation or natural disaster may result in our incurring substantial costs and the diversion of our resources. Risks Related to Our Corporate Structure PRC laws and regulations governing our businesses and the validity of certain of our contractual arrangements are uncertain .If we are found to be in violation, we could be subject to sanctions. In addition, changes in such PRC laws and regulations may materially and adversely affect our business. There are substantial uncertainties regarding the interpretation and application of PRC laws and regulations, including, but not limited to, the laws and regulations governing our business, or the enforcement and performance of our contractual arrangements with certain of our affiliated Chinese entities. We are considered foreign persons or foreign invested enterprises under PRC law. As a result, we are subject to PRC law limitations on foreign ownership of Internet and advertising companies. These laws and regulations are relatively new and may be subject to change, and their official interpretation and enforcement may involve substantial uncertainty. The effectiveness of newly enacted laws, regulations or amendments may be delayed, resulting in detrimental reliance by foreign investors. New laws and regulations that affect existing and proposed future businesses may also be applied retroactively. The PRC government has broad discretion in dealing with violations of laws and regulations, including levying fines, revoking business and other licenses and requiring actions necessary for compliance. In particular, licenses and permits issued or granted to us by relevant governmental bodies may be revoked at a later time by higher regulatory bodies. We cannot predict the effect of the interpretation of existing or new PRC laws or regulations on our businesses. We cannot assure you that our current ownership and operating structure would not be found in violation of any current or future PRC laws or regulations. As a result, we may be subject to sanctions, including fines, and could be required to restructure our operations or cease to provide certain services. Any of these or similar actions could significantly disrupt our business operations or restrict us from conducting a substantial portion of our business operations, which could materially and adversely affect our business, financial condition and results of operations. Our corporate actions are substantially controlled by our principal shareholders and affiliated entities. As of June 18, 2006, our principal shareholders and their affiliated entities own approximately 64% of our outstanding common stock (which will be reduced to approximately 57% after completion of announced but not yet closed transactions).These shareholders, acting individually or as a group, could exert substantial influence over matters such as electing directors and approving mergers or other business combination transactions. This concentration of ownership may also discourage, delay or prevent a change in control of our company, which could deprive our shareholders of an opportunity to receive a premium for their shares as part of a sale of our company and might reduce the price of our Common stock. These actions may be taken even if they are opposed by our other shareholders.  17       Table of Contents  Risks Related to Doing Business in China Adverse changes in economic and political policies of the PRC government could have a material adverse effect on the overall economic growth of China, which could adversely affect our business. As our interactive marketing and sales services business expands, we expect an increasing portion of our business operations to be conducted in China. Accordingly, our results of operations, financial condition and prospects are subject to a significant degree to economic, political and legal developments in China. Chinas economy differs from the economies of most developed countries in many respects, including the amount of government involvement, level of development, growth rate, control of foreign exchange and allocation of resources. While Chinas economy has experienced significant growth in the past 20 years, growth has been uneven across different regions and among various economic sectors of China. The PRC government has implemented various measures to encourage economic development and guide the allocation of resources. Some of these measures benefit the overall PRC economy, but may also have a negative effect on us. For example, our financial condition and results of operations may be adversely affected by governmental control over capital investments or changes in tax regulations that are applicable to us. Since early 2004, the PRC government has implemented certain measures to control the pace of economic growth. Such measures may cause a decrease in the level of economic activity in China, which in turn could adversely affect our results of operations and financial condition. Our subsidiaries and affiliates are subject to restrictions on paying dividends and making other payments to us. As our interactive marketing and sales services business develops, we expect to increasingly rely on dividends payments from our subsidiaries and affiliated entities in China. 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 affiliated entities in China are also required to set aside a portion of their after-tax profits according to PRC accounting standards and regulations for certain reserve funds. The PRC government also imposes controls on the conversion of RMB into foreign currencies and the remittance of currencies out of China. We may experience difficulties in completing the administrative procedures necessary to obtain and remit foreign currency. Furthermore, if our subsidiaries or 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 either we or our subsidiaries is unable to receive all of the revenues from our operations through these contractual or dividend arrangements, we may be unable to declare dividends on our common stock. Uncertainties with respect to the PRC legal system could adversely affect us. We conduct a substantial and increasing portion our business through subsidiaries and affiliated entities based in China. Our operations in China are governed by PRC laws and regulations. Our subsidiaries are generally subject to laws and regulations applicable to foreign investments in China and, in particular, laws applicable to wholly foreign-owned enterprises. The PRC legal system is based on written statutes. Prior court decisions may be cited for reference but have limited precedent value. Since 1979, PRC legislation and regulations have significantly enhanced the protections afforded to various forms of foreign investments in China. However, China has not developed a fully integrated legal system and recently-enacted laws and regulations may not sufficiently cover all aspects of economic activities in China. In particular, because these laws and regulations are relatively new, and because of the limited published decisions and their non-binding nature, the interpretation and enforcement of these laws and regulations involve uncertainties. In addition, the PRC legal system is based in part on governmental policies and internal rules (some of which are not published on a timely basis or at all) that may have a retroactive effect. As a result, we may not be aware of our violation of these policies and rules until after the occurrence of the violation. In addition, any litigation in China may be protracted and result in substantial costs and diversion of resources and management attention.  18       Table of Contents  You may experience difficulties in effecting service of legal process, enforcing foreign judgments or bringing original actions in China based on United States or other foreign laws against us or our management. We conduct a substantial and increasing portion of our operations in China and a substantial portion of our assets will be located in China. In addition, all 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 on our senior executive officers, including matters arising under U.S. federal securities laws or applicable state securities laws. Moreover, our PRC counsel has advised us that PRC does not have treaties with the United States or many other countries providing for the reciprocal recognition and enforcement of judgment of courts. Governmental control of currency conversion may affect the value of your investment. The PRC government imposes controls on the conversion of RMB to foreign currencies and, in certain cases, the remittance of currencies out of China. As our interactive marketing and sales services business expands, we expect to derive an increasing percentage of our revenues in RMB. Under our current structure, we expect our income will be primarily derived from dividend payments from our PRC subsidiaries. Shortages in the availability of foreign currency may restrict the ability of our PRC subsidiaries and our affiliated entities 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 the PRC State Administration of Foreign Exchange by complying with certain procedural requirements. However, approval from appropriate government authorities is required when RMB is to be converted into foreign currency and remitted out of China to pay capital expenses such as the repayment of bank 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 demands, we may not be able to pay dividends in foreign currencies to our shareholders, including holders of our Common stock. Fluctuation in the value of RMB may have a material adverse effect on your investment. The value of RMB against the U.S. dollar and other currencies may fluctuate and is affected by, among other things, changes in political and economic conditions. On July 21, 2005, the PRC government changed its decade-old policy of pegging the value of the RMB to the U.S. dollar. Under the new policy, the RMB is permitted to fluctuate within a narrow and managed band against a basket of foreign currencies. This change in policy has resulted in an approximately 2.0% appreciation of the RMB against the U.S. dollar. While the international reaction to the RMB revaluation has generally been positive, there remains significant international pressure on the PRC government to adopt a more flexible currency policy, which could result in a further and significant appreciation of the RMB against the U.S. dollar. As our interactive marketing and sales services business continues to grow, a greater portion of our revenues and costs will be denominated in RMB, while a significant portion of our financial assets may be denominated in U.S. dollars. We expect to rely significantly on dividends and other fees paid to us by our subsidiaries and affiliated entities in China. Any significant revaluation of RMB may materially and adversely affect our cash flows, revenues, earnings and financial position, and the value of, and any dividends payable on, our Common stock in U.S. dollars. For example, an appreciation of RMB against the U.S. dollar would make any new RMB denominated investments or expenditures more costly to us, to the extent that we need to convert U.S. dollars into RMB for such purposes. We face risks related to health epidemics and other outbreaks. Our business could be adversely affected by the effects of SARS or another epidemic or outbreak. China reported a number of cases of SARS in April 2004. Any prolonged recurrence of SARS or other adverse public health developments in China may have a material adverse effect on our business operations. For instance, health or other governmental regulations adopted in response may require temporary closure of Internet cafes, which is one of the avenues where users could access our websites, or of our offices. Such closures would severely disrupt our business operations and adversely affect our results  19       Table of Contents  of operations. We have not adopted any written preventive measures or contingency plans to combat any future outbreak of SARS or any other epidemic. Risks Related to Our Common Stock There has been only a limited public market for our common stock to date. To date, there has been only a limited public market for our common stock on the Over-the-Counter Bulletin Board. Our common stock is currently not listed on any exchange. If an active trading market for our common stock does not develop, the market price and liquidity of our common stock will be materially and adversely affected. The market price for our common stock may be volatile. The market price for our common stock may be volatile and subject to wide fluctuations in response to factors including the following: actual or anticipated fluctuations in our quarterly operating results;changes in financial estimates by securities research analysts, if any;conditions in the China consumer goods and online marketing markets;changes in the economic performance or market valuations of other U.S. public companies with substantial operations in China;announcements by us or our competitors of new products, acquisitions, strategic partnerships, joint ventures or capital commitments;addition or departure of key personnel;fluctuations of exchange rates between RMB and the U.S. dollar;intellectual property litigation; andgeneral economic or political conditions in China. In addition, the securities market has from time to time experienced significant price and volume fluctuations that are not related to the operating performance of particular companies. These market fluctuations may also materially and adversely affect the market price of our Common stock. We will need additional capital, and the sale of additional common stock or other equity securities could result in additional dilution to our shareholders. We expect to require additional cash resources to fund our operations, as well as investments or acquisitions which we may decide to pursue. To satisfy our cash requirements, we may seek to sell additional equity or debt securities or obtain a credit facility. The sale of additional equity securities could result in additional dilution to our shareholders. 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 cannot assure you that financing will be available in amounts or on terms acceptable to us, if at all. Substantial future sales or the perception of sales of our common stock in the public market could cause the price of our common stock to decline. Sales of our common stock in the public market or the perception that these sales could occur, could cause the market price of our common stock to decline. As of June 18, 2006, approximately 61,120,295 shares, or 59% of our outstanding shares will be freely transferable without restriction or additional registration under the Securities Act of 1933, as amended, or the Securities Act. The remaining  20       Table of Contents  common stock outstanding as of such date will be available for sale, subject to volume and other restrictions as applicable under Rule 144 under the Securities Act. You may face difficulties in protecting your interests, and your ability to protect your rights through the U.S. federal courts may be limited, because we conduct a significant portion of our operations in China and all of our officers reside outside the United States. We conduct a substantial portion of our operations in China through our wholly owned subsidiaries in China. All of our officers reside outside the United States and some or all of the assets of those persons are located outside the United States. As a result, it may be difficult or impossible for you to bring an action against us or against these individuals in China in the event that you believe that your rights have been infringed under the securities laws or otherwise. Even if you are successful in bringing an action of this kind, the laws of China may render you unable to enforce a judgment against our assets or the assets of our directors and officers. If we fail to maintain an effective system of internal control over financial reporting, we may not be able to accurately report our financial results or prevent fraud. We are subject to reporting obligations under the U.S. securities laws. The Securities and Exchange Commission, or the SEC, as required by Section 404 of the Sarbanes-Oxley Act of 2002, adopted rules requiring every public company to include a management report on such companys internal controls over financial reporting in its annual report, which contains managements assessment of the effectiveness of the companys internal controls over financial reporting. In addition, an independent registered public accounting firm must attest to and report on managements assessment of the effectiveness of the companys internal controls over financial reporting. These requirements may first apply to our annual report on Form 10-K for the fiscal year ending March 31, 2007. Our management may conclude that our internal controls over our financial reporting are not effective. Moreover, even if our management concludes that our internal controls over financial reporting are effective, our independent registered public accounting firm may still decline to attest to our managements assessment or may issue a report that is qualified if they are not satisfied with our controls or the level at which our controls are documented, designed, operated or reviewed, or if it interprets the relevant requirements differently from us. Our reporting obligations as a public company will place a significant strain on our management, operational and financial resources and systems for the foreseeable future. We are a young company with limited accounting personnel and other resources with which to address our internal controls and procedures. If we fail to timely achieve and maintain the adequacy of our internal controls, we may not be able to conclude that we have effective internal controls over financial reporting at a reasonable assurance level. Moreover, effective internal controls over financial reporting are necessary for us to produce reliable financial reports and are important to help prevent fraud. As a result, our failure to achieve and maintain effective internal controls over financial reporting could result in the loss of investor confidence in the reliability of our financial statements, which in turn could harm our business and negatively impact the trading price of our common stock. Furthermore, we anticipate that we will incur considerable costs and use significant management time and other resources in an effort to comply with Section 404 and other requirements of the Sarbanes-Oxley Act. We will incur increased costs as a result of being a public company. As a public company, we will incur significant legal, accounting and other expenses that we did not incur as a private company. In addition, the Sarbanes-Oxley Act, as well as rules subsequently implemented by SEC has required changes incorporate governance practices of public companies. We expect these new rules and regulations to increase our legal, accounting and financial compliance costs and make certain corporate activities more time-consuming and costly. In addition, we will incur additional costs associated with our public company reporting requirements. We are currently evaluating and monitoring developments with respect to these new rules, and we cannot predict or estimate the amount of additional costs we may incur or the timing of such costs.  21       Table of Contents  When we account for employee share options using the fair value method, such accounting treatment could significantly reduce our net income. On December 16, 2004, the Financial Accounting Standard Board, or FASB, issued FASB Statement No. 123(R), Share-Based Payment, which requires a public company to recognize, as an expense, the fair value of stock options and other share-based compensation to employees at the first fiscal year that begins on or after June 15, 2005. Currently, we record share-based compensation to the extent that the fair value of the shares on the date of grant exceeds the exercise price of the option. We recognize compensation expense over the related vesting periods. For the periods after December 31, 2005, we could have ongoing accounting charges significantly greater than those we would have recorded under our current method of accounting for share options. See Managements Discussion and Analysis of Financial Conditions and Results of OperationsCritical Accounting Policies for a more detailed presentation of accounting for share-based compensation plans. Item 2. Properties The majority of our operations are in China, where we have leased offices in Beijing, Wuhan and Shanghai. We believe that our existing facilities are adequate to meet our current requirements, and that future growth can be accommodated by leasing additional or alternative space. Item 3. Legal Proceedings We are not aware of any pending legal proceedings against us. We may in future be party to litigation arising in the course of our business. Such claims, even if not meritorious, could result in the expenditure of significant financial and managerial resources. Item 4. Submissions of Matters to a Vote of Security Holders On June 29, 2006, at a special meeting of our shareholders, the shareholders elected the following nominees for directors to our Board of Directors and received the votes listed. NameForWithheldBruno Wu63,573,194Yu Bing63,523,19450,000Herbert Kloiber63,523,19450,000Kay KoplovitzYang Qi,63,573,194William Adamopoulos63,573,194Mark Newburg63,523,19450,000 and The proposal to change the state of incorporation from Minnesota to Delaware was approved by the following vote:  22       Table of Contents  ForAgainstAbstainBroker Non-Votes63,386,639186,555 Part II. Item 5. Market for Common Equity and Related Shareholder Matters Our common shares are quoted on the Over-the-Counter Bulletin Board under the symbol SNMD. The following quotations are adjusted to reflect the 2-for-1 reverse stock split that occurred on September 18, 2005 and reflect the high and low bids for our common stock based on inter-dealer prices, without retail mark-up, mark-down or commission and may not represent actual transactions. The high and low bid prices for our common shares for each full financial quarter for the past eight completed quarters were as follows: 04/01/05 to 03/31/0604/01/04 to 03/31/05HighLowHighLowFirst Quarter4.882.820.340.34Second Quarter4.202.840.600.60Third Quarter4.153.001.901.40Fourth Quarter4.353.605.101.24 The quotations above reflect inter-dealer prices, without retail mark-up, mark-down or commission and may not represent actual transactions. On June 15, 2006, the last reported sale price for our common stock on the OTC Bulletin Board was $4.25. As of June 18,2006, there were 444 shareholders of record of our common stock. Dividend Policy We have never paid any cash dividends and do not anticipate paying cash dividends in the foreseeable future. Recent Sales of Securities During the quarter ended March 31, 2006, we issued shares in the following transactions pursuant to exemptions from the registration requirements of theSecurities Act of 1933, as amended (the Act). In February 2006, we issued 196,000 shares of common stock at price of $2.30 per share and warrants for the purchase of an aggregate of 196,000 shares of common stock at an exercise price of $4.90 per share. These issuances were to four investors pursuant to Regulation S of the Act. On March 6, 2006, we issued 50,000 shares of Common Stock, a $1,898,000 note convertible into common stock at price of$2.04 per share and warrants for the purchase of an aggregate of 4 million shares of Common Stock at an exercise price of $2.10per share. Each of these issuances was made to one accredited investor pursuant to Regulation D and Section 4(2) of the Act. During January to March 2006, we issued Common Stock in connection with acquisitions as follows: 14,900,000 shares of common stock pursuant to the acquisition of China Focus Channel Development Co., Limited(Focus);  2,000,000 shares of common stock as finders fee for the acquisition of Focus;  853,333 shares of common stock pursuant to the acquisition of Telefaith Holdings Limited; and  409,207 shares of common stock pursuant to the acquisition of Magzone Asia Pte Ltd. Each of the foregoing transactions was made pursuant to Regulation S of the Act.  23       Table of Contents    Item 6. Management Discussion and Analysis Overview Our principal focus is on our China-based business-to-business interactive marketing and sales services business. Our goal is to be one of Chinas first integrated business media and channel management companies. We are in the process of building e-enabled distribution systems, media platforms, and electronic exchanges in a number of Chinas key industries, connecting buyers and sellers with a suite of turnkey digital media, e-commerce, and information management solutions. We have completed a number of acquisitions as of March 31, 2006 and announced several other acquisitions that we expect to close subsequent to the quarter ending March 31, 2006. (See Business  Recent Developments). We have also divested our legacy brokerage business which we operated prior to the reverse acquisition. As a result of these transactions, we expect that our results of operations for future periods will be materially different and that our principal sources of revenue, operating expenses and profits will be derived from our China based businesses. As such, our historical results to March 31, 2006 are not indicative of the future performance of the Company. On June 29, 2006, our wholly owned subsidiary, Sun New Media Holdings Limited entered into an agreement with MIDGET Limited and divest our stake in Compass Multimedia Holdings Limited for a consideration of approximately RMB5.3 million(US$0.67 million). The disposal will not have a material impact on our statement of operations for the financial year commencing April 1, 2006. Results of Operations Fiscal Period Ended March 31, 2006 Except for certain employee and financing related charges, our operating results for the period ended March 31, 2006principally reflect our legacy brokerage business, which has since been divested. The operating results did not include any contribution from China Focus Channel Development Co. Ltd. as was originally expected due to the delay in the transfer of the business and assets from Hubei Zhengyuan Trade Development Limited to Suizhou Focus Channel Development Limited. The Focus transaction is discussed in more detail in the section on Business  Recent Developments. Revenue.Total revenue for the 6-month period ended March 31, 2006 was $402,173, of which 99% were attributable to the legacy on-line brokerage business. Expenses.Our total expenses for the 6-month period ended March 31, 2006 were $13,586,576. These include general and administrative expenses of $10,783,946 (of which $9,654,099 relate to stock based employee incentive compensation) and expenses related to our brokerage business of $454,016, convertible notes discount costs of $105,807, and provision for impairment loss in marketable securities of $1,456,221. Excluding the expenses relating to our brokerage business and the non-cash expenses associated with incentive compensation, warrants and convertible notes, our total operating expenses would have been $1,916,433. Of this amount approximately $436,000was for legal and professional fees incurred for acquisitions. Net Loss.Our net loss for the 6-month period ended March 31, 2006 was $13,146,176 including non-cash expenses of about$11.2 million. Our ability to achieve profitability in the future will depend upon our ability to effectively integrate and operate our acquired businesses. We must successfully implement of our acquisition and expansion strategies and rationalize our businesses to achieve economies of scale, improved operational efficiencies and productivity, and reduce costs. In addition, we must successfully expand our brand awareness, client base and increase our global market presence.  24       Table of Contents  Fiscal Period Ended September 30, 2005 Our results for the fiscal period ended September 30, 2005, or fiscal 2005, include the results of our interactive marketing and sales services business from inception in June 2005 and our brokerage business from September 18, 2005. Revenue.Brokerage commission revenue for the fiscal 2005 was $27,358. We had no revenue related to our interactive marketing and sales services business during fiscal 2005. Expenses.Our total expenses for fiscal 2005 were $123,299. These included expenses relating to our brokerage business of clearing firm charges of $5,094, commission expenses of $8,450 and general and administrative expenses of $24,697 and general and administrative expenses relating to our interactive marketing and sales services business of $85,058. Net Loss.Our net loss for fiscal 2005 was $95,941. Liquidity and Capital Resources As of March 31, 2006, we had approximately $1.4 million in cash and cash equivalents and $8.1 million in marketable securities. Subsequent to March 31, 2006, we have received net proceeds of $8,311,845 from the exercise of warrants to purchase our common stock. As of June 18, 2006, warrants with a weighted average exercise price per share of $3.51 and an aggregate exercise price of $40.5 million remained outstanding. Proceeds from the conversion of outstanding warrants will be used for working capital, including new acquisitions. If we are unsuccessful in raising further new capital, our ability to seek strategic acquisitions to grow our business would be adversely affected. Off-Balance Sheet Arrangement As of March 31, 2006, we do not have any off-balance sheet arrangements. Capital Expenditure Commitments We had no material capital expenditures for the period ended March 31, 2006. However we expect to invest approximately$250,000 in capital expenditure over the next 12 months. Recent Accounting Pronouncements In December 2004, the FASB issued SFAS No. 123R, Share-Based Payment, which establishes standards for the accounting for transactions in which an entity exchanges its equity instruments for goods or services. A key provision of this statement is the requirement of a public entity to measure the cost of employee services received in exchange for an award of equity instruments(including stock options) based on fair value of the award at the grant date. That cost will be recognized over the period during which an employee is required to provide service in exchange for the award (i.e., the requisite service period or vesting period).This standard becomes effective for the Company for its first annual or interim period ended on or after December 15, 2005. The Company adopted SFAS 123R for the quarter ended December 31, 2005. In May 2005, the FASB issued SFAS No. 154, accounting Changes and Error Corrections, FAS 154, which replaces APB Opinion No. 20 Accounting Changes and SFAS No. 3, Reporting Accounting Changes in Interim Financial Statements. SFAS 154provides guidance on the accounting for and reporting  25       Table of Contents  of accounting changes and error corrections. It establishes retrospective application as the required method for reporting a change in accounting principle and the reporting of a correction of an error. SFAS 154 is effective for accounting changes and corrections of errors made in fiscal years beginning after December 15, 2005. Critical Accounting Policies and Estimates Our audited financial statements and accompanying notes are prepared in accordance with generally accepted accounting principles (GAAP) used in the United States. In preparing financial statements, management has made certain estimates and assumptions that affected the reported amounts of assets, liabilities, revenue, and expenses. These estimates and assumptions were made consistent with standard accounting policies and practices. We believe that understanding the basis and nature of the estimates and assumptions involved with the following aspects of our consolidated financial statements is critical to an understanding of our financials. Revenue recognition The Companys revenues consisted of brokerage commissions generated by Global American Investments, Inc .Securities transactions and related revenues and expenses are recorded on a trade date basis. Commission revenues are recorded on a settlement date basis. The Company recognizes revenues from transaction and information services in accordance with Staff Accounting Bulletin (SAB) No. 104, Revenue Recognition, when all of the following conditions exist: persuasive evidence of an arrangement exists in the form of an accepted purchase order; delivery has occurred, based on shipping terms, or services have been rendered; the Companys price to the buyer is fixed or determinable, as documented on the accepted purchase order; and collectability is reasonably assured. Stock-based compensation Effective January 1, 2006, the company adopted SFAS No. 123 (revised 2004), Share Based Payment,(SFAS No. 123(R)) which revises SFAS No. 123 and supersedes APB 25. SFAS No. 123(R) requires that all share-based payments to employees be recognized in the financial statements based on their fair values at the date of grant. The calculated fair value is recognized as expense (net of any capitalization) over the requisite service period, net of estimated forfeitures, using the straight-line method under SFAS No. 123(R). The Company considers many factors when estimating expected forfeitures, including types of awards, employee class and historical experience. The statement was adopted using the modified prospective method of application which requires compensation expense to be recognized in the financial statements for all unvested stock options beginning in the quarter of adoption. There were no unvested stock options at the beginning of this reporting period therefore no compensation expense was recognized in the period. No adjustments to prior periods have been made as a result of adopting SFAS No. 123(R). As at September 30, 2005 the Company elected to account for stock-based employee compensation arrangements in accordance with the provisions of Accounting Principles Board Opinion No. 25, Accounting for Stock Issued to Employees, (APB No. 25) and comply with the disclosure provisions of SFAS No. 123 as amended by SFAS No. 148. During the period from September 18, 2005 to September 30, 2005, no stock-based employee compensation arrangements have been effected and accordingly no disclosure of pro forma information is required. In accordance with SFAS No. 123 the Company applies the fair value method using the Black-Scholes option-pricing model in accounting for options granted to consultants. The Company accounts for equity instruments issued in exchange for the receipt of goods or services from other than employees in accordance with SFAS No. 123 and the conclusions reached by the Emerging Issues Task Force in Issue No. 96-18, Accounting for Equity Instruments That Are Issued to Other Than Employees for Acquiring or in Conjunction with Selling Goods or Services (EITF 96-18). Costs are measured at the estimated fair market value of the consideration received or the estimated fair value of the equity instruments issued, whichever is more reliably measurable. The value of equity instruments issued for consideration other than employee services is determined on the earlier of a performance commitment or completion of performance by the provider of goods or services as defined by EITF 96-18.  26       Table of Contents    Item 7. Financial Statements Financial Statements Sun New Media, Inc. Consolidated Financial Statements Period from October 1, 2005 to March 31, 2006 (Expressed In United States Dollars)  27       Table of Contents  Report of Independent Registered Public Accountants29Consolidated Balance Sheet30Consolidated Statement of Operations31Consolidated Statement of Changes in Stockholders Equity32Consolidated Statement of Cash Flows34Notes to Consolidated Financial Statements35  28       Table of Contents   REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS  To the Board of Directors and Stockholders of  Sun New Media Inc. (Formerly known as SE Global Equities Corp.)  We have audited the accompanying balance sheet of Sun New Media Inc (formerly known as SE Global Equities Corp.) (the Company) as of September 20, 2005 and the related consolidated statement of operations, changes in stockholders equity. and cash flows for the period from June 6, 2005 to September 30, 2005. These consolidated financial statements are the responsibility of the Companys management. Our responsibility is to express an opinion on these financial statements based on our audits.  We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the 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 financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.  In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of September 30, 2005 and the results of its operations and its cash flows for the period from June 6, 2005 to September 30, 2005 in conformity with accounting principles generally accepted in the United States of America.  /s/ MOORES ROWLAND MAZARS Chartered Accountants Certified Public Accountants Hong Kong  January 13, 2006                                  29A    REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM  To the Board of Directors and Stockholders of Sun New Media Inc.   We have audited the accompanying consolidated balance sheet of Sun New Media Inc (the Company) as of March 31, 2006 and the related consolidated statements of operations, changes in stockholders equity, and cash flows for the period from October 1, 2005 to March 31, 2006.  These consolidated financial statements are the responsibility of the Companys management.  Our responsibility is to express an opinion on these financial statements based on our audits.  We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States).  Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the 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 financial statement presentation.  We believe that our audit provides a reasonable basis for our opinion.  In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of March 31, 2006 and the results of its operations and its cash flows for the period from October 1, 2005 to March 31, 2006 in conformity with accounting principles generally accepted in the United States of America.  The Company restated the March 31, 2006 financial statements referred to above to correct an error in accounting for convertible notes with detachable warrants as more fully described in Note 17.  /s/ Bernstein & Pinchuk LLP  New York, New York June 29, 2006 except for Note 17 as to which the date is August 31, 2006 29B       Table of Contents  SUN NEW MEDIA INC. CONSOLIDATED BALANCE SHEET As of March 31, 2006 and September 30, 2005 (Restated)NoteAs ofAs ofSeptember 30,March 31,200620051US$US$ASSETSCurrent AssetsCash and bank balances1,373,715201,957Accounts receivable, net of provision for doubtful debts $72,046(2005: Nil)415,7356,277Other receivable, prepayments and deposits8466,39624,859Inventories85,346Marketable securities8,140,377Amounts due from stockholders9292,106150,446Amounts due from related parties9892,699Total current assets11,666,374383,539Investment in associated company24,987Goodwill and intangible assets461,794,537Plant and equipment52,205,5365,554Clearing broker deposit36,98036,980Total Assets75,728,414426,073LIABILITIES AND STOCKHOLDERS EQUITYCurrent LiabilitiesAccounts payable987,23871,204Other payables and accruals106,928,09838,526Amounts due to related parties9489,122Factoring loan11233,043Total current liabilities8,637,501109,730Minority interest(101,520)Convertible notes62,816,000Discount on convertible notes6(2,570,634)Commitments and Contingencies12STOCKHOLDERS EQUITYCommon stock; authorized 750,000,000 shares, US$0.01 par valuePreference stock, authorized 250,000,000 shares, US$0.01 par value84,055,510 (2005: 9,259,370) shares of common stock issued and outstanding, US$0.01 par value840,55592,59414,537,253 (2005: 55,250,000) shares of common stock reserved to be issued, US$0.01 par value145,372552,500Additional paid in capital79,439,3975,250Foreign currency translation adjustments1,920Deficit(13,480,177)(334,001)Total stockholders equity66,947,067316,343Total liabilities and stockholders equity75,728,414426,073  (1)Information for the comparative period is not applicable since the Company commenced its operations on June 6, 2005. The accompanying notes are an integral part of these consolidated financial statements.  30       Table of Contents  SUN NEW MEDIA INC. CONSOLIDATED STATEMENT OF OPERATIONS For the periods ended March 31, 2006 and September 30, 2005 (Restated)NotePeriod fromPeriod fromOctober 1, 2005June 6, 2005to March 31, 2006to September 30,2005(1)US$US$REVENUES402,17327,358Direct costs245,06318,723157,1108,635OPERATING EXPENSESGeneral and administrative10,783,94616,938Depreciation and amortization6,767Finders fee55,000Consulting and professional fees988,77232,638Impairment loss on marketable securities1,456,221Total operating expenses13,235,706104,576Operating loss(13,078,596)(95,941)Interest income637Amortization of discount on notes(105,807)Loss from continuing operations before income tax(13,146,176)(95,941)Income tax expenses7Loss from continuing operations(13,183,776)Discontinued operations37,590Net loss(13,146,176)(95,941)Earnings per share:Weighted average number of shares outstandingBasic and diluted72,809,16015,398,259Net loss per share of common stockBasic and diluted(0.18)(0.01)  (1)Information for the comparative period is not applicable since the Company commenced its operations on June 6, 2005. The accompanying notes are an integral part of these consolidated financial statements.  31      Table of Contents  SUN NEW MEDIA INC. CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS EQUITY Period from June 6, 2005 to March 31, 2006 Common sharesIssuedReserve and to be issuedNumberNumberAdditionalofofPaid inTranslationNoteSharesAmountsSharesAmountsCapitalDeficitAdjustmentTotalUS$US$US$US$US$US$Balance, June 6,2005250,000250,000250,000Elimination of SNMG shares upon reverse acquisition(250,000)(250,000)250,000Consolidation of SNMD shares upon reverse acquisition18,518,740185,188185,188Additional paid in capital of SNMD upon reverse acquisition6,269,3596,269,359Accumulated losses of SNMD upon reverse acquisition(6,350,013)(6,350,013)1 for 2 reverse split(9,259,370)(92,594)92,594Issuance of stocks for acquisition of SNMG(i)50,000,000500,000(500,000)Issuance of stocks for finders fees(i)5,000,00050,0005,00055,000Issuance of stocks for management
fees(i)250,0002,5002502,750Par value of shares issued for reverse acquisition in excess of the additional paid-in capital238,060(238,060)Net loss for the period(95,941)(95,941)Balance, September 30,200519,259,37092,59455,250,000552,5005,250(334,001)316,343(i)The stocks were reserved as of September 30, 2005 and were issued on October 4, 2005.(1)Information for the comparative period is not applicable since the Company commenced its operations on June 6, 2005. The accompanying notes are an integral part of these consolidated financial statements.  32       Table of Contents   SUN NEW MEDIA INC. CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS EQUITY Period from June 6, 2005 to March 31, 2006 Common sharesIssuedReserved and to be issuedForeignNumberNumberAdditionalCurrencyofofPaid inTranslationNoteSharesAmountsSharesAmountsCapitalDeficitAdjustmentTotalUS$US$US$US$US$US$Balance, October 1, 20059,259,37092,59455,250,000552,5005,250(334,001)316,343Issuance of stocks for acquisition from SNMG55,250,000552,500(55,250,000)(552,500)Issuance of stocks for stock options exercised43,00043034,09034,520Issuance of stocks for stock purchase196,0001,960448,840450,800Issuance of stocks to Barron Partners LLP100,0001,000203,000204,000Issuance of stocks for acquisition of Focus14,900,000149,00024,851,01325,000,013Issuance of stocks for finders fee2,000,00020,0007,780,0007,800,000Issuance of stocks for acquisition of Telefaith853,3338,533359,396367,929Issuance of stocks for acquisition of Magzone409,2074,0921,595,9101,600,002Issuance of stocks for employees performance incentives1,044,60010,4463,868,6533,879,099Issuance of stocks for purchase of assets(ii)1,156,30311,5634,035,4974,047,060Issuance of stocks for grant of license(ii)6,900,00069,00024,081,00024,150,000Issuance of stocks for shares swap(ii)5,042,01750,4206,896,1786,946,598Issuance of stocks for acquisition of CSTV(iii)460,5264,605556,732561,337Issuance of stocks for acquisition of Lifestyle(iii)978,4079,7842,259,4902,269,274Discount on convertible notes and warrants2,676,4412,676,441   Capital contribution89,90789,907Expenses incurred on issuance of stocks(302,000)(302,000)Other comprehensive income1,9201,920Net loss for the period(13,146,176)(13,146,176)Balance, March 31, 2006(Restated)84,055,510840,55514,537,253145,37279,439,397(13,480,177)1,92066,947,067(ii)The stocks were reserved as of March 31, 2006 and were issued on May 9, 2006.(iii)The stocks were reserved as of March 31, 2006 and were issued on April 17, 2006. The accompanying notes are an integral part of these consolidated financial statements.  33       Table of Contents   SUN NEW MEDIA INC. CONSOLIDATED STATEMENT OF CASH FLOWS For the periods ended March 31, 2006 and September 30, 2005 (Restated)October 1, 2005June 6, 2005 toto March 31, 2006September 30,2005US$US$(1)Cash flows from operating activitiesNet loss for the period(13,146,176)(95,941)Adjustments to reconcile net loss to net cash used in operating activities;Finders fee55,000Stock-based compensation9,654,099Depreciation of fixed assets6,767Amortization of discount on notes105,807Impairment loss on marketable securities1,456,221Changes in assets and liabilities:Accounts receivable(43,689)Other receivables, deposits and prepayments(294,642)Due from related parties(751,166)Due from stockholders(141,660)(97,349)Accounts payable241,8561,920Other payables and accruals853,70138,526Due to related parties403,628Net cash used in operating activities(1,655,254)(97,844)Cash flows from investing activitiesPurchase of fixed assets(5,680)Cash paid in business combination, net(403,159)49,801Investment in associated company(24,987)Net cash provided by investing activities(433,826)49,801Cash flows from financing activitiesIssuance of common stock654,800250,000Issuance of convertible notes2,816,000Expenses incurred on issuance of common stock(20,400)Expenses incurred on issuance of convertible notes(281,600)Minority interest, net89,907Net cash provided by financing activities3,258,707250,000Net effect of exchange rate changes on consolidating subsidiaries2,131Net increase in cash and cash equivalents1,171,758201,957Cash and cash equivalents, beginning of the period201,957Cash and cash equivalents, end of the period1,373,715201,957  (1)Information for the comparative period is not applicable since the Company commenced its operations on June 6, 2005. The accompanying notes are an integral part of these consolidated financial statements.  34       Table of Contents  SUN NEW MEDIA INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS For the period from October 1, 2005 to March 31, 2006 Note 1  Organization and Nature of Business Sun New Medias goal is to become one of Chinas leading multi-media powered marketing and channel management company. Our principal focus is on our China-based business-to-business interactive marketing and sales services business. We are creating this business through the ongoing acquisition of various entities and assets. We continued to operate the legacy SE Global Capital brokerage business through March 31, 2006. Sun New Media Inc (formerly known as SE Global Equity Corp, SE Global), a Minnesota corporation, and each of its subsidiaries are collectively referred to herein as the Company or SNMD. On September 12,2005, the stockholders of SE Global approved the Share Purchase Agreement (the Reverse Acquisition Agreement) dated as of July 21, 2005, between SE Global and Sun Media Investment Holdings Limited (Sun Media) to acquire 100% of the issued and outstanding shares of Sun New Media Group Limited (SNMG)(the Reverse Acquisition Transaction). SNMG was incorporated in the British Virgin Islands on June 6, 2005 as a limited liability company. Under the terms of the Reverse Acquisition Agreement, SE Global amended its Articles of Incorporation prior to the closing of the Transaction to: change its name from SE Global to Sun New Media, Inc;  complete a one for two reverse stock split (reverse split) of the issued and outstanding shares of common stock of SE Global; and  amend its authorized share capital to consist of 750,000,000 shares of common stock with a par value of $0.01 per share; and 250,000,000 shares of preferred stock with a par value of $0.01 per share. Under the terms of the Reverse Acquisition Agreement, SE Global issued 50,000,000 shares of its common stock (post reverse split) to Sun Media as consideration for Sun Media selling all of the issued and outstanding shares of SNMG. SE Global issued an additional 5,000,000 shares (post reverse split) to two parties who introduced Sun Media to SE Global as finders fee. SE Global and Sun Media completed the above transactions on September 18, 2005. SE Global changed its name from SE Global Equities Corp to Sun New Media Inc. and began trading under the new symbol SNMD on a post one for two reverse split basis on September 20, 2005. At the closing, the businesses of the Company and SNMG were combined (the Combination). The Combination was accounted for as a purchase transaction for financial accounting purposes. As a result of the Combination, Sun Media owned a majority of the outstanding shares of Company common stock. Therefore, the Combination was accounted for as a reverse acquisition in which SNMG is the purchaser of the Company. Our subsidiaries include the following: SNMG;Global-American Investments Inc (GAI);SE Global Equity Inc;SE Global Capital Inc;Sun Global Marketing Network Limited;China Focus Channel Development (HK) Limited;Sun New Media Holdings Limited;Telefaith Holdings Limited;Magzone Asia Pte Ltd;Lifestyle Magazines Publishing Pte Ltd; andChina Sports Television Production Limited.   35       Table of Contents  Note 2  Summary of the Companys significant accounting policies Basis of Consolidation and Presentation The consolidated financial statements include the accounts of the Company, its subsidiaries and variable interest entities, VIEs for which the Company is the primary beneficiary. All significant intercompany accounts and transactions have been eliminated .Investments in entities in which the Company can exercise significant influence, but which are less than majority owned and not otherwise controlled by the Company, are accounted for under the equity method. The Company has adopted FASB Interpretation No. 46R consolidation of Variable Interest Entities, FIN 46R, an Interpretation of Accounting Research Bulletin No. 51. FIN 46Rrequires a VIE to be consolidated by a company if that company is subject to a majority of the risk of loss for the VIEs or is entitled to receive a majority of the VIEs residual returns. The consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States. The Group has the following significant domestic Variable Interest Entities, or VIEs: Sun China Media (Beijing) Technology Co., Ltd. (SCMBT), a PRC company controlled through us by contract and is owned equally by Qiong Zhou and Yuling Li, each of whom are non-executive employees of the Company.  Suizhou Focus Trading Development Co., Ltd. (SFC), a PRC company controlled by us by contract and is engaged in marketing, information and technology services to beverage and electronic device distributors. It is 60% owned by Qi Yang, one of our officers and directors and 25% and 15% owned by Bingwei Wu and Quanyi Mao, two employees of the Company respectively.  Shanghai Shengji Technology Co., Ltd (Shengji), a PRC company controlled by us by contract, and is engaged in wireless mobile services. It is 40% owned by Hui Yan, 40% owned by Min Lin and 20% owned by KezhouLuan, each employees of the Company.  Sun China Media (Beijing) International Advertising Co. Ltd (SCMIA), a China company controlled by us by contract and is engaged in advertising business. It is 50% owned by Qiong Zhou, and 50% owned by Yuling Li,non-executive PRC employees of the Company. The capital investment in these VIEs is funded by the Company and registered as interest-free loans to these PRC employees. As of March 31, 2006, the total amount of interest-free loans to the employee shareholders of the VIEs listed above wasUS$262,500. Under various contractual agreements, employee shareholders of the VIEs are required to transfer their ownership in these entities to our subsidiaries in China when permitted by PRC laws and regulations or to our designees at any time for the amount of outstanding loans, and all voting rights of the VIEs are assigned to us. We have the power to appoint all directors and senior management personnel of the VIEs. Through our wholly-owned subsidiaries in China, we have also entered into exclusive technical agreements and other service agreements with the VIEs, under which these subsidiaries provide technical services. Use of estimates The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amount of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amount of revenue and expenses for the periods that the financial statements are prepared. Actual amounts could differ from these estimates. Financial instruments The Companys financial instruments include cash and cash equivalents, accounts receivable and payable. The fair values of these financial instruments approximate their carrying values due to the short-term maturity of the instruments.  36       Table of Contents  Business combinations The Company accounts for its business combinations using the purchase method of accounting. This method requires that the acquisition cost to be allocated to the assets and liabilities the Company acquired based on their fair values. The Company makes estimates and judgments in determining the fair value of the acquired assets and liabilities, based on independent appraisal reports for material purchases as well as its experience with similar assets and liabilities in similar industries. If different judgments or assumptions were used, the amounts assigned to the individual acquired assets or liabilities could be materially different. When considering whether an acquired assets group constitutes a business, the Company used the criteria defined by EITF 98-3determining Whether a Non-monetary Transaction Involves Receipt of Productive Assets or of a Business. Goodwill and intangible assets, net Goodwill represents the excess of the purchase price over the fair value of the identifiable assets and liabilities acquired as a result of the Companys acquisitions of interests in its subsidiaries and VIEs. Under Statement of Financial Accounting Standards, FAS No. 142, goodwill and Other Intangible Assets, FAS 142, goodwill is no longer amortized, but tested for impairment upon first adoption and annually, thereafter, or more frequently if events or changes in circumstances indicate that it might be impaired. The Company assesses goodwill for impairment periodically in accordance with SFAS 142. The Company applies the criteria specified in SFAS No. 141, business Combinations to determine whether an intangible asset should be recognized separately from goodwill. Intangible assets acquired through business acquisitions are recognized as assets separate from goodwill if they satisfy either the contractual-legal or reparability criterion. Per SFAS 142, intangible assets with definite lives are amortized over their estimated useful life and reviewed for impairment in accordance with SFAS No. 144, accounting for the Impairment or Disposal of Long-lived Assets. The Company reviews the amortization methods and estimated useful lives of intangible assets at least annually or when events or changes in circumstances indicate that it might be impaired. The recoverability of an intangible asset to be held and used is evaluated by comparing the carrying amount of the intangible asset to its future net undiscounted cash flows. If the intangible asset is considered to be impaired, the impairment loss is measured as the amount by which the carrying amount of the intangible asset exceeds the fair value of the intangible asset, calculated using a discounted future cash flow analysis. The Company uses estimates and judgments in its impairment tests, and if different estimates or judgments had been utilized, the timing or the amount of the impairment charges could be different. Plant and equipment Plant and equipment are stated at cost, net of depreciation. Depreciation is computed primarily on the straight-line method for financial reporting purposes over the following estimated useful lives: YearsFurniture, fixtures and equipment3 - 5Motor vehicles5 Impairment of marketable securities Marketable securities are classified as trading securities and reported fair at fair value. The carrying amounts are reviewed at each balance sheet date to determine whether there is any indication of any impairment. Any unrealized gains or losses are included in the statement of operations. Revenue recognition Brokerage fees and commissions derived from securities transactions and related revenues and expenses are recorded on a trade date basis. Commission revenues are recorded on a settlement date basis. Transaction service revenue will be mainly attributed from the management fee income of China Focus Channel Development Ltd which we acquired on January 27, 2006. According to the supplemental agreement, the management fee agreement will be effective on April 1, 2006, therefore there was no management fee revenue recognized as of March 31, 2006. Information services business, a start-up operation, did not generate revenue during the period. Loss per share Basic loss per share includes no dilution and is computed by dividing loss available to common stockholders by the weighted average number of common shares outstanding for the year. Diluted net loss per share reflects the potential dilution of securities that could share in the loss of the Company. Stock options and outstanding warrants have not been included in the diluted earnings per share calculation because their effect would be anti-dilutive. Therefore, basic and diluted earnings per share are the same.  37       Table of Contents  Foreign currency translation The financial statements are presented in United States dollars. In accordance with Statement of Financial Accounting Standards (SFAS) No. 52, Foreign Currency Translation, since the functional currency of the Company is U.S. Dollar, the foreign currency financial statements of the Companys subsidiaries are re-measured into U.S. dollars. Monetary assets and liabilities are re-measured using the foreign rate that prevailed at the balance sheet date. Revenue and expenses are translated at weighted average rates of exchange during the year and stockholders equity accounts and capital asset accounts are translated by using historical exchange rates. Any re-measurement gain or loss incurred is reported in the consolidated statement of operations. Income taxes The Company follows the liability method of accounting for income taxes in accordance with SFAS No. 109. Under this method ,future tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax balances. Future tax assets and liabilities are measured using enacted or substantially enacted tax rates expected to apply to the taxable income in the years in which those differences are expected to be recovered or settled. The effect on future tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the date of enactment or substantive enactment. A valuation allowance is provided for deferred tax assets if it is more likely than not that the Company will not realize the future benefit, or if the future deductibility is uncertain. Stock-based compensation Effective January 1, 2006, the company adopted SFAS No. 123 (revised 2004), Share Based Payment,(SFAS No. 123(R)) which revises SFAS No. 123 and supersedes APB 25. SFAS No. 123(R) requires that all share-based payments to employees be recognized in the financial statements based on their fair values at the date of grant. The calculated fair value is recognized as expense (net of any capitalization) over the requisite service period, net of estimated forfeitures, using the straight-line method under SFAS No. 123(R). The Company considers many factors when estimating expected forfeitures, including types of awards, employee class and historical experience. The statement was adopted using the modified prospective method of application which requires compensation expense to be recognized in the financial statements for all unvested stock options beginning in the quarter of adoption. There were no unvested stock options at the beginning of this reporting period therefore no compensation expense was recognized in the period. No adjustments to prior periods have been made as a result of adopting SFAS No. 123(R). As at September 30, 2005 the Company elected to account for stock-based employee compensation arrangements in accordance with the provisions of Accounting Principles Board Opinion No. 25, Accounting for Stock Issued to Employees,(APB No. 25) and comply with the disclosure provisions of SFAS No. 123 as amended by SFAS No. 148. During the period from September 18, 2005 to September 30, 2005, no stock-based employee compensation arrangements have been effected and accordingly no disclosure of pro forma information is required. In accordance with SFAS No. 123 the Company applies the fair value method using the Black-Scholes option-pricing model in accounting for options granted to consultants. The Company accounts for equity instruments issued in exchange for the receipt of goods or services from other than employees in accordance with SFAS No. 123 and the conclusions reached by the Emerging Issues Task Force in Issue No. 96-18,Accounting for Equity Instruments That Are Issued to Other Than Employees for Acquiring or in Conjunction with Selling Goods or Services (EITF 96-18). Costs are measured at the estimated fair market value of the consideration received or the estimated fair value of the equity instruments issued, whichever is more reliably measurable. The value of equity instruments issued for consideration other than employee services is determined on the earlier of a performance commitment or completion of performance by the provider of goods or services as defined by EITF 96-18. Recently Issued Accounting Pronouncements In December 2004, the FASB issued Statement of Financial Accounting Standards (SFAS) No. 123R,Share-Based Payment, which establishes standards for the accounting for transactions in which an entity exchanges its equity instruments for goods or services. A key provision of this statement is the requirement of a public entity to measure the cost of employee services received in exchange for an award of equity instruments (including stock options) based on the grant date fair value of the award. That cost will be recognized over the period during which  38       Table of Contents  an employee is required to provide service in exchange for the award (i.e., the requisite service period or vesting period). This standard becomes effective for the Company for its first annual or interim period ended on or after December 15, 2005. The Company adopted SFAS 123R for the quarter ended December 31, 2005. In May 2005, the FASB issued SFAS No. 154, Accounting Changes and Error Corrections, SFAS 154, which replaces APB Opinion No. 20 Accounting Changes and SFAS No. 3, Reporting Accounting Changes in Interim Financial Statements. SFAS 154 provides guidance on the accounting for and reporting of accounting changes and error corrections. It establishes retrospective application as the required method for reporting a change in accounting principle and the reporting of a correction of an error. SFAS 154 is effective for accounting changes and corrections of errors made in fiscal years beginning after December 15, 2005. Related Parties Parties are considered to be related if one party has the ability, directly or indirectly, to control the other party, or exercise significant influence over the other party in making financial and operating decisions. Parties are also considered to be related if they are subject to common control or common significant influence. Deferred Expenses Payments made for future expenses were amortized over the life of service received.  NOTE 3  BUSINESS ACQUISITIONS Pursuant to FAS 141, paragraph 6, exchange transactions in which the consideration given is cash are measured by the amount of cash paid. However, if the consideration given is not in the form of cash (that is, in the form of non-cash assets, liabilities incurred, or equity interests issued), measurement is based on the fair value of the consideration given or the fair value of the asset (or net assets) acquired, whichever is more clearly evident and, thus, more reliably measurable.  The Company is a recently formed business with a very short history of operating and stock performance. At the time of completion of following acquisitions, all of which involved the issuance of the Companys common stock, the Companys common stock was traded on the Over-the-Counter Bulletin Board (OTCBB) with a high volatility in both volume and price during the relevant periods. Management determined that fair value of the common shares issued in these transactions would not be a reliable indicator of the value of acquired assets. Management determined that using the fair market value of the assets as determined by an independent appraisal firm would be the more reliable indicator of value. Therefore management determined that the fair value of the asset (or net assets) acquired is more clearly evident and thus, more reliably measurable when consideration is not in the form of cash.   39       Table of Contents  Share Purchase Agreement between the Company and Lifestyle Magazines Publishing Pte Ltd (Lifestyle Magazines) On March 31, 2006 we completed the acquisition of Lifestyle pursuant to a Sale and Purchase Agreement dated February 14, 2006 (the Lifestyle Purchase Agreement) by and between the Company and United Home Limited (United Home) and acquired a 100% controlling interest in Lifestyle Magazines. The Company announced the original agreement for the Lifestyle transaction on

April 6, 2006.

 Lifestyle Magazines and its results of its operations have been consolidated into the operations and financial condition of the Company for the fiscal year ended March 31, 2006. The consideration paid by the Company for the acquisition was satisfied through the issuance of 978,406 shares of the Companys common stock. Incorporated in Singapore, Lifestyle Magazines is one of Southeast Asias leading publishers of lifestyle and special interest magazines. It brings to the Company six popular magazine titles: New Man, Home Concepts, Space, Todays Parents, Se Xiang Wei, and Pregnancy Guide. At the time of entering into the agreement on February 14, 2006, our common stock was traded on OTCBB with limited liquidity and a comparative short trading history. The management believes the value of the acquired assets appraised by an independent appraiser will provide a more clearly evident and, thus, more reliable measurement for our non-cash consideration. Therefore the management determined to use the value of acquired assets to measure our consideration (the Company stock) paid. The Company used independent valuation report as a guidance to record this transaction. The purchase price was allocated as follows: Cash$63,590Current assets683,702Other assets11,657Current liabilities(1,051,983)Intangible assets2,562,308Purchase price$2,269,274  Share Purchase Agreement between the Company and Magzone Asia Pte Ltd (Magzone) The Company completed the acquisition of Magzone on March 10, 2006 for a consideration of issuance of the Companys common stock and cash.  The Company announced the original agreement for Magzone transaction on

March



16

,

2006

.. Magzone and its results of its operations have been consolidated into the operations and financial condition of the Company for the fiscal year ended March 31, 2006. The consideration paid by the Company for the acquisition was satisfied through US$399,998 and the issuance of 409,207 shares of the Companys common stock. At the time of entering into the agreement, our common stock was traded on OTCBB with limited liquidity and a comparative short trading history. The management believes the value of the acquired assets appraised by an independent appraiser will provide a more clearly evident and, thus, more reliable measurement for our non-cash consideration. Therefore the management determined to use the value of acquired assets to measure our consideration (the company stock) paid. The Company used independent valuation report as a guidance to record this transaction. The purchase price was allocated as follows: Cash$112,407Current assets15,126Other assets4,852Current liabilities(116,622)Goodwill on consolidation96,683Intangible assets1,887,554Purchase price$2,000,000   Share Purchase Agreement between the Company and Telefaith Holdings Limited (Telefaith) On March 2, 2006 we completed the acquisition of Telefaith Holdings Ltd. the parent company of Shengji Information Technology Ltd. in exchange for 853,333 shares of our Common Stock. The Company announced the Telefaith transaction on

December 8, 2005.

 Telefaith and its results of its operations have been consolidated into the operations and financial condition of the Company for the fiscal year ended March 31, 2006. At the time of entering into the agreement, our common stock was traded on OTCBB with limited liquidity and a comparative short trading history. The management believes the value of the acquired assets appraised by an independent appraiser will provide a more clearly evident and, thus, more reliable measurement for our non-cash consideration. Therefore the management determined to use the value of acquired assets to measure our consideration (the company stock) paid. The Company used independent valuation report as a guidance to record this transaction.  40       Table of Contents  The purchase price was allocated as follows: Cash$456Current assets6,194Other assets106,484Current liabilities(47,573)Intangible assets302,368Purchase price$367,929  Share Purchase Agreement between the Company and Sun New Media Holdings Limited On February 15, 2006 we completed the acquisition of Sun New Media Holdings Limited (SNMH) according to the terms of agreement with SNMH as originally announced on November 29, 2005. SNMH and its results of its operations have been consolidated into the operations and financial condition of the Company for the fiscal year ended March 31, 2006.  As a result of the acquisition, we  acquired an 85% equity interest in Sun 365 Multimedia Holdings Ltd, a Beijing based television and multimedia production-company; a 51% equity interest in Compass Multimedia Ltd. (HK), the creator and distributor of the Gogosun e-publishing platform and Chinas first digital TV Guide and a 30% equity interest in Global Woman Multimedia Co. Ltd., a TV and new media company with various online and offline media assets centered on Ms. Yang Lan, one of Chinas leading media personalities. The consideration for this acquisition was US $1.00.  Cash$1,026Current assets1,026Other assets80,988Current liabilities(85,053)Retained earnings3,040Purchase price$1  Share Purchase Agreement between the Company and China Focus Channel Development Co. Ltd (Focus) On January 27, 2006, we completed the acquisition of all of the capital stock of China Focus Channel Development Co. Ltd. (Focus),pursuant to a Sale and Purchase agreement (the Focus Purchase Agreement) dated November 22, 2005 with Yang Qi, Mao Quan Yi and Wu Bing Wei (collectively, the Sellers) in exchange for 14,900,000 shares of our common stock. The Company announced the original agreement for the Focus transaction on

November



25

,

2005

  Focus and its results of its operations have been consolidated into the operations and financial condition of the Company for the fiscal year ended March 31, 2006.] The terms of the Focus Purchase Agreement also provide that the Company will issue an additional 2,000,000 shares of its common stock to the Sellers  if: a)the audited net profit after tax (PAT) of Suizhou Focus Channel Development Limited (SFC),wholly owned subsidiary of Focus, is in excess of $4.5 million for the fiscal year ending December 31, 2006,b)the audited PAT of SFC is in excess of $5.0 million for the fiscal year ending December 31, 2007; andc)the audited PAT of SFC for the fiscal year ending December 31, 2008 is in excess of $5.5 million. In the event that the audited PAT is less than the guaranteed amounts for each of the fiscal years, the Sellers shall either make-up the shortfall in cash, or forfeit their rights to receive the shares of the Companys common stock.  Under the terms of the Focus Purchase Agreement, Sellers also agreed to transfer to SFC the business and assets of Hubei Zhengyuan Trade Development Ltd., a separate PRC company (HZTD). At closing (January 27, 2006), the parties entered into a supplemental agreement which provided for a 90-day period from closing to effect the transfer of the HZTD business and assets. HZTD was engaged in the beverage distribution business in Hubei province in China. Focus, through its PRC subsidiary, was engaged in marketing and channel management services to third parties, including HZTD.  At the time of the transaction, the Company desired to increase its concentration in the consumer goods marketing and management, including to the beverage vertical market. The acquisition of Focus, coupled with the acquisition of the HZTD business and assets, was complementary to that business strategy.  On March 31, 2006, SFC and HZTD, entered into a management services agreement (the New Agreement) which will take effect from April 1, 2006. Under the terms of the New Agreement, HZTD agreed to pay SFC and/ or its nominees a management fee equal to 12% of its total cash sales. In addition, the Sellers will guarantee SFC that the management fee payable to SFC arising from this New Agreement shall not be less than RMB4 million (approximately US$500,000) per month, and that the operating costs of SFC including staff costs shall not be more than RMB8 million (approximately US$1 million) per annum subject to an inflationary cost increase of no more than 10% per annum for the duration of the New Agreement. Notwithstanding the above, the profit guarantees as provided by the Sellers as per the original Purchase Agreement remained unchanged. As a result of the New Agreement, the total assets acquired by the Company in connection with the Focus Purchase Agreement were the contract rights to receive the 12% management fee from HZTD.   In addition to the New Agreement, the Company and the Sellers have entered into a separate Supplemental Agreement (the New Supplemental Agreement) to the original Purchase Agreement to alter the following terms: i)the profit related shares shall be reduced to 700,000 shares per year from the original 2,000,000 shares per year for which the profit guarantees are met;  ii)the Company shall pay the Sellers a cash component of RMB40 million (approximately US$5 million); and  iii)the business and assets of HZTD shall remain with HZTD and will not be transferred to SFC as provided in the original Purchase Agreement.  41       Table of Contents  In summary, assuming that profit guarantee for each of the three years are met, total consideration for the acquisition of Focus shall be 17 million shares of our common stock and cash of RMB40 million (approximately US$5 million) instead of 20.9 million shares. The purchase price was allocated as follows: Cash$13Current assetsOther assetsCurrent liabilitiesGoodwill on consolidation7,800,000Intangible assets (contract rights)25,000,000Purchase price$32,800,013  Share Purchase Agreement between SE Global and Sun Media The Company intended to purchase the business assets of SNMG and pursuant to the Share Purchase Reverse Acquisition Agreement, the Company acquired 100% of the stock of SNMG in exchange for 50,000,000 shares of the Companys common stock. The transaction resulted in the former shareholders of SNMG owning shares equaling 77.5% of the outstanding shares of Company common stock. The Company also issued 5,000,000 shares of common stock to 2 other parties as finders fees. The pre-share fair value of the issued shares referred to above was US$0.01108 at September 18, 2005. The Combination was accounted for as a reverse acquisition under U.S. generally accepted accounting principles, with SNMG considered being the acquiring entity even though the Company survives and is the legal parent of SNMG. As a result of the reverse acquisition: (a) the historical financial statements of the Company for periods prior to the Combination are no longer the financial statements of the Company on a going forward basis, and therefore no longer presented; (b) based on the closing date of September 18, 2005, the consolidated financial statements for the fiscal period ended September 30, 2005 include 13 days(September 18 to September 30, 2005) of operating activity for SNMD and it subsidiaries (other than SNMG). As SNMG was incorporated on June 6, 2005, there are no comparative figures to be presented. These pro forma adjustments reflect the allocation of the assets and liabilities of SNMD of the difference between the purchase consideration and the book value of SNMD. SNMDs book value is assumed to be its stockholders equity: US$Consideration:Shares of SNMD common stock outstanding as of September 18, 20059,259,370Fair value per share of SNM0.01108Fair value of SNMD common stock102,614Book value of SNMD prior to CombinationStockholders equity at September 18, 2005102,614  42       Table of Contents  NOTE 4  GOODWILL AND INTANGIBLE ASSETS The following table summarizes goodwill from the Companys acquisitions: As ofAs ofMarch 31,2006September 30,2005US$000US$000Focus7,8007,800 The following table summarizes intangible assets: As ofAs ofMarch 31,2006September 30,2005US$000US$000Service agreements25,000Magazines mastheads2,562License24,452Technology1,98053,994 The above intangible assets have original estimated useful lives as follow: Service agreements30 yearsTechnology3 to 10 years  NOTE 5  PLANT AND EQUIPMENT, NET Plant and equipment is summarized as follows: As ofAs ofMarch 31, 2006September 30,2005US$US$CostMotor vehicles124,303Leasehold building and improvement1,401,397Furniture, fixtures and equipments982,6507,4192,508,3507,419Accumulated depreciation(302,814)(1,865)2,205,5365,554  NOTE 6  Convertible Notes With Detachable Warrants and Stock Options Convertible Notes With Detachable Warrants On December 31, 2005, when the market price of the Companys stock was $4.09, the Company issued a $918,000convertible note with detachable warrants to Barron Partners, LLP. The note is convertible into the Companys common stock at $2.04 per share. On March 6, 2006, when the market price of the Companys stock was $3.93, the Company issued a $1,898,000 convertible note with detachable warrants to Barron Partners, LLP. The note is convertible into the Companys common stock at $2.04 per share. Under the terms of the notes, the Company agreed to file a registration  43       Table of Contents  statement for the shares of common stock underlying the notes within 90 days of the closing date and use its reasonable best commercial efforts to cause the registration statement to be declared effective within 180 days of the closing date. In accordance with the guidelines of APB No. 14, Accounting for Convertible Debt and Debt Issued with Stock Purchase Warrants, EITF Issue No. 98-5, Accounting for Convertible Securities with Beneficial Conversion Features or Contingently Adjustable Conversion Ratios and EITF Issue No. 00-27, Application of issue No. 98-5 to Certain Convertible Instruments, the Company has determined that each of the above notes was issued with a beneficial conversion feature. The intrinsic value was calculated at the date of issue as the difference between the conversion price of the note and the fair value of the Companys common stock into which the note was convertible, multiplied by the number of common shares into which the note was convertible, limited by the face amount of the note. The Company has treated the beneficial conversion features as a discount to the face amount of the notes and is amortizing them over the term of the respective notes. Upon conversion of all or a portion of the note, the proportionate share of unamortized discount has been charged to interest expense. As of March 31, 2006, $105,807 was charged to non-cash interest expenses. Detachable Warrants On December 31, 2005, and March 6, 2006 we issued warrants for the purchase of an aggregate of 11 million and 4 million shares of common stock to one accredited investor respectively. The exercise price of the warrants ranges from $2.04 to $4.8. Stock Option Plan 2001 Stock Option Plan Effective October 10, 2001,4 SE Global awarded a total of 2,150,000 non-qualified options at a price of $1.14 post stock split($0.57 pre stock split) under the 2001 Plan to certain employees, officers, directors and consultants of SE Global and certain of its subsidiaries. Of these options, 940,000 were deemed to be a modification of options granted under the original Plan and as such are subject to variable accounting in accordance with the provisions of the Financial Accounting Standards Board Interpretation No. 44, Accounting for Certain Transactions Involving Stock Compensation  An Interpretation of APB Opinion No. 25 (FIN 44). As at March 31, 2006, there were no stock options that were subject to variable accounting. 2004 Stock Option Plan Effective January 22, 2004, the Company adopted the 2004 Stock Option Plan (the 2004 Plan) allowing for the awarding of options to acquire shares of common stock. The following table summarizes stock option activity since the completion of the business combination: Weighted AverageWeighted AverageRemainingNumber ofExercise PriceContractual LifeoptionsUS$YearsBalance, September 18, 2005977,0000.3822.15Revere stock split adjustment(488,500)0.382Balance, September 30, 2005488,5000.7651.82Exercise of stock options(43,000)Balance, March 31, 2006445,5000.7410.82 2006 Stock Award On March 31, 2006, the board awarded 1,044,600 shares of common stock to employees. The Company recorded $3,879,099 as stock based employee compensation in the statement of operations.  44       Table of Contents  The Company also recorded an expense of $5,775,000 relating to the award of 1,500,000 shares of common stock to senior management as stock based compensation in the statement of operations.  The US$302,000 in expenses relate to a 10% finder's fee commission paid to Telperion, Ltd on the Company's debt financing transaction for US$3,020,000 with Barron Partners, LLP. This transaction occurred in two parts.  On December 31, 2005, the Company entered into an agreement with Barron Partners, LLP, by which the Company issued to Barron's 50,000 new shares of the Company's common stock and convertible notes carrying value of US$918,000 in exchange for US$1,020,000 in cash proceeds. On March 6, 2005, the Company entered into agreement with Barron Partners, LLP by which the Company issued to Barron's 50,000 new shares of the Company's common stock and convertible notes carrying a value of US$1,898,000 in exchange for US$2,000,000 in cash proceeds.   NOTE 7  INCOME TAXES The Company is incorporated in the state of Minnesota, United States and has operations in the PRC and the United States of America. The Company has incurred net accumulated operating losses and current operating losses for income tax purposes. The Company believes that it is more likely than not that these net accumulated operating losses will not be utilized in the future. Therefore, the Company has provided full valuation allowance for the deferred tax assets arising from the losses at these locations as of March 31, 2006 and September 30, 2005. The components of income before income taxes are as follows: As ofAs ofMarch 31, 2006September 30,2005US$US$Loss subject to non-China operations(12,914,275)(95,941)Loss subject to China operations(231,901)Loss before taxes(13,146,176)(95,941)Income taxes subject to China operationsEffective tax rate for China operations China Pursuant to the PRC Income Tax Laws, the Companys subsidiaries and VIEs are generally subject to Enterprise Income Taxes, EIT, at a statutory rate of 33%, which comprises 30% national income tax and 3% local income tax. Some of these subsidiaries and VIEs are qualified new technology enterprises and under PRC Income Tax Laws, they are subject to a preferential tax rate of 15%. In addition, some of the Companys subsidiaries are Foreign Investment Enterprises and under PRC Income Tax Laws, they are entitled to either a three-year tax exemption followed by three years with a 50%reduction in the tax rate, commencing the first operating year, or a two-year tax exemption followed by three years with a 50%reduction in the tax rate, commencing the first profitable year. The VIEs are wholly owned by the Companys employees and controlled by the Company through various contractual agreements. To the extent that these VIEs have undistributed after-tax net income, the Company has to pay taxes on behalf of its employees when dividends are distributed from these local entities in the future. The dividend tax rate is 20%. The following table sets forth the significant components of the net deferred tax assets for China operation as of March 31, 2006and September 30, 2005. As ofAs ofMarch 31,2006September 30,2005US$US$Deferred tax assets:Net operating loss carry forwardAllowance for doubtful accounts, accruals and other liabilities27,280DepreciationTotal deferred tax assets27,820Less: Valuation allowance(27,820)Deferred tax assets  45       Table of Contents  A reconciliation of the effective income tax rate to the Federal statutory rate is as follows: As ofAs ofMarch 31,2006September 30,2005Federal Income Tax Rate34.0%34.0%Effect of valuation allowance(34.0%)(34.0%)Effective Income Tax Rate A reconciliation of current income taxes at statutory rates with the reported taxes is as follows: As ofAs ofMarch 31, 2006September 30,2005US$US$Income tax at statutory rates(635,445)(32,620)Unrecognized benefits of non-capital losses635,44532,620Total current income taxes The tax effects of temporary differences that give rise to significant components of future income tax assets and liabilities are asfollows: As ofAs ofMarch 31, 2006September 30,2005US$US$Future income tax assets (liabilities):Operating losses available for future periods1,067,50932,620Valuation allowance(1,067,509)(32,620)Net future income tax asset (liability) The Company has incurred operating losses of approximately $3,144,729, which, if unutilized, will expire through 2020.Management believes that the realization of the benefits from these deferred tax assets appears uncertain due to the Companys limited operating history. Accordingly a full, deferred tax asset valuation allowance has been provided and no deferred tax asset benefit has been recorded. NOTE 8  OTHER RECEIVABLES, PREPAYMENTS AND DEPOSITS Other receivables, prepayments and deposits are summarized as follow: As ofAs ofMarch 31,2006September 30,2005US$US$Other receivables114,923Staff advances34,069Deferred expenses2,0632,750Rental deposits9,11112,945Prepaid administrative expenses306,2309,164466,39624,859 Deferred expense of $2,062 (2005: $2,750) represents a prepayment for management fees under a management agreement between the Company and Capital Alliance Group Inc. (CAG) which lasts for two years effective September 18,2005. As part of the share purchase transaction between the Company and SNMG (the Transaction), the Company entered into a management agreement (Management agreement) with CAG, a minority shareholder of the Company. Under the Management agreement, CAG provides the Company with  46       Table of Contents  advisory services, which include general corporate, administrative, technical and management advisory services as is reasonably considered necessary or advisable by Company to achieve the goals and needs of the Company as determined by the policies and proceedings of management and the Board of Directors and the requirements of the Securities and Exchange Commission. The Company is required to issue 250,000 shares to CAG in return as consideration. The fair value of the Companys Common Stock as of September 18, 2005 was US$0.01108. NOTE 9  MARKETABLE SECURITIES  On April 20, 2006, pursuant to the Sale and Purchase agreement (the SBN Purchase Agreement) dated November 21, 2005 between the Company and Sun Business Network Ltd. (SBN), the Company acquired exclusive perpetual online publishing rights to certain magazines, a group of property holdings in Beijing and 53,000,000 ordinary common shares of Asia Premium Television Group, Inc. The Company announced the original agreement for the  SBN transaction on

November



23

,

2005

.. The consideration paid by the Company for the acquisition will be satisfied through the issuance of  8,056,303 shares of the Companys common stock. The terms of the SBN Purchase Agreement also provide that the Company will issue an additional 6,900,000 shares of its common stock if the audited net profits after tax of the online publishing business are at least US$2.415 million for the twelve months commencing January 1, 2006. In the event that the audited net profits after tax are less than the targeted amount, SBN shall either deliver to the Company the cash value of the shortfall, or forfeit its rights to receive the additional shares. At the time of entering into the agreement on November 21, 2005, our common stock was traded on OTCBB with limited liquidity and short term trading history, while Asia Premium Television Group. Inc. has been traded on the OTCBB, for a comparably longer time, therefore management determined to use the market value of the securities received the value of acquired assets to measure our consideration (the Company stock) paid.  Our largest shareholder, SMIH owns approximately 11.3% of Sun Business Network Ltd. (SBN), and our Executive Chairman, Dr. Wu, is also the Chairman & Director of SBN. Our Director  & CEO, Mr Ricky Ang owns 4.1% of SBN and is also the Executive Vice-Chairman & Managing Director of SBN.  NOTE 10  AMOUNTS DUE FROM STOCKHOLDERS AMOUNT DUE FROM/ (TO) RELATED PARTIES The amounts are non-trade, interest free and with no fixed terms of repayment. Please refer to note 13 for related parties transactions during the period. NOTE 11  OTHER PAYABLES AND ACCRUALS Other payables and accruals are summarized as follow: As ofAs ofMarch 31, 2006September 30,2005US$US$Other payables126,8358,326Accrued operating expenses6,726,88730,200Prepayment from customers74,3766,928,09838,526 Included in accrued operating expenses is an accrual of stock-based compensation payable to senior management of $5,775,000(2005: Nil). NOTE 12  FACTORING LOAN This relates to amount which has been obtained from a finance company under a factoring facility. Interest is charged at 1.5%per annum above the prevailing Singapore Inter-Bank offer rate. These loans are secured by a guarantee given by Sun Business Network Ltd, a related party and floating charge over accounts receivables amounting to $233,043. NOTE 13  COMMITMENTS AND CONTINGENCIES Commitments The Company leases office premises for its operations in PRC and United States under operating leases. Rental expenses under operating lease for the period ended March 31, 2006 was US$75,390 (2005: US$2,574). Future minimum rental payments under non-cancelable operating leases are approximately as follows: As ofAs ofMarch 31, 2006September 30,2005US$US$2006174,86230,965200761,97929,161236,84160,126  47       Table of Contents  Contingencies GAI is undergoing a review by the National Association of Security Dealers (NASD) for compliance with NASD Rules applicable to Order Audit Trial System (OATS). While a final determination has yet to be made, it is possible that GAI could be subject to disciplinary action which may entail a penalty. NOTE 14  RELATED PARTIES TRANSACTIONS In October 2005, we issued 50 million shares of our common stock to SMIH in consideration for the outstanding shares of SNMG (the Reverse Acquisition Transaction). Messrs. Bruno Wu and John Zongyang Li are all directors and officers of Sun Media Investment Holdings Limited (SMIH) and were appointed directors and officers of the Company on close of the SNMG Transaction pursuant to the terms of that agreement. In conjunction with the Reverse Acquisition Transaction, Capital Alliance Group (CAG) sold to SMIH 500,000 shares of our common stock (prestock split) for an aggregate purchase price of $450,000. In addition, CAG entered into a management agreement with us on close of the Reverse Acquisition Transaction and we issued 250,000 shares of our common stock to CAG as compensation for its performance under this management agreement. Our largest shareholder, SMIH owns approximately 11.3% of Sun Business Network Ltd. (SBN), and our Executive Chairman, Dr. Wu, is also the Chairman & Director of SBN. Our Director & CEO, Mr Ricky Ang owns 4.1% of SBN and is also the Executive Vice-Chairman & Managing Director of SBN. On November 21, 2005, we entered into two agreements with SBN. Pursuant to the first agreement, we would issue 1,156,303 shares of our common stock in exchange for a group of property holdings in Beijing and 53,000,000 common shares of Asia Premium Television Group, Inc. We will issue up to13,800,000 shares of our common stock, 50% to be issued upon closing and the remaining 50% within 30 days of receipt of the audited accounts of the on-line publishing business purchased from SBN. SNMD also entered into a Shares Swap Agreement with SBN. Under the terms of the Shares Swap Agreement, SBN will issue 150,000,000 SBN shares in exchange for 5,042,017shares of our common stock. On December 6, 2005, we entered into an agreement with SMIH which provides that we will issue 2,008,929 shares of our common stock in exchange for 75,000,000 ordinary shares of SBN. As a result of the transaction, we will acquire approximately10.15% of the existing issued share capital of SBN. The closing of the transaction subject to certain closing conditions and is expected to close during the first quarter of 2006. We entered into a termination agreement with SMIH on March 31, 2006 with respect to this transaction. On February 15, 2006, we acquired Sun New Media Holdings Ltd. (SMH) from SMIH. We paid US$1.00to SMIH in exchange for 100% of the outstanding shares of SMH. SMH has a 51% stake in Compass Multi-media Ltd, a 85%stake in Sun 365 Multi-Media Holdings Limited and a 30% stake in Global Woman Multimedia Co Limited. NOTE 15  OPERATING RISKS Credit risk The carrying amounts of accounts receivable and cash and bank balances represent the Companys maximum exposure to credit risk. No other financial assets carry a significant exposure to credit risk. The Company has no significant concentration of credit risk. Cash is placed with reputable financial institutions. NOTE 16  REPORT OF SEGMENT INFORMATION We determine our business segments based upon our management and internal reporting structure. Our reportable segments are online securities brokerage services segment, transactional services segment and information services segment. Information regarding our business segments is as follows: Period fromPeriod fromOctober 1, 2005June 6, 2005to March 31,
2006to September 30,
2005US$US$RevenueOnline Brokerage397,91227,358Transactional ServiceInformation Service4,261Gross profitOnline Brokerage152,8498,635Transactional ServiceInformation Service4,261Depreciation and amortizationOnline Brokerage732Transactional ServiceInformation Service6,035 NOTE 17  SUBSEQUENT EVENTS   On June 14, 2006, the Company entered into a Sales & Purchase Agreement with Sun Media Investment Holdings Ltd.(SMIH) to acquire 100% of the outstanding shares of Credit Network 114 Limited (Credit114). Credit 114 is incorporated in British Virgin Islands and is engaged in the business of data collection and management The Company also signed a supplementary agreement with SMIH to acquire            search engine technology and additional on-line business media content. The transaction is expected to take place over a 90 day period, over which time the Company will pay SMIH a total of US $2.5 million for 100 percent ownership of Credit114 and the assets described above. The first of four equal payments of US $625,000 will be made within 10 days of signing the agreement, the second within 30 days of signing, the third within 60 days and the fourth within 90 days.  On June 8, 2006, the Company entered into agreement with Mr. Ren Huiliang (the Seller) to purchase100% of William Brand Administer Limited and its subsidiary William Textiles Limited, collectively William Brand. William Brand is a China-based producer and distributor of womens luxury apparel. The consideration for the acquisition is to be satisfied in full through the issuance of 4,655,172 shares of the Companys common stock. The Company will issue the shares to the Seller in four installments: the first installment of 1,163,793 shares will be issued within thirty days of the completion of the deal; the remaining shares will be issued in thirds at the end of each of the next three years, subject to William Brands attainment of revenue and profit guarantees in each year. William Brand must achieve a minimum of US $15 million of revenue in year one, US $17.5 million in year two, and US $20 million in year three. William Brand must also generate minimum after-tax profits of US $3 million, US $3.5 million, and US $4 million in years one, two and three, respectively.  On May 23, 2006, the Company signed a strategic cooperative and sales purchase agreement (the CEAC Agreement) with China Electronic Appliances Corporation (CEAC), a subsidiary of the China Electronics Corporation (CEC), and two individuals, Mr. Yong Li and Mr. Mianchun Wang, management designees from CEAC. The CEAC Agreement provides that the Registrant and its subsidiary Focus shall purchase a 49% stake in Beijing Trans Global Logistics (BTGL) and its subsidiary from Messrs. Wang and Li and a 31% stake in BTGL from CEAC. As a result, the Company will effectively own 80% of shares of BTGL and will effectively own 64% of the shares in Beijing CEAC Trans Global Logistics. The consideration for the acquisition is to be satisfied by the Company with 9,000,000 RMB in cash and 6.71 million RMB in 139,792 shares of the Companys common stock. As part of the transaction, CEAC and Mr. Yong Li and Mr. Mianchun Wanghave provided a revenue and profit guarantee to the Company. Assuming BTGL and its subsidiary meet this guarantee in each of the  48       Table of Contents  three years following the signing of the agreement, the sellers will receive an additional 139,792 shares of the Companys common stock per year. Assuming management meets all performance targets, a maximum aggregate of 559,168 shares may be issued in this transaction.  On April 20, 2006, the Company entered into an agreement (the ASTV Purchase Agreement) with SMIH. The ASTV Purchase Agreement provides that the Company will purchase various assets, including real estate, automobiles, office equipment, and program rights, as well as SMIHs 48,629,331 shares in Asia Premium Television Group (OTCBB: ASTV, ASTV) to be satisfied by the issuance of 860,647 shares of Company common stock.  On April 20, 2006, pursuant to the Sale and Purchase Agreement (the GAI Purchase Agreement) dated April 20, 2006 by and among the Company and Kingston Capital Group Limited (Kingston), the Company sold 100% of the issued and outstanding shares of Global American Investments Inc. to Kingston in exchange for US$40,000. Kingston is unrelated to the Company and the transaction was negotiated at arms length. Note 18  Restatement Subsequent to the filing of the 10KSB, we found that the amortization of note discount was overstated and warrant valuation discount should not be recorded. The consolidated balance sheet and consolidated statement of operations were adjusted accordingly and the impact is a decrease in net loss by $2,680,687, a decrease in liabilities by $177,582 and a decrease in additional paid-in capital by $2,503,105. Item 8. Changes In and Disagreements With Accountants on Accounting and Financial Disclosure Disclosure regarding the Companys change of independent registered public accounting firm from Grant Thornton Beijing to Bernstein & Pinchuk LLP effective May 18, 2006 has been previously reported on the Companys Current Report on Form 8-K filed with the Securities and Exchange Commission on May 24, 2006. Disclosure regarding the Companys change of independent registered public accounting firm from Moores RowlandMazars to Grant Thornton Beijing effective April 21, 2006 has been previously reported on the Companys Current Report on Form 8-K filed with the Securities and Exchange Commission on April 24, 2006. Disclosure regarding the Companys change of independent registered public accounting firm from Dale Matheson Labonteto Moores Rowland Mazars effective September 29, 2005 has been previously reported on the Companys Current Report on Form 8-K filed with the Securities and Exchange Commission on November 25, 2005.  Item 8A. Controls and Procedures Evaluation of Disclosure Controls and Procedures Under the supervision and with the participation of our management, including our Chief Executive Officer and Acting Chief Financial Officer, we evaluated the effectiveness of our disclosure controls and procedures, as such term is defined under Rule 13a-15(e) promulgated under the Securities Exchange Act of 1934, as amended. Based upon that evaluation, our principal executive officer and principal financial officer concluded that our disclosure controls and procedures were effective as of the end of the period covered by this annual report. Changes in internal control over Financial Reporting There has been no change in our internal control over financial reporting during the quarter ended March 31, 2006 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting. Item 8B. Other Information None.  49       Table of Contents     PART III Item 9. Directors and Executive Officers of the Registrant The following table sets forth the names of all our directors and executive officers as of June 18, 2006. These persons will serveuntil our next annual meeting of the shareholders or until their successors are elected or appointed and qualified, or their priorresignation or termination. Date PositionNameAgePositionFirst HeldBruno Wu39Chairman and DirectorSept. 12,2005Ricky Gee Hing Ang55Chief Executive OfficerMar. 1, 2006John Zongyang Li50DirectorSept. 12,2005Kay Koplovitz60Vice-Chairman and DirectorSept. 12,2005Herbert Kloiber58DirectorJan. 4, 2006Yu Bing40DirectorJan. 17, 2006William Adamopoulos44DirectorMay 11,2006Yang Qi38DirectorMay 11,2006Mark Newburg51DirectorMay 31,2006Frank Zhao46Chief Financial Officer and SecretaryMar 1, 2006Hwee Ling Ng32Senior Vice President, FinanceJan 4, 2006 Dr. Bruno Wu, Chairman and Director.Dr. Bruno Wu is the co-founder and Executive Chairman of Sun Media InvestmentHoldings (SMIH), one of the leading private media groups in China. SMIH currently holds investment interests ineleven (11) media related companies in Asia and its portfolio includes thirty-one (31) magazine titles, three (3) newspapers, ten(10) broadcasting television channels, three (3) websites and various equity stakes in internet, multimedia products, education andcollege, sports and racing, and music and entertainment. SMIH currently operates in fifteen (15) cities across nine (9) countriesand regions. Prior to Sun Media, Dr. Wu was the Chief Operating Officer from June 1998 to February 1999 of ATV, one of the twofree-to-air networks in Hong Kong. From 2001 to 2002, Dr. Wu was also the co-chairman of SINA Corporation, a Chineseinternet media company. Dr. Wu received his Diploma of Studies in French Civilization from the University of Savoie, France in1987, and graduated with a Bachelor of Science in Business Administration-Finance from Culver-Stockton College in Missouriin 1990. He later received his Master of Arts in International Affairs from Washington University, Missouri in 1993, and in 2001,he received his Ph.D. from the International Politics Department of College of Law, Fudan University, Shanghai, China. Dr. Wu is a member of the international council of Museum of Television and Radio in New York and Los Angeles, and amember of both the International Council and the Foundation of The International Academy of Television Arts and SciencesUSA, the organization that issues the annual International Emmy Award. In 2003, Dr. Wu was appointed as the Chairman of theiEMMYs Festival for a term of two years. Dr. Wu is also a trustee of the Board of Foreign Affairs University of China. InOctober 1998, Dr. Wu received the Super Media Star Award issued by Hong Kong  Macau Distinguished PersonsSociety. Mr. Ricky Gee Hing Ang, Chief Executive Officer.Mr. Ricky Ang has served as our CEO since March, 2006. Mr. Ang alsoserves as the Executive Vice Chairman & Managing Director of Sun Business Network Limited (SBN), acompany he founded in late 1994, and listed on the Singapore Stock Exchange in mid-1998. Mr. Ang has over 30 years ofentrepreneurial business experience. Earlier, Mr. Ang was CEO of HB Media Holdings, a company he founded in 1993. Prior toMedia Holdings, Mr. Ang was Senior Vice President at Times Publishing, Ltd., where he headed its printing division, expandingits printing business worldwide; and managed its manufacturing operations in Malaysia, Hong Kong and the UK. He alsomanaged Times Publishing sales offices in New York, San Francisco, London and Sydney. Mr. Ang graduated from theLondon College of Printing.  50       Table of Contents  Mr. John Zongyang Li, Director.Mr. John Li is the Vice-Chairman and Chief Investment Officer of SMIH. Concurrently, healso serves as the Chairman and Chief Executive Officer of Auston International Group Limited, a listed company in Singapore. Prior to his current positions, Mr. Li served as Executive Director and Group Chief Financial Officer of SBN fromNovember 2004 to July 2005, and as Deputy Chairman and Acting Chairman of Leadership Publishing Group from February 2003to March 2004. Mr. Li also served as the Executive Director and Executive Deputy Chief Executive Officer of Sun Media Groupfrom June 2002 to December 2004. Prior to his service with Sun Media Group, Mr. Li spent ten years with FramlingtonInvestment Management Company Ltd., an investment management company in London, where he served as a Senior FundManager and the Head of the Asia Pacific region. Mr. Li holds a Bachelor degree in Economics from Peking University, and aMaster of Business Administration degree from Middlesex University Business School in London. He is a founding member of the Society of Hong Kong Economy in Beijing. Kay Koplovitz, Vice-Chairman and Independent Director. Ms. Kay Koplovitz is the Founder of USA Networks, and was thefirst female network president in television history, serving as chairman and CEO from 1977 to 1998. She is the former President of the National Academy of Television Arts & Sciences. She served as the Presidential appointee to chair the National Womens Business Council from 1998 to 2001, created Springboard Enterprises, a national non-profit organization that matches venture capital and women entrepreneurs in high growth businesses. She also founded Angels4Equity, now called Boldcap Ventures LLC, in 2001, an investment fund. In 1998, she co-founded Koplovitz & Co., LLC, a New York-based media and investment advisory firm, with her husband, William C. Koplovitz, Jr., and currently serves as a principal. Ms. Koplovitz also currently serves on the board of Liz Claiborne, Inc. and Boldcap Ventures LLC. Dr. Herbert Kloiber, Director.Dr. Kloiber is the Chairman and majority shareholder of Tele-Munchen Gruppe (TMG). Prior to TMG, Dr. Kloiber worked in various capacities at Beta/ Taurus from 1970  1976. In 1974, he was named Managing Director of Unitel, the film and television production division. Dr. Kloiber is a member of the Supervisory Board of the Bavarian Film Funding Organization and the Advisory Board of Hypo Vereinsbank, Germanys second largest bank. He is amember of the Board of Directors of Scandinavian RTL II and ATV. Mr. Yu Bing, Director.Mr. Yu was previously an Executive Vice President at Lenovo Computers and President of the Lenovo/Asia Info group. Mr. Yu joined Lenovo in 1990 and since 1996 was the principal executive in charge of developing the companys channel sales distribution network. In 2001, Mr. Yu was appointed to head the newly formed Lenovo ITServices Group. Under Mr. Yus guidance, the group grew rapidly to more than 1,000 employees in less than 2 years and earned a coveted position amongst the 5 most powerful IT Services Brands Mr. William Adamopoulos, Director.Mr. Adamopoulos is currently the President and Publisher of Forbes Asia and has servedas Managing Director of Forbes since 1999. Mr. Adamopoulos has built up the Forbes business and brand across the region including the establishment of a regional headquarters, an Asian printing operation; the annual Forbes Global CEO Conference, new local language editions and building Forbes Asia circulation to 80,000. Prior to joining Forbes, Mr. Adamopoulos was Publisher and Managing Director of The Asian Wall Street Journal in Hong Kong. He has also held the positions of President of Dow Jones Publishing Company (Asia), President of Dow Jones Printing Company (Asia), Managing Director of Dow Jones Interactive (Asia) and Chairman of the Dow Jones Asia Regional Committee. Mr Yang Qi, Director.Mr. Yang Qi, founded Focus Channel Development Company Ltd., a leading sales force and channel  management services company that was recently acquired by Sun New Media, and served as its chairman. Mr. Mark Newburg, Director.Mr. Newburg has been President and Chief Executive Officer of Vending Data Corporation, ad esigner and (China-based) manufacturer of security and productivity enhancing products and services to the gaming industry since 2005. Prior to Vending Data, Mr. Newburg spent 26 years with NCR, beginning as an International Tax Administrator in1981 and ultimately becoming its Vice President, Asia Pacific. During this period, Mr. Newburg concurrently served as Chairman of NCR Japan. From 1995-1997, Mr. Newburg was Finance Vice President NCR Asia Pacific Mr Frank Zhao, Chief Financial Officer and Secretary.Mr. Frank Zhao has served as Chief Financial Officer and Secretary of the Company since February 27, 2006. Prior to joining the Company, Mr. Zhao was VP, Finance at Hurray! Holdings Ltd., a Beijing based, wireless entertainment company from August 2005 to February 2006; Controller at FARO Technologies, Inc., a$100 million manufacturer of computer aided laser measurement  51       Table of Contents  devices from April 2003 to July 2005; VP, Finance at Resort Reservations Network, an $80 million retail travel company (part ofINTRA WEST company) from October 1996 to November 2002. Mr. Zhao has a Masters in Finance and Accounting from the University of Hartford in Connecticut, a BS in Economics from Beijing University and is a US certified public accountant. Ms. Hwee Ling Ng, Senior Vice President, Finance.Ms. Hwee Ling Ng has served as Senior Vice President, Finance since March 29, 2006. From January, 2006 until then, she served as our Acting Chief Financial Officer. Since July 2004, Ms. Ng has served, and currently serves, as the Chief Financial Officer of SBN. Ms. Ng previously served as SBNs Group Financial Controller from September 2003 to July 2004, and as its Chief Accountant from June 2001 to September 2003. Ms. Ng also served as Finance Manager for Zing Asia Pte Ltd, a subsidiary of SBN, from October 1999 to May 2001. Prior to joining SBN, Ms. Ng served as an auditor at an international public accounting firm. Ms. Ng holds a Bachelor of Accountancy from Nanyang Technological University of Singapore and is a member of the Institute of Certified Public Accountants of Singapore. There are no family relationships among any of our officers and directors.  Audit Committee Financial Expert Our Board of Directors has appointed Mr. Mark Newburg as the chairman of the audit committee. He is qualified as an audit committee financial expert, as such term is defined in the rules and regulations of the Securities and Exchange Commission, currently serving on our audit committee.  Compliance with Section 16(a) of the Securities Exchange Act of 1934 Section 16(a) of the Securities and Exchange Act of 1934 requires the Companys officers and directors and persons who beneficially own more than 10% of the Companys common stock (collectively, Reporting Persons) to file reports of beneficial ownership and changes in beneficial ownership with the SEC. Reporting Persons are required by SEC regulations to furnish the Company with copies of all Section 16(a) forms they file. We believe that all Reporting Persons complied with all applicable reporting requirements, except for the late filing of the Form 3filings for Messrs. Bruno Wu, Yucheng Ding, Xiaotao Chen, Chauncey Shey, John Zongyang Li, and Clarence Lo, Ms. Kay Koplovitz and Sun Media Investment Holdings and certain errant Form 4 filings. The Company is putting in place an enhanced compliance program to assist officers and directors with these filings.  Code of Ethics We have adopted a code of ethics that applies to all of our executive officers and employees, including our Chief Executive Officer and our Acting Chief Financial Officer. A copy of our code of ethics is filed as an exhibit to this report. We also undertake to provide any person with a copy of our code of ethics free of charge. Investors may request a copy of our code ofethics by calling our investor relations department at +1- 212-626-6744, or by writing to the attention of Chairman of the Board of Directors at 4th Floor, 1120 Avenue of the Americas, New York NY USA.  Item 10. Executive Compensation Summary of Compensation of Executive Officers During the period from October 1, 2005 to March 31, 2006, no executive officer of the Company received compensation in excess of $100,000. During this period, no options were exercised by executive officers during the fiscal year. We entered into a three year employment contract with Frank Zhao, our Chief Financial Officer. Pursuant to the agreement, Mr. Zhao is entitled to employment benefits and annual leave. We entered into a an agreement with Hwee Ling Ng, our Senior Vice President of Finance, pursuant to which we will provide Ms. Ng with severance payments equal to three months salary in the event her termination is terminated.  52       Table of Contents  Compensation of Directors No compensation was paid to any of our directors for the directors services as a director during the fiscal period ended March 31, 2006. We recently adopted a compensation program for the independent members of our Board of Directors which has both a cash component and an equity component. The cash component comprised of (i) a $50,000 annual retainer payable in quarterly installments, (ii) a $25,000 annual retainer for the chair of the Audit Committee, (iii) a $10,000 annual retainer for the chairs of the Compensation Committee and Nominating and Corporate Governance Committee and (iv) a $1,000 stipend for attendance at each board meeting and committee meeting. The equity component of the program is comprised of (i) a stock option grant or restricted stock grant with a value of $25,000 upon appointment to the board and (ii) a stock option grant or restricted stock grant with a value of $75,000 upon election to the Board by the shareholders. In addition, the board of directors may award special remuneration to any director undertaking any special services on behalf of our company other than services ordinarily required of a director.  Item 11. Security Ownership of Certain Beneficial Owners and Management Equity Compensation Plan.The following table provides information as of March 31, 2006, concerning shares of our common stock authorized for issuance under our existing equity compensation plans. Number ofNumber ofsecuritiessecurities to beRemaining availableissued uponWeighted averagefor future issuanceexercise ofexercise price of(excludingoutstandingoutstandingsecuritiesoptions, warrantsoptions, warrantsreflected in columnand rightsand rights(a))Plan Category(a)(b)(c)Equity compensation plans approved by security holders445,500$0.741(1)Equity compensation plans not approved by security holdersN/AN/AN/ATotal:445,500$0.741 Note: (1)The number of securities remaining available for future issuance has expired as of March 31, 2006. The Company intends to implement a new shares option scheme to be approved by the stockholders in due course. Security Ownership of Certain Beneficial Owners and Management The following table sets forth, as at June 18, 2006, certain information with respect to the beneficial ownership of our common stock by each shareholder known by us to be the beneficial owner of more than five percent (5%) of our common stock, and by each of our current directors and executive officers. Each person has sole voting and investment power with respect to the shares of common stock, except as otherwise indicated. Beneficial ownership consists of a direct interest in the shares of common stock, except as otherwise indicated. Unless otherwise indicated, the address for each Beneficial Owner shall be. No. 387 Yongjia Road Shanghai 200031Peoples Republic of China.  53       Table of Contents  Amount and Nature ofPercentage ofName and Address of Beneficial OwnerBeneficial Ownership(1)Class(1)Bruno Wu(2)38,053,14536.70%John Zongyang Li(3)24,924,82524.04%Kay Koplovitz1,000,0000.96%Herbert Kloiber(4)1,000,0000.96%Bing YuWilliam Adamopoulos500,0000.48%Yang Qi8,940,0008.62%Mark NewburgRicky Gee Hing Ang(5)13,248,32012.78%Frank Zhao70,0000.07%Hwee Ling Ng60,0000.06%Sun Media Investment Holdings Limited (SMIH) P.O. Box 957, Offshore Incorporations Centre, Road Town, Tortola, British Virgin Islands24,774,82523.89%Sun Business Network Ltd. (SBN) 50 Raffles Place#29-00 Singapore Land Tower Singapore 04862313,098,32012.63%Sun Culture Foundation Limited Room 3503,35/F.,Two International Finance Centre, 8 Finance Street, Central, Hong Kong10,000,0009.64%Directors and Executive Officers as a Group(6)(7)49,773,14548.00% Notes: (1)Based on 103,689,630 shares of common stock issued and outstanding as of June 18, 2006. Except as otherwise indicated, we believe that the beneficial owners of the common stock listed above, based on information furnished by such owners, have sole investment and voting power with respect to such shares, subject to community property laws where applicable. Beneficial ownership is determined in accordance with the rules of the SEC and generally includes voting or investment power with respect to securities. Shares of common stock subject to options or warrants currently exercisable, or exercisable within 60 days, are deemed outstanding for purposes of computing the percentage ownership of the person holding such option or warrants, but are not deemed outstanding for purposes of computing the percentage ownership of any other person.(2)Includes 24,774,825 shares held by SMIH, 13,098,320 shares held by SBN and 180,000 shares held by Ms. Yang Lan. Our Chairman, Dr Bruno Wu, is also the Chairman and Director of SMIH and SBN. Dr. Wu disclaims ownership except to the extent of his pecuniary interest.(3)Includes 24,774,825 shares held by SMIH. Our Director, John Zongyang Li, is also a Director and shareholder of SMIH. Mr. Li disclaims ownership except to the extent of his pecuniary interest.(4)Includes 1,000,000 shares held by Tele-Munchen Fernseh-Gmbh & Co. Our Director, Dr Herbert Kloiber, is also theChairman and majority shareholder of Tele-Munchen Fernseh-Gmbh & Co. Dr. Kloiber disclaims ownership except tothe extent of his pecuniary interest.(5)Includes 13,098,320 shares held by SBN. Our Director, Ricky Gee Hing Ang, is also the Executive Vice Chairman &Director of SBN. Mr. Ang disclaims ownership except to the extent of his pecuniary interest.(6)Includes 24,774,825 shares held by SMIH, 13,098,320 shares held by SBN and 1,000,000 shares held by Tele-Munchen Fernseh-Gmbh & Co.(7)The address of our current officers and directors is care of Sun New Media Inc., Fourth Floor 1120 Avenue of the Americas, New York, NY.  54       Table of Contents    Item 12. Certain Relationships and Related Transactions Other than disclosed below or under the caption entitled Compensation of Directors, during the last two years, we were not involved in any transaction in which a director, director nominee, officer or shareholder of the Company, or any family member of any such persons, had a direct or indirect material interest where the amount involved exceeded $60,000. In October 2005, we issued 50 million shares of our common stock to SMIH in consideration for the outstanding shares of SNMG (the Reverse Acquisition Transaction). Messrs. Bruno Wu and John Zongyang Li are all directors and officers of Sun Media Investment Holdings Limited (SMIH) and were appointed directors and officers of the Company on close of the SNMG Transaction pursuant to the terms of that agreement. In conjunction with the Reverse Acquisition Transaction, CAG sold to SMIH 500,000 shares of our common stock (pre stock split) for an aggregate purchase price of $450,000. In addition, CAG entered into a management agreement with us on close of the Reverse Acquisition Transaction and we issued 250,000 shares of our common stock to CAG as compensation for its performance under this management agreement. Our largest shareholder, SMIH owns approximately 11.3% of Sun Business Network Ltd. (SBN), and our Executive Chairman, Dr. Wu, is also the Chairman & Director of SBN. Our Director & CEO, Mr Ricky Ang owns 4.1% of SBN and is also the Executive Vice-Chairman & Managing Director of SBN. On November 21, 2005, we entered into two agreements with SBN. Pursuant to the first agreement, we would issue 1,156,303 shares of our common stock in exchange for a group of property holdings in Beijing and 53,000,000 common shares of Asia Premium Television Group, Inc. We will issue up to13,800,000 shares of our common stock, 50% to be issued upon closing and the remaining 50% within 30 days of receipt of the audited accounts of the on-line publishing business purchased from SBN. SNMD also entered into a Shares Swap Agreement with SBN. Under the terms of the Shares Swap Agreement, SBN will issue 150,000,000 SBN shares in exchange for 5,042,017shares of our common stock. On December 6, 2005, we entered into an agreement with SMIH which provides that we will issue 2,008,929 shares of our common stock in exchange for 75,000,000 ordinary shares of SBN. As a result of the transaction, we will acquire approximately10.15% of the existing issued share capital of SBN. The closing of the transaction subject to certain closing conditions and is expected to close during the first quarter of 2006. We entered into a termination agreement with SMIH on March 31, 2006 with respect to this transaction. On February 15, 2006, we acquired Sun New Media Holdings Ltd. (SMH) from SMIH. We paid US$1.00to SMIH in exchange for 100% of the outstanding shares of SMH. SMH has a 51% stake in Compass Multi-media Ltd, a 85%stake in Sun 365 Multi-Media Holdings Limited and a 30% stake in Global Woman Multimedia Co Limited. On April 20, 2006, we entered into an agreement with SMIH for the purchase of various assets, including real estates, automobiles, office equipment and program rights as well as 48,629,331 shares in Asia Premium Television Group for an aggregate consideration of US$3,442,587 which is to be satisfied by the issuance of 860,647 shares of our common stock. As at March 31, 2006, there are amounts due from Sun Media Investment Holdings Limited of $229,009 (2005: $97,349), Sun Business Network Ltd of $574,485 (2005: Nil) and Capital Alliance Group Inc of $63,097 (2005: $53,097). Item 13. Exhibits Exhibits Exhibit Number and Exhibit Title 2.1Share Purchase Agreement dated July 21, 2005 by and between the Registrant and Sun Media InvestmentHoldings Limited to acquire Sun New Media Group Limited (incorporated by reference from our Current Reporton Form 8-K filed on July 22, 2005)2.2Share Purchase Agreement dated November 21, 2005 by and between the Registrant and Sun Business  55       Table of Contents  Network Ltd. to acquire a group of property holdings in Beijing and shares of Asia Premium Television Group,Inc.(incorporated by reference from our Current Report on Form 8-K filed on November 23, 2005)2.3Share Swap Agreement by and between the Registrant and Sun Business Network Ltd. dated November 21, 2005(incorporated by reference from our Current Report on Form 8-K filed on November 23, 2005)2.4Sale and Purchase Agreement by and between the Registrant, Yang Qi, Mao Quan Yi and Wu Bing Wei datedNovember 22, 2005 to acquire China Focus Channel Development (HK) Limited (incorporated by reference fromour Current Report on Form 8-K filed on November 25, 2005)2.5Sale and Purchase Agreement by and between the Registrant and Sun Media Investment Holdings Ltd. datedNovember 29, 2005 to acquire Sun New Media Holdings Ltd. (incorporated by reference from our Current Reporton Form 8-K filed on December 1, 2005)2.6Sale and Purchase Agreement by and between the Registrant, Yan Hui, Lin Min and Luan Kezhou datedDecember 6, 2005 to acquire Telefaith Holdings Limited (incorporated by reference from our Current Report onForm 8-K filed on December 8, 2005)2.7Sale and Purchase Agreement dated December 6, 2005 by and between the Registrant and Sun Media InvestmentHoldings Limited to acquire shares of Sun Business Network Ltd. (incorporated by reference from our CurrentReport on Form 8-K filed on December 8, 2005)2.8Stock Purchase Agreement between Sun New Media Inc and Barron Partners LP dated December 31, 2005(incorporated by reference from our Current Report on Form 8-K filed on January 6, 2006)2.9Share Purchase Agreement dated January 4, 2006 to acquire Magzone Asia Pte Ltd (incorporated by referencefrom our Current Report on Form 8-K filed on January 6, 2006)2.10Share Purchase Agreement dated February 13, 2006 by and between the Registrant and China EntertainmentSports Limited to acquire China Sport TV Productions Ltd (incorporated by reference from our Current Report onForm 8-K filed on February 17, 2006)2.11Share Purchase Agreement dated February 14, 2006 by and between the Registrant and United Home Limited toacquire Lifestyle Magazines Publishing Pte Ltd (incorporated by reference from our Current Report on Form 8-Kfiled on February 17, 2006)2.12Stock Purchase Agreement between Sun New Media Inc and Barron Partners LP dated March 6, 2006(incorporated by reference from our Current Report on Form 8-K filed on March 9, 2006)2.13Termination Agreement dated March 31, 2006 by and between the Registrant and Sun Media Investment HoldingsLimited relating to the Sale and Purchase Agreement dated December 6, 2005 by and between the Registrant andSun Media Investment Holdings Limited to acquire shares of Sun Business Network Ltd. (incorporated byreference from our Current Report on Form 8-K filed on April 5, 2006)  56       Table of Contents  2.14Sale and Purchase Agreement dated April 20, 2006 by and between the Registrant and Kingston Capital GroupLimited to divest Global American Investments Inc (incorporated by reference from our Current Report onForm 8-K filed on April 26, 2006)2.15Sale and Purchase Agreement dated April 20, 2006 by and between the Registrant and Sun Media InvestmentHoldings Limited to purchase various assets (incorporated by reference from our Current Report on Form 8-Kfiled on April 26, 2006)2.16Sales Purchase Agreement dated May 23, 2006 by and between the Registrant, its subsidiary, China FocusChannel Development Co. Ltd (Focus) and China Electronic Appliances Corporation(CEAC) and two individuals to purchase a 49% stake in Beijing Trans Global Logistics(BTGL) and its subsidiary from the two individuals and a 31% stake in BTGL from CEAC(incorporated by reference from our Current Report on Form 8-K filed on May 30, 2006)2.17Sale and Purchase Agreement dated June 8, 2006 by and between the Registrant, its subsidiary, Focus, and MrRen Huiliang to acquire William Brand Administer Limited and its subsidiary William Textiles Limited(incorporated by reference from our Current Report on Form 8-K filed on June 14, 2006)2.18Sale and Purchase Agreement dated June 14, 2006 by and between the Registrant and Sun Media InvestmentHoldings Limited to acquire Credit Network 114 Limited (incorporated by reference from our Current Report onForm 8-K filed on June 20, 2006)3.1Articles of Incorporation as Amended (incorporated by reference from our Form 10-SB Registration Statement,filed June 14, 1999)3.2Certificate of Amendment to Articles of Incorporation, dated April 11, 2001 (incorporated by reference from ourForm 10-KSB, filed April 1, 2002)3.3Certificate of Amendment to Articles of Incorporation, dated September 15, 2005 (incorporated by reference fromour Current Report on Form 8-K filed on September 22, 2005)3.4Bylaws (incorporated by reference from our Form 10-SB Registration Statement, filed June 14, 1999)4.1Pooling Agreement by and between dated September 18, 2005 among the Registrant, Fidelity Transfer Company,as Trustee, Sun Media Investment Holdings Ltd. And Capital Alliance Group Inc. (incorporated by reference fromour Current Report on Form 8-K filed on September 22, 2005)4.2Supplementary Pooling Agreement dated December 23, 2005 among the Registrant, Fidelity Transfer Company, asTrustee, Sun Media Investment Holdings Ltd. And Capital Alliance Group Inc. (incorporated by reference fromour Current Report on Form 8-K filed December 27, 2005)4.3Supplementary Pooling Agreement dated March 15, 2006 among the Registrant, Fidelity Transfer Company, asTrustee, Sun Media Investment Holdings Ltd. And Capital Alliance Group Inc. (incorporated by reference fromour Current Report on Form 8-K filed March 21, 2006)10.1Finders Fee Agreement by and between the Registrant and Yu Hiyang and Beckford Finance SA dated July 21,2005 (incorporated by reference from our Current Report on Form 8-K filed on July 22, 2005)10.2Stock Purchase Agreement by and between Capital Alliance and Sun Media dated July 21, 2005 (incorporated byreference from our Current Report on Form 8-K filed on July 22, 2005)10.3Management Agreement by and between the Registrant and Capital Alliance dated September 18, 2005(incorporated by reference from our Current Report on Form 8-K filed on September 22, 2005)  57       Table of Contents  10.4Share Holding Agreement by between Capital Alliance, SE Global and Sun Media Investment Holdings Ltd.dated September 18, 2005 (incorporated by reference from our Current Report on Form 8-K filed onSeptember 22, 2005)10.5Stock Purchase Agreement dated December 31, 2005 by and between Sun New Media Inc. and Barron PartnersLP(incorporated by reference from our Current Report on Form 8-K filed on January 6, 2006)14.1Code of Ethics (incorporated by reference to our Annual Report on Form 10KSB filed on June 30, 2006)21Subsidiaries of Sun New Media, Inc. (incorporated by reference to our Annual Report on Form 10KSB filed onJune 30, 2006)23.1Consent of Moores Rowland Mazars31.1Certificate of CEO as Required by Rule 13a-14(a)/15d-1431.2Certificate of CFO as Required by Rule 13a-14(a)/15d-1432.1Certificate of CEO as Required by Rule 13a-14(b) and Rule 15d-14(b) and Section 1350 of Chapter 63 of Title18 of the United States Code32.2Certificate of CFO as Required by Rule 13a-14(b) and Rule 15d-14(b) and Section 1350 of Chapter 63 of Title18 of the United States Code  58       Table of Contents    Item 14. Principal Accountant Fees and Services During the fiscal years ended March 31, 2006 and September 30, 2005, Bernstein & Pinchuk LLP provided various audit, audit related and non-audit services to us as follows: March 31, 2006September 30,2005Audit Fees$120,000Audit-Related FeesTax FeesAll Other Fees$120,000 Moores Rowland Mazars During the fiscal years ended March 31, 2006 and September 30, 2005, Moores Rowland Mazars provided various audit, audit related and non-audit services to us as follows: March 31, 2006September 30,2005Audit Fees$$20,000Audit-Related Fees11,000Tax FeesAll Other Fees26,625$37,625$20,000 Dale Matheson Carr-Hilton Labonte During the fiscal years ended March 31, 2006 and September 30, 2005, Dale Matheson Carr-Hilton Labonte (DMCL) provided various audit, audit related and non-audit services to us as follows: March 31, 2006September 30,2005Audit Fees$37,950Audit-Related FeesTax FeesAll Other Fees$$37,950  59       Table of Contents     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. 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.  NEXTMART, INC.By:/s/ Ren HuiliangMr. Ren Huiliang, Chief Executive OfficerDate: April 2, 2008  In accordance with theSecurities 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.  By:/s/ Bruno Wu
BBrBruno Wu, Chairman
Date: April 2, 2008By:/s/ Ren Huiliang
Ren Huiliang, Chief Executive Officer and Acting Chief Financial Officer
Date: April 2, 2008By:/s/ Tao Kan
Tao Kan, Director
Date: April 2, 2008By:/s/ Bryan Li
Bryan Li, Director
Date: April 2, 2008By:/s/ Chen Zhaobin
Chen Zhaobin, Director
Date: April 2, 2008  60       Table of Contents    INDEX TO EXHIBITS Exhibit No.Exhibit Title2.1Share Purchase Agreement dated July 21, 2005 by and between the Registrant and Sun Media InvestmentHoldings Limited to acquire Sun New Media Group Limited (incorporated by reference from our Current Reporton Form 8-K filed on July 22, 2005)2.2Share Purchase Agreement dated November 21, 2005 by and between the Registrant and Sun Business NetworkLtd. to acquire a group of property holdings in Beijing and shares of Asia Premium Television Group,Inc.(incorporated by reference from our Current Report on Form 8-K filed on November 23, 2005)2.3Share Swap Agreement by and between the Registrant and Sun Business Network Ltd. dated November 21, 2005(incorporated by reference from our Current Report on Form 8-K filed on November 23, 2005)2.4Sale and Purchase Agreement by and between the Registrant, Yang Qi, mao Quan Yi and Wu Bing Wei datedNovember 22, 2005 to acquire China Focus Channel Development (HK) Limited (incorporated by reference fromour Current Report on Form 8-K filed on November 25, 2005)2.5Sale and Purchase Agreement by and between the Registrant and Sun Media Investment Holdings Ltd. datedNovember 29, 2005 to acquire Sun New Media Holdings Ltd. (incorporated by reference from our CurrentReport on Form 8-K filed on December 1, 2005)2.6Sale and Purchase Agreement by and between the Registrant, Yan Hui, Lin Min and Luan Kezhou datedDecember 6, 2005 to acquire Telefaith Holdings Limited (incorporated by reference from our Current Report onForm 8-K filed on December 8, 2005)2.7Sale and Purchase Agreement dated December 6, 2005 by and between the Registrant and Sun Media InvestmentHoldings Limited to acquire shares of Sun Business Network Ltd. (incorporated by reference from our CurrentReport on Form 8-K filed on December 8, 2005)2.8Stock Purchase Agreement between Sun New Media Inc and Barron Partners LP dated December 31, 2005(incorporated by reference from our Current Report on Form 8-K filed on January 6, 2006)2.9Share Purchase Agreement dated January 4, 2006 to acquire Magzone Asia Pte Ltd (incorporated by referencefrom our Current Report on Form 8-K filed on January 6, 2006)2.10Share Purchase Agreement dated February 13, 2006 to acquire China Sport TV Productions Ltd (incorporated byreference from our Current Report on Form 8-K filed on February 17, 2006)2.11Share Purchase Agreement dated February 14, 2006 to acquire Lifestyle Magazines Publishing Pte Ltd(incorporated by reference from our Current Report on Form 8-K filed on February 17, 2006)2.12Stock Purchase Agreement between Sun New Media Inc and Barron Partners LP dated March 6, 2006(incorporated by reference from our Current Report on Form 8-K filed on March 9, 2006)2.13Termination Agreement dated March 31, 2006 relating to the Sale and Purchase Agreement dated December 6,2005 to acquire shares of Sun Business Network Ltd. (incorporated by reference from our Current Report onForm 8-K filed on April 5, 2006)2.14Sale and Purchase Agreement dated April 20, 2006 to divest Global American Investments Inc (incorporated byreference from our Current Report on Form 8-K filed on April 26, 2006)2.15Sale and Purchase Agreement dated April 20, 2006 to purchase various assets (incorporated by reference fromour Current Report on Form 8-K filed on April 26, 2006)2.16Sales Purchase Agreement dated May 23, 2006 to purchase a 49% stake in Beijing Trans Global Logistics(BTGL) and its subsidiary from the two individuals and a 31% stake in BTGL (incorporated byreference from our Current Report on Form 8-K filed on May 30, 2006)   2.17Sale and Purchase Agreement dated June 8, 2006 to acquire William Brand Administer Limited and its subsidiaryWilliam Textiles Limited (incorporated by reference from our Current Report on Form 8-K filed on June 14,2006)         Table of Contents  2.18Sale and Purchase Agreement dated June 14, 2006 to acquire Credit Network 114 Limited (incorporated by referencefrom our Current Report on Form 8-K filed on June 20, 2006)3.1Articles of Incorporation as Amended (incorporated by reference from our Form 10-SB Registration Statement, filedJune 14, 1999)3.2Certificate of Amendment to Articles of Incorporation, dated April 11, 2001 (incorporated by reference from ourForm 10-KSB, filed April 1, 2002)3.3Certificate of Amendment to Articles of Incorporation, dated September 15, 2005 (incorporated by reference fromour Current Report on Form 8-K filed on September 22, 2005)3.4Bylaws (incorporated by reference from our Form 10-SB Registration Statement, filed June 14, 1999)4.1Pooling Agreement by and between dated September 18, 2005 among the Registrant, Fidelity Transfer Company, asTrustee, Sun Media Investment Holdings Ltd. And Capital Alliance Group Inc. (incorporated by reference from ourCurrent Report on Form 8-K filed on September 22, 2005)4.2Supplementary Pooling Agreement dated December 23, 2005 among the Registrant, Fidelity Transfer Company, asTrustee, Sun Media Investment Holdings Ltd. And Capital Alliance Group Inc. (incorporated by reference from ourCurrent Report on Form 8-K filed December 27, 2005)4.3Supplementary Pooling Agreement dated March 15, 2006 among the Registrant, Fidelity Transfer Company, asTrustee, Sun Media Investment Holdings Ltd. And Capital Alliance Group Inc. (incorporated by reference from ourCurrent Report on Form 8-K filed March 21, 2006)10.1Finders Fee Agreement by and between the Registrant and Yu Hiyang and Beckford Finance SA dated July 21, 2005(incorporated by reference from our Current Report on Form 8-K filed on July 22, 2005)10.2Stock Purchase Agreement by and between Capital Alliance and Sun Media dated July 21, 2005 (incorporated byreference from our Current Report on Form 8-K filed on July 22, 2005)10.3Management Agreement by and between the Registrant and Capital Alliance dated September 18, 2005 (incorporatedby reference from our Current Report on Form 8-K filed on September 22, 2005)10.4Share Holding Agreement by between Capital Alliance, SE Global and Sun Media Investment Holdings Ltd. datedSeptember 18, 2005 (incorporated by reference from our Current Report on Form 8-K filed on September 22, 2005)10.5Stock Purchase Agreement dated December 31, 2005 by and between Sun New Media Inc. and Barron PartnersLP(incorporated by reference from our Current Report on Form 8-K filed on January 6, 2006)14.1Code of Ethics (incorporated by reference to our Annual Report on Form 10KSB filed on June 30, 2006)21Subsidiaries of Sun New Media, Inc. (incorporated by reference to our Annual Report on Form 10KSB filed onJune 30, 2006)31.1Certificate of CEO as Required by Rule 13a-14(a)/15d-1431.2Certificate of CFO as Required by Rule 13a-14(a)/15d-1432.1Certificate of CEO as Required by Rule 13a-14(b) and Rule 15d-14(b) and Section 1350 of Chapter 63 of Title 18of the United States Code32.2Certificate of CFO as Required by Rule 13a-14(b) and Rule 15d-14(b) and Section 1350 of Chapter 63 of Title 18of the United States Code