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UNITED STATESSECURITIES AND EXCHANGE COMMISSIONWashington, D.C.
20549

FORM 10-K

[X]  ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934

For the fiscal year ended: December 31, 2010

OR

[   ]   TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934

For the transition period from __________to ____________

Commission File Number: 000-51806

CHINA MARKETING MEDIA HOLDINGS, INC.
(Exact name of registrant as specified in its
charter)

|Texas                           | 76-0641113                             
|------------------------------- | ---------------------------------------
|(State or other jurisdiction of | (I.R.S. Employer Identification Number)
|incorporation or organization)  |                                        

RMA 901KunTai International Mansion No. 12 Chaowai
Street Beijing, 100020, China(Address of principal executive
office and zip code)

(86)10-59251090(Registrants telephone number,
including area code)

Securities registered pursuant to Section 12(b) of the Act:
None.

Securities registered pursuant to Section 12(g) of the Act:
Common Stock, no par value

Indicate by check mark if the registrant is a well-known
seasoned issuer, as defined in Rule 405 of the Securities Act. Yes [   ]         No [ x
]

Indicate by check mark if the registrant is not required to file
reports pursuant to Section 13 or Section 15(d) of the Act. Yes [   ]         No [ x ]

Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.Yes [ x ]         No [   ]

Indicate by check mark whether the registrant has submitted
electronically and posted on its corporate Website, if any, every Interactive
Data File required to be submitted and posted pursuant to Rule 405 of Regulation
S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such
shorter period that the registrant was required to submit and post such
files).Yes [   ]         No [   ]

---

Indicate by check mark if disclosure of delinquent filers
pursuant to Item 405 of Regulation S-K is not contained herein, and will not 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-K
or any amendment to this Form 10-K. [   ]

Indicate by check mark whether the registrant is a large
accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller
reporting company. See the definitions of large accelerated filer,
accelerated filer and smaller reporting company in Rule 12b-2 of the
Exchange Act.

|Large Accelerated Filer [   ]                                                        | Accelerated Filer [   ]        
|------------------------------------------------------------------------------------ | -------------------------------
|                                                                                     |                                
|Non-Accelerated Filer [   ] 
    (Do not check if a smaller
      reporting company) | Smaller reporting company [ x ]

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

As of June 30, 2010 (the last business day of the registrants
most recently completed second fiscal quarter), the aggregate market value of
the shares of the registrants common stock held by non-affiliates (based upon
the closing price of such shares as reported on the Over-the-Counter Bulletin
Board) was approximately $15.8 million.

There were a total of 28,686,002 shares of the registrants
common stock outstanding as of March 23, 2011.

DOCUMENTS INCORPORATED BY REFERENCE

None.

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CHINA MARKETING MEDIA HOLDINGS, INC.

Annual Report on FORM 10-KFor the Fiscal Year
Ended December 31, 2010

|Number   |                                                                                                                           | Page
|-------- | ------------------------------------------------------------------------------------------------------------------------- | ----
|PART I  
|Item 1.  | Business.                                                                                                                 | 2   
|Item 1A. | Risk Factors.                                                                                                             | 10  
|Item 2.  | Properties.                                                                                                               | 13  
|Item 3.  | Legal Proceedings.                                                                                                        | 16  
|Item 4.  | [Removed and
      Reserved].                                                                                             | 16  
|PART II 
|Item 5.  | Market for Registrants
      Common Equity, Related Stockholder Matters and Issuer Purchases of Equity
      Securities. | 17  
|Item 6.  | Selected Financial Data.                                                                                                  | 18  
|Item 7.  | Managements
      Discussion and Analysis of Financial Condition and Results of Operations.                              | 18  
|Item 8.  | Financial Statements and Supplementary Financial Data.                                                                    | 24  
|Item 9.  | Changes in and
      Disagreements With Accountants on Accounting and Financial Disclosure.                               | 25  
|Item 9A. | Controls and Procedures.                                                                                                  | 25  
|Item 9B. | Other
      Information.                                                                                                  | 25  
|PART III
|Item 10. | Directors,
      Executive Officers and Corporate Governance.                                                             | 27  
|Item 11. | Executive Compensation.                                                                                                   | 29  
|Item 12. | Security
      Ownership of Certain Beneficial Owners and Management and Related
      Stockholder Matters                | 31  
|Item 13. | Certain Relationships and Related Party Transactions, and
      Director Independence.                                    | 32  
|Item 14. | Principal
      Accountant Fees and Services.                                                                             | 32  
|PART IV 
|Item 15. | Exhibits,
      Financial Statements Schedules.                                                                           | 34  

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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 Securities Act of 1933, as
amended; and (viii) Exchange Act are to the Securities Exchange Act of 1934,
as amended.

FORWARD-LOOKING STATEMENTS

Statements contained in this annual report include
forward-looking statements within the meaning of such term in Section 27A of
the Securities Act and Section 21E of the Exchange Act. Forward-looking
statements involve known and unknown risks, uncertainties and other factors
which could cause actual financial or operating results, performances or
achievements expressed or implied by such forward-looking statements not to
occur or be realized. Forward-looking statements made in this Report generally
are based on our best estimates of future results, performances or achievements,
predicated upon current conditions and the most recent results of the companies
involved and their respective industries. Forward-looking statements may be
identified by the use of forward-looking terminology such as may, will,
could, should, project, expect, believe, estimate, anticipate,
intend, continue, potential, opportunity or similar terms, variations of
those terms or the negative of those terms or other variations of those terms or
comparable words or expressions. Potential risks and uncertainties include,
among other things, such factors as:

- the recent credit crisis and turmoil in the global financial system
- strong competition in our industry;
- our significant reliance on the operation and management right agreement
  between us and Sale and Marketing Publishing House, or CMO; and
- significant deficiency in our internal controls over our financial
  reporting.

Additional disclosures regarding factors that could cause our
results and performance to differ from results or performance anticipated by
this annual report are discussed in Item 1A. Risk Factors. Readers are urged
to carefully review and consider the various disclosures made by us in this
annual report and our other filings with the SEC. These reports attempt to
advise interested parties of the risks and factors that may affect our business,
financial condition and results of operations and prospects. The forward-looking
statements made in this annual report speak only as of the date hereof and we
disclaim any obligation to provide updates, revisions or amendments to any
forward-looking statements to reflect changes in our expectations or future
events.

1

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PART I

ITEM
1.           BUSINESS

Overview

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. 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, providing sales and marketing
consulting services and online sales of various consumer products. All of our
operations, assets, personnel, officers and directors are located in China.
Currently, we publish China Marketingmagazine in China. We publish three
issues of China Marketingper month, including a sales edition, case
edition and channel edition. In October 2010, we added a new issue called
Career Development Edition. In June 2009, we began to publish eight special
issues of China Marketing, which include cosmetic edition, food edition,
gift edition, tobacco edition, finance edition, sporting goods edition, edition
for agricultural resources and edition for entrepreneurs in Henan province. In
December 2009, we discontinued the special issue of finance edition. Therefore,
we currently have 4 main issues and 7 special issues. Currently, the
distribution network of our magazines consists of over 60 major distribution
agencies and 30,000 bookstores and news stands covering over 300 cities
throughout China.

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
US$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
US$1.45 million in connection with this transfer of rights. Shenzhen New Media
agreed to pay this amount over the 9 year term of the agreement, which is for
the full remaining term of the assigned contract. Thereafter, on December 21,
2005, our indirect subsidiary, Shenzhen New Media acquired Shenzhen Media.

We had to enter into the Operation and Management Right
Agreement and the Entrust Agreement instead of acquiring CMO outright as a
result of restrictions under Chinese law that prohibit foreign persons from
engaging in certain publishing activities in China. CMO is an affiliate of the
Administration of Press and Publication of Henan Provincial Government and was
established under the laws of China. Because of its ownership of the national
publishing codes of China Marketing, 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.

2

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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.

To increase our revenue stream, our management began exploring
the feasibility of engaging in new business lines in July 2007. Management
considered the potential costs and benefits of launching another magazine or
acquiring other publishing or advertising assets and determined that such
actions require capital outlays that are greater than the company can currently
afford and would take several months or years to implement. As a result,
management investigated other business types to increase our revenues with lower
capital expenditures and shorter ramp up times. During the search for new
business opportunities, management noted that credit cards are the
fastest-growing consumer credit product in China, and it is widely expected in
China that card usage and profitability will experience explosive growth over
the next decade. According to Shanghai Daily(June 25, 2008), China had
more than 104.73 million credit cards in circulation at the end of March of
2008, up 92.9 percent since two years ago. While cash is still the main form of
payment in China, the use of credit cards is becoming a popular alternative to
carrying banknotes. As a result of, or possible contributing to the increasing
popularity of credit cards, many consumers in China are choosing to shop online
and pay with credit cards. Consumers in China are realizing that online shopping
allows consumers to browse through many items and categories without leaving
their homes, to compare prices of multiple suppliers or stores, and to arrange
for convenient shipping of products by the supplier. Our management decided that
the company should enter into the online sales and marketing business to take
advantage of this marketplace trend. Management believes that engaging in online
business is beneficial and suitable for small businesses like us as it requires
significantly lower capital outlay compared with traditional business
approaches.

In July 2008, we began our new business of online marketing and
sales of consumer products by entering into various cooperation arrangements
with Chinese banks. These banks existing consumer communication channel allows
us to spend a limited amount of money as the startup cost for advertisement. We
have been able to market and sell our products by sending marketing brochures
with the banks' monthly statements to their credit card customers and receive
payments through the banks' already developed online payment mechanism.

In June 2010, we launched a new business platform called Easy
Buy that connects businesses, banks and customers on a single platform. With
the innovative Invisible Printing Optical Identification Technology(IP-OIT),
this sales and marketing platform helps the advertising clients to further
promote their products and enhance their sales distribution channel. At the same
time, we will be able to market and sell our products by sending the special
catalog to the gold and platinum card holders through various banks, thus,
bringing in more advertising revenues for the company.

We do not maintain a corporate website, but we utilize
http://www.cmmo.com.cnfor the sale and promotion of the magazines we
publish.

History and Corporate Structure

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 to Infolife, Inc. we continued our business as an 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 22,808,002 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 22,808,002 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.

3

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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 sales 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, computers, and communication
systems. It also provides information system consulting services.

(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. On August
2, 2008, Shenzhen Media sold 42% ownership of Beijing Orient to Shanghai Cheng
Mei Biotechnology Co., Ltd. (Shanghai Cheng Mei) for a cash price of $141,831
(equivalent to RMB 987,461). After the sale, Shenzhen Media owns 10% of Beijing
Orient.

4

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(5) Shanghai Zhiduo Network Technology Company Limited, or
Shanghai Zhiduo, was incorporated in China on July 18, 2008. Shenzhen New Media
owned 51% of Shanghai Zhiduo, which was engaged in the business of management
consulting services and brand name consulting services. On March 18, 2010, SZNT
discontinued its operations and applied for liquidation process with the local
government. The liquidation process was completed and finalized on August 27,
2010.

(6) Shenzhen Directory Marketing Management Co. Ltd, or SDMM,
was incorporated in China in June 2010 and is mainly engaged in providing
advertising services, business enterprises marketing planning services, and
information system consulting services. The Company, through Shenzhen Media,
holds 30% of the equity interest of SDMM and one individual shareholder, Ge
Zhihong, owns the remaining 70% equity interest of SDMM, respectively, and
accounts for the investment using the equity method.

Our Products

China Marketingwas first published by CMO in April 1994
as a monthly magazine. Thereafter, in September 2001, CMO began publishing two
issues of this magazine per month. In May 2004, after the establishment of the
operation and management rights agreement, we started to publish three issues of
this magazine per month. In June 2003, the first issue of China Business
& Tradewas published. In January 2007, we decided to stop publishing
China Business & Tradeby combining the content of China Business
& Tradeinto the Case edition of China Marketing. In October
2010, we published a new issue of Career Development edition. In June 2009, we
began to publish eight special issues of China Marketing, which include
cosmetic edition, food edition, gift edition, tobacco edition, finance edition,
sporting goods edition, edition for agricultural resources and edition for
entrepreneur in Henan. In December 2009, we discontinued to publish the Finance
edition. The special editions are published from time to time based upon market
conditions.

The dimension of China Marketingis 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 the magazine and 200g double-side halftone paper for the
covers of Case edition. All editions of the magazine are published in Chinese
and circulated within the greater China area, which includes mainland China and
Hong Kong.

Each issue of China Marketingfocuses 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. The fourth issue, the
Career Development edition, assists recent graduates and individuals start and
manage a career in the sales and marketing field.

Each of the seven special editions we published in 2010 focuses
on different sales and marketing strategies for a specific industry.

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.

5

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The physical printing, assembling and production of our
magazines have been outsourced to independent third party printers. The printers
are responsible for typesetting the articles, proof reading, plate-making, paper
supplying, binding and packaging. Specifically, the printing works of the
publication of Sales edition and Case edition were contracted to Henan Xinhua
Printing Factory. The printing works of the publication of Channel edition were
contracted to Henan Ruiguang Printing Co., Ltd.

Under these outsourcing agreements, the paper cost accounts for
a large proportion of the quoted price. The printing price 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.

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 Brand Consultant Company. The
services that we currently offer mainly focus on assisting our customers on the
promotion of brand awareness.

Online Sales

In July 2008, we began our new business of online marketing and
sales of consumer products. These products mainly consist of notebook computer
hardware. We currently sell our computer products through our website
www.91ap.com, on which we offer a complete line of our products to our
consumers 24 hours a day, seven days a week. In order to attract customers, we
have entered into various cooperation arrangements with Chinese banks, including
Bank of China, China Construction Bank, Hua Xia Bank and China Minsheng Bank,
through which we are able to market our products by sending marketing brochures
with the banks monthly statements to credit card customers. Our brochures
include information about our computer hardware products as well as purchase
methods. The banks credit card customers can either purchase our products
directly by visiting our online sales website or call the purchase hotline
provided in the brochures; however, they must use their credit cards issued by
the banks with which we have a cooperation arrangement. We procure all of the
notebook computers that we sell from the sales agents of ASUSTek Computer Inc.
The two largest suppliers of our goods are Shanghai Hua Jie United Information
Co. Ltd. and Digital China Holding Limited Beijing Office. After consumers make
orders online, we process these orders and ship and deliver the products to
consumers in China through our subsidiary Shenzhen Media. Currently, the sales
of computer hardware contribute approximately 95% of our total revenue from
online sales. In June 2010, we launched a new business platform called Easy
Buy that connects businesses, banks and customers on a single platform. With
the innovative Invisible Printing Optical Identification Technology (IP-OIT),
this sales and marketing platform helps the advertising clients to further
promote their products and enhance their sales distribution channel. At the same
time, we will be able to market and sell our products by sending the special
catalog to the gold and platinum cardholders through various banks, thus,
generating more advertising revenues for the company.

Our Distribution Channels of Our Magazines

Currently, the distribution network of our magazines consists
of over sixty major distribution agencies and 30,000 bookstores and news stands
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.

6

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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
distribution agents who then distribute the magazines to retail sales agents who
sell the magazines from various locations throughout China.

As of December 31, 2010, the annual circulation of our
magazines during the 2010 fiscal year was 2,474,338 units, among which
approximately 54.98% 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 sales were through postal subscriptions 32.68%
and direct orders 12.34% . As of December 31, 2009, the annual circulation of
our magazines during the 2009 fiscal year was 2,669,715 units, among which
approximately 62.8% of sales were made through retail agents such as news
stands, airports, subways and bookstores throughout China. These retail agents
obtained our magazines from our distribution agents who operate throughout
China. The remaining 37.2% of our sales were through postal subscriptions 26.4%
and direct orders 10.8% .

The following table lists the annual circulation of our
magazines during the fiscal year ended December 31, 2010:

China Marketing (Sales
      edition)
    China Marketing (Case
      edition)
    China Marketing
      (Channel edition)
    China Marketing (Career
      Development edition)
    Special Editions
    TotalDistribution agents
    393,985
    305,773
    432,215
    34,950
    193,493
    1,360,416Subscriptions through post offices
    265,568
    265,575
    277,643
    0
    50,034
    858,820Direct subscriptions
    28,831
    28,177
    44,933
    0
    153,161
    255,102Total
    688,384
    599,525
    754,791
    34,950
    396,688
    2,474,338


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

Names of
      Distribution Agents
    Distribution AreaBeijing Luopan Zhengzhang Books Co., Ltd
    Beijing, HebeiNanjing Raotian Cultural Development Co., Ltd.
    Jiangsu Province


7

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Names of
      Distribution Agents
    Distribution AreaGuangzhou Rutu Culture Development Co., Ltd
    Guangdong ProvinceWuhan Dagong Books Co., Ltd
    Hubei ProvinceHengyang Post Office Books Retail Co., Ltd
    Hunan Province


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 40-45% of
total proceeds generated by their sales.

Prices of Our Products

The fixed retail price of the Sales edition and the Case
edition of China Marketingis RMB 10 per issue (approximately $1.49); the
fixed retail price of the Channel edition of China Marketingis RMB 8 per
issue (approximately $1.19); the fixed retail price of the seven special issues
is RMB 20 per issue (approximately $2.99) . Subscribers who subscribe to our
magazines directly pay this same fixed retail price per issue on an issue by
issue basis.

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,and
Fortuneare 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, Forbesand Fortuneand our local competitors, such as New
Selling, Successful Sellingand Contemporary Selling. We also
believe that the quality and design features of our magazines are superior to
the quality and design features of New Selling, Successful Sellingand Contemporary Sellingbut 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. In addition,
CMO has obtained international standard code for China Marketing, which
is ISSN1005-3530. These codes, respectively, are printed on the last page of
each publication.

We have registered our magazines title China Marketing as
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
magazines.

8

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We have registered our www.cmmo.com.cnInternet domain
name. The articles and other contents of our magazines are protected under
copyright laws of China.

Our Employees

We currently have 375 full-time employees and we do not expect
any significant changes in the number of our employees during the next 12
months.

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 employees in China participate in a state pension plan
organized by Chinese municipal and provincial governments. Currently, each month
we are required to contribute to the plan with approximately $91 for each of our
employees and approximately $140 for each of our executive officers and
directors. The compensation expenses related to this plan were approximately
$231,590 and $245,917 for the fiscal years 2010 and 2009, 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.

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.

9

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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.

ITEM
1A.           RISK
FACTORS

You should carefully consider the risks described below,
together with all of the other information included in this report. If any of
the following risks actually occurs, our business, financial condition or
results of operations could suffer. In that case, the trading price of our
common stock could decline. You should also refer to the other information about
us contained in this report, including our financial statements and related
notes.

RISKS RELATING TO OUR BUSINESS

The recent financial crisis could negatively affect our
business, results of operations, and financial condition.

The recent credit crisis and turmoil in the global financial
system may have an impact on our business and our financial condition, and we
may face challenges if conditions in the financial markets do not improve. Our
ability to access the capital markets may be restricted at a time when we would
like, or need, to raise capital, which could have an impact on our flexibility
to react to changing economic and business conditions. In addition, these
economic conditions also impact levels of consumer spending, which have recently
deteriorated significantly and may remain depressed for the foreseeable future.
Consumer purchases of discretionary items, including our magazines and
electronic products, generally decline during recessionary periods and other
periods where disposable income is adversely affected. In addition, a
substantial portion of our revenues is derived from the sale of advertising
space. In a down economy, advertising budgets are usually the first budgets to
be cut. Also, even slight downturns in the economy may cause our advertising
customers to advertise less or negotiate lower rates with us. If demand for our
products fluctuates as a result of economic conditions or otherwise, our revenue
and gross margin could be harmed.

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.

10

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Chinese regulations currently permit the payment of dividends
only out of accumulated profits as determined in accordance with Chinese
accounting standards and regulations. Our subsidiaries in China are also
required to set aside a portion of their after tax profits according to Chinese
accounting standards and regulations to fund certain reserve funds. Currently,
our subsidiaries in China are the only sources of revenues or investment
holdings for the payment of dividends. If they do not accumulate sufficient
profits under Chinese accounting standards and regulations to first fund certain
reserve funds as required by Chinese accounting standards, we will be unable to
pay any dividends.

We face strong competition from both local and foreign
competitors and increased competition could negatively affect our financial
results.

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

Fluctuations in the cost of paper, which can result in
increases in the price we pay to third parties to print our magazines, can have
a significant effect on our operating results.

The physical printing, assembling and production of the
magazines are outsourced to independent third party printers pursuant to
outsourcing agreements that we have entered into with these printers. Under
these outsourcing agreements, the paper cost accounts for a large proportion of
the quoted price. The printing price is equal to the quantity of units
multiplied by the unit price, which is a fixed price under the agreement. This
fixed price remains constant during the term of the agreement. Therefore, the
printer assumes the risk of increasing paper costs during the term of the
agreement. However, these agreements generally have a term of one year and,
therefore, increases in paper costs could result in increased outsourcing costs
for us from year to year. Unexpected or significant increases in paper prices
may have an adverse effect on our future results of operations. We may not be
able to recoup paper cost increases by passing them through to our advertisers
and readers and, accordingly, such cost increases could have a material adverse
effect on our results of operations.

Our success is dependent on our ability to modify our
magazines and develop new media products to address current trends in our
industry. The development of new products is costly and time consuming with no
guarantee 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 guarantee 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 significantly 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.

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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 15 years of experience in the publication business. They also
depend in significant part upon our ability to attract and retain additional
qualified management, editorial staff, marketing and sales and support personnel
for our operations. If we lose a key employee or if a key employee fails to
perform in his or her current position, or if we are not able to attract and
retain skilled employees as needed, our business could suffer. Significant
turnover in our senior management could significantly deplete our institutional
knowledge held by our existing senior management team. We depend on the skills
and abilities of these key employees in managing the publication, marketing and
sales aspects of our business, any part of which could be harmed by further
turnover.

Since we publish our magazines in China, we are subject
to the Chinese Advertising Law, which imposes upon us restrictions regarding the
content of our publication and our ability, as a foreign corporation, to own
media assets in China.

The advertising industry in China is governed by the
Advertising Law which came into effect in February 1995. Advertisers,
advertising operators and distributors, including entities such as ourselves,
which engage in advertising activities are required to comply with applicable
procedures and provisions under the Advertising Law. If our operations are
determined to be in breach of the Advertising Law, penalties may be imposed
which include fines, confiscation of advertising fees, orders to cease
dissemination of the relevant advertisement and orders to publish an
advertisement with corrective information.

Investor confidence and the market price of our shares
may be adversely impacted if we are unable to correct 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, 2010, 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, however, if any of these deficiencies
remains, then our financial condition could be adversely affected.

RISKS RELATED TO THE MARKET FOR OUR STOCK

Our common stock is quoted on the Over-the-Counter
Bulletin Board which may have an unfavorable impact on our stock price and
liquidity.

Our common stock is currently quoted on the Over-the-Counter
Bulletin Board. The Over-the-Counter Bulletin Board are significantly more
limited markets than any national securities exchange. The market for our
securities is very limited, volatile and characterized by very low trading
volumes. The quotation of our shares on the Over-the-Counter 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.

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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 March  22, 2011, the closing price for our common
stock was $0.55 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.

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 major stockholder, Yingsheng Li, owns 32.07% of our
outstanding voting securities. As a result, he possesses significant influence,
giving him the ability, among other things, to elect a majority of our Board of
Directors and to authorize or prevent proposed significant corporate
transactions. His 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 the major stockholder are not in their best interests.

ITEM
2.           PROPERTIES

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 Unit 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.

We believe that all our properties have been adequately
maintained, are generally in good condition, and are suitable and adequate for
our business.

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:

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- Level of government involvement in the economy;
- Control of foreign exchange;
- Methods of allocating resources;
- Balance of payments position;
- International trade restrictions; and
- International conflict.

The Chinese economy differs from the economies of most
countries belonging to the Organization for Economic Cooperation and
Development, or OECD, in many ways. As a result of these differences, we may not
develop in the same way or at the same rate as might be expected if the Chinese
economy were similar to those of the OECD member countries.

Our business is largely subject to the uncertain legal
environment in China and the 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.

We may be unable to negotiate or complete a business
combination transaction 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.

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.

15

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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. 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.           [REMOVED AND
RESERVED]

16

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PART II

ITEM
5.           MARKET FOR
REGISTRANTS COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF
EQUITY SECURITIES.

Market for Our Common Stock

Our common stock is quoted on the Over-the-Counter Bulletin
Board under the symbol CMKM. Trading in our common stock has been limited and
sporadic.

The following table sets forth, for the periods indicated, the
high and low bid 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.

|                             |   | **Closing Bid Prices(1)** | 
|---------------------------- | - | ------------------------- | 
|                             |   | High                      | 
|                             |   |                           | 
|Year Ended December 31, 2010 |   |                           | 
|First Quarter                | $ | 0.95                      | 
|Second Quarter               | $ | 0.87                      | 
|Third Quarter                | $ | 0.80                      | 
|Fourth Quarter               | $ | 0.95                      | 
|                             |   |                           | 
|Year Ended December 31, 2009 |   |                           | 
|First Quarter                | $ | 0.02                      | 
|Second Quarter               | $ | 0.02                      | 
|Third Quarter                | $ | 0.02                      | 
|Fourth Quarter               | $ | 0.02                      | 

________________________(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.comfor the periods
indicated.

Approximate Number of Holders of Our Common
Stock

As of March  4, 2011, there were approximately 271
stockholders of record of our common stock.

Dividends

During fiscal years 2009 and 2010, we did not declare or pay a
cash dividend. 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.

Securities Authorized for Issuance Under 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, 2010 that were not previously disclosed in a quarterly report
on Form 10-Q or a current report on Form 8-K that was filed during the 2010
fiscal year.

Purchases of Equity Securities

No repurchases of our common stock were made during the fourth
quarter of 2010.

17

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ITEM
6.           SELECTED
FINANCIAL DATA

Not applicable.

ITEM
7.           MANAGEMENTS
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following managements discussion and analysis should be
read in conjunction with our financial statements and the notes thereto and the
other financial information appearing elsewhere in this report. In addition to
historical information, the following discussion contains certain
forward-looking information. See Special Note Regarding Forward Looking
Statements above for certain information concerning those forward looking
statements.

General

We generate revenues through sales of our magazines, sales of
advertising space in our magazines, providing sales and marketing consulting
services and online sales of electronic products. During the fiscal year ended
December 31, 2010, we generated $1,646,740 in revenues from the sale of our
magazines, $9,376,304 in revenues from the sale of advertising space in these
magazines, $3,384,896 in revenues from providing consulting services and
$20,563,361 in revenues from online sales of consumer products. During the
fiscal year ended December 31, 2009, we generated $1,638,966 in revenues from
the sale of our magazines, $4,504,651 in revenues from the sale of advertising
space in these magazines, $3,344,962 in revenues from providing consulting
services and $15,411,781 in revenues from online sales of consumer products.

In July 2008, we began our new business of online marketing and
sales of consumer products. This new business generated $20,563,361 in revenue
in 2010, which constitutes 58.80% of total revenues. In early 2010, we expanded
our online sales business by offering additional products including cell phones,
jewelries, watches, apparel, beauty products and home appliances. Because we
just launched this new business recently, we are still in the stage of
investigating the market and evaluating potential opportunities to increase our
revenues from this business line. However, we intend to sell more types of
products online and expect that our online marketing and sales in China well
generate a significant part of annual revenues for the Company over the next
five years.

Industry Overview

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

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

18

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Results of Operations

Fiscal Year Ended December 31, 2010 Compared with Fiscal
Year Ended December 31, 2009

The following table summarizes the results of our operations
during the fiscal years ended December 31, 2010 and 2009. It provides
information regarding the dollar and percentage increase or (decrease) from 2009
fiscal year to 2010 fiscal year:

|                                                                     |   | Year Ended December 31, 2010 |  |   |            |  |   |            |  
|-------------------------------------------------------------------- | - | ---------------------------- |  | - | ---------- |  | - | ---------- | -
|                                                                     |   |                              |  |   |            |  |   |            |  
|Item                                                                 |   | 2010                         |  |   | 2009       |  |   | Increase   |  
|                                                                     |   |                              |  |   |            |  |   | (Decrease) |  
|Revenue                                                              | $ | 34,971,301                   |  | $ | 24,900,360 |  | $ | 10,070,941 |  
|Cost of Sales                                                        | $ | 23,474,919                   |  | $ | 17,652,056 |  | $ | 5,822,863  |  
|Gross Profit                                                         | $ | 11,496,382                   |  | $ | 7,248,304  |  | $ | 4,248,078  |  
|Operating Expenses                                                   | $ | 7,154,034                    |  | $ | 5,917,937  |  | $ | 1,236,097  |  
|Other Income (expense)                                               | $ | 32,592                       |  | $ | 140,426    |  |   | ($107,834  | )
|Provision for Taxes                                                  | $ | 56,950                       |  | $ | 27,328     |  | $ | 29,622     |  
|Net income attributable to China Marketing
      Media Holding, Inc. | $ | 4,310,264                    |  | $ | 1,505,774  |  | $ | 2,804,490  |  

Revenue

Our revenues in fiscal year 2010 amounted to approximately
$35.0 million , which is $10.1 million or approximately 40.4% more than that of
fiscal year 2009, when we had revenues of approximately $24.9 million. The
overall increase in our revenues for the fiscal year 2010 is due to the
significant expansion of our online sales of consumer products, which began in
July 2008. Compared to 2009, our revenues attributable to sales of magazines
increased by $7,774 in 2010 and advertising revenues in 2010 increased by
$4,871,653. Our revenues attributable to consulting services increased by
$39,934 in 2010, and revenues generated from selling consumer products in 2010
increased by approximately $5.15 million as compared to 2009. The companys new
online business has been growing rapidly, which resulted in an increase of
revenue in consumer product sales and advertising space sales.

Components of Revenues

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

|                    |   |            |  |   |            |  |   | Increase   |  |  | % Increase   | 
|------------------- | - | ---------- |  | - | ---------- |  | - | ---------- |  |  | ------------ | 
|Revenue Category    |   | 2010       |  |   | 2009       |  |   | (Decrease) |  |  | (% Decrease) | 
|Magazine Sales      | $ | 1,646,740  |  | $ | 1,638,966  |  | $ | 7,774      |  |  | 0.5%         | 
|Advertising Sales   | $ | 9,376,304  |  | $ | 4,504,651  |  | $ | 4,871,653  |  |  | 108.1%       | 
|Consulting Services | $ | 3,384,896  |  | $ | 3,344,962  |  | $ | 39,934     |  |  | 1.2%         | 
|Consumer products   | $ | 20,563,361 |  | $ | 15,411,781 |  | $ | 5,151,580  |  |  | 33.4%        | 
|Total               | $ | 34,971,301 |  | $ | 24,900,360 |  | $ | 10,070,941 |  |  | 40.4%        | 

19

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Cost of Sales

Our cost of sales in fiscal years 2010 and 2009 was $23,474,919
and $17,652,056, respectively, which accounts for approximately 67.13% and
70.89%, respectively, as a percentage of total revenues. The dollar amount of
the cost of sales increased with the growth of annual sales. Cost of goods sold
as a percentage of annual revenues decreased by about 3.8% in 2010 as compared
with 2009. The decrease in cost of goods sold was primarily driven by an
increase in selling price of our online consumer products as the relatively new
business has reached to a mature stage. The dollar amount of the costs of goods
sold increased mainly because of the increase in total sales.

Operating Expenses

Our operating expenses, which consist of payroll, goodwill
impairment loss and other general and administrative expenses, increased by
$1,236,097 or 20.9% in the 2010 fiscal year compared to the 2009 fiscal year.
The increase was due to a goodwill impairment loss of $446,543 or 7.6% . A
goodwill impairment test was conducted using three scenarios compared to the
implied fair value of the reporting unit Shenzhen Cainas goodwill with its
carrying amount of that goodwill. The companys evaluation of goodwill completed
during the year resulted in an impairment loss of $446,543. (refer to Note 2
under Goodwill). The other 13% of the increase in operating expenses was mainly
due to the fact that we hired additional employees and paid more commissions for
our online consumer products selling business.

Income taxes

United States

China Marketing Media Holdings, Inc. is subject to United
States tax at a tax rate of 34%. No provision for income taxes in the United
States has been made as we had no U.S. taxable income for the period
presented.

British Virgin Islands

Media Challenge was incorporated in the BVI, and, under the
current laws of the BVI, is not subject to income taxes.

PRC

Before the implementation of the enterprise income tax (EIT)
law (as discussed below), Foreign Invested Enterprises (FIE) established in
the PRC are generally subject to an EIT rate of 33.0%, which includes a 30.0%
state income tax and a 3.0% local income tax. On March 16, 2007, the National
Peoples Congress of China passed the new Corporate Income Tax Law (EIT Law),
and on November 28, 2007, the State Council of China passed the Implementing
Rules for the EIT Law (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 old tax laws
applicable to FIEs, and its associated preferential tax treatments, beginning
January 1, 2008.

Despite these pending changes, the EIT Law gives the FIEs
established before March 16, 2007 (Old FIEs) a five-year grandfather period
during which they can continue to enjoy their existing preferential tax
treatments. During this five-year grandfather period, the Old FIEs which enjoyed
tax rates lower than 25% under the original EIT Law shall gradually increase
their EIT rate by 2% per year until the tax rate reaches 25%. In addition, the
Old FIEs that are eligible for the two-year exemption and three-year half
reduction or five-year exemption and five-year half-reduction under the
original EIT Law, are allowed to remain to enjoy their preference until these
holidays expire. The discontinuation of any such special or preferential tax
treatment or other incentives would have an adverse effect 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 a EIT of 25.0% on its global income. The Implementing
Rules define the term de facto management bodies as an

20

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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% .

Under the income tax law and the related implementing rules,
FIEs engaging in manufacturing businesses with a term of operation exceeding ten
years may, subject to approval from local taxation authorities, be entitled to a
two-year tax exemption from PRC EIT starting from the year they become
profitable and a 50.0% tax reduction for the three years thereafter.

We are currently subject to income taxes according to
applicable tax laws in the PRC. The tax rates are 15% for NMA, 15% for Shenzhen
New Media and Shenzhen Media and 0% for CMO. CMO is exempt from PRC income tax
as a part of the government supporting program from year 2009 to 2013.

We incurred income taxes of $56,950 and $27,328 in 2010 and
2009, respectively, or an increase of 108.4% . The increase in income tax
expense was the result of a catch-up payment of $29,000 of tax liability from
2009 by Shenzhen Caina to the Chinese tax authority.

Net income attributable to China Marketing Media Holdings,
Inc. (profit after taxes)

We earned net income of $4,310,264 in fiscal year 2010. This is
an increase of $2,804,490 or approximately 186.2% from the net income of
$1,505,774 in fiscal year 2009. The increase was mainly due to the expansion of
online consumer products sales.

Liquidity and Capital Resources

As of December 31, 2010, we had cash and cash equivalents of
approximately $7.18 million. We had no bank loans during the period. The
following table provides detailed information about our net cash flow for all
financial statements periods presented in this report.

Cash Flow(All amounts in thousands of U.S. dollars)Fiscal Years EndedDecember 31,2010
    
    
    2009Net cash provided by (used in) operating
      activities
    $
    3,611,065
    
    $
    (480,937
    )Net cash provided by (used in) investing activities
    
    (2,218,610
    )
    
    4,718,816Net cash provided by (used in) financing
      activities
    
    -
    
    
    (849,398
    )Net cash inflow
    
    1,631,018
    
    
    3,385,522


Operating Activities:

Net cash used in operating activities was approximately $3.61
million in fiscal year ended December 31, 2010, which is an increase of
approximately $4.09 million from approximately $(0.48) million net cash provided
by operating activities in fiscal year ended December 31, 2009. Such increase
of net cash provided by operating activities was primarily attributable to an
increase in income from continuing operations.

Investing Activities:

Our main uses of cash for investing activities are payments
relating to the acquisition of property, plant and equipment.

21

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Net cash provided by investing activities was approximately
$(2.22) million in fiscal year 2010, a decrease of approximately $6.94 million
from approximately $4.72 million net cash used in operating activities in fiscal
year 2009. Such decrease of net cash provided by investing activities was
primarily attributable to a $5.97 million refund from investment deposit to us
after we terminated the operating and management agreement with Shanghai Longcom
Telecom Co. Ltd in the first quarter of 2009.

Financing Activities

There was no net cash used in financing activities for the
fiscal year ended December 31, 2010 as compared to approximately $(0.85) million
used in financing activities in fiscal year 2009. The difference was mainly
attributable to repayment of related party payables in 2009.

We believe that our current cash on hand and continuing revenue
from operations is sufficient to maintain operations at current levels for at
least the next twelve months. However, in order to expand operations, management
believes that it will be necessary for us to raise additional capital either
through the sale of equity securities or through a long-term debt financing.
Full implementation of the current expansion plans will include an acquisition
of other magazines and/or advertising businesses that requires approximately $10
million of additional capital. We can provide no assurances that we will be able
to obtain additional capital on terms favorable to the Company, if at all.

Off-Balance Sheet Arrangements

We have not entered 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 2010,
the value of RMB against US dollars appreciated by 18.52%, from RMB 8.1/ $1 to
RMB 6.6/ $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:

22

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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 Recognition . In accordance with ASC Topic 605,
"Revenue Recognition", the Company recognizes revenue when persuasive evidence
of an arrangement exists, transfer of title has occurred or services have been
rendered, the selling price is fixed or determinable and collectibility is
reasonably assured. 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.

23

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Recent Changes in Accounting Standards

The Company has reviewed all recently issued, but not yet
effective, accounting pronouncements and does not believe the future adoption of
any such pronouncements may be expected to cause a material impact on its
financial condition or the results of its operations.

In April 2010, the FASB issued Accounting Standards Update
2010-13, CompensationStock Compensation (Topic 718): Effect of Denominating
the Exercise Price of a Share-Based Payment Award in the Currency of the Market
in Which the Underlying Equity Security Trades, or ASU 2010-13. ASU 2010-13
provides amendments to Topic 718 to clarify that an employee share-based payment
award with an exercise price denominated in currency of a market in which a
substantial porting of the entitys equity securities trades should not be
considered to contain a condition that is not a market, performance, or service
condition. Therefore, an entity would not classify such an award as a liability
if it otherwise qualifies as equity. The amendments in this Update are effective
for fiscal years, and interim periods within those fiscal years, beginning on or
after December 15, 2010. The Company is currently evaluating the impact of this
ASU; however, the Company does not expect the adoption of this ASU will have a
material impact on its consolidated financial statements.

In July 2010, the FASB issued Accounting Standards Update
2010-20 which amends Receivables (Topic 310). ASU 2010-20 is intended to
provide additional information to assist financial statement users in assessing
an entitys risk exposures and evaluating the adequacy of its allowance for
credit losses. The disclosures as of the end of a reporting period are effective
for interim and annual reporting periods ending on or after December 15, 2010.
The disclosures about activity that occurs during a reporting period are
effective for interim and annual reporting periods beginning on or after
December 15, 2010. The amendments in ASU 2010-20 encourage, but do not require,
comparative disclosures for earlier reporting periods that ended before initial
adoption. However, an entity should provide comparative disclosures for those
reporting periods ending after initial adoption. While ASU 2010-20 will not have
a material impact on our consolidated financial statements, we expect that it
will expand our disclosures related to Loans receivable.

In December 2010, the FASB issued Accounting Standards Update
2010-28 which amend Intangibles- Goodwill and Other (Topic 350). The ASU
modifies Step 1 of the goodwill impairment test for reporting units with zero or
negative carrying amounts. For those reporting entities, they are required to
perform Step 2 of the goodwill impairment test if it is more likely than not
that a goodwill impairment exists. An entity should consider whether there are
any adverse qualitative factors indicating that impairment may exist. The
qualitative factors are consistent with the existing guidance in Topic 350,
which requires that goodwill of a reporting unit be tested for impairment
between annual tests if an event occurs or circumstances change that would more
likely than not reduce the fair value of a reporting unit below its carrying
amount. ASU 2010-28 is effective for fiscal years, and interim periods within
those years, beginning after December 15, 2010. Early adoption is not permitted.
The Company is currently evaluating the impact of this ASU; however, the Company
does not expect the adoption of this ASU to have a material impact on its
consolidated financial statements.

In December 2010, the FASB issued Accounting Standards Update
2010-29 which addresses diversity in practice about the interpretation of the
pro forma revenue and earnings disclosure requirements for business combinations
(Topic 805). This ASU specifies that if a public entity presents comparative
financial statements, the entity should disclose revenue and earnings of the
combined entity as though the business combination(s) that occurred during the
current year had occurred as of the beginning of the comparable prior annual
reporting period only. This ASU also expands the supplemental pro forma
disclosures under Topic 805 to include a description of the nature and amount of
material, nonrecurring pro forma adjustments directly attributable to the
business combination included in the reported pro forma revenue and earnings.
ASU 2010-29 is effective prospectively for business combinations for which the
acquisition date is on or after the beginning of the first annual reporting
period beginning on or after December 15, 2010. Early adoption is permitted. The
Company is currently evaluating the impact of this ASU and expects the adoption
of this ASU will have an impact on its future business combinations.

ITEM
8.            FINANCIAL
STATEMENTS AND SUPPLEMENTARY FINANCIAL DATA

The full text of our audited consolidated financial statements
as of December 31, 2010 and 2009 begins on page F-1 of this annual report.

24

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ITEM
9.           CHANGES IN AND
DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.

None.

ITEM
9A.        CONTROLS AND
PROCEDURES.

Evaluation of Disclosure Controls and
Procedures

Our management, with the participation of our Chief Executive
Officer and Chief Financial Officer (the Certifying Officers), evaluated the
effectiveness of our disclosure controls and procedures. The term disclosure
controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the
Exchange Act, means controls and other procedures of a company that are designed
to ensure that information required to be disclosed by a company in the reports,
such as this report, that it files or submits under the Exchange Act is
recorded, processed, summarized and reported, within the time periods specified
in the SECs rules and forms. Disclosure controls and procedures include,
without limitation, controls and procedures designed to ensure that information
required to be disclosed by a company in the reports that it files or submits
under the Exchange Act is accumulated and communicated to the companys
management, including its principal executive and principal financial officers,
as appropriate to allow timely decisions regarding required disclosure. Based on
that evaluation, the Certifying Officers have concluded that, because of the
deficiencies in internal control over financial reporting described below, our
disclosure controls and procedures were not effective as of December 31, 2010.
The details of the management analysis are provided below.

Managements annual report on internal control over
financial reporting

Management is responsible for establishing and maintaining
adequate internal control over financial reporting for the Company. Internal
control over financial reporting refers to the process designed by, or under the
supervision of, our Chief Executive Officer and Chief Financial Officer, and
effected by our Board of Directors, management and other personnel, to provide
reasonable assurance regarding the reliability of our financial reporting and
the preparation of financial statements for external purposes in accordance with
U.S. GAAP, and includes those policies and procedures that:

|(1) | pertain to the maintenance of records that in reasonable
      detail accurately and fairly reflect the transactions and dispositions of
      our assets;                                                                                                                                                       
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                                                  
|(2) | provide reasonable assurance that transactions are
      recorded as necessary to permit preparation of financial statements in
      accordance with U.S. GAAP, and that our receipts and expenditures are
      being made only in accordance with the authorization of our management and
      directors; and
|    |                                                                                                                                                                                                                                                                                                                  
|(3) | provide reasonable assurance regarding prevention or
      timely detection of unauthorized acquisition, use or disposition of our
      assets that could have a material effect on the financial
    statements.                                                                                               

Management assessed the effectiveness of our internal control
over financial reporting as of December 31, 2010. In making this assessment,
management used the framework set forth in the report entitled Internal Control
- Integrated Framework issued by the Committee of Sponsoring Organizations of
the Treadway Commission. Based on that evaluation, our management concluded that
our internal controls over financial reporting as of December 31, 2010 were not
effective in some areas. During our assessment, 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.

Because the knowledge of our current accounting department
staff of the U.S. GAAP and related internal control procedures is limited, our
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 a stand alone Audit Committee of the Board also contributes to insufficient
oversight of our accounting and audit functions.

25

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In order to correct the foregoing significant deficiencies, we
have taken and/or continue to work on the following remediation measures:

- We are in the process of (i) arranging necessary training for our
  accounting department staff and (ii) enageing external professional accounting
  or consulting firm(s) to assist us in the preparation of the US GAAP accounts.
  We intend to complete these steps no later than June 30, 2011;
- We continue to search for qualified personnel. As of the end of this fiscal
  period, we estimate that we additionally require at least one individual to
  bolster our internal audit function. However, due to the scarcity of qualified
  candidates with extensive experience in U.S. GAAP reporting and accounting in
  the PRC, in general, and in the province where the Company maintains its
  operations, we were not able to hire such additional personnel in a timely
  fashion before the end of our reporting period. We will continue our search
  for such personnel with assistance form recruiters and through referrals and
  intend to complete this process no later than March 31, 2011;
- We have allocated significant financial and human resources to strengthen
  the internal control structure. We have been actively working with external
  consultants to assess our data collection, financial reporting, and control
  procedures and to strengthen our internal controls over financial reporting;
  and
- We have and continue to search for suitable candidates to serve as
  independent directors on our Board of Director and on the Audit (or other
  standing committee thereof) Committee, who are financially literate, and to
  contain at least one member who is a financial expert as that term is
  defined in the SCEs rules. We intend to have our Audit Committee to meet at
  least once every quarter, prior to the release of that periods financial
  statements, to, among other things, discuss, with management and our
  independent auditors, prior to the release of each periods financial
  statements, the financial statements themselves, significant accounting
  policies and estimates, our internal controls, and the scope and findings of
  the work performed by our independent auditor in its audit or review of the
  financial statements. We estimate that we need to at lease two additional
  directors that meet the independence requirements and intend to complete this
  search in the near future.

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

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 rules of the Securities and Exchange
Commission that permit us to provide only managements report in this annual
report.

Changes in internal control over financial reporting

As described above, during the fourth quarter of the fiscal
year ended December 31, 2010, we have taken certain remediation measures that
have materially affected, or are reasonably likely to materially affect, our
internal control over financial reporting. In order to remediate this weakness,
we are increasing the number of our accounting staff and professionals. Until we
are able to hire professionals to help the Company implement a more efficient
internal control system to remediate this weakness, management chose to address
the above-described weakness frequently to its staff.

ITEM 9B.        
OTHER INFORMATION.

None.

26

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PART III

ITEM
10.           DIRECTORS,
EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE.

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
    PositionYingsheng Li
    53
    President, Chief Executive
      Officer and ChairmanBin Li
    49
    Executive DirectorXiaofeng Ding
    42
    DirectorDongsheng Ren
    39
    DirectorWengao Luo
    37
    Chief Operating OfficerZhen Zhen Peri
    55
    Chief Financial Officer


Yingsheng Lihas been our Chief Executive Officer,
President and Chairman since December 31, 2005. Mr. Li has more than 15 years of
experience in Magazine Publishing and has worked in various positions, including
Senior Editor, Chief Editor and Chief Marketing Correspondent. Mr. Li was
awarded one of the top ten publishers by the Henan Provincial Government in
2002. Mr. Lis substantial experience in the publishing industry and his day to
day leadership of the Company provides him with intimate knowledge of our
business and operations. Mr. Li holds a Bachelors degree in Commerce and a
postgraduate degree in Economics from Zhengzhou University.

Xiaofeng Dinghas been our Director and the Senior
Manager of our publishing house since December 31, 2005. Mr. Ding has been
working for the organization for more than 10 years and became the distribution
manager of CMO in 2000. Mr. Ding handles negotiations for distribution contracts
and plays a major role in maintaining and establishing relationships with the
advertising agencies. Mr. Ding has brought to the company extensive publishing
experience and keeps up to date with industry information and finds potential
business opportunities for the company. Mr. Ding graduated from He Fei Industry
University of China with a Bachelors degree in Material Science and Engineering
and a Masters degree in National Economics at Zhengzhou University.

Dongsheng Renhas been our Director since December 2005.
Prior to joining the Company in March 2003, Mr. Ren held a General Manger
position at Bank of Nanfang. Mr. Ren has more than 7 years of experience in
asset management and investment banking. He received a 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.

Bin Lihas been our Executive Director since December
31, 2005. Mr. Li worked as the Vice President of Henan Huayan Corporation from
1996 to 2000. Under the leadership of Mr. Li, the company launched a new
business of online marketing and sales of consumer products and built an
internet/online publishing and advertisement platform. The new platform has
brought measurable revenue and net income for the company. Mr. Li received his
PhD in Management in 2004 from the School of Management of Xian Jiao Tong
University.

Wengao Luohas been our Chief Operating officer since
September 6, 2010. Mr. Luo has 10 years of employment with CMKM in various
positions, including Manager in the Beijing office, as well as Chief Editor and
General Manager of Channel Edition. Mr. Luo has contributed his editing and
publishing experience to CMKM and has been a great asset for the Company ever since. Mr. Luo has a
Bachelors degree in Management from Xian Jiao Tong University and an MBA form
China People University.

27

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Zhen Zhen Perijoined the Company in July 2010 and has
served as Chief Financial Officer since September 6, 2010. Mrs. Peri has more
than 20 years of financial reporting experience in both private and public held
companies in the United States. Mrs. Peri worked as a Senior Accountant at
Thrifty Oil Company from 1995 to 1997; Senior Cost Accountant at CTX Intl from
1997 to 1999; Tax and Fixed Assets Analyst at Avery Dennison Corporation from
1999 to 2003; Assistant Controller at California Expanded Metal from 2003 to
2005; and Accounting Manager at the Hill Phoenix division of Dover Corporation
from 2005 to 2009, where she also served on the Internal Control Committee. Mrs.
Peri holds a Bachelor of Science in Business degree from California State
University, Fresno with a major in Accounting.

There are no agreements or understandings for any of our
executive officers or director to resign at the request of another person and no
officer or director is acting on behalf of nor will any of them act at the
direction of any other person.

Directors are elected until their successors are duly elected
and qualified.

Board Composition and Committees

The board of directors is currently composed of four members,
Yingsheng Li, Xiaofeng Ding, Dongsheng Ren and Bin Li, none of whom is
independent for the purposes of the federal securities law. All board action
requires the approval of a majority of the directors in attendance at a meeting
at which a quorum is present. We may increase the size of our board of directors
in the future but have not determined the approximate time to take such action.
Notwithstanding the fact that the Companys securities are not listed on a U.S.
securities stock exchange, the Board has determined to adhere to the
independence standards set forth in the Nasdaq Stock Market.

We currently do not have standing audit, nominating or
compensation committees. Our board of directors handles the functions that would
otherwise be handled by each of the committees. We intend, however, to establish
an audit committee, a nominating committee and a compensation committee of the
board of directors as soon as practicable.

Our board of directors has not made a determination as to
whether any member of our board can fulfill the functions of an Audit Committee
financial expert. Upon the establishment of an audit committee, the board will
determine whether any of the directors qualify as an audit committee financial
expert.

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

There were no material changes to the procedures by which
shareholders may recommend nominees to the Board since the Companys last
disclosure of such policies.

No director or officer of the Company has, during the last 10
years, has been subject to or involved in any legal proceedings described under
Item 401(f) of Regulation S-K, been convicted of any criminal proceeding
(excluding traffic violations or similar misdemeanors), or been a party to a
civil proceeding of a judicial or administrative body of competent jurisdiction
and as a result of such proceeding was or is subject to a judgment, decree or
final order enjoining future violations of, or prohibiting or mandating
activities subject to, United States federal or state securities laws or finding
any violations with respect to such laws.

Section 16(a) Beneficial Ownership Reporting
Compliance

28

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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 (except Forms 3 for Zhen Zhen Peri and Wengao Luo
were inadvertently filed late and has been filed as of the date hereof) filed
the required reports on time in the 2010 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.

ITEM
11.           EXECUTIVE
COMPENSATION

Summary Compensation Table  2010 and 2009

The following summary compensation table sets forth the
aggregate compensation we paid or accrued to Yingsheng Li, our Chief Executive
Officer and Chairman, Bin Li, our Executive Director and Zhen Zhen Peri, our
Chief Financial Officer for services rendered in all capacities during the
fiscal years 2010 and 2009. 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, Chief Executive
      Officer and Chairman
    2010
    19,964
    3,181
    23,1452009
    14,470
    7,588
    22,058Bin Li, Executive Director
    2010
    35,821
    -
    35,8212009
    29,411
    -
    29,411Zhen Zhen Peri, Chief Financial Officer
    2010
    35,821
    1,866
    37,687


(1) The compensations of Mr. Yingsheng Li, Mr. Bin Li and Ms.
Zhen Zhen Peri were paid by the Company in RMB. The dollar amounts in the above
table were calculated on the base that $1= RMB 6.8 and $1= RMB 6.7 for years
2009 and 2010, respectively.

Employment Agreements

We entered into an employment agreement with Mr. Yingsheng Li,
our named executive officer. This agreement was signed on March 26, 2009 for a
two-year term ending April 1, 2011. We expect that this agreement will be
automatically renewed for an additional year by the parties upon its expiration.
Under the terms of the agreement, as renewed, we are obligated to pay Mr. Li a monthly salary of RMB
8,079 (approximately $1,664). This agreement does not include the termination or
severance provisions.

29

---

We entered into an employment agreement with our Executive
Director, Bin Li, on March 1, 2004. This agreement was renewed on March 26, 2010
for a one-year term ending April 1, 2011. 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 20,000 (approximately $2,985). This agreement does not
include the termination or severance provisions.

We entered into an employment agreement with Mr. Wengao Luo,
our Chief Operating officer. This agreement was signed on March 26, 2010 for a
two-year term ending March 25, 2012. 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. Luo a
monthly salary of RMB 10,000 (approximately $1,493). This agreement does not
include the termination or severance provisions.

We entered into an employment agreement with Ms. Zhen Zhen
Peri, our Chief Financial Officer. This agreement was signed on July 19, 2010
for a one-year term ending July 18, 2011. 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 Ms. Zhen
Zhen Peri a monthly salary of RMB 20,000 (approximately $2,985). This agreement
does not include the termination or severance provisions.

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, 2010.

Director Compensation

The following table provides information on the compensation
paid by us to our directors for the fiscal years ended on December 31, 2010
only. 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.

|Name          | Year | Fees earned or paid in
      Cash | Total  
|------------- | ---- | --------------------------------- | -------
|              |      | ($)                               | ($)(1) 
|              |      |                                   |        
|Xiaofeng Ding | 2010 | - -                               | - -    
|Dongsheng Ren | 2010 | - -                               | - -    
|Bin Li        | 2010 | $35,821                           | $35,821

(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 6.8 and $1= RMB 6.7 for years 2009 and 2010,
respectively.

During 2010 and 2009, we did not pay 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. 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, 2010. We do not have non-equity incentive or
a deferred compensation plan that our directors may participate in.

30

---

ITEM 12.       
 SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED
STOCKHOLDER MATTERS.

Security Ownership of Certain Beneficial Owners and
Management

The following table sets forth information regarding beneficial
ownership of our common stock as of March 23, 2010 (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.

|Name of Beneficial Owner                                            | Office                                                 | Amount of Beneficial
      Ownership | Percent of Class
|------------------------------------------------------------------- | ------------------------------------------------------ | ------------------------------------ | ----------------
|Yingsheng Li                                                        | President, Chief
      Executive Officer, and Chairman | 9,198,271                            | 32.07%          
|Xiaofeng Ding                                                       | Director                                               | 147,172                              | 0.51%           
|Dongsheng Ren                                                       | Director                                               | 5,535,316                            | 3.13%           
|Bin Li                                                              | Executive Director                                     | 0                                    | *               
|Wengao Luo                                                          | Chief Operating Officer                                | 238,197                              | 0.83%           
|All officers and directors as a group
      (5 persons named above) |                                                        | 15,118,956                           | 36.54%          

* Less than 1%

31

---

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 28,686,002 shares of our common stock
are considered to be outstanding pursuant to SEC Rule 13d-3(d)(1) as of March
23, 2011. For each beneficial owner above, any options or warrants exercisable
within 60 days have been included in the denominator.

ITEM 13.        
CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS.

Transactions with Related Persons

The following includes a summary of transactions since the
beginning of the 2009 fiscal year, or any currently proposed transaction, in
which we were or are to be a participant and the amount involved exceeded or
exceeds the lesser of $120,000 or one percent of the average of our total assets
at year-end for the last two completed fiscal years, and in which any related
person had or will have a direct or indirect material interest (other than
compensation described under Item 11, Executive Compensation).

Our Chief Executive Officer, Yingsheng Li, and our director,
Xiaofeng Ding are also executive officers and/or directors of Sale and Marketing
Publishing House (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.

Except as set forth in our discussion above, 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.

Director Independence

Notwithstanding the fact that the Companys securities are not
listed on a U.S. securities stock exchange, the Board has determined to adhere
to the independence standards set forth in the Nasdaq Marketplace Rules. Under
the foregoing standards, the Board determined that none of our current director
meets independence requirements. The Company will seek to add members to its
Board and the Board committees (once they are established) as soon as
practicable.

ITEM 14.        
PRINCIPAL ACCOUNTANT FEES AND SERVICES.

The following is a summary of the fees billed to the Company by
our independent auditor, Child Van Wagoner & Bradshaw, PLLC, for
professional services rendered for the fiscal years ended December 31, 2010 and
2009:

|                      |   | 2010    |  |   | 2009    | 
|--------------------- | - | ------- |  | - | ------- | 
|                      |   |         |  |   |         | 
|Audit fees(1)         | $ | 155,000 |  | $ | 130,000 | 
|Audit-related fees(2) |   | 183     |  |   | 0       | 
|Tax fees(3)           |   | 10,500  |  |   | 10,500  | 
|All other fees        |   | 0       |  |   | 0       | 
|Total                 | $ | 165,683 |  | $ | 140,500 | 

32

---

|(1) | Consists of fees billed for the audit of our annual
      financial statements, review of financial statements included in our
      Quarterly Reports on Form 10-Q and services that are normally provided by
      the accountant in connection with statutory and regulatory filings or
      engagements.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                                              
|(2) | Consists of fees billed for all out-of-pocket expenses
      associated with performing audit and review services.                                                                                                                                                                                           
|    |                                                                                                                                                                                                                                                                                                              
|(3) | Consists of fees billed for professional services
      rendered by the principal accountant for tax compliance, tax advice, and
      tax planning.                                                                                                                                                         

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 services performed by Child Van Wagoner & Bradshaw, PLLC for
our consolidated financial statements as of and for the year ended December 31,
2010.

33

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PART IV

ITEM 15.        EXHIBITS,
FINANCIAL STATEMENTS SCHEDULES.

(a)
    The following documents are filed as
      part of this report:(1)
    Financial Statement are set
      forth beginning on page F-1 of the Report
    Report of Independent Registered Public
      Accounting Firm
    F-2
    Consolidated Balance Sheets
    F-3
    Consolidated Statement of Operations
    F-4 - 5
    Consolidated Statement of Cash Flows
    F-6 - 7
    Consolidated Statement of Stockholders Equity
    F-8
    Notes to Consolidated Statements
    F-9 - F-25(2)
    Financial Statement Schedules: All
      Schedules are omitted because the information called for is not
      applicable, is not required, or because the financial information is set
      forth in the financial statements or notes thereto.(3)
    Exhibits


|Exhibit Number | Description of Exhibit                                                                                                                                                                                                                                                                                                                            
|-------------- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|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                                                                                                                                                                 

34

---

|      | 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]                                                                        

35

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|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. [Incorporated by reference to Exhibit 10.20
        to the Annual Report of the Company on Form 10-KSB, filed with the SEC
        on April 18, 2008, in file number 0-51806]                                  
|      |                                                                                                                                                                                                                                                                                                                                                                     
|10.21 | Termination Agreement, dated December
        12, 2008, by and between Shenzhen New Media and Shanghai Longcom Telecom
        Co., Ltd. [Incorporated by reference to Exhibit 10.1 to the Current Report
        of the Company on Form 8-K, filed with the SEC on December 17, 2008, in
        file number 0-51806]                                              
|      |                                                                                                                                                                                                                                                                                                                                                                     
|14    | Code of Ethics [Incorporated by reference
        to Exhibit 14 to the Amendment No. 1 to the Registration Statement of
        the Company on Form 10-SB, filed with the SEC on January 3, 2007, in file
        number 0-51806]                                                                                                                                   
|      |                                                                                                                                                                                                                                                                                                                                                                     
|21    | List of Subsidiaries
        of the Registrant*                                                                                                                                                                                                                                                                                                                     
|      |                                                                                                                                                                                                                                                                                                                                                                     
|31.1  | Certification
        of Chief Executive Officer filed pursuant to Section 302 of the Sarbanes-
        Oxley Act of 2002*                                                                                                                                                                                                                                          

36

---

|31.2 | Certification
        of Chief Financial Officer filed pursuant to Section 302 of the Sarbanes-
        Oxley Act of 2002*                                                   
|---- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|     |                                                                                                                                                                              
|32.1 | Certifications
        of Chief Executive Officer furnished pursuant to 18 U.S.C. Section 1350,
        as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002*
|     |                                                                                                                                                                              
|32.2 | Certifications
        of Chief 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.                                                          
|-- | -------------------------------------------------------------------------
|   |                                                                          
|** | Represents management contract or compensatory plan or
      arrangement.

37

---

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the Company has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.

| | China Marketing Media Holdings, Inc.
| | ------------------------------------
| |                                     
| |                                     
| | By:
      /s/Yingsheng Li           
| | Yingsheng Li                        
| | Chief Executive Officer             
| | (Principal Executive Officer)       
| |                                     
| |                                     
| |                                     
| | Date: March 31, 2011                

Pursuant to the requirements of the Securities Exchange Act of
1934, this report has been signed below by the following persons on behalf of
the Company 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-K.

|Signature          |  | Capacity                                               | Date          
|------------------ |  | ------------------------------------------------------ | --------------
|                   |  |                                                        |               
|/s/ Yingsheng Li   |  | President, Chief Executive
      Officer and           | March 31, 2011
|Yingsheng Li       |  | Chairman                                               |               
|                   |  |                                                        |               
|/s/ Xiaofeng Ding  |  | Director                                               | March 31, 2011
|Xiaofeng Ding      |  |                                                        |               
|                   |  |                                                        |               
|/s/ Dongsheng Ren  |  | Director                                               | March 31, 2011
|Dongsheng Ren      |  |                                                        |               
|                   |  |                                                        |               
|/s/ Bin Li         |  | Executive Director                                     | March 31, 2011
|Bin Li             |  |                                                        |               
|                   |  |                                                        |               
|/s/ Wengao Luo     |  | Chief Operating Officer                                | March 31, 2011
|Wengao Luo         |  |                                                        |               
|                   |  |                                                        |               
|/s/ Zhen Zhen Peri |  | Chief Financial Officer
      (Principal Financial and | March 31, 2011
|Zhen Zhen Peri     |  | Accounting Officer)                                    |               

---



|                                              
|----------------------------------------------
|CHINA MARKETING MEDIA HOLDINGS, INC.          
|                                              
|Consolidated Financial Statements             
|For The Years Ended December 31, 2010 and 2009
|                                              



---

CHINA MARKETING MEDIA HOLDINGS, INC.

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

|                                                                   | Page      
|------------------------------------------------------------------ | ----------
|Consolidated Balance
    Sheets                                    | F-3       
|Consolidated Statements of Operations And
    Comprehensive Income | F-4  F-5 
|Consolidated Statements
    of Cash Flows                          | F-6  F-7 
|Consolidated Statements of Changes in
    Equity                   | F-8       
|Notes to Consolidated
    Financial Statements                     | F-9  F-25

F-1

---

| |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
| |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
      To The Board of Directors and Stockholders of
      China Marketing Media Holdings, Inc. 
      Beijing, China
      We have audited the accompanying consolidated balance
      sheets of China Marketing Media Holdings, Inc. (the Company) as of
      December 31, 2010 and 2009, and the related consolidated statements of
      operations and comprehensive income, cash flows, and changes in equity for
      the years ended December 31, 2010 and 2009. 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 of
      America). 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, 2010
      and 2009, and the results of its operations and its cash flows for the
      years ended December 31, 2010 and 2009, in conformity with accounting
      principles generally accepted in the United States of America.
      
      Child, Van Wagoner & Bradshaw, PLLC Salt Lake
      City, Utah March 31, 2011

F-2

---



|CHINA MARKETING MEDIA HOLDINGS, INC.                 
|-----------------------------------------------------
|CONSOLIDATED BALANCE SHEETS                          
|AS OF DECEMBER 31, 2010 AND 2009                     
|(Currency expressed in United States Dollars (US$))



|                                                                                                                         |   | As of December 31, |  
|------------------------------------------------------------------------------------------------------------------------ | - | ------------------ | -
|                                                                                                                         |   | 2010               |  
|ASSETS                                                                                                                   |   |                    |  
|Current assets:                                                                                                          |   |                    |  
|Cash and cash equivalents                                                                                                | $ | 7,177,767          |  
|Accounts receivable                                                                                                      |   | 2,295,022          |  
|Prepaid expenses                                                                                                         |   | 3,846,569          |  
|Inventory                                                                                                                |   | 653,857            |  
|                                                                                                                         |   |                    |  
|Total current assets                                                                                                     |   | 13,973,215         |  
|                                                                                                                         |   |                    |  
|Non-current assets:                                                                                                      |   |                    |  
|Loan receivable                                                                                                          |   | -                  |  
|Long-term investments                                                                                                    |   | 2,716,212          |  
|Related party receivables 
    affiliates                                                                               |   | 3,020,402          |  
|Related party receivables                                                                                                |   | 366,133            |  
|Other receivable                                                                                                         |   | 828,181            |  
|Investment held to maturity                                                                                              |   | 907,468            |  
|Goodwill                                                                                                                 |   | 382,345            |  
|Property, plant and equipment                                                                                            |   | 1,824,157          |  
|Less: accumulated depreciation                                                                                           |   | (667,574           | )
|License agreement                                                                                                        |   | 1,533,373          |  
|Less: accumulated amortization                                                                                           |   | (1,077,588         | )
|                                                                                                                         |   |                    |  
|Total non-current assets                                                                                                 |   | 9,833,109          |  
|                                                                                                                         |   |                    |  
|TOTAL ASSETS                                                                                                             | $ | 23,806,324         |  
|                                                                                                                         |   |                    |  
|LIABILITIES AND EQUITY                                                                                                   |   |                    |  
|Current liabilities:                                                                                                     |   |                    |  
|Accounts payable                                                                                                         | $ | 828,692            |  
|Accrued expenses and levies                                                                                              |   | 153,582            |  
|Deferred revenues                                                                                                        |   | 1,113,735          |  
|Taxes payable                                                                                                            |   | 197,433            |  
|Other payable                                                                                                            |   | 521,480            |  
|                                                                                                                         |   |                    |  
|Total current liabilities                                                                                                |   | 2,814,922          |  
|                                                                                                                         |   |                    |  
|Long-term liabilities:                                                                                                   |   |                    |  
|Deferred tax liability                                                                                                   |   | 28,329             |  
|                                                                                                                         |   |                    |  
|Total liabilities                                                                                                        |   | 2,843,251          |  
|                                                                                                                         |   |                    |  
|Commitments and contingencies                                                                                            |   |                    |  
|                                                                                                                         |   |                    |  
|Equity:                                                                                                                  |   |                    |  
|China Marketing Media Holdings, Inc.
    stockholders equity:                                                           |   |                    |  
|Common stock, no par value, 100,000,000 shares authorized,   
    28,686,002 shares issued and outstanding, respectively |   | 1,112,546          |  
|Additional paid-in capital                                                                                               |   | 165,000            |  
|Retained earnings                                                                                                        |   | 17,070,517         |  
|Accumulated other comprehensive
    income                                                                               |   | 2,615,010          |  
|Total China Marketing Media Holdings, Inc. stockholders
    equity                                                      |   | 20,963,073         |  
|Non-controlling interests                                                                                                |   | -                  |  
|Total equity                                                                                                             |   | 20,963,073         |  
|                                                                                                                         |   |                    |  
|TOTAL LIABILITIES AND EQUITY                                                                                             | $ | 23,806,324         |  

See accompanying notes to consolidated financial statements.

F-3

---



|CHINA MARKETING MEDIA HOLDINGS, INC.                 
|-----------------------------------------------------
|CONSOLIDATED STATEMENTS OF OPERATIONS                
|AND COMPREHENSIVE INCOME                             
|FOR THE YEARS ENDED DECEMBER 31, 2010 AND 2009       
|(Currency expressed in United States Dollars (US$))



|                                                                                                                      |   | Years ended December 31, |  
|--------------------------------------------------------------------------------------------------------------------- | - | ------------------------ | -
|                                                                                                                      |   | 2010                     |  
|Revenue, net                                                                                                          |   |                          |  
|Magazine advertising                                                                                                  | $ | 14,407,940               |  
|Consumer products                                                                                                     |   | 20,563,361               |  
|Total operating revenue, net                                                                                          |   | 34,971,301               |  
|                                                                                                                      |   |                          |  
|Cost of revenue                                                                                                       |   |                          |  
|Magazine advertising                                                                                                  |   | 3,634,990                |  
|Consumer products                                                                                                     |   | 19,839,929               |  
|Total cost of revenue                                                                                                 |   | 23,474,919               |  
|                                                                                                                      |   |                          |  
|Gross profit                                                                                                          |   | 11,496,382               |  
|                                                                                                                      |   |                          |  
|Operating expenses:                                                                                                   |   |                          |  
|Impairment loss on goodwill                                                                                           |   | 446,543                  |  
|General and administrative                                                                                            |   | 6,707,491                |  
|Total operating expenses                                                                                              |   | 7,154,034                |  
|                                                                                                                      |   |                          |  
|Income from operations                                                                                                |   | 4,342,348                |  
|                                                                                                                      |   |                          |  
|Other income (expense):                                                                                               |   |                          |  
|Interest income                                                                                                       |   | 112,440                  |  
|Interest expense                                                                                                      |   | (78,631                  | )
|Investment loss (equity method)                                                                                       |   | (42,256                  | )
|Subsidy income                                                                                                        |   | 40,586                   |  
|Other income                                                                                                          |   | 453                      |  
|Total other income                                                                                                    |   | 32,592                   |  
|                                                                                                                      |   |                          |  
|Income from continuing operations before income taxes                                                                 |   | 4,374,940                |  
|                                                                                                                      |   |                          |  
|Income tax expense                                                                                                    |   | (56,950                  | )
|                                                                                                                      |   |                          |  
|Income from continuing operations, net of tax                                                                         |   | 4,317,990                |  
|                                                                                                                      |   |                          |  
|Discontinued operations, net of tax                                                                                   |   | 20,616                   |  
|                                                                                                                      |   |                          |  
|NET INCOME                                                                                                            | $ | 4,338,606                |  
|                                                                                                                      |   |                          |  
|(Subtract) add: net (income) loss attributable to
    non-controlling interests                                       |   | (28,342                  | )
|                                                                                                                      |   |                          |  
|Net income attributable to China Marketing Media Holdings,
    Inc.                                                   | $ | 4,310,264                |  
|                                                                                                                      |   |                          |  
|Earnings per share  basic and diluted:                                                                               |   |                          |  
|Income from continuing operations
    attributable to China    Marketing Media Holdings, Inc. common
    stockholders | $ | 0.15                     |  
|Discontinued operations attributable to China Marketing Media   
    Holdings, Inc. common stockholders               |   | 0.00                     |  
|Net income attributable to China Marketing
    Media Holdings,    Inc. common stockholders                            | $ | 0.15                     |  
|                                                                                                                      |   |                          |  
|Weighted average common stock outstanding 
    basic and diluted                                                     |   | 28,686,002               |  

See accompanying notes to consolidated financial statements.

F-4

---



|CHINA MARKETING MEDIA HOLDINGS, INC.                 
|-----------------------------------------------------
|CONSOLIDATED STATEMENTS OF OPERATIONS                
|AND COMPREHENSIVE INCOME (CONTINUED)                 
|FOR THE YEARS ENDED DECEMBER 31, 2010 AND 2009       
|(Currency expressed in United States Dollars (US$))



|                                                                              |   | Years ended December 31, | 
|----------------------------------------------------------------------------- | - | ------------------------ | 
|                                                                              |   | 2010                     | 
|                                                                              |   |                          | 
|NET INCOME                                                                    | $ | 4,338,606                | 
|Other comprehensive income:                                                   |   |                          | 
|- Foreign currency translation gain                                           |   | 667,661                  | 
|                                                                              |   |                          | 
|COMPREHENSIVE INCOME                                                          | $ | 5,006,267                | 
|                                                                              |   |                          | 
|Comprehensive income (loss) attributable to non-controlling
    interests     | $ | 28,342                   | 
|Comprehensive income attributable to China
    Marketing Media Holdings, Inc. | $ | 4,977,925                | 

See accompanying notes to consolidated financial statements.

F-5

---



|CHINA MARKETING MEDIA HOLDINGS, INC.                 
|-----------------------------------------------------
|CONSOLIDATED STATEMENTS OF CASH FLOWS                
|FOR THE YEARS ENDED DECEMBER 31, 2010 AND 2009       
|(Currency expressed in United States Dollars (US$))



|                                                                                |   | Years ended December 31, |  
|------------------------------------------------------------------------------- | - | ------------------------ | -
|                                                                                |   | 2010                     |  
|Cash flows from operating
    activities:                                       |   |                          |  
|Net income                                                                      | $ | 4,338,606                |  
|Net (income) from discontinued
    operations                                   |   | (20,616                  | )
|Net income from continuing operations                                           |   | 4,317,990                |  
|Adjustments to reconcile income
    from continuing operations to net           |   |                          |  
|cash provided by (used
    in) operating activities:                            |   |                          |  
|Amortization and
    depreciation                                               |   | 332,251                  |  
|Loss on disposal of
    property, plant and equipment                           |   | 11,129                   |  
|Investment loss (equity
    method)                                             |   | 35,691                   |  
|Impairment loss on
    goodwill                                                 |   | 446,543                  |  
|Changes in operating assets and
    liabilities:                                |   |                          |  
|Accounts receivable                                                             |   | 565,965                  |  
|Prepaid expenses                                                                |   | (3,168,193               | )
|Inventory                                                                       |   | (355,534                 | )
|Other receivable                                                                |   | (314,348                 | )
|Due from major sales
    agents                                                 |   | -                        |  
|Accounts payable and
    accrued expenses                                       |   | 713,773                  |  
|Deferred revenues                                                               |   | 741,230                  |  
|Taxes payable                                                                   |   | 100,009                  |  
|Other payable                                                                   |   | 166,615                  |  
|Deferred tax liability                                                          |   | 27,632                   |  
|                                                                                |   |                          |  
|Net cash provided by (used in)
    operating activities  continuing operations |   | 3,620,753                |  
|Net cash used in discontinued
    operations                                    |   | (9,688                   | )
|                                                                                |   |                          |  
|Net cash provided by (used in)
    operating activities                         |   | 3,611,065                |  
|                                                                                |   |                          |  
|Cash flows from investing
    activities:                                       |   |                          |  
|Purchase of property,
    plant and equipment                                   |   | (47,610                  | )
|Purchase of intangible
    assets                                               |   | -                        |  
|Receipt of loan advances
    from a third party                                 |   | 1,180,159                |  
|Payment on loan
    advances to a third party                                   |   | -                        |  
|Refund from investment
    deposit                                              |   | -                        |  
|Purchase of investments                                                         |   | (2,216,337               | )
|Purchase of investment
    held to maturity                                     |   | (885,119                 | )
|Related party
    receivables - affiliates                                      |   | (245,467                 | )
|                                                                                |   |                          |  
|Net cash (used in) provided by
    investing activities  continuing operations |   | (2,214,374               | )
|Net cash used in discontinued
    operations                                    |   | (4,236                   | )
|                                                                                |   |                          |  
|Net cash (used in) provided by
    investing activities                         |   | (2,218,610               | )

See accompanying notes to consolidated financial statements.

F-6

---



|CHINA MARKETING MEDIA HOLDINGS, INC.                 
|-----------------------------------------------------
|CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)    
|FOR THE YEARS ENDED DECEMBER 31, 2010 AND 2009       
|(Currency expressed in United States Dollars (US$))



|                                                                  |   | Years ended December 31, | 
|----------------------------------------------------------------- | - | ------------------------ | 
|                                                                  |   | 2010                     | 
|Cash flows from financing activities:                             |   |                          | 
|Repayment of related party payables                               |   | -                        | 
|Net cash used in financing activities 
    continuing operations |   | -                        | 
|Net cash used in discontinued operations                          |   | -                        | 
|Net cash used in financing activities                             |   | -                        | 
|Effect of exchange rate changes in cash and cash equivalents      |   | 238,563                  | 
|NET CHANGE IN CASH AND CASH EQUIVALENTS                           |   | 1,631,018                | 
|BEGINNING OF YEAR                                                 |   | 5,546,749                | 
|END OF YEAR                                                       | $ | 7,177,767                | 
|SUPPLEMENTAL DISCLOSURE OF CASH FLOW
    INFORMATION:             |   |                          | 
|Cash paid for income taxes                                        | $ | 26,881                   | 
|Cash paid for interest                                            | $ | -                        | 

See accompanying notes to consolidated financial statements.

F-7

---



|CHINA MARKETING MEDIA HOLDINGS, INC.                 
|-----------------------------------------------------
|CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY         
|FOR THE YEARS ENDED DECEMBER 31, 2010 AND 2009       
|(Currency expressed in United States Dollars (US$))



|                                        |  | Stockholders equity |  |   |           |  |   |            | 
|--------------------------------------- |  | -------------------- |  | - | --------- |  | - | ---------- | 
|                                        |  |                      |  |   |           |  |   |            | 
|                                        |  |                      |  |   |           |  |   |            | 
|                                        |  | Common stock         |  |   | Retained  |  |   | Additional | 
|                                        |  | No. of
    shares    |  |   | Amount    |  |   | earnings   | 
|Balance at January 1, 2009              |  | 28,686,002           |  | $ | 1,112,546 |  | $ | 11,254,479 | 
|Net income (loss) for the year          |  | -                    |  |   | -         |  |   | 1,505,774  | 
|Foreign currency translation adjustment |  | -                    |  |   | -         |  |   | -          | 
|Balance as of December 31, 2009         |  | 28,686,002           |  | $ | 1,112,546 |  | $ | 12,760,253 | 
|Net income for the year                 |  | -                    |  |   | -         |  |   | 4,310,264  | 
|Foreign currency translation adjustment |  | -                    |  |   | -         |  |   | -          | 
|Balance as of December 31, 2010         |  | 28,686,002           |  | $ | 1,112,546 |  | $ | 17,070,517 | 

See accompanying notes to consolidated financial statements.

F-8

---



|CHINA MARKETING MEDIA HOLDINGS, INC.                 
|-----------------------------------------------------
|NOTES TO CONSOLIDATED FINANCIAL STATEMENTS           
|FOR THE YEARS ENDED DECEMBER 31, 2010 AND 2009       
|(Currency expressed in United States Dollars (US$))



|1. | ORGANIZATION AND BUSINESS BACKGROUND
|-- | ------------------------------------

China Marketing Media Holdings, Inc. ("China Marketing", CMKM
or the "Company") was incorporated under the laws of the State of Texas on
October 29, 1999.

The Company engages in the sale of its magazines and
advertising space within its magazines, which are sold throughout China; and
provides consulting services to clients concerning advertising and marketing
matters. The Company also conducts online sales of electronic products through
Shenzhen Media Investment Co., Ltd. ("Shenzhen Media").

Recapitalization and restructuring

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 laws of the People's Republic of
China ("PRC").

According to an agreement, dated March 7, 2005, Shenzhen New
Media acquired 100% of Shenzhen Media, an entity controlled by six common owners
of Media Challenge. Shenzhen Media was formed on October 22, 2003, under the
laws of the 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 the 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 the PRC known as Shenzhen New Media Advertising Co., Ltd. ("NMA").
The registered capital of NMA is one million RMB (approximately $122,100).

In November 2007, Shenzhen Media formed a new 52% owned
subsidiary in the PRC known as Beijing Orient Converge Human Resources
Management Center Co. Ltd. ("BJOC"). The registered capital of BJOC is RMB
5,000,000 (approximately $684,500).

On July 18, 2008, Shenzhen New Media formed a new 51% owned
subsidiary, Shanghai Zhiduo Network Technology Company Limited ("SZNT") under
the laws of the PRC. The registered capital of SZNT is RMB 1,000,000
(approximately $142,879). SZNT is engaged in the business of management
consulting services and brand name consulting services.

F-9

---



|CHINA MARKETING MEDIA HOLDINGS, INC.                 
|-----------------------------------------------------
|NOTES TO CONSOLIDATED FINANCIAL STATEMENTS           
|FOR THE YEARS ENDED DECEMBER 31, 2010 AND 2009       
|(Currency expressed in United States Dollars (US$))

On August 2, 2008, Shenzhen Media sold 42% ownership of BJOC to
Shanghai Cheng Mei Biotechnology Co., Ltd. ("Shanghai Cheng Mei") for a cash
price of $141,831 (equivalent to RMB 987,461). After the sale, Shenzhen Media
owns 10% of BJOC.

On March 18, 2010, the Companys 51%-owned subsidiary, SZNT,
discontinued its operations and applied for liquidation process with the local
government. The liquidation process was completed and finalized on August 27,
2010.

The consolidated entity is hereafter referred to as "the
Company".

|2. | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
|-- | ------------------------------------------



| | Basis of presentation
| | ---------------------

These accompanying consolidated financial statements have been
prepared in accordance with generally accepted accounting principles in the
United States of America (U.S. GAAP).

| | Use of estimates
| | ----------------

In preparing these consolidated financial statements,
management makes estimates and assumptions that affect the reported amounts of
assets and liabilities in the balance sheets and revenues and expenses during
the years reported. Actual results may differ from these estimates.

| | Basis of consolidation
| | ----------------------

The consolidated financial statements reflect the consolidated
operations of CMKM and its subsidiaries. All significant inter-company balances
and transactions have been eliminated in consolidation.

| | 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.

| | Accounts receivable
| | -------------------

Accounts receivable are recognized and carried at original
invoice amount less an allowance for any uncollectible amounts. Management
reviews the adequacy of the allowance for doubtful accounts on an ongoing basis,
using historical collection trends and aging of receivables. Management also
periodically evaluates individual customers financial condition, credit
history, and the current economic conditions to make adjustments in the
allowance when it is considered necessary. Account balances are charged off
against the allowance after all means of collection have been exhausted and the
potential for recovery is considered remote. The Company does not have any
off-balance-sheet credit exposure related to its customers.

| | Inventory
| | ---------

Inventories mainly consist of the electronic products purchased
from third parties, which are stated at the lower of cost, as determined on a
first-in, first-out basis, or market. Management compares the cost of
inventories with the market value, and allowance is made for writing down the
inventories to their market value, if lower.

F-10

---



|CHINA MARKETING MEDIA HOLDINGS, INC.                 
|-----------------------------------------------------
|NOTES TO CONSOLIDATED FINANCIAL STATEMENTS           
|FOR THE YEARS ENDED DECEMBER 31, 2010 AND 2009       
|(Currency expressed in United States Dollars (US$))

| |                              
| | -----------------------------
| | Property, plant and equipment

Property, plant and equipment are stated at cost less
accumulated depreciation and accumulated impairment losses, if any. Depreciation
is calculated on the straight-line basis over the following expected useful
lives from the date on which they become fully operational and after taking into
account their estimated residual values:

|                        |  | Expected useful life |  |  | Residual value | 
|----------------------- |  | -------------------- |  |  | -------------- | 
|Buildings               |  | 20 years             |  |  | 5%             | 
|Motor vehicles          |  | 5 years              |  |  | 5%             | 
|Furniture and equipment |  | 5 years              |  |  | 5%             | 
|Computer equipment      |  | 5 years              |  |  | 5%             | 

Expenditure for maintenance and repairs is expensed as
incurred. The gain or loss on the disposal of plant and equipment is the
difference between the net sales proceeds and the carrying amount of the
relevant assets and is recognized in the statement of operations.

|                                   |   | As of December 31, |  
|---------------------------------- | - | ------------------ | -
|                                   |   | 2010               |  
|                                   |   |                    |  
|Buildings                          | $ | 1,114,923          |  
|Motor vehicles                     |   | 356,669            |  
|Furniture and equipment            |   | 136,685            |  
|Computer equipment                 |   | 215,880            |  
|                                   |   | 1,824,157          |  
|Less: accumulated depreciation     |   | (667,574           | )
|                                   |   |                    |  
|Property, plant and equipment, net | $ | 1,156,583          |  

Depreciation expense for the years ended December 31, 2010 and
2009 was $172,640 and $174,746, respectively.

Long-lived assets of the Company are reviewed annually to
assess whether the carrying value has become impaired according to the
guidelines established in the Accounting Standards Codification ("ASC") Topic
360-10-5, Impairment or Disposal of Long-Lived Assets.No impairment of
assets was recorded during the years reported.

| | Goodwill
| | --------

The Company evaluates the carrying value of goodwill during the
fourth quarter of each year and between annual evaluations if events occur or
circumstances change that would more likely than not reduce the fair value of
the reporting unit below its carrying amount. Such circumstances could include,
but are not limited to (1) a significant adverse change in legal factors or in
business climate, (2) unanticipated competition, or (3) an adverse action or
assessment by a regulator. When evaluating whether goodwill is impaired, the
Company compares the fair value of the reporting unit to which the goodwill is
assigned to the reporting units carrying amount, including goodwill. The fair
value of the reporting unit is estimated using a combination of the income, or
discounted cash flows, approach and the market approach, which utilizes
comparable companies data. If the carrying amount of a reporting unit exceeds
its fair value, then the amount of the impairment loss must be measured. The
impairment loss would be calculated by comparing the implied fair value of
reporting unit goodwill to its carrying amount. In calculating the implied fair
value of reporting unit goodwill, the fair value of the reporting unit is
allocated to all of the other assets and liabilities of that unit based on their
fair values. The excess of the fair value of a reporting unit over the amount
assigned to its other assets and liabilities is the implied fair value of
goodwill. An impairment loss would be recognized when the carrying amount of
goodwill exceeds its implied fair value. The Companys evaluation of goodwill
completed during the year resulted in an impairment loss of $446,543.

F-11

---



|CHINA MARKETING MEDIA HOLDINGS, INC.                 
|-----------------------------------------------------
|NOTES TO CONSOLIDATED FINANCIAL STATEMENTS           
|FOR THE YEARS ENDED DECEMBER 31, 2010 AND 2009       
|(Currency expressed in United States Dollars (US$))

| |                  
| | -----------------
| | Intangible assets

In accordance with ASC Topic 350-50, General Intangibles
Other Than Goodwill,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, 2010 and 2009.

Amortization expense of the license agreement included in cost
of revenue for the years ended December 31, 2010 and 2009 was $159,611 and
$142,201, respectively.

As of December 31, 2010, estimated future annual amortization
expense related to the license agreement in the next three years is as follows:

|Years ending December 31: |   |         | 
|------------------------- | - | ------- | 
|2011                      | $ | 151,928 | 
|2012                      |   | 151,928 | 
|2013                      |   | 151,929 | 
|                          |   |         | 
|Total:                    | $ | 455,785 | 



| | Long-term investments
| | ---------------------

Long-term investments represent cost and equity method
investments in the PRC. Equity method investments are recorded at original cost
and adjusted to recognize the Companys proportionate share of the investees
net income or losses and additional contributions made and distributions
received. The Company recognizes a loss if it is determined that other than
temporary decline in the value of the investment exists. The Company also
accounts for investments, other than marketable securities, with ownership less
than 20% using the cost method.

|(a) | Shenzhen Keungxi Technology Company Ltd. ("SKTC")
|--- | -------------------------------------------------

SKTC was incorporated in China in October 2005. Its business
scope includes, among others, sales and development of computer software, and
computer and communication systems. It also provides information system
consulting services. The Company, through Shenzhen Media, holds 48% of the
equity interest of SKTC and three individual shareholders, Wengao Luo, Xi Chen
and Bin Li own the remaining 21.5%, 21.5% and 9% equity interest of SKTC,
respectively and accounts for the investment using the equity method.

F-12

---



|CHINA MARKETING MEDIA HOLDINGS, INC.                 
|-----------------------------------------------------
|NOTES TO CONSOLIDATED FINANCIAL STATEMENTS           
|FOR THE YEARS ENDED DECEMBER 31, 2010 AND 2009       
|(Currency expressed in United States Dollars (US$))

|                                |   |         |  
|------------------------------- | - | ------- | -
|Balance as of December 31, 2005 | $ | 78,555  |  
|Investment loss (48%)           |   | (41,835 | )
|Advances made to SKTC           |   | 166,031 |  
|Balance as of December 31, 2006 |   | 202,751 |  
|Investment loss (48%)           |   | (49,916 | )
|Advances made to SKTC           |   | 217,541 |  
|Balance as of December 31, 2007 |   | 370,376 |  
|Investment loss (48%)           |   | (47,908 | )
|Advances made to SKTC           |   | 22,123  |  
|Balance as of December 31, 2008 |   | 344,591 |  
|Investment loss (48%)           |   | (33,455 | )
|Advances made to SKTC           |   | 71,915  |  
|Balance as of December 31, 2009 |   | 383,051 |  
|Investment loss (48%)           |   | (2,527  | )
|Advances made to SKTC           |   | 21,331  |  
|Balance as of December 31, 2010 | $ | 401,855 |  



|(b) | Shanghai Qiyu Information Technology Co., Limited
    (SQIT)
|--- | --------------------------------------------------------------

SQIT was incorporated in China in November 2007 and is mainly
engaged in the provision of network services. In January 2009, the Company,
through Shenzhen Media, holds 30% of the equity interest of SQIT and accounts
for the investment using the equity method. The investment was liquidated on
January 19, 2010.

|(c) | Beijing Orient Converge Human Resources
    Management Center Co. Ltd (BJOC)
|--- | ------------------------------------------------------------------------------

BJOC was incorporated in China in October 2004 and is mainly
engaged in providing consultation, professional training and relevant sale and
marketing services to business enterprises in China. In November 2007, the
Company, through Shenzhen Media, held 52% of the equity interest of BJOC and
accounted for the investment in consolidation.

On August 2, 2008, the Companys subsidiary, Shenzhen Media,
sold 42% ownership of BJOC to Shanghai Cheng Mei Biotechnology Co., Ltd.
("Shanghai Cheng Mei") for a cash consideration of $141,831 (equivalent to RMB
987,461). As of December 31, 2010, the Company, through Shenzhen Media owns the
remaining 10% of BJOC amounting to $75,622 and records this investment using the
cost method.

|(d) | Shenzhen Directory Marketing Management Co. Ltd
    (SDMM)
|--- | ------------------------------------------------------------

SDMM was incorporated in China in June 2010 and is mainly
engaged in providing advertising services, business enterprises marketing
planning services and information system consulting services. The Company,
through Shenzhen Media, holds 30% of the equity interest of SDMM and one
individual shareholder, Ge Zhihong, owns the remaining 70% equity interest of
SDMM, respectively and accounts for the investment using the equity method.

F-13

---



|CHINA MARKETING MEDIA HOLDINGS, INC.                 
|-----------------------------------------------------
|NOTES TO CONSOLIDATED FINANCIAL STATEMENTS           
|FOR THE YEARS ENDED DECEMBER 31, 2010 AND 2009       
|(Currency expressed in United States Dollars (US$))



|Purchases of investment         | $ | 2,268,671 |  
|------------------------------- | - | --------- | -
|Investment loss (30%)           |   | (95,156   | )
|Balance as of December 31, 2010 | $ | 2,173,515 |  



|(e) | Beijing Guangrun Lingzhi International
    Advertising Co. Ltd. (BJGL)
|--- | ------------------------------------------------------------------------

BJGL was incorporated in China in November 2010 and is mainly
engaged in providing advertising services. The Company, through Beijing Media,
holds 40% of the equity interest of BJGL and one corporate shareholder,
Highlight Consulting Co., Ltd., and two individual shareholders, Tianyou Cai and
Tieying Luo, own the remaining 40%, 10% and 10% equity interest of BJGL,
respectively and accounts for the investment using the equity method.

|Purchases of investment         | $ | 3,630 |  
|------------------------------- | - | ----- | -
|Investment loss (40%)           |   | (84   | )
|Balance as of December 31, 2010 | $ | 3,546 |  



|(f) | Beijing Kang Pusen Media Consultation Planning
    Co., Ltd. (BJKP)
|--- | ---------------------------------------------------------------------

BJKP was incorporated in China in March 2008 and is mainly
engaged in providing sales training services. The Company, through Shenzhen New
Media, holds 20% of the equity interest of BJKP and four individual
shareholders, Xiaofang Wang, Yi Rong, Qiang Zhao and Lijie Wang, own the
remaining 50%, 10%, 10% and 10% equity interest of BJKP, respectively and
accounts for the investment using the equity method.

|Purchases of investment         | $ | -      | 
|------------------------------- | - | ------ | 
|Investment loss (20%)           |   | 61,674 | 
|Balance as of December 31, 2010 | $ | 61,674 | 



| | Investment held to maturity
| | ---------------------------

Investment in unit trusts in the PRC, which the Company has the
intent and ability to hold to maturity are reported at amortized cost, adjusted
for premiums and discounts that are recognized in interest income using the
interest method over the period to maturity.

| | Non-controlling interest
| | ------------------------

Non-controlling interest represents non-controlling owners 49%
of equity in SZNT for the years ended December 31, 2010 and 2009. SZNT
discontinued its operations and applied for liquidation process with the local
government. The liquidation process was completed and finalized on August 27,
2010.

| | Revenue recognition
| | -------------------

In accordance with ASC Topic 605, "Revenue Recognition",
the Company recognizes revenue when persuasive evidence of an arrangement
exists, transfer of title has occurred or services have been rendered, the
selling price is fixed or determinable and collectibility is reasonably assured.

|(a) | Magazine advertising
|--- | --------------------

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-14

---



|CHINA MARKETING MEDIA HOLDINGS, INC.                 
|-----------------------------------------------------
|NOTES TO CONSOLIDATED FINANCIAL STATEMENTS           
|FOR THE YEARS ENDED DECEMBER 31, 2010 AND 2009       
|(Currency expressed in United States Dollars (US$))

The Company recognizes revenues for the advertising sales and
consulting service ratably over the periods when the customer's advertisements
are published and services are provided. Total revenue from the advertising
sales is $9,376,304 and $4,504,651 for the years ended December 31, 2010 and
2009, respectively. Total revenue from marketing consulting service is
$3,384,896 and $3,344,962 for the years ended December 31, 2010 and 2009,
respectively.

The Company recognizes revenue from the publishing of the 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 $1,646,740 and $1,638,966 for years
ended December 31, 2010 and 2009, respectively.

|(b) | Consumer products
|--- | -----------------

Since the fourth quarter of 2008, the Company commenced the
business line of selling consumer products on the internet portal www.ipinipin.com, which attributed $20,563,361 and
$15,411,781 of revenue for the years ended December 31, 2010 and 2009,
respectively.

The Company derives the major revenues from the trading of
consumer products. The Company recognizes its revenues net of value-added taxes
(VAT) when the products are delivered to the customers, which occurs when the
customer has taken title and has assumed the risks and rewards of ownership,
prices are fixed or determinable and collectibility is reasonably assured.

An analysis of the Companys revenues by products is as
follows:

|                             |   | Years ended December 31, | 
|---------------------------- | - | ------------------------ | 
|                             |   | 2010                     | 
|Magazine advertising:        |   |                          | 
|Advertising pages sales      | $ | 9,376,304                | 
|Marketing consulting service |   | 3,384,896                | 
|Publishing                   |   | 1,646,740                | 
|Total magazine advertising   |   | 14,407,940               | 
|Consumer products            |   | 20,563,361               | 
|                             |   |                          | 
|Total revenue                | $ | 34,971,301               | 



| | Cost of revenue
| | ---------------



|(a) | Magazine advertising
|--- | --------------------

Cost of revenue 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 customers. 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.

F-15

---



|CHINA MARKETING MEDIA HOLDINGS, INC.                 
|-----------------------------------------------------
|NOTES TO CONSOLIDATED FINANCIAL STATEMENTS           
|FOR THE YEARS ENDED DECEMBER 31, 2010 AND 2009       
|(Currency expressed in United States Dollars (US$))

Second, order distribution involves requests 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 requests 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 in turn distribute the magazines to retail agents at various
locations throughout China. The Company granted sales agents a two-month return
privilege. Average return rate for the years ended December 31, 2010 and 2009
was 17% and 11%, respectively.

In accordance with the provisions of ASC Topic 605-15-25-1, Sales
of Product when Right of Return Exists (ASC 605-15-25-1), 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.                                                                                            

The Company recognizes magazine sales revenue in accordance
with the provisions of ASC 605-15-25-1: first, our price to the sales agent is
fixed; second, the sales agent has to pay us fully upon order request and the
payment is not contingent on resale of the magazines; third, the Company is not
responsible in the event of theft or physical destruction or damage of the
product after delivery; fourth, our sales agents include bookstores, reading
groups, and culture groups, etc.; fifth, the Company has no obligations to
resell the magazines distributed to sales agents; and finally, the amount of
returns can be reasonably estimated and are included in accrued liabilities.

|(b) | Consumer products
|--- | -----------------

Cost of revenue consists primarily of purchase cost of consumer
products, direct labor and other overheads, which are directly attributable to
the sale of consumer products. Shipping and handling cost, associated with the
delivery of consumer products to the customers, are recorded in cost of revenue
and are recognized when the related product is delivered to the customer.

| | Advertising expenses
| | --------------------

Advertising costs are expensed as incurred under ASC Topic
720-35, Advertising Costs. The Company incurred advertising costs of
$85,659 and $57,180 for the years ended December 31, 2010 and 2009.

| | 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 period. 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:

F-16

---



|CHINA MARKETING MEDIA HOLDINGS, INC.                 
|-----------------------------------------------------
|NOTES TO CONSOLIDATED FINANCIAL STATEMENTS           
|FOR THE YEARS ENDED DECEMBER 31, 2010 AND 2009       
|(Currency expressed in United States Dollars (US$))

|                                                                                                                   |   |                          |  
|------------------------------------------------------------------------------------------------------------------ | - | ------------------------ | -
|                                                                                                                   |   | Years ended December 31, |  
|                                                                                                                   |   | 2010                     |  
|Numerator for basic and diluted EPS                                                                                |   |                          |  
|Income from continuing
    operations attributable to China Marketing Media Holdings, Inc. common
    stockholders | $ | 4,317,990                |  
|Discontinued operations
    attributable to China Marketing Media Holdings, Inc. common stockholders               |   | (7,726                   | )
|Net income attributable to
    China Marketing Media Holdings, Inc. common stockholders                            | $ | 4,310,264                |  
|                                                                                                                   |   |                          |  
|Denominator for basic and
    diluted EPS                                                                          |   |                          |  
|- Weighted average shares
    of common stock outstanding                                                          |   | 28,686,002               |  
|                                                                                                                   |   |                          |  
|Earnings per share  basic
    and diluted                                                                         |   |                          |  
|Income from continuing
    operations attributable to China Marketing Media Holdings, Inc. common
    stockholders | $ | 0.15                     |  
|Discontinued operations
    attributable to China Marketing Media Holdings, Inc. common stockholders               | $ | 0.00                     |  
|Net income attributable to
    China Marketing Media Holdings, Inc. common stockholders                            | $ | 0.15                     |  



| | Foreign currency translation and comprehensive
    income
| | ---------------------------------------------------------

The accompanying financial statements are presented in United
States Dollars (US$). The functional currency is Renminbi Yuan ("RMB") of the
PRC. The financial statements are translated into US$ 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.

On July 21, 2005, the PRC changed its foreign currency exchange
policy from a fixed RMB/US$ exchange rate into a flexible rate under the control
of the PRC's government. The Company uses 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$ at rates used in translation.

| | Income taxes
| | ------------

The Company adopted ASC Topic 740, Income Taxesregarding accounting for uncertainty in income taxes, which prescribes the
recognition threshold and measurement attributes for financial statement
recognition and measurement of tax positions taken or expected to be taken on a
tax return. In addition, the guidance requires the determination of whether the
benefits of tax positions will be more likely than not sustained upon audit
based upon the technical merits of the tax position. For tax positions that are
determined to be more likely than not sustained upon audit, a company recognizes
the largest amount of benefit that is greater than 50% likely of being realized
upon ultimate settlement in the financial statements. For tax positions that are
not determined to be more likely than not sustained upon audit, a company does
not recognize any portion of the benefit in the financial statements. The
guidance provides for de-recognition, classification, penalties and interest,
accounting in interim periods and disclosure.

F-17

---



|CHINA MARKETING MEDIA HOLDINGS, INC.                 
|-----------------------------------------------------
|NOTES TO CONSOLIDATED FINANCIAL STATEMENTS           
|FOR THE YEARS ENDED DECEMBER 31, 2010 AND 2009       
|(Currency expressed in United States Dollars (US$))

For the years ended December 31, 2010 and 2009, the Company did
not have any interest and penalties associated with tax positions. As of
December 31, 2010, the Company did not have any significant unrecognized
uncertain tax positions.

The Company conducts major businesses in the PRC and is subject
to tax in this jurisdiction. As a result of its business activities, the Company
files tax returns that are subject to examination by the foreign tax authority.

| | Retirement plan costs
| | ---------------------

Contributions to retirement plans (which are defined
contribution plans) are charged to general and administrative expenses in the
consolidated statements of operation and comprehensive income as and when the
related employee service is provided.

| | Related parties
| | ---------------

Parties, which can be a corporation or individual, are
considered to be related if the Company has the ability, directly or indirectly,
to control the other party or exercise significant influence over the other
party in making financial and operating decisions. Companies are also considered
to be related if they are subject to common control or common significant
influence.

| | Segment reporting
| | -----------------

ASC Topic 280, Segment Reportingestablishes standards
for reporting information about operating segments on a basis consistent with
the Companys internal organization structure as well as information about
geographical areas, business segments and major customers in the financial
statements. The Company operates in two reportable operating segments:
Advertising and marketing matters and online sales of consumer products.

| | Fair value of financial instruments
| | -----------------------------------

The Company adopts ASC Topic 825, Financial Instruments
to make disclosures about fair value of financial instruments. The carrying
value of the Companys financial instruments include cash and cash equivalents,
accounts receivable, prepaid expenses, accounts payable, accrued expenses and
levies, deferred revenues, taxes payable and other payables. Fair values were
assumed to approximate carrying values for these financial instruments because
they are short term in nature. The fair value of related party receivables is
not determinable due to its related party nature.

Investment held to maturity is determined using Level 2, which
is carried at fair value, with quoted prices in markets that are not active,
determined by the financial institution who sold the unit trust.

The Company also follows the guidance of the ASC Topic 820-10,
Fair Value Measurements and Disclosures ("ASC 820-10"), with respect to
financial assets and liabilities that are measured at fair value. ASC 820-10
establishes a three-tier fair value hierarchy that prioritizes the inputs used
in  measuring fair value as follows:

F-18

---



|CHINA MARKETING MEDIA HOLDINGS, INC.                 
|-----------------------------------------------------
|NOTES TO CONSOLIDATED FINANCIAL STATEMENTS           
|FOR THE YEARS ENDED DECEMBER 31, 2010 AND 2009       
|(Currency expressed in United States Dollars (US$))
|                                                     

- Level 1: Inputs are based
  upon unadjusted quoted prices for identical instruments traded in active
  markets;
- Level 2: Inputs, other
  than the quoted prices in active markets, that are observable either directly
  or indirectly; and
- Level 3: Inputs are
  generally unobservable and typically reflect managements estimates of
  assumptions that market participants would use in pricing the asset or
  liability. The fair values are therefore determined using model-based
  techniques, including option pricing models and discounted cash flow models.

Fair value estimates are made at a specific point in time based
on relevant market information about the financial instrument. These estimates
are subjective in nature and involve uncertainties and matters of significant
judgment and, therefore, cannot be determined with precision. Changes in
assumptions could significantly affect the 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 State Administration of Foreign Exchange or its local offices.
Dividend payments are restricted to 85% of profits, after tax.

|3. | DISCONTINUED OPERATIONS
|-- | -----------------------

On March 18, 2010, the Companys 51%-owned subsidiary, SZNT
discontinued its operations and applied for liquidation process with the local
government. The liquidation process was completed and finalized on August 27,
2010.

No revenues were generated from the discontinued operations for
the years ended December 31, 2010 and 2009. The results of operations were
reclassified as loss from discontinued operations in the consolidated statements
of operations for the years presented.

|4. | PREPAID EXPENSES
|-- | ----------------

Prepaid expenses consist primarily of prepayments made to an
unrelated company in advance for financial and legal consultation services to be
rendered. As of December 31, 2010 and 2009, prepaid expenses consist of the
following:

|                                                              |   | As of December 31, | 
|------------------------------------------------------------- | - | ------------------ | 
|                                                              |   | 2010               | 
|                                                              |   |                    | 
|Prepayments for financial and legal
    consultation services | $ | 490,774            | 
|Prepaid operating expense                                     |   | 3,355,795          | 
|                                                              |   |                    | 
|                                                              | $ | 3,846,569          | 

F-19

---



|CHINA MARKETING MEDIA HOLDINGS, INC.                 
|-----------------------------------------------------
|NOTES TO CONSOLIDATED FINANCIAL STATEMENTS           
|FOR THE YEARS ENDED DECEMBER 31, 2010 AND 2009       
|(Currency expressed in United States Dollars (US$))

The Company launched the new business called Easy Buy in June
2010, but not until the 4th quarter of 2010, did the big orders for the Pens
(IP-OIT) start to arrive, so the Company had to place the large orders to
satisfy the demand. 77% of the prepaid operating expense was for purchasing the
Pens and the remaining balance was for other advances to suppliers.

|5. | LOAN RECEIVABLE
|-- | ---------------

In 2009, the Company, through Shenzhen New Media, entered into
a loan and investment option agreement (the Agreement) with Beijing Kang Pusen
Management Consultants Co., Ltd (Kang Pusen). Kang Pusen is mainly engaged in
sales training services in the PRC.

Under the Agreement, the Company provides a loan advance of
$1,170,070 (equivalent to RMB8,000,000) to Kang Pusen, which is non-interest
bearing, secured by 100% equity interest of Kang Pusen and repayable by cash in
full or conversion to equity, subject to the fulfillment of performance
requirements in 2010 results. Based on the agreed conditions, when Kang Pusen
achieves its revenue up to RMB10 million before May 2010, the loan advances at
the discretion of the Company may be converted into common stock at the
conversion price equal to 20% ownership in Kang Pusen. Additionally, when Kang
Pusen achieves 2010 full years performance milestone, whereas annual revenue is
RMB30 million and net income is RMB12 million, together with the profit
commitment of not less than 30% annual growth in the next three years, the
Company may agree to increase its equity interest in Kang Pusen up to 45%-55%,
at the conversion price of not exceeding 6 times of its earnings per share. The
note automatically matured on December 24, 2010 in full repayment and the
Company did not exercise the conversion option.

|6. | RELATED PARTY TRANSACTIONS WITH AN AFFILIATE
|-- | --------------------------------------------

Sale and Marketing 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:

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 customers already existing at the time of the contract, in
addition to any new clients that Shenzhen Media can solicit and develop.
Shenzhen Media shall bear all the operating costs and receive all the revenues
from the contracted businesses.

As of December 31, 2010 and 2009, related party receivables
represented loans receivable from CMO totaling $3,020,402 and $2,685,944, which
are unsecured, and non-interest bearing. These loans have no fixed repayment
schedule and are receivable on demand.

|7. | RELATED PARTY RECEIVABLES
|-- | -------------------------

As of December 31, 2010 and 2009, related party receivables
represented advances totaling $366,133 and $354,063, which are unsecured, and
bear no interest. These related party receivables have no fixed repayment
schedule and are receivable on demand.

F-20

---



|CHINA MARKETING MEDIA HOLDINGS, INC.                 
|-----------------------------------------------------
|NOTES TO CONSOLIDATED FINANCIAL STATEMENTS           
|FOR THE YEARS ENDED DECEMBER 31, 2010 AND 2009       
|(Currency expressed in United States Dollars (US$))

|   |                            
|-- | ---------------------------
|8. | INVESTMENT HELD TO MATURITY



|                                                               |   | As of December 31, | 
|-------------------------------------------------------------- | - | ------------------ | 
|                                                               |   | 2010               | 
|Investment in unit trust in the PRC, held to
    maturity:     |   |                    | 
|- Maturity in 18 months with interest rate of 9% per annum     | $ | 756,223            | 
|- Maturity in 24 months with interest rate of
    9% per annum |   | 151,245            | 
|                                                               |   |                    | 
|                                                               | $ | 907,468            | 



|9. | 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 periods presented. The
applicable income tax rates for the Company for the years ended December 31,
2010 and 2009 are 34%.

British Virgin Islands

The Companys subsidiary, 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s subsidiaries in the PRC are currently subject to
income taxes according to applicable tax laws in the PRC. The tax rates are 15%
for NMA, 15% for Shenzhen New Media and Shenzhen Media and 0% for CMO. The
provision for income taxes for the years ended December 31, 2010 and 2009 was
$56,950 and $27,328, respectively.

Pursuant to the laws and regulations in the PRC, NMA, 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. CMO accounts for most of the revenue during the periods
presented. Other subsidiaries income tax rates range from 15% to 25%.

F-21

---



|CHINA MARKETING MEDIA HOLDINGS, INC.                 
|-----------------------------------------------------
|NOTES TO CONSOLIDATED FINANCIAL STATEMENTS           
|FOR THE YEARS ENDED DECEMBER 31, 2010 AND 2009       
|(Currency expressed in United States Dollars (US$))



|(a) | Provision for income taxes
|--- | --------------------------



|                    |   | Years ended December 31, | 
|------------------- | - | ------------------------ | 
|                    |   | 2010                     | 
|                    |   |                          | 
|Current income tax  | $ | 29,318                   | 
|Deferred income tax |   | 27,632                   | 
|                    |   |                          | 
|Total               | $ | 56,950                   | 



|(b) | Reconciliation of effective income tax rate
|--- | -------------------------------------------



|                                   |  | Years ended December 31, |  
|---------------------------------- |  | ------------------------ | -
|                                   |  | 2010                     |  
|                                   |  |                          |  
|Statutory U.S. tax rate            |  | 34%                      |  
|Impact of foreign tax differential |  | (16                      | )
|Tax exemption, credits             |  | (19                      | )
|Goodwill impairment                |  | 2                        |  
|                                   |  |                          |  
|Effective worldwide tax rate       |  | 1 %                      |  



|(c) | Deferred tax liabilities
|--- | ------------------------



|               |   | As of December 31, | 
|-------------- | - | ------------------ | 
|               |   | 2010               | 
|               |   |                    | 
|Expenses items | $ | 28,329             | 

There is no material unrecognized tax benefit as of December
31, 2010 and 2009.

|10. | CONCENTRATIONS AND RISK
|--- | -----------------------

The Company is exposed to the following concentrations of risk:

|(a) | Business risk with CMO
|--- | ----------------------

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

|(b) | Major customers
|--- | ---------------

For the year ended December 31, 2010, there is no single
customer who accounts for 10% or more of revenues.

For the year ended December 31, 2009, one customer represents
more than 10% of the Companys revenues amounting to $2,560,948, with $490,441
of accounts receivable at that date.

F-22

---



|CHINA MARKETING MEDIA HOLDINGS, INC.                 
|-----------------------------------------------------
|NOTES TO CONSOLIDATED FINANCIAL STATEMENTS           
|FOR THE YEARS ENDED DECEMBER 31, 2010 AND 2009       
|(Currency expressed in United States Dollars (US$))

|    |              
|--- | -------------
|(c) | Major vendors

For the years ended December 31, 2010 and 2009, there is no
single vendor who accounts for 10% or more of purchases.

|(d) | Major distribution agents for the publishing
    business
|--- | ---------------------------------------------------------

For the years ended December 31, 2010 and 2009, approximately
47% and 26% of the Companys sales are generated from its 4 major sales agents
in the PRC, respectively. The representatives solicited advertising from the
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, management believes no severe
impact would occur on the Companys sales if any of the distributing agents were
lost.

|(e) | Economic and political risks
|--- | ----------------------------

The Company faces a number of risks and challenges as a result
of having primary operations and marketing in the PRC. Changing political
climates in the PRC could have a significant effect on the Company's business.

|(f) | 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.

|11. | SEGMENT INFORMATION
|--- | -------------------

The Companys business units have been aggregated into two
reportable segments: Advertising and marketing matters and online sales of
consumer products. The Company, through its subsidiaries operates these segments
in the PRC. All the identifiable assets of the Company are located in the PRC
during the years presented.

The accounting policies of the segments are the same as those
described in the summary of significant accounting policies (see Note 2). The
Company had no inter-segment sales for the years ended December 31, 2010 and
2009. The Companys reportable segments are strategic business units that offer
different products and services. They are managed separately because each
business requires different technology and marketing strategies.

Summarized financial information concerning the Companys
reportable segments is shown in the following table for the years ended December
31, 2010 and 2009:

F-23

---



|CHINA MARKETING MEDIA HOLDINGS, INC.                 
|-----------------------------------------------------
|NOTES TO CONSOLIDATED FINANCIAL STATEMENTS           
|FOR THE YEARS ENDED DECEMBER 31, 2010 AND 2009       
|(Currency expressed in United States Dollars (US$))



|                                                         |   | Year ended December 31, 2010 | 
|-------------------------------------------------------- | - | ---------------------------- | 
|                                                         |   | Magazine                     | 
|                                                         |   | advertising                  | 
|                                                         |   |                              | 
|Revenue, net                                             | $ | 14,407,940                   | 
|Cost of revenue                                          |   | 3,634,990                    | 
|Gross profit                                             |   | 10,772,950                   | 
|Depreciation and amortization                            |   | 160,775                      | 
|(Loss) income from continuing operations, net
    of tax |   | 5,052,483                    | 
|Discontinued operations, net of tax                      |   | 20,616                       | 
|Net (loss) income                                        |   | 5,073,099                    | 
|Expenditure for long-lived assets                        | $ | 22,345                       | 



|                                  |   | Year ended December 31, 2009 | 
|--------------------------------- | - | ---------------------------- | 
|                                  |   | Magazine                     | 
|                                  |   | advertising                  | 
|                                  |   |                              | 
|Revenue, net                      | $ | 9,488,579                    | 
|Cost of revenue                   |   | 3,151,729                    | 
|Gross profit                      |   | 6,336,850                    | 
|Depreciation and amortization     |   | 157,373                      | 
|Net (loss) income                 |   | 1,361,926                    | 
|Expenditure for long-lived assets | $ | 26,363                       | 

All of the Companys revenues were derived from customers
located in the PRC.

|12. | COMMITMENTS AND CONTINGENCIES
|--- | -----------------------------
|    |                              
|(a) | Operating lease commitments  

The Company is committed to lease various office spaces under
several non-cancelable operating agreements in a term ranging from 1 to 4 years,
with fixed monthly rentals, expiring between December 2010 and December 2012.
Costs incurred under these operating leases are recorded as rent expense and
totaled approximately $315,100 and $359,880 for the years ended December 31,
2010 and 2009.

As of December 31, 2010, the Company has future minimum rent
payments due under various non-cancelable operating leases in next two years, as
follows:

|Year ending December 31: |   |         | 
|------------------------ | - | ------- | 
|2011                     | $ | 227,666 | 
|2012                     |   | 171,955 | 
|                         |   |         | 
|Total:                   | $ | 399,621 | 



|(b) | 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.

F-24

---



|CHINA MARKETING MEDIA HOLDINGS, INC.                 
|-----------------------------------------------------
|NOTES TO CONSOLIDATED FINANCIAL STATEMENTS           
|FOR THE YEARS ENDED DECEMBER 31, 2010 AND 2009       
|(Currency expressed in United States Dollars (US$))

|    |                                 
|--- | --------------------------------
|13. | RECENT ACCOUNTING PRONOUNCEMENTS

The Company has reviewed all recently issued, but not yet
effective, accounting pronouncements and does not believe the future adoption of
any such pronouncements may be expected to cause a material impact on its
financial condition or the results of its operations.

In October 2009, the Financial Accounting Standards Board
(FASB) issued Accounting Standards Update (ASU) 2009-14 to amend ASC 605
Revenue Recognition. The amendments in this update change the accounting model
for revenue arrangements that include both tangible products and software
elements. The amendments in ASU 2009-14 will be effective for the fiscal years
beginning January 1, 2011. The Company believes that ASU 2009-13 will not have a
material impact on its consolidated financial statements.

In October 2009, the FASB issued ASU 2009-13 amending ASC 605
related to revenue arrangements with multiple deliverables. Among other things,
ASU 2009-13 provides guidance for entities in determining the accounting for
multiple deliverable arrangements and establishes a hierarchy for determining
the amount of revenue to allocate to the various deliverables. The amendments in
ASU 2009-13 will be effective for the fiscal years beginning January 1, 2011.
The Company believes that ASU 2009-13 will not have a material impact on its
consolidated financial statements

In January 2010, the FASB issued further guidance under ASC No.
820, Fair Value Measurements and Disclosures ("ASC 820"). ASC 820
requires disclosures about the transfers of investments between levels in the
fair value hierarchy and disclosures relating to the reconciliation of fair
value measurements using significant unobservable inputs (level 3 investments).
ASC 820 is effective for the fiscal years and interim periods beginning after
December 15, 2010. The Company will adopt the update on January 1, 2011 and
expects that ASC 820 will not have a material impact on its consolidated
financial statements.

Management has reviewed the ASUs up through 2011-01 and does
not believe that any other recently issued, but not yet effective, updates, if
adopted, would have a material effect on the accompanying financial statements.

|14. | SUBSEQUENT EVENTS
|--- | -----------------

In accordance with ASC Topic 855, Subsequent Events,
which establishes general standards of accounting for and disclosure of events
that occur after the balance sheet date but before financial statements are
issued, the Company has evaluated all events or transactions that occurred after
December 31, 2010 up through the date the Company issued the audited
consolidated financial statements. During the period, the Company did not have
any material recognizable subsequent events.

F-25

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