China Mass Media Reports Third Quarter 2011 Unaudited Financial Results

BEIJING, Nov. 21, 2011 /PRNewswire-Asia-FirstCall/ -- China Mass Media Corp. ("China Mass Media" or the "Company") (NYSE: CMM), a leading television advertising company in China, today announced its unaudited financial results for the third quarter ended September 30, 2011.

Third Quarter 2011 Highlights:

  • Total net revenues were RMB57.5 million (US$9.0 million), an increase of 5.1% from the third quarter of 2010 and an increase of 11.3% from the second quarter of 2011.
  • Operating income was RMB16.9 million (US$2.6 million), an increase of 35.1% from RMB12.5 million in the third quarter of 2010 and an increase of 17.7% from the second quarter of 2011.
  • Net income was RMB14.0 million (US$2.2 million), an increase of 117.8% from RMB6.43 million in the third quarter of 2010 and an increase of 24.8% from the second quarter of 2011.
  • Net cash outflows from operating activities were RMB158.3 million (US$24.8 million), compared to RMB54.5 million net cash inflows in the third quarter of 2010 and RMB12.8 million net cash outflows in the second quarter of 2011.

Mr. Shengcheng Wang, Chairman and Chief Executive Officer of China Mass Media, commented, "Our third quarter revenue and net profit increased from both the second quarter of 2011 and the third quarter of 2010, primarily due to receiving RMB14.7 million (US$2.3 million) as service fee from China Central Television ('CCTV') for the Company's services in advertising and promotional activities in connection with the Beijing Olympic Games in 2008. Because of CCTV's slow internal examination and approval procedures, this service fee was paid to us in the third quarter of 2011.

"Our third quarter revenues from advertising agency services decreased from the previous quarter as well as from the third quarter of 2010. Although the sales rates increased significantly from the third quarter of 2010, sales revenues declined compared with the previous quarter and the third quarter of 2010, as a result of more discounts given to clients in light of fierce market competition and increasing media costs. July and August are weak seasons for the traditional advertising market.  However, the market picked up in September and customer demands for advertising increased significantly. We were pleased that advertising time slots of our 'Periodic China News Package' on CCTV-4 were all sold out in September.  

"Our advertising production services have been showing good momentum. In the third quarter we successfully produced a number of commercials for clients, including Xiwang Sugar and the Beijing Economic and Technological Development Zone Management Committee. Still, third quarter revenues from advertising and creative production decreased compared with the previous quarter and the third quarter of 2010 because of the lower average price charged to customers during the quarter. In addition, due to program changes at CCTV in June 2011, our contracts with CCTV for the production of the TV program 'Guang Er Gao Zhi' was terminated.  Thus, beginning with the third quarter, the Company no longer generates revenue from sponsorship services. This led to the decline in revenues compared with the previous quarter and the third quarter of 2010.

"In addition to advertising agency services, content production has become an important component of our development strategy. In the third quarter, we had achieved a number of new developments in our new film and TV production business. The Company completed the scripts of two TV plays, and entered into filming stages. We expect the filming of one of the plays to be completed by the end of this year, and the post-production to be completed by the first quarter of 2012. We are actively in discussion with major television stations regarding the distribution plans.

"Television is still considered by advertisers to be the best and largest media platform in China. Following the recently closed 2012 Annual Prime Time Advertising Resources Auction at CCTV, the sales of these advertising resources reached a record of RMB14.26 billion, a 12.5% increase from the RMB12.67 billion in the previous year.  The alcohol, finance and food and beverage industries were the top three contributors.  We actively participated in this auction as the agent for Sanyo Electric, enlisting our professional services to help them obtain the best resources. We plan to continue our advertising agency services for the 'Periodic China News Package' on CCTV-4 in 2012. In addition, we recently acquired a 60-second time slot in connection with the 'All Day Classic Package' on CCTV-8 starting from 2012. CCTV-8 is the only national TV drama series channel in China. It ranks third among all channels in China in terms of audience share in 2009 according to 2010 China TV & Radio Yearbook, and is ideal for advertising family consumer products. The "All Day Classic Package" broadcasts 14 times per day, and covers all time slots from morning to evening on CCTV-8, which had a cumulative rating of 2.69% according to our own statistics in the first three quarters of 2011. In the following months, we will focus on presales of 2012 advertising resources to lock-in clients in advance.

"Net cash outflows in the third quarter were largely due to the settling of outstanding payables to CCTV in relation to the media fees for the 'Daytime Advertising Package' and 'Television Guide Package' for the year ended December 31, 2009."

Julie Sun, our Chief Financial Officer, added, "The Company declared a special cash dividend of US$0.07667 per share on the Company's ordinary shares on October 28, 2011.  For further details of the special cash dividend distribution, please see the Company's announcement published on October 28, 2011.  As a result of this special cash dividend distribution, an unrecognized withholding tax of over RMB10 million (US$1.6 million) will be provided in our fourth quarter, which will have a significant adverse effect to our fourth quarter financial results."

Third Quarter 2011 Financial Results

Revenues

Revenues from advertising agency services were RMB43.4 million (US$6.8 million), including RMB3.5 million (US$0.55 million) of revenue resulting from a reduction of media fees for a program that we recognize revenue on a net basis, in the third quarter of 2011, a decrease of 7.0 % from RMB46.6 million in the third quarter of 2010, and a decrease of 5.1% from RMB45.7 million in the second quarter of 2011. Due to continued fierce price competition, revenues from the Company's "Daytime Advertising Package" and "Television Guide Package" decreased as compared to the previous quarter. The Company's "Periodic China News Package" on CCTV-4 registered a noticeable increase in sales as compared to the previous quarter. Especially in September, all one-minute advertising time slots were sold out.  Nevertheless, the total revenues from advertising agency services decreased slightly from the second quarter of 2011. The decrease in revenues compared with the third quarter of last year was mainly due to the decrease in revenues relating to the "Periodic China News Package", as the time slots available for sale from that program decreased from 90 seconds in 2010 to 60 seconds in 2011.

Revenues from special event services were RMB14.7 million (US$2.3 million) in the third quarter of 2011, being the service fee paid by CCTV for the Company's services in advertising and promotional activities for the 2008 Beijing Olympic Games. We recognized this revenue when the Company received payment from CCTV during the quarter.  No special event services revenue were recognized in the third quarter of 2010 and in the previous quarter of 2011.

Revenues from production and sponsorship services were RMB3.3 million (US$0.5 million) in the third quarter of 2011, a decrease of 69.2% from RMB10.7 million in the third quarter of 2010, and a decrease of 65.0% from RMB9.4 million in the second quarter of 2011. During the third quarter of 2011, the Company successfully produced a number of commercials for clients such as Xiwang Sugar and Beijing Economic and Technological Development Zone Management Committee. As of July 1, 2011, the Company ceased to be the producer of the "Guang Er Gao Zhi" program due to CCTV program changes. Revenues from sponsorship service in relation to the "Guang Er Gao Zhi" program amounted to RMB5.4 million and RMB4.5 million for the three months ended June 30, 2011 and September 30, 2010 respectively. Overall, revenues from production and sponsorship services decreased significantly on both a year-over-year and sequential basis.

Operating costs and expenses

Cost of revenues was RMB27.0 million (US$4.2 million) in the third quarter of 2011, a decrease of 15.7 % from RMB32.0 million in the third quarter of 2010 and an increase of 10.2% from RMB24.5 million in the second quarter of 2011. The significant decrease in cost of revenues from the third quarter of 2010 was because time slots available on the Company's "Periodic China News Package" on CCTV-4 decreased from 90 seconds in 2010 to 60 seconds in 2011. The increase of cost of revenue compared with the second quarter of 2011 was mainly because in the second quarter of 2011, the Company received a RMB4.1 million refund from CCTV for the purchase price relating to the advertisements that CCTV-4 failed to broadcast in 2010, and such refund was used to offset the relevant media costs of the "Periodic China News Package". Thus the cost of revenues in the second quarter was lower as a result.

Sales and marketing expenses were RMB6.7 million (US$1.1 million) in the third quarter of 2011, an increase of 87.3% from RMB3.6 million in the third quarter of 2010 and an increase of 59.5% from RMB4.2 million in the second quarter of 2011. The increase compared with the third quarter of 2010 and the previous quarter was mainly due to the increase in salary. The Company extended a bonus of RMB2.0 million to our Chief Executive Officer for his contribution in the Special Event Services.

General and administrative expenses were RMB7.0 million (US$1.1 million) in the third quarter of 2011, an increase of 3.8% compared to the RMB6.7 million in the third quarter of 2010 and a decrease of 19.8% from RMB8.7 million in the second quarter of 2011. The increase compared with the third quarter of 2010 was mainly due to the effect of a write-back of bad debt provision in the third quarter of 2010.  The decrease compared with the previous quarter was mainly because of the Company's payment of RMB2.5 million in fees for sponsors, lawyers and auditors in the previous quarter in connection with the Company's efforts to list on the Hong Kong Stock Exchange.

Operating income, as a result of the foregoing factors, was RMB16.9 million (US$2.6 million) in the third quarter of 2011, an increase of 35.1% from RMB12.5 million in the third quarter of 2010 and an increase of 17.7% from RMB14.3 million in the second quarter of 2011. The Company's operating margin was 22.8%, 27.7% and 29.3% for the quarters ended September 30, 2010, June 30, 2011 and September 30, 2011, respectively.

Other expenses included an exchange loss of RMB0.8 million (US$0.1 million) in the third quarter of 2011. As the Company converted its overseas US dollar deposits to Renminbi deposits at the end of the first quarter, the exchange loss arising from the appreciation of the Renminbi against the US dollar decreased significantly as compared to the exchange loss of RMB3.3 million in the third quarter of 2010. Other expenses are relatively stable as compared with the second quarter of 2011.

Income tax expense was RMB7.0 million (US$1.1 million) in the third quarter of 2011, an increase of 57.3% from RMB4.5 million in the third quarter of 2010, and an increase of 21.2% from RMB5.8 million in the second quarter of 2011. The Company's effective tax rate was 41%, 34.0% and 33.4% for the quarters ended September 30, 2010, June 30, 2011 and September 30, 2011, respectively. The effective tax rate for the third quarter of 2011 was higher than the PRC statutory tax rate mainly because the intermediary service expenses incurred by offshore companies and exchange losses of RMB0.8 million incurred by the appreciation of the Renminbi against the US dollar were not deductible for PRC tax purposes.

Effective tax rate for the third quarter of 2011 was higher than the PRC Statutory tax rate was also attributable to the 10% withholding tax being accrued for the 30% earnings earned in PRC.  As we declared a special cash dividend in the fourth quarter of 2011, we need to accrue additional withholding tax in the fourth quarter of 2011 to make the dividend payments.

Net income was RMB14.0 million (US$2.2 million) in the third quarter of 2011, an increase of 117.8% from net income of RMB6.4 million in the third quarter of 2010 and an increase of 24.8% from RMB11.2 million in net income in the second quarter of 2011. The Company's net margin was 11.8%, 21.7% and 24.4% for the quarters ended September 30, 2010, June 30, 2011 and September 30, 2011, respectively.

Basic and diluted earnings per ADS for the third quarter of 2011 were RMB0.56 (US$0.09), compared with basic and diluted earnings per ADS of RMB0.24 for the third quarter of 2010 and RMB0.44 for the second quarter of 2011. Each ADS represents 30 ordinary shares of the Company as of September 30, 2011.

Business Outlook

The Company currently expects to generate total net revenues of between RMB48 million and RMB53 million for the fourth quarter of 2011. The expected range of net revenues represents a potential decrease of 36.7% to 30.1% compared with the fourth quarter of 2010 due to continuous price competition. This forecast reflects the Company's current and preliminary estimate, which is subject to change.

Conference Call

China Mass Media will host a conference call and live webcast at 8:00 a.m. Eastern Standard Time (EST) on November 21, 2011 (9:00 pm Beijing Time on November 21, 2011).

The dial-in details for the live conference call are as follows:

- International Toll Free Number:

+ 65 6723 9381

- U.S. Toll Free Number:                                                                

+1 866 519 4004

- U.S. Toll Number:                                                                

+1 718 354 1231

- HK. Toll Number:

852 2475 0994

- China Toll Free Number:

800 819 0121


400 620 8038

Passcode: CMM




A live webcast of the conference call will be available on the investor relations section of the Company's website at: http://www.chinammia.com.

A telephone replay of the call will be available after the conclusion of the conference call. The dial-in details for the replay are as follows:

- U.S. Toll Free Number:                                                                

+1 866 214 5335

- International dial-in number:

+61 2 8235 5000

Passcode: 2042 7269




Non-GAAP Disclosure

In addition to the unaudited consolidated financial information presented in accordance with US GAAP, management uses a non-GAAP measure of net income excluding non-cash share-based compensation. Company management believes excluding the share-based compensation expenses from non-GAAP financial measures is useful for the investors' understanding of overall current financial performance. Nevertheless, the limitation of using non-GAAP financial measures excluding share-based compensation expenses is that share-based compensation expenses have been and will continue to be a significant recurring expense in the Company's business.

The presentation of the non-GAAP financial measures is not intended to be considered in isolation or as a substitute for the financial information prepared and presented in accordance with US GAAP. For more information on these non-GAAP financial measures, please see the tables captioned "Reconciliations of unaudited non-GAAP results of operations measures to the nearest comparable GAAP measures" set forth below, which shall be read in conjunction with the preceding financial information presented in accordance with US GAAP.

Safe Harbor Statement

This document contains forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended, and Section 27A of the Securities Act of 1933, as amended, and the U.S. Private Securities Litigation Reform Act of 1995. These statements include, but are not limited to, statements about the Company's plans, objectives, expectations, strategies, intentions, or other characterizations of future events or circumstances and are generally identified by the words "anticipates", "believes", "could", "estimates", "expects", "intends", "may", "plans", "seeks", "would", and similar expressions.

A number of factors could cause the Company's actual results, performance, achievements or industry results to be materially different from any future results, performance or achievements expressed or implied by these forward-looking statements. Additional information concerning factors that could cause actual results to materially differ from those in the forward-looking statements is contained in the Securities and Exchange Commission filings of the Company. China Mass Media does not undertake any obligation to update any forward-looking statements, except as required under applicable law.

About China Mass Media Corp.

As a leading television advertising company in China, the Company provides a full range of advertising services, including advertising agency services, creative production services, public service announcement sponsorship services, and other value added services. The Company currently offers approximately 41 minutes of advertising time slots per day on CCTV Channels 1, 2, and 4. CCTV is the largest television network in China. The Company has produced over 400 advertisements and has won a number of prestigious awards in China and across the world, including the "Gold World Medal" at The New York Festivals® International Television & Film Awards. For more information, please visit http://www.chinammia.com.

For further information, contact:

China Mass Media Corp.
Julie Sun
Chief Financial Officer
6/F, Tower B, Corporate Square,
35 Finance Street Xicheng District
Beijing, 100033
P. R. China
Phone: +86-10-8809-1050
Email: juliesun@chinammia.com

Christensen
Tip Fleming
Phone: +852-2117-0861
Email: tfleming@christensenir.com

Teal Willingham
Phone: +852-9827-3632
Email: twillingham@christensenir.com

CHINA MASS MEDIA CORP.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS



THREE MONTHS ENDED,


September 30,
2010


June 30,
2011


September 30,
2011


September 30,
2011


RMB


RMB


RMB


US$









Revenues:








  Advertising agency services

46,604,275


45,663,780


43,352,565


6,797,204

  Special event services

-


-


14,659,600


2,298,463

Advertisement production and sponsorship services

10,708,029


9,440,351


3,301,713


517,672

Total revenue

57,312,304


55,104,131


61,313,878


9,613,339

Less: Business tax

(2,561,134)


(3,406,283)


(3,793,799)


(594,826)


Total net revenues

54,751,170


51,697,848


57,520,079


9,018,513









Operating costs and expenses:








  Cost of revenues

(31,954,073)


(24,459,536)


(26,953,073)


(4,225,944)

  Sales and marketing expenses

(3,595,523)


(4,222,482)


(6,733,407)


(1,055,724)

  General and administrative expense

(6,712,846)


(8,689,827)


(6,965,218)


(1,092,069)

Total operating costs and expenses

(42,262,442)


(37,371,845)


(40,651,698)


(6,373,737)









Operating income

12,488,728


14,326,003


16,868,381


2,644,776









Interest and investment income

1,482,268


3,465,320


4,970,052


779,249

Other expense, net

(3,071,458)


(766,957)


(799,574)


(125,364)









Income before tax

10,899,538


17,024,366


21,038,859


3,298,661

Income tax expense

(4,465,167)


(5,792,977)


(7,021,745)


(1,100,932)

Net income

6,434,371


11,231,389


14,017,114


2,197,729









Net income available to ordinary shareholders

6,434,371


11,231,389


14,017,114


2,197,729









Earnings per ordinary share, basic

0.008


0.0147


0.0186


0.0029

Earnings per ordinary share, diluted

0.008


0.0147


0.0186


0.0029

Earnings per ADS, basic

0.24


0.4420


0.5580


0.0875

Earnings per ADS, diluted

0.24


0.4420


0.5580


0.0875









Shares used in calculating earnings per ordinary share, basic

788,012,500


762,320,613


753,541,727


753,541,727

Shares used in calculating earnings per ordinary share, diluted

788,702,468


762,320,613


753,541,727


753,541,727

Shares used in calculating earnings per ADS, basic(Note)

26,267,083


25,410,687


25,118,058


25,118,058

Shares used in calculating earnings per ADS, diluted

26,290,082


25,410,687


25,118,058


25,118,058










Note: Effective on November 28, 2011, the Company will change the ratio of its ordinary shares to American
depositary share ("ADS") from 30:1 to 300:1.  There will be no change to China Mass Media's underlying ordinary
shares.  After November 28, 2011, all earnings per ADS for prior periods will be retrospectively adjusted to reflect
the new ADS ratio.




CHINA MASS MEDIA CORP.

UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS




December 31,
2010


September 30,
2011


September 30,
2011



RMB


RMB


US$

Assets







Current assets







  Cash and cash equivalents


544,427,828


145,325,197


22,785,387

  Restricted cash


10,000,000





  Short-term investments


150,000,000


414,149,829


64,934,122

  Notes receivable


5,892,690


1,460,000


228,912

Accounts receivable, net


991,024


3,065,450


480,629

  Prepaid expenses and other current assets


41,794,343


102,393,184


16,054,121

Total current assets


753,105,885


666,393,660


104,483,171

Non-current assets







  Property and equipment, net


58,602,500


58,252,554


9,133,357

Total non-current assets


58,602,500


58,252,554


9,133,357

Total assets


811,708,385


724,646,214


113,616,528








Liabilities and Shareholders' Equity







Current liabilities:







  Accounts payable


156,494,604


86,417,004


13,549,232

  Customer advances


39,311,493


50,438,822


7,908,251

  Accrued expenses and other current liabilities


23,848,004


23,479,183


3,681,277

  Taxes payable


30,194,919


20,644,655


3,236,854

  Amount due to related parties


53,237,048


10,883,700


1,706,444

Total current liabilities


303,086,068


191,863,364


30,082,058

Total Liabilities


303,086,068


191,863,364


30,082,058






















Shareholders' equity







Ordinary shares ($0.001 par value; 3,000,000,000 shares authorized; 788,332,360 shares issued and outstanding as of December 31, 2010; 751,829,020 shares issued and outstanding as of September 30, 2011)


5,381,321


5,145,681


806,786

Additional paid-in capital


361,736,018


343,021,364


53,781,964

Statutory reserves


25,000,000


25,000,000


3,919,724

Other comprehensive income


-


349,058


54,728

Retained earnings


126,034,102


159,581,955


25,020,689

Repurchased shares to be cancelled, at cost (13,860,000 ordinary shares as of December 31, 2010 and 1,326,000 ordinary shares as of September 30, 2011)


(9,529,124)


(315,208)


(49,421)

Total Shareholders' Equity


508,622,317


532,782,850


83,534,470








Total Liabilities and Shareholders' Equity


811,708,385


724,646,214


113,616,528











CHINA MASS MEDIA CORP.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS



THREE MONTHS ENDED


September 30,
2010


June 30,
2011


September 30,
2011


September 30,
2011


RMB


RMB


RMB


US$









Cash flows from operating activities:








Net income

6,434,371


11,231,389


14,017,114


2,197,729

Adjustments to reconcile net income to net cash provided by (used in) operating activities








  Depreciation expense

774,606


1,038,622


1,072,696


168,187

  Investment income

(1,140,083)


(2,306,877)


(3,824,844)


(599,693)

  Exchange loss

3,308,936


784,999


785,798


123,204

  Share-based compensation

215,601


627,576


438,047


68,681

  Loss (Gain) on disposal of property and equipment

-


(7,359)


14,143


2,217

 Changes in assets and liabilities:








  Notes receivable

-


6,726,095


440,000


68,987

  Accounts receivable, net

5,634,850


(3,188,009)


5,215,435


817,723

  Prepaid expense and other current assets

4,256,345


(4,883,765)


(58,749,687)


(9,211,302)

  Accounts payable

19,248,859


(9,778,480)


(104,450,980)


(16,376,761)

  Customer advances

15,051,709


(5,854,045)


16,964,850


2,659,901

  Accrued expenses and other current liabilities

770,278


2,301,925


(32,056)


(5,025)

  Taxes payable

97,832


(1,516,820)


4,166,500


653,261

  Amount due to related parties

(123,360)


(7,995,148)


(34,371,353)


(5,389,049)

Net cash provided by (used in) operating activities

54,529,944


(12,819,897)


(158,314,337)


(24,821,940)

Cash flows from investing activities:








Net proceeds from redemption / (purchase) of short-term investments

(190,000,000)


(196,469,251)


182,317,254


28,585,333

Decrease in restricted cash

-


10,000,000


-



Purchase of property and equipment

(6,408,266)


(409,384)


(707,707)


(110,961)

Proceeds from disposal of property and equipment

-


146,796


783


123

Gain on sales of investment

1,040,082


2,570,987


3,824,844


599,693

Net cash provided by / (used in) investing activities

(195,268,184)


(184,160,852)


185,435,174


29,074,188









Cash flows from financing activities:
Repurchase stocks on open market

-


(2,673,929)


(2,986,471)


(468,246)

Net cash used in financing activities

-


(2,673,929)


(2,986,471)


(468,246)


Effect of foreign currency exchange

(3,308,936)


(320,371)


(785,797)


(123,204)

Net increase / (decrease) in cash and cash equivalents

(144,047,176)


(199,975,049)


23,348,569


3,660,798

Cash and cash equivalents at beginning of the period

543,670,688


321,951,677


121,976,628


19,124,589

Cash and cash equivalents at end of the period

399,623,512


121,976,628


145,325,197


22,785,387




CHINA MASS MEDIA CORP.

SELECTED OPERATING DATA




THREE MONTHS ENDED



September 30,
2010


June 30,
2011


September 30,
2011








Number of programs secured during the period


35


35


3(1)

Total advertising time obtained (seconds)


2,621,970


2,580,630


224,400(2)

Total advertising time sold (seconds)


132,880


148,330


104,310(3)








(1) The Company ceased to be the advertising agency of CCTV-E and CCTV-F from July 1, 2011. The number of programs
secured and total advertising time obtained decreased accordingly.  


(2) Represents the total amount of time during regular television programs secured through our contracts with
CCTV-1, CCTV-2 and CCTV-4 for the period ended September 30, 2011.  


(3) During the three-month periods ended September 30, 2010, June 30, 2011 and September 30, 2011, the Company
has sold 19,680 seconds and 21,000 seconds and nil seconds of advertisements in CCTV-E and CCTV-F.





RECONCILIATIONS OF UNAUDITED NON-GAAP RESULTS OF OPERATIONS
MEASURES TO THE NEAREST COMPARABLE GAAP MEASURES (*)



THREE MONTHS ENDED SEPTEMBER 30, 2010


THREE MONTHS ENDED SEPTEMBER 30, 2011


GAAP Results

Adjustment

NON-GAAP Result


GAAP Result

Adjustment

NON-GAAP Result


RMB

RMB

RMB


RMB

RMB

RMB









Operating income

12,488,728

215,601

12,704,329


16,868,381

438,047

17,306,428









Net income

6,434,371

215,601

6,649,972


14,017,114

438,047

14,455,161









(*)The adjustment is for share-based compensation expenses and has no tax effect as the Cayman Islands, where the
Company was incorporated, currently does not levy taxes on individuals or corporations based upon profits, income,
gains or appreciation.



Non-GAAP Disclosure

In addition to the unaudited consolidated financial information presented in accordance with US GAAP, management uses a non-GAAP measure of net income excluding non-cash share-based compensation. Company management believes excluding the share-based compensation expenses from non-GAAP financial measures is useful for the investors' understanding of overall current financial performance. Nevertheless, the limitation of using non-GAAP financial measures excluding share-based compensation expenses is that share-based compensation expenses have been and will continue to be a significant recurring expense in the Company's business.

The presentation of the non-GAAP financial measures is not intended to be considered in isolation or as a substitute for the financial information prepared and presented in accordance with US GAAP. For more information on these non-GAAP financial measures, please see the tables captioned "Reconciliations of unaudited non-GAAP results of operations measures to the nearest comparable GAAP measures" set forth above, which shall be read in conjunction with the preceding financial information presented in accordance with US GAAP.

SOURCE China Mass Media Corp.



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