V Media Corp - FORM 10-Q - February 14, 2011

Attached files

file	filename
EX-32.2 - EXHIBIT 32.2 - V Media Corp	ex32x2.htm
EX-31.2 - EXHIBIT 31.2 - V Media Corp	ex31x2.htm
EX-31.1 - EXHIBIT 31.1 - V Media Corp	ex31x1.htm
EX-32.1 - EXHIBIT 32.1 - V Media Corp	ex32x1.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark one)

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

For the quarterly period ended December 31, 2010

o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from _______________to ________________

Commission File Number: 000-53027

CHINA NEW MEDIA CORP.

(Exact Name of Registrant as Specified in Its Charter)

Delaware	33-0944402
(State or Other jurisdiction of Incorporation or Organization)	(I.R.S. Employer Identification No.)

Dalian Vastitude Media Group 8th Floor, Golden Name Commercial Tower 68 Renmin Road, Zhongshan District Dalian, P.R. China	116001
(Address of Principal Executive Offices)	(Zip Code)

86-0411-8272-8168

(Registrant’s Telephone Number, Including Area Code)

N/A

(Former Name, Former Address and Former Fiscal Year, if Changed Since Last Report)

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

Yes x No o

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

Yes o No o

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 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 o Smaller reporting company x

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes o No x

As of February 14, 2011, the Company had outstanding 27,550,001 shares of common stock, $0.0001 par value.

INDEX

	Page
PART I FINANCIAL INFORMATION	2

Item 1. Unaudited Consolidated Financial Statements.	2

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.	22

Item 3. Quantitative and Qualitative Disclosures About Market Risk.	31

Item 4. Controls and Procedures.	31

PART II OTHER INFORMATION	33

Item 1. Legal Proceedings.	33

Item 1A. Risk Factors.	33

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.	33

Item 3. Defaults Upon Senior Securities.	33

Item 4. Reserved.	33

Item 5. Other Information.	33

Item 6. Exhibits.	33

Signatures	34

INTRODUCTION

Use of Certain Defined Terms

In this Form 10-Q, unless indicated otherwise, references to:

·	“We,” “us,” “our” and the “Company” refers to China New Media Corp. and its subsidiaries.

·	“Securities Act” refers to the Securities Act of 1933, as amended, and “Exchange Act” refer to the Securities Exchange Act of 1934, as amended;

·	“China” and “PRC” refer to the People's Republic of China;

·	“RMB” refers to Renminbi, the legal currency of China; and

“U.S. dollar,” “$” and “US$” refer to the legal currency of the United States. For all U.S. dollar amounts reported, the dollar amount has been calculated on the basis that $1 = RMB 6.82702 for December 31, 2009, and $1 = RMB 6.60231 for December 31, 2010, which were determined based on the currency conversion rate at the end of each respective period. The conversion rates of $1 = RMB 6.8291 is used for the condensed consolidated statement of income and other comprehensive income and consolidated statement of cash flows for the first six months of fiscal year 2009, and $1= RMB 6.7133 is used for the condensed consolidated statement of income and other comprehensive income and consolidated statement of cash flows for the first six months of fiscal year 2010; both of which were based on the average currency conversion rate for each respective quarter.

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

Information contained in this report includes some statements that are not purely historical fact and that are “forward-looking statements” as defined by the Private Securities Litigation Reform Act of 1995. These forward-looking statements are contained principally in the sections titled “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and are generally identifiable by use of the words “may,” “will,” “should,” “expect,” “anticipate,” “estimate,” “believe,” “intend” or “project” or the negative of these words or other variations on these words or comparable terminology.

The forward-looking statements herein represent our expectations, beliefs, plans, intentions or strategies concerning future events, including, but not limited to: our future financial performance; the continuation of historical trends; the sufficiency of our cash balances for future needs; our future operations; our sales and revenue levels and gross margins, costs and expenses; new product introduction, entry and expansion into new markets and utilization of new sales channels and sales agents; improvements in, and the relative quality of, our technologies and the ability of our competitors to copy such technologies; our competitive technological advantages over our competitors; brand image, customer loyalty and expanding our client base; the sufficiency of our resources in funding our operations; and our liquidity and capital needs.

Our forward-looking statements are based on our current expectations and beliefs concerning future developments, and there can be no assurance that any projections or other expectations included in any forward-looking statements will come to pass. Moreover, our forward-looking statements are subject to various known and unknown risks, uncertainties and other factors that may cause our actual results, performance or achievements to be materially different from future results, performance or achievements expressed or implied by any forward-looking statements.

Except as required by applicable laws, we undertake no obligation to update publicly any forward-looking statements for any reason, even if new information becomes available or other events occur in the future.

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS.

CHINA NEW MEDIA CORP.

CONDENSED CONSOLIDATED BALANCE SHEETS

(IN US DOLLARS)

(UNAUDITED)


	December 31,		June 30,
	2010		2010
ASSETS

Current assets
Cash and cash equivalents	$	1,242,306	$	1,672,017
Accounts receivable, net of allowance for bad debt
$65,613 and $62,635		4,594,533		3,388,247
Advance to suppliers		93,005		1,050,567
Other current assets		1,751,195		282,617
Deferred tax assets		59,327		34,790
Total current assets		7,740,366		6,428,237

Property, equipment and construction in progress, net,		17,171,322		13,120,233

Other assets
Security deposits		1,907,045		1,874,363
Intangible asset, net		98,672		93,903
Billboards use right		5,069,079		2,172,894
Investment advance		-		1,887,505
Total other assets		7,074,796		6,028,665

Total Assets	$	31,986,484	$	25,577,136

LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities
Short term loans	$	8,451,587	$	7,196,112
Long term loans-current		454,386		737,307
Accounts payable, accrued expenses and other payables		1,193,011		154,808
Deferred revenues		2,664,258		1,628,911
Taxes payable		1,861,657		1,395,209
Due to related parties		127,431		437,121
Total current liabilities		14,752,330		11,549,467

Long term loans		454,386		442,384

Total Liabilities		15,206,716		11,991,851

Commitments and contingencies

Stockholders' equity
Series A Preferred Stock, $0.0001 par value, 20,000,000 shares authorized,
1,000,000 shares issued and outstanding		100		100
Common stock, $0.0001 Par value; 80,000,000 shares authorized;
27,550,701 shares issued and outstanding		2,755		2,755
Additional paid-in-capital		6,746,071		6,746,071
Accumulated other comprehensive income		349,598		94,571
Retained earnings		8,194,836		5,852,218
Total stockholders' equity		15,293,360		12,695,715
Noncontrolling interest		1,486,408		889,570
Total stockholders' equity		16,779,768		13,585,284

Total Liabilities and Stockholders' Equity	$	31,986,484	$	25,577,136

The accompany notes are an integral part of these condensed consolidated financial statements

CHINA NEW MEDIA CORP.

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(IN US DOLLARS)

(UNAUDITED)


	For the six months ended December 31,						For the three months ended December 31,
	2010			2009			2010			2009


Revenues	$	9,168,539		$	7,133,365		$	5,047,789		$	3,966,032

Cost of revenue		(3,962,040	)		(2,891,813	)		(2,228,838	)		(1,698,846	)

Gross profit		5,206,499			4,241,552			2,818,951			2,267,186

Selling, general and administrative expenses		(1,691,586	)		(1,279,416	)		(926,447	)		(698,146	)

Income from operations		3,514,913			2,962,136			1,892,504			1,569,040

Other income (expenses):
Interest income		3,031			8,290			1,529			512
Interest expense		(315,557	)		(81,444	)		(159,227	)		(12,085	)
Other income		117,537			94,166			52,249			94,166
Other expenses		(15,424	)		(379	)		(15,288	)		11,895

Total Other income (expenses)		(210,413	)		20,633			(120,737	)		94,488

Income before income taxes		3,304,500			2,982,769			1,771,767			1,663,528

Income tax provision (benefit)		26.49	%		25.21	%
- Current		898,516			751,872			494,958			422,062
- Deferred		(23,204	)		-			(15,042	)		-

Net income		2,429,188			2,230,897			1,291,851			1,241,466

Less: net income attribute to the noncontrolling interest		86,570			189,849			34,374			107,982

Net income attributable to China New Media Corp.		2,342,618			2,041,048			1,257,477			1,133,484

Other comprehensive income
Foreign currency translation gain		255,027			2,951			149,608			(396	)

Comprehensive income	$	2,597,645		$	2,043,999		$	1,407,085		$	1,133,088

Earnings per share
Basic		0.0850			0.0769			0.0456			0.0427
Diluted		0.0850			0.0758			0.0456			0.0421
Weighted average number of common shares
Basic		27,550,701			26,524,413			27,550,701			26,524,413
Diluted		27,550,701			26,919,593			27,550,701			26,919,593

The accompany notes are an integral part of these condensed consolidated financial statements

CHINA NEW MEDIA CORP.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(IN US DOLLARS)

(UNAUDITED)

	For the six months ended December 31,
	2010			2009

CASH FLOWS FROM OPERATING ACTIVITIES:
Net income	$	2,429,188		$	2,230,897
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization		760,330			400,951
Deferred tax benefit		(23,204	)		-
Changes in operating assets and liabilities
Accounts receivable		(1,095,936	)		139,739
Restricted cash		-			(65,894	)
Other current assets		(1,658,136	)		(91,299	)
Advance to employee		59,688			-
Security deposit		17,872			7,322
Advance to suppliers		969,766			(1,102,223	)
Accounts payable, accrued expenses and other payables		1,060,860			(91,094	)
Deferred revenues		974,767			1,621,793
Taxes payable		421,508			888,071

Net cash provided by operating activities		3,916,703			3,938,263

CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of intangible asset		(11,917	)		-
Acquisition of billboards use right		(2,790,327	)		229,535
Advance payment for investment		1,906,665			(647,375	)
Acquisition of property and equipment		(4,384,629	)		(3,999,017	)

Net cash used in investing activities		(5,280,208	)		(4,416,857	)

CASH FLOWS FROM FINANCING ACTIVITIES:
Net proceeds from capital contributions		-			3,500,000
Capital contributions from noncontrolling interest		476,666			-
Net proceeds from short-term bank loans		1,042,707			292,862
Net Proceeds from bank acceptance notes payable		-			65,894
Repayment of related party loans		(320,236	)		(154,171	)
Repayments of long-term bank loans		(297,916	)		(292,862	)

Net cash provided by financing activities		901,221			3,411,723

EFFECT OF EXCHANGE RATE CHANGE ON
CASH AND CASH EQUIVALENTS		32,573			112

NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS		(429,711	)		2,933,241

CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD		1,672,017			147,366

CASH AND CASH EQUIVALENTS, END OF PERIOD	$	1,242,306		$	3,080,607

SUPPLEMENTAL CASH FLOW DISCLOSURE
Income taxes paid	$	692,274		$	73,607
Interest paid	$	156,330		$	66,815

The accompany notes are an integral part of these condensed consolidated financial statements

NOTE 1- ORGANIZATION AND BASIS OF PRESENTAION

China New Media Corp., (“the Company”), formerly known as Golden Key International Inc., is a corporation organized under the laws of the State of Delaware in 1999.

On December 8, 2009, Golden Key International Inc. acquired all of the outstanding capital stock of HongKong Fortune-Rich Investment Co., Ltd., a Hong Kong corporation (“Fortune-Rich ”), through China New Media Corp., a Delaware corporation (the “Merger Sub”) wholly owned by the Company. Fortune-Rich is a holding company whose only asset, held through a subsidiary, is 100% of the registered capital of Dalian Guo-Heng Management & Consultation Co., Ltd. (“Dalian Guo-Heng”), a limited liability company organized under the laws of the People’s Republic of China. Substantially all of the Fortune-Rich’s operations are conducted in China though Dalian Guo-Heng, and through contractual arrangements with several of Dalian Guo-Heng’s consolidated affiliated entities in China, including Dalian Vastitude Media Group Co., Ltd. (“V-Media”) and its subsidiaries. V-Media is a fast-growing out-door advertising company with dominant operation in Dalian, the commercial center of Northeastern China. As a result of these contractual arrangements, which obligate the Company to absorb a majority of the risk of loss from V-Media’s activities and entitle it to receive a majority of its residual returns. In addition, V-Media Group 's shareholders have pledged their equity interest in V-Media Group to Dalian Guo-Heng, irrevocably granted Dalian Guo-Heng an exclusive option to purchase, to the extent permitted under PRC law, all or part of the equity interests in V-Media Group and agreed to entrust all the rights to exercise their voting power to the person(s) appointed by Dalian Guo-Heng. Through these contractual arrangements, the Company and Dalian Guo-Heng hold all the variable interests of V-Media Group, and the Company and Dalian Guo-Heng have been determined to be the most closely associated with V-Media Group. Therefore, the Company is the primary beneficiary of V-Media Group. Based on these contractual arrangements, the Company believes that V-Media Group should be considered as a Variable Interest Entity (“VIE”) under Accounting Standards Codification (“ASC”) 810, because the equity investors in V-Media Group do not have the characteristics of a controlling financial interest and the Company through Dalian Guo-heng is the primary beneficiary of V-Media Group.

In connection with the acquisition, Merger Sub issued 10 shares of the common stock of the Merger Sub which constituted no more than 10% ownership interest in the Merger Sub and 1,000,000 shares of Series A Preferred Stock of the Company to the shareholders of Fortune-Rich, in exchange for all the shares of the capital stock of Fortune-Rich (the “Share Exchange” or “Merger”). The 10 shares of the common stock of the Merger Sub were converted into 26,398,634 shares of the common stock of the Company so that upon completion of the Merger, the shareholders of Fortune-Rich own approximately 96 % of the common stock of the Company;

NOTE 1- BASIS OF PRESENTAION (Continued)

The acquisition was accounted for as a reverse merger under the purchase method of accounting since there was a change of control. Accordingly, Hong Kong Fortune-Rich Investment Co., Ltd. and its subsidiaries will be treated as the continuing entity for accounting purposes.

As part of the merger, the Company’s name was changed from “Golden Key International, Inc.” to “China New Media Corp.” to more effectively reflect our business and communicate our brand identity to customers.

The Company, along with its subsidiaries and VIEs, is engaging in sales, construction and operations of outdoor advertising displays and other alternative media business.

The condensed interim financial statements contain unaudited information as of December 31, 2010 and June 30, 2010 and for the three and six months ended December 31, 2010 and 2009. The unaudited condensed consolidated financial statements of China New Media Corp., (the “Company”) have been prepared by the company pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). The accompanying unaudited condensed financial statements do not include complete footnotes and financial statement presentations. As a result, these unaudited condensed financial statements should be read along with the audited financial statements and notes thereto for the year ended June 30, 2010, included in the Company's form 10-K filed with the SEC. In our opinion, the unaudited condensed financial statements reflect all adjustments, including normal recurring adjustments, necessary for a fair presentation of the financial position, results of operations and cash flows for those periods presented. The preparation of financial statements in conformity with United States (U.S.) generally accepted accounting principles requires management to make estimates and assumptions that affect reported assets, liabilities, revenues and expenses, as well as disclosure of contingent assets and liabilities. Actual results could differ from those estimates and assumptions. Moreover, the results of operations for the interim periods presented are not necessarily indicative of the results that may be expected for the entire year.

NOTE 2- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Principles of Consolidation

The accompanying unaudited condensed consolidated financial statements include the financial statements of China New Media Corp., its subsidiary, Fortune-Rich and its wholly-owned subsidiary Dalian Guo-Heng, as well as Dalian Guo-Heng’s variable interest entity, V-Media Group.

China New Media Corp. established a new subsidiary Shanghai Vastitude Advertising & Media Co., Ltd on July 5, 2010. V-Media Group holds 80% of the new subsidiary’s equity, and Ni, Huiwei holds 20% of its equity.

The noncontrolling interests represent the minority stockholders’ interest in V-Media Group’s majority owned subsidiaries.

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

Use of Estimates

In preparing the financial statements in conformity with accounting principles generally accepted in the United States of America, management makes estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the dates of the financial statements, as well as the reported amounts of revenues and expenses during the reporting years. Significant estimates, required by management, include the recoverability of long-lived assets and the fair value of outstanding warrants and collectability of accounts receivable Actual results could differ from those estimates.

NOTE 2-SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Cash and Cash Equivalents

Cash and cash equivalents include cash on hand and demand deposits with a bank with an original maturity of less than three months.

Accounts Receivable

Accounts receivable are presented at net realizable value. The Company maintains allowances for doubtful accounts for estimated losses. The Company reviews the accounts receivable on a periodic basis and makes general and specific allowances when there is doubt as to the collectability of individual balances. In evaluating the collectability of individual receivable balances, the Company considers many factors, including the age of the balance, customer’s historical payment history, its current credit-worthiness and current economic trends.

Property, Equipment and Construction in Progress, net

Property and equipment are stated at cost less accumulated depreciation. Expenditures for maintenance and repairs are charged to earnings as incurred while additions, renewals and betterments are capitalized. When the asset property and equipment is retired or otherwise disposed of, the related cost and accumulated depreciation are removed from the respective accounts, and any gain or loss is included in operations. Depreciation of property, plant and equipment is provided using the straight-line method for substantially all assets with estimated lives as follows:

	Estimated Useful Life	Residual value
Advertising equipment	4-15 years		5%
Automobile	7 years		5%
Computer, office equipment and furniture	5 years		5%
Corporate Boats	7 years		5%

Construction in progress represents direct costs of construction or acquisition and design fees incurred. Capitalization of these costs ceases and the construction in progress is transferred to plant and equipment when substantially all the activities necessary to prepare the assets for their intended use are completed. No depreciation is provided until it is completed and ready for intended use.

NOTE 2-SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Advance to suppliers

The Company periodically makes advances to certain vendors for purchases of advertising materials and equipments and records those advances as advance to suppliers.

Intangible asset

The Company reviews intangible assets and billboards use right for impairment in accordance with the provisions of ASC 360-10, “Impairment or Disposal of Long-Lived Assets.”

There was no impairment of intangible assets and billboards use right at the balance sheet dates. Although management believes the assumptions used in testing for impairment are reasonable, changes in any one of the assumptions could produce a significantly different result.

Deferred revenues

Deferred revenues represent cash received in advance from customers according to the contracts for advertising service fees, advertisement production and sponsorship fees. These advances are usually refundable to the customers if the Company is unable to deliver the advertising services. Deferred revenues are recognized as income when services are provided based on the terms of the contracts.

Impairment of long-lived assets

Long-lived assets, which include property, plant and equipment and intangible assets, are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of long-lived assets to be held and used is measured by a comparison of the carrying amount of an asset to the estimated undiscounted future cash flows expected to be generated by the assets. If the carrying amount of an asset exceeds its estimated undiscounted future cash flows, an impairment charge is recognized by the amount by which the carrying amount of the asset exceeds the fair value of the assets. Fair value is generally determined using the asset’s expected future discounted cash flows or market value, if readily determinable. No impairment loss has been recorded for the quarters ended December 31, 2010 and 2009.

Revenue recognition

The Company recognizes revenues when advertisements are posted over respective contractual terms based on the schedules agreed with customers and collections are reasonably assured. Payments received in advance of services provided are recorded as deferred revenues.

NOTE 2-SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Cost of revenues

Cost of advertising services consists primarily of media costs payable under exclusive advertising agreements, depreciation of advertising equipments and amortization of billboards use right, business taxes and surcharges and other direct operating costs. Media costs are expensed as incurred.

Selling, General and administrative Costs

Selling, general and administrative costs consist primarily of salaries and commissions for sales representatives, salaries for administrative staffs, rent expenses, office supplies, depreciation expense and employee benefits for administrative staffs.

Foreign currency translation

The Company and Fortune-Rich and the VIE use the United States dollar (“US Dollars”) for financial reporting purposes. The Company, Dalian Guo-Heng and Dalian Vastitute Group maintain their books and records in the currency of Renminbi (“RMB”), being the primary currency of the economic environment in which their operations are conducted.

For financial reporting purposes, RMB has been translated into United States dollars ("USD") as the reporting currency. Assets and liabilities are translated at the exchange rate in effect at the balance sheet date. Revenues and expenses are translated at the average rate of exchange prevailing during the reporting period. Translation adjustments arising from the use of different exchange rates from period to period are included as a component of stockholders' equity as "Accumulated other comprehensive income". Gains and losses resulting from foreign currency translations are included in accumulated other comprehensive income. There is no significant fluctuation in exchange rate for the conversion of RMB to USD after the balance sheet date.

Income Taxes

The Company recognized deferred tax assets and liabilities based upon the expected future tax consequences of events that have been included in the financial statements or tax returns. Under this method, deferred income taxes are recognized for the tax consequences in future years of differences between the tax bases of assets and liabilities and their financial reporting amounts at each period end based on enacted tax laws and statutory tax rates applicable to the periods in which the differences are expected to affect taxable income. Valuation allowances are established, whenever necessary, against net deferred tax assets when it is more likely than not that some portion or all of the deferred tax asset will not be realized.

NOTE 2-SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Fair Value of Financial Instruments

The Company adopted the provisions of ASC 820, Fair Value Measurements and Disclosures. ASC 820 clarifies the definition of fair value, prescribes methods for measuring fair value, and establishes a fair value hierarchy to classify the inputs used in measuring fair value as follows:

Level 1-Observable inputs such as unadjusted quoted prices in active markets for identical assets or liabilities available at the measurement date.

Level 2-Inputs other than quoted prices that are observable for the asset or liability in active markets, quoted prices for identical or similar assets and liabilities in markets that are not active, inputs other then quoted prices that are observable, and inputs derived from or corroborated by observable market data.

Level 3-Inputs are unobservable inputs which reflect managements’ own assumptions based on the best available information.

The carrying amounts of certain financial instruments, including accounts receivable, advances to vendors, other receivables, accounts payable, advance from customers, taxes payable, other payables and accrued liabilities, approximate their fair value due the short-term nature of these items. The Company uses Level 3 method to measure fair value of its long-term liabilities. The carrying amount of the Company’s long term bank loans approximates the fair value based on the Company's expected borrowing rate with similar remaining maturities and comparable risk in market.

Stock-Based Compensation

The Company measures compensation expense for its non-employee stock-based compensation under ASC 718, “Accounting for Equity Instruments that are Issued to Other Than Employees for Acquiring, or in Conjunction with services”. The fair value of the stock issued is used to measure the transaction, as this is more reliable than the fair value of the services received. Fair value is measured as the value of the Company’s common stock on the date that the commitment for performance by the counterparty has been reached or the counterparty’s performance is complete. The fair value of the equity instrument is charged directly to compensation expense and additional paid-in capital.

NOTE 2-SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Earnings per Share

The Company computes earnings per share (“EPS’) in accordance with ASC 260, “Earnings per share.” ASC 260 requires companies with complex capital structures to present basic and diluted EPS. Basic EPS is measured as net income divided by the weighted average common shares outstanding for the period. Diluted EPS is similar to basic EPS but presents the dilutive effect on a per share basis of potential common shares (e.g., convertible securities, options and warrants) as if they had been converted at the beginning of the periods presented, or issuance date, if later. Potential common shares that have an anti-dilutive effect (i.e., those that increase income per share or decrease loss per share) are excluded from the calculation of diluted EPS.

Reclassification

Certain prior period amounts have been reclassified to conform to the current period presentation. These reclassifications had no effect on reported total assets, liabilities, stockholders' equity or net income.

NOTE 3 - MAJOR SUPPLIERS

During the three months ended December 31, 2010, one major supplier provided approximately 12% of the Company’s purchase of advertising materials. For the six months ended December 31, 2010, one major supplier provided approximately 11% of the Company’s purchase of advertising materials.

A summary of the major suppliers who provided 10% or more of the Group’s combined purchases is as follows:

		For the six months ended December 31,
		2010		2009
Major suppliers
	Supplier A	$	420,729	$	1,501,055
	Supplier B		279,536		992,244
	Other suppliers		3,248,747		687,138
	Total Purchases	$	3,949,012	$	3,180,437

NOTE 4–PROPERTY, EQUIPMENT AND CONSTRUCTION IN PROGRESS, NET

Property, equipment and construction in progress consist of the following as of December 31, 2010 and June 30, 2010:


	December 31, 2010			June 30, 2010
Advertising equipment	$	15,968,651		$	14,857,020
Office equipment and furniture		303,612			234,428
Office building		311,702
Automobiles		915,588			597,701
Corporate boats		322,921			314,392
Subtotal		17,822,474			16,003,541
Less: Accumulated depreciation		(5,243,569	)		(4,362,006	)
Construction in progress		4,592,417			1,478,698

Total	$	17,171,322		$	13,120,233

Depreciation expense was $377,657 and $249,646 for the three months ended December 31, 2010 and 2009, respectively, and totaled $750,598 and $396,064, for the six months ended December 31, 2010 and 2009 respectively.

NOTE 5 –SECURITY DEPOSIT

Security deposit mainly comprised of deposits made to third parties to guaranty the Company’s outstanding loans (see Note 10 and 11). As of December 31, 2010 and June 30, 2010, the Company has security deposit balances of $1,907,045 and $1,874,363, respectively.

NOTE 6 - INTANGIBLE ASSETS

Intangible assets consist of computer software acquired. The Company amortizes the intangible assets on a straight-line basis over the useful terms 3 to 10 years. Amortization expense for the three months ended December 31, 2010 and 2009 amounted to $5,094 and $1,924, respectively, and totaled $9,570 and $4,887 for the six months period ended December 31, 2010 and 2009, respectively.

The projected amortization expense attributed to future periods is as follows:

The period ending December 31,	Expense
2011	$	20,417
2012		14,591
2013		8,785
2014		8,785
2015		8,785
Thereafter		37,309
	$	98,672

NOTE 7 - BILLBOARDS USE RIGHT

The Company makes advance payments for the right to construct advertising equipments and post advertisements in certain locations based on long-term contracts with local government authorities or other business entities. These payments are recorded as billboards use right and amortized on a straight-line basis over the contract terms 2 to 15 years.

Amortization of billboards use right for the three months ended December 31, 2010 and 2009 was $258,956, and $176,670, respectively, and totaled $463,187 and $190,625 for the six months ended December 31, 2010 and 2009, respectively.

The projected amortization expense attributed to future periods is as follows:

Period ending December 31,	Expense
2011	$	1,040,139
2012		1,006,863
2013		642,822
2014		637,795
2015		337,451
Thereafter		1,404,009
		5,069,079

NOTE 8 - TAXES

a) Corporate Income Tax

United States

The Company is subject to income taxes on an entity basis on income arising in or derived from the tax jurisdiction in which each entity is domiciled.

China New Media Corp., a Delaware corporation, has incurred a net operating loss for income tax purposes for the year ended June 30, 2010. The Company had loss carry forwards of approximately $125,000 for U.S. income tax purposes available for offset against future taxable U.S. income expiring in 2030. Management believes that the realization of the benefits from these losses appears uncertain due to the Company's limited operating history. Accordingly, a full deferred tax asset valuation allowance has been provided and no deferred tax asset benefit has been recorded for US operation. The valuation allowance as of December 31, 2010 was $42,500.

The company intends to invest undistributed earnings in foreign subsidiaries indefinitely and these undistributed earnings are essentially permanent in duration.

Hong Kong

Fortune-Rich was incorporated in Hong Kong and is subject to income taxes under the current laws of Hong Kong, but the entity has no taxable income as of December 31, 2010 .

PRC

Dalian Guo-heng and V-Media Group are governed by the Income Tax Law of the People’s Republic of China concerning the private-run enterprises, which are currently subject to tax at a statutory rate of 25% on net income reported after appropriated tax adjustments. Because of different tax jurisdictions’ restriction, V-Media Group’s subsidiaries of Beijing, Tianjin and Network have loss carryover that can only be used to offset their own future taxable income. The combined loss carry forward for those subsidiaries amounted $146,598 as of December 31, 2010.

The Company periodically evaluates the likelihood of the realization of deferred tax assets, and reduces the carrying amount of the deferred tax assets by a valuation allowance to the extent it believes a portion will not be realized. The Company considers many factors when assessing the likelihood of future realization of the deferred tax assets, including its recent cumulative earnings experience, expectation of future income, the carryforward periods available for tax reporting purposes, and other relevant factors. For the six months ended Decembere 31, 2010, management concluded that it was more likely than not those additional deferred tax assets would be realized. This determination was based upon actual and projected future operating results in our business. Accordingly, the Company recorded a non-cash income tax benefit of $23,204 for the six months ended December 31, 2010.

Significant components of the income tax provision were as follows for the six months ended December 31, 2010 and 2009:

	For six months ended December 31,
	2010			2009
Current tax provision
Federal	$	-		$	-
State		-			-
Foreign		898,516			751,872

		898,516			751,872

Deferred tax provision,net
Federal		-			-
State		-			-
Foreign		(23,204	)		-

		(23,204	)		-

Income tax provision	$	875,312		$	751,872

b) Business Tax

Dalian Guo-heng, Dalian Vastitude Media Group Co., Ltd. and its five subsidiaries are also subject to 5% business tax and related surcharges levied on advertising services in China, which are approximately 3% on our revenues from providing advertising services. Dalian V-Media’s another subsidiary is only subject to 3% business tax. Total business tax expense for the three months ended December 31, 2010 and 2009 was $111,779 and $132,552, respectively, and totaled $441,172 and $347,792 for the six months ended December 31, 2010 and 2009, respectively.

c) Taxes payable at December 31, 2010 and June 30, 2010 consisted of the following:

	December 31,		June 30,
	2010		2010
Business tax payable	$	240,260	$	187,826
Corporate income tax payable		1,407,554		1,199,227
Other		213,843		8,156

Total taxes payable	$	1,861,657	$	1,395,209

NOTE 8 – TAXES (Continued)

The Company recognizes interest and penalties accrued related to unrecognized tax benefits and penalties, if any, as income tax expense. The Company files income tax returns with U.S. Federal Government, as well as Delaware State and the Company files returns in foreign jurisdictions of Hongkong and PRC China. With few exceptions, the Company is subject to U.S. federal and state income tax examinations by tax authorities for years on or after 2007.

The Company’s foreign subsidiaries and VIEs also file income tax returns with both the National Tax Bureau and the Local Tax Bureaus. The Company is subject to income tax examinations by these foreign tax authorities. The Company has passed all tax examinations by both National and Local tax authorities since the inception of the Company in 2000.

NOTE 9 - SHORT TERM LOANS

The short term loans include the following:

	Dec 31, 2010		Jun 30, 2010
a) Loan payable to Harbin Bank	$	908,773	$	884,768

b) Loan payable to Shanghai Pudong Development Bank		908,773		884,768

c) Loan payable to Dalian Bank Xigang Branch		1,514,621		1,474,613

d) Loan payable to Industrial and Commercial Bank of China		272,632		265,430

e) Loan payable to Jinzhou Bank		2,271,932		2,211,920

f) Loan payable to Xinye Bank		2,574,856		1,474,613

Total short term loans	$	8,451,587	$	7,196,112

a) Loan payable to Harbin Bank had an original one-year term from April 14, 2009 to April 13, 2010 at a fixed interest rate of 5.31% per year. The loan has been renewed for another year from April 27, 2010 to April 26, 2011 at a fixed interest rate of 6.37% per year. This loan has been guaranteed by an unrelated company, Union Chuangye Guaranty Company. This loan is also collateralized by certain street fixtures.

b) Loan payable to Shanghai Pudong Development bank had an original one-year term from November 10, 2008 to November 10, 2009 with the amount of RMB 6,000,000 (approximately $897 thousand) at a fixed interest rate of 7.99% per year. This loan has been renewed from November 23, 2010 to November 15, 2011 at a fixed interest rate of 6.37% per year. This loan has been guaranteed by the Company’s major Stockholders Mr. Guojun Wang and Ms. Ming Ma using their personal properties as collaterals.

c) Loan payable to Dalian Bank Xigang Branch had an original one-year term from January 6, 2009 to January 6, 2010 at the fixed interest rate of 6.90% per year. This loan has been repaid and a new loan has been obtained with one year term from Febuary 9, 2010 to February 8, 2011 at a fixed interest rate of 6.90% per year. This loan has been guaranteed by an unrelated company, Dalian Huanbohai Development Credit Guaranty Company. In the guaranty contract, the Company pledged part of its advertising equipment with the approximate value of RMB13, 000,000 (approximately $1.97 million) to Dalian Huanbohai Development Credit Guaranty Company.

d) Loan payable to Industrial and Commercial Bank of China is a one-year term loan from July 20, 2009 to July 5, 2010 at a fixed interest rate of 6.93% per year. This loan has been renewed for another year from July 5, 2010 to June 21, 2011 at a fixed interest rate of 6.90% per year. This loan is guaranteed by an unrelated company, Dalian Baifute Xianlan Manufacture Company.

e) Loan payable to Jinzhou Bank is a one-year term loan from April 21, 2010 to April 20, 2011 at a fixed interest rate of 6.90% per year. This loan has been guaranteed by the Company’s major Stockholders Mr. Guojun Wang and Ms. Ming Ma. The Company pledged part of its advertising equipment with the value of RMB17,000,000 (approximately $2.57 million).

f) Loan payable to Xinye Bank consists of two loans. One loan is a one-year term loan from June 25, 2010 to June 24, 2011 with the amount of RMB 10,000,000 (approximately $1.5 million) at a fixed interest rate of 6.10% per year. This loan has been guaranteed by the Company’s major Stockholders Mr. Guojun Wang and Ms. Ming Ma. The other loan is a one-year term loan from July 20, 2010 to July 19, 2011 with the amount of RMB 7,000,000 (approximately $1.0 million) at a fixed interest rate of 6.10% per year. This loan has been guaranteed by the Company’s major Stockholders Mr. Guojun Wang and Ms. Ming Ma and also has been guaranteed by an unrelated company, Union Chuangye Guaranty Company. Both loans are collateralized by certain street fixture and billboards.

NOTE 10 - LONG TERM LOANS

The long term loans include the following:

	Dec 31, 2010		Jun 30, 2010

a) Loan payable to China Development Bank	$	-	$	294,923

b) Loan payable to Dalian Bank	$	908,772	$	884,768

Total long term loans	$	908,772	$	1,179,691

Less: current portion	$	454,386		737,307

Total long term loans noncurrent portion	$	454,386	$	442,384

a) Loan payable to China Development Bank was repaid on December 27, 2010

b) Loan payable to Dalian Bank has a three-year term from May 31, 2009 to June 25, 2012 at a fixed interest rate of 5.94% per year. Repayment of RMB 2,000,000 (approximately $302,924) was required on June 23, 2010 and repayments of equal amount of RMB 3,000,000 (approximately $454,386) are required on June 23, 2011 and June 25, 2012. This loan has been guaranteed by an unrelated company, Dalian Enterprise Credit Guaranty Company. This loan is also collateralized by certain properties and street fixture.

NOTE 11 - RELATED PARTY TRANSACTIONS

Amounts due to related parties are as follows:

	December 31,		June 30,
	2010		2010
Ma, Ming	$	3,787	$	97,562
Modern Trailer Company		30,292		309,669
Wang, Mingyi		725		-
Meng, Zhaohui		1,943		-
Wang, Guojun		90,684		29,890
Total	$	127,431	$	437,121

Meng, Zhaohui is an employee of the company and all other individuals are stockholders of the Company. Modern Trailer Company is the minority stockholder of Dalian Vastitude Modern Transit Media Co., Ltd., which is one of Dalian V-Media’s subsidiaries. The stockholders provide funds for the Company’s operations for advertising material and equipment purchase purposes. These amounts due are generally unsecured, non-interest bearing and due upon demand.

Note 12 - STOCKHOLDERS’ EQUITY

(1) Issuance of Stocks

Prior to the Merger, the Company had 10,862,067 shares of common stock issued and outstanding. The Company cancelled 9,760,000 shares of common stock issued to former stockholders of the Company to spin-off the Company’s previous subsidiary, Deep Rooted Inc. In connection with the Merger on December 9, 2009, Merger Sub issued 10 shares of the common stock of the Merger Sub which consisted of no more than a 10% ownership interest in the Merger Sub and 1,000,000 shares of Series A Preferred Stock of the Company to the shareholders of Fortune-Rich, in exchange for all the shares of the capital stock of Fortune-Rich (the “Share Exchange” or “Merger”). The 10 shares of the common stock of the Merger Sub were converted into approximately 26,398,634 shares of the common stock of the Company so that upon completion of the Merger, the stockholders of Fortune-Rich own approximately 96 % of the common stock of the Company.

Note 12 - STOCKHOLDERS’ EQUITY (Continued)

On November 23, 2009, prior to and in conjunction with the Merger, Fortune-Rich entered into a Securities Purchase Agreement (“SPA”) with an institutional investor and pursuant to the SPA, Fortune-Rich agreed to issue 10,415,000 shares of its common stock in exchange for $3,500,000 in cash. These shares of Fortune-Rich were convertible into 5,497,933 shares of the common stock of the Company upon completion of the Merger mentioned above. In addition, the investor was entitled to receive 6,249,000 warrants of Fortune-Rich, which were exchanged for 3,298,760 warrants of the Company upon the completion of the Merger. These warrants are exercisable immediately for the same number of common shares of the Company. The Warrants, which were assumed by the Company upon the Merger, expire in four years.

In January 2010, the Company issued 50,000 common shares to several consultants for their services provided. The fair value of the common shares evaluated at the grant date was $125,000.

(2) Warrants

The warrants issued in connection with the Merger meet the conditions for equity classification pursuant to ASC 815, “Derivatives and Hedging”; therefore, these warrants were classified as equity and included in Additional Paid-in Capital. There are 3,928,760 warrants outstanding with an exercise price of 0.95 as of December 31, 2010.

(3) Preferred equity

Series A Preferred Stock have an aggregate voting power of 40% of the combined voting power of the entire Company’s shares, Common Stock and Preferred Stock as long as the Company is in existence. Each holder of the Series A Preferred Stock shall have full voting rights and powers equal to the voting rights and powers of the holders of Common Stock, and shall be entitled, notwithstanding any provision hereof, to notice of any stockholders’ meeting in accordance with the by-laws of the Corporation, and shall be entitled to vote, together with holders of Common Stock, with respect to any question upon which holders of Common Stock have the right to vote. The Series A Preferred Stock is not subject to any reverse split applicable to the Common Stock of the Company and is not convertible into any other securities.

Series A Preferred Stock have a liquidation value of $1.00 per share. The holders of the Series A Preferred Stock are not entitled to receive dividends per share of Series A Preferred Stock and the Company has no rights to redeem Series A Preferred Stock.

Note 13 – EARNINGS PER SHARE

GAAP requires presentation of basic and diluted earnings per share in conjuction with the disclosure of the methodology used in computing such earnings per share. Basic earnings per share excludes dilution is computed by dividing income available to common stockholders by the weighted average common shares outstanding during the period. Diluted earnings per share takes into account the potential dilution that could occur if securities or other contracts to issue common stock were exercised and converted into common stock using the treasury method.

Common stock equivalents represent the dilutive effect of the assumed exercise of the outstanding stock options and warrants, using the treasury stock method, at either the beginning of the respective period presented or the date of issuance, whichever is later, and only if the common stock equivalents are considered dilutive based upon the Company’s net income position at the calculation date.

As of December 31, 2010, the Company had 1,000,000 shares of preferred stock, that has not been included in diluted weighted average shares calculation because pursuant to the Merger agreement, no preferred shares can be converted to any securities as of December 31, 2010.

The Company has outstanding warrants to acquire 3,298,760 shares of common stock. All the outstanding warrants were considered anti-dilutive and weren’t included in the weighted average shares-diluted calculation using the treasury stock method.

The following table sets forth earnings per share calculation for the three and the six months ended December 31, 2010 and 2009:

	For six months ended				For three months ended
	December 31,				December 31,
	2010		2009		2010		2009
Basic earning per share
Net income attributable to China New Media Corp.	$	2,342,618	$	2,041,048	$	1,257,476	$	1,133,482

Weighted average number of common shares outstanding - Basic		27,550,701		26,524,413		27,550,701		26,650,193

Earnings per share-Basic	$	0.09	$	0.08	$	0.05	$	0.04

Diluted earnings per share
Net income attributable to China New Media Corp.	$	2,342,618	$	2,041,048	$	1,257,476	$	1,133,482

Weighted average number of common shares outstanding -Basic		27,550,701		26,524,413		27,550,701		26,650,193
Effect of diluted securities-warrant		0		395,180		0		790,359
Weighted average number of common shares outstanding - Diluted		27,550,701		26,919,593		27,550,701		27,440,552

Earnings per share-Diluted	$	0.09	$	0.08	$	0.05	$	0.04

Note 14 – SEGMENT INFORMATION

ASC 280, "Segment Reporting", establishes standards for reporting information about operating segments on a basis consistent with the Company's internal organizational structure as well as information about geographical areas, business segments and major customers in financial statements for details on the Company's business segments.

The Company is an outdoor advertising company in China which provides a full range of integrated outdoor advertising services including art design, advertising publishing, daily maintenance and technical upgrading. The Company's chief operating decision maker ("CODM") has been identified as the CEO who reviews the financial information of separate operating segments when making decisions about allocating resources and assessing performance of the group. Based on management's assessment, the Company has determined that its operating segments can be categorized by geographic locations as well as the format of the outdoor media platforms.

The accounting policies of the segments are the same as those described in the summary of significant accounting policies. The CODM evaluates performance based on each reporting segment's revenues, cost of revenues, and gross profit. Selling expenses and G&A expenses are not separated reviewed to each segment. The CODM does not review balance sheet information to measure the performance of the reportable segments, nor is this part of the segment information regularly provided to the CODM.

Revenue and cost of revenues by segment were as follows:


	For three mohths ended December 31, 2010
	Dalian District			Shenyang District			Beijing District			Tianjin District			Shanghai District

Revenue	$	4,513,761		$	181,252		$	-		$	52,479		$	300,297
Cost of revenue		(1,855,432	)		(181,156	)		(15,108	)		(16,141	)		(161,001	)
Gross profit	$	2,658,329		$	96		$	(15,108	)	$	36,338		$	139,296


	For three mohths ended December 31, 2009
	Dalian District			Shenyang District			Beijing District		Tianjin District		Shanghai District

Revenue	$	3,764,663		$	201,369		$	-	$	-	$	-
Cost of revenue		(1,587,072	)		(111,774	)		-		-		-
Gross profit	$	2,177,591		$	89,595		$	-	$	-	$	-


	For six months ended December 31, 2010
	Dalian District			Shenyang District			Beijing District			Tianjin District			Shanghai District

Revenue	$	8,138,839		$	367,011		$	-		$	66,955		$	595,734
Cost of revenue		(3,354,597	)		(212,001	)		(30,507	)		(28,001	)		(336,934	)
Gross profit	$	4,784,242		$	155,010		$	(30,507	)	$	38,954		$	258,800


	For six mohths ended December 31, 2009
	Dalian District			Shenyang District			Beijing District		Tianjin District		Shanghai District

Revenue	$	6,874,000		$	259,365		$	-	$	-	$	-
Cost of revenue		(2,753,674	)		(138,139	)		-		-		-
Gross profit	$	4,120,326		$	121,226		$	-	$	-	$	-

Note 15 – Subsequent event

On January 14, 2011, the company completed an investment approximately RMB 7 million (US$1.05 million) to upgrade a billboard located at Youhao Square in Dalian into a HD LED Screen with size over 140 square meters (approximately 1,506 square feet). This screen becomes the company’s third outdoor HD LED screen in Dalian.

On January 24, 2011, the company acquired the operating rights of a billboard from Shenyang Golden Hotel which is located at key business district on Qingnian Street in Shenyang city. The agreement is for three years and we plan to invest approximately RMB 3 million ($455,000) to upgrade it into a mega-sized LED screen with a size of over 500 square meters (approximately 5,382 square feet).

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

Overview

We are a leading outdoor advertising company in China. We provide a full range of integrated outdoor advertising services, including art design, advertising publishing, daily maintenance and technical upgrading. We believe our well-diversified outdoor advertising media network and our ability to provide advertising services on an integrated basis allow us to target and satisfy client needs at all different levels. Founded in 2000, we have grown steadily and expanded our media network into Shenyang, Tianjin, Beijing and Shanghai from our headquarters in Dalian.

Our principal executive offices are located at Golden Name Commercial Tower 8th floor, 68 Renmin Road, Zhongshan District, Dalian, P.R. China. Our telephone number is 86-411-82728168.

Our Corporate History

We were originally incorporated as Golden Key International, Inc. under the laws of the State of Delaware on February 18, 1999. Prior to a reverse merger transaction effected on December 8, 2009, we were a development stage company with no revenues or profits. We had nominal assets and no operations other than maintaining our public company status and searching for a suitable party with which to execute a reverse merger transaction, in which a previously private company takes on our public company status. Management felt it was in the best interests of the Company to abandon our original business plan of becoming a leading cross-platform community portal provider and pursue a direction for the Company that would provide the best return on stockholder investment.

On December 8, 2009, we acquired all of the outstanding capital stock of Hongkong Fortune-Rich Investment Co., Limited, a Hong Kong corporation (“Fortune-Rich”), through China New Media Corp., a Delaware corporation (the “Merger Sub”) wholly owned by us. Fortune-Rich is a holding company whose only asset, held through a subsidiary, is 100% of the registered capital of Dalian Guo-Heng Management and Consultation Co., Ltd. (“Dalian Guo-Heng”), a limited liability company organized under the laws of the People’s Republic of China. Substantially all of Fortune-Rich’s operations are conducted in China through Dalian Guo-Heng, and through contractual arrangements with several of Dalian Guo-Heng’s consolidated affiliated entities in China, including Dalian Vastitude Media Group Co., Ltd. (“V-Media”) and its subsidiaries. V-Media is a fast-growing outdoor advertising company with major operations in Dalian, the commercial center of Northeastern China. In connection with the acquisition, the Merger Sub issued 10 shares of the common stock of the Merger Sub, which constituted no more than 10% ownership interest in the Merger Sub, and 1,000,000 shares of Series A Preferred Stock of the Company to the shareholders of Fortune-Rich in exchange for all of the shares of capital stock of Fortune-Rich (the “Share Exchange” or “Merger”). The 10 shares of the common stock of the Merger Sub were converted into 26,398,634 shares of the common stock of the Company, so that upon completion of the Merger, the shareholders of Fortune-Rich owned approximately 96% of the common stock of the Company. Effective December 28, 2009, our trading symbol on the OTC Bulletin Board is CMDI.OB.

Through the contractual arrangements between Dalian Guo-Heng and V-Media, we operate one of the largest outdoor advertising networks in northeast China with a strong market presence in Dalian and Shenyang, the two most popular commercial cities in Northeast China. We provide clients with advertising opportunities through our diverse media platforms, which include four major proprietary channels: (1) Street Fixture and Display Network, which includes bus and taxi shelters; (2) Mobile Advertisement displayed on mass city transit systems, which includes displays on city buses, metro-trains and train stations; (3) Billboard and Large LED displays along the city’s streets and highways; and (4) our proprietary and patented multi-media system, “City Navigator.”

We have experienced sustainable business growth in recent years. The size of our network has grown significantly over the years since the commercial launch of our advertising network. From September 30, 2010 to December 31, 2010, the number of bus and taxi shelters on which we operate and carry our advertisements increased from 777 to 785. For the same period, the number of buses that carry our mobile advertisements changed from 320 to 324; the number of mobile displays through Dalian metro-trains increased from 28 to 32. We also operate 52 City Navigators and 3 mega-screen (126 M2 to 400 M2, approximately 1,356 square feet to 4,306 square feet) LED screens and 7 metal billboards across Dalian urban area, 1 mega-screen (88 M2, approximately 947 square feet) LED screen in the business district in Shenyang, 1 indoor LED screen (22 M2, approximately 237 square feet) in Tianjin Railway Station and 5 billboards in Shanghai.

Subsidiaries of V-Media

The following table sets forth information concerning V-Media’s subsidiaries:

Name of Subsidiary	V-Media’s Ownership Percentage	Region of Operations	Primary Business
Shenyang Vastitude Media Co., Ltd.	100%	Shenyang	Advertising company
Tianjin Vastitude AD Media Co., Ltd.	100%	Tianjin	Advertising company
Dalian Vastitude Network Technology Co., Ltd.	60%	Dalian	Computer exploitation, technical service and domestic advertisement
Dalian Vastitude Engineering & Design Co., Ltd.	83%	Dalian	Engineering, design and construction
Dalian Vastitude & Modern Transit Media Co., Ltd.	70%	Dalian	Advertising company
Vastitude (Beijing) Technology Co.	60%	Beijing	Advertising company
Shanghai Vastitude Advertising & Media Co., Ltd.	80%	Shanghai	Advertising company

Factors Affecting Our Results of Operations

The increase in our operating results during the period included in the accompanying unaudited condensed consolidated financial statements is attributable to a number of factors, including our steady expansion of outdoor media network in Dalian, our headquarter, our technical innovation and outdoor media system upgrading. We expect our business to continue to be driven by the following factors:

Increasing Domestic Spending in Outdoor Advertising

The demand for our advertising time slots is directly related to the outdoor advertising spending in northeast China. The increase in advertising spending is largely determined by the economic conditions in our region. According to the “Statistical Communiqué of the PRC on 2008 National Economic and Social Development” released by National Bureau of Statistics of China on Feb. 26, 2009, China’s economy has experienced rapid growth in the last five years. The annual growth rate has been in the range of 9% to 13%. The domestic retail sales have been growing even faster than any other sectors, with an average annual growth rate of 15.5% in the last 5 years. The latest government’s economic stimulus plan is aimed at building a domestic consumer-driven economy, which, we believe, is going to generate more demand for outdoor advertising. We expect the outdoor advertising spending in our regional market will maintain its double-digit growth in the years to come.

Expansion of Our Market Presence by Launching City Navigator ® Networks in Other Major Commercial Cities

We believe our proprietary multi-media advertising system – City Navigator ® Network is one of the most advanced outdoor advertising platforms available in China. This system combines the latest LED displaying technology, internet and WI-FI technology, and has proven to be very effective in our competition to get access to top tier cities such as Shanghai and Beijing.

By using wireless access technology, our LED displays at bus and taxi shelters are able to display real time programs at the control of our centralized computer systems. It consists of a Wi-Fi receiver, large-screen LED display, and web-based touch-screen kiosk which provide the public with information on all aspects of the city life, including travel, traffic, restaurants, shopping, hotels, business, medical and education. In addition, every City Navigator is equipped with Bluetooth, wireless access and printing technology. Users can either print the information or send the information to their cell phones or computers. As City Navigator® Network adopts Wi-Fi technology, users can enjoy its service from any area covered by its Wi-Fi signals. We intend to aggressively expand our media platform by launching City Navigator ® Networks in our target cities, such as, Tianjin, Qingdao and Shanghai, to create our own cross-region advertising network and enhance our advertising distribution capacity.

Promotion of Our Brand Name to Attract a Wider Client Base and Increase Revenues

We plan to promote our brand name, [国域无疆]TM, through both our own media channels and public channels in North China. We believe that the enhancement of public awareness to our brand name will help to broaden our client base, especially in the new marketplace such as Shenyang and Tianjin. As we expand our advertising client base and promote public’s awareness to our brand, demand for time slots and advertising space on our network will continue to grow.

Upgrade of Our Outdoor Billboard Network with New Digital Display Technology

We intend to capitalize recent advances in digital display technology, especially mega-screen LED displays, to meet major institutional clients’ needs. Because the LED displays can be linked through centralized computer systems to instantaneously change static advertisements, and it is highly visible even during bright daylight, it improves the advertising effectiveness and efficiency markedly. We plan to build more mega-screen (100 M2 to 500 M2, approximately 1,076.4 square feet to 5,382 square feet) LED displays at premier locations in our marketplace.

As we continue to expand our network, we expect to face a number of challenges. We have expanded our network rapidly, and we, as well as our competitors, have occupied many of the most desirable locations in Dalian. In order to continue expanding our network in a manner that is attractive to potential advertising clients, we must continue to identify and occupy desirable locations and to provide effective channels for advertisers. In addition, we must react to continuing technological innovations in the use of wireless and broadband technology in our network, and changes in the regulatory environment, such as the regulations allowing 100% foreign ownership of PRC advertising companies and new regulations governing cross-border investment by PRC persons.

We believe that our business model and success in our regional market give us a considerable advantage over our competitors. Our future growth will depend primarily on the following factors:

·	Overall economic growth in China, which we expect to contribute to an increase in advertising spending in major urban areas in China where consumer spending is concentrated;

·	Our ability to expand our network into new locations and additional cities;

·	Our ability to expand our sales force and engage in increased sales and marketing efforts;

·	Our ability to expand our client base through promotion of our services; and

·	Our ability to expand our new systems, including large-screen LED display networks and City Navigator® Networks.

New Business Development

Billboard Acquisition in Shenyang city

On January 24, 2011, we acquired the operating rights of a billboard from Shenyang Golden Hotel which is located at key business district on Qingnian Street in Shenyang city. The agreement is for three years and we plan to invest approximately RMB 3 million ($455,000) to upgrade it into a mega-sized LED screen with a size of over 500 square meters (approximately 5,382 square feet).

Results of Operations

Comparison of Three-Month Periods ended December 31, 2010 and December 31, 2009

The following table shows the operations of the Company on a consolidated basis for the three months ended December 31, 2010 and 2009:

REVENUES	3 Months Ended December 31,
	2010		2009		Difference		% Change
Dalian District
Street Fixture and Display Network	$	1,621,365,	$	1,231,219	$	390,146		31.69	%
City Transit system Display Network		966,683		997,755		-31,072		-3.11	%
Outdoor Billboards		1,248,353		731,821		516,532		70.58	%
City Navigator		425,778		294,029		131,749		44.81	%
Other Service Income (a)		251,582		509,839		-258,257		-50.65	%
Subtotal for Dalian District	$	4,513,761	$	3,764,663	$	749,098		19.90	%

Shenyang District
Street Fixture and Display Network	$	73,787	$	167,478	$	-93,691		-55.94	%
Outdoor Billboards		107,465		33,891		73,574		217.09	%
Other Service Income(a)		--				--		100	%
Subtotal for Shenyang District	$	181,252	$	201,369	$	-20,117		-9.99	%

Tianjin District
Outdoor Billboards	$	52,479	$	-	$	52,479		100	%
Subtotal for Tianjing District	$	52,479	$		$	52,479		100	%

Shanghai District
Outdoor Billboads	$	300,297	$	-	$	300,297		100	%
Subtotal for Shanghai District	$	300,297	$		$	300,297		100	%

Total Revenues	$	5,047,789	$	3,966,032	$	1,081,757		27.28	%

(a) Other service income generated by Construction & Design service provided by V-Media Engineering & Design Company and technique service provided by V-Media Engineering & Design Company to outside customers.

Sales revenue

During the three months ended December 31, 2010, we had revenues of $ 5,047,789 as compared to revenues of $3,966,032 during the three months ended December 31, 2009, an increase of $1,081,757, or 27.3%. Revenue growth was driven by the demand for our outdoor advertising platforms as the Company continues to expand its advertising network in Dalian,Shenyang, Tianjin and Shanghai, , Geographically, for the three months ended December 31, 2010, sales in Dalian, Shenyang, Tianjin and Shanghai district accounts for 89.4% , 3.6%, 1.0% and 6.0% of total sales, compared with 94.9%, 5.1%, 0%, and 0% same period in 2009. Revenue was increased in Dalian, Tianjin and Shanghai district, and partially offset by the decrease in sales through the Street Fixture and Display Network in Shenyang. This decrease was due to the Company’s focus on sales through billboard platforms in Shenyang city.

Having recognized that the billboard platforms have significant growth potential and attractive profit margin, we will continue to focus our resources on the billboard segment going forward in cities outside of the one in which we are headquartered.

Cost of revenues.

Our cost of revenues for the three months ended December 31, 2010 increased by $529,992 to $2,228,838 from $1,698,846 for the three months ended December 31, 2009, representing an increase of 31.2%. The increase mainly resulted from the increased sales during the period. Cost of revenue as a percentage of sales revenue for the three months ended December 31, 2010 and 2009 were 44.2% and 42.8%, respectively. The increase was largely due to the billboard construction cost in Shenyang and the platform maintenance cost for the city transit system.

The breakdown of the cost of revenue is as follows:

COST OF REVENUES	3 Months Ended December 30,
	2010		2009		Difference		% Change
Dalian District
Street Fixture and Display network	$	566,991,	$	408,837	$	158,154		38.68	%
City Transit system Display network		519,642		548,260		-28,618		-5.22	%
Outdoor Billboards		436,367		197,912		238,455		120.49	%
City Navigator		148,614		129,661		18,953		14.62	%-
Other service cost (b)		183,818		302,403		-118,585		-39.21	%
Subtotal for Dalian District	$	1,855,432	$	1,587,072	$	268,360		16.91	%

Shenyang District
Street Fixture and Display network	$	73,861	$	88,302	$	-14,441		-16.35	%
Outdoor Billboards		107,295		23,473		83,822		357.10	%
Other service cost (b)		--		0		13		100	%
Subtotal for Shenyang District	$	181,156	$	111,774	$	69,382		62.07	%

Beijing District
Outdoor Billboards	$	15,108	$		$	15,108		100	%
Subtotal for Beijing District	$	15,108	$		$	15,108		100	%

Tianjing District
Outdoor Billboards	$	16,141	$		$	16,141		100	%
Subtotal for Tianjing District	$	16,141	$		$	16,141		100	%

Shanghai District
Outdoor Billboards	$	161,001	$		$	161,001		100	%
Subtotal for Shanghai District	$	161,001	$		$	161,001		100	%

Total Cost of Revenues	$	2,228,838	$	1,698,846	$	529,992		31.20	%

(b) Other service cost attribute to V-Media Engineering & Design Company and to V-Media Network Technology Company when they provide Construction & Design service and technique service to outside customers, respectively.

Gross Profit

Our gross profit for the three months ended December 31, 2010 grew by $551,765 or 24.3% to $2,818,951 from $2,267,186 for the same period in 2009. The increase in gross profit was in line with our growth in revenue as we acquired more advertising contracts during the three months ended by December 31, 2010. Our gross margin during the three months ended December 31, 2010 and 2009 were 55.8% and 57.2%, respectively. The decrease is mainly due to the billboard construction cost in our Shenyang subsidiary.

Selling, General and Administrative Expenses

Selling, general and administrative expenses, totaled $926,447 during the three months ended December 31, 2010, an increase of $228,301 or 32.7%, compared to $698,146 for the same period ended December 31, 2009. Our selling, general and administrative expenses were consistent with growth in revenue and during this quarter, we experienced modest increase in our operating expenses, which was mainly attributed to an increase in our payroll and administrative costs.

Other Income (Expenses)

For the three months ended December 31, 2010, we had total other expense of $120,737 compared with total other income of $94,488 during the same period of 2009. Other expenses were mainly due to the $147,143 increase in interest expense during the period.

Total interest expense on the bank loans for the three months ended December 31, 2010 and 2009, amounted to $159,227 and $12,085, respectively.

Net Income Attributable to the Company

Net income attributable to the Company was $1,257,476 for the three months ended December 31, 2010, as compared with $ 1,133,484 during the three months ended December 31, 2009, representing an increase of 10.9%. The increase in net income was mainly attributed to our increase in revenue and our efforts to control the costs.

Comprehensive Income

Our business operates primarily in Chinese Renminbi (“RMB”), but we report our results in U.S. Dollars. The conversion of our accounts from RMB to U.S. Dollars results in translation adjustments. As a result of a currency translation adjustment gain, our comprehensive income was $1,407,084 during the three months ended December 31, 2010, as compared with $1,133,088 during the three months ended December 31, 2009, an increase of 24.2%. The increase is due to significant currency exchange fluctuation of Chinese RMB to US Dollar for the periods.

Operation Results of the Six months Ended December 31, 2010 and 2009

Revenues

We generate revenues from the sale of outdoor advertising on our advertising network. The following table sets the revenues generated from each of our advertising categories for the periods indicated.

REVENUES	6 Months Ended December 31,
	2010		2009		Difference		% Change
Dalian District
Street Fixture and Display network	$	2,964,421	$	2,396,451	$	567,970		23.70	%
City Transit system Display network		1,812,244		1,691,581		120,663		7.13	%
Outdoor Billboards		2,186,680		1,524,610		662,070		43.43	%
City Navigator		718,481,		403,775		314,706		77.94	%
Other service income (a)		457,013		857,583		-400,570		-46.71	%
Subtotal for Dalian District	$	8,138,839	$	6,874,000	$	1,264,839		18.40	%

Shenyang District
Street Fixture and Display network	$	133,396	$	215,713	$	-82,317		-38.16	%
Outdoor Billboards		224,381		43,652		180,729		414.02	%
Other service income(a)		9,234				9,234		100	%
Subtotal for Shenyang District	$	367,011	$	259,365	$	107,646		41.50	%

Tianjin District
Outdoor Billboards	$	66,955	$	-	$	66,955		100	%
Subtotal for Tianjing District	$	66,955	$		$	66,955		100	%

Shanghai District
Outdoor Billboads	$	595,734	$	-	$	595,734		100	%
Subtotal for Shanghai District	$	595,734	$		$	595,734		100	%

Total Revenues	$	9,168,539	$	7,133,365	$	2,035,174		28.53	%

(a) Other service income generated by Construction & Design service provided by V-Media Engineering & Design Company and technique service provided by V-Media Network Technology Company to outside customers.

During the six months ended December 31, 2010, we had revenues of $9,168,539, as compared to $7,133,365 during the six months ended December 31, 2009, an increase of approximately $2,035,174, or 28.53% due to our increased and expanded sale to the existing and new customers in 2010. Our advertising network has been expanding quickly. We obtained more desirable locations in Dalian, Tianjin and Shanghai for advertisements, created new media platforms and continued our efforts to expand our client base in Shenyang.

Cost of Revenue

COST OF REVENUES	6 Months Ended December 31,
	2010		2009		Difference		% Change
Dalian District
Street Fixture and Display network	$	1,092,241	$	826,137	$	266,104		32.21	%
City Transit system Display network		885,722		822,881		62,841		7.64	%
Outdoor Billboards		785,5669		514,919		270,647		52.56	%
City Navigator		232,113		181.674		50,439		27.76	%-
Other service cost (b)		358,955		408,064		-49,109		-12.03	%
Subtotal for Dalian District	$	3,354,597,.6	$	2,753.674	$	600,923		21.82	%

Shenyang District
Street Fixture and Display network	$	83,759	$	110,230	$	-26,471		-24.01	%
Outdoor Billboards		126,708		27,910		98,798		353.99	%
Other service cost (b)		1,534		0		1,534		100	%
Subtotal for Shenyang District	$	212,001	$	138,139	$	73,862		53.47	%

Beijing District
Outdoor Billboards	$	30,507	$		$	30,507		100	%
Subtotal for Beijing District	$	30,507	$		$	30,507		100	%

Tianjing District
Outdoor Billboards	$	28,001	$		$	28,001		100	%
Subtotal for Tianjing District	$	28,001	$		$	28,001		100	%

Shanghai District
Outdoor Billboards	$	336,934	$		$	336,934		100	%
Subtotal for Shanghai District	$	336,934	$		$	336,934		100	%

Total Cost of Revenues	$	3,962,040	$	2,891,813	$	1,070,227		37.01	%

(b) Other service cost attribute to V-Media Engineering & Design Company and by V-Media Network Technology Company when they provide Construction & Design service and technique service to outside customers, respectively.

During the six months ended December 31, 2010, we had cost of revenue of $3,962,040, as compared with cost of revenue of $2,891,813, an increase of approximately $1,070,227, or 37.01%, reflecting the increase in revenues. Gross profit rose to $5,206,499 for the six months ended December 31, 2010, increased 22.75% compared with the six months ended December 31, 2009. The main reasons for the increase of gross profit from 2009 to 2010 are as following: 1) Increased usage of advertising space as we have been able to secure more popular locations and have raised more brand awareness among our customers; and, 2) we are also able to realize more profits on some of our new advertising channels, such as large-screen LED billboards, which have lower maintenance costs and higher profitability.

Selling, General and Administrative Expenses

Our operating expenses were $1,691,586 for the six months ended December 31, 2010, compared with $1,279,416 during the six months ended December 31, 2009, an increase of $412,169 or approximately 32.2%. The increase was mainly due to the increase of salaries and other administrative expenses.

Other Income (Expenses)

For the six months ended December 31, 2010, we had a total other expenses of $210,413 compared with total other income of $20,633 during the same period of 2009. Other expenses were mainly due to the $234,113 increase in interest expense during the period.

Total interest expense on the bank loans for the six months ended December 31, 2010 and 2009, amounted to $315,557 and $81,444, respectively.

Net Income attributable to the Company

As a result of the factors described above, we had net income attributable to the Company in the amount of $2,342,618 for the six months ended December 31, 2010, compared with $2,041,048 for the six months ended December 31, 2009, which represents an increase of 14.78%. The increase in net income was mainly attributed to our increase in revenue and our efforts to control the costs.

Comprehensive Income

Also, as a result of a currency translation adjustment gain, our comprehensive income was $2,597,644 for the six months ended December 31, 2010, compared with $2,044,000 for the six months ended December 31, 2009, an increase of 27.1%. The difference between Net Income and Comprehensive Income is due to the significant currency exchange fluctuation.

Liquidity and Capital Resources

We have historically funded our working capital needs from operations, advance payments from customers, bank borrowings, and capital from shareholders. Presently, our principal sources of liquidity are generated from our operations and through bank loans. Our working capital requirements are influenced by the level of our operations, the numerical and dollar volume of our sales contracts, the progress of our contract execution and the timing of accounts receivable collections.

Based on our current operating plan, we believe that our existing resources, including cash generated from operations as well as the bank loans, will be sufficient to meet our working capital requirement for our current operations. In order to fully implement our business plan and continue our growth, however, we will require additional capital either from our shareholders or from outside sources.

As of December 31, 2010, cash and cash equivalents were $ 1,242,306, a decrease of $429,710 from $ 1,672,017 as of June 30, 2010.

Cash Flow from Operating Activities

Net cash provided by operating activities was $3,916,703 for the six months ended December 31, 2010, compared with net cash provided by operating activities of $3,938,263 for the six months ended December 31, 2009. The major components of cash provided in operations were related to the increased net income and accounts payable, a decrease in advance to suppliers, offset by an increase in accounts receivable, and an increase in other current assets

Cash Used in Investing Activities

For the six months ended December 31, 2010, our net cash used in investing activities was $5,280,208 as compared to net cash used in investing activities of $4,416,857 for the six months ended December 31, 2009. Net cash used in investing activities was mainly attributable to the acquisition of intangible assets and billboards use rights and the addition of property and equipment.

Cash Provided by Financing Activities

For the six months ended December 31, 2010, net cash provided by financing activities was $901,221 as compared to $3,411,723 for the same period ended December 31, 2009. The decrease was mainly attributable to the net proceeds from the private placement of common stock in December 2009, and partially offset by an increase in short-term bank loans in 2010.

Critical Accounting Policies

While our significant accounting policies are more fully described in Note 2 to our consolidated financial statements, we believe that the following accounting policies are the most critical to assist in fully understanding and evaluating this “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”

Use of Estimates

In preparing the financial statements in conformity with accounting principles generally accepted in the United States of America, management makes estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the dates of the financial statements, as well as the reported amounts of revenues and expenses during the reporting years. Significant estimates, required by management, include the recoverability of long-lived assets and the valuation of outstanding warrants and accrual of allowance of doubtful accounts. Actual results could differ from those estimates.

Accounts Receivables

Property, Equipment and Construction in Progress, net

	Estimated Useful Life	Residual value
Advertising equipment	4-15 years	0.05
Automobile	7 years	0.05
Computer, office equipment and furniture	5 years	0.05
Corporate Boats	7 years	0.05

Revenue recognition

Deferred revenues

Foreign currency translation

Income Taxes

Impact of Accounting Pronouncements

None.

Off-Balance Sheet Arrangements

We do not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition or results of operations.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

As a “smaller reporting company,” as defined by Item 10 of Regulation S-K, the Company is not required to provide this information.

ITEM 4. CONTROLS AND PROCEDURES.

Evaluation of Disclosure Controls and Procedures

Under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, we conducted an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended, as of the end of the period covered by this Quarterly Report on Form 10-Q (the “Evaluation Date”). The evaluation of our disclosure controls and procedures included a review of our processes and the effect on the information generated for use in this Quarterly Report on Form 10-Q. In the course of this evaluation, we sought to identify any material weaknesses in our disclosure controls and procedures and to confirm that any necessary corrective action, including process improvements, was taken. The purpose of this evaluation is to determine if, as of the Evaluation Date, our disclosure controls and procedures were operating effectively such that the information, required to be disclosed in our reports with the Securities and Exchange Commission (“SEC”) (i) was recorded, processed, summarized and reported within the time periods specified in SEC rules and forms, and (ii) was accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure. In designing and evaluating our disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and management is required to apply its judgment in evaluating and implementing possible controls and procedures. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, have been detected.

Based upon, and as of the Evaluation Date, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures contained significant deficiencies and material weaknesses. Therefore, our management concluded that our disclosure controls and procedures were not effective. We believe that the deficiencies and weaknesses in our disclosure controls and procedures result from weaknesses in our internal control over financial reporting, which are described under Item 9A – “Controls and Procedures – Management’s Annual Report on Internal Control Over Financial Reporting” in the Company’s Annual Report on Form 10-K filed with the SEC on October 13, 2010.

Changes in Internal Control over Financial Reporting

During the most recent quarter ended December 31, 2010, the Company began to implement the following changes to its internal control over financial reporting that have materially affected, or that are reasonably likely to materially affect, its internal control over financial reporting.

·	We began evaluating the roles of our existing accounting personnel in an effort to realign the reporting structure of our internal auditing staff in China that will test and monitor the implementation of our accounting and internal control procedures.

·	We initiated in the process of completing a review and revision of the documentation of the Company’s internal control procedures and policies.

We began the preliminary implementation of an initiative and training in China to ensure the importance of internal controls and compliance with established policies and procedures are fully understood throughout the organization and plan to provide additional US GAAP training to all employees involved to ensure the performance of and compliance with those procedures and policies.

The remedial measures being undertaken may not be fully effectuated or may be insufficient to address the significant deficiencies we identified, and there can be no assurance that significant deficiencies or material weaknesses in our internal control over financial reporting will not be identified or occur in the future. If additional significant deficiencies (or if material weaknesses) in our internal controls are discovered or occur in the future, among other similar or related effects: (i) the Company may fail to meet future reporting obligations on a timely basis, (ii) the Company’s consolidated financial statements may contain material misstatements and (iii) the Company’s business and operating results may be harmed.

PART II - OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS.

From time to time, the Company may become involved in various lawsuits and legal proceedings which arise in the ordinary course of business.

ITEM 1A. RISK FACTORS.

As a “smaller reporting company,” as defined by Item 10 of Regulation S-K, the Company is not required to provide this information.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.

None.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES.

None.

ITEM 4. RESERVED.

ITEM 5. OTHER INFORMATION.

Not applicable.

ITEM 6. XHIBITS.

Exhibit Number	Description of Exhibit
31.1*	Certification of Principal Executive Officer pursuant to Rule 13a-14(a).
31.2*	Certification of Principal Financial Officer pursuant to Rule 13a-14(a).
32.1*	Certification of Principal Executive Officer pursuant to 18 U.S.C. Section 1350.
32.2*	Certification of Principal Financial Officer pursuant to 18 U.S.C. Section 1350.

* Filed herewith

SIGNATURES

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

Date: February 14, 2011

	CHINA NEW MEDIA CORP.

	By:	/s/ Guojun Wang
		Name: Guojun Wang
		Title: Chief Executive Officer and Chairman
		(principal executive officer and duly authorized officer)



	By:	/s/ Hongwen Liu
		Name: Hongwen Liu
		Title: Chief Financial Officer and Treasurer
		(principal financial officer)

Exhibit Number	Description of Exhibit
31.1*	Certification of Principal Executive Officer pursuant to Rule 13a-14(a).
31.2*	Certification of Principal Financial Officer pursuant to Rule 13a-14(a).
32.1*	Certification of Principal Executive Officer pursuant to 18 U.S.C. Section 1350.
32.2*	Certification of Principal Financial Officer pursuant to 18 U.S.C. Section 1350.

* Filed herewith

V Media Corp - FORM 10-Q - February 14, 2011

Attached files

V Media Corp Reports