**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 March 31, 2005





**[
] 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 o





Number of
shares of common stock outstanding as of May 11, 2005: 30,155,843





Number of
shares of preferred stock outstanding as of May 11, 2005: 1,975,000







Index




**INDEX TO FORM 10-QSB**Page
      No.**PART
      I**Item
      1.    Financial
      Statements (Unaudited)Condensed Consolidated Balance Sheet- March 31, 2005 (unaudited)
    3Condensed Consolidated Statements of
      Operations- Three Months Ended March 31, 2005 and
      2004 (unaudited)
    4Condensed Consolidated Statements of Cash
      Flows-
      Three Months Ended March 31, 2005 and 2004 (unaudited)
    5Notes to Condensed Consolidated Financial Statements
      (unaudited)
    6-7Item
      2.    Management's Discussion and
      Analysis of Financial Condition And
      Results of Operations
    8-12Item
      3.    Quantitative and Qualitative Disclosures
      About Market Risk
    12Item
      4.    Controls and
    Procedures
    12**PART
      II**Item
      1.    Legal
    Proceedings
    12Item
      2.    Changes in
      Securities
    12Item
      3.    Defaults Upon Senior
      Securities
    12Item
      4.    Submission of Matters to a Vote of
      Security Holders
    12Item
      5.    Other
    Information
    12
  2
 Index





Item
1.    Financial Statements


CHINA DIGITAL MEDIA CORPORATION AND
    SUBSIDIARIESCONSOLIDATED
      BALANCE SHEET (Unaudited)AT
      MARCH 31, 2005**ASSETS**2005**CURRENT
      ASSETS**Cash
      and cash equivalents
    
    
    
    
    $
    93,606Accounts
      receivable, net of allowances
    
    
    
    
    
    1,013,514Inventories
    
    
    
    
    
    857,382Other
      receivables and prepaid expenses
    
    
    
    
    
    56,648Total
      Current Assets
    
    
    
    
    
    2,021,150**PROPERTY
      AND EQUIPMENT, NET**
    
    
    
    
    
    5,570,663**TOTAL
      ASSETS**
    
    
    
    
    $
    7,591,813**LIABILITIES
      AND STOCKHOLDERS' EQUITY****CURRENT
      LIABILITIES**Accounts
      payable
    
    
    
    
    $
    3,593,477Other
      payables and accrued liabilities
    
    
    
    
    
    38,517Due
      to a director
    
    
    
    
    
    75,821Due
      to a related company
    
    
    
    
    
    68,678Value
      added taxes payable
    
    
    
    
    
    19,641Income
      taxes payable
    
    
    
    
    
    312,636Due to a Stockholder
    
    
    
    
    
    191,934Total
      Current Liabilities
    
    
    
    
    
    4,300,704**COMMITMENTS
      AND CONTINGENCIES****STOCKHOLDERS'
      EQUITY**Common
      stock ($.001 par value, 100,000,000 shares authorized,28,579,976
      shares issued and outstanding at March 31, 2005)
    
    
    
    
    
    28,580Series
      A convertible preferred stock ($.001 par value, 40,000,000 shares
      authorized,1,975,000
      shares issued and outstanding at March 31, 2005)
    
    
    
    
    
    1,975Series
      B 2% convertible preferred stock ($.001 par value, 1,000 shares
      authorized,-0-
      shares issued and outstanding at March 31, 2005)
    
    
    
    
    
    -Additional
      paid in capital
    
    
    
    
    
    3,422,839Common
      Stock Subscription Receivables
    
    
    
    
    
    (2,290,025
    )Retained
      earnings
    
    
    
    
    
    2,127,740Total
      Stockholders' Equity
    
    
    
    
    
    3,291,109**TOTAL
      LIABILITIES AND STOCKHOLDERS' EQUITY**
    
    
    
    
    $
    7,591,813


3
 Index




CHINA DIGITAL MEDIA CORPORATION AND
    SUBSIDIARIESCONSOLIDATED
      STATEMENTS OF OPERATIONS (Unaudited)FOR
      THE THREE MONTHS ENDED MARCH 31, 2005 AND 20042005
    
    2004**NET
      SALES**Revenue
      from digitalization of television signals
    
    $
    691,101
    
    $
    356,938Government
      grant, PRC
    
    
    302,371
    
    
    302,371993,472
    
    
    659,309**COST
      OF SALES**
    
    
    (121,025
    )
    
    (105,403
    )**GROSS
      PROFIT**
    
    
    872,447
    
    
    553,906**OPERATING
      EXPENSES**Selling,
      general and administrative expenses
    
    
    171,656
    
    
    157,287Depreciation
      and amortization
    
    
    263,136
    
    
    25,303Total
      Operating Expenses
    
    
    434,792
    
    
    182,590**INCOME
      FROM OPERATIONS**
    
    
    437,655
    
    
    371,316**OTHER
      INCOME**Interest
      income, net
    
    
    198
    
    
    527Total
      Other Income
    
    
    198
    
    
    527**NET
      INCOME**
    
    $
    437,853
    
    $
    371,843Net
      income per share - basic diluted
    
    $
    0.02
    
    $
    0.04Net income per share - fully diluted
    
    $
    0.02
    
    $
    0.03Weighted
      average shares outstanding
    
    
    23,051,117
    
    
    10,439,296




****


4
 Index





CHINA DIGITAL MEDIA CORPORATION AND
    SUBSIDIARIESCONSOLIDATED
      STATEMENTS OF CASH FLOWS (Unaudited)FOR
      THE THREE MONTHS ENDED MARCH 31, 2005 AND 20042005
    
    2004**CASH
      FLOWS FROM OPERATING ACTIVITIES**Net
      income
    
    $
    437,853
    
    $
    371,843Adjusted
      to reconcile net income to cash providedby
      (used in) operating activities:Depreciation
    
    
    263,136
    
    
    25,303Changes
      in operating assets and liabilitiesIncrease
      in accounts receivable
    
    
    (702,103
    )
    
    (324,215
    )Increase
      in other receivable and prepaid expenses
    
    
    (9,485
    )
    
    (89,528
    )Increase
      in inventories
    
    
    (237,750
    )
    
    (40,639
    )Increase
      in accounts payable
    
    
    569,564
    
    
    656,122Increase/(decrease)
      in other payables and accrued liabilities
    
    
    (3,277
    )
    
    95,158Increase
      in value added tax payables
    
    
    (5,993
    )
    
    3,412Net
      cash provided by operating activities
    
    
    311,945
    
    
    697,456**CASH
      FLOWS FROM INVESTING ACTIVITIES**Purchases
      of property and equipment
    
    
    (406,221
    )
    
    (715,008
    )Net
      cash used in investing activities
    
    
    (406,221
    )
    
    (715,008
    )**CASH
      FLOWS FROM FINANCING ACTIVITIES**Due
      from directors - net
    
    
    20,717
    
    
    -Due
      to a related company
    
    
    38,988
    
    
    (90,348
    )Due
      to a stockholder
    
    
    (32,000
    )
    
    755,927Net
      cash provided by financing activities
    
    
    27,705
    
    
    665,579**NET
      INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS**
    
    
    (66,571
    )
    
    648,027**CASH
      AND CASH EQUIVALENTS AT BEGINNING OF PERIOD**
    
    
    160,177
    
    
    2,074**CASH
      AND CASH EQUIVALENTS AT END OF PERIOD**
    
    $
    93,606
    
    $
    650,101**Supplemental
      Information**Interest
      expense paid
    
    $
    -
    
    $
    -Income
      taxes paid
    
    $
    -
    
    $
    -6,586,500
      common shares subscribed during the quarter
    
    $
    2,290,025
    
    $
    -


5
 Index


****


**NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**


**CHINA
DIGITAL MEDIA CORPORATION & SUBSIDIARIES**


**MARCH
31, 2005 (UNAUDITED)**







**NOTE
1 - 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 financial position at March 31, 2005,
the results of operations for the three month periods ended March 31, 2005 and
2004, and cash flows for the three months ended March 31, 2005 and 2004. The
results for the period ended March 31, 2005 are not necessarily indicative of
the results to be expected for the entire fiscal year ending December 31, 2005.
These financial statement should be read in conjunction with the financial
statements and notes for the year ended December 31, 2004 appearing in the
Company's annual report on Form 10-KSB and 8-K as filed with the Securities
and Exchange Commission.





Revenue
Recognition - The Company generates two revenue streams: software development
and digitalization of television signals.





Software
development





We
provide various information technology professional services to our customers
based on a negotiated fixed-price time and materials contracts. We recognize
services-based revenue from all of our contracts when the service has been
performed, the customer has approved the completion of services and an invoice
has been issued and collectibility is reasonably assured.





Digitalization
of television signals





We
entered into a 20 year agreement with Nanhai Network Company to assist
the conversion of television signal from analogue into digital by
providing digital television set-top-box ("STB") and smart cards to
the subscribers in Nanhai City on a loan basis. We are entitled to a portion of
fees payable by the existing subscriber under a subscription agreement between
the subscriber and the Nanhai Network Company. R evenue is
recognized on a straight line basis in accordance with the term of the
subscription agreement. We also charge installation fees and sell 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.





The local
government of Nanhai City also approved a grant of $1,209,482 each year for five
years to finance the purchase of STB and smart cards for sale and loan to
subscribers. The grant is recognized as revenue on receipt from the local
government.





Management's
Use of Estimates - The preparation of financial statements in conformity with
accounting principles generally accepted in the United States requires
management to make estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosures of contingent assets and liabilities at
the date of financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from those
estimates.




Income
Per Share - Basic income (loss) per share is computed by dividing income (loss)
available to common shareholders by the weighted average number of common shares
outstanding during the periods. Diluted income per share is computed similar to
basic income (loss) per share except that the denominator is increased to
include the number of additional common shares that would have been outstanding
if the potential common shares had been issued and if the additional common
shares were dilutive. There are no potentially dilutive securities for the three
months ended March 31, 2005 and 2004.




Property
and equipment - Property
and equipment are stated at cost, less accumulated depreciation. Expenditures
for additions, major renewals and betterments are capitalized and expenditures
for maintenance and repairs are charged to expense as incurred. Depreciation is
provided on a straight-line basis, less estimated residual value over the
assets’ estimated useful lives. The estimated useful lives are as
follows:




STB and
smart cards    5 Years


Motor
vehicles 10 Years


Furniture,
fixtures and equipment    5 Years




Long-lived
assets - In accordance with Statement of Financial Accounting Standards No. 121,
“Accounting for the impairment of Long-Lived Assets and for Long-Lived Assets to
be Disposed of", long-lived assets and certain identifiable intangible assets
held and used by us are reviewed for impairment whenever events or changes in
circumstances indicate that the carrying amount of an asset may not be
recoverable. For purposes of evaluating the recoverability of long-lived assets,
the recoverability test is performed using undiscounted net cash flows related
to the long- lived assets. We review long-lived assets to determine that
carrying values are not impaired.




Fair
value of financial instruments - Statement of Financial Accounting Standards No.
107, "Disclosure About Fair Value of Financial Instruments," requires certain
disclosures regarding the fair value of financial instruments. Trade accounts
receivable, accounts payable, and accrued liabilities are reflected in the
financial statements at fair value because of the short-term maturity of the
instruments.





Foreign
currency translation - The
functional currency of ADTL is Hong Kong Dollars and AGTL is the Chinese
Renminbi (“RMB”). Transactions denominated in Hong Kong Dollars and RMB are
translated into United States dollars using year end exchange rates as to assets
and liabilities and average exchange rates as to revenues and expenses. Capital
accounts are translated at their historical exchange rates when the capital
transaction occurred. Net gains and losses resulting from foreign exchange
translations are included in the statements of operations and stockholder’s
equity as other comprehensive income (loss). No translation differences were
recorded for the three months ended March 31, 2005 and 2004.





6
 Index


****


**NOTE
2 - SEGMENT INFORMATION**





We
operate in three reportable segments, Digitalization of Television Signals,
Software Development and Investment Holding. The accounting policies of the
segments are the same as described in the summary of significant accounting
policies. We evaluate segment performance based on income from operations. All
inter-company transactions between segments have been eliminated. As a result,
the components of operating income for one segment may not be comparable to
another segment. The following is a summary of our segment information for the
three months ended March 31, 2005 and 2004:












**NOTE
3 - COMMITMENTS AND CONTINGENCIES**





Employee
benefits





Our full
time employees in China are entitled to employee benefits including medical
care, welfare subsidies, unemployment insurance and pension benefits through a
Chinese government mandated multi-employer defined contribution plan. We are
required to accrue for those benefits based on certain percentages of the
employees’ salaries and make contributions to the plans out of the amounts
accrued for medical and pension benefits. The total provision and contributions
made for such employee benefits was $6,350 and $2,383 for the three months ended
March 31, 2005 and 2004, respectively. The Chinese government is responsible for
the medical benefits and the pension liability to be paid to these
employees.




We also
operate a Mandatory Provident Fund plan (“the plan”) which is available to all
employees in Hong Kong. Both of us and the employees are required to contribute
5% (subject to an aggregate amount of $256) per month of the employees’ relevant
income. Our contributions are 100% vested in the employees as soon as they are
paid to the plan. Contributions to the plan are expensed as they become payable
in accordance with the rules of the plan and amounted to $385 and $385 for the
three months ended March 31, 2005 and 2004, respectively. The
assets of the plan are held separately from those of ours and are managed by
independent professional fund managers.





Operating
leases commitments





We lease
office space from third parties under two operating leases which expire on May
31, 2005 and August 7, 2005 at monthly rental of $290 and $1,734. We also lease
spaces for staff quarters from third parties under five operating leases which
expire from May 1, 2005 to March 16, 2006 with total monthly rental of $641.
Accordingly, for the three months ended March 31, 2005 and 2004, we recognized
rental expense for these spaces in the amount of $6,134 and $5,203,
respectively.





As of
March 31, 2005, we have outstanding commitments with respect to the above
non-cancelable operating leases, which are due as follows:




Capital
commitments




According
to the amended Articles of Association of AGTL, ADTL has to fulfill registered
capital contributions of $5 million within two years from July 16, 2004. As of
March 31, 2005, we have fulfilled $1,305,177 of the registered capital
requirement and have registered capital commitments of $3,694,823.




7
 Index





**NOTE
4 - COMMON STOCK AND RELATED PARTY TRANSACTIONS**





During
the three months ended March 31, 2005, we issued 20,000,000 shares of our
restricted common stock to our President and Chief Executive Officer pursuant to
the Plan of Exchange dated December 28, 2004. These shares were issued in
exchange for all of the shares of capital stock of Arcotect Digital Technology
Limited pursuant to the exchange thereto. In addition, we issued 105 shares of
common stock to various parties during the three months ended March 31, 2005 due
to our rounding up of common shares on account of the reverse split. We also
issued 6,586,500 common shares to six creditors during the three months ended
March 31, 2005. These shares were issued under Regulation E with an aggregate
consideration of $2,290,025 in debt principal in the form of 9% ninety-day
promissory notes. We extended these notes for an additional two months in return
for an increase of three percentage points in the annual percentage interest
rate under the notes.





During
the quarter ended March 31, 2005, we did not issue preferred stock.





**NOTE
5 - SUBSEQUENT EVENTS**





As of May
1, 2005, six obligors under an aggregate of $2,290,025 in principal amount of
their 9% ninety-day promissory notes owing to us, which notes were delivered to
us in connection with the obligors’ purchase of 6,586,500 shares of our common
stock under its Regulation E offering which closed on February 7, 2005, are in
default in their payment obligations.





We have
agreed to an extension of the term of the notes for an additional two months in
return for an increase of three percentage points (3%) in the annual percentage
interest rate under the notes.





On April
18, 2005, our counsel informed us that Edward A. Roth, our former Chairman and
President, as well as the consultant and manager of our former businesses in
this country, had unilaterally, and without the approval or our consent,
terminated the operations of the our three beauty salons located in South
Florida, on or about February 7, 2005.





Such
termination was not reported to us by Mr. Roth, and we did not find out about
this bizarre action until our counsel spoke to an agent for one of the landlords
on April 18, 2005. When we were confronted with this breach of contract and
breach of fiduciary duty by Mr. Roth, the Board of Directors promptly discharged
Mr. Roth as a consultant to all of our subsidiaries and as an officer of the
same.





As
previously reported, a Complaint, dated March 3, 2005, in the matter of RM Coral
Palm Plaza, Ltd., a Florida limited partnership, Plaintiff, vs. Hairmax of
Florida, Inc. f/k/a National Beauty Corporation, a Florida corporation, and
Hairmax International, Inc., f/k/a National Beauty Corporation, a Nevada
corporation, Defendants, was filed in the Circuit Court of the Seventeenth
Judicial Circuit in and for Broward County, Florida. The Complaint arose out of
an alleged breach of lease by defendants Hairmax of Florida, Inc. and Hairmax
International, Inc., with respect to its operation of a hair salon located at
2031 North University Drive, Coral Springs, Florida 33071. If all of the
allegations of the plaintiff had been proven at trial, the plaintiff might have
been entitled to damages of approximately $90,000, which sum represents
delinquent rents and an acceleration of rents due for the balance of the lease
term, which extends through February of 2008.





On April
15, 2005, the parties entered into a Settlement Agreement that provided that the
litigation would be dismissed with prejudice in exchange for the payment by the
Defendants of an aggregate amount equal to $15,000. It was agreed that payment
would be made in an amount equal to $10,000 upon execution of the Settlement
Agreement, with the remaining $5,000 being paid in two installments by September
5, 2005.





8
 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., formerly known as HairMax International Corp., was
incorporated in Nevada in 1987. We formerly operated through our discontinued
wholly owned subsidiaries, Cleaning Express USA, Hair Max of Florida, Inc. f/k/a
Beauty Works USA, Inc. and Cleaning Express USA, Inc., a full service cleaning
company that formerly offered daily residential cleaning services, carpet
cleaning and other related services in the South Florida area. During 2005, we
discontinued the above mentioned operations in these subsidiaries.




Our
business plan now currently entails developing one of the fastest growing
companies in the China broadcasting media and Cable TV industry. We are one of
the fastest growing companies engaged in the business of broadcasting media and
Cable TV in the People's Republic of China. We are realigning our business
direction to cover more segments of the media industry through investment,
mergers, acquisitions and alliance partnership. In view of the rapid growth and
potential market of China's media industry, we will continue to put our
resources into the target media market across the China while looking for
potential distribution partners in the United States and other
countries.




Arcotect
Digital Technology Limited and our China operating subsidiary Arcotect
Technology (Guangzhou) Limited is the sole contractor and operator of digital
television services in Nanhai, a city in the Guangdong province. The city of
Nanhai has approximately 400,000 paying Cable TV subscribers which it plans to
migrate from analog television to digital television. Thus far, we have migrated
around 100,000 subscribers from analog television to digital television by
installing a digital set-top-box into subscriber's premises. We are offering an
additional 60 TV channels divided into four product packages, namely "World
Movies", "Life & Leisure", "World Sports" and "News". We are responsible for
migrating all 400,000 subscribers from analog to digital television service as
well as operating its own pay-TV and interactive services. We currently employ
approximately 200 people to support the existing operations.




We plan
to allocate more resources in order to develop more high value added services,
including but not limited to information services (e- Government),
High-Definition Television service, IP Set-top-box and Near- Video-On-Demand
service.




Nanhai is
the first model city in China to implement city-wide total migration of Digital
Television by contracting with professional managers who fund their operations
from the capital market. Our success represents a successful model of
cooperation and a win-win situation for the state owned Cable Network Company,
the TV viewers and investors like us. We intend to duplicate this successful
model and seek co-operation with cable companies in other cities of China and
continue to grow our business with contributions from existing operations and
new businesses.




The
broadcasting media and Cable TV industry is capital intensive and is gradually
opening up to foreign investment. We plan to expand and diversify into 1) TV
Channel operations and Advertisement sales and 2) TV program production and
related content management services in the near future through selective
acquisitions and alliances."




9
 Index




**RESULTS
OF OPERATIONS**





**Net Income
(Loss)**





We had
net income of $437,853 and $371,843, or $.02 and $.04 per common share for the
three months ended March 31, 2005 and 2004, respectively. The change in net
income was primarily due to an increase in sales and related gross
profit.





**Sales**





Revenues
increased $334,163 or 51% to $993,472 for the three months ended March 31, 2005,
from $659,309 for the three months ended March 31, 2004. The increase was
primarily due to increased demand for our product and services and increased
revenue from digitalization of television signals in the first quarter of 2005
compared to the comparable period in 2004.





Gross
profit margins increased from 84% during the three months ended March 31, 2004
to 87% during the three months ended March 31, 2005 although remained relatively
consistent between periods.





**Expenses**





Selling,
general, and administrative expenses for the three months ended March 31, 2005
increased $252,202 or 138% to $434,792. In comparison with the three month
period ended March 31, 2004, selling, general and administrative expenses
increased $14,369 due to growth due support increased revenue. Depreciation and
amortization increased $237,833 from $25,303 during the three months ended March
31, 2004 due to acquisitions of property in equipment since the prior
period.





**Liquidity
and Capital Resources**





On March
31, 2005, we had cash of $93,606 and a working capital deficit of $2,087,620.
This compares with cash of $160,177 and a working capital deficit of $2,215,939
at December 31, 2004. The decrease in cash and increase in working capital
deficit was due to an increase in net income for the three months ended March
31, 2005. Operating activities had a net generation of cash in the amount of
$311,945 during the three months ended March 31, 2005 reflecting an excess of
revenues over expenditures and increased depreciation as mentioned
above.





Net cash
used in investing activities for the three months ended March 31, 2005 was
$406,221 as compared with net cash used in investing activities of $715,008 for
the three months ended March 31, 2004. The decrease in net cash used in
investing activities is attributable to fewer purchases of property and
equipment during the three months ended March 31, 2005 compared to the
comparable period in 2004.





Net cash
provided by financing activities for the three months ended March 31, 2005 was
$27,705 as compared with net cash provided by financing activities of $665,579
for the three months ended March 31, 2004. The decrease in net cash provided by
financing activities is attributable to no proceeds from shareholder loan
payable in 2005 compared to a large infusion in 2004.








**ITEM
3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK**





We do not
have any material risk with respect to changes in foreign commodities prices or
interest rates. We do not believe that we have any other relevant market risk
with respect to the categories intended to be discussed in this item of this
report.




**Concentrations
and Risks**





During
2005 and 2004, 99% of the Comapany's assets were located in China and 100% of
the Company's revenues were derived from customers in China.





The
Company relied on one supplier for approximately 85% of its purchases in 2004.
As of March 31, 2005, accounts payable to this supplier amounted to
$3,319,860.





In
2005 and 2004, the Company did not derive revenue from any one customer for
more than 10% of its total revenue.





**ITEM 4. CONTROLS AND PROCEDURES**





**Quarterly
Evaluation of Controls**





As of the
end of the period covered by this quarterly report on Form 10-QSB, we evaluated
the effectiveness of the design and operation of (i) our disclosure controls and
procedures ("Disclosure Controls"), and (ii) our internal control over financial
reporting ("Internal Controls"). This evaluation ("Evaluation") was performed by
our President and Chief Executive Officer, Daniel Ng ("CEO") and Lui Chi Keung,
our Chief Financial Officer. In this section, we present the conclusions of our
CEO and CFO based on and as of the date of the Evaluation, (i) with respect to
the effectiveness of our Disclosure Controls, and (ii) with respect to any
change in our Internal Controls that occurred during the most recent fiscal
quarter that has materially affected, or is reasonably likely to materially
affect our Internal Controls.





**CEO
and CFO Certifications**





Attached
to this annual report, as Exhibits 31.1 and 31.2, are certain certifications of
the CEO and CFO, which are required in accordance with the Exchange Act and the
Commission's rules implementing such section (the "Rule 13a-14(a)/15d-14(a)
Certifications"). This section of the annual report contains the information
concerning the Evaluation referred to in the Rule 13a-14(a)/15d-14(a)
Certifications. This information should be read in conjunction with the Rule
13a-14(a)/15d-14(a) Certifications for a more complete understanding of the
topic presented.





**Disclosure
Controls and Internal Controls**





Disclosure
Controls are procedures designed with the objective of ensuring that information
required to be disclosed in our reports filed with the Commission under the
Exchange Act, such as this annual report, is recorded, processed, summarized and
reported within the time period specified in the Commission's rules and forms.
Disclosure Controls are also designed with the objective of ensuring that
material information relating to the Company is made known to the CEO and the
CFO by others, particularly during the period in which the applicable report is
being prepared. Internal Controls, on the other hand, are procedures which are
designed with the objective of providing reasonable assurance that (i) our
transactions are properly authorized, (ii) the Company's assets are safeguarded
against unauthorized or improper use, and (iii) our transactions are properly
recorded and reported, all to permit the preparation of complete and accurate
financial statements in conformity with accounting principals generally accepted
in the United States.





10
 Index


****


**Limitations
on the Effectiveness of Controls**





Our
management does not expect that our Disclosure Controls or our Internal Controls
will prevent all error and all fraud. A control system, no matter how well
developed and operated, can provide only reasonable, but not absolute assurance
that the objectives of the control system are met. Further, the design of the
control system must reflect the fact that there are resource constraints, and
the benefits of controls must be considered relative to their costs. Because of
the inherent limitations in all control systems, no evaluation of controls can
provide absolute assurance that all control issues and instances so of fraud, if
any, within the Company have been detected. These inherent limitations include
the realities that judgments in decision -making can be faulty, and that
breakdowns can occur because of simple error or mistake. Additionally, controls
can be circumvented by the individual acts of some persons, by collusion of two
or more people, or by management override of the control. The design of a system
of controls also is based in part upon certain assumptions about the likelihood
of future events, and there can be no assurance that any design will succeed in
achieving its stated objectives under all potential future conditions. Over
time, control may become inadequate because of changes in conditions, or because
the degree of compliance with the policies or procedures may deteriorate.
Because of the inherent limitations in a cost-effective control system,
misstatements due to error or fraud may occur and not be detected.





**Scope
of the Evaluation**





The CEO
and CFO's evaluation of our Disclosure Controls and Internal Controls included a
review of the controls' (i) objectives, (ii) design, (iii) implementation, and
(iv) the effect of the controls on the information generated for use in this
annual report. In the course of the Evaluation, the CEO and CFO sought to
identify data errors, control problems, acts of fraud, and they sought to
confirm that appropriate corrective action, including process improvements, was
being undertaken. This type of evaluation is done on a quarterly basis so that
the conclusions concerning the effectiveness of our controls can be reported in
our quarterly reports on Form 10-QSB and annual reports on Form 10-KSB. The
overall goals of these various evaluation activities are to monitor our
Disclosure Controls and our Internal Controls, and to make modifications if and
as necessary. Our external auditors also review Internal Controls in connection
with their audit and review activities. Our intent in this regard is that the
Disclosure Controls and the Internal Controls will be maintained as dynamic
systems that change (including improvements and corrections) as conditions
warrant.





Among
other matters, we sought in our Evaluation to determine whether there were any
significant deficiencies or material weaknesses in our Internal Controls, which
are reasonably likely to adversely affect our ability to record, process,
summarize and report financial information, or whether we had identified any
acts of fraud, whether or not material, involving management or other employees
who have a significant role in our Internal Controls. This information was
important for both the Evaluation, generally, and because the Rule
13a-14(a)/15d-14(a) Certifications, Item 5, require that the CEO and CFO
disclose that information to our Board (audit committee), and to our independent
auditors, and to report on related matters in this section of the annual report.
In the professional auditing literature, "significant deficiencies" are referred
to as "reportable conditions". These are control issues that could have
significant adverse affect on the ability to record, process, summarize and
report financial data in the financial statements. A "material weakness" is
defined in the auditing literature as a particularly serious reportable
condition where the internal control does not reduce, to a relatively low level,
the risk that misstatement cause by error or fraud may occur in amounts that
would be material in relation to the financial statements and not be detected
within a timely period by employee in the normal course of performing their
assigned functions. We also sought to deal with other controls matters in the
Evaluation, and in each case, if a problem was identified; we considered what
revisions, improvements and/or corrections to make in accordance with our
ongoing procedures.





**Conclusions**





Based
upon the Evaluation, the Company's CEO and CFO have concluded that, subject to
the limitations noted above, our Disclosure Controls are effective to ensure
that material information relating to the Company is made known to management,
including the CEO and CFO, particularly during the period when our periodic
reports are being prepared, and that our Internal Controls are effective to
provide reasonable assurance that our financial statements are fairly presented
inconformity with accounting principals generally accepted in the United States.
Additionally, there has been no change in our Internal Controls that occurred
during our most recent fiscal quarter that has materially affected, or is
reasonably likely to affect, our Internal Controls.





11
 Index


****


**PART
II. OTHER INFORMATION**





**Item
1. Legal Proceedings**





As
previously reported, a Complaint, dated March 3, 2005, in the matter of RM Coral
Palm Plaza, Ltd., a Florida limited partnership, Plaintiff, vs. Hairmax of
Florida, Inc. f/k/a National Beauty Corporation, a Florida corporation, and
Hairmax International, Inc., f/k/a National Beauty Corporation, a Nevada
corporation, Defendants, was filed in the Circuit Court of the Seventeenth
Judicial Circuit in and for Broward County, Florida. The Complaint arose out of
an alleged breach of lease by defendants Hairmax of Florida, Inc. and Hairmax
International, Inc., with respect to its operation of a hair salon located at
2031 North University Drive, Coral Springs, Florida 33071. If all of the
allegations of the plaintiff had been proven at trial, the plaintiff might have
been entitled to damages of approximately $90,000, which sum represents
delinquent rents and an acceleration of rents due for the balance of the lease
term, which extends through February of 2008.





On April
15, 2005, the parties entered into a Settlement Agreement that provided that the
litigation would be dismissed with prejudice in exchange for the payment by the
Defendants of an aggregate amount equal to $15,000. It was agreed that payment
would be made in an amount equal to $10,000 upon execution of the Settlement
Agreement, with the remaining $5,000 being paid in two installments by September
5, 2005.





**Item
2. Changes in Securities**





During
the three months ended March 31, 2005, we issued 20,000,000 shares of our
restricted common stock to our President and Chief Executive Officer pursuant to
the Plan of Exchange dated December 28, 2004. These shares were issued in
exchange for all of the shares of capital stock of Arcotect Digital Technology
Limited pursuant to the exchange thereto. In addition, we issued 105 shares of
common stock to various parties during the three months ended March 31, 2005 due
to our rounding up of common shares on account of the reverse split. We also
issued 6,586,500 common shares to six creditors during the three months ended
March 31, 2005. These shares were issued under Regulation E with an aggregate
consideration of $2,290,025 in debt principal in the form of 9% ninety-day
promissory notes.





**Item
3. Defaults Upon Senior Securities**





None.





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





None.





**Item
5. Other Information**





None.





**Item
6. Exhibits and Reports on Form 8-K**





(a)
Exhibits are incorporated by reference.


(b) On
January 10, 2005, we filed an 8-K regarding a change in control among other
events.


(c) On
January 10, 2005, we filed a DEF 14C for amendments to our charter for a name
change among other items.


(d) On
January 18, 2005, we filed an 8-K regarding continuance of operations and BDC
status.


(e) On
March 17, 2005, we filed an 8-K regarding termination of BDC status and to seek
buyers of our operations.


(f) On
March 31, 2005, we filed an 8-K regarding a complain that we received as
discussed above in item 1of this part herein.


(g) On
April 21, 2005 We filed an 8-K/A Financial Statements of
Arcotec.





12
 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: May
      16, 2005
    By:
    /s/ Lui
      Chi KeungLui Chi KeungChief
      Financial Officer




****Date: May
      16, 2005
    By:
    /s/ Daniel
      NgDaniel NgChief
      Executive Officer




13