UNITED
STATES


SECURITIES
AND EXCHANGE COMMISSION


Washington,
D.C. 20549







FORM
10-KSB









[X]
            ANNUAL
      REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
      1934




For the
fiscal year endedDecember 31,
2007




[ 
      ]
            TRANSITION
      REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
      [No Fee Required]




For the
transition period from ________ to ________




Commission
File No. 000-29019




CHINA ENTERTAINMENT
GROUP, INC.





(Name of
small business issuer as specified in its charter)




NEVADA
            
            22-3617931(State
      or jurisdiction of incorporation or organization)
            
            (I.R.S.
      Employer Identification No.)Unit
      3409 Shun Tak Centre, West Tower,
              168-200
      Connaught Road Central, Hong Kong
            
            n/a(Address
      of principal executive offices)
            
            (Zip
      Code)




Issuer’s
telephone number, including area code:011-852-2312-1888




Securities
registered pursuant to Section 12(b) of the Act:




Title
      of each class
            
            Name
      of each exchange on which registeredNone
            
            None




Securities
      registered pursuant to Section 12(g) of the Act:$.001
      Par Value Common Stock(Title
      of Class)




Check
whether the issuer (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
report), and (2) has been subject to such filing requirements for the past 90
days. Yes [__] No [X]
 
 Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act). Yes [__] No [X]
 
 Check if
disclosure of delinquent filers in response to Item 405 of Regulation S-B is not
contained in this form, and no disclosure will 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-KSB or any amendment to
this Form 10-KSB. [  ]
  The
issuer’s revenues from continued operations and discontinued operations for the
fiscal year ended December 31, 2007 were $nil  and $757,062
respectively.
  As of
March 11, 2008, the registrant had 19,340,419 common shares outstanding that
were held by non-affiliates. The aggregate market value of the common shares
held by non-affiliates was approximately $251,425. This calculation is based
upon the closing sale price of $0.013 per share as of March 11,
2008.
 
 As of
March 11, 2008, there were 128,963,425 shares of the issuer’s $0.001 par value
common stock issued and outstanding.
 
 Documents
Incorporated By Reference: None.
 
 Transitional
Small Business Disclosure Format: Yes [__] No [X]









TABLE OF
CONTENTS


TO ANNUAL REPORT ON
FORM 10-KSB


FOR YEAR ENDED
DECEMBER 31, 2007






PART
      I
            
            PageItem
      1.
            Description
      of Business
            2Item
      2.
            Description
      of Property
            7Item
      3.
            Legal
      Proceedings
            7Item
      4.
            Submission
      of Matters to Vote of Security Holders
            7




PART
      IIItem
      5.
            Market
      for Common Equity and Related StockholderMatters
            7Item
      6.
            Management's
      Discussion and Analysis of Financial Condition and Results of
      Operations
            10Item
      7.
            Financial
      Statements
            16Item
      8.
            Changes
      in and Disagreements with Accountants on Accounting and Financial
      Disclosure
            17Item
      8A.
            Controls
      and Procedures
            17Item
      8B.
            Other
      Information
            17




PART
      IIIItem
      9.
            Directors,
      Executive Officers, Promoters and Control Persons; Compliance with Section
      16(a) of the Exchange Act
            18Item
      10.
            Executive
      Compensation
            19Item
      11.
            Security Ownership of Certain Beneficial Owners and Management and
      Related Stockholder Matters
            20Item
      12.
            Certain
      Relationships and Related Transactions
            22Item
      13.
            Exhibits
            23Item
      14.
            Principal
      Accountant Fees and Services
            24




Signatures
            
            25








(REMAINDER
OF PAGE INTENTIONALLY LEFT BLANK)









FORWARD-LOOKING
STATEMENTS
 
 The
following discussion, including the discussion regarding our financial condition
and results of operations, contain forward-looking statements and should be read
in conjunction with the consolidated financial statements and related notes
thereto. China Entertainment Group, Inc. is referred to herein as "we" or "the
Company" or "China Entertainment Group" or "our."  The words or
phrases "would be," "will allow," "intends to," "will likely result," "are
expected to," "will “continue," "is anticipated," "estimate," "project," or
similar expressions are intended to identify "forward-looking statements." Such
statements include those concerning expected financial performance, corporate
strategy, and operational plans. Actual results could differ materially from
those projected in the forward-looking statements as a result of a number of
risks and uncertainties, including: (a) general economic conditions in China;
(b) regulatory factors in China that may lead to additional costs or otherwise
negatively affect our business; (c) our ability to manage our planned growth
efficiently, including whether our management will be able to: (i) identify,
hire, train, retain, motivate and manage required personnel or (ii) successfully
manage and exploit existing and potential market opportunities; (d) our ability
to generate sufficient revenues or obtain financing to sustain and grow our
operations; and (e) our ability to successfully fulfill our primary cash
requirements which are explained below under "Liquidity, Capital Resources and
Financial Condition".  Statements made herein are as of the date of
the filing of this Form 10-KSB with the Securities and Exchange Commission and
should not be relied upon as of any subsequent date.
 
 Unless
otherwise required by applicable law, we do not undertake, and we specifically
disclaim any obligation, to update any forward-looking statements to reflect
occurrences, developments, unanticipated events or circumstances after the date
of such statement.  The safe harbors for forward-looking statements
provided by the Private Securities Litigation Reform Act of 1995 (the "Reform
Act") are unavailable to issuers of penny stock.  Our shares may be
considered penny stock and as a result of such safe harbors set forth under the
Reform Act are unavailable to us.
 
 
 (REMAINDER
OF PAGE INTENTIONALLY LEFT BLANK)
  1
  PART
I
 
 ITEM
      1.
              DESCRIPTION OF
      BUSINESS
 
 INTRODUCTION
 
 China
Entertainment Group, Inc. has no active operations subsequent to the Asset Sale
(as described below ) and is currently searching for a new business
opportunity.
 
 Immediately
before the Asset Sale described below, with effect from December 31, 2007, we
owned all of the equity interest in Metrolink Pacific Limited ("MPL"), a British
Virgin Islands corporation. MPL, in turn, owns a 100% equity interest in Anglo
Market International Limited, a corporation incorporated in the British Virgin
Islands on September 15, 2000, a 100% equity interest in China Star Management
Limited, a company incorporated in Hong Kong on September 6, 1985, and a 100%
interest in MPL subsidiary Metrolink Global Limited, a corporation incorporated
in the British Virgin Islands on September 10, 2004. MPL's subsidiaries
currently provide artist management, talent development and artist brokering
services. Prior the Asset Sale, China Entertainment Group, Inc. (together with
our direct and indirect subsidiaries, and their respective predecessors, unless
the context otherwise requires, the "Company") had been a multi-faceted
entertainment company with historically profitable operations in film,
television, print and music artist management fees comprised of talent
development fees, artist casting, booking and brokering commissions, and artist
promotional fees.
 
 Our
principal executive office is located at Unit 3409 Shun Tak Centre, West Tower,
168-200 Connaught Road Central, Hong Kong, China. Our telephone number is
011-852-2313-1888.
 
 HISTORICAL
BACKGROUND
 
 We were
originally incorporated in the state of Nevada as Shur De Cor, Inc. ("Shur De
Cor") on August 14, 1987. By 1999, Shur De Cor was a public company with no
operations searching for a business opportunity. In April 1999, Shur De Cor
merged with Interactive Marketing Technology, Inc., a New Jersey corporation
("Interactive New Jersey"), in an arm's length
transaction.  Interactive New Jersey was engaged in the business of
direct marketing of consumer products and desired to become a public company.
Shur De Cor was the surviving corporation and changed its name to Interactive
Marketing Technology, Inc. Shur De Cor's management resigned and the management
of Interactive New Jersey filled the vacancies.
 
 Through
our then wholly owned subsidiary, IMT's Plumber, Inc., we produced, marketed,
and sold a licensed product called the Plumber's Secret, which was discontinued
during fiscal 2001.  In May 2002, we discontinued our former business
and actively sought to either acquire a third party, merge with a third party or
pursue a joint venture with a third party in order to re-enter our former
business of direct marketing of proprietary consumer products in the United
States and worldwide.
 
 On
November 17, 2004, our Board of Directors unanimously approved, subject to
shareholder approval, entering into a Share Exchange Agreement (the "Agreement")
with MPL, an international business company organized to do business under the
laws of the British Virgin Islands.  At that time, MPL was wholly
owned by Imperial International Limited ("Imperial"), a company incorporated
under the laws of the British Virgin Islands. The parent company and 100% owner
of Imperial is Together Again Limited ("TAL").
 
 On
November 17, 2004, the Board also approved, subject to shareholder approval,
amendments to our Articles of Incorporation to change our corporate name ("Name
Change") from Interactive Marketing Technology, Inc. to China Artists Agency,
Inc. ("China Artists"), and to increase the authorized common stock of the
Company to 200,000,000 shares (the "Authorized Share Increase").  On
that same date, and also subject to shareholder approval, the Board also
approved a 1 for 1.69 reverse stock split to accommodate the terms of the
Agreement (the "Reverse Split"), and a spin-off of the Company's existing
business, including its assets and liabilities, into a Nevada corporation formed
as the Company's wholly owned subsidiary into a separate public company by means
of pro-rata share dividend (the "Spin-off").
 
 The
above-described actions approved by the Board also required approval by a
majority of the Company's shareholders under Nevada Revised
Statutes.  Thus, on November 15, 2004, as authorized by the Nevada
Revised Statutes, the majority shareholders, who together owned 50.4% of our
issued and outstanding shares of common stock, approved the Agreement, the
Authorized Share Increase, the Name Change, the Reverse Split, and the Spin-off
by action of written consent.
  2
  On
November 17, 2004, the Company, as contemplated under the Agreement, issued an
aggregate of 109,623,006 shares of its common stock to Imperial, the sole
shareholder of MPL, in exchange for 100% of the issued and outstanding shares of
MPL capital stock transferred to China Artists by Imperial at the closing (the
"Share Exchange").  The acquisition of the 100% interest includes
MPL's interests in its subsidiaries, Anglo Market International Limited, China
Star Management Limited, and Metrolink Global Limited (hereinafter MPL and its
subsidiaries are collectively referred to as the "Metrolink Group"). Upon
completion of the Share Exchange, MPL became the Company's wholly owned
subsidiary and China Artist's former owner subsequently transferred control of
China Artists to Imperial.  We relied on Rule 506 of Regulation D of
the Securities Act of 1933, as amended (the "Act") in regard to the shares that
we issued pursuant to the Share Exchange.  We believe this offering
qualified as a "business combination" as defined by Rule 501(d). Reliance on
Rule 506 requires that there are no more than 35 non-accredited purchasers of
securities from the issuer in an offering under Rule 506.  MPL
represented to us that they had one stockholder, who has certified that it is an
`accredited investor' as defined in Rule 501(a) of Regulation D. MPL also
represented to us that there had been no advertising or general solicitation in
connection with this transaction.
 
 The
Company's Certificate of Amendment to our Articles of Incorporation to effect
the Name Change, the Reverse Split, and the Authorized Share Increase was filed
with the Nevada Secretary of State and became effective on December 21,
2004.  Concurrent with Name Change, Reverse Split and Authorized Share
Increase, the Company also obtained a new stock symbol, "CAAY", and a new CUSIP
Number.  The new stock symbol and CUSIP number also became effective
on December 21, 2004.
 
 The
Spin-off, which was approved by both the Board and the majority shareholders
prior to the closing of the Agreement, resulted in the formation of a separate
public company, All Star Marketing, Inc. ("All Star").  All Star is a
Nevada corporation and it was formed as a wholly owned subsidiary of the
Company.  The Spin-off was satisfied by means of a pro-rata share
dividend to the Company's shareholders of record as of December 10,
2004.  The purpose of the Spin-Off was to allow the subsidiary to
operate as a separate public company and raise working capital through the sale
of its own equity.  This allowed our management to focus exclusively
on our business after the Share Exchange concluded, while at the same time,
allowing the spun-off company to have greater exposure by trading as an
independent public company. Additionally, the shareholders and the market will
then more easily identify the results and performance of the Company as a
separate entity from that of All Star.
 
 On June
27, 2005, the Company's Board of Directors and the Company's majority
shareholder approved and authorized a name change to China Entertainment Group,
Inc.  The Company's Certificate of Amendment to our Articles of
Incorporation to effect our name change to China Entertainment Group, Inc. was
filed with the Nevada Secretary of State and became effective on August 4,
2005.  Concurrent with Name Change, the Company also obtained a new
stock symbol, "CGRP", and a new CUSIP Number.  The new stock symbol
and CUSIP number became effective on August 9, 2005.
 
 On
January 17, 2008, the Company entered into an Agreement (“Agreement”) with
Imperial, the Company’s current majority shareholder, pursuant to which the
Company agreed to sell and Imperial agreed to purchase substantially all of the
Company’s assets.  Pursuant to the Agreement, the Company will sell
100% of total issued and paid up capital of MPL, the Company’s wholly-owned
subsidiary and operating business to Imperial with effect from December 31, 2007
in exchange for Imperial’s payment of US$1 to the Company (the “Asset Sale”) at
the closing of the Asset Sale transaction (the “Closing”). The Closing of the
Asset Sale transaction is subject to the satisfaction of all of the closing
conditions set forth in the Agreement. As of the date of this filing, all of the
closing conditions have either been satisfied or waived by the Parties except
for the Company’s compliance with the required notification provisions of
Section 14(c) of the Securities Exchange Act of 1934, as amended, and Regulation
14C thereunder in regards to administrative notification of all Company
shareholders regarding the majority shareholder’s approval of the Asset Sale
(the “14C Requirements”) and thus the accounts of MPL and its subsidiaries have
been deconsolidated from the Company effective as of December 31, 2007. The
Company presently intends to maintain its corporate existence after the Asset
Sale transaction is fully completed.  Although there are no specific
plans, the Company expects that it may seek to find a private, operating company
with which to combine. In the event Company can find and complete any such
transaction, it is generally to be expected that the current owners of Company,
in the aggregate, would have a significantly reduced equity ownership of the
surviving company.  There can be no assurance that the Company will be
able to identify any business with which the Company may conduct a business
combination, nor that any such transaction could be completed.  The
Agreement was attached to the Form 8-K filed with the Securities and Exchange
Commission on February 22, 2008 as Exhibit 10.1 and is incorporated herein
by reference; provided, however, that the warranties and representations
contained in such agreement are made solely to Imperial and solely for purposes
of the Asset Sale.  The foregoing summary and description do not
purport to be complete and are qualified in their entirety by reference to the
Agreement.
  3
 
 We are
currently authorized to issue 200,000,000 shares of common stock, $0.001 par
value, of which 128,963,425 shares of common stock are currently issued and
outstanding as of March 11, 2008.  We are currently not authorized to
issue preferred stock.
 
 DESCRIPTION
OF OUR BUSINESS OPERATIONS
 
 HISTORICAL
FINANCIAL STATEMENTS
 
 As a
result of the reverse acquisition that occurred on November 17, 2004, the
financial statements of the Company became the historical financial statements
of the accounting parent.  In summary, the accounting effect of the
reverse acquisition results in MPL as the accounting parent and China
Entertainment Group (the former public shell) as the accounting
subsidiary.  The consolidated financial statements include the
operations of the accounting subsidiary from the date of acquisition and reflect
the historical financial statements of MPL, the accounting acquirer, as adjusted
for the effects of the exchange of shares on its equity accounts, the inclusion
of net liabilities of the accounting subsidiary as of the date of the Merger
(November 17, 2004) on their historical basis, and the inclusion of the
accounting subsidiary's results of operations from that
date.  Additionally, China Entertainment Group adopted the fiscal year
of the accounting parent, December 31, effective from December 24,
2004.
  MPL was
organized on September 10, 2004, for the purpose of reorganizing the group
structure of its intermediate holding company, Together Again Limited ("TAL").
Prior to the incorporation of MPL, the current operations of the company were
conducted through TAL (the "predecessor entity").  The reorganization
of TAL's group structure was completed in October 2004 by transferring certain
assets and liabilities employed in the operation of the principal activity of
TAL ("the Business") to Metrolink Global Limited ("MGL"), a company incorporated
in the British Virgin Islands in consideration of the HK$3,645,820, satisfied by
(a) the allotment and issue by 99 MGL ordinary shares to MPL, the immediate
holding company of MGL; (b) the allotment and issue by MPL to Imperial of 99 MPL
ordinary shares; and (c) the allotment and issue of 98 ordinary shares of
Imperial to TAL, each issued and credited as fully paid; (d) allotment of 20
ordinary shares of MPL to Imperial as consideration for acquiring the entire
issued share capital of China Star Management Limited ("CSML") and Anglo Market
International Limited ("AMIL") each issued and credited as fully paid. At the
same time, the Company entered into several deeds of novation with MGL for
completion of the transfer of the Business as follows: (i) deed of novation in
relation to amounts paid by CSML on behalf of the Company; (ii) deed of novation
in relation to artist contract entered by the Company; and (iii) deed of
novation in relation to professional fees contracted to be paid by the
Company.
 
 Since MPL
succeeded to substantially all of the business and operations of TAL and its own
operations prior to the succession were insignificant relative to the operations
assumed or acquired in the reorganization, the historical financial statements
of MPL's predecessor entity become those of MPL.
 
 Effective
from the date of the Asset Sale, all the operations of MPL, CSML, AMIL and MGL
from the beginning of the year up to the effective date of the Asset Sale were
reported as discontinued operations in the financial statements of the Company
for the year ended December 31, 2007. The results of operations of MPL, CSML,
AMIL and MGL from the previous year have been restated retrospectively to
conform to the current year presentation regarding the discontinued
operations.
 
 ARTIST
MANAGEMENT UNIT
 
 During
the year ended December 31, 2007, the Company derived revenue and income from
artist management fees from artists that the Company had under
contract.  Similar to artist management companies in the United States
such as the Creative Artists Agency or the William Morris Agency, our Company
was one of the major artist management agencies in Asia and represented several
well-known Chinese film and television artists whose work was distributed
throughout China and other parts of Asia. We provided artist management services
through Metrolink Group, which consists of the following entities:
  ●
              China
      Star Management Limited ("CSML") is a wholly owned subsidiary of MPL and
      was incorporated under the laws of the Hong Kong on September 6,
      1985.  CSML provides talent management and talent brokering
      services, including locating projects, contract negotiations, work
      scheduling, artist training and development, image building and
      improvement, publicity campaigns, and providing personal assistant
      services in Hong Kong;
  4
 ●
              Anglo
      Market International Limited ("AMIL") is a wholly owned subsidiary of MPL
      that was incorporated under the laws of the British Virgin Islands on
      September 15, 2000.  AMIL also provides talent management and
      talent brokering services, including locating projects, contract
      negotiations, work scheduling, artist training and development, image
      building and improvement, publicity campaigns, and providing personal
      assistant services outside Hong
Kong.
 
 ●
              Metrolink
      Global Limited ("MGL") is a wholly owned subsidiary of MPL that was
      incorporated under the laws of the British Virgin Islands on September 10,
      2004. MGL mainly manages one artist's PRC business including locating
      projects, contract negotiations and providing personal assistant
      services.
 
 Effective
from the date of the Asset Sale, the artist management unit has been disposed to
Imperial and the Company has no artist management unit remained.
 
 OUR
MARKET
 
 Effective
from the date of the Asset Sale, our Company does not have an operative market.
 
 COMPETITIVE
BUSINESS CONDITIONS AND COMPETITIVE POSITION IN THE INDUSTRY
 
 Our
Company currently has no operations and thus there are no competitive
businesses or competitions.
  SOURCES
AND AVAILABILITY OF RAW MATERIALS AND NAMES OF PRINCIPAL SUPPLIERS
 
 Our
Company currently has no operations and thus it does not require the
purchase of raw materials.
 
 SEASONAL
VARIATIONS
 
 Our
Company currently has no operations and thus it does not experience
seasonal variations.
  CONCENTRATION
OF CUSTOMERS
  As of
December 31, 2007, the Company had no operations and thus it had no customers.
For the year ended December 31, 2007, all of the Company's revenue from
discontinued operations was generated by 13 artists, and the aggregate revenues
from 4 of these artists accounted for more than 93% of the Company’s revenue
from discontinued operations.
 PATENTS,
TRADEMARKS, LICENSES, FRANCHISES, CONCESSIONS, ROYALTY AGREEMENTS OR LABOR
CONTRACTS
 
 We do not
own any patents, trademarks, licenses or other forms of intellectual
property.
 
 GOVERNMENT
REGULATIONS
 
 Our
Company's activities are subject to various governmental regulations concerning
business activities generally in various countries.  We believe that
we are in compliance with all applicable laws and regulations.
 
 EMPLOYEES
 
 As of
December 31, 2007, our Company had no full time employees. We relied on
management services provided by related companies.
 
 CURRENCY
CONVERSION AND EXCHANGE
  As of
December 31, 2007, the Company had minimal assets, which dominated in the local
currency, thus it does not anticipate significant foreign exchange
losses.  The Company does not currently engage in any hedging
activity because it is not subject to foreign currency risk but it will
continue to monitor its foreign exchange exposure and market conditions to
determine if any hedging is required.
 5
 
 RISK
FACTORS
 
 This
information statement contains "forward looking statements" which can be
identified by the use of forward-looking words such as "believes", "estimates",
"could", "possibly", "probably", "anticipates", "estimates", "projects",
"expects", "may" or "should" or other variations or similar words. No assurances
can be given that the future results anticipated by the forward-looking
statements will be achieved.  The following matters constitute
cautionary statements identifying important factors with respect to those
forward-looking statements, including certain risks and uncertainties that could
cause actual results to vary materially from the future results anticipated by
those forward-looking statements.  Among the key factors that have a
direct bearing on our results of operations are the effects of various
governmental regulations, the fluctuation of our direct costs and the costs and
effectiveness of our operating strategy. Other factors could also cause actual
results to vary materially from the future results anticipated by those
forward-looking statements.
 
 RISK RELATED TO OUR
FINANCIAL POSITIONS AND LIQUIDITY
 
 THE
COMPANY HAS RECEIVED AUDIT OPINIONS WITH EXPLANATORY PARAGRAPH REGARDING ITS
ABILITY TO CONTINUE AS A GOING CONCERN.
 
 The audit
report our independent registered public accounting firm issued on our audited
financial statements for the fiscal year ended December 31, 2007 and 2006
contain explanatory paragraphs regarding our ability to continue as a going
concern.  As discussed in the report of independent registered public
accounting firm for the years ended December 31, 2007 and 2006, the Company has
no active operations subsequent to the year ended December 31, 2007 and had net
stockholders’ deficiency as of December 31, 2006 as a result of negative working
capital and recurring losses from operations. These matters raise substantial
doubt about our ability to continue as a going concern. The financial statements
for both years do not include any adjustment that might result from the outcome
of this uncertainty.
 
 RISKS RELATED TO OUR
BUSINESS
  Although
there are no specific plans, the Company expects that it may seek to find a
private, operating company with which to combine after the Asset Sale. There can
be no assurance that the Company will be able to identify any business with
which the Company may conduct a business combination, nor that any such
transaction could be completed.
  RISKS RELATED TO OWNING OUR
COMMON STOCK:
 
 Our
Company's principal security holder, Imperial, owns a majority of our
outstanding common stock, allowing this shareholder to control matters requiring
approval of our shareholders.  Our principal security holder owns
approximately 85% of our outstanding shares of our common stock. Such
concentrated control of the company may adversely affect the price of our common
stock.  Our principal security holder will control matters requiring
approval by our security holders, including the election of
directors.  Such concentrated control may also make it difficult for
our shareholders to receive a premium for their shares of our common stock in
the event we merge with a third party or enter into different transactions which
require shareholder approval.  In addition, certain provisions of the
Nevada Revised Statutes could have the effect of making it more difficult or
more expensive for a third party to acquire, or of discouraging a third party
from attempting to acquire, control of us in the future.
 
 Although
there are no specific plans, the Company expects that it may seek to find a
private, operating company with which to combine after the Asset Sale. In the
event Company can find and complete any such transaction, it is generally to be
expected that the current owners of Company, in the aggregate, would have a
significantly reduced equity ownership of the surviving company.
  6
 
 Because
our common stock will be subject to the "penny stock" rules, the level of
trading activity in our stock may be reduced, which may make it difficult for
investors in our common stock to sell their shares. Broker-dealer practices in
connection with transactions in "penny stocks" are regulated by certain penny
stock rules adopted by the Securities and Exchange Commission (the
“SEC”).  Penny stocks, like shares of our common stock, generally are
equity securities with a price of less than $5.00, other than securities
registered on certain national securities exchanges or quoted on
NASDAQ.  The penny stock rules require a broker-dealer, prior to a
transaction in a penny stock not otherwise exempt from the rules, to deliver a
standardized risk disclosure document that provides information about penny
stocks and the nature and level of risks in the penny stock
market.  The broker-dealer also must provide the customer with current
bid and offer quotations for the penny stock, the compensation of the
broker-dealer and its salesperson in the transaction, and, if the broker-dealer
is the sole market maker, the broker-dealer must disclose this fact and the
broker-dealer's presumed control over the market, and monthly account statements
showing the market value of each penny stock held in the customer's
account.  In addition, broker-dealers who sell these securities to
persons other than established customers and "accredited investors" 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.  Consequently, these requirements may have the effect of
reducing the level of trading activity, if any, in the secondary market for a
security subject to the penny stock rules, and investors in our common stock may
find it difficult to sell their shares.
 
 ITEM
      2.
              DESCRIPTION
      OF PROPERTY
 
 Our
principal executive offices are located in a facility consisting of
approximately 2,683 square feet located at Unit 3409 Shun Tak Centre, West
Tower, 168-200 Connaught Road Central, Hong Kong. We do not own this property
and we have not entered into a lease of this office space because it is shared
with other affiliated companies.
 
 We
believe that the current facilities occupied by the Company will be able to meet
the Company's operational needs.
 
 ITEM
      3.
              LEGAL
      PROCEEDINGS
  Lang, et al. v. Welch, et
al. (China Entertainment Group, Inc.) (United States District Court,
Central District California, Case No. CV 07-1068-GHK-PJWx).OnDecember 20, 2006,
plaintiffs Sanford Lang and Martin Goldrod (collectively, “Plaintiffs”)
initiated a lawsuit in the Los Angeles Superior Court, Central District,
alleging claims for fraud, breach of contract, violations of RICO, and civil
conspiracy against several parties, including the Company.  The Company was
provided with a copy of Plaintiffs’ Complaint on or about February 28, 2007,
after the matter was removed to United States District Court.  According to
the Complaint, the Company is “a nominal Defendant” as Plaintiffs purport to
assert claims derivatively on its behalf.  Accordingly, it appears that no
relief is being sought against the Company itself.  On or about
January 31, 2008, Plaintiffs and Defendants, including the Company, entered
into a confidential settlement agreement to resolve all claims pending between
them.  Subject to satisfactory discharge of certain obligations set forth
in the confidential settlement agreement, it is anticipated that a dismissal of
the action will be filed no later than early January 2009.
  ITEM
4.                      SUBMISSION
OF MATTERS TO VOTE OF SECURITY HOLDERS
 
 None.
 
 PART
II
 
 ITEM
      5.
              MARKET
      FOR COMMON EQUITY AND RELATED STOCKHOLDER
  MATTERS
 
 We are
subject to the informational requirements of the Securities Exchange Act of
1934. Accordingly, we file annual, quarterly and other reports and information
with the SEC.  You may read and copy these reports and other
information we file at the SEC’s public reference rooms in Washington, D.C., New
York, New York, and Chicago, Illinois. Our filings are also available to the
public from commercial document retrieval services and the Internet worldwide
website maintained by the SEC at www.sec.gov.
 
 MARKET
FOR COMMON EQUITY
 
 Our
Common Stock is traded over-the-counter and quoted on the National Quotation
Bureau's Pink Sheets under the symbol "CGRP".  Until April 17, 2000,
our common stock was listed on the OTC Electronic Bulleting Board under the
symbol "IAMK.OB".  After entering into the Agreement, we changed our
symbol from "IAMK.OB" to "CAAY.OB" with CUSIP Number 16936W 10 4, and these
changes became effective on December 21, 2004.  In June 2005, in
connection with our name change to China Entertainment Group, Inc., our ticker
symbol changed to “CGRP.OB” with CUSIP Number 16939C105.  The following
table sets forth the range of the high and low bid prices of our stock as
reported by the Nasdaq Trading and Market Services for each fiscal quarter for
the last two years ending December 31, 2007 and December 31, 2006. The bid
prices represent inter-dealer quotations, without adjustments for retail
mark-ups, markdowns or commissions and may not necessarily represent actual
transactions.
  7
  Bid
      PricesHigh
              
              
              LowFiscal
      Year Ended December 31, 2007Fourth
      Quarter (ended December 31, 2007)
              
              
              0.06
              
              
              
              0.015Third
      Quarter (ended September 30, 2007)
              
              
              0.015
              
              
              
              0.01Second
      Quarter (ended June 30, 2007)
              
              
              0.015
              
              
              
              0.012First
      Quarter (ended March 31, 2007)
              
              
              0.019
              
              
              
              0.006Fiscal
      Year Ended December 31, 2006Fourth
      Quarter (ended December 31, 2006)
              
              
              0.032
              
              
              
              0.015Third
      Quarter (ended September 30, 2006)
              
              
              0.03
              
              
              
              0.03Second
      Quarter (ended June 30, 2006)
              
              
              0.08
              
              
              
              0.03First
      Quarter (ended March 31, 2006)
              
              
              0.1
              
              
              
              0.03
 
 Stockholders
of Record
 
 As of
March 11, 2008, the number of record holders of our common stock was
approximately 82.
 
 Dividends
 
 We have
not declared or paid, and do not anticipate declaring or paying in the near
future, any dividends on our common stock.  We intend to reinvest in
our business operations any funds that could be used to pay a cash
dividend.
  Recent
Sales of Unregistered Securities; Use of Proceeds From Registered
Securities
 
 The
following issuances were made during the year ended December 31, 2004, all
pursuant to Section 4(2) of the Securities Act of 1933 and pursuant to
Regulation D promulgated thereunder:
 
 During
2004, we issued 121,123,897 shares of common stock. The issuances of these
unregistered shares (the "Unregistered Shares") were made under exemptions from
registration and prospectus delivery requirements of the Securities Act of 1933
(the “1933 Act"), as amended, and as specified in Section 4(2) of the 1933 Act.
The details of the share issuances consist of:
 
 (1)
              1,183,432
      (equivalent to 2,000,000 shares of ordinary stock prior the Reverse Split)
      Unregistered Shares were issued to former affiliate Sandy Lang, and former
      officer and director Marty Goldrod prior the Reverse Split as payment in
      full for accrued salaries, accrued travel and entertainment expenses
      (Sandy and Marty), shareholder advances (by Marty), and a note payable
      issued to shareholder (Sandy) during the third quarter of the fiscal year
      2004. The details regarding the issuance of the 1,183,432 shares of the
      Company's common stock were previously disclosed in a Current Report on
      Form 8-K filed by the Company on November 19, 2004 and thus no further
      information required under Item 701 of Regulation S-B will be included
      herein.
 
 (2)
              Pursuant
      to Section 1.02(a) and Section 3.01(q) of the Agreement dated November 17,
      2004, the Company issued 109,623,006 shares, 6,809,522 shares (refer to
      subsequent cancellation and re-issuance disclosed below) and 3,507,937
      shares of the Unregistered Shares to Imperial, Orient Financial Services
      Limited ("Orient"), and Emerging Growth Partners, Inc. ("Emerging"),
      respectively, with an aggregate issuance of 119,940,465 shares. The table
      below sets forth the details of the issuance of the 119,940,465
      shares:
 
 Name
      of Party
              
              Number
      of Shares
                Issued
      and Dateof
      Issuance
              
              Nature
      of
                Transaction
              
              Amount
      Received
                from
      the TransactionImperial
      International Limited
              
              109,623,006
      shares issued
                on
      December 22, 2004
              
              Share
      exchange with shareholder Metrolink Pacific Ltd.
              
              $146,475.98Orient
      Financial Service Ltd.
              
              6,809,522
      shares issued
                on
      December 22, 2004
              
              Services
      rendered related to Share Exchange
              
              $6,809.52Emerging
      Growth Partners, Inc.
              
              3,507,937
      shares issued
                on
      December 22, 2004
              
              Services
      rendered related to Share Exchange
              
              $3,507.94
  8
  The
amount paid for services rendered by Orient and Emerging was based on the number
of Unregistered Shares issued in relation to the services rendered for the Share
Exchange and the $0.001 par value of the Unregistered Shares. Fair market value
of such shares is not applicable in determining the amount of the transaction as
the Unregistered Shares have not been registered under the 1933 Act, as amended
and may not be offered for sales, sold, or otherwise disposed of, except in
compliance with the registration provisions in the Act, or pursuant to an
exemption from such registration provisions, the availability of which is to be
established to the satisfaction of the Company.
 
 During
2005, we cancelled and issued 4,809,522 shares of common stock. The issuances of
these unregistered shares (the "Unregistered Shares") were made under exemptions
from registration and prospectus delivery requirements of the 1933 Act, as
amended, and as specified in Section 4(2) of the 1933 Act. The Company's Board
of Directors approved the cancellation of 4,809,522 shares of common stock
previously issued to Orient, an unrelated party, for services provided in
connection with the Company's merger agreement in November
2004.  These shares were subsequently re-issued in November 2005 in
the name of Emerging, an unrelated party, pursuant to an Advisory Services
Agreement dated June 10, 2005 and to Sandy Lang, a former officer, pursuant to a
verbal agreement reached in May 2005 (the "Verbal Agreement").  Under
the Verbal Agreement, in exchange for the shares issued to him, Mr. Lang agreed
to settle, forebear to litigate, and release any and all actions or claims
(whether directly or indirectly and in whichever jurisdiction) that he has or
may have against the Company arising out of, in connection with, or leading to
the Share Exchange discussed under the section above titled “Description of
Business”.
  DESCRIPTION OF CAPITAL
STOCK
 
 Our
authorized capital stock consists of 200,000,000 shares of $0.001 par value
common stock, of which 128,963,425 shares are issued and outstanding as of March
11, 2008.  Holders of the shares of our common stock are entitled to
receive dividends when and as declared by our Board of Directors from funds
legally available.  All the shares of our common stock have equal
voting rights and, according to the opinion of our legal counsel, are
nonassessable.  Each shareholder of our common stock is entitled to
share ratably in any assets available for distribution to holders of our equity
securities upon our liquidation.  Holders of our common stock do not
have preemptive rights.
 
 EQUITY
COMPENSATION PLANS
 
 We have
no securities authorized for issuance under any equity compensation
plans.
  PENNY
STOCK REGULATION
 
 Shares of
our common stock are subject to rules adopted by the SEC that regulate
broker-dealer practices in connection with transactions in "penny stocks". Penny
stocks are generally equity securities with a price of less than $5.00 (other
than securities registered on certain national securities exchanges or quoted on
the Nasdaq system, provided that current price and volume information with
respect to transactions in those securities is provided by the exchange or
system). The penny stock rules require a broker-dealer, prior to a transaction
in a penny stock not otherwise exempt from those rules, deliver a standardized
risk disclosure document prepared by the SEC, which contains the
following:
 
 ●
              a
      description of the nature and level of risk in the market for penny stocks
      in both public offerings and secondary
trading;
 
 ●
              a
      description of the broker's or dealer's duties to the customer and of the
      rights and remedies available to the customer with respect to violation to
      such duties or other requirements of securities'
  laws;
 
 ●
              a
      brief, clear, narrative description of a dealer market, including "bid"
      and "ask" prices for penny stocks and the significance of the spread
      between the "bid" and "ask" price;
  9
  ●
              a
      toll-free telephone number for inquiries on disciplinary
      actions;
 
 ●
              definitions
      of significant terms in the disclosure document or in the conduct of
      trading in penny stocks; and
 
 ●
              such
      other information and is in such form (including language, type, size and
      format), as the SEC shall require by rule or
  regulation.
  Prior to
effecting any transaction in penny stock, the broker-dealer also must provide
the customer the following:
 
 ●
              the
      bid and offer quotations for the penny
stock;
 
 ●
              the
      compensation of the broker-dealer and its salesperson in the
      transaction;
 
 ●
              the
      number of shares to which such bid and ask prices apply, or other
      comparable information relating to the depth and liquidity of the market
      for such stock; and
 
 ●
              monthly
      account statements showing 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 acknowledgment of the receipt
of a risk disclosure statement, a written agreement to transactions involving
penny stocks, and a signed and dated copy of a written suitably statement. These
disclosure requirements may have the effect of reducing the trading activity in
the secondary market for a stock that becomes subject to the penny stock rules.
Holders of shares of our common stock may have difficulty selling those shares
because our common stock is currently subject to the penny stock
rules.
 
 ITEM
      6.
              MANAGEMENT'S
      DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
      OPERATIONS
 
 This
following information specifies certain forward-looking statements of management
of the Company.  Forward-looking statements are statements that
estimate the happening of future events are not based on historical
fact.  Forward-looking statements may be identified by the use of
forward-looking terminology, such as "may", "shall", "could", "expect",
"estimate", "anticipate", "predict", "probable", "possible", "should",
"continue", or similar terms, variations of those terms or the negative of those
terms.  The forward-looking statements specified in the following
information have been compiled by our management on the basis of assumptions
made by management and considered by management to be reasonable. Our future
operating results, however, are impossible to predict and no representation,
guaranty, or warranty is to be inferred from those forward-looking
statements.
 
 The
assumptions used for purposes of the forward-looking statements specified in the
following information represent estimates of future events and are subject to
uncertainty as to possible changes in economic, legislative, industry, and other
circumstances.  As a result, the identification and interpretation of
data and other information and their use in developing and selecting assumptions
from and among reasonable alternatives require the exercise of
judgment.  To the extent that the assumed events do not occur, the
outcome may vary substantially from anticipated or projected results, and,
accordingly, no opinion is expressed on the achievability of those
forward-looking statements.  No assurance can be given that any of the
assumptions relating to the forward-looking statements specified in the
following information are accurate, and we assume no obligation to update any
such forward-looking statements.
 
 CRITICAL
ACCOUNTING POLICIES
 
 Our
Management's Discussion and Analysis of Financial Condition and Results of
Operations section discusses our financial statements, which have been
prepared in accordance with accounting principles generally accepted in the
United States of America (“US GAAP”).  This discussion and analysis
should be read in conjunction with the accompanying financial statements and
related notes.
  10
 
 An
accounting policy is deemed to be critical if it requires an accounting estimate
to be made based on assumptions about matters that are highly uncertain at the
time the estimate is made, and if different estimates that reasonably could have
been used or changes in the accounting estimate that are reasonably likely to
occur could materially change the financial statements.  We believe
the following critical accounting policies reflect our more significant
estimates and assumptions used in the preparation of our financial
statements:
 
 Use
of Estimates
 
 The
preparation of financial statements in accordance with US GAAP requires
management to make estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent assets and liabilities at
the date of the financial statements and the reported amounts of revenue and
expenses during the reporting period.  Actual results may differ from
these estimates under different assumptions or conditions.
  Revenue
recognition
 
 Service
fee income from provision of artist management services is recognized when
services are rendered. In accordance with SEC Staff Accounting Bulletin (“SAB”)
101, Revenue Recognition in
Financial Statements, the Company presents its revenue on a net basis as
it acts as an agent for the artists.
 
 Contingencies
and litigation
 
 We may be
subject to certain asserted and unasserted claims encountered in the normal
course of business.  It is our belief that the resolution of these
matters will not have a material adverse effect on our financial position or
results of operations, however, we cannot provide assurance that damages that
result in a material adverse effect on our financial position or results of
operations will not be imposed in these matters.  We account for
contingent liabilities when it is probable that future expenditures will be made
and such expenditures can be reasonably estimated.
  RECENT
ACCOUNTING PRONOUNCEMENTS
  In
February 2006, the Financial Accounting Standards Board (“FASB”) issued
SFAS 155, Accounting for
Certain Hybrid Financial Instruments – an amendment of FASB Statements 133 and
140 (“SFAS 155”).  The statement permits interests in hybrid
financial instruments that contain an embedded derivative that would otherwise
require bifurcation, to be accounted for as a single financial instrument at
fair value, with changes in fair value recognized in earnings. This election is
permitted on an instrument-by-instrument basis for all hybrid financial
instruments held, obtained, or issued as of the adoption date. The provisions of
SFAS 155 are effective for the Company on January 1, 2007.  The
application of this guidance has not had a material effect on the Company’s
financial position, cash flows and results of operation.
  In June
2006, the FASB issued Interpretation 48, Accounting for Uncertainty in Income
Taxes-an interpretation of FASB Statement No. 109 (“FIN 48”), which
clarifies the accounting for uncertainty in tax positions. This interpretation
requires that the Company recognize in its financial statements the impact of a
tax position if that position is more likely than not of being sustained on
audit, based on the technical merits of the position. The provisions of FIN 48
are effective for the Company on January 1, 2007, with the cumulative
effect of the change in accounting principle, if any, recorded as an adjustment
to opening retained earnings. The application of this guidance has not had a
material effect on the Company’s financial position, cash flows and results of
operation.
  In
September 2006, the FASB issued SFAS 157, Fair Value Measurements
(“SFAS 157”), which provides guidance about how to measure assets and
liabilities that use fair value. SFAS 157 will apply whenever another US GAAP
standard requires (or permits) assets or liabilities to be measured at fair
value but does not expand the use of fair value to any new
circumstances.  This standard also will require additional disclosures
in both annual and quarterly reports. SFAS 157 will be effective for financial
statements issued for fiscal years beginning after November 15, 2007, and will
be adopted by us beginning in the first quarter of 2008.   The
Company does not expect there to be any significant impact of adopting SFAS 157
on its financial position, cash flows and results of operations.
 In
September 2006, the SEC staff issued Staff Accounting Bulletin (“SAB”) 108,
Considering the Effects of
Prior Year Misstatements when Quantifying Misstatements in Current Year
Financial Statements (“SAB 108”). SAB 108 was issued to eliminate the
diversity of practice in how public companies quantify misstatements of
financial statements, including misstatements that were not material to prior
years’ financial statements.  The Company began to apply the
provisions of SAB 108 to its annual financial statements for the year ended
December 31, 2006.  The application of this guidance has not had a
material effect on the Company’s financial position, cash flows and results of
operation.
  11
 
 In
February 2007, the FASB issued SFAS 159, The Fair Value Option for Financial
Assets and Financial Liabilities – Including an amendment of FASB Statement No.
115 (“SFAS 159”), which will be effective for the Company beginning
January 1, 2008. This standard permits entities to choose to measure many
financial instruments and certain other items at fair value and consequently
report unrealized gains and losses on such items in earnings.  The
Company does not expect there to be any significant impact of adopting this
standard on its financial position, cash flows and results of
operations.
 
 In
December 2007, the FASB issued SFAS 141 (revised 2007), Business Combinations (“SFAS
141(R)”).  SFAS 141(R) establishes principles and requirements for how
an acquirer recognizes and measures in its financial statements the identifiable
assets acquired, the liabilities assumed, any noncontrolling interest in the
acquiree and the goodwill acquired.  141(R) also establishes
disclosure requirements to enable the evaluation of the nature and financial
effects of the business combination.  141(R) will be effective for
financial statements issued for fiscal years beginning after December 15, 2008,
and will be adopted by us beginning in the first quarter of 2009.  The
Company does not expect there to be any significant impact of adopting 141(R) on
its financial position, cash flows and results of operations.
 
 In
December 2007, the FASB issued SFAS 160, Noncontrolling Interests in
Consolidated Financial Statements – an amendment of Accounting Research Bulletin
No.51(“SFAS 160”).  SFAS 160 establishes accounting and
reporting standards for ownership interests in subsidiaries held by parties
other than the parent, the amount of consolidated net income attributable to the
parent and to the noncontrolling interest, changes in a parent’s ownership
interest, and the valuation of retained noncontrolling equity investments when a
subsidiary is deconsolidated.  SFAS 160 also establishes disclosure
requirements that clearly identify and distinguish between the interests of the
parent and the interests of the noncontrolling owners.  SFAS 160 will
be effective for financial statements issued for fiscal years beginning after
December 15, 2008, and will be adopted by the Company beginning in the first
quarter of 2009.  The Company does not expect there to be any
significant impact of adopting SFAS 160 on its financial position, cash flows
and results of operations.
 
 Other recent accounting pronouncements
issued by the FASB (including its Emerging Issues Task Force (“EITF”)), the
American Institute of Certified Public Accountants (“AICPA”), and the SEC did
not or are not believed by management to have a material impact on the Company's
present or future financial statements.
 
 BUSINESS
OVERVIEW
 
 Through
the Share Exchange that resulted in our acquisition of MPL, our principal
activity became the provision of artist management services.  Our
Company operates under a similar business model to the U.S. based Creative
Artists Agency ("CAA") and International Creative Management ("ICM") by
managing, on a turnkey basis, all of our clients film and recording contract
commitments as well as their product endorsements and advertising commitments.
 We provide training, management and agency services to both new and
established artists, and we are actively engaged in image management promotion
and the marketing of our clients.  To maintain our competitiveness, we
continue to maintain good relationships with our senior artists.  In
addition, we continue to search for and foster talented artists, and we are
actively seeking more artists from the People's Republic of China ("PRC"), Hong
Kong and Taiwan.  The infusion of new talent will enhance our
Company's competitiveness and bring fresh input into the entertainment industry.
However, the entertainment industry, particularly the film industry in Hong Kong
encountered greater challenges in these years.  The industry continued
to suffer from the issue of infringements on intellectual property rights. In
addition to the popularity of copied compact discs, the advances of information
technology, especially the improvement in BT (bit torrent) point-to-point
technology and the rapid growth of peer-to-peer sharing activity on the
Internet, have caused decreased revenues in the film industry. The demand and
rate for our artists both suffer from the decrease in number of films produced
resulting in loss position in our operations.
  In order
to save the operating expenses of the Company and optimize the corporate
structure for new business opportunities in the future, our management has
decided to restructure the Company.
  12
 
 On
January 17, 2008, the Company entered into an Agreement (“Agreement”) with
Imperial, the Company’s current majority shareholder, pursuant to which the
Company agreed to sell and Imperial agreed to purchase substantially all of the
Company’s assets.  Pursuant to the Agreement, the Company will sell
100% of total issued and paid up capital of MPL, the Company’s wholly-owned
subsidiary and operating business to Imperial with effect from December 31, 2007
in exchange for Imperial’s payment of US$1 to the Company (the “Asset Sale”) at
the closing of the Asset Sale transaction (the “Closing”). The Closing of the
Asset Sale transaction is subject to the satisfaction of all of the closing
conditions set forth in the Agreement. As of the date of this filing, all of the
closing conditions have either been satisfied or waived by the Parties except
for the Company’s compliance with the required notification provisions of
Section 14(c) of the Securities Exchange Act of 1934, as amended, and Regulation
14C thereunder in regards to administrative notification of all Company
shareholders regarding the majority shareholder’s approval of the Asset Sale
(the “14C Requirements”) and thus the accounts of MPL and its subsidiaries have
been deconsolidated from the Company effective as of December 31, 2007. The
Company presently intends to maintain its corporate existence after the Asset
Sale transaction is fully completed.  Although there are no specific
plans, the Company expects that it may seek to find a private, operating company
with which to combine. In the event Company can find and complete any such
transaction, it is generally to be expected that the current owners of Company,
in the aggregate, would have a significantly reduced equity ownership of the
surviving company.  There can be no assurance that the Company will be
able to identify any business with which the Company may conduct a business
combination, nor that any such transaction could be completed.  The
Agreement was attached to the Form 8-K filed with the Securities Exchange
Commission on February 22, 2008 as Exhibit 10.1 and is incorporated herein by
reference; provided, however, that the warranties and representations contained
in such agreement are made solely to Imperial and solely for purposes of the
Asset Sale.  The foregoing summary and description do not purport to
be complete and are qualified in their entirety by reference to the
Agreement.
 
 After the
Asset Sale, all these operations were classified as discontinued operations.
There was no operation from continued operations of the Company.
 
 RESULTS
OF OPERATIONS
 
 YEAR
ENDED DECEMBER 31, 2007 COMPARED TO THE YEAR ENDED DECEMBER 31,
2006
  Revenue
from discontinued operations
 
 Revenue
from discontinued operations recognized from the provision of artist management
services decreased 30.0% to $757,062 for the year ended December 31, 2007
from $1,081,389 for the same period in 2006.  The decrease
resulted primarily from the decreased demand for artists’
services.  The entertainment industry, particularly the film industry
in Hong Kong, encountered greater challenges in the year 2007.  The
industry continued to suffer from the issue of infringements on intellectual
property rights. In addition to the popularity of copied compact discs, the
advances of information technology, especially the improvement in BT (bit
torrent) point-to-point technology and the rapid growth of peer-to-peer sharing
activity on the Internet, have caused decreased revenues in the film industry.
The immediate impact of these advances of information technology was the
production of fewer films during the year. No revenue was derived from the
continued operations of the Company.
 .
 General
and Administrative Expenses
 
 General
and administrative expenses incurred for the year ended December 31, 2007 from
continuing operations increased $39,093, or 21.5%, to $221,012 compared to
$181,919 for the same period in 2006.  General and administrative
expenses from continuing operation mainly consisted of legal and professional
fees and the increase was primarily caused by increased legal and professional
fees. General and administrative expenses incurred for the year ended December
31, 2007 from discontinued operations decreased $10,582, or 1.0%, to
$1,064,610 compared to $1,075,192 for the same period in 2006. The decrease was
insignificant.
 
 Reversal
of Provisions For Impairment Of Amounts Due From
Affiliates
  There was
no reversal of provisions for impairment of amounts due from affiliates from
both continuing and discontinued operations for the year ended December 31,
2007.  During 2006, the Company reversed the provision for impairment
of amount due from an affiliate in the amount of approximately $89,000 from
discontinued operations.
 
 Provisions
For Impairment Of Deposits And Other Current Assets
 
 There was
no provision for impairment of deposits and other current assets from both
continuing and discontinued operations for the year ended December 31,
2007.  Provisions for impairment of deposits paid and other current
assets occurred because some of our artist management contracts expired during
the year ended December 31, 2006 and the Company made provisions for impairment
of deposits paid in connection with these expired contracts in the amount of
approximately $330,000 from the discontinued operations.
  13
 
 Income
Tax
 
 Income
tax represents the aggregate taxes provided on the assessable
profits.  No income taxes expenses were provided for the years ended
December 31, 2007 and December 31, 2006 as the Company incurred tax losses for
the both years.
  Net
Income (Loss)
  Net loss
from continuing operations increased $39,093 from $181,919 and was due to the
increase in legal and professional fees incurred. Net operating results from
discontinued operations improved by $1,537,763 or 653%. The increase of
operating results from discontinued operation was a result of the Asset Sale net
off with an increase in loss from operations of MPL and its subsidiaries. The
decreased demand for artists’ management services led to the increase in
loss from the operation of MPL and its subsidiaries for the year ended December
31, 2006. Net income for the year ended December 31, 2007 increased $1,498,670,
or 359.1%, to $1,081,336 compared to a net loss of $417,334 for the same period
in 2006.  The increase primarily resulted from the gain of the Asset
Sale.
 LIQUIDITY,
CAPITAL RESOURCES AND FINANCIAL CONDITION
 
 Liquidity
  We had
working capital at December 31, 2007 of $1.  We regularly review our
cash funding requirements and attempt to meet those requirements through a
combination of cash on hand, cash provided by operations, deposits received and
possible future public and private equity offerings.  We evaluate
possible acquisitions of, or investments in, businesses that our complementary
to ours, which transactions may require the use of cash.  The
stockholders agreed to provide continuing financial supporting to the Company to
enable it to continue as a going concern since the Company has no active
operation subsequent to the Asset Sale. In the event that they do not, we may
require additional funds in the future to support our working capital
requirements or for other purposes and may seek to raise such additional funds
through the sale of public or private equity as well as other
sources.
 Cash
flows from operating activities
 
 For the
year ended December 31, 2007, net cash flows used in operating activities was
$185,442 (net cash flows provided by operating activities was $172,273 in the
same period for 2006), primarily resulting from a decrease in deposits paid, a
decrease in accounts receivable and a decrease in accrued expenses, other
liabilities and deposit received.
  Cash
flows from investing activities
 
 For the
year ended December 31, 2007, net cash flows used in investing activities was
$357,296 as compared to $509 for the same period in 2006.  The
increase in cash flow used in investing activities primarily resulted from net
proceed from disposal of subsidiaries, net of cash and cash equivalents
disposed.
  Cash
flows from financing activities
  Net cash
flows used in financing activities for the year ended December 31, 2007 was
$477,150, representing repayments to certain affiliates. Net cash flows provided
by financing activities for the year ended December 31, 2006 was $578,364. The
cash inflows were mainly provided by advances from certain
affiliates.
 
 Expected
Material Capital Commitments
 
 The
Company has no material commitments for capital expenditures and has no plans or
intention to purchase or sell any plant and/or other significant
equipment.
  14
  Expected
Significant Changes in Number of Employees
 
 The
Company does not anticipate any significant changes in its number of employees,
other than the changes that may arise during the expansion into a new
business.
 
 EFFECTS
OF INFLATION
 
 The
Company believes that the effect of inflation has not been material during the
years ended December 31, 2007 and December 31, 2006.  The countries in
which the Company conducted the majority of its operations, which include Hong
Kong, PRC and the United States, were subject to moderate degrees of inflation.
The countries in which the Company operates subsequent to the Asset Sale, which
is currently United States and Hong Kong, are subject to moderate degrees
of inflation.
  EFFECT
OF FLUCTUATION IN FOREIGN EXCHANGE RATES
 
 All of
the Company's expenses subsequent to the Asset Sale are denominated primarily in
Hong Kong dollars and U.S. dollars. The value of the Hong Kong dollar-to-United
States dollar may fluctuate and is affected by, among other things, changes in
political and economic conditions. Although a devaluation of the Hong Kong
dollar relative to the United States dollar would likely reduce the Company's
expenses (as expressed in United States dollars), any material increase in the
value of the Hong Kong dollar relative to the United States dollar would
increase the Company's expenses, and could have a material adverse effect on the
Company's business, financial condition and results of
operations.  The Company has never engaged in currency hedging
operations but will continue to monitor its foreign exchange exposure and market
conditions to determine if hedging is required.
 
 OFF-BALANCE
SHEET ARRANGEMENTS
 
 There are
no off-balance sheet arrangements that have or are reasonably likely to have a
current or future effect on our financial condition, changes in financial
condition, revenues or expenses, results of operations, liquidity, capital
expenditures or capital resources that are material to investors.
  15
  ITEM 7. FINANCIAL
STATEMENTS
   CHINA
ENTERTAINMENT GROUP, INC. AND SUBSIDIARIES
 INDEX
TO FINANCIAL STATEMENTS
   REPORT
      OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
              F-1BALANCE
      SHEET
              F-2CONSOLIDATED
      STATEMENT OF OPERATIONS
              F-3CONSOLIDATED
      STATEMENT OF CHANGES IN STOCKHOLDERS’ EQUITY (DEFICIENCY)
              F-4CONSOLIDATED
      STATEMENT OF CASH FLOWS
              F-5NOTES
      TO FINANCIAL STATEMENTS
              F-6
   16
  REPORT
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
 To the
Board of Directors and Stockholders of
 China
Entertainment Group, Inc.
  We have
audited the accompanying balance sheet of China Entertainment Group, Inc. (the
“Company”) as of December 31, 2007, and the related consolidated statement of
operations, changes in stockholders’ equity (deficiency), and cash flows of
China Entertainment Group, Inc. and its subsidiaries (collectively referred to
as the “Group”) for the years ended December 31, 2007 and 2006.  These
financial statements are the responsibility of the Company’s
management.  Our responsibility is to express an opinion on these
financial statements based on our audits.
 
 We
conducted our 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 Group
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 Group’s
internal control over financial reporting. Accordingly, we express no such
opinion. An audit includes examining, on a test basis, evidence supporting the
amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement
presentation.  We believe that our audits provide a reasonable basis
for our opinion.
 
 In our
opinion, the financial statements referred to above present fairly, in all
material respects, the financial position of the Company as of December 31,
2007, and the results of the Group’s consolidated operations and its cash flows
for the years ended December 31, 2007 and 2006, in conformity with accounting
principles generally accepted in the United States of America.
 
 The
accompanying financial statements have been prepared assuming that the Company
will continue as a going concern.  As discussed in Note 1 to financial
statements, the Company has no active operation subsequent to the year ended
December 31, 2007.  This matter raises substantial doubt about the
Company’s ability to continue as a going concern.  Management’s plans in
regards to this matter are also described in Note 1 to financial
statements.  These financial statements do not include any adjustments that
might result from the outcome of this uncertainty.
   /s/
      HLB Hodgson Impey ChengChartered
      AccountantsCertified
      Public Accountants
  Hong
Kong
  March 11,
2008
 F-1
  CHINA ENTERTAINMENT GROUP,
INC.
 BALANCE
SHEET
 
 December
      31,
                2007ASSETCurrent
      AssetAmount
      due from an affiliate
              
              $
              1Total
      asset
              
              $
              1STOCKHOLDERS’
      EQUITYCommitments
      and contingenciesStockholders’
      EquityCommon
      stock, $0.001 par value; 200,000,000 shares authorized;128,963,425
      shares issued and outstanding
              
              $
              128,963Additional
      paid-in capital
              
              
              118,762Accumulated
      deficit
              
              
              (247,724
              )Total
      stockholders’ equity
              
              
              1Total
      stockholders’ equity
              
              $
              1
 
 
 The accompanying notes are an
integral part of these financial statements.
  F-2
  CHINA
ENTERTAINMENT GROUP, INC. AND SUBSIDIARIES
 CONSOLIDATED
STATEMENT OF OPERATIONS
 FOR
THE YEARS ENDED DECEMBER 31
 
 2007
              
              
              2006General
      and administrative expenses
              
              $
              (221,012
              )
              
              $
              (181,919
              )Loss
      from continuing operation before income tax
              
              
              (221,012
              )
              
              
              (181,919
              )Income
      tax
              
              
              -
              
              
              
              -Net
      loss from continuing operation
              
              
              (221,012
              )
              
              
              (181,919
              )Discontinued
      operation:Loss
      from operation of Metrolink Pacific Limited (“MPL”) and its
      subsidiaries
              
              
              (307,548
              )
              
              
              (235,415
              )Gain
      on disposal of subsidiaries
              
              
              1,609,896
              
              
              
              -Net
      income (loss) from discontinued operation
              
              
              1,302,348
              
              
              
              (235,415
              )Net
      income (loss)
              
              $
              1,081,336
              
              
              $
              (417,334
              )Basic
      and diluted earning (loss) per share from:Continuing
      operation
              
              $
              (0.002
              )
              
              $
              (0.001
              )Discontinued
      operation
              
              
              0.010
              
              
              
              (0.002
              )$
              0.008
              
              
              $
              (0.003
              )Basic
      and diluted weighted average shares outstanding
              
              
              128,963,425
              
              
              
              128,963,425
 
 
 The accompanying notes are an
integral part of these financial statements.
  F-3
  CHINA
ENTERTAINMENT GROUP, INC. AND SUBSIDIARIES
 CONSOLIDATED
STATEMENT OF CHANGES IN STOCKHOLDERS’ EQUITY (DEFICIENCY)
 FOR
THE YEARS ENDED DECEMBER 31, 2007 AND 2006
 
 Common
              
              
              Common
              
              
              AdditionalStock
              
              
              Stock
              
              
              Paid-in
              
              
              Accumulated(shares)
              
              
              (par
      value)
              
              
              Capital
              
              
              Deficit
              
              
              TotalBalance
      – December 31, 2005
              
              
              128,963,425
              
              
              $
              128,963
              
              
              $
              118,762
              
              
              $
              (911,726
              )
              
              $
              (664,001
              )Net
      loss
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              (417,334
              )
              
              
              (417,334
              )Balance
      – December 31, 2006
              
              
              128,963,425
              
              
              
              128,963
              
              
              
              118,762
              
              
              
              (1,329,060
              )
              
              
              (1,081,335
              )Net
      income
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              1,081,336
              
              
              
              1,081,336Balance
      – December 31, 2007
              
              
              128,963,425
              
              
              $
              128,963
              
              
              $
              118,762
              
              
              $
              (247,724
              )
              
              $
              1
 
 
 The accompanying notes are an
integral part of these financial statements.
  F-4
  CHINA
ENTERTAINMENT GROUP, INC. AND SUBSIDIARIES
 CONSOLIDATED
STATEMENT OF CASH FLOWS
 FOR
THE YEARS ENDED DECEMBER 31
 
 2007
              
              
              2006Operating
      activitiesNet
      income (loss)
              
              $
              1,081,336
              
              
              $
              (417,334
              )Adjustments
      to reconcile net income (loss) to net cash (used in) provided by operating
      activitiesGain
      of disposal of subsidiaries
              
              
              (1,609,896
              )
              
              
              -Reversal
      of provision for impairment of amount due from an
affiliate
              
              
              -
              
              
              
              (88,738
              )Depreciation
              
              
              10,943
              
              
              
              10,894Provisions
      for impairment of deposits paid and other current assets
              
              
              -
              
              
              
              330,350Changes
      in operating assets and liabilitiesDecrease
      (increase) in accounts receivable
              
              
              96,975
              
              
              
              (26,831
              )Decrease
      in deposits paid, prepaid expenses and other current
assets
              
              
              312,295
              
              
              
              605,881Decrease
      in accounts payable, accrued expenses, other liabilities and deposits
      received
              
              
              (77,095
              )
              
              
              (241,949
              )Net
      cash (used in) provided by operating activities
              
              
              (185,442
              )
              
              
              172,273Investing
      activitiesNet
      proceed from disposal of subsidiaries, net of cash and cash equivalents
      disposed
              
              
              (357,296
              )
              
              
              -Purchases
      of fixed asset
              
              
              -
              
              
              
              (509
              )Net
      cash used in investing activities
              
              
              (357,296
              )
              
              
              (509
              )Financing
      activities(Repayments
      to) advances from affiliates
              
              
              (477,150
              )
              
              
              578,364Net
      cash (used in) provided by financing activities
              
              
              (477,150
              )
              
              
              578,364(Decrease)
      increase in cash and cash equivalents
              
              
              (1,019,888
              )
              
              
              750,128Cash
      and cash equivalents, beginning of period
              
              
              1,019,888
              
              
              
              269,760Cash
      and cash equivalents, end of period
              
              $
              -
              
              
              $
              1,019,888Cash
      paid for:Interest
              
              $
              -
              
              
              $
              244
 
 
 The
accompanying notes are an integral part of these financial
statements.
  F-5
  CHINA
ENTERTAINMENT GROUP, INC. AND SUBSIDIARIES
 NOTES
TO FINANCIAL STATEMENTS
 
 
 Note
      1.
              BUSINESS
      OPERATIONS AND GOING CONCERN
  Business
Operations
  China
Entertainment Group, Inc. is a Nevada corporation that serves as an investment
holding company. The Company, through its wholly-owned subsidiaries, was engaged
in the provision of artist management services, primarily in Hong Kong and
China, through December 31, 2007. Effective December 31, 2007, the major
stockholder of the Company approved the disposal (the “Disposal”) of 100% of
total issued and paid up capital of MPL, a wholly-owned subsidiary of the
Company, to Imperial International Limited (“Imperial”), an intermediate holding
company at a consideration of $1 and the accounts of MPL and its subsidiaries
have been deconsolidated from the Group effectively from the effective date of
the Disposal. Subsequent to the Disposal, the Company has no active operation as
the only operation of the Group, which was the provision of artist management
services, was disposed to Imperial. The Company is searching for a new business
opportunity.
 
 Going
Concern
 
 As of
December 31, 2007, subsequent to the Disposal, the Company has no active
operation. This matter raises substantial doubt about the Company’s ability to
continue as a going concern. The future of the Company is dependent upon its
ability to obtain financing and upon future profitable operations derived from
the development of new business opportunity. The financial statements have been
prepared on a going concern basis as the stockholders agreed to provide
continuing financial supporting to the Company to enable it to continue as a
going concern and to settle its liabilities as and when they fall due. The
financial statements do not include any adjustments relating to the
recoverability and classification of recorded asset amounts or any other
adjustment that might be necessary should the Company be unable to continue as a
going concern.
 
 Note
      2.
              SUMMARY
      OF PRINCIPAL ACCOUNTING POLICIES
 
 Basis
of presentation
 
 The
balance sheet represents the accounts of the parent Company only, which is the
legal entity. The consolidated statement of operations and cash flows include
the accounts of China Entertainment Group, Inc. and its subsidiaries. The
financial statements have been prepared in accordance with accounting principles
generally accepted in the United States of America (“US GAAP”).All significant
intercompany transactions have been eliminated. Prior year amounts have been
reclassified to conform to current-year presentation for the Group’s results of
discontinued operation.
 
 Discontinued
operation
 
 The Group
reports discontinued operation in accordance with the guidance of Statement of
Financial Accounting Standards (“SFAS”) 144, Accounting for the Impairment or
Disposal of Long-Lived Assets (“SFAS 144”). According to SFAS 144, the
Group reports business or asset group as discontinued operation when, among
other things, there is committed plan to divest the business or asset group,
actively begin marketing the business or asset group, and when the sale of the
business or asset group is deemed probable within the next 12 months. From the
effective date of the Disposal as mentioned in Note 1 to financial statements,
the Company no longer has a controlling financial interest in MPL and its
subsidiaries. Accordingly, all financial information related to MPL and its
subsidiaries’ operations has been presented as discontinued operation in the
accompanying financial statements. Refer to Note 5 – Discontinued
Operation.
 
 Use
of estimates
 
 The
preparation of financial statements in accordance with US GAAP requires
management to make estimates and assumptions that affect the reported amounts of
the assets and liabilities and disclosure of contingent assets and liabilities
at the date of the balance sheet and the reported amounts of revenues and
expenses during the reporting periods. Actual results may differ from
management’s estimates.
 
 Related
party transaction
 
 Parties
are considered to be related if one party has the ability, directly or
indirectly, to control the other party or exercise significant influence over
the other party in making financial and operating decisions. Parties are also
considered to be related if they are subject to common control or common
significant influence. Related parties may be individuals or corporate entities.
A transaction is considered to be a related party transaction when there is a
transfer of resources or obligations between related parties.
  F-6
 CHINA
ENTERTAINMENT GROUP, INC. AND SUBSIDIARIES
 NOTES
TO FINANCIAL STATEMENTS
 Fair
value of financial instruments
 
 The
Company considers that the carrying amount of Amount due an affiliate to
approximate fair value due to the short maturity.
 
 Concentrations
of credit risk
 
 The
Group's discontinued operation is subject to certain concentrations of credit
risk as follows:
 
 ·
              Due to revenue and major
      customers– For theyear ended
      December 31, 2007, 4 artists (2006: 2) each accounted for more than 10% of
      the Group’s net revenue and collectively accounted for approximately 93%
      (2006: 60%) of the Group’s net
revenue.
  Earning
(loss) per share
  Basic
earning (loss) per share (“EPS”) is computed by dividing net earning/(loss)
(numerator) by the weighted average number of common stock outstanding
(denominator) during the period. Diluted EPS is computed by dividing net
earning/(loss) (numerator) by the weighted average number of common stock
outstanding plus dilutive common stock equivalents. There was no common stock
equivalents for any of the periods presented.
 
 Stock-based
compensation
 
 Prior to
January 1, 2006, the Group applied SFAS 123 Accounting for Stock-Based
Compensation (“SFAS 123”) and Accounting Principles Board Opinion (“APB”)
No. 25, Accounting for Stock
Issued to Employees (“A PB 25”)
in accounting for its stock option plans whereby no compensation cost would be
recognized in the Group’s consolidated financial statements for stock options
granted under any of the stock option plans which on the date of grant the
exercise price per share was equal to or exceeded the fair value per share.
Compensation cost was only recognized for warrants and options granted to
non-employees for services provided. Effective January 1, 2006, the Group
adopted the provisions of SFAS 123(R), Share-Based Payment (“SFAS
123(R)”). SFAS 123(R) requires that all share-based payments to employees,
including grants of stock options, to be measured based on their grant-date fair
value and recognized as expense over the required service period. The adoption
of SFAS 123(R) has no impact on the results of operations for the years ended
December 31, 2007 and 2006 as the Group did not have share-based compensation
during the year.
  Foreign
currency translation
  The
functional currencies of our foreign subsidiaries are their local currencies.
Revenue and expenses are translated at average exchange rates during the period,
and assets and liabilities are translated as at the end of period exchange
rates. Translation adjustments resulting from this process are included in
accumulated other comprehensive income (loss) in stockholders' equity
(deficiency). Transaction gains and losses that arise from exchange rate
fluctuations on transactions denominated in a currency other than the functional
currency are included in the results of operations as incurred. These amounts
are immaterial to the financial statements.
  Cash
and cash equivalents
  Cash and
cash equivalents represent all highly liquid investments with original
maturities of three months or less.
 
 Fixed
assets
 
 Fixed
assets are stated at cost less accumulated depreciation. The Group provides for
depreciation using the straight-line method over the estimated useful lives of
the related assets, which is five years. Depreciation expense for the year ended
December 31, 2007 was $10,943 (2006: $10,894). When assets are retired or
disposed of, the cost and accumulated depreciation thereon are removed and any
resulting gains or losses are recognized in current operations. Repairs and
maintenance are expensed as incurred.
  F-7
 CHINA
ENTERTAINMENT GROUP, INC. AND SUBSIDIARIES
 NOTES
TO FINANCIAL STATEMENTS
 
 Impairment
of long-lived assets
 
 The Group
assesses the recoverability of the carrying amounts of long-lived assets
pursuant to the provisions of SFAS 144,when there isobjective
indicators of impairment exist. A loss is recognized when expected undiscounted
future cash flows are less than the carrying amount of the asset. The impairment
loss is the amount by which the carrying amount of the asset exceeds its fair
value.
 
 Provision
of impairment for deposits paid
 
 The
Company periodically assesses the recoverability of the carrying amounts of
deposits paid when there is objective evidence that deposit paid is
impaired.
  Revenue
recognition
  Service
fee income from provision of artist management services is recognized when
services are rendered. In accordance with Securities and Exchange Commission
(“SEC”) Staff Accounting Bulletin No. 101, Revenue Recognition in Financial
Statements, the Group presents its revenue on a net basis as it acts as
an agent for the artists. Revenue from discontinued operation on a gross basis
for 2007 was approximately $2,231,000 (2006: $3,383,000).
 
 Advertising
costs
 
 Advertising
costs are expensed as incurred and were immaterial for both years
presented.
 
 Pension
obligation
 
 The Group
operates a defined contribution plan and the assets of which are generally held
in a separate trustee administered fund. The pension plan is generally funded by
payments from employees and by the relevant group companies. The Group’s
contributions to the defined contribution plan are expensed as incurred. The
Group’s contributions to the defined contribution plan for the year ended
December 31, 2007 was approximately $6,000
(2006:  $8,000).
  Income
taxes
  The Group
accounts for income taxes pursuant to the provisions of SFAS 109, Accounting for Income Taxes
(“SFAS 109”) and related interpretations and guidance including Interpretation
48, Accounting for Uncertainty
in Income Taxes–an interpretation of FASB Statement No. 109 (“FIN
48”), issued by the Financial Accounting Standards Board (“FASB”). Under SFAS
109, income taxes are accounted for under the asset and liability
method.  The charge for taxation is based on the results for the year
as adjusted for items, which are non-assessable or disallowed, and is calculated
at tax rates that have been enacted or substantively enacted at the balance
sheet date.  Deferred tax assets and liabilities are recognized for
the future tax consequences attributable to differences between the carrying
amounts of existing assets and liabilities and their respective tax bases,
operating loss and tax credit carryforwards. Deferred tax assets and liabilities
are measured using enacted tax rates expected to apply in the year(s) in which
those temporary differences are expected to be recovered or settled. The effect
on deferred tax assets and liabilities due to a change in tax rates is
recognized in current operations in the period that includes the enactment date.
There are no deferred tax amounts recognized as of December 31,
2007.
  Note
      3.
              RECENT
      ACCOUNTING PRONOUNCEMENTS
 
 In
February 2006, the FASB issued SFAS 155, Accounting for Certain Hybrid
Financial Instruments – an amendment of FASB Statements 133 and 140
(“SFAS 155”).  The statement permits interests in hybrid financial
instruments that contain an embedded derivative that would otherwise require
bifurcation, to be accounted for as a single financial instrument at fair value,
with changes in fair value recognized in earnings. This election is permitted on
an instrument-by-instrument basis for all hybrid financial instruments held,
obtained, or issued as of the adoption date. The provisions of SFAS 155 are
effective for the Group on January 1, 2007.  The application of this
guidance has not had a material effect on the Group’s financial position, cash
flows and results of operation.
 
 In June
2006, the FASB issued FIN 48, which clarifies the accounting for uncertainty in
tax positions. This interpretation requires that the Group recognize in its
financial statements the impact of a tax position if that position is more
likely than not of being sustained on audit, based on the technical merits of
the position. The provisions of FIN 48 are effective for the Group on
January 1, 2007, with the cumulative effect of the change in accounting
principle, if any, recorded as an adjustment to opening retained earnings. The
application of this guidance has not had a material effect on the Group’s
financial position, cash flows and results of operation.
  F-8
 CHINA
ENTERTAINMENT GROUP, INC. AND SUBSIDIARIES
 NOTES
TO FINANCIAL STATEMENTS
 In
September 2006, the FASB issued SFAS 157, Fair Value Measurements
(“SFAS 157”), which provides guidance about how to measure assets and
liabilities that use fair value. SFAS 157 will apply whenever another US GAAP
standard requires (or permits) assets or liabilities to be measured at fair
value but does not expand the use of fair value to any new circumstances. This
standard also will require additional disclosures in both annual and quarterly
reports. SFAS 157 will be effective for financial statements issued for fiscal
years beginning after November 15, 2007, and will be adopted by us beginning in
the first quarter of 2008.  The Company does not expect there to be
any significant impact of adopting SFAS 157 on its financial position, cash
flows and results of operations.
 
 In
September 2006, the SEC staff issued Staff Accounting Bulletin (“SAB”) 108,
Considering the Effects of
Prior Year Misstatements when Quantifying Misstatements in Current Year
Financial Statements (“SAB 108”). SAB 108 was issued to eliminate the
diversity of practice in how public companies quantify misstatements of
financial statements, including misstatements that were not material to prior
years’ financial statements.  The Group began to apply the provisions
of SAB 108 to its annual financial statements for the year ended December 31,
2006.  The application of this guidance has not had a material effect
on the Group’s position, cash flows and results of operation.
 
 In
February 2007, the FASB issued SFAS 159, The Fair Value Option for Financial
Assets and Financial Liabilities – Including an amendment of FASB Statement No.
115 (“SFAS 159”), which will be effective for the Company beginning
January 1, 2008. This standard permits entities to choose to measure many
financial instruments and certain other items at fair value and consequently
report unrealized gains and losses on such items in earnings. The Company does
not expect there to be any significant impact of adopting this standard on its
financial position, cash flows and results of operations.
 
 In
December 2007, the FASB issued SFAS 141 (revised 2007), Business Combinations (“SFAS
141(R)”).  SFAS 141(R) establishes principles and requirements for how
an acquirer recognizes and measures in its financial statements the identifiable
assets acquired, the liabilities assumed, any noncontrolling interest in the
acquiree and the goodwill acquired.  SFAS 141(R) also establishes
disclosure requirements to enable the evaluation of the nature and financial
effects of the business combination.  SFAS 141(R) will be effective
for financial statements issued for fiscal years beginning after December 15,
2008, and will be adopted by the Company beginning in the first quarter of
2009.  The Company does not expect there to be any significant impact
of adopting SFAS 141(R) on its financial position, cash flows and results of
operations.
 
 In
December 2007, the FASB issued SFAS 160, Noncontrolling Interests in
Consolidated Financial Statements – an amendment of Accounting Research Bulletin
No.51(“SFAS 160”).  SFAS 160 establishes accounting and
reporting standards for ownership interests in subsidiaries held by parties
other than the parent, the amount of consolidated net income attributable to the
parent and to the noncontrolling interest, changes in a parent’s ownership
interest, and the valuation of retained noncontrolling equity investments when a
subsidiary is deconsolidated.  SFAS 160 also establishes disclosure
requirements that clearly identify and distinguish between the interests of the
parent and the interests of the noncontrolling owners.  SFAS 160 will
be effective for financial statements issued for fiscal years beginning after
December 15, 2008, and will be adopted by the Company beginning in the first
quarter of 2009.  The Company does not expect there to be any
significant impact of adopting SFAS 160 on its financial position, cash flows
and results of operations.
 
 Other
recent accounting pronouncements issued by the FASB (including its Emerging
Issues Task Force (“EITF”)), the American Institute of Certified Public
Accountants (“AICPA”), and the SEC did not or are not believed by management to
have a material impact on the present or future financial
statements.
 
 Note
      4.
              RELATED
      PARTY TRANSACTIONS
 
 Amount
due from an affiliate represents the consideration payable by Imperial, an
intermediate holding company, in relation to the Disposal. The amount is
unsecured, interest-free and due on demand.
  F-9
 CHINA
ENTERTAINMENT GROUP, INC. AND SUBSIDIARIES
 NOTES
TO FINANCIAL STATEMENTS
 Related
party transactions included in the consolidated statement of operations for the
years presented include the following:
 
 Nature
      of
              
              Description
              
              Years
      ended
                December
      31,Relatedparty
              
              relationship
      and control
              
              of
      transactions
              
              2007
              
              
              2006Discontinued operationChina
      Star HK Distribution Limited
              
              Related
      company, a subsidiary of China Star Entertainment Limited (“China Star”),
      which owns 49% of Together Again Limited (“TAL”)
              
              Service
      income, net (note a)
              
              $
              220,449
              
              
              $
              572,615China
      Star
              
              Related
      company, owns 49% of TAL
              
              Management
      fee paid(note
      b)
              
              $
              107,693
              
              
              $
              107,693China
      Star Laser Disc Company Limited
              
              Related
      company, a subsidiary of China Star which owns 49% with
TAL
              
              Management
      fee paid(note
      b)
              
              $
              507,692
              
              
              $
              507,692
  Notes:
              (a)
              The
      transactions were carried out at market price or, where no market price
      was available, at cost plus a percentage profit
  mark-up.
  (b)
                The
      transactions were carried out at terms agreed between both
      parties.
 Note
      5.
              DISCONTINUED
      OPERATION
 
 As
mentioned in Note 1 to financial statements, the major stockholder of the
Company approved the plan, effective December 31, 2007, to dispose of its artist
management services operation to Imperial. Accordingly, the Group’s
subsidiaries’ results of operations have been presented as a discontinued
operation within the consolidated statement of operations in accordance with
SFAS 144. The subsidiaries were acquired in November 2004 in connection with a
reverse acquisition and provided artist management services primarily in Hong
Kong and the China. The summary of the operating results from discontinued
operation is as follows:
 
 2007
              
              
              2006Revenue,
      net
              
              $
              682,681
              
              
              $
              1,080,040Other
      revenue
              
              
              74,381
              
              
              
              1,349General
      and administrative expenses
              
              
              (1,064,610
              )
              
              
              (1,075,192
              )Reversal
      of provision for impairment of amount due from an
affiliate
              
              
              -
              
              
              
              88,738Provisions
      for impairment of deposits paid and other current assets
              
              
              -
              
              
              
              (330,350
              )Loss
      before income tax
              
              
              (307,548
              )
              
              
              (235,415
              )Income
      tax
              
              
              -
              
              
              
              -Loss
      from operation of MPL and its subsidiaries
              
              $
              (307,548
              )
              
              $
              (235,415
              )
 
 There
were no assets or liabilities of the Group’s subsidiaries included in the
balance sheet as of December 31, 2007, which represents the balance sheet
of the Company only.
  F-10
  CHINA
ENTERTAINMENT GROUP, INC. AND SUBSIDIARIES
 NOTES
TO FINANCIAL STATEMENTS
 Note
      6.
              INCOME
      TAX
  Hong Kong
Tax:  Hong Kong profits tax has been provided at a rate of
17.5% on the estimated assessable profits arising in Hong Kong. A reconciliation
of the provision for Hong Kong profits tax is as follow:
 2007
              
              
              2006%
              
              
              
              
              
              %Income
      (loss) before income tax
              
              $
              1,081,336
              
              
              
              100
              
              
              $
              (417,334
              )
              
              
              (100
              )(Provision)
      benefit for Hong Kong profits tax
              
              $
              (189,234
              )
              
              
              (17.5
              )
              
              $
              73,034
              
              
              
              17.5Tax
      effect of loss incurred at the company level
              
              
              491,960
              
              
              
              45.5
              
              
              
              (38,182
              )
              
              
              (9.1
              )Tax
      effect of earnings not taxable in determining taxable
    profits
              
              
              (320,590
              )
              
              
              (29.6
              )
              
              
              15,765
              
              
              
              3.8Tax
      effect of expenses not deductible in determining taxable
      profits
              
              
              15,949
              
              
              
              1.5
              
              
              
              (48,711
              )
              
              
              (11.7
              )Tax
      effect of unrecognized temporary differences
              
              
              1,915
              
              
              
              0.1
              
              
              
              (1,906
              )
              
              
              (0.5
              )Provision
      for income tax
              
              $
              -
              
              
              
              -
              
              
              $
              -
              
              
              
              -
  For the
years ended December 31, 2007 and 2006, the Group generated operating losses
and, therefore, has no tax liability. The US tax loss carryforwards will expire
through 2027 and the Hong Kong tax loss carryforwards has no expiry date.
Management believes it is more likely than not that the net carrying value of
the deferred tax asset will not be realized and has provided a 100% valuation
allowance. Pursuant to the Tax Reform Act of 1986, annual utilization of the US
net operating loss carryforwards may be limited if a cumulative change in
ownership of more than 50% is deemed to occur within any three-year
period.
 
 Note
      7.
              STOCKHOLDERS’
      EQUITY (DEFICIENCY)
 
 Common
stock
 
 The
Company had no equity transaction during the years ended December 31, 2007 and
2006.
 
 Note
      8.
              CONTINGENCIES
      AND COMMITMENTS
 
 Litigations
 
 Lang, et
al. v. Welch, et al. (China Entertainment Group, Inc.) (United States District
Court, Central District California, Case No. CV 07-1068-GHK-PJWx).  On
December 20, 2006, plaintiffs Sanford Lang and Martin Goldrod (collectively,
“Plaintiffs”) initiated a lawsuit in the Los Angeles Superior Court, Central
District, alleging claims for fraud, breach of contract, violations of RICO, and
civil conspiracy against several parties, including the Company.  The
Company was provided with a copy of Plaintiffs’ Complaint on or about February
28, 2007, after the matter was removed to United States District
Court.  According to the Complaint, the Company is a “nominal
Defendant” as Plaintiffs purport to assert claims derivatively on its
behalf.  Accordingly, it appears that no relief sought against the
Company itself.  On or about January 31, 2008, Plaintiffs and
Defendants, including the Company, entered into a confidential settlement
agreement to resolve all claims pending between them.  Subject to
satisfactory discharge of certain obligations set forth in the confidential
settlement agreement, it is anticipated that a dismissal of the action will be
filed no later than early January 2009. The
consolidated financial statements do not include any adjustments related to the
outcome of this uncertainty.
  Note
      9.
              SEGMENT
      INFORMATION
 
 Operating
segments are defined as components of an enterprise about which separate
financial information is available that is evaluated regularly by the chief
operation decision maker, or decision-making group, in deciding how to allocate
resources and in assessing performance. MPL’s wholly-owned subsidiaries were as
follows: Anglo Market International Limited ("AMIL"), China Star Management
Limited ("CSML"), and Metrolink Global Limited ("MGL"). The principal activities
of MPL’s subsidiaries were the provision of artist management services and such
operation was disposed with an effective date on December 31, 2007. The “other”
column represents unallocated corporate-related costs of the parent
company.
  F-11
 CHINA
ENTERTAINMENT GROUP, INC. AND SUBSIDIARIES
 NOTES
TO FINANCIAL STATEMENTS
 The
Company’s segment information for the years ended December 31, 2007 and 2006 are
as follows:
 
 2007
              
              AMIL
              
              
              CSML
              
              
              MGL
              
              
              OTHER
              
              
              TotalRevenue,
      netContinuing
      operation
              
              $
              -
              
              
              $
              -
              
              
              $
              -
              
              
              $
              -
              
              
              $
              -Discontinued
      operation
              
              $
              237,846
              
              
              $
              444,835
              
              
              $
              -
              
              
              $
              -
              
              
              $
              682,681$
              682,681Net (loss)
      incomeContinuing
      operation
              
              $
              -
              
              
              $
              -
              
              
              $
              -
              
              
              $
              (221,012
              )
              
              $
              (221,012
              )Discontinued
      operation
              
              $
              220,673
              
              
              $
              (512,836
              )
              
              $
              (15,385
              )
              
              $
              1,609,896
              
              
              $
              1,302,348$
              1,081,336Total
      assets
              
              $
              -
              
              
              $
              -
              
              
              $
              -
              
              
              $
              1
              
              
              $
              1
 
 2006
              
              AMIL
              
              
              CSML
              
              
              MGL
              
              
              OTHER
              
              
              TotalRevenue,
      netContinuing
      operation
              
              $
              -
              
              
              $
              -
              
              
              $
              -
              
              
              $
              -
              
              
              $
              -Discontinued
      operation
              
              $
              130,180
              
              
              $
              949,860
              
              
              $
              -
              
              
              $
              -
              
              
              $
              1,080,040$
              1,080,040Net (loss)
      incomeContinuing
      operation
              
              $
              -
              
              
              $
              -
              
              
              $
              -
              
              
              $
              (181,919
              )
              
              $
              (181,919
              )Discontinued
      operation
              
              $
              112,884
              
              
              $
              (73,411
              )
              
              $
              (274,888
              )
              
              $
              -
              
              
              $
              (235,415
              )$
              (417,334
              )
 
 Geographic
information is based on the location of the selling service. Revenues from
discontinued operation from external customers by geographic region were as
follows:
 
 Year
      ended December 31:
              
              2007
              
              
              2006%
              
              
              %Hong
      Kong
              
              
              48
              
              
              
              70People’s
      Republic of China
              
              
              50
              
              
              
              29Other
              
              
              2
              
              
              
              1100
              
              
              
              100
  F-12
  ITEM
      8.
              CHANGES
      IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
      DISCLOSURE
  None.
  ITEM
      8A.
              CONTROLS
      AND PROCEDURES
 
 (a)
              Evaluation of disclosure
      controls and procedures. We maintain controls and procedures
      designed to ensure that information required to be disclosed in the
      reports that we file or submit under the 1934 Act is recorded, processed,
      summarized and reported within the time periods specified in the rules and
      forms of the SEC. Based upon their evaluation of those controls and
      procedures performed as of the period covered by this report, our chief
      executive officer and the chief accounting officer concluded that our
      disclosure controls and procedures were inadequate to ensure that
      information required to be disclosed by us in reports that we file or
      submit under the 1934 Act is recorded, processed, summarized and reported
      within the time periods specified in SEC rules and forms. We are
      developing a plan to ensure that all information will be recorded,
      processed, summarized and reported on a timely basis. This plan is
      dependent, in part, upon reallocation of responsibilities among various
      personnel, possibly hiring additional personnel and additional
      funding.
 
 (b)
              Management's annual report on internal control
      over financial reporting. Our
      management is responsible for establishing and maintaining adequate
      internal control over financial reporting (as defined in Rule 13a-15(f)
      under the Exchange Act). Our management assessed the effectiveness of our
      internal control over financial reporting as of December 31, 2007. In
      making this assessment, our management used the criteria set forth by the
      Committee of Sponsoring Organizations of the Treadway Commission (COSO) in
      Internal Control-Integrated Framework. Based on this evaluation, our
      management concluded that, as of December 31, 2007, our internal control
      over financial report was effective.
                    
                    This
      annual report does not include an attestation report of the Company's
      registered public accounting firm regarding internal control over
      financial reporting. Management's report was not subject to attestation by
      the company's registered public accounting firm pursuant to temporary
      rules of the Securities and Exchange Commission that permit the company to
      provide only management's report in this annual
      report.
 
 (c)
              Changes in internal
      controls. Other than as mentioned above, there were no changes in
      our internal controls or in other factors that could significantly affect
      these controls subsequent to the date of the evaluation of those controls
      by the chief executive officer and chief accounting
    officer.
 
 ITEM
      8B.
              OTHER
      INFORMATION
 
 As
described in full detail in our Current Report on Form 8-K filed on April 23,
2007, and incorporated herein by reference, effective on February 15, 2007,
Clancy and Co., P.L.L.C. resigned as the Registrant’s independent accountant
engaged to audit the Registrant’s financial statements.  As more fully
described in our Current Report on Form 8-K filed on January 31, 2008, and
incorporated herein by reference, effective January 16, 2008, HLB Hodgson
Impey Cheng, whose address is 31/F Gloucester Tower, The Landmark, 11 Pedder
Street, Central, Hong Kong, was engaged to serve as the Company’s new
independent accountant to audit the Company’s financial statements.
  17
  PART
III
 
 ITEM
      9.
              DIRECTORS,
      EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS; COMPLIANCE WITH SECTION
      16(a) OF THE EXCHANGE ACT
 
 The
following table and text sets forth the names and ages of all directors and
executive officers of the Company as of December 31, 2007.  Ms. Chen
Ming Yin, Tiffany and Mr. Tang Chien Chang were named as directors of the
Company, effective December 24, 2004.  The members of the board of
directors of the Company have not yet been named to any board committees. The
Board of Directors is comprised of only one class.  Except as
otherwise described below, all of the directors will serve until the next annual
meeting of stockholders and until their successors are elected and qualified, or
until their earlier death, retirement, resignation or removal. Also provided
herein are brief descriptions of the business experience of each director and
executive officer during the past five years and an indication of directorships
held by each director in other companies subject to the reporting requirements
under the federal securities laws.
 
 Name
              Age
              Position(s)Ms.
      Chen Ming Yin Tiffany
              50
              DirectorMr.
      Tang Chien Chang
              49
              Director
      and Chief Executive OfficerMs.
      Dorothy Wong
              41
              Chief
      Accounting Officer
  Biographies
of Directors and Executive Officers
 
 TIFFANY
CHEN MING YIN, 50, Director. Ms. Chen has produced a number of blockbuster films
and is the vice chairman and executive director of two Hong Kong listed
companies in the entertainment and multi-media industries. She has over 15 years
of experience in the industries.  Ms. Chen is not an officer or
director of any other U.S. reporting company.
 
 TANG
CHIEN CHANG, 49, Director and Chief Executive Officer. Mr. Tang has been
self-employed as a businessman and investor in the entertainment industry for at
least the last five years.  Mr. Tang is not an officer or director of
any other U.S. reporting company.
 
 DOROTHY
WONG, 41, Chief Accounting Officer. Ms. Wong received her degree in Accountancy
from City Polytechnic University in 1990. She is a member of the Hong Kong
Institute of Certified Public Accountants. She is the Financial Controller and
Company Secretary of China Star Entertainment Limited ("China Star"), a
shareholder of the Company. She joined China Star in 2001. Prior to her
employment with China Star, she worked with an international accounting firm for
over 10 years.
 
 Family
Relationships
 
 There are
no family relationships between or among any of the current directors, executive
officers or persons nominated or charged by the Company to become directors or
executive officers.
 
 Involvement
in Certain Legal Proceedings
  There are
no orders, judgments, or decrees of any governmental agency or administrator, or
of any court of competent jurisdiction, revoking or suspending for cause any
license, permit or other authority to engage in the securities business or in
the sale of a particular security or temporarily or permanently restraining any
of our officers or directors from engaging in or continuing any conduct,
practice or employment in connection with the purchase or sale of securities, or
convicting such person of any felony or misdemeanor involving a security, or any
aspect of the securities business or of theft or of any felony. Nor are any of
the officers or directors of any corporation or entity affiliated with us so
enjoined.
  18
 
 Audit
Committee and Independent Directors
 
 As the
Company believes that our Board of Directors has the integrity and the resources
to oversee the control of the operations of the Company, the Company did not
establish an audit committee, nor do we have a financial expert on our Board of
Directors as that term is defined by Item 401(e)(2).
 
 Section
16(a) Beneficial Ownership Reporting Compliance:
  Section
16(a) of the 1934 Act, requires the Company's directors, executive officers and
holders of more than 10% of the Company's common stock to file with the SEC
initial reports of ownership and reports of changes in ownership of common stock
and other equity securities of the Company. Such executive officers, directors
and greater than 10% beneficial owners are required by the SEC to furnish us
copies of all Section 16(a) forms filed by such reporting persons.  To
our knowledge, based solely on the Company's review of copies of Forms 3, 4, and
5 filed with the SEC or written representations from certain reporting persons,
we believe that during fiscal year ended December 31, 2007, the shareholder
Imperial, the current director and chief executive officer Mr. Tang Chien Chang,
and current director Ms. Chen Ming Yin Tiffany were subject to but have not
filed the reports they are required to file under Section 16(a) of the 1934
Act.
 
 Code
of Ethics
 
 We have
adopted a code of ethics that applies to our principal executive officer,
principal financial officer, principal accounting officer, or controller, or
persons performing similar functions.  We will provide to any person
without charge, upon request, a copy of such Code of Ethics.  Persons
wishing to make such a request should contact Dorothy Wong at our principal
office.
  ITEM
      10.
              EXECUTIVE
      COMPENSATION
 
 Executive
Compensation
  The
following executive compensation disclosure reflects all compensation awarded
to, earned by or paid to the executive officers below for the fiscal year ended
December 31, 2007 and 2006.  The following table summarizes all
compensation for fiscal year 2007 and 2006 received by our Chief Executive
Officer, and the Company’s two most highly compensated executive officers who
earned more than $100,000 in fiscal year 2007.
 SUMMARY
COMPENSATION TABLE
  Name
      andprincipalposition
                
                Year
                
                
                Salary
                  ($)
                
                
                Bonus
                  ($)
                
                
                Stock
                  Awards
                  ($)
                
                
                Option
                  Awards
                  ($)
                
                
                Non-
                  Equity
                  Incentive
                  Plan
                  Compen-sation
                  ($)
                
                
                Non
                  qualified
                  Deferred
                  Compen-
                  sation
                  Earnings
                  ($)
                
                
                All
      Other
                  Compen-
                  sation
                  ($)
                
                
                Total
                  ($)Mr.
      Tang Chien
                
                
                2007
                
                
                $
                -
                
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                -Chang
      (1), Chief
                
                
                2006
                
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                -Executive
      OfficerMs.
      Chen Ming
                
                
                2007
                
                
                $
                15,385
                
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                15,385Yin
      Tiffany(2),
                
                
                2006
                
                
                
                15,385
                
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                15,385DirectorMs.
      Dorothy
                
                
                2007
                
                
                $
                -
                
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                -Wong(1),
      Chief
                
                
                2006
                
                
                $
                -
                
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                -Accounting
      Officer
 (1)
              For
      the year ended December 31, 2007, Mr. Tang and Ms Wong did not receive any
      cash or share-based compensation.
 (2)
              For
      the year ended December 31, 2007, Ms. Chen received salary of $15,385. No
      share-based compensation was received during the year ended December 31,
      2007.
  19
  Employment
Agreements
 
 The
Company currently does not have any employment agreements with any of the
Company's directors.  The Company's subsidiary has a service agreement
with Director, Ms. Chen Ming Yin Tiffany.
 
 Outstanding
Equity Awards at Fiscal Year-End
 
 As of
December 31, 2007, the Company does not have any outstanding equity
awards.
 
 Employee
Retirement Plans, Long-Term Incentive Plans and Pension Plans
 
 The
Company does not have any long-term incentive plan to serve as an incentive for
performance to occur over a period of longer than one fiscal year.
 
 Director
Compensation
 
 The
Company has not entered into any written director's compensation agreements with
Ms. Chen Ming Yin Tiffany or Mr. Tang Chien Chang at this time.
 
 COMMUNICATIONS
WITH MEMBERS OF THE BOARD OF DIRECTORS
 
 The Board
of Directors has not established a formal process for stockholders to send
communications to its members. Any stockholder may send a communication to any
member of the Board of Directors in care of our address below:
 
 China
Entertainment Group, Inc.
 Attn: Ms.
Dorothy Wong
 Unit 3409
Shun Tak Centre, West Tower,
 168-200
Connaught Road Central, Hong Kong
 Telephone:
011-852-2313-1888
 
 If a
communication is sent to our address, we will forward any such communication to
the Board member.  If the stockholder would like the communication to
be confidential, it should be so marked.
 
  ITEM
      11.
              SECURITY
      OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED
      STOCKHOLDER MATTERS
 
 As used
in this section, the term beneficial ownership with respect to a security is
defined by Rule 13d-3 under the 1934 Act, as amended, as consisting of sole or
shared voting power (including the power to vote or direct the vote) and/or sole
or shared investment power (including the power to dispose of or direct the
disposition of) with respect to the security through any contract, arrangement,
understanding, relationship or otherwise, subject to community property laws
where applicable.  As of March 11, 2008, the Company had a total of
approximately 128,963,425 shares of Common Stock, which are the only issued and
outstanding voting equity securities of the Company.
 
 The
following table sets forth, as of March 11, 2008: (a) the names and addresses of
each beneficial owner of more than five percent (5%) of the Company's Common
Stock known to the Company, the number of shares of Common Stock beneficially
owned by each such person, and the percent of the Company's Common Stock so
owned; and (b) the names and addresses of each director and executive officer,
the number of shares of Common Stock beneficially owned, and the percentage of
the Company's Common Stock so owned, by each such person, and by all directors
and executive officers of the Company as a group.  Each person has
sole voting and investment power with respect to the shares of Common Stock,
except as otherwise indicated. Beneficial ownership consists of a direct
interest in the shares of Common Stock, except as otherwise
indicated.
  20
  Name,
      Address and Title
                
                Total
      Number
                  of
      Shares of
                  Common
      Stock
                
                Percentage
                  Ownership
      of
                  Common
      Stock (3)Ms.
      Chen Ming Yin Tiffany
                  Director
                  Unit
      3409 Shun Tak Centre, West Tower,
                  168-200
      Connaught Road Central, Hong Kong
                
                0
      (1)(2)
                
                0%Mr.
      Tang Chien Chang
                  Director
      and Chief Executive Officer
                  Unit
      3409 Shun Tak Centre, West Tower,
                  168-200
      Connaught Road Central, Hong Kong
                
                0
      (1)(2)
                
                0%Ms.
      Dorothy Wong
                  Chief
      Accounting Officer
                  Unit
      3409 Shun Tak Centre, West Tower,
                  168-200
      Connaught Road Central, Hong Kong
                
                0
                
                0%All Directors and Executive Officers
      (3 persons)
                
                0
                
                0%
 Other 5% or
Greater Owners:
 Name,
      Address and Title
                
                Total
      Number of
                  Shares
      of
                  Common
      Stock
                
                Percentage
                  Ownership
      of
                  Common
      Stock (3)Imperial
      International Limited
                  Unit
      3409 Shun Tak Centre, West Tower,
                  168-200
      Connaught Road Central, Hong Kong
                
                109,623,006
      (2)
                
                85%Total
      of All Directors and Executive Officers and 5% or Greater
      Owners
                
                109,623,006
                
                85%
 (1)
              Ms.
      Chen Ming Yin, Tiffany, is a direct 0.75% shareholder of China Star, which
      is an indirect 49% owner of TAL. Tang Chien Chang is indirectly a 50%
      owner of Colima Enterprises Limited ("Colima"), a 51% owner of TAL.
      Imperial is 100% owned by TAL. Imperial owns approximately 85% of the
      Company.
 
 (2)
              Imperial
      is 100% owned by TAL. TAL is 51% owned by Colima, whose directors are Mr.
      Tang Chien Chang and Mr. Kim Min Sup, Mark. Colima is 50% owned by Stylish
      Century Enterprises, Inc., ("Stylish") whose director is Mr. Kim Min Sup,
      Mark; Stylish is 100% owned by Mantex Holdings Limited, whose owner and
      director is Mr. Kim Min Sup, Mark. Colima is 50% owned by Givon
      Enterprises Corp., ("Givon") whose director is Mr. Tang Chien Chang; Givon
      is 100% owned by Chartwell Overseas Limited ("Chartwell"), whose owner and
      director is Mr. Tang Chien Chang. TAL is 49% owned by China Star, listed
      on the Main Board of The Stock Exchange of Hong Kong Limited. China Star
      is 0.75% owned directly by Ms. Chen Ming Yin, Tiffany; 16.65% owned by
      Porterstone Limited ("Porterstone"), whose owner is Ms. Chen Min Yin,
      Tiffany; 1.30% owned by Mr. Heung Wah Keung, and 0.66% owned by Dorest
      Company Limited ("Dorest"). Dorest is 100% owned by Glenstone Investments
      Limited ("Glenstone"); Glenstone is 40% owned by Mr. Heung Wah Kueng, and
      60% owned by Porterstone.
 
 (3)
              Figures
      may vary slightly due to rounding.
 
 21
  CHANGE
IN CONTROL
 
 None.
  ITEM
      12.
              CERTAIN
      RELATIONSHIPS AND RELATED
TRANSACTIONS
 
 Amounts
due from an affiliate of $1 represents the consideration payable by Imperial, an
immediate holding company, in relation to the Asset Sale. The amount is
unsecured, interest-free and due on demand.
  Related
party transactions included in the consolidated statement of operations for the
years presented include the following:
  Nature
      ofrelationship
              
              Description
      of
              
              Year
      ended December 31,Related
      party
              
              and
      control
              
              transaction
              
              2007
              
              
              2006Discontinued
      operationChina
      Star HK Distribution Limited
              
              Related
      company, a subsidiary of China Star which owns 49% of TAL
              
              Services
      income, net
              
              $
              220,449
              
              
              $
              572,615China
      Star
              
              Related
      company, owns 49% of TAL
              
              Management
      fee paid
              
              $
              107,693
              
              
              $
              107,693China
      Star Laser Disc Company Limited
              
              Related
      company, a subsidiary of China Star which owns 49% with
TAL
              
              Management
      fee paid
              
              $
              507,692
              
              
              $
              507,692
 
 With
regard to any future related party transactions, we plan to fully disclose any
and all related party transactions, including, but not limited to, the
following:
 
 ●
              disclose
      such transactions in prospectuses where
  required;
 
 ●
              disclose
      in any and all filings with the SEC, where
  required;
 
 ●
              obtain
      disinterested directors consent;
and
 
 ●
              obtain
      shareholder consent where required.
   22
 ITEM 13.
                EXHIBITS
  Exhibit
                  Number
                Description2.1
                Share Exchange Agreement dated November 17, 2004
      by and among, inter alia, the Registrant, MPL, and the shareholders of MPL
      (1)3.1(i)
                Certificate of Amendment to Articles of
      Incorporation (1)3.1(ii)
                Articles of Amendment of Articles of Incorporation
      (2)3.1(iii)
                Articles of Incorporation
    (3)3.1(iv)
                Articles of Merger (3)3.2
                Bylaws (3)10.1
                Agreement for the sale and purchase of 120 shares
      in the issued share capital of Metrolink Pacific Limited dated January 17,
      2008 by and between the Company and Imperial International Limited
      (8)16.1
                Letter on Change of Certifying Accountant
      (4)16.2
                Letter from Clancy and Co., P.L.L.C. dated April
      20, 2007 (7)21
                List
      of Subsidiaries (6)31.1
                Rule
      13a-14(a) Certifications of Chief Executive Officer pursuant to Section
      302 of the Sarbanes-Oxley Act of 200231.2
                Rule
      13a-14(a) Certifications of Chief Accounting Officer pursuant to Section
      302 of the Sarbanes-Oxley Act of 200232.1
                Certification
      of the Chief Executive Officer and pursuant to 18 U.S.C. Section 1350 as
      adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
      2002.32.2
                Certification
      of the Chief Accounting Officer pursuant to 18 U.S.C. Section 1350 as
      adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
      2002.99.1
                Form 8-K Current Report filed on November 19, 2005
      (5)99.2
                Schedule 14C Definitive Information Statement
      filed on November 30, 2004
(1)
 
  (1)
                  Incorporated
      by reference from the Company’s Schedule 14C filed on November 30,
      2004.
 (2)
                  Incorporated
      by reference from the Company’s Form 10-QSB filed on October 23,
      2001.
 (3)
                  Incorporated
      by reference from the Company’s Form 10-QSB filed on January 19,
      2000.
 (4)
                  Incorporated
      by reference from the Company’s Form 8-K filed on July 27,
      2005.
 (5)
                  Incorporated
      by reference from the Company’s Form 8-K filed on November 19,
      2005.
 (6)
                  Incorporated
      by reference from the Company’s Form 10-KSB filed on January 13,
      2006.
 (7)
                  Incorporated
      by reference from the Company’s Form 8-K filed on April 23,
      2007.
 (8)
                  Incorporated
      by reference from the Company’s Form 8-K filed on February 22,
      2008.
  23
  ITEM
      14.
              PRINCIPAL
      ACCOUNTANT FEES AND SERVICES
  Effective
January 16, 2008, we engaged HLB Hodgson Impey Cheng to serve as the Company’s
new independent accountant to audit the Company’s financial statements. The
following are the services provided and the amount billed.
 Fee
      Category
              
              Year
      Ended
                December
      31,
                2007
              
              
              Year
      Ended
                December
      31,
                2006Audit
      fees
              
              $
              125,000
              
              
              $
              125,000Audit-related
      fees
              
              
              -
              
              
              
              -Tax
      fees
              
              
              -
              
              
              
              -All
      other fees
              
              
              -
              
              
              
              -
 
 AUDIT
FEES
  Audit
fees consist of fees billed for professional services rendered for the audit of
our financial statements and review of our interim financial statements included
in quarterly reports and services that are normally provided by our independent
accountants in connection with statutory and regulatory filings or
engagements.
  AUDIT
RELATED FEES
 
 There
were no fees billed for services reasonably related to the performance of the
audit or review of the financial statements outside of those fees disclosed
above under "Audit Fees" for the year ended December 31, 2007 or
2006.
 
 TAX
FEES
 
 There
were no fees billed for services for tax compliance, tax advice and tax planning
work to the Company for the years ended December 31, 2007 and 2006.
 
 PRE-APPROVAL
POLICIES AND PROCEDURES
 
 Prior to
engaging its accountants to perform particular services, our board of directors
obtains an estimate for the service to be performed. All of the services
described above were approved by the board of directors in accordance with its
procedure.
 
 
 [SIGNATURES
PAGE FOLLOWS]
  24
  SIGNATURES
  Pursuant
to the requirements of Section 13 or 15(d) of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on its behalf by
the undersigned, thereunto duly authorized.
  CHINA ENTERTAINMENT GROUP,
      INC.
                    (Registrant)Dated:
      March 14, 2008
                  By:
                  /s/ Tang
      Chien ChangTang
      Chien ChangChief
      Executive Officer
  Pursuant
to the requirements of the Securities Exchange Act of 1934, this report has been
signed below by the following persons on behalf of the registrant and in the
capacities and on the dates indicated.
  Signature
                  
                  Title
                  
                  Date/s/
      Chen Ming Yin Tiffany
                  
                  Director
                  
                  March
      14, 2008Chen
      Ming Yin Tiffany/s/
      Tang Chien Chang
                  
                  Director
                  
                  March
      14, 2008Tang
      Chien Chang