HAFG 10-K & 10-Q changes, risk factors and insider trading

The risk factors listed in this section and other factors noted herein or incorporated by reference could cause our actual results to differ materially from those contained in any forward-looking statements. The following risk factors, in addition to the information discussed elsewhere herein, should be carefully considered in evaluating us and our business:

We have a limited operating history, which may make it difficult for you to evaluate our business and prospects.

We began operations in China in February 8, 2008 and had our first month of revenue in June 2008. We entered into two Memoranda of Understanding in February 2008 and closed our first acquisition in May 2008 for radio advertising inventory for a radio channel in Tianjin, China. We secured our radio advertising minutes in Beijing in July 2008. As such, we have a very limited operating history upon which you can evaluate the viability and sustainability of our business and its acceptance by advertisers and consumers. It is also difficult to evaluate the viability of radio advertising in China because the industry is still underdeveloped and we do not have the experience to know how the radio advertising industry will develop in China. In addition, due to our short operating history in China and recent additions to our management team, some of our senior management and employees have only worked together at the Company for a relatively short period of time. As a result, it may be difficult for you to evaluate the effectiveness of our senior management and other key employees and their ability to address future challenges to our business.

We have expanded our scope of operations to include airline magazines and plan to further expand our scope to include media that specifically targets the affluent of China.

Our business previously focused on radio advertising sales but due to market conditions and other factors we expanded our strategy to include media that targets lifestyle trends of the affluent and middle class. In November 2008, we closed a transaction by which we gained exclusive rights to sell advertising for the 4th largest airline group in China. We are repositioning the Company away from solely a radio advertising company and towards a broader media company that targets affluent consumers. If we do not effectively manage our re-positioning we could impact the overall expected performance of the business. Further, we are not sure how the market will react to a broadening of our media offerings. Any failure to efficiently or effectively manage this growth of our operations may limit our future growth and hamper our business strategy.

Our failure to maintain relationships with radio stations and specific radio channels would harm our business and prospects.

Our ability to generate revenues from advertising sales depends on our ability to air advertisements on radio channels. Our ability to place advertisements on specific radio channels in large part is related to our ability to secure and maintain exclusive sales agreements with radio channels in China. This, in turn, requires we develop and maintain business relationships with national, regional and local radio stations as well as with national and local government agencies. As of June 30, 2009, we were in control of 54 minutes of radio advertising per day in Tianjin, China and 54 minutes in Xi’an, China. In total, the Company controls 108 minutes of inventory per day, or 39,420 minutes per year. We have entered into three exclusive advertising agency arrangements with different entities. We cannot assure you we can maintain these relationships on satisfactory terms, or at all. If we fail to maintain relationships with radio stations we would be at risk of losing our rights to be the exclusive advertising agent for the respective channel. In turn, we would lose inventory and be unable to satisfy our customers’ advertising needs.

Our failure to maintain our relationship with the airline magazine would harm our business and prospects.

Our ability to generate revenues from airline magazine advertising sales depends on our exclusive right to sell and manage advertising for the Hainan Airline Group’s airline magazine. We cannot assure you we can maintain the relationship with the airline on satisfactory terms, or at all. If we fail to maintain relationships with the airline we would be at risk of losing our rights to be the exclusive advertising agent for the magazine. In turn, we would lose the inventory and be unable to satisfy our customers’ advertising needs. Any failure to maintain this relationship on a satisfactory level would severely impact our revenue and materially impact our ability to continue to operate.

We derive nearly all of our revenues from the sale of advertising, and advertising is sensitive to overall economic trends, domestic consumption trends and advertising trends.

Demand for the Company’s various advertising assets, and the resulting advertising spending by our customers, is sensitive to changes in general economic conditions and specifically to changes in overall advertising spending. It is likely that a decline in overall advertising spending in China will have a greater impact on radio advertising as it is deemed non essential and as such customers will shift a larger portion of spending to primary media such as television. Advertisers may reduce their investment in advertising for any number of reasons, including:

Our quarterly operating results are difficult to predict and may fluctuate significantly from period to period in the future.

Our quarterly operating results are difficult to predict and may fluctuate significantly based on the seasonality of consumer spending and corresponding advertising trends in China. Revenues of our business are largely dependent on overall advertising expenditures. Overall advertising in China tends to decrease during January and February each year due to the Chinese Lunar New Year holiday. We also expect to experience fluctuations around overall commercial slowdowns which can be influenced by external influences. As radio is a support medium to other advertising media, our operating results are likely to fluctuate as overall advertising spending decreases. The reduction in overall advertising spending in the market is likely to cause advertisers to shift their marketing mix and, in turn, reduce the percentage of advertising spending on radio advertising. As a result, you may not be able to rely on period to period comparisons of our operating results as an indication of our future performance. A large portion of costs are fixed thus, if our revenues for a particular quarter are lower than expected, we may be unable to reduce our operating expenses for that quarter by a corresponding amount, which would harm our operating results for that quarter relative to our operating results from other quarters.

Our business has been impacted by global economic conditions and a corresponding decrease in global advertising spending, which may adversely affect our financial condition, results of operations and cashflow from operations.

Recent global market and economic conditions have been unprecedented and challenging with tighter credit conditions and recessions in most major economies continuing into 2009. Continued concerns about the systemic impact of potential long-term and wide-spread recession, the availability and cost of credit, and the global housing and mortgage markets have contributed to increased market volatility and diminished expectations for Western and emerging economies. These conditions, combined with declining business and consumer confidence and increased unemployment, have contributed to volatility of unprecedented levels.

As a result of these market conditions, the cost and availability of capital has been and may continue to be adversely affected. Concern about the stability of markets generally and the strength of counterparties specifically led many lenders and institutional investors to reduce, and in some cases, cease providing credit to businesses and consumers, as well as increase the cost of lending. These factors led to a decrease in spending by businesses and consumers alike, and to a decline in global advertising and media spending. Furthermore, bank borrowings are an import source of our liquidity. Continued turbulence in the U.S. and international markets and economies and prolonged declines in business consumer spending may adversely affect our liquidity and financial condition, the liquidity and financial condition of our customers, and in turn impact our accounts receivable, and our ability to raise capital needed to expand the business.

Our independent registered public accounting firm added an emphasis paragraph to their audit report contained in our Annual Report on Form 10-K for the fiscal year ended June 30, 2009 describing an uncertainty related to our ability to continue as a going concern.

Due to our continued losses and limited capital resources, our independent registered public accounting firm issued a report that describes an uncertainty related to our ability to continue as a going concern. The auditors’ report discloses that we did not generate significant revenues during the fiscal year ended June 30, 2009, we incurred a net loss of approximately $6,425,846, and consumed cash in operating activities of approximately $2,873,355. These conditions raise substantial doubt about our ability to continue as a going concern and may make it difficult for us to raise capital. Our financial statements do not include any adjustments that might result from the outcome of this uncertainty.

One of our directors and our CEO, Ju Baochun, beneficially owns a significant number of shares of our common stock which will have an impact on all major decisions on which our shareholders may vote and which may discourage an acquisition of the Company.

Ju Baochun, one of our directors and our CEO, currently owns approximately 56% of our outstanding common stock. As a result, Mr. Ju has the ability to significantly impact virtually all corporate actions requiring shareholder approval, including the following:

The interests of Mr. Ju may differ from the interests of our other shareholders. Further, Mr. Ju's beneficial stock ownership may discourage potential investors from investing in our common stock due to the lack of influence they could have on our business decisions, which in turn could reduce our stock price.

If advertisers or the listening public do not accept, or lose interest in, our radio advertising, our revenues may be negatively affected and our business may not expand or be successful.

China’a radio advertising industry is small and underdeveloped compared to alternative advertising media including television, outdoor, Internet, newspapers and magazines. We compete with these media and others for advertising spending of our current and prospective customers. Our success depends upon the emergence of radio as a viable messaging medium, the continued increase in listenership and ultimately the broader acceptance of radio by the advertisers themselves. Advertisers may elect not to invest in radio advertising as a whole or not use our specific services. If a substantial number of advertisers lose interest in advertising on the radio or on our channels specifically, we will be unable to generate sufficient revenues and cash flows to operate our business, and our financial condition and results of operations would be materially and adversely affected.

If advertisers lose interest in print media or air travel based media, our airline magazine advertising revenues may be negatively affected and our business may not expand or be successful.

The air travel advertising industry in China is still developing. Although there has been support for air travel based advertising as well as print media in general, there is no certainty this will continue. We compete with all platforms and media types for a share of advertising spending of our current and prospective customers. Our success depends upon print and air travel based media continuing to develop and garner support from the advertising community. If a substantial number of advertisers lose interest in advertising in airline magazines, we will be unable to generate sufficient revenues and cash flows to operate our business, and our financial condition and results of operations would be materially and adversely affected.

The process of building a relationship with a radio channel and then gaining exclusive rights to their advertising inventory can be time consuming and requires resources, mostly management’s time and attention, from which we may be unable to recognize the anticipated benefits.

Our business plan depends largely on our ability to gain exclusive rights to radio channels across China. The process depends on our ability to establish relationships with local, regional and national radio stations which control up to 10 radio channels. Establishing these relationships and securing exclusive rights to radio advertising inventory can be lengthy and often not result in securing of the exclusive rights. We often need to convince radio stations about the benefit of partnering with us to ensure they maximize the value of their individual channels and station as a whole. We invest considerable time and effort into the process but a radio station may decide not to partner with us. If a majority of targets decide not to partner with us, we will not be able to grow our business or revenues as planned.

The acquisition of additional exclusive radio advertising inventory requires significant up front costs that may not be immediately recoverable.

Once we sign a contract with a radio channel to acquire the exclusive sales and marketing rights for its advertising inventory, we immediately deposit up to 25% of the first year's contract price. Such deposits are usually held for the term of the contract and roll-over as contracts are renewed. Further, we often have to establish a new sales office to handle the new contract. Such deposits and investments usually come months before any revenue is generated by the new contact. We may also experience further delays in revenue generation, if any, due to deployment delays or difficulties in selling advertising time to new or current advertisers to be aired on the new radio channels acquired.

The acquisition of additional exclusive radio advertising inventory may result in the Company placing advertisements that are restricted.

The acquisition of new advertising inventory either through new contracts with channels or the acquisition of competing businesses may result in the Company placing advertisements that are restricted by the regulatory body. An estimated 40% to 50% of current radio advertising in China is sold to companies placing “medical advertisements.” These advertisements are restricted and per the regulatory body may not be aired without prior approval by relevant government authorities. However, local regulatory bodies have overlooked strict enforcement so far due to concerns strict enforcement may lead to a financial crisis in the radio industry. As we expand our inventory we are likely to be in a situation where an acquisition and / or radio channel has existing sales derived from such advertisements. The Company plans to eliminate such advertisements but may not be able to immediately as many of these advertisements are content substitutes which will require the channels replace the content prior to eliminating the advertisements. Further, the Company, as part of negotiations with radio channels, may offer a timed removal of the advertisements as they often provide an existing source of revenue that can not be immediately replaced and that offsets the immediate costs associated with a new contract. The Company, as a core principle, will follow all applicable advertising laws; however, the Company also accepts the need at times to phase the restricted advertisements out versus an immediate removal.

There are no guarantees the regulatory body will not immediately eliminate all such restricted advertisements. If the Company through acquisitions and new contacts implements a phase out approach to such advertisements, a change in regulatory action would adversely impact the result of the Company. The Company does not currently sell any such restricted advertisements.

We face significant competition from alternative advertising media, and if we do not compete successfully against new and existing competitors, we may not be able to execute on our plan, and our profitability may be adversely affected.

The radio industry in China is underdeveloped and for the most underutilized by advertisers in the market. We compete first and foremost with alternative advertising media to increase the level of investment in radio advertising in China. We compete with other mobile digital television advertising companies and new media advertising companies in China. Further, if the radio advertising industry expands as expected in the coming years, the Company is likely to face new competitors focused on selling radio advertising. We compete for advertising customers primarily on the basis of cost per impression and reach of the radio channels we have under contract. Specifically in the radio advertising industry we compete with Yuan Chuan Radio, Beijing Universal Chief Advertising, Simulcast, Beijing Radio Station, Xinhua Finance Media Unlimited and numerous other smaller radio advertising companies. We also face competition from radio stations that establish their own sales networks. The Company views its primary competition as coming from other advertising media, such as television, outdoor, newspapers, magazines and the Internet. The alternative media have already established a stronger presence in China and have a far more comprehensive and organized sales effort.

Further, we may also face competition from new entrants into radio advertising. Though we are working to acquire a significant amount of exclusive radio advertising minutes, the total amount of radio advertising inventory in China is approximately 80 million minutes. The vast amount of minutes across China means that as radio becomes a more viable advertising medium, there will be plenty of inventory available for competitors looking to enter the market. Therefore, we cannot assure you we will succeed in executing on our plan of gaining a market leading amount of advertising under contract at very attractive rates.

Increased competition could reduce our ability to secure new contracts for radio advertising, attract new customers and maintain our planned growth trajectory. We cannot assure you we will successfully compete against new or existing competitors.

The airline magazine will continue to face competition from alternative print media as well as alternative platforms. Further, the Company will find increasing competition from airport based advertising. Increased competition could impact our revenue and profit by driving prices down and costs up.

If we or someone else in the radio advertising industry does not “champion” the industry, we may not be able to execute on our sales plan, and our profitability may be adversely affected.

We believe the radio industry in China is underdeveloped and for the most part underutilized by advertisers. As such, the industry will require a “champion” to promote the inherent benefits of adding radio advertising to existing marketing activities. Companies in China, to date, have not adopted radio as part of their advertising plan as companies have done in other parts of the world. For the industry to meet the more aggressive growth forecasts, we believe the medium as a whole will have to become a larger part of the marketing spending by larger advertisers in China. We expect to take an active role in championing the industry but accept that this will require an investment of time and resources. There are no guarantees our effort to promote the radio advertising industry will be successful in attracting an increased market share of radio advertising. We cannot assure you we will be able to efficiently or effectively promote the radio advertising industry to become a larger portion of the total advertising spending. Any failure to effectively develop the radio advertising industry may materially and adversely affect our business and future growth.

Acquisitions of existing radio advertising businesses and new exclusive contracts with radio channels may expose us to potential risks and have an adverse effect on our ability to manage our business.

Selective acquisitions and new deals directly with radio channels form a major part of our strategy to expand our business. As we are presented with appropriate opportunities, we may acquire additional businesses or exclusive contracts for radio advertising that are part of our core business. Our integration of the acquired entities and contacts into our business may not be successful and may not enable us to expand into new markets. This would significantly affect the expected benefits of these acquisitions. Moreover, the integration of new acquisitions has required, and will continue to require, significant attention from our management. Future acquisitions will also likely present similar challenges.

The diversion of our management’s attention and difficulties encountered in any integration process could have an adverse effect on our ability to manage our business. In addition, we may face challenges trying to integrate new operations, services and personnel with our existing operations. Our recent acquisitions and possible future acquisitions may also expose us to other potential risks, including risks associated with unforeseen or hidden liabilities, the diversion of resources from our existing businesses and technologies, our inability to generate sufficient revenues to offset the costs, expenses of acquisitions and potential loss of, or harm to, relationships with employees and advertising customers as a result of our integration of new businesses and new regulations governing cross-border investment by PRC residents.

There may be unknown risks inherent in our acquisitions and signing of new contracts with radio channels for the exclusive sales and marketing rights of their advertising inventory.

Although we conduct due diligence with respect to the major acquisitions we have undertaken and expect to do so with respect to future acquisitions, we may not be aware of all of the risks associated with the targets of such acquisitions. Any discovery of adverse information concerning any company we acquired could have a material adverse effect on our business, financial condition and results of operations. While we are entitled to seek indemnification in certain circumstances, successfully asserting indemnification or enforcing such indemnification could be costly and time consuming or may not be successful at all.

Failure to manage our growth could strain our management, operational and other resources and we may not be able to achieve anticipated levels of growth in the new networks and media platforms we are beginning to operate, either of which could materially and adversely affect our business and growth potential.

We have expanded our operations and plan to continue to expand in China. We must continue to expand our operations to meet our plan and the expected needs of the emerging radio advertising industry. We must continue to sign new contracts for the exclusive rights to radio advertising inventory across China. We also need to take advantage of the current environment that provides the opportunities to enter into such agreements. Our expansion has resulted, and will continue to result, in substantial demands on our management's resources. It has also increased our need for a reliable supply of management to handle the sales and marketing activities needed in the expanding markets. To manage our growth, we must develop and improve our existing administrative and operational systems and, our financial and management controls and further expand, train and manage our work force. We may not be able to manage our current or future expansion as it extends beyond our base of operations in Beijing, China. We cannot assure you we will be able to efficiently or effectively manage the growth of our operations, recruit top talent and train our personnel. Any failure to efficiently manage our expansion may materially and adversely affect our business and future growth.

Our business depends substantially on the continuing efforts of our key executives. Our business may be severely disrupted if we lose their services.

Our future success heavily depends upon the continued services of our key executives, particularly Ju BaoChun our Chief Executive Officer, and Jeffrey Dash, our Chief Financial Officer. We rely on the expertise of our key executives in business operations and the advertising industries and on their relationships with our stockholders, business partners and regulators. If one or more of our key executives is unable or unwilling to continue in his present positions, we may not be able to replace them easily or at all. Therefore, our business may be severely disrupted, our financial condition and results of operations may be materially and adversely affected and we may incur additional expenses to recruit and train personnel.

Our senior management and employees have worked together for a short period of time, which may make it difficult for you to evaluate their effectiveness and ability to address challenges.

Due to our limited operating history, certain of our senior management and employees have worked together at the Company for a relatively short period of time. As a result, it may be difficult for you to evaluate the effectiveness of our senior management and other key employees and their ability to work with the employees of our operating groups and address future challenges to our business.

If we are unable to attract, train and retain key individuals, highly skilled employees and important talent, our business may be adversely affected.

We need to hire additional employees, including personnel to sell our radio advertising inventory and administrative staff to support our operations. If we are unable to identify, attract, hire, train and retain individuals in these areas or retain our existing employees, due to our failure to provide them with adequate incentives or otherwise, the effectiveness of our sales efforts and overall business management may be negatively impacted, which could adversely affect our business, expansion and results of operations.

We may be subject to intellectual property infringement claims, which may force us to incur legal expenses and could potentially result in judgments against us, which may materially disrupt our business.

We cannot be certain our radio advertising content or other aspects of our business do not or will not infringe upon patents, copyrights or other intellectual property rights held by third parties. Although we are not aware of any such claims, we may become subject to legal proceedings and claims relating to the intellectual property of others in the ordinary course of our business. If we are found to have violated the intellectual property rights of others, we may be enjoined from using such intellectual property, and we may incur licensing fees or be forced to develop alternatives. In addition, we may incur substantial expenses in defending against these third party infringement claims, regardless of their merit. Successful infringement or licensing claims against us may impact our ability to place advertisement for our customers or in substantial monetary liabilities, which may materially and adversely disrupt our business.

If we fail to implement effective internal controls required by the Sarbanes-Oxley Act of 2002, to remedy any material weaknesses in our internal controls that we may identify, or to obtain the attestation required by Section 404 of the Sarbanes-Oxley Act of 2002, such failure could result in material misstatements in our financial statements, cause investors to lose confidence in our reported financial information and have a negative effect on the trading price of our common stock.

Section 404 of the Sarbanes-Oxley Act of 2002 requires management of public companies to develop and implement internal controls over financial reporting and evaluate the effectiveness thereof, and the independent auditors to attest to the effectiveness of such internal controls and the evaluation performed by management. We have not yet been required to obtain the independent auditor attestation required by the Sarbanes-Oxley Act of 2002.

Any failure to complete our assessment of our internal controls over financial reporting, to remediate any material weaknesses that we may identify, or to implement new or improved controls, or difficulties encountered in their implementation, could harm our operating results, cause us to fail to meet our reporting obligations or result in material misstatements in our financial statements. Any such failure also could adversely affect the results of the periodic management evaluations of our internal controls and, in the case of a failure to remediate any material weaknesses that we may identify, would adversely affect our ability to obtain the annual auditor attestation reports regarding the effectiveness of our internal controls over financial reporting that are required under Section 404 of the Sarbanes-Oxley Act. Inadequate internal controls could also cause investors to lose confidence in our reported financial information, which could have a negative effect on the trading price of our common stock.

Further, because some members of our management team have limited or no experience operating a publicly-traded company, we may need to recruit, hire, train and retain additional financial reporting, internal controls and other personnel in order to develop and implement appropriate internal controls and reporting procedures. This may be time consuming, difficult and costly for us.

The following discussion and analysis of the results of operations and financial condition of Legend Media for the year ended June 30, 2009 should be read in conjunction with Legend Media’s financial statements and the notes to those financial statements that are included elsewhere in this Annual Report on Form 10-K. Our discussion includes forward-looking statements based upon current expectations that involve risks and uncertainties, such as our plans, objectives, expectations and intentions. Actual results and the timing of events could differ materially from those anticipated in these forward-looking statements as a result of a number of factors, including those set forth under the "Risk Factors," "Special Note Regarding Forward Looking Statements" and "Description of Business" sections in this report. We use words such as “anticipate,” “estimate,” “plan,” “project,” “continuing,” “ongoing,” “expect,” “believe,” “intend,” “may,” “will,” “should,” “could,” and similar expressions to identify forward-looking statements.

Legend Media, formerly known as Noble Quests, Inc., was organized as a Nevada corporation on March 16, 1998, for the purpose of selling multi-media marketing services and other related services to network marketing groups. Specifically, we assisted network marketers in using marketing tools such as public relations, advertising, direct mail, collateral development, electronic communications and promotion tools to increase product and service awareness.

On January 31, 2008, we entered into the Share Exchange Agreement with Ms. Shannon McCallum-Law, the majority stockholder, sole director and Chief Executive Officer of the Company, Well Chance and the Well Chance Shareholder. Pursuant to the terms of the Share Exchange Agreement, we acquired all of the issued and outstanding shares of Well Chance's common stock for the issuance of 1,200,000 shares of our common stock to the Well Chance Shareholder on the basis of 1,200 shares of our common stock for every one share of Well Chance common stock held.

Concurrently with the closing of the transactions under the Share Exchange Agreement and as a condition thereof, Ms. McCallum-Law returned to us for cancellation 2,419,885 of the 5,119,885 shares of our common stock she owned. Ms. McCallum-Law was not compensated for canceling the shares. In addition, we issued 4,100,000 shares of our common stock to certain affiliates of Well Chance for $87,740 and 200,000 shares in exchange for consulting services performed in connection with this transaction. Upon completion of the foregoing transactions, we had an aggregate of 8,200,000 shares of common stock issued and outstanding.

Well Chance was incorporated under the laws of the British Virgin Islands as an International Business Company on February 22, 2005. Well Chance was formed to create a business that principally engaged in the development and management of a technology platform that deploys advertisements across its various advertising media.

We expanded our business in February 2008 to focus on building a consumer advertising network in the PRC focused on the Chinese radio advertising and air travel based advertising. We conduct our business operations through our 80% owned subsidiary Legend (Beijing) Consulting Co., Ltd. and our wholly owned subsidiary Legend (Beijing) Information and Technology Co., Ltd., each of which are incorporated under the laws of the PRC.

As of October 12, 2009, we secured the exclusive rights to 39,420 minutes of radio advertising annually Tianjin and Xi’an. The Company also has rights to sell advertising content for an airline magazine which has the potential to reach 20 million Chinese consumers. Management has identified several other opportunities to acquire additional advertising rights and expects continued expansion of both air travel and radio advertising assets as well as other targeted media platforms in China.

While our significant accounting policies are more fully described in Note 2 to our consolidated financial statements in this Annual Report on Form 10-K, we believe that the accounting policies described below are the most critical to aid you in fully understanding and evaluating this management discussion and analysis.

Use of Estimates

The preparation of financial statements in conformity with United States generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Areas that require estimates and assumptions include valuation of accounts receivable and determination of useful lives of property and equipment.

The accompanying consolidated financial statements include the accounts of Legend Media and its subsidiaries as follows:

*Variable Interest Entities: See heading entitled “Variable Interest Entities” below.

Variable Interest Entities

In January 2003, the Financial Accounting Standards Board (the “FASB”) issued Statement of Financial Accounting Standards Board Interpretation No. 46, "Consolidation of Variable Interest Entities, an Interpretation of Accounting Research Bulletin ("ARB") No. 51" ("FIN 46"). In December 2003, the FASB modified FIN 46 (“FIN 46R”) to make certain technical corrections and address certain implementation issues that had arisen. FIN 46 provides a new framework for identifying VIEs and determining when a company should include the assets, liabilities, non-controlling interests and results of activities of a VIE in its consolidated financial statements.

FIN 46R states that in general, a VIE is a corporation, partnership, limited liability corporation, trust or any other legal structure used to conduct activities or hold assets that either (1) has an insufficient amount of equity to carry out its principal activities without additional subordinated financial support, (2) has a group of equity owners that are unable to make significant decisions about its activities, or (3) has a group of equity owners that do not have the obligation to absorb losses or the right to receive returns generated by its operations.

On May 30, 2008, the Company purchased 80% of the common stock of Legend Media Tianjin Investment Company Limited, and on July 21, 2008, the Company purchased 100% of the common stock of News Radio Limited. Additionally, on November 28, 2008, the Company entered into and closed the Music Radio Acquisition Agreement with Well Chance, Music Radio Limited, , and the Music Radio Shareholders, pursuant to which the Company acquired control of YSLD, another VIE. Due to certain restrictions imposed upon Chinese advertising companies, direct investment and ownership of media and advertising companies in the PRC is prohibited. Therefore, the Company acquired control of TJ YSLD, and the Company acquired control of MAIHESI (through its purchase of News Radio Limited). The Company structured the Music Radio Limited and News Radio Limited transactions to comply with such restrictions.

The principal regulations governing foreign ownership in the advertising industry in China include:

These regulations set the guidelines by which foreign entities can directly invest in the advertising industry. The regulations require foreign entities that directly invest in the China advertising industry to have at least two years of direct operations in the advertising industry outside of China. Further, since December 10, 2005, 100% ownership in Chinese advertising companies is allowed, but the foreign company must have at least three years of direct operations in the advertising industry outside of China.

Because the Company has not been involved in advertising outside of China for the required number of years, the Company’s domestic PRC operating subsidiaries, which are considered foreign-invested, are currently ineligible to apply for the required advertising services licenses in China. The Company’s PRC operating affiliates hold the requisite licenses to provide advertising services in China and they are owned or controlled by PRC citizens designated by the Company. The Company’s radio advertising business operates in China though contractual arrangements with consolidated entities in China. The Company and its newly acquired PRC subsidiaries entered into contractual arrangements with TJ YSLD, MAIHESI and YSLD as well as their respective shareholders under which:

As the Company is able to exert significant control over the PRC operating affiliates and a substantial portion of the economic benefits and risks have been transferred to the Company, it has determined that the advertising entities, TJ YSLD, MAIHESI and YSLD meet the definition of a VIE. Further, the Company is considered to be the primary beneficiary of the risks and benefits of equity ownership of TJ YSLD, MAIHESI and YSLD and thus consolidated these entities in its accompanying financial statements as of June 30, 2009.

Intangible Assets

Intangible assets consist of contract rights purchased in the acquisition of Legend Media Tianjin Investment Company Limited, the entity controlling the advertising rights to Tianjin FM 92.5, on May 30, 2008 and the acquisition of News Radio Limited, the entity controlling the advertising rights to Beijing FM 90.5 on July 21, 2008. In July 2009, the Company terminated the Beijing FM 90.5 contract and on June 30, 2009 recognized an impairment loss for the entire amount of the intangible asset. Further, the Company recognized an impairment loss on the Tianjin (see Long-Lived Assets). Intangible assets consist of the following at the dates indicated:

The FM 92.5 contract rights primarily arise from an exclusive contract acquired in connection with the acquisition of Legend Media Tianjin Investment Company Limited, which is amortized over the 31 month contract period, from June 1, 2008, the first day of operations by the Company, based on the duration of the existing advertising agreement that expired December 31, 2008 plus renewal of the advertising agreement. The agreement was renewed on January 1, 2009. The contract is with Tianjin FM 92.5 and provides exclusive rights to 54 advertising minutes per day or 19,710 minutes per year. The channel is Beijing-based and through a relay facility airs in Tianjin. Legend Media’s contract is with the Beijing channel’s exclusive agent, which has a national exclusive contract with the channel. The exclusive agent subcontracted the rights for the Tianjin market to Legend Media. The value was derived as the net present value of the contract’s earnings before interest, tax, depreciation and amortization (“EBITDA”) over the contract’s expected term from May 30, 2008 through December 31, 2010, using a 15% discount rate. The change in value of the FM92.5 contract and the exclusivity agreement from June 30, 2008 to December 31, 2008 is a result of foreign currency translation at each balance sheet date and a reallocation of the value between these two intangible assets subsequent to June 30, 2008. At the May 30, 2008 purchase date, the Company initially applied a 10% discount rate to calculate the net present value of the FM 92.5 contract’s EBITDA. However, the Company subsequently determined a 15% discount rate more accurately reflects the rate of return the Company expects to earn on the contract, which resulted in a contract value of $1,709,888. The $1,709,888 was reduced by $201,524 on June 30, 2009 to recognize an impairment after forecasting the remaining value of the agreement through December 31, 2010.

Amortization expense on this contract for the year ended June 30, 2009 was $656,597.

The remainder of the purchase price of $7,388,731 was allocated to an Operating Agreement among Legend Media (Beijing) Consulting Co., Ltd., TJ YSLD and Ju Baochun (the "Music Radio Operating Agreement"), entered into in connection with the Music Radio Share Purchase Agreement. Mr. Ju, through a company he owns and operates, is the 80% owner of Music Radio Limited, which is the 20% owner of the post-acquisition VIE, TJ YSLD Pursuant to the terms of the Music Radio Operating Agreement, TJ YSLD and Mr. Ju are prohibited from:

Amortization expense on this contract for the year ended June 30, 2009 was $732,428.

The FM 90.5 contract rights capitalized in July 2008 and impaired on June 30, 2009 primarily relate to an exclusive contract acquired in connection with the acquisition of News Radio Limited which is being amortized over the 48-month contract period, beginning July 1, 2008. The contract was with the Beijing FM 90.5 radio station and provides 126 advertising minutes per day or 45,990 minutes per year. Amortization expense on this contract for the year ended June 30, 2009 was $241,678 and included in amortization expense in the accompanying consolidated statements of operations and other comprehensive income (loss). See Note 12.

Amortization expense for the Company’s intangible assets for the years ended June 30, 2009 and 2008 was $1,630,702 and $0, respectively.

The Company’s revenue recognition policies comply with SEC Staff Accounting Bulletin (“SAB”) 104. The Company purchases (i) advertising inventory in the form of advertising airtime, the unit being minutes, from radio stations and (ii) advertising pages from airline magazines. The Company then distributes these minutes and pages under various sales agreements. We recognize advertising revenue over the term of each sales agreement, provided evidence of an arrangement exists, the fees are fixed or determinable and collection of the resulting receivable is reasonably assured. We recognize deferred revenue when cash has been received on a sales agreement, but the revenue has not yet been earned. Under these policies, no revenue is recognized unless persuasive evidence of an arrangement exists, delivery has occurred, the fee is fixed or determinable, and collection is reasonably assured. Barter advertising revenues and the offsetting expense are recognized at the fair value of the advertising as determined by similar cash transactions. Barter revenue for the years ended June 30, 2009 and 2008 was $3,247,565 and $111,833, respectively. Barter expense for years ended June 30, 2009 and 2008 was $2,205,597 and $80,494, respectively. Under PRC regulations, the Company must pay certain taxes on revenues generated. These taxes include:

The Company recognizes these taxes in cost of revenue in the period incurred.

The Company expenses advertising costs monthly according to the terms of the underlying contracts. The contract is expensed evenly over the term of the agreement from the date advertising is first expected to take place. As the advertising inventory does not carry forward, all minutes are expensed whether sold or not. Cost of revenue for the years ended June 30, 2009 and 2008 was $5,115,998 and $2,789,490, respectively.

Recent Pronouncements

In December 2007, the SEC issued SAB 110, which expresses the views of the SEC staff regarding the use of a “simplified” method, as discussed in the previously issued SAB 107, in developing an estimate of expected term of “plain vanilla” share options in accordance with Statement of Financial Accounting Standards ("SFAS") No. 123(R), “Share-Based Payment” ("SFAS No. 123(R)"). In particular, the SEC staff indicated in SAB 107 that it will accept a company’s election to use the simplified method, regardless of whether the company has sufficient information to make more refined estimates of expected term. At the time SAB 107 was issued, the SEC staff believed that more detailed external information about employee exercise behavior (e.g., employee exercise patterns by industry and/or other categories of companies) would, over time, become readily available to companies. Therefore, the SEC staff stated in SAB 107 that it would not expect a company to use the simplified method for share option grants after December 31, 2007. The SEC staff understands that such detailed information about employee exercise behavior may not be widely available by December 31, 2007. Accordingly, the SEC staff will continue to accept, under certain circumstances, the use of the simplified method beyond December 31, 2007. Upon the Company’s adoption of SFAS No. 123(R), the Company elected to use the simplified method to estimate the Company’s expected term.

In December 2007, the FASB issued SFAS No. 141 (Revised 2007), “Business Combinations” (“SFAS 141R”). SFAS 141R changes how a reporting enterprise accounts for the acquisition of a business. SFAS No. 141R requires an acquiring entity to recognize all the assets acquired and liabilities assumed in a transaction at the acquisition-date fair value, with limited exceptions, and applies to a wider range of transactions or events. SFAS 141R is effective for fiscal years beginning on or after December 15, 2008 and early adoption and retrospective application is prohibited. The Company believes adopting SFAS 141R will significantly affect its financial statements for any business combination completed after June 30, 2009. In February 2007, the FASB issued SFAS No. 159, “The Fair Value Option for Financial Assets and Financial Liabilities” (“SFAS 159”). SFAS 159 permits entities to choose to measure many financial assets and financial liabilities at fair value. Unrealized gains and losses on items for which the fair value option has been elected are reported in earnings. SFAS 159 is effective as of the beginning of an entity’s first fiscal year that begins after November 15, 2007. The Company adopted SFAS 159 on July 1, 2008. The Company chose not to elect the option to measure the fair value of eligible financial assets and liabilities.

In December 2007, the FASB issued SFAS No. 160, “Noncontrolling Interests in Consolidated Financial Statements,” (“SFAS 160”) which is an amendment of ARB No. 51. This statement clarifies that a noncontrolling interest in a subsidiary is an ownership interest in the consolidated entity that should be reported as equity in the consolidated financial statements. This statement changes the way the consolidated income statement is presented, thus requiring consolidated net income to be reported at amounts that include the amounts attributable to both parent and the noncontrolling interest. This statement is effective for the fiscal years, and interim periods within those fiscal years, beginning on or after December 15, 2008. Based on current conditions, the Company does not expect the adoption of SFAS 160 to have a significant effect on its results of operations or financial position.

In June 2007, the FASB issued FASB Staff Position No. EITF 07-3, “Accounting for Nonrefundable Advance Payments for Goods or Services Received for use in Future Research and Development Activities”, which addresses whether nonrefundable advance payments for goods or services that used or rendered for research and development activities should be expensed when the advance payment is made or when the research and development activity has been performed. . This statement will not have an impact on the Company’s financial statements.

In March 2008, the FASB issued SFAS No. 161, “Disclosures about Derivative Instruments and Hedging Activities, an amendment of FASB Statement No. 133” (“SFAS 161”). SFAS 161 changes the disclosure requirements for derivative instruments and hedging activities. Entities are required to provide enhanced disclosures about (a) how and why an entity uses derivative instruments, (b) how derivative instruments and related hedged items are accounted for under Statement 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. Based on current conditions, the Company does not expect the adoption of SFAS 161 to have a significant impact on its results of operations or financial position.

In May 2008, the FASB issued SFAS No. 162, “The Hierarchy of Generally Accepted Accounting Principles” (“SFAS 162”). SFAS 162 identifies the sources of accounting principles and the framework for selecting the principles to be used in the preparation of financial statements of nongovernmental entities that are presented in conformity with US GAAP. This statement will not have an impact on the Company’s financial statements.

In May 2008, the FASB issued SFAS No. 163, “Accounting for Financial Guarantee Insurance Contracts, an interpretation of FASB Statement No. 60” (“SFAS 163”).The scope of SFAS 163 is limited to financial guarantee insurance (and reinsurance) contracts, as described in this statement, issued by enterprises included within the scope of Statement No. 60. Accordingly, this statement does not apply to financial guarantee contracts issued by enterprises excluded from the scope of FASB Statement No. 60 or to some insurance contracts that seem similar to financial guarantee insurance contracts issued by insurance enterprises (such as mortgage guaranty insurance or credit insurance on trade receivables). SFAS 163 also does not apply to financial guarantee insurance contracts that are derivative instruments included within the scope of FASB Statement No. 133, “Accounting for Derivative Instruments and Hedging Activities.” This statement will not have an effect on the Company’s financial statements.

In June 2008, the FASB issued EITF Issue 07-5 “Determining whether an Instrument (or Embedded Feature) is indexed to an Entity’s Own Stock” (“EITF No. 07-5”). EITF No. 07-5 is effective for financial statements issued for fiscal years beginning after December 15, 2008, and interim periods within those fiscal years. Early application is not permitted. Paragraph 11(a) of SFAS 133 “Accounting for Derivatives and Hedging Activities” specifies that a contract that would otherwise meet the definition of a derivative but is both (a) indexed to the Company’s own stock and (b) classified in stockholders’ equity in the statement of financial position would not be considered a derivative financial instrument. EITF No. 07-5 provides a new two-step model to be applied in determining whether a financial instrument or an embedded feature is indexed to an issuer’s own stock and thus able to qualify for the SFAS 133 paragraph 11(a) scope exception. This statement will not have an impact on the Company’s financial statements.

In April 2008, the FASB issued FSP 142-3 “Determination of the Useful Life of Intangible Assets” (“FSP 142-3”), which amends the factors a company should consider when developing renewal assumptions used to determine the useful life of an intangible asset under SFAS 142. FSP 142-3 is effective for financial statements issued for fiscal years beginning after December 15, 2008, and interim periods within those fiscal years. SFAS 142 requires companies to consider whether renewal can be completed without substantial cost or material modification of the existing terms and conditions associated with the asset. FSP 142-3 replaces the previous useful life criteria with a new requirement—that an entity consider its own historical experience in renewing similar arrangements. If historical experience does not exist then the Company would consider market participant assumptions regarding renewal including 1) highest and best use of the asset by a market participant, and 2) adjustments for other entity-specific factors included in SFAS 142. This statement will not have an impact on the Company’s financial statements.

On October 10, 2008, the FASB issued FSP 157-3, “Determining the Fair Value of a Financial Asset When the Market for That Asset Is Not Active,” ("FSP 157-3") which clarifies the application of SFAS 157 in a market that is not active and provides an example to illustrate key considerations in determining the fair value of a financial asset when the market for that financial asset is not active. FSP 157-3 became effective on October 10, 2008, and its adoption did not have a material impact on the financial position or results for the year ended June 30, 2009.

In January 2009, the FASB issued FSP EITF 99-20-1, “Amendments to the Impairment Guidance of EITF Issue No. 99-20, Recognition of Interest Income and Impairment on Purchased and Retained Beneficial Interests in Securitized Financial Assets” (“FSP EITF 99-20-1”). FSP EITF 99-20-1 changes the impairment model included within EITF 99-20 to be more consistent with the impairment model of SFAS No. 115. FSP EITF 99-20-1 achieves this by amending the impairment model in EITF 99-20 to remove its exclusive reliance on “market participant” estimates of future cash flows used in determining fair value. Changing the cash flows used to analyze other-than-temporary impairment from the “market participant” view to a holder’s estimate of whether there has been a “probable” adverse change in estimated cash flows allows companies to apply reasonable judgment in assessing whether an other-than-temporary impairment has occurred. The adoption of FSP EITF 99-20-1 did not have a material impact on our consolidated financial statements.

In 2026, the Company further expanded its business operations by commencing export trading activities of various products. During the three months ended March 31, 2026, the Company generated export trading revenue of $244,896. The Company expects this business line to further diversify its revenue streams and expand its commercial presence across global markets.

Revenue

The Group generated net profit of $44,951 and had net cash provided by operating activities of $655 for the three months ended March 31, 2026.

As of March 31, 2026, the Group had a net current liability of $317,888.