UNITED STATES


SECURITIES AND EXCHANGE COMMISSION


Washington, D.C. 20549





FORM 10-K


___________





ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)


OF THE SECURITIES EXCHANGE ACT OF 1934





For the fiscal year ended June 30, 2012





Commission file number: 000-53027





V MEDIA CORPORATION


(Formerly China New Media Corporation)


(Exact name of registrant as specified in its charter)





Delaware

33-0944402(State or other jurisdiction of incorporation or organization)

(I.R.S. Employer Identification No.)Dalian Vastitude Media Group

8th Floor, Golden Name Commercial Tower

68 Renmin Road, Zhongshan District, Dalian, P.R. China

116001(Address of principal executive offices)

(Zip Code)Registrant’s telephone number, including area code: 86-0411-82728168





Securities registered pursuant to Section 12(b) of the Act: None





Securities registered pursuant to Section 12(g) of the Act: Common Stock, par value $0.0001 per share





Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.


Yes o No x





Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15 (d) of the Act.


Yes o No x





Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No o





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





Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.  o





Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.





Large accelerated filer o
Accelerated fileroNon-accelerated filer o (Do not check if a smaller reporting company)
Smaller reporting company x





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





The aggregate market value of the registrant’s common stock held by non-affiliates as of December 31, 2011 was approximately $635,336.16 based upon the closing price of the common stock as quoted by the Over-the-Counter Bulletin Board (the “OTC Bulletin Board”)





As of September 27, 2012, there were 27,590,701 shares of the registrant’s common stock, par value $0.0001 per share, outstanding.













Table of Contents





PART I





ITEM 1.
BUSINESS
1ITEM 1A.
RISK FACTORS
4ITEM 1B.
UNRESOLVED STAFF COMMENTS
11ITEM 2.
PROPERTIES
12ITEM 3.
LEGAL PROCEEDINGS
12ITEM 4.
(REMOVED AND RESERVED)
12





PART II





ITEM 5.
MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
13ITEM 6.
SELECTED FINANCIAL DATA
14ITEM 7.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
14ITEM 7A.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
21ITEM 8.
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
21ITEM 9.
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
21ITEM 9A.
CONTROLS AND PROCEDURES
22ITEM 9B.
OTHER INFORMATION
23





PART III





ITEM 10.
DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
24ITEM 11.
EXECUTIVE COMPENSATION
27ITEM 12.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
29ITEM 13.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
29ITEM 14.
PRINCIPAL ACCOUNTANT FEES AND SERVICES
29





PART IV





ITEM 15.
EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
30





SIGNATURES
32





EXHIBIT INDEX
33











i
















As used herein, “we,” “us,” “our” and the “Company” refers to V Media Corporation and its subsidiaries.





CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS





Information contained in this annual report contains “forward-looking statements” as defined by the Private Securities Litigation Reform Act of 1995.  These forward-looking statements are contained principally in the sections titled “Risk Factors,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Business,” and are generally identifiable by use of the words “may,” “will,” “should,” “expect,” “anticipate,” “estimate,” “believe,” “intend” or “project” or the negative of these words or other variations on these words or comparable terminology.





The forward-looking statements herein represent our expectations, beliefs, plans, intentions or strategies concerning future events, including, but not limited to: our future financial performance; the continuation of historical trends; the sufficiency of our cash balances for future needs; our future operations; our sales and revenue levels and gross margins, costs and expenses; the relative cost of our operation as compared to our competitors; new product introduction, entry and expansion into new markets and utilization of new sales channels and sales agents; improvements in, and the relative quality of, our technologies and the ability of our competitors to copy such technologies; our competitive technological advantages over our competitors; brand image, customer loyalty and expanding our client base; the sufficiency of our resources in funding our operations; and our liquidity and capital needs.





Our forward-looking statements are based on our current expectations and beliefs concerning future developments, and there can be no assurance that any projections or other expectations included in any forward-looking statements will come to pass.  Moreover, our forward-looking statements are subject to various known and unknown risks, uncertainties and other factors that may cause our actual results, performance or achievements to be materially different from future results, performance or achievements expressed or implied by any forward-looking statements.





Except as required by applicable laws, we undertake no obligation to update publicly any forward-looking statements for any reason, even if new information becomes available or other events occur in the future.











ii













PART I


ITEM 1. BUSINESS.





Overview





We are one of the fastest growing outdoor advertising companies in China. We own and operate various outdoor media network and provide a full range of integrated outdoor advertising services to our clients, including art design, advertising publishing, daily maintenance and technical upgrading. We believe our well-diversified outdoor advertising media network and our ability to provide advertising services on an integrated basis allow us to target and satisfy client needs at all levels. Founded in 2000, we have grown steadily and expanded our media network into Shenyang, Tianjin, Beijing and Shanghai from our headquarters in Dalian.





Our principal executive offices are located at Golden Name Commercial Tower 8th floor, 68 Renmin Road, Zhongshan District, Dalian, P.R. China. Our telephone number is 86-411-82728168.





Our Corporate History





We were originally incorporated as Golden Key International, Inc. under the laws of the State of Delaware on February 18, 1999. Prior to a business combination transaction effected on December 8, 2009, we were a development stage company with no revenues or profits. We had nominal assets and no operations other than maintaining our public company status and searching for the opportunity of a merger or acquisition with a private entity. Management felt it was in the best interests of the Company to abandon our original business plan of becoming a leading cross-platform community portal provider and pursue a direction for the Company that would provide the best return on stockholder investment.





On December 8, 2009, we acquired all of the outstanding capital stock of Hongkong Fortune-Rich Investment Co., Limited, a Hong Kong corporation (“Fortune-Rich”), through China New Media Corp., a Delaware corporation (the “Merger Sub”) wholly owned by us (the “Merger”).  Fortune-Rich is a holding company whose only asset, held through a subsidiary, is 100% of the registered capital of Dalian Guo-Heng Management and Consultation Co., Ltd. (“Dalian Guo-Heng”), a limited liability company organized under the laws of the People’s Republic of China. Substantially all of Fortune-Rich’s operations are conducted in China through Dalian Guo-Heng, and through contractual arrangements with several of Dalian Guo-Heng’s consolidated affiliated entities in China, including Dalian Vastitude Media Group Co., Ltd. (“V-Media”) and its subsidiaries. V-Media is a fast-growing outdoor advertising company with major operations in Dalian, the commercial center of Northeastern China. Upon the completion of the Merger, our name was changed from Golden Key International, Inc. to China New Media Corp. 26,398,634 shares of the common stock of the Company were issued to the shareholders of Fortune-Rich, which constituted approximately 96% of the common stock of the Company. Effective December 28, 2009, our trading symbol on the OTC Bulletin Board was changed to CMDI.OB.





Through the contractual arrangements between Dalian Guo-Heng and V-Media, we operate one of the largest outdoor advertising networks in northeast China with strong market presence in Dalian and Shenyang, the two most popular commercial cities in Northeast China; and expanded presence in Beijing, Tianjin and Shanghai. We provide clients with advertising opportunities through our diverse media platforms, which include four major proprietary channels: (1) Street Fixture and Display Network, which includes bus and taxi shelters; (2) Mobile Advertisement which includes displays on mass city transit system such as city buses, metro-trains and train stations; (3) Billboard and Large LED displays along the city’s streets and highways; and (4) our proprietary and patented multi-media system, “City Navigator ® Network.”





On July 17, 2012, our name was changed from China New Media Corp. to V Media Corporation through a short form merger pursuant to Section 253 of the General Corporation Law of the State of Delaware by merging a wholly owned subsidiary of the Company into the Company, with the Company as the surviving corporation in the merger. Our trading symbol on the OTC Bulletin Board remains to be CMDI.OB.











1




Subsidiaries of V-Media





The following table sets forth information concerning V-Media’s subsidiaries:





V-Media’s

Ownership Percentage

Region of Operations

Primary BusinessShenyang Vastitude Media Co., Ltd.


100%

Shenyang

Advertising companyTianjin Vastitude AD Media Co., Ltd.


100%

Tianjin

Advertising companyDalian Vastitude Network Technology Co., Ltd.


60%

Dalian

Computer exploitation, technical service, domestic advertisementDalian Vastitude Engineering & Design Co., Ltd.


83%

Dalian

Engineering, design, constructionDalian Vastitude & Modern Transit Media Co., Ltd.


70%

Dalian

Advertising  companyVastitude (Beijing) Technology Co.


60%

Beijing

Advertising companyShanghai Vastitude Advertising & Media Co., Ltd.


100%

Shanghai

Advertising company





Intellectual Property





As of June 30, 2012, Mr. Guojun Wang, our CEO and largest shareholder of V-Media, is the owner of 40 patents in the outdoor advertising display field.  His innovations on billboards, bus and taxi shelters, newsstands and other street fixtures have been vastly used in our outdoor display networks.  Mr. Wang has entered into licensing agreements with V-Media to allow V-Media to use his patents without charge.





Regulation





China’s advertising laws and regulations require advertisers, advertising operators and advertising distributors, including businesses such as ours, to ensure that the content of the advertisements they prepare or distribute are fair and accurate and are in full compliance with applicable law. Outdoor advertisements in China must be registered with the local State Administration for Industry & Commerce (“SAIC”) before dissemination.  The content, format, specifications, periods and locations of dissemination of the outdoor advertisement must be submitted for filing with the local SAIC.





Violation of these laws or regulations may result in penalties, including fines, confiscation of advertising fees, orders to cease dissemination of the advertisements, and orders to publish an advertisement correcting the misleading information. In circumstances involving serious violations, the Chinese government may revoke a violator’s license for advertising business operations.  Furthermore, advertisers, advertising operators or advertising distributors may be subject to civil liability if they infringe on the legal rights and interests of third parties in the course of their advertising business.








2







As an advertising service provider, we are obligated under Chinese laws and regulations to monitor the advertising content shown on our platforms for compliance with applicable law. In addition, for advertising content related to certain types of products and services, such as food products, alcohol, cosmetics, pharmaceuticals and medical procedures, we are required to confirm that the advertisers have obtained the requisite government approvals, including the advertising client’s operating qualifications, proof of quality inspection of the advertised products, government pre-approval of the contents of the advertisement and filing with the local authorities.




Marketing





Our marketing staff is trained to work closely with customers such as direct advertisers and advertising agencies. We provide professional and customizing advice to meet customers’ advertising needs.  As of June 30, 2012, we had 44 dedicated sales and marketing personnel. We depend on our marketing staff to explain our service offerings to our existing and potential clients and to cover a large number of clients in a wide variety of industries.





Competition





We compete with some of the largest advertising companies in China that operate outdoor advertising networks such as JCDecaux China, Clear Media, CBS Outdoor (China) and TOM OMG. We compete primarily on the basis of network size and coverage, location, price, the range of services that we offer and our brand name. We also compete for overall advertising spending with other alternative advertising media companies, such as Internet, street furniture, billboard, frame and public transport advertising companies, and with traditional advertising media, such as newspapers, television, magazines and radio. The Company has entered into a one-year lease agreement commencing March 1, 2012 for a LED in Time Square, New York City. It is a big step for the company to expand overseas operations and become international. Management is negotiating with potential customers in New York, but competition is strong.





Customers





For the fiscal year ended June 30, 2012, we do not have any individual customers accounting for more than 10% of our total revenues. Although our revenues from these advertising clients generally constitute a substantial part of our total revenues, we believe our business is not dependent on any individual advertising client.





Employees





V-Media currently has 139 full-time employees as of June 30, 2012, including 21 in manufacturing, 8 in research and development, 39 in administration and financial department, and 44 in sales, purchasing and marketing.





Recent Developments





Recognition of a “China Well-know Trademark” by the SAIC





On January 10, 2012, our trademark “ Vastitude Media” has been recognized by the State Administration for Industry and Commerce (SAIC) as a “China Well-known Trademark”. This is the first Well-known trademark that has ever been given in the outdoor media industry and entitles the Company to an additional RMB 50 million credit line.





Expansion of Beijing Subsidiary





On August 28, 2011, we completed the construction of a 200 square meter (approximately 2,153 square feet) LED screen at Beijing International Airport. We subsequently signed a one-year advertising contract valued at RMB 18 million or approximately $2.8 million effective as of October 1, 2011.





Expansion of Shenyang Subsidiary





We continued our expansion strategy in Shenyang. In November 2011, we launched a 558 square-meter LED screen located atop the 22-story Golden Hotel in Shenyang. This LED screen represents the second LED screen owned and operated by us in Shenyang.








3


ITEM 1A. RISK FACTORS.





Investing in our common stock involves a high degree of risk.  The risks we have described are not the only ones facing our Company. Additional risks not presently known to us or that we currently deem immaterial may also affect our business operations.  Any of these risks could materially and adversely affect our business, results of operations and financial condition, which in turn could materially and adversely affect the trading price of our common stock.  You should not invest in our securities unless you can afford to lose all of your investment.





RISKS RELATED TO OUR BUSINESS





We have limited experience operating an advertising company and we rely heavily on our sales and marketing staff.





We have a fairly limited operating history in the outdoor advertising business due to the fact that our company was established in 2000. It is difficult to forecast accurately our future revenues and expenses related to this business. We will continue to be subject to risks inherent in the establishment of a new business, including, among other things, efficiently deploying our capital, developing our product and service offerings, developing and implementing our marketing campaigns and strategies and developing awareness and acceptance of our products. Our ability to generate future revenues from our operations will be dependent on a number of factors, many of which are beyond our control. To be successful, we must, among other things, establish greater market recognition in this business. This will require us to expend significant resources, including capital and management time.





In addition, we will need to further increase the size of our sales and marketing staff if our business continues to grow. We may not be able to hire, retain, integrate or motivate our current or new marketing personnel, which would cause short-term disruptions of our operations, restrict our sales efforts and negatively affect our advertising service revenue.





We depend on the availability of additional human resources for future growth.




We have recently experienced a period of significant growth in our advertising platforms . We believe that continued expansion is essential for us to remain competitive and to capitalize on the growth potential of our business. Such expansion may place a significant strain on our management and operations and financial resources. As our operations continue to grow, we will have to continually improve our management, operational and financial systems, procedures and controls, and other resources infrastructure and expand our workforce. There can be no assurance that our existing or future management, operating and financial systems, procedures and controls will be adequate to support our operations, or that we will be able to recruit, retain and motivate our personnel. Further, there can be no assurance that we will be able to establish, develop or maintain the business relationships beneficial to our operations, or to do so or to implement any of the above activities in a timely manner. Failure to manage our growth effectively could have a material adverse effect on our business and the results of our operations and financial condition.




Our results could be adversely impacted by product quality and performance.





We provide advertising service based on specific requirements of each of our customers. We believe that future orders of our products or services will depend on our ability to maintain the performance, reliability and quality standards required by our customers. If our products or services have performance, reliability or quality problems, we may experience delays in the collection of accounts receivables, higher manufacturing or installation costs, additional warranty and service expense, and reduced, cancelled or discontinued orders. Additionally, performance, reliability or quality claims from our customers, with or without merit, could result in costly and time-consuming litigation that could require significant time and attention of management and involve significant monetary damages.







4


We may require additional capital in the future, which may not be available on favorable terms or at all.





Our future capital requirements will depend on many factors, including industry and market conditions, our ability to successfully implement our branding and marketing initiatives and expansion of our production capabilities.  We may need to raise additional funds in order to grow our business and implement our business strategy. We anticipate that any such additional funds would be raised through equity or debt financings.  In addition, we may enter into a revolving credit facility or a term loan facility with one or more syndicates of lenders.  Any equity or debt financing, if available at all, may be on terms that are not favorable to us.  Even if we are able to raise capital through equity or debt financings, as to which there can be no assurance, the interest of existing stockholders in our Company may be diluted, and the securities we issue may have rights, preferences and privileges that are senior to those of our common stock or may otherwise materially and adversely affect the holdings or rights of our existing stockholders.  If we cannot obtain adequate capital, we may not be able to fully implement our business strategy, and our business, results of operations and financial condition would be adversely affected. In addition, if we raise additional capital through private placements or registered offerings, it is likely that broker-dealers will be engaged.  The activities of such broker-dealers are highly regulated and we cannot assure that the activities of such broker-dealers will not violate relevant regulations and generate liabilities despite our expectation otherwise.





Our success depends on our management team and other key personnel, the loss of any of whom could disrupt our business operations.





Our future success will depend in substantial part on the continued service of our senior management, including Mr. Guojun Wang, our Chief Executive Officer and Chairman. The loss of the services of one or more of our key personnel could impede implementation of our business plan and result in reduced profitability. We do not carry key man life or other insurance in respect of any of our officers or employees. Our future success will also depend on the continued ability to attract, retain and motivate highly qualified technical sales and marketing customer support personnel. Because of the rapid growth of the economy in the PRC, competition for qualified personnel is intense. We cannot guarantee that we will be able to retain our key personnel or that we will be able to attract, assimilate or retain qualified personnel in the future.





We have limited business insurance coverage.




The insurance industry in China is at an early stage of development.  Insurance companies in China offer limited business insurance products, and do not, to our knowledge, offer business liability insurance.  As a result, we do not have business liability insurance coverage for our operations. Moreover, while business disruption insurance is available, we have determined that the risks of disruption in comparison to the cost of the insurance are such that we do not require it at this time. Therefore, any business disruption, litigation or natural disaster might result in substantial costs and diversion of our resources.




Our management may exercise broad discretion and judgment.




Any person who invests in our common stock will do so without an opportunity to evaluate the specific merits or risks of many potential new prospective business opportunities in which we may engage.  In these circumstances, investors will be entirely dependent on the broad discretion and judgment of management in connection with the selection of a prospective business. There can be no assurance that determinations made by management will guarantee that we will achieve our business objectives.




There is no active market in our common stock and none may develop or be sustained.




Our stock is currently quoted on the OTC Bulletin Board under the symbol “CMDI.OB.” There is currently no active trading market in our common stock and there is no assurance that an active trading market will develop.  In the event that an active trading market commences, there can be no assurance as to the market price of the shares of common stock, whether any trading market will provide liquidity to investors, or whether any trading market will be sustained.









5


Payment of dividends is unlikely.




We intend to retain our earnings, if any, to support operations and to finance the growth and development of our business. Therefore, we do not expect to pay any dividends on our common stock for the foreseeable future. The payment of dividends will be contingent upon future revenues and earnings, if any, capital requirements and overall financial conditions. The payment of any future dividends will be within the discretion of our board of directors.




We may issue additional securities.




We may issue additional shares of common stock in connection with a future financing. To the extent that additional shares of common stock are issued, our stockholders would experience dilution of their respective ownership interests in our shares. The issuance of additional shares of common stock may adversely affect the market price of our common stock, in the event that an active trading market commences, of which there can be no assurance.




If we become directly subject to the recent scrutiny, criticism and negative publicity involving certain U.S.-listed Chinese companies, we may have to expend significant resources to investigate and resolve the matter which could harm our business operations, stock price and reputation and could result in a loss of your investment in our stock, especially if such matter cannot be addressed and resolved quickly.




Recently, U.S. public companies that have substantially all of their operations in China, particularly companies like us which have completed so-called reverse merger transactions, have been the subject of intense scrutiny, criticism and negative publicity by investors, short sellers, financial commentators and regulatory agencies, such as the United States Securities and Exchange Commission. Much of the scrutiny, criticism and negative publicity has centered around financial and accounting irregularities and mistakes, a lack of effective internal controls over financial accounting, inadequate corporate governance policies or a lack of adherence thereto and, in many cases, allegations of fraud. As a result of the scrutiny, criticism and negative publicity, the publicly traded stock of many U.S. listed Chinese companies has sharply decreased in value and, in some cases, has become virtually worthless. Many of these companies are now subject to shareholder lawsuits, SEC enforcement actions and are conducting internal and external investigations into the allegations. It is not clear what affect this sector-wide scrutiny, criticism and negative publicity will have on our company, our business and our stock price. If we become the subject of any unfavorable allegations, whether such allegations are proven to be true or untrue, we will have to expend significant resources to investigate such allegations and/or defend our company. This situation could be costly and time consuming and distract our management from growing our company. If such allegations are not proven to be groundless, our company and business operations will be severely impacted. It could seriously affect our ability to raise money and our ability to uplist to major stock exchange, and your investment in our stock could be rendered worthless.





General economic conditions may adversely affect our financial condition and results of operations.




The unprecedented events in global financial markets have had a profound impact on the global economy.  Many industries are impacted by these market conditions.  A continued or worsened slowdown in the financial markets or other economic conditions, including but not limited to, consumer spending, employment rates, business conditions, inflation, fuel and energy costs, consumer debt levels, lack of available credit, the state of the financial markets, interest rates, and tax rates may adversely affect our Company’s growth and profitability.  Specifically:





·
the global credit/liquidity crisis could impact the cost and availability of financing and our Company’s overall liquidity;·
volatile energy prices, commodity and consumables prices and currency exchange rates impact potential production costs; and


·
the devaluation and volatility of global stock markets impacts the valuation of our Company’s equity securities.





These factors could have a material adverse effect on our Company’s financial condition and results of operations.







6


Climate change and related regulatory responses may impact our business.





To the extent that climate change increases the risk of natural disasters or other disruptive events in the areas in which we operate, we could be harmed. While we maintain business recovery plans that are intended to allow us to recover from natural disasters or other events that can be disruptive to our business, our plans may not fully protect us from all such disasters or events.





There are risks related to doing business in China given an uncertain regulatory environment.





Uncertainty in the state regulatory environment in China may expose our Company to unexpected liability exposure and possibly even penalties. China has an evolving regulatory environment as to what is permitted and often new regulations are adopted to regulate certain areas where there were no regulations before. As a result, our Company may be exposed to unforeseen risks of violating rules that did not exist. Such risks apply to all aspects of the operation of our Company. In case our Company is found to be in such violation, we could be subjected to monetary and other unexpected penalties.  This may in turn have an impact on our results of operation and the value of shares of our common stock.





Capital outflow policies in the People’s Republic of China may hamper our ability to remit income to the United States.





The PRC has adopted currency and capital transfer regulations. These regulations may require us to comply with complex regulations for the movement of capital. Although our directors believe that it is currently in compliance with these regulations, should these regulations or the interpretation of them by courts or regulatory agencies change, we may not be able to remit all income earned and proceeds received in connection with our operations or from the sale of our operating subsidiary to our stockholders.





The fluctuation of the Renminbi may materially and adversely affect your investment.




The value of the Chinese Renminbi against the U.S. dollar and other currencies may fluctuate and is affected by, among other things, changes in the PRC’s political and economic conditions. Any significant revaluation of the Renminbi may materially and adversely affect our cash flows, revenues and financial condition. For example, to the extent that we need to convert U.S. dollars we receive from any future offerings of our common stock into Renminbi for our operations, appreciation of the Renminbi against the U.S. dollar could have a material adverse effect on our business, financial condition and results of operations.  Conversely, if we decide to convert our Renminbi into U.S. dollars for the purpose of making payments for dividends on our shares of common stock or for other business purposes and the U.S. dollar appreciates against the Renminbi, the U.S. dollar equivalent of the Renminbi we convert would be reduced. Any significant devaluation of Renminbi may reduce our operation costs in U.S. dollars but may also reduce our earnings in U.S. dollars. The depreciation of significant U.S. dollar denominated assets could result in a charge to our income statement and a reduction in the value of these assets. On the other side, however, the continued appreciation of Renminbi against U.S. dollar will also result in translation gain under U.S. GAAP.




Since July 2005, the RMB has no longer been pegged to the U.S. dollar. Although the People's Bank of China regularly intervenes in the foreign exchange market to prevent significant short-term fluctuations in the exchange rate, the RMB may appreciate or depreciate significantly in value against the U.S. dollar in the medium to long term. Moreover, it is possible that in the future PRC authorities may lift restrictions on fluctuations in the RMB exchange rate and lessen intervention in the foreign exchange market.  We may not be able to hedge effectively against Renminbi appreciation, so there can be no assurance that future movements in the exchange rate of Renminbi and other currencies will not have an adverse effect on our financial condition.




In addition, there can be no assurance that we will be able to obtain sufficient foreign exchange to pay dividends or satisfy other foreign exchange requirements in the future.







7




It may be difficult to enforce judgments or bring actions outside the United States against our Company and certain of our directors and officers.




It may be difficult to effect service of process and enforcement of legal judgments upon our Company and our officers and directors because some of them reside outside the United States. As our operations are presently based in China and some of our key directors and officers reside outside the United States, service of process on our key directors and officers may be difficult to effect within the United States. Also, substantially all of our assets are located outside the United States and any judgment obtained in the United States against us may not be enforceable outside the United States.




We may experience difficulty in establishing business controls and procedures that meet Western standards.




The PRC historically has not adopted a Western style of management and financial reporting concepts and practices, modern banking, computer or other control systems. We may have difficulty in hiring and retaining a sufficient number of qualified employees to work in the PRC. As a result of these factors, we may experience difficulty in establishing management, legal and financial controls, collecting financial data and preparing financial statements, books of account and corporate records and instituting business practices that meet Western standards.




Compliance with changing regulation of corporate governance and public disclosure will result in additional expenses and pose challenges for our management team.




Changing laws, regulations and standards relating to corporate governance and public disclosure, including the Dodd-Frank Wall Street Reform and Consumer Protection Act and the rules and regulations promulgated thereunder, the Sarbanes-Oxley Act and SEC regulations, have created uncertainty for public companies and significantly increased the costs and risks associated with accessing the U.S. public markets. Our management team will need to devote significant time and financial resources to comply with both existing and evolving standards for public companies, which will lead to increased general and administrative expenses and a diversion of management time and attention from revenue generating activities to compliance activities.




Compliance with China’s advertising laws and regulations may be difficult and could be costly, and failure to comply could subject us to government sanctions.





China’s advertising laws and regulations require advertisers, advertising operators and advertising distributors to ensure the content of the advertisements they prepare or distribute are fair and accurate and are in compliance with applicable law. Violation of these laws or regulations may result in penalties, including fines, confiscation of advertising fees, orders to cease dissemination of the advertisements and orders to publish an advertisement correcting the misleading information. In circumstances involving serious violations, the Chinese government may revoke a violator’s license for advertising operations.





As an advertising service provider, we are obligated under China’s laws and regulations to monitor the advertising content shown on our network for compliance with applicable law. We endeavor to comply with such requirements, including by requesting relevant documents from the advertisers. However, we can provide no assurance each advertisement that an advertiser or advertising agency client provides us and which we publish is in compliance with relevant advertising laws and regulations or that the supporting documentation and government approvals provided to us by our advertising clients in connection with certain advertising content are complete. Although we review advertising content for compliance with relevant laws and regulations, the content standards in China are less certain and less clear than in those in more developed countries such as the U.S. and we can provide no assurance that we will be able to properly review the content to comply with the standards imposed on us.







8


We rely on contractual arrangements between Dalian Guo-Heng and V-Media for our operations in China, which may not be as effective as direct ownership in providing operational control.





We rely on contractual arrangements between Dalian Guo-Heng and V-Media to operate our advertising business. For a description of these contractual arrangements, see “Part I – Item 1 – Business – Overview.”





These contractual arrangements may not be as effective as direct ownership in providing us with control over our variable interest entity. Under the current contractual arrangements, if V-Media fails to perform its obligations under these contractual arrangements, we may have to incur substantial costs and resources to enforce such arrangements, and rely on legal remedies under Chinese laws, including seeking specific performance or injunctive relief and claiming damages, and we can provide no assurance as to the effectiveness of these remedies, if available.





Many of these contractual arrangements are governed by Chinese law and provide for the resolution of disputes through either arbitration or litigation in China. Accordingly, these contracts would be interpreted in accordance with Chinese law and any disputes would be resolved in accordance with Chinese legal procedures. The legal environment in China is not as developed as in other jurisdictions, such as the U.S. As a result, uncertainties in the Chinese legal system could limit our ability to enforce these contractual arrangements, which may make it difficult to exert effective control over V-Media, and our ability to conduct our business may be materially and adversely affected.





Failure to comply with PRC regulations relating to the establishment of offshore special purpose companies by PRC residents may subject our PRC resident shareholders to personal liability, limit our ability to acquire PRC companies or to inject capital into our PRC subsidiary or affiliate, limit our PRC subsidiary’s and affiliate’s ability to distribute profits to us or otherwise materially adversely affect us.





In October 2005, SAFE, issued the Notice on Relevant Issues in the Foreign Exchange Control over Financing and Return Investment Through Special Purpose Companies by Residents Inside China, generally referred to as Circular 75, which required PRC residents to register with the competent local SAFE branch before establishing or acquiring control over an offshore special purpose company, or SPV, for the purpose of engaging in an equity financing outside of China on the strength of domestic PRC assets originally held by those residents. Internal implementing guidelines issued by SAFE, which became public in June 2007 (known as Notice 106), expanded the reach of Circular 75 by (1) purporting to cover the establishment or acquisition of control by PRC residents of offshore entities which merely acquire “control” over domestic companies or assets, even in the absence of legal ownership; (2) adding requirements relating to the source of the PRC resident’s funds used to establish or acquire the offshore entity; covering the use of existing offshore entities for offshore financings; (3) purporting to cover situations in which an offshore SPV establishes a new subsidiary in China or acquires an unrelated company or unrelated assets in China; and (4) making the domestic affiliate of the SPV responsible for the accuracy of certain documents which must be filed in connection with any such registration, notably, the business plan which describes the overseas financing and the use of proceeds.  Amendments to registrations made under Circular 75 are required in connection with any increase or decrease of capital, transfer of shares, mergers and acquisitions, equity investment or creation of any security interest in any assets located in China to guarantee offshore obligations, and Notice 106 makes the offshore SPV jointly responsible for these filings. In the case of an SPV which was established, and which acquired a related domestic company or assets, before the implementation date of Circular 75, a retroactive SAFE registration was required to have been completed before March 31, 2006; this date was subsequently extended indefinitely by Notice 106, which also required that the registrant establish that all foreign exchange transactions undertaken by the SPV and its affiliates were in compliance with applicable laws and regulations.  Failure to comply with the requirements of Circular 75, as applied by SAFE in accordance with Notice 106, may result in fines and other penalties under PRC laws for evasion of applicable foreign exchange restrictions. Any such failure could also result in the SPV’s affiliates being impeded or prevented from distributing their profits and the proceeds from any reduction in capital, share transfer or liquidation to the SPV, or from engaging in other transfers of funds into or out of China.








9


We believe our shareholders are currently in compliance with Circular 75. However, because of uncertainty over how Circular 75 will be interpreted and implemented, and how or whether SAFE will apply it to us in the future, we cannot predict how it will affect our business operations or future strategies. For example, our present and prospective PRC subsidiary’s and affiliate’s ability to conduct foreign exchange activities, such as the remittance of dividends and foreign currency-denominated borrowings, may be subject to compliance with Circular 75 by our PRC resident beneficial holders. In addition, such PRC residents may not always be able to complete the necessary registration procedures required by Circular 75. We also have little control over either our present or prospective direct or indirect shareholders or the outcome of such registration procedures. A failure by our PRC resident beneficial holders or future PRC resident shareholders to comply with Circular 75, if SAFE requires it, could subject these PRC resident beneficial holders to fines or legal sanctions, restrict our overseas or cross-border investment activities, limit our subsidiary’s and affiliate’s ability to make distributions or pay dividends or affect our ownership structure, which could adversely affect our business and prospects.





Adverse changes in the political and economic policies of the Chinese government could have a material adverse effect on the overall economic growth of China, which could reduce the demand for our services and have a material adverse effect on our competitive position.





Substantially all of our assets are located in China and substantially all of our revenue is derived from our operations in China. Accordingly, our business, financial condition, results of operations and prospects are affected significantly by economic, political and legal developments in China. The Chinese economy differs from the economies of many developed countries in many respects, including:





· the amount of government involvement;


· the level of development;


· the growth rate;


· the control of foreign exchange; and


· the allocation of resources.





While the Chinese economy has experienced significant growth in the past 25 years, growth has been uneven both geographically and among various sectors of the economy. The Chinese government has implemented various measures to encourage economic growth and guide the allocation of resources. Some of these measures may benefit the overall Chinese economy, but may also have a negative effect on us. For example, our operating results and financial condition may be adversely affected by the government control over capital investments or changes in tax regulations. We cannot predict the future direction of political or economic reforms or the effects such measures may have on our business, financial position or results of operations. Any adverse change in the political or economic conditions in China, including changes in the policies of the Chinese government or in laws and regulations in China, could have a material adverse effect on the overall economic growth of China and in the advertising industry. Such developments could have a material adverse effect on our business, lead to reduction in demand for our services and materially and adversely affect our competitive position.





The Chinese government exerts substantial influence over the manner in which we must conduct our business activities.





China only recently has permitted provincial and local economic autonomy and private economic activities, and as a result, we are dependent on our relationship with the local government in the province in which we operate our business. The Chinese government has exercised and continues to exercise substantial control over virtually every sector of the Chinese economy through regulation and state ownership. Our ability to operate in China may be harmed by changes in its laws and regulations, including those relating to taxation, environmental regulations, land use rights, property and other matters. The central or local governments of these jurisdictions may impose new, stricter regulations or interpretations of existing regulations that would require additional expenditures and efforts on our part to ensure compliance with such regulations or interpretations.







10


RISKS RELATED TO THE MARKET FOR OUR STOCK





Our common stock is quoted on the OTC Bulletin Board which may have an unfavorable impact on our stock price and liquidity.





Our common stock is quoted on the OTC Bulletin Board.  The OTC Bulletin Board is a significantly more limited market than the New York Stock Exchange or NASDAQ system.  The quotation of our shares on the OTC Bulletin Board may result in a less liquid market available for existing and potential stockholders to trade shares of our common stock, could depress the trading price of our common stock and could have a long-term adverse impact on our ability to raise capital in the future.





The market price of our common stock may be volatile.




The market price of our common stock has been, and will likely continue to be, highly volatile. Some of the factors that may materially affect the market price of our common stock are beyond our control, such as changes in financial estimates by industry and securities analysts and conditions or trends in the industry in which we operate. These factors may materially adversely affect the market price of our common stock, regardless of our performance. In addition, the public stock markets have experienced extreme price and trading volume volatility. This volatility has significantly affected the market prices of securities of many companies for reasons frequently unrelated to the operating performance of the specific companies. These broad market fluctuations may adversely affect the market price of our common stock. We expect the price of our common stock will be subject to continued volatility.




We are subject to penny stock regulations and restrictions.




Our shares are subject to rules applicable to “penny stock” which pertain to any equity security with a market price less than $5.00 per share or an exercise price of less than $5.00 per share.  Penny stock rules require a broker-dealer, prior to a transaction in a penny stock, to deliver a standardized risk disclosure document prepared by the SEC, which specifies information about penny stocks and the nature and significance of risks of the penny stock market. A broker-dealer must also provide the customer with bid and offer quotations for the penny stock, the compensation of the broker-dealer, and sales person in the transaction, and monthly account statements indicating the market value of each penny stock held in the customer's account. In addition, the penny stock rules require that, prior to a transaction in a penny stock not otherwise exempt from those rules, the broker-dealer must make a special written determination that the penny stock is a suitable investment for the purchaser and receive the purchaser's written agreement to the transaction. These disclosure requirements may have the effect of reducing the trading activity in our shares.





Our senior management holds a significant percentage of our outstanding voting securities.





Guojun Wang, our Chairman and Chief Executive Officer, and his wife, Ms. Ming Ma, who is President and a director of the board, beneficially own 10,167,600 shares of common stock, which represent 36.8% of the common stock of the Company. Mr. Wang owns 6,850,000 of these shares, which represents 24.8% of the common stock of the Company, and Ms. Ma owns 3,317,600 of these shares, which represents 12.0% of the common stock of the Company. As a result, they possess significant influence, giving them the ability to prevent significant corporate transactions.  Their ownership and control may impede or delay any future change in control through merger, consolidation, takeover or other business combinations and may discourage a potential acquirer from making a tender offer.





ITEM 1B.  UNRESOLVED STAFF COMMENTS.





None.







11


ITEM 2.  PROPERTIES.





Our principal executive offices are located at 8th Floor, Golden Name Commercial Tower, 68 Renmin Road, Zhongshan District, Dalian, P.R. China, 116001. This office consists of approximately 8,988 square feet which we leased from Mr. Guojun Wang and Ms. Ming Ma for  a nominal $1 a year. This lease agreement is renewable each year for a one-year period.





Our Shenyang subsidiary office is located at 5B-2-1 Room, 136 Huigong Street, Shenhe District, Shenyang, P.R. China, 110013. This office consists of approximately 4,700 square feet. This lease agreement is renewable each year for a one-year period.





Our Tianjin subsidiary office is located at Room 1-2-1217, Chengji Economics and Trade Center, Heping District, Tianjin, P.R. China, 300051. This office consists of approximately 678 square feet. This lease agreement is renewable each year for a one-year period.





Our Shanghai subsidiary office is located at Room 1018, No. 799, Huanlindong Road, Pudong New District, Shanghai, P.R. China, 200123. This office consists of approximately 215 square feet. This lease agreement is renewable upon expiration for a two-year period.




Dalian Vastitude & Modern Transit Media Co., Ltd. is located at 11 Liaohe West Road, Development Zone, Dalian, P.R. China, 116600. This office consists of approximately 3,331 square feet. This lease agreement is renewable upon expiration for a three-year period.




ITEM 3.  LEGAL PROCEEDINGS.





From time to time, the Company may become involved in various lawsuits and legal proceedings which arise in the ordinary course of business.





ITEM 4.  (REMOVED AND RESERVED.)




Not applicable.





12










PART II





ITEM 5.  MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES.





Trading Information





Our common stock is currently quoted on the OTC Bulletin Board maintained by the NASD under the symbol CMDI.OB.  The transfer agent for our common stock is Securities Transfer Corporation, 2591 Dallas Parkway, Suite 102, Frisco, TX 75034.





The following table sets forth the high and low closing bid quotations for our common stock for the fiscal quarters indicated as reported on the OTC Bulletin Board.  The quotations reflect inter-dealer prices, without retail mark-up, mark-down or commission and may not necessarily represent actual transactions.  Trading in our common stock has been sporadic and does not constitute an active market. Our common stock is thinly traded and any reported sale prices may not be a true market-based valuation of our common stock.





Year 2012

High ($)


Low ($)First Quarter ended September 30, 2011


0.58



0.25Second Quarter ended December 31, 2011


0.35



0.10Third Quarter ended March 31, 2012


0.28



0.12Fourth Quarter ended June 30, 2012


0.28



0.10





Year 2011

High ($)


Low ($)First Quarter ended September 30, 2011


2.35



1.55Second Quarter ended December 31, 2011


2.00



0.81Third Quarter ended March 31, 2012


0.82



0.45Fourth Quarter ended June 30, 2012


0.52



0.25





As of September 27, 2012, there were approximately 274 owners of record of our common stock.





Trades in our common stock may be subject to Rule 15g-9 under the Exchange Act, which imposes requirements on broker-dealers who sell securities subject to the rule to persons other than established customers and accredited investors.  For transactions covered by the rule, broker-dealers must make a special suitability determination for purchasers of the securities and receive the purchaser’s written agreement to the transaction before the sale.





Our shares are subject to rules applicable to “penny stock” which pertain to any equity security with a market price less than $5.00 per share or an exercise price of less than $5.00 per share.  Penny stock rules require a broker-dealer, prior to a transaction in a penny stock, to deliver a standardized risk disclosure document prepared by the SEC, which specifies information about penny stocks and the nature and significance of risks of the penny stock market. A broker-dealer must also provide the customer with bid and offer quotations for the penny stock, the compensation of the broker-dealer, and sales person in the transaction, and monthly account statements indicating the market value of each penny stock held in the customer's account. In addition, the penny stock rules require that, prior to a transaction in a penny stock not otherwise exempt from those rules, the broker-dealer must make a special written determination that the penny stock is a suitable investment for the purchaser and receive the purchaser's written agreement to the transaction. These disclosure requirements may have the effect of reducing the trading activity in our shares.





Dividend Policy





We have not paid or declared any cash dividends on our common stock in the past and do not foresee doing so in the foreseeable future.  We intend to retain any future earnings for the operation and expansion of our business.  Any decision as to future payment of dividends will depend on the available earnings, the capital requirements of our Company, our general financial condition and other factors deemed pertinent by our Board of Directors.








13





Sales of Unregistered Securities




None.




Purchases of Equity Securities by the Issuer and Affiliated Purchasers




None.




ITEM 6.  SELECTED FINANCIAL DATA.




As a “smaller reporting company,” as defined by Item 10 of Regulation S-K, the Company is not required to provide this information.




ITEM 7.  MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.




Factors that can affect our results of operations are as follows:




Domestic Spending and Urbanization





The demand for our advertising time slots is directly related to the outdoor advertising spending in northeast China. Advertising spending is largely determined by the economic conditions in our region.  The Chinese government is aimed at building a domestic consumer-driven economy, which we believe, will continue to generate demand for outdoor advertising.





Expansion of Our Market Presence by Launching City Navigator ® Networks in Other Major Commercial Cities





We believe our proprietary multi-media advertising system – City Navigator ® Network is one of the most advanced outdoor advertising platforms available in China. This system combines the latest LED displaying technology, internet and WI-FI technology, and has proven to be very effective in our competition to get access to top tier cities such as Shanghai and Beijing.





By using wireless access technology, our LED displays at bus and taxi shelters are able to display real time programs at the control of our centralized computer systems. It consists of a Wi-Fi receiver, large-screen LED display, and web-based touch-screen kiosk which provide the public with information on all aspects of the city life, including travel, traffic, restaurants, shopping, hotels, business, medical and education.  In addition, every City Navigator is equipped with Bluetooth, wireless access and printing technology. Users can either print the information or send the information to their cell phones or computers. As City Navigator® Network adopts Wi-Fi technology, users can enjoy its service from any area covered by its Wi-Fi signals.  We are aggressively expanding our media platform by launching City Navigator ® Networks in our target cities, such as, Tianjin, Qingdao and Shanghai, to create our own cross-region advertising network and enhance our advertising distribution capacity.





Promotion of Our Brand Name to Attract a Wider Client Base and Increase Revenues




We promote our brand name, [国域无疆]TM, through both our own media channels and public channels in North China. We believe that the enhancement of public awareness to our brand name will help to broaden our client base, especially in the new marketplace such as Shenyang and Tianjin. As we expand our advertising client base and promote public’s awareness to our brand, demand for time slots and advertising space on our network will continue to grow.









14


Upgrade of Our Outdoor Billboard Network with New Digital Display Technology




We intend to capitalize recent advances in digital display technology, especially mega-screen LED displays, to meet major institutional clients’ needs. Because the LED displays can be linked through centralized computer systems to instantaneously change static advertisements, and are highly visible even during bright daylight, it improves the advertising effectiveness and efficiency markedly.  We plan to build more mega-screen (100 square meters to 500 square meters, approximately 1,076.4 square feet to 5,382 square feet) LED displays at premier locations in our marketplace. The Company has entered into a one-year lease agreement commencing March 1, 2012 for a LED in Time Square, New York City. It is a big step for the company to expand overseas operations and become international.





As we continue to expand our network, we expect to face a number of challenges. We have expanded our network rapidly, and we, as well as our competitors, have occupied many of the most desirable locations in Dalian. In order to continue expanding our network in a manner that is attractive to potential advertising clients, we must continue to identify and occupy desirable locations and to provide effective channels for advertisers. In addition, we must react to continuous technological innovations in the use of wireless and broadband technology in our network, and changes in the regulatory environment, such as the regulations allowing 100% foreign ownership of PRC advertising companies and new regulations governing cross-border investment by PRC persons.




We believe that our business model and success in our regional market give us a considerable advantage over our competitors.  Our future growth will depend primarily on the following factors:




●
Overall economic growth in China, which we expect to contribute to an increase in advertising spending in major urban areas in China where consumer spending is concentrated;





●
Our ability to expand our network into new locations and additional cities including New York;





●
Our ability to expand our sales force and engage in increased sales and marketing efforts;





●
Our ability to expand our client base through promotion of our services;





●
Our ability to expand our new systems including large-screen LED display network and City Navigator® Networks which commenced operation in the third quarter of 2009.











15


Results of Operations for the Year Ended June 30, 2012 Compared to the Year Ended June 30, 2011




Revenue





The following table shows the operations of the Company on a consolidated basis for the fiscal years ended June 30, 2012 and 2011:




REVENUESFiscal Years Ended June 30,2012


2011


Difference

% ChangeDalian DistrictStreet Fixture and Display network

$
5,316,472


$
6,629,401


$
-1,312,929

-19.8
%City Transit system Display network


3,015,754



4,415,623



-1,399,869

-31.7
%Outdoor Billboards


3,915,086



5,205,074



-1,289,988

-24.8
%City Navigator


1,356,042



1,773,982



-417,940

-23.6
%Other service income (a)


526,154



799,083



-272,929

-34.2
%Subtotal for Dalian District

$
14,129,508


$
18,823,163


$
-4,693,655

-24.9
%Shenyang DistrictStreet Fixture and Display network

$
256,543


$
160,602


$
95,941

59.7
%Outdoor Billboards


982,923



449,175



533,748

118.8
%Other service income (a)

$
-



9,356


$
-9,356

-100
%Subtotal for Shenyang District

$
1,239,466


$
619,133


$
620,333

100.2
%Beijing DistrictOutdoor Billboards

$
2,124,900



54,330


$
2,070,570

3811.1
%Subtotal for Beijing District

$
2,124,900



54,330


$
2,070,570

3811.1
%Tianjin DistrictOutdoor Billboards

$
422,556



203,473



219,083

107.7
%Subtotal for Tianjin District

$
422,556



203,473



219,083

107.7
%Shanghai DistrictOutdoor Billboards

$
554,255


$
878,265


$
-324,010

-36.9
%Subtotal for Shanghai District

$
554,255


$
878,265


$
-324,010

-36.9
%Total Revenues

$
18,470,685


$
20,578,364


$
-2,107,679

-10.2
%





(a) Other service income generated by Construction & Design service provided by Dalian Vastitute Engineering & Design Company and technique service provided by Dalian Vastitute Network Technology Company to outside customers.





Revenue





Our total revenues for the fiscal year ended June 30, 2012 were $18,470,685, a decrease of $2,107,679 or 10.2%, from $20,578,364 for the fiscal year ended June 30, 2011. The decline in revenue was primarily attributable to a decrease in contracting demand from advertisers under unfavorable macroeconomic conditions. Advertisers from certain industries such as real estate significantly reduced their advertising budgets in fiscal year 2012.





For the fiscal year ended June 30, 2012, sales in Dalian district, accounted for 76.5% of our total sales, decreased by $4,693,655, or 24.9%, to $14,129,508 from $18,823,163 for the fiscal year ended June 30, 2011. Dalian is the Company’s headquarter and was most affected by cyclical industries such as real estate.





Overall sales in Shenyang district increased by 620,333, or 100.2%, to $1,239,466 from $619,133 for the fiscal year ended June 30, 2012. In Shenyang, sales generated from street furniture and display network increased 59.7%, or $95,941 compared with same period in 2011, while sales generated from billboards including LED screens increased 118.8%, or $533,748 compared with same period in 2011. The increased sales reflected the Company’s focused effort on developing Shenyang market, as Shenyang will be the host city for the upcoming 12th National Games of the People’s Republic of China in 2013.





For fiscal year ended June 30, 2012, sales in Tianjin district increased by 219,083, or 107.7%, to $422,556 from $203,473 for the fiscal year ended June 30, 2011. Sales in Beijing district increased by $2,070,570, or 3,811.1% to $2,124,900 from $54,330 and in Shanghai district decreased by $324,010, or 36.9% to $554,255 from $878,265 for the fiscal year ended June 30, 2011.







16


Cost of Revenue




Cost of revenue for the fiscal year ended June 30, 2012 were $10,750,398, an increase of $1,773,448 or 19.8%, from $8,976,950 for the same period ended June 30, 2011. The increase in cost of revenue was primarily attributable to increased depreciation of advertising equipment and labor and raw material cost. As a percentage of total revenues, cost of revenue accounted for approximately 58.2% and 43.6% for the fiscal years ended June 30, 2012 and 2011, respectively.







COST OF  REVENUES


Fiscal Years Ended June 30,2012



2011



Difference



% ChangeDalian DistrictStreet Fixture and Display network

$
3,093,073


$
2, 487,325


$
605,748



24.4
%City Transit system Display network


1,916,391



2,150,578



-234,187



-10.9
%Outdoor Billboards


1,831,756



1,856,244



-24,488



-1.3
%City Navigator


511,209



586,014



-74,805



-12.8
%Other service cost (b)


451,503



675,359



-223,856



-33.1
%Subtotal for Dalian District

$
7,803,932


$
7,755,520


$
48,412



0.6
%Shenyang DistrictStreet Fixture and Display network

$
220,912


$
96,220


$
124,692



129.6
%Outdoor Billboards


571,727



261,580



310,147



118.6
%Other service cost (b)






1,554



-1,554



-100
%Subtotal for Shenyang District

$
792,639


$
359,354


$
433,285



120.6
%Beijing DistrictOutdoor Billboards

$
1,070,574


$
109,827


$
960,747



874.8
%Subtotal for Beijing District

$
1,070,574



109,827

$

960,747



874.8
%Tianjin DistrictOutdoor Billboards

$
260,749



130,889


$
129,860



99.2
%Subtotal for Tianjin District

$
260,749



130,889


$
129,860



99.2
%Shanghai DistrictOutd oor Billboards

$
822,504


$
621,360


$
201,144



32.4
%Subtotal for Shanghai District


822,504



621,360



201,144



32.4
%Total Cost of Revenue

$
10,750,398


$
8,976,950


$
1,773,448



19.8
%





(b) Other service cost attributed by Dalian Vastitute Engineering & Design Company and by Dalian Vastitute Network Technology Company when they provide Construction & Design service and technique service to outside customers, respectively.







17


Gross Profit





Gross profit for the fiscal year ended June 30, 2012 decreased by $3,881,127, or 33.5%, to $7,720,287, as compared to $11,601,414 for the fiscal year ended June 30, 2011.  The decrease in gross profit was partially attributable to the revenue decrease.  Gross profit margin was approximately 41.8% and 56.4% for the fiscal year ended June 30, 2012 and 2011, respectively. The decline in gross profit percentage during 2012 compared with 2011 was mainly due to the increased cost of securing new advertising platform, increased maintenance cost of advertising equipment, and the increase of labor and raw material cost during the fiscal year ended June 30, 2012.





Selling, General and Administrative Expenses





Our selling, general and administrative expenses consist primarily of salaries of sales personnel, commissions for sales representatives, rent expenses and related administrative expenses. SG&A expenses were $6,586,810 for the fiscal year ended June 30, 2012, as compared to $4,048,022 for the year ended June 30, 2011, an increase of $2,528,788 or 63%.  Among which, $1,114,475 increased amortization expense was associated with a LED in Time Square newly rented in current year; $665,703 was due to increased depreciation expense; $242,743 was due to higher maintenance and professional fees as being a public company.




Income from Operations




Income from operations was $1,133,477 for the year ended June 30, 2012 as compared to $7,553,392 for the year ended June 30, 2011, a decrease of $6,419,915 or 85%. The decrease was mainly due to our decrease in total revenue and increase in cost of revenue and selling, general and administrative expense.




Other Income (Expense)




Total other expense was $547,581 for the year ended June 30, 2012 as compared to total other expenses of $776,552 for the year ended June 30, 2011, an decrease of $228,971, or 29%. Interest expense was $1,236,432, increased $421,329 as compared to $815,103 for the year ended June 30, 2011. The increase is due to higher average bank loan balance and guarantee fee paid to third-party guarantee companies. However, the impact on total other expense was mitigated by the increase of other income, which is mainly tax refund the company received this year, amounting $718,984.




Income Before Income Taxes





Income before income taxes was $585,896 for the year ended June 30, 2012 as compared to $6,776,840 for the year ended June 30, 2011, a decrease of $6,190,944 or 91.4% due to the reason described above.





Income tax provision





Income tax provision was $226,807 for the year ended June 30, 2012 as compared to $1,810,240 for the year ended June 30, 2011, a decrease of $1,583,433 or 87.5% due to the decrease of income before income taxes from 2011 to 2012.





Net Income attributable to V- Media Corp.





Net income attributable to V- Media Corp. for the fiscal year ended June 30, 2012 was $50,853, a decrease of $4,821,032, or 99%, compared to net income of $4,871,885 for the fiscal year ended June 30, 2011. The decrease was attributable to the decrease in gross profit. Net income as a percentage of total net sales was approximately 2% and 23.7% for the fiscal year ended June 30, 2012 and 2011, respectively.





Liquidity and Capital Resources





We have historically funded our working capital needs from operations, advance payments from customers, bank borrowings, and capital from shareholders. Presently, our principal sources of liquidity are generated from our operations and bank loans.  Our working capital requirements are influenced by the level of our operations, the numerical and dollar volume of our sales contracts, the progress of our contract execution and the timing of accounts receivable collections.





Based on our current operating plan, we believe that our existing resources, including cash generated from operations as well as the bank loans, will be sufficient to meet our working capital requirement for our current operations over the next twelve months. In order to fully implement our business plan and continue our growth, however, we will require additional capital either from our shareholders or from outside sources.





As of June 30, 2012, the Company’s cash and cash equivalents amounted to $ 1,526,604, a decrease of $282,277 from $1,808,881 as of June 30, 2011.








18




Cash Flow from Operating Activities





Net cash provided by operating activities was $8,767,908 for the fiscal year ended June 30, 2012, an increase of $2,019,703 from $6,748,205 for the fiscal year ended June 30, 2011. The increase was mainly due to an increase in depreciation and amortization, account payable and a decrease in accounts receivable.





Cash Used in Investing Activities





Net cash used in investing activities in the fiscal year ended June 30, 2012 was $9,224,072 as compared to cash used in investing activities of $9,589,263 for the year ended June 30, 2011.  Net cash used in investing activities for 2012 and 2011was mainly used to acquire new outdoor advertising platforms to expand our existing advertising network.





Cash Provided by Financing Activities





For the year ended June 30, 2012, net cash provided by financing activities was $142,674 as compared to cash provided by financing of $2,899,297 for the year ended June 30, 2011. This was due to the increased repayment of short-term bank loans in 2012.





Loan Facility





Short-Term Loans





a) Loan payable to Harbin Bank had a one-year term from May 9, 2011 to May 8, 2012 at a variable interest rate of 7.57% per year. The loan was repaid as of June 30, 2012.
 
 b) Loan payable to Shanghai Pudong Development bank consists of two loans. One is an original one-year term loan from November 15, 2010 to November 15, 2011 with the amount of RMB 6,000,000 (approximately $952 thousand) at a fixed interest rate of 7.57% per year. This loan has been renewed from November 22, 2011 to November 21, 2012 at a variable interest rate of 8.528% per year. The Company pledged a real estate property owned by the Company’s major Stockholder. The other loan is a one-year term loan due on June 15, 2012 in the amount of RMB 10,000,000 (approximately $1.57 million) at a variable interest rate of 8.203% per year. The loan has been renewed from June 18, 2012 to June 14, 2013. This loan has been guaranteed by an unrelated company, Union Chuangye Guaranty Company. The Company pledged part of its advertising equipment with the value of RMB 20.4 million (approximately $3.2 million).


c) Loan payable to Dalian Bank Xigang Branch had an original one-year term from March 14, 2011 to March 11, 2012 at a variable interest rate of 5.56% at June 30, 2011. This loan has been repaid and a new loan has been borrowed with one year term from March 27, 2012 to March 26, 2013 at a variable interest rate of 9.184% per year. This loan has been guaranteed by an unrelated company, Dalian Huanbohai Development Credit Guaranty Company. The Company also pledged part of its advertising equipment with the value of RMB18.26 million (approximately $2.9 million).





d) Loan payable to Industrial and Commercial Bank of China is a one-year term loan from September 28, 2011 to August 21, 2012 at a fixed interest rate of 7.872% per year. The Company pledged a real estate property owned by the Company’s major Stockholder. The loan has been paid off on August 21, 2012.





e) Loan payable to Jinzhou Bank was a one-year term loan from April 21, 2010 to April 20, 2011 at a fixed interest rate of 8.20% per year. The loan had been renewed for another year from May 3, 2011 to April 20, 2012 at a fixed interest rate of 8.20% per year. This loan has been guaranteed by the Company’s major Stockholders Mr. Guojun Wang and Ms. Ming Ma. The Company pledged part of its advertising equipment with the value of RMB17,000,000 (approximately $2.7 million). This loan has been repaid in April 2012.


f) Loan payable to Industrial Bank was a one-year term loan from July 20, 2010 to July 19, 2011 in the amount of RMB 7,000,000 (approximately $1.1 million) at a variable interest rate of 6.11% per year. This loan has been repaid on July 19, 2011.











19





g) Loan payable to Jilin Bank consists of two loans. One loan is a one-year term loan from May 6, 2011 to May 4, 2012 in the amount of RMB 5,000,000 (approximately $0.8 million) at a variable interest rate of 8.528% per year. The other loan is a one-year term loan from May 9, 2011 to May 8, 2012 in the amount of RMB 10,000,000 (approximately $1.6 million) at a variable interest rate of 8.528% per year. In May, the Company had negotiated to renew the two loans and changed the amount to RMB 3,000,000 (approximately $0.47 million) and RMB 15,000,000 (approximately $2.36 million). The new due date is May 9, 2013. The two loans have been guaranteed by an unrelated company, Dalian Enterprise Credit Guaranty Co., Ltd. The Company also pledged part of its advertising equipment with the approximate value of RMB 43,408,300 (approximately $6.9 million).





h) Loan payable to Dalian Bank Shenyang Branch was a one-year term loan from June 10, 2011 to June 8, 2012 at a variable interest rate of 8.52% per year. ) The loan was renewed on a one-year term loan from June 6, 2012 to June 5, 2013 at a variable interest rate of 8.856% per year  These loans have been guaranteed by Dalian Vastitude Media Group Co., Ltd.





i) Loan payable to Dalian Bank Shanghai Branch is an eleven-month term loan from December 29, 2011 to November 28, 2012 at a floating interest rate of 9.184% per year. This loan has been guaranteed by Dalian Vastitude Media Group Co., Ltd.





j) Loan payable to Yinkou bank is one-year term loan from June 29, 2012 to June 28, 2013 at a floating interest rate of 8.203% per year. This loan has been guaranteed by Zhongqing Union Credit Guarantee (Dalian) Corporation





k) Loan payable to China Merchant bank is one-year term loan from May 24, 2012 to May 24, 2013 at a fixed interest rate of 8.528% per year. The Company also pledged part of its advertising equipments for this loan.





l) The Company entered into loans for $520,994 (RMB 3.3 million) from outside unrelated parties in June 2012, which are due on demand and bears no interest.




Long term loan




On December 29, 2011, V-Media Group’s subsidiary Shenyang and Beijing subsidiaries entered into loan agreements with ORIX finance leases (China) Co., Ltd. (“ORIX Leasing”) pursuant to which Shenyang and Beijing borrowed $0.64 million (RMB 4.1 million) and $0.55 million (RMB 3.5 million) from ORIX leasing and pledged its advertising equipment with the approximate value of RMB $0.99 million (RMB6.26 million) and $0.85 million (RMB5.37 million), respectively. These loans are paid on a monthly basis over a two-year period and consist of a fixed payment based upon a 24-month amortization of the purchase price plus an interest component that is based upon the rate announced from time to time by the People’s Bank of China for two-year loans. At June 30, 2012, the monthly payment under the agreement for Shengyang and Beijing were $0.03 million (RMB 181,309) and $0.02 million (RMB 155,410) respectively, which including an interest component calculated at the rate of 6.65%. In our previously filed Forms 10Q (December and March) ,this transaction was disclosed under Note 12 as a sale-leaseback transaction; management reclassified it as a long-term loan at June 30, 2012, to reflect the substance more accurately. The reclassification had no material effect on consolidated total assets, liabilities, stockholders' equity, net income or cash flows.




As of June 30, 2012, the loan amounted to $953,430, including $590,370 due in one year.







20




Application of Critical Accounting Policies




Management's discussion and analysis of its financial condition and results of operations are based upon our consolidated financial statements, which have been prepared in accordance with United States generally accepted accounting principles (“U.S. GAAP”). Our financial statements reflect the selection and application of accounting policies which require management to make significant estimates and judgments. See Note 2 to our consolidated financial statements, “Summary of Significant Accounting Policies.”





Off-Balance Sheet Arrangements





We do not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition or results of operations.





ITEM 7A.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.





As a “smaller reporting company,” as defined by Item 10 of Regulation S-K, the Company is not required to provide this information.





ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.





Our consolidated financial statements for the fiscal years ended June 30, 2012 and 2011 are attached hereto.





ITEM 9.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.





None.








21


ITEM 9A.  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 Chief Financial Officer, we conducted an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended, as of the end of the period covered by this Annual Report on Form 10-K (the “Evaluation Date”). The evaluation of our disclosure controls and procedures included a review of our processes and the effect on the information generated for use in this Annual Report on Form 10-K. In the course of this evaluation, we sought to identify any material weaknesses in our disclosure controls and procedures and to confirm that any necessary corrective action, including process improvements, was taken. The purpose of this evaluation is to determine if, as of the Evaluation Date, our disclosure controls and procedures were operating effectively such that the information, required to be disclosed in our reports with the Securities and Exchange Commission (“SEC”) (i) was recorded, processed, summarized and reported within the time periods specified in SEC rules and forms, and (ii) was accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.  In designing and evaluating our disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and management is required to apply its judgment in evaluating and implementing possible controls and procedures.  Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, have been detected.





Based upon, and as of the Evaluation Date, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures contained material weaknesses. Therefore, our management concluded that our disclosure controls and procedures were not effective.  We believe that the weaknesses in our disclosure controls and procedures result from weaknesses in our internal control over financial reporting, which is described below.





Notwithstanding management’s assessment that the internal control over financial reporting was ineffective as of June 30, 2012 due to the material weakness described in the “Management’s Annual Report on Internal Control over Financial Reporting section below, the Company believes that the consolidated financial statements included in this Annual Report on Form 10-K fairly present its financial condition, results of operations and cash flows for the fiscal periods covered thereby in all material respects.





Management’s Annual Report on Internal Control over Financial Reporting





Management is responsible for establishing and maintaining adequate internal control over financial reporting for the Company.  The Company’s internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles.  The Company’s internal control over financial reporting includes those policies and procedures that:





(i)
pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the Company;





(ii)
provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”), and that receipts and expenditures of the Company are being made only in accordance with authorizations of management and directors of the Company; and





(iii)
provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Company’s assets that could have a material effect on the financial statements.





Because of its inherent limitations, internal control over financial reporting cannot provide absolute assurance of preventing and detecting misstatements on a timely basis.  Internal control over financial reporting is a process that involves human diligence and compliance and is subject to lapses in judgment and breakdowns resulting from human failures.





Management of the Company, including the Company’s Chief Executive Officer and Chief Financial Officer, conducted an evaluation of the effectiveness of the Company’s internal control over financial reporting as of the Evaluation Date.  In making this evaluation, management used the criteria set forth in the Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”).  Based on this evaluation, management concluded that we had made improvement in our internal control over financial reporting as of the Evaluation Date and the Company’s internal control over financial reporting as of the Evaluation Date was not effective based on these criteria.








22







Through the past fiscal year, we have been implementing the following changes to our internal control over financial reporting that have materially affected its internal control over financial reporting:





●           To improve its financial system, management of the Company has engaged more experienced accounting professional who are familiar with U.S. GAAP Standard and reporting requirements.





●           The Company has designed procedures to enhance the independent performance by separate individuals of different tasks, such as in the custody of assets and the recording of transactions.





●           We initiated in the process of completing a review and revision of the documentation of the Company’s internal control procedures and policies.





●           We began the preliminary implementation of an initiative and training in China to ensure the importance of internal controls and compliance with established policies and procedures are fully understood throughout the organization and plan to provide additional U.S. GAAP training to all employees involved to ensure the performance of and compliance with those procedures and policies.





Our management, including our Chief Executive Officer and Chief Financial Officer, does not expect that our disclosure controls and procedures or our internal controls will prevent all error and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within V Media Corp. have been detected.





ITEM 9B. OTHER INFORMATION.





None.







23





PART III







ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE.





Directors and Executive Officers





The following sets forth certain information with respect to our current directors and executive officers.





Name

Age

Positions with the CompanyGuojun Wang

48

Chief Executive Officer and Chairman of the BoardHongwen Liu

45

Chief Financial OfficerMing Ma

46

President and DirectorDror Poleg

32

DirectorFeng Wan

35

Chief Technology Officer





All directors hold office until the next annual meeting of our stockholders and until their successors have been elected and qualify.  All executive officers serve at the pleasure of the Board of Directors.





Guojun Wang, 48, Chairman and Chief Executive Officer. Mr. Wang has served as our Chairman and Chief Execuitve Officer since December 2009.  Before Mr. Wang founded V-Media in September 2000, he had served as President of Dalian Pacific Advertisement Co., Ltd. for 11 years. With his more than 20 years of experience in the Chinese media and advertising industry and his success in building and managing one of the largest regional outdoor media companies in China, Mr. Wang was elected Vice Chairman of China Advertising Association of Commerce in 2007. He graduated from Northeastern University of Finance & Economics with a bachelor’s degree in Economics in 1988.  Mr. Wang’s role as the founder of the Company provides the Board of Directors with considerable institutional knowledge and an important long-term perspective on the Company and our industry as a whole.





Hongwen Liu, 45, Chief Financial Officer. Mr. Liu joined the Company as Chief Financial Officer in December 2009.  Prior to that, he served as Deputy Director of Dalian Da-xin Accounting Firm for nine years. Mr. Liu graduated from the Computer-Based Accounting Department of Dalian Radio and Television University in July 1991.





Ming Ma, 46, President and Director. Ms. Ma has served as our President since December 2009 and became a director in June 2010.  Ms. Ma  has been in charge of V-Media’s daily operation since its inception in September 2000. Prior to that, she had served as Sales Manager in Dalian Pacific Advertisement Co. Ltd. Ms. Ma graduated from Dalian Institute of Finance Trade Union in 1991.  Ms. Ma’s many years of experience in the advertising industry provides the Board of Directors with valuable insight into our industry.  Ms. Ma is the wife of Mr. Wang, our Chairman and Chief Executive Officer.




Dror Poleg, 32, Director. Mr. Poleg has served as a director since June 2010.  Mr. Poleg has extensive experience in corporate strategy and cross-cultural communication, as well as nearly 10 years of advertising and marketing experience. Currently, Mr. Poleg is the Vice President of Leasing & Marketing at GTC Real Estate China, a subsidiary of one of the largest development groups in Europe.  Mr. Poleg has worked with GTC Real Estate China since August 2007 and started as the Marketing Director.   From August 2007 to August 2010, Mr. Poleg served as the China Marketing Director of Kardan N.V., a Dutch investment group that is traded on NYSE Euronext and invests in real estate and infastructure.  From March 2007 to the present, Mr. Poleg has served as the founder and Director of Dror Poleg & Company Ltd., which is in the strategy, communication and investment consulting business.  From May 2005 to May 2007, he served as the Online Operations Manager of Standards Group, an advertising and marketing agency.  Mr. Poleg received his Bachelor of Arts in Media & Communications from Swinburne University, Melbourne, Australia.







24





Feng Wan,35, Chief Technology Officer. Mr. Wan also serves as General Manager of Dalian Vastitude Network Technology Co., Ltd. Mr. Wan joined the Company in 2001, He provides technical and manangement services for the Company because of his broad industry experiences. He graduated from the Central Party School with a Law degree in 2000.








Family Relationships





Mr. Guojun Wang and Ms. Ming Ma are husband and wife.





Involvement in Certain Legal Proceedings





None.





Code of Business Conduct and Ethics





We currently have a code of ethics that applies to our officers, employees and directors, including our Chief Executive Officer (i.e., our principal executive officer) and our Chief Financial Officer (i.e., our principal accounting officer and principal financial officer). A copy of the Code of Ethics is available on the Company’s website http://en.gywj.cn.





Section 16(a) Beneficial Ownership Reporting Compliance





Section 16(a) of the Securities Exchange Act of 1934, as amended, requires our directors and executive officers, and persons who beneficially own more than 10% of any class of our equity securities, who collectively we generally refer to as insiders, to file with the SEC initial reports of beneficial ownership and reports of changes in beneficial ownership of common stock and other equity securities of the Company.  Our insiders are required by SEC regulation to furnish us with copies of all Section 16(a) reports they file.  Based solely upon a review of the copies of the forms furnished to us, we believe that during the fiscal year ended June 30, 2012, our insiders complied with all applicable filing requirements, except that on March 19, 2012, Mr. Stephen Monticelli filed a late statement of changes in beneficial ownership on Form 4 for the purchase of a total of 2,000 shares of the common stock of the Company at $0.28 per share by indirect ownerships from the open market on March 13, 2012.





Corporate Governance





Board Leadership Structure.Our Board of Directors does not have a policy regarding the separation of the roles of Chief Executive Officer and Chairman of the Board, as the Board believes it is in the best interest of the Company to make that determination based on the position and direction of the Company and the membership of the Board.  In the future, we may allow two individuals to hold these two positions if the Board of Directors believes that it would be in the best interests of the Company and its stockholders.





Risk Management.The Company’s management is responsible for the day-to-day risk management of the Company.  Management reports to the Board of Directors on the material risks the Company faces when management determines that the Company’s risk profile materially changes.  The Board of Directors uses management’s reports to evaluate the Company’s exposure to risks in light of the Company’s business plan and growth strategies.  The Board of Directors primarily focuses on risks in the areas of operations, liquidity and regulatory changes and compliance, which the Board of Directors believes are the areas most likely to have a potential impact on the Company in a material way.







25


Consideration and Determination of Executive and Director Compensation.  The Board of Directors has the primary authority to determine our compensation philosophy and to establish compensation for our executive officers.  In establishing executive officer compensation, the Board of Directors uses its subjective evaluation of the executives’ performance and responsibilities, our overall performance and the Chief Executive Officer’s recommendations.  The Board of Directors has not used any compensation consultant in setting executive salaries, or in determining other components of executive compensation, nor does it seek formally to benchmark the compensation of our executive officers against compensation paid by other companies to their executives.





Management plays a significant role in the compensation-setting process.  The most significant aspects of management’s role are:




·  evaluating employee performance;
 ·  preparing information for meetings of the Board of Directors;
 ·  establishing business performance targets and objectives;
 ·  providing background information regarding the Company’s strategic objectives; and
 ·  recommending salary levels and equity awards.




Risk Management related to Compensation Policies and Practices.  We do not believe that our compensation policies and practices encourage excessive and unnecessary risk-taking, and that the level of risk that they do encourage is not reasonably likely to have a material adverse effect on the Company.  The design of our compensation policies and practices encourages our employees to remain focused on both our short- and long-term goals.





Board and the Board Committees:




Our Board of Directors currently consists of three members: Mr. Guojin Wang, Ms. Ming Ma and Mr. Dror Poleg. We do not have a standing nominating, audit or compensation committee. As a small public company, we believe that all of our directors acting together, as opposed to a subset of them acting by means of a committee, is the most efficient and effective framework for us to perform the functions otherwise associated with nominating, audit and compensation committees.




Nominating Committee Functions -- Our Board of Directors seeks to ensure that it is composed of members whose particular experience, qualifications, attributes, and skills, when taken together, will allow the Board of Directors to satisfy its oversight obligations effectively. Currently, the Company does not have a separate nominating committee. The Board of Directors as a whole is in charge of identifying and appointing appropriate persons to add to the Board of Directors when necessary. In identifying Board candidates it is the Board’s goal to identify persons whom it believes have appropriate expertise and experience to contribute to the oversight of a company of the Company’s nature while also reviewing other appropriate factors.  In evaluating a director candidate, our Board of Directors will review his or her qualifications including capability, availability to serve, conflicts of interest, general understanding of business, understanding of our business and technology, educational and professional background, personal accomplishment and other relevant factors. Our Board of Directors has not established any specific qualification standards for director nominees, although from time to time the Board of Directors may identify certain skills or attributes as being particularly desirable to help meet specific needs that have arisen. The Company believes that each of the persons that currently comprise its Board of Directors have the experience, qualifications and attributes and skills taken as a whole to enable the Board of Directors to satisfy its oversight responsibilities effectively. .




Audit Committee Functions-- Currently we do not have an audit committee.




Compensation Committee Functions--We do not have a compensation committee due to the small size of the board. Rather, the full Board of Directors participates in deliberations concerning executive compensation and establishes the compensation and benefit plans and programs of the Company. In establishing executive officer compensation, the Board of Directors uses its subjective evaluation of the executives’ performance and responsibilities, our overall performance and the Chief Executive Officer’s recommendations.  The Board of Directors has not used any compensation consultant in setting executive salaries, or in determining other components of executive compensation, nor does it seek formally to benchmark the compensation of our executive officers against compensation paid by other companies to their executives. We do not currently have a written compensation committee charter or similar document. Mr. Guojun Wang and Ms. Ming Ma are board members and also our employee. Their compensation was decided by the employment agreements they entered into with the Company before the business combination.







26


Independent Directors





Our Board has determined that Mr. Dror Poleg is an “independent director” within the meaning of applicable Nasdaq listing standards relating to Board composition and Section 301 of the Sarbanes-Oxley Act of 2002.





ITEM 11.  EXECUTIVE COMPENSATION.





Executive Compensation





The following table sets forth information concerning the annual compensation earned by our named executive officers for the periods specified.





Summary Compensation Table





Name and Principal Position

Fiscal Year Ended

June 30,

Salary

($)(1)


Bonus

($)

Stock Awards ($)

Option Awards ($)

Nonequity Incentive Plan Compensation ($)

Nonqualified Deferred Compensation Earnings ($)

All Other Compensation ($)

Total

($)Guojun Wang,

Chief Executive Officer

2011

$
45,249


$
4,525

-

-

-

-

-

$
49,7742012


47,220



4,722

-

-

-

-

-


51,942





(1)
The amounts shown in this table were paid in RMB and were translated into U.S. dollars at the rate of  0.1574 for 2012 and 0.1508 for 2011, which are the average 12 month exchange rates that the Company used in its audited financial statements for such years.




Employment Agreements with Named Executive Officers





V-Media has entered into an employment agreement with each of its executive employees.  Each agreement has a term of three years.  Except for salary and bonus, the terms of the agreements are substantially identical and reflect employment standards common in China.  Mr. Guojun Wang, our Chief Executive Officer, receives an annual salary of RMB 300,000 (approximately $47,220), less all applicable taxes and other appropriate deductions.  Mr. Wang is entitled to an annual bonus in an amount of 10% of his annual salary, which must be approved by the Company’s Board of Directors based on the Company’s results of operations.





Director Compensation





For the periods specified, Messrs. Poleg and Tse, each of them is paid a base fee of USD 10,000 per year. If a Board committee is established and they become a Chair, they will receive an additional USD 5,000 per year for a total of USD 15,000 in total compensation for the year.  Mr. Monticelli receives $2,500 per month as cash compensation, an annual grant of 33,333 shares of restricted stock of the Company which vests one year from the date of grant, and a warrant to purchase up to 50,000 shares of the Company’s common stock at an exercise price of $1.80 per share. On September 24, 2012, Mr. Monticelli submitted his resignation as an independent director of the Company.  On September 25, 2012, Mr. Tse submitted his resignation as an independent director of the Company.  In submitting their resignations, neither Mr. Monticelli nor Mr. Tse expressed any disagreement with the Company on any matter relating to the Company’s operations, policies or practices. Mr. Guojun Wang and Ms. Ming Ma did not receive compensation for their services as directors.







27


ITEM 12.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS.





Equity Compensation Plan Information





The Company does not maintain any equity compensation plans.





Security Ownership of Certain Beneficial Owners and Management





The following table sets forth information regarding the beneficial ownership of our Common Stock as of September 27, 2012 by (i) each person known by us to be the beneficial owner of more than 5% of our Common Stock, (ii) our directors, (iii) our named executive officers and (iv) our directors and executive officers as a group.





Beneficial ownership has been determined in accordance with the rules and regulations of the SEC and includes voting or investment power with respect to the shares. Unless otherwise indicated, the persons named in the table below have sole voting and investment power with respect to the number of shares indicated as beneficially owned by them.




Name and Address of Beneficial Owner

Common Stock Beneficially Owned(1)


Percentage of Common Stock  Owned (1)Five Percent Stockholders (other than directors and principal executive officer):Chuk Chung Fuk (2)


6,590,000



23.89
%China Reinv Partners, L.P.(3)


5,497,933



19.93
%Directors and Named Executive Officers:Guojun Wang (4)


6,850,000



24.83
%Hongwen Liu (4)


0



*Ming Ma (4)


3,317,600



12.02
%Dror Poleg (4)


0



*Feng Wan (4)


10,000



0.04
%Wei Wang (4)


30,000



0.11
%Directors and Executive Officers as a group (8 persons)


10,207,600



37.00
%


_______________





*           Less than 1%.







28


(1)
Applicable percentage ownership is based on 27,590,001 shares of common stock outstanding as of September 27, 2012. 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 that are currently issuable upon conversion or exercisable within 60 days of September 27, 2012, are deemed to be beneficially owned by the person holding such convertible securities or warrants for the purpose of computing the percentage of ownership of such person, but are not treated as outstanding for the purpose of computing the percentage ownership of any other person.





(2)
The address of this stockholder is Room 1105, 11/F., Tower 1, Lippo Center, No. 89 Queensway, Admiralty, Hong Kong.





(3)
Based on a Schedule 13G filed by the indicated holder.  The address of the indicated holder is c/o Oded Har-Even, Zysman Aharoni Gayer & Co./Sullivan & Worcester LLP, 1290 Avenue of the Americas, 29th Floor, New York, NY 10023 U.S.A.





(4)
The address of the indicated holder is c/o Golden Name Commercial Tower, Room 803, No. 68 Renming Road, Zhongshan District, Dalian, China 116001.








ITEM 13.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE.




Related Transactions




Amounts due to certain stockholders are as follows:




As of June 30,2012


2011Due to stockholdersMa, Ming

$
412,242


$
--Wang, Caiqin


118,050



116,038Wang, Guojun


64,482



42,259Total due to stockholders

$
594,774


$
158,297





The above stockholders listed are officers and directors of the Company.  Each of these stockholders provided funds for the Company’s operations and for advertising material and equipment purchase purposes. These amounts due are generally unsecured, non-interest bearing and due upon demand.





ITEM 14.  PRINCIPAL ACCOUNTING FEES AND SERVICES.





Audit Fees.  The aggregate fees billed by Friedman LLP for professional services rendered for the audit of our annual financial statements included in our Annual Report on Form 10-K and the reviews of the financial statements included in our quarterly reports on Form 10-Q totaled $140,000 for the fiscal year ended June 30, 2012 and $135,000 for the fiscal year ended June 30, 2011.





Audit-Related Fees. The aggregate fees billed by our independent accounting firm related to assurance and related services totaled $0 for the fiscal year ended June 30, 2012 and $0 for the fiscal year ended June 30, 2011.





Tax Fees. The aggregate fees billed by our independent accounting firm for professional services rendered for tax compliance, tax advice and tax planning totaled $0 for the fiscal years ended June 30, 2012 and  2011.





All Other Fees. The aggregate of all other fees for services provided by our independent accounting firm were $0 for the fiscal year ended June 30, 2012 and $0 for the fiscal year ended June 30, 2011.














29





PART IV




ITEM 15.  EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.





The following documents are filed as part of this report:





1.           Financial Statements





INDEX TO FINANCIAL STATEMENTS





Report of Registered Independent Public Accounting Firm


F-1Consolidated Balance Sheets


F-2Consolidated Statements of Income and Comprehensive Income


F-3Consolidated Statements of Equity


F-4Consolidated Statements of Cash Flows


F-5Notes to the Financial Statements


F-6





2.           Financial Statement Schedules





None.





3.           Exhibits





3.1
Articles of Incorporation (incorporated by reference to Exhibit 3.1 to the Company’s registration statement on Form SB2 filed on April 11, 2007).





3.2
Bylaws (incorporated by reference to Exhibit 3.1 to the Company’s registration statement on Form SB2 filed on April 11, 2007).





10.1
Agreement and Plan of Merger, dated December 8, 2009, among the Company and the certain parties listed therein (incorporated by reference to Exhibit 10.1 to the Company’s current report on Form 8-K filed on December 9, 2009).





10.2
Certificate of Designation of Series A Preferred Stock (incorporated by reference to Exhibit 10.2 to the Company’s current report on Form 8-K filed on December 9, 2009).





10.3
Exclusive Service Agreement dated November 6, 2009 among Dalian Guo-Heng, V-Media and its subsidiaries (incorporated by reference to Exhibit 10.3 to the Company’s current report on Form 8-K filed on December 9, 2009).





10.4
Call Option Agreement dated November 6, 2009 among Dalian Guo-Heng, V-Media, V-Media’s shareholders and subsidiaries (incorporated by reference to Exhibit 10.4 to the Company’s current report on Form 8-K filed on December 9, 2009).





10.5
Shareholders’ Voting Rights Proxy Agreement dated November 6, 2009 among Dalian Guo-Heng, V-Media and V-Media’s shareholders (incorporated by reference to Exhibit 10.5 to the Company’s current report on Form 8-K filed on December 9, 2009).





10.6
Equity Pledge Agreement dated November 6, 2009 among Dalian Guo-Heng, V-Media, V-Media’s shareholders and subsidiaries (incorporated by reference to Exhibit 10.6 to the Company’s current report on Form 8-K filed on December 9, 2009).








30








10.7
Form of Employment Agreement (incorporated by reference to Exhibit 10.7 to the Company’s current report on Form 8-K filed on December 9, 2009).^





10.8
Stock Purchase Agreement dated December 8, 2009, by and between the Company and the shareholders listed therein (incorporated by reference to Exhibit 10.13 to the Company’s current report on Form 8-K filed on December 9, 2009).





10.9
Cooperation Agreement between Vastitude (Beijing) Technology Co., Ltd. and Beijing Shidai Lianxin Cultural Propagation Co., Ltd., dated February 9, 2010 (incorporated by reference to Exhibit 10.1 to the Company’s current report on Form 8-K filed on March 5, 2010).





10.10
Cooperation Agreement between Dalian Vastitude Media Group Co., Ltd. and Liaoning Daily Newspaper Media Group Co., Ltd., dated February 10, 2010 (incorporated by reference to Exhibit 10.2 to the Company’s current report on Form 8-K filed on March 5, 2010).





10.11
Contract with Shanghai Vastitude Advertising & Media Co., Ltd. and Shanghai Haosheng Advertising Co., Ltd. (incorporated by reference to Exhibit 10.1 to the Company’s current report on Form 8-K filed on July 14, 2010) (English translation).14.1
Code of Ethics.21.1
Subsidiaries of the Registrant.31.1
Certification of Principal Executive Officer pursuant to Rule 13a-14(a).*31.2
Certification of Principal Financial Officer pursuant to Rule 13a-14(a).*32.1
Certification of Principal Executive Officer pursuant to 18 U.S.C. Section 1350.*32.2
Certification of Principal Financial Officer pursuant to 18 U.S.C. Section 1350.*99.1
Certificate of Ownership Merging V Media Corporation into China New Media Corp. dated July 17, 2012 (incorporated by reference to Exhibit 3.1 to the Company’s current report on Form 8-K filed on July 18, 2012).101
Interactive data files pursuant to Rule 405 of Regulation S-T: (i) the Balance Sheets at June 30, 2012 and June 30, 2011, (ii) the Statements of Operations and Comprehensive Income (Loss)  for the years ended June 30, 2012 and 2011, (iii) the Statements of Stockholders’ Equity for the years ended June 30, 2012 and 2011, (iv) Statements of Cash Flows for the years ended June 30, 2012 and 2011 and (v) the notes to the Financial Statements. **




* Filed herewith.









^ Indicates a management contract or compensatory plan or arrangement.







31








SIGNATURES







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





V Media CorporationDate:  September 27, 2012
By:
/s/ Guojun WangGuojun Wang

Chief Executive Officer








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








SIGNATURE

TITLE

DATE/s/ Guojun Wang

Chief Executive Officer and Chairman

September 27, 2012Guojun Wang

(principal executive officer)/s/ Hongwei Liu

Chief Financial Officer

September 27, 2012Hongwen Liu

(principal financial and accounting officer)/s/ Ming Ma

Director

September 27, 2012Ming Ma


32


Exhibit Index







3.1
Articles of Incorporation (incorporated by reference to Exhibit 3.1 to the Company’s registration statement on Form SB2 filed on April 11, 2007).





3.2
Bylaws (incorporated by reference to Exhibit 3.1 to the Company’s registration statement on Form SB2 filed on April 11, 2007).





10.1
Agreement and Plan of Merger, dated December 8, 2009, among the Company and the certain parties listed therein (incorporated by reference to Exhibit 10.1 to the Company’s current report on Form 8-K filed on December 9, 2009).





10.2
Certificate of Designation of Series A Preferred Stock (incorporated by reference to Exhibit 10.2 to the Company’s current report on Form 8-K filed on December 9, 2009).





10.3
Exclusive Service Agreement dated November 6, 2009 among Dalian Guo-Heng, V-Media and its subsidiaries (incorporated by reference to Exhibit 10.3 to the Company’s current report on Form 8-K filed on December 9, 2009).





10.4
Call Option Agreement dated November 6, 2009 among Dalian Guo-Heng, V-Media, V-Media’s shareholders and subsidiaries (incorporated by reference to Exhibit 10.4 to the Company’s current report on Form 8-K filed on December 9, 2009).





10.5
Shareholders’ Voting Rights Proxy Agreement dated November 6, 2009 among Dalian Guo-Heng, V-Media and V-Media’s shareholders (incorporated by reference to Exhibit 10.5 to the Company’s current report on Form 8-K filed on December 9, 2009).





10.6
Equity Pledge Agreement dated November 6, 2009 among Dalian Guo-Heng, V-Media, V-Media’s shareholders and subsidiaries (incorporated by reference to Exhibit 10.6 to the Company’s current report on Form 8-K filed on December 9, 2009).


10.7
Form of Employment Agreement (incorporated by reference to Exhibit 10.7 to the Company’s current report on Form 8-K filed on December 9, 2009).^
 
 10.8
Stock Purchase Agreement dated December 8, 2009, by and between the Company and the shareholders listed therein (incorporated by reference to Exhibit 10.13 to the Company’s current report on Form 8-K filed on December 9, 2009).
 
 10.9
Cooperation Agreement between Vastitude (Beijing) Technology Co., Ltd. and Beijing Shidai Lianxin Cultural Propagation Co., Ltd., dated February 9, 2010 (incorporated by reference to Exhibit 10.1 to the Company’s current report on Form 8-K filed on March 5, 2010).
 
 10.10
Cooperation Agreement between Dalian Vastitude Media Group Co., Ltd. and Liaoning Daily Newspaper Media Group Co., Ltd., dated February 10, 2010 (incorporated by reference to Exhibit 10.2 to the Company’s current report on Form 8-K filed on March 5, 2010).
 
 10.11
Contract with Shanghai Vastitude Advertising & Media Co., Ltd. and Shanghai Haosheng Advertising Co., Ltd. (incorporated by reference to Exhibit 10.1 to the Company’s current report on Form 8-K filed on July 14, 2010) (English translation).14.1
Code of Ethics.21.1
Subsidiaries of the Registrant.31.1
Certification of Principal Executive Officer pursuant to Rule 13a-14(a).*31.2
Certification of Principal Financial Officer pursuant to Rule 13a-14(a).*32.1
Certification of Principal Executive Officer pursuant to 18 U.S.C. Section 1350.*32.2
Certification of Principal Financial Officer pursuant to 18 U.S.C. Section 1350.*99.1
Certificate of Ownership Merging V Media Corporation into China New Media Corp. dated July 17, 2012 (incorporated by reference to Exhibit 3.1 to the Company’s current report on Form 8-K filed on July 18, 2012).101
Interactive data files pursuant to Rule 405 of Regulation S-T: (i) the Balance Sheets at June 30, 2012 and June 30, 2011, (ii) the Statements of Operations and Comprehensive Income (Loss)  for the years ended June 30, 2012 and 2011, (iii) the Statements of Stockholders’ Equity for the years ended June 30, 2012 and 2011, (iv) Statements of Cash Flows for the years ended June 30, 2012 and 2011 and (v) the notes to the Financial Statements. **
 
 * Filed herewith.
 
 ** To be filed by Amendment.
 
 ^ Indicates a management contract or compensatory plan or arrangement.




33
 
  
 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
   To the Board of Directors and Shareholder
 V Media Corporation
 (Formerly China New Media Corporation)
  We have audited the accompanying consolidated balance sheets of V Media Corporation (Formerly China New Media Corporation) and subsidiaries (the “Company”) as of June 30, 2012 and 2011, and the related consolidated statements of income and comprehensive income, equity, and cash flows for the years then ended. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.
  We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
  In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of June 30, 2012 and 2011, and the results of its operations and its cash flows for the years then ended in conformity with accounting principles generally accepted in the United States of America.
  /s/ Friedman LLPNew York, NYSeptember 27, 2012
    1700 BROADWAY, NEW YORK, NY 10019      T  212.842.7000        F  212.842.7001           WWW.FRIEDMANLLP.COM

OFFICES IN NEW YORK LONG ISLAND AND NEW JERSEY AND A MEMBER OF DFK WITH AFFILIATES WORLDWIDE
   F-1
 V MEDIA CORP. AND SUBSIDIARIES
 (FORMERLY CHINA NEW MEDIA CORPORTATION)
 CONSOLIDATED BALANCE SHEETS
 (IN US DOLLARS)
 As of June 30


As of June 302012


2011ASSETSCurrent assetsCash and cash equivalents

$
1,526,604


$
1,808,880Accounts receivable, net


4,960,911



5,395,698Advance to suppliers


413,883



619,582Prepaid expenses


-



189,759Loans receivable


2,099,493



1,761,139Other current assets


113,129



243,159Deferred tax assets


396,961



129,443Total current assets


9,510,981



10,147,660Property, equipment and construction in progress, net


23,204,841



18,867,352Other assetsBillboards use right, net


4,798,745



4,766,060Security deposits


2,043,750



1,955,343Equity investment


82,572



-Total other assets


6,925,067



6,721,403Total Assets

$
39,640,889


$
35,736,415LIABILITIES AND EQUITYCurrent liabilitiesShort term loans

$
11,035,314


$
11,603,746Current portion of long term loans


590,370



464,150Accounts payable


2,274,736



47,067Other payables


1,902,658



1,121,947Accrued expenses


21,533



491,997Deferred revenues


2,649,472



1,618,548Taxes payable


507,145



1,055,620Due to related parties


594,774



158,297Total current liabilities


19,576,002



16,561,372Long term loan-non current portion


363,060



-Total  Liabilities


19,939,062



16,561,372Commitments and contingenciesEquitySeries A Preferred Stock, $0.0001 par value, 20,000,000 shares authorized,1,000,000 shares issued and outstanding


100



100Common stock, $0.0001 Par value; 80,000,000 shares authorized;27,590,701 shares issued and outstanding


2,759



2,759Additional paid-in-capital


6,820,820



6,820,820Accumulated other comprehensive income


786,806



636,300Retained earnings


10,774,956



10,724,103Total V Media Corp. equity


18,385,441



18,184,082Noncontrolling interest


1,316,386



990,961Total equity


19,701,827



19,175,043Total Liabilities and Equity

$
39,640,889


$
35,736,415
     F-2
  V MEDIA CORP. AND SUBSIDIARIES
 (FORMERLY CHINA NEW MEDIA CORPORTATION)
 CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
 (IN US DOLLARS)
 For the years ended June 30,2012


2011Revenues

$
18,470,685


$
20,578,364Cost of revenue


(10,750,398
)


(8,976,950
)Gross profit


7,720,287



11,601,414Selling, general and administrative expenses


(6,586,810
)


(4,048,022
)Income  from operations


1,133,477



7,553,392Other income (expenses):Interest income


5,279



25,824Interest expense


(1,236,432
)


(815,103
)Loss from equity investment


(11,868
)


-Other income


718,984



29,158Other expenses


(23,544
)


(16,431
)Total Other income (expenses)


(547,581
)


(776,552
)Income before income taxes


585,896



6,776,840Income tax provision (benefit)Current


492,080



1,904,238Deferred


(265,273
)


(93,998
)Total income tax provision


226,807



1,810,240Net income


359,089



4,966,600Less: net income attribute to the noncontrolling interest


308,236



94,715Net income  attributable to V Media Corp.

$
50,853


$
4,871,885Net income


359,089



4,966,600Other comprehensive incomeForeign currency translation adjustments


167,695



541,729Comprehensive income


526,784



5,508,329Less: comprehensive income attributed to the noncontrolling interest


325,425



140,357Comprehensive income attributable to V Media Corp.

$
201,359


$
5,367,972Earnings per shareBasic

$
0.00


$
0.18Diluted

$
0.00


$
0.17Weighted average number of common sharesBasic


27,550,701



27,550,701Diluted


27,550,701



28,196,904
  F-3
  V MEDIA CORP. AND SUBSIDIARIES
 (FORMERLY CHINA NEW MEDIA CORPORTATION)
 CONSOLIDATED STATEMENTS OF EQUITY
 FOR THE YEARS ENDED JUNE 30, 2012 AND 2011
 Preferred Stock

Par value $0.0001


Common Stock

Par value $0.0001


Additional paid-in


Accumulated Other comprehensive


Retained


NoncontrollingShares


Amount


Shares


Amount


capital


income


earnings


Interest


TotalBalance at July 1, 2010


1,000,000



100



27,550,701



2,755



6,746,071



94,571



5,852,218



889,570



13,585,284Common stock issued for service


-



-



40,000



4



35,784



-



-



-



35,788Non-controlling interest acquisition


-



-



-



-



38,965



-



-



(38,965
)


-Net income


-



-



-



-



-



-



4,871,885



94,715



4,966,600Foreign currency translation gain


-



-



-



-



-



541,729



-



45,642



587,372Balance at June 30, 2011


1,000,000


$
100



27,590,701


$
2,759


$
6,820,820


$
636,300


$
10,724,103


$
990,961


$
19,175,043Net income for the period


-



-



-



-



-



-



50,853



308,236



359,089Foreign currency translation gain


-



-



-



-



-



150,506



-



17,189



167,695Balance at June. 30, 2012


1,000,000


$
100



27,590,701


$
2,759


$
6,820,820


$
786,806


$
10,774,956


$
1,316,386


$
19,701,827
    
  F-4
 V MEDIA CORP. AND SUBSIDIARIES
 (FORMERLY CHINA NEW MEDIA CORPORTATION)
 CONSOLIDATED STATEMENTS OF CASH FLOWS
 (IN US DOLLARS)
 For the years ended June 30,2012


2011CASH FLOWS FROM OPERATING ACTIVITIES:Net income

$
359,089


$
4,966,600Adjustments to reconcile net income to net cashprovided by operating activities:Depreciation and amortization


4,861,544



2,497,692Amortization of stock based compensation expense


24,804



35,788Loss from equity investment


11,868



-Provision for doubful accounts


197,736



288,575Deferred tax benefit


(265,273
)


(90,660
)Changes in operating assets and liabilitiesAccounts receivable


330,633



(2,009,171
)Other current assets


134,247



3,189,819Prepaid expenese


179,893Security deposit


(54,495
)


10,966Advance to suppliers


216,445



470,822Accounts payable


2,651,796



445,350Other payables


174,253



(2,550,342
)Accrued expenses


(490,701
)


(20,737
)Deferred revenues


1,002,852



(88,285
)Taxes payable


(566,783
)


(398,212
)Net cash provided by operating activities


8,767,908



6,748,205CASH FLOWS FROM INVESTING ACTIVITIES:Loan to third party


(2,414,293
)


-Proceeds from (repayment of) loans to third party


2,106,484



(1,717,895
)Equity investment


(94,440
)


-Acquisition of billboards use rights


(2,536,601
)


(1,409,700
)Purchase of property and equipment


(6,285,222
)


(6,461,668
)Net cash used in investing activities


(9,224,072
)


(9,589,263
)CASH FLOWS FROM FINANCING ACTIVITIES:Proceeds from short-term bank loans


11,035,314



12,224,325Repayment of short-term bank loans


(11,805,000
)


(8,270,284
)Proceeds (repayment) from related party loans


431,130



(300,155
)Proceeds from long term loans


1,217,326



-Repayment of long-term bank loans


(736,096
)


(754,588
)Net cash provided by financing activities


142,674



2,899,298EFFECT OF EXCHANGE RATE CHANGE ONCASH AND CASH EQUIVALENTS


31,214



78,624NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS


(282,276
)


136,864CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR


1,808,880



1,672,017CASH AND CASH EQUIVALENTS, END OF YEAR

$
1,526,604


$
1,808,881SUPPLEMENTAL CASH FLOW DISCLOSURESIncome taxes paid

$
1,298,242


$
2,462,752Interest paid

$
945,633


$
772,372
 F-5
 
  V-MEDIA CORPORATION AND SUBSIDIARIES
 (FORMERLY CHINA NEW MEDIA CORPORATION)
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
  NOTE 1 - ORGANIZATION AND BASIS OF PRESENTATION
 
 V Media Corp., (“the Company”), originally known as Golden Key International Inc. and formerly known as China New Media Corp., is a corporation organized under the laws of the State of Delaware in 1999.
 
 Effective July 17, 2012, the Company changed its name from China New Media Corp. to V Media Corporation through a short form merger pursuant to Section 253 of the General Corporation Law of the State of Delaware by merging a wholly owned subsidiary of the Company into the Company, with the Company as the surviving corporation in the merger.
  The Company, along with its subsidiaries and VIEs, is engage in the sales, construction and operations of outdoor advertising displays and other alternative media business.
 
 On December 8, 2009, Golden Key International Inc. acquired all of the outstanding capital stock of HongKong Fortune-Rich Investment Co., Ltd., a Hong Kong corporation (“Fortune-Rich ”), through V Media Corp., a Delaware corporation (the “Merger Sub”) wholly owned by the Company.  Fortune-Rich is a holding company whose only asset, held through a subsidiary, is 100% of the registered capital of Dalian Guo-Heng Management & Consultation Co., Ltd. (“Dalian Guo-Heng”), a limited liability company organized under the laws of the People’s Republic of China (“PRC”). Substantially all of the Fortune-Rich’s operations are conducted in China though Dalian Guo-Heng, and through contractual arrangements with several of Dalian Guo-Heng’s consolidated affiliated entities in China, including Dalian Vastitude Media Group Co., Ltd. (“V-Media”) and its subsidiaries. V-Media is an out-door advertising company headquartered in Dalian, the commercial center of Northeastern China.  As a result of these contractual arrangements, which obligate the Company to absorb a majority of the risk of loss from V-Media’s activities and entitle it to receive a majority of its residual returns. In addition, V-Media Group 's shareholders have pledged their equity interest in V-Media Group to Dalian Guo-Heng, irrevocably granted Dalian Guo-Heng an exclusive option to purchase, to the extent permitted under PRC law, all or part of the equity interests in V-Media Group and agreed to entrust all the rights to exercise their voting power to the person(s) appointed by Dalian Guo-Heng. Through these contractual arrangements, the Company and Dalian Guo-Heng hold all the variable interests of V-Media Group, and the Company and Dalian Guo-Heng have been determined to be the most closely associated with V-Media Group. Therefore, the Company is the primary beneficiary of V-Media Group. Based on these
  
 F-6
  NOTE 1 - ORGANIZATION AND BASIS OF PRESENTATION (Continued)
  contractual arrangements, the Company believes that V-Media Group should be considered as a Variable Interest
 
 Entity (“VIE”)  under Accounting Standards Codification (“ASC”) 810 (“Consolidation”), because the equity investors in V-Media Group do not have the characteristics of a controlling financial interest and the Company through Dalian Guo-Heng is the primary beneficiary of V-Media Group.
 
 In connection with the acquisition, Merger Sub issued 10 shares of the common stock of the Merger Sub which constituted the 10% ownership interest in the Merger Sub and 1,000,000 shares of Series A Preferred Stock of the Company to the shareholders of Fortune-Rich, in exchange for all the shares of the capital stock of Fortune-Rich (the “Share Exchange” or “Merger”). The 10 shares of the common stock of the Merger Sub were converted into approximately 26,398,634 shares of the common stock of the Company so that upon completion of the Merger, the shareholders of Fortune-Rich own approximately 96 % of the common stock of the Company. As a result of the above-mentioned transactions, the shareholders of Fortune-Rich and persons affiliated with V-Media own securities that represent 96% of the equity in the Company.
 
 The acquisition was accounted for as a reverse merger under the purchase method of accounting since there was a change of control. Accordingly, Hong Kong Fortune-Rich Investment Co., Ltd. and its subsidiaries will be treated as the continuing entity for accounting purposes.
 
 As part of the merger, the Company’s name was changed from “Golden Key International, Inc.” to “China New Media Corp.”
 
 
  F-7
 
 V-MEDIA CORPORATION AND SUBSIDIARIES
 (FORMERLY CHINA NEW MEDIA CORPORATION)
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
  NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
  Principles of Consolidation
  The accompanying consolidated financial statements include the accounts of V Media Corp., its subsidiary, Fortune-Rich and its wholly-owned subsidiary Dalian Guo-Heng, as well as Dalian Guo-Heng’s variable interest entity, V-Media Group. The noncontrolling interests represent the minority stockholders’ interest in V-Media Group’s majority owned subsidiaries. All significant inter-company balances and transactions have been eliminated in consolidation.
 
 Use of Estimates
  In preparing the consolidated financial statements in conformity with accounting principles generally accepted in the United States of America, management makes estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the dates of the consolidated financial statements, as well as the reported amounts of revenues and expenses during the reporting years. Significant estimates, required by management, include the recoverability of long-lived assets and the valuation of outstanding warrants and allowance of doubtful accounts.  Actual results could differ from those estimates.
 
 Cash and Cash Equivalents
  Cash and cash equivalents include cash on hand and demand deposits with a bank with an original maturity of less than three months. Since a majority of the bank accounts are located in PRC, those bank balances are uninsured.
 
 Accounts Receivable
 
 Accounts receivable are recorded at net realizable value consisting of the carrying amount less an allowance for uncollectible amounts, as needed.
 
 The Company uses the aging method to estimate the allowance for anticipated uncollectible receivable balances. Under the aging method, bad debt percentages determined by management based on historical experience as well as current economic climate are applied to customers’ balances categorized by the number of months the underlying invoices have remained outstanding. The allowance is adjusted to the amount computed as a result of the agingmethod. If facts subsequently become available to indicate that the allowance provided requires an adjustment, then the adjustment will be classified as a change in estimate. The allowance for doubtful accounts totaled $488,723 and $286,027 as of June 30, 2012 and June 30, 2011, respectively. Accounts are written off only after exhaustive collection efforts.
   
 F-8
 
 V-MEDIA CORPORATION AND SUBSIDIARIES
 (FORMERLY CHINA NEW MEDIA CORPORATION)
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
  
 NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
  Advance to suppliers
  The Company periodically makes advances to certain vendors for purchases of advertising materials and equipment and records those advances as advance to suppliers. Historically, the Company has not experienced any losses as a result of these advances.
 
 Property, Equipment and Construction in Progress
 
 Property and equipment are stated at cost less accumulated depreciation. Expenditures for maintenance and repairs are charged to earnings as incurred while additions, renewals and betterments are capitalized. When property and equipment is retired or otherwise disposed of, the related cost and accumulated depreciation are removed from the respective accounts, and any gain or loss is included in operations. Depreciation of property, plant and equipment is provided using the straight-line method for substantially all assets with estimated lives as follows:
 
 Estimated

Useful Life

Residual

valueBuilding
15 years


5%Improvement of the building
5 years


0%Advertising equipment
4-15 years


5%Transportation
7 years


5%Office equipment and furniture
5 years


5%
 
 Construction in progress represents direct costs of construction or acquisition and design fees incurred. Capitalization of these costs ceases and the construction in progress is transferred to plant and equipment when substantially all the activities necessary to prepare the assets for their intended use are completed. No depreciation is provided until it is completed and ready for intended use.
 
 Impairment of long-lived assets
  Long-lived assets, which include property, plant and equipment, billboard use right and intangible assets, are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of long-lived assets to be held and used is measured by a comparison of the carrying amount of an asset to the estimated undiscounted future cash flows expected to be generated by the assets. If the carrying amount of an asset exceeds its estimated undiscounted future cash flows, an impairment charge is recognized by the amount by which the carrying amount of the asset exceeds the fair value of the assets. Fair value is generally determined using the asset’s expected future discounted cash flows or market value, if readily determinable. No impairment loss has been recorded for the years ended June 30, 2012 and 2011.
   F-9
 
 V-MEDIA CORPORATION AND SUBSIDIARIES
 (FORMERLY CHINA NEW MEDIA CORPORATION)
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
  NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
 
 
 Deferred revenues
 
 Deferred revenues represent cash received in advance from customers according to the contracts for advertising service fees, advertisement production and sponsorship fees. These advances are usually refundable to the customers if the Company is unable to deliver the advertising services. Deferred revenues are recognized as income when services are provided based on the terms of the contracts.
 
 Revenue recognition
 
 The Company recognizes revenues when advertisements are posted over respective contractual terms based on the schedules agreed with customers and collections are reasonably assured. Payments received in advance of services provided are recorded as deferred revenues.
 
 Cost of revenues
 
 Cost of advertising services consists primarily of media costs payable under exclusive advertising agreements, depreciation of advertising equipment and amortization of billboards use right, business taxes and surcharges and other direct operating costs. Media costs are expensed as incurred.
  Foreign currency translation
 
 The Company and Fortune-Rich use the United States dollar (“US Dollars”) for financial reporting purposes. The Company, Dalian Guo-Heng and Dalian Vastitute Group maintain their books and records in the currency of Renminbi (“RMB”), being the primary currency of the economic environment in which their operations are conducted.
 
 For financial reporting purposes, RMB has been translated into United States dollars ("USD") as the reporting currency. Assets and liabilities are translated at the exchange rate in effect at the balance sheet date. Revenues and expenses are translated at the average rate of exchange prevailing during the reporting period. Translation adjustments arising from the use of different exchange rates from period to period are included as a component of stockholders' equity as "Accumulated other comprehensive income". Gains and losses resulting from foreign currency translations are included in accumulated other comprehensive income. There is no significant fluctuation in exchange rate for the conversion of RMB to USD after the balance sheet date.
 
 Income Taxes
 
 The Company recognized deferred tax assets and liabilities based upon the expected future tax consequences of events that have been included in the financial statements or tax returns.  Under this method, deferred income taxes are recognized for the tax consequences in future years of differences between the tax bases of assets and liabilities and their financial reporting amounts at each period end based on enacted tax laws and statutory tax rates applicable to the periods in which the differences are expected to affect taxable income. Valuation allowances are established, whenever necessary, against net deferred tax assets when it is more likely than not that some portion or all of the deferred tax asset will not be realized.
 
   F-10
 
 V-MEDIA CORPORATION AND SUBSIDIARIES
 (FORMERLY CHINA NEW MEDIA CORPORATION)
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
  NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
 
 Equity Method Investment
 
 The Company uses the equity method to account for its investment with ownership interest between 20% and 50% because it has significant influence but not control. Under the equity method, the Company recognizes its initial investment at cost and subsequently recognizes in earnings its proportionate share of the income or loss of the investee.
 
 Fair Value of Financial Instruments
 
 The Company follows the provisions of Accounting Standards Codification (“ASC”) 820, “Fair Value Measurements and Disclosures.” ASC 820 clarifies the definition of fair value, prescribes methods for measuring fair value, and establishes a fair value hierarchy to classify the inputs used in measuring fair value as follows:
 
 Level 1-Observable inputs such as unadjusted quoted prices in active markets for identical assets or liabilities available at the measurement date.
 
 Level 2-Inputs other than quoted prices that are observable for the asset or liability in active markets, quoted prices for identical or similar assets and liabilities in markets that are not active, inputs other then quoted prices that are observable, and inputs derived from or corroborated by observable market data.
 
 Level 3-Inputs are unobservable inputs which reflect managements’ own assumptions.
 
 The carrying amounts of certain financial instruments, including accounts receivable, advances to suppliers, other receivable, accounts payable, taxes payable, other payables, accrued expenses, deferred revenue, short-term capital lease obligations and short-term borrowing approximate their fair value due the short-term nature of these items. The carrying amount of the Company’s long-term capital lease obligations approximates the fair value based on the Company's expected borrowing rate for financial instruments with similar remaining maturities and comparable risk in market.
 
 Stock-Based Compensation
 
 The Company measures compensation expense for its non-employee stock-based compensation under ASC 718, “Compensation- Stock Compensation”.  The fair value of the stock issued is used to measure the transaction, as this is more reliable than the fair value of the services received.  Fair value of stock is measured as the value of the Company’s common stock on the date that the commitment for performance by the counterparty has been reached or the counterparty’s performance is complete.  The warrants are valued by “Black-Scholes Option Valuation Model”. The fair value of the equity instrument is charged to prepaid compensation expense and additional paid-in capital and later amortized along with passage of service period.
 
 Earnings per Share
 
 The Company computes earnings per share (“EPS’) in accordance with ASC 260, “Earnings per share.” ASC 260 requires companies with complex capital structures to present basic and diluted EPS.  Basic EPS is measured as net income divided by the weighted average common shares outstanding for the period.  Diluted EPS is similar to basic EPS but presents the dilutive effect on a per share basis of potential common shares (e.g., convertible securities, options and warrants) as if they had been converted at the beginning of the periods presented, or issuance date, if later.  Potential common shares that have an anti-dilutive effect (i.e., those that increase income per share or decrease loss per share) are excluded from the calculation of diluted EPS.
 
 Concentrations of Business and Credit Risk
 
 The Company maintains certain bank accounts in the PRC, which are not protected by FDIC insurance or other insurance. The Company’s operations are carried out in the PRC. Accordingly, the Company’s business, financial condition and results of operations may be influenced by the political, economic and legal environments in the PRC and the general state of the PRC’s economy.
 
 
 F-11
 
 V-MEDIA CORPORATION AND SUBSIDIARIES
 (FORMERLY CHINA NEW MEDIA CORPORATION)
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 
 NOTE 2- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
 
 The Company’s operations in the PRC are subject to specific considerations and significant risks not typically associated with companies in the North America and Western Europe. The Company’s operating results may be adversely affected by changes in governmental policies with respect to laws and regulations, anti-inflationary measures, currency conversion and remittance abroad, and rates and methods of taxation, among other things.
 
 Reclassification
 
 Certain prior year amounts have been reclassified to conform to the current period presentation. The sale-leaseback transaction disclosed in the previous Forms 10Q (December and March) has been reclassified as a long-term loan to accurately reflect the transaction substance. These reclassifications had no material effect on reported total assets, liabilities, stockholders' equity or net income.
 
 Recent Accounting Pronouncements
 
 The Company’s management does not believe that any recently issued, but not yet effective, accounting standards, if currently adopted, will have a material effect on the Company’s condensed consolidated financial position, results of operations, or cash flows.
  NOTE 3 - LOANS RECEIVABLE
 
 The loans receivable include the following:
  June 30,

2012


June 30,

2011a)

Dalian Qianbaihe Cloth Accessories Co.

$
103,884


$
-b)

Feiyue International Trade


214,064



-c)

Dalian Tianjun Trade Co.


1,259,200



928,300d)

Rongbang New Energy Resources Technology co.


-



832,839e)

Rongfu Auto Parts Co.


31,232



-f)

Dalian Digital Media Co.


40,731



-g)

Beijing Cross-Strait Publishing Exchange Center


47,220



-h)

Others


403,161



-Total loans receivable

$
2,099,493


$
1,761,139
 
  a) The Company made a non-interest bearing loan of $0.1million (RMB 0.66 million) to Dalian Qianbaihe Cloth Accessories Co.on April 30, 2012. The loan is expected to be paid back by December 31, 2012.
  b) The Company made a non-interest loan of $0.21 million (RMB 1.36 million) to Feiyue International Trade Co. The loan was repaid during July, 2012.
  c) The Company made two loans to Dalian Tianjun Trade Co.: (1) One-year term loan from June 10, 2011 to June 9, 2012 in the amount of $0.94 million (RMB 6 million) at a fixed interest rate of 10% per annum. Dalian Tianjun Trade Co. repaid $0.15 million (RMB1 million) as of June 30, 2012, with the remaining balance of $0.79 million (RMB 5 million) renewed for another year from June 10, 2012 to June 9, 2013 at a fixed interest rate of 10% per year. (2) One-year term loan from December 29, 2011 to December 28, 2012 in the amount of $0.47 million (RMB 3 million) at a fixed interest rate of 10% per annum.
  d) The Company made two loans to Rongbang New Energy Resources: one is a $0.04 million loan (RMB 0.38 million), and another is $0.79 million loan (RMB 5 million) for one year from April 27, 2011 to April 26, 2012 at fixed interest rate of 10% per annum. Both loans were repaid as of June 30, 2012.
  e) The Company made a non-interest bearing loan of $0.03million (RMB 0.2 million) to Rongfu Auto Parts Co. on January 15, 2012 which is due on January 14, 2013.
    F-12
 V-MEDIA CORPORATION AND SUBSIDIARIES
 (FORMERLY CHINA NEW MEDIA CORPORATION)
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
  NOTE 3 - LOANS RECEIVABLE (continued)
  f) The Company made a non-interest bearing loan of $0.04million (RMB 0.26 million) to Dalian Digital Media Co,
 on June 30, 2012. The loan is due on demand and bears no interest.
  g) The Company loaned $0.05 million (RMB 0.3 million) to Beijing Cross-Strait publishing exchange center on November 20, 2011 which is due on November 19, 2012 with no interest.
  h) The Company made various loans of $0.4 million (RMB 2.54 million) to unrelated parties during the year ended June 30, 2012. $8,500 was repaid during July, 2012.
 
 NOTE 4 - MAJOR SUPPLIERS
 
 During the year ended June 30, 2012, three major suppliers provided approximately 76% of the Company’s purchase of raw materials, with each supplier accounted for 27%, 26% and 23% respectively. For the year ended June 30, 2011, one major supplier provided 27% of the Company’s purchase of raw materials.
  NOTE 5 - PROPERTY, EQUIPMENT AND CONSTRUCTION IN PROGRESS, NET
 
 Property, equipment and construction in progress consist of the following:
 
 June 30, 2012


June 30, 2011Advertising equipment

$
26,034,266


$
20,950,906Office equipment and furniture


667,417



518,763Office building and Improvement


438,097



355,048Transportation


1,498,251



1,338,611Subtotal


29,350,311



23,163,328Less: Accumulated depreciation


(8,536,303
)


(6,217,911
)Construction in progress


3,103,112



1,921,935Total

$
23,204,841


$
18,867,352
 
 Depreciation expense totaled $2,274,967 and $1,561,413 for the years ended June 30, 2012 and 2011, respectively. Approximately $18.1 million of advertising equipment was pledged as a guarantee against short term loans as of June 30, 2012.
 
 Construction in progress mainly consists of billboards and other outdoor advertising platforms.
 
 NOTE 6 - SECURITY DEPOSITS
 
 Security deposits are mainly comprised of deposits made to third parties to guarantee the Company’s outstanding loans (see Note 9 and 10).
   
 F-13
 
 V-MEDIA CORPORATION AND SUBSIDIARIES
 (FORMERLY CHINA NEW MEDIA CORPORATION)
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 NOTE 7 - EQUITY INVESTMENT
 
 On August 18, 2011, the Company obtained a 20% interest in Letian Net (“Letian”) after the entire consideration totaling $94,440 (RMB 600,000) was deposited to a designated bank account of the Company's subsidiary – Dalian Vastitude Network Technology Co., Ltd. on December 31, 2011. Under the equity method of accounting of the 20% loss in the equity of Letian of $11,868 was recognized for the year ended June 30, 2012. Letian is an online advertising platform in Dalian, the PRC.
 
 NOTE 8 - BILLBOARDS USE RIGHT
 
 The Company makes advance payments for the right to construct advertising equipment and post advertisements in certain locations in the PRC, based on long-term contracts with local government authorities or other business entities. These payments are recorded as billboards use right and amortized on a straight-line basis over the contract terms.
 
 The Company leases a billboard use right at Times Square in New York under non-cancellable operating leases. The Company recognizes expense on a straight-line basis over the term of the lease. The Company has entered into a one-year lease agreement commencing March 1, 2012,   paid the first nine months and is liable to pay the balance of $0.84 million in October 2012. As of June 30, 2012, there was no revenue generated from this billboard.
  Amortization of billboard use rights for the year ended June 30, 2012 and 2011 was $2,586,578, and $1,083,412, respectively.
 
 The projected amortization expense as of June 30, 2012 attributed to future years is as follows:
  Years ending June 30,2013

$
1,988,6662014


801,8712015


484,5262016


341,0152017


305,457Thereafter


877,210$
4,798,745
  The following is a schedule by year for future minimum payments under the billboard use right agreements at June 30, 2012:
 
 Years ending June 30,

Payment2013

$
2,004,1652014


1,617,4512015


600,3722016


55,090$
4,277,078
   F-14
 V-MEDIA CORPORATION AND SUBSIDIARIES
 (FORMERLY CHINA NEW MEDIA CORPORATION)
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
  NOTE 9 - SHORT TERM LOANS
 
 The short term loans include the following:
 
 June 30, 2012


June 30, 2011a) Loan payable to Harbin Bank

$
-


$
928,300b) Loans payable to Shanghai Pudong Development Bank


2,518,400



2,475,466c) Loan payable to Dalian Bank Xigang Branch


1,574,000



1,547,166d) Loan payable to Industrial and Commercial Bank of China


283,320



-e) Loan payable to Jinzhou Bank


-



2,320,749f) Loans payable to Industrial Bank


-



1,083,016g) Loans payable to Jilin Bank


2,833,200



2,320,749h) Loan payable to Dalian Bank Shenyang Branch


944,400



928,300i) Loan payable to Dalian Bank Shanghai Branch


472,200



-j) Loan payable to Yinkou Bank


944,000



-k) Loan payable to China Merchant bank


944,000



-l) Loan payable to various unrelated parties


520,994



-Total short term loans

$
11,035,314


$
11,603,746
 
 a) Loan payable to Harbin Bank had a one-year term from May 9, 2011 to May 8, 2012 at a variable interest rate of 7.57% per year. The loan was repaid as of June 30, 2012.
 
 b) Loan payable to Shanghai Pudong Development bank consists of two loans. One is an original one-year term loan from November 15, 2010 to November 15, 2011 with the amount of RMB 6,000,000 (approximately $952 thousand) at a fixed interest rate of 7.57% per year. This loan has been renewed from November 22, 2011 to November 21, 2012 at a variable interest rate of 8.528% per year. The Company pledged a real estate property owned by the Company’s major Stockholder. The other loan is a one-year term loan due on June 15, 2012 in the amount of RMB 10,000,000 (approximately $1.57 million) at a variable interest rate of 8.203% per year. The loan has been renewed from June 18, 2012 to June 14, 2013. This loan has been guaranteed by an unrelated company, Union Chuangye Guaranty Company. The Company pledged part of its advertising equipment with the value of RMB 20.4 million (approximately $3.2 million).
   F-15
 V-MEDIA CORPORATION AND SUBSIDIARIES
 (FORMERLY CHINA NEW MEDIA CORPORATION)
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
  NOTE 9 - SHORT TERM LOANS (Continued)
 
 c) Loan payable to Dalian Bank Xigang Branch had an original one-year term from March 14, 2011 to March 11, 2012 at a variable interest rate of 5.56% at June 30, 2011. This loan has been repaid and a new loan has been borrowed with one year term from March 27, 2012 to March 26, 2013 at a variable interest rate of 9.184% per year. This loan has been guaranteed by an unrelated company, Dalian Huanbohai Development Credit Guaranty Company. The Company also pledged part of its advertising equipment with the value of RMB18.26 million (approximately $2.9 million).
 
 d) Loan payable to Industrial and Commercial Bank of China is a one-year term loan from September 28, 2011 to August 21, 2012 at a fixed interest rate of 7.872% per year. The Company pledged a real estate property owned by the Company’s major Stockholder. The loan has been paid off on August 21, 2012.
 
 e) Loan payable to Jinzhou Bank was a one-year term loan from April 21, 2010 to April 20, 2011 at a fixed interest rate of 8.20% per year. The loan had been renewed for another year from May 3, 2011 to April 20, 2012 at a fixed interest rate of 8.20% per year. This loan has been guaranteed by the Company’s major Stockholders Mr. Guojun Wang and Ms. Ming Ma. The Company pledged part of its advertising equipment with the value of RMB17,000,000 (approximately $2.7 million). This loan has been repaid in April 2012.
 
 f) Loan payable to Industrial Bank was a one-year term loan from July 20, 2010 to July 19, 2011 in the amount of RMB 7,000,000 (approximately $1.1 million) at a variable interest rate of 6.11% per year. This loan has been repaid on July 19, 2011.
 
 g) Loan payable to Jilin Bank consists of two loans. One loan is a one-year term loan from May 6, 2011 to May 4, 2012 in the amount of RMB 5,000,000 (approximately $0.8 million) at a variable interest rate of 8.528% per year. The other loan is a one-year term loan from May 9, 2011 to May 8, 2012 in the amount of RMB 10,000,000 (approximately $1.6 million) at a variable interest rate of 8.528% per year. In May, the Company had negotiated to renew the two loans and changed the amount to RMB 3,000,000 (approximately $0.47 million) and RMB 15,000,000 (approximately $2.36 million). The new due date is May 9, 2013. The two loans have been guaranteed by an unrelated company, Dalian Enterprise Credit Guaranty Co., Ltd. The Company also pledged part of its advertising equipment with the approximate value of RMB 43,408,300 (approximately $6.9 million).
 
 h) Loan payable to Dalian Bank Shenyang Branch was a one-year term loan from June 10, 2011 to June 8, 2012 at a variable interest rate of 8.52% per year. ) The loan was renewed on a one-year term loan from June 6, 2012 to June 5, 2013 at a variable interest rate of 8.856% per year  These loans have been guaranteed by Dalian Vastitude Media Group Co., Ltd.
 
 i) Loan payable to Dalian Bank Shanghai Branch is an eleven-month term loan from December 29, 2011 to November 28, 2012 at a floating interest rate of 9.184% per year. This loan has been guaranteed by Dalian Vastitude Media Group Co., Ltd.
 
 j) Loan payable to Yinkou bank is one-year term loan from June 29, 2012 to June 28, 2013 at a floating interest rate of 8.203% per year. This loan has been guaranteed by Zhongqing Union Credit Guarantee (Dalian) Corporation
 
 k) Loan payable to China Merchant bank is one-year term loan from May 24, 2012 to May 24, 2013 at a fixed interest rate of 8.528% per year. The Company also pledged part of its advertising equipments for this loan.
  l) The Company entered into loans for $520,994 (RMB 3.3 million) from outside unrelated parties in June 2012, which are due on demand and bear no interest.
 
 
 F-16
 
 V-MEDIA CORPORATION AND SUBSIDIARIES
 (FORMERLY CHINA NEW MEDIA CORPORATION)
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 
 NOTE 10 - LONG TERM LOAN
  Long term loans consist of following:
  As of June 30, 2012


As of June 30, 2011Long term loan-ORIX leasing (a)

$
953,430


$
-Long term loan-Dalian Bank  (b)


-



461,150Subtotal:


953,430



461,150Less: current portion


(590,370
)


(461,150
)Long term loan- noncurrent portion

$
363,060


$
-
 
 (a): On December 29, 2011, V-Media Group’s subsidiary Shenyang and Beijing subsidiaries entered into loan agreements with ORIX finance leases (China) Co., Ltd. (“ORIX Leasing”) pursuant to which Shenyang and Beijing borrowed $0.64 million (RMB 4.1 million) and $0.55 million (RMB 3.5 million) from ORIX leasing and pledged its advertising equipment with the approximate value of RMB $0.99 million (RMB6.26 million) and $0.85 million (RMB5.37 million), respectively. These loans are paid on a monthly basis over a two-year period and consist of a fixed payment based upon a 24-month amortization of the purchase price plus an interest component that varies based upon the rate announced from time to time by the People’s Bank of China for two-year loans. At June 30, 2012, the monthly payment under the agreement for Shengyang and Beijing were $0.03 million (RMB 181,309) and $0.02 million (RMB 155,410) respectively, which including an interest component calculated at the rate of 6.65%.
  In the Company’s previous Form 10Q, this transaction was disclosed under Note 12 as a sale-leaseback transaction; management reclassified it as a long-term loan at June 30, 2012, to reflect the substance of the transaction.  This reclassification had no significant effect on the Company’s consolidated financial position and results of operations.
 
 Future payments of the loan are as follows:
  Year ending June 30,

Payment2013

$
590,3702014


363,060Total

$
953,430
 
 b) Loan payable to Dalian Bank matured on June 25, 2012 and carried a variable interest rate of 4.95% at June 30, 2011. This loan has been guaranteed by an unrelated company, Dalian Enterprise Credit Guaranty Company. The loan has been paid off as of June 30, 2012.
  NOTE 11 - OTHER INCOME
 
 Since one of the Company’s subsidiaries is located in a special economic development zone in Dalian city, the Company received a special tax refund of $718,984 from the local government as a subsidy income for the year ended June 30, 2012.
 
 NOTE 12 - RELATED PARTY TRANSACTIONS
 
 Amounts due to related parties are as follows:
 
 June 30,

2012


June 30,

2011Wang, Caiqin

$
118,050


$
116,038Ma, Ming


412,242



-Wang, Guojun


64,482



42,259Total

$
594,774


$
158,297
 
 The above stockholders provide funds for the Company’s operations for advertising material and equipment purchase. These amounts due are generally unsecured, non-interest bearing and due upon demand.
 
 
 F-17
 
 V-MEDIA CORPORATION AND SUBSIDIARIES
 (FORMERLY CHINA NEW MEDIA CORPORATION)
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
  NOTE 13 - STOCKHOLDERS’ EQUITY
 
 (1) Preferred Stock
  In conjunction with the reversed merger on December 8, 2009, the Company issued 1,000,000 shares of Series A preferred stock, which have an aggregate voting power of 40% of the combined voting power of the entire Company’s shares, Common Stock and Preferred Stock as long as the Company is in existence. These preferred shares are not convertible into common shares of the Company and are not freely traded in the market. The preferred shares also do not contain any dividend right, liquidation preference right, redemption right or preemptive right.
 
 (2) Issuance of Stocks
 
 On March 26, 2011, the Company granted 40,000 restricted shares of its common stock, which should be vested one year from the date of issue to its employee in consideration for services rendered from February 19, 2010. The fair value of the awards is measured based on the grant date stock price of $0.42 per share with an aggregate amount of $16,800. The amortization of share-based compensation expense was $12,932 and $ 3,868 for the years ended June 30, 2012 and 2011, respectively.
 
 On March 7, 2011, the Company appointed Mr. Stephen Monticelli as an independent director of the Company. Mr. Monticelli will receive an annual grant of 33,333 restricted shares of its common stock which will be vested one year from the date of the grant. The fair value of the awards is measured based on the grant date stock price of $0.52 per share with an aggregate amount of $17,333. The amortization of share-based compensation expense was $11,872 and $5,461for the years ended June 30, 2012 and 2011, respectively.
 
 (3) Warrants
 
 On November 23, 2009, prior to and in conjunction with the Merger, Fortune-Rich entered into a Securities Purchase Agreement (“SPA”) with an institutional investor and pursuant to the SPA, Fortune-Rich issued 10,415,000 shares of its common stock in exchange for $3,500,000 in cash. These shares of Fortune-Rich were convertible into 5,497,933 shares of the common stock of the Company upon completion of the Merger mentioned above. In addition, the investor was entitled to receive 6,249,000 warrants of Fortune-Rich, which were exchanged for 3,298,760 warrants of the Company upon the completion of the Merger with an exercise price of 0.95. These warrants are exercisable immediately for the same number of common shares of the Company.
 
 The warrants, which were assumed by the Company upon the Merger, expire in four years. The warrants issued in connection with the Merger meet the conditions for equity classification pursuant to ASC 815, “Derivatives and Hedging”; therefore, these warrants were classified as equity and included in Additional Paid-in Capital.
    F-18
 
 V-MEDIA CORPORATION AND SUBSIDIARIES
 (FORMERLY CHINA NEW MEDIA CORPORATION)
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 NOTE 13 - STOCKHOLDERS’ EQUITY (continued)
 On March 7, 2011, the Company granted its independent director, Stephen Monticelli warrants to purchase up to 50,000 shares of the Company’s common stock at an exercise price of $1.80 per share. The Warrant Shares for the first year (up to an aggregate total of 16,666 shares) will be vested following a full year of service as a Non-Executive Director. The Warrant Shares for the second year (up to an aggregate total for years one and two of 33,333 shares) will be vested following a second full year of service as a Non-Executive Director. The Warrant Shares for years three through five (up to an aggregate total for all five years of 50,000 shares) will be vested following the third full year of service as a Non-Executive Director.
 
 The fair value of warrants granted was estimated at the date of grant using the Black-Scholes option-pricing model with the following assumptions: expected life 4.19 years, expected volatility 197%, dividend yield 0.00%, risk free interest rate 0.83% and the exercise price of $1.8. The fair value of the warrants to the director was $18,988 at the grant date. There were no estimated forfeitures as the Company has a short history of issuing options. Related stock compensation expenses recognized were $11,872 and $-0- for the years ended June 30, 2012 and 2011, respectively.
 
 The following is a summary of the status of warrant activities for the years ended June 30, 2012 and 2011:
 
 Warrants

Weighted Average

Exercise

Average Remaining

Average IntrinsicOutstanding

Price

Life in years

ValueOutstanding, June 30, 2010
3,298,760

$
0.95

2.40

-Granted
50,000

$
1.80

4.69

-Forfeited
-


-

-

-Exercised
-


-

-

-Outstanding, June 30, 2011
3,348,760

$
0.96

2.40

-Exercisable, June 30, 2011
3,298,760

$
0.95

2.40

-Outstanding, June 30, 2011
3,348,760

$
0.96

2.40

-Granted
-


-

-

-Forfeited
-


-

-

-Exercised
-


-

-

-Outstanding, June 30, 2012
3,348,760

$
0.96

1.45

-Exercisable, June 30, 2012
3,315,426

$
0.95

1.43

-
 
   
 F-19
 
 V-MEDIA CORPORATION AND SUBSIDIARIES
 (FORMERLY CHINA NEW MEDIA CORPORATION)
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 NOTE 14 - TAXES
 
 a)
Corporate Income Tax
 
 Significant components of the income tax provision were as follows:
  For the years ended June 30,2012


2011Current tax provisionFederal

$
-


$
-State


-



-Foreign


492,080



1,904,238492,080



1,904,238Deferred tax benefit, net of valuation allowanceFederal


-



-State


-



-Foreign


(265,273
)


(93,998
)(265,273
)


(93,998
)Income tax provision

$
226,807


$
1,810,240
  The following table reconciled the US statutory rates to the Company’s effective rate for the years ended June 30, 2012 and 2011. Other item represents the net income that could not be offset by loss incurred by other subsidiaries
 
 For the year ended June 30
2012
2011US statutory income tax rate
35.00
%
35.00
%Income not taxed in US
-35.00
%
-35.00
%China Income tax statutory rate
25.00
%
25.00
%Non-taxable item in China
0.3
%
0
%Other Item
13.4
%
1.7
%Effective rate
38.7
%
26.7
%
 
 United States
 
 The Company is subject to income taxes on an entity basis on income arising in or derived from the tax jurisdiction in which each entity is domiciled.
 
 V Media Corp., a Delaware corporation, has incurred a net operating loss for federal income tax purposes for the year ended June 30, 2012. The Company had loss carry forwards for U.S. federal income tax purposes available for offset against future taxable U.S income expiring through 2031 of approximately $182,321 and $157,516 as of June 30, 2012 and June 30, 2011, respectively. Management believes that the realization of the benefits from these losses appears uncertain due to the Company's limited operating history in the United States. Accordingly, a full deferred tax asset valuation allowance has been provided against federal deferred tax assets and no deferred tax asset benefit has been recorded for the US operations. The valuation allowance against federal deferred tax assets was $61,989 and $53,555 as of June 30, 2012 and June 30, 2011, respectively.
  
   F-20
 V-MEDIA CORPORATION AND SUBSIDIARIES
 (FORMERLY CHINA NEW MEDIA CORPORATION)
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 NOTE 14 - TAXES (Continued)
  Hong Kong
 
 Fortune-Rich was incorporated in Hong Kong and has operations through its subsidiaries in the PRC, its only tax jurisdiction. Fortune-Rich did not earn any income that was derived in Hong Kong since incorporation and therefore was not subject to Hong Kong Profit tax. All Fortune-Rich and its subsidiaries’ income is generated in the PRC. Accordingly, its income tax provision is calculated based on the applicable tax rates and existing legislation, interpretations and practices in respect thereof.
  PRC
 
 Dalian Guo-heng and V-Media Group are governed by the Income Tax Law of the People’s Republic of China concerning the private-run enterprises, which are currently subject to tax at a statutory rate of 25% on net income reported after appropriated tax adjustments. Because of different tax jurisdictions’ restriction, the V-Media Group and its subsidiaries of Jiaotong, Shenyang, Wangluo, Tianjin, Beijing and Shanghai have loss carryovers that can only be used to offset their own future taxable income. The loss carry forward for those subsidiaries amounted to $1,587,852 and $375,992 as of June 30, 2012 and June 30, 2011, respectively.
 
 The Company periodically evaluates the likelihood of the realization of deferred tax assets, and reduces the carrying amount of the deferred tax assets by a valuation allowance to the extent it believes a portion will not be realized. The Company considers many factors when assessing the likelihood of future realization of the deferred tax assets, including its recent cumulative earnings experience, expectation of future income, the carry forward periods available for tax reporting purposes, and other relevant factors. For the year ended June 30, 2012, management concluded PRC deferred tax assets would be realized in the future. Accordingly, the Company recorded a deferred tax benefit of $265,273 and $93,998 from loss carryover for the years ended June 30, 2012 and 2011, respectively.
 
 b) Business Tax
 
 Dalian Guo-heng, Dalian Vastitude Media Group Co., Ltd. and its five subsidiaries are also subject to 5% business tax and related surcharges levied on advertising services in China, which are approximately 3% on our revenues from providing advertising services. Dalian V-Media’s another subsidiary is only subject to 3% business tax. Total business tax expenses were $831,869 and $1,017,529 for the years ended June 30, 2012 and 2011, respectively.
 
 c) Taxes payable consisted of the following:
  June 30,


June 30,2012


2011Business tax payable

$
216,869


$
115,973Corporate income tax payable


(1,108
)


773,286Other


291,384



166,361Total taxes payable

$
507,145


$
1,055,620
 The Company recognizes interest and penalties accrued related to unrecognized tax benefits and penalties, if any, as income tax expense. There were no unrecognized tax benefits or penalties for the period ended June 30, 2012. The Company files income tax returns with U.S. Federal Government, as well as Delaware State. The Company also files returns in foreign jurisdictions of Hong Kong and PRC China. With few exceptions, the Company is subject to U.S. federal and state income tax examinations by tax authorities for years on or after 2008.
 
 The Company’s foreign subsidiaries and VIEs also file income tax returns with both the National Tax Bureau and the Local Tax Bureaus. The Company is subject to income tax examinations by these foreign tax authorities. The Company has passed all tax examinations by both National and Local tax authorities since the inception of the Company in 2000.
 
 
 
 F-21
 V-MEDIA CORPORATION AND SUBSIDIARIES
 (FORMERLY CHINA NEW MEDIA CORPORATION)
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 
  NOTE 15 - EARNINGS PER SHARE
 
 As of June 30, 2012, the Company had 1,000,000 shares of preferred stock issued and outstanding, that have not been included in diluted weighted average shares calculation because pursuant to the Merger agreement, no preferred shares can be converted to any securities as of June 30, 2012.
 
 The Company’s outstanding warrants to acquire 3,298,760 shares of common stock at exercise price of $0.95, were not included in the diluted weighted average shares calculation, because they are anti-dilutive.
 
 The warrants issued on March 7, 2011 to acquire 50,000 shares of common stock with an exercise price of $1.80, were not included in the diluted weighted average shares calculation, because they are anti-dilutive.
  The following table sets forth earnings per share calculations:
 For the years ended

June 30,2012



2011Basic earnings per shareNet income attributable to V Media Corp

$
50,853


$
4,871,885Weighted average number of common shares outstanding - Basic


27,550,701



27,550,701Earnings per share-Basic

$
0.00


$
0.18Diluted earnings per shareNet income attributable to V Media Corp.

$
50,853


$
4,871,885Weighted average number of common shares outstanding -Basic


27,550,701



27,550,701Effect of diluted securities-warrant






646,203Weighted average number of common shares outstanding - Diluted


27,550,701



28,196,904Earnings per share-Diluted

$
0.00


$
0.17
 
 
 
 F-22
 
 V-MEDIA CORPORATION AND SUBSIDIARIES
 (FORMERLY CHINA NEW MEDIA CORPORATION)
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
  NOTE 16 - SEGMENT INFORMATION
 
 ASC 280, "Segment Reporting", establishes standards for reporting information about operating segments on a basis consistent with the Company's internal organizational structure as well as information about geographical areas, business segments and major customers in financial statements for details on the Company's business segments.
 
 The Company is an outdoor advertising company in China which provides a full range of integrated outdoor advertising services including art design, advertising publishing, daily maintenance and technical upgrading. The Company's chief operating decision maker ("CODM") has been identified as the CEO who reviews the financial information of separate operating segments when making decisions about allocating resources and assessing performance of each entity. Based on management's assessment, the Company has determined that its operating segments can be categorized by geographic locations as well as the format of the outdoor media platforms.
 
 The accounting policies of the segments are the same as those described in the summary of significant accounting policies. The CODM evaluates performance based on each reporting segment's revenues, cost of revenues, and gross profit. Selling expenses and G&A expenses are not separated reviewed to each segment. The CODM does not review balance sheet information to measure the performance of the reportable segments, nor is this part of the segment information regularly provided to the CODM.
 
 For the year ended June 30, 2012Dalian District

Shenyang District

Beijing District

Tianjin District

Shanghai District

TotalRevenue

$
14,129,508


$
1,239,466


$
2,124,900


$
422,556


$
554,255


$
18,470,685Cost of Revenue


(7,803,932
)


(792,639
)


(1,070,574
)


(260,749
)


(822,504
)


(10,750,398
)Gross Profit

$
6,325,576


$
446,827


$
1,054,326


$
161,807


$
(268,249
)

$
7,720,287For the year ended June 30, 2011Dalian District

Shenyang District

Beijing District

Tianjin District

Shanghai District

TotalRevenue

$
18,823,163


$
619,133


$
54,330


$
203,473


$
878,265


$
20,578,364Cost of Revenue


(7,755,520
)


(359,354
)


(109,827
)


(130,889
)


(621,360
)


(8,976,950
)Gross Profit

$
11,067,643


$
259,778


$
(55,496
)

$
72,584


$
256,905


$
11,601,414
      F-23