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EX-4.3 - SRKP 25 INCv208789_ex4-3.htm
EX-5.1 - SRKP 25 INCv208789_ex5-1.htm
EX-1.1 - SRKP 25 INCv208789_ex1-1.htm
EX-23.2 - SRKP 25 INCv208789_ex23-2.htm
EX-23.3 - SRKP 25 INCv208789_ex23-3.htm
 
As Filed with the Securities and Exchange Commission on January 25, 2011
Registration No. 333-166866


UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
________________
 
FORM S-1/A
Amendment No. 9

REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
________________
 
China Century Dragon Media, Inc.
(Name of Registrant As Specified in its Charter)

Delaware
7311
26-1583852
(State or Other Jurisdiction of
(Primary Standard Industrial
(I.R.S. Employer Identification No.)
Incorporation
Classification Code Number)
 
or Organization)
   

Room 801, No. 7, Wenchanger Road,
Jiangbei, Huizhou City, Guangdong Province, China
0086-0752-3138789
(Address and Telephone Number of Principal Executive Offices)
________________
 
Corporation Service Company
2711 Centerville Road
Suite 400
Wilmington, DE 19808
800-222-2122
(Name, Address and Telephone Number of Agent for Service)
________________
 
Copies to
Thomas J. Poletti, Esq.
Melissa A. Brown, Esq.
K&L Gates LLP
10100 Santa Monica Blvd., 7th Floor
Los Angeles, CA 90067
Telephone: (310) 552-5000
Facsimile: (310) 552-5001
 
David Ficksman, Esq.
TroyGould PC
1801 Century Park East, Suite 1600
Los Angeles, CA 90067-2367
Telephone: (310) 789-1290
Facsimile: (310) 789-1490
_______________
 
Approximate Date of Proposed Sale to the Public: From time to time after the effective date of this Registration Statement

If any of the securities being registered on this form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, check the following box.þ

If this form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. £

If this form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. £

If this form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement the same offering. £

Indicate by check mark 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 “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer o
Accelerated filer o
Non-accelerated filer þ
(Do not check if a smaller reporting company)
Smaller reporting company o
 
CALCULATION OF REGISTRATION FEE
 
         
Proposed
   
Proposed
       
         
Maximum
   
Maximum
   
Amount of
 
Title of Each Class of
 
Amount To Be
   
Offering Price
   
Aggregate
   
Registration
 
Securities To Be Registered
 
Registered (1)
   
Per Share
   
Offering Price
   
Fee
 
Common Stock, $0.0001 par value per share
    1,610,000 (2)   $ 7.00 (2)   $ 11,270,000 (2)   $ 1029.80 (3)
Common Stock, $0.0001 par value per share
    1,034,403 (4)   $ 7.00 (5)   $ 7,240,821 (5)   $ 590.02 (6)
Underwriters’ Warrants to Purchase Common Stock
    70,000 (7)     N/A       N/A       N/A (8)
Common Stock Underlying Underwriters’ Warrants, $0.0001 par value per share
    70,000 (9)   $ 8.40 (10)   $ 588,000 (10)   $ 53.72 (11)
      Total Registration Fee
                          $ 1,673.55 (12)
 
(1)
In accordance with Rule 416(a), the Registrant is also registering hereunder an indeterminate number of additional shares of Common Stock that shall be issuable pursuant to Rule 416 to prevent dilution resulting from stock splits, stock dividends or similar transactions.

(2)
The registration fee for securities to be offered by the Registrant is based on an estimate of the Proposed Maximum Aggregate Offering Price of the securities, and such estimate is solely for the purpose of calculating the registration fee pursuant to Rule 457(o). Includes shares that the Underwriters have the option to purchase from the Registrant to cover over-allotments, if any.

 
(3)
The Registrant previously paid registration fees of $655.96 for 1,150,000 shares at a proposed maximum offering price of $8.00 registered at a registration fee rate of $71.30 per million.  Also includes registration fees of $373.84 for the registration of 460,000 shares of common stock at a proposed maximum offering price of $7.00 per share at a registration fee rate of $116.10 per million.

 
(4)
This Registration Statement also covers the resale under a separate resale prospectus (the “Resale Prospectus”) by selling stockholders of the Registrant of up to 1,034,403 shares of Common Stock previously issued to the selling stockholders as named in the Resale Prospectus.

 
(5)
Estimated solely for the purpose of calculating the registration fee pursuant to Rule 457.

 
(6)
The registrant previously paid registration fees of $590.02 for these shares based on a proposed maximum offering price of $8.00 per share at a registration fee of $71.30 per million.

 
(7)
Represents the maximum number of warrants, each of which will be exercisable at a percentage of the per share offering price, to purchase the Registrant’s common stock to be issued to the Underwriters in connection with the public offering.

 
(8)
In accordance with Rule 457(g) under the Securities Act, because the shares of the Registrant’s common stock underlying the Underwriters’ warrants are registered hereby, no separate registration fee is required with respect to the warrants registered hereby.

 
(9)
Represents the maximum number of shares of the Registrant’s common stock issuable upon exercise of the Underwriters’ warrants.

 
(10)
Estimated solely for the purpose of calculating the registration fee pursuant to Rule 457(g) under the Securities Act, based on an estimated maximum exercise price of $8.40 per share, or 120% of the maximum offering price.

 
(11)
Includes previously paid registration fees of $34.22 for 50,000 shares at a proposed maximum offering price of $9.60 per share registered at a registration fee rate of $71.30 per million and registration fees of $11.98 for the registration of 20,000 shares at a proposed maximum offering price of $8.40 per share at a registration fee rate of $116.10 per million.

 
(12)
Previously paid.
 


The Registrant amends this registration statement on such date or dates as may be necessary to delay its effective date until the Registrant shall file a further amendment which specifically states that this registration statement shall hereafter become effective in accordance with Section 8(a) of the Securities Act of 1933, or until the registration statement shall become effective on such date as the Commission, acting pursuant to Section 8(a), may determine.





EXPLANATORY NOTE

This Registration Statement contains two prospectuses, as set forth below.

 
· 
Public Offering Prospectus. A prospectus to be used for the public offering by the Registrant (the “Public Offering Prospectus”) of up to 1,400,000 shares of the Registrant’s common stock (in addition to 210,000 shares that may be sold upon exercise of the Underwriters’ over-allotment option, if any) through the Underwriters named on the cover page of the Public Offering Prospectus. We are also registering the warrants and shares of common stock underlying the warrants to be received by the Underwriters in this offering.

 
· 
Resale Prospectus.  A prospectus to be used for the resale by selling stockholders of up to 1,034,403 shares of the Registrant’s common stock (the “Resale Prospectus”).

The Resale Prospectus is substantively identical to the Public Offering Prospectus, except for the following principal points:

 
· 
they contain different outside front covers;
 
· 
they contain different Offering sections in the Prospectus Summary section beginning on page 3;
 
· 
they contain different Use of Proceeds sections on page 39;
 
· 
the Capitalization and Dilution sections on pages 41 and 42, respectively, of the Public Offering Prospectus are deleted from the Resale Prospectus;
 
· 
a Selling Stockholder section is included in the Resale Prospectus beginning on page 88A;
 
· 
references in the Public Offering Prospectus to the Resale Prospectus will be deleted from the Resale Prospectus;
 
· 
the Underwriting section from the Public Offering Prospectus on page 88 is deleted from the Resale Prospectus and a Plan of Distribution is inserted in its place;
 
· 
the Legal Matters section in the Resale Prospectus on page 91 deletes the reference to counsel for the Underwriters; and
 
·
the outside back cover of the Public Offering Prospectus is deleted from the Resale Prospectus.
 
The Registrant has included in this Registration Statement, after the financial statements, a set of alternate pages to reflect the foregoing differences of the Resale Prospectus as compared to the Public Offering Prospectus.

In addition, except as otherwise specified, all information in the Public Offering Prospectus and Resale Prospectus, including share and per share information, has been adjusted to reflect a reverse stock split that the Registrant effected on January 14, 2011 pursuant to which every 3.4482759 shares of the Registrant’s common stock were converted into 1 share of the Registrant’s common stock



The information in this prospectus is not complete and may be changed. We may not sell these securities until the registration statement filed with the Securities and Exchange Commission becomes effective. This prospectus is not an offer to sell these securities and we are not soliciting offers to buy these securities in any state where the offer or sale is not permitted.
 

     
PRELIMINARY PROSPECTUS
Subject To Completion
January 25, 2011     
     


1,400,000 Shares

 
China Century Dragon Media, Inc.

Common Stock

 
This is a public offering of our common stock.  We are a reporting company under Section 13 of the Securities Exchange Act of 1934, as amended. Our shares of common stock are not currently listed or quoted for trading on any national securities exchange or national quotation system. We have applied for the listing of our common stock on the NYSE Amex under the symbol “CDM.”  There can, however, be no assurance that our common stock will be accepted for listing on the NYSE Amex.

We are offering all of the 1,400,000 shares of our common stock offered by this prospectus.  We expect that the public offering price of our common stock will be between $6.00 and $7.00 per share.

Investing in our common stock involves a high degree of risk.  Before buying any shares, you should carefully read the discussion of material risks of investing in our common stock in “Risk Factors” beginning on page 14 of this prospectus.

Neither the U.S. Securities and Exchange Commission nor any state securities commission has approved or disapproved of anyone’s investment in these securities or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense.

   
Per Share
   
Total
 
Public offering price
  $ [___ ]   $ [___ ]
Underwriting discounts and commissions
  $ [___ ]   $ [___ ]
Proceeds, before expenses, to China Century Dragon Media, Inc.
  $ [___ ]   $ [___ ]
 
The Underwriters have a 45-day option to purchase up to 210,000 additional shares of common stock at the public offering price solely to cover over-allotments, if any, if the Underwriters sell more than 1,400,000 shares of common stock in this offering (the “Over-allotment Shares”).  If the Underwriters exercise this option in full, the total underwriting discounts and commissions will be $[__], and total proceeds, before expenses, will be $[__].

We have agreed to pay the Underwriters an aggregate non-accountable expense allowance of 2.5% of the gross proceeds of this offering or $[__], based on a public offering price of $[__] per share.

The Underwriters will also receive warrants to purchase a number of shares equal to 5% of the shares of our common stock sold in connection with this offering, or 70,000 shares, exercisable at a per share price equal to 120% of the offering price of this offering.  The Underwriters are offering the common stock as set forth under “Underwriting.”  Delivery of the shares will be made on or about [__________], 2011.
 
WestPark Capital, Inc.
I-Bankers Securities, Inc.
Joseph Gunnar & Co., LLC
 
The Date of this Prospectus is ____________________, 2011
 

 
[INSIDE FRONT COVER]
 

TABLE OF CONTENTS
 
PROSPECTUS SUMMARY
    3  
SUMMARY FINANCIAL DATA
    13  
RISK FACTORS
    14  
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
    37  
USE OF PROCEEDS
    39  
DIVIDEND POLICY
    40  
CAPITALIZATION
    41  
MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
    41  
DILUTION
    42  
SELECTED CONSOLIDATED FINANCIAL DATA
    44  
MANAGEMENT’S DISCUSSION AND ANALYSIS OF  FINANCIAL CONDITION AND RESULTS OF OPERATIONS
    45  
DESCRIPTION OF BUSINESS
    58  
MANAGEMENT
    69  
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
    76  
BENEFICIAL OWNERSHIP OF CERTAIN BENEFICIAL OWNERS, AND MANAGEMENT
    80  
DESCRIPTION OF SECURITIES
    81  
SHARES ELIGIBLE FOR FUTURE SALE
    85  
UNDERWRITING
    88  
LEGAL MATTERS
    91  
EXPERTS
    91  
ADDITIONAL INFORMATION
    91  
INDEX TO FINANCIAL STATEMENTS
    F-1  
PART II INFORMATION NOT REQUIRED IN THE PROSPECTUS
 
II-1
 
SIGNATURES
 
II-7
 
 
Please read this prospectus carefully. It describes our business, our financial condition and results of operations. We have prepared this prospectus so that you will have the information necessary to make an informed investment decision.

You should rely only on information contained in this prospectus.  We have not, and the Underwriters have not, authorized any other person to provide you with different information.  This prospectus is not an offer to sell, nor is it seeking an offer to buy, these securities in any state where the offer or sale is not permitted.  The information in this prospectus is complete and accurate as of the date on the front cover, but the information may have changed since that date.
 
i

 

 
PROSPECTUS SUMMARY
 
Because this is only a summary, it does not contain all of the information that may be important to you. You should carefully read the more detailed information contained in this prospectus, including our financial statements and related notes. Our business involves significant risks. You should carefully consider the information under the heading “Risk Factors” beginning on page 14In addition, except as otherwise specified, all information in this prospectus and all share and per share information has been adjusted to reflect a reverse stock split that was effected on January 14, 2011 in which every 3.4482759 shares of our common stock was converted into 1 share of our common stock.
 
As used in this prospectus, unless otherwise indicated, the terms “we,” “our,” “us,” “Company” and “China Media” refer to China Century Dragon Media, Inc., a Delaware corporation, formerly known as SRKP 25, Inc. (“SRKP 25”). We conduct our business through Beijing CD Media Advertisement Co., Ltd., a company incorporated under the laws of the People’s Republic of China, (“CD Media Beijing”), an entity controlled by our wholly-owned subsidiary, Huizhou CD Media Co., Ltd., a company incorporated under the laws of the People’s Republic of China (“CD Media Huizhou”) through a series of contractual arrangements.
 
“China” or “PRC” refers to the People’s Republic of China. “RMB” or “Renminbi” refers to the legal currency of China and “$” or “U.S. Dollars” refers to the legal currency of the United States.
 
Company Overview
 
We are a television advertising company in China that primarily offers blocks of advertising time on certain channels on China Central Television (“CCTV”). We purchase advertising time on certain of the nationally broadcast television channels of CCTV, the state television broadcaster of the PRC and China’s largest television network, which we repackage and sell to our customers. We assist our customers in identifying the most appropriate advertising time slots for their television commercials based on the customer’s advertising goals and in developing a cost-effective advertising program to maximize their return on their advertising investment.
 
Our goal is to become a leading provider of integrated advertising services in China. We intend to achieve this goal by implementing the following strategies:
 
·
Maximize our existing resources to increase our profitability. We plan to increase our profitability by (1) expanding our sale force; and (2) strengthening relationships with our existing clients to increase the rate of contract renewals.

·
Expand our purchases of advertising time on CCTV.  We intend to increase our purchases of advertising time aired on CCTV to help our clients reach a diverse audience.  We also intend to increase our purchase of advertising directly from CCTV which we believe will provide access to a wider variety of advertising opportunities and more favorable pricing terms for our purchase of advertising time than we receive from third-party agencies.  We have little experience in purchasing advertising time directly from CCTV and have no specific plans to increase our purchases of advertising time directly from CCTV in the near future.  The purchase of advertising time directly from CCTV involves a number of challenges. While there are no restrictions or rules promulgated by CCTV that regulate a company’s ability to purchase advertising time directly from CCTV, the majority of the available commercial time offered by CCTV is in large blocks, which will require a large capital commitment for us to acquire directly from CCTV.  Additionally, if we purchase this time in large blocks, we could be subject to additional risk as it may be difficult for us to resell such a large amount of advertising time.
 
·
Develop regional television advertising opportunities.  We currently only purchase advertising time aired on CCTV. We intend to build relationships with providers of advertising time aired on certain highly rated regional television networks.  We believe that our purchase of advertising time aired on regional networks will allow us to offer our clients new ways to reach their target audience and allow us to expand our client base to advertisers who desire a more targeted marketing strategy.  We have no experience in purchasing regional television advertising time and may not be successful in doing so.  While we have initiated contact with certain regional television companies to explore the opportunity of entering into arrangements with them to obtain advertising time on their networks, we have not entered into any agreements with any regional television network and have no specific plans to purchase any advertising time from any regional television networks.
   
·
Expand into new advertising platforms. We intend to expand our media resources in new advertising media platforms, including the Internet, radio, mobile devices and indoor or outdoor flat panel displays.  We believe that our expansion into new media platforms will enable us to offer added value to our clients by providing them with an avenue to reach consumers and will strengthen our competitiveness in the advertising industry.  We have no experience in any of these media platforms and may not be successful in expanding into these areas.  We currently have no specific plans to enter into new advertising platforms in the near future.
 
3

 

 
·
Pursue acquisitions to broaden our service offerings and advertising platforms.  We will consider strategic acquisitions that will provide us with a broader range of service offerings and access to new markets and new advertising media platforms.  We currently have no plans to pursue any acquisitions.

Our business is subject to a number of risks and uncertainties, including risks related to our dependence on CCTV and our ability to continue obtaining advertising time slots on CCTV; the continued strength of CCTV’s market position; CCTV’s continued use of third party agencies to sell advertising time; our dependence on a limited number of suppliers for our advertising time; our lack of long-term contracts with our customers; our ability to adapt to changing advertising trends and preferences of advertisers, television channels and viewers; our corporate structure based on contractual arrangements with CD Media Beijing; our limited ability to adjust the fees we charge for our services; and PRC regulations regarding the advertising industry and advertising content in the PRC.  Investors should carefully consider these risks and all of the risks discussed in “Risk Factors” beginning on page 14 of this prospectus before investing in our securities.

Corporate Information

We were incorporated in the State of Delaware on December 17, 2007.  We were originally organized as a “blank check” shell company to investigate and acquire a target company or business seeking the perceived advantages of being a publicly held corporation. On April 30, 2010, we (i) closed a share exchange transaction, described below, pursuant to which we became the 100% parent of CD Media (Holding) Co., Limited, a British Virgin Islands corporation (“CD Media BVI”), (ii) assumed the operations of CD Media BVI and its subsidiaries, including CD Media Huizhou, and (iii) changed our name from SRKP 25, Inc. to China Century Dragon Media, Inc.  CD Media Huizhou controls CD Media Beijing through contractual arrangements.  While CD Media Huizhou has no direct equity ownership in CD Media Beijing, through the contractual agreements CD Media Huizhou receives the economic benefits of CD Media Beijing’s operations.

Our principal executive offices and corporate offices are located at Room 801, No. 7, Wenchanger Road, Jiangbei, Huizhou City, Guangdong Province, China.  Our telephone number is 0086-0752-3138789.

We are a reporting company under Section 13 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”).  Our shares of common stock are not currently listed or quoted for trading on any national securities exchange or national quotation system. We have applied for the listing of our common stock on the NYSE Amex.

Recent Events

 
On October 27, 2010, our Board of Directors and stockholders approved an amendment to our Certificate of Incorporation to effect a 1-for-3.4482759 reverse stock split of all of our issued and outstanding shares of common stock (the “Reverse Stock Split”). On January 14, 2011, we filed the amendment to the Certificate of Incorporation with the Secretary of the State of Delaware. The par value and number of authorized shares of our common stock remained unchanged. All references to number of shares and per share amounts included in this prospectus give effect to the Reverse Stock Split. The number of shares and per share amounts included in the consolidated financial statements and the accompanying notes, starting on page F-1, have been adjusted to reflect the Reverse Stock Split retroactively. Unless otherwise indicated, all outstanding shares and earnings per share information contained in this prospectus give effect to the Reverse Stock Split.
 
Share Exchange

Effective as of March 31, 2010, we entered into a share exchange agreement with CD Media BVI, CD Media Huizhou, CD Media Beijing and the shareholders of CD Media BVI.  Effective as of April 23, 2010, the parties to the share exchange agreement entered into an amended and restated share exchange agreement (the “Exchange Agreement”).  Pursuant to the Exchange Agreement, we agreed to issue an aggregate of 5,539,000 shares of our common stock in exchange for all of the issued and outstanding securities of CD Media BVI (the “Share Exchange”).  On April 30, 2010, the Share Exchange closed and CD Media BVI became our wholly-owned subsidiary and we immediately changed our name from “SRKP 25, Inc.” to “China Century Dragon Media, Inc.”  We issued a total of 5,519,135 shares of common stock to the shareholders of CD Media BVI and 19,865 shares to Richever Limited, their designee and in exchange for all of the issued and outstanding shares of CD Media BVI. Richever Limited is an unaffiliated third party who was not a shareholder of CD Media BVI prior to the Share Exchange.  The shareholders issued such shares to Richever Limited to satisfy an obligation owed to a partner of its PRC legal counsel, Han Kun Law Offices (“Han Kun”), who had personally paid an amount owed by the Company to Han Kun for legal services.
 
4

 

 
Prior to the closing of the Share Exchange and the Private Placement, as described below, our stockholders canceled an aggregate of 1,290,615 shares held by them such that there were 767,345 shares of common stock outstanding immediately prior to the Share Exchange.  Our stockholders also canceled warrants to purchase an aggregate of 1,646,349 shares of common stock such that the stockholders held warrants to purchase an aggregate of 411,611 shares of common stock immediately prior to the Share Exchange.  Each warrant is entitled to purchase one share of our common stock at $0.000344 per share and expires five years from the closing of the Share Exchange.  Immediately after the closing of the Share Exchange and closing of the Private Placement, we had 7,340,748 outstanding shares of common stock, no shares of Preferred Stock, no options, and warrants to purchase 411,611 shares of common stock.  The stockholders did not receive any consideration for the cancellation of the shares and warrants. The cancellation of the shares and warrants was accounted for as a contribution to capital.

The number of shares and warrants cancelled was determined based on negotiations with the security holders of SRKP 25 and CD Media BVI.  The number of shares and warrants cancelled by SRKP 25 was not pro rata, but based on negotiations between the security holders and SRKP 25.  As indicated in the Share Exchange Agreement, the parties to the transaction acknowledged that a conflict of interest existed with respect to the negotiations for the terms of the Share Exchange due to, among other factors, the fact that WestPark Capital, Inc. (“WestPark Capital”) was advising CD Media BVI in the transaction.  As further discussed below in “Recent Events—Private Placement,” certain of the controlling stockholders and control persons of WestPark Capital were also, prior to the completion of the Share Exchange, controlling stockholders and control persons of SRKP 25.  Under these circumstances, the shareholders of CD Media BVI and the stockholders of SRKP 25 negotiated an estimated value of CD Media BVI and its subsidiaries, an estimated value of the shell company (based on similar recent transactions by WestPark Capital involving similar public shells), and the mutually desired capitalization of the company resulting from the Share Exchange.

With respect to the determination of the amounts of shares and warrants cancelled, the value of the shell company was derived primarily from its utility as a public company platform, including its good corporate standing and its timely public reporting status, which we believe allowed us to raise capital at an appropriate price per share and subsequently list our stock on a national securities exchange.  We believe that investors may have been unwilling to invest in our company in the Private Placement (as that term is defined below) on acceptable terms, if at all, in the absence of an investment in a public reporting vehicle and thus required us to effect the Share Exchange as a condition to the Private Placement.  We did not consider registering our own securities directly as a viable option for accessing the public markets.  We felt that private financing absent a reverse merger was not immediately available to us and we chose the structure offered by WestPark as the best option to becoming publicly listed on a national securities exchange.

The services provided by WestPark Capital were not a consideration in determining this aspect of the transaction.  Under these circumstances and based on these factors, the shareholders of CD Media BVI and the stockholders of SRKP 25 agreed upon the amount of shares and warrants to be cancelled.  Further to such negotiations, we paid a $215,750 success fee to WestPark Capital for services provided in connection with the Share Exchange, including coordinating the share exchange transaction process, interacting with principals of the shell corporation and negotiating the definitive purchase agreement for the shell, conducting a financial analysis of CD Media BVI, conducting due diligence on CD Media BVI and its subsidiaries and managing the interrelationships of legal and accounting activities.  All of the fees due to WestPark Capital in connection with the Share Exchange have been paid as of the date of this prospectus.

Based on a per share offering price of $6.50, which is the midpoint of our estimated offering price of the shares to be sold in this offering, the 767,345 shares retained by the SRKP 25 stockholders had an implied monetary value of approximately $5.0 million.  Assuming exercise of the 411,611 warrants also retained by the SRKP 25 stockholders, 1,178,956 shares would have been retained by the SRKP 25 stockholders with an implied monetary value of approximately $7.7 million.  The implied monetary value of the retained shares was calculated based on an estimated $6.50 per share offering price, without regard to liquidity, marketability, or legal or resale restrictions; accordingly, such amounts should not be considered as an indication of the fair value of the retained shares.
 
The transactions contemplated by the Exchange Agreement, as amended, were intended to be a “tax-free” contribution and/or reorganization pursuant to the provisions of Sections 351 and/or 368(a) of the Internal Revenue Code of 1986, as amended.
 
5

 

 
Private Placement

On April 30, 2010, concurrently with the closing of the Share Exchange, we closed a private placement of shares of common stock (the “Private Placement”).  Pursuant to subscription agreements entered into with the investors, we sold an aggregate of 1,034,403 shares of common stock at $5.17 per share, for gross proceeds of approximately $5.35 million.  We paid WestPark Capital a commission equal to 10.0% with a non-accountable fee of 4.0% of the gross proceeds from the Private Placement.  We also agreed to retain WestPark Capital for a period of five months following the closing of the Private Placement to provide us with financial consulting services for which we paid WestPark Capital $4,000 per month.  Out of the proceeds of the Private Placement, we paid $300,000 to Keen Dragon Group Limited, a third party unaffiliated with CD Media BVI, the Company, or WestPark Capital (“Keen Dragon”) for services as an advisor to the Company.  Keen Dragon conducts advisory services exclusively for Chinese companies and is paid directly by such Chinese companies.  It provides on-the-ground support that WestPark Capital cannot provide for Chinese entities seeking to access the U.S. capital markets, employs only Mandarin speakers and helps bridge the cultural gap for many Chinese entities in the same type of deals.  WestPark Capital does not pay Keen Dragon referral fees or other consideration for providing services to the Company.  There neither are nor were any arrangements between WestPark Capital and Keen Dragon regarding their representation of, or services provided to, the Company. We conducted the Private Placement in order to raise money for working capital and to pay for anticipated expenses to be incurred in connection with the public offering contemplated by this offering.

We agreed to file a registration statement covering the common stock sold in the Private Placement within 30 days of the closing of the Private Placement pursuant to the subscription agreement entered into with each investor and to cause such registration statement to be declared effective by the SEC no later than 150 days from the date of filing or 180 days from the date of filing if the registration statement is subject to a full review by the SEC.  We filed the registration statement on May 14, 2010.

Each of the investors in the Private Placement also entered into a lock-up agreement pursuant to which they agreed that (i) if the proposed public offering that we expect to conduct is for $10 million or more, then the investors would not be able to sell or transfer their shares until at least six months after the public offering’s completion, and (ii) if the offering is for less than $10 million, then one-tenth of their shares would be released from the lock-up restrictions ninety days after the offering and there would be a pro rata release of the shares thereafter every 30 days over the following nine months.  WestPark Capital, Inc. may release some or all of the shares from the lock-up restrictions earlier, however, any such early release shall be made pro rata with respect to all investors’ shares acquired in the Private Placement.  We currently intend this offering to be in an amount less than $10 million. However, there can be no assurance of the actual size of this offering.

Each of the stockholders and warrantholders of SRKP 25 prior to the completion of the Share Exchange (the “Existing Securityholders”) will  enter into an amended and restated lock-up agreement pursuant to which they will agree that they will not be able to sell or transfer their shares until at least six months after the public offering’s completion.  The Underwriters may release some or all the shares from the lock-up restrictions earlier.
 
Some of the controlling stockholders and control persons of WestPark Capital were also, prior to the completion of the Share Exchange, controlling stockholders and control persons of SRKP 25, Inc., our predecessor, including Richard Rappaport, who is the Chief Executive Officer of the WestPark Capital and was the President and a significant stockholder of SRKP 25, Inc. prior to the Share Exchange, and Anthony C. Pintsopoulos, who is the President and Treasurer of WestPark Capital and was one of the controlling stockholders and an officer and director of SRKP 25, Inc. prior to the Share Exchange.  Mr. Rappaport is the sole owner of the membership interests in the parent of WestPark Capital.  Kevin DePrimio, Robert Schultz and Jason Stern, each employees of WestPark Capital, were also stockholders of SRKP 25, Inc. and are also our stockholders.  Each of Messrs. Rappaport and Pintsopoulos resigned from all of their executive and director positions with the Company upon the closing of the Share Exchange.  Mr. Rappaport beneficially owns approximately 11.5% of our outstanding shares as of the date of this prospectus, and Messrs. Rappaport, Pintsopoulos, DePrimio, Schultz and Stern collectively beneficially own approximately 13.2% of our outstanding shares as of the date of this prospectus.

Certain Relationships and Related Transactions

The table below identifies all the benefits that WestPark Capital and its affiliates have received and will receive in connection with the Share Exchange, the Private Placement and this offering.
 
 
 
$
     
Other
Share Exchange
    235,750 (1)    
Registration rights for an aggregate of 650,941 shares and 366,034 shares underlying warrants (2) (3)
Retained Shares and Warrants
   
6,610,338
(4)      
Private Placement
    789,039 (5)      
Public Offering
   
[______]
(6)    
Warrants to purchase 70,000 shares of common stock at an exercise price of $8.40 per share
Total
   
[______]
       
 
6

 

 
(1) Includes a success fee of $215,750 paid to WestPark Capital for services provided in connection with the Share Exchange and $20,000 for consulting fees payable to WestPark by the Company for five months of consulting services provided to the Company by WestPark.

(2)  Pursuant to a Registration Rights Agreement executed in connection with the closing of the Share Exchange, affiliates of WestPark Capital received registration rights for an aggregate of 650,941 shares and 366,034 shares underlying warrants.  We originally agreed to include such shares in a subsequent registration statement that was to be filed on or before November 24, 2010 (the “Required Filing Date”), which is 10 days after the end of the six-month period that immediately followed the date on which we filed the registration statement of which this prospectus is a part.  We have not yet filed the subsequent registration statement to cover these shares and have agreed with the other parties to the Registration Rights Agreement to extend the Required Filing Date such that we will file the registration statement covering these shares as soon as practicable after this offering.  The shareholders of CD Media BVI immediately prior to the date of the Share Exchange and their designee holding an aggregate of 5,539,000 shares of our common stock have agreed with the Underwriters not to directly or indirectly sell, offer, contract or grant any option to sell, pledge, transfer (excluding intra-family transfers, transfers to a trust for estate planning purposes or to beneficiaries of officers, directors and shareholders upon their death), or  otherwise dispose of or enter into any transaction which may result in the disposition of any shares of our common stock or securities convertible into, exchangeable or exercisable for any shares of our common stock, without the  prior written consent of the Underwriters, for a period of 24 months after the date of this prospectus.
 
(3)  Based on a per share offering price of $6.50, which is the midpoint of our estimated offering price of the shares to be sold in this offering, the 650,941 shares retained by SRKP 25 stockholders who are affiliates of WestPark Capital have an implied monetary value of approximately $4.2 million.  Assuming the exercise of the 366,034 warrants also retained by the SRKP 25 stockholders who are affiliates of WestPark Capital, 1,016,975 shares would have been retained by such stockholders with an implied monetary value of approximately $6.6 million.  The implied monetary value of the retained shares was calculated based on an estimated $6.50 per share offering price, without regard to liquidity, marketability, the likelihood of this offering being consummated, or legal or resale restrictions; accordingly, such amounts should not be considered an indication of the fair value of the retained shares.

(4)  Represents the implied aggregate monetary value of 650,941 shares and 366,034 shares underlying warrants, assuming the exercise of warrants retained by WestPark Capital and its affiliates.  The implied monetary value of the retained shares was calculated based on an estimated $6.50 per share offering price of the common shares to be sold in this offering, without regard to liquidity, marketability or legal or sale restrictions; accordingly, such amount should not be considered as an indication of the fair value of the retained shares and warrants.

(5) Represents commissions of $535,028, a non-accountable expense allowance of $214,011, and a reimbursement of WestPark Capital’s fees for legal counsel of $40,000.

(6) Represents underwriting discounts and commissions of $[__], plus a non-accountable fee of $[_____] and a reimbursement of $40,000 for WestPark Capital’s legal fees.
 
7

 

 
Corporate Structure

The corporate structure of the Company is illustrated as follows:

 
Our subsidiary, CD Media (HK) Limited (“CD Media HK”), is a holding company with no operations at this time.  Its operations are not subject to PRC laws and regulations.

Contractual Arrangements

PRC laws, rules and regulations impose special requirements on foreign investors having ownership of PRC companies providing advertising services in the PRC.  In order to invest in the advertising industry in the PRC, a foreign investor must have at least two years of direct operations in the advertising industry outside the PRC.  We are a Delaware corporation and have not had any direct operations in the advertising industry outside of China. Therefore, we are unable to own a direct interest in a company providing advertising services in the PRC.  Our PRC subsidiary, CD Media Huizhou, is a wholly foreign-owned enterprise (a “WFOE”).
 
8

 

 
Pursuant to the Exclusive Business Cooperation Agreement (as described below) between CD Media Huizhou, CD Media Beijing and each of the shareholders of CD Media Beijing, CD Media Huizhou provides “technical and consulting services” to CD Media Beijing.  “Technical and consulting services” is a general description of the various services provided by CD Media Huizhou to CD Media Beijing, and include providing cultural consulting to and designing enterprise images for CD Media Beijing.  CD Media Huizhou received a business license on November 2, 2009 which permits it to design, handle (as agent) and organize cultural communications (excluding news releases and making advertisements), to provide cultural consulting services and to design images for enterprises.  The license does not allow it to provide advertising services, the approval authority of which business is with the competent administration of industry and commerce.  The scope of CD Media Huizhou’s business license is extensive enough in its language to cover any necessary services to be provided by CD Media Huizhou to CD Media Beijing under the Exclusive Business Cooperation Agreement, and CD Media Huizhou does not need any special administrative pre-approvals for it to engage in such activities, as long as it does not directly engage in advertising business which is not stated in its business license.

Due to the PRC regulations on foreign ownership of PRC companies engaged in the Chinese advertising industry, we cannot directly operate our advertising business through CD Media Huizhou.  Therefore, we operate our advertising operations through contractual arrangements with CD Media Beijing.
 
On July 29, 2010, HuiHua Li, HaiMing Fu and ZhiFeng Yan (collectively, the “Beijing Shareholders”) executed several share transfer agreements and acquired an aggregate of 100% of the equity interest of CD Media Beijing from the former shareholders of CD Media Beijing, Wen Xu, Yongxia Cheng and Hongbo Zheng (collectively, the “Former Shareholders”).  Beijing Shareholders’ equity interest in CD Media Beijing was later registered with the local competent authority on August 6, 2010. HuiHua Li is the Chairman of the Board of the Company; HaiMing Fu is the Chief Executive Officer of the Company; and ZhiFeng Yan is a director of the Company.  The Former Shareholders are each relatives of the original shareholders of CD Media Beijing, ZhiFeng Yan, Tianyi Wang and HaiMing Fu, and were chosen to comply with the Company’s corporate structure requirements and regulations promulgated by the PRC State Administration of Foreign Exchange (“SAFE”).  The Former Shareholders transferred the equity interest of CD Media Beijing to the Beijing Shareholders to align the equity ownership of CD Media Beijing with the management of the Company and to ensure compliance by the shareholders of CD Media Beijing with the contractual arrangements described below.
 
Each of the Beijing Shareholders entered into a series of contractual arrangements that provide us with effective control over the operations of CD Media Beijing and of the related economic benefits of CD Media Beijing in consideration for the services provided by CD Media Huizhou.  We intend to continue our business operations in China upon the expiration of these contractual arrangements by renewing them or entering into new contractual arrangements if the then current PRC law does not allow us to directly operate advertising businesses in China. We believe that, under these contractual arrangements, we have sufficient control over CD Media Beijing to renew or enter into new contractual arrangements prior to the expiration of the current arrangements on terms that would enable us to continue to operate our business in China after the expiration of the current arrangements.

Exclusive Business Cooperation Agreement.    Pursuant to the exclusive business cooperation agreement entered into on March 30, 2010 between CD Media Huizhou and CD Media Beijing, CD Media Huizhou provides technical and consulting services related to the business operations of CD Media Beijing. As consideration for such services, CD Media Beijing has agreed to pay an annual service fee to CD Media Huizhou in an amount equal to a certain percentage (the “Rate of Service”) of its income for such year.  The parties will agree on the Rate of Service after further negotiations, which may be adjusted from time to time.  The term of this agreement is 10 years from the date thereof. CD Media Beijing may terminate the agreement upon CD Media Huizhou’s gross negligence or commission of a fraudulent act against CD Media Beijing.  CD Media Huizhou may terminate the agreement at any time upon giving 30 days’ prior written notice to CD Media Beijing.

The annual service fee and Rate of Service has not yet been determined because (1) such fee is calculated based on the audited annual income of CD Media Beijing, which can only be determined after the completion of the annual audit of CD Media Beijing; and (2) it allows CD Media Huizhou and CD Media Beijing to adjust the amount of funds distributed from CD Media Beijing to CD Media Huizhou from time to time based on the operational results of and financial needs of CD Media Beijing and CD Media Huizhou.  The parties will determine the amount of the service fee annually based on the a variety of factors, including CD Media Beijing’s net profits and CD Media Beijing’s working capital needs.  The fee will also be structured to assure that CD Media Beijing complies with PRC Corporate Law, which requires a company organized in the PRC to set aside at least 10.0% of its after-tax net profits based on PRC accounting standards each year to its statutory reserves until the accumulative amount of such reserves reaches 50.0% of its registered capital.  Because each of the shareholders of CD Media Beijing has provided a power of attorney (as described below) in which he/she provides CD Media Huizhou the power to act as his/her exclusive agent with respect to all matters related to his/her ownership of the equity interest in CD Media Beijing, CD Media Huizhou alone may decide whether to defer payment of the annual service fee.
 
9

 

 
Exclusive Option Agreement.    CD Media Huizhou entered into option agreements on July 30, 2010 with each of the Beijing Shareholders, as well as CD Media Beijing itself, pursuant to which CD Media Huizhou has an exclusive option to purchase, or to designate another qualified person to purchase, to the extent permitted by PRC law and foreign investment policies, part or all of the equity interests in CD Media Beijing owned by each of the Beijing Shareholders.  To the extent permitted by the PRC laws, the purchase price for the entire equity interest shall equal the actual capital contributions paid into the registered capital of CD Media Beijing by each of the Beijing Shareholders. Each of the exclusive option agreements has a 10 year term.

Power of Attorney.    Each of the Beijing Shareholders signed a power of attorney dated July 30, 2010 providing CD Media Huizhou the power to act as his/her exclusive agent with respect to all matters related to his/her ownership of the ownership interest in CD Media Beijing, including without limitation to: 1) attend the shareholders’ meetings of CD Media Beijing;  2) exercise all the shareholder's rights and shareholder's voting rights, including the sale, transfer, pledge or disposition of such shareholder’s shareholding in part or in whole; and 3) designate and appoint on behalf of such shareholders the legal representative, the executive director and/or director, supervisor, the chief executive officer and other senior management members of CD Media Beijing.

Equity Interest Pledge Agreement.    Pursuant to equity pledge agreements dated July 30, 2010, each of the Beijing Shareholders pledged his/her equity interest in CD Media Beijing to CD Media Huizhou to secure CD Media Beijing’s obligations under the exclusive business cooperation agreement as described above. In addition, the Beijing Shareholders agreed not to transfer, sell, pledge, dispose of or create any encumbrance on any equity interests in CD Media Beijing that would affect CD Media Huizhou’s interests. The equity pledge agreement will expire when CD Media Beijing fully performs its obligations under the exclusive business cooperation agreement described above. We registered the equity pledges with the Mentougou Branch of Beijing Administration of Industry and Commerce on August 19, 2010.

In the opinion of Han Kun Law Offices, our PRC legal counsel:
 
 
· 
the ownership structure of CD Media Beijing and CD Media Huizhou complies with current PRC laws, rules and regulations;
 
 
· 
each agreement under our contractual arrangements with CD Media Beijing and its shareholders is valid and binding on all parties to these arrangements, and do not violate current PRC laws, rules or regulations; and
 
 
· 
the business operations of CD Media Huizhou and CD Media Beijing comply with current PRC laws, rules and regulations.
 
Our PRC legal counsel has, however, advised us that the PRC regulatory authorities may take a view that is contrary to the above opinions of our PRC legal counsel because contracts governed by PRC law are interpreted using a “substance-over-form” principle which prohibits such parties from using their contractual arrangements in legal form to violate the compulsory rules of PRC laws and regulations or to cover up any illegal purpose.  Although none of the agreements comprising the contractual arrangements described above does by itself violate PRC laws and regulations, the PRC regulatory authorities may, by taking them as a whole, view the structure established by the contractual arrangements as done to avoid the application of certain restrictions or requirements on foreign investment in the PRC advertising industry and determine such structure to be in violation of the “substance-over-form” principle.  However, our PRC counsel believes that the uncertainty surrounding its opinions and the likelihood that the PRC regulatory authorities would view the contractual arrangements as violating the “substance-over-form” principle is low due to (i) the fact that many other comparable companies have used similar contractual arrangements to establish a similar corporate structure for the successful registration of their securities with the SEC and listing of their securities on a U.S national securities exchange and (ii) the lack of practical procedures and standards of penalties or sanctions for the competent PRC authorities to take against the Company by challenging the legal basis of the contractual arrangements based on the “substance-over-form” principle.  Additionally, due to the vagueness and uncertainty surrounding PRC laws and regulations, the PRC authorities may issue new rules and regulations that could be applied retroactively and may overturn our PRC legal counsel’s opinion.  Neither we nor our PRC legal counsel can predict whether and when PRC government authorities will issue any such new rules and regulations.
 
10

 

 
If the PRC government determines that the above-described agreements that establish the structure for operating our PRC advertising businesses do not comply with applicable restrictions on foreign investment in the advertising industry, we could be subject to severe penalties including being prohibited from continuing operation. If CD Media Beijing or the Beijing Shareholders fail to perform their obligations under these contractual arrangements, we would not be able to continue our business operations in China or to derive economic benefits from operations of CD Media Beijing and may incur substantial costs to enforce such agreements and rely on legal remedies under PRC law, including seeking specific performance or injunctive relief, and claiming damage.  For further information on the risks related to our contractual arrangement, see “Risk Factors.”   See “Risk Factors—Risks Related to Our Corporate Structure.”
 
11

 

   
The Offering
 
Common stock we are offering
 
1,400,000 shares (1)
     
Common stock included in Underwriters’ option to purchase shares from us to cover over-allotments, if any
 
210,000 shares
     
Common stock outstanding after the offering
 
8,740,748 shares (2)
     
Offering price
 
$6.00 to $7.00 per share (estimate)
     
Use of proceeds
 
We intend to use approximately one-fifth of the net proceeds from this offering to invest in our present advertising business to obtain more advertising time, two-fifths of the net proceeds of this offering to obtain advertising time and cooperation rights on regional television stations; and two fifths of the proceeds for general corporate purposes.  See “Use of Proceeds” on page 39 for more information on the use of proceeds.
     
Conflicts of interest
 
Affiliates of WestPark Capital beneficially own approximately 13.2% of our company and, therefore, WestPark Capital has a “conflict of interest” under FINRA Rule 2720.  Accordingly, this offering is being conducted in accordance with FINRA Rule 2720, which requires that a “qualified independent underwriter” as defined in FINRA Rule 2720 participate in the preparation of the registration statement and prospectus and exercise its usual standards of due diligence in respect thereto.  Joseph Gunnar & Co., LLC is assuming the responsibilities of acting as the qualified independent underwriter in the offering.  The public offering price will be no higher than that recommended by Joseph Gunnar & Co., LLC.  See “Underwriting—Conflicts of Interest” on page 90 for more information.
     
Risk factors
 
Investing in these securities involves a high degree of risk. As an investor you should be able to bear a complete loss of your investment. You should carefully consider the information set forth in the “Risk Factors” section beginning on page 14.
     
Proposed symbol
 
We have applied for the listing of our common stock on the NYSE Amex under the symbol “CDM.”
     
Concurrent resale registration
 
Upon the effectiveness of the Registration Statement of which this prospectus forms a part, 1,034,403 shares of our common stock will be registered for resale by the holders of such shares.  None of these securities are being offered by us and we will not receive any proceeds from the sale of these shares. For additional information, see above under “Prospectus Summary — Recent Events.
____________________
 
(1)
Excludes (i) up to 70,000 shares of common stock underlying warrants to be received by the Underwriters in this offering, and (ii) 1,034,403 shares of our common stock held by the selling stockholders that are concurrently being registered with this offering for resale by such selling stockholders under a separate prospectus, and (iii) the 210,000 shares of our common stock that we may issue upon the Underwriters’ over-allotment option exercise.

(2) 
Based on 7,340,748 shares of common stock issued and outstanding as of the date of this prospectus and (ii) 1,400,000 shares of common stock issued in the public offering.  Excludes (i) the Underwriters’ warrants to purchase a number of shares equal to 5% of the shares of common stock sold in this offering excluding the shares sold in the over-allotment option, and (ii) 411,611 shares of common stock underlying warrants that are exercisable at $0.000344.  Excludes the 210,000 shares of our common stock that we may issue upon the Underwriters’ over-allotment option exercise.
 
12

SUMMARY FINANCIAL DATA
 
The following summary financial information contains (i) consolidated statement of operations data for each of the years in the five-year period ended December 31, 2009 and the nine months ended September 30, 2010 and 2009 and (ii) the consolidated balance sheet data as of year-end for each of the years in the five-year period ended December 31, 2009 and as of September 30, 2010.  The consolidated statement of operations data and balance sheet data were derived from the audited consolidated financial statements, except for data for the years ended and as of December 31, 2006 and 2005 and the nine months ended and as of September 30, 2010 and 2009. Such financial data should be read in conjunction with the consolidated financial statements and the notes to the consolidated financial statements starting on page F-1 and with “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”  Share and per share information has been adjusted to reflect a reverse stock split that was effected on January 14, 2011 in which every 3.4482759 shares of our common stock was converted into 1 share of our common stock.
 
Consolidated Statements of Operations
 
Nine Months Ended September 30,
   
Years Ended December 31,
 
   
2010
   
2009
   
2009
   
2008
   
2007
   
2006
   
2005
 
   
(unaudited)
   
(unaudited)
                     
(unaudited)
   
(unaudited)
 
   
(all amounts are in US Dollars and in thousands, except share and per share amounts)
 
                                           
Revenues
  $ 69,712     $ 38,104     $ 74,480     $ 44,684     $ 17,103     $ 6,231     $ 1,926  
Gross profit
    13,859       7,185       14,734       8,186       4,264       1,417       (66 )
Income (loss) from continuing operations
    7,109       4,069       9,010       4,605       1,223       711       (130 )
Income from discontinued operations
    235       -       -       -       -       -       -  
Net income (loss)
  $ 7,344     $ 4,069     $ 9,010     $ 4,605     $ 1,223     $ 711     $ (130 )
Earnings per share - Basic
                                                       
Earnings per share from continuing operations
  $ 1.08     $ 0.73     $ 1.63     $ 0.83     $ 0.22     $ 0.13     $ (0.02 )
Earnings per share from discontinued operations
  $ 0.04     $ -     $ -     $ -     $ -     $ -     $ -  
Earnings per share
  $ 1.12     $ 0.73     $ 1.63     $ 0.83     $ 0.22     $ 0.13     $ (0.02 )
Earnings per share - Diluted
                                                       
Earnings per share from continuing operations
  $ 1.02     $ 0.73     $ 1.63     $ 0.83     $ 0.22     $ 0.13     $ (0.02 )
Earnings per share from discontinued operations
  $ 0.03     $ -     $ -     $ -     $ -     $ -     $ -  
Earnings per share
  $ 1.05     $ 0.73     $ 1.63     $ 0.83     $ 0.22     $ 0.13     $ (0.02 )
Weighted average shares outstanding – basic
    6,555,371       5,539,000       5,539,000       5,539,000       5,539,000       5,539,000       5,539,000  
Weighted average shares outstanding – diluted
    6,966,982       5,539,000       5,539,000       5,539,000       5,539,000       5,539,000       5,539,000  
 
Consolidated Balance Sheets
 
As of September 30,
   
As of December 31,
 
   
2010
   
2009
   
2008
   
2007
   
2006
   
2005
 
   
(unaudited)
                     
(unaudited)
   
(unaudited)
 
   
(all amounts are in US Dollars and in thousands)
Total Current Assets
  $ 30,946     $ 13,678     $ 11,158     $ 4,545     $ 2,265     $ 1,443  
Total Assets
    30,973       20,532       11,188       4,564       2,267       1,443  
Total Current Liabilities
    2,848       4,844       4,579       2,767       1,777       2,229  
Total Liabilities
    2,849       4,844       4,579       2,767       1,777       2,229  
Total Stockholders' Equity (Deficiency)
    28,124       15,687       6,609       1,797       490       (786 )
 
The acquisition of CD Media BVI by us on April 30, 2010 pursuant to the Share Exchange was accounted for as a recapitalization by us. The recapitalization was, at the time of the Share Exchange, the merger of a private operating company (CD Media BVI) into a non-operating public shell corporation (us) with nominal net assets and as such is treated as a capital recapitalization, rather than a business combination. As a result, the assets of the operating company are recorded at historical cost. The transaction is the equivalent to the issuance of stock by the private company for the net monetary assets of the shell corporation. The pre-acquisition financial statements of CD Media BVI are treated as the historical financial statements of the consolidated companies. The financial statements presented will reflect the change in capitalization for all periods presented, therefore the capital structure of the consolidated enterprise, being the capital structure of the legal parent, is different from that appearing in the financial statements of CD Media BVI in earlier periods due to this recapitalization.

13

 
RISK FACTORS
 
Any investment in our common stock involves a high degree of risk.  Investors should carefully consider the risks described below and all of the information contained in this prospectus before deciding whether to purchase our common stock.  Our business, financial condition or results of operations could be materially adversely affected by these risks if any of them actually occur.  Our shares of common stock are not currently listed or quoted for trading on any national securities exchange or national quotation system.  If and when our common stock is traded, the trading price could decline due to any of these risks, and an investor may lose all or part of his or her investment.  Some of these factors have affected our financial condition and operating results in the past or are currently affecting our company.  This prospectus also contains forward-looking statements that involve risks and uncertainties.  Our actual results could differ materially from those anticipated in these forward-looking statements as a result of certain factors, including the risks we face as described below and elsewhere in this prospectus.

RISKS RELATED TO OUR OPERATIONS

We operate in the advertising industry which is subject to changing economic conditions.  A decline in the general economic conditions in the PRC could have a material adverse effect on our business and financial condition.
 
All of our revenues are generated from our advertising business in the PRC, which in turn is subject to downturns in the PRC economy.  Advertisers typically decrease their purchases of advertising time during economic downturns.  Additionally, advertisers may decrease their purchases of television advertising time to shift to other forms of advertising media upon an adverse change in the PRC economy. Any decrease in demand for advertising time or services from advertisers would negatively affect our revenues and profitability and cause a material adverse effect on our business and results of operations.
 
Our CCTV-related business has been, and is expected to continue to be, critical to our business and financial performance.
 
Our CCTV-related business has been, and is expected to continue to be, critical to our business and financial performance.  In particular, we primarily derive revenues from selling television advertising time slots to advertising clients on CCTV, the largest television network in China.  Furthermore, we believe that our track record and performance in securing prime-time advertising time on CCTV have contributed, and may continue to contribute, significantly to our brand name and the development of our client base of Chinese advertisers, which are expected to have a substantial impact on our overall business. Consequently, the continued success in our business is subject to a number of risks, including the following:
 
· 
CCTV may change its sales method at any time as it wishes and without prior notice. While CCTV currently uses third-party agencies to sell a significant portion of its advertising time slots to companies such as ours,  CCTV also sells a portion of its advertising time slots directly by itself or through auctions. If CCTV introduces new methods of sales that are materially different from the methods it is currently using, it may take us a significant amount of time to develop expertise, if at all, in buying advertising time on CCTV under any new sales method.
 
· 
CCTV’s advertising time, particularly prime-time advertising time, is limited and is highly coveted by advertisers and advertising agencies. As a result, there is intense competition for such advertising time. In particular, we face intense competition for CCTV related advertising business from a number of domestic competitors, such as Walk-On Advertising Co., Ltd. (San Ren Xing) and Vision CN Communications Group (Tong Lu), Charm Communications, Inc. and China Mass Media Corp., which may have competitive advantages, such as significantly greater financial, marketing or other resources or stronger market reputation.

Any of these risks could result in a significant decrease in our revenues, which in turn would have a material adverse effect on our business, results of operations, financial condition and prospects.

We depend on a limited number of suppliers for our advertising time.  The loss of any of these suppliers would cause a disruption to our operations and a material adverse effect on our business.
 
We purchase a significant amount of our advertising time from a few suppliers who act as agents for CCTV.  Our top three suppliers collectively accounted for 16.4%, 29.2%, 20.1%, 30.5% and 49.5% of our total purchases of advertising time during the nine months ended September 30, 2010 and 2009 and the years ended December 31, 2009, 2008 and 2007, respectively.  For the nine months ended September 30, 2010, we did not have any suppliers who accounted for more than 10% of our total purchases of advertising time during the period.  If our relationship with any of these suppliers were to end, we would have to obtain advertising time from other suppliers.  We cannot guaranty our investors that we will be able to obtain an adequate supply of advertising time from other suppliers.  Additionally, advertising time that we are able to obtain from other suppliers may not be in as popular time slots or be on as popular CCTV channels as the advertising time that we currently purchase and our customers may not be willing to pay as much for this advertising time.  Our results of operations would be hurt if we are not able to obtain adequate supplies of advertising time that is attractive to our customers.
 
14

 
We make advances to our suppliers which do not correspond with specific advertising time slots and if we do not use the entire amount of such advances to purchase specific advertising time slots within one year of making an advance, we will lose the amount of any unused advance.

We make advances to our suppliers which do not correspond to specific advertising time slots.  These advances are deposits which we later use to purchase specific time slots from our suppliers.  At each year-end, we make large advances to our suppliers to show our future intent to purchase time slots from our suppliers in the next year.  As of September 30, 2010 and December 31, 2009, we had outstanding advances of $7.3 million and $7.6 million, respectively, which were not allocated to specific time slots.  While these advances provide us with certain advantages, such as the ability to purchase favorable time slots from our suppliers, we do not receive any legal rights from making such advances.    The advances are non-refundable and we will lose the amount of any advance with which we do not purchase specific time slots within one year of making such advance.  While we strive to predict accurately the amount of advertising time we will need in the coming year when making our year-end advances, we cannot assure you that we will accurately be able to predict our need for advertising timeslots.  If we fail to predict accurately our need for advertising time slots and pay advances to our suppliers in excess of our actual need for advertising time slots, we will lose any unused advances.  The loss of a large portion of our advances could negatively affect our ability to purchase advertising time in the future, and could have a negative impact on our results of operations and financial condition.
 
An unfavorable change in CCTV’s market position could materially and adversely affect our ability to generate revenues and income.
 
As the largest television network in China, CCTV currently has 21 public channels and 19 pay television channels and reaches approximately 90% of the households in the PRC.  Due to CCTV’s vast coverage across the PRC, advertising time on CCTV channels is seen as an attractive marketing platform by advertisers for advertising their products and services.   Additionally, due to its ownership by the PRC central government, CCTV benefits from special treatment provided by the PRC government, such as the requirement that CCTV-1 be broadcast by all regional television networks in China, making CCTV-1 an attractive channel for advertisers.  CCTV is not the only television network in the PRC.  CCTV faces growing competition from other television networks for market share.  A decline in CCTV’s market position could negatively affect the prices that we are able to charge for the advertising time we purchase that are aired on CCTV, which could negatively impact our ability to generate revenues and income.
 
We rely on access to advertising time slots during television programs to place our clients’ advertisements and the desirability of the advertising time slots we obtain depends on the popularity of the relevant television programs and other factors that are difficult to predict.
 
The value of our adverting time slots on CCTV depends on the ratings, popularity and viewership demographics of the shows during which our advertising time slots occur.  We cannot predict the popularity of television programs.  Poor ratings for programs to which our advertising time slots are attached could negatively affect the prices that we can charge for our advertising time purchased for airing on CCTV, which could negatively affect our revenues and results of operations.
 
 Our ability to adjust the fees we charge for our services is limited and any substantial increase in the prices charged by CCTV for the advertising time slots available to us may reduce our revenues and profitability.
 
In negotiating with our advertising clients, we set the prices for our advertising packages based on a number of factors, including the popularity of programs to which our time slots are attached, viewer demographics for such programs, prices charged by our competitors and market demand.  We negotiate the pricing terms for the advertising time slots that we purchase from third parties for airing on CCTV when we make the purchase of the advertising time.  We then charge our customers a premium for the advertising time slots.  These third parties typically increase the prices charged to us for the advertising time slots each year. Our ability to bargain for lower prices for the advertising time slots is limited and while we are typically able to pass on such price increases to our advertising clients, we cannot assure you that we will always be able to pass such increases on to our customers.  If these third parties substantially raise the prices charged to us for the advertising time slots we purchase and we are unable to pass on such costs to our advertising clients, our gross profits and results of operations would be materially adversely affected.
 
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We may experience difficulties in our planned expansion into regional television networks, which could result in a decrease in our revenues and profitability.
 
Currently we purchase all of our advertising time slots for airing on CCTV.  As we expand our business, we intend to purchase advertising time from third parties promoters for airing on satellite and regional television networks, or from such networks directly, to expand our products and service offerings.  Our experience in selling advertising time slots on CCTV channels may not translate to selling advertising time slots on such networks.  Our implementation of this strategy could divert resources away from our existing business, which could result in a decrease in our revenues and profitability.
 
We plan to secure media resources in new advertising media platforms. We may not be successful in that business due to our lack of experience and expertise with respect to those new media platforms and we may face many other risks and uncertainties.
 
We intend to secure media resources in new advertising media platforms, such as the Internet, radio, mobile devices and indoor or outdoor flat panel displays. Our expertise and experience in television advertising may not be readily applied to advertising businesses involving those new media platforms.  Our existing and potential competitors may have competitive advantages, such as significantly greater financial, marketing or other resource or expertise and experience with respect to new advertising media platforms. As a result, we may not be able to successfully secure media resources in new advertising media platforms on favorable terms, or at all.
 
            Furthermore, the market in China for advertising services involving some of those new media platforms is relatively new and its potential is uncertain. Our success in securing and managing media resources in new advertising media platforms depends on the acceptance of advertising on those new media platforms by our advertising clients and their continuing interest in such advertising as a component of their advertising strategies.

Implementing our plan to secure media resources in new advertising media platforms will also require us to:
 
 
· 
continue to identify and obtain media resources in those new media platforms that are attractive to advertisers;
 
 
· 
significantly expand our capital expenditures to pay for media resources;
 
 
· 
obtain related governmental approvals; and
 
 
· 
expand the number of operations and sales staff that we employ.
 
We cannot assure you that we will be able to successfully secure media resources in new advertising media platforms or that the related business will generate new revenues to pay for any increased capital expenditures or operating costs. If we are unable to successfully implement our strategy relating to new advertising media platforms, or if such expansion does not otherwise benefit our business, our prospects and competitive position may be materially harmed and our business, financial condition and results of operations may be materially and adversely affected.
 
China regulates media content extensively and we may be subject to government actions based on the advertising content we design for advertising clients or services we provide to them.
 
PRC advertising laws and regulations require advertisers, advertising operators and advertising distributors, including businesses such as ours, to ensure that the content of the advertisements they prepare or distribute is fair and accurate and is in full compliance with applicable laws, rules and regulations. Violation of these laws, rules or regulations may result in penalties, including fines, confiscation of advertising fees, orders to cease dissemination of the advertisements and orders to publish an advertisement correcting the misleading information. In circumstances involving serious violations, the PRC government may revoke a violator’s license for advertising business operations.
 
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Our business includes assisting advertising clients in designing and producing advertisements, as well as executing their advertising campaign. Under our agreements with third parties providing advertising time on CCTV we are typically responsible for the compliance with applicable laws, rules and regulations with respect to advertising content that we provide to the media. In addition, some of our advertising clients provide completed advertisements for us to display on CCTV. Although these advertisements are subject to internal review and verification of CCTV, their content may not fully comply with applicable laws, rules and regulations. Further, for advertising content related to special types of products and services, such as alcohol, cosmetics, pharmaceuticals and medical procedures, we are required to confirm that our clients have obtained requisite government approvals, including operating qualifications, proof of quality inspection of the advertised products and services, government pre-approval of the content of the advertisement and filings with the local authorities. We endeavor to comply with such requirements, including by requesting relevant documents from the advertising clients and employing qualified advertising inspectors who are trained to review advertising content for compliance with applicable PRC laws, rules and regulations. However, we cannot assure you that violations or alleged violations of the content requirements will not occur with respect to our operations. If the relevant PRC governmental agencies determine the content of the advertisements that we represent violated any applicable laws, rules or regulations, we could be subject to penalties. Although our agreements with our clients normally require them to warrant the fairness, accuracy and compliance with relevant laws and regulations of their advertising content and agree to indemnify us for violations of these warranties, these contractual remedies may not cover all of our losses resulting from governmental penalties. Violations or alleged violations of the content requirements could also harm our reputation and impair our ability to conduct and expand our business.
We may be exposed to liabilities from allegations that certain of our clients’ advertisements may be false or misleading or that our clients’ products may be defective.
 
Our advertising customers may become subject to claims that their advertisements are false or misleading or that their products are defective.  We may be joined as a defendant along with our clients in litigation or administrative proceedings related to such claims.  These actions could be costly to defend and could result in harm to our reputation.  If we are made a party to any proceedings relating to such claims, our results of operations would be materially adversely affected.
 
We receive a significant portion of our revenues from a few large clients, and the loss of one or more of these clients could materially and adversely impact our business, results of operations and financial condition.
 
We derive a significant portion of our revenues from a limited number of large advertising clients. For example, our ten largest advertising clients accounted for approximately 35.0%, 43.9%, 35.2%, 47.7% and 61.1% of our total revenues in the nine months ended September 30, 2010 and 2009 and the years ended December 31, 2009, 2008 and 2007, respectively. Our clients generally are able to reduce advertising and marketing spending or cancel an advertising campaign at any time for any reason. It is possible that our clients could reduce their advertising spending in a given period in comparison with historical patterns, and they could reduce their advertising spending for future periods. A significant reduction in advertising and marketing spending by our large clients, or the loss of one or more of our large clients, to the extent the loss in our revenues resulting from the loss of these clients is not replaced by new client accounts or increased business from existing clients, would lead to a substantial decline in our revenues, which could have a material adverse effect on our business, results of operations and financial condition.
 
 Because we do not have long-term contracts with our customers, our customers can terminate their relationship with us at any time, which could cause a material adverse effect on our results of operations.

We generally do not have exclusive or long-term agreements with our advertising clients.  As a result, our customers may terminate their agreements and we may lose our business with them if they are unsatisfied with our services or for other reasons.  Most of our contracts with our advertisers are for a term of one year or less.  We cannot rely on long-term contracts to protect us from the negative financial effects of a decline in the demand for television advertising time.  We, therefore, must rely on our attractive advertising time slots and our favorable pricing to attract and retain customers.  We cannot assure you that we will be able to maintain our relationships with our current customers or that we will be able to attract new customers.  If a considerable number of our current clients terminate their relationships with us and we are unable to replace such clients, our revenues and net income could decrease and cause a material adverse effect on our results of operations.

If we are unable to adapt to changing advertising trends and preferences of advertisers, television channels and viewers, we will not be able to compete effectively.
 
The market for television advertising requires us to continuously identify new advertising trends and the preferences of advertisers, television channels and viewers, which may require us to develop new features and enhancements for our services. We may incur development and acquisition costs or to hire new managers or other personnel in order to keep pace with new market trends, but we may not have the financial and other resources necessary to fund and implement these development or acquisition projects or to hire suitable personnel. Further, we may fail to respond to changing market preferences in a timely fashion. If we cannot succeed in developing and introducing new services on a timely and cost-effective basis, the demand for our advertising services may decrease and we may not be able to compete effectively or attract advertising clients, which would have a material adverse effect on our business and prospects.

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We are subject to risks relating to the nature of China’s advertising industry, including frequent and sudden changes in advertising proposals.
 
The nature of the advertising business in China is such that sudden changes in advertising proposals and actual advertisements are frequent. In China, television stations remain responsible for the content of advertisements, and as a result, television stations may reject or recommend changes to the content of advertisements. We strive to minimize problems related to work for clients by encouraging the conclusion of basic written agreements, but we are exposed to the risk of unforeseen incidents or disputes with advertising clients. In addition, similar to other companies in our industry in the PRC where relationships between advertising clients within a particular industry and advertising companies are not typically exclusive, we are currently acting for multiple clients within a single industry in a number of industries. If this practice in China were to change in favor of exclusive relationships and if our efforts to respond to this change were ineffective, our business, results of operations and financial condition could be materially and adversely affected.
 
We are subject to intense competition in the industry in which we operate, which could cause loss of our market share and material harm to our profitability.

The advertising industry is highly competitive and fragmented in China. We compete for business with other advertising companies based on the desirability of the advertising time slots we offer for advertising, the broadcast area of the television network, the services we offer and the prices for our advertising time and our services.  We compete directly with advertising agencies that provide television airtime to advertisers and with other companies that purchase advertising timeslots from CCTV and other television networks.

Some of our competitors may have direct relationships with CCTV, stronger relationships with third party providers that purchase advertising time directly from CCTV, larger market shares, greater media resources, larger access to advertising customer bases and greater financial resources than us.  Additionally, we may face competition from new foreign-owned entrants into the PRC advertising industry.  Additionally, we face competition for advertisers’ spending from companies offering advertising services on non-traditional advertising platforms, including the Internet, street furniture, billboard, frame and public transport advertising companies, and with other traditional advertising media, such as newspapers, magazines and radio.  Greater competition in the advertising industry could result in lower prices for our products, which would lead to decreased revenues and net income.

We rely on computer software and hardware systems in our operations, the failure of which could adversely affect our business, results of operations and financial condition.
 
We are dependent upon our computer software and hardware systems in designing our advertisements and keeping important operational and market information. In addition, we rely on our computer hardware for the storage, delivery and transmission of data. Any system failure that causes interruptions to the input, retrieval and transmission of data or increase in the service time could disrupt our normal operations. Although we have a disaster recovery plan that is designed to address the failures of our computer software and hardware systems, we may not be able to effectively carry out this disaster recovery plan or restore our operations within a sufficiently short time frame to avoid business disruptions. Any failure in our computer software or hardware systems could decrease our revenues and harm our relationships with advertisers, television channels and other media companies, which in turn could have a material adverse effect on our business, results of operations and financial condition.
 
Our failure to maintain a skilled a dedicated sales and marketing team, our sales and revenues could decrease and cause an adverse effect on our results of operations.
 
We depend on our dedicated sales staff persons to sell our advertising packages and to increase awareness, acceptance and use of our consulting services.  We experience a high turnover rate among our sales and marketing personnel and we cannot assure you that we will be able to retain our current staff members or replace staff members who leave.  As our business grows, we will need to increase the size of our sales and marketing staff.  Because industry demand for experienced sales and marketing employees exceeds the number of personnel available, the competition for attracting and retaining these employees is intense.  If we are unable to hire, retain, integrate or motivate our current or new sales personnel, our sales and marketing efforts may be materially impaired and our business, financial condition and results of operations could be materially and adversely affected.

 
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We do not carry any business interruption or liability insurance.  As a result, we may incur uninsured losses, increasing the possibility that you would lose your entire investment in our company.
 
We could be exposed to liabilities or other claims for which we would have no insurance protection.  We do not currently maintain any business interruption insurance or any other comprehensive insurance policy, except for a key-man life insurance policy on certain of officers and directors and liability insurance on our automobiles.  As a result, we may incur uninsured liabilities and losses as a result of the conduct of our business.  Business disruption insurance is available to a limited extent in China, but we have determined that the risks of disruption, the cost of such insurance and the difficulties associated with acquiring such insurance make it impractical for us to have such insurance. Should uninsured losses occur, any purchasers of our common stock could lose their entire investment.

Our labor costs are likely to increase as a result of changes in Chinese labor laws.
 
We expect to experience an increase in our cost of labor due to recent changes in Chinese labor laws which are likely to increase costs further and impose restrictions on our relationship with our employees. In June 2007, the National People’s Congress of the PRC enacted new labor law legislation called the Labor Contract Law and more strictly enforced existing labor laws. The new law, which became effective on January 1, 2008, amended and formalized workers’ rights concerning overtime hours, pensions, layoffs, employment contracts and the role of trade unions. As a result of the new law, we have had to increase the salaries of our employees, provide additional benefits to our employees, and revise certain other of our labor practices. The increase in labor costs has increased our operating costs, which increase we have not always been able to pass through to our customers. In addition, under the new law, employees who either have worked for us for 10 years or more or who have had two consecutive fixed-term contracts must be given an “open-ended employment contract” that, in effect, constitutes a lifetime, permanent contract, which is terminable only in the event the employee materially breaches our rules and regulations or is in serious dereliction of his or her duties. Such non-cancelable employment contracts will substantially increase our employment related risks and limit our ability to downsize our workforce in the event of an economic downturn. No assurance can be given that we will not in the future be subject to labor strikes or that we will not have to make other payments to resolve future labor issues caused by the new laws. Furthermore, there can be no assurance that the labor laws will not change further or that their interpretation and implementation will vary, which may have a negative effect upon our business and results of operations.
 
Our business may be adversely affected by the global economic downturn, in addition to the continuing uncertainties in the financial markets.

The global economy is currently in a pronounced economic downturn. Global financial markets are continuing to experience disruptions, including severely diminished liquidity and credit availability, declines in consumer confidence, declines in economic growth, increases in unemployment rates, and uncertainty about economic stability. Given these uncertainties, there is no assurance that there will not be further deterioration in the global economy, the global financial markets and consumer confidence. Any economic downturn generally or any decrease in consumer spending in the PRC, could cause advertisers to reduce their spending on advertisements, would have a material adverse effect on our business, cash flows, financial condition and results of operations.

Although we believe we have adequate liquidity and capital resources to fund our operations internally, in light of current market conditions, our inability to access the capital markets on favorable terms, or at all, may adversely affect our financial performance. The inability to obtain adequate financing from debt or capital sources could force us to self-fund strategic initiatives or even forego certain opportunities, which in turn could potentially harm our performance.

We may pursue future growth through strategic acquisitions and alliances which may not yield anticipated benefits and may adversely affect our operating results, financial condition and existing business.

We may seek to grow in the future through strategic acquisitions in order to complement and expand our business. The success of our acquisition strategy will depend on, among other things:
 
 
· 
the availability of suitable candidates;
 
 
· 
competition from other companies for the purchase of available candidates;
 
 
· 
our ability to value those candidates accurately and negotiate favorable terms for those acquisitions;
 
 
· 
the availability of funds to finance acquisitions;
 
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· 
the ability to establish new informational, operational and financial systems to meet the needs of our business;
 
 
· 
the ability to achieve anticipated synergies, including with respect to complementary products or services; and
 
 
· 
the availability of management resources to oversee the integration and operation of the acquired businesses.
 
If we are not successful in integrating acquired businesses and completing acquisitions in the future, we may be required to reevaluate our acquisition strategy. We also may incur substantial expenses and devote significant management time and resources in seeking to complete acquisitions. Acquired businesses may fail to meet our performance expectations. If we do not achieve the anticipated benefits of an acquisition as rapidly as expected, or at all, investors or analysts may not perceive the same benefits of the acquisition as we do. If these risks materialize, our stock price could be materially adversely affected.
 
We may need additional capital to implement our current business strategy, which may not be available to us, and if we raise additional capital, it may dilute your ownership in us.
 
We currently depend on net revenues to meet our short-term cash requirements.  In order to grow revenues and sustain profitability, we will need additional capital.  Obtaining additional financing will be subject to a number of factors, including market conditions, our operating performance and investor sentiment.  These factors may make the timing, amount, terms and conditions of additional financing unattractive to us.  We cannot assure you that we will be able to obtain any additional financing.  If we are unable to obtain the financing needed to implement our business strategy, our ability to increase revenues will be impaired and we may not be able to sustain profitability.
 
Our failure to effectively manage growth could harm our business.
 
We have rapidly and significantly expanded our services offerings since our inception and will endeavor to further expand our service offerings in the future.  Any additional significant growth in the market for our services or our entry into new markets may require and expansion of our employee base for managerial, operational, financial, sales and marketing and other purposes. During any growth, we may face problems related to our operational and financial systems and controls, including quality control and service capacities. We would also need to continue to expand, train and manage our employee base. Continued future growth will impose significant added responsibilities upon the members of management to identify, recruit, maintain, integrate, and motivate new employees.

Aside from increased difficulties in the management of human resources, we may also encounter working capital issues, as we will need increased liquidity to finance the purchase of additional advertising time slots, develop new services and the hiring of additional employees. For effective growth management, we will be required to continue improving our operations, management, and financial systems and controls. Our failure to manage growth effectively may lead to operational and financial inefficiencies that will have a negative effect on our profitability. We cannot assure investors that we will be able to timely and effectively meet that demand and maintain the quality standards required by our existing and potential customers.

We may be subject to intellectual property infringement claims, which could result in litigation and substantial costs to defend.
 
We place advertisements provided by our advertising clients on television and may be subject to claims of infringement based on our clients’ advertisements.  Some of our existing contracts with our advertising clients do not provide us with indemnity from our clients for any intellectual property infringement claims relating to the advertisements provided by our clients.  We cannot be certain that our operations or any aspects of our business do not or will not infringe upon patents, copyrights or other intellectual property rights held by third parties. We may receive notice of claims of infringement of other parties’ proprietary rights.  Such actions could result in litigation and we could incur significant costs and diversion of resources in defending such claims.  The party making such claims could secure a judgment awarding substantial damages, as well as injunctive or other equitable relief.  Even if such litigation is not successful, it could result in substantial costs and diversion of resources and management’s attention from the operation of our business.

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We face risks related to natural disasters, terrorist attacks or other unpredictable events in China which could have a material adverse effect on our business and results of operations.
 
Our business could be materially and adversely affected by natural disasters, terrorist attacks or other events in China where all of our operations are located.  For example, in early 2008, parts of China suffered a wave of strong snow storms that severely impacted public transportation systems. In May 2008, Sichuan Province in China suffered a strong earthquake measuring approximately 8.0 on the Richter scale that caused widespread damage and casualties.  The May 2008 Sichuan earthquake has had a material adverse effect on the general economic conditions in the areas affected by the earthquake.  The occurrence of any future disasters such as earthquakes, fires, floods, wars, terrorist attacks, computer viruses, transportation disasters or other events, or our information system or communications network breaks down or operates improperly as a result of such events, our facilities may be seriously damaged, and we may have to stop or delay operations.  We may incur expenses relating to such damages, which could have a material adverse effect on our business and results of operations.

We may adopt an equity incentive plan under which we may grant securities to compensate employees and other services providers, which would result in increased share-based compensation expenses and, therefore, reduce net income.
 
We may adopt an equity incentive plan under which we may grant shares or options to qualified employees. Under current accounting rules, we would be required to recognize share-based compensation as compensation expense in our statement of operations, based on the fair value of equity awards on the date of the grant, and recognize the compensation expense over the period in which the recipient is required to provide service in exchange for the equity award. We have not made any such grants in the past, and accordingly our results of operations have not contained any share-based compensation charges. The additional expenses associated with share-based compensation may reduce the attractiveness of issuing stock options under an equity incentive plan that we may adopt in the future. If we grant equity compensation to attract and retain key personnel, the expenses associated with share-based compensation may adversely affect our net income. However, if we do not grant equity compensation, we may not be able to attract and retain key personnel or be forced to expend cash or other compensation instead. Furthermore, the issuance of equity awards would dilute the shareholders’ ownership interests in our company.
 
RISKS RELATED TO OUR CORPORATE STRUCTURE

If the PRC government determines that the agreements establishing the structure for operating our China business do not comply with applicable PRC laws, rules and regulations, we could be subject to severe penalties including being prohibited from continuing our advertising operations in the PRC.
 
Foreign entities that invest in companies that operate in the advertising industry in the PRC must have at least two years of direct operations in the advertising industry outside of the PRC.  Our wholly-owned subsidiary CD Media BVI has not engaged in any advertising operations outside of the PRC and, therefore, is unable to make direct investments in or establish enterprises in the advertising industry in China.  As a result, our PRC subsidiary, CD Media Huizhou cannot directly provide advertising services in the PRC.  We provide our advertising services through CD Media Beijing, which is owned directly by three PRC citizens.  CD Media Huizhou controls the operations of CD Media Beijing and receives the economic benefits and bears the economic risks of CD Media Beijing through a series of contractual arrangements.

There are considerable uncertainties regarding the interpretation and application of current and future PRC laws, rules and regulations, including but not limited to the laws, rules and regulations governing the validity and enforcement of our contractual arrangements with CD Media Beijing. Although our PRC legal counsel has advised us that our corporate structure, including our contractual arrangements with CD Media Beijing, complies with all applicable PRC laws, rules and regulations, we cannot assure you that the PRC government will not take a view contrary to the opinion of our PRC legal counsel and determine that our corporate structure and our contractual arrangement violate PRC law, rules and regulations.  Our PRC legal counsel has also advised us that if the PRC government decides that our contractual agreements with CD Media Beijing that establish the framework for our advertising operations in the PRC violate PRC restrictions on foreign ownership of advertising businesses, the PRC may impose harsh penalties upon us, including but not limited to the following:
 
 
· 
revoking the business and operating licenses of CD Media Huizhou and/or CD Media Beijing;
 
 
· 
ending or restricting any transactions among CD Media Huizhou and CD Media Beijing;
 
 
· 
imposing fines;
 
 
· 
confiscating our, CD Media Huizhou’s or CD Media Beijing’s income;
 
 
· 
imposing restrictions on our operations with which we may be unable to comply;
 
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· 
requiring us to restructure our corporate structure or operations; or
 
 
· 
restricting or prohibiting the use of any proceeds of an offering of our securities to finance our operations in the PRC.
 
The imposition of any such penalties would have a material adverse effect on our business and results of operations.
 
We rely on contractual arrangements with CD Media Beijing, our consolidated affiliated entity in China, and its shareholders, which may not be as effective in providing us with operational control or enabling us to derive economic benefits as through ownership of controlling equity interest.
 
We rely upon, and expect to continue to rely upon, contractual arrangements with CD Media Beijing, our consolidated affiliated entity in China, and its shareholders to operate our advertising business. These contractual arrangements provide us with effective control over CD Media Beijing and the economic benefits and risks of CD Media Beijing.  Although each of the shareholders of CD Media Beijing is an officer and/or director of the Company, we cannot assure you that such shareholders will perform their responsibilities under the agreements.  If CD Media Beijing or any of its shareholders fails to perform their responsibilities under any of our contractual arrangements, we may incur substantial costs to enforce such agreements and rely on legal remedies under PRC law, including seeking specific performance or injunctive relief, and claiming damage.  We cannot assure investors that we will be successful in enforcing such agreements.
 
If (i) the applicable PRC authorities invalidate these contractual arrangements for violation of PRC laws, rules and regulations, (ii) CD Media Beijing or its shareholders terminate these contractual arrangements or (iii) CD Media Beijing or its shareholders fail to perform their obligations under these contractual arrangements, we would not be able to continue our business operations in China or to derive economic benefits from operations of CD Media Beijing. Additionally, if we cannot renew these contractual arrangements upon their expiration, we would not be able to continue our business operations unless the then current PRC law allows us to directly operate advertising businesses in China.
 
If CD Media Beijing or all or part of its assets become subject to liens or rights of third-party creditors, we may be unable to continue some or all of our business activities, which could severely disrupt our business and result in a material adverse effect to our results of operations. If CD Media Beijing undergoes a voluntary or involuntary liquidation proceeding, its shareholders or unrelated third-party creditors may claim rights to some or all of CD Media Beijing’s assets, which would inhibit our ability to operate our advertising business and derive the economic benefits of CD media Beijing.
 
All of these contractual arrangements are governed by PRC laws.  Accordingly, these contracts will be interpreted in accordance with PRC laws and any disputes would be resolved in accordance with PRC legal procedures. The legal environment in the PRC is not as developed as in some other jurisdictions, such as the United States. As a result, uncertainties in the PRC legal system could limit our ability to enforce these contractual arrangements. In the event we are unable to enforce these contractual arrangements, we may not be able to exercise effective control over our operating entities, and we may be precluded from operating our business, which would have a material adverse effect on our financial condition and results of operations.
 
The PRC tax authorities may scrutinize our contractual arrangements with CD Media Beijing, which could result in the tax authorities determining that we owe additional taxes or that we are not entitled  for certain tax exemptions, or both, which could substantially increase our taxes owed and have a negative impact on our financial condition.
 
Under applicable PRC laws, rules and regulations, arrangements and transactions among related parties may be subject to audits or challenges by the PRC tax authorities. Neither we nor our PRC legal counsel are able to determine whether any of our contractual arrangements with CD Media Beijing will be regarded by the PRC tax authorities as arm’s length transactions because, to our knowledge, the PRC tax authorities have not issued a ruling or interpretation in respect of the type of transaction structure similar to ours. The relevant tax authorities may determine that our contractual relationships with CD Media Beijing and its shareholders were not entered into on an arm’s length basis. If any of the transactions between CD Media Huizhou, our wholly owned subsidiary in China, and CD Media Beijing, our affiliated entity, and its shareholders, including our contractual arrangements with CD Media Beijing, are determined not to have been entered into on an arm’s length basis, or are found to result in an impermissible reduction in taxes under PRC laws, the PRC tax authorities may adjust the profits and losses of CD Media Beijing and assess more taxes on it. In addition, the PRC tax authorities may impose late payment interest and other penalties to CD Media Beijing for underpaid taxes. The late payment interest will be charged against the underpaid taxes during the period from June 1 of the next year to the year the taxable event occurs to the date the underpaid taxes are made up, and will be charged by day.  The daily rate is the then current base rate for RMB loans published by the People’s Bank of China plus 5%.  Our net income may be materially and adversely affected if CD Media Beijing’s tax liabilities increase or if it is found to be subject to late payment interest or other penalties.
 
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We rely principally on dividends and other distributions on equity paid by our wholly-owned subsidiary to fund any cash and financing requirements we may have, and any limitation on the ability of our subsidiary to pay dividends to us could have a material adverse effect on our ability to conduct our business.
 
As a holding company, we rely principally on dividends and other distributions on equity paid by CD Media Huizhou, our PRC subsidiary, for our cash requirements, including the funds necessary to service any debt we may incur or for operating a public company. CD Media Huizhou’s sole operations consist of providing technical and consulting services to CD Media Beijing pursuant to the contractual arrangements and all of CD Media Huizhou’s revenue is generated from the service fees paid to it by CD Media Beijing pursuant to the contractual arrangements.  As all of CD Media Huizhou’s revenues consist of the annual service fee that CD Media Beijing pays to CD Media Huizhou pursuant to the contractual arrangements, the amount of cash that CD Media Huizhou has to distribute to us is entirely dependent on the operations of CD Media Beijing and the amount of annual service fee, which can vary from time to time.  The payment of the service fee can be delayed by the Company, which could negatively affect its cash and financing requirements.
 
If CD Media Huizhou incurs debt on its own behalf in the future, the instruments governing the debt may restrict its ability to pay dividends or make other distributions to us. In addition, the PRC tax authorities may require us to adjust our taxable income under the contractual arrangements CD Media Huizhou currently has in place with CD Media Beijing in a way that would materially and adversely affect CD Media Huizhou’s ability to pay dividends and other distributions to us. Furthermore, relevant PRC laws, rules and regulations permit payments of dividends by CD Media Huizhou only out of its retained earnings, if any, determined in accordance with PRC accounting standards and regulations. Under PRC laws, rules and regulations, CD Media Huizhou is also required to set aside a portion of its net profit each year to fund specific reserve funds. These reserves are not distributable as cash dividends.  The statutory general reserve fund requires annual appropriations of 10% of after-tax profit to be set aside prior to payment of dividends until the cumulative fund reaches 50% of the registered capital. As a result CD Media Huizhou is restricted in its ability to transfer a portion of its net assets to us whether in the form of dividends, loans or advances. Any limitation on the ability of CD Media Huizhou to pay dividends to us could materially and adversely limit our ability to grow, make investments or acquisitions that could be beneficial to our businesses, pay dividends or otherwise fund and conduct our business.
 
CD Media Huizhou may not receive any cash from the operations of CD Media Beijing with which it has contractual arrangements.
 
All of CD Media Huizhou’s revenue consists of the service fees derived from the exclusive business cooperation agreement under the contractual arrangements that CD Media Huizhou has with CD Media Beijing.  The amount of annual service fee to CD Media Huizhou is to be determined by the parties based on the audited annual revenue of CD Media Beijing and the Rate of Service payable under the exclusive business cooperation agreement which is adjustable from time to time by the parties.  It is possible that CD Media Huizhou and CD Media Beijing may decide to have CD Media Beijing retain all or most of its annual after-tax profit and cause CD Media Huizhou to receive no cash from CD Media Beijing.  Given that CD Media Huizhou has been vested with and may exercise the shareholder’s rights of all shareholders of CD Media Beijing pursuant to the power of attorney under the contractual arrangements between CD Media Huizhou and CD Media Beijing, CD Media Huizhou can alone decide the Rate of Service and the amount of cash to be received from CD Media Beijing pursuant to the exclusive business cooperation agreement.
 
RISKS RELATED TO US DOING BUSINESS IN CHINA

As substantially all of our assets are located in the PRC and all of our revenues are derived from our operations in China, changes in the political and economic policies of the PRC government could have a significant impact upon the business we may be able to conduct in the PRC and accordingly on the results of our operations and financial condition.

Our business operations may be adversely affected by the current and future political environment in the PRC. The Chinese government exerts substantial influence and control over the manner in which we must conduct our business activities. Our ability to operate in China may be adversely affected by changes in Chinese laws and regulations, including those relating to taxation, import and export tariffs, raw materials, environmental regulations, land use rights, property and other matters. Under the current government leadership, the government of the PRC has been pursuing economic reform policies that encourage private economic activity and greater economic decentralization. There is no assurance, however, that the government of the PRC will continue to pursue these policies, or that it will not significantly alter these policies from time to time without notice.
 
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Our operations are subject to PRC laws and regulations that are sometimes vague and uncertain. Any changes in such PRC laws and regulations, or the interpretations thereof, may have a material and adverse effect on our business.
 
The PRC’s legal system is a civil law system based on written statutes. Decided legal cases do not have so much value as precedent in China as those in the common law system prevalent in the United States. There are substantial uncertainties regarding the interpretation and application of PRC laws and regulations, including but not limited to, governmental approvals required for conducting business and investments, laws and regulations governing the advertising industry, as well as commercial, antitrust, patent, product liability, environmental laws and regulations, consumer protection, and financial and business taxation laws and regulations.
 
The Chinese government has been developing a comprehensive system of commercial laws, and considerable progress has been made in introducing laws and regulations dealing with economic matters. However, because these laws and regulations are relatively new, and because of the limited volume of published cases and judicial interpretation and their lack of force as precedents, interpretation and enforcement of these laws and regulations involve significant uncertainties. New laws and regulations that affect existing and proposed future businesses may also be applied retroactively.
 
Our PRC subsidiary, CD Media Huizhou, is considered a foreign invested enterprise under PRC laws, and as a result is required to comply with PRC laws and regulations, including laws and regulations specifically governing the activities and conduct of foreign invested enterprises. We cannot predict what effect the interpretation of existing or new PRC laws or regulations may have on our businesses. If the relevant authorities find us in violation of PRC laws or regulations, they would have broad discretion in dealing with such a violation, including, without limitation:
 
 
· 
levying fines;
 
 
· 
revoking our business license, other licenses or authorities;
 
 
· 
requiring that we restructure our ownership or operations; and
 
 
· 
requiring that we discontinue any portion or all of our business.
 
Investors may experience difficulties in effecting service of legal process, enforcing foreign judgments or bringing original actions in China based upon U.S. laws, including the federal securities laws or other foreign laws against us or our management.

All of our current operations are conducted in China. Moreover, all of our directors and officers are nationals and residents of China. All or substantially all of the assets of these persons are located outside the United States and in the PRC. As a result, it may not be possible to effect service of process within the United States or elsewhere outside China upon these persons. In addition, uncertainty exists as to whether the courts of China would recognize or enforce judgments of U.S. courts obtained against us or such officers and/or directors predicated upon the civil liability provisions of the securities laws of the United States or any state thereof, or be competent to hear original actions brought in China against us or such persons predicated upon the securities laws of the United States or any state thereof.

The scope of the business license for CD Media Beijing in China is limited, and we may not expand or continue our business without government approval and renewal, respectively.

Our principal operating entity, CD Media Beijing, can only conduct business within its approved business scope, which ultimately appears on its business license. CD Media Beijing’s business license covers its present business to design, create, handle (as agent), and release advertisements in PRC for domestic and foreign investors; to arrange cultural communications (excluding shows); to undertake exhibitions and presentations; and to provide advertising consulting services (excluding intermediary services). Currently, we plan to expand into the purchase of advertising time on local and regional networks, to expand our production consulting services and begin providing production services. CD Media Beijing’s business license currently covers all of our planned expansion activities described in this prospectus, except for the production of proprietary television programming. We, through CD Media Beijing, were previously involved in the production of a television series, “Chi Dan Zhong Xin,” pursuant to a cooperation agreement with a television production company, under which we supervised the cash distribution process for the series. We were also involved in the production of an animation series, “Xiao Mo Dou,” pursuant to a cooperation agreement with a media distribution company and a software development company, under which we were responsible for funding, marketing and promoting the series. Our supervision of the cash distribution process for the Chi Dan Zhong Xin series and our funding, marketing and promotion of the Xiao Mo Dou series did not constitute production work of television series which would require expansion of the scope of business license of CD Media Beijing, but was within the scope of CD Media Beijing’s business license because CD Media Beijing’s provision of support services for these series is not prohibited by its license.  CD Media Beijing was never the registered copyright owner of either of the two television series, and its interests in these two television series were limited to economic rights based on the relevant cooperation agreements, including the rights to receive certain percentages of the profits deriving from the series.  CD Media Beijing’s economic interest in such productions did not violate its business license because CD Media Beijing did not directly perform any production services.

 
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We may choose to enter into new areas and activities that are not currently covered by our business license. Prior to expanding our business and engaging in activities that are not covered by our current business license, we are required to apply and receive approval from the relevant PRC government authorities. In order for us to expand our business beyond the scope of our license, we will be required to enter into a negotiation with the PRC authorities for the approval to expand the scope of our business. PRC authorities, which have discretion over business licenses, may reject our request to expand the scope of our business license to include our planned areas of expansion. We will be prohibited from engaging in any activities that the PRC authorities do not approve in our expanded business license. Specifically, if an entity engages in the production of television series without the requisite approvals from competent PRC authorities, it can be subject to fines from RMB10,000 to RMB50,000, a ban from engaging in such activities and the possible confiscation of its tools, equipment and media used for television series production. Our business and results of operations may be materially and adversely affected if we are unable to obtain the necessary government approval for an expanded business license that covers any areas in which we wish to expand.
 
Contract drafting, interpretation and enforcement in China involves significant uncertainty.
 
We have entered into numerous contracts governed by PRC law, many of which are material to our business. As compared with contracts in the United States, contracts governed by PRC law tend to contain less detail and are not as comprehensive in defining contracting parties’ rights and obligations. As a result, contracts in China are more vulnerable to disputes and legal challenges. In addition, contract interpretation and enforcement in China is not as developed as in the United States, and the result of any contract dispute is subject to significant uncertainties. Therefore, we cannot assure you that we will not be subject to disputes under our material contracts, and if such disputes arise, we cannot assure you that we will prevail.

Recent PRC regulations relating to acquisitions of PRC companies by foreign entities may create regulatory uncertainties that could restrict or limit our ability to operate. Our failure to obtain the prior approval of the China Securities Regulatory Commission, or the CSRC, for our planned public offering and the listing and trading of our common stock could have a material adverse effect on our business, operating results, reputation and trading price of our common stock.

The PRC State Administration of Foreign Exchange, or “SAFE,” issued a public notice in November 2005, known as Circular 75, concerning the use of offshore holding companies controlled by PRC residents in mergers and acquisitions in China. This circular requires that (1) a PRC resident shall register with a local branch of the SAFE before he or she establishes or controls an overseas special purpose vehicle, or SPV, for the purpose of overseas equity financing (including convertible debt financing); (2) when a PRC resident contributes the assets of or his or her equity interests in a domestic enterprise to an SPV, or engages in overseas financing after contributing assets or equity interests to an SPV, such PRC resident must register his or her interest in the SPV and any changes in such interest with a local branch of the SAFE; and (3) when the SPV undergoes a material change outside of China, such as a change in share capital or merger or acquisition, the PRC resident shall, within 30 days from the occurrence of the event that triggers the change, register such change with a local branch of the SAFE. In addition, SAFE issued updated internal implementing rules, or the Implementing Rules in relation to Circular 75. However, there exist uncertainties regarding the SAFE registration for PRC residents’ interests in overseas companies.  If any PRC resident stockholder of a SPV fails to make the required SAFE registration and amended registration, the onshore PRC subsidiaries of that offshore company may be prohibited from distributing their profits and the proceeds from any reduction in capital, share transfer or liquidation to the offshore entity.  Failure to comply with the SAFE registration and amendment requirements described above could result in liability under PRC laws for evasion of applicable foreign exchange restrictions. Because of uncertainty in how Circular 75 will be interpreted and enforced, we cannot be sure how it will affect our business operations or future plans. For example, CD Media Huizhou’s ability to conduct foreign exchange activities, such as the remittance of dividends and foreign currency-denominated borrowings, may be subject to compliance with Circular 75 by our PRC resident beneficial holders over whom we have no control.  In addition, we cannot assure you that such PRC residents will be able to complete the necessary approval and registration procedures required by the SAFE regulations.  Failure by any PRC resident beneficial holder to register as required with the relevant branch of SAFE could subject these PRC resident beneficial holders to fines or legal sanctions, restrict our overseas or cross-border investment activities, limit CD Media Huizhou’s ability to make distributions or pay dividends or affect our ownership structure, which could adversely affect our business and prospects.

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On August 8, 2006, the PRC Ministry of Commerce (“MOFCOM”), joined by the State-owned Assets Supervision and Administration Commission of the State Council, the State Administration of Taxation, the State Administration for Industry and Commerce, the China Securities Regulatory Commission and SAFE, released a substantially amended version of the Provisions for Foreign Investors to Merge with or Acquire Domestic Enterprises (the “Revised M&A Regulations”), which took effect on September 8, 2006 and was further amended on June 22, 2009. These new rules significantly revised China’s regulatory framework governing onshore-to-offshore restructurings and foreign acquisitions of domestic enterprises. These new rules signify greater PRC government attention to cross-border merger, acquisition and other investment activities, by confirming MOFCOM as a key regulator for issues related to mergers and acquisitions in China and requiring MOFCOM approval of a broad range of merger, acquisition and investment transactions. Further, the new rules establish reporting requirements for acquisition of control by foreigners of companies in key industries, and reinforce the ability of the Chinese government to monitor and prohibit foreign control transactions in key industries.

Among other things, the Revised M&A Regulations include new provisions that purport to require that an offshore special purpose vehicle, or SPV, formed for listing purposes and controlled directly or indirectly by PRC companies or individuals must obtain the approval of the CSRC prior to the listing and trading of such SPV’s securities on an overseas stock exchange. On September 21, 2006, the CSRC published on its official website procedures specifying documents and materials required to be submitted to it by SPVs seeking CSRC approval of their overseas listings. However, the application of this PRC regulation remains unclear with no consensus currently existing among the leading PRC law firms regarding the scope and applicability of the CSRC approval requirement. Our PRC counsel, Han Kun Law Offices, believes that it is uncertain whether the transaction is subject to CSRC's approval, and in reality, many other similar companies have completed similar transactions like the share exchange and private placement contemplated under the Exchange Agreement without CSRC's approval and our PRC legal counsel is not aware of any situation in which the CSRC has imposed a punishment or penalty in connection with any such transactions.  However, if the CSRC or other PRC Government Agencies subsequently determine that CSRC approval is required for the share exchange and private placement contemplated under the Exchange Agreement, we may face material regulatory actions or other sanctions from the CSRC or other PRC Government Agencies.
 
If the CSRC or another PRC regulatory agency subsequently determines that CSRC approval was required for our restructuring, we may face regulatory actions or other sanctions from the CSRC or other PRC regulatory agencies. These regulatory agencies may impose fines and penalties on our operations in the PRC, limit our operating privileges in the PRC, or take other actions that could have a material adverse effect on our business, financial condition, results of operations, reputation and prospects, as well as the trading price of our common stock.

According to the Revised M&A Regulations and other PRC rules regarding foreign exchange, an offshore company’s shares can be used as consideration for the acquisition of a domestic PRC company’s equity by foreign investors only under very limited circumstances. Prior approval from the MOFCOM must be obtained before such a share exchange can be done. If relevant PRC government authorities deem a future acquisition of a domestic PRC company’s equity by us or our offshore subsidiary using our common stock or other types of our securities as consideration to be a transaction subject to the Revised M&A Regulations, complying with the requirements of this regulation to complete such transactions could be time-consuming and any required approval processes, including obtaining approval from the MOFCOM, may delay or inhibit our ability to complete such transactions. Any delay or inability to obtain applicable approvals to complete acquisitions could affect our ability to expand our business or maintain our market share.  However, the application of the Revised M&A Regulations remains unclear and it is uncertain whether a future acquisition of a domestic PRC company’s equity by our domestic PRC subsidiary using our common stock or other types of our securities as consideration will be subject to such regulations.
 
Also, if later the CSRC requires that we obtain its approval, we may be unable to obtain a waiver of the CSRC approval requirements, if and when procedures are established to obtain such a waiver. Any uncertainties and/or negative publicity regarding this CSRC approval requirement could have a material adverse effect on the trading price of our common stock.  It is uncertain that CSRC is or will be curtailing or suspending overseas listings for Chinese private companies.

It is uncertain how our business operations or future strategy will be affected by the interpretations and implementation of Circular 75 and the Revised M&A Regulations. It is anticipated that application of the new rules will be subject to significant administrative interpretation, and we will need to closely monitor how MOFCOM, SAFE, CSRC and other ministries apply the rules to ensure that our domestic and offshore activities continue to comply with PRC law. Given the uncertainties regarding interpretation and application of the new rules, we may need to expend significant time and resources to maintain compliance with such rules.

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If the land use rights of our landlord are revoked, we would be forced to relocate operations.
 
Under Chinese law, land is owned by the state or rural collective economic organizations. The state issues to the land users the land use right certificate. Land use rights can be revoked and the land users could be forced to vacate at any time when redevelopment of the land is in the public interest. The public interest rationale is interpreted quite broadly and the process of land appropriation may be less than transparent. We do not have any land use rights and each of our facilities relies on land use rights of our landlords, and the loss of such rights would require us to identify and relocate our operations, which could have a material adverse effect on our financial conditions and results of operations.

We will not be able to complete an acquisition of prospective acquisition targets in the PRC unless their financial statements can be reconciled to U.S. generally accepted accounting principles in a timely manner.

Companies based in the PRC may not have properly kept financial books and records that may be reconciled with U.S. generally accepted accounting principles. If we attempt to acquire a significant PRC target company and/or its assets, we would be required to obtain or prepare financial statements of the target that are prepared in accordance with and reconciled to U.S. generally accepted accounting principles. Federal securities laws require that a business combination meeting certain financial significance tests require the public acquirer to prepare and file historical and/or pro forma financial statement disclosure with the SEC. These financial statements must be prepared in accordance with, or be reconciled to U.S. generally accepted accounting principles and the historical financial statements must be audited in accordance with the standards of the Public Company Accounting Oversight Board (United States), or PCAOB. If a proposed acquisition target does not have financial statements that have been prepared in accordance with, or that can be reconciled to, U.S. generally accepted accounting principles and audited in accordance with the standards of the PCAOB, we will not be able to acquire that proposed acquisition target. These financial statement requirements may limit the pool of potential acquisition targets with which we may acquire and hinder our ability to expand our retail operations. Furthermore, if we consummate an acquisition and are unable to timely file audited financial statements and/or pro forma financial information required by the Securities Exchange Act of 1934, as amended (the “Exchange Act”), such as Item 9.01 of Form 8-K, we will be ineligible to use the SEC’s short-form registration statement on Form S-3 to raise capital, if we are otherwise eligible to use a Form S-3. If we are ineligible to use a Form S-3, the process of raising capital may be more expensive and time consuming and the terms of any offering transaction may not be as favorable as they would have been if we were eligible to use Form S-3.
 
We face uncertainty from China’s Circular on Strengthening the Administration of Enterprise Income Tax on Non-Resident Enterprises' Share Transfer Income (“Circular 698”) that was released in December 2009 with retroactive effect from January 1, 2008.

The Chinese State Administration of Taxation (SAT) released a circular (Guoshuihan No. 698 – Circular 698) on December 10, 2009 that addresses the transfer of shares of Chinese resident companies by nonresident companies.  Circular 698, which is effective retroactively to January 1, 2008, may have a significant impact on many companies that use offshore holding companies to invest in China.  While, Circular 698 does not apply to shareholders who are individuals, two of the original shareholders of CD Media BVI were BVI companies.  The PRC authority has the discretion to determine whether these enterprise shareholders are treated as resident enterprises. If such shareholders are recognized as non-resident enterprises, Circular 698 may have been applicable to the Share Exchange due to the transfer of shares of CD Media BVI, which directly holds the equity interests of CD Media Huizhou, to the Company by such enterprise shareholders.  Circular 698 provides that where a non-resident enterprise investor indirectly transfers the equity of a PRC resident enterprise, if the overseas intermediary holding company being transferred by the non-resident enterprise is established in a country/region where the effective tax rate is less than 12.5% or which does not tax the overseas income of its residents, the non-resident enterprise must submit the required documents to the PRC tax authority in charge of the PRC resident enterprise within 30 days after the equity transfer agreement is concluded.   However, there is uncertainty as to the application of Circular 698.  For example, while the term "indirectly transfer" is not defined, it is understood that the relevant PRC tax authorities have jurisdiction regarding requests for information over a wide range of foreign entities having no direct contact with China. Moreover, the relevant authority has not yet promulgated any formal provisions or formally declared or stated how to calculate the effective tax in the country or jurisdiction and to what extent and the process of the disclosure to the tax authority in charge of that Chinese resident enterprise. We have not provided any information to the relevant PRC tax authorities regarding the share exchange transaction.

We have sought the advice, but not an opinion, of PRC legal counsel regarding the application of and the risks associated with Circular 698.  Circular 698, which provides parties with a short period of time to comply its requirements, indirectly taxes foreign companies on gains derived from the indirect sale of a Chinese company.  It further provides that where a foreign investor indirectly transfers equity interests in a Chinese resident enterprise through an abuse of form of organization and there are no reasonable commercial purposes such that the corporate income tax liability is avoided, the PRC tax authority will have the power to re-assess the nature of the equity transfer in accordance with PRC’s “substance-over-form” principle and deny the existence of the offshore holding company that is used for tax planning purposes. However, there are no formal declarations with regard to how to decide “abuse of form of organization” and “reasonable commercial purpose,” which can be utilized by us to balance if our company complies with the Circular 698.
 
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If the PRC tax authorities determines that Circular 698 applies to the Share Exchange and we need to make up underpaid taxes, the underpaid taxes will equal the equity transfer gains multiplied by the applicable income tax rate determined by the PRC tax authorities, and pursuant to Circular 698, equity transfer gains will equal the balance of the equity transfer price after deducting the cost of equity investment.  However, because the transfer of the equity of CD Media BVI by its original company shareholders involved a share exchange transaction with the Company, a "blank check" shell company at that time, it is difficult to determine the fair market value of the shares of the Company, and thus the equity transfer gains received by the original company shareholders. Circular 698 has not provided any guidance under such circumstances.  The short history of and lack of clear guidance on the application of Circular 698 make it hard to quantify the tax consequences in advance.
 
Due to the short history of the New EIT law and lack of applicable legal precedents, it remains unclear how the PRC tax authorities will determine the PRC tax resident treatment of our holding companies, China Century Dragon Media, Inc., a Delaware corporation, and CD Media BVI a company organized under the laws of the British Virgin Islands.   If China Century Dragon Media, Inc. or CD Media BVI is determined to be a PRC resident enterprise by PRC tax authorities, Circular 698 will not be applicable to any direct or indirect transfer of our shareholdings in CD Media Huizhou, or in an intermediary holding company between China Century Dragon Media, Inc. and CD Media Huizhou.  If China Century Dragon Media, Inc. or CD Media BVI is determined to be a non-resident enterprise by the PRC tax authorities and the direct or indirect transfer of our shareholdings in CD Media Huizhou, or in an intermediary holding company between China Century Dragon Media, Inc. and CD Media Huizhou, is recognized by the tax authority in charge as the transfer of shares of Chinese resident companies by nonresident companies, we may become at risk of being taxed under Circular 698 and we may be required to expend valuable resources to comply with Circular 698 or to establish that we should not be taxed under Circular 698, which could have a material adverse effect on our financial condition and results of operations.   Because CD Media BVI, a British Virgin Islands company owns 100% of CD Media Huizhou and the Company, a Delaware corporation, owns 100% of CD Media BVI, it is possible that Circular 698 could apply to any transfer of shares of the Company or CD Media BVI, as an indirect transfer of the equity of CD Media Huizhou, if such transfers are not made through a public securities market or by individuals. If the PRC tax authority determines that Circular 698 applies to us, we will be obligated to make tax returns filings with the relevant PRC tax authority in accordance with PRC tax laws and regulations.  Failure to do so will subject us to fines up to RMB 10,000 ($1,471).   Furthermore, if the PRC tax authority determines that our arrangement which resulted in the underpayment of taxes was done to evade taxation, in addition to paying all the underpaid taxes, we may be subject to further penalties including late fees, fines ranging from 50% to 500% of the underpaid taxes, and even criminal liabilities under grave circumstances.
 
The foreign currency exchange rate between U.S. Dollars and Renminbi could adversely affect our financial condition.

Until 1994, the Renminbi experienced a gradual but significant devaluation against most major currencies, including dollars, and there was a significant devaluation of the Renminbi on January 1, 1994 in connection with the replacement of the dual exchange rate system with a unified managed floating rate foreign exchange system. Since 1994, the value of the Renminbi relative to the U.S. dollar has remained stable and has appreciated slightly against the U.S. Dollar. Countries, including the United States, have argued that the Renminbi is artificially undervalued due to China’s current monetary policies and have pressured China to allow the Renminbi to float freely in world markets. In July 2005, the PRC government changed its policy of pegging the value of the Renminbi to the U.S. dollar. Under the new policy the Renminbi is permitted to fluctuate within a narrow and managed band against a basket of designated foreign currencies. While the international reaction to the Renminbi revaluation has generally been positive, there remains significant international pressure on the PRC government to adopt an even more flexible currency policy, which could result in further and more significant appreciation of the Renminbi against the U.S. dollar.

As we may rely on dividends and other fees paid to us by our subsidiary and affiliated consolidated entities in China, any significant revaluation of the Renminbi may materially and adversely affect our cash flows, revenues, earnings and financial position, and the amount of, and any dividends payable on, our shares in U.S. dollars. To the extent that we need to convert U.S. dollars into Renminbi for our operations, appreciation of the Renminbi against the U.S. dollar would have an adverse effect on the Renminbi amount we would receive from the conversion. Conversely, if we decide to convert our Renminbi into U.S. dollars for the purpose of making payments for dividends on our shares or for other business purposes, appreciation of the U.S. dollar against the Renminbi would have a negative effect on the U.S. dollar amount available to us. In addition, since our functional and reporting currency is the U.S. dollar while the functional currency of our subsidiary and affiliated consolidated entities in China is Renminbi, appreciation or depreciation in the value of the Renminbi relative to the U.S. dollar would have a positive or negative effect on our reported financial results, which may not reflect any underlying change in our business, results of operations or financial condition.

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Governmental control of currency conversion may limit our ability to utilize our revenues.

Substantially all of our revenues and expenses are denominated in Renminbi.  Under PRC laws, the Renminbi is currently convertible under a company’s “current account,” which includes dividends, trade and service-related foreign exchange transactions, but not under the company’s “capital account,” which includes foreign direct investment and loans, without the prior approval of SAFE.  SAFE reserves the discretion to deny the conversion of RMB into foreign currencies for capital account transactions. Currently our PRC subsidiary, CD Media Huizhou, may purchase foreign currencies for settlement of current account transactions, including payments of dividends to us, without the approval of SAFE.  Therefore, CD Media Huizhou may convert the annual service fee it receives in RMB from CD Media Beijing into other currencies, such as U.S. Dollars, for settlement of current account transactions without having to obtain approval from SAFE.  However, foreign exchange transactions by CD Media Huizhou under the capital account continue to be subject to significant foreign exchange controls and require the approval of or need to register with PRC governmental authorities, including SAFE. Therefore, CD Media Huizhou may not convert the annual service fee from RMB into other currencies for capital account transactions, such as to repay a loan, without first obtaining the approval of SAFE.  If CD Media Huizhou borrows foreign currency loans from us or other foreign lenders, these loans must first be registered with the SAFE.  If CD Media Huizhou, a wholly foreign-owned enterprise, borrows foreign currency, the accumulative amount of its foreign currency loans shall not exceed the difference between the total investment and the registered capital of CD Media Huizhou. If we finance CD Media Huizhou by means of additional capital contributions, these capital contributions must be approved by certain government authorities such as the Ministry of Commerce or its local counterparts. Additionally, the existing and future restrictions on currency exchange may affect the ability of our PRC subsidiary or affiliated entities to obtain foreign currencies, limit our ability to meet our foreign currency obligations, or otherwise materially and adversely affect our business.
 
Inflation in the PRC could negatively affect our profitability and growth.
 
While the PRC economy has experienced rapid growth, such growth has been uneven among various sectors of the economy and in different geographical areas of the country. Rapid economic growth can lead to growth in the money supply and rising inflation. According to the National Bureau of Statistics of China, in October 2010 China’s Consumer Price Index increased 4.4% year over year.   If prices for our products and services rise at a rate that is insufficient to compensate for the rise in the costs of supplies such as raw materials, it may have an adverse effect on our profitability.
 
Furthermore, in order to control inflation in the past, the PRC government has imposed controls on bank credits, limits on loans for fixed assets and restrictions on state bank lending. In January 2010, the Chinese government took steps to tighten the availability of credit including ordering banks to increase the amount of reserves they hold and to reduce or limit their lending. The implementation of such policies may impede economic growth. In October 2004, the People’s Bank of China, the PRC’s central bank, raised interest rates for the first time in nearly a decade and indicated in a statement that the measure was prompted by inflationary concerns in the Chinese economy. In April 2006, the People’s Bank of China raised the interest rate again. Repeated rises in interest rates by the central bank would likely slow economic activity in China which could, in turn, materially increase our costs and also reduce demand for our products and services.
 
Because our funds are held in banks which do not provide insurance, the failure of any bank in which we deposit our funds could affect our ability to continue in business.

Banks and other financial institutions in the PRC do not provide insurance for funds held on deposit. A significant portion of our assets are in the form of cash deposited with banks in the PRC, and in the event of a bank failure, we may not have access to our funds on deposit. Depending upon the amount of money we maintain in a bank that fails, our inability to have access to our cash could impair our operations, and, if we are not able to access funds to pay our suppliers, employees and other creditors, we may be unable to continue in business.

Failure to comply with the United States Foreign Corrupt Practices Act could subject us to penalties and other adverse consequences.

As our ultimate holding company is a Delaware corporation, we are subject to the United States Foreign Corrupt Practices Act, which generally prohibits United States companies from engaging in bribery or other prohibited payments to foreign officials for the purpose of obtaining or retaining business. Foreign companies, including some that may compete with us, are not subject to these prohibitions. Corruption, extortion, bribery, pay-offs, theft and other fraudulent practices may occur from time-to-time in the PRC. We can make no assurance, however, that our employees or other agents will not engage in such conduct for which we might be held responsible. If our employees or other agents are found to have engaged in such practices, we could suffer severe penalties and other consequences that may have a material adverse effect on our business, financial condition and results of operations.
 
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If we make equity compensation grants to persons who are PRC citizens, they may be required to register with the State Administration of Foreign Exchange of the PRC, or SAFE. We may also face regulatory uncertainties that could restrict our ability to adopt an equity compensation plan for our directors and employees and other parties under PRC law.

On March 28, 2007, SAFE issued the “Operating Procedures for Administration of Domestic Individuals Participating in the Employee Stock Ownership Plan or Stock Option Plan of An Overseas Listed Company, also known as “Circular 78.” It is not clear whether Circular 78 covers all forms of equity compensation plans or only those which provide for the granting of stock options.   Domestic individuals who are granted shares or share options by companies listed on overseas stock exchanges based on the employee share option or share incentive plan are required to register with the State Administration of Foreign Exchange or its local counterparts. Pursuant to Circular 78, PRC individuals participating in the employee stock option plans of the overseas listed companies shall entrust their employers, including the overseas listed companies and the subsidiaries or branch offices of such offshore listed companies in China, or engage domestic agents to handle various foreign exchange matters associated with their employee stock options plans. The domestic agents or the employers shall, on behalf of the domestic individuals who have the right to exercise the employee stock options, apply annually to the State Administration of Foreign Exchange or its local offices for a quota for the conversion and/or payment of foreign currencies in connection with the domestic individuals’ exercise of the employee stock options. The foreign exchange proceeds received by the domestic individuals from sale of shares under the stock option plans granted by the overseas listed companies must be remitted into the bank accounts in China opened by their employers or PRC agents. If we adopt an equity compensation plan in the future and make option grants to our officers and directors, most of whom are PRC citizens, Circular 78 may require our officers and directors who receive option grants and are PRC citizens to register with SAFE. We will comply with Circular 78 if we adopt an equity incentive plan. We believe that the registration and approval requirements contemplated in Circular 78 will be burdensome and time consuming.  If it is determined that any of our equity compensation plans are subject to Circular 78, failure to comply with such provisions may subject our PRC subsidiary when it is deemed a domestic agent as defined under Circular 78 and participants of our incentive plan who are PRC citizens to fines and legal sanctions and may prevent us from being able to grant equity compensation to our PRC employees. If we are unable to compensate our PRC employees and directors through equity compensation, our business operations may be adversely affected.
 
Under the New EIT Law, we and CD Media BVI may be classified as “resident enterprises” of China for tax purpose, which may subject us and CD Media BVI to PRC income tax on taxable global income.

Under the new PRC Enterprise Income Tax Law (the “New EIT Law”) and its implementing rules, both of which became effective on January 1, 2008, enterprises are classified as resident enterprises and non-resident enterprises. An enterprise established outside of China with its “de facto management bodies” located within China is considered a “resident enterprise,” meaning that it can be treated in a manner similar to a Chinese domestic enterprise for enterprise income tax purposes. The implementing rules of the New EIT Law define de facto management body as a managing body that in practice exercises “substantial and overall management and control over the production and operations, personnel, accounting, and properties” of the enterprise. Due to the short history of the New EIT law and lack of applicable legal precedents, it remains unclear how the PRC tax authorities will determine the PRC tax resident treatment of a foreign company such as us and CD Media BVI. The Company has not sought the advice of PRC tax counsel regarding the risks associated with the New EIT Law.  Because both our and CD Media BVI’s members of management are located in China, we believe it is likely that the we and CD Media BVI meet the qualifications of a “resident enterprise” and would be recognized as a Chinese “resident enterprise,” subject to the ultimate judgment of the PRC tax authority, based on the standard of “de facto management body”.  “Resident enterprise” treatment would not have impacted the Company’s results since the New EIT Law’s effectiveness, as CD Media BVI has no taxable income and no dividends were paid by any of our subsidiaries, including CD Media BVI and CD Media Huizhou.  If the PRC tax authorities determine that we or CD Media BVI is a “resident enterprise” for PRC enterprise income tax purposes, a number of PRC tax consequences could follow.  First, we may be subject to the enterprise income tax at a rate of 25% on our worldwide taxable income, including interest income on the proceeds from this offering, as well as PRC enterprise income tax reporting obligations.  The failure to pay such taxes will subject us to fines up to RMB10,000 ($1,471), and furthermore, if the PRC tax authority determines that our arrangement which resulted in the underpayment of taxes was done to evade taxation, in addition to paying all the underpaid taxes, we may be subject to further penalties including late fees, fines ranging from 50% to 500% of the underpaid taxes, and even criminal liabilities under grave circumstances. Second, the New EIT Law provides that dividend paid between “qualified resident enterprises” is exempted from enterprise income tax. A recent circular issued by the State Administration of Taxation on April 22, 2010, regarding the standards used to classify certain Chinese-invested enterprises controlled by Chinese enterprises or Chinese group enterprises and established outside of China as “resident enterprises” clarified that dividends and other income paid by such “resident enterprises” will be considered to be PRC source income, subject to PRC withholding tax, currently at a rate of 10%, when recognized by non-PRC shareholders. It is unclear whether the dividends that we or CD Media BVI receives from CD Media Huizhou will constitute dividends between “qualified resident enterprises” and would therefore qualify for tax exemption, because the definition of qualified resident enterprises is unclear and the relevant PRC government authorities have not yet issued guidance with respect to the processing of outbound remittances to entities that are treated as resident enterprises for PRC enterprise income tax purposes. We are actively monitoring the possibility of “resident enterprise” treatment for the applicable tax years and are evaluating appropriate organizational changes to avoid this treatment, to the extent possible. As a result of the New EIT Law, our historical operating results will not be indicative of our operating results for future periods and the value of our common stock may be adversely affected.
 
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Dividends payable by us to our foreign investors and any gain on the sale of our shares may be subject to taxes under PRC tax laws.

If dividends payable to our stockholders are treated as income derived from sources within China, then the dividends that stockholders receive from us, and any gain on the sale or transfer of our shares, may be subject to taxes under PRC tax laws.  We have not consulted with PRC tax counsel regarding the taxes that may be associated with dividends paid by us.
 
Under the New EIT Law and its implementing rules, PRC enterprise income tax at the rate of 10% is applicable to dividends payable by us to our investors that are non-resident enterprises so long as such non-resident enterprise investors do not have an establishment or place of business in China or, despite the existence of such establishment of place of business in China, the relevant income is not effectively connected with such establishment or place of business in China, to the extent that such dividends have their sources within the PRC. Similarly, any gain realized on the transfer of our shares by such investors is also subject to a 10% PRC income tax if such gain is regarded as income derived from sources within China and we are considered as a resident enterprise which is domiciled in China for tax purpose. Additionally, there is a possibility that the relevant PRC tax authorities may take the view that the purpose of us and CD Media BVI is holding CD Media Huizhou, and the capital gain derived by our overseas shareholders or investors from the share transfer is deemed China-sourced income, in which case such capital gain may be subject to a PRC withholding tax at the rate of up to 10%. If we are required under the New EIT Law to withhold PRC income tax on our dividends payable to our foreign shareholders or investors who are non-resident enterprises, or if you are required to pay PRC income tax on the transfer or our shares under the circumstances mentioned above, the value of your investment in our shares may be materially and adversely affected.
 
In January, 2009, the State Administration of Taxation promulgated the Provisional Measures for the Administration of Withholding of Enterprise Income Tax for Non-resident Enterprises (“Measures”), pursuant to which, the entities which have the direct obligation to make the following payment to a non-resident enterprise shall be the relevant tax withholders for such non-resident enterprise, and such payment includes: incomes from equity investment (including dividends and other return on investment), interests, rents, royalties, and incomes from assignment of property as well as other incomes subject to enterprise income tax received by non-resident enterprises in China. Further, the Measures provides that in case of equity transfer between two non-resident enterprises which occurs outside China, the non-resident enterprise which receives the equity transfer payment shall, by itself or engage an agent to, file tax declaration with the PRC tax authority located at place of the PRC company whose equity has been transferred, and the PRC company whose equity has been transferred shall assist the tax authorities to collect taxes from the relevant non-resident enterprise. However, it is unclear whether the Measures refer to the equity transfer by a non-resident enterprise which is a direct or an indirect shareholder of the said PRC company. Given these Measures, there is a possibility that we may have an obligation to withhold income tax in respect of the dividends paid to non-resident enterprise investors.  If we have such an obligation, our omission or failure to fulfill such obligation may subject us to similar penalties to those applied to a taxpayer, including fines up to RMB10,000, and in the case of being recognized as constituting evasion of taxation, other than making up for the underpaid taxes, we may be subject to further penalties including late fees, fines ranging from 50% to 500% of the underpaid taxes, and even criminal liabilities under grave circumstances.
 
SAFE rules and regulations may limit our ability to transfer the net proceeds from this offering to CD Media Beijing, which may adversely affect the business expansion of CD Media Beijing, and we may not be able to convert the net proceeds from this offering into Renminbi to invest in or acquire any other PRC companies.

On August 29, 2008, SAFE promulgated Circular 142, a notice regulating the conversion by a foreign-invested company of foreign currency into Renminbi by restricting how the converted Renminbi may be used. The notice requires that the registered capital of a foreign-invested company settled in Renminbi converted from foreign currencies may only be used for purposes within the business scope approved by the applicable governmental authority and may not be used for equity investments within the PRC. In addition, SAFE strengthened its oversight of the flow and use of the registered capital of a foreign-invested company settled in Renminbi converted from foreign currencies. The use of such Renminbi capital may not be changed without SAFE’s approval, and may not in any case be used to repay Renminbi loans if the proceeds of such loans have not been used. Violations of Circular 142 will result in severe penalties, such as heavy fines. As a result, Circular 142 may significantly limit our ability to transfer the net proceeds from this offering to CD Media Beijing, and we may not be able to convert the net proceeds from this offering into Renminbi to invest in or acquire any other PRC companies

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Any recurrence of Severe Acute Respiratory Syndrome (SARS), Avian Flu, or another widespread public health problem, such as the spread of H1N1 (“Swine”) Flu, in the PRC could adversely affect our operations.
 
A renewed outbreak of SARS, Avian Flu or another widespread public health problem, such as the spread of H1N1 (“Swine”) Flu, in China, where all of our operations are located and where the substantial portion of our sales occur, could have a negative effect on our operations. Our business is dependent upon our ability to continue to market and sell advertising time and produce television programs. Such an outbreak could have an impact on our operations as a result of:
 
 
·
quarantines or closures of some of our facilities, which would severely disrupt our operations,
 
 
·
the sickness or death of our key officers and employees, and
 
 
·
a general slowdown in the Chinese economy.
 
Any of the foregoing events or other unforeseen consequences of public health problems could adversely affect our operations.

Further downturn in the economy of the PRC may slow our growth and profitability.

All of our revenues are generated from sales in China. The growth of the Chinese economy has been uneven across geographic regions and economic sectors, in large part due to the recent downturn in the global economy, which resulted in slow growth of the China economy. While the Chinese economy has recently begun to show signs of improvement, there can be no assurance that growth of the Chinese economy will be steady or that there will not be further deterioration in the global economy as a whole or the Chinese economy in particular. If economic conditions deteriorate further, our business and results of operations could be materially and adversely affected, especially if such conditions result in a decreased use of our products or in pressure on us to lower our prices.

Because our business is located in the PRC, we may have difficulty establishing adequate management, legal and financial controls, which we are required to do in order to comply with U.S. GAAP and securities laws, and which could cause a materially adverse impact on our financial statements, the trading of our common stock and our business.
 
PRC companies have historically not adopted a Western style of management and financial reporting concepts and practices, which includes strong corporate governance, internal controls and, computer, financial and other control systems. Most of our middle and top management staff are not educated and trained in the Western system, and we may have difficulty hiring new employees in the PRC with experience and expertise relating to U.S. GAAP and U.S. public-company reporting requirements. In addition, we may have difficulty in hiring and retaining a sufficient number of qualified employees to work in the PRC. As a result of these factors, we may experience difficulty in establishing management, legal and financial controls, collecting financial data and preparing financial statements, books of account and corporate records and instituting business practices that meet Western standards. Therefore, we may, in turn, experience difficulties in implementing and maintaining adequate internal controls as required under Section 404 of the Sarbanes-Oxley Act of 2002. This may result in significant deficiencies or material weaknesses in our internal controls which could impact the reliability of our financial statements and prevent us from complying with SEC rules and regulations and the requirements of the Sarbanes-Oxley Act of 2002. Any such deficiencies, material weaknesses or lack of compliance could result in restatements of our historical financial information, cause investors to lose confidence in our reported financial information, have an adverse impact on the trading price of our common stock, adversely affect our ability to access the capital markets and our ability to recruit personnel, lead to the delisting of our securities from the stock exchange on which they are traded, lead to litigation claims, thereby diverting management’s attention and resources, and which may lead to the payment of damages to the extent such claims are not resolved  in our favor, lead to regulatory proceedings, which may result in sanctions, monetary or otherwise, and have a materially adverse effect on our reputation and business.

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RISKS RELATED TO OUR OWNERSHIP OF OUR COMMON STOCK AND THIS OFFERING

There is no current trading market for our common stock, and there is no assurance of an established public trading market, which would adversely affect the ability of our investors to sell their securities in the public market.
 
Our common stock is not currently listed or quoted for trading on any national securities exchange or national quotation system.  We have applied for the listing of our common stock on the NYSE Amex.  There is no guarantee that the NYSE Amex, or any other securities exchange or quotation system, will permit our shares to be listed and traded.  If we fail to obtain a listing on the NYSE Amex, we will not complete this offering.  Even if such listing is approved, there can be no assurance that any broker will be interested in trading our stock.  Our underwriters are not obligated to make a market in our securities and, even after making a market, can discontinue market making at any time without notice.

The market price and trading volume of shares of our common stock may be volatile.

When and if a market develops for our securities, the market price of our common stock could fluctuate significantly for many reasons, including for reasons unrelated to our specific performance, such as reports by industry analysts, investor perceptions, or negative announcements by customers, competitors or suppliers regarding their own performance, as well as general economic and industry conditions. For example, to the extent that other large companies within our industry experience declines in their share price, our share price may decline as well. In addition, when the market price of a company’s shares drops significantly, shareholders could institute securities class action lawsuits against the company. A lawsuit against us could cause us to incur substantial costs and could divert the time and attention of our management and other resources.
 
Shares eligible for future sale may adversely affect the market price of our common stock, as the future sale of a substantial amount of outstanding stock in the public marketplace could reduce the price of our common stock.
 
In addition to the 1,400,000 shares of common stock offered in this offering, the registration statement of which this prospectus is a part also covers 1,034,403 shares of our common stock issued in a private placement that closed concurrently with the Share Exchange on April 30, 2010.  Each investor in the Private Placement may sell or transfer any shares of the common stock after the effective date of the registration statement except that they, along with all of our pre-Share Exchange stockholders, entered into a lock-up agreement pursuant to which they agreed that (i) if the proposed public offering that we hope to conduct is for $10 million or more, then the investors would not be able sell or transfer their shares until at least six months after the public offering’s completion, and (ii) if the offering is for less than $10 million, then one-tenth of the investors’ shares would be released from the lock-up restrictions ninety days after offering and there would be a pro rata release of the shares thereafter every 30 days over the following nine months.  We currently intend this offering to be in an amount less than $10 million. However, there can be no assurance of the actual size of this offering.

WestPark Capital, the placement agent in the Private Placement, in its sole discretion, may allow early releases under the referenced lock-up restrictions provided however any such early release shall be made pro rata with respect to all investors’ shares acquired in the Private Placement.

We have also agreed to register shares of common stock held by our stockholders immediately prior to the Share Exchange and all of the shares of common stock underlying the warrants held by our stockholders immediately prior to the Share Exchange, both of which total 1,178,956 shares of common stock.  All of the shares included in an effective registration statement may be freely sold and transferred, subject to any applicable lock-up agreement.

Additionally, the former shareholders of CD Media BVI and their designee received 5,539,000 shares of common stock in the Share Exchange, and may be eligible to sell all or some of our shares of common stock by means of ordinary brokerage transactions in the open market pursuant to Rule 144, promulgated under the Securities Act (“Rule 144”), subject to certain limitations.  Under Rule 144, an affiliate stockholder who has satisfied the required holding period may, under certain circumstances, sell within any three-month period a number of securities which does not exceed the greater of 1% of the then outstanding shares of common stock or the average weekly trading volume of the class during the four calendar weeks prior to such sale.  Immediately prior to this offering, 1% of our issued and outstanding shares of common stock was approximately 73,407 shares.  Non-affiliate stockholders are not subject to volume limitations.  Any substantial sale of common stock pursuant to any resale prospectus or Rule 144 may have an adverse effect on the market price of our common stock by creating an excessive supply.

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If you purchase securities in this offering, you will suffer immediate dilution of your investment.
 
Assuming our sale of 1,400,000 shares of common stock at an assumed public offering price of $6.50 per share of common stock, which is the mid-point of the estimated initial offering price range set forth on the cover of this prospectus, and after deducting the underwriting discount and commissions and estimated offering expenses, our as-adjusted net tangible book value as of September 30, 2010 would be approximately $35.2 million, or $4.03 per share of common stock outstanding, based on 8,740,748 after this offering.  The sale of 1,400,000 shares of common stock in this offering represents an immediate increase in net tangible book value of $0.20 per share of common stock to our existing stockholders and an immediate dilution of $2.47 per share of common stock to the new investors purchasing common stock in this offering.  There would be further dilution when our outstanding warrants to purchase 411,611 shares of common stock are exercised at $0.000344 per share.  In addition, purchasers of common stock in this offering will have contributed approximately 60.3% of the aggregate price paid by all owners of our common stock but will own only approximately 15.3% of our common stock outstanding after this offering, assuming the exercise of our outstanding warrants to purchase 411,611 shares.
 
The former shareholders of CD Media BVI and their designee have significant influence over us.

Collectively, the former shareholders of CD Media BVI and their designee beneficially own or control approximately 75.5% of our outstanding common stock prior to the completion of this offering.  Three of the former shareholders of CD Media BVI, HuiHua Li, our Chairman of the Board, HaiMing Fu, our Chief Executive Officer and ZhiFeng Yan, one of our directors, collectively beneficially own or control approximately 31.1% of our outstanding common stock prior to the completion of this offering.
 
As a result, the former shareholders of CD Media BVI and their designee have significant influence over our company and they, with their combined share ownership, have a controlling influence in determining the outcome of any corporate transaction or other matters submitted to our stockholders for approval, including mergers, consolidations and the sale of all or substantially all of our assets, election of directors, and other significant corporate actions.  The designee is an unaffiliated third party who was not a shareholder of CD Media BVI prior to the Share Exchange, and none of the former shareholders of CD Media BVI has control over the shares held by such designee.  While there is no agreement among the former shareholders of CD Media BVI and the designee to vote their shares in any particular manner, should these stockholders vote together they  would have the power to prevent or cause a change in control.  In addition, without the consent of these stockholders, we could be prevented from entering into transactions that could be beneficial to us.  The interests of these stockholders may differ from the interests of our other stockholders.

We have broad discretion in the use of the net proceeds from this offering and may not use them effectively.

Our management will have broad discretion in the application of the net proceeds from this offering and could spend the proceeds in ways that do not improve our results of operations or enhance the value of our securities. We intend to use the net proceeds for working capital and general corporate purposes.  The failure by our management to apply these funds effectively could result in financial losses that could have a material adverse effect on our business and cause the price of our securities to decline. Pending the application of these funds, we may invest the net proceeds from this offering in a manner that does not produce income or that loses value.

For a further description of our intended use of the proceeds of this offering, see the “Use of Proceeds” section of this prospectus.

If we fail to maintain effective internal controls over financial reporting, the price of our common stock may be adversely affected.

We are required to establish and maintain appropriate internal controls over financial reporting. Failure to establish those controls, or any failure of those controls once established, could adversely impact our public disclosures regarding our business, financial condition or results of operations. Any failure of these controls could also prevent us from maintaining accurate accounting records and discovering accounting errors and financial frauds. Rules adopted by the SEC pursuant to Section 404 of the Sarbanes-Oxley Act of 2002 require annual assessment of our internal control over financial reporting. The standards that must be met for management to assess the internal control over financial reporting as effective are new and complex, and require significant documentation, testing and possible remediation to meet the detailed standards. We may encounter problems or delays in completing activities necessary to make an assessment of our internal control over financial reporting. In addition, the attestation process by our independent registered public accountants is new and we may encounter problems or delays in completing the implementation of any requested improvements and receiving an attestation of our assessment by our independent registered public accountants. If we cannot assess our internal control over financial reporting as effective, or our independent registered public accountants are unable to provide an unqualified attestation report on such assessment, investor confidence and share value may be negatively impacted.

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In addition, management’s assessment of internal controls over financial reporting may identify weaknesses and conditions that need to be addressed in our internal controls over financial reporting or other matters that may raise concerns for investors. Any actual or perceived weaknesses and conditions that need to be addressed in our internal control over financial reporting or disclosure of management’s assessment of our internal controls over financial reporting may have an adverse impact on the price of our common stock.
 
Our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were ineffective as of June 30, 2010.  If we are unable to maintain the correct steps taken after June 30, 2010 to improve our disclosure controls and procedures, the market price of our common stock may be adversely affected.

As a U.S. public company, we must maintain disclosure controls and procedures that ensure that information required to be disclosed by us in reports filed or submitted to the SEC under the Exchange Act is recorded, processed, summarized and reported, within the requisite time periods.  Disclosure controls and procedures ensure that information required to be disclosed by us in our Exchange Act reports is accumulated and communicated to the appropriate members of our management team to allow management to make timely decisions regarding required disclosure.  Our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were ineffective as of June 30, 2010 due our accounting staff’s inability to speak or read English.  In an effort to strengthen our disclosure controls and procedures, we hired a new Chief Financial Officer on July 28, 2010 who can speak and read English fluently.  In addition, our Chief Executive Officer, Chief Financial Officer and other members of our accounting staff hold meetings at least monthly to discuss Company business, operating results and other business transactions to ensure that we are able to disclose accurate information in a timely manner with the SEC.  Additionally, the Company has purchased access to a professional accounting website, which explains SEC reporting rules and regulations and provides examples and guidance on how to provide adequate disclosure. As a result of our taking such actions, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures as of September 30, 2010 were effective.  Although we were able to conclude that our disclosure controls and procedures were effective as of September 30, 2010, we cannot assure you that we will be able to conclude in the future that our disclosure controls and procedures are effective.  Establishing and maintaining effective disclosure controls and procedures can be difficult and costly, and could require us to take additional actions to ensure our disclosure controls are effective, such as providing additional training to existing employees, forming a disclosure committee and hiring additional personnel.  If we are unable to implement and maintain effective disclosure controls and procedures, the market price of our common stock may be adversely affected.

 
We may not be able to achieve the benefits we expect to result from the Share Exchange.
 
On April 23, 2010, we entered into an Amended and Restated Share Exchange Agreement with CB Media BVI, the shareholders of CD Media BVI, CD Media Beijing and CD Media Huizhou, pursuant to which we agreed to acquire 100% of the issued and outstanding securities of CD Media BVI in exchange for shares of our common stock.  On April 30, 2010, the Share Exchange closed, CD Media BVI became our 100%-owned subsidiary, and our sole business operations became that of CD Media BVI and its subsidiaries and CD Media Beijing.  We also have a new Board of Directors and management consisting of persons from CD Media BVI and changed our corporate name from SRKP 25, Inc. to China Century Dragon Media, Inc.

We may not realize the benefits that we hoped to receive as a result of the Share Exchange, which include:
 
 
·
access to the capital markets of the United States;
 
 
· 
the increased market liquidity expected to result from exchanging stock in a private company for securities of a public company that may eventually be traded;
 
 
·
the ability to use registered securities to make acquisition of assets or businesses;
 
 
·
increased visibility in the financial community;
 
 
·
enhanced access to the capital markets;
 
 
·
improved transparency of operations; and
 
 
·
perceived credibility and enhanced corporate image of being a publicly traded company.
 
There can be no assurance that any of the anticipated benefits of the Share Exchange will be realized with respect to our new business operations.  In addition, the attention and effort devoted to achieving the benefits of the Share Exchange and attending to the obligations of being a public company, such as reporting requirements and securities regulations, could significantly divert management’s attention from other important issues, which could materially and adversely affect our operating results or stock price in the future.

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Compliance with changing regulation of corporate governance and public disclosure will result in additional expenses.
 
Changing laws, regulations and standards relating to corporate governance and public disclosure, including the Sarbanes-Oxley Act of 2002 and related SEC regulations, have created uncertainty for public companies and significantly increased the costs and risks associated with accessing the public markets and public reporting. For example, on January 30, 2009, the SEC adopted rules requiring companies to provide their financial statements in interactive data format using the eXtensible Business Reporting Language, or XBRL. We will have to comply with these rules by June 15, 2011. Our management team will need to invest significant management time and financial resources to comply with both existing and evolving standards for public companies, which will lead to increased general and administrative expenses and a diversion of management time and attention from revenue generating activities to compliance activities.
 
Our common stock may be considered a “penny stock,” and thereby be subject to additional sale and trading regulations that may make it more difficult to sell.
 
Our common stock, which is not currently listed or quoted for trading, may be considered to be a “penny stock” if it does not qualify for one of the exemptions from the definition of “penny stock” under Section 3a51-1 of the Exchange Act, once, and if, it starts trading.  Our common stock may be a “penny stock” if it meets one or more of the following conditions (i) the stock trades at a price less than $5.00 per share; (ii) it is NOT traded on a “recognized” national exchange; (iii) it is NOT quoted on the Nasdaq Capital Market, or even if so, has a price less than $5.00 per share; or (iv) is issued by a company that has been in business less than three years with net tangible assets less than $5 million.

The principal result or effect of being designated a “penny stock” is that securities broker-dealers participating in sales of our common stock will be subject to the “penny stock” regulations set forth in Rules 15-2 through 15g-9 promulgated under the Exchange Act.  For example, Rule 15g-2 requires broker-dealers dealing in penny stocks to provide potential investors with a document disclosing the risks of penny stocks and to obtain a manually signed and dated written receipt of the document at least two business days before effecting any transaction in a penny stock for the investor’s account.  Moreover, Rule 15g-9 requires broker-dealers in penny stocks to approve the account of any investor for transactions in such stocks before selling any penny stock to that investor.  This procedure requires the broker-dealer to (i) obtain from the investor information concerning his or her financial situation, investment experience and investment objectives; (ii) reasonably determine, based on that information, that transactions in penny stocks are suitable for the investor and that the investor has sufficient knowledge and experience as to be reasonably capable of evaluating the risks of penny stock transactions; (iii) provide the investor with a written statement setting forth the basis on which the broker-dealer made the determination in (ii) above; and (iv) receive a signed and dated copy of such statement from the investor, confirming that it accurately reflects the investor’s financial situation, investment experience and investment objectives.  Compliance with these requirements may make it more difficult and time consuming for holders of our common stock to resell their shares to third parties or to otherwise dispose of them in the market or otherwise.
 
If securities or industry analysts do not publish research or reports or publish unfavorable research about our business, the price and trading volume of our common stock could decline.

The trading market for our common stock will depend in part on the research and reports that securities or industry analysts publish about us or our business. We do not currently have and may never obtain research coverage by securities and industry analysts. If no securities or industry analysts commence coverage of us the trading price for our common stock and other securities would be negatively affected. In the event we obtain securities or industry analyst coverage, if one or more of the analysts who covers us downgrades our securities, the price of our securities would likely decline. If one or more of these analysts ceases to cover us or fails to publish regular reports on us, interest in the purchase of our securities could decrease, which could cause the price of our common stock and other securities and their trading volume to decline.

We do not foresee paying cash dividends in the foreseeable future and, as a result, our investors’ sole source of gain, if any, will depend on capital appreciation, if any.

We do not plan to declare or pay any cash dividends on our shares of common stock in the foreseeable future and currently intend to retain any future earnings for funding growth.  As a result, investors should not rely on an investment in our securities if they require the investment to produce dividend income.  Capital appreciation, if any, of our shares may be investors’ sole source of gain for the foreseeable future.  Moreover, investors may not be able to resell their shares of our common stock at or above the price they paid for them.

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CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
 
The information contained in this prospectus, including in the documents incorporated by reference into this prospectus, includes some statements that are not purely historical and that are “forward-looking statements.”  Such forward-looking statements include, but are not limited to, statements regarding our company’s and our management’s expectations, hopes, beliefs, intentions or strategies regarding the future, including our financial condition, results of operations, and the expected impact of the Share Exchange.  In addition, any statements that refer to projections, forecasts or other characterizations of future events or circumstances, including any underlying assumptions, are forward-looking statements.  The words “anticipates,” “believes,” “continue,” “could,” “estimates,” “expects,” “intends,” “may,” “might,” “plans,” “possible,” “potential,” “predicts,” “projects,” “seeks,” “should,” “will,” “would” and similar expressions, or the negatives of such terms, may identify forward-looking statements, but the absence of these words does not mean that a statement is not forward-looking.

The forward-looking statements contained in this prospectus are based on current expectations and beliefs concerning future developments and the potential effects on the parties and the transaction.  There can be no assurance that future developments actually affecting us will be those anticipated.  These forward-looking statements involve a number of risks, uncertainties (some of which are beyond the parties’ control) or other assumptions that may cause actual results or performance to be materially different from those expressed or implied by these forward-looking statements, including the following:
 
 
·
Our dependence on CCTV;
 
 
·
Our ability to continue obtaining advertising time slots aired on CCTV;
 
 
·
The continued strong market position and national coverage of CCTV channels;
 
 
·
CCTV’s continuing to use third party agencies to sell advertising time;
 
 
·
Our dependence on a limited number of suppliers for our advertising time;
 
 
·
Our lack of long-term contracts with our customers;
 
 
·
Our ability to adapt to changing advertising trends and preferences of advertisers, television channels and viewers;
 
 
·
Our limited ability to adjust the fees we charge for our services;
 
 
·
Our ability to purchase advertising time from satellite and regional television networks;
 
 
·
Our ability enter into new advertising media platforms;
 
 
·
Exposure to PRC governmental actions regarding the advertising content of our clients;
 
 
·
Exposure to intellectual property claims from third parties;
 
 
·
Our ability to raise additional capital to fund our operations;
 
 
·
Expected growth in consumer spending, average income levels and advertising spending levels;
 
 
·
Changes in the laws of the PRC that affect our operations and our corporate structure;
 
 
·
Inflation and fluctuations in foreign currency exchange rates;
 
 
·
Our ability to obtain all necessary government certifications, approvals, and/or licenses to conduct our business;
 
 
·
Development of a public trading market for our securities;
 
37

 
 
·
The cost of complying with current and future governmental regulations and the impact of any changes in the regulations on our operations; and
 
 
·
The other factors referenced in this Current Report, including, without limitation, under the sections entitled “Risk Factors,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” and “Business.”
 
The risks included above are not exhaustive. Other sections of this prospectus may include additional factors that could adversely impact our business and operating results.  Moreover, we operate in a very competitive and rapidly changing environment.  New risk factors emerge from time to time and we cannot predict all such risk factors, nor can we assess the impact of all such risk factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements.
 
You should not rely upon forward-looking statements as predictions of future events. We cannot assure you that the events and circumstances reflected in the forward-looking statements will be achieved or occur.  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.  Moreover, neither we nor any other person assume responsibility for the accuracy and completeness of the forward-looking statements.  Except as required by law, we undertake no obligation to update publicly any forward-looking statements for any reason after the date of this prospectus to conform these statements to actual results or to changes in our expectations.
 
You should read this prospectus, and the documents that we reference in this prospectus and have filed as exhibits to this prospectus with the Securities and Exchange Commission, completely and with the understanding that our actual future results, levels of activity, performance and achievements may materially differ from what we expect. We qualify all of our forward-looking statements by these cautionary statements.
 
38

 
USE OF PROCEEDS
 
Based on a per share offering price of $6.50, which is the midpoint of our estimated offering price range, we estimate that the net proceeds from the sale of the 1,400,000 shares of common stock in the offering will be approximately $7.2 million after deducting the estimated underwriting discounts and commissions of 9%, a non-accountable allowance of 2.5% and estimated offering expenses of approximately $950,000.

We intend to use approximately one-fifth of the net proceeds from this offering to invest in our present advertising business to obtain more advertising time, two-fifths of the net proceeds of this offering to obtain advertising time and cooperation rights on regional television stations; and two-fifths of the proceeds for general corporate purposes.    Other than as indicated in this Use of Proceeds section, we cannot specify with certainty the exact amounts that will be used for each purpose. The amounts and timing of our actual expenditures will depend on numerous factors, including the status of our development efforts, sales and marketing activities, the amount of cash generated or used by our operations and competition. We may find it necessary or advisable to use portions of the proceeds for other purposes, and we will have broad discretion in the application of the net proceeds. We have no current intentions to acquire any other businesses. Pending these uses, the proceeds will be invested in short-term, investment grade, interest-bearing securities.

Circular 142 promulgated by SAFE regulates the conversion of foreign currency into Renminbi by a foreign-invested company like CD Media Huizhou and restricts how the converted Renminbi may be used. To the extent that we need to convert the net proceeds of this offering that has been injected in the registered capital of CD Media Huizhou into Renminbi, we will be subject to the restrictions of Circular 142. Pursuant to Circular 142, the registered capital of a foreign-invested company, like CD Media Huizhou, settled in Renminbi converted from foreign currencies may only be used for purposes within the business license approved by the applicable governmental authority and may not be used for equity investments within the PRC. Although, the scope of CD Media Huizhou’s business license is limited, the providing of financing activities by CD Media Huizhou to CD Media Beijing would not be regarded as outside the scope of CD Media Huizhou’s business license because such financing activities are consistent with various forms of commercial and business cooperation transactions that are in compliance with the business scope of both CD Media Huizhou and CD Media Beijing. CD Media Huizhou’s financing transactions with CD Media Beijing to fund CD Media Beijing’s advertising activities would not cause CD Media Huizhou to engage in or conduct advertising activities outside the scope of its license. In addition, the use of such registered capital may not be changed without SAFE’s approval, and may not in any case be used to repay Renminbi loans if the proceeds of such loans have not been used. We intend to convert most of the proceeds of the offering in Renminbi in order to use them in our operations in the PRC as described above.

Some of the proceeds from this offering may be invested in CD Media Huizhou as a “shareholder loan,” up to an amount equal to the total investment amount for CD Media Huizhou approved by the relevant PRC government authority less the total approved registered capital of CD Media Huizhou. Shareholder loans shall be registered with SAFE to become effective. Although Circular 142 does not specifically subject shareholder loans to its limitations and restrictions of conversion and usage of foreign currency, in practice, SAFE would apply such limitations and restrictions as principle in granting the registration of shareholder loans and therefore limit and restrict the usage of shareholder loans registered with SAFE. Currently, because the total investment amount for CD Media Huizhou is approximately $2,577,320, we are currently not able to make any shareholder loans to CD Media Huizhou. We are currently in the process of applying for an updated total approved investment amount and registered capital amount of HK$100,000,000 (approximately $12,879,958) and HK $60,000,000 (approximately $7,727,975), respectively, which will allow us to make shareholder loans. All proceeds invested as registered capital and/or as a shareholder loan to CD Media Huizhou can be used by the company for its business purposes.
 
If the application for the increase of the approved investment amount and registered capital amount of CD Media Huizhou is not approved by the competent authority, we may not be able to bring the proceeds of this offering into China by making a contribution to the registered capital of CD Media Huizhou or extending any foreign exchange shareholder loans to CD Media Huizhou, which are the two most efficient methods for bringing the proceeds into China from a cost, tax and time standpoint. It is very unlikely that such application will not be approved by the competent authority because there are no specific prohibitions to increasing the approved investment amount and registered capital amount of CD Media Huizhou under PRC law which would cause such application to be rejected by the competent authority. One factor that the competent authority will consider in granting the approval is whether the applied amounts match the needs of the business development of CD Media Huizhou. We believe that CD Media Huizhou has established a reasonable and justified application for an increase in its registered capital and approved investment amount based on its business needs and there is little chance that the application will be rejected on this basis. If the application is not approved, the Company could bring the proceeds into China by setting up other companies similar to CD Media Huizhou and then having those companies enter into financing/commercial relationships with CD Media Beijing. The formation of such financing/commercial relationships with CD Media Beijing may increase our tax burdens in China.
 
39

 
The Underwriters have a 45-day option to purchase up to 210,000 additional shares of common stock at the public offering price solely to cover over-allotments, if any, if the Underwriters sell more than 1,400,000 shares of common stock in this offering.

 
We do not expect to declare or pay any cash dividends on our common stock in the foreseeable future, and we currently intend to retain future earnings, if any, to finance the expansion of our business. The decision whether to pay cash dividends on our common stock will be made by our board of directors, in its discretion, and will depend on our financial condition, operating results, capital requirements and other factors that the board of directors considers significant.  We did not pay cash dividends for the years ended December 31, 2009, 2008, and 2007.

Under applicable PRC regulations, foreign-invested enterprises in China may pay dividends only out of their accumulated profits, if any, determined in accordance with PRC accounting standards and regulations. In addition, a foreign-invested enterprise in China is required to set aside at least 10.0% of its after-tax profit based on PRC accounting standards each year to its statutory reserve until the accumulative amount of such reserve reaches 50.0% of its registered capital. The funds in the statutory reserve are not distributable as cash dividends, and may be used only for the following purposes:  covering deficits of the company; expanding the company’s production and operations; and increasing the company’s registered capital.  If a company’s statutory reserve is not sufficient to cover its accumulated deficits, then its profits for the current year must first be applied to cover such deficits before being set aside to the statutory reserve.  A PRC company may only distribute dividends from its net profits after the above requirements for covering previous deficits and supplementing the statutory reserve are satisfied; otherwise, its shareholders who receive dividends distributed in violation with the above requirements must return such dividends to the company. The board of directors of a foreign-invested enterprise has the discretion to allocate a portion of its after-tax profits to staff welfare and bonus funds, which may not be distributed to equity owners except in the event of liquidation.
 
In general, PRC law allows foreign invested companies to declare and pay dividends, however, dividends can only be paid out of net accumulated profits of our direct subsidiary, CD Media Huizhou, and only when CD Media Huizhou has enough net assets to pay the dividends after its previous deficits are covered and the mandatory requirement of supplementing the statutory reserve is satisfied.   Any dividends distributed to its shareholder, CD Media BVI, in violation of the above requirements must be returned to CD Media Huizhou.  Currently, and during all of the periods presented in this prospectus, substantially all of our net profits and net assets are held by CD Media Beijing.  As a result, dividends are restricted until such time that we generate net profits in our wholly-owned subsidiary, CD Media Huizhou, which will be derived from the management fees payable to CD Media Huizhou by CD Media Beijing pursuant to the Exclusive Business Cooperation Agreement. CD Media Huizhou has not yet received any management fee payments from CD Media Beijing.  CD Media Huizhou has accumulated deficits of $2,178 for the year ended December 31, 2009. Therefore, it has no retained earnings which can be declared and distributed as dividends outside of China.
 
Because all of our operations are conducted in the PRC, substantially all of our revenues and expenses are denominated in Renminbi (RMB).  Under PRC law, the conversion of RMB into U.S. dollars is subject to various restrictions.  The remittance of dividends in U.S. dollars out of China by a foreign invested Chinese company is subject to administrative procedural requirements promulgated by SAFE.  A bank processing a payment of dividends must review and approve the dividend payment application submitted by a foreign invested Chinese company, such as CD Media Huizhou, using the administrative procedures promulgated by SAFE.  CD Media Huizhou's failure to meet these requirements could prevent us from paying dividends to shareholders outside China.
 
Our inability to receive dividends or other payments from our Chinese subsidiary, CD Media Huizhou, could adversely limit our ability to grow, make investments or acquisitions that could be beneficial to our business, pay dividends, or otherwise fund and conduct our business. Our funds may not be readily available to us to satisfy obligations which have been incurred outside the PRC, which could adversely affect our business and prospects or our ability to meet our cash obligations. Accordingly, if we do not receive dividends from CD Media Huizhou, our liquidity, financial condition and ability to make dividend distributions to our stockholders will be materially and adversely affected.
 
40

 
CAPITALIZATION
 
The following table sets forth our capitalization as of September 30, 2010 (unaudited) on:

 
·
an actual basis, which consists of
 
 
 (i)
the 5,539,000 shares of common stock that were issued to the shareholders of CD Media BVI and their designee pursuant to the Share Exchange as outstanding as of September 30, 2010, as the Share Exchange was accounted for as a reverse merger and a recapitalization CD Media BVI and its subsidiaries (see Note 1 to the financial statements);
 
 
 (ii)
the 767,345 shares of common stock outstanding immediately prior to the Share Exchange after giving effect to the cancellation of 1,290,615 shares in connection with the Share Exchange that closed on April 30, 2010; and
 
 
 (iii)
the 1,034,403 shares of common stock at $5.17 per share in the Private Placement that closed concurrently with the Share Exchange pursuant to which we received approximately $3.7 million (unaudited) in net proceeds; and

 
·
an as adjusted basis to reflect our receipt of estimated net proceeds of approximately $7.2 million from the sale of 1,400,000 shares of common stock in this offering at an assumed public offering price of $6.50, which is the mid-point of the estimated range of the per share offering price, and after deducting estimated underwriting discounts of 9%, a non-accountable allowance of 2.5% and commissions and estimated offering expenses of approximately $950,000.
 
You should read this table in conjunction with “Use of Proceeds,” “Summary Financial Information,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our consolidated financial statements and related notes included elsewhere in this prospectus.

   
September 30, 2010
 
   
Actual
   
As Adjusted
 
   
(amounts in thousands)
 
Due to Related Parties
  $ 1     $ 1  
Stockholders’ equity:
               
Preferred stock, $0.0001 par value, 10,000,000 shares authorized, none issued and outstanding
  $ -     $ -  
Common stock, $0.0001 par value, 100,000,000 shares authorized, 7,340,748 shares issued and outstanding on an actual basis and 8,740,748 issued and outstanding on an as-adjusted basis (1)
    1       1  
Additional paid-in capital
    5,167       12,270  
Accumulated other comprehensive income
    941       941  
Statutory surplus reserve fund
    790       790  
Retained earnings
    21,225       21,225  
Total stockholders’ equity
  $ 28,124     $ 35,227  
Total capitalization
  $ 28,125     $ 35,278  
 _____
(1)
The number of our shares of common stock shown above to be outstanding after this offering is based on (i) 7,340,748 shares of common stock issued and outstanding as of September 30, 2010.  The number (i) excludes the 210,000 shares of our common stock that we may issue upon the Underwriters’ over-allotment option exercise, (ii) excludes the 411,611 shares of common stock that will be issued upon the exercise of outstanding warrants exercisable at $0.000344 per share; and (iii) excludes the 70,000 shares of common stock underlying warrants that will be issued to the Underwriters upon completion of this offering.

MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
 
There has never been a public trading market for our common stock and our shares of common stock are not currently listed or quoted for trading on any national securities exchange or national quotation system.  We have applied for the listing of our common stock on the NYSE Amex.  As of the date of this prospectus, we had 140 stockholders of record.

41

 
DILUTION
 
If you invest in our shares of common stock, you will incur immediate, substantial dilution based on the difference between the public offering price per share you will pay in this offering and the net tangible book value per share of common stock immediately after this offering.

As of September 30, 2010, we had 7,340,748 shares of common stock outstanding, which consists of (i) the 5,539,000 shares of common stock that were issued to the former shareholders of CD Media BVI and their designee pursuant to the Share Exchange, which was accounted for as a reverse merger and a recapitalization CD Media BVI and its subsidiaries (see Note 1 to the financial statements); (ii) the 767,345 shares of common stock outstanding immediately prior to the Share Exchange after the cancellation of 1,290,615 shares in connection with the Share Exchange, and (iii) the sale and issuance of 1,034,403 shares of common stock at $5.17 per share in the Private Placement that closed concurrently with the Share Exchange pursuant to which we received approximately $3.7 million (unaudited) in net proceeds.

Our net tangible book value as of September 30, 2010 was approximately $28.1 million, or $3.83 per share (unaudited) based on 7,340,748 shares of common stock outstanding.   Based on the mid-range point of the per share offering price of $6.50, investors will incur further dilution from the sale by us of 1,400,000 shares of common stock offered in this offering, and after deducting the estimated underwriting discount and commissions of 9%, a non-accountable allowance of 2.5% and estimated offering expenses of $950,000, our as adjusted net tangible book value as of September 30, 2010 would have been $35.2 million, or $4.03 per share, based on 8,740,748 after this offering.  This represents an immediate increase in net tangible book value of $0.20 per share to our existing stockholders and an immediate dilution of $2.47 per share to the new investors purchasing shares of common stock in this offering.

The following table illustrates this per share dilution, excluding 411,611 shares issuable upon the exercise of outstanding warrants at $0.000344 per share:
 
Assumed public offering price per share (mid-range price)
        $ 6.50  
Net tangible book value per share as of September 30, 2010
  $ 3.83          
Increase per share attributable to new public investors
  $ 0.20          
                 
Net tangible book value per share after this offering
          $ 4.03  
                 
Dilution per share to new public investors
          $ 2.47  

Furthermore, our stockholders hold warrants to purchase 411,611 shares of common stock at a per share exercise price of $0.000344.  If all of the warrants were exercised, the as-adjusted net tangible book value per share as of September 30, 2010 would decrease to $3.85 per share after this offering, which would represent an immediate increase in net tangible book value of $0.02 per share to our existing stockholders and an immediate dilution of $2.65 per share to the new investors purchasing shares of common stock in this offering.

The following table sets forth, on an as-adjusted basis as of September 30, 2010, the difference between the number of shares of common stock purchased from us, the total cash consideration paid, and the average price per share paid by our existing stockholders and the average price to be paid by new investors in this public offering before deducting estimated underwriting discounts and commissions and estimated offering expenses payable by us, using an assumed public offering price of $6.50 per share of common stock.

The shares outstanding as of September 30, 2010 on an actual basis includes:

 
·
5,539,000 shares of common stock that was issued to the shareholders of CD Media BVI and their designee pursuant to the Share Exchange that closed on April 30, 2010;
 
 
·
767,345 shares of common stock and 411,611 shares of common stock underlying currently outstanding warrants, each held by the original SRKP 25, Inc. stockholders, with the warrants being exercisable at $0.000344 per share; and
 
 
·
1,034,403 shares of common stock sold at $5.17 per share in our Private Placement that closed concurrently with the Share Exchange.
 
42

 
   
Shares Purchased
   
Total Cash Consideration
       
   
Number
   
Percent
   
Amount
(in thousands)
   
Percent
   
Average Price
Per Share
 
Shares issued to shareholders of CD Media BVI in the Share Exchange
    5,539,000       60.5 %   $ 632       4.2 %   $ 0.11  
Shares held by original SRKP 25, Inc. stockholders after Share Exchange, including assumed exercise of warrants to purchase 411,611 shares of common stock at $0.000344 per share
    1,178,956       12.9 %   $ 2       0 %   $ 0.00  
Investors in the Private Placement
    1,034,403       11.3 %   $ 5,350       35.5 %   $ 5.17  
New investors in this offering
    1,400,000       15.3 %   $ 9,100       60.3 %   $ 6.50  
                                         
Total 
    9,152,359       100.0 %   $ 15,084       100.0 %        

The total consideration amount for shares of common stock held by our existing stockholders includes total cash paid for our outstanding shares of common stock, including imputed interest allocated for interest free loans that we have received from related parties, as of September 30, 2010 and excludes the value of securities that we have issued for services.  If the Underwriters’ over-allotment option of 210,000 shares of common stock is exercised in full, the number of shares held by existing stockholders will be reduced to 82.8% of the total number of shares that will be outstanding after this offering, and the number of shares held by the new investors in this offering will be increased to 1,610,000 shares, or 17.2% of the total number of shares of common stock outstanding after this offering.

Unless otherwise noted, the number of our shares outstanding after this offering as shown above (i) excludes the 210,000 shares of our common stock that we may issue upon the Underwriters’ over-allotment option exercise.

We may choose to raise additional capital due to market conditions or strategic considerations even if we believe we have sufficient funds for our current or future operating plans. To the extent that additional capital is raised through the sale of equity or convertible debt securities, the issuance of these securities could result in further dilution to our stockholders.
 
43


 
SELECTED CONSOLIDATED FINANCIAL DATA
 
The following selected consolidated financial data contains (i) consolidated statement of operations data for each of the years in the five-year period ended December 31, 2009 and the nine months ended September 30, 2010 and 2009 and (ii) the consolidated balance sheet data as of year-end for each of the years in the five-year period ended December 31, 2009 and as of September 30, 2010.  The consolidated statement of operations data and balance sheet data were derived from the audited consolidated financial statements, except for data for the years ended and as of December 31, 2006 and 2005 and the nine months ended and as of September 30, 2010 and 2009. Such financial data should be read in conjunction with the consolidated financial statements and the notes to the consolidated financial statements starting on page F-1 and with “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”  Share and per share information has been adjusted to reflect a reverse stock split that was effected on January 14, 2011 in which every 3.4482759 shares of our common stock was converted into 1 share of our common stock.
 
Consolidated Statements of Operations
 
Nine Months Ended September 30,
   
Years Ended December 31,
 
   
2010
   
2009
   
2009
   
2008
   
2007
   
2006
   
2005
 
   
(unaudited)
   
(unaudited)
                     
(unaudited)
   
(unaudited)
 
   
(all amounts are in US Dollars and in thousands, except share and per share amounts)
 
                                           
Revenues
  $ 69,712     $ 38,104     $ 74,480     $ 44,684     $ 17,103     $ 6,231     $ 1,926  
Gross profit
    13,859       7,185       14,734       8,186       4,264       1,417       (66 )
Income (loss) from continuing operations
    7,109       4,069       9,010       4,605       1,223       711       (130 )
Income from discontinued operations
    235       -       -       -       -       -       -  
Net income (loss)
  $ 7,344     $ 4,069     $ 9,010     $ 4,605     $ 1,223     $ 711     $ (130 )
Earnings per share - Basic
                                                       
Earnings per share from continuing operations
  $ 1.08     $ 0.73     $ 1.63     $ 0.83     $ 0.22     $ 0.13     $ (0.02 )
Earnings per share from discontinued operations
  $ 0.04     $ -     $ -     $ -     $ -     $ -     $ -  
Earnings per share
  $ 1.12     $ 0.73     $ 1.63     $ 0.83     $ 0.22     $ 0.13     $ (0.02 )
Earnings per share - Diluted
                                                       
Earnings per share from continuing operations
  $ 1.02     $ 0.73     $ 1.63     $ 0.83     $ 0.22     $ 0.13     $ (0.02 )
Earnings per share from discontinued operations
  $ 0.03     $ -     $ -     $ -     $ -     $ -     $ -  
Earnings per share
  $ 1.05     $ 0.73     $ 1.63     $ 0.83     $ 0.22     $ 0.13     $ (0.02 )
Weighted average shares outstanding – basic
    6,555,371       5,539,000       5,539,000       5,539,000       5,539,000       5,539,000       5,539,000  
Weighted average shares outstanding – diluted
    6,966,982       5,539,000       5,539,000       5,539,000       5,539,000       5,539,000       5,539,000  
 
Consolidated Balance Sheets
 
As of September 30,
   
As of December 31,
 
   
2010
   
2009
   
2008
   
2007
   
2006
   
2005
 
   
(unaudited)
                     
(unaudited)
   
(unaudited)
 
   
(all amounts are in US Dollars and in thousands)
Total Current Assets
  $ 30,946     $ 13,678     $ 11,158     $ 4,545     $ 2,265     $ 1,443  
Total Assets
    30,973       20,532       11,188       4,564       2,267       1,443  
Total Current Liabilities
    2,848       4,844       4,579       2,767       1,777       2,229  
Total Liabilities
    2,849       4,844       4,579       2,767       1,777       2,229  
Total Stockholders' Equity (Deficiency)
    28,124       15,687       6,609       1,797       490       (786 )
 
The acquisition of CD Media BVI by us on April 30, 2010 pursuant to the Share Exchange was accounted for as a recapitalization by us. The recapitalization was, at the time of the Share Exchange, the merger of a private operating company (CD Media BVI) into a non-operating public shell corporation (us) with nominal net assets and as such is treated as a capital recapitalization, rather than a business combination. As a result, the assets of the operating company are recorded at historical cost. The transaction is the equivalent to the issuance of stock by the private company for the net monetary assets of the shell corporation. The pre-acquisition financial statements of CD Media BVI are treated as the historical financial statements of the consolidated companies. The financial statements presented will reflect the change in capitalization for all periods presented, therefore the capital structure of the consolidated enterprise, being the capital structure of the legal parent, is different from that appearing in the financial statements of CD Media BVI in earlier periods due to this recapitalization.

44


MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
 
Forward-Looking Statements

The following discussion of our financial condition and results of operations should be read in conjunction with our financial statements and the related notes, and the other financial information included in this prospectus.

This prospectus contains forward-looking statements.  The words “anticipated,” “believe,” “expect, “plan,” “intend,” “seek,” “estimate,” “project,” “could,” “may,” and similar expressions are intended to identify forward-looking statements.  These statements include, among others, information regarding future operations, future capital expenditures, and future net cash flow.  Such statements reflect our management’s current views with respect to future events and financial performance and involve risks and uncertainties, including, without limitation, the current economic downturn adversely affecting demand for the our products; our reliance on our major customers for a large portion of our net sales; our ability to develop and market new products; our ability to raise additional capital to fund our operations; our ability to accurately forecast amounts of supplies needed to meet customer demand; market acceptance of our products; exposure to product liability and defect claims; fluctuations in the availability of raw materials and components needed for our products; protection of our intellectual property rights; changes in the laws of the PRC that affect our operations; inflation and fluctuations in foreign currency rates and various other matters, many of which are beyond our control.  Should one or more of these risks or uncertainties occur, or should underlying assumptions prove to be incorrect, actual results may vary materially and adversely from those anticipated, believed, estimated or otherwise indicated.  Consequently, all of the forward-looking statements made in this prospectus are qualified by these cautionary statements and there can be no assurance of the actual results or developments.

Overview
 
Through CD Media Beijing, we are engaged in the promotion, sale and marketing of advertising packages on China television stations. We mainly purchase advertising time packages that air on CCTV-1, CCTV-2 and CCTV-3, three of the main channels of CCTV, the state television station of the PRC, which we repackage and sell to our customers.   Currently we obtain almost all of our advertising time from third parties that act as agents for the sale of advertising time slots by CCTV.  During the nine months ended September 30, 2010, we obtained a very small amount of advertising time directly from CCTV, consisting of 8 minutes on channel CCTV-1.
 
Our advertising business includes securing all or a portion of advertising time and other advertising rights, which include soft advertising, such as sponsorship, on a specific television channel or program.  We derive revenues in these cases from selling the advertising media resources that we have acquired to advertisers.

Recent Events
 
On October 27, 2010, our Board of Directors and stockholders approved an amendment to our Certificate of Incorporation to effect a 1-for-3.4482759 reverse stock split of all of our issued and outstanding shares of common stock (the “Reverse Stock Split”). On January 14, 2011, we filed the amendment to the Certificate of Incorporation with the Secretary of the State of Delaware.  The par value and number of authorized shares of our common stock remained unchanged. All references to number of shares and per share amounts included in this prospectus give effect to the Reverse Stock Split. The number of shares and per share amounts included in the consolidated financial statements and the accompanying notes, starting on page F-1, have been adjusted to reflect the Reverse Stock Split retroactively. Unless otherwise indicated, all outstanding shares and earnings per share information contained in this prospectus give effect to the Reverse Stock Split.
 
SRKP 25 entered into an amended and restated share exchange agreement effective April 23, 2010, with CD Media BVI, CD Media Huizhou, CD Media Beijing, and the shareholders of CD Media BVI pursuant to which the shareholders of CD Media BVI would transfer all of the issued and outstanding securities of CD Media BVI to SRKP 25 in exchange for 5,539,000 shares of SRKP 25’s common stock.  On April 30, 2010, the Share Exchange closed and CD Media BVI became a wholly-owned subsidiary of SRKP 25, which immediately changed its name to “China Century Dragon Media, Inc.” A total of 5,539,000 shares were issued to the former shareholders of CD Media BVI.  Prior to the closing of the Share Exchange and the closing of the Private Placement, the stockholders of SRKP 25 agreed to the cancellation of an aggregate of 1,290,615 shares and 1,646,349 warrants to purchase shares of common stock held by them such that there were 767,345 shares of common stock and warrants to purchase 411,611 shares of common stock owned by them immediately after the Share Exchange and Private Placement. The warrants are currently exercisable and expire on April 30, 2015.  We paid a $215,750 success fee to WestPark Capital for services provided in connection with the Share Exchange, including coordinating the share exchange transaction process, interacting with principals of the shell corporation and negotiating the definitive purchase agreement for the shell, conducting a financial analysis of CD Media BVI, conducting due diligence on CD Media BVI and its subsidiaries and managing the interrelationships of legal and accounting activities.

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Pursuant to the terms of the Share Exchange and a Registration Rights Agreement entered into with each of the original SRKP 25 stockholders, we agreed to register all of the 767,345 shares of common stock and all of the 1,419,333 shares of common stock underlying the 411,611 warrants held by the original SRKP 25 stockholders, all of which were outstanding immediately prior to the closing of the Share Exchange.  We originally agreed to include such shares in a subsequent registration statement (the “Subsequent Registration Statement”) that was to be filed on or before November 24, 2010 (the “Required Filing Date”), which is 10 days after the end of the six-month period that immediately followed the date on which we filed the registration statement of which this prospectus is a part.  We have not yet filed the Subsequent Registration Statement and have agreed with the other parties to the Registration Rights Agreement to extend the Required Filing Date such that we will file the registration statement covering these shares as soon as practicable after this offering.

We agreed to use reasonable efforts to cause the Subsequent Registration Statement to become effective within one hundred fifty (150) days after the Required Filing Date or the actual filing date, whichever is earlier, or one hundred eighty (180) days after the Required Filing Date or the actual filing date, whichever is earlier, if such Subsequent Registration Statement is subject to a full review by the SEC (the “Required Effectiveness Date”). In addition, we agreed to use our reasonable best efforts to maintain the registration statement effective for a period of 12 months at our expense.  We also agreed to a penalty provision pursuant to which we agreed that if we fail to file the Subsequent Registration Statement by the Required Filing Date or if it does not become effective on or before the Required Effectiveness Date we are required to issue, as liquidated damages, to each of the original SRKP 25 stockholders shares (the “Penalty Shares”) equal to a total of 0.0333% of their respective shares for each calendar day that the Subsequent Registration Statement has not been filed or declared effective by the SEC (and until the Subsequent Registration Statement is filed with or declared effective by the SEC), as applicable. However, no Penalty Shares shall be due to the original SRKP 25 stockholders if we are using our best efforts to cause the Subsequent Registration Statement to be filed and declared effective in a timely manner.  Although we have not yet filed the Subsequent Registration Statement to cover the shares held by the original SRKP 25 stockholders, the Company’s requirement to issue any Penalty Shares  related to the timely filing of the Subsequent Registration Statement has been waived based on the Company’s agreement to file the Subsequent Registration Statement as soon as practicable after this offering.
 
In addition, on April 30, 2010, concurrently with the close of the Share Exchange, we closed a private placement of shares of our common stock (the “Private Placement”).  Pursuant to subscription agreements entered into with the investors, we sold an aggregate of 1,034,403 shares of common stock at $5.17 per share.  As a result, we received gross proceeds in the amount of approximately $5.35 million. We paid WestPark Capital a commission equal to 10.0% with a non-accountable fee of 4.0% of the gross proceeds from the Private Placement.  We have also retained WestPark Capital for a period of five months following the closing of the Private Placement to provide us with financial consulting services for which we will pay WestPark Capital $4,000 per month.  Out of the proceeds of the Private Placement, we paid $300,000 to Keen Dragon Group Limited, a third party unaffiliated with CD Media BVI, the Company, or WestPark Capital for services as an advisor to the Company, including assisting in preparations for the Share Exchange and the Company’s listing of securities in the United States.

Factors Affecting Our Results of Operations

Material underlying drivers of our ability to maintain and increase our level of revenues include the unit advertising price that we are able to charge our customers, the overall volume of advertising time sold and enhancement of our portfolio of advertising time.  Our business, results of operations and financial condition are significantly affected by a number of factors and trends, including:

Ability to Obtain High Quality Advertising Time Slots on Favorable Terms
 
We depend on the high quality advertising time slots we obtain from third party providers for airing on CCTV for our advertising services. Almost all of our revenues for our advertising services are derived from the advertising time slots we obtain from these providers. We purchased a very small amount of advertising time directly from CCTV during the nine months ended September 30, 2010.  Our ability to continue to obtain our existing advertising time slots and to add additional high quality advertising time slots will have a significant effect on our results of operations.
 
The quality of advertising time slots available to us is measured based on the perceived effectiveness of advertisements placed during such time slots, which is in turn affected by the ratings and the geographical and demographic coverage of the relevant television programs. Our results of operations will be affected by any changes with respect to the popularity, rating or coverage of the television programs during which our advertising time slots occur.
 
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Our profitability also depends on the price of advertising time slots charged to us by these third party providers. These providers have been increasing the prices for many of their advertising time slots in recent years, and we expect that they will continue to raise such prices in the future. Our profit margin may be affected if we are not able to obtain the rights to these advertising time slots on favorable terms or pass on the increasing costs to our clients. If any other advertising agency is able to obtain such high quality advertising time slots on terms more favorable than ours, we may lose our clients and our revenues may decline.
 
Ability to Increase the Size, Quality and the Level of Diversification of Our Advertising Client Base

We compete for the advertising spending of advertisers with other advertising agencies, including both international advertising agencies and domestic Chinese advertising agencies, some of which are also our clients. From time to time these agencies introduce their clients to us, primarily due to our rights over certain advertising time slots on CCTV. We plan to continue to attract new business from potential clients, as well as to gain more business from our existing corporate clients, by increasing our sales efforts and by seeking opportunities to provide these clients with additional services. We will continue to improve the size, quality and level of diversification of our client base, leveraging the high quality advertising time slots we have obtained.

Level of Advertising Spending

Demand for our services and, as a result, growth in our revenues are driven by overall advertising spending in China, which is influenced by the pace of overall economic growth. We expect that the overall economic growth in China will contribute to an increase in advertising spending by international and domestic brand names looking to reach a growing consumer market. The global financial crisis and economic downturn in 2008 and 2009 adversely affected economies and businesses around the world, including those in China. We believe that, as the Chinese economy recovers from the adverse effects of the global financial crisis, advertising spending should increase in both urban areas and smaller cities in China. However, if the global or Chinese economy does not fully recover from the recent financial crisis or another economic downturn occurs, our business, results of operations and financial condition could continue to be materially and adversely affected.

In addition, the demand for our services is affected by the level of television advertising spending in China, which is in turn affected by the popularity of television programs in China and advertisers’ perceptions regarding the effectiveness of television advertising.  Television advertising also competes with other advertising media, such as billboards, Internet, mobile phones and out-of-home advertising networks.  If television advertising becomes a less favorable choice for advertisers in China, we may not be able to successfully attract enough advertisers for our advertising time slots and our revenues and earnings growth may be adversely affected.

Aside from fluctuations in the level of advertising spending resulting from changes in the overall economic and market conditions in China, our revenues are affected by seasonal fluctuations in consumer spending that also affect the level of advertising spending over time in China. The second and third quarters of each year are expected to be slower seasons for the Chinese advertising industry in general. As a result, our quarterly results of operations may fluctuate significantly from period to period.

Our Growth Strategy
 
As part of our growth strategy, we intend to increase our purchases of advertising time aired on CCTV and to purchase more advertising directly from CCTV, to develop a regional television business, enhance our production consulting services, begin providing production services and expand into new advertising platforms.  With respect to our purchase of advertising time from CCTV, we will face significant competition from advertising agencies that purchase time directly from CCTV, many of which have greater financial resources and a more established relationship with CCTV than us.  While there are no restrictions or rules promulgated by CCTV that regulate a company’s ability to purchase advertising time directly from CCTV, the majority of the available commercial time offered by CCTV is in large blocks, which will require large amounts of capital for us to acquire directly from CCTV.  If we purchase this time in large blocks, we could be subject to additional risk as it may be difficult for us to sell such a large amount of advertising time.  CCTV does sell some of its most sought after commercial time in smaller blocks at higher prices per minute and we made one such purchase directly from CCTV during the nine months ended September 30, 2010.  We will evaluate our purchases of advertising time directly from CCTV and may purchase time directly from CCTV in the future if we see an economic benefit to do so.  We will face some difficultly in establishing a regional television business because we do not currently have any relationships with any regional television stations.  We will face competition from many companies that already have extensive relationships with such television stations.  In addition, we may be unable to enter into certain local markets due to a region’s preference to protect its local advertising agents in the area.  We intend to expand into production services and our opening of a production studio will require significant amounts of capital.  We do not have any specific plans regarding our expansion into production services and are currently unsure of when we will begin to provide such services. As we have no specific plans for our expansion into production services, we are unsure of the costs that we will incur in expanding to provide such services and do not currently intend to use any of the proceeds from this offering to enter into the production services business.  We have no significant experience in the production of television advertisements, public service announcements and television series and we may have a difficult time entering into such areas because of our inexperience. In addition, we have no significant experience in any media platform other than television advertising.  We have no experience in any of our planned areas of expansion and we will have to hire additional personnel to assist us in our expansion efforts.  We may not be able to find people qualified to assist us in such endeavors.
 
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Other Factors

In addition to the factors discussed above, our reported results are also affected by the fluctuations in the value of the Renminbi against the U.S. dollar because our reporting currency is the U.S. dollar while the functional currency of our subsidiary and affiliated consolidated entities in China, which operate all of our business, is the Renminbi. In 2007 and 2008, the Renminbi appreciated against the U.S. dollar by approximately 6.5% and 6.5%, respectively, and in 2009, the Renminbi depreciated against the U.S. dollar by approximately 0.1%. The fluctuation of the Renminbi against the U.S. dollar contributed to the fluctuation in our net income reported in U.S. dollar terms in 2007, 2008 and 2009, respectively. For additional information relating to the fluctuations in the value of the Renminbi against the U.S. dollar, see “Risk Factors — Risks Relating to Doing Business in China — The foreign currency exchange rate between U.S. Dollars and Renminbi could adversely affect our financial condition” and “— Quantitative and Qualitative Disclosure About Market Risk — Foreign Exchange Risk.”

Revenues

Substantially all of our revenues are derived from reselling blocks (or slots) of advertising time on several popular television channels of CCTV. We acquire this advertising time in large blocks from certain advertising agencies that work directly with CCTV. We repackage these large blocks into smaller time slots and sell these smaller slots to advertising agencies or other companies. Our pricing depends on the quality, ratings and target audience of the relevant television programs where the advertisements will be broadcast, the sales prices of our competitors, general market conditions and market demand. We recognize the revenue ratably over the broadcast period, which is normally several weeks. If the advertisements are not broadcast, for instance due to CCTV’s change of program schedule, the advance payments made to us by our clients will be returned to our clients.
 
Our revenue growth is driven by increasing the number of advertising minutes we sell and an increase in the price per minute at which we sell advertising time to our clients.  In 2009, the most important driving force in our increase in revenues was increased customer demand. We do not base our purchases of advertising time based on the amount of advertising time available for purchase, but instead base our purchases on anticipated customer demand.  We purchased more time slots that were more attractive to customers, which caused our existing customers to place additional orders with us and attracted new customers to our company and allowed us to increase the price at which we re-sold our advertising time to our customers.  The average price per minute of advertising time sold during 2009 increased 81.8% over the average price per minute we charged in 2008.  The increase in the volume of advertising sold by us during 2009 was affected only by an increase in customer demand for advertising time and was not affected by an increase in advertising inventory available to us for purchase or an increase in funds available to us to make purchases.  We do not offer any special pricing or incentives to new or existing customers to entice them to make purchases from us.
 
When we purchase a block of advertising time, we are required to pay a deposit and are committed to pay the remainder of the balance prior to the broadcast. As a result, we bear the risks and rewards in these arrangements. Consequently, revenues are recognized at gross billings to our clients and the cost for purchasing the advertising time slots is recorded as our cost of goods sold and recognized over the same period as the related revenue, which is the broadcast period.
 
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Cost of Revenues

We purchase blocks of advertising time on certain CCTV programs for a fixed fee. Part or all of the fee is paid in advance and we recognize this cost, as our cost of goods sold, at the same time that we recognize the related revenue, which is ratably over the broadcast periods. The broadcast period typically ranges from one to three weeks and represents substantially all of our cost of goods sold. In 2009, third party providers offering television advertising slots on CCTV significantly increased the media fees for certain programs, which significantly increased our cost of goods sold. We were able to increase our prices and as a percentage of revenue, cost of goods sold decreased slightly.
 
Sales and Marketing Expenses
 
Our sales and marketing expenses consist primarily of salaries and benefits for our sales and marketing personnel, office rental expenses directly related to our sales and marketing activities, traveling expenses incurred by our sales personnel and promotional and entertainment expenses. Our sales personnel receive performance-based compensation and we market our services primarily through the efforts of our sales and marketing personnel. We expect selling and marketing expenses to increase as we expand our sales force.
 
General and Administrative Expenses

Our general and administrative expenses primarily consist of salaries and benefits for our management, accounting and administrative personnel, professional service fees, office rental and maintenance expenses directly related to our general office administration activities, depreciation of office equipment, other administrative expenses and allowances for doubtful accounts. We expect our general and administrative expenses to increase as we hire additional personnel, improve our corporate infrastructure and incur additional costs to meet the requirements of being a public company in the U.S.

PRC Business Tax and Related Surcharges

Our PRC subsidiaries, CD Media Huizhou and CD Media Beijing, are required to pay business tax at a rate of 5.0%, and related surcharges at a rate of approximately 3.0%, on our gross profit from providing advertising services. Under the PRC tax law, business tax is levied on the net amount of total advertising revenues less media fees paid to the media providers. As we reported revenues from certain of our advertising time slots on a gross basis, our effective business tax rate was approximately 1.08% of our total revenues in 2009.

Critical Accounting Policies and Estimates

We prepare our combined financial statements in conformity with U.S. GAAP, which requires us to make estimates and assumptions that affect the reported amounts of our assets and liabilities as of the date of our financial statements and our revenues and expenses during the financial reporting period. Our estimates and assumptions are based on available information and our historical experience, as well as other estimates and assumptions that we believe to be reasonable. The estimates and assumptions that form the basis for our judgments may not be readily apparent from other sources. We continually evaluate these estimates and assumptions based on the most recently available information, our own experience and other assumptions that we believe to be reasonable. Our actual results may differ significantly from estimated amounts as a result of changes in our estimates or changes in the facts or circumstances underlying our estimates and assumptions. Some of our accounting policies require higher degrees of judgment than others in their application. We consider the policies discussed below to be critical to an understanding of our financial statements as their application places the most significant demands on our management’s judgment. When reviewing our combined financial statements, you should take into account:
 
 
·
our critical accounting policies discussed below;
 
 
·
the related judgments made by our management and other uncertainties affecting the application of these policies;
 
 
·
the sensitivity of our reported results to changes in prevailing facts and circumstances and our related estimates and assumptions; and
 
 
·
the risks and uncertainties described under “Risk Factors.”
 
See note 3 to our combined financial statements for additional information regarding our critical accounting policies.

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Revenue Recognition
 
Our revenues are derived from reselling blocks (or slots) of advertising time on several popular television channels of CCTV. We acquire this advertising time in large blocks, repackage the blocks into smaller time slots and sell these smaller slots to advertising agencies or other companies. Our pricing depends on the quality, ratings and target audience of the relevant television programs where the advertisements will be broadcast, the sales prices of our competitors, general market conditions and market demand. We recognize revenue when persuasive evidence of an arrangement exists, delivery has occurred, the price is fixed or determinable and collection is reasonably assured, which is generally over the broadcast period.
 
Revenue arrangements involving multiple deliverables are broken down into single-element arrangements based on their relative fair value for revenue recognition purposes, when possible. We recognize revenues on the elements delivered and defer the recognition of revenues of the undelivered elements until the remaining obligations have been satisfied.

Our business is centered around purchasing blocks of advertising time, repackaging the time into smaller units and reselling the smaller blocks (or slots) to our clients. We generally pay for the blocks of advertising time in advance of reselling it to our customers and we are committed to pay the remainder of the balance prior to the broadcast. In determining whether revenue is reported gross or net, we considered the eight factors outlined in ASC 605-45. We sell the right to utilize advertising space on certain TV channels of CCTV. This right is conveyed to us by CCTV through contractual arrangements and we provide this right to our clients through an unrelated contractual arrangement. As a result, we are the primary obligor in this arrangement. In addition, we acquire the advertising blocks in advance and have unmitigated risk that we may not be able to resell all of the advertising time we purchase.  We are required to pay for the advertising time regardless whether we can resell the time or collect our fees from our customers. We also have latitude in establishing the price; discretion in supplier selection; and we assume the credit risk for the amount billed to our customers. Based on these factors, we recognize revenues on the basis of gross billings to our clients and the cost for purchasing the advertising time slots is recorded as our cost of goods sold and recognized over the same period as the related revenue, which is the broadcast period.
  
We report revenues gross of business tax and related surcharges, which are charged to cost of goods sold.
 
Income Tax

The Company accounts for income taxes in accordance with current accounting standards, which require an asset and liability approach for financial accounting and reporting for income taxes and allow recognition and measurement of deferred tax assets based upon the likelihood of realization of tax benefits in future years. Under the asset and liability approach, deferred taxes are provided for the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. A valuation allowance is provided for deferred tax assets if it is more likely than not these items will either expire before the Company is able to realize their benefits, or that future deductibility is uncertain.

The Company adopted the accounting standard for uncertainty in income taxes which prescribes a comprehensive model for how a company should recognize, measure, present and disclose in its financial statements uncertain tax positions that the Company has taken or expects to take on a tax return (including a decision whether to file or not to file a return in a particular jurisdiction).

Results of Operations
 
The following table sets forth information from our statements of operations for the nine months ended September 30, 2010 and 2009 (unaudited) and the years ended December 31, 2009, 2008 and 2007, in dollars (in thousands) and as a percentage of revenue:
 
   
Nine Months Ended September 30,
   
Years Ended December 31,
 
   
2010
         
2009
         
2009
         
2008
         
2007
       
   
(unaudited)
         
(unaudited)
                                           
Revenue
  $ 69,712       100.0 %   $ 38,104       100.0 %   $ 74,480       100.0 %   $ 44,684       100.0 %   $ 17,103       100.0 %
Cost of Goods Sold
    (55,853 )     80.1 %     (30,919 )     81.1 %     (59,746 )     80.2 %     (36,498 )     81.7 %     (12,839 )     75.1 %
Gross Profit
    13,859       19.9 %     7,185       18.9 %     14,734       19.8 %     8,186       18.3 %     4,264       24.9 %
                                                                                 
General and administrative
                                                                               
Selling expenses
    2,225       3.2 %     1,394       3.7 %     2,110       2.8 %     1,673       3.8 %     2,068       12.1 %
General and administrative
    1,733       2.5 %     362       1.0 %     575       0.8 %     371       0.8 %     374       2.2 %
Depreciation of equipment
    8       *       7       *       9       *       7       *       2       *  
Total operating expenses
    3,966       5.7 %     1,763       4.7 %     2,694       3.6 %     2,051       4.6 %     2,444       14.3 %
 
                                                                               
Income from operations
    9,893       14.2 %     5,422       14.2 %     12,040       16.2 %