Median Group Inc - FORM 10-Q - November 20, 2012

Attached files

file	filename
EX-32 - EXHIBIT 32.1 - Median Group Inc	ex321-093012cmg.htm
EX-32 - EXHIBIT 32.2 - Median Group Inc	ex322-093012cmg.htm
EX-31 - EXHIBIT 31.1 - Median Group Inc	ex311-093012cmg.htm
EX-31 - EXHIBIT 31.2 - Median Group Inc	ex312-093012cmg.htm

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q

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

	For the quarterly three month period ended September 30, 2012

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

	For the transition period from [ ] to [ ]

_______________________________________

Commission File Number: 000-50431

CHINA MEDIA GROUP CORPORATION
_______________________________________

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

Texas	7310	32-0034926
_____________	________________	______________
(State or other jurisdiction of incorporation or organization)	(Primary Standard Industrial Classification Code Number)	(I.R.S. Employer Identification No.)

1402 Wan Chai Commercial Center, 204 Johnston Road, Wanchai, Hong Kong	______
__________________________________________________	_____________
(Address of Company's principal executive offices)	(Zip Code)

Tel: +011 852 3171 1208 Fax: +011 852 3007 8368
_______________________________________

(Company's Telephone Number, Including Area Code)

Not Applicable
(Former Name, Former Address and Former Fiscal Year if Changed Since Last Report)

Indicate by check whether the registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes [ x ] No [ ]

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T ("232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

Yes [ x ] No [ ]

Indicate by check whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See the definitions of "large accelerated filer," "accelerated filer" and "small reporting company" in Rule 12b-2 of the Exchange Act. (check one)

Large Accelerated Filer [ ] Accelerated Filer [ ] Non-Accelerated Filer [ ] Smaller Reporting Company[ x ]

SEC 1296 (03-10)	Potential persons who are to respond to the collection of information contained in this form are not required to respond unless the form displays a currently valid OMB control number.
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes [ ] No[ x ]

The number of common equity shares outstanding as of October 31, 2012 was 1,113,623,296 shares of Common Stock, no par value.

FORWARD-LOOKING STATEMENTS

This quarterly report contains forward-looking statements as that term is defined in the Private Securities Litigation Reform Act of 1995. These statements relate to future events or our future financial performance. In some cases, you can identify forward-looking statements by terminology such as "may", "will", "should", "expects", "plans", "anticipates", "believes", "estimates", "predicts", "potential" or "continue" or the negative of these terms or other comparable terminology. These statements are only predictions and involve known and unknown risks, uncertainties and other factors, including the risks in the section entitled "Risk Factors", that may cause our or our industry's actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by these forward-looking statements.

Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements. Except as required by applicable law, including the securities laws of the United States, we do not intend to update any of the forward-looking statements to conform these statements to actual results.

Our financial statements are stated in United States Dollars and are prepared in accordance with United States Generally Accepted Accounting Principles. In this quarterly report, unless otherwise specified, all dollar amounts are expressed in United States Dollars.

Definitions and Conventions

References to "China" or "PRC" refer to the People's Republic of China.

References to "Common Stock" means the Common Stock, no par value, of China Media Group Corporation.

References to the "Commission" or "SEC" means the U.S. Securities and Exchange Commission.

References to "ECE" means ECE Technologies Sdn. Bhd., a company incorporated in Malaysia.

References to the "ATeam" means A-Team Resources Sdn. Bhd., a company incorporated in Malaysia that is engaged in the business of consumer electronics and light appliances.

References to the "BRR" means Beijing Ren Ren Health Culture Promotion Co., Limited, a company incorporated in China that is a 50% subsidiary of Good World. BRR is engaged in advertising sales in China.

References to the "ATC Marketing" means ATC Marketing Limited, a company incorporated in Hong Kong that is a 50% subsidiary of Good World. ATC Marketing is a joint venture company with AdvanceTech Communications Sdn. Bhd. holding the worldwide marketing rights, other than certain rights belonging to the Company, of a convergent communication device named M.A.G.I.C.

References to the "Good World" means Good World Investments Limited, an investment holding company incorporated in the British Virgin Islands that is a wholly owned subsidiary of CMG.

References to the "ATC" means AdvanceTech Communications Sdn. Bhd., a Malaysia incorporated company that is developing a convergent communication device named M.A.G.I.C.

References to the "RRMG" means Ren Ren Media Group Limited, a company incorporated in Hong Kong that is a wholly owned subsidiary of CMG. RRMG is an administrative and advertising sales company in Hong Kong and China.

References to "Company", "CMG", "we", "our", "Group" means China Media Group Corporation and includes, unless the context requires or indicate otherwise, the operation of its subsidiaries (all herein defined).

References to "33 Act" or "Securities Act" means the Securities Act of 1933, as amended.

References to "34 Act" or "Exchange Act" means the Securities Act of 1934, as amended.

PART I


Item 1.	Condensed Consolidated Financial Statements

China Media Group Corporation
Condensed Consolidated Financial Statements
September 30, 2012
(Unaudited)
(Expressed In United States Dollars)

Condensed Consolidated Balance Sheets as of September 30, 2012 and December 31, 2011

Condensed Consolidated Statements of Operations for the three months and nine months period ended September 30, 2012 and 2011

Condensed Consolidated Statements of Stockholders' Equity for the years ended December 31, 2011 and 2010, and for the nine months period ended September 30, 2012

Condensed Consolidated Statements of Cash Flows for the nine months periods ended September 30, 2012 and 2011

Notes to Condensed Consolidated Financial Statements

CHINA MEDIA GROUP CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEETS

AS OF SEPTEMBER 30, 2012 AND DECEMBER 31, 2011

		September 30 2012	December 31 2011
	Notes	(Unaudited)	(Audited)
ASSETS		US$	US$
Current Assets:
Cash and cash equivalents	6	112,097	23,992
Restricted cash	6	-	57,395
Trade receivables	7	3,487,175	3,017,369
Due from related parties	8	326,855	-
Prepayments, deposit and other receivables	9	239,438	139,055
Total current assets		4,165,565	3,237,811

Non-current assets:
Property and equipments, net	10	142,473	83,905
Advance payment for distribution rights	11	68,932	-
Investment in shares	12	81,556	-
Goodwill		6,323,061	-
Total non-current assets		6,616,022	83,905

Total assets		10,781,587	3,321,716

LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Bank overdraft	6	1,636	-
Trade payables	13	46,724	44,197
Other payables and accruals	14	699,046	298,534
Short term debt	15	224,532	181,030
Due to officer and directors	16	422,722	133,027
Due to related parties	17	2,183,061	-
Trade finance payables	18	228,475	335,671
Taxation payable		124,005	90,739
Obligations under finance lease	19	55,366	24,433
Option liabilities		236,504	-
Total current liabilities		4,222,071	1,107,631

Long-term debts:
Obligations under finance leases	19	82,130	54,921
Term loans	15	191,973	274,589
Shareholder loans	20	2,000,000	-
		2,274,103	329,510

Total liabilities		6,496,174	1,437,141

Stockholders' equity:
Common stock, no par value, 85,000,000,000 shares authorized, 1,113,623,296 (2011: 558,779,837) shares issued and outstanding	4	2,580,543	583,107
Shares to be issued		52,510	-
Comprehensive income		173,553	106,458
Retained profits		1,478,807	1,195,010
Total stockholders' equity		4,285,413	1,884,575

		10,781,587	3,321,716

The accompanying notes are an integral part of these consolidated financial statements

F-3

CHINA MEDIA GROUP CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2012 AND 2011

(UNAUDITED)


	Three months periods		Nine months periods
	ended September 30			ended September 30
	2012	2011		2012	2011
	(Unaudited)	(Unaudited)		(Unaudited)	(Unaudited)
	US$	US$		US$	US$
Net revenue	578,218	1,897,032		2,556,262	5,454,941
Cost of revenue	(306,832)	(821,193)		(1,792,185)	(2,696,475)
Gross profit	271,386	1,075,839		764,077	2,758,466

Operating expenses:
Administration expenses	(111,684)	(152,702)		(394,377)	(560,990)
Selling and distribution expenses	(24,599)	(30,430)		(75,009)	(117,587)
Profit from operations	135,103	892,707		294,691	2,079,889

Other income / (expenses)
Gain on foreign exchange	-	-		16,317	-
Gain on disposal of fixed assets	-	7,479		-	18,687
Other income	(1,502)	203		44,676	3,259
Interest income	-	-		24	-
Interest expenses	(50,243)	(16,340)		(71,911)	(63,808)

Profit before taxation	83,358	884,049		283,797	2,038,027
Taxation	-	-		-	-
Net profit before uncontrolled interest	83,358	884,049		283,797	2,038,027

Uncontrolled interest	-	-		-	-
Net profit	83,358	884,049		283,797	2,038,027

Other comprehensive income
Foreign currency translation gain	75,230	-		67,095	-
Comprehensive income	158,588	884,049		350,892	2,038,027

Basic and diluted profit per common share	0.00	0.00		0.00	0.00

Basic and diluted weighted average number of common shares *	1,113,623,296	558,779,837		789,627,116	558,779,837

*	Weighted average number of shares used to compute basic and diluted loss per share for the three months and nine months ended September 30, 2012 and 2011 are the same since the effect of dilutive securities are anti-dilutive.
	The accompanying notes are an integral part of these consolidated financial statements.

F-4

CHINA MEDIA GROUP CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

FOR THE YEARS ENDED DECEMBER 31, 2011 AND 2010

AND FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2012

(UNAUDITED)


		Common	Additional					Total
		Stock	Paid-in	Comprehensive	Shares to	Retained	Uncontrolled	Stockholders'
	Shares	Amount	Capital	Income	be issued	Profits	Interest	Equity
		US$	US$	US$	US$	US$	US$	US$

Balance at December 31,2009 and January 1, 2010	558,779,837	583,107	-	2,461	-	767,942	-	1,353,510
Comprehensive income	-	-	-	155,439	-	-	-	155,439
Net profit	-	-	-	-	-	71,390	-	71,390

Balance at December 31, 2010 and January 1, 2011	558,779,837	583,107	-	157,900	-	839,332	-	1,580,339
Comprehensive loss	-	-	-	(51,442)	-	-	-	(51,442)
Net profit	-	-	-	-	-	355,678	-	355,678
Balance at December 31, 2011 and January 1, 2012	558,779,837	583,107	-	106,458	-	1,195,010	-	1,884,575
Issuance of shares for service	-	-	-	-	-	-	-	-
Issuance of shares for acquisition of Legal Acquirer	554,843,459	1,997,436	-	-	-	-	-	1,997,436
Share to be issued for acquisition of share investment	-	-	-	-	52,510	-	-	52,510
Comprehensive income	-	-	-	67,095	-	-	-	67,095
Net profits	-	-	-	-	-	283,797	-	283,797
Balance at September 30, 2012	1,113,623,296	2,580,543	-	173,553	52,510	1,478,807	-	4,285,413

The accompanying notes are an integral part of these consolidated financial statements.

F-5

CHINA MEDIA GROUP CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2012 AND 2011

(UNAUDITED)

	For the Nine Months ended September 30 2012	For the Nine Months ended September 30 2011
	US$	US$
Cash flows from operating activities:
Net profit	283,797	2,038,027
Adjustment to reconcile net loss to net cash used in operating activities:
Depreciation	34,001	48,141
Loss on disposal of fixed assets	-	8,776
(Increase) / decrease in assets:
Trade receivable	(469,806)	414,217
Prepaid expenses, deposit and other receivables	(12,028)	(1,236,597)
Due from related parties	(15,097)	-
(Increase) / decrease in liabilities:
Trade payable	2,527	(780,774)
Other payable and accrued expenses	(112,547)	(36,390)
Terms loan (short term)	43,502	(111,884)
Trade financing payables	(107,196)	49,686
Obligation under finance lease (short term)	30,933	51,680
Tax payables	124,005	1,298
Due to directors and officers	(132,986)	(38,701)
Due to related parties	419,798	-
Terms loan (long term)	(82,616)	-
Obligation under finance lease (longterm)	27,209	(83,804)
Net cash provided by operating activities	33,496	323,675

Cash flows from investing activities:
Acquisition of subsidiary, net of cash	20,676	-
Purchase of property and equipment	(92,193)	20,864
Net cash (used in) / provided by investing activities	(71,517)	20,864

Cash flows from financing activities :
Issue of shares for acquisition of subsidiary	-	-

Net cash provided by financing activities	-	-

Net (decrease) / increase in cash and cash equivalents	(38,021)	344,539
Effect of exchange rate changes on cash and cash equivalents	67,095	(142,584)
Cash and cash equivalents - net, beginning	81,387	(120,883)

Cash and cash equivalents - net, ending	110,461	81,072

Supplemental disclosure of cash flow information:
Interests paid	50,243	47,468

Income tax paid	-	-

The accompanying notes are an integral part of these consolidated financial statements.

F-6

CHINA MEDIA GROUP CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1

ORGANIZATION

China Media Group Corporation (the "Company") is a Texas corporation, incorporated on October 1, 2002.

In January 2006, the Company established a wholly owned subsidiary Ren Ren Media Group Limited, a company incorporated in Hong Kong, as its operating company in Hong Kong. In March 2007, the Company acquired all the outstanding shares of Good World Investments Limited, a British Virgin Islands corporation that holds 50% of Beijing Ren Ren Health Culture Promotion Limited, a company incorporated in China in the advertising and media business in China.

In May 2009, the Group established a 50/50 joint venture company, ATC Marketing Limited, which is to be in the business of marketing and distributing of convergent multimedia communication and internet devices.

In June 2012, the Group acquired 100% equity interest of A-Team Resources Sdn. Bhd., a distributor of electronics and light appliances, at a consideration price of $2,011,607 by the issuance of 558,779,837 shares in the Company.

The Group is engaged in the distribution of electronics and light appliances and the marketing and distribution of contingent devices. During the quarter ended September 30, 2012, the Group recorded sales in the distribution of electronics and light appliances products.

NOTE 2

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES & REALIZATION OF ASSETS

General

The accompanying unaudited interim consolidated financial statements have been prepared in accordance with accounting principals generally accepted in the United States of America and the rules of the U.S. Securities and Exchange Commission, and should be read in conjunction with the audited financial statements and notes thereto for the year ended December 31, 2011. They do not include all information and footnotes required by accounting principles generally accepted in the United States of America for complete financial statements. However, except as disclosed herein, there has been no material change in the information disclosed in the notes to the financial statements for the year ended December 31, 2011 included in the Company Form 10-K filed with the Securities and Exchange Commission. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation of financial position and results of operations for the interim period presented have been included. Operating results for the interim period are not necessary indicative of the results that may be expected for the respective full.

Basis and business presentation

China Media Group Corporation. ("CMG" or the "Registrant"), a public traded and holding company was incorporated under the laws of the State of Texas in October 2002. In connection with the consummation of the reverse merger transaction on June 8, 2012 with A-Team Resources Sdn. Bhd., a Malaysia corporation ("ATeam"), the accounting acquirer (see below). The historical financial statements are those of ATeam, the accounting acquirer, immediately following the consummation of the reverse merger. All references that refer to (the "Company" or "CMG" or "we" or "us" or "our") are to CMG, the Registrant and its wholly or majority owned subsidiaries unless otherwise differentiated. The Company is now engaged in the business of distributing electronics and light appliances.

The unaudited condensed financial statements for the period ended September 30, 2012 include the financial statements of the Company, ATeam, and its wholly owned subsidiaries Ren Ren Media Group Limited, Good World Investments Limited, and two 50% subsidiaries, namely Beijing Ren Ren Health Culture Promotion Limited and ATC Marketing Limited. The Company consolidated all the above subsidiaries including the two 50% ownership companies during the period of control because of the sole largest shareholding status and/or controlling of the Board of Directors with effect from June 8, 2012 after the completion of the reverse merger with A-Team.

The results of subsidiaries acquired or sold during the year are consolidated from their effective dates of acquisition or through their effective dates of disposition, respectively.

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

F-7

CHINA MEDIA GROUP CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 2

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES & REALIZATION OF ASSETS (Continued)

Use of estimates

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

Net Income (Loss) per Share

Basic earnings per share were computed by dividing net loss by the weighted average number of shares of common stock outstanding during the year. Diluted loss per common share for the year ended December 31, 2011 and 2010 are not presented as it would be anti-dilutive.

Fair Value Measurements and Disclosures

ASC 820 "Fair Value Measurements and Disclosures" codified SFAS No. 107, "Disclosures about Fair Value of Financial Instruments". ASC 820 applies to all entities, transactions, and instruments that require or permit fair value measurements, with specific exceptions and qualifications. The Company is required to disclose estimated fair values of financial instruments. Unless otherwise indicated, the fair values of all reported assets and liabilities, which represent financial instruments, none of which are held for trading purposes, approximate are carrying values of such amounts.

Cash and Cash Equivalents

The Company considers all liquid investments with a maturity of three months or less from the date of purchase that are readily convertible into cash to be cash equivalents.

Inventories

Inventories are stated at the lower of cost or market, cost being determined on the first-in, first-out method. Inventories are written down if the estimated net realizable value is less than the recorded value.

Property & equipment

Property & equipment is stated at costs. Depreciation are computed using the straight-line method over the estimated economic useful lives of the related assets as follows:

Leasehold improvements	5 years
Furniture, fixture and equipment	5 years
Motor vehicles	5 - 10 years
Office equipment	2 - 5 years
Moulds	5 years

F-8

CHINA MEDIA GROUP CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 2	SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES & REALIZATION OF ASSETS (Continued)
Impairment of Non-Financial Assets
The Company evaluates all of its long-lived assets, such as motor vehicles, furniture and fittings, office equipment, mould, renovation and other intangibles, for impairment in accordance with ASC 360, Property, Plant and Equipment, when events or changes in circumstances warrant such a review. If an evaluation is required, the estimated future undiscounted cash flows associated with the asset are compared to the asset's carrying amount to determine if an adjustment to fair value is required.
Borrowing Costs
All borrowing costs are recognized in statement of income when incurred. Borrowing costs consist of interest and other costs that the Company incurred in connection with the borrowing of funds.
Lease
(a)	Finance Lease
	Finance leases, which transfer to the Company substantially all the risks and rewards incidental to ownership of the leased item, are capitalized at the inception of the lease at the fair value of the leased asset or, if lower, at the present value of the minimum lease payments. Any initial direct costs are also added to the amount capitalized. Lease payments are apportioned between the finance charges and reduction of the lease liability so as to achieve a constant rate of interest on the remaining balance of the liability. Finance charges are charged to the statement of comprehensive income. Contingent rents, if any, are charged as expenses in the periods in which they are incurred. Leased assets are depreciated over the estimated useful life of the asset. However, if there is no reasonable certainty that the Company will obtain ownership by the end of the lease term, the asset is depreciated over the shorter of the estimated useful life and the lease term.
(b)	Operating Lease
	Operating lease payments are recognized as an expense in statement of income on a straight-line basis over the lease term. The aggregate benefit of incentives provided by the lessor is amortized as a reduction of rental expense over the lease term on a straight-line basis.

F-9

CHINA MEDIA GROUP CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 2	SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES & REALIZATION OF ASSETS (Continued)
Income Taxes
(a)	Current Tax
	Current tax assets and liabilities are measured at the amount expected to be recovered from or paid to the taxation authorities. The tax rates and tax laws used to compute the amount are those that are enacted or substantively enacted by the reporting date. Current taxes are recognized in the statement of income except to the extent that the tax relates to items recognized outside the statement of income, either in other income or directly in equity.
(b)	Deferred Tax
	Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax basis and operating loss and tax credit carry-forwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. The Company records a valuation allowance for deferred tax assets if, based upon the available evidence, it is more likely than not that some or all of the deferred tax assets will not be realized.

Contingent Liabilities

A contingent liability is a possible obligation that arises from past events and whose existence will only be confirmed by the occurrence of one or more uncertain future events not wholly within the control of the Company. It can also be a present obligation arising from past events that is not recognized because it is not probable that an outflow of economic resources will be required or the amount of obligation cannot be measured reliably.

F-10

CHINA MEDIA GROUP CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 2

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES & REALIZATION OF ASSETS (Continued)

Provision for Doubtful Debts

An impairment loss is recognized when there is objective evidence that a financial asset is impaired. Management specifically reviews its receivables financial assets and analyses historical bad debts, customer concentrations, customer creditworthiness, current economic trends and changes in the customer payment terms when making a judgment to evaluate the adequacy of the allowance for impairment losses. Where there is objective evidence of impairment, the amount and timing of future cash flows are estimated based on historical loss experience for assets with similar credit risk characteristics. If the expectation is different from the estimation, such difference will impact the carrying value of receivables.

Fair Value Measurements and Disclosure

Intangible Assets

The Company evaluates intangible assets for impairment, at least on an annual basis and whenever events or changes in circumstances indicate that the carrying value may not be recoverable from its estimated future cash flows. Recoverability of intangible assets, other long-lived assets and, goodwill is measured by comparing their net book value to the related projected undiscounted cash flows from these assets, considering a number of factors including past operating results, budgets, economic projections, market trends and product development cycles. If the net book value of the asset exceeds the related undiscounted cash flows, the asset is considered impaired, and a second test is performed to measure the amount of impairment loss.

Income taxes

The Company accounts for income taxes under ASC 740 Income Taxes" which codified SFAS 109, "Accounting for Income Taxes." Under the asset and liability method of ASC 740, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statements carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. Under ASC 740, the effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period the enactment occurs. A valuation allowance is provided for certain deferred tax assets if it is more likely than not that the Company will not realize tax assets through future operations.

F-11

CHINA MEDIA GROUP CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 2

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES & REALIZATION OF ASSETS (Continued)

Stock-based compensation

ASC 718 "Compensation - Stock Compensation" codified SFAS No. 123 prescribes accounting and reporting standards for all stock-based payments award to employees, including employee stock options, restricted stock, employee stock purchase plans and stock appreciation rights. , may be classified as either equity or liabilities. The Company should determine if a present obligation to settle the share-based payment transaction in cash or other assets exists. A present obligation to settle in cash or other assets exists if: (a) the option to settle by issuing equity instruments lacks commercial substance or (b) the present obligation is implied because of an entity's past practices or stated policies. If a present obligation exists, the transaction should be recognized as a liability; otherwise, the transaction should be recognized as equity.

The Company accounts for stock-based compensation issued to non-employees and consultants in accordance with the provisions of ASC 505-50 "Equity - Based Payments to Non-Employees" which codified SFAS 123 and the Emerging Issues Task Force consensus in Issue No. 96-18 ("EITF 96-18"), "Accounting for Equity Instruments that are Issued to Other Than Employees for Acquiring or in Conjunction with Selling, Goods or Services". Measurement of share-based payment transactions with non-employees shall be based on the fair value of whichever is more reliably measurable: (a) the goods or services received; or (b) the equity instruments issued. The fair value of the share-based payment transaction should be determined at the earlier of performance commitment date or performance completion date.

Employees' benefits and pension obligations

Mandatory contributions of five percent of gross salary payments, subject to certain minimum and maximum levels, are made to defined contribution Mandatory Provident Fund schemes ("MPF schemes") pursuant to the laws of Hong Kong. These contributions are charged to expense in the same period as the related salary cost. Total contributions made by the Company to the MPF schemes were $1,628 and $nil for the year December 31, 2011 and 2010, respectively.

Issuance of shares for service

The Company accounts for the issuance of equity instruments to acquire goods and services based on the fair value of the goods and services or the fair value of the equity instrument at the time of issuance, whichever is more reliably measurable.

Revenue Recognition

The Company recognizes its revenue in accordance with the ASC 605 "Revenue Recognition" which codified Securities and Exchange Commissions ("SEC") Staff Accounting Bulletin No. 104, "Revenue Recognition in Financial Statements" ("SAB 104"). Revenue is recognized upon shipment, provided that evidence of an arrangement exists, title and risk of loss have passed to the customer, fees are fixed or determinable and collection of the related receivable is reasonably assured. Revenue is recorded net of estimated product returns, which is based upon the Company's return policy, sales agreements, management estimates of potential future product returns related to current period revenue, current economic trends, changes in customer composition and historical experience.

F-12

CHINA MEDIA GROUP CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 2

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES & REALIZATION OF ASSETS (Continued)

Foreign Currency Translation

The accounts of the Company's Hong Kong and China subsidiaries are maintained, in the Hong Kong dollars (HK) and Chinese Renminbi, respectively. Such financial statements are translated into U.S. Dollars (USD) in accordance with ASC 830 "Foreign Currency Translation" which codified Statement of Financial Accounts Standards ("SFAS") No. 52, "Foreign Currency Translation," with the respective currency as the functional currency. According to the Statement, all assets and liabilities were translated at the exchange rate on the balance sheet date, stockholder's equity are translated at the historical rates and statement of operations items are translated at the weighted average exchange rate for the year. The resulting translation adjustments are reported under other comprehensive income in accordance with SFAS No. 130, "Reporting Comprehensive Income. As of September 30, 2012, the comprehensive income was $52,510.

Recent Pronouncements

Recently Implemented Standards

ASC 105, Generally Accepted Accounting Principles ("ASC 105") (formerly Statement of Financial Accounting Standards No. 168, The FASB Accounting Standards Codification and the Hierarchy of Generally Accepted Accounting Principles a replacement of FASB Statement No.162) reorganized by topic existing accounting and reporting guidance issued by the Financial Accounting Standards Board ("FASB") into a single source of authoritative generally accepted accounting principles ("GAAP") to be applied by nongovernmental entities. All guidance contained in the Accounting Standards Codification ("ASC") carries an equal level of authority. Rules and interpretive releases of the Securities and Exchange Commission ("SEC") under authority of federal securities laws are also sources of authoritative GAAP for SEC registrants. Accordingly, all other accounting literature will be deemed "non-authoritative". ASC 105 is effective on a prospective basis for financial statements issued for interim and annual periods ending after September 15, 2009. The Company has implemented the guidance included in ASC 105 as of July 1, 2009. The implementation of this guidance changed the Company's references to GAAP authoritative guidance but did not impact the Company's financial position or results of operations.

ASC 855, Subsequent Events ("ASC 855") (formerly Statement of Financial Accounting Standards No. 165, Subsequent Events) includes guidance that was issued by the FASB in May 2009, and is consistent with current auditing standards in defining a subsequent event. Additionally, the guidance provides for disclosure regarding the existence and timing of a company's evaluation of its subsequent events. ASC 855 defines two types of subsequent events, "recognized" and "non-recognized". Recognized subsequent events provide additional evidence about conditions that existed at the date of the balance sheet and are required to be reflected in the financial statements. Non-recognized subsequent events provide evidence about conditions that did not exist at the date of the balance sheet but arose after that date and, therefore; are not required to be reflected in the financial statements. However, certain non-recognized subsequent events may require disclosure to prevent the financial statements from being misleading. This guidance was effective prospectively for interim or annual financial periods ending after June 15, 2009. The Company implemented the guidance included in ASC 855 as of April 1, 2009. The effect of implementing this guidance was not material to the Company's financial position or results of operations.

ASC 944, Financial Services Insurance ("ASC 944") contains guidance that was previously issued by the FASB in May 2008 as Statement of Financial Accounting Standards No. 163, Accounting for Financial Guarantee Insurance Contracts an interpretation of FASB Statement No. 60 that provides for changes to both the recognition and measurement of premium revenues and claim liabilities for financial guarantee insurance contracts that do not qualify as a derivative instrument in accordance with ASC 815, Derivatives and Hedging (formerly included under Statement of Financial Accounting Standards No. 133, Accounting for Derivative Instruments and Hedging Activities). This financial guarantee insurance contract guidance also expands the disclosure requirements related to these contracts to include such items as a company's method of tracking insured financial obligations with credit deterioration, financial information about the insured financial obligations, and management's policies for placing and monitoring the insured financial obligations. ASC 944, as it relates to financial guarantee insurance contracts, was effective for fiscal years beginning after December 15, 2008, except for certain disclosures related to the insured financial obligations, which were effective for the third quarter of 2008. The Company does not have financial guarantee insurance products, and, accordingly, the implementation of this portion of ASC 944 did not have an effect on the Company's results of operations or financial position.

F-13

CHINA MEDIA GROUP CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 2

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES & REALIZATION OF ASSETS (Continued)

Recent Pronouncements (Continued)

Recently Implemented Standards (Continued)

ASC 805, Business Combinations ("ASC 805") (formerly included under Statement of Financial Accounting Standards No. 141 (revised 2007), Business Combinations) contains guidance that was issued by the FASB in December 2007. It requires the acquiring entity in a business combination to recognize all assets acquired and liabilities assumed in a transaction at the acquisition-date fair value, with certain exceptions. Additionally, the guidance requires changes to the accounting treatment of acquisition related items, including, among other items, transaction costs, contingent consideration, restructuring costs, indemnification assets and tax benefits. ASC 805 also provides for a substantial number of new disclosure requirements. ASC 805 also contains guidance that was formerly issued as FSP FAS 141(R)-1, Accounting for Assets Acquired and Liabilities Assumed in a Business Combination That Arise from Contingencies which was intended to provide additional guidance clarifying application issues regarding initial recognition and measurement, subsequent measurement and accounting, and disclosure of assets and liabilities arising from contingencies in a business combination. ASC 805 was effective for business combinations initiated on or after the first annual reporting period beginning after December 15, 2008. The Company implemented this guidance effective January 1, 2009. Implementing this guidance did not have an effect on the Company's financial position or results of operations; however it will likely have an impact on the Company's accounting for future business combinations, but the effect is dependent upon acquisitions, if any, that are made in the future.

ASC 810, Consolidation ("ASC 810") includes new guidance issued by the FASB in December 2007 governing the accounting for and reporting of noncontrolling interests (previously referred to as minority interests). This guidance established reporting requirements which include, among other things, that noncontrolling interests be reflected as a separate component of equity, not as a liability. It also requires that the interests of the parent and the noncontrolling interest be clearly identifiable. Additionally, increases and decreases in a parent's ownership interest that leave control intact shall be reflected as equity transactions, rather than step acquisitions or dilution gains or losses. This guidance also requires changes to the presentation of information in the financial statements and provides for additional disclosure requirements. ASC 810 was effective for fiscal years beginning on or after December 15, 2008. The Company implemented this guidance as of January 1, 2009. The effect of implementing this guidance was not material to the Company's financial position or results of operations.

ASC 825, Financial Instruments ("ASC 825") includes guidance which was issued in February 2007 by the FASB and was previously included under Statement of Financial Accounting Standards No. 159, The Fair Value Option for Financial Assets and Financial Liabilities Including an amendment of FASB Statement No. 115. The related sections within ASC 825 permit a company to choose, at specified election dates, to measure at fair value certain eligible financial assets and liabilities that are not currently required to be measured at fair value. The specified election dates include, but are not limited to, the date when an entity first recognizes the item, when an entity enters into a firm commitment or when changes in the financial instrument causes it to no longer qualify for fair value accounting under a different accounting standard. An entity may elect the fair value option for eligible items that exist at the effective date. At that date, the difference between the carrying amounts and the fair values of eligible items for which the fair value option is elected should be recognized as a cumulative effect adjustment to the opening balance of retained earnings. The fair value option may be elected for each entire financial instrument, but need not be applied to all similar instruments. Once the fair value option has been elected, it is irrevocable. Unrealized gains and losses on items for which the fair value option has been elected will be reported in earnings. This guidance was effective as of the beginning of fiscal years that began after November 15, 2007. The Company does not have eligible financial assets and liabilities, and, accordingly, the implementation of ASC 825 did not have an effect on the Company's results of operations or financial position.

F-14

CHINA MEDIA GROUP CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 2

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES & REALIZATION OF ASSETS (Continued)

Recent Pronouncements (Continued)

Recently Implemented Standards (Continued)

ASC 820, Fair Value Measurements and Disclosures ("ASC 820") (formerly included under Statement of Financial Accounting Standards No. 157, Fair Value Measurements) includes guidance that was issued by the FASB in September 2006 that created a common definition of fair value to be used throughout generally accepted accounting principles. ASC 820 applies whenever other standards require or permit assets or liabilities to be measured at fair value, with certain exceptions. This guidance established a hierarchy for determining fair value which emphasizes the use of observable market data whenever available. It also required expanded disclosures which include the extent to which assets and liabilities are measured at fair value, the methods and assumptions used to measure fair value and the effect of fair value measures on earnings. ASC 820 also provides additional guidance for estimating fair value when the volume and level of activity for the asset or liability have significantly decreased. The emphasis of ASC 820 is that fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between willing market participants, under current market conditions. ASC 820 also further clarifies the guidance to be considered when determining whether or not a transaction is orderly and clarifies the valuation of securities in markets that are not active. This guidance includes information related to a company's use of judgment, in addition to market information, in certain circumstances to value assets which have inactive markets.

Fair value guidance in ASC 820 was initially effective for fiscal years beginning after November 15, 2007 and for interim periods within those fiscal years for financial assets and liabilities. The effective date of ASC 820 for all non-recurring fair value measurements of nonfinancial assets and nonfinancial liabilities was fiscal years beginning after November 15, 2008. Guidance related to fair value measurements in an inactive market was effective in October 2008 and guidance related to orderly transactions under current market conditions was effective for interim and annual reporting periods ending after June 15, 2009.

The Company applied the provisions of ASC 820 to its financial assets and liabilities upon adoption at January 1, 2008 and adopted the remaining provisions relating to certain nonfinancial assets and liabilities on January 1, 2009. The difference between the carrying amounts and fair values of those financial instruments held upon initial adoption, on January 1, 2008, was recognized as a cumulative effect adjustment to the opening balance of retained earnings and was not material to the Company's financial position or results of operations. The Company implemented the guidance related to orderly transactions under current market conditions as of April 1, 2009, which also was not material to the Company's financial position or results of operations.

Recently Issued Standards

In July 2012, FASB has issued Accounting Standards Update (ASU) No. 2012-02, Intangibles--Goodwill and Other (Topic 350): Testing Indefinite-Lived Intangible Assets for Impairment. This ASU states that an entity has the option first to assess qualitative factors to determine whether the existence of events and circumstances indicates that it is more likely than not that the indefinite-lived intangible asset is impaired. If, after assessing the totality of events and circumstances, an entity concludes that it is not more likely than not that the indefinite-lived intangible asset is impaired, then the entity is not required to take further action. However, if an entity concludes otherwise, then it is required to determine the fair value of the indefinite-lived intangible asset and perform the quantitative impairment test by comparing the fair value with the carrying amount in accordance with Codification Subtopic 350-30, Intangibles--Goodwill and Other, General Intangibles Other than Goodwill. Under the guidance in this ASU, an entity also has the option to bypass the qualitative assessment for any indefinite-lived intangible asset in any period and proceed directly to performing the quantitative impairment test. An entity will be able to resume performing the qualitative assessment in any subsequent period. The amendments in this ASU are effective for annual and interim impairment tests performed for fiscal years beginning after September 15, 2012. Early adoption is permitted, including for annual and interim impairment tests performed as of a date before July 27, 2012, if a public entity's financial statements for the most recent annual or interim period have not yet been issued or, for nonpublic entities, have not yet been made available for issuance.

In August 2012, FASB has issued Accounting Standards Update (ASU) No. 2012-03, Technical Amendments and Corrections to SEC Sections. This ASU amends various SEC paragraphs pursuant to SAB 114, SEC Release No. 33-9250, and ASU 2010-22, which amend or rescind portions of certain SAB Topics.

In October 2012, FASB has issued Accounting Standards Update (ASU) No. 2012-04, Technical Corrections and Improvements. This ASU make technical corrections, clarifications, and limited-scope improvements to various Topics throughout the Codification. The amendments in this ASU that will not have transition guidance will be effective upon issuance for both public entities and nonpublic entities. For public entities, the amendments that are subject to the transition guidance will be effective for fiscal periods beginning after December 15, 2012. For nonpublic entities, the amendments that are subject to the transition guidance will be effective for fiscal periods beginning after December 15, 2013.

F-15

CHINA MEDIA GROUP CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 2

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES & REALIZATION OF ASSETS (Continued)

Recent Pronouncements (Continued)

Recently Issued Standards (continued)

In October 2012, FASB has issued Accounting Standards Update (ASU) No. 2012-06, Business Combinations (Topic 805): Subsequent Accounting for an Indemnification Asset Recognized at the Acquisition Date as a Result of a Government-Assisted Acquisition of a Financial Institution. This ASU addresses the diversity in practice about how to interpret the terms on the same basis and contractual limitations when subsequently measuring an indemnification asset recognized in a government-assisted (Federal Deposit Insurance Corporation or National Credit Union Administration) acquisition of a financial institution that includes a loss-sharing agreement (indemnification agreement). For public and nonpublic entities, the amendments in this ASU are effective for fiscal years, and interim periods within those years, beginning on or after December 15, 2012. Early adoption is permitted. The amendments should be applied prospectively to any new indemnification assets acquired after the date of adoption and to indemnification assets existing as of the date of adoption arising from a government-assisted acquisition of a financial institution.

In January 2011, the FASB issued ASU 2011-01 an accounting pronouncement related to receivables ("FASB ASC Topic 310"). The amendments in this update temporarily delay the effective date of the disclosures about troubled debt restructurings in ASU 2010-20 for public entities. The delay is intended to allow the Board time to complete its deliberations on what constitutes a troubled debt restructuring. The effective date of the new disclosures about troubled debt restructurings for public entities and the guidance for determining what constitutes a troubled debt restructuring will then be coordinated. Currently, that guidance is anticipated to be effective for interim and annual periods ending after June 15, 2011. The adoption of this pronouncement is not expected to have a material impact on our consolidated financial statements.

The FASB has issued Accounting Standards Update (ASU) No. 2011-02, Receivables (Topic 310): A Creditor's Determination of Whether a Restructuring Is a Troubled Debt Restructuring. The FASB believes the guidance in this ASU will improve financial reporting by creating greater consistency in the way GAAP is applied for various types of debt restructurings.

The ASU clarifies which loan modifications constitute troubled debt restructurings. It is intended to assist creditors in determining whether a modification of the terms of a receivable meets the criteria to be considered a troubled debt restructuring, both for purposes of recording an impairment loss and for disclosure of troubled debt restructurings.

In evaluating whether a restructuring constitutes a troubled debt restructuring, a creditor must separately conclude that both of the following exist: (a) the restructuring constitutes a concession; and (b) the debtor is experiencing financial difficulties. The amendments to FASB Accounting Standards Codification? (Codification) Topic 310, Receivables, clarify the guidance on a creditor's evaluation of whether it has granted a concession and whether a debtor is experiencing financial difficulties.

For public companies, the new guidance is effective for interim and annual periods beginning on or after June 15, 2011, and applies retrospectively to restructurings occurring on or after the beginning of the fiscal year of adoption. For nonpublic entities, the amendments to the Codification in the ASU are effective for annual periods ending on or after December 15, 2012, including interim periods within those annual periods. Early application is permitted.

The FASB has issued Accounting Standards Update (ASU) No. 2011-03, Transfers and Servicing (Topic 860): Reconsideration of Effective Control for Repurchase Agreements. The ASU is intended to improve financial reporting of repurchase agreements ("repos") and other agreements that both entitle and obligate a transferor to repurchase or redeem financial assets before their maturity.

In a typical repo transaction, an entity transfers financial assets to a counterparty in exchange for cash with an agreement for the counterparty to return the same or equivalent financial assets for a fixed price in the future. FASB Accounting Standards Codification? (Codification) Topic 860, Transfers and Servicing, prescribes when an entity may or may not recognize a sale upon the transfer of financial assets subject to repo agreements. That determination is based, in part, on whether the entity has maintained effective control over the transferred financial assets.

F-16

CHINA MEDIA GROUP CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 2

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES & REALIZATION OF ASSETS (Continued)

Recent Pronouncements (Continued)

Accounting Standards Issued But Not Yet Effective

The amendments to the Codification in this ASU are intended to improve the accounting for these transactions by removing from the assessment of effective control the criterion requiring the transferor to have the ability to repurchase or redeem the financial assets. The guidance in the ASU is effective for the first interim or annual period beginning on or after December 15, 2011. The guidance should be applied prospectively to transactions or modifications of existing transactions that occur on or after the effective date. Early adoption is not permitted.

The FASB has issued Accounting Standards Update (ASU) No. 2011-04, Fair Value Measurement (Topic 820): Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRSs. This ASU represents the converged guidance of the FASB and the IASB (the Boards) on fair value measurement. The collective efforts of the Boards and their staffs, reflected in ASU 2011-04, have resulted in common requirements for measuring fair value and for disclosing information about fair value measurements, including a consistent meaning of the term "fair value." The Boards have concluded the common requirements will result in greater comparability of fair value measurements presented and disclosed in financial statements prepared in accordance with U.S. GAAP and IFRSs.

The FASB has issued Accounting Standards Update (ASU) No. 2011-05, Comprehensive Income (Topic 220): Presentation of Comprehensive Income. This ASU amends the FASB Accounting Standards Codification? (Codification) to allow an entity the option to present the total of comprehensive income, the components of net income, and the components of other comprehensive income either in a single continuous statement of comprehensive income or in two separate but consecutive statements. In both choices, an entity is required to present each component of net income along with total net income, each component of other comprehensive income along with a total for other comprehensive income, and a total amount for comprehensive income. ASU 2011-05 eliminates the option to present the components of other comprehensive income as part of the statement of changes in stockholders' equity. The amendments to the Codification in the ASU do not change the items that must be reported in other comprehensive income or when an item of other comprehensive income must be reclassified to net income.

ASU 2011-05 should be applied retrospectively. For public entities, the amendments are effective for fiscal years, and interim periods within those years, beginning after December 15, 2011. For nonpublic entities, the amendments are effective for fiscal years ending after December 15, 2012, and interim and annual periods thereafter. Early adoption is permitted

The FASB has issued Accounting Standards Update (ASU) No. 2011-08, Intangibles-Goodwill and Other (Topic 350): Testing Goodwill for Impairment. ASU 2011-08 is intended to simplify how entities, both public and nonpublic, test goodwill for impairment. ASU 2011-08 permits an entity to first assess qualitative factors to determine whether it is "more likely than not" that the fair value of a reporting unit is less than its carrying amount as a basis for determining whether it is necessary to perform the two-step goodwill impairment test described in Topic 350, Intangibles-Goodwill and Other. The more-likely-than-not threshold is defined as having a likelihood of more than 50%.

ASU 2011-08 is effective for annual and interim goodwill impairment tests performed for fiscal years beginning after December 15, 2011. Early adoption is permitted, including for annual and interim goodwill impairment tests performed as of a date before September 15, 2011, if an entity's financial statements for the most recent annual or interim period have not yet been issued or, for nonpublic entities, have not yet been made available for issuance.

Reclassifications

Certain comparative amounts have been reclassified to conform to the current period's presentation.

F-17

CHINA MEDIA GROUP CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 3

UNCERTAINTY OF ABILITY TO CONTINUE AS A GOING CONCERN

The Company's financial statements are prepared using the generally accepted accounting principles applicable to a going concern, which contemplates the realization of assets and liquidation of liabilities in the normal course of business. As of September 30, 2012, the Company has a retained earning totaling $1,478,807 and its current liabilities exceed its current assets by $56,506. In view of the matters described above, recoverability of a major portion of the recorded asset amounts shown in the accompanying balance sheets is dependent upon continued operations of the Company, which in turn is dependent upon the Company's ability to raise additional capital, obtain financing and to succeed in its future operations. The financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern.

Management has taken steps to revise its operating and financial requirements, which it believes are sufficient to provide the Company with the ability to continue as a going concern. The Company is actively pursuing additional funding and potential merger or acquisition candidates and strategic partners, which would enhance stockholders' investment. Management believes that the above actions will allow the Company to continue operations through the next fiscal year.

NOTE 4

STOCKHOLDERS' EQUITY

Common Stock

On June 8, 2012, the Company issued 558,779,837 shares in the Company in consideration of the acquisition of 100% equity interests in A-Team.

NOTE 5

STOCK OPTIONS AND WARRANTS

Stock Options

The Company adopted ASC 718 "Compensation Stock Compensation" codified SFAS No. 123 (Revised 2004), Share Based Payment ("SFAS No. 123R"), under the modified-prospective transition method on April 1, 2006. SFAS No. 123R requires companies to measure and recognize the cost of employee services received in exchange for an award of equity instruments based on the grant-date fair value.

2002 Stock Option Plan

Effective on October 11, 2002, the Company adopted the 2002 Stock Option Plan (the "2002 Plan") allowing for the awarding of options to acquire shares of common stock. This plan provides for the grant of incentive stock options to key employees and directors. Options issued under this plan will expire over a maximum term of ten years from the date of grant.

On May 18, 2007, the board of directors approved to issue 12,300,000 stock options to employees to purchase shares of our Common Stock under the 2002 Stock Option Plan, at exercise price of $0.038 for a vesting period of 3 years. The 12,300,000 stock options expired on May 17, 2010.

On April 16, 2010, the board of directors approved to issue 19,000,000 stock options to employees to purchase shares of our Common Stock under the 2002 Stock Option Plan, at exercise price of $0.010 for an option period of 5 years, and for these options 50% of the entitlement is vested immediately to option holders and the remaining 50% shall be vested in one year from the date of issue of the option.

As of September 30, 2012, the Company has 19,000,000 stock options outstanding and the option liability is $236,504.

F-18

CHINA MEDIA GROUP CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 5

STOCK OPTIONS AND WARRANTS (Continued)

Following is a summary of the activities of the 2002 Stock Option Plan for the period ended September 30, 2012:

	Options outstanding
Outstanding, December 31, 2011	19,000,000
Granted during the period	-
Forfeited/lapsed during the period	-
Exercised during the period	-
Outstanding, September 30, 2012	19,000,000

Following is a summary of the status of options outstanding at September 30, 2012:

Outstanding Options			Exercisable Options
___________________			_____________________________
Grant Date	Exercise Price	Number		Average Remaining Contractual Life	Average Exercise Price	Number	Intrinsic Price

4/16/2010	$0.010	19,000,000		2.54	$0.010	19,000,000	$0.00

On April 16, 2010, the Company granted 19,000,000 stock options to 5 qualified persons. As of September 30, 2012, there were 19,000,000 outstanding stock options.

The assumptions used in calculating the fair value of options granted using the Black-Scholes option pricing model are as follows:

i) The outstanding 19,000,000 stock options granted on April 16, 2010 and will expire on April 16, 2015:
	Grant date:	4/16/2010
	Risk-free interest rate	3.25%
	Expected life of the options	5.00 years
	Expected volatility	250%
	Expected dividend yield	0

F-19

CHINA MEDIA GROUP CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 5

STOCK OPTIONS AND WARRANTS (Continued)

2007 Stock Incentive Plan

On February 19, 2007, the Company adopted the 2007 Stock Incentive Plan (the "2007 Plan") allowing for the awarding of options to acquire shares of common stock. This plan provides for the grant of incentive stock options to key employees, directors and consultants. Options issued under this plan will expire over a maximum term of ten years from the date of grant. The Company had not issued any stock options under this scheme.

On March 8, 2007, we registered 38,400,000 shares underlying stock options under the 2007 Stock Incentive Plan with the SEC pursuant to a registration statement on Form S-8.

During the year 2007, the Company had issued a total of 5,811,300 shares to its staff and consultants for their service provided.

No shares were issued under the registration statement on Form S-8 during the year 2008-2010.

In May 2012, the Company issued 711,009 shares to it consultant for this services.

No shares were issued under the registration statement on Form S-8 during the year 2009 and 2008. As at September 30, 2012 there were 31,877,681 shares available underlying stock options under the 2007 Stock Incentive Plan.

NOTE 6

CASH AND CASH EQUIVALENTS

Cash and cash equivalents are summarized as follows:

(a) The fixed deposits with licensed banks bear interest rate at 3% per annum.

(b) Cash and cash equivalents comprise of the following as at the end of the reporting period:


		September 30 2012	December 31 2011
		US$	US$

Cash and bank balances		112,097	13,807
Fixed deposits with licensed banks	(a)	-	67,580
		112,097	81,387
Less: Restricted cash	(b)	-	(57,395)
Bank overdraft		(1,636)	-
		110,461	23,992

F-20

CHINA MEDIA GROUP CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 7

TRADE RECEIVABLES

	September 30 2012	December 31 2011
	US$	US$

Trade receivables	1,368,876	1,819,683
Trade receivables owed by a corporation in which a Director has a financial interests	2,118,299	1,197,686
	3,487,175	3,017,369
Less: Allowance for impairment losses	-	-
	3,487,175	3,017,369

Trade receivables are non-interest bearing and the normal credit terms range from 30 to 90 days (2011: 30 to 90 days) terms. Other credit terms are assessed and approved on a case-by-case basis.

The Company has no significant concentration of credit risk that arises from exposure to a single debtor or to groups of debtors.

NOTE 8

DUE FROM RELATED PARTIES

Due from related parties are summarized as follows:

		September 30 2012	December 31 2011
		US$	US$

Advance to supplier	(a)	255,438	-
Due from investment company	(b)	71,417	-
Due from director of subsidiary company	(c)	-	-

		326,855	-

a)	Advance to suppliers is the deposit for the purchases of M.A.G.I.C. phone paid to AdvanceTech Communications Sdn. Bhd. ("ATC"), a minority shareholder of our subsidiary company.

b)	Due from investment company is an amount due from a company in which our director Mr. Con Unerkov is a shareholder.

F-21

CHINA MEDIA GROUP CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 9

PREPAYMENTS, DEPOSITS AND OTHER RECEIVABLES

	September 30 2012	December 31 2011
	US$	US$

Other receivables	83,555	372
Deposits	38,325	25,302
Prepayments	117,558	113,381
	239,438	139,055

NOTE 10

PROPERTY AND EQUIPMENT, NET

Property and equipment is summarized as follows:

	September 30 2012	December 31 2011
	US$	US$
Cost
Leasehold improvements	79,298	79,298
Furniture, fixtures and equipment	149,934	149,934
Computers	-	-
Motor vehicles	181,778	181,778
Moulds	4,225	4,225
	415,235	415,235
Additional cost:
Leasehold improvements	-	-
Furniture, fixtures and equipment	5,707	-
Computers	101,164	-
Motor vehicles	47,951	-
Moulds	-	-
	570,057	415,235
Accumulated depreciation	(427,584)	(331,330)

Balance at end of period	142,473	83,905

F-22

CHINA MEDIA GROUP CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 11

ADVANCE PAYMENT FOR DISTRIBUTION RIGHTS

On January 25, 2006, the Company entered into an agreement with Fleming Assets Limited ("Fleming") to acquire the distribution rights for the M.A.G.I.C. Convergent Communications Device for the territories of China and Hong Kong. Under the agreement the Company will issue the following shares to Fleming:

*	Within one month of signing the agreement, one million shares of the Company;
*	Within one month of receiving the prototype devices, one million shares of the Company;
*	Within one month of receiving the product from commercial production, two million shares of the Company; and
*	A royalty payment of 100,000 shares of the Company for every 5,000 devices sold for the next 3 years.

The Company issued 1,000,000 shares of common stock in 2006 upon signing the agreement.

NOTE 12

INVESTMENT IN SHARES

Investment in shares relates to acquisition of 5% interests in AdvanceTech Communications Sdn. Bhd. ("ATC") for US$81,556 as announced in Form 8K filed on February 22, 2011. Pursuant to the agreement, the Company shall issue the 2,205,376 shares as part of the consideration within two months from the completion date. As at the date of this report, the Company still has not issued the shares as it is pending the delivery of the ATC shares, which has been extended to October 2012 which is still outstanding at the date of this report.

NOTE 13

TRADE PAYABLES

		September 30 2012		December 31 2011
		US$		US$

		46,724		44,197

These amounts are non-interest bearing. Trade payables are normally settled on 30 to 90 days (2011: 30-90 days) terms.

NOTE 14

OTHER PAYABLES AND ACCRUALS

Other payables and accruals are summarized as follows:
		September 30 2012	December 31 2011
		US$	US$

Accruals		154,245	170,165
Accrued salaries and wages		24,909	-
Accrued accounting, legal and consulting fee		247,426	-
Other payables	a	162,804	128,369
Other creditors	b	57,021	-
Sundry creditors	b	33,002	-
Deposit from customers		19,639	-

Balance at end of period / year		699,046	298,534

a)	Other payables are Company expenses such as postage, sundries, etc., and advanced on behalf of the Company from various parties.
b)	These amounts are non-interest bearing. Other payables are normally settled on an average terms of 6 months.

F-23

CHINA MEDIA GROUP CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 15

TERM LOANS


	September 30 2012	December 31 2011
	US$	US$
Current portion:
Not later than one (1) year	224,532	181,030

Non-current portion:
later than one (1) year and not later than two (2) years	191,973	194,788
later than two (2) years and not later than five (5) years	-	79,801
	191,973	274,589

	416,505	455,619

The term loan provided by Alliance Bank Malaysia Berhad is secured by the followings : -
	(i)	Pledged of Company's fixed deposit;
	(ii)	Guarantee by a third party corporation in which the Directors have financial interest;
	(iii)	Notice of assignment and receivables finance agreement; and
	(iv)	Joint and several guarantee by the Directors of the Company.
	The interest rates to the facility is fixed at 1.00 percentage points above the lenders' base lending rates prevailing in Malaysia.
	The term loan is repayable by 36 equal monthly installment of USD17,971 (RM 57,000) per month.

NOTE 16	DUE TO OFFICERS AND DIRECTORS

The amounts due to directors and officers are interests free, unsecured and repayable on demand. The balance of due to directors and officers is $422,722 as of September 30, 2012 (December 31, 2011: $133,027).

NOTE 17

DUE TO RELATED PARTIES

Due to related parties are summarized as follows:

		September 30 2012	December 31 2011
		US$	US$

Due to shareholders	(a)	959,205	-
Due to directors of subsidiary companies	(b)	333,914	-
Due to former directors of the company	(c)	889,942	-

		2,183,061	-

(a)	The amounts due to beneficial shareholders are unsecured, repayable on demand and are interest free except for the $50,000 which bears interests at 6% per annum.
(b)	The amount due to directors of subsidiary companies is interest free, unsecured and repayable on demand.
(c)	The amount due to former directors of the company is interest free, unsecured and repayable on demand.

F-24

CHINA MEDIA GROUP CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 18	TRADE FINANCING PAYABLES
Trade financing payables for the financial period ended September 30, 2012 and December 31, 2011 which bear interest at 2.0 percentage points above the lender's base lending rates prevailing in Malaysia are secured as follows:-

	(i)	Acceptance of the Facility Offer Letter;
	(ii)	Execution of the Receivables Finance Agreement; and
	(iii)	Jointly and severally guaranteed by a Director of the Company and a third party.
	Trade financing payables are normally settled on 30 to 90 days (2011: 30 to 90 days) terms.

NOTE 19

OBLIGATIONS UNDER FINANCE LEASES


	September 30 2012	December 31 2011
	US$	US$
Minimum lease payments:
Not later than one (1) year	65,513	30,332
Later than one (1) year but not later than five (5) years	97,897	68,512

Total minimum lease payments	163,410	98,844
Less: Future interest charges	(25,914)	(19,490)

Present value of minimum lease payments	137,496	79,354


Repayable as follows:
Not later than one (1) year	55,366	24,433
Later than one (1) year and not later than five (5) years	82,130	54,921

	137,496	79,354

The effective rates implicit in the lease is range between 4.76% to 7.30% (2010 : 4.76% to 7.30%) per annum.

F-25

CHINA MEDIA GROUP CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 20

SHAREHOLDER LOAN

	September 30 2012	December 31 2011
	US$	US$

Shareholder Loan	2,000,000

The long term shareholder loan of $2,000,000 is unsecured, bears interest at 8% per annum, repayable on November 25, 2013.

NOTE 21

RELATED COMPANY TRANSACTIONS

The Company agreed to pay directors and officers a monthly salary for services performed. For the three months ended September 30, 2012 and 2011, the Company paid the directors and its officers and their services companies a total remuneration of $1,351 and $1,348, respectively.

On November 25, 2005, a subsidiary of the Company signed a loan agreement with one of its major shareholder, Central High Limited for a loan of $2,000,000. This long term shareholder loan is unsecured and repayable on November 25, 2010, and bears interest of 8% per annum. On November 25, 2009 the repayment of the loan was extended for a further two years to November 25, 2012. On March 19, 2012 the loan was extended for a further one year to November 25, 2013. The accrued interest for the three months and nine months ended September 30, 2012 was $40,000 and $120,000 respectively.

F-26

CHINA MEDIA GROUP CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 22

INCOME TAXES

No provision was made for income tax for the year ended December 31, 2011 and 2010, since the Company and its subsidiaries had significant net operating loss. In the year ended December 31, 2011 and 2010, the Company and its subsidiaries incurred net operating losses for tax purposes of approximately $99,304 and $5,597,741, respectively. Total net operating losses carry forward at December 31, 2011 and 2010, (i) for Federal and State purpose were $11,228,165 and $11,063,748, respectively and (ii) for its entities outside of the United States were $1,730,470 and $1,707,655, respectively for the two years. The net operating loss carry-forwards may be used to reduce taxable income through the year 2025. The availability of the Company's net operating loss carry-forwards are subject to limitation if there is a 50% or more change in the ownership of the Company's stock.

There was no significant difference between reportable income tax and statutory income tax. The gross deferred tax asset balance as of December 31, 2011 and 2010 was approximately $4,694,677 and $4,624,137, respectively. A 100% valuation allowance has been established against the deferred tax assets, as the utilization of the loss carry-forwards cannot reasonably be assured.

A reconciliation between the income tax computed at the Malaysia, Hong Kong and PRC China statutory rate and the Group's provision for income tax is as follows:

	2011	2010

Malaysia statutory rate	25%	25%
Valuation allowance - Malaysia rate	25%	25%
Hong Kong statutory rate	16.5%	16.5%
Valuation allowance - Hong Kong rate	(16.5%)	(16.5%)
PRC China Enterprise Income Tax	25%	25%
Valuation allowance - PRC rate	(25%)	(25%)

Provision for income tax	-	-

F-27

CHINA MEDIA GROUP CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 23

SEGMENT REPORTING

Business Segments

For management purposes, the Group currently organized into two operating units -Trading of electronics and light appliances and advertising. Turnover represents the net amounts received and receivable for goods sold or services provided by the Group during the period. These units are the basis on which the Group reports its primary segment information.

Segment information about these businesses is presented below.

	Trading of Electronics and Light Appliances		Advertising		Consolidated
	For the nine months ended Sep 30,		For the nine months ended Sep 30,		For the nine months ended Sep 30,
	2012	2011	2012	2011	2012	2011
	US$	US$	US$	US$	US$	US$
Turnover	2,556,262	5,454,941	-	-	2,556,262	5,454,941

Segment results	764,077	2,758,466	-	-	764,077	2,758,466

Unallocated corporate income					61,107	21,946
Unallocated corporate expenses					(469,386)	(678,577)

Profit from operations					355,708	2,101,835
Finance costs					(71,911)	(63,808)

Profit for the period					283,797	2,038,027

					As at Sep 30
					2012	2011
ASSETS
Segment assets	10,103,517	4,035,865	404,131	-	10,507,648	4,035,865
Unallocated corporate assets					273,939	119,580
Consolidated total assets					10,781,587	4,155,445

LIABILITIES
Segment liabilities	1,073,468	627,259	585,182	-	1,658,650	627,259
Unallocated corporate liabilities					4,837,524	30,092
Consolidated total liabilities					6,496,174	657,351

Depreciation of fixed assets	33,909	48,141	92	-	34,001	48,141

F-28

CHINA MEDIA GROUP CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 24

COMMITMENTS AND CONTINGENCIES

(a)

The Company leases office premises for its operations in United States and Hong Kong under operating leases. Rental expenses under operating lease for the three month ended September 30, 2012 was $43,929.

Future minimum rental payments under non-cancelable operating leases for the three month ended September 30, 2012 are $50,893.

(b)	Under the Distribution Rights Agreement for M.A.G.I.C. Convergent Device, the Company is committed to issue shares under certain conditions as set out in Note 9.

(c)

As disclosed in Note 16 above, the Company has agreed to issue 2,205,376 shares for the acquisition of 5% of ATC. As at the date of this report, the Company still has not issued the shares as it is pending the delivery of the ATC shares, which has been extended to October 2012 which is still outstanding as at the date of this report.

NOTE 25

SUBSEQUENT EVENTS

(a)

The Group has evaluated all subsequent events through November 15, 2012, the date these consolidated financial statements were issued, and determined that, other than as disclosed below, there were no subsequent events or transactions that require recognition or disclosures in the financial statements.

F-29

Item 2.

Management's Discussion and Analysis of Financial Condition and Results of Operations.

Forward Looking Statements

THIS FOLLOWING INFORMATION SPECIFIES CERTAIN FORWARD-LOOKING STATEMENTS OF MANAGEMENT OF THE COMPANY. FORWARD-LOOKING STATEMENTS ARE STATEMENTS THAT ESTIMATE THE HAPPENING OF FUTURE EVENTS AND ARE NOT BASED ON HISTORICAL FACT. FORWARD-LOOKING STATEMENTS MAY BE IDENTIFIED BY THE USE OF FORWARD-LOOKING TERMINOLOGY, SUCH AS "MAY", "SHALL", "COULD", "EXPECT", "ESTIMATE", "ANTICIPATE", "PREDICT", "PROBABLE", "POSSIBLE", "SHOULD", "CONTINUE", OR SIMILAR TERMS, VARIATIONS OF THOSE TERMS OR THE NEGATIVE OF THOSE TERMS. THE FORWARD-LOOKING STATEMENTS SPECIFIED IN THE FOLLOWING INFORMATION HAVE BEEN COMPILED BY OUR MANAGEMENT ON THE BASIS OF ASSUMPTIONS MADE BY MANAGEMENT AND CONSIDERED BY MANAGEMENT TO BE REASONABLE. OUR FUTURE OPERATING RESULTS, HOWEVER, ARE IMPOSSIBLE TO PREDICT AND NO REPRESENTATION, GUARANTY, OR WARRANTY IS TO BE INFERRED FROM THOSE FORWARD-LOOKING STATEMENTS.

THE ASSUMPTIONS USED FOR PURPOSES OF THE FORWARD-LOOKING STATEMENTS SPECIFIED IN THE FOLLOWING INFORMATION REPRESENT ESTIMATES OF FUTURE EVENTS AND ARE SUBJECT TO UNCERTAINTY AS TO POSSIBLE CHANGES IN ECONOMIC, LEGISLATIVE, INDUSTRY, AND OTHER CIRCUMSTANCES. AS A RESULT, THE IDENTIFICATION AND INTERPRETATION OF DATA AND OTHER INFORMATION AND THEIR USE IN DEVELOPING AND SELECTING ASSUMPTIONS FROM AND AMONG REASONABLE ALTERNATIVES REQUIRE THE EXERCISE OF JUDGMENT. TO THE EXTENT THAT THE ASSUMED EVENTS DO NOT OCCUR, THE OUTCOME MAY VARY SUBSTANTIALLY FROM ANTICIPATED OR PROJECTED RESULTS, AND, ACCORDINGLY, NO OPINION IS EXPRESSED ON THE ACHIEVABILITY OF THOSE FORWARD-LOOKING STATEMENTS. WE CANNOT GUARANTY THAT ANY OF THE ASSUMPTIONS RELATING TO THE FORWARD-LOOKING STATEMENTS SPECIFIED IN THE FOLLOWING INFORMATION ARE ACCURATE, AND WE ASSUME NO OBLIGATION TO UPDATE ANY SUCH FORWARD-LOOKING STATEMENTS.

Critical Accounting Policy and Estimates

Our Management's Discussion and Analysis of Consolidated Financial Condition and Results of Operations section discusses our consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of these consolidated financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. On an on-going basis, management evaluates its estimates and judgments, including those related to revenue recognition, accrued expenses, financing operations, and contingencies and litigation. Management bases its estimates and judgments on historical experience and on various other factors that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions. The most significant accounting estimates inherent in the preparation of our consolidated financial statements include estimates as to the appropriate carrying value of certain assets and liabilities which are not readily apparent from other sources. These accounting policies are described at relevant sections in this discussion and analysis and in the notes to the consolidated financial statements included in our Quarterly Report on Form 10-Q for the period ended September 30, 2012.

Overview

DESCRIPTION OF BUSINESS.

OUR BACKGROUND. The Company was incorporated in Texas on October 1, 2002 and in 2005 changed its business focus to advertising and media in the emerging China market. Under new management, the Company commenced to position the Company to capitalize on the growth of the Chinese advertising market where global companies are rushing into China to try to grab and hold the attention of its 1.3 billion citizens.

The Company conducts its advertising business through Ren Ren Media Group Limited, its wholly owned subsidiary company in Hong Kong. For its trading in mobile convergent devices, it will trade through a 50/50 joint venture subsidiary company ATC Marketing Limited. For the Millennium Development Goals Program, we conduct this business through our 50% owned subsidiary company Beijing Ren Ren Health Culture Promotion Co., Limited.

On June 8, 2012, Good World, CMG and ECE Technologies Sdn. Bhd. closed the sales and purchase agreement for Good World to acquire 100% equity interests in A-Team Resources Sdn. Bhd. ("Acquisition"), a privately held Malaysian corporation ("ATeam") that is in the consumer electronics and light appliances businesses for 558,779,837 shares in the Company, representing 51% of the then enlarged share capital of the Company. Immediately after the transaction closed, ECE transferred 200,000,000 shares in the Company to independent third parties, and ECE then held 358,779,837 shares representing about 31.62% equity interests in the Company.

The transaction has been accounted for in substance as a reverse acquisition of the Company by ATeam since the stockholders of ATeam owned a majority of the Company's voting power immediately following the Acquisition and ATeam's management has assumed operational, management and governance control. For accounting purposes, ATeam shall be the accounting acquirer and or the surviving entity. Accordingly, the historical financial statements are those of Ateam, the accounting acquirer, immediately following the consummation of the reverse merger.

OUR BUSINESS. Prior to the acquisition of the consumer electronics and light appliances business, our mission was to become one of China's new age media companies through the use of new technologies and devices combined with traditional media of TV, Newspapers, Magazines, Billboards and Internet to reach today's mobile society. Today, with the acquisition of the consumer electronics and light appliances businesses which will bring us the major revenue source to the Company now, our business focus will be on the development of this business segment to further strengthen our Products and Services business unit.

We have now reorganized our business units to two business units mainly "Products and Services" and "Telecommunications and Mobile Computing" business units and with less focus on the "Advertising" business unit unless we have the necessary resources to pursue opportunities in this business segment.

As discussed above, in June 2012, the Group acquired 100% equity interests in ATeam, a distributor of electronics and light appliances. This acquisition will strengthen the Products and Services division by providing for sale a range of products in the electronic and light appliance segment and possibly extending the marketing to new markets in China and India. ATeam will also provide a steady revenue base and operations to the Group.

ATeam was established in 2001 specialized in the manufacturing and assembling of home appliances products (white goods). Currently ATeam is operating from Selangor, which is located in the central part of Western Malaysia. Their main markets are in North America, Southeast Asia, Africa, Oceania, Mid East and Eastern Asia.

2012 Products & Services Overview

Although we have established 2 business units, those are "Telecommunication and Mobile" and "Product Services". A brief review and description of these two business units' strategies and operations are described below.

Products Services Units

Our goal is to build brand recognition on our product range and to take advantage of our contacts networks, distribution channels and trading partners. We will leverage on our advertising platform, if and when available, to develop our own brand names for select products. This will uniquely position our product and services for brand awareness as well as develop a long term business unit that will serve both consumers and industrial markets.

In June 2012, we completed the acquisition of ATeam, a company that manufactures and distributes consumer electronics and light appliances. ATeam has a range of products and some under its own brand name of ECE, Maco and ATech. ATeam's products are currently being sold and distributed in Malaysia, Indonesia, Thailand, Vietnam, Singapore, Sri Lanka, South Africa, Middle East countries, and in India Sub-Continent. The growth of ATeam will be in the developing countries and we will look for opportunities to sell ATeam's range of products to China.

ATeam produces washing machines, chest freezers, wine and display chillers, and refrigeration-based products. It has a manufacturing plant located at Port Klang, Selangor, Malaysia on a piece of land with an area of 110,000 square feet which houses a factory with a built-up of 60,000 square feet. It has a work force of 30 workers.

ATeam was established in 2001 specialised in the manufacture, assembling and distribution/trading of home appliances products (white goods). Currently, the Group is operating from Selangor, which is located in the central part of Malaysia

During the period of review, products and services division sold washers, freezers and chillers to South East Asia,, India, Africa and Middle East markets and the revenue recorded for this division was $578,218 for the three months ended September 30, 2012.

Telecommunications Unit

On or about January 23, 2006, the Company announced the establishment of the Telecommunications and Mobile Computing Division to focus on the new media advertising where we would take advantage of new convergent devices for telecommunications advertising. The business of selling advertising through telecommunications media and devices is still at an early stage as we are developing strategies to effectively enter the market. No revenue has been generated from advertising through telecommunications media and devices at the date of this report.

We have secured the distribution rights for M.A.G.I.C. Convergent Device for the territory of China and Hong Kong. M.A.G.I.C. is a next generation convergent device that has the full capabilities of a notebook computer shrink to a size of a PDA phone. In 2009, we have also entered into a joint venture with AdvanceTech Communications Sdn. Bhd. ("ATC") to market and distribute the devices developed by ATC worldwide other than the countries already under distribution by the Group. The current device under development, M.A.G.I.C. W3 is being positioned as the high end convergent device for professionals running special applications. We expect the M.A.G.I.C. W3 to enter the information and advertising sector of the mobile phone market. We have received the first prototype of the M.A.G.I.C. W3 by Q3 in October 2012 but we have requested additional units for technical due diligence. Subject to satisfactory technical review, we expect to launch the commercial product in of 2013. There has been no other significant update for the M.A.G.I.C. W3. No revenue was recorded for this 3 months ended September 30, 2012.

Marketing & Sales Overview

Products Services Unit

For our Products Services unit, we will focus on building on ATeam's existing products, markets and distribution channels. We also plan to focus on opening the India and China markets and develop additional products. We expect our major revenue generation will be from this business unit in the coming future.

Telecommunication Unit

There are many competitors in the market place offering a variation of the M.A.G.I.C W3, however very few that offers full computer operability in full Windows 7 OS with phone functionality. With the emergence of newer convergent device technologies, there is an opportunity for us to offer convergent devices and applications and solutions that have more functionality than traditional mobile devices. The new devices are easier to integrate with existing data and video applications and systems, and are easier to maintain and administer. We believe that the rate of adoption of convergent device and its applications and solutions by corporate executives and innovative applications will accelerate the adaptation of our M.A.G.I.C. Convergent device is going to deliver more secure, and more functional in internet-based applications. We believe mobile executives will recognize the benefit of having notebook functionality in a handheld device combined with video and data capabilities.

For our M.A.G.I.C. Convergent devices, we will sell through distribution channels, network operators and small enterprises. We will approach distribution channels and network operators in Hong Kong and China, initially and then in other territories to sell the M.A.G.I.C. Device. We will also sell to certain enterprises that will take advantage of the special functions in M.A.G.I.C. Device and customize to their operational needs. Select firms that we will target are transportation and logistic companies, courier companies, and direct sales companies. We will also target corporate and financial executives to customize the M.A.G.I.C. Device to their requirements. To sell this high value product with innovative applications, we plan to employ business development teams focused on creating high-value strategic customers and business alliances.

Advertising Unit

Our plan is to work with advertising agents in Hong Kong and Guangdong initially to work on a plan to secure some outdoor media boards with the limited resources available to the Group. We will discuss with our contacts in Hong Kong and China regarding securing outdoor media boards. We plan to co-operate with international advertising firms to place out the advertising on ad/sign placements on either an agent or outsourced basis. We will recruit a team to manage the 10 largest cities in China where we would secure, manage and administer ad/sign placements for these cities. For the other cities we will look for partners or agents to work with us to secure ad/sign placements. Once we have certain ad/sign placements network for the second-tier cities, we will approach advertising agencies to sell these ad/sign placements to their customers. This will require resources commitments and the Group will only pursue business in this advertising unit if the right opportunities arise where our commitment is not onerous but strategically synergistic.

For our Products Services unit, we will work with our advertisers to cross promote and sell their products on our advertising platform, once we have built up. In some cases, we will look to develop our own brands. We will employ a small team to handle enquires and to provide support to our advertising customers.

Strategy

As stated above, our strategy is to build a business that takes advantage of the advertising platform for our products. We have acquired a product line of consumer electronics and light appliances to enter the emerging markets like India and the Middle East and China. Our strategy will be to utilize our advertising platform to build our brand and our name in these markets for quality products. Continued development and innovation will ensure our relevance far into the future. Both our brand and our products will continue to evolve becoming more known for quality products as these emerging markets develops will recognize the benefit of having notebook functionality in a handheld device combined with video and data capabilities.

Plan of operations

OUR PLAN OF OPERATION FOR THE NEXT TWELVE MONTHS.

We hope to generate additional revenues in the next twelve months by engaging business operations through internal growth and through strategic acquisitions and cooperative advertising agreements, as described more fully under "Overview" above.

We have cash and cash equivalents net of bank overdraft, of $110,461 as of September 30, 2012; increase from the previous period end of December 31, 2011. In the opinion of management, these funds will not satisfy our working capital requirements to operate at our current level of activity for the next twelve months. To effectuate our business plan, during the next twelve months, we must arrange for adequate funding to implement our plans of increasing our advertising offerings and promote our advertising services, through cooperation agreements and otherwise.

Financing and funding

Management intends to continue to raise additional financing through debt and equity financing or other means and interests that it deems necessary, with a view to implementing our business plan and building a revenue base. We plan to use the proceeds of such financings to provide working capital to our operations and increase our capital expenditure for marketing and working with our co-operative partners. There can be no assurances that sufficient financing will be available on terms acceptable to us or at all. Our forecast for the period for which financial resources will be needed to support our operations involves risks and uncertainties and actual results could fail as a result of a number of factors.

Specifically, we hope to accomplish the steps listed below to implement our business plan. We estimate that we will require approximately $1,500,000 to commence operations as envisioned below during the next twelve months. The figures and steps outlined below are estimates only, and our actual progress and cost may vary from these estimates and is subject to our ability to obtain adequate funding. Such additional capital may be raised through public or private equity financing, borrowings, or other sources, such as contributions from our officers and directors. If we are unable to obtain funds necessary to implement our business plan, we may revise or scale back our business plan.

We are not currently conducting any research and development activities, other than the continual development of our website in both English and Chinese. We do not anticipate conducting such activities in the near future. In the event that we expand our business scope, then we may need to hire additional employees or independent contractors as well as purchase or lease additional equipment.

Results of operation.

FOR THE THREE MONTHS AND NINE MONTHS PERIOD ENDED SEPTEMBER 30, 2012 COMPARED TO THE THREE MONTHS AND NINE MONTHS PERIOD ENDED SEPTEMBER 30, 2011

REVENUES.

For the three months period ended September 30, 2012, the Group has realized revenue of $578,218 and a cost of revenue of $306,832, achieving a gross profit of $271,386. For the three month period ended September 30, 2011, the Group has realized revenue of $1,897,032 and a cost of revenue of $821,193 achieving a gross profit of $1,075,839.

For the nine months period ended September 30, 2012, the Group has realized revenue of $2,556,262 and a cost of revenue of $1,792,185, achieving a gross profit of $764,077. For the nine month period ended September 30, 2011, the Group has realized revenue of $5,454,941 and a cost of revenue of $2,696,475 achieving a gross profit of $2,758,466.

OPERATING EXPENSES.

For the three months period ended September 30, 2012, our gross profit was $271,386 and our total operating expenses were $136,283, of which $111,684 was general and administrative expenses and $24,599 was selling expenses. We also had $50,243 in interest expenses and $1,502 in other expenses, so that the net profit to our shareholders for the three months period ended September 30, 2012 was $83,358. This is in comparison to the same period ended September 30, 2011, where our gross profit was $1,075,839 and our total operating expenses were $183,132, of which $152,702 was general and administrative expenses and $30,430 was selling expenses. We also had $16,340 in interest expenses, $7,479 in gain on disposal of fixed assets and $203 in other income, so that the net profit to our shareholders for the three months period ended September 30, 2011 was $884,049.

For the nine months period ended September 30, 2012, our gross profit was $764,077 and our total operating expenses were $469,386, of which $394,377 was general and administrative expenses and $75,009 was selling expenses. We also had $71,911 in interest expenses, $24 in interest income and $44,676 in other income and $16,317 in foreign exchange gain, so that the net profit to our shareholders for the nine months period ended September 30, 2012 was $283,797. This is in comparison to the same period ended September 30, 2011, where our gross profit was $2,758,466 and our total operating expenses were $678,577, of which $560,990 was general and administrative expenses and $117,587 was selling expenses. We also had $63,808 in interest expenses $18,687 in gain on disposal of fixed assets and $3,259 in other income, so that the net profit to our shareholders for the nine months period ended September 30, 2011 was $2,038,027.

Liquidity and Capital Resources

As at September 30, 2012, the Company had cash and cash equivalents totaling $112,097, after deduction $1,636 bank overdraft, the net cash balance was $110,461, other current assets of $4,165,565 and non-current assets totaling $6,616,022 which were represented by $142,473 in fixed assets, $68,932 in distribution rights and $81,556 in investment in shares and $6,323,061 in goodwill. The total assets of the Company were $10,781,587 as of September 30, 2012. We also had current liabilities of $4,222,071 which were mainly represented by $699,046 in accruals, $46,724 in trade payables, $422,722 due to directors and officers, $2,183,061 due to related parties, $236,504 in option liabilities, $228,475 in trade financing payables, $224,532 in term loan -short term as of September 30, 2012. We also had $2,000,000 in long-term shareholders loan and $191,973 in fixed loan, $82,130 in obligation under finance lease as of September 30, 2012, made our total liabilities $6,496,174.

At present the Company does not have sufficient cash resources to provide for all general corporate operations in the foreseeable future. The Company will be required to raise additional capital in order to continue to operate in fiscal 2012.

Going Concern

The Company's financial statements are presented on a going concern basis, which contemplates the realization of assets and satisfaction of liabilities in the normal course of business. The Company has experienced decrease in revenue and operations in recent periods. For the three months ended September 30, 2012 the Company recorded net profit of $83,358 and has retained earning of $1,478,807 as at September 30, 2012. The current liabilities exceeded current assets by $56,506 as at September 30, 2012. The Company's ability to continue as a going concern must be considered in light of the problems, expenses and complications frequently encountered in developing markets and the competitive environment in which the Company operates. The Company is pursuing financing for its operations and seeking additional investment. In addition, the Company is seeking to expand its revenue base by adding new customers. Failure to secure such financing, to raise additional equity capital and to expand its revenue based may result in the Company depleting its available funds and not being able to pay its obligations. These financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classification of liabilities that may result from the possible inability of the Company to continue as a going concern.

Off Balance Sheet Arrangements

As of September 30, 2012, there were no off balance sheet arrangements. The Company has no off balance sheet obligations nor guarantees and has not historically used special purpose entities for any transactions.

Item 3.

Quantitative and Qualitative Disclosure About Market Risk.

Quantitative and Qualitative Disclosures about Market Risk:

The Company is exposed to various market risks, including changes in interest rates. Market risk is the potential loss arising from adverse changes in market rates and prices, such as interest rates and foreign currency exchange rates. The Company does not enter into derivatives or other financial instruments for trading or speculative purposes. The Company also has not entered into financial instruments to manage and reduce the impact of changes in interest rates and foreign currency exchange rates, although we may enter into such transactions in the future.

Item 4.

Controls and Procedures.

Evaluation of Disclosure Controls and Procedures:

Our disclosure controls and procedures are designed to ensure that information required to be disclosed in reports that we file or submit under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the United States Securities and Exchange Commission. Our principal executive and financial officer have reviewed the effectiveness of our "disclosure controls and procedures" (as defined in the Securities Exchange Act of 1934 Rules 13a-14(c) and 15d-14(c)) within the end of the period covered by this Quarterly Report on Form 10-Q and have concluded that the disclosure controls and procedures are effective to ensure that material information relating to the Company is recorded, processed, summarized, and reported in a timely manner. There were no significant changes in our internal controls or in other factors that could significantly affect these controls subsequent to the last day they were evaluated by our principal executive and financial officers.

Changes in Internal Controls over Financial Reporting:

There have been no changes in the Company's internal control over financial reporting during the last quarterly period covered by this report that have materially affected, or are reasonably likely to materially affect, the Company's internal control over financial reporting.

PART II - OTHER INFORMATION

Item 1.

Legal Proceedings

None.
Item 1A	Risk Factors
Not required.

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

None.

Item 3.

Defaults Upon Senior Securities

None.

Item 4.

Mine Safety Disclosures

Not Applicable.

Item 5.

Other Information

None.

Item 6.

Exhibits

Exhibit No.

Description of Exhibit


2.1	Shareholders' Agreement between Good World Investments Limited, Advance Tech Communications Sdn. Bhd. And ATC Marketing Limited⁽⁶⁾
2.2	Sale and Purchase Agreement between Good World Investments Limited, Tidewell Limited and the Company⁽⁷⁾
2.3	Sale and Purchase Agreement entered by Good World Investments Limited to acquire 5% equity interest in Advance Tech Communications Sdn. Bhd. ⁽⁹⁾
2.4	Sale and Purchase Agreement between Good World Investments Limited and Keen Star International (HK) Limited⁽⁸⁾
2.5	Sale and Purchase Agreement between Good World Investments Limited and ECE Technologies Sdn. Bhd.⁽¹⁰⁾
3.1	Articles of Incorporation ⁽¹⁾
3.1.1	Certificate of Amendment to Articles of Incorporation ⁽²⁾
3.1.2	Certificate of Amendment to Articles of Incorporation, as amended.⁽⁵⁾
3.2	Bylaws ⁽¹⁾
10.3	2002 Stock Option Plan ⁽³⁾
10.4	2007 Stock Incentive Plan⁽⁴⁾
31.1*	Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2*	Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1*	Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2*	Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

1.	Incorporated by reference to our Registration Statement on Form SB-2 as filed with the SEC on April 15, 2003.
2.	Incorporated by reference to our Current Report on Form 8-K as filed with the SEC on February 3, 2005.
3.	Incorporated by reference to our Registration Statement on Form SB-2 as filed with the SEC on April 15, 2003.
4.	Incorporated by reference to our Registration Statement on Form S8 as filed with the SEC on March 8, 2007.
5.	Incorporated by reference to our Registration Statement on Form SB-2 as filed with the SEC on March 16, 2007.
6.	Incorporated by reference to our Current Report on Form 8-K as filed with the SEC on May 26, 2009.
7.	Incorporated by reference to our Current Report on Form 8-K as filed with the SEC on September 22, 2010.
8.	Incorporated by reference to our Current Report on Form 8-K as filed with the SEC on April 14, 2011.
9.	Incorporated by reference to our Current Report on Form 8-K as filed with the SEC on February 22, 2011.
10.	Incorporated by reference to our Current Report on Form 8-K as filed with the SEC on March 16, 2012..

* Filed herewith.

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

	China Media Group Corporation
	a Texas corporation

	/s/ Mohd Mahyudin bin Zainal
	---------------------------------------
	Mohd Mahyudin bin Zainal
	Chief Executive Officer

	China Media Group Corporation
	a Texas corporation

	/s/Mohd Suhaimi bin Rozali
	---------------------------------------
	Mohd Suhaimi bin Rozali
	Chief Financial Officer

In accordance with the Exchange Act, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

By:	/s/ MohdMahyudin bin Zainal	November 19, 2012
	--------------------------------------------
	Mohd Mahyudin bin Zainal
Its:	Principal executive officer,
	President, Director

By:	/s/ Norlizah binti Zainal	November 19, 2012
	--------------------------------------------
	Norlizah binti Zainal
Its:	Chief financial officer,
	Director

By:	/s/ Con Unerkov	November 19, 2012
	--------------------------------------------
	Con Unerkov
Its:	Secretary, Treasurer,
	Director

By:	/s/ Mohd Suhaimi bin Rozali	November 19, 2012
	--------------------------------------------
	Mohd Suhaimi bin Rozali
Its:	Chief Financial Officer, Company Secretary,
	Treasurer, Director
By:	/s/ Mohd Khairudin Bin Ramli	November 19, 2012
	--------------------------------------------
	Mohd Khairudin Bin Ramli
Its:	Director
By:	/s/ Lam Pui Kit	November 19, 2012
	--------------------------------------------
	/s/ Lam Pui Kit
Its:	Director

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