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SECURITIES AND EXCHANGE COMMISSION
o | REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR 12(g) OF THE SECURITIES EXCHANGE ACT OF 1934 |
þ | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
o | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
o | SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
(Translation of Registrant’s name into English)
(Jurisdiction of incorporation or organization)
NO.35 Financial Street, Xicheng District
Beijing 100033, China
(Address of principal executive offices)
Telephone: + (86 10) 58325288
Email: ir@jrj.com
Facsimile: + (86 10)58325200
9/F, Tower C, Corporate Square
No.35 Financial Street, Xicheng District
Beijing 100033, China
Title of each class | Name of each exchange on which registered | |
None | None |
(Title of Class)
* | Not for trading, but only in connection with the listing on the NASDAQ Global Market of American Depository Shares each representing 5 ordinary shares pursuant to the requirements of the Securities and Exchange Commission |
None
Large accelerated filero | Accelerated filerþ | Non-accelerated filero |
U.S. GAAPþ | International Financial Reporting Standards as issued | Othero | ||
By the International Accounting Standards Boardo |
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EX-4.2 | ||||||||
Exhibit 4.3 | ||||||||
Exhibit 4.4 | ||||||||
Exhibit 4.74 | ||||||||
Exhibit 4.75 | ||||||||
Exhibit 4.76 | ||||||||
Exhibit 4.78 | ||||||||
Exhibit 4.103 | ||||||||
Exhibit 4.104 | ||||||||
Exhibit 4.151 | ||||||||
Exhibit 4.152 | ||||||||
Exhibit 8.1 | ||||||||
Exhibit 12.1 | ||||||||
Exhibit 12.2 | ||||||||
Exhibit 13.1 | ||||||||
Exhibit 13.2 | ||||||||
Exhibit 15.1 | ||||||||
Exhibit 15.2 |
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• | “we,” “us,” “our company,” “the company,” “our”, refer to China Finance Online Co. Limited, or CFO Hong Kong and its subsidiaries, and, in the context of describing our operations include consolidated affiliates in China, Hong Kong or British Virgin Islands; |
• | “shares” and “ordinary shares” refer to our ordinary shares, “preferred shares” refers to our preferred shares, all of which were converted into our ordinary shares upon the completion of our initial public offering on October 20, 2004, “ADSs” refers to our American depositary shares, each of which represents five ordinary shares, and “ADRs” refers to the American depositary receipts which evidence our ADSs; |
• | “China” or “PRC” refers to the People’s Republic of China, excluding Taiwan, Hong Kong and Macau; |
• | “Hong Kong” refers to the Hong Kong Special Administrative Region of the People’s Republic of China; and |
• | all references to “Renminbi,” “RMB” or “yuan” are to the legal currency of China, all references to “U.S. dollars,” “dollars,” “$” or “US$” are to the legal currency of the United States and all references to “Hong Kong dollars” or “HK$” are to the legal currency of Hong Kong. Any discrepancies in any table between totals and sums of the amounts listed are due to rounding. |
• | our goals and strategies, including how we effect our goals and strategies; |
• | our future business developments, business prospects, financial condition and results of operations; |
• | our future pricing strategies or policies; |
• | our plans to expand our service offerings; |
• | our plans to use acquisitions and strategic investments as part of our corporate strategy; |
• | competition in the PRC financial data and information services industry; |
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• | the expected growth of the online financial data and information services market; |
• | performance of China’s securities markets; |
• | performance of Hong Kong’s securities markets; |
• | growth in our registered user accounts and subscriber base; |
• | PRC governmental policies relating to taxes and how they will impact our business; |
• | PRC governmental policies relating to the Internet and Internet content providers; |
• | PRC governmental policies relating to the securities investment advisory companies to provide advisory services on securities and related products; |
• | PRC governmental policies relating to the distribution of content, especially the distribution of financial content over the Internet; and |
• | PRC governmental policies relating to mobile value-added services. |
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For the year ended December 31, | ||||||||||||||||||||
(in thousands of U.S. dollars, except per share or per ADS data) | 2006 | 2007 | 2008 | 2009 | 2010 | |||||||||||||||
Consolidated statement of operations and comprehensive income (loss) data: | ||||||||||||||||||||
Net revenues | 7,128 | 25,903 | 56,243 | 53,606 | 59,716 | |||||||||||||||
Cost of revenues | (1,468 | ) | (4,427 | ) | (9,367 | ) | (8,147 | ) | (8,497 | ) | ||||||||||
Gross profit | 5,660 | 21,476 | 46,876 | 45,459 | 51,219 | |||||||||||||||
Operating expenses: | ||||||||||||||||||||
General and administrative | (2,956 | ) | (7,784 | ) | (15,371 | ) | (16,982 | ) | (13,208 | ) | ||||||||||
Product development | (742 | ) | (2,269 | ) | (5,635 | ) | (10,754 | ) | (13,028 | ) | ||||||||||
Sales and marketing | (2,666 | ) | (6,924 | ) | (13,521 | ) | (26,095 | ) | (26,991 | ) | ||||||||||
Total operating expenses | (6,364 | ) | (16,977 | ) | (34,527 | ) | (53,831 | ) | (53,227 | ) | ||||||||||
Government subsidies | — | 136 | 437 | 567 | 514 | |||||||||||||||
Income (loss) from operations | (704 | ) | 4,635 | 12,786 | (7,805 | ) | (1,494 | ) | ||||||||||||
Interest income | 1,003 | 1,105 | 1,609 | 1,352 | 1,590 | |||||||||||||||
Interest expense | — | — | — | — | (142 | ) | ||||||||||||||
Exchange gain, net | 267 | 424 | 1,489 | 2 | 813 | |||||||||||||||
Gain from trading securities | — | — | — | 41 | 1,138 | |||||||||||||||
Other income, net | 115 | 9 | (169 | ) | (258 | ) | (7 | ) | ||||||||||||
Loss from impairment of cost method investment | (1,322 | ) | (11,127 | ) | — | — | — | |||||||||||||
Income (loss) before income tax benefit (provision) | (641 | ) | (4,954 | ) | 15,715 | (6,668 | ) | 1,898 | ||||||||||||
Income tax benefit (provision) | 41 | 809 | 3,047 | 446 | (264 | ) | ||||||||||||||
Purchased pre-acquisition earning | — | — | 227 | — | — | |||||||||||||||
Net income (loss) | (600 | ) | (4,145 | ) | 18,989 | (6,222 | ) | 1,634 | ||||||||||||
Less: net (loss) attributable to the noncontrolling interests | — | (15 | ) | (31 | ) | (2 | ) | (326 | ) | |||||||||||
Net income (loss) attributable to China Finance Online Co. Limited | $ | (600 | ) | $ | (4,130 | ) | $ | 19,020 | $ | (6,220 | ) | 1,960 | ||||||||
Net income (loss) per share attributable to China Finance Online Co. Limited | ||||||||||||||||||||
-basic | $ | (0.01 | ) | $ | (0.04 | ) | $ | 0.19 | $ | (0.06 | ) | $ | 0.02 | |||||||
-diluted | $ | (0.01 | ) | $ | (0.04 | ) | $ | 0.17 | $ | (0.06 | ) | $ | 0.02 | |||||||
Net income (loss) per ADS equivalent attributable to China Finance Online Co. Limited | ||||||||||||||||||||
-basic(1) | $ | (0.03 | ) | $ | (0.22 | ) | $ | 0.96 | $ | (0.30 | ) | $ | 0.09 | |||||||
-diluted(1) | $ | (0.03 | ) | $ | (0.22 | ) | $ | 0.84 | $ | (0.30 | ) | $ | 0.09 |
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For the year ended December 31, | ||||||||||||||||||||
(in thousands of U.S. dollars)(1) | 2006 | 2007 | 2008 | 2009 | 2010 | |||||||||||||||
Consolidated balance sheet data: | ||||||||||||||||||||
Cash and cash equivalents | $ | 44,956 | $ | 74,729 | $ | 97,544 | $ | 107,391 | $ | 106,773 | ||||||||||
Current working capital(2) | 38,011 | 53,811 | 78,226 | 81,255 | 90,146 | |||||||||||||||
Total assets | 71,119 | 103,885 | 141,823 | 165,609 | 180,091 | |||||||||||||||
Deferred revenue, current | 6,419 | 20,457 | 28,202 | 30,620 | 32,995 | |||||||||||||||
Total current liabilities | 8,521 | 31,034 | 35,472 | 52,401 | 60,259 | |||||||||||||||
Deferred revenue, non-current | — | 4,665 | 8,786 | 14,547 | 13,022 | |||||||||||||||
Total equity | $ | 62,453 | $ | 67,834 | $ | 96,942 | $ | 97,667 | $ | 105,843 |
(1) | Each ADS represents five ordinary shares. | |
(2) | Current working capital is the difference between total current assets and total current liabilities. |
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Average(1) | High | Low | Period-end | |||||||||||||
(RMB per U.S.$1.00) | ||||||||||||||||
December 31, 2006 | 7.9693 | 8.0705 | 7.8051 | 7.8087 | ||||||||||||
December 31, 2007 | 7.5806 | 7.8127 | 7.2946 | 7.2946 | ||||||||||||
December 31, 2008 | 6.9193 | 7.2946 | 6.7800 | 6.8225 | ||||||||||||
December 31, 2009 | 6.8314 | 6.8399 | 6.8201 | 6.8282 | ||||||||||||
December 31, 2010 | 6.7668 | 6.8284 | 6.6227 | 6.6227 | ||||||||||||
Most recent six months: | ||||||||||||||||
November 2010 | 6.6558 | 6.6925 | 6.6239 | 6.6762 | ||||||||||||
December 2010 | 6.6515 | 6.6786 | 6.6227 | 6.6227 | ||||||||||||
January 2011 | 6.6027 | 6.6349 | 6.5876 | 6.5891 | ||||||||||||
February 2011 | 6.5840 | 6.5985 | 6.5752 | 6.5752 | ||||||||||||
March 2011 | 6.5662 | 6.5750 | 6.5564 | 6.5564 | ||||||||||||
April 2011 | 6.5292 | 6.5527 | 6.4990 | 6.4990 | ||||||||||||
May 2011 (through 16th) | 6.5006 | 6.5108 | 6.4948 | 6.5108 |
(1) | Averages are calculated from month-end rates. |
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• | the acquisition may not further our business strategy, or we may pay more than it is worth; |
• | we may not realize the anticipated increase in our revenues if we are unable to sell the acquired company’s products to our customer base, or the acquired contract models of acquired contract models companies; |
• | we may have difficulty identifying suitable acquisition opportunities and integrating acquired companies with our existing operations or their products and services with our existing products and services; |
• | we may have higher than anticipated costs in continuing support and development of acquired products; |
• | we may have multiple and overlapping product lines that are offered, priced and supported differently, which could cause customer confusion and delays; |
• | our due diligence process may fail to identify problems, such as issues with unlicensed use of intellectual property; |
• | we may have legal and tax exposures or lose anticipated tax benefits as a result of unforeseen difficulties in our legal entity integration activities; |
• | we may face contingencies related to intellectual property, financial disclosures and accounting practices or internal controls; |
• | our ongoing business may be disrupted and our management’s attention may be diverted by transition or integration issues; and |
• | to the extent that we issue a significant amount of equity securities in connection with future acquisitions, existing ADS holders and shareholders may be diluted and earnings per share may decrease. |
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• | providing CFO Software tax exemption for 2007 and a preferential tax rate of 7.5% for 2008, 2009 and 2010, and |
• | providing CFO Meining and CFO Genius a preferential tax rate of 15% for 2008, 2009 and 2010. |
• | providing CFO Success tax exemption for 2008 and 2009 and a preferential EIT rate of 12.5% for each of 2010, 2011 and 2012; |
• | providing CFO Shenzhen Shangtong and CFO Qicheng tax exemption for 2010 and 2011 and a preferential EIT rate of 12.5% for each of 2012, 2013 and 2014; and |
• | providing CFO Zhengning a reduced tax rate of 10%, 11% and 12% for 2009, 2010 and 2011, respectively, and an eventual transition to the standard tax rate of 25% in 2012. |
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• | any breakdowns or system failures resulting in a sustained shutdown of all or a material portion of our servers, including failures which may be attributable to sustained power shutdowns, or efforts to gain unauthorized access to our systems causing loss or corruption of data or malfunctions of software or hardware; and |
• | any disruption or failure in the national backbone network, which would prevent our users from logging on to our website or accessing our services. |
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• | revoking business and operating licenses of CFO Beijing, CFO Software, CFO Stockstar, CFO Genius, CFO Jujin, CFO Zhengning, CFO Success, CFO Fuhua or CFO Meining; |
• | discontinuing or restricting our operations or those of CFO Beijing, CFO Software, CFO Stockstar, CFO Genius, CFO Jujin, CFO Zhengning, CFO Success, CFO Fuhua or CFO Meining; |
• | imposing conditions or requirements with which we, CFO Beijing, CFO Software, CFO Stockstar, CFO Genius, CFO Jujin, CFO Zhengning, CFO Success, CFO Fuhua or CFO Meining could not satisfy; |
• | requiring us, CFO Beijing, CFO Software, CFO Stockstar, CFO Genius, CFO Jujin, CFO Zhengning, CFO Success, CFO Fuhua or CFO Meining to restructure the relevant ownership structure or operations; |
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• | restricting or prohibiting our use of the proceeds of our initial public offering in 2004 to finance our business and operations in China; or |
• | taking other regulatory or enforcement actions, including levying fines that could be harmful to our business. |
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• | Our articles of association provide for a staggered board, which means that our directors, excluding our chief executive officer, are divided into two classes, with half of our board, excluding our chief executive officer, standing for election every two years. Our chief executive officer will at all time serve as a director, and will not retire as a director, so long as he remains our chief executive officer. This means that, with our staggered board, at least two annual shareholders’ meetings, instead of one, are generally required in order to effect a change in a majority of our directors. Our staggered board can discourage proxy contests for the election of our directors and purchases of substantial blocks of our shares by making it more difficult for a potential acquirer to take control of our board in a relatively short period of time. |
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• | Hong Kong law permits shareholders of a company to remove directors by a shareholders’ resolution. Our articles of association require any shareholder who wishes to remove a director in this way to give us at least 120 days’ notice of the resolution, making it more difficult and time consuming for a potential acquirer who has accumulated a substantial voting position to obtain control of our board by removing opposing directors. |
• | Our articles of association provide that our board can have no less than five and no more than nine directors. Our board currently has five directors. Any increase in the maximum number of directors on our board beyond nine directors can only be accomplished by amending our articles of association, which under Hong Kong law requires a shareholders’ supermajority vote of 75% and at least 21 days’ notice. These restrictions can make it more difficult for a potential acquirer who has accumulated a majority of our shares to take control of us by promptly increasing the size of our board and appointing new directors that are its nominees. |
• | Hong Kong does not have merger laws that permit Hong Kong companies to merge in the same way as U.S. companies could in the United States. However, the Hong Kong Companies Ordinance has provisions that facilitate arrangements for the reconstruction and amalgamation of companies. The arrangement must be approved by a majority in number of each class of shareholders and creditors with whom the arrangement is to be made, representing three-fourths in value of each such class of shareholders or creditors that are present and voting either in person or by proxy at meetings convened by the High Court of Hong Kong. The arrangements must be sanctioned by the High Court of Hong Kong after shareholders or creditors approve it at the court-convened meeting. |
• | Our shareholders have authorized our board of directors, without any further action by shareholders, to issue additional shares. Under Hong Kong law, the authority granted by our shareholders will remain valid until the conclusion of our next annual general meeting, or the time when our next annual general meeting is required to be held. For as long as this approval remains effective, or is renewed, our board of directors will have the power to issue additional ordinary shares (including ordinary shares represented by ADSs) and preference shares without any further action by shareholders. |
• | to recognize or enforce against us judgments of courts of the United States based on the civil liability provisions of U.S. securities laws; or |
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• | to allow original actions brought in Hong Kong, based on the civil liability provisions of U.S. securities laws that are penal in nature. |
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• | attract visitors and market our subscription based service offerings. The pool of registered users that are attracted by the two finance portals for information and free services forms a natural target for our subscription services and brokerage services; |
• | store content and serve as an integral part of our information platform; |
• | serve as download platforms for our service offerings; and |
• | display online advertisements. |
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• | financial analysis tools that permit users to calculate and analyze quantitatively financial data; |
• | current and historical financial data and information for China’s and Hong Kong’s listed company stocks, bonds, mutual funds and stock index futures; |
• | categorized news and research reports; and |
• | online forums and bulletin boards. |
• | Securities market data analysis tools. Our securities market data service packages are developed on the basis of Level II quotes licensed from the Shanghai and Shenzhen Stock Exchanges. In June 2006, we entered into an agreement with SSE Infonet Ltd. Co, which is associated with the Shanghai Stock Exchange. Under the definitive agreement, we are certified by Shanghai Stock Exchange to develop service packages based on Level II quotes, and upgrade the features and functions of our current products. The definitive agreement was contemplated to continue through July 31, 2012. |
• | Technical Analysis.Technical analysis involves researching historical price and volume data, patterns and trends to predict the performance of a given stock. This type of analysis focuses on chart formations and formulas in identifying major and minor trends to recognize buying opportunities and exit points. |
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• | Fundamental Analysis.Fundamental analysis involves examining the company’s financials and operations, especially sales, earnings, growth potential, assets, debt, management, products, and competition. Fundamental Analysis takes into consideration only those variables that are directly related to the company itself, rather than the overall state of the market or technical analysis data. |
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• | Categorized macro information. This feature allows subscribers to search and sort up-to-date and comprehensive news and information relating to the broader financial markets or a specific financial topic or industry sector. We have a dedicated team of professional editors who collect, organize, categorize and index macro-economic and financial market information on a daily basis, according to user feedback and classification methods that we believe are accepted practice in securities markets in China. |
• | Industry sector analysis. Many investors in China seek to distinguish between listed companies with investment potential and those prone to financial trouble by analyzing listed companies’ financial data published in their financial statements and comparing such data among companies within the same industry sector. We collect and process listed company financial data and information according to classification methods set by relevant PRC regulatory authorities, and allow subscribers to view the relative standings of listed companies in the same industry sector or geographical locations based on market accepted performance parameters, including price-to-earnings ratios and profit margins etc. |
• | Fundamental analysis. Historical and real-time financial information are important to investors because they provide insight into company fundamentals. This research tool integrates the historical and real-time trading information we maintain in our database, as well as fundamental financial information such as earnings-per-share, shareholding structure, business description and competition and other related data and information. Our subscribers can receive fundamental financial and trading information organized by their specifications and display these results on a graphical interface that we designed to be easy to visualize and navigate. |
• | Mutual fund analysis. Our mutual fund research tool focuses on categorizing information relating to the portfolio holdings of mutual funds. This feature allows subscribers to study the collective effect of large market players on individual stocks. This feature also offers information relating to the performance of individual mutual funds, allowing subscribers to assess the risks and rewards of investing in mutual funds. |
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• | Technical analysis. This feature allows investors interested in trends formulated by historical trading data to perform technical analysis on listed companies. With over 60 markets accepted technical indicators and a complete database of historical data and information on all of China’s and Hong Kong’s listed company stocks, our subscribers can perform extensive chart analysis and pattern recognition on any stock listed on China’s stock exchanges. |
• | Securities market data analysis. This feature provides faster and more comprehensive trading data and statistical information on market transactions. With our Securities Market Data service packages developed on the basis of Level II quotes licensed from the Shanghai and Shenzhen Stock Exchanges, our subscribers are provided with trading transparency and unique insight into a stock price’s movements, and can make more informed investment decisions. |
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• | increase the breadth of our service offerings through the addition of new features and functions to our service packages; |
• | enhance our subscribers’ experience by improving the quality of our research tools and website; |
• | develop additional research tools, features and content specifically targeting the high-end subscribers; and |
• | design and build new financial instrument service products that fit our strategies. |
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• | leveraging our own website platform and other online and mobile platform to increase registered user base; |
• | building competitiveness in product innovation and data quality to increase both the registered users and paid subscribers; |
• | building our customer database by better understanding and in depth user data mining on our registered users; |
• | reinforcing internet capacity through two of our industry-leading financial portal sites and related web applications to improve users experience and stickiness. |
• | upgrading our existing service offerings and expanding our present service; |
• | encouraging our subscribers to migrate to newer and more comprehensive service offerings. |
• | acquiring strategic resources and capabilities in order to strength entry barriers, broaden product offering, expand business scale, diverse revenue resources and monetize registered user base; and |
• | obtaining access to complementary resources and capabilities through strategic partnerships that enable us to penetrate into a bigger market to solidify our leading position and enhance our brand awareness. |
• | publishers and distributors of traditional media, including print, radio and television as well as radio and television programs and news focused on financial news and information; |
• | internet portals providing information on business, finance and investing; |
• | financial information web pages offered by websites; |
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• | stock research software vendors, especially those that develop and market stock research software through stock brokerage companies; and |
• | stock brokerage companies, especially stock brokerage companies with online trading capabilities. |
• | MIIT; |
• | CSRC; |
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• | Ministry of Culture; |
• | General Administration of Press and Publication (National Copyright Administration); |
• | State Administration of Industry and Commerce; |
• | Ministry of Public Security; |
• | Ministry of Commerce; and |
• | State Administration of Radio, Film and Television |
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Jurisdiction | Legal | |||||
of | Ownership | |||||
Name | Incorporation | Interest | ||||
Fortune Software (Beijing) Co., Ltd. | PRC | 100 | % | |||
China Finance Online (Beijing) Co., Ltd. | PRC | 100 | % | |||
Beijing Fuhua Innovation Technology Development Co., Ltd. * | PRC | Nil | ||||
Fortune (Beijing) Success Technology Co., Ltd. | PRC | 100 | % | |||
Beijing Chuangying Securities Advisory and Investment Co., Ltd.* | PRC | Nil | ||||
Shanghai Meining Computer Software Co., Ltd.* | PRC | Nil | ||||
Zhengning Information & Technology (Shanghai) Co., Ltd. | PRC | 100 | % | |||
Shanghai Chongzhi Co., Ltd.* | PRC | Nil | ||||
Fortune (Beijing) Qicheng Technology Co., Ltd* | PRC | Nil | ||||
Shanghai Stockstar Securities Advisory and Investment Co., Ltd. * | PRC | Nil | ||||
Jujin Software (Shenzhen) Co., Ltd. | PRC | 100 | % | |||
Shenzhen Genius Information Technology Co., Ltd. | PRC | 100 | % | |||
Shenzhen Shangtong Software Co., Ltd. * | PRC | Nil | ||||
Shenzhen Newrand Securities Advisory and Investment Co., Ltd.* | PRC | Nil | ||||
Shenzhen Newrand Securities Training Center* | PRC | Nil | ||||
Stockstar Information Technology (Shanghai) Co., Ltd. | PRC | 100 | % | |||
Daily Growth Financial Holdings Limited | BVI | 85 | % | |||
Daily Growth Futures Limited | Hong Kong | 85 | % | |||
Daily Growth Securities Limited | Hong Kong | 85 | % | |||
Daily Growth Wealth Management Limited | Hong Kong | 85 | % | |||
Daily Growth Investment Services Limited | Hong Kong | 85 | % | |||
Hong Kong Genius Information Technology Co., Ltd. | Hong Kong | 100 | % |
* | Denotes variable interest entities or subsidiaries of variable interest entities |
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• | performance of China’s securities markets, and user demand for market intelligence on China’s securities markets, as well as the overall performance of China’s economy; |
• | termination of our TopView series of market data analysis products. On December 31, 2008, SSE Infonet Ltd. Co terminated the provision of TopView data to third-party software vendors, including us. We subsequently terminated the offering of TopView products to our customers. Our 2009 operating results were impacted from the TopView termination; |
• | contribution of alternative revenue resources such as revenues from online advertising; |
• | seasonality associated with the level of activity of our users and subscribers and the trading activities of China’s securities markets; |
• | tax refund from the PRC tax authorities for value-added-taxes we are required to pay on the sale of subscriptions to our service packages; |
• | other tax incentives we receive from PRC tax authorities resulting from CFO Success, CFO Zhengning, CFO Qicheng, and CFO Shenzhen Shangtong being the “Software Enterprises”; CFO Software, CFO Meining and CFO Genius being the “High and New Technology” companies; and CFO Stockstar, CFO Jujin, and CFO Newrand are entitled to enjoy a reduced tax rate; |
• | our cost structure, including, in particular, our cost for raw data, bandwidth costs and personnel-related expenses; |
• | the desirability of our service packages relative to other products and offerings available in the market; |
• | our ability to benefit from the acquisition of CFO Stockstar, CFO Genius, Daily Growth Securities and the contractual arrangements with CFO Newrand, CFO Fuhua, CFO Chongzhi, CFO Chuangying, CFO Securities Consulting, and CFO Shenzhen Shangtong and other VIEs; and |
• | PRC telecommunication and regulatory policies. |
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• | the number of registered user accounts on our websites; |
• | the number of active paying individual subscribers; and |
• | the service packages selected by our subscribers. |
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Years ended December 31, | ||||||||||||
2008 | 2009 | 2010 | ||||||||||
Subscription fees | $ | 50,598,929 | $ | 47,201,162 | $ | 49,518,331 | ||||||
Advertising revenue | 2,946,389 | 3,985,699 | 7,031,219 | |||||||||
Brokerage service revenue | 956,549 | 2,228,630 | 3,003,246 | |||||||||
Others | 1,740,901 | 190,386 | 163,246 | |||||||||
Total revenue from external customers | $ | 56,242,768 | $ | 53,605,877 | $ | 59,716,042 | ||||||
• | if we enter into additional commercial agreements for purchasing data from new sources or if we obtain different or additional data from existing sources; or |
• | due to rate increases we may experience in the future upon renewal of our existing agreements. |
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• | The revenue growth is projected at a compound annual growth rate, or CAGR. For the years 2011-2015, the CAGR of the four reporting units are approximately 7% for each of 2011 through 2014 and 10% for 2015 for Southern China; 5%, 5%, 7%, 8%, 10% for Eastern China; 7%, 2%, 8%, 9%, 9% for Northern China and 24%, 19%, 12%, 7%, 7% for Hong Kong, which is within the range of comparable companies at the time of valuation. |
• | In the projection period, the cost of revenues as a percentage of revenues is expected to remain stable. |
• | Operating expenses, including selling expenses, R&D expenses and general and administrative expenses, as a percentage of sales is expected to remain stable. |
• | To maintain normal operations, capital expenditures are estimated to be around 8%, 2%, 3%, and 3% of revenue for the four reporting units, respectively. |
• | The working capital requirement is estimated based on main accounts turnover days. |
• | A perpetual growth rate after 2015 is assumed to be at 3% per year for each of the four reporting units. |
• | The weighted average cost of capital, or WACC, used in the calculation is 15%, 22%, 23% and 17% for the four reporting units, respectively. |
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(in thousands of U.S. dollars, | For the year ended December 31, | |||||||||||||||||||||||
except as % of net revenues) | 2008 | 2009 | 2010 | |||||||||||||||||||||
Consolidated statement of operations and comprehensive income (loss) data: | ||||||||||||||||||||||||
Gross revenues | $ | 57,146 | 101.6 | % | $ | 55,108 | 102.8 | % | $ | 61,408 | 102.8 | % | ||||||||||||
Business tax | (903 | ) | (1.6 | ) | (1,502 | ) | (2.8 | ) | (1,692 | ) | (2.8 | ) | ||||||||||||
Net revenues | 56,243 | 100 | % | 53,606 | 100 | % | 59,716 | 100 | % | |||||||||||||||
Cost of revenues | (9,367 | ) | (16.7 | ) | (8,147 | ) | (15.2 | ) | (8,497 | ) | (14.2 | ) | ||||||||||||
Gross profit | 46,876 | 83.3 | 45,459 | 84.8 | 51,219 | 85.8 | ||||||||||||||||||
Operating expenses: | ||||||||||||||||||||||||
General and administrative | (15,371 | ) | (27.3 | ) | (16,982 | ) | (31.7 | ) | (13,208 | ) | (22.1 | ) | ||||||||||||
Product development | (5,635 | ) | (10.0 | ) | (10,754 | ) | (20.1 | ) | (13,028 | ) | (21.8 | ) | ||||||||||||
Sales and marketing | (13,521 | ) | (24.0 | ) | (26,095 | ) | (48.7 | ) | (26,991 | ) | (45.2 | ) | ||||||||||||
Total operating expenses | (34,527 | ) | (61.4 | ) | (53,831 | ) | (100.4 | ) | (53,227 | ) | (89.1 | ) | ||||||||||||
Government subsidies | 437 | 0.8 | 567 | 1.1 | 514 | 0.9 | ||||||||||||||||||
Income (loss) from operations | 12,786 | 22.7 | (7,805 | ) | (14.6 | ) | (1,494 | ) | (2.5 | ) | ||||||||||||||
Interest income | 1,609 | 2.9 | 1,352 | 2.5 | 1,590 | 2.7 | ||||||||||||||||||
Interest expense | — | — | — | — | (142 | ) | (0.2 | ) | ||||||||||||||||
Exchange gain, net | 1,489 | 2.6 | 2 | — | 813 | 1.4 | ||||||||||||||||||
Gain from trading securities | — | — | 41 | 0.1 | 1,138 | 1.9 | ||||||||||||||||||
Other expense, net | (169 | ) | (0.3 | ) | (258 | ) | (0.5 | ) | (7 | ) | — | |||||||||||||
Income (loss) before income taxes benefit (provision) | 15,715 | 27.9 | (6,668 | ) | (12.4 | ) | 1,898 | 3.2 | ||||||||||||||||
Purchased pre-acquisition earning | 227 | 0.4 | — | — | — | — | ||||||||||||||||||
Income tax benefit (provision) | 3,047 | 5.4 | 446 | 0.8 | (264 | ) | (0.4 | ) | ||||||||||||||||
Net income (loss) | 18,989 | 33.8 | (6,222 | ) | (11.6 | ) | 1,634 | 2.7 | ||||||||||||||||
Less: net loss attributable to noncontrolling interests | 31 | 0.1 | 2 | — | 326 | 0.5 | ||||||||||||||||||
Net income (loss) attributable to China Finance Online Co. Limited | $ | 19,020 | 33.8 | % | $ | (6,220 | ) | (11.6 | %) | 1,960 | 3.3 | % |
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For the year ended December 31 | ||||||||||||
(in thousands of U.S. dollars) | 2008 | 2009 | 2010 | |||||||||
Net cash provided by operating activities | $ | 27,849 | $ | 16,231 | $ | 4,585 | ||||||
Net cash used in investing activities | (7,410 | ) | (6,472 | ) | (14,376 | ) | ||||||
Net cash provided by financing activities | 573 | 189 | 7,153 | |||||||||
Net increase (decrease) in cash and cash equivalents | 22,815 | 9,847 | (618 | ) | ||||||||
Cash and cash equivalents at beginning of year | 74,729 | 97,544 | 107,391 | |||||||||
Cash and cash equivalents at end of year | $ | 97,544 | $ | 107,391 | $ | 106,773 |
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• | increase the breadth of our service offerings through the addition of new features and functions to our service packages; |
• | enhance our subscribers’ experience by improving the quality of our research tools and website; and |
• | develop additional research tools, features and content specifically targeting the high-end subscribers. |
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Office Premises | Data Purchase | Total | ||||||||||
(in U.S. dollars) | ||||||||||||
Less than 1 year | 2,566,811 | 1,414,299 | 3,981,040 | |||||||||
1 – 3 years | 1,620,586 | 79,239 | 1,699,825 | |||||||||
3 – 5 years | — | — | — |
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Name | Age | Position | ||||
Zhiwei Zhao | 47 | Chief Executive Officer and a member of the Board of Directors | ||||
Hugo Shong | 54 | Chairman of the Board of Directors | ||||
Kheng Nam Lee(1) | 63 | Director | ||||
Ling Wang(1)(2)(3) | 48 | Director | ||||
Fansheng Guo(1)(2)(3) | 55 | Director | ||||
Jun (Jeff) Wang | 40 | Chief Financial Officer | ||||
Caogang Li | 45 | Chief Operating Officer | ||||
Kiang Dalaroy | 54 | Chief Strategy Officer |
(1) | Member, audit committee | |
(2) | Member, compensation committee | |
(3) | Member, nominations committee |
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Number of | ||||||||||||
ordinary Shares to | ||||||||||||
be issued upon | Exercise price per | |||||||||||
exercise of options | ordinary share | Date of grant | Date of expiration | |||||||||
Zhiwei Zhao | 400,000 | $ | 1.120 | November 15, 2005 | November 15, 2015 | |||||||
400,000 | $ | 1.070 | July 5, 2006 | July 5, 2016 | ||||||||
800,000 | $ | 0.960 | January 18, 2007 | January 17, 2017 | ||||||||
750,000 | $ | 1.426 | February 22, 2010 | February 21, 2020 | ||||||||
Hugo Shong | * | $ | 0.160 | January 5, 2004 | January 4, 2014 | |||||||
* | $ | 1.040 | June 15, 2004 | June 14, 2014 | ||||||||
* | $ | 1.314 | February 18, 2005 | February 18, 2015 | ||||||||
* | $ | 0.960 | January 18, 2007 | January 17, 2017 | ||||||||
* | $ | 1.426 | February 22, 2010 | February 21, 2020 | ||||||||
Kheng Nam Lee | * | $ | 0.160 | January 5, 2004 | January 4, 2014 | |||||||
* | $ | 1.040 | June 15, 2004 | June 14, 2014 | ||||||||
* | $ | 1.314 | February 18, 2005 | February 18, 2015 | ||||||||
* | $ | 0.960 | January 18, 2007 | January 17, 2017 | ||||||||
* | $ | 1.426 | February 22, 2010 | February 21, 2020 | ||||||||
Fansheng Guo | * | $ | 0.160 | January 5, 2004 | January 4, 2014 | |||||||
* | $ | 1.040 | June 15, 2004 | June 14, 2014 | ||||||||
* | $ | 1.314 | February 18, 2005 | February 18, 2015 | ||||||||
* | $ | 0.960 | January 18, 2007 | January 17, 2017 | ||||||||
* | $ | 1.426 | February 22, 2010 | February 21, 2020 | ||||||||
Ling Wang | * | $ | 0.160 | January 5, 2004 | January 4, 2014 | |||||||
* | $ | 1.040 | June 15, 2004 | June 14, 2014 | ||||||||
* | $ | 1.314 | February 18, 2005 | February 18, 2015 | ||||||||
* | $ | 0.960 | January 18, 2007 | January 17, 2017 | ||||||||
* | $ | 1.426 | February 22, 2010 | February 21, 2020 | ||||||||
Jun (Jeff) Wang | * | $ | 1.070 | July 5, 2006 | July 5, 2016 | |||||||
* | $ | 0.960 | January 18, 2007 | January 17, 2017 | ||||||||
* | $ | 1.426 | February 22, 2010 | February 21, 2020 | ||||||||
Caogang Li | * | $ | 1.158 | November 30, 2005 | November 30, 2015 | |||||||
* | $ | 0.96 | January 18, 2007 | January 17, 2017 | ||||||||
* | $ | 1.426 | February 22, 2010 | February 21, 2020 |
* | Upon exercise of all options granted, would beneficially own less than 1% of our outstanding ordinary shares. |
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Name | Number | Percent | ||||||
Selected Employees | ||||||||
Zhiwei Zhao | 8,958,493 | 8.16 | % | |||||
Jun (Jeff) Wang | * | * | ||||||
Caogang Li | * | * | ||||||
All executive officers as a group (3 persons) | 10,558,493 | 9.62 | % |
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• | recommending to our shareholders, if appropriate, the annual re-appointment of our independent registered public accounting firm and pre-approving all auditing and non-auditing service fees permitted to be performed by the independent registered public accounting firm; |
• | annually reviewing an independent registered public accounting firm’s report describing the independent registered public accounting firm’s internal quality-control procedures, any material issues raised by the most recent internal quality control review, or peer review, of the independent registered public accounting firm and all relationships between the independent registered public accounting firm and our company; |
• | setting clear hiring policies for employees or former employees of the independent registered public accounting firm; |
• | reviewing with the independent registered public accounting firm any audit problems or difficulties and management’s response; |
• | reviewing and approving all proposed related-party transactions, as defined in Item 404 of Regulation S-K under the U.S. securities laws; |
• | discussing the annual audited financial statements with management and the independent registered public accounting firm; |
• | discussing with management and the independent registered public accounting firm major issues regarding accounting principles and financial statement presentations; reviewing reports prepared by management or the independent auditors relating to significant financial reporting issues and judgments; |
• | reviewing reports prepared by management or the independent registered public accounting firm relating to significant financial reporting issues and judgments; |
• | discussing earnings press releases, as well as financial information and earnings guidance provided to analysts and rating agencies; |
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• | reviewing with management and the independent registered public accounting firm the effect of regulatory and accounting initiatives, as well as off-balance sheet structures on our financial statements; |
• | discussing policies with respect to risk assessment and risk management; |
• | reviewing major issues as to the adequacy of our internal controls and any special audit steps adopted in light of material control deficiencies; |
• | timely reviewing annual reports from the independent registered public accounting firm regarding all critical accounting policies and practices to be adopted by our company, all alternative treatments of financial information within U.S. GAAP that have been discussed with management and all other material written communications between the independent registered public accounting firm and management; |
• | establishing procedures for the receipt, retention and treatment of complaints received from our employees regarding accounting, internal accounting controls or auditing matters and the confidential, anonymous submission by our employees of concerns regarding questionable accounting or auditing matters; |
• | annually reviewing and reassessing the adequacy of our audit committee charter; |
• | such other matters that are specifically delegated to our audit committee by our board of directors from time to time; |
• | meeting separately, periodically, with management and the independent registered public accounting firm; and |
• | reporting regularly to the full board of directors. |
• | determining and recommending the compensation of our senior management; |
• | reviewing and making recommendations to our board of directors regarding our compensation policies and forms of compensation provided to our directors and officers; |
• | reviewing and determining bonuses for our officers and other employees; |
• | reviewing and determining stock-based compensation for our directors, officers, employees and consultants; |
• | administering our equity incentive plans in accordance with the terms thereof; and |
• | such other matters that are specifically delegated to the compensation committee by our board of directors from time to time. |
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• | convening shareholders’ meetings and reporting its work to shareholders at such meetings; |
• | implementing shareholders’ resolutions; |
• | determining our business plans and investment proposals; |
• | formulating our profit distribution plans and loss recovery plans; |
• | determining our debt and finance policies and recommending proposals for the increase or decrease in our share capital and the issuance of debentures; |
• | formulating our major acquisition and disposition plans, and plans for consolidation, division or dissolution; |
• | proposing amendments to our articles of association; and |
• | exercising any other powers conferred at shareholders’ meetings or under our memorandum and articles of association. |
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• | each person known to us to own beneficially more than 5% of our ordinary shares; and |
• | each of our directors and executive officers who beneficially own any of our ordinary shares. |
* | Unless otherwise noted, the address of each shareholder is China Finance Online (Beijing) Co., Ltd., 9th Floor of Tower C, Corporate Square, No.35 Financial Street, Xicheng District, Beijing, China 100033. |
Number of Shares | ||||||||
Beneficially Owned | ||||||||
Name | Number | Percent | ||||||
5% Shareholder | ||||||||
IDG Technology Venture Investment, Inc.(1) | 15,670,507 | 14.13 | % | |||||
IDG Technology Venture Investments, LP (2) | 6,723,115 | 6.06 | % | |||||
Vertex Technology Fund (III) Ltd. (3) | 7,580,494 | 6.84 | % | |||||
Jianping Lu (4) | 7,156,121 | 6.45 | % | |||||
Ling Zhang (5) | 8,746,370 | 7.89 | % | |||||
C&F International Holdings Limited (6) | 10,558,493 | 9.52 | % | |||||
FMR LLC (7) | 14,332,020 | 12.92 | % | |||||
Directors and executive officers | ||||||||
Hugo Shong | * | * | ||||||
Kheng Nam Lee | * | * | ||||||
Ling Wang | * | * | ||||||
Fansheng Guo | * | * | ||||||
Zhiwei Zhao | 9,275,964 | 8.37 | % | |||||
Jun (Jeff) Wang | * | * | ||||||
Caogang Li | * | * | ||||||
All current directors and executive officers as a group (7 persons) | 13,295,164 | 11.99 | % |
* | Upon exercise of all options currently exercisable or vesting within 60 days of the date of this annual report, would beneficially own less than 1% of our ordinary shares. |
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(1) | Includes 15,670,507 ordinary shares held by IDG Technology Venture Investment, Inc.. IDG Technology Venture Investment, Inc. is the limited partner of IDG Technology Venture Investments, LP and does not control IDG Technology Venture Investments, LP. IDG Technology Venture Investment, Inc., a Massachusetts corporation, is wholly owned by International Data Group Inc., a Massachusetts corporation, which is controlled by Patrick McGovern, the majority shareholder, founder and chairman of International Data Group Inc. IDG Technology Venture Investment, Inc. disclaims beneficial ownership of all of the ordinary shares owned by IDG Technology Venture Investments, LP. The registered address of IDG Technology Venture Investment, Inc. is 5 Speen Street, Framingham, MA 01701, U.S.A. | |
(2) | Includes 6,723,115 ordinary shares held by IDG Technology Venture Investments, LP. The general partner of IDG Technology Venture Investments, LP is IDG Technology Venture Investments, LLC. Messrs. Patrick McGovern and Quan Zhou are managing members of IDG Technology Venture Investments, LLC, both of whom disclaim beneficial ownership of our shares held by IDG Technology Venture Investments, LLC. IDG Technology Venture Investment, Inc. is a limited partner of IDG Technology Venture Investments, LP, and does not control IDG Technology Venture Investments, LP. IDG Technology Venture Investments, LP disclaims beneficial ownership of all of the ordinary shares owned by IDG Technology Venture Investment, Inc. The registered address of IDG Technology Venture Investments, LP is Corporation Service Company, 1013 Centre Road, Wilmington, County of New Castle, Delaware 19805-1297, U.S.A. | |
(3) | Includes 7,580,494 ordinary shares held by Vertex Technology Fund (III) Ltd as of December 31, 2010 in the form of 1,516,098 ADS and 4 ordinary shares. Vertex Management (II) Pte Ltd is the fund manager of Vertex Technology Fund (III) Ltd, and may be deemed to have power to vote and dispose of the shares held of record by Vertex Technology Fund (III) Ltd. Vertex Venture Holdings Ltd, as the sole shareholder of Vertex Technology Fund (III) Ltd, and as the sole shareholder of Vickers Capital Limited, which is the sole shareholder of Vertex Management (II) Pte Ltd, may also be deemed to have the power to vote and dispose of these shares. The address of Vertex Technology Fund (III) Ltd is 250 North Bridge Road, #05-01 Raffles City Tower, Singapore 179101. | |
(4) | Includes (i) 4,028,156 ordinary shares held by Cast Technology, Inc.; and (ii) 3,127,965 ordinary shares held by Fanasia Capital Limited. Both Cast Technology, Inc. and Fanasia Capital Limited are held 45% and 55% by Jianping Lu and Ling Zhang, respectively. | |
(5) | Includes (i) 4,923,302 ordinary shares held by Cast Technology, Inc.; and (ii) 3,823,068 ordinary shares held by Fanasia Capital Limited. Both Cast Technology, Inc. and Fanasia Capital Limited are held 45% and 55% by Jianping Lu and Ling Zhang, respectively. | |
(6) | Includes 10,558,493 ordinary shares held by C&F International Holdings Limited, a company incorporated in British Virgin Islands. C&F International Holdings Limited holds the ordinary shares on behalf of and exclusively for the benefit of the group of employees eligible for the 2007 Equity Incentive Plan. C&F International Holdings Limited is 100% owned by C&F Global Limited, a British Virgin Islands Company, which is in turn owned by the selected employees. |
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(7) | * | Fidelity Management & Research Company (“Fidelity”), a wholly-owned subsidiary of FMR LLC and an investment adviser registered under Section 203 of the Investment Advisers Act of 1940, is the beneficial owner of 14,307,020 shares of the common stock outstanding of China Finance Online Co. Limited as a result of acting as investment adviser to various investment companies. The registered address is 82 Devonshire Street, Boston, Massachusetts 02109. Edward C. Johnson 3d, Chairman of FMR LLC, and FMR LLC, through its control of Fidelity, and the funds each has sole power to dispose of the 14,307,020 shares owned by the Funds. Members of the family of Edward C. Johnson 3d, are the predominant owners, directly or through trusts, of series B voting common shares of FMR LLC, representing 49% of the voting power of FMR LLC. The Johnson family group and all other series B shareholders have entered into a shareholders’ voting agreement under which all series B voting common shares will be voted in accordance with the majority vote of series B voting common shares. Accordingly, members of the Johnson family may be deemed, under the Investment Company Act of 1940, to form a controlling group with respect to FMR LLC. Neither FMR LLC nor Edward C. Johnson 3d has the sole power to vote or direct the voting of the shares owned directly by the Fidelity Funds, which power resides with the Funds’ Boards of Trustees. Fidelity carries out the voting of the shares under written guidelines established by the funds’ boards of trustees. |
* | Pyramis Global Advisors Trust Company (“PGATC”), an indirect wholly-owned subsidiary of FMR LLC and a bank as defined in Section 3(a)(6) of the Securities Exchange Act of 1934, is the beneficial owner of 25,000 shares of the outstanding common stock of the China Finance Online Co. Limited as a result of its serving as investment manager of institutional accounts owning such shares. The registered address is 900 Salem Street, Smithfield, Rhode Island, 02917. Edward C. Johnson 3d and FMR LLC, through its control of Pyramis Global Advisors Trust Company, each has sole dispositive power over 25,000 shares and sole power to vote or to direct the voting of 0 shares of common stock owned by the institutional accounts managed by PGATC as reported above. | |
* | As of March 31, 2011, FMR LLC holds 8,005,180 shares or 7.22% of the common stock outstanding of China Finance Online Co. Limited according to the 13G filed with the SEC on April 8, 2011, including 7,980,180 shares held by Fidelity and 25,000 shares held by PGATC. |
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• | a strategic consulting service agreement between CFO Software and CFO Chongzhi; |
• | a technical support agreement between CFO Software and CFO Chongzhi; |
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• | an operation agreement between CFO Software and CFO Chongzhi; |
• | a loan agreement with Xun Zhao and Zhenfei Fan. We entered into a loan agreement with Xun Zhao and Zhenfei Fan to extend to them a loan in the amount of $65,958 and $80,615, respectively, for the sole purpose of financing their acquisition of equity interests in CFO Chongzhi; |
• | a purchase option agreement among CFO Software, CFO Chongzhi, Xun Zhao and Zhenfei Fan; |
• | voting arrangements with each of Xun Zhao and Zhenfei Fan regarding their voting rights in CFO Shangtong; and |
• | a share pledge agreement among CFO Software, Xun Zhao and Zhenfei Fan. |
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• | a strategic consulting and service agreement between CFO Software and CFO Chuangying; |
• | a technical support agreement between CFO Software and CFO Chuangying; |
• | an operation agreement between CFO Software and CFO Chuangying; |
• | a loan agreement with Yang Yang and Zhenfei Fan. We entered into a loan agreement with Yang Yang and Zhenfei Fan to extend to each of them a loan in the amount of $322,100 and $263,500, respectively, for the sole purpose of financing their acquisition of equity interests in CFO Chuangying; |
• | a purchase option agreement among CFO Software, CFO Chuangying, Yang Yang and Zhenfei Fan; and |
• | voting arrangements with each of Yang Yang and Zhenfei Fan regarding their voting rights in CFO Chuangying. |
• | a strategic consulting service agreement between CFO Success and CFO Shenzhen Shangtong; |
• | a technical support agreement between CFO Success and CFO Shenzhen Shangtong; |
• | an operation agreement between CFO Success and CFO Shenzhen Shangtong; |
• | a loan agreement with Lin Yang and Shaoming Shi. We entered into a loan agreement with Lin Yang and Shaoming Shi to extend to each of them a loan in the amount of $80,500 and $65,900, respectively, for the sole purpose of financing their acquisition of equity interests in CFO Shenzhen Shangtong; |
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• | a purchase option agreement among CFO Success, CFO Shenzhen Shangtong, Lin Yang and Shaoming Shi; |
• | voting arrangements with each of Lin Yang and Shaoming Shi regarding their voting rights in CFO Shenzhen Shangtong; and |
• | a share pledge agreement among CFO Success, Lin Yang and Shaoming Shi. |
• | a strategic consulting service agreement between CFO Chuangying and CFO Qicheng; |
• | a technical support agreement between CFO Chuangying and CFO Qicheng; |
• | an operation agreement between CFO Chuangying and CFO Qicheng; |
• | a loan agreement with Lin Yang and Yang Yang. We entered into a loan agreement with Lin Yang and Yang Yang to extend to each of them a loan in the amount of $80,500 and $65,900, respectively, for the sole purpose of financing their acquisition of equity interests in CFO Qicheng; |
• | a purchase option agreement among CFO Chuangying, CFO Qicheng, Lin Yang and Yang Yang; |
• | voting arrangements with each of Lin Yang and Yang Yang regarding their voting rights in CFO Qicheng; and |
• | a share pledge agreement among CFO Chuangying, Lin Yang and Yang Yang. |
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• | the fifth anniversary of the consummation of our initial public offering, or October 24, 2009; |
• | upon such holder holding less than 1% of our outstanding ordinary shares after our initial public offering; and |
• | upon such holder becoming eligible to sell all of such holder’s registrable securities pursuant to Rule 144 under the Securities Act within any three-month period without volume limitations, under Rule 144(k), or under any comparable securities law of a jurisdiction other than the United States for sale of registrable securities in such jurisdiction. |
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Sales Price | ||||||||
High | Low | |||||||
Yearly highs and lows | ||||||||
Year 2006 | 9.68 | 3.95 | ||||||
Year 2007 | 47.68 | 4.53 | ||||||
Year 2008 | 26.15 | 4.72 | ||||||
Year 2009 | 13.54 | 6.97 | ||||||
Year 2010 | 9.10 | 6.20 | ||||||
Quarterly highs and lows | ||||||||
First Quarter 2009 | 11.44 | 6.97 | ||||||
Second Quarter 2009 | 13.54 | 9.17 | ||||||
Third Quarter 2009 | 13.28 | 8.64 | ||||||
Fourth Quarter 2009 | 9.25 | 7.28 | ||||||
First Quarter 2010 | 9.01 | 6.86 | ||||||
Second Quarter 2010 | 8.19 | 6.20 | ||||||
Third Quarter 2010 | 8.28 | 6.90 | ||||||
Fourth Quarter 2010 | 8.59 | 6.53 | ||||||
First Quarter 2011 | 7.27 | 4.32 | ||||||
Monthly highs and lows | ||||||||
November 2010 | 8.59 | 7.32 | ||||||
December 2010 | 7.77 | 6.53 | ||||||
January 2011 | 7.27 | 5.65 | ||||||
February 2011 | 5.94 | 5.07 | ||||||
March 2011 | 5.50 | 4.32 | ||||||
April 2011 | 6.39 | 4.22 |
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• | dealers in securities or currencies; |
• | traders in securities that elect to use a mark-to-market method of accounting for securities holdings; |
• | banks or other financial institutions; |
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• | insurance companies; |
• | tax-exempt organizations; |
• | regulated investment companies or real estate investment trusts; |
• | U.S. expatriates; |
• | partnerships and other entities treated as partnerships for U.S. federal income tax purposes or persons holding ADSs through any such entities; |
• | persons that hold ADSs as part of a hedge, straddle, constructive sale, conversion transaction or other integrated investment; |
• | U.S. Holders (as defined below) whose functional currency for tax purposes is not the U.S. dollar; |
• | persons liable for alternative minimum tax; or |
• | persons who actually or constructively own 10% or more of the total combined voting power of all classes of our shares (including ADSs) entitled to vote. |
• | a citizen or resident of the United States for U.S. federal income tax purposes; |
• | a corporation, or other entity taxable as a corporation, that was created or organized in or under the laws of the United States or any political subdivision thereof; |
• | an estate the income of which is subject to U.S. federal income tax regardless of its source; or |
• | a trust if (a) a court within the United States is able to exercise primary supervision over its administration and one or more U.S. persons have the authority to control all substantial decisions of the trust, or (b) the trust has a valid election in effect to be treated as a U.S. person. |
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• | at least 75% of its gross income is passive income (the “income test”), or |
• | at least 50% of the value of its assets (based on an average of the quarterly values of the assets during a taxable year) is attributable to assets that produce or are held for the production of passive income (the “asset test”). |
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• | the excess distribution or gain will be allocated ratably over your holding period for the ADSs or ordinary shares, |
• | the amount allocated to the current taxable year, and any taxable year prior to the first taxable year in which we became a PFIC, will be treated as ordinary income, and |
• | the amount allocated to each other taxable year will be subject to the highest tax rate in effect for that taxable year and the interest charge generally applicable to underpayments of tax will be imposed on the resulting tax attributable to each such taxable year. |
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• | that gain is effectively connected with the conduct of a U.S. trade or business and, if an applicable income tax treaty so requires as a condition for you to be subject to U.S. federal income tax with respect to income from your ADSs, such gain is attributable to a permanent establishment that you maintain in the United States; or |
• | you are a nonresident alien individual and are present in the United States for at least 183 days in the taxable year of the sale or other disposition and either (1) your gain is attributable to an office or other fixed place of business that you maintain in the United States or (2) you have a tax home in the United States. |
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Category | Depositary actions | Associated fee | ||
(a) Depositing or substituting the underlying shares | Each person to whom ADSs are issued against deposits of shares, including deposits and issuances in respect of: | US$5.00 for each 100 ADSs (or portion thereof) evidenced by the ADRs issued | ||
• Share distributions, stock dividend, stock split, merger | ||||
• Exchange of securities or any other transaction or event affecting the ADSs or the deposited securities | ||||
(b) Receiving or distributing dividends | Distribution of cash dividends | US$0.02 or less per ADS |
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Category | Depositary actions | Associated fee | ||
(c) Selling or exercising rights | Distribution or sale of securities, the fee being in an amount equal to the fee for the execution and delivery of ADSs which would have been charged as a result of the deposit of such securities | Up to US$5.00 for each 100 ADSs (or portion thereof) | ||
(d) Withdrawing an underlying security | Acceptance of ADRs surrendered for withdrawal of deposited securities | US$5.00 for each 100 ADSs (or portion thereof) evidenced by the ADRs surrendered | ||
(e) Transferring, splitting or grouping receipts | Transfers of depositary receipts | US$1.50 per ADS | ||
(f) General depositary services, particularly those charged on an annual basis | Services performed by the depositary in administering the ADRs | US$0.02 per ADS (or portion thereof) not more than once each calendar year and payable at the sole discretion of the depositary by billing ADR Holders or by deducting such charge from one or more cash dividends or other cash distributions | ||
(g) Expenses of the Depositary | Expenses incurred on behalf of ADR Holders in connection with: • Compliance with foreign exchange control regulations or any law or regulation relating to foreign investment • The depositary’s or its custodian’s compliance with applicable law, rule or regulation • Stock transfer or other taxes and other governmental charges • Cable, telex and facsimile transmission and delivery charges • fees for the transfer or registration of deposited securities in connection with the deposit or withdrawal of deposited securities • Expenses of the depositary in connection with the conversion of foreign currency into U.S. dollars (which are paid out of such foreign currency) • Any other charge payable by depositary or its agents in connection with the servicing of the shares or the deposited securities | Expenses payable at the sole discretion of the depositary by billing ADR Holders or by deducting such charges from one or more cash dividends or other cash distributions |
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Beijing, the People’s Republic of China
May 31, 2011
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For the Year Ended December 31, | ||||||||||||
2010 | 2009 | 2008 | ||||||||||
Audit Fees(1) | US$ | 735,000 | US$ | 735,000 | US$ | 735,000 | ||||||
Tax Fees(2) | — | — | 119,737 | |||||||||
(1) | “Audit Fees” means the aggregate fees in each of the fiscal years listed for professional services rendered by Deloitte Touche Tohmatsu CPA Ltd. for the audit of our annual financial statements, review of interim financial statements and attestation services that are provided in connection with statutory and regulatory filings or engagements. | |
(2) | “Tax Fees” means the aggregate fees billed in each of the fiscal years listed for professional tax services rendered by Deloitte Touche Tohmatsu CPA Ltd. |
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Exhibit | ||||
Number | Description | |||
1.1 | Amended and Restated Memorandum and Articles of Association of China Finance Online Co. Limited (incorporated by reference to Exhibit 3.1 from our Registration Statement on Form F-1 (File No. 333-119166) filed with the Securities and Exchange Commission on October 4, 2004) | |||
2.1 | Specimen ordinary share certificate (incorporated by reference to Exhibit 4.1 from our Registration Statement on Form F-1 (File No. 333-119166) filed with the Securities and Exchange Commission on September 21, 2004) | |||
2.2 | Specimen American depositary receipt of China Finance Online Co. Limited (Incorporated by reference to the Registration Statement on Form F-6 (File No. 333-119530) filed with the Securities and Exchange Commission with respect to American depositary shares representing ordinary shares on October 5, 2004 | |||
2.3 | Shareholders Agreement of China Finance Online Co. Limited dated June 2000 among China Finance Online Co. Limited and certain of its shareholders (incorporated by reference to Exhibit 4.2 from our Registration Statement on Form F-1 (File No. 333-119166) filed with the Securities and Exchange Commission on September 21, 2004) | |||
4.1 | 2004 Incentive Stock Option Plan and form of option agreement (incorporated by reference to Exhibit 4.1 from our 2006 Annual Report on Form 20-F (File No.000-50975) filed with the Securities and Exchange Commission on May 29, 2007) | |||
4.2 | * | Results of 2006 Annual General Meeting | ||
4.3 | * | Results of 2009 Annual General Meeting | ||
4.4 | * | Results of 2010 Annual General Meeting | ||
4.5 | Restricted Stock Issuance and Allocation Agreement-2007 Equity Incentive Plan (incorporated by reference to Exhibit 99.1 on Form 6-K (File No. 000-50975) filed with the Securities and Exchange Commission on August 24, 2007) | |||
4.6 | Amended Restricted Stock Issuance and Allocation Agreement 2007 Equity Incentive Plan dated May 20, 2009 (incorporated by reference to Exhibit 4.3 from our 2009 Annual Report on Form 20-F (File No.000-50975) filed with the Securities and Exchange Commission on May 28, 2010) | |||
4.7 | Form of Option Agreement with outside consultants and strategic advisors (incorporated by reference to Exhibit 10.2 from our Registration Statement on Form F-1 (File No. 333-119166) filed with the Securities and Exchange Commission on September 21, 2004) | |||
4.8 | Purchase Option and Cooperation Agreement dated May 27, 2004 among China Finance Online Co. Limited, Jun Ning, Wu Chen and CFO Fuhua Innovation Technology Development Co., Ltd. (incorporated by reference to Exhibit 10.3 from our Registration Statement on Form F-1 (File No. 333-119166) filed with the Securities and Exchange Commission on September 21, 2004) | |||
4.9 | Share Pledge Agreement dated May 27, 2004 among Jun Ning, Wu Chen and China Finance Online (Beijing) Co., Ltd. (incorporated by reference to Exhibit 10.4 from our Registration Statement on Form F-1 (File No. 333-119166) filed with the Securities and Exchange Commission on September 21, 2004) | |||
4.10 | Proxy from Wu Chen to Jian Feng dated May 27, 2004 (incorporated by reference to Exhibit 10.6 from our Registration Statement on Form F-1 (File No. 333-119166) filed with the Securities and Exchange Commission on September 21, 2004) | |||
4.11 | Framework Agreement on Exercising Purchase Option dated November 20, 2006 by and among Jun Ning, Wu Chen, Zhiwei Zhao, CFO Fuhua Innovation Technology Development Co., Ltd. and China Finance Online (Beijing) Co., Ltd. (incorporated by reference to Exhibit 4.7 from our 2006 Annual Report on Form 20-F (File No.000-50975) filed with the Securities and Exchange Commission on May 29, 2007) | |||
4.12 | Purchase Option and Cooperation Agreement dated November 20, 2006 among China Finance Online Co. Limited, Zhiwei Zhao, Wu Chen, Fuhua Innovation Technology Development Co., Ltd. and China Finance Online (Beijing) Co., Ltd. (incorporated by reference to Exhibit 4.10 from our 2006 Annual Report on Form 20-F (File No.000-50975) filed with the Securities and Exchange Commission on May 29, 2007) |
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Exhibit | ||||
Number | Description | |||
4.13 | Share Pledge Agreement dated November 20, 2006 among Zhiwei Zhao, Wu Chen, Fuhua Innovation Technology Development Co., Ltd. and China Finance Online (Beijing) Co., Ltd. (incorporated by reference to Exhibit 4.11 from our 2006 Annual Report on Form 20-F (File No.000-50975) filed with the Securities and Exchange Commission on May 29, 2007) | |||
4.14 | Equipment Lease Agreement between China Finance Online (Beijing) Co., Ltd. and Fuhua Innovative Technology Development Co., Ltd. dated May 27, 2004 (incorporated by reference to Exhibit 10.7 from our Registration Statement on Form F-1 (File No. 333-119166) filed with the Securities and Exchange Commission on September 21, 2004) | |||
4.15 | Technical Support Agreement between China Finance Online (Beijing) Co., Ltd. and Fuhua Innovative Technology Development Co., Ltd. dated May 27, 2004 (incorporated by reference to Exhibit 10.8 from our Registration Statement on Form F-1 (File No. 333-119166) filed with the Securities and Exchange Commission on September 21, 2004) | |||
4.16 | Amended and Restated Strategic Consulting Agreement between China Finance Online (Beijing) Co., Ltd. and Fuhua Innovative Technology Development Co., Ltd. dated May 27, 2004 (incorporated by reference to Exhibit 10.9 from our Registration Statement on Form F-1 (File No. 333-119166) filed with the Securities and Exchange Commission on September 21, 2004) | |||
4.17 | Framework Agreement on Exercising Purchase Option dated October 18, 2007 by and among China Finance Online Co. Limited, Wu Chen, Zhiwei Zhao, Jun Wang, CFO Fuhua Innovation Technology Development Co., Ltd and China Finance Online (Beijing) Co., Ltd. (incorporated by reference to Exhibit 4.15 from our 2007 Annual Report on Form 20-F (File No.000-50975) filed with the Securities and Exchange Commission on June 5, 2008) | |||
4.18 | Loan Agreement between China Finance Online Co. Limited and Jun Wang dated October 18, 2007 (incorporated by reference to Exhibit 4.16 from our 2007 Annual Report on Form 20-F (File No.000-50975) filed with the Securities and Exchange Commission on June 5, 2008) | |||
4.19 | Share Transfer Contract (related to shares of Beijing Fuhua Innovation Technology Development Co., Ltd.) dated October 18, 2007 by and between Wu Chen and Jun Wang (incorporated by reference to Exhibit 4.17 from our 2007 Annual Report on Form 20-F (File No.000-50975) filed with the Securities and Exchange Commission on June 5, 2008) | |||
4.20 | Share Pledge Agreement dated October 18, 2007 among Zhiwei Zhao, Jun Wang, Fuhua Innovation Technology Development Co., Ltd. and China Finance Online (Beijing) Co., Ltd. (incorporated by reference to Exhibit 4.18 from our 2007 Annual Report on Form 20-F (File No.000-50975) filed with the Securities and Exchange Commission on June 5, 2008) | |||
4.21 | Purchase Option and Cooperation Agreement dated October 18, 2007 among China Finance Online Co. Limited, Zhiwei Zhao, Jun Wang and CFO Fuhua Innovation Technology Development Co., Ltd. (incorporated by reference to Exhibit 4.19 from our 2007 Annual Report on Form 20-F (File No.000-50975) filed with the Securities and Exchange Commission on June 5, 2008) | |||
4.22 | Purchase Option and Coopration Agreement dated March 3, 2008 among China Finance Online Co. Limited, Zhiwei Zhao, Jun Wang and CFO Fuhua Innovation Technology Development Co., Ltd. (incorporated by reference to Exhibit 4.20 from our 2007 Annual Report on Form 20-F (File No.000-50975) filed with the Securities and Exchange Commission on June 5, 2008) | |||
4.23 | Capital Increase Agreement relating to CFO Fuhua Innovation Technology Development Co., Ltd. dated March 3, 2008 among CFO Fuhua Innovation Technology Development Co., Ltd., Jun Wang and Zhiwei Zhao (incorporated by reference to Exhibit 4.21 from our 2007 Annual Report on Form 20-F (File No.000-50975) filed with the Securities and Exchange Commission on June 5, 2008) |
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Exhibit | ||||
Number | Description | |||
4.24 | Loan Agreement dated March 3, 2008 among China Finance Online (Beijing) Co., Ltd., Jun Wang and Zhiwei Zhao (incorporated by reference to Exhibit 4.22 from our 2007 Annual Report on Form 20-F (File No.000-50975) filed with the Securities and Exchange Commission on June 5, 2008) | |||
4.25 | Share Pledge Agreement dated March 3,2008 among Zhiwei Zhao, Jun Wang, Fuhua Innovation Technology Development Co., Ltd. and China Finance Online (Beijing) Co., Ltd. (incorporated by reference to Exhibit 4.23 from our 2007 Annual Report on Form 20-F (File No.000-50975) filed with the Securities and Exchange Commission on June 5, 2008) | |||
4.26 | Loan Agreement dated August 21, 2007 among Fortune Software (Beijing) Co., Ltd., Wei Xiong and Zhenfei Fan (incorporated by reference to Exhibit 4.24 from our 2007 Annual Report on Form 20-F (File No.000-50975) filed with the Securities and Exchange Commission on June 5, 2008) | |||
4.27 | Operation Agreement among dated August 21, 2007 by and between Fortune Software (Beijing) Co., Ltd. and Beijing CFO Premium Technology Co., Ltd.(incorporated by reference to Exhibit 4.25 from our 2007 Annual Report on Form 20-F (File No.000-50975) filed with the Securities and Exchange Commission on June 5, 2008) | |||
4.28 | Technical Support Agreement between Fortune Software (Beijing) Co., Ltd. and Beijing CFO Premium Technology Co., Ltd. dated August 21, 2007 (incorporated by reference to Exhibit 4.26 from our 2007 Annual Report on Form 20-F (File No.000-50975) filed with the Securities and Exchange Commission on June 5, 2008) | |||
4.29 | Strategic Consulting and Service Agreement between Fortune Software (Beijing) Co., Ltd. and Beijing Premium Technology Co., Ltd. dated August 21, 2007 (incorporated by reference to Exhibit 4.27 from our 2007 Annual Report on Form 20-F (File No.000-50975) filed with the Securities and Exchange Commission on June 5, 2008) | |||
4.30 | Purchase Option Agreement dated August 21, 2007 among Fortune Software. Limited, Wei Xiong, Zhenfei Fan and Beijing Premium Technology Co., Ltd. (incorporated by reference to Exhibit 4.28 from our 2007 Annual Report on Form 20-F (File No.000-50975) filed with the Securities and Exchange Commission on June 5, 2008) | |||
4.31 | Framework Agreement among Fortune Software (Beijing) Co., Ltd., Wu Chen, Jun Wang and Beijing Glory Co., Ltd. dated September 10, 2007 (incorporated by reference to Exhibit 4.29 from our 2007 Annual Report on Form 20-F (File No.000-50975) filed with the Securities and Exchange Commission on June 5, 2008) | |||
4.32 | Loan Agreement dated September 1, 2007 among Fortune Software (Beijing) Co., Ltd., Wu Chen and Zhiwei Zhao (incorporated by reference to Exhibit 4.30 from our 2007 Annual Report on Form 20-F (File No.000-50975) filed with the Securities and Exchange Commission on June 5, 2008) | |||
4.33 | Share Transfer Contract (related to shares of Beijing Glory Co., Ltd.) dated September 10, 2007 by and between Wu Chen and Jun Wang (incorporated by reference to Exhibit 4.31 from our 2007 Annual Report on Form 20-F (File No.000-50975) filed with the Securities and Exchange Commission on June 5, 2008) | |||
4.34 | Operation Agreement dated September 10, 2007 by and between Fortune Software (Beijing) Co.,Ltd. and Beijing Glory Co., Ltd. (incorporated by reference to Exhibit 4.32 from our 2007 Annual Report on Form 20-F (File No.000-50975) filed with the Securities and Exchange Commission on June 5, 2008) | |||
4.35 | Technical Support Agreement between Fortune Software (Beijing) Co., Ltd. and Beijing CFO Glory Co., Ltd. dated September 10, 2007 (incorporated by reference to Exhibit 4.33 from our 2007 Annual Report on Form 20-F (File No.000-50975) filed with the Securities and Exchange Commission on June 5, 2008) |
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Exhibit | ||||
Number | Description | |||
4.36 | Strategic Consulting and Service Agreement between Fortune Software (Beijing) Co., Ltd. and Beijing Glory Co., Ltd. dated September 10, 2007 (incorporated by reference to Exhibit 4.34 from our 2007 Annual Report on Form 20-F (File No.000-50975) filed with the Securities and Exchange Commission on June 5, 2008) | |||
4.37 | Purchase Option Agreement dated September 10, 2007 among China Finance Online Co. Limited, Jun Wang, Zhiwei Zhao and Beijing Glory Co., Ltd. (incorporated by reference to Exhibit 4.3 from our 2007 Annual Report on Form 20-F (File No.000-50975) filed with the Securities and Exchange Commission on June 5, 2008) | |||
4.38 | Framework Agreement for Exercise of Purchase Option dated June 2, 2009 among Wei Xiong, Zhenfei Fan, Zhiwei Zhao, Jun Wang, CFO Software and CFO Premium (incorporated by reference to Exhibit 4.35 from our 2009 Annual Report on Form 20-F (File No.000-50975) filed with the Securities and Exchange Commission on May 28, 2010) | |||
4.39 | Purchase Option Agreement dated June 2, 2009 among CFO Software, CFO Premium, Zhiwei Zhao and Jun Wang (incorporated by reference to Exhibit 4.36 from our 2009 Annual Report on Form 20-F (File No.000-50975) filed with the Securities and Exchange Commission on May 28, 2010) | |||
4.40 | Share Pledge Agreement dated June 2, 2009 among CFO Software, Zhiwei Zhao and Jun Wang (incorporated by reference to Exhibit 4.37 from our 2009 Annual Report on Form 20-F (File No.000-50975) filed with the Securities and Exchange Commission on May 28, 2010) | |||
4.41 | Loan Agreement dated January 21, 2009 among CFO Software, Yang Yang and Zhenfei Fan (incorporated by reference to Exhibit 4.92 from our 2008 Annual Report on Form 20-F (File No.000-50975) filed with the Securities and Exchange Commission on May 22, 2009) | |||
4.42 | Purchase Option Agreement dated January 21, 2009 among CFO Software, CFO Chuangying (formerly known as Guangzhou Boxin Investment Advisory Co., Ltd.), Yang Yang and Zhenfei Fan (incorporated by reference to Exhibit 4.93 from our 2008 Annual Report on Form 20-F (File No.000-50975) filed with the Securities and Exchange Commission on May 22, 2009) | |||
4.43 | Operation Agreement dated February 12, 2009 between CFO Software and CFO Chuangying (incorporated by reference to Exhibit 4.40 from our 2009 Annual Report on Form 20-F (File No.000-50975) filed with the Securities and Exchange Commission on May 28, 2010) | |||
4.44 | Technical Support Agreement dated February 12, 2009 between CFO Software and CFO Chuangying (incorporated by reference to Exhibit 4.41 from our 2009 Annual Report on Form 20-F (File No.000-50975) filed with the Securities and Exchange Commission on May 28, 2010) | |||
4.45 | Strategic Consulting and Service Agreement dated February 12, 2009 between CFO Software and CFO Chuangying (incorporated by reference to Exhibit 4.42 from our 2009 Annual Report on Form 20-F (File No.000-50975) filed with the Securities and Exchange Commission on May 28, 2010) | |||
4.46 | Framework Agreement for Exercise of Purchase Option dated October 15, 2009 among Yang Yang, Zhenfei Fan, Zhiwei Zhao, Jun Wang, CFO Chuangying and CFO Software (incorporated by reference to Exhibit 4.43 from our 2009 Annual Report on Form 20-F (File No.000-50975) filed with the Securities and Exchange Commission on May 28, 2010) | |||
4.47 | Purchase Option Agreement dated October 15, 2009 among CFO Software, CFO Chuangying, Zhiwei Zhao and Jun Wang (incorporated by reference to Exhibit 4.44 from our 2009 Annual Report on Form 20-F (File No.000-50975) filed with the Securities and Exchange Commission on May 28, 2010) |
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Exhibit | ||||
Number | Description | |||
4.48 | Loan Agreement dated August 3, 2009 among CFO Success, Lin Yang and Shaoming Shi (incorporated by reference to Exhibit 4.45 from our 2009 Annual Report on Form 20-F (File No.000-50975) filed with the Securities and Exchange Commission on May 28, 2010) | |||
4.49 | Share Pledge Agreement dated August 3, 2009 among CFO Success, Lin Yang and Shaoming Shi (incorporated by reference to Exhibit 4.46 from our 2009 Annual Report on Form 20-F (File No.000-50975) filed with the Securities and Exchange Commission on May 28, 2010) | |||
4.50 | Purchase Option Agreement dated August 3, 2009 among CFO Success, CFO Shenzhen Shangtong, Lin Yang and Shaoming Shi (incorporated by reference to Exhibit 4.47 from our 2009 Annual Report on Form 20-F (File No.000-50975) filed with the Securities and Exchange Commission on May 28, 2010) | |||
4.51 | Operation Agreement dated August 3, 2009 between CFO Success and CFO Shenzhen Shangtong (incorporated by reference to Exhibit 4.48 from our 2009 Annual Report on Form 20-F (File No.000-50975) filed with the Securities and Exchange Commission on May 28, 2010) | |||
4.52 | Technical Support Agreement dated August 3, 2009 between CFO Success and CFO Shenzhen Shangtong (incorporated by reference to Exhibit 4.49 from our 2009 Annual Report on Form 20-F (File No.000-50975) filed with the Securities and Exchange Commission on May 28, 2010) | |||
4.53 | Strategic Consulting and Service Agreement dated August 3, 2009 between CFO Success and CFO Shenzhen Shangtong (incorporated by reference to Exhibit 4.50 from our 2009 Annual Report on Form 20-F (File No.000-50975) filed with the Securities and Exchange Commission on May 28, 2010) | |||
4.54 | Loan Agreement dated November 20, 2009 among CFO Chuangying, Yang Yang and Lin Yang (incorporated by reference to Exhibit 4.51 from our 2009 Annual Report on Form 20-F (File No.000-50975) filed with the Securities and Exchange Commission on May 28, 2010) | |||
4.55 | Share Pledge Agreement dated November 20, 2009 among CFO Chuangying, Yang Yang and Lin Yang (incorporated by reference to Exhibit 4.52 from our 2009 Annual Report on Form 20-F (File No.000-50975) filed with the Securities and Exchange Commission on May 28, 2010) | |||
4.56 | Purchase Option Agreement dated November 20, 2009 among CFO Chuangying, CFO Qicheng, Yang Yang and Lin Yang (incorporated by reference to Exhibit 4.53 from our 2009 Annual Report on Form 20-F (File No.000-50975) filed with the Securities and Exchange Commission on May 28, 2010) | |||
4.57 | Operation Agreement dated November 20, 2009 between CFO Chuangying and CFO Qicheng (incorporated by reference to Exhibit 4.54 from our 2009 Annual Report on Form 20-F (File No.000-50975) filed with the Securities and Exchange Commission on May 28, 2010) | |||
4.58 | Technical Support Agreement dated November 20, 2009 between CFO Chuangying and CFO Qicheng (incorporated by reference to Exhibit 4.55 from our 2009 Annual Report on Form 20-F (File No.000-50975) filed with the Securities and Exchange Commission on May 28, 2010) |
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Exhibit | ||||
Number | Description | |||
4.59 | Strategic Consulting and Service Agreement dated November 20, 2009 between CFO Chuangying and CFO Qicheng (incorporated by reference to Exhibit 4.56 from our 2009 Annual Report on Form 20-F (File No.000-50975) filed with the Securities and Exchange Commission on May 28, 2010) | |||
4.60 | Loan Agreement dated November 25, 2009 among CFO Chuangying, Yang Yang and Lin Yang (incorporated by reference to Exhibit 4.57 from our 2009 Annual Report on Form 20-F (File No.000-50975) filed with the Securities and Exchange Commission on May 28, 2010) | |||
4.61 | Share Pledge Agreement dated November 25, 2009 among CFO Chuangying, Yang Yang and Lin Yang (incorporated by reference to Exhibit 4.58 from our 2009 Annual Report on Form 20-F (File No.000-50975) filed with the Securities and Exchange Commission on May 28, 2010) | |||
4.62 | Purchase Option Agreement dated November 25, 2009 among CFO Chuangying, CFO Yingchuang, Yang Yang and Lin Yang (incorporated by reference to Exhibit 4.59 from our 2009 Annual Report on Form 20-F (File No.000-50975) filed with the Securities and Exchange Commission on May 28, 2010) | |||
4.63 | Operation Agreement dated November 25, 2009 between CFO Chuangying and CFO Yingchuang (incorporated by reference to Exhibit 4.60 from our 2009 Annual Report on Form 20-F (File No.000-50975) filed with the Securities and Exchange Commission on May 28, 2010) | |||
4.64 | Technical Support Agreement dated November 25, 2009 between CFO Chuangying and CFO Yingchuang (incorporated by reference to Exhibit 4.61 from our 2009 Annual Report on Form 20-F (File No.000-50975) filed with the Securities and Exchange Commission on May 28, 2010) | |||
4.65 | Strategic Consulting and Service Agreement dated November 25, 2009 between CFO Chuangying and CFO Yingchuang (incorporated by reference to Exhibit 4.62 from our 2009 Annual Report on Form 20-F (File No.000-50975) filed with the Securities and Exchange Commission on May 28, 2010) | |||
4.66 | Loan agreement dated November 30, 2009 among CFO Chuangying, Ran Yuan and Zhihong Wang (incorporated by reference to Exhibit 4.63 from our 2009 Annual Report on Form 20-F (File No.000-50975) filed with the Securities and Exchange Commission on May 28, 2010) | |||
4.67 | Share Pledge Agreement dated November 25, 2009 among CFO Chongzhi, Ran Yuan and Zhihong Wang (incorporated by reference to Exhibit 4.64 from our 2009 Annual Report on Form 20-F (File No.000-50975) filed with the Securities and Exchange Commission on May 28, 2010) | |||
4.68 | Purchase Option Agreement dated November 30, 2009 among CFO Chongzhi, CFO Decheng, Ran Yuan and Zhihong Wang (incorporated by reference to Exhibit 4.65 from our 2009 Annual Report on Form 20-F (File No.000-50975) filed with the Securities and Exchange Commission on May 28, 2010) | |||
4.69 | Operation Agreement dated November 30, 2009 between CFO Chongzhi and CFO Decheng (incorporated by reference to Exhibit 4.66 from our 2009 Annual Report on Form 20-F (File No.000-50975) filed with the Securities and Exchange Commission on May 28, 2010) | |||
4.70 | Technical Support Agreement dated November 30, 2009 between CFO Chongzhi and CFO Decheng (incorporated by reference to Exhibit 4.67 from our 2009 Annual Report on Form 20-F (File No.000-50975) filed with the Securities and Exchange Commission on May 28, 2010) |
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Exhibit | ||||
Number | Description | |||
4.71 | Strategic Consulting and Service Agreement dated November 30, 2009 between CFO Chongzhi and CFO Decheng (incorporated by reference to Exhibit 4.68 from our 2009 Annual Report on Form 20-F (File No.000-50975) filed with the Securities and Exchange Commission on May 28, 2010) | |||
4.72 | Shanghai Stock Exchange Level-II Quotations License Agreement dated July 30, 2009 between SSE Infonet Ltd. and Fortune Software (Beijing) Co., Ltd. (certain portions of the agreement have been omitted and filed separately with the Securities and Exchange Commission pursuant to a request for confidential treatment) (incorporated by reference to Exhibit 4.69 from our 2009 Annual Report on Form 20-F (File No.000-50975) filed with the Securities and Exchange Commission on May 28, 2010) | |||
4.73 | License Agreement relating to the distribution of TopView between Fortune Software (Beijing) Co., Ltd. and Shanghai Stock Exchange Information Network Co., Ltd. dated December 26, 2007 (incorporated by reference to Exhibit 4.37 from our 2007 Annual Report on Form 20-F (File No.000-50975) filed with the Securities and Exchange Commission on June 5, 2008) | |||
4.74 | * | Shenzhen Stock Exchange Proprietary Information License Agreement dated April 15, 2010 between Fortune Software (Beijing) Co., Ltd. and Shenzhen Securities Information Co., Ltd. (certain portions of the agreement have been omitted and filed separately with the Securities and Exchange Commission pursuant to a request for confidential treatment) (incorporated by reference to Exhibit 4.71 from our 2009 Annual Report on Form 20-F (File No.000-50975) filed with the Securities and Exchange Commission on May 28, 2010); Appendix I to the Shenzhen Stock Exchange Proprietary Information License Agreement, dated March 7, 2011 (certain portions of Appendix I have been omitted and filed separately with the Securities and Exchange Commission on May 31, 2011 pursuant to a request for confidential treatment, which request is pending). | ||
4.75 | * | Securities Information License Contract dated January 28, 2010 between SSE Infonet Ltd. and CFO Software (certain portions of the agreement have been omitted and filed separately with the Securities and Exchange Commission pursuant to a request for confidential treatment) (incorporated by reference to Exhibit 4.72 from our 2009 Annual Report on Form 20-F (File No.000-50975) filed with the Securities and Exchange Commission on May 28, 2010); Appendices II and III to the Securities Information License Contract, dated January 5, 2011 (certain portions of Appendices II and III have been omitted and filed separately with the Securities and Exchange Commission on May 31, 2011 pursuant to a request for confidential treatment, which request is pending). | ||
4.76 | * | Shenzhen Stock Exchange Quotations (Web Based Plus Version) License Agreement dated October 21, 2009 between Shenzhen Securities Information Co., Ltd. and Fortune Software (Beijing) Co., Ltd. (incorporated by reference to Exhibit 4.73 from our 2009 Annual Report on Form 20-F (File No.000-50975) filed with the Securities and Exchange Commission on May 28, 2010); Renewal of Shenzhen Stock Exchange Quotations (Web Based Plus Version) License Agreement dated March 18, 2011. |
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Exhibit | ||||
Number | Description | |||
4.77 | Basic Market Prices Agreement dated September 28, 2009 between HKEx Information Services Limited and China Finance Online Co. Limited (certain portions of the agreement have been omitted and filed separately with the Securities and Exchange Commission pursuant to a request for confidential treatment) (incorporated by reference to Exhibit 4.74 from our 2009 Annual Report on Form 20-F (File No.000-50975) filed with the Securities and Exchange Commission on May 28, 2010) | |||
4.78 | * | China Financial Futures Exchange Futures Information License Agreement dated April 8, 2009 between CFO Software and China Financial Futures Exchange (certain portions of the agreement have been omitted and filed separately with the Securities and Exchange Commission pursuant to a request for confidential treatment) (incorporated by reference to Exhibit 4.75 from our 2009 Annual Report on Form 20-F (File No.000-50975) filed with the Securities and Exchange Commission on May 28, 2010); Supplemental Agreement dated April 16, 2011 (certain portions of the Supplemental Agreement have been omitted and filed separately with the Securities and Exchange Commission on May 31, 2011 pursuant to a request for confidential treatment, which request is pending). | ||
4.79 | Lease Contract for Housing Unit of Corporate Square dated August 9, 2007 between Fortune Software (Beijing) Co. Ltd. and China Galaxy Securities Company Limited (incorporated by reference to Exhibit 4.46 from our 2007 Annual Report on Form 20-F (File No.000-50975) filed with the Securities and Exchange Commission on June 5, 2008) | |||
4.80 | Lease Contract for Housing Unit of Corporate Square dated August 9, 2007 between Beijing Fuhua Innovation Technology Development Co., Ltd. and China Galaxy Securities Company Limited (incorporated by reference to Exhibit 4.47 from our 2007 Annual Report on Form 20-F (File No.000-50975) filed with the Securities and Exchange Commission on June 5, 2008) | |||
4.81 | Lease Contract for Housing Unit of Corporate Square dated August 1, 2007 between China Finance Online (Beijing) Co., Ltd. and China Galaxy Securities Company Limited (incorporated by reference to Exhibit 4.48 from our 2007 Annual Report on Form 20-F (File No.000-50975) filed with the Securities and Exchange Commission on June 5, 2008) | |||
4.82 | Lease Contract for Housing Unit of Corporate Square dated August 1, 2007 between Beijing Fuhua Innovation Technology Development Co., Ltd. and China Galaxy Securities Company Limited (incorporated by reference to Exhibit 4.49 from our 2007 Annual Report on Form 20-F (File No.000-50975) filed with the Securities and Exchange Commission on June 5, 2008) | |||
4.83 | Lease Contract for Housing Unit of Corporate Square dated August 1, 2007 between Fortune Software (Beijing) Co. Ltd. and China Galaxy Securities Company Limited (incorporated by reference to Exhibit 4.50 from our 2007 Annual Report on Form 20-F (File No.000-50975) filed with the Securities and Exchange Commission on June 5, 2008) | |||
4.84 | Lease Contract dated June 26, 2009 between China National Precision Machinery I&E Corp. Beijing Aerospace CPMIEC Building and CFO Wisdom (Unit 619) (incorporated by reference to Exhibit 4.81 from our 2009 Annual Report on Form 20-F (File No.000-50975) filed with the Securities and Exchange Commission on May 28, 2010) | |||
4.85 | Lease Contract dated June 26, 2009 between China National Precision Machinery I&E Corp. Beijing Aerospace CPMIEC Building and CFO Wisdom (Unit 621) (incorporated by reference to Exhibit 4.82 from our 2009 Annual Report on Form 20-F (File No.000-50975) filed with the Securities and Exchange Commission on May 28, 2010) | |||
4.86 | Lease Contract dated June 26,2009 between China National Precision Machinery I&E Corp. Beijing Aerospace CPMIEC Building and CFO Wisdom (Unit 622) (incorporated by reference to Exhibit 4.83 from our 2009 Annual Report on Form 20-F (File No.000-50975) filed with the Securities and Exchange Commission on May 28, 2010) |
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Exhibit | ||||
Number | Description | |||
4.87 | Lease Contract dated June 26, 2009 between China National Precision Machinery I&E Corp. Beijing Aerospace CPMIEC Building and CFO Success (Unit 623) (incorporated by reference to Exhibit 4.84 from our 2009 Annual Report on Form 20-F (File No.000-50975) filed with the Securities and Exchange Commission on May 28, 2010) | |||
4.88 | Lease Contract dated June 26,2009 between China National Precision Machinery I&E Corp. Beijing Aerospace CPMIEC Building and CFO Software (Unit 626) (incorporated by reference to Exhibit 4.85 from our 2009 Annual Report on Form 20-F (File No.000-50975) filed with the Securities and Exchange Commission on May 28, 2010) | |||
4.89 | Lease Contract dated March 30, 2009 between Beijing Jintai Hengye Co., Ltd. House Lease Branch and CFO Wisdom (Unit 1106) (incorporated by reference to Exhibit 4.86 from our 2009 Annual Report on Form 20-F (File No.000-50975) filed with the Securities and Exchange Commission on May 28, 2010) | |||
4.90 | Suntrans Office Building Lease Contract dated April 30, 2009 between Beijing Suntrans Real Estate Development Co. Ltd. and CFO Chuangying (Unit 1125-1136) (incorporated by reference to Exhibit 4.87 from our 2009 Annual Report on Form 20-F (File No.000-50975) filed with the Securities and Exchange Commission on May 28, 2010) | |||
4.91 | Suntrans Office Building Lease Contract dated April 30, 2009 between Beijing Suntrans Real Estate Development Co. Ltd. CFO Yingchuang (Unit 1137-1140) (incorporated by reference to Exhibit 4.88 from our 2009 Annual Report on Form 20-F (File No.000-50975) filed with the Securities and Exchange Commission on May 28, 2010) | |||
4.92 | Suntrans Office Building Lease Contract dated April 30, 2009 between Beijing Suntrans Real Estate Development Co. Ltd. and CFO Qicheng (Unit 1141-1144) (incorporated by reference to Exhibit 4.89 from our 2009 Annual Report on Form 20-F (File No.000-50975) filed with the Securities and Exchange Commission on May 28, 2010) | |||
4.93 | Suntrans Office Building Lease Contract dated April 30, 2009 between Beijing Suntrans Real Estate Development Co. Ltd. and CFO Wisdom (Unit 1145-1148) (incorporated by reference to Exhibit 4.90 from our 2009 Annual Report on Form 20-F (File No.000-50975) filed with the Securities and Exchange Commission on May 28, 2010) | |||
4.94 | Agreement for the Sale and Purchase of Shares in Daily Growth Investment Company Limited dated September 7, 2007 among William Wang, FNG International Holdings Limited and China Finance Online Co. Limited (incorporated by reference to Exhibit 4.51 from our 2007 Annual Report on Form 20-F (File No.000-50975) filed with the Securities and Exchange Commission on June 5, 2008) | |||
4.95 | Agreement for the Sale and Purchase of Shares in Daily Growth Investment Company Limited dated September 7, 2007 among Tsang Kin-Woo, FNG International Holdings Limited and China Finance Online Co., Limited (incorporated by reference to Exhibit 4.52 from our 2007 Annual Report on Form 20-F (File No.000-50975) filed with the Securities and Exchange Commission on June 5, 2008) | |||
4.96 | Agreement for the Sale and Purchase of Shares in Daily Growth Investment Company Limited dated September 7, 2007 among Wong Chan Miu-Wan Stella, FNG International Holdings Limited and China Finance Online Co. Limited (incorporated by reference to Exhibit 4.53 from our 2007 Annual Report on Form 20-F (File No.000-50975) filed with the Securities and Exchange Commission on June 5, 2008) |
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Exhibit | ||||
Number | Description | |||
4.97 | Agreement for the Sale and Purchase of Shares in Daily Growth Investment Company Limited dated September 7, 2007 among Shun Kin Enterprises Limited, FNG International Holdings Limited and China Finance Online Co. Limited (incorporated by reference to Exhibit 4.54 from our 2007 Annual Report on Form 20-F (File No.000-50975) filed with the Securities and Exchange Commission on June 5, 2008) | |||
4.98 | Agreement for the Sale and Purchase of Shares in Daily Growth Investment Company Limited dated September 7, 2007 among Midopa Enterprises Limited, FNG International Holdings Limited and China Finance Online Co. Limited (incorporated by reference to Exhibit 4.55 from our 2007 Annual Report on Form 20-F (File No.000-50975) filed with the Securities and Exchange Commission on June 5, 2008) | |||
4.99 | Agreement for the Sale and Purchase of Shares in Daily Growth Investment Company Limited dated September 7, 2007 among Hung Yung, FNG International Holdings Limited and China Finance Online Co. Limited (incorporated by reference to Exhibit 4.56 from our 2007 Annual Report on Form 20-F (File No.000-50975) filed with the Securities and Exchange Commission on June 5, 2008) | |||
4.100 | Agreement for the Sale and Purchase of Shares in Daily Growth Investment Company Limited dated September 7, 2007 among Chu Ping-Im, FNG International Holdings Limited and China Finance Online Co. Limited (incorporated by reference to Exhibit 4.57 from our 2007 Annual Report on Form 20-F (File No.000-50975) filed with the Securities and Exchange Commission on June 5, 2008) | |||
4.101 | Agreement for the Sale and Purchase of Shares in Daily Growth Investment Company Limited dated September 7, 2007 among Eternal Growth Investment Limited, FNG International Holdings Limited and China Finance Online Co. Limited (incorporated by reference to Exhibit 4.58 from our 2007 Annual Report on Form 20-F (File No.000-50975) filed with the Securities and Exchange Commission on June 5, 2008) | |||
4.102 | Form of indemnification agreement for directors and officers (incorporated by reference to Exhibit 10.18 from our Registration Statement on Form F-1 (File No. 333-119166) filed with the Securities and Exchange Commission on September 21, 2004) | |||
4.103 | Labor Contract of Zhao Zhiwei dated June 21, 2010 | |||
4.104 | Labor Contract of Jeff Wang dated May 24, 2011 | |||
4.105 | Form of Amended Change in Control Agreement dated October 15, 2008 (incorporated by reference to Exhibit 4.55 from our 2008 Annual Report on Form 20-F (File No.000-50975) filed with the Securities and Exchange Commission on May 22, 2009) | |||
4.106 | Engagement Letter between China Finance Online Co. Limited and Deloitte Touche Tohmatsu CPA. Ltd dated February 26, 2008 (incorporated by reference to Exhibit 4.67 from our 2007 Annual Report on Form 20-F (File No.000-50975) filed with the Securities and Exchange Commission on June 5, 2008) | |||
4.107 | Loan Agreement dated May 8, 2008 among Fortune Software (Beijing) Co., Ltd., Lin Yang and Shaoming Shi (incorporated by reference to Exhibit 4.57 from our 2008 Annual Report on Form 20-F (File No.000-50975) filed with the Securities and Exchange Commission on May 22, 2009) | |||
4.108 | Operation Agreement dated June 8, 2008 between Fortune Software (Beijing) Co., Ltd. and Shanghai Shangtong Information Technology Co., Ltd. (incorporated by reference to Exhibit 4.58 from our 2008 Annual Report on Form 20-F (File No.000-50975) filed with the Securities and Exchange Commission on May 22, 2009) | |||
4.109 | Technical Support Agreement dated June 8, 2008 between Fortune Software (Beijing) Co., Ltd. and Shanghai Shangtong Information Technology Co., Ltd. (incorporated by reference to Exhibit 4.59 from our 2008 Annual Report on Form 20-F (File No.000-50975) filed with the Securities and Exchange Commission on May 22, 2009) |
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Exhibit | ||||
Number | Description | |||
4.110 | Strategic Consulting Service Agreement dated June 8, 2008 between Fortune Software (Beijing) Co., Ltd. and Shanghai Shangtong Information Technology Co., Ltd. (incorporated by reference to Exhibit 4.60 from our 2008 Annual Report on Form 20-F (File No.000-50975) filed with the Securities and Exchange Commission on May 22, 2009) | |||
4.111 | Purchase Option and Cooperation Agreement dated June 8, 2008 among Fortune Software(Beijing) Co., Ltd., Lin Yang, Shaoming Shi and Shanghai Shangtong Information Technology Co., Ltd. (incorporated by reference to Exhibit 4.61 from our 2008 Annual Report on Form 20-F (File No.000-50975) filed with the Securities and Exchange Commission on May 22, 2009) | |||
4.112 | Share Pledge Agreement dated June 8, 2008 among Lin Yang, Shaoming Shi and Fortune Software(Beijing) Co., Ltd. (incorporated by reference to Exhibit 4.62 from our 2008 Annual Report on Form 20-F (File No.000-50975) filed with the Securities and Exchange Commission on May 22, 2009) | |||
4.113 | Framework Agreement on Exercising Purchase Option dated January 5, 2010 by and among Shaoming Shi, Lin Yang, Juanjuan Wang, Minghua Wang, Shanghai Shangtong Co., Ltd. and Fortune Software (Beijing) Co., Ltd. (incorporated by reference to Exhibit 4.110 from our 2009 Annual Report on Form 20-F (File No.000-50975) filed with the Securities and Exchange Commission on May 28, 2010) | |||
4.114 | Purchase Option and Cooperation Agreement dated January 5, 2010 among Fortune Software(Beijing) Co., Ltd., Juanjuan Wang, Minghua Wang and Shanghai Shangtong Co., Ltd. (incorporated by reference to Exhibit 4.111 from our 2009 Annual Report on Form 20-F (File No.000-50975) filed with the Securities and Exchange Commission on May 28, 2010) | |||
4.115 | Share Pledge Agreement dated January 5, 2010 among Juanjuan Wang, Minghua Wang and Fortune Software(Beijing) Co., Ltd. (incorporated by reference to Exhibit 4.112 from our 2009 Annual Report on Form 20-F (File No.000-50975) filed with the Securities and Exchange Commission on May 28, 2010) | |||
4.116 | Loan Agreement dated May 8, 2008 among Fortune Software (Beijing) Co., Ltd., Zhenfei Fan and Xun Zhao (incorporated by reference to Exhibit 4.63 from our 2008 Annual Report on Form 20-F (File No.000-50975) filed with the Securities and Exchange Commission on May 22, 2009) | |||
4.117 | Operation Agreement dated June 8, 2008 between Fortune Software (Beijing) Co., Ltd. and Shanghai Chongzhi Information Technology Co., Ltd. (also known as Shanghai Chongzhi Co., Ltd.) (incorporated by reference to Exhibit 4.64 from our 2008 Annual Report on Form 20-F (File No.000-50975) filed with the Securities and Exchange Commission on May 22, 2009) | |||
4.118 | Technical Support Agreement dated June 8, 2008 between Fortune Software (Beijing) Co., Ltd. and Shanghai Chongzhi Co., Ltd. (incorporated by reference to Exhibit 4.65 from our 2008 Annual Report on Form 20-F (File No.000-50975) filed with the Securities and Exchange Commission on May 22, 2009) | |||
4.119 | Strategic Consulting Service Agreement dated June 8, 2008 between Fortune Software (Beijing) Co., Ltd. and Shanghai Chongzhi Co., Ltd. (incorporated by reference to Exhibit 4.66 from our 2008 Annual Report on Form 20-F (File No.000-50975) filed with the Securities and Exchange Commission on May 22, 2009) | |||
4.120 | Purchase Option and Cooperation Agreement dated June 8, 2008 among Fortune Software(Beijing) Co., Ltd., Zhenfei Fan, Xun Zhao and Shanghai Chongzhi Co., Ltd. (incorporated by reference to Exhibit 4.67 from our 2008 Annual Report on Form 20-F (File No.000-50975) filed with the Securities and Exchange Commission on May 22, 2009) |
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Exhibit | ||||
Number | Description | |||
4.121 | Share Pledge Agreement dated June 8, 2008 among Zhenfei Fan, Xun Zhao and Fortune Software(Beijing) Co., Ltd. (incorporated by reference to Exhibit 4.68 from our 2008 Annual Report on Form 20-F (File No.000-50975) filed with the Securities and Exchange Commission on May 22, 2009) | |||
4.122 | Framework Agreement on Exercising Purchase Option dated January 8, 2010 by and among Zhenfei Fan, Xun Zhao, Zhengyan Wu, Shanghai Chongzhi Co., Ltd., and Fortune Software (Beijing) Co., Ltd. (incorporated by reference to Exhibit 4.119 from our 2009 Annual Report on Form 20-F (File No.000-50975) filed with the Securities and Exchange Commission on May 28, 2010) | |||
4.123 | Purchase Option and Cooperation Agreement dated January 8, 2010 among Fortune Software(Beijing) Co., Ltd., Zhengyan Wu, Xun Zhao and Shanghai Chongzhi Co., Ltd. (incorporated by reference to Exhibit 4.120 from our 2009 Annual Report on Form 20-F (File No.000-50975) filed with the Securities and Exchange Commission on May 28, 2010) | |||
4.124 | Share Pledge Agreement dated January 8, 2010 among Zhengyan Wu, Xun Zhao and Fortune Software(Beijing) Co., Ltd. (incorporated by reference to Exhibit 4.121 from our 2009 Annual Report on Form 20-F (File No.000-50975) filed with the Securities and Exchange Commission on May 28, 2010) | |||
4.125 | Loan Agreement dated August 21, 2008 among Fortune Software (Beijing) Co., Ltd., Shaoming Shi and Lin Yang (incorporated by reference to Exhibit 4.69 from our 2008 Annual Report on Form 20-F (File No.000-50975) filed with the Securities and Exchange Commission on May 22, 2009) | |||
4.126 | Operation Agreement dated October 15, 2008 by and between Fortune Software (Beijing) Co., Ltd. and Zhongcheng Futong Co., Ltd. (formerly known as Beijing Tongxinshengshi Environment Engineering Co., Ltd.)(incorporated by reference to Exhibit 4.70 from our 2008 Annual Report on Form 20-F (File No.000-50975) filed with the Securities and Exchange Commission on May 22, 2009) | |||
4.127 | Technical Support Agreement dated October 15, 2008 between Fortune Software (Beijing) Co., Ltd. and Zhongcheng Futong Co., Ltd. (incorporated by reference to Exhibit 4.71 from our 2008 Annual Report on Form 20-F (File No.000-50975) filed with the Securities and Exchange Commission on May 22, 2009) | |||
4.128 | Strategic Consulting Service Agreement dated October 15, 2008 between Fortune Software (Beijing) Co., Ltd. and Zhongcheng Futong Co., Ltd. (incorporated by reference to Exhibit 4.72 from our 2008 Annual Report on Form 20-F (File No.000-50975) filed with the Securities and Exchange Commission on May 22, 2009) | |||
4.129 | Purchase Option Agreement dated October 15, 2008 among Fortune Software(Beijing) Co., Ltd., Shaoming Shi, Lin Yang and Zhongcheng Futong Co., Ltd. (incorporated by reference to Exhibit 4.73 from our 2008 Annual Report on Form 20-F (File No.000-50975) filed with the Securities and Exchange Commission on May 22, 2009) | |||
4.130 | Framework Agreement on Exercising Purchase Option dated January 5, 2010 by and among Shaoming Shi, Lin Yang, Dongmei Wang, Wei Cui, Zhongcheng Futong Co., Ltd. and Fortune Software (Beijing) Co., Ltd. (incorporated by reference to Exhibit 4.127 from our 2009 Annual Report on Form 20-F (File No.000-50975) filed with the Securities and Exchange Commission on May 28, 2010) |
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Exhibit | ||||
Number | Description | |||
4.131 | Purchase Option and Cooperation Agreement dated January 5, 2010 among Fortune Software(Beijing) Co., Ltd., Dongmei Wang, Wei Cui and Zhongcheng Futong Co., Ltd. (incorporated by reference to Exhibit 4.128 from our 2009 Annual Report on Form 20-F (File No.000-50975) filed with the Securities and Exchange Commission on May 28, 2010) | |||
4.132 | Share Pledge Agreement dated January 5, 2010 among Dongmei Wang, Wei Cui and Fortune Software(Beijing) Co., Ltd. (incorporated by reference to Exhibit 4.129 from our 2009 Annual Report on Form 20-F (File No.000-50975) filed with the Securities and Exchange Commission on May 28, 2010) | |||
4.133 | Share Transfer Agreement dated August 19, 2008 among Lin Yang, Shaoming Shi, Xin Wang and Zhihua Yang (incorporated by reference to Exhibit 4.74 from our 2008 Annual Report on Form 20-F (File No.000-50975) filed with the Securities and Exchange Commission on May 22, 2009) | |||
4.134 | Loan Agreement dated August 21, 2008 among Fortune Software (Beijing) Co., Ltd., Shaoming Shi and Lin Yang (incorporated by reference to Exhibit 4.75 from our 2008 Annual Report on Form 20-F (File No.000-50975) filed with the Securities and Exchange Commission on May 22, 2009) | |||
4.135 | Operation Agreement dated October 15, 2008 by and between Fortune Software (Beijing) Co., Ltd. and Huifu Jinyuan Co., Ltd., (formerly known as Wisdom Door (Beijing) International Culture Spread Co., Ltd.) (incorporated by reference to Exhibit 4.76 from our 2008 Annual Report on Form 20-F (File No.000-50975) filed with the Securities and Exchange Commission on May 22, 2009) | |||
4.136 | Technical Support Agreement dated October 15, 2008 by and between Fortune Software (Beijing) Co., Ltd. and Huifu Jinyuan Co., Ltd., (incorporated by reference to Exhibit 4.77 from our 2008 Annual Report on Form 20-F (File No.000-50975) filed with the Securities and Exchange Commission on May 22, 2009) | |||
4.137 | Strategic Consulting Service Agreement dated October 15, 2008 between Fortune Software (Beijing) Co., Ltd. and Huifu Jinyuan Co., Ltd., (incorporated by reference to Exhibit 4.78 from our 2008 Annual Report on Form 20-F (File No.000-50975) filed with the Securities and Exchange Commission on May 22, 2009) | |||
4.138 | Purchase Option Agreement dated October 15, 2008 among Fortune Software(Beijing) Co., Ltd., Shaoming Shi, Lin Yang and Huifu Jinyuan Co., Ltd., (incorporated by reference to Exhibit 4.79 from our 2008 Annual Report on Form 20-F (File No.000-50975) filed with the Securities and Exchange Commission on May 22, 2009) | |||
4.139 | Share Transfer Agreement dated September 25, 2008 among Lin Yang, Shaoming Shi, Yiming Li and Xu Wang (incorporated by reference to Exhibit 4.80 from our 2008 Annual Report on Form 20-F (File No.000-50975) filed with the Securities and Exchange Commission on May 22, 2009) | |||
4.140 | Loan Agreement dated October 17, 2008 between Fortune Software (Beijing) Co., Ltd. and Lin Yang (incorporated by reference to Exhibit 4.81 from our 2008 Annual Report on Form 20-F (File No.000-50975) filed with the Securities and Exchange Commission on May 22, 2009) | |||
4.141 | Loan Agreement dated October 17, 2008 among Fortune Software (Beijing) Co., Ltd., Fortune (Beijing) Success Technology Co., Ltd. and Linghaima (incorporated by reference to Exhibit 4.82 from our 2008 Annual Report on Form 20-F (File No.000-50975) filed with the Securities and Exchange Commission on May 22, 2009) | |||
4.142 | Purchase Option Agreement dated October 17, 2008 among Fortune Software (Beijing) Co., Ltd., Shenzhen Newrand Securities Investment and Advisory Co., Ltd. and Lin Yang (incorporated by reference to Exhibit 4.83 from our 2008 Annual Report on Form 20-F (File No.000-50975) filed with the Securities and Exchange Commission on May 22, 2009) |
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Exhibit | ||||
Number | Description | |||
4.143 | Purchase Option Agreement dated October 17, 2008 among Fortune Software (Beijing) Co., Ltd., Fortune (Beijing) Success Technology Co., Ltd., Shenzhen Newrand Securities Investment and Advisory Co., Ltd. and Linghai Ma (incorporated by reference to Exhibit 4.84 from our 2008 Annual Report on Form 20-F (File No.000-50975) filed with the Securities and Exchange Commission on May 22, 2009) | |||
4.144 | Share Transfer Agreement dated September 16, 2008 among Linhai Ma, Lin Yang, Shenzhen Guoxuan Capital Holding Co., Ltd., Labor Union Committee of Shenzhen Newrand Securities Investment Advisory Co., Ltd., Zhaowen Li and Shiqin Wang (incorporated by reference to Exhibit 4.85 from our 2008 Annual Report on Form 20-F (File No.000-50975) filed with the Securities and Exchange Commission on May 22, 2009) | |||
4.145 | Securities Investment and Consultancy Information and Technical Support Agreement dated October 17, 2009 between Shenzhen Newrand Securities Investment and Advisory Co., Ltd. and Shenzhen Genius Information Technology Co., Ltd. (incorporated by reference to Exhibit 4.142 from our 2009 Annual Report on Form 20-F (File No.000-50975) filed with the Securities and Exchange Commission on May 28, 2010) | |||
4.146 | Securities Investment and Consultancy Information and Technical Support Agreement dated January 27, 2010 between Shanghai Securities Consulting Co.,Ltd. and Shanghai Meining Computer Software Co., Ltd. (incorporated by reference to Exhibit 4.143 from our 2009 Annual Report on Form 20-F (File No.000-50975) filed with the Securities and Exchange Commission on May 28, 2010) | |||
4.147 | Securities Investment and Consultancy Information and Technical Support Agreement dated January 27, 2010 between Beijing Chuangying Securities Advisory and Investment Co., Ltd. and Beijing Fuhua Innovation Technology Development Co., Ltd. (incorporated by reference to Exhibit 4.144 from our 2009 Annual Report on Form 20-F (File No.000-50975) filed with the Securities and Exchange Commission on May 28, 2010) | |||
4.148 | Loan Agreement dated January 21, 2009 among Fortune Software (Beijing) Co., Ltd., Yang Yang and Zhenfei Fan (incorporated by reference to Exhibit 4.92 from our 2008 Annual Report on Form 20-F (File No.000-50975) filed with the Securities and Exchange Commission on May 22, 2009) | |||
4.149 | Lease Contract dated January 10, 2008 between Shanghai Lushi Food Co., Ltd. and Shanghai Meining Computer Software Co., Ltd. (incorporated by reference to Exhibit 4.96 from our 2008 Annual Report on Form 20-F (File No.000-50975) filed with the Securities and Exchange Commission on May 22, 2009) | |||
4.150 | Lease Contract dated April 10, 2008 between Shenzhen Zhiguangda Industrial Development Co., Ltd. and Shenzhen Genius Information Technology Co., Ltd. (incorporated by reference to Exhibit 4.99 from our 2008 Annual Report on Form 20-F (File No.000-50975) filed with the Securities and Exchange Commission on May 22, 2009) | |||
4.151 | * | Renewal of Lease Contract dated May 1, 2011 between Shenzhen Zhiguangda Industrial Development Co., Ltd. and Shenzhen Genius Information Technology Co., Ltd. | ||
4.152 | * | Lease Contract dated June 1, 2010 between Shanghai Zhangjiang Micro-electronics Port Co. Ltd. and Zhengning Information & Technology (Shanghai) Co., Ltd. (certain portions of Appendices II and III have been omitted and filed separately with the Securities and Exchange Commission on May 31, 2011 pursuant to a request for confidential treatment, which request is pending). | ||
4.153 | Entrusted Loan Contract dated May 7, 2008 among Fortune (Beijing) Success Technology Co., Ltd., Beijing Glory Co., Ltd. and China Bohai Bank Co., Ltd. Beijing Branch (incorporated by reference to Exhibit 4.100 from our 2008 Annual Report on Form 20-F (File No.000-50975) filed with the Securities and Exchange Commission on May 22, 2009) |
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Exhibit | ||||
Number | Description | |||
4.154 | Entrusted Loan Contract dated December 11, 2007 among Beijing Glory Co., Ltd., Fortune Software (Beijing) Co., Ltd. and China Construction Bank (incorporated by reference to Exhibit 4.101 from our 2008 Annual Report on Form 20-F (File No.000-50975) filed with the Securities and Exchange Commission on May 22, 2009) | |||
4.155 | Entrusted Loan Contract dated April 11, 2008 between Beijing Premium Technology Co., Ltd., Zhengning Information Technology (Shanghai) Co., Ltd. and China Construction Bank Corporation (incorporated by reference to Exhibit 4.102 from our 2008 Annual Report on Form 20-F (File No.000-50975) filed with the Securities and Exchange Commission on May 22, 2009) | |||
4.156 | Entrusted Loan Contract dated January 12, 2009 among CFO Success, CFO Glory and Hua Xia Bank Co, Ltd. Beijing Zizhuqiao Branch (incorporated by reference to Exhibit 4.151 from our 2009 Annual Report on Form 20-F (File No.000-50975) filed with the Securities and Exchange Commission on May 28, 2010) | |||
4.157 | Issuer Information Feed Service Agreement dated February 13, 2009 between HKEx Information Service Limited and Fortune Software (Beijing) Co., Ltd. (incorporated by reference to Exhibit 4.103 from our 2008 Annual Report on Form 20-F (File No.000-50975) filed with the Securities and Exchange Commission on May 22, 2009) | |||
8.1 | * | List of principle subsidiaries and significant PRC-incorporated affiliates | ||
12.1 | * | CEO Certification Pursuant to Rule 13a-14(a) (17 CFR 240.13a-14(a)) (17 CFR 240.13a-14(a)) or Rule 15d-1(a) (17 CFR 240.15d-14(a)) | ||
12.2 | * | CFO Certification Pursuant to Rule 13a-14(a) (17 CFR 240.13a-14(a)) or Rule 15d-1(a) (17 CFR 240.15d-14(a)) | ||
13.1 | * | CEO Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 | ||
13.2 | * | CFO Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 | ||
15.1 | * | Consent of Deloitte Touche Tohmatsu CPA Ltd. | ||
15.2 | * | Written Consent of American Appraisal China Limited |
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SIGNATURE
Date: May 31, 2011 | CHINA FINANCE ONLINE CO. LIMITED | |||
/s/ Jeff Wang | ||||
Name: | Jeff Wang | |||
Title: | Chief Financial Officer |
129
Table of Contents
and Consolidated Financial Statements
For the years ended December 31, 2008, 2009 and 2010
Table of Contents
CONTENTS | PAGE | |||
F – 1 | ||||
F – 2 | ||||
F – 4 | ||||
F – 5 | ||||
F – 6 | ||||
F – 7 | ||||
F – 47 |
Table of Contents
Beijing, the People’s Republic of China
May 31, 2011
F-1
Table of Contents
(In U.S. dollars, except share-related data)
December 31, | ||||||||
2009 | 2010 | |||||||
Assets | ||||||||
Current assets: | ||||||||
Cash and cash equivalents | $ | 107,391,084 | $ | 106,773,478 | ||||
Restricted cash | — | 14,533,347 | ||||||
Prepaid expenses and other current assets | 4,281,137 | 4,077,398 | ||||||
Trust bank balances held on behalf of customers | 13,310,238 | 9,625,461 | ||||||
Accounts receivable — margin clients, net of allowance for doubtful accounts of nil and nil in 2009 and 2010, respectively | 2,724,456 | 8,095,396 | ||||||
Accounts receivable — others, net of allowance for doubtful accounts of $31,440 and $36,039 in 2009 and 2010, respectively | 2,644,696 | 3,634,653 | ||||||
Trading securities | 67,588 | 31,272 | ||||||
Deferred tax assets, current | 3,236,810 | 3,634,120 | ||||||
Total current assets | 133,656,009 | 150,405,125 | ||||||
Property and equipment, net | 10,268,480 | 8,276,275 | ||||||
Acquired intangible assets, net | 4,779,101 | 4,349,181 | ||||||
Cost method investment | 1,479,571 | 1,479,571 | ||||||
Rental deposits | 725,261 | 718,800 | ||||||
Goodwill | 12,602,699 | 12,949,587 | ||||||
Other assets | 219,473 | 231,107 | ||||||
Deferred tax assets, non-current | 1,878,843 | 1,680,936 | ||||||
Total assets | $ | 165,609,437 | $ | 180,090,582 | ||||
Liabilities and shareholders’ equity | ||||||||
Current liabilities: | ||||||||
Deferred revenue, current (including deferred revenue, current of the consolidated variable interest entities without recourse to China Finance Online Co. Limited $9,089,776 and $13,340,978 as of December 31, 2009 and December 31, 2010, respectively) | $ | 30,620,060 | $ | 32,994,717 | ||||
Accrued expenses and other current liabilities (including accrued expenses and other current liabilities of the consolidated variable interest entities without recourse to China Finance Online Co. Limited $1,272,280 and $2,659,121 as of December 31, 2009 and December 31, 2010, respectively) | 8,244,867 | 10,838,363 | ||||||
Amounts due to customers for the trust bank balances held on their behalf | 13,310,238 | 9,625,461 | ||||||
Short-term loan | — | 6,424,093 | ||||||
Accounts payable (including accounts payable of the consolidated variable interest entities without recourse to China Finance Online Co. Limited $12,046 and $31,498 as of December 31, 2009 and December 31, 2010, respectively) | 101,646 | 221,084 | ||||||
Income taxes payable (including income taxes payable of the consolidated variable interest entities without recourse to China Finance Online Co. Limited $122,783 and $93,956 as of December 31, 2009 and December 31, 2010, respectively) | 123,880 | 155,394 | ||||||
Total current liabilities | 52,400,691 | 60,259,112 | ||||||
Deferred revenue, non-current (including deferred revenue, non-current of the consolidated variable interest entities without recourse to China Finance Online Co. Limited $4,852,430 and $4,961,948 as of December 31, 2009 and December 31, 2010, respectively) | 14,547,248 | 13,021,678 | ||||||
Deferred tax liabilities, non-current (including deferred tax liabilities, non-current of the consolidated variable interest entities without recourse to China Finance Online Co. Limited $983,934 and $947,758 as of December 31, 2009 and December 31, 2010, respectively) | 994,573 | 966,689 | ||||||
Total liabilities | 67,942,512 | 74,247,479 | ||||||
F-2
Table of Contents
(In U.S. dollars, except share-related data)
December 31, | ||||||||
2009 | 2010 | |||||||
Commitments (Note 20) | ||||||||
Equity: | ||||||||
China Finance Online Co. Limited shareholder’s equity: | ||||||||
Ordinary shares ($0.00013 par value; 500,000,000 shares authorized as of December 31, 2009 and 2010, respectively; 110,250,163 and 110,887,883 shares issued and outstanding as of December 31, 2009 and 2010, respectively) | 14,237 | 14,319 | ||||||
Additional paid-in capital | 74,130,609 | 78,974,697 | ||||||
Accumulated other comprehensive income | 6,342,765 | 8,030,982 | ||||||
Retained earnings | 16,919,785 | 18,879,907 | ||||||
Total China Finance Online Co. Limited shareholders’ equity | 97,407,396 | 105,899,905 | ||||||
Noncontrolling interest | 259,529 | (56,802 | ) | |||||
Total equity | 97,666,925 | 105,843,103 | ||||||
Total liabilities and equity | $ | 165,609,437 | $ | 180,090,582 | ||||
F-3
Table of Contents
(In U.S. dollars, except share-related data)
Years ended December 31, | ||||||||||||
2008 | 2009 | 2010 | ||||||||||
Net revenues | $ | 56,242,768 | $ | 53,605,877 | $ | 59,716,042 | ||||||
Cost of revenues | 9,367,143 | 8,146,724 | 8,497,145 | |||||||||
Gross profit | 46,875,625 | 45,459,153 | 51,218,897 | |||||||||
Operating expenses: | ||||||||||||
General and administrative (including share-based compensation of $7,767,874, $6,436,536 and $4,152,437 for 2008, 2009 and 2010, respectively) | 15,371,171 | 16,982,032 | 13,208,337 | |||||||||
Product development (including share-based compensation of $59,200, $56,505 and $151,255 for 2008, 2009 and 2010, respectively) | 5,635,173 | 10,754,380 | 13,027,879 | |||||||||
Sales and marketing (including share-based compensation of $213,076, $107,675 and $215,979 for 2008, 2009 and 2010, respectively) | 13,520,295 | 26,095,233 | 26,991,093 | |||||||||
Total operating expenses | 34,526,639 | 53,831,645 | 53,227,309 | |||||||||
Government subsidies | 436,946 | 567,373 | 514,113 | |||||||||
Income (loss) from operations | 12,785,932 | (7,805,119 | ) | (1,494,299 | ) | |||||||
Interest income | 1,609,112 | 1,352,307 | 1,590,218 | |||||||||
Interest expense | — | — | (142,169 | ) | ||||||||
Exchange gain, net | 1,489,076 | 1,874 | 812,969 | |||||||||
Gain from trading securities | — | 40,574 | 1,138,147 | |||||||||
Other expense, net | (168,536 | ) | (257,674 | ) | (7,321 | ) | ||||||
Income (loss) before income tax benefit (expense) | 15,715,584 | (6,668,038 | ) | 1,897,545 | ||||||||
Income tax benefit (expense) | 3,047,129 | 446,164 | (263,386 | ) | ||||||||
Purchased pre-acquisition earning | 226,769 | — | — | |||||||||
Net income (loss) | $ | 18,989,482 | $ | (6,221,874 | ) | $ | 1,634,159 | |||||
Less: net loss attributable to the noncontrolling interest | (30,633 | ) | (2,131 | ) | (325,963 | ) | ||||||
Net income (loss) attributable to China Finance Online Co. Limited | $ | 19,020,115 | $ | (6,219,743 | ) | $ | 1,960,122 | |||||
Net income (loss) per share attributable to China Finance Online Co. Limited | ||||||||||||
Basic | $ | 0.19 | $ | (0.06 | ) | $ | 0.02 | |||||
Diluted | $ | 0.17 | $ | (0.06 | ) | $ | 0.02 | |||||
Weighted average shares used in calculating net income (loss) per share | ||||||||||||
Basic | 98,957,993 | 105,203,564 | 108,247,552 | |||||||||
Diluted | 112,984,532 | 105,203,564 | 114,125,022 | |||||||||
F-4
Table of Contents
AND COMPREHENSIVE INCOME
(In U.S. dollars, except share-related data)
Accumulated other | Total China Finance | Non | Total | |||||||||||||||||||||||||||||||||
Ordinary shares | Additional | comprehensive | Retained | Online Co. Limited | controlling | Total | comprehensive | |||||||||||||||||||||||||||||
Shares | Amount | paid-in capital | income (loss) | earnings | shareholders’ equity | interest | equity | income (loss) | ||||||||||||||||||||||||||||
Balance as of January 1, 2008 | 109,754,433 | 14,172 | 58,727,378 | 4,501,432 | 4,119,413 | 67,362,395 | 471,431 | 67,833,826 | ||||||||||||||||||||||||||||
Exercise of share options by employees | — | — | 531,449 | — | — | 531,449 | — | 531,449 | ||||||||||||||||||||||||||||
Exercise of share options by non-employees | 260,000 | 34 | 41,566 | — | — | 41,600 | — | 41,600 | ||||||||||||||||||||||||||||
Share-based compensation | — | — | 8,040,150 | — | — | 8,040,150 | — | 8,040,150 | ||||||||||||||||||||||||||||
Acquisition of noncontrolling interest of Daily Growth Securities | — | — | — | — | — | — | (440,798 | ) | (440,798 | ) | ||||||||||||||||||||||||||
Foreign currency translation adjustment | — | — | — | 1,946,646 | — | 1,946,646 | — | 1,946,646 | 1,946,646 | |||||||||||||||||||||||||||
Net income (loss) | — | — | — | — | 19,020,115 | 19,020,115 | (30,633 | ) | 18,989,482 | 18,989,482 | ||||||||||||||||||||||||||
Balance as of December 31, 2008 | 110,014,433 | 14,206 | 67,340,543 | 6,448,078 | 23,139,528 | 96,942,355 | — | 96,942,355 | 20,936,128 | |||||||||||||||||||||||||||
Exercise of share options by employees | 185,730 | 24 | 181,357 | — | — | 181,381 | — | 181,381 | ||||||||||||||||||||||||||||
Exercise of share options by non-employees | 50,000 | 7 | 7,993 | — | — | 8,000 | — | 8,000 | ||||||||||||||||||||||||||||
Share-based compensation | — | — | 6,600,716 | — | — | 6,600,716 | — | 6,600,716 | ||||||||||||||||||||||||||||
Acquisition of CFO Securities Consulting | — | — | — | — | — | — | 261,660 | 261,660 | ||||||||||||||||||||||||||||
Foreign currency translation adjustment | — | — | — | (105,313 | ) | — | (105,313 | ) | — | (105,313 | ) | (105,313 | ) | |||||||||||||||||||||||
Net loss | — | — | — | — | (6,219,743 | ) | (6,219,743 | ) | (2,131 | ) | (6,221,874 | ) | (6,221,874 | ) | ||||||||||||||||||||||
Balance as of December 31, 2009 | 110,250,163 | 14,237 | 74,130,609 | 6,342,765 | 16,919,785 | 97,407,396 | 259,529 | 97,666,925 | (6,327,187 | ) | ||||||||||||||||||||||||||
Exercise of share options by employees | 637,720 | 82 | 717,175 | — | — | 717,257 | — | 717,257 | ||||||||||||||||||||||||||||
Share-based compensation | — | — | 4,504,806 | — | — | 4,504,806 | 14,865 | 4,519,671 | ||||||||||||||||||||||||||||
Acquisition of noncontrolling interest of CFO Securities Consulting | — | — | (377,893 | ) | — | — | (377,893 | ) | (5,233 | ) | (383,126 | ) | ||||||||||||||||||||||||
Foreign currency translation adjustment | — | — | — | 1,688,217 | — | 1,688,217 | — | 1,688,217 | 1,688,217 | |||||||||||||||||||||||||||
Net income (loss) | — | — | — | — | 1,960,122 | 1,960,122 | (325,963 | ) | 1,634,159 | 1,634,159 | ||||||||||||||||||||||||||
Balance as of December 31, 2010 | 110,887,883 | 14,319 | 78,974,697 | 8,030,982 | 18,879,907 | 105,899,905 | (56,802 | ) | 105,843,103 | 3,322,376 | ||||||||||||||||||||||||||
F-5
Table of Contents
(In U.S. dollars)
Years ended December 31, | ||||||||||||
2008 | 2009 | 2010 | ||||||||||
Operating activities: | ||||||||||||
Net income (loss) | $ | 18,989,482 | $ | (6,221,874 | ) | $ | 1,634,159 | |||||
Adjustments to reconcile net income (loss) to net cash provided by operating activities: | ||||||||||||
Share-based compensation | 8,040,150 | 6,600,716 | 4,519,671 | |||||||||
Depreciation and amortization | 2,139,145 | 2,987,094 | 3,610,026 | |||||||||
Provision of allowance for doubtful accounts | — | — | 238,077 | |||||||||
Gain from trading securities | — | (40,574 | ) | (1,138,147 | ) | |||||||
Deferred taxes | (3,200,390 | ) | (917,284 | ) | (99,475 | ) | ||||||
Loss on disposal of property and equipment | 37,659 | 182,235 | 53,547 | |||||||||
Purchased pre-acquisition earning | (226,769 | ) | — | — | ||||||||
Changes in assets and liabilities: | ||||||||||||
Accounts receivable, others | (711,933 | ) | (722,778 | ) | (971,341 | ) | ||||||
Accounts receivable, margin clients | (580,453 | ) | (1,774,224 | ) | (5,390,473 | ) | ||||||
Prepaid expenses and other current assets | (5,567,706 | ) | 4,648,114 | 157,930 | ||||||||
Advances to employees | 1,597,941 | 160,634 | — | |||||||||
Trust bank balances held on behalf of customers | 854,063 | (11,305,861 | ) | 3,642,887 | ||||||||
Rental deposits | (74,487 | ) | (133,601 | ) | 20,021 | |||||||
Deferred revenue | 9,943,656 | 8,206,417 | (540,386 | ) | ||||||||
Account payable | (182,528 | ) | (113,289 | ) | 108,382 | |||||||
Accrued expenses and other current liabilities | (2,482,122 | ) | 3,387,725 | 2,355,637 | ||||||||
Amounts due to customers for the trust bank balance held on their behalf | (854,063 | ) | 11,305,861 | (3,642,887 | ) | |||||||
Income taxes payable | 126,961 | (18,097 | ) | 27,067 | ||||||||
Net cash provided by operating activities | 27,848,606 | 16,231,214 | 4,584,695 | |||||||||
Investing activities: | ||||||||||||
Purchase of property and equipment | (5,006,365 | ) | (4,514,342 | ) | (906,296 | ) | ||||||
Acquisition of businesses (net of cash acquired of $1,521,109, $8,282 and nil for the years ended December 31, 2008, 2009, and 2010, respectively) | (2,403,620 | ) | (1,932,472 | ) | (89,335 | ) | ||||||
Consideration paid for acquiring noncontrolling interest of CFO Securities Consulting | — | — | (383,126 | ) | ||||||||
Purchase of trading securities | — | (267,782 | ) | (5,616,027 | ) | |||||||
Proceeds from sales of trading securities | — | 240,775 | 6,830,374 | |||||||||
Restricted cash | — | — | (14,216,294 | ) | ||||||||
Proceeds from disposal of fixed assets | — | 1,468 | 4,936 | |||||||||
Net cash used in investing activities | (7,409,985 | ) | (6,472,353 | ) | (14,375,768 | ) | ||||||
Financing activities: | ||||||||||||
Proceeds from stock options exercised by employees | 531,449 | 181,381 | 717,257 | |||||||||
Proceeds from exercise of options granted to non-employee | 41,600 | 8,000 | — | |||||||||
Proceeds from short-term loan | — | — | 6,435,586 | |||||||||
Net cash provided by financing activities | 573,049 | 189,381 | 7,152,843 | |||||||||
Effect of exchange rate changes | 1,803,516 | (101,377 | ) | 2,020,624 | ||||||||
Net increase (decrease) in cash and cash equivalents | 22,815,186 | 9,846,865 | (617,606 | ) | ||||||||
Cash and cash equivalents, beginning of year | 74,729,033 | 97,544,219 | 107,391,084 | |||||||||
Cash and cash equivalents, end of year | 97,544,219 | 107,391,084 | 106,773,478 | |||||||||
Supplemental disclosure of cash flow information | ||||||||||||
Income taxes paid | $ | 169,270 | $ | 515,782 | $ | 377,970 | ||||||
F-6
Table of Contents
FOR THE YEARS ENDED DECEMBER 31, 2008, 2009 AND 2010
(In U.S. dollars)
1. | ORGANIZATION AND PRINCIPAL ACTIVITIES |
China Finance Online Co. Limited (“China Finance Online” or the “Company”) was incorporated in Hong Kong on November 2, 1998. China Finance Online and its subsidiaries including its variable interest entities (collectively, the “Group”) are principally providing vertically integrated financial services including news, data, analytics and brokerage through web portals, software systems, and mobile handsets. |
Details of China Finance Online’s significant subsidiaries and variable interest entities as of December 31, 2010 were as follows: |
Place of | Date of | legal | ||||||||
incorporation or | incorporation or | ownership | Principal | |||||||
Company name | establishment | acquisition | interest | activity | ||||||
Subsidiaries: | ||||||||||
China Finance Online (Beijing) Co., Ltd. (“CFO Beijing”) | Beijing, PRC | Jul. 9, 1998 | 100 | % | Subscription service | |||||
Fortune Software (Beijing) Co., Ltd. (“CFO Software”) | Beijing, PRC | Dec. 7, 2004 | 100 | % | Subscription service | |||||
Fortune (Beijing) Success Technology Co., Ltd. (“CFO Success”) | Beijing, PRC | Oct. 16, 2007 | 100 | % | Subscription service | |||||
Shenzhen Genius Information Technology Co., Ltd. (“CFO Genius”) | Shenzhen, PRC | Sep. 21, 2006 | 100 | % | Subscription service | |||||
Jujin Software (Shenzhen) Co., Ltd. (“CFO Jujin”) | Shenzhen, PRC | Mar. 9, 2007 | 100 | % | Subscription service | |||||
Stockstar Information Technology (Shanghai) Co., Ltd. (“CFO Stockstar”) | Shanghai, PRC | Oct. 1, 2006 | 100 | % | Subscription service | |||||
Zhengning Information & Technology (Shanghai) Co., Ltd. (“CFO Zhengning”) | Shanghai, PRC | Jan. 31, 2007 | 100 | % | Subscription service | |||||
Daily Growth Financial Holdings Limited (“Daily Growth Holdings”) | BVI | Jul. 16, 2007 | 85 | % | Investment holdings | |||||
Daily Growth Securities Limited (“Daily Growth Securities”) (Note 3) | Hong Kong, PRC | Nov. 23, 2007 | 85 | % | Brokerage service | |||||
Daily Growth Futures Limited (“Daily Growth Futures”) | Hong Kong, PRC | Apr. 16, 2008 | 85 | % | Brokerage service | |||||
Daily Growth Wealth Management Limited (“Daily Growth Wealth Management”) | Hong Kong, PRC | Oct. 8, 2008 | 85 | % | Securities advising | |||||
Daily Growth Investment Services Limited (“Daily Growth Investment Services”) | HongKong, PRC | Jun. 30, 2009 | 85 | % | N/A | |||||
Hong Kong Genius Information Technology Co., Ltd. (“CFO HK Genius”) | HongKong, PRC | May. 18, 2010 | 100 | % | N/A | |||||
Variable interest entities: | ||||||||||
Beijing Fuhua Innovation Technology Investment Co., Ltd. (“CFO Fuhua”) | Beijing, PRC | Dec. 31, 2000 | Nil | Web portal and advertising service | ||||||
Shanghai Chongzhi Co., Ltd., (“CFO Chongzhi”) | Shanghai, PRC | Jun. 6, 2008 | Nil | Subscription service | ||||||
Fortune (Beijing) Qicheng Technology Co., Ltd. (“CFO Qicheng”) | Beijing, PRC | Dec. 18, 2009 | Nil | N/A | ||||||
Beijing Chuangying Securities Advisory and Investment Co., Ltd. (“CFO Chuangying”) (Note 3) | Beijing, PRC | Jan. 9, 2009 | Nil | Securities investment advising | ||||||
Shenzhen Newrand Securities Advisory and Investment Co., Ltd. (“CFO Newrand “) (Note 3) | Shenzhen, PRC | Oct. 17, 2008 | Nil | Securities investment advising | ||||||
Shenzhen Shangtong Software Co., Ltd. (“CFO Shenzhen Shangtong”) | Shenzhen, PRC | Sep. 23, 2009 | Nil | Subscription service | ||||||
Subsidiaries of variable interest entities: | ||||||||||
Shanghai Meining Computer Software Co., Ltd. (“CFO Meining”) | Shanghai, PRC | Oct. 1, 2006 | Nil | Web portal, subscription and SMS | ||||||
Shenzhen Newrand Securities Training Center (“CFO Newrand Training”) | Shenzhen, PRC | Oct. 17, 2008 | Nil | Securities investment training | ||||||
Shanghai Stockstar Securities Advisory and Investment Co., Ltd (former name: Shanghai Securities Consulting Co., Ltd) (“CFO Securities Consulting”) (Note 3) | Shanghai, PRC | Nov. 5, 2009 | Nil | Securities investment advising |
PRC regulations prohibit direct foreign ownership of business entities providing certain services in PRC, such as internet content service and securities investment advisory service. In order to comply with these regulations, China Finance Online, through its subsidiaries, entered into contractual arrangements with the Company’s variable interest entities (“VIEs”) and their equity owners who are PRC citizens as follows: |
The Group made loans to the shareholders of the VIEs solely for the purposes of capitalizing the VIEs. Pursuant to the loan agreements, these loans can only be repaid by transferring all of their interests in the VIEs to the Group or a third party designated by the Group. |
F-7
Table of Contents
FOR THE YEARS ENDED DECEMBER 31, 2008, 2009 AND 2010
(In U.S. dollars)
1. | ORGANIZATION AND PRINCIPAL ACTIVITIES — continued |
The Group has entered into agreements with the VIEs and their shareholders that provide the Group with the substantial ability to control the VIEs. Pursuant to these contractual arrangements: |
• | the shareholders of the VIEs have granted the Group or individuals designated by the Group an irrevocable proxy to exercise all their voting rights as shareholders of the VIEs, including the right to appoint directors, the general manager and other senior management of the VIEs; |
• | the VIEs will not enter into any transaction that may materially affect its assets, liabilities, equity or operations without the Group’s prior written consent; |
• | the VIEs will not distribute any dividends; |
• | the Group may purchase the entire equity interest in, or all the assets of the VIEs at a price equal to the total principal amount of the loan lent by the Group to the owners of the VIEs when and if such purchase is permitted by PRC law or the current shareholders of the VIEs cease to be directors or employees of the VIEs; |
• | the shareholders of the VIEs will not transfer, sell, pledge, dispose of or create any encumbrance on their equity interest in the VIEs without the prior written consent of the Group. |
The Group has entered into a series of contractual arrangements with each VIE and its individual shareholders, pursuant to which the Group provides services to the VIEs in exchange for fees. The principal services agreements that the Group has entered into with VIEs include: |
• | strategic consulting services agreement, pursuant to which the amount of the fee to be charged is 30% of each VIE’s income before tax; |
• | technical support services agreement, pursuant to which the amount of the fee to be charged is 30% of each VIE’s income before tax; |
• | operating support services agreement, pursuant to which the amount of the fee to be charged is 40% of each VIE’s income before tax; |
Through the above contractual arrangements, the Group has the right to determine the amount of these fees and they are intended to transfer substantially all of the economic benefits of each VIE to the Company. |
F-8
Table of Contents
FOR THE YEARS ENDED DECEMBER 31, 2008, 2009 AND 2010
(In U.S. dollars)
1. | ORGANIZATION AND PRINCIPAL ACTIVITIES — continued |
Details of significant VIEs and their counterparts which substantially control the VIEs as of December 31, 2010 were as follows: |
VIE Name | Contractual Arrangement Date | Counterpart | ||
CFO Fuhua | May 27, 2004 | CFO Beijing | ||
CFO Chongzhi | June 8, 2008 | CFO Software | ||
CFO Newrand | October 17, 2008 | CFO Software and CFO Success | ||
CFO Chuangying | January 21, 2009 | CFO Software | ||
CFO Shenzhen Shangtong | August 3, 2009 | CFO Success | ||
CFO Qicheng | November 20, 2009 | CFO Chuangying |
Risks in relation to the VIE structure |
The Company believes that the contractual arrangements entered with the VIEs are in compliance with PRC law and are legally enforceable. However, uncertainties in the PRC legal system could limit the Company’s ability to enforce these contractual arrangements and if the shareholders of the VIEs were to reduce their interests in the Company, their interests may diverge from that of the Company and that may potentially increase the risk that they would seek to act contrary to the contractual terms, for example by influencing the VIEs not to pay the service fees when required to do so. |
Adoption of authoritative pronouncement regarding VIEs |
In June 2009, the Financial Accounting Standards Board (“FASB”) issued an authoritative pronouncement to amend the accounting rules for VIEs. The amendments effectively replace the quantitative-based risks-and-rewards calculation for determining which reporting entity, if any, has a controlling financial interest in a variable interest entity with an approach focused on identifying which reporting entity has (1) the power to direct the activities of a variable interest entity that most significantly affect the entity’s economic performance and (2) the obligation to absorb losses of, or the right to receive benefits from, the entity. Additionally, an enterprise is required to assess whether it has an implicit financial responsibility to ensure that a variable interest entity operates as designed when determining whether it has the power to direct the activities of the variable interest entity that most significantly impact the entity’s economic performance. The new guidance also requires additional disclosures about a reporting entity’s involvement with variable interest entities and about any significant changes in risk exposure as a result of that involvement. |
The new guidance is effective at the start of a reporting entity’s first fiscal year beginning after November 15, 2009, and all interim and annual periods thereafter. The new VIE model requires that, upon adoption, a reporting entity should determine whether an entity is a VIE, and whether the reporting entity is the VIE’s primary beneficiary, as of the date that the reporting entity first became involved with the entity, unless an event requiring reconsideration of those initial conclusions occurred after that date. When making this determination, a reporting entity must assume that new guidance had been effective from the date of its first involvement with the entity. The Group adopted the new guidance on January 1, 2010. |
F-9
Table of Contents
FOR THE YEARS ENDED DECEMBER 31, 2008, 2009 AND 2010
(In U.S. dollars)
1. | ORGANIZATION AND PRINCIPAL ACTIVITIES — continued |
Adoption of authoritative pronouncement regarding VIEs — continued |
The Company has consolidated its VIEs under the authoritative literature prior to the amendment discussed above because it was the primary beneficiary of those entities. Because the Company, through its wholly owned subsidiary, has (1) the power to direct the activities of the VIE that most significantly affect the entity’s economic performance and (2) the right to receive benefits from the VIE, it continues to consolidate the VIE upon the adoption of the new guidance which therefore, other than for additional disclosures, including those for prior periods, had no accounting impact. |
The following financial statement amounts and balances of the VIEs and their subsidiaries were included in the accompanying consolidated financial statements as of and for the years ended: |
Year ended December 31, | ||||||||
2009 | 2010 | |||||||
Total assets | $ | 66,591,127 | $ | 84,004,604 | ||||
Total liabilities | 16,333,249 | 22,035,259 | ||||||
Year ended December 31, | ||||||||||||
2008 | 2009 | 2010 | ||||||||||
Net revenue | $ | 11,790,437 | $ | 16,766,910 | $ | 25,737,779 | ||||||
Net income | 2,380,554 | 2,354,387 | 3,614,094 | |||||||||
Year ended December 31, | ||||||||||||
2008 | 2009 | 2010 | ||||||||||
Net cash provided by (used in) operating activities | $ | 16,539,572 | $ | (24,061,646 | ) | $ | 9,078,975 | |||||
Net cash (used in) provided by investing activities | (533,240 | ) | (1,560,927 | ) | 178,192 | |||||||
Net cash provided by financing activities | 31,573,849 | 14,785,320 | 1,477,018 | |||||||||
Effect of exchange rate changes | 1,945,739 | (59,929 | ) | 1,922,878 | ||||||||
There are no consolidated VIE’s assets that are collateral for the VIE’s obligations and can only be used to settle the VIE’s obligations. |
F-10
Table of Contents
FOR THE YEARS ENDED DECEMBER 31, 2008, 2009 AND 2010
(In U.S. dollars)
2. | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES |
Basis of presentation |
The consolidated financial statements of the Group have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”). |
Basis of consolidation |
The consolidated financial statements include the financial statements of China Finance Online, its subsidiaries and its variable interest entities. All inter-company transactions and balances have been eliminated upon consolidation. |
Cash and cash equivalents |
Cash and cash equivalents consist of cash on hand and highly liquid investments which are unrestricted as to withdrawal or use, and which have remaining maturities of three months or less when purchased. |
Restricted cash |
Restricted cash represents the security deposit for the credit standby letter issued by a bank to provide guarantee for the short-term loan borrowed by CFO HK Genius. The restriction period is one year. |
Fair value |
Fair value is the price that would be received from selling an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. When determining the fair value measurements for assets and liabilities required or permitted to be recorded at fair value, the Group considers the principal or most advantageous market in which it would transact and it considers assumptions that market participants would use when pricing the asset or liability. |
Authoritative literature provides a fair value hierarchy which prioritizes the inputs to valuation techniques used to measure fair value into three broad levels. The level in the hierarchy within which the fair value measurement in its entirety falls is based upon the lowest level of input that is significant to the fair value measurement as follows: |
Level 1-inputs are based upon unadjusted quoted prices for identical instruments traded in active markets. |
Level 2-inputs are based upon quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active and model-based valuation techniques for which all significant assumptions are observable in the market or can be corroborated by observable market data for substantially the full term of the assets or liabilities. |
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 that include option pricing models, discounted cash flow models, and similar techniques. |
F-11
Table of Contents
FOR THE YEARS ENDED DECEMBER 31, 2008, 2009 AND 2010
(In U.S. dollars)
2. | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES — continued |
Trust bank balances held on behalf of customers |
Daily Growth Securities and Daily Growth Futures receive fund from customers for purpose of buying or selling securities on behalf of its customers and deposits the fund in its interest-bearing bank account. Such bank balance represents an asset of the Group for the amounts due to customers for the trust bank balance held on their behalf and payable to customers on demand. The Group also recognizes a corresponding liability. |
Use of estimates |
The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and revenue and expenses in the financial statements and accompanying notes. Significant accounting estimates reflected in the Group’s financial statements include cost method investment, goodwill and impairment of long-lived assets, income taxes and stock-based compensation. Actual results could differ from those estimates. |
Trading securities |
Trading securities are securities that are bought and held principally for the purpose of selling them in the near term and are reported at fair value, with unrealized gains and losses recognized in earnings. |
Property and equipment, net |
Property and equipment, net are carried at cost less accumulated depreciation. Depreciation is calculated on a straight-line basis over the following estimated useful lives: |
Technology infrastructure | 5 years | |||
Computer equipment | 5 years | |||
Furniture, fixtures and equipment | 5 years | |||
Motor vehicle | 5 years | |||
Leasehold improvements | Shorter of the lease term or 5 years |
F-12
Table of Contents
FOR THE YEARS ENDED DECEMBER 31, 2008, 2009 AND 2010
(In U.S. dollars)
2. | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES — continued |
Acquired intangible assets, net |
Acquired intangible assets are estimated by management based on the fair value of assets acquired. Identifiable intangible assets are carried at cost less accumulated amortization. Amortization of definite-lived intangible assets is computed using the straight-line method over the estimated average useful lives, which are as follows: |
Securities consulting license and related trademarks | 15 years | |||
Completed technology | 5 years | |||
Customer relationship | 4-5 years | |||
Value-added service license | 3-4 years | |||
Agreement with mobile operators | 3 years | |||
Intellectual property | 10 years |
Certain trademarks resulting from the acquisitions of business and certain trading rights bought by the Company are determined to have indefinite lives. If an intangible asset is determined to have an indefinite life, it is not amortized until its useful life is determined to be no longer indefinite. |
An intangible asset that is not subject to amortization is tested for impairment at least annually if events or changes in circumstances indicate that the asset might be impaired. Such impairment test consists of a comparison of the fair values of the assets with their carrying amounts and an impairment loss is recognized if and when the carrying amounts exceed the fair values. |
The estimates of fair values of intangible assets not subject to amortization are determined using various discounted cash flow valuation methodologies. Significant assumptions are inherent in this process, including estimates of discount rates. Discount rate assumptions are based on an assessment of the risk inherent in the respective intangible assets. During the years ended December 31, 2008, 2009 and 2010, the Group did not record any impairment losses associated with intangible assets. |
Impairment of long-lived assets |
The Group reviews its long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may no longer be recoverable. When these events occur, the Group compares the carrying value of the long-lived assets to the estimated undiscounted future cash flows expected to result from the use of the assets and their eventual disposition. If the sum of the expected undiscounted cash flow is less than the carrying amount of the assets, the Group would recognize an impairment loss based on the fair value of the assets. There were no impairment losses in the years ended December 31, 2008, 2009 and 2010. |
F-13
Table of Contents
FOR THE YEARS ENDED DECEMBER 31, 2008, 2009 AND 2010
(In U.S. dollars)
2. | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES — continued |
Business combinations |
Business combinations are recorded using the purchase method of accounting. On January 1, 2009, the Company adopted a new accounting pronouncement with prospective application which made certain changes to the previous authoritative literature on business combinations. From January 1, 2009, the assets acquired, the liabilities assumed, and any noncontrolling interest of the acquiree at the acquisition date, if any, are measured at their fair values as of that date. Goodwill is recognized and measured as the excess of the total consideration transferred plus the fair value of any noncontrolling interest of the acquiree, if any, at the acquisition date over the fair values of the identifiable net assets acquired. Previously, any noncontrolling interest was reflected at historical cost. Common forms of the consideration made in acquisitions include cash and common equity instruments. Consideration transferred in a business acquisition is measured at the fair value as at the date of acquisition. |
Where the consideration in an acquisition includes contingent consideration the payment of which depends on the achievement of certain specified conditions post-acquisition, from January 1, 2009, the contingent consideration is recognized and measured at its fair value at the acquisition date and if recorded as a liability it is subsequently carried at fair value with changes in fair value reflected in earnings. For periods prior to January 1, 2009, contingent consideration was not recorded until the contingency was resolved. |
Goodwill |
The excess of the purchase price over the fair value of net assets acquired is recorded on the consolidated balance sheet as goodwill. |
The Company completes a two-step goodwill impairment test. The first step is to compare the fair values of each reporting unit to its carrying amount, including goodwill. If the fair value of each reporting unit exceeds its carrying amount, goodwill is not considered to be impaired and the second step will not be required. If the carrying amount of a reporting unit exceeds its fair value, the second step is to compare the implied fair value of goodwill to the carrying value of a reporting unit’s goodwill. The implied fair value of goodwill is determined in a manner similar to accounting for a business combination with the allocation of the assessed fair value determined in the first step to the assets and liabilities of the reporting unit. The excess of the fair value of the reporting unit over the amounts assigned to the assets and liabilities is the implied fair value of goodwill. An impairment loss is recognized for any excess in the carrying value of goodwill over the implied fair value of goodwill. |
The Group performs goodwill impairment tests annually on December 31 by comparing the carrying value to the fair value of each reporting unit. Based on the Group’s assessment, there was no impairment of goodwill for the years ended December 31, 2008, 2009 and 2010. |
F-14
Table of Contents
FOR THE YEARS ENDED DECEMBER 31, 2008, 2009 AND 2010
(In U.S. dollars)
2. | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES — continued |
Revenue recognition |
The Group generates revenue primarily from annual subscription fees from subscribers to their financial data and information services including their downloadable proprietary research tools. The Group recognizes revenues when all of the following criteria are met: (1) persuasive evidence of an arrangement exists, (2) delivery has occurred, (3) the fee is fixed or determinable and (4) collectibility is probable. Upon receipt of the upfront cash payments from the subscriber, the Group will activate the subscriber’s account and provide the subscriber the access code. This will commence a certain subscription period according to the customer demand and the full payment will be deferred and recognized ratably over the subscription period. The Group recognizes revenue ratably over the life of the arrangement. |
The Group derives its advertising fees from advertising sales on their website principally for a fixed period of time, generally less than one year. Revenues from advertising arrangements are recognized ratably over the period the advertising is displayed. |
The Group also derives commission from its brokerage services provided by the subsidiaries, Daily Growth Securities and Daily Growth Futures which buy or sell securities and futures on their customers’ behalf. The commission income is recognized on a trade date basis as transactions occur. |
F-15
Table of Contents
FOR THE YEARS ENDED DECEMBER 31, 2008, 2009 AND 2010
(In U.S. dollars)
2. | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES — continued |
Business taxes and value added taxes |
Revenue is recorded net of business taxes when incurred. The Group is subject to business taxes of 3%-5% on taxable services provided to its customers. During the years ended December 31, 2008, 2009, and 2010, business taxes totaled $903,330, $1,501,799, and $1,692,069, respectively. |
The Group’s PRC subsidiaries are subject to value added tax at a rate of 17% on subscription-based revenue. Value added tax payable on subscription-based revenue is computed net of value added tax paid on purchases. In respect of subscription-based revenue, however, if the net amount of value added tax payable exceeds 3% of subscription-based revenue, the excess portion of value added tax can be refunded immediately. The Group therefore is subject to an effective net value added tax burden of 3% from subscription-based revenue and records value added tax on a net basis. Net amount of value added tax is recorded either in the line item of other current liabilities or prepaid expenses and other current assets on the face of consolidated balance sheet. |
Subscription-based revenue includes the benefit of the rebate of value added taxes on sale of the downloadable software received from the Chinese tax authorities as part of the PRC government policy of encouraging software development in the PRC. In 2008, 2009 and 2010, the Group recognized $4,834,336, $4,424,737, and $3, 711, 613, respectively, in value added tax refunds. |
Government subsidies |
The Group records government subsidies when granted by local government authority and are not subject to future return. The government subsidies include R&D subsidy, business tax refund, innovation fund and high-tech company subsidy. Government subsidies granted totaled $436,946, $567,373 and $514,113 for the years ended December 31, 2008, 2009 and 2010, respectively. |
Deferred revenue |
Payments received in advance of service are recorded as deferred revenue until earned and when the relevant revenue recognition requirements have been met. |
Cost method investment |
For investments in an investee over which the Group does not have significant influence, the Group carries the investment at cost and recognizes income as any dividends declared from distribution of investee’s earnings. The Group reviews the cost method investments for impairment whenever events or changes in circumstances indicate that the carrying value may no longer be recoverable. An impairment loss is recognized in earnings equal to the difference between the investment’s cost and its fair value at the balance sheet date of the reporting period for which the assessment is made. The fair value of the investment would then become the new cost basis of the investment. |
F-16
Table of Contents
FOR THE YEARS ENDED DECEMBER 31, 2008, 2009 AND 2010
(In U.S. dollars)
2. | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES — continued |
Foreign currency translation |
The functional and reporting currency of the Company is the United States dollar (“U.S. dollar”). The financial records of the Group’s subsidiaries and VIEs located in the PRC, Hong Kong and British Virgin Island are maintained in their local currencies, the Renminbi (“RMB”), Hong Kong Dollars (“HK$”), and U.S. Dollars (“US$”), respectively, which are also the functional currencies of these entities. |
Monetary assets and liabilities denominated in currencies other than the functional currency are translated into the functional currency at the rates of exchange ruling at the balance sheet date. Transactions in currencies other than the functional currency during the year are converted into functional currency at the applicable rates of exchange prevailing when the transactions occurred. Transaction gains and losses are recognized in the statements of operations. |
The Group’s entities with functional currency of RMB and HK$ translate their operating results and financial position into the US$, the Group’s reporting currency. Assets and liabilities are translated using the exchange rates in effect on the balance sheet date. Revenues, expenses, gains and losses are translated using the average rate for the year. Translation adjustments are report as cumulative translation adjustments and are shown as a separate component of other comprehensive income. |
Foreign currency risk |
The RMB is not a freely convertible currency. The State Administration for Foreign Exchange, under the authority of the People’s Bank of China, controls the conversion of Renminbi into foreign currencies. The value of the RMB is subject to changes in central government policies and to international economic and political developments affecting supply and demand in the China Foreign Exchange Trading System market. Cash and cash equivalents of the Group included aggregate amounts of $79,921,228, $93,753,238 and $92,922,206 at December 31, 2008, 2009 and 2010 which were denominated in RMB. |
Cost of raw data |
Cost of raw data is expensed as incurred and is recorded in cost of revenues. |
Product development expenses |
Costs of product development, including investment in data capability, are expensed as incurred until technological feasibility has been established, at which time any additional costs would be capitalized. The Group essentially completed its development concurrently with the establishment of technological feasibility, and, accordingly, no costs have been capitalized. |
F-17
Table of Contents
FOR THE YEARS ENDED DECEMBER 31, 2008, 2009 AND 2010
(In U.S. dollars)
2. | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES — continued |
Advertising costs |
The Group expenses advertising costs as incurred. Total advertising expenses were $1,102,779, $4,819,561, and $6,077,608 for the years ended December 31, 2008, 2009 and 2010, respectively, and have been included as part of sales and marketing expenses in the accompanying consolidated statements of operations. |
Income taxes |
Current income taxes are provided for in accordance with the laws of the relevant tax authorities. Deferred income taxes are recognized for temporary differences between the tax basis of assets and liabilities and their reported amounts in the financial statements, net operating loss carry forwards and credits by applying enacted statutory tax rates applicable to future years. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized. Current income taxes are provided for in accordance with the laws of the relevant tax authorities. |
The impact of an uncertain income tax position on the income tax return is recognized at the largest amount that is more-likely-than not to be sustained upon audit by the relevant tax authority. An uncertain income tax position will not be recognized if it has less than a 50% likelihood of being sustained. Interest and penalties on income taxes will be classified as a component of the provisions for income taxes. |
Comprehensive income (loss) |
Comprehensive income (loss) includes net income (loss) and foreign currency translation adjustments. Comprehensive income (loss) is reported as a component of the consolidated statements of equity and comprehensive income (loss). |
Fair value of financial instruments |
Financial instruments include cash and cash equivalents, restricted cash, accounts receivable, trading securities, cost method investment, accounts payable and short-term loan. |
The carrying values of cash and cash equivalents, restricted cash, accounts receivable, trading securities, accounts payable and short-term loan approximate their fair value due to their short-term maturities. |
The carrying value of the cost method investment was $1,479,571 as of December 31, 2009 and 2010, which approximate the fair value of the investment based on the valuation performed by the Company, with the assistance of American Appraisal China Limited, an independent valuation firm. |
The Group does not use derivative instruments to manage risks. |
F-18
Table of Contents
FOR THE YEARS ENDED DECEMBER 31, 2008, 2009 AND 2010
(In U.S. dollars)
2. | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES — continued |
Share-based compensation |
Share-based compensation with employees is measured based on the grant date fair value of the equity instrument. The Group recognizes the compensation costs net of an estimated forfeiture rate using the straight-line method, over the requisite service period of the award, which is generally the vesting period of the award. The estimate of forfeitures will be adjusted over the requisite service period to the extent that actual forfeitures differ, or are expected to differ, from such estimates. Changes in estimated forfeitures will be recognized through a cumulative catch-up adjustment in the period of change and will also impact the amount of share-based compensation expense to be recognized in future periods. |
Share awards issued to nonemployees are measured at fair value at the earlier of the commitment date or the date the services is completed and recognized over the period the service is provided or as goods is received. |
Effective January 1, 2009, the Group adopted an authoritative pronouncement issued by the FASB regarding noncontrolling interest in the accompanying consolidated financial statements. The pronouncement requires noncontrolling interest to be separately presented as a component of equity in the accompanying consolidated financial statements. The presentation regarding noncontrolling interest was retroactively applied for all the presented periods. |
Net income (loss) per share |
Basic net income (loss) per share attributable to China Finance Online Co. Limited is computed by dividing net income (loss) attributable to China Finance Online Co. Limited by the weighted average number of ordinary shares outstanding during the period. Diluted net income (loss) per ordinary share attributable to China Finance Online Co. Limited reflects the potential dilution that could occur if securities or other contracts to issue ordinary shares were exercised or converted into ordinary shares. The dilutive effect of the stock options and nonvested shares is computed using treasury stock method. |
Concentrations of credit risk |
Financial instruments that potentially expose the Group to concentrations of credit risk consist principally of cash and cash equivalents, restricted cash and accounts receivable. The Group places its cash and cash equivalents and restricted cash with financial institutions with high-credit ratings and quality. |
F-19
Table of Contents
FOR THE YEARS ENDED DECEMBER 31, 2008, 2009 AND 2010
(In U.S. dollars)
2. | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES — continued |
Concentrations of credit risk — continued |
The Group conducts ongoing credit evaluations of its customers and generally does not require collateral or other security from its customers except for the accounts receivable-margin clients which represents the margin loan to customers for securities purchase. The accounts receivable-margin client was collateralized by the securities the margin client purchased. The Group manages its credit risk by collecting up-front fee from its customers and billing at regular intervals during the contract period. The Group assesses the adequacy of allowance for doubtful accounts primarily based upon the age of the receivables and factors surrounding the credit risk of specific customers. |
Details of clients accounting for 10% or more of accounts receivable are as follows: |
Year ended December 31, | ||||||||||||||||
2009 | 2010 | |||||||||||||||
Amount | % | Amount | % | |||||||||||||
Client A | $ | — | — | $ | 1,498,895 | 12.8 | ||||||||||
Client B | $ | 1,027,365 | 19.1 | $ | 1,444,874 | 12.3 | ||||||||||
Client C | $ | 617,365 | 11.5 | $ | — | — |
These clients are all margin clients who have collateralized the securities they purchase to the Group. |
There were no customers with 10% or more of the Group’s revenues during 2008, 2009, or 2010. |
Recently issued accounting pronouncements not yet adopted |
On January 21, 2010, the FASB issued authoritative guidance to improve disclosures about fair value measurements. This guidance amends previous guidance on fair value measurements to add new requirements for disclosures about transfers into and out of Levels 1 and 2 and separate disclosures about purchases, sales, issuances, and settlements relating to Level 3 measurement on a gross basis rather than as a net basis as currently required. This guidance also clarifies existing fair value disclosures about the level of disaggregation and about inputs and valuation techniques used to measure fair value. This guidance is effective for annual and interim periods beginning after December 15, 2009, except for the requirement to provide the Level 3 activities of purchases, sales, issuances, and settlements on a gross basis, which will be effective for annual and interim periods beginning after December 15, 2010. Early application is permitted and in the period of initial adoption, entities are not required to provide the amended disclosures for any previous periods presented for comparative purposes. The Group does not expect the adoption of this pronouncement will have a significant effect on its consolidated financial position or results of operations. |
F-20
Table of Contents
FOR THE YEARS ENDED DECEMBER 31, 2008, 2009 AND 2010
(In U.S. dollars)
2. | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES — continued |
Recently issued accounting pronouncements not yet adopted — continued |
In April 2010, the FASB issued an authoritative pronouncement regarding the milestone method of revenue recognition. The scope of this pronouncement is limited to arrangements that include milestones relating to research or development deliverables. The pronouncement specifies guidance that must be met for a vendor to recognize consideration that is contingent upon achievement of a substantive milestone in its entirety in the period in which the milestone is achieved. The guidance applies to milestones in arrangements within the scope of this pronouncement regardless of whether the arrangement is determined to have single or multiple deliverables or units of accounting. The pronouncement will be effective for fiscal years, and interim periods within those years, beginning on or after June 15, 2010. Early application is permitted. Companies can apply this guidance prospectively to milestones achieved after adoption. However, retrospective application to all prior periods is also permitted. The Group does not expect the adoption of this pronouncement will have a significant impact on its consolidated financial position or results of operations. |
In December 2010, the FASB issued an authoritative pronouncement on when to perform Step 2 of the goodwill impairment test for reporting units with zero or negative carrying amounts. The amendments in this update modify Step 1 so that for those reporting units, an entity is required to perform Step 2 of the goodwill impairment test if it is more likely than not that a goodwill impairment exists. In determining whether it is more likely than not that goodwill impairment exists, an entity should consider whether there are any adverse qualitative factors indicating that an impairment may exist. The qualitative factors are consistent with existing guidance, 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. For public entities, the guidance is effective for impairment tests performed during entities’ fiscal years (and interim periods within those years) that begin after December 15, 2010. Early adoption will not be permitted. For nonpublic entities, the guidance is effective for impairment tests performed during entities’ fiscal years (and interim periods within those years) that begin after December 15, 2011. Early application for nonpublic entities is permitted; nonpublic entities that elect early application will use the same effective date as that for public entities. The Group does not expect the adoption of this pronouncement will have a significant effect on its consolidated financial position or results of operations. |
F-21
Table of Contents
FOR THE YEARS ENDED DECEMBER 31, 2008, 2009 AND 2010
(In U.S. dollars)
2. | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES — continued |
Recently issued accounting pronouncements not yet adopted — continued |
In December 2010, the FASB issued an authoritative pronouncement on disclosure of supplementary pro forma information for business combinations. The objective of this guidance is to address diversity in practice regarding the interpretation of the pro forma revenue and earnings disclosure requirements for business combinations. The amendments in this update specify 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. The amendments also expand the supplemental pro forma disclosures 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. The amendments affect any public entity as defined by Topic 805 that enters into business combinations that are material on an individual or aggregate basis. The amendments will be effective for business combinations consummated in periods beginning after December 15, 2010, and should be applied prospectively as of the date of adoption. Early adoption is permitted. The Group does not expect the adoption of this pronouncement will have a significant effect on its consolidated financial position or results of operations. |
3. | ACQUISITIONS |
To expand its market share during 2008, 2009 and 2010, China Finance Online made a number of acquisitions of businesses. Each acquisition has been recorded using the purchase method of accounting, and accordingly the acquired assets and liabilities were recorded at their fair values on the dates of acquisitions and the results of their operations have been included in the Group’s results of operations since the dates of their acquisitions. |
Acquisition of CFO Chuangying |
On January 9, 2009, CFO Software, one subsidiary of the Company, entered into a series of contractual arrangements with CFO Chuangying, which is a China Securities Regulatory Commission or CSRC licensed securities investment advisory firm. As a result of the contractual arrangements, the Group became the primary beneficiary of CFO Chuangying. (see Note 1). For the acquisition, the total cash consideration was $585,112, of which, $563,145 was paid in 2009 and the remaining consideration of $21,967 was paid in 2010. The purchase price was allocated to assets acquired and liabilities assumed as of the acquisition day as follows and the goodwill was allocated to subscription services and other related services operating segment. |
Useful life | ||||||||
Purchase price allocation: | ||||||||
Acquired intangible assets: | ||||||||
Securities consulting license | $ | 549,758 | 15 years | |||||
Total assets acquired | 549,758 | |||||||
Deferred tax liabilities | (137,440 | ) | ||||||
Total net assets | 412,318 | |||||||
Goodwill | 172,794 | |||||||
Total | 585,112 | |||||||
F-22
Table of Contents
FOR THE YEARS ENDED DECEMBER 31, 2008, 2009 AND 2010
(In U.S. dollars)
3. | ACQUISITIONS — continued |
Acquisition of CFO Securities Consulting |
On November 5, 2009, CFO Chongzhi, one VIE of the Group acquired 80% of the equity interest of CFO Securities Consulting, which is a CSRC licensed securities investment advisory firm. For the acquisition, the total cash consideration was $1,328,040, of which, $1,260,672 was paid in 2009 and the remaining consideration of $67,368 was paid in 2010. Following an independent valuation performed by American Appraisal China Limited, the Group allocated the purchase price to assets acquired and liabilities assumed as of the acquisition day as follows and the goodwill was allocated to subscription services and other related services operating segment. |
Useful life | ||||||||
Purchase price allocation: | ||||||||
Cash and cash equivalents | $ | 8,282 | ||||||
Other account receivables | 222,317 | |||||||
Acquired intangible assets: | ||||||||
Trademark | 350,191 | 15 years | ||||||
Securities consulting license | 900,596 | 15 years | ||||||
Total assets acquired | 1,481,386 | |||||||
Deferred tax liabilities | (312,697 | ) | ||||||
Noncontrolling interest | (261,660 | ) | ||||||
Total net assets | 907,029 | |||||||
Goodwill | 421,011 | |||||||
Total | 1,328,040 | |||||||
On November 9, 2010, CFO Chongzhi contributed additional capital of $3,762,227 (equivalent to RMB25,000,000) in CFO Securities Consulting, consequently, the Group’s beneficial interest in CFO Securities Consulting increased from 80% to 92.5%. On November 17, 2010 and December 20, 2010 CFO Chongzhi acquired the remaining 5% and 2.5% equity interest in CFO Securities Consulting for total cash consideration of $383,126. The difference of $377,893 between the carrying value of noncontrolling interest and the total cash consideration was recorded as additional paid-in capital on the consolidated balance sheet. Since then, the Group became the 100% beneficiary of CFO Securities Consulting. |
The Net income attributable to China Finance Online Co. Limited and transfers from the noncontrolling interest as of December 31, 2010 is as below: |
2010 | ||||
Net income attributable to China Finance Online Co. Limited | $ | 1,960,122 | ||
Transfers from the noncontrolling interest | ||||
Decrease in China Finance Online Co. Limited’s paid-in capital for purchase of CFO Securities Consulting’s common shares | (377,893 | ) | ||
Net income attributable to China Finance Online Co. Limited and transfers from the noncontrolling interest | 1,582,229 | |||
F-23
Table of Contents
FOR THE YEARS ENDED DECEMBER 31, 2008, 2009 AND 2010
(In U.S. dollars)
3. | ACQUISITIONS — continued |
Acquisition of CFO Newrand |
On October 17, 2008, CFO software, entered into a series of contractual arrangements with CFO Newrand, which is a CSRC licensed securities investment advisory firm. As a result of the contractual arrangements, the Group became the primary beneficiary of CFO Newrand. (see Note 1). For the acquisition, the total cash consideration was $3,826,296, of which, $3,709,037 was paid in 2008 with the remaining consideration of $117,259 paid in 2009. The purchase price was allocated to assets acquired and liabilities assumed as of the acquisition day as follows and the goodwill was allocated to subscription services and other related services operating segment. |
Useful life | ||||||||
Purchase price allocation: | ||||||||
Cash and cash equivalents | $ | 1,521,109 | ||||||
Acquired intangible assets: | ||||||||
Securities consulting license | 1,183,926 | 15 years | ||||||
Trade mark | 440,496 | 15 years | ||||||
Total assets acquired | 3,145,531 | |||||||
Deferred tax liabilities | (406,106 | ) | ||||||
Total net assets | 2,739,425 | |||||||
Goodwill | 1,086,871 | |||||||
Total | 3,826,296 | |||||||
Acquisitions of Huifu Jinyuan Co., Ltd & Zhongcheng Futong Co., Ltd |
On October 22, 2008 and October 29, 2008, CFO Software entered into a series of contractual arrangements with Huifu Jinyuan Co., Ltd (“CFO Huifu”) and Zhongcheng Futong Co., Ltd (“CFO Zhongcheng “), respectively. As a result of the contractual arrangements, the Group became the primary beneficiary of CFO Huifu and CFO Zhongcheng. For the forementioned acquisitions, the total cash considerations were $255,974, and $202,359 was recorded on the consolidated balance sheet as goodwill which was allocated to subscription services and other related services operating segment. |
Acquisition of Daily Growth Securities |
In March 2008, the Group injected further capital of $11,565,000 (equivalent to HK$90,000,000) in Daily Growth Securities; consequently, the Group’s equity interest in Daily Growth Securities increased from 85% to 98.5%. On May 15, 2008, the Company acquired the remaining 1.5% equity interest in Daily Growth Securities for a cash consideration of $678,073 including $61,405 in transaction costs and recorded $456,501 as goodwill on the consolidated balance sheet by which Daily Growth Securities became wholly owned by the Company. |
F-24
Table of Contents
FOR THE YEARS ENDED DECEMBER 31, 2008, 2009 AND 2010
(In U.S. dollars)
3. | ACQUISITIONS — continued |
The following summarized unaudited pro forma results of operations for the years ended December 31, 2008 and 2009 assuming that all significant acquisitions during the year ended December 31, 2008 and 2009 occurred as of January 1, 2008 and 2009, respectively. These pro forma results have been prepared for comparative purposes only and do not purport to be indicative of the results of operations which actually would have resulted had the significant acquisitions occurred as of January 1, 2008 and 2009, nor is it indicative of future operating results. |
For the years ended December 31 | ||||||||
2008 | 2009 | |||||||
(unaudited) | (unaudited) | |||||||
Revenues | $ | 56,371,385 | $ | 53,605,878 | ||||
Net income (loss) attributable to China Finance Online Co., Limited | $ | 18,858,118 | $ | (6,318,295 | ) | |||
Net income (loss) per share attributable to China Finance Online Co. Limited | ||||||||
- basic | $ | 0.19 | $ | (0.06 | ) | |||
- diluted | $ | 0.17 | $ | (0.06 | ) | |||
Fair value of acquired assets |
The Group measured the fair value for the assets acquired, with the assistance of American Appraisal, an independent valuation firm, using discounted cash flow techniques, and these assets were classified as Level 3 assets because the Group used unobservable inputs to value them, reflecting the Group’s assessment of the assumptions market participants would use in valuing these purchased intangible assets. |
F-25
Table of Contents
FOR THE YEARS ENDED DECEMBER 31, 2008, 2009 AND 2010
(In U.S. dollars)
4. | ACCOUNTS RECEIVABLE |
December 31, | ||||||||
2009 | 2010 | |||||||
Accounts receivable-margin clients | 2,724,456 | 8,095,396 | ||||||
Less: Allowance for doubtful accounts | — | — | ||||||
Accounts receivable- margin clients, net | $ | 2,724,456 | $ | 8,095,396 | ||||
Accounts receivable-others | 2,676,136 | 3,670,692 | ||||||
Less: Allowance for doubtful accounts | (31,440 | ) | (36,039 | ) | ||||
Accounts receivable-others, net | $ | 2,644,696 | $ | 3,634,653 | ||||
Accounts receivable- margin clients represent the receivables derived in the brokerage service in Daily Growth Securities, which is pledged by the customer’s purchased securities. |
Accounts receivable-others represent the receivables derived in other ordinary business without any collateral or other security from its customers. |
5. | PREPAID EXPENSES AND OTHER CURRENT ASSETS |
Prepaid expenses and other current assets consist of the following: |
December 31, | ||||||||
2009 | 2010 | |||||||
Prepayment of advertising fees | $ | 526,492 | $ | 170,018 | ||||
Advertising deposit (note i) | 261,460 | 134,341 | ||||||
Prepayment to sales agents | 212,294 | 84,350 | ||||||
Advances to suppliers | 805,212 | 1,209,399 | ||||||
VAT refund receivable | 817,532 | 975,066 | ||||||
Income tax prepayment and business tax refund receivable | 175,434 | 81,031 | ||||||
Interest receivable | 409,194 | 632,061 | ||||||
Other current assets | 1,073,519 | 791,132 | ||||||
$ | 4,281,137 | $ | 4,077,398 | |||||
Notes: | ||
(i) | The advertising deposit represents amounts of deposit paid to advertising agent, which is expected to be refunded within a year. |
F-26
Table of Contents
FOR THE YEARS ENDED DECEMBER 31, 2008, 2009 AND 2010
(In U.S. dollars)
6. | TRADING SECURITIES |
The Group purchased trading securities in 2009 and 2010. The Group measured the trading securities at fair value based on quoted market prices in an active market. As a result the Group has determined the valuation of its trading securities falls within Level 1 of the fair value hierarchy. As of December 31, 2010, the fair value of trading securities was $31,272. Gains and losses on the trading securities are recognized in the consolidated statement of operations for the years ended December 31, 2009 and 2010 were $40,574 and $1,138,147, respectively. |
7. | COST METHOD INVESTMENT |
In December 2005, the Group purchased 9,800,000 Series B preferred shares in Moloon for $15,000,000, which represents a 25% interest in Moloon on an if-converted basis. China Finance Online’s investment in these preferred shares was not in-substance common stock, and accordingly, the investment has been recorded as a cost method investment. |
In April 2006, the Group sold part of its investment in Moloon to a third party for a cash consideration of $1,187,500 and reduced the Group’s investment in Moloon’s preferred shares to 9,100,000 shares. |
Moloon is a Chinese wireless technology and service provider. In 2006, China Mobile Communication Corporation, primarily through which Moloon provided its MVAS service to its customers, announced policy changes which had a substantial negative impact on Moloon’s MVAS business. Following an independent valuation prepared by American Appraisal China Limited, the Group determined that its investment in Moloon was impaired and recorded an impairment loss of $1,322,000. |
Thereafter, in 2007 Moloon adopted new strategies to transform itself into a provider of mobile online gaming services in China. However, despite the new strategies Moloon’s financial conditions have deteriorated and, following an independent valuation prepared by American Appraisal China Limited, the Group determined that its investment in Moloon was further impaired and recorded an additional impairment loss of $11,127,000 in 2007, reducing the carrying balance of such investment to $1,479,571. There was no further impairment of the Group’s cost method investment in Moloon for the year ended December 31, 2008 and 2009. |
In August 2010, Moloon was wholly acquired by Ocean Butterflies Holdings Inc., a private and independent music and entertainment production company incorporated in the Cayman Islands (“Ocean Butterflies Holdings “), in the form of shares exchange between Moloon and Ocean Butterflies Holdings (the “Share Swap Transaction”). As a result of the Share Swap Transaction, the Group holds 7,439,479 ordinary shares of Ocean Butterflies Holdings, which represents 16.82% of shares in Ocean Butterflies Holdings. The investment is still recorded as a cost method investment. |
Following an independent valuation performed by American Appraisal China Limited, there was no impairment of the Group’s cost method investment in Ocean Butterflies Holdings Inc. for the year ended December 31, 2010. |
F-27
Table of Contents
FOR THE YEARS ENDED DECEMBER 31, 2008, 2009 AND 2010
(In U.S. dollars)
8. | PROPERTY AND EQUIPMENT, NET |
Property and equipment, net consisted of: |
December 31, | ||||||||
2009 | 2010 | |||||||
Technology infrastructure | $ | 7,759,146 | $ | 8,196,351 | ||||
Computer equipment | 1,874,318 | 1,786,148 | ||||||
Furniture, fixtures and equipment | 2,384,253 | 2,776,313 | ||||||
Motor vehicle | 645,517 | 665,547 | ||||||
Leasehold improvements | 2,667,512 | 3,122,796 | ||||||
15,330,746 | 16,547,155 | |||||||
Less: accumulated depreciation | (5,062,266 | ) | (8,270,880 | ) | ||||
$ | 10,268,480 | $ | 8,276,275 | |||||
Depreciation expense for the years ended December 31, 2008, 2009, and 2010 were $1,794,368, $2,495,028, and $3,048,634, respectively. |
9. | ACQUIRED INTANGIBLE ASSETS, NET |
Acquired intangible assets, net, arose from the acquisitions of CFO Genius, CFO Meining, CFO-Stockstar, CFO Newrand, Daily Growth Securities, CFO Zhongcheng, CFO Chuangying and CFO Securities Consulting and from the establishment of Daily Growth Futures during 2006 through 2010 and consisted of the following: |
December 31, | ||||||||
2009 | 2010 | |||||||
Intangible assets not subject to amortization: | ||||||||
Trademarks | $ | 843,561 | $ | 869,736 | ||||
Stock exchange trading right | 64,475 | 64,241 | ||||||
Futures exchange trading right | 64,475 | 64,241 | ||||||
Intangible assets subject to amortization: | ||||||||
Completed technology | 850,883 | 877,286 | ||||||
Customer relationship | 686,857 | 708,170 | ||||||
Value-added service license | 27,094 | 27,934 | ||||||
Agreement with mobile operators | 12,155 | 12,533 | ||||||
Securities consulting license and related trademarks | 3,426,717 | 3,533,047 | ||||||
Intellectual property | 73,226 | 75,498 | ||||||
6,049,443 | 6,232,686 | |||||||
Less: Accumulated amortization | (1,270,342 | ) | (1,883,505 | ) | ||||
$ | 4,779,101 | $ | 4,349,181 | |||||
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FOR THE YEARS ENDED DECEMBER 31, 2008, 2009 AND 2010
(In U.S. dollars)
9. | ACQUIRED INTANGIBLE ASSETS, NET — continued |
Amortization expense for the years ended December 31, 2008, 2009 and 2010 was $344,777, $492,066 and $561,392, respectively. Future amortization expenses of acquired intangible assets with determinable lives are $444,708, $243,086, $243,086, $243,086 and $2,176,997 for 2011, 2012, 2013, 2014 and 2015 and thereafter, respectively. |
10. | GOODWILL |
Changes in goodwill for the years ended December 31, 2008, 2009 and 2010 were as follows: |
Southern | Eastern | Northern | ||||||||||||||||||
China | China | China | Hong Kong | Total | ||||||||||||||||
Balance as of December 31, 2008 | 2,330,274 | 8,210,504 | 202,759 | 1,274,975 | 12,018,512 | |||||||||||||||
Acquisition (Note 3) | — | 421,011 | 172,794 | — | 593,805 | |||||||||||||||
Exchange difference | (1,945 | ) | (6,886 | ) | 35 | (822 | ) | (9,618 | ) | |||||||||||
Balance as of December 31, 2009 | 2,328,329 | 8,624,629 | 375,588 | 1,274,153 | 12,602,699 | |||||||||||||||
Exchange difference | 72,247 | 267,620 | 11,654 | (4,633 | ) | 346,888 | ||||||||||||||
Balance as of December 31, 2010 | 2,400,576 | 8,892,249 | 387,242 | 1,269,520 | 12,949,587 | |||||||||||||||
The Group performs the annual impairment tests on December 31 of each year. Based on impairment test performed, no impairment of goodwill was recorded during the years ended December 31, 2008, 2009 and 2010, respectively. |
11. | BANK FACILITIES AND SHORT-TERM LOANS |
The Group obtained a term loan facility amount up to $2,569,637 and a revolving loan facility amount up to $10,150,067 from a bank. The facilities are guaranteed by a standby letter of credit, which is secured by the Group’s restricted cash of $14,533,347. As of December 31, 2010, $6,424,093 of loans was outstanding under such loan facilities. The outstanding loans have the interest margin, which is 1.8%, plus Hong Kong Interbank Offered Rate ranging from 0.08% to 0.24%. The facilities will be matured in July 2011. |
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Table of Contents
FOR THE YEARS ENDED DECEMBER 31, 2008, 2009 AND 2010
(In U.S. dollars)
12. | ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES |
Accrued expenses and other current liabilities consist of: |
December 31, | ||||||||
2009 | 2010 | |||||||
Accrued bonus | $ | 4,355,130 | $ | 5,402,453 | ||||
Accrued professional service fees | 436,834 | 476,282 | ||||||
Withholding individual income tax-option exercise | 144,979 | 61,653 | ||||||
Value added taxes payable | 444,278 | 879,983 | ||||||
Other taxes payable | 487,461 | 685,246 | ||||||
Accrued raw data cost | 308,566 | 593,698 | ||||||
Accrued office rental | 131,603 | 64,536 | ||||||
Accrued bandwidth cost | 519,763 | 99,593 | ||||||
Accrued welfare benefits | 288,123 | 252,898 | ||||||
Accrued refund of subscription fees (i) | — | 1,328,554 | ||||||
Acquisition consideration payable | 89,335 | — | ||||||
Others | 1,038,795 | 993,467 | ||||||
�� | $ | 8,244,867 | $ | 10,838,363 | ||||
(i) | In October 2010, the CSRC promulgated the Provisional Regulations on Securities Investment Advisory and Provisional Regulations on Issuance of Securities Research Reports (collectively referred to as the “New Regulations”), which will be effective on January 1, 2011. The New Regulations allow securities investment advisory companies to provide advisory services for securities and related products under the framework of the provisional regulations and receive service compensation. The New Regulations prohibit the activities of those participants without licenses, thus benefitting the Company which has the licenses. |
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Table of Contents
FOR THE YEARS ENDED DECEMBER 31, 2008, 2009 AND 2010
(In U.S. dollars)
The New Regulations also allow the customer to terminate the service with securities investment advisory company within five days after the service agreement is signed and request refund of the subscription fee. It further emphasizes that the customer must take full responsibility of its own investment decision, rather than the advisory company. | ||
The Company has noticed certain customers claimed for refund of the subscription fee which were received by the Company in 2010, in excuse of not fully realizing the risks associated with their own investment decisions prior to the implementation of the New Regulations. In consideration of the transitory period of the New Regulations and the Company’s business from a long-term perspective, the Company made a $1,328,554 accrual based on the actual requests from customers and the estimation of future refund in the year of 2011. The estimated refund was recorded as reduction of revenue in relation to the subscription fee of 2010 or deferred revenue depending on whether or not the service has been provided. |
13. | STOCK OPTIONS AND NONVESTED SHARES |
As of December 31, 2010, the Company and its subsidiary Daily Growth Holding have three share-based compensation plans, which are described below. The compensation cost that has been charged against income for those plans was $8,040,150, $6,600,716, and $4,519,671 for 2008, 2009, and 2010, respectively. |
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Table of Contents
FOR THE YEARS ENDED DECEMBER 31, 2008, 2009 AND 2010
(In U.S. dollars)
13. | STOCK OPTIONS AND NONVESTED SHARES — continued |
In January 2004, the Company adopted the 2004 stock incentive plan (the “2004 Plan”) which allows the Company to offer a variety of incentive awards to employees, directors, officers and other eligible persons in the Group, and consultants and advisors outside the Group. Options to purchase 5,688,488 ordinary shares are authorized under the Plan. In September 2004 and December 2006, the Company increased the total number of ordinary shares available for issuance under the 2004 Plan by an additional 10,000,000 shares. In June 2009, the shareholders approved the increase in the number of ordinary shares available for issuance under the 2004 Plan by 3,000,000 ordinary shares. In June 2010, the Company’s shareholders approved the increase in the number of ordinary shares available for issuance under the 2004 Plan by 3,000,000 ordinary shares annually until December 31, 2014. As a result the total number of ordinary shares authorized under the 2004 Plan was 21,688,488 as of December 31, 2010. |
Options to employees |
In 2008, the Company granted totaling 2,820,840 stock options to officers and employees at an exercise price that equaled the trading price of the stock upon the stock option grant. These options vest over 3 years. |
In 2009, the Company granted totaling 10,000 stock options to an employee at an exercise price that equaled the trading price of the stock upon the stock option grant. These options vest over 3 years. |
In 2010, the Company granted totaling 3,562,000 stock options to employees at an exercise price that equaled the trading price of the stock upon the stock option grant. These options vest over 3 years. |
The fair value of employee options was estimated on the basis of the Black-Scholes Option Pricing model with the following assumptions: |
Years ended December 31, | ||||||||
2009 | 2010 | |||||||
Weighted average risk free rate of return | 2.03 | % | 1.11%-2.47 | % | ||||
Weighted average expected option life | 5.98 years | 5.98 years | ||||||
Expected volatility rate | 57.92 | % | 54.37%-57.06 | % | ||||
Dividend yield | — | — |
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Table of Contents
FOR THE YEARS ENDED DECEMBER 31, 2008, 2009 AND 2010
(In U.S. dollars)
13. | STOCK OPTIONS AND NONVESTED SHARES — continued |
Options to employees — continued |
(1) | Expected volatility |
The volatility of the underlying ordinary shares during the life of the options was estimated based on the historical stock price volatility of the Company and listed comparable companies over a period comparable to the expected term of the options. |
(2) | Risk-free interest rate |
Risk-free interest rate was estimated based on the yield to maturity of treasury bonds of the United States with a maturity period close to the expected term of the options. |
(3) | Expected option life |
The Group used the simplified method to estimate the expected life. |
(4) | Dividend yield |
The dividend yield was estimated by the Company based on its expected dividend policy over the expected term of the options. |
(5) | Exercise price |
Options are generally granted at an exercise price equal to the fair market value of the Company’s shares at the date of grant. |
In October and December 2008, ten employees of the Company surrendered their rights to purchase in total of 970,000 ordinary shares of the Company at the exercise price ranged from $2.44 to $3.134 pursuant to the 2004 Plan. On December 1, 2008, the Company granted new options to purchase 970,000 ordinary shares at the exercise price of $1.26 to the ten employees which will vest in 3 years pursuant to the 2004 Plan. The foregoing was accounted for as a modification of the share based compensation awards. An incremental compensation cost of $76,200 arising from the modification was measured at the excess of the fair value of the new options at the grant date over the fair value of the options surrendered by the ten employees at the date of modification. The total unrecognized compensation cost of $1,122,361, which was the sum of the remaining unrecognized share based compensation amount of $1,046,161 of the original awards and the incremental cost resulting from the modification as of the modification date, was recognized over the requisite service period of the newly granted option awards. |
Options to non-employees |
The Company granted 6,919,500 and 350,000 stock options to non-employees in 2004 and 2005, respectively. All of the options have vested as of December 31, 2008. |
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FOR THE YEARS ENDED DECEMBER 31, 2008, 2009 AND 2010
(In U.S. dollars)
13. | STOCK OPTIONS AND NONVESTED SHARES — continued |
2008 | 2009 | 2010 | ||||||||||||||||||||||
Weighted | Weighted | Weighted | ||||||||||||||||||||||
Number | average | Number | average | Number | average | |||||||||||||||||||
of options | exercise price | of options | exercise price | of options | exercise price | |||||||||||||||||||
Outstanding at beginning of year | 10,557,568 | $ | 0.84 | 11,439,978 | $ | 0.91 | 10,834,298 | $ | 0.87 | |||||||||||||||
Granted | 2,820,840 | $ | 1.79 | 10,000 | $ | 1.65 | 3,562,000 | $ | 1.43 | |||||||||||||||
Exercised | (829,670 | ) | $ | 0.69 | (236,480 | ) | $ | 0.80 | (637,720 | ) | $ | 1.12 | ||||||||||||
Forfeited | (138,760 | ) | $ | 1.00 | (69,360 | ) | $ | 1.22 | (655,340 | ) | $ | 1.27 | ||||||||||||
Cancelled | (970,000 | ) | $ | 2.81 | (309,840 | ) | $ | 2.03 | — | — | ||||||||||||||
Outstanding at end of year | 11,439,978 | $ | 0.91 | 10,834,298 | $ | 0.87 | 13,103,238 | $ | 0.99 | |||||||||||||||
Shares exercisable at end of year | 7,903,538 | $ | 0.80 | 9,439,258 | $ | 0.82 | 9,316,838 | $ | 0.82 | |||||||||||||||
The following table summarizes information with respect to stock options outstanding at December 31, 2010: |
Options outstanding | Option exercisable | |||||||||||||||||||||||||||
Aggregate | Aggregate | |||||||||||||||||||||||||||
Weighted | Weighted | intrinsic | Weighted | intrinsic | ||||||||||||||||||||||||
average | average | value as of | average | value as of | ||||||||||||||||||||||||
Number | remaining | exercise | December 31, | Number | exercise | December 31, | ||||||||||||||||||||||
outstanding | contractual life | price | 2010 | exercisable | price | 2010 | ||||||||||||||||||||||
Ordinary shares | ||||||||||||||||||||||||||||
$0.16 | 2,845,738 | 2,845,738 | ||||||||||||||||||||||||||
$1.04 | 200,000 | 200,000 | ||||||||||||||||||||||||||
$1.31 | 1,435,100 | 1,435,100 | ||||||||||||||||||||||||||
$1.32 | 27,000 | 27,000 | ||||||||||||||||||||||||||
$1.12 | 400,000 | 400,000 | ||||||||||||||||||||||||||
$1.16 | 200,000 | 200,000 | ||||||||||||||||||||||||||
$1.07 | 700,000 | 700,000 | ||||||||||||||||||||||||||
$0.96 | 2,699,000 | 2,699,000 | ||||||||||||||||||||||||||
$1.25 | 100,000 | 100,000 | ||||||||||||||||||||||||||
$1.32 | 123,600 | 123,600 | ||||||||||||||||||||||||||
$1.26 | 886,800 | 582,800 | ||||||||||||||||||||||||||
$1.65 | 10,000 | 3,600 | ||||||||||||||||||||||||||
$1.426 | 3,426,000 | — | ||||||||||||||||||||||||||
$1.43 | 50,000 | — | ||||||||||||||||||||||||||
13,103,238 | 5.31 years | $ | 0.99 | $ | 4,563,063 | 9,316,838 | $ | 0.82 | $ | 4,549,079 | ||||||||||||||||||
The weighted-average grant-date fair value of options granted during the years 2008, 2009 and 2010 was $1.04, $0.91 and $0.78, respectively. The total intrinsic value of options exercised during the years ended December 31, 2008, 2009 and 2010 was $594,813, $155,880, and $115,985, respectively. |
F-34
Table of Contents
FOR THE YEARS ENDED DECEMBER 31, 2008, 2009 AND 2010
(In U.S. dollars)
13. | STOCK OPTIONS AND NONVESTED SHARES — continued |
Summary of stock options to employees and non-employees — continued |
As of December 31, 2010, 3,760,100 ordinary shares were available for future grant of awards. The Company recognized share-based compensation expenses of $1,217,980, $1,290,446 and $ 1,765,437 for stock option in the years ended December 31, 2008, 2009 and 2010, respectively. |
As of December 31, 2010, there was $1,342,249 unrecognized share-based compensation expenses relating to the stock options, which is expected to be recognized over a weighted average period of 2 years. |
In July 2007, the Company adopted the 2007 Equity incentive plan (the “2007 Plan”) and granted nonvested shares covering 10,558,493 ordinary shares of the Company to the employees who were eligible for the 2007 Plan. The vesting of the nonvested shares are subject to achieving certain operating performance targets and rendering service to the Company for the requisite service period stated in the 2007 Plan. |
The grant date fair value of a nonvested share was measured at the quoted market price of the Company’s equity shares. The nonvested shares shall become vested during the three years following the grant date from July 2007 to June 2010 based on the Company’s certain operating performance targets for the years 2008 and 2009. Based on the Company’s operating performance during 2008 and 2009, 4,329,024, 2,886,016 and 1,443,008 shares were vested in 2008, 2009 and 2010. |
The Company recognized a compensation expense of $6,822,170, $5,310,270 and $2,655,135 for the nonvested shares in 2008, 2009 and 2010, respectively. |
In 2009, in light of the significant global economic downturn and its impact on the Group’s performance, the board approved the Amended Restricted Stock Issuance and Allocation Agreement (the “Amended Agreement”), which was executed on July 1, 2010 to extend the performance period and the vesting term. Under the Amended Agreement, there were 1,900,445 granted nonvested shares, which were not vested due to the operating performance targets for 2008 and 2009 were not achieved, became eligible for vesting if the Company can achieve the new performance targets for 2010, 2011 or 2012. The change of performance target was accounted for as a modification of the terms of the nonvested share award, and no other terms or conditions of the award were modified. Immediately before the modification, the share based compensation expense of the 1,900,445 nonvested shares that expected to be recognized over the vesting period was zero. As the Company continues to believe that it is not probable that the new performance targets will be achieved, therefore, there is no incremental compensation cost associated with the modification. |
There was no share based compensation expense recognized in 2010 after the modification date due to the new performance target of 2010 was not achieved. |
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Table of Contents
FOR THE YEARS ENDED DECEMBER 31, 2008, 2009 AND 2010
(In U.S. dollars)
13. | STOCK OPTIONS AND NONVESTED SHARES — continued |
A summary of the status of the nonvested shares as of December 31, 2008, 2009 and 2010, and changes during the year ended December 31, 2010 is presented below. |
Weighted- | ||||||||||||
average grant/ | Aggregate | |||||||||||
modification | intrinsic | |||||||||||
Nonvested shares | Shares | date fair value | value | |||||||||
At the beginning of year 2008 | 10,558,493 | 1.84 | 46,246,199 | |||||||||
Granted | — | — | — | |||||||||
Vested | (4,329,024 | ) | — | (6,086,608 | ) | |||||||
Forfeited | — | — | — | |||||||||
At the end of year 2008 | 6,229,469 | 1.84 | 8,758,633 | |||||||||
Granted | — | — | — | |||||||||
Vested | (2,886,016 | ) | — | (5,520,949 | ) | |||||||
Forfeited | — | — | — | |||||||||
At the end of year 2009 | 3,343,453 | 1.84 | 4,881,441 | |||||||||
Granted | — | — | — | |||||||||
Vested | (1,443,008 | ) | — | (2,117,855 | ) | |||||||
Forfeited | — | — | — | |||||||||
At the end of year 2010 | 1,900,445 | 1.43 | 2,481,981 | |||||||||
In November 2010, Daily Growth Holdings, a subsidiary of the Company, implemented the “2010 equity incentive plan” (the “plan”) under which the Company transferred 1,500 nonvested shares which representing 15% of total Daily Growth Holdings’ equity interest to its management group as a share incentive. If the grantees left the Company before the third anniversary of the grant date when the nonvested shares become vested, they should transfer the shares to the Company at no consideration. Therefore, the total share based compensation expenses are recognized ratably over the three years of vesting period. In addition, as the grantees are entitled to all the shareholder’s rights, including the dividend rights since the date of grant, the 15% share of the earnings of Daily Growth Holdings is recognized as noncontrolling interest on the Company’s consolidated financial statements since November 1, 2010, the date of grant. |
The fair value of the share incentive was determined to be $1,188 per share. The Group recognized $99,099 share based compensation cost for the year ended December 31, 2010. |
As of December 31, 2010, there was $1,683,378 unrecognized compensation cost relating to nonvested shares, which is expected to be recognized over a weighted average period of 3 years. |
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Table of Contents
FOR THE YEARS ENDED DECEMBER 31, 2008, 2009 AND 2010
(In U.S. dollars)
14. | INCOME TAXES |
Hong Kong |
China Finance Online, Daily Growth Securities, Daily Growth Futures, Daily Growth Wealth Management, Daily Growth Investment Services, CFO HK Genius and other five subsidiaries were established in Hong Kong. These companies were subject to Hong Kong profit tax at 16.5%. These companies have not recorded tax provision for Hong Kong profits tax as there were no assessable profits arising in or derived from Hong Kong. |
British Virgin Islands |
Companies that were incorporated in the BVI are not subject to taxation in their country of incorporation. Subsidiaries incorporated in the BVI include Daily Growth Holdings and other five subsidiaries. |
PRC |
The Group’s PRC entities are subject to 25% PRC Enterprise Income Tax (“EIT”) on the taxable income in accordance with the relevant PRC income tax laws, except for certain entities that enjoy preferential tax rates, which are lower than the statutory rates, as described below. |
Under the EIT Law and its implementing rules, an enterprise which qualifies as a “high and new technology enterprise” (“the HNTE”) is entitled to a tax rate of 15%. CFO Software, CFO Meining and CFO Genius obtained the HNTE status in 2008. |
Under the EIT law and its implementing rules, enterprises that obtain status of “Software Enterprises” are entitled to be exempted from EIT tax for the first two profit-making years and enjoy a preferential 12.5% tax rate, which is half of the standard EIT rate of 25% for the three years thereafter. |
A summary of the main PRC entities that subject to tax preferential policies for the year ended December 31, 2010 is as follows: |
PRC entities | Chinese enterprise income tax rate | Qualification for preferential tax rate | ||
CFO Success | Full tax exemption for the year 2008 and 2009 and a preferential tax rate of 12.5% from 2010 to 2012. | Software Enterprises | ||
CFO Qicheng | Full tax exemption for the years 2010 and 2011, and preferential tax rate of 12.5% from 2012 to 2014 | Software Enterprises | ||
CFO Shenzhen Shangtong | Full tax exemption for the years 2010 and 2011, and preferential tax rate of 12.5% from 2012 to 2014 | Software Enterprises | ||
CFO Zhengning | Full exemption for the year 2008 and preferential tax rate of 10%, 11% and 12% from 2009 to 2011. | Software Enterprises | ||
CFO Stockstar | Transition tax rate 22%, 24% for 2010, 2011 and 25% from 2012 and thereafter. | Transition rules of the EIT Law | ||
CFO Jujin | Transition tax rate 22%, 24% for 2010, 2011 and 25% from 2012 and thereafter. | Transition rules of the EIT Law | ||
CFO New land | Transition tax rate 22%, 24% for 2010, 2011 and 25% from 2012 and thereafter. | Transition rules of the EIT Law | ||
CFO Software | Preferential tax rate of 7.5% from 2008 to 2010. | HNTE and local tax policy to apply 50% reduced tax rate | ||
CFO Meining | Preferential tax rate of 15% from 2008 to 2010. | HNTE | ||
CFO Genius | Preferential tax rate of 15% from 2008 to 2010. | HNTE |
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Table of Contents
FOR THE YEARS ENDED DECEMBER 31, 2008, 2009 AND 2010
(In U.S. dollars)
14. | INCOME TAXES — continued |
PRC— continued |
The HNTE status obtained by CFO Software, CFO Meining and CFO Genius in 2008 under the EIT Law is valid for three years and qualifying entities can then apply to renew for an additional three years provided their business operations continue to qualify for the HNTE status. The Group assumed its qualifying entities will continue to obtain the renewal in the future. Accordingly, in calculating deferred tax assets and liabilities, the Group assumed its qualifying entities will continue to renew the HNTE status at the conclusion of the initial three year period. |
CFO Chongzhi, CFO Zhongcheng and Shanghai Shangtong Co., Ltd. (“CFO-Shangtong”) are approved by the local tax authority in 2009 and 2010 to file their income tax by adopting the “deemed-profit method”. Under this method, the three entities filed their income tax by calculating as 2.5% of the gross revenues. This method is subject to be reevaluated by the local tax authority in the future. |
The EIT Law includes a provision specifying that legal entities organized outside of the PRC will be considered residents for PRC Income tax purposes if the place of effective management or control is within the PRC. The implementation rules to the EIT Law provide that non-resident legal entities will be considered PRC residents if substantial and overall management and control over the manufacturing and business operations, personnel, accounting, properties, etc, occurs within the PRC. Despite the present uncertainties resulting from the limited PRC tax guidance on the issue, the Group does not believe that currently the legal entities organized outside of the PRC within the Group should be treated as residents for EIT law purposes. If the PRC tax authorities subsequently determine that the Company and its subsidiaries registered outside the PRC should be deemed a resident enterprise, the Company and its subsidiaries registered outside the PRC will be subject to the PRC income tax at a rate of 25%. |
If the Company were to be non-resident for PRC tax purpose, dividends paid to it out of profits earned after January 1, 2008 would be subject to a withholding tax. In the case of dividends paid by PRC subsidiaries the withholding tax would be 10% not considering the arrangements for the Avoidance of Double Taxation on income and Prevention of Fiscal Evasion with respect to Taxes on Income between mainland and Hong Kong. |
F-38
Table of Contents
FOR THE YEARS ENDED DECEMBER 31, 2008, 2009 AND 2010
(In U.S. dollars)
14. | INCOME TAXES — continued |
PRC— continued |
Aggregate undistributed earnings of the Group’s subsidiaries located in PRC that are taxable upon distribution to the Group are considered to be indefinitely reinvested because the Group does not have any present plan to pay any cash dividends on its ordinary shares in the foreseeable future and intends to retain most of its available funds and any future earnings for use in the operation and expansion of its business. Accordingly, no deferred tax liability has been accrued for the Chinese dividend withholding taxes that would be payable upon the distribution of those amounts to the Company as of December 31, 2010. |
Income tax (provision) benefit was as follows: |
December 31, | ||||||||||||
2008 | 2009 | 2010 | ||||||||||
Current | $ | (153,261 | ) | $ | (471,120 | ) | $ | (362,861 | ) | |||
Deferred | 3,200,390 | 917,284 | 99,475 | |||||||||
Total | $ | 3,047,129 | $ | 446,164 | $ | (263,386 | ) | |||||
The principal components of deferred income taxes were as follows: |
December 31, | ||||||||
2009 | 2010 | |||||||
Current deferred tax assets: | ||||||||
Deferred revenue — current | $ | 2,852,510 | $ | 2,785,595 | ||||
Accrued expenses and other liability | 200,775 | 828,746 | ||||||
Net operating loss carrying forwards | 183,525 | 19,779 | ||||||
Total current deferred tax assets | 3,236,810 | 3,634,120 | ||||||
Non-current deferred tax assets: | ||||||||
Deferred revenue — non-current | $ | 1,829,496 | $ | 1,680,936 | ||||
Net operating loss carrying forwards | 2,321,949 | 4,038,354 | ||||||
4,151,445 | 5,719,290 | |||||||
Less: valuation allowance | (2,272,602 | ) | (4,038,354 | ) | ||||
Total non-current deferred tax assets | $ | 1,878,843 | $ | 1,680,936 | ||||
Non-current deferred tax liabilities: | ||||||||
Intangible assets | (994,573 | ) | (966,689 | ) | ||||
Total non-current deferred tax liabilities | $ | (994,573 | ) | $ | (966,689 | ) | ||
F-39
Table of Contents
FOR THE YEARS ENDED DECEMBER 31, 2008, 2009 AND 2010
(In U.S. dollars)
14. | INCOME TAXES — continued |
PRC— continued |
A valuation allowance of $2,272,602 and $4,038,354 was established as of December 31, 2009 and 2010, respectively, for the entities that have incurred losses because the Group believes that it is more likely than not that the related deferred tax assets will not be realized in the future. At December 31, 2010, operating loss carry forwards includes approximately $13.2 million which will expire by 2015, and $7.3 million which will carry forward indefinitely. |
A reconciliation between the statutory PRC enterprise income tax rate of 25% and the effective tax rate is as follows: |
Years ended December 31, | ||||||||||||
2008 | 2009 | 2010 | ||||||||||
% | % | % | ||||||||||
Statutory tax rate in PRC | 25.0 | (25.0 | ) | 25.0 | ||||||||
Effect of tax holiday | (74.3 | ) | (38.2 | ) | (221.8 | ) | ||||||
Effect of different income tax rates in other jurisdictions | 1.3 | 2.6 | 9.7 | |||||||||
Non-deductible expenses | 39.0 | 45.9 | 143.2 | |||||||||
Non-taxable income | (7.9 | ) | (14.4 | ) | (32.2 | ) | ||||||
Change in valuation allowance | (2.2 | ) | 22.4 | 89.9 | ||||||||
Effective tax rate | (19.1 | ) | (6.7 | ) | 13.8 | |||||||
During the years ended December 31, 2008, 2009 and 2010, if the China Finance Online’s subsidiaries in the PRC were neither in the tax holiday period nor had they been specifically allowed special tax concessions, they would have recorded additional income tax expense of $11,660,280, $2,373,822 and 4,208,756, respectively. The impact of the tax holidays on basic net income per ordinary share was an increase of $0.12, $0.02 and $0.04, for the years ended December 31, 2008, 2009 and 2010, respectively. |
The Group did not identify significant unrecognized tax benefits for the years ended December 31, 2008, 2009 and 2010. The Group did not incur any interest and penalties related to potential underpaid income tax expenses and also believed that the adoption of pronouncement issued by FASB regarding accounting for uncertainty in income taxes did not have a significant impact on the unrecognized tax benefits within 12 months from December 31, 2010. |
Since September 2010, the relevant tax authorities of the Group’s subsidiaries and VIEs have not conducted a tax examination. In accordance with relevant PRC tax administration laws, tax years from 2005 to 2010 of the Group’s PRC subsidiaries and VIEs remain subject to tax audits as of December 31, 2010, at the tax authority’s discretion. |
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Table of Contents
FOR THE YEARS ENDED DECEMBER 31, 2008, 2009 AND 2010
(In U.S. dollars)
15. | AMERICAN DEPOSITARY SHARES (“ADS”) PLAN |
In October 2005, the Group issued 2,000,000 ordinary shares to its American Depositary Receipt bank and in exchange received 400,000 ADSs for purposes of future exercise of share options by employees. |
As of December 31, 2006, all 400,000 ADSs had been issued to employees who exercised their options. In January 2006, the Group issued 3,000,000 ordinary shares to its American Depositary Receipt bank and in exchange received 600,000 ADSs for purposes of future exercise of share options by employees. |
As of December 31, 2007, 905,256 American depositary shares (“ADSs”) had been issued to employees and the remaining 94,744 ADSs continued to be held by the Group for future exercises. These 94,744 ADSs represent 473,720 ordinary shares of the Group. |
As of December 31, 2008, the remaining ADSs carried from 2007 were used for option exercise. No ADS is outstanding for potential option exercises. |
In June 2009, the shareholders approved the increase in the number of ordinary shares available for issuance under the 2004 Plan by 3,000,000 ordinary shares. |
In June 2010, the shareholders approved the increase in the number of ordinary shares available for issuance under the 2004 Plan by 3,000,000 ordinary shares annually until December 31, 2014. |
16. | REPURCHASED SHARES |
In year 2005, the Group repurchased 10,708,030 ordinary shares at prices ranging from $1.13 to $1.41 per share, including brokerage commission, for a total consideration of $13,200,394. In year 2007, the Group granted 10,558,493 nonvested shares to employees out of the repurchased shares. Therefore there were 149,537 repurchased shares at the end of 2007. In year 2008 and 2009, 95,950 and 750 repurchased shares were used for options exercised by employees, respectively. Therefore, the number of the remaining repurchased share as of December 31, 2008, 2009 and 2010 was 53,587, 52,837 and 52,837, respectively. |
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FOR THE YEARS ENDED DECEMBER 31, 2008, 2009 AND 2010
(In U.S. dollars)
17. | NET INCOME (LOSS) PER SHARE |
The following table sets forth the computation of basic and diluted income (loss) per share for the years indicated: |
Years ended December 31, | ||||||||||||
2008 | 2009 | 2010 | ||||||||||
Net income (loss) attributable to China Finance Online Co. Limited | $ | 19,020,115 | $ | (6,219,743 | ) | $ | 1,960,122 | |||||
Weighted average ordinary shares outstanding used in computing basic net income per share | 98,957,993 | 105,203,564 | 108,247,552 | |||||||||
Plus: Incremental shares from assumed conversions of stock options and nonvested shares | 14,026,539 | — | 5,877,470 | |||||||||
Weighted average ordinary shares outstanding used in computing diluted net income per share (note) | 112,984,532 | 105,203,564 | 114,125,022 | |||||||||
Net income (loss) per share attributable to China Finance Online Co. Limited | ||||||||||||
- basic | $ | 0.19 | $ | (0.06 | ) | $ | 0.02 | |||||
- diluted | $ | 0.17 | $ | (0.06 | ) | $ | 0.02 | |||||
As of December 31, 2008 and 2010, 1,491,776 options and zero nonvested shares, and 767,083 options and zero nonvested shares were excluded in computation of diluted net income per share,respectively, because their effects were anti-dilutive. For year 2009, all of the options and nonvested shares were anti-dilutive because the Group was in the loss position. |
18. | MAINLAND CHINA CONTRIBUTION PLAN AND PROFIT APPROPRIATION |
Full time employees of the Group in the PRC participate in a government-mandated defined contribution plan pursuant to which certain pension benefits, medical care, unemployment insurance, employee housing fund and other welfare benefits are provided to employees. Chinese labor regulations require the Group to accrue for these benefits based on certain percentages of the employees’ salaries. The total provisions for such employee benefits were $1,913,046, $3,228,517 and $3,898,237 for the years ended December 31, 2008, 2009 and 2010 respectively. |
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FOR THE YEARS ENDED DECEMBER 31, 2008, 2009 AND 2010
(In U.S. dollars)
19. | NONCONTROLLING INTEREST |
Daily Growth | CFO Securities | Daily Growth | ||||||||||||||
Securities | Consulting | Holdings | Total | |||||||||||||
Balance as of December 31, 2007 | 471,431 | — | — | 471,431 | ||||||||||||
Acquisition of noncontrolling interest of Daily Growth Securities (Note 3) | (440,798 | ) | — | — | (440,798 | ) | ||||||||||
Net loss | (30,633 | ) | — | — | (30,633 | ) | ||||||||||
Balance as of December 31, 2008 | — | — | — | — | ||||||||||||
Acquisition of CFO Securities Consulting (Note 3) | — | 261,660 | — | 261,660 | ||||||||||||
Net loss | — | (2,131 | ) | — | (2,131 | ) | ||||||||||
Balance as of December 31, 2009 | — | 259,529 | — | 259,529 | ||||||||||||
Acquisition of noncontrolling intetres of CFO Securities Consulting (Note 3) | — | (5,233 | ) | — | (5,233 | ) | ||||||||||
Share-based compensation of Daily Growth Holdings (Note 13) | — | — | 14,865 | 14,865 | ||||||||||||
Net loss | — | (254,296 | ) | (71,667 | ) | (325,963 | ) | |||||||||
Balance as of December 31, 2010 | — | — | (56,802 | ) | (56,802 | ) | ||||||||||
20. | COMMITMENTS |
The Group leases certain office premises and purchases data under non-cancelable leases. Rent expense under operating leases for 2008, 2009 and 2010 were $2,038,449, $2,970,407 and $3,067,950, respectively. |
Future minimum payments under non-cancelable operating leases and data purchase agreements were as follows: |
Year ending | ||||
2011 | 3,981,040 | |||
2012 | 1,331,688 | |||
2013 | 276,728 | |||
2014 | 91,409 | |||
Total | $ | 5,680,865 | ||
21. | SEGMENT AND GEOGRAPHIC INFORMATION |
The Group has two operating segments (1) online financial data subscription service and other related services, (2) brokerage service. Operating segments are defined as components of an enterprise about which separate financial information is available that is evaluated regularly by the chief operating decision-makers in deciding how to allocate resources and in assessing performance. The Group’s chief executive officer and chief operating officer have been identified as the chief operating decision makers. The Group’s chief operating decision makers direct the allocation of resources to operating segments based on the profitability and cash flows of each respective segment. |
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FOR THE YEARS ENDED DECEMBER 31, 2008, 2009 AND 2010
(In U.S. dollars)
21. | SEGMENT AND GEOGRAPHIC INFORMATION — continued |
The Group evaluates performance based on several factors, including net revenue, cost of revenue, operating expenses, income from operation. The accounting policies of the business segments are the same as those described in “Note 2: Summary of Significant Accounting Policies.” The following tables show the operations of the Group’s operating segments: |
For the year ended December 31, 2010 |
Subscription | ||||||||||||
services and | ||||||||||||
other related | Brokerage | |||||||||||
services | services | Consolidated | ||||||||||
Net revenue | $ | 56,712,796 | $ | 3,003,246 | $ | 59,716,042 | ||||||
Cost of revenue | 8,098,809 | 398,336 | 8,497,145 | |||||||||
Operating expenses: | ||||||||||||
General and administrative | 10,976,571 | 2,231,766 | 13,208,337 | |||||||||
Product development | 13,027,879 | — | 13,027,879 | |||||||||
Sales and marketing | 25,241,232 | 1,749,861 | 26,991,093 | |||||||||
Total operating expenses | 49,245,682 | 3,981,627 | 53,227,309 | |||||||||
Government subsidies | 514,113 | — | 514,113 | |||||||||
Loss from operations | (117,582 | ) | (1,376,717 | ) | (1,494,299 | ) | ||||||
Total assets | 147,245,516 | 32,845,066 | 180,090,582 | |||||||||
For the year ended December 31, 2009 |
Subscription | ||||||||||||
services and | ||||||||||||
other related | Brokerage | |||||||||||
services | services | Consolidated | ||||||||||
Net revenue | $ | 51,377,247 | $ | 2,228,630 | $ | 53,605,877 | ||||||
Cost of revenue | 7,498,892 | 647,832 | 8,146,724 | |||||||||
Operating expenses: | ||||||||||||
General and administrative | 15,302,683 | 1,679,349 | 16,982,032 | |||||||||
Product development | 10,754,380 | — | 10,754,380 | |||||||||
Sales and marketing | 25,762,671 | 332,562 | 26,095,233 | |||||||||
Total operating expenses | 51,819,734 | 2,011,911 | 53,831,645 | |||||||||
Government subsidies | 567,373 | — | 567,373 | |||||||||
Loss from operations | (7,374,006 | ) | (431,113 | ) | (7,805,119 | ) | ||||||
Total assets | 137,075,374 | 28,534,063 | 165,609,437 | |||||||||
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FOR THE YEARS ENDED DECEMBER 31, 2008, 2009 AND 2010
(In U.S. dollars)
21. | SEGMENT AND GEOGRAPHIC INFORMATION — continued | |
For the year ended December 31, 2008 |
Subscription | ||||||||||||
services and | ||||||||||||
other related | Brokerage | |||||||||||
services | services | Consolidated | ||||||||||
Net revenue | $ | 55,286,219 | $ | 956,549 | $ | 56,242,768 | ||||||
Cost of revenue | (9,181,922 | ) | (185,221 | ) | (9,367,143 | ) | ||||||
Operating expenses: | ||||||||||||
General and administrative | (14,055,716 | ) | (1,315,455 | ) | (15,371,171 | ) | ||||||
Product development | (5,635,173 | ) | — | (5,635,173 | ) | |||||||
Sales and marketing | (13,342,967 | ) | (177,328 | ) | (13,520,295 | ) | ||||||
Total operating expenses | (33,033,856 | ) | (1,492,783 | ) | (34,526,639 | ) | ||||||
Government subsidies | 436,946 | — | 436,946 | |||||||||
Income (loss) from operations | 13,507,387 | (721,455 | ) | 12,785,932 | ||||||||
Total assets | 124,128,214 | 17,695,097 | 141,823,311 | |||||||||
Enterprise wide disclose |
The Group derives revenue from external customers for each of the following services during the years presented: |
Years ended December 31, | ||||||||||||
2008 | 2009 | 2010 | ||||||||||
Subscription fees | $ | 50,598,929 | $ | 47,201,162 | $ | 49,518,331 | ||||||
Advertising revenue | 2,946,389 | 3,985,699 | 7,031,219 | |||||||||
Brokerage service revenue | 956,549 | 2,228,630 | 3,003,246 | |||||||||
Others | 1,740,901 | 190,386 | 163,246 | |||||||||
Total revenue from external customers | $ | 56,242,768 | $ | 53,605,877 | $ | 59,716,042 | ||||||
Substantially all of the Company’s revenues for the years ended December 31, 2008, 2009 and 2010 were generated from the PRC and Hong Kong. |
As of December 31, 2008, 2009 and 2010, respectively, substantially all of long-lived assets of the Group are located in the PRC and Hong Kong. |
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Table of Contents
FOR THE YEARS ENDED DECEMBER 31, 2008, 2009 AND 2010
(In U.S. dollars)
22. | STATUTORY RESERVES AND RESTRICTED NET ASSETS |
PRC legal restrictions permit payments of dividends by the Group’s PRC entities only out of their retained earnings, if any, determined in accordance with PRC regulations. Prior to payment of dividends, pursuant to the laws applicable to the PRC Domestic Enterprises and PRC Foreign Investment Enterprises, the PRC entities must make appropriations from after-tax profit to non-distributable statutory reserve funds as determined by the Board of Directors of the Group. These reserve funds include the (1) general reserve, (2) enterprise expansion fund and (3) staff bonus and welfare fund. Subject to certain cumulative limits, the general reserve fund requires annual appropriations of not less than 10% of after-tax profit (as determined under accounting principles and financial regulations applicable to PRC enterprises at each year-end); the other two funds are to be made at the discretion of the board of directors of each of the Group’s subsidiaries. |
These reserve funds can only be used for specific purposes and are not distributable as cash dividends. |
The appropriation to these reserves by the Group’s PRC subsidiaries were $3,335,073, $nil and $221,679 in 2008, 2009 and 2010. |
The balance of the statutory reserves was 5,485,798 and 5,707,477 as of December 31 2009 and 2010. Such reserves have been included in the retained earnings of the Company’s consolidated balance sheet. |
As a result of these PRC laws and regulations and the requirement that distributions by PRC entities can only be paid out of distributable profits computed in accordance with PRC GAAP, the PRC entities are restricted from transferring a portion of their net assets to the Group. Amounts restricted include paid-in capital and the statutory reserves of the Company’s PRC subsidiaries and VIEs. As of December 31, 2010, the aggregate amounts restricted which represented the amount of net assets of the relevant subsidiaries and VIEs in the Group not available for distribution was $74,864,472. As a result of the above restrictions, parent-only financials are presented on financial statement Schedule I. |
23. | SUBSEQUENT EVENT |
Grant of share option |
On February 1st, 2011, the Company granted 200,000 options to an employee with an exercise price of $1.14 per share. |
F-46
Table of Contents
Financial information of Parent Company
Balance sheets
(In U.S. dollars, except share-related data)
December 31, | ||||||||
2009 | 2010 | |||||||
Assets | ||||||||
Current assets: | ||||||||
Cash and cash equivalents | $ | 3,620,238 | $ | 2,808,010 | ||||
Amounts due from subsidiaries | 19,016,051 | 3,637,539 | ||||||
Prepaid expenses and other current assets | 20,352 | 99,156 | ||||||
Dividends receivable | 25,836,613 | 26,638,314 | ||||||
Total current assets | 48,493,254 | 33,183,019 | ||||||
Investments in subsidiaries | 47,893,966 | 72,211,545 | ||||||
Cost method investment | 1,479,571 | 1,479,571 | ||||||
Goodwill | 50,534 | 50,534 | ||||||
Total assets | $ | 97,917,325 | $ | 106,924,669 | ||||
Liabilities and shareholders’ equity | ||||||||
Current liabilities: | ||||||||
Accrued expenses and other current liabilities | 367,357 | 313,903 | ||||||
Amounts due to subsidiaries | 142,572 | 710,861 | ||||||
Total current liabilities | $ | 509,929 | $ | 1,024,764 | ||||
Shareholders’ equity | ||||||||
Ordinary shares ($0.00013 par value; 500,000,000 shares authorized as of December 31, 2009 and 2010, respectively; 110,250,163 and 110,887,883 shares issued and outstanding as of December 31, 2009 and 2010, respectively) | 14,237 | 14,319 | ||||||
Additional paid-in capital | 74,130,609 | 78,974,697 | ||||||
Accumulated other comprehensive income | 6,342,765 | 8,030,982 | ||||||
Retained earnings | 16,919,785 | 18,879,907 | ||||||
Total shareholders’ equity | 97,407,396 | 105,899,905 | ||||||
Total liabilities and shareholders’ equity | $ | 97,917,325 | $ | 106,924,669 | ||||
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Table of Contents
Statements of operations
(In U.S. dollars)
December 31, | ||||||||||||
2008 | 2009 | 2010 | ||||||||||
Cost of revenues | $ | — | $ | — | $ | 139,276 | ||||||
Gross profit | — | — | (139,276 | ) | ||||||||
Operating expenses: | ||||||||||||
General and administrative | 577,934 | 1,071,533 | 760,786 | |||||||||
Product development | — | — | 53,202 | |||||||||
Share-based compensation | 8,040,150 | 6,600,716 | 4,420,572 | |||||||||
Total operating expenses | 8,618,084 | 7,672,249 | 5,234,560 | |||||||||
Interest income | 50,970 | 4,510 | 2,249 | |||||||||
Equity in earnings of subsidiaries and VIEs | 25,997,391 | 1,469,390 | 6,500,738 | |||||||||
Exchange gain (loss) | 1,589,838 | (21,394 | ) | 830,971 | ||||||||
Net income (loss) | $ | 19,020,115 | $ | (6,219,743 | ) | $ | 1,960,122 | |||||
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Table of Contents
Parent Company Statement of Shareholders’ Equity and Comprehensive Income
(In U.S. dollars, except share data)
Additional | Accumulated other | Total | ||||||||||||||||||||||||||
Ordinary shares | paid-in | comprehensive | Retained | shareholders’ | Comprehensive | |||||||||||||||||||||||
Shares | Amount | capital | income (loss) | earnings | equity | income | ||||||||||||||||||||||
Balance as of January 1, 2008 | 109,754,433 | 14,172 | 58,727,378 | 4,501,432 | 4,119,413 | 67,362,395 | ||||||||||||||||||||||
Exercise of share options by employees | — | — | 531,449 | — | — | 531,449 | ||||||||||||||||||||||
Exercise of share options by non-employees | 260,000 | 34 | 41,566 | — | — | 41,600 | ||||||||||||||||||||||
Share-based compensation | — | — | 8,040,150 | — | — | 8,040,150 | ||||||||||||||||||||||
Foreign currency translation adjustment | — | — | — | 1,946,646 | — | 1,946,646 | 1,946,646 | |||||||||||||||||||||
Net income | — | — | — | — | 19,020,115 | 19,020,115 | 19,020,115 | |||||||||||||||||||||
Balance as of December 31, 2008 | 110,014,433 | 14,206 | 67,340,543 | 6,448,078 | 23,139,528 | 96,942,355 | 20,966,761 | |||||||||||||||||||||
Exercise of share options by employees | 185,730 | 24 | 181,357 | — | — | 181,381 | ||||||||||||||||||||||
Exercise of share options by non-employees | 50,000 | 7 | 7,993 | — | — | 8,000 | ||||||||||||||||||||||
Share-based compensation | — | — | 6,600,716 | — | — | 6,600,716 | ||||||||||||||||||||||
Foreign currency translation adjustment | — | — | — | (105,313 | ) | — | (105,313 | ) | (105,313 | ) | ||||||||||||||||||
Net loss | — | — | — | — | (6,219,743 | ) | (6,219,743 | ) | (6,219,743 | ) | ||||||||||||||||||
Balance as of December 31, 2009 | 110,250,163 | 14,237 | 74,130,609 | 6,342,765 | 16,919,785 | 97,407,396 | (6,325,056 | ) | ||||||||||||||||||||
Exercise of share options by employees | 637,720 | 82 | 717,175 | — | — | 717,257 | ||||||||||||||||||||||
Share-based compensation | — | — | 4,420,572 | — | — | 4,420,572 | ||||||||||||||||||||||
Equity pick up from compensation of a subsidiary | — | — | 84,234 | — | — | 84,234 | ||||||||||||||||||||||
Acquisition of noncontrolling interest of CFO Securities Consulting | — | — | (377,893 | ) | — | — | (377,893 | ) | ||||||||||||||||||||
Foreign currency translation adjustment | — | — | — | 1,688,217 | — | 1,688,217 | 1,688,217 | |||||||||||||||||||||
Net income | — | — | — | — | 1,960,122 | 1,960,122 | 1,960,122 | |||||||||||||||||||||
Balance as of December 31, 2010 | 110,887,883 | 14,319 | 78,974,697 | 8,030,982 | 18,879,907 | 105,899,905 | 3,648,339 | |||||||||||||||||||||
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Table of Contents
Statements of cash flows
(In U.S. dollars, except share-related data)
December 31, | ||||||||||||
2008 | 2009 | 2010 | ||||||||||
Operating activities: | ||||||||||||
Net income (loss) | $ | 19,020,115 | $ | (6,219,743 | ) | $ | 1,960,122 | |||||
Adjustments to reconcile net income (loss) to net cash used in operating activities: | ||||||||||||
Share-based compensation | 8,040,150 | 6,600,716 | 4,420,572 | |||||||||
Equity in earnings of subsidiaries | (25,997,391 | ) | (1,469,390 | ) | (6,500,738 | ) | ||||||
Changes in assets and liabilities: | ||||||||||||
Prepaid expenses and other current assets | 84,695 | 28,525 | (78,804 | ) | ||||||||
Amounts due from subsidiaries | (15,071,573 | ) | (105,742 | ) | (1,845,474 | ) | ||||||
Accrued expenses and other current liabilities | (1,541,036 | ) | 31,836 | (53,454 | ) | |||||||
Amounts due to subsidiaries | (47,217 | ) | 129,250 | 568,289 | ||||||||
Net cash used in operating activities | (15,512,257 | ) | (1,004,548 | ) | (1,529,487 | ) | ||||||
Investing activities: | ||||||||||||
Net cash provided by investing activities | — | — | — | |||||||||
Financing activities: | ||||||||||||
Proceeds from stock options exercised by employees | 531,449 | 181,381 | 717,257 | |||||||||
Proceeds from exercise of options granted to non-employee | 41,600 | 8,000 | — | |||||||||
Net cash provided by financing activities | 573,049 | 189,381 | 717,257 | |||||||||
Effect of exchange rate changes | (2 | ) | (2 | ) | 2 | |||||||
Net decrease in cash and cash equivalents | (14,939,210 | ) | (815,169 | ) | (812,228 | ) | ||||||
Cash and cash equivalents, beginning of the year | 19,374,617 | 4,435,407 | 3,620,238 | |||||||||
Cash and cash equivalents, end of the year | $ | 4,435,407 | $ | 3,620,238 | $ | 2,808,010 | ||||||
F-50