CHND China Media Inc (CE)

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

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

 

For the quarterly period ended  December 31, 2011

 

[  ] 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:  333-150952

 

China Media Inc.

(Exact name of registrant as specified in its charter)

 

Nevada		46-0521269
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

 

12/F, Block D, Chang An Guo Ji

No. 88 Nan Guan Zheng Street

Beilin District, Xi'an City, Shaan'xi Province

China - 710068

(Address of principal executive offices)

 

(86) 298765-1114

(Registrants telephone number, including area code)

 

Copy of Communications to:

 

Bernard & Yam, LLP

Attn: Bin Zhou, Esq.

401 Broadway, Suite 1708

New York, NY 10013

Phone: 212-219-7783

Facsimile: 212-219-3604

 

Check whether the issuer (1) 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 issuer was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days [X] Yes [  ] No

 

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). [X] Yes [  ] No

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.

 

[  ] Large accelerated filer Accelerated filer	[  ] Non-accelerated filer
[X] Smaller reporting company

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). [  ] Yes [X] No

 

As of December 31, 2011 and February 13, 2012, the registrant had 39,750,000 shares of common stock outstanding.

 

 

 

Table of Contents

 

PART I - FINANCIAL INFORMATION	3
Item 1. Financial Statements	3
Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations	10
Item 3. Quantitative and Qualitative Disclosures About Market Risk	13
Item 4. Controls and Procedures	13
PART II - OTHER INFORMATION	14
Item 1. Legal Proceedings	14
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	14
Item 3. Defaults Upon Senior Securities	14
Item 4. Submission of Matters to a Vote of Security Holders	14
Item 5. Other Information	14
Item 6. Exhibits	15

 

 

PART I - FINANCIAL INFORMATION

 

Item 1.  Financial Statements

 

The unaudited interim consolidated financial statements of China Media Inc. (the “Company”, “China Media”, “we”, “our”, “us”) follow. All currency references in this report are to U.S. dollars unless otherwise noted.

 

CHINA MEDIA INC.

DECEMBER 31, 2011

(UNAUDITED )

 

Financial Statement Index

 

Consolidated Balance Sheets as of December 31, 2011 and June 30, 2011 (Unaudited)	4
Consolidated Statements of Operations for the three and six months ended December 31, 2011, and 2010 (Unaudited)	5
Consolidated Statements of Cash Flows for the six months ended December 31, 2011 and 2010 (Unaudited)	6
Notes to the Consolidated Financial Statements (Unaudited)	7

 

 

CHINA MEDIA INC.

CONSOLIDATED BALANCE SHEETS

 

			DECEMBER 31, 2011				JUNE 30, 2011
			(Unaudited)
Assets
Current assets
Cash and cash equivalents		$	100,934			$	1,257,770
Accounts receivable, net of allowance of $38,306 and $37,716 at Dec 31, 2011 and Jun 30, 2011, respectively			37,738				—
Notes receivable			1,602,624				1,577,940
Prepaid and other receivable			119,476				77,656
Total current assets			1,860,772				2,913,366
Fixed assets, net			42,190				48,554
Intangible assets, net			40,851				46,410
Film costs			1,616,765				648,193
Long-term investments			4,085,120				3,377,642
Total assets		$	7,645,698			$	7,034,165
Liabilities and Stockholders' Equity
Current liabilities
Accounts payable		$	28,698			$	7,282
Accrued liabilities and other payable			218,888				202,920
Short-term debt			801,312				—
Due to related parties			4,854				206,400
Total current liabilities			1,053,752				416,602
Total liabilities			1,053,752				416,602
Stockholders' equity
Common stock, $0.00001 par value, 180,000,000 shares authorized; 39,750,000 shares issued and outstanding at December 31, 2011 and June 30, 2011			398				398
Additional paid-in capital			11,163,961				11,157,099
Accumulated other comprehensive income			887,583				784,280
Accumulated deficit			(5,459,996	)			(5,324,214	)
Total stockholders' equity			6,591,946				6,617,563
Total liabilities and stockholders' equity		$	7,645,698			$	7,034,165

 

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

 

 

CHINA MEDIA INC.

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME

(Unaudited)

  

			FOR THE SIX MONTHS ENDED								FOR THE THREE MONTHS ENDED
			DECEMBER 31,								DECEMBER 31,
			2011				2010				2011				2010
Revenues		$	11,076			$	19,394			$	7,877			$	19,394
Cost of revenues			—				—				—				—
Gross profit			11,076				19,394				7,877				19,394
Selling, general and administrative			150,498				137,394				107,413				109,543
Depreciation and amortization expense			17,733				17,291				8,793				8,700
Total operating expenses			168,231				154,685				116,206				118,243
Other income
Interest income			28,512				—				11,093				—
Government subsidies/grants			—				2,982				—				25
Interest expense			(6,862	)			—				(3,455	)			—
Net loss before income taxes			(135,505	)			(132,309	)			(100,691	)			(98,824	)
Income taxes			277				—				197				(97	)
Net loss			(135,782	)			(132,309	)			(100,888	)			(98,727	)
Less: Net loss attributable to non-controlling interest			—				(10,646	)			—				—
Net loss attributable to China Media, Inc.		$	(135,782	)		$	(121,663	)		$	(100,888	)		$	(98,727	)
Comprehensive Income (Loss)
Net loss			(135,782	)			(132,309	)			(100,888	)			(98,727	)
Foreign currency translation gain			103,304				186,620				50,284				73,831
Comprehensive income (loss) attributable to China Media Inc.			(32,478	)			54,311				(50,604	)			(24,896	)
Less: Comprehensive income attributable to non-controlling interest			—				35,754				—				—
Comprehensive income (loss) attributable to China Media Inc.		$	(32,478	)		$	18,557			$	(50,604	)		$	(24,896	)
Net loss per common share, basic and diluted		$	(0.00	)		$	(0.00	)		$	(0.00	)		$	(0.00	)
Weighted average number of shares outstanding - basic and diluted			39,750,000				39,750,000				39,750,000				39,750,000

 

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

 

 

CHINA MEDIA INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE SIX MONTHS ENDED DECEMBER 31, 2011 and 2010

(Unaudited)

 

			FOR THE SIX MONTHS ENDED DECEMBER 31,
			2011				2010
CASH FLOWS OPERATING ACTIVITIES
Net loss		$	(135,782	)		$	(132,309	)
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
Imputed interest			6,862				—
Amortization expense			6,272				5,963
Depreciation expense			11,461				11,328
Changes in operating assets and liabilities:
Accounts receivable			(37,661	)			405,017
Prepaid and other receivable			(40,523	)			(197,297	)
Accounts payable			21,305				3,073
Accrued liabilities and other payable			12,768				168
Film costs			(956,480	)			(19,335	)
Deferred revenue			—				226,860
Net cash provided by (used in) operating activities of operations			(1,111,778	)			303,468
CASH FLOW INVESTING ACTIVITIES
Cash paid for purchase of fixed assets			(4,353	)			—
Cash paid for long-term investments			(940,800	)			(153,190	)
Return of investment			287,493				—
Net cash used in investing activities			(657,660	)			(153,190	)
CASH FLOW FINANCING ACTIVITIES
Repayments to related parties			(204,357	)			(170,191	)
Proceeds from short-term debt			799,680				—
Net cash provided by (used in) financing activities			595,323				(170,191	)
Effect of exchange rate changes on cash			17,279				(8,653	)
NET CHANGE IN CASH			(1,156,836	)			(28,566	)
CASH AT BEGINNING OF PERIOD			1,257,770				47,263
CASH AT END OF PERIOD		$	100,934			$	18,697
SUPPLEMENTAL INFORMATION:
Interest paid		$	—			$	—
Income taxes paid		$	298			$	172
Non-Cash Transaction
Long-term investments to other receivable			117,056				—

 

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

 

 

CHINA MEDIA INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

December 31, 2011

 

NOTE 1.  Description of Business

 

China Media Inc. (the “Company”, “China Media”) formerly Protecwerx Inc., was incorporated in the State of Nevada on October 16, 2007.

 

Vallant Pictures Entertainment Co., Ltd. (“Vallant”,) was incorporated in the British Virgin Islands on May 23, 2007.

 

Xi’An TV Media Co. Ltd. (“Xi’An TV”) was incorporated in Xi’An, Shann’Xi Province, People’s Republic of China (“PRC”) on March 9, 2005. Xi’An TV is in the businesses of producing and developing television programming for the Chinese market.

 

On July 7, 2009, Fullead Overseas Limited, a company incorporated under the laws of the British Virgin Islands (the “Buyer”), entered into a share purchase agreement (the “Share Purchase Agreement”), pursuant to which the Buyer agreed to purchase a total of 32,500,000 shares of the Company’s common stock, representing 85% of the total issued and outstanding shares of common stock of the Company on a fully-diluted basis. Bin Li, the Company’s Director, is the owner and sole Director of the Buyer.

 

On September 16, 2009, the Company entered into a share exchange agreement (the “Share Exchange Agreement”) with Vallant and Bin Li, the Company’s Director and the former sole shareholder of Vallant. According to the terms of the Share Exchange Agreement, the Company agreed to acquire the sole issued and outstanding common share of Vallant from Bin Li in exchange for 7,000 shares of the Company’s common stock.

 

On November 30, 2009, the Company closed the transactions contemplated by the Share Exchange Agreement and acquired Vallant as its wholly owned subsidiary. Vallant has entered into a series of contractual obligations with Xi’An TV as well as the holders of 62.61% of the voting shares of Xi’An TV. In December 2009, the former shareholders of Xi’an TV transferred all of its equity interest in the entity to three individuals, as a result of this change of control, Vallant and the new shareholders amended the series of contractual obligations in December 2009.

 

On September 17, 2010, Vallant and the holders of 100% of the voting shares of Xi’An TV further amended the various consulting agreements and equity pledge agreement dated December 28, 2009. According to the amended agreements, Xi’An TV will provide Vallant with 100% of its income. Xi’An TV shareholders now pledged 100% of their equity interests in Xi’An TV to Vallant to guarantee Xi’An TV’s performance of its obligations under the Business Operations Agreement.

 

In compliance with the PRC’s laws and regulations, Vallant conducts all of the business in China through Xi’An TV, a domestic Variable Interest Entity (“VIE”). It does this by controlling Xi’An TV through various consulting agreements and equity pledge agreement dated June 20, 2007, as amended on December 28, 2009 and September 17, 2010, respectively.

 

According to the Business Services Agreement, Vallant has the exclusive right to provide services required in the regular course of business to Xi’An TV, effectively restricting and controlling the operations of Xi’An TV. In exchange, Xi’An TV will provide Vallant with 100% (62.61% prior to September 17, 2010) of its income. Furthermore, the Business Operations agreement also states that Vallant has the right to control the appointment of the board members and senior executives of Xi’An TV.

 

According to the Option Agreement, Vallant has the exclusive and irrevocable right to acquire 100% of the equity interests of Xi’An TV if permitted under the PRC law. In the Equity Pledge Agreement, Xi’An TV shareholders also pledged 100% (62.61% as amended September 17, 2010) of their equity interests in Xi’An TV to Vallant to guarantee Xi’An TV’s performance of its obligations under the Business Operations Agreement.

 

In light of the above, Vallant has a controlling interest in Xi’An TV based on the fact that:

 

·

Vallant has the ability to absorb 100% (62.61 prior to September 17, 2010) of the expected residual return from Xi’An TV, which makes Vallant the primary beneficiary of Xi’An TV. In the event Xi’An TV fails to pay any required amounts, Vallant could exercise its right to acquire certain pledged shares in Xi’An TV pursuant to a equity pledge agreement executed by and between Vallant and Xi’An TV which guarantee all required payment;

 

·

Vallant has the exclusive right to purchase all of the outstanding interests in Xi’An TV, which would make Xi’An TV a wholly-owned subsidiary of Vallant when it’s allowable under the PRC regulation; and

 

·

Vallant could exercise absolute influence over Xi’An TV through overseeing the board and senior executives of Xi’An TV.

 

 

Upon executing the above agreements, Xi’An TV is considered a VIE and Vallant is its primary beneficiary. Xi’An TV is consolidated into the Vallant under the guidance of FASB Accounting Standards Codification (ASC) 810, Consolidation.

 

The Company had 39,743,000 shares of our common stock issued and outstanding before the closing of the transactions contemplated by the Share Exchange Agreement. Upon the closing of the transactions, we issued 7,000 shares of our common stock to Bin Li, our Director and the former sole shareholder of Vallant. Mr. Li is the beneficial owner of 2,000,000 additional shares of our common stock. The 7,000 shares were issued in reliance upon an exemption from registration pursuant to Regulation S promulgated under the Securities Act of 1933, as amended (the “Securities Act”). Upon the closing of the Share Exchange, there were 39,750,000 shares of our common stock issued and outstanding.

 

The share exchange is being accounted for as a reverse merger, since the former sole shareholder of Vallant, Bin Li acquired the majority of the Company’s common stock with the aim of completing the share exchange with Vallant, and Vallant is deemed to be the accounting acquirer in the reverse merger. Consequently, the assets and liabilities and the historical operations that will be reflected in the consolidated financial statements for periods prior to the Share Exchange Agreement will be those of Vallant and will be recorded at the historical cost basis. After the completion of the Share Exchange Agreement, the Company’s consolidated financial statements will include the assets and liabilities of Vallant, the historical operations of Vallant and its subsidiaries from the closing date of the Share Exchange Agreement. 

 

NOTE 2.  Summary of Significant Accounting Policies

 

Basis of Presentation and Consolidation

 

The accompanying unaudited interim consolidated financial statements of China Media, Inc. (“We” or the “Company”), have been prepared in accordance with United States generally accepted accounting principles (“U.S. GAAP”) and the rules of the Securities and Exchange Commission, and should be read in conjunction with the audited financial statements and notes thereto contained in the Company’s annual financial statements for the years ended June 30, 2011. In the opinion of management, all adjustments, consisting of normal recurring adjustments, necessary for a fair presentation of financial position and the results of operations for the interim periods presented have been reflected herein. The results of operations for interim periods are not necessarily indicative of the results to be expected for the full year. Notes to the consolidated financial statements which would substantially duplicate the disclosure contained in the audited financial statements for the year ended June 30, 2011 included in this document have been omitted.

 

Use of Estimates

 

The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes, including estimates of ultimate revenues and ultimate costs of film and television product, estimates of product sales that will be returned and the amount of receivables that ultimately will be collected, the potential outcome of future tax consequences of events that have been recognized in the Company’s financial statements and loss contingencies. Actual results could differ from those estimates. To the extent that there are material differences between these estimates and actual results, the Company’s financial condition or results of operations will be affected. Estimates are based on past experience and other assumptions that management believes are reasonable under the circumstances, and management evaluates these estimates on an ongoing basis.

 

NOTE 3.  Related Party Transactions

 

Mr. Dean Li, President and Shareholder of Xi’An TV, had advanced $4,854 and $206,400 to the Company at December 31, 2011 and June 30, 2011, respectively. The company paid RMB 1,303,300 (approximately $204,357) back to Mr. Dean Li by the end of December 2011. The outstanding shareholder loan discussed above is non-secured, free of interest with no maturity date.

 

The imputed interests are assessed as an expense to the business operation and an addition to the paid-in-capital and calculated based on annual interest rate in the range of 5.94-6.56% with the reference to the one-year loan.

 

The Company also leased an office space from a former shareholder with a monthly rent of approximately $950 with term that expires in May 2014.

 

NOTE 4. Long-term Investments

 

The Company entered into a Letter of Intent on January 28, 2010 with Nantong Oriental Science and Education Investment Co., Ltd.(Nantong”) to set up a training school located in Haimen, China (Haimen Project”). Per the letter of intent, the Company will contribute RMB 30,000,000 (approximately $4,406,100) and Nantong will contribute its land use right with a determined value of RMB 20,000,000 (approximately $2,937,400). 60% of the profits and risks from the project shall be allocated to the Company. The term of this Letter of Intent is one year started from the signing date. Both parties of this agreement will jointly operate and manage this project once it is approved and established.

 

 

As of June 30, 2011, the Company has contributed RMB 21,833,500 (approximately $3,377,642) to Nantong for Haimen Project. However, the application for license of Haimen Project is declined by the State Department of Education. On June 8, 2011, the board of the Company approved to re-invest RMB 20,000,000 into a new project with Shaan’Xi Shengshi Ronghua Media Co. Ltd. (Shengshi Ronghua) for a taxi advertising project. On June 21, 2011, the Company entered into an agreement with Natong and Shengshi Ronghua, all the parties agree that Nantong will transfer RMB 20,000,000 directly to Shengshi Ronghua for this advertising project with remaining balance to be paid back to the Company directly. In September 2011, Shengshi Ronghua received RMB 20,000,000 from Nantong. As of December 31, 2011, the Company has received the remaining balance in the amount of RMB 1,833,500 (approximately $287,493) from Nantong.

 

In July 2011, the Company contributed RMB 6,000,000 (approximately $934,200) to Shaan’Xi Shiqiang Industrial Co., Ltd. (Shiqiang”) to invest in their Intelligent small medical kit" advertising project for ten years. Per the agreement, the project will be operated by Shiqiang and 51% of the profits from the project will be allocated to the Company. As a return, Shiqiang will pledge its adverting right of this project to the Company. Both parties agreed that the Company has right to withdraw the investment if the project profit is not maintained at RMB 1,000,000 (approximately $155,700) or when the Company believes the risk is too high.

 

NOTE 5. Short-term Debt

 

On November 7, 2011, the Company obtained a short-term loan from an unrelated party - Shaanxi Goethe trade Co., Ltd.. This loan is based on good-faith, and is non-interest bearing and payable on demand. There is no financial or non-financial covenant associated with this loan. The proceeds from this loan are utilized for working capital. As of December 31, 2011 and June 30, 2011, the Company had outstanding loan from unrelated party of $801,312 and $0, respectively.

 

 

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

 

Forward Looking Statements

 

This quarterly report on Form 10-Q contains forward-looking statements that involve risks and uncertainties. These statements relate to future events or our future financial performance. In some cases, you can identify forward-looking statements by terminology including "could", "may", "should", "expect", "plan", "anticipate", "believe", "estimate", "predict", "potential" and the negative of these terms or other comparable terminology. These statements are only predictions. Actual events or results may differ materially.

 

While these forward-looking statements, and any assumptions upon which they are based, are made in good faith and reflect our current judgment regarding the direction of our business, actual results will almost always vary, sometimes materially, from any estimates, predictions, projections, assumptions or other future performance suggested in this report.

 

Results of Operations

 

Comparison of the six months ended December 31, 2011 and 2010 :

 

			For the Six Months Ended December 31,
			2011				2010
Revenues		$	11,076			$	19,394
Cost of revenues			—				—
Gross profit			11,076				19,394
Operating expenses
Selling, general and administrative expenses			150,498				137,394
Depreciation and amortization expense			17,733				17,291
Total operating expenses			168,231				154,685
Other income (expenses):
Interest income			28,512				—
Government subsidies/grants			—				2,982
Interest expense			(6,862	)			—
Total other expenses			21,650				2,982
Net loss before income taxes			(135,505	)			(132,309	)
Income taxes			277				—
Net loss			(135,782	)			(132,309	)
Less : net loss attributable to non-controlling interest			—				(10,646	)
Net loss attributable to China Media, Inc.		$	(135,782	)		$	(121,663	)

 

Revenues

 

During the six months ended December 31, 2011, we generated revenue primarily from advertising agencies. Revenues decreased by $8,318 or 43% to $11,076 for the six months ended December 31, 2011 from $19,394 for the six months ended December 31, 2010.

 

 

Cost of revenues

 

We had no cost of revenues for the six months ended December 31, 2011 and 2010.

 

Gross profit

 

As a result of the foregoing, our gross profit decreased $8,318 for the six months ended December 31, 2011.

 

Operating expenses

 

During the six months ended December 31, 2011 our total operating expenses were $168,231, an increase of $13,546, as compared to $154,685 for the six months ended December 31, 2010.

   

Net loss

 

Net loss for the six months ended December 31, 2011 was $135,782, an increase of $14,119 from the net loss of $121,663 for the six months ended December 31, 2010. This increase was the result of increase general and administrative expenses.

 

Comparison of the three months ended December 31, 2011 and 2010 :

 

			For the Three Months Ended December 31,
			2011				2010
Revenues		$	7,877			$	19,394
Cost of revenues			—				—
Gross profit			7,877				19,394
Operating expenses
Selling, general and administrative expenses			107,413				109,543
Depreciation and amortization expense			8,793				8,700
Total operating expenses			116,206				118,243
Other income (expenses):
Interest income			11,093				—
Government subsidies/grants			—				25
Interest expense			(3,455	)			—
Total other expenses			7,638				25
Net loss before income taxes			(100,691	)			(98,824	)
Income taxes			80				97
Net loss			(100,888	)			(98,727	)
Less : net loss attributable to non-controlling interest			—				—
Net loss attributable to China Media, Inc.		$	(100,888	)		$	(98,727	)

 

 

Revenues

 

During the three months ended December 31, 2011, we generated revenue primarily from advertising agencies. Revenues decreased by $11,517 or 59% to $7,877 for the three months ended December 31, 2011 from $19,394 for the three months ended December 31, 2010.

 

Cost of revenues

 

We had no cost of revenues for the three months ended December 31, 2011 and 2010.

 

Gross profit

 

As a result of the foregoing, our gross profit decreased $11,517 for the three months ended December 31, 2011.

 

Operating expenses

 

During the three months ended December 31, 2011 our total operating expenses were $116,206, a decrease of $2,037, as compared to $118,243 for the three months ended December 31, 2010.

   

Net loss

 

For the three months ended December 31, 2011 we incurred a net loss of $100,888. During the same period in 2010 we incurred a net loss of $98,727.

 

Liquidity and Capital Resources

 

The following table sets forth a summary of our cash flows for the periods indicated:

 

			For the six months ended
			December 31,
			2011				2010
Net cash provided by (used in) operating activities		$	(1,111,778	)		$	303,468
Net cash used in investing activities			(657,660	)			(153,190	)
Net cash provided by (used in) financing activities			595,323				(170,191	)
Effect of exchange rate changes on cash and cash equivalents			17,279				(8,653	)
NET CHANGE IN CASH			(1,156,836	)			(28,566	)
CASH AT BEGINNING OF PERIOD			1,257,770				47,263
CASH AT END OF PERIOD		$	100,934			$	18,697

 

As of December 31, 2011 we had cash of $100,934 in our bank accounts and a working capital surplus of $807,020.

 

For the six months ended December 31, 2011, we used net cash of $1,111,778 from operating activities, compared to net cash received of $303,468 from operating activities during the six months ended December 31, 2010. The decrease in net of cash of $1,415,246 was mainly due to collection of accounts receivable, deferred revenue and film cost in the six months ended December 31, 2011.

 

During the six months ended December 31, 2011, we spent approximately net cash of $657,660 in investing activities compared to net cash used of $153,190 in investing activities. The increase in net of cash of $504,470 was mainly due to investment in Shiqiang advertising project.

 

During the six months ended December 31, 2011, we earned net cash of $595,323 in financing activities, compared to net cash used of $170,191 in financing activities during the same period in fiscal 2010. The increase was mainly due to proceeds received from a short-term loan with an unrelated party.

 

Our cash level decreased by $1,156,836 during the six months ended December 31, 2011.

 

We anticipate that we will meet our ongoing cash requirements by retaining income as well as through equity or debt financing.  We plan to cooperate with various individuals and institutions to acquire the financing required to produce and distribute our products and anticipate this will continue until we accrue sufficient capital reserves to finance all of our productions independently.

 

 

We intend to meet our cash requirements for the next 12 months through retaining income generated from daily operations and partnerships with finance groups on television and movie projects.

 

Financial Obligations

 

On November 7, 2011, we obtained a short-term loan from an unrelated party - Shaanxi Goethe trade Co., Ltd.. This loan is based on good-faith, and is non-interest bearing and payable on demand. There is no financial or non-financial covenant associated with this loan. The proceeds from this loan are utilized for working capital.

 

Critical Accounting Policies and Estimates

 

Please refer to “Management’s Discussion and Analysis of Financial Condition and Results of Operations”, in our 2011 10-K for disclosures regarding our critical accounting policies and estimates. The interim financial statements follow the same accounting policies and methods of computations as those for the year ended June 30, 2011.

 

Off-Balance Sheet Arrangements

 

We have no significant off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that are material to stockholders.

 

Inflation

 

The amounts presented in the financial statements do not provide for the effect of inflation on our operations or financial position. The net operating losses shown would be greater than reported if the effects of inflation were reflected either by charging operations with amounts that represent replacement costs or by using other inflation adjustments.

 

Audit Committee

 

The functions of the audit committee are currently carried out by our Board of Directors, who has determined that we do not have an audit committee financial expert on our Board of Directors to carry out the duties of the audit committee. The Board of Directors has determined that the cost of hiring a financial expert to act as a director and to be a member of the audit committee or otherwise perform audit committee functions outweighs the benefits of having a financial expert on the audit committee.

 

Item 3.  Quantitative and Qualitative Disclosures About Market Risk

 

Not applicable.

 

Item 4.  Controls and Procedures

 

Evaluation of Disclosure Controls and Procedures

 

We maintain disclosure controls and procedures, as defined in Rule 13a-15(e) promulgated under the Securities Exchange Act of 1934 (the "Exchange Act"), that are designed to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission's rules and forms and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure. We carried out an evaluation, under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures as of December 31, 2011. Based on the evaluation of these disclosure controls and procedures, the Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective.

 

Management Report on Internal Control Over Financial Reporting

 

Our management is responsible for establishing and maintaining adequate internal control over financial reporting. 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 our internal control over financial reporting based on the framework in Internal Control – Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”).  Based on the evaluation performed, our management concluded that during the period covered by this report, our internal controls over financial reporting were effective.

 

 

During the quarterly period, we implemented the following measures to improve our internal control over financial reporting:

 

(1)	Engaged outside consultants to assist in our assessment of the effectiveness of the company’s internal controls over financial reporting; and

 

(2)	Developed and instituted new internal control procedures to strengthen our month-end close and financial reporting processes;

 

We believe these measures have strengthened our internal control over financial reporting and disclosure controls and procedures.

 

Changes in Internal Control

 

Except for the changes discussed above, there was no change in our internal control over financial reporting (as defined in Rule 13a-15(e) and Rule 15d-15(e) under the Exchange Act) that occurred during the quarterly period that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

 

PART II - OTHER INFORMATION

 

Item 1.  Legal Proceedings

 

We are not aware of any legal proceedings to which we are a party or of which our property is the subject. None of our directors, officers, affiliates, any owner of record or beneficially of more than 5% of our voting securities, or any associate of any such director, officer, affiliate or security holder are (i) a party adverse to us in any legal proceedings, or (ii) have a material interest adverse to us in any legal proceedings. We are not aware of any other legal proceedings that have been threatened against us.

 

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

 

None.

 

Item 3.  Defaults Upon Senior Securities

 

None.

 

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

 

None.

 

Item 5.  Other Information

 

None.

 

 

Item 6.  Exhibits

 

Exhibit Number		Exhibit Description
31.1		Certification of Chief Executive Officer pursuant to Rule 13a-14(a) or 15d-14(a) of the Securities Exchange   Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2		Certification of Chief Financial Officer pursuant to Rule 13a-14(a) or 15d-14(a) of the Securities Exchange   Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1		Certification of Chief Executive Officer pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of   the Sarbanes-Oxley Act of 2002
32.2		Certification of Chief Financial Officer pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the   Sarbanes-Oxley Act of 2002
101		The following materials from our Quarterly Report on Form 10-Q for the quarter ended December 31, 2011, formatted in XBRL (eXtensible Business Reporting Language): (i) the Consolidated Balance Sheets, (ii) the Consolidated Statements of Operations, (iii) the Consolidated Statements of Cash Flows, and (iv) Notes to Consolidated Financial Statements.
		101.INS**      XBRL Instance
		101.SCH**     XBRL Taxonomy Extension Schema
		101.CAL**     XBRL Taxonomy Extension Calculation
		101.DEF**      XBRL Taxonomy Extension Definition
		101.LAB**     XBRL Taxonomy Extension Labels
		101.PRE**      XBRL Taxonomy Extension Presentation

 

** XBRL information is furnished and not filed or a part of a registration statement or prospectus for purposes of sections 11 or 12 of the Securities Act of 1933, as amended, is deemed not filed for purposes of section 18 of the Securities Exchange Act of 1934, as amended, and otherwise is not subject to liability under these sections.

 

SIGNATURES

 

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

 

	China Media Inc.
	(Registrant)
	/s/ Shuncheng Ma
Date: February 14, 2012	Shuncheng Ma
	Chief Financial Officer