China Media Group Corp. (OTC:CHMD.OB) Slightly Lifted from the Bottom at Improved Financials
27 Apr 2010

China Media Group Corp. (OTC: CHMD.OB) was slightly lifted from the bottom after the company published its 10-k on April 17. Currently the company trades in the $0.03 range up from $ 0.015 earlier in April.

China Media Group Corp. recorded a higher gross profit number of $ 85 K for the year ending December 31, 2009 compared to $ 44 K for the fiscal year ending December 31, 2008 and $ 28 K for the fiscal year ending December 31, 2007. This gave the market enough evidence that the company is on the right track and will be enhancing shareholder value.

Another positive signal as read in the financial statements is the decrease of the SG&A to $ 469 K for the year ending December 31, 2009 as compared to $ 1026 K for the year ending December 31, 2008. Interest expense is also showing an improvement from $190 K  in the year ending December 31, 2009  as compared to $ 171 K in the year ending December 31, 2008. The company has also better managed its working capital position as evidenced by the positive flows from accounts payable and zero prepaid expenses incurred in 2009.

These positive trends have to be read in relation to the fact that the major adjustment to the operating line represents a non-recurring write-off of goodwill.

However, a word of caution is warranted as the company has incurred short term debt in 2009 of $ 100 K which actually represents a capitalization of part of its long term debt and has further increased its liabilities to a shareholder of $243 K and repaid $ 35 K to related parties. This information together with other items in the cash flow statement are presented in the operations section where they clearly do not belong. This presentation of cash flow information is misleading and needs further adjustments to arrive at the actual cash flow from operations for the company which will show an improvement in 2009 as compared to 2008 but still in the negative territory.

The company currently sells mobile devices and advertising services in Hong Kong.

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