BALANCE SHEETS

(In US dollars)

	As of December 31,
	2014		2015
Current assets
Cash and cash equivalents	$	18,154,644	$	5,616,759
Available-for-sale securities		20,013,487		64,755,514
Prepaid expenses and other current assets		48,162		4,024,878
Loan to third party		-		13,300,000
Loans to related party		-		1,612,000

Total current assets		38,216,293		89,309,151
Long-term investments		364,913,556		334,485,472

Total assets	$	403,129,849	$	423,794,623

Liabilities and shareholders' equity

Current liabilities
Accrued expenses and other current liabilities		71,835		969,263
Advances from subsidiaries		38,698,888		61,101,834
Short-term bank loans		42,428,890		49,962,510

Total liabilities	$	81,199,613	$	112,033,607

Ordinary shares		942		943
Additional paid-in capital		162,687,212		166,874,541
Warrants		5,548,000		3,346,000
Accumulated other comprehensive income		57,531,228		61,603,388
Retained earnings		96,162,854		79,936,144

Total shareholders' equity		321,930,236		311,761,016

Total liabilities and shareholders' equity	$	403,129,849	$	423,794,623

STATEMENTS OF COMPREHENSIVE INCOME

(In US dollars)

	For the years ended December 31,
	2013			2014			2015

Operating expenses
Product development		(305,385	)		(545,060	)		(578,398	)
Selling and marketing		(214,856	)		(16,795	)		(109,956	)
General and administrative		(1,173,778	)		(1,223,687	)		(1,238,999	)

Total operating expenses and loss from operation	$	(1,694,019	)	$	(1,785,542	)	$	(1,927,353	)

Interest income		129,500			36,346			11,852
Interest income from loans to related party		-			-			32,534
Interest income from loan to third party		-			-			540,274
Interest expense		(693,280	)		(895,056	)		(883,974	)
Impairment loss on cost method investment		(2,000,000	)		(1,999,999	)		-
Investment income		-			-			1,161,132
Gain on sale of available-for-sales securities		-			-			536,016
Dividend received		-			-			628,417
Equity in earnings of subsidiaries and variable interest entities		24,919,448			27,232,172			(15,164,476	)

Net income (loss) before income tax expense	$	20,661,649		$	22,587,921		$	(16,226,710	)
Income tax expense		-			-			-

Net income (loss)	$	20,661,649		$	22,587,921		$	(16,226,710	)

STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY

(In US dollars)

													Accumulated
													other					Total
	Ordinary shares						Additional						comprehensive		Retained			shareholders'
	Shares			Amount			paid-in capital			Warrants			income		earnings			equity

Balance as of January 1, 2013		1,678,097,663		$	832		$	126,786,049		$	15,566,332		$	46,618,263	$	93,912,592		$	282,884,068
Issuance of ordinary shares for share-based compensation		35,000,000			18			849,020			-			-		-			849,038
Share-based compensation recognized		-			-			1,573,729			-			-		-			1,573,729
Repurchase of ordinary shares		(78,214,600	)		(32	)		(10,123,789	)		-			-		-			(10,123,821	)
Warrants exercised		200,000,000			100			32,967,232			(5,147,332	)		-		-			27,820,000
Other comprehensive income		-			-			-			-			8,944,839		-			8,944,839
Net income		-			-			-			-			-		20,661,649			20,661,649

Balance as of December 31, 2013		1,834,883,063		$	918		$	152,052,241		$	10,419,000		$	55,563,102	$	114,574,241		$	332,609,502
Issuance of ordinary shares for share-based compensation		7,190,000			4			436,621			-			-		-			436,625
Share-based compensation recognized		-			-			1,547,780			-			-		-			1,547,780
Repurchase of ordinary shares		-			-			(12,410	)		-			-		-			(12,410	)
Warrants exercised		40,000,000			20			8,662,980			(2,723,000	)		-		-			5,940,000
Warrants forfeited		-			-			-			(2,148,000	)		-		-			(2,148,000	)
Other comprehensive income		-			-			-			-			1,968,126		-			1,968,126
Dividends to shareholders		-			-			-			-			-		(40,999,308	)		(40,999,308	)
Net income		-			-			-			-			-		22,587,921			22,587,921

Balance as of December 31, 2014		1,882,073,063		$	942		$	162,687,212		$	5,548,000		$	57,531,228	$	96,162,854		$	321,930,236

Issuance of ordinary shares for share-based compensation		2,060,000			1			939,881			-			-		-			939,882
Share-based compensation recognized		-			-			1,045,448			-			-		-			1,045,448
Warrants expired		-			-			2,202,000			(2,202,000	)		-		-			-
Other comprehensive income		-			-			-			-			4,072,160		-			4,072,160
Net loss		-			-			-			-			-		(16,226,710	)		(16,226,710	)

Balance as of December 31, 2015		1,884,133,063			943			166,874,541			3,346,000			61,603,388		79,936,144			311,761,016

STATEMENTS OF CASH FLOWS

(In US dollars)

	For the years ended December 31,
	2013			2014			2015

Operating activities:
Net cash used in operating activities	$	(1,237,414	)	$	(3,468,054	)	$	(2,675,869	)

Investing activities:
Acquisition of equity method investments		-			-			(1,000,000	)
Purchase of available-for-sales securities		-			(16,380,050)			(26,326,715)
Proceeds from sale of available-for-sales securities		-			-			1,500,251
Loans to related party		-			-			(1,612,000)
Loans to third parties		-			-			(17,000,000)
Loan repayment from third parties		-			-			3,700,000

Net cash used in investing activities	$	-		$	(16,380,050	)	$	(40,738,464	)

Financing activities:
Repurchase of ordinary shares		(10,123,821	)		(12,410	)		-
Proceeds from exercise of employee stock options		849,038			436,625			939,882
Proceeds from bank borrowing		-			42,428,890			7,533,620
Advances from subsidiaries		2,335,666			5,417,880			23,514,181
Repayment to subsidiaries		-			(190,490)			(1,111,235	)
Proceeds from exercise of warrants		27,820,000			5,940,000			-
Dividends paid to shareholders		-			(40,999,308)			-

Net cash provided by financing activities	$	20,880,883		$	13,021,187		$	30,876,448

Net increase (decrease) in cash and cash equivalents		19,643,469			(6,826,917	)		(12,537,885	)
Cash and cash equivalents, beginning of year		5,338,092			24,981,561			18,154,644

Cash and cash equivalents, end of year	$	24,981,561		$	18,154,644		$	5,616,759

BASIS FOR PREPARATION

The condensed financial information of KongZhong has been prepared using the same accounting policies as set out in KongZhong's consolidated financial statements, except that KongZhong used the equity method to account for investments in its subsidiaries and variable interest entities.

INVESTMENTS IN SUBSIDIARIES AND VARIABLE INTEREST ENTITIES

KongZhong and its subsidiaries and variable interest entities are included in the consolidated financial statements where the inter-company balances and transactions are eliminated upon consolidation. For the purpose of KongZhong's stand-alone financial statements, its investments in subsidiaries and variable interest entities are reported using the equity method of accounting. KongZhong's share of income and losses from its subsidiaries and variable interest entities is reported as equity in earnings of subsidiaries and variable interest entities in the accompanying condensed financial information of KongZhong.