The number of common equity shares outstanding as of April 30, 2011 was 554,132,450 shares of Common Stock, no par value.

FORWARD-LOOKING STATEMENTS

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

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

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

As used in this quarterly report, the terms "we", "us", "our", "CHMD", and "the Company" mean China Media Group Corporation and its subsidiaries unless otherwise indicated.

PART I

Condensed Consolidated Balance Sheets as of March 31, 2011 and December 31, 2010

Condensed Consolidated Statements of Operations for the three months period ended March 31, 2011 and 2010

Condensed Consolidated Statements of Stockholders' Equity for the years ended December 31, 2010 and 2009, and for the three months period ended March 31, 2011

Condensed Consolidated Statements of Cash Flows for the three months periods ended March 31, 2011 and 2010

Notes to Condensed Consolidated Financial Statements

CHINA MEDIA GROUP CORPORATION

CONSOLIDATED BALANCE SHEETS

AS OF MARCH 31, 2011 AND DECEMBER 31, 2010

March 31, 2011

December 31, 2010

(Unaudited)

(Audited)

US$

US$

Notes

--------------------

---------------------

23,877

17,654

21

170,000

170,000

7

338,281

339,715

136,888

128,990

---------------------

---------------------

669,046

656,359

8

11,903

15,044

9

138,000

138,000

16

81,556

-

---------------------

---------------------

231,459

153,044

---------------------

---------------------

900,505

809,403

=============

=============

11

599,232

547,654

12

214,591

214,591

13

1,065,976

1,085,855

14

931,800

855,388

5

231,577

202,014

---------------------

---------------------

3,043,176

2,905,502

---------------------

---------------------

20

2,000,000

2,000,000

6

7,773,902

7,773,902

1,799,358

1,799,358

16

52,510

-

67,030

67,176

(13,963,062)

(13,867,043)

127,591

130,508

----------------------

---------------------

(4,142,671)

(4,096,099)

----------------------

---------------------

900,505

809,403

=============

============

CHINA MEDIA GROUP CORPORATION

CONSOLIDATED STATEMENTS OF OPERATIONS

FOR THE THREE MONTHS ENDED MARCH 31, 2011 AND 2010

(UNAUDITED)

Three months periods

Ended March 31

---------------------------------------------

2011

2010

-----------------

---------------

US$

US$

28,889

15,532

(12,559)

(6,240)

----------------

---------------

16,330

9,292

68,646

101,740

---------------

---------------

(52,316)

(92,448)

-

-

(46,620)

(42,491)

-----------------

--------------

(98,936)

(134,939)

2,917

7,116

-----------------

--------------

(96,019)

(127,823)

-----------------

--------------

(146)

2,030

-----------------

--------------

(96,165)

(125,793)

=========

=========

(0.00)

(0.00)

=========

=========

554,132,450

534,132,450

=========

*

Weighted average number of shares used to compute basic and diluted loss per share for the three months ended March 31, 2011 and 2010 are the same since the effect of dilutive securities are anti-dilutive.

CHINA MEDIA GROUP CORPORATION

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

FOR THE YEARS ENDED DECEMBER 31, 2010 AND 2009

AND FOR THE THREE MONTHS ENDED MARCH 31, 2011

(UNAUDITED)

Common

Additional

Total

Stock

Paid-in

Comprehensive

Shares to

Accumulated

Uncontrolled

Stockholders'

Shares

Amount

Capital

Income

be issued

Deficit

Interest

Equity

US$

US$

US$

US$

US$

US$

US$

--------------

----------

-------------

--------------

-------------

-------------

-------------

--------------

534,132,450

7,428,902

1,660,183

43,265

-

(5,735,198)

168,230

3,565,382

-

-

100,691

-

-

-

100,691

-

-

-

883

-

-

883

-

-

-

-

-

(2,534,104)

(20,255)

(2,554,359))

--------------

-----------

--------------

---------------

-------------

--------------

--------------

---------------

534,132,450

7,428,902

1, 760,874

44,148

-

(8,269,302)

147,975

1,112,597

-

-

38,484

-

-

-

-

38,484

-

-

-

23,028

-

-

-

23,028

20,000,000

345,000

-

-

-

-

-

345,000

-

-

-

-

-

-

5,110

5,110

-

-

-

-

-

(5,597,741)

(22,577)

(5,620,318)

-------------

-----------

--------------

---------------

-------------

--------------

--------------

---------------

554,132,450

7,773,902

1,799,358

67,176

-

(13,867,043)

130,508

(4,096,099)

-

-

-

-

52,510

-

-

52,510

-

-

-

(146)

-

-

-

(146)

-

-

-

-

-

(96,019)

(2,917)

(98,936)

-------------

-----------

--------------

---------------

-------------

--------------

--------------

---------------

554,132,450

7,773,902

1,799,358

67,030

52,510

(13,963,062)

127,591

(4,142,671)

=======

=======

========

=========

========

========

========

=========

CHINA MEDIA GROUP CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE THREE MONTHS ENDED MARCH 30, 2011 AND 2010

(UNAUDITED)

For the Three Months ended March 31,
2011

For the Three Months ended March 31,
2010

US$

US$

--------------------

--------------------

(96,019)

(127,823)

3,141

3,140

(2,917)

(7,116)

-

25,173

(7,898)

6,773

13

-

(27,625)

-

51,578

44.068

29,563

-

(19,879)

(2,720)

76,412

39,881

--------------------

--------------------

6,369

(18,624)

--------------------

--------------------

-

-

--------------------

--------------------

-

-

--------------------

--------------------

-

-

--------------------

--------------------

-

-

--------------------

--------------------

6,369

(18,624)

(146)

2,030

17,654

32,860

--------------------

--------------------

23,877

16,266

============

============

46,620

42,491

============

============

-

-

============

============

ORGANIZATION

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

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

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

The Group will be engaged in the media and advertising business, focusing mainly in China, and the marketing and distribution of convergent devices and the sale and marketing of organic fertilizers and produce. During the period, the Group recorded sales in the provision of advertising services.

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

The accompanying unaudited interim consolidated financial statements have been prepared in accordance with accounting principals generally accepted in the United States of America and the rules of the U.S. Securities and Exchange Commission, and should be read in conjunction with the audited financial statements and notes thereto for the year ended December 31, 2010. They do not include all information and footnotes required by accounting principles generally accepted in the United States of America for complete financial statements. However, except as disclosed herein, there has been no material change in the information disclosed in the notes to the financial statements for the year ended December 31, 2010 included in the Company Form 10-K filed with the Securities and Exchange Commission. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation of financial position and results of operations for the interim period presented have been included. Operating results for the interim period are not necessary indicative of the results that may be expected for the respective full.

Principles of Consolidation

The consolidated financial statements for the year ended March 31, 2011 include the financial statements of the Company, its wholly owned subsidiaries Ren Ren Media Group Limited, Good World Investments Limited, 51% subsidiary Premium Multimedia Sdn. Bhd., and two 50% subsidiaries, namely Beijing Ren Ren Health Culture Promotion Limited and ATC Marketing Limited. ATC Marketing Limited was established on the date of May 21, 2009 and Premium Multimedia Sdn. Bhd. was acquired on September 26, 2009 and the disposal in October 2010. The Company consolidated both of these 50% ownership companies during the period of control because of the sole largest shareholding status and/or controlling of the Board of Directors. On June 18, 2010, the Group acquired a 50% subsidiary, AX Organic Limited and then disposed of this investment in December 2010 and the Company consolidates this subsidiary into the Group accounts during this period as the Group has control of the Board of Directors.

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

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

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

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

Net Income (Loss) per Share

Basic earnings per share were computed by dividing net loss by the weighted average number of shares of common stock outstanding during the year. Diluted loss per common share for the year ended December 31, 2010 and 2009 are not presented as it would be anti-dilutive.

Fair Value Measurements and Disclosures

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

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

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

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

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

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

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

Stock-based compensation

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

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

Employees' benefits and pension obligations

Mandatory contributions of five percent of gross salary payments, subject to certain minimum and maximum levels, are made to defined contribution Mandatory Provident Fund schemes ("MPF schemes") pursuant to the laws of Hong Kong. These contributions are charged to expense in the same period as the related salary cost. Total contributions made by the Company to the MPF schemes were $nil and $542 for the year December 31, 2010 and 2009, respectively.

Issuance of shares for service

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

Revenue Recognition

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

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

The accounts of the Company's Hong Kong and China subsidiaries are maintained, in the Hong Kong dollars (HK) and Chinese Renminbi, respectively. Such financial statements are translated into U.S. Dollars (USD) in accordance with ASC 830 "Foreign Currency Translation" which codified Statement of Financial Accounts Standards ("SFAS") No. 52, "Foreign Currency Translation," with the respective currency as the functional currency. According to the Statement, all assets and liabilities were translated at the exchange rate on the balance sheet date, stockholder's equity are translated at the historical rates and statement of operations items are translated at the weighted average exchange rate for the year. The resulting translation adjustments are reported under other comprehensive income in accordance with SFAS No. 130, "Reporting Comprehensive Income. As of March 31, 2011, the comprehensive income was $67,030.

Recent Pronouncements

Recently Implemented Standards

ASC 105, Generally Accepted Accounting Principles ("ASC 105") (formerly Statement of Financial Accounting Standards No.168, The FASB Accounting Standards Codification and the Hierarchy of Generally Accepted Accounting Principles a replacement of FASB Statement No.162) reorganized by topic existing accounting and reporting guidance issued by the Financial Accounting Standards Board ("FASB") into a single source of authoritative generally accepted accounting principles ("GAAP") to be applied by nongovernmental entities. All guidance contained in the Accounting Standards Codification ("ASC") carries an equal level of authority. Rules and interpretive releases of the Securities and Exchange Commission ("SEC") under authority of federal securities laws are also sources of authoritative GAAP for SEC registrants. Accordingly, all other accounting literature will be deemed "non-authoritative". ASC 105 is effective on a prospective basis for financial statements issued for interim and annual periods ending after September15, 2009. The Company has implemented the guidance included in ASC 105 as of July1, 2009. The implementation of this guidance changed the Company's references to GAAP authoritative guidance but did not impact the Company's financial position or results of operations.

ASC 855, Subsequent Events ("ASC 855") (formerly Statement of Financial Accounting Standards No.165, Subsequent Events) includes guidance that was issued by the FASB in May 2009, and is consistent with current auditing standards in defining a subsequent event. Additionally, the guidance provides for disclosure regarding the existence and timing of a company's evaluation of its subsequent events. ASC 855 defines two types of subsequent events, "recognized" and "non-recognized". Recognized subsequent events provide additional evidence about conditions that existed at the date of the balance sheet and are required to be reflected in the financial statements. Non-recognized subsequent events provide evidence about conditions that did not exist at the date of the balance sheet but arose after that date and, therefore; are not required to be reflected in the financial statements. However, certain non-recognized subsequent events may require disclosure to prevent the financial statements from being misleading. This guidance was effective prospectively for interim or annual financial periods ending after June15, 2009. The Company implemented the guidance included in ASC 855 as of April1, 2009. The effect of implementing this guidance was not material to the Company's financial position or results of operations.

ASC 944, Financial Services - Insurance ("ASC 944") contains guidance that was previously issued by the FASB in May 2008 as Statement of Financial Accounting Standards No.163, Accounting for Financial Guarantee Insurance Contracts - an interpretation of FASB Statement No.60 that provides for changes to both the recognition and measurement of premium revenues and claim liabilities for financial guarantee insurance contracts that do not qualify as a derivative instrument in accordance with ASC 815, Derivatives and Hedging (formerly included under Statement of Financial Accounting Standards No.133, Accounting for Derivative Instruments and Hedging Activities). This financial guarantee insurance contract guidance also expands the disclosure requirements related to these contracts to include such items as a company's method of tracking insured financial obligations with credit deterioration, financial information about the insured financial obligations, and management's policies for placing and monitoring the insured financial obligations. ASC 944, as it relates to financial guarantee insurance contracts, was effective for fiscal years beginning after December15, 2008, except for certain disclosures related to the insured financial obligations, which were effective for the third quarter of 2008. The Company does not have financial guarantee insurance products, and, accordingly, the implementation of this portion of ASC 944 did not have an effect on the Company's results of operations or financial position.

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Recent Pronouncements (Continued)

Recently Implemented Standards (Continued)

ASC 805, Business Combinations ("ASC 805") (formerly included under Statement of Financial Accounting Standards No.141 (revised 2007), Business Combinations) contains guidance that was issued by the FASB in December 2007. It requires the acquiring entity in a business combination to recognize all assets acquired and liabilities assumed in a transaction at the acquisition-date fair value, with certain exceptions. Additionally, the guidance requires changes to the accounting treatment of acquisition related items, including, among other items, transaction costs, contingent consideration, restructuring costs, indemnification assets and tax benefits. ASC 805 also provides for a substantial number of new disclosure requirements. ASC 805 also contains guidance that was formerly issued as FSP FAS 141(R)-1, Accounting for Assets Acquired and Liabilities Assumed in a Business Combination That Arise from Contingencies which was intended to provide additional guidance clarifying application issues regarding initial recognition and measurement, subsequent measurement and accounting, and disclosure of assets and liabilities arising from contingencies in a business combination. ASC 805 was effective for business combinations initiated on or after the first annual reporting period beginning after December15, 2008. The Company implemented this guidance effective January1, 2009. Implementing this guidance did not have an effect on the Company's financial position or results of operations; however it will likely have an impact on the Company's accounting for future business combinations, but the effect is dependent upon acquisitions, if any, that are made in the future.

ASC 810, Consolidation ("ASC 810") includes new guidance issued by the FASB in December 2007 governing the accounting for and reporting of noncontrolling interests (previously referred to as minority interests). This guidance established reporting requirements which include, among other things, that noncontrolling interests be reflected as a separate component of equity, not as a liability. It also requires that the interests of the parent and the noncontrolling interest be clearly identifiable. Additionally, increases and decreases in a parent's ownership interest that leave control intact shall be reflected as equity transactions, rather than step acquisitions or dilution gains or losses. This guidance also requires changes to the presentation of information in the financial statements and provides for additional disclosure requirements. ASC 810 was effective for fiscal years beginning on or after December15, 2008. The Company implemented this guidance as of January1, 2009. The effect of implementing this guidance was not material to the Company's financial position or results of operations.

ASC 825, Financial Instruments ("ASC 825") includes guidance which was issued in February 2007 by the FASB and was previously included under Statement of Financial Accounting Standards No.159, The Fair Value Option for Financial Assets and Financial Liabilities Including an amendment of FASB Statement No.115. The related sections within ASC 825 permit a company to choose, at specified election dates, to measure at fair value certain eligible financial assets and liabilities that are not currently required to be measured at fair value. The specified election dates include, but are not limited to, the date when an entity first recognizes the item, when an entity enters into a firm commitment or when changes in the financial instrument causes it to no longer qualify for fair value accounting under a different accounting standard. An entity may elect the fair value option for eligible items that exist at the effective date. At that date, the difference between the carrying amounts and the fair values of eligible items for which the fair value option is elected should be recognized as a cumulative effect adjustment to the opening balance of retained earnings. The fair value option may be elected for each entire financial instrument, but need not be applied to all similar instruments. Once the fair value option has been elected, it is irrevocable. Unrealized gains and losses on items for which the fair value option has been elected will be reported in earnings. This guidance was effective as of the beginning of fiscal years that began after November15, 2007. The Company does not have eligible financial assets and liabilities, and, accordingly, the implementation of ASC 825 did not have an effect on the Company's results of operations or financial position.

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Recent Pronouncements (Continued)

Recently Implemented Standards (Continued)

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

Fair value guidance in ASC 820 was initially effective for fiscal years beginning after November15, 2007 and for interim periods within those fiscal years for financial assets and liabilities. The effective date of ASC 820 for all non-recurring fair value measurements of nonfinancial assets and nonfinancial liabilities was fiscal years beginning after November15, 2008. Guidance related to fair value measurements in an inactive market was effective in October 2008 and guidance related to orderly transactions under current market conditions was effective for interim and annual reporting periods ending after June15, 2009.

The Company applied the provisions of ASC 820 to its financial assets and liabilities upon adoption at January1, 2008 and adopted the remaining provisions relating to certain nonfinancial assets and liabilities on January1, 2009. The difference between the carrying amounts and fair values of those financial instruments held upon initial adoption, on January1, 2008, was recognized as a cumulative effect adjustment to the opening balance of retained earnings and was not material to the Company's financial position or results of operations. The Company implemented the guidance related to orderly transactions under current market conditions as of April1, 2009, which also was not material to the Company's financial position or results of operations.

Recently Issued Standards

In August 2009, the FASB issued ASC Update ("ASU") No.2009-05, Fair Value Measurements and Disclosures (Topic 820): Measuring Liabilities at Fair Value ("ASC Update No.2009-05"). This update amends ASC 820, Fair Value Measurements and Disclosures and provides further guidance on measuring the fair value of a liability. The guidance establishes the types of valuation techniques to be used to value a liability when a quoted market price in an active market for the identical liability is not available, such as the use of an identical or similar liability when traded as an asset. The guidance also further clarifies that a quoted price in an active market for the identical liability at the measurement date and the quoted price for the identical liability when traded as an asset in an active market when no adjustments to the quoted price of the asset are required are both Level 1 fair value measurements. If adjustments are required to be applied to the quoted price, it results in a level 2 or 3 fair value measurement. The guidance provided in the update is effective for the first reporting period (including interim periods) beginning after issuance. The Company does not expect that the implementation of ASC Update No.2009-05 will have a material effect on its financial position or results of operations.

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Recent Pronouncements (Continued)

Recently Issued Standards (continued)

In September 2009, the FASB issued ASC Update ("ASU") No.2009-12, Fair Value Measurements and Disclosures (Topic 820): Investments in Certain Entities that Calculate Net Asset Value per Share (or Its Equivalent) ("ASU No.2009-12"). This update sets forth guidance on using the net asset value per share provided by an investee to estimate the fair value of an alternative investment. Specifically, the update permits a reporting entity to measure the fair value of this type of investment on the basis of the net asset value per share of the investment (or its equivalent) if all or substantially all of the underlying investments used in the calculation of the net asset value is consistent with ASC 820. The update also requires additional disclosures by each major category of investment, including, but not limited to, fair value of underlying investments in the major category, significant investment strategies, redemption restrictions, and unfunded commitments related to investments in the major category. The amendments in this update are effective for interim and annual periods ending after December15, 2009 with early application permitted. The Company does not expect that the implementation of ASC Update No.2009-12 will have a material effect on its financial position or results of operations.

In October 2009, the FASB issued FASB issued ASU No. 2009-13, Revenue Recognition (Topic 605): Multiple-Deliverable Revenue Arrangements (a consensus of the FASB Emerging Issues Task Force). ( "ASC Update No. 2009-13"). This updates set forth the guidance on the existing multiple-element arrangement currently in FASB Topic 605-25 (Revenue Recognition - Multiple-Element Arrangements). This new guidance eliminates the requirement that all undelivered elements have objective evidence of fair value before a company can recognize the portion of the overall arrangement fee that is attributable to the items that have already been delivered. Further, companies will be required to allocate revenue in arrangements involving multiple deliverables based on the estimated selling price of each deliverable, even though such deliverables are not sold separately by either company itself or other vendors. This new guidance also significantly expands the disclosures required for multiple-element revenue arrangements. The revised guidance will be effective for the first annual period beginning on or after June 15, 2010. The Company does not expect that the implementation of ASU No. 2009-13 will have a material effect on its financial statements.

In 2010, the FASB issued ASC Update ("ASU") No. 2010-01, Equity (Topic 505): Accounting for Distributions to Shareholders with Components of Stock and Cash. This update clarify that the stock portion of a distribution to shareholders that allows them to elect to receive cash or stock with a potential limitation on the total amount of cash that all shareholders can elect to receive in the aggregate is considered a share issuance that is reflected in earnings per share prospectively and is not a stock dividend. This ASU codified the consensus reached in EITF Issue No. 09-E "Accounting for Stock Dividends, Including Distributions to Shareholders with Components of Stock and Cash". ASU 2010-01 is effective for interim and annual periods ending on or after December 15, 2009, and should be applied on a retrospective basis. The adoption of this update did not have any impact on the Company's financial statements.

In 2010, the FASB issued ASC Updated ("ASU") No. 2010-02, Consolidation (Topics 810) - Accounting and Reporting for Decreases in Ownership of a Subsidiary - A Scope Clarification This updated provides guidance for noncontrolling interests and changes in ownership interests of a subsidiary. An entity is required to deconsolidate a subsidiary when the entity ceases to have a controlling financial interest in the subsidiary. Upon deconsolidation of a subsidiary, an entity recognizes a gain or loss on the transaction and measures any retained investment in the subsidiary at fair value. The gain or loss includes any gain or loss associated with the difference between the fair value of the retained investment in the subsidiary and its carrying amount at the date the subsidiary is deconsolidated. In contrast, an entity is required to account for a decrease in its ownership interest of a subsidiary that does not result in a change of control of the subsidiary as an equity transaction. The adoption of this update did not have any impact on the Company's financial statements.

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Recent Pronouncements (Continued)

In 2010, the FASB issued ASC Update ("ASU") No. 2010-13, Compensation - Stock Compensation (Topic 718): Effect of Denominating the Exercise Price of a Share-Based Payment Award in the Currency of the Market in Which the Underlying Equity Security Trades. This update is to codify the consensus reached in EITF Issue No. 09-J, "Effect of Denominating the Exercise Price of a Share-Based Payment Award in the Currency of the Market in Which the Underlying equity Security Trades" The amendments to the Codification clarify that an employee share-based payment award with an exercise price denominated in the currency of a market in which a substantial portion of the entity's equity shares trades should not be considered to contain a condition that is not a market, performance, or services condition. Therefore, an entity would not classify such an award as a liability if it otherwise qualifies as equity. The adoption of this update did not have any impact on the Company's financial statements.

In 2010, the FASB issued ASC Update ("ASU") No. 2010-21, Accounting for Technical Amendments to Various SEC Rules and Schedules. This update amends various SEC paragraphs in the FASB Accounting Standards Codification pursuant to SEC Final Rule, "Technical Amendments to Rules Forms, Schedules and Codification of Financial Reporting Policies". The adoption of this update did not have any impact on the Company's financial statements.

In 2010, the FASB issued ASC Update ("ASU") No. 2010-22, Accounting for Various Topics. This update amends various SEC paragraphs in the FASB Accounting Standards Codification based on external comments received and the issuance of Staff Accounting Bulletin (SAB) No. 112 which amends or rescinds portion of certain SAB topics. SAB 112 was issued to being existing SEC guidance into conformity with ASC 805 "Business Combination" and ASC 810 "Consolidation". The adoption of this update did not have any impact on the Company's financial statements.

UNCERTAINTY OF ABILITY TO CONTINUE AS A GOING CONCERN

The Company's financial statements are prepared using the generally accepted accounting principles applicable to a going concern, which contemplates the realization of assets and liquidation of liabilities in the normal course of business. As of March 31, 2011, the Company has incurred an accumulated deficits totaling $13,963,062 and its current liabilities exceed its current assets by $2,374,130. In view of the matters described above, recoverability of a major portion of the recorded asset amounts shown in the accompanying balance sheets is dependent upon continued operations of the Company, which in turn is dependent upon the Company's ability to raise additional capital, obtain financing and to succeed in its future operations. The financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern.

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

STOCKHOLDERS' EQUITY

On June 18, 2010 the Company issued 10,000,000 shares of Common Stock pursuant to a Stock Purchase Agreement to acquire 50% controlling interests in AX Organic Limited.

On October 8, 2010 the Group completed the transaction to acquire 69% interests in China Integrated Media Corporation Limited ("CIMC"), a public company in Australia, by the issuance of 10,000,000 shares in the Company as part of the purchase consideration. CIMC is in the business of television media and digital signage boards.

STOCK OPTIONS AND WARRANTS

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

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

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

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

As of March 31,2011, the Company has 19,000,000 stock options outstanding and the option liabilities is $231,577.

STOCK OPTIONS AND WARRANTS (Continued)

Following is a summary of the activities of the 2002 Stock Option Plan for the period ended September 30, 2010:

Options outstanding

19,000,000

-

-

-

---------------------------

19,000,000

================

Outstanding Options

Exercisable Options

-----------------------

-----------------------------------------------------

Grant
Date

Exercise
Price

Number

Average Remaining
Contractual Life

Average
Exercise Price

Number

Intrinsic Price

4/16/2010

$0.010

19,000,000

4.04

$0.010

19,000,000

$0.00

During the period on May 17, 2010, 12,300,000 stock options expired and on April 16, 2010, the Company granted 19,000,000 stock options to 5 qualified persons. As of March 31, 2011, there were 19,000,000 outstanding stock options.

12/23/2006

Risk-free interest rate

4.63%

3.00 years

95%

0

5/18/2007

Risk-free interest rate

4.63%

3.00 years

139%

0

4/16/2010

Risk-free interest rate

3.25%

5.00 years

250%

0

STOCK OPTIONS AND WARRANTS (Continued)

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

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

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

No shares were issued under the registration statement on Form S-8 during the year 2009 and 2008. As at June 30, 2010 there were 32,588,700 shares available underlying stock options under the 2007 Stock Incentive Plan.

As of March 31, 2011, there were no outstanding stock options to purchase shares of our Common Stock under the 2007 Stock Incentive Plan.

In December 2006, the Company entered into an Equity Line of Credit Agreement ("ELOC") to sell commons stock of the Company up to $2,500,000. As part of this agreement, the Company issued, inter alia, stock warrants for a total of 31,250,000 shares of Common Stock in the Company. In October 2007, 500,000 warrant shares were exercised. The remaining 30,750,000 stock warrants expired in May 2009.

As part of the ELOC agreement above, the Company also issued 527,776 stock warrants as part of commission in relation to the draw down of the Debenture Purchase Agreement. All these stock warrants expired in May 2009.

As at March 31, 2011, there is no warrant share outstanding.

STOCK PURCHASE AGREEMENTS

On June 18, 2010 the Company issued 10,000,000 shares of Common Stock pursuant to a Stock Purchase Agreement to acquire 50% controlling interests in AX Organic Limited.

On October 8, 2010 the Company issued 10,000,000 shares of Common Stock as part of the purchase consideration pursuant to a Sale and Purchase Agreement to acquire 69% controlling interests in China Integrated Media Corporation Limited.

On February 22, 2011 the Company entered into an agreement to issue 2,205,376 shares in the Company as part of the consideration to acquire share investment..

DUE FROM RELATED PARTIES

March 31, 2011

December 31, 2010

US$

US$

(a)

241,288

231,424

(b)

1,470

12,143

(c)

95,523

95,535

(d)

-

613

----------------

----------------

338,281

339,715

===========

===========

Advance to suppliers is the deposit for the purchases of M.A.G.I.C. phone paid to AdvanceTech Communications Sdn. Bhd. ("ATC"). Our director, Mr. LOI Cheng Pheng is a director and shareholder of ATC.

Due from investment company is an amount due from China Integrated Media Corporation Ltd in which our director Mr. Con Unerkov is a shareholder.

This is amount due from a former subsidiary company, AX Organic Limited, which was disposed during the year.

The amount due from director of subsidiary company was repaid during the period.

PROPERTY AND EQUIPMENT, NET

March 31, 2011

December 31, 2010

US$

US$

7,216

7,216

7,797

8,058

47,951

47,951

---------------

---------------

62,964

63,225

-

-

(51,061)

(48,181)

---------------

---------------

11,903

15,044

===========

===========

ADVANCE PAYMENT FOR DISTRIBUTION RIGHTS

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

*

*

*

*

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

GOODWILL

March 31, 2011

December 31, 2010

US$

US$

-

4,791,676

-

(4,791,676)

-

-

-------------------

-------------------

-

-

===========

===========

OTHER PAYABLES AND ACCRUALS

March 31, 2011

December 31, 2010

US$

US$

19,746

25,694

17,844

12,629

235,323

218,823

92,230

96,182

(a)

137,570

97,804

76,950

76,951

19,569

19,571

-----------------

-----------------

599,232

547,654

===========

===========

Other payables are Company expenses such as postage, sundries, etc., and advanced on behalf of the Company from various parties.

SHORT -TERM DEBT

As of December 31, 2010, the Company had two short term debts for a total amount of $214,591 which consisted of a debt of $114,591 and $100,000 as further described below.

The Company had an outstanding unsecured debt payable, of $114,591 (December 31, 2009: $99,645), with annual interest rate of 10%. This debt is due on May 31, 2011. The Company recorded accrued interest of $6,684 for the year ended December 31, 2010 (year ended December 31, 2009: $9,964).

The Company also had during the year entered into two loan agreements of $50,000 each for a total of $100,000. Both the loans are unsecured, bears interest at 10% per annum, repayable on June 3, 2011 and July 5, 2011. Initially, the holder of these loans can convert the loan into Common Stock of the Company at any time prior to the maturity of the loan and at a conversion price of US$0.02 per share. Subsequent to the year end in April 2011, the terms of the loan was amended as follows: i) the interest rate was increased to 12% with effect from January 1, 2011, and ii) the loan was extended for one more year and the convertible feature was cancelled with effect December 30, 2010.

DUE TO OFFICERS AND DIRECTORS

The amounts due to directors and officers are interests free, unsecured and repayable on demand. The balance of due to directors and officers is $1,065,976 as of March 31, 2011 (December 31, 2010: $1,085,855).

DUE TO RELATED PARTIES

March 31, 2011

December 31, 2010

US$

US$

(a)

740,124

698,889

(b)

32,908

-

(c)

158,768

156,499

-----------------

-------------------

931,800

855,388

===========

===========

(a) The amounts due to shareholders are unsecured, repayable on demand and is interest free except for the $50,000 which bears interests at 6% per annum. Included in the amount is $229,281 (2010: $229,435) which is due to our beneficial shareholder and director of the Company Mr. PK Lam.

(b) The amount due to an investment company is interest free, unsecured and repayable on demand.

(c) The amount due to directors of subsidiary companies is interest free, unsecured and repayable on demand.

LONG-TERM DEBTS

March 31, 2011

December 31, 2010

US$

US$

2,000,000

2,000,000

-

-

------------

------------

2,000,000

2,000,000

===========

===========

The long term shareholder loan of $2,000,000 is unsecured, bears interest at 8% per annum, repayable on November 25, 2010. On November 25, 2009 the repayment of the loan was extended for a further two years to November 25, 2012.

The other loan is unsecured, accrue interest at 10% per annum and payable on May 31, 2011. At the balance sheet date, this loan was reclassified to short term loan (note 12).

INVESTMENT IN SHARES

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

INCOME TAXES

No provision was made for income tax for the year ended December 31, 2010 and 2009, since the Company and its subsidiaries had significant net operating loss. In the year ended December 31, 2010 and 2009, the Company and its subsidiaries incurred net operating losses for tax purposes of approximately $5,597,741 and $2,534,104, respectively. Total net operating losses carry forward at December 31, 2010 and 2009, (i) for Federal and State purpose were $11,063,748 and $6,113,311, respectively and (ii) for its entities outside of the United States were $1,707,655 and $1,454,671, respectively for the two years. The net operating loss carry-forwards may be used to reduce taxable income through the year 2025. The availability of the Company's net operating loss carry-forwards are subject to limitation if there is a 50% or more change in the ownership of the Company's stock.

There was no significant difference between reportable income tax and statutory income tax. The gross deferred tax asset balance as of December 31, 2010 and 2009 was approximately $4,624,137 and $2,601,000, respectively. A 100% valuation allowance has been established against the deferred tax assets, as the utilization of the loss carry-forwards cannot reasonably be assured.

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

2010

2009

----------------------

----------------------

16.5%

16.5%

(16.5%)

(16.5%)

(25%)

(25%)

(25%)

(25%)

----------------------

----------------------

-

-

=============

=============

SEGMENT REPORTING

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

Segment information about these businesses is presented below.

Advertising

Telecommunication Device

Product Services

Consolidated

For the three months
ended March 31,

For the three months
ended March 31,

For the three months
ended March 31,

For the three months
ended March 31,

2011

2010

2011

2010

2011

2010

2011

2010

US$

US$

US$

US$

US$

US$

US$

US$

28,889

15,532

-

-

-

-

28.889

15,532

=======

=======

=======

======

======

======

=========

=========

13,413

(2,919)

-

(4,521)

-

-

13,413

(7,440)

=======

=======

=======

======

======

======

-

-

(62,812)

(77,892)

--------------

--------------

(49,399)

(85,332)

(46,620)

(42,491)

--------------

--------------

(96,019)

(127,823)

=========

=========

As at March 31

2011

2010

9,881

4,812,746

355,152

239,416

-

-

365,033

5,052,162

535,472

165,324

--------------

--------------

900,505

5,217,486

=========

=========

127,591

140,859

-

-

-

-

127,591

140,859

5,043,176

4,212,625

--------------

--------------

5,170,767

4,353,484

=========

=========

2,797

2,797

343

343

-

-

3,140

3,140

=======

=======

=======

======

======

======

=========

=========

COMMITMENTS AND CONTINGENCIES

The Company leases office premises for its operations in United States and Hong Kong under operating leases. Rental expenses under operating lease for the three month ended March 31, 2011 and for the year ended December 31, 2010 was $5,825 and $24,404, respectively.

Future minimum rental payments under non-cancelable operating leases for the three month ended March 31, 2011 and for the year ended December 31, 2010 are $18,652 and $25,023, respectively.

On or about May 7, 2008, the Company received a correspondence from a law firm regarding complaints on some transmission of unsolicited facsimile allegedly from the Company in 2006, and advised of potential litigation. The Company has never sent or authorized any unsolicited facsimile transmission, and the Company has taken every possible effort to distance from these unauthorized transmissions. The Company firmly believes that the complaint is frivolous and without basis, and is consulting with its legal attorney. The Company would vigorously defend any such legal action if pursued.

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

RELATED COMPANY TRANSACTIONS

The Company agreed to pay directors and officers a monthly salary for services performed. During the year ended December 31, 2010 and 2009, the Company paid the directors and its officers and their services companies a total remuneration of $9,000 and $12,000, respectively. During the period under review, the Directors and officers did not receive any remuneration from the Group.

On November 25 2005, a subsidiary of the Company signed a loan agreement with one of its major shareholder, Central High Limited for a loan of $2,000,000. This long term shareholder loan is unsecured and repayable on November 25, 2010, and bears interest of 8% per annum. On November 25, 2009 the repayment of the loan was extended for a further two years to November 25, 2012. The accrued interest for 2010 was $160,000 (2009: $160,000) and $40,000 for the three months period ended March 31, 2011.

SUBSEQUENT EVENTS

As disclosed in the Form 8-K filed with the SEC on April 14, 2011 the Group disposed 51% interests in its investment held for resale in Jademan International Limited ("Jademan") for HK$1,377,000 (about US$176,538). The Group realized a gross profit of about $89,000 on the sale of this investment in shares. Jademan's main asset was its equity holding in China Integrated Media Corporation Limited.

The Group has evaluated all other subsequent events through May 19, 2011, the date these consolidated financial statements were issued, and determined that there were no other additional subsequent events or transactions that require recognition or disclosures in the financial statements.

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

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

Our Management's Discussion and Analysis of Consolidated Financial Condition and Results of Operations section discusses our consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of these consolidated financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. On an on-going basis, management evaluates its estimates and judgments, including those related to revenue recognition, accrued expenses, financing operations, and contingencies and litigation. Management bases its estimates and judgments on historical experience and on various other factors that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions. The most significant accounting estimates inherent in the preparation of our consolidated financial statements include estimates as to the appropriate carrying value of certain assets and liabilities which are not readily apparent from other sources. These accounting policies are described at relevant sections in this discussion and analysis and in the notes to the consolidated financial statements included in our Quarterly Report on Form 10-Q for the period ended March 31, 2011.

DESCRIPTION OF BUSINESS.

OUR BACKGROUND. The Company was incorporated in Texas on October 1, 2002 and was originally formed to be a frozen drink machine rental service. It was intended to specialize in renting frozen drink machines for gatherings such as wedding receptions, birthday parties, football parties, anniversaries, family reunions, weekend barbeques, social functions and fund raising events, as well as any other type of occasion. From the beginning, this business was at the first stage of development and the primary focus was on continuing to developing and revising our business strategies.

In January 2005, the Company changed its name to International Debt Exchange Associates Inc. reflecting the Company's intent to become a diverse company through mergers and acquisitions and still maintained the current business as a frozen drink machine rental service.

In September 2005, the Company changed its board of directors whom has since changed the Company name to China Media Group Corporation to reflect the Company's intent to focus all its efforts in advertising and media in the emerging China market. Under new management, the Company commenced to position the Company to capitalize on the growth of the Chinese advertising market where global companies are rushing into China to try to grab and hold the attention of its 1.3 billion citizens.

OUR BUSINESS. Our mission is to become one of China's leading new age media companies through the use of new technologies and devices combined with traditional media of TV, Newspapers, Magazines, Billboards and Internet to reach today's mobile society. In order to facilitate this, the Company established 4 strategic business units being "Advertising" "Print" "Telecommunications and Mobile Computing" and "Products and Services".

We plan to offer advertising services in China. These advertising services would be across all media thus we will offer our customers selective advertising on specific media for nationwide campaign. China's advertising industry is still young and fragmented. We aim to differ from other advertisers so that we can provide nationwide campaigns across all media spectrum. To this end, we will work to secure strategic ad placements in key cities in China so that our customers will have the ability to launch nationwide campaigns.

Due to the recent global economic recession, companies have been more cautious in their discretionary spending. We believe that the China advertising market has rebounded with the continued growth of its economy. We will look to re-launch the outdoor advertising markets and to raise the adequate capital to roll out the Beijing Ren Ren outdoor project. We will also explore other markets in the Asia region for any synergistic business opportunities.

Although we have established 4 business units, only three units have begun in operation, i.e.: Advertising, Telecommunications and Mobile Computing and Products Services. In summary, some major events during this quarter were as follows:

Advertising Unit

On March 13, 2007, the Company acquired 100% of the issued and outstanding shares of Good World Investments Limited, which owns 50% of the registered capital of Beijing Ren Ren Health Culture Promotion Limited ("BRR"). BRR is working with the Chinese Government on a benevolent project named "Great Wall of China Project" to advertise and promote health education and health awareness in China. We believe BRR provides a strategic advertising platform for us to launch our advertising operations in China as it can advertise in hospitals and districts in China. During the period the Company did not derive any advertising income from the BRR project but has recorded $10,298 in relation to other advertising services.

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

Advertising through mobile devices is becoming more prominent to reach the mobile society of today. The goal of the Telecommunications and Mobile Computing Unit is to provide the Company with entry into the new sector of advertising through telecommunication media and devices. Our strategy on gaining access in telecommunication media is through cooperation with existing networks or establishes select networks. However our longer term strategy is to partner with network operators to provide extensive network access for our advertising media. We have secured the distribution rights for M.A.G.I.C. Convergent Device for the territory of China and Hong Kong. M.A.G.I.C. is a next generation convergent device that has the full capabilities of a notebook computer shrink to a size of a PDA phone. In 2009, we have also entered into a joint venture with AdvanceTech Communications Sdn. Bhd. ("ATC") to market and distribute the devices developed by ATC worldwide other than the countries already under distribution by the Company. The current device under development, M.A.G.I.C. W3 is being positioned as the high end convergent device for professionals running special applications. We expect the M.A.G.I.C. W3 to enter the information and advertising sector of the mobile phone market. We expect to receive the final prototype for M.A.G.I.C. W3 by Q3 2011. There has been no other significant update for the M.A.G.I.C. W3.

We have commenced a Products Services Unit to build brands recognition and to take advantage of our contacts networks, distribution channel and trading partners. We will leverage off our advertising platform to develop our own brands name for select products. This will uniquely position our Product Services for brand awareness as well as develop a long term business unit that will serve both consumers and industries markets. During this quarter, we did not realize any revenue from this business unit. However the Group is in discussion and exploring other products that can be distributed in our product services unit.

As announced in the Form 8K in April 2010, the Company entered into an agreement to acquire controlling interests in AX Organic Limited, a company that is in the business of marketing, sales and distribution of organic fertilizers and vegetables. This agreement, closed in June 2010. Through this initial agreement, we expect that this new product line of organic fertilizers and produce will enable us to promote healthy living and healthy products under the Population Great Wall of China project as described in Advertising business unit above. During the period, we have started the preparation for the soil remediation for the project in Huangpi, China. However due to poor weather conditions in the quarter and financial difficulties encountered by our customer, we are waiting for clearance to continue our work. We expect to know the status of the Huangpi soil remediation project before the end of the year.

OUR PLAN OF OPERATION FOR THE NEXT TWELVE MONTHS.

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

We have cash and cash equivalents of $23,877 as of March 31, 2011; an increase from the previous period end of December 31, 2010. In the opinion of management, these funds will not satisfy our working capital requirements to operate at our current level of activity for the next twelve months. To effectuate our business plan, during the next twelve months, we must arrange for adequate funding to implement our plans of increasing our advertising offerings and promote our advertising services, through cooperation agreements and otherwise.

Financing and funding

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

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

Over the course of the next two years, subject to available resources, we propose to build up our advertising presences to over 5 regional offices in China. Over the next two years, we also propose to acquire strategic partners that have existing operations in cities or regions to grow our business by acquisition and through cooperation agreements and otherwise, subject to available funding. In addition, we plan to devote more resources to the Products Division in our newly founded organic products. We plan to support the organic products division, subject to available resources, and to combine it with our benevolent program in Beijing. Additional support staff may be hired as necessity and resources dictate within the next twelve months.

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

Results of operation.

FOR THE THREE MONTHS PERIOD ENDED MARCH 31, 2011 COMPARED TO THE THREE MONTHS PERIOD ENDED MARCH 31, 2010

REVENUES.

For the three months period ended March 31, 2011, the Group has realized revenue of $28,889 and a cost of revenue of $12,559, achieving a gross profit of $16,330. For the three month period ended March 31, 2010, the Group has realized revenue of $15,532 and a cost of revenue of $6,240 achieving a gross profit of $9,292. We hope to generate additional revenues when we begin to receive contracts from clients or through acquisitions. Depending upon the availability of operating capital, we intend to expand our operations in the next 12 months.

OPERATING EXPENSES.

For the three month period ended March 31, 2011, our gross profit was $16,330 and our total operating expenses were $68,646, all of which were selling, general and administrative expenses. We also had $46,620 in interest expenses, and loss attributable to uncontrolled interests of $2,917, so that the net loss to our shareholders for the three months period ended March 31, 2011 was $96,019. This is in comparison to the same period ended March 31, 2010, where our gross profit was $9,292 and our total operating expenses were $101,740, all of which were selling, general and administrative expenses. We also had $$42,491 in interest expenses and loss attributable to uncontrolled interests of $7,116, so that the net loss to our shareholders for the three months period ended March 31, 2010 was $127,823.

Liquidity and Capital Resources

As at March 31, 2011, the Company had cash and cash equivalents totaling $23,877, other current assets of $645,169 and non-current assets totaling $231,459 which were represented by $11,903 in fixed assets, $138,000 in distribution rights and $81,556 in investment in shares. The total assets of the Company were $900,505 as of March 31, 2011. We also had current liabilities of $3,043,176 which were represented by $599,232 in accruals, $214,591 in short term debt, $1,065,976 due to directors and officers, $931,800 due to related parties, $231,577 in option liabilities as of March 31, 2011. We also had $2,000,000 in long-term shareholders loan and $127,591 in uncontrolled interests as of March 31, 2011, made our total liabilities $5,170,767.

At present the Company does not have sufficient cash resources to provide for all general corporate operations in the foreseeable future. The Company will be required to raise additional capital in order to continue to operate in fiscal 2011.

Going Concern

The Company's financial statements are presented on a going concern basis, which contemplates the realization of assets and satisfaction of liabilities in the normal course of business. The Company has experienced significant losses from operations in recent periods. For the three months ended March 31, 2011 the Company incurred net losses of $96,019 and has accumulated losses of $13,963,062 as at March 31, 2011. The Company's ability to continue as a going concern must be considered in light of the problems, expenses and complications frequently encountered in developing markets and the competitive environment in which the Company operates. The Company is pursuing financing for its operations and seeking additional investment. In addition, the Company is seeking to expand its revenue base by adding new customers and to start out its advertising business. Failure to secure such financing, to raise additional equity capital and to expand its revenue based may result in the Company depleting its available funds and not being able to pay its obligations. These financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classification of liabilities that may result from the possible inability of the Company to continue as a going concern.

Off Balance Sheet Arrangements

As of March 31, 2011, there were no off balance sheet arrangements. The Company has no off balance sheet obligations nor guarantees and has not historically used special purpose entities for any transactions.

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

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

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

PART II - OTHER INFORMATION

As disclosed in the Form 8-K filed with the SEC on February 22, 2010 the Group acquired 5% equity interests in Advance Tech Communications Sdn. Bhd. for RM293,000 (about US$96,642) which was paid by RM87,900 cash and the balance paid by the issuance of 2,205,376 common shares of the Company.