UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

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

For the quarterly period ended September 30, 2015

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

For the transition period from ______________ to ______________

Commission File Number: 333-152539

CHINA NETWORK MEDIA, INC.

(Exact name of registrant as specified in its charter)

Delaware		32-0251358
(State or other jurisdiction of		(I.R.S. Employer Identification No.)
incorporation or organization)

Room 205, Building A
No. 1 Torch Road, High-Tech Zone
Dalian, China		116023
(Address of principal executive offices)		(Zip Code)

+86 (411) 3973-1515

(Registrant’s telephone number, including area code)

N/A

(Former name, former address and former fiscal year, if changed since last report)

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 that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ¨ No x

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

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions 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 ¨ (do not check if smaller reporting company)	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

As of November 16, 2015, the registrant had 65,604,533 shares of common stock, par value $0.001 per share, issued and outstanding.

CHINA NETWORK MEDIA, INC.

FORM 10-Q REPORT

September 30, 2015

TABLE OF CONTENTS

		Page Number
PART I - FINANCIAL INFORMATION

Item 1.	Financial Statements.	4
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations.	5
Item 3.	Quantitative and Qualitative Disclosures About Market Risk.	16
Item 4.	Controls and Procedures.	16

PART II - OTHER INFORMATION

Item 1.	Legal Proceedings.	17
Item 1A.	Risk Factors.	17
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds.	17
Item 3.	Defaults Upon Senior Securities.	17
Item 4.	Mine Safety Disclosures.	17
Item 5.	Other Information.	17
Item 6.	Exhibits.	17

SIGNATURES		18

CAUTIONARY STATEMENT ON FORWARD-LOOKING INFORMATION

This Quarterly Report on Form 10-Q (this “Report”) contains “forward-looking statements”. Forward-looking statements discuss matters that are not historical facts. Because they discuss future events or conditions, forward-looking statements may include words such as “anticipate,” “believe,” “estimate,” “intend,” “could,” “should,” “would,” “may,” “seek,” “plan,” “might,” “will,” “expect,” “predict,” “project,” “forecast,” “potential,” “continue” negatives thereof or similar expressions. Forward-looking statements speak only as of the date they are made, are based on various underlying assumptions and current expectations about the future and are not guarantees. Such statements involve known and unknown risks, uncertainties and other factors that may cause our actual results, level of activity, performance or achievement to be materially different from the results of operations or plans expressed or implied by such forward-looking statements.

We cannot predict all of the risks and uncertainties. Accordingly, such information should not be regarded as representations that the results or conditions described in such statements or that our objectives and plans will be achieved and we do not assume any responsibility for the accuracy or completeness of any of these forward-looking statements. These forward-looking statements are found at various places throughout this Report and include information concerning possible or assumed future results of our operations, including statements about potential acquisition or merger targets; business strategies; future cash flows; financing plans; plans and objectives of management, any other statements regarding future acquisitions, future cash needs, future operations, business plans and future financial results, and any other statements that are not historical facts.

These forward-looking statements represent our intentions, plans, expectations, assumptions and beliefs about future events and are subject to risks, uncertainties and other factors. Many of those factors are outside of our control and could cause actual results to differ materially from the results expressed or implied by those forward-looking statements. In light of these risks, uncertainties and assumptions, the events described in the forward-looking statements might not occur or might occur to a different extent or at a different time than we have described. You are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this Report. All subsequent written and oral forward-looking statements concerning other matters addressed in this Report and attributable to us or any person acting on our behalf are expressly qualified in their entirety by the cautionary statements contained or referred to in this Report.

Except to the extent required by law, we undertake no obligation to update or revise any forward-looking statements, whether as a result of new information, future events, a change in events, conditions, circumstances or assumptions underlying such statements, or otherwise.

CERTAIN TERMS USED IN THIS REPORT

When this report uses the words “we,” “us,” “our,” and the “Company,” they refer to the combined business of China Network Media Inc. and its consolidated subsidiaries and variable interest entities.

In addition, unless the context otherwise requires and for the purposes of this Report only:

“MGYS” refers to Metha Energy Solutions Inc., a Delaware corporation;

“PRC” and “China” refers to the People’s Republic of China, excluding, for the purpose of this Report, Taiwan and the special administrative regions of Hong Kong and Macau;

“PRC Operating Subsidiaries” and “PRC Operating Entities” refers to “Science & Technology (Dalian)” and “Dalian Tianyi”;

“Renminbi” and “RMB” refers to the legal currency of China;

“Science & Technology Trading” or “WFOE” refers to our indirect subsidiary of Science & Technology World Website Trade (Dalian) Co., Ltd., a PRC limited company;

“Science & Technology Network” refers to our variable interest entity Science & Technology World Network (Dalian) Co., Ltd., a PRC limited company;

“Dalian Tianyi” refers to our variable interest entity Dalian Tianyi Culture Development Co., Ltd., a PRC limited company;

PART I - FINANCIAL INFORMATION

Item 1. Financial Statements.

INDEX TO FINANCIAL STATEMENTS

	PAGE

INTERIM FINANCIAL STATEMENTS

CONSOLIDATED BALANCE SHEETS AS OF SEPTEMBER 30, 2015 (UNAUDITED) AND DECEMBER 31, 2014	F-1

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME/(LOSS) FOR THE NINE AND THREE MONTHS ENDED SEPTEMBER 30, 2015 AND 2014 (UNAUDITED)	F-2

CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2015 AND 2014 (UNAUDITED)	F-3

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)	F-4~F-24

China Network Media Inc.

Consolidated Balance Sheets

(Stated in US dollars, except for number of shares)

	September 30,			December 31,
	2015			2014
	(Unaudited)
Assets
Current assets
Cash and cash equivalents	$	583,235		$	909,922
Prepaid taxes		71,703			92,127
Prepaid expenses and other current assets		20,946			41,234
Total current assets		675,884			1,043,283
Property and equipment, net		7,489			20,485
Total assets	$	683,373		$	1,063,768

Liabilities and shareholders’ deficit
Current Liabilities
Deferred revenue	$	36,208		$	964,252
Due to related parties		81,864			84,662
Advance from customers		15,714			32,502
Income tax payable		152,127			133,620
Other current liabilities		26,286			32,229
Total current liabilities		312,199			1,247,265

Total liabilities	$	312,199		$	1,247,265

Shareholders’ equity (deficit)

Common stock ($0.001 par value,100,000,000 shares authorized; 65,604,533 and 65,175,333 shares issued and outstanding as of September 30, 2015 and December 31, 2014, respectively)		65,604			65,175
Additional paid in capital		1,343,623			1,322,828
Accumulated deficit		(970,364	)		(1,514,655	)
Accumulated other comprehensive loss		(67,689	)		(56,845	)
Total shareholders' equity (deficit)		371,174			(183,497	)
Total liabilities and shareholders' equity	$	683,373		$	1,063,768

See accompanying notes to the consolidated financial statements.

The assets of the variable interest entities (the “VIEs”) can be used to settle obligations of the consolidated entities. Conversely, liabilities recognized as a result of consolidating these VIEs do not represent additional claims on the Company’s general assets (Note 3).

F-1

China Network Media Inc.

Consolidated Statements of Operations and Comprehensive Income (Loss)

(Stated in US dollars, except for number of shares)

	For the Nine Months Ended September 30,						For the Three Months Ended September 30,
	2015			2014			2015			2014
	(Unaudited)			(Unaudited)			(Unaudited)			(Unaudited)
Revenue
- Third parties	$	1,062,484		$	861,619		$	273,823		$	274,279
- Related parties		174,328			20,324			174,328			6,761
		1,236,812			881,943			448,151			281,040
Cost of revenue
- Third parties		125,137			358,419			23,776			92,067
- Related parties		20,532			8,455			20,532			2,304
		145,669			366,874			44,308			94,371

Gross profit		1,091,143			515,069			403,843			186,669

Operating expenses:
Research and development expenses		25,873			97,147			8,921			30,810
Selling and marketing expenses		1,784			25,611			583			5,946
General and administrative expenses		336,860			465,224			76,208			106,161
Total operating expenses		364,517			587,982			85,712			142,917
Income (Loss) from Operations		726,626			(72,913	)		318,131			43,752

Other income		6,858			8,270			25			2,326

Income (loss) from operations before income taxes		733,484			(64,643	)		318,156			46,078
Provision for income taxes		189,193			57,920			61,738			28,247
Net income (loss)		544,291			(122,563	)		256,418			17,831

Other comprehensive (Loss) income
Foreign currency translation adjustment		(10,844	)		2,668			(10,116	)		(197	)
Comprehensive Income (loss)	$	533,447		$	(119,895	)	$	246,302		$	17,634

Basic and diluted earnings (loss) per share	$	0.008		$	(0.002	)	$	0.004		$	0.0003

Weighted-average number of shares outstanding -Basic and diluted		65,540,074			62,455,847			65,604,533			63,636,868

See accompanying notes to the consolidated financial statements.

F-2

China Network Media Inc.

Consolidated Statements of Cash Flows

For the Nine Months Ended September 30, 2015 and 2014

(Stated in US dollars)

	For the Nine Months Ended September 30,
	2015			2014
	(Unaudited)			(Unaudited)
Cash Flows From Operating Activities
Net income (loss)	$	544,291		$	(122,563	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation expense		14,429			22,127
Issuance of shares to employees and part-time consultants		21,224			100,843
Changes in operating assets and liabilities:
Accounts receivable		-			(678	)
Prepaid expenses and other current assets		19,509			70,404
Advance from a customer		(16,198	)		65,038
Deferred revenue		(923,804	)		(116,984	)
Prepaid taxes		17,937			(7,864	)
Income tax payable		23,608			57,920
Other current liabilities		(5,028	)		(2,685	)
Deferred revenue, noncurrent		-			(11,291	)
Net cash (used in) provided by operating activities		(304,032	)		54,267

Cash Flows From Investing Activities
Purchases of property and equipment		-			(2,276	)
Short term loan to an unrelated party		(129,586	)		-
Cash repayment from an unrelated party		129,586			-
Purchases of property and equipment		(1,731	)		-
Net cash used in investing activities		(1,731	)		(2,276	)

Cash Flows From Financing Activities
Cash proceeds from a related party		-			178,855
Cash repayment to a related party		-			(178,855	)
Net cash provided by financing activities		-			-
Effect of exchange rate fluctuation on cash and cash equivalents		(20,924	)		(971	)

Net (decrease) increase in cash and cash equivalents		(326,687	)		51,020
Cash and cash equivalents, beginning of the period		909,922			135,465
Cash and cash equivalents, end of the period	$	583,235		$	186,485

Supplemental disclosure information:
Income taxes paid	$	165,733		$	-

See accompanying notes to the consolidated financial statements.

F-3

China Network Media Inc.

(Formerly Known As Metha Energy Solutions Inc.)

Notes to Consolidated Financial Statements

(Unaudited)

(U.S Dollars unless otherwise noted)

NOTE 1.

DESCRIPTION OF BUSINESS AND ORGANIZATION

China Network Media Inc. (formerly known as Metha Energy Solutions Inc.) was incorporated on April 18, 2008 under the laws of the State of Delaware.

Science & Technology World Website Media Group Co., Ltd. (“Science & Technology Media”) was organized under the laws of the British Virgin Island on February 15, 2011 to serve as a holding company for the People's Republic of China (the "PRC") operations. On September 16, 2011, Science & Technology Media established Science & Technology World Website Hong Kong Media Holding Co., Ltd. (“HK Science & Technology”) in Hong Kong to serve as an intermediate holding company.

On January 20, 2012, HK Science and Technology established Science& Technology World Website Trade (Dalian) Co., Ltd (the “WFOE” or “Science & Technology Trading”) in the PRC. Its purposes are, among others, a platform for online B2B service.

HK Science and Technology and the WFOE are considered foreign investor and foreign invested enterprise respectively under PRC law. As a result, HK Science & Technology and the WFOE are subject to limitations under PRC law on foreign ownership of Chinese companies. According to the Catalogue of Industries for Guiding Foreign Investment (2011 Revision) (the “Catalogue”), there are four kinds of industries which are encouraged, permitted, restricted and prohibited for foreign investment. The primary business of Dalian Tianyi Culture Development Co., Ltd (“Dalian Tianyi”) and Science & Technology World Network (Dalian) Co., Ltd (“Science & Technology (Dalian)”) are within the category in which foreign investment is currently restricted.

On January 21, 2012, the WFOE respectively entered into a series of agreements with Dalian Tianyi, Science & Technology (Dalian) and their respective shareholders (“Contractual Arrangements”). The relationship with Dalian Tianyi, Science & Technology (Dalian) and their respective shareholders are governed by the Contractual Arrangements. The Contractual Arrangements is comprised of a series of agreements, including Exclusive Technical Consulting Service Agreements and Operating Agreements, through which WFOE has the right to advise, consult, manage and operate Dalian Tianyi and Science & Technology (Dalian), and collect 85% of their respective net profits. The shareholders of Dalian Tianyi and Science & Technology (Dalian) have granted WFOE, under the Exclusive Equity Interest Purchase Agreement, the exclusive right and option to acquire all of their equity interests respectively in Dalian Tianyi and Science & Technology (Dalian). Furthermore, the shareholders of Dalian Tianyi and Science & Technology (Dalian) is under the procedure of pledging all of their equity interests respectively in Dalian Tianyi and Science & Technology (Dalian) to WFOE under the Exclusive Equity Interest Pledge Agreement, and through the Exclusive Equity Interest Pledge Agreement, WFOE can collect the remaining 15% of Dalian Tianyi and Science & Technology (Dalian)’s respective net profits.

According to the Power of Attorney executed by the shareholders of Dalian Tianyi and Science & Technology (Dalian), they exclusively authorized WFOE to perform and exercise any and all of the shareholder’s rights in Dalian Tianyi and Science & Technology (Dalian).

As a result of the Contractual Arrangements, under generally accepted accounting principles in the United States, or U.S. GAAP, Science & Technology Media is considered the primary beneficiary of Dalian Tianyi and Science & Technology (Dalian) (“VIEs”)

F-4

On October 29, 2012, Science & Technology Media entered into a Share Exchange Agreement by and among (i) Science & Technology Holding, (ii) the principal shareholders of China Network Media Inc., (iii) China Network Media Inc., (iv) the shareholders of Science & Technology Holding and (v) Science & Technology Media.

The acquisition was accounted for as a “reverse merger,” and Science & Technology Media was deemed to be the accounting acquirer in the reverse merger. Consequently, the assets and liabilities and the historical operations that would be reflected in the financial statements prior to the acquisition would be those of Science &Technology Media and its wholly owned subsidiaries and VIEs, and would be recorded at the historical cost, and the consolidated financial statements after completion of the acquisition would include the assets, liabilities and operation of China Network Media Inc., Science & Technology Media and its wholly owned subsidiaries and VIEs from the closing date of the acquisition. As a result of the issuance of the shares of common stock pursuant to the Exchange Agreement, a change in control of occurred as a result of the acquisition.

In connection with the closing of the Exchange Agreement, Toft ApS, China Network Media Inc.’s principal shareholder, agreed to cancel its 10,000,000 shares of the common stock that it owned in China Network Media Inc. and to issue 50,000,000 shares to shareholders of Science & Technology Holding, who acquired a majority interest in China Network Media Inc., in October 2012 for the purpose of the reverse acquisition of Science & Technology Media. Additionally, the existing officers and directors from China Network Media Inc. resigned from its board of directors and all officer positions effective immediately after the closing of the reverse merger. Accordingly, China Network Media Inc. appointed Mr. Jiang Wei, the former major shareholder of Science & Technology Holding as the Chairman of the Board and appointed Mr. Peng HuiAn, the former major shareholder of Science & Technology Holding as the Chief Executive Officer. The shareholders of Science & Technology Media shareholder were issued common stock of China Network Media Inc. constituting approximately 95.02% of the fully diluted outstanding shares. After the reverse merger, 52,620,030 common stock were outstanding.

China Network Media Inc.’ directors approved the Exchange Agreement and the transactions contemplated thereby. Simultaneously, the directors of Science & Technology Media also approved the Exchange Agreement and the transactions contemplated thereby.

As a result of the Exchange Agreement, China Network Media Inc. acquired 100% of the processing and production operations of Science & Technology Media and its subsidiaries, the business and operations of which now constitutes its primary business and operations.

On March 19, 2013, the Company submitted dissolution application for Science & Technology Holding which was approved on April 2, 2013.

China Network Media Inc., its wholly-owned subsidiaries and VIEs are collectively referred as “the Company”, “we”, “us”, “our” for the purposes of these notes.

We operate a multi-languages portal website that serves to the technology industry and provide advertising opportunities to the companies through our diverse business network in China. The Company currently operates its website through different versions in China.

F-5

As our main target, we provide online platform to business entrepreneurs and corporations with a B2B marketplace that can help our customers:

Set their brand image through multiple languages online magazine, online corporate multimedia advertisement, executives interviews, institutional alliances and flexible membership package that tailor made based on what our customers need;

Set up customer’s online exhibition to introduce their products to the public, where they have our tailor-made corporate introduction with 3D product description and factory facilities online show room ;

Develop intelligent leisure retirement industry through building a unique international intelligent technology health leisure endowment industrial district including residential area, holiday resort, spa area etc. ;

Develop an e-commercial platform to combine the online sales business with above intelligent leisure district and all the branches over the world to provide elderly products and also exclusive products provided by our agents;

B2B product purchase platform for companies and end-users;

Online job opportunity section for corporate clients; and

Corporate blogs.

We currently derive a substantial portion of our revenues from online advertising membership services. Our advertising membership solutions present corporate users with attractive opportunities to combine the visual impact and engagement of traditional television-like multimedia advertisements and online magazines with the interactivity and precise targeting capabilities of the Internet. We strive to promote a novel and unique advertising environment on our website to attract technology enterprises.

NOTE 2.

GOING CONCERN AND LIQUIDITY

The accompanying unaudited consolidated financial statements have been prepared assuming that the Company will continue as a going concern. The Company currently has limited revenue and has accumulated deficit of $970,364 and $1,514,655 as of September 30, 2015 and December 31, 2014, respectively. These conditions raise substantial doubt about the Company’s ability to continue as a going concern. Management plans to fund continuing operations through new financing from related parties and equity financing arrangements. The Company’s continuation as a going concern is dependent on its ability to meet its obligations, to obtain additional financing as may be required until 2015 when it can generate sources of recurring revenues and to ultimately attain profitability. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

F-6

The principal sources of liquidity are cash and cash equivalents, short-term investments, loans from shareholders, as well as the cash flows generated from our operations.

As of September 30, 2015, the Company had cash and cash equivalents of approximately $583,235. As of December 31, 2014, the Company had cash and cash equivalents of approximately $909,922. Cash and cash equivalents include cash on hand, deposits in banks with maturities of three months or less, and all highly liquid investments which are unrestricted as to withdrawal or use, and which have original maturities of three months or less at the time of purchase.

The Company believes that the current cash and cash equivalents combined with proceeds that it expect to generate from operating activities are sufficient to meet anticipated working capital needs, commitments and capital expenditures over the next twelve months. It may, however, require additional cash resources due to changes in business conditions and other future developments, or changes in general economic conditions. The management also promised to provide economic supports to the Company for operation need including provide loans to the Company.

NOTE 3.

VARIABLE INTEREST ENTITIES

To satisfy PRC laws and regulations, the Company conducts certain business in the PRC through its Variable Interest Entities (“VIEs”).

Risks in Relation to the VIE Structure:

The Ministry of Commerce of PRC (“MOFCOM”) published a discussion draft of the proposed Foreign Investment Law (the “Draft”) in January 2015 aiming to, upon its enactment, replace the trio of existing laws regulating foreign investment in China. The Draft embodies an expected PRC regulatory trend to rationalize its foreign investment regulatory regime in line with prevailing international practice and the legislative efforts to unify the corporate legal requirements for both foreign and domestic investments.

The MOFCOM is currently soliciting comments on the Draft and substantial uncertainties exist with respect to its enactment timetable, interpretation and implementation. The Draft, if enacted as proposed, may materially impact the viability of our current corporate structure, corporate governance and business operations. The Draft expands the definition of foreign investment and introduces the principle of "actual control" in determining whether a company is considered a Foreign Investment Enterprise (“FIE”).

F-7

Under the Draft, Variable Interest Entities (“VIEs”) that are controlled via contractual arrangement would be deemed as FIEs, if they are ultimately "controlled" by foreign investors. Therefore, for any companies with a VIE structure in an industry category that falls under restricted to foreign investment or prohibited from foreign investment, the VIE structure may be deemed legitimate only if the ultimate controlling persons) is/are of PRC nationality (either PRC companies or PRC citizens). Conversely, if the actual controlling person(s) is/are of foreign nationalities, then the VIEs will be treated as FIEs and any operation in the industry category falls under restricted to foreign investment or prohibited from foreign investment, without market entry clearance may be considered as illegal. Moreover, for the enterprises which are not incorporated under the laws of China (foreign investors) but are "controlled" by Chinese investors, they may submit documentary evidence to apply for identifying their investment as the investment by Chinese investors when they applying for the market entry clearance to engage in any investment as set out in industries restricted to foreign investment or prohibited from foreign investment in China. The competent authorities of foreign investment will grant the review opinion on whether the said investment is identified as the investment by Chinese investors.

In conclusion, if the Draft enacted as proposed, it is possible that the Company's conduct of certain of its operations and businesses through the VIEs could be found by PRC authorities to be in violation of PRC laws and regulations prohibiting or restricting foreign ownership of companies that engage in such operations and businesses. If such a finding were made, regulatory authorities with jurisdiction over the licensing and operation of such businesses would have broad discretion in dealing with such a violation, including levying fines, confiscating the Company's income, revoking the business or operating licenses of the affected businesses, requiring the Company to restructure its ownership structure or operations, or requiring the Company to discontinue all or any portion of its operations. Any of these actions could cause significant disruption to the Company's business operations, and have a material adverse impact on the Company's cash flows, financial position and operating performance. The Company's management considers the possibility of such a finding by PRC regulatory authorities to be remote.

These contractual arrangements may not be as effective in providing the Company with control over the VIEs as direct ownership. Due to its VIE structure, the Company has to rely on contractual rights to effect control and management of the VIEs, which exposes it to the risk of potential breach of contract by the shareholders of the VIEs for a number of reasons. For example, their interests as shareholders of the VIEs and the interests of the Company may conflict and the Company may fail to resolve such conflicts; the shareholders may believe that breaching the contracts will lead to greater economic benefit for them; or the shareholders may otherwise act in bad faith. If any of the foregoing were to happen, the Company may have to rely on legal or arbitral proceedings to enforce its contractual rights, including specific performance or injunctive relief, and claiming damages. Such arbitral and legal proceedings may cost substantial financial and other resources, and result in a disruption of its business, and the Company cannot assure that the outcome will be in its favor. In addition, as all of these contractual arrangements are governed by PRC law and provide for the resolution of disputes through either arbitration or litigation in the PRC, they would be interpreted in accordance with PRC law and any disputes would be resolved in accordance with PRC legal procedures. The legal environment in the PRC is not as developed as in other jurisdictions, such as the United States. As a result, uncertainties in the PRC legal system could further limit the Company’s ability to enforce these contractual arrangements. Furthermore, these contracts may not be enforceable in China if PRC government authorities or courts take a view that such contracts contravene PRC laws and regulations or are otherwise not enforceable for public policy reasons. In the event that the Company is unable to enforce any of these agreements, the Company would not be able to exert effective control over the affected VIEs and consequently, the results of operations, assets and liabilities of the affected VIEs and their subsidiaries would not be included in the Company's consolidated financial statements. If such were the case, the Company's cash flows, financial position and operating performance would be materially adversely affected.

F-8

The Company's agreements with respect to its consolidated VIEs are approved and in place. The Company's management believes that such agreements are enforceable, and considers it a remote possibility that PRC regulatory authorities with jurisdiction over the Company's operations and contractual relationships would find the agreements to be unenforceable under existing laws.

The significant terms of the VIE Agreements are summarized below:

Exclusive Technical Consulting Service Agreement: During the term of this Agreement, Science & Technology Trading shall provide the following technical consulting services to Dalian Tianyi and Science & Technology (Dalian) in accordance with this Agreement: (i) Provision of advanced management skills to offer a framework for the construction of a new management platform; (ii) Provision of technology information and materials related to Dalian Tianyi and Science & Technology (Dalian)’s business development and operation. The content of the technology information and documents may be enhanced or diminished during the performance of this Agreement and upon mutual agreement to address each Party’s requirements; and (iii) Training of technical and managerial personnel for Dalian Tianyi and Science & Technology (Dalian) and provision of required training documents. Science & Technology Trading will send technologists and managerial personnel to Dalian Tianyi and Science & Technology (Dalian) to provide related technology and training services as necessary. Dalian Tianyi and Science & Technology (Dalian) hereby agrees to accept the technical consulting services provided by Science & Technology Trading. Dalian Tianyi and Science & Technology (Dalian) further agrees that, during the term of this Agreement, it shall not accept technical consulting and services from any other party without the prior written consent of Science & Technology Trading. Science & Technology Trading shall be the sole and exclusive owner of all right, title and interests to any and all intellectual property rights arising from the performance of this Agreement, including but not limited to, copyrights, patent, know-how and commercial secrets, whether such intellectual property is developed by Science & Technology Trading or Dalian Tianyi and Science & Technology (Dalian).

Exclusive Equity Interest Purchase Agreement: Under the Exclusive Option Agreements entered into by and among Science & Technology Trading, each of the PRC Shareholders irrevocably granted to Science & Technology Trading the exclusive right to purchase or designate one or more persons to purchase all or any portion of the Equity Interest from the PRC Shareholders subject to compliance with legal restrictions under applicable PRC laws. The PRC Shareholders shall not sell or transfer all or any portion of the Equity Interest to any party other than Science & Technology Trading and/or the Specified Person.

Equity Interest Pledge Agreement: Under the Equity Pledge Agreements entered into by and among Science& Technology Trading, the PRC Operating Entities and each of the PRC Shareholders, the PRC Shareholders pledged all of their equity interests in the PRC Operating Entities as security to ensure that Science& Technology Trading collects the Consulting Fee under the Service Agreement. The Pledge shall be effective as of the date that the Pledge is recorded in the register of shareholders of Dalian Tianyi and Science & Technology (Dalian) and shall remain effective so long as this Agreement remains in effect. During the Term of the Pledge, Science& Technology Trading shall be entitled to foreclose on the Pledge in accordance with this Agreement in the event that Dalian Tianyi and Science & Technology (Dalian) fail to pay the Consulting Fees in accordance with the Service Agreement. Science& Technology Trading shall be entitled to exercise, dispose of or assign the Pledge in accordance with this Agreement.

F-9

Powers of Attorney: The PRC Shareholders have each executed an irrevocable power of attorney to appoint Science& Technology Trading as their sole representative with full authority to perform and exercise any and all shareholder’s rights associated with the Equity Interest, including but not limited to, the right to attend shareholders’ meetings, the right to execute shareholders’ resolutions, the right to sell, assign, transfer or pledge any or all of the Equity Interest and the right to vote the Equity Interest for all matters, including but not limited to, the appointment of legal representatives, board members, executive directors, inspectors, chief managers and other senior management officers and the submission of all the Company’s related documentations to the competent authorities. The term of each power of attorney is valid so long as such shareholder is a shareholder of the respective PRC Operating Entity.

As a result of these VIE Agreements, the Company through its wholly-owned subsidiary, Science& Technology Trading, was granted with unconstrained decision making rights and power over key strategic and operational functions that would significantly impact the PRC Operating Entities or the VIEs’ economic performance, which includes, but is not limited to, the development and execution of the overall business strategy; important and material decision making; decision making for merger and acquisition targets and execution of merger and acquisition plans; business partnership strategy development and execution; government liaison; operation management and review; and human resources recruitment and compensation and incentive strategy development and execution. Science& Technology Trading also provides comprehensive services to the VIEs for their daily operations, such as operational technical support, OA technical support, accounting support, general administration support and technical support for products and services. As a result of the Exclusive Business Cooperation Agreements, the Equity Pledge Agreements and the Exclusive Option Agreements, the Company will bear all of the VIEs’ operating costs in exchange for 100% of the net income of the VIEs. Under these agreements, the Company has the absolute and exclusive right to enjoy economic benefits similar to equity ownership through the VIE Agreements with our PRC Operating Entities and their shareholders.

F-10

In addition, as all of these contractual arrangements are governed by PRC law and provide for the resolution of disputes through either arbitration or litigation in the PRC, they would be interpreted in accordance with PRC law and any disputes would be resolved in accordance with PRC legal procedures. The legal environment in the PRC is not as developed as in other jurisdictions, such as the United States. As a result, uncertainties in the PRC legal system could further limit the Company’s ability to enforce these contractual arrangements. Furthermore, these contracts may not be enforceable in China if PRC government authorities or courts take a view that such contracts contravene PRC laws and regulations or are otherwise not enforceable for public policy reasons. In the event the Company is unable to enforce these contractual arrangements, it may not be able to exert effective control over the VIEs, and its ability to conduct its business may be materially and adversely affected.

Most of our operations are conducted through our affiliated companies which the Company controls through contractual agreements in the form of variable interest entities. Current regulations in China permit our PRC subsidiaries to pay dividends to us only out of its accumulated distributable profits, if any, determined in accordance with their articles of association and PRC accounting standards and regulations. The ability of these Chinese affiliates to make dividends and other payments to us may be restricted by factors that include changes in applicable foreign exchange and other laws and regulations.

Under PRC law, our subsidiary may only pay dividends after 10% of its after-tax profits have been set aside as reserve funds, unless such reserves have reached at least 50% of its registered capital. Such cash reserve may not be distributed as cash dividends.

The PRC Income Tax Law also imposes a 10% withholding income tax on dividends generated on or after January 1, 2008 and distributed by a resident enterprise to its foreign investors, if such foreign investors are considered as non-resident enterprise without any establishment or place within China or if the received dividends have no connection with such foreign investors’ establishment or place within China, unless such foreign investors’ jurisdiction of incorporation has a tax treaty with China that provides for a different withholding arrangement.

As of September 30, 2015, there were no such retained earnings available for distribution.

F-11

The following financial statement amounts and balances of the VIEs were included in the accompanying consolidated financial statements as of and for the nine months and three months ended September 30, 2015 and 2014, respectively:

	September 30, 2015		December 31, 2014
	(Unaudited)

Total assets	$	683,373	$	1,063,768

Total liabilities	$	312,199	$	1,247,265

	Nine months ended September 30,
	2015		2014
	(Unaudited)		(Unaudited)

Revenues	$	1,236,812	$	881,943

Net income (loss)	$	544,291	$	(122,563	)

	For Three Months Ended September 30,
	2015		2014
	(Unaudited)		(Unaudited)
Revenues	$	448,151	$	281,040

Net income (loss)	$	256,418	$	17,831

All of our current revenue is generated in PRC currency Renminbi (“RMB”). Any future restrictions on currency exchanges may limit our ability to use net revenues generated in Renminbi to make dividends or other payments in U.S. dollars or fund possible business activities outside China.

Foreign currency exchange regulation in China is primarily governed by the following rules:

Foreign Exchange Administration Rules (1996), as amended in August 2008, or the Exchange Rules;

Administration Rules of the Settlement, Sale and Payment of Foreign Exchange (1996), or the Administration Rules.

Under the Administration Rules, RMB is freely convertible for current account items, including the distribution of dividends, interest payments, trade and service related foreign exchange transactions, but not for capital account items, such as direct investments, loans, repatriation of investments and investments in securities outside of China, unless the prior approval of the State Administration of Foreign Exchange (“SAFE”) is obtained and prior registration with the SAFE is made. Foreign-invested enterprises like ours that need foreign exchange for the distribution of profits to their shareholders may affect payment from their foreign exchange accounts or purchase and pay foreign exchange rates at the designated foreign exchange banks to their foreign shareholders by producing board resolutions for such profit distribution. Based on their needs, foreign-invested enterprises are permitted to open foreign exchange settlement accounts for current account receipts and payments of foreign exchange along with specialized accounts for capital account receipts and payments of foreign exchange at certain designated foreign exchange banks.

F-12

NOTE 4.

SUMMARIES OF SIGNIFICANT ACCOUNTING POLICIES

Basis of preparation

The accompanying consolidated balance sheet as of December 31, 2014, which has been derived from audited financial statements, and the unaudited interim consolidated financial statements as of September 30, 2015 and for the nine months and three months periods ended September 30, 2015 and 2014 have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”). Certain information and footnote disclosures, which are normally included in financial statements prepared in accordance with United States generally accepted accounting principles (U.S. GAAP), have been condensed or omitted pursuant to such rules and regulations, although we believe that the disclosures made are adequate to provide for fair presentation. The interim financial information should be read in conjunction with the Financial Statements and the notes thereto included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2014, previously filed with the SEC.

In the opinion of management, all adjustments (which include normal recurring adjustments) necessary to present a fair statement of the Company’s consolidated financial position as of September 30, 2015, its consolidated results of operations and cash flows for the nine months and three months periods ended September 30, 2015 and 2014, as applicable, have been made. The interim results of operations are not necessarily indicative of the operating results for the full fiscal year or any future periods.

Principles of consolidation

The consolidated financial statements include the financial statements of the Company and its wholly-owned subsidiaries and VIEs. Upon consolidation, all balances and transactions between the Company and its subsidiaries and VIEs have been eliminated.

Use of estimates

The preparation of consolidated financial statements in conformity with United States generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Management makes these estimates using the best information available at the time the estimates are made; however actual results could differ from those estimates. Significant items subject to such estimates and assumptions include valuation allowances for receivables and recoverability of carrying amount and the estimated useful lives of long-lived assets.

F-13

Cash and cash equivalents

Cash and cash equivalents include cash on hand, cash on deposit with various financial institutions in PRC and all highly-liquid investments with original maturities of three months or less at the time of purchase. Cash accounts are not insured or otherwise protected. Should any bank or trust company holding cash deposits become insolvent, or if the Company is otherwise unable to withdraw funds, the Company would lose the cash on deposits with that particular bank or other financial institutions.

Property and equipment

Property and equipment mainly comprise computer equipment, hardware and office furniture. Property and equipment are recorded at cost less accumulated depreciation with no residual value.

Depreciation for financial reporting purposes is provided using the straight-line method over the estimated useful lives of the assets:

Office and other equipment		5 years

Computers		3 years

Depreciation expense is allocated among Research and development expenses, Selling and marketing expenses and General and administrative expenses.

When office equipment and electronic devices are retired or otherwise disposed of, resulting gain or loss is included in net income or loss in the year of disposition for the difference between the net book value and proceeds received thereon. Maintenance and repairs which do not improve or extend the expected useful lives of the assets are charged to expenses as incurred.

Impairment of long-lived assets

Long-lived assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of long-lived assets to be held and used is measured by a comparison of the carrying amount of the asset to the estimated undiscounted future cash flows expected to be generated by the asset. If the carrying amount of an asset exceeds its estimated future undiscounted cash flows, an impairment loss is recognized for the difference between the carrying amount of the asset and its fair value. There were no impairment losses for the nine months ended September 30, 2015 and 2014, respectively.

F-14

Revenue recognition

The Company recognizes revenue in accordance with ASC 605, Revenue Recognition. Revenues are recognized when the four of the following criteria are met: (i) persuasive evidence of an arrangement exists, (ii) the service has been rendered, (iii) the fees are fixed or determinable, and (iv) collectability is reasonably assured. The recognition of revenue involves certain management judgments. The amount and timing of our revenues could be materially different for any period if management made different judgments or utilized different estimates.

Online Membership Revenue

Online membership revenue includes revenue from members for brand advertising services as well as others services.

The Company has the arrangements with nonrefundable up-front fees model (“the Model”) to recognize revenue for the online membership business. We apply the Model, where a contract is signed to establish a fixed price for our services to be provided for a period of time as a membership enrollment, for a majority of our online membership revenue. Revenue is recognized ratably over the membership periods on a straight line basis, unless evidence suggests that the revenue is earned or obligations are fulfilled in a different pattern, over the contractual term of the arrangement or the expected period during which those specified services will be performed, whichever is longer. The Company provides advertisement placements to our advertising customers on our different Website channels and in different formats, which can include, among other things, banners, links, logos, buttons, rich media, pre-roll and post-roll video screens, pause video screens and content integration, as specified in the contracts with the members. The members can choose various on line services from the membership contracts based on their yearly membership.

For online membership revenue recognition, the Company recognizes revenue when all revenue recognition criteria are met.

Related parties

A party is considered to be related to the Company if the party directly or indirectly or through one or more intermediaries, controls, is controlled by, or is under common control with the Company. Related parties also include principal owners of the Company, its management, members of the immediate families of principal owners of the Company and its management and other parties with which the Company may deal if one party controls or can significantly influence the management or operating policies of the other to an extent that one of the transacting parties might be prevented from fully pursuing its own separate interests. A party which can significantly influence the management or operating policies of the transacting parties or if it has an ownership interest in one of the transacting parties and can significantly influence the other to an extent that one or more of the transacting parties might be prevented from fully pursuing its own separate interests is also a related party.

F-15

Earnings (loss) per common share

Basic earnings (loss) per share is computed by dividing income attributable to common shareholders by the weighted average number of common shares outstanding for all periods. Diluted earnings (loss) per share is computed by dividing net income (loss) attributable to common shareholders by the weighted average number of shares outstanding, increased by common stock equivalents. Common stock equivalents represent incremental shares issuable upon exercise of outstanding warrants. The Company has no such warrants. However, potential common shares are not included in the denominator of the diluted earnings (loss) per share calculation when inclusion of such shares would be anti-dilutive, such as in a period in which a net loss is recorded.

Foreign currency transactions and translations

An entity’s functional currency is the currency of the primary economic environment in which it operates, normally that is the currency of the environment in which the entity primarily generates and expends cash. Management’s judgment is essential to determine the functional currency by assessing various indicators, such as cash flows, sales price and market, expenses, financing and inter-company transactions and arrangements. The reporting currency of the Company is United States dollars (“U.S. dollars” or “$”), and the functional currency of HK Science & Technology is Hong Kong dollars (“HK dollar”). The functional currency of the Company’s PRC subsidiary and VIEs is the Renminbi (“RMB’), and PRC is the primary economic environment in which the Company operates. The reporting currency of these consolidated financial statements is the United States dollar.

For financial reporting purposes, the financial statements of the Company’s PRC subsidiary and VIEs, which are prepared using the RMB, are translated into the Company’s reporting currency, the United States dollar. The financial statements of HK Science & Technology, which are prepared using the HK dollar, are translated into the Company’s reporting currency, the United States dollar. Assets and liabilities are translated using the exchange rate at each balance sheet date. Revenue and expenses are translated using average rates prevailing during each reporting period, and shareholders' equity is translated at historical exchange rates. Adjustments resulting from the translation are recorded as a separate component of accumulated other comprehensive income in owners’ equity.

Transactions denominated in currencies other than the functional currency are translated into the functional currency at the exchange rates prevailing at the dates of the transactions. The resulting exchange differences are included in the determination of net income (loss) of the consolidated financial statements for the respective periods.

F-16

The exchange rates used for foreign currency translation were as follows:

	September 30, 2015		December 31, 2014
(US$1 = RMB) Balance sheet items, except for equity accounts		6.3638		6.1535
(US$1 = HKD)
Balance sheet items, except for equity accounts		7.7502		7.7580

	Nine months ended September 30,
	2015		2014
(US$1 = RMB) Items in the statements of income and comprehensive income, and statements of cash flows		6.1735		6.1502
(US$1 = HKD) Items in the statements of income and comprehensive income, and statements of cash flows		7.7531		7.7579

No representation is made that the RMB amounts could have been, or could be, converted into U.S. dollars at the rates used in translation.

Translations adjustments resulting from this process are included in accumulated other comprehensive loss in the shareholder’s deficit were $67,689 at September 30, 2015 and $56,845 at December 31, 2014, respectively.

Fair Value Measurements

The Company applies the provisions of ASC Subtopic 820-10, Fair Value Measurements, for fair value measurements of financial assets and financial liabilities and for fair value measurements of nonfinancial items that are recognized or disclosed at fair value in the financial statements. ASC 820 also establishes a framework for measuring fair value and expands disclosures about fair value measurements.

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. When determining the fair value measurements for assets and liabilities required or permitted to be recorded at fair value, the Company considers the principal or most advantageous market in which it would transact and it considers assumptions that market participants would use when pricing the asset or liability.

ASC 820 establishes a fair value hierarchy that requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. ASC 820 establishes three levels of inputs that may be used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to measurements involving significant unobservable inputs (Level 3 measurements).

F-17

The three levels of the fair value hierarchy are as follows:

Level 1 inputs to the valuation methodology are quoted prices (unadjusted) for identical assets or liabilities in active markets.

Level 2 inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets, and inputs that are observable for the assets or liability, either directly or indirectly, for substantially the full term of the financial instruments.

Level 3 inputs to the valuation methodology are unobservable and significant to the fair value.

There were no transfers between level 1, level 2 or level 3 measurements for the three months ended September 30, 2015 and 2014, respectively.

As of September 30, 2015 the Company used Level 2 to measure the fair value of the shares that the Company issued to employees and part-time consultants for the service rendered. As the Company’s shares were still not active on OTCBB, no quoted price for those shares.

The carrying values of the Company’s financial assets and liabilities, including accounts receivables, other current assets, and accrued expenses and other current liabilities, are a reasonable estimate of fair value because of the short period of time between the origination of such instruments and their expected realization and if applicable, their stated interest rate approximates current rates available.

Share-Based Compensation

Pursuant to ASC Topic 718, Compensation - Stock Compensation, the Company measures the cost of employee services received in exchange for an award of stock-based compensation based on the grant-date fair value of the award. The cost is recognized over the requisite service period, except for awards granted to employees for past services, which are fully expensed by the grant date.

Recently adopted accounting pronouncements

The Company does not believe other recently issued but not yet effective accounting standards from ASU 2015-01 to ASU 2015-16, if currently adopted, would have a material effect of the consolidated financial position, results of operation and cash flows.

NOTE 5.

EARNINGS (LOSS) PER SHARE

The FASB’s accounting standard for earnings (loss) per share requires presentation of basic and diluted earnings (loss) per share in conjunction with the disclosure of the methodology used in computing such earnings (loss) per share. Basic earnings (loss) per share excludes dilution and is computed by dividing income available to common stockholders by the weighted average common shares outstanding during the period. Diluted earnings (loss) per share takes into account the potential dilution that could occur if securities or other contracts to issue common stock were exercised and converted into common stock. The Company has no potential dilutive securities as of September 30, 2015.

F-18

The following is a reconciliation of the basic and diluted earnings (loss) per share computations for the nine months ended September 30, 2015 and 2014:

	For nine months ended September 30,
	2015		2014
	(Unaudited)		(Unaudited)
Net income(loss) for basic and diluted earnings (loss) per share	$	544,291	$	(122,563	)

Weighted average shares used in basic and diluted computation		65,540,074		62,455,847
Earnings (loss) per share:
Basic and diluted	$	0.008	$	(0.002	)

NOTE 6.

CONCENTRATION OF RISK

Credit risk

Financial instruments that potentially expose the Company to concentrations of credit risk consist primarily of cash, cash equivalents. The Company places its cash and cash equivalents with financial institutions, which management believes are of high-credit ratings and quality.

The Company conducts credit evaluations of customers and generally does not require collateral or other security from its customers. The Company establishes an allowance for doubtful accounts primarily based upon the age of the receivables and factors surrounding the credit risk of specific customers.

Concentration of customers and suppliers

For the nine months ended September 30, 2015, three customers accounted for 40%, 14% and 14% of the Company’s sales respectively. For the nine months ended September 30, 2014, one customer accounted for 13% of the Company’s sales. Except for the afore-mentioned customers, there was no other single customer who accounted for more than 10% of the Company’s sales for the nine months ended September 30, 2015 and 2014, respectively.

For the three months ended September 30, 2015, one customer accounted for 59% of the Company’s sales. For the three months ended September 30, 2014, two customers accounted for 20% and 16% of the Company’s sales. Except for the afore-mentioned customers, there was no other single customer who accounted for more than 10% of the Company’s sales for the three months ended September 30, 2015 and 2014, respectively.

F-19

For the nine months and three months ended September 30, 2015, there was no supplier who accounted for more than 10% of the Company’s purchases. For the nine months ended September 30, 2014, one supplier accounted for 17% of the Company’s purchases. Except for the afore-mentioned, there was no other single supplier who accounted for more than 10% of the Company’s cost of sales for the nine and three months ended September 30, 2015 and 2014, respectively.

NOTE 7.

PREPAID EXPENSES AND OTHER CURRENT ASSETS

At September 30, 2015 and December 31, 2014, prepayment and other current assets consist of:

	September 30, 2015		December 31, 2014
	(Unaudited)

Prepaid rental, phone and to other vendors	$	-	$	5,199
Prepayment to advertisement and internet resources providers		5,808		18,428
Other current assets		15,138		17,607
	$	20,946	$	41,234

Prepayment to advertisement and internet resources providers consists of the deposits required by and made to the telecommunication platform operators for using their network services.

NOTE 8.

PROPERTY AND EQUIPMENT

Property and equipment consists of network equipment and servers used for hosting Company’s website and furniture, equipment and computers used in the office.

At September 30, 2015 and December 31, 2014, Property and equipment consists of the following:

	September 30, 2015			December 31, 2014
	(Unaudited)
Office and other equipment	$	94,528		$	96,022
Computers		62,315			64,444
Property and equipment, cost		156,843			160,466
Less: accumulated depreciation		(149,354	)		(139,981	)
Property and equipment, net	$	7,489		$	20,485

Depreciation expense for the nine months ended September 30, 2015 and 2014 were $14,429 and $22,127, respectively. Depreciation expense for the three months ended September 30, 2015 and 2014 were $2,422 and $ 6,882, respectively.

F-20

NOTE 9.

RELATED PARTY TRANSACTIONS

At September 30, 2015 and December 31, 2014, the Company had a balance due to Xie He Si Decoration Co., Ltd, a related company owned by the Chairman, Mr. Jiang Wei, of $81,864 and $84,662, respectively, for advances made to fund operations. This payable is due on demand, is non-interest bearing and has no maturity date.

NOTE 10.

ADVANCE FROM CUSTOMERS AND DEFERRED REVENUE

Advances from customers represent customer payments for membership contracts but membership has not started. Deferred revenue represents customer payments made in advance for membership contracts while services have not been fully provided. Membership contracts are typically billed on full basis in advance and revenue is recognized ratably over the membership period.

As of September 30, 2015 and December 31, 2014, advances from customers and deferred revenue consisted of the following:

	September 30, 2015		December 31, 2014
	(Unaudited)
Advance from customers	$	15,714	$	32,502
Deferred revenue, current		36,208		964,252
Total	$	51,922	$	996,754

NOTE 11.

OTHER CURRENT LIABILITIES

As of September 30, 2015 and December 31, 2014, other current liabilities consist of the following:

	September 30, 2015		December 31, 2014
	(Unaudited)
Payroll payable	$	9,561	$	11,126
Other payable		16,725		21,103
Total	$	26,286	$	32,229

NOTE 12.

TAXATION

Income Tax

Science & Technology Trading and our combined VIEs are established in Dalian, Province, PRC, and governed by the Income Tax Law of the PRC concerning privately-held enterprises, which are generally subject to tax at a statutory rate of 25% on income reported in the statutory financial statements after appropriate tax adjustments in 2015 and 2014.

F-21

The effective tax rate for the Company for the nine months ended September 30, 2015 and 2014 was 26% and 90% respectively.

A reconciliation of the provision for income taxes determined at the U.S. federal corporate income tax rate to the Company’s effective income tax rate is as follows:

	September 30, 2015			September 30, 2014
	Unaudited			Unaudited
US federal rate		34	%		35	%
Taxable income(losses)		733,484			(64,643	)
Computed expected income tax (expense) benefit		(249,385	)		22,625
Reconciliation items:
Rate differential for domestic earnings		66,014			(6,464	)
Non-deductible expenses		(219	)		(709	)
Valuation allowance on deferred tax assets		(5,603	)		(73,372	)
Effective income tax expense	$	(189,193	)	$	(57,920	)

Realization of the net deferred tax assets is dependent on factors including future reversals of existing taxable temporary differences and adequate future taxable income, exclusive of reversing deductible temporary differences and tax loss or credit carry forwards. The Company evaluates the potential realization of deferred tax assets on an entity-by-entity basis. As of September 30, 2015, valuation allowances were provided against deferred tax assets in entities where it was determined it was more likely than not that the benefits of the deferred tax assets will not be realized. The Company had deferred tax assets which consisted of tax loss carry-forwards, which can be carried forward to offset future taxable income for five years from the year the loss occurred. The management determines it is more likely than not that these deferred tax assets could not be recognized, so full allowances were provided as of September 30, 2015 and December 31, 2014. The deferred tax assets arising from net operating losses will expire from 2019 if not utilized.

F-22

The Company adopted ASC 740-10-25, which provides criteria for the recognition, measurement, presentation and disclosure of uncertain tax position. The Company must recognize the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position. The tax benefits recognized in the financial statements from such a position are measured based on the largest benefit that has a greater than 50% likelihood of being realized upon ultimate resolution. Our estimated liability for unrecognized tax benefits, may be affected by changing interpretations of laws, rulings by tax authorities, changes and/or developments with respect to tax audits, and expiration of the statute of limitations. The outcome for a particular audit cannot be determined with certainty prior to the conclusion of the audit and, in some cases, appeal or litigation process. The actual benefits ultimately realized may differ from our estimates. As each audit is concluded, adjustments, if any, are recorded in our financial statements. Additionally, in future periods, changes in facts, circumstances, and new information may require us to adjust the recognition and measurement estimates with regard to individual tax positions. Changes in recognition and measurement estimates are recognized in the period in which the changes occur. The Company has elected to classify interest and penalties related to an uncertain tax position, if and when required, as part of income tax expense in the combined statements of operations. The Company did not recognize any additional liabilities for uncertain tax positions as a result of the implementation of ASC 740-10-25.

Value Added Tax and relevant surcharge

Revenue of our membership and advertising planning services are subject to 6% value added tax (“VAT”) and 0.72% total surcharge of the gross service income for the business incurred on and after November 1, 2014.

The Company pays the VAT when the invoices are issued to customers and estimates the income tax as the full received amounts had been recognized as revenue. The prepaid VAT and income tax are deductible in the following years.

NOTE 13.

SHAREHOLDERS’ EQUITY (DEFICIT) AND STATUTORY RESERVES

On October 29, 2012, Science & Technology Media entered into a Share Exchange Agreement by and among (i) Science & Technology Holding, (ii) the principal shareholders of China Network Media Inc. (iii) China Network Media Inc. and (iv) the shareholders of Science &Technology Holding.

China Network Media Inc. acquired and now owns 100% of the issued and outstanding shares of capital stock of Science &Technology Media, a British Virgin Islands holding company which controls Dalian Tianyi, Science &Technology (Dalian) and their telecommunications business;

China Network Media Inc. issued 50,000,000 shares of common stock to the shareholders of Science & Technology Media shareholders; and

Science & Technology Media were issued common stock of China Network Media Inc. constituting approximately 95.02% of the fully diluted outstanding shares.

As stipulated by the laws and regulations for enterprises operating in PRC, the subsidiaries of the Company are required to make annual appropriations to a statutory surplus reserve fund. Specifically, the subsidiaries of the Company are required to allocate 10% of their profits after taxes, as determined in accordance with the PRC accounting standards applicable to the subsidiaries of the Company, to a statutory surplus reserve until such reserve reaches 50% of the registered capital of the subsidiaries of the Company. The Company can use the statutory surplus reserve to offset deficits, expand its plant or increase capital when and only when the reserve balance exceeds 50% of the registered capital, and the amount capitalized should be limited to 50% of the statutory surplus reserve. The Company is not yet subject to the requirement to appropriate statutory reserves as they have not produced accumulated net earnings since inception

F-23

NOTE 14.

SHARES GRANTED AND ISSUED TO EMPLOYEES

On February 25, 2014 the Company determined to cancel 10,000 shares which have been issued to 1 consultant, for the contract terminated. The total fair value of these shares was estimated to be $40.

On April 8, 2014 the Company determined to grant equity awards of 2,377,950 and 820,354 shares to 10 part-time consultants and 53 employees respectively, for the services rendered. The total fair value of these shares at the date of grant was estimated to be $90,305.

On September 17, 2014 the Company determined to grant equity awards of 373,200 shares to 13 part-time consultants for the services rendered. The total fair value of these shares at the date of grant was estimated to be $10,538.

On December 14, 2014 the Company determined to grant equity awards of 1,218,000 shares to 9 part-time consultants for the services rendered. The total fair value of these shares at the date of grant was estimated to be $60,234.

On February 10, 2015, the Company determined to grant equity awards of 429,200 shares to 2 part-time consultants and 46 employees for the services rendered. The total fair value of these shares at the date of grant was estimated to be $21,224.

The fair value of the shares granted was $0.04945 per share calculated through the application of an income approach to evaluate the future value of the operation into a present market value. This method eliminates the discrepancy in time value of money by using a discount rate to reflect all business risks including intrinsic and extrinsic uncertainties in relation to the operation.

Major assumptions used for measuring the fair value as follow:

•

It is assumed that there will be no material change in the existing political, legal, technological, fiscal or economic condition which may adversely affect the business of the Company;

•

The Company will adhere to the terms that bond with the contracts and agreements;

•

The Company’s competitive advantages and disadvantages will not change significantly during the period.

NOTE 15.

COMMITMENTS

The Company’s operating lease commitment as of September 30, 2015 and December 31, 2014 were $30,565and $25,883, respectively. The unpaid lease commitment amount is expected to be paid in one year.

NOTE 16.

SUBSEQUENT EVENTS

The Company has evaluated subsequent events through the issuance of the consolidated financial statements and no subsequent event is identified.

F-24

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

The following discussion provides information which management believes is relevant to an assessment and understanding of our results of operations and financial condition for the three months ended September 30, 2015. The discussion should be read along with our financial statements and notes thereto contained elsewhere in this Report. The following discussion and analysis contains forward-looking statements, which involve risks and uncertainties. Our actual results may differ significantly from the results, expectations and plans discussed in these forward-looking statements. See “Cautionary Statement On Forward-Looking Information.”

Overview

We are an emerging online media, search, community and mobile service group. We operate a multi-lingual portal website that serves the technology industry and provides advertising opportunities to companies through our diverse business network in China. We conduct our business through our variable interest entities Dalian Tianyi and Science & Technology (Dalian) in China, which we control through a series of contractual arrangements.

As our main target, we are working on building a carrier in network technology industry integrating new network media, intelligent aged care, seniors housing and aged friendly communities, and technology product selling as the primary business; mobile TV media, traditional media, software development, network game as auxiliary business, to get huge business opportunity from internet industry and healthy retirement industry based in Dalian and facing the whole world:

Build brand image through multiple languages online magazines, online corporate multimedia advertisement, executives interviews, institutional alliances and flexible membership package that are tailored to each business’ needs.

Showcase products to the public, through our custom-made corporate and factory facilities online show room;

Also, the Company has the following future developments:

Host product purchase for businesses and end-users;

Publish job openings and seek talents for corporate clients; and

Post corporate blogs;

We currently derive a substantial portion of our revenues from online advertising services. Our advertising solutions present corporate users with attractive opportunities to combine the visual impact of traditional television-like multimedia advertisements and online magazines with the interactivity and precise targeting capabilities of the Internet.

Critical Accounting Policies and Management Estimates

Our discussion and analysis of our financial condition and results of operations relates to our consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”). The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. On an ongoing basis, we evaluate our estimates based on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions. We believe the consolidation, revenue recognition, income taxes and uncertain tax positions, computation of net loss per share, determination of net accounts receivable, and determination of functional currencies represent critical accounting policies that reflect the more significant judgments and estimates used in the preparation of our consolidated financial statements.

Principles of Consolidation

Risks in Relation to the VIE Structure:

Use of Estimates

The preparation of consolidated financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Management makes these estimates using the best information available at the time the estimates are made; however actual results could differ from those estimates. Significant items subject to such estimates and assumptions include valuation allowances for receivables and recoverability of carrying amount and the estimated useful lives of long-lived assets.

Revenue Recognition

Online Membership Revenue

Online membership revenue includes revenue from members for brand advertising services as well as others services.

The Company has the arrangements with nonrefundable up-front fees model (“the Model”) to recognize revenue for the online membership business. We apply the Model, where a contract is signed to establish a fixed price for our services to be provided for a period of time as a membership enrollment, for a majority of our online membership revenue. Revenue is recognized ratably over the membership periods on a straight line basis, unless evidence suggests that the revenue is earned or obligations are fulfilled in a different pattern, over the contractual term of the arrangement or the expected period during which those specified services will be performed, whichever is longer. We provide advertisement placements to our advertising customers on our different Website channels and in different formats, which can include, among other things, banners, links, logos, buttons, rich media, pre-roll and post-roll video screens, pause video screens and content integration, as specified in the contracts with the members. The members can choose various on line services from the membership contracts based on their yearly membership. The Company recognizes revenue when all revenue recognition criteria are met.

Income Taxes and Uncertain Tax Positions

Income Taxes

The Company follows ASC 740, Income Taxes, which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements or tax returns. Under this method, deferred income taxes are recognized for the tax consequences in future years of differences between the tax bases of assets and liabilities and their financial reporting amounts at each period end based on enacted tax laws and statutory tax rates, applicable to the periods in which the differences are expected to affect taxable income. Valuation allowances are established, when necessary, to reduce deferred tax assets to the amount expected to be realized.

Property and Equipment

Property and equipment mainly comprise computer equipment, hardware and office furniture. Property and equipment are recorded at cost less accumulated depreciation with no residual value.

Depreciation for financial reporting purposes is provided using the straight-line method over the estimated useful lives of the assets:

Office and other equipment		5 years

Computers		3 years

Depreciation expense is included in Selling and marketing expenses and general and administrative expenses.

Foreign currency transactions and translations

For financial reporting purposes, the financial statements of the Company’s PRC subsidiary and VIEs, which are prepared using the RMB, are translated into the Company’s reporting currency, the United States dollar. Assets and liabilities are translated using the exchange rate at each balance sheet date. Revenue and expenses are translated using average rates prevailing during each reporting period, and shareholders' equity is translated at historical exchange rates. Adjustments resulting from the translation are recorded as a separate component of accumulated other comprehensive income in owners’ equity.

Transactions denominated in currencies other than the functional currency are translated into the functional currency at the exchange rates prevailing at the dates of the transactions. The resulting exchange differences from settlement date are included in the determination of net income (loss) of the consolidated financial statements for the respective periods.

The exchange rates used for foreign currency translation were as follows:

	September 30, 2015		December 31, 2014
(US$1 = RMB) Balance sheet items, except for equity accounts		6.3638		6.1535
(US$1 = HKD)
Balance sheet items, except for equity accounts		7.7502		7.7580

	Nine months ended September 30,
	2015		2014
(US$1 = RMB) Items in the statements of income and comprehensive income, and statements of cash flows		6.1735		6.1199
(US$1 = HKD) Items in the statements of income and comprehensive income, and statements of cash flows		7.7531		7.7579

No representation is made that the RMB amounts could have been, or could be, converted into U.S. dollars at the rates used in translation.

Results of Operations

Comparison for Three Months Ended September 30, 2015 and 2014

The following table shows key components of the results of operations during three months ended September 30, 2015 and 2014:

	For Three Months Ended September 30,						Change of Amount			Change of %
	2015			2014
	(Unaudited)			(Unaudited)
Revenue
- Third parties	$	273,823		$	274,279		$	(456	)		(0	)%
- Related parties		174,328			6,761			167,567			2,478	%
		448,151			281,040			167,111			59	%
Cost of revenue
- Third parties		23,776			92,067			(73,542	)		(76	)%
- Related parties		20,532			2,304			23,479			797	%
		44,308			94,371			(50,063	)		(53	)%

Gross profit		403,843			186,669			217,174			116	%

Operating expenses:
Research and development expenses		8,921			30,810			(21,889	)		(71	)%
Selling and marketing expenses		583			5,946			(5,363	)		(90	)%
General and administrative expenses		76,208			106,161			(29,953	)		(28	)%
Total operating expenses		85,712			142,917			(57,205	)		(40	)%
Income from Operations		318,131			43,752			274,379			627	%

Other (expense) income		25			2,326			(2,301	)		(99	)%

Income from operations before income taxes		318,156			46,078			272,078			(86	)%
Provision for income taxes		61,738			28,247			33,491			119	%
Net income		256,418			17,831			238,587			1,338	%

Other comprehensive loss
Foreign currency translation adjustment		(10,116	)		(197	)		(9,919	)		(5,035	)%
Comprehensive income	$	246,302		$	17,634		$	228,668			1,297	%

Revenue

Total revenue was $448,151 for three months ended September 30, 2015, compared to $281,040 for the corresponding period in 2014. The increase in total revenues from the three months ended September 30, 2014 to the three months ended September 30, 2015 was $167,111 or 59%. The increase was mainly attributable to increases in planning and advertising revenue, driven by the business development activities in prior years.

Costs and Expenses

Cost of revenue

Total cost of revenues was $44,308 for the three months ended September 30, 2015, compared to $94,371 for the corresponding period in 2014. The decrease in cost of revenues from the three months ended September 30, 2014 to the three months ended September 30, 2015 was $50,063, or 53%. The main decrease in cost of revenues was mainly a result of decrease in information cost of $1,068, decrease in labor cost of $37,762, and other cost decrease of $18,111 and offset by increase in the cooperation fee for network building of $61 and sales tax of $6,817.

Operating Expenses

Total operating expenses were $85,712 for the three months ended September 30, 2015, compared to $142,917 for the corresponding period in 2014. The decrease in operating expenses from the three months ended September 30, 2014 to the three months ended September 30, 2015 was $57,205, or 40%. The decrease was mainly attributable to decrease of research and development expenses of $21,889, decrease of general and administrative expenses of $29,953 and selling expenses of $5,363.

Research and Development Expenses

Research and development expenses mainly consist of personnel-related expenses incurred for costs associated with new research in new products and services, development and enhancement of existing products and services, and enhancement of our websites, which mainly include the development costs of online advertisement and maintenance costs after the website is available for marketing.

Research and development expenses were $8,921 for the three months ended September 30, 2015, compared to $30,810 for the corresponding period in 2014. The decrease in research and development expenses from the three months ended September 30, 2014 to the three months ended September 30, 2015 was $21,889, or 71%. The decrease was mainly related to decrease in salary and benefits expenses.

Selling and Marketing Expenses

Selling and marketing expenses mainly consist of advertising and promotional expenditures, salary and benefits expenses, sales commissions and travel expenses.

Selling and marketing expenses were $583 for the three months ended September 30, 2015, compared to $5,946 for the corresponding period in 2014. The decrease in selling and marketing expenses from the three months ended September 30, 2014 to the three months ended September 30, 2015 was $5,363, or 90%. The decrease was mainly contributed by decrease in staff cost by $3,939, office expenses by $939 and others by $485. The main reason for the decrease of staff cost because of contracts developed in 2015 were less than those in 2014, less salary incentive for selling personnel.

General and Administrative Expenses

General and administrative expenses mainly consist of salary and benefits expenses, professional service fees, and website hosting service fee, and office rental expenses.

General and administrative expenses were $76,208 for the three months ended September 30, 2015, compared to $106,161 for the corresponding period in 2014. The decrease in general and administrative expenses from the three months ended September 30, 2014 to the three months ended September 30, 2015 was $29,953, or 28%. The decreases were mainly due to a decrease of share base payment of $10,538, decrease of rental expenses of $8,209, decrease of utilities of $6,062, decrease of travelling expenses of $2,881, decrease of business entertainment of $4,993, decrease in miscellaneous fee of $5,838 as the management adjusted the staff structure and cut the office expenses budget in the second quarter 2015 and an increase of $8,568 for professional fees.

Income from Operations

As a result of the foregoing, our operating income was $318,113 for the three months ended September 30, 2015, compared to loss of $43,752 for the three months ended September 30, 2014.

Other Income

Other income was $25 for the three months ended September 30, 2015, compared to other income of $2,326 for the corresponding period in 2014. The decreases were mainly due to less subsidy income in 2015.

Income Tax Expense

Income tax expense was $61,738 for the three months ended September 30, 2015, compared to $28,247 for the three months ended September 30, 2014.

Net Income

For the three months ended September 30, 2015, we had net income of $256,418, compared to $17,831 for the three months ended September 30, 2014.

Comparison for the Nine Months Ended September 30, 2015 and 2014

The following table shows key components of the results of operations during nine months ended September 30, 2015 and 2014:

	For Nine Months Ended September 30,						Change of Amount			Change of %
	2015			2014
	(Unaudited)			(Unaudited)
Revenue
- Third parties	$	1,062,484		$	861,619		$	200,865			23	%
- Related parties		174,328			20,324			154,004			76	%
		1,236,812			881,943			354,869			40	%
Cost of revenue
- Third parties		125,137			363,670			(238,533	)		(62	)%
- Related parties		20,532			3,204			17,328			541	%
		145,669			366,874			(221,205	)		(60	)%

Gross profit		1,091,143			515,069			576,074			112	%

Operating expenses:
Research and development expenses		25,873			97,147			(71,274	)		(73	)%
Selling and marketing expenses		1,784			25,611			(23,827	)		(93	)%
General and administrative expenses		336,860			465,224			(128,364	)		(28	)%
Total operating expenses		364,517			587,982			(223,465	)		(38	)%
Income (loss) from Operations		726,626			(72,913	)		799,539			(1,097	)%

Other income		6,858			8,270			(1,412	)		(17	)%

Income (loss) from operations before income taxes		733,484			(64,643	)		798,127			(1,235	)%
Provision for income taxes		189,193			57,920			131,273			227	%
Net income (loss)		544,291			(122,563	)		676,854			(552	)%

Other comprehensive (loss) income
Foreign currency translation adjustment		(10,844	)		2,668			(13,512	)		(506	)%
Comprehensive income (loss)	$	533,447		$	(119,895	)	$	(653,342	)		(545	)%

Revenue

Total revenues were $1,236,812 for nine months ended September 30, 2015, compared to $881,943 for the corresponding period in 2014. The increase in total revenues from the nine months ended September 30, 2014 to the nine months ended September 30, 2015 was $354,869 or 40%. The increase was mainly attributable to increases in planning and advertising revenue, which caused by business development.

Costs and Expenses

Cost of revenue

Total cost of revenues was $145,669 for the nine months ended September 30, 2015, compared to $366,874 for the corresponding period in 2014. The decrease in cost of revenues from the nine months ended September 30, 2014 to the nine months ended September 30, 2015 was $221,205, or 60%. The main decrease in cost of revenues was mainly a result of decrease in the cooperation fee for network building of $60,973 due to the cooperation with the media resource provider has been completed, decrease in information cost of $17,891, decrease in labor cost of $100,911, and other cost decrease of $51,734 and increase in sales tax of $10,304.

Operating Expenses

Total operating expenses were $364,517 for the nine months ended September 30, 2015, compared to $587,982 for the corresponding period in 2014. The decrease in operating expenses from the nine months ended September 30, 2015 to the nine months ended September 30, 2014 was $223,465, or 38%. The decrease was mainly attributable to decrease of research and development expenses of $71,274, decrease of general and administrative expenses of $128,364 and selling expenses of $23,827.

Research and Development Expenses

Research and development expenses were $25,873 for the nine months ended September 30, 2015, compared to $97,147 for the corresponding period in 2014. The decrease in research and development expenses from the nine months ended September 30, 2014 to the nine months ended September 30, 2015 was $71,274, or 73%. The decrease was mainly related to decrease in salary and benefits expenses due to the staff restructure of the research and development department.

Selling and Marketing Expenses

Selling and marketing expenses mainly consist of advertising and promotional expenditures, salary and benefits expenses, sales commissions and travel expenses.

Selling and marketing expenses were $1,784 for the nine months ended September 30, 2015, compared to $25,611 for the corresponding period in 2014. The decrease in selling and marketing expenses from the nine months ended September 30, 2014 to the nine months ended September 30, 2015 was $23,827, or 93%. The decrease was mainly contributed by decrease in staff cost by $16,810, office expenses by $5,093, travel cost of $1,852 and miscellaneous expense by $72. The Company put more emphasis on exploring sizable customers and customers located in the northeast district of China, which led to a decrease in marketing expenses in 2015.

General and Administrative Expenses

General and administrative expenses mainly consist of salary and benefits expenses, professional service fees, and website hosting service fee, and office rental expenses.

General and administrative expenses were $336,860 for the nine months ended September 30, 2015, compared to $465,224 for the corresponding period in 2014. The decrease in general and administrative expenses from the nine months ended September 30, 2014 to the nine months ended September 30, 2015 was $128,264, or 28%. The decreases were mainly due to a decrease of share base payment of $79,618, decrease of rental expenses of $12,698, office expenses of $4,524, $11,661 decrease in staff cost and a decrease of $19,863 miscellaneous fee as the management adjusted the staff structure and cut the office expenses budget in 2015.

Income (loss) from Operations

As a result of the foregoing, our operating income was $726,626 for the nine months ended September 30, 2015, compared to loss of $72,913 for the nine months ended September 30, 2014.

Other Income

Other income was $6,858 for the nine months ended September 30, 2015, compared to other income of $8,270 for the corresponding period in 2014.

Income Tax Expense

Income tax expense was $189,193 for the nine months ended September 30, 2015, compared to $57,920 for the nine months ended September 30, 2014.

Net Income (loss)

For the nine months ended September 30, 2015, we had net income of $544,291, compared to the net loss of $122,563 for the nine months ended September 30, 2014.

Going Concern

The financial statements have been prepared assuming that the Company will continue as a going concern. The Company currently has limited revenue and has accumulated deficit of $970,364 and $1,514,655 as of September 30, 2015 and December 31, 2014, respectively. These conditions raise substantial doubt about the Company’s ability to continue as a going concern. Management plans to fund continuing operations through new financing from related parties and equity financing arrangements. The Company’s continuation as a going concern is dependent on its ability to meet its obligations, to obtain additional financing as may be required until 2015 when it can generate sources of recurring revenues and to ultimately attain profitability. The financial statements do not include any adjustments that might result from the outcome of this uncertainty. The management also promised to provide economic supports to the Company for operation need including provide loans to the Company.

Liquidity and Capital Resources

Our principal sources of liquidity are cash and cash equivalents, short-term investments, loans from shareholders, as well as the cash flows generated from our operations.

As of September 30, 2015, we had cash and cash equivalents of approximately $583,235. As of December 31, 2014, we had cash and cash equivalents of approximately $909,922. Cash equivalents primarily comprise petty cash and cash in the bank accounts.

We believe that our current cash and cash equivalents combined with proceeds that we expect to generate from our operating activities are sufficient to meet anticipated working capital needs, commitments and capital expenditures over the next twelve months. We may, however, require additional cash resources due to changes in business conditions and other future developments, or changes in general economic conditions.

Cash Generating Ability

We believe that we will generate cash flow from our membership business and other business, which, along with our available cash, will provide sufficient liquidity and financial flexibility.

Our cash flows were summarized below:

	Nine months ended September 30,
	2015			2014
	(Unaudited)			(Unaudited)
Net cash used in operating activities	$	(304,032	)	$	54,267
Net cash used in investing activities		(1,731	)		(2,276	)
Net cash provided by financing activities		-			-
Effect of exchange rate change on cash and cash equivalents		(20,924	)		(971	)
Net (decrease) increase in cash and cash equivalents		(326,687	)		51,020
Cash and cash equivalents at beginning of period		909,922			135,465
Cash and cash equivalents at end of period	$	583,235		$	186,485

Net Cash Used in Operating Activities

For the nine months ended September 30, 2015, $304,032 net cash used in operating activities was primarily attributable to our net income of $544,291 adjusted by non-cash items of depreciation and amortization of $14,429 and $21,224 issuance of shares to employees and part-time consultants, prepaid expenses decreased by 19,509, prepaid tax decreased by $17,937, income tax payable increased by $23,608, advance from customers decreased by $16,198, deferred revenue decreased by $923,804, and other liabilities decreased by $5,028.

For the nine months ended September 30, 2014, $54,267 net cash provided by operating activities was primarily attributable to our net loss of $122,563 adjusted by non-cash items of depreciation and amortization of $22,127 and $100,843 issuance of shares to employees and part-time consultants, decreased prepaid expenses by $70,404 due to decreased advanced payment for advertising strategic cooperation fee, decreased other liabilities by $2,685, decreased deferred revenue by $128,275, and decreased prepaid tax by $7,864, offset by increased advance from customers by $65,038, increased income tax payable by $57,920 and increased accounts receivable by $678.

Net Cash Used in Investing Activities

For the nine months ended September 30, 2015, net cash used in investing activities was $1,731 due to the purchase of new office equipment.

For the nine months ended September 30, 2014, net cash used in investing activities of $2,276, due to the purchase of new office equipment.

Net Cash Provided by Financing Activities

For the nine months ended September 30, 2015 and 2014, there was no cash provided by financing activities, respectively.

Off-Balance Sheet Commitments and Arrangements

As of September 30, 2015 and December 31, 2014, we had lease agreements for the principal offices with commitment amount of 30,565 and $25,883, respectively. The unpaid contract amount is expected to be paid in one year. We have not entered into any financial guarantees or other commitments to guarantee the payment obligations of third parties. We have not entered into any derivative contracts that are indexed to our shares and classified as shareholder’s equity, or that are not reflected in our consolidated financial statements. Furthermore, we do not have any retained or contingent interest in assets transferred to an unconsolidated entity that serves as credit, liquidity or market risk support to such entity. We do not have any variable interest in any unconsolidated entity that provides financing, liquidity, market risk or credit support to us or that engages in leasing, hedging or product development services with us.

Impact of Recently Issued Accounting Standards

Item 3. Quantitative and Qualitative Disclosures About Market Risk.

Smaller reporting companies are not required to provide the information required by this item.

Item 4. Controls and Procedures.

Evaluation of Disclosure Controls and Procedures

Pursuant to Rule 13a-15(b) under the Securities Exchange Act of 1934 (“Exchange Act”), the Company carried out an evaluation, with the participation of the Company’s management, including the Company’s Chief Executive Officer and Chief Financial Officer, of the effectiveness of the Company’s disclosure controls and procedures (as defined under Rule 13a-15(e) under the Exchange Act) as of the end of the period covered by this report. Based upon that evaluation, the Company’s Chief Executive Officer and Chief Financial Officer concluded that despite our hiring of a financial consultant who is familiar with U.S. GAAP in January 2013 and additional trainings offered to our staff in the accounting department and improvements in internal control over financial reporting, our disclosure controls and procedures were not effective as of September 30, 2015 for the material weakness describe below.

Lack of US GAAP expertise - Despite our efforts to improve the Company’s controls and procedures, our accounting personnel do not have sufficient knowledge, experience and training in maintaining our books and records and preparing financial statements in accordance with US GAAP standards and SEC rules and regulations. As such, our personnel do not have adequate accounting skills and understanding necessary to fulfill the requirements of US GAAP-based reporting, including the skills of US GAAP-based period end closing, consolidation of financial statements, and US GAAP conversion, and they are inadequately supervised by persons with requisite qualifications.

Our management has identified the following steps to address the above material weakness:

(1) In January 2013, we engaged a financial accountant to assist us in preparing our financial statements in accordance with US GAAP standards and SEC rules and regulations.

(2) We intend to hire, as needed, key accounting personnel with technical accounting expertise and reorganize the finance department to ensure that accounting personnel with adequate experience, skills and knowledge relating to complex, non-routine transactions are directly involved in the review and accounting evaluation of our complex, non-routine transactions.

Changes in Internal Controls over Financial Reporting

There has been no change in our internal control over financial reporting that occurred during the fiscal quarter covered by this Quarterly Report on Form 10-Q that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

PART II - OTHER INFORMATION

Item 1.

Legal Proceedings.

We are currently not involved in any litigation that we believe could have a material adverse effect on our financial condition or results of operations. There is no action, suit, proceeding, inquiry or investigation before or by any court, public board, government agency, self-regulatory organization or body pending or, to the knowledge of the executive officers of our company or any of our subsidiaries, threatened against or affecting our company, our common stock, any of our subsidiaries or of our companies or our subsidiaries’ officers or directors in their capacities as such, in which an adverse decision could have a material adverse effect.

Item 1A.

Risk Factors.

Smaller reporting companies are not required to provide the information under this item.

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds.

None.

Item 3.

Defaults Upon Senior Securities.

None.

Item 4.

Mine Safety Disclosures.

Not applicable.

Item 5.

Other Information.

None.

Item 6.

Exhibits

Exhibit Number		Exhibit Title

31.1		Certification of Principal Executive and Principal Financial Officer, pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32.1+		Certification of Principal Executive and Principal Financial Officer, pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

101.INS		XBRL Instance Document

101.SCH		XBRL Taxonomy Schema

101.CAL		XBRL Taxonomy Calculation Linkbase

101.DEF		XBRL Taxonomy Definition Linkbase

101.LAB		XBRL Taxonomy Label Linkbase

101.PRE		XBRL Taxonomy Presentation Linkbase

+In accordance with SEC Release 33-8238, Exhibit 32.1 is being furnished and not filed.

SIGNATURES

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

	CHINA NETWORK MEDIA, INC.

Dated: November 16, 2015	By:	/s/ HuiAn Peng
		HuiAn Peng
		Chief Executive Officer and Chief Financial Officer
		(Principal Executive Officer and Principal Accounting and Financial Officer)

China Network Media, Inc. 10-Q