CHND China Media Inc (CE)

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.

SEPTEMBER 30, 2015

(UNAUDITED)

Financial Statement Index

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CHINA MEDIA INC.

CONSOLIDATED BALANCE SHEETS

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CHINA MEDIA INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

September 30, 2015

China Media Inc. (the “Company”, “China Media”) was incorporated in the State of Nevada.

The Company does not conduct any substantive operations of its own, rather, it conducts its primary business operations through Vallant Pictures Entertainment Co., Ltd., its wholly owned subsidiary incorporated under the laws of the British Virgin Islands, which in turn, conducts its business through Xi’an TV Media Co. Ltd. (“Xi’An TV”). Effective control over Xi’An Media was transferred to the Company through the series of contractual arrangements without transferring legal ownership in Xi’An Media. As a result of these contractual arrangements, the Company maintained the ability to approve decisions made by Xi’An Media and was entitled to substantially all of the economic benefits of Xi’An Media.

Xi’An TV was incorporated in Xi’An, Shaan’Xi Province, People’s Republic of China (“PRC”) and is in the business of producing and developing television programming for the Chinese market.

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 year ended June 30, 2015 contained in the Company’s Form 10-K field on September 25, 2015. 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, 2015 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 products, 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 made 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, the President and Chief Executive Office of the Company, had advanced $1,012,703 to the Company at June 30, 2015 and the loan was fully repaid by the Company in July 2015. The loans borrowed from Mr. Dean Li are non-secured, free of interest with no specified 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 reference to one-year loan.

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On June 16, 2014, the Company and Hangzhou Yanse Advertising Production Company (“Hangzhou Yanse”) entered into an agreement in production and distribution of the film “Dan Ta”. In July 2015, the cooperation between the Company and Hangzhou Yanse was terminated. Hangzhou Yanse refunded RMB 10 million (approximately $1,643,466) to the Company for part of its investments on July 30, 2015. The remaining investment of RMB 5 million (approximately $791,402) was subsequently made to Mr. Dean Li on behalf of the Company, which was presented as Due from related party as of September 30, 2015, and received by the Company as of the filing date.

NOTE 4. Film Costs

Film costs consist of the following:

The decrease of film costs is primarily due to the termination of film “Dan Ta” that was discussed in Note 3.

NOTE 5. Notes Receivable

On March 20, 2013, the Company lent RMB 946,500 (approximately $155,000) in the form of an interest free loan to China Fengde Movie and TV Copyright Agency (“Zhongshi Fengde”), one of the Company’s business partners. The Company collected RMB 530,000 (approximately $86,305) as of June 30, 2014. No repayment was collected during the year ended June 30, 2015 and the three months ended September 30, 2015. The outstanding balance was RMB 416,500 (approximately $65, 551) as of September 30, 2015.

On June 13, 2014, the Company lent RMB 18M (approximately $2,931,119) to Shaan’Xi Hushi Culture Communication Company (SHCC), a company owned by a business friend of Dean Li, the President and Chief Executive Officer of the Company. Based on the agreement, the Company will waive interest on the loan if SHCC repays the loan within 30 days; the Company will charge interest rate at 200% of the prevailing PRC prime rate if SHCC repays the loan after 30 days. In July 2014, the Company received repayment of RMB 11M (approximately $1,786,410) and SHCC orally promised to pay off the remaining balance no later than December 31, 2015. On January 8, 2015, the Company received interest of RMB 455,000 (approximately $74,165) on the loan. The

Outstanding balance was RMB 7M (approximately $1,101,703) as of September 30, 2015.

On July 1, 2014, the Company lent an additional RMB 3M (approximately $487,203) to SHCC with three months term. Based on the agreement, the Company will waive interest on the loan if SHCC repays the loan within 30 days; the Company will charge interest rate at four times of the current bank loan rate if SHCC repays the loan after 30 days. No collection has been received as of the filing date and SHCC orally promised to pay off the loan before December 31, 2015. On January 19, 2015, the Company received interest of RMB 360,000 (approximately $58,694) on the loan. The outstanding balance was RMB 3M (approximately $472,158) as of September 30, 2015.

On November 30, 2012, the Company entered into an agreement with Zhongshi Fengde to co-purchase copyrights of two TV series with the Company’s total investment is RMB 18 million (approximately $2.86 million at the time of investment). On January 28, 2015, both parties agreed to transfer the Company’s payment in these two TV series to a short-term loan to Zhongshi Fengde as the copyrights purchase was not successfully completed. As a result, film costs of approximately $2.83 million were reclassified to notes receivable as of September 30, 2015. No collection has been received as of the filing date.

Interest income for the three months ended September 30, 2015 and 2014 was 62,299 and nil, respectively, for the notes discussed above.

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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 three months ended September 30, 2015 and 2014:

Revenue and Cost

We had no sales and cost for the three months ended September 30, 2015 and 2014.

Operating expenses

For the three months ended September 30, 2015, our total operating expenses were $37,021, a slight decrease of $10,395 as compared to $47,416 for the three months ended September 30, 2014. The changes are relevant to payroll expenses, transportation fee, amortization expenses, etc.

Net income (loss)

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For the three months ended September 30, 2015 we earned a net income of $25,278. During the same period of 2014 we incurred a net loss of $98. This increase was the result of decrease in interest expense of due to related parties, which recorded in other expense.

Liquidity and Capital Resources

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

As of September 30, 2015 we had cash of $106,126 in our bank accounts and a working capital surplus of $6,369,646.

For the three months ended September 30, 2015, we received net cash of $842,420 in operating activities, compared to net cash used of 1,762,734 in operating activities during the same period of 2014. The increase in net cash of $2,605,154 was mainly due to the increases in cash received for film costs.

For the three months ended September 30, 2015, we received net cash of $0 in investing activities, compared to net cash received of $1,299,207 from investing activities during the same period in fiscal 2014, including $1,786,410 collection of notes receivable and $487,203 loan made to other third party - Shaan’Xi Hushi Culture Communication Company.

During the three months ended September 30, 2015, we used net cash of $799,386 in financing activities, compared to net cash received of $0 in financing activities during the same period in fiscal 2014. The decrease was mainly due to repayment made to related parties.

Our cash level increased by $30,514 during the three months ended September 30, 2015, compared to a decrease of $463,659 in the same period of 2014.

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.

Critical Accounting Policies and Estimates

Please refer to “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our 2015 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, 2015.

Off-Balance Sheet Arrangements

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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 September 30, 2015. 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

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(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.

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PART II - OTHER INFORMATION

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.

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Item 6.  Exhibits

 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.

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