GeoInvesting - China Marketing Media (OTC BB:CMKM)

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

AND COMPREHENSIVE INCOME

(Currency expressed in United States Dollars (“US$”), except for number of shares)

(Unaudited)

	Three months ended September 30,						Nine months ended September 30,
	2011			2010			2011			2010

Revenue	$	6,627,666		$	9,122,428		$	23,365,433		$	26,626,368

Cost of revenue		4,869,666			6,152,549			16,928,824			18,361,801

Gross profit		1,758,000			2,969,879			6,436,609			8,264,567

Operating expenses:
Salaries and related benefits expenses		761,801			686,127			2,327,592			2,203,076
Selling, general and administrative expenses		1,032,202			803,082			3,598,191			2,373,612

Total operating expenses		1,794,003			1,489,209			5,925,783			4,576,688

(Loss) income from operations		(36,003	)		1,480,670			510,826			3,687,879

Other income (expense):
Interest income		1,784			26,208			6,695			111,633
Interest expense		(95,298	)		(415	)		(163,292	)		(34,431	)
Investment loss in unconsolidated affiliates		(33,019	)		(23,172	)		(194,499	)		(33,260	)
Subsidy income		40,290			-			101,376			-
Other (expenses) income		-			192			(83,424	)		787

Total other (expenses) income		(86,243	)		2,813			(333,144	)		44,729

(Loss) income from continuing operations before income tax expense		(122,246	)		1,483,483			177,682			3,732,608
Income tax expense		(1,364	)		(75	)		(70,082	)		(28,203	)

(Loss) income from continuing operations, net of income tax expense		(123,610	)		1,483,408			107,600			3,704,405

(Loss) income from discontinued operations, net of income tax expense		(389	)		(47,443	)		(60,398	)		(130,540	)

NET (LOSS) INCOME	$	(123,999	)	$	1,435,965		$	47,202		$	3,573,865
Add: net loss attributable to non-controlling interests		-			(33,084	)		-			(28,342	)

Net (loss) income attributable to China Marketing Media Holdings, Inc.	$	(123,999	)	$	1,402,881		$	47,202		$	3,545,523

Amounts attributable to China Media Holdings, Inc.
(Loss) income from continuing operations		(123,610	)		1,483,408			107,600			3,704,405
(Loss) income from discontinued operations		(389	)		(80,527	)		(60,398	)		(158,882	)
Net (loss) income attributable to China Media Holdings, Inc.	$	(123,999	)	$	1,402,881		$	47,202		$	3,545,523

Net (loss) income per common share attributable to China Marketing Media Holdings, Inc. – Basic and diluted
Continuing operations	(0.00	)	0.05		0.00		0.13
Discontinued operations	(0.00	)	(0.00	)	(0.00	)	(0.01	)
Net (loss) income per common share	(0.00	)	0.05		0.00		0.12

Weighted average number of common share outstanding – basic and diluted	28,686,002		28,686,002		28,686,002		28,686,002

Due to a highly competitive market for consumer products, the management has decided to focus on the higher gross margin end users rather than wholesalers and distributors. This also decreased the total Consumer Products division sales for the three-month period ended September 30, 2011. The decrease of overall revenues was also caused by Advertising Space Sales of $862,925 or 40%, but offset by an increase in Consulting Service of $171,100 or 19.6% and a slight increase in Magazine Sales of $10,292 or 2.4%. Even though the Consulting Service sector has been growing rapidly in recent months, the Advertising Space Sales still suffer from a soft market.

CHINA MARKETING MEDIA HOLDINGS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

AND COMPREHENSIVE INCOME

(Currency expressed in United States Dollars (“US$”), except for number of shares)

(Unaudited)

	Three months ended June 30,						Six months ended June 30,
	2011			2010			2011			2010

Revenue	$	9,608,012		$	8,712,848		$	16,737,767		$	17,503,940

Cost of revenue		7,445,144			6,216,953			12,059,158			12,209,252

Gross profit		2,162,868			2,495,895			4,678,609			5,294,688

Operating expenses:
Salaries and related benefits expenses		789,352			822,704			1,565,791			1,516,949
Selling, general and administrative expenses		1,256,752			799,632			2,565,989			1,570,530

Total operating expenses		2,046,104			1,622,336			4,131,780			3,087,479

Income from operations		116,764			873,559			546,829			2,207,209

Other income (expense):
Interest income		4,013			85,492			4,911			85,425
Interest expenses		(67,994	)		-			(67,994	)		(34,016	)
Investment loss in unconsolidated affiliates		(160,924	)		(2,634	)		(161,480	)		(10,088	)
Other(expenses) income		(83,042	)		(174	)		(22,338	)		595

Total other (expenses) income		(307,947	)		82,684			(246,901	)		41,916

(Loss) income from continuing operations before income tax expense		(191,183	)		956,243			299,928			2,249,125
Income tax expense		(983	)		(22,810	)		(68,718	)		(28,128	)

(Loss) income from continuing operations, net of income tax expense		(192,166	)		933,433			231,210			2,220,997

(Loss) income from discontinued operations, net of income tax expense		-			5,045			(60,009	)		(83,097	)

NET (LOSS) INCOME	$	(192,166	)	$	938,478		$	171,201		$	2,137,900
Add: net loss attributable to non-controlling interests		-			-			-			4,742

Net (loss) income attributable to China Marketing Media Holdings, Inc.	$	(192,166	)	$	938,478		$	171,201		$	2,142,642

Amounts attributable to China Media Holdings, Inc.
(Loss) income from continuing operations		(192,166	)		933,433			231,210			2,220,997
(Loss) income from discontinued operations		-			5,045			(60,009	)		(78,355	)
Net (loss) income attributable to China Media Holdings, Inc.	$	(192,166	)	$	938,478		$	171,201		$	2,142,642

The following are some financial highlights for the first quarter of 2011:

Revenues: Our revenues were approximately $7.1 million for the first quarter of 2011, a decrease of 18.9% from the same quarter a year ago.

Gross Margin: Gross margin was 35.4% for the first quarter of 2011, as compared to 31.8% for the same quarter in 2010.

Operating Profit: Operating profit was approximately $0.37 million for the first quarter 2011, a decrease of approximately 70.8% from approximately $1.26 million of the same period of 2010.

Net Income attributable to China Marketing Media Holdings, Inc.: Net income was approximately $0.36 million for the first quarter of 2011, a decrease of 69.8% from the same period of last year.

Fully diluted earnings per share was $0.01 for the first quarter of 2011, as compared to $.04 for the first quarter ended March 31, 2010.

This decrease in sales was due to a supply shortage experienced by ASUS, one of our major vendors, who was having some issues with meeting demands. The issues have been resolved since early March. The Advertising Pages Sales for the three-month period ended March 31, 2011, which is 1,289,592, or 44.0% less than the same period in 2010. Such decrease was due to the fact that the number of advertising trade shows was reduced. Despite the decrease in overall revenue, Consulting Service’s revenue actually rose $797,215 or 121% in the quarter compared to the same period last year. This was attributable to the sales by more well-established sales channels and a variety of sales promotions to attract more customers.

CHINA MARKETING MEDIA HOLDINGS, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

AND COMPREHENSIVE INCOME

FOR THE YEARS ENDED DECEMBER 31, 2010 AND 2009

(Currency expressed in United States Dollars (“US$”))

		Years ended December 31,
		2010			2009
Revenue, net
Magazine advertising	$	14,407,940		$	9,488,579
Consumer products		20,563,361			15,411,781
Total operating revenue, net		34,971,301			24,900,360

Cost of revenue
Magazine advertising		3,634,990			3,151,729
Consumer products		19,839,929			14,500,327
Total cost of revenue		23,474,919			17,652,056

Gross profit		11,496,382			7,248,304

Operating expenses:
Impairment loss on goodwill		446,543			-
General and administrative		6,707,491			5,917,937
Total operating expenses		7,154,034			5,917,937

Income from operations		4,342,348			1,330,367

Other income (expense):
Interest income		112,440			55,767
Interest expense		(78,631	)		-
Investment loss (equity method)		(42,256	)		(55,369	)
Subsidy income		40,586			140,028
Other income		453			-
Total other income		32,592			140,426

Income from continuing operations before income taxes		4,374,940			1,470,793

Income tax expense		(56,950	)		(27,328	)

Income from continuing operations, net of tax		4,317,990			1,443,465

Discontinued operations, net of tax		20,616			-

NET INCOME	$	4,338,606		$	1,443,465

(Subtract) add: net (income) loss attributable to non-controlling interests		(28,342	)		62,309

Net income attributable to China Marketing Media Holdings, Inc.	$	4,310,264		$	1,505,774

Earnings per share – basic and diluted:
Income from continuing operations attributable to China Marketing Media Holdings, Inc. common stockholders	$	0.15		$	0.05
Discontinued operations attributable to China Marketing Media Holdings, Inc. common stockholders		0.00			-
Net income attributable to China Marketing Media Holdings, Inc. common stockholders	$	0.15		$	0.05

Weighted average common stock outstanding – basic and diluted		28,686,002			28,686,002

GeoTeam Note: Fourth Quarter 2010 vs. 2009 EPS was $0.03 vs. $0.01

We believe that the media and advertising industry in China is one of the fastest growing in the world and presents numerous opportunities for consolidation and growth. Based on a new forecast by ZenithOptimedia, the world’s largest media services group, China, now the world’s fourth largest advertising economy, will overtake Germany as the world’s third-largest advertising market after the United States and Japan. And markets in developing countries are predicted to grow much faster than developed markets, accounting for almost 36 per cent of all advertising spending by 2013, up from 31.5 per cent in 2010. China’s fast-growing economy would result in an increase in advertising spending of more than 50 per cent, from 22.6 billion dollars in 2010 to 34.2 billion dollars in 2013.

With respect to our online sales business, accompanying the rapid development of Internet in China, more and more Chinese begins to favor online shopping for its convenience, quick delivery and less cost. According to an article on September 10, 2010 by Reuters, MasterCard Inc. predicted that, “China will likely surpass the United States to become the world’s top credit card market by number of cards in a decade, as rising wealth and urbanization enable Chinese consumers to spend more using plastic.” Therefore, we believe that the business of online sales is an important new business line that we should engage to increase our revenue stream.

Third Quarter Financial Performance Highlights

Revenues were approximately $9.1 million for the third quarter of 2010, an increase of 32.2% from the same quarter of last year.

Gross margin was 32.6% for the third quarter of 2010, as compared to 30.2% for the same period of last year.

Operating profit was approximately $1.46 million for the third quarter of 2010, an increase of approximately 95.5% from approximately $0.74 million of the same period last year.

Net income was approximately $1.40 million for the third quarter of 2010, an increase of 89.6% from the same period of last year.

Fully diluted earnings per share was $0.05 for the third quarter of 2010 vs. $0.03.

Second Quarter Financial Highlights:

Revenues grew 60.5% year over year from approximately $5.5 million to $8.8 million.
Net income of $938,478 for the second quarter of 2010, an increase of 372% from the same period of last year.
Fully diluted earnings per share ("EPS") were $0.03 for the second quarter of 2010 vs. $0.01.

First Half 2010 Financial Highlights:

Sales increase from $9,893,635 to $17,580,509, a 77.7% improvement year over year.
Advertising revenue jumped almost 155% in the first half of 2010 compared to the same period last year, while online electronics sales and consulting revenue grew 87.3% and 82.3% respectively.
Net income after tax for the first six months of 2010 was $2,137,900, or $.07 EPS, compared to $230,653, or $.01 EPS for the first half of 2009.

Mr. Yingsheng Li, President and CEO of China Marketing Media commented, "We are very excited to deliver another solid quarter to our shareholders. In the past year, to diversify our revenue source, China Marketing Media has been expanding to new business opportunities, such as our B2C online division. We are happy to see the recent operating results of our new initiative."

"Despite the decrease of our magazine subscription, our traditional advertising business rebounded tremendously as many Chinese companies are ramping up their marketing budget in 2010. Meanwhile, the fast development of the company's B2C business continues to generate potential clients of our advertising and consulting. Therefore, we expect to see further improvement of our advertising and consulting businesses in coming quarters," concluded Mr. Yingsheng Li.

Please note: On July 6, 2010, the GeoTeam® removed all Chinese stocks that were on GeoBargains and GeoSpecial lists to respective Radar lists as we complete our "quality assessment."

***Very Important GeoTeam note. We have yet to verify if the Chinese filings for ChinaHybrid stocks we monitor match respective SEC filings. We are in the process of completing this task. Although we are not totally convinced that SAIC filings are an accurate represenation of financial statements the issue is impacting stock prices. Conservative investors may want to limit exposure or buy put options on stocks, that have this availability, as insurance against long positions, until we publish our findings. Odds are we will identify some promising companies that will fail this litmus test.

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