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United States

  

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

 1 

INDEX TO FORM 10-Q

|                                                                                          |                                                                                                                           | Page No.    |
|-----------------------------------------------------------------------------------------------|--------------------------------------------------------------------------------------------------------------------------------|-------------|
|                                                                                          |                                                                                                                           |        |
| PART I                                                                                        |                                                                                                                           |
|                                                                                          |                                                                                                                           |        |
| Item 1. Financial Statements                                                                  |                                                                                                                           |
|                                                                                          |                                                                                                                           |        |
|                                                                                          | Condensed Consolidated Balance Sheet - June 30, 2009 (unaudited)                                                               | 3           |
|                                                                                          |                                                                                                                           |        |
|                                                                                          | Condensed Consolidated Statements of Operations And Comprehensive Income - Six months Ended June 30, 2009 and 2008 (unaudited) | 4           |
|                                                                                          |                                                                                                                           |        |
|                                                                                          | Condensed Consolidated Statements of Cash Flows - Six months Ended June 30, 2009 and 2008 (unaudited)                          | 5           |
|                                                                                          |                                                                                                                           |        |
|                                                                                          | Notes to Condensed Consolidated Financial Statements (unaudited)                                                               |  6 - 8 |
|                                                                                          |                                                                                                                           |        |
| Item 2. Management's Discussion and Analysis of Financial Condition And Results of Operations | 9                                                                                                                              |
|                                                                                          |                                                                                                                           |        |
| Item 3. Controls and Procedures                                                               | 12                                                                                                                             |
|                                                                                          |                                                                                                                           |        |
| PART II                                                                                       |                                                                                                                           |
|                                                                                          |                                                                                                                           |        |
|                                                                                          | Item 1. Legal Proceedings                                                                                                      |  12    |
|                                                                                          |                                                                                                                           |        |
|                                                                                          | Item 2. Unregistered Sales of Equity Securities and Use of Proceeds                                                            |  13    |
|                                                                                          |                                                                                                                           |        |
|                                                                                          | Item 3. Defaults Upon Senior Securities                                                                                        |  13    |
|                                                                                          |                                                                                                                           |        |
|                                                                                          | Item 4. Submission of Matters to a Vote of Security Holders                                                                    |  13    |
|                                                                                          |                                                                                                                           |        |
|                                                                                          | Item 5. Other Information                                                                                                      |  13    |
|                                                                                          |                                                                                                                           |        |
|                                                                                          | Item 6. Exhibits                                                                                                               |  13    |
|                                                                                          |                                                                                                                           |        |
|                                                                                          | Signatures                                                                                                                     |  14    |

----

Table of Contents

  

|                                                                                   |   |          |        |   |              |   |
|----------------------------------------------------------------------------------------|--------|---------------|-------------|--------|-------------------|--------|
| CHINA DIGITAL MEDIA CORPORATION AND SUBSIDIARIES                                       |   |
| CONDENSED CONSOLIDATED BALANCE SHEETS                                                  |   |
|                                                                                   |   |          |        |   |              |   |
| ASSETS                                                                                 |   |          |        |   |
|                                                                                   |   | June 30, 2009 |        |   | December 31, 2008 |   |
|                                                                                   |   | (Unaudited)   |        |   | (Audited)         |   |
| CURRENT ASSETS                                                                         |   |          |        |   |              |   |
| Cash and cash equivalents                                                              |   | $             | 251,570     |   |              | $      | 436,062 |   |
| Accounts receivable, net of allowances                                                 |   |          | 1,774,020   |   |              |   | 1,078,228 |   |
| Inventories, net                                                                       |   |          | 982,525     |   |              |   | 1,247,781 |   |
| Other receivables and prepaid expenses                                                 |   |          | 784,938     |   |              |   | 194,386 |   |
| Value added taxes recoverable                                                          |   |          | 99,441      |   |              |   | 52,820 |   |
| Total Current Assets                                                                   |   |          | 3,892,494   |   |              |   | 3,009,277 |   |
|                                                                                   |   |          |        |   |              |   |   |   |
| INTANGIBLE ASSETS, NET of impairment of $3,996,595                                     |   |          | 324,330     |   |              |   | 324,329 |   |
| PROPERTY AND EQUIPMENT, NET                                                            |   |          | 13,740,602  |   |              |   | 14,202,241 |   |
| TOTAL ASSETS                                                                           |   | $             | 17,957,426  |   |              | $      | 17,535,847 |   |
|                                                                                   |   |          |        |   |              |   |   |   |
| LIABILITIES AND STOCKHOLDERS' EQUITY                                                   |   |          |        |   |              |
| CURRENT LIABILITIES                                                                    |   |          |        |   |              |   |   |   |
| Convertible debentures, net of discount                                                |   | $             | 450,000     |   |              | $      | 950,000 |   |
| Accounts payable                                                                       |   |          | 5,554,353   |   |              |   | 5,178,216 |   |
| Other payables and accrued liabilities                                                 |   |          | 746,364     |   |              |   | 923,980 |   |
| Due to directors                                                                       |   |          | 285,829     |   |              |   | 285,642 |   |
| Due to a stockholder                                                                   |   |          | 9,270       |   |              |   | 396,331 |   |
| Due to related companies                                                               |   |          | 520,653     |   |              |   | 454,555 |   |
| Business and other tax payable                                                         |   |          | 21,453      |   |              |   | 23,099 |   |
| Income tax payable                                                                     |   |          | 2,650,297   |   |              |   | 2,603,012 |   |
| Total Current Liabilities                                                              |   |          | 10,238,219  |   |              |   | 10,814,835 |   |
|                                                                                   |   |          |        |   |              |   |   |   |
| LONG TERM LIABILITIES                                                                  |   |          |        |   |              |   |   |   |
| Convertible debentures, net of discount                                                |   |          | 2,515,000   |   |              |   | 2,015,000 |   |
| Accounts payable                                                                       |   |          | 885,950     |   |              |   | 333,632 |   |
| Total Long Term Liabilities                                                            |   |          | 3,400,950   |   |              |   | 2,348,632 |   |
|                                                                                   |   |          |        |   |              |   |   |   |
| COMMITMENTS AND CONTINGENCIES                                                          |   |          | -           |   |              |   | - |   |
|                                                                                   |   |          |        |   |              |   |   |   |
| MINORITY INTERESTS                                                                     |   |          | -           |   |              |   | - |   |
|                                                                                   |   |          |        |   |              |   |   |   |
| STOCKHOLDERS' EQUITY                                                                   |   |          |        |   |              |   |   |   |
| Series A convertible preferred stock ($0.001 par value, 40,000,000 shares              |   |          |        |   |              |   |   |   |
|  authorized,1,875,000 shares issued and outstanding as of                         |   |          |        |   |              |   |   |   |
| June 30, 2009 and December 31, 2008)                                                   |   |          | 1,875       |   |              |   | 1,875 |   |
| Common stock ($0.001 par value, 500,000,000 shares authorized,                         |   |          |        |   |              |   |   |   |
| 42,706,363 shares issued and outstanding as of June 30, 2009                           |   |          |        |   |              |   |   |   |
|  and December 31, 2008)                                                           |   |          | 42,706      |   |              |   | 42,706 |   |
| Additional paid-in capital                                                             |   |          | 14,984,021  |   |              |   | 14,984,021 |   |
| Retained earnings                                                                      |   |          |        |   |              |   |   |   |
|    Unappropriated                                                       |   |          | (14,415,036 | )      |              |   | (14,346,279 | ) |
|    Appropriated                                                         |   |          | 1,521,997   |   |              |   | 1,521,997 |   |
| Accumulated other comprehensive income                                                 |   |          | 2,182,694   |   |              |   | 2,168,060 |   |
| Total Stockholders' Equity                                                             |   |          | 4,318,257   |   |              |   | 4,372,380 |   |
|                                                                                   |   |          |        |   |              |   |   |   |
| TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY                                             |   | $             | 17,957,426  |   |              | $      | 17,535,847 |   |
|                                                                                   |   |          |        |   |              |   |   |   |
|                                                                                   |   |          |        |   |              |   |   |   |
|                                                                                   |   |          |        |   |              |   |   |   |
| The accompanying notes are an integral part of these consolidated financial statements |   |

----

Table of Contents

| CHINA DIGITAL MEDIA CORPORATION AND SUBSIDIARIES                                              |
|-----------------------------------------------------------------------------------------------|
| CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND                                           |
| COMPREHENSIVE INCOME (LOSS) (UNAUDITED)                                                  |
|                                                                                          |   |   |   |   |   |   |   |   |   |   |
|                                                                                          |   | For the three months ended |   |   | For the six months ended |   |
|                                                                                          |   | June 30 |   |   | June 30 |   |
|                                                                                          |   | 2009 |   | 2008 |   |   | 2009 |   | 2008 |   |
|                                                                                          |   |   |   |   |   |   |   |   |   |   |
| NET SALES                                                                                     |   |   |   |   |   |   |   |   |   |   |
| Revenue from digitalization of television signals                                             |   |           2,064,493 |  $ |           1,710,504 |   |  $ |           3,807,013 |  $ |           3,261,976 |   |
| Revenue from television advertising                                                           |   |                76,752 |   |                54,341 |   |   |              144,303 |   |              144,924 |   |
| Revenue from software development                                                             |   |                         - |   |                  8,341 |   |   |                         - |   |                18,657 |   |
|                                                                                          |   |           2,141,245 |   |           1,773,186 |   |   |           3,951,316 |   |           3,425,557 |   |
| COST OF SALES                                                                                 |   |   |   |   |   |   |   |   |   |   |
| Cost of Sales - digitalization of television signals                                          |   |             (311,616) |   |             (229,559) |   |   |             (494,327) |   |             (376,524) |   |
| Depreciation - digitalization of television signals                                           |   |          (1,132,151) |   |             (853,030) |   |   |          (2,276,707) |   |          (1,803,193) |   |
| Cost of Sales - television advertising                                                        |   |               (50,339) |   |               (31,428) |   |   |               (78,666) |   |             (102,009) |   |
|                                                                                          |   |          (1,494,106) |   |          (1,114,017) |   |   |          (2,849,700) |   |          (2,281,726) |   |
| GROSS PROFIT                                                                                  |   |              647,139 |   |              659,169 |   |   |           1,101,616 |   |           1,143,831 |   |
|                                                                                          |   |   |   |   |   |   |   |   |   |   |
| OPERATING EXPENSES                                                                            |   |   |   |   |   |   |   |   |   |   |
| Selling, general and administrative expenses                                                  |   |             (604,419) |   |             (507,475) |   |   |          (1,185,360) |   |          (1,198,500) |   |
| Amortization of convertible debt discount                                                     |   |                         - |   |             (258,202) |   |   |                         - |   |             (752,369) |   |
| Depreciation and amortization                                                                 |   |               (21,244) |   |               (18,375) |   |   |               (42,915) |   |               (42,867) |   |
| Total Operating Expenses                                                                      |   |             (625,663) |   |             (784,052) |   |   |          (1,228,275) |   |          (1,993,736) |   |
|                                                                                          |   |   |   |   |   |   |   |   |   |   |
| GAIN (LOSS) FROM OPERATION                                                                    |   |                21,476 |   |             (124,883) |   |   |             (126,659) |   |             (849,905) |   |
|                                                                                          |   |   |   |   |   |   |   |   |   |   |
| OTHER INCOME (EXPENSES)                                                                       |   |   |   |   |   |   |   |   |   |   |
| Interest income                                                                               |   |                     606 |   |                     737 |   |   |                     924 |   |                  1,945 |   |
| Other income                                                                                  |   |              142,389 |   |                21,600 |   |   |              282,518 |   |                80,505 |   |
| Interest expenses                                                                             |   |               (87,247) |   |               (79,402) |   |   |             (164,695) |   |             (109,711) |   |
| Interest paid to related companies and directors                                              |   |                (5,737) |   |                (9,600) |   |   |               (11,762) |   |               (16,568) |   |
| Other expenses                                                                                |   |                   (733) |   |               (19,147) |   |   |                (1,725) |   |               (42,590) |   |
| Total Other Income (Expenses) , net                                                           |   |                49,278 |   |               (85,812) |   |   |              105,260 |   |               (86,419) |   |
|                                                                                          |   |   |   |   |   |   |   |   |   |   |
| NET GAIN (LOSS) BEFORE TAXES                                                                  |   |                70,754 |   |             (210,695) |   |   |               (21,399) |   |             (936,324) |   |
|                                                                                          |   |   |   |   |   |   |   |   |   |   |
| Income tax (expense) income                                                                   |   |               (23,375) |   |               (66,414) |   |   |               (47,358) |   |              412,307 |   |
| NET GAIN (LOSS)                                                                               |   |                47,379 |   |             (277,109) |   |   |               (68,757) |   |             (524,017) |   |
|                                                                                          |   |   |   |   |   |   |   |   |   |   |
| OTHER COMPREHENSIVE INCOME                                                                    |   |   |   |   |   |   |   |   |   |   |
| Foreign currency translation gain                                                             |   |                  5,433 |   |              338,530 |   |   | 14,634 |   |              928,898 |   |
|                                                                                          |   |   |   |   |   |   |   |   |   |   |
| COMPREHENSIVE GAIN                                                                            |   | 52,812 | $ | 61,421 |   | $ | (54,123) | $ | 404,881 |   |
|                                                                                          |   |   |   |   |   |   |   |   |   |   |
| Net gain (loss) per share - basic - two classes method                                        |   | 0.00 | $ | (0.01) |   | $ | (0.00) | $ |                  (0.01) |   |
|                                                                                          |   |   |   |   |   |   |   |   |   |   |
| Net gain (loss) per share - diluted                                                           |   | 0.00 | $ | (0.01) |   | $ | (0.00) | $ |                  (0.01) |   |
|                                                                                          |   |   |   |   |   |   |   |   |   |   |
| Weighted average number of shares outstanding during the period - basic                       |   | 42,706,363 |   | 42,681,678 |   |   | 42,706,363 |   |          42,480,690 |   |
|                                                                                          |   |   |   |   |   |   |   |   |   |   |
| Weighted average number of shares outstanding during the period - diluted                     | 42,706,363 |   | 42,681,678 |   |   | 42,706,363 |   |          42,480,690 |   |
|                                                                                          |   |   |   |   |   |   |   |   |   |   |
|  The accompanying notes are in integral part of these consolidated financial statements. |   |

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Table of Contents

| CHINA DIGITAL MEDIA CORPORATION AND SUBSIDIARIES                                       |   |
|----------------------------------------------------------------------------------------|--------|
| CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS                                        |   |
| FOR THE SIX MONTHS ENDED JUNE 30, 2009 and 2008                                        |   |
| (UNAUDITED)                                                                            |   |
|                                                                                   |   |   |   |   |   |   |
|                                                                                   |   |   |   |   |   |   |
|                                                                                   |   | 2009 |   |   | 2008 |   |
|                                                                                   |   |   |   |   |   |   |
| CASH FLOWS FROM OPERATING ACTIVITIES                                                   |   |   |   |   |   |   |
| Total net loss                                                                         |   |   | (68,757 | ) |   |   | (524,017 | ) |
| Adjusted to reconcile net loss to cash provided by operating activities:               |   |   |   |   |   |   |   |   |
| Depreciation-cost of sales                                                             |   |   | 2,276,707 |   |   |   | 1,803,193 |   |
| Depreciation and amortization                                                          |   |   | 42,915 |   |   |   | 42,867 |   |
| Amortization of convertible debt discount                                              |   |   | - |   |   |   | 752,369 |   |
| Amortization on stock compensation                                                     |   |   | - |   |   |   | 21,200 |   |
| Changes in operating assets and liabilities                                            |   |   |   |   |   |   |   |   |
| (Increase) decrease in:                                                                |   |   |   |   |   |   |   |   |
|   Accounts receivable                                                        |   |   | (695,792 | ) |   |   | (613,275 | ) |
|   Other receivables and prepaid expenses                                     |   |   | (637,173 | ) |   |   | 73,773 |   |
|   Inventories                                                                |   |   | 265,256 |   |   |   | (878,387 | ) |
|   Deferred tax asset                                                         |   |   | - |   |   |   | 123,982 |   |
|   Other assets                                                               |   |   | - |   |   |   | 124,471 |   |
| Increase (decrease) in:                                                                |   |   |   |   |   |   |   |   |
|   Accounts payable                                                           |   |   | 928,455 |   |   |   | 1,043,699 |   |
|   Other payables and accrued liabilities                                     |   |   | (177,616 | ) |   |   | 453,992 |   |
|   Business tax payable                                                       |   |   | (1,646 | ) |   |   | (155,048 | ) |
|   Value added taxes payable                                                  |   |   | - |   |   |   | 45,530 |   |
|   Income tax payable                                                         |   |   | 47,285 |   |   |   | (423,572 | ) |
|   Other tax payable                                                          |   |   | - |   |   |   | - |   |
| Net cash provided by operating activities                                              |   |   | 1,979,634 |   |   |   | 1,890,777 |   |
|                                                                                   |   |   |   |   |   |   |   |   |
| CASH FLOWS FROM INVESTING ACTIVITIES                                                   |   |   |   |   |   |   |   |   |
| Purchase of property and equipment                                                     |   |   | (1,856,677 | ) |   |   | (2,068,775 | ) |
| Net cash used in investing activities                                                  |   |   | (1,856,677 | ) |   |   | (2,068,775 | ) |
|                                                                                   |   |   |   |   |   |   |   |   |
| CASH FLOWS FROM FINANCING ACTIVITIES                                                   |   |   |   |   |   |   |   |   |
| Due to related companies                                                               |   |   | 66,098 |   |   |   | (59,971 | ) |
| Due to a stockholder                                                                   |   |   | (387,061 | ) |   |   | 38,295 |   |
| Due to directors                                                                       |   |   | 187 |   |   |   | 55,833 |   |
| Net cash (used in) provided by financing activities                                    |   |   | (320,776 | ) |   |   | 34,157 |   |
|                                                                                   |   |   |   |   |   |   |   |   |
| EFFECT OF EXCHANGE RATE ON CASH                                                        |   |   | 13,327 |   |   |   | (65,238 | ) |
|                                                                                   |   |   |   |   |   |   |   |   |
| NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS                                   |   |   | (184,492 | ) |   |   | (209,079 | ) |
|                                                                                   |   |   |   |   |   |   |   |   |
| CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD                                       |   |   | 436,062 |   |   |   | 334,410 |   |
|                                                                                   |   |   |   |   |   |   |   |   |
| CASH AND CASH EQUIVALENTS AT END OF PERIOD                                             |   | $ | 251,570 |   |   | $ | 125,331 |   |
|                                                                                   |   |   |   |   |   |   |   |   |
| SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION                                       |   |   |   |   |   |   |   |   |
| Cash paid for interest                                                                 |   | $ | 62,934 |   |   | $ | - |   |
| Cash paid for income tax                                                               |   | $ | - |   |   | $ | - |   |
|                                                                                   |   |   |   |   |   |   |   |   |
|                                                                                   |   |   |   |   |   |   |   |   |
| The accompanying notes are an integral part of these consolidated financial statements |   |

----

Table of Contents

----

Table of Contents

|                                |   | Digitalization |       |   |        |   |      |        |   |   | Investments   |   |   |   |    |
|-------------------------------------|--------|----------------|------------|--------|-------------|--------|-----------|-------------|--------|--------|---------------|--------|--------|--------|---------|
|                                |   | of Television  |       |   | Television  |   |      | Software    |   |   | in Television |   |   |   |    |
|                                |   | Signals        |       |   | Advertising |   |      | Development |   |   | Series        |   |   | Total  |    |
| 2009                                |   |           |       |   |        |   |      |        |   |   |          |   |   |   |    |
|  Revenues                      |   | $              | 3,807,013  |   |        | $      | 144,303   |        |   | $      | -             |   |   | $      | -       |   |   | $ | 3,951,316 |   |
|  Gross profit                  |   |           | 1,035,978  |   |        |   | 65,638    |        |   |   | -             |   |   |   | -       |   |   |   | 1,101,616 |   |
|  Net Income (loss)             |   |           | 380,325    |   |        |   | 50,890    |        |   |   | (105,520      | )      |   |   | (7,788  | ) |   |   | 317,907 |   |
|  Total assets                  |   |           | 16,435,134 |   |        |   | 1,036,083 |        |   |   | 381,875       |   |   |   | 104,334 |   |   |   | 17,957,426 |   |
|  Capital expenditure           |   |           | 1,818,436  |   |        |   | 1,077     |        |   |   | 36,710        |   |   |   | 454     |   |   |   | 1,856,677 |   |
|  Depreciation and amortization |   | $              | 2,303,414  |   |        | $      | 24        |        |   | $      | 15,901        |   |   | $      | 283     |   |   | $ | 2,319,622 |   |
|                                |   |           |       |   |        |   |      |        |   |   |          |   |   |   |    |   |   |   |   |   |
| 2008                                |   |           |       |   |        |   |      |        |   |   |          |   |   |   |    |   |   |   |   |   |
|  Revenues                      |   | $              | 3,261,976  |   |        | $      | 144,924   |        |   | $      | 18,657        |   |   | $      | -       |   |   | $ | 3,425,557 |   |
|  Gross profit                  |   |           | 1,082,258  |   |        |   | 42,916    |        |   |   | 18,657        |   |   |   | -       |   |   |   | 1,143,831 |   |
|  Net Income (loss)             |   |           | 436,694    |   |        |   | 26,076    |        |   |   | 224,089       |   |   |   | (12,260 | ) |   |   | 674,599 |   |
|  Total assets                  |   |           | 26,211,732 |   |        |   | 656,137   |        |   |   | 4,213,517     |   |   |   | 107,655 |   |   |   | 31,189,041 |   |
|  Capital expenditure           |   |           | 1,846,138  |   |        |   | 11,673    |        |   |   | 93,514        |   |   |   | 117,450 |   |   |   | 2,068,775 |   |
|  Depreciation and amortization |   | $              | 1,828,925  |   |        | $      | -         |        |   | $      | 10,153        |   |   | $      | 6,982   |   |   | $ | 1,846,060 |   |

|                                                 |   | 2009   |    |   | 2008   |   |
|------------------------------------------------------|--------|--------|---------|--------|--------|--------|
|                                                 |   |   |    |   |   |   |
| Total net income for reportable segments             |   | $      | 317,907 |   |   | $      | 674,599 |   |
| Unallocated amounts relating to corporate operations |   |   |    |   |   |   |   |   |
| Interest expenses                                    |   |   | 163,164 |   |   |   | 108,744 |   |
| Amortization of convertible debt discount            |   |   | -       |   |   |   | 752,369 |   |
| Interest paid to related companies and directors     |   |   | 11,762  |   |   |   | 16,568 |   |
| Administration expenses                              |   |   | 189,760 |   |   |   | 287,170 |   |
| Professional fees                                    |   |   | 20,254  |   |   |   | 17,092 |   |
| Others                                               |   |   | 1,725   |   |   |   | 16,673 |   |
|                                                 |   |   |    |   |   |   |   |   |
| Total net loss                                       |   | $      | (68,757 | )      |   | $      | (524,017 | ) |

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Table of Contents

| -   | 42,706,363 shares of common stock;                                                                                          |   |   |
|---------------|-----------------------------------------------------------------------------------------------------------------------------|--------|--------|
| -   | 1,875,000 shares of preferred stock;                                                                                        |   |   |   |
| -   | 6,888,882 shares of common stock to be issued upon conversion of convertible debenture;                                     |   |
| -   | warrants to purchase 6,888,882 shares of common stock at an exercise price of $0.80 per share, expire in November 2012;     |
| -   | warrants to purchase 6,888,882 shares of common stock at an exercise price of $1.20 per share, expire in November 2012; and |
| -   | warrants to purchase 3,444,441 shares of common stock at an exercise price of $2.25 per share, expire in November 2012.     |
|          |                                                                                                                        |   |   |   |   |

|                                              |   |   |       |   |   |   |
|---------------------------------------------------|--------|--------|------------|--------|--------|--------|
|                                              |   | 2009   |       |   | 2008   |   |
|                                              |   |   |       |   |   |   |
| Net Loss                                          |   | $      | (68,757    | )      |   | $      | (524,017 | ) |
|                                              |   |   |       |   |   |   |   |   |
| Basic - 2 classes method                          |   |   |       |   |   |   |   |   |
| Loss available to common stockholders             |   | $      | (68,757    | )      |   | $      | (524,017 | ) |
|                                              |   |   |       |   |   |   |   |   |
| Weighted-average common stock outstanding         |   |   | 42,706,363 |   |   |   | 42,480,690 |   |
|                                              |   |   |       |   |   |   |   |   |
| Basic earnings per share - Common Stock           |   |   | (0.00      | )      |   |   | (0.01 | ) |
|                                              |   |   |       |   |   |   |   |   |
| Diluted                                           |   |   |       |   |   |   |   |   |
| Loss available to common stockholders             |   | $      | (68,757    | )      |   | $      | (524,017 | ) |
|                                              |   |   |       |   |   |   |   |   |
| Diluted weighted-average common stock outstanding |   |   | 42,706,363 |   |   |   | 42,480,690 |   |
|                                              |   |   |       |   |   |   |   |   |
| Diluted earnings per share                        |   |   | (0.00      | )      |   |   | (0.01 | ) |

|                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |    | Jun 30,         |          |    | Dec 31,         |   |
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|---------|-----------------|---------------|---------|-----------------|--------|
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |    | 2009            |          |    | 2008            |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |    | (Unaudited)     |          |    | (Audited)       |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |    |            |          |    |            |   |
|  $2,150,000 Convertible Debentures, net of $135,000 conversions and unamortized discount of $0 as of June 30, 2009 and December 31, 2008 at 13% interest per annum for the first quarter and at 10% interest per annum due each quarter end in 2009, 2010 andexpired at June 30, 2010.                                                                                                                                                                                 |  $ |  2,015,000 |          |  $ | 2,015,000  |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |    |            |          |    |            |   |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |    |            |          |    |            |   |   |   |
|   $500,000 Convertible Debentures, net of unamortized discount of $0 as of June 30, 2009 and December 31, 2008 at 4% interest per annum for the period of January 1 to May 17, 2008 due April 30, 2009, and 10% interest per annum for the period of May 18 to December 31, 2008 due October 31, 2009, and at 13% interest per annum for theyear 2009 due at the end of 2009, and at 14% interest per annum for the year 2010 due at the end of 2010 upon expiry. |    |            | 500,000  |    |            |   | 500,000  |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |    |            |          |    |            |   |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |    |            |          |    |            |   |   |   |
|   $200,000 Convertible Debentures, net of unamortized discount of $0 as of March 31, 2009 and December 31, 2008 respecitively at 4% interest per annum due May 2008, in default                                                                                                                                                                                                                                                                                   |    |            | 200,000  |    |            |   | 200,000  |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |    |            |          |    |            |   |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |    |            |          |    |            |   |   |   |
|   $150,000 Convertible Debentures, net of unamortized discount of $0 as of March 31, 2009 and December 31, 2008 respecitively at 4% interest per annum due May 2008, in default                                                                                                                                                                                                                                                                                   |    |            | 150,000  |    |            |   | 150,000  |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |    |            |          |    |            |   |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |    |            |          |    |            |   |   |   |
|   $100,000 Convertible Debentures, net of unamortized discount of $0 as of March 31, 2009 and December 31, 2008 at 4% interest per annum due June 2008, in default                                                                                                                                                                                                                                                                                                |    |            | 100,000  |    |            |   | 100,000  |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |    |            |          |    |            |   |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |    |            |          |    |            |   |   |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |  $ |            | 2,965,000     |    |  $         |   | 2,965,000 |   |

  

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| -   | Through a subsidiary, Arcotect (Guangzhou) Limited (“AGL”), converting analog cable television subscribers to digital television and providing various value added and broadband services to the digital subscribers; and |
|---------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| -   | Television advertising sales.                                                                                                                                                                                                         |   |   |
|          |                                                                                                                                                                                                                                  |   |

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| 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       |

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|  Date: August 5, 2009 /s/ Ng Chi ShingNg Chi ShingChief Executive Officer Date: August 5, 2009 /s/ Ng Chi ShingNg Chi ShingChief Financial Officer |
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------|