May 15, 2009 - 10-Q: Quarterly report pursuant to Section 13 or 15(d)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q

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

EXCHANGE ACT OF 1934 For the quarterly period ended: March 31, 2009

Commission File Number: 000-33067

CHINA YOUTH MEDIA, INC.

(Exact name of registrant as specified in its charter)

DELAWARE		87-0398271
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

4143 Glencoe Avenue, Unit B, Marina Del Rey, CA 90292

(Address of principal executive offices)

Registrant’s telephone number, including area code: (310) 728-1450

Not Applicable

(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. x Yes o No

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). o Yes o 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 definition of “large accelerated filer”, “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

	Large accelerated filer	o	Accelerated filer	o
	Non-accelerated filer	o	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).

o Yes x No

APPLICABLE ONLY TO CORPORATE ISSUERS

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date. As of May 14, 2009, the issuer had 157,346,672 outstanding shares of Common Stock, $.001 par value.

TABLE OF CONTENTS

PART I - FINANCIAL INFORMATION

		Page
Item 1.	Financial Statements	2
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	18
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	23
Item 4T.	Controls and Procedures	23
PART II - OTHER INFORMATION

Item 1.	Legal Proceedings	24
Item 1A.	Risk Factors
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	24
Item 3.	Defaults Upon Senior Securities	24
Item 4.	Submission of Matters to a Vote of Security Holders	25
Item 5.	Other Information	25
Item 6.	Exhibits	25

SIGNATURES		26

CHINA YOUTH MEDIA, INC.

Consolidated Balance Sheet

	March 31,			December 31,
	2009			2008
	(Unaudited)			(Audited)
ASSETS
CURRENT ASSETS
Cash and cash equivalents	$	231,813		$	34,425
Accounts receivable, net		161,604			161,604
Other current assets		112,500			112,500
TOTAL CURRENT ASSETS		505,917			308,529

Property and equipment, net		17,122			16,778
Intangible assets, net		8,973,884			8,537,503
Other Assets		71,955			98,968

TOTAL ASSETS	$	9,568,878		$	8,961,778

LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)

CURRENT LIABILITIES

Accounts payable	$	196,840		$	197,582
Accrued liabilities		876,195			848,006
Note payable - related party		5,000			5,000

TOTAL CURRENT LIABILITIES		1,078,035			1,050,588

LONG TERM LIABILITIES

Convertible notes payable - related party		2,228,047			2,228,047
Convertible note payable		250,000			250,000
Note payable		748,510			100,000
Debt discount - beneficial conversion feature		(188,626	)		(207,489	)

TOTAL LONG TERM LIABILITIES		3,037,931			2,370,558

TOTAL LIABILITIES		4,115,966			3,421,146
COMMITMENTS AND CONTINGENCIES

STOCKHOLDERS' EQUITY (DEFICIT)

Preferred stock, $0.001 par value: 2,000,000 shares authorized;
Series A Preferred Stock, $0.001 par value; 500,000 shares authorized; 83,020 shares issued and outstanding at March 31, 2009 and December 31, 2008;		83			83
Common stock, $0.001 par value: 500,000,000 shares authorized; 76,078,439 shares issued and outstanding at March 31, 2009; 71,828,439 shares issued and outstanding at December 31, 2009;		76,078			71,828
Paid-in capital		16,936,596			16,313,219
Accumulated deficit		(11,559,845	)		(10,844,498	)

TOTAL STOCKHOLDERS' EQUITY (DEFICIT)		5,452,912			5,540,632

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)	$	9,568,878		$	8,961,778

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

CHINA YOUTH MEDIA, INC.

Consolidated Statements of Operations (Unaudited)

	Three Months Ended
	March 31, 2009			March 31, 2008
REVENUE
Sales	$	—		$	76,149
Total revenue		—			76,149

OPERATING EXPENSES
Cost of sales		—			16,209
Selling, general and administrative expenses		695,016			379,095

Total operating expenses		695,016			395,304

Operating loss		(695,016	)		(319,155	)

Other Income (expense)
Interest expense		(69,693	)		(39,774	)
Rental Income		49,362			—
Loss on Abandonment		—			(130,317	)

Total other income (expense)		(20,331	)		(170,091	)


LOSS BEFORE INCOME TAXES		(715,347	)		(489,246	)

PROVISION FOR INCOME TAXES		—			1,600

NET LOSS	$	(715,347	)	$	(490,846	)

BASIC AND DILUTED NET LOSS PER COMMON SHARE	$	(0.01	)	$	(0.01	)

WEIGHTED AVERAGE COMMON SHARES OUTSTANDING		73,958,995			39,767,440

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

CHINA YOUTH MEDIA, INC.

Consolidated Statements of Cash Flows (Unaudited)

	Three Months Ended
	March 31, 2009			March 31, 2008
Cash flows from operating activities:
Net loss	$	(715,347	)	$	(490,846	)
Adjustments to reconcile net loss to net cash used in operating activities:
Loss on Abandonment		—			130,317
Depreciation		1,913			21,533
Amortization of licenses		169,442			31,211
Amortization of debt discount		18,863			9,684
Stock-based compensation to employees and directors		1,127			49,342
Changes in operating assets and liabilities:
Accounts receivable		—			3,798
Inventories		—			15,436
Other assets		27,013			—
Accounts payable and accrued liabilities		49,947			72,566
Deferred revenue		—			—

Net cash used in operating activities		(447,042	)		(156,959	)

Cash flows from investing activities:
Purchases of property and equipment		(2,257	)		—
Purchases of intangible assets		(5,823	)		—

Net cash used in investing activities		(8,080	)		—

Cash flows from financing activities:
Proceeds from issuance of common stock		4,000			300,000
Proceeds from related party note		—			82,000
Proceeds from note		648,510			—

Net cash provided by financing activities		652,510			382,000

Net increase (decrease) in cash and cash equivalents		197,388			225,041

Cash and cash equivalents at beginning of period		34,425			5,600

Cash and cash equivalents at end of period	$	231,813		$	230,641

Supplemental disclosures of cash flow information:

Cash paid for income taxes	$	—		$	1,600

Non-cash investing and financing activity:

Shares issued pursuant to consulting agreement	$	22,500		$	—
Acquisition of intangible assets for stock	$	600,000		$	—

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

CHINA YOUTH MEDIA, INC.

Notes to Consolidated Interim Financial Statements - Unaudited

March 31, 2009

1. Description of Business

China Youth Media, Inc. (“the Company”) was organized under the laws of the State of Utah on July 19, 1983 under the name of Digicorp. Pursuant to shareholder approval, on October 6, 2006, the Board of Directors of the Company approved and authorized the Company to enter into an Agreement and Plan of Merger by and between the Company and Digicorp, Inc., a Delaware corporation and newly formed wholly-owned subsidiary of the Company that was incorporated under the Delaware General Corporation Law for the purpose of effecting a change of domicile. Effective February 22, 2007, the Company changed its domicile from Utah to Delaware with the name of the surviving corporation being Digicorp, Inc.

Pursuant to a Certificate of Amendment to our Certificate of Incorporation filed with the State of Delaware which took effect as of October 16, 2008, the Company’s name changed from “Digicorp, Inc.” to “China Youth Media, Inc.” (the “Corporate Name Change”). As a result of the Corporate Name Change, our stock symbol changed to “CHYU” with the opening of trading on October 16, 2008 on the OTCBB.

China Youth Media, Inc.

Youth Media (BVI) Limited

On May 8, 2008, under the laws of the British Virgin Islands, the Company formed Youth Media (BVI) Limited (“YM BVI”). YM BVI is a wholly-owned subsidiary of the Company and was established for the purpose of incorporating the Company’s wholly-owned subsidiary in Hong Kong.

Youth Media (Hong Kong) Limited and Youth Media (Beijing) Limited

Youth Media (Hong Kong) Limited (“YMHK”), a company organized under the laws of Hong Kong on May 19, 2008, and Youth Media (Beijing) Limited (“YMBJ”), a company organized under the laws of the People’s Republic of China on December 10, 2008, are wholly-owned subsidiaries of YM BVI and were formed by the Company to take advantage of its shift in business to aggregation and distribution of international content and advertising for Internet or online consumption in China.

Rebel Crew Films, Inc.

Rebel Crew Films is a wholly-owned subsidiary of the Company and was organized under the laws of the State of California on August 7, 2002. In January 2008, the Company entered into a license and distribution agreement with Westlake Entertainment, Inc. which effectively shifted all day-to-day operations related to our home video library to Westlake Entertainment. The licensing transaction was part of an initiative to focus a significant amount of the Company’s available resources to building and launching www.Koobee.com, our ITVN media portal in China.

ViraCast and Beat9.com

Our patent pending technology called ViraCast dynamically inserts and continuously updates interactive, geo-targeted advertising into digital content, such as Internet videos, podcasts, etc. ViraCast digitally embeds advertising into digital content that then has the ability to propagate virally across the Internet while continuously tracking ad consumption and user interaction. ViraCast tracks impressions, clicks, and other pertinent data valuable to advertisers. Our customers benefit from our verifiable ad tracking by paying only for ads that are viewed, clicked or acted on. Currently, ViraCast is available via our wholly-owned and operated website www.Beat9.com.

PerreoRadio.com

PerreoRadio.com is our wholly-owned and operated website targeted to the young, urban Latino demographic in both the United States and internationally. It offers online radio shows, podcasts, music, and music videos from some of the top DJ’s from the United States, Latin America, and the Caribbean. PerreoRadio.com generates almost exclusively all revenue from the placement of ads on the website. We are a publisher-affiliate to all the large ad-network providers. We generally recognize revenue on a monthly basis when payment is received from our publisher-affiliates.

The Company is organized in a single operating segment with no long-lived assets outside of the United States of America. All of our revenues to date have been generated in the United States, but with the development of our China ITVN media portal, we expect that a portion of our future revenues will be from other countries.

2. Basis of Presentation and Significant Accounting Policies.

Basis of Presentation

The accompanying consolidated financial statements have been prepared in accordance with the Generally Accepted Accounting Principles in the United States of America (“GAAP”).

Principles of Consolidation

The accompanying consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. All significant intercompany accounts and transactions have been eliminated in consolidation.

Going Concern

The accompanying financial statements have been prepared assuming that the Company will continue as a going concern which contemplates the realization of assets and satisfaction of liabilities in the normal course of business. At March 31, 2009, the Company had an accumulated deficit of $11.6 million and a working capital deficit of $572,000. During the three months ended March 31, 2009, the Company incurred a loss of approximately $715,000. During the three months ended March 31, 2009, the Company primarily relied upon debt and equity investments to fund its operations. These conditions raise substantial doubt about the Company’s ability to continue as a going concern. Management is currently seeking additional financing and believes that these avenues will continue to be available to the Company to fund its operations, however no assurances can be made. The accompanying financial statements do not include any adjustments that might result from the outcome of this uncertainty.

Use of Estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. These estimates are based on knowledge of current events and anticipated future events and accordingly, actual results may differ from those estimates.

Foreign Currency Transactions

The Company’s functional currency is the United States Dollar (the “US Dollar”). From time to time, and with the contemplation of expanding the Company’s operations in China, the Company enters into transactions denominated in the currency of the People’s Republic of China, whose principal unit is the Yuan (“Renminbi” or “RMB”) and in the Hong Kong Dollar (“HK Dollar”). The transactions denominated in currencies other than the functional currency are translated into US Dollars at the exchange rates quoted by the Federal Reserve Bank of New York which represents the noon buying rate in the City of New York and are certified for customs purposes. These exchange rates are not intended to imply that the foreign exchange rates quoted could have been, or could be, converted, realized or settled into U.S. dollars or any other currency at the quoted rate on the date of the transaction. During the three months ended March 31, 2009, exchange rate fluctuations between the US Dollar and the PRC RMB were relatively flat and the Company did not recognize any exchange rate gains or losses.

Cash and Cash equivalents

The Company considers only highly liquid investments such as money market funds and commercial paper with maturities of 90 days or less at the date of their acquisition as cash and cash equivalents.

The Company maintains cash in bank and deposit accounts which, at times, may exceed federally insured limits. The Company has not experienced any losses in such accounts. The Company believes it is not exposed to any significant credit risk on cash and cash equivalents.

Fair Value of Financial Instruments

The carrying amounts of financial instruments, including cash and cash equivalents, accounts receivable, accounts payable and accrued liabilities, approximate fair value as of March 31, 2009 because of their generally short term nature.

Goodwill

In accordance with Statement of Financial Accounting Standards No. 142, Goodwill and Other Intangible Assets (“SFAS No. 142”), goodwill is defined as the excess of the purchase price over the fair value assigned to individual assets acquired and liabilities assumed and is tested for impairment at the reporting unit level (operating segment or one level below an operating segment) on an annual basis in the Company’s fourth fiscal quarter or more frequently if indicators of impairment exist. The performance of the test involves a two-step process. The first step of the impairment test involves comparing the fair value of the Company’s reporting units with each respective reporting unit’s carrying amount, including goodwill. The fair value of reporting units is generally determined using the income approach. If the carrying amount of a reporting unit exceeds the reporting unit’s fair value, the second step of the goodwill impairment test is performed to determine the amount of any impairment loss. The second step of the goodwill impairment test involves comparing the implied fair value of the reporting unit’s goodwill with the carrying amount of that goodwill. In accordance with SFAS No. 142, no amortization is recorded for goodwill with indefinite useful life. No goodwill impairment was recognized during the three months ended March 31, 2009 and 2008.

Intangible Assets

In accordance with Statement of Financial Accounting Standards No. 142, Goodwill and Other Intangible Assets (“SFAS No. 142”), intangible assets that are determined not to have an indefinite useful life are subject to amortization. The Company amortizes intangible assets using the straight-line method over their estimated useful lives.

Impairment of Long-Lived and Intangible Assets

In accordance with Statement of Financial Accounting Standards No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets (“SFAS No. 144”), the Company reviews long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of these assets may not be recoverable. The Company assesses the recoverability of the long-lived and intangible assets by comparing the carrying amount to the estimated future undiscounted cash flow associated with the related assets. No impairment was recognized during the three months ended March 31, 2009 and 2008.

Website Development Costs

The Company accounts for development costs associated with Koobee according to the provisions of SOP 98-1, Accounting for the Costs of Computer Software Developed or Obtained for Internal Use. Costs directly related to the development of the website infrastructure are capitalized. Other costs including planning, maintenance, and operating costs are expensed as incurred.

Stock-Based Compensation

The Company accounts for stock-based compensation awards in accordance with the provisions of Statement of Financial Accounting Standards No. 123(R), Share-Based Payment (“SFAS No. 123R”), which addresses the accounting for employee stock options. SFAS No. 123R revises the disclosure provisions of Statement of Financial Accounting Standards No. 123, Accounting-Based Compensation (“SFAS No. 123”), and supersedes Accounting Principles Board Opinion No. 25, Accounting for Stock Issued to Employees (“APB No. 25”). SFAS No. 123R requires that the cost of all employee stock options, as well as other equity-based compensation arrangements, be reflected in the financial statements over the vesting period based on the estimated fair value of the awards. During the three months ended March 31, 2009 and March 31, 2008, the Company had stock-based compensation expense related to issuances of stock options and warrants to the Company’s employees, directors and consultants of $1,100 and $49,000, respectively.

Revenue Recognition

Advertising Supported Intranet Television Network Media Website - Koobee is a large scale, advertising supported Intranet Television Network (ITVN) media portal that is initially targeting China’s campus based college students, estimated to total more than 30 million young people. Koobee is a venue for marketers to deliver traditional TV spots and new media advertising campaigns to a vast, upwardly mobile, targeted demographic. Advertisers and channel owners will have available to them multiple touch points ranging from interstitial interactive ads to banners within social networking clubs and sponsored competitions, all with accurate ad tracking that ensures clients realize value from unique and fully licensed content. Koobee provides advertisers the impact of TV with the ROI of the Internet. We expect this combination to be competitive and sufficiently appealing to capture market share in China’s fast growth online advertising industry. We believe that significant opportunities exist in the China Internet advertising space, and we will actively pursue this potential source of revenue during the year ending December 31, 2009.

Digital Content Distribution. - - ViraCast and www.Beat9.com - The Company generates revenue by dynamically inserting and continuously updating interactive, geo-targeted advertising into digital content, such as Internet videos, podcasts, etc. Our patent pending technology, ViraCast, digitally embeds advertising into digital content that then has the ability to propagate virally across the Internet while continuously tracking ad consumption and user interaction. ViraCast tracks impressions, clicks and other pertinent data valuable to advertisers. Ads are provided from our publisher-affiliates and we generally recognize revenue on a monthly basis when payment is received from our publisher-affiliates.

Website Ad Revenue. - www.PerreoRadio.com - We generate revenue from our wholly owned and operated website www.PerreoRadio.com. PerreoRadio.com generates revenue almost exclusively from the placement of ads on the website. We are a publisher-affiliate to all the large ad-network providers. We generally recognize revenue on a monthly basis when payment is received from our publisher-affiliates.

Accounts Receivable

Accounts receivable are recorded at the invoice amount and do not bear interest. Accounts receivable at March 31, 2009 and December 31, 2008 are presented net of an allowance for doubtful accounts of $15,000 and 15,000, respectfully.

Allowance for Doubtful Accounts

The allowance for doubtful accounts is the Company’s estimate of the amount of probable credit losses in the Company’s existing accounts receivable. The Company determines the allowance based on historical write-off experience. The Company reviews its allowance for doubtful accounts periodically. Past due balances are reviewed individually for collectability. Account balances are charged off against the allowance after all means of collection have been exhausted and potential for recovery is considered remote. The Company does not have any off-balance-sheet exposure related to its customers.

Property and Equipment

Property and equipment are recorded at cost and depreciated using the straight-line method over the useful lives of the assets, generally from three to seven years. Property and equipment at March 31, 2009 and December 31, 2008 are presented net of accumulated depreciation of $25,600 and $23,700, respectfully. Depreciation expense for the three months ended March 31, 2009 and 2008 was $2,000 and $22,000, respectively.

Beneficial Conversion Feature of Convertible Notes Payable

The Company accounts for convertible notes payable in accordance with the guidelines established by APB Opinion No. 14, Accounting for Convertible Debt and Debt issued with Stock Purchase Warrants (“APB No. 14”), Emerging Issues Task Force (“EITF”) 98-5, Accounting for Convertible Securities with Beneficial Conversion Features or Contingently Adjustable Conversion Ratios and EITF 00-27, Application of Issue No 98-5 To Certain Convertible Instruments.

The Beneficial Conversion Feature (“BCF”) of a convertible note, is normally characterized as the convertible portion or feature of certain notes payable that provide a rate of conversion that is below market value or in-the-money when issued. The Company records a BCF related to the issuance of a convertible note when issued and also records the estimated fair value of the warrants issued with those convertible notes.

The BCF of a convertible note is measured by allocating a portion of the note’s proceeds to the warrants and as a reduction of the carrying amount of the convertible note equal to the intrinsic value of the conversion feature, both of which are credited to additional paid-in-capital. The Company calculates the fair value of warrants issued with the convertible note using the Black-Scholes valuation model and uses the same assumptions for valuing employee options in accordance with SFAS No. 123R. The only difference is that the contractual life of the warrants is used.

The value of the proceeds received from a convertible note is then allocated between the conversion feature and warrants on a relative fair value basis. The allocated fair value is recorded in the consolidated financial statements as a debt discount (premium) from the face amount of the note and such discount is amortized over the expected term of the convertible note (or to the conversion date of the note, if sooner) and is credited to interest expense.

Income Taxes

The Company has implemented the provisions of Statement of Financial Accounting Standards No. 109, Accounting for Income Taxes (“SFAS 109”). SFAS 109 requires that income tax accounts be computed using the liability method. Deferred taxes are determined based upon the estimated future tax effects of differences between the financial reporting and tax reporting bases of assets and liabilities given the provisions of currently enacted tax laws.

Advertising Costs

The Company expenses advertising costs when incurred. Advertising expense for the three months ended March 31, 2009 and 2008 was $900 and $800, respectively.

Recent Accounting Pronouncements

In December 2007, the FASB issued Statement of Financial Accounting Standards No. 141(R), Business Combinations (“SFAS 141(R)”). This statement requires the acquiring entity in a business combination to record all assets acquired and liabilities assumed at their respective acquisition-date fair values, changes the recognition of assets acquired and liabilities assumed arising from contingencies, changes the recognition and measurement of contingent consideration, and requires the expensing of acquisition-related costs as incurred. SFAS 141(R) also requires additional disclosure of information surrounding a business combination, such that users of the entity’s financial statements can fully understand the nature and financial impact of the business combination. SFAS 141(R) is effective for the Company beginning January 1, 2009 and we will apply it prospectively to business combinations completed on or after that date.

In December 2007, the FASB issued Statement of Financial Accounting Standards No. 160, Noncontrolling Interests in Consolidated Financial Statements an amendment of ARB 51 (“SFAS 160”). SFAS 160 establishes accounting and reporting standards for ownership interests in subsidiaries held by parties other than the parent, the amount of consolidated net income attributable to the parent and to the noncontrolling interest, changes in a parent’s ownership interest and the valuation of retained noncontrolling equity investments when a subsidiary is deconsolidated. SFAS 160 also established reporting requirements that provide sufficient disclosures that clearly identify and distinguish between the interests of the parent and the interests of the noncontrolling owner. SFAS No. 160 is effective for the Company beginning January 1, 2009. We do not expect the adoption of this standard to have a material impact on the Company’s income statement, financial position or cash flows.

In February 2008, the FASB issued FASB Staff Position (“FSP”) No. FAS 157-2, Effective Date of FASB Statement No. 157 (“FSP FAS 157-2”), which delays the effective date of SFAS No. 157, Fair Value Measurements (“SFAS 157”) for all non-financial assets and non-financial liabilities, except those that are recognized or disclosed at fair value in the financial statements on a recurring basis (at least annually) for fiscal years beginning after November 15, 2008, and interim periods within those fiscal years for items within the scope of this FSP. The adoption of FSP FAS 157-2 is not expected to have a material impact on the Company’s consolidated financial position, cash flows, or results of operations.

In March 2008, the FASB issued SFAS No. 161, “Disclosures about Derivative Instruments and Hedging Activities an amendment of FASB Statement No. 133”, which is effective for fiscal years beginning after November 15, 2008. This statement amends and expands the disclosure requirements of SFAS No. 133 with the intent to provide users of financial statements with an enhanced understanding of: a) How and why an entity uses derivative instruments; b) How derivative instruments and related hedged items are accounted for under SFAS No. 133 and its related interpretations; and c) How derivative instruments and related hedged items affect an entity’s financial position, financial performance, and cash flows. SFAS No. 161 is effective for the Company beginning in the first quarter of fiscal 2009. We do not expect the adoption of SFAS No. 161 to have a material effect on the Company’s consolidated results of operations and financial condition.

In April 2008, the FASB issued FSP FAS No. 142-3, “Determination of the Useful Life of Intangible Assets”, which is effective for fiscal years beginning after November 15, 2008. This statement amends the factors that should be considered in developing renewal or extension assumptions used to determine the useful life of a recognized intangible asset under SFAS No. 142. FAS No. 142-3 is effective for the Company beginning January 1, 2009. We do not expect the adoption of FAS No. 142-3 to have a material impact on the Company’s income statement, financial position or cash flows.

In May 2008, the FASB issued FSP Accounting Principles Board Opinion (“APB”) No. 14-1, Accounting for Convertible Debt Instruments That May Be Settled in Cash upon Conversion (Including Partial Cash Settlement) (“FSP APB 14-1”), which requires the issuer of certain convertible debt instruments that may be settled in cash (or other assets) on conversion to separately account for the liability (debt) and equity (conversion option) components of the instrument in a manner that reflects the issuer’s nonconvertible debt borrowing rate. FSP APB 14-1 became effective for the Company on January 1, 2009 and requires retroactive application. The adoption of FSP APB 14-1 is not expected to have a material impact on the Company’s consolidated financial position, cash flows, or results of operations.

In May 2008, the FASB issued SFAS No. 162, “The Hierarchy of Generally Accepted Accounting Principles”, which is effective 60 days following the SEC’s approval of the Public Company Accounting Oversight Board (PCAOB) amendments to AU Section 411, The Meaning of Present Fairly in Conformity With Generally Accepted Accounting Principles. This Statement identifies the sources of accounting principles and the framework for selecting the principles used in the preparation of financial statements of nongovernmental entities that are presented in conformity with generally accepted accounting principles (GAAP) in the United States (the GAAP hierarchy). We do not expect the adoption of SFAS No. 162 to have a material impact on the Company’s income statement, financial position or cash flows.

3. Other Current Assets

On September 1, 2008 the Company entered into a Consulting Agreement (“Consulting Agreement”) with American Capital Ventures, Inc. (“ACV, Inc.”). Pursuant to the terms of the Consulting Agreement, ACV, Inc. will provide the Company with investor relations consulting services for a period of two years and in consideration, ACV, Inc. will receive 2.5 million shares of the Company’s Common Stock of which 1.5 million shares will be issued during the initial twelve-month term and the remainder will be issued on the thirteenth month of the agreement term. The Consulting Agreement was valued at $225,000 based on the fair value of the underlying shares of the Company’s common stock on the effective date of the Agreement and will be amortized on a straight-line basis over the agreement term of two years.

The balance recorded in other current assets at March 31, 2009 corresponds to the current portion of the prepaid expense of $112,500 related to the Consulting Agreement with ACV, Inc.

4. Property and Equipment

Property and equipment at March 31, 2009 and December 31, 2008 consist of the following:

Property and Equipment	March 31			December 31,
	2009			2008
Computer Software and Equipment	$	36,103		$	33,846
Office Furniture and Equipment		6,628			6,628
Total Property and Equipment		42,731			40,474

Less: Accumulated Depreciation		(25,608	)		(23,696)
Property and Equipment, net	$	17,123		$	16,778

5. Intangible Assets

Intangible assets consist of capitalized Content License Agreements, China IPTV & Mobile Licenses, license fees for licensed content the Company acquired from owners including producers, studios and distributors, as well as the Company’s Koobee.com and PerreoRadio.com suite of websites and internet properties.

On June 2, 2008, the Company entered into a Content License Agreement (the “Content License Agreement”) with New China Media, LLC (“New China Media”), YGP, LLC (“YGP”) and TWK Holdings, LLC (“TWK”) (collectively referred to as “Content Providers”). In consideration for the license to certain content by the Content Providers, the Content License Agreement provided for the issuance of 31,200 shares of the Company’s Series A Convertible Preferred Stock, that are convertible to 31,200,000 shares of the Company’s common stock. The Content License was valued at $2,808,000 based on the fair value of the associated underlying shares of the Company’s common stock. The Content License Agreement has a term of 2 years with an automatic renewal term of an additional 2 years and, as such, has an estimated useful life of 4 years. The Content License Agreement will be amortized over the respective estimated useful life and will be reviewed periodically for impairment in accordance with FASB Statement No. 144, Accounting for Impairment or Disposal of Long-Lived Assets. On January 8, 2009, the Content License Agreement was further extended by an additional eight (8) years for a total of ten (10) years. In consideration for the increase in the term of the agreement, New China Media received four million (4,000,000) shares of the Company’s common stock. The Content License Agreement extension was valued at $604,000 based on the fair value of the associated underlying shares of the Company’s common stock on the date of the extension agreement.

Koobee.com has been determined to have an indefinite useful life based primarily on the renewability of the domain name. Intangible assets with an indefinite life are not subject to amortization, but will be subject to periodic evaluation for impairment.

Licensed content acquired is capitalized at the time of purchase. The term of the licensed content agreements usually vary between one to five years (the “Title Term”). At the end of the Title Term, the Company generally has the option of discontinuing distribution of the title or extending the Title Term. The Company amortizes the capitalized license fees, on a straight line basis over the Title Term. During the three months ended March 31, 2009 and 2008, amortization expense related to the licensed content was $4,300 and $31,200, respectively.

The PerreoRadio suite of websites consists of the following Internet domain names and all materials, intellectual property, goodwill and records in connection therewith (the “PerreoRadio Assets” or “PerreoRadio”): Perreoradio.com, Radioperreo.com, Perreomobile.com, Perreotv.com, Puroperreo.com, Puroreggaeton.com, Purosandungueo.com, Sandungueoradio.com, Machetemusic.net, Machetemusic.org, Machetemusica.com and Musicamachete.com.

Intangible assets and accumulated amortization at March 31, 2009 and December 31, 2008 are comprised of the following:

Intangible Assets	March 31,			December 31,
	2009			2008
China IPTV & Mobile Licenses	$	6,391,800		$	6,391,800
YesTV China IPTV Rights		3,408,,000			2,808,000
Koobee		7,833			2,010
PerreoRadio Assets		27,800		$	27,800
Licensed and Developed Content		283,104			283,104
Total Intangible Assets		10,118,537			9,512,714

Less: Accumulated Amortization		(1,144,653	)		(975,211	)
Intangible Assets, net	$	8,973,884		$	8,537,503

6. Other Assets

The balance recorded in other current assets at March 31, 2009 correspond to security deposits of $18,400 related to our lease holdings, $1,500 related to Water and Power Utility deposit requirements, $5,200 of deferred rental income, and the long-term portion of the prepaid expense of $47,000 related to the Consulting Agreement with ACV, Inc.

7. Loss Per Common Share

Income (loss) per common share is based on the weighted average number of common shares outstanding. The Company complies with SFAS No. 128, Earnings Per Share, which requires dual presentation of basic and diluted earnings per share on the face of the statements of operations. Basic per share earnings or loss excludes dilution and is computed by dividing income (loss) available to common stockholders by the weighted-average common shares outstanding for the period. Diluted per share earnings or loss reflect the potential dilution that could occur if convertible preferred stock or debentures, options and warrants were to be exercised or converted or otherwise result in the issuance of common stock that is then shared in the earnings of the entity.

Since the effects of outstanding options, warrants and the conversion of convertible preferred stock and convertible debt are anti-dilutive in all periods presented, shares of common stock underlying these instruments have been excluded from the computation of Loss per Common Share.

As of March 31, 2009, there were outstanding (i) 6,925,000 options and 58,333 warrants issued pursuant to the Company’s Stock Option Plan, (ii) 1,950,000 shares issuable upon conversion of outstanding warrants that were issued outside the Company’s Stock Option Plan, (iii) 83,020,000 shares reserved for issuance upon conversion of Series A Convertible Preferred Stock, (iv) 74,147,467 shares reserved for issuance upon conversion of outstanding convertible promissory notes, and (v) 750,000 reserved for issuance pursuant to the Consulting Agreement with ACV, Inc.

8. Accrued Liabilities

Accrued liabilities at March 31, 2009 and December 31, 2008 are comprised of the following:


Accrued Liabilities	March 31,		December 31,
	2009		2008
Obligations on license agreements	$	47,595	$	47,595
Accrued salaries		330,000		330,000
Accrued professional fees		67,500		90,000
Interest		127,847		77,016
Deferred rent expense		—		25,899
Sublease security deposits		32,000		32,000
Accrued vendor liabilities		200,082		200,082
Other		45,414		45,414
	$	850,438	$	848,006

9. Note Payable - Related Party

On July 13, 2006, William Horne, the Company’s former Chief Financial Officer and Director, loaned the Company $5,000. As consideration for the loan, the Company issued Mr. Horne a demand promissory note (the “July 06 Note”) at a rate equal to the prime rate published in The Wall Street Journal from time to time, and currently 8.25%, to the date of payment in full. Pursuant to the terms of a Conversion and Note Termination Agreement dated July 1, 2008, by and between Mr. Horne and the Company (the “Conversion Note”), the entire principal amount outstanding and all interest accrued from inception of the July 06 Note through the date of the Conversion Note, totaling approximately $813, and other various amounts owed to Mr. Horne totaling approximately $1,231, will be converted into 234,789 shares of Common Stock (the “Conversion Shares”). The conversion of the note was based upon a common stock value of $0.03 per share, which represented the offering price of the Company’s Common Stock in its most recently completed equity financing transaction on the date of the Conversion Note. At March 31, 2009, the Conversion Shares had not been issued.

10. Convertible Note Payable - Related Party

Rebel Holdings Convertible Note

The Consolidated Note provides that the principal amount thereof shall, at the option of Rebel Holdings, be convertible at a conversion price equal to the lesser of, or more favorable to Rebel Holdings, of the following (i) $0.03 per share of Common Stock (which represents the offering price of the Company’s Common Stock in its most recently completed equity financing transaction) provided a notice of conversion is submitted no later than 45 days after September 10, 2008, or (ii) the then current offering terms for any bona fide pending offering of the Company, provided a notice of conversion pursuant thereto is submitted no later than 30 days following the completion of the offering, and contains such other terms and conditions as set forth therein. Pursuant to a notice of conversion provided within the allowable time period, Rebel Holdings elected to convert the entire principal amount outstanding under the Consolidated Note into 69,268,233 shares of Common Stock at $0.03 per share. As of March 31, 2009, the 69,268,233 shares of Common Stock related to the Consolidated Note have not been issued.

Mojo Music Convertible Note

Other convertible notes payable - related party — On September 30, 2008, the Company entered into a subscription agreement with Mojo Music, Inc. (“Mojo Music”). Jay Rifkin, the Company’s President and Chief Executive Officer, is the sole managing member of Mojo Music. The Company sold 1.5 Units, with each Unit consisting of a $100,000 Convertible Promissory Note bearing interest at 12% per annum, due three years from the date of issuance and warrants to purchase an aggregate of up to 350,000 shares of its Common Stock. The warrants are exercisable for a period of five years and have an exercise price equal to $0.09 per share subject to the Company’s filing of a certificate of amendment to its certificate of incorporation increasing the number of its available shares for issuance. The subscription agreement with Mojo Music provided the Company with $150,000 in gross proceeds. Pursuant to the subscription agreement with Mojo Music, the Company issued 525,000 Purchase Warrants. See Note 16 Warrants.

As the effective conversion price of the Mojo Music Convertible Promissory Note on the date of issuance was below the fair market value of the underlying common stock, the Company recorded debt discount in the amount of $28,300 based on the intrinsic value of the beneficial conversion feature of the Mojo Music Convertible Promissory Note. The warrant issued to Mojo Music in conjunction with the convertible note will expire after September 30, 2013. The Company recorded debt discount in the amount of $28,300 based on the estimated fair value of the warrants. In accordance with EITF No. 00-27, Application of Issue No. 98-5 to Certain Convertible Instruments, the debt discount as a result of the beneficial conversion feature of the Mojo Music Convertible Promissory Note and the estimated fair value of the warrants was amortized as non-cash interest expense over the term of the debt using the effective interest method. During the three months ended March 31, 2009, interest expense of $2,400 has been recorded from the debt discount amortization.

11. Convertible Note Payable

Convertible note payable — On August 29, 2008, the Company entered into a subscription agreement with Year of the Golden Pig, LLC (“YGP, LLC”). The Company sold 2.5 Units, with each Unit consisting of a $100,000 Convertible Promissory Note bearing interest at 12% per annum, due three years from the date of issuance and warrants to purchase an aggregate of up to 350,000 shares of its Common Stock. The warrants are exercisable for a period of five years and have an exercise price equal to $0.09 per share subject to the Company’s filing of a certificate of amendment to its certificate of incorporation increasing the number of its available shares for issuance. The subscription agreement with YPG, LLC provided the Company with $250,000 in gross proceeds. Pursuant to the subscription agreement with YGP, LLC, the Company issued 875,000 Purchase Warrants. See Note 16 Warrants.

As the effective conversion price of the YPG, LLC Convertible Promissory Note on the date of issuance was below the fair market value of the underlying common stock, the Company recorded debt discount in the amount of $112,700 based on the intrinsic value of the beneficial conversion feature of the YPG, LLC Convertible Promissory Note. The warrant issued to YPG, LLC in conjunction with the convertible note will expire after August 29, 2013. The Company recorded debt discount in the amount of $57,100 based on the estimated fair value of the warrants. In accordance with EITF No. 00-27, Application of Issue No. 98-5 to Certain Convertible Instruments, the debt discount as a result of the beneficial conversion feature of the YGP, LLC Convertible Promissory Note and the estimated fair value of the warrants was amortized as non-cash interest expense over the term of the debt using the effective interest method. During the three months ended March 31, 2009, interest expense of $9,400 has been recorded from the debt discount amortization.

12. Note Payable

On December 26, 2008, the subsidiaries of the Company, YMHK and YMBJ, entered into a Joint Venture Agreement (the “Joint Venture Agreement”) with China Youth Interactive Media (Beijing) Company Limited (“CYI”) and Xinhua Finance Media Limited (“XFM”) to develop business opportunities contemplated by the Campus Network Agreements (the “Joint Venture”) (YMHK, YMBJ and CYI henceforth the “JV Companies”). Pursuant to the Joint Venture agreement, XFM will provide working capital to YMHK in monthly increments for the twelve month period ending December 31, 2009 for the operations of the Joint Venture and, to the extent covered by the budget as set forth in the business plans, for the general overhead of the JV Companies. Each of the JV Companies shall be obligated on a joint and several basis, following written notice from XFM, to return, repay or reimburse, as the case may be, all of the working capital provided by XFM, upon demand by XFM in the sole discretion of XFM with twelve months notice following the conclusion of the twelve month period ending December 31, 2009, together with interest accrued at an annual rate of 7 percent. The earliest date that any twelve-month written notice can be given is January 1, 2010 in which event the working capital will be due January 1, 2011. At March 31, 2009, the Joint Venture Agreement with XFM provided the Company with $749,000 in gross proceeds and the Company recognized the amount as a $749,000 principal amount of a 7% Promissory Note (the “Xinhua Note”) due January 1, 2011. See Note 17 Subsequent Events for additional principal amounts from XFM related to the Joint Venture Agreement.

13. Debt Discount - Beneficial Conversion Feature

As noted in Note 10 Convertible Note Payable - Related Party, the Company recorded debt discount in the amount of $28,300 based on the intrinsic value of the beneficial conversion feature of the Mojo Music Convertible Promissory Note and debt discount in the amount of $28,300 based on the estimated fair value of the warrants that were issued in conjunction with the Mojo Music Convertible Promissory Note.

As noted in Note 11 Convertible Note Payable, the Company recorded debt discount in the amount of $112,700 based on the intrinsic value of the beneficial conversion feature of the YPG, LLC Convertible Promissory Note and debt discount in the amount of $57,100 based on the estimated fair value of the warrants that were issued in conjunction with the YPG, LLC Convertible Promissory Note.

14. Stock Based Compensation

Effective July 20, 2005, the Board of Directors of the Company approved the 2005 Stock Option and Restricted Stock Plan (the “2005 Plan”). The Plan reserves 15,000,000 shares of common stock for grants of incentive stock options, nonqualified stock options, warrants and restricted stock awards to employees, non-employee directors and consultants performing services for the Company. Options and warrants granted under the Plan have an exercise price equal to or greater than the fair market value of the underlying common stock at the date of grant and become exercisable based on a vesting schedule determined at the date of grant. The options expire 10 years from the date of grant whereas warrants generally expire 5 years from the date of grant. Restricted stock awards granted under the Plan are subject to a vesting period determined at the date of grant.

The Company accounts for stock-based compensation awards in accordance with the provisions of SFAS No. 123(R), Share-Based Payment, which addresses the accounting for employee stock options. SFAS 123(R) requires that the cost of all employee stock options, as well as other equity-based compensation arrangements, be reflected in the financial statements over the vesting period based on the estimated fair value of the awards. The Company adopted SFAS 123(R) as of January 1, 2005. Prior to the adoption date, there were no stock options or other equity-based compensation awards outstanding.

A summary of stock option activity for the year ended March 31, 2009 is presented below:

			Outstanding Options
	Shares Available for Grant		Number of Shares		Weighted Average Exercise Price		Weighted Average Remaining Contractual Life (years)		Aggregate Intrinsic Value

December 31, 2008		8,016,667		6,983,333		0.74		6.91		―
Grants		―		―
Cancellations		―		―
March 31, 2009
		8,016,667		6,983,333		0.75		6.64		―
Options exercisable at:
December 31, 2008				6,383,333		0.80		6.80		―
March 31, 2009				6,320,833		0.80		6.54		―

The aggregate intrinsic value in the table above represents the total pretax intrinsic value (i.e., the difference between our closing stock price on March 31, 2009 and the exercise price, times the number of shares) that would have been received by the option holders had all option holders exercised their options on March 31, 2009. There have not been any options exercised during the three months ended March 31, 2009 or 2008.

During the three months ended March 31, 2009 there was no stock-based compensation awards granted by the Company. All outstanding stock-based compensation awards that the Company granted in 2008 were granted at the per share fair market value on the grant date. Vesting of options differs based on the terms of each option. The Company utilized the Black-Scholes options pricing model.

During the three months ended March 31, 2009 and 2008, stock-based compensation totaling $1,100 and $49,000, respectively, was recorded by the Company. During the three months ended March 31, 2009 and 2008, total unrecognized compensation cost related to unvested stock options was $28,000 and $174,000. The cost is expected to be recognized over a weighted average period of 1.86 years.

15. Equity Transactions

Recent Sales of Unregistered Securities

We issued the following equity securities during the three months ended March 31, 2009 and 2008 that were not registered under the Securities Act of 1933, as amended (the “Securities Act”).

On March 26, 2008, the Company entered into a subscription agreement with an accredited investor in a private placement exempt from the registration requirements of the Securities Act of 1933, as amended (the “Securities Act”). The Company issued and sold to the accredited investor an aggregate of 10,000,000 shares of its common stock. These issuances resulted in aggregate gross proceeds to the Company of $300,000.

On January 8, 2009, the Content License Agreement was further extended by an additional eight (8) years for a total of ten (10) years. In consideration for the increase in the term of the agreement, New China Media received four million (4,000,000) shares of the Company’s common stock. The Content License Agreement extension was valued at $604,000 based on the fair value of the associated underlying shares of the Company’s common stock on the date of the extension agreement. See Note 5 Intangible Assets.

On February 6, 2009, pursuant to a letter of instruction from ACV, notwithstanding anything to the contrary to the Consulting Agreement between ACV and the Company, the Company agreed to issue in advance of the thirteenth month of the Consulting Agreement 250,000 shares of the Company’s common stock that will be deducted from the 1,000,000 (one million) shares of the Company’s common stock that were scheduled to be issued on the thirteenth month of the Consulting Agreement so that the remaining shares of the Company’s common stock to be issued to ACV on such date are 750,000, unless the Consulting Agreement is earlier terminated pursuant to the terms thereof.

16. Warrants

During 2005, the Company issued a total of 550,000 warrants, outside of its 2005 Plan, to purchase shares of common stock at prices ranging from $0.145 to $0.65 per share to consultants.

During September 2008, the Company entered into subscription agreements with Year of the Golden Pig, LLC (“YGP, LLC”) and with Mojo Music, Inc. (“Mojo Music”), in which the Company issued an aggregate of 4 Units, with each Unit consisting of a $100,000 principal amount of a 12% Convertible Promissory Note due three years from its issuance and 350,000 Common Stock Purchase Warrants outside of its 2005 Plan, with each Warrant entitling the holder thereof to purchase at any time beginning from the date of issuance through five years thereafter one share of Common Stock at a price of $0.09 per share.

The following table summarizes information about common stock warrants outstanding at March 31, 2009:

Outstanding								Exercisable
Exercise Price		Number Outstanding		Weighted Average Remaining Contractual Life (years)		Weighted Average Exercise Price		Number Exercisable		Weighted Average Exercise Price
$	0.15		250,000		0.22	$	0.02		250,000	$	0.02
$	0.65		300,000		0.23		0.10		300,000		0.10
$	0.09		875,000		1.98		0.04		875,000		0.04
$	0.09		525,000		1.21		0.02		525,000		0.02
$	0.09 - $0.65		1,950,000		3.64	$	0.18		1,950,000	$	0.18

17. Subsequent Events

On April 9, 2009, pursuant to the Joint Venture agreement (see Note 12 Note Payable), XFM advanced the Company $223,662. The advance was consistent with the monthly scheduled working capital needs of the Company, as provided for in the budget as set forth in the business plans. The Company recognized the $223,662 as additional principal on the 7% Promissory Note due January 1, 2011.

On September 30, 2005, the Company granted Jay Rifkin, our Chief Executive Officer and Chairman of the Board, options to purchase 4,400,000 shares of common stock with an exercise price of $0.85 per share, which vested annually over a period of three years from the date granted and which became fully vested on September 30, 2008. On May 11, 2009, with Mr. Rifkin’s consent, the Company canceled the options to purchase 4,400,000 shares of common stock. Further, on May 11, 2009, the Company granted Mr. Rifkin immediately vested options to purchase 3,750,000 shares of common stock with an exercise price equal to the closing price of the Company’s common stock on the date of grant, $0.13 per share..

On May 11, 2009, the Company granted Jay Rifkin, our Chief Executive Officer and Chairman of the Board, options to purchase 20,000,000 shares of the Company’s common stock with an exercise price equal to the closing price of the Company’s common stock on the date of grant, $0.13 per share, and which such stock options shall vest over a period of 4 years from the date of grant.

On July 20, 2005, the Company granted to each of Alice Campbell and William Horne, members of our Board of Directors, options to purchase 350,000 and 400,000 shares of common stock, respectively. The stock options had an exercise price of $0.25 per share and were vested on the date granted. On May 11, 2009, with the consent of Ms. Campbell and Mr. Horne, the Company canceled these options. Further, on May 11, 2009, the Company granted to each of Ms. Campbell and Mr. Horne immediately vested options to purchase 300,000 and 350,000 shares of common stock, respectively, with an exercise price equal to the closing price of the Company’s common on the date of grant, $0.13 per share.

On December 29, 2005, the Company granted to each of David M. Kaye and Alan Morelli, members of our Board of Directors, options to purchase 350,000 shares of common stock with an exercise price of $1.50 per share, which vested annually over a period of three years from the date of their board appointment, March 26, 2006 and which became fully vested on March 26, 2009. On May 11, 2009, with the consent of Mr. Kaye and Mr. Morelli, the Company canceled these options. Further, on May 11, 2009, the Company granted to each of Mr. Kaye and Mr. Morelli immediately vested options to purchase 275,000 shares of common stock with an exercise price equal to the closing price of the Company’s common stock on the date of grant, $0.13 per share.

On May 11, 2008, the Company granted to each of the members of our Board of Directors, as consideration for service on our Board of Directors, options to purchase 2,000,000 shares of common stock with an exercise price equal to the closing price of the Company’s common on the date of grant, $0.13 per share, and which such stock options shall vest over a period of 4 years from the date of grant.

On May 11, 2009, the Company granted to three employees options to purchase an aggregate of 7,000,000 shares of common stock with an exercise price of $0.13 per share. A fraction of these stock options were vested on the date of grant with the remaining amount vesting over a period of 4 years from the date of grant..

On May 11, 2009, the Company granted a consultant, as consideration for services on behalf of the Company, a vested warrant with a term of 7 seven years to purchase 1,250,000 shares of common stock with an exercise price of $0.03 per share. The issuance of this warrant was exempt from registration requirements pursuant to Section 4(2) of the Securities Act of 1933, as amended.

On June 2, 2008, the Company entered into a Content License Agreement with New China Media, LLC (“New China Media”), YGP, LLC (“YGP”) and TWK Holdings, LLC (“TWK”) (New China Media, YGP and TWK collectively referred to as “Content Providers”) providing for (i) the assignment by Content Providers and the assumption by the Company of certain rights of Content Providers for the territory of the People’s Republic of China to use, transmit and publicly display via the Internet certain content; and (ii) the purchase by YGP, New China Media and TWK of 16,200 shares, 3,000 shares and 12,000 shares of Series A Convertible Preferred Stock of the Company for $16,200, $3,000 and $12,000, respectively. On May 14, 2009 the Company issued 12,000,000 shares of common stock to TWK, pursuant to a notice of conversion, in which TWK agreed to convert the entire amount of their shares of Series A Convertible Preferred Stock of the Company into 12,000,000 shares of common stock. The securities were issued in reliance upon the exemption from registration pursuant to Section 4(2) of the Securities Act of 1933, as amended.

On September 10, 2008, the Company, on the one hand, and Jay Rifkin, the Company’s President and Chief Executive Officer, and Rebel Holdings, LLC (“Rebel Holdings”), of which Mr. Rifkin is the sole managing member, on the other hand, entered into a Loan Consolidation and Amendment to Security Agreement (the “Loan Consolidation Agreement”), effective as of July 1, 2008. Pursuant to the Loan Consolidation Agreement, the parties agreed to consolidate various outstanding loans made to the Company by Jay Rifkin and Rebel Holdings and other amounts incurred by or due to Mr. Rifkin, in each case through June 30, 2008, into one convertible promissory note payable to Rebel Holdings in the principal amount of $2,078,047, with a maturity date of July 1, 2010 and interest at the prime rate (the “Consolidated Note”). The Consolidated Note provided that the principal amount thereof shall, at the option of Rebel Holdings, be convertible at a conversion price equal to the lesser of, or more favorable to Rebel Holdings, of the following (i) $0.03 per share of Common Stock (which represents the offering price of the Company’s Common Stock in its most recently completed equity financing transaction) provided a notice of conversion is submitted no later than 45 days after September 10, 2008, or (ii) the then current offering terms for any bona fide pending offering of the Company, provided a notice of conversion pursuant thereto is submitted no later than 30 days following the completion of the offering, and contains such other terms and conditions as set forth therein. On May 14, 2009 the Company issued Rebel Holdings 69,268,233 shares of common stock, pursuant to a notice of conversion provided within the allowable time period, in which Rebel Holdings elected to convert the entire principal amount outstanding under the Consolidated Note into 69,268,233 shares of common stock at $0.03 per share. The securities were issued in reliance upon the exemption from registration pursuant to Section 4(2) of the Securities Act of 1933, as amended.

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

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our financial statements and the related notes thereto contained elsewhere in this Form 10-Q. This discussion contains forward-looking statements that involve risks and uncertainties. All statements regarding future events, our future financial performance and operating results, our business strategy and our financing plans are forward-looking statements. In many cases, you can identify forward-looking statements by terminology, such as “may,” “should,” “expects,” “intends,” “plans,” “anticipates,” “believes,” “estimates,” “predicts,” “potential,” or “continue” or the negative of such terms and other comparable terminology. These statements are only predictions. Known and unknown risks, uncertainties and other factors could cause our actual results to differ materially from those projected in any forward-looking statements. In evaluating these statements, you should specifically consider various factors, including, but not limited to, those set forth under “Risk Factors” previously disclosed in Item 1A included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2008, which was filed with the SEC on April 13, 2009.

The following “Overview” section is a brief summary of the significant issues addressed in this MD&A. Investors should read the relevant sections of the MD&A for a complete discussion of the issues summarized below. The entire MD&A should be read in conjunction with Item 1. Financial Statements.

Overview

China Youth Media, Inc.

China Youth Media, Inc. is a China focused youth marketing and media company whose business is to provide advertisers and corporations with direct and centralized access to China’s massive but difficult to reach student population. The cornerstone of the Company’s China youth marketing strategy is Koobee, a large scale, advertising supported Intranet Television Network (ITVN) media portal that is initially targeting China’s campus-based college students, estimated to total more than 30 million young people.

Koobee

Koobee is a venue designed for marketers to deliver traditional TV spots and new media advertising campaigns to a highly targeted demographic in the world’s fastest growing broadband market. Koobee will deliver TV-style entertainment primarily on a dedicated fiber network directly to the computers of these students, offering a compelling solution for advertisers and corporations to reach the most active online community in China and a key segment of the world’s largest youth market.

Koobee will initially be offering a 24 hour sports channel featuring All Sports Network (ASN) content from the NFL, NHL, and Pac 10 and Big Ten games; a 24 hour music channel by BTTV, a popular youth lifestyle and music entertainment TV channel in China; a travel and leisure channel by Quest USA; and a fashion channel featuring “China’s Next Top Model,” part of the international Top Model franchise and based on the hit U.S. TV show “America’s Next Top Model.”

While we plan to offer a range of premium international content, we also anticipate that Koobee will be the first live network to be populated directly by students for students, making it a powerful tool set to promote events, ideas and interests to students all over China.

To our advertisers, we plan to offer multiple touch points ranging from interstitial interactive ads to banners within social networking clubs and sponsored competitions, all with accurate ad tracking that will help ensure that clients realize value from unique and fully licensed content. With Koobee, we intend to provide advertisers the impact of TV with the ROI of the Internet. We expect this combination to be competitive and sufficiently appealing to capture market share in China’s fast growth online advertising industry.

Online

Whether through Koobee.com, Koobee.com.cn or Koobee.tv, we have strategically positioned Koobee, the advertising supported ITVN media portal, to be the engine that drives multiple revenue streams, including brand sponsorships, interactive advertising and eCommerce. Koobee is a venue designed for marketers to deliver traditional TV spots and new media advertising campaigns to a highly targeted demographic in the world’s fastest growing broadband market.

On Campus

Our access to China’s college students includes event staging and advertising rights on campuses throughout China. China Youth Media will offer marketers an opportunity to sponsor live events and showcase their brands with international touring acts. We will carefully place each event at the most appropriate campuses and venues to generate the largest turnout and highest ROI. We will also offer coordinated Internet and campus event campaigns that will bring international touring acts and sponsors directly to China’s college students with live ITVN broadcast straight into their dorm rooms. We have a strategic partnership with Xinhua Sports & Entertainment Ltd., a leading media group in China with assets that include an extensive event planning group with international brands as clients.

On Mobile

Our partner China Youth Net is in the final stages of securing our mobile video and advertising license. Our plan is to deploy an advanced mobile media and advertising delivery system catering specifically to China’s youth market. We will offer opt-in surveys and data collection, as well as coordinated Internet, campus event and mobile campaigns.

Advertising Services

China Youth Media seeks to enable brands to achieve their media objective by providing tailor-made advertising services and niche-targeted media campaigns. Our brand-tailored advertising services will include:

	1)	Targeted niche marketing into campuses

	2)	Standard digital media buys on our Koobee portal

	3)	In-show ad inventory

	4)	Creative ad placements and overlays

	5)	Channel sponsorship and branded content

	6)	Competitive CPMs and building priceless lifetime loyalty

	7)	Event sponsorship

	8)	Mobile media and text campaigns

Our secure and fully tracked network will help ensure that advertisers see real returns and value. Our accurate ad tracking will detail precisely how many times an ad has been consumed, where it has been viewed and for how long, providing comprehensive student viewer profiles throughout.

Our Wholly-Owned Subsidiaries

Youth Media (BVI) Limited

Youth Media (Hong Kong) Limited and Youth Media (Beijing) Limited

Rebel Crew Films, Inc.

ViraCast and Beat9.com

Our patent pending proprietary technology called ViraCast allows for enterprise workflow management, processing, distribution and control of content by dynamically inserting and continuously updating interactive, geo-targeted advertising into digital content, such as Internet videos, podcasts, etc. Digital content that has been processed with ViraCast then has the ability to propagate virally across the Internet while ViraCast continuously tracks ad consumption and user interaction. ViraCast provides content producers, advertisers, and marketers new revenue models built around these emerging platforms with enhanced user data, reporting, and accountability. ViraCast tracks impressions, clicks, and other pertinent data valuable to advertisers. Our customers benefit from our verifiable ad tracking by paying only for ads that are viewed, clicked or acted on. Currently, ViraCast is available via our wholly-owned and operated website www.Beat9.com.

PerreoRadio.com

PerreoRadio.com is our wholly-owned and operated website targeted to the young, urban Latino demographic in both the United States and internationally. It offers online radio shows, podcasts, music, and music videos from some of the top DJ’s from the United States, Latin America, and the Caribbean. PerreoRadio generates almost exclusively all revenue from the placement of ads on the website. We are a publisher-affiliate to all the large ad-network providers. We generally recognize revenue on a monthly basis when payment is received from our publisher-affiliates.

Company History

China Youth Media, Inc. (referred to herein as the “Company,” “we,” “us,” and “our”) was organized under the laws of the State of Utah on July 19, 1983 under the name of Digicorp. On February 22, 2007, we changed the Company’s domicile from the State of Utah to the State of Delaware effected by the merger of the Company, a Utah corporation, with and into, Digicorp, Inc., a newly formed wholly owned subsidiary of the Company that was incorporated under the Delaware General Corporation Law for the purpose of effecting the change of domicile.

The Company changed its name from “Digicorp, Inc.” to “China Youth Media, Inc.” (the “Corporate Name Change”) pursuant to a Certificate of Amendment to our Certificate of Incorporation filed with the State of Delaware which took effect as of October 16, 2008. The Corporate Name Change was approved and authorized by the Board of Directors of the Company and by the holders of shares representing a majority of our voting securities which holders have given their written consent. As a result of the Corporate Name Change, our stock symbol changed to “CHYU” with the opening of trading on October 16, 2008 on the OTCBB.

Revenue Sources

Advertising Supported Intranet Television Network Media Website - Koobee is a large scale, advertising supported Intranet Television Network (ITVN) media portal that is initially targeting China’s campus based college students, estimated to total more than 30 million young people. Koobee is a venue for marketers to deliver traditional TV spots and new media advertising campaigns to a vast, upwardly mobile, targeted demographic. Advertisers and channel owners will have available to them multiple touch points ranging from interstitial interactive ads to banners within social networking clubs and sponsored competitions, all with accurate ad tracking that ensures clients realize value from unique and fully licensed content. We expect this combination to be competitive and sufficiently appealing to capture market share in China’s fast growth online advertising industry.

Website Ad Revenue. - www.PerreoRadio.com - We generate revenue from our wholly owned and operated website www.PerreoRadio.com. PerreoRadio generates revenue almost exclusively from the placement of ads on the website. We are a publisher-affiliate to all the large ad-network providers. We generally recognize revenue on a monthly basis when payment is received from our publisher-affiliates.

Critical Accounting Policies and Estimates

Our discussion and analysis of our financial condition and results of operation are based upon the accompanying financial statements which have been prepared in accordance with the generally accepted accounting principles in the United States of America. The preparation of the financial statements requires that we make estimates and assumptions that affect the amounts reported in assets, liabilities, revenues and expenses. Management evaluates on an on-going basis our estimates with respect to the valuation allowances for accounts receivable, income taxes, accrued expenses and equity instrument valuation, for example. We base these estimates on various assumptions and experience that we believe to be reasonable. The following critical accounting policies are those that are important to the presentation of our financial condition and results of operations and require management’s most difficult, complex, or subjective judgments, often as a result of the need to make estimates of matters that are inherently uncertain.

The following critical accounting policies affect our more significant estimates used in the preparation of our financial statements and, in particular, our most critical accounting policy relates to the valuation of our intangible assets and stock based compensation.

Allowance for Doubtful Account - Our allowance for doubtful accounts relates to accounts receivable. The allowance for doubtful accounts is an estimate prepared by management that identifies a certain portion of receivables that may go uncollected. In determining adequacy of the allowance for doubtful account, we consider customer balances in receivables, historical bad debts, customer concentrations, current economic trends and changes in customer payment patterns. Changes in the financial condition of our customer may change, which would require additional allowances. The allowance for doubtful account is reviewed quarterly, and adjustments are made as deemed necessary.

Beneficial Conversion Feature of Convertible Notes Payable - The Beneficial Conversion Feature (“BCF”) of a convertible note, is normally characterized as the convertible portion or feature of certain notes payable that provide a rate of conversion that is below market value or in-the-money when issued. The Company accounts for BCF in accordance with the guidelines established by Emerging Issues Task Force (“EITF”) 98-5, Accounting for Convertible Securities with Beneficial Conversion Features or Contingently Adjustable Conversion Ratios. The Company records a BCF related to the issuance of a convertible note when issued and also records the estimated fair value of the warrants issued with those convertible notes. The BCF of a convertible note is measured by allocating a portion of the note’s proceeds to the warrants and as a reduction of the carrying amount of the convertible note equal to the intrinsic value of the conversion feature, both of which are credited to additional paid-in-capital. The Company calculates the fair value of warrants issued with the convertible note using the Black-Scholes valuation model and uses the same assumptions for valuing employee options in accordance with SFAS No. 123R. The only difference is that the contractual life of the warrants is used. The value of the proceeds received from a convertible note is then allocated between the conversion feature and warrants on a relative fair value basis. The allocated fair value is recorded in the consolidated financial statements as a debt discount (premium) from the face amount of the note and such discount is amortized over the expected term of the convertible note (or to the conversion date of the note, if sooner) and is credited to interest expense.

Goodwill and Other Intangible Assets - Goodwill and Intangible Assets correspond to the excess cost over fair value of certain assets during acquisition. In accordance with the provisions of FASB Statement No. 142, Goodwill and Other Intangible Assets, goodwill and intangible assets acquired that are determined to have an indefinite useful life are not subject to amortization, but instead are tested for impairment at periodic intervals. Intangible assets with a useful life that can be estimated are amortized over their respective estimated useful lives to their estimated residual values and are reviewed periodically for impairment in accordance with FASB Statement No. 144, Accounting for Impairment or Disposal of Long-Lived Assets. Certain events or changes in circumstances may occur that indicate that goodwill or assets are impaired and consequently require testing on a periodic basis. Determining the fair value of goodwill or assets is subjective in nature and involves using estimates and assumptions. We base our fair value estimates on assumptions we believe to be reasonable but that are inherently uncertain. To date we have not recognized impairments on any of our goodwill and other intangible assets.

Stock-Based Compensation - We have adopted the provisions of SFAS No. 123(R), Share-Based Payment, which requires that share-based payments be reflected as an expense based upon the grant-date fair value of those grants. Accordingly, the fair value of each option grant, non-vested stock award and shares issued under our employee stock purchase plan, were estimated on the date of grant. We estimate the fair value of these grants using the Black-Scholes model which requires us to make certain estimates in the assumptions used in this model, including the expected term the award will be held, the volatility of the underlying common stock, the discount rate, dividends and the forfeiture rate. The expected term represents the period of time that grants and awards are expected to be outstanding. Expected volatilities were based on historical volatility of our stock. The risk-free interest rate approximates the U.S. treasury rate corresponding to the expected term of the option. Dividends were assumed to be zero. Forfeiture estimates are based on historical data. These inputs are based on our assumptions, which we believe to be reasonable but that include complex and subjective variables. Other reasonable assumptions could result in different fair values for our stock-based awards. Stock-based compensation expense, as determined using the Black-Scholes option pricing model, is recognized on a straight line basis over the service period, net of estimated forfeitures. To the extent that actual results or revised estimates differ from the estimates used, those amounts will be recorded as a cumulative adjustment in the period that estimates are revised.

Results of Operations

Quarter Revenues

Revenue for the Three Months ended March 31, 2009 was zero as compared to the three months ended March 31, 2008 in which we generated revenues of $68,000. The decrease in sales revenue during the three months ended March 31, 2009 is principally attributed to the change in the Company strategy to building and launching a large scale, advertising supported Internet media portal in China.

Quarter Operating Expenses

Operating expenses were $695,000 and $395,000 during the three months ended March 31, 2009 and 2008, respectively. The significant component in the increase in operating expenses during the three months ended March 31, 2009 was the non-cash expense related to the amortization of our content and license agreements.

Stock based compensation expense from grants of nonqualified stock options to our employees and non-employee directors decreased to $1,100 during three months ended March 31, 2009 from $49,000 during the three months ended March 31, 2008. The decrease in stock based compensation expense from grants of nonqualified stock options during three months ended March 31, 2009 as compared to the three months ended March 31, 2008 resulted primarily from cancellations of nonqualified stock options to employees no longer with the Company.

Salaries and employee benefits, excluding stock based compensation expense, reflected a decrease of approximately $40,000 for the three months ended March 31, 2009 as compared to the three months ended March 31, 2008. During the three months ended March 31, 2009 and 2008, salaries and employee benefits, excluding stock based compensation expense was $85,000 and $125,000, respectively. The reduction in costs reflect a shift in our strategy from revenue generated primarily through the direct sales of licensed film content, which requires a large sales force, to building and launching a large scale, advertising supported Internet media portal in China.

The remaining operating expenses consisted of professional fees, rent expense, amortization expense and general and administrative expenses. Professional fees were approximately $155,000 more during the three months ended March 31, 2009 compared to the three months ended March 31, 2008. The increase in professional fees are exclusively due to significant increases in amounts paid in consulting and legal fees related to the establishment of our wholly-owned subsidiaries in Hong Kong and China and the deployment of our Internet media portal in China.

Amortization of Content Licenses and Cooperation Agreements. Non-cash amortization expense for the three months ends March 31, 2009 and 2008 were $170,000 and $31,000, respectively. The significant increase in amortization expense is attributed to the amortization of the Content License Agreement with New China Media, LLC, YGP, LLC (“YGP”) and TWK Holdings, LLC. and the amortization of the Cooperation Agreement with China Youth Net Technology (Beijing) Co., Ltd., China Youth Interactive Cultural Media (Beijing) Co., Ltd. and China Youth Net Advertising Co. Ltd.

Accounting Fees for the three months ended March 31, 2009 and 2008 were $21,000 and $23,000, respectively. The fees paid for Accounting services are related to Auditing and SEC filing requirements.

Legal expense increased by approximately $100,000 during the three months ended March 31, 2009 as compared to the three months ended March 31, 2008. During the three months ended March 31, 2009 and 2008 legal fees were $100,000 and $800, respectively. . The increase in legal fees paid is attributed primarily to the establishment of our wholly-owned subsidiaries in Hong Kong and China, the deployment of our Internet media portal in China, and the development of contracts and review of major company transactions.

Consulting fees increased by $56,000 during the three months ended March 31, 2009 as compared to the three months ended March 31, 2008. For the three months ended March 31, 2009 consulting fees were $84,000 of which the majority of the expense was related to the deployment of our Internet media portal in China. During the three months ended March 31, 2009 and 2008 consulting fees were $84,000 and $27,000.

General and administrative expense decreased by approximately $209,000 during the three months ended March 31, 2009 compared to the three months ended March 31, 2008 and is attributed to the change in strategy of the Company to focus on developing an Internet media portal in China and away from a large sales force needed for the direct sales of our home video library. During the three months ended March 31, 2009 and 2008 general and administrative expense was $170,000 and $379,000, respectively.

Net Loss

For the three months ended March 31, 2009 and 2008 the Company had a net loss of approximately $715,000 and $491,000, respectively. The increase in the net loss recorded for the three months ended March 31, 2009 as compared to the three months ended March 31, 2008 is in part attributed to the significant increase in non-cash amortization expense for the three months ends March 31, 2009 which was $170,000 as compared to the three months ended March 31, 2008 which was $31,000. As noted in Note 5. Intangible Assets, the significant increase in amortization expense is attributed to the amortization of the Content License Agreement and the Cooperation Agreement.

Interest Income and Other, Net

Given the financials constraints of the Company and its reliance on financing activities, interest expense related to the financing of capital was $70,000 for the three months ended March 31, 2009 and $40,000 for the three months ended March 31, 2008. This represents an increase of approximately $30,000 of interest expense related to the financing of capital during the three months ended March 31, 2009 as compared to the three months ended March 31, 2008.

Liquidity and Capital Resources

Our principal sources of liquidity are cash generated from financing activities. For the three months ended, March 31, 2009, the Company’s primary source of liquidity was the working capital provided to the Company pursuant to the Joint Venture Agreement with Xinhua Finance Media Limited (“XFM”). Pursuant to the Joint Venture agreement, XFM provides working capital to the Company’s wholly-owned subsidiary, YMHK, in monthly increments for the twelve month period ending December 31, 2009. At March 31, 2009, the Joint Venture Agreement with XFM provided the Company with $749,000 in gross proceeds and the Company recognized the amount as a $749,000 principal amount of a 7% Promissory Note due January 1, 2011. As of March 31, 2009, our cash and cash equivalents were $232,000. We had a working capital deficit of approximately $572,000 at March 31, 2009 and we continue to have recurring losses. In the past we have primarily relied upon loans from related parties to fund our operations and, to a lesser extent, financing transactions with other parties. These conditions raise substantial doubt about our ability to continue as a going concern. We are actively seeking sources of additional financing in order to maintain and potentially expand our operations and to fund our debt repayment obligations. Even if we are able to obtain funding, there can be no assurance that a sufficient level of sales will be attained to fund such operations or that unbudgeted costs will not be incurred. Future events, including the problems, delays, expenses and difficulties frequently encountered by similarly situated companies, as well as changes in economic, regulatory or competitive conditions, may lead to cost increases that could make the net proceeds of any new funding and cash flow from operations insufficient to fund our capital requirements. There can be no assurances that we will be able to obtain such additional funding from management or other investors on terms acceptable to us, if at all.

Total assets were $9,569,000 at March 31, 2009 versus $8,961,778 at December 31, 2008. The change in total assets is primarily attributable to several major transactions conducted by the Company resulting in a significant increase in Intangible Assets. See Note 5 Intangible Assets.

DVD sales decreased significantly both during the year ended December 31, 2008 and during the three months ended March 31, 2009. This decrease reflects the Company’s plans to shift its business to the exploitation of our internet media portal in China. We do not expect to generate revenues from the sales of our home video library during the year ending December 31, 2009.

Intangible Assets net at March 31, 2009 and December 31, 2008 was $8,974,000 and $8,538,000, respectively. This significant increase in the Company’s intangible assets was exclusively as a result of the capitalization of a Content License Agreement and a Cooperation Agreement entered into by the Company as described in Note 5 Intangible Assets. Furthermore, the significant increase in intangible assets was slightly offset by the increase in the amortization expense of our licensed content.

Accumulated amortization expense at March 31, 2009 and December 31, 2008 was $1,145,000 and $975,000, respectively.

Property and Equipment increased primarily from the purchase of office equipment during the three months ended March 31, 2009.

Off-Balance Sheet Arrangements

We do not have any off balance sheet arrangements that are reasonably likely to have a current or future effect on our financial condition, revenues and results of operations, liquidity, or capital expenditures.

Risk Factors

There have been no material changes from risk factors previously disclosed in Item 1A included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2008, which was filed with the SEC on April 13, 2009.

Item 3. Quantitative and Qualitative Disclosures About Market Risk.

We are a smaller reporting company as defined by Rule 12b-2 of the Securities Exchange Act of 1934 and are not required to provide the information under this item.

Item 4T. Controls and Procedures.

As of the end of the period covered by this report, we conducted an evaluation, under the supervision and with the participation of our chief executive officer and chief financial officer of our disclosure controls and procedures (as defined in Rule 13a-15(e) and Rule 15d-15(e) of the Exchange Act). Based upon this evaluation, our chief executive officer and chief financial officer concluded that, as of March 31, 2009, our disclosure controls and procedures are effective to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is: (1) accumulated and communicated to our management, including our chief executive officer and chief financial officer, as appropriate to allow timely decisions regarding required disclosure; and (2) recorded, processed, summarized and reported, within the time periods specified in the Commission’s rules and forms. There was no change to our internal controls or in other factors that could affect these controls during our last fiscal quarter that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

PART II

Item 1. Legal Proceedings.

We are not a party to any pending legal proceeding, nor is our property the subject of a pending legal proceeding, that is not in the ordinary course of business or otherwise material to the financial condition of our business. None of our directors, officers or affiliates is involved in a proceeding adverse to our business or has a material interest adverse to our business.

Item 1A. Risk Factors.

We are a smaller reporting company as defined by Rule 12b-2 of the Securities Exchange Act of 1934 and are not required to provide the information under this item.

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

On September 10, 2008, the Company, on the one hand, and Jay Rifkin, the Company’s President and Chief Executive Officer, and Rebel Holdings, LLC (“Rebel Holdings”), of which Mr. Rifkin is the sole managing member, on the other hand, entered into a Loan Consolidation and Amendment to Security Agreement (the “Loan Consolidation Agreement”), effective as of July 1, 2008. Pursuant to the Loan Consolidation Agreement, the parties agreed to consolidate various outstanding loans made to the Company by Jay Rifkin and Rebel Holdings and other amounts incurred by or due to Mr. Rifkin, in each case through June 30, 2008, into one convertible promissory note payable to Rebel Holdings in the principal amount of $2,078,047, with a maturity date of July 1, 2010 and interest at the prime rate (the “Consolidated Note”). The Consolidated Note provided that the principal amount thereof shall, at the option of Rebel Holdings, be convertible at a conversion price equal to the lesser of, or more favorable to Rebel Holdings, of the following (i) $0.03 per share of Common Stock (which represents the offering price of the Company’s Common Stock in its most recently completed equity financing transaction) provided a notice of conversion is submitted no later than 45 days after September 10, 2008, or (ii) the then current offering terms for any bona fide pending offering of the Company, provided a notice of conversion pursuant thereto is submitted no later than 30 days following the completion of the offering, and contains such other terms and conditions as set forth therein. On May 14, 2009 the Company issued Rebel Holdings 69,268,233, pursuant to a notice of conversion provided within the allowable time period, in which Rebel Holdings elected to convert the entire principal amount outstanding under the Consolidated Note into 69,268,233 shares of common stock at $0.03 per share. The securities were issued in reliance upon the exemption from registration pursuant to Section 4(2) of the Securities Act of 1933, as amended.

Item 3. Defaults Upon Senior Securities.

Not applicable.

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

Not applicable.

Item 5. Other Information.

See Note 17 to the Financial Statements included with this report for information on the cancellation and grant of certain stock options and the additional grant of a common stock purchase warrant.

Item 6. Exhibits.

Exhibit Number		Description
31.1		Certification by Chief Executive Officer, required by Rule 13a-14(a) or Rule 15d-14(a) of the Exchange Act
31.2		Certification by Chief Financial Officer, required by Rule 13a-14(a) or Rule 15d-14(a) of the Exchange Act
32.1		Certification by Chief Executive Officer, required by Rule 13a-14(b) or Rule 15d-14(b) of the Exchange Act and Section 1350 of Chapter 63 of Title 18 of the United States Code
32.2		Certification by Chief Financial Officer, required by Rule 13a-14(b) or Rule 15d-14(b) of the Exchange Act and Section 1350 of Chapter 63 of Title 18 of the United States Code

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 YOUTH MEDIA, INC.

	Date: May 15, 2009	By:	/s/ Jay Rifkin
			Jay Rifkin
			Chief Executive Officer


	Date: May 15, 2009	By:	/s/ Jay Rifkin
			Jay Rifkin
			Principal Financial Officer

Form: 10-Q

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