8-K

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 8-K

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

Date of report (date of earliest event reported): May 23, 2006

SUN NEW MEDIA INC.

(Exact name of registrant as specified in its charter)

Minnesota	000-26347	410985135
(State or other jurisdiction of incorporation)	(Commission File No.)	(I.R.S. Employer Identification No.)

Fourth Floor
1120 Avenue of the Americas
New York NY 10036
(Address of principal executive offices)

Registrant’s telephone number, including area code:
1-888-865-0901 ext. 322

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

o Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

o Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

o Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

TABLE OF CONTENTS

	Item 1.01 Entry into a Material Definitive Agreement
	Item 3.02 Unregistered Sales of Equity Securities
	Item 9.01 Financial Statements and Exhibits
SIGNATURES
	INDEX TO EXHIBITS
EXHIBIT 2.1
EXHIBIT 99.1

Item 1.01 Entry into a Material Definitive Agreement

On May 23, 2006, Sun New Media Inc. (the “Registrant”) through its subsidiary China Focus Channel Development Co. Ltd (“Focus”), signed a strategic cooperative and sales purchase agreement (the “Agreement”) with China Electronic Appliances Corporation (“CEAC”), a subsidiary of the China Electronics Corporation (“CEC”), and two individuals, Mr. Yong Li and Mr. Mianchun Wang, management designees from CEAC.

The Agreement provides that the Registrant and its subsidiary Focus shall purchase a 49% stake in Beijing Trans Global Logistics (“BTGL”) and its subsidiary from Messrs. Wang and Li and a 31% stake in BTGL from CEAC. As a result, the Registrant will effectively own 80% of shares of BTGL and will effectively own 64% of the shares in Beijing CEAC Trans Global Logistics. The consideration for the acquisition is 15,710,000 RMB to be satisfied by the Registrant with 9,000,000 RMB in cash and 6.71 million RMB in 139,792 shares of the Registrant’s common stock at US $6 per share.

As part of the transaction, CEAC and Mr. Yong Li and Mr. Mianchun Wang have provided a revenue and profit guarantee to the Registrant. Assuming BTGL and its subsidiary meet this guarantee in each of the three years following the signing of the agreement, the sellers will receive an additional 139,792 shares of the Registrant’s common stock per year, issued at US $6 per share.

Assuming management meets all performance targets, a maximum aggregate of 559,168 shares may be issued in this transaction, at a value of US$6 per share, for an aggregate of US $3,355,008.

The transactions pursuant to the Purchase Agreement are subject to certain conditions and are expected to close during the second quarter of 2006. A summary of the Purchase Agreement is attached hereto as Exhibits 2.1.

Item 3.02 Unregistered Sales of Equity Securities

Pursuant to the Agreement described in Item 1.01 above, the Registrant may be required to issue a maximum of 559,168 shares of common stock at a value of US$6 per share. The issuance of such shares has not been registered under the Securities Act of 1933, as amended (the “Act”), in reliance on the exemption from registration provided by Regulation S and Section 4(2) of the Act.

Item 9.01 Financial Statements and Exhibits

     (d) Exhibits

Exhibit No.	Description
2.1	A summary of the Sale and Purchase Agreement dated May 23, 2006
99.1	Press Release dated May 23, 2006 announcing entering into a Sale and Purchase Agreement.

SIGNATURES

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

Date: May 30, 2006

SUN NEW MEDIA INC.
By:	/s/ Frank Zhao
	Frank Zhao
	Chief Financial Officer

INDEX TO EXHIBITS

Exhibit No.	Description
2.1	A summary of the Sale and Purchase Agreement dated May 23, 2006
99.1	Press Release dated May 23, 2006 announcing entering into a Sale and Purchase Agreement.

EX-2.1

Exhibit 2.1

Term Sheet for CEC Deal

In 2006, Sun New Media Inc. (“SNMI”) through its subsidiary China Focus Channel Development Co. Ltd (“Focus”) signed a strategic cooperative and sales purchase agreement with China Electronic Appliances Corporation (“CEAC”), a subsidiary of the China Electronics Corporation (“CEC”), and two individuals, Mr. Yong Li and Mr. Mianchun Wang, management designees from CEAC. The terms of the Strategic Cooperative and Sale Purchase Agreement are outlined below.

BASIC TERMS

• Sun New Media and its subsidiary China Focus Channel Development Co., Ltd (“the buyers”) shall enter into an agreement with CEAC and Mr. Yong Li and Mr. Mianchun Wang, management designees from Beijing Trans Global Logistics (“the sellers”), to purchase 80% of Beijing Trans Global Logistics Inc. and its subsidiary Beijing CEAC Trans Global Logistics Co., Ltd (“the target company”). Sun New Media will purchase a 49% stake in Beijing Trans Global Logistics and its subsidiary from Messrs. Wang and Li and a 31% stake from CEAC. As a result Beijing Trans Global Logistics Co., ltd will be 80% owned by SNMI and 20% owned by Messrs Wang and Ltd and SNMI will effectively own 64% of the shares in Beijing CEAC Trans Global Logistics.

• The consideration for the acquisition is 15,710,000 RMB to be satisfied by SNMI with 9 Million RMB in cash and 6.71 Million RMB in new SNMI shares (139,792) at US $6 per share.

• As part of the transaction, the sellers have provided a revenue and profit guarantee to Sun New Media (see below). Assuming Beijing Trans Global Logistics and its subsidiary meet this guarantee in each of the three years following the signing of the agreement, the sellers will receive 139,792 bonus shares per year, issued at US$6 per share. CEAC has agreed to distribute the bonus shares between itself and the management designees, Messrs. Wang and Li.

• The total potential share issue, assuming management meets all performance targets, is 559,168 Sun New Media shares, or US$3,355,008 at US$6 per share.

• The agreement is subject to the approval of the State Asset Commission of the People’s Republic of China.

REVENUE/PROFIT GUARANTEES

• In the first year following the acquisition, Beijing CEAC Trans Global Logistics must achieve revenue of at least 400 Million RMB with a guaranteed after-tax profit (otherwise it forfeits its right to the bonus shares). The first year period is from April 2006 to March 31, 2007.

• In the second year following the acquisition, Beijing CEAC Trans Global Logistics must achieve revenue of at least 450 Million RMB with a guaranteed after-tax profit (otherwise it forfeits its right to the bonus shares). This second year period is from April 2007 to March 31, 2008.

• In the third year following the acquisition, Beijing CEAC Trans Global Logistics must achieve revenue of at least 500 Million RMB with a guaranteed after-tax profit (otherwise it forfeits its right to the bonus shares). This third year period is from April 2008 to March 31, 2009.

• The estimated net profit on all of the business contained under the revenue guarantee is approximately 2%.

• Any new business or revenue streams initiated by Sun New Media in its involvement in the company post-acquisition will not count towards the sellers meeting their obligations under this revenue/profit guarantee. The revenue guarantee must be met through the transference of the seller’s legacy business into Beijing CEAC Trans Global (see below).

ADDITIONAL CONDITIONS

As part of the Strategic Cooperative and Sale Purchase Agreement, CEAC offers the following guarantees to Beijing CEAC Trans Global Logistics (“the company”):

(a) CEAC will transfer a pre-determined portion of its current business operations to Beijing CEAC Trans Global Logistics. The value of these transferred operations shall be no less than 400 Million RMB in the first year following the completion of the agreement, 450 Million RMB in the second year, and 500 Million RMB in the third year.

(b) CEAC also guarantees to provide sufficient working capital to the company during the three year revenue/profit guarantee period so as to meet its performance obligations under the agreement. This working capital requirement refers to any working capital that is necessary above and beyond the US$ 4 million commitment from SNMI (see below).

(c) CEAC will transfer a number of its customers to the company in order to help it meet the revenue guarantees and expand its business into new areas under Sun New Media’s guidance. These customers will include (but are not limited to) IBM, Motorola, Cisco, and others.

(d) CEAC will sign an exclusive agreement to support the company in the development a digital marketing platform

(e) CEAC will sign an exclusive agreement with the company to provide it with information web services such as an e-publishing product catalog.

(f) CEAC will sign an exclusive agreement for the electronic version of its magazine China Electronics Market Intelligence that will be distributed to thousands of businesses within the vertical.

(g) CEAC will help arrange a partnership between China’s Electronics Enterprise Association and the company in order to obtain the database of China’s network of electronics enterprises, helping the company gain direct marketing access to thousands of businesses in the vertical

(h) CEAC will sign an agreement with the company to ensure that it has exclusive rights to work with CEAC to create an electronic transactions market.

SNMI offers the following guarantees to the Beijing CEAC Trans Global Logistics (“the company”):

(a) SNMI will provide the company with working capital for its new business operations. In addition, SNMI will offer a letter of credit for up to 4 million USD per revenue/profit guarantee period. The remainder of the working capital must be provided by CEAC to the company during each said period.

(b) SNMI guarantees that it will make best efforts to help the company make a movement into the capital market, either through an IPO or other means of enhancing shareholder value, within 36 months.

Key Benefits of the Transaction to SNMI:

1.	Leverage the power of the absolute market leader in the electronics parts industry to assume a leading position in the electronics parts distribution and media space from day one, with guaranteed revenue of 400 million RMB.
2.	Secure a minimum of 1.35 billion RMB in revenue over a three year period
3.	Build first mover advantage and barriers to entry in the creation of a high-margin, scalable electronic marketplace for the electronics parts industry.

ABOUT THE COMPANIES

About China Electronics Corporation (“CEC”):

• Established in 1989 after being approved by China’s National Council

• Classified as a special “large scale corporation” with operations all across China

• One of the State’s key enterprises, managed by the central government

• Has 26 subsidiaries and investment stakes in 30 domestic companies; also controls 6 foreign companies, and has majority stakes in 4 public companies

• Has a registered capital of 6.15 Billion RMB, assets of 3.5 Billion RMB and 34,000 employees.

• Annual revenue of approximately 80 Billion RMB

• Focuses on the development and production of electric circuits, software, communication networks, digital home electronics and information technology products

• Is the national leader in technology and design of integrated circuits, software, and consumer mobile products

About the China Electronic Appliance Corporation (“CEAC”)

• Established in 1964 and is now a subsidiary of CEC

• Is one of China’s top three logistics companies, with 13 domestic subsidiaries, holdings in 15 companies, and a solid nationwide service network

• Operates primarily in areas of electronic parts distribution, communication services, import and export, and exhibition services; the company’s business model includes consulting services, and the operation of magazines and auctions.

About the Subsidiary — Beijing CEAC China Trans Gobal Logistics Co., Ltd

• A joint venture between CEAC and Beijing China Trans Logistics Co., Ltd; established in March, 2002

• The principal distribution and logistics company for CEAC.

• Based in Beijing with a core business of logistical services

About China’s Electronic Parts Industry:

• In 2005, the industry maintained rapid growth. Statistics show the total revenue of all companies producing electronic parts in China reached

4,68.462 Billion RMB, with a year-on-year increase of 22.8%. These companies (3770 surveyed in total) achieved after-tax profits of 25.347 Billion RMB and a year-on-year growth rate of 19.81%.

• Enterprises off the mainland (HK, Macau, Taiwan) accounted for 66% of this total revenue, 309.32 Billion RMB. Private enterprises, meanwhile,

continued to post large gains in total revenue and paid taxes, 28.44% and 19.14% respectively.

• In 2005, China’s export of electronic parts continued to increase rapidly. There were three major breakthroughs: (1) Import/export revenue broke US $50 Billion for the first time, reaching US $56.623 Billion, a 20.69% increase from the year before; (2) National exports broke US $20 Billion for the first time at US $23.308 Billion, with year-on-year growth of 22.85%. (3) China’s trade deficit for electronic parts decreased significantly, down 37.17 percentage points from the same period of the previous year.

• It is predicted that in 2006 China’s total imports and exports for electronic parts will grow by 20%.

EX-99.1

Exhibit 99.1

Contact:	Ricky Ang	Yvonne L. Zappulla
	Chief Executive Officer	Managing Director
	Sun New Media Inc.	Wall Street Consultants Corp.
		845-680-0300
		Yvonne@WallStreetIR.com

Sun New Media Enters Third Business Vertical — Electronic Parts

Electronic parts vertical expected to generate minimum revenue of US $165 million over
three years, US $50 million expected in first year of operation

New York, NY- (PRNewswire)-May 23, 2006 – Sun New Media Inc. (OTCBB: SNMD), today announced its entry into the electronic parts business vertical, a highly fragmented, US$50 billion industry in China. Pending the approval of the State Asset Management Commission of the People’s Republic of China, Sun New Media has agreed to purchase 80 percent of Beijing Trans Global Logistics, a State-owned electronic component trading/logistics enterprise, and with it, a 64 percent equity stake in Beijing CEAC Trans Global Logistics (“BCTGL”). Additionally, Sun New Media has signed a Strategic Cooperative Agreement with China Electronic Appliances Corporation (“CEAC”), a subsidiary of State-owned China Electronics Corporation. These two agreements provide the foundation for Sun New Media’s expansion into its third business vertical.

CEAC is engaged in electronic parts distribution, import/export, consulting, and magazine publication and communication services. CEAC is one of China’s top logistic companies, with 13 subsidiaries and a nationwide service network. BCTGL, the target of this acquisition, was established in 2002 as a subsidiary of CEAC to provide a logistical services network throughout China utilizing CEAC warehouses. Upon State approval of the Sales Purchase Agreement, BCTGL will be 64 percent owned by Sun New Media and 20 percent owned by CEAC, with the remaining ownership retained by BCTGL management.

As a result of the strategic partnership between CEAC and Sun New Media through their mutual ownership in BCTGL, Sun New Media will become a leading distributor of electronic parts in China with access to nationwide network of warehouses, service and distribution to all of China’s major cities.

According to the terms of the Sales Purchase Agreement, Sun New Media will purchase an 80 percent equity stake in Beijing Trans Global Logistics for approximately US$1.96 million (15,710,000 RMB), of which approximately US$1.12 million (9 Million RMB) will be paid in cash and the balance in 138,066 Sun New Media common shares valued for the purposes of this transaction at US$6.00 per share. Sun New Media’s equity ownership of Beijing Trans Global Logistics will entitle it to a 64 percent equity stake in CEAC’s subsidiary, Beijing CEAC Trans Global Logistics (BCTGL), the venue for Sun New Media’s electronic parts vertical. The agreement includes minimum revenue and profit margin goals for the first three years set forth in the Strategic Cooperative Agreement, the achievement of which would result in the granting of an additional 138,066 bonus shares in each of the first three years, for an aggregate 552,264 shares. Sun New Media anticipates State approval of the transaction during its second fiscal quarter ending September 2006.

In accordance with the terms of the Strategic Cooperative agreement, CEAC will generate business for BCTGL for the first three years of at least US$50.0 million (400 million RMB) in the first year, US$56.2 million (450 million RMB) in the second year, and $62.5 million (500 million RMB) in the third year, all of which must come from CEAC legacy businesses. CEAC will also transfer a number of its major customers to BCTGL. In accordance with U.S. GAAP, the financial results of BCTGL will be fully consolidated into the revenue and expenses lines of the Sun New Media Consolidated Statement of Operations with an adjustment for the minority interest. BCTGL expects to earn a minimum of 2 percent net profit margins on the transferred CEAC business. Over time BCTGL margins are expected to grow as CEAC clients are converted to the more efficient e-transaction based platform. CEAC has also agreed to supply working capital needed to support BCTGL. Correspondingly, Sun New Media has agreed to provide BCTGL a Letter of Credit for up to US$4 million during the first three years of the arrangement to finance CEAC’s payment for components before shipment to customers.

In addition, CEAC has agreed to set-up a digital marketing platform using BCTGL software to enable the on-line parts sales. BCTGL has been granted exclusive rights to the on-line magazine, China Electronic Market Intelligence, China’s leading electronics publication. CEAC intends to sign an exclusive agreement with BCTGL to provide it with an e-publishing catalog and access to the Electronic Enterprise Association database with information on over 10,000 buyers of electronic components in the country.

Commenting on the transaction, Ricky Ang, Sun New Media’s CEO, said, “This is an important agreement for Sun New Media because it establishes a strategic partnership with China’s market leader in the electronics parts industry. CEAC will be supplying BCTGL with immediate revenues, customers, a highly valuable business database, business intelligence and content. Sun New Media expects to begin booking revenue from the electronic parts vertical during our

third fiscal quarter 2007, which ends December 31, 2006. This new vertical is expected to add during its first full year of operation approximately $0.02 to Sun New Media earnings.”

Li Gang, CEO of China Electronic Appliances Corporation (CEAC) commented, “This venture will provide CEAC with a unique opportunity to continue to lead the electronic parts market place. As the Internet age enables the launch of a direct sales era in China, our Company wants to be in the foreground utilizing an e-enabled market place that offers greater cost effectiveness for both ourselves and the buyers of our product. It was clear to us that in linking with Sun New Media, an expert at e-enabled distribution systems, our margins will improve as we connect our logistics and distribution via an electronic marketplace.”

Dr. Bruno Wu, Chairman of Sun New Media commented, “The electronic parts industry is over US$50 billion and is projected to continue to grow in excess of 20 percent per annum. By virtue of acquiring a majority stake in BCTGL, we believe that Sun New Media will hold the leading position in the electronics parts distribution business and be in a position to expand the flow of available product beyond that of the current captive base to include electronic parts from manufacturers worldwide. Through the strengths of this powerful cooperation agreement we are building a first mover advantage in creating a high margin, scalable e-marketplace for the electronic parts industry.”

About China Electronics Corporation (“CEC”)

With revenues of 80 billion RMB (US $10 billion), CEC is the national leader in technology, design and production of integrated circuits, software, communication networks, digital home electronics and information technology products. CEC was established in 1989 after being approved by China’s National Council. Managed by the Central Government, CEC is one of the State’s key enterprises. CEC is classified as a special “large scale corporation, and has operations all across China. As well as 26 subsidiaries and investment in 30 domestic companies, CEC also controls six foreign companies and has majority ownership in four public domestic companies. CEC has registered capital of 6.15 billion RMB, assets of 3.5 billion RMB, and 34,000 employees.

About the China Electronic Appliance Corporation (“CEAC”)

CEAC was established in 1964, and is a subsidiary of CEC. CEAC is one of China’s top three logistics companies, with 13 domestic subsidiaries, holdings in 15 companies, and a nationwide service network. CEAC’s business operations are mainly in electronics parts distribution, communication services, import and export and exhibition services. Consulting services and the operation of magazines and auctions are also part of their business model.

About the Subsidiary — Beijing CEAC China Trans Global Logistics Co., Ltd (“BCTGL”)

BCTGL was established in March 2002 as a joint venture between CEAC and Beijing China Trans Logistics Co., Ltd. BCTGL, managed by Messrs. Yong Lee and Mianchun Wang, is headquartered in Beijing providing logistical services network for the electronics components and parts industry throughout China and serves as the primary distribution and Logistics Company for CEAC. BCTGL’s clients include

some of the world’s leading industry players, such as AMD, Ericsson, Cisco, Intel and Phillips. BCTGL holds valuable licenses, including: International Import and Export Permit, National Transportation Agency License, International Transportation Agency License, and Custom Clearance Agency License.

About Sun New Media Inc.

Sun New Media is China’s leading multi-media powered marketing and channel management company. Sun New Media builds e-enabled distribution systems, transaction platforms and business communities in China’s fastest growing verticals, connecting buyers and sellers with a suite of turnkey digital media, e-commerce, and information management solutions. Companies leverage Sun New Media’s web-based business media communities to access vital industrial intelligence and forge trading relationships with suppliers and buyers that promote cost efficiencies and increased distribution reach.

This press release includes statements that may constitute “forward-looking” statements, usually containing the word “believe,” “estimate,” “project,” “expect” “plan” “anticipate” or similar expressions, including statements regarding future financial performance. Forward-looking statements inherently involve risks and uncertainties that could cause actual results to differ materially from the forward-looking statements. Factors that would cause or contribute to such differences include, but are not limited to, continued acceptance of Sun New Media’s product and services in the marketplace, competitive factors, changes in regulatory environments, and other risks detailed in Sun New Media’s periodic report filings with the Securities and Exchange Commission. In addition, there is no certainty that the transactions described above will be completed or, if completed, that the terms for such transactions may not change before completion. Nor is there any certainty that New Media will be able to benefit from the described transactions in the manner currently expected. By making these forward-looking statements, Sun New Media disclaims any obligation to update these statements for revisions or changes after the date of this release.