UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-KSB

(Mark One)

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

For the fiscal year ended: December 31, 2007

£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.

-------------------------------------------------------------------------------------------------------

(Name of small business issuer in its charter)

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

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
QNo
£

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.Q

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

The issuers revenues for its most recent fiscal year are $9,744,654.

The aggregate market value of the voting and non-voting common equity held by non-affiliates computed by reference to the average bid and asked price of such common equity, as of April 16, 2008 is $228,080.  Shares of common stock held by each officer and director and by each person who owns 10 percent or more of the outstanding common stock have been excluded in that such persons may be deemed to be affiliates of the issuer.  This determination of affiliate status is not necessarily a conclusive determination for other purposes.

The number of shares outstanding of the issuers common stock as of April 16, 2008 is 27,586,002.

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 the British Virgin Islands; (iv) "PRC" and "China" are to the 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 the United States Securities Act of 1933, as amended; and (viii) "Exchange Act" are to the United States 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 47,780,000 to 4,778,000 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.  The words "believe," "expect," "anticipate," "project," "targets," "optimistic," "intend," "aim," "will" or similar expressions are intended to identify forward-looking statements. All forward-looking statements included in this report are based on information available to us on the date of this report.  These forward-looking statements are subject to certain uncertainties and other factors that could cause actual results to differ materially from such statements.  These uncertainties and other factors include, but are not limited to: changes in economic conditions, a fluctuation of RMB, changes in domestic and foreign laws, regulations and taxes, changes in economic conditions, uncertainties related to Chinas legal system and economic, political and social events in China, a general economic downturn, a downturn in the securities markets, Securities and Exchange Commission regulations which affect trading in the securities of penny stocks, and other risks and uncertainties.  We assume no obligation or duty to update any such forward-looking statements, except as required by law.

PART I

ITEM 1.  DESCRIPTION OF BUSINESS.

Background

We were originally organized under the laws of the State of Texas on October 29, 1999 under the name 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.  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.

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 shareholders 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 shareholders 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.

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Business Overview

We are a holding company and we have no operations other than administrative matters and the ownership of our direct and indirect operating subsidiaries.  Through our indirect Chinese subsidiaries, we are engaged in the business of selling magazines and advertising space in our magazines and providing sales and marketing consulting services.  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.

|China Marketing -Sales edition | China Marketing -Case edition | China Marketing -Channel 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 for the right to all revenues generated from selling the magazines and their advertising space.

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.

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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, CMO is the
owner of the magazine.  Although our Chief Executive Officer, Yingsheng Li, and
other members of our executive team are also executive officers and/or directors
of CMO, 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.

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.

Our Current Organizational Structure

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.  It is currently responsible for providing and editing the contents of the magazine.

(4) Beijing Orient Converge Human Resources Management Center Co. Ltd., or Beijing Orient, was incorporated in China in November 2007.  It is engaged in the business of vocational training, employment recommendation and services.  It also conducts sales and marketing professional training.  Shenzhen Media Investment Co., Ltd. owns 52% of Beijing Orient while Shanghai Faith Biological Cell Technology Co., Ltd. owns the other 48%.

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.

The dimension of China Marketing is 210mm x 285mm.  The magazine is published in color.  We use double-side offset paper within the magazine and 157g double-side halftone paper for the covers of Sales edition and Channel edition of China Marketing and200g 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.

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.

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 were contracted to Henan Xinhua Printing Factory.  The printing works of the publication of Channel edition of China Marketing were contracted to Henan Ruiguang Printing Co., Ltd.

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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.

Advertising Consulting Services

We also provide advertising consulting services to our customers through our subsidiary, Shenzhen Caina.  The services that we currently offer mainly focus on assisting our customers on the promotion of brand name.

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.

As of December 31, 2007, the annual circulation of our magazines during the 2007 fiscal year, was 3,557,139 units, among which, approximately 63% 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 37% of our sales were through postal subscriptions 32% and direct orders 5%.  As of December 31, 2006, the annual circulation of our magazines was approximately 3,705,627 units, among which 66% of sales were made through retail agents such as newsstands, airports, subways and bookstores throughout China.  The remaining 34% of our sales were through postal subscriptions (32%) and direct orders (2%).

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The following table lists the annual circulation of our magazines during the fiscal year ending December 31, 2007:

Different editions
  China Marketing (Sales edition)
  China Marketing
(Case edition)
  China Marketing (Channel edition)
  TotalDistribution agents
  826,929
  584,900
  829,169
  2,240,998Subscriptions through post offices
  420,026
  297,092
  421,165
  1,138,283Direct subscriptions
  65,629
  46,421
  65,808
  177,858Total
  1,312,584
  928,413
  1,316,142
  3,557,139


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.

Prices of Our Magazines

The fixed retail price of the Sales edition and the Channel edition of China Marketing is RMB 7.5 per issue (approximately, $1) and the fixed retail price of the Case edition of China Marketing is RMB 10 per issue (approximately $1.39).  Subscribers who subscribe to our magazines directly pay this same fixed retail price per issue on an issue by issue basis.

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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 $1).  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.

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.

We have registered our magazines title China Marketing as a trademark with the Trademark Office of the State Administration for Industry and Commerce of China.  We use our trademark for the sales and marketing of our magazine.

We have registered our www.cmmo.com.cn Internet domain name. The articles and other contents of our magazine 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.

Our Employees

We currently have 125 full-time employees and we do not expect any significant changes in the number of our employees during the next 12 months.

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

Department
  Number of EmployeesManagement
  5Accounting Department
  6Administration
  10Brand Name Consulting
  20Customer Service
  20Design Department
  24Research Department
  3Sales Department
  3Issuing Department
  12Training Project
  1Commercial Advertisement Department
  2Consultation Advertisement Department
  6Partnership Advertisement Department
  8Video Center
  5Total
  125


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.  Currently 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 $126,414 and $42,292 for the fiscal years 2007 and 2006, 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.

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.

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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 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 RMB.  The value of 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 , 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 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.

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.

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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.

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 relationship 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.

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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.

Investor confidence and the market price of our shares may be adversely impacted if we are unable to correct a material weakness or significant deficiency in our internal controls over our financial reporting identified by our management.

During our assessment of the effectiveness of internal control over financial reporting as of December 31, 2007, management identified significant deficiencies related to our U.S. GAAP expertise, internal audit functions and the absence of Audit Committee, as of that date. The current staff in the accounting department of the subsidiaries is relatively new to U.S. GAAP and internal control procedures and needs substantial additional training so as to meet with the higher demands of being a U.S. public company.  The significant deficiency in internal audit function is also due to the Companys lack of sufficient qualified resources to perform internal audit functions.  We have taken steps to address these deficiencies as described in Item 8A(T) below, however, if any of these deficiencies remains, then our financial condition could be adversely affected.

We do not have any independent directors and may be unable to appoint any qualified independent directors.

We currently do not have any independent directors. We plan to appoint a number of independent directors which will constitute a majority of our board of directors before our common stock is listed on a national securities exchange or NASDAQ, but we may not be able to identify independent directors qualified to be on our board.

RISKS RELATED TO DOING BUSINESS IN CHINA

Changes in Chinas political or economic situation could harm us and our operational results.

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.

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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,
- the sickness or death of our key officers and employees, and
- a general slowdown in the Chinese economy.

Any of the foregoing events or other unforeseen consequences of public health problems could damage our operations.

We may be unable to complete a business combination transaction efficiently or on favorable terms due to complicated merger and acquisition regulations that became effective on September 8, 2006.

On August 8, 2006, six PRC regulatory agencies promulgated the Regulation on Mergers and Acquisitions of Domestic Companies by Foreign Investors, which became effective on September 8, 2006. This new regulation, among other things, governs the approval process by which a PRC company may participate in an acquisition of assets or equity interests. Depending on the structure of the transaction, the new regulation will require the PRC parties to make a series of applications and supplemental applications to the government agencies. In some instances, the application process may require the presentation of economic data concerning a transaction, including appraisals of the target business and evaluations of the acquirer, which are designed to allow the government to assess the transaction. Government approvals will have expiration dates by which a transaction must be completed and reported to the government agencies. Compliance with the new regulations is likely to be more time consuming and expensive than in the past and the government can now exert more control over the combination of two businesses. Accordingly, due to the new regulation, our ability to engage in business combination transactions has become significantly more complicated, time consuming and expensive, and we may not be able to negotiate a transaction that is acceptable to our stockholders or sufficiently protect their interests in a transaction.

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The new regulation allows PRC government agencies to assess the economic terms of a business combination transaction. Parties to a business combination transaction may have to submit to the Ministry of Commerce and other relevant government agencies an appraisal report, an evaluation report and the acquisition agreement, all of which form part of the application for approval, depending on the structure of the transaction. The regulations also prohibit a transaction at an acquisition price obviously lower than the appraised value of the PRC business or assets and in certain transaction structures, require that consideration must be paid within defined periods, generally not in excess of a year. The regulation also limits our ability to negotiate various terms of the acquisition, including aspects of the initial consideration, contingent consideration, holdback provisions, indemnification provisions and provisions relating to the assumption and allocation of assets and liabilities. Transaction structures involving trusts, nominees and similar entities are prohibited. Therefore, such regulation may impede our ability to negotiate and complete a business combination transaction on financial terms that satisfy our investors and protect our stockholders economic interests.

We may be exposed to liabilities under the Foreign Corrupt Practices Act, and any determination that we violated the Foreign Corrupt Practices Act could have a material adverse effect on our business.

We are subject to the Foreign Corrupt Practice Act, or FCPA, and other laws that prohibit improper payments or offers of payments to foreign governments and their officials and political parties by U.S. persons and issuers as defined by the statute, for the purpose of obtaining or retaining business.  We have operations, agreements with third parties and we make sales in China.  Our activities in China create the risk of unauthorized payments or offers of payments by the employees, consultants, sales agents or distributors of our Company, even though they may not always be subject to our control.  It is our policy to implement safeguards to discourage these practices by our employees. However, our existing safeguards and any future improvements may prove to be less than effective, and the employees, consultants, sales agents or distributors of our Company may engage in conduct for which we might be held responsible.  Violations of the FCPA may result in severe criminal or civil sanctions, and we may be subject to other liabilities, which could negatively affect our business, operating results and financial condition. In addition, the U.S. government may seek to hold our Company liable for successor liability FCPA violations committed by companies in which we invest or that we acquire.

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 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, 2008, the closing price for our common stock was $0.01 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 Exchange Act, 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.

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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.

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 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.

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.

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 2007.

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PART II

ITEM 5.  MARKET FOR COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND SMALL BUSINESS ISSUER PURCHASES OF EQUITY SECURITIES.

Market Information

Our 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              
|Year Ended December 31, 2007
|1st Quarter                  | $0,25             
|2nd Quarter                  | $0.25             
|3rd Quarter                  | $2.00             
|4th Quarter                  | $0.32             
|                            
|Year Ended December 31, 2006
|1st Quarter(2)               | $4.00             
|2nd Quarter                  | $2.25             
|3rd Quarter                  | $3.50             
|4th Quarter                  | $2.05             
|                             |                   

________________________

(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, 2008, there were approximately 18 stockholders of record of our common stock, as reported by our transfer agent.  In computing the number of holders of record, each broker-dealer and clearing corporation holding shares on behalf of its customers is counted as a single shareholder.

Dividends

In January 2006, our three directors, Yingsheng Li, Xiaofeng Ding and Dongsheng Ren authorized the payment to themselves in the aggregate amount of $972,754; the payments were originally characterized as a dividend.  Of the total $972,754 declared, $672,592 was paid during 2006.  In July 2007, when the directors realized that the amounts paid were not properly characterized, the board cancelled the remaining payments and recharacterized the 2006 payments as bonuses paid in 2006 for services as directors.

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.

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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.

Recent Sales of Unregistered Securities

We have not sold any equity securities during the fiscal year ended December 31, 2007 that were not previously disclosed in a quarterly report on Form 10-QSB or a current report on Form 8-K that was filed during the 2007 fiscal year.

ITEM 6.  MANAGEMENTS DISCUSSION AND ANALYSIS OR PLAN OF OPERATION.

Overview

The following analysis discusses changes in the financial condition and results of operations as of and for years ended on December 31, 2007 and 2006, and should be read in conjunction with our audited consolidated financial statements and the notes thereto include elsewhere in this report.

General

We generate revenues through sales of our magazines, sales of advertising space in our magazines and providing sales and marketing consulting services.  During the fiscal year ended December 31, 2007, we generated $1,388,547 in revenues from the sale of our magazines, $6,047,678 in revenues from the sale of advertising space in these magazines and $2,308,427 in revenues from providing consulting services.   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.

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.  A copy of the Equity Transfer Agreement has been filed as Exhibit 10.5 to our annual report on Form 10-KSB on April 17, 2007.

On December 13, 2007, Shenzhen New Media entered into an operation and management agreement, or the Shanghai Longcom Agreement, with Shanghai Longcom Telecom Co., Ltd., or Shanghai Longcom, a company incorporated in the PRC, pursuant to which from March 2008 to March 2009, Shenzhen New Media has exclusive rights to operate and manage the business of Shanghai Longcom.  Shenzhen New Media paid RMB 40,000,000 (approximately $5.48 million) to Shanghai Longcom as a deposit in exchange for such operation and management rights over the business of Shanghai Longcome.  Under the Shanghai Longcom Agreement, Shenzhen New Media is also expected to acquire 100% equity interests in Shanghai Longcom by the end of 2009.  Both parties agreed that the purchase price of acquisition shall be adjusted based on the actual operating results of Shanghai Longcom.  Shanghai Longcom is engaged in the business of online direct marketing, distribution, B2C e-commerce, IT retail and 3 C retail sales model by cooperating with mainstream products OEM / ODM manufacturers.

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.

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Results of Operations

Fiscal Year Ended December 31, 2007 Compared with Fiscal Year Ended December 31, 2006

The following table summarizes the results of our operations during the fiscal years ended December 31, 2007 and 2006.  It provides information regarding the dollar and percentage increase or (decrease) from the 2006 fiscal period to the 2007 fiscal period:

|                       | Year Ended December 31, |           |                    
|---------------------- | ----------------------- | --------- | -------------------
|Item                   | 2007                    | 2006      | Increase (Decrease)
|Revenue                | 9,744,654               | 8,383,087 | 1,361,567          
|Cost of Sales          | 3,198,026               | 3,057,859 | 140,167            
|Gross Profit           | 6,546,628               | 5,325,228 | 1,221,400          
|Operating Expenses     | 3,632,791               | 2,301,759 | 1,331,032          
|Other Income (expense) | 14,073                  | 42,094    | (28,021)           
|Provision for Taxes    | 35,896                  | 0         | 35,896             
|Net income             | 2,930,155               | 3,065,562 | (135,407)          

Revenue

Our revenues in fiscal year 2007 amounted to $9,744,654, which is $1.36 million or approximately 17% more than that of fiscal year 2006, when we had revenues of $8,383,087.  Compared to 2006, our revenues attributable to sales of magazines decreased by $61,946 in 2007 and advertising revenues in 2007 decreased by $884,913 as compared to 2006.  The overall increase in revenues was attributable to our new subsidiary, Shenzhen Caina, which contributed revenues of $2,308,427 from advertising consulting services, while in 2006 we did not provide any advertising consulting services to our customers.  The decrease of our magazine sales and advertising sales during 2007 is mainly due to the rapid development of online newspaper and magazines that reduced readership generally.

Components of Revenues

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

|Revenue Category    | 2007       | 2006       | Increase (Decrease) | % Increase (% Decrease)
|------------------- | ---------- | ---------- | ------------------- | -----------------------
|                    |            |            |                     |                        
|Magazine Sales      | $1,388,547 | $1,450,494 | $61,946             | (5%)                   
|                    |            |            |                     |                        
|Advertising Sales   | $6,047,679 | $6,932,593 | $884,914            | (12.8%)                
|                    |            |            |                     |                        
|Consulting Services | $2,540,330 | 0          | $2,540,330          | 100%                   
|                    |            |            |                     |                        
|Total               | $9,976,557 | $8,383,087 | $1,593,469          | 19%                    

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Cost of Sales

Our cost of sales in fiscal years 2007 and 2006 was $3,198,026 and $3,057,859, respectively, which accounts for approximately 32.9% and 36.5%, respectively, as a percentage of total revenues.  The dollar amount of the cost of sales increased with the growth of annual sales.  Cost of sales as a percentage of annual revenues declined by about 3.6% in 2007 as compared with 2006, which is mainly attributable to the change of product mix, where certain higher margin products such as advertising consulting services accounted for a higher percentage of our revenues

Expenses

Our expenses consist of payroll and other general and administrative expense.  Payroll expense was $1,423,251 in the 2007 fiscal year compared to $899,556 in the 2006 fiscal year.  The increase in payroll expense is mainly a result of increased salaries for employees hired by our new subsidiary Shenzhen Caina for advertising consulting

Our other general and administrative expenses were $2,209,540 (22.2% of total sales) and $1,402,203 (16.8% of total sales) in fiscal years 2007 and 2006, respectively.  The increase of other general and administrative expenses is mainly due to the increase of rent expense, staff welfare expense and utilities expense.

Income taxes

Foreign invested Enterprises, or FIEs, established in the PRC are generally subject to a foreign enterprise income tax, or FEIT, of 33.0%.  In practice, however, most FIEs enjoy preferential FEIT treatments and holidays that result in an effective tax rate that is much lower than the statutory rate of 33.0%.

We are 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 Caina, 15% for Shenzhen New Media and Shenzhen Media and 33% for CMO.  Beijing Media is under a special local income tax rate - pure revenue rate (total revenue x 9%x applied income tax rate), for small company.

On March 16, 2007, the National Peoples Congress of China passed the new Enterprise Income Tax Law, or EIT Law, and on November 28, 2007, the State Council of China passed the Implementing Rules for the EIT Law, or Implementing Rules, which took effect on January 1, 2008.  The EIT Law and Implementing Rules impose a unified EIT of 25.0% on all domestic-invested enterprises and FIEs, unless they qualify under certain limited exceptions.  Therefore, nearly all FIEs are subject to the new tax rate alongside other domestic businesses rather than benefiting from the FEIT, and its associated preferential tax treatments, beginning January 1, 2008.

Despite these pending changes, the EIT Law gives existing FIEs a five-year grandfather period during which they can continue to enjoy their existing preferential tax treatments.  We are expecting that the measures to implement the grandfather period will be enacted by the Chinese government in the coming months and will assess what the impact of the new regulations are at that time.  The discontinuation of any such special or preferential tax treatment or other incentives would have an adverse affect on any organizations business, fiscal condition and current operations in China.

In addition to the changes to the current tax structure, under the EIT Law, an enterprise established outside of China with de facto management bodies within China is considered a resident enterprise and will normally be subject to an EIT of 25.0% on its global income.  The Implementing Rules define the term de facto management bodies as an establishment that exercises, in substance, overall management and control over the production, business, personnel, accounting, etc., of a Chinese enterprise.  If the PRC tax authorities subsequently determine that we should be classified as a resident enterprise, then the organizations global income will be subject to PRC income tax of 25.0%.

We incurred income taxes of $35,896 in 2007, while in 2006 we did not incur income taxes in 2006. We paid more tax in 2007 compared to 2006 because of revenues generated by our new subsidiary Shenzhen Caina.

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Net income (profit after taxes)

We earned net income of approximately $2,930,155 million in fiscal year 2007.  This is a decrease of $135,407 million or approximately 4.5%from fiscal year 2006 net income of $3.07 million.  The decrease in our 2007 net income resulted was mainly due to the increase of payroll expense and other general and administrative expenses.

Liquidity and Capital Resources

As of December 31, 2007, we had a cash balance of $1,548,602 and net current assets of $1,208,686.

On December 13, 2007, Shenzhen New Media entered into the Shanghai Longcom Agreement with Shanghai Longcom, pursuant to which Shenzhen New Media paid RMB 40,000,000 (approximately $5.48 million) to Shanghai Longcom as a deposit in exchange for the operation and management rights over Shanghai Longcoms business under the Shanghai Longcom Agreement.

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, 2007, 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.

Inflation

Our 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 2007, the value of RMB against US dollars appreciated by 10.7%, from RMB8.1/$1 to RMB 7.29/$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:

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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 RecognitionWe recognize magazine sales revenue in accordance with the provisions of SFAS 48, "Criteria for Recognizing Revenue When Right of Return Exists,"which states that 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. Estimated returns are based on historical data but require significant judgment on the part of management.

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.

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 State Administration of Foreign Exchange. Dividend payments are restricted to 85% of profits, after tax.

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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.

None.

ITEM 8A(T) . CONTROLS AND PROCEDURES.

Disclosure Controls and Procedures

We maintain disclosure controls and procedures (as defined in Rule 13a-15(e) under the Exchange Act) that are designed to ensure that information that would be required to be disclosed in Exchange Act reports is recorded, processed, summarized and reported within the time period specified in the SECs rules and forms, and that such information is accumulated and communicated to our management, including to our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.

As required by Rule 13a-15 under the Exchange Act, our management, including Mr. Yingsheng Li and Ms. Yifang Fu, our Chief Executive Officer and our then Chief Financial Officer, evaluated the effectiveness of the design and operation of our disclosure controls and procedures as of December 31, 2007.  Based on that evaluation, management concluded that because of the significant deficiencies in internal control over financial reporting described below, our disclosure controls and procedures were not effective as of December 31, 2007.

Internal Controls Over Financial Reporting

Managements Annual Report on Internal Control over Financial Reporting.

Section 404 of the Sarbanes-Oxley Act of 2002 requires that management document and test the Companys internal control over financial reporting and include in this Annual Report on Form 10-KSB a report on managements assessment of the effectiveness of our internal control over financial reporting.

Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Rule 13a-15(f) of the Exchange Act.  Since we just recently started the evaluation process of our international controls over financial reporting, we have not completed all of the evaluations necessary to issue guidance on the status of our internal controls.  However, during our assessment of the effectiveness of internal control over financial reporting as of December 31, 2007, management identified the significant deficiencies related to (i) the U.S. GAAP expertise of our internal accounting staff, (ii) our internal audit functions and (iii) the absence of an Audit Committee.

Although our former CFO, Yifang Fu has sufficient knowledge and experience in U.S. GAAP principles, our current accounting department responsible for financial reporting of the Company, on a consolidated basis, is relatively new to U.S. GAAP and the related internal control procedures required of U.S. public companies.  Management has determined that they require additional training and assistance in U.S. GAAP matters.  Management has determined that our internal audit function is also significantly deficient due to insufficient qualified resources to perform internal audit functions.  Finally, management determined that the lack of an Audit Committee of the board of directors of the Company also contributes to insufficient oversight of our accounting and audit functions.

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In order to correct the foregoing material weaknesses, we have taken the following remediation measures:

- We are in a process of arranging necessary training and engaging with external professional accounting or consultancy firms to assist us in the preparation of the US GAAP accounts .
- We have committed to the establishment of effective internal audit functions, however, due to the scarcity of qualified candidates with extensive experience in U.S. GAAP reporting and accounting in the region, we were not able to hire sufficient internal audit resources before end of 2007.  However, we will increase our search for qualified candidates with assistance from recruiters and through referrals.
- In addition, we have allocated significant financial and human resources to strengthen the internal control structure.  As part of our efforts to comply with Section 404 of the Sarbanes-Oxley Act for fiscal year 2008, we are actively working with external consultants to assess our data collection, financial reporting, and control procedures and to strengthen our internal controls over financial reporting.
- We have also launched a search for suitable candidates to serve as our independent directors and to serve on an audit committee and other standing committees in the near future.  We expect to establish these committees within the next 12 months.

We believe that the foregoing steps will remediate the significant deficiency identified above, and we will continue to monitor the effectiveness of these steps and make any changes that our management deems appropriate.

A material weakness (within the meaning of PCAOB Auditing Standard No. 5) is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected on a timely basis. A significant deficiency is a deficiency, or a combination of deficiencies, in internal control over financial reporting that is less severe than a material weakness, yet important enough to merit attention by those responsible for oversight of the company's financial reporting.

Our management is not aware of any material weaknesses in our internal control over financial reporting, and nothing has come to the attention of management that causes them to believe that any material inaccuracies or errors exist in our financial statement as of December 31, 2007.  The reportable conditions and other areas of our internal control over financial reporting identified by us as needing improvement have not resulted in a material restatement of our financial statements. Nor are we aware of any instance where such reportable conditions or other identified areas of weakness have resulted in a material misstatement of omission in any report we have filed with or submitted to the Commission.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies and procedures may deteriorate.

This annual report does not include an attestation report of our registered public accounting firm regarding internal control over financial reporting.  Managements report was not subject to attestation by our registered public accounting firm pursuant to temporary rules of the Securities and Exchange Commission that permit us to provide only managements report in this annual report.

Changes in Internal Controls over Financial Reporting.

During the fiscal year ended December 31, 2007, there were no changes in our internal control over financial reporting identified in connection with the evaluation performed 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.

On December 13, 2007, Shenzhen New Media entered into an operation and management agreement, or the Shanghai Longcom Agreement, with Shanghai Longcom Telecom Co., Ltd., or Shanghai Longcom, a company incorporated in the PRC, pursuant to which from March 2008 to March 2009, Shenzhen New Media has exclusive rights to operate and manage the business of Shanghai Longcom.  Shenzhen New Media paid RMB 40,000,000 (approximately $5.48 million) to Shanghai Longcom as a deposit in exchange for such operation and management rights over the business of Shanghai Longcome.  Under the Shanghai Longcom Agreement, Shenzhen New Media is also expected to acquire 100% equity interests in Shanghai Longcom by the end of 2009.  Both parties agreed that the purchase price of acquisition shall be adjusted based on the actual operating results of Shanghai Longcom.  Shanghai Longcom is engaged in the business of online direct marketing, distribution, B2C e-commerce, IT retail and 3 C retail sales model by cooperating with mainstream products OEM/ODM manufacturers.

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The foregoing summary of the material terms and conditions of the operation and Agreement is qualified in its entirety by reference to the Agreement, a copy of which is attached hereto as Exhibit 10.20 and incorporated by reference herein.

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 Officers

The following table sets forth the name, age and position of each of our current executive officers and directors:

|Name          | Age | Position                                                                       
|------------- | --- | -------------------------------------------------------------------------------
|Yingsheng Li  | 47  | President, Chief Executive Officer, Interim Chief Finacial Officer and Chairman
|Bin Li        | 43  | Executive Director                                                             
|Xiaofeng Ding | 36  | Director                                                                       
|Dongsheng Ren | 33  | Director                                                                       

Yingsheng Li has been our Chief Executive Officer, President and Chairman since December 31, 2005.  On March 3, 2008, Mr. Li was appointed as our Interim Chief Financial Officer.  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 Renhas 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 Lihas 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.

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Family Relationships

Except as described below, there are no family relationships among our directors or officers:

Mr. Bin Li, our Executive Director is the brother of our Chief Executive Officer, Mr. Yingsheng Li.

Involvement in Certain Legal Proceedings

To the best of our knowledge, none of our directors or executive officers has been convicted in a criminal proceeding, excluding traffic violations or similar misdemeanors, or has been a party to any judicial or administrative proceeding during the past five years that resulted in a judgment, decree or final order enjoining the person from future violations of, or prohibiting activities subject to, federal or state securities laws (except where not subsequently dismissed without sanction or settlement), or from engaging in any type of business practice, or a finding of any violation of federal or state securities laws.  To the best of our knowledge, no petition under the federal bankruptcy laws or any state insolvency law was filed by or against, or a receiver, fiscal agent or similar officer was appointed by a court for the business or property of any of our directors or officers, or any partnership in which any of our directors or officers was a general partner at or within two years before the time of such filing, or any corporation or business association of which any of our directors or officers was an executive officer at or within two years before the time of such filing.  Except as set forth in our discussion below in Certain Relationships and Related Transactions, and Director Independence, none of our directors, director nominees or executive officers has been involved in any transactions with us or any of our directors, executive officers, affiliates or associates which are required to be disclosed pursuant to the rules and regulations of the SEC.

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 believe that all persons subject to reporting filed the required reports on time in the 2007 fiscal year.

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.  We are in the process of building up the Company website.  Once our website is available, we will make the code of ethics available on the website.  Thereafter, any amendments or waivers to the code of ethics will be posted on our website within four business days of such amendment or waiver. Until such time, however, any amendments or waivers to our code of ethics will be filed with the SEC in a Current Report on Form 8-K.

Nominating Committee

We do not have a standing nominating committee and our entire board of directors currently is responsible for the functions that would otherwise be handled by a nominating committee.  However, we intend to establish a nominating committee of the board of directors as soon as practicable.  We envision that the nominating committee would be primarily responsible for nominating directors and setting policies and procedures for the nomination of directors.  The nominating committee would also be responsible for overseeing the creation and implementation of our corporate governance policies and procedures.

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Audit Committee and Audit Committee Financial Expert

We do not have an audit committee or an audit committee financial expert serving on the audit committee.  Our entire board of directors currently is responsible for the functions that would otherwise be handled by an audit committee.  However, we intend to establish an audit committee of the board of directors as soon as practicable.  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.

Summary Compensation Table  2006 and 2007

The following summary compensation table sets forth the aggregate compensation we paid or accrued to Yingsheng Li, our Chief Executive Officer and Chairman for services rendered in all capacities during the fiscal years 2006 and 2007.  No other executive officers received total compensation in excess of $100,000 in either year.

Name and Principal Position
  Year
  Salary ($)
  Bonus ($)
  Total ($)(1)Yingsheng Li,CEO and Chairman
  2006
  15,404
  281,385(2)
  296,7892007
  19,050
  12,818
  31,868


(1)

Mr. Yingsheng Lis compensation was paid by the Company in RMB.  The dollar amounts in the above table were calculated on the base that $1= RMB 7.79 and $1= RMB 7.2 for years 2006 and 2007, respectively.

(2)

In January 2006, our three directors, Yingsheng Li, Xiaofeng Ding and Dongsheng Ren authorized the payment to themselves in the aggregate amount of $972,754; the payments were originally characterized as a dividend.  Of the total $972,754 declared, $672,592 was paid during 2006.  In July 2007, when the directors realized that the amounts paid were not properly characterized, the board cancelled the remaining payments and recharacterized the 2006 payments as bonuses paid in 2006 for services as directors.

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, 2007.

Employment Agreements

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

We entered into an employment agreement with our Executive Director, Bin Li, on March 1, 2004.  This agreement was renewed on March 1, 2008 for a one-year term ending March 1, 2009.  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 12,000 (approximately, $1,666).

Director Compensation

The following table provides information on the compensation paid by us to our directors for the fiscal year ended on December 31, 2007.  Bonus compensation that Mr. Yingsheng Li, our Chairman and Chief Executive Officer, received for his services as a director is reflected in the summary compensation table above.

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Name
      Fees earned or paid
      All Other
      Totalin Cash ($)
      Compensation
      ($)(1)($)Xiaofeng Ding
      -
      -
      -Dongsheng Ren
      -
      -
      -Bin Li
      22,864
      -
      22,864


(1)

Each of the persons listed in the above table received compensation from the Company in RMB.  The dollar amounts in the above table were calculated on the base that $1= RMB 7.2.

Historically, except for Mr. Bin Li, we have not paid our directors retainer fees or fees for attending meetings of our board of directors but we do reimburse directors for reasonable travel expenses related to attendance at board meetings.  However, we paid a bonus to three of our four directors during 2006.  Mr. Bin Li did not receive a dividend declaration because he did not own any shares in either Media Challenge or the Company at the time the dividend was declared.

In the future, we may adopt a policy of paying independent directors a fee for their attendance at board and committee meetings.  No stock or stock options or other equity incentives were awarded to our directors during the fiscal year ended December 31, 2007.   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, 2008 (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.  Except as otherwise noted, each person listed below is the sole beneficial owner of the shares and has sole investment and voting power as to such shares.  No person listed below has any options, warrants or other rights to acquire additional securities of the Company except as may be otherwise noted.

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.

|Title of Class             | Name and Address                                              | Office, If Any                                                           | Number of Shares Beneficially Owned | Percent of Class
|-------------------------- | ------------------------------------------------------------- | ------------------------------------------------------------------------ | ----------------------------------- | ----------------
|Common Stock, no par value | Yingsheng Li                                                  | President, Chief Executive, Interim Chief Financial Officer and Chairman | 9,958,425                           | 36.10%          
|Common Stock, no par value | Xiaofeng Ding                                                 | Director                                                                 | 6,746,077                           | 24.45%          
|Common Stock, no par value | Dongsheng Ren                                                 | Director                                                                 | 6,103,498                           | 22.13%          
|Common Stock, no par value | Bin Li                                                        | Executive Director                                                       | 0                                   | *               
|Common Stock, no par value | All officers and directors as a group (4 persons named above) |                                                                          | 22,808,000                          | 82.68%          

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* Less than 1%

1Beneficial ownership is determined in accordance with the rules of the SEC and generally includes voting or investment power with respect to securities.

2A total of 27,586,002shares of our common stock are considered to be outstanding pursuant to SEC Rule 13d-3(d)(1) as of April 16, 2008.  For each beneficial owner above, any options or warrants exercisable within 60 days have been included in the denominator.

Changes in Control

We do not currently have any arrangements which if consummated may result in a change of control of our Company.

Securities Authorized for Issuance under Equity Compensation Plans

None.

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

Certain Relationships and Related Transactions

The following includes a summary of transactions since the beginning of the 2007 fiscal year, or any currently proposed transaction, in which we were or are to be a participant and the amount involved exceeded or exceeds $120,000 or one percent of the average of the Company's total assets at year end of 2006 and 2007.  We believe the terms obtained or consideration that we paid or received, as applicable, in connection with the transactions described below were comparable to terms available or the amounts that would be paid or received, as applicable, in arms-length transactions.

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.

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Promoters and Certain Control Persons

We did not have any promoters at any time during the past five fiscal years.

Director Independence

The board of directors is currently composed of four members, Mr. Yingsheng Li, Mr. Xiaofeng Ding, Mr. Dongsheng Ren and Mr. Bin Li.  Neither of them is independent director, 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]                                 
|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. [Incorporated by reference to Exhibit 10.3 to the Annual Report of the Company on Form 10-KSB, filed with the SEC on April 17, 2007, in file number 0-51806]
|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]                                                              

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|10.5  | Equity Transfer Agreement, dated October 10, 2006, by and between Zhu Yu Tong and Shenzhen New Media.  [Incorporated by reference to Exhibit 10.5 to the Annual Report of the Company on Form 10-KSB, filed with the SEC on April 17, 2007, in file number 0-51806]                                                          
|----- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|10.6  | Outsourcing Agreement, dated December 30, 2006, by and between Henan Xinhua Printing Factory and CMO.  [Incorporated by reference to Exhibit 10.6 to the Annual Report of the Company on Form 10-KSB, filed with the SEC on April 17, 2007, in file number 0-51806]                                                          
|10.7  | Outsourcing Agreement, dated December 30, 2006, by and between Henan Xinhua Printing Factory and CMO.  [Incorporated by reference to Exhibit 10.6 to the Annual Report of the Company on Form 10-KSB, filed with the SEC on April 17, 2007, in file number 0-51806]                                                          
|10.8  | Outsourcing Agreement, dated December 16, 2006, by and between Henan Ruiguang Printing Co., Ltd. and CMO.  [Incorporated by reference to Exhibit 10.6 to the Annual Report of the Company on Form 10-KSB, filed with the SEC on April 17, 2007, in file number 0-51806]                                                      
|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]   

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|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]                 
|10.20* | Operation and Management Agreement, dated December 13, 2007, by and beween Shenzhen New Media and Shanghai Longcom Telecom Co., Ltd.                                                                                                                                                                                                
|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]                                                                                                                           
|21*    | List of Subsidiaries of the Registrant                                                                                                                                                                                                                                                                                              
|31*    | Certification of Principal Executive Officer and Principal Financial Officer filed pursuant to Section 302 of the Sarbanes-Oxley Act of 2002*                                                                                                                                                                                       
|32*    | Certifications of Principal Executive Officer and 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

During the fiscal years ended December 31, 2006 and December 31, 2007, fees for services provided by our independent auditor, Child Van Wagoner & Bradshaw, PLLC, were as follows:

32

---



|                   | Year Ended December 31,
|------------------ | -----------------------
|                   | 2006                   
|Audit Fees         | $86,500                
|Audit-Related Fees | 0                      
|Tax Fees           | 0                      
|All Other Fees     | 0                      
|Total              | $86,500                

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.

Pre-Approval Policies and Procedures

Under the Sarbanes-Oxley Act of 2002, all audit and non-audit services performed by our auditors must be approved in advance by our Board to assure that such services do not impair the auditors independence from us. In accordance with its policies and procedures, our Board pre-approved the audit and non-audit service performed by our auditor for our consolidated financial statements as of and for the year ended December 31, 2007.







33

---



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.         
|--------------------- | ---------------------------------------------
|                      |                                              
|Dated: April 18, 2008 | By:                                          
|                      | Yingsheng Li, 
CEO, President and Interim CFO

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.

Each person whose signature appears below hereby authorizes Yingsheng Li as attorneys-in-fact to sign on his behalf, individually, and in each capacity stated below, and to file all amendments and/or supplements to this annual report on Form 10-KSB.

|SIGNATURE                      | CAPACITY                                        | DATE          
|------------------------------ | ----------------------------------------------- | --------------
|                               |                                                 |               
|/s/Yingsheng Li
  Yingsheng Li | President, Chief Executive Officer and Chairman | April 18, 2008
|/s/Bin Li
Bin Li               | Executive Director                              | April 18, 2008
|/s/Xiaofeng Ding
Xiaofeng Ding | Director                                        | April 18, 2008
|/s/Dongsheng Ren
Dongsheng Ren | Director                                        | April 18, 2008



34

---









CHINA MARKETING MEDIA HOLDINGS, INC.

CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2007 AND 2006







F-1

---

CHINA MARKETING MEDIA HOLDINGS, INC. 
INDEX TO CONSOLIDATED FINANCIAL STATEMENTSPAGEREPORT OF INDEPENDENT
    REGISTERED PUBLIC ACCOUNTING FIRM
    F-3CONSOLIDATED BALANCE
    SHEETS
    F-4CONSOLIDATED
    STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME
    F-5CONSOLIDATED
    STATEMENTS OF CHANGES IN STOCKHOLDERS EQUITY
    F-6CONSOLIDATED
    STATEMENTS OF CASH FLOWS
    F-7NOTES TO CONSOLIDATED
    FINANCIAL STATEMENTS
    F-8-F-19



F-2

---

Report of Independent Registered Public
              Accounting FirmTo 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, 2007 and
    2006, 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, 2007 and
    2006, 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 14, 2008

---

CHINA MARKETING MEDIA HOLDINGS, INC. 
CONSOLIDATED BALANCE SHEETS

|                                                                | December 31, |            | December 31,
|--------------------------------------------------------------- | ------------ | ---------- | ------------
|                                                                |              | 2007       |             
|                                                                |              |            |             
|ASSETS                                                          |              |            |             
|CURRENT ASSETS                                                  |              |            |             
|Cash and cash equivalents                                       | $            | 1,548,602  | $           
|Accounts receivable                                             |              | 90,280     |             
|Prepaid expenses                                                |              | 289,381    |             
|Settlement receivable                                           |              | -          |             
|TOTAL CURRENT ASSETS                                            |              | 1,928,263  |             
|OTHER ASSETS                                                    |              |            |             
|Due from directors                                              |              | -          |             
|Investment Deposit - purchase of targets                        |              | 5,476,001  |             
|Deferred tax asset                                              |              | 34,154     |             
|Loan receivables to major sales agents                          |              | 58,949     |             
|Investment (equity method)                                      |              | 370,376    |             
|Related party receivables - affiliates                          |              | 1,842,795  |             
|Other receivable                                                |              | 133,597    |             
|Goodwill                                                        |              | 760,478    |             
|Other assets                                                    |              | 149,064    |             
|Fixed assets                                                    |              | 1,513,818  |             
|Accumulated depreciation                                        |              | (191,887)  |             
|License agreement                                               |              | 1,383,964  |             
|Accumulated amortization                                        |              | (576,651)  |             
|TOTAL OTHER ASSETS                                              |              | 10,954,658 |             
|TOTAL ASSETS                                                    | $            | 12,882,921 | $           
|LIABILITIES AND
    STOCKHOLDERS' EQUITY                        |              |            |             
|CURRENT LIABILITIES                                             |              |            |             
|Accounts payable                                                |              | 74,762     | $           
|Accrued expenses and levies                                     |              | 275,780    |             
|Deferred revenues                                               |              | 250,621    |             
|Other payable                                                   |              | 49,664     |             
|Taxes payable                                                   |              | 49,228     |             
|Dividend payable                                                |              | -          |             
|TOTAL CURRENT
    LIABILITIES                                   |              | 700,055    |             
|Long-term debt - related party (affiliate) see
    note 7       |              | -          |             
|TOTAL LIABILITIES                                               |              | 700,055    |             
|Minority Interest                                               |              | 281,606    |             
|STOCKHOLDERS' EQUITY                                            |              |            |             
|Common stock: no par value; 100,000,000 common
    shares       |              | 1,112,546  |             
|authorized; 27,586,002 common shares issued and
    outstanding |              |            |             
|Retained earnings                                               |              | 9,785,181  |             
|Accumulated other comprehensive income                          |              | 1,003,533  |             
|TOTAL STOCKHOLDERS'
    EQUITY                                  |              | 11,901,260 |             
|TOTAL LIABILITIES
    AND STOCKHOLDERS' EQUITY                  | $            | 12,882,921 | $           

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,
|---------------------------------------------- | - | -----------------------
|                                               |   | 2007                   
|                                               |   |                        
|Revenues                                       |   |                        
|Sales revenue                                  | $ | 9,735,841              
|Cost of goods sold                             |   | 3,331,653              
|Gross profit                                   |   | 6,404,188              
|                                               |   |                        
|Expenses                                       |   |                        
|Amortization and depreciation                  |   | 140,207                
|Advertising and promotion                      |   | 184,859                
|Payroll expenses                               |   | 1,423,251              
|Legal and professional fees                    |   | 251,462                
|Other general and administrative               |   | 1,499,385              
|Total expenses                                 |   | 3,499,164              
|                                               |   |                        
|Income from
    operations                     |   | 2,905,024              
|                                               |   |                        
|Other income
    (expenses)                    |   |                        
|Interest income (expense)                      |   | 48,297                 
|Investment loss from unconsolidated subsidiary |   | (49,916)               
|Other                                          |   | 15,692                 
|Total other income
    (expenses)              |   | 14,073                 
|                                               |   |                        
|Net income before
    taxes                    |   | 2,919,097              
|Provision for income taxes                     |   | 35,896                 
|                                               |   |                        
|Net income before
    minority interest        |   | 2,883,201              
|Less minority interest (loss)                  |   | (46,954)               
|Net Income                                     | $ | 2,930,155              
|Foreign currency translation adjustment        |   | 675,112                
|                                               |   |                        
|Comprehensive
    income                       | $ | 3,605,267              
|                                               |   |                        
|Basic and fully
    diluted earnings per share | $ | 0.11                   
|Weighted average
    shares 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     |   | Stocks    |   | Earnings  |                   | Income        |       | Equity    
|                                 |            |   |           |   |           |                   |               |       |           
|January 1, 2006                  | 27,586,002 | $ | 1,112,546 | $ | 3,789,464 | $                 | 96,869        | $     | 4,998,879 
|Net income                       |            |   |           |   | 3,065,562 |                   |               |       | 3,065,562 
|Foreign currency
    translation |            |   |           |   |           |                   | 231,552       |       | 231,552   
|                                 |            |   |           |   |           |                   |               |       |           
|December 31, 2006                | 27,586,002 | $ | 1,112,546 | $ | 6,855,026 | $                 | 328,421       | $     | 8,295,993 
|Net income                       |            |   |           |   | 2,930,155 |                   |               |       | 2,930,155 
|Foreign currency
    translation |            |   |           |   |           |                   | 675,112       |       | 675,112   
|                                 |            |   |           |   |           |                   |               |       |           
|Balance December 31,
    2007    | 27,586,002 | $ | 1,112,546 | $ | 9,785,181 | $                 | 1,003,533     | $     | 11,901,260

See accompanying notes to consolidated financial statements







F-6

---



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

|                                                                        | December 31, 2007 | December 31, 2006
|----------------------------------------------------------------------- | ----------------- | -----------------
|Cash flow from
    operating activities:                                |                   |                  
|Net income                                                              | $                 | 2,930,155        
|Adjustments to reconcile net income to cash
    provided by operations: |                   |                  
|Minority interest                                                       |                   | (46,954)         
|Amortization and depreciation                                           |                   | 273,834          
|Loss on disposals of fixed assets                                       |                   | -                
|Investment (gain) loss (equity method)                                  |                   | 49,916           
|Change in operating assets and liabilities:                             |                   |                  
|Accounts receivable                                                     |                   | 65,819           
|Settlement receivable                                                   |                   | 356,093          
|Deposits                                                                |                   | -                
|Due from major sales agent                                              |                   | 435,157          
|Deferred tax asset                                                      |                   | (32,977)         
|Prepaid expenses                                                        |                   | (33,234)         
|Other asset                                                             |                   | 90,047           
|Accounts payable                                                        |                   | 34,518           
|Accrued expenses                                                        |                   | 38,703           
|Other payable                                                           |                   | (100,067)        
|Taxes payable                                                           |                   | (53,149)         
|Deferred revenues                                                       |                   | 145,372          
|Net cash provided
    by operations                                     |                   | 4,153,233        
|Cash flow from
    investing activities:                                |                   |                  
|Cash acquired from subsidiary                                           |                   | 116,119          
|Receipts from directors                                                 |                   | 955,649          
|Loan receivable from affiliate                                          |                   | (105,846)        
|Deposits to acquire target company                                      |                   | (5,476,001)      
|Purchase of fixed assets                                                |                   | (157,022)        
|Advance to unconsolidated entity                                        |                   | (198,274)        
|Net cash used in
    investing activities                               |                   | (4,865,375)      
|Cash flow from
    financing activities:                                |                   |                  
|Repayment of payable to affiliate                                       |                   | (3,607,259)      
|Capital contribution from minority interest                             |                   | 328,560          
|Net cash used in
    financing activities                               |                   | (3,278,699)      
|Increase (decrease) in
    cash and cash equivalents                    |                   | (3,990,841)      
|                                                                        |                   |                  
|Effect on rate changes
    on cash                                      |                   | 411,603          
|Cash and cash
    equivalents, beginning of period                      |                   | 5,127,840        
|Cash and cash
    equivalents, end of period                            | $                 | 1,548,602        
|Supplemental
    disclosures of cash flow information:                  |                   |                  
|Interest paid in cash                                                   | $                 | -                
|Income taxes paid in cash                                               | $                 | 62,696           
|Non-Cash investing
    and financing activities                         |                   |                  
|Dividend payable offset by related party
    receivable                 | $                 | 300,974          
|Deposit conversion to subsidiary                                        | $                 | 1,095,200        

See accompanying notes to consolidated financial statements

F-7

---



CHINA MARKETING MEDIA HOLDINGS, INC 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1.

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
22,808,002 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.

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., 122,100USD (exchange
rate as 1USD: 8.19 RMB).

On March 26, 2007, the Company acquired 100% of Shenzhen
Caina Brand Consultant Company ("Shenzhen Caina"). Shenzhen Caina owned 100% of
Beijing Caina Xianliang Marketing and Layout Company. After the acquisition,
Shenzhen New Media owned 100% of Shenzhen Caina and Beijing Caina. Both Shenzhen
Caina and Beijing Caina provide consulting services to clients concerning
advertising and marketing matters.

In November 2007, Shenzhen Media formed a new 52% owned
subsidiary in PRC known as Beijing Orient Converge Human Resources Management
Center Co. Ltd.( "BJOC"). The registered capital of BJOC is RMB5,000,000
i.e.,684,500USD (exchange rate as 1USD: 7.30 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.

F-8

---



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

2. Basis of Presentation

The consolidated financial statements include the accounts of
China Marketing, Media Challenge, Shenzhen New Media, Shenzhen Media, Beijing
Media, NMA, Shenzhen Caina, Beijing Caina and BJOC. All material intercompany
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 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.

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

The Company publishes three issue magazines each month,
(namely Sale edition, Channel edition and Case edition) of "China Marketing" and
other special editions periodically, for example, "China Business & Trade" 
(Training edition).

F-9

---



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

3.

The Company recognizes revenues for the advertising sales and consulting
service ratably over the periods when the customers advertisements are
published and service are provided. Total revenue from the advertising sales is
$5,882,432 and $6,932,594 for the years ended December 31, 2007 and 2006,
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 $1,388,547 and
$1,450,493 for the years ended December 31, 2007 and 2006, respectively.

Property, Plant and Equipment

Property, plant and equipment are carried at cost less
accumulated depreciation. Depreciation is provided over their estimated useful
lives, using the straight-line method. Estimated useful lives of the plant and
equipment are as follows:

|Buildings                   | 20 years
|--------------------------- | --------
|Vehicle                     | 5 years 
|Furniture and
    equipment | 5 years 
|Computer equipment          | 5 years 

Depreciation expense for the years ended December 31, 2007
and 2006 was $140,207 and $106,338, respectively.

|At cost                            |   | 2007      |   | 2006     
|---------------------------------- | - | --------- | - | ---------
|Building                           | $ | 969,717   | $ | 916,060  
|Motor vehicles                     |   | 119,803   |   | 119,056  
|Furniture and
    equipment        |   | 424,298   |   | 82,387   
|                                   | $ | 1,513,818 | $ | 1,117,503
|Less: accumulated
    depreciation |   | (191,887) |   | ( 53,699)
|                                   | $ | 1,321,993 | $ | 1,063,804

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, "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, 2007 and 2006.

F-10

---



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

3. Summary of Significant Accounting Policies
(continued)

License amortization expense included in cost of sales for
the years ended December 31, 2007 and 2006 was $133,627 and $126,842,
respectively.

Goodwill on acquisition of subsidiaries

On March 26, 2007, the Company acquired 100% of Shenzhen
Caina, an entity formerly owned by an individual not related to the Company.
Shenzhen Caina owns 100% of Beijing Caina. After acquisition, Shenzhen New Media
owns 100% of Shenzhen Caina and Beijing Caina. Both Shenzhen Caina and Beijing
Caina provide consulting services to clients regarding advertising and marketing
matters. Goodwill on acquisition of the above-mentioned subsidiaries was
calculated as follows:

|                                                       |   | RMB         |   | USD      
|------------------------------------------------------ | - | ----------- | - | ---------
|Purchase consideration                                 | ¥ | 8,000,000   | $ | 1,095,200
|Less: Net assets at fair value                         |   |             |   | -        
|Cash and cash equivalents                              |   | 848,200     |   | 116,119  
|Accounts receivable                                    |   | 934,000     |   | 127,865  
|Prepaid expenses                                       |   | 110,236     |   | 15,091   
|Deposit                                                |   | 248,532     |   | 34,024   
|Settlement receivable                                  |   |             |   | -        
|Others                                                 |   | 544,100     |   | 74,487   
|Related party receivable                               |   | 1,180,920   |   | 161,668  
|Fixed assets                                           |   | 1,365,173   |   | 186,892  
|Accumulated depreciation                               |   | (142,390)   |   | (19,493) 
|Accrued expenses and levies                            |   | (1,409,544) |   | (192,967)
|Other payable                                          |   | (1,066,164) |   | (145,958)
|Taxes payable                                          |   | (168,051)   |   | (23,006) 
|Net assets acquired                                    | ¥ | 2,445,013   | $ | 334,722  
|Goodwill on acquisition                                | ¥ | 5,554,987   | $ | 760,478  
|Acquisition of subsidiaries (net of cash
    acquired) | ¥ | 7,151,800   | $ | 979,081  

Investment (equity method)

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.

Balance as of Dec.31, 2005
      $
      78,555Investment Losses (48%)
      
      (41,835)Advances made to SKTC
      
      166,031Balance as of Dec.31, 2006
      
      202,751Investment Losses (48%)
      
      (49,916)Advances made to SKTC
      
      217,541Balance as of Dec.31, 2007
      
      370,376


F-11

---



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

3. Summary of Significant Accounting Policies
(continued)

Minority Interest

Minority interest represents non-controlling owners 48% of
equity in BJOC.

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, 2007 was
12.41%. and for 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.

F-12

---



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

3. Summary of Significant Accounting Policies
(continued)

Advertising and Promotion Expense

Advertising and promotion costs are expensed as incurred. The
Company incurred $184,859 and $36,452 of advertising and promotion costs for the
years ended December 31, 2007 and 2006 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,
|------------------------------------------------------- | - | -----------------------
|                                                        |   | 2007                   
|NUMERATOR FOR BASIC
    AND DILUTED EPS                 |   |                        
|Net income to common stockholders                       | $ | 2,930,155              
|                                                        |   |                        
|DENOMINATORS FOR BASIC
    AND DILUTED EPS              |   |                        
|Weighted average shares of common stock
    outstanding |   | 27,586,002             
|EPS - Basic and
    Diluted                             | $ | 0.11                   

Approximately 64% 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 25% 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 would occur on the Company sales if any of the distributing agents
were lost.

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-13

---



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

3. Summary of Significant Accounting Policies
(continued)

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 2007, one of the companys subsidiaries, NMA, which has
accounted for most of the revenues, is exempt from taxes at the national level.

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 deferred tax assets of $34,154 and $0as of December 31,
2007 and 2006, respectively.

Fair Value of Financial Instruments

Statement of Financial Accounting Standards No.107
"Disclosures About Fair Value of Financial Instruments", requires that the
Company disclose estimated fair values of financial instruments. The carrying
amounts of reported current assets and current liabilities approximate their
fair value because of short maturity of theses instrument and market rates of
interest.

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 direct and
indirect 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. Loan Receivable with Major Sales Agents

The Company had loans receivable amounting to $58,949 and
$604,853 as of December 31, 2007 and 2006, 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-14

---



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

5. 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, 2007 and 2006, prepaid balance under these
arrangements totaled $289,381 and $192,574, respectively.

6. Investment Deposit  purchase of a target company

On December 13, 2007, Shenzhen New Media signed an agreement
with Shanghai Longcom Telecom Co. Ltd. ("Longcom") for an acquisition of 100%
operation rights in Shanghai Longcom Telecom Co. Ltd. Shenzhen New Media paid
RMB 40,000,000 (approximately $5,476,001) as a purchase deposit. Longcom is
engaged in online direct marketing, distribution, B2C (business to consumer)
e-commerce, IT retail and 3 C (computer, communication and consumer products)
retail sales model by cooperating with mainstream products OEM / ODM
manufacturers.

On October 30, 2006, Shenzhen New Media entered into an
Equity Transfer Agreement with Shenzhen Caina to acquire 100% shares ownership
from its sole owner, Mr. Zhu Yu Tong. The Company paid RMB 8,000,000
(US$1,024,590) as the purchase deposit to Mr. Zhu Yu Tong. The legal
registration was complete in March 2007.

The following pro forma information is presented on a
consolidated basis as if the acquisition took place at the beginning of the
period presented.

|                                                                                      |   | Year
    ended     |                   | Year
    ended
|------------------------------------------------------------------------------------- | - | ------------------ | ----------------- | --------------
|                                                                                      |   | March
    30, 2007 | December 31, 2006
|Revenue                                                                               | $ | 10,190,438         | $                 | 9,540,757     
|Income before
    extraordinary items and the cumulative effect of accounting changes |   | 2,964,226          |                   | 3,268,860     
|Net income                                                                            |   | 2,964,226          |                   | 3,268,860     
|Earnings per share                                                                    |   | 0.11               |                   | 0.12          

7.

Zhengzhou Magazine Publishing House ("CMO"), an affiliate
owned by the PRC government, is controlled and directed by a common director and
major shareholder of the Company. CMO is not a direct or indirect subsidiary of
the Company. Transactions with CMO are listed as follows:

|                                                  | December 31, 2006 | December 31, 2007
|------------------------------------------------- | ----------------- | -----------------
|                                                  |                   |                  
|Contract receivable                               | $                 | 790,851          
|Less: Payable, zero
    interest rate             |                   | 2,364,673        
|Net balance amount due
    to CMO,                |                   |                  
|Balance due on August
    18, 2008, zero interest | $                 | (1,573,822)      

Operation and Management Right Agreement

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.

F-15

---



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

7. Related Party Transactions with an Affiliate
(continued)

Shenzhen Media shall bear all the operating costs and receive
all the revenues from the contracted businesses.

Shenzhen Caina Corporate Image Consulting and Design Company
is an affiliate owned and controlled by Mr. Zhu Yuhong, brother of Mr. Zhu Yu
Tong. Shenzhen Caina loaned $104,044 to Shenzhen Caina Corporate Image
Consulting and Design Company to develop businesses for Shenzhen Caina.

Related party balance as of December 31, 2007 as follows:

|                                                              | Twelve months ended | Twelve months ended
|------------------------------------------------------------- | ------------------- | -------------------
|                                                              | December 31, 2007   | December 31, 2006  
|Loan receivable - CMO                                         | $                   | 1,738,751          
|Loan receivable - Shenzhen Caina Brand Consultant
    Company |                     | 104,044            
|Total of related party receivables                            | $                   | 1,842,795          

The above loans are unsecured, and bear no interest. These
loans have no fixed payment schedule and are payable on demand.

8. 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 $925,944 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.

9. Income Taxes Expense

Income Taxes

United States

The Company was incorporated in the
United States of America and is subject to U.S. tax law. No provisions for
income taxes have been made as the Company has no U. S. taxable income for the
years presented. The applicable income tax rates for the Company for the years
ended December 31, 2007 and 2006 are 34% .

British Virgin Islands

Media Challenge was incorporated in
the British Virgin Islands and is not subject to income taxes under the current
laws of the British Virgin Islands.

PRC

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, 2007 and 2006 was
$35,896 and $0, 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. Other subsidiaries income tax
rate range from 0% to 33%.

F-16

---



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

9. Income Taxes Expense (continued)

a) The provision for income taxes consists of the following:

|                             |   | Year Ended
|---------------------------- | - | ----------
|                             |   | 2007      
|PRC:                         |   |           
|Current Tax                  | $ | 70,050    
|- Deferral tax
    provision |   | (34,154)  
|                             |   |           
|Total                        | $ | 35,896    

The amount represents the difference of the provision for PRC
enterprise income tax calculated at the one of subsidiarys standard income tax
rate of 15%.

b) Deferred taxes result from temporary difference relating
to items that are expensed/recognized as revenue for financial reporting, but
are not currently deductible/taxable for income tax purpose. Significant
components of our deferred tax assets and deferred tax liabilities as at
December 31, 2007 and 2006 are as follows:

|                              | December 31, 2007 | December
    31,2006
|----------------------------- | ----------------- | --------------------
|                              |                   | USD                 
|Deferred tax assets:          |                   |                     
|Deferred Revenue              | $                 | 36,207              
|Deferred tax
    liabilities: |                   |                     
|Accrued expense               |                   | 1,873               
|Valuation allowance           |                   | -                   
|Net deferred tax asset        | $                 | 34,154              

10. Lease Commitments

The Company leases four office spaces located at Room
101-114, Jinglian Garden, Jingtian Road, Futian District, Shenzhen, 518000, PRC,
Room 903-905, Kun Tai International Mansion, Chao Wai Street, Beijing, 100020,
PRC and 4A602 Houxiandai City, No.16 Baiziwan Rd., Beijing, 100200, PRC, 7th
Floor, Building 1 , Qinghua Post-graduation school of Qinghua University,
Guanghua Road, Beijing,100020, PRC., Room 556 Shenchang Building, No.51 Zhichun
Rd., Haidian District, Beijing, PRC.

These leases require monthly payments as of following: a
monthly payment of $16,136 from November 2007 to November 2009, a monthly
payment of $4,756 from September 2007 to August 2009, a monthly payment of
$3,817 from November 2007 to October 2008, a monthly payment of 10,889 from May
2007 to June 2009 and a monthly payment of $330 from November 2007 to November
2008, respectively.

The future lease commitment for the office lease is $430,643
and $207,472 for year 2008 and year 2009 respectively.

11. 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

F-17

---



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

11. Concentrations and Risk (continued)

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.

12. 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.

13. Common Stock

On February 10, 2006 the Company effected a 1:10 reverse
stock split, after which it issued the 22,808,002 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.

14. Recent Accounting Pronouncements

In December, 2007, the Financial Accounting Standards Board (FASB)
issued Statement of Financial Accounting Standards (SFAS) No. 141 (revised
2007), "Business Combinations" (hereinafter "SFAS No. 141 (revised 2007)"). This
statement establishes principles and requirements for how an acquirer a)
recognizes and measures in its financial statements the identifiable assets
acquired, the liabilities assumed and any noncontrolling interest in the
acquiree, b) recognizes and measures the goodwill acquired in the business
combination or a gain from a bargain purchase and c) determines what information
to disclose to enable users of the financial statements to evaluate the nature
and financial effects of the business combination. The scope of SFAS No. 141
(revised 2007) is broader than the scope of SFAS No. 141, which it replaces. The
effective date of SFAS No. 141 (revised 2007) is for all acquisitions in which
the acquisition date is on or after the beginning of the first annual reporting
period beginning on or after December 15, 2008. The adoption of this statement
has no immediate material effect on the Company's consolidated financial
condition or results of operations.

In December, 2007, the FASB issued SFAS No. 160, "Noncontrolling
Interests in Consolidated Financial Statements - an amendment of ARB No. 51"
(hereinafter "SFAS No. 160"). This statement establishes accounting and
reporting standards that require a) the ownership interests in subsidiaries held
by parties other than the parent be clearly identified, labeled and presented in
the consolidated statement of financial position with equity, but separate from
the parent's equity, b) the amount of consolidated net income attributable to
the parent and to the noncontrolling interest be clearly identified and
presented on the face of the consolidated statement of income, c) changes in a
parent's ownership interest while the parent retains its controlling financial
interest in its subsidiary be accounted for consistently, d) when a subsidiary
is deconsolidated, any retained noncontrolling equity investment in the former
subsidiary be initially measured at fair value and e) entities provide
sufficient disclosures that clearly identify and distinguish between the
interests of the parent and theinterests of the noncontrolling owners.
The effective date of this standard is for fiscal years and interim periods
beginning on or after December 15, 2008. The adoption of this statement had no
immediate material effect on the Company's consolidated financial condition or
results of operations.

F-18

---



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

14. Recent Accounting Pronouncements (continued)

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.







F-19

---



|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. [Incorporated by reference to Exhibit 10.3 to the Annual Report of the Company on Form 10-KSB, filed with the SEC on April 17, 2007, in file number 0-51806]
|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.  [Incorporated by reference to Exhibit 10.5 to the Annual Report of the Company on Form 10-KSB, filed with the SEC on April 17, 2007, in file number 0-51806]                                                                                        
|10.6        | Outsourcing Agreement, dated December 30, 2006, by and between Henan Xinhua Printing Factory and CMO.  [Incorporated by reference to Exhibit 10.6 to the Annual Report of the Company on Form 10-KSB, filed with the SEC on April 17, 2007, in file number 0-51806]                                                                                        
|10.7        | Outsourcing Agreement, dated December 30, 2006, by and between Henan Xinhua Printing Factory and CMO.  [Incorporated by reference to Exhibit 10.6 to the Annual Report of the Company on Form 10-KSB, filed with the SEC on April 17, 2007, in file number 0-51806]                                                                                        
|10.8        | Outsourcing Agreement, dated December 16, 2006, by and between Henan Ruiguang Printing Co., Ltd. and CMO.  [Incorporated by reference to Exhibit 10.6 to the Annual Report of the Company on Form 10-KSB, filed with the SEC on April 17, 2007, in file number 0-51806]                                                                                    



---



|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]
|------ | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|10.20* | Operation and Management Agreement, dated December 13, 2007, by and beween Shenzhen New Media and Shanghai Longcom Telecom Co., Ltd.                                                                                                                                                                               
|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]                                                                                                          
|21*    | List of Subsidiaries of the Registrant                                                                                                                                                                                                                                                                             
|31*    | Certification of Principal Executive Officer and Principal Financial Officer filed pursuant to Section 302 of the Sarbanes-Oxley Act of 2002*                                                                                                                                                                      
|32*    | Certifications of Principal Executive Officer and 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.











---