0001549727-13-000187.txt : 20130926 0001549727-13-000187.hdr.sgml : 20130926 20130926135847 ACCESSION NUMBER: 0001549727-13-000187 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 14 CONFORMED PERIOD OF REPORT: 20130630 FILED AS OF DATE: 20130926 DATE AS OF CHANGE: 20130926 FILER: COMPANY DATA: COMPANY CONFORMED NAME: CHINA MEDIA INC. CENTRAL INDEX KEY: 0001434674 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-MOTION PICTURE & VIDEO TAPE PRODUCTION [7812] IRS NUMBER: 000000000 STATE OF INCORPORATION: NV FISCAL YEAR END: 0630 FILING VALUES: FORM TYPE: 10-K SEC ACT: 1934 Act SEC FILE NUMBER: 333-150952 FILM NUMBER: 131116463 BUSINESS ADDRESS: STREET 1: 12/F, BLOCK D, CHANG AN GUO JI, STREET 2: NO. 88 NAN GUAN ZHENG STREET CITY: BEILIN DISTRICT, XI'AN STATE: F4 ZIP: 710068 BUSINESS PHONE: (86) 298765-1114 MAIL ADDRESS: STREET 1: 12/F, BLOCK D, CHANG AN GUO JI, STREET 2: NO. 88 NAN GUAN ZHENG STREET CITY: BEILIN DISTRICT, XI'AN STATE: F4 ZIP: 710068 FORMER COMPANY: FORMER CONFORMED NAME: Protecwerx Inc. DATE OF NAME CHANGE: 20080508 10-K 1 chndform10kjune302013finalv1.htm FORM 10-K Converted by EDGARwiz

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549


FORM 10-K

 

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

 

For the fiscal year ended June 30, 2013

 

[  ] TRANSITION REPORT UNDER 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.)

 

Room 10128,  No. 269-5-1 Taibai South Road,

Yanta District, Xi'an City, Shaan'xi Province, China

 

710068

(Address of principal executive offices)

 

(Zip Code)

 

Registrant's telephone number, including area code: (86) 298765-1114


Copy of Communications to:


Bernard & Yam, LLP

401 Broadway, Suite 1708

New York, NY 10013

Phone: 212-219-7783

Facsimile: 212-219-3604


Securities registered pursuant to Section 12(b) of the Act:

 

Title of Each Class

 

Name of Each Exchange On Which Registered

N/A

 

N/A


Securities registered pursuant to Section 12(g) of the Act:

 

Common StockPar Value $ 0.00001 Per Share

(Title of class)

 

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 the Securities Act. Yes [  ]   No [ X ]

 

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act Yes [  ]   No [ X ]

 

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period



1




that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the last 90 days. Yes [ X ]   No [  ]

 

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-K (§229.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).Yes [ X ] No[  ]

 

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter)  is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.  [  ]

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definition of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer [  ]     

Accelerated filer [  ]       

Non-accelerated filer [  ]         

Smaller reporting company [ X ]

 

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

 

The aggregate market value of Common Stock held by non-affiliates of the Registrant on December 31, 2012 (11,243,000) was $ 5,059,350 based on a $0.45 closing price for the Common Stock on December 31, 2012. For purposes of this computation, all executive officers and directors have been deemed to be affiliates. Such determination should not be deemed to be an admission that such executive officers and directors are, in fact, affiliates of the Registrant.

 

Indicate the number of shares outstanding of each of the registrant’s classes of common stock as of the latest practicable date: 39,750,000 shares of common stock issued & outstanding as of September 18, 2013.




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TABLE OF CONTENTS

 

 

Page Number

Item 1.   Business

1-13

Item 1A.   Risk Factors

13

Item 1B.   Unresolved Staff Comments

13

Item 2.   Properties

13

Item 3.   Legal Proceedings

13

Item 4.   [Removed and Reserved]

13

Item 5.   Market for Common Equity and Related Stockholder Matters

14

Item 6.   Selected Financial Data

15

Item 7.   Management’s Discussion and Analysis of Financial Condition and Results of Operations

15-19

Item 7A.   Quantitative and Qualitative Disclosures About Market Risk

19

Item 8.   Financial Statements and Supplementary Data

20-34

Item 9.   Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

35

Item 9A.   Controls and Procedures

35-36

Item 9B.   Other Information

36

Item 10.    Directors, Executive Officers and Corporate Governance

36-39

Item 11.    Executive Compensation

39-40

Item 12.    Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

40-41

Item 13.    Certain Relationships and Related Transactions, and Director Independence

41-42

Item 14.    Principal Accountants Fees and Services

42

Item 15.    Exhibits, Financial Statement Schedules

42-43

 


 





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PART I

 

Item 1.  Business

 

This annual report contains forward-looking statements. 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”, “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 (US$) and are prepared in accordance with United States Generally Accepted Accounting Principles.

 

In this annual report, unless otherwise specified, all dollar amounts are expressed in United States Dollars and all references to “common shares” refer to the common shares in our capital stock.

 

As used in this annual report, the terms “we”, “us”, “our company”, mean China Media Inc., a Nevada corporation and our subsidiaries, unless otherwise indicated.


Share Exchange


On September 16, 2009 we entered into a share exchange agreement (the “Share Exchange Agreement”) with Vallant Pictures Entertainment Co., Ltd., a company incorporated under the laws of the British Virgin Islands (“Vallant”) and Bin Li, our Director and the former sole shareholder of Vallant.  According to the terms of the Share Exchange Agreement, we agreed to acquire the sole issued and outstanding common share of Vallant from Bin Li in exchange for 7,000 shares of our common stock.


On November 30, 2009 we closed the transactions contemplated by the Share Exchange Agreement and acquired Vallant as our wholly owned subsidiary.  Vallant has entered into a series of contractual obligations with Xi’An TV Media Co., Ltd., a company incorporated under the laws of the People’s Republic of China (“Xi’An TV”) that is engaged in the business of producing and developing television programming for the Chinese market, as well as the holders of 62.61% of the voting shares of Xi’An TV.  A full description of these contractual arrangements is included under the heading “Organization”, below.


We 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 of our common stock were issued to Mr. Li in reliance upon an exemption from registration pursuant to Regulation S under the Securities Act.


Prior to our entry into the Share Exchange Agreement, Bin Li was our Director and the sole officer, director and beneficial owner of Vallant.  Further details on the transactions contemplated by the Share Exchange Agreement can be found in our Current Report on Form 8-K filed with the SEC on September 18, 2009.


Organization




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Our relationship with Xi’An TV and its shareholders is governed by a series of contractual arrangements between Vallant, Xi’An TV and the holders of 100% (62.61% until September 17, 2010) of the share capital of Xi’An TV (the “Xi’An TV Shareholders”).  Under the laws of China, the contractual arrangements constitute valid and binding obligations of the parties of such agreements.  Each of the contractual arrangements and the rights and obligations of the parties thereto are enforceable and valid in accordance with the laws of China.  Other than pursuant to the contractual arrangements between Vallant and Xi’An TV described below, Xi’An TV cannot transfer 100% (62.61% until September 17, 2010) of the funds generated from their operations.


On June 20, 2007 Vallant entered into the following contractual arrangements with Xi’An TV and the Xi’An TV Shareholders:


Business Operations Agreement.  Pursuant to this agreement between the Xi’An TV Shareholders, Xi’An TV and Vallant, the Xi’An TV Shareholders must designate the candidates recommended by Vallant as their representatives on the Board of Directors of Xi’An TV, and Vallant acquired the right to appoint the senior executives of Xi’An TV.  In addition, Vallant must guarantee Xi’An TV’s performance under any agreements or arrangements relating to Xi’An TV’s business arrangements with any third party, and upon request from Xi’An TV, Vallant must provide loans to support the operational capital requirements of Xi’An TV and loan guarantees if third party loans are necessary.  In return, Xi’An TV must pledge its accounts receivable and all of its assets to Vallant.  This agreement is effective for an indefinite term and may be terminated by Vallant with 30 days notice.


Business Services Agreement.  Pursuant to this agreement among Vallant and Xi’An TV, Vallant acquired the exclusive rights to provide Xi’An TV with all services required by Xi’An TV in the regular course of business, including services pertaining to administration, human resources, production, screenplay drafting and marketing.  As part of this agreement, Vallant must also undertake to:


  

develop business opportunities on behalf of XiAn TV;


  

provide relevant market information research;


  

receive payments from customers on behalf of XiAn TV;


  

administer staff training and human resources for XiAn TV; and


  

provide daily accounting and financial services.


In exchange, Xi’An TV must provide Vallant with 62.61% (now 100%) of its income.  This agreement is effective for an indefinite term and may be terminated by Vallant at any time with no notice.


Option AgreementPursuant to this agreement between the Xi’An TV Shareholders, Xi’An TV and Vallant, the Xi’An TV Shareholders irrevocably granted Vallant or its designees the exclusive option to purchase, to the extent permitted under the laws of China, all or part of their equity interest in Xi’An TV for the cost of their initial contributions to the registered capital of Xi-An TV or the minimum amount of consideration permitted by applicable Chinese law.  The proceeds of the exercise of the option will be applied to repay loans extended by the Xi’An TV Shareholders to Xi’An TV, unless otherwise agreed.  Vallant or its designees have sole discretion to decide when to exercise the option, whether in part or in full.  This agreement is effective for an indefinite term and may be terminated by Vallant at any time with no notice.


Equity Pledge AgreementPursuant to this agreement between Xi'An TV, the Xi’An TV Shareholders and Vallant, the Xi’An TV Shareholders pledged all 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 described above.  If Xi’An TV or the Xi’An TV Shareholders breach their respective contractual obligations, Vallant, as the pledgee, will be entitled to certain rights, including the right to sell the pledged equity interests.  The Xi’An TV Shareholders also agreed that upon the occurrence of any event of default, Vallant will acquire an exclusive, irrevocable power of attorney to take the place and stead of the Xi’An TV Shareholders to carry out the security provisions of this agreement and take any action and execute any instrument that



5




Vallant may deem necessary or advisable to accomplish the purposes of this agreement.  The Xi’An TV Shareholders must not dispose of their pledged equity interests or take any actions that would prejudice Vallant’s interests.  This agreement is effective for an indefinite term and may be terminated by Vallant at any time with no notice.


On September 17, 2010, the shares of Xi’An TV changed ownership and we entered into a new set of agreements with the new holders of 100% of Xi’An TV’s shares.


Since the Xi’An TV Shareholders do not have the characteristics of a controlling financial interest and do not have sufficient equity at risk for Xi’An TV to finance its activities without additional subordinated financial support from other parties, Xi’An TV’s financial statements become consolidated as our own.  As such, and due to the interest we hold in Xi’An TV through Vallant, the following business description describes the business and operations of Xi’An TV as our own.


Business Overview:


Products and Services


Since our incorporation we have produced one feature-length film, eleven television series and one documentary. Television series in China are similar to those in the North American market, but they do not operate on the basis of seasons.  Each series has a definite lifetime of anywhere from 10 to 50 episodes, at which point the series ends and a new one is developed.  The new series may be based on previous ones, but the development of a new series does not follow the same type of recurring seasonal structure as in North America.


In 2007, our television series Special Mission received a viewership rating of 4% of the entire Chinese market when it was broadcast on China Central Television (“CCTV”), Channel 8.  In the same year Invisible Wingsreceived the Outstanding Children’s Film and Outstanding Young Actress awards during the 12th Film Ornamental Column Awards, the Golden Elephant Award during the Indian International Film Festival, the Golden Angel Award during the Hollywood China-USA Film Festival, and was featured as the opening film of Beijing International Sport Film Week.

 

Below is a summary of some of our more successful programming that we have already released:


[chndform10kjune302013fina001.jpg]

 

Invisible Wings – A 90 minute feature film, this motivational drama describes the story of a 15-year old Chinese girl who lost her arms in an accident, and whose mother was diagnosed with schizophrenia and anxiety.  The young girl’s love for her mother motivates her to apply herself diligently to her studies and athletics.  She also takes care of her mother while battling her disabilities.  The girl overcomes all odds and wins a medal in the Chinese national games for the disabled and represents her country at the Paralympics.




6




In 2007, Invisible Wings received the Outstanding Children’s Film and Outstanding Young Actress awards during the 12th Film Ornamental Column Awards, the Golden Elephant Award during the Indian International Film Festival, the Golden Angel Award during the Hollywood China-USA Film Festival, and was featured as the opening film of Beijing International Sport Film Week.


[chndform10kjune302013fina002.jpg]


Special Mission – A 40-episode television series with each episode lasting 40 minutes, Special Mission is a war drama that focuses on the actions of members of the Chinese military intelligence community as they fight against the Japanese army which invaded China.  The series describes various characters who sacrificed their lives in order to protect their country and uncover the plans of the Japanese forces.

 

 

[chndform10kjune302013fina003.jpg]


Lotus Lantern Prequel – A 46 episode television series with each episode lasting 52 minutes, Lotus Lantern Prequel is a drama based on traditional Chinese mythology that describes the story of God Erlang, a popular mythological figure, who battles through adversity and many enemies to reunite with his mother and younger sister.


After being broadcast on CCTV-8 in April 2009, Lotus Lantern Prequel achieved a first-run audience rating of 3.9% during prime time and was syndicated on many Chinese regional television stations.


We plan to invest approximately $7,990,000 in producing and distributing six new television series over the next two years. We anticipate raising sufficient capital for these expenditures through debt or equity financing as well as engaging in joint venture productions with other established production companies.




7




We plan to undertake the development and production of our programming through a series of different stages from development to post-production.  The process can be summarized as follows:


Development Stage


This is the initial stage during which we develop and research a concept.  We undertake market research and hold focus groups to establish whether demand exists for a particular type of programming.  Once we receive positive feedback on a concept we instruct our writers to produce a plot of the program based on suggestions from the focus groups and the results of our market research.  Alternatively, we can acquire original works or rights to adapt classic works, both from China and abroad, that we believe will be marketable to the Chinese market.  If we complete any such acquisition, we generally produce a plot based on the work which may be further revised as we continue developing the project.  The plot provides a basic outline of the program and provides a foundation upon which our writers can produce a screenplay or script.


Our plot is then reviewed by our development committee.  This committee is made up of recognized television and film professionals in China as well as members of our local Shaan’Xi Province Administration of Radio, Film and Television (“ARFT”) agency, who are responsible for approving the programming for distribution to television stations.  By having a development committee in place, we hope to avoid producing works that will either not be granted government approval for distribution, will be too difficult to produce or will not be attractive to television stations and viewers.


Once we have decided upon the basic plot for a project, we determine its production schedule, a rough budget and terms of financing.  We may provide the financing directly or through a joint venture with one or more third parties interested in participating in the project.  Potential investors include advertisers and distributors, home video publishers and private investors.  Currently, we partner primarily with such investors to provide the financing required to develop our television programming, but we also plan on raising capital through the sale of our debt or equity securities.


The development stage usually takes six months to several years, subject to our market research, co-production negotiations and script judgment from focus groups and the development committee.


Pre-Production Stage


The next stage involves developing a detailed script or screenplay based on the basic plot outline produced in the first stage of the process.  The script generally incorporates all of the themes and major characteristics of the outline while taking into account production scenarios.  Our scripts and screenplays are based on our own original work as well as adaptations of books, musical works, folklore and classic Chinese or international stories.


We hire part-time writers who work out of our offices to create the screenplays and scripts for our television series and films.  Occasionally, we also purchase completed screenplays and scripts from suppliers such as professional writers, other film producers or the general public.


After the screenplay or script is finalized, our financial department plans the investment budget and our film and television series production center prepares a detailed production plan and searches for a suitable director, production manager and executive producer, as well as actors and crew.  The production manager is responsible for executing all facets of production, the executive producer supervises the production process and the director is responsible for the actors, crew and cinematography.


This part of the process generally takes one to two months depending on the complexity of the script and the production.


Production Stage


This stage deals with the actual filming of the television series or film.  The director, actors and crew gather at a studio at our offices, at a sound stage we rent out or that is provided by one of the production partners, or at another location to film a particular scene or scenes.  Our involvement in this stage is minimal unless



8




modifications to the script or screenplay must be made.  Currently, we outsource the principal photography and filming of the various scenes to the Xi’An Television Production Center.  We do not directly employ any directors, actors or crew.


Depending on the complexity of the project, the production stage can last up to six months for a television series and up to three months for a film.


Post-Production Stage


Once production has wrapped up, we are responsible for coordinating all of the tasks required to produce a finished product for television or the cinema.  We assign an editor to assemble the various pieces of film and determine scene transitions, and we add musical elements, subtitles, visual and/or digital effects to the television series or film.  Once the editing process is complete, which takes up to three months, the director provides input on any changes and a final version of the program or film is produced.


Markets


According to an article titled “China Film Industry Development Status” on www.chinafilm.com, the Chinese film industry generated revenues of approximately $1.2 billion from film sales during 2008.  This represents an increase of 25% over sales numbers in 2007 and includes 7.15 million film screenings to an audience of 1.6 billion people.  Sixty percent of the films were produced domestically in China.


During early 2009, the television series department of the State Administration of Radio, Film and Television (“SARFT”) agency completed a review of the television series industry in China.  They found that Chinese television stations invested approximately $800 million into the production and purchase of television series in 2008.  This represents an increase of 38% compared to the amounts spent in 2007.


Additionally, according to www.people.com.cn, Chinese film and television series producers generated revenue of approximately $440 million by exporting their productions outside of China.


The major purchasers of television series are regional and national television stations.  The demand for such programming from other media providers, such as internet television stations who distribute programs through an internet connection or directly onto a client’s mobile phone, is limited, and as such we have not considered producing programs intended for these types of media.


Since the major regional and national television networks are subject to heavy government influence, we develop our television series and films with this consideration in mind.  Generally, we plan to focus on topics that the government supports, such as revolutionary history or modern Chinese culture, which will make our programming more attractive for networks such as CCTV to broadcast and release through their stations.


Distribution Methods


After we complete the production and editing of a film or television series, we must file an application for approval to broadcast the program with the SARFT agency.  Once we are granted approval and provided with a broadcasting permit for the film or series, we are free to distribute the program, which, in the case of a television series, we normally begin following the completion of one or two episodes.


Our main customers include the following networks:


  

CCTV;

  

Hunan Satellite Television;

  

Jiangsu Satellite Television;

  

Zhejiang Satellite Television;

  

Jiangxi Satellite Television;

  

Anhui Satellite Television; and




9







  

all other provincial broadcast television networks in China.


CCTV is the major state television broadcaster in mainland China.  It has a network of 19 channels that broadcast different programs and is accessible to more than one billion viewers.  The programming on Channels 1 and 8 of the CCTV network is most closely aligned with the characteristics of our films and television series.  Once our programming is televised on CCTV, regional television networks regularly purchase the same programming to use for their television stations.


We distribute our films and television series primarily through our direct sales channel.  Occasionally, we may also use the services of an outside distributor to facilitate sales to a wider range of customers.  However, even though we devote a significant amount of our resources to ensuring that the programming we produce appeals to our customers and have had success distributing it in the past, there can be no assurance that any film or television series we produce will be purchased by any distributors or television networks.


Competition


We face competition from various television and film production companies ranging from small, private businesses to large, state-sponsored enterprises.  Some of our major competitors include China Film Group, Huayi Brothers Media Group and PolyBona Film Distribution Co.


Many of our competitors have longer operating histories, better brand recognition and greater financial resources than we do.  In order for us to successfully compete in our industry we will need to:


  

develop highly marketable programming;

  

continue developing our relationships with major television networks; and


  

increase our financial resources.


However, there can be no assurance that even if we do these things we will be able to compete effectively with the other companies in our industry.


As of June 2010, there were approximately 3000 film and television producers registered in China. Among these, approximately one-third had not produced any films or television series between 2006 and 2008, and the majority of the others only produced an average of two to three films or series per year.  The film and television industry in China is highly de-centralized and there are no truly dominant producers with whom we must compete.


We believe that we will be able to compete effectively in our industry because of a successful product development strategy that we have already used to produce profitable programming.  Our past productions have been successful due to the detailed production process and strategy described above as well as the strong relationships we have forged with television networks.


We also attempt to increase the probability that our programming will be profitable and will be purchased by television networks by having all of our concepts vetted by our programming committee.  This committee is comprised of established professionals in the Chinese film and television industry as well as members of the examination team of the Shaan’Xi Province ARFT agency, which provides approval for programming to be distributed to television networks.  We believe that having our programming vetted by this committee increases our competitiveness in the industry and the chance that any television series or film we produce will be approved by the government and subsequently purchased by one or more television networks.


Additionally, we have established relationships with actors, directors and production agencies through previous collaborations, and have created cooperative relationships with the major television station in the city of Xi’An and the Xi’An Television Production Center that have provided us with access to partners of theirs as well as major television networks throughout the country.  This resulted in our television series, Special Mission, being distributed to over 90% of the television stations throughout China.



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Intellectual Property


We have not filed for any protection of our name or trademark.  Since we produce film and television scripts and screenplays, we develop and sell intellectual property regarding these productions.  Our intellectual property rights are protected to the fullest extent permitted by Chinese law.  The following is a list of films and television series in which we hold, or used to hold, intellectual property rights:


Name

Programming Type

Current Intellectual Property Income Rights

Special Mission

TV Series

Yes

Invisible Wings

Film

No (Sold)

Doctor County Mayor

TV Series

Yes

Lotus Lantern Prequel

TV Series

Yes

Fox-Hunting

TV Series

No (Sold)

Lucky Chicken

TV Series

Yes

Hard Corps

TV Series

Yes

Tianshan Urgency Action

TV Series

Yes


Drive Dragon Gate


TV Series


Yes


Lover’s Grief


TV Series


Yes


Desert Love Story


TV Series


No (Sold)


Gongtan Ancient Town of China


Documentary


Yes


Six Men’s Disasters in Tang Dynasty


TV Series Script


Yes


Lady Shexiang


TV Series


Yes


Xia Hai


TV Series


Yes


Huang Tu Nv Nv


TV Series


Yes


Xiao Lao Xiang Jin Cheng


TV Series


Yes


Guo Men Ying Xiong


TV Series


Yes


The love of the Hawthron Tree


TV Series


Yes


Zhu De


TV Series


Yes


Qiang Xia


TV Series


Yes


We also own the copyright of our logo and all of the contents of our website, www.xatvm.com.


Research and Development




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We did not incur any research and development expenses during the years ended June 30, 2013 and 2012. 


Reports to Security Holders


The public may read and copy any materials that we file with the SEC at the SEC's Public Reference Room at 100 F Street, NE, Washington, D.C. 20549.  The public may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330.  The SEC maintains an Internet site that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC.  The address of that site is www.sec.gov.


Government Regulations


Regulation on Screenplay (Outline) Keeping On Record and Film Management enacted by the SARFT on April 3, 2006


This regulation affects the following two procedures we undertake:


  

before producing a film, the producer of the film is required to submit the screenplay to the local Provincial AFRT for backup and record keeping, and if the film deals with subjects pr themes of historical or revolutionary importance, the screenplay must be supervised and approved by the SARFT; and


  

each film produced in China must be submitted to the examination committee of SARFT, which examines the films content and decides whether the film should be allowed to be broadcast in China.  Films that receive approval receive a Film Public Show Permit and Film Examination Written Decision designation, and without this designation, a film cannot be aired on television in China and will therefore not be distributed.


Effect on our operations.  We need to submit any films we produce to the SARFT for approval prior to their distribution and broadcasting.  It generally takes approximately two or three months to complete the examination, and it may take longer if we receive comments that we must revise the film in some way.  Since we work with a number of individuals who form part of the SARFT examination group, we limit the risk of not receiving broadcast approval or being required to revise our scripts and screenplays.  However, if revisions are required or a screenplay is rejected, this could increase our costs of production and impact our profitability.


Regulations on Radio and Television Program Production and Operation Management enacted by the SARFT on June 15, 2004


This regulation states that all Chinese enterprises operating in the business of radio and television program production must acquire a Permit Certificate of Radio and Television Program Production and Operation.  The regular term of this license is two years and it may be renewed every two years.  Additionally, the regulation specifies that television series may only be produced by companies or entities that have received a Permit Certificate distributed by the SARFT.


Effect on our operations.  We currently hold the appropriate Permit Certificate, and as such we are qualified to operate a film and television program production business in China.  Renewing the Permit Certificate is a very straightforward process and we do not anticipate that it will cost us much or have a significant effect on our operations.


Regulation on Radio Television Management enacted by the State Council on August 1, 1997


This regulation was enacted to provide guidance on establishing Chinese radio and television stations as well as planning and constructing radio and television networks under the supervision of the SARFT.  The regulation also states that radio and television programs may not be produced by companies or entities that do not hold the relevant Permit Certificate, that radio and television programs may not be broadcasted



12




without the approval of the SARFT and that any companies or entities that act in violation of these regulations will face regulatory action.


Effect on our operations.  This is a general administrative regulation relating to all radio and television programming companies.  We currently comply with all of the requirements of the regulation and if at any time we do not possess any specific permits that may be required, we plan to locate cooperative companies that do and partner with them to produce of our films and television series.


Environmental Regulations


We are not aware of any material violations of environmental permits, licenses or approvals that have been issued with respect to our operations.  We expect to comply with all applicable laws, rules and regulations relating to our business, and at this time, we do not anticipate incurring any material capital expenditures to comply with any environmental regulations or other requirements.


While our intended projects and business activities do not currently violate any laws, any regulatory changes that impose additional restrictions or requirements on us or on our potential customers could adversely affect us by increasing our operating costs or decreasing demand for our products or services, which could have a material adverse effect on our results of operations.

 

Employees


We currently have 46 employees including our Chief Financial Officer and Chief Executive Officer.  We engage eleven of the employees on a full-time basis and 35 on a part-time basis.

 

Item 1A.  Risk Factors

 

As a “smaller reporting company”, we are not required to provide the information required by this Item.

 

Item 1B.  Unresolved Staff Comments

 

None.

 

Item 2.  Properties

 

We currently rent one office space and occupy one office space for free totaling 1,109 square meters in area for the following business purposes:

 

  

·

Production Center: Room B 2802, Yiyuange Building B, Huashuo Garden, No. 190, Wenyi Road, Yanta District, XiAn, ShaanXi Province, China, with an area of 209 square meters.  We rent this office from our shareholder Zheng Shao Kang at a cost of approximately $1,063 per month.


·

Corporate Office: Room 10128,  No. 269-5-1 Taibai South Road, Yanta District, Xi’An, Shaan'Xi Province, China, with an area of 319.07 square meters. Lease term: from January 1, 2013 to December 31, 2013. The rent is approximately $21,366 per year.

 

 

Item 3.  Legal Proceedings

 

We know of no material, existing or pending legal proceedings against us, nor are we involved as a plaintiff in any material proceeding or pending litigation. There are no proceedings in which any of our directors, officers or affiliates, or any registered or beneficial shareholder, is an adverse party or has a material interest adverse to our company.

 

Item 4.  [Removed and Reserved]

 

 



13




PART II

 

Item 5.  Market for Common Equity and Related Stockholder Matters


Market Information


Our common stock is not traded on any exchange.  Our common stock is quoted on OTC Bulletin Board under the trading symbol “CHND.OB”.   We cannot assure you that there will be a market in the future for our common stock.


OTC Bulletin Board securities are not listed nor traded on the floor of an organized national or regional stock exchange.  Instead, OTC Bulletin Board securities transactions are conducted through a telephone and computer network connecting dealers.  OTC Bulletin Board issuers are traditionally smaller companies that do not meet the financial and other listing requirements of a national or regional stock exchange.


The range of high and low bid quotations by quarters from July 1, 2011 through June 30, 2013 is listed below. The quotations are taken from the OTC Bulletin Board. They reflect inter-dealer prices, without retail mark-up, mark-down or commission, and may not necessarily represent actual transactions.

  

Period Ended:

 

High

 

 

Low

 

04/01/2013 to 06/30/2013

 

 

$ 0.17

 

 

 

$ 0.17

 

01/01/2013 to 03/31/2013

 

 

$ 0.45

 

 

 

$ 0.17

 

10/01/2012 to 12/31/2012

 

 

$ 0.51

 

 

 

$ 0.10

 

07/01/2012 to 09/30/2012

 

 

$ 0.51

 

 

 

$ 0.51

 

04/01/2012 to 06/30/2012

 

 

$ 0.51

 

 

 

$ 0.51

 

01/01/2012 to 03/31/2012

 

 

$ 1.01

 

 

 

$ 0.15

 

10/01/2011 to 12/31/2011

 

 

0

 

 

 

0

 

07/01/2011 to 09/30/2011

 

 

0

 

 

 

0

 


Holders


As of September 18, 2013 there were 255 holders of record of our common stock.


Dividends


To date, we have not paid dividends on shares of our common stock and we do not expect to declare or pay dividends on shares of our common stock in the foreseeable future.  The payment of any dividends will depend upon our future earnings, if any, our financial condition, and other factors deemed relevant by our Board of Directors.


Equity Compensation Plans


For the year ended June 30, 2013 and as of September 18, 2013 we did not have any equity compensation plans.

 

Outstanding Equity Awards at Fiscal Year-End

 

There were no outstanding equity awards for our executive officers and directors as of June 30, 2013.

 

Purchase of Equity Securities by the Issuer and Affiliated Purchasers

 

We did not purchase any of our shares of common stock or other securities during the year ended June 30, 2013.

 

Recent Sales of Unregistered Securities

 

We did not have any sales of unregistered securities which have not been previously disclosed.



14




 

Item 6.  Selected Financial Data

 

As a “smaller reporting company”, we are not required to provide the information required by this Item.


Item 7.  Management’s Discussion and Analysis of Financial Condition and Results of Operations


The following discussion should be read in conjunction with our financial statements, including the notes thereto, appearing elsewhere in this annual report.  The discussion of results, causes and trends should not be construed to imply any conclusion that these results or trends will necessarily continue into the future.  All references to currency in this “Management’s Discussion and Analysis of Financial Condition and Results of Operations” section are to U.S. dollars, unless otherwise noted.


Liquidity and Capital Resources


For the years ended June 30, 2013 and June 30, 2012

 

As of June 30, 2013 we had $184,746 in cash, current assets of $4,128,689, current liabilities of $577,000 and working capital of $3,551,689. As of June 30, 2012 we had $45,681 in cash, current assets of $3,036,212, current liabilities of $316,160 and working capital of $2,720,052. As of June 30, 2013 we had total assets of $7,629,216, compared to total assets of $7,159,419 as of June 30, 2012.


During the year ended June 30, 2013 we used net cash of $3,153,109 in operating activities, compared to net cash used of $1,349,154 in operating activities during the year ended June 30, 2012. The decrease in net cash of $1,803,955 was mainly due to cash paid for film costs including TV series “The Love of The Hawthorn Tree” in the amount of RMB 3,000,000 (approximately $478,300), TV series “Zhu De” in the amount of RMB 10,000,000 (approximately $1,594,300), and TV series “Qiang Xia” in the amount of RMB 8,000,000 (approximately $1,275,500).


During the year ended June 30, 2013 we received net cash of $3,171,298 from investing activities, including $3,172,589 collection of long term investments and $158,228 collection of notes receivable. During the year ended June 30, 2012 we received net cash of $288,686 from investing activities, including $289,158 collection of long term investments.


During the year ended June 30, 2013 we received net cash of $100,237 from financing activities, which is mainly derived from a related party loan. During the year ended June 30, 2012 we used net cash of $176,389 on financing activities, including $205,542 used to pay related party loan.


Our net cash increased by $139,065 during the year ended June 30, 2013, compared to net cash decreased by $1,212,089 during the year ended June 30, 2012. The increase in cash during fiscal 2013 was primarily due to collection of long term investments.


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 films and television series and anticipate this will continue until we accrue sufficient capital reserves to finance all of our productions independently.


We estimate that our expenses over the next 12 months (beginning October 2013) will be approximately $6,350,000 as described in the table below. These estimates may change significantly depending on the nature of our future business activities and our ability to raise capital from shareholders or other sources.

 

Description

Estimated Completion Date

Estimated Expenses

 ($)

Legal and accounting fees

12 months

100,000

Film and television series production costs

12 months

5,000,000

Marketing and advertising

12 months

300,000

Investor relations and capital raising

12 months

200,000

Management and operating costs

12 months

200,000

Salaries and consulting fees

12 months

100,000

Fixed asset purchases

12 months

300,000

General and administrative expenses

12 months

150,000

Total

  

6,350,000


We intend to meet our cash requirements for the next 12 months through a combination of debt financing and equity financing by way of private placements. There is good potential for the development of our business in China. If we get more liquidity, it will be best way to expand our business and improve profit. We currently do not have any arrangements in place to complete any private placement financings and there is no assurance that we will be successful in completing any such financings.  If we are not able to successfully complete any private placement financings, we plan to cooperate with film and television producers or obtain shareholder loans to meet our cash requirements. However, there is no assurance that any such financing will be available or if available, on terms that will be acceptable to us. We may not raise sufficient funds to fully carry out our business plan.

 

Results of Operations


The following table sets forth information from our statements of operations for the years ended June 30, 2013 and 2012:


   

For The Years Ended June 30

  

2013

 

2012

  

 

 

 

Revenues

$

1,672,656

 

$

1,280,474

Cost of revenues

 

 1,339,286

 

 

   962,024

Gross profit

 

    333,370

 

 

   318,450

 

 

 

 

 

 

Operating expenses

 

 

 

 

 

Selling, general and administrative expenses

 

   292,998

 

 

   312,509

Depreciation and amortization expense

 

     18,950

 

 

     30,587

Total operating expenses

 

   311,948

 

 

   343,096

 

 

 

 

 

 

Other income (expenses):

 

 

 

 

 

      Interest income

 

     44,366

 

 

     95,095

      Interest expense

 

     (4,615)

 

 

    (6,902)

           Total other income

 

     39,751

 

 

    88,193

 

 

 

 

 

 

Net income before income taxes

 

    61,173

 

 

    63,547

Income taxes

 

      8,246

 

 

      7,961

Net income

$

    

    52,927

 

      

$

 

    55,586

 



Revenues


During the year ended June 30, 2013 we generated $1,672,656 of revenues, compared to revenues of $1,280,474 during the year ended June 30, 2012, an increase of $392,182. Such increase was mainly due to the increase in revenues of TV series and commercial sales to advertising agencies.




16




Cost of Revenues


Our cost of revenues during the year ended June 30, 2013 was $1,339,286, an increase of $377,262, as compared to $962,024 for the year ended June 30, 2012. The increase is due to costs incurred for the TV series sold in the current fiscal year.


Gross Profit


As a result of the foregoing, our gross profit increased by $14,920 from $318,450 for the year ended June 30, 2012 to $333,370 for the year ended June 30, 2013. The increase in gross profit is mainly due to the revenues generated from different kinds of TV series.


Operating Expenses


During the year ended June 30, 2013 our total operating expenses were $311,948, a decrease of $31,148, as compared to $343,096 for the year ended June 30, 2012.


Net Income


For the year ended June 30, 2013 we generated a net income of $52,927, as compared to $55,586 for the year ended June 30, 2012, a decrease of $2,659. Such decrease is mainly due to the decreased interest income.


 Contractual Obligations

 

As a “smaller reporting company”, we are not required to provide tabular disclosure obligations.

 

Off-Balance Sheet Arrangements

 

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

 

APPLICATION OF CRITICAL ACCOUNTING POLICIES

 

Our audited financial statements and accompanying notes are prepared in accordance with generally accepted accounting principles used in the United States.  Preparing financial statements requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue, and expenses. These estimates and assumptions are affected by management's application of accounting policies.  We believe that understanding the basis and nature of the estimates and assumptions involved with the following aspects of our consolidated financial statements is critical to an understanding of our financials.


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 based on past experience and other assumptions that management believes are reasonable under the circumstances, and management evaluates these estimates on an ongoing basis.


Fair Value of Financial Instruments



17





The fair value of financial instruments, which consist of cash, accounts receivable, notes receivable, prepaid and other assets, accounts payable, accrued liabilities, due to related parties and short term debt, were estimated to approximate their carrying values due to the immediate or relatively short maturity of these instruments.


Revenue Recognition


The Company’s revenue primarily comes from the distribution of film and TV series’ broadcasting rights and investment return from the collectively produced film and TV series.


In accordance with ASC 926, Entertainment - Films, revenue from sale or licensing arrangements of a film shall be recognized when the following five revenue criteria are met: persuasive evidence of an arrangement exists, the film is completed and delivery has occurred, the license period of the arrangement has begun, the selling price is fixed or determinable, and collectability is reasonably assured.


The Company also generates advertising revenues from the sale of advertising services. In the majority of advertising arrangements, the Company acts as an agent in the transaction and records advertising revenues on a net basis. Customer payments received in advance of the performance of services are recorded as customer deposits in the consolidated balance sheet, and are recognized as revenue when the advertising services are rendered.


Cost of Revenues


Film Costs - We capitalize film costs in accordance with ASC 926. Film costs are stated at the lower of cost, less accumulated amortization, or fair value. Production overhead, a component of film costs, includes allocable costs of individuals or departments with exclusive or significant responsibility for the production of films. Substantially all of our resources are dedicated to the production of our films. Capitalized production overhead does not include selling, general and administrative expenses. Interest expense on funds invested in production is capitalized into film costs until production is completed. In addition to the films being produced, costs of productions in development are capitalized as development film costs in accordance with the provisions of the ASC and are transferred to film production costs when a film is set for production. In the event a film is not set for production within three years from the time the first costs are capitalized or the film is abandoned, all such costs are generally expensed.


Film Cost Amortization - Once a film is released, film costs are amortized and participations and residual costs are accrued on an individual film basis in the proportion that the revenue during the period for each film (“Current Revenue”) bears to the estimated remaining total revenue to be received from all sources for each film (“Ultimate Revenue”) as of the beginning of the current fiscal period as required by the ASC. The amount of film costs that is amortized each period will depend on the ratio of Current Revenue to Ultimate Revenue for each film for such period. We make certain estimates and judgments of Ultimate Revenue to be received for each film based on information received from our distributor and our knowledge of the industry. Ultimate Revenue does not include estimates of revenue that will be earned beyond ten years of a film’s initial theatrical release date.


Unamortized film production costs are evaluated for impairment each reporting period on a film-by-film basis in accordance with the requirements of the ASC. If estimated remaining net cash flows are not sufficient to recover the unamortized film costs for that film, the unamortized film costs will be written down to fair value determined using a net present value calculation.


Earnings (loss) Per Share


The Company calculates net income (loss) per share in accordance with ASC 260, Earnings Per Share. Basic earnings (loss) per share is computed by dividing net income (loss) by the weighted average number of shares of common stock outstanding during each period. Diluted earnings per share is computed by dividing net income by the weighted average number of shares of common stock, common stock equivalents and potentially dilutive securities outstanding during each period. As of June 30, 2013 and



18




2012, respectively, the Company had no common stock equivalents that could potentially dilute future earnings per share. 

 

Item 7A.  Quantitative and Qualitative Disclosures About Market Risk

 

As a “smaller reporting company”, we are not required to provide the information required by this Item.





19




Item 8.  Financial Statements and Supplementary Data


CHINA MEDIA INC.

Consolidated Financial Statements

(Expressed in US dollars)

 

Report of Independent Registered Public Accounting Firm 

F-1

Consolidated Balance Sheets as of June 30, 2013 and 2012 

F-2

Consolidated Statements of Operations and Comprehensive Income for the years ended June 30, 2013 and 2012

F-3

Consolidated Statements of Changes in Stockholders’ Equity 

F-4

Consolidated Statements of Cash Flows for the years ended June 30, 2013 and 2012

F-5

Notes to the Consolidated Financial Statements 

F-6

 

 




20




 

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM


To the Board of Directors and Stockholders of China Media Inc.

Xi’An, People’s Republic of China


We have audited the accompanying consolidated balance sheets of China Media Inc. and its subsidiaries (collectively the “Company”) as of June 30, 2013 and 2012, and the related consolidated statements of operations and comprehensive income, changes in stockholders’ equity and cash flows for the years then ended. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements of the Company referred to above present fairly, in all material respects, the financial position of the Company as of June 30, 2013 and 2012 and the results of their operations and their cash flows for the years then ended in conformity with accounting principles generally accepted in the United States of America.


/s/ MALONEBAILEY, LLP

MALONEBAILEY, LLP


www.malonebailey.com

Houston, Texas

 

September 26, 2013


 




















F-1



21





CHINA MEDIA INC.

CONSOLIDATED BALANCE SHEETS

 

 

 

 

 

JUNE 30, 2013

 

JUNE 30, 2012

Assets

 

 

 

 

Current assets

 

 

 

 

 

Cash and cash equivalents

 $                 184,746

 

 $                   45,681

 

 

Accounts receivable, net of allowance of $39,493 and $38,644 at June 30, 2013 and June 30, 2012, respectively

                 2,032,981

 

                 1,271,458

 

 

Notes receivable

                 1,643,637

 

                 1,616,764

 

 

Prepaid and other receivable

                    267,325

 

                    102,309

 

Total current assets

                 4,128,689

 

                 3,036,212

 

 

 

 

 

 

 

 

Fixed assets, net

                      35,322

 

                      32,161

 

 

Intangible assets, net

                      22,679

 

                      34,871

 

 

Film costs

                 3,442,526

 

                    886,050

 

 

Long-term investments

                                 -

 

                 3,170,125

 

 

 

 

 

 

 

Total assets

 $             7,629,216

 

 $              7,159,419

 

 

 

 

 

 

Liabilities and Stockholders' Equity

 

 

 

 

Current liabilities

 

 

 

 

 

Accounts payable

 $                  15,681

 

 $                   14,191

 

 

Customer deposits

                    162,274

 

                      41,484

 

 

Accrued liabilities and other payable

                    262,255

 

                    226,287

 

 

Due to related parties

                    136,790

 

                      34,198

 

Total current liabilities

                    577,000

 

                    316,160

 

Total liabilities

$                577,000     

 

   $                 316,160

 

 

 

 

 

 

Stockholders' equity

 

 

 

 

 

Common stock, $0.00001 par value, 180,000,000 shares authorized; 39,750,000 shares issued and outstanding at June 30, 2013 and June 30, 2012, respectively

 $                        398

 

 $                        398

 

 

Additional paid-in capital

               11,168,616

 

               11,164,001

 

 

Accumulated other comprehensive income

                 1,098,903

 

                    947,488

 

 

Accumulated deficit

              (5,215,701)

 

              (5,268,628)

 

Total stockholders' equity

                 7,052,216

 

                6,843,259

 

 

 

 

 

 

 

Total liabilities and stockholders' equity

 $             7,629,216

 

 $              7,159,419




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



F-2



22





CHINA MEDIA INC.

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME


 

 

 

 

 

 

 

FOR THE YEARS ENDED JUNE 30,

 

 

2013

 

2012

 

 

 

 

 

Revenues

 $             1,672,656

 

 $             1,280,474

Cost of revenues

                 1,339,286

 

                    962,024

Gross profit

                    333,370

 

                    318,450

 

 

 

 

 

Selling, general and administrative

                    292,998

 

                    312,509

Depreciation and amortization expense

                      18,950

 

                      30,587

 

Total operating expenses

                    311,948

 

                    343,096

 

 

 

 

 

Other income (expense)

 

 

 

 

Interest income

                      44,366

 

                      95,095

 

Interest expense

                       (4,615)

 

                       (6,902)

Net income before income taxes

                      61,173

 

                      63,547

Income taxes

                        8,246

 

                         7,961

Net income

 $                  52,927

 

 $                   55,586

 

 

 

 

 

Comprehensive income

 

 

 

 

Net income

                      52,927

 

                      55,586

 

Foreign currency translation gain

                    151,415

 

                    163,208

Comprehensive income

 $                204,342

 

 $                 218,794

 

 

 

 

 

Net income per common share, basic and diluted

  $                      0.00

 

     $                       0.00

Weighted average number of shares outstanding – basic and diluted

               39,750,000

 

               39,750,000

 

 

 

 

 


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


F-3



23





CHINA MEDIA INC.

Consolidated Statement of Changes in Stockholders' Equity

For the Years Ended June 30, 2013 and 2012

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Common Stock

 

Additional Paid-in Capital

 

Accumulated Other Comprehensive Income

 

Accumulated Deficit

 

Total Equity

 

 

Shares

 

Amount

 

 

 

 

Balance, June 30, 2011

 

     39,750,000

 

$         398

 

$        11,157,099

 

$              784,280

 

$        (5,324,214)

 

$    6,617,563

Foreign currency translation

 

                       -

 

                -

 

                              -

 

                      163,208

 

                               -

 

              163,208

 

 

 

 

 

 

 

 

 

 

 

 

 

Imputed interest on related party loan

 

                        -

 

                -

 

                                      6,902

 

                                  -

 

                                -

 

                6,902

Net Income

 

                        -

 

                 -

 

                                -

 

                               -

 

                         55,586

 

              55,586

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance, June 30, 2012

 

     39,750,000

 

           398

 

           11,164,001

 

                   947,488

 

             (5,268,628)

 

        6,843,259

 

 

 

 

 

 

 

 

 

 

 

 

 

Foreign currency translation

 

                        -

 

                 -

 

                                -

 

                      151,415

 

                                -

 

            151,415

 

 

 

 

 

 

 

 

 

 

 

 

 

Imputed interest on related party loan

 

                        -

 

                 -

 

                      4,615

 

                                   -

 

                                -

 

                 4,615

Net Income

 

                        -

 

                -

 

                                -

 

                                 -

 

                          52,927

 

               52,927

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance, June 30, 2013

 

    39,750,000

 

$         398

 

$         11,168,616

 

 $              1,098,903

 

$          (5,215,701)

 

$     7,052,216




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


F-4



24







CHINA MEDIA INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE YEARS ENDED JUNE 30, 2013 AND 2012

 

 

 

 

 

 

 

 

 

 

 

FOR THE YEARS ENDED JUNE 30,

 

 

 

 

2013

 

2012

CASH FLOWS OPERATING ACTIVITIES

 

 

 

 

Net income

 $                    52,927

 

 $                 55,586

 

Adjustments to reconcile net income to

net cash provided by (used in)

 

 

 

 

operating activities:

 

 

 

 

 

Imputed interest

                          4,615

 

                       6,902

 

 

Amortization expense

                       12,755

 

                     12,617

 

 

Depreciation expense

                          6,195

 

                     17,970

 

 

Amortization of film costs

                     382,653

 

                                -

 

Changes in operating assets and liabilities:

 

 

 

 

 

 

Accounts receivable

                   (722,018)

 

             (1,265,061)

 

 

 

Prepaid and other receivable

                   (160,203)

 

                   (22,628)

 

 

 

Accounts payable

                          1,159

 

                       6,696

 

 

 

Accrued liabilities and other payable

                       20,716

 

                     18,281

 

 

 

Customer deposits

                     117,990

 

                     41,275

 

 

 

Cash paid for film costs

                (2,869,898)

 

                 (220,792)

Net cash used in operating activities

                (3,153,109)

 

             (1,349,154)

 

 

 

 

 

 

 

CASH FLOW INVESTING ACTIVITIES

 

 

 

 

 

 

Cash paid for purchase of fixed assets

                        (8,610)

 

                         (472)

 

 

 

Loans made to others

                   (150,909)

 

                                -

 

 

 

Collection of long term investments

                  3,172,589

 

                   289,158

 

 

 

Collection of notes receivable

                     158,228

 

                                -

Net cash provided by investing activities

                  3,171,298

 

                   288,686

 

 

 

 

 

 

 

CASH FLOW FINANCING ACTIVITIES

 

 

 

 

 

 

Repayments to related parties

                                 -   

 

                 (205,542)

 

 

 

Proceeds from related parties

                     100,237

 

                     29,153

Net cash provided by (used in) financing activities

                     100,237

 

                 (176,389)

 

 

 

 

 

 

 

Effect of exchange rate changes on cash

                       20,639

 

                     24,768

NET CHANGE IN CASH

                     139,065

 

             (1,212,089)

CASH AT BEGINNING OF THE YEAR

                       45,681

 

               1,257,770

CASH AT END OF THE YEAR

 $                  184,746

 

 $                 45,681

 

 

 

 

 

 

 

SUPPLEMENTAL INFORMATION:

 

 

 

 

Interest paid

  $                              -

 

 $                           -

 

Income taxes paid

 $                      7,740

 

 $                      699


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


F-5



25




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, Shaan’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 their equity interests 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% prior to 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:




26







·

 

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


Principles of Consolidation


The consolidated financial statements include the accounts of the Company and Xi’An TV, which is a variable interest entity with the Company as the primary beneficiary. In accordance with United States generally accepted accounting principles (“U.S. GAAP”) regarding “Consolidation of Variable Interest Entities”, the Company identifies entities for which control is achieved through means other than through voting rights (a "variable interest entity" or "VIE") and determines when and which business enterprise, if any, should consolidate the VIE. The Company evaluated its participating interest in Xi’An TV and concluded it is the primary beneficiary of Xi’An TV, a variable interest entity. The Company consolidated Xi’An TV and all significant intercompany transactions and balances have been eliminated.


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



27




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.


Concentration of Credit Risk


The Company maintains cash balances at various financial institutions in the PRC which do not provide insurance for amounts on deposit. The Company has not experienced any losses in such accounts and believes it is not exposed to significant credit risk in this area.


The Company operates principally in the PRC and grants credit to its customers in this geographic region. Although the PRC is economically stable, it is always possible that unanticipated events in foreign countries could disrupt the Company’s operations.


Fair Value of Financial Instruments


The fair value of financial instruments, which consist of cash, accounts receivable, notes receivable, prepaid and other assets, accounts payable, accrued liabilities, due to related parties and short term debt, were estimated to approximate their carrying values due to the immediate or relatively short maturity of these instruments.


Cash and Cash Equivalents


Cash and cash equivalents include cash on hand, demand deposits with banks and liquid investments with an original maturity of three months or less.


Accounts Receivable


Accounts receivable are stated at the amount management expects to collect from outstanding balances. Management provides for probable uncollected amounts through a charge to earnings and a credit to an allowance for bad debts based on its assessment of the current status of individual accounts. Balances are still outstanding after management has used reasonable collection efforts are written off through a charge to the allowance for bad debts and a credit to accounts receivable.


Fixed Assets


Fixed assets are recorded at cost and depreciated using the straight-line method, with an estimated 5% salvage value of original cost, over the estimated useful lives of the assets as follows:


 

 

Asset Category

Estimated Useful Life

Electronic Equipment

5 years

Communication Equipment

3 years

Machinery Equipment

5 years

Automobiles

10 years

Office Furniture

5 years


Leasehold improvements are amortized using the straight-line method over the life of the asset, not to exceed the length of the lease. Repairs and maintenance costs are expensed as incurred.


Intangible Assets


The Company has the following intangible assets:


 

 

Intangible Asset Category

Estimated Useful Life

TV series Production Right

10 years


Intangible assets with finite lives are amortized over their estimated useful lives to a company and are reviewed for impairment in accordance with U.S. GAAP. Finite-lived intangible assets are amortized on a straight-line basis over the estimated useful economic lives of 10 years and the amortization expenses for the years ended June 30, 2013 and 2012 were $12,755 and $12,617, respectively.


Impairment of Long-Lived Assets


The Company evaluates for impairment losses on long-lived assets used in operations when indicators of impairment are present and the undiscounted cash flows estimated to be generated by those assets are less than the assets’ carrying amount.


Revenue Recognition


The Company’s revenue primarily comes from the distribution of film and TV series’ broadcasting rights and investment return from the collectively produced film and TV series.


In accordance with ASC 926, Entertainment - Films, revenue from sale or licensing arrangements of a film shall be recognized when the following five revenue criteria are met: persuasive evidence of an arrangement exists, the film is completed and delivery has occurred, the license period of the arrangement has begun, the selling price is fixed or determinable, and collectability is reasonably assured.


The Company also generates advertising revenues from the sale of advertising services. In the majority of advertising arrangements, the Company acts as an agent in the transaction and records advertising revenues on a net basis. Customer payments received in advance of the performance of services are recorded as customer deposits in the consolidated balance sheet, and are recognized as revenue when the advertising services are rendered.


Cost of Revenues


Film Costs - The Company capitalizes film costs in accordance with ASC 926. Film costs are stated at the lower of cost, less accumulated amortization, or fair value. Production overhead, a component of film costs, includes allocable costs of individuals or departments with exclusive or significant responsibility for the production of films. Substantially all of the Company’s resources are dedicated to the production of its films. Capitalized production overhead does not include selling, general and administrative expenses. Interest expense on funds invested in production is capitalized into film costs until production is completed. In addition to the films being produced, costs of productions in development are capitalized as development film costs in accordance with the provisions of the ASC and are transferred to film production costs when a film is set for production. In the event a film is not set for production within three years from the time the first costs are capitalized or the film is abandoned, all such costs are generally expensed.


Film Cost Amortization - Once a film is released, film costs are amortized and participations and residual costs are accrued on an individual film basis in the proportion that the revenue during the period for each film (“Current Revenue”) bears to the estimated remaining total revenue to be received from all sources for each film (“Ultimate Revenue”) as of the beginning of the current fiscal period as required by the ASC. The amount of film costs that is amortized each period will depend on the ratio of Current Revenue to Ultimate Revenue for each film for such period. The Company makes certain estimates and judgments of Ultimate Revenue to be received for each film based on information received from its distributor and its knowledge of the industry. Ultimate Revenue does not include estimates of revenue that will be earned beyond ten years of a film’s initial theatrical release date.


Unamortized film production costs are evaluated for impairment when indicators of impairment are present on a film-by-film basis in accordance with the requirements of the ASC. If the fair value of a film is less than its unamortized film cost, the unamortized film costs will be written down to fair value determined using a discounted cash flow calculation.




29




Income Taxes


The Company accounts for income tax under the provisions of ASC 740, Income Taxes, which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of the events that have been included in the financial statements or tax returns. Deferred income taxes are recognized for all significant temporary differences between tax and financial statements bases of assets and liabilities. Valuation allowances are established against net deferred tax assets when it is more likely than not that some portion or all of the deferred tax assets will not be realized. There were no deferred tax assets or liabilities at June 30, 2013 and 2012.


Comprehensive Income


Comprehensive income consists of two components, net income and other comprehensive income (loss). Other comprehensive income refers to revenue, expenses, gains and losses that under generally accepted accounting principles are recorded as an element of stockholders’ equity but are excluded from net income. During the periods presented, other comprehensive income (loss) includes changes in cumulative translation adjustment from foreign currency translation.


Foreign Currency Translation


The Company uses United States dollars (“U.S. dollar” or “US$” or “$”) for financial reporting purposes. The subsidiaries within the Company maintain their books and records in Renminbi (“RMB”), the currency of China, the economic environment in which the Company’s primary subsidiaries conduct their operations. Transactions denominated in foreign currencies are translated into U.S. dollar at exchange rate in effect on the date of the transactions. Exchange gains or losses on transactions are included in earnings.


The financial statements of the Company are translated into United States dollars in accordance with U.S. GAAP, using year-end rates of exchange for assets and liabilities, and average rates of exchange for the period for revenues, costs, and expenses and historical rates for equity. Translation adjustments resulting from the process of translating the local currency financial statements into U.S. dollars are included in determining comprehensive income.


The exchange rates used for foreign currency translation were as follows (US$1 = RMB):


 

 

 

 

 

 

 

 

 

Period Covered

 

Balance Sheet

Date Rate

 

 

Average Rate

 

 

 

 

 

 

 

 

 

 

Year ended June 30, 2013

 

 

6.1732

 

 

 

6.2720

 

Year ended June 30, 2012

 

 

6.3089

 

 

 

6.3408

 


Earnings (Loss) Per Share


The Company calculates net income (loss) per share in accordance with ASC 260, Earnings Per Share. Basic earnings (loss) per share is computed by dividing net income (loss) by the weighted average number of shares of common stock outstanding during each period. Diluted earnings per share is computed by dividing net income by the weighted average number of shares of common stock, common stock equivalents and potentially dilutive securities outstanding during each period. As of June 30, 2013 and 2012, respectively, the Company had no common stock equivalents that could potentially dilute future earnings per share.


Recent Accounting Pronouncements


In July 2012, the Financial Accounting Standards Board issued ASU 2012-02, Intangibles—Goodwill and Other (Topic 350): Testing Indefinite-Lived Intangible Assets for Impairment, to simplify the manner in which entities test indefinite-lived intangible assets for impairment. The ASU permits an entity to first assess qualitative factors to determine whether events and circumstances indicate that it is more likely than not that the indefinite-lived intangible asset is impaired as a basis for determining whether it is necessary to perform a quantitative impairment



30




test. The ASU is effective for annual and interim impairment tests performed for fiscal years beginning after September 15, 2012, with early adoption permitted. The Company does not expect the adoption to have a material impact on its consolidated financial statements.


In August 2012, the FASB issued Accounting Standards Update (“ASU”) 2012-03, “Technical Amendments and Corrections to SEC Sections: Amendments to SEC Paragraphs Pursuant to SEC Staff Accounting Bulletin (SAB) No. 114, Technical Amendments Pursuant to SEC Release No. 33-9250, and Corrections Related to FASB Accounting Standards Update 2010-22 (SEC Update)” in Accounting Standards Update No. 2012-03. This update amends various SEC paragraphs pursuant to the issuance of SAB No. 114. The Company does not expect the adoption to have a material impact on its consolidated financial statements.


In October 2012, the FASB issued ASU 2012-04, “Technical Corrections and Improvements” in Accounting Standards Update No. 2012-04 ("ASU 2012-04"). The amendments in this update cover a wide range of topics in the Accounting Standards Codification. These amendments include technical corrections and improvements to the Accounting Standards Codification and conforming amendments related to fair value measurements. The amendments in this update will be effective for fiscal periods beginning after December 15, 2012. The Company does not expect the adoption to have a material impact on its consolidated financial statements.

 

In February 2013, the FASB issued ASU 2013-02, “Reporting of Amounts Reclassified out of Accumulated Other Comprehensive Income” (“ASU 2013-02”). Under ASU 2013-02, an entity is required to provide information about the amounts reclassified out of accumulated other comprehensive income by component. In addition, an entity is required to present, either on the face of the financial statements or in the notes, significant amounts reclassified out of accumulated other comprehensive income by the respective line items of net income, but only if the amount reclassified is required to be reclassified in its entirety in the same reporting period. For amounts that are not required to be reclassified in their entirety to net income, an entity is required to cross-reference to other disclosures that provide additional details about those amounts. ASU 2013-02 does not change the current requirements for reporting net income or other comprehensive income in the financial statements. The amendments in this update will be effective for fiscal periods beginning after December 15, 2012. The Company does not expect the adoption to have a material impact on its consolidated financial statements.


NOTE 3. Accounts Receivable


 

 

June 30,

 

 

 

2013

 

 

2012

 

Accounts receivable

 

 

$2,072,474

 

 

 

$1,310,102

 

Bad debt allowance                                                                                   

 

 

$39,493

 

 

 

     $38,644

 

Accounts receivable, net

 

 

$2,032,981

 

 

 

$1,271,458

 

 

 

June 30,

 

 

 

2013

 

 

2012

 

Notes receivable

 

 

$1,643,637

 

 

 

$1,616,764

 


The notes receivable balances as of June 30, 2013 and 2012 include two one-year term notes to third parties with interest rate of 3% and one note to third party with no interest specified. Interest incomes including imputed interest income for the years ended June 30, 2013 and 2012 were $43,885 and $94,280 for the notes above (also see Note 11 related to imputed interest income).



NOTE 5. Fixed Assets



31





Fixed assets consist of the following:


 

 

June 30,

 

Asset Category

 

2013

 

 

2012

 

Electronic Equipment

 

 

$176,051

 

 

 

$163,705

 

Communication Equipment

 

 

693

 

 

 

678

 

Machinery Equipment

 

 

94,593

 

 

 

92,558

 

Automobiles

 

 

51,699

 

 

 

50,587

 

Office Furniture

 

 

     2,414

 

 

 

    2,362

 

 

 

 

325,450

 

 

 

309,890

 

Less: Accumulated depreciation

 

 

(290,128

)

 

 

(277,729

)

Fixed assets, net

 

 

$ 35,322

 

 

 

$ 32,161

 


Depreciation expense for the years ended June 30, 2013 and 2012 was $6,195 and $17,970, respectively.


NOTE 6. Film Costs


Film costs consist of the following:


 

 

June 30,

 

 

2013

 

 

2012

 

Completed and not released:

 

 

 

 

 

 

TV Series

 

 

$3,401,802

 

 

 

$855,934

 

In development-TV Series

 

 

       40,724

 

 

 

   30,116

 

Film costs

 

 

$3,442,526

 

 

 

$886,050

 


Amortization of film cost was included in cost of revenues. See Note 8 for details.


NOTE 7. Related Party Transactions


Mr. Dean Li, President and Shareholder of Xi’An TV, had advanced $136,790 and $34,198 to the Company at June 30, 2013 and 2012, respectively. The 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 reference to one-year loan.


The Company also leased an office space from a former shareholder with a monthly rent of approximately $1,063 with lease termination date of May 7, 2014.


NOTE 8. Revenues and Cost of Revenues


The Company’s revenues by film and TV series are as follows:

 

                

                                            

Years Ended June 30,

 

 

     2013

 

 

      2012

 

Lady Shexiang TV Series

 

 

$               -   

 

 

 

$ 1,045,609

 

Xia Hai TV Series

 

 

-

 

 

 

214,484

 

Huang Tu Nv Nv TV Series

 

 

573,980

 

 

 

-

 

Xiao Lao Xiang Jin Cheng TV Series

 

 

573,980

 

 

 

-

 

Guo Men Ying Xiong TV Series

 

 

516,582

 

 

 

-

 

Advertising Revenue

 

 

        8,114

 

 

 

      20,381

 

Total Revenues

 

 

$1,672,656

 

 

 

$ 1,280,474

 

 

 

 

 

 

 

 

 

 

 

 


The Company’s cost of revenues by film and TV series are as follows:



 

 

Years Ended June 30,

 

 

 

     2013

 

 

        2012

 

Lady Shexiang TV Series

 

 

$               -

 

 

 

$  804,315

 

Xia Hai TV Series

 

 

-

 

 

 

157,709

 

Huang Tu Nv Nv TV Series

 

 

478,316

 

 

 

-

 

Xiao Lao Xiang Jin Cheng TV Series

 

 

478,316

 

 

 

-

 

Guo Men Ying Xiong TV Series

 

 

382,654

 

 

 

-

 

Total Cost of Revenues

 

 

$1,339,286

 

 

 

$  962,024

 


NOTE 9. 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 had contributed RMB 21,833,500 (approximately $3,377,642) to Nantong for Haimen Project. However, the application for license of Haimen Project was declined by the State Department of Education. On June 8, 2011, the Board of the Company approved to re-invest RMB 20,000,000 (approximately $3,170,125) 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 Nantong and Shengshi Ronghua. All of the parties agreed that Nantong will transfer RMB 20,000,000 (approximately $3,170,125) 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 (approximately $3,170,125) from Nantong. As of December 31, 2011, the Company had 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 the 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. In March 2012, the Company decided to withdraw from Shiqiang project due to low profitability and the Company received the full refund of RMB 6,000,000 (approximately $934,200) in April 2012.


During the year ended June 30, 2012, due to various difficulties encountered during the operation of the taxi advertising project with Shengshi Ronghua, the Company considered the project unfeasible and decided to withdraw from the project. On July 20, 2012, the Company and Shengshi Ronghua entered into a mutual agreement to terminate the original agreement signed on June 21, 2011. Shengshi Ronghua refunded RMB 2,000,000 (approximately $317,012) to the Company in July 2012 and refunded the remaining RMB 18,000,000 (approximately $2,853,113) to the Company in December 2012.


NOTE 10. Income Taxes




33




The Company accounts for income taxes pursuant to ASC 740, Income Taxes, which requires recognition of deferred income tax liabilities and assets for the expected future tax consequences of events that have been recognized in the Company’s financial statements or tax returns.


Before December 31, 2012, Xi’An TV’s taxable income was assessed at 10% of its taxable revenue. Starting from January 1, 2013, the tax authority determined that Xi’An TV should be taxed at 25% of its taxable income until further notice. The Company’s income taxes for the years ended June 30, 2013 and 2012 were $8,246 and $7,961, respectively.


The following table reconciles the Company’s statutory tax rates to its effective tax rate as a percentage of income before income taxes:


 

 

 

 

 

 

 

 

 

For The Years Ended June 30

 

 

2013

 

2012

U.S. statutory rate

 

 

34.0%

 

 

34.0%

Foreign income not recognized in the U.S.

 

 

-34.0%

 

 

-34.0%

PRC preferential enterprise income tax rate

 

 

25.0%

 

 

25.0%

Permanent difference

 

 

-11.5%

 

 

-12.5%

Effective tax rate

 

 

13.5%

 

 

12.5%


The tax authority of the PRC conducts periodic and ad hoc tax filing reviews on business enterprises operating in the PRC after those enterprises have completed their relevant tax filings, hence the Company’s tax filings may not be finalized. It is therefore uncertain as to whether the PRC tax authority may take different views about the Company’s tax filings which may lead to additional tax liabilities.


The Company has no United States corporate income tax liability as of June 30, 2013 and 2012.


NOTE 11. Commitments and Contingencies


The Company has entered into one office lease agreement with a former shareholder with monthly rent of RMB 6,667 (approximately $1,063) and lease termination date of May 7, 2014.


During the period of April 1, 2010 to November 19, 2011, the Company occupied an office space belonging to Shaan’Xi Railway Transportation Trade Company (SXRT), a company owned by a business friend of Dean Li, the President and Shareholder of Xi’An TV, for free. In return, the Company issued a note of $1,423,240 to SXRT with an interest rate of 3%. Although the Company did not make the monthly rent payment to SXRT, the Company recorded imputed rent expense and imputed interest income of $47,992 in fiscal year 2012 and $24,679 in fiscal year 2011 based on interest rate for one-year loan published by Xi’An Commercial Bank since the interest income surrendered is determinable and measureable.


In November 2011, the Company entered into a lease agreement to lease its main office for a monthly rent of RMB11,167 (approximately $1,781). The lease had a term of one year and expired on December 31, 2012. On January 1, 2013, the Company renewed the lease for another year with the rent remaining unchanged.


The Company’s commitments for minimum lease payments under the non-cancelable operating leases are as follows:


 

 

 

 

For The Year Ended June 30,

 

 

2014

 

$

21,897

 

 

 

 

Total:

 

$

21,897


Rent expense for the years ended June 30, 2013 and 2012 was $41,379 and $80,339, respectively.




34




Item 9.  Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

 

We have not had any disagreements with, or changes in, our independent accounting firm during the year ended June 30, 2013.

 

Item 9A.  Controls and Procedures

 

We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our reports filed under the Securities Exchange Act of 1934, as amended, 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 president and chief executive officer (who is acting as our principal executive officer) and our chief financial officer (who is acting as our principal financial officer and principle accounting officer) to allow for timely decisions regarding required disclosure.

 

As of June 30, 2013, the year end covered by this report, we carried out an evaluation, under the supervision and with the participation of our president and chief executive officer (who is acting as our principal executive officer) and our chief financial officer (who is acting as our principal financial officer and principle accounting officer), of the effectiveness of the design and operation of our disclosure controls and procedures. Based on the foregoing, our president and chief executive officer (who is acting as our principal executive officer) and our chief financial officer (who is acting as our principal financial officer and principle accounting officer) concluded that our disclosure controls and procedures were effective as of the end of the period covered by this annual report.

 

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 annual period covered by this report, 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.


This annual report does not include an attestation report of the Company’s registered public accounting firm regarding internal control over financial reporting.  Management’s report was not subject to attestation by the Company’s registered public accounting firm pursuant to the rules of the SEC that permit the Company to provide only management’s report in this annual report.

 

Changes in Internal Control Over Financial Reporting

 

During the annual period covered by this report, 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

 




35




(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.

 

Our senior executives and our Board of Directors are committed to achieving and maintaining a strong control environment, high ethical standards, and financial reporting integrity. This commitment has been and will continue to be communicated to and reinforced with our employees and to external stakeholders.

 

In addition, under the direction of the Board of Directors, management will continue to review and make changes to the overall design of our internal control environment, as well as policies and procedures to improve the overall effectiveness of internal control over financial reporting and our disclosure controls and procedures.

 

Except for the changes discussed above, there was no change in our internal control over financial reporting that occurred during the year ended June 30, 2013 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

 

Item 9B.  Other Information

 

None.

 

 

 

 

PART III

 

Item 10.  Directors, Executive Officers and Corporate Governance


Directors and Officers


Our Bylaws state that our authorized number of directors shall be not less than one and shall be set by resolution of our Board of Directors.  Our Board of Directors has fixed the number of directors at three, and we currently have three directors.


Our current directors and officers are as follows:


Name 

Age

Position 

Dean Li

50

President, Chief Executive Officer, Secretary and Director

Shuncheng Ma

51

Chief Financial Officer, Principal Accounting Officer and Treasurer

Bin Li

45

Director

Shengli Liu

42

Director


Our Directors will serve in that capacity until our next annual shareholder meeting or until their successors are elected and qualified.  Officers hold their positions at the will of our Board of Directors.  There are no arrangements, agreements or understandings between non-management security holders and management under which non-management security holders may directly or indirectly participate in or influence the management of our affairs.


Dean Li, President, Chief Executive Officer, Secretary and Director


Dean Li has served as our President, Chief Executive Officer, Secretary and Director since July 7, 2009.  Mr. Li has significant experience in China’s capital markets and corporate management.  He received his Bachelor’s degree in radio engineering technology from the Chinese People’s Liberation Military Academy in 1985, and was awarded the military rank of Technical Captain in 1987.  After ending his military career in 1993, Mr. Li was appointed as the General Manager of the Shanghai Branch Company of Shaan’Xi Province International Trust Investment Holding Co., where he remained until 1998.


From 1998 to 2001, Mr. Li worked as the Assistant to the General Manager of Wuhan International Financial Leasing Co., and he also held the position of General Manager of Wuhan Zhongnan Securities Corp.  From 2001 to



36




2005, Mr. Li served as the Northern Area General Manager of Wuhan Securities Co. Ltd.  From 2000 to 2001, he also served as a Director in a Chinese publicly listed company, Dalian Thermoelectricity Holding Ltd.  


Mr. Li earned a Master’s degree of enterprise culture from the Central China Normal University in 2004.  Since 2005 he has served on the board of directors of Xi’An TVMEDIA Co., Ltd. and Shaan’Xi Western Capital Investment Management Co., Ltd.


Shuncheng Ma, Financial Officer, Principal Accounting Officer and Treasurer


Shuncheng Ma received the bachelor degree in Northwest University in mathematics department in 1986. He received EMBA in Northwest University Economic Management School in 2005. He worked as general manager in Liubao Industrial Co. Ltd. from 1995. Mr. Ma worked as general manager in Shaanxi Hongbao Green Engineering Co. Ltd.


Bin Li, Director


Bin Li has served as our Director since July 7, 2009.  Mr. Li has 18 years of experience in the movie and TV industry in China.  In 2006, Mr. Li invested in Xi’An TVMEDIA Co., Ltd. and became one of its major shareholders.  From 1987 to 1990, he served in the 77th unit of the Chinese People’s Liberation Army, and from 1991 to the present he has worked in production for Xi’An Movie Studio, one of the most famous movie studios in China.


Shengli Liu, Director


Shengli Liu has served as our Director since July 7, 2009.  Mr. Liu has over 10 years of experience in business management.  He was one of the founders of Shaan’Xi Li Bao Ecological Technology Stock Co., Ltd. and has served as the company’s as Chairman since 2002.


In 1998, Mr. Liu founded Shaan’Xi Heng Li Da Real Estate Co. Ltd., where he is currently engaged in various aspects of the real estate business and serves as Chairman and General Manager. In 2001, Mr. Liu founded Shaan’Xi Heng Li Da Commercial Co., Ltd., a company of which he is also currently the Chairman and General Manager.  From 2000 to 2002, Mr. Liu was in charge of the reorganization of the Zhong Shan Men Printing Factory in Xi’An, where he facilitated an asset acquisition valued at approximately $1,250,000.


 Other Directorships


None of our directors hold any other directorships in any company with a class of securities registered pursuant to section 12 of the Exchange Act or subject to the requirements of section 15(d) of such Act or any company registered as an investment company under the Investment Company Act of 1940.

 

Family Relationships

 

There are no family relationships among our directors or officers.


Board of Directors and Director Nominees


Since our Board of Directors does not include a majority of independent directors, the decisions of the Board regarding director nominees are made by persons who have an interest in the outcome of the determination.  The Board will consider candidates for directors proposed by security holders, although no formal procedures for submitting candidates have been adopted.  Unless otherwise determined, at any time not less than 90 days prior to the next annual Board meeting at which the slate of director nominees is adopted, the Board will accept written submissions from proposed nominees that include the name, address and telephone number of the proposed nominee; a brief statement of the nominee’s qualifications to serve as a director; and a statement as to why the security holder submitting the proposed nominee believes that the nomination would be in the best interests of our security holders.  If the proposed nominee is not the same person as the security holder submitting the name of the nominee, a letter from the nominee agreeing to the submission of his or her name for consideration should be provided at the time of submission.  The letter should be accompanied by a résumé supporting the nominee's qualifications to serve on the Board, as well as a list of references.


The Board identifies director nominees through a combination of referrals from different people, including management, existing Board members and security holders.  Once a candidate has been identified, the Board



37




reviews the individual's experience and background and may discuss the proposed nominee with the source of the recommendation.  If the Board believes it to be appropriate, Board members may meet with the proposed nominee before making a final determination whether to include the proposed nominee as a member of the slate of director nominees submitted to security holders for election to the Board.


Some of the factors which the Board considers when evaluating proposed nominees include their knowledge of and experience in business matters, finance, capital markets and mergers and acquisitions.  The Board may request additional information from each candidate prior to reaching a determination.  The Board is under no obligation to formally respond to all recommendations, although as a matter of practice, it will endeavor to do so.


Conflicts of Interest


Our directors are not obligated to commit their full time and attention to our business and, accordingly, they may encounter a conflict of interest in allocating their time between our operations and those of other businesses.  In the course of their other business activities, they may become aware of investment and business opportunities which may be appropriate for presentation to us as well as other entities to which they owe a fiduciary duty.  As a result, they may have conflicts of interest in determining to which entity a particular business opportunity should be presented.  They may also in the future become affiliated with entities, engaged in business activities similar to those we intend to conduct.


In general, officers and directors of a corporation are required to present business opportunities to a corporation if:


  

the corporation could financially undertake the opportunity;


  

the opportunity is within the corporations line of business; and


  

it would be unfair to the corporation and its stockholders not to bring the opportunity to the attention of the corporation.


We plan to adopt a code of ethics that obligates our directors, officers and employees to disclose potential conflicts of interest and prohibits those persons from engaging in such transactions without our consent.


 

Significant Employees


Other than as described above, we do not expect any other individuals to make a significant contribution to our business.

 

Involvement in Certain Legal Proceedings

 

To the best of our knowledge, none of our directors or executive officers has, during the past ten years:

 

  

been convicted in a criminal proceeding or been subject to a pending criminal proceeding (excluding traffic violations and other minor offences);

 

  

had any bankruptcy petition filed by or against the business or property of the person, or of any partnership, corporation or business association of which he was a general partner or executive officer, either at the time of the bankruptcy filing or within two years prior to that time;

 

  

been subject to any order, judgment, or decree, not subsequently reversed, suspended or vacated, of any court of competent jurisdiction or federal or state authority, permanently or temporarily enjoining, barring, suspending or otherwise limiting, his involvement in any type of business, securities, futures, commodities, investment, banking, savings and loan, or insurance activities, or to be associated with persons engaged in any such activity;

 

  

been found by a court of competent jurisdiction in a civil action or by the SEC or the Commodity Futures Trading Commission to have violated a federal or state securities or commodities law, and the judgment has not been reversed, suspended, or vacated;

 




38







  

been the subject of, or a party to, any federal or state judicial or administrative order, judgment, decree, or finding, not subsequently reversed, suspended or vacated (not including any settlement of a civil proceeding among private litigants), relating to an alleged violation of any federal or state securities or commodities law or regulation, any law or regulation respecting financial institutions or insurance companies including, but not limited to, a temporary or permanent injunction, order of disgorgement or restitution, civil money penalty or temporary or permanent cease-and-desist order, or removal or prohibition order, or any law or regulation prohibiting mail or wire fraud or fraud in connection with any business entity; or

 

  

been the subject of, or a party to, any sanction or order, not subsequently reversed, suspended or vacated, of any self-regulatory organization (as defined in Section 3(a)(26) of the Exchange Act (15 U.S.C. 78c(a)(26))), any registered entity (as defined in Section 1(a)(29) of the Commodity Exchange Act (7 U.S.C. 1(a)(29))), or any equivalent exchange, association, entity or organization that has disciplinary authority over its members or persons associated with a member.

 

Except as set forth in our discussion below in “Certain Relationships and Related Transactions, and Director Independence – Transactions with Related Persons,” none of our directors, director nominees or executive officers has been involved in any transactions with us or any of our directors, executive officers, affiliates or associates which are required to be disclosed pursuant to the rules and regulations of the SEC.

 

Audit Committee


We do not currently have an audit committee or a committee performing similar functions. The Board of Directors as a whole participates in the review of financial statements and disclosure.


Code of Ethics


We have not adopted a code of ethics that applies to our officers, directors and employees.  When we do adopt a code of ethics, we will disclose it in a Current Report on Form 8-K.

 

Section 16(a) Beneficial Ownership Compliance

 

Section 16(a) of the Securities Exchange Act requires our executive officers and directors, and persons who own more than 10% of our common stock, to file reports regarding ownership of, and transactions in, our securities with the Securities and Exchange Commission and to provide us with copies of those filings.  Based solely on our review of the copies of such forms received by us, or written representations from certain reporting persons, we believe that during the year ended June 30, 2013, all filing requirements applicable to our officers, directors and greater than 10% percent beneficial owners were complied with, though some were filed late.

  

 

Item 11.  Executive Compensation


The following summary compensation table sets forth the total annual compensation paid or accrued by us to or for the account of our principal executive officer during the last completed fiscal year and each other executive officer whose total compensation exceeded $100,000 in either of the last two fiscal years:


SUMMARY COMPENSATION TABLE (1)

Name and Principal Position

Year

Salary

($)

Bonus

($)

Total

($)

Dean Li, President, CEO, Secretary and Director

2013

2012

$7,079

$7,050

None

None

$7,079

$7,050

Shuncheng Ma, Chief Financial Officer, Treasurer

2013

2012

$3,312

$3,312

None

None

$3,312

$3,312

 

(1) 

We have omitted certain columns in the summary compensation table pursuant to Item 402(a)(5) of Regulation S-K as no compensation was awarded to, earned by, or paid to any of the executive officers or directors required to be reported in that table or column in any fiscal year covered by that table.

 

Compensation Plans

 




39




As of June 30, 2013, we did not have any compensation plans in place.  However, we may issue stock options to our directors, officers and employees in the future, upon adoption of a stock option plan.

 

Management Agreements


We have not yet entered into any consulting or management agreements with any of our current executive officers or directors.


Stock Options/SAR Grants

 

During the period from inception to June 30, 2013, we did not grant any stock options to our executive officers.

 

Aggregated Option Exercises in Last Fiscal Year and Fiscal Year-End Values

 

There were no options exercised during our fiscal years ended June 30, 2013 and June 30, 2012 by any officer or director of our company.

 

Outstanding Equity Awards at Fiscal Year End

 

No equity awards were outstanding as of the year ended June 30, 2013.

 

Compensation of Directors


Our directors did not receive any compensation for their services as directors from our inception to June 30, 2013.  We have no formal plan for compensating our directors for their services in the future in their capacity as directors, although such directors are expected in the future to receive options to purchase shares of our common stock as awarded by our Board of Directors or by any compensation committee that may be established.


Pension, Retirement or Similar Benefit Plans


There are no arrangements or plans in which we provide pension, retirement or similar benefits to our directors or executive officers.  We have no material bonus or profit sharing plans pursuant to which cash or non-cash compensation is or may be paid to our directors or executive officers, except that stock options may be granted at the discretion of the Board of Directors or a committee thereof.


Compensation Committee


We do not currently have a compensation committee of the Board of Directors or a committee performing similar functions.  The Board of Directors as a whole participates in the consideration of executive officer and director compensation.

 

 

Item 12.  Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters


The following table sets forth the ownership, as of September 18, 2013, of our common stock by each of our directors, by all of our executive officers and directors as a group and by each person known to us who is the beneficial owner of more than 5% of any class of our securities.  As of September 18, 2013 there were 39,750,000 shares of our common stock issued and outstanding.  All persons named have sole or shared voting and investment control with respect to the shares, except as otherwise noted.  The number of shares described below includes shares which the beneficial owner described has the right to acquire within 60 days of the date of this registration statement.


Title of Class

Name and Address of Beneficial Owner

Amount and Nature of 

Beneficial Ownership

Percent of Class

(5)

Common Stock

Bin Li (1)

12/F, Block D, Chang An Guo Ji

No. 88 Nan Guan Zheng Street

Beilin District, Xi’An

Shaan’Xi Province, China

2,007,000

5.05%

Common Stock

Dean Li (2)

Room #10128, Taibai South Road #269-5-1,Yanta District, Xi'An

Shaan'Xi Province, China

0

0

Common Stock

Shengli Liu (3)

4/F, Building A

No. 12 Xiangzimiao Street

Nanmenli District, Xi'An

Shaan’Xi Province, China

0

0

Common Stock

Shuncheng Ma (4)

12/F, Block D, Chang An Guo Ji

No. 88 Nan Guan Zheng Street

Beilin District, Xi’An

Shaan’Xi Province, China

0

0

 

All Officers and Directors as a Group 

2,007,000

5.05%

Common Stock

Baoxing Li

Room 19, Building 129, Tuan Jie Nan Lu Dong Fang, Lian Hu District, Xi’An

Shaan’Xi Province, China

3,000,000

7.55%

Common Stock

Jing Mu

Room 11, Building 1

No. 62 Daxing Road

Lianhu District, Xi’An

Shaan’Xi Province, China

7,509,000

18.89%

Common Stock

Hao Sun

No. 201 Shangqin Road

Xincheng District, Xi’An

Shaan’Xi Province, China

10,000,000

25.16%

Common Stock

Wenxin Nie

Room 2, 1/F Block 1, Building 4,

No. 12 Xiangzimiao St., Beilin District,

Xi’An, Shaan’Xi Province, China

5,000,000

12.57%

 

All Others as a Group 

25,509,000

64.17%

 

 

 

 

(1)

Bin Li is our Director.

(2)

Dean Li is our President, Chief Executive Officer, Secretary and Director.


(3)

Shengli Liu is our Director.

(4)

Shuncheng Ma is our Chief Financial Officer, Principal Accounting Officer and Treasurer.


(5)

Based on 39,750,000 issued and outstanding shares of our common stock as of September 18, 2013

 

Changes in Control

 

We are unaware of any contract or other arrangement or provisions of our Articles or Bylaws the operation of which may at a subsequent date result in a change of control of our company.  There are not any provisions in our Articles or Bylaws, the operation of which would delay, defer, or prevent a change in control of our company.

 

Item 13.  Certain Relationships and Related Transactions, and Director Independence


Mr. Dean Li, President and Shareholder of Xi’An TV, had advanced $100,237 and $29,300 to the Company during the year ended June 30, 2013 and 2012. For the years ended June 30, 2013 and 2012, the shareholder loan had an outstanding balance of $136,790 and $34,198, respectively.





41




There have been no other transactions since the beginning of our last fiscal year or any currently proposed transactions in which we are, or plan to be, a participant and the amount involved exceeds $120,000 or one percent of the average of our total assets at year end for the last two completed fiscal years, and in which any related person had or will have a direct or indirect material interest.

 

The promoters of our company are our directors and officers.

 

Director Independence


Our securities are quoted on the OTC Bulletin Board which does not have any director independence requirements.  At the moment, only Shengli Liu could be considered an independent director under most definitions of “independence”.  Once we engage further directors and officers, we plan to develop a definition of independence and scrutinize our Board of Directors with regard to this definition.

 

Item 14.  Principal Accountants Fees and Services

 

The aggregate fees billed for the most recently completed fiscal year ended June 30, 2013 and for fiscal year ended June 30, 2012 for professional services rendered by the principal accountant for the audit of our annual financial statements and review of the financial statements included in our quarterly reports on Form 10-Q and services that are normally provided by the accountant in connection with statutory and regulatory filings or engagements for these fiscal periods were as follows:


 

 

Year Ended June 30

 

 

 

2013

 

 

2012

 

Audit Fees

 

 

$ 68,000

 

 

 

$ 68,000

 

Audit Related Fees

 

 

-

 

 

 

-

 

Tax Fees

 

 

-

 

 

 

-

 

All Other Fees

 

 

-

 

 

 

-

 

Total

 

 

$ 68,000

 

 

 

$ 68,000

 

 

 

Our board of directors pre-approves all services provided by our independent auditors. All of the above services and fees were reviewed and approved by the board of directors either before or after the respective services were rendered.

 

Our board of directors has considered the nature and amount of fees billed by our independent auditors and believes that the provision of services for activities unrelated to the audit is compatible with maintaining our independent auditors’ independence.

 

 

PART IV

 

Item 15.  Exhibits, Financial Statement Schedules

 

Exhibits required by Item 601 of Regulation S-K


Exhibit Number

Description

2.1

Share Exchange Agreement with Vallant Pictures Entertainment dated September 16, 2009 (incorporated by reference from our Current Report on Form 8-K filed on September 18, 2009)

10.1

Technical Consultancy and Services Agreement between Vallant Pictures Entertainment Co., Ltd. and Xi’An TV Media Inc. dated September 17, 2010(incorporated by reference from our Amended Current Report on Form 8-K/A filed on September 27, 2011).

10.2

Business Operating Agreement between Vallant Pictures Entertainment Co., Ltd., Xi’An TV Media Ltd. and the Shareholders of 100% of Xi’An TV Media Inc. dated September 17, 2010 (incorporated by reference from our Current Report on Form 8-K filed on September 22, 2010).

10.3

Equity Pledge Agreement between Vallant Pictures Entertainment Co., Ltd. and each of the Shareholders of Xi’An TV Media Inc. dated September 17, 2010 (incorporated by reference from our Current Report on Form 8-K filed on September 22, 2010).

10.4

Exclusive Option Agreement between Vallant Pictures Entertainment Co., Ltd., Xi’An TV Media Inc. and the Shareholders of 100% of Xi’An TV Media Inc. dated September 17, 2010 (incorporated by reference from our Current Report on Form 8-K filed on September 22, 2010).

31.1*

Section 302 Certification of the Sarbanes-Oxley Act of 2002.

31.2*

Section 302 Certification of the Sarbanes-Oxley Act of 2002.

32.1*

Section 906 Certification of the Sarbanes-Oxley Act of 2002

32.2*

Section 906 Certification of the Sarbanes-Oxley Act of 2002

 

*Filed herewith.

 





43





SIGNATURES

 

In accordance with Section 13 or 15(d) of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

 

CHINA MEDIA INC.

 

 

 

 

Date:  September 26, 2013

/s/Shuncheng Ma

 

Shuncheng Ma

 

Chief Financial Officer and Director

(Principal Financial Officer and Principal Accounting Officer)

 






44



EX-31 2 exhibit312.htm EXHIBIT 31 Converted by EDGARwiz

Exhibit 31.2

 

CERTIFICATION PURSUANT TO 18 U.S.C. ss 1350, AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

 

I, Shuncheng Ma, certify that:

 

1. 

I have reviewed this annual report on Form 10-K of China Media Inc.;

 

2.

Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

 

3.

Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

 

4.

The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

 

 

(a)

Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

 

 

(b)

Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

 

 

(c)

Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

 

 

(d)

Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

 

5.

The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):

 

 

(a)

All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

 

 

(b)

Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

 

Date:  September 26, 2013

 

/s/ Shuncheng Ma                                                                         

Shuncheng Ma

 

Chief Financial Officer

 

(Principal Financial Officer and Principal Accounting Officer)




EX-31 3 exhibit311.htm EXHIBIT 31 Converted by EDGARwiz

Exhibit 31.1

 

CERTIFICATION PURSUANT TO 18 U.S.C. ss 1350, AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

 

I, Dean Li, certify that:

 

1. 

I have reviewed this annual report on Form 10-K of China Media Inc.;

 

2.

Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

 

3.

Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

 

4.

The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

 

 

(a)

Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

 

 

(b)

Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

 

 

(c)

Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

 

 

(d)

Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

 

5.

The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):

 

 

(a)

All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

 

 

(b)

Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

 

Date:  September 26, 2013

 

/s/ Dean Li                                                                          

Dean Li

 

President, Chief Executive Officer and Director

 

(Principal Executive Officer)




EX-32 4 exhibit321.htm EXHIBIT 32 Converted by EDGARwiz


EXHIBIT 32.1

 

CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002


I, Dean Li, hereby certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:


(1)

the Annual Report on Form 10-K of China Media Inc. for the year ended June 30, 2013 (the "Report") fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and


(2)

the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of China Media Inc.


Dated: September 26, 2013

 

 

/s/ Dean Li

 

Dean Li

 

Chief Executive Officer

 

(Principal Executive Officer)

 

A signed original of this written statement required by Section 906, or other document authenticating, acknowledging, or otherwise adopting the signature that appears in typed form within the electronic version of this written statement required by Section 906, has been provided to China Media Inc. and will be retained by China Media Inc. and furnished to the Securities and Exchange Commission or its staff upon request.




EX-32 5 exhibit322.htm EXHIBIT 32 Converted by EDGARwiz

EXHIBIT 32.2

 

CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002


I, Shuncheng Ma, hereby certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:


(1)

the Annual Report on Form 10-K of China Media Inc. for the year ended June 30, 2013 (the "Report") fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and


(2)

the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of China Media Inc.


Dated: September 26, 2013

 

 

/s/Shuncheng Ma

 

Shuncheng Ma

 

Chief Financial Officer

 

(Principal Financial Officer and Principal Accounting Officer)

 

A signed original of this written statement required by Section 906, or other document authenticating, acknowledging, or otherwise adopting the signature that appears in typed form within the electronic version of this written statement required by Section 906, has been provided to China Media Inc. and will be retained by China Media Inc. and furnished to the Securities and Exchange Commission or its staff upon request.




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NOTE 11. Commitments and Contingencies
12 Months Ended
Jun. 30, 2013
Commitments and Contingencies Disclosure [Abstract]  
NOTE 11. Commitments and Contingencies

NOTE 11. Commitments and Contingencies

 

The Company has entered into one office lease agreement with a former shareholder with monthly rent of RMB 6,667 (approximately $1,063) and lease termination date of May 7, 2014.

 

During the period of April 1, 2010 to November 19, 2011, the Company occupied an office space belonging to Shaan’Xi Railway Transportation Trade Company (SXRT), a company owned by a business friend of Dean Li, the President and Shareholder of Xi’An TV, for free. In return, the Company issued a note of $1,423,240 to SXRT with an interest rate of 3%. Although the Company did not make the monthly rent payment to SXRT, the Company recorded imputed rent expense and imputed interest income of $47,992 in fiscal year 2012 and $24,679 in fiscal year 2011 based on interest rate for one-year loan published by Xi’An Commercial Bank since the interest income surrendered is determinable and measureable.

 

In November 2011, the Company entered into a lease agreement to lease its main office for a monthly rent of RMB11,167 (approximately $1,781). The lease had a term of one year and expired on December 31, 2012. On January 1, 2013, the Company renewed the lease for another year with the rent remaining unchanged.

 

The Company’s commitments for minimum lease payments under the non-cancelable operating leases are as follows:

 

    
For The Year Ended June 30,   
2014  $21,897 
      
Total:  $21,897 

 

Rent expense for the years ended June 30, 2013 and 2012 was $41,379 and $80,339, respectively.

XML 18 R4.htm IDEA: XBRL DOCUMENT v2.4.0.8
Consolidated Statements of Operations and Comprehensive Income (USD $)
12 Months Ended
Jun. 30, 2013
Jun. 30, 2012
Income Statement [Abstract]    
Revenues $ 1,672,656 $ 1,280,474
Cost of revenues 1,339,286 962,024
Gross profit 333,370 318,450
Selling, general and administrative 292,998 312,509
Depreciation and amortization expense 18,950 30,587
Total operating expenses 311,948 343,096
Other income (expense)    
Interest income 44,366 95,095
Interest expense (4,615) (6,902)
Net income before income taxes 61,173 63,547
Income taxes 8,246 7,961
Net income 52,927 55,586
Foreign currency translation gain 151,415 163,208
Comprehensive income $ 204,342 $ 218,794
Net income per common share, basic and diluted $ 0.00 $ 0.00
Weighted average number of shares outstanding-basic and diluted 39,750,000 39,750,000
XML 19 R10.htm IDEA: XBRL DOCUMENT v2.4.0.8
NOTE 4. Notes Receivable
12 Months Ended
Jun. 30, 2013
Receivables [Abstract]  
NOTE 4. Notes Receivable

NOTE 4. Notes Receivable

 

   June 30,
   2013  2012
Notes receivable  $1,643,637   $1,616,764 
           

 

The notes receivable balances as of June 30, 2013 and 2012 include two one-year term notes to third parties with interest rate of 3% and one note to third party with no interest specified. Interest incomes including imputed interest income for the years ended June 30, 2013 and 2012 were $43,885 and $94,280 for the notes above (also see Note 11 related to imputed interest income).

.

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NOTE 8. Revenues and Cost of Revenues (Tables)
12 Months Ended
Jun. 30, 2013
Accounting Policies [Abstract]  
Revenues
   Years Ended June 30,
   2013  2012
Lady Shexiang TV Series  $—     $1,045,609 
Xia Hai TV Series   —      214,484 
Huang Tu Nv Nv TV Series   573,980    —   
Xiao Lao Xiang Jin Cheng TV Series   573,980    —   
Guo Men Ying Xiong TV Series   516,582    —   
Advertising Revenue   8,114    20,381 
Total Revenues  $1,672,656   $1,280,474 
Cost of Revenues
   Years Ended June 30,
   2013  2012
Lady Shexiang TV Series  $—     $804,315 
Xia Hai TV Series   —      157,709 
Huang Tu Nv Nv TV Series   478,316    —   
Xiao Lao Xiang Jin Cheng TV Series   478,316    —   
Guo Men Ying Xiong TV Series   382,654    —   
Total Cost of Revenues  $1,339,286   $962,024 
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NOTE 2. Summary of Significant Accounting Policies (Policies)
12 Months Ended
Jun. 30, 2013
Accounting Policies [Abstract]  
Principles of Consolidation

Principles of Consolidation

 

The consolidated financial statements include the accounts of the Company and Xi’An TV, which is a variable interest entity with the Company as the primary beneficiary. In accordance with United States generally accepted accounting principles (“U.S. GAAP”) regarding “Consolidation of Variable Interest Entities”, the Company identifies entities for which control is achieved through means other than through voting rights (a "variable interest entity" or "VIE") and determines when and which business enterprise, if any, should consolidate the VIE. The Company evaluated its participating interest in Xi’An TV and concluded it is the primary beneficiary of Xi’An TV, a variable interest entity. The Company consolidated Xi’An TV and all significant intercompany transactions and balances have been eliminated.

Use of Estimates

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.

Concentration of Credit Risk

Concentration of Credit Risk

 

The Company maintains cash balances at various financial institutions in the PRC which do not provide insurance for amounts on deposit. The Company has not experienced any losses in such accounts and believes it is not exposed to significant credit risk in this area.

 

The Company operates principally in the PRC and grants credit to its customers in this geographic region. Although the PRC is economically stable, it is always possible that unanticipated events in foreign countries could disrupt the Company’s operations.

Fair Value of Financial Instruments

Fair Value of Financial Instruments

 

The fair value of financial instruments, which consist of cash, accounts receivable, notes receivable, prepaid and other assets, accounts payable, accrued liabilities, due to related parties and short term debt, were estimated to approximate their carrying values due to the immediate or relatively short maturity of these instruments.

Cash and Cash Equivalents

Cash and Cash Equivalents

 

Cash and cash equivalents include cash on hand, demand deposits with banks and liquid investments with an original maturity of three months or less.

Accounts Receivable

Accounts Receivable

 

Accounts receivable are stated at the amount management expects to collect from outstanding balances. Management provides for probable uncollected amounts through a charge to earnings and a credit to an allowance for bad debts based on its assessment of the current status of individual accounts. Balances are still outstanding after management has used reasonable collection efforts are written off through a charge to the allowance for bad debts and a credit to accounts receivable.

Fixed Assets

Fixed Assets

 

Fixed assets are recorded at cost and depreciated using the straight-line method, with an estimated 5% salvage value of original cost, over the estimated useful lives of the assets as follows:

 

     
Asset Category   Estimated Useful Life
Electronic Equipment   5 years
Communication Equipment   3 years
Machinery Equipment   5 years
Automobiles   10 years
Office Furniture   5 years

 

Leasehold improvements are amortized using the straight-line method over the life of the asset, not to exceed the length of the lease. Repairs and maintenance costs are expensed as incurred.

Intangible Assets

Intangible Assets

 

The Company has the following intangible assets:

     
Intangible Asset Category   Estimated Useful Life
TV series Production Right   10 years

 

Intangible assets with finite lives are amortized over their estimated useful lives to a company and are reviewed for impairment in accordance with U.S. GAAP. Finite-lived intangible assets are amortized on a straight-line basis over the estimated useful economic lives of 10 years and the amortization expenses for the years ended June 30, 2013 and 2012 were $12,755 and $12,617, respectively.

Impairment of Long-Lived Assets

Impairment of Long-Lived Assets

 

The Company evaluates for impairment losses on long-lived assets used in operations when indicators of impairment are present and the undiscounted cash flows estimated to be generated by those assets are less than the assets’ carrying amount.

Revenue Recognition

Revenue Recognition

 

The Company’s revenue primarily comes from the distribution of film and TV series’ broadcasting rights and investment return from the collectively produced film and TV series.

 

In accordance with ASC 926, Entertainment - Films, revenue from sale or licensing arrangements of a film shall be recognized when the following five revenue criteria are met: persuasive evidence of an arrangement exists, the film is completed and delivery has occurred, the license period of the arrangement has begun, the selling price is fixed or determinable, and collectability is reasonably assured.

 

The Company also generates advertising revenues from the sale of advertising services. In the majority of advertising arrangements, the Company acts as an agent in the transaction and records advertising revenues on a net basis. Customer payments received in advance of the performance of services are recorded as customer deposits in the consolidated balance sheet, and are recognized as revenue when the advertising services are rendered.

Cost of Revenues

Cost of Revenues

 

Film Costs - The Company capitalizes film costs in accordance with ASC 926. Film costs are stated at the lower of cost, less accumulated amortization, or fair value. Production overhead, a component of film costs, includes allocable costs of individuals or departments with exclusive or significant responsibility for the production of films. Substantially all of the Company’s resources are dedicated to the production of its films. Capitalized production overhead does not include selling, general and administrative expenses. Interest expense on funds invested in production is capitalized into film costs until production is completed. In addition to the films being produced, costs of productions in development are capitalized as development film costs in accordance with the provisions of the ASC and are transferred to film production costs when a film is set for production. In the event a film is not set for production within three years from the time the first costs are capitalized or the film is abandoned, all such costs are generally expensed.

 

Film Cost Amortization - Once a film is released, film costs are amortized and participations and residual costs are accrued on an individual film basis in the proportion that the revenue during the period for each film (“Current Revenue”) bears to the estimated remaining total revenue to be received from all sources for each film (“Ultimate Revenue”) as of the beginning of the current fiscal period as required by the ASC. The amount of film costs that is amortized each period will depend on the ratio of Current Revenue to Ultimate Revenue for each film for such period. The Company makes certain estimates and judgments of Ultimate Revenue to be received for each film based on information received from its distributor and its knowledge of the industry. Ultimate Revenue does not include estimates of revenue that will be earned beyond ten years of a film’s initial theatrical release date.

 

Unamortized film production costs are evaluated for impairment when indicators of impairment are present on a film-by-film basis in accordance with the requirements of the ASC. If the fair value of a film is less than its unamortized film cost, the unamortized film costs will be written down to fair value determined using a discounted cash flow calculation.

Income Taxes

Income Taxes

 

The Company accounts for income tax under the provisions of ASC 740, Income Taxes, which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of the events that have been included in the financial statements or tax returns. Deferred income taxes are recognized for all significant temporary differences between tax and financial statements bases of assets and liabilities. Valuation allowances are established against net deferred tax assets when it is more likely than not that some portion or all of the deferred tax assets will not be realized. There were no deferred tax assets or liabilities at June 30, 2013 and 2012.

Foreign Currency Translation

Foreign Currency Translation

 

The Company uses United States dollars (“U.S. dollar” or “US$” or “$”) for financial reporting purposes. The subsidiaries within the Company maintain their books and records in Renminbi (“RMB”), the currency of China, the economic environment in which the Company’s primary subsidiaries conduct their operations. Transactions denominated in foreign currencies are translated into U.S. dollar at exchange rate in effect on the date of the transactions. Exchange gains or losses on transactions are included in earnings.

 

The financial statements of the Company are translated into United States dollars in accordance with U.S. GAAP, using year-end rates of exchange for assets and liabilities, and average rates of exchange for the period for revenues, costs, and expenses and historical rates for equity. Translation adjustments resulting from the process of translating the local currency financial statements into U.S. dollars are included in determining comprehensive income.

 

The exchange rates used for foreign currency translation were as follows (US$1 = RMB):

 

                 
Period Covered  

Balance Sheet

Date Rate

    Average Rate  
                 
Year ended June 30, 2013     6.1732       6.2720  
Year ended June 30, 2012     6.3089       6.3408  
Earnings (Loss) Per Share

Earnings (Loss) Per Share

 

The Company calculates net income (loss) per share in accordance with ASC 260, Earnings Per Share. Basic earnings (loss) per share is computed by dividing net income (loss) by the weighted average number of shares of common stock outstanding during each period. Diluted earnings per share is computed by dividing net income by the weighted average number of shares of common stock, common stock equivalents and potentially dilutive securities outstanding during each period. As of June 30, 2013 and 2012, respectively, the Company had no common stock equivalents that could potentially dilute future earnings per share.

Recent Accounting Pronouncements

Recent Accounting Pronouncements

 

In July 2012, the Financial Accounting Standards Board issued ASU 2012-02, Intangibles—Goodwill and Other (Topic 350): Testing Indefinite-Lived Intangible Assets for Impairment, to simplify the manner in which entities test indefinite-lived intangible assets for impairment. The ASU permits an entity to first assess qualitative factors to determine whether events and circumstances indicate that it is more likely than not that the indefinite-lived intangible asset is impaired as a basis for determining whether it is necessary to perform a quantitative impairment test. The ASU is effective for annual and interim impairment tests performed for fiscal years beginning after September 15, 2012, with early adoption permitted. The Company does not expect the adoption to have a material impact on its consolidated financial statements.

 

In August 2012, the FASB issued Accounting Standards Update (“ASU”) 2012-03, “Technical Amendments and Corrections to SEC Sections: Amendments to SEC Paragraphs Pursuant to SEC Staff Accounting Bulletin (SAB) No. 114, Technical Amendments Pursuant to SEC Release No. 33-9250, and Corrections Related to FASB Accounting Standards Update 2010-22 (SEC Update)” in Accounting Standards Update No. 2012-03. This update amends various SEC paragraphs pursuant to the issuance of SAB No. 114. The Company does not expect the adoption to have a material impact on its consolidated financial statements.

 

In October 2012, the FASB issued ASU 2012-04, “Technical Corrections and Improvements” in Accounting Standards Update No. 2012-04 ("ASU 2012-04"). The amendments in this update cover a wide range of topics in the Accounting Standards Codification. These amendments include technical corrections and improvements to the Accounting Standards Codification and conforming amendments related to fair value measurements. The amendments in this update will be effective for fiscal periods beginning after December 15, 2012. The Company does not expect the adoption to have a material impact on its consolidated financial statements.

 

In February 2013, the FASB issued ASU 2013-02, “Reporting of Amounts Reclassified out of Accumulated Other Comprehensive Income” (“ASU 2013-02”). Under ASU 2013-02, an entity is required to provide information about the amounts reclassified out of accumulated other comprehensive income by component. In addition, an entity is required to present, either on the face of the financial statements or in the notes, significant amounts reclassified out of accumulated other comprehensive income by the respective line items of net income, but only if the amount reclassified is required to be reclassified in its entirety in the same reporting period. For amounts that are not required to be reclassified in their entirety to net income, an entity is required to cross-reference to other disclosures that provide additional details about those amounts. ASU 2013-02 does not change the current requirements for reporting net income or other comprehensive income in the financial statements. The amendments in this update will be effective for fiscal periods beginning after December 15, 2012. The Company does not expect the adoption to have a material impact on its consolidated financial statements.

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Note 9. Long-term Investments (Details) (USD $)
3 Months Ended
Dec. 31, 2012
Sep. 30, 2012
Jun. 30, 2012
Dec. 31, 2011
Sep. 30, 2011
Jun. 30, 2011
Jan. 28, 2010
Note 9. Long-Term Investments Details              
Long Term Investments to Nantong           $ 3,377,642 $ 4,406,100
Nantong Land Use Rights             2,937,400
Long Term Investments to Shengshi Ronghua         3,170,125    
Collection of Long Term Investments to Nantong       287,493 3,170,125    
Long Term Investments to Shiqiang         934,200    
Shiqiang Profit Maintained     155,700        
Collection of Long Term Investments to Shiqiang     934,200        
Collection of Long Term Investments to Shengshi Ronghua $ 2,853,113 $ 317,012          
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Note 1. Description of Business (Details)
3 Months Ended
Dec. 31, 2009
Sep. 30, 2009
Note 1. Description Of Business Details    
Stock Issued During Period, Shares, Issued for Cash   32,500,000
Stock Issued During Period, Shares, Issued for Noncash Consideration 7,000  
Shares, Outstanding 39,750,000 39,743,000
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NOTE 11. Commitments and Contingencies (Tables)
12 Months Ended
Jun. 30, 2013
Commitments and Contingencies Disclosure [Abstract]  
Commitments for Lease
    
For The Year Ended June 30,   
2014  $21,897 
      
Total:  $21,897 
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12 Months Ended
Jun. 30, 2013
Jun. 30, 2012
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Jun. 30, 2013
Jun. 30, 2012
Receivables [Abstract]    
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NOTE10. Income Taxes (Tables)
12 Months Ended
Jun. 30, 2013
Schedule of Investments [Abstract]  
Income tax reconciliation
       
   For The Years Ended
   2013  2012
U.S. statutory rate   34.0%   34.0%
Foreign income not recognized in the U.S.   -34.0%   -34.0%
PRC preferential enterprise income tax rate   25.0%   25.0%
Permanent difference   -11.5%   -12.5%
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Consoldiated Statements of Cash Flows (USD $)
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Jun. 30, 2013
Jun. 30, 2012
CASH FLOWS OPERATING ACTIVITIES    
Net income $ 52,927 $ 55,586
Adjustments to reconcile net income to net cash provided by (used in) operating activities:    
Imputed interest 4,615 6,902
Amortization expense 12,755 12,617
Depreciation expense 6,195 17,970
Amortization of film costs 382,653  
Changes in operating assets and liabilities:    
Accounts receivable (722,018) (1,265,061)
Prepaid and other receivable (160,203) (22,628)
Accounts payable 1,159 6,696
Accrued liabilities and other payable 20,716 18,281
Customer deposits 117,990 41,275
Cash paid for film costs (2,869,898) (220,792)
Net cash used in operating activities (3,153,109) (1,349,154)
CASH FLOW INVESTING ACTIVITIES    
Cash paid for purchase of fixed assets (8,610) (472)
Loans made to others (150,909)  
Collection of long term investments 3,172,589 289,158
Collection of notes receivable 158,228  
Net cash provided by investing activities 3,171,298 288,686
CASH FLOW FINANCING ACTIVITIES    
Repayments to related parties   (205,542)
Proceeds from related parties 100,237 29,153
Net cash provided by (used in) financing activities 100,237 (176,389)
Effect of exchange rate changes on cash 20,639 24,768
NET CHANGE IN CASH 139,065 (1,212,089)
CASH AT BEGINNING OF THE YEAR 45,681 1,257,770
CASH AT END OF THE YEAR 184,746 45,681
SUPPLEMENTAL INFORMATION:    
Interest paid 0 0
Income taxes paid $ 7,740 $ 699
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NOTE 2. Summary of Significant Accounting Policies
12 Months Ended
Jun. 30, 2013
Accounting Policies [Abstract]  
NOTE 2. Summary of Significant Accounting Policies

NOTE 2. Summary of Significant Accounting Policies

 

Principles of Consolidation

 

The consolidated financial statements include the accounts of the Company and Xi’An TV, which is a variable interest entity with the Company as the primary beneficiary. In accordance with United States generally accepted accounting principles (“U.S. GAAP”) regarding “Consolidation of Variable Interest Entities”, the Company identifies entities for which control is achieved through means other than through voting rights (a "variable interest entity" or "VIE") and determines when and which business enterprise, if any, should consolidate the VIE. The Company evaluated its participating interest in Xi’An TV and concluded it is the primary beneficiary of Xi’An TV, a variable interest entity. The Company consolidated Xi’An TV and all significant intercompany transactions and balances have been eliminated.

 

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.

 

Concentration of Credit Risk

 

The Company maintains cash balances at various financial institutions in the PRC which do not provide insurance for amounts on deposit. The Company has not experienced any losses in such accounts and believes it is not exposed to significant credit risk in this area.

 

The Company operates principally in the PRC and grants credit to its customers in this geographic region. Although the PRC is economically stable, it is always possible that unanticipated events in foreign countries could disrupt the Company’s operations.

 

Fair Value of Financial Instruments

 

The fair value of financial instruments, which consist of cash, accounts receivable, notes receivable, prepaid and other assets, accounts payable, accrued liabilities, due to related parties and short term debt, were estimated to approximate their carrying values due to the immediate or relatively short maturity of these instruments.

 

Cash and Cash Equivalents

 

Cash and cash equivalents include cash on hand, demand deposits with banks and liquid investments with an original maturity of three months or less.

 

Accounts Receivable

 

Accounts receivable are stated at the amount management expects to collect from outstanding balances. Management provides for probable uncollected amounts through a charge to earnings and a credit to an allowance for bad debts based on its assessment of the current status of individual accounts. Balances are still outstanding after management has used reasonable collection efforts are written off through a charge to the allowance for bad debts and a credit to accounts receivable.

 

Fixed Assets

 

Fixed assets are recorded at cost and depreciated using the straight-line method, with an estimated 5% salvage value of original cost, over the estimated useful lives of the assets as follows:

 

     
Asset Category   Estimated Useful Life
Electronic Equipment   5 years
Communication Equipment   3 years
Machinery Equipment   5 years
Automobiles   10 years
Office Furniture   5 years

 

Leasehold improvements are amortized using the straight-line method over the life of the asset, not to exceed the length of the lease. Repairs and maintenance costs are expensed as incurred.

 

Intangible Assets

 

The Company has the following intangible assets:

     
Intangible Asset Category   Estimated Useful Life
TV series Production Right   10 years

 

Intangible assets with finite lives are amortized over their estimated useful lives to a company and are reviewed for impairment in accordance with U.S. GAAP. Finite-lived intangible assets are amortized on a straight-line basis over the estimated useful economic lives of 10 years and the amortization expenses for the years ended June 30, 2013 and 2012 were $12,755 and $12,617, respectively.

 

Impairment of Long-Lived Assets

 

The Company evaluates for impairment losses on long-lived assets used in operations when indicators of impairment are present and the undiscounted cash flows estimated to be generated by those assets are less than the assets’ carrying amount.

 

Revenue Recognition

 

The Company’s revenue primarily comes from the distribution of film and TV series’ broadcasting rights and investment return from the collectively produced film and TV series.

 

In accordance with ASC 926, Entertainment - Films, revenue from sale or licensing arrangements of a film shall be recognized when the following five revenue criteria are met: persuasive evidence of an arrangement exists, the film is completed and delivery has occurred, the license period of the arrangement has begun, the selling price is fixed or determinable, and collectability is reasonably assured.

 

The Company also generates advertising revenues from the sale of advertising services. In the majority of advertising arrangements, the Company acts as an agent in the transaction and records advertising revenues on a net basis. Customer payments received in advance of the performance of services are recorded as customer deposits in the consolidated balance sheet, and are recognized as revenue when the advertising services are rendered.

 

Cost of Revenues

 

Film Costs - The Company capitalizes film costs in accordance with ASC 926. Film costs are stated at the lower of cost, less accumulated amortization, or fair value. Production overhead, a component of film costs, includes allocable costs of individuals or departments with exclusive or significant responsibility for the production of films. Substantially all of the Company’s resources are dedicated to the production of its films. Capitalized production overhead does not include selling, general and administrative expenses. Interest expense on funds invested in production is capitalized into film costs until production is completed. In addition to the films being produced, costs of productions in development are capitalized as development film costs in accordance with the provisions of the ASC and are transferred to film production costs when a film is set for production. In the event a film is not set for production within three years from the time the first costs are capitalized or the film is abandoned, all such costs are generally expensed.

 

Film Cost Amortization - Once a film is released, film costs are amortized and participations and residual costs are accrued on an individual film basis in the proportion that the revenue during the period for each film (“Current Revenue”) bears to the estimated remaining total revenue to be received from all sources for each film (“Ultimate Revenue”) as of the beginning of the current fiscal period as required by the ASC. The amount of film costs that is amortized each period will depend on the ratio of Current Revenue to Ultimate Revenue for each film for such period. The Company makes certain estimates and judgments of Ultimate Revenue to be received for each film based on information received from its distributor and its knowledge of the industry. Ultimate Revenue does not include estimates of revenue that will be earned beyond ten years of a film’s initial theatrical release date.

 

Unamortized film production costs are evaluated for impairment when indicators of impairment are present on a film-by-film basis in accordance with the requirements of the ASC. If the fair value of a film is less than its unamortized film cost, the unamortized film costs will be written down to fair value determined using a discounted cash flow calculation.

 

Income Taxes

 

The Company accounts for income tax under the provisions of ASC 740, Income Taxes, which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of the events that have been included in the financial statements or tax returns. Deferred income taxes are recognized for all significant temporary differences between tax and financial statements bases of assets and liabilities. Valuation allowances are established against net deferred tax assets when it is more likely than not that some portion or all of the deferred tax assets will not be realized. There were no deferred tax assets or liabilities at June 30, 2013 and 2012.

 

Comprehensive Income

 

Comprehensive income consists of two components, net income and other comprehensive income (loss). Other comprehensive income refers to revenue, expenses, gains and losses that under generally accepted accounting principles are recorded as an element of stockholders’ equity but are excluded from net income. During the periods presented, other comprehensive income (loss) includes changes in cumulative translation adjustment from foreign currency translation.

 

Foreign Currency Translation

 

The Company uses United States dollars (“U.S. dollar” or “US$” or “$”) for financial reporting purposes. The subsidiaries within the Company maintain their books and records in Renminbi (“RMB”), the currency of China, the economic environment in which the Company’s primary subsidiaries conduct their operations. Transactions denominated in foreign currencies are translated into U.S. dollar at exchange rate in effect on the date of the transactions. Exchange gains or losses on transactions are included in earnings.

 

The financial statements of the Company are translated into United States dollars in accordance with U.S. GAAP, using year-end rates of exchange for assets and liabilities, and average rates of exchange for the period for revenues, costs, and expenses and historical rates for equity. Translation adjustments resulting from the process of translating the local currency financial statements into U.S. dollars are included in determining comprehensive income.

 

The exchange rates used for foreign currency translation were as follows (US$1 = RMB):

 

                 
Period Covered  

Balance Sheet

Date Rate

    Average Rate  
                 
Year ended June 30, 2013     6.1732       6.2720  
Year ended June 30, 2012     6.3089       6.3408  

 

Earnings (Loss) Per Share

 

The Company calculates net income (loss) per share in accordance with ASC 260, Earnings Per Share. Basic earnings (loss) per share is computed by dividing net income (loss) by the weighted average number of shares of common stock outstanding during each period. Diluted earnings per share is computed by dividing net income by the weighted average number of shares of common stock, common stock equivalents and potentially dilutive securities outstanding during each period. As of June 30, 2013 and 2012, respectively, the Company had no common stock equivalents that could potentially dilute future earnings per share.

 

Recent Accounting Pronouncements

 

In July 2012, the Financial Accounting Standards Board issued ASU 2012-02, Intangibles—Goodwill and Other (Topic 350): Testing Indefinite-Lived Intangible Assets for Impairment, to simplify the manner in which entities test indefinite-lived intangible assets for impairment. The ASU permits an entity to first assess qualitative factors to determine whether events and circumstances indicate that it is more likely than not that the indefinite-lived intangible asset is impaired as a basis for determining whether it is necessary to perform a quantitative impairment test. The ASU is effective for annual and interim impairment tests performed for fiscal years beginning after September 15, 2012, with early adoption permitted. The Company does not expect the adoption to have a material impact on its consolidated financial statements.

 

In August 2012, the FASB issued Accounting Standards Update (“ASU”) 2012-03, “Technical Amendments and Corrections to SEC Sections: Amendments to SEC Paragraphs Pursuant to SEC Staff Accounting Bulletin (SAB) No. 114, Technical Amendments Pursuant to SEC Release No. 33-9250, and Corrections Related to FASB Accounting Standards Update 2010-22 (SEC Update)” in Accounting Standards Update No. 2012-03. This update amends various SEC paragraphs pursuant to the issuance of SAB No. 114. The Company does not expect the adoption to have a material impact on its consolidated financial statements.

 

In October 2012, the FASB issued ASU 2012-04, “Technical Corrections and Improvements” in Accounting Standards Update No. 2012-04 ("ASU 2012-04"). The amendments in this update cover a wide range of topics in the Accounting Standards Codification. These amendments include technical corrections and improvements to the Accounting Standards Codification and conforming amendments related to fair value measurements. The amendments in this update will be effective for fiscal periods beginning after December 15, 2012. The Company does not expect the adoption to have a material impact on its consolidated financial statements.

 

In February 2013, the FASB issued ASU 2013-02, “Reporting of Amounts Reclassified out of Accumulated Other Comprehensive Income” (“ASU 2013-02”). Under ASU 2013-02, an entity is required to provide information about the amounts reclassified out of accumulated other comprehensive income by component. In addition, an entity is required to present, either on the face of the financial statements or in the notes, significant amounts reclassified out of accumulated other comprehensive income by the respective line items of net income, but only if the amount reclassified is required to be reclassified in its entirety in the same reporting period. For amounts that are not required to be reclassified in their entirety to net income, an entity is required to cross-reference to other disclosures that provide additional details about those amounts. ASU 2013-02 does not change the current requirements for reporting net income or other comprehensive income in the financial statements. The amendments in this update will be effective for fiscal periods beginning after December 15, 2012. The Company does not expect the adoption to have a material impact on its consolidated financial statements.

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NOTE 5. Fixed Assets
12 Months Ended
Jun. 30, 2013
Property, Plant and Equipment [Abstract]  
NOTE 5. Fixed Assets

NOTE 5. Fixed Assets

 

Fixed assets consist of the following:

 

   June 30,
Asset Category  2013  2012
Electronic Equipment  $176,051   $163,705 
Communication Equipment   693    678 
Machinery Equipment   94,593    92,558 
Automobiles   51,699    50,587 
Office Furniture   2,414    2,362 
    325,450    309,890 
Less: Accumulated depreciation   (290,128)   (277,729)
Fixed assets, net  $35,322   $32,161 

 

Depreciation expense for the years ended June 30, 2013 and 2012 was $6,195 and $17,970, respectively.

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Insurance [Abstract]  
NOTE 3. Accounts Receivable

NOTE 3. Accounts Receivable

 

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    2013     2012  
Accounts receivable     $2,072,474       $1,310,102  
Bad debt allowance                                                                                        $39,493            $38,644  
Accounts receivable, net     $2,032,981       $1,271,458  

 

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NOTE 11. Commitments and Contingencies - Commitments for Lease (Details) (USD $)
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Commitments and Contingencies Disclosure [Abstract]  
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NOTE 2. Summary of Significant Accounting Policies - Note 2. Summary of Significant Accounting Policies: Exchange rates used for foreign currency translation (Details)
12 Months Ended
Jun. 30, 2013
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Accounting Policies [Abstract]    
Foreign Currency Exchange Rate Balance Sheet Date 6.1732 6.3089
Foreign Currency Exchange Rate Average 6.2720 6.3408
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NOTE 4. Notes Receivable (Details Narrative) (USD $)
12 Months Ended
Jun. 30, 2013
Jun. 30, 2012
Receivables [Abstract]    
Interest Income (Expense), Net $ 43,885 $ 94,280
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12 Months Ended
Jun. 30, 2013
Jun. 30, 2012
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Total Cost of Revenues 1,339,286 962,024
Lady Shexiang TV Series
   
Total Revenues    1,045,609
Total Cost of Revenues    804,315
Xia Hai TV Series
   
Total Revenues    214,484
Total Cost of Revenues    157,709
Huang Tu Nv Nv TV Series
   
Total Revenues 573,980   
Total Cost of Revenues 478,316   
Xiao Lao Xiang Jin Cheng TV Series
   
Total Revenues 573,980   
Total Cost of Revenues 478,316   
Guo Men Ying Xiong TV Series
   
Total Revenues 516,582   
Total Cost of Revenues 382,654   
Advertising Revenue
   
Total Revenues $ 8,114 $ 20,381
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Consoldiated Balance Sheets (Parenthetical) (USD $)
Jun. 30, 2013
Jun. 30, 2012
Statement of Financial Position [Abstract]    
Allowance for doubtful accounts $ 39,493 $ 38,644
Common stock, par value $ 0.00001 $ 0.00001
Common stock, shares authorized 180,000,000 180,000,000
Common stock, shares issued 39,750,000 39,750,000
Common stock, shares outstanding 39,750,000 39,750,000

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NOTE 8. Revenues and Cost of Revenues
12 Months Ended
Jun. 30, 2013
Accounting Policies [Abstract]  
NOTE 8. Revenues and Cost of Revenues

NOTE 8. Revenues and Cost of Revenues

 

The Company’s revenues by film and TV series are as follows:

   Years Ended June 30,
   2013  2012
Lady Shexiang TV Series  $—     $1,045,609 
Xia Hai TV Series   —      214,484 
Huang Tu Nv Nv TV Series   573,980    —   
Xiao Lao Xiang Jin Cheng TV Series   573,980    —   
Guo Men Ying Xiong TV Series   516,582    —   
Advertising Revenue   8,114    20,381 
Total Revenues  $1,672,656   $1,280,474 

 

The Company’s cost of revenues by film and TV series are as follows:

 

   Years Ended June 30,
   2013  2012
Lady Shexiang TV Series  $—     $804,315 
Xia Hai TV Series   —      157,709 
Huang Tu Nv Nv TV Series   478,316    —   
Xiao Lao Xiang Jin Cheng TV Series   478,316    —   
Guo Men Ying Xiong TV Series   382,654    —   
Total Cost of Revenues  $1,339,286   $962,024 
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Consolidated Statement of Changes in Stockholders Equity (USD $)
Common Stock
Additional Paid-In Capital
Accumulated Other Comprehensive Income
Accumulated Deficit
Total
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Balance (in Shares) at Jun. 30, 2011 39,750,000        
Foreign currency translation 0 0 163,208 0 163,208
Imputed interest on related party loan   6,902     6,902
Net Income (Loss) 0 0 0 55,586 55,586
Balance at Jun. 30, 2012 398 11,164,001 947,488 (5,268,628) 6,843,259
Balance (in Shares) at Jun. 30, 2012 39,750,000        
Foreign currency translation     151,415   151,415
Imputed interest on related party loan   4,615     4,615
Net Income (Loss)       52,927 52,927
Balance at Jun. 30, 2013 $ 398 $ 11,168,616 $ 1,098,903 $ (5,215,701) $ 7,052,216
Balance (in Shares) at Jun. 30, 2013 39,750,000        
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Consoldiated Balance Sheets (USD $)
Jun. 30, 2013
Jun. 30, 2012
Current assets    
Cash and cash equivalents $ 184,746 $ 45,681
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Notes receivable 1,643,637 1,616,764
Prepaid and other receivable 267,325 102,309
Total current assets 4,128,689 3,036,212
Fixed assets, net 35,322 32,161
Intangible assets, net 22,679 34,871
Film costs 3,442,526 886,050
Long-term investments   3,170,125
Total assets 7,629,216 7,159,419
Current liabilities    
Accounts payable 15,681 14,191
Customer deposits 162,274 41,484
Accrued liabilities and other payable 262,255 226,287
Due to related parties 136,790 34,198
Total current liabilities 577,000 316,160
Total liabilities 577,000 316,160
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Additional paid-in capital 11,168,616 11,164,001
Accumulated other comprehensive income 1,098,903 947,488
Accumulated deficit (5,215,701) (5,268,628)
Total stockholders' equity 7,052,216 6,843,259
Total liabilities and stockholders' equity $ 7,629,216 $ 7,159,419
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12 Months Ended
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Accounting Policies [Abstract]    
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NOTE 6. Film Costs (Tables)
12 Months Ended
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Accounting Policies [Abstract]  
Film Cost
   June 30,
   2013  2012
Completed and not released:          
TV Series  $3,401,802   $855,934 
In development-TV Series   40,724    30,116 
Film costs  $3,442,526   $886,050 
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12 Months Ended
Jun. 30, 2013
Jun. 30, 2012
Schedule of Investments [Abstract]    
U.S. statutory rate 34.00% 34.00%
Foreign income not recognized in the U.S. (34.00%) (34.00%)
PRC preferential enterprise income tax rate 25.00% 25.00%
Permanent difference (11.50%) (12.50%)
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NOTE 6. Film Costs - Film Cost (Details) (USD $)
Jun. 30, 2013
Jun. 30, 2012
Accounting Policies [Abstract]    
Direct-to-television Film Costs, Completed and Not Released $ 3,401,802 $ 855,934
Direct-to-television Film Costs, Development 40,724 30,116
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NOTE 7. Related Party Transactions (Details Narrative) (USD $)
12 Months Ended
Jun. 30, 2013
Jun. 30, 2012
Related Party Transactions [Abstract]    
Advance from Related party $ 136,790 $ 34,198
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Related Party Transactions [Abstract]  
NOTE 7. Related Party Transactions

NOTE 7. Related Party Transactions

 

Mr. Dean Li, President and Shareholder of Xi’An TV, had advanced $136,790 and $34,198 to the Company at June 30, 2013 and 2012, respectively. The 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 reference to one-year loan.

 

The Company also leased an office space from a former shareholder with a monthly rent of approximately $1,063 with lease termination date of May 7, 2014.

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Jun. 30, 2013
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Insurance [Abstract]    
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NOTE 11. Commitments and Contingencies (Details Narrative) (USD $)
12 Months Ended
Jun. 30, 2013
Jun. 30, 2012
Jun. 30, 2011
Commitments and Contingencies Disclosure [Abstract]      
Notes, Loans and Financing Receivable, Gross, Noncurrent   $ 1,423,240  
imputed interest income   47,992 24,679
Operating Leases, Rent Expense 41,379 80,339  
Monthly rent $ 1,063 $ 1,781  
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NOTE 10. Income Taxes
12 Months Ended
Jun. 30, 2013
Schedule of Investments [Abstract]  
NOTE 10. Income Taxes

NOTE 10. Income Taxes

 

The Company accounts for income taxes pursuant to ASC 740, Income Taxes, which requires recognition of deferred income tax liabilities and assets for the expected future tax consequences of events that have been recognized in the Company’s financial statements or tax returns.

 

Before December 31, 2012, Xi’An TV’s taxable income was assessed at 10% of its taxable revenue. Starting from January 1, 2013, the tax authority determined that Xi’An TV should be taxed at 25% of its taxable income until further notice. The Company’s income taxes for the years ended June 30, 2013 and 2012 were $8,246 and $7,961, respectively.

 

The following table reconciles the Company’s statutory tax rates to its effective tax rate as a percentage of income before income taxes:

 

       
   For The Years Ended
   2013  2012
U.S. statutory rate   34.0%   34.0%
Foreign income not recognized in the U.S.   -34.0%   -34.0%
PRC preferential enterprise income tax rate   25.0%   25.0%
Permanent difference   -11.5%   -12.5%
Effective tax rate   13.5%   12.5%

 

The tax authority of the PRC conducts periodic and ad hoc tax filing reviews on business enterprises operating in the PRC after those enterprises have completed their relevant tax filings, hence the Company’s tax filings may not be finalized. It is therefore uncertain as to whether the PRC tax authority may take different views about the Company’s tax filings which may lead to additional tax liabilities.

 

The Company has no United States corporate income tax liability as of June 30, 2013 and 2012.

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NOTE 6. Film Costs
12 Months Ended
Jun. 30, 2013
Accounting Policies [Abstract]  
NOTE 6. Film Costs

NOTE 6. Film Costs

 

Film costs consist of the following:

 

   June 30,
   2013  2012
Completed and not released:          
TV Series  $3,401,802   $855,934 
In development-TV Series   40,724    30,116 
Film costs  $3,442,526   $886,050 

 

Amortization of film cost was included in cost of revenues. See Note 8 for details.

XML 83 R7.htm IDEA: XBRL DOCUMENT v2.4.0.8
NOTE 1. Description of Business
12 Months Ended
Jun. 30, 2013
Accounting Policies [Abstract]  
NOTE 1. Description of Business

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, Shaan’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 their equity interests 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% prior to 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.

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NOTE 2. Summary of Significant Accounting Policies (Tables)
12 Months Ended
Jun. 30, 2013
Accounting Policies [Abstract]  
Note 2. Summary of Significant Accounting Policies: Intangible Assets: Schedule of Finite-Lived Intangible Assets
     
Intangible Asset Category   Estimated Useful Life
TV series Production Right   10 years
Note 2. Summary of Significant Accounting Policies: Exchange rates used for foreign currency translation
                 
Period Covered  

Balance Sheet

Date Rate

    Average Rate  
                 
Year ended June 30, 2013     6.1732       6.2720  
Year ended June 30, 2012     6.3089       6.3408  
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NOTE 9. Long-term Investments
12 Months Ended
Jun. 30, 2013
Schedule of Investments [Abstract]  
NOTE 9. Long-term Investments

NOTE 9. 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 had contributed RMB 21,833,500 (approximately $3,377,642) to Nantong for Haimen Project. However, the application for license of Haimen Project was declined by the State Department of Education. On June 8, 2011, the Board of the Company approved to re-invest RMB 20,000,000 (approximately $3,170,125) 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 Nantong and Shengshi Ronghua. All of the parties agreed that Nantong will transfer RMB 20,000,000 (approximately $3,170,125) 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 (approximately $3,170,125) from Nantong. As of December 31, 2011, the Company had 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 the 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. In March 2012, the Company decided to withdraw from Shiqiang project due to low profitability and the Company received the full refund of RMB 6,000,000 (approximately $934,200) in April 2012.

 

During the year ended June 30, 2012, due to various difficulties encountered during the operation of the taxi advertising project with Shengshi Ronghua, the Company considered the project unfeasible and decided to withdraw from the project. On July 20, 2012, the Company and Shengshi Ronghua entered into a mutual agreement to terminate the original agreement signed on June 21, 2011. Shengshi Ronghua refunded RMB 2,000,000 (approximately $317,012) to the Company in July 2012 and refunded the remaining RMB 18,000,000 (approximately $2,853,113) to the Company in December 2012.

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NOTE 5. Fixed Assets (Tables)
12 Months Ended
Jun. 30, 2013
Property, Plant and Equipment [Abstract]  
Fixed Assets
   June 30,
Asset Category  2013  2012
Electronic Equipment  $176,051   $163,705 
Communication Equipment   693    678 
Machinery Equipment   94,593    92,558 
Automobiles   51,699    50,587 
Office Furniture   2,414    2,362 
    325,450    309,890 
Less: Accumulated depreciation   (290,128)   (277,729)
Fixed assets, net  $35,322   $32,161 
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NOTE 3. Accounts Receivable (Tables)
12 Months Ended
Jun. 30, 2013
Insurance [Abstract]  
Accounts Receivable
    June 30,  
    2013     2012  
Accounts receivable     $2,072,474       $1,310,102  
Bad debt allowance                                                                                        $39,493            $38,644  
Accounts receivable, net     $2,032,981       $1,271,458  
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Jun. 30, 2013
Sep. 18, 2013
Dec. 31, 2012
Document And Entity Information      
Entity Registrant Name China Media Inc.    
Entity Central Index Key 0001434674    
Document Type 10-K    
Document Period End Date Jun. 30, 2013    
Amendment Flag false    
Current Fiscal Year End Date --06-30    
Is Entity a Well-known Seasoned Issuer? No    
Is Entity a Voluntary Filer? No    
Is Entity's Reporting Status Current? Yes    
Entity Filer Category Smaller Reporting Company    
Entity Public Float     $ 5,059,350
Entity Common Stock, Shares Outstanding   39,750,000  
Document Fiscal Period Focus FY    
Document Fiscal Year Focus 2013    
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NOTE 4. Notes Receivable (Tables)
12 Months Ended
Jun. 30, 2013
Receivables [Abstract]  
Notes Receivable
   June 30,
   2013  2012
Notes receivable  $1,643,637   $1,616,764 
           
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