**U.S.
      Securities and Exchange Commission**


Washington,
      D.C. 20549










**FORM
      10-QSB**










**[X]
      QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT** **OF
      1934**




**For
      the quarterly period ended June 30, 2006**





**[
       ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE** **ACT
      OF 1934**




**For
      the transition period from _______ to _______**







**CHINA
      DIGITAL MEDIA
      CORPORATION**


**(Exact
      name of small business issuer as specified in its charter)**





**HAIRMAX
      INTERNATIONAL CORP.**


**(Former
      name of registrant)**




**Nevada**
              **13-3422912****(State
                  or other jurisdiction of**
              **(IRS
                  Employer Identification No.)****incorporation
                  or organization)**




**2505-06,
      25/F, Stelux House, 698 Prince Edward Road E. Kowloon, Hong
      Kong**


**(Address
      of principal executive offices)**





**(011)
      852-2390-8600**


**(Issuer's
      telephone number)**










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





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





Number
      of
      shares of common stock outstanding as of August 11, 2006:
      31,757,365





Number
      of
      shares of preferred stock outstanding as of August 11, 2006:
      1,875,000












**INDEX
                TO FORM 10-QSB**Page
                No.**PART
                I**Item
                1.    Financial Statements (Unaudited)
            3Condensed Consolidated Balance Sheet- June 30, 2006 (unaudited)
            3Condensed
                Consolidated Statements of Operations And
                Comprehensive Income- Six Months and Three Months Ended June 30, 2006 and 2005 (unaudited)
            4Condensed Consolidated Statements of Cash
                Flows-
                Six Months Ended June 30, 2006 and 2005 (unaudited)
            5Notes to Condensed Consolidated Financial Statements
                (unaudited)
            6-10Item
                2.    Management's Discussion and
                Analysis of Financial Condition And
                Results of Operations
            11-15Item
                3.    Controls and
                Procedures
            15**PART
                II**Item
                1.    Legal Proceedings
            16Item
                2.    Unregistered Sales of Equity Securities
                and Use of Proceeds
            16Item
                3.    Defaults Upon Senior
                Securities
            16Item
                4.    Submission of Matters to a Vote of
                Security Holders
            16Item
                5.    Other Information
            16Item 6.   
              Exhibits and Reports
            17






2
 *Index*


**ITEM
        1.**






**CHINA
                  DIGITAL MEDIA CORPORATION AND SUBSIDIARIES****CONDENSED
                  CONSOLIDATED BALANCE SHEET****AS
                  OF JUNE 30, 2006****(UNAUDITED)****ASSETS****CURRENT
                  ASSETS**Cash
                  and cash equivalents
              
              $
              472,466Accounts
                  receivable, net
              
              
              7,435,979Inventories,
                  net
              
              
              1,159,396Due
                  from a related company
              
              
              89,744Other
                  receivables and prepaid expenses
              
              
              1,111,117**Total
                  Current Assets**
              
              
              10,268,702**INTANGIBLE
                  ASSETS**
              
              
              394,901**INVESTMENTS
                  IN TELEVISION SERIES, NET**
              
              
              662,871**INVESTMENTS
                  IN AFFILIATE**
              
              
              177,947**PROPERTY
                  AND EQUIPMENT, NET**
              
              
              13,546,813**TOTAL
                  ASSETS**
              
              $
              25,051,234**LIABILITIES
                  AND STOCKHOLDERS' EQUITY****CURRENT
                  LIABILITIES**Accounts
                  payable
              
              $
              8,740,539Other
                  payables and accrued liabilities
              
              
              292,996Due
                  to a director
              
              
              76,957Due
                  to a stockholder
              
              
              199,922Due
                  to a related company
              
              
              161,769Value
                  added tax and other taxes payable
              
              
              78,350Income
                  tax payable
              
              
              2,542,306**Total
                  Current Liabilities**
              
              
              12,092,839**COMMITMENTS
                  AND CONTINGENCIES**
              
              
              -**MINORITY
                  INTERESTS**
              
              
              130,651**STOCKHOLDERS'
                  EQUITY**Series
                  A convertible preferred stock, $0.001 par value, 40,000,000
                  sharesauthorized,1,875,000
                  shares issued and outstanding
              
              
              1,875Series
                  B convertible preferred stock, $0.001 par value, 1,000
                  sharesauthorized,
                  Nil share issued and outstanding
              
              
              -Common
                  stock, $0.001 par value, 500,000,000 shares authorized,31,727,365
                  shares issued and outstanding
              
              
              31,727Additional
                  paid-in capital
              
              
              5,909,892Deferred
                  stock compensation
              
              
              (39,633
              )Retained
                  earningsUnappropriated
              
              
              6,005,886Appropriated
              
              
              956,343Accumulated
                  other comprehensive loss
              
              
              (38,346
              )**Total
                  Stockholders' Equity**
              
              
              12,827,744**TOTAL
                  LIABILITIES AND STOCKHOLDERS' EQUITY**
              
              $
              25,051,234




3
 *Index*


**CHINA
                  DIGITAL MEDIA CORPORATION AND SUBSIDIARIES****CONDENSED
                  CONSOLIDATED STATEMENTS OF OPERATIONS AND****COMPREHENSIVE
                  INCOME (UNAUDITED)**For
                  the three months
              
              For
                  the six monthsended
                  June 30,
              
              ended
                  June 30,2006
              
              2005
              
              2006
              
              2005**NET
                  REVENUE**Revenue
                  from digitalization of television signals
              
              $
              2,151,935
              
              $
              1,008,441
              
              $
              3,607,306
              
              $
              1,699,542Revenue
                  from television advertising
              
              
              1,994,673
              
              
              -
              
              
              3,726,706
              
              
              -Revenue
                  from software development
              
              
              10,372
              
              
              -
              
              
              33,223
              
              
              -Revenue
                  from investments in television series
              
              
              391
              
              
              -
              
              
              175,020
              
              
              -Government
                  grant received
              
              
              313,233
              
              
              302,370
              
              
              625,070
              
              
              604,7414,470,604
              
              
              1,310,811
              
              
              8,167,325
              
              
              2,304,283**COST
                  OF REVENUE**
              
              
              (2,010,149
              )
              
              (79,639
              )
              
              (3,946,013
              )
              
              (200,664
              )**GROSS
                  PROFIT**
              
              
              2,460,455
              
              
              1,231,172
              
              
              4,221,312
              
              
              2,103,619**OPERATING
                  EXPENSES**Selling,
                  general and administrative expenses
              
              
              652,092
              
              
              234,197
              
              
              1,203,941
              
              
              405,853Depreciation
                  and amortization
              
              
              683,372
              
              
              291,075
              
              
              1,261,420
              
              
              554,211Total
                  Operating Expenses
              
              
              1,335,464
              
              
              525,272
              
              
              2,465,361
              
              
              960,064**INCOME
                  FROM OPERATIONS**
              
              
              1,124,991
              
              
              705,900
              
              
              1,755,951
              
              
              1,143,555**OTHER
                  INCOME (EXPENSES)**Equity
                  in loss of affiliate
              
              
              (1,402
              )
              
              -
              
              
              (1,402
              )
              
              -Interest
                  income
              
              
              8,266
              
              
              -
              
              
              25,518
              
              
              -Other
                  income
              
              
              174
              
              
              -
              
              
              78,121
              
              
              -Other
                  expenses
              
              
              -
              
              
              (249
              )
              
              -
              
              
              (51
              )Interest
                  paid to a related company, director and stockholder
              
              
              (4,657
              )
              
              -
              
              
              (6,434
              )
              
              -Total
                  Other Income (Expenses), net
              
              
              2,381
              
              
              (249
              )
              
              95,803
              
              
              (51
              )**NET
                  INCOME BEFORE TAXES AND MINORITY INTERESTS**
              
              
              1,127,372
              
              
              705,651
              
              
              1,851,754
              
              
              1,143,504Income
                  tax expenses
              
              
              (355,392
              )
              
              -
              
              
              (640,951
              )
              
              -Minority
                  interests
              
              
              14,193
              
              
              -
              
              
              19,920
              
              
              -**NET
                  INCOME**
              
              $
              786,173
              
              $
              705,651
              
              $
              1,230,723
              
              $
              1,143,504**OTHER
                  COMPREHENSIVE (LOSS) INCOME**Foreign
                  currency translation (loss) gain
              
              
              (42,940
              )
              
              -
              
              
              360
              
              
              -**COMPREHENSIVE
                  INCOME**
              
              $
              743,233
              
              $
              705,651
              
              $
              1,231,083
              
              $
              1,143,504**Net
                  income per share-basic**
              
              $
              0.02
              
              $
              0.02
              
              $
              0.04
              
              $
              0.04**Net
                  income per share-diluted**
              
              $
              0.02
              
              $
              0.00
              
              $
              0.03
              
              $
              0.00Weighted
                  average number of shares outstanding during the period -
                  basic
              
              
              31,700,698
              
              
              29,579,968
              
              
              31,332,747
              
              
              26,315,543Weighted
                  average number of shares outstanding during the period-
                  diluted
              
              
              41,075,698
              
              
              404,579,968
              
              
              40,707,747
              
              
              402,982,209




4
 *Index*


**CHINA
                  DIGITAL MEDIA CORPORATION AND SUBSIDIARIES****CONDENSED
                  CONSOLIDATED STATEMENTS OF CASH FLOWS****FOR
                  THE SIX MONTHS ENDED JUNE 30, 2006 and 2005****(UNAUDITED)**2006
              
              2005**CASH
                  FLOWS FROM OPERATING ACTIVITIES**Net
                  income
              
              $
              1,230,723
              
              $
              1,143,504Adjusted
                  to reconcile net income to cash providedby
                  operating activities:Equity
                  in loss of affiliate
              
              
              1,402
              
              
              -Amortization
                  - cost of revenue
              
              
              108,244
              
              
              -Depreciation
              
              
              1,261,420
              
              
              554,211Stock
                  issued for services
              
              
              60,200
              
              
              -Minority
                  interests
              
              
              (19,920
              )
              
              -Changes
                  in operating assets and liabilities(Increase)
                  decrease in:Accounts
                  receivable, net
              
              
              (2,991,892
              )
              
              (1,641,458
              )Other
                  receivables and prepaid expenses
              
              
              (360,527
              )
              
              (69,622
              )Inventories,
                  net
              
              
              (733,369
              )
              
              (305,057
              )Due
                  from a related company
              
              
              (89,744
              )
              
              -Increase
                  (decrease) in:Due
                  to a director
              
              
              -
              
              
              75,923Due
                  to a stockholder
              
              
              71,238
              
              
              -Due
                  to related parties
              
              
              20,332
              
              
              57,239Accounts
                  payable
              
              
              4,514,200
              
              
              950,686Other
                  payables and accrued liabilities
              
              
              2,340
              
              
              8,650Value
                  added tax and other taxes payable
              
              
              62,020
              
              
              (6,425
              )Income
                  tax payable
              
              
              667,954
              
              
              -Net
                  cash provided by operating activities
              
              
              3,804,621
              
              
              767,651**CASH
                  FLOWS FROM INVESTING ACTIVITIES**Investments
                  in affiliate
              
              
              (179,350
              )
              
              -Purchase
                  of property and equipment
              
              
              (4,858,352
              )
              
              (1,237,040
              )Net
                  cash used in investing activities
              
              
              (5,037,702
              )
              
              (1,237,040
              )**CASH
                  FLOWS FROM FINANCING ACTIVITIES**Proceeds
                  from private placement
              
              
              387,500
              
              
              375,763Investment
                  from a minority stockholder
              
              
              122,514
              
              
              -Loan
                  from a related company
              
              
              128,684
              
              
              -Net
                  cash provided by financing activities
              
              
              638,698
              
              
              375,763**NET
                  DECREASE IN CASH AND CASH EQUIVALENTS**
              
              
              (594,383
              )
              
              (93,626
              )**EFFECT
                  OF EXCHANGE RATE ON CASH**
              
              
              (57,063
              )
              
              -**CASH
                  AND CASH EQUIVALENTS AT BEGINNING OF PERIOD**
              
              
              1,123,912
              
              
              160,177**CASH
                  AND CASH EQUIVALENTS AT END OF PERIOD**
              
              $
              472,466
              
              $
              66,551




**SUPPLEMENTAL
                  DISCLOSURE OF NON-CASH OPERATING AND INVESTING
                  ACTIVITIES:**During
                  2006, the Company issued 335,308 shares of restricted common stock
                  for
                  outstanding participation costs in the production of television
                  series.During
                  2006, the Company issued 40,000 shares of restricted common stock
                  valued
                  $46,600 for consulting
                  services.




5
 *Index*




**CHINA
      DIGITAL MEDIA CORPORATION AND SUBSIDIARIES**


**NOTES
      TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**


**AS
      OF JUNE 30, 2006 (UNAUDITED)**







**NOTE
      1 - BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES**





(A)
      Basis
      of Presentation





The
      accompanying unaudited condensed consolidated financial statements have been
      prepared in accordance with accounting principles generally accepted in the
      United States of America for interim financial information and pursuant to
      the
      rules and regulations of the Securities and Exchange Commission. Accordingly,
      they do not include all of the information and footnotes required by generally
      accepted accounting principles for complete financial statements.





In
      the
      opinion of management, the unaudited condensed consolidated financial statements
      contain all adjustments consisting only of normal recurring accruals considered
      necessary to present fairly the Company's consolidated financial position at
      June 30, 2006, the consolidated results of operations for the three and six
      months ended June 30, 2006 and 2005, and consolidated statements of cash flows
      for the six months ended June 30, 2006 and 2005. The consolidated results for
      the three and six months ended June 30, 2006 are not necessarily indicative
      of
      the results to be expected for the entire fiscal year ending December 31, 2006.
      These consolidated financial statement should be read in conjunction with the
      consolidated financial statements and notes for the year ended December 31,
      2005
      appearing in the Company's annual report on Form 10-KSB as filed with the
      Securities and Exchange Commission.





(B)
            Principles
                of Consolidation





The
      accompanying unaudited condensed consolidated financial statements for the
      three
      months and six months ended June 30, 2006 include the unaudited financial
      statements of China Digital Media Corporation (“CDMC”) and its wholly owned or
      controlled subsidiaries, China Digimedia Holding Limited (“CDHL”), Arcotect
      (Guangzhou) Limited (“AGL”), Guangdong M-Rider Media Company (“M-Rider”) and
      Digimedia Services (Shenzhen) Limited (“Digimedia Shenzhen”) and its 90%
      variable interest entity (“VIE”) in Guangdong HuaGuang DigiMedia Culture
      Development Limited (“HuaGuang”) and 51% owned subsidiary of HuaGuang in Guizhou
      Guishi Digimedia Advertising Company Limited (“Guishi Digimedia”) (collectively,
“the Company”). The
      Company accounts for 49% investment held by HuaGuang in Guizhou
      Guishi Huaguang Media Company Limited (“Guishi Huaguang”) using
      the
      equity method. The
      minority interest represents the minority shareholders’ 10% and 54.1%
      proportionate share of the results of HuaGuang and Guishi Digimedia
      respectively.





The
      accompanying unaudited condensed consolidated financial statements for the
      three
      and six months ended June 30, 2005 include the financial statements of CDMC
      and
      its wholly owned subsidiaries, CDHL and AGL.





All
      significant inter-company balances and transactions have been eliminated in
      consolidation.





(C)
            Revenue
                Recognition





Digitalization
      of television signals





The
      Company entered into an agreement with Nanhai Network Company to assist its
      subscribers on the conversion of television signals from analog into digital
      by
      providing STB and smart cards to the subscribers in Nanhai City on a lease
      basis. The Company is entitled to a portion of fees payable by the existing
      subscribers under a subscription agreement entered into between the subscribers
      and the Nanhai Network Company. Revenue is recognized on a straight line basis
      in accordance with the terms of the subscription agreement. The Company also
      charges installation fees and sells STB and smart cards to new subscribers.
      Revenue arising from these services is recognized when the subscriber is
      invoiced for the STB and smart cards upon the completion of installation
      works.




6
 *Index*


**CHINA
        DIGITAL MEDIA CORPORATION AND SUBSIDIARIES**
 **NOTES
        TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**
 **AS
        OF JUNE 30, 2006 (UNAUDITED)**




Government
      grant





The
      local
      government of Nanhai City also approved a grant of Rmb10,000,000 ($1,247,348)
      each year for five years from 2003 to finance the purchase of STB and smart
      cards for sale and lease to subscribers. The grant is recognized as revenue
      on
      receipt from the local government.





Television
      Advertising sales





The
      Company acts as an advertising agent for certain television channels by selling
      advertising air time spaces and television program backdrops to customers.
      The
      Company's advertising services revenue is derived from billings that are earned
      when the advertisements are placed and revenue is recognized as the media
      placements appear. During 2006, the Company purchase blocks of advertising
      slots
      and was the primary obligor and carried all of the credit risk for the
      advertisement placements and accordingly, recorded the full amount of such
      billings from the advertisement placements as revenue. Deferred revenues are
      recognized as a liability when billings are received in advance of the date
      before revenues are earned.





Software
      development





The
      Company provides various information technology professional services to its
      customers based on a negotiated fixed-price time and materials contract. The
      Company recognizes services-based revenue from all of its contracts when the
      services have been performed, the customers have approved the completion of
      the
      services and invoices have been issued and collectibility is reasonably assured.





Television
      series





The
      Company invested in the production of two television series. Revenue from
      investments in television series is recognized upon receipt from the production
      company.




**NOTE
      2 -** **INVESTMENT
      IN AFFILIATE**





On
      May 8,
      2006 ,
      the
      Company’s 90% VIE, HuaGuang, set up Guishi Huaguang, a joint venture which
      HuaGuang owns 49% interest, located in China. The joint venture was formed
      to provide
      television programming services with a
      life of 20 years.





The
      Company’s effective interest of 44.1% in Guishi Huaguang is accounted for using
      the equity method of accounting and is stated at cost plus equity in
      undistributed earnings since acquisition. The Company’s share of the loss for
      the three months and six months ended June 30, 2006 was $1,402.




A
      summary
      of the unaudited condensed financial statements of the affiliate as of June
      30,
      2006 is as follows:





Current
                assets
            
            $
            374,314Non-current
                assets
            
            
            263Total
                Assets
            
            
            374,577Current
                liabilities
            
            
            2,715Stockholders’
                equity
            
            
            371,862Total
                Liabilities and Stockholders’ Equity
            
            
            374,577Revenues
            
            $
            -Gross
                Profit
            
            
            -Net
                loss
            
            
            (3,180
            )




7
 *Index*


**CHINA
        DIGITAL MEDIA CORPORATION AND SUBSIDIARIES**
 **NOTES
        TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**
 **AS
        OF JUNE 30, 2006 (UNAUDITED)**




The
      Company’s share of the loss for the three months and six months ended June 30,
      2006 is as follows:





Company
                share at 44.1%
            
            $
            (1,402
            )Equity
                in loss of affiliate
            
            $
            (1,402
            )





**NOTE
      3 -** **ACQUISITION**




On
      April
      10, 2006, the Company, through its 90% VIE HuaGuang, set
      up
      Guishi Digimedia, a joint venture which HuaGuang owns 51%
      of
      the common stock of Guishi Digimedia. Guishi Digimedia was incorporated on
      April
      10, 2006 and the Company paid cash of $127,514 for the registered capital of
      Guishi Digimedia.




**NOTE
      4 - SEGMENT INFORMATION**





The
      Company operates in five reportable segments; digitalization of television
      signals, television advertising sales, software development, investment in
      television series and other. The accounting policies of the segments are the
      same as described in the summary of significant accounting policies. The Company
      evaluates segment performance based on income from operations. All inter-company
      transactions between segments have been eliminated on consolidation. As a
      result, the components of operating income for one segment may not be comparable
      to another segment. The following is an unaudited summary of our segment
      information for the six months ended June 30, 2006 and 2005:


**Digitalization**
              
              
              
              
              
              **Investments****of
                  Television**
              
              **Television**
              
              **Software**
              
              **in
                  television****Signals**
              
              **Advertising**
              
              **Development**
              
              **series**
              
              **Others**
              
              **Total****2006****Revenues**
              
              $
              4,232,376
              
              $
              3,726,706
              
              $
              33,223
              
              $
              175,020
              
              $
              -
              
              $
              8,167,325**Gross
                  profit**
              
              
              3,657,415
              
              
              475,087
              
              
              33,180
              
              
              55,630
              
              
              -
              
              
              4,221,312**Total
                  assets**
              
              
              19,962,610
              
              
              3,537,762
              
              
              68,235
              
              
              929,611
              
              
              553,016
              
              
              25,051,234**Capital
                  expenditure**
              
              
              4,843,604
              
              
              12,679
              
              
              2,069
              
              
              -
              
              
              -
              
              
              4,858,352**Depreciation
                  and amortization**
              
              
              1,224,881
              
              
              8,120
              
              
              6,372
              
              
              18,147
              
              
              3,900
              
              
              1,261,420**2005****Revenues**
              
              $
              2,273,243
              
              $
              -
              
              $
              7,782
              
              $
              -
              
              $
              23,258
              
              $
              2,304,283**Gross
                  profit**
              
              
              2,072,945
              
              
              -
              
              
              7,417
              
              
              -
              
              
              23,257
              
              
              2,103,619**Total
                  assets**
              
              
              8,998,598
              
              
              -
              
              
              122,795
              
              
              -
              
              
              46,144
              
              
              9,167,537**Capital
                  expenditure**
              
              
              1,230,959
              
              
              -
              
              
              -
              
              
              -
              
              
              6,081.00
              
              
              1,237,040**Depreciation
                  and amortization**
              
              
              546,180
              
              
              -
              
              
              5,579
              
              
              -
              
              
              2,452
              
              
              554,211





8
 *Index*


**CHINA
        DIGITAL MEDIA CORPORATION AND SUBSIDIARIES**
 **NOTES
        TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**
 **AS
        OF JUNE 30, 2006 (UNAUDITED)**




**NOTE
      5 - COMMITMENTS AND CONTINGENCIES**





Capital
      commitments




According
      to the amended Articles of Association of AGL, CDHL has to fulfill registered
      capital contributions of $5 million within two years from July 16, 2004. As
      of
      June 30, 2006, the Company has fulfilled $4,899,127 of the registered capital
      requirement and has outstanding registered capital commitments of $100,873.




Contingent
      consideration





During
      2005, the Company acquired all of the issued and outstanding capital of M-Rider
      for a total consideration of $1,047,559 of which $132,927 was payable in cash
      and $914,632 payable by the issue of shares of the Company’s common stock. On
      the effective date of August 25, 2005, CDHL paid the cash consideration of
      $132,927 and 29,158 shares of the Company’s common stock having a value of
      $62,141 were issued to the stockholders of M-Rider. As of June 30, 2006, the
      Company is contingently liable to issue shares of common stock to the value
      of
      $852,491 one year from the effective date, adjusted proportionately for the
      achievement by M-Rider by that date that their net operating cash flow is not
      less than $1,129,512.





On
      January 31, 2006, HuaGuang entered into an Asset Transfer Agreement (the “AT
      Agreement”) with Guiyang Classic & Fashion Advertising Co., Limited
      (“Guiyang Classic”), a television program production company organized and
      existing under the laws of the PRC, pursuant to which HuaGuang will acquire
      all
      media related businesses, assets, contracts and management from Guiyang Classic.
      Pursuant to the terms of the AT Agreement, the Company will pay $2,200,000
      to
      Guiyang Classic by a combination of cash and restricted common stock of the
      Company, subject to certain adjustments in the event that the acquired assets
      generate a profit of less of than $2,500,000 in the next two years. The
      completion of this transaction is subjected to certain conditions, including
      official PRC Government approval and due diligence. The Company expects to
      complete the acquisition during the third quarter of 2006.


Contingences
  The
        Company accounts for loss contingencies in accordance with SFAS 5 “Accounting
        for Loss Contingencies”, and other related guidance. Set forth below is a
        description of certain loss contingencies as of June 30, 2006 and management’s
        opinion as to the likelihood of loss in respect of each loss contingency.
  On
        May
        24, 2005, Ziegler, Ziegler & Associates LLP and Scott Ziegler filed a
        Complaint against the Company in the United States District Court for the
        Southern District of New York for using their internet domain name to distribute
        the Company’s promotional information over the internet. The Plaintiffs seek
        several types of damages in an amount not less than $1,250,000. The Company’s
        counsel was instructed to vigorously defend the action as the emails in question
        were distributed by a party not hired nor associated with the Company.
        Accordingly, no provision has been made as of June 30, 2006.
  On
        January 18, 2006, counsel for plaintiff threatened to file a complaint in
        the
        County Court in and for Miami-Dade County, Florida against the Company in
        an
        action for damages that does not exceed $15,000, exclusive of court costs,
        attorney’s fees and interest. The plaintiff alleged that the Company was a
        guarantor of a lease entered into by its Hairmax of Florida, Inc. subsidiary,
        which abandoned the lease and failed to pay the full rental due under the
        lease.
  The
        Company has made a settlement offer to the plaintiff of $9,000 and is awaiting
        the plaintiff’s response. The Company has accrued $9,000 as at June 30,
        2006.


**NOTE
      6 - COMMON STOCK**





On
      March
      15, 2006, the Company issued 310,000 shares of restricted common stock at $1.25
      per share to a corporate investor for an aggregate consideration of $387,500
      under a Stock Purchase Agreement dated March 14, 2006. The Company relied on
      an
      exemption from registration pursuant to Regulation S under the Securities Act
      of
      1933 in connection with the issuance of the shares.





On
      March
      29, 2006, the Company issued 2,381 shares of restricted common stock with a
      fair
      value of $3,000 to a consultant retained by a
      stockholder. The fair value of $3,000 on this stock issue was charged to the
      stockholder’s account in the accompanying financial statements. The Company
      relied on an exemption from registration pursuant to Section 4(2) under the
      Securities Act in connection with the issuance of the shares.





On
      March
      30, 2006, the Company issued 335,308 shares of restricted common stock with
      a
      fair value of $577,065 for the outstanding participation costs in the production
      of two television series. The Company relied on an exemption from registration
      pursuant to Section 4(2) under the Securities Act in connection with the
      issuance of the shares.





On
      June
      5, 2006, the Company issued 40,000 shares of restricted common stock with a
      fair
      value of $46,400 to a consultant .
      The
      Company relied on an exemption from registration pursuant to Section 4(2) under
      the Securities Act in connection with the issuance of the shares. During
      2006, the Company recognized expense of $23,200 and recorded deferred stock
      compensation of $23,200 as of June 30, 2006, for services provided.





During
      2006, the Company recognized expense of $34,000 and recorded deferred stock
      compensation of $16,433 as of June 30, 2006, for services provided by CEOcast,
      Inc. for one year commencing from September 27, 2005.





During
      2006, CDHL contributed registered capital of $660,012 to AGL.




9
 *Index*


**CHINA
        DIGITAL MEDIA CORPORATION AND SUBSIDIARIES**
 **NOTES
        TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**
 **AS
        OF JUNE 30, 2006 (UNAUDITED)**




**NOTE
      7 -** **RELATED
      PARTY TRANSACTIONS**





On
      April
      20, 2006, the Company entered into an agreement with a related company to
      advance a total of $128,205 to support the research and development on the
      Middleware Applications for digital TV set-top box. The advance will be used
      to
      pay for license fees in the future and other expenses or refunded to the Company
      if the application cannot be applied to the Company’s set-top boxes. As of June
      30, 2006, the Company has advanced $89,744 to the related company.





As
      of
      June 30, 2006, a director and a related company loaned to the Company $76,957
      and $161,769 respectively as short-term unsecured loans. The loans bear interest
      at 6% per annum and have no fixed repayment terms.





As
      of
      June 30, 2006, a stockholder loaned to the Company $199,922 as short-term
      unsecured loans. The loan bears interest at 6% per annum and has no fixed
      repayment terms.




**NOTE
      8 -** **SUBSEQUENT
      EVENTS**





(1)
      Registered capital contribution





On
      July
      13, 2006, the Company fulfilled its outstanding registered capital commitment
      to
      AGL of $100,873.





(2)
      Sale
      of securities





On
      July
      7, 2006, the Company sold 20 units of securities to a corporate investor for
      $1,000,000 and on July 21, 2006, the Company sold 2 units of securities to
      an
      accredited investor for $100,000. Each “Unit” consists of (i) a 8% interest
      bearing convertible debenture in the principal amount of $50,000, convertible
      at
      $0.80 per share and matured on the earlier of: (a) one year from the first
      anniversary of the subscription agreement or (b) the date of a closing of a
      firm
      underwritten public offering of securities of the Company’s common stock or
      other securities, (ii) a five-year Class A warrant to purchase 62,500 shares
      of
      its common stock, par value $0.001 per share at an exercise price of $0.90
      per
      share, (iii) a five-year Class B warrant to purchase 31,250 shares of its common
      stock at an exercise price of $2.00 per share, (iv) a Class J warrant to
      purchase 31,250 shares of its common stock at an exercise price of $0.80 per
      share exercisable for 12 months starting on June 1, 2007, (v) a six-year Class
      C
      warrant to purchase 31,250 shares of its common stock at an exercise price
      of
      $0.90 per share on the same terms as the Class A Warrant, provided that it
      is
      only exercisable if the Class J Warrant has already been exercised, and (vi)
      a
      six-year Class D warrant to purchase 15,625 shares of its common stock at an
      exercise price of $2.00 per share on the same terms as the Class B Warrant,
      provided that it is only exercisable if the Class J Warrant has already been
      exercised; and further provided that only investors purchasing greater than
      $250,000 in Units received the warrants set forth in (iv), (v), and (vi) above.
      The securities issuable upon conversion of the debenture and exercise of the
      warrants are eligible for certain registration rights. Additionally, the
      investors agreed to enter into a 90 day post-Public Offering lock-up on the
      securities issuable upon conversion of the debenture and exercise of the
      warrants. For the 90 days after such period, the investors have agreed not
      to
      sell more than five percent (5%) of its outstanding common stock, on a fully
      diluted basis, as of the date of such sale. **** The
      Company paid commissions of 10% to a registered broker-dealer in connection
      with
      this financing.


(3)
        Stock
        issued for Services
 
 During
        July 2006, the Company issued 30,000 shares of common stock having a fair
        value
        of approximately $30,000 to a consultant for services to be performed through
        July 2007.




10
 *Index*





**ITEM
      2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION**





We
      are
      hereby providing cautionary statements identifying important factors that could
      cause our actual results to differ materially from those projected in forward
      looking statements made in this quarterly report on Form 10-QSB. Any statements
      that express, or involve discussions as to, expectations, beliefs, plans,
      objectives, assumptions or future events or performance (often, but not always,
      through the use of words or phrases such as "likely will result", "are expected
      to", "will continue", "is anticipated", "estimated", "intends", "plans" and
      "projection") are not historical facts and may be forward-looking statements
      and
      involve estimates and uncertainties which could cause actual results to differ
      materially from those expressed in the forward-looking statements.





We
      caution that the factors described herein could cause actual results to differ
      materially from those expressed in any forward-looking statements and that
      the
      investors should not place undue reliance on any such forward-looking
      statements. Further, any forward-looking statement speaks only as of the date
      on
      which such statement is made, and we undertake no obligation to update any
      forward-looking statement to reflect events or circumstances after the date
      on
      which such statement is made or to reflect the occurrence of unanticipated
      events or circumstances. Consequently, no forward-looking statement can be
      guaranteed.





New
      factors emerge from time to time, and it is not possible for us to predict
      all
      such factors. Further, we cannot assess the impact of each such factor on our
      results of operations or the extent to which any factor, or combination of
      factors, may cause actual results to differ materially from those contained
      in
      any forward-looking statements.





**Overview**





China
      Digital Media Corporation (”CDMC”) was previously known as HairMax
      International, Inc. (“Hairmax”), a Nevada corporation. It was incorporated in
      Nevada in 1987. Arcotect Digital Technology Limited, a corporation organized
      under the laws of Hong Kong, consummated a reverse merger with Hairmax in March,
      2005, and Hairmax subsequently changed its name to China Digital Media
      Corporation, which is now our corporate name. With the termination of the
      original businesses of Hairmax, all of China Digital Media Corporation’s
      businesses are now located in the People’s Republic of China (the “PRC” or
‘China”). Arcotect Digital Technology Limited has changed its name to China
      Digimedia Holdings Limited (“CDHL”), and is a wholly-owned subsidiary of CDMC.


.


We
      are
      engaged in the media industry in the PRC, the business of broadcasting media
      and
      cable television. Our business plan is to strengthen our branding and to enlarge
      our presence and involvement in the media industry through investments, mergers,
      acquisitions and alliance partnerships. In view of the rapid growth and
      potential opportunities we believe exist in China's media industry, we will
      continue to invest our resources into the media market throughout
      China.




Cable
      TV operations and digital broadcast technology development




Arcotect
      (Guangzhou) Ltd. (“AGL”), a wholly owned foreign subsidiary of CDMC doing
      business in China, is the sole contractor and operator of digital television
      (“DTV”) services in Nanhai, Guangdong Province, a city with over 410,000
      residential and commercial cable television subscribers.




On
      February 6, 2004, we signed a 20-year Co-operative Agreement for Total Migration
      into DTV System for the Nanhai District and subsequently signed a supplementary
      agreement on July 8, 2005 (collectively, the “Co-operative Agreements”) with Nanhai
      Network Company, a city-owned cable network operator in Guangdong
      Province .
      Pursuant to the Co-operative Agreements, the Company is responsible for
      migrating all cable television subscribers in Nanhai from an analog to a digital
      system (“Migration”) by the end of 2007.




11
 *Index*





Under
      the Co-operative
      A greement,
      the Company is a sole contractor and operator of digital TV in Nanhai. The
      Company is responsible for supplying all subscribers with a digital set-top-box
      on a lease basis to subscribers. If subscribers want an additional set-top-box,
      the subscriber must purchase the set-top-box from the Company. The Company
      is
      also responsible for providing operational support services including migration
      planning, marketing and sales, software development, customer service and
      logistics administration. The Company’s proprietary operating support system
      automates many of the processes, such as database management, billing, work
      orders and inventory control, and assists in the operation of a 24/7 call center
      for technical support and customer care.





The
      broadcast system that decrypts the signal with the Company’s set-top-box and
      appropriate smart cards can carry up to 800 digital channels of pay-TV programs
      and value added multimedia services. Currently, the services consist of 148
      channels, including a 48-channel basic package and 100 pay channels bundled
      into
      various value added packages, such as World Movie, Life & Leisure, World
      Sports, News, Drama and Family.




As
      of
      June 30, 2006, the Company migrated over 200,000 subscribers into digital system
      according to our schedule out of approximately 410,000 subscribers in
      Nanhai. The Company has deployed an IP (Internet Protocol) based set-top-box
      which is integrated with new middleware applications, JAVA Runtime, XML browser,
      which is developed by Arable Media Limited, a software developer specialised
      in
      middleware products and applications for digital TV set-top box and broadcasting
      technologies. The Company believes the advanced set-top-box will enable the
      Company to provide additional value added services which can be deployed in
      the
      future; such as targeted advertising, interactive TV programs, online shopping
      and console games, as well as interactive education services.




In
      May
      2006, the Company commercially launched high definition TV broadcasts, providing
      dramatically improved resolution and sound quality, in which 3 high definition
      TV channels are packaged in our pay-TV programs. The Company is currently
      negotiating partnerships with various vendors to provide interactive services,
      transforming a television set into an interactive multimedia
      platform.




In
      early
      May of 2006, the Company in Nanhai moved its office into a new premise with more
      than 10,000 sq. ft. The new office building is also headquarters to Nanhai
      TV
      Bureau and Nanhai Network Company.





TV
      advertising sales




In
      August
      2005, the Company acquired 100% control of Guangdong M-Rider Media Company
      Limited (“M-Rider”) through our VIE and strategic partner - HuaGuang. M-Rider is
      an advertising sales company engaged in the distribution of television
      commercials. The Company pays fixed fees to the television stations and is
      responsible for reselling commercial airtime to international and local
      advertising customers, either directly or through agents. The
      Company has many years of experience in providing consultancy and media planning
      to clients, and assisting clients to professionally deliver their message
      precisely to their targeted audiences in an efficient way. In addition, the
      Company believes that it can manage advertising resources more effectively
      to
      enhance value of the advertising space.




In
      December 2005, M-Rider signed its largest wholesaler contract with Southern
      International Media Advertising Co., Ltd., to manage and operate the commercial
      airtime of a provincial station’s channel for a one year term starting on
      January 1, 2006, extendable for an additional year. As
      of
      June 30, 2006, M-Rider generated approximately $3.6 million revenue for selling
      advertising space in which over 230 brand names advertised on the managed
      channel. This
      successful model could be applied to other TV stations in other cities as well
      as in other provinces throughout China.




12
 *Index*




TV
      channel management and program production





With
      a
      growing subscription base, we intend to capitalize on our distribution platform
      through the production of original programming. Our plan is to develop a
      long-term presence in television program production, but we realize that program
      production is a relatively high risk venture. In order to obtain sufficient
      production experience, we have decided to participate through a strategic
      partner, Guangdong Runshi Movie & Music Production Co., Ltd., which has two
      ingredients essential for success in China: a Class A license that allows
      filming to take place before submitting the film content for censorship, which
      makes the process very cost effective, and a good program distribution network.
      We have made a minority investment in two television series, XiGuan Affairs,
      with 40 episodes, and The Story of a Small Town, with 24 episodes.




In
      January 2006, the Company entered into an acquisition agreement, through its
      VIE, HuaGuang to purchase the media assets and personnel of Guiyang Classic
      & Fashion Advertising Co., Ltd., a television program production and
      advertising company in China. The target’s management team has over a decade of
      business experience in the media industry and a track record of successful
      television program production for different television channels.




In
      February 2006, the Company’s VIE, HuaGuang, entered into two joint venture
      agreements with a provincial television station for a term of 20 years. HuaGuang
      is engaged to operate a TV channel commencing May 2006; such operations to
      include content management, advertising sales and program production. Pursuant
      to the joint venture contracts, the provincial television station will provide
      the exclusive use of a television channel, including production resources and
      equipment, while outsourcing its entire advertising air time slots to the two
      joint ventures for an initial term of five years and the term is extendable.
      Guishi Digimedia, a 51% subsidiary of HuaGuang will serve as the exclusive
      advertising agent to manage the TV commercials. Guishi Huaguang, a 49% owned
      interest of HuaGuang, will be responsible for sourcing and production content,
      as well as schedule planning. Currently, over 100 professionals and experienced
      staff are working on the production, planning and scheduling, contents sourcing
      where the channel is focusing on fashion, entertainment, lifestyle and sports,
      24 hours a day.





The
      Company relied on three suppliers for approximately 99% of its purchases in
      the
      first quarter of 2006 for the Nanhai digitalization of TV system in the Nanhai
      project and relied on one TV channel for approximately 90% of its purchase
      of TV
      advertising time slots in the first quarter of 2006 for the advertising agency
      sales of M-Rider. As of June 30, 2006, accounts payable to these suppliers
      amounted to $5,186,257, $2,406,846 and $524,278 for the Nanhai project, and
      $686,458 for M-Rider’s operations, respectively. Management believes that there
      are alternative sources of supply in the event that any of these suppliers
      cease
      or otherwise become unreliable to provide goods and services to the
      Company.





For
      the
      six months period ended June 30, 2006, the Company did not derive revenue from
      any one customer that amounted to more than 10% of its total
      revenue.





At
      present, some of our targeted businesses are subject to certain governmental
      restrictions in the PRC. In order to enable us to invest in certain media
      sectors such as TV advertising and content productions before government
      regulations and policies in this field are opened to foreign investors, we
      have
      strategically partnered with a Chinese registered company, Guangdong HuaGuang
      DigiMedia Culture Development Limited (“HuaGuang”), formerly known as Guangdong
      Pukonyi Culture Development Limited, to hold investments in programs production
      and advertising operations on our behalf. We are therefore not the direct owner
      of the programming and advertising operations, whilst HuaGuang became a Variable
      Interest Entity (“VIE”) of the Company. We anticipate that this arrangement will
      be continued until further relaxation of the broadcasting policy in China.
      According to our Alliance Agreement with HuaGuang, we have Board and management
      control and operations of HuaGuang and are entitled to receive 90% of its gross
      profit. We have been advised by our Chinese counsel that these arrangements
      are
      necessary for the Company to control and benefit from its investments through
      HuaGuang, even though it is not the legal owner of these investments.




13
 *Index*





**RESULTS
      OF OPERATIONS**





**Sales**





Total
      net
      sales for the three months ended June 30, 2006 increased by $3,159,793 or
      241% to $4,470,604 from $1,310,811 for the same period ended June 30, 2005.
      For six months ended June 30, 2006, we recorded total revenue of $8,167,325,
      or
      254% increase compared to total revenue of $2,304,283 for the same period last
      year. The increase in total net sales was due to the consolidation of revenue
      from the newly acquired subsidiary, M-Rider and the joint venture operation
      in
      Guiyang. Together with an increase in the number of television subscribers,
      sales of value-added services and the increase of commercial accounts, total
      revenues for digital television operations had contributed a growth for the
      three months ended June 30, 2006 as compared to the comparable period in 2005.
      Advertising revenue was a new income source upon acquisition of M-Rider and
      establishment of new joint venture in Guiyang. Although the joint venture in
      Guiyang has just commenced in operation from May of 2006, the company had made
      a
      contribution of $117,842 of revenue to the advertising revenue
      segment.





Due
      to
      business expansion of the Company into the agency and joint venture business
      of
      television advertising and channel management, gross profit margin dropped
      from
      94% during the three months ended June 30, 2005 to 55% during the three months
      ended June 30, 2006.





**Expenses**





Selling,
      general, administrative and depreciation and amortization expenses for the
      three
      months ended June 30, 2006 increased by $810,192 or 154% to $1,335,464 in
      comparison with the three month period ended June 30, 2005. Selling, general,
      administrative and depreciation and amortization expenses were $2,465,361 for
      the six months ended June 30, 2006, increased by $1,505,297, compared to the
      same period ended June 30, 2006. Selling, general and administrative expenses
      increased by $417,895 for the three months ended June 30, 2006 over the same
      period last year due to an increase in business activities, appointment of
      additional personnel for the development of new value-added products and
      services and the operation of newly established joint venture company.
      Depreciation and amortization increased by $392,297 for the three months ended
      June 30, 2006 mainly due to the increase in the acquisition of STBs for the
      migration project in Nanhai.





**Income
      from Operation**





Income
      from operation for the three and six months ended June 30, 2006 was $1,124,991
      and $1,755,951 respectively. The increase of $419,091, or 59%, over $705,900
      for
      the three months ended June 30, 2005 was primarily due to the continued
      increases in total revenue and gross profit.





**Minority
      Interest**





Minority
      interest in the statement of operation represents the minority shareholders’
share of the profits in our consolidated variable interest entity and 51%
      subsidiary. For the six months ended June 30, 2006, we recognized minority’s
      share of our profit of $19,920.




**Net
      Income**





We
      had
      net income of $786,173 and $1,230,723, or $0.02 and $0.04 per common share
      for
      the three and six months period ended June 30, 2006, compared to the net income
      of $705,651 and $1,143,504 for the same period ended June 30, 2005 respectively.
      The increase in net income was attributable to the increase in number of digital
      television subscribers in Nanhai operations in comparison with the same period
      in 2005. Net income before taxes and minority interests increased by 60% to
      $1,127,216 for the three months ended June 30, 2006 from last period.




14
 *Index*




**Liquidity
      and Capital Resources**





On
      June
      30, 2006, we had cash of $472,446 and a working capital deficit of $1,824,137.
      This compares with cash of $66,551 and a working capital deficit of $1,603,438
      at June 30, 2005. The increase in cash was mainly due to receivable collections
      from Nanhai Network Company, increased retained earnings and additional paid
      in
      capital for the Company. Operating activities had a net generation of cash
      in
      the amount of $3,804,621 during the six months ended June 30, 2006 reflecting
      an
      excess of revenues over expenditure, and increased depreciation as mentioned
      above.





Net
      cash
      used in investing activities for the six months ended June 30, 2006 was
      $5,037,702 as compared with net cash used in investing activities of $1,237,040
      for the six months ended June 30, 2005. The increase in net cash used in
      investing activities was due to an increase in purchases of STBs and investment
      in subsidiaries, compared to the comparable period in 2005.





Net
      cash
      provided by financing activities for the six months ended June 30, 2006 was
      $638,698. The majority of net cash provided by financing activities was
      attributable through a private placement.





We
      continued to receive cash from Nanhai Network Company according to the project
      schedule and plan of television digitalization migration. The Company's
      investment in STBs and smart cards remained the substantial accounts payable
      at
      June 30, 2006. Due to our acquisition and expansion of operations, additional
      cash was invested. Two additional joint venture investments commenced operation
      in the second quarter of 2006.


**Foreign
        Currency Translation Risk**
 
 The
        Company’s major operation is in the PRC, which may give rise to significant
        foreign currency risks from fluctuations and the degree of volatility of
        foreign
        exchange rates between the United
        States dollars (“US$”) and
        the Chinese
        Renminbi (“RMB”) .
        On July
        21, 2005, PRC let the RMB to fluctuate ending its decade-old valuation peg
        to
        the US$. The new RMB rate reflects an approximately 2% increase in value
        against
        the US$. Historically, the PRC government has benchmarked the RMB exchange
        ratio
        against the US$, thereby mitigating the associated foreign currency exchange
        rate fluctuation risk. The Company does not believe that its foreign currency
        exchange rate fluctuation risk is significant, especially if the PRC government
        continues to benchmark the RMB against the US$
 
 The
        financial statements of the subsidiaries (whose functional currency is HK$
        or
        RMB) are translated into US$ using the closing rate method. The balance sheet
        items are translated into US$ using the exchange rates at the respective
        balance
        sheet dates. The capital and various reserves are translated at historical
        exchange rates prevailing at the time of the transactions while income and
        expenses items are translated
        at the average exchange rate for the year. All exchange differences are recorded
        within equity. Translation gain for the six months ended June 30, 2006was
        $360.





**ITEM
      3. CONTROLS AND PROCEDURES**




**Evaluation
      of Disclosure Controls and Procedures**




The
      Company’s chief executive officer and principal financial officer have reviewed
      and evaluated the effectiveness of the Company’s disclosure controls and
      procedures (as defined in Exchange Act Rules 13d-15(e) and 15d-15(e)) as of
      the
      end of the period covered by this quarterly report. Based on that evaluation,
      the chief executive officer and principal financial officer have concluded
      that
      the Company’s current disclosure controls and procedures are adequate and
      effective to ensure that material information relating to the Company was made
      known to them by others, particularly during the period in which this Quarterly
      Report on Form 10-QSB was being prepared.




**Changes
      in Internal Controls**





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




15
 *Index*




**PART
      II. OTHER INFORMATION**





**Item
      1. Legal Proceedings**





On
      May
      24, 2005, a Complaint was filed against us, among others, in the United States
      District Court for the Southern District of New York, in a matter captioned
      as
“Ziegler, Ziegler & Associates LLP and Scott Ziegler, Plaintiffs, v. China
      Digital Media Corporation and John Does 1-10, Defendants.” In the Complaint, the
      Plaintiffs allege, among other things, that we and John Does 1-10 used Plaintiff
      Scott Zeigler’s e-mail address and Plaintiff Ziegler, Ziegler & Associates,
      LLP’s internet domain name to distribute promotional information about us over
      the internet. The Plaintiffs seek a several types of relief, including damages
      in an amount not less than $1,250,000. Pre-trial discovery has commenced in
      the
      matter. The file number of the civil action is 05 CV 4960. We made a motion
      to
      dismiss the complaint on the grounds that the Plaintiffs failed
      to establish that the District Court for the Southern District has personal
      jurisdiction over CDMC.  The Court has allowed the Plaintiffs to take
      discovery on the jurisdictional issue only, before deciding whether it will
      allow Plaintiffs to prosecute their case.  Plaintiffs have started,
      but not yet completed jurisdictional discovery.





The
      Company contested the allegations of the Plaintiffs and has retained counsel
      admitted to practice in the U.S. District Court for the Southern District of
      New
      York to vigorously defend the action. The Company did not hire a stock promoter
      or a spammer to distribute promotional e-mails, and the emails themselves recite
      that they were paid for by a shareholder of our Company, and not by the Company
      or an affiliate. We believe that the shareholder referred to in the emails
      was
      promoting its own interest and we had nothing to do with such activity. We
      believe we have no liability in this matter.





**Item
      2. Unregistered Sales of Equity Securities and Use of
      Proceeds**





During
      the quarter ended June 30, 2006, we issued certain unregistered securities
      as
      described in our Form 8-K filed July 13, 2006.





**Item
      3. Defaults Upon Senior Securities**





None.





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





None.





**Item
      5. Other Information**





On
      May
      10, 2006, for value received, Ng Chi Shing (“Mr. Ng”), Chairman and Chief
      Executive Officer of the Registrant, executed an Irrevocable Stock Power and
      assigned all of his right, title and interest in and to 23,250,000 shares of
      Common Stock and 1,875,000 shares of Series A Convertible Preferred Stock of
      the
      Registrant to Modern Delta Holdings Limited, a limited liability company
      organized under the laws of the British Virgin Islands (“Modern Delta”). As a
      result of this transfer, all of his shares of capital stock of the Registrant
      will be held by an investment holding company controlled by Mr. Ng.





After
      the
      transfer, Mr. Ng will continue to be the beneficial owner of 23,250,000 shares
      of Common Stock and 1,875,000 shares of Series A Convertible Preferred Stock,
      at
      such term as defined in Rule 13d-3 under the Exchange Act, with the holdings
      of
      Modern Delta together representing 79.45% of the Registrant’s total combined
      voting power.





The
      ownership restructuring enabled Mr. Ng to transfer all of his shares of capital
      stock to Modern Delta, an investment holding company, and it also enabled him
      to
      consummate the promised transfer of an indirect 25.168% interest in these
      stockholdings to Mr. Chen Lu, Director of Business Development of the
      Registrant, a member of the Board of Directors of the Registrant and a minority
      shareholder of Modern Delta. Mr. Ng will continue as Chairman and Chief
      Executive Officer of the Registrant, and he will also be the Chairman, sole
      Board member and majority shareholder of Modern Delta. ****




16
 *Index*





**Item
      6. Exhibits**


**EXHIBIT
                  NO.**
              **DESCRIPTION
                  OF EXHIBIT**31.1
              Certification
                  of Chief Executive Officer pursuant to
                  Rule 13a-14(a) under the Securities Exchange Act of
                1934,
                    as adopted pursuant to Section 302 of the
                    Sarbanes-Oxley Act of 2002.31.2
              Certification
                  of Chief Financial Officer pursuant to
                  Rule 13a-14(a) under the Securities Exchange Act of
                1934,
                    as adopted pursuant to Section 302 of the
                    Sarbanes-Oxley Act of 2002.32
              Certification
                  of Chief Executive Officer and Chief
                  Financial Officer pursuant to 18 U.S.C. Section 1350,
                as
adopted
                  pursuant to Section 906 of the Sarbanes-Oxley Act of
                  2002.




17
 *Index*




**SIGNATURES**





Pursuant
      to the requirements of the Securities Exchange Act of 1934, the registrant
      has
      duly caused this report to be signed on its behalf by the undersigned, thereunto
      duly authorized.




**CHINA
                DIGITAL MEDIA CORPORATION**
              (Registrant)Date: August
              16, 2006
            By:
            /s/ Ng
              Chi
              ShingNg
                Chi Shing
              Chief
                  Executive Officer
                Chief
                  Financial Officer






18