UNITED STATES 
SECURITIES AND EXCHANGE COMMISSION

FORM 10-KSB

(Mark One) 
[X]         ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934 
For the fiscal year ended: December 31, 2006

[    ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 
For the transition period from ____________ to _____________

Commission File No. 000-51806

CHINA MARKETING MEDIA HOLDINGS, INC.

|TEXAS                                                | 76-0641113                              
|---------------------------------------------------- | ----------------------------------------
|(State
    or other jurisdiction of incorporation or | (I.R.S.
    Employer Identification No.)
|organization)                                        |                                         

RMA 901 
KunTai International Mansion 
No. 12 Chaowai Street 
Beijing, 100020, China 
-------------------------------------------------------------------------------------------------------

(Address of Principal Executive Offices)

(86) 10-59251090 
------------------------------------------------- 
(Registrants Telephone Number, Including Area Code)

Securities registered under Section 12(b) of the
Exchange Act: NONE

Securities registered under Section 12(g) of the
Exchange Act: Common stock, no par value

Check whether the issuer (1) filed all reports
required to be filed by Section 13 or 15(d) of the Exchange Act during the past
12 months (or such shorter period that the registrant was required to file such
reports), and (2) has been subject to such filing requirements for the past 90
days. Yes___ No X

Check if no disclosure of delinquent
filers in response to Item 405 of Regulation S-B is contained in this form, and
no disclosure will be contained, to the best of registrant's knowledge, in
definitive proxy or information statements incorporated by reference in Part III
of this Form 10-KSB or any amendment to this Form 10-KSB.

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

The issuers revenues for its most recent fiscal year
are $8,383,087.

As of April 16, 2007, the aggregate
market value of such shares held by non-affiliates of the registrants common
stock (based upon the average bid and asked price of $0.20 of such shares as
reported on the pink sheets) was approximately $955,600. Shares of the
registrants common stock held by each executive officer and director have been
excluded in that such persons may be deemed to be affiliates of the registrant.
This determination of affiliate status is not necessarily a conclusive
determination for other purposes.



Documents incorporated by reference: NONE.

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INTRODUCTORY NOTE

Except as otherwise indicated by the context, references to
"we," "us," "our," or "the Company" are to China Marketing Media Holdings, Inc.,
and its subsidiaries. References to "Media Challenge" are references to Media
Challenge Holdings Limited, a British Virgin Islands company. Unless the context
otherwise requires, all references to (i) "Shenzhen New Media" are to Shenzhen
New Media Consulting Co., Ltd.; (ii) "Shenzhen Media" are to Shenzhen Media
Investment Co., Ltd.; (iii) "BVI" are to British Virgin Islands; (iv) "PRC" and
"China" are to Peoples Republic of China; (v) "U.S. dollar," "$" and "US$" are
to United States dollars; (vi) "RMB" are to Renminbi, the legal currency of
China; (vii) "Securities Act" are to Securities Act of 1933, as amended; and
(viii) "Exchange Act" are to the Securities Exchange Act of 1934, as amended.

Effective January 25, 2006, we implemented a 1-for-10 reverse
stock split in issued and outstanding shares of our common stock which reduced
the number of our issued and outstanding shares from 275,860,000 to 27,586,002
shares. Unless otherwise indicated, all share and per share information
contained herein has been adjusted to give effect to such reverse stock split.

FORWARD-LOOKING STATEMENTS

This report contains forward-looking statements, which
reflect our views with respect to future events and financial performance. These
forward-looking statements are subject to certain uncertainties and other
factors that could cause actual results to differ materially from such
statements. Important factors that may cause actual results to differ from those
projected include the risk factors specified below. These
forward-looking statements are identified by, among other things, the words
"anticipates", "believes", "estimates", "expects", "plans", "projects",
"targets" and similar expressions. Readers are cautioned not to place undue
reliance on these forward-looking statements, which speak only as of the date
the statement was made. We undertake no obligation to publicly update or revise
any forward-looking statements, whether as a result of new information, future
events or otherwise.

PART I

ITEM 1. DESCRIPTION OF BUSINESS.

Our Background

We were originally organized under the laws of the State of
Texas on October 29, 1999 under the name of Brazos Strategies, Inc. We changed
our name to Infolife, Inc. on July 16, 2003 and finally to China Marketing Media
Holdings, Inc. on February 7, 2006. We do not maintain a corporate website, but
we utilize the following URL www.cmmo.com.cn for the sale and promotion of the
magazines we publish.

When we operated under the name Brazos Strategies, Inc., we
were an Internet service provider.

Thereafter, when we changed our name toInfolife, Inc.
we continued our business as Internet service provider in Tomball, Texas. This
business was later sold back to the original shareholders of Infolife, Inc.

The Reverse Acquisition Transaction

On December 29, 2005, Ibroader Developments Limited or
Ibroader, I-Mode Technology, Inc. or I-Mode, Fugu Enterprises, Inc. or Fugu, and
four individual purchasers, Liu Man Han, Li Adrian, Woo Chi Wai and Wong Lap
Woon acquired approximately 4.3 million shares of our outstanding common stock,
or approximately 90% of our then issued and outstanding common stock. Among
them, Ibroader acquired 0.95 million shares, I-Mode acquired 0.8 million shares,
Fugu acquired 0.5 million shares, Liu Man Han acquired 0.2 million shares, Li
Adrian acquired approximately 0.55 million shares, Woo Chi Wai acquired 0.5
million shares and Wong Lap Woon acquired 0.8 million shares. The aggregated
cash consideration was $100,000 and each buyer paid its pro rata share of the
total consideration. This transaction resulted in a change of control.

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Shortly thereafter, on December 31, 2005, we entered into a
share exchange agreement with Media Challenge, a BVI corporation, and the
shareholders of Media Challenge. Pursuant to the share exchange agreement we
acquired 121,000 shares of Media Challenge, constituting all of the issued and
outstanding capital stock of Media Challenge, in exchange for convertible
promissory notes in the principal amount of $441,600. These convertible
promissory notes were convertible into 22,808,000 shares of our common stock,
but only after the completion of a 1-for-10 reverse split of our common stock
that we became obligated to effect pursuant to the share exchange agreement.
Thereafter, on January 25, 2006, we completed a 1-for-10 reverse split of our
common stock as contemplated by the share exchange agreement. At that time the
convertible note issued to Media Challenge also converted into 22,808,000 shares
of our common stock and the former stockholders of Media Challenge, Yingsheng
Li, Xiaofeng Ding, and Dongsheng Ren became our controlling stockholders.
Collectively, they became the owners of about 82% of our outstanding common
stock. Media Challenge thereby became our wholly owned subsidiary and the former
stockholders of Media Challenge became our controlling stockholders. Immediately
prior to the stock split we had 47,780,000 shares of common stock outstanding
and immediately following the stock split and the issuance of our common stock
pursuant to the share exchange agreement, there were 27,586,002 shares of common
stock outstanding.

Media Challenge entered into the share exchange transaction
with us so that it could become a public reporting company whose securities are
quoted on the pink sheets. Media Challenge believed that it would derive
benefits from becoming a public reporting and trading company such as
potentially enhanced ability to raise capital, potentially enhanced reputation
from being a public company, potentially enhanced ability to use stock options
to attract and retain senior executives and enhanced transparency of our
financial and operating information to stockholders and potential investors and
strategic partners.

Our Business

We are a holding company and we have no operations other than
administrative matters and the ownership of our direct and indirect operating
subsidiaries. The following organizational chart illustrates our current
organizational structure and our respective ownership interest in our various
subsidiaries.

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(1) Beijing Media Management Consultation Company was
incorporated in China in October 2004 to carry on consultation, professional
training and provide relevant sale and marketing services to business
enterprises in China.

(2) Shenzhen Keungxi Technology Company Ltd. or SKTC was
incorporated in China in October 2005. Its business scope includes, among
others, sales and development of computer software, computer and communication
systems. It also provides information system consulting services. Shenzhen Media
holds 48% of the equity of SKTC and three individual shareholders, Wengao Luo,
Xi Chen and Bin Li own the remaining 21.5%, 21.5% and 9% of SKTC, respectively.

(3) Sale and Marketing Publishing House or CMO is the owner
of the "China Marketing" magazine and "China Business & Trade" magazine. It is
currently responsible for providing and editing the contents of these magazines.

Our Magazines and Publishing Rights

Through our indirect Chinese subsidiaries, we are engaged in
the business of selling magazines and advertising space in our magazines. All of
our operations, assets, personnel, officers and directors are located in China.
Currently we publish China Marketing(Xiao Shou Yu Shi Chang)
magazine in China. We publish three issues of China Marketing per month,
including a sales edition, case edition and channel edition. From June 2003
through December 2006, we published one issue of China Business & Trade
magazine per month, which was the training edition.

|China Marketing -Sales edition   | China Marketing -Case edition           
|-------------------------------- | ----------------------------------------
|                                 |                                         
|                                 |                                         
|                                 |                                         
|China Marketing -Channel edition | China Business & Trade -Training edition
|                                 |                                         
|                                 |                                         

Our magazines are Chinese publications tailored to the sales
and marketing industry. The magazines were originally published by Sale and
Marketing Publishing House or CMO under the Light Industrial Ministry of the
Henan Provincial Government. On October 22, 2003, the Henan Provincial
Government, Shenzhen Niu Si Tai Asset Management Limited Corporation, and CMO
incorporated Shenzhen Media under the laws of China. On October 23, 2003,
Shenzhen Media entered into a ten year operation and management right agreement
with CMO or Operation and Management Right Agreement, pursuant to which from
November 1, 2003 to October 31, 2013, Shenzhen Media is obligated to market the
magazines, sell the magazines and advertising space, provide strategic planning
for the magazines, and train the professional staff of CMO. The agreement was
amended on January 8, 2004. Under the terms of the agreement, as amended,
Shenzhen Media agreed to pay a lump sum deposit of RMB 10,109,300 (approximately
$1,220,930) and bear all of the operating costs relating to the publishing of
the magazines in exchange of the right to all revenues generated from selling
the magazines and their advertising space.

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On November 20, 2004, Shenzhen Media and Shenzhen New Media
entered into an entrust agreement or Entrust Agreement, under which Shenzhen
Media transferred all of its rights under the Operation and Management Right
Agreement to Shenzhen New Media. Shenzhen New Media agreed to pay Shenzhen Media
$1.45 million in connection with this transfer of rights. Shenzhen New Media
agreed to pay this amount over the 9 year term of the agreement, which is for
the full remaining term of the assigned contract. Thereafter, on December 21,
2005, our indirect subsidiary, Shenzhen New Media acquired Shenzhen Media.

We had to enter into the Operation and Management Right
Agreement and the Entrust Agreement instead of acquiring CMO outright as a
result of restrictions under Chinese law that prohibit foreign persons from
engaging in certain publishing activities in China. CMO is an affiliate of the
Administration of Press and Publication of Henan Provincial Government and was
established under the laws of China. Because of its ownership of the national
publishing codes of China Marketing and China Business & Trade,
CMO is the owner of these two magazines. It is only through these two above
agreements that we have obtained a right to oversee the operation and strategic
planning of advertising, publishing, and staff training for the magazines that
are published by CMO. Under these agreements, we are also entitled to collect
advertising revenues from clients already existing at the time of the
agreements, in addition to any new clients that we can solicit and retain. As a
result, we derive the economic benefits and incur the economic burdens that we
would otherwise have as the owner of CMO or the owner of CMOs assets while
still complying with Chinese law.

The Entrust Agreement and the Operation and Management Right
Agreement between Shenzhen New Media and Shenzhen Media and between Shenzhen
Media and CMO, respectively, are both protected by the laws of China and these
agreements cannot be amended or terminated without the written consent of all
parties involved.

Our Employees

We currently have 27 full-time employees and we do not expect
any significant changes in the number of our employees during the next 12
months.

The following table illustrates the allocation of these
employees among the various job functions conducted at our company.

Department
      Number of EmployeesManagement
      5Accounting Department
      4Issuing Department
      4Commercial Advertisement Department
      5Consultation Advertisement Department
      2Partnership Advertisement Department
      4Data Analysis Department
      3Total
      27


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We believe that our relationship with our employees is good.
The remuneration payable to employees includes basic salaries and allowances.
We have not experienced any significant problems or
disruption to our operations due to labor disputes, nor have we experienced any
difficulties in recruitment and retention of experienced staff.
Our Chinese subsidiaries have trade unions which protect
employees rights, aim to assist in the fulfillment of our economic objectives,
encourage employee participation in management decisions and assist in mediating
disputes between us and union members.

Our employees in China participate in a state pension scheme
organized by Chinese municipal and provincial governments. Each month we are
required to contribute to the scheme with approximately $47.5 for each of our
employees and approximately $59.1 for each of our executive officers and
directors. The compensation expenses related to this scheme were approximately $42,292 and
$48,753 for the fiscal year 2006 and 2005, respectively.
In addition, we are required by Chinese law to cover
employees in China with various types of social insurance. We have purchased
social insurances for all of our employees.
Our Products

China Marketing was first published by CMO in April 1994
as a monthly magazine. Thereafter, in September 2001, CMO began publishing two
issues of this magazine per month. In May 2004, after the establishment of the
operation and management rights agreement, we started to publish three issues of
this magazine per month. In June 2003, the fist issue of China Business &
Trade was published. In January 2007, we decided to stop publishing China
Business & Trade by combining the content of China Business & Trade
into the Case edition of China Marketing.
The dimension of both China Marketing and China
Business & Trade is 210mm x 285mm. The magazines are published in color. We
use double-side offset paper within the magazines and 157g double-side halftone
paper for the covers of Sales edition and Channel edition of China Marketing
and China Business & Tradeand200g double-side halftone paper for
the covers of Case edition of China Marketing. All editions of the
magazines are published in Chinese and circulated within the greater China area,
which includes mainland China and Hong Kong.
Each issue of China Marketing focuses on specific
topics. The first monthly issue of the magazine, the Sales edition, is a blend
of overall discussion on sales and marketing for executives who need to keep
track of the latest developments in their industries. This issue also introduces
creative and successful marketing strategies and analyzes market trends of
different industries and new business opportunities. It offers the readers a
macro view of the developments and trends in various industries across China.
Competitive and sales strategies are proposed to readers who need advice on
formulating an appropriate strategy for their products. Practical methodologies
are also presented to facilitate the readers in managing their business
operations. The second issue of the magazine, the Case edition, features sales
and marketing case studies. This edition includes detailed reports by industry
experts that explain different sales and marketing techniques and theories
underlying the featured case study. These cases focus mainly on business sales
and marketing events that have occurred in China. These case studies offer our
Chinese readers some insight into particular sales and marketing approaches used
by the companies who are the subject of the case study. The third issue, the
Channel edition, is tailored to supply chain management executives. This edition
provides information on the supply chain management process including,
manufacturers, distributors, and logistics management.
China Business & Trade was published to provide readers
with a comprehensive view of basic marketing theories and applications through
real business examples. The target readers for the magazine were sales and
marketing executives working in early stage (emerging) local businesses.
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The physical printing,
assembling and production of our magazines have been outsourced to independent third
party printers. The printers are responsible for typesetting the articles,
proof reading, plate-making, paper supplying, binding and packaging.
Specifically, the printing works of the publication of Sales edition and Case
edition of China Marketing and some copies of China Trade & Business
were contracted to Henan Xinhua Printing Factory.The printing works of
the publication of Channel edition of China Marketing and some copies of
China Trade & Business were contracted to Henan Ruiguang Printing Co.,
Ltd.
Under these outsourcing agreements, the paper cost accounts
for a large proportion of the quoted price. The printing price equals to the
quantity of units multiplied by the unit price which is a fixed price under the
agreement. This fixed price remains constant during the term of the agreement.
Therefore, the printer assumes the risk of increasing paper costs.
We outsource the production of our magazines to independent
third party printers because we are not in the printing business. We believe it
is commercially beneficial for us to hire the independent printers who have more
professional knowledge of printing than we do.

Advertising

In addition to generating revenues through sales of our
magazines, we also generate revenues through the sale of advertising that is
placed in our magazines.

Based on the market position of each edition of the
magazines, our marketing team identifies the sort of potential clients that
would be interested in advertising in our magazines and offers them an
advertising package within the magazines. Also, our magazines have built up a
base of clients that regularly advertise in the magazines.

Our Content

CMOs editorial department is solely responsible for
providing the editorial content of the magazines.

The content of our magazines can be broken down into three
categories consisting of topics of interest, case studies and management
practice. Topics of interest are identified by CMOs editors and articles are
prepared by CMO editors based upon publicly available information about the
particular topic. Case studies on actual sales and marketing events are
identified by CMOs editors, who also provide commentary and analysis on these
case studies. Freelance writers are retained to write articles on management
practices in the sales and marketing industry. These management practice
articles are designed to utilize real life experiences to provide readers with
solutions to their sales and marketing problems and general sales and marketing
guidance.

Our Distribution Channels

Currently, our distribution network consists of over sixty
distribution agencies and 30,000 shops covering over 300 cities throughout
China. We plan to develop a more comprehensive distribution network for our
magazines that we hope will eventually reach all major cities in China.

There are three main distribution channels for our magazines
in China: (1) postal subscription based distribution; (2) direct order
distribution; and (3) agency based distribution.

Our first distribution channel, postal subscription based
distribution, involves the distribution of our magazines by Chinese post
offices. Unlike the United States, subscribers of our magazines and other
magazines published in China, can request a subscription directly from the post
offices in China who arrange delivery of the magazines to the address requested
by the subscriber. Direct order based distribution involves a direct request
from a subscriber to us for a single issue or multiple issues of our magazines
that do not involve an ongoing subscription. Upon receipt of this request, we
deliver the ordered issues to the address requested by the subscriber. Finally,
agency based distribution, involves the delivery by us of our magazines to sales
agents who then distribute the magazines to retail sales agents who sell the
magazines from various locations throughout China.

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As of December 31, 2006, the annual circulation of our
magazines during the 2006 fiscal year, was 3,705,627 million units, among which,
approximately 66% of sales were made through retail agents such as newsstands,
airports, subways and bookstores throughout China. These retail agents obtained
our magazines from our distribution agents who operate throughout China. The
remaining 34% of our sales were through postal subscriptions (32%) and direct
orders (2%). As of December 31, 2005, the annual circulation of our magazines
was approximately 4.06 million units, among which 70% of sales were made through
retail agents such as newsstands, airports, subways and bookstores throughout
China. The remaining 30% of our sales were through postal subscriptions (28%)
and direct orders (2%).
The following table lists the annual circulation of our
magazines during the fiscal year ending December 31, 2006:

|Different     | China Marketing | China Marketing | China Marketing   | China Business & |          
|------------- | --------------- | --------------- | ----------------- | ---------------- | ---------
|editions      | (Sales edition) | (Case edition)  | (Channel edition) | Trade            | Total    
|              |                 |                 |                   |                  |          
|Distribution  |                 |                 |                   |                  |          
|agents        | 1,080,618       | 488,357         | 757,271           | 101,764          | 2,428,010
|              |                 |                 |                   |                  |          
|              |                 |                 |                   |                  |          
|Subscriptions |                 |                 |                   |                  |          
|through post  | 385,764         | 386,026         | 386,249           | 11,255           | 1,169,294
|offices       |                 |                 |                   |                  |          
|              |                 |                 |                   |                  |          
|              |                 |                 |                   |                  |          
|Direct        |                 |                 |                   |                  |          
|subscriptions | 17,211          | 62,338          | 15,588            | 13,186           | 108,323  
|              |                 |                 |                   |                  |          
|              |                 |                 |                   |                  |          
|Total         | 1,483,593       | 936,721         | 1,159,108         | 126,205          | 3,705,627
|              |                 |                 |                   |                  |          

The following table lists our principal distribution agents and their
distribution areas:

|Names of Distribution Agents                    | Distribution Area 
|----------------------------------------------- | ------------------
|                                                |                   
|Guangzhou Qiankuntai Bookstore                  | Guangzhou         
|                                                |                   
|Huadao Consulting Co., Ltd.                     | China             
|                                                |                   
|Nanjing Cultural Development Co., Ltd.          | Nanjing           
|                                                |                   
|Shandong Qianyan Culture Dissemination Co., Ltd | Shangdong Province
|                                                |                   
|Zhengzhou Huanghe Culture Group                 | Henan Province    
|                                                |                   
|Changsha Youyou Reading Group                   | Hunan Province    
|                                                |                   
|Hangzhou Tianyi Books Co., Ltd                  | Hangzhou          

We have entered into a distribution agreement with each of
these principal distributors. The distribution agreement has a one year term
that is automatically renewed for an additional year unless either party
provides the other with notice of termination one month prior to the end of the
term. Pursuant to the agreement, the distributor has the obligation, at its own
expense, to sell and deliver our magazines to retail agents and readers within
the distributors authorized distribution territory. Our distributors receive
sales commissions on the distribution of our magazines ranging from 40 to 45
percent of total proceeds generated by their sales.

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Prices of Our Products
The fixed retail price of the Sales edition and the Channel
edition ofChina Marketing
is RMB 7.5 per issue (approximately, $0.95) and the fixed retail price of the
Case edition of China Marketing is RMB 10 per issue (approximately
$1.27). Subscribers who subscribe to our magazines directly pay this same fixed
retail price per issue on an issue by issue basis.

The subscription price paid for all editions of China
Marketing by those subscribers who subscribe through post offices in China
is RMB 7.5 per issue (approximately $0.95). Subscribers who subscribe through
post offices in China are charged through an annual payment arrangement where
they pay for the annual subscription fees at the beginning of each year based
upon the number of issues that will be published during the year.

The fixed retail price, as well as the price paid per issue
by subscribers who ordered directly from us or who subscribed through post
offices in China for our China Business & Trade magazine was RMB 6.0 per
issue (approximately $0.76).

In the past, when we have developed new editions of our
magazines or a new magazine title, we have employed a "bundle" pricing approach
in order to attempt to increase the overall pool of subscribers or readers.
Through this approach, we bundle our newly developed editions or magazines,
e.g., the China Business & Trade magazine, with our older more widely
read editions, e.g., the Sales edition, at a discounted price to the price that
the subscriber would have paid for both editions separately. As a result, the
newly developed editions can penetrate into the market more quickly than if they
were sold separately. We plan to use this approach in the future if we develop
new editions or begin to publish new magazine titles. We define the newly
developed editions or magazine as which have been issued not more than two
years.

Competition

Both local and overseas publishers issue business related
magazines in China.Business Week, Harvard Business Review, Forbes, andFortune are some of the well-known international business magazine titles
that have Chinese versions published in China. These magazines publish
translated articles from the English version and develop some local stories with
the editorial staff hired by the local publishing houses.

Our local competition consists of three sub-titles, namely New Selling, Successful Selling, and Contemporary Selling. We
compete with our competitors based upon the price of our magazines, the quality
of the articles and information that we publish, and the design features of our
magazines. We believe that prices of our magazines are lower than the prices of
our international competitors such as Business Week, Harvard Business
Review, Forbes and Fortune and our local competitors, such as
New Selling, Successful Sellingand Contemporary Selling.
We believe that the quality and design features of our magazines are superior to
the quality and design features of New Selling, Successful Selling
and Contemporary Selling but not as good as our international
competitors.

Our Intellectual Property

We believe that our business is dependent in part on our
ability to establish and maintain the copyright of the content and titles of our
magazines.

Our magazines have been registered with the General
Administration of Press & Publication of China and CMO has obtained the national
publishing code CN41-1210/F for China Marketing and CN11-3443/F for China Business & Trade. In addition, CMO has obtained international standard
codes for both China Marketing and China Business & Trade, which
are ISSN1005-3530 and ISSN1005-5800, respectively. These codes, respectively,
are printed on the last page of each publication.

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We have registered our magazines titles "China Marketing"
and "China Business & Trade" as trademarks with the Trademark Office of the
State Administration for Industry and Commerce of China. We use our trademarks
for the sales and marketing of our magazines.

We have registered our www.cmmo.com.cn Internet domain name.
The articles and other contents of our magazines are protected by copyright laws
of China.
Our Research and Development Initiatives

We do not currently undertake any research and development
activities and have not spent any money on research and development activities
during our last two fiscal years.
Government Regulation

General
The media and advertising industry in China is governed by
the State Council, which is the highest authority in the executive branch of
Chinas central government, and several ministries and agencies under its
authority, including the State Administration for Industry and Commerce, the
State Administration of Radio, Film and Television, the General Administration
of Press and Publication , the Ministry of Culture and the State Council News
Office.
Regulations Regarding Foreign Investment in the Chinese
Media Sector
On July 6, 2005, the Chinese government promulgated Certain
Opinions on the Introduction of Foreign Investment in Cultural Fields, which
provide an overall framework with respect to foreign investments in Chinese
media and other cultural sectors. This document specifies the areas in which
foreign investments are permitted or prohibited in accordance with Chinas
commitments regarding its entry into the World Trade Organization or WTO. Under
the document, foreign investment in the media sector is permitted in the areas
of printing of packaging and decorating materials, redistributing books,
newspapers, periodicals, producing of recordable disks, duplication of read only
disks, and engaging in works of art and the construction and operation of
performance sites, cinema, event brokerage agencies and movie technology. In
addition, pursuant to the Administrative Measures on Foreign-Invested
Enterprises in Redistribution of Books, Newspapers and Periodicals issued by the
General Administration of Press and Publication and the Ministry of Commerce,
effective May 2003, foreign investors are permitted to establish wholly foreign
owned redistribution companies that redistribute and sell, on the wholesale or
retail level, books, newspapers or periodicals that have already been published
by a licensed content-oriented company in China.
Censorship of Advertising Content by the Chinese
Government
The advertising industry in China is governed by the
Advertising Law which came into effect in February 1995. In addition, principal
regulations governing advertising services in China include: (1) the Advertising
Administrative Regulations, effective December 1987; and (2) the Implementing
Rules for the Advertising Administrative Regulations, effective January 2005.
Chinese advertising laws and regulations set forth certain content requirements
for advertisements in China, which include prohibitions on, among other things,
misleading content, superlative wording, socially destabilizing content, or
content involving obscenities, the supernatural, violence, discrimination or
infringement of the public interest. There are specific restrictions and
requirements regarding advertisements that relate to matters such as patented
products or processes, pharmaceuticals, medical instruments, agrochemicals,
veterinary pharmaceuticals, foodstuff, alcohol, cosmetics and others. In
addition, all advertisements relating to pharmaceuticals, medical instruments,
agrochemicals and veterinary pharmaceuticals advertised through radio, film,
television, newspaper, periodical and other forms of media, together with any
other advertisements which are subject to censorship by administrative
authorities according to relevant laws and administrative regulations, must be
submitted to the relevant administrative authorities for content approval prior
to dissemination.
Advertisers, advertising operators and advertising
distributors are required by Chinese advertising laws and regulations to ensure
that the content of the advertisements they prepare or distribute are true and
in full compliance with applicable laws. In providing advertising services,
advertising operators and advertising distributors must review the prescribed
supporting documents in connection with any advertisements and verify that the
content of such advertisements comply with applicable Chinese laws and
regulations. In addition, prior to distributing advertisements for certain
commodities that are subject to government censorship and approval, advertising
distributors are required to ensure that governmental review has been performed
and approval obtained. Violation of these regulations may result in penalties,
including fines, confiscation of advertising income, orders to cease
dissemination of advertisements and orders to publish an advertisement
correcting the misleading information. In circumstances involving serious
violations, the relevant administrative authorities may order violators to cease
their advertising business operations. Furthermore, advertisers, advertising
operators or advertising distributors may be subject to civil liability if they
infringe on the legal rights and interests of third parties in the course of
their advertising business. At the present time, we are not subject to any of
the penalties mentioned above.
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Risk Factors

RISKS RELATING TO OUR BUSINESS
A large portion of our revenues comes from advertising. In a
down economy, advertising budgets are usually the first budgets to be cut.
Therefore, if there is a general downturn in the economy, we may suffer more
severe effects than other businesses.A substantial portion of our revenues is derived from the
sale of advertising space. If there is a future general economic downturn or a
recession in China, our advertisers may reduce their advertising budgets. Also,
even slight downturns in the economy may cause our advertising customers to
advertise less or negotiate lower rates with us. Any general decline in the
amount of advertising that our clients place with us would result in a decline
in our revenues and our net income.
Government regulation of currency conversion and the
fluctuation of the RMB may materially and adversely affect our operations
and financial results.

We receive substantially all of our revenues in RMB, which
currently is not a freely convertible currency. We will have to convert a
portion of these revenues into other currencies in order to make payments to
those of our service providers and others who do not transact business in RMB.
Under the PRC's existing foreign exchange regulations, we will be able to make
payments to parties that do not transact business in RMB without prior approval
from the State Administration on Foreign Exchange or SAFE by complying with
various procedural requirements. The Chinese Government, however, may, at its
discretion, restrict access in the future to foreign currencies for current
account transactions. If this were to occur, we may not be able to pay service
providers or others whom we work with that transact business in currencies other
than the RMB. The value of the RMB against the US dollar and other currencies
fluctuates and is affected by, among other things, changes in Chinas political
and economic conditions. Since 1994, the conversion of RMB into foreign
currencies, including US dollars, has been based on rates set by the Peoples
Bank of China or PBOC, which are set daily based on the previous day's interbank
foreign exchange market rates and current exchange rates on the world financial
markets. Any devaluation of the RMB, however, may materially and adversely
affect the value of our assets and our financial results, since we will receive
substantially all of our revenues, and express our profits, in RMB.
Our holding company structure may limit the payment of
dividends to our stockholders.

We have no direct business operations, other than our
ownership of our subsidiaries and their contractual relationship with CMO and
the business incident to such contractual relationship. While we have no current
intention of paying dividends, should we decide in the future to do so, as a
holding company, our ability to pay dividends and meet other obligations depends
upon the receipt of dividends or other payments from our operating subsidiaries
and other holdings and investments. In addition, our operating subsidiaries,
from time to time, may be subject to restrictions on their ability to make
distributions to us, including as a result of restrictive covenants in loan
agreements, restrictions on the conversion of local currency into U.S. dollars
or other hard currency and other regulatory restrictions as discussed below. If
future dividends are paid in RMB, fluctuations in the exchange rate for the
conversion of RMB into U.S. dollars may reduce the amount received by U.S.
stockholders upon conversion of the dividend payment into U.S. dollars.
11
Chinese regulations currently permit the payment of dividends
only out of accumulated profits as determined in accordance with Chinese
accounting standards and regulations. Our subsidiaries in China are also
required to set aside a portion of their after tax profits according to Chinese
accounting standards and regulations to fund certain reserve funds. Currently,
our subsidiaries in China are the only sources of revenues or investment
holdings for the payment of dividends. If they do not accumulate sufficient
profits under Chinese accounting standards and regulations to first fund certain
reserve funds as required by Chinese accounting standards, we will be unable to
pay any dividends.
We face strong competition from both local and foreign
competitors and increased competition could negatively affect our financial
results.

Our magazines compete with a number of other magazine
publishers. Both local and overseas publishers issue business related magazines
in China, some of which may have substantially greater financial resources than
us that may enhance their ability to compete in the publication of sales and
marketing periodicals. In addition, we face broad competition for audiences and
advertising revenue from other media companies that produce magazines,
newspapers and online content. Overall competitive factors include product
positioning, editorial quality, circulation, price and customer service.
Competition for advertising dollars is primarily based on advertising rates, the
nature and scope of readership, reader response to advertisers products and
services and the effectiveness of the sales team. Increased competition could
force us to lower our prices or offer services at a higher cost to us, which
could reduce our operating income.
Fluctuations in the cost of paper, which can result in
increases in the price we pay to third parties to print our magazines, can have
a significant effect on our operating results.

The physical printing, assembling and production of the
magazines are outsourced to independent third party printers pursuant to
outsourcing agreements that we have entered into with these printers. Under
these outsourcing agreements, the paper cost accounts for a large proportion of
the quoted price. The printing price is equal to the quantity of units
multiplied by the unit price, which is a fixed price under the agreement. This
fixed price remains constant during the term of the agreement. Therefore, the
printer assumes the risk of increasing paper costs during the term of the
agreement. However, these agreements generally have a term of one year
and, therefore, increases in paper costs could result in increased outsourcing
costs for us from year to year. Unexpected or significant increases in paper
prices may have an adverse effect on our future results of operations. We may
not be able to recoup paper cost increases by passing them through to our
advertisers and readers and, accordingly, such cost increases could have a
material adverse effect on our results of operations.
Our success is dependent on our ability to modify our
magazines and develop new media products to address current trends in our
industry. The development of new products is costly and time consuming with no
guaranty that the new product will generate our intended results.

Our success depends, in large part, on our ability to monitor
the sales and marketing community in China and market trends, and to adapt our
magazines and any new media products that we develop to the evolving information
needs of existing and emerging target audiences. Our future success will depend
in part on our ability to continue offering new publications and services that
successfully gain market acceptance by addressing the needs of specific audience
groups within our target markets. The process of internally researching and
developing, launching, gaining acceptance and establishing profitability for a
new publication or service, is inherently risky and costly with no guarantee of
success. New publications typically require several years and significant
investment to achieve profitability. We cannot guaranty that our efforts to
introduce new, or assimilate acquired, publications or services will be
successful or profitable. Costs related to the development of new publications
are expensed as incurred and, accordingly, our profitability from year to year
may be adversely affected by the number and timing of new product launches.
We are currently completely dependent on an operation and
management right agreement between us and CMO and our failure to extend this
agreement may have a material negative effect on our results of operations,
financial condition and cash flow.

12
We obtained our rights to market the magazines, sell the
magazines and advertising space, pursuant to an operation and management right
agreement
that runs through October 31, 2013. Therefore, our relationships with CMO is
critically important to us. Our failure to extend the contractual relationship
with CMO on commercially reasonable terms may make it difficult
for us to continue to operate our business unless and until we find a
comparable replacement publishing house. It would be very difficult for us to
find a comparable replacement publishing house and we are not at all certain
that we would be able to do so.
We depend heavily on key personnel, and turnover of key
employees and senior management could harm our business.

Our future business and results of operations depend in
significant part upon the continued contributions of our key editorial staff and
senior management personnel, including our Chief Executive Officer, Yingsheng
Li, who has over ten years of experience in the publication business. They also
depend in significant part upon our ability to attract and retain additional
qualified management, editorial staff, marketing and sales and support personnel
for our operations. If we lose a key employee or if a key employee fails to
perform in his or her current position, or if we are not able to attract and
retain skilled employees as needed, our business could suffer. Significant
turnover in our senior management could significantly deplete our institutional
knowledge held by our existing senior management team. We depend on the skills
and abilities of these key employees in managing the publication, marketing and
sales aspects of our business, any part of which could be harmed by further
turnover.
Since we publish our magazines in China, we are subject to
the Chinese Advertising Law, which imposes upon us restrictions regarding the
content of our publication and our ability, as a foreign corporation, to own
media assets in China.

The advertising industry in China is governed by the
Advertising Law which came into effect in February 1995. Advertisers,
advertising operators and distributors, including entities such as ourselves,
which engage in advertising activities are required to comply with applicable
procedures and provisions under the Advertising Law. If our operations are
determined to be in breach of the Advertising Law, penalties may be imposed
which include fines, confiscation of advertising fees, orders to cease
dissemination of the relevant advertisement and orders to publish an
advertisement with corrective information.
We may be exposed to potential risks relating to our internal
controls over financial reporting and our ability to have those controls
attested to by our independent auditors.

As directed by Section 404 of the Sarbanes-Oxley Act of 2002
or SOX 404, the Securities and Exchange Commission adopted rules requiring
public companies to include a report of management on the companys internal
controls over financial reporting in their annual reports, including Form 10-K
or 10-KSB. In addition, the independent registered public accounting firm
auditing a companys financial statements must also attest to and report on
managements assessment of the effectiveness of the companys internal controls
over financial reporting as well as the operating effectiveness of the companys
internal controls. We are not subject to these requirements for the fiscal year
ending December 31, 2006, accordingly we have not evaluated our internal control
systems in order to allow our management to report on, and our independent
auditors to attest to, our internal controls as required by these requirements
of SOX 404. Under current law, we will be subject to these requirements
beginning with our annual report for the fiscal year ending December 31, 2007,
although the auditor attestation will not be required until our annual report
for the fiscal year ended on December 31, 2008. We can provide no assurance that
we will comply with all of the requirements imposed thereby. There can be no
positive assurance that we will receive a positive attestation from our
independent auditors. In the event we identify significant deficiencies or
material weaknesses in our internal controls that we cannot remediate in a
timely manner or we are unable to receive a positive attestation from our
independent auditors with respect to our internal controls, investors and others
may lose confidence in the reliability of our financial statements.RISKS RELATED TO DOING BUSINESS IN CHINAChanges in Chinas political or economic situation could harm us and our
operational results.13
Economic reforms adopted by the Chinese government have had a
positive effect on the economic development of the country, but the government
could change these economic reforms or any of the legal systems at any time.
This could either benefit or damage our operations and profitability. Some of
the things that could have this effect are:

Level of government involvement in the economy;
  Control of foreign exchange;
  Methods of allocating resources;
  Balance of payments position;
  International trade restrictions; and
  International conflict.The Chinese economy differs from the economies of most
countries belonging to the Organization for Economic Cooperation and
Development, or OECD, in many ways. As a result of these differences, we may not
develop in the same way or at the same rate as might be expected if the Chinese
economy were similar to those of the OECD member countries.
Our business is largely subject to the uncertain legal
environment in China and your legal protection could be limited.

The Chinese legal system is a civil law system based on
written statutes. Unlike common law systems, it is a system in which precedents
set in earlier legal cases are not generally used. The overall effect of
legislation enacted over the past 20 years has been to enhance the protections
afforded to foreign invested enterprises in China. However, these laws,
regulations and legal requirements are relatively recent and are evolving
rapidly, and their interpretation and enforcement involve uncertainties. These
uncertainties could limit the legal protections available to foreign investors,
such as the right of foreign invested enterprises to hold licenses and permits
such as requisite business licenses. In addition, all of our executive officers
and our directors are residents of China and not of the U.S., and substantially
all the assets of these persons are located outside the U.S. As a result, it
could be difficult for investors to effect service of process in the U.S., or to
enforce a judgment obtained in the U.S. against us or any of these persons.
The Chinese government exerts substantial influence over the
manner in which we must conduct our business activities that could have negative
effect on our business operations in China.

China only recently has permitted provincial and local
economic autonomy and private economic activities. The Chinese government has
exercised and continues to exercise substantial control over virtually every
sector of the Chinese economy through regulation and state ownership. Our
ability to operate in China may be harmed by changes in its laws and
regulations, including those relating to taxation, import and export tariffs,
environmental regulations, land use rights, property and other matters. We
believe that our operations in China are in material compliance with all
applicable legal and regulatory requirements. However, the central or local
governments of these jurisdictions may impose new, stricter regulations or
interpretations of existing regulations that would require additional
expenditures and efforts on our part to ensure our compliance with such
regulations or interpretations. Accordingly, government actions in the future,
including any decision not to continue to support recent economic reforms and to
return to a more centrally planned economy or regional or local variations in
the implementation of economic policies, could have a significant effect on
economic conditions in China or particular regions thereof, and could require us
to divest ourselves of any interest we then hold in Chinese properties or joint
ventures.
Any recurrence of severe acute respiratory syndrome, or SARS,
or another widespread public health problem, could harm our operations.

A renewed outbreak of SARS or another widespread public
health problem in China, where our operations are conducted, could have a
negative effect on our operations.
Our operations may be impacted by a number of health-related
factors, including the following:quarantines or
  closures of some of our offices which would severely disrupt our operations,

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a general
  slowdown in the Chinese economy. 

Any of the foregoing events or other unforeseen consequences
of public health problems could damage our operations.
Recent Chinese merger and acquisition regulations may limit
our ability as to acquire assets and equity interests of Chinese companies,
which could hinder our ability to expand in China and adversely affect our
long-term profitability.

On August 8, 2006, the Ministry of Commerce, together with
several other government agencies, promulgated a set of regulations entitled
"Regulations on Mergers and Acquisitions of Domestic Enterprises by Foreign
Investors, " which became effective on September 8, 2006, covering all
acquisitions of assets and equity interests of Chinese companies by foreign
investors, including overseas companies under the de facto control of Chinese
persons or entities. Depending on the structure of the transaction, these
regulations will require the target Chinese companies to make a series of
applications to the aforementioned agencies, some of which must be made within
strict time limits and depend on approvals from one or the other of the
aforementioned agencies. If obtained, approvals will have expiration dates by
which a transaction must be completed. It is expected that compliance with the
regulations will be more time consuming than in the past, will be more costly
and will permit the government much more extensive scrutiny and control over the
terms of the transaction. Therefore acquisitions in China may not be able to be
completed because the terms of the transaction may not satisfy aspects of the
approval process and may not be completed, even if approved, if they are not
consummated within the time permitted by the approvals granted. This may
restrict our ability to implement our acquisition strategy and adversely affect
our business and prospects.RISKS RELATED TO THE MARKET FOR OUR STOCK
Our common stock is quoted on the Pink Sheets which may have
an unfavorable impact on our stock price and liquidity.Our common stock is currently quoted on the Pink Sheets and
we plan to take action to have our common stock quoted on the OTC Bulletin
Board. The Pink Sheets and the OTC Bulletin Board are significantly more limited
markets than the New York Stock Exchange or Nasdaq system. The quotation of our
shares on the Pink Sheets or the OTC Bulletin Board may result in a less liquid
market available for existing and potential stockholders to trade shares of our
common stock, could depress the trading price of our common stock and could have
a long-term adverse impact on our ability to raise capital in the future.
We are subject to penny stock regulations and restrictions,
which may affect the ability of broker-dealers to sell our securities and may
affect the ability of purchasers to sell any of our securities in the secondary
market.

The Securities and Exchange Commission, or SEC has adopted
regulations which generally define so-called "penny stocks" to be an equity
security that has a market price less than $5.00 per share or an exercise price
of less than $5.00 per share, subject to certain exemptions. As of April 16,
2007, the closing bid and asked prices for our common stock were $0.20 per share
and therefore, it is designated a "penny stock." As a "penny stock", our common
stock may become subject to Rule 15g-9 under the Securities Exchange Act of
1934, as amended, or the "Penny Stock Rule". This rule imposes additional sales
practice requirements on broker-dealers that sell such securities to persons
other than established customers and "accredited investors" (generally,
individuals with a net worth in excess of $1,000,000 or annual incomes exceeding
$200,000, or $300,000 together with their spouses). For transactions covered by
Rule 15g-9, a broker-dealer must make a special suitability determination for
the purchaser and have received the purchasers written consent to the
transaction prior to sale. As a result, this rule may affect the ability of
broker-dealers to sell our securities and may affect the ability of purchasers
to sell any of our securities in the secondary market.
For any transaction involving a penny stock, unless exempt,
the rules require delivery, prior to any transaction in a penny stock, of a
disclosure schedule prepared by the SEC relating to the penny stock market.
Disclosure is also required to be made about sales commissions payable to both
the broker-dealer and the registered representative and current quotations for
the securities. Finally, monthly statements are required to be sent disclosing
recent price information for the penny stock held in the account and information
on the limited market in penny stock.
15
There can be no assurance that our common stock will qualify for exemption
from the Penny Stock Rule. In any event, even if our common stock were exempt
from the Penny Stock Rule, we would remain subject to Section 15(b)(6) of the
Securities Exchange Act of 1934, as amended, or the Exchange Act, which gives
the SEC the authority to restrict any person from participating in a
distribution of penny stock, if the SEC finds that such a restriction would be
in the public interest.
Certain of our stockholders hold a significant percentage of
our outstanding voting securities and accordingly may make decisions regarding
our daily operations, significant corporate transactions and other matters that
other stockholders may believe are not in their best interests .

Our three major stockholders, Yingsheng Li, Xiaofeng Ding, and Dongsheng Ren,
own in excess of 80% of our outstanding voting securities. They own 36.10%,
24.45% and 22.13% of our outstanding common stock, respectively. As a result,
they possess significant influence, giving them the ability, among other things,
to elect a majority of our Board of Directors and to authorize or prevent
proposed significant corporate transactions. Their ownership and control may
also have the effect of delaying or preventing a future change in control,
impeding a merger, consolidation, takeover or other business combination or
discourage a potential acquirer from making a tender offer. Other stockholders
may believe that these future decisions made by these three major stockholders
are not in their best interests.
We were late on our obligation to file reports as required by Section 13(a)
of the Exchange Act and, as a result, we may be subject to an administrative
proceeding to revoke our registration under the Exchange Act and the trading of
our stock could be suspended.

On January 4, 2007, we received a letter from the Division of Corporation
Finance of the SEC in connection with our failure to comply with our reporting
requirements under Section 13(a) of the Exchange Act. Specifically, as of the
date of the SECs letter, we failed to file our quarterly reports on Form 10-QSB
for the interim periods that preceded our fiscal year ended December 31, 2006.
We are required to file all these periodic reports not previously
filed or we may face an SEC administrative proceeding to revoke our registration
and the trading of our stock could be suspended. Our counsel has contacted the
SEC in connection with this matter and has communicated progress we have made to
date in bringing our filings current. To date, the SEC has not scheduled such an
administrative proceeding. We are currently working on the late reports. Our counsel is keeping the SEC abreast of our efforts on a continuing
basis. However, there is no guarantee that we will be able to complete our back
filings in a manner and within a period of time acceptable to the SEC. There is
no guarantee that we will be able to maintain an uninterrupted public market for
our securities. Furthermore, since our management team does not have a lot of
experience with the SEC reporting requirements, we may experience problems and
delays in filing our reports in the future.
ITEM 2. DESCRIPTION OF PROPERTY.

All land in China is owned by the State or collectives.
Individuals and companies are permitted to acquire rights to use land or land
use rights for specific purposes. In the case of land used for industrial
purposes, the land use rights are granted for a period of 50 years. This period
may be renewed at the expiration of the initial and any subsequent terms
according to the relevant Chinese laws. Granted land use rights are transferable
and may be used as security for borrowings and other obligations.
Our main executive office is located at RMA 901, KunTai International
Mansion, No. 12 Chaowai Street, Beijing, 100020, China. We have land use rights
relating to the land and physical office space within the building where our
offices are located. These land use rights initially expire in 2056. This
location has a total of 630 square feet of working space including 150 square
feet open working area, two large conference rooms, six small meeting rooms and
eight offices.
ITEM 3. LEGAL PROCEEDINGS.

From time to time, we may become involved in various lawsuits
and legal proceedings which arise in the ordinary course of business. However,
litigation is subject to inherent uncertainties, and an adverse result in these
or other matters may arise from time to time that may harm our business. We are
currently not aware of any such legal proceedings or claims that we believe will
have a material adverse affect on our business, financial condition or operating
results.
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ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.

No matters were submitted to a vote of our security holders
during the fourth quarter of fiscal year 2006.PART II
ITEM 5. MARKET FOR COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND SMALL
BUSINESS ISSUER PURCHASES OF EQUITY SECURITIES.
Market InformationOur common stock is quoted on the pink sheets under the
symbol CMKM. The CUSIP number is 169411105. Prior to February 10, 2006, our
stock symbol was IFLF. Trading in our common stock has been limited and
sporadic.
The following table sets forth, for the periods indicated,
the high and low closing prices of our common stock. These prices reflect
inter-dealer prices, without retail mark-up, mark-down or commission, and may
not represent actual transactions. These prices are adjusted to reflect the
1-for-10 reverse split of our issued and outstanding common stock that occurred
on January 25, 2006.

|                             |       | Closing
    Prices (1) |      
|---------------------------- | ----- | ---------------------- | -----
|                             | High  |                        | Low  
|Year Ended December 31, 2006 |       |                        |      
|1st Quarter (2)              | $4.00 |                        | $0.45
|2nd Quarter                  | $2.25 |                        | $0.10
|3rd Quarter                  | $3.50 |                        | $1.09
|4th Quarter                  | $2.05 |                        | $0.25
|                             |       |                        |      
|Year Ended December 31, 2005 |       |                        |      
|1st Quarter                  | N/A   |                        | N/A  
|2nd Quarter                  | N/A   |                        | N/A  
|3rd Quarter                  | N/A   |                        | N/A  
|4th Quarter                  | N/A   |                        | N/A  

________________________ 
(1) The above tables set forth the range of high and low closing prices per
share of our common stock as reported by www.quotemedia.com for the periods
indicated. 
(2) Market prices were only available from February 13, 2006.

Approximate Number of Holders of Our Common Stock

As of April 16, 2007, there were approximately 24
stockholders of record of our common stock.

Dividends

China Marketing Media Holdings, Inc. has never declared or paid cash dividends. Any
future decisions regarding dividends will be made by the board of directors of
the company. The company currently intends to retain and use any future earnings
for the development and expansion of its business and does not anticipate paying
any cash dividends in the foreseeable future.

Equity Compensation Plans

We do not have in effect any compensation plans under which
our equity securities are authorized for issuance and we do not have any
outstanding stock options.

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Recent Sales of Unregistered Securities

On February 10, 2006, we issued 22,808,000 shares of common
stock to the former shareholders of Media Challenge upon conversion of the
convertible promissory notes that were originally issued to those former
shareholders in connection with the reverse acquisition transaction that closed
on December 31, 2005. The issuance of such shares was exempt from registration
under the Securities Act, as a private transaction under Section 4(2) of the
Securities Act.
Our reliance on the exemption provided by Section 4(2) of the
Securities Act was based upon the following factors: (a) the issuance of the
securities was an isolated private transaction by us which did not involve a
public offering; (b) there were only a limited number of offerees; (c) there
were no subsequent or contemporaneous public offerings of the securities by us;
(d) the securities were not broken down into smaller denominations; and (e) the
negotiations for the sale of the stock took place directly between the offeree
and us.
Transfer Agent

Our independent stock transfer agent is Standard Transfer &
Trust Co., Inc., located in 2980 S. Rainbow Blvd., Suite 220H, Las Vegas, NV
89146. Their phone number is (702) 212-3493.ITEM 6. MANAGEMENTS DISCUSSION AND ANALYSIS OR PLAN OF
OPERATION.
OverviewGeneral
We generate revenues through sales of our magazines and
through sales of advertising space in our magazines. During the fiscal year
ended December 31, 2005, we generated $1,633,092 in revenues from the sale of
our magazines and $5,033,019 in revenues from the sale of advertising space in
these magazines. During the fiscal year ended December 31, 2006, we generated
$1,450,494 in revenues from the sale of our magazines and $6,932,593 in revenues
from the sale of advertising space in these magazines.
Although Media Challenge became our wholly-owned subsidiary
following the reverse acquisition transaction, because this transaction resulted
in a change of control, the transaction was recorded as a "reverse merger"
whereby Media Challenge was considered to be the accounting acquirer of Infolife
(our previous name).
The following analysis discusses changes in the financial
condition and results of operations as of and for years ended on December 31,
2006 and 2005, and should be read in conjunction with our audited consolidated
financial statements and the notes thereto include elsewhere in this report.
Industry Wide Factors that are Relevant to Our Business
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. According to the press release issued by
ZenithOptimedia on ZenithOptimedias April 2006 Advertising Expenditure
Forecasts, advertising spending in China is expected to increase by $6.44
billion from 2005 to 2008 with a growth rate of 66% over the three-year forecast
period. In 2008, China would become the 5th largest advertisement
market in the world while it was the 7th largest advertisement market
in the world in 2005. In addition, we believe Chinas hosting of the Olympic
Games in Beijing in 2008 and the International World Exposition in Shanghai in
2010 will benefit its advertising industry. In light of Chinas growing number
of consumers with rising income and increasing consumer spending, we believe
that the media and advertising industry in China represents an attractive area
where we could generate more revenues in the future.
Recent Development

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On October 10, 2006, our wholly owned subsidiary Shenzhen New
Media entered into an equity transfer agreement or Equity Transfer Agreement
with Yutong Zhu, the sole owner of Shenzhen Caina Brand Consultant Company or
Shenzhen Caina, pursuant to which Shenzhen New Media agreed to purchase 100%
ownership of Shenzhen Caina from Mr. Zhu. Incorporated in the PRC, Shenzhen Caina engages in the business of advertisement design, brand,
sales and marketing consulting and other related services.
Under the Equity Transfer Agreement, Shenzhen New Media had
the obligation to pay RMB 8 million (approximately $1.03 million) to Mr. Zhu within 30 business
days following the date of execution of this agreement. Shenzhen New Media paid
RMB 8 million to Mr. Zhu on November 24, 2006. The acquisition of Shenzhen Caina
was completed in March 2007.
Results of Operations
Fiscal Year Ended December 31, 2006 Compared with Fiscal Year
Ended December 31, 2005
The following table summarizes the results of our operations
during the fiscal years ended December 31, 2006 and 2005. It provides
information regarding the dollar and percentage increase or (decrease) from the
2005 fiscal period to the 2006 fiscal period:

|                    | Year Ended December 31, |           |           
|------------------- | ----------------------- | --------- | ----------
|                    |                         |           |           
|Item                | 2006                    | 2005      | Increase  
|                    |                         |           | (Decrease)
|Revenue             | 8,383,087               | 6,666,111 | 1,716,976 
|Cost of Sales       | 3,057,859               | 2,462,412 | 595,447   
|Gross Profit        | 5,325,228               | 4,203,699 | 1,121,529 
|Operating Expenses  | 1,674,167               | 769,928   | 904,174   
|Other Income        | 42,093                  | (32,712)  | 74,805    
|(expense)           |                         |           |           
|Provision for Taxes | 0                       | 634,498   | (634,498) 
|Net income          | 3,693,154               | 2,766,561 | 926,593   

Revenue

Our
revenues in fiscal year 2006 amounted to $8,383,087, which is $1.72 million or
approximately 26% more than that of fiscal year 2005, when we had revenues of
$6,666,111.  Revenues attributable to sales of our magazines decreased by
$182,598 during the fiscal year 2006 as compared to the fiscal year 2005 while
advertising revenues for the fiscal year 2006 increased by $1,899,574 as
compared to the fiscal year 2005.  The overall increase in our revenues is
attributable to the increased advertising revenues.  Sales of our magazines
decreased during the fiscal year 2006 because of the rapid development of online
newspaper and magazines that reduced readership generally; however, the
circulation volume of our magazines has been maintained at levels that are
consistent with our historical experience.  As a result, instead of being
adversely affected by the decreasing of the circulation volume of our magazines,
advertising revenues generated in the 2006 fiscal year increased during such
period.  Compared with the fiscal year 2005, we sold more commercial advertising
space in 2006.  During the fiscal year 2006, in addition to four regular issues
of our magazines that we publish each month, we published four
special issues for the Chinese Manufacturer
Agents Conference, the Huhehaote Drug Commodities
Fair, the Shenzhen
Pharmaceutical Trade Conference and the Beijing Commercial Fair, respectively. 
These four
supplemental issues generated advertising revenues of $1,441,474 in aggregate for
us.

Components of Revenues

The following table shows the different components comprising our total
revenues during each of the past two fiscal years.

19

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|Revenue Category  | 2006       | 2005      
|----------------- | ---------- | ----------
|                  |            |           
|Magazine Sales    | $1,450,494 | $1,633,092
|                  |            |           
|Advertising Sales | $6,932,593 | $5,033,019
|                  |            |           
|Total             | $8,383,087 | $6,666,111

Cost of Sales

Our cost of sales in fiscal years 2006 and
2005 was $3,057,859 and $2,462,412, respectively, which accounts for
approximately 36.5% and 36.9%, respectively, as a percentage of total revenues. 
The dollar amount of the cost of sales increased with the growth of annual
sales, which was mainly attributable to the increase of our advertising costs. 
In 2006, our advertising costs increased by $512,429, which mainly composed of
commissions paid to the advertising employee. Cost of sales as a percentage of annual
revenues declined by about 0.4% in 2006 as compared with 2005, which is
attributable to the decrease in the cost of printing per copy and the decreased
total amount of circulation of our magazines in year 2006.  The decrease in the
cost of printing per copy is mainly attributable to the decreased number of
pages included in each issue of our magazines in 2006.  Since February 2006, we
have reduced the number of pages per issue of our Sales edition and Channel
edition of China Marketing from 96 pages to 88 pages.  Since February 2006, we
have also reduced the number of pages of our Case edition of China Marketing
from 96 pages to 80 pages.

Expenses

Our expenses consist of payroll and other general and
administrative expense. Payroll expense was $271,964 in the 2006 fiscal year
compared to $178,616 in the 2005 fiscal year. The difference of $93,348 in
payroll expense is mainly a result of higher salaries paid to employees who
sell advertising.

Our other general and administrative expenses were $679,173
(9% of total sales) and $574,003 (8.6% of total sales) in fiscal years 2006 and
2005, respectively. The increase of other general and administrative expenses
are mainly due to increased rent of our current offices, increased postage
expenses and leasing expenses of our new offices.

Income taxes

We did not incur income taxes in 2006 because we received an
income tax refund of $110,298 at the end of the 2006 fiscal year. This is a
decrease of 100% from the taxes we incurred in 2005, which amounted to $634,498.

Net income (profit after taxes)

We earned net income of approximately $3.69 million in fiscal
year 2006. This is an increase of $0.93 million or approximately 33% from fiscal
year 2005 net income of $2.77 million. The increase in our 2006 net income was  mainly due to the increase of our
advertising sales
and the decrease in income tax expense.

Liquidity and Capital Resources

As of December 31, 2006, we had a cash balance of $5,127,840
and net current assets of $4,729,604. As of such date, we had a loan borrowed
from CMO in an amount of $1,573,822. Due to the nature of our business, we do
not require substantial amounts of plant and equipment. As a result, we have no
plans to acquire or to sell any substantial amount of assets in the next 12
months.

We believe that our current cash on hand and continuing
revenue from operations is sufficient to maintain operations at their current
levels for at least the next twelve months. However, in order to expand
operations, management believes it will be necessary for us to raise additional
capital either through sale of equity securities or through debt financing. Full
implementation of the current expansion plans, which includes the potential
acquisition of other magazines and/or advertising businesses will require
approximately $10 million in additional capital.

Off-Balance Sheet Arrangements

During the fiscal year ended December 31, 2006, we did not
enter into any off-balance sheet arrangements that have or are reasonably likely
to have a current or future effect on our financial condition, changes in
financial condition, revenues or expenses, results of operations, liquidity,
capital expenditures, or capital resources that is material to investors.

20

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InflationOur results of operations have not been affected by inflation
and management does not expect that inflation risk would cause material impact
on its operations in the future.
Seasonality

Our results of operations are not materially affected by
seasonality and we do not expect seasonality to cause any material impact on our
operations in the future.
Currency Fluctuations

Our operating subsidiaries are located in China. All expenses
of the subsidiary and revenue received from customers are incurred in China
denominated in RMB as the functional currency. Based on Chinese government
regulation, all foreign currencies under the category of current accounts are
allowed to be freely exchanged with hard currencies. During the past years of
operation through July of 2005, there were no significant changes in exchange
rates. On July 21, 2005, the Chinese government changed its foreign currency
exchange policy from a fixed RMB/USD exchange rate into a flexible rate under
the control of the Chinese government. From August 2005 through December 2006,
the value of RMB against US dollars appreciated by 2%, from RMB8.1/$1 to
RMB7.97/$1.
Critical Accounting Policies

The preparation of financial statements in conformity with
accounting principles generally accepted in the United States requires our
management to make assumptions, estimates and judgments that affect the amounts
reported in the financial statements, including the notes thereto, and related
disclosures of commitments and contingencies, if any. We consider our critical
accounting policies to be those that require the more significant judgments and
estimates in the preparation of financial statements, including the following:
Estimates. The preparation of financial statements in
conformity with generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosures of contingent assets and liabilities at the date of
the financial statements and the reported amounts of income and expenses during
the reporting period. Actual results could differ from those estimates.
Cash and Cash Equivalents. For purposes of the statements
of cash flows, cash and cash equivalents includes cash on hand and demand
deposits held by banks. Deposits held in financial institutions in China are not
insured by any government entity or agency.
Trade Accounts Receivable. Trade accounts receivable are
recognized and carried at original invoice amount less an allowance for any
uncollectible amounts. An estimate for doubtful accounts is made when collection
of the full amount becomes questionable.
Revenue Recognition. Revenues are recognized when (1)
persuasive evidence of an arrangement exists; (2) delivery has occurred
according to the sale terms, (3) the seller's price to the buyer is fixed or
determinable; and (4) collectible is reasonably assured.
Magazines. During the fiscal year ended December 31,
2006, the Company published two magazines - China Marketing and China
Business & Trade in China. The Company published three issues of China
Marketing per month, including a sales edition, case edition and channel
edition. The Company published one issue of China Business & Trade per
month, which was the training edition.
21

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The Company recognizes revenue for the advertising sales when
the customers advertisement has been published. In addition, the Company
recognizes revenue from the publishing of above magazines when the risks and
rewards of ownership of the goods have transferred to the customer, which is
usually on delivery or when title passes.
Subscription fees collected are classified with other
payables on the balance sheet until the criteria for revenue recognition are
completed.
Cost of Goods Sold. Cost of goods sold includes printing,
labor costs and amortization incurred by the Company in the production of its
magazines. The Company records the estimated cost of returned magazines at the
date the Company delivered the magazines to its vendors. The sales are based on
three main distribution channels throughout China: (1) postal subscription base
distribution; (2) direct order distribution; and (3) agency base distribution.
First, postal subscription channel involves the distribution
of our magazines by Chinese postal offices. Magazine subscribers can request
their subscriptions delivered from the postal offices in China. Returns are not
allowed for magazines sold through postal subscription.
Second, order distribution involves request made by a
subscriber to us for a single or multiple issues of magazines that do not
involve an ongoing subscription. Upon receipt of order request and payment, we
deliver the ordered issues to the address requested by the subscriber. Returns
are not permitted for magazines sold through direct request subscription.
Third, agency distribution involves delivery of our magazines
to sales agents who then distribute the magazines to retail agents at various
locations throughout China. During 2006 we granted sales agents a two-month
return privilege. Average return rate for the year ended December 31, 2006 was
17%.
In accordance with the provisions of SFAS 48, "Criteria
for Recognizing Revenue When Right of Return Exists,"if an
enterprise sells its product but gives the buyer the right to return the
product, revenue from the sales transaction shall be recognized at time of sale
only if all of the following conditions are met:
a.The seller's price to the buyer is
substantially fixed or determinable at the date of sale.

b.The buyer has paid the seller, or
the buyer is obligated to pay the seller and the obligation is not contingent on
resale of the product.

c.The buyer's obligation to the
seller would not be changed in the event of theft or physical destruction or
damage of the product.

d.The buyer acquiring the product for
resale has economic substance apart from that provided by the seller.

e.The seller does not have
significant obligations for future performance to directly bring about resale of
the product by the buyer.

f.The amount of future returns can be
reasonably estimated.

We recognize magazine sales revenue in accordance with the
provisions of SFAS 48: first, our price to the sale agent is fixed; second, the
sale agent has to pay us fully upon order request and the payment is not
contingent on resale of the magazines; third, we are not responsible in the
event of theft or physical destruction or damage of the product after delivery;
fourth, our sale agents include bookstores, reading group, and culture group,
etc.; fifth, we have no obligations to resell the magazines distributed to sale
agents; finally, the amount of returns can be reasonably estimated.

Foreign Currency and Comprehensive Income. The financial
statements are presented in US dollars. The functional currency is the RMB of
the PRC. The financial statements are translated into US dollars from RMB using
exchange rates at the end of the period for assets and liabilities and weighted
average exchange rates for revenues and expenses. Capital accounts are
translated at their historical exchange rates when the capital transactions
occurred.

22

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On July 21, 2005, the PRC changed its foreign currency
exchange policy from a fixed RMB/USD exchange rate into a flexible rate under
the control of the PRCs government. We use the Closing Rate Method in currency
translation of the financial statements of the Company.
RMB is not freely convertible into the currency of other
nations. All such exchange transactions must take place through authorized
institutions. There is no guarantee the RMB amounts could have been, or could
be, converted into US dollars at rates used in translation.
Restrictions on Transfer of Assets Out of the PRC.
Dividend payments by Shenzhen New Media and its subsidiary are limited by
certain statutory regulations in China. No dividends may be paid by Shenzhen New
Media without first receiving prior approval from the Foreign Currency Exchange
Management Bureau. Dividend payments are restricted to 85% of profits, after
tax.
ITEM 7. FINANCIAL STATEMENTS.

Financial statements are being filed with this report and are
located immediately following the signature page.
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE.

On December 31, 2005, we retained Child, Sullivan & Company
as our initial independent auditors. On or about January 1, 2006, Child,
Sullivan & Company changed its accounting practice from a corporation to a
professional limited liability company named Child, Van Wagoner & Bradshaw, PLLC.
As this is viewed as a separate legal entity, we terminated our auditing
arrangement with Child, Sullivan & Company as our independent auditor and
engaged Child, Van Wagoner & Bradshaw, PLLC, as our independent auditor for our
fiscal year ended December 31, 2005. The decision to change our independent
auditor was approved by the our board of directors.
None of the reports of Child, Sullivan & Company, on our
financial statements for either of the past two years or subsequent interim
period contained an adverse opinion or disclaimer of opinion, or was qualified
or modified as to uncertainty, audit scope or accounting principles.
There were no disagreements between us and Child, Sullivan &
Company, on any matter of accounting principles or practices, financial
statement disclosure, or auditing scope or procedure, which, if not resolved to
the satisfaction of Child, Sullivan & Company, would have caused them to make
reference to the subject matter of the disagreement in connection with its
report. Further, Child, Sullivan & Company has not advised us that:
1)     internal
controls necessary to develop reliable financial statements did not exist; or
2)    
information has come to the attention of Child, Sullivan & Company which made it
unwilling to rely upon managements representations, or made it unwilling to be
associated with the financial statements prepared by management; or
3)     the scope
of the audit should be expanded significantly, or information has come to the
attention of Child, Sullivan & Company that they have concluded will, or if
further investigated might, materially impact the fairness or reliability of a
previously issued audit report or the underlying financial statements, or the
financial statements issued or to be issued covering the fiscal year ended
December 31, 2006.
On or about January 2, 2006 we engaged Child, Van Wagoner &
Bradshaw, PLLC as our independent auditor to audit our financial statements as
successor to Child, Sullivan & Company. During our two most recent fiscal years
or subsequent interim period, we have not consulted with the entity of Child,
Van Wagoner & Bradshaw, PLLC regarding the application of accounting principles
to a specific transaction, either completed or proposed, or the type of audit
opinion that might be rendered on our financial statements, nor did the entity
of Child, Van Wagoner & Bradshaw, PLLC provide advice to us, either written or
oral, that was an important factor considered by us in reaching a decision as to
the accounting, auditing or financial reporting issue. Further, during our two
most recent fiscal years or subsequent interim period, we have not consulted the
entity of Child, Van Wagoner & Bradshaw, PLLC on any matter that was the subject
of a disagreement or a reportable event.
23

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ITEM 8A . CONTROLS AND PROCEDURES.

Our management, with the participation of our chief executive
officer and chief financial officer, Mr. Yingsheng Li and Ms. Yifang Fu,
respectively, evaluated the effectiveness of our disclosure controls and
procedures. The term "disclosure controls and procedures," as defined in Rules
13a-15(e) and 15d-15(e) under the Exchange Act, means controls and other
procedures of a company that are designed to ensure that information required to
be disclosed by a company in the reports, such as this report, that it files or
submits under the Exchange Act is recorded, processed, summarized and reported,
within the time periods specified in the SECs rules and forms. Disclosure
controls and procedures include, without limitation, controls and procedures
designed to ensure that information required to be disclosed by a company in the
reports that it files or submits under the Exchange Act is accumulated and
communicated to the companys management, including its principal executive and
principal financial officers, as appropriate to allow timely decisions regarding
required disclosure. Management recognizes that any controls and procedures, no
matter how well designed and operated, can provide only reasonable assurance of
achieving their objectives and management necessarily applies its judgment in
evaluating the cost-benefit relationship of possible controls and procedures.
Based on that evaluation, Mr. Li and Ms. Fu concluded that as of December 31,
2006, and as of the date that the evaluation of the effectiveness of our
disclosure controls and procedures was completed, our disclosure controls and
procedures were effective to satisfy the objectives for which they are intended.
There were no changes in our internal control over financial
reporting identified in connection with the evaluation performed that occurred
during the fiscal year covered by this report that has materially affected or is
reasonably likely to materially affect, our internal control over financial
reporting.ITEM 8B. OTHER INFORMATION.

None.PART III
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS AND
CORPORATE GOVERNANCE; COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT.Directors and Executive OfficersThe following table sets forth the name, age and position of each of our
current executive officers and directors:

|Name          | Age | Position                                           
|------------- | --- | ---------------------------------------------------
|              |     |                                                    
|Yingsheng Li  | 46  | President, Chief Executive Officer and
    Chairman
|              |     |                                                    
|Bin Li        | 42  | Executive Director                                 
|              |     |                                                    
|Xiaofeng Ding | 35  | Director                                           
|              |     |                                                    
|Dongsheng Ren | 32  | Director                                           
|              |     |                                                    
|Yifang Fu     | 33  | Chief Financial Officer                            

24

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Yingsheng Li has been our Chief Executive Officer,
President and Chairman since December 31, 2005. Mr. Li has been working for our
magazines for over 11 years. Mr. Li has more than 10 years of experience in
magazine publishing and has worked in a number of different positions such as a
reporter, director, and associate editor at CMO. Mr. Li was named one of the top
ten publishers by the Henan Provincial Government in 2002. Mr. Li holds a
bachelors degree in Commerce and a postgraduate degree in Economics from
Zhengzhou University.
Xiaofeng Ding has been our director since December 31,
2005. Mr. Ding has been working for the magazines for over 5 years and became
the distribution manager of CMO in 2000. Mr. Ding handles negotiations for
distribution contracts and assists in maintaining and establishing relationships
with advertising agencies. Mr. Ding graduated from He Fei Industry University of
China in 1990 with a bachelors degree in Material Science and Engineering. He
also received a postgraduate degree in national economics at Zhengzhou
University in 2002.
Dongsheng Ren has been our director since December 31,
2005. Prior to joining the Company in 2003, Mr. Ren worked at the Bank of
Nanfang as an assistant general manger and general manager from 2000 to 2003.
Mr. Ren has more than 7 years of experience in asset management and investment
banking. He received his bachelors degree in electronic engineering and a
masters degree in international economics from Xian Jiao Tong University in
1993 and 1996, respectively. He has been a qualified accountant in China since
1999.
Bin Li has been our executive director since December 31,
2005. Before joining the Company in March 2004, Mr. Li worked as the Vice
President of Henan Huayuan Corporation, a food service business, from 1996 to
2000. In 2001, Mr. Li was admitted to the School of Management of Xian Jiaotong
University and received his Ph.D. in Management in 2004.
Yifang Fu has been our Chief FinancialOfficer
since November 26, 2006. Ms. Fu worked as a staff accountant at CA Imports,
LLC., an import/export business based in Brimfield, Ohio, from March 2001 to
December 2004. Ms. Fu joined Century 21 China Real Estate as a senior accountant
in charge of US GAAP reports in April 2005. From November 2005 to October 2006,
Ms. Fu was a senior budget/financial analyst of E & W Global Financial Inc., a
financial consulting firm, in Beijing, China. Ms. Fu holds a master degree in
accounting from Ken State University.

Family Relationships

There are no family relationships among our directors or
executive officers.

Involvement in Certain Legal Proceedings

Our executive officers and director are not subject to any
legal proceedings in the past five years and that may adversely affect their
ability and/or integrity to serve as our directors and executive officers.

Section 16(A) Beneficial Ownership Reporting Compliance

Under U.S. securities laws, directors, certain executive
officers and persons holding more than 10% of our common stock must report their
initial ownership of the common stock, and any changes in that ownership, to the
SEC. The SEC has designated specific due dates for these reports. Based solely
on our review of copies of such reports filed with the SEC and written
representations of our directors and executive officers, we have the following
late Section 16(A) filings: (1) a late Form 3 report filed by Ms. Yifang Fu on
March 20, 2007 to report appointment as our Chief Executive Officer on November
26, 2006; (2) late Form 3 reports filed by each of Yingsheng Li, Xiaofeng Ding
and Dongsheng Ren on April 12, 2007, in each case to report appointment as our
executive officer and/or director as well as the beneficial ownership of our
common stock as of December 31, 2005; and (3) a late Form 3 report filed by Bin
Li on April 12, 2007 to report appointment as our executive director on December
31, 2005.

Code of Ethics

On December 28, 2006, our board of directors adopted a code
of ethics that applies to all of our directors, officers and employees,
including our principal executive officer, principal financial officer, and
principal accounting officer. The code of ethics addresses, among other things,
honesty and ethical conduct, conflicts of interest, compliance with laws,
regulations and policies, including disclosure requirements under the federal
securities laws, confidentiality, trading on inside information, and reporting
of violations of the code. A copy of the code of ethics has been filed as
Exhibit 14 to our registration statement on Form 10-SB/A on January 3, 2007.

25

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Audit Committee and Audit Committee Financial Expert

As of December 31, 2006, we did not have an audit committee
or an audit committee financial expert serving on the audit committee because we
were not engaged in any significant business activities and had no operations or
revenues. Our entire board of directors currently is responsible for the
functions that would otherwise be handled by the audit committee. We, however,
intend to establish an audit committee of the board of directors. We envision
that the audit committee will be primarily responsible for reviewing the
services performed by our independent auditors, evaluating our accounting
policies and our system of internal controls. Upon the establishment of an audit
committee, the board will determine whether any of the directors qualify as an
audit committee financial expert.
ITEM 10. EXECUTIVE COMPENSATION.

The following summary compensation table sets forth the
aggregate compensation we paid or accrued to Yingsheng Li, our Chief Executive
Officer for services rendered in all capacities during the fiscal year ended
December 31, 2006. No other executive officers received total compensation in
excess of $100,000.

|                      |      |                        |           |        |        | Non-                  | Non-         | All Other | Total ($)             
|--------------------- | ---- | ---------------------- | --------- | ------ | ------ | --------------------- | ------------ | --------- | ----------------------
|Name and              | Year | Salary ($)             | Bonus ($) | Stock  | Option | Equity Incentive Plan | qualified    | Compen-   |                       
|Principal             |      |                        |           | Awards | Awards | Compensation          | Deferred     | sation    |                       
|Position              |      |                        |           | ($)    | ($)    | Earnings ($)          | Compen-      | ($)       |                       
|                      |      |                        |           |        |        |                       | sation       |           |                       
|                      |      |                        |           |        |        |                       | Earnings ($) |           |                       
|Yingsheng Li,
    CEO | 2006 | $15,404 (RMB 120,000)* | -         | -      | -      | -                     | -            | -         | $15,404 (RMB 120,000)*

* Calculated on the base that $1= RMB 7.79.

Outstanding Equity Awards at Fiscal Year End

None of our executive officers received any equity awards,
including, options, restricted stock or other equity incentives, during the
fiscal year ended December 31, 2006.

Employment Agreements

We do not have any employment agreements with any of our
executive officers except for the following executive officers:

We entered into an employment agreement with our Executive
Director, Bin Li, on March 1, 2004. This agreement expired on March 1, 2007. On
the same date, Mr. Bin Lis employment agreement was renewed for a one-year term
ending March 1, 2008. We expect that this agreement will be automatically
renewed for an additional year by the parties upon its expiration. Under the
terms of the agreement, as renewed, we are obligated to pay Mr. Li a monthly
salary of RMB 8,000 (approximately, $1,000).

We entered into a temporary employment agreement with our
Chief Financial Officer, Yifang Fu, on December 15, 2006. This agreement expired
on February 28, 2007. On the same date, Ms. Fus employment agreement was
renewed for a one-year term ending February 28, 2008 and her monthly base salary
has been increased to RMB 25,000 (approximately, $3,125). We expect that this
agreement will be automatically renewed for an additional year by the parties
upon its expiration.

Director Compensation

26

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There have been no fees earned or paid in cash for services to our directors.
No stock or stock options or other equity incentives were awarded to our
directors during the fiscal year ended December 31, 2006. We do not have
non-equity incentive or a deferred compensation plan that our directors may
participate in.ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
RELATED STOCKHOLDER MATTERS.

The following table sets forth information regarding beneficial ownership of
our common stock as of April 16, 2007 (i) by each person who is known by us to
beneficially own more than 5% of our common stock; (ii) by each of our officers
and directors; and (iii) by all of our officers and directors as a group.
Unless otherwise specified, the address of each of the persons set forth
below is in care of China Marketing Media Holdings, Inc. RMA 901, KunTai
International Mansion, No. 12 Chaowai Street, Beijing, 100020, China.

|                  |                                     |                     | Number of Shares | Percent
|----------------- | ----------------------------------- | ------------------- | ---------------- | -------
|Title of Class    | Name
    and Address                | Office, If Any      | Beneficially     | of     
|                  |                                     |                     | Owned            | Class  
|                  |                                     |                     |                  |        
|                  |                                     | President,          |                  |        
|Common            | Yingsheng Li                        | Chief               |                  |        
|Stock,
    no par | No.3
    Garden, Jing Ba Road, Jin  | Executive and       | 9,958,425        | 36.10% 
|value             | Shui
    District, Zhengzhou, China | Chairman            |                  |        
|                  |                                     |                     |                  |        
|Common            | Xiaofeng Ding                       |                     |                  |        
|Stock,
    no par | No.1
    Garden, Jing Yi Road, Jin  | Director            | 6,746,077        | 24.45% 
|value             | Shui
    District, Zhengzhou, China |                     |                  |        
|                  |                                     |                     |                  |        
|Common            | Dongsheng Ren                       |                     |                  |        
|Stock,
    no par | No.97
    Pai Fang Street, Jin Niu  | Director            | 6,103,498        | 22.13% 
|value             | District, Chengdu, China            |                     |                  |        
|                  |                                     |                     |                  |        
|                  | Bin Li                              |                     |                  |        
|Common            | Zhubang
    2000, Ba Li Zhuang,     | Executive           | 0                |        
|Stock,
    no par | Chao
    Yang District, Beijing,    | Director            |                  | *      
|value             | China                               |                     |                  |        
|                  |                                     |                     |                  |        
|Common            | Yifang
    Fu                       |                     |                  |        
|Stock,
    no par | # 29
    Guang Qu Road, Chao Yang   | Chief
    Financial | 0                | *      
|value             | District, Beijing, China            | Officer             |                  |        
|                  |                                     |                     |                  |        
|Common            |                                     |                     |                  |        
|Stock,
    no par | All
    officers and directors as a |                     | 22,808,000       | 82.68% 
|value             | group
    (5 persons named above)   |                     |                  |        

* Less than 1%

1

27

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2A total of 27,586,002 shares of our common stock are
considered to be outstanding pursuant to SEC Rule 13d-3(d)(1) as of April 16,
2007. For each beneficial owner above, any options or warrants exercisable
within 60 days have been included in the denominator.

Changes in Control

There have been no arrangements since the beginning of the 2006 fiscal year
which would have resulted in a change in control of the Company.

ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND
DIRECTOR INDEPENDENCE.

Certain Relationships and Related Transactions

Except for the transactions described below, no director,
executive officer, nominee for elections as a director of the Company, or an
owner of five percent of more of the Companys outstanding shares, or any member
of their immediate family, has any interest, direct or indirect, in any
transaction or in any proposed transaction, which has materially affected or
will materially affect us during the fiscal year ended December 31, 2006.

Our Chief Executive Officer, Yingsheng Li, and other members
of our executive team are also executive officers and/or directors of CMO. We
are parties to the Operation and Management Right Agreement with CMO. This
agreement is material to the operation of our business. Under this agreement,
from November 1, 2003 to October 31, 2013, our subsidiary, Shenzhen Media, is
obligated to market the magazines, sell the magazines and advertising space,
provide strategic planning for the magazines, and train the professional staff
of CMO. Under the terms of the contract, Shenzhen Media bears all of the
operating costs relating to the publishing of the magazines and is entitled to
all revenues generated from selling the magazines and its advertising space.

Prior to becoming a public reporting company, we loaned money
to our directors, Yingsheng Li, Xiaofeng Ding and Dongsheng Ren. The loans are
unsecured, and non-interest bearing. The loans were paid off by the end of March
2007.

On March 7, 2005, our indirect subsidiary, Shenzhen New
Media, entered into an agreement of share transfer with our directors, Yingsheng
Li, Xiaofeng Ding and Dongsheng Ren, pursuant to which, on December 21, 2005
Shenzhen New Media acquired 25.86%, 15.17% and 20.78%, respectively, of the
equity of Shenzhen Media for a total purchase price of RMB 500,000
(approximately $62,500).

We believe that the terms of our above related party
transactions are comparable to terms that would have been achieved in an
arms-length negotiation and thus comparable to terms with unaffiliated third
parties.

Director Independence

We currently do not have any independent directors, as the
term "independent" is defined by the rules of the Nasdaq Stock Market.

ITEM 13. EXHIBITS.

> The following exhibits are filed as part of this report or
>   incorporated by reference:

|            |                                                                                                                                                                                                                                                                                                                                           
|----------- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit No. | Description                                                                                                                                                                                                                                                                                                                               
|            |                                                                                                                                                                                                                                                                                                                                           
|2.1         | Share Exchange Agreement by and among the
    Company, Media Challenge Holdings Limited and certain shareholders thereof,
    dated as of December 31, 2005 [Incorporated by reference to Exhibit 2.1 to
    the Registration Statement of the Company on Form 10-SB, filed with the SEC
    on February 14, 2006, in file number 0-51806]

28

---



|2.2   | Convertible Promissory Note [Incorporated by
    reference to Exhibit 2.2 to the Amendment No. 1 to the Registration
    Statement of the Company on Form 10-SB, filed with the SEC on January 3,
    2007, in file number 0-51806]                                                                                             
|----- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|      |                                                                                                                                                                                                                                                                                                                                 
|3.1   | Articles of Incorporation, as amended
    [Incorporated by reference to Exhibit 3.1 to the Registration Statement of
    the Company on Form 10-SB, filed with the SEC on February 14, 2006, in file
    number 0-51806]                                                                                                        
|      |                                                                                                                                                                                                                                                                                                                                 
|3.2   | Amended and Restated Bylaws [Incorporated by
    reference to Exhibit 3.2 to the Amendment No. 1 to the Registration
    Statement of the Company on Form 10-SB, filed with the SEC on January 3,
    2007, in file number 0-51806]                                                                                             
|      |                                                                                                                                                                                                                                                                                                                                 
|10.1  | Operation and Management Right Agreement, dated
    October 23, 2006, by and between CMO and Shenzhen Media [Incorporated by
    reference to Exhibit 10.1 to the Amendment No. 1 to the Registration
    Statement of the Company on Form 10-SB, filed with the SEC on January 3,
    2007, in file number 0-51806]            
|      |                                                                                                                                                                                                                                                                                                                                 
|10.2  | Amendment to Operation and Management Right
    Agreement, dated January 8, 2004, by and between CMO and Shenzhen Media
    [Incorporated by reference to Exhibit 10.2 to the Amendment No. 1 to the
    Registration Statement of the Company on Form 10-SB, filed with the SEC on
    January 3, 2007, in file number 0-51806]
|      |                                                                                                                                                                                                                                                                                                                                 
|10.3* | Description of Verbal Amendment to Operation and
    Management Right Agreement, dated January 8, 2004, by and between Sale and
    Marketing Publishing House and Shenzhen Media Investment Co., Ltd.                                                                                                                          
|      |                                                                                                                                                                                                                                                                                                                                 
|10.4  | Entrust Agreement, dated November 20, 2004, by
    and between Shenzhen New Media and Shenzhen Media [Incorporated by reference
    to Exhibit 10.3 to the Amendment No. 1 to the Registration Statement of the
    Company on Form 10-SB, filed with the SEC on January 3, 2007, in file number
    0-51806]                   
|      |                                                                                                                                                                                                                                                                                                                                 
|10.5* | Equity Transfer Agreement, dated October 10,
    2006, by and between Zhu Yu Tong and Shenzhen New Media.                                                                                                                                                                                                                       
|      |                                                                                                                                                                                                                                                                                                                                 
|10.6* | Outsourcing Agreement, dated December 30, 2006,
    by and between Henan Xinhua Printing Factory and CMO.                                                                                                                                                                                                                       
|      |                                                                                                                                                                                                                                                                                                                                 
|10.7* | Outsourcing Agreement, dated December 30, 2006,
    by and between Henan Xinhua Printing Factory and CMO.                                                                                                                                                                                                                       
|      |                                                                                                                                                                                                                                                                                                                                 
|10.8* | Outsourcing Agreement, dated December 16, 2006,
    by and between Henan Ruiguang Printing Co., Ltd. and CMO.                                                                                                                                                                                                                   
|      |                                                                                                                                                                                                                                                                                                                                 
|10.9  | Employment Agreement, dated March 1, 2004, by and
    between Bin Li and Shenzhen New Media [Incorporated by reference to Exhibit
    10.7 to the Amendment No. 1 to the Registration Statement of the Company on
    Form 10-SB, filed with the SEC on January 3, 2007, in file number 0-51806]                                
|      |                                                                                                                                                                                                                                                                                                                                 
|10.10 | Employment Agreement, dated December 15, 2006, by
    and between Yifang Fu and China Marketing [Incorporated by reference to
    Exhibit 10.8 to the Amendment No. 1 to the Registration Statement of the
    Company on Form 10-SB, filed with the SEC on January 3, 2007, in file number
    0-51806]                        

29

---



|10.11 | Agreement of Share Transfer, dated March 7, 2005,
    by and among Yingsheng Li, Xiaofeng Ding, Dongsheng Ren and Shenzhen New
    Media [Incorporated by reference to Exhibit 10.9 to the Amendment No. 1 to
    the Registration Statement of the Company on Form 10-SB, filed with the SEC
    on January 3, 2007, in file number 0-51806]       
|----- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|      |                                                                                                                                                                                                                                                                                                                                                     
|10.12 | Agreement of Share Transfer, dated March 7, 2005,
    by and between CMO and Shenzhen New Media [Incorporated by reference to
    Exhibit 10.10 to the Amendment No. 1 to the Registration Statement of the
    Company on Form 10-SB, filed with the SEC on January 3, 2007, in file number
    0-51806]                                           
|      |                                                                                                                                                                                                                                                                                                                                                     
|10.13 | Distribution Agreement, dated February 8, 2006,
    by and between Shenzhen New Media and Guangzhou Qiankuntai Bookstore
    [Incorporated by reference to Exhibit 10.11 to the Amendment No. 1 to the
    Registration Statement of the Company on Form 10-SB, filed with the SEC on
    January 3, 2007, in file number 0-51806]                  
|      |                                                                                                                                                                                                                                                                                                                                                     
|10.14 | Distribution Agreement, dated April 3, 2006, by
    and between Shenzhen New Media and Huadao Consulting Co., Ltd. [Incorporated
    by reference to Exhibit 10.12 to the Amendment No. 1 to the Registration
    Statement of the Company on Form 10-SB, filed with the SEC on January 3,
    2007, in file number 0-51806]                        
|      |                                                                                                                                                                                                                                                                                                                                                     
|10.15 | Distribution Agreement, dated February 8, 2006,
    by and between Shenzhen New Media and Nanjing Cultural Development Co., Ltd.
    [Incorporated by reference to Exhibit 10.13 to the Amendment No. 1 to the
    Registration Statement of the Company on Form 10-SB, filed with the SEC on
    January 3, 2007, in file number 0-51806]          
|      |                                                                                                                                                                                                                                                                                                                                                     
|10.16 | Distribution Agreement, dated February 8, 2006,
    by and between Shenzhen New Media and Shandong Qianyan Culture Dissemination
    Co., Ltd. [Incorporated by reference to Exhibit 10.14 to the Amendment No. 1
    to the Registration Statement of the Company on Form 10-SB, filed with the
    SEC on January 3, 2007, in file number 0-51806]
|      |                                                                                                                                                                                                                                                                                                                                                     
|10.17 | Distribution Agreement, dated February 28, 2006,
    by and between Shenzhen New Media and Changsha Youyou Reading Group
    [Incorporated by reference to Exhibit 10.15 to the Amendment No. 1 to the
    Registration Statement of the Company on Form 10-SB, filed with the SEC on
    January 3, 2007, in file number 0-51806]                  
|      |                                                                                                                                                                                                                                                                                                                                                     
|10.18 | Distribution Agreement, dated February 9, 2006,
    by and between Shenzhen New Media and Zhengzhou Huanghe Culture Group
    [Incorporated by reference to Exhibit 10.16 to the Amendment No. 1 to the
    Registration Statement of the Company on Form 10-SB, filed with the SEC on
    January 3, 2007, in file number 0-51806]                 
|      |                                                                                                                                                                                                                                                                                                                                                     
|10.19 | Distribution Agreement, dated February 8, 2006,
    by and between Shenzhen New Media and Hangzhou Tianyi Books Co., Ltd.
    [Incorporated by reference to Exhibit 10.17 to the Amendment No. 1 to the
    Registration Statement of the Company on Form 10-SB, filed with the SEC on
    January 3, 2007, in file number 0-51806]                 
|      |                                                                                                                                                                                                                                                                                                                                                     
|14    | Code of Ethics [Incorporated by reference to
    Exhibit 14 to the Amendment No. 1 to the Registration Statement of the
    Company on Form 10-SB, filed with the SEC on January 3, 2007, in file number
    0-51806]                                                                                                                               

30

---



|21*   | List of Subsidiaries of the Registrant                                                                                                                                   
|----- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|      |                                                                                                                                                                          
|31.1* | Certification of Principal Executive Officer
    filed pursuant to Section 302 of the Sarbanes-Oxley Act of 2002*                                                        
|      |                                                                                                                                                                          
|31.2* | Certification of Principal Financial Officer
    filed pursuant to Section 302 of the Sarbanes-Oxley Act of 2002*                                                        
|      |                                                                                                                                                                          
|32.1* | Certifications of Principal Executive Officer
    furnished pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section
    906 of the Sarbanes-Oxley Act of 2002*
|      |                                                                                                                                                                          
|32.2* | Certifications of Principal Financial Officer
    furnished pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section
    906 of the Sarbanes-Oxley Act of 2002*

*Filed herewith.

ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES.

Independent Auditors Fees

As disclosed above in Item 8 "

During the fiscal years ended December 31, 2005 and December
31, 2006, fees for services provided by our independent auditors were as
follows:

|                   | Year Ended December 31,
|------------------ | -----------------------
|                   |                        
|                   | 2005                   
|Audit Fees         | $17,000                
|Audit-Related Fees | 0                      
|Tax Fees           | 0                      
|All Other Fees     | 0                      
|Total              | 17,000                 

"Audit Fees" consisted of fees billed for services rendered
for the audit of our annual financial statements, review of financial statements
included in our quarterly reports on Form 10-QSB, and other services normally
provided in connection with statutory and regulatory filings. "Audit-Related
Fees" consisted of fees billed for due diligence procedures in connection with
acquisitions and divestitures and consultation regarding financial accounting
and reporting matters. "Tax Fees" consisted of fees billed for tax payment
planning and tax preparation services. "All Other Fees" consisted of fees billed
for services in connection with legal matters and technical accounting research.

Pre-Approval Policies and Procedures

31

---

As we do not have an audit committee, the board of directors
has established a policy regarding pre-approval of all  non-audit
services provided to us by our independent auditor. On an ongoing basis,
management communicates specific projects and categories of service for which
the advance approval of the board of directors is requested. The board of
directors reviews these requests and advises management if the board of
directors approves the engagement of the independent auditor. During the fiscal
year ended December 31, 2006, our board of directors pre-approved the engagement
of our independent auditor to assist us with federal and state tax returns.
32

---

SIGNATURES

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

| | CHINA MARKETING MEDIA
    HOLDINGS, INC.    
| | --------------------------------------------
| |                                             
| |                                             
| | By: /s/ Yingsheng
    Li                    
| | Name: Yingsheng Li                          
| | Title: Chief Executive Officer and President

In accordance with the Exchange Act, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated.

|SIGNATURE        | CAPACITY                                   | DATE          
|---------------- | ------------------------------------------ | --------------
|                 |                                            |               
|                 |                                            |               
|/s/Yingsheng Li  | President, Chief
    Executive Officer and | April 17, 2007
|Yingsheng Li     | Chairman                                   |               
|                 |                                            |               
|/s/Bin Li        | Executive Director                         | April 17, 2007
|Bin Li           |                                            |               
|                 |                                            |               
|/s/Xiaofeng Ding | Director                                   | April 17, 2007
|Xiaofeng Ding    |                                            |               
|                 |                                            |               
|/s/Dongsheng Ren | Director                                   | April 17, 2007
|Dongsheng Ren    |                                            |               
|                 |                                            |               
|/s/Yifang Fu     | Chief Financial
    Officer                | April 17, 2007
|Yifang Fu        |                                            |               

33

---

CHINA MARKETING MEDIA HOLDINGS, INC. 
CONSOLIDATED FINANCIAL STATEMENTS 
DECEMBER 31, 2006F-1

---

CHINA MARKETING MEDIA HOLDINGS, INC.
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

|                                                                   |     
|------------------------------------------------------------------ | ----
|                                                                   | PAGE
|                                                                   |     
|REPORT OF INDEPENDENT
    REGISTERED PUBLIC ACCOUNTING FIRM        | F-3 
|                                                                   |     
|CONSOLIDATED BALANCE
    SHEETS                                    | F-4 
|                                                                   |     
|CONSOLIDATED
    STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME | F-5 
|                                                                   |     
|CONSOLIDATED
    STATEMENTS OF CHANGES IN STOCKHOLDERS EQUITY     | F-6 
|                                                                   |     
|CONSOLIDATED
    STATEMENTS OF CASH FLOWS                          | F-7 
|                                                                   |     
|NOTES TO CONSOLIDATED
    FINANCIAL STATEMENTS                     | F-8 

F-2

---

Report of Independent Registered Public Accounting Firm
To the Board of Directors 
China Marketing Media Holdings, Inc. 
Peoples Republic of China
We have audited the consolidated balance sheets of China
Marketing Media Holdings, Inc. (the Company) as of December 31, 2006 and 2005,
and the related consolidated statements of operations and comprehensive income,
changes in stockholders equity, and cash flows for the years ended December 31,
2006 and 2005. These consolidated financial statements are the responsibility of
the Companys management. Our responsibility is to express an opinion on these
consolidated financial statements based on our audits.
We conducted our audits in accordance with the standards of
the Public Company Accounting Oversight Board (United States). Those standards
require that we plan and perform the audits to obtain reasonable assurance about
whether the consolidated financial statements are free of material misstatement.
The company is not required to have, nor were we engaged to perform, an audit of
its internal control over financial reporting. Our audits included consideration
of internal control over financial reporting as a basis for designing audit
procedures that are appropriate in the circumstances, but not for the purpose of
expressing an opinion on the effectiveness of the companys internal control
over financial reporting. Accordingly, we express no such opinion. An audit also
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the consolidated financial statements
referred to above present fairly, in all material respects, the financial
position of China Marketing Media Holdings, Inc. as of December 31, 2006 and
2005, and the results of its operations and its cash flows for the years then
ended, in conformity with accounting principles generally accepted in the United
States of America.
Child, Van Wagoner & Bradshaw, PLLC 
Salt Lake City, Utah 
April 10, 2007
F-3

---

CHINA MARKETING MEDIA HOLDINGS, INC. 
BALANCE SHEETS

|                                                          | December 31, | December 31,
|--------------------------------------------------------- | ------------ | ------------
|                                                          |              | 2006        
|ASSETS                                                    |              |             
|CURRENT ASSETS                                            |              |             
|Cash and cash equivalents                                 | $            | 5,127,840   
|Accounts receivable                                       |              | 28,612      
|Prepaid expenses                                          |              | 192,574     
|Deposit                                                   |              | -           
|Settlement receivable                                     |              | 345,025     
|TOTAL CURRENT ASSETS                                      |              | 5,694,051   
|OTHER ASSETS                                              |              |             
|Due from directors                                        |              | 925,944     
|Deposit - purchase of targets                             |              | 1,024,590   
|Loan receivables to major sales agents                    |              | 604,853     
|Investment (equity method)                                |              | 202,751     
|Others                                                    |              | 42,588      
|Fixed assets                                              |              | 1,117,503   
|Accumulated depreciation                                  |              | (53,699)    
|License agreement                                         |              | 1,294,736   
|Accumulated amortisation                                  |              | (410,000)   
|TOTAL OTHER ASSETS                                        |              | 4,749,266   
|TOTAL ASSETS                                              | $            | 10,443,317  
|                                                          |              |             
|LIABILITIES AND
    STOCKHOLDERS' EQUITY                  |              |             
|CURRENT LIABILITIES                                       |              |             
|Accounts payable                                          | $            | 36,497      
|Accrued expenses and levies                               |              | 40,439      
|Deferred revenues                                         |              | 93,609      
|Other payable                                             |              | 25,955      
|Taxes payable                                             |              | 76,028      
|Dividend payable                                          |              | 691,919     
|TOTAL CURRENT
    LIABILITIES                             |              | 964,447     
|Long-term debt -
    related party (affiliate) see note 6 |              | 1,573,822   
|TOTAL LIABILITIES                                         |              | 2,538,269   
|STOCKHOLDERS' EQUITY                                      |              |             
|Common stock: no par value; 100,000,000 shares            |              |             
|authorized; 27,586,002 shares issued and
    outstanding  |              | 1,112,546   
|Retained earnings                                         |              | 6,509,864   
|Accumulated other comprehensive income                    |              | 282,638     
|TOTAL STOCKHOLDERS'
    EQUITY                            |              | 7,905,048   
|TOTAL LIABILITIES
    AND STOCKHOLDERS' EQUITY            | $            | 10,443,317  
|                                                          |              |             

See accompanying notes to consolidated financial statements

F-4

---

CHINA MARKETING MEDIA HOLDINGS, INC. 
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME

|                                               |   | Year ended December 31,
|---------------------------------------------- | - | -----------------------
|                                               |   | 2006                   
|Revenues                                       |   |                        
|Sales revenue                                  | $ | 8,383,087              
|Cost of goods sold                             |   | 3,057,859              
|Gross profit                                   |   | 5,325,228              
|                                               |   |                        
|Expenses                                       |   |                        
|Depreciation                                   |   | 106,338                
|Advertising and promotion                      |   | 36,452                 
|Payroll expenses                               |   | 271,964                
|Legal and professional fees                    |   | 580,240                
|Other general and administrative               |   | 679,173                
|Total expenses                                 |   | 1,674,167              
|                                               |   |                        
|Income from operations                         |   | 3,651,061              
|                                               |   |                        
|Other income (expenses)                        |   |                        
|Interest income                                |   | 40,165                 
|Interest expense                               |   | -                      
|Investment loss from unconsolidated subsidiary |   | (41,835)               
|Other                                          |   | 43,763                 
|Total other income (expenses)                  |   | 42,093                 
|                                               |   |                        
|Net income before taxes                        | $ | 3,693,154              
|                                               |   |                        
|Provision for income taxes                     |   | -                      
|                                               |   |                        
|Net income                                     | $ | 3,693,154              
|                                               |   |                        
|Foreign currency translation adjustment        |   | 185,769                
|                                               |   |                        
|Comprehensive income                           | $ | 3,878,923              
|                                               |   |                        
|Basic and fully diluted earnings per share     | $ | 0.13                   
|Weighted average number of shares of           |   |                        
|common stock outstanding                       |   | 27,586,002             
|                                               |   |                        

See accompanying notes to consolidated financial statements

F-5

---

CHINA MARKETING MEDIA HOLDINGS, INC. 
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS EQUITY

|                             |            |   |           |   |           | Accumulated Other |               | Total
|---------------------------- | ---------- | - | --------- | - | --------- | ----------------- | ------------- | -----
|                             | Common     |   | Common    |   | Retained  | Comprehensive     | Stockholders'
|                             | Shares     |   | Shares    |   | Earnings  |                   | Income        |      
|                             |            |   |           |   |           |                   |               |      
|January 1, 2005              | 27,586,002 | $ | 508,681   | $ | 1,249,432 |                   |               | $    
|                             |            |   |           |   |           |                   |               |      
|Increase in subsidiary       |            |   | 603,865   |   |           |                   |               |      
|registered capital           |            |   |           |   |           |                   |               |      
|                             |            |   |           |   |           |                   |               |      
|Net income                   |            |   |           |   | 2,766,561 |                   |               |      
|                             |            |   |           |   |           |                   |               |      
|Declaration of dividend      |            |   |           |   | (226,529) |                   |               |      
|                             |            |   |           |   |           |                   |               |      
|Foreign currency translation |            |   |           |   |           |                   | 96,869        |      
|                             |            |   |           |   |           |                   |               |      
|Balance                      | 27,586,002 | $ | 1,112,546 | $ | 3,789,464 | $                 | 96,869        | $    
|December 31, 2005            |            |   |           |   |           |                   |               |      
|Net income                   |            |   |           |   | 3,693,154 |                   |               |      
|                             |            |   |           |   |           |                   |               |      
|Declaration of dividend      |            |   |           |   | (972,754) |                   |               |      
|                             |            |   |           |   |           |                   |               |      
|Foreign currency translation |            |   |           |   |           |                   | 185,769       |      
|                             |            |   |           |   |           |                   |               |      
|Balance December 31, 2006    | 27,586,002 | $ | 1,112,546 | $ | 6,509,864 | $                 | 282,638       | $    
|                             |            |   |           |   |           |                   |               |      

See accompanying notes to consolidated financial statements

F-6

---

CHINA MARKETING MEDIA HOLDINGS, INC. 
CONSOLIDATED STATEMENTS OF CASH FLOWS

|                                                                        | December 31, | December 31,
|----------------------------------------------------------------------- | ------------ | ------------
|                                                                        |              | 2006        
|Cash flow from
    operating activities:                                |              |             
|Net income                                                              | $            | 3,693,154   
|Adjustments to reconcile net income to cash
    provided by operations: |              |             
|Amortisation and depreciation                                           |              | 233,180     
|Loss on disposals of fixed assets                                       |              | 4,132       
|Investment loss (equity method)                                         |              | 41,835      
|Change in operating assets and liabilities:                             |              |             
|Accounts receivable                                                     |              | 324,492     
|Settlement receivable                                                   |              | (345,025)   
|Deposits                                                                |              | 59,480      
|Due from major sales agent                                              |              | 413,734     
|Prepaid expenses                                                        |              | 205,417     
|Other asset                                                             |              | 4,139       
|Accounts payable                                                        |              | 36,497      
|Other payable                                                           |              | (3,546)     
|Taxes payable                                                           |              | (308,436)   
|Deferred revenues                                                       |              | 86,496      
|Net cash provided
    by operations                                     |              | 4,445,549   
|Cash flow from
    investing activities:                                |              |             
|Note receivable                                                         |              | -           
|Receipts from (borrowings to) directors                                 |              | 1,893,348   
|Deposits                                                                |              | -           
|Deposits to a target company                                            |              | (1,024,590) 
|Purchase of fixed assets                                                |              | (957,177)   
|Capital contributed to unconsolidated entity                            |              | (161,625)   
|Net cash used in
    investing activities                               |              | (250,044)   
|Cash flow from
    financing activities:                                |              |             
|Capital contribution                                                    |              | -           
|Repayment of payable to affiliate                                       |              | (68,520)    
|Dividend paid                                                           |              | (572,037)   
|Net cash used in
    financing activities                               |              | (640,557)   
|Increase in cash and
    cash equivalents                               |              | 3,554,948   
|                                                                        |              |             
|Effect on rate changes
    on cash                                      |              | 109,038     
|Cash and cash
    equivalents, beginning of period                      |              | 1,463,854   
|Cash and cash
    equivalents, end of period                            | $            | 5,127,840   
|Supplemental
    disclosures of cash flow information:                  |              |             
|Interest paid in cash                                                   | $            | -           
|Income taxes paid in cash                                               | $            | 457,452     

See accompanying notes to consolidated financial statements

F-7

---

1. Nature of operations

China Marketing Media Holdings, Inc. (fka Infolife, Inc. and Brazos
Strategies, Inc.) ("China Marketing") was incorporated under the laws of the
State of Texas on October 29, 1999.
On December 31, 2005, China Marketing completed a share
exchange (the "Exchange") with the stockholders of Media Challenge Holdings
Limited ("Media Challenge") pursuant to the terms of an Agreement for Share
Exchange dated December 31, 2005. In the Exchange, China Marketing acquired all
of the issued and outstanding stock of Media Challenge in exchange for a
convertible promissory note in the amount of $441,600 that was converted into
22,808,000 shares of China Marketing common stock upon the completion of a one
for ten reverse stock split. The Exchange resulted in the previous controlling
shareholders of Media Challenge becoming the controlling shareholders of China
Marketing. Consequently, the Exchange is accounted for as a reverse merger,
whereby the accounts of Media Challenge are recapitalized to show the adopted
capital structure of China Marketing.
Media Challenge was incorporated on August 12, 2004, under
the laws of the Territory of the British Virgin Islands (BVI). Media Challenge
is a holding company and has no operations other than operations that it
conducts through its direct and indirect subsidiaries. One of Media Challenges
subsidiaries, Shenzhen New Media Consulting Co., Ltd. ("Shenzhen New Media") was
incorporated on November 15, 2004 under the law of Peoples Republic of China ("PRC").
According to an agreement, dated March 7, 2005, Shenzhen New
Media acquired 100% of Shenzhen Media Investment Co., Ltd. ("Shenzhen Media"),
an entity controlled by three common owners of Media Challenge. Shenzhen Media
was formed on October 22, 2003, under the laws of PRC. China Marketing completed
the acquisition of Shenzhen Media on December 21, 2005, and Shenzhen Media is
now a wholly owned subsidiary of Shenzhen New Media. The transaction was
accounted for as a transfer of entities under common control. (see note 4)
In October 2004, Shenzhen Media formed a new wholly owned subsidiary in PRC
known as Beijing Media Management and Consulting Co., Ltd. ("Beijing Media").
In November 2005, Shenzhen New Media formed a new wholly owned subsidiary in
PRC known as Shenzhen New Media Advertising Co., Ltd. ("NMA"). The registered
capital of NMA is one million RMB, i.e., $122,100 (exchange rate as 1USD: 8.19
RMB).
The consolidated entity is hereafter referred to as "the Company".
The Company engages in the sale of its magazines and advertising space within
its magazines, which are sold throughout China.
2. Basis of Presentation

The consolidated financial statements include the accounts of
China Marketing, Media Challenge, Shenzhen New Media, Shenzhen Media, Beijing
Media, and NMA. All material inter-company accounts and transactions have been
eliminated in consolidation.
The accompanying consolidated financial statements are
prepared in accordance with accounting principles generally accepted in the
United States of America ("US GAAP"). This basis differs from that used in the
statutory accounts of Shenzhen New Media, which were prepared in accordance with
the accounting principles and relevant financial regulations applicable to
enterprises in the PRC. All necessary adjustments have been made to present the
financial statements in accordance with US GAAP. These statements have been
retroactively restated to show the effects due to the consolidation of Shenzhen
Media (see note 4) and reverse merger wherein the Company assumed the capital
structure of China Marketing and a 1:10 reverse stock split that was effected on
February 10, 2006.
3. Summary of Significant Accounting Policies

Economic and Political Risks
The Company faces a number of risks and challenges as a result of having
primary operations and marketing in the PRC. Changing political climates in the
PRC could have a significant effect on the Companys business.
F-8

---

3. Summary of Significant
Accounting Policies (continued)

Control by Principal Stockholders

The directors, executive officers and their affiliates or
related parties own, beneficially and in the aggregate, the majority of the
voting power of the outstanding shares of the common stock of the Company.
Accordingly, the directors, executive officers and their affiliates, if they
voted their shares uniformly, would have the ability to control the approval of
most corporate actions, including increasing the authorized capital stock of the
Company and the dissolution, merger or sale of the Companys assets.

Cash and Cash Equivalents

For purposes of the statements of cash flows, cash and cash equivalents
includes cash on hand and demand deposits held by banks. Deposits held in
financial institutions in the PRC are not insured by any government entity or
agency.

Trade Accounts Receivable

Trade accounts receivable are recognized and carried at
original invoice amount less an allowance for any uncollectible amounts. An
estimate for doubtful accounts is made when collection of the full amount
becomes questionable.

Revenue Recognition

Revenues are recognized when (1) persuasive evidence of an
arrangement exists; (2) delivery has occurred according to the sale terms; (3)
the seller's price to the buyer is fixed or determinable; and (4) collectibles
are reasonably assured.

Magazines

During the fiscal year ended December 31, 2006, the Company
published two magazines  China
Marketing andChina Business
& Trade in China. The Company published three issues of
China Marketing per month,
including sales edition, case edition, and channel edition. The Company
published one issue ofChina
Business & Trade per month, which is the training edition.

The Company recognizes revenues for the advertising sales
ratably over the periods when the customers advertisements are published. Total
revenue from the advertising sales is $6,932,594 and $5,033,019 for the years
ended December 31, 2006 and 2005, respectively.

In addition, the Company recognizes revenue from the
publishing of above magazines when the risks and rewards of ownership of the
goods have transferred to the customer, which is usually on delivery or when
title passes. Total revenue from the publishing business is $1,450,493 and
$1,633,092 for the years ended December 31, 2006 and 2005, respectively.

Property, Plant and Equipment

Property, plant and equipment are carried at cost less
accumulated depreciation. Depreciation is computed using the straight-line
method over the useful lives of the assets. Major renewals and betterments are
capitalized and depreciated; maintenance and repairs that do not extend the life
of the respective assets are charged to expense as incurred. Upon disposal of
assets, the cost and related accumulated depreciation are removed from the
accounts and any gain or loss is included in income. Depreciation related to
property and equipment used in production is reported in cost of sales. Property
and equipment are depreciated over their estimated useful lives.

Depreciation expense for the years ended December 31, 2006 and 2005 was
$106,338 and $8,607, respectively. The increase of depreciation expense is
mainly due to purchasing of office spaces.

Long-term assets of the Company are reviewed annually to assess whether the
carrying value has become impaired according to the guidelines established in
Statement of Accounting Standards (SFAS) No. 144,

F-9

---

"Accounting for the Impairment or Disposal of Long-Lived Assets." No
impairment of assets was recorded in the periods reported.
Intangible Assets
In accordance with SFAS 142, "Goodwill
and Other Intangible Assets", Goodwill amounts are not amortized, but rather
are tested for impairment at least annually. Intangible assets that are not
considered to have an indefinite useful life are amortized over their useful
lives, which is the ten years of the "license agreement." The carrying amount of
the asset is reviewed whenever events or changes in circumstances indicate that
the carrying value of an asset may not be recoverable. Recoverability of these
assets is measured by comparison of the carrying amount of the asset to the
future undiscounted cash flows the asset is expected to generate. If the asset
is considered to be impaired, the amount of any impairment is measured as the
difference between the carrying value and the fair value of the impaired asset.
No intangible asset impairment charges are deemed necessary for the years ended
December 31, 2006 and 2005.

License amortization expense included in cost of sales for the years ended
December 31, 2006 and 2005 was $126,842 and $123,435, respectively.

Cost of Goods Sold

Cost of goods sold includes printing, labor costs and
amortization incurred by the Company in the production of its magazines. The
Company records the estimated cost of returned magazines at the date we
delivered the magazines to our vendors. Our sales are based on three main
distribution channels throughout China: (1) postal subscription base
distribution; (2) direct order distribution; and (3) agency base distribution.

First, postal subscription channel involves the distribution
of our magazines by Chinese post offices. Magazine subscribers can request their
subscriptions delivered from the post offices in China. Returns are not allowed
for magazines sold through postal subscription.

Second, order distribution involves request made by a
subscriber to us for a single or multiple issues of magazines that do not
involve an ongoing subscription. Upon receipt of order request and payment, we
deliver the ordered issues to the address requested by the subscriber. Returns
are not permitted for magazines sold through direct request subscription.

Third, agency distribution involves delivery of our magazines
to sales agents who then distribute the magazines to retail agents at various
locations throughout China. During 2006 we granted sales agents a two-month
return privilege. Average return rate for the year ended December 31, 2006 was
17%.

In accordance with the provisions of SFAS 48, "Criteria
for Recognizing Revenue When Right of Return Exists," if an enterprise sells
its product but gives the buyer the right to return the product, revenue from
the sales transaction shall be recognized at time of sale only if all of the
following conditions are met:

g.The seller's price to the buyer is
substantially fixed or determinable at the date of sale.

h.The buyer has paid the seller, or
the buyer is obligated to pay the seller and the obligation is not contingent on
resale of the product.

i.The buyer's obligation to the
seller would not be changed in the event of theft or physical destruction or
damage of the product.

j.d. The buyer acquiring the product
for resale has economic substance apart from that provided by the seller.

k.The seller does not have
significant obligations for future performance to directly bring about resale of
the product by the buyer.

l.The amount of future returns can be
reasonably estimated.

F-10

---

We recognize magazine sales revenue in accordance with the
provisions of SFAS 48 : first, our price to the sale agent is fixed; second, the
sale agent has to pay us fully upon order request and the payment is not
contingent on resale of the magazines; third, we are not responsible in the
event of theft or physical destruction or damage of the product after delivery;
fourth, our sale agents include bookstores, reading group, and culture group,
etc.; fifth, we have no obligations to resell the magazines distributed to sale
agents; finally, the amount of returns can be reasonably estimated.
Advertising and Promotion Expense
Advertising and promotion costs are expensed as incurred. The
Company incurred $36,452 and $8,672 of advertising and promotion costs for the
years ended December 31, 2006 and 2005 respectively.
Reclassification
Certain amounts in the prior year have been reclassified to
conform to the current years presentation.
Earnings Per Share
Basic earnings per common share ("EPS") are calculated by
dividing net income by the weighted average number of common shares outstanding
during the year. Diluted EPS is calculated by adjusting the weighted average
outstanding shares, assuming conversion of all potentially dilutive securities,
such as stock options and warrants. The numerators and denominators used in the
computations of basic EPS are presented in the following table:

|                                                    |   | Year ended December 31,
|--------------------------------------------------- | - | -----------------------
|                                                    |   | 2006                   
|NUMERATOR FOR BASIC AND DILUTED EPS                 | $ | 3,693,154              
|Net income to common stockholders                   |   |                        
|DENOMINATORS FOR BASIC AND DILUTED EPS              |   |                        
|Weighted average shares of common stock outstanding |   | 27,586,002             
|EPS - Basic and Diluted                             | $ | 0.13                   

Major Sale Agents for the Advertising Business

Approximately 59% of the Companys sales are generated from
its four major sale agents in the PRC. The representatives solicited advertising
from general public in their designated geographic territory. The Companys
magazines are believed to be well established and recognized by the general
public. In this regard, the management believes no severe impact on the company
sales would result if any of the sale agents are lost.

Major Distribution Agents for the Publishing Business

Approximately 27% of the Companys magazines are distributed
by three major distribution agents in the PRC. The distribution agents are
distributing the magazines to the retails outlets in their designated geographic
territory. The Companys magazines are believed to be well established and
recognized by the general public. In this regard, the management believes no
severe impact on the Company sales if lost any of the distributing agents.

Foreign Currency and Comprehensive Income

The accompanying financial statements are presented in US
dollars. The functional currency is the Renminbi ("RMB") of the PRC. The
financial statements are translated into US dollars from RMB at year-end
exchange rates for assets and liabilities, and weighted average exchange rates
for revenues and expenses. Capital accounts are translated at their historical
exchange rates when the capital transactions occurred.

F-11

---

On July 21, 2005, the PRC changed its foreign currency
exchange policy from a fixed RMB/USD exchange rate into a flexible rate under
the control of the PRCs government. We use the Closing Rate Method in currency
translation of the financial statements of the company.
RMB is not freely convertible into the currency of other
nations. All such exchange transactions must take place through authorized
institutions. There is no guarantee the RMB amounts could have been, or could
be, converted into US dollars at rates used in translation.

Taxes
Income tax expense is based on reported income before income
taxes. Deferred income taxes reflect the effect of temporary differences between
assets and liabilities that are recognized for financial reporting purposes and
the amounts that are recognized for income tax purposes. In accordance with
Statement of Financial Accounting Standard ("SFAS") No. 109, "Accounting for
Income Taxes," these deferred taxes are measured by applying currently enacted
tax laws.
In 2006, one of the companys subsidiaries, NMA, which has
accounted for most of the revenues, is exempt from taxes at the national level
compared to 2005 most of our revenues came from another subsidiary, Shenzhen New
Media, which has an income tax rate of 15%.
The company has implemented SFAS No.109 "Accounting for
Income Taxes", which provides for a liability approach to accounting for income
taxes. Deferred income taxes result from the effect of transactions that are
recognized in different periods for financial and tax reporting purposes. The
company has recorded no deferred tax assets or liabilities as of December 31,
2006 and 2005, since nearly all differences in tax bases and financial statement
carrying values are permanent differences.
Estimates
The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosures of contingent assets and liabilities at the date of the financial
statements and the reported amounts of income and expenses during the reporting
period. Actual results could differ from those estimates.
Restrictions on Transfer of Assets Out of the PRC
Dividend payments by Shenzhen New Media and its subsidiary
are limited by certain statutory regulations in the PRC. No dividends may be
paid by Shenzhen New Media without first receiving prior approval from the
Foreign Currency Exchange Management Bureau. Dividend payments are restricted to
85% of profits, after tax.
4. Business Combinations between Entities under Common Control

The Company entered into a stock purchase agreement, dated
March 7, 2005, with Shenzhen Media. Shenzhen Media was formed on October 22,
2003 as a limited liability company in the PRC and was 61.81% owned by three of
the Companys directors and 38.19% owned by a minority entity, Sale and
Marketing Publishing House ("CMO"). CMO is controlled by a common director of
our Company. Pursuant to the agreement, the Company purchased all of the stock
of Shenzhen Media for a total purchase price of RMB 27,790,000. The Company
completed the acquisition of Shenzhen Media on December 21, 2005 and Shenzhen
Media is now a wholly owned subsidiary of Shenzhen New Media.
The acquisition was accounted for as a transfer of entities
under common control. Accordingly, the operations of Shenzhen Media for the
years ended December 31, 2006 and 2005 are included in the consolidated
statements as if the transaction had occurred at the beginning of the first
period presented, each account stated at its historical cost.
5. Loan Receivable with Major Sales Agents
The Company had loans receivable amounting to $604,853 and
$1,018,587 as of December 31, 2006 and 2005, respectively. Loans were provided
to the Companys major sales agents. The loans are unsecured, and bear no
interest. These loans have no fixed payment schedule and are payable on demand.
F-12

---

6.Settlement Receivable

The settlement receivable balance is related to a car
accident which has been settled on April 9, 2007 in favor of the Company and the
full amount of $ 345, 025 will be refunded to the Company.

7.
Prepaid Expenses

Prepaid expenses consist primarily of prepayments made to the
unrelated company in advance for future financial and legal consultation
services. As of December 31, 2006 and 2005, prepaid balance under these
arrangements totaled $192,574 and $397,991, respectively.

8.
Deposit  purchase of a target company

On October 10, 2006, Shenzhen New Media entered into an
Equity Transfer Agreement with Shenzhen Caina Brand Consultant Company to
acquire 100% shares ownership from its sole owner, Mr. Zhu Yu Tong. The company
paid RMB 8,000,000 (US$1,024,328) as the purchase deposit to Mr. Zhu Yu Tong.
The legal registration was completed in March 2007.

9.
Related Party Transactions with an
Affiliate

CMO is an affiliate owned by the PRC government. It is
controlled and directed by a company director and major shareholder of the
company. The company has verbal agreement with CMO that each party handles
transactions between each other under the same terms, receivable accounts and
payable accounts from separate transactions can be netted. Transactions with CMO
are listed as follows:

|                                              |   | December 31, 2006 |   | December 31, 2005
|--------------------------------------------- | - | ----------------- | - | -----------------
|                                              |   |                   |   |                  
|Contract receivable                           | $ | 790,851           | $ | 728,079          
|Less: Payable, zero interest rate             |   | 2,364,673         |   | 2,370,421        
|Net balance amount due to CMO,                |   |                   |   |                  
|balance due on August 18, 2008, zero interest | $ | -1,573,822        | $ | -1,642,342       

Operation and Management Right Agreement dated October 23, 2003, between
CMO and Shenzhen Media.

On October 23, 2003, Shenzhen Media entered into a 10-year
agreement with CMO. The agreement calls for the payment of $1,220,930 to CMO in
exchange for a right to oversee the operation and strategic planning of
advertising, publishing, and staff training for the magazines that are published
by CMO. Under this agreement, Shenzhen Media is entitled to collect advertising
revenues from clients already existing at the time of the contract, in addition
to any new clients that Shenzhen Media can solicit and retain. Also, Shenzhen
Media shall bear all the operating costs and receive all the revenues from the
contracted businesses.

CMOs revenue and expenses have been included in the consolidation financial
statement for the years ended December 31, 2006 and 2005 and are presented in
the following table.

|                  | For the year ended    | For the year ended   
|----------------- | --------------------- | ---------------------
|                  | December 31,
    2006 | December 31,
    2005
|                  |                       |                      
|Revenue           | $                     | 2,779,100            
|Cost of sales     |                       | 1,668,678            
|Gross profit      |                       | 1,110,422            
|Expenses          |                       | 1,101,418            
|Income before tax |                       | 9,004                
|Income tax        |                       | -                    
|Net income        | $                     | 9,004                

F-13

---

Contract receivable as of December 31, 2006 and 2005 was $ 790,851 and
$728,079, respectively.
10. Related Party Receivable with Directors
The Company loaned money to our directors, Yingsheng Li,
Xiaofeng Ding and Dongsheng Ren. The loans are unsecured, non-interest bearing.
The balances due from the directors were $980,565 at year ended December 31,
2006. The balance bears no interest and is payable on demand. This loan had been
fully repaid on March 30, 2007.
11. Dividends

The Company had declared dividends amounted to $972,754 and
$226,529 during 2006 and 2005, respectively. Dividends was declared at the
beginning of 2006 and 2005 for the previous shareholders, dividend payable as of
December 31, 2006 and 2005 were $691,919 and $291,202, respectively.
12. Income Taxes Expense

The Company is currently subject to income taxes according to
applicable tax laws in the PRC. The tax rates are 0% for Shenzhen New Media
Advertising Company Ltd., 15% for Shenzhen New Media and Shenzhen Media and 33%
for Zhenzhou magazine publishing house ("CMO"). The provision for income taxes
for the years ended December 31, 2006 and 2005 was $0 and $634,498,
respectively.
Pursuant to the laws and regulations in the PRC, Shenzhen New
Media Advertisement, as a wholly foreign owned enterprise ("WFOE") in the PRC,
is entitled to an exemption from the PRC enterprise income tax for two years
commencing from its first profitable year in 2006.
13. Lease Commitment

The Company leases an office space located at Room 903-905,
Kun Tai International Mansion, Chao Wai Street, Beijing, 100020, PRC. The lease
requires a monthly payment of $4,089 from October 2006 to August 2007.
The future lease commitment for the office lease is $32,715 in 2007.
14. Concentrations and Risk

The Companys major operations are through an agreement with
its affiliate as discussed in Note 6 with CMO, a company owned by the PRC
government. All the revenues are generated through production of the magazines
owned by CMO. The current contract will terminate in 2013, and it is unknown
whether the contract will be renewed. A change in the political climate in the
PRC could also have a material adverse effect on the Companys business.
15. Contingencies

The Company has not, historically, carried any property or
casualty insurance. No amounts have been accrued for any liability that could
arise from the lack of insurance. Management feels the chances of such an
obligation arising are remote.
Deposits in banks in the PRC are not insured by any
government entity or agency, and are consequently exposed to risk of loss.
Management believes the probability of a bank failure, causing loss to the
Company, is remote.
16. Recapitalization

On December 31, 2005 China Marketing acquired Media Challenge
Holdings whose only business was the 100% ownership of Shenzhen New Media. This
acquisition transaction involved the issuance of 22,808,000 post split shares of
China Marketing common stock in exchange for 100% of the outstanding shares of
Media Challenge, and was accounted for as a reverse merger, whereby the accounts
of Media Challenge became those of China Marketing. The accounts of the
accounting acquirer, Media Challenge, included herein have been adjusted to
reflect the capital structure of the parent retroactive to the beginning of the
first period presented in accordance with rules for reverse merger accounting.
F-14

---

On February 7, 2006 the Company changed its name from Infolife, Inc. to China
Marketing Media Holdings, Inc.
On February 10, 2006 the Company effected a 1:10 reverse stock split, after
which it issued the 22,808,000 shares called for in the exchange agreement with
Media Challenge shareholders. Immediately prior to the stock split there were
47,780,000 shares of common stock outstanding, and immediately following the
split and the issuance required by the Exchange, there were 27,586,002 shares of
common stock outstanding. These financial statements have been retroactively
restated to show the effects of the reverse stock split as if they had occurred
at the beginning of the first period presented.
17. Subsequent Event

Pursuit to the Equity Transfer Agreement dated on October 10, 2006 with
Shenzhen Caina Brand Consultant Company (see note 8), the Company completed its
legal registration and acquisition in March 2007.
Shenzhen Caina Brand Consultant Company was incorporated in Shenzhen, China
and conducts business in advertisement design, brand, sales and marketing
consulting and other services.
18. Recent Accounting Pronouncements

In February 2007, the FASB issued Statement No. 159, "The
Fair Value Option for Financial Assets and Financial Liabilities - Including an
amendment to FASB Statement No. 115". This statement permits companies to
choose to measure many financial instruments and other items at fair value. The
objective is to improve financial reporting by providing entities with the
opportunity to mitigate volatility in reported earnings caused by measuring
related assets and liabilities differently without having to apply complex hedge
accounting provisions. This Statement is expected to expand the use of fair
value measurement of accounting for financial instruments. This statement
applies to all entities, including not for profit.
The fair value option established by this statement permits
all entities to measure eligible items at fair value at specified election
dates. This statement is effective as of the beginning of an entitys first
fiscal year that begins after November 15, 2007
The Company is currently assessing the impact adoption of SFAS No. 159 will
have on its consolidated financial statements.
In December 2006, the FASB issued SFAS No. 157 "Fair Value
Measurements" which defines fair value, establishes a framework for measuring
fair value in generally accepted accounting principles and expands disclosure
about fair value measurements. The statement clarifies that the exchange price
is the price in an orderly transaction between market participants to sell the
asset or transfer the liability in the market in which the reporting entity
would transact for the asset or liability, that is, the principal or most
advantageous market for the asset or liability. It also emphasizes that fair
value is a market-based measurement, not an entity-specific measurement, and
that market participant assumptions include assumptions about risk and effect of
a restriction on the sale or use of an asset. The provisions are effective for
fiscal years beginning after November 15, 2007. The Company is currently
assessing the impact of the statement.
In June 2006, the FASB issued FASB Interpretation Number 48
(FIN 48), "Accounting for Uncertainty in Income Taxesan interpretation of FASB
Statement No. 109." This interpretation contains a two step approach to
recognizing and measuring uncertain tax positions accounted for in accordance
with SFAS No. 109. The first step is to evaluate the tax position for
recognition by determining if the weight of available evidence indicates it is
more likely than not that the position will be sustained on audit, including
resolution of related appeals or litigation processes, if any. The second step
is to measure the tax benefit as the largest amount which is more than 50%
likely of being realized upon ultimate settlement. The provisions are effective
for fiscal years beginning after December 15, 2006. It is not expected that FIN
48 will have a material effect on the Companys financial position or results of
operations.
In February 2006, the Financial Accounting Standards Board ("FASB")
issued SFAS No. 155, "Accounting for Certain Hybrid Financial Instruments  an
amendment of FASB Statements No. 133 and 140". The statement permits fair value
re-measurement for any hybrid financial instrument that contains an embedded
derivative that otherwise would require bifurcation, clarifies which
interest-only strips are not subject to the requirements of Statement 133,
establishes a requirement to evaluate interests in securitized financial assets
to identify interests that are freestanding derivatives or that are hybrid
financial instruments that contain an embedded derivative requiring bifurcation,
clarifies that concentrations of credit risk in the form of subordination are
not embedded derivatives, and amends Statement 140 to eliminate the prohibition
on a qualifying special-purpose entity from holding a derivative financial
instrument that pertains to a beneficial interest other than another derivative
financial instrument. The Statement is effective for financial instruments
acquired or issued after the beginning of the first fiscal year that begins
after December 15, 2006. The Company expects that the Statement will have no
material impact on its consolidated financial statements.
F-15

---

In February 2006, the FASB issued Staff Position No. FAS 123(R)-4,
"Classification of Options and Similar Instruments Issued as Employee
Compensation That Allow for Cash Settlement upon the Occurrence of a Contingent
Event". This position addresses the classification of options and similar
instruments issued as employee compensation that allow for cash settlement upon
the occurrence of a contingent event, amending paragraphs 32 and A229 of SFAS
No. 123 (revised 2004), "Share-Based Payment". As the Company has not
traditionally paid compensation through the issuance of equity securities, no
impact is expected on its consolidated financial statements.
F-16
EXHIBITS

|            |                                                                                                                                                                                                                                                                                                                                           
|----------- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit No. | Description                                                                                                                                                                                                                                                                                                                               
|            |                                                                                                                                                                                                                                                                                                                                           
|2.1         | Share Exchange Agreement by and among the
    Company, Media Challenge Holdings Limited and certain shareholders thereof,
    dated as of December 31, 2005 [Incorporated by reference to Exhibit 2.1 to
    the Registration Statement of the Company on Form 10-SB, filed with the SEC
    on February 14, 2006, in file number 0-51806]

|      |                                                                                                                                                                                                                                                                                                                                 
|----- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|2.2   | Convertible Promissory Note [Incorporated by
    reference to Exhibit 2.2 to the Amendment No. 1 to the Registration
    Statement of the Company on Form 10-SB, filed with the SEC on January 3,
    2007, in file number 0-51806]                                                                                             
|      |                                                                                                                                                                                                                                                                                                                                 
|3.1   | Articles of Incorporation, as amended
    [Incorporated by reference to Exhibit 3.1 to the Registration Statement of
    the Company on Form 10-SB, filed with the SEC on February 14, 2006, in file
    number 0-51806]                                                                                                        
|      |                                                                                                                                                                                                                                                                                                                                 
|3.2   | Amended and Restated Bylaws [Incorporated by
    reference to Exhibit 3.2 to the Amendment No. 1 to the Registration
    Statement of the Company on Form 10-SB, filed with the SEC on January 3,
    2007, in file number 0-51806]                                                                                             
|      |                                                                                                                                                                                                                                                                                                                                 
|10.1  | Operation and Management Right Agreement, dated
    October 23, 2006, by and between CMO and Shenzhen Media [Incorporated by
    reference to Exhibit 10.1 to the Amendment No. 1 to the Registration
    Statement of the Company on Form 10-SB, filed with the SEC on January 3,
    2007, in file number 0-51806]            
|      |                                                                                                                                                                                                                                                                                                                                 
|10.2  | Amendment to Operation and Management Right
    Agreement, dated January 8, 2004, by and between CMO and Shenzhen Media
    [Incorporated by reference to Exhibit 10.2 to the Amendment No. 1 to the
    Registration Statement of the Company on Form 10-SB, filed with the SEC on
    January 3, 2007, in file number 0-51806]
|      |                                                                                                                                                                                                                                                                                                                                 
|10.3* | Description of Verbal Amendment to Operation and
    Management Right Agreement, dated January 8, 2004, by and between Sale and
    Marketing Publishing House and Shenzhen Media Investment Co., Ltd.                                                                                                                          
|      |                                                                                                                                                                                                                                                                                                                                 
|10.4  | Entrust Agreement, dated November 20, 2004, by
    and between Shenzhen New Media and Shenzhen Media [Incorporated by reference
    to Exhibit 10.3 to the Amendment No. 1 to the Registration Statement of the
    Company on Form 10-SB, filed with the SEC on January 3, 2007, in file number
    0-51806]                   
|      |                                                                                                                                                                                                                                                                                                                                 
|10.5* | Equity Transfer Agreement, dated October 10,
    2006, by and between Zhu Yu Tong and Shenzhen New Media.                                                                                                                                                                                                                       
|      |                                                                                                                                                                                                                                                                                                                                 
|10.6* | Outsourcing Agreement, dated December 30, 2006,
    by and between Henan Xinhua Printing Factory and CMO.                                                                                                                                                                                                                       
|      |                                                                                                                                                                                                                                                                                                                                 
|10.7* | Outsourcing Agreement, dated December 30, 2006,
    by and between Henan Xinhua Printing Factory and CMO.                                                                                                                                                                                                                       
|      |                                                                                                                                                                                                                                                                                                                                 
|10.8* | Outsourcing Agreement, dated December 16, 2006,
    by and between Henan Ruiguang Printing Co., Ltd. and CMO.                                                                                                                                                                                                                   
|      |                                                                                                                                                                                                                                                                                                                                 
|10.9  | Employment Agreement, dated March 1, 2004, by and
    between Bin Li and Shenzhen New Media [Incorporated by reference to Exhibit
    10.7 to the Amendment No. 1 to the Registration Statement of the Company on
    Form 10-SB, filed with the SEC on January 3, 2007, in file number 0-51806]                                
|      |                                                                                                                                                                                                                                                                                                                                 
|10.10 | Employment Agreement, dated December 15, 2006, by
    and between Yifang Fu and China Marketing [Incorporated by reference to
    Exhibit 10.8 to the Amendment No. 1 to the Registration Statement of the
    Company on Form 10-SB, filed with the SEC on January 3, 2007, in file number
    0-51806]                        

---



|10.11 | Agreement of Share Transfer, dated March 7, 2005,
    by and among Yingsheng Li, Xiaofeng Ding, Dongsheng Ren and Shenzhen New
    Media [Incorporated by reference to Exhibit 10.9 to the Amendment No. 1 to
    the Registration Statement of the Company on Form 10-SB, filed with the SEC
    on January 3, 2007, in file number 0-51806]       
|----- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|      |                                                                                                                                                                                                                                                                                                                                                     
|10.12 | Agreement of Share Transfer, dated March 7, 2005,
    by and between CMO and Shenzhen New Media [Incorporated by reference to
    Exhibit 10.10 to the Amendment No. 1 to the Registration Statement of the
    Company on Form 10-SB, filed with the SEC on January 3, 2007, in file number
    0-51806]                                           
|      |                                                                                                                                                                                                                                                                                                                                                     
|10.13 | Distribution Agreement, dated February 8, 2006,
    by and between Shenzhen New Media and Guangzhou Qiankuntai Bookstore
    [Incorporated by reference to Exhibit 10.11 to the Amendment No. 1 to the
    Registration Statement of the Company on Form 10-SB, filed with the SEC on
    January 3, 2007, in file number 0-51806]                  
|      |                                                                                                                                                                                                                                                                                                                                                     
|10.14 | Distribution Agreement, dated April 3, 2006, by
    and between Shenzhen New Media and Huadao Consulting Co., Ltd. [Incorporated
    by reference to Exhibit 10.12 to the Amendment No. 1 to the Registration
    Statement of the Company on Form 10-SB, filed with the SEC on January 3,
    2007, in file number 0-51806]                        
|      |                                                                                                                                                                                                                                                                                                                                                     
|10.15 | Distribution Agreement, dated February 8, 2006,
    by and between Shenzhen New Media and Nanjing Cultural Development Co., Ltd.
    [Incorporated by reference to Exhibit 10.13 to the Amendment No. 1 to the
    Registration Statement of the Company on Form 10-SB, filed with the SEC on
    January 3, 2007, in file number 0-51806]          
|      |                                                                                                                                                                                                                                                                                                                                                     
|10.16 | Distribution Agreement, dated February 8, 2006,
    by and between Shenzhen New Media and Shandong Qianyan Culture Dissemination
    Co., Ltd. [Incorporated by reference to Exhibit 10.14 to the Amendment No. 1
    to the Registration Statement of the Company on Form 10-SB, filed with the
    SEC on January 3, 2007, in file number 0-51806]
|      |                                                                                                                                                                                                                                                                                                                                                     
|10.17 | Distribution Agreement, dated February 28, 2006,
    by and between Shenzhen New Media and Changsha Youyou Reading Group
    [Incorporated by reference to Exhibit 10.15 to the Amendment No. 1 to the
    Registration Statement of the Company on Form 10-SB, filed with the SEC on
    January 3, 2007, in file number 0-51806]                  
|      |                                                                                                                                                                                                                                                                                                                                                     
|10.18 | Distribution Agreement, dated February 9, 2006,
    by and between Shenzhen New Media and Zhengzhou Huanghe Culture Group
    [Incorporated by reference to Exhibit 10.16 to the Amendment No. 1 to the
    Registration Statement of the Company on Form 10-SB, filed with the SEC on
    January 3, 2007, in file number 0-51806]                 
|      |                                                                                                                                                                                                                                                                                                                                                     
|10.19 | Distribution Agreement, dated February 8, 2006,
    by and between Shenzhen New Media and Hangzhou Tianyi Books Co., Ltd.
    [Incorporated by reference to Exhibit 10.17 to the Amendment No. 1 to the
    Registration Statement of the Company on Form 10-SB, filed with the SEC on
    January 3, 2007, in file number 0-51806]                 
|      |                                                                                                                                                                                                                                                                                                                                                     
|14    | Code of Ethics [Incorporated by reference to
    Exhibit 14 to the Amendment No. 1 to the Registration Statement of the
    Company on Form 10-SB, filed with the SEC on January 3, 2007, in file number
    0-51806]                                                                                                                               

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|21*   | List of Subsidiaries of the Registrant                                                                                                                                   
|----- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|      |                                                                                                                                                                          
|31.1* | Certification of Principal Executive Officer
    filed pursuant to Section 302 of the Sarbanes-Oxley Act of 2002*                                                        
|      |                                                                                                                                                                          
|31.2* | Certification of Principal Financial Officer
    filed pursuant to Section 302 of the Sarbanes-Oxley Act of 2002*                                                        
|      |                                                                                                                                                                          
|32.1* | Certifications of Principal Executive Officer
    furnished pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section
    906 of the Sarbanes-Oxley Act of 2002*
|      |                                                                                                                                                                          
|32.2* | Certifications of Principal Financial Officer
    furnished pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section
    906 of the Sarbanes-Oxley Act of 2002*

*Filed herewith.

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